NoBlood

Jan B. Wade · #1 (**permalink**) 11-19-2003, 08:27 AM

Blood products firm Hemosol plans to raise up to $8.6M in private financing
08:30 AM EST Nov 19

STEVE ERWIN
TORONTO (CP) - Shares in Hemosol Inc. jumped on the Toronto stock market Friday after the blood-substitute products firm announced plans for a cash transfusion of more than $8.6 million to help stabilize the company's finances.

News of the pending cash influx comes months after Hemosol confirmed problems in a clinical trial of the company's key artificial blood product, Hemolink, leaving investors uncertain the cash-strapped Toronto area firm could survive past the end of this year. The offering unveiled Friday will give Hemosol more time to conduct a non-clinical review of Hemolink and consider "strategic alternatives" for its state-of-the-art manufacturing operations in Mississauga, Ont. New steps could include making drugs for other biotechnology companies, said spokesman Jason Hogan.

He also said the financing should allow Hemosol to continue operating well into 2004.

The news sent Hemosol's shares to a Friday high of 87 cents, up 13 cents, or 17.5 per cent. That enthusiasm was tempered in late afternoon trading, but the stock still closed up by more than five per cent, gaining four cents to 78 cents on the Toronto stock market.

Its shares had traded above the $2 mark through the first 12 weeks of the year before a mid-March plunge, which occurred after Hemosol ceased clinical trials of Hemolink because surgery patients could face heart-related complications.

The company slashed its workforce - it now has about 50 core employees, down from about 150 at the end of last year - and announced it could be sold.

In June, an internal review of Hemolink's use in patients undergoing cardiac bypass surgery confirmed there were more heart attacks in patients receiving the so-called hemoglobin raffimer, designed to improve oxygen delivery through the bloodstream, than in the control group.

Hemosol said Friday that Loewen, Ondaatje, McCutcheon Ltd. and Vengate Capital Partners will try to sell up to 11.5 million share and purchase warrant units of the company at 75 cents each.

Assuming the offering is fully subscribed, Hemosol will get about $4.4 million when the deal closes. The nearly $4.2 million that's left will be held in escrow and released upon certain financing conditions.

The financing is expected to close by Nov. 25.

"This new capital will provide short-term stability while management continues to work on more comprehensive financing and strategic options," said Lee Hartwell, Hemosol's chief executive.

"In doing so, this new capital will also provide the resources and flexibility to allow the company to properly evaluate and potentially execute other ongoing initiatives with the goal of putting the company back on a long-term growth path."

Hogan said the new capital will give Hemosol what it needs most: time. The company is in the middle of ongoing studies that it hopes will eventually get Hemolink back into clinical trials, and needs more time to negotiate alternate uses of its $86-million Mississauga facility.

"It was well documented that we were going to run into cash problems before the end of this year. We needed to raise capital and we did that," he said in an interview.

Hogan said Hemosol's "contract manufacturing strategy" has received plenty of inquiries from biotech companies looking to manufacture or develop biologic drugs, which are derived from living sources, rather than drugs that are chemically synthesized.

However, the company needs more time to complete due diligence and ensure potential contracts would prove profitable.

While there is pharmaceutical overcapacity worldwide for the production of standard antibiotics, facilities for biologics are in short supply, Hogan said.

"There's not many of these facilities in North America, especially given that our facility was built to manufacture blood products, which again adds another level of complexity to the manufacturing process," Hogan said.

"We not only have the facility, but we also have a great deal of expertise in the form of people that have experience in manufacturing these types of products."

Hogan said Hemosol could accommodate up to 15 different "suites" at its Mississauga plant to develop or manufacture 15 different products.