##### 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, 2009
 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
 Yes o No þ




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Note regarding references to QLT
  Note regarding Currency and Accounting Standards
   Note regarding Exchange Rates
  2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005High
    
    $
    1.2995
    
    
    $
    1.2971
    
    
    $
    1.1852
    
    
    $
    1.1726
    
    
    $
    1.2703Low
    
    
    1.0289
    
    
    
    0.9717
    
    
    
    0.9168
    
    
    
    1.0989
    
    
    
    1.1507Average
    
    
    1.1412
    
    
    
    1.0660
    
    
    
    1.0734
    
    
    
    1.1340
    
    
    
    1.2115Period End
    
    
    1.0461
    
    
    
    1.2240
    
    
    
    0.9881
    
    
    
    1.1652
    
    
    
    1.1656
 Note regarding Trademarks
  
    
    Visudyne® is a registered trademark of Novartis AG.
 
    
    Eligard® is a registered trademark of Sanofi-Aventis Corp.
 
    
    Aczone® is a registered trademark of Allergan, Inc.
 
    
    Lucentis® is a registered trademark of Genentech, Inc.
 
    
    Avastin® is a registered trademark of Genentech, Inc.
 
    
    Xalatan® is a registered trademark of Pfizer Health AB.
 
    
    Patanol® is a registered trademark of Alcon Research, Ltd.
 
    
    PatadayTM is a trademark of Alcon, Inc.
  2




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##### Table of Contents



QLT INC.
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 2009
 Table of Contents
 Item 1. Business
    
    
    5Overview
    
    
    5Key Developments
    
    
    6Securities Transactions
    
    
    7Visudyne  Our Approved Product
    
    
    8Our Products in Development
    
    
    9Manufacturing
    
    
    15Product Sales, Marketing and Distribution
    
    
    15Financial Information about Segments and Geographic Area
    
    
    16Supply of Medical Lasers Required for Visudyne Therapy
    
    
    16Patents, Trademarks and Proprietary Rights Competition
    
    
    16Government Regulation
    
    
    19Third-Party Reimbursement
    
    
    22Liability and Product Recall
    
    
    23Research and Development Costs
    
    
    23Human Resources
    
    
    23Corporate Information
    
    
    23Item 1A. RISK FACTORS
    
    
    24Item 1B. UNRESOLVED STAFF COMMENTS
    
    
    37Item 2. PROPERTIES
    
    
    37Item 3. LEGAL PROCEEDINGS
    
    
    37Item 4. RESERVED
    
    
    38Item 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    39Item 6. SELECTED FINANCIAL DATA
    
    
    43Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
    
    
    46Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    67Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    67Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    101Item 9A. CONTROLS AND PROCEDURES
    
    
    101
  3




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##### Table of Contents



Item 9B. OTHER INFORMATION
    
    
    102Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    103Item 11. EXECUTIVE COMPENSATION
    
    
    103Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS
MATTERS
    
    
    104Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
    
    
    105Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    106Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    107Exhibit 11Exhibit 21Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   4




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PART I
 
 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.
  5




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Visudyne combined with Anti-VEGF drugs for the treatment of wet AMD. ®
 QLT091001 for the treatment of Leber Congenital Amaurosis. cis
 QLT091568 for the treatment of glaucoma and ocular hypertension.
 Business Strategy
  
 Key Developments
  Sale of QLT USA (Eligard)
     6




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Restructure of Novartis Relationship
   Settlement of MGH Litigation
   
 Securities Transactions
    7




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Visudyne  Our Approved Product
  Photodynamic Therapy
   Wet AMD
  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.
  8




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Commercialization Rights and Revenue
      
 Our Products In Development
  Product/Indication
    
    Status/Development StagePunctal Plug (latanoprost)Glaucoma and Ocular Hypertension
    
    Phase II studies ongoing through 2010.Punctal Plug (olopatadine)Allergic Conjunctivitis
    
    Phase II proof of concept study
planned to be initiated in the second
half of 2010.VisudyneWet AMD
    
    Phase II study of Visudyne followed by
an anti-VEGF drug (with or without
dexamethasone) either as a bi-therapy
or triple therapy, expected to
complete in the first half of 2010.QLT091001Leber Congenital Amaurosis
    
    Completed Phase Ia study in March
2009. Commenced Phase Ib study in
December 2009.QLT091568Glaucoma and Ocular Hypertension
    
    Phase I/II proof of concept study
completed by Othera in 2009.
Preclinical, formulation and
development work through 2010.
  9




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Punctal Plug Drug Delivery System
   Initial Drug and Target Indication
 Latanoprost for Glaucoma and Ocular Hypertension.
 Current Treatment. ®
 Potential Market
 Latanoprost Punctal Plug Drug Delivery System (L-PPDS)
  10




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##### Table of Contents



L-PPDS Phase II Clinical Trials and Device Program.
 L-PPDS Phase II Clinical Trials
   Latanoprost Concentration in L-PPDS44 μg
    
    81 μg
    
    95 μg (A)
    
    95 μg (B)*Number of Subjects
    
    
    N=57
    **
    
    
    N=53
    
    
    
    N=42
    
    
    N=39Mean IOP Baseline Value (mmHg)
    
    
    24.5
    
    
    
    25.4
    
    
    
    25.1
    
    
    25.0Range of Mean IOP Change from Baseline: Weeks 1 to 6 (mmHg)
    
    -3.3 to -3.6
    
    -1.9 to -3.4
    
    -3.4 to -4.1
    
    -3.0 to -4.7Status of Phase II Trial
    
    Complete
    
    Complete
    
    Ongoing to 12 weeks follow-up
    
    Ongoing to 12 weeks 
follow-upEquivalent Number of Latanoprost Eye Drops (% of Amount in Eye Drops over 3 Months)
    
    
    29 (32
    %)
    
    
    54 (60
    %)
    
    
    63 (70
    %)
    
    63 (70%)
 *
    
    The B formulation was designed to deliver a higher average daily dose
than the A formulation.**
    
    Of the 60 subjects enrolled, three did not have a follow-up IOP value and were excluded
from this analysis.    11




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Punctal Plug Device Study.
   Second Drug and Target Indication
 Olopatadine for Allergic Conjunctivitis. ® TM
 Visudyne  Expansion of Therapy
   12




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##### Table of Contents



Clinical Trials
 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.
  P P
 MONT BLANC Study (Novartis-sponsored).
   13




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##### Table of Contents



EVEREST Study (Novartis-sponsored).
  
 
 
 QLT091001  Synthetic Retinoid Program
 cis
 Initial Target Indication
 Leber Congenital Amaurosis. cis RPE65 LRAT cis
 LCA Phase Ia Study.
 LCA Phase Ib Study. RPE65 LRAT
  14




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QLT091568  Beta Blocker Glaucoma Program
  Initial Target Indication
 Glaucoma.
 Clinical Trial Results.
 Planned Development of QLT091568.
 
 Manufacturing
    
 Product Sales, Marketing and Distribution
 United States Distribution
   15




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Rest of World Distribution
  
 Financial Information about Segments and Geographic Areas
  
 Supply of Medical Lasers Required for Visudyne Therapy
  
 Patents, Trademarks and Proprietary Rights
   16




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Visudyne
 Verteporfin  UBC License.
 Verteporfin Patent Rights.
 Verteporfin lipid-based formulation
 Approved Uses of Visudyne.
 MGH License.
 Photosensitizers
 Punctal Plug Drug Delivery System
   17




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QLT901001
  QLT091568
  Atrigel ® System for Sustained Release Drug Delivery
 ®
 Other Patents, Trademarks and Proprietary Rights
      18




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Competition
  Visudyne
 ® ®
 
 
 Government Regulation
  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;
 
    
    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.
  19




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##### Table of Contents




    
    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  Approval of Medical Devices
   FDA Regulation  Post-Approval Requirements
   20




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EU Regulation  Approval of Medicinal Product
  Healthcare Fraud and Abuse Laws
   Additional Regulatory Issues
    21




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Third-Party Reimbursement
      22




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Liability and Product Recall
   
 Research and Development Costs
  
 Human Resources
  
 Corporate Information
    23




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##### Table of Contents



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,
 
    
    failure of ongoing clinical trials
to meet study endpoints, including our RADICAL clinical trial,
 
    
    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.
 Receipt of a significant amount of the consideration paid for 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,
  24




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
    
    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.
  We have limited experience marketing and selling products. 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.
   25




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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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Product development is a long, expensive and uncertain process, and we may terminate one or more of
our development programs.
  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 approve 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;
 
    
    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;
 
    
    pre-clinical or clinical data is interpreted by third parties in different ways;
 
    
    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.
  27




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##### Table of Contents



If our process related to product development, and in particular the development of our punctal
plug drug delivery technology, does not result in an approved and commercially successful product,
our business could be adversely affected.
   Our success depends largely on the successful commercialization of our technology, and in
particular our drug/device combination punctal plug drug delivery 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,
 
    
    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.
   28




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##### Table of Contents



We face intense competition, which may limit our commercial opportunities and our ability to
generate revenues.
    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.
     29




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##### Table of Contents



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 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.
    If we do not successfully develop and launch replacements for our products that lose patent
protection, our revenues may decline and we may not be able to compete effectively.
   30




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Our commercial success depends in part on our ability and the ability of our licensors to obtain
and maintain patent protection on technologies, to preserve trade secrets, and to operate without
infringing the proprietary rights of others.
     In the field of PDT we are dependent on the success and continued supply of third-party medical
device companies with complementary light source and light delivery devices by third party
suppliers.
   If our supply of Visudyne is interrupted, our ability to maintain our inventory levels could suffer
and our future revenues may be reduced.
  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 product sales.
    31




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Inherent uncertainties associated with forecasting product demand and future product launch and
other factors could result in our inventory becoming obsolete or reduced, possibly materially, in
market value.
  If the facilities storing our inventory are damaged or destroyed, our ability to meet market demand
for our products could be significantly affected.
  If our contract manufacturers fail to comply with FDA and other foreign regulatory requirements or
with our product specifications, we may be unable to meet demand for our products and may lose
potential revenue and be subject to claims from our licensees.
     32




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We rely on our employees and consultants to keep our trade secrets confidential.
  Visudyne or our product candidates may exhibit adverse side effects that prevent their widespread
use or that necessitate withdrawal from the market.
  If we fail to comply with ongoing regulatory requirements, it will materially harm our business.
    33




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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.
  Our provision for income taxes and effective income tax rate may vary significantly and may
adversely affect our results of operations and cash resources.
    34




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##### Table of Contents



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 establishing 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.
  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.
  35




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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, 2009, which could result in adverse United States federal income tax consequences to U.S.
shareholders.
  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.
    36




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The continued uncertainty in global economic conditions could negatively affect our business,
results of operations and financial condition.
   
 Item 1B.
    
    UNRESOLVED STAFF COMMENTS
  
 Item 2.
    
    PROPERTIES
   
 Item 3.
    
    LEGAL PROCEEDINGS
    37




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Settlement of Litigation with Massachusetts General Hospital
     
 Item 4.
    
    RESERVED
  38




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##### Table of Contents



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.$)2009Fourth 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
    
    
    
    1.412008Fourth Quarter
    
    $
    3.54
    
    
    $
    2.20
    
    
    $
    3.30
    
    
    $
    1.80Third Quarter
    
    
    4.39
    
    
    
    3.30
    
    
    
    4.08
    
    
    
    3.25Second Quarter
    
    
    4.03
    
    
    
    3.44
    
    
    
    3.95
    
    
    
    3.43First Quarter
    
    
    4.85
    
    
    
    2.32
    
    
    
    4.59
    
    
    
    2.45
    39




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Share Price Performance Graph
  
 Dec. 31,
    
    
    Dec. 30,
    
    
    Dec. 29,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009QLT Total Return
    
    
    100.00
    
    
    
    39.55
    
    
    
    52.61
    
    
    
    27.49
    
    
    
    14.99
    
    
    
    30.85S&P/TSX Composite Index
    
    
    100.00
    
    
    
    125.99
    
    
    
    143.98
    
    
    
    181.40
    
    
    
    95.92
    
    
    
    145.28NASDAQ Biotechnology Index
    
    
    100.00
    
    
    
    102.84
    
    
    
    103.89
    
    
    
    108.65
    
    
    
    94.93
    
    
    
    109.77
   Dividend Policy
   40




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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, 2009 through October 31, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,731,534November 1, 2009 through
November 30, 2009
    
    
    142,965
    
    
    $
    3.56
    
    
    
    142,965
    
    
    
    2,588,569December 1, 2009 through
December 31, 2009
    
    
    723,825
    
    
    $
    4.79
    
    
    
    723,825
    
    
    
    1,864,744Total
    
    
    866,790
    
    
    
    
    
    
    
    866,790
    
    
    
    1,864,744
 Exchange Controls and Other Limitations Affecting Holders of Common Shares
   41




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##### Table of Contents



(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
    42




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##### Table of Contents



Item 6.
    
    SELECTED FINANCIAL DATA
 Annual Financial Data
  Year Ended December 31,
    
    2009(5)
    
    
    2008(4)
    
    
    2007(3)
    
    
    2006(2)
    
    
    2005(1)(In thousands of U.S. dollars except
per share information)CONSOLIDATED STATEMENT OF OPERATIONS DATATotal revenues
    
    $
    42,106
    
    
    $
    48,312
    
    
    $
    67,746
    
    
    $
    129,370
    
    
    $
    190,923Research and development expenses
    
    
    28,590
    
    
    
    29,568
    
    
    
    37,510
    
    
    
    39,182
    
    
    
    44,099Income (loss) from continuing operations
    
    
    (36,220
    )
    
    
    (9,247
    )
    
    
    (125,537
    )
    
    
    39,898
    
    
    
    62,673Income (loss) before extraordinary gain
    
    
    99,434
    
    
    
    134,891
    
    
    
    (109,997
    )
    
    
    (101,605
    )
    
    
    (325,412
    )Net income (loss)
    
    
    99,434
    
    
    
    134,891
    
    
    
    (109,997
    )
    
    
    (101,605
    )
    
    
    (325,412
    )Basic net income (loss) per common share:Continuing operations
    
    
    (0.65
    )
    
    
    (0.12
    )
    
    
    (1.68
    )
    
    
    0.48
    
    
    
    0.68Discontinued operations
    
    
    2.42
    
    
    
    1.93
    
    
    
    0.21
    
    
    
    (1.68
    )
    
    
    (4.19
    )Net income (loss)
    
    
    1.77
    
    
    
    1.81
    
    
    
    (1.47
    )
    
    
    (1.20
    )
    
    
    (3.51
    )Diluted net income (loss) per common share:Continuing operations
    
    
    (0.65
    )
    
    
    (0.12
    )
    
    
    (1.68
    )
    
    
    0.48
    
    
    
    0.68Discontinued operations
    
    
    2.42
    
    
    
    1.93
    
    
    
    0.21
    
    
    
    (1.68
    )
    
    
    (4.19
    )Net income (loss)
    
    
    1.77
    
    
    
    1.81
    
    
    
    (1.47
    )
    
    
    (1.20
    )
    
    
    (3.51
    )CONSOLIDATED BALANCE SHEET DATACash and cash equivalents
    
    $
    31,664
    
    
    $
    165,395
    
    
    $
    30,564
    
    
    
    108,843
    
    
    $
    103,117Short-term investment securities
    
    
    156,450
    
    
    
    
    
    
    
    96,167
    
    
    
    265,373
    
    
    
    362,498Working capital
    
    
    257,610
    
    
    
    281,966
    
    
    
    49,583
    
    
    
    323,028
    
    
    
    514,713Total assets
    
    
    419,637
    
    
    
    491,758
    
    
    
    548,987
    
    
    
    639,106
    
    
    
    776,494Convertible debt
    
    
    
    
    
    
    
    
    
    
    172,500
    
    
    
    172,500
    
    
    
    172,500Total shareholders equity
    
    
    404,454
    
    
    
    343,230
    
    
    
    219,823
    
    
    
    303,214
    
    
    
    526,111
   43




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##### Table of Contents



Quarterly Financial Data (6)
  Three Months Ended
    
    December 31(5)
    
    
    September 30
    
    
    June 30
    
    
    March 31(In thousands of U.S. dollars except per share information)2009Total 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 (loss)
    
    
    80,582
    
    
    
    8,921
    
    
    
    8,629
    
    
    
    1,301Basic 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 (loss)
    
    
    1.49
    
    
    
    0.16
    
    
    
    0.16
    
    
    
    0.02Diluted 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 (loss)
    
    
    1.49
    
    
    
    0.16
    
    
    
    0.16
    
    
    
    0.022008(4)Total revenues
    
    
    11,850
    
    
    
    10,868
    
    
    
    13,685
    
    
    
    11,908Gross profit
    
    
    8,368
    
    
    
    7,879
    
    
    
    9,234
    
    
    
    8,685Research and development expenses
    
    
    6,519
    
    
    
    6,887
    
    
    
    8,114
    
    
    
    8,047Net income (loss) from continuing operations
    
    
    (1,962
    )
    
    
    12,137
    
    
    
    (6,871
    )
    
    
    (12,551
    )Net income (loss)
    
    
    5,874
    
    
    
    146,926
    
    
    
    (7,438
    )
    
    
    (10,471
    )Basic net income (loss) per common shareContinuing operations
    
    
    (0.03
    )
    
    
    0.16
    
    
    
    (00.09
    )
    
    
    (0.17
    )Discontinued operations
    
    
    0.11
    
    
    
    1.81
    
    
    
    (0.01
    )
    
    
    0.03Net income (loss)
    
    
    0.08
    
    
    
    1.97
    
    
    
    (0.10
    )
    
    
    (0.14
    )Diluted net income (loss) per common shareContinuing operations
    
    
    (0.03
    )
    
    
    0.16
    
    
    
    (00.09
    )
    
    
    (0.17
    )Discontinued operations
    
    
    0.11
    
    
    
    1.81
    
    
    
    (0.01
    )
    
    
    0.03Net income (loss)
    
    
    0.08
    
    
    
    1.97
    
    
    
    (0.10
    )
    
    
    (0.14
    )
 (1)
    
    During the fourth quarter of 2005, events and circumstances indicated impairment of
goodwill and intangible assets acquired in connection with our acquisition of QLT USA in
November 2004. As a result, we recorded a non-cash charge of $410.5 million to reduce the
carrying value of our goodwill to $104.0 million and our intangible assets to $6.9 million.(2)
    
    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 in our results for 2006.(3)
    
    In July 2007, the District Court 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 QPD) 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.  44




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(4)
    
    Assets related to Aczone were sold by QLT USA to Allergan 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.(5)
    
    On October, 1, 2009, the Eligard product line was divested as part of the sale of all of
the shares of QLT USA to Tolmar for up to an aggregate $230.0 million. Pursuant to the stock
purchase agreement, we received $20.0 million on closing and will receive $10.0 million on or
before October 1, 2010 and up to an additional $200.0 million payable on a quarterly basis in
amounts equal to 80% of the royalties paid under the license agreements with each of Sanofi
and MediGene for the commercial marketing of Eligard in Canada, the U.S. and Europe (beginning
with the royalties payable for Eligard sales that occurred in the quarter ended September 30,
2009) until the earlier of QLT receiving the additional $200.0 million or October 1, 2024. In
addition, under the terms of the stock purchase agreement, Tolmar paid QLT an amount equal to
the cash that QLT USA had on-hand at closing. We recognized a pre-tax gain of $107.4 million
related to this transaction within discontinued operations for 2009.(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.  45




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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;
 
    
    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, reimbursement and sales;
 
    
    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 FDA 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 punctal plug drug delivery system;
 
    
    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.
   46




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##### Table of Contents



Overview
 ®
 ® ® ®
 Products, Revenues and Other Sources of Funds
   Research and Development
   47




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Revenue Recognition
 Net Product Revenue
    Discontinued Operations
    48




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##### Table of Contents



Inventory and Cost of Sales
   Annual Production Volume.
 Overhead Allocation.
 Provisions for Noncompletion of Inventory and Obsolete Inventory.
   Discontinued Operations
   49




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Stock-Based Compensation
 Share-Based Payment,
    Research and Development
  Income Taxes
   50




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##### Table of Contents



Accounting for Uncertainty in Income Taxes,
 Discontinued Operations and Assets Held for Sale
   Contingent Consideration
   Long-Lived and Intangible Assets
     51




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Recently Issued and Recently Adopted Accounting Standards
  COMPARISON OF YEARS ENDED DECEMBER 31, 2009 AND 2008
  Revenues
 Net Product Revenue
  For the 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
    )$
    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)
    
    Less: Marketing and distribution costsThis represents 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 are related to its sales
force, advertising expenses, marketing and certain administrative overhead costs. The costs
incurred by us include marketing support, legal and administrative expenses that we incurred
in support of Visudyne sales.(2)
    
    Less: Inventory costsThis represents Novartis cost of goods sold related to Visudyne. It includes 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)
    
    Less: Royalties to third partiesThis represents the royalty expenses we incurred and charged to Novartis pursuant to the PDT
Agreement between QLT and Novartis. The amounts are calculated by us based on specified
royalty rates from existing license agreements with our licensors of certain Visudyne patent
rights.(4)
    
    Add: Advance on inventory costs from NovartisThis represents the amount that Novartis advanced to us for shipments of bulk Visudyne and
reimbursement for inventory obsolescence. The price of the Visudyne shipments is determined
based on the PDT Agreement and represents our actual costs of producing Visudyne.(5)
    
    Add: Royalties reimbursed to QLTThis is related to item (3) above and represents the amounts we receive from Novartis in
reimbursement for the actual royalty expenses we owed to third party licensors.(6)
    
    Add: Other costs reimbursed to QLTThis represents reimbursement by Novartis to us of our portion of the marketing and
distribution costs described in (1) above. Our marketing and distribution costs include
marketing support, legal and administrative expenses that we incur in support of Visudyne
sales.  52




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Costs and Expenses
 Cost of Sales
   Research and Development
   53




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
    
    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,
    
    delays in study progression, including study site, Institutional Review Board and
regulatory delays,
    
    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)
    
    2009
    
    
    2008
    
    
    2007Ocular
    
    $
    28,016
    
    
    $
    26,423
    
    
    $
    27,769Dermatology
    
    
    10
    
    
    
    2,926
    
    
    
    9,250Urology and Oncology
    
    
    
    
    
    
    
    
    
    
    19Other
    
    
    564
    
    
    
    219
    
    
    
    472$
    28,590
    
    
    $
    29,568
    
    
    $
    37,510
  Product/Indication
    
    Status/Development StagePunctal Plug (latanoprost)Glaucoma and Ocular Hypertension
    
    Phase II studies ongoing through 2010.Punctal Plug (olopatadine)Allergic Conjunctivitis
    
    Phase II proof of concept study planned to be initiated in
the second half of 2010.VisudyneWet AMD
    
    Phase II study of Visudyne followed by an anti-VEGF drug
(with or without dexamethasone) either as a bi-therapy or
triple therapy, expected to complete in the first half of
2010.QLT091001Leber Congenital Amaurosis
    
    Completed Phase Ia study in March 2009. Commenced Phase Ib
study in December 2009.QLT091568Glaucoma and Ocular Hypertension
    
    Phase I/II proof of concept study completed by Othera in
2009. Preclinical, formulation and development work
through 2010.
  54




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Selling, General and Administrative Expenses
  Litigation
   Gain on Sale of Long-Lived Asset
  In-process Research and Development
  Restructuring Charge
   55




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##### Table of Contents



Investment and Other Income
 Net Foreign Exchange Gains (Losses)
  Interest Income
  Interest Expense
   Fair Value Change in Contingent Consideration
  Income (loss) from Discontinued Operations
  Income Taxes
     56




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COMPARISON OF YEARS ENDED DECEMBER 31, 2008 AND 2007
  Revenues
 Net Product Revenue
  For the year endedDecember 31,(In thousands of U.S. dollars)
    
    2008
    
    
    2007Visudyne sales by Novartis
    
    $
    141,865
    
    
    $
    214,857Less: Marketing and distribution costs(1)
    
    
    (62,213
    )
    
    
    (103,903
    )Less: Inventory costs(2)
    
    
    (11,153
    )
    
    
    (17,508
    )Less: Royalties to third parties(3)
    
    
    (3,040
    )
    
    
    (4,546
    )$
    65,459
    
    
    $
    88,900QLTs 50% share of Novartis net proceeds from Visudyne sales
    
    $
    32,730
    
    
    $
    44,450Add: Advance on inventory costs from Novartis(4)
    
    
    7,142
    
    
    
    11,332Add: Royalties reimbursed to QLT(5)
    
    
    3,090
    
    
    
    4,516Add: Other costs reimbursed to QLT(6)
    
    
    5,350
    
    
    
    7,448Revenue from Visudyne sales
    
    $
    48,312
    
    
    $
    67,746
 (1)
    
    Less: Marketing and distribution costsThis represents 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. The costs incurred by Novartis are related to its sales force, advertising
expenses, marketing and certain administrative overhead costs. The costs incurred by us
include marketing support, legal and administrative expenses that we incurred in support of
Visudyne sales.(2)
    
    Less: Inventory costsThis represents Novartis cost of goods sold related to Visudyne. It includes the cost of
bulk Visudyne we shipped to Novartis and our provisions for excess or obsolete inventory, plus
Novartis packaging and labelling costs, freight, custom duties and inventory obsolescence.(3)
    
    Less: Royalties to third partiesThis represents the royalty expenses we incurred and charged to Novartis pursuant to the PDT
Agreement. The amounts are calculated by us based on specified royalty rates from existing
license agreements with our licensors of certain Visudyne patent rights.(4)
    
    Add: Advance on inventory costs from NovartisThis represents the amount that Novartis advanced to us for shipments of bulk Visudyne and
reimbursement for inventory obsolescence. The price of the Visudyne shipments is determined
based on the PDT Agreement between QLT and Novartis and represents our actual costs of
producing Visudyne.(5)
    
    Add: Royalties reimbursed to QLTThis is related to item (3) above and represents the amounts we received from Novartis in
reimbursement for the actual royalty expenses we owe to third party licensors.(6)
    
    Add: Other costs reimbursed to QLTThis represents reimbursement by Novartis to us of our portion of the marketing and
distribution costs described in (1) above. Our marketing and distribution costs include
marketing support, legal and administrative expenses that we incur in support of Visudyne
sales.  57




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Costs and Expenses
 Cost of Sales
   Research and Development
  Selling, General and Administrative Expenses
  Litigation
   Gain on Sale of Long-Lived Asset
   58




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In-process Research and Development
   Business Combinations Determining Whether a
Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business
 Restructuring Charge
   Investment and Other Income
 Net Foreign Exchange Losses
  Interest Income
   59




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##### Table of Contents



Interest Expense
  Income from Discontinued Operations
   Income Taxes
    LIQUIDITY AND CAPITAL RESOURCES
 General
   60




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Sources and Uses of Cash
   
    
    A positive cash flow variance from tax refunds, net of tax installments, of $58.1
million;
 
    
    A positive cash flow variance from lower operating and inventory related expenditures of
$23.0 million;
 
    
    A positive cash flow variance from lower restructuring costs of $6.5 million;
 
    
    A positive cash flow variance from foreign exchange of $6.0 million;
 
    
    A positive cash flow variance from higher investment and other income of $5.2 million;
 
    
    A positive cash flow variance from proceeds related to the fair value change in
contingent consideration of $3.3 million;
 
    
    A negative cash flow variance from the litigation settlement payment to MGH of $19.1
million;
 
    
    A negative cash flow variance from lower cash receipts from product sales and royalties
of $7.6 million;
 
    
    A negative cash flow variance from the purchase of in-process research and development
of $7.5 million; and
 
    
    A negative cash flow variance from payment of the MEEI judgment resulting in the release
of the appeal bond and an additional $2.2 million payment to MEEI.
   Interest and Foreign Exchange Rates
    61




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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)
    
    
    6,481
    
    
    
    1,679
    
    
    
    3,239
    
    
    
    1,563
    
    
    
    Purchase Obligations (3)
    
    
    6,353
    
    
    
    3,333
    
    
    
    2,014
    
    
    
    1,006
    
    
    
    Total
    
    $
    12,834
    
    
    $
    5,012
    
    
    $
    5,253
    
    
    $
    2,569
    
    
    $
    
 (1)
    
    At December 31, 2009, we had approximately $1.5 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 postage meters.
 (3)
    
    Purchase obligations comprise minimum purchase requirements of our product supply agreements
with contract manufacturers ($0.9 million) and other outstanding purchase commitments related
to the normal course of business ($5.5 million).
 Off-Balance Sheet Arrangements
    62




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##### Table of Contents



CERTAIN CANADIAN AND U.S. FEDERAL INCOME TAX INFORMATION FOR U.S. RESIDENTS
  Canadian Federal Tax Information
    U.S. Federal Income Tax Information
   U.S. Holders
   63




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##### Table of Contents



Sale or Other Disposition of Common Shares
   Distributions on Common Shares
    Passive Foreign Investment Company
   64




---



##### Table of Contents



The Company believes that it qualified as a PFIC for 2008 and 2009. Please be aware that the
Companys status as a PFIC can have significant adverse tax consequences for U.S. Holders.
 pro rata
 (a)
    
    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.
 Mark-to-Market Election.
  65




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##### Table of Contents



de minimis
 Subsidiary PFICs.
 IRS Form 8621 Reporting.
 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
   66




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##### Table of Contents



Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  67




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
        
  68




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##### Table of Contents



CONSOLIDATED BALANCE SHEETS
 As at December 31,
    
    2009
    
    
    2008(In thousands of U.S. dollars)ASSETSCurrent assetsCash and cash equivalents
    
    $
    188,114
    
    
    $
    165,395Restricted cash
    
    
    
    
    
    
    124,578Accounts receivable (Note 4)
    
    
    9,465
    
    
    
    11,151Note receivable (Note 19)
    
    
    9,259
    
    
    
    Current portion of contingent consideration (Note 18)
    
    
    33,587
    
    
    
    Income taxes receivable
    
    
    4,879
    
    
    
    41,801Inventories (Note 5)
    
    
    2,874
    
    
    
    3,163Current portion of deferred income tax assets (Note 16)
    
    
    5,608
    
    
    
    403Mortgage receivable
    
    
    11,466
    
    
    
    Assets held for sale
    
    
    
    
    
    
    72,763Other (Note 6)
    
    
    6,052
    
    
    
    10,474271,304
    
    
    
    429,728Property, plant and equipment (Note 7)
    
    
    2,597
    
    
    
    3,113Deferred income tax assets (Note 16)
    
    
    13,320
    
    
    
    5,139Goodwill (Note 9)
    
    
    
    
    
    
    23,145Mortgage receivable (Note 19)
    
    
    
    
    
    
    9,834Long-term inventories and other assets (Note 10)
    
    
    14,925
    
    
    
    20,799Contingent consideration (Note 18)
    
    
    117,491
    
    
    
    $
    419,637
    
    
    $
    491,758LIABILITIESCurrent liabilitiesAccounts payable
    
    $
    3,876
    
    
    $
    4,865Accrued restructuring charge (Note 15)
    
    
    
    
    
    
    314Accrued liabilities (Note 11)
    
    
    5,574
    
    
    
    129,473Liabilities held for sale
    
    
    
    
    
    
    8,906Deferred revenue
    
    
    4,244
    
    
    
    4,20413,694
    
    
    
    147,762Uncertain tax position liabilities(Note 16)
    
    
    1,489
    
    
    
    76615,183
    
    
    
    148,528COMMITMENTS AND GUARANTEES (NOTE 20)CONTINGENCIES (NOTE 22)SHAREHOLDERS EQUITYShare capital (Note 13)Authorized500,000,000 common shares without par value5,000,000 first preference shares without par
value, issuable in seriesIssued and outstandingCommon shares
    
    
    506,023
    
    
    
    702,221December 31, 2009 53,789,289 sharesDecember 31, 2008 74,620,328 sharesAdditional paid in-capital
    
    
    275,592
    
    
    
    123,367Accumulated deficit
    
    
    (480,130
    )
    
    
    (579,564
    )Accumulated other comprehensive income
    
    
    102,969
    
    
    
    97,206404,454
    
    
    
    343,230$
    419,637
    
    
    $
    491,758
   69




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##### Table of Contents



CONSOLIDATED STATEMENTS OF OPERATIONS
 Year ended December 31,
    
    2009
    
    
    2008
    
    
    2007(In thousands of U.S. dollars except per share information)RevenuesNet product revenue (Note 14)
    
    $
    42,106
    
    
    $
    48,312
    
    
    $
    67,746Costs and expensesCost of sales
    
    
    20,198
    
    
    
    14,145
    
    
    
    18,143Research and development
    
    
    28,590
    
    
    
    29,568
    
    
    
    37,510Selling, general and administrative
    
    
    18,337
    
    
    
    18,230
    
    
    
    23,427Depreciation
    
    
    1,403
    
    
    
    2,940
    
    
    
    5,331Litigation (Note 22)
    
    
    20,662
    
    
    
    864
    
    
    
    110,162Gain on sale of long-lived assets
    
    
    
    
    
    
    (21,666
    )
    
    
    Purchase of in-process research and development
    
    
    7,517
    
    
    
    
    
    
    
    42,865Restructuring charges (Note 15)
    
    
    (263
    )
    
    
    9,517
    
    
    
    57196,444
    
    
    
    53,598
    
    
    
    238,009Operating loss
    
    
    (54,338
    )
    
    
    (5,286
    )
    
    
    (170,263
    )Investment and other income (expense)Net foreign exchange gains (losses)
    
    
    7,003
    
    
    
    643
    
    
    
    (1,743
    )Interest income
    
    
    4,339
    
    
    
    7,249
    
    
    
    14,278Interest expense
    
    
    (1,848
    )
    
    
    (10,339
    )
    
    
    (9,026
    )Fair value change in contingent consideration
    
    
    3,279
    
    
    
    
    
    
    
    Other gains
    
    
    28
    
    
    
    289
    
    
    
    813Loss from continuing operations before income taxes
    
    
    (41,537
    )
    
    
    (7,444
    )
    
    
    (165,941
    )Recovery of (provision for) income taxes (Note 16)
    
    
    5,317
    
    
    
    (1,803
    )
    
    
    40,404Loss from continuing operations
    
    $
    (36,220
    )
    
    $
    (9,247
    )
    
    $
    (125,537
    )Income from discontinued operations, net of income taxes
(Note 17)
    
    
    135,654
    
    
    
    144,138
    
    
    
    15,540Net income (loss)
    
    $
    99,434
    
    
    $
    134,891
    
    
    $
    (109,997
    )Basic and diluted net income (loss) per common shareContinuing operations
    
    $
    (0.64
    )
    
    $
    (0.12
    )
    
    $
    (1.68
    )Discontinued operations
    
    
    2.41
    
    
    
    1.93
    
    
    
    0.21Net income (loss)
    
    $
    1.77
    
    
    $
    1.81
    
    
    $
    (1.47
    )Weighted average number of common shares outstanding (thousands)Basic
    
    
    56,194
    
    
    
    74,620
    
    
    
    74,907Diluted
    
    
    56,194
    
    
    
    74,620
    
    
    
    74,907
   70




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year ended December 31,
    
    2009
    
    
    2008
    
    
    2007(In thousands of U.S. dollars)Cash flows (used in) provided by operating activitiesNet income (loss)
    
    $
    99,434
    
    
    $
    134,891
    
    
    $
    (109,997
    )Adjustments to reconcile net income (loss) to net cash from
operating activitiesIn-process research and development
    
    
    
    
    
    
    
    
    
    
    42,865Depreciation
    
    
    1,403
    
    
    
    2,947
    
    
    
    6,710Write-down of inventory
    
    
    8,114
    
    
    
    7,066
    
    
    
    3,074Write-down of fixed assets, investments and deposit
    
    
    448
    
    
    
    1,715
    
    
    
    403Share-based compensation
    
    
    2,161
    
    
    
    3,391
    
    
    
    3,502Amortization of deferred financing expenses
    
    
    
    
    
    
    851
    
    
    
    1,290Unrealized foreign exchange losses (gains)
    
    
    2,290
    
    
    
    9,731
    
    
    
    (22,420
    )Interest on restricted cash
    
    
    (295
    )
    
    
    (3,344
    )
    
    
    (2,509
    )Interest earned on note receivable
    
    
    (250
    )
    
    
    
    
    
    
    Deferred income taxes
    
    
    (5,510
    )
    
    
    12,685
    
    
    
    7,656Gain on sale of long-lived assets
    
    
    
    
    
    
    (21,666
    )
    
    
    (3,989
    )Gain on sale of discontinued operations
    
    
    (107,363
    )
    
    
    (134,874
    )
    
    
    Trading securities
    
    
    
    
    
    
    
    
    
    
    58,357Litigation
    
    
    
    
    
    
    
    
    
    
    110,162Changes in non-cash operating assets and liabilitiesAppeal bond collateral
    
    
    124,622
    
    
    
    
    
    
    
    (118,781
    )Long term deposits and other assets
    
    
    5,599
    
    
    
    (3,720
    )
    
    
    5,590Accounts receivable
    
    
    8,143
    
    
    
    (7,698
    )
    
    
    16,800Inventories
    
    
    (833
    )
    
    
    (4,824
    )
    
    
    (3,191
    )Accounts payable
    
    
    (1,920
    )
    
    
    1,397
    
    
    
    (6,254
    )Income taxes receivable / payable
    
    
    47,371
    
    
    
    (12,455
    )
    
    
    (44,429
    )Accrued restructuring charge
    
    
    (743
    )
    
    
    703
    
    
    
    (2,306
    )Other accrued liabilities
    
    
    (124,306
    )
    
    
    7,179
    
    
    
    (113,408
    )Deferred revenue
    
    
    (1,723
    )
    
    
    (3,029
    )
    
    
    (4,763
    )56,642
    
    
    
    (9,054
    )
    
    
    (175,638
    )Cash provided by (used in) investing activitiesShort-term investment securities
    
    
    
    
    
    
    
    
    
    
    16,435Net proceeds from sale of property, plant & equipment net
of mortgage
    
    
    116
    
    
    
    49,870
    
    
    
    4,035Net proceeds from sale of investment in QLT USA
    
    
    16,477
    
    
    
    Restricted cash
    
    
    
    
    
    
    2,307
    
    
    
    1,689Purchase of property, plant and equipment
    
    
    (1,094
    )
    
    
    (516
    )
    
    
    (2,066
    )Proceeds from sale of long-lived assets
    
    
    
    
    
    
    171,181
    
    
    
    Acquisition of ForSight Newco. II, Inc.
    
    
    
    
    
    
    
    
    
    
    (42,631
    )Proceeds received on contingent consideration
    
    
    5,162
    
    
    
    
    
    
    
    20,661
    
    
    
    222,842
    
    
    
    (22,538
    )Cash used in financing activitiesRedemption of convertible debt
    
    
    
    
    
    
    (172,500
    )
    
    
    Common shares repurchased, including fees
    
    
    (55,911
    )
    
    
    
    
    
    
    (5,878
    )Issuance of common shares
    
    
    125
    
    
    
    
    
    
    
    1,253(55,786
    )
    
    
    (172,500
    )
    
    
    (4,625
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    1,202
    
    
    
    (2,624
    )
    
    
    30,479Net increase (decrease) in cash and cash equivalents
    
    
    22,719
    
    
    
    38,664
    
    
    
    (172,322
    )Cash and cash equivalents, beginning of year
    
    
    165,395
    
    
    
    126,731
    
    
    
    299,053Cash and cash equivalents, end of year
    
    $
    188,114
    
    
    $
    165,395
    
    
    $
    126,731Supplementary cash flow information:Interest paid
    
    $
    1,832
    
    
    $
    5,571
    
    
    $
    5,861Income taxes paid
    
    
    6,305
    
    
    
    13,997
    
    
    
    148
  71




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##### Table of Contents



Non-cash investing and financing activities:
 (1)
    
    On October 1, 2009, all of the
shares of QLT USA were sold to Tolmar for up to an aggregate $230.0 million,
plus cash on hand of $118.3 million. The aggregate $230.0 million includes contingent
consideration of $200.0 million which had a fair value of $156.2 million on
October 1, 2009, and represents a non-cash investing activity. The contingent consideration
represents amounts owed on a quarterly basis in amounts equal to 80% of the royalties paid under the license agreements
with Sanofi Synthelabo Inc. (Sanofi) and MediGene Aktiengesellschaft (MediGene) for the
commercial marketing of Eligard until the earlier of QLT receiving the additional $200.0
million or October 1, 2024. During the year ended December 31, 2009, proceeds received on
collection of the contingent consideration totalled $8.4 million. Approximately $3.3 million
of the proceeds related to the fair value change in contingent consideration and were included
in cash flows provided by operating activities and the remaining proceeds of $5.2 million were
included in cash provided by investing activities. See Note 17  Discontinued Operations and
Assets held for Sale.   72




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##### Table of Contents



CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
 Accumulated(All amounts except share and
    
    
    
    
    
    
    
    
    
    Additional
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Totalper share information are
    
    Common Shares
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Shareholdersexpressed in thousands of U.S. dollars)
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Income (Loss)
    
    
    Deficit
    
    
    Income (Loss)
    
    
    EquityBalance at December 31, 2006
    
    
    75,188,980
    
    
    $
    708,206
    
    
    $
    114,724
    
    
    $
    83,535
    
    
    $
    (603,251
    )
    
    $
    
    
    
    $
    303,214Adjustment for the
adoption of FASB
Interpretation No. 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,207
    )
    
    
    
    
    
    
    (1,207
    )Exercise of stock
options, for cash, at
prices ranging from CAD
$7.79 to CAD $9.84 per
share and U.S. $2.89 -
U.S. $9.29 per share
    
    
    181,348
    
    
    
    2,597
    
    
    
    (1,344
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,253Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    3,696
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,696Common share repurchase
    
    
    (750,000
    )
    
    
    (8,582
    )
    
    
    2,703
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,879
    )Other comprehensive loss:Cumulative translation
adjustment from
application of U.S.
dollar reporting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,728
    
    
    
    
    
    
    
    28,728
    
    
    
    28,728Unrealized gain on available for sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    15
    
    
    
    15Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (109,997
    )
    
    
    (109,997
    )
    
    
    (109,997
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (81,254
    )
    
    
    Balance at December 31, 2007
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105,197Balance at December 31, 2009
    
    
    53,789,289
    
    
    $
    506,023
    
    
    $
    275,592
    
    
    $
    102,969
    (1)
    
    $
    (480,130
    )
    
    $
    
    
    
    $
    404,454
 (1)
    
    At December 31, 2009, our accumulated other comprehensive income is entirely related to
cumulative translation adjustments from the application of U.S. dollar reporting.   73




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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 Foreign Currency Translation
  74




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##### Table of Contents



Segment Information
  Cash and Cash Equivalents
  Inventories
  Long-lived and Intangible Assets
    Goodwill Impairment
   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
  75




---



##### Table of Contents



Revenue Recognition
    Discontinued Operations
   Inventory and Cost of Sales
   76




---



##### Table of Contents



Discontinued Operations
  Stock-Based Compensation
 Share-Based Payment,
   Research and Development
  Income Taxes
   77




---



##### Table of Contents



Derivative Financial Instruments
  Discontinued Operations
   Contingent Consideration
  Contingencies Related to Legal Proceedings
  Net Income (Loss)Per Common Share
   78




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##### Table of Contents



(In thousands of U.S. dollars, except per share data)
    
    2009
    
    
    2008
    
    
    2007Numerator:Loss from continuing operations
    
    $
    (36,220
    )
    
    $
    (9,247
    )
    
    $
    (125,537
    )Income from discontinued operations, net of income
taxes
    
    
    135,654
    
    
    
    144,138
    
    
    
    15,540Net income (loss)
    
    $
    99,434
    
    
    $
    134,891
    
    
    $
    (109,997
    )Effect of dilutive securities:Convertible senior notes  interest expense
    
    
    
    
    
    
    
    
    
    
    Adjusted income (loss)
    
    $
    99,434
    
    
    $
    134,891
    
    
    $
    (109,997
    )Denominator: (thousands)Weighted average common shares outstanding
    
    
    56,194
    
    
    
    74,620
    
    
    
    74,925Effect of dilutive securities:Stock options
    
    
    56
    
    
    
    
    
    
    
    Diluted weighted average common shares outstanding
    
    
    56,250
    
    
    
    74,620
    
    
    
    74,925Basic net income (loss) per common share:Continuing operations
    
    $
    (0.64
    )
    
    $
    (0.12
    )
    
    $
    (1.68
    )Discontinued operations
    
    
    2.41
    
    
    
    1.93
    
    
    
    0.21Net income (loss)
    
    $
    1.77
    
    
    $
    1.81
    
    
    $
    (1.47
    )Diluted net income (loss) per common share:Continuing operations
    
    $
    (0.64
    )
    
    $
    (0.12
    )
    
    $
    (1.68
    )Discontinued operations
    
    
    2.41
    
    
    
    1.93
    
    
    
    0.21Net income (loss)
    
    $
    1.77
    
    
    $
    1.81
    
    
    $
    (1.47
    )
  Subsequent Events
  Recently Issued Accounting Standards
 Revenue Arrangements with Multiple Deliverables
 Accounting for Transfers of Financial Asset, an
amendment of FASB Statement No. 140
  79




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Amending FASB interpretation No. 46(R)
 Recently Adopted Accounting Standards
 Business Combinations ( Income Tax
 Noncontrolling Interests in Consolidated Financial
Statements  an amendment of Accounting Research Bulletin No. 51 (
 Effective Date of FASB Statement No. 157, (SFAS
157)
 Disclosures about Derivative Instruments and Hedging
Activities-an amendment of SFAS 133
  80




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Determining Whether a Market Is Not
Active and a Transaction Is Not Distressed (
 Recognition and Presentation of Other-Than-Temporary Impairments
 Interim Disclosures
about Fair Value of Financial Instruments
 The Hierarchy of Generally Accepted Accounting Principles
 Amendments to Certain Recognition and Disclosure
Requirements
 4. ACCOUNTS RECEIVABLE
 (In thousands of U.S. dollars)
    
    2009
    
    
    2008Visudyne
    
    $
    9,293
    
    
    $
    11,056Trade and other
    
    
    172
    
    
    
    95$
    9,465
    
    
    $
    11,151
   81




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##### Table of Contents



5. INVENTORIES
 (In thousands of U.S. dollars)
    
    2009
    
    
    2008Raw materials and supplies
    
    $
    231
    
    
    $
    49Work-in-process
    
    
    29,782
    
    
    
    26,629Finished goods
    
    
    
    
    
    
    Provision for excess inventory
    
    
    (11,560
    )
    
    
    (2,471
    )Provision for non-completion of inventory
    
    
    (2,185
    )
    
    
    (1,874
    )$
    16,268
    
    
    $
    22,333Long-term inventory
    
    
    (13,394
    )
    
    
    (19,170
    )Current inventory
    
    $
    2,874
    
    
    $
    3,163
    6. OTHER CURRENT ASSETS
 (In thousands of U.S. dollars)
    
    2009
    
    
    2008Inventory in transit held by Novartis
    
    $
    5,030
    
    
    $
    5,555Foreign exchange contracts
    
    
    
    
    
    
    3,542Prepaid expenses and other
    
    
    1,022
    
    
    
    1,377$
    6,052
    
    
    $
    10,474
   82




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##### Table of Contents



7. PROPERTY, PLANT AND EQUIPMENT
 2009Accumulated
    
    
    Net(In thousands of U.S. dollars)
    
    Cost
    
    
    Depreciation
    
    
    Book ValueLeasehold improvements
    
    $
    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
 2008Accumulated
    
    
    Net(In thousands of U.S. dollars)
    
    Cost
    
    
    Depreciation
    
    
    Book ValueLeasehold improvement
    
    $
    169
    
    
    $
    11
    
    
    $
    158Office furnishings, fixtures, and other
    
    
    38
    
    
    
    24
    
    
    
    14Research equipment
    
    
    1,124
    
    
    
    666
    
    
    
    458Commercial manufacturing equipment
    
    
    3,499
    
    
    
    2,852
    
    
    
    647Computer hardware and operating system
    
    
    10,748
    
    
    
    8,912
    
    
    
    1,836$
    15,578
    
    
    $
    12,465
    
    
    $
    3,113
 8. ACQUISITIONS AND DIVESTITURES
 Acquisition of OT-730
  Acquisition of ForSight Newco II
   83




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##### Table of Contents



(In thousands of U.S. dollars)Purchase PriceCash paid
    
    $
    (41,447
    )Acquisition costs
    
    
    (891
    )$
    (42,338
    )Assets & Liabilities AcquiredNet working capital
    
    $
    (83
    )Property & equipment
    
    
    108Accrued change of control bonus
    
    
    (552
    )In-process R&D
    
    
    42,865$
    42,338
   Sale of QLT USA
  Sale of Aczone and out-license of certain Atrigel rights
  Sale of Land and Building
    84




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##### Table of Contents



9. GOODWILL AND INTANGIBLE ASSETS
   (In thousands of U.S. dollars)
    
    GoodwillCost
    
    $
    409,586Accumulated impairment losses
    
    
    (305,628
    )Reduction in valuation allowance against deferred tax assets*
    
    
    (3,738
    )Allocation to cost of business disposals
    
    
    (5,317
    )Balance as of December 31, 2007
    
    $
    94,903Reduction in valuation allowance against deferred tax assets*
    
    
    (39,354
    )Allocation to cost of business dispositions  discontinued
operations (sale of Aczone, out-license of certain Atrigel
rights and related sale of Atrigel equipment)
    
    
    (32,404
    )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
    
    $
    
 *
    
    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 Atrix Laboratories, Inc. in 2004. (See Note 16  Income Taxes.) 10. LONG-TERM INVENTORIES AND OTHER ASSETS
 (In thousands of U.S. dollars)
    
    2009
    
    
    2008Inventory, net of provisions
    
    $
    13,394
    
    
    $
    19,170Other
    
    
    1,531
    
    
    
    1,629$
    14,925
    
    
    $
    20,799
  85




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##### Table of Contents



11. ACCRUED LIABILITIES
 (In thousands of U.S. dollars)
    
    2009
    
    
    2008Litigation charge  MEEI judgment (Note 22)
    
    $
    
    
    
    $
    125,119Royalties
    
    
    508
    
    
    
    713Ongoing damages  MEEI judgment (Note 22)
    
    
    765
    
    
    
    Compensation
    
    
    3,715
    
    
    
    3,218Interest
    
    
    10
    
    
    
    418Other
    
    
    576
    
    
    
    5$
    5,574
    
    
    $
    129,473
 12. FOREIGN EXCHANGE FACILITY
  13. SHARE CAPITAL
 (a)
    
    Authorized SharesThere were no changes to the authorized share capital of QLT during the three-year period
ended December 31, 2009.(b)
    
    Share Buy-Back ProgramOn June 4, 2007, our Board of Directors announced a share buy-back program pursuant to
which we had the right to purchase up to $50.0 million of our outstanding common shares or
up to 5.7 million common shares over a 12-month period commencing on June 11, 2007. The
share purchases were to be made as a normal course issuer bid. All purchases were to be
effected in the open market through the facilities of the TSX or NASDAQ, and in accordance
with all regulatory requirements. Cumulative purchases under this program between June 11,
2007 and June 10, 2008 were 750,000 shares at an average price of $7.82, for a total cost of
$5.9 million.On 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 2.7 million 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.
All purchases are to be effected in the open market through the facilities of the Toronto
Stock Exchange or NASDAQ Stock Market, and in accordance with regulatory requirements. The
actual number of common shares which are purchased and the timing of such purchases are
determined by management, subject to compliance with applicable law. All common shares
repurchased will be cancelled. Cumulative purchases under this program during 2009 were
866,790 shares at an average price of $4.59, for a total cost of $4.0 million.
  86




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##### Table of Contents



(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.In the year ended December 31, 2009, there were also options outstanding under the Atrix
2000 Stock Incentive Plan (Atrix Plan) that had been granted to employees of our U.S.
subsidiary, QLT USA, to purchase common shares of QLT Inc. On October 1, 2009, we sold all
of the shares of QLT USA to Tolmar, and all outstanding stock options issued under the Atrix
Plan were subsequently exercised or terminated. As of January 18, 2010, the Atrix Plan and
all previously existing equity compensation plans of QLT are expired and no options
previously granted under these plans remain outstanding. No financial
assistance is provided by us to the participants under any equity compensation plan to
facilitate the exercise of options.Below is a summary of the principal terms of the QLT Plan:QLT 2000 Incentive Stock Option Plan (Amended and Restated on May 5, 2009)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 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, 2009,
options to purchase an aggregate total of 5.8 million common shares were outstanding under
the QLT Plan and exercisable in the future at prices ranging between CAD $2.44 and CAD
$20.75 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 fair market value of our
common shares immediately preceding the grant. As such, the exercise price for options
granted is the closing price on the Toronto Stock Exchange immediately preceding the grant.Vesting.Vesting of options occurs monthly over 36 months, subject to such altered vesting
schedules as the Compensation Committee or our Board may determine. For senior managers,
executive officers and directors and excluding some situations of retirement and service
periods over 20 years, 50% of any unvested options vest on the termination of employment
without cause, and 100% of unvested options vest on the occurrence of a change of control.
  87




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##### Table of Contents



Transferability. No option may be transferred or assigned except by will or by operation of
the laws of devolution or distribution and descent or pursuant to a qualified domestic
relations order, as defined by the U.S. Internal Revenue Code of 1986 and may be exercised
only by an optionee during his or her lifetime.Amendments or Termination. The QLT Plan will terminate on March 1, 2019 or such earlier date
as the Compensation Committee determines. The Compensation Committee has the right at any
time to suspend or terminate the QLT Plan. The QLT Plan explicitly specifies: (i) the type
of amendments that can be made to the QLT Plan by the Compensation Committee without the
approval of the shareholders, and (ii) the type of amendments that the Compensation
Committee may not make to the QLT Plan or any specific option grant without shareholder or
applicable optionee, as the case may be, approval.
  Weighted-AverageWeighted Average
    
    
    Remaining Contractual(In Canadian dollars)
    
    Number of Options
    
    
    Exercise Price
    
    
    Term (Years)Outstanding at December 31, 2006
    
    
    4,066,022
    
    
    $
    13.87Granted
    
    
    1,398,096
    
    
    
    8.38Exercised
    
    
    (30,632
    )
    
    
    8.37Forfeited and expired
    
    
    (1,080,114
    )
    
    
    16.40Outstanding at December 31, 2007
    
    
    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
    
    
    
    5.84
    
    
    
    2.83Exercisable at December 31, 2009
    
    
    3,639,411
    
    
    
    7.18
    
    
    
    2.21
  88




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##### Table of Contents



Weighted-AverageWeighted Average
    
    
    Remaining Contractual(In U.S. dollars)
    
    Number of Options
    
    
    Exercise Price
    
    
    Term (Years)Outstanding at December 31, 2006
    
    
    3,000,156
    
    
    $
    12.31Granted
    
    
    211,235
    
    
    
    7.07Exercised
    
    
    (150,716
    )
    
    
    6.89Forfeited and expired
    
    
    (1,768,292
    )
    
    
    12.76Outstanding at December 31, 2007
    
    
    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
    
    
    $
    8.13
    
    
    
    0.05Exercisable at December 31, 2009
    
    
    78,471
    
    
    
    8.13
    
    
    
    0.05
   2009
    
    
    2008
    
    
    2007Annualized volatility
    
    
    53.8
    %
    
    
    42.1
    %
    
    
    37.0
    %Risk-free interest rate
    
    
    1.8
    %
    
    
    2.9
    %
    
    
    4.4
    %Expected life (years)
    
    
    3.6
    
    
    
    3.9
    
    
    
    3.3Dividends
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0
     89




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##### Table of Contents



(In thousands of U.S. dollars, except share information)
    
    2009
    
    
    2008
    
    
    2007Cost of sales
    
    $
    31
    
    
    $
    17
    
    
    $
    31Research and development
    
    
    939
    
    
    
    991
    
    
    
    1,916Selling, general and administrative
    
    
    1,208
    
    
    
    1,564
    
    
    
    1,129Restructuring
    
    
    
    
    
    
    540
    
    
    
    40Discontinued operations
    
    
    (17
    )
    
    
    279
    
    
    
    386Share based compensation expense before income taxes
    
    
    2,161
    
    
    
    3,391
    
    
    
    3,502Related income tax benefits
    
    
    (48
    )
    
    
    (88
    )
    
    
    (152
    )Share based compensation, net of income taxes
    
    $
    2,113
    
    
    $
    3,303
    
    
    $
    3,350
 14. NET PRODUCT REVENUE
  (In thousands of U.S. dollars)
    
    2009
    
    
    2008
    
    
    2007Visudyne sales by Novartis
    
    $
    105,657
    
    
    $
    141,865
    
    
    $
    214,857Less: Marketing and distribution costs
    
    
    (34,346
    )
    
    
    (62,213
    )
    
    
    (103,903
    )Less: Inventory costs
    
    
    (6,031
    )
    
    
    (11,153
    )
    
    
    (17,508
    )Less: Royalties to third parties
    
    
    (2,276
    )
    
    
    (3,040
    )
    
    
    (4,546
    )$
    63,004
    
    
    $
    65,459
    
    
    $
    88,900QLTs 50% share of Novartis net proceeds
from Visudyne sales
    
    $
    31,502
    
    
    $
    32,730
    
    
    $
    44,450Add: Advance on inventory costs from
Novartis
    
    
    5,608
    
    
    
    7,142
    
    
    
    11,332Add: Royalties reimbursed to QLT
    
    
    2,272
    
    
    
    3,090
    
    
    
    4,516Add: Other costs reimbursed to QLT
    
    
    2,724
    
    
    
    5,350
    
    
    
    7,448Revenue from Visudyne sales
    
    $
    42,106
    
    
    $
    48,312
    
    
    $
    67,746
  15. RESTRUCTURING CHARGE
   90




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##### Table of Contents



Employee
    
    
    
    
    
    
    ContractTermination
    
    
    Asset
    
    
    Termination(In thousands of U. S. dollars)
    
    costs(1)
    
    
    Write-downs
    
    
    costs
    
    
    TotalBalance at December 31, 2007(2)
    
    $
    119
    
    
    $
    
    
    
    $
    
    
    
    $
    119Restructuring charge
    
    
    7,639
    
    
    
    1,539
    
    
    
    339
    
    
    
    9,517Foreign exchange
    
    
    (132
    )
    
    
    
    
    
    
    
    
    
    
    (132
    )Cash payments
    
    
    (6,772
    )
    
    
    
    
    
    
    (339
    )
    
    
    (7,111
    )Non-cash portion
    
    
    (540
    )
    
    
    (1,539
    )
    
    
    
    
    
    
    (2,079
    )Balance at December 31, 2008
    
    $
    314
    
    
    $
    
    
    
    $
    
    
    
    $
    314Restructuring adjustment
    
    
    (263
    )
    
    
    
    
    
    
    
    
    
    
    (263
    )Foreign exchange
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    13Cash payments
    
    
    (64
    )
    
    
    
    
    
    
    
    
    
    
    (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 previous restructurings. 16. INCOME TAXES
 Recovery of (provision for) income taxes
  (In thousands of U.S. dollars)
    
    2009
    
    
    2008
    
    
    2007Canada
    
    $
    (15,624
    )
    
    $
    9,601
    
    
    $
    (122,644
    )United States and other
    
    
    (25,913
    )
    
    
    (17,045
    )
    
    
    (43,297
    )Loss before income taxes and
discontinued operations
    
    $
    (41,537
    )
    
    $
    (7,444
    )
    
    $
    (165,941
    )
  (In thousands of U.S. dollars)
    
    2009
    
    
    2008
    
    
    2007Canada
    
    $
    5,156
    
    
    $
    (2,058
    )
    
    $
    40,518United States and other
    
    
    161
    
    
    
    255
    
    
    
    (114
    )Recovery of (provision for) income taxes
    
    $
    5,317
    
    
    $
    (1,803
    )
    
    $
    40,404
  91




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(In thousands of U.S. dollars)
    
    2009
    
    
    2008
    
    
    2007Current income taxes
    
    $
    (10
    )
    
    $
    (2,187
    )
    
    $
    41,275Deferred income taxes
    
    
    5,327
    
    
    
    384
    
    
    
    (871
    )Recovery of (provision for) income taxes
    
    $
    5,317
    
    
    $
    (1,803
    )
    
    $
    40,404
  (In thousands of U.S. dollars)
    
    2009
    
    
    2008
    
    
    2007Loss before income taxes
and discontinued
operations
    
    $
    (41,537
    )
    
    $
    (7,444
    )
    
    $
    (165,941
    )Canadian statutory tax
rates
    
    
    30.00
    %
    
    
    31.00
    %
    
    
    34.12
    %Expected income tax
recovery
    
    $
    12,461
    
    
    $
    2,308
    
    
    $
    56,619Purchased in-process
research and development
    
    
    (452
    )
    
    
    
    
    
    
    (17,074
    )Net increase in valuation
allowance
    
    
    (11,179
    )
    
    
    (6,667
    )
    
    
    (633
    )Non-taxable portion of
capital gains
    
    
    849
    
    
    
    1,694
    
    
    
    Tax recovery (cost) of
undistributed earnings of
affiliates
    
    
    1,613
    
    
    
    (1,613
    )
    
    
    Foreign tax rate
differences
    
    
    2,537
    
    
    
    1,516
    
    
    
    2,528Investment tax credits
    
    
    1,626
    
    
    
    963
    
    
    
    2,532Prior year tax rate
differences in loss
carryback years
    
    
    (92
    )
    
    
    
    
    
    
    (2,328
    )Stock options
    
    
    (547
    )
    
    
    (876
    )
    
    
    (1,129
    )Future tax rate reductions
    
    
    (1,385
    )
    
    
    
    
    
    
    (519
    )Other
    
    
    (114
    )
    
    
    872
    
    
    
    408Recovery of (provision
for) income taxes
    
    $
    5,317
    
    
    $
    (1,803
    )
    
    $
    40,404
  92




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Deferred tax assets and liabilities
  (In thousands of U.S. dollars)
    
    2009
    
    
    2008Deferred tax assetsNet operating loss carryforwards
    
    $
    20,200
    
    
    $
    9,114Contingent consideration
    
    
    5,386
    
    
    
    Research & development tax credit carryforwards
    
    
    3,504
    
    
    
    3,308Capital loss carryforwards
    
    
    40,004
    
    
    
    Depreciable and amortizable assets
    
    
    4,182
    
    
    
    3,365Provision for excess and non-completion of inventory
    
    
    3,436
    
    
    
    1,129Other temporary differences
    
    
    1,084
    
    
    
    559Total gross deferred income tax assets
    
    $
    77,796
    
    
    $
    17,475Less: valuation allowance
    
    
    (58,669
    )
    
    
    (9,843
    )Total deferred income tax assets
    
    $
    19,127
    
    
    $
    7,632Less: current portion
    
    
    (5,608
    )
    
    
    (403
    )Net long-term portion of deferred income tax assets
    
    $
    13,519
    
    
    $
    7,229Deferred tax liabilitiesTax cost of undistributed earnings
    
    
    
    
    
    $
    (1,619
    )Capital gains reserve
    
    
    (199
    )
    
    
    (471
    )Total deferred income tax liabilities
    
    $
    (199
    )
    
    $
    (2,090
    )Net deferred income tax assets
    
    $
    18,928
    
    
    $
    5,542
     93




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(In thousands of U.S. dollars)
    
    2009
    
    
    2008
    
    
    2007Balance as at January 1
    
    $
    766
    
    
    $
    756
    
    
    $
    715Increases related to current year tax positions
    
    
    365
    
    
    
    110
    
    
    
    41Changes in tax positions of a prior period
    
    
    358
    
    
    
    (100
    )
    
    
    Settlements
    
    
    
    
    
    
    
    
    
    
    Lapse of Statute of Limitations
    
    
    
    
    
    
    
    
    
    
    Balance as at December 31
    
    $
    1,489
    
    
    $
    766
    
    
    $
    756
     17. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
    94




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December 31,
    
    
    December 31,(In thousands of U.S. dollars)
    
    2009
    
    
    2008Assets held for saleAccounts receivable
    
    $
    
    
    
    $
    19,944Income taxes receivable
    
    
    
    
    
    
    9,098Inventories
    
    
    
    
    
    
    8,469Deferred income tax assets
    
    
    
    
    
    
    34,509Property, plant and equipment
    
    
    
    
    
    
    71Other
    
    
    
    
    
    
    672$
    
    
    
    $
    72,763Liabilities held for saleAccounts payable
    
    $
    
    
    
    $
    4,701Deferred revenue
    
    
    
    
    
    
    2,938Uncertain tax position liabilities
    
    
    
    
    
    
    1,267$
    
    
    
    $
    8,906
  ,
   95




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2009Nine monthsended(In thousands of U.S. dollars)
    
    September 30
    
    
    2008
    
    
    2007Product revenue and other
    
    $
    28,625
    
    
    $
    42,186
    
    
    $
    29,797Royalty revenue
    
    
    32,148
    
    
    
    33,643
    
    
    
    30,362Net revenue
    
    
    60,773
    
    
    
    75,829
    
    
    
    60,159Operating pre-tax income
    
    
    29,174
    
    
    
    21,704
    
    
    
    15,212Other gains
    
    
    1,828
    
    
    
    
    
    
    
    4,000Gain on sale of discontinued operations
    
    
    107,363
    
    
    
    134,874
    
    
    
    Pre-tax income
    
    
    138,365
    
    
    
    156,578
    
    
    
    19,212Provision for income taxes(1)
    
    
    (2,711
    )
    
    
    (67,160
    )
    
    
    (3,672
    )Recovery of income taxes(2)
    
    
    
    
    
    
    54,720
    
    
    
    Net income from discontinued operations
    
    $
    135,654
    
    
    $
    144,138
    
    
    $
    15,540
 (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. (See Note 16  Income Taxes.) 18. CONTINGENT CONSIDERATION
  19. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
   96




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Fair Value Measurements at December 31, 2009Carrying ValueDecember 31,(In thousands of U.S. dollars)
    
    2009
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Assets:Cash and cash equivalents
    
    $
    188,114
    
    
    $
    188,114
    
    
    $
    
    
    
    $
    Contingent consideration(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    151,078Total
    
    $
    188,114
    
    
    $
    188,114
    
    
    $
    
    
    
    $
    151,078
 (1)
    
    To estimate the fair value of contingent consideration at December 31, 2009, we used a
discounted cash flow model based on estimated timing and amount of future cash flows,
discounted using a cost of capital of 9.5% 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 and pricing assumptions based on historical sales data and expected
future competition. If the discount rate were to increase by 1%, the contingent
consideration would decrease by $3.4 million, from $151.1 million to $147.7 million. If
estimated future revenues were to decrease by 10%, the contingent consideration would
decrease by $3.9 million, from $151.1 million to $147.2 million.  (In thousands of U.S. dollars)
    
    Level 3Balance at December 31, 2008
    
    $
    Transfers to Level 3
    
    
    156,240Net settlements
    
    
    (8,441
    )Fair value change in contingent consideration
    
    
    3,279Balance at December 31, 2009
    
    $
    151,078
 .
     97




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20. COMMITMENTS AND GUARANTEES
   (In thousands of U.S. dollars)Year ending December 31,2010
    
    $
    1,6792011
    
    
    1,6532012
    
    
    1,5862013
    
    
    1,5632014 and thereafter
    
    
    Total
    
    $
    6,481
    98




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##### Table of Contents



21. SEGMENT INFORMATION
   (1)
 (In thousands of U.S. dollars)
    
    2009
    
    
    2008
    
    
    2007U.S.
    
    $
    16,394
    
    
    $
    16,612
    
    
    $
    15,063Europe
    
    
    10,960
    
    
    
    13,953
    
    
    
    35,512Canada
    
    
    2,526
    
    
    
    4,529
    
    
    
    7,105Japan
    
    
    8,301
    
    
    
    8,746
    
    
    
    6,278Other
    
    
    3,925
    
    
    
    4,472
    
    
    
    3,788$
    42,106
    
    
    $
    48,312
    
    
    $
    67,746
  (In thousands of U.S. dollars)
    
    2009
    
    
    2008Canada
    
    $
    1,977
    
    
    $
    2,798U.S.
    
    
    620
    
    
    
    315$
    2,597
    
    
    $
    3,113
 (1)
    
    Revenues are attributable to a geographic segment based on the location of the customer.
Novartis contributed all of our total revenues in each of the last three years. 22. CONTINGENCIES
   Settlement of Litigation with Massachusetts General Hospital
   99




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100




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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
   101




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REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
  Internal ControlIntegrated
Framework
    Internal
ControlIntegrated Framework
    
 
  102




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Item 9B. OTHER INFORMATION
  PART III
  
 Item 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
   OUR EXECUTIVE OFFICERS
  Name
    
    Age
    
    PositionRobert L. Butchofsky
    
    48
    
    President and Chief Executive OfficerCameron R. Nelson
    
    44
    
    Vice President, Finance and Chief Financial OfficerLinda M. Lupini
    
    50
    
    Senior Vice President, Human Resources and Organizational DevelopmentAlexander R. Lussow
    
    47
    
    Senior Vice President, Commercial Operations and Business Development
 
 Item 11.
    
    EXECUTIVE COMPENSATION
   103




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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)
    
    
    5,826,812
    (1)
    
    CAD$
    5.84
    
    
    
    1,588,173Equity compensation
plans approved by
security holders
(Atrix 2000 Stock
Incentive Plan)
    
    
    78,471
    (2)
    
    USD$
    8.13
    
    
    
    
    (3)Total
    
    
    5,905,283
    
    
    
    
    
    
    
    1,588,173
 (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.(2)
    
    On October 1, 2009, we sold all of the shares of QLT USA to Tolmar, and all
outstanding stock options issued under the 2000 Atrix Performance Stock Option Plan were
subsequently exercised or terminated.(3)
    
    The Atrix 2000 Stock Incentive Plan was only available for issuance of stock options
to employees, officers, and directors of QLT USA. Therefore, there are no further shares available
for issuance under this plan.   104




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Item 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 Item 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
   105




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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.
 
 (ii)
    
    Schedules required by Article 12 of Regulation S-X:
  Schedule II  Valuation and Qualifying Accounts for the Years ended December 31, 2009,
2008 and 2007.
 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 year2009
    
    $
    1,874
    
    
    $
    
    
    
    $
    311
    
    
    $
    
    
    
    $
    2,1852008
    
    
    2,292
    
    
    
    
    
    
    
    ( 417
    )
    
    
    (1
    )
    
    
    1,8742007
    
    
    4,016
    
    
    
    
    
    
    
    648
    
    
    
    (2,372
    )
    
    
    2,292
 (1)
    
    Foreign currency translation adjustments. Reserve for inventory obsolescence  (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 year2009
    
    $
    2,471
    
    
    $
    8,114
    
    
    
    975
    
    
    $
    
    
    
    $
    11,5602008
    
    
    3,020
    
    
    
    
    
    
    
    (549
    )
    
    
    
    
    
    
    2,4712007
    
    
    
    
    
    
    3,074
    
    
    
    (54
    )
    
    
    
    
    
    
    3,020
 (1)
    
    Foreign currency translation adjustments. Deferred tax asset valuation allowance  (In thousands of U.S. dollars)
 AdditionsBalance at
    
    
    charged to
    
    
    Write-offsbeginning of
    
    
    costs and
    
    
    and provision
    
    
    Balance atYear
    
    year
    
    
    expenses
    
    
    reduction
    
    
    end of year2009
    
    $
    9,843
    
    
    $
    48,826
    
    
    $
    
    
    
    $
    58,6692008
    
    
    3,150
    
    
    
    7,261
    
    
    
    (568
    )
    
    
    9,8432007
    
    
    759
    
    
    
    3,473
    
    
    
    (1,082
    )
    
    
    3,150
 Exhibits
   106




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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)  107




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POWER OF ATTORNEY
    Signatures
    
    Title
    
    Date/s/
Robert L. Butchofsky

Robert L. Butchofsky
    
    President, Chief Executive Officer and Director
(Principal Executive Officer)
    
    March 10, 2010/s/ Cameron R. Nelson

Cameron R. Nelson
    
    Vice President, Finance and Chief Financial Officer

(Principal Financial and Accounting Officer)
    
    March 10, 2010/s/ C. Boyd Clarke
    
    Chairman of the Board of Directors and Director
    
    March 10, 2010C. Boyd Clarke/s/ Bruce L.A. Carter
    
    Director
    
    March 10, 2010Bruce L.A. Carter/s/ Peter A. Crossgrove
    
    Director
    
    March 10, 2010Peter A. Crossgrove/s/ Kathryn E. Falberg
    
    Director
    
    March 10, 2010Kathryn E. Falberg/s/ Ian J. Massey
    
    Director
    
    March 10, 2010Ian J. Massey/s/ Joseph L. Turner
    
    Director
    
    March 10, 2010Joseph L. Turner/s/ Jack L. Wood
    
    Director
    
    March 10, 2010Jack L. Wood
  108




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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.
  109




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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.
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Exhibit
    
    Description
    
    Location10.20
    
    
    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, 2006.10.21
    *
    
    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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##### Table of Contents



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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##### Table of Contents



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 the Companys
Current Report on Form
8-K dated October 19,
2009.10.49
    *
    
    2000 QLT Incentive Stock Option Plan (as amended
and restated effective May 5, 2009).
    
    Exhibit to the
Companys Registration
Statement on Form S-8
filed on October 14,
2009.11
    
    
    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.32.1
    
    
    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.  113