QLT Inc. (NASDAQ:QLTI) (TSX:QLT) (“QLT” or the “Company”) is a
biotechnology company dedicated to the development and
commercialization of innovative ocular products that address the
unmet medical needs of patients and clinicians worldwide. The
Company reported financial results today for the fourth quarter and
year ended December 31, 2015. Unless otherwise specified, all
amounts are reported in U.S. dollars and in accordance with U.S.
GAAP.
2015 FOURTH QUARTER AND YEAR END
FINANCIAL RESULTS
Operating Expenses/Income
Research and Development (“R&D”)
Expenses
During the fourth quarter of 2015, R&D
expenditures were $2.0 million compared to $2.1 million for
the same period in 2014. The net $0.1 million (5%) decrease
was primarily due to lower salary and overhead costs incurred
in 2015 related to R&D headcount attrition and downsizing of
our lease space. These savings were partially offset by costs
related to: (i) advancing start-up activities for our Phase III
QLT091001 pivotal trial towards our goal of initiation in the third
quarter of 2016, and (ii) commencement of our natural history study
of visual function in subjects with Inherited Retinal Disease
phenotypically diagnosed as Leber Congenital Amaurosis or Retinitis
Pigmentosa caused by autosomal recessive LRAT or RPE65 mutations
(the “Natural History Study”).
During the year ended December 31, 2015, R&D
expenditures were $9.8 million compared to $13.8 million for the
same period in 2014. The net $4.0 million (29%) decrease was
primarily due to: (i) higher costs incurred in 2014 related to the
completion of certain synthetic retinoid related studies and
start-up activities for our Phase III QLT091001 pivotal trial, and
(ii) lower salary and overhead costs associated with R&D
headcount attrition, the foreign exchange impact of the weakening
Canadian dollar, and downsizing of our lease space. These savings
were partially offset by 2015 costs related to: (i) the transfer
and outsourcing of our analytical and bio-analytical testing
functions to third party contract research organizations, (ii) our
Natural History Study, and (iii) the accelerated vesting of certain
outstanding stock options and restricted stock units on June 7,
2015 in connection with our proposed merger with InSite Vision
Incorporated (the “InSite Merger”), which was terminated on
September 15, 2015, and certain other strategic transactions.
Selling, General and Administrative (“SG&A”)
Expenses
During the fourth quarter of 2015, SG&A
expenses were $1.7 million compared to $8.1 million for the same
period in 2014. The net $6.4 million (79%) decrease in
SG&A expenses was primarily due to: (i) a $5.7 million fee (the
“Breakup-Fee”) paid to Credit Suisse, our former financial advisor,
in October 2014 in connection with the termination of our proposed
merger with Auxilium Pharmaceuticals, Inc. (the “Auxilium Merger”),
(ii) lower overall operating costs related to the downsizing
of our lease space and the weakening Canadian dollar, and (iii)
lower directors’ fees related to the October 2014 disbanding of the
Executive Transition Committee of the Board of Directors and the
corresponding appointment of Dr. Geoffrey Cox as Interim Chief
Executive Officer of the Company.
During the year ended December 31, 2015,
SG&A expenses were $15.7 million compared to $16.8 million for
the same period in 2014. The net $1.1 million (7%) decrease was
primarily due to a $1.6 million decrease in transaction and
consulting fees incurred in connection with our exploration and
pursuit of certain strategic alternatives in each respective year,
including the proposed InSite Merger in 2015 and proposed Auxilium
Merger in 2014. Furthermore, 2015 SG&A expenses were positively
impacted by a decrease in directors’ fees and overall operating
costs related to the downsizing of our lease space and the
weakening Canadian dollar. These savings were substantially offset
by higher stock based compensation expense associated with the
accelerated vesting of certain stock options and restricted stock
units as described above and a decrease in the amount of overhead
expenses allocated to our R&D programs due to R&D headcount
attrition.
Termination Fees
On September 15, 2015, InSite paid QLT a
$2.7 million termination fee (the “InSite Termination Fee”)
pursuant to the termination provisions of the June 8, 2015 merger
agreement between QLT and InSite. Similarly, on October 9, 2014,
Auxilium Pharmaceuticals Inc. (“Auxilium”) paid QLT a $28.4 million
termination fee (the “Auxilium Termination Fee”) pursuant to the
termination provisions of the June 25, 2014 merger agreement
between QLT and Auxilium.
Operating Loss and Net Loss per
Share
During the fourth quarter of 2015, the operating
loss was $3.8 million ($0.06 per share) compared to operating
income of $17.9 million ($0.31 per share) for the same period in
2014. The $21.7 million increase in net loss was primarily due to
the October 2014 receipt of the Auxilium Termination Fee, which was
offset by the payment of the Breakup Fee to Credit Suisse in the
same period.
During the year ended December 31, 2015, the
operating loss was $23.3 million ($0.44 per share) compared to $3.8
million ($0.08 per share) for the same period in 2014. The $19.5
million increase in operating loss was primarily due to the receipt
of the $28.4 million Auxilium Termination Fee in 2014, which was
significantly larger than the $2.7 million InSite Termination Fee
received in 2015. The negative variance resulting from these
termination fees was partially offset by a general decline in
operating expenses in 2015.
Cash and Cash Equivalents
As at December 31, 2015, the Company’s
consolidated cash balance was $141.8 million compared to $155.9
million at December 31, 2014. The $14.1 million decrease in
cash was primarily due to $13.4 million of funds used in operating
activities and $8.7 million of consulting and transaction fees paid
in connection with the Company’s strategic activities. These cash
outflows were partially offset by $5.5 million of proceeds received
from stock option exercises and the receipt of the $2.7 million
InSite Termination Fee as described above.
On February 5, 2016, we completed a $45.0
million cash investment in Aralez Pharmaceuticals, Inc. (“Aralez”)
and received 7,200,000 common shares of Aralez (the “Aralez
Shares”) at a purchase price of US$6.25 per Aralez Share. We intend
to effect a special distribution of these Aralez Shares to our
shareholders on or around March 22, 2016 (the “Aralez
Distribution”) as part of a reorganization of QLT’s share capital
pursuant to a court-approved statutory plan of arrangement. The
Aralez Distribution will be payable, at the election of each
shareholder, in either Aralez Shares or cash, subject to proration
as may be necessary to reflect a maximum cash component of $15.0
million. The entitlement of each QLT shareholder to a portion of
the Aralez Shares (or cash in lieu thereof, subject to proration)
is 0.13629 per QLT common share held, based on the 7,200,000 Aralez
Shares acquired divided by the 52,829,398 QLT shares outstanding on
February 16, 2016, the designated record date for the Aralez
Distribution.
Passive Foreign Investment
Company
The Company believes that it was classified as a
Passive Foreign Investment Company (“PFIC”) for 2008 through 2015,
and that it may be classified as a PFIC in 2016, which could have
adverse tax consequences for U.S. shareholders. Please refer to our
2015 Annual Report on Form 10-K for additional information.
QLT Inc. -
Financial Highlights |
|
|
|
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|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS |
|
|
|
In accordance with
United States generally accepted accounting principles |
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended |
Twelve months
ended |
|
December 31, |
December 31, |
|
(In thousands of U.S. dollars except share and per share
information) |
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
Research and development |
$ |
2,036 |
|
$ |
2,119 |
|
$ |
9,790 |
|
$ |
13,803 |
|
|
Selling, general and
administrative |
|
1,707 |
|
|
8,149 |
|
|
15,646 |
|
|
16,791 |
|
|
Depreciation |
|
68 |
|
|
211 |
|
|
576 |
|
|
891 |
|
|
Restructuring charges |
|
- |
|
|
- |
|
|
- |
|
|
744 |
|
|
Termination fee |
|
- |
|
|
(28,400 |
) |
|
(2,667 |
) |
|
(28,400 |
) |
|
|
|
3,811 |
|
|
(17,921 |
) |
|
23,345 |
|
|
3,829 |
|
|
|
|
|
|
|
|
Operating
(loss) income |
|
(3,811 |
) |
|
17,921 |
|
|
(23,345 |
) |
|
(3,829 |
) |
|
Other income
(expense) |
|
|
|
|
|
Net foreign exchange (losses)
gains |
|
37 |
|
|
12 |
|
|
32 |
|
|
(62 |
) |
|
Interest income |
|
42 |
|
|
33 |
|
|
277 |
|
|
113 |
|
|
Fair value change in contingent
consideration |
|
- |
|
|
(2,000 |
) |
|
- |
|
|
(534 |
) |
|
Other |
|
57 |
|
|
- |
|
|
49 |
|
|
115 |
|
|
|
|
136 |
|
|
(1,955 |
) |
|
358 |
|
|
(368 |
) |
|
|
|
|
|
|
|
(Loss) income
from continuing operations before income taxes |
|
(3,675 |
) |
|
15,966 |
|
|
(22,987 |
) |
|
(4,197 |
) |
|
(Provision for)
recovery of income taxes |
|
(5 |
) |
|
(2 |
) |
|
(22 |
) |
|
192 |
|
|
(Loss) income from continuing operations |
|
(3,680 |
) |
|
15,964 |
|
|
(23,009 |
) |
|
(4,005 |
) |
|
Loss from discontinued
operations, net of income taxes |
|
- |
|
|
(3 |
) |
|
- |
|
|
(66 |
) |
|
Net (loss) income and comprehensive (loss)
income |
$ |
(3,680 |
) |
$ |
15,961 |
|
$ |
(23,009 |
) |
$ |
(4,071 |
) |
|
|
|
|
|
|
|
Basic and
diluted net (loss) income per common
share |
|
|
|
|
|
Continuing operations |
$ |
(0.06 |
) |
$ |
0.31 |
|
$ |
(0.44 |
) |
$ |
(0.08 |
) |
|
Discontinued
operations |
|
- |
|
|
(0.00 |
) |
|
- |
|
|
(0.00 |
) |
|
Net (loss)
income per common share |
$ |
(0.06 |
) |
$ |
0.31 |
|
$ |
(0.44 |
) |
$ |
(0.08 |
) |
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding
(thousands)1 |
|
|
|
|
|
Basic |
|
52,829 |
|
|
51,191 |
|
|
52,169 |
|
|
51,126 |
|
|
Diluted |
|
52,829 |
|
|
51,220 |
|
|
52,169 |
|
|
51,126 |
|
|
|
|
|
|
|
|
(1) During the three months ended December 31, 2014, the
Company’s restricted stock units had a dilutive impact. However,
the dilutive impact did not change the income per common share
value, as basic and diluted net income per common share were
calculated as $0.31.
CONDENSED
CONSOLIDATED BALANCE SHEETS |
|
|
|
(In
thousands of U.S. dollars) |
December
31, 2015 |
December 31, 2014 |
|
ASSETS |
|
|
|
Current
assets |
|
|
|
Cash and cash equivalents |
$ |
141,824 |
|
$ |
155,908 |
|
|
Accounts receivable, net of
allowances for doubtful accounts |
|
287 |
|
|
363 |
|
|
Income taxes receivable |
|
14 |
|
|
47 |
|
|
Prepaid and
other |
|
611 |
|
|
1,053 |
|
|
Total current
assets |
|
142,736 |
|
|
157,371 |
|
|
|
|
|
|
Accounts
receivable |
|
2,000 |
|
|
2,000 |
|
|
Property, plant and
equipment |
|
430 |
|
|
1,000 |
|
|
Total assets |
$ |
145,166 |
|
$ |
160,371 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
Current
liabilities |
|
|
|
Accounts payable |
$ |
1,656 |
|
$ |
1,943 |
|
|
Accrued
liabilities |
|
1,827 |
|
|
1,528 |
|
|
Total current
liabilities |
|
3,483 |
|
|
3,471 |
|
|
Uncertain tax position
liabilities |
|
342 |
|
|
388 |
|
|
Total liabilities |
|
3,825 |
|
|
3,859 |
|
|
|
|
|
|
SHAREHOLDERS’
EQUITY |
|
|
|
Share
capital |
|
|
|
Authorized |
|
|
|
500,000,000 common shares without par value |
|
|
|
5,000,000
first preference shares without par value, issuable in series
|
|
|
|
Issued
and outstanding common shares |
$ |
475,333 |
|
$ |
467,034 |
|
|
December
31, 2015 – 52,829,398 shares |
|
|
|
December
31, 2014 – 51,199,922 shares |
|
|
|
Additional paid-in
capital |
|
97,377 |
|
|
97,838 |
|
|
Accumulated
deficit |
|
(534,338 |
) |
|
(511,329 |
) |
|
Accumulated other
comprehensive income |
|
102,969 |
|
|
102,969 |
|
|
Total shareholders'
equity |
|
141,341 |
|
|
156,512 |
|
|
Total shareholders' equity and liabilities |
$ |
145,166 |
|
$ |
160,371 |
|
|
|
|
|
|
About QLT
QLT is a biotechnology company dedicated to the
development and commercialization of innovative ocular products
that address the unmet medical needs of patients and clinicians
worldwide. We are focused on developing our synthetic retinoid
program for the treatment of certain inherited retinal
diseases.
QLT’s head office is based in Vancouver, Canada
and the Company is publicly traded on NASDAQ Stock Market (symbol:
QLTI) and the Toronto Stock Exchange (symbol: QLT). For more
information about the Company’s products and developments, please
visit our web site at www.qltinc.com.
Visudyne® is a registered trademark of Novartis
AG
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
applicable Canadian securities laws. Forward-looking statements
include, but are not limited to, statements concerning the proposed
Aralez Distribution, the availability of certain liquidity events
for shareholders, including the election of shareholders to receive
cash in lieu of Aralez Shares, the effect the strategic
transactions may have on QLT and the QLT shares, and the future
potential of Aralez; statements concerning our synthetic retinoid
program, including our timing, ability and plans to initiate a
pivotal trial of QLT091001 in the third quarter of 2016; statements
concerning our PFIC status; and statements which contain language
such as: “assuming,” “prospects,” “goal,” “future,” “projects,”
“potential,” “believes,” “expects,” “hopes,” 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. Many such risks, uncertainties and other factors
are taken into account as part of our assumptions underlying these
forward-looking statements and include, among others, the
following: the Company’s future operating results are uncertain and
likely to fluctuate; currency fluctuations; the risk that the
proposed return of capital via the Aralez Distribution may not
occur; the risk that the share purchase agreement entered into
between the Company and certain third parties under which such
third parties agreed to purchase up to $15.0 million of the Aralez
Shares from the Company in order to fund the cash election in the
Aralez Distribution will not be completed, and therefore no cash
will be distributed to shareholders; the risk that we will be
treated as a PFIC in 2016 and future years; the risk that the
Company will determine it is not feasible to submit a Marketing
Authorization Application (“MAA”) for conditional approval with the
European Medicines Agency (the “EMA”) based upon existing clinical
data, the Natural History Study data or other reasons; risks and
uncertainties associated with our ability and timing to commence a
pivotal trial for QLT091001, including due to interactions between
QLT and the applicable regulatory authorities; the risk that the
EMA denies any conditional approval and the MAA we may submit;
risks and uncertainties concerning the impact that QLT’s success or
failure in pursuing various future strategic initiatives will have
on the market price of our securities; risks resulting from the
potential loss of key personnel; uncertainties relating to our
development plans, timing and results of the clinical development
and commercialization of our products and technologies, including
pivotal clinical trials; assumptions related to continued
enrollment trends, efforts and success, and the associated costs of
these programs; outcomes for our clinical trials may not be
favorable or may be less favorable than interim/preliminary results
and/or previous trials; there may be varying interpretations of
data produced by one or more of our clinical trials; risks and
uncertainties associated with the safety and effectiveness of our
technology; the timing, expense and uncertainty associated with the
regulatory approval process for products to advance through
development stages; the risk that we may not receive any or as much
additional contingent consideration as we might expect under our
agreements with respect to the sale of Visudyne® and the punctal
plug delivery system technology; risks and uncertainties related to
the scope, validity, and enforceability of our intellectual
property rights and the impact of patents and other intellectual
property of third parties; and general economic conditions and
other factors described in detail in QLT’s Annual Report 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.
This press release also contains “forward
looking information” that constitutes “financial outlooks” within
the meaning of applicable Canadian securities laws. This
information is provided to give investors general guidance on
management’s current expectations of certain factors affecting our
business, including our financial results. Given the uncertainties,
assumptions and risk factors associated with this type of
information, including those described above, investors are
cautioned that the information may not be appropriate for other
purposes.
QLT Inc. Contacts:
Investor & Media Relations
Andrea Rabney or David Pitts
Argot Partners
212-600-1902
andrea@argotpartners.com
david@argotpartners.com
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