PDL BioPharma Inc. (PDLI) posted second quarter earnings of 38 cents per share, in line with the Zacks Consensus Estimate, but down 8 cents from the year-ago quarter. Lower revenues and higher general and administrative expenses led to the decline in second-quarter earnings.
Quarterly Details
Second quarter revenues of $120.3 million was just shy of the Zacks Consensus Estimate of $121 million and about 4% below the year-ago figure of $125.9 million. The decline was because PDL BioPharma no longer books royalties on sales of Synagis received from MedImmune, a subsidiary of AstraZeneca plc (AZN).
PDL BioPharma terminated its license agreement with MedImmune for Synagis and has initiated legal proceedings against it. PDL BioPharma is seeking damages for patent infringement in addition to breach of contract. The trial date is set for January 2011.
Quarterly general and administrative expenses increased 57% year over year to $8.8 million. Legal expenses associated with the MedImmune litigation resulted in increased expenses.
PDL BioPharma had announced in January that it will pay two special dividends of 50 cents each to its shareholders in 2010. The payment for first of the two dividends was made on April 1, 2010, with the second one scheduled for October 1, 2010, to all shareholders of record as of September 15, 2010.
PDL BioPharma said that it will provide revenue guidance for the third quarter in September.
Our View
We currently have a Neutral recommendation on PDL BioPharma, which is supported by a Zacks #3 Rank (Hold). The company currently derives a significant portion of its revenue from licenses granted to companies under the Queen patents, covering the humanization of antibodies. The patents are set to expire in 2013-14.
However, we view the filing of a Biologics License Application for breast cancer treatment trastuzumab-DM1 by Roche Holdings Ltd. (RHHBY) as a positive. Approval of this candidate would result in incremental royalty revenues for PDL BioPharma. We expect investor focus to remain on the company’s revenue guidance, due in September, and the approvability of trastuzumab-DM1.
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