TORONTO (Reuters) - QLT Inc's shares jumped more than 12 percent on Wednesday after the Canadian eye care company reached a settlement with Massachusetts General Hospital related to QLT's Visudyne anti-blindness treatment.

Under the terms of the settlement, QLT will pay $20 million to MGH for royalty obligations. In exchange, the hospital has agreed to drop its lawsuit against the Vancouver-based company.

Shares of QLT, which have risen about 66 percent so far this year, gained 12.6 percent to C$4.48 on the Toronto Stock Exchange on Wednesday morning.

"We are pleased to put this matter behind us and continue to concentrate on our clinical programs and strategic growth initiatives," Bob Butchofsky, QLT's president and chief executive, said in a release.

"We believe that this agreement fairly resolves our dispute and serves to recognize the critically important contributions made by MGH in the development of Visudyne."

The company was not immediately available for further comment.

Visudyne, which treats age-related macular degeneration, was developed by QLT in cooperation with Massachusetts General and the Massachusetts Eye and Ear Infirmary.

Massachusetts General launched its suit in February arguing that it was entitled to higher revenues from Visudyne sales.

That followed a decision in 2006 in which a U.S. district court jury found the company liable for unjust enrichment and unfair trade practices. The following year the court ordered QLT to pay Massachusetts Eye and Ear Infirmary damages amounting to 3.01 percent on worldwide net sales of Visudyne.

QLT estimated that the amount of damages and interest that it is required to pay MEEI could be about $113.2 million, based on net sales of Visudyne of about $2.6 billion. The company is appealing the MEEI payment ruling.

Massachusetts General Hospital had filed a complaint claiming it was entitled to the same amount.

(Reporting by Scott Anderson; editing by Peter Galloway)