UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of
Report (Date of Earliest Event Reported): July 28, 2010
PDL
BioPharma, Inc.
(Exact
name of Company as specified in its charter)
000-19756
(Commission
File Number)
|
Delaware
|
94-3023969
|
|
|
(State
or Other Jurisdiction of
|
(I.R.S.
Employer Identification No.)
|
|
|
Incorporation)
|
932
Southwood Boulevard
Incline
Village, Nevada 89451
(Address
of principal executive offices, with zip code)
(775)
832-8500
(Company’s
telephone number, including area code)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the Company under any of the following
provisions:
|
¨
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
¨
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
¨
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
¨
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
Item
2.02 Results of Operations and Financial Condition.
On July
28, 2010, PDL BioPharma, Inc. (the “Company”) issued a press release announcing
the financial results for the second quarter ended June 30, 2010. A copy of this
earnings release is attached as Exhibit 99.1 hereto. The Company will
host an earnings call and webcast on July 28, 2010 during which the Company will
discuss its financial results for the second quarter ended June 30,
2010.
Item 7.01
Regulation FD Disclosure.
On July
28, 2010, the Company distributed to analysts covering or interested in
covering the Company’s securities a
summary of certain information regarding the Company’s earnings,
licensed products, foreign currency hedging contracts, business expansion
exploration and ongoing litigation (the “Information
Sheet”) to assist
those analysts in valuing the Company’s securities. A
copy of the Information Sheet is attached hereto as Exhibit
99.2.
Limitation of
Incorporation by Reference
In
accordance with General Instruction B.2. of Form 8-K, the information in this
report, including the exhibit, is furnished pursuant to Items 2.02 and 7.01 and
shall not be deemed to be “filed” for the purpose of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the
liabilities of that section.
Cautionary
Statements
This
filing includes “forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we can give no
assurance that such expectations will prove to be correct. Important factors
that could impair the Company’s royalty assets or business are disclosed in the
“Risk Factors” contained in the Company’s 2009 Annual Report on Form 10-K and
other periodic reports filed with the Securities and Exchange Commission. All
forward-looking statements are expressly qualified in their entirety by such
factors. We do not undertake any duty to update any forward-looking statement
except as required by law.
Item
9.01 Financial Statements and Exhibits.
|
Exhibit
No.
|
Description
|
|
|
99.1
|
Press
Release, dated July 28, 2010, regarding the financial results of PDL
BioPharma, Inc. for the second quarter ended June 30,
2010
|
|
|
99.2
|
Information Sheet, dated July 28, 2010 |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
|
PDL
BIOPHARMA, INC.
|
|||
|
(Company)
|
|||
|
|
By:
|
/s/ Christine R. Larson | |
| Christine R. Larson | |||
| Vice President and Chief Financial Officer | |||
Dated: July
28, 2010
EXHIBIT
INDEX
|
Exhibit
No.
|
Description
|
|
|
99.1
|
Press
Release, dated July 28, 2010, regarding the financial results of PDL
BioPharma, Inc. for the second quarter ended June 30,
2010
|
|
|
99.2
|
Information Sheet, dated July 28, 2010 |
|
Contacts:
|
|
|
Cris
Larson
|
Jennifer
Williams
|
|
PDL
BioPharma, Inc.
|
Cook
Williams Communications
|
|
775-832-8505
|
360-668-3701
|
|
Cris.Larson@pdl.com
|
jennifer@cwcomm.org
|
|
PDL
BioPharma Announces Second Quarter 2010 Financial
Results
|
INCLINE
VILLAGE, NV, July 28, 2010 –
PDL BioPharma, Inc. (PDL) (NASDAQ: PDLI) today reported financial results
for the second quarter ended June 30, 2010.
“Our
licensed products continue to generate substantial clinical interest. In early
July, Roche and Genentech announced that they have filed a Biologics License
Application with the U.S. Food and Drug Administration for trastuzumab-DM1, a
promising new therapeutic for breast cancer, and during the American Society of
Clinical Oncology Meeting in June, many positive clinical data presentations
related to our licensed compounds were made,” said John P. McLaughlin, president
and chief executive officer of PDL BioPharma.
“In
January 2010, we put in place quarterly Eurodollar hedging contracts for
royalties to be received through March 2012 to protect PDL against the
fluctuations in Eurodollar exchange rates, which resulted in revenue to PDL of
$1.5 million for the second quarter of 2010 and, contracts which matured on June
30, 2010, will result in additional revenue to be recognized in the third
quarter of $2.9 million,” continued Mr. McLaughlin. “Also during the second
quarter, we continued to simplify our capital structure by repurchasing
approximately $84 million of our convertible notes due in August 2023. Together
with the $55 million of convertible notes repurchased in the first half of 2009,
PDL has reduced its fully diluted shares outstanding by 21.5 million
shares.”
Financial
Results for the Second Quarter and Six-Months Ended June 30, 2010
Total
revenues for the second quarter of 2010 were $120.3 million, compared with
$125.9 million for the same period of 2009. Included in second quarter 2009
results were the second of two $12.5 million installment payments from Alexion
and royalties of $18.9 million for sales on Synagis® from MedImmune. Due to the
ongoing legal disputes with MedImmune, second quarter and six month 2010 revenue
does not include royalties on sales of Synagis®. Excluding the Alexion payment
and royalties received from MedImmune, second quarter 2010 revenue increased 27
percent when compared with the second quarter of 2009. Revenue growth was
primarily driven by increased first quarter 2010 sales by our licensees of
Avastin® and Herceptin®, which are marketed by Genentech and Roche, Lucentis®,
which is marketed by Genentech and Novartis, and Tysabri®, which is marketed by
Elan and Biogen Idec. PDL received royalties for these product sales in the
second quarter of 2010.
Total
general and administrative expenses for the second quarter of 2010 were $8.8
million, compared with $5.6 million for the second quarter of 2009. The increase
was primarily due to increased legal expenses associated with the MedImmune
litigation and the two interference proceedings initiated by the U.S. Patent and
Trade Office in February and November of 2009. Significant expense items in the
second quarter of 2010 were legal fees of $5.8 million, compensation and
benefits of $1.0 million, professional service fees of $1.0 million and
stock-based compensation expense of $0.2 million.
Net
income for the second quarter of 2010 was $50.1 million, or $0.30 per diluted
share, compared with net income of $77.2 million, or $0.47 per diluted share,
for the same period in 2009.
To reduce
the dilution from our convertible notes, during the three months ended June 30,
2010, the Company repurchased at market prices an aggregate $84.2 million face
value of the Company’s 2023 Notes an average premium of 19% to face value for
total consideration of $100.4 million in cash plus accrued
interest. This transaction resulted in a charge to non-operating
expense of $16.3 million or $14.7 million net of tax. The effect of these
transactions was to reduce net income per diluted share from $0.38 to $0.30 for
the three months ended June 30, 2010. During the same period in 2009, we
repurchased at market prices an aggregated $50.0 million face value of the 2023
Notes at a 2% discount to face value and $5.0 million of the Company’s 2012
Notes at a discount to face value of 10.75%. These transactions
resulted in a gain of $1.2 million or $0.8 million net of tax. The
effect of these transactions was to increase net income per diluted share from
$0.46 to $0.47 for the three months ended June 30, 2009. The result of these
repurchase transactions was to reduce shares used to compute net income per
diluted share on an as-converted basis by 14.9 million shares and 6.6 million
shares in 2010 and 2009, respectively.
Net cash
provided by operating activities for the second quarter of 2010 was $123.6
million, compared with $103.4 million for the second quarter of 2009. At June
30, 2010, PDL had cash, cash equivalents and short-term investments of $223.7
million compared with $303.2 million at December 31, 2009, a decrease which can
be primarily attributed to the repurchase of convertible notes, payment of the
April dividend, pay down of the non-recourse notes partially offset by cash
provided by operations.
Total
revenues for the six months ended June 30, 2010 were $182.4 million, compared
with $188.5 million for the same period of 2009. Total general and
administrative expenses for the six months ended June 30, 2010 were $18.2
million compared to $10.3 million for the same period of 2009. Net income for
the first six months of 2010 was approximately $76.1 million, or $0.44 per
diluted share, compared to $114.7 million, or $0.69 per diluted
share. Adjusted for the convertible note transactions described
above, non-GAAP net income for the six months ended June 30, 2010 totaled $90.9
million, or $0.52 per diluted share, compared with non-GAAP net income of $113.9
million, or $0.69 per diluted share for the same period of 2009.
2010
Dividends
PDL
previously announced that it would pay two special dividends of $0.50 per share
each, to its stockholders in 2010. The first special dividend, totaling $59.9
million, was paid on April 1, 2010 to all stockholders of record on March 15,
2010. The second special dividend will be paid on October 1, 2010 to all
stockholders of record on September 15, 2010. PDL does not pay regular
dividends.
Third
Quarter 2010 Revenue Guidance
As
previously announced, PDL will continue to provide revenue guidance for each
quarter in the third month of that quarter. Third quarter 2010 revenue guidance
will be provided in early September.
Conference
Call Details
PDL will
hold a conference call to discuss financial results at 4:30 p.m. ET today, July
28, 2010.
To access
the live conference call via phone, please dial (866) 804-6924 from the United
States and Canada or (857) 350-1670 internationally. The conference ID is
90954288. Please dial in approximately 10 minutes prior to the start of the
call. A telephone replay will be available beginning approximately one hour
after the call through August 4, 2010, and may be accessed by dialing (888)
286-8010 from the United States and Canada or (617) 801-6888 internationally.
The replay passcode is 20973845.
To access
the live and subsequently archived webcast of the conference call, go to the
Company’s website at http://www.pdl.com
and go to “Company Presentations & Events.” Please connect to the website at
least 15 minutes prior to the call to allow for any software download that may
be necessary.
About
PDL BioPharma
PDL
pioneered the humanization of monoclonal antibodies and, by doing so, enabled
the discovery of a new generation of targeted treatments for cancer and
immunologic diseases. PDL is focused on maximizing the value of its antibody
humanization patents and related assets. The Company receives royalties on sales
of a number of humanized antibody products marketed today based on patents which
expire in late 2014. For more information, please visit
www.pdl.com.
NOTE: PDL
BioPharma and the PDL BioPharma logo are considered trademarks of PDL BioPharma,
Inc.
Non-GAAP
Financial Information
The
Company has presented certain financial information in conformance with GAAP and
also on a non-GAAP basis for the three and six months ended June 30, 2010 and
2009. Management believes that this non-GAAP information is useful
for investors taken in conjunction with the Company’s U.S. GAAP financial
statements. Non-GAAP financial information is not prepared under a
comprehensive set of accounting rules and should only be used to supplement an
understanding of the Company’s net income as reported under U.S.
GAAP. A reconciliation between U.S. GAAP and non-GAAP financial
information is provided in the table below.
Forward-Looking
Statements
This
press release contains forward-looking statements. Each of these forward-looking
statements involves risks and uncertainties. Actual results may differ
materially from those, express or implied, in these forward-looking statements.
Factors that may cause differences between current expectations and actual
results include, but are not limited to, the following:
|
·
|
The
expected rate of growth in royalty-bearing product sales by PDL’s existing
licensees;
|
|
·
|
The
relative mix of royalty-bearing Genentech products manufactured and sold
outside the U.S. versus manufactured or sold in the
U.S.;
|
|
·
|
The
ability of our licensees to receive regulatory approvals to market and
launch new royalty-bearing products and whether such products, if
launched, will be commercially
successful;
|
|
·
|
Changes
in any of the other assumptions on which PDL’s projected royalty revenues
are based;
|
|
·
|
The
outcome of pending litigation or disputes;
and
|
|
·
|
The
failure of licensees to comply with existing license agreements, including
any failure to pay royalties due.
|
Other
factors that may cause PDL’s actual results to differ materially from those
expressed or implied in the forward-looking statements in this press release are
discussed in PDL’s filings with the SEC, including the “Risk Factors” section of
its annual and quarterly reports filed with the SEC. Copies of PDL’s filings
with the SEC may be obtained at the “Investors” section of PDL’s website at
www.pdl.com.
PDL expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in PDL’s expectations with regard thereto or any change in
events, conditions or circumstances on which any such statements are based for
any reason, except as required by law, even as new information becomes available
or other events occur in the future. All forward-looking statements in this
press release are qualified in their entirety by this cautionary
statement.
|
PDL
BIOPHARMA, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME DATA
|
|
(Unaudited)
|
|
(In
thousands, except per share
amounts)
|
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Revenues
|
||||||||||||||||
|
Royalties
|
$ | 120,343 | $ | 113,403 | $ | 182,404 | $ | 175,701 | ||||||||
|
License
and other
|
- | 12,461 | - | 12,785 | ||||||||||||
|
Total
revenues
|
120,343 | 125,864 | 182,404 | 188,486 | ||||||||||||
|
General
and administrative expenses
|
8,820 | 5,590 | 18,230 | 10,283 | ||||||||||||
|
Operating
income
|
111,523 | 120,274 | 164,174 | 178,203 | ||||||||||||
|
Gain
(loss) on repurchase of convertible notes
|
(16,327 | ) | 1,195 | (16,327 | ) | 1,195 | ||||||||||
|
Interest
and other income, net
|
90 | 310 | 170 | 646 | ||||||||||||
|
Interest
expense
|
(11,560 | ) | (3,357 | ) | (24,087 | ) | (6,931 | ) | ||||||||
|
Income
before income taxes
|
83,726 | 118,422 | 123,930 | 173,113 | ||||||||||||
|
Income
tax expense
|
33,588 | 41,185 | 47,785 | 58,419 | ||||||||||||
|
Net
income
|
$ | 50,138 | $ | 77,237 | $ | 76,145 | $ | 114,694 | ||||||||
|
Net
income per basic share
|
$ | 0.42 | $ | 0.65 | $ | 0.64 | $ | 0.96 | ||||||||
|
Net
income per diluted share
|
$ | 0.30 | $ | 0.47 | $ | 0.44 | $ | 0.69 | ||||||||
|
Cash
dividends declared and paid per common share
|
$ | - | $ | - | $ | 1.00 | $ | 1.00 | ||||||||
|
Shares
used to compute income per basic share
|
119,536 | 119,357 | 119,530 | 119,342 | ||||||||||||
|
Shares
used to compute income per diluted share
|
173,398 | 169,566 | 178,821 | 171,053 | ||||||||||||
|
PDL
BIOPHARMA, INC.
|
|
RECONCILIATION
OF GAAP FINANCIAL INFORMATION TO NON-GAAP
|
|
(Unaudited)
|
|
(In
thousands, except per share
amounts)
|
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Net
Income
|
$ | 50,138 | $ | 77,237 | $ | 76,145 | $ | 114,694 | ||||||||
|
Add
back loss (gain) on repurchase of convertible notes
|
16,327 | (1,195 | ) | 16,327 | (1,195 | ) | ||||||||||
|
Deduct
income tax expense (benefit) on repurchase of convertible
notes
|
(1,590 | ) | 418 | (1,590 | ) | 418 | ||||||||||
|
Non-GAAP
net income
|
64,875 | 76,460 | 90,882 | 113,917 | ||||||||||||
|
Add
back interest expense for convertible notes, net of estimated
taxes
|
1,360 | 1,819 | 2,995 | 3,761 | ||||||||||||
|
Non-GAAP
income used to compute non-GAAP net income per diluted
share
|
$ | 66,235 | $ | 78,279 | $ | 93,877 | $ | 117,678 | ||||||||
|
Non-GAAP
net income per basic share
|
$ | 0.54 | $ | 0.64 | $ | 0.76 | $ | 0.95 | ||||||||
|
Non-GAAP
net income per diluted share
|
$ | 0.38 | $ | 0.46 | $ | 0.52 | $ | 0.69 | ||||||||
|
PDL
BIOPHARMA, INC.
|
|
GENERAL
AND ADMINISTRATIVE EXPENSE DATA
|
|
(Unaudited)
|
|
(In
thousands)
|
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Compensation
and benefits
|
$ | 996 | $ | 829 | $ | 1,997 | $ | 1,568 | ||||||||
|
Legal
expense
|
5,811 | 2,813 | 12,161 | 4,373 | ||||||||||||
|
Other
professional service
|
1,005 | 837 | 2,083 | 1,566 | ||||||||||||
|
Insurance
|
195 | 269 | 423 | 516 | ||||||||||||
|
Depreciation
|
28 | 35 | 62 | 922 | ||||||||||||
|
Stock-based
compensation
|
171 | 206 | 359 | 402 | ||||||||||||
|
Other
|
614 | 601 | 1,145 | 936 | ||||||||||||
|
Total
general and administrative expenses
|
$ | 8,820 | $ | 5,590 | $ | 18,230 | $ | 10,283 | ||||||||
|
PDL
BIOPHARMA, INC.
|
|
CONDENSED
CONSOLIDATED BALANCE SHEET DATA
|
|
(Unaudited)
|
|
(In
thousands)
|
|
June
30,
|
December
31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Cash,
cash equivalents and short-term investments
|
$ | 223,694 | $ | 303,227 | ||||
|
Total
assets
|
$ | 271,531 | $ | 338,411 | ||||
|
Convertible
notes payable
|
$ | 343,828 | $ | 427,998 | ||||
|
Non-recourse
notes payable
|
$ | 249,635 | $ | 300,000 | ||||
|
Total
stockholders' deficit
|
$ | (434,858 | ) | $ | (415,953 | ) | ||
|
PDL
BIOPHARMA, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW DATA
|
|
(Unaudited)
|
|
(In
thousands)
|
|
Six
Months Ended
|
||||||||
|
June
30,
|
||||||||
|
2010
|
2009
|
|||||||
|
Net
income
|
$ | 76,145 | $ | 114,694 | ||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities
|
17,889 | (241 | ) | |||||
|
Changes
in assets and liabilities
|
29,593 | (11,080 | ) | |||||
|
Net
cash provided by operating activities
|
$ | 123,627 | $ | 103,373 | ||||
|
PDL
BIOPHARMA, INC.
|
|
MIX
OF EX-U.S. SALES AND EX-U.S.-BASED MANUFACTURING AND SALES
OF
GENENTECH PRODUCTS
|
|
(Unaudited)
|
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Avastin
|
||||||||||||||||
|
%
Ex-U.S. Sold
|
49 | % | 46 | % | 49 | % | 46 | % | ||||||||
|
%
Ex-U.S. Manufuactured and Sold
|
27 | % | - | 16 | % | - | ||||||||||
|
Herceptin
|
||||||||||||||||
|
%
Ex-U.S. Sold
|
70 | % | 69 | % | 70 | % | 70 | % | ||||||||
|
%
Ex-U.S. Manufuactured and Sold
|
47 | % | 30 | % | 45 | % | 23 | % | ||||||||
|
Lucentis
|
||||||||||||||||
|
%
Ex-U.S. Sold
|
57 | % | 51 | % | 57 | % | 50 | % | ||||||||
|
%
Ex-U.S. Manufuactured and Sold
|
- | - | - | - | ||||||||||||
|
Xolair
|
||||||||||||||||
|
%
Ex-U.S. Sold
|
36 | % | 26 | % | 35 | % | 26 | % | ||||||||
|
%
Ex-U.S. Manufuactured and Sold
|
36 | % | 26 | % | 35 | % | 26 | % | ||||||||
PDL
BioPharma, Inc.
2Q2010
July 28,
2010
The
following document was compiled from public press releases for your
convenience. This document, together with the press release issued
today, provides information regarding PDL related to its second quarter 2010
financial and business results.
Non-GAAP
Earnings per Share
An
important component of our current strategy is the improvement of our capital
structure and reducing the dilution associated with our convertible
notes. To this end, in the second quarter of 2010, we repurchased
$84.2 million face value of our 2.75% subordinated notes due in August 2023 at
market prices at an average premium of 19% to face value for total consideration
of $100.4 million in cash, plus accrued interest. This transaction
resulted in a charge to non-operating expense of $16.3 million or $14.7 million
net of tax. The effect of these transactions was to reduce net income
per diluted share from $0.38 to $0.30.
During
the second quarter of 2009, we repurchased at market prices $50.0 million face
value of the 2023 Notes at approximately a 2% discount to face value for total
consideration of $49.3 million in cash, plus accrued but unpaid interest, and
$5.0 million face value of the 2012 Notes at a 10.75% discount to face value for
total consideration of $4.5 million in cash, plus accrued but unpaid
interest. These transactions resulted in a gain of $1.2 million or
$0.8 million net of tax. The effect of these transactions was to
increase net income per diluted share from $0.46 to $0.47.
The
result of these repurchase transactions was to reduce shares used to compute net
income per diluted share on an as converted basis by 14.9 million shares and 6.6
million shares in 2010 and 2009, respectively. Excluding these
transactions, non-GAAP earnings per share was:
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Net
Income
|
$ | 50,138 | $ | 77,237 | $ | 76,145 | $ | 114,694 | ||||||||
|
Add
back loss (gain) on repurchase of convertible notes
|
16,327 | (1,195 | ) | 16,327 | (1,195 | ) | ||||||||||
|
Deduct
income tax expense (benefit) on repurchase of convertible
notes
|
(1,590 | ) | 418 | (1,590 | ) | 418 | ||||||||||
|
Non-GAAP
net income
|
64,875 | 76,460 | 90,882 | 113,917 | ||||||||||||
|
Add
back interest expense for convertible notes, net of estimated
taxes
|
1,360 | 1,819 | 2,995 | 3,761 | ||||||||||||
|
Non-GAAP
income used to compute non-GAAP net income per diluted
share
|
$ | 66,235 | $ | 78,279 | $ | 93,877 | $ | 117,678 | ||||||||
|
Non-GAAP
net income per basic share
|
$ | 0.54 | $ | 0.64 | $ | 0.76 | $ | 0.95 | ||||||||
|
Non-GAAP
net income per diluted share
|
$ | 0.38 | $ | 0.46 | $ | 0.52 | $ | 0.69 | ||||||||
We will
continue to look for opportunities to further limit and reduce dilution
associated with these securities in future quarters as well as to improve our
capital structure.
PDL
BioPharma, Inc.
2Q2010
July 28,
2010
Licensed
Product Regulatory Updates
Trastuzumab-DM1
(T-DM1)
On July
6, 2010, Genentech and Roche submitted a Biologics License Application (BLA) to
the U.S. Food and Drug Administration (FDA) for T-DM1 in people with advanced
HER2-positive breast cancer who have previously received multiple HER2-targeted
medicines and chemotherapies. This submission is based on the results of a Phase
2 study, which showed T-DM1 shrank tumors in one-third of women who had received
on average seven prior medicines for advanced HER2-positive breast cancer.1 According to analyst estimates, T-DM1 could
reach peak sales of 2 to 5 billion Swiss francs and T-DM1 could win regulatory
approval as early as 2011.2
Lucentis®(ranibizumab)
On June
22, 2010, Genentech and Roche announced the approval of Lucentis for an
additional indication, the treatment of patients with macular edema (swelling in
the retina) following retinal vein occlusion. The FDA approved the new
indication after a six-month priority review.3
Avastin®
(bevacizumab)
On July
20, 2010, ODAC voted that use of Avastin in combination with paclitaxel for
previously untreated advanced HER2-negative breast cancer be removed from the US
label. The FDA expects to make a final decision by September 17, 2010. If the
FDA accepts the recommendation to remove approval for first line treatment in
HER2-negative breast cancer, we would no longer receive royalties for this
indication. Based on our internal model, we estimate that in 2009,
this indication represented less than 5% of total global Avastin
sales. The ODAC recommendation does not impact Avastin’s use in
advanced colorectal, lung and kidney cancer, and glioblastoma.1
Mylotarg®
(gemtuzumab ozogamicin)
On June
21, 2010, at the request of the FDA after results from a recent clinical trial
raised new concerns about the product’s safety and the drug failed to
demonstrate clinical benefit to patients enrolled in the trials, Pfizer, the
parent company of Wyeth, voluntarily withdrew from the U.S. market the drug
Mylotarg for patients with acute myeloid leukemia, a bone marrow
cancer. Pfizer will continue to make Mylotarg available for current
patients.5
Motavizumab
On June 2, 2010, the FDA’s Antiviral
Drugs Advisory Committee voted 14 to 3 against the license to market MedImmune’s
motavizumab for the prevention of serious respiratory syncytial virus (RSV)
disease in high-risk infants.6
Foreign
Currency Exchange Contracts
We hedge
certain foreign currency exchange risk exposures related to our licensees’
product sales with foreign currency exchange contracts. In general, these
contracts are intended to offset the underlying foreign currency market risk in
our royalty revenues. Approximately 50% of our revenue is based
on sales in currencies other than the US dollar. As such,
when the US dollar strengthens by 10%, our revenues will decline by
5%.
PDL
BioPharma, Inc.
2Q2010
July 28,
2010
In
January and May 2010, we entered into a series of foreign currency exchange
contracts covering the 12 quarters in which our licensees’ sales occur through
December 2012. We did not have foreign currency exchange contracts prior to
January 2010. 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.
PDL
BioPharma, Inc.
2Q2010
July 28,
2010
Business
Expansion through Acquisition of New Royalty Assets
PDL is
exploring options to acquire additional royalty assets to diversify its business
beyond the Queen et al patent estate. The Company has evaluated numerous
opportunities, but will only proceed with transactions that fit the Company’s
criteria. PDL’s primary targets are commercial-stage products with the
opportunity for new indications consistent with our current portfolio. PDL is
evaluating products that are first- in-class, or the gold standard of their
treatment group.
Litigation
Updates
European
Opposition to ‘216 Patent
In
November 2003, in an appeal proceeding of a prior action of the Opposition
Division of the EPO, the Technical Board of Appeal of the EPO ordered that
certain claims in our ‘216 Patent be remitted to the Opposition Division for
further prosecution and consideration of issues of patentability, that is,
entitlement to priority, novelty, enablement and inventive step. The
Technical Board of Appeal has scheduled a hearing for the appeal with respect to
the ‘216 Patent to begin on February 28, 2011. PDL intends to vigorously defend
the ‘216 Patent in this proceeding.
Action
for Declaratory Judgment by MedImmune
In
December 2008, MedImmune filed a lawsuit against us in the United States
District Court for the Northern District of California. MedImmune’s complaint
seeks a declaratory judgment that the U.S. Queen et al. 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. A
jury trial is scheduled to begin on January 25, 2011.
Forward-looking
Statements
This
document contains forward-looking statements. Each of these forward-looking
statements involves risks and uncertainties. Actual results may differ
materially from those, express or implied, in these forward-looking statements.
Factors that may cause differences between current expectations and actual
results include, but are not limited to, the following:
-- The
expected rate of growth in royalty-bearing product sales by PDL's existing
licensees;
-- The
relative mix of royalty-bearing Genentech products manufactured and sold outside
the U.S. versus manufactured or sold in the U.S.;
-- The
ability of our licensees to receive regulatory approvals to market and launch
new royalty-bearing products and whether such products, if launched, will be
commercially successful;
-- Changes
in any of the other assumptions on which PDL's projected royalty revenues are
based;
-- The
outcome of pending litigation or disputes;
-- The
change in foreign currency exchange rate; and
-- The
failure of licensees to comply with existing license agreements, including any
failure to pay royalties due.
PDL
BioPharma, Inc.
2Q2010
July 28,
2010
Other
factors that may cause PDL's actual results to differ materially from those
expressed or implied in the forward-looking statements in this document are
discussed in PDL's filings with the SEC, including the "Risk Factors" sections
of its annual and quarterly reports filed with the SEC. Copies of PDL's filings
with the SEC may be obtained at the "Investors" section of PDL's website at
www.pdl.com. PDL expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements contained
herein to reflect any change in PDL's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statements are
based for any reason, except as required by law, even as new information becomes
available or other events occur in the future. All forward-looking statements in
this press release are qualified in their entirety by this cautionary
statement.
Royalty
Revenue by Product ($ in 000's) *
|
Avastin
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
16,870
|
44,765
|
61,635
|
||
|
2009
|
13,605
|
35,161
|
21,060
|
15,141
|
84,966
|
|
2008
|
9,957
|
30,480
|
19,574
|
12,394
|
72,405
|
|
2007
|
8,990
|
21,842
|
17,478
|
9,549
|
57,859
|
|
2006
|
10,438
|
15,572
|
15,405
|
12,536
|
53,952
|
|
Herceptin
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
23,402
|
38,555
|
61,957
|
||
|
2009
|
16,003
|
32,331
|
26,830
|
18,615
|
93,779
|
|
2008
|
14,092
|
34,383
|
28,122
|
20,282
|
96,880
|
|
2007
|
19,035
|
28,188
|
22,582
|
14,802
|
84,608
|
|
2006
|
15,142
|
28,188
|
21,557
|
20,354
|
85,241
|
|
Lucentis
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
7,220
|
19,091
|
26,310
|
||
|
2009
|
4,621
|
12,863
|
8,123
|
6,152
|
31,759
|
|
2008
|
3,636
|
11,060
|
7,631
|
4,549
|
26,876
|
|
2007
|
2,931
|
6,543
|
6,579
|
3,517
|
19,570
|
|
2006
|
-
|
-
|
6,579
|
3,335
|
9,914
|
|
Xolair
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
3,723
|
6,386
|
10,110
|
||
|
2009
|
2,665
|
5,082
|
4,085
|
3,722
|
15,553
|
|
2008
|
1,488
|
4,866
|
3,569
|
2,927
|
12,850
|
|
2007
|
1,684
|
3,942
|
3,332
|
2,184
|
11,142
|
|
2006
|
2,263
|
2,969
|
3,041
|
2,495
|
10,768
|
|
Raptiva
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
(150)
|
142
|
(8)
|
||
|
2009
|
477
|
589
|
22
|
150
|
1,238
|
|
2008
|
405
|
1,618
|
1,111
|
802
|
3,937
|
|
2007
|
588
|
1,246
|
1,160
|
738
|
3,733
|
|
2006
|
776
|
1,060
|
1,069
|
874
|
3,780
|
|
Synagis
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
-
|
-
|
-
|
||
|
2009
|
17,145
|
18,869
|
1,568
|
3,159
|
40,741
|
|
2008
|
16,268
|
17,376
|
2,278
|
4,251
|
40,173
|
|
2007
|
14,352
|
16,747
|
1,608
|
4,042
|
36,748
|
|
2006
|
14,171
|
14,689
|
1,608
|
3,664
|
34,131
|
|
Tysabri
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
8,791
|
8,788
|
17,579
|
||
|
2009
|
6,656
|
7,200
|
7,642
|
8,564
|
30,062
|
|
2008
|
3,883
|
5,042
|
5,949
|
6,992
|
21,866
|
|
2007
|
839
|
1,611
|
2,084
|
2,836
|
7,370
|
|
2006
|
-
|
-
|
-
|
237
|
237
|
|
Actemra
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
1,587
|
1,950
|
3,538
|
||
|
2009
|
585
|
537
|
909
|
1,197
|
3,228
|
|
2008
|
44
|
116
|
179
|
369
|
708
|
|
2007
|
32
|
326
|
32
|
34
|
425
|
|
2006
|
-
|
-
|
-
|
-
|
-
|
|
Mylotarg
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
366
|
153
|
519
|
||
|
2009
|
293
|
370
|
805
|
453
|
1,921
|
|
2008
|
314
|
132
|
288
|
209
|
943
|
|
2007
|
276
|
137
|
292
|
426
|
1,131
|
|
2006
|
309
|
168
|
311
|
568
|
1,355
|
* As
reported to PDL by its licensees
Reported
Net Sales Revenue by Product ($ in 000's) *
|
Avastin
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
1,586,093
|
1,596,892
|
3,182,984
|
||
|
2009
|
1,345,487
|
1,295,536
|
1,439,730
|
1,514,053
|
5,594,806
|
|
2008
|
980,715
|
1,084,930
|
1,180,427
|
1,239,382
|
4,485,454
|
|
2007
|
678,068
|
746,587
|
797,013
|
875,084
|
3,096,752
|
|
2006
|
439,318
|
516,052
|
570,551
|
592,897
|
2,118,817
|
|
Herceptin
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
1,337,732
|
1,349,512
|
2,687,244
|
||
|
2009
|
1,210,268
|
1,133,993
|
1,226,435
|
1,278,626
|
4,849,323
|
|
2008
|
1,105,426
|
1,195,215
|
1,211,982
|
1,186,806
|
4,699,428
|
|
2007
|
891,761
|
949,556
|
979,602
|
1,015,033
|
3,835,952
|
|
2006
|
529,585
|
659,719
|
761,099
|
803,576
|
2,753,979
|
|
Lucentis
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
759,965
|
698,890
|
1,458,855
|
||
|
2009
|
462,103
|
469,736
|
555,296
|
615,212
|
2,102,347
|
|
2008
|
363,615
|
393,682
|
460,167
|
454,922
|
1,672,386
|
|
2007
|
224,820
|
219,579
|
299,995
|
322,300
|
1,066,695
|
|
2006
|
-
|
-
|
10,689
|
157,742
|
168,431
|
|
Xolair
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
240,904
|
225,878
|
466,781
|
||
|
2009
|
184,669
|
181,086
|
211,006
|
219,693
|
796,454
|
|
2008
|
137,875
|
169,521
|
177,179
|
183,753
|
668,329
|
|
2007
|
129,172
|
130,700
|
144,250
|
147,754
|
551,876
|
|
2006
|
95,241
|
99,354
|
112,608
|
118,002
|
425,204
|
|
Raptiva
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
-
|
14,224
|
14,224
|
||
|
2009
|
62,653
|
21,526
|
1,502
|
-
|
85,681
|
|
2008
|
55,541
|
57,601
|
66,992
|
65,216
|
245,349
|
|
2007
|
45,134
|
47,401
|
52,914
|
53,885
|
199,333
|
|
2006
|
32,672
|
35,458
|
39,610
|
41,353
|
149,093
|
|
Synagis
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
-
|
-
|
-
|
||
|
2009
|
571,486
|
623,951
|
57,271
|
105,314
|
1,358,021
|
|
2008
|
542,283
|
574,207
|
80,930
|
141,696
|
1,339,116
|
|
2007
|
478,388
|
548,227
|
53,586
|
139,736
|
1,219,936
|
|
2006
|
472,362
|
489,634
|
30,185
|
124,629
|
1,116,811
|
|
Tysabri
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
293,047
|
287,925
|
580,972
|
||
|
2009
|
221,854
|
229,993
|
257,240
|
285,481
|
994,569
|
|
2008
|
129,430
|
163,076
|
200,783
|
233,070
|
726,359
|
|
2007
|
30,468
|
48,715
|
71,972
|
94,521
|
245,675
|
|
2006
|
-
|
-
|
-
|
7,890
|
7,890
|
|
Actemra
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
52,908
|
62,511
|
115,420
|
||
|
2009
|
19,504
|
17,920
|
30,313
|
39,888
|
107,627
|
|
2008
|
1,452
|
1,377
|
5,981
|
12,305
|
21,116
|
|
2007
|
2,388
|
873
|
1,071
|
1,137
|
5,470
|
|
2006
|
-
|
-
|
-
|
-
|
-
|
|
Mylotarg
|
Q1
|
Q2
|
Q3
|
Q4
|
Total
|
|
2010
|
8,500
|
8,658
|
17,159
|
||
|
2009
|
8,367
|
8,406
|
8,813
|
8,654
|
34,240
|
|
2008
|
8,978
|
8,050
|
8,225
|
8,140
|
33,393
|
|
2007
|
7,879
|
8,202
|
8,345
|
7,878
|
32,304
|
|
2006
|
8,832
|
9,084
|
8,874
|
16,081
|
42,871
|
* As
reported to PDL by its licensees
1
Genentech (July 6, 2010). “Genentech Submits Application to FDA for
Trastuzumab-DM1 in Previously Treated Advanced HER2-Positive Breast Cancer.”
Press release.
3
Genentech (June 22, 2010). “FDA Approves Lucentis® (Ranibizumab Injection) for
the Treatment of Macular Edema Following Retinal Vein Occlusion.” Press
release.