QLT announces yard sale

Canada’s beleaguered QLT, which put itself up for sale in November, is to be carved up and sold. First on the block are prostate cancer drug Eligard, Aczone for acne and delivery system Atrigel.

As EP Vantage predicted in November, a white knight was unlikely to appear on the horizon wanting to buy the whole company. (See article Nov 29, QLT waves the white flag) The group’s piecemeal portfolio carries a lot of baggage, making takeover talks complicated.

The danger now is that baggage also deters buyers of the individual products. Progress may not be as swift as QLT hopes, and with a $170m convertible loan due in September, the situation is fairly pressing. While the group ended the third-quarter with $172m in cash, October’s acquisition of ForSight Labs, for $42m, has made a dent in that.

Going to the highest bidder

Eligard is on the surface the most valuable product on offer. The drug is a long acting formulation of the market leading LHRH analogue Leuplin/Lupron from Takeda, TAP Pharmaceutical Products and Abbott Labs. It is marketed by a handful of partners, including Sanofi Aventis in the US and Astellas in Europe. QLT recorded $42m in royalties on estimated total sales of $110m in 2006.

While the product could provide a handy royalty stream for a small company, the size of the asset is unlikely to interest any large players. The cost of renegotiating all the marketing contracts could also prove prohibitive.

On top of that, the not-so certain patent situation may be a deterrent. Generic Lupron is slated to appear later this year or next, which could be a serious threat. Meanwhile in the US, some analysts believe Eligard itself could lose patent protection this year, although it is theoretically protected until 2011.

Awaiting cleaner label

Second up is Aczone, which is not likely to receive any serious bids until the FDA decides whether to approve a cleaner safety profile. The drug was approved in 2005, but the regulator required that patients were screened for certain types of anaemia before it could be prescribed.

That decision prompted marketing partner Astellas to hand back the rights, effectively halting commercialisation plans. A decision on whether the screening restriction can be removed is not expected until the first half of 2008.

What could attract some interest is the Atrigel system, used in Eligard, a sustained-release drug delivery platform. The company has collaborations in place with a handful of companies, including Pfizer.

To help with costs QLT announced last week the loss of 115 staff, 45% of the company's workforce. Additionally, QLT will sell its own backyard, with headquarters and land in Vancouver up for sale.

Retaining assets

While those assets are sold, QLT will struggle on with blindness drug Visudyne, which is flailing in the face of competition from Lucentis. Marketed seemingly unenthusiastically by Novartis, sales of the drug fell 39% in 2007 on the previous year, to $215m.

Results from a phase II trial comparing the drug in combination with Lucentis, against Lucentis alone, in patients with choroidal neovascularization (CNV) secondary to age-related macular degeneration (AMD), are due late-2008.

The company will also continue working on newly-acquired punctal plugs for Glaucoma and an early stage photodynamic therapy. All products could be sold in the future.

Shares in QLT, which shed 48% last year, have fallen further since the company waved the white flag. The news last week, detailing which products were up sale, failed to produce any bounce, actually resulting in a further fall of 11%. Investors seem to have little confidence that the group will get much for the assets, fears that could prove well founded.

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