A competitive advantage is every business's key to survival. Once competitors have that edge, it's only a matter of time before they start to erode other companies' market share. That's clearly happening to biotech company QLT (NASDAQ:QLTI), as superior drugs from other companies drive down sales for QLT's lead product, Visudyne.

Sales of Visudyne, used to treat some types of age-related macular degeneration, were down 39% in the third quarter. That led to a $23 million drop in revenues, to $38 million, while adjusted earnings per share fell to $0.06. Going forward, QLT expects adjusted 2006 earnings per share to come in at $0.25-$0.33 a share. The company also reduced Visudyne revenue guidance for the year to a range of $340 million-$355 million. (Note that QLT only keeps a portion of these revenues as royalties, since the drug is partnered with Novartis (NYSE:NVS).)

It's no coincidence that Visudyne's sales declines have accelerated over the past two quarters. Genentech's (NYSE:DNA) Lucentis was approved in the U.S. in June, which probably accounts for faster Visudyne sales declines during that quarter; some patients probably delayed treatment until they could get Lucentis. With Lucentis on the market for the entire third quarter, Visudyne sales fell even faster.

Quarter

Visudyne Sales*

Y-O-Y Sales Growth

Q4 06**

$62.8-$77.8

(27.4%-41.4%)

Q3 06

$75.1

(39.3%)

Q2 06

$95.3

(26.1%)

Q1 06

$106.8

(13.7%)

Q4 05

$107.2

(13.5%)
*in millions
**QLT estimates

When Genentech released third-quarter results earlier in the month, it announced that 80% of Lucentis users were patients already receiving treatment for AMD. This number closely resembles the 78% reduction in U.S. Visudyne sales, down to $11 million. With Lucentis expected to be approved in the EU in the first half of next year, Visudyne's sales declines shouldn't stop anytime soon.

There was one bright spot in the quarter for QLT, though. Eligard sales were up 61% year over year, to $34 million. QLT shareholders must now ask themselves whether Eligard sales can grow quickly enough to overcome the loss of Visudyne revenues, because without Visudyne sales, shares of QLT look expensive.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.