On November 6, 2018 PDL BioPharma, Inc. ("PDL" or "the Company") (NASDAQ: PDLI) reported financial results for the three and nine months ended September 30, 2018 including (Press release, PDL BioPharma, NOV 6, 2018, View Source [SID1234530825]):
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Third Quarter Financial Highlights
Total revenues of $67.9 million.
GAAP net income attributable to PDL’s shareholders of $25.6 million or $0.18 per share.
Non-GAAP net income attributable to PDL’s shareholders of $12.3 million. A reconciliation of GAAP to non-GAAP financial results can be found in Table 3 at the end of this news release.
Cash and cash equivalents of $401.0 million as of September 30, 2018.
Completed a $25.0 million share repurchase program authorized in September 2017 by repurchasing 0.6 million shares of common stock in the open market during the quarter for $1.4 million.
Announced new share repurchase program of up to $100.0 million.
"Our third quarter revenues increased 8% from the prior year to $68 million, reflecting higher product sales and $42 million in royalty rights revenue that included an increase in fair value of the royalty rights from Assertio Therapeutics, formerly known as Depomed, as a result of our purchase of the remaining interest in royalty payments of this asset," said John P. McLaughlin, CEO of PDL. "We benefitted from a particularly strong showing during the quarter from the type 2 diabetes drug Glumetza, and I’m pleased to report that overall the Assertio asset has performed substantially better than we expected. With Tekturna, we are cautiously optimistic about the transition to a non-personal promotion campaign from a direct sales model, which we completed mid-way through the third quarter. Tekturna sales remained stable throughout the quarter, with the new sales strategy reducing costs and increasing profitability."
"We announced a new $100 million share repurchase program in late September after completing the previous program early in the third quarter," he added. "While to date we have been unable to execute any share buybacks under the new program due to blackout periods, we plan to begin aggressively repurchasing shares once the blackout is lifted."
"After serving as CEO for more than 10 years, I have informed the board of directors of my intention to retire as CEO at year-end 2018 while continuing to serve on the board," said McLaughlin. "It has been a pleasure to serve PDL and its shareholders. I’m gratified to announce our plan for PDL President, Dominique Monnet, to succeed me as CEO effective December 31, 2018 and to simultaneously join the PDL board. Dominique is a seasoned industry veteran with a track record of commercial success in biopharmaceutical development and has been an integral part of our management team for more than a year. I’m confident in Dominique’s leadership abilities and am delighted to be transferring the CEO responsibilities to his very capable hands."
Mr. Monnet joined PDL as President in September 2017, bringing more than 30 years of leadership experience in the biotech and pharmaceutical industries. He was instrumental in overseeing global commercialization operations, including successful new product launches, while serving in senior management positions at Alexion Pharmaceuticals, Amgen and Schering-Plough.
"It is a privilege to succeed John as we continue to execute our strategy to accelerate PDL’s growth and deliver value to our shareholders," said Monnet. "Under John’s leadership, PDL built a very strong balance sheet and an impressive track-record of investments. As a result, we are exceptionally well positioned to pursue exciting acquisition and partnership opportunities and invest and nurture companies and products that have the potential to grow, succeed and return superior shareholder value. I am delighted that John has agreed to remain on the Board, and I look forward to my continued partnership with the teams at PDL, Noden and Lensar."
Revenue Highlights
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Total revenues of $67.9 million for the three months ended September 30, 2018 included:
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Product revenues of $24.4 million, which consisted of $17.8 million from sales of Tekturna and Tekturna HCT in the U.S. and Rasilez and Rasilez HCT in the rest of the world (collectively, the Noden Products), and $6.6 million for product revenue from the LENSAR Laser System;
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Net royalty payments from acquired royalty rights and a change in fair value of the royalty rights assets of $42.2 million, primarily related to the Assertio royalty asset;
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Royalties from PDL’s licensees to the Queen et al. patents of $0.5 million, which consisted of royalties earned on sales of Tysabri; and
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Interest revenue from note receivable investment to CareView Communications ("CareView") of $0.8 million.
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Total revenues for the third quarter of 2018 were $67.9 million, compared with $62.7 million for the third quarter of 2017, reflecting PDL’s strategic shift to a pharmaceutical business model.
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Product revenue was $24.4 million, a 22% increase from $20.1 million for the comparable prior-year quarter due to sales of the Noden Products and the LENSAR Laser System, the latter of which PDL did not begin to recognize until May 2017. Product revenues accounted for 36% of total revenues compared with 32% in the third quarter of 2017;
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Product revenue from the Noden Products was $9.7 million in the U.S. and $8.1 million in the rest of the world;
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PDL recognized $42.2 million in revenue from royalty rights – change in fair value, compared with $35.4 million in the prior-year period. The increase was due to the increased fair value of the Assertio royalty rights as a result of the purchase of all of Assertio’s remaining interest in royalty and milestone payments payable on sales of type 2 diabetes products licensed by Assertio, offset by declines in fair value adjustments for certain other royalty right assets;
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PDL received $19.1 million in net cash royalties from its royalty rights for the third quarter of 2018, compared with $26.3 million for the prior-year period. The decrease is mainly due to higher royalties in 2017 as a result of the launch of the authorized generic for Glumetza in February 2017 sold by a subsidiary of Bausch Health Companies Inc. (formerly known as Valeant Pharmaceuticals International, Inc.);
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Royalties from PDL’s licensees to the Queen et al. patents were $0.5 million, compared with $1.4 million for the third quarter of 2017 as product supply of Tysabri manufactured prior to patent expiry in the U.S. have been extinguished and ex-U.S. product supplies are rapidly being depleted; and
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Interest revenue from the note receivable investment to CareView was $0.8 million. Interest revenue decreased from $5.3 million in the prior-year due to the sale of the kaléo, Inc. note receivable in September 2017.
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Total revenues for the nine months ended September 30, 2018 were $153.0 million, compared with $252.0 million for the nine months ended September 30, 2017:
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Product revenue was $79.5 million, a 54% increase from $51.5 million for the prior-year period. Product revenue for 2018 consisted of $62.0 million from sales of the Noden Products and $17.5 million from sales of the LENSAR Laser System;
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PDL recognized $66.1 million in revenue from royalty rights – change in fair value, compared with $132.2 million for the prior-year period;
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PDL received $57.0 million in net cash royalties from its royalty rights year-to-date 2018, compared with $74.4 million for the prior-year period;
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Royalties from PDL’s licensees to the Queen et al. patents were $4.5 million, compared with $31.9 million for the prior-year period; and
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Interest revenue from note receivable investment to CareView was $2.3 million. Interest revenue decreased from $17.0 million in the comparable nine-month period of 2017 due to the above-noted sale of the kaléo, Inc. note receivable in September 2017.
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License and other revenue decreased by $18.9 million primarily due to a $19.5 million payment received in 2017 from Merck as part of the previously announced settlement agreement to resolve the patent infringement lawsuits related to Keytruda.
Operating Expense Highlights
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Operating expenses for the three months ended September 30, 2018 of $31.2 million increased $1.0 million from $30.1 million for the three months ended September 30, 2017. The increase was a result of the Noden Products and LENSAR contributing additional cost of product revenue of $6.0 million and $0.4 million, respectively, due to increased revenue from the Noden Products and recognition of costs of product revenue for ex-U.S. revenue and increased revenue from LENSAR, as well as general and administrative expenses increasing 10%, or $1.2 million, primarily due to stock-based compensation awards granted in the period, partially offset by lower asset management and asset purchase professional expenses. The increase in operating expenses was partially offset by lower intangible asset amortization expense due to the second quarter of 2018 impairment of the intangible assets related to the Noden Products, as well as by reduced sales and marketing expenses related to the change in marketing strategy of the Noden Products.
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Operating expenses for the nine months ended September 30, 2018 were $237.1 million, a $149.0 million increase from $88.1 million for the prior-year period. The increase was primarily a result of the impairment of the Noden intangible asset of $152.3 million, as well as the Noden Products and LENSAR contributing additional cost of product revenue of $20.0 million and $4.4 million, respectively, which was due to increased revenue from the Noden Products and recognition of costs of product revenue for ex-U.S. revenue and increased revenue from LENSAR, which PDL did not begin to recognize until May 2017, partially offset by the decrease in fair value of the contingent liability.
Stock Repurchase Programs
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From July 1, 2018 to July 5, 2018, the Company completed its $25.0 million stock repurchase program with the repurchase of 0.6 million shares of its common stock at a weighted average price of $2.44 per share, for a total of $1.4 million.
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PDL repurchased 8.7 million shares of its common stock under the $25.0 million share repurchase program during the nine months ended September 30, 2018, for an aggregate purchase price of $25.0 million, or an average cost of $2.86 per share, including trading commission. All shares repurchased were retired.
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Since initiating its first stock repurchase program in March 2017, the Company has used $55.0 million to repurchase a total of 22.1 million shares of its common stock.
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On September 21, 2018, the Company’s board of directors authorized the repurchase of issued and outstanding shares of the Company’s common stock having an aggregate value of up to $100.0 million pursuant to a new share repurchase program.
Other Financial Highlights
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PDL had cash and cash equivalents of $401.0 million as of September 30, 2018, compared with cash, cash equivalents and short-term investments of $532.1 million as of December 31, 2017.
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The reduction in cash balance for the nine months ended September 30, 2018 was primarily a result of retiring the remaining $126.4 million of principal from PDL’s 4.0% Convertible Senior Notes due 2018, plus $2.6 million of accrued interest, common stock repurchases of $25.0 million and the $20.0 million purchase of Assertio’s remaining interest in royalty and milestone payments payable on sales of type 2 diabetes products licensed by Assertio, partially offset by the proceeds from royalty rights of $57.0 million.
Conference Call and Webcast Details
PDL will hold a conference call to discuss financial results and provide a business update at 4:30 p.m. Eastern time today, November 6, 2018. Slides to accompany the conference call are available in the Investor Relations section of www.pdl.com.
To access the live conference call via phone, please dial 844-535-4071 from the U.S. and Canada or 706-679-2458 internationally. The conference ID is 6461756. 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 U.S. and Canada or 404-537-3406 internationally. The replay passcode is 6461756.
To access the live and subsequently archived webcast of the conference call, go to the Company’s website at www.pdl.com and go to the Investor Relations section and select "Events & Presentations."