PDLI

PDL BioPharma, Inc. (PDLI)

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PDL BioPharma, Inc. (PDLI)

Q4 2011 Earnings Call

February 23, 2012 04:30 p.m. ET

Executives

Jennifer Williams – IR

John McLaughlin – President, CEO, Acting CFO

Caroline Krumel – VP, Finance

Analysts

Charles Duncan – JMP Securities

Brian Klein – Lazard Capital Markets

Jason Kantor – RBC Capital Markets

Phil Nadeau – Cowen & Company

Presentation

Operator

Good afternoon and welcome to the PDL BioPharma’s Fourth Quarter and Year End 2011 Conference Call. Today’s call is being recorded. For opening remarks and introduction I would now like to turn the call over to Jennifer Williams.

Jennifer Williams

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 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. With me this afternoon is Caroline Krumel, our Vice President of Finance. I’ll begin with a brief business update and then turn to our financial results.

We continue to execute on our corporate objective of restructuring our capital to reduce the potential dilution associated with our convertible notes and to increase our financial flexibility. In January and February of 2012 we completed public and privately negotiated exchange transactions where we exchanged a $179 million worth of our 2.78 Convertible Notes due February 15, 2015 for a $179 million aggregate principal amount of new 2.78 Series 2012 Convertible Notes due February 15, 2015. We made this exchange into the new Notes because they are net share settle.

This means that the principal is paid in cash and any other sums due may be paid in shares. The effect of this exchange is a reduction of $27.8 million shares of potential dilution, a significant benefit to our stockholders. Additionally, as we manage our intellectual property portfolio we remain very active in evaluating opportunities to purchase new royalty assets to further improve return to our stockholders.

To reiterate what we said before, we are pursuing commercial stage assets in the range of $75 million to $150 million purchase price which generally represents the net present value of the future royalty stream.

Turning to our financial results, total revenues for the fourth quarter of 2011 were $72.8 million compared to $76.1 million in the fourth quarter of 2010, a 4% decrease. Total revenues for the full year ended December 31, 2011, were $362 million compared with $345 million for the same period in 2010. 2011 total revenue includes $400,000 milestone payment from Roche for a progress in clinical trial and a $10 million settlement payment from UCB resolving all disputes between our two companies.

Excluding the milestone and the one time payments, royalty revenue was $351.6 million for 2011 compared with $343.5 million for 2010, a 2% increase year-over-year. Royalty revenues for the fourth quarter of 2011 are based on third quarter product sales by PDL’s licensees. The fourth quarter 2000 revenue decline is primarily driven by reduced royalties from third quarter 2011 sales of Avastin and Herceptin which are marketed by Genentech and Roche, partially offset by increased royalties from the third quarter sales of Lucentis which is marketed by Genentech and Novartis, and Tysabri which is marketed by Elan and Biogen Idec. Royalty revenue for the fourth quarter in full year are net of payments made under our February 2011 settlement agreement with Novartis.

Turning to expenses, our operating expenses in 2011 were $18.3 million compared to a $133.9 million in 2010. Included in operating expenses in 2010 was $92.5 million legal settlement with MedImmune and $41.4 million general and administrative expenses. For the fourth quarter of 2011 G&A expenses were $4.8 million compared with $12.1 million for the same period of 2010.

Net income in 2011 was a $199.4 million or $1.15 per diluted share as compared with net income of $91.9 million in 2010 or $0.54 per diluted share. Net income for the fourth quarter of 2011 was $38.9 million or $0.24 per diluted share compared with the net loss of $24.5 million or $0.18 loss per diluted share for the same period in 2010.

Adjusting for effects of certain convertible note transactions throughout the year, non-GAAP net income for 2011 was $201.6 million or $1.17 per diluted share. Adjusting for legal settlement with MedImmune and the effects of certain convertible note transactions throughout 2010, non-GAAP net income was $168.4 million or $0.97 per diluted share in that year.

Non-GAAP net income for the fourth quarter of 2011 was $39.6 million or $0.24 per diluted share compared with non-GAAP net income of $35 million or $0.20 per diluted share for the fourth quarter of 2010.

Read the rest of this transcript for free on seekingalpha.com