On May 4, 2016 PDL BioPharma, Inc. (PDL) (NASDAQ: PDLI) reported financial results for the first quarter ended March 31, 2016(Press release, PDL BioPharma, MAY 4, 2016, View Source [SID:1234511937]).

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Total revenues of $103.1 million for the first quarter of 2016.
Non-GAAP diluted earnings per share (EPS) of $0.52 increased approximately 11 percent versus the same period in 2015.
Non-GAAP net income increased 7 percent to $84.8 million.
GAAP diluted EPS of $0.34 decreased by 32 percent compared to the same period of 2015.
GAAP net income decreased by 34 percent to $55.9 million.
The largest component of the difference in non-GAAP measure compared to GAAP is the exclusion of mark-to-market adjustments related to the fair value election of our investments in royalty rights. A full reconciliation of all components of the GAAP to Non-GAAP quarterly financial results can be found in Table 4 at the end of this release.
Revenue Highlights
Total revenues of $103.1 million for the quarter ended March 31, 2016 included:
Royalties from PDL’s licensees to the Queen et al. patents of $121.5 million, which consisted of royalties earned on sales of products under license agreements associated with the Queen et al. patents;
Net royalty payments from acquired royalty rights and a change in fair value of the royalty rights assets of negative $27.1 million, which consisted of revenues associated with the change in estimated fair value of our royalty right assets and primarily related to the Depomed, Inc. royalty rights acquisition;

Interest revenue from notes receivable debt financings to late-stage healthcare companies of $9.0 million; and
License and other revenues of negative $0.2 million, which consisted of a negative $0.3 million mark-to-market adjustments on warrants held and, a realized gain of $0.1 million from the sale of PDL’s investment in AxoGen Inc. common stock.
Total revenues decreased by 31 percent for the first quarter ended March 31, 2016, when compared to the same period in 2015.
The decrease in royalties from PDL’s licensees to the Queen et al. patents is due to decreased Lucentis and Actemra royalties as a result of the conclusion of their license agreements, partially offset by increased royalties from other Queen et al. royalty revenues.

PDL expects its revenue from the Queen et al. patents to materially decrease beyond this first quarter of 2016.
The decrease in royalty rights – change in fair value was driven by the $47.9 million decrease in the fair value of the Depomed royalty rights assets and is primarily a result of lower than expected cash royalties in the first quarter and an adjustment reducing future cash flows due to lower projected demand data, greater erosion of market share due to the launch of a generic, and higher gross-to-net adjustments for Glumetza.

PDL received $17.2 million in net cash royalty payments from its acquired royalty rights in the first quarter of 2016, compared to $0.9 million for the same period of 2015.
The decrease in interest revenues was due to reduced interest from Direct Flow Medical, Inc. as a result of ceasing to accrue interest due to the loan being impaired.

Operating Expense Highlights
Operating expenses were $9.8 million for the quarter ended March 31, 2016, compared to $7.7 million for the same period of 2015.
The increase in operating expenses for the quarter, as compared to the same period in 2015, was a result of an increase in general and administrative expenses of $1.5 million for legal service expenses mostly related to business development activities, the asset management of Wellstat Diagnostics, legal expenses related to a complaint against Merck Sharp & Dohme, Corp, and $0.9 million for compensation, including stock-based compensation, offset in part by a decrease in professional services from asset management expenses.

Other Financial Highlights
PDL had cash, cash equivalents, and short-term investments of $292.0 million at March 31, 2016, compared to $220.4 million at December 31, 2015.

The increase was primarily attributable to proceeds from royalty right payments of $17.2 million and cash generated by operating activities of $92.5 million, offset in part by the repayment of a term loan for $25.0 million, payment of dividends of $8.2 million and an additional note receivable purchase of $5.0 million.
Net cash provided by operating activities in the first quarter of 2016 was $92.5 million, compared with $71.8 million in the same period in 2015.

Recent Developments
Q2 2016 Dividends
On May 2, 2016, our board of directors declared a quarterly dividend of $0.05 per share of common stock to be paid on June 13, 2016 to stockholders of record on June 6, 2016, the record date of the dividend payment.