PDL BioPharma, Inc. (PDLI)

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PDL BioPharma, Inc. (PDLI)

Q4 2010 Earnings Call

February 28, 2011 04:30 pm ET


Jennifer Williams – Investor Relations

John McLaughlin – President and Chief Executive Officer

Cris Larson – Vice President and Chief Financial Officer


Kimberly Lee – Global Hunter Securities LLC

Jason Kantor – RBC Capital Markets Corp.

Jason Zhang – BMO Capital Markets

Joel D. Sendek – Lazard Capital Markets

Charles Duncan – JMP Securities

Phil Nadeau – Cowen & Company, LLC



Good afternoon and welcome to the PDL BioPharma’s Fourth Quarter 2010 Earnings Conference Call. Today’s call is being recorded. For opening remarks and introductions, I would now like to turn the call over to Jennifer Williams.

Jennifer Williams

Hello and thank you all for joining us today. Before we begin, let me remind you that the information we will cover today contains forward-looking statements regarding our financial performance and other matters and our actual results may differ materially from those expressed or implied in the forward-looking statements.

Factors that may cause differences between current expectations and actual results are described in our filings with the Securities and Exchange Commission, copies of which may be obtained in the Investor section on our web site at pdl.com.

The forward-looking statements made during this conference call should be considered accurate only as of the date of this call and although we may elect to update forward-looking statements from time to time in the future, we specifically disclaim any duty or obligation to do so, even as new information becomes available or other events occur in the future.

I’ll now turn the call over to John McLaughlin, President and CEO of PDL BioPharma.

John McLaughlin

Thanks, Jennifer, and good afternoon, everyone. Also with me today is Cris Larson, our Vice President and Chief Financial Officer. I’ll begin with a business update and then turn the call over to Cris to discuss our financial results.

The fourth quarter of 2010 and early 2011 have been very productive. We increased our royalty revenues quarter-over-quarter, as well as year-over-year. And over the course of the last month we’ve favorably resolved a number of challenges to the Queen et al patents in the United States and in Europe. The resolution of these legal matters will allow us to turn our concentrated efforts in 2011 to purchasing new royalty assets as part of our long-term strategy.

In addition today we announced we have moved from a special dividend policy to a regular quarterly dividend policy beginning in 2011. We believe at establishing a regular dividend policy will provide more consistent returns to our stockholders, while at the same time allowing us to manage our current and future cash flow.

To briefly review recent legal matters, earlier this month we reached a settlement with MedImmune resolving all disputes between the companies. This includes all issues involving at MedImmune’s product Synagis as well as our Queen et al patents.

Under the agreement we paid MedImmune $65 million on February 15, 2011 and we’ll pay them an additional $27.5 million by February 2012. No further payments will be owed by either party.

Importantly MedImmune also agreed to seize all support of any party involved in the European Patent Office or EPO opposition to our European patent. In related transaction, PDL through the wholly owned subsidiary of BTI Acquisitions Crop acquired BioTransplant, a bankrupt company. BioTransplant was one of the opponents in the appeal opposition before the EPO.

We subsequently instructed BioTransplant’s representative before the EPO to formally withdraw its opposition appeal. We believe that BioTransplant activities before the EPO were financially supported by MedImmune before our acquisition of the bankrupt company. We also announced the settlement agreement with UCB Pharma, which resolves all legal disputes between the companies.

We received $10 million from UCB in return for our agreement not to sue UCB for any royalties related to their product Cimzia. In addition UCB agreed to terminate pending patent interference proceedings before the U.S. Patent and Trademark Office ending all challenges to the Queen et al patents before the U.S. Patent Office. Equally important, UCB withdrew its opposition appeal to our European patents in EPO.

This morning we announced that we entered into a settlement agreement with Novartis that resolves all disputes between the companies. We agreed to dismiss our claims against Novartis in our Nevada lawsuit and Novartis agreed to withdraw its opposition appeal to our European patents in EPO.

Under the Term C agreement, we will pay Novartis an amount based on net sales of Lucentis during calendar year 2011 and beyond. We have not disclosed this amount, but we can tell you that it is less than the royalty amount Genentech pays us on the same sales of Lucentis and it is not currently material.

The settlement does not affect PDL’s claims against Genentech and Roche in the Nevada State court action. Finally this morning, we announced that the EPO has cancelled its appeal hearing, which was scheduled to begin today regarding our European Patent. Because all appellants have withdrawn from the appeals proceeding and the appeals proceeding was terminated the 2000 decision, upholding the claims of our European patent will become the final decision of the EPO.

In 2010, 35% of our revenues resulted from the sales of products that were made in Europe and sold outside of the United States and based on recent Roche announcements we anticipate that this percentage of revenues will increase in the future. Moving forward with the revolution of these legal challenges we have eliminated a number of uncertainties in our future cash flows and we are pleased to be able to focus on the creation of shareholder value. We continue to have discussions with a number of parties regarding new royalty assets and while we cannot disclose the specifics of any agreement until it’s final we can tell you that our ideal royalty assets are approved products.

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