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Vasogen Announces Second Quarter 2005 Results

Toronto, Ontario - July 13, 2005

Vasogen Inc. (NASDAQ:VSGN; TSX:VAS) today reported the results of operations for the second quarter of 2005. Comparative figures relate to the three- and six-month periods ending May 31, 2005, and to the three- and six-month periods ending May 31, 2004. All dollar amounts referenced herein are in Canadian dollars, unless otherwise stated.

Cash, cash equivalents, and marketable securities held to maturity totalled $85.6 million, at May 31, 2005, compared with $73.0 million at year-end. The increase is a result of the net proceeds received from the financing that was completed February 2, 2005, less cash used in operations during the first half of the year.

In line with guidance, our cash used in operations for the second quarter was $19 million, or approximately US$15.5 million, and for the first half of the year was $34.2 million, or approximately US$27.7 million.

The loss for the second quarter of 2005 was $25.1 million, or $0.31 per share, compared to a loss of $14.1 million, or $0.20 per share, in the second quarter of 2004. For the six months ended May 31, 2005, the loss was $45.0 million, or $0.57 per share, compared to a loss of $26.2 million, or $0.39 per share, for the comparable period in 2004. The increased loss over the comparable period in 2004 resulted mainly from higher costs associated with the expansion of our phase III clinical programs. The difference between cash used in operations and our accounting loss includes such non-cash items as option grant expense, amortization expense, and accrued expenses related to our phase III clinical trials.

Research and development expenditures totalled $20.7 million in the second quarter of 2005, compared to $12.5 million in the second quarter of 2004. For the six months ended May 31, 2005, these expenditures were $37.5 million, compared to $22.3 million for the comparable period in 2004. This increase in research and development spending results primarily from expanded clinical trial activity, including the increased number of clinical sites participating in our phase III ACCLAIM trial in chronic heart failure and the significantly higher level of patient enrollment into both our ACCLAIM trial and our phase III SIMPADICO trial in peripheral arterial disease, when compared to the same period in 2004.

General and administration expenditures totalled $6.0 million for the second quarter of 2005, compared to $3.9 million for the second quarter of 2004. For the six months ended May 31, 2005, these expenditures were $11.4 million, compared to $7.1 million for the comparable period in 2004. The majority of the increase in general and administration expenditures resulted from infrastructure and other support costs, which have increased to support our advancing clinical programs, and for corporate, marketing, regulatory, and business development activities associated with planning for the commercialization of our products.

Our functional currency is the Canadian dollar. The funds raised in the financings that we completed in 2005 and 2004 were primarily in U.S. dollars and we are holding U.S. dollars in anticipation of the significant U.S. dollar research and development expenses that we expect to incur in connection with executing our phase III clinical trials. Although fluctuations in the U.S./Canadian exchange rate can be significant from an accounting perspective, they do not affect our ability to pay U.S. dollar denominated research and development expenditures. Due to the strengthening of the U.S. dollar relative to the Canadian dollar during the three and six months ending May 31, 2005, our statement of operations includes a foreign exchange gain of $0.9 million and $2.0 million, respectively.

An expanded Management’s Discussion and Analysis for the quarter is accessible on Vasogen’s web site at www.vasogen.com.

Highlights

  • We have commenced the process of preparing the 6-month primary endpoint data for analysis in our phase III SIMPADICO trial in peripheral arterial disease (PAD). The initiation of this process, which includes the collecting and cleaning of data from all sites in preparation for locking the database and completing data analysis, positions us to report the results of the study during the fourth quarter of this year. The double-blind, placebo-controlled SIMPADICO trial, which has enrolled over 550 patients at 50 centers in the United States and Canada, is designed to further assess the impact of our Celacade™ technology on PAD and to support regulatory approval in North America and commercialization in North America and Europe. The primary endpoint of this trial is the change in maximal treadmill walking distance after six months; an efficacy endpoint recognized by the FDA and other regulatory authorities for approving new treatments for symptomatic PAD. PAD leads to reduced mobility and a marked impairment in the ability to undertake the basic activities of daily independent living. Patients with PAD also have a six-fold increase in risk of death from cardiovascular disease and an estimated 30% of patients diagnosed with PAD will die within five years. It is estimated that in the United States alone, PAD affects over seven million people, with related healthcare costs exceeding $10 billion annually. In approximately 80,000 patients each year, the progression of PAD results in the need for amputation.
  • We reached full enrollment in our double-blind, placebo-controlled, phase III ACCLAIM trial in chronic heart failure. The ACCLAIM trial, which has enrolled over 2,400 patients at 176 clinical sites in North America, Europe, and Israel, is designed to further assess the impact of our Celacade technology on the risk of death and cardiovascular hospitalizations in advanced chronic heart failure patients and to support regulatory approval in North America and commercialization in North America and Europe. ACCLAIM is an event-rate-driven study that will reach its primary endpoint when 701 patients have experienced a primary endpoint event, defined as either death or first cardiovascular hospitalization, and all patients have been treated for at least six months. Based on the current number of events and current event-rate trends, the ACCLAIM trial remains on schedule and is expected to reach its primary endpoint during the second half of 2005. Patients with heart failure experience a continuing decline in their health, resulting in an increased frequency of hospitalization and in premature death. The average five-year survival rate for all patients with heart failure is approximately 50%. In North America and Europe, chronic heart failure affects over ten million people and is associated with more than 600,000 deaths each year. In the U.S. alone, the cost of medical care, primarily resulting from hospitalization, is estimated to exceed $19 billion annually.
  • We successfully completed our phase I clinical trial of VP025, the lead drug candidate from our VP series of drugs. The double-blind, placebo-controlled, phase I dose-escalation trial of VP025 examined the safety and tolerability of three doses of VP025 in 24 healthy volunteers. Multiple administrations of either low, mid, or high doses of VP025 were shown to be safe and well tolerated when compared to placebo and no drug-related serious adverse events were reported. VP025 is being developed to target the chronic inflammation within the central nervous system that is associated with a number of neurological diseases, such as Alzheimer’s disease.
  • We announced that we have been granted a European patent covering the use of our Celacade technology for the treatment of chronic heart failure, and have completed the registration procedure to bring it fully into force in all the major countries of Europe.

    • As previously announced, a conference call will be conducted on July 13, 2005, at 4:30 p.m. Eastern Time. The conference call may be accessed by calling 416-695-6120 or 1-800-769-8320 ten minutes prior to the call. An audio web cast of the event will also be available at www.vasogen.com. A re-broadcast of the conference call may be accessed by calling 1-877-244-9113, pin code 5455, and will also be available at www.vasogen.com.

    About Vasogen:
    Vasogen is focused on the research and commercial development of technologies targeting the chronic inflammation underlying cardiovascular and neurological disease. The Company’s lead product, the Celacade™ technology, is currently in two pivotal phase III clinical trials designed to support regulatory approval in North America and commercialization in North America and Europe. The pivotal phase III SIMPADICO trial, which is fully enrolled at 50 centers in North America, is designed to further investigate the use of Celacade technology to improve intermittent claudication, a debilitating symptom associated with peripheral arterial disease. The pivotal phase III ACCLAIM trial, designed to further investigate the use of Celacade technology to reduce the risk of death and hospitalization in patients with advanced chronic heart failure, is fully enrolled at 176 clinical centers in North America, Europe, and Israel. Vasogen is also developing a new class of drugs for the treatment of neuro-inflammatory disorders, such as Alzheimer’s disease. VP025, which has completed phase I clinical development, is the lead product candidate from this new class of drugs.

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