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PDL BioPharma Misses on Q1 Earnings

Zacks Equity Research

PDL BioPharma Inc. (PDLI) posted first-quarter 2014 earnings of 48 cents per share, below the Zacks Consensus Estimate of 50 cents but ahead of the year-ago figure of 36 cents per share. The year-over-year increase in earnings was attributable to higher revenues.

PDL BioPharma generated first-quarter 2014 revenues of $139.7 million, up 52.1% year over year. Revenues were above the company’s guidance of $133 million announced in Mar 2014. Revenues were well above the Zacks Consensus Estimate of $133 million.

Quarter in Detail

PDL BioPharma derived revenues for the first quarter of 2014 primarily from royalties. PDL BioPharma receives royalties from companies like Roche Holdings Ltd. (RHHBY) and Novartis (NVS). The royalties are earned on worldwide net sales of products like Avastin, Herceptin, Lucentis, Xolair, Kadcyla, Tysabri, Actemra and Perjeta.

Increased royalties on sales of Avastin, Herceptin, Xolair, Perjeta, Kadcyla and Actemra drove first-quarter royalties.

As per the company’s agreement with Roche earlier in the year, effective retroactively to Aug 15, 2013, PDL BioPharma will be receiving 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.

General and administrative (G&A) expenses were $4.6 million in the reported quarter, down approximately 36.2%.

The company is expected to provide its revenue guidance for the second quarter of 2014 in Jun 2014.

Our Take

PDL BioPharma’s earnings were below expectations. We remain concerned about PDL BioPharma’s future revenue stream once the royalty payments dry up.

PDL BioPharma currently carries a Zacks Rank #2 (Buy). Some better-ranked stocks include Zacks Ranked #1 (Strong Buy) Gilead Sciences Inc. (GILD).

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