PDL BioPharma Inc. (PDLI) announced that it expects to receive royalty revenues of roughly $109 million in the fourth quarter of 2013, up around 27% from the year-ago figure.
PDL BioPharma receives royalties from companies including Roche Holdings (RHHBY) and Novartis (NVS). The royalties are earned on worldwide net sales of products like Avastin, Herceptin, Lucentis, Xolair, Kadcyla, Actemra and Perjeta.
Royalty payments for Roche’s products are tiered (1-3%) in the U.S., while PDL BioPharma receives a flat 3% royalty if a product is both manufactured and sold outside the U.S.
The anticipated growth in royalty revenues primarily emanates from higher sales of Herceptin (up 5%), Avastin (up 9%) and Lucentis (up 9%) during the third quarter of 2013 for which PDL will receive royalties in the fourth quarter of 2013. However, worldwide sales for Tysabri decreased 1% in the third quarter of 2013.
PDL BioPharma recognizes royalty revenues on Glumetza (as per a deal in Oct 2013) a month after sales by the licensees occurred. The company expects $10 million of royalty revenues from two months of sales of Glumetza in the final quarter of 2013.
Effective from the second quarter of 2011, PDL BioPharma started paying back a portion of the royalties it receives on Lucentis sales outside the U.S. to Novartis. The payment is made in accordance with a settlement agreement, which the companies had entered into in Feb 2011. The amount paid is less than the fourth quarter 2013 royalty guidance.
PDL BioPharma currently carries a Zacks Rank #3 (Hold). Some better ranked stocks in the bio pharma sector include Actelion Ltd. (ALIOF). Actelion holds a Zacks Rank #1 (Strong Buy).