FORT COLLINS - Pharmaceutical firm QLT Inc. plans to divest its Fort Collins-based QLT USA Inc. subsidiary with employee reductions already on the way.

The Vancouver-based drug developer detailed the initial steps of a strategic restructuring in mid-January. In addition to a headcount reduction, a major element of the restructuring is the sale of QLT USA.

QLT USA was formed through the $855 million purchase of Atrix Laboratories Inc. in November 2004. The company's products include Eligard, a prostate cancer treatment; Aczone, a dermatology product for the treatment of acne; and Atrigel, a drug delivery system.

QLT operates for the time being out of a building on Midpoint Drive in east Fort Collins where they research and develop Eligard and the two other drugs that are assets of QLT USA.

As part of its restructuring, QLT will also let go of 115 employees - about 45 percent of its work force - with more reductions in the future as assets are divested. A QLT spokeswoman said the company would not comment on how the headcount reductions would affect its specific sites - in Vancouver and Fort Collins. In an August interview with the Business Report, a company official said that there were 35 to 40 employees in Fort Collins.

The QLT spokeswoman also said the company would not be detailing its divesture plans any more than it had in corporate filings. According to those filings with the U.S. Securities and Exchange Commission, the sale could take on a couple of forms.



Several rocky years

The decision to sell the assets comes after several rocky post-acquisition years, complete with disappointing earnings and stock performance and costly patent battles.

QLT has been in court a number of times to defend its patents - both those developed by the company and those acquired from Atrix. In February 2007, the company settled a patent infringement suit over the Eligard product for $112.5 million. A few months later, a court found QLT liable to pay past, current and future royalties amounting to $69.6 million on its Visudyne product to the Massachusetts Eye and Ear Infirmary.

Largely due to litigation charges, the company has reported a net loss of $63 million for the first nine months of 2007. QLT will report its year-end results on Feb. 22, after this story is published.

Litigation and earnings aside, QLT's stock has taken a pummeling since the Atrix acquisition. The slide went from around $23 in early 2004 to $16 by the time the acquisition closed in November of that year, until today, when the stock is trading below $4.

"Following a comprehensive review of available options, the QLT board has concluded that seeking offers for the sale of QLT USA as a whole or of its assets is a key initial step in executing our strategy," said QLT Chairman Boyd Clarke in a company release. The company in December tapped Goldman Sachs & Co. to assist the board in evaluating "alternative ways to maximize shareholder value."



Tolmar on a roll

Regardless of what the impending divesture might mean for the Fort Collins site, the company that was formerly Atrix will still have a presence in the city. In late 2006, the company spun off its generic and manufacturing business, creating Tolmar Inc.

Argentina-based pharmaceutical company Technofarma paid $21 million for what was a bulk of QLT's operations in Fort Collins. The enterprises employed 140 of QLT USA's 165 employees, most of who worked in the manufacturing facility.

Tolmar has already expanded to 170 employees and CEO Michael Duncan anticipates being at 190 by the end of the year. The company is in the process of moving its research and development and administrative offices to a facility near its manufacturing operations on Centre Avenue.

"2007 couldn't have been better for us," Duncan said. "We were profitable the entire year."

Duncan expects this year to be just as bright. Tolmar will have 13 active projects in various stages of development. It had seven last year.

"We're substantially increasing our headcount in research and development," he said. The company currently has six product development positions open, the most of any department.

The QLT asset sale should not affect operations at Tolmar, which currently manufactures Eligard for QLT. Because of the contract and the requirements necessary to approve a drug-manufacturing site, Duncan said whoever buys Eligard would most likely continue with Tolmar.

Duncan is not aware of how the asset sale might affect QLT's Fort Collins employees, many of who are his former colleagues. He said that while he hoped any buyer would maintain the site, Tolmar would try to find a way to absorb any causalities.

Duncan has been in the pharmaceutical industry for more than 20 years and was part of Atrix as well as QLT. Recruiting employees, especially in the niche market of dermatology that Tolmar serves, is a nationwide endeavor.

"Those are highly technical employees," he said of the QLT workers.