Vancouver Sun Editorial
January 30, 2006

The anchor of British Columbia's biotechnology cluster and one of the world's few biotech firms to have ever recorded a profit, QLT Inc. is going through a rough patch. What makes this noteworthy is that the success of QLT was seen as the dawn of the knowledge economy in B.C., moving the province from its centuries-old reliance on resources into a 21st century of high-tech and high hopes.

Founded as Quadra Logic Technologies in 1981 by James Miller, a University of British Columbia biochemist, the company juggled cheap pregnancy tests, a diagnostic tool for the AIDS virus and a cancer treatment, the latter using photo-dynamic therapy -- drugs activated by light -- to attack tumours, before it found the product that would put it on the map, and on investors' radar screens.

While the cancer drug never became a big moneymaker (QLT sold worldwide rights to Axcan Pharma in 2000), its development helped spawn Visudyne, a light-activated compound that could treat age-related macular degeneration, the leading cause of blindness in adults.

The demographics for Visudyne were, and still are, promising; a population growing older and blinder. Julia Levy, the scientist who steered its development, became the CEO and public face of the company, which changed its name to QLT PhotoTherapeutics to reflect its new focus. Levy turned out to be as good at investor relations as she was at chemistry and QLT became a stock market darling. The share price soared to dizzying heights, peaking at $115 a share, before the 2000 technology bubble burst.

Since then QLT has had a more difficult row to hoe. The initial success of Visudyne has attracted a host of competitors. Eyetech Pharmaceuticals and Pfizer have been marketing Macugen (Eyetech was recently taken over by OSI Pharmaceuticals for $935 million US) while Genentech and Genaera Corp. are pushing their respective entries, Lucentis and Evizon, through late clinical trials. QLT is hoping Visudyne will be used to complement Evizon, but this market is getting crowded and Visudyne sales are beginning to flatten out. The long-term outlook for QLT's principal product isn't encouraging.

QLT saw the writing on the wall and, in 2004, spent $855 million to buy Atrix, a U.S. company that had in its pipeline a drug to treat prostate cancer, called Eligard. In so doing, however, QLT inherited a problem -- a patent infringement complaint by Takeda Abbott Pharmaceuticals (TAP) that, if upheld, could cost QLT $419 million US in damages. The early rounds in court are not going well. Last week, a U.S. district court dismissed QLT's claim that the TAP patent is unenforceable and a Chicago jury confirmed the validity of the TAP patent in December. Both decisions are being appealed.

QLT laid off 100 employees this month, has restructured three times in three years, has chopped the "non-core" assets that came with Atrix, and has chewed through a slew of senior executives, including former CEO Paul Hastings, who was replaced in September by acting CEO Robert Butchofsky. In the last 12 months, QLT's stock price has dropped from more than $20 a share to less than $7.

QLT continues to be an anomaly in the biotech business, being a company with a real revenue stream and money in the bank, but it needs another blockbuster drug to get back in the game.