TORONTO Charting a new course after a boardroom coup, Canadian biotech company QLT Inc outlined plans on Monday to cut 68 percent of its workforce and find a new chief executive.
The company's new board, elected following a proxy battle in June, plans to sell or spin off parts of the company, return $100 million in capital to shareholders and focus on developing a treatment for several eye diseases that can cause blindness.
The new board is controlled by activist investors who took charge of the flailing company after the success of the proxy campaign spearheaded by Danish investment fund NB Public Equity Komplementar ApS.
"Our board was elected by concerned and frustrated shareholders, disquieted that the company's spending and headcount seemed inappropriate given the nature of its assets, size and focus," QLT Chairman Jason Aryeh said in a letter to shareholders.
"We believe that it is critical that a change in QLT's direction be implemented to prevent further erosion of QLT's value and assets."
The Vancouver-based company, which also revised its earnings forecast, said several senior executives would leave, including long-time Chief Executive Robert Butchofsky.
It said Butchofsky has agreed to stay in his job until July 31, or until the board names a new CEO. QLT said it is currently evaluating several candidates for the post.
QLT, a strong performer in the early 2000s on sales of its Visudyne treatment for age-related blindness, lost market share following entry of rival products such as Novartis AG's Lucentis.
It will now focus on developing QLT091001, a treatment for several inherited eye diseases that can cause blindness. European and U.S. regulators have given the compound orphan drug status, a status that makes it easier for treatments for rare diseases to win regulatory approval.
The Vancouver-based company said it would slash 146 jobs and continue with a workforce of 68. The restructuring will result in a charge of about $15 million to $19 million.
"It is our firmly held belief that QLT can now largely preserve its financial resources while simultaneously maximizing the value of its core assets," the board said in its letter.
QLT has retained Goldman Sachs to explore the sale or spin-out of its punctal plug technology - a drug delivery system that the company is developing to help treat eye diseases.
"In our model, we assume a discounted cash flow value of about $350 million for the punctal plug revenues," said Bloom Burton & Co analyst Philippa Flint in a note to clients.
After deducting expenses related to further trials, Flint pegs discounted cash flows from the business at about $200 million.
Goldman has also been tasked with determining whether it is in QLT's best interest to find a partner for the Visudyne business or to sell it. Flint questioned the wisdom of selling Visudyne.
"While we applaud the board for making tough decisions and reining in spending, we believe one of the key advantages of an investment in QLT was the diversity of its pipeline," said Flint. "We see Visudyne as a cash cow and believe it not only can offset operational costs but also act to reduce overall risk."
The company said it now expects its 2012 adjusted earnings before interest, taxes, depreciation and amortization to be somewhere between a loss of $3 million and a profit $3 million. It had earlier forecast a loss of between $10 million and $17 million.
QLT plans to release a more detailed outlook in August, when it issues its second-quarter results.
The board has authorized a $100 million return of capital to shareholders that it plans to implement as soon as possible. The company said it is still considering the best way to get the money in shareholders' hands.
QLT also said industry veteran Vince Anido will join its board. Anido was until recently president and CEO of Ista Pharmaceuticals, which was acquired by Bausch & Lomb for about $500 million.
QLT shares were 1.4 percent higher at C$7.81 on the Toronto Stock Exchange late on Monday afternoon.
(This version of the story has been corrected to remove an extraneous word from the headline)
(Reporting by Maneesha Tiwari in Bangalore and Allison Martell and Euan Rocha in Toronto; Editing by Joyjeet Das; and Peter Galloway)