Media Release [HEMOSOL INC. LOGO]
HEMOSOL TO REALIZE $16 MILLION IN PROCEEDS FROM EXISTING TAX LOSSES
TORONTO, ON, FEBRUARY 12, 2004 - Hemosol Inc. (TSX: HML, NASDAQ:HMSL) today
announced that it has entered into an agreement with MDS Inc. (TSX: MDS, NYSE:
MDZ) under which Hemosol will benefit from its existing accumulated income tax
losses and other tax assets through a reorganization of both Hemosol's business
and certain MDS diagnostic assets. The transaction will involve a cash payment
to Hemosol of $16 million along with certain other consideration.
"We are pleased to have this unique opportunity to obtain critical cash
resources to fund Hemosol's future business activities," said Lee Hartwell,
Chief Executive Officer of Hemosol. "The proceeds from this transaction will
allow us to continue with a number of value-creating initiatives including:
- the implementation of the novel "Cascade" or plasma
purification technology developed by ProMetic Life Sciences
and the American Red Cross;
- the opportunity to provide biomanufacturing services to other
biotech companies; and
- further development of product candidates in our research
pipeline, including HEMOLINK."
The transaction will be effected under a statutory Plan of Arrangement that will
be subject to approval by the Superior Court of Justice of Ontario and the
shareholders and warrantholders of Hemosol Inc., as well as certain regulatory
approvals. It is expected that a special meeting of the Company's shareholders
and warrantholders to consider and vote on the Arrangement will be held as soon
as possible and no later than April 30, 2004. The Arrangement must be approved
by two-thirds of the votes cast by the shareholders and warrantholders voting at
the shareholders' meeting and by a majority of the votes cast by minority
shareholders voting at the meeting.
As part of the transaction, Hemosol shareholders will exchange each common share
of Hemosol Inc. for one common share of Hemosol Corp., which will be the
successor to Hemosol's current business, and one Class A common share of Hemosol
Inc. (to be renamed Opco.) which will aquire an indirect interest in the
diagnostics business currently carried on by MDS. Following the transaction,
Hemosol Corp. will be held by existing Hemosol shareholders (including MDS) on
the same pro-rata basis as Hemosol Inc. was held prior to the transaction. MDS
currently holds approximately 12% of the outstanding shares of Hemosol Inc.
Newly formed Hemosol Corp. will own a 93% equity interest in a new partnership
that will carry on Hemosol's current and future business, with the remaining 7%
being owned by Opco. MDS will hold 99.5% of the equity of Opco and existing
Hemosol shareholders will hold the remaining 0.5% through the Class A common
shares to be issued. It is a condition of closing that Hemosol Corp. be listed
on the TSX and NASDAQ.
Also as part of the transaction, Hemosol will decrease the total number of
warrants issued, or to be issued to MDS as consideration for the previously
disclosed guarantee by MDS of Hemosol's bank loan, from an aggregate of
10,000,000 warrants to a total of 7,500,000 warrants (which will become Hemosol
Corp. warrants).
The Corporation's Board of Directors, after careful review, and upon the
recommendation of its independent committee composed of three directors who are
not related to MDS (after receiving a
fairness opinion from KPMG Corporate Finance Inc.), has concluded that the
transaction with MDS is fair, from a financial point of view, to the Hemosol
shareholders, other than MDS. The Board of Directors has approved the
transaction and recommends that shareholders vote in favour of the transaction.
Details of the independent committee's and the Board of Directors'
recommendations, as well as the fairness opinion of KPMG will be included in the
information circular to be mailed to the Hemosol shareholders in connection with
the special meeting.
The Arrangement should not result in any tax payable by Canadian resident
shareholders, unless they sell the newly issued shares of Hemosol Corp. or the
shares of Opco which will be issued as part of the transaction, in which case
normal capital gains taxes may apply. For shareholders who are U.S. taxpayers,
this transaction will likely be treated as a taxable distribution of property by
Hemosol. Depending upon whether Opco has earnings and profits for the 2004
fiscal year, all or a portion of such distribution may be taxable as a dividend.
U.S. shareholders will be urged to carefully review the information circular and
to consult their tax advisors in this regard.
ABOUT HEMOSOL INC.
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) [hemoglobin raffimer], 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 hepatitis C 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.
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 Hemosol's actual results to differ materially from
forecasts and estimates include, but are not limited 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 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 & Media Relations
416 361 1331
800 789 3419
416 815 0080 fax
ir@hemosol.com
www.hemosol.com