PDL BioPharma, Inc. Announces Fourth Quarter And Full Year 2014 Financial Results
INCLINE VILLAGE, Nev., Feb. 23, 2015 /PRNewswire/ -- PDL BioPharma, Inc. (PDL) (NASDAQ: PDLI) today reported financial results for the fourth quarter and year ended December 31, 2014.
Total revenues in 2014 increased 27 percent to $581.2 million from $456.3 million in 2013. Revenues for the year ended December 31, 2014 included $487.5 million in royalty and license payments from PDL's licensees to the Queen et al. patents, $45.7 million in net royalty payments from acquired royalty rights and a change in fair value of the royalty rights asset, and $48.0 million in interest revenue from notes receivable debt financings to late-stage healthcare companies. The full year 2014 royalty revenue growth over the full year 2013 is driven by increased sales of Avastin®, Herceptin®, Xolair®, Perjeta®, Kadcyla®, Tysabri®, and Actemra® by PDL's licensees, along with a higher fixed royalty rate in 2014 over the blended fixed and tiered rate in 2013, acquired royalty rights from PDL's purchase of Depomed's diabetes-related royalties, a $29.0 million increase in interest revenue related to acquisitions of new revenue generating assets, and a $5.0 million retroactive payment in the first quarter of 2014 related to PDL's settlement agreement with Genentech, partially offset by a higher foreign exchange loss and higher rebate paid to Novartis AG for Lucentis.
For the fourth quarter of 2014, total revenues were $117.1 million, compared to $112.0 million in the fourth quarter of 2013. Revenues for the fourth quarter of 2014 include $131.9 million in royalty payments from PDL's licensees to the Queen et al. patents, $13.3 million in interest revenue from notes receivable debt financings to late-stage healthcare companies, partially offset by a $28.1 million decrease in royalty rights due to a change in fair value of the Depomed royalties. On a cash basis, during the quarter and year ended December 31, 2014, PDL received $20.7 million and $102.5 million, respectively, in net cash royalty right payments, primarily from Glumetza® royalties. Since October 2013, PDL's total cash receipts of $113.0 million from Depomed exceeded the Company's initial forecast by $37.5 million and the return of invested capital is approximately 47 percent. The decrease in royalty rights, which is a change in their fair value, is primarily a result of a $42.6 million non-cash reduction to the fair value of the Depomed royalty asset due to a re-forecast of expected future cash flows of Glumetza in 2015. In late 2014, Salix Pharmaceuticals, Inc. (Salix) disclosed there was an excess of supply of Glumetza and other drugs at the distribution level that it commercialized. PDL commenced a review of all public statements by Salix, publicly available historical third-party prescription data, analyst reports and other relevant data sources. PDL also engaged a third-party expert to specifically assess estimated inventory levels of Glumetza in the distribution channel and to ascertain the potential effects those excess inventory levels could have on expected future cash flows. For example, the cash royalties paid to PDL on sales of Glumetza in the third and fourth quarter of 2014 were $51.7 million, approximately $18.9 million above the Company's internal forecast. Because PDL expects that the sales of Glumetza, and therefore royalties on such sales paid to the Company, will be lower in 2015 as distributors reduce their excess levels of inventory of Glumetza, PDL adjusted the estimated future cash flows of Glumetza. This adjustment resulted in the decrease in fair value of the Glumetza-related royalties.
Operating expenses in 2014 were $34.9 million, compared with $29.8 million in 2013. Operating expenses in the fourth quarter of 2014 were $17.7 million, compared with $7.9 million in 2013. The increase in operating expenses for the quarter and year ended December 31, 2014, when compared to the quarter and year ended December 31, 2013, was a result of an increase in general and administrative expenses for professional services mostly related to the acquisition of revenue generating assets, and an increase in compensation related expenses, partially offset by a decrease in legal expenses mostly related to litigation.
Net income in 2014 was $322.2 million, or $1.86 per diluted share as compared with net income in 2013 of $264.5 million, or $1.66 per diluted share. Net income for the fourth quarter of 2014 was $55.1 million, or $0.32 per diluted share, as compared with net income of $61.1 million in the same period of 2013, or $0.39 per diluted share.
Net cash provided by operating activities in 2014 was $292.3 million, compared with $269.7 million in 2013. At December 31, 2014, PDL had cash, cash equivalents and investments of $293.7 million, compared with $99.5 million at December 31, 2013. The increase was primarily attributable to net cash provided by the proceeds from the issuance of the February 2018 Notes of $300.0 million, proceeds from royalty rights of $102.5 million, repayment of notes receivables of $68.8 million, proceeds from the issuance of warrants of $11.4 million, and cash generated by operating activities of $292.3 million, offset in part by cash advanced on notes receivable of $230.0 million, payment of dividends of $96.6 million, purchase of royalty rights at fair value of $81.1 million, repayment of a portion of the Term Loan of $75.0 million, repurchase of a portion of the convertible note balance of $56.2 million, purchase of call options for $31.0 million, and payment of debt issuance costs related to the February 2018 Note issuance of $9.8 million.
Recent Developments
Retirement of Series 2012 Notes
On February 17, 2015, the Company completed the retirement of the remaining $22.3 million of aggregate principal of its Series 2012 notes at their stated maturity for $22.3 million, plus accrued interest of approximately $0.3 million and approximately 1.34 million shares of its common stock.
Securities Lawsuit Dismissal
On February 2, 2015, the federal class action entitled Hampe v. PDL Biopharma, Inc., et al., No. 2:14-cv-01526-APG-NJK (D. Nev.), was voluntarily dismissed without prejudice. Shortly thereafter, on February 17, 2015, the federal derivative action entitled Freely, et ano. v. Lindell, et al., No. 2:14-cv-01738-APG-GWF (D. Nev.) was likewise voluntarily dismissed without prejudice. On February 18, 2015, the parties to the Nevada state court derivative action, Marchetti, et ano. v. Lindell, et al., No. A-14-708757-C (Dist. Ct. Clark Co., Nev.), filed a stipulation and proposed order of dismissal, which is subject to the approval of the court.
Securities and Exchange Commission (SEC) Comment Letter
On December 8, 2014, the SEC communicated to PDL, in a close-out letter, that it had completed its review of the Annual Report on Form 10- K for the fiscal year ended December 31, 2013 and the related topic of accounting for the acquisition of Depomed royalties.
Quarterly Dividends
On January 27, 2015, PDL's Board of Directors declared regular quarterly dividends of $0.15 per share of common stock, payable on March 12, June 12, September 11 and December 11 of 2015 to all stockholders who own shares of PDL on March 5, June 5, September 4 and December 4 of 2015, the record dates for each of the dividend payments, respectively. On December 12, 2014, PDL paid the fourth quarterly dividend to stockholders of record totaling $24.3 million using earnings generated in the fourth quarter of 2014.
Conference Call Details
PDL will hold a conference call to discuss financial results at 4:30 p.m. Eastern Time today, February 23, 2015.
To access the live conference call via phone, please dial (800) 668-4132 from the United States and Canada or (224) 357-2196 internationally. The conference ID is 86575750. 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 March 1, 2015, and may be accessed by dialing (855) 859-2056 from the United States and Canada or (404) 537-3406 internationally. The replay passcode is 86575750.
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 "Events & Presentations." 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, Inc.
PDL manages a portfolio of patents and royalty assets, consisting of its Queen et al. patents, license agreements with various biotechnology and pharmaceutical companies, and royalty and other assets acquired.
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