PDL BioPharma Inc.’s (PDLI) shares gained over 2.6% after the company announced its fourth quarter financial results on Mar 3, 2014. Shares however went down nearly 2% the following day. PDL BioPharma posted fourth-quarter 2013 earnings of 39 cents per share, below the Zacks Consensus Estimate of 41 cents but ahead of the year-ago figure of 34 cents per share. The year-over-year increase in earnings was attributable to higher revenues.
PDL BioPharma generated fourth-quarter 2013 revenues of $110.1 million, up 28% year over year. Revenues were above the company’s guidance of $109 million announced in Dec 2013. Revenues were well above the Zacks Consensus Estimate of $104 million.
PDL BioPharma’s 2013 earnings of $1.66 per share were above the year-ago earnings of $1.45 per share but below the Zacks Consensus Estimate of $1.79 per share. Total revenues in 2013 were $442.9 million, up 18.3% from the prior year. Revenues were below the Zacks Consensus Estimate of $449 million.
Quarter in Detail
PDL BioPharma derived revenues for the fourth quarter of 2013 primarily from royalties. PDL BioPharma receives royalties from companies like Roche Holdings Ltd. (RHHBY) and Novartis (NVS). The royalties are earned on worldwide net sales of products like Avastin, Herceptin, Lucentis, Xolair, Kadcyla, Tysabri, Actemra and Perjeta.
Increased royalties on sales of Avastin, Herceptin, Lucentis, Perjeta, Kadcyla and Actemra drove fourth-quarter 2013 royalties.
General and administrative (G&A) expenses were $7.9 million in the reported quarter, up approximately 1.7%. The increase in G&A expenses during the quarter was primarily due to the amortization of Depomed intangible assets.
The company is expected to provide its revenue guidance for the first quarter of 2014 soon.
In Feb 2014, PDL BioPharma announced that it has entered into an agreement with Roche to settle all outstanding legal disputes between them. The settlement includes the Nevada litigation and arbitration proceedings related to the audit of royalties on sales.
As per the agreement, effective retroactively to Aug 15, 2013, PDL BioPharma will be receiving a fixed royalty rate of 2.125% on global sales of Avastin, Herceptin, Lucentis Xolair, Kadcyla and Perjeta from Roche. Previously royalties on Roche’s products were tiered 1–3% in the U.S. and flat 3% in the ex-U.S. markets. PDL BioPharma is expected to recognize royalties till the first quarter of 2016.
PDL BioPharma’s earnings were below expectations. More than the fourth quarter results, we believe investors were more interested in the Roche settlement. The settlement comes as a huge relief for PDL BioPharma. The company has been struggling with the Roche dispute for a long time now. However, we are still concerned about PDL BioPharma’s future revenue stream once the royalty payments dry up.
PDL BioPharma currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks include Zacks Ranked #1 (Strong Buy) Alexion Pharmaceuticals, Inc. (ALXN).
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