PDL BioPharma Inc. (PDLI - Analyst Report) recently announced that it expects to receive royalty revenues of around $143 million in second quarter 2013, up 14% from the royalties earned in the second quarter of 2012.
PDL BioPharma receives royalties from companies like Roche Holdings Ltd. (RHHBY - Analyst Report) and Novartis (NVS - Analyst Report) . The royalties are earned on worldwide net sales of products like Avastin, Herceptin, Lucentis, Xolair, Kadcyla, 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 7%), Avastin (up 8%), Tysabri (up 12%) and Lucentis (up 8%) during the first quarter of 2013 for which PDL will receive royalties in the second 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 second 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 as a second line treatment for HER2+ metastatic breast cancer and as a first line treatment for 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.
PDL BioPharma also announced that it had filed a Notice of Arbitration against Roche with the American Arbitration Association in Voorhees. The Notice of Arbitration was filed as PDL BioPharma believes that Roche has paid it lower royalties from at least 2007. Roche also did not allow PDL BioPharma to check its books and records to determine whether the paid royalty amounts were calculated accurately.
PDL BioPharma currently carries a Zacks Rank #4 (Sell). However, other companies such as Elan Corporation, plc currently look better positioned with a Zacks Rank #2 (Buy).