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Q3 2009 Earnings Call

October 27, 2009 8:30 am ET


Karen Peterson - Investor Relations Specialist

Robert L. Butchofsky - President, Chief Executive Officer, Director

Cameron R. Nelson - Chief Financial Officer, Vice President - Finance


John Gibbons - Odeon Partners

Matthew Golub (ph) - Greyfire Capital (ph)

Doug Miehm - RBC Capital Markets



Hello and welcome to the QLT Inc. third quarter 2009 conference call. As a reminder, all participants are in a listen only mode and the conference is being recorded. After the presentation there will be an opportunity to ask questions. (Operator's Instructions) At this time I would like to turn the conference over to Karen Peterson, Investor Relations specialist. Please go ahead.

Karen Peterson

Good morning, everyone, and welcome to QLT's third quarter 2009 earnings conference call. If you have not yet received a copy of our press release, you can find it by visiting our website at qltinc.com. The conference call is being webcast live and will be available on our website for the next 30 days. Presenting today are Bob Butchofsky our President and CEO and Camerson Nelson, our CFO.

Before I turn the call over to Bob, I'd like to take a few moments to go over the Safe Harbor Statement. I need to remind you that certain statements in this conference call are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and constitute forward looking information within the meaning of Canadian Securities Laws.

Forward looking statements include, but are not limited to, our financial projections, statements relating to our clinical development, sales and marketing, share repurchase plans, our expectations for timing and results of clinical studies, statements related to the financial impact and accounting of the sale of QLT USA and the Visudyne (inaudible), and statements which include language such as belief, goal, future, project, expects, outlook, and similar expressions.

Forward looking statements are predictions only which involve known and unknown risks, uncertainties and other factors that may cause actual results to materially differ from those expressed in such statements. Any such risks and certainties are taken into account as part of our assumptions underlying these forward looking statements, including but not limited to (inaudible), are uncertain and unlikely to fluctuate. Currency fluctuations may impact financial results. The risk of future sales of Visudyne or Elegard may be less than expected. Uncertainties relating to costs and success of R&D, commercialization of products, and litigations, uncertainties related to the financial implications and tax treatment of transactions, and other factors including those described in QLT's annual report on Form 10-K, quarterly reports on Form 10-Q, and other filings with the US and Canadian securities regulatory authorities.

Forward looking statements are based on the current expectations of QLT, and QLT does not assume any obligation such information to reflect later events or developments except as required by law. And with that, I'll turn the call over to Bob.

Robert L. Butchofsky

Good morning, everyone, and thanks for joining us on the third quarter call. I just want to highlight for you, in addition to our earnings release, we issued a separate release today announcing our intention to do a normal course issuer bid of stock buyback for 5% of our shares or about 2.7 million shares.

I want to turn to the business of the company today, and I'm very pleased with the recent corporate developments that we've had, and I want to review those for you and then let Cam walk you through our financial results, but also explain for you the recent announcements and the impact they'll have on our financial statements going forward.

Over the past couple of months we've continued to focus our business as a pure ocular company and we've positioned ourselves to enhance the revenue stream from Visudyne beginning next year, and we significantly added to our cash position with a receipt of $45 million CAD from the Canadian Revenue Agency in September.

We're even stronger financially as a result of these events with approximately $194 million the bank at the end of the quarter and approximately $210 million in the bank today, and that includes the up-front payment for the QLT USA transaction which was received just after the quarter end. Importantly, we've simplified our business considerably with the divestment of QLT USA.

Now let me talk briefly about each of the deals and what they'll mean for QLT.

On October 1st, TOLMAR Holding agreed to purchase our subsidiary QLT USA which includes the Eligard line of products, and that deal is up to an aggregate of $230 million. We believe this is a win for the company and this allows QLT to receive 80% of our previous Eligard royalty revenue. However, the royalty will come to us on a tax free basis until either the earlier of 2024 or until we receive $200 million in aggregate royalty payments. This allows us still to benefit in the product growth of Eligard and earn $200 million in royalty revenue on a plug program and the synthetic retinoid.

I'd now like to turn to the deal announced last week with Novartis. Since last year we've publically acknowledged the possibility of negotiating a revision to the terms of our contract with Novartis for Visudyne. We disagreed with Novartis's decision late last year to pull their field force in the US that was promoting Visudyne.

We said at the time we did not expect a short term negative impact on Visudyne sales, but that we felt that lack of field promotion would be detrimental to the brand over the long term. We still believe that and our third quarter results support that conclusion when you see that average vials sold per day in the US has dropped from roughly 113 vials per day in the third quarter last year to approximately 84 vials per day in the most recent quarter.

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