VANCOUVER, Feb. 22 /PRNewswire-FirstCall/ - QLT Inc. today reported its financial results for the fourth quarter ended December 31, 2005 and full year 2005 as well as issued its Visudyne sales guidance for 2006. Unless specified otherwise, all amounts are in U.S. dollars and in accordance with U.S. GAAP.
“The Company has faced many challenges over the last 12 months. I continue to work closely with the Senior Management team and our Board of Directors in reviewing the Company’s assets, products, business lines, and strategic position to determine the most effective steps toward enhancing shareholder value,” said Bob Butchofsky, Acting Chief Executive Officer.
2005 RESULTS
Earnings Per Share (EPS)
On a GAAP basis, QLT reported a loss of $4.04 in the fourth quarter and a loss of $3.51 for the full year 2005. The large fourth quarter and full year losses were primarily due to a $410.5 million non-cash charge for impairment of goodwill and other intangible assets, described below, that resulted from the acquisition of Atrix Laboratories, Inc.
Non-GAAP EPS was $0.11 in the fourth quarter and $0.66 for the full year 2005, within the Company’s 2005 non-GAAP EPS guidance range of $0.63 to $0.77. Exhibits 1 and 2 provide detailed reconciliations from GAAP to non-GAAP EPS for both the quarter and the year. Non-GAAP EPS was derived by taking GAAP EPS and excluding (i) the impairment of goodwill, other intangible assets, and plant and equipment, (ii) the amortization of intangibles (iii) restructuring charges, and (iv) separation charges related to the departure of the former CEO.
Annual Sales
As previously announced, Visudyne(R) sales for the fourth quarter were $107.2 million, a decrease of 13.5% over sales in the fourth quarter of 2004. Worldwide Visudyne sales were $483.8 million for the full year 2005, 7.9% higher than for 2004. For the full year 2005, Eligard(R) sales were $88.8 million worldwide, an increase of 5% over 2004.
Revenues
Total revenues reached $242.0 million in 2005, growing 30.0% from the prior year due primarily to revenue from products added in the Atrix acquisition. Revenue from Visudyne for the year was $187.2 million up by $9.8 million over the prior year. The profit share from Visudyne sales increased to 31.7% from 31.1% in 2004.
Research and Development (R&D) Expenses
Expenditures for R&D in 2005 were $74.6 million compared to $50.1 million for the same period in 2004, primarily due to programs resulting from the Atrix acquisition. For the fourth quarter of 2005, expenditures for R&D were $19.8 million compared to $17.2 million in the same period of 2004.
Selling, General & Administrative (SG&A) Expenses
For 2005, SG&A expenditures were $23.5 million compared to $17.5 million in 2004, an increase of 34.4%, resulting from a full year of expenses from the Atrix acquisition and separation charges related to the departure of the former CEO. For the fourth quarter of 2005, SG&A expenditures were $5.4 million, down $0.7 million from the fourth quarter of 2004.
Impairment of Goodwill and Other Intangibles
QLT previously disclosed that, under current accounting standards, we had and would continue to periodically evaluate changes in events and circumstances related to our business for any potential impairment of goodwill and intangible assets. As a result of that review, in the fourth quarter of 2005 the Company recorded a $410.5 million non-cash charge for impairment of goodwill and other intangible assets resulting from our 2004 acquisition of Atrix. At the end of 2005, management updated QLT’s strategic plan, which led management to revisit the impairment analysis previously conducted during the third quarter of 2005. Management determined the amount of the impairment charge after considering QLT’s updated strategic plan and factors such as the actual sales performance of Eligard in 2005 and projections for future Eligard sales performance, the adverse trial decision in the ongoing TAP litigation related to Eligard, future projections for Aczone(TM), decisions to partner future Atrigel(R) programs, and adjustments to forecasts for Atrix products in pre-clinical and clinical development.
Cash and Short-Term Investments
The Company’s cash and short-term investments at December 31, 2005 were $466 million, compared with $380 million at December 31, 2004. The balance benefited from the build-up during the year of our Income Tax Payable, from zero at the start of the year to $17 million by year-end. The amount owing will be paid in the first quarter of 2006.
2006 Visudyne Sales Guidance
Based on recent events and current trends in Visudyne sales, QLT is projecting that Visudyne sales will range from $370 million to $400 million in 2006.
Pending the outcome of the ongoing discussions with the Board of Directors as well as recent developments with respect to the Eligard litigation outlined below, QLT is suspending detailed guidance for 2006.
Eligard Litigation Update
TAP has filed a motion to prevent or limit the manufacture, sale and promotion of Eligard in the U.S. until expiry of the patent on May 1, 2006. The Company’s subsidiary, QLT USA Inc., has opposed that motion and filed a motion with the court to ensure the continued availability of Eligard to prostate cancer patients in the U.S. until the TAP patent expires. Those motions have not yet been heard by the court. In addition, unless the court explicitly permits the continued sale of Eligard, or a license is granted, the marketing partner for Eligard in the U.S., Sanofi-aventis, has advised that it may elect to suspend Eligard sales in the U.S. until the expiry of the TAP patent on May 1, 2006.
About QLT
QLT Inc. is a global biopharmaceutical company specializing in developing treatments for cancer, eye diseases, dermatological and urological conditions. We have combined our expertise in the discovery, development, commercialization and manufacture of innovative drug therapies with our unique technology platforms to create highly successful products such as Visudyne and Eligard. For more information, visit our web site at www.qltinc.com.
A full explanation of how QLT determines and recognizes revenue resulting from Visudyne sales is contained in the financial statements contained in the periodic reports on Forms 10-Q and 10-K, under the heading “Significant Accounting Policies - Revenue Recognition.” Visudyne sales are product sales by Novartis under its agreement with QLT.
Certain statements in this press release constitute “forward looking statements” of QLT within the meaning of the Private Securities Litigation Reform Act of 1995 and constitute “forward looking information” within the meaning of the Securities Act (Ontario). Forward looking statements include, but are not limited to: the Company’s projections of 2006 sales of Visudyne; and statements which contain language such as: “assuming,” “prospects,” “future,” “projects,” “expects” and “outlook.” Forward-looking statements are predictions only which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from those expressed in such statements. Factors that could cause actual events or results to differ materially include, but are not limited to: the Company’s future operating results are uncertain and likely to fluctuate, currency fluctuations in primary markets might impact financial results, the risk that future sales of Visudyne may be less than expected (including as a result of the timing and impact of existing competitive products and/or new products launches by competitors), the uncertainty of and timing of pricing and reimbursement might limit the future sales of Visudyne, the appeal of the adverse trial decision in the ongoing TAP patent litigation against the Company’s subsidiary (QLT USA, Inc.) might be unfavorable and could result in the payment by QLT USA of damages which may be substantial, sales of Eligard could be adversely affected in the event there is an injunction granted preventing the manufacture, sale and/or promotion of Eligard in the United States until the expiry of the TAP patent on May 1, 2006, the Company’s reliance on third-parties for the manufacture of Visudyne, the Company’s reliance on third-parties for the continued supply of light source and light delivery devices for Visudyne therapy, the risk that the Company’s dependence on third parties to market Visudyne, general competitive conditions within the biotechnology and drug delivery industry, general economic conditions and other factors described in detail in QLT’s Annual Information Form on Form 10-K, quarterly reports on Form 10-Q and other filings with the U.S. Securities and Exchange Commission and Canadian securities regulatory authorities. Forward looking statements are based on the current expectations of QLT and QLT does not assume any obligation to update such information to reflect later events or developments except as required by law.
QLT Inc. - Financial Highlights CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ----------------------------------------------- (In accordance with United States generally accepted accounting principles) (In thousands of United States Three months ended Year ended dollars, except per share December 31, December 31, information) 2005 2004 2005 2004 ------------------------------------------------------------------------- (Unaudited) Revenues Net product revenue $ 43,507 $ 49,939 $ 210,024 $ 179,298 Net royalties 5,290 2,338 19,942 2,338 Contract research and development 1,366 1,532 11,283 4,436 Licensing and milestones 222 - 724 - ------------------------------------------------------------------------- 50,385 53,809 241,973 186,072 ------------------------------------------------------------------------- Costs and expenses Cost of sales 11,307 11,059 51,230 33,377 Research and development 19,822 17,192 74,597 50,059 Selling, general and administrative 5,411 6,110 23,477 17,464 Depreciation 2,221 1,188 8,088 3,715 Amortization of intangibles 1,806 852 6,915 852 Impairment of goodwill and other intangible assets 410,534 - 410,534 - Impairment of plant and equipment 6,955 - 6,955 - Purchase of in-process research and development - 236,000 - 236,000 Restructuring charge 4,657 - 8,042 - ------------------------------------------------------------------------- 462,713 272,401 589,837 341,467 ------------------------------------------------------------------------- Operating loss (412,328) (218,592) (347,865) (155,395) Investment and other income Net foreign exchange gains 456 540 4,152 837 Interest income 4,147 2,766 13,203 10,136 Interest expense (1,594) (1,602) (6,357) (6,261) Other gains (losses) 45 (7) 49 1,905 ------------------------------------------------------------------------- 3,054 1,697 11,047 6,617 ------------------------------------------------------------------------- Loss before income taxes (409,274) (216,895) (336,818) (148,778) Recovery (provision) for income taxes 38,881 (6,345) 11,406 (29,448) ------------------------------------------------------------------------- Loss before extraordinary gain (370,393) (223,240) (325,412) (178,226) ------------------------------------------------------------------------- Extraordinary gain - 2,124 - 12,517 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net loss $(370,393) $(221,116) $(325,412) $(165,709) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic net loss per common share Loss before extraordinary gain $ (4.04) $ (2.64) $ (3.51) $ (2.43) Extraordinary gain - 0.02 - 0.17 ------------------------------------------------------------------------- Net loss $ (4.04) $ (2.62) $ (3.51) $ (2.26) Diluted net loss per common share Loss before extraordinary gain $ (4.04) $ (2.64) $ (3.51) $ (2.43) Extraordinary gain - 0.02 - 0.17 ------------------------------------------------------------------------- Net loss $ (4.04) $ (2.62) $ (3.51) $ (2.26) Weighted average number of common shares outstanding (in thousands) Basic 91,610 84,513 92,637 73,240 Diluted 91,610 84,513 92,637 73,240 ------------------------------------------------------------------------- QLT Inc. CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- (In accordance with United States generally accepted accounting principles) December 31, December 31, (In thousands of United States dollars) 2005 2004 ------------------------------------------------------------------------- (Unaudited) ASSETS Current assets Cash and cash equivalents $ 345,799 $ 277,087 Short-term investment securities 119,816 102,765 Accounts receivable 43,986 56,600 Inventories 46,239 45,899 Current portion of deferred income tax assets 2,480 4,753 Other 20,728 13,521 ------------------------------------------------------------------------- 579,048 500,625 ------------------------------------------------------------------------- Property, plant and equipment 75,497 81,674 Deferred income tax assets 7,593 6,926 Intangibles, net 6,926 119,600 Goodwill 103,958 402,518 Other long-term assets 3,472 4,906 ------------------------------------------------------------------------- $ 776,494 $1,116,249 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES Current liabilities Accounts payable $ 14,519 $ 12,993 Income taxes payable 17,253 - Accrued restructuring charge 5,205 - Other accrued liabilities 17,901 19,528 Current portion of deferred revenue 9,457 2,278 ------------------------------------------------------------------------- 64,335 34,799 Deferred income tax liabilities 9,800 52,171 Deferred revenue 3,748 - Long-term debt 172,500 172,500 ------------------------------------------------------------------------- 250,383 259,470 ------------------------------------------------------------------------- SHAREHOLDERS’ EQUITY Common shares 861,676 848,498 Additional paid in capital 60,396 92,193 Accumulated deficit (495,476) (173,794) Accumulated other comprehensive income 99,515 89,882 ------------------------------------------------------------------------- 526,111 856,779 ------------------------------------------------------------------------- $ 776,494 $1,116,249 ------------------------------------------------------------------------- ------------------------------------------------------------------------- As at December 31, 2005, there were 91,184,681 issued and outstanding common shares and 9,647,224 outstanding stock options. QLT Inc. Condensed Consolidated Statement of Operations 2005 Fourth Quarter Reconciliation of GAAP Earnings to Exhibit 1 Non-GAAP Earnings ------------------------------------------------------------------------- (In millions of United States dollars, except per share data) (Unaudited) Three months Three months ended ended December 31, December 31, 2005 2005 Adjusted GAAP Adjustments Non-GAAP(1) ------------------------------------------------------------------------- Revenues Net product revenue $ 43.5 $ - $ 43.5 Net royalties 5.3 - 5.3 Contract research and development 1.4 - 1.4 Licensing and milestones 0.2 - 0.2 ------------------------------------------------------------------------- 50.4 - 50.4 ------------------------------------------------------------------------- Cost and expenses Cost of sales (11.3) - (11.3) Research and development (19.8) - (19.8) Selling, general and administrative (5.4) - (5.4) Depreciation (2.2) - (2.2) Amortization of intangibles (1.8) 1.8(a) - Impairment of goodwill & other intangible assets (410.5) 410.5(b) - Impairment of plant and equipment (7.0) 7.0(c) - Restructuring charge (4.7) 4.7(d) - ------------------------------------------------------------------------- (462.7) 424.0 (38.7) ------------------------------------------------------------------------- Operating (loss) income (412.3) 424.0 11.7 Investment and other income Net foreign exchange gains 0.5 - 0.5 Interest income 4.1 - 4.1 Interest expense (1.6) - (1.6) Other gains 0.0 - 0.0 ------------------------------------------------------------------------- 3.0 - 3.0 ------------------------------------------------------------------------- (Loss) income before income taxes (409.3) 424.0 14.7 Recovery (provision) for income taxes 38.9 (43.6)(e) (4.7) ------------------------------------------------------------------------- Net (loss) income $ (370.4) $ 380.4 $ 10.0 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net (loss) income per common share: Basic $ (4.04) $ 0.11 Diluted $ (4.04) $ 0.11 Weighted average number of common shares outstanding (in millions) Basic 91.6 91.6 Diluted 91.6 91.7 Adjustments: ------------ (a) Remove amortization of acquired intangibles resulting from our merger with Atrix in November, 2004. (b) Remove impairment of goodwill and other intangible assets. (c) Remove impairment of plant and equipment. (d) Remove restructuring costs. (e) Remove the income tax impact of (a), (b), (c), and (d). Note 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 because they exclude those non-operational activities or transactions that are not necessarily relevant to understanding the trends of the Company or the prospects of future performance. QLT Inc. Condensed Consolidated Statement of Operations Year ended December 31, 2005 Reconciliation of GAAP Earnings to Non-GAAP Earnings Exhibit 2 ------------------------------------------------------------------------- (In millions of United States dollars, except per share data) (Unaudited) Year ended Year ended December 31, December 31, 2005 2005 Adjusted GAAP Adjustments Non-GAAP(1) ------------------------------------------------------------------------- Revenues Net product revenue $ 210.0 $ - $ 210.0 Net royalties 19.9 - 19.9 Contract research and development 11.3 - 11.3 Licensing and milestones 0.7 - 0.7 ------------------------------------------------------------------------- 242.0 - 242.0 ------------------------------------------------------------------------- Cost and expenses Cost of sales (51.2) - (51.2) Research and development (74.6) - (74.6) Selling, general and administrative (23.5) 2.9(a) (20.6) Depreciation (8.1) - (8.1) Amortization of intangibles (6.9) 6.9(b) - Impairment of goodwill and other intangible assets (410.5) 410.5(c) - Impairment of plant and equipment (7.0) 7.0(d) Restructuring (8.0) 8.0(e) - ------------------------------------------------------------------------- (589.8) 435.3 (154.5) ------------------------------------------------------------------------- Operating (loss) income (347.8) 435.3 87.5 Investment and other income Net foreign exchange gains 4.2 - 4.2 Interest income 13.2 - 13.2 Interest expense (6.4) - (6.4) Other gains 0.0 - 0.0 ------------------------------------------------------------------------- 11.0 - 11.0 ------------------------------------------------------------------------- (Loss) income before income taxes (336.8) 435.3 98.5 Recovery (provision) for income taxes 11.4 (47.4)(f) (36.0) ------------------------------------------------------------------------- Net (loss) income $ (325.4) $ 387.9 $ 62.5 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net (loss) income per common share: Basic $ (3.51) $ 0.67 Diluted $ (3.51) $ 0.66 Weighted average number of common shares outstanding (in millions) Basic 92.6 92.6 Diluted 92.6 102.6 Adjustments: ------------ (a) Remove separation costs related to the resignation of Paul J. Hastings (former President and Chief Executive Officer). (b) Remove amortization of acquired intangibles resulting from our merger with Atrix in November, 2004. (c) Remove impairment of goodwill and other intangible assets. (d) Remove impairment of plant and equipment. (e) Remove restructuring costs. (f) Remove the income tax impact of (a), (b), (c), (d), and (e). Note 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 because they exclude those non-operational activities or transactions that are not necessarily relevant to understanding the trends of the Company or the prospects of future performance.
QLT Inc. will hold an investor conference call to discuss year-end results, 2006 guidance, as well as the TAP litigation on Wednesday, February 22nd at 8:30 a.m. ET (5:30 a.m. PT). The call will be broadcast live via the Internet at www.qltinc.com. To participate on the call, please dial 1-800-525-6384 (North America) or 780-409-1668 (International) before 8:30 a.m. ET. A replay of the call will be available via the Internet and also via telephone at 1-800-695-1018 (North America) or 402-220-1753 (International), access code 9614255.
QLT Inc.: --------- Vancouver, Canada Therese Hayes/Tamara Hicks Telephone: 604-707-7000 or 1-800-663-5486 Fax: 604-707-7001 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. 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.”
QLT Inc.
CONTACT: QLT Inc.: Vancouver, Canada, Therese Hayes, Tamara Hicks,Telephone: (604) 707-7000, or 1-800-663-5486, Fax: (604) 707-7001; Torequest a free copy of this organization’s annual report, please go tohttp://www.newswire.ca and click on Tools for Investors.
