PDLI

PDL BioPharma, Inc. (PDLI)

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PDL Biopharma, Inc. (PDLI)

Q 1 2011 Earnings Call

April 27, 2011 04:30 pm ET

Executives

Jennifer Williams - IR

John McLaughlin - President and CEO

Cris Larson - VP & CFO

Analysts

Mike Oakes - JPMorgan

Charles Duncan - JMP Securities

Adnan Butt - RBC Capital Markets

Phil Nadeau - Cowen & Company

Presentation

Operator

Good afternoon and welcome to the PDL Biopharma’s first quarter 2011 earnings conference call. Today's call is being recorded. For opening remarks and introductions I will now 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 maybe obtained in the Investor section on our website 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 will begin with the business update and then turn the call over to Cris to discuss our financial results in detail. Over the course of the first quarter, we concluded a number of legal matters as we discussed on our year-end call at the end of February.

We reached settlements with three different parties, MedImmune, UCB Pharma and Novartis which along with the purchase of a bankrupt biotech company, BioTransplant resolved all challenges to the Queen et al. patents in the U.S. Patent and Trademark Office and the European Patent Office as well as our litigation with MedImmune.

Also in the first quarter, our board of directors declared regular quarterly dividend of $0.15 per quarter which we paid the first dividend on March 15 and the remaining dividends will be paid on June 15, September 15 and December 15.

At this time, we are actively pursuing a couple of royalty asset purchase opportunities, we are generally looking for approved biologics with strong patent protection that will increase the return to our stockholders. These assets typically come from universities or in ventures who are looking monetize the assets, biotech companies who need additional capital and pharmaceutical companies who have acquired these assets through M&A and who are looking to defray their acquisition costs.

We continue to believe this a viable strategy for the company to improve stockholder value overtime. We look forward to sharing our progress with you in the months ahead. At this time, I’d like to turn the call over to Cris Larson to discuss our first quarter financial results.

Cris Larson

Thank you, John. Total revenues for the first quarter of 2011 were $83.3 million compared with $62.1 million in the first quarter of 2010. Excluding, the one-time settlement payment from UCB Pharma, revenues increased 18% over the comparable quarter of 2010. The growth in revenues was primarily driven by increased sales by our licensees, Herceptin, Lucentis and Tysabri.

Also contributing to the growth was an increase in the amount of Avastin that is both made and sold outside of the United States. Under our license agreement with Genentech we received a flat royalty rate of 3% for sales of products that are both manufactured and sold outside of the United States. By comparison we received a tiered royalty rate from Genentech for products that is either made or sold in the United States and typically the tiered royalty rate paid to PDL is at its lowest level of 1% in the first quarter of each calendar year.

Turning to expenses, total expenses for the first quarter of 2011 were $5.8 million compared to $9.4 million for the first quarter of 2010. The decrease is primarily due to a decrease in legal fees resulting from the conclusion of the legal issues that John described earlier. In addition we saw a decline in professional services fees due to reduced costs associated with one time special project costs.

Net income for the first quarter of 2011 was $44.5 million or $0.25 per diluted share compared with net income of $26 million or $0.15 per diluted share for the first quarter of 2010. As you know in response to requests from our stockholders and with additional clarity regarding our future cash flows we declared a regular quarterly dividend of $0.15 per share that was approved by our Board of Directors at the end of February.

As John mentioned on March 15 we paid the first of four quarterly dividends to all stockholders of record on March 8 for a total of $21 million. As of March 8, 2011 in connection with the March dividend payment, the conversion ratios for our 2% convertible notes due in 2012 and our 2.875% convertible notes due in 2015 were both adjusted to 144.47 shares per $1000 principal amount or a conversion price of approximately $6.92 per share of common stock.

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