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QLT announces third quarter results for 2009

^{Published on 2009-10-27 17:03:46 - Market Wire}
 

 - As previously announced, under the terms of our sale of QLT USA, we expect to be paid up to an additional $200 million in quarterly payments equal to 80% of the royalties paid to QLT USA under the Sanofi and Medigene agreements. As a result of this transaction: - In the fourth quarter we expect to record a gain of over $100 million within income from discontinued operations related to the accounting gain on the sale, which represents the excess of the estimated present value of all consideration expected to be received under the deal compared to the net book value of the net assets that were sold. - We will have an asset on the balance sheet called Contingent Consideration, which represents the estimated present value of the expected remaining payments due from the $200 million of quarterly payments mentioned above. - Cash collected each quarter will not be recorded as revenue, rather it will draw down the Contingent Consideration asset on the balance sheet. In the fourth quarter we expect to collect Contingent Consideration of approximately $8.4 million. - Each period we will have to assess the fair value of the Contingent Consideration and any changes will flow through the P&L as gains or losses within Other Income and Expense. - Guidance for Eligard sales was increased in our last earnings update to $240-255 million. Given that we will no longer be reporting any revenue from Eligard sales on our statements of operations, we are discontinuing our guidance for end-user Eligard sales. However, Eligard sales through the nine months ended September 30, 2009 of $191.1 million were in line with the previous guidance. - Guidance for R&D expense is $30-33 million and for SG&A expense is $18-21 million, unchanged from previous guidance, although we do expect that both line items will be near the bottom end of the guidance ranges. - Guidance for adjusted EBITDA (defined as operating income plus stock compensation and depreciation expense and adjusted for other one-time and non-cash items) was increased in our last earnings call to $15-20 million. As above, given that we will no longer be reporting revenue from Eligard, we are discontinuing guidance for adjusted EBITDA. However, through the nine months ended September 30, 2009 adjusted EBITDA (including EBITDA associated with our discontinued operations) was $18.3 million. - The amendment to the Visudyne agreement does not take effect until January 1, 2010, and therefore there is not expected to be any material impact to our 2009 operating results. Beginning in 2010, QLT's revenue from Visudyne will comprise: (i) end-user net sales of Visudyne in the U.S., (ii) royalties in the amount of 20% of net sales of Visudyne outside of the U.S., (iii) product revenue from selling unlabelled Visudyne product to Novartis for its sale of the product outside of the U.S., and (iv) reimbursement from Novartis for the existing third party royalties we currently pay to University of British Columbia and Massachusetts General Hospital for sales of Visudyne outside the U.S. (no reimbursement will be received for the ongoing damages paid to MEEI in the amount of 3.01% of Visudyne sales). 

 - Announced the receipt of an income tax refund of Cdn$45.3 million from the Canada Revenue Agency. The income tax refund resulted primarily from a request to carryback losses the Company incurred in 2007 in connection with the judgment of the United States District Court for the District of Massachusetts in favor of Massachusetts Eye and Ear Infirmary. - Announced the sale of all of the shares of QLT's wholly-owned U.S. subsidiary, QLT USA, Inc. ("QLT USA"), to TOLMAR Holding, Inc. ("TOLMAR") for up to an aggregate US$230 million pursuant to a Stock Purchase Agreement dated October 1, 2009. QLT USA's principal operating asset is the Eligard line of products for the treatment of prostate cancer. The Eligard line of products is currently manufactured by TOLMAR, Inc., a wholly-owned subsidiary of TOLMAR. - Announced that QLT has restructured its agreement with Novartis Pharma AG to simplify the relationship, under which, effective January 1, 2010, it will, among other things, receive exclusive U.S. rights to the Visudyne patents to sell and market Visudyne in the U.S. 

 QLT Inc.-Financial Highlights CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ----------------------------------------------- (In thousands of United Three months ended Nine months ended States dollars, except September 30, September 30, per share information) 2009 2008 2009 2008 ------------------------------------------------------------------------- (Unaudited) Revenues Net product revenue $ 8,785 $ 10,868 $ 31,296 $ 36,462 ------------------------------------------------------------------------- Costs and expenses Cost of sales(1) 2,202 2,989 12,693 10,663 Research and development 7,375 6,887 20,486 23,049 Selling, general and administrative 4,500 4,422 12,484 15,519 Depreciation 370 464 1,061 2,566 Litigation 316 - 650 864 Gain on sale of long-lived assets - (21,289) - (21,289) Restructuring 3 349 (144) 9,439 ------------------------------------------------------------------------- 14,766 (6,178) 47,230 40,811 ------------------------------------------------------------------------- Operating (loss) income (5,981) 17,046 (15,934) (4,349) Investment and other income (expense) Net foreign exchange gains (losses) 7,517 (296) 14,292 (58) Interest income 1,853 1,853 3,818 5,789 Interest expense - (2,743) (1,848) (8,811) Other (9) 26 16 288 ------------------------------------------------------------------------- 9,361 (1,160) 16,278 (2,792) ------------------------------------------------------------------------- Income (loss) from continuing operations before income taxes 3,380 15,886 344 (7,141) Provision for income taxes (1,144) (3,749) (472) (144) ------------------------------------------------------------------------- Income (loss) from continuing operations 2,236 12,137 (128) (7,285) ------------------------------------------------------------------------- Income from discontinued operations, net of income taxes 6,685 134,789 18,980 136,302 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income $ 8,921 $ 146,926 $ 18,852 $ 129,017 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic net income per common share Continuing operations $ 0.04 $ 0.16 $ (0.00) $ (0.10) Discontinued operations 0.12 1.81 0.33 1.83 ------------------------------------------------------------------------- Net income $ 0.16 $ 1.97 $ 0.33 $ 1.73 Diluted net income per common share Continuing operations $ 0.04 $ 0.16 $ (0.00) $ (0.10) Discontinued operations 0.12 1.81 0.33 1.83 ------------------------------------------------------------------------- Net income $ 0.16 $ 1.97 $ 0.33 $ 1.73 Weighted average number of common shares outstanding (in thousands) Basic 54,624 74,620 56,844 74,620 Diluted 54,765 74,620 56,844 74,620 ------------------------------------------------------------------------- (1) Includes amount accrued on Visudyne sales pursuant to judgment rendered in the MEEI litigation. QLT Inc. CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- (In accordance with United States generally accepted accounting principles) September 30, December 31, (In thousands of United States dollars) 2009 2008 ------------------------------------------------------------------------- (Unaudited) ASSETS Current assets Cash and cash equivalents $ 194,039 $ 165,395 Restricted cash - 124,578 Accounts receivable 8,209 11,151 Income taxes receivable 407 41,801 Inventories 3,922 3,163 Current portion of deferred income tax assets 1,279 403 Mortgage receivable 11,221 - Assets held for sale 58,543 72,763 Other 7,240 10,474 ------------------------------------------------------------------------- 284,860 429,728 ------------------------------------------------------------------------- Property, plant and equipment 2,345 3,113 Deferred income tax assets 6,772 5,139 Goodwill 23,145 23,145 Mortgage receivable - 9,834 Long-term inventories and other assets 18,304 20,799 ------------------------------------------------------------------------- $ 335,426 $ 491,758 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES Current liabilities Accounts payable $ 4,676 $ 4,865 Accrued restructuring charge 123 314 Accrued liabilities 4,097 129,473 Liabilities held for sale 7,316 8,906 Deferred revenue 4,306 4,204 ------------------------------------------------------------------------- 20,518 147,762 Uncertain tax position liabilities 1,447 766 ------------------------------------------------------------------------- 21,965 148,528 ------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Common shares 514,056 702,221 Additional paid-in capital 269,035 123,367 Accumulated deficit (560,712) (579,564) Accumulated other comprehensive income 91,082 97,206 ------------------------------------------------------------------------- 313,461 343,230 ------------------------------------------------------------------------- $ 335,426 $ 491,758 ------------------------------------------------------------------------- ------------------------------------------------------------------------- As at September 30, 2009, there were 54,630,692 issued and outstanding common shares and 5,908,273 outstanding stock options. QLT Inc. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS ---------------------------------------------- 2009 Third Quarter Reconciliation of GAAP Earnings to Adjusted Non-GAAP Earnings Exhibit 1 ------------------------------------------------------------------------- Three months Three months ended ended (In millions of United September 30, September 30, States dollars, except 2009 2009 per share information) GAAP Adjustments Non-GAAP(1) ------------------------------------------------------------------------- (Unaudited) Revenues Net product revenue $ 8.8 $ - $ 8.8 ------------------------------------------------------------------------- Cost and expenses Cost of sales (2.2) 0.0 (a) (2.2) Research and development (7.4) 0.2 (a) (7.2) Selling, general and administrative (4.5) 0.9 (a)(b) (3.6) Depreciation (0.4) - (0.4) Litigation (0.3) 0.3 (c) - Restructuring (0.0) 0.0 (d) - ------------------------------------------------------------------------- (14.8) 1.4 (13.3) ------------------------------------------------------------------------- Operating loss (6.0) 1.4 (4.6) Investment and other income (expense) Net foreign exchange gains (losses) 7.5 (8.0) (e) (0.5) Interest income 1.9 (1.6) (f) 0.2 Other (0.0) - (0.0) ------------------------------------------------------------------------- 9.4 (9.7) (0.3) ------------------------------------------------------------------------- Income(loss) from continuing operations before income taxes 3.4 (8.3) (4.9) Provision for income taxes (1.1) 1.6 (g) 0.5 ------------------------------------------------------------------------- Income (loss) from continuing operations 2.2 (6.7) (4.4) ------------------------------------------------------------------------- Income from discontinued operations, net of income taxes 6.7 (6.7) (h) - ------------------------------------------------------------------------- Net income (loss) $ 8.9 $ (13.3) $ (4.4) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic net income (loss) per common share: Continuing operations $ 0.04 $ (0.08) Discontinued operations 0.12 0.00 ----------------------------------------------------------------------- Net income (loss) $ 0.16 $ (0.08) Diluted net income (loss) per common share: Continuing operations $ 0.04 $ (0.08) Discontinued operations 0.12 0.00 ----------------------------------------------------------------------- Net income (loss) $ 0.16 $ (0.08) Weighted average number of common shares outstanding (in millions): Basic 54.6 54.6 Diluted 54.8 54.8 Adjustments: ----------- (a) Remove stock-based compensation. (b) Remove capital tax. (c) Remove litigation expense. (d) Remove restructuring expense. (e) Remove foreign exchange gains related to intercompany debt. (f) Remove interest income related to income tax refunds. (g) Remove income tax impact of the above adjustments. (h) Remove income from discontinued operations, net of income tax. (1) The adjusted non-GAAP financial measures have no standardized meaning under GAAP and are not comparable between companies. Management believes that the adjusted non-GAAP financial measures are useful for the purpose of financial analysis. Management uses these measures internally to evaluate the Company's operating performance before items that are considered by management to be outside of the Company's core operating results. QLT Inc. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS ---------------------------------------------- 2009 Third Quarter Reconciliation of GAAP Earnings to Adjusted Non-GAAP Earnings Exhibit 2 ------------------------------------------------------------------------- Nine months Nine months ended ended (In millions of United September 30, September 30, States dollars, except 2009 2009 per share information) GAAP Adjustments Non-GAAP(1) ------------------------------------------------------------------------- (Unaudited) Revenues Net product revenue $ 31.3 $ - $ 31.3 ------------------------------------------------------------------------- Cost and expenses Cost of sales (12.7) 4.7 (a)(b) (8.0) Research and development (20.5) 0.7 (b) (19.8) Selling, general and administrative (12.5) 1.4 (b)(c) (11.0) Depreciation (1.1) - (1.1) Litigation (0.7) 0.7 (d) - Restructuring 0.1 (0.1) (e) - ------------------------------------------------------------------------- (47.2) 7.3 (39.9) ------------------------------------------------------------------------- Operating loss (15.9) 7.3 (8.6) Investment and other income (expense) Net foreign exchange gains (losses) 14.3 (16.0) (f) (1.7) Interest income 3.8 (2.7) (g) 1.1 Interest expense (1.8) - (1.8) Other 0.0 - 0.0 ------------------------------------------------------------------------- 16.3 (18.7) (2.4) ------------------------------------------------------------------------- Income (loss) from continuing operations before income taxes 0.3 (11.3) (11.0) Provision for income taxes (0.5) 2.0 (h) 1.5 ------------------------------------------------------------------------- Loss from continuing operations (0.1) (9.3) (9.5) ------------------------------------------------------------------------- Income from discontinued operations, net of income taxes 19.0 (19.0) (i) - ------------------------------------------------------------------------- Net income (loss) $ 18.9 $ (28.4) $ (9.5) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic net income (loss) per common share: Continuing operations $ (0.00) $ (0.17) Discontinued operations 0.33 0.00 ----------------------------------------------------------------------- Net income (loss) $ 0.33 $ (0.17) Diluted net income (loss) per common share: Continuing operations $ (0.00) $ (0.17) Discontinued operations 0.33 0.00 ----------------------------------------------------------------------- Net income (loss) $ 0.33 $ (0.17) Weighted average number of common shares outstanding (in millions): Basic 56.8 56.8 Diluted 56.8 56.8 Adjustments: ----------- (a) Remove inventory write-down. (b) Remove stock-based compensation. (c) Remove capital tax. (d) Remove litigation expense. (e) Remove restructuring credit. (f) Remove foreign exchange gains related to intercompany debt. (g) Remove interest income related to income tax refunds. (h) Remove income tax impact of the above adjustments. (i) Remove income from discontinued operations, net of income tax. (1) The adjusted non-GAAP financial measures have no standardized meaning under GAAP and are not comparable between companies. Management believes that the adjusted non-GAAP financial measures are useful for the purpose of financial analysis. Management uses these measures internally to evaluate the Company's operating performance before items that are considered by management to be outside of the Company's core operating results. 

 QLT Plug Delivery, Inc. is a wholly-owned subsidiary of QLT Inc. Eligard is a registered trademark of Sanofi-aventis. Visudyne is a registered trademark of Novartis AG.