PDL BioPharma Inc.
) recently announced that it expects to generate third quarter 2012
royalty revenues of $85 million, up 2% year over year.
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PDL BioPharma receives royalties on worldwide net sales of
Roche Holdings Ltd.
) Avastin and Herceptin; Roche/
) Lucentis and Xolair; and
Elan Corporation/Biogen Idec
) Tysabri. The company will also receive royalties on Roche's
Perjeta (pertuzumab), which was launched in the US in June 2012.
Royalty payments for all 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
the higher sales of Herceptin (up 1%), Lucentis (up 4%) and Xolair
during the second quarter of 2012, on which PDL will receive
royalties in the third quarter. The company is also expected to
benefit from the inclusion of Perjeta royalties in the third
quarter of 2012.
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 third quarter 2012 revenue guidance is net of
In the second quarter of 2012, PDL's royalty revenues of $125.9
million represented an increase of 3.1% from the year-ago period.
Increased royalties on sales of Herceptin, Lucentis, Xolair and
Tysabri drove second quarter 2012 royalties.
Currently, we have a Neutral recommendation on PDL BioPharma. The
stock carries a Zacks #3 Rank ("Hold") in the short term.