PDL BioPharma Inc. (PDLI) posted fourth quarter earnings of 20 cents per share, above the year-ago figure of 17 cents. Higher revenues boosted earnings in the quarter. Earnings per share were, however, a penny short of the Zacks Consensus Estimate of 21 cents.
For full year 2010, PDL reported earnings per share of 97 cents, down from $1.06 per share in 2009 but ahead of the Zacks Consensus Estimate of 90 cents. Full year 2010 revenues of $345 million were well above the prior-year figure of $318.2 million. Revenues also beat the Zacks Consensus Estimate of $343 million. 2009 revenues included royalties from MedImmune, a subsidiary of AstraZeneca (AZN), on sales of Synagis, which PDL no longer receives. Excluding this revenue, sales were up 30% over the prior year.
Quarterly Details
Fourth quarter revenue of $76.1 million was higher than the Zacks Consensus Estimate of $74 million and the year-ago revenue of $58.3 million. The top-line increase resulted from higher sales of Roche’s (RHHBY) Avastin, Herceptin, Lucentis and Biogen (BIIB)/Elan’s (ELN) Tysabri, in the third quarter of 2010, on which PDL BioPharma received royalties in the fourth quarter. Revenue in the reported quarter also outdid the company guidance of $74 million provided in December 2010.
General and administrative expenses increased from $5.5 million in the year-earlier quarter to $12.1 million in the fourth quarter of 2010. Increased legal costs perpetrated the rise in expenses.
PDL announced that it is shifting from a special dividend policy to a regular dividend policy of paying dividend of 15 cents in each quarter.
On the legal front, PDL resolved patent disputes with Novartis (NVS), MedImmune, and UCB Pharma S.A. (UCBJF) in the quarter.
Settlement with MedImmune
In February 2011, PDL resolved all legal disputes with MedImmune, a subsidiary of AstraZeneca, for $92.5 million including payments related to royalties on sales of MedImmune’s product Synagis (a respiratory virus treatment) and PDL’s patents. This dispute has been ongoing since December 2008.
Under the definitive settlement agreement, PDL paid MedImmune $65 million and will pay another $27.5 million by February 10, 2012. MedImmune has not paid any royalties to PDL since September 2009 on Synagis sales and is not liable to pay any further royalties to PDL, either on past or future sales. MedImmune will not challenge the Queen et al. patents henceforth or assist any other parties involved in opposing the European patent ‘216B (key Queen patent in EU).
Settlement with UCB Pharma
In February 2011, PDL entered into a settlement with UCB Pharma to refrain from suing the latter for any royalties on UCB’s drug Cimzia under the Queen et al. patents. This settlement marks the end of all legal disputes between the two companies. In the process, PDLI received a lump sum payment of $10 million from UCB. UCB consequently withdrew its challenge to the European patent ‘216B in the European Patent Office (EPO).
Settlement with Novartis
In late February 2011, PDL entered into a settlement agreement with Novartis under which PDL agreed to dismiss all claims against Novartis as well as the Nevada lawsuit. Novartis also withdrew its opposition appeal to the European patent ‘216B. PDL will get lower royalties on net sales of Lucentis under the settlement agreement. The litigation with Roche, however, continues.
In February 2011, the acquisition of BioTransplant (a bankrupt company) by PDL was approved and BioTransplant subsequently withdrew its opposition appeal challenging the validity of the ‘216B patent. Following the settlements with MedImmune, UCB Pharma and Novartis, and the acquisition of BioTransplant, all the parties challenging the validity of the ‘216 B patents have formally withdrawn their participation. Accordingly, the EPO validated its 2007 decision upholding the ’216B patent.
We believe that the validation of the European patent means limited risk to ex-US royalties. In 2010, PDL generated 35% of revenues from sales of products manufactured and sold outside the US. The validation of the ‘216B patent minimizes the risk to this source of ex-US revenue.
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