Vasogen Announces 2006 Year-End Results

    TORONTO, Jan. 31 /CNW/ - Vasogen Inc. (NASDAQ:  VSGN; TSX:VAS) today
reported its financial and operational results for the fiscal year ended
November 30, 2006. All dollar amounts referenced herein are Canadian dollars
unless otherwise noted.
    At November 30, 2006, our cash and cash equivalents, restricted cash, and
marketable securities held to maturity totaled $36.8 million, compared with
$85.2 million at November 30, 2005.
    As of January 1, 2007, the outstanding principal balance of our
convertible notes has been reduced to US$4.6 million from the US$8.2 million
outstanding principal balance at November 30, 2006, as a result of the two
instalment payments made since year-end. Since September 1, 2006, we have been
required, under the terms of the convertible notes, to maintain a balance of
cash, including restricted cash, and marketable securities equal to 110% of
the convertible notes outstanding. We have satisfied this cash test at all
times since it came into effect.
    We incurred a net loss for the year of $66.4 million, or $0.71 per common
share, compared with a net loss of $93.0 million, or $1.17 per common share,
for the previous year. The loss has decreased as a result of the reduction in
the costs associated with our phase III clinical programs. Included in the
loss for the year are $19.2 million of non-cash expenses for stock-based
compensation, amortization and certain costs associated with the convertible
note financing.
    In 2006, research and development expenses were $32.7 million compared to
$71.5 million in 2005. The majority of the decrease in our R&D expenses, when
compared with 2005, resulted from a significant reduction in the clinical
trial activities relating to our phase III programs.
    General and administration expenses were $19.3 million in 2006, compared
to $22.1 million in 2005. These costs have decreased in 2006 as a result of
the reduced level of activity required to support the current operations.


    Celacade(TM) Technology

    -   The key findings from the 2,400-patient ACCLAIM trial of our Celacade
        technology in chronic heart failure were presented at the World
        Congress of Cardiology 2006 and at the 10th Annual Scientific Meeting
        of the Heart Failure Society of America. We announced in June that
        the ACCLAIM study did not reach the primary endpoint of significantly
        reducing the risk of death and cardiovascular hospitalization in the
        total patient population; however, this endpoint was met for large
        pre-defined subgroups. In patients with NYHA Class II heart failure
        at baseline, Celacade was shown to significantly reduce the risk of
        death or first cardiovascular hospitalization by 39%. Celacade was
        also shown to significantly reduce the risk of death or first
        cardiovascular hospitalization by 26% in patients with no prior
        history of heart attack at baseline. Consistent with the impact of
        Celacade on the risk of mortality and morbidity in major subgroups
        within the ACCLAIM trial was the finding of a significant improvement
        in quality of life for the entire study population. Celacade was
        shown to be well tolerated in the ACCLAIM patient population, who
        were receiving standard-of-care medications for heart failure,
        including diuretics, beta-blockers, and ACE-inhibitors; there were no
        significant between-group differences for any serious adverse events.

    -   In March 2006, the results of the SIMPADICO trial were presented at
        the 55th Annual Scientific Session of the American College of
        Cardiology. While the study did not reach the primary endpoint of
        change in maximal treadmill walking distance, therapy using our
        Celacade technology significantly reduced high sensitivity C-reactive
        protein, a pre-specified secondary endpoint and a widely recognized
        marker of systemic inflammation associated with increased
        cardiovascular risk, including heart failure, stroke, and heart


    -   In May 2006, we announced that preclinical findings from our VP025
        drug development program demonstrated a significant reduction of
        several pro-inflammatory cytokines in a preclinical model of diabetes
        with diabetic retinopathy, a common complication of diabetes that
        eventually results in the loss of vision. These findings were
        presented at the Scientific Sessions of the Association for Research
        in Vision and Ophthalmology (ARVO) Annual Meeting.


    -   On March 22, 2006, following our annual meeting of shareholders,
        Terrance H. Gregg succeeded William R. Grant as Chairman of our Board
        of Directors. Mr. Gregg joined Vasogen's Board of Directors in 1999.
        Mr. Gregg's extensive experience in the healthcare sector includes
        his role as President and Chief Operating Officer of MiniMed, Inc.,
        where he successfully transformed the company from a development-
        stage therapeutic device company into a global leader in diabetes
        management systems. In 2001, Medtronic acquired MiniMed for
        US$3.4 billion.

    -   In January 2006, Ronald M. Cresswell, Ph.D., Hon. D. Sc., F.R.S.E.,
        former Senior Vice President and Chief Scientific Officer of Warner-
        Lambert, and Calvin R. Stiller, C.M., O.ONT, M.D., F.R.C.P.(C.),
        co-founder and former Chairman and CEO of the Canadian Medical
        Discoveries Fund, were appointed to our Board of Directors. Both
        individuals have considerable experience directing the research,
        development, and business initiatives of companies commercializing
        products for the healthcare industry. Dr. Cresswell has over 30 years
        of research and commercial development experience in cardiovascular
        and other important therapeutic areas and his vision and leadership
        in the development of Lipitor(R) was instrumental in the product's
        ultimate success. Dr. Stiller was principal investigator of the
        Canadian multi-center study that established the importance of
        cyclosporine and led to its worldwide use as first-line therapy for
        transplant rejection.

    -   In November 2006, we raised US$20.3 million in gross proceeds through
        the sale of our common shares and warrants to institutional

    -   Further to our press release issued on August 11, 2006, regarding our
        listing on the NASDAQ Global Market, we are planning to apply to
        transfer our listing to the NASDAQ Capital Market.

    As previously announced, a conference call will be conducted on
January 31, 2007, at 4:30 p.m. Eastern Time. The conference call may be
accessed by calling 416-695-6130 or 1-888-789-0150 ten minutes prior to the
call. An audio web cast of the event will also be available at A re-broadcast of the conference call may be accessed by
calling 416-641-2130 or 1-888-330-1923, pin code 9115 followed by the number
sign, and will also be available at

    About Vasogen:
    Vasogen is focused on the research and commercial development of
technologies targeting the chronic inflammation underlying cardiovascular and
neurological disease. Vasogen's Celacade(TM) technology is in late-stage
development for the treatment of chronic heart failure. The recently completed
phase III ACCLAIM trial assessed the impact of Celacade on reducing the risk
of mortality and morbidity in patients with Class II-IV systolic heart
failure. Vasogen is also developing a new class of drugs for the treatment of
neuro-inflammatory disorders.VP025 is the lead product candidate from this new
class of drugs.

    Certain statements contained in this press release, the upcoming
conference call and webcast, or elsewhere in our public documents 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, summary statements relating to results of the ACCLAIM trial in
patients with chronic heart failure, plans to advance the development of
Celacade(TM), plans to fund our current activities, statements concerning our
partnering activities and health regulatory submissions, strategy, future
operations, future financial position, future revenues, projected costs,
prospects, plans and objectives of management. 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, including assumptions about
the nature, size and accessibility of the market for Celacade in the treatment
of chronic heart failure, particularly in Europe, the regulatory approval
process leading to commercialization and the availability of capital on
acceptable terms to pursue the development of Celacade, and the feasibility of
additional trials. 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 in the forward-looking statements. These risks
include, but are not limited to, the outcome of further analysis of the
ACCLAIM trial results, the requirement or election to conduct additional
clinical trials, delays or setbacks in the regulatory approval process,
securing and maintaining corporate alliances, the need for additional capital
and the effect of capital market conditions and other factors on capital
availability, the potential dilutive effects of any financing, risks
associated with the outcome of our research and development programs, the
adequacy, timing and results of our clinical trials, competition, market
acceptance of our products, the availability of government and insurance
reimbursements for our products, the strength of intellectual property,
reliance on subcontractors and key personnel, losses due to fluctuations in
the U.S.-Canadian exchange rate, 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, 2006, as well as in our later public filings. 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. Unless otherwise indicated, numerical
values indicating the statistical significance ("p-values") of results
included in this document are based on analyses that do not account for
endpoint multiplicity.

    The consolidated financial statements, accompanying notes to the
consolidated financial statements, and Management's Discussion and Analysis
for the year ended November 30, 2006, are accessible on Vasogen's web site at and will be available on SEDAR and EDGAR.

                   Financial statements are provided below.


    Consolidated Balance Sheets
    (In thousands of Canadian dollars)

    November 30, 2006 and 2005
                                                            2006        2005

    Current assets:
      Cash and cash equivalents                        $  30,427   $  50,521
      Restricted cash                                      6,403           -
      Marketable securities                                    -      22,999
      Clinical supplies                                    1,211       1,862
      Tax credits recoverable                              1,327       1,130
      Prepaid expenses and deposits                        1,384       1,623
      Accrued gain on forward exchange contracts               -         703
                                                          40,752      78,838
    Restricted cash                                            -      11,701
    Property and equipment                                   615       1,121
    Acquired technology                                      253         506
    Deferred financing costs                                 150       2,645
                                                       $  41,770   $  94,811

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable                                 $   3,369   $   5,733
      Accrued liabilities                                  5,067      20,554
      Current portion of senior convertible
       notes payable                                       8,754      16,659
      Accrued loss on forward exchange contracts               -         763
                                                          17,190      43,709

    Senior convertible notes payable                           -      18,795
    Shareholders' equity:
      Share capital:
          Unlimited common shares, without par value
        Issued and outstanding:
          156,651,342 common shares (2005 - 82,255,374)  344,217     295,007
      Stock options                                       10,713       8,466
      Equity component of senior convertible
       notes payable                                       1,639       7,985
      Warrants                                            11,390       5,345
      Contributed surplus                                  7,995         223
      Deficit                                           (351,374)   (284,719)
                                                          24,580      32,307

                                                       $  41,770   $  94,811


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

                                                                 Period from
                                                                  December 1,
                                                                     1987 to
                                      Years ended November 30,   November 30,
                                    2006        2005        2004        2006
      Research and
       development             $  32,732   $  71,421   $  51,794   $ 228,681
      General and
       administration             19,251      22,126      15,852     105,172
      Foreign exchange
       (gain) loss                   104        (719)      8,288       8,993
    Loss before the
     undernoted                  (52,087)    (92,828)    (75,934)   (342,846)
    Interest expense on
     senior convertible
     notes payable                  (930)       (344)          -      (1,274)
    Accretion in carrying
     value of senior
     convertible notes
     payable                      (7,824)     (1,742)          -      (9,566)
    Amortization of
     deferred financing
     costs                        (2,495)       (408)          -      (2,903)
    Loss on extinguishment
     of senior convertible
     notes payable                (4,995)          -           -      (4,995)

    Investment income              1,971       2,274       1,384      12,015

    Loss for the period          (66,360)    (93,048)    (74,550)   (349,569)

    Deficit, beginning
     of period:
      As originally reported    (284,719)   (187,665)   (113,115)     (1,510)
      Impact of change in
       accounting for
       compensation                    -      (4,006)          -           -
      As restated               (284,719)   (191,671)   (113,115)     (1,510)

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

    Deficit, end of period     $(351,374)  $(284,719)  $(187,665)  $(351,374)
    Basic and diluted loss
     per common share          $   (0.71)  $   (1.17)  $   (1.07)


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

                                                                 Period from
                                                                  December 1,
                                                                     1987 to
                                      Years ended November 30,   November 30,
                                    2006        2005        2004        2006
    Cash provided by
     (used in):
    Operating activities:
      Loss for the period      $ (66,360)  $ (93,048)  $ (74,550)  $(349,569)
      Items not involving
        Amortization                 782         589         463       5,657
        Accretion in carrying
         value of senior
         convertible notes
         payable                   7,824       1,742           -       9,566
        Amortization of
         deferred financing
         costs                     2,495         408           -       2,903
        Loss on extinguishment
         of senior convertible
         notes payable             4,995           -           -       4,995
         compensation              3,083       3,615         455      11,590
        Common shares issued
         for services                 36           -           -       2,485
        Unrealized foreign
         exchange loss (gain)        (65)       (542)      8,278       8,977
        Other                          -           -           -         (35)
      Change in non-cash
       operating working
       capital                   (17,158)     12,634       9,542       4,486
                                 (64,368)    (74,602)    (55,812)   (298,945)

    Financing activities:
      Shares and warrants
       issued for cash            23,106      52,502      76,913     309,013
      Warrants exercised
       for cash                        -           -           -      16,941
      Options exercised
       for cash                        -         627       1,300       7,669
      Share issue costs           (2,221)     (3,720)     (5,625)    (23,206)
      Issue (repayment) of
       senior convertible
       notes payable, net         (3,976)     42,790           -      39,436
      Restricted cash              5,298     (11,701)          -      (6,403)
      Paid to related parties          -           -           -        (234)
                                  22,207      80,498      72,588     343,216

    Investing activities:
      Purchases of property
       and equipment                 (23)       (490)       (816)     (2,416)
      Purchases of acquired
       technology                      -           -           -      (1,283)
      Purchases of marketable
       securities                    (80)    (22,999)    (74,872)   (244,846)
      Settlement of forward
       exchange contracts           (102)     (4,732)          -      (4,834)
      Maturities of
        marketable securities     23,079      67,651      59,976     240,677
                                  22,874      39,430     (15,712)    (12,702)

    Foreign exchange loss
     on cash held in foreign
     currency                       (807)       (141)       (204)     (1,142)

    Increase (decrease) in
     cash and cash
     equivalents                 (20,094)     45,185         860      30,427
    Cash and cash equivalents,
     beginning of period          50,521       5,336       4,476           -
    Cash and cash equivalents,
     end of period             $  30,427   $  50,521   $   5,336   $  30,427

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,,

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