PDL BioPharma Reports Third Quarter 2018 Financial Results
INCLINE VILLAGE, Nev., Nov. 6, 2018 /PRNewswire/ -- PDL BioPharma, Inc. ("PDL" or "the Company") (NASDAQ: PDLI) reports financial results for the three and nine months ended September 30, 2018 including:
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
-- Total revenues of $67.9 million for the three months ended September 30,
2018 included:
-- 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;
-- 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;
-- 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
-- Interest revenue from note receivable investment to CareView
Communications ("CareView") of $0.8 million.
-- 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.
-- 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;
-- Product revenue from the Noden Products was $9.7 million in the U.S.
and $8.1 million in the rest of the world;
-- 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;
-- 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.);
-- 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
-- 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.
-- 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:
-- 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;
-- PDL recognized $66.1 million in revenue from royalty rights - change
in fair value, compared with $132.2 million for the prior-year
period;
-- 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;
-- 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
-- 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.
-- 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
-- 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.
-- 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
-- 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.
-- 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.
-- 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.
-- 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
-- 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.
-- 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."
About PDL BioPharma, Inc.
We seek to provide a significant return for our stockholders by acquiring and managing a portfolio of companies, products, royalty agreements and debt facilities in the biotechnology, pharmaceutical and medical device industries. In 2012 we began providing alternative sources of capital through royalty monetizations and debt facilities, and in 2016 we began acquiring commercial-stage products and launching specialized companies dedicated to the commercialization of these products. To date, we have consummated 17 of such transactions, of which nine are active and outstanding. We have one debt transaction outstanding, representing deployed capital of $20.0 million: CareView; we have one hybrid royalty/debt transaction outstanding, representing deployed capital of $44.0 million: Wellstat Diagnostics; and we have five royalty transactions outstanding, representing deployed capital of $416.1 million, respectively: KYBELLA(®), AcelRx, University of Michigan, Viscogliosi Brothers and Depomed (now Assertio Therapeutics). Our equity and loan investments in the Noden Products represent deployed capital of $191.2 million, respectively, and our converted equity and loan investment in LENSAR represents deployed capital of $40.0 million.
NOTE: PDL, PDL BioPharma, the PDL logo and the PDL BioPharma logo are trademarks or registered trademarks of, and are proprietary, to PDL BioPharma, Inc. which reserves all rights therein.
Forward-looking Statements
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Each of these forward-looking statements involves risks and uncertainties. Actual results may differ materially from those, express or implied, in these forward-looking statements. Important factors that could impair the value of the Company's assets and business are disclosed in the risk factors contained in the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 16, 2018 and subsequent filings. All forward-looking statements are expressly qualified in their entirety by such factors. We do not undertake any duty to update any forward-looking statement except as required by law.
TABLE 1
PDL BIOPHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS DATA
(In thousands, except per share amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
Revenues
Royalties from Queen et al.
patents $
533 $
1,443 $
4,534 $
31,884
Royalty rights -change in fair
value 42,184 35,353 66,117 132,224
Interest revenue 754 6,051 2,254 16,968
Product revenue, net 24,387 20,067 79,472 51,477
License and other 40 (165) 614 19,471
Total revenues 67,898 62,749 152,991 252,024
Operating Expenses
Cost of product revenue
(excluding intangible
amortization and impairment) 11,926 5,565 37,016 12,632
Amortization of intangible assets 1,577 6,275 14,254 18,438
General and administrative
expenses 13,211 11,989 39,401 35,853
Sales and marketing 3,469 4,994 14,367 11,194
Research and development 672 605 2,149 6,652
Impairment of intangible assets 152,330
Change in fair value of
anniversary payment and
contingent consideration 302 700 (22,433) 3,349
Total operating expenses 31,157 30,128 237,084 88,118
Operating income (loss) 36,741 32,621 (84,093) 163,906
Non-operating expense, net
Interest and other income, net 1,581 238 4,871 726
Interest expense (2,866) (5,096) (9,262) (15,082)
Gain (loss) on bargain purchase (2,276) 3,995
Total non-operating expense, net (1,285) (7,134) (4,391) (10,361)
Income (loss) before income taxes 35,456 25,487 (88,484) 153,545
Income tax expense (benefit) 9,900 4,755 (3,346) 65,180
Net income (loss) 25,556 20,732 (85,138) 88,365
Less: Net loss attributable to
noncontrolling interests (47)
Net income (loss) attributable to
PDL's shareholders $
25,556 $
20,732 $
(85,138) $
88,412
Net income (loss) per share
Basic $
0.18 $
0.14 $
(0.58) $
0.56
Diluted $
0.18 $
0.14 $
(0.58) $
0.56
Shares used to compute income per
basic share 143,171 151,146 147,159 156,802
Shares used to compute income per
diluted share 144,224 152,317 147,159 157,529
TABLE 2
PDL BIOPHARMA, INC.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(Unaudited)
(In thousands)
September 30, December 31,
2018 2017
Cash, cash equivalents
and short-term
investments $
400,984 $
532,114
Total notes receivable $
70,966 $
70,737
Total royalty rights -at
fair value $
378,291 $
349,223
Total assets $
984,427 $
1,243,123
Total convertible notes
payable $
122,780 $
243,481
Total stockholders'
equity $
739,387 $
845,890
TABLE 3
PDL BIOPHARMA, INC.
GAAP to NON-GAAP RECONCILIATION:
NET INCOME AND DILUTED EARNINGS PER SHARE
(Unaudited)
(In thousands)
A reconciliation between net income (loss) on a GAAP basis and on a non-GAAP basis is as follows:
Three Months Ended Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
GAAP net income (loss) attributed
to PDL's shareholders as reported $
25,556 $
20,732 $
(85,138) $
88,412
Adjustments to Non-GAAP net income
(loss) (as detailed below) (13,249) 975 126,925 (14,730)
Non-GAAP net income attributed to
PDL's shareholders $
12,307 $
21,707 $
41,787 $
73,682
An itemized reconciliation between net income (loss) on a GAAP basis and on a non-GAAP basis is as follows:
Three Months Ended Nine Months Ended
September 30,
September 30,
2018 2017 2018 2017
GAAP net income (loss) attributed
to PDL's shareholders as reported $
25,556 $
20,732 $
(85,138) $
88,412
Adjustments:
Mark-to-market adjustment to fair
value assets (23,128) (9,011) (9,068) (57,820)
Non-cash interest revenues (79) (670) (229) (823)
Non-cash stock-based compensation
expense 2,596 939 4,814 3,014
Non-cash debt offering costs 1,834 2,801 5,745 8,195
Mark-to-market adjustment on
warrants held (40) 165 (114) 29
Impairment of intangible assets 152,330
Amortization of intangible assets 1,577 6,275 14,254 18,438
Mark-to-market adjustment of
anniversary payment and contingent
consideration 302 700 (22,433) 3,349
Income tax effect related to above
items 3,689 (224) (18,374) 10,888
Total adjustments (13,249) 975 126,925 (14,730)
Non-GAAP net income $
12,307 $
21,707 $
41,787 $
73,682
Use of Non-GAAP Financial Measures
We supplement our consolidated financial statements presented on a GAAP basis by providing additional measures which may be considered "non-GAAP" financial measures under applicable SEC rules. We believe that the disclosure of these non-GAAP financial measures provides our investors with additional information that reflects the amounts and financial basis upon which our management assesses and operates our business. These non-GAAP financial measures are not in accordance with generally accepted accounting principles and should not be viewed in isolation or as a substitute for reported, or GAAP, net income, and diluted earnings per share, and are not a substitute for, or superior to, measures of financial performance performed in conformity with GAAP.
"Non-GAAP net income" is not based on any standardized methodology prescribed by GAAP and represent GAAP net income adjusted to exclude (1) mark-to-market adjustments related to the fair value election for our investments in royalty rights presented in our earnings, which include the fair value re-measurement of future discounted cash flows for each of the royalty rights assets we have acquired, (2) non-cash interest revenue from notes receivable (3) stock-based compensation expense, (4) non-cash interest expense related to PDL debt offering costs, (5) mark-to-market adjustments related to warrants held, (6) impairment of intangible assets, (7) amortization of intangible assets, (8) mark-to-market adjustment related to acquisition-related contingent considerations, and to adjust (9) the related tax effect of all reconciling items within our reconciliation of our GAAP to Non-GAAP net income. Non-GAAP financial measures used by PDL may be calculated differently from, and therefore may not be comparable to, non-GAAP measures used by other companies.
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SOURCE PDL BioPharma, Inc.
