Wall Street Transcript Interview with John P. McLaughlin, CEO and President of PDL BioPharma, Inc. (PDLI)

Wall Street Transcript

67 WALL STREET, New York - September 16, 2012 - The Wall Street Transcript has just published its Biotechnology and Pharmaceuticals Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Biotechnology and Pharmaceutical Valuations - Oncology Drug Development - Orphan Drugs - FDA Approval Process - Reimbursement Trends

Companies include: PDL BioPharma, Inc. (PDLI) and many others.

In the following excerpt from the Biotechnology and Pharmaceuticals Report, the CEO of PDL Biopharma discusses the outlook for his company for investors:

TWST: Please begin with a brief overview of PDL BioPharma?

Mr. McLaughlin: Sure. PDL is a biotech company. We're publicly traded, and we're a little different from most biotech companies in the sense that we don't do research, development, manufacturing or commercialization. We have a family of patents called the Queen et al. patents. We receive royalties on those, and we use some of the royalty income to pay dividends to our shareholders. In 2012, we established a dividend policy of paying $0.60 in quarterly increments of $0.15. We've done that in previous years. We use other portions of the revenue to identify additional revenue-generating assets to the benefit of our shareholders.

TWST: What is the science behind a humanized antibody?

Mr. McLaughlin: So as your question alludes to, the technology involves the humanization of antibodies. In the early 1980s, scientists hypothesized that it might be possible to develop antibodies outside human systems. They targeted, for example, sites found on cancer cells, targeted proteins expressed in the body, and they developed those antibodies oftentimes in mouse systems.

The problem is when you take an antibody developed in a mouse and inject it into a human being, it sometimes, particularly if you do it chronically, is recognized as a foreign substance, and before it can accomplish its therapeutic goals, the body starts to reject it. And what our technology does very simply is when you have our murine-derived antibody, it takes portions of that antibody that are important for binding to its specific target, and it transfers that onto a human framework, such that it is no longer recognized as a foreign substance when injected into a human being. And the trick to it is to maintain, as I mentioned, its binding and specificity. So what that means is it only binds to its target, a site on a cancer cell, for example, and when it gets there, it binds tightly.

TWST: After a 2009 patent dispute, the CEO of the offending and large company said, "PDL helped revolutionize the development of therapeutic antibodies to treat patients with previously untreatable and devastating conditions." Why would this company and others come to PDL? Was it because of its patented approach? Why not do it themselves?

Mr. McLaughlin: So as you know, antibodies have become a cornerstone of therapeutics for treating various serious diseases - cancer, eye diseases, arthritis, things like that. This humanization approach was an early technology when people were just starting to get excited about antibodies, and it was a good way to be able to take one of these murine, mouse-derived antibodies and make it into human therapy. And the science exploded in terms of people getting excited about antibodies as therapeutics.

In the early 1990s, you had a couple of small antibodies out there, but not many. By the end of the 1990s, you had Herceptin approved, and in the early 2000s, you saw a slew of antibodies, and of course, it's one of the hottest areas of therapeutic research right now in biotech and Big Pharma. It is a technology that allows you in a reproducible fashion to take the important regions off those mouse-derived antibodies, put them on a human framework and turn it into a human therapy for serious, unmet medical needs.

TWST: The bulk of PDL BioPharma's revenues are derived from royalty payments. The company generated more than $200 million in royalty revenue through the first six months of this year. Would you tell us what we should know about the Queen patent expirations that are scheduled for the next three years, and should PDL BioPharma be considered a liquidating asset as some have suggested?

For more from this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers, and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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