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Vasogen Announces Third Quarter 2009 Results

Thursday, October 15, 2009 General News J E 4
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MISSISSAUGA, ON, Oct. 15 /PRNewswire-FirstCall/ - Vasogen Inc. (NASDAQ:VSGN; TSX:VAS) today reported the results of operations for the three and nine months ended August 31, 2009. All dollar amounts referenced herein are in Canadian dollars unless otherwise noted.

At August 31, 2009, our cash and cash equivalents totaled $4.8 million, compared with $5.8 million at May 31, 2009. Our net cash used in operating activities for the three months ended August 31, 2009, was $1.0 million and included the payment of $0.4 million for fees mainly related to our ongoing strategic review and $0.3 million for restructuring costs.

The net loss for the third quarter of 2009 was $1.2 million, or $0.05 per common share, compared with a net loss of $2.6 million, or $0.12 per common share for the same period in 2008. The $1.2 million loss for the three months ended August 31, 2009 included a charge for fees of $0.7 million mainly related to our ongoing strategic review, which included the cost of the fairness opinion rendered by JMP Securities LLC in connection with the proposed business combination with IntelliPharmaCeutics.

We incurred a net loss for the nine months ended August 31, 2009 of $4.5 million, or $0.20 per common share, compared with a net loss of $15.3 million, or $0.68 per common share for the same period in 2008. The loss for the nine months ended August 31, 2009 has decreased when compared with the same period in 2008 due to the significant restructuring expenditures that were incurred during 2008 and the resulting lower number of employees in 2009. A portion of this decrease also relates to a $1.2 million non-cash provision taken against our clinical supplies during the nine months ended August 31, 2008.

    Corporate Update

    -   On Monday August 17, 2009, Vasogen Inc., IntelliPharmaCeutics Ltd.
        ("IPC US") and IntelliPharmaCeutics Corp. ("IPC Opco" and together
        with IPC US, "IPC") announced that they had entered into an
        arrangement agreement, (the "IPC Arrangement Agreement"), which is
        subject to shareholder and regulatory approvals, whereby Vasogen will
        combine with IPC under a plan of arrangement (the "Plan of
        Arrangement") and merger to continue as a publicly-traded entity to
        be called IntelliPharmaCeutics International Inc. ("New IPC"). IPC
        are privately-held specialty pharmaceutical companies that are
        focused on developing and manufacturing new and generic controlled-
        release pharmaceutical products using its broadly applicable,
        proprietary delivery technologies. Currently, IPC has 15 product
        candidates in its development pipeline several of which are partnered
        with third-party drug companies. IPC's lead product candidates
        include Dexmethylphenidate XR, a generic version of the marketed drug
        Focalin XR(R), which is partnered with Par Pharmaceutical and is
        currently the subject of an Abbreviated New Drug Application (ANDA)
        filing with the U.S. Food and Drug Administration (FDA), and
        Carvedilol CR, a generic version of the brand name drug Coreg CR, an
        internal pipeline now in pivotal bioequivalence studies.

    -   On August 17, 2009, we also announced we had entered into an
        arrangement agreement, subject to shareholder, unitholder and
        regulatory approvals, with Cervus LP (TSXV:CVL.UN), an Alberta based
        limited partnership, and its general partner Cervus GP Ltd. (the
        "Cervus Arrangement Agreement"), that will reorganize Vasogen prior
        to completion of the transaction with IPC pursuant to the Plan of
        Arrangement, and which will provide gross proceeds to Vasogen of
        approximately $7.5 million in non-dilutive capital.

    -   On August 11, 2009, the Staff of the NASDAQ Listing Qualifications
        Department (the "Staff") notified the Company that it had not
        regained compliance with the $1.00 minimum bid price requirement set
        forth in Listing Rule 5550 (a)(2). On September 15, 2009, the Staff
        further notified Vasogen that it believes the proposed transaction
        with IPC is a business combination that will result in a "change of
        control" and accordingly, under NASDAQ Listing Rule 5110(a), requires
        that the post-combination entity apply and be approved for initial
        listing on NASDAQ. Under NASDAQ's rules, if the Staff determines that
        the post-combination entity does not qualify for initial listing, it
        will be subject to delisting. Accordingly, on September 16, 2009, an
        initial listing application was submitted to the NASDAQ Listing
        Qualifications Department on behalf of the combined entity; the
        application remains pending. On September 23, 2009, the parties
        appeared before a NASDAQ Listing Qualifications Panel ("the Panel")
        and presented their plan to comply with the minimum bid price
        requirement and the initial listing requirements upon consummation of
        the transaction. To date, the Panel has not rendered a decision.
        Pending the Panel's decision, Vasogen's securities remain listed on
        NASDAQ.

    -   To further reduce the rate at which we use our cash during our
        strategic review process, the employment of Graham Neil, our Vice-
        President, Finance, and CFO, was terminated effective July 14, 2009.
        Mr. Neil has agreed to fulfill the role of CFO, in a consulting
        capacity at substantially reduced compensation, to assist the board
        of directors (the "Board") in bringing closure to the ongoing
        strategic review process.

We will conduct a live webcast presentation of our Special Meeting of Shareholders being held at the offices of McCarthy Tétrault, LLP, Suite 5300, Toronto Dominion Bank Tower, 66 Wellington Street West, Toronto, on Monday, October 19, 2009 at 10:00 a.m. ET. To participate via webcast, please go to www.vasogen.com. A re-broadcast of the presentation will be available at www.vasogen.com.

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 include, without limitation, our plans to complete the business combination resulting from our strategic review, which is described in the press release dated August 17, 2009, statements regarding the status of development, or expenditures relating to our business, 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 in the forward-looking statements. 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, 2008, as well as in our other public filings, including our Management's Discussion and Analysis for the period ended August 31, 2009. 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, 2009, 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   November
                                                         31, 2009   30, 2008
    -------------------------------------------------------------------------
                                                       (Unaudited)
    Assets

    Current assets:
      Cash and cash equivalents                         $   4,843  $   8,556
      Tax credits recoverable                                 422        582
      Prepaid expenses and deposits                           332        188
    -------------------------------------------------------------------------
                                                            5,597      9,326

    Property and equipment                                     12         16

    -------------------------------------------------------------------------
                                                        $   5,609  $   9,342
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable                                  $     286  $     101
      Accrued liabilities                                   1,047      1,141
    -------------------------------------------------------------------------
                                                            1,333      1,242
    Shareholders' equity
      Share capital:
        Authorized:
          Unlimited common shares, without par value
            Issued and outstanding:
            22,623,195 common shares (November 30, 2008
            - 22,424,719)                                 365,730    365,677
      Warrants                                             16,725     16,725
      Contributed surplus                                  24,172     23,555
      Deficit                                            (402,351)  (397,857)
    -------------------------------------------------------------------------
                                                            4,276      8,100

    -------------------------------------------------------------------------
                                                        $   5,609  $   9,342
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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,
                            2009       2008       2009       2008       2009
    -------------------------------------------------------------------------

    Expenses:
      Research and
       development     $       7  $   1,096  $     363  $   8,734  $ 248,074
      General and
       administration      1,150      1,627      4,594      7,237    129,920
      Foreign exchange
       loss (gain)             4        (59)        58       (194)    10,723
    -------------------------------------------------------------------------
    Loss before the
     undernoted           (1,161)    (2,664)    (5,015)   (15,777)  (388,717)
    Interest expense on
     senior convertible
     notes payable             -          -          -          -     (1,279)
    Accretion in
     carrying value of
     senior convertible
     notes payable             -          -          -          -    (10,294)
    Amortization of
     deferred financing
     costs                     -          -          -          -     (3,057)
    Loss on
     extinguishment of
     senior convertible
     notes payable             -          -          -          -     (6,749)
    Gain on sale of
     patents                   -          -        487          -        487
    Investment income          3         78         34        453     13,872
    Change in fair
     value of embedded
     derivatives               -          -          -          -        829
    -------------------------------------------------------------------------
    Loss and
     comprehensive loss
     for the period       (1,158)    (2,586)    (4,494)   (15,324)  (394,908)
    Deficit, beginning
     of period          (401,193)  (394,521)  (397,857)  (381,783)    (1,510)
    Impact of change in
     accounting for
     stock-based
     compensation              -          -          -          -     (4,006)
    Impact of change in
     accounting for
     financial
     instruments               -          -          -          -     (1,632)
    Charge for
     acceleration
     payments on equity
     component of
     senior convertible
     notes payable             -          -          -          -       (295)
    -------------------------------------------------------------------------
    Deficit, end of
     period            $(402,351) $(397,107) $(402,351) $(397,107) $(402,351)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted
     loss per common
     share             $   (0.05) $   (0.12) $   (0.20) $   (0.68)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    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,
                            2009       2008       2009       2008       2009
    -------------------------------------------------------------------------
    Cash provided by
     (used in):
    Operating
     activities:
      Loss for
       the period      $  (1,158) $  (2,586) $  (4,494) $ (15,324) $(394,908)
      Items not
       involving cash:
        Amortization           2        191          4        378      6,381
        Loss on
         disposition of
         property and
         equipment             -          -          -          -        125
        Gain on sale
         of patents            -          -       (487)         -       (487)
        Accretion in
         carrying value
         of senior
         convertible
         notes payable         -          -          -          -     10,294
        Amortization of
         deferred
         financing costs       -          -          -          -      3,057
        Loss on
         extinguishment
         of senior
         convertible
         notes payable         -          -          -          -      6,749
        Change in fair
         value of
         embedded
         derivatives           -          -          -          -       (829)
        Stock-based
         compensation         51        141        617        692     11,007
        Common shares
         issued for
         services              -          -          -          -      2,485
        Unrealized
         foreign exchange
         gain (loss)           4        (98)        56         61     11,475
        Other                  -          -          -          -        (35)
    Change in non-cash
     operating working
     capital                 114       (348)       156        493        594
    -------------------------------------------------------------------------
                            (987)    (2,700)    (4,148)   (13,700)  (344,092)
    Financing activities:
      Shares and warrants
       issued for cash         -          -          -          -    326,358
      Warrants exercised
       for cash                -          -          -          -     16,941
      Options exercised
       for cash                -          -          -          -      7,669
      Share issue costs        -          -          -          -    (24,646)
      Repayment of
       senior convertible
       notes payable, net      -          -          -          -     38,512
      Paid to related
       parties                 -          -          -          -       (234)
    -------------------------------------------------------------------------
                               -          -          -          -    364,600
    Investing activities:
      Purchases of
       property and
       equipment               -          -          -         (6)    (2,471)
      Purchases of
       acquired technology     -          -          -          -     (1,283)
      Proceeds on
       disposition of
       patents                 -          -        487          -        487
      Purchases of
       marketable
       securities              -          -          -          -   (244,846)
      Proceeds on
       disposition of
       property and
       equipment               -          -          -          -         62
      Settlement of
       forward foreign
       exchange contracts      -          -          -          -     (4,824)
      Maturities of
       marketable securities   -          -          -          -    240,677
    -------------------------------------------------------------------------
                               -          -        487         (6)   (12,198)
    Foreign exchange
     gain (loss) on cash
     held in foreign
     currency                 (4)        99        (52)       (51)    (3,467)
    -------------------------------------------------------------------------
    Increase (decrease) in
     cash and cash
     equivalents            (991)    (2,601)    (3,713)   (13,757)     4,843
    Cash and cash
     equivalents,
     beginning
     of period             5,834     12,389      8,556     23,545          -
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end
     of period         $   4,843  $   9,788  $   4,843  $   9,788  $   4,843
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

SOURCE Vasogen Inc.

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