By Sunny Freeman , The Canadian Press

For the first time in a decade, QLT Inc. (TSX:QLT) is clear of litigation that the Vancouver-based drug developer says has kept its shares undervalued.

QLT said Wednesday it has agreed to pay US$20 million to Massachusetts General Hopsital in Boston to settle a royalty dispute over its Visudyne treatment for a common form of age-related blindness.

Shares in QLT rose 74 cents or more than 18 per cent to $4.72 Wednesday on the Toronto Stock Exchange after the company announced the settlement.

"The market's reaction kind of speaks for itself today," Bob Butchofsky, QLT's president and chief executive officer, said in an interview with The Canadian Press.

"We're extremely pleased to have it behind us," he said. "It will save us a lot of money in legal expenses, plus the uncertainty that you have whenever you have litigation ongoing."

"We felt we were undervalued with the litigation presence and clearly the market agrees. Once we removed that risk we're seeing a nice appreciation for our shareholders," Butchofsky added.

QLT said Wednesday that the US$20 million will be payment in full for all past and future royalty obligations under the licence agreement between the company and the hospital.

MGH sued the company in February seeking higher royalties on the sales of Visudyne, which is used to treat age-related macular degeneration.

QLT said it has been paying the hospital a 0.5 per cent royalty on Visudyne sales in the United States and Canada. The hospital was seeking a royalty in line with what QLT was paying Massachusetts Eye and Ear Infirmary.

MEEI was awarded a 3.01 per cent royalty rate on worldwide sales in a legal action against QLT that was launched in 2000.

Butchofsky said the company has experienced a busy 90 days in which it settled the lawsuit, as well as reached a deal to sell its Eligard prostate cancer treatment to another company. It also struck another deal with its Swiss co-developer, Novartis Pharma AG, for exclusive rights to sell and market Visudyne in the United States starting next year.

After several years of diversification into other product areas, QLT has been working to refocus its business on Visudyne and the development of other eye treatments.

Revenues from sales of Visudyne fell nearly 20 per cent in the third quarter compared with last year.

Butchofsky attributes the loss to a lack of promotion in the U.S. for the past year after Novartis pulled its sales team.

The company expects sales to increase with a planned brand relaunch in January, when it will send a dozen sales people into the field to promote the drug.

"We're looking forward to getting back into the physician's offices and solidifying our story and hopefully trying to generate some incremental growth in the US market," Butchofsky said.

After several years of diversification into other product areas, QLT has been working to refocus its business on Visudyne and the development of other eye treatments.

While Visudyne sales have been falling in recent years due to competing drugs for age-related macular degeneration, QLT believes its new focus will give it an advantage in the ocular field in the future.