VANCOUVER, Oct. 27 /PRNewswire-FirstCall/ - QLT Inc. today reported financial results for the third quarter ended September 30, 2005. Unless specified otherwise, all amounts are in U.S. dollars and in accordance with U.S. GAAP.
2005 Q3 Results
Sales
Visudyne(R) worldwide sales for the third quarter were $123.7 million, an increase of 8.6% over the third quarter of 2004. Visudyne sales in the U.S. for the quarter were $51.0 million, down 9.7% over the same period last year. Visudyne sales in the rest of the world were $72.8 million, an increase of 26.6% over the same period last year.
Eligard(R) worldwide sales for the third quarter were $21.4 million, down 6.6% from the third quarter of 2004. Eligard sales in the U.S. for the quarter were $12.0 million, down 30.7% over the same period last year. Eligard sales in the rest of the world were $9.4 million, an increase of 67.3% from the same period last year.
Sales of dermatology products from our Sandoz alliance for the third quarter were $4.0 million, compared to $2.3 million in the same period last year.
Total product sales were $149.6 million, up 6.9% over total product sales in the third quarter of 2004.
Diluted Earnings Per Share (EPS)
Non-GAAP EPS, which excludes restructuring charges, amortization of intangible assets, and separation charges related to the recent departure of our former CEO, was $0.17 in the third quarter, while GAAP EPS was $0.14. A reconciliation between non-GAAP EPS and GAAP EPS for the third quarter of 2005 is provided in Exhibit 1 of this press release.
Prior year GAAP results reflect operations before our merger in the fourth quarter last year. Therefore, we have provided non-GAAP (adjusted pro forma) results, which reflect ongoing results as if the merger had occurred just prior to January 1, 2004. A reconciliation between non-GAAP results and GAAP results for the third quarter of 2004 is provided in Exhibit 3. For the third quarter of 2004, non-GAAP EPS, excluding the charge for amortization of intangibles, was $0.15, while GAAP EPS was $0.24.
Growth in non-GAAP EPS from $0.15 in the third quarter of 2004 to $0.17 in 2005 was primarily attributable to growth in Visudyne sales and profitability, higher interest income, and lower R&D expense. These gains were partially offset by lower Contract R&D Revenue and a higher effective tax rate in the quarter.
QLT Revenues
The Company's revenues were $64.2 million in the third quarter, up 37.9% from revenues in the same period last year, and up 5.9% compared to pro forma (non-GAAP) revenues in the same period last year.
Revenue from Visudyne was $49.9 million in the third quarter, up 9.3% from the third quarter last year. QLT's share of profit from Visudyne sales increased to 33.7% in the third quarter, up from 32.0% in the same period last year.
Research and Development (R&D) Expense
R&D expense in the third quarter was $18.3 million, up $6.1 million from R&D expense in the third quarter last year primarily due to programs added in the Atrix acquisition. R&D expense was down $1.6 million from non-GAAP R&D expense of $19.9 million last year.
Selling, General and Administrative (SG&A) Expense
For the third quarter of 2005, SG&A expense was $8.3 million, up $5.4 million from prior year third quarter expense due to separation charges related to the departure of our former CEO during the third quarter and to the Atrix acquisition. Non-GAAP SG&A expense in the quarter was $5.4 million, up slightly from the pro forma amount last year.
Cash and Short-term Investments
The company's cash and short-term investments increased from $415 million to $449 million during the third quarter of 2005.
2005 Revised Eligard Guidance
Based on recent events and current trends in Eligard sales, QLT is revising its Eligard sales range from $90-$115 million to a new range of $80-$90 million. Total sales for Eligard in 2004 were $84 million.
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.
QLT Inc. - Financial Highlights Condensed CONSOLIDATED STATEMENTS OF operations ----------------------------------------------- (In accordance with United States generally accepted accounting principles) (In thousands of United Three months ended Nine months ended States dollars, except September 30, September 30, per share information) 2005 2004 2005 2004 ------------------------------------------------------------------------- (Unaudited) Revenues Net product revenue $ 56,989 $ 45,704 $ 166,517 $ 129,359 Net royalties 5,296 - 14,652 - Contract research and development 1,701 849 9,917 2,904 Licensing and milestones 189 - 502 - ------------------------------------------------------------------------- 64,175 46,553 191,588 132,263 ------------------------------------------------------------------------- Costs and expenses Cost of sales 13,953 7,946 39,923 22,318 Research and development 18,254 12,200 54,775 32,867 Selling, general and administrative 8,330 2,966 18,063 11,354 Depreciation 2,139 802 5,867 2,527 Amortization of intangibles 1,327 - 5,109 - Restructuring - - 3,388 - ------------------------------------------------------------------------- 44,003 23,914 127,125 69,066 ------------------------------------------------------------------------- Operating income 20,172 22,639 64,463 63,197 Investment and other income Net foreign exchange gains 513 (317) 3,700 297 Interest income 3,508 2,620 9,056 7,370 Interest expense (1,603) (1,583) (4,763) (4,659) Other gains - 1,912 - 1,912 ------------------------------------------------------------------------- 2,418 2,632 7,993 4,920 ------------------------------------------------------------------------- Income before income taxes 22,590 25,271 72,456 68,117 Provision for income taxes (9,691) (8,570) (27,475) (23,103) ------------------------------------------------------------------------- Income before extraordinary gain 12,899 16,701 44,981 45,014 ------------------------------------------------------------------------- Extraordinary gain - - - 10,393 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income $ 12,899 $ 16,701 $ 44,981 $ 55,407 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic net income per common share Income before extraordinary gain $ 0.14 $ 0.24 $ 0.48 $ 0.65 Extraordinary gain - - - 0.15 ------------------------------------------------------------------------- Net income $ 0.14 $ 0.24 $ 0.48 $ 0.80 Diluted net income per common share Income before extraordinary gain $ 0.14 $ 0.24 $ 0.47 $ 0.62 Extraordinary gain - - - 0.13 ------------------------------------------------------------------------- Net income $ 0.14 $ 0.24 $ 0.47 $ 0.75 Weighted average number of common shares outstanding (in thousands) Basic 92,637 69,594 92,979 69,482 Diluted 92,919 79,618 103,293 79,736 ------------------------------------------------------------------------- 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) 2005 2004 ------------------------------------------------------------------------- (Unaudited) ASSETS Current assets Cash and cash equivalents $ 206,698 $ 277,087 Short-term investment securities 241,914 102,765 Accounts receivable 58,227 56,600 Inventories 43,353 45,899 Current portion of deferred income tax assets 4,185 4,753 Other 22,127 13,521 ------------------------------------------------------------------------- 576,504 500,625 ------------------------------------------------------------------------- Property, plant and equipment 81,954 81,674 Deferred income tax assets 7,274 6,926 Intangibles, net 109,846 119,600 Goodwill 409,586 402,518 Other long-term assets 3,782 4,906 ------------------------------------------------------------------------- $1,188,946 $1,116,249 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES Current liabilities Accounts payable $ 9,272 $ 12,993 Income taxes payable 20,130 - Accrued restructuring charge 633 - Other accrued liabilities 17,610 19,528 Current portion of deferred revenue 9,759 2,278 ------------------------------------------------------------------------- 57,404 34,799 Deferred income tax liabilities 48,736 52,171 Deferred revenue 3,205 - Long-term debt 172,500 172,500 ------------------------------------------------------------------------- 281,845 259,470 ------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Common shares 874,318 848,498 Additional paid in capital 64,538 92,193 Accumulated deficit (131,255) (173,794) Accumulated other comprehensive income 99,500 89,882 ------------------------------------------------------------------------- 907,101 856,779 ------------------------------------------------------------------------- $1,188,946 $1,116,249 ------------------------------------------------------------------------- ------------------------------------------------------------------------- As at September 30, 2005, there were 92,648,880 issued and outstanding common shares and 10,601,127 outstanding stock options. QLT Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- (In accordance with United States generally accepted accounting principles) Three months ended Nine months ended (In thousands of September 30, September 30, United States dollars) 2005 2004 2005 2004 ------------------------------------------------------------------------- (Unaudited) Cash flows from operating activities Net income $ 12,899 $ 16,701 $ 44,981 $ 55,407 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of intangibles 1,327 - 5,109 - Depreciation 2,139 802 5,867 2,527 Amortization of deferred financial expenses 287 267 845 770 Unrealized foreign exchange losses (3,718) (5,282) (79) 2,669 Extraordinary gain - - - (10,393) Deferred income taxes 877 5,490 1,375 18,315 Changes in non-cash operating assets and liabilities Accounts receivable 1,829 (705) (203) (8,786) Inventories 651 (3,650) 3,099 (1,086) Other assets (1,472) 1,243 (7,142) 3,982 Accounts payable (2,298) 1,835 (4,945) (1,481) Income taxes payable 7,294 (1,775) 19,065 (67) Accrued restructuring charge (219) - 590 - Other accrued liabilities (596) (1,002) (8,570) (4,874) Deferred revenue 3,886 (178) 10,350 (2,094) ------------------------------------------------------------------------- 22,886 13,746 70,342 54,889 ------------------------------------------------------------------------- Cash provided by (used in) investing activities Short-term investment securities 71,471 286,798 (132,303) 192,041 Purchase of property, plant and equipment (1,551) (2,476) (4,724) (9,381) Purchase costs related to Atrix Laboratories, Inc. (84) (1,416) (968) (2,134) Purchase of Kinetek Pharmaceuticals Inc., net of cash acquired - - - (2,316) ------------------------------------------------------------------------- 69,836 282,906 (137,995) 178,210 ------------------------------------------------------------------------- Cash provided by (used in) provided by financing activities Common shares repurchased - - (15,537) - Long-term debt (net) - (18) - (123) Issuance of common shares 225 186 11,266 13,958 ------------------------------------------------------------------------- 225 168 (4,271) 13,835 ------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents 7,388 22,355 1,535 14,773 ------------------------------------------------------------------------- Net (decrease) increase in cash and cash equivalents 100,336 319,175 (70,388) 261,707 Cash and cash equivalents, beginning of period 106,363 204,940 277,087 262,408 ------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 206,698 $ 524,115 $ 206,698 $ 524,115 ------------------------------------------------------------------------- ------------------------------------------------------------------------- QLT Inc. Condensed Consolidated Statement of Operations 2005 Third Quarter Reconciliation of GAAP Earnings to Non-GAAP Earnings Exhibit 1 ------------------------------------------------------------------------- (In millions of United States dollars, except per share data) (Unaudited) Three months Three months ended ended September 30, September 30, 2005 2005 Adjusted GAAP Adjustments Non-GAAP(1) ------------------------------------------------------------------------- Revenues Net product revenue $ 57.0 $ - $ 57.0 Net royalties 5.3 - 5.3 Contract research and development 1.7 - 1.7 Licensing and milestones 0.2 - 0.2 ------------------------------------------------------------------------- 64.2 - 64.2 ------------------------------------------------------------------------- Cost and expenses Cost of sales (14.0) - (14.0) Research and development (18.3) - (18.3) Selling, general and administrative (8.3) 2.9 (a) (5.4) Depreciation (2.1) - (2.1) Amortization of intangibles (1.3) 1.3 (b) - ------------------------------------------------------------------------- (44.0) 4.2 (39.8) ------------------------------------------------------------------------- Operating income 20.2 4.2 24.4 Investment and other income (expense) Net foreign exchange gains 0.5 - 0.5 Interest income 3.5 - 3.5 Interest expense (1.6) - (1.6) ------------------------------------------------------------------------- 2.4 - 2.4 ------------------------------------------------------------------------- Income before income taxes 22.6 4.2 26.8 Provision for income taxes (9.7) (1.5) (c) (11.2) ------------------------------------------------------------------------- Net income $ 12.9 $ 2.7 $ 15.6 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Income per common share: Basic $ 0.14 $ 0.17 Diluted $ 0.14 $ 0.17 Weighted average number of common shares outstanding (in millions) Basic 92.6 92.6 Diluted 92.9 92.9 Adjustments: ------------ (a) Remove separation costs related to the departure 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 the income tax impact of (a) and (b). 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 Nine months ended September 30, 2005 Reconciliation of GAAP Earnings to Non-GAAP Earnings Exhibit 2 ------------------------------------------------------------------------- (In millions of United States dollars, except per share data) (Unaudited) Nine months Nine months ended ended September 30, September 30, 2005 2005 Adjusted GAAP Adjustments Non-GAAP(1) ------------------------------------------------------------------------- Revenues Net product revenue $ 166.5 $ - $ 166.5 Net royalties 14.7 - 14.7 Contract research and development 9.9 - 9.9 Licensing and milestones 0.5 - 0.5 ------------------------------------------------------------------------- 191.6 - 191.6 ------------------------------------------------------------------------- Cost and expenses Cost of sales (39.9) - (39.9) Research and development (54.8) - (54.8) Selling, general and administrative (18.1) 2.9 (a) (15.2) Depreciation (5.8) - (5.8) Amortization of intangibles (5.1) 5.1 (b) - Restructuring (3.4) 3.4 (c) - ------------------------------------------------------------------------- (127.1) 11.4 (115.7) ------------------------------------------------------------------------- Operating income 64.5 11.4 75.9 Investment and other income (expense) Net foreign exchange gains 3.7 - 3.7 Interest income 9.1 - 9.1 Interest expense (4.8) - (4.8) ------------------------------------------------------------------------- 8.0 - 8.0 ------------------------------------------------------------------------- Income before income taxes 72.5 11.4 83.9 Provision for income taxes (27.5) (4.1) (d) (31.6) ------------------------------------------------------------------------- Net income $ 45.0 $ 7.3 $ 52.3 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Income per common share: Basic $ 0.48 $ 0.56 Diluted $ 0.47 $ 0.55 Weighted average number of common shares outstanding (in millions) Basic 93.0 93.0 Diluted 103.3 103.3 Adjustments: ------------ (a) Remove separation costs related to the departure 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 restructuring costs related to integration activities that followed our merger with Atrix. (d) Remove the income tax impact of (a), (b) and (c). 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 ---------------------------------------------- 2004 Third Quarter Reconciliation of GAAP Earnings to Non-GAAP Earnings (Pro Forma) Exhibit 3 ------------------------------------------------------------------------- (In millions of United States dollars, except per share data) (Unaudited) Atrix Three months pre-merger ended Three months operations September 30, ended (July 1, 2004 September 30, 2004 - Adjusted 2004 September 30, Pro Forma GAAP 2004) Adjustments Non-GAAP(1) ------------------------------------------------------------------------- Revenues Net product revenue $ 45.7 $ 5.1 $ - $ 50.8 Net royalties - 4.9 - 4.9 Contract research and development 0.8 3.9 - 4.7 Licensing and milestones - 2.2 (2.1) (a) 0.1 ------------------------------------------------------------------------- 46.6 16.1 (2.1) 60.6 ------------------------------------------------------------------------- Cost and expenses Cost of sales (7.9) (3.4) - (11.4) Research and development (12.2) (7.7) - (19.9) Selling, general and administrative (3.0) (2.4) 0.3 (b) (5.1) Depreciation (0.8) (0.8) (0.2) (c) (1.8) Amortization of intangibles - - (1.9) (d) (1.9) ------------------------------------------------------------------------- (23.9) (14.3) (1.8) (40.0) ------------------------------------------------------------------------- Operating income 22.6 1.8 (3.9) 20.6 Investment and other income (expense) Net foreign exchange losses (0.3) - - (0.3) Interest income 2.6 0.7 (2.0) (e) 1.3 Interest expense (1.6) - - (1.6) Other gains 1.9 0.2 (2.1) (f) (0.0) ------------------------------------------------------------------------- 2.6 0.9 (4.1) (0.6) ------------------------------------------------------------------------- Income before income taxes 25.3 2.7 (7.9) 20.0 Provision for income taxes (8.6) - 2.0 (g) (6.5) ------------------------------------------------------------------------- Net income 16.7 2.7 (5.9) 13.5 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income per common share: Basic $ 0.24 $ 0.15 Diluted Net income $ 0.21 $ 0.14 Convertible senior notes - interest expense 0.03 - ------------------------------------------------------------------------- Diluted net income 0.24 0.14 ------------------------------------------------------------------------- Add back amortization of acquired intangibles net of related tax 0.01 --------- Diluted income per common share less effect of acquired intangibles(1) $ 0.15 --------- Weighted average number of common shares outstanding (millions) Basic 69.6 91.9 Diluted 79.6 95.1 Adjustments: ------------ (a) Remove licensing fees and milestone revenue related to deferred revenue recorded at fair value upon merger. (b) Adjust for patent maintenance expenses and merger-related expenses. (c) Increase depreciation as a result of recording property, plant and equipment at fair value. (d) Record additional amortization of acquired intangibles. (e) Remove foregone interest income from cash consumed in the merger and harmonization of treasury investment policies. (f) Remove milestone payment from former business and gain on sale of investments that would have been liquidated. (g) Tax impact of adjustments (c), (d), (e), and (f). Note 1: ------- The adjusted pro forma non-GAAP financial measures presented above are utilized by QLT's management to gain an understanding of the performance of the Company as a result of the merger. The adjusted pro forma non-GAAP financial measures have no standardized meaning under GAAP and are not comparabl
