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PDL BioPharma Inc. (PDLI - Analyst Report) announced that it expects to receive royalty revenues of roughly $109 million in the fourth quarter of 2013, up around 27% from the year-ago figure.

PDL BioPharma receives royalties from companies including Roche Holdings (RHHBY - Analyst Report) and Novartis (NVS - Analyst Report). The royalties are earned on worldwide net sales of products like Avastin, Herceptin, Lucentis, Xolair, Kadcyla, Actemra and Perjeta.

Royalty payments for Roche’s products are tiered (1-3%) in the U.S., while PDL BioPharma receives a flat 3% royalty if a product is both manufactured and sold outside the U.S.

The anticipated growth in royalty revenues primarily emanates from higher sales of Herceptin (up 5%), Avastin (up 9%) and Lucentis (up 9%) during the third quarter of 2013 for which PDL will receive royalties in the fourth quarter of 2013. However, worldwide sales for Tysabri decreased 1% in the third quarter of 2013.

PDL BioPharma recognizes royalty revenues on Glumetza (as per a deal in Oct 2013) a month after sales by the licensees occurred. The company expects $10 million of royalty revenues from two months of sales of Glumetza in the final quarter of 2013.

Effective from the second quarter of 2011, PDL BioPharma started paying back a portion of the royalties it receives on Lucentis sales outside the U.S. to Novartis. The payment is made in accordance with a settlement agreement, which the companies had entered into in Feb 2011. The amount paid is less than the fourth quarter 2013 royalty guidance.

PDL BioPharma currently carries a Zacks Rank #3 (Hold). Some better ranked stocks in the bio pharma sector include Actelion Ltd. (ALIOF). Actelion holds a Zacks Rank #1 (Strong Buy).

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