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PDL BioPharma Misses on Q3 Earnings

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PDL BioPharma Inc. (PDLI ) posted third-quarter 2013 earnings of 36 cents per share, below the Zacks Consensus Estimate of 39 cents but ahead of the year-ago figure of 32 cents per share. The year-over-year increase in earnings was attributable to higher revenues.

PDL BioPharma generated third-quarter 2013 revenues of $97.3 million, up 14.2% year over year. Revenues were just above of the company’s guidance of $97 million announced in Sep 2013. Revenues as per the Zacks Consensus Estimate were also $97 million.

Quarter in Detail

PDL BioPharma derived revenues for the third quarter of 2013 primarily 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, Actemra and Perjeta.

Increased royalties on sales of Avastin, Herceptin, Lucentis, Perjeta, Kadcyla and Actemra drove third-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 third-quarter 2013 revenue is net of this payment.

General and administrative (G&A) expenses were $7.9 million in the reported quarter, up approximately 40.3%. The increase in G&A expenses during the quarter was primarily due to increased legal-related expenses.

The company is expected to provide its revenue guidance for the fourth quarter of 2013 in early December this year.

Other Developments

PDL BioPharma is also set to receive royalties on Roche's Gazyva, which was approved earlier in the month for the treatment of chronic lymphocytic leukemia. The drug is expected to enter the U.S. market by mid-Nov 2013.

We note that in Oct 2013, PDL BioPharma completed a financing agreement with LENSAR, Inc. PDL BioPharma will provide up to $60 million of debt financing to LENSAR. PDL BioPharma has already funded $40 million in cash to LENSAR and is expected to fund the balance $20 million by Sep 30, 2014 on achieving certain specified sales milestone. In return, PDL BioPharma will be receiving a security interest in all of LENSAR's assets and the principal amount outstanding. PDL BioPharma also entered into a couple of debt financing transactions in Oct and Nov 2013 respectively.

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

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