On March 8, 2018 PDL BioPharma, Inc. (PDL or the Company) (NASDAQ: PDLI) reported financial results for the fourth quarter and year ended December 31, 2017 including (Press release, PDL BioPharma, MAR 8, 2018, View Source [SID1234524568]):
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Total revenues of $68.0 million and $320.1 million for the three and twelve months ended December 31, 2017, respectively.
GAAP diluted EPS of $0.15 and $0.71 for the three and twelve months ended December 31, 2017, respectively.
GAAP net income attributable to PDL’s shareholders of $22.3 million and $110.7 million for the three and twelve months ended December 31, 2017, respectively.
Non-GAAP net income attributable to PDL’s shareholders of $24.8 million and $100.7 million for the three and twelve months ended December 31, 2017. A full reconciliation of all components of the GAAP to non-GAAP financial results can be found in Table 3 at the end of the release.
"2017 was a great year for us and one where we experienced a 31 percent increase in revenue from the previous year," stated John P. McLaughlin, chief executive officer of PDL. "Since 2012, we have built a rich portfolio of income generating assets and products to replace revenues from our expired Queen et al patents. We expect the revenues from these assets, whose net book value is $5.54 per share, to fuel the building of our specialty pharma business. It’s important to note that $264 million, or 83 percent of our 2017 revenues, came from sources other than the Queen et al patents. In 2018, we need to continue to execute successfully on our business model as well as close the gap between our share price and our book value per share."
Revenue Highlights
Total revenues of $68.0 million for the three months ended December 31, 2017 included:
Royalties from PDL’s licensees to the Queen et al. patents of $4.5 million, which consisted of royalties earned on sales of Tysabri;
Net royalty payments from acquired royalty rights and a change in fair value of the royalty rights assets of $30.1 million, which consisted of the change in estimated fair value of our royalty right assets, primarily related to Depomed, Inc. (Depomed) royalty asset;
Interest revenue from note receivable investment to CareView Communications of $0.8 million; and
Product revenues of $32.6 million, which consisted of $25.1 million from sales of Tekturna and Tekturna HCT in the United States, Rasilez and Rasilez HCT in the rest of the world (collectively, the Noden Products) and $7.5 million for product sales of the LENSAR Laser System.
Total revenues increased by 2 percent for the three months ended December 31, 2017, when compared to the same period in 2016.
Royalties from PDL’s licensees to the Queen et al. patents were lower due to reduced sales of Tysabri that was manufactured prior to the patent expiry date;
PDL received $32.8 million in net cash royalties from its royalty rights in the fourth quarter of 2017, compared to $25.3 million for the same period of 2016. The increase in cash royalties is mainly due to a one-time settlement payment from Valeant related to the royalty audit of Glumetza and the launch of the authorized generic for Glumetza sold by Valeant Pharmaceuticals International, Inc. PDL received royalties on the authorized generic equivalents under the same terms as the branded Glumetza;
The decrease in interest revenues was primarily due to the sale of the kaléo, Inc. note receivable in September 2017; and
The increase in product revenues were derived from the sale of the LENSAR Laser System, which PDL did not begin to recognize until May 2017.
Total revenues increased by 31 percent for the year ended December 31, 2017, when compared to the year ended December 31, 2016.
The decrease in royalties from PDL’s licensees to the Queen et al. patents is due to the expiration of the patent license agreement with Genentech, Inc. and reduced royalties on Tysabri.
The increase in royalty rights – change in fair value was primarily due to the year-to-date increase in fair value of the Depomed royalty asset by $134.1 million.
PDL received $107.3 million in net cash royalties, including a one-time settlement payment from Valeant related to the royalty audit of Glumetza, from its royalty rights in the year ended December 31, 2017, compared to $72.6 million for the same period of 2016.
The decrease in interest revenues was primarily due to the early repayment of the Paradigm Spine, LLC note receivable and the sale of the kaléo, Inc. note receivable.
Product revenue increased due to sales of the Noden Products, which PDL did not begin to recognize until the third quarter of 2016, and sales of the LENSAR Laser System, which PDL did not begin to recognize until May 2017.
License and other revenue increased by $19.6 million primarily due to a one-time $19.5 million payment from Merck as part of the previously announced settlement agreement to resolve the patent infringement lawsuit related to Keytruda.
Operating Expense Highlights
Operating expenses were $38.2 million for the three months ended December 31, 2017, compared to $74.2 million for the same period of 2016. The decrease in operating expenses for the three months ended December 31, 2017, as compared to the same period in 2016, was primarily a result of the prior year period loss on extinguishment of Direct Flow Medical notes receivable, partially offset by the increase in operating expenses related to the acquisitions and operations of Noden and LENSAR, contributing an additional $13.8 million of cost of product revenue and $6.0 million in sales and marketing expenses due to an increase in Noden’s sales force.
Operating expenses were $126.3 million for the year ended December 31, 2017, compared to $114.9 million for the year ended December 31, 2016. The increase in operating expenses in 2017 was a result of the acquisitions and operations of Noden and LENSAR, contributing an additional $26.5 million of cost of product revenue, $12.7 million of intangible asset amortizations, $17.1 million in sales and marketing expenses, and $3.6 million in research and development costs for the completion of a pediatric trial for Tekturna. General administrative expenses increased by $5.9 million of which $7.5 million was related to Noden and $3.2 million was related to LENSAR, partially offset by a decrease of $51.1 million from the loss on extinguishment for the Direct Flow Medical notes receivable in 2016.
Recent Developments
On February 1, 2018, PDL completed the retirement of the remaining $126.4 million of aggregate principal of its 4.0% Convertible Senior Notes due 2018 at their stated maturity by making a payment to the noteholders of $126.4 million, plus $2.6 million of accrued interest.
In February 2018, we entered into a modification agreement with CareView whereby we agreed, effective as of December 28, 2017, to modify the credit agreement before remedies could otherwise have become available to us under the credit agreement in relation to certain obligations of CareView that would potentially not be met, including the requirement to make principal payments. Under the modification agreement we agreed that (i) a lower liquidity covenant would be applicable and (ii) principal repayment would be delayed for a period of up to December 31, 2018. In exchange for agreeing to these modifications, among other things, the exercise price of our warrants to purchase 4.4 million shares of common stock of CareView was reduced and, subject to the occurrence of certain events, CareView agreed to grant us additional equity interests.
Other Financial Highlights
PDL had cash, cash equivalents, short-term investments and other investments of $532.1 million at December 31, 2017, compared to $242.1 million at December 31, 2016.
Conference Call and Webcast Details
PDL will hold a conference call to discuss financial results at 4:30 p.m. Eastern Time today, March 8, 2018.
To access the live conference call via phone, please dial (800) 668-4132 from the United States and Canada or (224) 357-2196 internationally. The conference ID is 9384627. Please dial in approximately 10 minutes prior to the start of the call. A telephone replay will be available beginning approximately one hour after the call through one week following the call, and may be accessed by dialing (855) 859-2056 from the United States and Canada or (404) 537-3406 internationally. The replay passcode is 9384627.
To access the live and subsequently archived webcast of the conference call, go to the Company’s website at View Source and go to the Investor Relations section and select "Events & Presentations." Please connect to the website at least 15 minutes prior to the call to allow for any software download that may be necessary.