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PDL BioPharma, Inc. Message Board

pharmarobot 11 posts  |  Last Activity: Sep 18, 2014 2:59 PM Member since: Dec 8, 1997
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  • Reply to

    PDLI Statement Given

    by ducktown10 Sep 18, 2014 9:48 AM
    pharmarobot pharmarobot Sep 18, 2014 2:59 PM Flag

    E&Y did make a written statement that PDLI filed with the original 8-k disclosing their resignation. It was simply confirming portions of the disclosure that PDLI made. See below. It does not shed any light on the situation. Clearly what they saw did not rise to the level of a "noisy exit" requirement. However, it seems clear that there was a disagreement about something. Firms do not walk away from million dollar engagements for no reason.

    Securities and Exchange Commission 100 F Street, N.E.
    Washington, DC 20549
    Ladies and Gentlemen:
    [Ernst & Young LLP Letterhead]
    We have read Item 4.01 of Form 8-K dated September 16, 2014, of PDL BioPharma, Inc. and are in agreement with the statements contained in paragraphs 1 through 5 on page 2 therein. We have no basis to agree or disagree with other statements of the registrant contained therein.
    /s/ Ernst & Young LLP

  • Reply to

    What happened?

    by saiani Sep 17, 2014 9:58 AM
    pharmarobot pharmarobot Sep 17, 2014 11:07 AM Flag

    I went back and reread the 8-K and the E&Y letter. Its clear there must have been some significant disagreement about accounting matters. Firms don't resign effective on the same day they make the call unless there has been something discovered that makes them uncomfortable. Clearly the company was unprepared, since they have not appointed another auditor. The legalistic letter from E&Y to PDLI confirming their 10K statement is threading the needle between coming public with their reasons and giving false reassurance to the market.

  • Reply to

    Auditor quits

    by texaz78 Sep 16, 2014 4:23 PM
    pharmarobot pharmarobot Sep 17, 2014 10:06 AM Flag

    According to the company's 8k there was no "disagreement" with E&Y. On the other hand, accounting firms don't typically resign without a reason. My guess is that it centers on revenue recognition and valuation of portfolio assets. You will recall that the company had a disagreement with the SEC on this when filing their most recent 10Q. Sometimes the auditors get uncomfortable when they think that the company is too aggressive on the accounting side. Just a guess. We will never know for sure unless it metastasizes into something bigger.

  • Reply to


    by vonstutt Sep 10, 2014 3:04 PM
    pharmarobot pharmarobot Sep 11, 2014 10:28 AM Flag

    I think a buyout is unlikely given that the enterprise value of the company is so high. Like many other companies, they may try to invert, but the benefit would likely be only on prospective investments and the chances of finding an attractive inversion partner are diminished based on the number of companies trying to do the same thing. One key problem they are likely to have in inverting is their valuation, which is impossible to justify on a net asset value basis. In order to accept the current valuation, one needs to attribute value to the business itself. Given its position in the industry, I do not think it is justified, but obviously others might.

  • Reply to


    by vonstutt Sep 10, 2014 3:04 PM
    pharmarobot pharmarobot Sep 11, 2014 9:24 AM Flag

    Based on its revised strategy of continuing to invest in royalties, it would make little sense for it to increase its dividend or to pay a special dividend, in effect liquidating the company. In fact, I think it likely that they will not be able to afford the $90 million per year now spent on the dividend once the Queen royalties are over in Q1 2016. One thing certain based on my discussion with Pete Garcia the CFO is that they will need to raise money, convert the outstanding convertible debt, or both in order to continue to make investments.

  • Reply to

    Volume Spike

    by astuteinvestor1 Sep 2, 2014 5:05 PM
    pharmarobot pharmarobot Sep 3, 2014 9:04 AM Flag

    I think that this is the most logical rationale for the spike in volume; i.e., trading around the dividend. Nothing could change the term of the Queen royalties at this point. The settlement with Genentech/Roche made that term definitive. They may also be seeking to redomicile through an inversion to avoid higher taxes on future income, although that would not impact the taxes on their current portfolio. In my opinion, there is still no rational justification for the current stock price.

  • Reply to

    The PDLI brain trust is all the money ...

    by dadaswalapala Aug 22, 2014 11:22 AM
    pharmarobot pharmarobot Aug 27, 2014 2:06 PM Flag

    I think it has to do with the fact that it is owned by computer driven, not human driven investment vehicles, such as the index and dividend funds I mentioned previously. There doesn't seem to be any other explanation, since anyone with eyes can see the cliff coming.

  • Reply to

    The PDLI brain trust is all the money ...

    by dadaswalapala Aug 22, 2014 11:22 AM
    pharmarobot pharmarobot Aug 27, 2014 8:54 AM Flag

    No, it was acquired shortly after the spin-off. PDLI's only source of new royalties is acquisition. These tend to be competitive and there are a lot of other companies with more resources, such as Royalty Pharma, among others.

  • Reply to

    The PDLI brain trust is all the money ...

    by dadaswalapala Aug 22, 2014 11:22 AM
    pharmarobot pharmarobot Aug 26, 2014 2:44 PM Flag

    Substantially all of the company's revenue comes from the Queen et al patents. These were developed by the company while it was a research driven entity. Several years ago, it split its operations into the operating company, which I think was called Focus, and the stub, PDLI. The original intent was to liquidate the Queen royalty and distribute the proceeds to investors. About a year and a half ago, they decided to start investing in loans secured by IP and in royalty rights outright.

    You raise what is the central question regarding the company's valuation; that is, what happens after Queen. The Queen royalty expires with the payment made in the first quarter of 2016, so that mean 6 payments after this quarter's. After that, they will have to rely on the revenue coming from their new acquisitions. So far these total about $715 million in purchase price and they will not come close to replacing the Queen revenue. That is why the PE ratio is so low and the dividend yield is so high. The other issue is that because the company has significant debt and is paying about $90 million per year in order to keep the dividend where it is, it will have to raise additional capital in order to continue making investments.

    How all of this works out is anyone's guess and since I have been short the stock for a while to my detriment, I am not sure that you should be listening to me. Based on my analysis, the company is worth no more than $6 per share. It may take the expiration of the Queen patents and the dramatic decline in revenue that will ensue in order for this to happen, so that means it may take a year or more.

    One other note to keep in mind is that the bulk of the shareholder base is index funds or dividend yield funds which are all quantitatively driven. As you can see from the chart, the stock tends to drop dramatically when it declines, which is a direct result of the shareholder base

    Happy hunting.

  • pharmarobot by pharmarobot Aug 12, 2014 2:43 PM Flag

    PDLI has announce two issues in the last few days, which are clearly impacting the view of the stock. The first is a disagreement with the SEC over the accounting associated with its investment in the Duramed royalty. In this instance the issue is over how to account for the asset and income associated with the asset -- as an intangible (valued at cost less amortization) or as a security (current market value). The difference is accounting related and not cash flow related. For me this is unimportant, since I value the company at its asset value anyway, which is in any case far below its current market cap.

    The second issue is more relevant to valuation. The Company has been trumpeting its investments over the last year or so and to have one go into default so early calls into question its underwriting standards. While this one investment represents a relatively small portion of the total capital invested, it doesn't reflect well on the prospects for its others.

  • Reply to

    Where is this stock going?

    by dean2013 Jul 8, 2014 1:13 PM
    pharmarobot pharmarobot Jul 11, 2014 10:08 AM Flag

    I wouldn't expect to see much more than you have historically on this board. There are two schools of thought -- one that thinks the stock is cheap on the basis of dividend yield and PE, the other that thinks the stock is overvalued, since the company's principal source of revenue and cash flow is going away in 7 quarters and their current investments cannot come close to making up the difference. I happen to be in the latter camp. The proof will be in the pudding and will play out over the next year or so.

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