INCLINE VILLAGE, Nev., Nov. 10, 2014 /PRNewswire/ -- PDL BioPharma, Inc. (PDL) (NASDAQ: PDLI) today reported financial results for the third quarter and nine months ended September 30, 2014.
Total revenues for the third quarter of 2014 increased approximately 64 percent to $164.6 million from $100.2 million in the third quarter of 2013. Revenues for the third quarter of 2014 include $123.9 million in royalty payments from PDL’s licensees to the Queen et al. patents, $27.6 million in net royalty payments from acquired royalty rights and a change in fair value of the royalty rights asset, and $13.1 million in interest revenue from notes receivable debt financings to late-stage healthcare companies. The revenue growth in the third quarter of 2014 includes the effect of the flat royalty rate on the Genentech related products in 2014 versus a tiered rate in 2013. The third quarter 2014 royalty payments received from PDL’s licensees to the Queen et al. patents were for worldwide net sales in the second quarter 2014.
In the second quarter of 2014, PDL recorded a change in accounting related to its acquisition of royalty rights from Depomed. As part of this change, PDL has elected to measure these royalty right assets at fair value. The change in fair value along with net cash royalties received from Depomed and Viscogliosi Brothers are currently presented as a component of “royalty rights - change in fair value” in PDL’s income statements. Of the $27.6 million recognized in “royalty rights - change in fair value” for the quarter ended September 30, 2014, $32.3 million were net cash royalty receipts from Depomed and Viscogliosi Brothers.
Total revenues for the first nine months of 2014 increased 35 percent to $464.2 million, compared with $344.3 million for the first nine months of 2013. The increase for the nine month period of 2014 over 2013 is primarily driven by the addition of the royalty payments from PDL’s purchase of Depomed’s diabetes-related royalties, increased royalties in the first three quarters of 2014 related to sales of Avastin®, Herceptin®, Xolair®, Kadcyla®, Perjeta®, Tysabri® and Actemra®, along with a higher fixed royalty rate in 2014 over the blended fixed and tiered 2013 rate, a $23.2 million increase in interest revenue related to acquisitions of new revenue generating assets, and a $5.0 million retroactive payment in first quarter of 2014 related to our settlement agreement with Genentech, partially offset by a higher foreign exchange loss and higher rebate paid to Novartis AG for Lucentis.
Operating expenses in the third quarter of 2014 were $5.7 million, compared with $7.9 million in the third quarter of 2013. Operating expenses in the first nine months of 2014 were $17.2 million, compared with $21.9 million in the first nine months of 2013. The decreases in operating expenses for the three and nine months ended September 30, 2014, compared to the three and nine months ended September 30, 2013, were primarily due to a decrease in litigation legal expenses, partially offset by an increase in due diligence professional services and compensation.
Net income in the third quarter of 2014 was $102.2 million, or $0.61 per diluted share, as compared with net income in the third quarter of 2013 of $56.2 million, or $0.36 per diluted share. Net income for the first nine months of 2014 was $267.2 million, or $1.62 per diluted share, as compared with net income in the first nine months of 2013 of $203.4 million, or $1.31 per diluted share.
Net cash provided by operating activities in the first nine months of 2014 was $223.2 million, compared with $208.5 million in the first nine months of 2013. PDL had cash, cash equivalents and investments in the aggregate of $284.5 million and $99.5 million at September 30, 2014, and December 31, 2013, respectively. 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 $81.7 million, proceeds from the issuance of warrants of $11.4 million, and cash generated by operating activities of $223.2 million, offset in part by cash advanced on notes receivable of $215.0 million, purchase of call options for $31.0 million, repurchase of a portion of the Series 2012 Notes for $29.9 million, payment of dividends of $72.1 million, repayment of a portion of the Term Loan of $56.3 million, purchase of royalty rights - at fair value of $15.5 million, and payment of debt issuance costs related to the February 2018 Note issuance of $9.3 million.
Recent Developments
Royalty Acquisition
On November 6, 2014, PDL acquired a portion of all royalty payments of the University of Michigan’s (“U-M”) worldwide royalty interest in Cerdelga (eliglustat) for $65.6 million. Under the terms of the royalty agreement, PDL will receive 75 percent of all royalty payments due under U-M’s license agreement with Genzyme until expiration of the licensed patents, excluding any patent term extension. Cerdelga, an oral therapy for adult patients with Gaucher disease type 1, was developed by Genzyme, a Sanofi company. Cerdelga was approved by the U.S. Food and Drug Administration (FDA) on August 19, 2014. In addition to the recent FDA approval, marketing applications for Cerdelga are under review by the European Medicines Agency and other regulatory authorities.
2014 Dividends
On January 29, 2014, PDL’s Board of Directors declared regular quarterly dividends of $0.15 per share of common stock, payable on March 12, June 12, September 12 and December 12 of 2014 to all stockholders who own shares of PDL on March 5, June 5, September 5 and December 5 of 2014, the record dates for each of the dividend payments, respectively. On September 12, 2014, PDL paid the third quarterly dividend to stockholders of record totaling $24.0 million using earnings generated in the third quarter of 2014.
Revenue Guidance for the Fourth Quarter of 2014
As previously announced, PDL will continue to provide revenue guidance for each quarter in the third month of that quarter. Fourth quarter 2014 revenue guidance will be provided in December 2014.
Conference Call Details
PDL will hold a conference call to discuss financial results at 4:30 p.m. Eastern Time, November 10, 2014.
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