PDL BioPharma, Inc.
Jul 28, 2010

PDL BioPharma Announces Second Quarter 2010 Financial Results

INCLINE VILLAGE, Nev., July 28, 2010 /PRNewswire via COMTEX/ --

PDL BioPharma, Inc. (PDL) (Nasdaq: PDLI) today reported financial results for the second quarter ended June 30, 2010.

"Our licensed products continue to generate substantial clinical interest. In early July, Roche and Genentech announced that they have filed a Biologics License Application with the U.S. Food and Drug Administration for trastuzumab-DM1, a promising new therapeutic for breast cancer, and during the American Society of Clinical Oncology Meeting in June, many positive clinical data presentations related to our licensed compounds were made," said John P. McLaughlin, president and chief executive officer of PDL BioPharma.

"In January 2010, we put in place quarterly Eurodollar hedging contracts for royalties to be received through March 2012 to protect PDL against the fluctuations in Eurodollar exchange rates, which resulted in revenue to PDL of $1.5 million for the second quarter of 2010 and, contracts which matured on June 30, 2010, will result in additional revenue to be recognized in the third quarter of $2.9 million," continued Mr. McLaughlin. "Also during the second quarter, we continued to simplify our capital structure by repurchasing approximately $84 million of our convertible notes due in August 2023. Together with the $55 million of convertible notes repurchased in the first half of 2009, PDL has reduced its fully diluted shares outstanding by 21.5 million shares."

Financial Results for the Second Quarter and Six-Months Ended June 30, 2010

Total revenues for the second quarter of 2010 were $120.3 million, compared with $125.9 million for the same period of 2009. Included in second quarter 2009 results were the second of two $12.5 million installment payments from Alexion and royalties of $18.9 million for sales on Synagis® from MedImmune. Due to the ongoing legal disputes with MedImmune, second quarter and six month 2010 revenue does not include royalties on sales of Synagis®. Excluding the Alexion payment and royalties received from MedImmune, second quarter 2010 revenue increased 27 percent when compared with the second quarter of 2009. Revenue growth was primarily driven by increased first quarter 2010 sales by our licensees of Avastin® and Herceptin®, which are marketed by Genentech and Roche, Lucentis®, which is marketed by Genentech and Novartis, and Tysabri®, which is marketed by Elan and Biogen Idec. PDL received royalties for these product sales in the second quarter of 2010.

Total general and administrative expenses for the second quarter of 2010 were $8.8 million, compared with $5.6 million for the second quarter of 2009. The increase was primarily due to increased legal expenses associated with the MedImmune litigation and the two interference proceedings initiated by the U.S. Patent and Trade Office in February and November of 2009. Significant expense items in the second quarter of 2010 were legal fees of $5.8 million, compensation and benefits of $1.0 million, professional service fees of $1.0 million and stock-based compensation expense of $0.2 million.

Net income for the second quarter of 2010 was $50.1 million, or $0.30 per diluted share, compared with net income of $77.2 million, or $0.47 per diluted share, for the same period in 2009.

To reduce the dilution from our convertible notes, during the three months ended June 30, 2010, the Company repurchased at market prices an aggregate $84.2 million face value of the Company's 2023 Notes an average premium of 19% to face value for total consideration of $100.4 million in cash plus accrued interest. This transaction resulted in a charge to non-operating expense of $16.3 million or $14.7 million net of tax. The effect of these transactions was to reduce net income per diluted share from $0.38 to $0.30 for the three months ended June 30, 2010. During the same period in 2009, we repurchased at market prices an aggregated $50.0 million face value of the 2023 Notes at a 2% discount to face value and $5.0 million of the Company's 2012 Notes at a discount to face value of 10.75%. These transactions resulted in a gain of $1.2 million or $0.8 million net of tax. The effect of these transactions was to increase net income per diluted share from $0.46 to $0.47 for the three months ended June 30, 2009. The result of these repurchase transactions was to reduce shares used to compute net income per diluted share on an as-converted basis by 14.9 million shares and 6.6 million shares in 2010 and 2009, respectively.

Net cash provided by operating activities for the second quarter of 2010 was $123.6 million, compared with $103.4 million for the second quarter of 2009. At June 30, 2010, PDL had cash, cash equivalents and short-term investments of $223.7 million compared with $303.2 million at December 31, 2009, a decrease which can be primarily attributed to the repurchase of convertible notes, payment of the April dividend, pay down of the non-recourse notes partially offset by cash provided by operations.

Total revenues for the six months ended June 30, 2010 were $182.4 million, compared with $188.5 million for the same period of 2009. Total general and administrative expenses for the six months ended June 30, 2010 were $18.2 million compared to $10.3 million for the same period of 2009. Net income for the first six months of 2010 was approximately $76.1 million, or $0.44 per diluted share, compared to $114.7 million, or $0.69 per diluted share. Adjusted for the convertible note transactions described above, non-GAAP net income for the six months ended June 30, 2010 totaled $90.9 million, or $0.52 per diluted share, compared with non-GAAP net income of $113.9 million, or $0.69 per diluted share for the same period of 2009.

2010 Dividends

PDL previously announced that it would pay two special dividends of $0.50 per share each, to its stockholders in 2010. The first special dividend, totaling $59.9 million, was paid on April 1, 2010 to all stockholders of record on March 15, 2010. The second special dividend will be paid on October 1, 2010 to all stockholders of record on September 15, 2010. PDL does not pay regular dividends.

Third Quarter 2010 Revenue Guidance

As previously announced, PDL will continue to provide revenue guidance for each quarter in the third month of that quarter. Third quarter 2010 revenue guidance will be provided in early September.

Conference Call Details

PDL will hold a conference call to discuss financial results at 4:30 p.m. ET today, July 28, 2010.

To access the live conference call via phone, please dial (866) 804-6924 from the United States and Canada or (857) 350-1670 internationally. The conference ID is 90954288. Please dial in approximately 10 minutes prior to the start of the call. A telephone replay will be available beginning approximately one hour after the call through August 4, 2010, and may be accessed by dialing (888) 286-8010 from the United States and Canada or (617) 801-6888 internationally. The replay passcode is 20973845.

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 "Company Presentations & Events." Please connect to the website at least 15 minutes prior to the call to allow for any software download that may be necessary.

About PDL BioPharma

PDL pioneered the humanization of monoclonal antibodies and, by doing so, enabled the discovery of a new generation of targeted treatments for cancer and immunologic diseases. PDL is focused on maximizing the value of its antibody humanization patents and related assets. The Company receives royalties on sales of a number of humanized antibody products marketed today based on patents which expire in late 2014. For more information, please visit www.pdl.com.

NOTE: PDL BioPharma and the PDL BioPharma logo are considered trademarks of PDL BioPharma, Inc.

Non-GAAP Financial Information

The Company has presented certain financial information in conformance with GAAP and also on a non-GAAP basis for the three and six months ended June 30, 2010 and 2009. Management believes that this non-GAAP information is useful for investors taken in conjunction with the Company's U.S. GAAP financial statements. Non-GAAP financial information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of the Company's net income as reported under U.S. GAAP. A reconciliation between U.S. GAAP and non-GAAP financial information is provided in the table below.

Forward-Looking Statements

This press release contains forward-looking statements. 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. Factors that may cause differences between current expectations and actual results include, but are not limited to, the following:

Other factors that may cause PDL's actual results to differ materially from those expressed or implied in the forward-looking statements in this press release are discussed in PDL's filings with the SEC, including the "Risk Factors" section of its annual and quarterly reports filed with the SEC. Copies of PDL's filings with the SEC may be obtained at the "Investors" section of PDL's website at www.pdl.com. PDL expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in PDL's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based for any reason, except as required by law, even as new information becomes available or other events occur in the future. All forward-looking statements in this press release are qualified in their entirety by this cautionary statement.

                                PDL BIOPHARMA, INC.
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME DATA
                                    (Unaudited)
                      (In thousands, except per share amounts)




                                 Three Months           Six Months
                                     Ended                Ended
                                   June 30,              June 30,
                                   --------              --------
                                  2010         2009      2010          2009
                                  ----         ----      ----          ----

    Revenues
        Royalties             $120,343     $113,403  $182,404      $175,701
        License and other            -       12,461         -        12,785
    Total revenues             120,343      125,864   182,404       188,486
    General and
     administrative expenses     8,820        5,590    18,230        10,283
                                 -----        -----    ------        ------
    Operating income           111,523      120,274   164,174       178,203
    Gain (loss) on repurchase
     of convertible notes      (16,327)       1,195   (16,327)        1,195
    Interest and other
     income, net                    90          310       170           646
    Interest expense           (11,560)      (3,357)  (24,087)       (6,931)
                               -------       ------   -------        ------

        Income before income
         taxes                  83,726      118,422   123,930       173,113
    Income tax expense          33,588       41,185    47,785        58,419
        Net income             $50,138      $77,237   $76,145      $114,694
                               =======      =======   =======      ========

    Net income per basic
     share                       $0.42        $0.65     $0.64         $0.96
                                 =====        =====     =====         =====
    Net income per diluted
     share                       $0.30        $0.47     $0.44         $0.69
                                 =====        =====     =====         =====

    Cash dividends declared
     and paid per common
     share                          $-           $-     $1.00         $1.00
                                   ===          ===     =====         =====

    Shares used to compute
     income per basic share    119,536      119,357   119,530       119,342
                               =======      =======   =======       =======
    Shares used to compute
     income per diluted share  173,398      169,566   178,821       171,053
                               =======      =======   =======       =======


                                         PDL BIOPHARMA, INC.
                      RECONCILIATION OF GAAP FINANCIAL INFORMATION TO NON-GAAP
                                             (Unaudited)
                              (In thousands, except per share amounts)



                                      Three Months
                                         Ended            Six Months Ended
                                       June 30,               June 30,
                                       --------               --------
                                   2010         2009    2010           2009
                                   ----         ----    ----           ----

    Net Income                  $50,138      $77,237 $76,145       $114,694
    Add back loss (gain) on
     repurchase of
     convertible notes           16,327      (1,195)  16,327         (1,195)
    Deduct income tax expense
     (benefit) on repurchase
     of convertible notes       (1,590)          418 (1,590)            418
                                 ------          ---  ------            ---
        Non-GAAP net income      64,875       76,460  90,882        113,917
    Add back interest expense
     for convertible notes,
     net of estimated taxes       1,360        1,819   2,995          3,761
                                  -----        -----   -----          -----
      Non-GAAP income used to
       compute non-GAAP net
       income per diluted share $66,235      $78,279 $93,877       $117,678
                                =======      ======= =======       ========

    Non-GAAP net income per
     basic share                  $0.54        $0.64   $0.76          $0.95
                                  =====        =====   =====          =====
    Non-GAAP net income per
     diluted share                $0.38        $0.46   $0.52          $0.69
                                  =====        =====   =====          =====


                            PDL BIOPHARMA, INC.
                  GENERAL AND ADMINISTRATIVE EXPENSE DATA
                                (Unaudited)
                               (In thousands)


                                                           Six Months
                                Three Months Ended                       Ended
                                     June 30,              June 30,
                                     --------              --------
                                   2010        2009    2010          2009
                                   ----        ----    ----          ----
    Compensation and benefits      $996        $829  $1,997        $1,568
    Legal expense                 5,811       2,813  12,161         4,373
    Other professional service    1,005         837   2,083         1,566
    Insurance                       195         269     423           516
    Depreciation                     28          35      62           922
    Stock-based compensation        171         206     359           402
    Other                           614         601   1,145           936
       Total general and
        administrative expenses  $8,820      $5,590 $18,230       $10,283
                                 ======      ====== =======       =======


                          PDL BIOPHARMA, INC.
               CONDENSED CONSOLIDATED BALANCE SHEET DATA
                              (Unaudited)
                            (In thousands)



                                                              December
                                              June 30,           31,
                                                   2010            2009
                                                   ----            ----
    Cash, cash equivalents and short-
     term investments                          $223,694        $303,227
    Total assets                               $271,531        $338,411
    Convertible notes payable                  $343,828        $427,998
    Non-recourse notes payable                 $249,635        $300,000
    Total stockholders' deficit               $(434,858)      $(415,953)


                        PDL BIOPHARMA, INC.
        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW DATA
                            (Unaudited)
                          (In thousands)


                                                    Six Months Ended
                                                        June 30,
                                                        --------
                                                      2010           2009
                                                      ----           ----
    Net income                                     $76,145       $114,694
    Adjustments to reconcile net income to
     net cash provided by operating
     activities                                     17,889           (241)
    Changes in assets and liabilities               29,593        (11,080)
    Net cash provided by operating
     activities                                   $123,627       $103,373
                                                  ========       ========


                                PDL BIOPHARMA, INC.
          MIX OF EX-U.S. SALES AND EX-U.S.-BASED MANUFACTURING AND SALES
                               OF GENENTECH PRODUCTS
                                    (Unaudited)


                                  Three Months Ended     Six Months Ended
                                       June 30,              June 30,
                                       --------              --------
                                   2010          2009  2010          2009
                                   ----          ----  ----          ----
    Avastin
      % Ex-U.S. Sold                 49%           46%   49%           46%
      % Ex-U.S. Manufuactured and
       Sold                          27%            -    16%            -
    Herceptin
      % Ex-U.S. Sold                 70%           69%   70%           70%
      % Ex-U.S. Manufuactured and
       Sold                          47%           30%   45%           23%
    Lucentis
      % Ex-U.S. Sold                 57%           51%   57%           50%
      % Ex-U.S. Manufuactured and
       Sold                           -             -     -             -
    Xolair
      % Ex-U.S. Sold                 36%           26%   35%           26%
      % Ex-U.S. Manufuactured and
       Sold                          36%           26%   35%           26%

SOURCE PDL BioPharma, Inc.