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PDL BioPharma Beats Zacks Estimates

Zacks Equity Research

PDL BioPharma Inc. (PDLI) posted second-quarter earnings of 53 cents per share, above the year-ago figure of 39 cents and the Zacks Consensus Estimate of 49 cents. Earnings were boosted by higher revenues. Moreover, a lower share count also aided earnings in the reported quarter.

PDL BioPharma generated second-quarter 2012 revenues of $125.9 million, up 3.1%. Revenues were slightly above the guidance of $125 million announced by the company in June 2012. The Zacks Consensus Estimate was also $125 million.

Quarter in Detail

PDL BioPharma generated the entire revenues for the second quarter of 2012 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. The company will also receive royalties on Roche’s Perjeta (pertuzumab), which was launched in the US in June 2012.

Royalty revenues of $125.9 million represented an increase of 3.1% from the year-ago period. Increased royalties on sales of Herceptin, Lucentis, Xolair and Tysabri drove second 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 second-quarter 2012 revenue is net of this payment.

General and administrative (G&A) expenses were $5.1 million in the reported quarter, up approximately 36.3% due to the company’s efforts to obtain new royalty assets, legal expenses and compensation related expenses.

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

The company is expected to provide third-quarter 2012 revenue guidance in September 2012.

Our Recommendation

We currently have a Neutral recommendation on Shire. The stock carries a Zacks #4 Rank (Sell rating) in the short run.

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