PDL BioPharma Announces Fourth Quarter and Year End 2017 Financial Results
- Total revenues of
$68.0 million and$320.1 million for the three and twelve months endedDecember 31, 2017 , respectively. - GAAP diluted EPS of
$0.15 and$0.71 for the three and twelve months endedDecember 31, 2017 , respectively. - GAAP net income attributable to PDL's shareholders of
$22.3 million and$110.7 million for the three and twelve months endedDecember 31, 2017 , respectively. - Non-GAAP net income attributable to PDL's shareholders of
$24.8 million and$100.7 million for the three and twelve months endedDecember 31, 2017 . A full reconciliation of all components of the GAAP to non-GAAP financial results can be found in Table 3 at the end of the release.
"2017 was a great year for us and one where we experienced a 31 percent increase in revenue from the previous year," stated
Revenue Highlights
- Total revenues of
$68.0 million for the three months endedDecember 31, 2017 included: - Royalties from PDL's licensees to the Queen et al. patents of
$4.5 million , which consisted of royalties earned on sales of Tysabri®; - Net royalty payments from acquired royalty rights and a change in fair value of the royalty rights assets of
$30.1 million , which consisted of the change in estimated fair value of our royalty right assets, primarily related to Depomed, Inc. (Depomed) royalty asset; - Interest revenue from note receivable investment to CareView Communications of
$0.8 million ; and - Product revenues of
$32.6 million , which consisted of$25.1 million from sales of Tekturna® and Tekturna HCT® inthe United States , Rasilez® and Rasilez HCT® in the rest of the world (collectively, the Noden Products) and$7.5 million for product sales of theLENSAR ® Laser System. - Total revenues increased by 2 percent for the three months ended
December 31, 2017 , when compared to the same period in 2016. - Royalties from PDL's licensees to the Queen et al. patents were lower due to reduced sales of Tysabri that was manufactured prior to the patent expiry date;
- PDL received
$32.8 million in net cash royalties from its royalty rights in the fourth quarter of 2017, compared to$25.3 million for the same period of 2016. The increase in cash royalties is mainly due to a one-time settlement payment fromValeant related to the royalty audit of Glumetza and the launch of the authorized generic for Glumetza® sold by Valeant Pharmaceuticals International, Inc. PDL received royalties on the authorized generic equivalents under the same terms as the branded Glumetza; - The decrease in interest revenues was primarily due to the sale of the kaléo, Inc. note receivable in
September 2017 ; and - The increase in product revenues were derived from the sale of the LENSAR Laser System, which PDL did not begin to recognize until
May 2017 . - Total revenues increased by 31 percent for the year ended
December 31, 2017 , when compared to the year endedDecember 31, 2016 . - The decrease in royalties from PDL's licensees to the Queen et al. patents is due to the expiration of the patent license agreement with
Genentech, Inc. and reduced royalties on Tysabri. - The increase in royalty rights - change in fair value was primarily due to the year-to-date increase in fair value of the Depomed royalty asset by
$134.1 million . - PDL received
$107.3 million in net cash royalties, including a one-time settlement payment fromValeant related to the royalty audit of Glumetza, from its royalty rights in the year endedDecember 31, 2017 , compared to$72.6 million for the same period of 2016. - The decrease in interest revenues was primarily due to the early repayment of the
Paradigm Spine, LLC note receivable and the sale of the kaléo, Inc. note receivable. - Product revenue increased due to sales of the Noden Products, which PDL did not begin to recognize until the third quarter of 2016, and sales of the LENSAR Laser System, which PDL did not begin to recognize until
May 2017 . - License and other revenue increased by
$19.6 million primarily due to a one-time$19.5 million payment from Merck as part of the previously announced settlement agreement to resolve the patent infringement lawsuit related to Keytruda®.
Operating Expense Highlights
- Operating expenses were
$38.2 million for the three months endedDecember 31, 2017 , compared to$74.2 million for the same period of 2016. The decrease in operating expenses for the three months endedDecember 31, 2017 , as compared to the same period in 2016, was primarily a result of the prior year period loss on extinguishment ofDirect Flow Medical notes receivable, partially offset by the increase in operating expenses related to the acquisitions and operations ofNoden andLENSAR , contributing an additional$13.8 million of cost of product revenue and$6.0 million in sales and marketing expenses due to an increase inNoden's sales force. - Operating expenses were
$126.3 million for the year endedDecember 31, 2017 , compared to$114.9 million for the year endedDecember 31, 2016 . The increase in operating expenses in 2017 was a result of the acquisitions and operations ofNoden andLENSAR , contributing an additional$26.5 million of cost of product revenue,$12.7 million of intangible asset amortizations,$17.1 million in sales and marketing expenses, and$3.6 million in research and development costs for the completion of a pediatric trial for Tekturna. General administrative expenses increased by$5.9 million of which$7.5 million was related toNoden and$3.2 million was related toLENSAR , partially offset by a decrease of$51.1 million from the loss on extinguishment for theDirect Flow Medical notes receivable in 2016.
Recent Developments
- On
February 1, 2018 , PDL completed the retirement of the remaining$126.4 million of aggregate principal of its 4.0% Convertible Senior Notes due 2018 at their stated maturity by making a payment to the noteholders of$126.4 million , plus$2.6 million of accrued interest. - In
February 2018 , we entered into a modification agreement with CareView whereby we agreed, effective as ofDecember 28, 2017 , to modify the credit agreement before remedies could otherwise have become available to us under the credit agreement in relation to certain obligations of CareView that would potentially not be met, including the requirement to make principal payments. Under the modification agreement we agreed that (i) a lower liquidity covenant would be applicable and (ii) principal repayment would be delayed for a period of up toDecember 31, 2018 . In exchange for agreeing to these modifications, among other things, the exercise price of our warrants to purchase 4.4 million shares of common stock of CareView was reduced and, subject to the occurrence of certain events, CareView agreed to grant us additional equity interests.
Other Financial Highlights
- PDL had cash, cash equivalents, short-term investments and other investments of
$532.1 million atDecember 31, 2017 , compared to$242.1 million atDecember 31, 2016 .
Conference Call and Webcast Details
PDL will hold a conference call to discuss financial results at
To access the live conference call via phone, please dial (800) 668-4132 from
To access the live and subsequently archived webcast of the conference call, go to the Company's website at http://www.pdl.com and go to the Investor Relations section and select "Events & Presentations." Please connect to the website at least 15 minutes prior to the call to allow for any software download that may be necessary.
About
We seek to provide a significant return for our shareholders by acquiring and managing a portfolio of companies, products, royalty agreements and debt facilities in the biotech, pharmaceutical and medical device industries. In 2012, we began providing alternative sources of capital through royalty monetizations and debt facilities, and in 2016, we began acquiring commercial-stage products and launching specialized companies dedicated to the commercialization of these products. To date, we have consummated seventeen of such transactions, of which nine are active and outstanding. We have one debt transaction outstanding, representing deployed and committed capital of
The Company operates in three segments designated as Income Generating Assets, Pharmaceutical and Medical Devices.
NOTE: PDL,
Forward-looking Statements
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Each of these forward-looking statements involves risks and uncertainties. Actual results may differ materially from those, express or implied, in these forward-looking statements. Important factors that could impair the value of the Company's assets and business, restrict or impede the ability of the Company to invest or acquire new products are disclosed in the risk factors contained in the Company's Annual Report on Form 10-K, filed with the
TABLE 1 | |||||||||||||||
| |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME DATA | |||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
Three Months Ended |
Twelve Months Ended | ||||||||||||||
|
| ||||||||||||||
2017 |
2016 |
2017 |
2016 | ||||||||||||
Revenues |
|||||||||||||||
Royalties from Queen et al. patents |
$ |
4,531 |
$ |
15,513 |
$ |
36,415 |
$ |
166,158 |
|||||||
Royalty rights - change in fair value |
30,103 |
28,068 |
162,327 |
16,196 |
|||||||||||
Interest revenue |
776 |
5,503 |
17,744 |
30,404 |
|||||||||||
Product revenue, net |
32,646 |
17,541 |
84,123 |
31,669 |
|||||||||||
License and other |
(20) |
(133) |
19,451 |
(126) |
|||||||||||
Total revenues |
68,036 |
66,492 |
320,060 |
244,301 |
|||||||||||
Operating Expenses |
|||||||||||||||
Cost of product revenue (excluding intangible amortization) |
17,905 |
4,065 |
30,537 |
4,065 |
|||||||||||
Amortization of intangible assets |
6,251 |
6,014 |
24,689 |
12,028 |
|||||||||||
General and administrative expenses |
9,788 |
12,597 |
45,641 |
39,790 |
|||||||||||
Sales and marketing |
6,489 |
527 |
17,683 |
538 |
|||||||||||
Research and development |
729 |
1,887 |
7,381 |
3,820 |
|||||||||||
Change in fair value of anniversary payment and contingent consideration |
(3,000) |
(5,799) |
349 |
(3,716) |
|||||||||||
Asset impairment |
— |
3,735 |
— |
3,735 |
|||||||||||
Acquisition-related costs |
— |
59 |
— |
3,564 |
|||||||||||
Loss on extinguishment of notes receivable |
— |
51,075 |
— |
51,075 |
|||||||||||
Total operating expenses |
38,162 |
74,160 |
126,280 |
114,899 |
|||||||||||
Operating income |
29,874 |
(7,668) |
193,780 |
129,402 |
|||||||||||
Non-operating expense, net |
|||||||||||||||
Interest and other income, net |
933 |
184 |
1,659 |
588 |
|||||||||||
Interest expense |
(5,139) |
(4,743) |
(20,221) |
(18,267) |
|||||||||||
Gain (loss) on bargain purchase |
5,314 |
(2,353) |
9,309 |
— |
|||||||||||
Gain (loss) on extinguishment of debt |
— |
— |
— |
(2,353) |
|||||||||||
Total non-operating expense, net |
1,108 |
(6,912) |
(9,253) |
(20,032) |
|||||||||||
Income before income taxes |
30,982 |
(14,580) |
184,527 |
109,370 |
|||||||||||
Income tax expense |
8,646 |
(4,300) |
73,826 |
45,711 |
|||||||||||
Net income |
22,336 |
(10,280) |
110,701 |
63,659 |
|||||||||||
Less: Net income/(loss) attributable to noncontrolling interests |
— |
56 |
(47) |
53 |
|||||||||||
Net income attributable to PDL's shareholders |
$ |
22,336 |
$ |
(10,336) |
$ |
110,748 |
$ |
63,606 |
|||||||
Net income per share |
|||||||||||||||
Basic |
$ |
0.15 |
$ |
(0.06) |
$ |
0.71 |
$ |
0.39 |
|||||||
Diluted |
$ |
0.15 |
$ |
(0.06) |
$ |
0.71 |
$ |
0.39 |
|||||||
Shares used to compute income per basic share |
151,217 |
163,975 |
155,394 |
163,805 |
|||||||||||
Shares used to compute income per diluted share |
152,592 |
164,549 |
156,257 |
164,192 |
|||||||||||
Cash dividends declared per common share |
$ |
— |
$ |
— |
$ |
— |
$ |
0.10 |
TABLE 2 | |||||||
| |||||||
CONDENSED CONSOLIDATED BALANCE SHEET DATA | |||||||
(Unaudited) | |||||||
(In thousands) | |||||||
|
| ||||||
2017 |
2016 | ||||||
Cash, cash equivalents and short-term investments |
$ |
532,114 |
$ |
242,141 |
|||
Total notes receivable |
$ |
70,737 |
$ |
270,950 |
|||
Total royalty rights - at fair value |
$ |
349,223 |
$ |
402,318 |
|||
Total assets |
$ |
1,243,123 |
$ |
1,215,387 |
|||
Total convertible notes payable |
$ |
243,481 |
$ |
232,443 |
|||
Total stockholders' equity |
$ |
845,890 |
$ |
755,423 |
TABLE 3 | |||||||||||||||
| |||||||||||||||
GAAP to NON-GAAP RECONCILIATION: | |||||||||||||||
NET INCOME AND DILUTED EARNINGS PER SHARE | |||||||||||||||
(Unaudited) | |||||||||||||||
(In thousands, except per share amount) | |||||||||||||||
A reconciliation between net income on a GAAP basis and on a non-GAAP basis is as follows: | |||||||||||||||
Three Months Ended |
Twelve Months Ended | ||||||||||||||
|
| ||||||||||||||
2017 |
2016 |
2017 |
2016 | ||||||||||||
GAAP net income attributed to PDL's shareholders as reported |
$ |
22,336 |
$ |
(10,336) |
$ |
110,748 |
$ |
63,606 |
|||||||
Adjustments to Non-GAAP net income (as detailed below) |
2,445 |
1,716 |
(10,040) |
44,518 |
|||||||||||
Non-GAAP net income attributed to PDL's shareholders |
$ |
24,781 |
$ |
(8,620) |
$ |
100,708 |
$ |
108,124 |
|||||||
An itemized reconciliation between net income on a GAAP basis and on a non-GAAP basis is as follows: | |||||||||||||||
Three Months Ended |
Twelve Months Ended | ||||||||||||||
|
| ||||||||||||||
2017 |
2016 |
2017 |
2016 | ||||||||||||
GAAP net income attributed to PDL's shareholders as reported |
$ |
22,336 |
$ |
(10,336) |
$ |
110,748 |
$ |
63,606 |
|||||||
Adjustments: |
|||||||||||||||
Mark-to-market adjustment to fair value assets |
(2,746) |
(2,726) |
(55,074) |
56,386 |
|||||||||||
Non-cash interest revenues |
(101) |
(121) |
(924) |
(2,864) |
|||||||||||
Non-cash stock-based compensation expense |
124 |
1,093 |
3,138 |
3,742 |
|||||||||||
Non-cash debt offering costs |
2,843 |
3,942 |
11,038 |
10,009 |
|||||||||||
Mark-to-market adjustment on warrants held |
20 |
31 |
49 |
906 |
|||||||||||
Amortization of the intangible assets |
6,251 |
6,014 |
24,689 |
12,028 |
|||||||||||
Mark-to-market adjustment of anniversary payment and contingent consideration |
(3,000) |
(5,799) |
349 |
(3,716) |
|||||||||||
Income tax effect related to above items |
(946) |
(718) |
6,695 |
(31,973) |
|||||||||||
Total adjustments |
2,445 |
1,716 |
(10,040) |
44,518 |
|||||||||||
Non-GAAP net income |
$ |
24,781 |
$ |
(8,620) |
$ |
100,708 |
$ |
108,124 |
Use of Non-GAAP Financial Measures
We supplement our consolidated financial statements presented on a GAAP basis by providing additional measures which may be considered "non-GAAP" financial measures under applicable
"Non-GAAP net income" is not based on any standardized methodology prescribed by GAAP and represent GAAP net income adjusted to exclude (1) mark-to market adjustments related to the fair value election for our investments in royalty rights presented in our earnings, which include the fair value re-measurement of future discounted cash flows for each of the royalty rights assets we have acquired, (2) non-cash interest revenue from notes receivable (3) stock-based compensation expense, (4) non-cash interest expense related to PDL debt offering costs, (5) mark-to market adjustments related to warrants held, (6) mark-to-market adjustment related to acquisition-related contingent considerations, (7) amortization of intangible assets, and to adjust (7) the related tax effect of all reconciling items within our reconciliation of our GAAP to Non-GAAP net income. Non-GAAP financial measures used by PDL may be calculated differently from, and therefore may not be comparable to, non-GAAP measures used by other companies.
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