PDL BioPharma Inc.
(
PDLI
) posted fourth quarter earnings of 24 cents per share, 4 cents
above the year-ago figure of 20 cents. Lower general and
administrative expenses offset the decline in revenue to drive
earnings in the quarter. Earnings were however in line with the
Zacks Consensus Estimate.
Quarter in Detail
PDL BioPharma currently derives a significant portion of its
revenue from licenses granted to other companies under the Queen et
al patents, covering the humanization of antibodies. The patents
are set to expire in 2014.
At present PDL BioPharma receives royalty on worldwide net sales
of
Roche Holdings Ltd.
's (
RHHBY
) Avastin, Xolair and Herceptin; Roche and
Novartis'
(
NVS
) Lucentis; and
Elan Corporation
(
ELN
) and
Biogen Idec
's (
BIIB
) Tysabri. While the royalty payments are tiered in the US, PDL
BioPharma receives a flat 3% royalty if a product is both
manufactured and sold outside the US. However, Tysabri royalties
are calculated at a flat rate as a percent of sales, irrespective
of the manufacturing or sales location. In the fourth quarter PDL
BioPharma received royalties on sales achieved by the above
mentioned drugs during the third quarter of 2011.
PDL BioPharma generated fourth-quarter 2011 revenue of $72.8
million, representing a 4.0% decline from $76.0 million in the
prior-year period. Revenue was barely below the Zacks Consensus
Estimate of $73 million and exceeded the preliminary revenue of $72
million announced by the company in December 2011. Increased
royalties in the quarter from higher sales of Lucentis and Tysabri
were offset by reduced royalty from Avastin and Herceptin sales.
Effective from the second quarter of 2011, PDL BioPharma pays back
a portion of royalties it receives on Lucentis sales outside the US
to Novartis under its settlement agreement with the latter, which
the companies had entered into in February 2011. The fourth quarter
revenue is net of this payment.
Avastin sales suffered due to the reimbursement uncertainty
surrounding the metastatic breast cancer indication of the drug as
well as pricing pressures in EU. Royalties on Herceptin sales were
affected by a lower-than-expected proportion of revenue being
derived from sales made or sold ex US, which generates higher
royalties than US sales.
General and administrative (G&A) expenses were $4.8 million
in the reported quarter, down approximately 60.0% from $12.1
million in the prior-year quarter due to lower legal expenses.
Annual Results
In full year 2011, PDL BioPharma generated earnings of $1.17 per
share, up from 97 cents in the prior year and also beating the
Zacks Consensus Estimate of $1.14. PDL recorded revenue of $362
million in the full year, in line with the Zacks Consensus Estimate
and slightly above the preliminary revenue of $361 million.
Our Recommendation
Currently, we have a Neutral recommendation on PDL BioPharma.
The stock carries a Zacks #3 Rank ("Hold") in the short term. We
prefer to remain on the sidelines due to a lack of specific
timelines for the resolution of the Roche dispute.
The PDL BioPharma management is looking for commercial stage
products in the range of $75 million to $150 million in purchase
price to increase shareholder value. We would also like to have a
better visibility on PDL BioPharma's business extension plans with
the Queen patent portfolio set to expire in 2014
BIOGEN IDEC INC (
BIIB
): Free Stock Analysis Report
ELAN CP PLC ADR (
ELN
): Free Stock Analysis Report
NOVARTIS AG-ADR (
NVS
): Free Stock Analysis Report
PDL BIOPHARMA (
PDLI
): Free Stock Analysis Report
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