PDLI's EPS In Line, Revenue Misses

Zacks

PDL BioPharma Inc. (PDLI) posted third-quarter earnings of 32 cents per share, in line with the Zacks Consensus Estimate but above the year-ago figure of 28 cents. The year-over-year increase was attributable to higher revenues.

PDL BioPharma generated third-quarter 2012 revenues of $85.2 million, up 1.7% year over year. Revenues were slightly above the guidance of $85 million announced by the company in September 2012. Revenues narrowly missed the Zacks Consensus Estimate of $86 million.

Quarter in Detail

PDL BioPharma derived revenues for the third quarter of 2012 solely from royalties. PDL BioPharma receives royalties on worldwide net sales of Roche Holdings Ltd.'s (RHHBY) Avastin and Herceptin; Roche/ Novartis’ (NVS) Lucentis and Xolair; and Elan Corporation/Biogen Idec’s (ELN / BIIB) Tysabri.

Increased royalties on sales of Avastin, Lucentis and Xolair drove third quarter 2012 royalties.

Effective from the second quarter of 2011, PDL BioPharma started paying back a portion of the royalties it receives on Lucentis sales outside the US to Novartis. The payment is made in accordance with a settlement agreement, which the companies had entered into in February 2011. The third-quarter 2012 revenue is net of this payment.

General and administrative (G&A) expenses were $5.6 million in the reported quarter, up approximately 42.6% due to the company’s efforts to obtain new royalty assets, legal expenses and compensation related expenses.

On September 14, 2012, PDL BioPharma paid the third quarterly dividend of 15 cents per share.

The company is expected to provide revenue guidance for the fourth quarter of 2012 in December 2012.

Our Recommendation

We currently have a Neutral recommendation on PDL BioPharma. The stock carries a Zacks #5 Rank (Strong Sell rating) in the short run.

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