VANCOUVER, Oct. 25 /PRNewswire-FirstCall/ - QLT Inc. (NASDAQ: QLTI; TSX: QLT) today reported financial results for the third quarter ended September 30, 2007. Unless specified otherwise, all amounts are in U.S. dollars and in accordance with U.S. GAAP.
"While the greater than 50% growth in Eligard(R) sales through the first three quarters of 2007 has helped to offset the decline in worldwide Visudyne(R) sales as we move through 2008 we now expect our overall revenue to stabilize. If the revised labeling for Aczone is approved as we would hope, we could see revenue growth whether we out-license or retain Aczone(TM) following a potential launch next summer," said Bob Butchofsky, President and Chief Executive Officer. "Based on the current U.S. Food and Drug Administration (FDA) review guidelines, we expect an FDA decision on Aczone by the end of March."
"We are very excited about the recent acquisition of the ForSight punctal plug technology and the opportunities associated with that program, and we have begun implementing our plans for rapid development of the products that we believe could emerge from that technology. As a part of that effort, in order to align our resources with our expected near term revenue, and to best ensure the success of our most advanced and promising programs, we are reprioritizing our existing research and development (R&D) programs with the net effect being a significant reduction in 2008 R&D costs and staffing levels within both R&D and SG&A functions. We anticipate this review will be completed before the end of the year and will result in overall annualized expense reductions of approximately 20%."
Highlights:
- Eligard guidance range increased to $175M to $185M (from a previous range of $160M to $180M) on the continued strength of sales driven primarily by expanded approvals in Europe and increasing market share for the 6-month Eligard product in the U.S.
- Visudyne sales are stable in the U.S. and declining in Europe as expected given competitive pressures. Profitability of Visudyne is down in the third quarter, however, currently expected to improve in 2008.
- Planning for success with Aczone through modest investment in additional key marketing and sales positions, and currently conducting market research, branding and positioning. All spending on Aczone is expected to add value to the program whether QLT decides to self-market or license Aczone.
- R&D portfolio reprioritization with the net effect being a significant reduction in costs beginning in 2008 and reduced staffing levels in R&D and SG&A with anticipated overall annualized savings of approximately 20%.
We anticipate a restructuring charge in connection with the reprioritization with the majority of that charge being recorded in the fourth quarter of 2007.
2007 Q3 Results:
Worldwide Product Sales
Visudyne worldwide sales for the third quarter were $48.7 million, a decrease of 35.1% over the third quarter of 2006. Visudyne sales in the U.S. were $9.4 million, down 14.2% over last year, while sales in the rest of the world were $39.3 million, a decrease of 38.7% over last year. The decline in Visudyne sales during the third quarter was mainly due to the approval and reimbursement of alternative therapeutics for age-related macular degeneration (AMD) in Europe.
Eligard worldwide sales for the third quarter were $46.3 million, up 35.8% from the third quarter of 2006.
Eligard sales in the U.S. were $18.7 million, up 8.4% over last year, while sales in the rest of the world were $27.7 million, an increase of 63.9% over last year. The increase in sales in the rest of the world was driven by significant growth in Europe, particularly in markets where Eligard was launched during 2006.
QLT Revenues
The Company's revenues were $28.7 million in the third quarter, down $9.6 million or 25.1% from the same period last year. Revenues from Visudyne were $14.6 million in the quarter, down 43.3% from the third quarter last year. QLT's share of profit from Visudyne sales decreased to 18.8% compared to 24.8% in the same period last year. Spending to support Visudyne is still relatively high, but QLT and Novartis expect it to decline further in 2008. We expect that our share of profit from Visudyne sales will begin to grow again and to be in the low to mid 20% range in 2008. Eligard revenue included $7.5 million of royalty revenue, which represented approximately 16.2% of Eligard sales.
QLT Expenses
Research and development (R&D) expense in the third quarter was $10.7 million, down $2.8 million, or 21.0%, from R&D expense in the third quarter last year, primarily due to decreased spending on Atrigel(R) programs and Aczone.
Selling, general and administrative (SG&A) expense in the third quarter was $7.1 million, down $3.0 million or 29.4%, from the third quarter last year, primarily due to decreased legal expenses associated with the TAP litigation.
Operating Income/Loss and Earnings Per Share (EPS)/Loss Per Share
Operating loss for the quarter was $2.6 million, down from operating income of $2.5 million in the third quarter last year. The $5.1 million drop year-over-year occurred primarily because the $9.6 million drop in revenue was not fully offset by the $5.8 million reduction in R&D and SG&A expenses outlined above. In addition, third quarter operating results in 2007 included $1.5 million for accrued amounts related to the Massachusetts Eye and Ear Infirmary (MEEI) judgment (calculated as 3.01% of Visudyne worldwide sales) that were not in the prior year results. That judgment has been stayed pending the outcome of the appeal filed by QLT of the District Court decision in the MEEI litigation.
Also during the quarter, the Company recorded $3.0 million of other income related to the outright purchase by the then-existing licensee of the U.S. rights to QLT USA's BEMA Fentanyl technology.
Earnings per share was $0.00 in the third quarter, compared to a loss per share of $0.04 in the prior-year quarter. The increase occurred primarily because the prior year result included a loss of approximately $9.9 million related to discontinued operations.
Non-GAAP EPS, which excludes all charges and amounts accrued related to the MEEI judgment that is under appeal, stock compensation expense, and the gain related to the sale of BEMA Fentanyl, was $0.02 for the third quarter. Exhibits 1 and 2 provide the full detailed reconciliation between GAAP and non-GAAP EPS, for the third quarter and nine months ended September 30, 2007.
Cash and Short-term Investments
The Company's consolidated cash balance at September 30, 2007 consisted of $172.2 million of cash and cash equivalents and $122.0 million of restricted cash. The quarter end cash position does not reflect the payment of the up-front portion of the purchase price related to the completion of the recent acquisition of ForSight Newco II, Inc., announced October 18, 2007. The restricted cash balance comprises $119.8 million in a bond related to the MEEI judgment announced in July, as well as a $2.3 million purchase price escrow amount related to the divestment in late 2006 of the Company's generic dermatology and manufacturing facility. The Company has $172.5 million of convertible notes that may be put back to the Company in September 2008. The Company expects to add to its cash balance by proceeding with its previously announced intention to monetize the value built up in its property and headquarters in Vancouver and to continue with its goal of licensing or divesting the Atrigel systemic drug delivery technology.
Guidance
Based on recent events and current trends in Visudyne sales, QLT is projecting that Visudyne sales will range from $210 million to $216 million in 2007. Given the continued strong Eligard sales performance, the Company is now projecting that 2007 Eligard sales will be in the range of $175 million to $185 million, an increase over previously announced guidance of $160 million to $180 million.
QLT is also projecting that its SG&A expenses for 2007 will be in the range $27-28 million, up from guidance given at the beginning of the year of $22-25 million. The increase is primarily due to pre-launch commercial spending on Aczone (approximately $1.5 million), increased fees related to the MEEI litigation (approximately $1.3 million) and the 20% increase this year in our functional currency, the Canadian dollar, relative to the U.S. dollar (approximately $1.0 million).
R&D expenses for 2007 are expected to be between $45 million and $50 million.
About QLT
QLT Inc. is a global biopharmaceutical company dedicated to the discovery, development and commercialization of innovative therapies. Our research and development efforts are focused on pharmaceutical products in the fields of ophthalmology and dermatology. In addition, we utilize three unique technology platforms, photodynamic therapy, Atrigel(R) and punctal plugs with drugs, to create products such as Visudyne(R) and Eligard(R) and future product opportunities. For more information, visit our web site at www.qltinc.com.
Atrigel is a registered trademark of QLT USA, Inc.
Visudyne is a registered trademark of Novartis AG.
Eligard is a registered trademark of Sanofi-aventis
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QLT Inc.:
Vancouver, Canada
Therese Hayes
Telephone: 604-707-7000 or 1-800-663-5486
Fax: 604-707-7001
QLT Inc. is listed on the Nasdaq Stock Market under the trading symbol "QLTI" and on the Toronto Stock Exchange under the trading symbol "QLT."
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