Document and Entity Information (USD $)	12 Months Ended
Document and Entity Information (USD $)	Dec. 31, 2010	Feb. 22, 2011	Jun. 30, 2010
Document and Entity Information
Entity Registrant Name	PDL BIOPHARMA, INC.
Entity Central Index Key	0000882104
Trading Symbol	pdli
Document Type	10-K
Document Period End Date	Dec. 31, 2010
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2010
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		139,679,752
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 671,471,963

CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009
Assets
Cash and cash equivalents	$ 211,574	$ 303,227
Short-term investments	34,658
Receivables from licensees	469	1,050
Deferred tax assets	19,902	1,271
Foreign currency hedge	5,946
Prepaid and other current assets	12,114	10,288
Total current assets	284,663	315,836
Property and equipment, net	80	171
Long-term investments	1,997
Long-term deferred tax assets	22,620	10,396
Other assets	7,306	12,008
Total assets	316,666	338,411
Liabilities and Stockholders' Deficit
Accounts payable	2,540	370
Accrued legal settlement	65,000
Accrued liabilities	5,491	13,696
Deferred revenue	1,713	1,600
Current portion of convertible notes payable		199,998
Current portion of non-recourse notes payable	119,247	77,852
Total current liabilities	193,991	293,516
Convertible notes payable	310,428	228,000
Non-recourse notes payable	85,023	222,148
Other long-term liabilities	51,406	10,700
Total liabilities	640,848	754,364
Commitments and contingencies (Note 15)
Stockholders' deficit:
Preferred stock, par value $0.01 per share, 10,000 shares authorized; no shares issued and outstanding
Common stock, par value $0.01 per share, 250,000 shares authorized; 139,640 and 119,523 shares issued and outstanding at December 31, 2010 and 2009, respectively	1,396	1,195
Additional paid-in capital	(87,373)	(83,850)
Accumulated other comprehensive income	3,219
Accumulated deficit	(241,424)	(333,298)
Total stockholders' deficit	(324,182)	(415,953)
Total liabilities and stockholders' deficit	$ 316,666	$ 338,411

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2010	Dec. 31, 2009
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000	10,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	250,000	250,000
Common stock, shares issued	139,640	119,523
Common stock, shares outstanding	139,640	119,523

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Revenues:
Royalties	$ 343,475	$ 305,049	$ 278,713
License and other	1,500	13,135	15,483
Total revenues	344,975	318,184	294,196
Operating expenses:
General and administrative	41,396	21,064	51,544
Legal settlement	92,500
Total operating expenses	133,896	21,064	51,544
Operating income	211,079	297,120	242,652
Gain (loss) on retirement or conversion of convertible notes	(17,648)	1,518
Interest and other income, net	468	1,004	14,901
Interest expense	(43,529)	(19,357)	(14,219)
Income from continuing operations before income taxes	150,370	280,285	243,334
Income tax expense	58,496	90,625	5,014
Income from continuing operations	91,874	189,660	238,320
Discontinued operations (Note 20):
Loss from operations before income taxes			(162,684)
Income tax expense			7,249
Loss on discontinued operations			(169,933)
Net income	$ 91,874	$ 189,660	$ 68,387
Income per basic share:
Continuing operations	$ 0.73	$ 1.59	$ 2.01
Discontinued operations			$ (1.43)
Net income per basic share	$ 0.73	$ 1.59	$ 0.58
Income per diluted share:
Continuing operations	$ 0.54	$ 1.07	$ 1.48
Discontinued operations			$ (1.01)
Net income per diluted share	$ 0.54	$ 1.07	$ 0.47
Shares used to compute income per basic and diluted share:
Shares used to compute income per basic share	126,578	119,402	118,728
Shares used to compute income per diluted share	178,801	184,400	167,869

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Cash flows from operating activities
Net income	$ 91,874	$ 189,660	$ 68,387
Adjustments to reconcile net income to net cash provided by operating activities:
Asset impairment charges			3,777
Amortization of convertible notes offering costs	1,682	2,159	2,345
Amortization of non-recourse notes offering costs	7,238	1,256
Amortization of intangible assets			1,585
Other amortization and depreciation expense	330	991	20,909
Loss (gain) on retirement or conversion of convertible notes	17,648	(1,518)
Stock-based compensation expense	662	821	8,783
Loss on sale of assets, net			14,897
Loss on disposal of equipment			220
Tax benefit from stock-based compensation arrangements	12,818	64,140	19,720
Net excess tax benefit from stock-based compensation	(12,924)	(70,610)	(19,317)
Deferred income taxes	(5,677)	10,242	(21,909)
Changes in assets and liabilities:
Accounts receivable, net			17,201
Interest receivable			967
Receivables from licensees	581	12,450	(12,490)
Prepaid and other current assets	1,445	(4,903)	(12,497)
Other assets	182		568
Accounts payable	2,170	(1,347)	(7,176)
Accrued legal settlement	65,000
Accrued liabilities	(26,342)	(16,387)	(32,350)
Deferred revenue	113		23,670
Other long-term liabilities	27,500		2,859
Net cash provided by operating activities	184,300	186,954	80,149
Cash flows from investing activities
Purchases of investments	(46,668)		(15,000)
Maturities of investments	9,772	15,000	70,778
Sale of commercial assets			272,945
Sale of manufacturing assets			236,560
Purchase of property and equipment		(39)	(3,273)
Release of restricted cash		3,469	24,805
Net cash provided by (used in) investing activities	(36,896)	18,430	586,815
Cash flows from financing activities
Cash distribution to Facet Biotech Corporation			(405,968)
Proceeds from issuance of common stock, net of cancellations		1,402	15,390
Cash dividends paid	(130,043)	(319,020)	(506,612)
Retirement of convertible notes	(108,247)	(69,953)
Net proceeds from the issuance of convertible notes	82,039
Net proceeds from the issuance of non-recourse notes		285,746
Repayment of non-recourse notes	(95,730)
Net excess tax benefit from stock-based compensation	12,924	70,610	19,317
Payments of other long-term debt			(667)
Net cash used in financing activities	(239,057)	(31,215)	(878,540)
Net increase (decrease) in cash and cash equivalents	(91,653)	174,169	(211,576)
Cash and cash equivalents at beginning of the year	303,227	129,058	340,634
Cash and cash equivalents at end the year	211,574	303,227	129,058
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for interest	40,622	11,552	11,874
Cash paid during the year for income taxes	69,000	29,258	8,525
Non-Cash Investing and Financing Activities
Transfer of assets, net of liabilities, to Facet Biotech Corporation			49,651
Guarantee issued in connection with the Spin-Off (Note 17)			10,700
Conversion of convertible notes (Note 16)	$ 111,680

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Balance at Dec. 31, 2007	$ 507,610	$ 1,176	$ 1,098,251	$ (591,345)	$ (472)
Balance, shares at Dec. 31, 2007		117,577,262
Issuance of common stock under employee benefit plans, net, amount	15,390	17	15,373
Issuance of common stock under employee benefit plans, net, shares		1,727,304
Stock-based compensation expense for employees	8,783		8,783
Tax benefit from employee stock options	19,720		19,720
Guarantee issued in connection with the spin-off of biotechnology operations	(10,700)		(10,700)
Cash dividends paid	(506,612)		(506,612)
Spin-off of biotechnology operations	(455,619)		(455,619)
Comprehensive income:
Net income	68,387			68,387
Change in unrealized gains and losses on investments in available-for-sale securities, net of tax	(67)				(67)
Change in postretirement liability not yet recognized as net period expense, net of tax	539				539
Total comprehensive income	68,859
Balance at Dec. 31, 2008	(352,569)	1,193	169,196	(522,958)
Balance, shares at Dec. 31, 2008		119,304,566
Issuance of common stock under employee benefit plans, net, amount	1,402	2	1,400
Issuance of common stock under employee benefit plans, net, shares		218,319
Stock-based compensation expense for employees	773		773
Stock-based compensation expense for consultants	48		48
Tax benefit from employee stock options	64,140		64,140
Cash dividends paid	(319,020)
Dividends declared	(319,407)		(319,407)
Comprehensive income:
Net income	189,660			189,660
Balance at Dec. 31, 2009	(415,953)	1,195	(83,850)	(333,298)
Balance, shares at Dec. 31, 2009	119,523	119,522,885
Issuance of common stock for convertible debt, amount	112,875	200	112,675
Issuance of common stock for convertible debt, shares		19,969,069
Issuance of common stock under employee benefit plans, net, amount		1	(1)
Issuance of common stock under employee benefit plans, net, shares		148,198
Stock-based compensation expense for employees	662		662
Tax benefit from employee stock options	12,818		12,818
Cash dividends paid	(130,043)
Dividends declared	(129,677)		(129,677)
Comprehensive income:
Net income	91,874			91,874
Change in unrealized gains and losses on investments in available-for-sale securities, net of tax	(1)				(1)
Change in unrealized gains on cash flow hedges, net of tax	3,220				3,220
Total comprehensive income	95,093
Balance at Dec. 31, 2010	$ (324,182)	$ 1,396	$ (87,373)	$ (241,424)	$ 3,219
Balance, shares at Dec. 31, 2010	139,640	139,640,152

Organization and Business

12 Months Ended

Dec. 31, 2010

Organization and Business

Organization and Business

1. Organization and Business

PDL BioPharma, Inc. (we, us, our, PDL and the Company) was incorporated in Delaware in 1986. Our business is the management of our antibody humanization patents and royalty assets which consist of our Queen et al. patents and license agreements with numerous biotechnology and pharmaceutical companies. We receive royalties based on sales of humanized antibody products pursuant to certain rights we have licensed under our patents and may also receive royalty payments on new humanized antibody products launched before final patent expiry in December 2014. Generally, our license agreements cover humanized antibodies targeting antigens specified in the license agreements. Under our licensing agreements, we are entitled to receive a flat-rate or tiered royalty based upon our licensees' net sales of covered antibodies.

In the year ended December 31, 2010, we received royalties on sales of the seven humanized antibody products listed below, all of which are currently approved for use by the U.S. Food and Drug Administration (FDA) and other regulatory agencies outside the United States. In the years ended December 31, 2010, 2009 and 2008, we received approximately to $343.5 million, $305.0 million and $278.7 million, respectively, of royalty revenues under license agreements.


Licensees		Product Names
Genentech, Inc. (Genentech)		Avastin^®
		Herceptin^®
		Xolair^®
		Lucentis^®

Elan Corporation, Plc (Elan)		Tysabri^®

Wyeth Pharmaceuticals, Inc. (Wyeth)		Mylotarg^®

Chugai Pharmaceutical Co., Ltd. (Chugai)		Actemra^® /RoActemra^®

We have also entered into licensing agreements pursuant to which we have licensed certain rights under our patents for development-stage products that have not yet reached commercialization including products that are currently in Phase 3 clinical trials.

Until December 2008, our business included biotechnology operations which were focused on the discovery and development of novel antibodies which we spun off (the Spin-Off) to Facet Biotech Corporation (Facet). In April 2010, Abbott Laboratories (Abbott) acquired Facet and later renamed the company Abbott Biotherapeutics Corp. From March 2005 until March 2008, we also had commercial operations as well as manufacturing operations which we partially divested in 2006 and fully divested in 2008. The financial results of our former biotechnology, manufacturing and commercial operations are presented as Discontinued operations in the Consolidated Statements of Operations. For further information, see Note 20, Discontinued Operations.

- Definition

Description containing the entire organization, consolidation and basis of presentation of financial statements disclosure. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements.

+ References+ Details

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2010

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain amounts in prior periods have been reclassified to conform to the current period presentation.

Principles of Consolidation

Since November 2009, the consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, QHP Royalty Sub LLC (QHP). Prior to the Spin-Off, the consolidated financial statements included the accounts of PDL and its wholly-owned subsidiaries which were transferred to Facet and are now presented as Discontinued operations in the Consolidated Statements of Operations. For further information, see Note 20, Discontinued Operations. All material intercompany balances and transactions are eliminated in consolidation.

Management Estimates

The preparation of financial statements in conformity with GAAP requires the use of management's estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Segment Disclosures

We are required to report operating segments and make related disclosures about our products, services, geographic areas and major customers. Our chief operating decision-maker consisted of our executive management. Our chief operating decision-maker reviews our operating results and operating plans and makes resource allocation decisions on a company-wide or aggregate basis. As of December 31, 2010, we operated as one segment. Our operations and facilities are located in Incline Village, Nevada.

Cash Equivalents, Investments and Concentration of Credit Risk

We consider all highly liquid investments with initial maturities of three months or less at the date of purchase to be cash equivalents. We place our cash, cash equivalents and investments with high credit quality financial institutions and in securities of the U.S. government, U.S. government agencies and U.S. corporations and, by policy, limit the amount of credit exposure in any one financial instrument.

Fair Value Measurements

The fair value of our financial instruments are estimates of the amounts that would be received if we were to sell an asset or we paid to transfer a liability in an orderly transaction between market participants at the measurement date or exit price. We apply a three-level valuation hierarchy for fair value measurements. The categorization of assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. Level 1 inputs to the valuation method use unadjusted quoted market prices in active markets for identical assets and liabilities. Level 2 inputs to the valuation method are other observable inputs, including quoted market prices for similar assets and liabilities, quoted prices for identical and similar assets and liabilities in the markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 inputs to the valuation method, if any, are unobservable inputs based upon management's best estimate of the inputs that market participants would use in pricing the asset or liability at the measurement date, including assumptions about risk. As of December 31, 2010 and 2009, we had no Level 3 assets or liabilities.

Foreign Currency Hedging

We hedge certain foreign currency exposures related to our licensees' product sales with foreign currency exchange forward contracts and foreign currency exchange option contracts (collectively, foreign currency exchange contracts). In general, these contracts are intended to offset the underlying foreign currency market risk in our royalty revenues. Our exposure to credit risk from these contracts is a function of foreign currency exchange rates and, therefore, varies over time. We limit the credit risk that our counterparty to these contracts may be unable to perform by transacting with a major bank and monitoring the exposure in the context of current market conditions. We mitigate the risk of loss by entering into a netting agreement with our counterparty that provides for aggregate net settlement of all of the foreign currency exchange contracts should our counterparty default on the contracts prior to contract settlement. Therefore, our overall risk of loss in the event of counterparty default is limited to the amount of any unrecognized gains on outstanding contracts net of any unrecognized losses on outstanding contracts at the date of default. We do not enter into speculative foreign currency transactions. We have designated the foreign currency exchange contracts as cash flow hedges. At the inception of the hedging relationship and on a quarterly basis, we assess hedge effectiveness. The aggregate unrealized gain or loss on the effective component of our foreign currency exchange contracts net of estimated taxes is recorded in stockholders' deficit as accumulated other comprehensive income. Gains or losses on cash flow hedges are recognized as royalty revenue in the same period that the hedged transaction, royalty revenue, impacts earnings.

Revenue Recognition

We recognize royalty, licensing and other revenues from our Queen et al. patent portfolio covering the humanization of antibodies for use as drugs, in drug development and drug production. In connection with the divestiture of our former biotechnology, manufacturing and commercial operations, all revenues resulting from product sales and certain license and other revenues, including all revenues that we have recognized in the past from our collaboration partners under collaboration agreements, have been reflected as Discontinued operations in the Consolidated Statement of Operations. For further information, see Note 20, Discontinued Operations.

Revenues and their respective accounting treatment for financial reporting purposes comprise:

Royalty Revenues

Under most of our patent license agreements, we receive royalty payments based upon our licensees' net sales of covered products. Generally, under these agreements we receive royalty reports from our licensees approximately one quarter in arrears, that is, generally in the second month of the quarter after the licensee has sold the royalty-bearing product. We recognize royalty revenues when we can reliably estimate such amounts and collectability is reasonably assured. Accordingly, we recognize royalty revenues in the quarter reported to us by our licensees, i.e., generally royalty revenues are recognized one quarter following the quarter in which sales by our licensees occurred. Under this accounting policy, the royalty revenues we report are not based upon our estimates and such royalty revenues are typically reported in the same period in which cash is received from our licensees.

We may also receive annual license maintenance fees, payable at the election of the licensee to maintain the license in effect. We have no performance obligations with respect to such fees. Maintenance fees are recognized as they are due and when payment is reasonably assured.

License and Other Revenues

Generally there are three types of arrangements that we enter into under which we provide access to our proprietary patent portfolio covering the humanization of antibodies.

•

Under patent license agreements, the licensee typically obtains a non-exclusive license to one or more of our patents. In this arrangement, the licensee is responsible for all of the development work on its product. The licensee has the technical ability to perform the humanization of the antibody it is developing using our patented technology, but needs to obtain a license from us so as not to avoid infringe our patents. We have no future performance obligations under these agreements. Consideration that we receive for patent license agreements is recognized upon execution and delivery of the patent license agreement and when payment is reasonably assured.

•

Under patent rights agreements, the licensee purchases a research patent license in exchange for an upfront fee. In addition, the licensee has the right to obtain, in exchange for consideration separate from the upfront fee, patent licenses for commercial purposes for a specified number of drug targets to be designated by the licensee subsequent to execution of the agreement. The licensee performs all of the research and we have no further performance obligations with respect to the research patent license and the grant of the right to obtain commercial patent licenses. Therefore, upon delivery of the patent rights agreement, the earnings process is complete. When a licensee exercises its right to obtain patent licenses to certain designated drug targets for commercial purposes, we recognize the related consideration as revenues upon the licensee's exercise of such right, execution and delivery of the associated patent license agreement and when payment is reasonably assured.

•

Prior to the Spin-Off, under antibody humanization agreements, the licensee would typically pay an upfront fee for us to humanize an antibody. These upfront fees were recognized as the humanization work was performed, which was typically over three to six months, or upon acceptance of the humanized antibody by our licensee if such acceptance clause existed in the agreement. Such amounts are presented as Discontinued operations in the Consolidated Statements of Operations.

We enter into patent license and humanization agreements that may contain milestones associated with reaching particular stages in product development. We recognize "at risk" milestone payments upon achievement of the underlying milestone event and when they are due and payable under the arrangement. Milestones are deemed to be "at risk" when, at the onset of an arrangement, management believes that they will require a reasonable amount of effort to be achieved and are not simply reached by the lapse of time or through a perfunctory effort. Milestones which are not deemed to be "at risk" are recognized as revenue in the same manner as up-front payments. Generally, there are three types of agreements under which a customer would owe us a milestone payment:

•

Patent license agreements and humanization agreements sometimes require our licensees to make milestone payments to us when they achieve certain progress, such as FDA approval, with respect to the licensee's product.

•

We may also receive certain milestone payments in connection with licensing technology to or from our licensees, such as product licenses. Under these agreements, our licensees may make milestone payments to us when certain levels of development are achieved with respect to the licensed technology.

•

Prior to the divestiture of our commercial operations and the Spin-Off, we entered into humanization agreements which provided for the payment of certain milestones to us after the completion of services to perform the humanization process. These milestones generally include delivery of a humanized antibody meeting a certain binding affinity and, at the customer's election, delivery of a cell line meeting certain criteria described in the original agreement.

Amounts recognized with respect to our former biotechnology, manufacturing and commercial operations are presented as Discontinued operations in the Consolidated Statements of Operations.

Collaboration Revenues

Prior to the divestiture of our commercial operation and the Spin-Off, amounts received from our collaboration partners were recognized as revenue as the related services were performed. In certain instances, our collaboration agreements involved a combination of upfront fees, milestones and development costs where we were not able to establish fair value of all of the undelivered elements. In those cases, we recognized these upfront fees, milestones and reimbursements of development costs as the services were performed. Such amounts are presented as Discontinued operations in the Consolidated Statements of Operations.

Product Sales Revenues

Prior to the divestiture of our commercial operation, we recognized revenues from product sales when there was persuasive evidence that an arrangement existed, title passed, the price was fixed and determinable and collectability was reasonably assured. Product sales were recognized net of estimated allowances, discounts, sales returns, charge backs and rebates. Such amounts are presented as Discontinued operations in the Consolidated Statements of Operations.

Advertising and Promotional Expenses

Prior to the divestiture of our commercial operation and the Spin-Off, we engaged in promotional activities, which typically took the form of industry publications, journal ads, exhibits, speaker programs and other forms of media. Advertising and promotion expenditures were expensed as incurred. For the years ended December 31, 2010 and 2009, we did not have any advertising and promotional expenses. For the year ended December 31, 2008, advertising and promotional expenses were $3.4 million, and are presented as Discontinued operations in the Consolidated Statements of Operations.

Shipping and Handling Expenses

Prior to the divestiture of our commercial operation and the Spin-Off, we recorded costs associated with shipping and handling of revenue-generating products in cost of product sales, such costs are presented as Discontinued operations in the Consolidated Statements of Operations.

Research and Development Expenses

Prior to the divestiture of our commercial operation and the Spin-Off, major components of research and development expenses consisted of personnel costs, including salaries and benefits, clinical development, preclinical work, pharmaceutical development, materials and supplies, payments associated with work completed for us by third-party research organizations and overhead allocations consisting of various administrative and facilities related costs. All research and development costs were charged to expense as incurred and, since they related entirely to our former commercial and biotechnology operations, are reflected as Discontinued operations in the Consolidated Statements of Operations. For the years ended December 31, 2010 and 2009, we did not have any research and development expenses. For the year ended December 31, 2008, research and development expenses were $166.9 million.

Comprehensive Income

Comprehensive income comprises net income adjusted for other comprehensive income which includes the changes in unrealized gains and losses on foreign currency exchange contracts and changes in unrealized gains and losses on our investments in available-for-sale securities, if any, which are excluded from our net income.

The components of comprehensive income were as follows:


	Year Ended December 31,
(In thousands)	2010			2009		2008
Net income	$	91,874		$	189,660	$	68,387
Other comprehensive income:
Change in unrealized gain on cash flow hedges, net of taxes		3,220			-		-
Change in unrealized loss on short-term investments, net of taxes		(1	)		-		(67	)
Change in postretirement benefit liability not yet recognized in net periodic benefit expense, net of taxes		-			-		539

Total comprehensive income	$	95,093		$	189,660	$	68,859

Foreign Currency Translation

Prior to the divestiture of our commercial operation and the Spin-Off, the U.S. dollar was the functional currency for our former French subsidiary, which was assigned to Facet in connection with the Spin-Off in December 2008. All foreign currency gains and losses associated with our former French subsidiary are presented as Discontinued operations in the Consolidated Statements of Operations and have not been material.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization were computed using the straight-line method over the following estimated useful lives:


Leasehold improvements		Shorter of asset life or term of lease
Computer and office equipment		3 years
Furniture and fixtures		7 years

Prior to the Spin-Off, we also had the following:


Buildings and improvements		20 years
Laboratory and manufacturing equipment		7 years

Depreciation and amortization related to buildings and improvements, laboratory and manufacturing equipment as well as other property and equipment, used by our former biotechnology, manufacturing and commercial operations are presented as Discontinued operations in the Consolidated Statements of Operations.

Long-Lived Assets

We identify and record impairment losses, as circumstances dictate, on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the discounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets.

Recent Accounting Pronouncements

Management reviewed the most recently issued accounting pronouncements and determined that none were applicable to the Company.

Stock-Based Compensation

12 Months Ended

Dec. 31, 2010

Stock-Based Compensation

Stock-Based Compensation

3. Stock-Based Compensation

We recognize compensation expense, using a fair-value based method, for costs associated with all share-based awards including stock options and stock issued to our employees and directors under our stock plans. The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service periods in our Consolidated Statements of Operations.

We have adopted the simplified method to calculate the beginning balance of the additional paid-in capital (APIC) pool of the excess tax benefit and to determine the subsequent effect on the APIC pool and Consolidated Statements of Cash Flows of the tax effects of employee stock-based compensation awards that were outstanding upon our adoption.

We calculate stock-based compensation expense based on the number of awards ultimately expected to vest, net of estimated forfeitures. We estimate forfeiture rates at the time of grant and revise such rates, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In connection with the Spin-Off of Facet in December 2008 and the termination of our former employees, we adjusted the forfeiture rate assumption to 100% for all option pools except for our current members of the board of directors. As a result, during the fourth quarter of 2008, we recognized a change in estimate for stock-based compensation expense of $2.7 million, which increased our net loss, reflecting the amount of stock-based compensation expense recognized in prior periods that was not earned by employees as of their termination on the Spin-Off date. As this amount relates to unvested stock options held by our former employees who were associated with the biotechnology, manufacturing and commercial operations, this adjustment is reflected as Discontinued operations in the Consolidated Statements of Operations.

Stock-based compensation expense for employees and directors for the years ended December 31, 2010, 2009 and 2008 was as follows:


	Year Ended December 31,
(In thousands)	2010			2009			2008
General and administrative	$	662		$	773		$	879
Discontinued operations		-			-			7,904

Total stock-based compensation expense		662			773			8,783
Tax benefit related to current year stock-based compensation		(232	)		(271	)		(2,861	)

Stock-based compensation expense included in net income	$	430		$	502		$	5,922

We also account for stock options granted to persons other than employees or directors at fair value. Stock options granted to non-employees are subject to periodic re-measurement over their vesting terms. We recognize the resulting stock-based compensation expense during the service period over which the non-employee provides services to us. As of December 31, 2010, all stock options held by non-employees were fully vested. The stock-based compensation expense related to non-employees for the years ended December 31, 2010, 2009 and 2008 was zero, $48,000 and zero, respectively.

Valuation Assumptions

The stock-based compensation expense recognized for the years ended December 31, 2010, 2009 and 2008 was determined using the Black-Scholes option valuation model. Option valuation models require the input of subjective assumptions and these assumptions can vary over time. We did not grant any stock options under our stock-based incentive plans or issue shares of common stock under our employee stock purchase plan during the years ended December 31, 2010 and 2009, therefore weighted-average assumptions for the years ended December 31, 2010 and 2009 are not presented below.

The weighted-average assumptions used for the year ended December 31, 2008 were as follows:


	Year ended December 31, 2008
Stock Option Plans
Expected life, in years		4.0
Risk free interest rate		2.4	%
Volatility		41	%
Dividend yield		-

Employee Stock Purchase Plans
Expected life, in years		0.5
Risk free interest rate		2.8	%
Volatility		32	%
Dividend yield		-

The expected term represents the period that we expect our stock-based awards to be outstanding, which we determined based on historical experience of similar awards, the contractual terms of the stock-based awards, vesting schedules and expectations of future optionee behavior as influenced by changes to the terms of stock-based awards. We base expected volatility on both the historical volatility of our common stock and implied volatility derived from the market prices of traded options of our common stock. We base the risk-free interest rate on the implied yield available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of our options at the time of grant. Even though we issued a cash dividend in May 2008 relating to the sales of our former commercial operations and our former antibody manufacturing plant in March 2008, the dividend yield was determined to be zero since we did not have a plan in place to pay any additional cash dividends in the foreseeable future.

Stock-Based Incentive Plans

We currently have one active stock-based incentive plan under which we may grant stock-based awards to our employees, directors and consultants. Prior to 2009, we had five stock-based incentive plans which we could grant stock based awards.

The total number of shares of common stock authorized for issuance, shares of common stock issued upon exercise of options or grant of restricted stock, shares of common stock subject to outstanding awards and available for grant under each of these plans as of December 31, 2010, is set forth in the table below:


Title of Plan	Total Shares of Common Stock Authorized		Total Shares of Common Stock Issued		Total Shares of Common Stock Subject to Outstanding Awards		Total Shares of Common Stock Available for Grant
2005 Equity Incentive Plan⁽¹⁾		5,200,000		353,636		-		4,846,364
2002 Outside Directors Stock Option Plan⁽²⁾		172,000		140,750		31,250		-
1999 Non-statutory Stock Option Plan⁽²⁾		5,075,707		4,966,183		109,524		-
1999 Stock Option Plan⁽²⁾		3,786,719		3,653,150		133,569		-
1991 Nonstatutory Stock Option Plan⁽³⁾		13,994,479		13,994,479		-		-

		28,228,905		23,108,198		274,343		4,846,364

(1)	As of December 31, 2010, there were 39,600 shares of unvested restricted stock awards outstanding.

(2)	This plan was terminated in 2009 subject to options outstanding under this plan.

(3)	This plan expired in 2001 and we may no longer grant awards under this plan.

Under our 2005 Equity Incentive Plan, we are authorized to issue a variety of incentive awards, including stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance share and performance unit awards, deferred compensation awards and other stock-based or cash-based awards.

In September 2009, our Compensation Committee terminated the 1991 Nonstatutory Stock Option Plan. Also in September 2009, our Compensation Committee terminated the 1999 Outside Director Stock Option Plan and the 1999 Nonstatutory Stock Option Plan subject to any outstanding options. In June 2009, our stockholders approved amendments to the Company's 2005 Equity Incentive Plan to expand persons eligible to participate in the plan to include our outside directors. In February 2009, our Compensation Committee terminated the 2002 Outside Directors Stock Option Plan, subject to any outstanding options.

Stock options granted to employees under our stock-based incentive plans in connection with the start of employment customarily vested over four years with 25% of the shares subject to such an option vesting on the first anniversary of the grant date and the remainder of the stock option vesting monthly after the first anniversary at a rate of one thirty-sixth of the remaining non-vested shares subject to the stock option. Stock options granted to employees as additional incentive and for performance reasons after the start of employment customarily vested monthly after the grant date or such other vesting start date set by the company on the grant date at a rate of one forty-eighth of the shares subject to the option. Each outstanding stock option granted prior to mid-July 2005 has a term of 10 years and each outstanding stock option granted after mid-July 2005 has a term of seven years.

Employee Stock Purchase Plan

In addition to the stock-based incentive plans described above, we adopted the 1993 Employee Stock Purchase Plan (ESPP), which was intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended. However, after the Spin-Off, the Company's Compensation Committee terminated the Company's ESPP in June 2009. Under the ESPP prior to its termination, full-time employees who owned less than 5% of our outstanding shares of common stock were eligible to contribute a percentage of their base salary, subject to certain limitations, over the course of six-month offering periods for the purchase of shares of common stock. The purchase price for shares of common stock purchased under our ESPP equaled 85% of the fair market value of a share of common stock at the beginning or end of the relevant six-month offering period, whichever was lower. The stock-based compensation expense recognized in connection with our ESPP for the year ended December 31, 2008 was $0.3 million. No shares of common stock were purchased during the years ended December 31, 2010 and 2009.

Stock Option Activity

A summary of our stock option activity for the years ended December 31, 2010, 2009 and 2008 is presented below:


	2010					2009					2008
(In thousands)	shares			Weighted- Average Execise Price		shares			Weighted- Average Execise Price		shares			Weighted- Average Execise Price
Outstanding at beginning of year		1,564		$	19.82		5,776		$	18.04		14,956		$	19.85
Granted		-			-		-			-		1,055			9.34
Exercised		-			-		(213	)		6.57		(1,775	)		8.23
Forfeited		(1,290	)		20.36		(3,999	)		17.96		(8,460	)		22.21

Outstanding at end of year		274			17.25		1,564			19.82		5,776			18.04

Exercisable at end of year		274			17.25		1,543			20.01		5,665			18.24

Weighted-average grant-date fair value of options granted during the year					N/A					N/A				$	3.60

As of December 31, 2010, the aggregate intrinsic value of our outstanding and exercisable stock options was $47,000 and the weighted-average remaining contractual life was 2.87 years. The aggregate intrinsic value represents the total pre-tax intrinsic value, based on the closing prices of our common stock of $6.23 on December 31, 2010, which would have been received by the option holders had all option holders exercised their options as of that date. In connection with the Spin-Off of Facet in December 2008, we terminated substantially all employees. As a result, approximately 4 million options with an average exercise price of $17.96 were forfeited during the year ended December 31, 2009. Total unrecognized compensation cost associated with non-vested stock options outstanding as of December 31, 2010 was zero.

Additional information regarding our options exercised is set forth below:


	Year Ended December 31,
(In thousands)	2010		2009		2008
Cash received	$	-	$	1,402	$	14,661
Aggregate intrinsic value	$	-	$	326	$	8,495

Stock-based compensation expense for the year ended December 31, 2008 included stock option modification charges totaling $4.6 million. The stock option modification charges related to accelerated vesting and extended exercise periods for certain stock options provided in connection with the termination of certain employees and members of the board of directors. The majority of the stock option modification charges related to the termination of certain employees as a result of the sale of the commercial assets and is included in Discontinued operations in the Consolidated Statements of Operations.

Restricted Stock

A summary of our restricted stock activity for the years ended December 31, 2010, 2009 and 2008 is presented below:


	2010					2009					2008
	Number of shares (in thousands)			Weighted- average grant-date fair value per share		Number of shares (in thousands)			Weighted- average grant-date fair value per share		Number of shares (in thousands)			Weighted- average grant-date fair value per share
Nonvested at beginning of year		148		$	6.54		-		$	-		208		$	20.33
Awards granted		40			5.05		159			6.54		148			9.67
Awards vested		(148	)		6.54		(5	)		6.43		(78	)		18.07
Forfeited		-			-		(6	)		6.66		(278	)		15.30

Nonvested at end of year		40		$	5.05		148		$	6.54		-		$	-

Stock-based compensation expense associated with our restricted stock for the years ended December 31, 2010, 2009 and 2008 was $0.6 million, $0.5 million and $0.8 million, respectively. As of December 31, 2010, the aggregate pre-tax intrinsic value of non-vested restricted stock was $0.2 million. Total unrecognized compensation costs associated with non-vested restricted stock as of December 31, 2010 was $0.1 million, excluding forfeitures, which we expect to recognize over a weighted-average period of five months.

Cash Dividends	12 Months Ended
Cash Dividends	Dec. 31, 2010
Cash Dividends
Cash Dividends	4. Cash Dividends In February 2009, our board of directors declared two special cash dividends of $0.50 per share of common stock payable on April 1, 2009 and October 1, 2009. We paid $59.7 million to our stockholders on April 1, 2009 and $59.7 million to our stockholders on October 1, 2009. In November 2009, our board of directors declared an additional cash dividend equivalent to $1.67 per share of common stock payable on December 15, 2009. We paid $199.6 million to our stockholders on December 15, 2009. In January 2010, our board of directors declared two special cash dividends of $0.50 per share of common stock payable on April 1, 2010 and October 1, 2010. We paid $59.9 million to our stockholders on April 1, 2010 and $69.8 million to our stockholders on October 1, 2010. As of December 31, 2010, we had $20,000 accrued in other accrued liabilities for estimated dividends payable on unvested restricted stock. On February 25, 2011, our board of directors declared a quarterly regular dividend of $0.15 per share of common stock payable on March 15, June 15, September 15 and December 15 of 2011 to stockholders of record on March 8, June 8, September 8 and December 8 of 2011, the Record Dates for each of the dividend payment dates, respectively. Our board of directors will evaluate our dividend policy for subsequent years based on net income, debt service, income taxes and other corporate activities. For further information, see Note 22, Subsequent Events.

Spin-Off of Facet

12 Months Ended

Dec. 31, 2010

Spin-Off of Facet

Spin-Off of Facet

5. Spin-Off of Facet

On December 17, 2008, we transferred our biotechnology operations to Facet and on December 18, 2008, made a pro rata distribution to our stockholders of record on December 5, 2008 of one share of Facet common stock for every five shares of PDL common stock valued at $2.60 per share of common stock.

In connection with the Spin-Off, on December 17, 2008, PDL and Facet entered into a Separation and Distribution Agreement (the Separation Agreement). The Separation Agreement identifies the assets transferred, liabilities assumed and contracts assigned to Facet as part of the Spin-Off and describes when and how these transfers, assumptions and assignments occurred. In particular, all of the assets and liabilities associated or primarily used in connection with the biotechnology operations were transferred to Facet, including our intellectual property assets other than our Queen et al. patents. As a result, the primary assets and liabilities retained by us after the Spin-Off are our Queen et al. patents, our convertible notes and our leased office space in Nevada.

On December 18, 2008, we also entered into with Facet (i) a Transition Services Agreement pursuant to which Facet and we will provide each other with a variety of administrative services, including financial, tax, accounting, information technology, legal and human resources services, for a period of time of up to 36 months following the Spin-Off, (ii) a Tax Sharing and Indemnification Agreement that will govern Facet's and our respective rights, responsibilities and obligations after the Spin-Off with respect to taxes, (iii) a Cross License Agreement relating to our Queen et al. patents and certain other patents and know-how under which we granted to Facet a royalty-free, development license to our Queen et al. patents and a royalty-bearing, commercialization license to our Queen et al. patents and Facet granted to us a royalty-free license under certain intellectual property Facet owns solely for the purposes of allowing us to perform and fulfill existing obligations that we have under certain agreements with third parties and (iv) an Employee Matters Agreement which governs the employee benefit obligations of Facet and us as they relate to current and former employees, allocates liabilities and responsibilities relating to employee benefit matters, other than severance plans, that are subject to ERISA in connection with the Spin-Off, including the assignment and transfer of employees, and the establishment of a savings plan and a welfare plan.

In connection with the Spin-Off, we entered into amendments to the leases for the facilities in Redwood City, California, which formerly served as our headquarters, under which Facet was added as a co-tenant under the leases and a Co-Tenancy Agreement, under which Facet agreed to indemnify us for all matters related to the leases attributable to the period after the Spin-Off date. For further information, see Notes 15 and 17, Commitments and Contingencies and Other Long-Term Liabilities, respectively.

The total value of the Facet stock dividend of $455.6 million was based on the value of the net assets that were transferred to Facet in connection with the Spin-Off. The following net assets were transferred to Facet:


(In thousands)
*Net assets transferred:*
Cash and cash equivalents	$	405,968
Prepaid and other current assets		15,768
Land, property and equipment, net		122,373
Other intangible assets, net		7,471
Other assets		2,141
Accrued compensation		(3,365	)
Other accrued liabilities		(2,333	)
Deferred revenue		(58,723	)
Debt and other long-term liabilities		(34,149	)
Accumulated other comprehensive loss		468

Net assets transferred	$	455,619

Facet's historical results of operations have been presented as Discontinued operations in the Consolidated Statements of Operations. For further information, see Note 20, Discontinued Operations.

Net Income per Share

12 Months Ended

Dec. 31, 2010

Net Income per Share

Net Income per Share

6. Net Income per Share

We compute basic net income per share using the weighted-average number of shares of common stock outstanding during the periods presented less the weighted-average number of shares of restricted stock that are subject to repurchase. We compute diluted net income per share using the sum of the weighted-average number of common and common equivalent shares outstanding. Common equivalent shares used in the computation of diluted net income per share result from the assumed exercise of stock options, the issuance of restricted stock and the assumed conversion of our 2.00% Convertible Senior Notes due February 15, 2012 (the 2012 Notes), our 2.875% Convertible Senior Notes due February 15, 2015 (the 2015 Notes) and our 2.75% Convertible Subordinated Notes due August 16, 2023 (the 2023 Notes) on a weighted average basis for the period that the notes were outstanding, including both the effect of adding back interest expense and the inclusion of the underlying shares using the if-converted method. As of December 31, 2010, the conversion rates for the 2012 Notes and the 2015 Notes were 140.571 shares per $1,000 principal amount of the notes, or a conversion price of approximately $7.11 per share. The conversion rate for the 2023 Notes was 177.1594 shares per $1,000 principal amount of 2023 Notes, or a conversion price of approximately $5.64 per share. As of December 31, 2010, the 2023 Notes were fully retired or converted.

The following is a reconciliation of the numerators and denominators of the basic and diluted net income per share computations for the years ended December 31, 2010, 2009 and 2008:


	Year Ended December 31,
(In thousands)	2010		2009		2008
Numerator
Income from continuing operations used to compute income per basic share from continuing operations	$	91,874	$	189,660	$	238,320
Add back interest expense for convertible notes, net of estimated tax of $2.7 million, $3.8 million, and $1.4 million for the years ended December 31, 2010, 2009 and 2008, respectively (see Note 16)		5,087		7,079		10,450

Income used to compute income per diluted share from continuing operations	$	96,961	$	196,739	$	248,770


Net income	$	91,874	$	189,660	$	68,387
Add back interest expense for convertible notes, net of estimated tax of $2.7 million, $3.8 million, and $1.4 million for the years ended December 31, 2010, 2009 and 2008, respectively (see Note 16)		5,087		7,079		10,450

Income used to compute net income per diluted share	$	96,961	$	196,739	$	78,837

Denominator
Total weighted-average shares used to compute income per basic share		126,578		119,402		118,728
Effect of dilutive stock options		9		18		50
Restricted stock outstanding		103		42		10
Assumed conversion of 2012 notes		29,870		28,809		20,542
Assumed conversion of 2015 notes		4,229		-		-
Assumed conversion of 2023 notes		18,012		36,129		28,539

Shares used to compute income per diluted share from continuing operations and net income per diluted share		178,801		184,400		167,869

We excluded 0.3 million, 2.5 million and 10.3 million of outstanding stock options from our diluted earnings per share calculations for the years ended December 31, 2010, 2009 and 2008, respectively, because the option exercise prices were greater than the average market prices of our common stock during these periods; therefore, their effect was anti-dilutive.

Fiscal Year 2008 Restructuring Charges

12 Months Ended

Dec. 31, 2010

Fiscal Year 2008 Restructuring Charges

Fiscal Year 2008 Restructuring Charges

7. Fiscal Year 2008 Restructuring Charges

During the year ended December 31, 2008, we put into place certain restructuring plans under which we recognized involuntary termination benefits and idle facilities charges. As the majority of restructuring charges has been allocated to our former commercial operations and our former biotechnology operations, they are classified as Discontinued operations in the Consolidated Statements of Operations. For further information, see Note 20, Discontinued Operations. During the year ended December 31, 2008, we recognized $12.0 million of restructuring expense attributable to discontinued operations. In addition, we recognized approximately $0.2 million of restructuring charges in the year ended December 31, 2008 attributable to continuing operations, which is classified as general and administrative expenses in the Consolidated Statements of Operations. In the year December 31, 2009 restructuring activity consisted solely of payments and adjustments. There was no restructuring activity during the year ended December 31, 2010. The details of the restructuring plans are described below.

The following table summarizes the restructuring activity discussed above:


(In thousands)	Personnel Costs			Facilities Related			Total
Balance at December 31, 2007	$	411		$	1,912		$	2,323
Restructuring charges		11,928			227			12,155
Payments and adjustments		(10,305	)		(2,075	)		(12,380	)
Transfer of liability to Facet		(1,994	)		-			(1,994	)

Balance at December 31, 2008		40			64			104
Payments and adjustments		(40	)		(64	)		(104	)

Balance at December 31, 2009	$	-		$	-		$	-

Company-Wide Restructuring Plan

In March 2008, we commenced a restructuring plan in which we eliminated approximately 120 employment positions in the first quarter of 2008 and approximately 130 additional employment positions over the subsequent 12 months (the Transition Employees). All impacted employees were notified in March 2008. Subsequent to the completion of the restructuring, we had approximately 300 employees. Employees terminated in connection with the restructuring were eligible for a package consisting of severance payments of generally 12 weeks of salary and medical benefits along with up to three months of outplacement services. We recognized severance charges for Transition Employees over their respective estimated service periods. During the year ended December 31, 2008, we recognized restructuring charges of $9.4 million, which primarily related to post-termination severance costs as well as salary accruals relating to the portion of the 60-day notice period over which the terminated employees would not be providing services to the Company. As the restructuring efforts related primarily to our biotechnology operations, $9.2 million of the total $9.4 million of restructuring charges are presented as discontinued operations in the Consolidated Statements of Operations. These restructuring charges included expenses associated with employees who were terminated immediately as well as expenses associated with the Transition Employees. The remaining liability associated with these restructuring charges as of December 18, 2008 was transferred to Facet in connection with the Spin-Off.

In addition, in the fourth quarter of 2008, we commenced a restructuring plan pursuant to which we closed our France office and eliminated all related employment positions. In connection with this restructuring effort, we recognized charges of approximately $0.9 million. The liability associated with this restructuring plan was transferred to Facet in December 2008 in connection with the Spin-Off.

Commercial Restructuring

In connection with the divestiture of the commercial operation, we committed in the first quarter of 2008 to provide certain severance benefits to those employees whose employment positions we would likely eliminate in connection with the transactions. We recognized expenses for these severance benefits of $1.8 million during 2008, which are presented as discontinued operations in the Consolidated Statements of Operations. Substantially all related severance obligations were settled by the end of 2008.

Fair Value Measurements

12 Months Ended

Dec. 31, 2010

Fair Value Measurements

Fair Value Measurements

8. Fair Value Measurements

The following table summarizes, for assets and liabilities recorded at fair value, the respective fair value and classification by level of input within the fair value hierarchy defined in Note 2, Summary of Significant Accounting Policies:


	December 31, 2010								December 31, 2009
(In thousands)	Level 1		Level 2			Total			Level 1		Total
Assets:
Money market funds	$	203,318	$	-		$	203,318		$	296,969	$	296,969
Corporate debt securities		20,434		-			20,434			-		-
Commercial paper		-		7,998			7,998			-		-
U.S. government sponsored agency bonds		8,725		-			8,725			-		-
U.S. treasury securities		1,997		-			1,997			-		-
Foreign currency hedge contracts		-		17,763			17,763			-		-

Total	$	234,474	$	25,761		$	260,235		$	296,969	$	296,969

Liabilities:
Foreign currency hedge contracts	$	-	$	(12,810	)	$	(12,810	)	$	-	$	-

The fair value of the foreign currency hedging contracts is estimated based on pricing models using readily observable inputs from actively quoted markets and disclosed on a gross basis in the table above. The fair value of commercial paper is estimated based on its carrying value adjusted for observable inputs of the same security.

- Definition

This item represents the complete disclosure regarding the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the Company is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risk is are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References+ Details

Cash Equivalents and Investments

12 Months Ended

Dec. 31, 2010

Cash Equivalents and Investments

Cash Equivalents and Investments

9. Cash Equivalents and Investments

As of December 31, 2010, we had invested our excess cash balances primarily in money market funds, corporate debt securities, commercial paper, U.S. government sponsored agency bonds and U.S. treasury securities, and as of December 31, 2009, we had invested our excess cash balances primarily in money market funds. Our securities are classified as available-for-sale and are carried at estimated fair value, with unrealized gains and losses reported in accumulated other comprehensive income in stockholders' deficit net of estimated taxes. The estimated fair value is based upon quoted market prices for these or similar instruments. The cost of securities sold is based on the specific identification method. To date, we have not experienced credit losses on investments in these instruments and we do not require collateral for our investment activities.

A summary of our available-for-sale securities at December 31, 2010 and 2009 is presented below:


(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2010:
Money market funds	$	203,318	$	-	$	-		$	203,318
Corporate debt securities		20,437		2		(5	)		20,434
Commerical paper		7,998		-		-			7,998
U.S. government sponsored agency bonds		8,727		-		(2	)		8,725
U.S. treasury securities		1,994		3		-			1,997

Total	$	242,474	$	5	$	(7	)	$	242,472

Classification on Consolidated Balance Sheets:
Cash equivalents								$	205,817
Short-term investments									34,658
Long-term investments									1,997

Total								$	242,472

December 31, 2009:
Money market funds	$	296,969	$	-	$	-		$	296,969

Classification on Consolidated Balance Sheets:
Cash equivalents								$	296,969

During 2010, 2009 and 2008, we did not recognize any gains or losses on sales of available-for-sale securities.

A summary of our portfolio of available-for-sale debt securities by contractual maturity at December 31, 2010 is presented below:


	December 31, 2010
(In thousands)	Amortized Cost		Fair Value
Less than one year	$	37,162	$	37,157
Greater than one year but less than five years		1,994		1,997

Total	$	39,156	$	39,154

As of December 31, 2010, the unrealized loss on investments included in other comprehensive income, net of estimated taxes, was approximately $1,000. No significant facts or circumstances have arisen to indicate that there has been any deterioration in the creditworthiness of the issuers of these securities. Based on our review of these securities, we believe we had no other-than-temporary impairments on these securities as of December 31, 2010 because we do not intend to sell these securities and it is more likely than not that we will hold these securities until the recovery of their amortized cost basis.

- Definition

This item represents the entire disclosure related to Investments in Certain Debt and Equity Securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets).

+ References+ Details

Foreign Currency Hedging

12 Months Ended

Dec. 31, 2010

Foreign Currency Hedging

Foreign Currency Hedging

10. Foreign Currency Hedging

Our licensees operate in foreign countries which exposes us to market risk associated with foreign currency exchange rate fluctuations between the U.S. dollar and other currencies, primarily the Eurodollar. In order to manage the risk related to changes in foreign currency exchange rates, in January and May 2010 we entered into a series of foreign currency exchange contracts covering the quarters in which our licensees' sales occur through December 2012. Our foreign currency exchange contracts used to hedge royalty revenues based on underlying Eurodollar sales are designated as cash flow hedges.

The following table summarizes the notional amounts, foreign currency exchange rates and fair values of our open foreign currency exchange contracts designated as cash flow hedges at December 31, 2010:


Foreign Currency Exchange Forward Contracts

Currency	Notional Amount (In thousands)		Settlement Price ($ per Eurodollar)		Fair Value (In thousands)			Type
Eurodollar	$	137,179		1.400	$	6,740		Sell Eurodollar
Eurodollar		117,941		1.200		(12,810	)	Sell Eurodollar

Total	$	255,120			$	(6,070	)


Foreign Currency Exchange Option Contracts

Currency	Notional Amount (In thousands)		Strike Price ($ per Eurodollar)		Fair Value (In thousands)			Type
Eurodollar	$	147,957		1.510	$	772		Purchased call option
Eurodollar		129,244		1.315		10,251		Purchased call option

Total	$	277,201			$	11,023

The following table summarizes information about the fair value of our foreign currency exchange contracts on our Consolidated Balance Sheet as of December 31, 2010:


Cash Flow Hedge	Location	Fair Value (In thousands)
Foreign currency exchange contracts, net	Foreign currency hedge-current	$	5,946
Foreign currency exchange contracts, net	Other long-term liabilities		(993	)

		$	4,953

The foreign currency exchange contracts are presented on a net basis on our Consolidated Balance Sheets as we have entered into a netting arrangement with the counterparty. As of December 31, 2010, the unrealized net gain on the effective component of our foreign currency exchange contracts included in other comprehensive income, net of estimated taxes, was $3.2 million. There was no ineffective component of our foreign currency exchange contracts during the year ended December 31, 2010. During the year ended December 31, 2010, we recognized $5.2 million in royalty revenues from foreign currency exchange contracts which settled during the year. Approximately $3.9 million is expected to be reclassified from other comprehensive income to earnings in the next 12 months. We did not have foreign currency exchange contracts prior to January 2010.

Prepaid and Other Current Assets

12 Months Ended

Dec. 31, 2010

Prepaid and Other Current Assets

Prepaid and Other Current Assets

11. Prepaid and Other Current Assets

Prepaid and other current assets as of December 31, 2010 and 2009 consisted of the following:


	December 31,
(In thousands)	2010		2009
Non-recourse Notes issuance costs	$	3,362	$	3,373
2023 Notes issuance costs		-		524
Prepaid taxes		8,307		5,847
Other		445		544

Total	$	12,114	$	10,288

For further information about the Non-recourse Notes and the 2023 Notes, see Note 16, Convertible Notes and Non-recourse Notes.

Property and Equipment

12 Months Ended

Dec. 31, 2010

Property and Equipment

Property and Equipment

12. Property and Equipment

Property and equipment as of December 31, 2010 and 2009 consisted of the following:


	December 31,
(In thousands)	2010			2009
Leasehold improvements	$	112		$	112
Computer and office equipment		8,989			8,989
Furniture and fixtures		38			38

Gross property and equipment		9,139			9,139
Less accumulated depreciation and amortization		(9,059	)		(8,968	)

Property and equipment, net	$	80		$	171

Other Assets

12 Months Ended

Dec. 31, 2010

Other Assets

Other Assets

13. Other Assets

Other assets as of December 31, 2010 and 2009 consisted of the following:


	December 31,
(In thousands)	2010		2009
2012 Notes issuance costs	$	683	$	2,202
2015 Notes issuance costs		4,226		-
Non-recourse Notes issuance costs		2,397		9,624
Other		-		182

Total	$	7,306	$	12,008

For further information about the 2012 Notes, the 2015 Notes and the Non-recourse Notes, see Note 16, Convertible Notes and Non-Recourse Notes.

Other Accrued Liabilities

12 Months Ended

Dec. 31, 2010

Other Accrued Liabilities

Other Accrued Liabilities

14. Other Accrued Liabilities

Other accrued liabilities as of December 31, 2010 and 2009 consisted of the following:


	December 31,
(In thousands)	2010		2009
Consulting and services	$	2,187	$	2,154
Compensation		349		2,206
Interest		2,794		8,812
Dividend payable		20		386
Income taxes		-		81
Other		141		57

Total	$	5,491	$	13,696

Commitments and Contingencies

12 Months Ended

Dec. 31, 2010

Commitments and Contingencies

Commitments and Contingencies

15. Commitments and Contingencies

Operating Leases

Current Facilities and Equipment

We currently occupy a leased facility in Incline Village, Nevada, with a lease term through May 2012. We also have leased certain office equipment under operating leases. Rental expense under these arrangements totaled $0.1 million, $0.2 million and $7.0 million for the years ended December 31, 2010, 2009 and 2008, respectively, of which approximately $6.8 million was classified as discontinued operations during the year ended December 31, 2008.

As of December 31, 2010, the future minimum operating lease payments are:


(Dollars in thousands)
2011	$	184
2012		80
2013		5

Total	$	269

Former Facilities

In July 2006, we entered into two leases (the Leases) and a sublease (the Sublease) for the facilities in Redwood City, California, which formerly served as our headquarters. Pursuant to amendments to the Leases entered into in connection with the Spin-Off (the Lease Amendments), Facet was added as a co-tenant under the Leases. As a co-tenant, Facet is bound by all of the terms and conditions of the Leases. PDL and Facet are jointly and severally liable for all obligations under the Leases, including the payment of rental obligations. However, we also entered into a Co-Tenancy Agreement with Facet in connection with the Spin-Off and the Lease Amendments pursuant to which we assigned to Facet all rights under the Leases, including, but not limited to, the right to amend the leases, extend the lease term or terminate the leases and Facet assumed all of our obligations under the Leases. In addition, we assigned the Sublease to Facet. In the event that Facet amends the Leases to extend beyond the original expiration date, PDL shall have no liability for any obligations that accrue under the Leases with respect to the period after the original expiration date. Pursuant to the Co-Tenancy Agreement, we also relinquished any right or option to regain possession, use or occupancy of these facilities. In April 2010, Abbott acquired Facet and later renamed the company Abbott Biotherapeutics Corp.

Facet agreed to indemnify us for all matters associated with the Leases attributable to the period after the Spin-Off. Should Facet default under its lease obligations, we would be held liable by the landlord as a co-tenant and, thus, we have in substance guaranteed the payments under the lease agreements for the Redwood City facilities. As of December 31, 2010, the total lease payments for the duration of the guarantee, which runs through December 2021, are approximately $121.0 million. We would also be responsible for lease-related payments including utilities, property taxes and common area maintenance which may be as much as the actual lease payments. As of December 31, 2010 and December 31, 2009, we had a liability of $10.7 million on our Consolidated Balance Sheets related to the estimated fair value of this guarantee.

Contingencies

As permitted under Delaware law, pursuant to the terms of our bylaws, we have agreed to indemnify our directors and officers and, pursuant to the terms of indemnification agreements we have entered into, we have agreed to indemnify our executive officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving as an officer or director of the Company. While the maximum amount of potential future indemnification is unlimited, we have a director and officer insurance policy that limits our exposure and may enable us to recover a portion of any future amounts paid. We believe the fair value of these indemnification agreements and bylaw provisions is minimal and, accordingly, we have not recorded the fair value liability associated with these agreements as of December 31, 2010 and 2009.

Convertible Notes and Non-recourse Notes

12 Months Ended

Dec. 31, 2010

Convertible Notes and Non-recourse Notes

Convertible Notes and Non-recourse Notes

16. Convertible Notes and Non-recourse Notes

2012 Notes

In February 2005, we issued 2.00% Convertible Senior Notes due February 15, 2012 with a principal amount of $250.0 million (2012 Notes). The 2012 Notes are convertible at any time, at the holders' option, into our common stock at a conversion rate of 140.571 shares of common stock per $1,000 principal amount of the 2012 Notes or a conversion price of approximately $7.11 per share, as adjusted for the cash dividend paid on October 1, 2010 and subject to further adjustment in certain events. Interest on the 2012 Notes is payable semiannually in arrears on February 15 and August 15 of each year. The 2012 Notes are our senior unsecured debt and are redeemable by us in whole or in part on or after February 19, 2010 at 100.57% of principal amount if redeemed between February 19, 2010 and February 14, 2011 and at 100.29% of principal amount if redeemed between February 15, 2011 and the maturity date. The 2012 Notes are not puttable other than in the context of a fundamental change resulting in the reclassification, conversion, exchange or cancellation of our common stock. Such repurchase event or fundamental change is generally defined to include a merger involving PDL, an acquisition of a majority of PDL's outstanding common stock and a change of a majority of PDL's board of directors without the approval of the board of directors.

In November 2010, we exchanged $92.0 million in aggregate principal of the 2012 Notes for new 2015 Notes, see "2015 Notes" below. In 2010, we repurchased an aggregate of $2.5 million face value of our 2012 Notes at a discount of 0.5% to face value in a privately negotiated transaction with an institutional holder for aggregate consideration of $2.5 million in cash, plus accrued but unpaid interest. Also in 2010, certain holders of the 2012 Notes converted an aggregate of $10,000 face value of our 2010 Notes into 1,283 shares of common stock.

In 2009, the Company repurchased $5.0 million face value of our 2012 Notes, at a discount of 10.75% from face value in a privately negotiated transaction with an institutional holder, for aggregate consideration of $4.5 million in cash, plus accrued but unpaid interest. Also in 2009, the Company repurchased an aggregate of $17.0 million face value of our 2012 Notes, at a discount of 3.0% from face value in privately negotiated transactions with institutional holders, for aggregate consideration of $16.5 million in cash, plus accrued but unpaid interest. The Company recorded a net gain of $0.8 million from the purchase of the debt.

As of December 31, 2010, the remaining gross issuance costs associated with the 2012 Notes totaled $4.2 million. These costs are included in Other assets on the Consolidated Balance Sheets and are being amortized to interest expense over the term of the debt, or approximately seven years.

2015 Notes

On November 1, 2010, we completed an exchange of $92.0 million in aggregate principal of the 2012 Notes in separate, privately negotiated transactions with the note holders. Pursuant to the exchange transactions, the note holders received $92.0 million in aggregate principal of the new 2.875% Convertible Senior Notes due February 15, 2015 (the 2015 Notes). As a result of the exchange transaction, the Company recorded a net gain of $1.1 million. As part of the transaction, the Company also placed an additional $88.0 million in aggregate principal of the 2015 Notes. The 2015 Notes are due February 15, 2015 and are convertible at any time, at the holders' option, into our common stock at a conversion price of 140.571 shares of common stock per $1,000 principal amount of the 2015 Notes or $7.11 per share of common stock and subject to further adjustment in certain events including dividend payments. Interest on the 2015 Notes is payable semiannually in arrears on February 15 and August 15 of each year. The 2015 Notes are senior unsecured debt and are redeemable by us in whole or in part on or after August 15, 2014 at 100% of principal amount. The 2015 Notes are not puttable by the note holders other than in the context of a fundamental change resulting in the reclassification, conversion, exchange or cancellation of our common stock. Such repurchase event or fundamental change is generally defined to include a merger involving PDL, an acquisition of a majority of PDL's outstanding common stock and a change of a majority of PDL's board of directors without the approval of the board of directors. The issuance of the 2015 Notes was not registered under the Securities Act of 1933, as amended, in reliance on exemption from registration thereunder. As of December 31, 2010, $180.0 million in aggregate principal of the 2015 Notes was outstanding.

As of December 31, 2010, the remaining gross issuance costs associated with the 2015 Notes totaled $4.4 million. These costs are included in Other assets on the Consolidated Balance Sheets and are being amortized to interest expense over the term of the debt, or approximately four years. As of December 31, 2010, the discount on the 2015 Notes of $3.2 million is being amortized to interest expense over the term of the debt at an effective interest rate of 3.3%.

2023 Notes Retirement

In July 2003, we issued 2.75% Convertible Subordinated Notes due August 16, 2023 with a principal amount of $250.0 million (2023 Notes). In 2009, the Company repurchased an aggregate of $50.0 million face value of our 2023 Notes, at a discount of 2.0% from face value in privately negotiated transactions with institutional holders, for aggregate consideration of $49.0 million in cash, plus accrued but unpaid interest. The Company recorded a net gain of $0.7 million from the purchase of the debt. In 2010, we repurchased an aggregate of $84.2 million face value of our 2023 Notes, at a premium of 19% to face value in privately negotiated transactions with institutional holders, for aggregate consideration of $100.4 million in cash, plus accrued but unpaid interest. Also in 2010, certain holders of the 2023 Notes converted an aggregate of $61.6 million face value of our 2023 Notes into 11.1 million shares of common stock under incentives to induce conversion. We recorded a loss on the induced conversion totaling $2.4 million which comprised $1.2 million for the fair value of 0.2 million of additional shares issued (or three shares per $1,000 principal amount of 2023 Notes) to those note holders and $1.2 million of transaction costs. In August 2010, we announced our intent to redeem the balance of the 2023 Notes of $54.3 million in September 2010. Based on such notification to the holders of the 2023 Notes, an aggregate of $50.1 million face value of our 2023 Notes was converted to 8.9 million shares of common stock, plus accrued but unpaid interest, and the remaining $4.2 million face value of our 2023 Notes was redeemed for cash, plus accrued but unpaid interest. As of December 31, 2010, the 2023 Notes were fully retired.

Non-recourse Notes

In November 2009, we completed a $300 million securitization transaction in which we monetized 60% of the net present value of the estimated five year royalties from sales of Genentech products (the Genentech Royalties) including Avastin^®, Herceptin^®, Lucentis^®, Xolair^® and future products, if any, under which Genentech may take a license under our related agreements with Genentech. The QHP PhaRMA Senior Secured Notes due 2015 (the Non-recourse Notes) bear interest at 10.25% per annum and were issued in a non-registered offering by QHP, a Delaware limited liability company, and a newly formed, wholly-owned subsidiary of PDL. Concurrent with the securitization transaction and pursuant to the terms of a purchase and sale agreement, we sold, transferred, conveyed, assigned, contributed and granted to QHP, certain rights under our non-exclusive license agreements with Genentech including the right to receive the Genentech Royalties in exchange for QHP's proceeds from the Non-recourse Notes issuance. Once all obligations on the Non-recourse Notes have been paid in full, including all other sums payable under the indenture, the indenture shall cease to be of further effect and all of the security interests in the collateral shall terminate, including the pledge by PDL to the trustee of its equity interest in QHP. At such point, there will be no further restrictions on the Genentech Royalties and PDL shall be free to either keep them in QHP, transfer them back to PDL or to further dispose or monetize them.

The Genentech Royalties and other payments, if any, that QHP will be entitled to receive under the agreements with Genentech, together with any funds made available from certain accounts of QHP, will be the sole source of payment of principal and interest on the Non-recourse Notes, which will be secured by a continuing security interest granted by QHP in its rights to receive payments under such agreements and all of its other assets and a pledge by PDL of its equity ownership interest in QHP. The Non-recourse Notes may be redeemed at any time prior to maturity, in whole or in part, at the option of QHP at a make-whole redemption price.

As of December 31, 2010, the remaining gross issuance costs associated with the Non-recourse Notes totaled $14.3 million. These costs are included in Other assets on the Consolidated Balance Sheets and are being amortized to interest expense using the effective interest method over the estimated repayment period, or approximately three years.

The following table summarizes the activity of the 2012 Notes, the 2015 Notes, the 2023 Notes and the Non-recourse Notes discussed above, as well as the balance and fair value at December 31, 2010:


(In thousands)	2012 Notes			2015 Notes			2023 Notes			Non-recourse Notes			Total
Balance at December 31, 2009	$	228,000		$	-		$	199,998		$	300,000		$	727,998
Issuance		-			87,974			-			-			87,974
Payment		-			-			-			(95,730	)		(95,730	)
Repurchase		(2,500	)		-			(84,150	)		-			(86,650	)
Conversion to common stock		(10	)		-			(61,579	)		-			(61,589	)
2012 Note exchange		(92,026	)		92,026			-			-			-
2023 Note retirement or conversion		-			-			(54,269	)		-			(54,269	)
Discount		-			(3,036	)		-			-			(3,036	)

Balance at December 31, 2010	$	133,464		$	176,964		$	-		$	204,270		$	514,698

Fair value⁽¹⁾	$	133,631		$	190,800		$	-		$	208,356		$	532,787

(1)	As of December 31, 2010, the fair value of the remaining payments under our convertible notes and Non-recourse Notes was estimated based on the trading value of our notes then outstanding.

As of December 31, 2010, the future minimum principal payments under the 2012 Notes, the 2015 Notes and the Non-recourse Notes were as follows:


(In thousands)	2012 Notes		2015 Notes		Non-recourse Notes⁽¹⁾		Total
2011	$	-	$	-	$	119,247	$	119,247
2012		133,464		-		85,023		218,487
2013		-		-		-		-
2014		-		-		-		-
2015		-		180,000		-		180,000

Total	$	133,464	$	180,000	$	204,270	$	517,734

(1)	Repayment of the Non-recourse Notes is based on anticipated future royalties to be received from Genentech and the anticipated final payment date is September 2012.

Other Long-Term Liabilities

12 Months Ended

Dec. 31, 2010

Other Long-Term Liabilities

Other Long-Term Liabilities

17. Other Long-Term Liabilities

Other long-term liabilities as of December 31, 2010 and 2009 consisted of the following:


	December 31,
(In thousands)	2010		2009
Accrued lease liability	$	10,700	$	10,700
Accrued legal settlement		27,500		-
Uncertain tax position		12,213		-
Foreign currency hedge		993		-

Total	$	51,406	$	10,700

In connection with the Spin-Off, we entered into amendments to the leases for our former facilities in Redwood City, California, under which Facet was added as a co-tenant under the leases, and a Co-Tenancy Agreement, under which Facet agreed to indemnify us for all matters related to the leases attributable to the period after the Spin-Off date. Should Facet default under its lease obligations, we would be held liable by the landlord as a co-tenant and, thus, we have in substance guaranteed the payments under the lease agreements for the Redwood City facilities. As of December 31, 2010, the total lease payments for the duration of the guarantee, which runs through December 2021, are approximately $121.0 million. We would also be responsible for lease-related costs including utilities, property taxes and common area maintenance which may be as much as the actual lease payments if Facet were to default. In April 2010, Abbott acquired Facet and later renamed the company Abbott Biotherapeutics Corp.

As of December 31, 2010 and 2009, we had a liability of $10.7 million on our Consolidated Balance Sheets for the estimated fair value of this guarantee. We prepared a discounted, probability-weighted cash flow analysis to calculate the estimated fair value of the lease guarantee as of the Spin-Off. We were required to make assumptions regarding the probability of Facet's default on the lease payment, the likelihood of a sublease being executed and the times at which these events could occur. These assumptions are based on information that we received from real estate brokers and the current economic conditions, as well as expectations of future economic conditions. The fair value of this lease guarantee was charged to additional paid-in capital upon the Spin-Off and any future adjustments to the carrying value of the obligation will be recorded to additional paid-in capital. On a quarterly basis, we evaluate the underlying cash flow analysis assumptions and update them if necessary.

Revenues by Geographic Area and Significant Customers

12 Months Ended

Dec. 31, 2010

Revenues by Geographic Area and Significant Customers

Revenues by Geographic Area and Significant Customers

18. Revenues by Geographic Area and Significant Customers

The following table summarizes revenues from licensees who individually accounted for 10% or more of our total revenues from continuing operations:


	Year Ended December 31,
	2010			2009			2008
Licensees
Genentech, Inc. (Genentech)		86	%		71	%		73	%
MedImmune, Inc. (MedImmune)		0	%		13	%		14	%
Elan Corporation, Plc (Elan)		10	%		9	%		7	%

Royalty revenues and license and other revenues by geographic area are based on the country of domicile of the counterparty to the agreement. The following table summarizes revenues from continuing operations by geographic area:


	Year Ended December 31,
(In thousands)	2010		2009		2008
United States	$	130,070	$	154,706	$	146,380
Europe		213,677		160,743		146,883
Other		1,228		2,735		933

Total revenues	$	344,975	$	318,184	$	294,196

Income Taxes

12 Months Ended

Dec. 31, 2010

Income Taxes

Income Taxes

19. Income Taxes

The provision for income taxes for the years ended December 31, 2010, 2009 and 2008 consisted of the following:


	Year Ended December 31,
(In thousands)	2010			2009			2008
Current income tax expense (benefit) for continuing operations
Federal	$	91,325		$	87,402		$	17,105
State		11			(573	)		10,086

		91,336			86,829			27,191
Deferred income tax (benefit) for continuing operations—Federal		(32,840	)		3,796			(22,177	)

Income tax expense for continuing operations		58,496			90,625			5,014
Income tax expense for discontinued operations		-			-			7,249

Total provision	$	58,496		$	90,625		$	12,263

A reconciliation of the income tax provision computed using the U.S. statutory federal income tax rate compared to the income tax provision for continuing operations included in the Consolidated Statements of Operations is as follows:


	Year Ended December 31,
(In thousands)	2010		2009			2008
Tax at U.S. statutory rate on income before income taxes and discontinued operations	$	52,630	$	98,100		$	85,193
Change in valuation allowance		296		4,891			(103,844	)
Federal alternative minimum tax		-		-			17,105
State taxes		11		(573	)		6,556
Foreign taxes		-		-			4
Net operating loss re-establishment		-		(9,174	)		-
Non-deductible loss on retirement or conversion of convertible notes		4,960		-			-
Other		599		(2,619	)		-

Total	$	58,496	$	90,625		$	5,014

Deferred tax assets and liabilities are determined based on the differences between financial reporting and income tax bases of assets and liabilities, as well as net operating loss carryforwards and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse. The significant components of our net deferred tax assets and liabilities are as follows:


	December 31,
(In thousands)	2010			2009
Deferred tax assets:
Net operating loss carryforwards	$	7,930		$	8,552
Research and other tax credits		5,743			5,743
Intangible assets		8,952			6,290
Stock-based compensation		339			675
Reserves and accruals		32,541			608
Deferred revenue		599			525
Other		506			439

Total deferred tax assets		56,610			22,832
Valuation allowance		(10,930	)		(10,634	)

Total deferred tax assets		45,680			12,198

Deferred tax liabilities:
Deferred gain on repurchase of convertible notes		(1,079	)		(531	)
Unrealized gain on foreign currency hedge contracts		(2,079	)		-

Total deferred tax liabilities		(3,158	)		(531	)

Net deferred tax assets	$	42,522		$	11,667

As of December 31, 2010 and 2009, we had federal net operating loss carryforwards of $44.7 million and $46.5 million, respectively. As of December 31, 2010 and December 31, 2009, we had federal and California state research and other tax credit carryforwards of zero and $22.7 million, respectively. The federal net operating loss carryforwards will expire in the year 2023, if not used. In addition, as we moved our entire operations outside of California in 2008, it is unlikely that we will realize any future benefit from the state credit carry forwards. The net operating loss carryforwards which resulted from exercises of stock options were not recorded on the Consolidated Balance Sheet. Instead, such unrecognized deferred tax benefits were accounted for as a credit to additional paid in capital and were realized through a reduction in taxes payable.

Use of the federal and state net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the "change in ownership" provisions of the Internal Revenue Code of 1986. The annual limitation may result in the expiration of net operating losses and credits before they are used. We have an annual limitation on the use of our federal operating losses of $1.8 million for each of the years ended December 31, 2011 to 2022, and $1.3 million for the year ended December 31, 2023. As of December 31, 2010, we estimate that at least $22.0 million of the $44.7 million of federal net operating loss carryforwards and at least $2.8 million of the $22.7 million of federal tax credit carryforwards will expire prior to their use due to change of ownership provisions.

During the year ended December 31, 2010, we recorded a $55,000 net decrease in our liability associated with uncertain tax positions. A reconciliation of our unrecognized tax benefits, excluding accrued interest and penalties, for 2010 and 2009 is as follows:


	December 31,
(In thousands)	2010	2009
Balance at the beginning of the year	$ 23,116	$	23,922
Decreases related to prior year tax positions	-		(324	)
Expiration of statute of limitations for the assessment of taxes	(55)		(482	)

Balance at the end of the year	$ 23,061	$	23,116

The future impact of the unrecognized tax benefit of $23.1 million, if recognized, is as follows: $12.2 million would affect the effective tax rate and $10.9 million would result in adjustments to deferred tax assets and corresponding adjustments to the valuation allowance.

Estimated interest and penalties associated with unrecognized tax benefits reduced income tax expense in the Consolidated Statements of Operations by $26,000, $0.4 million and $0.1 million during the years ended December 31, 2010, 2009 and 2008 respectively. Accrued interest and penalties associated with the underpayment of income taxes were zero and $26,000 as of December 31, 2010 and 2009, respectively. In general, our income tax returns are subject to examination by U.S. federal, state and various local tax authorities for tax years 1992 forward. We do not anticipate any additional unrecognized tax benefits in the next 12 months that would result in a material change to our financial position.

Discontinued Operations

12 Months Ended

Dec. 31, 2010

Discontinued Operations

Discontinued Operations

20. Discontinued Operations

Biotechnology and Manufacturing Operations

In December 2008, we spun-off our biotechnology operations to Facet and, in March 2008, we sold our manufacturing operations to Genmab. We did not have discontinued operations for the years ended December 31, 2010 and 2009. For further information, see Notes 1 and 5, Organization and Business and Spin-Off of Facet, respectively.

The significant components of our former biotechnology and manufacturing operations for the year ended December 31, 2008, presented as discontinued operations, were as follows:


(In thousands)	Year Ended December 31, 2008
Net revenues⁽¹⁾	$	27,770
Total costs and expenses		(150,234	)
Income tax benefit		12,964

Loss from operations⁽²⁾	$	(109,500	)

(1)

Net revenues include revenues recognized under collaboration agreements with Biogen Idec, Inc. (Biogen Idec), which was effective starting in September 2005 and Bristol-Myers Squibb Company (BMS), which was effective starting in September 2008. Under each of the collaboration agreements, we determined that all elements should be accounted for as a single unit of accounting. As we had continuing obligations under the collaboration agreements, we recorded the upfront license fees as deferred revenue and we were recognizing the amounts over the respective estimated development periods. The upfront license fees from Biogen Idec and BMS were $40 million and $30 million, respectively. Under the agreement with Biogen Idec and BMS, we recognized $18.7 million and $5.8 million, respectively, during the year ended December 31, 2008.

(2)

Included within the loss from operations is a pre-tax gain of $49.7 million upon the close of the sale of our former Manufacturing Assets to Genmab in March 2008. In addition, loss from operations included $3.8 million of asset impairment charges for the year ended December 31, 2008 associated with the cost of certain research equipment and technologies that were expected to have no future useful life and certain information technology projects that were terminated and have no future benefit to us. Also included in loss from operations for the year ended December 31, 2008 are restructuring charges of approximately $10.1 million. For further information, see Note 7, Fiscal 2008 Restructuring Charges.

Commercial Operation

In 2006, we divested four off-branded products that we had acquired in connection with the ESP Pharma Inc. (ESP) business combination in March 2005. In March 2008, we closed the sales of the Commercial Assets, which assets constituted the remaining commercial assets from the ESP acquisition. We sold the rights to IV Busulfex^®, including trademarks, patents, intellectual property and related assets, to Otsuka Pharmaceutical Co., Ltd. (Otsuka) for $200 million in cash and an additional $1.4 million for the IV Busulfex inventories. We recognized a pre-tax loss of $64.6 million in connection with the sale of the Commercial Assets during the first quarter of 2008. This loss consisted of the total upfront consideration from the sales of the Commercial Assets of $280.4 million plus the write-off of $10.6 million in net liabilities, less the book values of intangible assets and inventories of $268.2 million, the write-off of goodwill of $81.7 million and transaction fees of $5.7 million.

Also in March 2008, we also sold the rights to Cardene^®, Retavase^® and ularitide (collectively, the Cardiovascular Assets), including all trademarks, patents, intellectual property, inventories and related assets, to EKR Therapeutics, Inc. (EKR). In consideration for the Cardiovascular Assets, we received upfront proceeds of $85.0 million, $6.0 million of which was placed in an escrow account for a period of approximately one year to cover certain product return related costs under the purchase agreement. In addition, the purchase agreement included contingent consideration of up to $85.0 million in potential future milestone payments as well as potential future royalties on certain Cardene and ularitide product sales. In the third quarter of 2008, we earned and received one of these milestone payments, a $25.0 million milestone payment related to approval by the FDA for a pre-mixed bag formulation of Cardene.

In connection with the sales of the Commercial Assets and the Cardiovascular Assets, we entered into agreements with both Otsuka and EKR to provide certain transition services. We provided these transition services to Otsuka and EKR through 2008 and have substantially completed such obligations under the agreements. Any fees or cost reimbursements received for transition services have been presented as discontinued operations.

In connection with the Spin-Off, we assigned all rights and obligations under the EKR sale agreement to Facet. Therefore, we will not receive any potential future milestone payments or royalties under the agreement with EKR.

The significant components of our commercial operation for the year ended December 31, 2008, presented as discontinued operations, were as follows:


(In thousands)	Year Ended December 31, 2008
Net revenues⁽¹⁾	$	66,467
Total costs and expenses		(106,687	)
Income tax expense		(20,213	)

Loss from operations⁽²⁾	$	(60,433	)

(1)

In August 2008, EKR received approval from the FDA for a pre-mixed bag formulation of Cardene. Under the terms of the purchase agreement with EKR, we received a $25.0 million milestone payment as a result of this approval; such amount is included in net revenues. In addition, we recorded favorable changes in estimates to revenues and accounts receivable reserves, which resulted in an increase to net revenues totaling approximately $2.1 million.

(2)	Included within loss from operations is $2.5 million that we recognized in connection with certain contingent Retavase manufacturing costs obligations for which we are required to reimburse EKR.

Also included in total costs and expenses for the year ended December 31, 2008 are restructuring charges of approximately $1.8 million. For further information, see Note 7, Fiscal 2008 Restructuring Charges.

Legal Proceedings	12 Months Ended
Legal Proceedings	Dec. 31, 2010
Legal Proceedings
Legal Proceedings	21. Legal Proceedings *Resolution of Challenges against the Queen et al. Patents in the United States and Europe* MedImmune Settlement In December 2008, MedImmune LLC (MedImmune) filed a lawsuit against us in the United States District Court for the Northern District of California (the U.S. District Court). MedImmune's complaint sought a declaratory judgment that the U.S. patents are invalid and/or not infringed by its Synagis^® and motavizumab products and, that therefore, MedImmune owes no royalties under its license agreement with us. MedImmune's complaint further alleged (i) that if our patents are valid and infringed by Synagis and/or motavizumab, MedImmune was entitled to a lower royalty rate on its sales of infringing products under the most favored licensee clause in our agreement, (ii) breach of contract, (iii) breach of the covenant of good faith and fair dealing and (iv) fraud. We answered MedImmune's complaint and alleged in our pleadings certain counterclaims, including that MedImmune breached the license agreement by (i) failing to pay all royalties due to us from the sale of Synagis, including sales by and through Abbott, whom we believe is MedImmune's sublicensee with respect to its Synagis franchise outside the United States and (ii) by demanding that we consent to conditions that are commercially unreasonable and contractually insupportable in order to permit an audit of sales and revenues associated with Synagis by an independent accountant, as required under the license agreement. Our pleadings further alleged that, as a result of MedImmune's breach of the license agreement and the Company's related cancelation thereof, MedImmune is infringing our U.S. Patent No. 6,180,370 (the '370 Patent) by making, using, selling, offering for sale and/or importing Synagis into the United States and by having Synagis made, used, sold, offered for sale and/or imported in the United States, and certain affirmative defenses against each of MedImmune's claims. On January 7, 2011, the U.S. District Court ruled on summary judgment that (i) the sole patent claim asserted in the litigation to support our allegation that MedImmune's product Synagis infringes our patent rights, claim 28 of the '370 Patent, is invalid as anticipated by a prior art patent; (ii) MedImmune did not breach its obligations under its license agreement with PDL by failing to pay royalties on sales of Synagis by its exclusive ex-US distributor, Abbott; (iii) MedImmune is not entitled to recoup from us royalties on sales of Synagis that MedImmune paid on European patent rights that were ultimately revoked; and (iv) issues of fact require a jury trial to decide our claim that MedImmune breached the license agreement by requiring that we consent to commercially unreasonable and contractually insupportable conditions to permit an independent audit of Synagis sales and revenue. On February 10, 2011, we entered into a definitive settlement agreement with MedImmune resolving all legal disputes with them, including those relating to MedImmune's product Synagis and PDL's patents known as the Queen et al. patents. Under the settlement agreement, PDL paid MedImmune $65.0 million on February 15, 2011, and will pay an additional $27.5 million by February 10, 2012, for a total of $92.5 million. No further payments will be owed by MedImmune to PDL under its license to the Queen et al. patents as a result of past or future Synagis sales and Medlmmune will cease any support, financial or otherwise, of any party involved in the appeal proceeding before the European Patent Office (EPO) relating to the opposition against our European Patent No. 0 451 216B (the '216B Patent) including the opposition owned by BioTransplant, Incorporated. (BioTransplant). Settlement with UCB On February 2, 2011, we reached a settlement with UCB Pharma S.A. (UCB). Under the settlement agreement, PDL provided UCB a covenant not to sue UCB for any royalties regarding UCB's Cimzia^® product under the Queen et al. patents in return for a lump sum payment of $10.0 million and termination of pending patent interference proceedings before the U.S. Patent and Trademark office (PTO) involving our U.S. Patent No. 5,585,089 patent (the '089 Patent) and the '370 Patent in PDL's favor. UCB also agreed to formally withdraw its opposition appeal challenging the validity of the '216B Patent. Settlement with Novartis On February 25, 2011, we reached a settlement with Novartis AG (Novartis). Under the settlement agreement, PDL agreed to dismiss its claims against Novartis in its action in Nevada state court, which also includes Genentech, Inc. (Genentech) and F. Hoffman-La Roche Ltd (Roche) as defendants. Novartis agreed to withdraw its opposition appeal in the EPO challenging the validity of the '216B Patent. The settlement does not affect our claims against Genentech and Roche in the Nevada state court action. Under the settlement agreement with Novartis, we will pay Novartis certain amounts based on a net of their sales of Lucentis, made by Novartis during the calendar year 2011 and beyond. Termination of European Opposition to '216B Patent Pursuant to our settlements with UCB, MedImmune and Novartis, and as a result of our acquisition of BioTransplant and subsequent withdrawal of BioTransplant's appeal, all of the active appellants in the EPO opposition have formally withdrawn their participation in the appeal proceeding. Accordingly, the EPO has cancelled the appeal proceeding and terminated the opposition proceeding in its entirety, with the result that the 2007 EPO decision upholding the claims of our '216B Patent as valid is now the final decision of the EPO. In the year ending December 31, 2010, approximately 35% of our revenues were derived from sales of products that were made in Europe and sold outside of the United States. *Genentech / Roche Matter* Communications with Genentech regarding European SPCs In August 2010, we received a letter from Genentech sent on behalf of the Roche and Novartis asserting that Avastin^®, Herceptin^®, Lucentis^® and Xolair^®, (the Genentech Products) do not infringe the supplementary protection certificates (SPCs) granted to PDL by various countries in Europe for each of the Genentech Products and seeking a response from PDL to these assertions. Genentech did not state what actions, if any, it intends to take with respect to its assertions. PDL's SPCs were granted by the relevant national patent offices in Europe and specifically cover the Genentech Products. The SPCs covering the Genentech Products effectively extend our European patent protection for the '216B Patent generally until December 2014, except that the SPCs for Herceptin will generally expire in July 2014. Genentech's letter does not suggest that the Genentech Products do not infringe PDL's U.S. patents to the extent that such Genentech Products are made, used or sold in the United States (U.S.-based Sales). Genentech's quarterly royalty payments received in August and November of 2010 and February of 2011 after receipt of the letter included royalties generated on all worldwide sales of the Genentech Products. If Genentech's assertions were true, then under the terms of our license agreements with Genentech, it would not owe us royalties on sales of the Genentech Products that are both manufactured and sold outside of the United States. Royalties on sale of the Genentech Products that are made and sold outside of the United States (ex-U.S.-based Manufacturing and Sales) accounted for approximately 35% of our royalty revenues for the year ended December 31, 2010. Based on announcements by Roche regarding moving more manufacturing outside of the United States, this amount will increase in the future. We believe that the SPCs are enforceable against the Genentech Products, that Genentech's letter violates the terms of the 2003 settlement agreement and that Genentech owes us royalties on sales of the Genentech Products on a worldwide basis. We intend to vigorously assert our SPC-based patent rights. Nevada Litigation with Genentech, Roche and Novartis in Nevada State Court In August 2010, we filed a complaint in the Second Judicial District of Nevada, Washoe County, naming Genentech, Roche and Novartis as defendants. We intend to enforce our rights under our 2003 settlement agreement with Genentech and are seeking an order from the court declaring that Genentech is obligated to pay royalties to us on ex-U.S.-based Manufacturing and Sales of the Genentech Products. The 2003 settlement agreement was entered into as part of a definitive agreement resolving intellectual property disputes between the two companies at that time. The agreement limits Genentech's ability to challenge infringement of our patent rights and waives Genentech's right to challenge the validity of our patent rights. Certain breaches of the 2003 settlement agreement as alleged by our complaint require Genentech to pay us liquidated and other damages of potentially greater than one billion dollars. This amount includes a retroactive royalty rate of 3.75% on past U.S.-based Sales of the Genentech Products and interest, among other items. We may also be entitled to either terminate our license agreements with Genentech or be paid a flat royalty of 3.75% on future U.S.-based Sales of the Genentech Products. On February 25, 2011, we reached a settlement with Novartis under which, among other things, PDL agreed to dismiss its claims against Novartis in its action in Nevada state court against Genentech, Roche and Novartis. Genentech and Roche continue to be parties to the Nevada suit. The outcome of this litigation is uncertain and we may not be successful in our allegations. *Settlement with Alexion Pharmaceuticals, Inc.* In March 2007, after the FDA's market approval of Alexion Pharmaceuticals, Inc.'s (Alexion) Soliris^® humanized antibody product, we filed a lawsuit against Alexion in the United States District Court for the District of Delaware for infringement of certain claims of United States Patent Number 5,693,761, United States Patent Number 5,693,762 and the '370 Patent (collectively, the Patents-in-Suit), which are three of our Queen et al. patents. We sought monetary damages and other relief. In June 2007, Alexion filed an answer denying that its Soliris product infringes the Patents-in-Suit, asserting certain defenses and counterclaiming for non-infringement and invalidity, and thereafter amended its answer to include a defense of unenforceability. In July 2008, the District Court issued a claim construction opinion. On December 31, 2008, we and Alexion entered into a definitive license agreement and settlement agreement. Under the terms of the agreements, we granted Alexion a license under certain claims in our Queen et al. patents and provided Alexion a covenant not to sue in respect of other claims in our Queen et al. patents, thus permitting Alexion to commercialize Soliris for all indications under our Queen et al. patents. In consideration of this license, Alexion agreed to pay us $25.0 million, of which Alexion paid $12.5 million in January 2009 and another $12.5 million was paid in May 2009.

Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2010

Quarterly Financial Data (Unaudited)

Quarterly Financial Data (Unaudited)

Quarterly Financial Data (Unaudited)


	2010 Quarter Ended
(In thousands, except per share data)	December 31			September 30		June 30		March 31
Revenues	$	76,129		$	86,442	$	120,343	$	62,061
Net income	$	(24,460	)	$	40,189	$	50,138	$	26,007
Net income per basic share	$	(0.18	)	$	0.32	$	0.42	$	0.22
Net income per diluted share	$	(0.18	)	$	0.24	$	0.30	$	0.15

	2009 Quarter Ended
(In thousands, except per share data)	December 31			September 30		June 30		March 31
Revenues	$	58,252		$	71,446	$	125,864	$	62,622
Net income	$	28,560		$	46,406	$	77,237	$	37,457
Net income per basic share	$	0.24		$	0.39	$	0.65	$	0.31
Net income per diluted share	$	0.17		$	0.29	$	0.47	$	0.23

- Definition

This element can be used to disclose the entire quarterly financial data disclosure in the annual financial statements as a single block of text. The disclosure includes a tabular presentation of financial information for each fiscal quarter for the current and previous year, including revenues, gross profit, income (loss) before extraordinary items and cumulative effect of a change in accounting principle and earnings per share data. It also includes an indication if the information in the note is unaudited, comments on the aggregate effect of year-end adjustments, and an explanation of matters or transactions that affect comparability or are pertinent to an understanding of the information furnished. Alternatively, the details of this disclosure can be reported using the elements in this group, or by using other taxonomy elements and applying the appropriate quarterly date and period contexts when creating an instance document. For example, the element for "Interest and Dividend Income, Operating" may be used by financial institutions from the Statement of Income, applying the appropriate quarterly date and period context when creating an instance document.

+ References+ Details

Valuation and Qualifying Accounts and Reserves

12 Months Ended

Dec. 31, 2010

Valuation and Qualifying Accounts and Reserves

Valuation and Qualifying Accounts and Reserves

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


(In thousands)	Balance at Beginning of Year		Charged to Costs and Expenses		Deductions⁽¹⁾			Charged to Other Accounts			Balance at End of Year
Year ended December 31, 2010:
Allowances for accounts receivable	$	-	$	-	$	-		$	-		$	-

Year ended December 31, 2009:
Allowances for accounts receivable	$	-	$	-	$	-		$	-		$	-

Year ended December 31, 2008:
Allowances for accounts receivable	$	17,722	$	4,120	$	(13,387	)	$	(8,455	)	$	-

(1)	Deductions represent amounts written off against the allowances or reserve.