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QLT Inc. has reported a worse-than-expected first-quarter net loss of $10.5 million US as sales of its key Visudyne eye drug faded 40 per cent from a year earlier.

QLT, reporting in U.S. dollars, said Friday its January-March revenue fell 42 per cent to $11.9 million as its share of profit from the quarter's $36.5 million in worldwide Visudyne sales declined to 21.5 per cent from 24.5 per cent a year earlier.

The quarterly net loss, including $7.4 million in restructuring charges, was worth 14 cents per share, compared with year-ago earnings of $4.9 million, six cents per share.

Excluding non-operating items, QLT said its loss was four cents per share. Analysts surveyed by Thomson Financial were on average expecting a profit of a penny per share.

QLT — now concentrating on punctal plugs to treat dry eyes while cutting staff by 45 per cent and seeking to divest other products such as Aczone for acne, Eligard for prostate cancer and the Atrigel drug-delivery system — said first-quarter research and development spending was $8 million, off from $8.4 million in the year-ago period.

The operating loss for the quarter was $14.4 million, compared with operating income of $1.7 million in the first three months of last year.

The company ended the quarter with $120 million in cash plus $122.4 million of restricted cash tied up in litigation, and "expects to significantly add to its cash balance in 2008 by proceeding with its previously announced intention to sell Eligard, Aczone, Atrigel and the headquarters facility and land in Vancouver."

Management maintained previous guidance that full-year Visudyne sales will range from $145 million to $160 million and QLT's share of profit from Visudyne will be about 20 per cent. Eligard sales are forecast to exceed $200 million.