PDL BioPharma, Inc.
Nov 10, 2010

PDL BioPharma Announces Third Quarter 2010 Financial Results

INCLINE VILLAGE, Nev., Nov. 10, 2010 /PRNewswire via COMTEX/ --

PDL BioPharma, Inc. (PDL) (Nasdaq: PDLI) today reported financial results for the third quarter and nine months ended September 30, 2010.

Financial Results for the Third Quarter Ended September 30, 2010

Revenues for the third quarter of 2010 were $86.4 million, a 21 percent increase when compared with $71.4 million for the same period in 2009. Revenue growth for the third quarter of 2010 over the same period in 2009 was primarily driven by increased second quarter 2010 sales by the Company's 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 third quarter of 2010.

General and administrative expenses for the third quarter of 2010 were $11.1 million compared with $5.3 million for the third quarter of 2009. Significant expense items in the third quarter of 2010 were legal fees of $8.7 million, compensation and benefits of $1.0 million, professional service fees of $0.5 million and stock-based compensation expense of $0.2 million.

Non-operating expenses were $12.1 million for the third quarter of 2010 compared with $2.6 million for the third quarter of 2009. Included in non-operating expense for 2010 is a loss of $2.4 million associated with the conversion of the Company's 2.75% Convertible Subordinated Notes due 2023 (the 2023 Notes) and interest expense of $9.9 million. In the third quarter of 2009, the Company recorded a gain of $0.3 million on the repurchase of a portion of its 2.00% Convertible Senior Notes due 2012 (the 2012 Notes) and interest expense of $3.1 million. The increase in interest expense is attributable to the 10.25% Non-recourse Notes due 2015 issued in November 2009 (the Non-recourse Notes) that have a current principal balance of $225.0 million.

Net income for the third quarter of 2010 was $40.2 million, or $0.24 per diluted share compared with net income of $46.4 million, or $0.29 per diluted share, for the same period in 2009.

Financial Results for the Nine Months Ended September 30, 2010

Revenues for the nine months ended September 30, 2010 were $268.8 million, compared with $259.9 million for the same period in 2009. General and administrative expenses for the nine months ended September 30, 2010 were $29.3 million compared to $15.5 million for the same period in 2009.

Non-operating expenses for the nine months ended September 30, 2010 were $52.4 million compared with $7.7 million for the same period in 2009. Included in non-operating expense for the nine months ended September 30, 2010 are $18.7 million in costs associated with the retirement or conversion of the 2023 Notes. Included in the nine months ended September 30, 2009 are gains associated with the repurchase of a portion of the 2012 Notes of $0.8 million and a portion of the 2023 Notes of $0.7 million.

Net income for the first nine months of 2010 was $116.3 million, or $0.67 per diluted share, compared to $161.1 million, or $0.97 per diluted share for the same period in 2009. Adjusting for gains or losses on retirement or conversion of convertible debt, non-GAAP net income for the nine months ended September 30, 2010 totaled $133.4 million, or $0.77 per diluted share, compared with non-GAAP net income of $160.1 million, or $0.96 per diluted share for the same period in 2009.

Net cash provided by operating activities for the first nine months of 2010 was $154.3 million compared with $132.8 million for the first nine months of 2009. At September 30, 2010, PDL had cash, cash equivalents and short-term investments of $227.2 million compared with $303.2 million at December 31, 2009, a decrease which can be primarily attributed to the retirement of the 2023 Notes, the payment of the April dividend and the $75 million repayment of the Company's Non-recourse Notes partially offset by cash provided by operations.

Exchange of 2.00% Senior Convertible Notes due 2012

As previously announced, the Company completed an exchange of $92.0 million in aggregate principal of the 2012 Notes in separate, privately negotiated transactions with the note holders. Pursuant to the exchange transactions, the note holders received $92.0 million in aggregate principal of new 2.875% Convertible Senior Notes due February 15, 2015 (the 2015 Notes). As part of the transaction, the Company also placed an additional $88.0 million in aggregate principal of the 2015 Notes. Following the exchange transactions, $136.0 million of the 2012 Notes remain outstanding. The conversion rate for the 2015 Notes is 140.571 shares of common stock per $1,000 principal amount of the 2015 Notes or $7.11 per share of common stock.

The following summarizes the Company's debt outstanding at December 31, 2009 and at November 1, 2010.




Debt Outstanding
(In millions)




11/1/2010


12/31/2009

2.75% Convertible Debt





Put Option - August 2010

$ -


$ 200

2.00% Convertible Debt





Maturity - February 2012

136


228

10.25% Securitization Note





Expected Maturity - September 2012

225


300

2.875% Convertible Debt





Maturity - February 2015

180


-



Total Debt

$ 541


$ 728

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, totaling $69.8 million, was paid on October 1, 2010 to all stockholders of record on September 15, 2010. PDL does not pay regular dividends.

Fourth Quarter and Full Year 2010 Revenue Guidance

As previously announced, PDL will continue to provide revenue guidance for each quarter in the third month of that quarter. Fourth quarter and year-end 2010 revenue guidance will be provided in early December.

Conference Call Details

PDL will hold a conference call to discuss financial results at 4:30 p.m. ET today, November 10, 2010.

To access the live conference call via phone, please dial (866) 271-5140 from the United States and Canada or (617) 213-8893 internationally. The conference ID is 98631412. 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 November 17, 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 74992654.

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 by leading pharmaceutical and biotechnology companies 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 generally accepted accounting principles in the U.S. (GAAP) and also on a non-GAAP basis for the three and nine months ended September 30, 2010 and 2009. Management believes that this non-GAAP information is useful for investors taken in conjunction with the Company'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 GAAP. A reconciliation between GAAP and non-GAAP financial information is provided in the table on page 5.

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 Ended


Nine Months Ended


September 30,


September 30,


2010


2009


2010


2009









Revenues








Royalties

$ 86,442


$ 71,446


$ 268,846


$ 247,147

License and other

-


-


-


12,785

Total revenues

86,442


71,446


268,846


259,932

General and administrative expenses

11,110


5,255


29,340


15,538

Operating income

75,332


66,191


239,506


244,394

Gain (loss) on retirement or conversion of convertible notes

(2,354)


323


(18,681)


1,518

Interest and other income, net

167


214


337


860

Interest expense

(9,928)


(3,105)


(34,015)


(10,036)









Income before income taxes

63,217


63,623


187,147


236,736

Income tax expense

23,028


17,217


70,813


75,636

Net income

$ 40,189


$ 46,406


$ 116,334


$ 161,100









Net income per basic share

$ 0.32


$ 0.39


$ 0.95


$ 1.35

Net income per diluted share

$ 0.24


$ 0.29


$ 0.67


$ 0.97









Cash dividends declared per common share

$ -


$ -


$ 1.00


$ 1.00









Shares used to compute income per basic share

127,479


119,411


122,209


119,366

Shares used to compute income per diluted share

172,217


168,576


178,448


172,248

PDL BIOPHARMA, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION

(Unaudited)

(In thousands, except per share amounts)
















Three Months Ended


Nine Months Ended


September 30,


September 30,


2010


2009


2010


2009









Net income

$ 40,189


$ 46,406


$ 116,334


$ 161,100

Add back loss (gain) on retirement or conversion of convertible notes

2,354


(323)


18,681


(1,518)

Deduct income tax expense (benefit) on retirement or conversion of convertible notes

-


113


(1,590)


531

Non-GAAP net income

42,543


46,196


133,425


160,113

Add back interest expense for convertible notes, net of estimated taxes

987


1,681


3,982


5,444

Non-GAAP net income used to compute non-GAAP net income per diluted share

$ 43,530


$ 47,877


$ 137,407


$ 165,557









Non-GAAP net income per diluted share

$ 0.25


$ 0.28


$ 0.77


$ 0.96









Shares used to compute net income per diluted share

172,217


168,576


178,448


172,248

Delete shares issued to induce note conversion to common stock (1)

(104)


-


(35)


-

Shares used to compute non-GAAP net income per diluted share

172,113


168,576


178,413


172,248

















(1) The shares used to compute non-GAAP net income per diluted share amounts are the same as the shares used to calculate GAAP net income per diluted share amounts, except the shares for the three and nine months ended September 30, 2010 exclude the weighted average effect of the shares issued as an incentive to induce conversion of the 2023 Notes in August 2010.

PDL BIOPHARMA, INC.

GENERAL AND ADMINISTRATIVE EXPENSE DATA

(Unaudited)

(In thousands)










Three Months Ended


Nine Months Ended


September 30,


September 30,


2010


2009


2010


2009

Compensation and benefits

$ 965


$ 821


$ 2,962


$ 2,389

Legal expense

8,660


3,063


20,821


7,436

Other professional services

535


567


2,618


2,133

Insurance

185


238


608


754

Depreciation

14


35


76


957

Stock-based compensation

166


215


525


617

Other

585


316


1,730


1,252

Total general and administrative expenses

$ 11,110


$ 5,255


$ 29,340


$ 15,538

PDL BIOPHARMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEET DATA

(Unaudited)

(In thousands)






September 30,


December 31,


2010


2009

Cash, cash equivalents and short-term investments

$ 227,190


$ 303,227

Total assets

$ 257,507


$ 338,411

Convertible notes payable

$ 227,990


$ 427,998

Non-recourse notes payable

$ 225,041


$ 300,000

Total stockholders' deficit

$ (304,542)


$ (415,953)

PDL BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW DATA

(Unaudited)

(In thousands)






Nine Months Ended


September 30,


2010


2009

Net income

$ 116,334


$ 161,100

Adjustments to reconcile net income to net cash provided by operating activities

20,199


(3,586)

Changes in assets and liabilities

17,780


(24,710)

Net cash provided by operating activities

$ 154,313


$ 132,804

PDL BIOPHARMA, INC.

MIX OF EX-U.S.-BASED SALES AND EX-U.S.-BASED MANUFACTURING AND SALES
OF GENENTECH PRODUCTS

(Unaudited)












Three Months Ended


Nine Months Ended



September 30,


September 30,



2010


2009


2010


2009

Avastin









% Ex-U.S.-based Sales

49%


46%


49%


46%


% Ex-U.S.-based Manufacturing and Sales

27%


-


20%


-

Herceptin









% Ex-U.S.-based Sales

68%


68%


70%


70%


% Ex-U.S.-based Manufacturing and Sales

45%


47%


45%


31%

Lucentis









% Ex-U.S.-based Sales

56%


55%


57%


52%


% Ex-U.S.-based Manufacturing and Sales

-


-


-


-

Xolair









% Ex-U.S.-based Sales

34%


31%


35%


28%


% Ex-U.S.-based Manufacturing and Sales

34%


31%


35%


28%

SOURCE PDL BioPharma, Inc.