##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the fiscal year ended December 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 Commission File No. 0-17082
 QLT Inc.
  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)
   Title of each class
    
    Name of each exchange on which registeredCommon Shares, without par value
    
    The Nasdaq Stock Market
  
 Yes o No þ
 Yes o No þ
 þ o
 o o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller Reporting Company o
 o þ




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##### Table of Contents



Note regarding references to QLT
  Note regarding Currency and Accounting Standards
  ®
 Note regarding Exchange Rates
  2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006High
    
    $
    1.0776
    
    
    $
    1.2995
    
    
    $
    1.2971
    
    
    $
    1.1852
    
    
    $
    1.1726Low
    
    
    0.9960
    
    
    
    1.0289
    
    
    
    0.9717
    
    
    
    0.9168
    
    
    
    1.0989Average
    
    
    1.0298
    
    
    
    1.1412
    
    
    
    1.0660
    
    
    
    1.0734
    
    
    
    1.1340Period End
    
    
    1.0009
    
    
    
    1.0461
    
    
    
    1.2240
    
    
    
    0.9881
    
    
    
    1.1652
 Note regarding Trademarks
  
    
    Aczone® is a registered trademark of Allergan, Inc.
 
    
    Atrigel® is a registered trademark of TOLMAR Therapeutics, Inc.
 
    
    Avastin® is a registered trademark of Genentech, Inc.
 
    
    Eligard® is a registered trademark of Sanofi-Aventis Corp.
 
    
    Lucentis® is a registered trademark of Genentech, Inc.
 
    
    PatadayTM is a trademark of Alcon, Inc.
 
    
    Patanol® is a registered trademark of Alcon Research, Ltd.
 
    
    Visudyne® is a registered trademark of Novartis AG.
 
    
    Xalatan® is a registered trademark of Pfizer Health AB.
   2




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##### 



QLT INC.
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 2010
 Table of Contents
 Item 1. BUSINESS
    
    
    4Overview
    
    
    4Securities Transactions
    
    
    5Eligard® Contingent Consideration
    
    
    6Visudyne®  Our Approved Product
    
    
    6Our Products in Development
    
    
    8Manufacturing
    
    
    14Product Sales, Marketing and Distribution
    
    
    14Financial Information about Segments and Geographic Area
    
    
    15Medical Lasers Required for Visudyne Therapy
    
    
    15Patents, Trademarks and Proprietary Rights
    
    
    16Competition
    
    
    18Government Regulation
    
    
    18Third-Party Reimbursement
    
    
    22Liability and Product Recall
    
    
    23Research and Development Costs
    
    
    23Human Resources
    
    
    24Corporate Information
    
    
    24Item 1A. RISK FACTORS
    
    
    24Item1B. UNRESOLVED STAFF COMMENTS
    
    
    37Item 2. PROPERTIES
    
    
    37Item 3. LEGAL PROCEEDINGS
    
    
    37Item 4. RESERVED
    
    
    37Item 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    38Item 6. SELECTED FINANCIAL DATA
    
    
    42Item7. MANAGEMENTS DISCUSSION AND ANAYLYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
    
    
    45Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    68Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    68Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    98Item 9A. CONTROLS AND PROCEDURES
    
    
    98Item 9B. OTHER INFORMATION
    
    
    100Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    101Item 11. EXECUTIVE COMPENSATION
    
    
    101Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS
MATTERS
    
    
    102Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
    
    
    102Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    102Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    103Exhibit 10.54Exhibit 11Exhibit 21Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
  
  3




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Item 1.
    
    BUSINESS
 
 Overview
 ®
 Products, Revenues and Other Sources of Funds
   ® ®
 Research and Development
  Punctal Plug
Drug Delivery System for the treatment of Glaucoma and Allergic Conjunctivitis.
   4




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QLT091001 for
the treatment of Leber Congenital Amaurosis and Retinitis Pigmentosa. cis
 ®
 Business Strategy
  
 Securities Transactions
    5




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Eligard ® Contingent Consideration
 ®
   
 Visudyne ®  Our Approved Product
  Photodynamic Therapy
   Wet AMD
   6




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Approved Indications
  Predominantly Classic CNV in AMD.
 Minimally Classic CNV in AMD.
 Occult with no Classic CNV in AMD.
 CNV due to Pathologic Myopia.
 CNV due to Presumed Ocular Histoplasmosis Syndrome.
 Commercialization Rights and Revenue
     7




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Our Products in Development
  Product/Indication
    
    Status/Development StageLatanoprost Punctal Plug Drug Delivery System (L-PPDS)Glaucoma and Ocular Hypertension
    
    Phase II study ongoingOlopatadine Punctal Plug Drug Delivery
System (O-PPDS)Allergic Conjunctivitis
    
    Phase II proof-of-principle study completed in
February 2011. Clinical development is suspended pending the
outcome of the L-PPDS Phase II study.QLT091001Leber Congenital Amaurosis (LCA) and
Retinitis
Pigmentosa (RP)
    
    Phase Ib proof-of-concept study ongoing
 Punctal Plug Drug Delivery System
   Initial Drug and Target Indication (L-PPDS)
 Latanoprost for Glaucoma and Ocular Hypertension.
  8




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Current Treatment. ®
 Potential Market
 Latanoprost Punctal Plug Drug Delivery System (L-PPDS)
 2010 L-PPDS Phase II Dosing Trials.
   Current L-PPDS
Phase II Clinical Trial .
  9




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Second Drug and Target Indication (O-PPDS)
 Olopatadine for Allergic Conjunctivitis.
 Current Treatment. ® TM
 Potential Market.
 Olopatadine Punctal Plug Drug Delivery System (O-PPDS)
 O-PPDS Clinical Trial.
 ®
     10




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Punctal Plug Devices for the L-PPDS and O-PPDS
  2010 Punctal Plug Device Study.
  Current Punctal Plug Device Development.
 QLT091001  Synthetic Retinoid Program
 cis
 Initial Target Indications
 Leber Congenital Amaurosis and Retinitis Pigmentosa. RPE65 LRAT cis
  Current Treatment.
  11




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Potential Market.
 LCA Phase Ia Study.
 LCA and RP Phase Ib Study.
   Visudyne  Expansion of Therapy
  RADICAL Study (QLT-sponsored). ® ®
 
    
    triple therapy with quarter-fluence Visudyne followed by Lucentis and then dexamethsone;
 
    
    triple therapy with half-fluence Visudyne followed by Lucentis and then dexamethsone; and
 
    
    double therapy with half-fluence Visudyne followed by Lucentis.
  12




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P P
 Final Outcomes from RADICAL Study (24 Months Follow-up)
 Triple therapy
    
    Double therapy
    
    LucentisQuarter-fluence
    
    Half-fluence
    
    Half-fluence
    
    monotherapyN=35
    
    N=34
    
    N=33
    

    N=29Mean retreatment visits
    
    5.8 (P=.01)
    
    4.2 (P<.001)
    
    6.2 (P=.03)
    
8.9Mean VA change from baseline (letters)
    
    0.3 (P=.46)
    
    2.0 (P=.71)
    
    -2.0 (P=.26)
    

    3.8Difference from Lucentis group
(95% CI)
    
    -3.5 (-12.0, 5.9)
    
    -1.8 (-11.1, 7.6)
    
    -5.8 (-15.9, 4.3)
    
    
 
 P
    
    values are from comparison with Lucentis monotherapy. CI: confidence interval  DENALI Study (Novartis-sponsored).
   13




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QLT091568  Beta Blocker Glaucoma Program
   
 Manufacturing
    
 Product Sales, Marketing and Distribution
 United States Distribution
   14




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Rest of World Distribution
  
 Financial Information about Segments and Geographic Areas
  
 Medical Lasers Required for Visudyne Therapy
     15




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Patents, Trademarks and Proprietary Rights
   Visudyne
 Verteporfin  UBC License.
 Verteporfin Patent Rights.
 Verteporfin lipid-based formulation
 Approved Uses of Visudyne.
 MGH License.
 Photosensitizers
  16




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Punctal Plug Drug Delivery System
  QLT091001
  QLT091568
  Atrigel ® System for Sustained Release Drug Delivery
  Other Patents Trademarks and Proprietary Rights
     17




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Competition
  Visudyne
 ® ®
 
 
 Government Regulation
   18




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FDA Regulation  Approval of Drug Products
  
    
    preclinical testing;
 
    
    submission of an investigational new drug application (IND) to the FDA, which must
become effective before human clinical trials may commence;
 
    
    adequate and well-controlled human clinical trials to establish the safety and efficacy
of the drug for its proposed intended use;
 
    
    validation and approval of the manufacturing facilities and process;
 
    
    submission of a new drug application (NDA) or abbreviated new drug application
(ANDA) to the FDA; and
 
    
    FDA approval of the application, including approval of all labelling.
    
    
    assess the efficacy of the drug in specific, targeted indications;
 
    
    assess dosage tolerance and optimal dosage; and
 
    
    identify possible adverse effects and safety risks.
   FDA Regulation  Clearance and Approval of Medical Devices
   19




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FDA Regulation  Post-Approval Requirements
   EU Regulation  Approval of Medicinal Products
  Orphan Drug Regulation
   20




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Healthcare Fraud and Abuse Laws
   Additional Regulatory Issues
    21




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Third-Party Reimbursement
      22




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
    
    An annual, non-deductible fee on any entity that manufactures or imports certain
branded prescription drugs and biologic agents into the U.S., apportioned among these
entities according to their market share in certain federal government healthcare programs
(excluding sales of any drug or biologic product marketed for an orphan indication),
beginning in 2011;
 
    
    An increase, from 15.1% to 23.1%, in the rebates a manufacturer must pay under the
Medicaid Drug Rebate Program, retroactive to January 1, 2010;
 
    
    Extension of manufacturers Medicaid rebate liability to covered drugs dispensed to
individuals who are enrolled in Medicaid managed care organizations, effective March 23,
2010;
 
    
    Expansion of the entities eligible for discounts under the Public Health Service
pharmaceutical pricing program, effective January 2010;
 
    
    New (Sunshine) requirements to report certain financial arrangements with physicians
and others, including reporting any transfer of value made or distributed to prescribers
and other healthcare providers and reporting any investment interests held by physicians
and their immediate family members during each calendar year beginning in 2012, with
reporting starting in 2013;
 
    
    A new requirement to annually report drug samples that manufacturers and distributors
provide to physicians, effective April 1, 2012;
 
    
    A licensure framework for follow-on biologic products; and
 
    
    A new Patient-Centered Outcomes Research Institute to oversee, identify priorities in,
and conduct comparative clinical effectiveness research, along with funding for such
research.
  
 Liability and Product Recall
   
 Research and Development Costs
   23




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##### Table of Contents



Human Resources
  
 Corporate Information
   
 Item 1A.
    
    RISK FACTORS
  Visudyne is currently our only commercial product. Accordingly, any decrease in sales of Visudyne
would harm our business.
  
    
    product manufacturing or supply interruptions or recalls,
 
    
    the development of competitive products by other companies,
 
    
    developing and maintaining effective sales and marketing capabilities,
 
    
    marketing or pricing actions by our competitors or regulatory authorities,
 
    
    changes in the reimbursement by third-party payors,
 
    
    changes in or withdrawal of regulatory approval for or the labelling of Visudyne,
 
    
    the majority of the laser devices used in Visudyne therapy have reached, or are nearing,
the end of their lifecycle,
 
    
    declining commercial supply and technical support for laser devices used in Visudyne
therapy,
 
    
    disputes relating to patents or other intellectual property rights,
 
    
    disputes with our licensees, and
 
    
    changes in laws and regulations that adversely affect our ability to market Visudyne.
  24




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Receipt of a significant amount of the consideration for the sale of QLT USA, including the Eligard
product line, is largely dependent on the success of Eligard in the U.S., Canada and in Europe,
which is not within our control. If we do not receive all or a material portion of the contingent
consideration, our cash position will suffer. Furthermore, an unfavorable change in the fair value
of our contingent consideration as a result of changes in estimates related to amount and timing of
future cash flows, and the applicable discount rate may adversely impact our earnings.
  
    
    lower than expected Eligard sales,
 
    
    product manufacturing or supply interruptions or recalls,
 
    
    the development of competitive products, including generics, by other companies that
compete with Eligard,
 
    
    marketing or pricing actions by competitors or regulatory authorities,
 
    
    changes in the reimbursement or substitution policies of third-party payors,
 
    
    changes in or withdrawal of regulatory approvals,
 
    
    disputes relating to patents or other intellectual property rights,
 
    
    disputes with Eligard marketing licensees, and
 
    
    changes in laws or regulations that adversely affect the ability to market Eligard.
   The continued commercialization of Visudyne in the U.S. is substantially dependent on our ability
to develop and maintain effective sales and marketing capabilities. If we are unable to develop and
maintain effective sales and marketing capabilities, our ability to generate revenues from the sale
of Visudyne in the U.S. may be harmed.
   25




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The marketing and sale of Visudyne in the U.S. is subject to extensive regulation and aggressive
government enforcement. Failure to comply with applicable laws and regulations could have a
material adverse effect on our business.
  Our commercial success depends in part on the success of third parties to market our products,
including Visudyne.
   Our revenues depend on coverage and reimbursement from third party payors and pricing, and if third
party payors reduce or refuse coverage or reimbursement or if prices are reduced, the use and sales
of our products will suffer, we may not increase our market share, and our revenues and
profitability will suffer.
   26




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27




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In the field of PDT, Visudyne therapy is dependent on the continued supply of, and technical
support for, complementary third-party laser light delivery devices.
   Product development is a long, expensive and uncertain process,
and we may terminate one or more of our development programs.  If we terminate one or more of our development programs our prospects
may suffer and we may incur significant expenses that could adversely affect our financial condition or results of operations.
  Our current and planned clinical trials may not begin on schedule, or at all, and may not be
completed on schedule, or at all.
  
    
    the FDA or other regulatory authorities do not permit us to proceed with a clinical trial
protocol or a clinical trial, or place a clinical trial on hold;
 
    
    the data and safety monitoring committee of a clinical trial recommends that a trial be
placed on hold or suspended;
 
    
    patients do not enroll in clinical trials at the rate we expect;
  28




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
    
    patients are not followed-up at the rate we expect;
 
    
    patients experience adverse side effects or events related to our products;
 
    
    patients die or suffer adverse medical effects during a clinical trial for a variety of
reasons, including the advanced stage of their disease or medical problems, which may or may
not be related to our product candidates;
 
    
    regulatory inspections of our clinical trials or manufacturing facilities, which may,
among other things, require us to undertake corrective action or suspend or terminate our
clinical trials if investigators find us not to be in compliance with regulatory
requirements;
 
    
    investigator sites are unable to commence a clinical trial on schedule or at all for
reasons beyond our control;
 
    
    the failure of our manufacturing process to produce finished products which conform to
design and performance specifications;
 
    
    changes in governmental regulations or administrative actions;
 
    
    the interim results of clinical trials are inconclusive or negative;
 
    
    our clinical trial expenditures are constrained by our budgetary considerations; or
 
    
    our trial design, although approved, is inadequate for demonstration of safety and/or
efficacy.
   If our process related to product development, and in particular the development of our punctal
plug drug delivery technology and synthetic retinoid, does not result in an approved and
commercially successful product, our business could be adversely affected.
    29




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Our success depends largely on the successful commercialization of our technology.
  
    
    Future clinical trial results may show that some or all of our technology is not safe or
effective;
 
    
    We and our strategic collaborators may face significant or unforeseen difficulties in
manufacturing our products. These difficulties may become apparent when we or our strategic
collaborators manufacture the products on a small scale for clinical trials and regulatory
approval or may only become apparent when scaling-up the manufacturing to commercial scale;
 
    
    We may need to obtain licenses under third-party patents which can be costly, or may not
be available at all;
 
    
    We may not be able to formulate products in a manner in which they are marketable or
subject to appropriate reimbursement;
 
    
    Even if our products are successfully developed, receive all necessary regulatory
approvals and are commercially produced, there is no guarantee that there will be market
acceptance of them or that they will not cause unanticipated side effects in patients; or
 
    
    Intellectual property rights could be challenged by third parties or we could be found to
be infringing on intellectual property rights of third parties.
   We face intense competition, which may limit our commercial opportunities and our ability to
generate revenues.
     30




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The future growth of our business may depend in part on our ability to successfully identify,
acquire on favorable terms, and assimilate technologies, products or businesses.
  
    
    difficulties in and costs associated with assimilating the operations, technologies,
personnel and products of an acquired business;
 
    
    assumption of known or unknown liabilities or other unanticipated events or
circumstances;
 
    
    acquired / in-licensed technology may not be successfully developed and commercialized;
 
    
    the potential disruption to our ongoing business; and
 
    
    the potential negative impact on our earnings and cash position.
   We depend on key management, scientific and technical personnel, and if we do not attract and
retain these key personnel, our business could be adversely
affected.
  We may become involved in legal proceedings from time to time and if there is an adverse outcome in
our litigation or other legal actions, our business may be harmed.
    Our commercial success depends in part on our ability and the ability of our licensors to obtain
and maintain patent protection on our products and technologies, to preserve trade secrets, and to
operate without infringing the proprietary rights of others.
   31




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If our supply of Visudyne does not match demand, our business and future revenue could be
materially adversely impacted.
     32




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We rely on third-party manufacturers and specialty wholesale distributors and other service
providers for the manufacture and distribution of Visudyne. Any difficulties with such third
parties could delay future revenues from our sales of Visudyne.
       If we fail to comply with ongoing regulatory requirements, it will materially harm our business.
    33




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Visudyne or our product candidates may exhibit adverse side effects that prevent their widespread
use or that necessitate withdrawal from the market.
  Our use of hazardous materials exposes us to the risk of environmental liabilities, and we may
incur substantial additional costs to comply with environmental laws.
  We have undertaken significant strategic and organizational changes, including the divestment of
certain core and non-core assets, to focus on the ocular therapeutic area. These changes and the
transactions we completed carry certain risks which could have a material adverse effect on our
business.
 ®
   34




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Our provision for income taxes and effective income tax rate may vary significantly and may
adversely affect our results of operations and cash resources.
   If we do not sustain profitability, our stock price may decline.
  Our operating results may fluctuate, which may cause our financial results to be below expectations
and the market price of our securities to decline.
  
    
    lower than expected revenues from sales of Visudyne;
 
    
    changes in pricing, pricing strategies or reimbursement levels for Visudyne;
 
    
    seasonal fluctuations, particularly in the third quarter due to decreased demand for
Visudyne in the summer months;
 
    
    high levels of marketing and advertising expenses for Visudyne or the launch of
additional competitors to Visudyne;
 
    
    fluctuations in currency exchange rates;
 
    
    higher than expected operating expenses as a result of increased costs associated with
the development or commercialization of Visudyne and our product candidates;
 
    
    costs of operating an internal sales and marketing team and infrastructure for the
distribution, sale and marketing of Visudyne in the U.S.; and
 
    
    increased operating expenses as a result of product, technology or other acquisitions or
business combinations.
  35




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The market price of our common shares is extremely volatile and the value of an investment in our
common shares could decline.
  
    
    announcements of technological innovations or new products by us or our competitors;
 
    
    results of our research and development programs;
 
    
    litigation commenced against us;
 
    
    regulatory developments or delays concerning our products;
 
    
    quarterly variations in our financial results;
 
    
    business and product market cycles;
 
    
    fluctuations in customer requirements;
 
    
    the availability and utilization of manufacturing capacity and our ability to continue
to supply Visudyne,
 
    
    the timing and amounts of contingent consideration or royalties paid to us by third
parties; and
 
    
    issues with the safety or effectiveness of our products.
  We may need additional capital in the future, and our prospects for obtaining it are uncertain .
  We believe that we were a passive foreign investment company for the taxable year ended December
31, 2010, which could result in adverse United States federal income tax consequences to U.S.
holders and may deter certain U.S. investors from purchasing our stock
which may have an adverse impact on our stock price.
   36




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If we fail to manage our exposure to global financial, securities market and foreign exchange risk
successfully, our operating results and financial statements could be materially impacted.
    
 Item 1B.
    
    UNRESOLVED STAFF COMMENTS
  
 Item 2.
    
    PROPERTIES
   
 Item 3.
    
    LEGAL PROCEEDINGS
  
 Item 4.
    
    RESERVED
  37




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PART II
 
 Item 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
 Common Share Information
  The Toronto Stock Exchange
    
    
    The NASDAQ Stock MarketHigh
    
    
    Low
    
    
    High
    
    
    Low(CAD$)
    
    
    (CAD$)
    
    
    (U.S.$)
    
    
    (U.S.$)2010Fourth Quarter
    
    $
    7.33
    
    
    $
    5.60
    
    
    $
    7.33
    
    
    $
    5.43Third Quarter
    
    
    6.56
    
    
    
    5.73
    
    
    
    6.41
    
    
    
    5.47Second Quarter
    
    
    6.68
    
    
    
    5.31
    
    
    
    6.46
    
    
    
    5.25First Quarter
    
    
    5.46
    
    
    
    4.77
    
    
    
    5.32
    
    
    
    4.482009Fourth Quarter
    
    $
    5.34
    
    
    $
    3.53
    
    
    $
    5.10
    
    
    $
    3.36Third Quarter
    
    
    4.76
    
    
    
    2.38
    
    
    
    4.42
    
    
    
    2.05Second Quarter
    
    
    2.84
    
    
    
    2.23
    
    
    
    2.49
    
    
    
    1.77First Quarter
    
    
    3.12
    
    
    
    1.82
    
    
    
    2.65
    
    
    
    1.41
    38




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Share Price Performance Graph
  
 Dec. 30,
    
    
    Dec. 29,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010QLT Total Return
    
    
    100.00
    
    
    
    133.02
    
    
    
    69.50
    
    
    
    37.89
    
    
    
    77.99
    
    
    
    115.25S&P/TSX Composite Index
    
    
    100.00
    
    
    
    114.28
    
    
    
    143.97
    
    
    
    76.13
    
    
    
    115.31
    
    
    
    139.45NASDAQ Biotechnology Index
    
    
    100.00
    
    
    
    101.02
    
    
    
    105.65
    
    
    
    92.31
    
    
    
    106.74
    
    
    
    122.76
   Dividend Policy
   39




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Equity Plans
  Recent Sales of Unregistered Securities
  Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    ISSUER PURCHASES OF EQUITY SECURITIESTotal Number of
    
    
    Maximum NumberTotal
    
    
    
    
    
    
    Shares Purchased as
    
    
    of Shares that MayNumber of
    
    
    Average
    
    
    Part of Publicly
    
    
    Yet Be PurchasedShares
    
    
    Price Paid
    
    
    Announced Plans or
    
    
    Under the Plans orPeriod
    
    Purchased
    
    
    per Share
    
    
    Programs
    
    
    ProgramsOctober 1, 2010 through
October 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    955,088
    (1)November 1, 2010 through
November 30, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    December 1, 2010 through
December 31, 2010
    
    
    22,300
    
    
    $
    6.78
    
    
    
    22,300
    
    
    
    3,592,985Total
    
    
    22,300
    
    
    
    
    
    
    
    22,300
    
    
    
    3,592,985
 (1)
    
    No purchases were made under the previous normal course issuer bid from October 1,
2010 to its expiry on November 2, 2010.  40




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##### Table of Contents



Exchange Controls and Other Limitations Affecting Holders of Common Shares
    (a)
    
    acquisition of common shares by a person in the ordinary course of that persons
business as a trader or dealer in securities;
 (b)
    
    acquisition of control of the Company in connection with the realization of security
granted for a loan or other financial assistance and not for any purpose related to the
provisions of the Investment Act; and
 (c)
    
    acquisition of control of the Company by reason of an amalgamation, merger,
consolidation or corporate reorganization following which the ultimate direct or indirect
control in fact of the Company, through the ownership of voting interests, remains
unchanged.
  Budget Implementation Act, 2009
  41




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##### Table of Contents



Item 6.
    
    SELECTED FINANCIAL DATA
 Annual Financial Data
 Year Ended December 31,
    
    2010(1)
    
    
    2009(2)
    
    
    2008(3)
    
    
    2007(4)
    
    
    2006(5)(In thousands of U.S. dollars except per share information)CONSOLIDATED STATEMENT OF OPERATIONS DATATotal revenues
    
    $
    44,697
    
    
    $
    42,106
    
    
    $
    48,312
    
    
    $
    67,746
    
    
    $
    129,370Research and development expenses
    
    
    33,485
    
    
    
    28,590
    
    
    
    29,568
    
    
    
    37,510
    
    
    
    39,182Purchase of in-process research and
development
    
    
    
    
    
    
    7,517
    
    
    
    
    
    
    
    42,865
    
    
    
    (Loss) income from continuing operations
    
    
    (17,539
    )
    
    
    (36,220
    )
    
    
    (9,247
    )
    
    
    (125,537
    )
    
    
    39,898Net (loss) income
    
    
    (17,539
    )
    
    
    99,434
    
    
    
    134,891
    
    
    
    (109,997
    )
    
    
    (101,605
    )Basic and diluted net (loss) income
per common share:Continuing operations
    
    
    (0.33
    )
    
    
    (0.64
    )
    
    
    (0.12
    )
    
    
    (1.68
    )
    
    
    0.48Discontinued operations
    
    
    
    
    
    
    2.41
    
    
    
    1.93
    
    
    
    0.21
    
    
    
    (1.68
    )Net (loss) income
    
    
    (0.33
    )
    
    
    1.77
    
    
    
    1.81
    
    
    
    (1.47
    )
    
    
    (1.20
    )CONSOLIDATED BALANCE SHEET DATACash and cash equivalents
    
    $
    209,478
    
    
    $
    188,114
    
    
    $
    165,395
    
    
    $
    30,564
    
    
    $
    108,843Short-term investment securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96,167
    
    
    
    265,373Working capital
    
    
    255,495
    
    
    
    257,610
    
    
    
    281,966
    
    
    
    49,583
    
    
    
    323,028Total assets
    
    
    387,783
    
    
    
    419,637
    
    
    
    491,758
    
    
    
    548,987
    
    
    
    639,106Convertible debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    172,500
    
    
    
    172,500Total shareholders equity
    
    
    372,944
    
    
    
    404,454
    
    
    
    343,230
    
    
    
    219,823
    
    
    
    303,214
   42




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##### Table of Contents



Quarterly Financial Data (6)
  Three Months Ended
    
    December 31
    
    
    September 30
    
    
    June 30
    
    
    March 31(In thousands of U.S. dollars except per share information)2010(1)Total revenues
    
    
    10,020
    
    
    
    8,585
    
    
    
    12,376
    
    
    
    13,716Gross profit
    
    
    6,629
    
    
    
    6,716
    
    
    
    8,984
    
    
    
    7,164Research and development expenses
    
    
    10,709
    
    
    
    8,101
    
    
    
    7,329
    
    
    
    7,347Net (loss) income from continuing operations
    
    
    (19,230
    )
    
    
    (697
    )
    
    
    (1,015
    )
    
    
    3,403Net (loss) income
    
    
    (19,230
    )
    
    
    (697
    )
    
    
    (1,015
    )
    
    
    3,403Basic and diluted net (loss) income per
common shareContinuing operations
    
    
    (0.38
    )
    
    
    (0.01
    )
    
    
    (0.02
    )
    
    
    0.06Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income
    
    
    (0.38
    )
    
    
    (0.01
    )
    
    
    (0.02
    )
    
    
    0.062009(2)Total revenues
    
    
    10,810
    
    
    
    8,785
    
    
    
    10,728
    
    
    
    11,783Gross profit
    
    
    3,305
    
    
    
    6,583
    
    
    
    3,588
    
    
    
    8,432Research and development expenses
    
    
    8,105
    
    
    
    7,375
    
    
    
    7,225
    
    
    
    5,886Net (loss) income from continuing operations
    
    
    (36,091
    )
    
    
    2,236
    
    
    
    896
    
    
    
    (3,261
    )Net income
    
    
    80,582
    
    
    
    8,921
    
    
    
    8,629
    
    
    
    1,301Basic and diluted net income (loss) per
common shareContinuing operations
    
    
    (0.67
    )
    
    
    0.04
    
    
    
    0.02
    
    
    
    (0.05
    )Discontinued operations
    
    
    2.15
    
    
    
    0.12
    
    
    
    0.14
    
    
    
    0.07Net income
    
    
    1.49
    
    
    
    0.16
    
    
    
    0.16
    
    
    
    0.02
 (1)
    
    For the year ended December 31, 2010, our net loss reflects a tax provision of $10.9 million
which was primarily due to a net increase in our valuation allowance resulting from lack of
sufficient evidence available to support our continued recognition of certain future tax
benefits.(2)
    
    On October 1, 2009, the Eligard product line was divested as part of the sale of all of the
shares of our U.S. subsidiary, QLT USA. See Item 1. Business, Eligard®Contingent
Consideration. We recognized a pre-tax gain of $107.4 million related to this transaction
within discontinued operations for 2009.(3)
    
    Assets related to Aczone were sold by QLT USA to Allergan Sales, LLC in July 2008 for cash
consideration of $150.0 million, pursuant to the terms of a purchase agreement executed on
June 6, 2008. We recognized a pre-tax gain of $118.2 million related to this transaction
within discontinued operations for 2008.On August 25, 2008, QLT USA entered into an exclusive license agreement with Reckitt for QLT
USAs Atrigel sustained-release drug delivery technology, except for certain rights being
retained by us and our prior licensees, including rights retained for use with the Eligard
products. We recognized a pre-tax gain of $16.7 million related to this transaction within
discontinued operations for 2008.On August 29, 2008, we completed the sale of our land and building comprising our corporate
headquarters and the adjacent undeveloped parcel of land in Vancouver to Discovery Parks for
CAD$65.5 million. We recognized a pre-tax gain of $21.7 million related to this transaction in
our results for 2008.As a result of an evaluation of QLT USAs prior earnings history, expected future earnings, and
gains recorded on the divestiture of Aczone and out-licensing of Atrigel, we concluded that a
valuation allowance was no longer required on substantially all of QLT USAs tax assets. We
recognized a reduction of our valuation allowance of $54.7 million within discontinued
operations and $4.8 million within continuing operations in the third quarter of 2008.  43




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##### Table of Contents



(4)
    
    In July 2007, the U.S. District Court for the District of Massachusetts entered judgment
in the lawsuit brought against us by MEEI in connection with U.S. patent no. 5,789,349. The
District Court found that we were liable under Massachusetts state law for unfair trade
practices, but that such violation was not knowing or willful, and determined that we should
pay MEEI 3.01% of past, present and future worldwide Visudyne net sales, plus interest and
legal fees. As a result, we recorded a charge of $110.2 million in our results for 2007.On October 18, 2007, we completed the acquisition of ForSight Newco II, Inc. (now QLT Plug
Delivery, Inc.) for aggregate consideration of $42.3 million. The acquired in-process R&D
charge of $42.9 million related to the proprietary ocular punctal plug drug delivery system in
development.(5)
    
    On February 9, 2007, QLT USA and Sanofi-aventis entered into a Settlement, Release and
Patent License to settle the TAP Pharmaceutical Products Inc. litigation, and without
admitting liability, QLT USA paid $112.5 million and Sanofi-aventis paid $45.0 million, for an
aggregate settlement amount of $157.5 million. As a result of this settlement, we recorded a
charge of $112.5 million within discontinued operations in 2006.(6)
    
    The basic and diluted income (loss) per share are determined separately for each quarter.
Consequently, the sum of the quarterly amounts may differ from the annual amounts disclosed in
the consolidated financial statements as a result of using different weighted average numbers
of shares outstanding.  44




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##### Table of Contents



Item 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
   
    
    levels of future sales of Visudyne®, including the impact of competition,
loss of patent protection and limited commercial supply and technical support for laser
devices required for Visudyne therapy;
 
    
    our ability to effectively market and sell Visudyne in the U.S.;
 
    
    the ability of Novartis Pharma AG (Novartis) to effectively market and sell Visudyne
in countries outside the U.S.;
 
    
    our continued ability to supply Visudyne to our customers;
 
    
    our expectations regarding Visudyne label changes and reimbursement;
 
    
    receipt of all or part of the contingent consideration pursuant to the stock purchase
agreement entered into with TOLMAR Holding, Inc. (Tolmar), which is based on anticipated
levels of future sales of Eligard®;
 
    
    unanticipated future operating results;
 
    
    our reliance on contract manufacturers and suppliers to manufacture Visudyne at
competitive prices and in accordance with the U.S. Food and Drug Administration and other
local and foreign regulatory requirements as well as our product specifications;
 
    
    our reliance on our specialty wholesale distributors to distribute Visudyne in
accordance with regulatory requirements and the terms of our agreements;
 
    
    our expectations regarding future tax liabilities as a result of our recent
restructuring transactions, changes in estimates of prior years tax items and results of
tax audits by tax authorities;
 
    
    the scope, validity and enforceability of our and third party intellectual property
rights;
 
    
    our ability to successfully develop our programs, including our punctal plug drug
delivery system and synthetic retinoid compound;
 
    
    the anticipated timing, cost and progress of the development of our technology and
clinical trials;
 
    
    the anticipated timing of regulatory submissions for products and product candidates;
 
    
    the anticipated timing for receipt of, and our ability to maintain, regulatory approvals
for products and product candidates;
 
    
    the anticipated timing for receipt of, and our ability to maintain, reimbursement
approvals for our products and product candidates, including reimbursement under U.S.
governmental and private insurance programs; and
 
    
    existing governmental laws and regulations and changes in, or the failure to comply
with, governmental laws and regulations.
   45




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##### Table of Contents



Overview
  Products, Revenues and Other Sources of Funds
   ® ®
 Research and Development
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   46




---



##### Table of Contents



Reporting Currency and Functional Currency Change
  Revenue Recognition
  Net Product Revenue
   Vendor Charge-backs
  Discounts
   47




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##### Table of Contents



Medicaid Rebates
  Distributor Fees
  Product Returns
   Royalties
  Discontinued Operations
  Inventory and Cost of Sales
   48




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##### Table of Contents



Annual Production Volume.
 Overhead Allocation.
 Provisions for Non-completion of Inventory and Obsolete Inventory.
   Discontinued Operations
  Stock-Based Compensation
    49




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##### Table of Contents



Research and Development
  Income Taxes
    50




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##### Table of Contents



Discontinued Operations and Assets Held for Sale
   Contingent Consideration
   Recently Issued and Recently Adopted Accounting Standards
  COMPARISON OF YEARS ENDED DECEMBER 31, 2010 AND 2009
  Revenues
 Net Product Revenue
   51




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##### Table of Contents



Year ended(In thousands of U.S. dollars)
    
    December 31, 2010U.S. Visudyne sales by QLT
    
    $
    22,597Visudyne sales to Novartis
    
    
    6,988Add: Royalties reimbursed to QLT(1)
    
    
    1,374Add: Other costs reimbursed to QLT(2)
    
    
    134Net product revenue from Visudyne sales
    
    $
    31,093
  Year ended(In thousands of U.S. dollars)
    
    December 31, 2009Worldwide Visudyne sales by Novartis
    
    $
    105,657Less: Marketing and distribution costs(3)
    
    
    (34,346
    )Less: Inventory costs(4)
    
    
    (6,031
    )Less: Royalties to third parties(5)
    
    
    (2,276
    )Novartis net proceeds from Visudyne sales
    
    $
    63,004QLTs 50% share of Novartis net proceeds from Visudyne sales
    
    $
    31,502Add: Advance on inventory costs from Novartis(6)
    
    
    5,608Add: Royalties reimbursed to QLT(1)
    
    
    2,272Add: Other costs reimbursed to QLT(2)
    
    
    2,724Net product revenue from Visudyne sales
    
    $
    42,106
 (1)
    
    Royalties reimbursed to QLTFor 2010, this represents amounts we receive from Novartis in reimbursement for actual royalty
expenses we incur with third party licensors for sales of Visudyne outside of the U.S. For
2009, this represented the amounts we received from Novartis in reimbursement for the actual
royalty expenses we incurred with third party licensors on worldwide Visudyne sales.(2)
    
    Other costs reimbursed to QLTFor 2010, this represents certain administrative expenses we incur on behalf of Novartis under
the Amended PDT Agreement. For 2009, this represented reimbursement by Novartis to us of our
portion of the marketing and distribution costs described in (3) below. Our marketing and
distribution costs included marketing support, legal and administrative expenses that we
incurred in support of Visudyne sales.(3)
    
    Marketing and distribution costsThis represented Novartis cost of marketing, promoting, and distributing Visudyne, as well as
certain specified costs incurred and paid for by QLT, determined in accordance with the PDT
Agreement between QLT and Novartis. The costs incurred by Novartis were related to its sales
force, advertising expenses, marketing, and certain administrative overhead costs. The costs
incurred by us included marketing support, legal and administrative expenses that we incurred
in support of Visudyne sales.(4)
    
    Inventory costsThis represented Novartis cost of goods sold related to Visudyne. It included the cost
of bulk Visudyne we shipped to Novartis and our previous provisions for certain excess or
obsolete inventory, losses on manufacturing purchase commitments, plus Novartis packaging and
labelling costs, freight, custom duties and inventory obsolescence.  52




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##### Table of Contents



(5)
    
    Royalties to third partiesThis represented the royalty expenses we incurred and charged to Novartis pursuant to the PDT
Agreement between QLT and Novartis. The amounts were calculated by us based on specified
royalty rates from license agreements with our licensors of certain Visudyne patent rights.(6)
    
    Advance on inventory costs from NovartisThis represented the amount that Novartis advanced to us for shipments of bulk Visudyne and
reimbursement for inventory obsolescence. The price of the Visudyne shipments was determined
based on the PDT Agreement between QLT and Novartis and represented our actual costs of
producing Visudyne.   Year ended
    
    
    Year ended(In thousands of U.S. dollars)
    
    December 31, 2010
    
    
    December 31, 2009U.S.
    
    $
    22,597
    
    
    $
    30,809Europe
    
    
    26,243
    
    
    
    29,639Rest of World
    
    
    41,778
    
    
    
    45,209Worldwide
    
    $
    90,618
    
    
    $
    105,657
 Year ended
    
    
    Year endedDecember 31, 2010
    
    
    December 31, 2009U.S.
    
    
    25
    %
    
    
    29
    %Europe
    
    
    29
    %
    
    
    28
    %Rest of World
    
    
    46
    %
    
    
    43
    %Worldwide
    
    
    100
    %
    
    
    100
    %
  53




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##### Table of Contents




    
    we own and license additional U.S. patents covering lipid-based formulations of verteporfin
and approved uses of Visudyne that provide additional patent protection for Visudyne and do
not expire until, at the latest, 2015 and 2016, respectively;
 
    
    in Europe and Japan, the basic patents covering the verteporfin compound do not expire
until 2014 and additional patents and patent applications relating to lipid-based formulations
of verteporfin and approved uses of Visudyne do not expire until, at the latest, 2016 and
2017, respectively; and
 
    
    relative to the sale of many other biopharmaceutical products, Visudyne does not generate
significant revenue and the manufacturing process is complex, which may make Visudyne a less
desirable generic target.
 Royalties
  Costs and Expenses
 Cost of Sales
  Research and Development
   
    
    inability to design devices to function as expected;
    
    delays or inability to formulate an active ingredient in an appropriate concentration to
deliver effective doses of a drug;
    
    changes in the regulatory environment;
    
    introduction of competing technologies and treatments;
    
    unexpected safety issues;
    
    patent application, maintenance and enforcement issues;
    
    inability to operate without infringing the proprietary rights of others;
    
    changes in the commercial marketplace;
    
    difficulty enrolling patients in, or keeping them in, our clinical studies;
    
    trial design is inadequate for demonstration of safety and/or efficacy;
  54




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##### Table of Contents




    
    delays in study progression, including study site, Institutional Review Board and regulatory
delays;
    
    positive study progression and results;
    
    failure to meet favorable study endpoints;
    
    inability to develop cost effective manufacturing methods that comply with regulatory
standards;
    
    inability to attract personnel or retain personnel with expertise required by our
development program;
    
    inability to manufacture sterile supplies necessary for composition of products;
    
    uncertainties related to collaborative arrangements;
    
    environmental risks; and
    
    other factors referenced under Item 1A, Risk Factors.
   (In thousands of U.S. dollars)
    
    2010
    
    
    2009
    
    
    2008OcularPunctal Plug Drug Delivery System
    
    $
    20,752
    
    
    $
    23,254
    
    
    $
    16,397QLT091001
    
    
    9,483
    
    
    
    1,918
    
    
    
    2,531QLT091568
    
    
    1,716
    
    
    
    
    
    
    
    Visudyne
    
    
    1,277
    
    
    
    2,844
    
    
    
    6,216Other
    
    
    
    
    
    
    
    
    
    
    1,279Ocular  Total
    
    
    33,228
    
    
    
    28,016
    
    
    
    26,423Dermatology and Other
    
    
    257
    
    
    
    574
    
    
    
    3,145$
    33,485
    
    
    $
    28,590
    
    
    $
    29,568
   Product/Indication
    
    Status/Development StageLatanoprost Punctal Plug Drug Delivery System (L-PPDS)Glaucoma and Ocular Hypertension
    
    Phase II study ongoingOlopatadine Punctal Plug Drug Delivery System (O-PPDS)Allergic Conjunctivitis
    
    Phase II proof-of-principle study completed in February 2011. Clinical development is
suspended pending the outcome of the L-PPDS Phase II study.QLT091001Leber Congenital Amaurosis (LCA) and Retinitis Pigmentosa (RP)
    
    Phase Ib proof-of-concept study ongoing
   55




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##### Table of Contents



Selling, General and Administrative Expenses
  Litigation
  In-process Research and Development
  Restructuring Charge
  Investment and Other Income (Expense)
 Net Foreign Exchange Gains (Losses)
  Interest Income
  Interest Expense
   56




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##### Table of Contents



Fair Value Change in Contingent Consideration
   Other Gains
  Income from Discontinued Operations
  Income Taxes
     57




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COMPARISON OF YEARS ENDED DECEMBER 31, 2009 AND 2008
  Revenues
 Net Product Revenue
  Year endedDecember 31,(In thousands of U.S. dollars)
    
    2009
    
    
    2008Visudyne sales by Novartis
    
    $
    105,657
    
    
    $
    141,865Less: Marketing and distribution costs(1)
    
    
    (34,346
    )
    
    
    (62,213
    )Less: Inventory costs(2)
    
    
    (6,031
    )
    
    
    (11,153
    )Less: Royalties to third parties(3)
    
    
    (2,276
    )
    
    
    (3,040
    )Novartis net proceeds from Visudyne sales
    
    $
    63,004
    
    
    $
    65,459QLTs 50% share of Novartis net proceeds from Visudyne sales
    
    $
    31,502
    
    
    $
    32,730Add: Advance on inventory costs from Novartis
(4)
    
    
    5,608
    
    
    
    7,142Add: Royalties reimbursed to QLT(5)
    
    
    2,272
    
    
    
    3,090Add: Other costs reimbursed to QLT(6)
    
    
    2,724
    
    
    
    5,350Revenue from Visudyne sales
    
    $
    42,106
    
    
    $
    48,312
 (1)
    
    Marketing and distribution costsThis represented Novartis cost of marketing, promoting, and distributing Visudyne, as well as
certain specified costs incurred and paid for by QLT, determined in accordance with the PDT
Agreement between QLT and Novartis. The costs incurred by Novartis were related to its sales
force, advertising expenses, marketing and certain administrative overhead costs. The costs
incurred by us included marketing support, legal and administrative expenses that we incurred
in support of Visudyne sales.(2)
    
    Inventory costsThis represented Novartis cost of goods sold related to Visudyne. It included the cost of
bulk Visudyne we shipped to Novartis and our provisions for certain excess or obsolete
inventory, losses on manufacturing purchase commitments, plus Novartis packaging and
labelling costs, freight and custom duties.(3)
    
    Royalties to third partiesThis represented the royalty expenses we incurred and charged to Novartis pursuant to the PDT
Agreement between QLT and Novartis. The amounts were calculated by us based on specified
royalty rates from existing license agreements with our licensors of certain Visudyne patent
rights.(4)
    
    Advance on inventory costs from NovartisThis represented the amount that Novartis advanced to us for shipments of bulk Visudyne and
reimbursement for inventory obsolescence. The price of the Visudyne shipments was determined
based on the PDT Agreement and represented our actual costs of producing Visudyne.(5)
    
    Royalties reimbursed to QLTThis was related to item (3) above and represented the amounts we received from Novartis in
reimbursement for the actual royalty expenses we owed to third party licensors.(6)
    
    Other costs reimbursed to QLTThis represented reimbursement by Novartis to us of our portion of the marketing and
distribution costs described in (1) above. Our marketing and distribution costs included
marketing support, legal and administrative expenses that we incurred in support of Visudyne
sales.  58




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##### Table of Contents



Costs and Expenses
 Cost of Sales
   Research and Development
  Selling, General and Administrative Expenses
  Litigation
    59




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Gain on Sale of Long-Lived Asset
  In-process Research and Development
  Restructuring Charge
  Investment and Other Income (Expense)
 Net Foreign Exchange Gains (Losses)
  Interest Income
  Interest Expense
   Fair Value Change in Contingent Consideration
   60




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Income (loss) from Discontinued Operations
  Income Taxes
    LIQUIDITY AND CAPITAL RESOURCES
 General
   Sources and Uses of Cash
   61




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
    
    A negative operating cash flow variance from lower cash receipts from product sales and
royalties of $70.0 million primarily due to the divestiture of the Eligard product line as
part of the sale of QLT USA;
 
    
    A negative operating cash flow variance from lower net tax refunds of $38.1 million;
 
    
    A negative operating cash flow variance from lower foreign exchange gains of $12.7
million;
 
    
    A negative operating cash flow variance from lower investment and other income of $1.5
million;
 
    
    A positive operating cash flow variance from lower restructuring costs of $0.5 million;
 
    
    A positive cash flow variance from settlement of the MEEI judgment resulting in the
release of the appeal bond and an additional $2.2 million payment in 2009;
 
    
    A positive cash flow variance from the purchase in 2009 of in-process research and
development of $7.5 million;
 
    
    A positive operating cash flow variance from proceeds related to the fair value change
in contingent consideration of $13.2 million;
 
    
    A positive cash flow variance from litigation settlement primarily resulting from the
2009 payment to MGH of $20.0 million; and
 
    
    A positive operating cash flow variance from lower operating and inventory related
expenditures of $26.7 million primarily due to the divestiture of the Eligard product line
as part of the sale of QLT USA.
   Interest and Foreign Exchange Rates
     62




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##### Table of Contents



Contractual Obligations
  (in thousands of U.S. dollars)
    
    Payments due by periodContractual Obligations(1)
    
    Total
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    More than 5 yearsOperating Leases (2)
    
    $
    5,854
    
    
    $
    1,930
    
    
    $
    3,778
    
    
    $
    146
    
    
    $
    Purchase Obligations (3)
    
    
    11,834
    
    
    
    5,599
    
    
    
    6,139
    
    
    
    96
    
    
    
    Total
    
    $
    17,688
    
    
    $
    7,529
    
    
    $
    9,917
    
    
    $
    242
    
    
    $
    
 (1)
    
    At December 31, 2010, we had approximately $1.7 million of long-term liabilities associated
with uncertain tax positions. At this time, we are unable to make a reasonably reliable
estimate of the timing of future payments, if any, due to uncertainties in the timing of
future outcomes of tax audits that may arise. As a result, uncertain tax liabilities are not
included in the table above.(2)
    
    In conjunction with the sale of our land and building, in September 2008 we entered into a
five-year operating lease with Discovery Parks for office and laboratory space. In connection
with our U.S. operations, in May 2009 we entered into a four-year operating lease with AMB
Property, L.P, to support certain of our commercial and development operations. Operating
leases comprise our long-term leases of office space, photocopiers and motor vehicles.(3)
    
    Purchase obligations comprise $5.1 million in minimum purchase requirements under our
agreement with Nippon Fine Chemical Co. Ltd. for the supply of an intermediate material used
in the production of Visudyne and $6.7 million in other outstanding purchase commitments
related to the normal course of business.
 Off-Balance Sheet Arrangements
   CERTAIN CANADIAN AND U.S. FEDERAL INCOME TAX INFORMATION FOR U.S. RESIDENTS
  Canadian Federal Tax Information
 Income Tax Act
  63




---



##### Table of Contents



Canada-U.S. Income Tax Convention (1980)
   U.S. Federal Income Tax Information
   U.S. Holders
   64




---



##### Table of Contents



Sale or Other Disposition of Common Shares
   Distributions on Common Shares
    Passive Foreign Investment Company
  The Company believes that it qualified as a PFIC for 2008, 2009 and 2010. Please be aware that the
Companys status as a PFIC can have significant adverse tax consequences for U.S. Holders.
 pro rata
  65




---



##### Table of Contents



(a)
    
    Excess distributions by the Company are subject to the following special
rules. An excess distribution generally is the excess of the amount a PFIC distributes
to a shareholder during a taxable year over 125% of the average amount it distributed
to the shareholder during the three preceding taxable years or, if shorter, the part of
the shareholders holding period before the taxable year. Distributions with respect
to the common shares made by the Company during the taxable year to a U.S. Holder that
are excess distributions must be allocated ratably to each day of the U.S. Holders
holding period. The amounts allocated to the current taxable year and to taxable years
prior to the first year in which the Company was classified as a PFIC are included as
ordinary income in a U.S. Holders gross income for that year. The amount allocated to
each other prior taxable year is taxed as ordinary income at the highest tax rate in
effect for the U.S. Holder in that prior year (without offset by any net operating loss
for such year) and the tax is subject to an interest charge at the rate applicable to
deficiencies in income taxes (the special interest charge).
 (b)
    
    The entire amount of any gain realized upon the sale or other disposition of
the common shares will be treated as an excess distribution made in the year of sale or
other disposition and as a consequence will be treated as ordinary income and, to the
extent allocated to years prior to the year of sale or disposition, will be subject to
the special interest charge described above.
 QEF Election pro rata pro rata pro rata
 Deemed Sale Election. The rules
regarding deemed sale elections are very complex. U.S. Holders are strongly urged to consult their
tax advisors about the deemed sale election with regard to the Company and any subsidiaries.
  66




---



##### Table of Contents



Mark-to-Market Election.
 de minimis
 Subsidiary PFICs.
 Recent Legislation.
 THE APPLICABILITY AND CONSEQUENCES OF THE PFIC RULES ARE EXCEEDINGLY COMPLEX. IN ADDITION, THE
FOREGOING SUMMARY DOES NOT ADDRESS ALL OF THE POTENTIAL U.S. FEDERAL INCOME TAX CONSEQUENCES WITH
RESPECT TO PFIC STATUS THAT MAY BE RELEVANT TO A PARTICULAR INVESTOR IN LIGHT OF SUCH INVESTORS
PARTICULAR CIRCUMSTANCES OR THAT MAY BE RELEVANT TO INVESTORS THAT ARE SUBJECT TO SPECIAL TREATMENT
UNDER U.S. FEDERAL INCOME TAX LAW. ACCORDINGLY, INVESTORS ARE STRONGLY URGED TO CONSULT THEIR TAX
ADVISORS REGARDING THE APPLICATION OF THE PFIC RULES TO THEM AND THE ADVISABILITY OF MAKING ANY OF
THE ELECTIONS DESCRIBED ABOVE.
 Outstanding Share Data
   67




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##### Table of Contents



Item 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  68




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
     Internal ControlIntegrated Framework
   
  69




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##### Table of Contents



CONSOLIDATED BALANCE SHEETS
 As at December 31,
    
    2010
    
    
    2009(In thousands of U.S. dollars)ASSETSCurrent assetsCash and cash equivalents
    
    $
    209,478
    
    
    $
    188,114Accounts receivable (Note 4)
    
    
    10,659
    
    
    
    9,465Note receivable (Note 20)
    
    
    
    
    
    
    9,259Current portion of contingent consideration (Note 19)
    
    
    36,520
    
    
    
    33,587Income taxes receivable
    
    
    61
    
    
    
    4,879Inventories (Note 5)
    
    
    3,324
    
    
    
    2,874Current portion of deferred income tax assets (Note 17)
    
    
    3,643
    
    
    
    5,608Current portion of mortgage receivable (Note 6)
    
    
    2,004
    
    
    
    11,466Other (Note 7)
    
    
    2,958
    
    
    
    6,052268,647
    
    
    
    271,304Property, plant and equipment (Note 8)
    
    
    3,035
    
    
    
    2,597Deferred income tax assets (Note 17)
    
    
    2,700
    
    
    
    13,320Mortgage receivable (Note 6)
    
    
    6,013
    
    
    
    Long-term inventories and other assets (Note 5 and 11)
    
    
    13,319
    
    
    
    14,925Contingent consideration (Note 19)
    
    
    94,069
    
    
    
    117,491$
    387,783
    
    
    $
    419,637LIABILITIESCurrent liabilitiesAccounts payable
    
    $
    6,031
    
    
    $
    3,876Income taxes payable
    
    
    716
    
    
    
    Accrued liabilities (Note 12)
    
    
    6,323
    
    
    
    5,574Deferred income tax liability
    
    
    82
    
    
    
    Deferred revenue
    
    
    
    
    
    
    4,24413,152
    
    
    
    13,694Uncertain tax position liabilities(Note 17)
    
    
    1,687
    
    
    
    1,48914,839
    
    
    
    15,183COMMITMENTS AND GUARANTEES (NOTE 21)CONTINGENCIES (NOTE 23)SHAREHOLDERS EQUITYShare capital (Note 14)Authorized500,000,000 common shares without par value5,000,000 first preference shares without par
value, issuable in seriesIssued and outstandingCommon shares
    
    
    479,998
    
    
    
    506,023December 31, 2010 51,154,392 sharesDecember 31, 2009 53,789,289 sharesAdditional paid in-capital
    
    
    287,646
    
    
    
    275,592Accumulated deficit
    
    
    (497,669
    )
    
    
    (480,130
    )Accumulated other comprehensive income
    
    
    102,969
    
    
    
    102,969372,944
    
    
    
    404,454$
    387,783
    
    
    $
    419,637
   70




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##### Table of Contents



CONSOLIDATED STATEMENTS OF OPERATIONS
 Year ended December 31,
    
    2010
    
    
    2009
    
    
    2008(In thousands of U.S. dollars except per share information)RevenuesNet product revenue (Note 15)
    
    $
    31,093
    
    
    $
    42,106
    
    
    $
    48,312Royalties
    
    
    13,604
    
    
    
    
    
    
    
    44,697
    
    
    
    42,106
    
    
    
    48,312Costs and expensesCost of sales
    
    
    15,204
    
    
    
    20,198
    
    
    
    14,145Research and development
    
    
    33,485
    
    
    
    28,590
    
    
    
    29,568Selling, general and administrative
    
    
    20,808
    
    
    
    18,337
    
    
    
    18,230Depreciation
    
    
    1,202
    
    
    
    1,403
    
    
    
    2,940Litigation
    
    
    
    
    
    
    20,662
    
    
    
    864Gain on sale of long-lived assets
    
    
    
    
    
    
    
    
    
    
    (21,666
    )Purchase of in-process research and development
    
    
    
    
    
    
    7,517
    
    
    
    Restructuring charges (recovery) (Note 16)
    
    
    
    
    
    
    (263
    )
    
    
    9,51770,699
    
    
    
    96,444
    
    
    
    53,598Operating loss
    
    
    (26,002
    )
    
    
    (54,338
    )
    
    
    (5,286
    )Investment and other income (expense)Net foreign exchange gains
    
    
    363
    
    
    
    7,003
    
    
    
    643Interest income
    
    
    1,834
    
    
    
    4,339
    
    
    
    7,249Interest expense
    
    
    
    
    
    
    (1,848
    )
    
    
    (10,339
    )Fair value change in contingent consideration
    
    
    16,493
    
    
    
    3,279
    
    
    
    Other gains
    
    
    674
    
    
    
    28
    
    
    
    289Loss from continuing operations before income taxes
    
    
    (6,638
    )
    
    
    (41,537
    )
    
    
    (7,444
    )(Provision for) recovery of income taxes (Note 17)
    
    
    (10,901
    )
    
    
    5,317
    
    
    
    (1,803
    )Loss from continuing operations
    
    $
    (17,539
    )
    
    $
    (36,220
    )
    
    $
    (9,247
    )Income from discontinued operations, net of income taxes (Note
18)
    
    
    
    
    
    
    135,654
    
    
    
    144,138Net (loss) income
    
    $
    (17,539
    )
    
    $
    99,434
    
    
    $
    134,891Basic and diluted net (loss) income per common shareContinuing operations
    
    $
    (0.33
    )
    
    $
    (0.64
    )
    
    $
    (0.12
    )Discontinued operations
    
    
    
    
    
    
    2.41
    
    
    
    1.93Net (loss) income
    
    $
    (0.33
    )
    
    $
    1.77
    
    
    $
    1.81Weighted average number of common shares outstanding (thousands)Basic
    
    
    52,382
    
    
    
    56,194
    
    
    
    74,620Diluted
    
    
    52,382
    
    
    
    56,194
    
    
    
    74,620
   71




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year ended December 31,
    
    2010
    
    
    2009
    
    
    2008(In thousands of U.S. dollars)Cash flows provided by (used in) operating activitiesNet (loss) income
    
    $
    (17,539
    )
    
    $
    99,434
    
    
    $
    134,891Adjustments to reconcile net (loss) income to net cash from
operating activitiesDepreciation
    
    
    1,202
    
    
    
    1,403
    
    
    
    2,947Write-down of inventory
    
    
    
    
    
    
    8,114
    
    
    
    7,066Write-down of fixed assets, investments and deposit
    
    
    
    
    
    
    448
    
    
    
    1,715Share-based compensation
    
    
    2,494
    
    
    
    2,161
    
    
    
    3,391Amortization of deferred financing expenses
    
    
    
    
    
    
    
    
    
    
    851Unrealized foreign exchange (gains) losses
    
    
    (331
    )
    
    
    2,290
    
    
    
    9,731Interest on restricted cash
    
    
    
    
    
    
    (295
    )
    
    
    (3,344
    )Interest earned on note receivable
    
    
    (741
    )
    
    
    (250
    )
    
    
    Deferred income taxes
    
    
    12,872
    
    
    
    (5,510
    )
    
    
    12,685Gain on sale of long-lived assets
    
    
    (425
    )
    
    
    
    
    
    
    (21,666
    )Gain on sale of discontinued operations
    
    
    
    
    
    
    (107,363
    )
    
    
    (134,874
    )Changes in non-cash operating assets and liabilitiesAppeal bond collateral
    
    
    
    
    
    
    124,622
    
    
    
    Long term deposits and other assets
    
    
    3,115
    
    
    
    5,599
    
    
    
    (3,720
    )Accounts receivable
    
    
    (1,186
    )
    
    
    8,143
    
    
    
    (7,698
    )Inventories
    
    
    1,006
    
    
    
    (833
    )
    
    
    (4,824
    )Accounts payable
    
    
    2,040
    
    
    
    (1,920
    )
    
    
    1,397Income taxes receivable / payable
    
    
    5,553
    
    
    
    47,371
    
    
    
    (12,455
    )Accrued restructuring charge
    
    
    
    
    
    
    (743
    )
    
    
    703Other accrued liabilities
    
    
    633
    
    
    
    (124,306
    )
    
    
    7,179Deferred revenue
    
    
    (4,244
    )
    
    
    (1,723
    )
    
    
    (3,029
    )4,449
    
    
    
    56,642
    
    
    
    (9,054
    )Cash provided by investing activitiesNet proceeds from sale of property, plant & equipment net
of mortgage
    
    
    108
    
    
    
    116
    
    
    
    49,870Net proceeds from sale of investment in QLT USA
    
    
    10,000
    
    
    
    16,477
    
    
    
    Restricted cash
    
    
    
    
    
    
    
    
    
    
    2,307Purchase of property, plant and equipment
    
    
    (1,589
    )
    
    
    (1,094
    )
    
    
    (516
    )Proceeds from sale of long-lived assets
    
    
    317
    
    
    
    
    
    
    
    171,181Proceeds from mortgage receivable
    
    
    3,822
    
    
    
    
    
    
    
    Proceeds from contingent consideration(1)
    
    
    20,490
    
    
    
    5,162
    
    
    
    33,148
    
    
    
    20,661
    
    
    
    222,842Cash used in financing activitiesRedemption of convertible debt
    
    
    
    
    
    
    
    
    
    
    (172,500
    )Common shares repurchased, including fees
    
    
    (17,246
    )
    
    
    (55,911
    )
    
    
    Issuance of common shares
    
    
    910
    
    
    
    125
    
    
    
    (16,336
    )
    
    
    (55,786
    )
    
    
    (172,500
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    103
    
    
    
    1,202
    
    
    
    (2,624
    )Net increase in cash and cash equivalents
    
    
    21,364
    
    
    
    22,719
    
    
    
    38,664Cash and cash equivalents, beginning of year
    
    
    188,114
    
    
    
    165,395
    
    
    
    126,731Cash and cash equivalents, end of year
    
    $
    209,478
    
    
    $
    188,114
    
    
    $
    165,395Supplementary cash flow information:Interest paid
    
    $
    
    
    
    $
    1,832
    
    
    $
    5,571Income taxes paid
    
    
    2,002
    
    
    
    6,305
    
    
    
    13,997
  72




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##### Table of Contents



Non-cash investing activity:
 (1)
    
    On October 1, 2009, all of the shares of QLT USA were sold to Tolmar Holding, Inc. for up to
an aggregate $230.0 million, plus cash on hand of $118.3 million. The purchase price included
contingent consideration of $200.0 million which had a fair value of $156.2 million on October
1, 2009, representing a non-cash investing activity.During the year ended December 31, 2010, proceeds
received on collection of the contingent
consideration totalled $37.0 million (2009  $8.4 million). Approximately
$20.5 million (2009  $5.2 million) of the proceeds were included within cash provided
by investing
activities. The remaining $16.5 million (2009  $3.3 million) of the proceeds were
recorded in
the Statement of Operations as the fair value change in contingent consideration and were
therefore reflected in the net (loss) income line item within cash provided by operating
activities.
   73




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##### Table of Contents



CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
 AccumulatedAdditional
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    TotalCommon Shares
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Accumulated
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Income (Loss)
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Equity(All amounts except share
and per share information
are expressed in thousands
of U.S. dollars)Balance at January 1, 2008
    
    
    74,620,328
    
    
    $
    702,221
    
    
    $
    119,779
    
    
    $
    112,278
    
    
    $
    (714,455
    )
    
    $
    
    
    
    $
    219,823Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    3,588
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,588Other comprehensive
income:Cumulative translation
adjustment from application
of U.S. dollar reporting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,072
    )
    
    
    
    
    
    
    (15,072
    )
    
    
    (15,072
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134,891
    
    
    
    134,891
    
    
    
    134,891Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    119,819
    
    
    
    Balance at December 31,
2008
    
    
    74,620,328
    
    
    $
    702,221
    
    
    $
    123,367
    
    
    $
    97,206
    
    
    $
    (579,564
    )
    
    $
    
    
    
    $
    343,230Exercise of stock options,
for cash, at prices ranging
from CAD $2.44 to CAD $3.73
per share and U.S. $3.78
per share
    
    
    35,751
    
    
    
    170
    
    
    
    (45
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,266
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,266Common share repurchase
    
    
    (20,866,790
    )
    
    
    (196,368
    )
    
    
    150,004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46,364
    )Other comprehensive income:Cumulative translation
adjustment from application
of U.S. dollar reporting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,763
    
    
    
    
    
    
    
    5,763
    
    
    
    5,763Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99,434
    
    
    
    99,434
    
    
    
    99,434Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105,197
    
    
    
    Balance at December 31, 2009
    
    
    53,789,289
    
    
    $
    506,023
    
    
    $
    275,592
    
    
    $
    102,969
    
    
    $
    (480,130
    )
    
    $
    
    
    
    $
    404,454Exercise of stock options,
for cash, at prices ranging
from CAD $2.44 to CAD $6.27
per share
    
    
    265,585
    
    
    
    1,243
    
    
    
    (333
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    910Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,365
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,365Common share repurchase
    
    
    (2,900,482
    )
    
    
    (27,268
    )
    
    
    10,022
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,246
    )Other comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,539
    )
    
    
    (17,539
    )
    
    
    (17,539
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,539
    )
    
    
    Balance at December 31, 2010
    
    
    51,154,392
    
    
    $
    479,998
    
    
    $
    287,646
    
    
    $
    102,969
    (1)
    
    $
    (497,669
    )
    
    
    
    
    
    $
    372,944
 (1)
    
    At December 31, 2010, our accumulated other comprehensive income is entirely related to
prior years cumulative translation adjustments from the application of U.S. dollar reporting when
the functional currency of QLT Inc. was the Canadian dollar. See Note 3  Significant Accounting
Policies.
   74




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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 ®
 1. BASIS OF PRESENTATION
  ® ® ®
 2. PRINCIPLES OF CONSOLIDATION
  3. SIGNIFICANT ACCOUNTING POLICIES
 Use of Estimates
  Reporting Currency and Functional Currency Change
   75




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Segment Information
  Cash and Cash Equivalents
  Inventories
  Long-lived and Intangible Assets
    Property, Plant and Equipment
  Method
    
    YearsOffice furnishings, fixtures and other
    
    Straight-line
    
    
    5Research and commercial manufacturing equipment
    
    Straight-line
    
    
    3-5Computer hardware and operating system
    
    Straight-line
    
    
    3-5
  76




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Revenue Recognition
  Net Product Revenue
   Royalties
  Discontinued Operations
  Inventory and Cost of Sales
    77




---



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Discontinued Operations
  Stock-Based Compensation
    Research and Development
  Income Taxes
  Derivative Financial Instruments
   78




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Discontinued Operations
   Contingent Consideration
  Contingencies Related to Legal Proceedings
  Net (Loss) Income Per Common Share
   (In thousands of U.S. dollars, except per share data)
    
    2010
    
    
    2009
    
    
    2008Numerator:Loss from continuing operations
    
    $
    (17,539
    )
    
    $
    (36,220
    )
    
    $
    (9,247
    )Income from discontinued operations, net of income
taxes
    
    
    
    
    
    
    135,654
    
    
    
    144,138Net (loss) income
    
    $
    (17,539
    )
    
    $
    99,434
    
    
    $
    134,891Denominator: (thousands)Weighted average common shares outstanding
    
    
    52,382
    
    
    
    56,194
    
    
    
    74,620Effect of dilutive securities:Stock options
    
    
    
    
    
    
    
    
    
    
    Diluted weighted average common shares outstanding
    
    
    52,382
    
    
    
    56,194
    
    
    
    74,620Basic and diluted net (loss) income per common share:Continuing operations
    
    $
    (0.33
    )
    
    $
    (0.64
    )
    
    $
    (0.12
    )Discontinued operations
    
    
    
    
    
    
    2.41
    
    
    
    1.93Net (loss) income
    
    $
    (0.33
    )
    
    $
    1.77
    
    
    $
    1.81
   79




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Recently Issued Accounting Standards
 Revenue Arrangements with Multiple Deliverables
 Milestone Method of
Revenue Recognition
 Recently Adopted Accounting Standards
 Accounting for Transfers of Financial Assets, an
amendment of FASB Statement No. 140
 Amending FASB interpretation No. 46(R)
 Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses,
  80




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4. ACCOUNTS RECEIVABLE
 (In thousands of U.S. dollars)
    
    2010
    
    
    2009Visudyne
    
    $
    10,139
    
    
    $
    9,293Trade and other
    
    
    520
    
    
    
    172$
    10,659
    
    
    $
    9,465
   5. INVENTORIES
 (In thousands of U.S. dollars)
    
    2010
    
    
    2009Raw materials and supplies
    
    $
    74
    
    
    $
    231Work-in-process
    
    
    28,045
    
    
    
    29,782Finished goods
    
    
    274
    
    
    
    Provision for excess inventory
    
    
    (11,077
    )
    
    
    (11,560
    )Provision for non-completion of inventory
    
    
    (2,185
    )
    
    
    (2,185
    )$
    15,131
    
    
    $
    16,268Long-term inventory
    
    
    (11,807
    )
    
    
    (13,394
    )Current inventory
    
    $
    3,324
    
    
    $
    2,874
    6. MORTGAGE RECEIVABLE
   81




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7. OTHER CURRENT ASSETS
 (In thousands of U.S. dollars)
    
    2010
    
    
    2009Inventory in transit held by Novartis
    
    $
    
    
    
    $
    5,030Prepaid expenses and other
    
    
    2,958
    
    
    
    1,022$
    2,958
    
    
    $
    6,052
  8. PROPERTY, PLANT AND EQUIPMENT
 2010Accumulated
    
    
    Net(In thousands of U.S. dollars)
    
    Cost
    
    
    Depreciation
    
    
    Book ValueLeasehold improvements
    
    $
    460
    
    
    $
    110
    
    
    $
    350Office furnishings, fixtures, and other
    
    
    352
    
    
    
    103
    
    
    
    249Research equipment
    
    
    2,494
    
    
    
    1,281
    
    
    
    1,213Commercial manufacturing equipment
    
    
    2,320
    
    
    
    2,239
    
    
    
    81Computer hardware and operating system
    
    
    12,957
    
    
    
    11,815
    
    
    
    1,142$
    18,583
    
    
    $
    15,548
    
    
    $
    3,035
 2009Accumulated
    
    
    Net(In thousands of U.S. dollars)
    
    Cost
    
    
    Depreciation
    
    
    Book ValueLeasehold improvement
    
    $
    244
    
    
    $
    58
    
    
    $
    186Office furnishings, fixtures, and other
    
    
    351
    
    
    
    40
    
    
    
    311Research equipment
    
    
    1,710
    
    
    
    945
    
    
    
    765Commercial manufacturing equipment
    
    
    3,048
    
    
    
    2,872
    
    
    
    176Computer hardware and operating system
    
    
    12,359
    
    
    
    11,200
    
    
    
    1,159$
    17,712
    
    
    $
    15,115
    
    
    $
    2,597
 9. ACQUISITIONS AND DIVESTITURES
 Acquisition of OT-730
   82




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Sale of QLT USA
  Sale of Aczone and out-license of certain Atrigel rights
  Sale of Land and Building
   10. GOODWILL
   (In thousands of U.S. dollars)
    
    GoodwillCost
    
    $
    409,586Accumulated impairment losses
    
    
    (305,628
    )Reduction in valuation allowance against deferred tax assets*
    
    
    (43,092
    )Allocation to cost of business dispositions  discontinued
operations (including sale of Aczone, out-license of certain
Atrigel rights and related sale of Atrigel equipment)
    
    
    (37,721
    )Balance as of December 31, 2008
    
    $
    23,145Allocation to cost of business disposition  discontinued
operations (sale of QLT USA)
    
    
    (23,145
    )Balance as of December 31, 2009
    
    $
    
 *
    
    Previously, we reduced our valuation allowance relating to various tax assets (including tax loss
carryforwards and research and development credit carryforwards) that were acquired upon the
acquisition of QLT USA (previously Atrix Laboratories, Inc.) in 2004.
  83




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11. LONG-TERM INVENTORIES AND OTHER ASSETS
 (In thousands of U.S. dollars)
    
    2010
    
    
    2009Inventory, net of provisions
    
    $
    11,807
    
    
    $
    13,394Other
    
    
    1,512
    
    
    
    1,531$
    13,319
    
    
    $
    14,925
 12. ACCRUED LIABILITIES
 (In thousands of U.S. dollars)
    
    2010
    
    
    2009Royalties
    
    $
    1,225
    
    
    $
    1,273Compensation
    
    
    3,698
    
    
    
    2,990DDSU compensation
    
    
    1,400
    
    
    
    725Interest
    
    
    
    
    
    
    10Other
    
    
    
    
    
    
    576$
    6,323
    
    
    $
    5,574
 13. FOREIGN EXCHANGE FACILITY
  14. SHARE CAPITAL
 (a)
    
    Authorized SharesThere were no changes to the authorized share capital of QLT for the years ended December
31, 2010 and 2009.
 (b)
    
    Share Buy-Back ProgramsOn December 1, 2008, we announced our decision to proceed with a modified Dutch Auction
tender offer to purchase a number of shares of our common stock not to exceed an aggregate
purchase price of $50.0 million. Under this Dutch Auction tender offer, shareholders were
invited to tender all or a portion of their shares at a price per share that was not less
than $2.20 and not greater than $2.50. Based on the number of shares tendered and the prices
specified by the tendering shareholders, we determined the lowest price per share within the
range that allowed us to buy $50.0 million of shares properly tendered. The tender offer
commenced on December 31, 2008 and expired on January 26, 2009. As a result of this tender
offer, we accepted for purchase and cancellation 20 million common shares at a price of
$2.50 per share, totalling $50.0 million. These shares represented approximately 26.8% of
the shares outstanding as of January 26, 2009.On October 27, 2009, we announced that our Board of Directors authorized the repurchase of
up to 2,731,534 of our common shares, being 5% of our issued and outstanding common shares,
over a 12-month period commencing November 3, 2009 under a normal course issuer bid. In May
2010, the normal course
issuer bid was increased to repurchase up to 4,700,060 shares, representing 10% of our
public float. All purchases under the bid were effected in the open market through the
facilities of the NASDAQ, and in accordance with all regulatory requirements. Cumulative
purchases under this program were 3,744,972 shares at an average price of $5.59 per share,
for a total cost of $20.9 million.
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On December 8, 2010, we announced that our Board of Directors authorized the repurchase of
up to 3,615,285 of our issued and outstanding common shares, being 10% of our public float
as of December 9, 2010, over a 12-month period commencing December 16, 2010 under a normal
course issuer bid. All purchases are to be effected in the open market through the
facilities of the TSX or NASDAQ, and in accordance with regulatory requirements. The actual
number of common shares which are purchased and the timing of such purchases will be
determined by management, subject to compliance with applicable law. All common shares
repurchased will be cancelled. Since initiating the normal course issuer bid, we have
repurchased through the facilities of the NASDAQ, and immediately cancelled, an aggregate
22,300 common shares at an average price of $6.78 per share, for a total cost of $0.2
million.(c)
    
    Stock OptionsWe currently maintain one equity compensation plan, the QLT 2000 Incentive Stock Option Plan
(QLT Plan), which provides for the issuance of common shares to directors, officers,
employees and consultants of QLT and its affiliates. The QLT Plan was amended and restated
with shareholder approval effective May 5, 2009. The principal terms of the QLT Plan are
detailed below. No financial assistance is provided by us to the participants under the QLT
Plan.Below is a summary of the principal terms of the QLT Plan:Share Reserve. We have reserved an aggregate of 7.8 million common shares for issuance
under the QLT Plan. Common shares with respect to options that are not exercised in full
will be available for grant under subsequent options under the plan. In addition, the
number of common shares reserved for issuance to any one person shall not, in the aggregate,
exceed five percent of the issued and outstanding common shares (on a non-diluted basis).
The Executive Compensation Committee of our Board of Directors (the Compensation
Committee) will not grant options to a director who is not an employee or executive of QLT
where such grant will result in such director being awarded options with an aggregate grant
value in excess of CAD $100,000 in any one year. At December 31, 2010, options to purchase
an aggregate total of 6.1 million common shares were outstanding under the QLT Plan and
exercisable in the future at prices ranging between CAD $2.44 and CAD $10.35 per common
share.Administration. The Compensation Committee administers the QLT Plan.Eligibility. The directors, officers, employees and consultants of QLT or our affiliated
companies, who are or will be, in the opinion of the Compensation Committee, important for
our growth and success and whose participation in the QLT Plan will, in the opinion of the
Compensation Committee, accomplish the purposes of the QLT Plan, are eligible to participate
in the QLT Plan.Grant and Exercise of Options. Subject to the terms of the QLT Plan, the Compensation
Committee may grant to any eligible person one or more options as it deems appropriate. The
Compensation Committee may also impose such limitations or conditions on the exercise or
vesting of any option as it deems appropriate.An option will expire automatically on the earlier of (i) the date on which such option is
exercised in respect of all of the common shares that may be purchased under the QLT Plan,
and (ii) the date fixed by the Compensation Committee as the expiry date of such option,
which date will not be more than five years from the date of grant. Options that would
otherwise expire during black out periods established by QLT will not expire until the
tenth business day after the earlier of the end of such black out period or, provided the
black out period has ended, the expiry date.Early termination of stock options in the event of termination of service, death or
disability are subject to the specific terms of each applicable option agreement.Exercise Price.The exercise price of options granted will be determined by the
Compensation Committee, but will in no event be less than the closing price on the Toronto
Stock Exchange immediately preceding the grant.
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Vesting.
 Transferability
 Amendments or Termination
  Weighted AverageWeighted Average
    
    
    Remaining Contractual(In Canadian dollars)
    
    Number of Options
    
    
    Exercise Price
    
    
    Term (Years)Outstanding at January 1, 2008
    
    
    4,353,372
    
    
    $
    11.52Granted
    
    
    2,304,250
    
    
    
    3.73Exercised
    
    
    
    
    
    
    Forfeited and expired
    
    
    (1,571,135
    )
    
    
    11.66Outstanding at December 31, 2008
    
    
    5,086,487
    
    
    $
    7.95Granted
    
    
    1,338,500
    
    
    
    2.85Exercised
    
    
    (16,197
    )
    
    
    3.35Forfeited and expired
    
    
    (581,978
    )
    
    
    17.49Outstanding at December 31, 2009
    
    
    5,826,812
    
    
    $
    5.84Granted
    
    
    1,390,600
    
    
    
    6.26Exercised
    
    
    (265,585
    )
    
    
    3.56Forfeited and expired
    
    
    (851,726
    )
    
    
    9.74Outstanding at December 31, 2010
    
    
    6,100,101
    
    
    $
    5.49
    
    
    
    2.63Exercisable at December 31, 2010
    
    
    4,080,059
    
    
    $
    5.78
    
    
    
    2.04
  86




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Weighted AverageWeighted Average
    
    
    Remaining Contractual(In U.S. dollars)
    
    Number of Options
    
    
    Exercise Price
    
    
    Term (Years)Outstanding at January 1, 2008
    
    
    1,292,383
    
    
    $
    11.46Granted
    
    
    97,250
    
    
    
    3.78Exercised
    
    
    
    
    
    
    Forfeited and expired
    
    
    (1,134,426
    )
    
    
    11.24Outstanding at December 31, 2008
    
    
    255,207
    
    
    $
    9.52Granted
    
    
    
    
    
    
    Exercised
    
    
    (19,554
    )
    
    
    3.78Forfeited and expired
    
    
    (157,182
    )
    
    
    10.94Outstanding at December 31, 2009
    
    
    78,471
    
    
    $
    8.13Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited and expired
    
    
    (78,471
    )
    
    
    8.13Outstanding at December 31, 2010
    
    
    
    
    
    
    Exercisable at December 31, 2010
    
    
    
    
    
    
    
   2010
    
    
    2009
    
    
    2008Annualized volatility
    
    
    53.8
    %
    
    
    53.8
    %
    
    
    42.1
    %Risk-free interest rate
    
    
    2.3
    %
    
    
    1.8
    %
    
    
    2.9
    %Expected life (years)
    
    
    3.7
    
    
    
    3.6
    
    
    
    3.9Dividends
    
    
    
    
    
    
    
    
    
    
    
    87




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##### Table of Contents



(In thousands of U.S. dollars, except share information)
    
    2010
    
    
    2009
    
    
    2008Cost of sales
    
    $
    163
    
    
    $
    31
    
    
    $
    17Research and development
    
    
    1,308
    
    
    
    939
    
    
    
    991Selling, general and administrative
    
    
    1,023
    
    
    
    1,208
    
    
    
    1,564Restructuring
    
    
    
    
    
    
    
    
    
    
    540Discontinued operations
    
    
    
    
    
    
    (17
    )
    
    
    279Share-based compensation expense before income taxes
    
    
    2,494
    
    
    
    2,161
    
    
    
    3,391Related income tax benefits
    
    
    (136
    )
    
    
    (48
    )
    
    
    (88
    )Share-based compensation, net of income taxes
    
    $
    2,358
    
    
    $
    2,113
    
    
    $
    3,303
 15. NET PRODUCT REVENUE
   (In thousands of U.S. dollars)
    
    2010U.S. Visudyne sales by QLT
    
    $
    22,597Visudyne sales to Novartis
    
    
    6,988Add: Royalties reimbursed to QLT
    
    
    1,374Add: Other costs reimbursed to QLT
    
    
    134Net product revenue from Visudyne sales
    
    $
    31,093
  88




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(In thousands of U.S. dollars)
    
    2009
    
    
    2008Visudyne sales by Novartis
    
    $
    105,657
    
    
    $
    141,865Less: Marketing and distribution costs
    
    
    (34,346
    )
    
    
    (62,213
    )Less: Inventory costs
    
    
    (6,031
    )
    
    
    (11,153
    )Less: Royalties to third parties
    
    
    (2,276
    )
    
    
    (3,040
    )Novartis net proceeds from Visudyne sales
    
    $
    63,004
    
    
    $
    65,459QLTs 50% share of Novartis net proceeds from
Visudyne sales
    
    $
    31,502
    
    
    $
    32,730Add: Advance on inventory costs from Novartis
    
    
    5,608
    
    
    
    7,142Add: Royalties reimbursed to QLT
    
    
    2,272
    
    
    
    3,090Add: Other costs reimbursed to QLT
    
    
    2,724
    
    
    
    5,350Revenue from Visudyne sales
    
    $
    42,106
    
    
    $
    48,312
  (In thousands of U.S. dollars)
    
    2010
    
    
    2009
    
    
    2008U.S.
    
    $
    22,597
    
    
    $
    30,809
    
    
    $
    36,572Europe
    
    
    26,243
    
    
    
    29,639
    
    
    
    45,824Rest of World
    
    
    41,778
    
    
    
    45,209
    
    
    
    59,469Worldwide
    
    $
    90,618
    
    
    $
    105,657
    
    
    $
    141,865
 2010
    
    
    2009
    
    
    2008U.S.
    
    
    25
    %
    
    
    29
    %
    
    
    26
    %Europe
    
    
    29
    %
    
    
    28
    %
    
    
    32
    %Rest of World
    
    
    46
    %
    
    
    43
    %
    
    
    42
    %Worldwide
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 16. RESTRUCTURING CHARGE
   89




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Employee Termination(In thousands of U. S. dollars)
    
    costs(1)Balance at December 31, 2008(2)
    
    $
    314Restructuring adjustment
    
    
    (263
    )Foreign exchange
    
    
    13Cash payments
    
    
    (64
    )Non-cash portion
    
    
    Balance at December 31, 2009
    
    $
    
 (1)
    
    Costs include severance, termination benefits, and outplacement support. Non-cash portion of
employee termination costs relates to stock-based compensation.(2)
    
    Opening balance represents remaining balance from the restructuring.
 17. INCOME TAXES
 Recovery of (provision for) income taxes
  (In thousands of U.S. dollars)
    
    2010
    
    
    2009
    
    
    2008Canada
    
    $
    15,330
    
    
    $
    (15,624
    )
    
    $
    9,601United States and other
    
    
    (21,968
    )
    
    
    (25,913
    )
    
    
    (17,045
    )Loss from continuing operations
before income taxes
    
    $
    (6,638
    )
    
    $
    (41,537
    )
    
    $
    (7,444
    )
  (In thousands of U.S. dollars)
    
    2010
    
    
    2009
    
    
    2008Canada
    
    $
    (11,501
    )
    
    $
    5,156
    
    
    $
    (2,058
    )United States and other
    
    
    600
    
    
    
    161
    
    
    
    255(Provision for) recovery of income taxes
    
    $
    (10,901
    )
    
    $
    5,317
    
    
    $
    (1,803
    )
 (In thousands of U.S. dollars)
    
    2010
    
    
    2009
    
    
    2008Current income taxes
    
    $
    (2,026
    )
    
    $
    (10
    )
    
    $
    (2,187
    )Deferred income taxes
    
    
    (8,875
    )
    
    
    5,327
    
    
    
    384(Provision for) recovery of income taxes
    
    $
    (10,901
    )
    
    $
    5,317
    
    
    $
    (1,803
    )
  90




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(In thousands of U.S. dollars)
    
    2010
    
    
    2009
    
    
    2008Loss from
continuing operations before income taxes
    
    $
    (6,638
    )
    
    $
    (41,537
    )
    
    $
    (7,444
    )Canadian statutory tax rates
    
    
    28.50
    %
    
    
    30.00
    %
    
    
    31.00
    %Expected income tax recovery
    
    $
    1,892
    
    
    $
    12,461
    
    
    $
    2,308Net increase in valuation allowance
    
    
    (22,791
    )
    
    
    (11,179
    )
    
    
    (6,667
    )Non-taxable portion of capital
gains
    
    
    5,850
    
    
    
    849
    
    
    
    1,694Tax (cost) recovery of
undistributed earnings of
affiliates
    
    
    (82
    )
    
    
    1,613
    
    
    
    (1,613
    )Foreign tax rate differences
    
    
    2,511
    
    
    
    2,537
    
    
    
    1,516Investment tax credits
    
    
    2,904
    
    
    
    1,626
    
    
    
    963Stock options
    
    
    (574
    )
    
    
    (547
    )
    
    
    (876
    )Future tax rate reductions
    
    
    (427
    )
    
    
    (1,385
    )
    
    
    Other
    
    
    (184
    )
    
    
    (658
    )
    
    
    872(Provision for) recovery of income
taxes
    
    $
    (10,901
    )
    
    $
    5,317
    
    
    $
    (1,803
    )
  91




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Deferred tax assets and liabilities
  (In thousands of U.S. dollars)
    
    2010
    
    
    2009Deferred tax assetsNet operating loss carryforwards
    
    $
    14,927
    
    
    $
    20,200Contingent consideration
    
    
    3,073
    
    
    
    5,386Research & development tax credit carryforwards
    
    
    4,978
    
    
    
    3,504Capital loss carryforwards
    
    
    35,699
    
    
    
    40,004Depreciable and amortizable assets
    
    
    11,037
    
    
    
    4,182Provision for excess and non-completion of inventory
    
    
    3,315
    
    
    
    3,436Other temporary differences
    
    
    1,660
    
    
    
    1,084Total gross deferred income tax assets
    
    $
    74,689
    
    
    $
    77,796Less: valuation allowance
    
    
    (68,346
    )
    
    
    (58,669
    )Total deferred income tax assets
    
    $
    6,343
    
    
    $
    19,127Less: current portion
    
    
    (3,643
    )
    
    
    (5,608
    )Net long-term portion of deferred income tax assets
    
    $
    2,700
    
    
    $
    13,519Deferred tax liabilitiesTax cost of undistributed earnings
    
    
    (82
    )
    
    
    Capital gains reserve
    
    
    
    
    
    
    (199
    )Total deferred income tax liabilities
    
    $
    (82
    )
    
    $
    (199
    )Net deferred income tax assets
    
    $
    6,261
    
    
    $
    18,928
     92




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(In thousands of U.S. dollars)
    
    2010
    
    
    2009
    
    
    2008Balance as at January 1
    
    $
    1,489
    
    
    $
    766
    
    
    $
    756Increases related to current year tax positions
    
    
    
    
    
    
    365
    
    
    
    110Changes in tax positions of a prior period
    
    
    198
    
    
    
    358
    
    
    
    (100
    )Settlements
    
    
    
    
    
    
    
    
    
    
    Lapse of Statute of Limitations
    
    
    
    
    
    
    
    
    
    
    Balance as at December 31
    
    $
    1,687
    
    
    $
    1,489
    
    
    $
    766
     18. DISCONTINUED OPERATIONS
   93




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Period ended
    
    
    Year ended(In thousands of U.S. dollars)
    
    October 1, 2009
    
    
    December 31, 2008Product revenue and other
    
    $
    28,625
    
    
    $
    42,186Royalty revenue
    
    
    32,148
    
    
    
    33,643Net revenue
    
    
    60,773
    
    
    
    75,829Operating pre-tax income
    
    
    29,174
    
    
    
    21,704Other gains
    
    
    1,828
    
    
    
    Gain on sale of discontinued operations
    
    
    107,363
    
    
    
    134,874Pre-tax income
    
    
    138,365
    
    
    
    156,578Provision for income taxes(1)
    
    
    (2,711
    )
    
    
    (67,160
    )Recovery of income taxes(2)
    
    
    
    
    
    
    54,720Net income from discontinued operations
    
    $
    135,654
    
    
    $
    144,138
 (1)
    
    In 2008, the income tax provision relating to the gain on sale of Aczone discontinued
operations (before application of loss carryforwards) was $55.2 million. Income tax provision
relating to the gain on sale of Atrigel discontinued operations (before application of loss
carryforwards) was $8.1 million.(2)
    
    During year ended December 31, 2008, we released our valuation allowance on substantially all
of QLT USAs tax assets.
  94




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19. CONTINGENT CONSIDERATION
  20. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
   Carrying ValueDecember 31,
    
    
    Fair Value Measurements at December 31, 2010(In thousands of U.S. dollars)
    
    2010
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Assets:Cash and cash equivalents
    
    $
    209,478
    
    
    $
    209,478
    
    
    $
    
    
    
    $
    Contingent consideration(1)
    
    
    130,589
    
    
    
    
    
    
    
    
    
    
    
    130,589Total
    
    $
    340,067
    
    
    $
    209,478
    
    
    $
    
    
    
    $
    130,589
 (1)
    
    To estimate the fair value of contingent consideration at December 31, 2010, we used a
discounted cash flow model based on estimated timing and amount of future cash flows,
discounted using a cost of capital of 9.0% determined by management after considering all
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 future competition and current exchange rates. If
the discount rate were to increase by 1%, the contingent consideration would decrease by
$2.2 million, from $130.6 million to $128.4 million. If estimated future revenues were to
decrease by 10%, the contingent consideration would decrease by $2.3 million, from $130.6
million to $128.3 million.
  (In thousands of U.S. dollars)
    
    Level 3Balance at January 1, 2009
    
    $
    Transfers to Level 3
    
    
    156,240Settlements
    
    
    (8,441
    )Fair value change in contingent consideration
    
    
    3,279Balance at December 31, 2009
    
    $
    151,078Transfers to Level 3
    
    
    Settlements
    
    
    (36,982
    )Fair value change in contingent consideration
    
    
    16,493Balance at December 31, 2010
    
    $
    130,589
   95




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.
      21. COMMITMENTS AND GUARANTEES
   (In thousands of U.S. dollars)Year ending December 31,2011
    
    $
    1,9302012
    
    
    1,9382013
    
    
    1,8402014
    
    
    772015 and thereafter
    
    
    69Total
    
    $
    5,854
    96




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##### Table of Contents



22. SEGMENT INFORMATION
   (1)
 (In thousands of U.S. dollars)
    
    2010
    
    
    2009
    
    
    2008U.S.
    
    $
    22,597
    
    
    $
    16,394
    
    
    $
    16,612Europe
    
    
    12,817
    
    
    
    10,960
    
    
    
    13,953Canada
    
    
    619
    
    
    
    2,526
    
    
    
    4,529Japan
    
    
    3,760
    
    
    
    8,301
    
    
    
    8,746Other
    
    
    4,904
    
    
    
    3,925
    
    
    
    4,472$
    44,697
    
    
    $
    42,106
    
    
    $
    48,312
  (In thousands of U.S. dollars)
    
    2010
    
    
    2009Canada
    
    $
    2,570
    
    
    $
    1,977U.S.
    
    
    465
    
    
    
    620$
    3,035
    
    
    $
    2,597
 (1)
    
    Revenues are attributable to a geographic segment based on the location of the customer. In
2010, under the Amended PDT Agreement, Visudyne is sold by QLT in the U.S., and by Novartis outside
the U.S. Previously, Visudyne was sold solely by Novartis on a worldwide basis, and they
contributed all of our total revenues.
 23. CONTINGENCIES
   97




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Item 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 Item 9A.
    
    CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Managements Report on Internal Control over Financial Reporting
    Changes in Internal Control over Financial Reporting
   98




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REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
  Internal ControlIntegrated
Framework
    Internal
ControlIntegrated Framework
    
  99




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Item 9B.
    
    OTHER INFORMATION
   100




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PART III
  
 Item 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
   OUR EXECUTIVE OFFICERS
  Name
    
    Age
    
    PositionRobert L. Butchofsky
    
    49
    
    President and Chief Executive OfficerCameron R. Nelson
    
    45
    
    Vice President, Finance and Chief Financial OfficerLinda M. Lupini
    
    51
    
    Senior Vice President, Human Resources and Organizational DevelopmentAlexander R. Lussow
    
    48
    
    Senior Vice President, Commercial Operations and Business Development
 
 Item 11.
    
    EXECUTIVE COMPENSATION
   101




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Item 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 Equity Compensation Plan Information
  (a)
    
    
    (b)
    
    
    (c)Number of securitiesremaining available forNumber of securities
    
    
    
    
    
    
    future issuance underto be issued upon
    
    
    Weighted average
    
    
    equity compensationexercise of
    
    
    exercise price of
    
    
    plans (excludingoutstanding options,
    
    
    outstanding options,
    
    
    securities reflected inPLAN CATEGORY
    
    warrants and rights
    
    
    warrants and rights
    
    
    column (a))Equity compensation
plans approved by
security holders
(QLT 2000 Incentive
Stock Option Plan)
    
    
    6,100,101
    (1)
    
    CAD     $5.49
    
    
    1,049,299Total
    
    
    6,100,101
    
    
    
    
    
    
    
    1,049,299
 (1)
    
    The QLT 2000 Incentive Stock Option Plan, as amended and restated effective May 5,
2009, provides for the issuance of common stock to employees, consultants, officers and directors
of QLT and its affiliates.  
 Item 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 Item 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
   102




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PART IV
 
 Item 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 Financial Statements
 (i)
    
    The following financial statement documents are included as part of Item 8 to this
Form 10-K.
 Report of Independent Registered Chartered Accountants
    
    
    69Consolidated Balance Sheets
    
    
    70Consolidated Statements of Operations
    
    
    71Consolidated Statements of Cash Flows
    
    
    72Consolidated Statements of Changes in Shareholders Equity
    
    
    74Notes to the Consolidated Financial Statements
    
    
    75
 (ii)
    
    Schedules required by Article 12 of Regulation S-X:Except for Schedule II  Valuation and Qualifying Accounts, all other schedules have been
omitted because they are not applicable or not required, or because the required
information is included in the consolidated financial statements or notes thereto.Schedule II  Valuation and Qualifying Accounts for the Years ended December 31, 2010,
2009 and 2008.Provision for non-completion of inventory(In thousands of U.S. dollars)
 Additions
    
    
    Charged /Balance at
    
    
    charged to
    
    
    (credited) to
    
    
    Write-offsbeginning of
    
    
    costs and
    
    
    other
    
    
    and provision
    
    
    Balance atYear
    
    year
    
    
    expenses
    
    
    accounts(1)
    
    
    reduction
    
    
    end of year2010
    
    $
    2,185
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,1852009
    
    
    1,874
    
    
    
    
    
    
    
    311
    
    
    
    
    
    
    
    2,1852008
    
    
    2,292
    
    
    
    
    
    
    
    (417
    )
    
    
    (1
    )
    
    
    1,874
 (1)
    
    Foreign currency translation adjustments. Provision for excess inventory(In thousands of U.S. dollars)
 Additions
    
    
    Charged /Balance at
    
    
    charged to
    
    
    (credited) to
    
    
    Write-offsbeginning of
    
    
    costs and
    
    
    other
    
    
    and provision
    
    
    Balance atYear
    
    year
    
    
    expenses
    
    
    accounts(1)
    
    
    reduction
    
    
    end of year2010
    
    $
    11,560
    
    
    $
    (483
    )
    
    $
    
    
    
    $
    
    
    
    $
    11,0772009
    
    
    2,471
    
    
    
    8,114
    
    
    
    975
    
    
    
    
    
    
    
    11,5602008
    
    
    3,020
    
    
    
    
    
    
    
    (549
    )
    
    
    
    
    
    
    2,471
 (1)
    
    Foreign currency translation adjustments. Deferred tax asset valuation allowance(In thousands of U.S. dollars)
 Additions chargedBalance at
    
    
    to costs and
    
    
    Write-offs and
    
    
    Balance at endYear
    
    beginning of year
    
    
    expenses
    
    
    provision reduction
    
    
    of year2010
    
    $
    58,669
    
    
    $
    17,540
    
    
    $
    (7,863
    )
    
    $
    68,3462009
    
    
    9,843
    
    
    
    48,826
    
    
    
    
    
    
    
    58,6692008
    
    
    3,150
    
    
    
    7,261
    
    
    
    (568
    )
    
    
    9,843
  103




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Exhibits
   104




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##### Table of Contents



SIGNATURES
   QLT INC.By:
    /s/ Robert L. ButchofskyRobert L. Butchofsky,President and Chief Executive Officer(Principal Executive Officer)By:
    /s/ Cameron R. NelsonCameron R. Nelson, Vice President, Finance and Chief Financial Officer(Principal Financial and Accounting Officer)  105




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##### Table of Contents



POWER OF ATTORNEY
    Signatures
    
    Title
    
    Date/s/ Robert L. Butchofsky
    
    President, Chief Executive Officer and Director
    
    March 1, 2011Robert L. Butchofsky
    
    (Principal Executive Officer)/s/ Cameron R. Nelson
    
    Vice President, Finance and Chief Financial Officer
    
    March 1, 2011Cameron R. Nelson
    
    (Principal Financial and Accounting Officer)/s/ C. Boyd Clarke

C. Boyd Clarke
    
    Chairman of the Board of Directors and Director
    
    March 1, 2011/s/ Bruce L.A. Carter

Bruce L.A. Carter
    
    Director
    
    March 1, 2011/s/ Peter A. Crossgrove

Peter A. Crossgrove
    
    Director
    
    March 1, 2011/s/ Kathryn E. Falberg

Kathryn E. Falberg
    
    Director
    
    March 1, 2011/s/ Ian J. Massey

Ian J. Massey
    
    Director
    
    March 1, 2011/s/ Joseph L. Turner

Joseph L. Turner
    
    Director
    
    March 1, 2011/s/ L. Jack Wood

L. Jack Wood
    
    Director
    
    March 1, 2011
  106




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Exhibit Index
  Exhibit
    
    Description
    
    Location2.1
    
    
    Asset Purchase Agreement, dated December 20, 2006,
by and among Tolmar, Inc., Dillford Company S.A. and
QLT USA, Inc. (1)
    
    Exhibit 2.1 to the
Companys Annual
Report on Form 10-K
for the year ended
December 31, 2006.2.2
    
    
    Agreement and Plan of Merger by and among QLT Inc,
Aspen Acquisition Corp. and Atrix Laboratories, Inc.
dated as of June 14, 2004.
    
    Annex A to the
Companys Joint
Proxy
Statement/Prospectus
on Form S-4 dated
October 14, 2004.2.3
    
    
    Agreement and Plan of Merger dated October 8, 2007,
by and among the Company, 3088923, Inc., ForSight
Newco II, Inc. and the Stockholders Representatives
named therein.(1)
    
    Exhibit 2.1 to the
Companys Current
Report on Form 8-K
dated October 8,
2007 and filed with
the Commission on
October 11, 2007.2.4
    
    
    Purchase Agreement, dated as of June 6, 2008, by and
between Allergan Sales, LLC and QLT USA, Inc.
    
    Exhibit 2.1 to the
Companys Current
Report on Form 8-K
dated June 6, 2008
and filed with the
Commission on June
10, 2008.2.5
    
    
    Stock Purchase Agreement dated as of October 1, 2009
between QLT Inc. and TOLMAR Holding, Inc.
    
    Exhibit 2.1 to the
Companys Current
Report on Form 8-K
dated October 1,
2009.3.0
    
    
    Articles
    
    Exhibit 3.2 to the
Companys Current
Report on Form 8-K
dated May 25, 2005
and filed with the
Commission on June
1, 2005.4.1
    
    
    Shareholder Rights Plan Agreement, as amended and
restated, dated as of April 8, 2005, between QLT Inc.
and ComputerShare Trust Company of Canada.
    
    Exhibit 41 to the Companys Current Report on
Form 8-K dated April 8, 2005 and filed with the
Commission on April 13, 2005.4.2
    
    
    Registration Rights Agreement, as amended and restated,
dated as of December 17, 2004 by and between QLT Inc.,
Elan International Services, Ltd., and Elan
Pharmaceutical Investments III, Ltd.
    
    Exhibit 4.2 to the Companys Quarterly Report
on Form 10-Q for the quarter ended March 31,
2005.10.1
    
    
    Agreement, dated April 8, 1982, between Dr. Julia Levy,
Quadra Logic Technologies Inc. and the University of
British Columbia.
    
    Exhibit to the Companys Registration Statement
on Form F-1 (File No. 33-31222) filed with the
Commission on September 25, 1989.10.2
    
    
    Agreement, dated January 15, 1988, between Dr. David
Dolphin, Quadra Logic Technologies Inc. and the
University of British Columbia.
    
    Exhibit to the Companys Annual Report on Form
20-F for the year ended December 31, 1988.10.3
    
    
    Royalty Adjustment and Stock Option Agreement dated
August 10, 1989, between Quadra Logic Technologies Inc.
and Dr. David Dolphin.
    
    Exhibit to the Companys Amendment No. 1 to the
Registration Statement on Form F-1 dated
November 6, 1989.10.4
    
    
    Royalty Agreement, dated December 15, 1987, between
Quadra Logic Technologies Inc. and Dr. David Dolphin.
    
    Exhibit to the Companys Amendment No. 1 to the
Registration Statement on Form F-1 dated
November 6, 1989.10.5
    
    
    1998 QLT Incentive Stock Option Plan.
    
    Exhibit 10.68 to the Companys Annual Report on
Form 10-K for the year ended December 31, 1998.
  107




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##### Table of Contents



Exhibit
    
    Description
    
    Location10.6*
    
    
    2000 QLT Incentive Stock Option Plan (as amended in
2002); (formerly numbered 10.70).
    
    Exhibit to the Companys Registration Statement
on Form S-8 filed with the Commission on
September 20, 2002.10.7*
    
    
    Employment Agreement dated December 18, 2001 between
QLT Inc. and Paul J. Hastings.
    
    Exhibit 10.77 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2002.10.8*
    
    
    Employment Agreement dated May 19, 2000 between QLT
Inc. and Alain Curaudeau.
    
    Exhibit 10.80 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2002.10.9
    
    
    PDT Product Development, Manufacturing and Distribution
Agreement, dated July 1, 1994, between Quadra Logic
Technologies Inc. and CIBA Vision AG, Hettlingen (now
Novartis Pharma AG).
    
    Exhibit to the Companys Annual Report on Form
10-K for the year ended December 31, 1995.10.10
    
    
    BPD-MA Verteporfin Supply Agreement, dated March 12,
1999 between QLT PhotoTherapeutics Inc. and Parkedale
Pharmaceuticals, Inc. (1)
    
    Exhibit 10.54 to the Companys Annual Report on
Form 10-K for the year ended December 31, 1998.10.11
    
    
    BPD-MA Presome Supply Agreement, dated February 6,
2008, between QLT PhotoTherapeutics Inc. and Nippon
Fine Chemical Co., Ltd. (1)
    
    Exhibit 10.55 to the Companys Annual Report on
Form 10-K for the year ended December 31, 1998.10.12
    
    
    BPD-MA Supply Agreement, dated December 11, 1998,
between QLT PhotoTherapeutics Inc. and Raylo Chemicals
Limited. (1)
    
    Exhibit 10.56 to the Companys Annual Report on
Form 10-K for the year ended December 31, 1998.10.13
    
    
    License Agreement, dated December 8, 1998, between QLT
PhotoTherapeutics Inc. and The General Hospital
Corporation. (1)
    
    Exhibit 10.63 to the Companys Annual Report on
Form 10-K for the year ended December 31, 1998.10.14
    
    
    Amending Agreement to PDT Product Development,
Manufacturing and Distribution Agreement dated as of
July 23, 2001 between Novartis Ophthalmics AG and QLT
Inc. (1)
    
    Exhibit 10.74 to the Companys Quarterly Report
on Form 10-Q for the quarter ended September
30, 2002.10.15
    
    
    Amending Agreement to PDT Product Development,
Manufacturing and Distribution Agreement entered into
July 22, 2003 between Novartis Ophthalmics AG (now a
division of Novartis Pharma AG) and QLT Inc.
    
    Exhibit 10.77 to the Companys Quarterly Report
on Form 10-Q for the quarter ended June 30,
2003.10.16
    
    
    Agreement and Plan of Merger by and among QLT Inc,
Aspen Acquisition Corp. and Atrix Laboratories, Inc.
dated as of June 14, 2004.
    
    See Exhibit 2.2 above.10.17
    
    
    License and Royalty Agreement, dated as of August 8,
2000 between Atrix Laboratories, Inc. and Pfizer Inc.
    
    Exhibit 99.3 to Atrix Laboratories, Inc.s
Current Report on Form 8-K dated August 8, 2000
and filed with the Commission on September 7,
2000.10.18
    
    
    Collaboration, Development and Supply Agreement dated
as of August 28, 2000 between Atrix Laboratories, Inc.
and Sandoz, Inc. (formerly Geneva Pharmaceuticals,
Inc.)
    
    Exhibit 10.13 to Atrix Laboratories, Inc.s
Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000.10.19
    
    
    Collaboration, License and Supply Agreement dated as of
December 8, 2000 between Atrix Laboratories, Inc. and
Sanofi-Synthelabo Inc. as amended through February 15,
2007. (1)
    
    Exhibit 10.19 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2006.10.20
    
    
    Collaboration, License and Supply Agreement, dated as
of April 4, 2001, between Atrix Laboratories, Inc. and
MediGene as amended through May 17, 2006. (1)
    
    Exhibit 10.20 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2006.
  108




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Exhibit
    
    Description
    
    Location10.21*
    
    
    Separation Letter Agreement with Michael J. Doty.
    
    Exhibit 10.1 to the Companys Current Report on
Form 8-K dated April 15, 2005 and filed with
the Commission on April 21, 2005.10.22*
    
    
    QLT Inc. 2005 Cash Incentive Plan.
    
    Exhibit 10.01 to the Companys Current Report
on Form 8-K dated May 10, 2005 and filed with
the Commission on May 16, 2005.10.23*
    
    
    Deferred Share Unit Plan For Non-Employee Directors.
    
    Exhibit 10.32 to the Companys Quarterly Report
on Form 10-Q for the quarter ended June 30,
2005.10.24*
    
    
    Change Of Control Letter Agreement between QLT Inc. and
Cameron Nelson.
    
    Exhibit 10.34 to the Companys Quarterly Report
on Form 10-Q for the quarter ended June 30,
2005.10.25*
    
    
    Letter Agreement dated September 23, 2005 between QLT
Inc. and Paul J. Hastings.
    
    Exhibit 10.1 to the Companys Current Report on
Form 8-K dated September 23, 2005 and filed
with the Commission on September 26, 2005.10.26*
    
    
    Employment Agreement dated September 26, 2005 between
QLT Inc. and Robert L. Butchofsky.
    
    Exhibit 10.35 to the Companys Quarterly Report
on Form 10-Q for the quarter ended September
30, 2005.10.27*
    
    
    Change of control letter agreement dated September 26,
2005 for Robert L. Butchofsky.
    
    Exhibit 10.36 to the Companys Quarterly Report
on Form 10-Q for the quarter ended September
30, 2005.10.28*
    
    
    Employment Agreement dated November 8, 2005 between QLT
Inc. and Cameron Nelson.
    
    Exhibit 10.37 to the Companys Quarterly Report
on Form 10-Q for the quarter ended September
30, 2005.10.29*
    
    
    Consultancy Agreement, dated December 7, 2005, between
QLT Inc. and Dr. Mohammad Azab.
    
    Exhibit 10.40 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2005.10.30*
    
    
    Employment Agreement dated December 9, 2005 between QLT
USA, Inc. and Michael R. Duncan.
    
    Exhibit 10.41 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2005.10.31*
    
    
    Change of Control Letter Agreement dated December 9,
2005 between QLT USA, Inc. and Michael R. Duncan.
    
    Exhibit 10.42 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2005.10.32*
    
    
    Form of Stock Option Agreement for stock option grants
to senior employees and executive officers.
    
    Exhibit 10.43 to the Companys Quarterly Report
on Form 10-Q for the quarter ended June 30,
2006.10.33*
    
    
    Employment Agreement dated May 31, 2006 between QLT
Inc. and Peter J. OCallaghan.
    
    Exhibit 10.44 to the Companys Quarterly Report
on Form 10-Q for the quarter ended June 30,
2006.10.34*
    
    
    Change of Control Agreement dated May 31, 2006 between
QLT Inc. and Peter J. OCallaghan.
    
    Exhibit 10.45 to the Companys Quarterly Report
on Form 10-Q for the quarter ended June 30,
2006.10.35
    
    
    Settlement, Release and Patent License dated February
9, 2007 by and among Takeda Pharmaceutical Company
Limited, Wako Pure Chemical Industries, Ltd., TAP
Pharmaceutical Products Inc., Abbott Laboratories,
Limited  Laboratories Abbott, Limited, QLT USA, Inc.,
and Sanofi-Synthelabo, Inc.
    
    Exhibit 10.35 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2006.
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Exhibit
    
    Description
    
    Location10.36
    
    
    Eligard Manufacturing and Supply Agreement, dated
December 22, 2006, between Tolmar, Inc. and QLT USA,
Inc. (1)
    
    Exhibit 10.36 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2006.10.37
    
    
    Amended and Restated Contribution Agreement, dated
February 9, 2007, between Sanofi-Synthelabo, Inc. and
QLT USA, Inc. (1)
    
    Exhibit 10.37 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2006.10.38
    
    
    Settlement Agreement dated March 2, 2007, by and
between the Company and Massachusetts Eye and Ear
Infirmary.(1)
    
    Exhibit 10.4 to the Companys Quarterly Report
on Form 10-Q for the quarter ended March 31,
2007.10.39*
    
    
    Separation Letter Agreement with Alain Curaudeau.
    
    Exhibit 10.1 to the Companys Current Report on
Form 8-K dated January 18, 2008 and filed with
the Commission on January 25, 2008.10.40
    
    
    Amended and Restated License Agreement, dated December
14, 2007 between QLT Inc. and the University of British
Columbia.(1)
    
    Exhibit 10.40 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2007.10.41*
    
    
    2007 Cash Incentive Bonus Plan for Executive Officers.
    
    Item 1.01 of the Companys Current Report on
Form 8-K dated February 27, 2007 and filed with
the Commission on March 3, 2007.10.42*
    
    
    2007 Cash Incentive Compensation Structure for
Executive Officers.
    
    Item 5.02 of the Companys Current Report on
Form 8-K dated May 17, 2007 and filed with the
Commission on May 23, 2007.10.43*
    
    
    2007 Base Salary for Chief Executive Officer.
    
    Item 5.02 of the Companys Current Report on
Form 8-K dated April 16, 2007 and filed with
the Commission on April 20, 2007.10.44
    
    
    QLT Guarantee dated June 6, 2008.
    
    Exhibit 10.44 to the Companys Current Report
on Form 8-K dated June 6, 2008 and filed with
the Commission on June 10, 2008.10.45
    
    
    Sale and Purchase Agreement dated May 15, 2008 by and
among QLT Inc., 560677 B.C. Ltd., 630321 B.C. Ltd. and
Discovery Parks Holdings Inc. as amended by each of: an
Amending Agreement dated July 4, 2008 by and among QLT
Inc., 560677 B.C. Ltd., 630321 B.C. Ltd. and Discovery
Parks Holdings Inc., an Amended and Restated Sale and
Purchase Agreement dated July 11, 2008 by and among QLT
Inc., 560677 B.C. Ltd., 630321 B.C. Ltd. and Discovery
Parks Holdings Inc., a Third Amending Agreement dated
July 16, 2008 by and among QLT Inc., 560677 B.C. Ltd.,
630321 B.C. Ltd. and Discovery Parks Holdings Inc., a
Fourth Amending Agreement dated July 18, 2008 by and
among QLT Inc., 560677 B.C. Ltd., 630321 B.C. Ltd. and
Discovery Parks Holdings Inc., a Fifth Amending
Agreement dated July 23, 2008 by and among QLT Inc.,
560677 B.C. Ltd., 630321 B.C. Ltd. and Discovery Parks
Holdings Inc., a Sixth Amending Agreement dated July
25, 2008 by and among QLT Inc., 560677 B.C. Ltd.,
630321 B.C. Ltd. and Discovery Parks Holdings Inc., a
Second Amended and Restated Sale and Purchase Agreement
dated July 30, 2008 by and among QLT Inc., 560677 B.C.
Ltd., 630321 B.C. Ltd. and Discovery Parks Holdings
Inc. and an Eighth Amending Agreement dated August 7,
2008 by and among QLT Inc., 560677 B.C. Ltd., 630321
B.C. Ltd. and Discovery Parks Holdings Ltd.
    
    Exhibit 10.45 to the Companys Quarterly Report
on Form 10-Q for the quarter ended June 30,
2008.
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Exhibit
    
    Description
    
    Location10.46
    
    
    License Agreement dated August 25, 2008 by and between
QLT USA, Inc. and Reckitt Benckiser Pharmaceuticals
Inc. (1)
    
    Exhibit 10.1 to the Companys Amended Current
Report on Form 8-K/A dated August 25, 2008 and
filed with the Commission on September 3, 2008.10.47
    
    
    Amendment No. 8 to BPD-MA Presome Supply Agreement
dated December 29, 2008 by and between QLT Inc. and
Nippon Fine Chemical Co., Ltd. (1)
    
    Exhibit 10.47 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2008.10.48
    
    
    Amended and Restated PDT Product Development,
Manufacturing and Distribution Agreement dated October
16, 2009 between QLT Inc. and Novartis Pharma AG.
    
    Exhibit 10.48 to the Companys Current Report
on Form 8-K dated October 22, 2009.10.49*
    
    
    2000 QLT Incentive Stock Option Plan (as amended and
restated effective May 5, 2009).
    
    Exhibit 10.1 to the Companys Registration
Statement on Form S-8 filed on October 14,
2009.10.50*
    
    
    Employment Agreement dated April 12, 2010 between QLT
Inc. and Dr. Dipak Panigrahi
    
    Exhibit 10.50 to the Companys Form 8-K dated
May 5, 201010.51*
    
    
    Change of Control Agreement dated April 12, 2010
between QLT Inc. and Dr. Dipak Panigrahi
    
    Exhibit 10.51 to the Companys Form 8-K dated
May 5, 201010.52
    
    
    Distribution Services Agreement dated effective as of
January 1, 2010 by and between QLT Ophthalmics, Inc.
and ASD Specialty Healthcare, Inc. d/b/a Besse Medical
(1)
    
    Exhibit 10.52 to the Companys Quarterly Report
on Form 10-Q/A (Amendment No. 1) dated November
1, 201010.53
    
    
    Amendment Agreement to Employment Agreement by and
between QLT Inc. and Dr. Dipak Panigrahi dated February
3, 2011
    
    Exhibit 10.53 to the Companys Form 8-K dated
February 4, 201110.54*
    
    
    Co-Development Agreement dated effective as of April 4,
2006 by and between QLT Inc. and Retinagenix, LLC, as
amended by letter agreements dated August 10, 2006,
September 11, 2008 and October 20, 2010 by and between
QLT Inc. and Retinagenix, LLC (2)
    
    Filed herewith.11
    
    
    Statement re: computation of per share earnings.
    
    Filed herewith.21
    
    
    Subsidiaries of QLT Inc.
    
    Filed herewith.23
    
    
    Consent of Deloitte & Touche LLP.
    
    Filed herewith.31.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002: Robert L. Butchofsky, President and Chief
Executive Officer.
    
    Filed herewith.31.2
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002: Cameron R. Nelson, Vice President,
Finance, and Chief Financial Officer.
    
    Filed herewith.
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Exhibit
    
    Description
    
    Location32.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002: Robert L. Butchofsky, President and Chief
Executive Officer.
    
    Filed herewith.32.2
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002: Cameron R. Nelson, Vice President,
Finance, and Chief Financial Officer.
    
    Filed herewith.
 Notes:
 *
    
    Denotes executive compensation plans or arrangements.(1)
    
    Certain portions of this exhibit have been omitted and filed separately with the Commission
pursuant to a grant of confidential treatment under Rule 24b-2 promulgated under the
Securities Exchange Act of 1934, as amended.(2)
    
    Certain portions of this exhibit have been omitted and filed separately with the Commission
pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the
Securities Exchange Act of 1934, as amended.  112