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PDL BioPharma Announces Fourth Quarter and Year End 2017 Financial Results

Total Revenues Increased by 31% in 2017

GAAP EPS Increased 350% and 82% for Q417 and FY 2017, respectively

INCLINE VILLAGE, Nev., March 8, 2018 /PRNewswire/ -- PDL BioPharma, Inc. (PDL or the Company) (PDLI) today reported financial results for the fourth quarter and year ended December 31, 2017 including:

  • Total revenues of $68.0 million and $320.1 million for the three and twelve months ended December 31, 2017, respectively.
  • GAAP diluted EPS of $0.15 and $0.71 for the three and twelve months ended December 31, 2017, respectively.
  • GAAP net income attributable to PDL's shareholders of $22.3 million and $110.7 million for the three and twelve months ended December 31, 2017, respectively.
  • Non-GAAP net income attributable to PDL's shareholders of $24.8 million and $100.7 million for the three and twelve months ended December 31, 2017. A full reconciliation of all components of the GAAP to non-GAAP financial results can be found in Table 3 at the end of the release.

"2017 was a great year for us and one where we experienced a 31 percent increase in revenue from the previous year," stated John P. McLaughlin, chief executive officer of PDL. "Since 2012, we have built a rich portfolio of income generating assets and products to replace revenues from our expired Queen et al patents. We expect the revenues from these assets, whose net book value is $5.54 per share, to fuel the building of our specialty pharma business. It's important to note that $264 million, or 83 percent of our 2017 revenues, came from sources other than the Queen et al patents. In 2018, we need to continue to execute successfully on our business model as well as close the gap between our share price and our book value per share."

Revenue Highlights

  • Total revenues of $68.0 million for the three months ended December 31, 2017 included:
  • Total revenues increased by 2 percent for the three months ended December 31, 2017, when compared to the same period in 2016.
  • Total revenues increased by 31 percent for the year ended December 31, 2017, when compared to the year ended December 31, 2016.

Operating Expense Highlights

  • Operating expenses were $38.2 million for the three months ended December 31, 2017, compared to $74.2 million for the same period of 2016. The decrease in operating expenses for the three months ended December 31, 2017, as compared to the same period in 2016, was primarily a result of the prior year period loss on extinguishment of Direct Flow Medical notes receivable, partially offset by the increase in operating expenses related to the acquisitions and operations of Noden and LENSAR, contributing an additional $13.8 million of cost of product revenue and $6.0 million in sales and marketing expenses due to an increase in Noden's sales force.
  • Operating expenses were $126.3 million for the year ended December 31, 2017, compared to $114.9 million for the year ended December 31, 2016. The increase in operating expenses in 2017 was a result of the acquisitions and operations of Noden and LENSAR, contributing an additional $26.5 million of cost of product revenue, $12.7 million of intangible asset amortizations, $17.1 million in sales and marketing expenses, and $3.6 million in research and development costs for the completion of a pediatric trial for Tekturna. General administrative expenses increased by $5.9 million of which $7.5 million was related to Noden and $3.2 million was related to LENSAR, partially offset by a decrease of $51.1 million from the loss on extinguishment for the Direct Flow Medical notes receivable in 2016.

Recent Developments

  • On February 1, 2018, PDL completed the retirement of the remaining $126.4 million of aggregate principal of its 4.0% Convertible Senior Notes due 2018 at their stated maturity by making a payment to the noteholders of $126.4 million, plus $2.6 million of accrued interest.
  • In February 2018, we entered into a modification agreement with CareView whereby we agreed, effective as of December 28, 2017, to modify the credit agreement before remedies could otherwise have become available to us under the credit agreement in relation to certain obligations of CareView that would potentially not be met, including the requirement to make principal payments. Under the modification agreement we agreed that (i) a lower liquidity covenant would be applicable and (ii) principal repayment would be delayed for a period of up to December 31, 2018. In exchange for agreeing to these modifications, among other things, the exercise price of our warrants to purchase 4.4 million shares of common stock of CareView was reduced and, subject to the occurrence of certain events, CareView agreed to grant us additional equity interests.

Other Financial Highlights

  • PDL had cash, cash equivalents, short-term investments and other investments of $532.1 million at December 31, 2017, compared to $242.1 million at December 31, 2016.

Conference Call and Webcast Details

PDL will hold a conference call to discuss financial results at 4:30 p.m. Eastern Time today, March 8, 2018.

To access the live conference call via phone, please dial (800) 668-4132 from the United States and Canada or (224) 357-2196 internationally. The conference ID is 9384627. Please dial in approximately 10 minutes prior to the start of the call. A telephone replay will be available beginning approximately one hour after the call through one week following the call, and may be accessed by dialing (855) 859-2056 from the United States and Canada or (404) 537-3406 internationally. The replay passcode is 9384627.

To access the live and subsequently archived webcast of the conference call, go to the Company's website at http://www.pdl.com and go to the Investor Relations section and select "Events & Presentations." Please connect to the website at least 15 minutes prior to the call to allow for any software download that may be necessary.

About PDL BioPharma, Inc.

We seek to provide a significant return for our shareholders by acquiring and managing a portfolio of companies, products, royalty agreements and debt facilities in the biotech, pharmaceutical and medical device industries. In 2012, we began providing alternative sources of capital through royalty monetizations and debt facilities, and in 2016, we began acquiring commercial-stage products and launching specialized companies dedicated to the commercialization of these products. To date, we have consummated seventeen of such transactions, of which nine are active and outstanding. We have one debt transaction outstanding, representing deployed and committed capital of $20.0 million: CareView Communications, Inc.; we have one hybrid royalty/debt transaction outstanding, representing deployed and committed capital of $44.0 million: Wellstat Diagnostics, LLC; and we have five royalty transactions outstanding, representing deployed and committed capital of $396.1 million and $397.1 million, respectively: KYBELLA®, AcelRx Pharmaceuticals, Inc. The Regents of the University of Michigan, Viscogliosi Brothers, LLC and Depomed, Inc. Our equity and loan investments in Noden Pharma DAC, Inc. and Noden Pharma USA, Inc. (together with their subsidiaries, "Noden") represent deployed and committed capital of $179.0 million and $202.0 million, respectively, and our converted equity and loan investment in LENSAR, Inc. represents deployed capital of $40.0 million.

The Company operates in three segments designated as Income Generating Assets, Pharmaceutical and Medical Devices.

NOTE:  PDL, PDL BioPharma, the PDL logo and the PDL BioPharma logo are trademarks or registered trademarks of, and are proprietary, to PDL BioPharma, Inc. which reserves all rights therein.

Forward-looking Statements

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Each of these forward-looking statements involves risks and uncertainties. Actual results may differ materially from those, express or implied, in these forward-looking statements. Important factors that could impair the value of the Company's assets and business, restrict or impede the ability of the Company to invest or acquire new products are disclosed in the risk factors contained in the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission, filed with the Securities and Exchange Commission on March 1, 2017. All forward-looking statements are expressly qualified in their entirety by such factors. We do not undertake any duty to update any forward-looking statement except as required by law.

TABLE 1

PDL BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME DATA

(In thousands, except per share amounts)



Three Months Ended


Twelve Months Ended


December 31,


December 31,


2017


2016


2017


2016

Revenues








Royalties from Queen et al. patents

$

4,531



$

15,513



$

36,415



$

166,158


Royalty rights - change in fair value

30,103



28,068



162,327



16,196


Interest revenue

776



5,503



17,744



30,404


Product revenue, net

32,646



17,541



84,123



31,669


License and other

(20)



(133)



19,451



(126)


Total revenues

68,036



66,492



320,060



244,301










Operating Expenses








Cost of product revenue (excluding intangible amortization)

17,905



4,065



30,537



4,065


Amortization of intangible assets

6,251



6,014



24,689



12,028


General and administrative expenses

9,788



12,597



45,641



39,790


Sales and marketing

6,489



527



17,683



538


Research and development

729



1,887



7,381



3,820


Change in fair value of anniversary payment and contingent consideration

(3,000)



(5,799)



349



(3,716)


Asset impairment



3,735





3,735


Acquisition-related costs



59





3,564


Loss on extinguishment of notes receivable



51,075





51,075


Total operating expenses

38,162



74,160



126,280



114,899


Operating income

29,874



(7,668)



193,780



129,402










Non-operating expense, net








Interest and other income, net

933



184



1,659



588


Interest expense

(5,139)



(4,743)



(20,221)



(18,267)


Gain (loss) on bargain purchase

5,314



(2,353)



9,309




Gain (loss) on extinguishment of debt







(2,353)


Total non-operating expense, net

1,108



(6,912)



(9,253)



(20,032)










Income before income taxes

30,982



(14,580)



184,527



109,370


Income tax expense

8,646



(4,300)



73,826



45,711


Net income

22,336



(10,280)



110,701



63,659


Less: Net income/(loss) attributable to noncontrolling interests



56



(47)



53


Net income attributable to PDL's shareholders

$

22,336



$

(10,336)



$

110,748



$

63,606










Net income per share








Basic

$

0.15



$

(0.06)



$

0.71



$

0.39


Diluted

$

0.15



$

(0.06)



$

0.71



$

0.39










Shares used to compute income per basic share

151,217



163,975



155,394



163,805


Shares used to compute income per diluted share

152,592



164,549



156,257



164,192










Cash dividends declared per common share

$



$



$



$

0.10


 

TABLE 2

PDL BIOPHARMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEET DATA

(Unaudited)

(In thousands)



December 31,


December 31,


2017


2016

Cash, cash equivalents and short-term investments

$

532,114



$

242,141


Total notes receivable

$

70,737



$

270,950


Total royalty rights - at fair value

$

349,223



$

402,318


Total assets

$

1,243,123



$

1,215,387


Total convertible notes payable

$

243,481



$

232,443


Total stockholders' equity

$

845,890



$

755,423


 

TABLE 3

PDL BIOPHARMA, INC.

GAAP to NON-GAAP RECONCILIATION:

NET INCOME AND DILUTED EARNINGS PER SHARE

(Unaudited)

(In thousands, except per share amount)


A reconciliation between net income on a GAAP basis and on a non-GAAP basis is as follows:










Three Months Ended


Twelve Months Ended


December 31,


December 31,


2017


2016


2017


2016

GAAP net income attributed to PDL's shareholders as reported

$

22,336



$

(10,336)



$

110,748



$

63,606


Adjustments to Non-GAAP net income (as detailed below)

2,445



1,716



(10,040)



44,518


Non-GAAP net income attributed to PDL's shareholders

$

24,781



$

(8,620)



$

100,708



$

108,124










An itemized reconciliation between net income on a GAAP basis and on a non-GAAP basis is as follows:










Three Months Ended


Twelve Months Ended


December 31,


December 31,


2017


2016


2017


2016

GAAP net income attributed to PDL's shareholders as reported

$

22,336



$

(10,336)



$

110,748



$

63,606


Adjustments:








Mark-to-market adjustment to fair value assets

(2,746)



(2,726)



(55,074)



56,386


Non-cash interest revenues

(101)



(121)



(924)



(2,864)


Non-cash stock-based compensation expense

124



1,093



3,138



3,742


Non-cash debt offering costs

2,843



3,942



11,038



10,009


Mark-to-market adjustment on warrants held

20



31



49



906


Amortization of the intangible assets

6,251



6,014



24,689



12,028


Mark-to-market adjustment of anniversary payment and contingent consideration

(3,000)



(5,799)



349



(3,716)


Income tax effect related to above items

(946)



(718)



6,695



(31,973)


Total adjustments

2,445



1,716



(10,040)



44,518


Non-GAAP net income

$

24,781



$

(8,620)



$

100,708



$

108,124


Use of Non-GAAP Financial Measures

We supplement our consolidated financial statements presented on a GAAP basis by providing additional measures which may be considered "non-GAAP" financial measures under applicable SEC rules. We believe that the disclosure of these non-GAAP financial measures provides our investors with additional information that reflects the amounts and financial basis upon which our management assesses and operates our business. These non-GAAP financial measures are not in accordance with generally accepted accounting principles and should not be viewed in isolation or as a substitute for reported, or GAAP, net income, and diluted earnings per share, and are not a substitute for, or superior to, measures of financial performance performed in conformity with GAAP.

"Non-GAAP net income" is not based on any standardized methodology prescribed by GAAP and represent GAAP net income adjusted to exclude (1) mark-to market adjustments related to the fair value election for our investments in royalty rights presented in our earnings, which include the fair value re-measurement of future discounted cash flows for each of the royalty rights assets we have acquired, (2) non-cash interest revenue from notes receivable (3) stock-based compensation expense, (4) non-cash interest expense related to PDL debt offering costs, (5) mark-to market adjustments related to warrants held, (6) mark-to-market adjustment related to acquisition-related contingent considerations, (7) amortization of intangible assets, and to adjust (7) the related tax effect of all reconciling items within our reconciliation of our GAAP to Non-GAAP net income. Non-GAAP financial measures used by PDL may be calculated differently from, and therefore may not be comparable to, non-GAAP measures used by other companies.

PDL BioPharma, Inc. (PRNewsFoto/PDL BioPharma, Inc.)

 

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