Vasogen Announces Third Quarter 2008 Results



    MISSISSAUGA, ON, Oct. 15 /CNW/ - Vasogen Inc. (NASDAQ:  VSGN; TSX:VAS)
today reported the results of operations for the three and nine months ended
August 31, 2008. All dollar amounts referenced herein are in Canadian dollars
unless otherwise noted.
    At August 31, 2008, our cash and cash equivalents totaled $9.8 million,
compared with $12.4 million at May 31, 2008.
    The net loss for the third quarter of 2008 was $2.6 million, or $0.12 per
common share, compared with a net loss of $5.3 million, or $0.24 per common
share for the same period in 2007. We incurred a net loss for the nine months
ended August 31, 2008 of $15.3 million, or $0.68 per common share, compared
with a net loss of $22.7 million, or $1.21 per common share for the same
period in 2007. Our net loss included restructuring costs for the three months
and nine months ended August 31, 2008 of $0.8 million and $3.1 million,
respectively. In addition to the cost savings from the termination of our
lease, as discussed below, we expect a further reduction of infrastructure and
other support costs associated with the facility.
    A key driver of our decreased loss in both these periods was lower salary
and benefit 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.
In addition, during the nine months ended August 31, 2008, the decrease was
impacted by a reduction in expenses resulting from the repayment of the senior
convertible notes in April 2007.

    
    Corporate Update

    -   On July 3, 2008, we announced the implementation of additional
        restructuring plans to further reduce our cash burn rate while we
        continued to explore strategic corporate alternatives with the goal
        of enhancing shareholder value. As part of this restructuring, we
        reduced the number of full-time employees to six and materially
        reduced expenses associated with the VP series of drugs.

    -   As at August 31, 2008, Vasogen had cash and cash equivalents of
        $9.8 million and had 22.4 million shares outstanding. Our net cash
        used in operating activities for the three months ended August 31,
        2008, was $2.7 million, which included restructuring costs of
        $1.4 million. Other than our accounts payable and accrued liabilities
        we do not have any debt.

    -   During the quarter, our Board of Directors reviewed a number of
        nonbinding proposals that were submitted to the Company as part of
        our ongoing strategic review process. We are undertaking a review and
        due diligence process to finalize which of these options, if any, to
        proceed with. Concurrent with this assessment, the Board is
        continuing to consider other strategic alternatives including the
        monetization of certain tangible and/or intangible assets of the
        Company, as well as the out-licensing of assets, potential asset
        divestiture, winding up, or liquidation of the Company.

    -   During the quarter, we had further communications with the FDA
        regarding the use of a Bayesian approach for ACCLAIM II and while we
        feel that we have addressed the issues raised by the agency, they
        have given no indication that they are considering changing their
        view. As a result, pending the outcome of our current strategic
        review process we are not planning any additional communications with
        the FDA regarding the design of ACCLAIM II.

    -   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 completed a lease surrender
        agreement with our landlord. As a result, our lease for this facility
        terminated on September 30, 2008 and our new corporate address is
        4 Robert Speck Parkway, 15th Floor, Mississauga, Ontario, L4Z 1S1.
    

    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 complete a sale, merger, acquisition, or other strategic alternative,
statements regarding the status of development, or expenditures relating to
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 the current
status of our programs, 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
August 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 nine months ended
August 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)

    -------------------------------------------------------------------------
                                                     August 31,  November 30,
                                                          2008          2007
    -------------------------------------------------------------------------
                                                    (Unaudited)

    Assets

    Current assets:
      Cash and cash equivalents                      $   9,788     $  23,545
      Clinical supplies                                      -         1,363
      Tax credits recoverable                              577         1,565
      Prepaid expenses and deposits                        261           787
      Change in fair value of forward
       foreign exchange contracts                            -           376
      -----------------------------------------------------------------------
                                                        10,626        27,636

    Property and equipment                                  42           414

    -------------------------------------------------------------------------
                                                     $  10,668     $  28,050
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable                               $     617     $   1,175
      Accrued liabilities                                1,327         3,519
      -----------------------------------------------------------------------
                                                         1,944         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                               23,436        22,744
      Deficit                                         (397,107)     (381,783)
      -----------------------------------------------------------------------
                                                         8,724        23,356


    -------------------------------------------------------------------------
                                                     $  10,668     $  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    Nine months ended    1987 to
                               August 31,           August 31,     August 31,
                            2008       2007       2008       2007       2008
    -------------------------------------------------------------------------
    Expenses:
      Research and
       development     $   1,096  $   2,588  $   8,734  $   9,347  $ 247,651
      General and
       administration      1,627      2,887      7,237     11,363    124,465
      Foreign exchange
       loss (gain)           (59)       242       (194)     1,200     10,776
    -------------------------------------------------------------------------

    Loss before the
     undernoted           (2,664)    (5,717)   (15,777)   (21,910)  (382,892)

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

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

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

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

    Investment income         78        370        453      1,003     13,778

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

    Loss and
     comprehensive loss
     for the period       (2,586)    (5,347)   (15,324)   (22,719)  (389,664)

    Deficit, beginning of period:
      As originally
       reported         (394,521)  (370,378)  (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        (394,521)  (370,378)  (381,783)  (353,006)    (7,148)

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

    -------------------------------------------------------------------------
    Deficit, end of
     period            $(397,107) $(375,725) $(397,107) $(375,725) $(397,107)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     loss per share    $   (0.12) $   (0.24) $   (0.68) $   (1.21) $       -

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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    Nine months ended    1987 to
                                August 31,           August 31,    August 31,
                            2008       2007       2008       2007       2008
    -------------------------------------------------------------------------

    Cash provided by
     (used in):

    Operating activities:
      Loss for the
       period          $  (2,586) $  (5,347) $ (15,324) $ (22,719) $(389,664)
      Items not
       involving cash:
        Amortization         191        125        378        378      6,536
        Accretion in
         carrying value
         of senior
         convertible
         notes payable         -          -          -        728     10,294
        Amortization of
         deferred
         financing costs       -          -          -        154      3,057
        Loss on
         extinguishment
         of senior
         convertible
         notes payable         -          -          -      1,754      6,749
        Change in fair
         value of
         embedded
         derivatives           -          -          -       (829)      (829)
        Stock-based
         compensation        141        164        692      1,615     10,271
        Common shares
         issued for
         services              -          -          -          -      2,485
        Unrealized gain
         on forward
         foreign
         exchange
         contract              -          -          -          -       (376)
        Unrealized
         foreign
         exchange
         loss (gain)         (98)       227         61      1,454     11,604
        Other                  -          -          -          -        (35)
      Change in non-cash
       operating working
       capital              (348)       413        493     (3,890)     1,446
      -----------------------------------------------------------------------
                          (2,700)    (4,418)   (13,700)   (21,355)  (338,462)

    Financing activities:
      Shares and warrants
       issued for cash         -          -          -     17,345    326,358
      Warrants exercised
       for cash                -          -          -          -     16,941
      Options exercised
       for cash                -          -          -          -      7,669
      Share issue costs        -          -          -     (1,440)   (24,646)
      Issue (repayment) of
       senior convertible
       notes payable,          -          -          -       (924)    38,512
      Cash released from
       restriction             -      3,078          -      6,403          -
      Paid to related
       parties                 -          -          -          -       (234)
      -----------------------------------------------------------------------
                               -      3,078          -     21,384    364,600

    Investing activities:
      Purchases of property
       and equipment           -         (8)        (6)       (49)    (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
      -----------------------------------------------------------------------
                               -         (8)        (6)       (39)   (12,747)

    Foreign exchange gain
     (loss) on cash held
     in foreign currency      99       (227)       (51)    (1,296)    (3,603)
    -------------------------------------------------------------------------

    Increase (decrease)
     in cash and cash
     equivalents          (2,601)    (1,575)   (13,757)    (1,306)     9,788
    Cash and cash
     equivalents,
     beginning of period  12,389     30,696     23,545     30,427          -
    -------------------------------------------------------------------------
    Cash and cash
     equivalents,
     end of period     $   9,788  $  29,121  $   9,788  $  29,121  $   9,788
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %SEDAR: 00001047E          %CIK: 0001042018




For further information:

For further information: Glenn Neumann, Investor Relations, 4 Robert
Speck Parkway, 15th Floor, Mississauga, ON, L4Z 1S1, tel: (905) 817-2004, fax:
(905) 847-6270, www.vasogen.com, investor@vasogen.com

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