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Delaware | 94-3023969 | |
(State or Other Jurisdiction of Incorporation) | (I.R.S. Employer Identification No.) |
Exhibit No. | Description | |
99.1 | ||
99.2 |
PDL BIOPHARMA, INC. | ||
(Company) | ||
By: | /s/ Dominique Monnet | |
Dominique Monnet | ||
President and Chief Executive Officer | ||
Exhibit No. | Description | |
99.1 | ||
99.2 |
Contacts: | ||
Jody Cain | ||
LHA Investor Relations | ||
310-691-7100 | ||
jcain@lhai.com |
• | Board of directors authorized common stock and convertible note repurchases up to $275.0 million in mid-December 2019 |
• | Retired $119.3 million principal value of convertible notes, or 80% of the Company’s debt, in mid-December 2019, for $97.9 million of cash and 13.4 million shares of Company common stock. The Company also repurchased 3.2 million shares of Company common stock in this transaction |
• | Immediately thereafter entered into a 10b5-1 program for $120.0 million to allow for the continued repurchase of convertible notes and the repurchase of common stock. The 10b5-1 program limit was set at approximately the amount remaining under the board of directors’ $275.0 million authorization after the mid-December 2019 convertible note repurchases. Pursuant to this program: |
◦ | Retired $13.7 million principal value of convertible notes in 2020. Approximately $17.0 million of convertible notes remain outstanding |
◦ | Retired 3.8 million shares of common stock through March 10, 2020 |
• | Engaged financial advisors to evaluate the sale of the entire Company, or the sale or distribution of its holdings of Evofem Biosciences, Inc. (“Evofem”) common stock, the portfolio of royalty assets and the Company’s Noden and LENSAR subsidiaries |
• | Negotiated a cooperation agreement with Engine Capital, Inc. that enables the Company to focus on the expeditious return of net proceeds to stockholders with input from a new board member with relevant experience in corporate sales process |
• | BofA Securities, Inc. has been engaged by the Company to act as its financial advisor in connection with the potential sale of the Company or its royalty asset portfolio. |
• | Torreya has been engaged to lead the effort in selling the Noden subsidiary or its assets and the Company’s equity stake in Evofem. |
• | SVB Leerink has been engaged to evaluate opportunities available to LENSAR, with a focus on maximizing the value of the LENSAR subsidiary. PDL remains committed to LENSAR and the development of its next generation technology while it pursues the optimal path to monetize this investment. PDL’s past capitalization of LENSAR has positioned it for growth, which has resulted in positive revenue and volume growth and a current capitalization allowing it to continue with its growth initiatives. SVB Leerink has also been engaged to advise the Company’s management and board of directors on overall liquidation and distribution strategies. |
• | LENSAR product revenue of $30.7 million exceeded the Company’s upwardly revised guidance of $29.0 million. |
• | Cash received from royalty assets totaled $79.3 million, significantly exceeding guidance of $60.0 - $65.0 million. |
• | Noden product revenue of $55.1 million exceeded the guidance range of $50.0 - $55.0 million. |
• | Total revenues were negative $5.8 million, including $21.0 million in product revenue and negative $26.8 million in revenue from royalty rights - change in fair value. |
• | LENSAR revenues were $8.5 million, an increase of 19% over the prior-year period, with procedure volume up 41%. |
• | Net cash from all royalty rights was $21.0 million, up from $20.9 million for the prior-year period. |
• | U.S. market share for branded Tekturna® and authorized generic of Tekturna of approximately 73% remained steady with the third quarter of 2019. |
• | GAAP net loss was $54.9 million. Non-GAAP net income was $4.2 million. A reconciliation of GAAP to non-GAAP financial results can be found in Table 4 at the end of this news release. |
• | Total revenues for the fourth quarter of 2019 included $21.0 million in product revenue and negative $26.8 million in revenue from royalty rights - change in fair value. |
◦ | Product revenue from the LENSAR Laser System® was $8.5 million, a 19% increase from the fourth quarter of 2018. Revenue generated outside the U.S. accounted for the majority of the revenue increase. LENSAR procedure volume for the fourth quarter of 2019 increased 41% from the prior-year period. |
◦ | Net royalty revenues from acquired royalty rights, which include cash royalties received and a change in fair value of the royalty rights assets, were negative $26.8 million compared with $19.1 million in the prior-year period. The decrease is primarily related to the decrease in fair value of the royalty rights for the Type 2 diabetes products acquired from Assertio Therapeutics. PDL received $21.0 million in net cash from all its royalty rights in the fourth quarter of 2019, up from $20.9 million in the prior-year period. See Table 3 for a rollforward of royalty asset for the fourth quarter and full year 2019 compared with the comparable periods in 2018. |
◦ | Product revenue from Noden was $12.4 million compared with $18.8 million in the prior-year period. Revenues for the U.S. and rest of the world were $4.3 million and $8.1 million, respectively, compared with $9.8 million and $9.0 million, respectively, in the prior-year period. The U.S. market share for branded Tekturna and the authorized generic of Tekturna was 73%, relatively unchanged from the third quarter of 2019. |
• | Total revenues for 2019 were $54.8 million and included $85.8 million in product revenue and negative $31.0 million in revenue from royalty rights - change in fair value. |
◦ | Product revenue from the LENSAR Laser System was $30.7 million, a 25% increase over 2018. Revenue generated outside of the U.S. accounted for the majority of the increase. LENSAR procedure volume for 2019 increased 33% over the prior year. |
◦ | Revenue from royalty rights - change in fair value was negative $31.0 million for 2019, compared with $85.3 million in 2018. The decrease is primarily related to a non-cash adjustment to the AcelRx and Assertio royalty asset fair values of negative $60.0 million and negative $46.3 million, respectively. PDL received $79.3 million in net cash from its royalty rights in 2019, compared with $78.0 million in 2018. |
◦ | Product revenue from the Noden Products was $55.1 million compared with $80.8 million for the prior year. Sales for 2019 were comprised of $25.3 million in the U.S. and $29.8 million in the rest of the world, compared with $40.5 million and $40.3 million, respectively, in 2018. The decline in sales of branded Tekturna in the U.S. is due primarily to the launch of an authorized generic of Tekturna in the U.S. and the launch of a third-party generic of aliskiren late in the first quarter of 2019. The decline in sales in the rest of the world is due to lower sales volume of Rasilez® in certain territories, in part reflecting additional measures to maximize product profitability. |
◦ | Interest revenue decreased by $2.3 million from 2018 due to modifications to the Company’s agreement with CareView Communications (“CareView”), which deferred interest payments for 2019. |
◦ | Royalties from PDL’s licensees to the Queen et al. patents were less than $0.1 million for 2019, compared with $4.5 million for 2018, reflecting the runout of the royalties on the sales of Tysabri®. |
• | Operating expenses for the fourth quarter of 2019 were $64.0 million, a $52.4 million increase from the fourth quarter of 2018. The increase was primarily due to: |
◦ | An impairment in the Noden intangible assets of $22.5 million due to a change in the strategy for Noden, |
◦ | a prior-year benefit for the release of the Noden contingent consideration liability of $19.2 million with no comparable adjustment in the current year quarter, |
◦ | a $10.8 million impairment of the CareView note receivable compared to an $8.2 million impairment in the prior year quarter, |
◦ | higher R&D costs for LENSAR associated with its next-generation technology, |
◦ | higher G&A expenses primarily due to higher compensation costs, mainly as a result of the prior-year expense reversal of a significant portion of the employee long-term incentive award, |
◦ | increased professional service expense, and |
◦ | an increase in cost of goods sold primarily due to Noden product sales outside of the United States, partially offset by: |
◦ | a decrease in sales and marketing expenses for our Noden subsidiary. |
• | Operating expenses for 2019 were $154.6 million, a $94.1 million decrease from the prior year. The decrease was primarily due to: |
◦ | A $22.5 million impairment of the Noden intangible assets in the current year compared to a $152.3 million impairment in 2018, |
◦ | lower intangible asset amortization expense of $9.5 million due to the 2018 impairment, |
◦ | decreased sales and marketing expenses of $8.7 million primarily due to the cost savings from the change in our marketing strategy to a non-personal promotion strategy for Noden in anticipation of a launch of a third-party generic form of aliskiren. This non-personal promotion strategy was subsequently discontinued upon the launch of our authorized generic form of Tekturna, partially offset by: |
◦ | the prior-year benefit from the release of the Noden contingent consideration liability of $41.6 million, |
◦ | increased cost of goods sold of $5.2 million primarily due to termination provisions in a Noden supply agreement amended in June 2019 involving end of contract fees and increased LENSAR product sales, |
◦ | increased research and development expenses of $4.4 million primarily related to the acquisition of intellectual property supporting our second-generation LENSAR product, and |
◦ | a $10.8 million impairment of the CareView note receivable in 2019 compared to an $8.2 million impairment in 2018. |
• | The market value of the Company’s investment in Evofem increased $18.3 million in the 2019 fourth quarter and $36.4 million in the 2019 full year. The Company acquired its investment in Evofem in two tranches in the second quarter of 2019, paying total consideration of $60.0 million. |
• | On a GAAP basis, the net loss attributable to PDL’s stockholders for the fourth quarter of 2019 was $54.9 million, or $0.48 per share, compared with GAAP net income attributable to PDL’s stockholders of $16.3 million, or $0.11 per share on a fully diluted basis, for the prior year period. Non-GAAP net income attributable to PDL’s stockholders was $4.2 million for the fourth quarter of 2019, compared with non-GAAP net income of $15.7 million for the fourth quarter of 2018. |
• | The GAAP net loss attributable to PDL’s stockholders for 2019 was $70.4 million, or $0.59 per share, compared with a GAAP net loss attributable to PDL’s stockholders of $68.9 million or $0.47 per share, for the prior year. Non-GAAP net income attributable to PDL’s stockholders was $39.1 million for 2019, compared with non-GAAP net income of $60.4 million for the prior-year. |
• | PDL had cash and cash equivalents of $193.5 million as of December 31, 2019, compared with cash and cash equivalents of $394.6 million as of December 31, 2018. |
◦ | The $201.1 million reduction in cash and cash equivalents during 2019 was primarily the result of the repurchase of convertible debt of $97.9 million, common stock repurchases of $86.9 million, the Company’s investment in Evofem of $60.0 million, net cash used in operations of $32.4 million and costs incurred in the exchange of convertible debt of $4.4 million. This reduction was partially offset by the proceeds from royalty rights of $79.3 million and cash proceeds from the sale of intangible assets of $5.0 million. |
• | In January 2020, PDL began repurchasing shares of its common stock in the open market pursuant to the |
• | Pursuant to this program, the Company also repurchased $13.7 million par value of convertible notes through February 2020. |
• | Since initiating its first stock repurchase program in March 2017, the Company has repurchased 56.9 million shares for $167.9 million, at an average cost of $2.95 per share. |
• | As of February 29, 2020, the Company had approximately 123.6 million shares of common stock outstanding. |
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues | ||||||||||||||||
Product revenue, net | $ | 20,967 | $ | 25,976 | $ | 85,835 | $ | 105,448 | ||||||||
Royalty rights - change in fair value | (26,765 | ) | 19,139 | (31,042 | ) | 85,256 | ||||||||||
Royalties from Queen et al. patents | — | 2 | 9 | 4,536 | ||||||||||||
Interest revenue | — | 83 | — | 2,337 | ||||||||||||
License and other | 3 | (81 | ) | (45 | ) | 533 | ||||||||||
Total revenues | (5,795 | ) | 45,119 | 54,757 | 198,110 | |||||||||||
Operating Expenses | ||||||||||||||||
Cost of product revenue (excluding intangible asset amortization and impairment) | 13,428 | 11,444 | 53,619 | 48,460 | ||||||||||||
Amortization of intangible assets | 1,561 | 1,577 | 6,306 | 15,831 | ||||||||||||
General and administrative | 12,561 | 6,019 | 45,598 | 45,420 | ||||||||||||
Sales and marketing | 1,967 | 2,772 | 8,482 | 17,139 | ||||||||||||
Research and development | 1,243 | 806 | 7,308 | 2,955 | ||||||||||||
Impairment of intangible assets | 22,490 | — | 22,490 | 152,330 | ||||||||||||
Asset impairment loss | 10,768 | 8,200 | 10,768 | 8,200 | ||||||||||||
Change in fair value of contingent consideration | — | (19,198 | ) | — | (41,631 | ) | ||||||||||
Total operating expenses | 64,018 | 11,620 | 154,571 | 248,704 | ||||||||||||
Operating (loss) income | (69,813 | ) | 33,499 | (99,814 | ) | (50,594 | ) | |||||||||
Non-operating income (expense), net | ||||||||||||||||
Interest and other income, net | 1,046 | 1,958 | 6,030 | 6,065 | ||||||||||||
Interest expense | (2,454 | ) | (2,895 | ) | (11,404 | ) | (12,157 | ) | ||||||||
Equity affiliate - change in fair value | 18,293 | — | 36,402 | — | ||||||||||||
Gain on sale of intangible assets | — | — | 3,476 | — | ||||||||||||
Gain on investments | — | — | — | 764 | ||||||||||||
Loss on exchange and extinguishment of convertible notes | (4,530 | ) | — | (8,430 | ) | — | ||||||||||
Total non-operating income (expense), net | 12,355 | (937 | ) | 26,074 | (5,328 | ) | ||||||||||
(Loss) income before income taxes | (57,458 | ) | 32,562 | (73,740 | ) | (55,922 | ) | |||||||||
Income tax (benefit) expense | (2,630 | ) | 16,283 | (3,049 | ) | 12,937 | ||||||||||
Net (loss) income | (54,828 | ) | 16,279 | (70,691 | ) | (68,859 | ) | |||||||||
Less: Net (loss) attributable to noncontrolling interests | 60 | — | (280 | ) | — | |||||||||||
Net (loss) income attributable to PDL's stockholders | $ | (54,888 | ) | $ | 16,279 | $ | (70,411 | ) | $ | (68,859 | ) | |||||
Net (loss) income per share | ||||||||||||||||
Basic | $ | (0.48 | ) | $ | 0.12 | $ | (0.59 | ) | $ | (0.47 | ) | |||||
Diluted | $ | (0.48 | ) | $ | 0.11 | $ | (0.59 | ) | $ | (0.47 | ) | |||||
Shares used to compute net (loss) income per basic share | 114,671 | 141,247 | 118,631 | 145,669 | ||||||||||||
Shares used to compute net (loss) income per diluted share | 114,671 | 142,608 | 118,631 | 145,669 |
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
Cash and cash equivalents | $ | 193,451 | $ | 394,590 | ||||
Notes receivable | $ | 53,410 | $ | 63,813 | ||||
Royalty rights - at fair value | $ | 266,196 | $ | 376,510 | ||||
Investment in equity affiliate | $ | 82,267 | $ | — | ||||
Total assets | $ | 716,119 | $ | 963,736 | ||||
Total convertible notes payable | $ | 27,250 | $ | 124,644 | ||||
Total stockholders’ equity | $ | 593,278 | $ | 729,779 |
Three Months Ended | ||||||||||||||||||||||||
December 31, 2019 | December 31, 2018 | |||||||||||||||||||||||
(in thousands) | Cash Royalties | Change In Fair Value | Total | Cash Royalties | Change In Fair Value | Total | ||||||||||||||||||
Assertio | $ | 19,245 | $ | (46,298 | ) | $ | (27,053 | ) | $ | 19,425 | $ | (1,331 | ) | $ | 18,094 | |||||||||
VB | 218 | (872 | ) | (654 | ) | 242 | 222 | 464 | ||||||||||||||||
U-M | 1,452 | (818 | ) | 634 | 1,194 | (1,929 | ) | (735 | ) | |||||||||||||||
AcelRx | 66 | 222 | 288 | 59 | 2,105 | 2,164 | ||||||||||||||||||
KYBELLA | 1 | 19 | 20 | — | (847 | ) | (847 | ) | ||||||||||||||||
$ | 20,982 | $ | (47,747 | ) | $ | (26,765 | ) | $ | 20,920 | $ | (1,780 | ) | $ | 19,140 |
Twelve Months Ended | ||||||||||||||||||||||||
December 31, 2019 | December 31, 2018 | |||||||||||||||||||||||
(in thousands) | Cash Royalties | Change In Fair Value | Total | Cash Royalties | Change In Fair Value | Total | ||||||||||||||||||
Assertio | $ | 72,225 | $ | (45,699 | ) | $ | 26,526 | $ | 71,502 | $ | 12,333 | $ | 83,835 | |||||||||||
VB | 966 | (518 | ) | 448 | 1,062 | (272 | ) | 790 | ||||||||||||||||
U-M | 5,664 | (5,197 | ) | 467 | 4,631 | (1,174 | ) | 3,457 | ||||||||||||||||
AcelRx | 307 | (57,428 | ) | (57,121 | ) | 249 | (2,514 | ) | (2,265 | ) | ||||||||||||||
Avinger | — | — | — | 366 | (396 | ) | (30 | ) | ||||||||||||||||
KYBELLA | 110 | (1,472 | ) | (1,362 | ) | 159 | (690 | ) | (531 | ) | ||||||||||||||
$ | 79,272 | $ | (110,314 | ) | $ | (31,042 | ) | $ | 77,969 | $ | 7,287 | $ | 85,256 |
Fair Value as of | Royalty Rights - | Fair Value as of | ||||||||||
(in thousands) | December 31, 2018 | Change in Fair Value | December 31, 2019 | |||||||||
Assertio | $ | 264,371 | $ | (45,699 | ) | $ | 218,672 | |||||
VB | 14,108 | (518 | ) | 13,590 | ||||||||
U-M | 25,595 | (5,197 | ) | 20,398 | ||||||||
AcelRx | 70,380 | (57,428 | ) | 12,952 | ||||||||
KYBELLA | 2,056 | (1,472 | ) | 584 | ||||||||
$ | 376,510 | $ | (110,314 | ) | $ | 266,196 |
A reconciliation between net (loss) income on a GAAP basis and on a non-GAAP basis is as follows: | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
GAAP net (loss) income attributed to PDL’s stockholders as reported | $ | (54,888 | ) | $ | 16,279 | $ | (70,411 | ) | $ | (68,859 | ) | |||||
Adjustments to Non-GAAP net income (as detailed below) | 59,132 | (592 | ) | 109,555 | 129,240 | |||||||||||
Non-GAAP net income attributed to PDL’s stockholders | $ | 4,244 | $ | 15,687 | $ | 39,144 | $ | 60,381 | ||||||||
An itemized reconciliation between net (loss) income on a GAAP basis and on a non-GAAP basis is as follows: | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
GAAP net (loss) income attributed to PDL’s stockholders, as reported | $ | (54,888 | ) | $ | 16,279 | $ | (70,411 | ) | $ | (68,859 | ) | |||||
Adjustments: | ||||||||||||||||
Mark-to-market adjustment to fair value - royalty assets | 47,747 | 1,781 | 110,314 | (7,287 | ) | |||||||||||
Mark-to-market adjustment to equity affiliate | (15,067 | ) | — | (31,641 | ) | — | ||||||||||
Non-cash interest revenues | — | (83 | ) | — | (312 | ) | ||||||||||
Non-cash stock-based compensation expense | 1,716 | (56 | ) | 7,119 | 4,758 | |||||||||||
Non-cash debt offering costs | 1,461 | 1,864 | 7,237 | 7,609 | ||||||||||||
Non-cash depreciation and amortization expense | 606 | 635 | 2,901 | 3,696 | ||||||||||||
Mark-to-market adjustment on warrants held | (3,228 | ) | 81 | (4,715 | ) | (33 | ) | |||||||||
Impairment of intangible assets | 22,490 | — | 22,490 | 152,330 | ||||||||||||
Non-cash amortization of intangible assets | 1,561 | 1,577 | 6,306 | 15,831 | ||||||||||||
Mark-to-market adjustment of contingent consideration | — | (19,198 | ) | — | (41,631 | ) | ||||||||||
Valuation allowance on deferred tax assets | 8,866 | 11,384 | 8,866 | 11,226 | ||||||||||||
Income tax effect related to above items | (7,020 | ) | 1,423 | (19,322 | ) | (16,947 | ) | |||||||||
Total adjustments | 59,132 | (592 | ) | 109,555 | 129,240 | |||||||||||
Non-GAAP net income | $ | 4,244 | $ | 15,687 | $ | 39,144 | $ | 60,381 |