HMSL Hemosol (MM)

Hemosol Announces First Quarter Financial Results Quarter Highlighted by Successful Scale-up of Cascade Technology TORONTO, May 6 /PRNewswire-FirstCall/ -- Hemosol Corp. (NASDAQ:HMSLNASDAQ:TSX: HML) today announced financial results and reviewed operations for the first quarter ended March 31, 2005. Unless otherwise stated, all dollar amounts presented herein are in Canadian dollars. Highlights of the quarter included: - Completion of technology transfer and successful scale-up to the 30- litre level of the Cascade technology, allowing the Company to move forward with the development of three valuable therapeutic proteins; - Completion of installation and validation of vial filling capability pursuant to agreement with Organon Canada, in preparation for inspection and licensing by Health Canada - expected in the second quarter of 2005; - Negotiation of financial agreements to secure further funding and to extend the Company's line of credit; - Continued development of product pipeline including next generation oxygen therapeutic. "In the first quarter we focused on implementing measures that will help Hemosol in its development of several important proteins and in establishing Meadowpine as a world class facility for clinical and commercial scale production," said Lee Hartwell, President and CEO of Hemosol. "Through our scale-up of the Cascade technology, the establishment of a sterile vial filling capability and the advancement of our product pipeline, we continue to build a stable platform for growth." The Company's net loss increased modestly to $5.9 million or ($0.10) per share for the quarter ended March 31, 2005 from $5.0 million or ($0.09) per share for the quarter ended March 31, 2004. This increase included additional depreciation of $1.0 million as the Company started to amortize equipment now deemed available for use. Total operating expenses for the quarter ended March 31, 2005 increased to $5.7 million from $3.5 million for the quarter ended March 31, 2004, an increase of $2.2 million. The principal cause of the increase was scientific and process development expenses that grew to $4.6 million from $2.1 million for the quarter ended March 31, 2004. This increase was mainly due to heightened activity related to bio-manufacturing as the Company readies its facility for the Health Canada licensing inspection and the additional depreciation of $1.0 million. As of March 31, 2005 the Company had $1.3 million of cash and cash- equivalents. Subsequent to the end of the quarter Hemosol closed financings generating gross proceeds of approximately $13.4 million. Cascade Technology Transfer At the end of the first quarter Hemosol announced that it had successfully scaled the Cascade technology up to the 30-litre pilot scale. At this scale, and during earlier development and engineering stages, Hemosol achieved significantly higher protein yields compared to current methods. Hemosol will now build towards clinical scale production by the end of the third quarter of 2005 in an effort to develop three key therapeutic protein products: - Intravenous Immunoglobulins (IVIG), Alpha 1 Proteinase Inhibitor (A1PI), and von Willebrand Factor/Factor VIII (vWF/FVIII). The Company plans to file the first of three Investigational New Drug applications related to these initial lead proteins with the U.S. Food and Drug Administration later this year in order to initiate a clinical development program. HEMOLINK Update There was a significant effort by the company in 2004 to modify HEMOLINK(TM) (hemoglobin raffimer) and to investigate its effects in pre- clinical studies. These studies were largely conducted and completed in 2004 in preparation for discussion with the FDA that was subsequently held in March of 2005. This meeting helped to clarify further pre-clinical development required for HEMOLINK prior to the re-initiation of clinical trials. Based upon a combination of the outcome of this meeting, the nature of the product changes required and the resources and new focus of the Company, Hemosol has elected to pursue HRC 101 as a more cost effective, late pre-clinical product for development in this sector, subject to available resources. HRC 101 is targeted at high volume blood loss indications as may occur during emergency blood loss situations where the life saving quality of the product may be most effectively demonstrated. Hemosol's extensive drug development experience in, and understanding of, the field from the technical, regulatory and clinical perspective has been fully captured in the design of this next generation oxygen therapeutic, positioning the company to compete effectively in this sector. "We believe that the refocusing of our oxygen therapeutic development program is the best way to extract value for shareholders in the near term," said Dr. David Bell, Chief Scientific Officer of Hemosol. "Hemosol is seeking partnership and business opportunities to advance development of its' products in an effort to unlock the value that resides within our product pipeline." Product Pipeline Other developments in the pipeline include the advancement of the hemoglobin-based drug delivery technology. Pre-clinical proof-of-concept studies have demonstrated the benefits of attaching the anti-viral drug, ribavirin, to hemoglobin for more effective delivery. The results have been presented at several major scientific conferences, most recently as an oral presentation by Hemosol's collaborating investigator in this area, Dr. Gary Levy, at the Tenth Annual International Liver Transplantation Society Congress in Kyoto, Japan (2004). Hemosol has also conducted imaging studies through collaboration with Prof. J. Valliant, a leading expert at McMaster University using newly obtained, state-of-the-art pre-clinical SPECT/CT imaging equipment that clearly shows the of the ability of hemoglobin to serve as a liver targeting drug carrier. The Company believes there is a major unmet need in the treatment of liver disease, particularly liver cancer, that can be effectively addressed through the drug delivery technology developed at Hemosol. Discoveries made in the identification of a new stem cell receptor have led to the development of a pre-clinical drug candidate in the form of a therapeutic monoclonal antibody targeted at the treatment of Epo non- responsive anemia (Epo or erythropoietin, is a well known drug used in the treatment of chronic anemia). The first presentation of results characterizing the expression and function of this receptor on hematopoietic progenitor cells will be made on May 5th at the International Society of Cellular Therapy meeting in Vancouver. Hemosol has initiated an active partnering program for this technology that may address a large segment of the Epo market that is currently underserved. More Financial Results Scientific and process development expenses increased to $4.6 million for the quarter ended March 31, 2005 from $2.1 million for the quarter ended March 31, 2004. This increase was mainly due to increased activity related to bio-manufacturing as the Company prepares its vial filling facility for the Health Canada licensing inspection. Included in this amount is additional depreciation of approximately $1.0 million for the technical equipment that is now deemed available for use. Regulatory and clinical expenses of $0.3 million for the quarter ended March 31, 2005 were unchanged compared to the same period in fiscal 2004. Administrative expenses decreased to $0.4 million from $0.8 million primarily due to lower estimates for capital taxes, reduction in salaries and lower insurance costs. Marketing and business development expenses increased to $0.2 million in the first quarter from $0.1 million for the same period in 2004 primarily related to increased activity for business development costs associated with bio-manufacturing and pipeline partnering activities. Amortization of deferred charges for the quarter ended March 31, 2005, were $0.3 million, representing the charge related to the maintenance of the guarantee of the Company's $20.0 million credit facility. Net interest expense increased slightly as a result of lower short- term investments and lower cash and cash-equivalent balances. Financial Statements to Follow: The following statements should be read in conjunction with the applicable notes, which can be found on the Company's website at http://www.hemosol.com/. Hemosol Corp. (A development stage company) (Incorporated under the laws of Ontario) CONSOLIDATED BALANCE SHEETS (unaudited) March 31 December 31 2005 2004 (in thousands of dollars) $ $ ------------------------------------------------------------------------- ASSETS Current Cash and cash equivalents 307 4,230 Cash held in escrow 1,000 1,000 Prepaids and other assets 345 366 Inventory 1,487 1,329 ------------------------------------------------------------------------- Total current assets 3,139 6,925 ------------------------------------------------------------------------- Property, plant and equipment, net 81,950 83,104 Patents and trademarks, net 1,137 1,164 License technology, net 8,934 5,022 Deferred charges, net 579 177 ------------------------------------------------------------------------- 95,739 96,392 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities 7,884 2,538 Short-term debt - 20,000 ------------------------------------------------------------------------- Total current liabilities 7,884 22,538 ------------------------------------------------------------------------- Long-term debt 20,000 - Minority interest 4,715 5,163 ------------------------------------------------------------------------- Total long term liabilities 24,715 5,163 ------------------------------------------------------------------------- Total liabilities 32,599 27,701 ------------------------------------------------------------------------- Shareholders' equity Common shares 311,711 311,711 Warrants and options 14,384 14,080 Contributed surplus 9,125 9,125 Deficit (272,080) (266,225) ------------------------------------------------------------------------- Total shareholders' equity 63,140 68,691 ------------------------------------------------------------------------- 95,739 96,392 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Hemosol Corp. (A development stage company) (Incorporated under the laws of Ontario) CONSOLIDATED STATEMENTS OF LOSS (unaudited) Three months ended March 31 2005 2004 (in thousands of dollars except per share data) $ $ ------------------------------------------------------------------------- EXPENSES Research and development Scientific and process 4,632 2,104 Regulatory and clinical 279 299 Administration 422 778 Marketing and business development 190 107 Support services 183 184 Foreign currency translation gain (1) (9) ------------------------------------------------------------------------- Loss from operations 5,705 3,463 Amortization of deferred charges 347 1,253 Interest income (18) (36) Interest expense 259 265 ------------------------------------------------------------------------- Loss before minority interest and income taxes 6,293 4,945 Minority interest (448) - Provision for current income taxes 10 50 ------------------------------------------------------------------------- Net loss for the period 5,855 4,995 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per share 0.10 0.09 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of common shares outstanding (000) 57,196 55,873 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Hemosol Corp. (A development stage company) (Incorporated under the laws of Ontario) CONSOLIDATED STATEMENTS OF DEFICIT (unaudited) Three months ended March 31 (in thousands of dollars) 2005 2004 ------------------------------------------------------------------------- Deficit, beginning of period 266,225 253,177 Net loss for the period 5,855 4,995 ------------------------------------------------------------------------- Deficit, end of period 272,080 258,172 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Hemosol Corp. (A development stage company) (Incorporated under the laws of Ontario) CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Three months ended March 31 2005 2004 (in thousands of dollars) $ $ ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss for the period (5,855) (4,995) Add (deduct) items not involving cash Amortization of property, plant and equipment 1,564 543 Amortization of license technology 88 42 Amortization of patents and trademarks 27 29 Amortization of deferred charges 347 1,253 Minority interest (448) - Stock-based compensation 64 - Foreign currency translation (gain) loss (1) 9 ------------------------------------------------------------------------- (4,214) (3,119) Net change in non-cash working capital balances related to operations 1,209 (1,693) ------------------------------------------------------------------------- Cash used in operating activities (3,005) (4,812) ------------------------------------------------------------------------- ------------------------------------------------------------------------- INVESTING ACTIVITIES Purchase of property, plant and equipment (410) (132) ------------------------------------------------------------------------- Cash used in investing activities (410) (132) ------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds on issuance of common shares - 180 Deferred charges (509) - Cash released from escrow - 448 ------------------------------------------------------------------------- Cash provided by financing activities (509) 628 ------------------------------------------------------------------------- Effect of exchange rates on cash and cash equivalents 1 (9) ------------------------------------------------------------------------- Net decrease in cash and cash equivalents during the period (3,923) (4,325) Cash and cash equivalents, beginning of period 4,230 8,125 ------------------------------------------------------------------------- Cash and cash equivalents, end of period 307 3,800 ------------------------------------------------------------------------- ------------------------------------------------------------------------- About Hemosol Hemosol is a biopharmaceutical company focused on the development and manufacturing of biologics, particularly blood-related proteins. Hemosol has a broad range of novel therapeutic products in development, including oxygen therapeutics and protein-based therapeutics to treat certain infectious diseases, cancers and anemia. For more information visit Hemosol's website at http://www.hemosol.com/. The Common Shares are listed on the NASDAQ Stock Market under the trading symbol "HMSL" and on the TSX under the trading symbol "HML". Certain statements concerning Hemosol's future prospects are "forward- looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and other applicable securities legislation. There can be no assurances that future results will be achieved, and actual results could differ materially from forecasts and estimates. Important factors that could cause actual results to differ materially from forecasts and estimates include, but are not limited to: Hemosol's ability to successfully implement the Cascade technology and commercialize products derived there from; Hemosol's ability to obtain additional financing which is critical to the implementation of the Cascade technology and to Hemosol's continued viability as a going concern; Hemosol's ability to obtain regulatory approvals for its products; Hemosol's ability to successfully complete clinical trials for its products; Hemosol's ability to enter into satisfactory arrangements for the supply of materials used in its manufacturing operations and the sale of resulting products to customers; technical, manufacturing or distribution issues; the competitive environment for Hemosol's products and services; the degree of market penetration of Hemosol's products; Hemosol's ability to attract and retain clients for its bio-manufacturing services; the risk that Hemosol may not become profitable; 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 Canadian securities 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 Corp. CONTACT: Jason Hogan, Investor & Media Relations, (416) 361-1331, (800) 789-3419, fax: (416) 815-0080, , http://www.hemosol.com/; Archived images on this organization are searchable through CNW Photo Archive website at http://photos.newswire.ca/. Images are free to accredited members of the media. 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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