UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 30, 2013
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No. 0-17082
QLT INC.
(Exact name of registrant as specified in its charter)
British Columbia, Canada | N/A | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
101 - 887 Great Northern Way, Vancouver, B.C., Canada |
V5T 4T5 | |
(Address of principal executive offices) | (Zip code) |
Registrants telephone number, including area code: (604) 707-7000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | x | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of July 29, 2013, the registrant had 51,081,878 outstanding shares of common stock.
QLT INC.
QUARTERLY REPORT ON FORM 10-Q
June 30, 2013
ITEM |
PAGE | |||||
PART IFINANCIAL INFORMATION | ||||||
1. |
FINANCIAL STATEMENTS | 1 | ||||
Unaudited Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012 |
1 | |||||
2 | ||||||
3 | ||||||
4 | ||||||
Notes to Unaudited Condensed Consolidated Financial Statements |
5 | |||||
2. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 16 | ||||
3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 24 | ||||
4. |
CONTROLS AND PROCEDURES | 25 | ||||
PART IIOTHER INFORMATION | ||||||
1. |
LEGAL PROCEEDINGS | 26 | ||||
1A. |
RISK FACTORS | 26 | ||||
6. |
EXHIBITS | 27 |
PART IFINANCIAL INFORMATION
ITEM 1. | FINANCIAL STATEMENTS |
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands of U.S. dollars) |
June 30, 2013 | December 31, 2012 | ||||||
ASSETS |
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Current assets |
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Cash and cash equivalents |
$ | 103,180 | $ | 307,384 | ||||
Restricted cash (Notes 6, 8, 9) |
7,502 | 7,500 | ||||||
Accounts receivable |
684 | 3,960 | ||||||
Contingent considerationcurrent (Notes 6 and 9) |
40,627 | 41,255 | ||||||
Income taxes receivable |
600 | 554 | ||||||
Deferred income tax assetscurrent |
362 | 644 | ||||||
Assets held for sale (Note 8) |
| 300 | ||||||
Prepaid and other |
2,396 | 1,442 | ||||||
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Total current assets |
155,351 | 363,039 | ||||||
Property, plant and equipment |
2,235 | 2,655 | ||||||
Deferred income tax assetsnon-current |
230 | 370 | ||||||
Contingent considerationnon-current (Notes 6 and 9) |
18,743 | 35,154 | ||||||
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Total assets |
176,559 | 401,218 | ||||||
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LIABILITIES |
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Current liabilities |
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Accounts payable |
3,319 | 6,121 | ||||||
Accrued liabilities (Note 2) |
1,189 | 2,515 | ||||||
Accrued restructuring charge (Note 5) |
666 | 1,933 | ||||||
Deferred income |
| 456 | ||||||
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Total current liabilities |
5,174 | 11,025 | ||||||
Uncertain tax position liabilities |
1,813 | 1,875 | ||||||
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Total liabilities |
6,987 | 12,900 | ||||||
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SHAREHOLDERS EQUITY |
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Share capital (Note 4) |
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Authorized |
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500,000,000 common shares without par value |
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5,000,000 first preference shares without par value, issuable in series |
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Issued and outstanding |
466,229 | 471,712 | ||||||
Common shares |
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June 30, 2013 51,081,878 shares |
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December 31, 2012 51,589,405 shares |
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Additional paid-in capital |
95,387 | 296,024 | ||||||
Accumulated deficit |
(495,013 | ) | (482,387 | ) | ||||
Accumulated other comprehensive income |
102,969 | 102,969 | ||||||
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Total shareholders equity |
169,572 | 388,318 | ||||||
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Total shareholders equity and liabilities |
$ | 176,559 | $ | 401,218 | ||||
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See the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
1
QLT Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
Three months ended June 30, |
Six months ended June 30, |
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(In thousands of U.S. dollars except share and per share information) |
2013 | 2012 | 2013 | 2012 | ||||||||||||
Expenses |
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Research and development |
$ | 4,392 | $ | 7,465 | $ | 8,472 | $ | 13,981 | ||||||||
Selling, general and administrative |
1,810 | 5,872 | 3,892 | 9,980 | ||||||||||||
Depreciation |
252 | 326 | 487 | 689 | ||||||||||||
Restructuring charges (Note 5) |
671 | | 1,493 | | ||||||||||||
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7,125 | 13,663 | 14,344 | 24,650 | |||||||||||||
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Operating loss |
(7,125 | ) | (13,663 | ) | (14,344 | ) | (24,650 | ) | ||||||||
Investment and other income |
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Net foreign exchange gains (losses) |
84 | (32 | ) | 18 | (150 | ) | ||||||||||
Interest income |
80 | 56 | 136 | 88 | ||||||||||||
Fair value change in contingent consideration (Notes 6 and 9) |
1,038 | 1,650 | 1,833 | 3,591 | ||||||||||||
Other gains |
36 | 29 | 36 | 83 | ||||||||||||
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1,238 | 1,703 | 2,023 | 3,612 | |||||||||||||
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Loss from continuing operations before income taxes |
(5,887 | ) | (11,960 | ) | (12,321 | ) | (21,038 | ) | ||||||||
Provision for income taxes (Note 7) |
(142 | ) | (251 | ) | (325 | ) | (548 | ) | ||||||||
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Loss from continuing operations |
(6,029 | ) | (12,211 | ) | (12,646 | ) | (21,586 | ) | ||||||||
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(Loss) Income from discontinued operations, net of income taxes (Note 8) |
(170 | ) | (4,093 | ) | 20 | (4,995 | ) | |||||||||
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Net loss and comprehensive loss |
($6,199 | ) | ($16,304 | ) | ($12,626 | ) | ($26,581 | ) | ||||||||
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Basic and diluted net loss per common share (Note 10) |
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Continuing operations |
($0.12 | ) | ($0.25 | ) | ($0.25 | ) | ($0.44 | ) | ||||||||
Discontinued operations |
($0.00 | ) | ($0.08 | ) | $ | 0.00 | ($0.10 | ) | ||||||||
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Net loss per common share |
($0.12 | ) | ($0.33 | ) | ($0.25 | ) | ($0.54 | ) | ||||||||
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Weighted average number of common shares outstanding (thousands) |
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Basic and diluted |
50,883 | 49,191 | 50,736 | 49,088 |
See the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
2
QLT Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended June 30, |
Six months ended June 30, |
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(In thousands of U.S. dollars) |
2013 | 2012 | 2013 | 2012 | ||||||||||||
Cash used in operating activities |
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Net loss and comprehensive loss |
$ | (6,199 | ) | $ | (16,304 | ) | $ | (12,626 | ) | $ | (26,581 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities |
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Depreciation |
252 | 371 | 487 | 779 | ||||||||||||
Share-based compensation |
94 | 4,831 | 142 | 5,552 | ||||||||||||
Unrealized foreign exchange (gains) losses |
(74 | ) | 46 | 135 | 243 | |||||||||||
Deferred income taxes |
189 | 458 | 458 | 651 | ||||||||||||
Recovery on assets held for sale |
(22 | ) | | (175 | ) | | ||||||||||
Gain on sale of discontinued operations (Note 8) |
(287 | ) | | (743 | ) | | ||||||||||
Fair value change in contingent consideration (Notes 6 and 9) |
(24 | ) | | 488 | | |||||||||||
Changes in non-cash operating assets and liabilities |
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Accounts receivable |
1,184 | 1,166 | 2,205 | 1,287 | ||||||||||||
Inventories |
| (531 | ) | | (956 | ) | ||||||||||
Prepaid and other |
(30 | ) | (30 | ) | (954 | ) | (1,069 | ) | ||||||||
Accounts payable |
(259 | ) | 360 | (2,489 | ) | 506 | ||||||||||
Income taxes receivable / payable |
(43 | ) | (391 | ) | (58 | ) | (298 | ) | ||||||||
Accrued liabilities |
(16 | ) | (1,167 | ) | (1,361 | ) | (3,043 | ) | ||||||||
Accrued restructuring |
(1,167 | ) | | (1,197 | ) | | ||||||||||
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(6,402 | ) | (11,191 | ) | (15,688 | ) | (22,929 | ) | |||||||||
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Cash provided by investing activities |
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Net proceeds from sale of property, plant |
19 | | 209 | | ||||||||||||
Net proceeds from sale of discontinued operations (Note 8) |
750 | | 750 | | ||||||||||||
Purchase of property, plant and equipment |
| (204 | ) | | (696 | ) | ||||||||||
Net proceeds from sale of other assets |
| | | 250 | ||||||||||||
Proceeds from mortgage receivable |
| | | 5,874 | ||||||||||||
Proceeds from contingent consideration (Notes 6 and 9) |
6,995 | 6,404 | 16,552 | 13,384 | ||||||||||||
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7,764 | 6,200 | 17,511 | 18,812 | |||||||||||||
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Cash (used in) provided by financing activities |
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Common shares repurchased, including fees |
| | (14,079 | ) | | |||||||||||
Cash distribution paid to common shareholders (Note 4(a)) |
(200,000 | ) | | (200,000 | ) | | ||||||||||
Issuance of common shares |
3,556 | 1,267 | 8,317 | 1,987 | ||||||||||||
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(196,444 | ) | 1,267 | (205,762 | ) | 1,987 | |||||||||||
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Effect of exchange rate changes on cash and cash equivalents |
(83 | ) | (136 | ) | (265 | ) | (134 | ) | ||||||||
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Net decrease in cash and cash equivalents |
(195,165 | ) | (3,860 | ) | (204,204 | ) | (2,264 | ) | ||||||||
Cash and cash equivalents, beginning of period |
298,345 | 207,193 | 307,384 | 205,597 | ||||||||||||
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Cash and cash equivalents, end of period |
$ | 103,180 | $ | 203,333 | $ | 103,180 | $ | 203,333 | ||||||||
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Supplementary cash flow information: |
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Interest paid |
$ | | $ | | $ | | $ | | ||||||||
Income taxes paid |
| 307 | 1 | 390 | ||||||||||||
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See the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
3
QLT Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Unaudited)
Common Shares | Additional Paid-in |
Accumulated | Accumulated Other Comprehensive |
Total Shareholders |
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Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||
(All amounts except share and per share information are expressed in thousands of U.S. dollars) |
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Balance at January 1, 2012 |
48,927,742 | $ | 458,118 | $ | 296,003 | $ | (528,085 | ) | $ | 102,969 | $ | 329,005 | ||||||||||||
Exercise of stock options, for cash, at prices ranging from CAD $2.44 to CAD $7.23 per share |
4,408,867 | 29,666 | (8,257 | ) | | | 21,409 | |||||||||||||||||
Stock-based compensation |
| | 5,902 | | | 5,902 | ||||||||||||||||||
Common share repurchase |
(1,747,204 | ) | (16,072 | ) | 2,376 | | | (13,696 | ) | |||||||||||||||
Net income |
| | | 45,698 | | 45,698 | ||||||||||||||||||
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Balance at December 31, 2012 |
51,589,405 | 471,712 | 296,024 | (482,387 | ) | 102,969 | 388,318 | |||||||||||||||||
Exercise of stock options, for cash, at prices ranging from CAD $2.44 to CAD $7.23 per share |
631,685 | 5,072 | (1,411 | ) | | | 3,661 | |||||||||||||||||
Stock-based compensation |
| | 48 | | | 48 | ||||||||||||||||||
Common share repurchase |
(1,691,479 | ) | (15,461 | ) | 1,982 | | | (13,479 | ) | |||||||||||||||
Net loss |
| | | (6,427 | ) | | (6,427 | ) | ||||||||||||||||
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Balance at March 31, 2013 |
50,529,611 | 461,323 | 296,643 | (488,814 | ) | 102,969 | 372,121 | |||||||||||||||||
Exercise of stock options, for cash, at prices ranging from CAD $2.44 to CAD $7.23 per share |
552,267 | 4,906 | (1,350 | ) | | | 3,556 | |||||||||||||||||
Stock-based compensation |
| | 94 | | | 94 | ||||||||||||||||||
Cash distribution to common shareholders at $3.92 per share (Note 4(a)) |
| | (200,000 | ) | | | (200,000 | ) | ||||||||||||||||
Net loss |
| | | (6,199 | ) | | (6,199 | ) | ||||||||||||||||
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Balance at June 30, 2013 |
51,081,878 | $ | 466,229 | $ | 95,387 | $ | (495,013 | ) | $ | 102,969 | (1) | $ | (169,572 | ) | ||||||||||
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(1) | At June 30, 2013 our accumulated other comprehensive income is entirely related to historical cumulative translation adjustments resulting from the application of U.S. dollar reporting when the functional currency of QLT Inc. was the Canadian dollar. |
See the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
4
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Throughout this Quarterly Report on Form 10-Q (this Report), the words we, us, our, the Company and QLT refer to QLT Inc. and its wholly owned subsidiaries, QLT Plug Delivery, Inc., QLT Therapeutics, Inc. and QLT Ophthalmics, Inc., unless stated otherwise.
Business
QLT is a biotechnology company dedicated to the development and commercialization of innovative ocular products that address the unmet medical needs of patients and clinicians worldwide. On July 9, 2012, as a result of a comprehensive business and portfolio review by our Board of Directors (the Board), we announced a new corporate strategy and plans to restructure our operations in order to concentrate our resources on our clinical development programs related to our synthetic retinoid, QLT091001, for the treatment of certain inherited retinal diseases. In connection with this strategic restructuring of the Company, we engaged a financial advisor to determine whether to divest our business related to our commercial product, Visudyne®, and to explore the sale of our punctal plug drug delivery system technology (the PPDS Technology). On September 24, 2012, we completed the sale of our Visudyne business to Valeant Pharmaceuticals International, Inc. (Valeant) pursuant to the terms of an asset purchase agreement (the Valeant Agreement). On April 3, 2013, we completed the sale of our PPDS Technology to Mati Therapeutics Inc. (Mati) pursuant to the terms of an asset purchase agreement (the Mati Agreement). See Note 8 Discontinued Operations and Assets Held for Sale.
1. CONDENSED SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (US GAAP) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (the SEC) for the presentation of interim financial information. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed, or omitted, pursuant to such rules and regulations. These financial statements do not include all disclosures required for the annual financial statements and should be read in conjunction with our audited consolidated financial statements and notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2012. All amounts herein are expressed in United States dollars unless otherwise noted.
In managements opinion, the condensed consolidated financial statements reflect all adjustments (including reclassifications and normal recurring adjustments) necessary to present fairly the financial position at June 30, 2013, and results of operations and cash flows for all periods presented. The interim results presented are not necessarily indicative of results that can be expected for a full year.
The results of operations relating to our PPDS Technology and Visudyne have been excluded from continuing operations and reported as discontinued operations for the current and prior periods. See Note 8 Discontinued Operations and Assets Held for Sale.
Principles of Consolidation
These condensed consolidated financial statements include the accounts of QLT and its subsidiaries, all of which are wholly owned. All intercompany transactions have been eliminated.
Use of Estimates
The preparation of financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as at the date of the financial statements, and the reported amounts of expenses during the reporting periods presented. Significant estimates are used for, but not limited, to the fair value of contingent consideration, allocation of overhead expenses to research and development, stock-based compensation, restructuring costs, and provisions for taxes, tax assets and liabilities. Actual results may differ from estimates made by management.
Segment Information
We operate in one industry segment, which is the business of developing, manufacturing, and commercializing opportunities in ophthalmology. As at the date of this report, our clinical development programs are solely focused on our synthetic retinoid, QLT091001. Our chief operating decision maker reviews our operating results and manages our operations as a single operating segment. Our segment information excludes the results of businesses classified as discontinued operations.
5
Discontinued Operations and Assets Held for Sale
We consider assets to be held for sale when management approves and commits to a formal plan to actively market the assets for sale. Upon designation as held for sale, the carrying value of the assets is recorded at the lower of their carrying value and their estimated fair values. We cease to record depreciation or amortization expense at that time.
The results of operations, including the gain on disposal for businesses that are classified as held for sale are excluded from continuing operations and reported as discontinued operations for all periods presented. We have not had and do not expect to have any significant continued involvement with the businesses following their sale other than our provision of certain transition services to Valeant pursuant to the Transition Services Agreement entered into with Valeant in connection with the Valeant Agreement. Amounts billed to Valeant under the Transition Services Agreement are included within discontinued operations. See Note 8 Discontinued Operations and Assets Held for Sale.
Income Taxes
Income taxes are reported using the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to: (i) differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and (ii) operating loss and tax credit carry forwards using applicable enacted tax rates. An increase or decrease in these tax rates will increase or decrease the carrying value of future net tax assets resulting in an increase or decrease to net income. Income tax credits, such as investment tax credits, are included as part of the provision for income taxes. The realization of our deferred tax assets is primarily dependent on the generation of sufficient capital gains and taxable income prior to expiration of any loss carry forward balance. A valuation allowance is provided when it is more likely than not that a deferred tax asset may not be realized. Changes in valuation allowances are included in our tax provision, or included within discontinued operations in the period of change.
Contingent Consideration
Contingent consideration arising from the sale of QLT USA and Visudyne is measured at fair value. The contingent consideration is revalued at each reporting period and changes are included in continuing operations. See Note 6 Contingent Consideration.
Net Loss Per Common Share
Basic net loss per common share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed in accordance with the treasury stock method, which uses the weighted average number of common shares outstanding during the period and also includes the dilutive effect of potentially issuable common stock from outstanding stock options.
Fair Value of Financial Assets and Liabilities
The carrying values of cash and cash equivalents, restricted cash, trade receivables and payables, and contingent consideration approximate fair value. We estimate the fair value of our financial instruments using the market approach. The fair values of our financial instruments reflect the amounts that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).
Recently Issued Accounting Standards
As at the date of this assessment, no new future accounting pronouncements were identified, which are expected to affect the Companys consolidated financial statements beyond June 30, 2013.
2. ACCRUED LIABILITIES
(In thousands of U.S. dollars) |
June 30, 2013 | December 31, 2012 | ||||||
Compensation(1) |
$ | 909 | $ | 2,270 | ||||
Directors Deferred Share Units compensation (DDSU) |
118 | 96 | ||||||
Other |
162 | $ | 149 | |||||
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$ | 1,189 | $ | 2,515 | |||||
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(1) | The decrease in the accrued compensation liability is primarily due to the pay-out of employee bonuses during the six months ended June 30, 2013. |
6
3. FOREIGN EXCHANGE FACILITY
We have a foreign exchange facility (the Facility) with HSBC Bank of Canada for the sole purpose of entering into foreign exchange contracts. The Facility previously allowed us to enter into a maximum of $50.0 million in spot or forward foreign exchange contracts for terms up to fifteen months. Effective April 23, 2013, we entered into an amendment with HSBC Bank of Canada (the Amendment) which reduced the limit applicable to forward foreign exchange contracts to $12.5 million for terms up to one month. The Amendment also reduced the limit applicable to spot foreign exchange contracts to $10.0 million. All other terms and conditions governing the Facility remain the same.
The Facility requires security in the form of cash or money market instruments based on the contingent credit exposure for any outstanding foreign exchange transactions. At June 30, 2013 and December 31, 2012, no collateral has been pledged as security for this facility given that we do not have any foreign exchange transactions outstanding.
4. SHARE CAPITAL
(a) Cash Distribution
On June 27, 2013, we completed a $200.0 million special cash distribution, by way of a reduction of the paid-up capital of the Companys common shares (Cash Distribution). The Cash Distribution was approved by the Companys shareholders at QLTs annual and special shareholders meeting on June 14, 2013. All shareholders of record as at June 24, 2013 (the Record Date) were eligible to participate in the Cash Distribution and received a payment of approximately $3.92 per share based upon the 51,081,878 common shares issued and outstanding on the Record Date.
(b) Share Repurchase Program
On October 2, 2012, we commenced a normal course issuer bid to repurchase up to 3,438,683 of our common shares, being 10% of our public float as of September 26, 2012, over a 12-month period. All purchases were effected in the open market through the facilities of the NASDAQ Stock Market, and in accordance with applicable regulatory requirements. All common shares repurchased were cancelled. Total purchases under this program, which we completed in March 2013, were 3,438,683 common shares at an average price of $7.86 per share, for a total cost of $27.0 million.
We implemented our share repurchase program pursuant to an automatic share purchase plan (the Plan), in accordance with applicable Canadian and US securities legislation. Under the Plan, we were able to repurchase our shares on any trading day during the share repurchase period, including during self-imposed trading blackout periods.
(c) Stock Options
On April 25, 2013, the Companys board of directors amended and restated the QLT 2000 Incentive Stock Plan (the Plan) to increase the number of shares of the Companys common stock, without par value, available for grant under the Plan from 7,800,000 to 11,800,000 and to make certain other amendments to the Plan. The amendment and restatement of the Plan was subject to shareholder approval, which was obtained on June 14, 2013. On July 29, 2013, the Company filed a registration statement to register the issuance of up to 4,000,000 additional shares of Common Stock that may be issued under the Plan as a result of the amendment to the Plan.
7
There were no stock options granted during the three and six months ended June 30, 2013. We used the Black-Scholes option pricing model to estimate the value of the options at each grant date, using the following weighted average assumptions (no dividends are assumed):
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Annualized volatility |
| 46.1 | % | | 46.8 | % | ||||||||||
Risk-free interest rate |
| 0.9 | % | | 1.0 | % | ||||||||||
Expected life (years) |
| 3.8 | | 3.8 |
The Black-Scholes option pricing model was developed for use in estimating the value of traded options that have no vesting restrictions and are fully transferable. In addition, option pricing models require the input of highly subjective assumptions, including the expected stock price volatility. We project expected volatility and expected life of our stock options based upon historical and other economic data trended into future years. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected life of our stock options.
The weighted average grant date fair value of stock options granted during the three and six months ended June 30, 2012 was CAD $2.52 and $2.55, respectively.
As at June 30, 2013, there were 60,637 unvested stock options. Total estimated compensation cost related to non-vested stock options and the expected and weighted average periods over which such costs are expected to be recognized at June 30, 2013 were as follows:
June 30, 2013 |
||||
Unrecognized estimated compensation costs (in thousands of U.S. dollars) |
$ | 145 | ||
Expected period of recognition of compensation cost (in months) |
36 | |||
Expected weighted average period of compensation cost to be recognized (in years) |
1.68 |
The intrinsic value of stock options exercised and the related cash from exercise of stock options during the three and six months ended June 30, 2013 and 2012 was as follows:
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
(In thousands of U.S. dollars) |
2013 | 2012 | 2013 | 2012 | ||||||||||||
Intrinsic value of stock options exercised |
$ | 806 | $ | 1,226 | $ | 2,142 | $ | 1,659 | ||||||||
Cash from exercise of stock options |
3,556 | 1,403 | 7,217 | 2,011 |
Upon option exercise, we issue new shares of stock.
The impact on our results of operations of recording stock-based compensation for the three and six months ended June 30, 2013 and 2012 was as follows:
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
(In thousands of U.S. dollars) |
2013 | 2012 | 2013 | 2012 | ||||||||||||
Research and development |
$ | 64 | $ | 1,071 | $ | 94 | $ | 1,252 | ||||||||
Selling, general and administrative |
30 | 1,497 | 45 | 1,724 | ||||||||||||
Discontinued operations |
| 2,263 | 3 | 2,576 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Stock-based compensation expense before income taxes |
94 | 4,831 | 142 | 5,552 | ||||||||||||
Related income tax benefits |
| (488 | ) | | (532 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Stock-based compensation, net of income taxes |
94 | 4,343 | 142 | 5,020 | ||||||||||||
|
|
|
|
|
|
|
|
There was no share-based compensation capitalized as part of inventory during the three and six months ended June 30, 2013. For the same period in the prior year, the share-based compensation capitalized as part of inventory and the related tax benefits recorded were negligible.
8
(c) | Deferred Share Units (DSUs) |
No cash payments were made under the Directors Deferred Share Units Plan (the DDSU Plan) during the three and six months ended June 30, 2013. On June 4, 2012, a new board of directors was elected at the Companys annual shareholders meeting. As a result, upon departure of the previous board of directors, $2.5 million was paid out to these former directors during the three and six months ended June 30, 2012 in accordance with the terms of the DDSU Plan.
The impact on our results of operations of recording DSU compensation for the three and six months ended June 30, 2013 and 2012 was as follows:
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
(In thousands of U.S. dollars) |
2013 | 2012 (1) | 2013 | 2012 (1) | ||||||||||||
Research and development |
$ | 9 | $ | 199 | $ | 33 | $ | 220 | ||||||||
Selling, general and administrative |
21 | 456 | 76 | 509 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Deferred share unit compensation expense |
30 | 655 | 109 | 729 | ||||||||||||
|
|
|
|
|
|
|
|
(1) | The DSU compensation for the three and six months ended June 30, 2012 includes a $0.3 million charge related to the accelerated vesting of 42,500 DSUs held by the previous board of directors as a result of the election of a new board of directors at the Companys annual shareholders meeting on June 4, 2012 and the consequent departure of the previous board of directors. |
5. RESTRUCTURING CHARGE
In July 2012 we restructured our operations in order to concentrate our resources on our clinical development programs related to our synthetic retinoid, QLT091001, for the treatment of certain inherited retinal diseases. Following the sale of Visudyne to Valeant, we further reduced our workforce to better align the Companys resources with our corporate objectives. Approximately 178 employees have been affected by the restructuring to date. We have made the appropriate severance and support provisions to assist with outplacement for these employees. During the year ended December 31, 2012, we recorded $16.9 million of restructuring charges of which $3.1 million was included in discontinued operations. During the three and six months ended June 30, 2013, we recorded further restructuring charges of $0.7 million and $1.5 million, respectively. Subsequent to June 30, 2013, we expect to record minimal additional restructuring charges related to severance, termination benefits and outplacement support, as we complete final activities associated with this restructuring.
9
The details of our restructuring accrual and activity are as follows:
(In thousands of U. S. dollars) |
Employee
Termination Costs(1) |
Asset Write-downs | Contract
Termination Costs(2) |
Total | ||||||||||||
Restructuring charge |
$ | 13,016 | $ | | $ | 834 | $ | 13,850 | ||||||||
Foreign exchange |
20 | | | 20 | ||||||||||||
Cash payments |
(13,243 | ) | | (718 | ) | (13,961 | ) | |||||||||
Discontinued operations |
1,561 | 1,056 | 463 | 3,080 | ||||||||||||
Non-cash portion |
| (1,056 | ) | | (1,056 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at December 31, 2012 |
1,354 | | 579 | 1,933 | ||||||||||||
Restructuring charge |
571 | | 251 | 822 | ||||||||||||
Foreign exchange |
47 | | | 47 | ||||||||||||
Cash payments |
(757 | ) | | (356 | ) | (1,113 | ) | |||||||||
Discontinued operations |
121 | (153 | ) | 47 | 15 | |||||||||||
Non-cash portion |
| 153 | | 153 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at March 31, 2013 |
1,336 | | 521 | 1,857 | ||||||||||||
Restructuring charge |
668 | | 3 | 671 | ||||||||||||
Foreign exchange |
(118 | ) | | | (118 | ) | ||||||||||
Cash payments |
(1,511 | ) | | (322 | ) | (1,833 | ) | |||||||||
Discontinued operations |
11 | (22 | ) | 78 | 67 | |||||||||||
Non-cash portion |
| 22 | | 22 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at June 30, 2013 |
$ | 386 | $ | | $ | 280 | $ | 666 | ||||||||
|
|
|
|
|
|
|
|
(1) | Costs include severance, termination benefits, and outplacement support. |
(2) | Costs include lease costs related to excess office space. |
10
6. CONTINGENT CONSIDERATION
Related to the Sale of QLT USA, Inc.
On October 1, 2009, we divested the Eligard® product line as part of the sale of all of the shares of our U.S. subsidiary, QLT USA, Inc. (QLT USA) to TOLMAR Holding, Inc. (Tolmar) for up to an aggregate $230.0 million plus cash on hand of $118.3 million. Pursuant to the stock purchase agreement with Tolmar, we received $20.0 million on closing and $10.0 million on October 1, 2010 and we are entitled to future consideration payable on a quarterly basis in amounts equal to 80% of the royalties paid under the license agreement with Sanofi Synthelabo Inc. for the commercial marketing of Eligard in the U.S. and Canada, and the license agreement with MediGene Aktiengesellschaft which, effective March 1, 2011, was assigned to Astellas Pharma Europe Ltd., for the commercial marketing of Eligard in Europe. The estimated fair value of these expected future quarterly payments is reflected as Contingent Consideration on our Condensed Consolidated Balance Sheet and represents a non-cash investing activity. We are entitled to these payments until the earlier of our receipt of the $200.0 million of such royalties or October 1, 2024.
During the three months ended June 30, 2013, proceeds received from the collection of the contingent consideration totalled $8.0 million (three months ended June 30, 2012$8.1 million). Approximately $7.0 million of these proceeds has been reflected as cash provided by investing activities in the Condensed Consolidated Statements of Cash Flows (three months ended June 30, 2012$6.4 million). The remaining $1.0 million of proceeds (three months ended June 30, 2012$1.6 million) was recognized as the fair value change in contingent consideration on the Condensed Consolidated Statement of Operations and Comprehensive Loss and is therefore reflected in the net loss line as part of the cash used in operating activities in the Condensed Consolidated Statements of Cash Flows.
During the six months ended June 30, 2013, proceeds received from the collection of the contingent consideration totalled $18.9 million (six months ended June 30, 2012$17.0 million). Approximately $16.6 million of these proceeds has been reflected as cash provided by investing activities in the Condensed Consolidated Statements of Cash Flows (six months ended June 30, 2012$13.4 million). The remaining $2.3 million (six months ended June 30, 2012$3.6 million) of proceeds were recognized as the fair value change in contingent consideration on the Condensed Consolidated Statement of Operations and Comprehensive Loss and is therefore reflected in the net loss line as part of the cash used in operating activities in the Condensed Consolidated Statements of Cash Flows.
As of June 30, 2013, we have received an aggregate $142.1 million (December 31, 2012$123.3 million) of Eligard related contingent consideration and expect to receive the remaining $57.9 million (December 31, 2012$76.7 million) on a quarterly basis over approximately the next two years.
Related to the Sale of Visudyne
On September 24, 2012, we completed the sale of Visudyne to Valeant. Pursuant to the Valeant Agreement, we received a payment of $112.5 million at closing (of which $7.5 million is currently held in escrow) and we are also eligible to receive additional amounts following the achievement of certain milestones, including: (i) $5.0 million upon receipt of the registration required for commercial sale of the Qcellus lasers (the Laser Registration) in the United States by December 31, 2013, $2.5 million if the Laser Registration is obtained after December 31, 2013 but before January 1, 2015, and $0 if the Laser Registration is obtained thereafter; (ii) up to $5.0 million in each calendar year commencing January 1, 2013 (up to a maximum of $15.0 million in the aggregate) for annual net royalties exceeding $8.5 million pursuant to the Amended and Restated PDT Product Development, Manufacturing and Distribution Agreement with Novartis Pharma AG (the Novartis Agreement) or from other third-party sales of Visudyne outside of the United States; and (iii) a royalty on net sales attributable to new indications for Visudyne, if any should be approved by the FDA. As at June 30, 2013, the estimated fair value of $4.7 million (December 31, 2012$4.6 million) of the $20.0 million of aggregate contingent payments of related to sale of Visudyne is also reflected as Contingent Consideration on our Condensed Consolidated Balance Sheet and represents a non-cash investing activity. The estimated fair value of the contingent consideration related to net royalties pursuant to the Novartis Agreement is based on historical sales, pricing, and foreign exchange data as well as expected competition and current exchange rates.
During the three and six months ended June 30, 2013, we received no proceeds related to the collection of the contingent consideration for the sale of Visudyne. In addition, we recorded a minor fair value increase in the contingent consideration during the three months ended June 30, 2013 and a net $0.5 million fair value decrease in the contingent consideration during the six months ended June 30, 2013 in the Condensed Consolidated Statement of Operations and Comprehensive Loss. We currently expect to satisfy the condition to receipt of the $5.0 million Laser Registration contingent payment in 2013.
The above contingent consideration payments related the sale of QLT USA and Visudyne are not generated from a migration or continuation of activities and therefore are not direct cash flows of the divested business. See Note 8 Discontinued Operations and Assets Held for Sale and Note 9Financial Instruments and Concentration of Credit Risk.
11
7. INCOME TAXES
During the three and six months ended June 30, 2013, the provision for income taxes was $0.1 million and $0.3 million, respectively. The provision in each period primarily relates to the current period gain on the fair value change of our Eligard related contingent consideration. In addition, the provisions also reflect that we have insufficient evidence to support current or future realization of the tax benefits associated with our development expenditures.
During the three and six months ended June 30, 2012, the provision for income taxes was $0.3 million and $0.5 million, respectively. The provision in each period primarily related to the gain on the fair value change of our Eligard related contingent consideration and income taxes associated with our mix of income allocable to our activities in the U.S.
During the three and six months ended June 30, 2013, the provision for income taxes on discontinued operations was $0.2 million and $0.2 million, respectively. The provision in each period primarily relates to the drawdown of a prepaid tax asset that was recorded in a prior year in connection with the intercompany transfer of certain intellectual property and the subsequent sale of such technology to Mati in April 2013. The provisions for income taxes on discontinued operations also reflects that we have insufficient evidence to support current or future realization of the tax benefits associated with expenditures related to our discontinued operations.
During the three and six months ended June 30, 2012, the provision for income taxes on discontinued operations was $0.1 million and $0.2 million, respectively. The provisions in each period primarily reflected the existence of insufficient evidence to support current or future realization of the tax benefits associated with expenditures related to our discontinued operations and our mix of income allocable to our activities in the U.S.
As insufficient evidence exists to support current or future realization of the tax benefits associated with the vast majority of our current and prior period operating expenditures, the benefit of certain tax assets was not recognized during the three and six months ended June 30, 2013 and 2012.
8. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
On September 24, 2012, we completed the sale of our Visudyne® business to Valeant pursuant to the Valeant Agreement. Under the terms of the Valeant Agreement, we received a payment of $112.5 million at closing and are also eligible to receive additional amounts of up to $5.0 million in contingent payments relating to the receipt of the Laser Registration, up to $15.0 million in contingent payments relating to royalties on sales of Visudyne under the Novartis Agreement or from other third party sales of Visudyne outside of the U.S. and a royalty on net sales of new indications for Visudyne, if any should be approved. The Valeant Agreement provides that $7.5 million of the purchase price will be held in escrow for one year following the closing date to satisfy indemnification claims that Valeant may have under the Valeant Agreement. This amount is reflected as Restricted Cash on our Consolidated Balance Sheet. Following the divestiture, we do not have significant continuing involvement in the operations or cash flows of the Visudyne business other than the provision of certain transition services to Valeant pursuant to the Transition Services Agreement. We expect that the transition services related activities will be complete by the third quarter of 2013.
On April 3, 2013, we completed the sale of our PPDS Technology to Mati pursuant to the terms of the Mati Agreement. Prior to the completion of the sale, Mati exercised an exclusive option to acquire the assets related to our PPDS Technology in exchange for $0.5 million. We recognized the $0.5 million over the stipulated 90 day option term in discontinued operations due to a continuing performance obligation related to the maintenance of the related intellectual property. In accordance with the terms of the Mati Agreement, we received an additional payment of approximately $0.8 million upon closing. Furthermore, we are eligible to receive future potential payments upon completion of certain product development and commercialization milestones that could reach $19.5 million (or exceed that amount if more than two products are commercialized), a low single digit royalty on world-wide net sales of all products using or developed from the PPDS Technology and a fee on payments received by Mati in respect of the PPDS Technology other than net sales. Under the terms of the sale agreement, we do not have any significant ongoing involvement in the operations or cash flows related to the PPDS Technology other than minor transition services which we have agreed to provide. We expect that the transition activities will be complete by the third quarter of 2013.
The results of operations relating to both our PPDS Technology and our Visudyne business have been excluded from continuing operations and reported as discontinued operations for all periods presented. In addition, as at December 31, 2012, approximately $0.3 million of property, plant and equipment related to our former PPDS Technology and Visudyne were reclassified as held for sale for disclosure purposes in the Consolidated Balance Sheets. As at June 30, 2013, these assets have been sold.
12
Operating results of our PPDS Technology and our Visudyne business included in discontinued operations are summarized as follows:
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(In thousands of U.S. dollars) |
2013 | 2012 | 2013 | 2012 | ||||||||||||
Total revenues |
$ | | $ | 7,989 | $ | | $ | 16,980 | ||||||||
Recovery on assets held for sale (1) |
22 | | 175 | | ||||||||||||
Operating pre-tax loss (3) |
(281 | ) | (3,971 | ) | (474 | ) | (4,802 | ) | ||||||||
Gain on sale of discontinued operations (2) |
287 | 743 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Pre-tax income (loss) |
6 | (3,971 | ) | 269 | (4,802 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Provision for income taxes |
(176 | ) | (122 | ) | (249 | ) | (193 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net (loss) income from discontinued operations |
$ | (170 | ) | $ | (4,093 | ) | $ | 20 | $ | (4,995 | ) | |||||
|
|
|
|
|
|
|
|
(1) | Relates to an increase in fair value on previously impaired equipment in connection with the sale of our PPDS Technology to Mati. |
(2) | Relates to the gain on sale of our PPDS Technology to Mati in April 2013. For the three months ended June 30, 2013, the net gain of $0.3 million represents $0.8 million of proceeds received upon completion of the transaction, net of $0.3 million of related transaction costs and the $0.2 million carrying value of the equipment, which was previously classified as held for sale. For the six months ended June 30, 2013, the net gain of $0.7 million represents total sale proceeds of $1.2 million, net of $0.3 million of related transaction costs and the $0.2 million carrying value of the equipment discussed above. |
(3) | The results for the three and six months ended June 30, 2013 includes operating pre-tax losses of $0.3 million and $0.3 million, respectively related to our PPDS Technology. However, the three and six months ended June 30, 2012 includes $7.3 million and $7.3 million of pre-tax losses related to our PPDS Technology, respectively. The remaining amounts relate to Visudyne. |
9. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
We have various financial instruments that must be measured under the fair value standard including cash and cash equivalents, restricted cash, contingent consideration and, from time to time, forward currency contracts. Our financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy.
The following tables provide information about our assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2013 and December 31, 2012 and indicate the fair value hierarchy of the valuation techniques we utilized to determine such fair value:
Carrying Value June 30, 2013 |
Fair Value Measurements at June 30, 2013 |
|||||||||||||||
(In thousands of U.S. dollars) |
Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 103,180 | $ | 103,180 | $ | | $ | | ||||||||
Restricted cash |
7,502 | 7,502 | | | ||||||||||||
Contingent consideration(1) |
59,370 | | | 59,370 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 170,052 | $ | 110,682 | $ | | $ | 59,370 | ||||||||
|
|
|
|
|
|
|
|
13
Carrying Value December 31, 2012 |
Fair Value Measurements at December 31, 2012 |
|||||||||||||||
(In thousands of U.S. dollars) |
Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 307,384 | $ | 307,384 | $ | | $ | | ||||||||
Restricted cash |
7,500 | 7,500 | | | ||||||||||||
Contingent consideration(1) |
76,409 | | | 76,409 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 391,293 | $ | 314,884 | $ | | $ | 76,409 | ||||||||
|
|
|
|
|
|
|
|
(1) | To estimate the fair value of contingent consideration at June 30, 2013, and December 31, 2012, we used a discounted cash flow model based on estimated timing and amount of future cash flows, discounted using a cost of capital of 8% for the contingent consideration related to the Eligard and Visudyne royalties and 2.24% and 3.5%, respectively, for the contingent consideration related to the Laser Registration, determined by management after considering available market and industry information. Future cash flows were estimated by utilizing external market research to estimate market size, to which we applied market share, pricing and foreign exchange assumptions based on historical sales data, expected competition and current exchange rates. If the discount rate were to increase by 1%, the contingent consideration related to the sale of QLT USA would decrease by $0.4 million, from $54.6 million to $54.3 million and the contingent consideration related to the sale of our Visudyne business would decrease by a negligible amount. If estimated future sales of Eligard were to decrease by 10%, the contingent consideration related to the sale of QLT USA would decrease by $0.3 million, from $54.6 million to $54.4 million. If estimated future sales of Visudyne were to decrease by 10%, the contingent consideration related to the sale of our Visudyne business would decrease by a negligible amount. |
The following table represents a reconciliation of our asset (contingent consideration) measured and recorded at fair value on a recurring basis, using significant unobservable inputs (Level 3):
Level 3 | ||||||||||||
(In thousands of U.S. dollars) |
Related to Sale of QLT USA |
Related to Sale of Visudyne |
Total | |||||||||
Balance at January 1, 2012 |
$ | 99,947 | $ | | $ | 99,947 | ||||||
Transfers / Additions to Level 3 |
| 5,364 | 5,364 | |||||||||
Settlements |
(37,117 | ) | | (37,117 | ) | |||||||
Fair value change in contingent consideration |
8,365 | (150 | ) | 8,215 | ||||||||
|
|
|
|
|
|
|||||||
Balance at December 31, 2012 |
71,195 | 5,214 | 76,409 | |||||||||
Transfers / Additions to Level 3 |
| | | |||||||||
Settlements |
(10,863 | ) | | (10,863 | ) | |||||||
Fair value change in contingent consideration |
1,307 | (512 | ) | 795 | ||||||||
|
|
|
|
|
|
|||||||
Balance at March 31, 2013 |
61,639 | 4,702 | 66,341 | |||||||||
Transfers / Additions to Level 3 |
| | | |||||||||
Settlements |
(8,009 | ) | | (8,009 | ) | |||||||
Fair value change in contingent consideration |
1,014 | 24 | 1,038 | |||||||||
|
|
|
|
|
|
|||||||
Balance at June 30, 2013 |
$ | 54,644 | $ | 4,726 | $ | 59,370 | (1) | |||||
|
|
|
|
|
|
(1) | Comprised of $40.6 million as current portion of contingent consideration and $18.7 million as long-term portion of contingent consideration on the Consolidated Balance Sheet. |
As at June 30, 2013 and December 31, 2012, we had no outstanding forward foreign currency contracts.
Other financial instruments that potentially subject us to concentration of credit risk include our cash, cash equivalents, restricted cash, accounts receivable and contingent consideration. To limit our credit exposure in regards to cash and cash equivalents, we deposit our cash with high quality financial institutions and the primary goals of our treasury policy are capital preservation and liquidity. Our treasury policy limits investments to certain money market securities issued by governments, financial institutions and corporations with investment-grade credit ratings, and places restrictions on maturities and concentration by issuer.
14
10. NET LOSS PER SHARE
The following table sets out the computation of basic and diluted net loss per common share:
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(In thousands of U.S. dollars, except share and per share data) |
2013 | 2012 | 2013 | 2012 | ||||||||||||
Numerator: |
||||||||||||||||
Loss from continuing operations |
$ | (6,029 | ) | $ | (12,211 | ) | $ | (12,646 | ) | $ | (21,586 | ) | ||||
Income (loss) from discontinued operations, net of income taxes |
(170 | ) | (4,093 | ) | 20 | (4,995 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss |
$ | (6,199 | ) | $ | (16,304 | ) | $ | (12,626 | ) | $ | (26,581 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Denominator: (thousands) |
||||||||||||||||
Weighted average common shares outstanding |
50,883 | 49,191 | 50,736 | 49,088 | ||||||||||||
Effect of dilutive securities: |
||||||||||||||||
Stock options |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted weighted average common shares outstanding |
50,883 | 49,191 | 50,736 | 49,088 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic and diluted net loss per common share |
||||||||||||||||
Continuing operations |
$ | (0.12 | ) | $ | (0.25 | ) | $ | (0.25 | ) | $ | (0.44 | ) | ||||
Discontinued operations |
$ | (0.00 | ) | $ | (0.08 | ) | $ | 0.00 | $ | (0.10 | ) | |||||
|
|
|
|
|
|
|
|
|||||||||
Net loss |
$ | (0.12 | ) | $ | (0.33 | ) | $ | (0.25 | ) | $ | (0.54 | ) | ||||
|
|
|
|
|
|
|
|
For the three and six months ended June 30, 2013, 114,549 stock options (2012 5,586,799 stock options) were excluded from the calculation of diluted net income (loss) per common share because their effect was anti-dilutive.
11. SUBSEQUENT EVENTS
On April 25, 2013, the Companys board of directors amended and restated the Plan to increase the number of common shares of the Company available for grant under the Plan and to make certain other amendments to the Plan, including a provision to permit the granting of restricted stock units (RSUs) under the Plan. The amendment and restatement of the Plan was subject to shareholder approval, which was obtained on June 14, 2013.
On July 15, 2013, the Board of Directors granted an aggregate of 862,000 stock options to employees, 100,000 stock options to directors, 48,000 RSUs to directors under the Plan, and 88,000 DSUs to directors under the DDSU Plan.
The stock options vest and become exercisable in thirty-six (36) successive and equal monthly installments beginning on the one-month anniversary of the date of grant and have an exercise price of CAD $4.54 per share, which is equal to the closing price of the Companys common shares on the Toronto Stock Exchange on the date of grant.
The RSUs vest in three (3) successive and equal yearly installments on the date of each of the first three annual general meetings of the Company held after the date of grant. Upon vesting, each RSU represents the right to receive one common share of the Company.
The DSUs vest in thirty-six (36) successive and equal monthly installments beginning on the first day of the first month after the date of grant. A vested DSU is convertible into cash only (i.e. no shares are issued), and is automatically converted after the director ceases to be a member of the Board unless the director is removed from the Board for just cause.
On July 29, 2013, the Company filed a registration statement to register the issuance of up to 4,000,000 additional shares of Common Stock that may be issued under the Plan as a result of the amendment to the Plan.
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ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following information should be read in conjunction with the accompanying unaudited interim condensed consolidated financial statements and notes thereto, which are prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and our audited consolidated financial statements and notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2012 (our 2012 Annual Report).
All of the following amounts are expressed in U.S. dollars unless otherwise indicated.
Note regarding Trademarks
The following words used in this Report are trademarks:
| Eligard® is a registered trademark of Sanofi S.A. |
| Visudyne® is a registered trademark of Novartis AG. |
| Qcellus is a trademark of Valeant Pharmaceuticals International, Inc. |
Any words used in this Report that are trademarks but are not referred to above are the property of their respective owners.
Overview
Corporate Restructuring
QLT is a biotechnology company dedicated to the development and commercialization of innovative ocular products that address the unmet medical needs of patients and clinicians worldwide. On July 9, 2012, as a result of a comprehensive business and portfolio review by our Board of Directors (the Board), we announced a new corporate strategy and plans to restructure our operations in order to concentrate our resources on our clinical development programs related to our synthetic retinoid, QLT091001, for the treatment of certain inherited retinal diseases. In connection with the strategic restructuring of the Company, over the course of 2012 we completed a significant reduction in force of approximately 178 employees, or 83% of our work force. Currently, our remaining employees are principally focused on the development of QLT091001.
In connection with the restructuring, following the departure of Robert Butchofsky, the Companys former President and Chief Executive Officer, on August 2, 2012, the Board formed an Executive Transition Committee currently composed of Directors Jeffrey Meckler and Dr. John Kozarich to perform the function of the Chief Executive Officer on an interim basis while the Board determines the resources and management necessary to pursue the Companys new strategy. Jeffrey Meckler serves as Chairman of the Executive Transition Committee.
Sales of Assets and Discontinued Operations
Visudyne
In September 2012, in connection with the strategic restructuring, we sold our only commercial product, Visudyne, to Valeant Pharmaceuticals International, Inc. (Valeant). Pursuant to the asset purchase agreement between the Company and Valeant (the Valeant Agreement), we sold all of our assets related to our Visudyne business, including the Qcellus laser then under development by us, for $112.5 million in upfront consideration (of which $7.5 million is held in escrow for one year from closing), contingent payments up to $20.0 million, and a royalty on net sales of new indications for Visudyne, if any should be approved. We will be entitled to the contingent payments upon the achievement of certain milestones, including: (i) $5.0 million upon receipt of the laser-related registration (the Laser Registration) required for commercial sale of the Qcellus laser in the United States by December 31, 2013, $2.5 million if the Laser Registration is obtained after December 31, 2013 but before January 1, 2015 and $0 if the Laser Registration is obtained thereafter and (ii) up to $5.0 million in each calendar year commencing January 1, 2013 (up to a maximum of $15.0 million in the aggregate) for annual net royalties exceeding $8.5 million received by Valeant under the license agreement with Novartis Pharma AG (Novartis), which we transferred to Valeant in connection with the sale, or from other third-party sales of Visudyne outside of the United States.
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In connection with the sale of our Visudyne business, we entered into a transition services agreement with Valeant, pursuant to which we have been providing transition services to Valeant concerning most of the aspects of the Visudyne and Qcellus laser business. We have completed substantially all of our transition services with respect to Visudyne and the commercial sale of Visudyne, but we continue to assist Valeant with respect to obtaining FDA approval of the Qcellus laser through the premarket approval process, including manufacturing prototype lasers for testing in connection with the approval process. We expect to complete the laser-related transition services, including manufacturing any commercial lasers, in the third quarter of 2013.
Punctal Plug Delivery Program
On April 3, 2013, we completed the sale of our punctal plug drug delivery system technology (the PPDS Technology) to Mati Therapeutics Inc. (Mati), a development company founded by Robert Butchofsky, our former President and Chief Executive Officer. After a lengthy process of seeking a buyer for the PPDS Technology, on December 24, 2012, we granted Mati a 90-day exclusive option to acquire the PPDS Technology in exchange for $0.5 million. On April 3, 2013, following Matis exercise of the option, we entered into an asset purchase agreement with Mati and completed the sale of the PPDS Technology to Mati. Under the terms of the asset purchase agreement (the Mati Agreement), we received an additional payment of approximately $0.8 million at closing and are eligible to receive potential payments upon the satisfaction of certain product development and commercialization milestones that could reach $19.5 million (or exceed that amount if more than two products are commercialized), a low single digit royalty on world-wide net sales of all products using or developed from the PPDS Technology and a fee on payments received by Mati in respect of the PPDS Technology other than net sales.
Eligard
On October 1, 2009, we divested the Eligard line of products to TOLMAR Holding, Inc. (Tolmar) as part of the sale of all of the shares of our U.S. subsidiary, QLT USA, Inc. (QLT USA). Pursuant to the stock purchase agreement, we are entitled to future consideration payable quarterly in amounts equal to 80% of the royalties paid under the license agreement with Sanofi Synthelabo Inc. (Sanofi) for the commercial marketing of Eligard in the U.S. and Canada, and the license agreement with MediGene Aktiengesellschaft (MediGene), which, effective March 1, 2011, was assigned to Astellas Pharma Europe Ltd. (Astellas), for the commercial marketing of Eligard in Europe. The estimated fair value of the expected future quarterly payments is reflected as Contingent Consideration on our Consolidated Balance Sheet. We are entitled to these quarterly payments until the earlier of our receipt of $200.0 million or October 1, 2024. As of June 30, 2013, we had received an aggregate $142.1 million of contingent consideration. While we expect to receive the full amount of contingent consideration in approximately the next two years, our continued receipt of contingent consideration under the stock purchase agreement is dependent upon sales of Eligard by Sanofi and Astellas, which could vary significantly due to competition, manufacturing difficulties and other factors.
Return of Capital
On June 27, 2013, we completed a special cash distribution to shareholders in the amount of $200.0 million, by way of a reduction of the paid-up capital of the common shares, resulting in the return of approximately $3.92 per share (the Cash Distribution). The Cash Distribution was made to shareholders without Canadian withholding taxes of up to 25% being payable, pursuant to an Advance Tax Ruling received from Canadian tax authorities. The Cash Distribution was approved by shareholders at our 2013 annual general and special meeting of shareholders on June 14, 2013 and was paid to shareholders of record as of June 24, 2013.
When the Board commenced its review of the most tax efficient and effective means to return capital to shareholders, it initially authorized a return of $100.0 million in capital. In connection with this, on October 2, 2012, we commenced a normal course issuer bid to repurchase up to 3,438,683 of our common shares, being 10% of our public float as of September 26, 2012, the maximum amount permitted under the Toronto Stock Exchange normal course issuer bid rules. The share repurchase program was implemented pursuant to an automatic share purchase plan, in accordance with applicable Canadian and U.S. securities legislation. Total repurchases under the program, which we completed in March 2013, were 3,438,683 common shares at an average price of $7.86 per share, for a total cost of $27.0 million. All purchases were effected in the open market through the facilities of the NASDAQ Stock Market, and in accordance with regulatory requirements. All common shares repurchased were cancelled.
Research and Development
Our research and development efforts are focussed on QLT091001, our orphan drug program for the treatment of inherited retinal diseases.
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We are currently conducting Phase Ib clinical proof-of-concept studies of QLT091001, a synthetic retinoid replacement therapy for 11-cis-retinal, a key biochemical component of the visual retinoid cycle, in patients with Leber Congenital Amaurosis (LCA) and Retinitis Pigmentosa (RP). Positive results from our initial Phase Ib clinical proof-of-concept study were reported for the 14 subject cohort of LCA patients in 2011 and for the 18 subject cohort of early-onset RP patients in March 2012.
A retreatment study in LCA and RP subjects is ongoing to provide retreatment for these subjects, as needed, in order to examine the safety, efficacy and tolerability of repeat dosing cycles of QLT091001 administered over seven days. Studies are also ongoing to further evaluate the safety and tolerability of QLT091001. We are also continuing our dialogue with the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) with respect to the design and protocol requirements for potential pivotal trials in LCA and RP patients.
QLT091001 has received orphan drug designations for the treatment of LCA (due to inherited mutations in the LRAT and RPE65 genes) and RP (all mutations) by the FDA, and for the treatment of LCA and RP (all mutations) by the EMA. The drug has also been granted two Fast Track designations by the FDA for the treatment of LCA and RP due to inherited mutations in the LRAT and RPE65 genes. In May 2011, the United States Patent and Trademark Office issued Patent No. 7,951,841, a key patent related to this program, covering various methods of use of QLT091001 in the treatment of diseases associated with an endogenous 11-cis-retinal deficiency, expiring on July 27, 2027, including the period of Patent Term Adjustment.
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RESULTS OF OPERATIONS
The following table sets out our net loss from operations for the three and six months ended June 30, 2013 and 2012:
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(In thousands of U.S. dollars, except per share data) |
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net loss |
$ | (6,199 | ) | $ | (16,304 | ) | $ | (12,626 | ) | $ | (26,581 | ) | ||||
Basic and diluted net loss per common share |
$ | (0.12 | ) | $ | (0.33 | ) | $ | (0.25 | ) | $ | (0.54 | ) |
Detailed discussion and analysis of our results of operations are as follows:
Costs and Expenses
Research and Development
Research and development, or R&D, expenditures all relate to our synthetic retinoid program. For the three months ended June 30, 2013, R&D expenditures were $4.4 million compared to $7.5 million for the same period in 2012. The $3.1 million (41%) decrease was primarily due to: (i) a $1.9 million decline in overall spending resulting from savings from our 2012 restructuring initiatives and higher spending in 2012 related to the completion of certain early stage safety studies and manufacturing activities required to support our clinical studies; and (ii) the $1.2 million impact of the accelerated vesting of certain stock options in connection with the election of a new Board of Directors on June 4, 2012.
For the six months ended June 30, 2013, R&D expenditures were $8.5 million compared to $14.0 million for the same period in 2012. The $5.5 million (39%) decrease was primarily due to: (i) a $4.3 million decline in overall spending resulting from savings from our 2012 restructuring initiatives and higher spending in 2012 related to the completion of certain early stage safety studies and manufacturing activities required to support our clinical studies; and (ii) the $1.2 million impact of the accelerated vesting of certain stock options described above.
Selling, General and Administrative Expenses
For the three months ended June 30, 2013, selling, general and administration, or SG&A, expenditures were $1.8 million compared to $5.9 million for the same period in 2012. The $4.1 million (69%) decrease was primarily due to: (i) a $2.9 million decrease in overall spending related to savings from our 2012 restructuring initiatives; (ii) a $0.9 million charge incurred in 2012 related to the accelerated vesting of employee stock options in connection with the election of a new Board of Directors on June 4, 2012; and (iii) higher compensation expense of $0.3 million incurred in 2012 related to the accelerated vesting of the previous directors deferred stock units.
For the six months ended June 30, 2013 SG&A expenditures were $3.9 million compared to $10.0 million for the same period in 2012. The $6.1 million (61%) decrease was primarily due to: (i) a $4.9 million decrease in overall SG&A spending related to savings from our 2012 restructuring initiatives; (ii) a $0.9 million charge incurred in 2012 related to the accelerated vesting of employee stock options related to the election of a new Board of Directors on June 4, 2012; and (iii) higher compensation expense of $0.3 million incurred in 2012 related to accelerated vesting of the previous directors deferred stock units.
Restructuring Charges
During the year ended December 31, 2012, we restructured our operations to focus our resources on our clinical development programs related to our synthetic retinoid, QLT091001, for the treatment of certain inherited retinal diseases. Following the sale of Visudyne to Valeant, we further reduced our workforce to better align the Companys resources with our corporate objectives. Approximately 178 employees have been affected by the restructuring plan to date. We made the appropriate severance and support provisions to assist these employees with outplacement.
During the three and six months ended June 30, 2013, we recorded further restructuring charges of $0.7 million and $1.5 million, respectively. Annualized operating savings resulting from the restructuring are expected to be approximately $24.6 million related to the reduction in force and approximately $0.6 million related to depreciation on assets written-down or held for sale. See Note 5 Restructuring Charges in the Notes to the Unaudited Condensed Consolidated Financial Statements.
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Investment and Other Income
Net Foreign Exchange Gains (Losses)
For the three and six months ended June 30, 2013 and 2012, net foreign exchange gains (losses) comprised gains and losses from the impact of foreign exchange fluctuations on our monetary assets and liabilities that are denominated in currencies other than the U.S. dollar (principally the Canadian dollar). See Liquidity and Capital Resources Interest and Foreign Exchange Rates below.
Fair Value Change in Contingent Consideration
As part of the sale of all of the shares of QLT USA to Tolmar, we are entitled to receive up to $200.0 million in consideration payable on a quarterly basis in amounts equal to 80% of the royalties paid under the license agreements with each of Sanofi and Astellas (formerly with MediGene) for the commercial marketing of Eligard in the U.S., Canada, and Europe. At June 30, 2013, there was up to $57.9 million remaining to be paid to us by Tolmar. The $54.7 million fair value of this amount is reported as part of Contingent Consideration on our Consolidated Balance Sheet, and is estimated using a discounted cash flow model.
On September 24, 2012, we completed the sale of our Visudyne business to Valeant pursuant to the Valeant Agreement. Under the terms of the Valeant Agreement, we received a payment of $112.5 million at closing (including $7.5 million held in an escrow account for one year) and are also eligible to receive additional amounts of up to $5.0 million in contingent payments relating to the Laser Registration, up to $15.0 million in contingent payments relating to royalties on sales of Visudyne under the Novartis Agreement or from other third party sales of Visudyne outside of the U.S. and a royalty on net sales of new indications for Visudyne, if any should be approved. The fair value of these amounts, $4.7 million, is reported as part of Contingent Consideration on our Consolidated Balance Sheet, and is estimated using a discounted cash flow model.
Contingent consideration is revalued at each reporting period and is positively impacted by the passage of time, since all remaining expected cash flows move closer to collection, thereby increasing their present value. The fair value change in contingent consideration is also impacted by the projected amount and timing of expected future cash flows and the cost of capital applied to discount these cash flows.
For the three months ended June 30, 2013, the fair value change in contingent consideration decreased by $0.6 million to $1.0 million compared to $1.7 million for the same period in 2012. For the six months ended June 30, 2013, the fair value change in contingent consideration decreased by $1.8 million to $1.8 million compared to $3.6 million for the same period in 2012. The fair value decreases are primarily due to the impact of the time value of money and cash collected during the period, which decreases the balance of future expected cash flows owed to us.
Income from Discontinued Operations
As a result of our comprehensive business and portfolio review in July 2012, we announced a new corporate strategy and plans to restructure our operations to focus our resources on our clinical development programs related to our synthetic retinoid, QLT091001, for the treatment of certain inherited retinal diseases. On September 24, 2012, we completed the sale of our Visudyne business to Valeant pursuant to the Valeant Agreement (see the Sale of Assets and Discontinued OperationsVisudyne section above for additional information). On April 3, 2013, we completed the sale of our PPDS Technology to Mati pursuant to the terms of the Mati Agreement. Prior to the completion of the sale, Mati exercised an exclusive option to acquire the assets related to our PPDS Technology in exchange for $0.5 million. We recognized the $0.5 million over the stipulated 90 day option term in discontinued operations due to a continuing performance obligation related to the maintenance of the related intellectual property. In accordance with the terms of the Mati Agreement, we received an additional payment of approximately $0.8 million upon closing (see the Sale of Assets and Discontinued Operations Punctal Plug Delivery Program section above for additional information).
The sale proceeds discussed above and the results of operations relating to both our PPDS Technology and Visudyne have been excluded from continuing operations and reported as discontinued operations for all periods presented. See Note 8 Discontinued Operations and Assets Held for Sale in the Notes to our Unaudited Condensed Consolidated Financial Statements.
Income Taxes
During the three and six months ended June 30, 2013, the provision for income taxes was $0.1 million and $0.3 million, respectively. The provision in each period primarily relates to the current period gain on the fair value change of our Eligard related contingent consideration. In addition, the provisions also reflect that we have insufficient evidence to support current or future realization of the tax benefits associated with our development expenditures.
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During the three and six months ended June 30, 2012, the provision for income taxes was $0.3 million and $0.5 million, respectively. The provision in each period primarily related to the gain on the fair value change of our Eligard related contingent consideration and income taxes associated with our mix of income allocable to our activities in the U.S.
During the three and six months ended June 30, 2013, the provision for income taxes on discontinued operations was $0.2 million and $0.2 million, respectively. The provision in each period primarily relates to the drawdown of a prepaid tax asset that was recorded in a prior year in connection with the intercompany transfer of certain intellectual property and the subsequent sale of such technology to Mati in April 2013. The provisions for income taxes on discontinued operations also reflects that we have insufficient evidence to support current or future realization of the tax benefits associated with expenditures related to our discontinued operations.
During the three and six months ended June 30, 2012, the provision for income taxes on discontinued operations was $0.1 million and $0.2 million, respectively. The provisions in each period primarily reflected the existence of insufficient evidence to support current or future realization of the tax benefits associated with expenditures related to our discontinued operations and our mix of income allocable to our activities in the U.S.
As insufficient evidence exists to support current or future realization of the tax benefits associated with the vast majority of our current and prior period operating expenditures, the benefit of certain tax assets was not recognized during the three and six months ended June 30, 2013 and 2012.
The net deferred tax asset of $0.6 million as of June 30, 2013 was largely the result of contingent consideration, and other temporary differences against which a valuation allowance was not applied.
As of June 30, 2013, we had a valuation allowance against specifically identified tax assets. The valuation allowance is reviewed periodically and if managements assessment of the more likely than not criterion for accounting purposes changes, the valuation allowance is adjusted accordingly.
LIQUIDITY AND CAPITAL RESOURCES
General
As at June 30, 2013, our cash resources, working capital, cash from divestitures, cash collected from contingent consideration, and other available financing resources are sufficient to service current product research and development needs, operating requirements, liability requirements, milestone payments, and restructuring and change in control obligations.
However, factors that may affect our future capital availability or requirements may include: returns of capital to shareholders, including future share repurchases; the status of competitors and their intellectual property rights; levels of future sales of Eligard and our receipt of contingent consideration under the QLT USA stock purchase agreement with Tolmar; levels of future sales of Visudyne and receipt of contingent consideration under the Valeant Agreement; the progress of our R&D programs, including preclinical and clinical testing; the timing and cost of obtaining regulatory approvals; the levels of resources that we devote to the development of manufacturing and other support capabilities; technological advances; the cost of filing, prosecuting and enforcing our patent claims and other intellectual property rights; pre-launch costs related to commercializing our products in development; acquisition and licensing activities; milestone payments and receipts; our ability to establish collaborative arrangements with other organizations; and the pursuit of future financial and/or strategic alternatives.
There is no guarantee that our future liquidity and capital resources will be sufficient to service our operating needs and financial obligations. In this event, our business could be materially and adversely affected and the Company would be required to seek other financing alternatives.
Sources and Uses of Cash
We finance operations, product development and capital expenditures primarily through existing cash and contingent consideration received from previous asset sales and interest income.
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During the three months ended June 30, 2013, we used $6.4 million of cash in operations compared to $11.2 million for the same period in 2012. The $4.8 million positive cash flow variance was primarily attributable to the following:
| A positive operating cash flow variance from lower operational spending of $14.9 million resulting from our 2012 restructuring initiatives; |
| A negative operating cash flow variance from lower cash receipts from product sales and royalties of $8.0 million, resulting from our 2012 divestiture of our Visudyne business to Valeant; |
| A negative operating cash flow variance from higher spending on restructuring costs of $1.8 million; and |
| A negative operating cash flow variance from a decrease of $0.3 million in other income. |
During the three months ended June 30, 2013, cash flows provided by investing activities primarily consisted of $7.0 million of contingent consideration received in connection with our previous sale QLT USA (see the Sale of Assets and Discontinued OperationsEligard section above for additional information); and $0.8 million of proceeds related to our recent sale of our PPDS Technology (see the Sale of Assets and Discontinued OperationsPunctal Plug Delivery Program section above for additional information).
During the three months ended June 30, 2013, cash used in financing activities included the $200.0 million Cash Distribution to shareholders, which was partially offset by $3.6 million of cash received in connection with the issuance of common shares related to the exercise of stock options.
For the six months ended June 30, 2013, we used $15.7 million of cash in operations compared to $22.9 million for the same period in 2012. The $7.2 million positive cash inflow variance was primarily attributable to the following:
| A positive operating cash flow variance from lower operational spending of $27.3 million; |
| A negative operating cash flow variance from lower cash receipts from product sales and royalties of $16.1 million, resulting from our 2012 divestiture of our Visudyne business to Valeant; |
| A negative operating cash flow variance from higher spending on restructuring costs of $2.7 million; and |
| A negative operating cash flow variance from a decrease of $1.3 million in other income. |
During the six months ended June 30, 2013, cash flows provided by investing activities consisted of $16.6 million of contingent consideration received in connection with our previous sale of QLT USA, $0.8 million of proceeds related to our sale of our PPDS Technology, and $0.2 million of proceeds from the sale of certain assets and property, plant and equipment, that was previously designated as held-for-sale.
During the six months ended June 30, 2013, cash flows used in financing activities included the $200.0 million Cash Distribution to shareholders, $14.1 million of cash used to repurchase common shares, including share repurchase costs, partially offset by $8.3 million of cash received for the issuance of common shares related to the exercise of stock options.
Interest and Foreign Exchange Rates
We are exposed to market risk related to changes in interest and foreign currency exchange rates, each of which could adversely affect the value of our current assets and liabilities. At June 30, 2013, we had $103.2 million in cash and cash equivalents and our cash equivalents had an average remaining maturity of approximately 18 days. If market interest rates were to increase immediately and uniformly by one hundred basis points from levels at June 30, 2013, the fair value of the cash equivalents would decline by an immaterial amount due to the short remaining maturity period.
The functional currency of QLT Inc. and its U.S. subsidiaries is the U.S. dollar and, therefore, our U.S. dollar-denominated cash and cash equivalents holdings do not result in foreign currency gains or losses in operations. To the extent that QLT Inc. holds a portion of its monetary assets and liabilities in Canadian dollars, we are subject to translation gains and losses. These translation gains and losses are included in operations for the period.
At June 30, 2013, we had no outstanding forward foreign currency contracts and no collateral was pledged for security.
Contractual Obligations
Our material contractual obligations as of June 30, 2013 consist of our clinical and development agreements. Since 2008, we have had an operating lease commitment under our five year lease term with Discovery Parks Holdings Ltd., an affiliate of Discovery Parks Trust, for approximately 67,000 square feet of office and laboratory space in Vancouver, British Columbia, Canada. On March 1, 2013, we entered into an amendment to our lease to extend the
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term for an additional two years commencing September 1, 2013 and reduced the leased space to approximately 20,000 square feet. We also have operating lease commitments in the U.S. for certain office space, office equipment and vehicles, which are expected to terminate by the end of the year. Details of these contractual obligations are described in our 2012 Annual Report.
Off-Balance Sheet Arrangements
In connection with the sale of assets and businesses; we provide indemnities related to certain matters; including product liability, patent infringement, and contract breach and misrepresentation. We also provide other indemnities to parties under the clinical trial, license, service, manufacturing, supply and other agreements that we enter into in the normal course of our business. If the indemnified party were to make a successful claim pursuant to the terms of the indemnification, we would be required to reimburse the loss. These indemnities are generally subject to certain threshold amounts, specified claims periods and other restrictions and limitations.
Except as described above and the contractual arrangements described in the Contractual Obligations section above, we do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future impact on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Outstanding Share Data
On April 25, 2013, the Companys board of directors amended and restated the QLT 2000 Incentive Stock Plan (the Plan) to increase the number of shares of the Companys common stock, without par value, available for grant under the Plan from 7,800,000 to 11,800,000 and to make certain other amendments to the Plan, including to permit the granting of restricted stock units (RSUs) under the Plan. The amendment and restatement of the Plan was subject to shareholder approval, which was obtained on June 14, 2013.
On July 15, 2013, the Board of Directors granted an aggregate of 862,000 stock options to employees, 100,000 stock options to directors, and 48,000 RSUs to directors under the Plan, and 88,000 deferred share units (DSUs) to directors under the DDSU Plan. The stock options vest and become exercisable in thirty-six (36) successive and equal monthly installments beginning on the one-month anniversary of the date of grant and have an exercise price of CAD $4.54 per share, which is equal to the closing price of the Companys common shares on the Toronto Stock Exchange on the date of grant. The RSUs vest in three (3) successive and equal yearly installments on the date of each of the first three annual general meetings of the Company held after the date of grant. Upon vesting, each RSU represents the right to receive one common share. The DSUs vest in thirty-six (36) successive and equal monthly installments beginning on the first day of the first month after the date of grant. A vested DSU is convertible into cash only (i.e. no shares are issued), and is automatically converted after the director ceases to be a member of the Board unless the director is removed from the Board for just cause.
On July 29, 2013, the Company filed a registration statement to register the issuance of up to 4,000,000 additional shares of Common Stock that may be issued under the Plan as a result of the amendment to the Plan.
As of July 29, 2013, there were 51,081,878 common shares issued and outstanding totalling $466.2 million in share capital. As of July 29, 2013, we had 1,076,549 stock options outstanding (of which 56,799 were exercisable) at a weighted average exercise price of CAD $4.80 per share. Each stock option is exercisable for one common share.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the periods presented. Significant estimates are used for, but not limited to, the fair value of contingent consideration, allocation of overhead expenses to research and development, stock-based compensation, and provisions for taxes, tax assets and liabilities. Actual results may differ from estimates made by management. Please refer to our Critical Accounting Policies and Estimates included as part of our 2012 Annual Report.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward looking information within the meaning of the Canadian securities legislation which are based on our current expectations and projections. Words such as anticipate, project, potential,
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goal, believe, expect, forecast, outlook, plan, intend, estimate, should, may, assume, continue and variations of such words or similar expressions are intended to identify our forward-looking statements and forward-looking information. Such statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of QLT to be materially different from the results of operations or plans expressed or implied by such forward-looking statements and forward-looking information. Many such risks, uncertainties and other factors are taken into account as part of our assumptions underlying the forward-looking statements and forward-looking information.
The following factors, among others, including those described in Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2012 (the 2012 Annual Report), as amended in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 (the Q1 2013 Quarterly Report) and Item 1A. Risk Factors in Part II of this Quarterly Report could cause our future results to differ materially from those expressed in the forward-looking statements and forward-looking information:
| our expectations regarding the results of our strategic restructuring; |
| unanticipated negative effects of our strategic restructuring; |
| our ability to maintain adequate internal controls over financial reporting; |
| our ability to retain or attract key employees, including a new Chief Executive Officer; |
| the anticipated timing, cost and progress of the development of our technology and clinical trials; |
| the anticipated timing of regulatory submissions for product candidates; |
| the anticipated timing for receipt of, and our ability to maintain, regulatory approvals for product candidates; |
| our ability to successfully develop and commercialize our synthetic retinoid program; |
| existing governmental laws and regulations and changes in, or the failure to comply with, governmental laws and regulations; |
| the scope, validity and enforceability of our and third party intellectual property rights; |
| the anticipated timing for receipt of, and our ability to maintain, orphan drug designations for our product candidates, particularly our synthetic retinoid; |
| receipt of all or part of the contingent consideration pursuant to the stock purchase agreement entered into with Tolmar, which is based on anticipated levels of future sales of Eligard; |
| receipt of all or part of the contingent consideration pursuant to the Valeant Agreement, which is based on future sales of Visudyne outside of the United States, sales attributable to any new indications for Visudyne and the receipt of regulatory approval of the Qcellus laser, which is currently under development; |
| receipt of all or part of the contingent consideration pursuant to the asset purchase agreement with Mati based on Matis successful development and sales of products based on our PPDS Technology; |
| our ability to effectively market and sell any future products; |
| our ability to perform our obligations under the Visudyne Transition Services Agreement with Valeant; |
| changes in estimates of prior years tax items and results of tax audits by tax authorities; and |
| unanticipated future operating results. |
Although we believe that the assumptions underlying the forward-looking statements and forward-looking information contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such statements and information included in this Quarterly Report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements and forward-looking information included herein, the inclusion of such statements and information should not be regarded as a representation by us or any other person that the results or conditions described in such statements and information or our objectives and plans will be achieved. Any forward-looking statement and forward-looking information speaks only as of the date on which it is made. Except to fulfill our obligations under the applicable securities laws, we undertake no obligation to update any such statement or information to reflect events or circumstances occurring after the date on which it is made.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
See Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources in this Quarterly Report as well as Item 7A. Quantitative and Qualitative Disclosures about Market Risk of our 2012 Annual Report.
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ITEM 4. | CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed in filings made pursuant to the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified and in accordance with the SECs rules and forms and is accumulated and communicated to management, including the Boards Executive Transition Committee, which functions as our principal executive officer, and our Chief Financial Officer. Our Executive Transition Committee and our Chief Financial Officer have evaluated our disclosure controls and procedures as of the end of the period covered by this Quarterly Report and concluded that our disclosure controls and procedures were effective in timely alerting them to material information required to be included in our periodic SEC reports.
It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. However, our Executive Transition Committee (functioning as our principal executive officer) and Chief Financial Officer have concluded that our disclosure controls and procedures are effective under circumstances where our disclosure controls and procedures should reasonably be expected to operate effectively.
Changes in Internal Control over Financial Reporting
Our internal control over financial reporting is designed with the objective of providing reasonable assurance regarding the reliability of our financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
No change was made to our internal controls over financial reporting during the fiscal quarter ended June 30, 2013 that has materially affected, or is reasonably likely to materially affect, such internal controls over financial reporting.
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PART IIOTHER INFORMATION
ITEM 1. | LEGAL PROCEEDINGS |
There are currently no material pending legal proceedings. For information regarding litigation and other risks, uncertainties and other factors that may materially and adversely affect our business, products, financial condition and operating results, refer to Item 1A. Risk Factors in our 2012 Annual Report, as amended in our Q1 2013 Quarterly Report and this Quarterly Report.
ITEM 1A. | RISK FACTORS |
Other than the amendment and restatement of the risk factors below concerning our available funds following our $200 million special cash distribution to shareholders in June 2013 and the resulting impact of the completion of the Cash Distribution on the future volatility of our stock price, management believes that there have been no material changes to the Companys risk factors as reported in Item 1A of our 2012 Annual Report, as amended in our Q1 2013 Quarterly Report and this Quarterly Report.
The risks described below and in our 2012 Annual Report and our Q1 2013 Quarterly Report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem not to be material also may materially adversely affect our business, products, financial condition and operating results.
We no longer generate revenues from continuing operations and continue to incur operating expenses. In order to fund our operations, we may need additional capital in the future, and our prospects for obtaining it are uncertain.
Although our divestment of non-core assets in 2008 and 2009 and our sale of the assets related to Visudyne in September 2012 and our assets related to our PPDS Technology in April 2013 generated significant cash, we no longer generate revenues from the sale of products and we will not generate any revenues from our products in development until such time, if ever, that they are approved for sale. In June 2013, we completed a special cash distribution to our shareholders in the amount of $200.0 million, by way of a reduction of paid-up capital of the Companys common shares, which has significantly reduced our cash resources. Going forward we will continue to incur operating expenses and, as a result, may not be able fund our operations or any anticipated growth beyond the near term. Insufficient funds may require us to delay, scale back, or eliminate some or all of our activities or to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose, and, if we are unable to obtain additional funding, may adversely affect our ability to operate as a going concern. The amount required to fund our operating expenses will depend on many factors, including the success of our research and development programs, the extent and success of any collaborative research arrangements, and the results of product, technology or other acquisitions or business combinations. We could seek additional funds in the future from a combination of sources, including out-licensing, joint development, sale of assets and other financing arrangements. In addition, we may issue debt or equity securities if we determine that additional cash resources could be obtained under favorable conditions or if future development funding requirements cannot be satisfied with available cash resources. The availability of financing will depend on a variety of factors such as market conditions, the general availability of credit and the availability of credit to our industry, the volume of trading activities, our credit ratings and credit capacity, as well as the possibility that customers or lenders could develop a negative perception of our long-term or short-term financial prospects if we incur large investment losses or if the level of our business activity decreases due to a market downturn. Disruptions, uncertainty or volatility in the capital and credit markets may also limit our access to capital required to operate our business. As a result of any or all of these factors, we may not be able to successfully obtain additional financing on favourable terms, or at all.
The market price of our common shares is volatile and the value of an investment in our common shares could decline.
The market prices for securities of biotechnology companies, including QLT, have been and are likely to continue to be volatile. As a result, investors in companies such as ours often buy at high prices only to see the price drop substantially a short time later, resulting in an extreme drop in value in the holdings of these investors. Trading prices of the securities of many biotechnology companies, including us, have experienced extreme price and volume fluctuations which have, at times, been unrelated to the operating performance of the companies whose securities were affected. Some of the factors that may cause volatility in the price of our securities include:
| results of our research and development programs; |
| issues with the safety or effectiveness of our product candidates; |
26
| announcements related to our strategic restructuring; |
| announcements of technological innovations or new products by us or our competitors; |
| litigation commenced against us; |
| regulatory developments or delays concerning our products; |
| quarterly variations in our financial results; and |
| the timing and amounts of contingent consideration paid to us by third parties. |
The price of our common shares may also be adversely affected by the estimates and projections of the investment community, general economic and market conditions, and the cost of operations in our product markets. Due to general economic conditions and the recent worldwide economic downturn, extreme price and volume fluctuations occur in the stock market from time to time that can particularly affect the prices of biotechnology companies. These extreme fluctuations are sometimes unrelated or disproportionate to the actual performance of the affected companies.
ITEM 6. | EXHIBITS |
The exhibits filed or furnished with this Quarterly Report are set forth in the Exhibit Index.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.
QLT Inc. (Registrant) | ||||||
Date: August 1, 2013 | By: | /s/ Jeffrey Meckler | ||||
Jeffrey Meckler | ||||||
Chairman, Executive Transition Committee | ||||||
(Principal Executive Officer) |
Date: August 1, 2013 | By: | /s/ Sukhi Jagpal | ||||
Sukhi Jagpal | ||||||
Chief Financial Officer | ||||||
(Principal Financial and Accounting Officer) |
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EXHIBIT INDEX
Exhibit Number |
Description | |
10.70 | Amended and Restated QLT 2000 Incentive Stock Plan (incorporated by reference to Appendix A to the Companys Definitive Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on May 22, 2013). | |
10.71* | Form of Amended and Restated 2000 Incentive Stock Plan Employee Stock Option Award. | |
10.72* | Form of Amended and Restated 2000 Incentive Stock Plan Director Stock Option Award. | |
10.73* | Form of Amended and Restated 2000 Incentive Stock Plan Restricted Stock Unit Award. | |
31.1* | Rule 13a-14(a) Certification of the Chief Executive Officer. | |
31.2* | Rule 13a-14(a) Certification of the Chief Financial Officer. | |
32.1* | Section 1350 Certification of the Chief Executive Officer. | |
32.2* | Section 1350 Certification of the Chief Financial Officer. | |
101.* | The following financial statements from the QLT Inc. Quarterly Report on Form 10Q for the quarter ended June 30, 2013, formatted in Extensible Business Reporting Language (XBRL):
unaudited condensed consolidated balance sheets;
unaudited condensed consolidated statements of operations;
unaudited condensed consolidated statements of comprehensive loss;
unaudited condensed consolidated statements of cash flows;
unaudited condensed consolidated statements of changes in shareholders equity; and
notes to unaudited condensed consolidated financial statements.
* Filed herewith Denotes executive compensation plans or arrangements |
29
Exhibit 10.71
To:
Personal and Confidential
Re: | Notification of Grant |
I am pleased to inform you that in recognition of your contribution to the Company, the Board of Directors of QLT Inc. (the Company) has granted to you an Option to purchase Common Shares (the Optioned Shares) at the Option Exercise Price of Cdn $ per Optioned Share, effective (the Grant Date). The Option to acquire the Optioned Shares will expire ten years from the Grant Date, on (the Expiry Date). The terms and conditions which govern the Option are set out in three places: (1) in this letter (the Notification Letter), (2) in the attached schedule which sets out general terms and conditions relating to the Option (the General Terms), and (3) in the QLT 2000 Incentive Stock Plan, as amended and restated effective April 25, 2013 (the Plan). Capitalized terms used but not defined in this Notification Letter have the meanings given to such terms in the Plan.
We encourage you to review a copy of the Companys Proxy Statement for the Annual General and Special Meeting of Shareholders held on June 14, 2013 (the Proxy Statement), which sets out a summary of the Plan and the amendments made to the Plan effective April 25, 2013, and a copy of the Plan Prospectus. The Proxy Statement, the Plan and Plan Prospectus are available for reference on QLink. You may also obtain a copy of any of these documents by contacting the Companys legal department at (604) 707-7363.
Anyone exercising options or trading in QLT stock must comply with the QLT Trading Policy. A copy of the Trading Policy has been previously provided to you, and you are subject to it. The QLT Trading Policy is also available for your reference on QLink.
By signing this Notification Letter where indicated, you and the Company agree that the Option is granted under and governed by the terms and conditions of this Notification Letter, the General Terms and the Plan, all of which together constitute the Award Agreement between you and the Company relating to the Option.
Please confirm receipt of this Notification Letter by signing and returning this Notification Letter to as soon as possible. You may retain a copy for your personal records.
In the event that you do not return a copy of this Notification Letter signed by you to the person indicated above, you will be deemed to have accepted the Option and agreed to the terms of the Award Agreement upon the exercise by you of the Option in respect of any one or more Optioned Shares.
Yours truly,
QLT Inc.
Per:
[Name]
[Title]
Accepted and agreed to: |
Date: | |||||||
___________________________________ | ____________________________ | |||||||
GENERAL TERMS AND CONDITIONS
STOCK OPTION GRANTS TO EMPLOYEES
1. | Defined Terms. All capitalized terms which are not defined in the Notification Letter or below have the meaning given to them in the Plan. |
2. | Term. Subject to the terms and conditions of the Plan, Section 5 of these General Terms and Conditions, and this Section 2, the Option will terminate on the earlier of: |
(a) | The date on which the Option is exercised with respect to all of the Optioned Shares; and |
(b) | 5:00 p.m. (Vancouver time) on the Expiry Date. |
If the end of the term of the Option falls within, or within two business days after the end of, a black out or similar period imposed under any insider trading policy or similar policy of the Company (but not, for greater certainty, a restrictive period resulting from the Company or its insiders being the subject of a cease trade order of a securities regulatory authority), the end of the term of the Option will be the tenth business day after the earlier of the end of such black out period and, provided the black out period has ended, the Expiry Date.
3. | Vesting. Subject to the terms and conditions of the Award Agreement, the Option will vest and become exercisable in 36 equal monthly instalments on the monthly anniversary of the Grant Date (each monthly anniversary, a Vesting Date), provided that, if the number of Optioned Shares is not equally divisible by 36, at each Vesting Date the cumulative number of Optioned Shares vested will be rounded to the nearest whole number. |
4. | Exercise of Options. |
(a) | Exercise Notice. The Grantee may exercise the Option in respect of vested Optioned Shares by giving written notice of exercise (the Exercise Notice) signed and dated by the Grantee (and not postdated), stating that the Grantee elects to exercise his or her rights to purchase Optioned Shares under the Option and specifying the number of Optioned Shares in respect of which the Option is being exercised and specifying the Option Exercise Price to be paid therefor. |
(b) | Delivery and Payment. The Grantee shall deliver the Exercise Notice to the Company at its principal office at 887 Great Northern Way, Suite 101, Vancouver, British Columbia, Canada, V5T 4T5 (or at such other address as the principal office of the Company may be located at the time of exercise) addressed to the attention of the Secretary or assistant secretary (if any) of the Company (or a designee notified in writing from time to time by the Company) and be accompanied by full payment (payable at par in Vancouver, British Columbia) in any combination of the following (subject to all applicable laws): |
(i) | cash, bank draft or certified cheque; |
(ii) | if and so long as the Common Shares are listed on an Exchange, delivery of a properly executed Exercise Notice, together with irrevocable instructions, to |
(A) | a brokerage firm designated by the Company to deliver promptly to the Company the aggregate amount of sale or loan proceeds to pay the Option Exercise Price and any withholding tax obligations that may arise in connection with the exercise, and |
(B) | the Company to deliver the certificates for such purchased shares directly to such brokerage firm, |
all in accordance with the regulations of any relevant regulatory authorities;
(iii) | with prior written consent of the Company and subject to Section 13.3 of the Plan, written instructions from the Grantee to the Company to effect a net settlement of Optioned Shares under the Option having a value equal to the Option Exercise Price of any Option and/or the withholding taxes due with respect to the exercise of the Option; and |
(c) | Certificate. As soon as practicable after any exercise of the Option, a certificate or certificates representing the Common Shares of which the Option is exercised will be delivered by the Company to the Grantee or to the Grantees designated brokered firm, as applicable. |
5. | Rules Upon Retirement, Death, Disability or Termination. The Option will terminate on the earlier of the expiry of the Option under Section 2 of these General Terms and Conditions and the 90th day (effective following the close of trading on the Exchange, if such day is a trading day) after the date of the Grantees Termination of Service as an employee or Consultant, as applicable, of the Company or its Affiliates, provided that: |
(a) | Retirement. If the Grantee ceases to be an employee of the Company or any Affiliate by reason of retirement (the date of retirement or cessation herein being called the retirement date) and: |
(i) | the Grantee: |
(A) | has worked on behalf of the Company or any Affiliate for at least 20 years, or |
(B) | is at least 60 years of age and has worked continuously on behalf of the Company or any Affiliate for at least five years, |
then all Optioned Shares of the Grantee will become immediately vested and will be exercisable on and after the retirement date until the expiry of the Option; or
(ii) | the Grantee has received the consent of the Committee at or after an earlier age and upon completion of that number of years of service as the Committee may specify, then all Optioned Shares of the Grantee will become immediately vested and will be exercisable on and after the retirement date, during a period ending on the earlier of: |
(A) | the 90th day after the retirement date, and |
(B) | the expiry of the Option, |
unless otherwise determined by the Committee and approved by the Exchange (if applicable).
(b) | Death. If the Grantee dies while the Option is otherwise exercisable, unless otherwise determined by the Committee and approved by the Exchange (if applicable), all Optioned Shares of the Grantee will become immediately vested and will be exercisable by the legal personal representatives of the estate of the Grantee during a period ending on the earlier of: |
(i) | the date that is 12 months following the date of death, and |
(ii) | the expiry of the Option. |
(c) | Disability. If the Committee determines, in its sole discretion, that the continuous service of the Grantee as an officer or employee of the Company or any Affiliate has been interrupted or terminated as a result of the Grantees complete disability, as determined by the Committee, in its sole discretion, (but no interruption or termination will be deemed to have occurred in the case of sick leave or any other leave of absence approved of by the Board, provided that either such leave is for a period of not more than 90 days or reemployment upon the expiration of such leave is provided or guaranteed by contract or law), unless otherwise determined by the Committee and approved by the Exchange (if applicable), the Optioned Shares will become immediately vested and will be exercisable by the Grantee (or in the case of a Grantee who is legally incapacitated, by his or her guardians or legal representatives) during the period ending on the earlier of: |
(i) | 12 months following the date of such termination, and |
(ii) | the expiry of the Option. |
(d) | Termination. If the Grantee is terminated by the Company as an employee of the Company or any Affiliate for cause, unless otherwise determined by the Committee and approved by the Exchange (if applicable), the Option will expire automatically on the date of the Grantees Termination of Service as an employee of the Company or any Affiliate. |
The Optioned Shares will cease to vest (on a monthly basis or at all) after the date of the Grantees Termination of Service as an employee of the Company.
6. | Change in Control. |
(a) | Definitions. For the purposes of this Section, Change in Control means any of the following events: |
(i) | Merger. A merger, consolidation, reorganization or arrangement involving the Company, other than a merger, consolidation, reorganization or arrangement in which stockholders of the Company immediately prior to such merger, consolidation, reorganization or arrangement own, directly or indirectly, securities possessing at least 50% of the total combined voting power of the outstanding voting securities of the corporation resulting from such merger, consolidation, reorganization or arrangement in substantially the same proportion as their ownership of such voting securities immediately prior to such merger, consolidation, reorganization or arrangement; |
(ii) | Tender Offer. The acquisition, directly or indirectly, by any person or group of persons acting jointly or in concert (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership of securities possessing more than 50% of the total combined voting power of the Companys outstanding securities pursuant to a tender offer (which for greater certainty, includes a takeover bid) made directly to the Companys stockholders; |
(iii) | Sale. The sale, transfer or other disposition of all or substantially all of the assets of the Company other than a sale, transfer or other disposition to an Affiliate of the Company or to an entity in which stockholders of the Company immediately prior to such sale, transfer or other disposition own, directly or indirectly, securities possessing at least 50% of the total combined voting power of the outstanding voting securities of the purchasing entity in substantially the same proportion as their ownership of such voting securities immediately prior to sale, transfer or other disposition; or |
(iv) | Board Change. A change in the composition of the Board over a period of 24 consecutive months or less such that a majority of the Board members ceases to be comprised of individuals who either have been: |
(A) | Board members continuously since the beginning of such period, or |
(B) | appointed or nominated for election as Board members during such period by at least a majority of the Board members described in subsection (A) above who were still in office at the time the Board approved such appointment or nomination. |
(b) | Acceleration. Effective immediately upon the occurrence of a Change in Control, any portion of the Option of the Grantee that is unvested will, to the extent determined by the Board or the Committee in its sole discretion with respect to the Change of Control, become immediately vested and will be exercisable on and after the date of the Change of Control until the expiry of the Option. |
7. | Conditions to Exercise. Notwithstanding any of the provisions of the Award Agreement, the Companys obligation to issue Common Shares to the Grantee upon exercise of the Option is subject to the following: |
(a) | Qualification. Completion of registration or other qualification of the Common Shares or obtaining approval of such governmental authority as the Company determines is necessary or advisable in connection with the authorization, issuance or sale of the Common Shares; |
(b) | Listing. The admission of the Common Shares to listing or quotation on the Exchange; and |
(c) | Undertakings. The receipt by the Company from the Grantee of such representations, agreements and undertakings, including as to future dealings in the Common Shares, as the Company or its counsel determines are necessary or advisable in order to safeguard against the violation of securities laws of any jurisdiction. |
8. | Adjustments. In the event that there is any material change in the Common Shares resulting from subdivisions, consolidations, substitutions or reclassifications of the Common Shares, the payment of stock dividends by the Company (other than dividends in the ordinary course) or other relevant changes in the capital of the Company or from a proposed merger, amalgamation or other corporate arrangement or reorganization involving the exchange or replacement of Common Shares for those in another corporation, appropriate adjustments in the number of Optioned Shares and the Option Exercise Price will be conclusively determined by the Committee. |
9. | Further Adjustments. Subject to Sections 6 and 8, if, because of a merger, amalgamation or other corporate arrangement or reorganization, the exchange or replacement of Common Shares for those in another corporation is imminent, the Board may, in a fair and equitable manner, determine the manner in which all unexercised or unvested options granted under this Option will be treated including, without limitation, requiring the acceleration of the time for the exercise and/or vesting of the option rights by the Grantee and of the time for the fulfilment of any conditions or restrictions on exercise or vesting. All determinations of the Board under this Section will be final, binding and conclusive for all purposes subject to the approval of the Exchange, if applicable. |
10. | Tax. The Grantee is solely responsible for the payment of any applicable taxes arising from the grant, vesting, settlement or exercise of the Option and any payment is to be in a manner satisfactory to the Company. Notwithstanding the foregoing, the Company will have the right to withhold from any amount payable to a Grantee, either under the Plan or otherwise, such amount as may be necessary to enable the Company to comply with the applicable requirements of any federal, provincial, state, local or foreign law, or any administrative policy of any applicable tax authority, relating to the withholding of tax or any other required deductions with respect to the Option (the Withholding Obligations). The Company may require the Grantee, as a condition to the exercise or settlement of the Option, to make such arrangements as the Company may require so that the Company can satisfy applicable Withholding Obligations, including, without limitation, requiring the Grantee to (i) remit the amount of any such Withholding Obligations to the Company in advance; (ii) reimburse the Company for any such Withholding Obligations; (iii) deliver written instructions contemplated in Section 4(b)(iii) hereof, to effect a net settlement of Common Shares under an Option in an amount required to satisfy any such Withholding Obligations; or (iv) pursuant to Section 4(b)(ii) hereof, cause such broker to withhold from the proceeds realized from such transaction the amount required to satisfy any such Withholding Obligations and to remit such amount directly to the Company. |
11. | Black Out Periods. The Grantee acknowledges and agrees that the Award Agreement and the grant of the Option to the Grantee is subject to the Grantees agreement to at all times comply with the Companys policies with respect to black out periods, as more particularly set out in the Companys Trading Policy, as amended from time to time. |
12. | No Rights as Shareholder. The Grantee will not have any rights as a Shareholder with respect to any of the Optioned Shares underlying the Option until such time as the Grantee becomes the record owner of such Optioned Shares. |
13. | No Effect on Employment. Nothing in the Award Agreement will: |
(a) | Continue Employment. Confer upon the Grantee any right to continue in the employ of or under contract with the Company or any Affiliate or affect in any way the right of the Company or any Affiliate to terminate his or her employment at any time. |
(b) | Extend Employment. Be construed to constitute an agreement, or an expression of intent, on the part of the Company or any Affiliate to extend the employment of the Grantee beyond the time that he or she would normally be retired pursuant to the provisions of any present or future retirement plan or policy of the Company or any Affiliate, or beyond the time at which he or she would otherwise be retired pursuant to the provisions of any contract of employment with the Company or any Affiliate. |
14. | Enurement. The Award Agreement shall enure to the benefit of and be binding upon the parties to the Award Agreement and upon the successors or assigns of the Company and upon the executors, administrators and legal personal representatives of the Grantee. |
15. | Further Assurances. Each of the parties to the Award Agreement will do such further acts and execute such further documents as may required to give effect to and carry out the intent of the Award Agreement. |
16. | Non-Assignable. The Option is personal to the Grantee and may not be assigned or transferred in whole or in part, except by will or by the operation of the laws of devolution or distribution and descent. |
17. | Amendments. Any amendments to the Award Agreement must be in writing duly executed by the parties and will (if required) be subject to the approval of the applicable regulatory authorities. |
18. | Time of the Essence. Time is of the essence of the Award Agreement. |
19. | Governing Law. The Award Agreement shall be governed, construed and enforced according to the laws of the Province of British Columbia and is subject to the exclusive jurisdiction of the courts of the Province of British Columbia. |
20. | Interpretation of the Award Agreement and the Plan. If any question or dispute arises as to the interpretation of the Award Agreement, the question or dispute will be determined by the Committee and such determination will be final, conclusive and binding for all purposes on both the Company and the Grantee. |
21. | Conflict Between these General Terms and Conditions and the Plan. If there is any conflict between these General Terms and the Plan, the Plan, as amended from time to time, will govern. |
These General Terms and Conditions are dated for reference: July 15, 2013
Exhibit 10.72
To:
Personal and Confidential
Re: | Notification of Grant |
I am pleased to inform you that in recognition of your contribution to the Company, the Board of Directors of QLT Inc. (the Company) has granted to you an Option to purchase Common Shares (the Optioned Shares) at the Option Exercise Price of Cdn $ per Optioned Share, effective (the Grant Date). The Option to acquire the Optioned Shares will expire ten years from the Grant Date, on (the Expiry Date). The terms and conditions which govern the Option are set out in three places: (1) in this letter (the Notification Letter), (2) in the attached schedule which sets out general terms and conditions relating to the Option (the General Terms), and (3) in the QLT 2000 Incentive Stock Plan, as amended and restated effective April 25, 2013 (the Plan). Capitalized terms used but not defined in this Notification Letter have the meanings given to such terms in the Plan.
We encourage you to review a copy of the Companys Proxy Statement for the Annual General and Special Meeting of Shareholders held on June 14, 2013 (the Proxy Statement), which sets out a summary of the Plan and the amendments made to the Plan effective April 25, 2013, and a copy of the Plan Prospectus. The Proxy Statement, the Plan and Plan Prospectus are available for reference on QLink. You may also obtain a copy of any of these documents by contacting the Companys legal department at (604) 707-7363.
Anyone exercising options or trading in QLT stock must comply with the QLT Trading Policy. A copy of the Trading Policy has been previously provided to you, and you are subject to it. The QLT Trading Policy is also available for your reference on QLink.
By signing this Notification Letter where indicated, you and the Company agree that the Option is granted under and governed by the terms and conditions of this Notification Letter, the General Terms and the Plan, all of which together constitute the Award Agreement between you and the Company relating to the Option.
Please confirm receipt of this Notification Letter by signing and returning this Notification Letter to as soon as possible. You may retain a copy for your personal records.
In the event that you do not return a copy of this Notification Letter signed by you to the person indicated above, you will be deemed to have accepted the Option and agreed to the terms of the Award Agreement upon the exercise by you of the Option in respect of any one or more Optioned Shares.
Yours truly,
QLT Inc.
Per:
[Name]
[Title]
Accepted and agreed to: | Date: | |||||||
___________________________________ | _____________________________ | |||||||
GENERAL TERMS AND CONDITIONS
STOCK OPTION GRANTS TO DIRECTORS
1. | Defined Terms. All capitalized terms which are not defined in the Notification Letter or below have the meaning given to them in the Plan. |
2. | Term. Subject to the terms and conditions of the Plan, Section 5 of these General Terms and Conditions, and this Section 2, the Option will terminate on the earlier of: |
(a) | The date on which the Option is exercised with respect to all of the Optioned Shares; and |
(b) | 5:00 p.m. (Vancouver time) on the Expiry Date |
If the end of the term of the Option falls within, or within two business days after the end of, a black out or similar period imposed under any insider trading policy or similar policy of the Company (but not, for greater certainty, a restrictive period resulting from the Company or its insiders being the subject of a cease trade order of a securities regulatory authority), the end of the term of the Option will be the tenth business day after the earlier of the end of such black out period and, provided the black out period has ended, the Expiry Date.
3. | Vesting. Subject to the terms and conditions of the Award Agreement, the Option will vest and become exercisable in 36 equal monthly instalments on the monthly anniversary of the Grant Date (each monthly anniversary, a Vesting Date), provided that, if the number of Optioned Shares is not equally divisible by 36, at each Vesting Date the cumulative number of Optioned Shares vested will be rounded to the nearest whole number. |
4. | Exercise of Options. |
(a) | Exercise Notice. The Grantee may exercise the Option in respect of vested Optioned Shares by giving written notice of exercise (the Exercise Notice) signed and dated by the Grantee (and not postdated), stating that the Grantee elects to exercise his or her rights to purchase Optioned Shares under the Option and specifying the number of Optioned Shares in respect of which the Option is being exercised and specifying the Option Exercise Price to be paid therefor. |
(b) | Delivery and Payment. The Grantee shall deliver the Exercise Notice to the Company at its principal office at 887 Great Northern Way, Suite 101, Vancouver, British Columbia, Canada, V5T 4T5 (or at such other address as the principal office of the Company may be located at the time of exercise) addressed to the attention of the Secretary or assistant secretary (if any) of the Company (or a designee notified in writing from time to time by the Company) and be accompanied by full payment (payable at par in Vancouver, British Columbia) in any combination of the following (subject to all applicable laws): |
(i) | cash, bank draft or certified cheque; |
(ii) | if and so long as the Common Shares are listed on an Exchange, delivery of a properly executed Exercise Notice, together with irrevocable instructions, to |
(A) | a brokerage firm designated by the Company to deliver promptly to the Company the aggregate amount of sale or loan proceeds to pay the Option Exercise Price and any withholding tax obligations that may arise in connection with the exercise, and |
(B) | the Company to deliver the certificates for such purchased shares directly to such brokerage firm, |
all in accordance with the regulations of any relevant regulatory authorities;
(iii) | with prior written consent of the Company and subject to section 13.3 of the Plan, written instructions from the Grantee to the Company to effect a net settlement of Optioned Shares under the Option having a value equal to the Option Exercise Price of any Option and/or the withholding taxes due with respect to the exercise of the Option; and |
(c) | Certificate. As soon as practicable after any exercise of the Option, a certificate or certificates representing the Common Shares of which the Option is exercised will be delivered by the Company to the Grantee or to the Grantees designated brokered firm, as applicable. |
5. | Rules Upon Retirement, Death, Disability or Termination. The Option will terminate on the earlier of the expiry of the Option under Section 2 of these General Terms and Conditions and the 90th day (effective following the close of trading on the Exchange, if such day is a trading day) after the date of the Grantees Termination of Service as a director of the Company or its Affiliates, provided that: |
(a) | Death. If the Grantee dies while the Option is otherwise exercisable, unless otherwise determined by the Committee and approved by the Exchange (if applicable), all Optioned Shares of the Grantee will become immediately vested and will be exercisable by the legal personal representatives of the estate of the Grantee during a period ending on the earlier of: |
(i) | the date that is 12 months following the date of death, and |
(ii) | the expiry of the Option. |
(b) | Disability. If the Board determines, in its sole discretion, that the continuous service of the Grantee as a director of the Company or any Affiliate has been interrupted or terminated as a result of the Grantees complete disability, as determined by the Board, in its sole discretion, (but no interruption or termination will be deemed to have occurred in the case of sick leave or any other leave of absence approved of by the Board, provided that either such leave is for a period of not more than 90 days), unless otherwise determined by the Board and approved by the Exchange (if applicable), the Optioned Shares will become immediately vested and will be exercisable by the Grantee (or in the case of an Grantee who is legally incapacitated, by his or her guardians or legal representatives) during the period ending on the earlier of: |
(i) | 12 months following the date of such termination, and |
(ii) | the expiry of the Option. |
(c) | Termination. If the Grantee ceases to be a director of the Company or any Affiliate as a result of: |
(i) | ceasing to meet the qualifications set forth in subsection 124(2) of the Business Corporations Act (British Columbia), as amended, or such other qualifications required by the corporate laws in any other jurisdiction under which the Company is continued or amalgamated, |
(ii) | a special resolution having been passed by the shareholders of the Company pursuant to subsection 128(3) of the Business Corporations Act (British Columbia), as amended, or an equivalent enactment pursuant to the corporate laws in any other jurisdiction under which the Company is continued or amalgamated, or |
(iii) | by order of a securities commission, the TSX, NASDAQ or any other regulatory body having jurisdiction to so order, |
unless otherwise determined by the Committee and approved by the Exchange (if applicable), the Option will expire automatically on the date of such cessation.
The Optioned Shares will cease to vest (on a monthly basis or at all) after the date of the Grantees Termination of Service as a director of the Company.
6. | Change in Control. |
(a) | Definitions. For the purposes of this Section, Change in Control means any of the following events: |
(i) | Merger. A merger, consolidation, reorganization or arrangement involving the Company other than a merger, consolidation, reorganization or arrangement in which stockholders of the Company immediately prior to such merger, consolidation, reorganization or arrangement own, directly or indirectly, securities possessing at least 50% of the total combined voting power of the outstanding voting securities of the corporation resulting from such merger, consolidation, reorganization or arrangement in substantially the same proportion as their ownership of such voting securities immediately prior to such merger, consolidation, reorganization or arrangement; |
(ii) | Tender Offer. The acquisition, directly or indirectly, by any person or group of persons acting jointly or in concert (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership of securities possessing more than 50% of the total combined voting power of the Companys outstanding securities pursuant to a tender offer (which for greater certainty, includes a takeover bid) made directly to the Companys stockholders; |
(iii) | Sale. The sale, transfer or other disposition of all or substantially all of the assets of the Company other than a sale, transfer or other disposition to an Affiliate of the Company or to an entity in which stockholders of the Company immediately prior to such sale, transfer or other disposition own, directly or indirectly, securities possessing at least 50% of the total combined voting power of the outstanding voting securities of the purchasing entity in substantially the same proportion as their ownership of such voting securities immediately prior to sale, transfer or other disposition; or |
(iv) | Board Change. A change in the composition of the Board over a period of 24 consecutive months or less such that a majority of the Board members ceases to be comprised of individuals who either have been: |
(A) | Board members continuously since the beginning of such period, or |
(B) | appointed or nominated for election as Board members during such period by at least a majority of the Board members described in subsection (A) above who were still in office at the time the Board approved such appointment or nomination. |
(b) | Acceleration. Effective immediately upon the occurrence of a Change in Control, any portion of the Option of the Grantee that is unvested will, to the extent determined by the Board in its sole discretion with respect to the Change of Control, become immediately vested and will be exercisable on and after the date of the Change of Control until the expiry of the Option. |
7. | Conditions to Exercise. Notwithstanding any of the provisions of the Award Agreement, the Companys obligation to issue Common Shares to the Grantee upon exercise of the Option is subject to the following: |
(a) | Qualification. Completion of registration or other qualification of the Common Shares or obtaining approval of such governmental authority as the Company determines is necessary or advisable in connection with the authorization, issuance or sale of the Common Shares; |
(b) | Listing. The admission of the Common Shares to listing or quotation on the Exchange; and |
(c) | Undertakings. The receipt by the Company from the Grantee of such representations, agreements and undertakings, including as to future dealings in the Common Shares, as the Company or its counsel determines are necessary or advisable in order to safeguard against the violation of securities laws of any jurisdiction. |
8. | Adjustments. In the event that there is any material change in the Common Shares resulting from subdivisions, consolidations, substitutions or reclassifications of the Common Shares, the payment of stock dividends by the Company (other than dividends in the ordinary course) or other relevant changes in the capital of the Company or from a proposed merger, amalgamation or other corporate arrangement or reorganization involving the exchange or replacement of Common Shares for those in another corporation, appropriate adjustments in the number of Optioned Shares and the Option Exercise Price will be conclusively determined by the Committee. |
9. | Further Adjustments. Subject to Sections 6 and 8, if, because of a merger, amalgamation or other corporate arrangement or reorganization, the exchange or replacement of Common Shares for those in another corporation is imminent, the Board may, in a fair and equitable manner, determine the manner in which all unexercised or unvested options granted under this Option will be treated including, without limitation, requiring the acceleration of the time for the exercise and/or vesting of the option rights by the Grantee and of the time for the fulfilment of any conditions or restrictions on exercise or vesting. All determinations of the Board under this Section will be final, binding and conclusive for all purposes subject to the approval of the Exchange, if applicable. |
10. | Tax. The Grantee is solely responsible for the payment of any applicable taxes arising from the grant, vesting, settlement or exercise of the Option and any payment is to be in a manner satisfactory to the Company. Notwithstanding the foregoing, the Company will have the right to withhold from any amount payable to a Grantee, either under the Plan or otherwise, such amount as may be necessary to enable the Company to comply with the applicable requirements of any federal, provincial, state, local or foreign law, or any administrative policy of any applicable tax authority, relating to the withholding of tax or any other required deductions with respect to the Option (the Withholding Obligations). The Company may require the Grantee, as a condition to the exercise or settlement of the Option, to make such arrangements as the Company may require so that the Company can satisfy applicable Withholding Obligations, including, without limitation, requiring the Grantee to (i) remit the amount of any such Withholding Obligations to the Company in advance; (ii) reimburse the Company for any such Withholding Obligations; (iii) deliver written instructions contemplated in Section 4(b)(iii) hereof, to effect a net settlement of Common Shares under an Option in an amount required to satisfy any such Withholding Obligations; or (iv) pursuant to Section 4(b)(ii) hereof, cause such broker to withhold from the proceeds realized from such transaction the amount required to satisfy any such Withholding Obligations and to remit such amount directly to the Company. |
11. | Black Out Periods. The Grantee acknowledges and agrees that the Award Agreement and the grant of the Option to the Grantee is subject to the Grantees agreement to at all times comply with the Companys policies with respect to black out periods, as more particularly set out in the Companys Trading Policy, as amended from time to time. |
12. | No Rights as Shareholder. The Grantee will not have any rights as a Shareholder with respect to any of the Optioned Shares underlying the Option until such time as the Grantee becomes the record owner of such Optioned Shares. |
13. | No Effect on Employment. Nothing in the Award Agreement will: |
(a) | Continue Employment. Confer upon the Grantee any right to continue in the employ of or under contract with the Company or any Affiliate or affect in any way the right of the Company or any Affiliate to terminate his or her employment at any time. |
(b) | Extend Employment. Be construed to constitute an agreement, or an expression of intent, on the part of the Company or any Affiliate to extend the employment of the Grantee beyond the time that he or she would normally be retired pursuant to the provisions of any present or future retirement plan or policy of the Company or any Affiliate, or beyond the time at which he or she would otherwise be retired pursuant to the provisions of any contract of employment with the Company or any Affiliate. |
14. | Enurement. The Award Agreement shall enure to the benefit of and be binding upon the parties to the Award Agreement and upon the successors or assigns of the Company and upon the executors, administrators and legal personal representatives of the Grantee. |
15. | Further Assurances. Each of the parties to the Award Agreement will do such further acts and execute such further documents as may required to give effect to and carry out the intent of the Award Agreement. |
16. | Non-Assignable. The Option is personal to the Grantee and may not be assigned or transferred in whole or in part, except by will or by the operation of the laws of devolution or distribution and descent. |
17. | Amendments. Any amendments to the Award Agreement must be in writing duly executed by the parties and will (if required) be subject to the approval of the applicable regulatory authorities. |
18. | Time of the Essence. Time is of the essence of the Award Agreement. |
19. | Governing Law. The Award Agreement shall be governed, construed and enforced according to the laws of the Province of British Columbia and is subject to the exclusive jurisdiction of the courts of the Province of British Columbia. |
20. | Interpretation of the Award Agreement and the Plan. If any question or dispute arises as to the interpretation of the Award Agreement, the question or dispute will be determined by the Committee and such determination will be final, conclusive and binding for all purposes on both the Company and the Grantee. |
21. | Conflict Between these General Terms and Conditions and the Plan. If there is any conflict between these General Terms and the Plan, the Plan, as amended from time to time, will govern. |
These General Terms and Conditions are dated for reference: July 15, 2013
Exhibit 10.73
QLT INC.
AMENDED AND RESTATED 2000 INCENTIVE STOCK PLAN
RESTRICTED STOCK UNIT AWARD GRANT NOTICE AND
RESTRICTED STOCK UNIT AWARD AGREEMENT
QLT Inc. (the Company), pursuant to its amended and restated 2000 Incentive Stock Plan, as amended from time to time (the Plan), hereby grants to the individual listed below (Participant), an award of restricted stock units (Restricted Stock Units or RSUs). Each Restricted Stock Unit represents the right to receive one Common Share upon vesting of such Restricted Stock Unit. This award of Restricted Stock Units is subject to all of the terms and conditions as set forth herein and in the Restricted Stock Unit Award Agreement attached hereto as Exhibit A (the Award Agreement) and the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Award Agreement.
Participants Name: |
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Participants Address: |
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Grant Date: |
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Total Number of RSUs: |
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Vesting Commencement Date: |
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Vesting Schedule: |
By his or her signature and the Companys signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Award Agreement and this Grant Notice. Participant has reviewed the Award Agreement, the Plan and this Grant Notice in their entirety and fully understands all provisions of this Grant Notice, the Award Agreement and the Plan. Additionally, by signing below, Participant agrees that Participant has read, fully understands and agrees to abide by the terms of the Companys Trading Policy and has read and fully understands the Plan Prospectus, copies of which have been delivered to Participant and are available for reference on QLink. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan or relating to the RSUs.
QLT INC.: | PARTICIPANT: | |||||||
By: | By: | |||||||
Print Name: | Print Name: | |||||||
Title: | ||||||||
Address: | Address: | |||||||
EXHIBIT A
TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE
RESTRICTED STOCK UNIT AWARD AGREEMENT
Pursuant to the Restricted Stock Unit Award Grant Notice (the Grant Notice) to which this Restricted Stock Unit Award Agreement (the Award Agreement) is attached, QLT Inc. (the Company) has granted to Participant an award of restricted stock units (Restricted Stock Units or RSUs) under the Companys amended and restated 2000 Incentive Stock Plan, as amended from time to time (the Plan).
ARTICLE I.
GENERAL
1.1 Defined Terms. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and the Grant Notice.
1.2 General. Each Restricted Stock Unit shall constitute a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of the Companys Common Shares (subject to adjustment as provided in Section 16 of the Plan) solely for purposes of the Plan and this Award Agreement. The Restricted Stock Units shall be used solely as a device for the determination of the Common Shares to eventually be delivered to Participant if such Restricted Stock Units vest pursuant to Section 2.3 below. The Restricted Stock Units shall not be treated as property or as a trust fund of any kind.
1.3 Incorporation of Terms of Plan. RSUs are subject to the terms and conditions of the Plan which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Award Agreement, the terms of the Plan shall control.
ARTICLE II.
GRANT OF RESTRICTED STOCK UNITS
2.1 Grant of RSUs. In consideration of Participants service as a director of the Company and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the Grant Date), the Company grants to Participant an award of RSUs as set forth in the Grant Notice.
2.2 Companys Obligation to Pay. Each RSU has a value equal to the Fair Market Value of a Common Share on the date it becomes vested. Unless and until the RSUs will have vested in the manner set forth in Article II hereof, Participant will have no right to receive any Common Shares in respect of any such RSUs. Prior to actual delivery of Common Shares for any vested RSUs, such RSUs will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.
2.3 Vesting Schedule. Subject to Section 2.4 and Section 2.5 below, the RSUs awarded by the Grant Notice will vest and become nonforfeitable with respect to the applicable portion thereof according to the vesting schedule set forth on the Grant Notice to which this Award Agreement is attached (the Vesting Schedule). Unless otherwise determined by the Committee, partial employment or service, even if substantial, during any vesting period will not entitle Participant to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a Termination of Service as provided in Section 2.4 below or under the Plan.
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2.4 Forfeiture, Termination and Cancellation upon Termination of Services.
(a) Termination. Upon Participants Termination of Service for any or no reason, the then-unvested RSUs subject to this Award Agreement (after giving effect to any accelerated vesting, including without limitation, pursuant to subsections (b) and (c) below) will thereupon be automatically forfeited, terminated and cancelled as of the applicable termination date without payment of any consideration by the Company, and Participant, or Participants beneficiary or personal representative, as the case may be, shall have no further rights hereunder.
(b) Death. If Participant dies while the RSUs are unvested, unless otherwise determined by the Committee and approved by the Exchange (if applicable), all Common Shares subject to the RSUs will become immediately vested and will be settled with the legal personal representatives of the estate of Participant.
(c) Disability. If the Board determines, in its sole discretion, that the continuous service of Participant as a director, officer, employee or Consultant of the Company or any Affiliate has been interrupted or terminated as a result of Participants complete disability, as determined by the Board in its sole discretion, (but no interruption or termination will be deemed to have occurred in the case of sick leave or any other leave of absence approved of by the Board, provided that either such leave is for a period of not more than 90 days), unless otherwise determined by the Board and approved by the Exchange (if applicable), the Common Shares subject to the RSUs will become immediately vested and will be settled with Participant (or in the case of a Participant who is legally incapacitated, by his or her guardians or legal representatives).
2.5 Acceleration upon a Change in Control. Effective immediately upon the occurrence of a Change in Control, all Common Shares subject to the RSUs will become immediately vested on the date of the Change in Control (as defined below). For purposes of this Award Agreement, Change in Control shall mean any of the following events:
(a) Merger. A merger, consolidation, reorganization or arrangement involving the Company other than a merger, consolidation, reorganization or arrangement in which stockholders of the Company immediately prior to such merger, consolidation, reorganization or arrangement own, directly or indirectly, securities possessing at least 50% of the total combined voting power of the outstanding voting securities of the corporation resulting from such merger, consolidation, reorganization or arrangement in substantially the same proportion as their ownership of such voting securities immediately prior to such merger, consolidation, reorganization or arrangement;
(b) Tender Offer. The acquisition, directly or indirectly, by any person or group of persons acting jointly or in concert (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership of securities possessing more than 50% of the total combined voting power of the Companys outstanding securities pursuant to a tender offer (which for greater certainty, includes a takeover bid) made directly to the Companys stockholders;
(c) Sale. The sale, transfer or other disposition of all or substantially all of the assets of the Company other than a sale, transfer or other disposition to an Affiliate of the Company or to an entity in which stockholders of the Company immediately prior to such sale, transfer or other disposition own, directly or indirectly, securities possessing at least 50% of the total combined voting power of the outstanding voting securities of the purchasing entity in substantially the same proportion as their ownership of such voting securities immediately prior to sale, transfer or other disposition; or
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(d) Board Change. A change in the composition of the Board over a period of 24 consecutive months or less such that a majority of the Board ceases to be comprised of individuals who either have been:
(i) Board members continuously since the beginning of such period, or
(ii) appointed or nominated for election as Board members during such period by at least a majority of the Board members described in subsection (A) above who were still in office at the time the Board approved such appointment or nomination.
2.6 Payment after Vesting.
(a) As soon as administratively practicable, and, in any event, within sixty (60) days, following the vesting of any Restricted Stock Units pursuant to Section 2.3 above or Section 3.2 below, the Company shall deliver to Participant a number of Common Shares (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Company in its sole discretion) equal to the number of Restricted Stock Units subject to this award that vest on the applicable vesting date, unless such Restricted Stock Units terminate prior to the given vesting date pursuant to Section 2.4 above. Notwithstanding the foregoing, in the event Common Shares cannot be issued pursuant to Section 2.8(a) or (b) hereof, then the Common Shares shall be issued pursuant to the preceding sentence as soon as administratively practicable after the Committee determines that Common Shares can again be issued in accordance with Sections 2.8(a) or (b) hereof. Notwithstanding any discretion in the Plan, the Grant Notice or this Award Agreement to the contrary, upon vesting of the RSUs, Common Shares will be issued as set forth in this section. In no event will the RSUs be paid to Participant in the form of cash.
(b) Notwithstanding anything to the contrary in this Award Agreement, the Participant will be solely responsible for paying any applicable withholding taxes arising from the grant, vesting or settlement of any RSUs and any payment is to be in a manner satisfactory to the Company. Notwithstanding the foregoing, the Company will have the right to withhold from any amount payable to a Participant, either under the Plan or otherwise, such amount as may be necessary to enable the Company to comply with the applicable requirements of any federal, provincial, state, local or foreign law, or any administrative policy of any applicable tax authority, relating to the withholding of tax or any other required deductions with respect to the Option (the Withholding Obligations). The Company may require the Participant, as a condition to the settlement of an RSU, to make such arrangements as the Company may require so that the Company can satisfy applicable Withholding Obligations, including, without limitation, requiring the Participant to (i) remit the amount of any such Withholding Obligations to the Company in advance; (ii) reimburse the Company for any such Withholding Obligations; (iii) deliver written instructions contemplated in Section 13.1(c) of the Plan, to effect a net settlement of Common Shares under an RSU in an amount required to satisfy any such Withholding Obligations; or (iv) pursuant to a transaction as contemplated in Section 13.1(b) of the Plan, cause such broker to withhold from the proceeds realized from such transaction the amount required to satisfy any such Withholding Obligations and to remit such amount directly to the Company.
Notwithstanding any other provision of this Award Agreement or the Plan to the contrary, if Participant is a Director or an executive officer of the Company within the meaning of Section 13(k) of the U.S. Exchange Act, Participant shall not be permitted to make payment with respect to any Restricted Stock Units, or continue any extension of credit with respect to such payment, with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the U.S. Exchange Act.
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The Company shall not be obligated to deliver any new certificate representing Common Shares to Participant or Participants legal representative or enter such Common Shares in book entry form unless and until Participant or Participants legal representative shall have paid or otherwise satisfied in full the amount of all federal, state, provincial and local taxes applicable to the taxable income of Participant resulting from the grant of the RSUs or the issuance of Common Shares.
2.7 Rights as Shareholder. Unless otherwise determined by the Committee, the Participant shall possess no incidents of ownership with respect to the Common Shares underlying the RSUs and deliverable hereunder unless and until such Common Shares are transferred to the Participant pursuant to the terms of the Plan and this Award Agreement.
2.8 Conditions to Delivery of Common Shares. Subject to Section 13.5 of the Plan, the Common Shares deliverable hereunder, or any portion thereof, may be either previously authorized but unissued Common Shares or issued Common Shares which have then been reacquired by the Company. Such Common Shares shall be fully paid and nonassessable.
(a) The Company shall not be required to issue or deliver any Common Shares deliverable hereunder or portion thereof prior to fulfillment of all of the following conditions:
(i) The completion of such registration or other qualification of such Common Shares or obtaining approval of such governmental authority as the Company will determine to be necessary or advisable in connection with the authorization, issuance or sale thereof;
(ii) The admission of such Common Shares to listing or quotation on the Exchange;
(iii) The obtaining of any approval or other clearance from any state, provincial or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable;
(iv) the receipt from Participant of such representations, agreements and undertakings, including as to future dealings in such Common Shares, as the Company or its counsel determines to be necessary or advisable in order to safeguard against the violation of the securities laws of any jurisdiction;
(b) No fractional Common Shares shall be issued under this Award Agreement and any such fractional shares shall be eliminated by rounding down.
ARTICLE III.
OTHER PROVISIONS
3.1 Administration. The Committee shall have the power to interpret the Plan and this Award Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon Participant, the Company and all other interested persons. No member of the Committee or the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Award Agreement or the RSUs.
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3.2 Adjustments upon Specified Events. Upon the occurrence of certain events relating to the Common Shares contemplated by Section 16.1 of the Plan (including, without limitation, an extraordinary cash dividend on such Common Shares), the Committee shall make such adjustments as the Committee deems appropriate in the number of Restricted Stock Units then outstanding and the number and kind of securities that may be issued in respect of the Restricted Stock Units. Participant acknowledges that the RSUs are subject to modification and termination in certain events as provided in this Award Agreement and Sections 15 and 16 of the Plan.
3.3 Grant is not Transferable. During the lifetime of Participant, this grant and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the RSUs, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, the RSUs and the rights and privileges conferred hereby immediately will become null and void. Notwithstanding anything herein to the contrary, this Section 3.3 shall not prevent transfers by will or by operation of the laws of devolution or distribution and descent or pursuant to a qualified domestic relations order, as defined by the U.S. Code.
3.4 Binding Agreement. Subject to the limitation on the transferability of the RSUs contained herein, this Award Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
3.5 Notices. Any notice to be given under the terms of this Award Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Companys principal office, and any notice to be given to Participant shall be addressed to Participant at Participants last address reflected on the Companys records. By a notice given pursuant to this Section 3.5, either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
3.6 Titles. The division of this Award Agreement into Sections and Articles and the insertion of headings are for convenience of reference only and will not affect the construction or interpretation of this Award Agreement or the Plan.
3.7 Governing Law; Severability. The laws of the Province of British Columbia shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Award Agreement regardless of the law that might be applied under principles of conflicts of laws.
3.8 Conformity to Securities Laws. Participant acknowledges that the Plan and this Award Agreement are intended to conform to the extent necessary with all applicable provisions of the U.S. Securities Act and the U.S. Securities Exchange Act and any and all regulations and rules promulgated by the U.S. Securities and Exchange Commission thereunder, and applicable state and Canadian securities laws and regulations. This Award Agreement, the Plan, the granting and vesting of the RSUs under the Plan and this Award Agreement, and the settlement and delivery of Common Shares hereunder are subject to compliance with all applicable federal, state, provincial, local and foreign laws, rules and regulations (including but not limited to state, provincial, federal and foreign securities law and margin requirements) and to such approvals by any stock exchange, regulatory or governmental authority as may,
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in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under this Award Agreement or the Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, this Award Agreement, the Plan and the RSUs granted hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
3.9 Amendments, Suspension and Termination. To the extent permitted by the Plan, this Award Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board, provided, that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Award Agreement shall adversely affect the RSUs in any material way without the prior written consent of Participant.
3.10 Successors and Assigns. The Company may assign any of its rights under this Award Agreement to single or multiple assignees, and this Award Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Section 3.3 hereof, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.
3.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Award Agreement, if Participant is subject to Section 16 of the U.S. Exchange Act, the Plan, the RSUs and this Award Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the U.S. Exchange Act (including any amendment to Rule 16b-3 of the U.S. Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Award Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
3.12 Not a Contract of Employment. Nothing in this Award Agreement or the Plan will confer upon Participant any right to continue in the employ or service of or under contract with the Company or any Affiliate or affect in any way the right of the Company or any such Affiliate to terminate his or her employment or service at any time; nor will anything in this Award Agreement or the Plan be deemed or construed to constitute an agreement, or an expression of intent, on the part of the Company or any such Affiliate to extend the employment or the service of Participant beyond the time that he or she would normally be retired pursuant to the provisions of any present or future retirement plan of the Company or any Affiliate or any present or future retirement policy of the Company or any Affiliate, or beyond the time at which he or she would otherwise be retired pursuant to the provisions of any contract of employment with the Company or any Affiliate.
3.13 Entire Agreement. The Plan, the Grant Notice and this Award Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
3.14 Section 409A. The RSUs are not intended to constitute nonqualified deferred compensation within the meaning of Section 409A of the U.S. Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, Section 409A). However, notwithstanding any other provision of the Plan, the Grant Notice or this Award Agreement, if at any time the Committee determines that the RSUs (or any portion thereof) may be subject to Section 409A, the Committee shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan, this Award
A-6
Agreement or the Grant Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Committee determines are necessary or appropriate either for the RSUs to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.
3.15 Limitation on Participants Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Award Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant shall have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the RSUs, and rights no greater than the right to receive the Common Shares as a general unsecured creditor with respect to RSUs, as and when payable hereunder.
A-7
EXHIBIT 31.1
CERTIFICATION
I, Jeffrey Meckler, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of QLT Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed, under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 1, 2013
/s/ Jeffrey Meckler |
Jeffrey Meckler Chairman, Executive Transition Committee (Principal Executive Officer) |
30
EXHIBIT 31.2
CERTIFICATION
I, Sukhi Jagpal, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of QLT Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed, under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 1, 2013
/s/ Sukhi Jagpal |
Sukhi Jagpal |
Chief Financial Officer |
(Principal Financial and Accounting Officer) |
31
EXHIBIT 32.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of QLT Inc. (the Company) for the quarterly period ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Jeffrey Meckler, Chairman, Executive Transition Committee and acting principal executive officer certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at and for the periods indicated. |
Dated: August 1, 2013
/s/ Jeffrey Meckler |
Jeffrey Meckler |
Chairman, Executive Transition Committee |
(Principal Executive Officer) |
32
EXHIBIT 32.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of QLT Inc. (the Company) for the quarterly period ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Sukhi Jagpal, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at and for the periods indicated. |
Dated: August 1, 2013
/s/ Sukhi Jagpal |
Sukhi Jagpal |
Chief Financial Officer |
(Principal Financial and Accounting Officer) |
33
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Net Loss Per Share
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss Per Share | 10. NET LOSS PER SHARE The following table sets out the computation of basic and diluted net loss per common share:
For the three and six months ended June 30, 2013, 114,549 stock options (2012 – 5,586,799 stock options) were excluded from the calculation of diluted net income (loss) per common share because their effect was anti-dilutive. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Expenses | ||||
Research and development | $ 4,392 | $ 7,465 | $ 8,472 | $ 13,981 |
Selling, general and administrative | 1,810 | 5,872 | 3,892 | 9,980 |
Depreciation | 252 | 326 | 487 | 689 |
Restructuring charges (Note 5) | 671 | 1,493 | ||
Total expenses | 7,125 | 13,663 | 14,344 | 24,650 |
Operating loss | (7,125) | (13,663) | (14,344) | (24,650) |
Investment and other income | ||||
Net foreign exchange gains (losses) | 84 | (32) | 18 | (150) |
Interest income | 80 | 56 | 136 | 88 |
Fair value change in contingent consideration (Notes 6 and 9) | 1,038 | 1,650 | 1,833 | 3,591 |
Other gains | 36 | 29 | 36 | 83 |
Total investment and other income | 1,238 | 1,703 | 2,023 | 3,612 |
Loss from continuing operations before income taxes | (5,887) | (11,960) | (12,321) | (21,038) |
Provision for income taxes (Note 7) | (142) | (251) | (325) | (548) |
Loss from continuing operations | (6,029) | (12,211) | (12,646) | (21,586) |
(Loss) Income from discontinued operations, net of income taxes (Note 8) | (170) | (4,093) | 20 | (4,995) |
Net loss and comprehensive loss | $ (6,199) | $ (16,304) | $ (12,626) | $ (26,581) |
Basic and diluted net loss per common share (Note 10) | ||||
Continuing operations | $ (0.12) | $ (0.25) | $ (0.25) | $ (0.44) |
Discontinued operations | $ 0.00 | $ (0.08) | $ 0.00 | $ (0.10) |
Net loss per common share | $ (0.12) | $ (0.33) | $ (0.25) | $ (0.54) |
Weighted average number of common shares outstanding (thousands) | ||||
Basic and diluted | 50,883 | 49,191 | 50,736 | 49,088 |
Foreign Exchange Facility
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Foreign Currency [Abstract] | |
Foreign Exchange Facility | 3. FOREIGN EXCHANGE FACILITY We have a foreign exchange facility (the “Facility”) with HSBC Bank of Canada for the sole purpose of entering into foreign exchange contracts. The Facility previously allowed us to enter into a maximum of $50.0 million in spot or forward foreign exchange contracts for terms up to fifteen months. Effective April 23, 2013, we entered into an amendment with HSBC Bank of Canada (the “Amendment”) which reduced the limit applicable to forward foreign exchange contracts to $12.5 million for terms up to one month. The Amendment also reduced the limit applicable to spot foreign exchange contracts to $10.0 million. All other terms and conditions governing the Facility remain the same. The Facility requires security in the form of cash or money market instruments based on the contingent credit exposure for any outstanding foreign exchange transactions. At June 30, 2013 and December 31, 2012, no collateral has been pledged as security for this facility given that we do not have any foreign exchange transactions outstanding. |
Financial Instruments and Concentration of Credit Risk (Tables)
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and Liabilities Measured at Fair Value | The following tables provide information about our assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2013 and December 31, 2012 and indicate the fair value hierarchy of the valuation techniques we utilized to determine such fair value:
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Reconciliation of Asset (Contingent Consideration) Measured and Recorded at Fair Value | The following table represents a reconciliation of our asset (contingent consideration) measured and recorded at fair value on a recurring basis, using significant unobservable inputs (Level 3):
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Subsequent Events
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Subsequent Events [Abstract] | |
Subsequent Events | 11. SUBSEQUENT EVENTS On April 25, 2013, the Company’s board of directors amended and restated the Plan to increase the number of common shares of the Company available for grant under the Plan and to make certain other amendments to the Plan, including a provision to permit the granting of restricted stock units (“RSUs”) under the Plan. The amendment and restatement of the Plan was subject to shareholder approval, which was obtained on June 14, 2013. On July 15, 2013, the Board of Directors granted an aggregate of 862,000 stock options to employees, 100,000 stock options to directors, 48,000 RSU’s to directors under the Plan, and 88,000 DSU’s to directors under the DDSU Plan. The stock options vest and become exercisable in thirty-six (36) successive and equal monthly installments beginning on the one-month anniversary of the date of grant and have an exercise price of CAD $4.54 per share, which is equal to the closing price of the Company’s common shares on the Toronto Stock Exchange on the date of grant. The RSU’s vest in three (3) successive and equal yearly installments on the date of each of the first three annual general meetings of the Company held after the date of grant. Upon vesting, each RSU represents the right to receive one common share of the Company. The DSU’s vest in thirty-six (36) successive and equal monthly installments beginning on the first day of the first month after the date of grant. A vested DSU is convertible into cash only (i.e. no shares are issued), and is automatically converted after the director ceases to be a member of the Board unless the director is removed from the Board for just cause. On July 29, 2013, the Company filed a registration statement to register the issuance of up to 4,000,000 additional shares of Common Stock that may be issued under the Plan as a result of the amendment to the Plan. |
Net Loss Per Share - Additional Information (Detail)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Earnings Per Share [Abstract] | ||||
Excluded from the calculation of diluted net income (loss) per common share | 114,549 | 5,586,799 | 114,549 | 5,586,799 |
Income Taxes - Additional Information (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Income Tax Disclosure [Abstract] | ||||
Provision for income taxes | $ 142 | $ 251 | $ 325 | $ 548 |
Provision for income tax on discontinued operation | $ 176 | $ 122 | $ 249 | $ 193 |
Foreign Exchange Facility - Additional Information (Detail) (USD $)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2013
|
Dec. 31, 2012
|
|
Derivative [Line Items] | ||
Maximum allowed facility of forward foreign exchange contracts | $ 50,000,000 | |
Allowed facility of forward foreign exchange contracts term | 15 months | |
Collateral pledged as security | 0 | 0 |
Outstanding forward foreign currency contracts | 0 | 0 |
Amendment with HSBC Bank of Canada [Member] | Forward foreign exchange contacts [Member]
|
||
Derivative [Line Items] | ||
Maximum allowed facility of forward foreign exchange contracts | 12,500,000 | |
Allowed facility of forward foreign exchange contracts term | 1 month | |
Amendment with HSBC Bank of Canada [Member] | Spot foreign exchange contracts [Member]
|
||
Derivative [Line Items] | ||
Maximum allowed facility of forward foreign exchange contracts | $ 10,000,000 |
Accrued Liabilities - Accrued Liabilities (Detail) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
||||
---|---|---|---|---|---|---|
Accrued Liabilities Current [Abstract] | ||||||
Compensation | $ 909 | [1] | $ 2,270 | [1] | ||
Directors' Deferred Share Units compensation ("DDSU") | 118 | 96 | ||||
Other | 162 | 149 | ||||
Total accrued liabilities | $ 1,189 | $ 2,515 | ||||
|
Financial Instruments and Concentration of Credit Risk - Additional Information (Detail) (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Fair Value Disclosures [Abstract] | ||
Outstanding forward foreign currency contracts | $ 0 | $ 0 |
Share Capital - Impact on Results of Operations of Recording DSU Compensation (Parenthetical) (Detail) (Directors Deferred Share Units [Member], USD $)
In Thousands, except Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2012
|
Jun. 30, 2012
|
|
Directors Deferred Share Units [Member]
|
||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Compensation cost associated with accelerated vesting of directors' deferred share units | $ 300 | $ 300 |
Number of directors' deferred share units for which vesting was accelerated | 42,500 |
Discontinued Operations and Assets Held for Sale - Summary of Operating Results of Discontinued Operations (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|||||||||||
Discontinued Operations And Disposal Groups [Abstract] | ||||||||||||||
Total revenues | $ 7,989 | $ 16,980 | ||||||||||||
Recovery on assets held for sale | 22 | [1] | 175 | [1] | ||||||||||
Operating pre-tax loss | (281) | [2] | (3,971) | [2] | (474) | [2] | (4,802) | [2] | ||||||
Gain on sale of Discontinued operations | 287 | [3] | 743 | [3] | ||||||||||
Pre-tax income (loss) | 6 | (3,971) | 269 | (4,802) | ||||||||||
Provision for income taxes | (176) | (122) | (249) | (193) | ||||||||||
Net (loss) income from discontinued operations | $ (170) | $ (4,093) | $ 20 | $ (4,995) | ||||||||||
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Subsequent Events - Additional Information (Detail) (CAD)
|
3 Months Ended | 6 Months Ended | 1 Months Ended | |||||
---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2013
|
Jul. 29, 2013
Subsequent Event [Member]
|
Jul. 15, 2013
Subsequent Event [Member]
Installment
|
Jul. 15, 2013
Subsequent Event [Member]
RSU's [Member]
Installment
|
Jul. 15, 2013
Subsequent Event [Member]
DSU's [Member]
Installment
|
Jul. 15, 2013
Subsequent Event [Member]
Employees [Member]
|
Jul. 15, 2013
Subsequent Event [Member]
Directors [Member]
|
|
Subsequent Event [Line Items] | ||||||||
Stock options granted | 0 | 0 | 862,000 | 100,000 | ||||
Stock related units granted | 48,000 | 88,000 | ||||||
Stock options vested, exercisable period (number of monthly installments) | 36 | |||||||
Stock option exercise price | 4.54 | |||||||
Stock units vesting period period (number of annual installments) | 3 | |||||||
Number of common share to be received upon vesting of RSU | 1 | |||||||
Stock units vesting period period (number of monthly installments) | 36 | |||||||
Number of additional shares of Common Stock may be issued under the plan | 4,000,000 | 4,000,000 |
Share Capital - Intrinsic Value of Stock Options Exercised and Related Cash from Exercise of Stock Options (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | ||||
Intrinsic value of stock options exercised | $ 806 | $ 1,226 | $ 2,142 | $ 1,659 |
Cash from exercise of stock options | $ 3,556 | $ 1,403 | $ 7,217 | $ 2,011 |
Net Loss Per Share (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Basic and Diluted Net Loss Per Common Share | The following table sets out the computation of basic and diluted net loss per common share:
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Condensed Summary of Significant Accounting Policies
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Accounting Policies [Abstract] | |
Condensed Summary of Significant Accounting Policies | 1. CONDENSED SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for the presentation of interim financial information. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed, or omitted, pursuant to such rules and regulations. These financial statements do not include all disclosures required for the annual financial statements and should be read in conjunction with our audited consolidated financial statements and notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2012. All amounts herein are expressed in United States dollars unless otherwise noted. In management’s opinion, the condensed consolidated financial statements reflect all adjustments (including reclassifications and normal recurring adjustments) necessary to present fairly the financial position at June 30, 2013, and results of operations and cash flows for all periods presented. The interim results presented are not necessarily indicative of results that can be expected for a full year. The results of operations relating to our PPDS Technology and Visudyne have been excluded from continuing operations and reported as discontinued operations for the current and prior periods. See Note 8 — Discontinued Operations and Assets Held for Sale. Principles of Consolidation These condensed consolidated financial statements include the accounts of QLT and its subsidiaries, all of which are wholly owned. All intercompany transactions have been eliminated. Use of Estimates The preparation of financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as at the date of the financial statements, and the reported amounts of expenses during the reporting periods presented. Significant estimates are used for, but not limited, to the fair value of contingent consideration, allocation of overhead expenses to research and development, stock-based compensation, restructuring costs, and provisions for taxes, tax assets and liabilities. Actual results may differ from estimates made by management. Segment Information We operate in one industry segment, which is the business of developing, manufacturing, and commercializing opportunities in ophthalmology. As at the date of this report, our clinical development programs are solely focused on our synthetic retinoid, QLT091001. Our chief operating decision maker reviews our operating results and manages our operations as a single operating segment. Our segment information excludes the results of businesses classified as discontinued operations.
Discontinued Operations and Assets Held for Sale We consider assets to be held for sale when management approves and commits to a formal plan to actively market the assets for sale. Upon designation as held for sale, the carrying value of the assets is recorded at the lower of their carrying value and their estimated fair values. We cease to record depreciation or amortization expense at that time. The results of operations, including the gain on disposal for businesses that are classified as held for sale are excluded from continuing operations and reported as discontinued operations for all periods presented. We have not had and do not expect to have any significant continued involvement with the businesses following their sale other than our provision of certain transition services to Valeant pursuant to the Transition Services Agreement entered into with Valeant in connection with the Valeant Agreement. Amounts billed to Valeant under the Transition Services Agreement are included within discontinued operations. See Note 8 — Discontinued Operations and Assets Held for Sale. Income Taxes Income taxes are reported using the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to: (i) differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and (ii) operating loss and tax credit carry forwards using applicable enacted tax rates. An increase or decrease in these tax rates will increase or decrease the carrying value of future net tax assets resulting in an increase or decrease to net income. Income tax credits, such as investment tax credits, are included as part of the provision for income taxes. The realization of our deferred tax assets is primarily dependent on the generation of sufficient capital gains and taxable income prior to expiration of any loss carry forward balance. A valuation allowance is provided when it is more likely than not that a deferred tax asset may not be realized. Changes in valuation allowances are included in our tax provision, or included within discontinued operations in the period of change. Contingent Consideration Contingent consideration arising from the sale of QLT USA and Visudyne is measured at fair value. The contingent consideration is revalued at each reporting period and changes are included in continuing operations. See Note 6 – Contingent Consideration. Net Loss Per Common Share Basic net loss per common share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed in accordance with the treasury stock method, which uses the weighted average number of common shares outstanding during the period and also includes the dilutive effect of potentially issuable common stock from outstanding stock options. Fair Value of Financial Assets and Liabilities The carrying values of cash and cash equivalents, restricted cash, trade receivables and payables, and contingent consideration approximate fair value. We estimate the fair value of our financial instruments using the market approach. The fair values of our financial instruments reflect the amounts that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Recently Issued Accounting Standards As at the date of this assessment, no new future accounting pronouncements were identified, which are expected to affect the Company’s consolidated financial statements beyond June 30, 2013. |
Share Capital
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share Capital | 4. SHARE CAPITAL (a) Cash Distribution On June 27, 2013, we completed a $200.0 million special cash distribution, by way of a reduction of the paid-up capital of the Company’s common shares (“Cash Distribution”). The Cash Distribution was approved by the Company’s shareholders at QLT’s annual and special shareholder’s meeting on June 14, 2013. All shareholders of record as at June 24, 2013 (the “Record Date”) were eligible to participate in the Cash Distribution and received a payment of approximately $3.92 per share based upon the 51,081,878 common shares issued and outstanding on the Record Date. (b) Share Repurchase Program On October 2, 2012, we commenced a normal course issuer bid to repurchase up to 3,438,683 of our common shares, being 10% of our public float as of September 26, 2012, over a 12-month period. All purchases were effected in the open market through the facilities of the NASDAQ Stock Market, and in accordance with applicable regulatory requirements. All common shares repurchased were cancelled. Total purchases under this program, which we completed in March 2013, were 3,438,683 common shares at an average price of $7.86 per share, for a total cost of $27.0 million. We implemented our share repurchase program pursuant to an automatic share purchase plan (the “Plan”), in accordance with applicable Canadian and US securities legislation. Under the Plan, we were able to repurchase our shares on any trading day during the share repurchase period, including during self-imposed trading blackout periods. (c) Stock Options On April 25, 2013, the Company’s board of directors amended and restated the QLT 2000 Incentive Stock Plan (the “Plan”) to increase the number of shares of the Company’s common stock, without par value, available for grant under the Plan from 7,800,000 to 11,800,000 and to make certain other amendments to the Plan. The amendment and restatement of the Plan was subject to shareholder approval, which was obtained on June 14, 2013. On July 29, 2013, the Company filed a registration statement to register the issuance of up to 4,000,000 additional shares of Common Stock that may be issued under the Plan as a result of the amendment to the Plan.
There were no stock options granted during the three and six months ended June 30, 2013. We used the Black-Scholes option pricing model to estimate the value of the options at each grant date, using the following weighted average assumptions (no dividends are assumed):
The Black-Scholes option pricing model was developed for use in estimating the value of traded options that have no vesting restrictions and are fully transferable. In addition, option pricing models require the input of highly subjective assumptions, including the expected stock price volatility. We project expected volatility and expected life of our stock options based upon historical and other economic data trended into future years. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected life of our stock options. The weighted average grant date fair value of stock options granted during the three and six months ended June 30, 2012 was CAD $2.52 and $2.55, respectively. As at June 30, 2013, there were 60,637 unvested stock options. Total estimated compensation cost related to non-vested stock options and the expected and weighted average periods over which such costs are expected to be recognized at June 30, 2013 were as follows:
The intrinsic value of stock options exercised and the related cash from exercise of stock options during the three and six months ended June 30, 2013 and 2012 was as follows:
Upon option exercise, we issue new shares of stock. The impact on our results of operations of recording stock-based compensation for the three and six months ended June 30, 2013 and 2012 was as follows:
There was no share-based compensation capitalized as part of inventory during the three and six months ended June 30, 2013. For the same period in the prior year, the share-based compensation capitalized as part of inventory and the related tax benefits recorded were negligible.
No cash payments were made under the Directors Deferred Share Units Plan (the “DDSU Plan”) during the three and six months ended June 30, 2013. On June 4, 2012, a new board of directors was elected at the Company’s annual shareholders’ meeting. As a result, upon departure of the previous board of directors, $2.5 million was paid out to these former directors during the three and six months ended June 30, 2012 in accordance with the terms of the DDSU Plan. The impact on our results of operations of recording DSU compensation for the three and six months ended June 30, 2013 and 2012 was as follows:
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Accrued Liabilities
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Payables And Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities | 2. ACCRUED LIABILITIES
|
Discontinued Operations and Assets Held for Sale - Summary of Operating Results of Discontinued Operations (Parenthetical) (Detail) (USD $)
|
3 Months Ended | 6 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Dec. 31, 2012
|
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Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||||
Gain on sale of Discontinued operations | $ 287,000 | [1] | $ 743,000 | [1] | |||||
Net proceeds from discontinued operations | 750,000 | 750,000 | |||||||
Carrying value of equipment sold | 300,000 | ||||||||
Pre-tax losses | 6,000 | (3,971,000) | 269,000 | (4,802,000) | |||||
PPDS Technology [Member]
|
|||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||||
Gain on sale of Discontinued operations | 300,000 | 800,000 | |||||||
Net proceeds from discontinued operations | 700,000 | 1,200,000 | |||||||
Transaction costs | 300,000 | 300,000 | |||||||
Carrying value of equipment sold | 200,000 | 200,000 | |||||||
Pre-tax losses | $ 300,000 | $ 7,300,000 | $ 300,000 | $ 7,300,000 | |||||
|
Share Capital - Additional Information (Detail)
|
1 Months Ended | 3 Months Ended | 6 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 31, 2012
|
Jun. 30, 2013
USD ($)
|
Jun. 30, 2012
USD ($)
|
Jun. 30, 2012
CAD
|
Jun. 30, 2013
USD ($)
|
Mar. 31, 2013
USD ($)
|
Jun. 30, 2012
USD ($)
|
Jun. 30, 2012
CAD
|
Dec. 31, 2012
|
Oct. 02, 2012
|
Sep. 26, 2012
|
Jun. 30, 2013
Canada [Member]
|
|
Class of Stock [Line Items] | ||||||||||||
Cash distribution approval date | Jun. 14, 2013 | |||||||||||
Cash distribution record date | Jun. 24, 2013 | |||||||||||
Total amount of cash distribution paid to shareholders of record | $ 200,000,000 | $ 200,000,000 | ||||||||||
Distribution payment per share | $ 3.92 | $ 3.92 | ||||||||||
Applicable Canadian withholding tax percentage | 25.00% | |||||||||||
Common stock, shares issued | 51,081,878 | 51,081,878 | 51,589,405 | |||||||||
Common stock, shares outstanding | 51,081,878 | 51,081,878 | 51,589,405 | |||||||||
Number of issued and outstanding common shares authorized to be repurchased | 3,438,683 | |||||||||||
Percentage of issued and outstanding common shares authorized to be repurchased | 10.00% | |||||||||||
Duration of normal course issuer bid | 12 months | |||||||||||
Number of issued and outstanding common shares repurchased | 3,438,683 | |||||||||||
Total average cost per share of the share repurchase | $ 7.86 | |||||||||||
Total cumulative cost of shares repurchased | 27,000,000 | |||||||||||
Amended and restated Company's 2000 Incentive Stock Option Plan | 11,800,000 | 11,800,000 | 7,800,000 | |||||||||
Additional shares of Common Stock issued under Plan | 4,000,000 | |||||||||||
Stock options granted | 0 | 0 | ||||||||||
Weighted average grant date fair value of stock options granted | 2.52 | 2.55 | ||||||||||
Unvested stock options | 60,637 | 60,637 | ||||||||||
Share based compensation capitalized as part of inventory | 0 | 0 | ||||||||||
Cash payments under DDSU plan | $ 0 | $ 2,500,000 | $ 0 | $ 2,500,000 |
Share Capital - Impact on Results of Operation of Recording Stock Based Compensation (Detail) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expense before income taxes | $ 94 | $ 4,831 | $ 142 | $ 5,552 |
Related income tax benefits | (488) | (532) | ||
Stock-based compensation, net of income taxes | 94 | 4,343 | 142 | 5,020 |
Research and development [Member]
|
||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expense before income taxes | 64 | 1,071 | 94 | 1,252 |
Selling, general and administrative [Member]
|
||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expense before income taxes | 30 | 1,497 | 45 | 1,724 |
Discontinued operations [Member]
|
||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Stock-based compensation expense before income taxes | $ 2,263 | $ 3 | $ 2,576 |
Contingent Consideration - Additional Information (Detail) (USD $)
|
3 Months Ended | 6 Months Ended | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | 1 Months Ended | 3 Months Ended | 6 Months Ended | 6 Months Ended | ||||||||||
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Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Dec. 31, 2012
|
Sep. 24, 2012
Visudyne [Member]
|
Jun. 30, 2013
Visudyne [Member]
|
Jun. 30, 2013
Visudyne [Member]
|
Dec. 31, 2012
Visudyne [Member]
|
Jun. 30, 2013
Visudyne [Member]
Maximum [Member]
|
Oct. 31, 2010
QLT USA and Eligard [Member]
|
Oct. 31, 2009
QLT USA and Eligard [Member]
|
Jun. 30, 2013
QLT USA and Eligard [Member]
|
Jun. 30, 2012
QLT USA and Eligard [Member]
|
Jun. 30, 2013
QLT USA and Eligard [Member]
|
Jun. 30, 2012
QLT USA and Eligard [Member]
|
Dec. 31, 2012
QLT USA and Eligard [Member]
|
Oct. 01, 2009
QLT USA and Eligard [Member]
|
Jun. 30, 2013
QLT USA and Eligard [Member]
Maximum [Member]
|
Jun. 30, 2013
Laser Registration [Member]
|
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||||||||||||
Potential aggregate proceeds from sale of subsidiary, net of cash on hand | $ 230,000,000 | |||||||||||||||||||
Cash on hand acquired from sale of subsidiary | 118,300,000 | |||||||||||||||||||
Proceeds from contingent consideration | 112,500,000 | 0 | 0 | 10,000,000 | 20,000,000 | 8,000,000 | 8,100,000 | 18,900,000 | 17,000,000 | |||||||||||
Percentage of royalties to be received as contingent consideration | 80.00% | |||||||||||||||||||
Date of assignment of license agreement for commercial marketing | Mar. 01, 2011 | |||||||||||||||||||
Future expected contingent consideration related to the sale of discontinued operations | 54,600,000 | 54,600,000 | 20,000,000 | 20,000,000 | 15,000,000 | 57,900,000 | 57,900,000 | 76,700,000 | 200,000,000 | |||||||||||
Expiration date of entitlement to contingent consideration | Oct. 01, 2024 | |||||||||||||||||||
Investing activity proceeds from contingent consideration | 6,995,000 | 6,404,000 | 16,552,000 | 13,384,000 | 7,000,000 | 6,400,000 | 16,600,000 | 13,400,000 | ||||||||||||
Fair value change in contingent consideration | 500,000 | 1,000,000 | 1,600,000 | 2,300,000 | 3,600,000 | |||||||||||||||
Aggregate contingent consideration received | 142,100,000 | 142,100,000 | 123,300,000 | |||||||||||||||||
Maximum duration over which the contingent consideration is expected to be received | 2 years | |||||||||||||||||||
Restricted cash (Note -) | 7,502,000 | 7,502,000 | 7,500,000 | 7,500,000 | 7,500,000 | 7,500,000 | ||||||||||||||
Milestone payment to be received contingent upon laser registration prior to December 31, 2013 | 5,000,000 | 5,000,000 | ||||||||||||||||||
Milestone payment to be received contingent upon laser registration after December 31, 2013 but before January 1, 2015 | 2,500,000 | |||||||||||||||||||
Milestone payment to be received contingent upon laser registration after January 1, 2015 | 0 | |||||||||||||||||||
Period in which the milestone payment related to the laser registration is expected to be received | 2013 | |||||||||||||||||||
Annual maximum amount of contingent consideration receivable from Visudyne royalties | 5,000,000 | |||||||||||||||||||
Minimum Threshold for Contingent Consideration receivable on Visudyne royalties | 8,500,000 | |||||||||||||||||||
Fair Value of Contingent Consideration | $ 4,700,000 | $ 4,600,000 |
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