QLT, Inc. / (QLTI NASDAQ) / $7.76 Note to Reader: All New Or Revised Material Since The

June 11, 2007 Research Associate: Subhasish Mukherjee, MBA (Fin) Zacks Research Digest Editor: Shilpa Chandak, CA Sr. Ed.: Ian Madsen, CFA; [email protected]; 1-800-767-3771, x9417

www.zackspro.com 111 N. Canal Street, Suite 1101 Chicago, IL 60606

QLT, Inc. (QLTI – NASDAQ) $7.76

Note to Reader: All new or revised material since the last report is highlighted.

Reason for Report: QLTI files Aczone Label Revision Supplement to FDA. Prev. Ed.: May 02, 2007

Recent Events

On May 29, 2007, QLTI submitted a label revision supplement to the FDA to request modification of the label to the requirement for monitoring for blood clots.

On April 25, 2007, QLTI reported financial results for the first quarter of fiscal year 2007, ended on March 31, 2007. The company generated total revenue of $32.7 million, down 35.1% versus $50.4 million in 1Q06 of fiscal year 2006. Pro forma EPS in 1Q07 is $0.08, which excludes stock option expenses and the restructuring charges.

Overview

Based in Vancouver, Canada, QLT, Inc. (QLTI) is a global biopharmaceutical company specializing in developing treatments for cancer, eye diseases, and dermatological and urological conditions. The company’s products include Visudyne, which is used for the treatment of choroidal neovascularization, and Eligard products that are used for prostate cancer by incorporating a leutinizing hormone-releasing hormone agonist, or LHRH agonist, known as leuprolide acetate with its proprietary Atrigel drug delivery system. The divestment of the Fort Collins manufacturing facility, the generic dermatology business and the dental products business in December 2006 may allow the company to focus on the profitability of its core business and increase its consolidated cash position. The company’s website is www.qltinc.com.

The analysts have identified the following factors for evaluating the investment merits of QLTI:

Key Positives Arguments Key Negatives Arguments Potential broadening of indications for Visudyne beyond Reliance on a single technology/product. QLTI does not ocular applications and increased reach to the patient have its own sales infrastructure and depends on population through combination therapy. partners for revenue. Well-established alliance partner with well-developed Thin product pipeline outside ocular indications. sales and distribution capabilities in Novartis. (However, analysts believe the Atrix acquisition might strengthen the pipeline.) Increasing competition from new therapies, though prospect of combination reduces potential threat. Strong clinical efficiency of Lucentis coupled with the rate of reimbursement approval could lead to a rapid decline in Visudyne ROW sales.

Note: QLTI’s fiscal year ends in December; all calendar references are to the fiscal year.

Revenue

Total Revenue Synopsis: According to the Zacks Digest Report, 1Q07 total revenue was $32.7 million, down 35.1% y-o-y, and FY07 total revenue was $126.7 million, down 27.6% y/y. The company aims to develop a robust ocular pipeline and stabilize Visudyne sales in 2007. One firm (RBC Cap.) assumes that the decrease in total revenue is due to falling visudyne sales following the preface of anti-VEGF therapies during 2006.

2006A 1Q07A 2Q07E 3Q07E 4Q07E 2007E 2008E 2009E Total Revenue $175.1 $32.7 $32.5 $30.2 $29.6↑ $127.8↑ $128.3↑ $141.2↑ Digest High $175.1 $32.7 $33.4 $31.3 $30.7 $137.0 $151.7 $166.9 Digest Low $175.0 $32.7 $31.2 $28.3 $27.6↑ $119.5 $89.3↑ $117.4↑

Visudyne

Indications: Classic subfoveal neovascularization (CNV) due to age-related macular degeneration (AMD). AMD results from the rapid growth of abnormal blood vessels under and toward the center, or macula, of the retina, the light-sensitive tissue lining the back of the eye. As the fragile new vessels grow and proliferate, they frequently leak blood and fluid that accumulates under and lifts the macula leading to vision loss.

Product Life Cycle: Marketed. Visudyne received its first approval in December 2000. It is currently available in more than 75 countries for the treatment of predominantly classic subfoveal choroidal neovascularization (CNV).

Importance: Visudyne is the first approved photodynamic therapy for wet age-related macular degeneration (AMD) and remains one of the most successful ophthalmology products ever. It is regarded as the worldwide standard of care for AMD, the leading cause of blindness in people over the age of 55. The objective of Visudyne therapy is to slow or arrest the progression of wet age-related macular degeneration, pathologic myopia, and presumed ocular histoplasmosis. Visudyne (Verteporfin) is a PTD drug administered via intravenous injection, carried through the bloodstream by lipoproteins, and then activated once inside target cells using laser light shone into the patient’s eyes. Activation of the drug creates radical formation, which causes cellular damage and cell death.

Partnership: QLTI has an exclusive co-development agreement with Novartis Ophthalmics, the eye health unit of Novartis Pharma. QLTI manufactures Visudyne, while Novartis Ophthalmics markets and distributes Visudyne worldwide. QLTI’s share of net profit (excluding the recovery of manufacturing and other costs) from the joint venture was 30.8% of Visudyne’s worldwide sales. However, QLTI recently expressed frustration with marketing partner Novartis, which was described as not doing a good enough job at controlling partnership costs and thus driving down profitability of the drug. Novartis will also be marketing Lucentis in the EU, so it will be interesting to see that how this dynamic plays out where Novartis is one of QLT's biggest allies but also a potential competitor.

Safety Issues: Visudyne used with Lucentis increases the risk of uveitis and endopthalmitis.

Regulatory Issues: On April 25, 2007, QLTI announced that the Committee for Medicinal Products for Human Use (CHMP) has recommend to the European Commission that Visudyne’s indication in the treatment of occult AMD be removed. The final EU decision is expected to be issued within two months from now. Management feels that positive decision by the European Commission is not expected to affect the approved use of Visudyne in the pathologic myopia indications. One firm (ScotiaCap.) believes that this news is expected to accelerate the downward trend in sales throughout 2007 and in 2008.

Zacks Investment Research Page 2 www.zackspro.com The CHMP decision is based on a review of data from the Visudyne in occult (VIO) trial, as reported in 2005, did not reach the significance level on its primary end-point. VIO was undertaken at the request of the CHMP to confirm the results of an earlier study, Visudyne in Photodynamic Therapy (VIP) that demonstrated evidence of efficacy and was the basis of the original approval for Visudyne in the occult patient population.

The effect of this decision will largely depend on the extent to which countries in the European Union change their reimbursement policies as well as market adoption following the results from combination use studies currently in progress.

Sales: QLTI recorded $20.6 million revenues from Visudyne in 1Q07, down 50.3% y-o-y from 1Q06. QLTI’s share of profit from Visudyne sales decreased to 24.5% in 1Q07 from 31.7% in the same period of the last year. Worldwide sales of Visudyne were $61.2 million in Q107, down 42.7% y-o-y. Visudyne sales in the U.S was $8.4 million, down 72.4% over last year, while sales in the rest of the world was $52.8 million, down 31.2% over last year. The company states that the decline in Visudyne sales during 1Q07 was mainly due to continued pressure in the U.S and new competition in the European market. One firm (BMO Capital) believes that once Lucentis is approved around the world, Visudyne will be used only in patients requiring frequent Lucentis treatment.

QLTI expects Visudyne sales to continue to decline in 2007 due to increased competition in Europe. The company did not provide Visudyne sales guidance for 2007 given the unpredictability of the timing and rate of decline. One firm (Caris & Co.) remains concerned that ROW sales could decline faster than expected given the strong clinical efficiency of Lucentis and rate of reimbursement approval.

Competition: Visudyne competes with Macugen and Lucentis, as well as off-label Avastin use, which could continue to drive down product sales for the company. One firm (Merrill) feels that consumption of Lucentis/Avastin is a bigger threat for the company than any other issues.

Additional Studies: QLT plans to conduct a trial (RADICAL) to evaluate Visudyne and Lucentis based double or triple therapies, beginning in 1H07 and the enrollment process is expected to begin in 2Q07. The design of the trial is yet to be finalized with the FDA.

One firm (Caris & Co.) believes the chance of showing better efficacy with Visudyne in combination with Lucentis is low because results of ANCHOR, MARINA, and SAILOR studies seem to suggest that frequent administration of Lucentis is necessary for good efficacy and that substituting Visudyne in place of Lucentis may not have a positive impact on vision outcomes. In the ANCHOR, MARINA, and SAILOR studies, higher doses of Lucentis have been associated with better vision. Furthermore, the vision benefit of Visudyne has been poor compared to Lucentis.

Novartis is also conducting a trial called MONT BLANC in Europe to compare Visudyne and Lucentis combination to Lucentis monotherapy. Novartis is starting another trial called DENALI, which will enroll 300 patients and will study the use of Visudyne in combination with Lucentis. QLTI will also be sponsoring 10 independent investigator studies; data from these studies are expected at medical meetings and in publications in 2007.

A combination trial of Macugen and Visudyne was initiated during 2H05. Positive results could counteract the potential threat of Genentech/Novartis’s Lucentis. The trial will enrolled 300 patients by 2H06, and data are expected by year-end 2007.

One firm (BMO Capital) believes that combination treatment will be used in patients requiring frequent Lucentis treatment, as monthly Lucentis treatment over the long term is not a viable option. Management believes that sales in the U.S market have stabilized and are tending upwards due to increased use of combination therapy.

Zacks Investment Research Page 3 www.zackspro.com Other Indications: QLTI is also evaluating the use of Visudyne with respect to indications other than ophthalmic, such as multiple basal cell carcinoma (a form of non-melanoma skin cancer), now in the Phase III trial.

Eligard

Indications: Decreases testosterone levels, thereby inhibiting tumor growth in patients with hormone- responsive prostate cancer.

Mechanism: Eligard, a compound acquired by QLTI in the Atrix merger, is an LHRH agonist, which serves to decrease testosterone levels thereby inhibiting tumor growth in patients with hormone- responsive prostate cancer. With Atrigel, QLTI’s unique drug delivery technology, Eligard is injected into the body subcutaneously in liquid form, where it solidifies and delivers a dose of leuprolide acetate at a controlled rate for a specific timeperiod.

Product Life Cycle: Commercialised and sold.

Importance: The market for prostate cancer treatment is estimated to be approximately $1.5 B with the US comprising $800M of the opportunity, where there are about 220,000 new cases of prostate cancer each year. Analysts are of the opinion that Eligard has approximately 10% of the luteinizing hormone- releasing hormone (LHRH) agonist market in the United States, with six-month Eligard accounting for 40% of sales, indicating a significant balancing effect.

Regulatory Issues: On December 1, 2006, QLTI announced that the six-month formulation of Eligard received approval in Germany. Eligard is already approved in Germany and other European countries for the one-month (7.5 mg) and three-month (22.5 mg) formulations. Approval of the six-month formulation in other European countries is expected to be obtained through the mutual recognition procedure, with the German approval serving as reference. Reimbursement in Germany for the six- month formulation is expected upon launch.

Sales: QLTI reported Eligard worldwide sales for 1Q07 were $41.8 million, up 145.6% from 1Q06. Eligard sales in the U.S. were 19.5 million, up 341% over last year, while sales in the rest of the world was $22.3 million, up 76.9% over last year. QLTI management expects to launch a generic equivalent to Lupron this year. This is likely to lead to a decline in Eligard sales.

One firm (ScotiaCap) believes that the strong performance of Eligard reflects a bright spot for the business but the threat of generic competition still looms on the horizon. Revenue from Eligard was $7.1 million in 1Q07.

Competition: Eligard faces stiff competition and high entry barriers from existing formulations. The newly introduced Trelstar (WPI) poses high threat to Eligard particularly because of its favorable reimbursement. A decrease in reimbursement by CMS also results in pricing pressure that could further reduce sales.

Partnership: QLTI has entered into marketing agreements for Eligard with Sanofi-Aventis in the U.S., Tecnofarma in Latin America, Yamanouchi U.K. Ltd. in Germany, Sosie Co, Ltd. in Japan, and Mayne Pharma PTY Ltd. in Australia. Eligard is approved for sale in Argentina, Australia, Bolivia, Canada, Columbia, Mexico, Germany, and the U.S.

Pipeline Drugs

Aczone

Zacks Investment Research Page 4 www.zackspro.com Indications: For the treatment of mild-to-moderate acne, most common in 12 to17 year olds. Aczone is also being investigated for its potential in the treatment of rosacea.

Product Life Cycle: QLTI has re-acquired full worldwide marketing rights for Aczone. The product approved by the FDA with a label restriction in mid-2005. The trial began in the fourth quarter of 2005.

Safety Issues: The FDA has mandated that patients should be screened for G6DP (glucose 6- phosphate dehydrogenase deficiency), a disease present in more than 1% of the population, as patients with G6PD may suffer from hemolytic anemia.

Regulatory Issues: On May 29, 2007, QLTI announced that it has submitted a labeling supplement to the U.S. F.D.A for Aczone to request the removal of the glucose-6-phosphate dehydrogenase (G6PD) screening and blood monitoring requirements from its current label. The NDA is based on the Phase IV clinical trial completed in 56 safety evaluated G6PD deficient patients in November 2006. The Phase IV clinical trial of Aczone was performed to meet the post approval commitment requested by the FDA. The purpose of this study was to accumulate more information about the safety of Aczone, in treating patients with acne who have G6DP deficiency. However, management feels that this filing represents a significant milestone for Aczone program and if the FDA approves the label revision Aczone will become a key contributor to the growth strategy of QLTI. One firm (Caris & Company) expects the FDA to respond by Q208 (assuming a 10 month review period).

Partnership: Once approved, Aczone will be marketed in the US, Canada, and Mexico under an agreement with Fujisawa Healthcare Inc. The European and rest of the world (ROW) rights currently remain with QLTI. In fact, QLTI now controls the worldwide rights for Aczone.

Lemuteporfin

Indications: For treating benign prostatic hyperplasia (BPH)

Product Life Cycle: Phase IIb

Importance: Though alternative treatments are available for benign prostatic hyperplasia, there remains a need for more effective and safe procedures. If found to be safe and effective, Lemuteporfin could offer such a treatment alternative with a procedure that may be minimally invasive and cause less damage to surrounding healthy tissues than current procedures.

Regulatory Issues: Results from a Phase I/II proof-of-concept trial have been presented and showed good tolerability and improvement in symptom scores in all light doses. On February 14, 2006, QLTI announced that a Phase II clinical trial of lemuteporfin-injectable in patients with benign prostatic hyperplasia (BPH) did not meet the study’s primary efficacy objective at three months. While the decrease in American Urological Association (AUA) Symptom Score was consistent with that seen after other minimally invasive therapies there was no significant difference between treatment and sham- control groups.

Other products in the drug development pipeline include: XR9576 and XR 9577 for multi-drug resistant breast cancer and NSCLC, respectively; and Integrin linked kinase for eye, immune system, and kidney conditions. XR9576 has passed through a series of three separate Phase II trials. Other clinical developments in the field of AMD include the investigation of other photosensitizing agents as well as potential pharmacological approaches using periocular steroids and anti-angiogenic drugs.

Octreotide: Octreotide is bng developed by QLT's wholly owned subsidiary, QLT USA and makes use of QLT's Atrigel extended-release technology to gradually deliver the drug therapy over a stipulated period of time.

Zacks Investment Research Page 5 www.zackspro.com QLTI plans to conduct clinical trials to evaluate both one-month and three-month formulations of octreotide in Atrigel to treat carcinoid tumors syndrome and also exploring the drug's potential in treating the diabetic eye disease known as diabetic retinopathy.

Margins

According to the Zacks Digest Report, 1Q07 gross margin was 73.4%, down 640 bps y-o-y; R&D expense was $11.0 million, down 23.8% y-o-y; and SG&A expense was $6.9 million, down 11.8% y-o-y.

QLTI reported 1Q07 R&D expense of $11.1 million, down $3.3 million versus 1Q06 primarily due to decreased spending on Aczone, Lemuteporfin, and Atrigel projects. The company reported 1Q07 SG&A expense of $6.8 million, down $1.0 million versus 1Q06 primarily due to decreased legal expenses associated with the TAP litigation.

Margins 2006A 1Q07A 2Q07E 3Q07E 4Q07E 2007E 2008E 2009E Gross 75.9% 73.4% 75.2%↓ 75.0%↓ 74.8%↓ 73.8%↓ 73.0%↓ 77.8% Operating -10.2% 13.1% 18.7%↑ 17.0%↑ 16.9%↑ 16.3%↑ 26.8%↑ 31.0%↑ Pretax -29.4% 22.9% 26.2%↑ 25.1%↑ 25.1%↑ 24.8%↑ 37.0%↑ 40.2%↑ Net -40.7% 15.7% 17.8%↑ 17.1%↑ 17.1%↑ 15.1%↑ 19.5%↑ 27.3%↑

QLTI expects 2007 R&D expenses of $45 million–$50 million, excluding up-front licensing fees, and SG&A expense of $22 million–$25 million. Going forward, the company plans to reduce its R&D expenses even further in an effort to reduce cost in lieu of declining sales of Visudyne. Management indicated that the guidance for R&D expense for 2007 includes funding for 2 to 3 new ocular products, which it hopes to license in 2007.

Earnings per Share

According to the Zacks Digest Report, 1Q07 pro forma EPS was $0.07, down 49.5% y-o-y versus $0.13 in 1Q06. Pro forma EPS in FY07 was $0.26, down 29.7% y-o-y versus $0.36 in 2006.

As per Zacks Digest Report, GAAP EPS in 1Q07 was 0.06, down 53.8% y-o-y versus $0.13 in 1Q06. GAAP EPS in FY07 was $0.27, up 122.5% y-o-y versus ($1.20) in 2006.

QLTI reported pro forma EPS of $0.08, (which excludes stock option expense and restructuring charges) in 1Q07, versus $0.13 in 1Q06 and GAAP EPS of $0.06 in 1Q07, versus $0.13 in 1Q06.

EPS 2006A 1Q07A 2Q07E 3Q07E 4Q07E 2007E 2008E 2009E Digest High $0.41 $0.08 $0.08 $0.08 $0.08 $0.30 $0.64 $0.68 Digest Low $0.32 $0.06 $0.04 $0.02 $0.01 $0.15 ($0.05) $0.31↑ Digest Avg. $0.36 $0.07 $0.07 $0.06 $0.05↓ $0.25↓ $0.29 $0.49↑

Target Price/Valuation

Zacks Investment Research Page 6 www.zackspro.com Of eleven analysts included in the Digest group, five have reported price targets for the stock, ranging from $6 (MorganStanley and ScotiaCap.) to $8 (RBC Cap. & UnionBankSwitz.). The Digest average target price is $7.08 (same from the previous report). Most of the firms have derived the target price by either applying P/E multiples on forward EPS estimates or using the DCF valuation method and sum of parts valuation.

Of seven analysts rating the stock, six (86 %) have assigned neutral ratings; one analyst (14%) has assigned negative rating. None of them has come out with positive rating.

Rating Distribution Positive 0% Neutral 86.00% Negative 14.00% Avg. Target Price $7.08

One firm (MorganStanley) expects the stock to remain range bound as most of the bad news (declining Visudyne sales and disappointing Eligard sales) is priced into the stock.

Long-Term Growth

QLTI’s immediate prospects are tied to the success of its lead product, Visudyne in the area of ophthalmology and in particular wet age-related macular degeneration (AMD), which has turned increasingly competitive recently. AMD is a progressive eye condition affecting as many as 15 million people in the U.S. alone. Current estimates suggest that up to 14%–24% of the U.S. population aged between 65–74 years, and 35% of people aged 75 years or above have the disease. ‘Wet’ AMD is less common but is a more severe type of AMD, and is characterized by the growth of abnormal blood vessels under the central part of the retina. The abnormal vessels leak fluid and blood, causing a blister to form in the retina. The disease's progression leads to scar tissue, distortion, and a loss of central vision. Although it afflicts only 10% of those who have AMD, it accounts for 90% of the blindness caused by this disease.

Notwithstanding standalone laser therapy, [transpupillary thermo therapy (TTT) and feeder vessel (FV) laser protocols], several drug-related research programs focusing on AMD are currently underway. These include Squalamine (Genaera Corp) now in Phase II and the nearest competitor to Visudyne, Macugen (pegaptanib sodium) by Pfizer (PFE) under license from Eyetech Pharmaceuticals, and Retaane (anecortave acetate) by Alcon (ACL). Macugen is approved for all wet AMD subtypes, and is expected to quickly become the standard of care for minimally classic and occult disease. Moreover, Genentech/Novartis’s Lucentis was also recently approved by the FDA, thus augmenting the competitive landscape for Visudyne. The future of the Visudyne franchise relies on the potential of the use of this medicine in combination with Lucentis (as clearly demonstrated in the FOCUS trial) and other drugs such as triamcinolone.

One firm (Merrill) believes attracting additional investors would require a return to growth in the topline and EPS, and in licensing mid-to late stage products to strengthen the pipeline. One firm (RBC Cap.) remains encouraged by the potential for Visudyne use in combination therapy but have lowered overall outlook in Europe because it believes that more market share will be lost, prior to the combination therapy gaining momentum.

Most firms believe that in short, QLTI suffers from the following drawbacks: (a) lacks a clear growth driver, (b) poor Eligard launch, and (c) competition to Visudyne from both Eyetech/Pfizer’s Macugen and Novartis’s Lucentis. QLTI's products face myriad challenges and the extent to which the company is able to manage these challenges is likely to be the main driver of the company’s shares in the near term.

Zacks Investment Research Page 7 www.zackspro.com QLTI also stated that it would in-license and develop early-stage products for the ocular market while keeping a tight control on costs, and work with Novartis to defend Visudyne sales.

Potentially Severe Problems

Potential problems for QLTI include greater-than-expected decrease in EU sales (due to the potential deletion of the occult indication), stronger-than-expected impact of competition, and higher-than-forecast operating expense. QLTI does not have its own independent commercial infrastructure, and is dependent on partners for royalty revenue. There is always the risk that the interests of these partners and QLTI might not always be aligned.

Capital Structure/Solvency/Cash Flow/Governance/Other

On June 7, 2007, QLTI announced that it has received the clearance from the Toronto Stock Exchange (TSX) regarding US$50 million share repurchase program.

On June 4, 2007, QLTI announced that its Broad of Directors has authorized the repurchase of up to US$50 million of the company’s outstanding common shares over the next twelve months on the NASDAQ Stock Market and Toronto Stock Exchange; however, the process is under review and requires approval. One firm (Scotia Capital) believes that following a significant decline in the share price, management has planned to initiate its second share repurchase program.

On March 5, 2007, QLTI announced the settlement of the litigation brought in 2001 by Massachusetts Eye and Ear Infirmary (MEEI) against QLTI and Novartis Ophthalmics, Inc., case No. 01-10747, in the US District Court for the District of Massachusetts. Under the terms of the settlement agreement, MEEI will dismiss with prejudice its claims for infringement of U.S. Patent No. 6,225,303 (the ‘303 Patent) against QLTI and Novartis Ophthalmics, Inc. and QLTI and Novartis will dismiss their counterclaims against MEEI and named MEEI researchers. QLT, MEEI, and Massachusetts General Hospital (MGH) have agreed to resolve by arbitration counterclaims raised by QLTI and MGH that researchers from QLTI and MGH should have been named as inventors on the ‘303 Patent. The outcome of the arbitration will have no effect on the settlement.

The settlement of the ‘303 Patent lawsuit does not resolve the separate ‘349 patent lawsuit brought in 2000 by MEEI against QLTI in the District Court, No. 00-10783. The parties have filed post-trial motions in connection with the ‘349 patent lawsuit. The timing of a final decision in the ‘349 patent lawsuit is uncertain.

QLTI ended FY06 with $378 million in cash and equivalents. The decrease over 2005 levels was primarily attributable to the Dutch tender offer share repurchase the company completed in 3Q06 in which the company repurchased 13 million shares for $104 million.

On February 9, 2007, QLTI announced that it had reached an agreement to settle litigation brought by TAP Pharmaceutical Products Inc. and its co-plaintiffs related to the company’s Eligard products. Under the terms of the settlement agreement, QLTI paid $112.5 million to TAP in 1Q07. However, QLTI recorded a charge of $112.5 million in its consolidated 2006 results. A few firms (BMO Capital; National Bank Financial) believe that the settlement of the Eligard litigation settlement removes a major overhang from the shares.

Zacks Investment Research Page 8 www.zackspro.com Upcoming Events

Period Product Indication News Flow Q207 Visudyne Phase IV study RADICAL 2H07 Octreotide Phase IIA trial One month GHPR-1 Atrigel Q208 Aczone Label change FDA could respond to QLTI’s request

Individual Analyst Opinions

POSITIVE RATINGS

NEUTRAL RATINGS

BMO Capital – Market Perform ($7.40): May 30, 2007: The firm maintains Market Perform rating on the stock. INVESTMENT SUMMARY: The firm believes if QLTI convinces FDA to remove the current warnings from the Aczone label, the drug will be launched soon.

Caris & Company – Average: June 06, 2007: The firm maintains Average rating on the stock. INVESTMENT SUMMARY: The firm believes that a faster than expected decline in ROW Visudyne sales could have a negative impact on the stock.

Merrill – Neutral: April 25, 2007. INVESTMENT SUMMARY: The firm has maintained its Neutral rating on the stock given the evidence of gradual improvement in US sales of Visudyne, signs of Visudyne’s longevity in Europe, and in-licensing of pipeline products.

MorganStanley – Equal weight ($6): April 25, 2007. The firm has downgraded rating from $7 to $6. INVESTMENT SUMMARY: The firm expects the stock to weaken over the next few quarters as ex-US Visudyne sales decelerate and there is no significant ramp in US sales.

RBC Cap. – Sector perform ($8): April 26, 2007. The firm has downgraded rating from $9 to $8. INVESTMENT SUMMARY: The firm believes that loss of the occult indication from the label will accelerate sales decline and lead to a larger decrease in market share.

NEGATIVE RATINGS

ScotiaCap. – Sector Underperform ($6): June 05, 2007. INVESTMENT SUMMARY: The firm maintains the Underperform rating based on the uncertainty in the timing of the share buyback.

CEASED COVERAGE

Citigroup – January 22, 2007 – The firm has discontinued coverage on the stock based on the declining investor interest.

Research Associate: Subhasish Mukherjee. Reviewed By: Copy Editor: Salma Islam Content Ed.: Shilpa Chandak.

Zacks Investment Research Page 9 www.zackspro.com