QLT Announces 2008 Third Quarter Results

"This has been a very productive quarter for QLT," said Bob Butchofsky, President and Chief Executive Officer of QLT. "The Company is in a much stronger position today than it was at the beginning of the year. The successful divestment of three assets provided us with enough capital to redeem our convertible debt and it leaves us in a position of strength with $155.9 million in unrestricted cash. Also, our royalty revenue from Visudyne and Eligard continue to be significant to the Company and provide additional funding for our internal development programs, including our proprietary punctal plug drug elution technology trials. As we announced separately this morning, the data from our Phase 2 CORE trial showed a meaningful reduction in intra-ocular pressure, suggesting that we are making progress in advancing this platform technology."

In a separate matter, QLT's worldwide Visudyne licensee, Novartis, recently announced a restructuring of its U.S. commercial organization. As part of the restructuring, Novartis will no longer have a dedicated Ophthalmic sales force, however it will continue to support Visudyne in the U.S. with indirect sales methods. In the near term, we expect profitability to increase as a result of reduced selling and administrative expenses.

2008 Q3 FINANCIAL RESULTS

Worldwide Product Sales

As previously announced, global Visudyne sales for the third quarter were $34.1 million, a decrease of 30.1% from sales in the third quarter of 2007. Sales in the U.S. were $9.1 million, down 2.9% from the prior-year third quarter, while sales outside the U.S. were $24.9 million, down 36.6% from the prior year. The drop in Visudyne sales was primarily due to the approval and reimbursement in Europe of alternative therapeutics for age-related macular degeneration. We now believe that Visudyne sales for the year will be at the low end of our guidance range of $145 million to $160 million.

Worldwide Eligard sales in the third quarter were $54.7 million, an increase of 18.3% over the third quarter of 2007. U.S. sales of $16.9 million were down 9.5% from last year's third quarter, while sales outside the U.S. increased 37.2% to $37.8 million.

QLT Revenues

For the third quarter, total revenue of $10.9 million was down 25.6% from the third quarter of 2007 due primarily to the drop in worldwide Visudyne product sales, which more than offset the improvement in Visudyne profitability. QLT's share of profit from Visudyne sales in the third quarter was 22.6%, up from 18.8% a year ago, as spending to support the product fell more than 40% from the prior-year quarter. All royalty and product revenues derived from Eligard product sales are now included in Income from discontinued operations, net of income taxes.

QLT Expenses

For the third quarter of 2008, expenditures for research and development (R&D) were $6.9 million compared to $9.1 million in the same period of 2007. The decrease occurred as increased spending on the punctal plug program was more than offset by declines related to preclinical research and lemuteporfin. Selling, general and administrative (SG&A) expense was $4.4 million, down from $6.0 million in the third quarter of 2007, primarily due to savings realized from our restructuring.

Gains on Asset Divestments

QLT reported gains on the three divestments that occurred during the third quarter. The gain on the sale of the building and land of $21.3 million was included as a separate line item within continuing operations. The combined pre-tax gains on the divestures of Aczone and Atrigel of $134.3 million were reported as part of income from discontinued operations.

Operating Income/Loss

Operating income for the third quarter was $17.0 million, but excluding the gain on the sale of building and land we had an operating loss of $4.2 million. This compared favorably to an operating loss of $6.5 million in the prior-year quarter as a result of lower operating expenses, which more than offset the drop in contribution from Visudyne.

Income from Discontinued Operations, Net of Income Taxes

Income from discontinued operations, net of income taxes, was $134.8 million for the third quarter compared to income of $2.2 million in the third quarter last year. The increase was driven by gains realized on the divestment of Aczone and Atrigel during the quarter.

Earnings Per Share (EPS)/Loss Per Share

QLT reported EPS of $1.97 in the third quarter of 2008 compared to EPS of $0.00 in the prior-year quarter. The improvement was primarily the result of gains recorded related to asset divestments during the quarter.

In the third quarter, non-GAAP EPS was $0.05, as the gains on asset divestments, restructuring charge, stock compensation, accrued cost of sales re: MEEI and other items were backed out of GAAP EPS. The full reconciliation of GAAP to non-GAAP EPS for the third quarter and nine months is provided in Exhibits 1 and 2, attached.

Cash and Short-Term Investments

The Company's consolidated cash balance at September 30, 2008 consisted of $155.9 million of cash and cash equivalents and $124.0 million of restricted cash. The restricted cash balance related to the bond posted to stay the execution of the July 17, 2007 judgment, pending appeal, in the MEEI litigation. During the quarter, the Company redeemed all of the $172.5 million of convertible notes that it issued in August 2003. The reported September 30, 2008 cash balance reflects collection of the net proceeds for the three asset divestments, repayment of the convertible notes, as well as a $16.5 million cash installment paid for income taxes that is expected to be adequate to cover all tax liabilities resulting from the three divestments during the quarter. -- www.cnxmarketlink.com