Vasogen Announces Second Quarter 2008 Results



    MISSISSAUGA, ON, July 9 /CNW/ - Vasogen Inc. (NASDAQ:  VSGN; TSX:VAS) today
reported the results of operations for the three and six months ended May 31,
2008. All dollar amounts referenced herein are in Canadian dollars unless
otherwise noted.
    At May 31, 2008, our cash and cash equivalents totaled $12.4 million,
compared with $19.9 million at February 29, 2008.
    The net loss for the second quarter of 2008 was $7.4 million, or
$0.33 per common share, compared with a net loss of $9.7 million, or $0.54 per
common share for the same period in 2007. We incurred a net loss for the six
months ended May 31, 2008 of $12.7 million, or $0.57 per common share,
compared with a net loss of $17.4 million, or $1.02 per common share for the
same period in 2007. A key driver of this decrease was a reduction in expenses
resulting from the repayment of the senior convertible notes in April 2007,
lower restructuring costs, reduced stock compensation expense, lower
infrastructure and other support costs driven by lower employee numbers in
2008, and a decrease in the foreign exchange loss that was incurred in the
prior periods.

    
    Corporate Update

        -  On April 14, 2008, we announced the implementation of a strategic
           restructuring plan to significantly reduce our cash burn rate and
           focus our efforts on opportunities that the Board and Management
           believe are most likely to provide shareholder value. As a result
           of this restructuring, our work force was reduced by approximately
           85% during the quarter. As a result, we are no longer maintaining
           the necessary quality processes or personnel to support European
           commercialization or clinical development of Celacade. We also
           retained JMP Securities to assist in exploring potential strategic
           alternatives with the goal of enhancing shareholder value.

        -  Subsequent to the end of our second quarter and following an
           extensive review of our VP series of drugs program, we announced a
           halt to the expenses associated with the VP program, including an
           additional reduction in our work force, to further reduce our cash
           burn rate as we continue to explore strategic alternatives.

        -  As part of our restructuring, a new tenant has been secured for
           our 37,111 sq. ft. leased facility located at 2505 Meadowvale
           Boulevard in Mississauga, Ontario, and we have negotiated a lease
           surrender agreement with our landlord. As a result, our lease for
           this facility will terminate on September 30, 2008.

        -  On April 24, 2008, we received a letter from the Listing
           Qualifications Department of The NASDAQ Stock Market indicating
           that the minimum closing bid price of our common stock had fallen
           below $1.00 for 30 consecutive trading days, and therefore, we
           were not in compliance with Marketplace Rule 4310(c)(4)
           (the "Rule"). In accordance with the NASDAQ Marketplace
           Rule 4310(c)(8)(D), we are provided a compliance period of
           180 calendar days, or until October 21, 2008, to regain compliance
           with this requirement.
    

    Certain statements in this document constitute "forward-looking
statements" within the meaning of the United States Private Securities
Litigation Reform Act of 1995 and/or "forward-looking information" under the
Securities Act (Ontario). These statements may include, without limitation,
plans to resume operations, to advance the development of the Celacade(TM)
System or our VP series of drugs including VP015 and VP025, plans to fund our
current activities, statements concerning our partnering activities, health
regulatory submissions, strategy, future operations, future financial
position, future revenues and projected costs. In some cases, you can identify
forward-looking statements by terminology such as "may", "will", "should",
"expects", "plans", "anticipates", "believes", "estimated", "predicts",
"potential", "continue", "intends", "could", or the negative of such terms or
other comparable terminology. We made a number of assumptions in the
preparation of these forward-looking statements. You should not place undue
reliance on our forward-looking statements, which are subject to a multitude
of risks and uncertainties that could cause actual results, future
circumstances or events to differ materially from those projected. These risks
include, but are not limited to, the outcome of our strategic review, securing
and maintaining corporate alliances, the need for additional capital and the
effect of capital market conditions and other factors, including halting
development of the Celacade System and VP series of drugs, on capital
availability, the potential dilutive effects of any financing and other risks
detailed from time to time in our public disclosure documents or other filings
with the Canadian and U.S. securities commissions or other securities
regulatory bodies. Additional risks and uncertainties relating to our Company
and our business can be found in the "Risk Factors" section of our Annual
Information Form and Form 20-F for the year ended November 30, 2007, as well
as in our later public filings, including our Management's Discussion and
Analysis for the quarter ended May 31, 2008. The forward-looking statements
are made as of the date hereof, and we disclaim any intention and have no
obligation or responsibility, except as required by law, to update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.

    The unaudited interim consolidated financial statements, accompanying
notes to the unaudited interim consolidated financial statements, and
Management's Discussion and Analysis for the three and six months ended May
31, 2008, will be accessible on Vasogen's Website at www.vasogen.com and will
be available on SEDAR and EDGAR.

    Summary financial tables are provided below.


    
    VASOGEN INC.
    (A DEVELOPMENT STAGE COMPANY)

    Interim Consolidated Balance Sheets
    (In thousands of Canadian dollars)

    -------------------------------------------------------------------------
                                                         May 31, November 30,
                                                           2008         2007
    -------------------------------------------------------------------------
                                                     (Unaudited)
    Assets

    Current assets:
        Cash and cash equivalents                     $  12,389    $  23,545
        Clinical supplies                                     -        1,363
        Tax credits recoverable                             580        1,565
        Prepaid expenses and deposits                       500          787
        Change in fair value of forward foreign
         exchange contracts                                   -          376
    -------------------------------------------------------------------------
                                                         13,469       27,636
    Property and equipment                                  234          414
    -------------------------------------------------------------------------
                                                      $  13,703    $  28,050
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
        Accounts payable                              $     349    $   1,175
        Accrued liabilities                               2,185        3,519
    -------------------------------------------------------------------------
                                                          2,534        4,694
    Shareholders' equity:
        Share capital:
         Authorized:
           Unlimited common shares, without
            par value
         Issued and outstanding:
          22,391,386 common shares
           (November 30, 2007 - 22,391,386)             365,670      365,670
        Warrants                                         16,725       16,725
        Contributed surplus                              23,295       22,744
        Deficit                                        (394,521)    (381,783)
    -------------------------------------------------------------------------
                                                        11,169       23,356
    -------------------------------------------------------------------------
                                                      $  13,703    $  28,050
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    VASOGEN INC.
    (A DEVELOPMENT STAGE COMPANY)

    Interim Consolidated Statements of Operations,
    Deficit and Comprehensive Income
    (In thousands of Canadian dollars, except per share amounts)
    (Unaudited)

    -------------------------------------------------------------------------
                                                                      Period
                                                                        from
                                                                  December 1,
                         Three months ended      Six months ended    1987 to
                                May 31,               May 31,         May 31,
                            2008       2007       2008       2007       2008
    -------------------------------------------------------------------------
    Expenses:
     Research and
      development      $   4,860  $   3,736  $   7,638  $   6,759  $ 246,555
     General and
      administration       2,929      4,888      5,610      8,476    122,838
     Foreign exchange
      loss (gain)           (338)     1,092       (135)       958     10,835
    -------------------------------------------------------------------------
    Loss before the
     undernoted           (7,451)    (9,716)   (13,113)   (16,193)  (380,228)

    Interest expense on
     senior convertible
     notes payable             -          -          -         (5)    (1,279)

    Accretion in carrying
     value of senior
     convertible notes
     payable                   -        (36)         -       (728)   (10,294)

    Amortization of
     deferred financing
     costs                     -         (9)         -       (154)    (3,057)

    Loss on extinguishment
     of senior
     convertible notes
     payable                   -       (470)         -     (1,754)    (6,749)

    Investment income         33        281        375        633     13,700

    Change in fair
     value of embedded
     derivatives               -        256          -        829        829
    -------------------------------------------------------------------------

    Loss and comprehensive
     loss for the period  (7,418)    (9,694)   (12,738)   (17,372)  (387,078)

    Deficit, beginning of
     period:
        As originally
         reported       (387,103)  (360,684)  (381,783)  (351,374)    (1,510)

        Impact of
         change in
         accounting
         for stock-based
         compensation          -          -          -          -     (4,006)
        Impact of change
         in accounting
         for financial
         instruments on
         December 1,
         2006                  -          -          -     (1,632)    (1,632)
        ----------------------------------------------------------
        As revised      (387,103)  (360,684)  (381,783)  (353,006)

    Charge for
     acceleration
     payments on
     equity component
     of senior
     convertible
     notes payable             -          -          -          -       (295)

    -------------------------------------------------------------------------
    Deficit, end of
     period            $(394,521) $(370,378) $(394,521) $(370,378) $(394,521)
    -------------------------------------------------------------------------
    Basic and diluted
     loss per common
     share             $   (0.33) $   (0.54) $   (0.57) $   (1.02) $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    VASOGEN INC.
    (A DEVELOPMENT STAGE COMPANY)

    Interim Consolidated Statements of Cash Flows
    (In thousands of Canadian dollars)
    (Unaudited)

    -------------------------------------------------------------------------
                                                                      Period
                                                                        from
                                                                  December 1,
                         Three months ended      Six months ended    1987 to
                                May 31,               May 31,         May 31,
                            2008       2007       2008       2007       2008
    -------------------------------------------------------------------------

    Cash provided by
     (used in):

    Operating
     activities:
      Loss for the
       period         $  (7,418) $  (9,694) $ (12,738) $ (17,372) $(387,078)
      Items not
       involving
       cash:
       Amortization          125        127        187        253      6,347
       Accretion in
        carrying value
        of senior
        convertible
        notes payable          -         36          -        728     10,294
       Amortization of
        deferred
        financing costs        -          9          -        154      3,057
       Loss on
        extinguishment
        of senior
        convertible notes
        payable                -        470          -      1,754      6,749
       Change in fair
        value of embedded
        derivatives            -       (256)         -       (829)      (829)
       Stock-based
        compensation         316        890        551      1,453     10,130
       Common shares
        issued for
        services               -          -          -          -      2,485
       Unrealized gain
        on forward
        foreign exchange
        contract               -          -          -          -       (376)
       Unrealized foreign
        exchange loss
        (gain)               (33)     1,326        159      1,226     11,702
       Other                   -          -          -          -        (35)
      Change in non-cash
       operating working
       capital              (557)      (829)       841     (4,304)     1,792
    -------------------------------------------------------------------------
                          (7,567)    (7,921)   (11,000)   (16,937)  (335,762)

    Financing activities:
     Shares and warrants
      issued for cash          -     17,345          -     17,345    326,358
     Warrants exercised
      for cash                 -          -          -          -     16,941
     Options exercised
      for cash                 -          -          -          -      7,669
     Share issue costs         -     (1,443)         -     (1,440)   (24,646)
     Issue (repayment)
      of senior
      convertible
      notes payable, net       -       (289)         -       (924)    38,512
     Cash released
      from restriction         -        289          -      3,325          -
     Paid to related
      parties                  -          -          -          -       (234)
    -------------------------------------------------------------------------
                               -     15,902          -     18,306    364,600

    Investing activities:
     Purchases of property
      and equipment           (6)       (11)        (6)       (41)    (2,471)
     Purchases of
      acquired technology      -          -          -          -     (1,283)
     Purchases of
      marketable securities    -          -          -          -   (244,846)
     Settlement of
      forward foreign
      exchange contracts       -          -          -         10     (4,824)
     Maturities of
      marketable securities    -          -          -          -    240,677
    -------------------------------------------------------------------------
                              (6)       (11)        (6)       (31)   (12,747)

    Foreign exchange gain
     (loss) on cash
     held in foreign
     currency                 32     (1,349)      (150)    (1,069)    (3,702)
    -------------------------------------------------------------------------

    Increase (decrease)
     in cash and cash
     equivalents          (7,541)     6,621    (11,156)       269     12,389

    Cash and cash
     equivalents,
     beginning of
     period               19,930     24,075     23,545     30,427          -

    -------------------------------------------------------------------------
    Cash and cash
     equivalents,
     end of period      $ 12,389  $  30,696  $  12,389  $  30,696  $  12,389
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %SEDAR: 00001047E          %CIK: 0001042018




For further information:

For further information: Glenn Neumann, Investor Relations, 2505
Meadowvale Blvd, Mississauga, ON, Canada, L5N 5S2, tel: (905) 817-2004, fax:
(905) 569-9231, www.vasogen.com, investor@vasogen.com

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VASOGEN INC.

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