PDL BioPharma, Inc. (PDLI)

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PDL BioPharma (PDLI)

Lazard Capital Markets Healthcare Conference

November 13, 2012 04:30 PM ET


John McLaughlin - President and CEO



Okay we will go ahead and get started. I am Christina Stewart from Lazard Capital Market. And I want to welcome both John McLaughlin and Bruce Tomlinson and they are going to give us an update on PDL BioPharma. Thank you.

John McLaughlin

Christine thanks very much. Welcome to the PDL presentation. Over this afternoon, I will be making some forward looking statements for additional information about the risks and uncertainties associated with those forward looking statements, please see our most recent filings with the Securities and Exchange Commission. We think there are a number of attributes that distinguish PDL among the universal biotech companies and public companies generally, and some of those points are captured on the slide.

You can see we have less than 10 employees. We don’t do any research development, commercialization or manufacturing. We really focus on managing our assets to the benefit of our shareholders. We are also quite profitable. You can see from the revenues, 362 million in 2011 compared to expenses of about 18.3 million. We used some of that cash flow to pay dividends. Unlike many dividend payers, we established the dividend policy in advance for the year; we pay quarterly, so you know at the beginning of the calendar year, exactly what the record date is and what the payment dates are. We move to a regular dividend, I suppose to a special dividend recognizing that implied a consistency and that was our intended message.

Our cash position is about a $160 million. We have done three deals since the beginning of the year depleted that, spent about $115 million. The nice thing about being about earning royalties is that cash position replenishes itself on a quarterly basis. Perhaps most importantly for our institutional investors, you can see our daily volume is about 2.5 million shares. We have had multiple investors come in with significant share hold positions in the millions of shares, and they have been able to ensure, and after they made a profit, exit the stock without moving the share’s share price.

PDL’s underlying technology involves the humanization of antibodies. So in the early 80s scientists hypothesized that it might be possible to develop antibodies in non-human systems against targets which antibodies typically don’t develop. We all develop antibodies for example when you are exposed to a bacteria and the frontier was that perhaps you could develop them against markers unique to cancer cells.

Most of these experiments were done in mice because they were simple biological system to develop such constructs. The difficulty is when you take a mouse from murine-derived antibody and clinically injected it into a human immune system maybe sometimes recognized as a foreign substance and rejected before it can accomplish its therapeutic goals. The importance of the PDL technology is, it allows you to take those binding regions denoted here in red and transfer them to a human framework such that they maintain the binding and specificity of an antibody. And those are the two key elements of an antibody that it only targets the regions antigens that you're hoping to target. And then when it targets then it binds tightly. And the beauty of the technology that was developed by PDL is that it allows you to do it on a routine and reliable basis maintaining both the specificity and the binding of the mirroring drive to antibodies.

Currently it's incorporated into products selling a little over $17 billion. As I mentioned at the outset, you could see our three parts mission statement. We focus on managing the queen at all patents of the underlying license agreements, looking for ways to optimize return for shareholders, so that could be buying back shares, buying back our converts, in some cases doing special dividends. But our primary focus for the next couple of years is really obtaining new revenue generating assets and I'll talk more about this in a few minutes.

What we're focused in on is, can we extend the duration of our dividend paying capabilities? We've heard from our shareholders, they like the dividend, they like the yield, it’s reasonably high. At today's share price it's about 7.7 % which makes us one of the higher paying dividend companies of all publically traded companies. Our focus is for assets that are backed by commercial staged products, it says preferentially that's a fairly strong preference to do development stage products or a late stage development product. That's going to be the rare exception for us, not the rule.

We're indifferent as to whether it's a device or a drug, can we also indifferent as to the therapeutic field what we're interested in, does it have a differentiated profile. It could be first in class, could be second in class but we want it to be a differentiated profile. For products they are marketing battles, that’s not going to where we're going to be focusing.

We're fortunate to have a very strong management team with substantial experience in healthcare as well as a strong board of directors. Jody Lindell has a background in healthcare companies, as well as an auditor, Paul Sandman was formerly general counsel of Boston Scientific. Barry Selick is now CEO of Threshold and is actually an inventor. And as for myself, I'm a lawyer by training with a regulatory and commercial background and I was Executive Vice President at Genentech for a number of years. I cofounded and sold both biotech and medtech companies.

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