PDL BioPharma Inc. ( PDLI ) announced that it expects to generate revenues of roughly $165 million in the third quarter of 2014, up 65% year over year. The revenue guidance is also well above the current Zacks Consensus Estimate of $135 million.
PDL BioPharma receives royalties from companies like Roche Holdings ( RHHBY ) and Novartis ( NVS ). The royalties are earned on worldwide net sales of products like Avastin, Herceptin, Xolair, Kadcyla, Actemra and Perjeta.
The anticipated rise in royalty revenues primarily emanates from higher second quarter sales of Avastin (up 5%), Herceptin (up 10%), Kadcyla (up 95%), Actemra (up 50%), Tysabri (up 38%) and Perjeta (up 266%) for which PDL BioPharma will receive royalties in the third quarter of 2014. The growth in third quarter revenues also reflects a higher fixed royalty rate following PDL BioPharma's settlement agreement with Roche.
According to the agreement with Roche, inked in Feb 2014 but effective retroactively to Aug 15, 2013, PDL BioPharma is receiving a fixed royalty rate of 2.125% on global sales of Avastin, Herceptin, Lucentis Xolair, Kadcyla and Perjeta from Roche. Previously royalties on Roche's products were tiered 1% to 3% in the U.S. and flat 3% in the ex-U.S. markets. PDL BioPharma is expected to recognize royalties untill the first quarter of 2016.
The company expects royalty revenues from acquired rights to be around $28 million in the third quarter. PDL BioPharma recognizes royalty revenues on Glumetza (as per a deal in Oct 2013) a month after sales have been booked by the licensees. The company expects the majority of royalty revenues from acquired rights to come from Glumetza in the third quarter of 2014.
Effective from the second quarter of 2011, PDL BioPharma started paying back a portion of the royalties it receives on Lucentis sales outside the U.S. to Novartis. The payment is made in accordance to a settlement agreement, which the companies had entered in Feb 2011. The amount paid is less than what PDL BioPharma receives in royalties.
PDL BioPharma currently carries a Zacks Rank #3 (Hold). A better-ranked stock is Gilead Sciences ( GILD ) with a Zacks Rank #1 (Strong Buy).
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