PDL BioPharma Inc.
) recently announced that it expects to generate fourth quarter
2012 royalty revenues of $86 million, up 17.8% year over
PDL BioPharma receives royalties on worldwide net sales of
Roche Holdings Ltd.
) Avastin and Herceptin; Roche/
) Lucentis and Xolair; and
) Tysabri. Moreover, the royalty revenues to PDL BioPharma for
the final quarter of 2012 are also expected to include royalties
worth $0.25 million from the sales of Roche's Perjeta
(pertuzumab). We note that the US Food and Drug administration
cleared Perjeta in June 2012 for treating patients suffering from
HER2-positive late-stage (metastatic) breast cancer.
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 15.2%), Avastin (up 13%)
and Lucentis (up 3%) during the third quarter of 2012, on which
PDL will receive royalties in the fourth quarter. PDL BioPharma
is also expected to benefit from the inclusion of Perjeta
royalties in the fourth 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 fourth quarter 2012 revenue
guidance is net of this payment.
For full-year 2012, BioPharma expects to generate revenues of
$374 million, up 3.3% year over year. The revenue guidance
for 2012 is above the Zacks Consensus Estimate of $367
Currently, we have an Underperform recommendation on PDL
BioPharma. The stock carries a Zacks #4 Rank ("Sell") in the
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