PDL BioPharma Inc.
) recently announced that it expects to generate second-quarter
2012 royalty revenues of $125 million, an increase of 2% over the
year-ago revenues of $122 million.
PDL BioPharma receives royalties on worldwide net sales of
Roche Holdings Ltd.'s
) Avastin and Herceptin; Roche and
) Lucentis and Xolair; and
Royalty payments for Roche's products are tiered in the US,
while PDL BioPharma receives a flat 3% royalty if a product is both
manufactured and sold outside the US. Tysabri royalties are
calculated at a flat rate as a percentage of sales, irrespective of
the manufacturing or sales location.
The anticipated growth in royalty revenues primarily emanates
from higher sales of Herceptin (up 4%), Lucentis (up 15%), Xolair
and Tysabri (up 13%) during the first quarter of 2012, on which PDL
will receive royalties in the second quarter.
Effective from the second quarter of 2011, PDL BioPharma started
paying back a portion of the royalties it receives on Lucentis
sales outside the US to Novartis. The payment is made in accordance
with a settlement agreement, which the companies had entered into
in February 2011. The second quarter 2012 revenue guidance is net
of this payment.
Avastin sales suffered due to the withdrawal of the drug in the
US for the metastatic breast cancer indication as well as pricing
pressure in the EU. In the first quarter of 2012, Roche reported a
mere 1% year-over-year growth in Avastin revenues.
In the first quarter of 2012, PDL's royalty revenues of $77.3
million represented an increase of 5.5% from the year-ago period.
Increased royalties on sales of Herceptin, Lucentis, Xolair and
Tysabri drove first quarter 2012 royalties.
Currently, we have an Outperform recommendation on PDL
BioPharma. The stock carries a Zacks #1 Rank ("Strong Buy") in the
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