TORONTO (CP) - The blood was drained from Hemosol Inc. shares Friday after the company reported safety problems with its key medical product. The stock plunged as much as 75 per cent during the day after Hemosol said it had stopped clinical trials of Hemolink, a blood substitute, because surgery patients could face heart-related complications. The trial suspension, announced late Thursday, is a terrible blow to the Toronto company, analysts said, because it has pinned much of its hopes on the commercial development of Hemolink. "The future of the company is very much in doubt," said Duncan Stewart, portfolio manager of Tera Capital Corp. But Hemosol disagreed with that gloomy assessment, calling it "too premature" while medical data are studied. Hemosol's stock had been halted all day Thursday, pending news. When trading resumed Friday, the stock sank as much as 75 per cent, or $1.54, to an all-time low of 51 cents. By the bell, it closed at 71 cents, down 65 per cent, or $1.34, on heavy volume of 5.6 million shares - a huge number for the company. The drop wiped about $62 million off the company's stock market value, which now stands at about $33 million. The stock's 52-week high is $6.35 and its 52-week low was 62 cents. "The vastly probable outcome of this is that these trials will never restart," Stewart said. "Further, if they don't, they will not get British or Canadian approval - in which case Hemosol essentially has no assets and will run out of cash. "But one never knows. It's always possible that they may recover from this," he said. But without approval from regulators to sell the Hemolink product commercially, "you're done. And this is really the only product they have." Hemosol said it halted two trials of Hemolink after the company's safety monitoring board found there was "the potential for an increase in certain cardiac adverse events" - heart problems. The company didn't elaborate on those side-effects. " 'Cardiac events' are intolerable," Stewart said, particularly with a product that's meant to be used instead of blood transfusions - a process that carries some risk but has been used with success for decades. "The standard for safety is so high that this sort of thing is a real problem." Enrolment in Hemosol's heart-bypass trial in the U.S. was temporarily suspended as the company reviews the data with its safety board and the U.S. Food and Drug Administration. As a precaution, enrolment is also on hold for patients in a new orthopedic surgery trial. "Until they can conclude that Hemolink is safe . . . they have to suspend the trial," said David Dean, an analyst with Sprott Securities. "If it turns out that at the end of the day the product is not safe, then there is no Hemosol." But Hemosol disagreed with analysts' opinions about its future, saying it was "too premature" to make that kind of assessment. "This is obviously not something we had expected would happen," said Jason Hogan, a spokesman for Hemosol. "It does happen when you're running any clinical study. We have to wait and review the data." Hogan added: "What was announced (Thursday) does not mean the product does not work. It did not relate to efficacy and it does not mean that the product is not safe. The (safety board) has seen some information and they felt it was necessary to make this recommendation in order to further review that data. And we're going to look at it." "We feel that Hemolink is still an exceptional product and that its need is still growing within the marketplace." The safety board is made up of independent medical experts. Hogan noted that the company also has the option of creating an outside independent medical board to examine the data. Suspension of the trials will also hurt the biotechnology company as it tries to raise more cash this year to fund its development. "They have around four months to restart the trial or they probably won't have enough money to finish it," Dean said. The trial suspension is "not going to help" the company raise funds, Hogan noted. "We don't have an active clinical program on right now and clearly this (safety board) ruling is going to raise concerns with respect to safety," he said. "We need time to assess what exactly this is to be able to have discussions with various parties to determine our course of action." The company said it will be looking for more cash this year as it ended 2002 with $17.6 million in cash and is burning about $3 million to $3.5 million a month. The Toronto-based firm reported Thursday a wider loss for the fourth quarter and all of 2002 as it invested in a new plant and pumped money into the Hemolink trials. For the full year, the company posted a loss of $54.8 million, up 42 per cent from the year earlier. GILLIAN LIVINGSTON |