QLT, Inc. (USA) (NASDAQ:QLTI)

NetscribeHealthC (23.30) Submitted: 3/12/2007 6:42:03 AM : Start Price: $8.26 QLTI Score: +8.09

QLT Inc. is a global biopharmaceutical company specializing in developing treatments for eye diseases as well as dermatological and urological conditions. The company along with its subsidiaries has expertise in the discovery, development and commercialization of innovative drug therapies with two of its unique technology platforms, photodynamic therapy and Atrigel, to create products such as Visudyne and Eligard.
QLT has been succumbing under the pressure of patent infringement. However, the company had to end up with costly deal in which it agreed to pay $113 million in order to settle a patent infringement lawsuit filed by TAP Pharmaceuticals over QLT’s sales of its prostate cancer treatment Eligard. More recently the company has made settlement with Massachusetts Eye and Ear Infirmary (MEEI), which would ease off the prolonged litigation environment since 2001. This would provide the much-needed breather for QLT.
But the company’s problem is not alone restricted to infringement litigation. Its sales has been dwindling on account increased competition, which is clearly reflected from the fact that it’s revenue from Visudyne for fiscal 2006 were just $129.4 million, a decrease of 31%. The severity of this problem is being felt by QLT, as it generates more than 85% of its product revenue from Visudyne.
The culprit for this stiff competition is Avastin (bevacizumab) from Genentech which is being extensively used by physicians as off-label treatment for wet age related macular degeneration (AMD). Lucentis and Avastin had a material negative impact on Visudyne sales in the U.S. in 2006 and are expected to eat the market share of Visudyne as these products are going to be available in other countries. Moreover, Novartis Ophthalmics, Genentech’s marketing partner for Lucentis outside the U.S., announced that it had received approval to market Lucentis in the European Union for the treatment of wet AMD, which would intensify competition in the European market as well.
The declining sales trend for QLT provides an apparent signal for investors to stay away from the company at least for the coming year.