HMSL Hemosol (MM)

Hemosol Announces Fourth Quarter and Full Year 2003 Financial Results TORONTO, March 11 /PRNewswire-FirstCall/ -- Hemosol Inc. today announced financial results and a review of operational highlights for the fourth quarter and year ended December 31, 2003. Unless otherwise stated, all dollar amounts presented herein are in Canadian dollars. The Company's net loss decreased slightly to $10.9 million, or ($0.22) per share, for the quarter ended December 31, 2003 from $11.4 million or ($0.25) per share for the quarter ended December 31, 2002. The loss in the quarter included a write-down of certain assets, including property, plant and equipment, inventory and patents and trademarks, of $6.5 million. Net losses for the year were $34.9 million ($0.75 per share) versus $54.8 million ($1.23 per share) in the prior year. Total operating expenses for the quarter ended December 31, 2003 (excluding the previously mentioned asset write downs of $6.5 million) decreased by 63% to $3.9 million from $10.5million for the quarter ended December 31, 2002, bringing operating expenses for the year ended December 31, 2003 to $25.6 million versus $47.4 million in the prior year. The lowering of operating expenses resulted from cost savings plans implemented in both June 2002 and April 2003 which have reduced the Company's average monthly burn to approximately $1.2 million. "The Company has commenced a number of strategic initiatives designed to allow Hemosol to realize value from its existing asset base and move the Company forward," said Lee Hartwell, Chief Executive Officer of Hemosol. "Leveraging the technological strength of our manufacturing team coupled with our state-of-the-art Meadowpine facility, we were able to forge the principal terms of a strategic alliance for the production of therapeutic blood products that will provide significant opportunities over the mid-term. Combined with the agreement with MDS allowing us to recognize value from accumulated tax losses and other tax assets, the Company will be well positioned to pursue a three-pronged value creation strategy, which includes advancing development of products across our pipeline, including HEMOLINK(TM) (hemoglobin raffimer), pursuing bio-manufacturing opportunities, and capitalizing on our alliance with ProMetic Life Sciences Inc. ("ProMetic") and the American National Red Cross ("ARC"). In December, Hemosol forged the principal terms of a strategic alliance with ProMetic and its strategic co-development partner, the ARC, to in-license their novel plasma separation technology. The Cascade purification process permits the recovery of valuable proteins from human plasma. The annual market for proteins that can be isolated using the Cascade technology is estimated to be worth in excess of US $5 billion and continues to grow. Under the terms of the exclusive North American agreement, the Cascade technology will be utilized at Hemosol's state-of-the-art Meadowpine manufacturing facility. The ARC and Hemosol will enter into a separate agreement for the supply of plasma and the purchase of the therapeutic products isolated using the Cascade technology. The organizations are working toward concluding the definitive agreement and are proceeding with the technology transfer. Hemosol is also actively pursuing opportunities to generate revenue by providing bio-manufacturing services to other bio-pharmaceutical companies. The Company believes there is considerable demand for facilities and expertise in engineering and quality assurance/control in this sector. Improving Financial Strength On November 28th, Hemosol completed the sale of 7,841,800 special warrants at a price of $0.75 per special warrant for gross proceeds of $5,881,350. Each special warrant consisted of one commonshare and one-half of one warrant. Each whole warrant entitles the holder to purchase one common share for $0.90 at any time within 36 months of the closing of the transaction. Hemosol initially received $5,400,000 on closing of the transaction, and subsequently received $481,350, which had been held in escrow pending shareholder approval, which was granted on January 22nd, 2004. Subsequent to the year-end, Hemosol announced that it had entered into an agreement with MDS Inc. (TSX: MDS, NYSE: MDZ) regarding a proposed transaction that will allow Hemosol's business to effectively exchange a significant portion of the existing and unutilized income tax losses and other tax assets for a $16 million dollar cash infusion. The transaction will be effected under a statutory Plan of Arrangement and is subject to certain approvals, including that of shareholders and warrantholders of Hemosol, who will vote at a special meeting of the Company to be held on April 20, 2004. Details of the transaction will be included in the information circular to be mailed to the Hemosol Inc. securityholders in connection with the special meeting. "The completion of these initiatives to re-capitalize the Company, will significantly strengthen our balance sheet and facilitate the execution of our strategy in the year ahead," said Lee Hartwell. More Financial Results The Company incurred interest expense of $221,000 for the quarter ended December 31, 2003 versus interest income of $156,000 for the quarter ended December 31, 2002. Interest expense for the year ended December 31, 2003 was $535,000 versus interest income of $842,000 in the prior year. The increase in interest expense was due to the Company drawing down its $20 million credit facility as well as lower balances in cash and cash-equivalents. Amortization of deferred charges increased to $1.3 million for the quarter ended December 31, 2003 from $0.8 million for the quarter ended December 31, 2002. Amortization of deferred charges for the year ended December 31, 2003 were $5.0 million versus $1.6 million in the prior year. The increase in amortization relates to charges associated with the $20 million credit facility. In the fourth quarter the Company realized $1.1 million of miscellaneous income related to the sale of certain equipment at its old manufacturing facility. Miscellaneous income for the full year ended December 31, 2003 totalled $2.9 million which included $1.8 million of net proceeds from an insurance policy received in the third quarter. The Company incurred a total of $0.03 million in capital expenditures during the quarter ended December 31, 2003, bringing capital expenditures for the year ended December 31, 2003 to $1.9 million versus $30.4 million in the prior year. Of this $0.2 million related to production equipment, information technology and various lab equipment expenditures and $1.7 million relating to the new facility. During the year, the company wrote-off costs of $4.7 million for impaired equipment related to the near term commercial production of HEMOLINK(TM). This brings total capital assets net of depreciation to $83.9 million at December 31, 2003, of which $81.7 million relates to the new facility. Annual and Special Meeting Hemosol will hold its Annual and Special Meeting of Shareholders at the TSX Broadcast Centre, Gallery Room, 130 King Street West, Toronto, Ontario, beginning at 10:00 am (EST) on April 20th, 2004. If you are unable to attend the Meeting, a live audio version will be available on the Internet. To access the live webcast please visit http://www.hemosol.com/ or http://www.financialdisclosure.ca/. The broadcast will be archived for up to twelve months. To listen to the presentation you will need a standard web browser equipped with Windows media player. Financial Statements to Follow: CONSOLIDATED BALANCE SHEETS As at December 31 2003 2002 $ (000's) $ ------------------------------------------------------------------------- ASSETS CURRENT Cash and cash equivalents 8,125 17,579 Cash held in escrow 448 5,000 Amounts receivable and prepaids 735 1,077 Inventory 1,274 2,877 ------------------------------------------------------------------------- TOTAL CURRENT ASSETS 10,582 26,533 ------------------------------------------------------------------------- Property, plant and equipment, net 83,881 88,907 Patents and trademarks, net 1,368 2,176 License Technology 2,520 - Deferred charges, net 2,026 6,696 ------------------------------------------------------------------------- TOTAL OTHER ASSETS 89,795 97,779 ------------------------------------------------------------------------- 100,377 124,312 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT Accounts payable and accrued liabilities 3,394 15,249 Short term debt 20,000 - Debentures payable - 5,000 ------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 23,394 20,249 ------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Common Shares 305,983 303,463 Non-employee warrants and options 15,642 10,300 Contributed surplus 8,535 8,535 Deficit (253,177) (218,235) ------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 76,983 104,063 ------------------------------------------------------------------------- 100,377 124,312 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF LOSS AND DEFICIT THREE MONTH TWELVE MONTH PERIOD ENDED PERIOD ENDED --------------------- --------------------- December December December December 31, 31, 31, 31, 2003 2002 2003 2002 $ $ $ $ ------------------------------------------------------------------------- EXPENSES Research and development Scientific and process 2,597 2,600 10,773 15,271 Regulatory and clinical 353 4,618 5,817 17,173 Administration 1,416 1,312 6,586 6,115 Marketing and business development 213 1,051 1,760 6,018 Support services 235 873 1,297 2,602 Write-off of property, plant and equipment 4,654 - 4,654 - Write-off of patents & trademarks 846 - 846 - Foreign currency translation loss (gain) 97 63 380 246 ------------------------------------------------------------------------- Loss from operations before the following 10,411 10,517 32,113 47,425 Amortization of deferred charges 1,262 836 5,009 1,587 Write-off of deferred charges - - - 6,453 Interest income (19) (156) (153) (842) Interest expense 240 - 688 - Miscellaneous Income (1,103) - (2,871) - ------------------------------------------------------------------------- Loss before income taxes 10,791 11,197 34,786 54,623 Provision for income taxes 156 211 156 211 ------------------------------------------------------------------------- NET LOSS FOR THE PERIOD 10,947 11,408 34,942 54,834 Deficit, beginning of period 242,230 206,827 218,235 163,401 ------------------------------------------------------------------------- DEFICIT, END OF PERIOD 253,177 218,235 253,177 218,235 ------------------------------------------------------------------------- BASIC AND DILUTED LOSS PER SHARE 0.22 0.25 0.75 1.23 ------------------------------------------------------------------------- ------------------------------------------------------------------------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES outstanding (000's) 49,012 46,066 46,837 44,514 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTH TWELVE MONTH PERIOD ENDED PERIOD ENDED --------------------- --------------------- December December December December 31, 31, 31, 31, 2003 2002 2003 2002 (000's) (000's) ------------------------------------------------------------------------- Net loss for the period (10,947) (11,408) (34,942) (54,834) ------------------------------------------------------------------------- Cash used in operating activities (2,646) (8,030) (26,655) (40,359) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash provided by (used in) investing activities 1,086 (5,320) (7,433) 35,026 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash providedby financing activities 8,555 (434) 24,555 20,179 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Effect ofexchange rates on cash and cash equivalents 56 131 79 (52) ------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents during the period 7,051 (13,653) (9,454) 14,794 Cash and cash equivalents, beginning of period 1,074 31,232 17,579 2,785 ------------------------------------------------------------------------- Cash and cash equivalents, end of period 8,125 17,579 8,125 17,579 ------------------------------------------------------------------------- ------------------------------------------------------------------------- About HemosolInc. Hemosol is a biopharmaceutical company focused on the development and manufacturing of biologics, particularly blood-related proteins. The Company has a broad range of novel therapeutic products in development, including HEMOLINK(TM) (hemoglobinraffimer), an oxygen therapeutic designed to rapidly and safely improve oxygen delivery via the circulatory system. Hemosol also is developing additional oxygen therapeutics, a hemoglobin-based drug delivery platform to treat diseases such as hepatitisC and cancers of the liver, and a cell therapy program initially directed to the treatment of cancer. Hemosol intends to leverage its expertise in manufacturing blood proteins and its state-of-the-art Meadowpine manufacturing facility to seek additional strategic growth opportunities. For more information visit Hemosol's website at http://www.hemosol.com/. Hemosol Inc.'s common shares are listed on The NASDAQ Stock Market under the trading symbol "HMSL" and on the Toronto Stock Exchange under the trading symbol "HML". HEMOLINK is a registered trademark of Hemosol Inc. Certain statements concerning Hemosol's future prospects are "forward-looking statements" under the United States Private Securities Litigation Reform Act of 1995. There can be noassurances that future results will be achieved, and actual results could differ materially from forecasts and estimates. Important factors that could cause Hemosol's actual results to differ materially from forecasts and estimates include, but are notlimited to: the successful and timely completion of the preclinical and clinical development of its products; Hemosol's ability to obtain regulatory approvals for its products; Hemosol's ability to manufacture or have manufactured its product in commercial quantities and at competitive costs; the competitive environment for therapeutic and non-therapeutic protein products derived from human blood; the ability to obtain adequate funding under acceptable terms to complete its development programs; and other factors set forth in filings with Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission. These risks and uncertainties, as well as others, are discussed in greater detail in the filings of Hemosol with Canadiansecurities regulatory authorities and the U.S. Securities and Exchange Commission. Hemosol makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made. DATASOURCE: Hemosol Inc. CONTACT: Jason Hogan, Investor Relations, (416) 361-1331, 800-789-3419, (416) 815-0080 fax, , http://www.hemosol.com/; To request a free copy of this organization's annual report, please go to http://www.newswire.ca/ and click on reports@cnw.

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