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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): September 27, 2011
PDL BioPharma, Inc.
(Exact name of Company as specified in its charter)
000-19756
(Commission File Number)
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Delaware
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94-3023969
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(State or Other Jurisdiction of Incorporation)
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(I.R.S. Employer Identification No.)
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932 Southwood Boulevard
Incline Village, Nevada 89451
(Address of principal executive offices, with zip code)
(775) 832-8500
(Company’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Company under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 7.01 Regulation FD Disclosure.
On September 27, 2011, PDL BioPharma, Inc. (the Company) will make a presentation at The JMP Securities Healthcare Conference in New York City, New York. A copy of the Company’s presentation materials has been posted to the Company’s website and is attached hereto as Exhibit 99.1
Limitation of Incorporation by Reference
In accordance with General Instruction B.2. of Form 8-K, this information, including Exhibit 99.1, is furnished pursuant to Item 7.01 and shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Item 7.01 of this Current Report on Form 8-K will not be deemed an admission as to the materiality of any information that is required to be disclosed solely by Regulation FD.
Cautionary Statements
This Current Report on Form 8-K and the presentation include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Important factors that could impair the Company’s royalty assets or business are disclosed in the “Risk Factors” contained in the Company’s 2010 Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission. All forward-looking statements are expressly qualified in their entirety by such factors. We do not undertake any duty to update any forward-looking statement except as required by law.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit No.
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Description
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99.1
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Presentation
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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PDL BIOPHARMA, INC.
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(Company)
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By:
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/s/ Christine R. Larson
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Christine R. Larson
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Vice President and Chief Financial Officer
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Dated: September 27, 2011
EXHIBIT INDEX
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Exhibit No.
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Description
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Presentation
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Exhibit 99.1
The JMP Securities Healthcare Conference
September 27, 2011
Forward Looking Statements
This presentation contains forward-looking statements, including PDL’s expectations with respect to its future royalty
revenues, expenses, net income, and cash provided by operating activities.
revenues, expenses, net income, and cash provided by operating activities.
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:
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:
• The expected rate of growth in royalty-bearing product sales by PDL’s existing licensees;
• The ability of PDL’s licensees to receive regulatory approvals to market and launch new royalty-bearing products and
whether such products, if launched, will be commercially successful;
whether such products, if launched, will be commercially successful;
• Changes in any of the other assumptions on which PDL’s projected royalty revenues are based;
• Changes in foreign currency rates;
• Positive or negative results in PDL’s attempt to acquire royalty-related assets;
• The outcome of pending litigation or disputes, including PDL’s current dispute with Genentech related to ex-U.S. sales of
Genentech licensed products; and
Genentech licensed products; and
• The failure of licensees to comply with existing license agreements, including any failure to pay royalties due.
Other factors that may cause PDL’s actual results to differ materially from those expressed or implied in the forward-
looking statements in this presentation are discussed in PDL’s filings with the 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 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 presentation are qualified in their entirety by this cautionary statement.
looking statements in this presentation are discussed in PDL’s filings with the 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 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 presentation are qualified in their entirety by this cautionary statement.
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Company
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PDL BioPharma, Inc.
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Ticker
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PDLI (NASDAQ)
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Location
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Incline Village, Nevada
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Employees
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Less than 10
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2010 Revenues
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$345 million
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2011- Q3YTD Revenue
Guidance |
$288 million
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2011 Regular Dividends
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$0.15 /share paid on March 15, June 15,
September 15 & December 15 |
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Q2-2011 Cash Position1
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$236 million
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Shares O/S2
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~ 140 million
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Average Daily Volume
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~ 3 million shares
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Key Information
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1. As of June 30, 2011; 2. Not fully diluted
Overview of PDL BioPharma
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Mission Statement
• Optimize return for shareholders
• Manage existing royalty assets
• Queen et al. Patents
• Patent license agreements
• Purchase new royalty generating assets
▪ Assets that improve shareholder return
▪ Commercial stage assets
▪ Prefer biologics with strong patent protection
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Antibody Humanization Technology
• Antibodies are naturally produced by humans to fight
foreign substances, such as bacteria and viruses
foreign substances, such as bacteria and viruses
• In the 1980’s, scientists began creating antibodies in non-
human immune systems, such as those of mice, that could
target specific sites on cells to fight various human
diseases
human immune systems, such as those of mice, that could
target specific sites on cells to fight various human
diseases
• However, mouse derived antibodies are recognized by the
human body as foreign substances and may be rejected
by the human immune system
human body as foreign substances and may be rejected
by the human immune system
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• PDL’s technology allows for the “humanization” of mouse derived antibodies by moving the
important binding regions from the mouse antibody onto a human framework
important binding regions from the mouse antibody onto a human framework
• PDL’s humanization technology is important because the humanized antibodies retain the
binding and activity levels from the original mouse antibody
binding and activity levels from the original mouse antibody
• PDL’s technology has been incorporated into antibodies to treat cancer, eye diseases, arthritis,
multiple sclerosis and other health conditions with aggregate annual sales of over $17 billion
multiple sclerosis and other health conditions with aggregate annual sales of over $17 billion
Corporate Governance
Management
• John McLaughlin
President & CEO
President & CEO
• Christine Larson
VP & CFO
VP & CFO
• Christopher Stone
VP, General Counsel &
Secretary
VP, General Counsel &
Secretary
• Caroline Krumel
VP of Finance
VP of Finance
• Danny Hart
Associate General Counsel
Associate General Counsel
Board of Directors
• Fred Frank
Lead Director
Lead Director
• Jody Lindell
• John McLaughlin
• Paul Sandman
• Harold Selick
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Licensed Products and Royalty Revenue
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Licensed Products and Royalty Revenue
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1. As reported to PDL by its licensee 2. As reported by Roche; assume 1.155 CHF/USD
Royalty Revenue & Licensed Products
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Royalties by Product
($ in millions)
How Long Will PDL Receive Royalties from
Queen et al. Patents?
Queen et al. Patents?
• PDL’s revenues consist of royalties generated on sales of licensed products
▪ Sold before the expiration of the Queen et al. patents in mid-2013 through end of 2014
or
▪ Made prior to the expiration of the Queen et al. patents and sold anytime thereafter
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Example of Antibody Formulation, Fill and Finish Schedule
½ month
1 month
½ month
2-3 months
Thaw, Formulation
& Vial Filling
& Vial Filling
Quality
Release
Release
Packaging
& Quality
& Quality
Inventory
Example of Antibody Bulk Manufacturing Schedule
Cell
Culture
Quality Release
Testing
Testing
Bulk Frozen Storage
1 mo
3 mos
5 mos
10 mos
15 mos
20 mos
27 mos
3 mos
2-18 months
1mo
1mo
Purification to Concentrated Bulk/Frozen
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Genentech Product Made or Sold in U.S.
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Net Sales up to $1.5 Billion
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3.0%
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Net Sales Between $1.5 Billion and $2.5 Billion
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2.5%
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Net Sales Between $2.5 Billion and $4.0 Billion
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2.0%
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Net Sales Over $4.0 Billion
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1.0%
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Genentech Product Made and Sold Ex-U.S.
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All Sales
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3.0%
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Queen et al Patents - Royalty Rates
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• Tysabri and Actemra
• Flat, low single-digit royalty
• Genentech Products (Avastin, Herceptin, Lucentis1 and Xolair)
• Tiered royalties on product made or sold in US
• Flat, 3% royalty on product made and sold outside US
• Blended global royalty rate on Genentech Products in 2010 was 1.9%
• Blended royalty rate on Genentech Products in 2010 made or sold in US was
1.5%
1.5%
1. As part of a settlement with Novartis, which commercializes Lucentis outside US, PDL agreed to pay to Novartis
certain amounts based on net sales of Lucentis made by Novartis during calendar year 2011 and beyond. The
amounts to be paid are less than we receive in royalties on such sales and we do not currently expect such amount
to materially impact our total annual revenues.
certain amounts based on net sales of Lucentis made by Novartis during calendar year 2011 and beyond. The
amounts to be paid are less than we receive in royalties on such sales and we do not currently expect such amount
to materially impact our total annual revenues.
Shift of Manufacturing Sites = Higher Royalties
• Roche is moving some manufacturing ex-US which may result in higher royalties to PDL due
to the flat 3% royalty for Genentech Products made and sold ex-US
to the flat 3% royalty for Genentech Products made and sold ex-US
▪ Current production at Penzburg (Herceptin) and Basel (Avastin) plants
▪ Two new plants in Singapore (CHO = antibody and e. coli = antibody fragment)
- E. coli (Lucentis) and CHO (Avastin) plants are approved for commercial supply to the US
- E. coli and CHO plants are expected to be approved for commercial supply to the EU in 2011
- Currently, all Lucentis is made in the US
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1. As reported to PDL by its licensee
Royalty Products - Approved
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Royalty Products - Avastin
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Avastin
Herceptin
Lucentis
Xolair
Tysabri
RoActemra
ü With respect to its accelerated approval for the treatment of
HER2- breast cancer, FDA, an FDA Advisory Committee and
an FDA special appeals committee have recommended
removal of this indication from Avastin’s label due to the lack
of compelling data reported in required confirmatory trial.
HER2- breast cancer, FDA, an FDA Advisory Committee and
an FDA special appeals committee have recommended
removal of this indication from Avastin’s label due to the lack
of compelling data reported in required confirmatory trial.
ü Final decision rests with the FDA Commissioner.
ü Genentech has submitted a new proposal to maintain the
approval with more restrictive labeling, REMS and a
commitment to conduct a new 480 patient confirmatory trial.
approval with more restrictive labeling, REMS and a
commitment to conduct a new 480 patient confirmatory trial.
ü EMEA narrowed, but did not withdraw Avastin’s approval for
first line treatment of HER2- breast cancer in combination
with paclitaxel or with Xeloda.
first line treatment of HER2- breast cancer in combination
with paclitaxel or with Xeloda.
ü Roche lowered its estimate of peak annual sales from of
Avastin from CHF8 - CHF9 billion to CHF7 billion.
Avastin from CHF8 - CHF9 billion to CHF7 billion.
Royalty Products - Avastin
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Avastin
Herceptin
Lucentis
Xolair
Tysabri
Actemra
ü On June 4, 2011, Genentech announced results from Phase 3
study evaluating Avastin in combination with chemotherapy
(gemcitabine and carboplatin) followed by the continued use of
Avastin alone in women with previously treated (recurrent)
platinum-sensitive ovarian cancer which showed that women who
received Avastin experienced a 52% reduction in the risk of their
disease progressing (HR=0.48, p<0.0001) compared to women
who received chemotherapy alone.
study evaluating Avastin in combination with chemotherapy
(gemcitabine and carboplatin) followed by the continued use of
Avastin alone in women with previously treated (recurrent)
platinum-sensitive ovarian cancer which showed that women who
received Avastin experienced a 52% reduction in the risk of their
disease progressing (HR=0.48, p<0.0001) compared to women
who received chemotherapy alone.
ü Two previous Phase 3 studies in women with newly diagnosed
ovarian cancer demonstrated that front-line Avastin in
combination with standard chemotherapy (carboplatin and
paclitaxel), followed by the continued use of Avastin alone,
significantly increased progression free survival compared to
treatment with chemotherapy alone.
ovarian cancer demonstrated that front-line Avastin in
combination with standard chemotherapy (carboplatin and
paclitaxel), followed by the continued use of Avastin alone,
significantly increased progression free survival compared to
treatment with chemotherapy alone.
ü EU’s CHMP has recommended approval for first line treatment of
ovarian cancer.
ovarian cancer.
ü Genentech expects to file an application for approval in US in late
2011 so that it can meet FDA’s request for overall survival data.
2011 so that it can meet FDA’s request for overall survival data.
Royalty Products - Lucentis
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Avastin
Herceptin
Lucentis
Xolair
Tysabri
Actemra
ü On January 7, 2011, Novartis announced that Lucentis has been
approved in the EU for the treatment of visual impairment due to
diabetic macular edema (DME).
approved in the EU for the treatment of visual impairment due to
diabetic macular edema (DME).
§ DME is a leading cause of blindness in the working-age
population in most developed countries.
population in most developed countries.
ü On February 11 and June 28, 2011, Genentech announced that
two Phase 3 studies evaluating patients with DME showed that a
significantly higher percentage of patients receiving monthly
dosing of Lucentis achieved an improvement in vision compared
to those in a control group, who received a placebo injection.
two Phase 3 studies evaluating patients with DME showed that a
significantly higher percentage of patients receiving monthly
dosing of Lucentis achieved an improvement in vision compared
to those in a control group, who received a placebo injection.
ü On June 6, 2011, Novartis announced that Lucentis has been
approved in the EU for the treatment of visual impairment due to
macular edema secondary to retinal vein occlusion.
approved in the EU for the treatment of visual impairment due to
macular edema secondary to retinal vein occlusion.
Royalty Products - Lucentis
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Avastin
Herceptin
Lucentis
Xolair
Tysabri
Actemra
ü On April 28, 2011, New England Journal of Medicine reported the
results from the NEI’s CATT study comparing Lucentis and
Avastin on fixed and variable schedules in the treatment of AMD.
results from the NEI’s CATT study comparing Lucentis and
Avastin on fixed and variable schedules in the treatment of AMD.
ü Efficacy results from the first year of the two year study showed
that, with respect to the primary endpoint of mean change in
visual acuity (number of lines of letters on an eye chart) at 12
months, less expensive Avastin was not inferior to Lucentis.
that, with respect to the primary endpoint of mean change in
visual acuity (number of lines of letters on an eye chart) at 12
months, less expensive Avastin was not inferior to Lucentis.
§ It is estimated that off label use of Avastin in the U.S. was
60% prior to the results of the CATT trial.
60% prior to the results of the CATT trial.
ü At 12 months, serious adverse events (primarily hospitalizations)
occurred at a 24% rate for patients receiving Avastin and a 19%
rate for patients receiving Lucentis. However, preliminary 24
month safety data showed no difference between Lucentis and
Avastin treated patients in terms of death, stroke and all
arteriothrombotic events.
occurred at a 24% rate for patients receiving Avastin and a 19%
rate for patients receiving Lucentis. However, preliminary 24
month safety data showed no difference between Lucentis and
Avastin treated patients in terms of death, stroke and all
arteriothrombotic events.
ü On August 30, 2011, FDA issued a health warning alert after at
least 16 AMD patients suffered eye infections after being treated
with repackaged Avastin.
least 16 AMD patients suffered eye infections after being treated
with repackaged Avastin.
ü Veterans Administration has halted its use of Avastin for AMD
pending an investigation into treatment related safety concerns.
pending an investigation into treatment related safety concerns.
Royalty Products - Lucentis
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Avastin
Herceptin
Lucentis
Xolair
Tysabri
Actemra
ü Regeneron and Bayer have reported data from two Phase 3 trials
investigating VEGF Trap in age-related macular degeneration (AMD)
patients showing that it may be injected into the eye every other month
with safety and efficacy comparable to that of monthly dosing of
Lucentis.
investigating VEGF Trap in age-related macular degeneration (AMD)
patients showing that it may be injected into the eye every other month
with safety and efficacy comparable to that of monthly dosing of
Lucentis.
ü On December 20, 2010, Regeneron reported positive Phase 3 data in
the treatment of retinal vein occlusion (RVO) for which Lucentis is
approved.
the treatment of retinal vein occlusion (RVO) for which Lucentis is
approved.
§ Unlike the AMD trial, monthly administration was used in the RVO
trial, which does not afford a dosing advantage with respect to
Lucentis.
trial, which does not afford a dosing advantage with respect to
Lucentis.
ü An FDA Advisory Committee recommended approval of VEGF Trap
for AMD on June 17, 2011. FDA extended the initial PDUFA date of
August 20, 2011 for AMD to November 18, 2011.
for AMD on June 17, 2011. FDA extended the initial PDUFA date of
August 20, 2011 for AMD to November 18, 2011.
ü On June 7, 2011, Regeneron and Bayer filed an application for AMD
in EU.
in EU.
ü Regeneron filed suit in February 2011 seeking a summary judgment
that it does not infringe Genentech’s patents and Genentech
countersued in April 2011 asserting that Regeneron is willfully
infringing Genentech’s patents, seeking treble damages and asking for
injunctive relief.
that it does not infringe Genentech’s patents and Genentech
countersued in April 2011 asserting that Regeneron is willfully
infringing Genentech’s patents, seeking treble damages and asking for
injunctive relief.
Royalty Products - Tysabri
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Avastin
Herceptin
Lucentis
Xolair
Tysabri
Actemra
ü FDA and EMEA have included JC virus (JCV) status as a risk factor
for PML in the product label for Tysabri.
for PML in the product label for Tysabri.
§ The EMEA also recommended a five-year renewal of the
Tysabri’s Marketing Authorization in the EU.
Tysabri’s Marketing Authorization in the EU.
§ EMEA Physician Info Document states that risk of PML in:
o JCV- patients is <0.2 per 1000
o JCV+ patients with no prior immunosuppressants is 0.4 per
1000 in first two years
1000 in first two years
o JCV+ patients with no prior immunosuppressants is 2.6 per
1000 in years 2-4
1000 in years 2-4
o JCV+ patients AND prior immunosuppressants AND 2 or
more years is 9 per 1000
more years is 9 per 1000
o JCV+ = roughly 55% of MS population
ü Net patient adds increased to 2400 in 2Q11, up from 1900 in 1Q11.
Royalty Products - Actemra
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Avastin
Herceptin
Lucentis
Xolair
Tysabri
Actemra
ü On January 5, 2011, Roche announced that FDA expanded the
Actemra label to include inhibition and slowing of structural joint
damage, improvement of physical function, and achievement of
major clinical response in adult patients with moderately to
severely active rheumatoid arthritis.
Actemra label to include inhibition and slowing of structural joint
damage, improvement of physical function, and achievement of
major clinical response in adult patients with moderately to
severely active rheumatoid arthritis.
ü On April 18, 2011, FDA approved Actemra to treat patients age 2
and older with active systemic juvenile idiopathic arthritis (SJIA).
and older with active systemic juvenile idiopathic arthritis (SJIA).
§ It is the first approved treatment for SJIA, a rare and severe
form of arthritis affecting children.
form of arthritis affecting children.
ü On July 19, 2011, Chugai/Roche announced that a subcutaneous
formulation of Actemra has shown efficacy in rheumatoid arthritis
comparable to the approved intravenous formulation. Based on
these non-inferiority data, the company plans to file for approval
in Japan in 2012.
formulation of Actemra has shown efficacy in rheumatoid arthritis
comparable to the approved intravenous formulation. Based on
these non-inferiority data, the company plans to file for approval
in Japan in 2012.
Potential Royalty Products
- Development Stage
- Development Stage
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Potential Royalty Products - T-DM1
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T-DM1
Breast HER2+ Cancer
ü On September 23, 2011, Roche/Genentech announced results
from a Phase 2 trial in first line HER2+ breast cancer patients
which showed a progression free survival of 14.2 months in the T
-DM1 treated patients compared to 9.2 months in the women
treated with combination of Herceptin and docetaxel.
from a Phase 2 trial in first line HER2+ breast cancer patients
which showed a progression free survival of 14.2 months in the T
-DM1 treated patients compared to 9.2 months in the women
treated with combination of Herceptin and docetaxel.
ü Overall response rate was 64.2% in the T-DM1 treated patients
and 58% in the Herceptin and docetaxel treated patients.
and 58% in the Herceptin and docetaxel treated patients.
ü Roche/Genentech expect to file for second line approval in 2012.
Ocrelizumab
Multiple Sclerosis
Pertuzumab
Breast HER2+ Cancer
Afutuzumab
Chronic Lymphocytic
Leukemia
Leukemia
Solanezumab
Alzheimer’s Disease
Daclizumab
Multiple Sclerosis
Datoluzumab
Colorectal Cancer
Bapineuzumab
Alzheimer’s Disease
Farletuzumab
Ovarian Cancer
Potential Royalty Products - Pertuzumab
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T-DM1
Breast HER2+ Cancer
ü On December 10, 2010, Roche/Genentech reported the results
from a Phase 2 trial investigating the neoadjuvant (prior to
surgery) use of pertuzumab and Herceptin plus chemotherapy for
the treatment of early-stage, HER2+ breast cancer.
from a Phase 2 trial investigating the neoadjuvant (prior to
surgery) use of pertuzumab and Herceptin plus chemotherapy for
the treatment of early-stage, HER2+ breast cancer.
ü Treatment significantly improved the rate of complete tumor
disappearance in the breast by more than half compared to
Herceptin plus docetaxel, p=0.014.
disappearance in the breast by more than half compared to
Herceptin plus docetaxel, p=0.014.
ü On July 15, 2011, Roche/Genentech reported the results from a
Phase 3 trial in pertuzumab plus Herceptin and docetaxel met the
primary endpoint of progression-free survival (PFS) vs. Herceptin
plus docetaxel alone
Phase 3 trial in pertuzumab plus Herceptin and docetaxel met the
primary endpoint of progression-free survival (PFS) vs. Herceptin
plus docetaxel alone
ü Roche/Genentech expect to file for approval at the end of 2011.
ü Unlicensed product.
Ocrelizumab
Multiple Sclerosis
Pertuzumab
Breast HER2+ Cancer
Afutuzumab
Chronic Lymphocytic
Leukemia
Leukemia
Solanezumab
Alzheimer’s Disease
Daclizumab
Multiple Sclerosis
Datoluzumab
Colorectal Cancer
Bapineuzumab
Alzheimer’s Disease
Farletuzumab
Ovarian Cancer
Potential Royalty Products - Bapineuzumab
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T-DM1
Breast HER2+ Cancer
ü Phase 3.
ü On July 19, 2011, researchers from Pfizer and Johnson &
Johnson reported long-term safety of 194 patients in a mid-stage
trial of the drug that stayed on treatment after the initial phase
ended.
Johnson reported long-term safety of 194 patients in a mid-stage
trial of the drug that stayed on treatment after the initial phase
ended.
§ The brain swelling condition called vasogenic edema, which
caused safety concerns early on in the trial, may decrease
over time.
caused safety concerns early on in the trial, may decrease
over time.
ü Data expected in second half of 2012.
Ocrelizumab
Multiple Sclerosis
Pertuzumab
Breast HER2+ Cancer
Afutuzumab
Chronic Lymphocytic
Leukemia
Leukemia
Solanezumab
Alzheimer’s Disease
Daclizumab
Multiple Sclerosis
Datoluzumab
Colorectal Cancer
Bapineuzumab
Alzheimer’s Disease
Farletuzumab
Ovarian Cancer
Potential Royalty Products - Solanezumab
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T-DM1
Breast HER2+ Cancer
ü Phase 3.
ü Data expected in second half of 2012.
Ocrelizumab
Multiple Sclerosis
Pertuzumab
Breast HER2+ Cancer
Afutuzumab
Chronic Lymphocytic
Leukemia
Leukemia
Solanezumab
Alzheimer’s Disease
Daclizumab
Multiple Sclerosis
Datoluzumab
Colorectal Cancer
Bapineuzumab
Alzheimer’s Disease
Farletuzumab
Ovarian Cancer
Potential Royalty Products - Daclizumab
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T-DM1
Breast HER2+ Cancer
ü Positive efficacy data reported from first of two Phase 3 trials.
Ocrelizumab
Multiple Sclerosis
Pertuzumab
Breast HER2+ Cancer
Afutuzumab
Chronic Lymphocytic
Leukemia
Leukemia
Solanezumab
Alzheimer’s Disease
Daclizumab
Multiple Sclerosis
Datoluzumab
Colorectal Cancer
Bapineuzumab
Alzheimer’s Disease
Farletuzumab
Ovarian Cancer
Genentech / Roche - Product Pipeline
2011
2012
2013
2014
Avastin
Lucentis
Diabetic Macular Edema (US)
Pertuzumab1
mBC HER2+ 1st Line
Avastin + Herceptin
mBC HER+ 2nd Line
Avastin
Relapsed Ovarian Cancer
T-DM1
HER 2+ Advanced mBC
Actemra
RA DMARD H2H (EU)
Actemra
Ankylosing Spondylitis
Herceptin
Subcutaneous Formulation
Avastin & Herceptin
HER2+ mBC 1st Line
Avastin
mCRC TML
Actemra
SC Formulation (EU)
Afutuzumab (GA101)
Chronic Lymphocytic
Leukemia
Leukemia
Actemra
Avastin
BC Adjuvant HER2+
Avastin
BC Adj Triple Negative
Herceptin
BC HER 2+ Adj 2 Year
Xolair
Chronic Idiopathic
Urticaria
Urticaria
Avastin
Glioblastoma 1st Line
Actemra
SC Formulation (US)
Lucentis
AMD High Dose (US)
T-DM1
HER 2+ mBC 1st Line
Ocrelizumab1
PPMS & RRMS
1.Not a licensed product
Source: Roche investor update, July 21, 2011
US & EU Filings Calendar
Financials
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Financial Overview
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1. Includes $92.5 million one time legal settlement to MedImmune. Net interest expense includes
$17.6 million loss on convertible note retirement.
$17.6 million loss on convertible note retirement.
2. Includes $10.0 million one time legal settlement from UCB.
Debt
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Current and Long-Term Liabilities
• $155 million 3.75% senior convertible notes due May 2015
▪ Notes issued May 16, 2011; conversion rate is 132.6682 / $1,000 face amount ($7.54/share)
▪ Bond hedge effectively increases conversion price to $8.87 / share
▪ Notes “net share settle” and are excluded from diluted EPS
• $180 million 2.875% convertible senior notes due February 2015
▪ Conversion rate is 151.713 shares / $1,000 face amount ($6.59/share)
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• $300 million 10.25% secured non-
recourse notes; principal balance of
$115 million as of September 30,
2011
recourse notes; principal balance of
$115 million as of September 30,
2011
▪ Approximately 40% of Genentech royalties
dedicated to quarterly principal and interest
dedicated to quarterly principal and interest
▪ After retirement, securitized Genentech
royalties will be retained by PDL
royalties will be retained by PDL
• The purpose of restructuring PDL’s
debt is to free up cash for the
acquisition of new royalty assets
debt is to free up cash for the
acquisition of new royalty assets
Legal Matters
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Recent Resolution of Legal Disputes
• PDL has resolved all challenges to the Queen et al. Patents in the
U.S. Patent and Trademark Office (USPTO) and the European
Patent Office (EPO) as well as its dispute with MedImmune
U.S. Patent and Trademark Office (USPTO) and the European
Patent Office (EPO) as well as its dispute with MedImmune
▪ UCB Pharma
- PDL received $10 million from UCB and PDL agreed not to sue UCB for any royalties
related to Cimzia
related to Cimzia
- UCB terminated patent interference proceedings before the USPTO and withdrew its
opposition appeal in the EPO
opposition appeal in the EPO
▪ MedImmune
- PDL paid MedImmune $65 million on February 15, 2011, and will pay them an additional
$27.5 million by February 2012
$27.5 million by February 2012
- MedImmune ceased support of any party in the EPO opposition appeal
▪ Novartis
- PDL dismissed its claims against Novartis in its Nevada lawsuit
- Novartis withdrew its opposition appeal to PDL’s European patent in EPO
- Beginning in 2Q11, PDL will pay Novartis an amount based on Novartis’ net ex-U.S. sales of
Lucentis during calendar year 2011 and beyond
Lucentis during calendar year 2011 and beyond
▪ BioTransplant
- PDL acquired BioTransplant, a bankrupt company and instructed BioTransplant to withdraw
its opposition appeal in the EPO
its opposition appeal in the EPO
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Pending Dispute with Genentech and Roche
• In August 2010, Genentech sent a fax on behalf of Roche and Novartis
asserting its products do not infringe PDL’s supplementary protection
certificates (SPCs)
asserting its products do not infringe PDL’s supplementary protection
certificates (SPCs)
▪ Products include Avastin, Herceptin, Lucentis and Xolair
▪ SPCs are patent extensions in Europe that are issued on a country-by-country and product-by
-product basis
-product basis
• PDL Response
▪ Genentech’s assertions are without merit
▪ PDL disagrees with Genentech’s assertions of non-infringement
▪ Genentech had waived its rights to challenge our patents, including SPCs in its 2003
Settlement Agreement with PDL
Settlement Agreement with PDL
• 2003 Settlement Agreement
▪ Resolved intellectual property disputes between the two companies at that time
▪ Limits Genentech’s ability to challenge infringement of PDL’s patent rights, including SPCs,
and waives Genentech’s right to challenge or assist other in challenging the validity of our
patent rights
and waives Genentech’s right to challenge or assist other in challenging the validity of our
patent rights
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Nevada Lawsuit Against Genentech/Roche
• PDL filed a lawsuit against Genentech and Roche in Nevada state court
▪ Lawsuit states that fax constitutes a breach of 2003 Settlement Agreement because Genentech assisted
Roche in challenging PDL’s patents and SPCs
Roche in challenging PDL’s patents and SPCs
▪ Complaint seeks compensatory damages, including liquidated damages and other monetary remedies set
forth in the 2003 Settlement Agreement, punitive damages and attorney’s fees
forth in the 2003 Settlement Agreement, punitive damages and attorney’s fees
• In November 2010, Genentech and Roche filed two motions to dismiss
▪ They contend that 2003 Settlement Agreement applies only to PDL’s U.S. patents
▪ They asserted that the Nevada court lacks personal jurisdiction over Roche
• On July 11, 2011, court denied Genentech and Roche's motion to dismiss four of PDL's
five claims for relief and denied Roche's separate motion to dismiss for lack of personal
jurisdiction.
five claims for relief and denied Roche's separate motion to dismiss for lack of personal
jurisdiction.
▪ The court dismissed one of PDL's claims that Genentech committed a bad-faith breach of the covenant of
good faith and fair dealing
good faith and fair dealing
• The court ruling allows PDL to continue to pursue its claims that:
▪ Genentech is obligated to pay royalties to PDL on international sales of the Genentech Products
▪ Genentech, by challenging, at the behest of Roche and Novartis, whether PDL's SPCs cover the Genentech
Products breached its contractual obligations to PDL under the 2003 settlement agreement
Products breached its contractual obligations to PDL under the 2003 settlement agreement
▪ Genentech breached the implied covenant of good faith and fair dealing with respect to the 2003 settlement
agreement
agreement
▪ Roche intentionally and knowingly interfered with PDL's contractual relationship with Genentech in conscious
disregard of PDL's rights
disregard of PDL's rights
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Optimizing Stockholder Return
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Business Strategy
• Purchase new royalty assets and
ladder like a bond portfolio
ladder like a bond portfolio
▪ Continue to reinvest in new royalty
assets and pay dividends
assets and pay dividends
- Commercial stage products
- Sweet spot $75MM to $150MM
▪ Debt repaid by end of 2015
▪ Company continues as long as it can
generate satisfactory return
generate satisfactory return
• If unable to acquire royalty assets on
attractive terms, build cash reserves
to:
attractive terms, build cash reserves
to:
▪ Repay debt
▪ Use all excess cash to pay dividends to
enhance shareholder return
enhance shareholder return
▪ Wind-up company in 2016 timeframe
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• Queen et al. patents expire end of 2014;
we anticipate royalties will likely
continue to ~2016
we anticipate royalties will likely
continue to ~2016
• PDL has two possible future pathways
Optimizing Stockholder Return
• Continuously evaluating alternatives
▪ Dividends
▪ Capital restructure
▪ Share repurchase
▪ Company sale
▪ Purchase of commercial stage, royalty
generating assets
generating assets
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Investment Highlights
• Strong historic revenue growth from approved products
• Potential for additional indications from existing products,
new product approvals and purchase of new royalty assets
new product approvals and purchase of new royalty assets
• Potential to grow and diversify revenues with the addition of
new royalty assets
new royalty assets
• Significantly reduced expenses with no R&D burn
• Liquidity - volume averages 3 million shares/day
• Return to stockholders
▪ In 2011, $0.60/share to be paid in quarterly regular dividends of
$0.15/share on March 15, June 15, September 15 and
December 15
$0.15/share on March 15, June 15, September 15 and
December 15
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