09/24/2012 08:35 EDT | Updated 09/24/2018 09:25 EDT

Valeant Pharmaceuticals buying Visudyne treatment for blindness from QLT

QLT Inc. (TSX:QLT) announced Monday the sale of Visudyne, the drug that put the Vancouver-based company on the map, for $112.5 million to Valeant Pharmaceuticals International Inc. (TSX:VRX) as it continues to narrow its focus to new drug development.

QLT chairman Jason Aryeh said the company's board is working on how to return the cash to shareholders.

"It may be a combination of things or it may be just one, but our object is not to sit on shareholders' money for the purpose of sitting on shareholders' money," Aryeh told a conference call to discuss the deal.

He also said with the Visudyne deal signed, the company would again get smaller, but did not say just how small, as it concentrates on the development of its synthetic oral retinoid program.

"Clearly this will be a smaller company and a more acutely focused company," Aryeh said.

Earlier this year, QLT said it would cut 146 of its 214 remaining jobs.

Visudyne helped QLT become one of Canada's most successful biotechnology firms on the back of the treatment for age-related macular degeneration — a major cause of blindness in the elderly.

But sales of the drug, which uses a combination of injections and light therapy to treat AMD, plunged in recent years after the introduction of Genentech's Lucentis and off-label use of cancer treatment Avastin.

Valeant agreed to pay $62.5 million to acquire the U.S. rights to Visudyne, and another $50 million for rights to the non-U.S.. royalties.

QLT is also eligible for up to $5 million in contingent payments relating to the development of its laser program in the United States, up to $15 million related to the non-U.S.. royalties.

RBC Capital Markets analyst Douglas Miehm noted QLT's board has already authorized a $100-million return of capital to shareholders and has been exploring the most tax efficient means of executing the transaction.

"The company is in the process of restructuring the operations and has been making various changes to refocus the operations on development of the retinoid program," Miehm wrote in a note to clients.

"Today's announcement should expedite the timelines and possibly increase the return to shareholders."

Valeant, which has acquired numerous products and companies since it absorbed the former Biovail pharmaceutical business, said Monday that it sees Visudyne as a valuable addition to the company's ophthalmology business that would complement its Macugen treatment for age-related blindness.

"Not only will we be able to use Visudyne to better leverage our current ophthalmology sales force with a complementary product to Macugen, we are pleased to add a product that retinal specialists around the county can use as an adjunctive to products like Macugen to improve treatment options," said Michael Pearson, Valeant's chairman and chief executive.

QLT has sold off several parts of its business in recent years including its prostate cancer drug Eligard, which was acquired by Tolmar Hold Inc. in a US$230-million deal.

A slate of seven directors nominated by a dissident shareholder NB Public Equity Komplementar ApS of Denmark, also known as Nordic Biotech, were elected to the QLT board earlier this year.

Since the new board took control, the company said it would focus its efforts on the development of its synthetic oral retinoid program.

The company also hired investment bank Goldman Sachs to explore the sale or spin-out of its punctal plug delivery system as well as to whether to help determine the future of the Visudyne business.

QLT shares closed up 56 cents at $7.97 on the Toronto Stock Exchange on Monday, while Valeant shares closed up 40 cents at $53.75.