PDLI Guides Q1 Royalty Revenue

PDL BioPharma Inc. (PDLI - Analyst Report) recently announced that it expects to generate first quarter 2013 royalty revenues of around $92 million, up 19.5% year over year.

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

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

The anticipated growth in royalty revenues primarily emanates from higher sales of Herceptin (up 11%), Avastin (up 10%), Tysabri (up 16%) and Lucentis (up 12%) during the fourth quarter of 2012, on which PDL will receive royalties in the first 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 US to Novartis. The payment is made in accordance with a settlement agreement, which the companies had entered into in Feb 2011. The first quarter 2013 royalty guidance includes this payment.

We remind investors that in Feb 2013, the US Food and Drug Administration (FDA) approved Roche’s Kadcyla for the second line treatment of HER2+ metastatic breast cancer and first line treatment of those patients who relapse within six months following adjuvant therapy. PDL BioPharma expects to receive royalties on sales of Kadcyla from the second quarter of 2013. Roche is also seeking EU approval of the product.

PDL BioPharma, a biotechnology company, currently carries a Zacks Rank #2 (Buy). However, other biotechnology companies such as Cytokinetics Incorporated (CYTK - Snapshot Report) carry a Zacks Rank #1 (Strong Buy).