Quantcast

PDL BioPharma Announces Fourth Quarter and Full Year 2010 Financial Results

February 28, 2011

INCLINE VILLAGE, Nev., Feb. 28, 2011 /PRNewswire/ – PDL BioPharma, Inc. (PDL) (Nasdaq: PDLI) today reported financial results for the fourth quarter and full year ended December 31, 2010.

Total revenues in 2010 were $345.0 million, compared to $318.2 million in 2009. Excluding 2009 royalty revenues for sales of Synagis® received from MedImmune, royalty revenues for 2010 increased 30 percent over 2009. For the fourth quarter of 2010, total revenues were $76.1 million, compared to $58.3 million in the fourth quarter of 2009.

Royalty revenues for the fourth quarter of 2010 are based on third quarter product sales by PDL’s licensees. Revenue growth for the fourth quarter of 2010 over the same period in 2009 was primarily driven by increased third quarter 2010 sales by the Company’s licensees of Avastin® and Herceptin®, which are marketed by Genentech and Roche; Lucentis®, which is marketed by Genentech and Novartis; and Tysabri®, which is marketed by Elan and Biogen Idec. PDL received royalties for these product sales in the fourth quarter of 2010.

Operating expenses in 2010 were $133.9 million, compared with $21.1 million in 2009. Included in operating expenses in 2010 is a $92.5 million legal settlement with MedImmune and $41.4 million general and administrative expenses. For the fourth quarter of 2010, general and administrative expenses were $12.1 million compared with $5.5 million for the same period of 2009. Significant expense items included in general and administrative expenses in 2010 were legal fees of $29.3 million, compensation and benefits of $4.1 million and professional services fees of $2.9 million. Legal fees include costs associated with the Company’s litigation with MedImmune and Genentech, preparation for the hearing with the European Patent Office (EPO) and the interference proceedings with the U.S. Patent and Trademark Office. Excluding the Genentech matter, the other matters have been concluded as of the date of this press release. Professional services fees include fees for the Company’s ongoing global royalty audits of its licensees, tax consultation and the preparation of long-term sales and royalty forecasts by outside consultants.

Net income in 2010 was $91.9 million, or $0.54 per diluted share as compared with net income of $189.7 million in 2009 or $1.07 per diluted share. Net loss for the fourth quarter of 2010 was $24.5 million or $0.18 per diluted share as compared with net income of $28.6 million or $0.17 per diluted share for the same period of 2009. Adjusting for the legal settlement with MedImmune and the effects of certain convertible note transactions throughout the year, non-GAAP net income was $173.5 million or $0.97 per diluted share in 2010 as compared with $195.8 million or $1.06 per diluted share in 2009. Non-GAAP net income for the fourth quarter of 2010 was $36.1 million or $0.20 per diluted share as compared with non-GAAP net income of $30.2 million or $0.17 per diluted share for the same period of 2009.

Net cash provided by operating activities in 2010 was $184.3 million, compared with $187.0 million in 2009. At December 31, 2010, PDL had cash, cash equivalents and investments of $248.2 million, compared with $303.2 million at December 31, 2009.

RECENT DEVELOPMENTS

2011 Dividends

On February 25, 2011, PDL’s board of directors adopted a regular, quarterly dividend policy and declared that the quarterly dividends to be paid to its stockholders in 2011 will be $0.15 per share of common stock and payable on March 15, June 15, September 15 and December 15 of 2011 to stockholders of record on March 8, June 8, September 8 and December 8 of 2011, the Record Dates for each of the dividend payments, respectively. PDL’s board of directors will evaluate the Company’s dividend policy for subsequent years based on net income, debt service, income taxes and other corporate activities.

Settlement with MedImmune

As previously announced, PDL entered into a settlement agreement with MedImmune resolving all legal disputes between the companies, including those relating to MedImmune’s product Synagis, and PDL’s patents known as the Queen et al. patents. Under the settlement agreement, PDL paid MedImmune $65.0 million on February 15, 2011 and will pay an additional $27.5 million by February 10, 2012, for a total of $92.5 million. No further payments will be owed by MedImmune to PDL under its license to the Queen et al. patents as a result of past or future Synagis sales and MedImmune agreed to cease any support, financial or otherwise, of any party involved in the appeal proceeding before the EPO relating to the opposition against PDL’s European Patent No. 0 451 216B (the ’216B Patent) including the opposition owned by BioTransplant Incorporated (BioTransplant).

Settlement with UCB

Also in February 2011, PDL reached a settlement agreement with UCB Pharma S.A. (UCB) that resolves all legal disputes between the companies. Under the agreement, PDL provided UCB a covenant not to sue UCB for any royalties regarding UCB’s Cimzia® product under the Queen et al. patents in return for a lump sum payment of $10 million, to be recognized as revenue in the first quarter of 2011. In addition, UCB agreed to terminate pending patent interference proceedings before the U.S. Patent and Trademark office (PTO) involving PDL’s U.S. Patent No. 5,585,089 patent (the ’089 Patent) and the ’370 Patent in PDL’s favor. UCB also agreed to formally withdraw its opposition appeal challenging the validity of the ’216B.

Settlement with Novartis

On February 25, 2011, PDL reached a settlement with Novartis. Under the settlement agreement, PDL agreed to dismiss its claims against Novartis in its action in Nevada state court which also includes Genentech, Inc. (Genentech) and F. Hoffman LaRoche Ltd (Roche). Novartis agreed to withdraw its opposition appeal in the EPO challenging the validity of the ’216B Patent. The settlement does not affect PDL’s claims against Genentech and Roche in the Nevada state court action. Under the settlement agreement with Novartis, PDL will pay Novartis an amount based on net sales of Lucentis during calendar year 2011 and beyond. The Company does not currently expect such amount to materially impact our total annual revenues.

Acquisition of BioTransplant

On February 8, 2011, the United States Bankruptcy Court for the District of Massachusetts issued an order approving the acquisition of BioTransplant by PDL’s wholly owned subsidiary, BTI Acquisitions I, Inc. for $415,000. In February 2011, PDL instructed BioTransplant’s representative before the EPO to formally withdraw its opposition appeal challenging the validity of the ’216B Patent. PDL believes that BioTransplant’s activities before the EPO, including payment of counsel fees, were financially supported by MedImmune. By virtue of PDL’s acquisition of BioTransplant and settlement of all disputes with MedImmune, including their financial support of BioTransplant’s appeal in the opposition proceeding, PDL was able to ensure that BioTransplant’s opposition and appeal would be withdrawn in accordance with the governing rules of practice before the EPO.

Termination of European Opposition to ’216B Patent

Pursuant to PDL’s settlements with UCB, MedImmune and Novartis, and as a result of PDL’s acquisition of BioTransplant and subsequent withdrawal of BioTransplant’s appeal, all of the active appellants in the EPO opposition have formally withdrawn their participation in the appeal proceeding. Accordingly, the EPO has cancelled the appeal proceeding and terminated the opposition proceeding in its entirety, with the result that the 2007 EPO decision upholds the claims of PDL’s ’216B Patent as valid, which will become the final decision of the EPO. In the year ended December 31, 2010, approximately 35 percent of PDL’s revenues were derived from sales of products that were made in Europe and sold outside of the United States.

Convertible Notes

In November 2010, PDL exchanged $92.0 million in aggregate principal of the 2012 Notes in separate, privately negotiated exchange transactions with the note holders. Pursuant to the exchange transactions, the note holders received $92.0 million in aggregate principal of new 2.875% Convertible Senior Notes due February 15, 2015 (the 2015 Notes). As part of the transaction, the Company also placed an additional $88.0 million in aggregate principal of the 2015 Notes.

In December 2010, PDL repurchased $2.5 million of 2012 Notes in the open market at a discount of 0.5% to face value in a privately negotiated transaction with an institutional holder, for an aggregate cost of $2.5 million in cash, plus accrued but unpaid interest. Following these transactions, $133.5 million of the 2012 Notes and $180 million of the 2015 Notes remain outstanding at December 31, 2010. The conversion rate for the 2015 Notes is 140.571 shares of common stock per $1,000 principal amount of the 2015 Notes or $7.11 per share of common stock.

The following table summarizes PDL’s debt outstanding at December 31, 2010 and December 31, 2009.


                                          Debt Outstanding
                                           (In millions)
                                           -------------
                                      12/31/2010      12/31/2009
                                      ----------      ----------
    2.75% Convertible Debt
      Put Option - August 2010                $-            $200
    2.00% Convertible Debt
      Maturity - February 2012               133             228
    10.25% Non-recourse Note
      Expected Maturity - September
       2012                                  204             300
    2.875% Convertible Debt
      Maturity - February 2015               180               -
                                             ---             ---
        Total Debt                          $517            $728
                                            ====            ====

Revenue Guidance for 2011

As previously announced, PDL will continue to provide revenue guidance for each quarter in the third month of that quarter. First quarter 2011 revenue guidance will be provided in early March.

Conference Call Details

PDL will hold a conference call to discuss financial results at 4:30 p.m. ET today, February 28, 2011.

To access the live conference call via phone, please dial (800) 260-8140 from the United States and Canada or (617) 614-3672 internationally. The conference ID is 90571277. Please dial in approximately 10 minutes prior to the start of the call. A telephone replay will be available beginning approximately one hour after the call through March 7, 2011, and may be accessed by dialing (888) 286-8010 from the United States and Canada or (617) 801-6888 internationally. The replay passcode is 84230593.

To access the live and subsequently archived webcast of the conference call, go to the Company’s website at http://www.pdl.com and go to “Company Presentations & Events.” Please connect to the website at least 15 minutes prior to the call to allow for any software download that may be necessary.

About PDL BioPharma

PDL pioneered the humanization of monoclonal antibodies and, by doing so, enabled the discovery of a new generation of targeted treatments for cancer and immunologic diseases. PDL is focused on maximizing the value of its antibody humanization patents and related assets. The Company receives royalties on sales of a number of humanized antibody products marketed by leading pharmaceutical and biotechnology companies today based on patents which expire in late 2014. For more information, please visit www.pdl.com.

NOTE: PDL BioPharma and the PDL BioPharma logo are considered trademarks of PDL BioPharma, Inc.

Non-GAAP Financial Information

The Company has presented certain financial information in conformance with generally accepted accounting principles in the U.S. (GAAP) and also on a non-GAAP basis for the three months and years ended December 31, 2010 and 2009. Management believes that this non-GAAP information is useful for investors taken in conjunction with the Company’s GAAP financial statements. Non-GAAP financial information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of the Company’s net income as reported under GAAP. A reconciliation between GAAP and non-GAAP financial information is provided in the table later in this document.

Forward-Looking Statements

This press release contains forward-looking statements. Each of these forward-looking statements involves risks and uncertainties. Actual results may differ materially from those, express or implied, in these forward-looking statements. Factors that may cause differences between current expectations and actual results include, but are not limited to, the following:

  • The expected rate of growth in royalty-bearing product sales by PDL’s existing licensees;
  • The relative mix of royalty-bearing Genentech products manufactured and sold outside the U.S. versus manufactured or sold in the U.S.;
  • The ability of our licensees to receive regulatory approvals to market and launch new royalty-bearing products and whether such products, if launched, will be commercially successful;
  • Changes in any of the other assumptions on which PDL’s projected royalty revenues are based;
  • The outcome of pending litigation or disputes;
  • The change in foreign currency exchange rate; and
  • The failure of licensees to comply with existing license agreements, including any failure to pay royalties due.

Other factors that may cause PDL’s actual results to differ materially from those expressed or implied in the forward-looking statements in this press release are discussed in PDL’s filings with the SEC, including the “Risk Factors” section of its annual and quarterly reports filed with the SEC. Copies of PDL’s filings with the SEC may be obtained at the “Investors” section of PDL’s website at www.pdl.com. PDL expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in PDL’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based for any reason, except as required by law, even as new information becomes available or other events occur in the future. All forward-looking statements in this press release are qualified in their entirety by this cautionary statement.

                                       PDL BIOPHARMA, INC.
                           CONSOLIDATED STATEMENTS OF OPERATIONS DATA
                                           (Unaudited)
                            (In thousands, except per share amounts)
                                Quarter Ended           Year Ended
                                 December 31,          December 31,
                                 ------------          ------------
                                 2010          2009      2010           2009
                                 ----          ----      ----           ----

    Revenues
        Royalties             $74,629       $57,902  $343,475       $305,049
        License and other       1,500           350     1,500         13,135
    Total revenues             76,129        58,252   344,975        318,184
    Operating expenses:
      General and
       administrative          12,056         5,526    41,396         21,064
      Legal settlement         92,500             -    92,500              -
                               ------           ---    ------            ---
        Total operating
         expenses             104,556         5,526   133,896         21,064
    Operating income
     (loss)                   (28,427)       52,726   211,079        297,120
    Gain (loss) on
     retirement or
     conversion of
     convertible notes          1,033             -   (17,648)         1,518
    Interest and other
     income, net                  131           144       468          1,004
    Interest expense           (9,514)       (9,321)  (43,529)       (19,357)
                               ------        ------   -------        -------

        Income before income
         taxes                (36,777)       43,549   150,370        280,285
    Income tax expense
     (benefit)                (12,317)       14,989    58,496         90,625
        Net income (loss)    $(24,460)      $28,560   $91,874       $189,660
                             ========       =======   =======       ========

    Net income (loss) per
     basic share               $(0.18)        $0.24     $0.73          $1.59
                               ======         =====     =====          =====
    Net income (loss) per
     diluted share             $(0.18)        $0.17     $0.54          $1.07
                               ======         =====     =====          =====

    Cash dividends
     declared per common
     share                         $-         $1.67     $1.00          $2.67
                                  ===         =====     =====          =====

    Shares used to compute
     income (loss) per
     basic share              139,542       119,509   126,578        119,402
                              =======       =======   =======        =======
    Shares used to compute
     income (loss) per
     diluted share            139,542       179,739   178,801        184,400
                              =======       =======   =======        =======

                       PDL BIOPHARMA, INC.
     RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
                           (Unaudited)
             (In thousands, except per share amounts)
                               Quarter Ended             Year Ended
                                December 31,            December 31,
                                ------------            ------------
                                2010          2009         2010          2009
                                ----          ----         ----          ----

    Net income (loss)       $(24,460)      $28,560      $91,874      $189,660
    Add back legal
     settlement expense       92,500             -       92,500             -
    Deduct income tax
     benefit on legal
     settlement expense      (32,375)            -      (32,375)            -
    Add back loss (gain) on
     retirement or
     conversion of
     convertible notes        (1,033)            -       17,648        (1,518)
    Deduct income tax
     expense (benefit) on
     retirement or
     conversion of
     convertible notes           373          -    (1,217)        531
                                 ---           ---       ------           ---
        Non-GAAP net income   35,005        28,560      168,430       188,673
    Add back interest
     expense for
     convertible notes, net
     of estimated taxes        1,105         1,635        5,087         7,079
                               -----         -----        -----         -----
      Non-GAAP net income
       used to compute non-
       GAAP net income per
       diluted share         $36,110       $30,195     $173,517      $195,752
                             =======       =======     ========      ========

    Non-GAAP net income
     per diluted share         $0.20         $0.17        $0.97         $1.06
                               =====         =====        =====         =====

    Shares used to compute
     net income (loss) per
     diluted share           139,542       179,739      178,801       184,400
    Delete shares issued to
     induce note conversion
     to common stock (1)           -             -          (73)            -
    Effect of dilutive
     stock options(2)             12             -            -             -
    Restricted stock
     outstanding(2)              115             -            -             -
    Assumed conversion of
     2012 Notes(2)            23,399             -            -             -
    Assumed conversion of
     2015 Notes(2)            16,777             -            -             -
    Shares used to compute
     non-GAAP net income
     per diluted share       179,845       179,739      178,728       184,400
                             =======       =======      =======       =======
    (1) Shares for the year ended December 31, 2010 exclude the weighted
    average effect of the shares issued as an incentive to induce
    conversion of the 2023 Notes in August 2010.
    (2) Shares for the quarter ended December 31, 2010 include the
    dilutive effect of stock options, restricted stock outstanding,
    assumed conversion of 2012 Notes and assumed conversion of 2015
    Notes that were excluded from GAAP net loss per diluted share due to
    their anti-dilutive effect.

                          PDL BIOPHARMA, INC.
                         OPERATING EXPENSE DATA
                              (Unaudited)
                             (In thousands)
                                     Quarter Ended         Year Ended
                                     December 31,         December 31,
                                     ------------         ------------
                                      2010         2009     2010          2009
                                      ----         ----     ----          ----
    Operating expenses:
      General and administrative
        Compensation and benefits   $1,103         $967   $4,065        $3,355
        Legal fees                   8,494        3,454   29,315        10,869
        Professional services          325          241    2,943         2,374
        Insurance                      185          238      793           992
        Stock-based compensation       138          203      662           821
        Depreciation                    14           34       91           991
        Other                        1,797          389    3,527         1,662
                                     -----          ---    -----         -----
           Total general and
            administrative          12,056        5,526   41,396        21,064
    Legal settlement                92,500            -   92,500             -
      Total operating expenses    $104,556       $5,526 $133,896       $21,064
                                  ========       ====== ========       =======

                      PDL BIOPHARMA, INC.
                CONSOLIDATED BALANCE SHEET DATA
                          (Unaudited)
                         (In thousands)
                                          December       December
                                             31,            31,
                                               2010           2009
                                               ----           ----
    Cash, cash equivalents and
     investments                           $248,229       $303,227
    Total assets                           $316,666       $338,411
    Convertible notes payable              $310,428       $427,998
    Non-recourse notes payable             $204,270       $300,000
    Total stockholders' deficit           $(324,182)     $(415,953)

                             PDL BIOPHARMA, INC.
                  CONSOLIDATED STATEMENT OF CASH FLOW DATA
                                 (Unaudited)
                               (In thousands)
                                                         Year Ended
                                                        December 31,
                                                        ------------
                                                        2010           2009
                                                        ----           ----
    Net income                                       $91,874       $189,660
    Adjustments to reconcile net income to net cash
     provided by operating activities                 21,777          7,481
    Changes in assets and liabilities                 70,649        (10,187)
    Net cash provided by operating activities       $184,300       $186,954
                                                    ========       ========

                          PDL BIOPHARMA, INC.
    MIX OF EX-U.S.-BASED SALES AND EX-U.S.-BASED MANUFACTURING AND
                                 SALES
                         OF GENENTECH PRODUCTS
                              (Unaudited)
                                         Quarter
                                          Ended          Year Ended
                                                          December
                                      December 31,                  31,
                                      ------------       ---------
                                    2010      2009  2010     2009
                                    ----      ----  ----     ----
    Avastin
      % Ex-U.S.-based Sales           51%       47%   50%      46%
      % Ex-U.S.-based-Manufacturing
       and Sales                      26%        -    21%       -
    Herceptin
      % Ex-U.S.-based-Sales           70%       70%   70%      70%
      % Ex-U.S.-based Manufacturing
       and Sales                      40%       22%   44%      29%
    Lucentis
      % Ex-U.S.-based Sales           55%       57%   56%      53%
      % Ex-U.S.-based Manufacturing
       and Sales                       -         -     -        -
    Xolair
      % Ex-U.S.-based Sales           35%       31%   35%      29%
      % Ex-U.S.-based Manufacturing
       and Sales                      35%       31%   35%      29%

SOURCE PDL BioPharma, Inc.


Source: newswire



comments powered by Disqus