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Vasogen Announces Third Quarter 2004 Results

Toronto, Ontario - October 13, 2004

Vasogen Inc. (NASDAQ:VSGN; TSX:VAS) today reported the results of operations for the third quarter of 2004. Comparative figures relate to the three and nine months ending August 31, 2003 and all dollar amounts referenced herein are in Canadian dollars, unless otherwise stated.

Cash, cash equivalents, and marketable securities held to maturity totaled $90.4 million at August 31, 2004, compared with $60.1 million at year-end 2003. The increase is a result of the net proceeds received from the financing that was completed March 4, 2004, being greater than the cash used in operations during the first three quarters of the fiscal period. Our net cash used in operating activities for the three months ended August 31, 2004 was $13.2 million.

The loss for the third quarter of 2004 was $19.6 million, or $0.27 per share, compared to a loss of $5.9 million, or $0.10 per share in the third quarter of 2003. For the nine months ended August 31, 2004 the loss was $45.8 million, or $0.67 per share, compared to a loss of $18.6 million, or $0.34 per share for the comparable period in 2003. The increased loss for these two periods resulted mainly from the costs of our phase III clinical programs. As further detailed below, our statement of operations also includes a foreign exchange loss of $2.1 million for the three months ended August 31, 2004.

Research and development (R&D) expenditures totaled $13.9 million in the third quarter of 2004, compared to $5.8 million in the third quarter of 2003. For the nine months ended August 31, 2004, R&D expenditures were $36.2 million, compared to $14.2 million for the comparable period in 2003. This increase was driven primarily by the increased recruitment of patients and the initiation of new clinical sites in our two phase III clinical trials. The number of new clinical site initiations increased by approximately 170% and 140% for the nine-month and three-month periods respectively, as compared to 2003. The number of patients recruited into these trials, which is a key driver of R&D costs, also increased substantially during these two periods as compared to 2003.

General and administration (G&A) expenditures totaled $4.1 million for the third quarter of 2004, compared to $2.6 million for the third quarter of 2003. For the nine months ended August 31, 2004, G&A expenditures were $11.2 million, compared to $7.2 million for the comparable period in 2003. The majority of the increase in G&A expenditures resulted from infrastructure and other costs, which have increased to support our two phase III clinical programs and preparatory activities for the commercialization of our products.

Our statement of operations includes a foreign exchange loss of $2.1 million for the three months ended August 31, 2004 as a result of the weakening of the U.S. dollar relative to the Canadian dollar during this period, and a foreign exchange gain of $0.5 million for the nine months ended August 31, 2004 as a result of the strengthening of the U.S. dollar relative to the Canadian dollar during this nine month period. While our functional currency is the Canadian dollar, the funds raised in the financings that we completed in 2003 and 2004 were in U.S. dollars, and they are subject to fluctuations in the U.S. exchange rate. We are holding U.S. dollars in anticipation of the significant U.S. dollar R&D expenses that we expect to incur in connection with executing our phase III clinical trials and, therefore, this exchange rate fluctuation, though significant from an accounting point of view, does not affect our ability to pay these U.S. dollar denominated R&D expenditures.

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

Highlights

• Comprehensive results from our phase II trial of Celacade™ (immune modulation therapy) in advanced chronic heart failure patients were published in the September 15, 2004 issue of the Journal of the American College of Cardiology (JACC) (Vol 44, Issue 6, pp. 1181-1186). The article was authored by Dr. Guillermo Torre-Amione, Medical Director of the Heart Transplant Service at the Methodist DeBakey Heart Center and Baylor College of Medicine; Dr. François Sestier, Faculty of Medicine at the University of Montreal; Dr. Branislav Radovancevic, Associate Director, Cardiovascular Surgery and Transplant Research, Texas Heart Institute; and Dr. James Young, Chairman, Division of Medicine at The Cleveland Clinic Foundation. The clinical trial evaluated 73 patients with advanced chronic heart failure who were all receiving stable doses of pharmaceuticals that reflected the current standard of care. The key finding from the published study was a significant reduction in the risk of death (p=0.022; 1 vs. 7 deaths) and all-cause hospitalization (p=0.008; 12 vs. 21 hospitalizations) for patients receiving Celacade™ compared to those receiving placebo.
  
  
• The results published in JACC formed the basis for our ongoing 2,000-patient phase III ACCLAIM trial, which is designed to support regulatory approval and marketing for Celacade™ for the treatment of chronic heart failure in North America and Europe. The ACCLAIM study is further evaluating the impact of Celacade™ on reducing mortality and morbidity in patients with advanced heart failure. ACCLAIM is expected to complete patient enrolment by the end of the first quarter of 2005.
• Our 500-patient phase III SIMPADICO trial, which is further investigating the impact of Celacade™ on reducing the debilitating symptoms associated with peripheral arterial disease (PAD), is designed to support regulatory approval and marketing of Celacade™ for the treatment of symptomatic PAD in North America and Europe. SIMPADICO is expected to complete patient enrolment by the end of the year.
  
  
• Preclinical results demonstrating the ability of Celacade™ to reduce heart muscle inflammation were presented at the 8th Annual Scientific Meeting of the Heart Failure Society of America in Toronto. The research was conducted by Dr. Guillermo Torre-Amione, Katy Becker, Corinne Brann, and Dr. Douglas L. Mann from the Methodist DeBakey Heart Center and Winter's Center of Heart Failure Research at Baylor College of Medicine. In a preclinical model of cardiac inflammation, Celacade™ decreased both myocardial levels of the pro-inflammatory cytokine TNF-a and inflammatory cellular infiltrates in heart tissue. Inflammatory cellular infiltrates were found in 57% of controls and in only 25% of animals treated with Celacade™. Furthermore, Celacade™ treatment resulted in a significant attenuation of TNF-a levels (p<0.001). Previous preclinical studies in other models of inflammatory disease have shown that, in addition to decreasing TNF-a levels, Celacade™ down-regulates a number of pro-inflammatory cytokines and increases levels of key anti-inflammatory cytokines. The key importance of this finding is that the anti-inflammatory effects of Celacade™ were focused at the tissue level within the myocardium, providing new insights into the potential mechanism of benefit of Celacade™ in heart failure.
  
  
• We held an R&D Investor Meeting in New York on September 9, 2004 to review Vasogen's technology and clinical programs. Panel members included: Dr. Jeffrey Olin, Professor of Medicine, Mount Sinai School of Medicine and Global Principal Investigator and Chairman of the Steering Committee for the SIMPADICO study; Dr. Milton Packer, Director, Center for Biostatistics and Clinical Science, University of Texas and a member of Vasogen's Scientific Advisory Board; Dr. Guillermo Torre-Amione, Medical Director, Heart Transplant Service, Texas Heart Institute and Medical Director, Cardiac Transplant Service, Baylor College of Medicine and Principal Investigator for the U.S. arm of the ACCLAIM trial; and Dr. James Young, Chairman, Department of Medicine and Medical Director of the Kaufman Center for Heart Failure at the Cleveland Clinic and Chairman of the Steering Committee and Global Principal Investigator for the ACCLAIM trial. Panel members discussed the need for new therapeutic options in chronic heart failure and peripheral arterial disease and described why the inflammatory pathway represents an important therapeutic target. The potential ability of Celacade™ to address the inflammatory pathway was presented along with the clinical impact of Celacade™ in phase II trials in PAD and CHF. Panel members also commented on the depth of experience of the Steering Committees for Vasogen's ACCLAIM and SIMPADICO trials.
  
  
• Our VP series of drugs are being developed at international centers of excellence for neuroscience. This program is focused on investigating the therapeutic potential of these drugs and identifying lead indications for clinical development. VP025, the lead product candidate from this new class of drugs, is being developed for the treatment of certain chronic neuroinflammatory disorders. We are currently in the process of preparing an IND submission and expect to initiate a phase I clinical trial of VP025 early next year.
  
  
• Preclinical research demonstrating the ability of VP025 to significantly delay the onset of disease and increase survival in a model of amyotrophic lateral sclerosis (ALS) - also referred to as Lou Gehrig's disease - were presented at the 128th Annual Meeting of the American Neurological Association. This research was conducted under the direction of Dr. Stanley Appel, Chief of Neurology at the Methodist Hospital and Professor of Neurology at Baylor College of Medicine. In a preclinical model of ALS, VP025 significantly delayed disease onset (p=0.009) and prolonged survival (p=0.004). These findings suggest that the anti-inflammatory effects of VP025 may be useful in slowing the progression of ALS. There is a desperate need for more effective therapies in ALS and this research could lead to a new approach for the treatment of this devastating disease.
  
  
• Preclinical research demonstrating the ability of VP025 to reverse a measure of the memory and learning impairment associated with aging was presented by Professor Marina Lynch, PhD, Department of Physiology, Trinity College, Dublin, Ireland, at the Fourth Federation of European Neuroscience Societies Forum in Lisbon, Portugal. We believe that the ability to actually improve an established loss of memory and learning would be a major breakthrough in the treatment of a number of debilitating diseases associated with aging, including Alzheimer's disease and Parkinson's disease.

As previously announced, a conference call will be conducted on October 13, 2004 at 4:30 p.m. Eastern Time. The conference call may be accessed at 416-695-5261 or 1-877-888-4605 ten minutes prior to the call. An audio webcast of the event will also be available at www.vasogen.com. A re-broadcast of the conference call may be accessed by calling 1-866-576-1010, pin code 5367, and will also be available at www.vasogen.com.

About Vasogen
Vasogen is a leader in the research and commercial development of immune modulation therapies targeting the chronic inflammation underlying cardiovascular disorders. Vasogen's lead product, Celacade™ (immune modulation therapy) is currently in pivotal phase III clinical trials for the treatment of chronic heart failure and peripheral arterial disease. The Company's 2,000-patient ACCLAIM trial, being conducted at cardiac centers throughout North America and Europe, is investigating the impact of Celacade™ on reducing the risk of mortality and morbidity in advanced chronic heart failure patients. Vasogen's 500-patient SIMPADICO trial, being conducted at medical centers throughout North America, is designed to further investigate the impact of Celacade™ on reducing the debilitating symptoms associated with peripheral arterial disease. Celacade™ is designed to target chronic inflammation by activating the immune system's physiological anti-inflammatory response to apoptotic cells. Vasogen is also developing a new class of drugs designed to interact with immune cells leading to the modulation of cytokines - potent chemical messengers that regulate and control inflammation. VP025, the lead candidate from this new class of drugs, is in preclinical development for the treatment of neurogenerative disorders including Parkinson's and Alzheimer's disease.

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