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Q2 Earnings Beat at PDL BioPharma

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PDL BioPharma Inc. (PDLI - Free Report) posted second-quarter 2013 earnings of 62 cents per share, ahead of the Zacks Consensus Estimate of 57 cents and the year-ago figure of 52 cents per share. The year-over-year increase in earnings was attributable to higher revenues.

PDL BioPharma generated second-quarter 2013 revenues of $143.6 million, up 14.1% year over year. Revenues were in line with the company’s guidance announced in Jun 2013. Revenues were ahead of the Zacks Consensus Estimate of $139 million.

Quarter in Detail

PDL BioPharma derived revenues for the second quarter of 2013 solely from royalties. PDL BioPharma receives royalties from companies like Roche Holdings Ltd. (RHHBY - Free Report) and Novartis (NVS - Free Report) . The royalties are earned on worldwide net sales of products like Avastin, Herceptin, Lucentis, Xolair, Kadcyla, Tysabri and Perjeta.

Increased royalties on sales of Avastin, Herceptin, Lucentis, Actemra and Tysabri drove second-quarter 2013 royalties.

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 second-quarter 2013 revenue is net of this payment.

General and administrative (G&A) expenses were $6.8 million in the reported quarter, up approximately 31.8%. The increase in G&A expenses during the quarter was primarily due to increased legal-related expenses.

The company is expected to provide revenue guidance for the third quarter of 2013 in early September this year.

Other Developments

We note that in Apr 2013, PDL BioPharma entered into a credit agreement with Avinger Inc. PDL BioPharma paid $20 million in cash on Apr 18, 2013 and is expected to provide additional funds of around $20 million on achieving certain specified revenue milestones. As per the agreement, PDL BioPharma will be receiving interest on the principal amount outstanding along with a low, single-digit royalty on the sale of Avinger's suite of products till Apr 2018.

PDL BioPharma currently carries a Zacks Rank #3 (Hold). However Actelion Ltd. seems to be more favourably placed. The stock carries a Zacks Rank #1 (Strong Buy).

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