UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Form 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of report (date of earliest event reported):  November 2, 2006

PDL BioPharma, Inc.

(Exact name of registrant as specified in its charter)


Delaware

 

000-19756

 

94-3023969

(State or other jurisdiction
of incorporation)

 

(Commission
File No.)

 

(I.R.S. Employer
Identification No.)

34801 Campus Drive
Fremont, California 94555
(Address of principal executive offices)

Registrant’s telephone number, including area code:  (510) 574-1400

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 




Item 2.02. Results of Operations and Financial Condition.

On November 2, 2006, PDL BioPharma, Inc. (the “Company” or “we”) issued a press release announcing the Company’s financial results for the quarter ended September 30, 2006 (the “Earnings Release”), which is attached as Exhibit 99.1 to this current report on Form 8-K and is incorporated herein by reference.

Use of Non-GAAP Financial Information

To supplement the information that is presented in accordance with U.S. generally accepted accounting principles (“GAAP”), in our historical information for the period presented in the Earnings Release, we provide certain non-GAAP financial measures that exclude from the directly comparable GAAP measures certain non-cash and other charges. These non-GAAP financial measures exclude depreciation of property and equipment, stock-based compensation expense, amortization of intangible assets, interest income and other, net, interest expense, income taxes and certain other items.  We believe that these non-GAAP measures enhance an investor’s overall understanding of our financial performance by reconciling more closely to the actual cash expenses of the Company in its operations as well as excluding expenses that in management’s view are unrelated to our core operations, the inclusion of which may make it more difficult for investors and financial analysts reporting on the Company to compare our results from period to period.  Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as reported by the Company may not be comparable to similarly titled items reported by other companies.

Item 9.01 Financial Statements and Exhibits.

(d)

 

Exhibits.

 

 

 

Exhibit No.

 

Description


 


99.1

 

Press Release, dated November 2, 2006, regarding the third quarter 2006 financial results of PDL BioPharma, Inc.




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:    November 3, 2006

 

PDL BIOPHARMA, INC.

 

 

 

 

 

 

 

By:

/s/ Andrew Guggenhime

 

 


 

 

Andrew Guggenhime

 

 

Senior Vice President and

 

 

Chief Financial Officer



Exhibit 99.1

PDL BioPharma Announces Third Quarter 2006 Financial Results

- Company provides updated 2006 financial guidance -

          FREMONT, Calif., Nov. 2, 2006 -- PDL BioPharma, Inc. (PDL) (Nasdaq: PDLI) today reported financial results for the third quarter and the nine months ended September 30, 2006:

 

*

Total revenues for the third quarter of 2006 rose 44 percent to $111.4 million from $77.1 million in the same period of 2005. Third quarter 2006 revenues included $18.8 million in deferred licensing, collaboration and other revenues recognized as a result of the discontinuation of the Roche collaboration for daclizumab in asthma.

 

 

 

 

*

GAAP net loss was $6.7 million, or $0.06 per basic and diluted share, in the third quarter of 2006, compared with a GAAP net loss of $45.2 million, or $0.43 per basic and diluted share, in the third quarter of 2005.

 

 

 

 

*

Non-GAAP net income was $26.5 million, or $0.23 per basic and diluted share, for the third quarter of 2006, from a non-GAAP net loss of $4.7 million, or $0.04 per basic and diluted share, in the third quarter of 2005.

 

 

 

 

*

Cash flow generated from operating activities for the first nine months of 2006 was $73.0 million, compared to $13.6 million in the first nine months of 2005.  The company ended the third quarter of 2006 with cash, cash equivalents, marketable securities and restricted cash and investments of $422.3 million compared to $333.9 million at December 31, 2005.

          “During the third quarter, increases in Cardene IV sales and strong partner-driven royalties continued to propel our underlying revenue growth,” PDL BioPharma Chief Executive Officer Mark McDade said. “Our non-GAAP profit for the quarter reflects the continued positive impact of our newly diversified revenue stream and bottom-line focus, as well as the recognition of revenues related to the discontinuation of the Roche asthma collaboration.   At the same time, we remain more focused than ever on advancing our lead clinical-stage programs, with the Nuvion program in IV steroid refractory ulcerative colitis tracking towards its next milestone anticipated in the second quarter of 2007.”

          Revenues

          Total revenues for the third quarter of 2006 consisted of product sales, royalties and license, collaboration and other revenues.

 

*

Net product sales in the third quarter of 2006 were $41.1 million.  Net product sales for the same period during 2005 totaled $43.6 million, of which $38.4 million were attributable to Cardene(R) I.V., Retavase(R) and IV Busulfex.  Net product sales during 2005 included $5.2 million in sales of four off-patent products that were divested during the first quarter of 2006.

 

 

 

 

 

 

*

Cardene net sales were $28.7 million in the third quarter of 2006, a 34 percent increase from $21.5 million for the same period in 2005.  Included in the third quarter 2006 net sales were $0.3 million in sales of Cardene SR, the rights to which the company acquired from Roche in September 2006.

 

 

 

 

 

 

*

Retavase net sales were $7.2 million in the third quarter of 2006, a decrease from $11.6 million for the third quarter of 2005 due to challenging market conditions and a continued decline in the thrombolytic market over this period.

 

 

 

 

 

 

*

IV Busulfex net sales were $5.2 million in the third quarter of 2006, compared to $5.4 million for the same period in 2005.

 

 

 

 

 

*

Royalty revenues for the third quarter of 2006 increased 64 percent to $42.5 million, compared with $26.0 million in the comparable period in 2005. Royalty revenues during the third quarter of 2006 reflect royalties PDL received based on worldwide net sales of seven antibody products licensed under PDL’s antibody humanization patents: Avastin(TM), Herceptin(R), Xolair(R), Raptiva(R) and Lucentis(TM) from Genentech, Inc.; Synagis(R) from MedImmune, Inc. and Mylotarg(R) from Wyeth.  Royalty revenues during the third quarter did not reflect sales of Tysabri(R), which was recently relaunched; PDL expects to begin receiving royalties from such sales in the fourth quarter.

 

 

 

 

 

*

License, collaboration and other revenues during the third quarter of 2006 increased to $27.8 million from $7.5 million in the same period of 2005, primarily as a result of the recognition in the third quarter of 2006 of $18.8 million in deferred revenue that the company would have recognized over the course of several years were it not for the discontinuation of the company’s co-development collaboration with Roche for daclizumab in asthma.




          Costs and Expenses

          Total costs and expenses were $119.3 million in the third quarter of 2006, compared with $120.0 million in the third quarter of 2005. On a non-GAAP basis, total costs and expenses in the third quarter of 2006 were $84.9 million compared to $81.9 million in the third quarter of 2005.

 

*

Cost of product sales was $17.4 million in the third quarter of 2006 compared to $22.2 million in the same period in 2005. Non-GAAP cost of product sales, which excludes amortization of product rights, was $6.8 million in the third quarter of 2006, a decrease from $10.3 million in the comparable 2005 period on the same basis.  The decrease in cost of product sales as a percentage of product sales was due to a more profitable product mix, particularly with respect to higher sales of Cardene IV, which has higher margins than the company’s other marketed products, a lower average royalty rate paid on sales of Cardene IV, and lower manufacturing and inventory-related costs when compared to the 2005 period.

 

 

 

 

*

Research and development (R&D) expenses increased to $70.9 million in the third quarter of 2006, compared with $49.5 million in the third quarter of 2005. Research and development expenses in the third quarter of 2006 included a $5.6 million charge incurred in connection with the company’s acquisition in September 2006 of certain Cardene-related rights from Roche.  On a non-GAAP basis, R&D expenses in the third quarter of 2006 were $54.8 million, an increase over the $45.3 million reported in the same period in the prior year due primarily to expanded clinical development activities associated with Nuvion.

 

 

 

 

*

Selling, general and administrative (SG&A) expenses were $26.7 million during the third quarter of 2006, compared with $26.8 million in the third quarter of 2005. Non-GAAP SG&A expenses were $23.3 million compared to $26.3 million in the prior year comparable period.

 

 

 

 

*

Third quarter 2006 expenses included $6.0 million in stock-based compensation expenses, a significant increase over the $0.2 million incurred in the same period in the prior year principally as a result of the adoption of Statement of Financial Accounting Standards (SFAS) No. 123(R) on January 1, 2006.

          2006 Financial Outlook

          PDL BioPharma is updating its guidance for the full year 2006 to reflect actual results for the first nine months of the year and its outlook for the fourth quarter.

 

*

PDL is refining its full year revenue guidance to a range of between $405 million and $420 million, within the prior guidance range of between $400 million and $430 million.  The company is updating its expectations for the revenue components as follows:  net product sales of $162 million to $167 million, lower than prior guidance primarily due to the disappointing performance of Retavase; royalty revenues of $183 million to $185 million, an increase from previous guidance due to the continued success of the companys licensees product sales; and licensing, collaboration and other revenues of $60 million to $68 million.

 

 

 

 

*

PDL expects full year cost of product sales, excluding amortization of product rights, to be approximately 23% as a percentage of net product sales.

 

 

 

 

*

On a non-GAAP basis, PDL expects total R&D and SG&A expenses in 2006 to be between $311 million and $319 million, a decrease from the companys prior guidance of between $350 million and $365 million.

 

 

 

 

 

*

The company now expects R&D expenses of $216 million to $221 million, lower than prior guidance due primarily to recent strategic decisions to slow development activities for the ularitide and daclizumab asthma clinical programs until partnerships are secured.

 

 

 

 

 

 

*

SG&A expenses of $95 million to $98 million, a range that is within the companys previously issued guidance.

 

 

 

 

 

*

For the full year 2006, PDL expects non-GAAP net income of $55 million to $60 million or, on a diluted per share basis, $0.47 to $0.51 based on a weighted average number of shares outstanding for the year of approximately 118 million.  This exceeds the companys previously stated range of $8 million to $23 million of non-GAAP net income.




          This forward-looking guidance excludes certain other expenses based on current estimates for the full year 2006, including the impact of stock-based compensation expenses of $23 million to $25 million, depreciation of property and equipment of $30 million to $32 million and amortization of intangible assets of approximately $45 million.  In addition, this non-GAAP guidance excludes the following charges recognized through the third quarter of 2006:  $5.9 million in other-acquisition related charges related to ESP Pharma operations prior to the company’s acquisition of the business and product sales returns of Retavase from sales made prior to the acquisition of the rights to Retavase in March 2005; a $5.6 million charge incurred in connection with the company’s acquisition in September 2006 of certain Cardene-related rights from Roche; a $4.1 million charge in the first quarter of 2006 related to the sale of the company’s off-patent products; and $2.6 million in asset impairment expenses. It also excludes the impact of interest income and other, net, interest expense and income taxes, the aggregate impact of which the company expects to have an income positive effect of approximately $3 million in 2006.

          Non-GAAP Financial Information

          The non-GAAP financial measures in this press release exclude depreciation of property and equipment, stock-based compensation expense, amortization of intangible assets, interest income and other, net, interest expense, income taxes and certain other items that would otherwise be included if measured in accordance with generally accepted accounting principles (GAAP). PDL’s management believes that these non-GAAP financial measures serve as a measure of the performance of PDL’s ongoing core operations. A description of the non-GAAP financial measures for the periods presented and a reconciliation of this information to the GAAP financial measures are included in the attached financial tables.

          Forward-looking Statements

          This press release contains forward-looking statements involving risks and uncertainties and PDL’s actual results may differ materially from those, express or implied, in the forward-looking statements. The forward-looking statements include PDL’s expectations regarding financial results, PDL’s expectations regarding the continuation of existing and new collaborative agreements, and the timing of clinical developments as well as other statements regarding PDL’s expectations. Factors that may cause differences between current expectations and actual results include, but are not limited to, the following: The continued execution of a biopharmaceutical business model; changes in PDL’s development plans as PDL and its collaborators consider development plans and alternatives; factors affecting the clinical timeline such as enrollment rates and availability of clinical materials; fluctuations in sales that may result from PDL’s integration of newly acquired operations; changes in the market due to alternative treatments or other actions by competitors; and variability in expenses particularly on a quarterly basis, due, in principal part, to total headcount of the organization and the timing of expenses. In addition, PDL’s revenues depend on the success and timing of sales of PDL’s licensees, including in particular the continued success of Avastin and Herceptin from Genentech, Inc. as well as the seasonality of sales of Synagis from MedImmune, Inc. In addition, quarterly revenues may be impacted by PDL’s ability to maintain and increase its revenues from collaborative arrangements such as its co-development agreements with Biogen Idec and Roche. PDL’s net income will be affected by state and federal taxes, and its revenues and expenses would be affected by new collaborations, material patent licensing arrangements or other strategic transactions.

          Further, there can be no assurance that results from completed and ongoing clinical studies will be successful or that ongoing or planned clinical studies will be completed or initiated on the anticipated schedules. 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 Securities and Exchange Commission (SEC), including the “Risk Factors” sections 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 http://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.

          About PDL BioPharma

          PDL BioPharma, Inc. is a biopharmaceutical company focused on discovering, developing and commercializing innovative therapies for severe or life-threatening illnesses. The company currently markets and sells a portfolio of leading products in the acute-care hospital setting in the United States and Canada and generates royalties through licensing agreements with top-tier biotechnology and pharmaceutical companies based on its pioneering antibody humanization technology. Currently, PDL’s diverse product pipeline includes investigational compounds in Phase 2 or Phase 3 clinical development for inflammation and autoimmune diseases, cardiovascular disorders and cancer. The company’s research platform is focused on the discovery and development of antibodies for the treatment of cancer and autoimmune diseases. For more information, please see PDL’s website at www.pdl.com.

          NOTE: PDL BioPharma, the PDL BioPharma logo, Retavase and Busulfex are considered trademarks and Cardene and Nuvion are registered U.S. trademarks of PDL BioPharma, Inc. Herceptin and Raptiva are registered trademarks and Avastin and Lucentis are trademarks of Genentech, Inc. Xolair is a registered trademark of Novartis AG. Synagis is a registered trademark of MedImmune, Inc. Mylotarg is a registered trademark of Wyeth.  Tysabri is a registered trademark of Elan Pharmaceuticals, Inc.



PDL BIOPHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 


 


 

 

 

2006

 

2005

 

2006

 

2005

 

 

 



 



 



 



 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales, net

 

$

41,064

 

$

43,594

 

$

117,650

 

$

83,094

 

Royalties

 

 

42,533

 

 

26,003

 

 

140,524

 

 

96,695

 

License, collaboration and other

 

 

27,795

 

 

7,536

 

 

48,754

 

 

17,127

 

 

 



 



 



 



 

Total revenues

 

 

111,392

 

 

77,133

 

 

306,928

 

 

196,916

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

 

17,433

 

 

22,209

 

 

61,874

 

 

43,481

 

Research and development

 

 

70,880

 

 

49,480

 

 

195,263

 

 

125,080

 

Selling, general and administrative

 

 

26,672

 

 

26,795

 

 

84,167

 

 

54,267

 

Acquired in-process research and development

 

 

—  

 

 

—  

 

 

—  

 

 

79,417

 

Other acquisition-related charges

 

 

2,615

 

 

6,266

 

 

5,910

 

 

9,473

 

Asset impairment charges

 

 

1,656

 

 

15,225

 

 

2,556

 

 

15,225

 

 

 



 



 



 



 

Total costs and expenses

 

 

119,256

 

 

119,975

 

 

349,770

 

 

326,943

 

 

 



 



 



 



 

Operating loss

 

 

(7,864

)

 

(42,842

)

 

(42,842

)

 

(130,027

)

Interest income and other, net

 

 

5,042

 

 

2,027

 

 

12,436

 

 

6,835

 

Interest expense

 

 

(3,693

)

 

(2,671

)

 

(9,465

)

 

(7,522

)

 

 



 



 



 



 

Loss before income taxes

 

 

(6,515

)

 

(43,486

)

 

(39,871

)

 

(130,714

)

Income tax expense

 

 

208

 

 

1,680

 

 

441

 

 

1,767

 

 

 



 



 



 



 

Net loss

 

$

(6,723

)

$

(45,166

)

$

(40,312

)

$

(132,481

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.06

)

$

(0.43

)

$

(0.36

)

$

(1.30

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares -- basic and diluted

 

 

113,868

 

 

105,272

 

 

113,293

 

 

101,910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



          In addition to the consolidated financial statements presented in accordance with GAAP, PDL uses non-GAAP measures of operating performance, which are adjusted from results based on GAAP to exclude depreciation of property and equipment; stock-based compensation expense; amortization of intangible assets; interest income and other, net; interest expense; income taxes and certain other miscellaneous items.  PDL believes that the non-GAAP results provide added insight into its performance by focusing on results generated by its ongoing core operations.  PDL uses the non-GAAP results when assessing the performance of its ongoing core operations, in making resource allocation decisions and for planning and forecasting.  Additionally, PDL considers these non-GAAP results in awarding bonus and other incentive compensation to its employees, including management.  The non-GAAP financial measures should be considered in addition to, not as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.  Investors are encouraged to review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures.

PDL BIOPHARMA, INC.
NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(in thousands, except per share amounts)
(unaudited)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 


 


 

 

 

2006

 

2005

 

2006

 

2005

 

 

 



 



 



 



 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales, net

 

$

41,064

 

$

43,594

 

$

117,650

 

$

83,094

 

Royalties

 

 

42,533

 

 

26,003

 

 

140,524

 

 

96,695

 

License, collaboration and other

 

 

27,795

 

 

7,536

 

 

48,754

 

 

17,127

 

 

 



 



 



 



 

Total revenues

 

 

111,392

 

 

77,133

 

 

306,928

 

 

196,916

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

 

6,772

 

 

10,302

 

 

30,083

 

 

18,609

 

Research and development

 

 

54,779

 

 

45,302

 

 

156,434

 

 

113,054

 

Selling, general and administrative

 

 

23,337

 

 

26,262

 

 

70,583

 

 

52,994

 

 

 



 



 



 



 

Non-GAAP costs and expenses

 

 

84,888

 

 

81,866

 

 

257,100

 

 

184,657

 

 

 



 



 



 



 

Non-GAAP net income (loss)

 

$

26,504

 

$

(4,733

)

$

49,828

 

$

12,259

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NON-GAAP NET INCOME (LOSS) PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.23

 

$

(0.04

)

$

0.44

 

$

0.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares -- basic

 

 

113,868

 

 

105,272

 

 

113,293

 

 

101,910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

0.23

 

$

(0.04

)

$

0.42

 

$

0.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares -- diluted (2)

 

 

116,594

 

 

105,272

 

 

117,438

 

 

106,460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

          (1)     These non-GAAP condensed consolidated statements of operations exclude depreciation of property and equipment; stock-based compensation expense; amortization of intangible assets; interest income and other, net; interest expense; income taxes and certain other miscellaneous items that were not classified in the foregoing categories and are identified below. 

          During the three months ended September 30, 2006, the miscellaneous excluded items consisted of (a) a $5.6 million charge incurred in connection with the company’s acquisition in September 2006 of certain Cardene-related rights from Roche, (b) other acquisition-related charges of $2.6 million related to the operations of ESP Pharma Holding Company, Inc. prior to the Company’s acquisition of ESP Pharma on March 23, 2005, primarily product returns, as well as returns of Retavase for sales made prior to the Company’s acquisition of the rights to the product from Centocor, Inc. on the same date, and (c) an asset impairment charge of $1.7 million for the impairment of an intangible asset related to the distribution of Retavase.  During the three months ended September 30, 2005, the miscellaneous excluded items consisted of (a) other acquisition-related charges of $6.3 million and (b) an asset impairment charge of $15.2 million for the impairment of the off-patent branded products, originally acquired from ESP Pharma, that the Company sold in the first quarter of 2006.

          During the nine months ended September 30, 2006, the miscellaneous excluded items consisted of (a) a $5.6 million charge incurred in connection with the company’s acquisition in September 2006 of certain Cardene-related rights from Roche, (b) other acquisition-related charges of $5.9 million, (c) asset impairment charges of $2.6 million and (d) a $4.1 million charge for payments to Wyeth in consideration of Wyeth’s consent to the Company’s transfer of the Company’s rights to the off-patent branded products.  During the nine months ended September 30, 2005, the miscellaneous excluded items consisted of (a) a $79.4 million charge for acquired in-process research and development related to the ESP Pharma acquisition, (b) other acquisition-related charges of $9.5 million and (c) an asset impairment charge of $15.2 million for the impairment of off-patent branded products.

          (2)     These weighted average shares exclude 12.4 million shares and 10.6 million shares of common stock underlying the convertible notes we issued in July 2003 and February 2005, respectively.



PDL BIOPHARMA, INC.
RECONCILIATION OF NON-GAAP CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS TO GAAP
(in thousands, except per share amounts)
(unaudited)

 

 

Three Months Ended September 30, 2006

 

 

 


 

 

 

Non-GAAP
Results

 

Adjustments

 

GAAP
Results As
Reported

 

 

 

 


 

 

 

 

 

Amortization of
Intangible
Assets

 

Other Excluded
Items

 

Depreciation
of Property
and Equipment

 

Stock-Based
Compensation
Expenses

 

 

 

 



 



 



 



 



 



 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales, net

 

$

41,064

 

$

—  

 

$

—  

 

$

—  

 

$

—  

 

$

41,064

 

Royalties

 

 

42,533

 

 

—  

 

 

—  

 

 

—  

 

 

—  

 

 

42,533

 

License, collaboration and other

 

 

27,795

 

 

—  

 

 

—  

 

 

—  

 

 

—  

 

 

27,795

 

 

 



 



 



 



 



 



 

Total revenues

 

 

111,392

 

 

—  

 

 

—  

 

 

—  

 

 

—  

 

 

111,392

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

 

6,772

 

 

10,661

 

 

 

 

 

—  

 

 

—  

 

 

17,433

 

Research and development

 

 

54,779

 

 

412

 

 

5,621

 

 

6,569

 

 

3,499

 

 

70,880

 

Selling, general and administrative

 

 

23,337

 

 

—  

 

 

—  

 

 

842

 

 

2,493

 

 

26,672

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP costs and expenses

 

 

84,888

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation of property and equipment

 

 

—  

 

 

—  

 

 

7,411

 

 

(7,411

)

 

—  

 

 

—  

 

Stock-based compensation

 

 

—  

 

 

—  

 

 

5,992

 

 

—  

 

 

(5,992

)

 

—  

 

Other acquisition-related charges

 

 

—  

 

 

—  

 

 

2,615

 

 

—  

 

 

—  

 

 

2,615

 

Asset impairment charges

 

 

—  

 

 

—  

 

 

1,656

 

 

—  

 

 

—  

 

 

1,656

 

 

 

 

 

 



 



 



 



 



 

Total costs and expenses

 

 

 

 

 

11,073

 

 

23,295

 

 

—  

 

 

—  

 

 

119,256

 

 

 

 

 

 



 



 



 



 



 

Operating loss

 

 

 

 

 

(11,073

)

 

(23,295

)

 

—  

 

 

—  

 

 

(7,864

)

Interest income and other, net

 

 

—  

 

 

—  

 

 

5,042

 

 

—  

 

 

—  

 

 

5,042

 

Interest expense

 

 

—  

 

 

—  

 

 

(3,693

)

 

—  

 

 

—  

 

 

(3,693

)

 

 



 



 



 



 



 



 

Income (loss) before income taxes

 

 

26,504

 

 

(11,073

)

 

(21,946

)

 

—  

 

 

—  

 

 

(6,515

)

Income tax expense

 

 

—  

 

 

—  

 

 

208

 

 

—  

 

 

—  

 

 

208

 

 

 



 



 



 



 



 



 

Net income (loss)

 

$

26,504

 

$

(11,073

)

$

(22,154

)

$

—  

 

$

—  

 

$

(6,723

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.23

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.06

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares -- basic

 

 

113,868

 

 

 

 

 

 

 

 

 

 

 

 

 

 

113,868

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

0.23

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.06

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares -- diluted

 

 

116,594

 

 

 

 

 

 

 

 

 

 

 

 

 

 

113,868

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




 

 

Three Months Ended September 30, 2005

 

 

 


 

 

 

Non-GAAP
Results

 

Adjustments

 

GAAP Results
As Reported

 

 

 

 


 

 

 

 

 

Amortization
of Intangible
Assets

 

Other Excluded
Items

 

Depreciation
of Property
and Equipment

 

Stock-Based
Compensation
Expenses

 

 

 

 



 



 



 



 



 



 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales, net

 

$

43,594

 

$

—  

 

$

—  

 

$

—  

 

$

—  

 

$

43,594

 

Royalties

 

 

26,003

 

 

—  

 

 

—  

 

 

—  

 

 

—  

 

 

26,003

 

License, collaboration and other

 

 

7,536

 

 

—  

 

 

—  

 

 

—  

 

 

—  

 

 

7,536

 

 

 



 



 



 



 



 



 

Total revenues

 

 

77,133

 

 

—  

 

 

—  

 

 

—  

 

 

—  

 

 

77,133

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

 

10,302

 

 

11,907

 

 

—  

 

 

—  

 

 

—  

 

 

22,209

 

Research and development

 

 

45,302

 

 

486

 

 

—  

 

 

3,624

 

 

68

 

 

49,480

 

Selling, general and administrative

 

 

26,262

 

 

—  

 

 

—  

 

 

415

 

 

118

 

 

26,795

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP costs and expenses

 

 

81,866

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation of property and equipment

 

 

—  

 

 

—  

 

 

4,039

 

 

(4,039

)

 

—  

 

 

—  

 

Stock-based compensation

 

 

—  

 

 

—  

 

 

186

 

 

—  

 

 

(186

)

 

—  

 

Other acquisition-related charges

 

 

—  

 

 

—  

 

 

6,266

 

 

—  

 

 

—  

 

 

6,266

 

Asset impairment charges

 

 

 

 

 

 

 

 

15,225

 

 

 

 

 

 

 

 

15,225

 

 

 

 

 

 



 



 



 



 



 

Total costs and expenses

 

 

 

 

 

12,393

 

 

25,716

 

 

—  

 

 

—  

 

 

119,975

 

 

 

 

 

 



 



 



 



 



 

Operating income (loss)

 

 

 

 

 

(12,393

)

 

(25,716

)

 

—  

 

 

—  

 

 

(42,842

)

Interest income and other, net

 

 

—  

 

 

—  

 

 

2,027

 

 

—  

 

 

—  

 

 

2,027

 

Interest expense

 

 

—  

 

 

—  

 

 

(2,671

)

 

—  

 

 

—  

 

 

(2,671

)

 

 



 



 



 



 



 



 

Income (loss) before income taxes

 

 

(4,733

)

 

(12,393

)

 

(26,360

)

 

—  

 

 

—  

 

 

(43,486

)

Income tax expense

 

 

—  

 

 

—  

 

 

1,680

 

 

—  

 

 

—  

 

 

1,680

 

 

 



 



 



 



 



 



 

Net income (loss)

 

$

(4,733

)

$

(12,393

)

$

(28,040

)

$

—  

 

$

—  

 

$

(45,166

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.04

)

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.43

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares - basic

 

 

105,272

 

 

 

 

 

 

 

 

 

 

 

 

 

 

105,272

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

(0.04

)

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.43

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares - diluted

 

 

105,272

 

 

 

 

 

 

 

 

 

 

 

 

 

 

105,272

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




PDL BIOPHARMA, INC.
RECONCILIATION OF NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS TO GAAP
(in thousands, except per share amounts)
(unaudited)

 

 

Nine Months Ended September 30, 2006

 

 

 


 

 

 

Non-GAAP
Results

 

Adjustments

 

GAAP Results
As Reported

 

 

 

 


 

 

 

 

 

Amortization of
Intangible
Assets

 

Other Excluded
Items

 

Depreciation of
Property and
Equipment

 

Stock-Based
Compensation
Expenses

 

 

 

 



 



 



 



 



 



 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales, net

 

$

117,650

 

$

—  

 

$

—  

 

$

—  

 

$

—  

 

$

117,650

 

Royalties

 

 

140,524

 

 

—  

 

 

—  

 

 

—  

 

 

—  

 

 

140,524

 

License, collaboration and other

 

 

48,754

 

 

—  

 

 

—  

 

 

—  

 

 

—  

 

 

48,754

 

 

 



 



 



 



 



 



 

Total revenues

 

 

306,928

 

 

—  

 

 

—  

 

 

—  

 

 

—  

 

 

306,928

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

 

30,083

 

 

31,791

 

 

—  

 

 

—  

 

 

—  

 

 

61,874

 

Research and development

 

 

156,434

 

 

1,386

 

 

5,621

 

 

21,550

 

 

10,272

 

 

195,263

 

Selling, general and administrative

 

 

70,583

 

 

—  

 

 

4,123

 

 

1,993

 

 

7,468

 

 

84,167

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP costs and expenses

 

 

257,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation of property and equipment

 

 

—  

 

 

—  

 

 

23,543

 

 

(23,543

)

 

—  

 

 

—  

 

Stock-based compensation

 

 

—  

 

 

—  

 

 

17,740

 

 

—  

 

 

(17,740

)

 

—  

 

Other acquisition-related charges

 

 

—  

 

 

—  

 

 

5,910

 

 

—  

 

 

—  

 

 

5,910

 

Asset impairment charges

 

 

—  

 

 

—  

 

 

2,556

 

 

—  

 

 

—  

 

 

2,556

 

 

 

 

 

 



 



 



 



 



 

Total costs and expenses

 

 

 

 

 

33,177

 

 

59,493

 

 

—  

 

 

—  

 

 

349,770

 

 

 

 

 

 



 



 



 



 



 

Operating loss

 

 

 

 

 

(33,177

)

 

(59,493

)

 

—  

 

 

—  

 

 

(42,842

)

Interest income and other, net

 

 

—  

 

 

—  

 

 

12,436

 

 

—  

 

 

—  

 

 

12,436

 

Interest expense

 

 

—  

 

 

—  

 

 

(9,465

)

 

—  

 

 

—  

 

 

(9,465

)

 

 



 



 



 



 



 



 

Income (loss) before income taxes

 

 

49,828

 

 

(33,177

)

 

(56,522

)

 

—  

 

 

—  

 

 

(39,871

)

Income tax expense

 

 

—  

 

 

—  

 

 

441

 

 

—  

 

 

—  

 

 

441

 

 

 



 



 



 



 



 



 

Net income (loss)

 

$

49,828

 

$

(33,177

)

$

(56,963

)

$

—  

 

$

—  

 

$

(40,312

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.44

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.36

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares -- basic

 

 

113,293

 

 

 

 

 

 

 

 

 

 

 

 

 

 

113,293

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

0.42

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.36

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares -- diluted

 

 

117,438

 

 

 

 

 

 

 

 

 

 

 

 

 

 

113,293

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




 

 

Nine Months Ended September 30, 2005

 

 

 


 

 

 

Non-GAAP
Results

 

Adjustments

 

GAAP Results
As Reported

 

 

 

 


 

 

 

 

 

Amortization of
Intangible
Assets

 

Other Excluded
Items

 

Depreciation
of Property
and Equipment

 

Stock-Based
Compensation
Expenses

 

 

 

 



 



 



 



 



 



 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales, net

 

$

83,094

 

$

—  

 

$

—  

 

$

—  

 

$

—  

 

$

83,094

 

Royalties

 

 

96,695

 

 

—  

 

 

—  

 

 

—  

 

 

—  

 

 

96,695

 

License, collaboration and other

 

 

17,127

 

 

—  

 

 

—  

 

 

—  

 

 

—  

 

 

17,127

 

 

 



 



 



 



 



 



 

Total revenues

 

 

196,916

 

 

—  

 

 

—  

 

 

—  

 

 

—  

 

 

196,916

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

 

18,609

 

 

24,872

 

 

—  

 

 

—  

 

 

—  

 

 

43,481

 

Research and development

 

 

113,054

 

 

1,622

 

 

—  

 

 

10,188

 

 

216

 

 

125,080

 

Selling, general and administrative

 

 

52,994

 

 

14

 

 

—  

 

 

963

 

 

296

 

 

54,267

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP costs and expenses

 

 

184,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation of property and equipment

 

 

—  

 

 

—  

 

 

11,151

 

 

(11,151

)

 

—  

 

 

—  

 

Stock-based compensation

 

 

—  

 

 

—  

 

 

512

 

 

—  

 

 

(512

)

 

—  

 

Acquired in-process research and development

 

 

—  

 

 

—  

 

 

79,417

 

 

—  

 

 

—  

 

 

79,417

 

Other acquisition-related charges

 

 

—  

 

 

—  

 

 

9,473

 

 

—  

 

 

—  

 

 

9,473

 

Asset impairment charges

 

 

 

 

 

 

 

 

15,225

 

 

 

 

 

 

 

 

15,225

 

 

 

 

 

 



 



 



 



 



 

Total costs and expenses

 

 

 

 

 

26,508

 

 

115,778

 

 

—  

 

 

—  

 

 

326,943

 

 

 

 

 

 



 



 



 



 



 

Operating income (loss)

 

 

 

 

 

(26,508

)

 

(115,778

)

 

—  

 

 

—  

 

 

(130,027

)

Interest income and other, net

 

 

—  

 

 

—  

 

 

6,835

 

 

—  

 

 

—  

 

 

6,835

 

Interest expense

 

 

—  

 

 

—  

 

 

(7,522

)

 

—  

 

 

—  

 

 

(7,522

)

 

 



 



 



 



 



 



 

Income (loss) before income taxes

 

 

12,259

 

 

(26,508

)

 

(116,465

)

 

—  

 

 

—  

 

 

(130,714

)

Income tax expense

 

 

—  

 

 

—  

 

 

1,767

 

 

—  

 

 

—  

 

 

1,767

 

 

 



 



 



 



 



 



 

Net income (loss)

 

$

12,259

 

$

(26,508

)

$

(118,232

)

$

—  

 

$

—  

 

$

(132,481

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.12

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(1.30

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares - basic

 

 

101,910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101,910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

0.12

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(1.30

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares - diluted

 

 

106,460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101,910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




PDL BIOPHARMA, INC.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(in thousands)
(unaudited)

 

 

September 30,
2006

 

December 31,
2005

 

 

 



 



 

Cash, cash equivalents, marketable securities, and restricted cash and investments

 

$

422,268

 

$

333,922

 

Total assets

 

$

1,196,783

 

$

1,163,154

 

Total stockholders’ equity

 

$

540,687

 

$

526,065

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW DATA
(in thousands)
(unaudited)

 

 

Nine Months Ended September 30,

 

 

 


 

 

 

2006

 

2005

 

 

 



 



 

Net loss

 

$

(40,312

)

$

(132,481

)

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

 

 

79,302

 

 

134,792

 

Changes in assets and liabilities

 

 

34,057

 

 

11,252

 

 

 



 



 

Net cash provided by operating activities

 

$

73,047

 

$

13,563