PDL BioPharma Inc. (PDLI) announced that it expects to generate revenues of roughly $140 million in the second quarter of 2014, down roughly 3% year over year. The expected revenues are however above the current Zacks Consensus Estimate of $131 million.
PDL BioPharma receives royalties from companies like Roche Holdings (RHHBY) and Novartis (NVS). The royalties are earned on worldwide net sales of products like Avastin, Herceptin, Xolair, Kadcyla, Actemra and Perjeta.
PDL BioPharma attributes the decrease in royalty revenues in the quarter to the fixed rate of 2.125% currently being applied on net sales of Roche’s Avastin, Herceptin, Lucentis, Xolair, Perjeta and Kadcyla.
According to the agreement with Roche, inked in Feb 2014, and effective retroactively to Aug 15, 2013, PDL BioPharma will receive 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 however stated that second quarter royalty revenues will increase on a sequential basis. The anticipated growth in royalty revenues primarily emanates from higher sales of Herceptin (up 3%), Avastin (up 9%), Kadcyla (up 446%), Perjeta (up 275%) and Actemra (up 37%) during the first quarter of 2014 for which PDL will receive royalties in the second quarter.
PDL BioPharma recognizes royalty revenues on Glumetza (as per a deal in Oct 2013) a month after sales by the licensees have been booked. The company expects $25 million of royalty revenues from sales of Glumetza in the second quarter of 2014.
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 to a settlement agreement, which the companies had entered in Feb 2011. The amount paid is less than what PDL BioPharma received in royalties.
PDL BioPharma currently carries a Zacks Rank #3 (Hold). A better ranked biopharma stock is Alexion Pharmaceuticals, Inc. (ALXN) with a Zacks Rank #2 (Buy).