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QLT Inc.
(QLTI-Q, QLT-T; US$15.15)
QLT Holds 2004 Analyst-Investor Day, No Surprises
Event: QLT hosts 2004 Analyst & Investor Day in NY
Impact to QLT: Neutral
Details: The analyst / investory day was well attended. QLT provided updates for its marketed and pipeline products. The company did not provide any financial guidance. Financial
guidance is expected to be released along with FY2004 results in February 2005.
We continue to believe that the three key drivers for QLT are 1) Visudyne Sales,
2) Eligard Sales and
3) Atrigel R&D contracts.
Here are some highlights from the event (all numbers in US$):
1. Visudyne- presented by Dr. Mohammad Azab, EVP of R&D and Chief Medical Officer
· Provided an overview comparing Visudyne and Macugen results
· Dr. Azab highlighted the concerns about Macugen.
1) Intravitreal injection,
2) Frequency of injections required (up to 9 times per year),and
3) Costs per Rx (estimated at between US$800 to $1000 per injection)
· In the US, approximately 80% of Visudyne treated patients also receive triamcinolone acetate (Kenalog).
Comment: Dr. Azab eloquently presented the risks and uncertainties associated with Macugen. In our initiating report, we also highlighted most of these concerns. Nevertheless, we believe that novel drugs will inherently have significant risks and uncertainties. Based on our analysis, we continue to believe that the future of wet AMD treatment will center around drugs delivered into or around the eye (e.g. Macugen, Lucentis or Retaane type drugs). We, therefore, maintain our view that Visudyne is a good niche wet-AMD treatment and predict sales will peak in 2005 and start to taper slowly or plateau thereafter (please see our initiation report dated October 15, 2004 for more details).
2. Eligard - presented by Mike Duncan, President of QLT USA
· Mr. Duncan is still forecasting Eligard 6-month approval sometime in Q1/05. PDUFA hearing date is scheduled for Dec. 17, 2004.
· Paul Hastings said that Eligard sales are trending towards $80 to $85 mm and he thought Eligards sales could double next year (although this is not the official guidance).
Comment: We continue to believe that the key to Eligard’s success will be dependent on the execution by QLT’s marketing partners (e.g. US- Sanofi-Aventis, Europe- Yamanouchi,
Australia- Mayne Pharma, Japan-Sosei Co/Nippon Organon KK and South America-Tecnofarma). We have made no changes to our Eligard sales forecast with peak sales of Eligard in 2008 at approximately $300 mm.
3. Atrigel - presented by Steve Garrett, SVP Clinical Research and Eric Dadey, VP of Drug Delivery
· Atrigel technology is based on biodegradable polymers (lactide and glycolide) and has been fully tested in animals with no toxicity concerns
· At the event, QLT had a live demonstration on how the Atrigel technology works.
· Paul Hastings announced that QLT had signed a sixth big pharmaceutical partnership to license Atrigel (previously announced relationships with Pfizer and Sanofi-Aventis)
Comments: We have been and continue to be impressed by Atrigel. We believe this drug technology has significant potential (hence the reason for the 6 interested big pharma R&D
contracts).
Recommendation: HOLD
Unchanged
12-Month Target Price: US$20.00
Unchanged
12-Month Total Return: 32.0%
Market Data (US$)
Current Price ($) 15.15
52-Wk Range ($) 14.35 - 30.70
Mkt Cap (f.d.)($mm) 1,227.2
Dividend ($) --
Yield (%) --
Financial Data (US$)
Fiscal Y-E December
Shares O/S (f.d.)(mm) 81.0
Float (mm) 69.6
Net Cash ($mm) 352.0
Net Cash/Shr (basic)($) 5.06
Shares O/S (basic)(mm) 69.6
Estimates (US$)
Year 2003A 2004E 2005E
EPS (basic)($) 0.65 0.83 0.80
EBITDA ($mm) 59.4 80.7 69.1
Sales ($mm) 146.7 180.0 274.6
Valuations
Year 2003A 2004E 2005E
P/E (basic)(x) 24.3 19.0 19.7
P/EBITDA (basic)(x) 18.5 13.1 15.9
P/Sales (basic)(x) 7.5 6.0 4.0
Industry Data (US$)
Year 2003A 2004E 2005E
QLT Rev ($mm) -- -- --
Visudyne 142 176 198
Eligard -- -- 48
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