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•	Total revenues of $21.0 million and $124.2 million for the three and six months ended June 30, 2016, respectively.

•	GAAP diluted EPS of $0.03 and $0.37 for the three and six months ended June 30, 2016, respectively.

•	GAAP net income of $4.1 million and $60.0 million for the three and six months ended June 30, 2016, respectively.

•	Non-GAAP diluted earnings per share (EPS) of $0.09 and $0.61 for the three and six months ended June 30, 2016, respectively.

•	Non-GAAP net income of $15.1 million and $100.2 million for the three and six months ended June 30, 2016, respectively.

•	Total revenues of $21.0 million for the three months ended June 30, 2016 included:

◦	Royalties from PDL's licensees to the Queen et al. patents of $14.2 million, which consisted of royalties earned on sales of Tysabri® under a license agreement associated with the Queen et al. patents;

◦	Net royalty payments from acquired royalty rights and a change in fair value of the royalty rights assets of negative $0.9 million, which consisted of the change in estimated fair value of our royalty right assets and primarily related to the Depomed, Inc., University of Michigan and Viscogliosi Brothers, LLC royalty rights acquisitions;

◦	Interest revenue from notes receivable financings to late-stage healthcare companies of $7.3 million; and

◦	License and other revenues of $0.3 million.

•	Total revenues decreased by 85 percent for the three months ended June 30, 2016, when compared to the same period in 2015.

◦	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. PDL continues to receive Queen et al. patent royalties on sales of Tysabri based on the sales of product manufactured prior to patent expiry, the amount and timing of which is uncertain.

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The decrease in royalty rights - change in fair value was driven by the $7.4 million decrease in the fair value of the Depomed royalty rights assets primarily as a result of higher gross-to-net adjustments for Glumetza, and a $7.6 million decrease in the fair value of the University of Michigan royalty right asset as a result of a delay in national pricing and reimbursement decisions in the European Union and Japan.

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◦	PDL received $14.7 million in net cash royalty payments and milestone payments from its acquired royalty rights in the second quarter of 2016, compared to $1.2 million for the same period of 2015. Of these payments from its acquired royalty rights, $6.0 million was related to the FDA approval milestone for Jentadueto® XR.

◦	The decrease in interest revenues was primarily due to ceasing to accrue interest due from Direct Flow Medical, Inc. as a result of the loan being impaired.

◦	Total revenues decreased by 57 percent for the six months ended June 30, 2016, when compared to the same period in 2015.

◦	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.

◦	The decrease in royalty rights - change in fair value was driven by the $55.3 million decrease in the fair value of the Depomed royalty rights assets, and a $6.0 million decrease in the fair value of the University of Michigan royalty right asset.

◦	PDL received $31.9 million in net cash royalty payments and milestone payments from its acquired royalty rights in the six months ended June 30, 2016, compared to $2.1 million for the same period of 2015.

◦	The decrease in interest revenues was primarily due to reduced interest from Direct Flow Medical, Inc.

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Operating expenses were $9.9 million for the three months ended June 30, 2016, compared to $7.4 million for the same period of 2015. The increase in operating expenses for the three months ended June 30, 2016, as compared to the same period in 2015, was primarily a result of acquisition-related costs of $3.0 million for the Noden Pharma DAC (Noden) transactions which were advanced to Noden, and are expected to be repaid to PDL by year end through an intercompany arrangement.

•	Operating expenses were $19.8 million for the six months ended June 30, 2016, compared to $15.1 million for the same period of 2015. The increase in operating expenses for the six months ended June 30, 2016, as compared to the same period in 2015, was a result of the acquisition-related costs from the Noden transactions.

•	PDL had cash, cash equivalents, and investments of $190.9 million at June 30, 2016, compared to $220.4 million at December 31, 2015.

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The decrease was primarily attributable to the restriction of $105.9 million in cash for the Noden transactions, repayment of the March 2015 Term Loan for $25.0 million, payment of dividends of $16.4 million, and an additional note receivable purchase of $5.0 million, partially offset by proceeds from royalty right payments of $31.9 million and cash generated by operating activities of $94.8 million.

•	Net cash provided by operating activities in the six months ended June 30, 2016 was $94.8 million, compared with $155.9 million in the same period in 2015.

•	Noden Transactions

◦	The acquisition of Tekturna® by Noden and PDL’s funding of the equity investment in Noden occurred on July 1, 2016.

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PDL expects to make equity contributions to Noden Pharma DAC and an affiliate totaling $107 million in the first year of the transaction, which includes an initial equity investment of $75 million and an additional $32 million equity contribution commitment which will be made on the one-year anniversary of the closing of the transaction. In addition, PDL provided Noden with a loan and loan commitments of up to an aggregate of $75 million, the majority of which PDL expects will be repaid in the next 45 days once Noden secures a debt facility from a third party. PDL also may contribute additional amounts of funding depending on the total amount of debt obtained by Noden, and as needed for specified milestone payments or other purposes.

◦	Noden closed its transaction relating to a purchase agreement with Novartis AG (Novartis) to acquire exclusive worldwide rights to manufacture, market, and sell the branded prescription medicine product sold under the name Tekturna® and Tekturna HCT® in the United States and Rasilez® and Rasilez HCT® in the rest

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◦	PDL has a majority equity interest ownership in Noden. Given this majority ownership by PDL, the financial statements of Noden will be consolidated with PDL beginning in Q3 2016, and is expected to be accretive to PDL's cash earnings.

•	ARIAD Royalty Agreement Second Tranche Payment

◦	On July 28, 2016, PDL funded the second tranche of $50.0 million due on the first anniversary of the closing date under the terms of the ARIAD Royalty Agreement.

◦	As a result of the second tranche payment, PDL’s royalty percentage will increase to 5.0% of the U.S. and European net revenues of Iclusig and 5.0% of the payments ARIAD receives elsewhere in the world until December 31, 2018.  Beginning January 1, 2019 and thereafter, the royalty rate will increase to 6.5% in all jurisdictions.

•	Dividend Policy

◦	On August 3, 2016, the PDL board of directors decided to eliminate the quarterly cash dividend payment.

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•	Total revenues of $21.0 million and $124.2 million for the three and six months ended June 30, 2016, respectively.

•	GAAP diluted EPS of $0.03 and $0.37 for the three and six months ended June 30, 2016, respectively.

•	GAAP net income of $4.1 million and $60.0 million for the three and six months ended June 30, 2016, respectively.

•	Non-GAAP diluted earnings per share (EPS) of $0.09 and $0.61 for the three and six months ended June 30, 2016, respectively.

•	Non-GAAP net income of $15.1 million and $100.2 million for the three and six months ended June 30, 2016, respectively.

•	Completed enrollment and continuing patient follow up on Phase 3 clinical trial.

•	Top line data from Phase 3 trial in mild Alzheimer’s disease expected in 4Q16. Lilly would file for product approval in 1H17 if data are positive.

•	PDL has a 2% know-how royalty on solanezumab which runs for 12.5 years from the date of its first sale.

•

On July 29, 2016, the Supreme Court of New York issued its Memorandum of Decision granting the Company’s motion for summary judgment and denying the Wellstat Diagnostics Guarantors’ cross-motion for summary judgment.  The Supreme Court of New York held that the Wellstat Diagnostics Guarantors are liable for all “Obligations” owed by Wellstat Diagnostics to PDL.  It did not set a specific dollar amount due, but ordered that a judicial hearing officer or special referee be designated to determine the amount of the Obligations owing, and awarded PDL its attorneys’ fees and costs in an amount to be determined.  The Supreme Court of New York has

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•	On August 2, 2016 the Delaware Bankruptcy Court announced its decision to grant PDL’s motion to dismiss the chapter 11 petition with prejudice as a bad faith filing, which should result in the receivership sale in the Maryland Circuit Court proceeding promptly.

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On July 1, 2016, Noden Pharma DAC, a newly-formed company organized under the laws of Irelandpurchased from Novartis the exclusive worldwide rights to manufacture, market, and sell the branded prescription medicine product sold under the name Tekturna® and Tekturna HCT® in the United States and Rasilez® and Rasilez HCT® in the rest of the world (collectively the "Noden Products") and certain related assets and will assume certain related liabilities in exchange for the following cash commitments: $110.0 million paid on July 1, 2016, the closing date of the acquisition, $89.0 million payable on the first anniversary of the closing date and up to $95.0 million of additional cash consideration contingent on achievement of sales targets and the date of the launch of a generic drug containing the pharmaceutical ingredient aliskiren.

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On July 1, 2016, PDL entered into an investment and stockholders’ agreement with Noden Pharma DAC and an affiliate and certain members of Noden’s management. PDL acquired an approximately 99% equity stake and obtained the majority voting power of Noden, for a total cash consideration of $75.0 million. It is expected that PDL’s equity ownership stake will ultimately be reduced to 88% upon the vesting of shares granted to Noden's noncontrolling interest holders.

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In addition to the initial $75.0 million cash equity contribution, PDL will make the following additional equity contributions to Noden and an affiliate: $32 million (and up to $89 million if Noden is unable to obtain debt financing) on July 1, 2017 to fund the anniversary payment and at least $38.0 million to fund a portion of certain milestone payments under the Noden Purchase Agreement, subject to their occurrence.

•	During the three and six month periods ended June 30, 2016, we recorded approximately $3.0 million in acquisition-related costs in connection with the Noden transactions. Noden is expected to reimburse PDL as part of the intercompany arrangement for all acquisition-related costs on or before December 31, 2016.

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PDL has not yet finalized the purchase price allocation for this acquisition. We will include additional information about the fair value of acquired assets and assumed liabilities of the Noden Products in its Quarterly Report on Form 10-Q for the period ending September 30, 2016 and in our Form 8-K/A due to be filed within 71 days of the filing date of the Form 8-K with respect to the closing of the Noden transaction that was filed on July 6, 2016.

•	On July 1, 2016, Noden began earning profits on the sale of Tekturna, Tekturna HCT, Rasilez and Rasilez HCT. During the transitional service period we expect to receive monthly reporting from Novartis one month in arrears, that is, generally after Novartis has sold the Noden Products. We recognize revenue when we can reliably estimate such amounts and collectability is reasonably assured.

•	On July 8, 2016, PDL entered into a royalty purchase agreement with an individual, whereby the Company acquired that individual's rights to receive certain royalties on sales of Kybella® by Allergan, in exchange for a $9.5 million cash payment and up to $1.0 million in future milestone payments based upon product sales targets.

•

We have reduced the fair market value of the Depomed royalty rights year to date 2016 by $55.3 million, primarily due to a reduction in Glumetza royalties received and a reduction in future cash flows due to lower projected demand data, greater erosion of market share due to the launch of a generic, and higher gross-to-net adjustments for Glumetza. As you will recall, Glumetza was marketed by Salix until its acquisition by Valeant. Because we have limited information from Valeant, we employ an independent third party consulting group to assist us in our quarterly evaluation of Glumetza and the other Depomed products on which we receive or will receive royalties. In February 2016, a generic competitor to Glumetza launched as expected. The impact of the generic on pricing and gross-to-net has been greater than typical generic models would predict.

•	PDL received a $6 million milestone for FDA approval of Jentadueto® XR in the second quarter of 2016. Jentadueto XR is the third approved product for which we will receive royalties from our Depomed royalty rights assets. We expect to begin receiving royalties on Jentadueto XR in the third quarter of 2016.

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•	Since PDL’s acquisition of the Depomed royalty rights in October 2013, PDL has received $178.5 million in net cash payments.

•	PDL and Depomed are in the process of conducting a royalty audit on Glumetza royalties owed by Valeant.

•

On July 15, 2016, PDL and Direct Flow Medical entered into the fifth Amendment and Limited Waiver to the Credit Agreement. PDL funded an additional $1.5 million to Direct Flow Medical in the form of a note with substantially the same interest and payment terms as the existing loans and a conversion feature whereby the $1.5 million loan would convert into equity of Direct Flow Medical upon the occurrence of certain events.

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On February 26, 2016, PDL and Direct Flow Medical entered into the fourth Amendment to the Credit Agreement that converted a $5.0 million short-term secured promissory note into a loan under the credit agreement with substantially the same interest and payment terms as the existing loans, added a conversion feature whereby the $5.0 million loan would convert into equity of Direct Flow Medical upon the occurrence of certain events, and provided for a second $5.0 million convertible loan tranche commitment, to be funded at the option of PDL. The commitment for the second tranche was not funded and has since expired.

•	PDL has agreed to waive the liquidity covenant and delay the timing of the unpaid interest payments until September 30, 2016, and Direct Flow Medical agreed to issue to PDL a specified amount of warrants to purchase shares of convertible preferred stock on the first day of each month for the duration of the waiver period at an exercise price of $0.01 per share.

•	Direct Flow Medical is is currently attempting to raise equity.

•	On February 18, 2016, PDL was advised that Sanofi and kaléo will terminate their license and development agreement later this year.

•	On March 31, 2016, PDL was informed by kaléo that the license and development agreement was terminated and that all U.S. and Canadian commercial and manufacturing rights to Auvi-Q ® and Allerject ® had been returned to kaléo. All manufacturing equipment had also been returned to kaléo, and kaléo intends to evaluate the timing and options for bringing Auvi-Q and Allerject ® back to the market.

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PDL entered into a secured note purchase agreement with Accel 300, a wholly-owned subsidiary of kaléo, which as of June 30, 2016, had a principal balance of $144.8 million due to PDL. Interest payments due have been paid on time and in full through the second quarter of 2016, and kaléo has indicated that it intends to make payments due to PDL under the note agreement until Auvi-Q is returned to the market.

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In May of 2016, PDL and ARIAD agreed to amend the ARIAD Royalty Agreement, as a result of ARIAD’s share purchase agreement with Incyte Corporation (Incyte), to include royalties on net sales of Iclusig® (ponatinib) made by Incyte once it takes over ARIAD’s commercialization operations with respect to Iclusig in the European Union and certain other countries. In addition, the Company and ARIAD agreed to restructure future funding under the Royalty Agreement such that ARIAD’s option to draw up to an additional $100 million between January and July of 2016 was reduced to a maximum amount of up to an additional $40 million, which can be drawn at ARIAD’s option in July of 2017.

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On July 28, 2016, PDL funded the second tranche of $50 million to ARIAD. This agreement was entered into in July 2015, in exchange for royalties on the net revenues of Iclusig. As a result of the second tranche payment, under the terms of the ARIAD Royalty Agreement, PDL’s royalty percentage will increase to 5.0% of the U.S. and European net revenues of Iclusig and 5.0% of the payments ARIAD receives elsewhere in the world until December 31, 2018.  Beginning January 1, 2019 and thereafter, the royalty rate will increase to 6.5% in all jurisdictions and continue until December 31, 2033, subject to a put option of PDL upon the occurrence of specified events and a call option of ARIAD.

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