MISSISSAUGA, Ontario--(BUSINESS WIRE)--May 21, 1999--Hyal Pharmaceutical Corporation (OTC BB:HYALF)(TSE:HPC) today reported a net loss of $14.1 million ($0.47 per share) for the year ended December 31, 1998, compared with a net loss of $18.6 million ($0.70 per share) for 1997. Included in the operating expenses for the 1998 period was a total of $2.6 million in costs relating to the debenture financing which did not have an effect on cash. When these costs are removed for comparative purposes only, total operating expenses for 1998 were reduced by $9.4 million or 52 percent compared to 1997. Research and development expenses for the year ended December 31, 1998 were reduced by 76 percent to $2.8 million compared with $11.7 for 1997. The reduction was primarily the result of reduced clinical costs, pre-clinical research expenses, and to a lesser extent to reductions in salary and consulting costs. Selling, general and administrative expenses for 1998 were reduced by 15 percent to $4.9 million compared with $5.7 million for 1997. Expenses were lower primarily as a result of reduced patent and legal costs. In the fourth quarter of 1998, it was decided to write off the remaining carrying value of the patent license agreement with Norpharmco. This resulted in a one-time non-cash charge of approximately $2.1 million. Also in the fourth quarter of 1998, the Board of Directors adopted a plan for the disposal of shares held in Hyal Pharmaceutical Australia Limited (HPAL). The loss from Discontinued Operations of $1.0 million represents the results from operations of HPAL. Subsequent to year end, on May 19, 1999, the Company announced that it had entered into an agreement with SkyePharma PLC, the Company's bankers, and the holders of the Company's 12 percent subordinated debentures providing for the acquisition by SkyePharma of all of the issued and outstanding shares of Hyal and the purchase by SkyePharma of Hyal's 12 percent subordinated debentures. The agreement provides that Hyal shareholders will receive from SkyePharma CDN$0.07 per share in cash upon FDA approval for the marketing of Solarase(tm), provided that such approval is obtained by December 31, 2000. SkyePharma will purchase the outstanding US$5.0 million 12 percent subordinated debentures for US$4.1 million, payable in ordinary shares of SkyePharma, with US$3.4 million to be paid on closing and the balance of US$.7 million to be paid upon FDA approval for the marketing of Solarase(tm) provided that such approval is obtained by December 31, 2000. In order for Hyal to carry on operations until such time as the shareholders have an opportunity to vote on the transaction, SkyePharma has agreed to provide interim financing to Hyal in the amount of CDN$750,000 on a secured basis. In addition, Elliott Associates, L.P., one of the debenture holders, has agreed to provide up to CDN$200,000 to fund the expenses of the transaction in certain circumstances, also on a secured basis. Closing of the transaction will be subject to a number of conditions in favor of SkyePharma, including SkyePharma being satisfied with its due diligence relating to the business and affairs of Hyal, the agreement of certain employees of Hyal designated by SkyePharma to continue their employment with SkyePharma, and the entering into of definitive documentation. A special meeting of Hyal's shareholders will be held on or before July 30, 1999 in order to consider the transaction with SkyePharma. This news release may contain forward-looking statements relating to the future performance of Hyal. Forward-looking statements, specifically those concerning future performance, are subject to certain risks and uncertainties, and actual results may differ materially. These risks and uncertainties are detailed from time to time in the Company's filings with the appropriate securities commissions. CONSOLIDATED BALANCE SHEETS Dec. 31, Dec. 31, Dec. 31, 1998 1998 1997 ------------------------------------------------------------- CDN US (Note a) CDN ASSETS CURRENT ASSETS Cash and cash equivalents $ - $ - $ 9,461,465 Marketable securities 31,686 20,666 - Restricted cash - - 6,997,296 Accounts receivable - trade 21,961 14,323 21,695 - other 105,637 68,896 274,119 Inventory 404,404 263,752 475,825 Prepaid expenses 50,809 33,138 144,751 Discontinued operations - net assets 2,809,737 1,832,510 4,704,352 -------------------------------------------------------------- 3,424,234 2,233,285 22,079,503 FUNDS HELD IN TRUST 955,000 622,851 - CAPITAL ASSETS 251,991 164,349 353,699 LICENSE AGREEMENT - - 2,395,556 DEFERRED FINANCING COSTS 151,042 98,510 1,222,138 -------------------------------------------------------------- $ 4,782,267 $3,118,995 $ 26,050,896 -------------------------------------------------------------- LIABILITIES CURRENT LIABILITIES Bank indebtedness $ 172,468 $ 112,484 $ - Accounts payable 1,538,677 1,003,525 3,602,488 Accrued liabilities 252,294 164,546 88,137 Obligation under capital leases - current portion 38,642 25,202 81,064 Debt component of debentures - current portion 7,353,419 4,795,900 7,126,653 Liabilities of discontinued operations including non-controlling interest 1,246,865 813,206 2,047,155 -------------------------------------------------------------- 10,602,365 6,914,863 12,945,497 DEBT COMPONENT OF DEBENTURES - - 4,861,850 OBLIGATION UNDER CAPITAL LEASES 22,470 14,655 60,862 -------------------------------------------------------------- 10,624,835 6,929,518 17,868,209 -------------------------------------------------------------- SHAREHOLDERS' EQUITY Share capital (31,788,776 common shares) 80,454,077 52,472,149 78,531,643 Equity component of debentures - - 1,896,934 Contributed surplus 1,859,063 1,212,481 1,859,063 Deficit (88,514,723) (57,729,302) (74,451,510) Cumulative translation adjustment 359,015 234,149 346,557 -------------------------------------------------------------- (5,842,568) (3,810,523) 8,182,687 -------------------------------------------------------------- $ 4,782,267 $ 3,118,995 $ 26,050,896 -------------------------------------------------------------- -------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS Years ended Dec. 31, Dec. 31, Dec. 31, 1998 1998 1997 -------------------------------------------------------------- CDN US (Note a) CDN REVENUE Sales $ 114,339 $ 74,572 $ 150,463 Interest Income 167,080 108,970 422,887 Licensing and royalty income 383,325 250,004 90,310 -------------------------------------------------------------- 664,744 433,546 663,660 -------------------------------------------------------------- EXPENSES Cost of goods sold 32,623 21,277 56,608 Selling, general, and administrative 4,856,996 3,167,733 5,734,204 Research and development 2,753,510 1,795,839 11,658,144 Interest 685,436 447,041 11,781 Amortization 439,553 286,676 436,250 Write-off of deferred financing costs 1,175,553 766,696 - Accretion of debenture principal 1,158,330 755,463 - -------------------------------------------------------------- 11,102,001 7,240,725 17,896,987 -------------------------------------------------------------- LOSS FROM OPERATIONS (10,437,257) (6,807,179) (17,233,327) WRITE-OFF OF LICENSE AGREEMENT (2,068,889) (1,349,329) - LOSS ON REDEMPTION OF DEBENTURES (534,724) (348,747) - -------------------------------------------------------------- LOSS FROM CONTINUING OPERATIONS (13,040,870) (8,505,255) (17,233,327) LOSS FROM DISCONTINUED OPERATIONS (1,022,343) (666,772) (1,337,771) -------------------------------------------------------------- NET LOSS $(14,063,213)$(9,172,027) $(18,571,098) -------------------------------------------------------------- -------------------------------------------------------------- LOSS PER SHARE Continuing operations $ (0.43)$ (0.28) $ (0.65) Discontinued operations (0.04) (0.02) (0.05) -------------------------------------------------------------- NET LOSS PER SHARE $ (0.47)$ (0.30) $ (0.70) -------------------------------------------------------------- -------------------------------------------------------------- Weighted average number of common shares outstanding 30,234,706 30,234,706 26,349,968 -------------------------------------------------------------- -------------------------------------------------------------- Note a: The Company reports its financial statements in Canadian dollars. Amounts stated in United States dollars have been translated at a specified rate solely for convenience. Such United States dollar amounts have been translated from Canadian dollars at CDN $1.00 equals US $.6522.  