Hemosol Announces Second Quarter 2002 Financial Results

TORONTO, ON, August 27, 2002 - Hemosol Inc. (NASDAQ: HMSL, TSE: HML, HML.WT) today announced financial results for the second quarter ended June 30, 2002. Unless otherwise stated, all dollar amounts presented herein are Canadian dollars.

For the second quarter ended June 30, 2002, the Company recorded a net loss of $19.9 million or $(0.47) per share compared to a loss of $14 million or $(0.35) per share in the corresponding prior year quarter. Included in the Company's net loss for the three months ended June 30, 2002 was a $645,000 restructuring charge related to a cost savings plan implemented in June. As planned, these cost saving measures are expected to reduce the Company's monthly average burn-rate to approximately $3 million, a reduction of more than $2 million per month. The quarter also reflects non-cash losses totalling $4.5 million related to a one-time charge for deferred financing costs and unrealised foreign exchange translation losses. 

"We took decisive action in the second quarter to focus our financial resources on delivering results from our ongoing clinical trials and making progress with our regulatory plans in the U.S. and Europe," said John W. Kennedy, President and Chief Executive Officer of Hemosol. "As a result of these actions, we have extended our cash resources past the point where we expect to have clinical data to report."

Clinical and Regulatory 

The clinical development program for HEMOLINKTM [hemoglobin raffimer] continues to progress. Study HLK 213, which involves the use of HEMOLINK in primary coronary artery bypass grafting (CABG) surgery, is actively enrolling patients. Additional resources have been directed to support the timely completion of this study. Enrolment has improved and the Company continues to expect to report data in the fourth quarter of 2002. 

Since study HLK 213 is Hemosol's highest clinical priority, HLK 214, a similar CABG study involving patients undergoing a repeat or "re-do" procedure, is progressing at a slower pace, and the Company will provide a projected completion date once enrolment for HLK 213 has been completed. The Company expects to provide further updates on the clinical and regulatory programs in the fall.

Manufacturing 

The Company is on track to complete the construction of its Meadowpine facility on budget and on time in September of this year. Immediately following final construction, commissioning of the facility will be completed and the validation process will begin. The Company's Skyway facility remains available for inspection by regulatory authorities during regular production as required. The Company currently has sufficient clinical trial material to complete all ongoing studies. Additional inventory will be produced as necessary. 

Financial Results

The Company's operating expenses in the second quarter totalled $15.5 million, (including a one-time $645,000 restructuring charge) a $4.4 million increase from the corresponding quarter in the prior year. Operating expenses for the first six months were $27.1 million, an increase of $5.8 million from the prior year. These increases were incurred to advance the clinical development program for HEMOLINK and to continue to raise the profile of HEMOLINK within the medical community. 

Interest income in the quarter totalled $259,000 versus $1,249,000 in the prior year corresponding quarter bringing year to date interest income to $477,000 versus $1,966,000 in the prior year.

Subsequent to the end of the quarter Hemosol terminated its $12.5 million subordinated debt facility, resulting in a one-time non-cash charge of $3.1 million in deferred financing charges which was taken during the second quarter. Included in this amount was $2.1 million related to the valuation of warrants at the time of issuance. The Company has not drawn down on its $35 million senior debt facility. Hemosol is in discussions with a third party to replace this facility with one containing less restrictive provisions. 

The Company also realized a non-cash loss of $1.4 million from unrealised foreign exchange translation of cash and cash equivalents denominated in U.S. dollars. This loss was virtually reversed in July as a result of weakening of the Canadian dollar vis-a-vis the U.S. dollar. Year to date non cash losses related to foreign exchange translation were $1.4 million versus $1.6 million in the prior year's first six months.

Capital expenditures during the quarter reached approximately $13.5 million, of which $12.6 million related to the Company's Meadowpine facility. Hemosol expects to spend a further $19 million in 2002 to complete construction and commissioning of this facility.

As at June 30th, 2002, the Company had approximately $39.9 million in cash and cash equivalents. The Company anticipates that it will require additional cash resources to fund operations beyond 2002 and is pursuing various financing alternatives including the replacement of its unused senior credit facility.

To view the financial statements, click on the link below: http://www.newswire.ca/releases/August2002/27/c5913.html 

Conference Call Information
The Company will host a conference call today at 4:30 PM EST. A live audio webcast of the conference call will be available through www.hemosol.com. Please connect to this website at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be needed to hear the webcast. A replay of the webcast will be available for 30 days starting on August 28, at www.hemosol.com  and www.financialdisclosure.ca . 

About Hemosol Inc. 
Hemosol is a near-term, commercial-stage biopharmaceutical company focused initially on developing life-sustaining therapies for the treatment of acute anemia resulting from hemoglobin deficiencies. Hemosol has a broad range of products in development, including its flagship product HEMOLINK(TM) [hemoglobin raffimer], an oxygen therapeutic, that is designed to rapidly and safely improve oxygen delivery to the circulatory system. HEMOLINK is currently being evaluated in late-stage clinical trials. The Company's pipeline includes several new product candidates designed to address major markets with unmet medical needs including transfusion medicine, tissue reperfusion, oncology and infectious disease indications based upon its protein bioconjugation and cell expansion technologies.

For more information visit Hemosol's website at 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 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 obtain regulatory approvals for its products; Hemosol's ability to successfully complete clinical trials for its products; technical or manufacturing or distribution issues; the competitive environment for Hemosol's products; the degree of market penetration of Hemosol's products; 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.


Contact: 
Jason Hogan
Investor Relations
416 361 1331
800 789 3419 
416 815 0080 fax

ir@hemosol.com 
www.hemosol.com