##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended September 30, 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.
 (Exact name of registrant as specified in its charter)
 British Columbia, Canada
    
    N/A(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)101- 887 Great Northern Way, Vancouver, B.C., Canada
    
    V5T 4T5(Address of principal executive offices)
    
    (Zip code)
 (604) 707-7000
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



QLT INC.
 QUARTERLY REPORT ON FORM 10-Q
September 30, 2009
 TABLE OF CONTENTS
 ITEM
    
    
    
    PAGEPART I  FINANCIAL INFORMATION1.
    
    FINANCIAL STATEMENTS
    
    
    1Unaudited Condensed Consolidated Balance Sheets 
as of
September 30, 2009 and December 31, 2008
    
    
    1Unaudited Condensed Consolidated Statements of Operations for the three and nine
months ended September 30, 2009 and September 30, 2008
    
    
    2Unaudited Condensed Consolidated Statements of Cash Flows for the three and nine
months ended September 30, 2009 and September 30, 2008
    
    
    3Unaudited Condensed Consolidated Statement of Changes in Shareholders
Equity and Comprehensive
Income for the three and nine months ended September 30, 2009
    
    
    4Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    52.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    183.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    274.
    
    CONTROLS AND PROCEDURES
    
    
    28PART II  OTHER INFORMATION1.
    
    LEGAL PROCEEDINGS
    
    
    291A.
    
    RISK FACTORS
    
    
    296.
    
    EXHIBITS
    
    
    42Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 QLT Inc.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 (In thousands of U.S. dollars)
    
    September 30, 2009
    
    
    December 31, 2008ASSETSCurrent assetsCash and cash equivalents
    
    $
    194,039
    
    
    $
    165,395Restricted cash (Note 12)
    
    
    
    
    
    
    124,578Accounts receivable
    
    
    8,209
    
    
    
    11,151Income taxes receivable
    
    
    407
    
    
    
    41,801Inventories (Note 2)
    
    
    3,922
    
    
    
    3,163Current portion of deferred income tax assets
    
    
    1,279
    
    
    
    403Mortgage receivable
    
    
    11,221
    
    
    
    Assets held for sale (Note 10)
    
    
    58,543
    
    
    
    72,763Other (Note 3)
    
    
    7,240
    
    
    
    10,474284,860
    
    
    
    429,728Property, plant and equipment
    
    
    2,345
    
    
    
    3,113Deferred income tax assets
    
    
    6,772
    
    
    
    5,139Goodwill (Note 10)
    
    
    23,145
    
    
    
    23,145Mortgage receivable
    
    
    
    
    
    
    9,834Long-term inventories and other assets (Note 4)
    
    
    18,304
    
    
    
    20,799$
    335,426
    
    
    $
    491,758LIABILITIESCurrent liabilitiesAccounts payable
    
    $
    4,676
    
    
    $
    4,865Accrued restructuring charge (Note 7)
    
    
    123
    
    
    
    314Accrued liabilities (Note 5)
    
    
    4,097
    
    
    
    129,473Liabilities held for sale (Note 10)
    
    
    7,316
    
    
    
    8,906Deferred revenue
    
    
    4,306
    
    
    
    4,20420,518
    
    
    
    147,762Uncertain tax position liabilities
    
    
    1,447
    
    
    
    76621,965
    
    
    
    148,528CONTINGENCIES (Note 12)SHAREHOLDERS EQUITYShare capital (Note 8)Authorized500,000,000 common shares without par value5,000,000 first preference shares without par value,
issuable
in seriesIssued and outstandingCommon shares
    
    
    514,056
    
    
    
    702,221September 30, 2009  54,630,692 sharesDecember 31, 2008  74,620,328 sharesAdditional paid in-capital
    
    
    269,035
    
    
    
    123,367Accumulated deficit
    
    
    (560,712
    )
    
    
    (579,564
    )Accumulated other comprehensive income
    
    
    91,082
    
    
    
    97,206313,461
    
    
    
    343,230$
    335,426
    
    
    $
    491,758
   1




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##### Table of Contents



QLT Inc.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,(In thousands of U.S. dollars except share and per share information)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008RevenuesNet product revenue (Note 9)
    
    $
    8,785
    
    
    $
    10,868
    
    
    $
    31,296
    
    
    $
    36,462Costs and expensesCost of sales
    
    
    2,202
    
    
    
    2,989
    
    
    
    12,693
    
    
    
    10,663Research and development
    
    
    7,375
    
    
    
    6,887
    
    
    
    20,486
    
    
    
    23,049Selling, general and administrative
    
    
    4,500
    
    
    
    4,422
    
    
    
    12,484
    
    
    
    15,519Depreciation
    
    
    370
    
    
    
    464
    
    
    
    1,061
    
    
    
    2,566Litigation
    
    
    316
    
    
    
    
    
    
    
    650
    
    
    
    864Gain on sale of long-lived assets
    
    
    
    
    
    
    (21,289
    )
    
    
    
    
    
    
    (21,289
    )Restructuring (Note 7)
    
    
    3
    
    
    
    349
    
    
    
    (144
    )
    
    
    9,43914,766
    
    
    
    (6,178
    )
    
    
    47,230
    
    
    
    40,811Operating (loss) income
    
    
    (5,981
    )
    
    
    17,046
    
    
    
    (15,934
    )
    
    
    (4,349
    )Investment and other income (expense)Net foreign exchange gains (losses)
    
    
    7,517
    
    
    
    (296
    )
    
    
    14,292
    
    
    
    (58
    )Interest income
    
    
    1,853
    
    
    
    1,853
    
    
    
    3,818
    
    
    
    5,789Interest expense
    
    
    
    
    
    
    (2,743
    )
    
    
    (1,848
    )
    
    
    (8,811
    )Other (losses) gains
    
    
    (9
    )
    
    
    26
    
    
    
    16
    
    
    
    2889,361
    
    
    
    (1,160
    )
    
    
    16,278
    
    
    
    (2,792
    )Income (loss) from continuing operations before income taxes
    
    
    3,380
    
    
    
    15,886
    
    
    
    344
    
    
    
    (7,141
    )Provision for income taxes
    
    
    (1,144
    )
    
    
    (3,749
    )
    
    
    (472
    )
    
    
    (144
    )Income (loss) from continuing operations
    
    
    2,236
    
    
    
    12,137
    
    
    
    (128
    )
    
    
    (7,285
    )Income from discontinued operations, net of income taxes (Note 10)
    
    
    6,685
    
    
    
    134,789
    
    
    
    18,980
    
    
    
    136,302Net income
    
    $
    8,921
    
    
    $
    146,926
    
    
    $
    18,852
    
    
    $
    129,017Basic net income per common shareContinuing operations
    
    $
    0.04
    
    
    $
    0.16
    
    
    $
    (0.00
    )
    
    $
    (0.10
    )Discontinued operations
    
    
    0.12
    
    
    
    1.81
    
    
    
    0.33
    
    
    
    1.83Net income
    
    $
    0.16
    
    
    $
    1.97
    
    
    $
    0.33
    
    
    $
    1.73Diluted net income per common shareContinuing operations
    
    $
    0.04
    
    
    $
    0.16
    
    
    $
    (0.00
    )
    
    $
    (0.10
    )Discontinued operations
    
    
    0.12
    
    
    
    1.81
    
    
    
    0.33
    
    
    
    1.83Net income
    
    $
    0.16
    
    
    $
    1.97
    
    
    $
    0.33
    
    
    $
    1.73Weighted average number of common shares outstanding (thousands)Basic
    
    
    54,624
    
    
    
    74,620
    
    
    
    56,844
    
    
    
    74,620Diluted
    
    
    54,765
    
    
    
    74,620
    
    
    
    56,844
    
    
    
    74,620
   2




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##### Table of Contents



QLT Inc.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,(In thousands of U.S. dollars)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Cash provided by (used in) operating activitiesNet income (loss)
    
    $
    8,921
    
    
    $
    146,926
    
    
    $
    18,852
    
    
    $
    129,017Adjustments to reconcile net income (loss) to net cash
from operating activitiesDepreciation
    
    
    373
    
    
    
    464
    
    
    
    1,072
    
    
    
    2,566Write-down of inventory
    
    
    
    
    
    
    
    
    
    
    4,638
    
    
    
    7,066Write-down of investment
    
    
    
    
    
    
    
    
    
    
    128
    
    
    
    Share-based compensation
    
    
    547
    
    
    
    789
    
    
    
    1,582
    
    
    
    2,830Amortization of deferred financing expenses
    
    
    
    
    
    
    166
    
    
    
    
    
    
    
    851Unrealized foreign exchange (gains) losses
    
    
    (7,445
    )
    
    
    511
    
    
    
    (12,418
    )
    
    
    6,122Interest on restricted cash
    
    
    
    
    
    
    (675
    )
    
    
    (295
    )
    
    
    (2,763
    )Deferred income taxes
    
    
    2,399
    
    
    
    6,285
    
    
    
    5,100
    
    
    
    11,038Gain on sale of long-lived assets
    
    
    
    
    
    
    (21,289
    )
    
    
    
    
    
    
    (21,289
    )Gain on sale of discontinued operations
    
    
    
    
    
    
    (134,264
    )
    
    
    
    
    
    
    (134,264
    )Changes in non-cash operating assets and liabilitiesAppeal bond collateral
    
    
    
    
    
    
    
    
    
    
    124,622
    
    
    
    Accounts receivable
    
    
    3,851
    
    
    
    533
    
    
    
    9,010
    
    
    
    (5,102
    )Inventories
    
    
    2,255
    
    
    
    (3,729
    )
    
    
    (2,302
    )
    
    
    (5,369
    )Long term deposits and other assets
    
    
    (222
    )
    
    
    2,282
    
    
    
    4,394
    
    
    
    267Accounts payable
    
    
    349
    
    
    
    331
    
    
    
    (922
    )
    
    
    819Income taxes receivable / payable
    
    
    47,100
    
    
    
    (12,367
    )
    
    
    51,801
    
    
    
    (19,429
    )Accrued restructuring charge
    
    
    (27
    )
    
    
    (349
    )
    
    
    (618
    )
    
    
    997Other accrued liabilities
    
    
    (298
    )
    
    
    1,755
    
    
    
    (125,640
    )
    
    
    8,688Deferred revenue
    
    
    (1,023
    )
    
    
    (1,633
    )
    
    
    (1,570
    )
    
    
    (1,633
    )56,780
    
    
    
    (14,264
    )
    
    
    77,434
    
    
    
    (19,588
    )Cash (used in) provided by investing activitiesNet proceeds from sale of property, plant & equipment,
net of mortgage
    
    
    
    
    
    
    49,390
    
    
    
    
    
    
    
    49,390Net proceeds from sale of long-lived assets
    
    
    
    
    
    
    170,537
    
    
    
    
    
    
    
    170,537Restricted cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,307Purchase of property, plant and equipment
    
    
    (469
    )
    
    
    (199
    )
    
    
    (492
    )
    
    
    (374
    )(469
    )
    
    
    219,728
    
    
    
    (492
    )
    
    
    221,860Cash provided by (used in) financing activitiesRedemption of convertible debt
    
    
    
    
    
    
    (172,500
    )
    
    
    
    
    
    
    (172,500
    )Common shares repurchased, including fees
    
    
    
    
    
    
    
    
    
    
    (51,889
    )
    
    
    Issuance of common shares
    
    
    35
    
    
    
    
    
    
    
    35
    
    
    
    35
    
    
    
    (172,500
    )
    
    
    (51,854
    )
    
    
    (172,500
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    2,766
    
    
    
    2,091
    
    
    
    3,556
    
    
    
    (558
    )Net increase in cash and cash equivalents
    
    
    59,112
    
    
    
    35,055
    
    
    
    28,644
    
    
    
    29,214Cash and cash equivalents, beginning of period
    
    
    134,927
    
    
    
    120,890
    
    
    
    165,395
    
    
    
    126,731Cash and cash equivalents, end of period
    
    $
    194,039
    
    
    $
    155,945
    
    
    $
    194,039
    
    
    $
    155,945Supplementary cash flow information:Interest paid
    
    $
    112
    
    
    $
    2,882
    
    
    $
    1,832
    (1)
    
    $
    5,501Income taxes paid
    
    
    572
    
    
    
    16,901
    
    
    
    2,908
    
    
    
    16,925
 (1)
    
    At September 30, 2009 interest paid relates to the MEEI judgment.   3




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##### Table of Contents



QLT Inc.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME
 (Unaudited)
 AccumulatedAdditional
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Total(All amounts except 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,
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
    )
    
    $
    
    
    
    $
    343,230Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    524
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    524Common share repurchase
    
    
    (20,000,000
    )
    
    
    (188,212
    )
    
    
    144,015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,197
    )Other comprehensive
income:Cumulative translation
adjustment from
application of U.S.
dollar reporting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,378
    )
    
    
    
    
    
    
    (9,378
    )
    
    
    (9,378
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,301
    
    
    
    1,301
    
    
    
    1,301Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,077
    )
    
    
    Balance at March 31, 2009
    
    
    54,620,328
    
    
    $
    514,009
    
    
    $
    267,906
    
    
    $
    87,828
    
    
    $
    (578,263
    )
    
    $
    
    
    
    $
    291,480Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    571
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    571Other comprehensive
income:Cumulative translation
adjustment from
application of U.S.
dollar reporting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,604
    
    
    
    
    
    
    
    1,604
    
    
    
    1,604Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,629
    
    
    
    8,629
    
    
    
    8,629Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,233
    
    
    
    Balance at June 30, 2009
    
    
    54,620,328
    
    
    $
    514,009
    
    
    $
    268,477
    
    
    $
    89,432
    
    
    $
    (569,633
    )
    
    $
    
    
    
    $
    302,285Exercise of stock
options at prices
ranging from CAD $2.44
to CAD $3.73 per share
    
    
    10,364
    
    
    
    47
    
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    570
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    570Other comprehensive
income:Cumulative translation
adjustment from
application of U.S.
dollar reporting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,650
    
    
    
    
    
    
    
    1,650
    
    
    
    1,650Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,921
    
    
    
    8,921
    
    
    
    8,921Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,571
    
    
    
    Balance at September 30,
2009
    
    
    54,630,692
    
    
    $
    514,056
    
    
    $
    269,035
    
    
    $
    91,082
    (1)
    
    $
    (560,712
    )
    
    $
    
    
    
    $
    313,461
 (1)
    
    At September 30, 2009 our accumulated other comprehensive income is entirely related to
cumulative translation adjustments from the application of U.S. dollar reporting.   4




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##### Table of Contents



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  1. CONDENSED SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Business
 ® ®
 Basis of Presentation
   ®
  Principles of Consolidation
  Use of Estimates
   5




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##### Table of Contents



Reporting Currency and Foreign Currency Translation
  Segmented Information
  Goodwill Impairment
  Revenue Recognition
 Net Product Revenue
      6




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##### Table of Contents



Royalties
   Assets Held for Sale and Discontinued Operations
   Income Taxes
  Contingencies Related to Legal Proceedings
  Net Income (Loss) Per Common Share
   7




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##### Table of Contents



Three months ended
    
    
    Nine months ended(In thousands of U.S. dollars, except
    
    September 30,
    
    
    September 30,share and per share data)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Numerator:Income (loss) from continuing operations
    
    $
    2,236
    
    
    $
    12,137
    
    
    $
    (128
    )
    
    $
    (7,285
    )Income from discontinued operations,
net of income taxes
    
    
    6,685
    
    
    
    134,789
    
    
    
    18,980
    
    
    
    136,302Net income
    
    $
    8,921
    
    
    $
    146,926
    
    
    $
    18,852
    
    
    $
    129,017Denominator: (thousands)Weighted average common shares
outstanding
    
    
    54,624
    
    
    
    74,620
    
    
    
    56,844
    
    
    
    74,620Effect of dilutive securities:Stock options
    
    
    141
    
    
    
    
    
    
    
    
    
    
    
    Diluted weighted average common shares
outstanding
    
    
    54,765
    
    
    
    74,620
    
    
    
    56,844
    
    
    
    74,620
  Fair Value of Financial Assets and Liabilities
  Subsequent Events
  Recently Issued Accounting Standards
 Revenue Arrangements with Multiple Deliverables
 Accounting for Transfers of Financial Asset, an
amendment of FASB Statement No. 140
  8




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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 or
 Effective Date of FASB Statement No. 157, or SFAS
157,
 Disclosures about Derivative Instruments and Hedging
Activities-an amendment of SFAS 133,
 Determining Whether a Market Is Not
Active and a Transaction Is Not Distressed,
  9




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##### Table of Contents



Recognition and Presentation of Other-Than-Temporary Impairments
 Interim Disclosures
about Fair Value of Financial Instruments
 The Hierarchy of Generally Accepted Accounting Principles
 Subsequent Events
 2. INVENTORIES
 (In thousands of U.S. dollars)
    
    September 30, 2009
    
    
    December 31, 2008Raw materials and supplies
    
    $
    234
    
    
    $
    49Work-in-process
    
    
    30,522
    
    
    
    26,629Provision for excess inventory
    
    
    (7,883
    )
    
    
    (2,471
    )Provision for non-completion of product inventory
    
    
    (2,139
    )
    
    
    (1,874
    )20,734
    
    
    
    22,333Less: Long-term inventory, net of provisions
    
    
    (16,812
    )
    
    
    (19,170
    )$
    3,922
    
    
    $
    3,163
    10




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##### Table of Contents



3. OTHER CURRENT ASSETS
 (In thousands of U.S. dollars)
    
    September 30, 2009
    
    
    December 31, 2008Inventory in transit held by Novartis
    
    $
    5,642
    
    
    $
    5,555Foreign exchange contracts
    
    
    155
    
    
    
    3,542Prepaid expenses and other
    
    
    1,443
    
    
    
    1,377$
    7,240
    
    
    $
    10,474
  4. LONG-TERM INVENTORIES AND OTHER ASSETS
 (In thousands of U.S. dollars)
    
    September 30, 2009
    
    
    December 31, 2008Inventory, net of provisions
    
    $
    16,812
    
    
    $
    19,170Other
    
    
    1,492
    
    
    
    1,629$
    18,304
    
    
    $
    20,799
 5. ACCRUED LIABILITIES
 (In thousands of U.S. dollars)
    
    September 30, 2009
    
    
    December 31, 2008Litigation charge  MEEI judgment (Note 12)
    
    $
    
    
    
    $
    125,119Royalties
    
    
    506
    
    
    
    713Ongoing damages  MEEI judgment (Note 12)
    
    
    707
    
    
    
    Compensation
    
    
    2,869
    
    
    
    3,218Interest
    
    
    15
    
    
    
    423$
    4,097
    
    
    $
    129,473
 6. FOREIGN EXCHANGE FACILITY
  7. RESTRUCTURING CHARGE
   11




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##### Table of Contents



EmployeeTermination(In thousands of U. S. dollars)
    
    Costs (1)Balance at December 31, 2008
    
    $
    314Restructuring adjustment
    
    
    (114
    )Foreign exchange
    
    
    (9
    )Cash payments
    
    
    (27
    )Balance at March 31, 2009
    
    $
    164Restructuring adjustment
    
    
    (33
    )Foreign exchange
    
    
    13Cash payments
    
    
    (11
    )Balance at June 30, 2009
    
    $
    133Restructuring adjustment
    
    
    3Foreign exchange
    
    
    7Cash payments
    
    
    (20
    )Balance at September 30, 2009
    
    $
    123
 (1)
    
    Costs include severance, termination benefits, and outplacement support. 8. SHARE CAPITAL
      Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Annualized volatility
    
    
    53.6
    %
    
    
    42.1
    %
    
    
    53.6
    %
    
    
    42.1
    %Risk-free interest rate
    
    
    2.2
    %
    
    
    2.9
    %
    
    
    1.8
    %
    
    
    2.9
    %Expected life (years)
    
    
    3.6
    
    
    
    3.9
    
    
    
    3.6
    
    
    
    3.9
   12




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##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,(In thousands of U.S. dollars)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Cost of sales
    
    $
    8
    
    
    $
    2
    
    
    $
    21
    
    
    $
    13Research and development
    
    
    218
    
    
    
    227
    
    
    
    706
    
    
    
    803Selling, general and administrative
    
    
    321
    
    
    
    492
    
    
    
    872
    
    
    
    1,300Restructuring charge
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    532Discontinued operations
    
    
    
    
    
    
    56
    
    
    
    (17
    )
    
    
    182Stock-based compensation expense before income taxes
    
    
    547
    
    
    
    789
    
    
    
    1,582
    
    
    
    2,830Related income tax benefits
    
    
    (13
    )
    
    
    (21
    )
    
    
    (35
    )
    
    
    (69
    )Stock-based compensation, net of income taxes
    
    $
    534
    
    
    $
    768
    
    
    $
    1,547
    
    
    $
    2,761
  9. NET PRODUCT REVENUE
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,(In thousands of U.S. dollars)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Visudyne sales by Novartis
    
    $
    23,497
    
    
    $
    34,081
    
    
    $
    80,236
    
    
    $
    111,237Less: Marketing and distribution
costs
    
    
    (8,019
    )
    
    
    (15,606
    )
    
    
    (25,492
    )
    
    
    (51,538
    )Less: Inventory costs
    
    
    (1,379
    )
    
    
    (2,322
    )
    
    
    (4,511
    )
    
    
    (7,384
    )Less: Royalties to third parties
    
    
    (503
    )
    
    
    (733
    )
    
    
    (1,731
    )
    
    
    (2,381
    )$
    13,596
    
    
    $
    15,420
    
    
    $
    48,502
    
    
    $
    49,934QLTs 50% share of Novartis net
proceeds from Visudyne sales
    
    $
    6,798
    
    
    $
    7,710
    
    
    $
    24,251
    
    
    $
    24,967Add: Advance on inventory costs from
Novartis
    
    
    762
    
    
    
    1,266
    
    
    
    3,646
    
    
    
    5,018Add: Royalties reimbursed to QLT
    
    
    494
    
    
    
    750
    
    
    
    1,730
    
    
    
    2,425Add: Other costs reimbursed to QLT
    
    
    731
    
    
    
    1,142
    
    
    
    1,669
    
    
    
    4,052Revenue from Visudyne sales
    
    $
    8,785
    
    
    $
    10,868
    
    
    $
    31,296
    
    
    $
    36,462
    13




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10. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
 ®
  (In thousands of U.S. dollars)
    
    September 30, 2009
    
    
    December 31, 2008Assets held for saleAccounts receivable
    
    $
    14,903
    
    
    $
    19,944Income taxes receivable
    
    
    3,297
    
    
    
    9,098Inventories
    
    
    10,604
    
    
    
    8,469Deferred income tax assets
    
    
    28,397
    
    
    
    34,509Property, plant and equipment
    
    
    790
    
    
    
    71Other
    
    
    552
    
    
    
    672$
    58,543
    
    
    $
    72,763Liabilities held for saleAccounts payable
    
    $
    4,164
    
    
    $
    4,701Deferred revenue
    
    
    1,836
    
    
    
    2,938Uncertain tax position liabilities
    
    
    1,316
    
    
    
    1,267$
    7,316
    
    
    $
    8,906
   Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,(In thousands of U.S. dollars)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Product revenue and other
    
    $
    9,626
    
    
    $
    8,355
    
    
    $
    28,625
    
    
    $
    26,039Royalty revenue
    
    
    10,563
    
    
    
    8,593
    
    
    
    32,148
    
    
    
    22,630Net revenue
    
    
    20,189
    
    
    
    16,948
    
    
    
    60,773
    
    
    
    48,669Operating pre-tax income
    
    
    9,492
    
    
    
    7,739
    
    
    
    29,174
    
    
    
    9,958Other gains
    
    
    1,828
    
    
    
    
    
    
    
    1,828
    
    
    
    Gain on sale of discontinued operations
    
    
    
    
    
    
    134,264
    
    
    
    
    
    
    
    134,264Pre-tax income
    
    
    11,320
    
    
    
    142,003
    
    
    
    31,002
    
    
    
    144,222Provision for income taxes*
    
    
    (4,635
    )
    
    
    (65,673
    )
    
    
    (12,022
    )
    
    
    (66,379
    )Recovery of income taxes**
    
    
    
    
    
    
    58,459
    
    
    
    
    
    
    
    58,459Net income from discontinued operations
    
    $
    6,685
    
    
    $
    134,789
    
    
    $
    18,980
    
    
    $
    136,302
 *
    
    During the three and nine months ended September 30, 2008, the income tax provision related to
the gain on sale of Aczone discontinued operations (before application of loss carryforwards) was
$55.2 million. The income tax provision relating to the gain on out-license of Atrigel discontinued
operations (before application of loss carryforwards) was $8.1 million.**
    
    During the three and nine months ended September 30, 2008, we released our valuation allowance
on substantially all of QLT USAs tax assets.  14




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11. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
   Carrying Value
    
    
    Fair Value Measurements at September 30,September 30,
    
    
    20092009
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Assets:Cash and cash equivalents
    
    $
    194,039
    
    
    $
    194,039
    
    
    $
    
    
    
    $
    Forward currency contracts (1)
    
    
    155
    
    
    
    
    
    
    
    155
    
    
    
    Total
    
    $
    194,194
    
    
    $
    194,039
    
    
    $
    155
    
    
    $
    
 .
 Maturity Period
    
    
    Quantity (millions)
    
    
    Average PriceCAD / USDForward contracts to sell USD
    
    
    2009
    
    
    USD 11.5
    
    1.08372 per USD
 (1)
    
    Our foreign currency forward contracts are valued using an income approach based on
the present value of the forward rate less the contract rate multiplied by the notional amount.     15




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12. CONTINGENCIES
        16




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##### Table of Contents



13. SUBSEQUENT EVENTS
        17




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  OVERVIEW
 ® ®
 Marketed Products
  Research and Development
    RECENT DEVELOPMENTS
   18




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##### Table of Contents



®
  RESULTS OF OPERATIONS
  Revenues
 Net Product Revenue
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,(In thousands of U.S. dollars)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Visudyne sales by Novartis
    
    $
    23,497
    
    
    $
    34,081
    
    
    $
    80,236
    
    
    $
    111,237Less: Marketing and distribution
costs(1)
    
    
    (8,019
    )
    
    
    (15,606
    )
    
    
    (25,492
    )
    
    
    (51,538
    )Less: Inventory costs(2)
    
    
    (1,379
    )
    
    
    (2,322
    )
    
    
    (4,511
    )
    
    
    (7,384
    )Less: Royalties to third parties(3)
    
    
    (503
    )
    
    
    (733
    )
    
    
    (1,731
    )
    
    
    (2,381
    )$
    13,596
    
    
    $
    15,420
    
    
    $
    48,502
    
    
    $
    49,934QLTs 50% share of Novartis net proceeds from Visudyne
sales
    
    $
    6,798
    
    
    $
    7,710
    
    
    $
    24,251
    
    
    $
    24,967Add: Advance on inventory costs from
Novartis(4)
    
    
    762
    
    
    
    1,266
    
    
    
    3,646
    
    
    
    5,018Add: Royalties reimbursed to QLT(5)
    
    
    494
    
    
    
    750
    
    
    
    1,730
    
    
    
    2,425Add: Other costs reimbursed to QLT(6)
    
    
    731
    
    
    
    1,142
    
    
    
    1,669
    
    
    
    4,052Revenue from Visudyne sales
    
    $
    8,785
    
    
    $
    10,868
    
    
    $
    31,296
    
    
    $
    36,462
 (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
Product Development, Manufacturing, and Distribution 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 incur in support of Visudyne sales.  19




---



##### Table of Contents



(2)
    
    Less: Inventory costsThis represents Novartis cost of goods sold related to Visudyne. It includes the cost of
bulk Visudyne we ship 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 incur and charge to Novartis pursuant to the PDT
Product Development, Manufacturing and Distribution 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 advances to us for shipments of bulk Visudyne and
reimbursement for certain inventory obsolescence. The price of the Visudyne shipments is
determined based on the existing 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 receive 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, certain legal and administrative expenses that we incur in support of
Visudyne sales.     20




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##### Table of Contents



Costs and Expenses
 Cost of Sales
   Research and Development
   
    
    inability to design punctal plugs to function as expected,
    
    delays or inability to formulate active ingredient in right concentration to deliver
effective doses of 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,
    
    difficulties in enrolling patients into 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.
  21




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Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,(In thousands of U.S. dollars)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Ocular
    
    $
    7,276
    
    
    $
    6,255
    
    
    $
    20,057
    
    
    $
    20,057Dermatology
    
    
    
    
    
    
    581
    
    
    
    10
    
    
    
    2,821Other
    
    
    99
    
    
    
    51
    
    
    
    419
    
    
    
    171$
    7,375
    
    
    $
    6,887
    
    
    $
    20,486
    
    
    $
    23,049
 Selling, General and Administrative Expenses
  Litigation
  Restructuring Charge
  Investment and Other Income (Expense)
 Net Foreign Exchange Gains (Losses)
   22




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Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,(In thousands of U.S. dollars)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Cash and cash equivalents
    
    $
    (337
    )
    
    $
    3,055
    
    
    $
    291
    
    
    $
    5,032Restricted cash
    
    
    
    
    
    
    5,104
    
    
    
    3
    
    
    
    7,904U.S. dollar convertible debt
    
    
    
    
    
    
    (7,623
    )
    
    
    
    
    
    
    (11,559
    )Foreign exchange contracts
    
    
    1,111
    
    
    
    3,446
    
    
    
    2,886
    
    
    
    5,275Foreign currency receivables, payables and other
    
    
    6,743
    
    
    
    (4,278
    )
    
    
    11,112
    
    
    
    (6,710
    )Net foreign exchange gains (losses)
    
    $
    7,517
    
    
    $
    (296
    )
    
    $
    14,292
    
    
    $
    (58
    )
 Interest Income
  Interest Expense
   Income from Discontinued Operations
  Income Taxes
   23




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LIQUIDITY AND CAPITAL RESOURCES
 General
   Sources and Uses of Cash
    
    
    A positive cash flow variance from tax refunds net of tax installments of $60.6 million;
    
    A positive cash flow variance from higher cash receipts from product sales and royalties
of $5.1 million;
    
    A positive cash flow variance from higher investment and other income of $3.5 million;
    
    A positive cash flow variance from lower operating and inventory related expenditures of
$3.4 million;
    
    A positive cash flow variance from lower restructuring costs of $0.3 million; and
    
    A negative cash flow variance from foreign exchange of $1.9 million.
    
    
    A positive cash flow variance from tax refunds net of tax installments of $61.2 million;
    
    A positive cash flow variance from higher cash receipts from product sales and royalties
of $17.7 million;
    
    A positive cash flow variance from lower operating and inventory related expenditures of
$7.7 million;
    
    A positive cash flow variance from lower restructuring costs of $5.9 million;
    
    A positive cash flow variance from higher investment and other income of $5.5 million;
    
    A positive cash flow variance from higher foreign exchange gains of $1.2 million; and
    
    A negative cash flow variance from settlement of the MEEI judgment resulting in the
release of the appeal bond and an additional $2.2 million payment.
   24




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##### Table of Contents



Interest and Foreign Exchange Rates
      Maturity Period
    
    
    Quantity (millions)
    
    
    Average PriceCAD / USDForward contracts to sell USD
    
    
    2009
    
    
    USD 11.5
    
    1.08372 per USD
 Contractual Obligations
  Off-Balance Sheet Arrangements
   25




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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Recently Issued and Recently Adopted Accounting Standards
  SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
   
    
    anticipated levels of future sales of Visudyne;
    
    our ability to effectively market and sell Visudyne in the U.S.;
    
    Novartis ability 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;
    
    our ability to successfully develop our latanoprost punctal plug delivery system
(L-PPDS);
    
    unanticipated future operating results;
    
    receipt of up to an additional $200.0 million in contingent consideration pursuant to
the stock purchase agreement entered into with TOLMAR, which is based on anticipated levels
of future sales of Eligard;
    
    the outcome of the MGH litigation against us and the effect of an adverse judgment;
  26




---



##### Table of Contents




    
    our dependency 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 expectations regarding future tax liabilities as a result of recent asset
divestitures, the restructure of our agreement with Novartis, 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;
    
    the anticipated timing, cost and progress of the development of our technology
(including our punctal plug delivery system and our synthetic retinoid 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; and
    
    the anticipated timing for receipt of, and our ability to maintain, reimbursement
approvals for our products in development.
   
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   27




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##### Table of Contents



ITEM 4.
    
    CONTROLS AND PROCEDURES
        28




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
  
 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 payers,
    
    changes in or withdrawal of regulatory approval for or the labeling of Visudyne,
    
    failure of ongoing clinical trials,
    
    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 Canada, the U.S. and in Europe, which is
not within our control. If we do not receive all or a material portion of the consideration
provided for under the stock purchase agreement, our cash position will suffer.
  
    
    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,
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
    
    marketing or pricing actions by competitors or regulatory authorities,
    
    changes in the reimbursement or substitution policies of third-party payers,
    
    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.
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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 payment and reimbursement from third party payers and pricing, and if third
party payers reduce or refuse payment, 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.
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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 time, 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.
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If our process related to product development, and in particular the development of our punctal
plug 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.
    
    Intellectual property rights could be challenged by third parties or we could be found to
be infringing on intellectual property rights of third parties.
   We are currently, and in the future may be, involved in legal proceedings and if there is an
adverse outcome in our litigation or other legal actions, our business may be harmed.
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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.
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The future growth of our business may depend in part on our ability to successfully identify,
acquire on favorable terms, and assimilate technologies, products or businesses.
  
    
    difficulties in and costs associated with assimilating the operations, technologies,
personnel and products of an acquired business,
    
    assumption of known or unknown liabilities or other unanticipated events or
circumstances,
    
    the potential disruption to our ongoing business, and
    
    the potential negative impact on our earnings and cash position.
  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.
  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.
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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 in the near future will also rely on third party
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.
    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.
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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.
    In the field of Photodynamic Therapy, or 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.
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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.
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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.
   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 expenses for Visudyne or the launch of additional competitors
to Visudyne,
    
    fluctuations in currency exchange rates,
    
    unfavorable outcome in the litigation commenced by MGH against us,
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
    
    higher than expected operating expenses as a result of increased costs associated with
the development or commercialization of Visudyne and our other products and 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,
    
    developments or outcome of litigation, including litigation regarding proprietary and
patent rights,
    
    regulatory developments or delays concerning our products,
    
    quarterly variations in our financial results,
    
    results of our research and development programs,
    
    business and product market cycles,
    
    fluctuations in customer requirements,
    
    the availability and utilization of manufacturing capacity and our ability to continue
to supply Visudyne and our other products,
    
    the timing and amounts of contingent consideration or royalties paid to us by third
parties, and
    
    issues with the safety or effectiveness of our products.
  We may need additional capital in the future, and our prospects for obtaining it are uncertain .
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We were a passive foreign investment company for the taxable year ended December 31, 2008, which
could result in adverse United States federal income tax consequences to U.S. Holders.
  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.
   The uncertainty in global economic conditions could negatively affect our business, results of
operations and financial condition.
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Various provisions of our charter may impede a change in control that is beneficial to our
shareholders.
   
 ITEM 6.
    
    EXHIBITS
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SIGNATURES
  QLT Inc.
(Registrant)Date: November 5, 2009
    By:
    /s/ Robert L. ButchofskyRobert L. ButchofskyPresident and  Chief Executive Officer
(Principal Executive Officer)Date: November 5, 2009
    By:
    /s/ Cameron R. NelsonCameron R. NelsonVice President, Finance and Chief Financial
Officer
(Principal Financial and Accounting Officer)  43




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EXHIBIT INDEX
 Exhibit
    
    Description31.1
    
    
    Rule 13a-14 (a) Certification of the Chief Executive Officer.31.2
    
    
    Rule 13a-14(a) Certification of the Chief Financial Officer.32.1
    
    
    Section 1350 Certification of the Chief Executive Officer.32.2
    
    
    Section 1350 Certification of the Chief Financial Officer.
  44