QLT Inc: A Place Called Hope
Robert Butchofsky smiles a lot for a man trying to sell the hope that his company has fallen as low as it can go. “We’re not dead,” says the president and CEO of QLT Inc. (QLT-T) as he guides this reporter out of his sleek office on Vancouver’s Great Northern Way.
He laughs as he says it with the casual confidence of a man who believes his message. Indeed, his next appointment isn’t to kick off some frantic series of meetings to rescue his beleaguered company but for a spin class with one of his vice-presidents. But gloom weighs heavily on QLT. Sales of its cornerstone product, the anti-blindness drug Visudyne, have plummeted 40 per cent in the past year alone, as competition gouges into its market. The company continues to bleed millions in red ink – some $14.4 million in the first quarter of 2008 alone. Nearly half its staff has been laid off this year, and it sold its headquarters this spring to raise cash; a beverage company now occupies some of the building’s vacated space.
Things were so different only a few years back. QLT – the company that pioneered B.C.’s biotech industry when it formed in 1982, attracting a flood of talent and investment dollars to the province – wasn’t just a money-maker; it promised to lead B.C. into a bold new age. “QLT was so, so successful,” says BMO Capital Markets biotech analyst Christine Charette, who has followed the company since 1992. In the early part of the millennium, biotech was being touted as The Next Big Thing. Governments raced to turn their regions into leading biotech clusters, hoping to create Silicon Valleys of life sciences. There is still hope in B.C. that the industry will ease the economy’s reliance on primary resources. “It is so vitally important to diversify our economy if we’re going to have economic stability and growth in the decades ahead,” says finance minister Colin Hansen. QLT’s shares topped $127 in August 1999, but with shares now going for around $3 industry insiders are praying for a new saviour.
Sadly, few can say with confidence where – or if – the next champion will be found. Consider that only three of the 90-plus bio-pharmaceutical companies that dominate B.C.’s biotech/life sciences sector have ever posted a profit – with only QLT and Angiotech Pharmaceuticals Inc. developing their own drugs from scratch. Angiotech, indeed, is suffering fortunes similar to those of QLT, losing royalties from its Taxus stents after reports surfaced that the product showed little advantage over drug therapy in some patients. The company’s other potential new products have failed in clinical trials, and its share price has dropped from about $100 in March 2000 to about $2 this summer. Aspreva Pharmaceuticals Corp., the third member of this elite club, is still making profits but was sold off this year to the Swiss-based Galenica Group – good news if you’re an investor but leaving little in the way of homegrown companies to lead B.C.’s industry out of the woods.
What’s most troubling is that the conditions under which those three flourished have turned sour for the next generation of companies. The credit crunch and the failure of biotech firms industry-wide have choked off vital investment money. Meanwhile, the huge scientific challenges that make commercialization so difficult look to become more daunting than ever.
Biotech has come to mean many things to many people. For some it conjures up companies such as agriculture giant Monsanto Co., which genetically engineers crops; for others it’s about making biofuels or other industrial products. In the medical business, however, it describes small startup companies that develop new medicines. These are to pharmaceutical giants what little dot-coms were to the IBMs, Microsofts and HPs. Biotech used to be known for taking a more novel, biological approach than traditional chemistry-driven pharma; the smaller players could dance in ways the lumbering giants could not. But pharmaceutical firms have adopted biotech’s ways and vice versa, and in the crossover it’s the size of the companies that have become the distinguishing characteristic.
There are variations on the biotech model. Aspreva, for example, didn’t develop new drugs but found new uses for existing ones, while other companies develop medical devices. A typical biotech company, like QLT, is spun out of a university lab with the goal of creating a new drug or targeting some disease. It could be argued that this puts them closer to science’s cutting edge. They start small but spawn products that can bring sales worth billions of dollars, so the growth potential for investors – and profit potential for entrepreneurial scientists – is unparalleled. Lured by that promise, investors race to what seems a gold rush; universities and their scientists work to transform their discoveries into cash cows; big pharma turns to biotech to breathe life into its stagnating R&D pipeline; and governments forge plans to build thriving biotech clusters to drive their economies. And yet, 26 years after the industry launched in B.C., biotech companies burn cash by the millions or tens of millions of dollars a year – those that haven’t flamed out entirely.
Save over 50% off the newsstand price with a subscription to BCBusiness Magazine
