QLT Inc. (NASDAQ:QLTI) (TSX:QLT) (“QLT” or the “Company”) reported
financial results today for the first quarter ended March 31, 2016.
Unless otherwise specified, all amounts are reported in U.S.
dollars and in accordance with U.S. GAAP.
Synthetic Retinoid Program
Update
On April 22, 2016, QLT announced that it had
completed enrollment and collection of data from its retrospective,
uncontrolled, multicenter Natural History Study in subjects with
Inherited Retinal Disease (IRD) in Retinitis Pigmentosa and Leber
Congenital Amaurosis patients due to underlying RPE65 or LRAT gene
mutations. As QLT expected, the preliminary analysis of the study
data suggests that IRD subjects, without therapeutic intervention,
demonstrate a continuing decline in visual field and eventually
visual acuity over time. Given these results, the Company is
in the process of finalizing its data analysis and plans to hold
discussions with select national European agencies in the second
quarter of 2016. The results of this study are expected to provide
important data to support the ongoing development of QLT091001 and
planned future submissions for regulatory approval in Europe and
the U.S., including the potential filing of a marketing
authorization application (MAA) with the European Medicines Agency
(EMA) for conditional approval in the second half of 2016.
QLT continues to advance toward initiating a
pivotal Phase III, multi-center, placebo-controlled, double-masked
clinical study for QLT091001 in this indication in the third
quarter of 2016. The pivotal trial is expected to enroll 48
patients at approximately 12 sites in the EU, U.S. and Canada.
2016 FIRST QUARTER FINANCIAL
RESULTS
Operating Expenses/Income
During the first quarter of 2016, research and
development (“R&D”) expenditures were $3.0 million compared to
$2.2 million for the same quarter in 2015. The net $0.8 million
(36%) increase was primarily due to higher costs incurred in
2016 related to our ongoing preparatory activities for our
QLT091001 pivotal trial and our natural history study. These cost
increases were partially offset by lower salary and overhead costs
resulting from (i) the 2015 transfer and outsourcing of our
bio-analytical functions and laboratories to an external contract
research organization and (ii) the foreign exchange impact of the
weakened Canadian dollar. In addition, no stock compensation
expense was recorded during the period due to the accelerated
vesting of all outstanding stock options in June 2015.
During the first quarter of 2016, selling,
general and administrative (“SG&A”), expenditures were $6.0
million compared to $3.6 million for the same quarter in 2015. The
$2.4 million (66%) increase in SG&A expense was primarily
due to a $4.0 million advisory fee paid to our advisors, Greenhill
& Co, LLC. (“Greenhill”), on February 5, 2016, which was
partially offset by a $0.9 million decrease in general strategic
consulting and advisory fees.
Excluding the impact of these consulting and
advisory fees, SG&A expenses decreased by $0.7 million. The
$0.7 million (41%) decrease in SG&A expense was primarily
due to a decrease in directors’ fees, general operating costs that
were affected by the foreign exchange impact of the weakened
Canadian dollar, downsizing of our lease space, and the absence of
stock compensation expense for the same reasons described
above.
Other Expenses/Income
On February 5, 2016, QLT completed a $45.0
million investment in Aralez Pharmaceuticals, Inc. (“Aralez”). In
exchange, QLT received 7,200,000 Aralez common shares at US $6.25
per common share.
On April 5, 2016, QLT completed a special
distribution of these Aralez shares, which was payable, at the
election of each shareholder, in either Aralez shares or cash,
subject to proration (the “Aralez Distribution”). The cash portion
of the Aralez Distribution was subject a maximum limit of $15.0
million, which was funded through the March 17, 2016 sale of
2,400,000 Aralez shares to certain third parties for US $6.25 per
share under the terms of a share purchase agreement (the “Backstop
Agreement”). On April 5, 2016, QLT distributed $15.0 million
of cash and the remaining 4,799,619 Aralez shares to its
shareholders, which had a fair market value of $19.3 million based
on the NASDAQ quoted closing price of Aralez’s shares on April 5,
2016.
On March 31, 2016, QLT recognized a $13.0
million loss related to the 4,800,000 Aralez shares that were held
by the Company at period end for the April 5, 2016 Aralez
Distribution. The $13.0 million loss represents the change in
value from the acquisition date to March 31, 2016.
Operating Loss and Net Loss per
Share
The operating loss for the first quarter of 2016
was $8.9 million, compared to $6.0 million for the same period in
2015. The net $2.9 million increase in our operating loss was
primarily due to the strategic consulting and advisory fees
described above. Excluding the impact of these fees, the adjusted
operating loss for the first quarter of 2016 was $4.1 million,
which is consistent with the adjusted operating loss for the same
quarter in 2015.
Net loss per common share was $0.41 in the first
quarter of 2016, compared to $0.12 for the same quarter in 2015.
The decrease in loss per share was primarily due to a $13.0 million
fair value loss related to the 4,800,000 Aralez shares held at
period end and the strategic consulting and advisory fees described
above.
Cash and Cash Equivalents
As at March 31, 2016, the Company’s consolidated
cash and cash equivalents were $102.9 million compared to $141.8
million at December 31, 2015. The $38.9 million decrease was
primarily due to the $45.0 million Aralez Investment, $4.5 million
of strategic consulting and advisory fees and cash used in
operating activities during the period. These cash decreases
were partially offset by the $15.0 million of cash received on
March 17, 2016 pursuant to the terms of the Backstop Agreement to
fund the Aralez Distribution on April 5, 2016.
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 |
|
|
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS |
(Unaudited) |
|
|
(In thousands of U.S.
dollars except share and per share information) |
|
|
|
Three months ended |
March
31, |
|
|
2016 |
|
|
2015 |
|
|
|
|
Expenses |
|
|
Research and development |
$ |
2,990 |
|
$ |
2,208 |
|
Selling, general and
administrative |
|
5,898 |
|
|
3,619 |
|
Depreciation |
|
38 |
|
|
188 |
|
|
|
8,926 |
|
|
6,015 |
|
|
|
|
Operating loss |
|
(8,926 |
) |
|
(6,015 |
) |
Other (expense) income |
|
|
Net foreign exchange (losses)
gains |
|
(77 |
) |
|
98 |
|
Interest income |
|
75 |
|
|
32 |
|
Fair value loss on investment |
|
(12,960 |
) |
|
- |
|
Other |
|
- |
|
|
(2 |
) |
|
|
(12,962 |
) |
|
128 |
|
|
|
|
Loss before income taxes |
|
(21,888 |
) |
|
(5,887 |
) |
Provision for income taxes |
|
(6 |
) |
|
(9 |
) |
Net loss and comprehensive loss |
$ |
(21,894 |
) |
$ |
(5,896 |
) |
|
|
|
Basic and diluted net loss per common
share |
|
|
Net loss per common share |
$ |
(0.41 |
) |
$ |
(0.12 |
) |
|
|
|
Weighted average number of common shares
outstanding (thousands) |
|
|
Basic and diluted |
|
52,829 |
|
|
51,237 |
|
CONDENSED CONSOLIDATED BALANCE
SHEETS |
|
|
|
(Unaudited) |
|
|
|
(In thousands of U.S.
dollars) |
|
March 31, 2016 |
December 31, 2015 |
ASSETS |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents (1) |
|
$ |
102,856 |
|
$ |
141,824 |
|
Investment (2) |
|
|
17,040 |
|
|
- |
|
Accounts receivable, net of
allowances for doubtful accounts |
|
|
321 |
|
|
287 |
|
Income taxes receivable |
|
|
14 |
|
|
14 |
|
Prepaid and
other |
|
|
725 |
|
|
611 |
|
Total current assets |
|
|
120,956 |
|
|
142,736 |
|
|
|
|
|
Accounts receivable |
|
|
2,000 |
|
|
2,000 |
|
Property, plant and
equipment |
|
|
461 |
|
|
430 |
|
Total assets |
|
$ |
123,417 |
|
$ |
145,166 |
|
|
|
|
|
LIABILITIES |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
|
$ |
2,969 |
|
$ |
1,656 |
|
Accrued
liabilities |
|
|
632 |
|
|
1,827 |
|
Total current liabilities |
|
|
3,601 |
|
|
3,483 |
|
Uncertain tax position liabilities |
|
|
369 |
|
|
342 |
|
Total liabilities |
|
|
3,970 |
|
|
3,825 |
|
|
|
|
|
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 |
|
$ |
475,333 |
|
March 31, 2016 – 52,829,398
shares |
|
|
|
December 31, 2015 – 52,829,398
shares |
|
|
|
Additional paid-in capital |
|
|
97,377 |
|
|
97,377 |
|
Accumulated deficit |
|
|
(556,232 |
) |
|
(534,338 |
) |
Accumulated other comprehensive income |
|
|
102,969 |
|
|
102,969 |
|
Total shareholders' equity |
|
|
119,447 |
|
|
141,341 |
|
Total
shareholders' equity and liabilities |
|
$ |
123,417 |
|
$ |
145,166 |
|
|
Footnotes: |
|
1) Cash and cash equivalents as at
March 31, 2016 includes $15.0 million of cash which was
subsequently distributed toQLT’s shareholders on April 5, 2016
as part of the Aralez Distribution. |
|
2) Reflects the value of
4,800,000 Aralez shares based on the March 31, 2016 US $3.55
closing price of Aralez’s commonshares. These shares were held
by QLT on March 31, 2016 and subsequently distributed to QLT’s
shareholders onApril 5, 2016 as part of the Aralez
Distribution. |
|
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.
About QLT091001
QLT091001 is an orally administered synthetic
retinoid replacement for 11-cis-retinal, which is a key biochemical
component of the visual retinoid cycle. We are currently developing
QLT091001 for the treatment of IRD caused by retinal pigment
epithelium protein 65 (“RPE65”) and lecithin:retinol
acyltransferase (“LRAT”) gene mutations, which include Leber
Congenital Amaurosis (“LCA”) and Retinitis Pigmentosa (“RP”).
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 any future
strategic transactions that may impact QLT and QLT’s shares,
statements concerning our synthetic retinoid program, including our
timing, ability and plans to apply for conditional approval in the
EU and commence our pivotal trial; statements concerning the
results from and utility of our natural history study; 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 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 MAA for
conditional approval with the EMA based upon existing clinical
data, the natural history study data or other reasons and the
impact of this outcome on the Company’s potential plans to commence
a pivotal trial for QLT091001; 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; 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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