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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 (Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended June 30, 2020
OR
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For transition period from               to            
Commission File Number: 000-19756
https://cdn.kscope.io/61fd9cacdd0aa90b6d84ff01002b9ca3-pdli-20200630_g1.jpg
PDL BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
Delaware94-3023969
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
932 Southwood Boulevard
Incline Village, Nevada 89451
(Address of principal executive offices and Zip Code)

(775832-8500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading symbolName of each exchange on which registered
Common Stock, par value $0.01 per sharePDLIThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒    No   ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company
If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes      No  ☒
As of July 31, 2020, there were 113,982,229 shares of the registrant’s Common Stock outstanding.



 PDL BIOPHARMA, INC.
2020 Form 10-Q
Table of Contents
 Page
PART I - FINANCIAL INFORMATION
   
ITEM 1.FINANCIAL STATEMENTS (unaudited)
   
 Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019
   
 Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2020 and 2019
   
 Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019
   
Condensed Consolidated Statements of Stockholders Equity for the Three and Six Months Ended June 30, 2020 and 2019
 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019
   
 Notes to the Condensed Consolidated Financial Statements
   
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
ITEM 4.CONTROLS AND PROCEDURES
 
PART II - OTHER INFORMATION
   
ITEM 1.LEGAL PROCEEDINGS
   
ITEM 1A.RISK FACTORS
   
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
ITEM 4.MINE SAFETY DISCLOSURES
ITEM 5.OTHER INFORMATION
ITEM 6.EXHIBITS
  
SIGNATURES
We own or have rights to certain trademarks, trade names, copyrights and other intellectual property used in our business, including PDL BioPharma and the PDL logo, each of which is considered a trademark. All other company names, product names, trade names and trademarks included in this Quarterly Report on Form 10-Q are trademarks, registered trademarks or trade names of their respective owners.
2


PART I. FINANCIAL INFORMATION

ITEM  1.         FINANCIAL STATEMENTS

PDL BIOPHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three Months EndedSix Months Ended
 June 30,June 30,
 2020201920202019
Revenues  
Product revenue, net$4,099  $5,268  $8,115  $10,004  
Lease revenue359  1,308  1,436  2,532  
Service revenue690  846  1,582  1,612  
Royalties from Queen et al. patents  6    9  
License and other63  30  73  (3) 
Total revenues5,211  7,458  11,206  14,154  
Operating expenses    
Cost of product revenue (excluding intangible asset amortization)2,639  4,929  5,499  8,729  
Amortization of intangible assets335  344  637  662  
Severance and retention3,579    22,313    
General and administrative9,719  8,695  22,471  17,005  
Sales and marketing1,237  1,861  2,487  3,435  
Research and development1,465  886  3,321  1,796  
Total operating expenses18,974  16,715  56,728  31,627  
Operating loss from continuing operations(13,763) (9,257) (45,522) (17,473) 
Non-operating expense, net    
Interest and other income, net69  1,650  582  3,524  
Interest expense(312) (2,984) (786) (5,939) 
Loss on extinguishment of convertible notes    (606)   
Total non-operating expense, net(243) (1,334) (810) (2,415) 
Loss from continuing operations before income taxes(14,006) (10,591) (46,332) (19,888) 
Income tax benefit from continuing operations(1,077) (2,575) (14,144) (3,422) 
Net loss from continuing operations(12,929) (8,016) (32,188) (16,466) 
(Loss) income from discontinued operations before income taxes (including loss on classification as held for sale of $16,143 and $28,904 for the three and six months ended June 30, 2020, respectively)(44,277) 4,830  (58,112) 23,517  
Income tax (benefit) expense of discontinued operations(6,878) 1,328  (7,961) 4,948  
(Loss) income from discontinued operations(37,399) 3,502  (50,151) 18,569  
Net (loss) income(50,328) (4,514) (82,339) 2,103  
Less: Net loss attributable to noncontrolling interests(357) (95) (645) (158) 
Net (loss) income attributable to PDL’s shareholders$(49,971) $(4,419) $(81,694) $2,261  
Net (loss) income per share - basic    
Net (loss) from continuing operations$(0.11) $(0.07) $(0.26) $(0.13) 
Net (loss) income from discontinued operations(0.32) 0.03  (0.42) 0.15  
Net (loss) income attributable to PDL’s shareholders$(0.43) $(0.04) $(0.68) $0.02  
Net (loss) income per share - diluted
Net (loss) from continuing operations$(0.11) $(0.07) $(0.26) $(0.13) 
Net (loss) income from discontinued operations(0.32) 0.03  (0.42) 0.15  
Net (loss) income attributable to PDL’s shareholders$(0.43) $(0.04) $(0.68) $0.02  
Weighted-average shares outstanding    
Basic115,908  118,285  119,402  123,484  
Diluted115,908  118,285  119,402  123,484  
See accompanying notes.
3


PDL BIOPHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
(In thousands)
Three Months EndedSix Months Ended
 June 30,June 30,
 2020201920202019
Net (loss) income$(50,328) $(4,514) $(82,339) $2,103  
Other comprehensive loss, net of tax    
Total other comprehensive loss, net of tax        
Comprehensive (loss) income(50,328) (4,514) (82,339) 2,103  
Less: Comprehensive loss attributable to noncontrolling interests(357) (95) (645) (158) 
Comprehensive (loss) income attributable to PDL’s shareholders$(49,971) $(4,419) $(81,694) $2,261  

See accompanying notes.
4


PDL BIOPHARMA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts) 
June 30,December 31,
 20202019
 (unaudited)(Note 1)
Assets  
Current assets:  
Cash and cash equivalents$105,446  $168,982  
Accounts receivable, net6,154  6,559  
Notes receivable52,598  52,583  
Inventory12,633  8,061  
Assets held for sale (Note 2)289,426  70,366  
Prepaid and other current assets29,291  7,344  
Total current assets495,548  313,895  
Property and equipment, net3,039  2,560  
Notes receivable, long-term636  827  
Intangible assets, net12,550  13,186  
Long-term assets held for sale (Note 2)  377,491  
Other assets8,883  9,247  
Total assets$520,656  $717,206  
Liabilities and Stockholders’ Equity  
Current liabilities:  
Accounts payable$3,524  $2,675  
Accrued liabilities14,498  11,923  
Liabilities held for sale (Note 2)18,213  31,095  
Total current liabilities36,235  45,693  
Convertible notes payable13,507  27,250  
Liabilities held for sale, long-term (Note 2)  120  
Other long-term liabilities50,913  50,865  
Total liabilities100,655  123,928  
Commitments and contingencies (Note 13)
Stockholders’ equity:  
Preferred stock, par value $0.01 per share, 10,000 shares authorized; no shares issued and outstanding    
Common stock, par value $0.01 per share, 350,000 shares authorized; 113,945 and 124,303 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively1,139  1,243  
Additional paid-in capital(66,164) (78,875) 
Retained earnings485,493  670,832  
Total PDL stockholders’ equity420,468  593,200  
Noncontrolling interests(467) 78  
Total stockholders’ equity420,001  593,278  
Total liabilities and stockholders’ equity$520,656  $717,206  

See accompanying notes.
5


PDL BIOPHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)
PDL Stockholders’ Equity
Common StockTreasury StockAdditional
Paid-In
Capital
Retained EarningsNon-controlling InterestTotal
Stockholders’ Equity
SharesAmount
Balance at December 31, 2019124,302,616  $1,243  $  $(78,875) $670,832  $78  $593,278  
Issuance of common stock, net of forfeitures1,781,197  18  —  (18) —  —    
Stock-based compensation expense—  —  —  14,453  —  —  14,453  
Repurchase and retirement of common stock(5,564,841) (56) (2,244) —  (17,978) —  (20,278) 
Transfer of subsidiary shares to non-controlling interest—  —  —  683  —  100  783  
Extinguishment of convertible notes—  —  —  (3,911) —  —  (3,911) 
Capped call transactions—  —  —  801  —  —  801  
Comprehensive loss:
Net loss—  —  —  —  (31,723) (288) (32,011) 
Total comprehensive loss—  —  —  —  —  —  (32,011) 
Balance at March 31, 2020120,518,972  1,205  (2,244) (66,867) 621,131  (110) 553,115  
Issuance of common stock, net of forfeitures183,903  2  —  458  —  —  460  
Stock-based compensation expense—  —  —  245  —  —  245  
Repurchase and retirement of common stock(6,758,147) (68) 2,244  —  (21,267) —  (19,091) 
Noncash liquidating distribution—  —  —  —  (64,400) —  (64,400) 
Comprehensive loss:
Net loss—  —  —  —  (49,971) (357) (50,328) 
Total comprehensive loss—  —  —  —  —  —  (50,328) 
Balance at June 30, 2020113,944,728  $1,139  $  $(66,164) $485,493  $(467) $420,001  

PDL Stockholders’ Equity
Common StockTreasury StockAdditional
Paid-In
Capital
Retained EarningsNon-controlling InterestTotal
Stockholders’ Equity
SharesAmount
Balance at December 31, 2018136,512,522  $1,365  $(2,103) $(98,030) $828,547  $  $729,779  
Issuance of common stock, net of forfeitures764,785  8  —  (8) —  —    
Stock-based compensation expense—  —  —  1,169  —  —  1,169  
Repurchase and retirement of common stock(13,460,164) (135) 613  —  (44,831) —  (44,353) 
Transfer of subsidiary shares to non-controlling interest—  —  —  —  —  572  572  
Comprehensive income:
Net income—  —  —  —  6,680  (63) 6,617  
Total comprehensive income—  —  —  —  —  —  6,617  
Balance at March 31, 2019123,817,143  1,238  (1,490) (96,869) 790,396  509  693,784  
Issuance of common stock, net of forfeitures37,996  —  —  —  —  —    
Stock-based compensation expense—  —  —  2,175  —  —  2,175  
Repurchase and retirement of common stock(8,185,970) (81) 944  —  (26,897) —  (26,034) 
Transfer of subsidiary shares to non-controlling interest—  —  —  229  —  (216) 13  
Comprehensive loss:
Net loss—  —  —  —  (4,419) (95) (4,514) 
Total comprehensive loss—  —  —  —  —  —  (4,514) 
Balance at June 30, 2019115,669,169  $1,157  $(546) $(94,465) $759,080  $198  $665,424  

See accompanying notes.
6


PDL BIOPHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 Six Months Ended June 30,
 20202019
Cash flows from operating activities  
Net (loss) income $(82,339) $2,103  
Less: (Loss) income from discontinued operations(50,151) 18,569  
Net loss from continuing operations
(32,188) (16,466) 
Adjustments to reconcile net loss to net cash used in operating activities:
  
Amortization of convertible notes conversion option and debt issuance costs485  3,876  
Accreted interest on convertible note principal38    
Amortization of intangible assets637  662  
Amortization of right-of-use assets370  362  
Change in fair value of derivative assets73  (3) 
Loss on extinguishment of convertible notes606    
Other amortization and depreciation867  1,509  
Loss on disposal of property and equipment316    
Stock-based compensation expense18,000  3,210  
Deferred income taxes(158) 9,353  
Changes in assets and liabilities:  
Accounts receivable582  (3,532) 
Prepaid and other current assets(21,944) 5,614  
Inventory(5,991) (1,138) 
Other assets67  406  
Accounts payable843  1,078  
Accrued liabilities3,360  1,155  
Other long-term liabilities266  167  
Net cash (used in) provided by operating activities - continuing operations(33,771) 6,253  
Net cash used in operating activities - discontinued operations1,688  (14,428) 
Cash flows from investing activities  
Purchase of intangible assets  (1,700) 
Purchase of property and equipment(235) (163) 
Net cash used in investing activities - continuing operations(235) (1,863) 
Net cash provided by (used in) investing activities - discontinued operations24,966  (27,274) 
Cash flows from financing activities  
Proceeds from the exercise of stock options461    
Repurchase of convertible notes(18,845)