QLT Inc. (QLT), a innovator of therapies in the field of ophthalmology and dermatology, has reported total revenues of $124.14 million for the full year 2008, compared with the total revenues of $127.61 million in the previous year-end. It reported a net income of $134.89 million or $1.81 per share, for the full year of 2008, compared with the net loss of $110 million or $1.47 per share, in the previous year-end.
“2008 was a pivotal year for us as we concluded a series of corporate development activities, including divesting the majority of our non-core assets, retiring our convertible debt, and launching a Dutch tender offer,” said Bob Butchofsky, President and Chief Executive Officer of QLT. “We are excited to embark on our next chapter as an ophthalmology-focused, development driven company. While we feel comfortable including Eligard® in our guidance for 2009, there is still the possibility that we will receive an attractive offer for the asset and divest Eligard at some point in the future. This will be a significant year for our punctal plug platform and we plan to be in a position to wrap up Phase II development by the end of this year.”
2008 financial results
Worldwide product sales
As previously announced, global Visudyne sales for the fourth quarter were $30.6 million, a decrease of 32.7% over sales in the fourth quarter of 2007. Sales in the US of $8.0 million were down 20.0% from the prior-year fourth quarter, while sales outside the US of $22.6 million were down 36.3%. For the full year 2008, worldwide Visudyne sales were $141.9 million, 34.0% lower than in 2007, as US sales declined 4.1% and non-US sales declined 40.4%. The drop in Visudyne sales was primarily due to the approval and reimbursement in Europe of alternative therapeutics for age-related macular degeneration.
Worldwide Eligard sales in the fourth quarter were $59.4 million, an increase of 23.6% over the fourth quarter of 2007. US sales of $20.4 million were up 16.8% from the fourth quarter of 2007, while sales outside the US increased 27.5% to $39.1 million. For the full year 2008, Eligard sales were $224.8 million, up 24.2% from the prior year, as US sales of $76.7 million grew 2.3% and non-US sales of $148.1 million were up 39.8%.
For the fourth quarter, total revenue of $39.0 million was up 26.3% from the fourth quarter of 2007, as the increase in Eligard revenue more than offset a drop in Visudyne revenue. For the fourth quarter, revenue from Visudyne of $11.9 million fell 12.7% while revenue related to Eligard (royalty and product revenue combined) of $24.0 million was up 41.4%. The 2008 fourth quarter revenue also included a one-time milestone of $2.8 million for achieving annual sales of Eligard in Europe of over $100 million. For the full year 2008, total revenues of $124.1 million were down 2.7% from the prior year due primarily to the decline in Visudyne revenue, which more than offset growth in Eligard revenue. Revenue from Visudyne for the full year was $48.3 million, down 28.7% from $67.7 million in the prior year, while royalty and product revenue related to Eligard was $71.5 million, up 22.3% from the prior year.
QLT’s share of profit from Visudyne sales in the fourth quarter was 25.3%, up from 12.9% in Q4 2007. However, the 2007 results included approximately $6 million of expense related to provisions for excess inventory taken in the fourth quarter of that year by both QLT and Novartis. Excluding this expense, the profit share in the fourth quarter of 2007 would have been 20.1%. For the full year 2008, QLT’s share of profit from Visudyne sales was 23.1%, up from 20.7% in 2007 (or 22.2% excluding the provisions for excess inventory). The increase in profitability for both the fourth quarter and the full year occurred as the reduction in Visudyne expenses exceeded the decline in sales.
For the fourth quarter of 2008, expenditures for Research and Development (R&D) were $6.5 million compared to $12.0 million in the same period of 2007. For the full year, expenditures for R&D were $29.6 million, down from $38.6 million in 2007.
For the fourth quarter of 2008, Selling General and Administrative (SG&A) expense was $4.6 million, down from $6.9 million in the fourth quarter of 2007. For the full year, SG&A expenditures of $21.7 million were down from $25.8 million in 2007, primarily due to savings realized from our restructuring activities during the year.
Gains on Asset Divestments
QLT reported gains on the three asset divestments that occurred during 2008. The gain on the sale of the building and land of $21.7 million was included as a separate line item within continuing operations.
Operating Income / Loss
Operating income for the fourth quarter was $11.4 million, compared to a loss of $48.1 million in the prior year quarter. The 2007 loss was driven by a charge of $42.9 million for the purchase of in-process R&D related to the acquisition of ForSight Newco II, Inc. (and our punctal plug delivery system) in October 2007. The improvement in the 2008 operating results was driven by increased revenue from Eligard and lower spending on R&D and SG&A. Full year operating income for 2008 was $26.6 million, compared to an operating loss in 2007 of $144.3 million. The income in 2008 included the gain of $21.7 million on the sale of the building and land, which was partially offset by a $10.2 million restructuring charge. Excluding these two items, 2008 operating profit would have been $15.1 million. The operating loss in 2007 was due primarily to a charge of $110.2 million related to the Massachusetts Eye and Ear Infirmary (MEEI) judgment as well as the charge for purchase of in-process R&D.
Earnings Per Share (EPS) / Loss Per Share
QLT reported EPS of $0.08 in the fourth quarter, compared to a loss per share of $0.62 in the fourth quarter of 2007. The loss per share in the fourth quarter of 2007 was driven by the charge for purchase of in-process R&D. For the full year 2008, EPS of $1.81 compared to a loss per share of $1.47 in 2007. The earnings in 2008 were driven by the gains on asset divestments, while the loss for the full year 2007 was primarily due to charges for the MEEI judgment and the purchase of in-process R&D.
The company’s consolidated cash balance at December 31, 2008 consisted of $165.4 million of cash and cash equivalents and $124.6 million of restricted cash, which represents a bond posted to stay execution of the MEEI judgment. The December 31, 2008 cash balance does not reflect payment for the $50 million modified Dutch auction tender offer completed in 2009. During 2008, the company redeemed $172.5 million of convertible notes, resulting in no long term debt at year end.
QLT is projecting that Visudyne sales will range from $90 million to $110 million in 2009 and expects that its share of profit from Visudyne sales will be approximately 24-26% in 2009. Eligard sales for the full year are expected to be $220 million to $240 million. Combined R&D and SG&A expenses are expected to be approximately flat to 2008, with R&D expense in 2009 of $30 million to $33 million and SG&A expense of $18 million to $21 million. Adjusted EBITDA (measured as operating income plus depreciation and stock compensation expense less licensing and milestone revenue) is expected to be $10 million to $15 million for 2009, assuming Eligard is not divested during the year.