SOURCE: PDL BioPharma

August 11, 2008 16:04 ET

PDL BioPharma Reports Second Quarter 2008 Financial Results

Record Royalty Revenues of $104.7 Million Driven by Strong Licensee Product Sales

REDWOOD CITY, CA--(Marketwire - August 11, 2008) - PDL BioPharma, Inc. (PDL) (NASDAQ: PDLI) today reported financial results for the quarter ended June 30, 2008. The financial results for continuing operations are summarized below; the complete financial results, including discontinued operations, are included in the financial tables accompanying this press release.

"We are very pleased with our financial results for the quarter, including the significant increase in our royalty revenues, and the reduction in total costs and expenses, which reflects the impact of our recent asset sales and ongoing restructuring activities as we continue to reduce our cost structure," said Andrew Guggenhime, senior vice president and chief financial officer, PDL. "As we prepare for the spin-off of our biotechnology assets, for which we intend to file key regulatory documents shortly, we continue to have an active, parallel process underway to evaluate various options for the monetization of our royalty stream."

Summary of Financial Results

-- Total revenues for the second quarter of 2008 were $111.9 million
   compared to $89.1 million in the same period of 2007.

   -- Royalty revenues for the second quarter of 2008 were $104.7 million
      compared to $79.8 million in the comparable period in 2007, an
      increase driven entirely by growth in royalty-bearing net sales
      reported by PDL's antibody product licensees, particularly Genentech,
      Inc.  Royalty revenues during the second quarter of 2008 reflect
      royalties PDL received based on worldwide licensee net sales during
      the first quarter of 2008 of eight antibody products licensed under
      PDL's antibody humanization patents.

   -- License, collaboration and other revenues were $7.2 million for the
      second quarter of 2008 compared to $9.2 million for the same period
      of 2007.  The decrease was primarily due to accelerated recognition
      of previously deferred collaboration revenues recorded in the second
      quarter of 2007 as a result of the termination of the company's
      previous collaboration with Roche.

-- Total costs and expenses for the second quarter of 2008 were $60.2
   million compared to $78.7 million reported for the second quarter of
   2007.

   -- Research and development (R&D) expenses decreased to $40.4 million
      for the second quarter of 2008 from $56.0 million for the same period
      of 2007.  This decrease was attributable primarily to reduced
      spending for the company's Nuvion® program, which was terminated in
      the second half of 2007, reduced spending for the PDL192 program due
      to a decrease in manufacturing activities, and lower employee-related
      expenses as a result of the company's restructuring activities.

   -- General and administrative (G&A) expenses in the second quarter of
      2008 were $16.6 million compared to $16.0 million for the prior year
      comparable period. The increase was primarily due to legal and
      professional services fees related to the company's strategic
      process, which were partially offset by lower employee-related costs
      due to the restructuring activities.

   -- As a result of a restructuring plan announced in March 2008, the
      company incurred restructuring charges in the second quarter of 2008
      of $3.0 million related to post-termination benefits for expected
      employee terminations resulting from the restructuring plan.

-- Income from continuing operations, after taxes, for the second quarter
   of 2008 was $50.8 million, or $0.43 per basic and $0.35 per diluted
   share, compared to $11.5 million, or $0.10 per basic and diluted share,
   in the comparable 2007 period.

-- GAAP net income for the second quarter of 2008 was $33.9 million, or
   $0.29 per basic and $0.24 per diluted share, compared to $10.9 million,
   or $0.09 per basic and diluted share, in the comparable 2007 period.

-- Cash provided by operating activities was $7.5 million for the six
   months ended June 30, 2008 compared to $45.9 million for the six months
   ended June 30, 2007.

-- Cash, cash equivalents, marketable securities and restricted cash and
   investments totaled approximately $493.7 million at June 30, 2008
   compared to $440.8 million at December 31, 2007.  During the second
   quarter of 2008, PDL declared a cash dividend of $4.25 per share, and
   paid out $506.4 million of that dividend in the period.

Strategic Update

PDL continues to pursue its previously announced goal to spin off its biotechnology assets into a separately publicly traded entity by the end of 2008 and, in connection with this effort, plans to file a Form 10 with the Securities and Exchange Commission (SEC) imminently. PDL expects to capitalize the new company with approximately $375 million of cash at the completion of the transaction. The company expects that this initial capitalization, along with potential milestone payments, non-humanization royalties and other payments under collaboration and other agreements, would fund the biotechnology spin-off for approximately three years based on the company's current operating plans. The company continues to explore, in parallel with the spin-off process, the possible sale or securitization of all or part of its antibody humanization royalty assets. As the company's goal is to separate its biotechnology assets from its antibody humanization royalty assets, a royalty transaction could be in lieu of the spin-off.

Recent Developments

--  In conjunction with this press release, PDL announced that Richard
    Murray, Ph.D., executive vice president and chief scientific officer, will
    resign from the company, effective September 5, to pursue personal and then
    other professional interests. The board of directors and the management are
    grateful to Dr. Murray for his dedication and service to PDL. Dr. Murray
    and the PDL management team continue to unify and strengthen the company's
    research and development efforts, and will work closely with Dr. Murray's
    senior research, product operations and program management staff to ensure
    a smooth transition.
    
--  In August, a new formulation of Cardene® received U.S. Food and Drug
    Administration (FDA) approval for marketing in the U.S. As a result, PDL
    has earned a milestone payment of $25 million from EKR Therapeutics, Inc.
    The terms of the agreement with EKR also include potential additional
    milestone and royalty payments on net sales of the product.
    
--  In July, PDL enrolled its first patient in the phase 1 trial of PDL192
    in patients with advanced solid tumor cancers. PDL192 is a novel humanized
    antibody that targets the TWEAK receptor, which has been shown to be
    expressed in a variety of solid tumor types. A poster that highlights
    preclinical data for the antibody will be presented on October 24 at the
    EORTC-NCI-AACR symposium on Molecular Targets and Cancer Therapeutics in
    Geneva, Switzerland.
    
--  In July, PDL initiated a phase 1 combination trial of elotuzumab
    (HuLuc63) with Revlimid® (lenalidomide) in patients with multiple
    myeloma. Two additional trials are ongoing, one of elotuzumab in
    combination with Velcade® (bortezomib) and a second trial of elotuzumab
    as a monotherapy in this same patient population.
    
--  In July, PDL announced the appointment of Gary A. Lyons to the
    company's board of directors. Lyons serves as chairperson of the
    Compensation Committee and as a member of the Nominating and Governance
    Committee. In addition, PDL announced the appointment of Brad Goodwin as
    chairperson of the Board. Goodwin has been a member of PDL's board since
    2006.  These appointments followed previously announced changes to the
    board of directors.
    

Forward-looking Statements

This press release contains forward-looking statements, including regarding:

--  PDL's plan to spin off its biotechnology assets into a separately
    publicly traded entity by the end of 2008;
--  PDL's expectations regarding the initial cash funding for the spin-off
    and the period of time the initial capitalization would fund the operations
    of the biotechnology spin-off;
--  The possibility of selling or securitizing PDL's antibody humanization
    royalty assets; and
--  Ongoing cost-reduction efforts.
    

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. Factors that may cause differences between current expectations and actual results include, but are not limited to, the following:

--  The failure to obtain necessary consents from third parties could
    delay or make impractical to effect a spin off of PDL's biotechnology
    assets;
--  Changes in development or operations plans could affect the initial
    cash funding needed to adequately capitalize the biotechnology entity;
--  PDL may not be able to negotiate a sale or securitization of its
    antibody humanization royalty assets on terms acceptable to it, or at all;
--  Alternative transactions or opportunities could arise or be pursued
    which would alter the timing or advisability of anticipated or planned
    transactions; and
--  Cost-reduction efforts may not be completed as anticipated or other
    events could arise which increase the company's expenses.
    

Other factors that may cause PDL's actual results to differ materially from those expressed or implied in the forward-looking statements in this press release are discussed in PDL's filings with the SEC, including the "Risk Factors" sections of its annual and quarterly reports filed with the SEC. Copies of PDL's filings with the SEC may be obtained at the "Investors" section of PDL's website at www.pdl.com. PDL expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in PDL's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based for any reason, except as required by law, even as new information becomes available or other events occur in the future. All forward-looking statements in this press release are qualified in their entirety by this cautionary statement.

About PDL BioPharma

PDL BioPharma, Inc. is a biotechnology company focused on the discovery and development of novel antibodies in oncology and immunologic diseases. For more information, please visit www.pdl.com.

NOTE: PDL BioPharma and the PDL BioPharma logo are considered trademarks and Nuvion is a registered trademark of PDL. Cardene is a registered trademark of EKR Therapeutics, Inc.; Avastin is a registered trademark of Genentech, Inc.; Revlimid is a registered trademark of Celgene Corporation; and Velcade is a registered trademark of Millennium Pharmaceuticals, Inc.


                            PDL BIOPHARMA, INC.
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except per share amounts)
                                (unaudited)


                                 Three Months Ended     Six Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2008       2007       2008       2007
                                ---------  ---------  ---------  ---------
REVENUES:
 Royalties                      $ 104,686  $  79,842  $ 154,641  $ 128,437
 License, collaboration and
  other                             7,207      9,215     14,581     19,476
                                ---------  ---------  ---------  ---------
    Total revenues                111,893     89,057    169,222    147,913

COSTS AND EXPENSES:
 Research and development          40,400     56,038     88,081    104,129
 General and administrative        16,582     16,021     37,025     28,015
 Restructuring charges              2,997      1,585      8,626      1,585
 Asset impairment charges             263      5,016      3,784      5,016
 Gain on sale of assets                 -          -    (49,671)         -
                                ---------  ---------  ---------  ---------
    Total costs and expenses       60,242     78,660     87,845    138,745
                                ---------  ---------  ---------  ---------
    Operating income               51,651     10,397     81,377      9,168
Interest income and other, net      4,468      4,931      9,335      9,963
Interest expense                   (3,986)    (3,427)    (7,975)    (6,984)
                                ---------  ---------  ---------  ---------
    Income from continuing
     operations before income
     taxes                         52,133     11,901     82,737     12,147
Income tax expense                  1,364        385      2,367        413
                                ---------  ---------  ---------  ---------
    Income from continuing
     operations                    50,769     11,516     80,370     11,734
Discontinued operations, net of
 income taxes (1)                 (16,837)      (606)  (108,313)   (11,429)
                                ---------  ---------  ---------  ---------
    Net income (loss)           $  33,932  $  10,910  $ (27,943) $     305
                                =========  =========  =========  =========
NET INCOME (LOSS) PER BASIC
 SHARE:
Income from continuing
 operations                     $    0.43  $    0.10  $    0.68  $    0.10
Discontinued operations             (0.14)     (0.01)     (0.92)     (0.10)
                                ---------  ---------  ---------  ---------
    Net income (loss)           $    0.29  $    0.09  $   (0.24) $       -
                                =========  =========  =========  =========

NET INCOME (LOSS) PER DILUTED
 SHARE:
Income from continuing
 operations                     $    0.35  $    0.10  $    0.55  $    0.10
Discontinued operations             (0.11)     (0.01)     (0.71)     (0.10)
                                ---------  ---------  ---------  ---------
    Net income (loss)           $    0.24  $    0.09  $   (0.16) $       -
                                =========  =========  =========  =========

WEIGHTED-AVERAGE SHARES - BASIC   118,827    116,087    118,176    115,595
                                =========  =========  =========  =========

WEIGHTED-AVERAGE SHARES -
 DILUTED                          152,455    119,816    152,056    118,400
                                =========  =========  =========  =========

(1) Discontinued operations reflects the financial results of our
    Commercial and Cardiovascular Operations.  The sale of the Commercial
    and Cardiovascular Operations was completed on March 7, 2008.




                           PDL BIOPHARMA, INC.
                    SUPPLEMENTAL FINANCIAL INFORMATION
                              (in thousands)
                               (unaudited)


                              Three Months Ended       Six Months Ended
                                   June 30,                June 30,
                            ----------------------  ----------------------
                               2008        2007        2008        2007
                            ----------  ----------  ----------  ----------

Depreciation (1)            $    4,761  $    7,309  $   12,763  $   14,687
Amortization of intangibles
 (1)                        $      412  $    8,782  $      824  $   17,566
Stock-based compensation
 (1)                        $    2,280  $    4,137  $    8,429  $    9,376
Other acquisition-related
 charges (1)                $        -  $      202  $        -  $    1,638
Restructuring charges (1)   $    2,997  $    1,585  $   10,383  $    1,585
Asset impairment charges    $      263  $    5,016  $    3,784  $    5,016
Gain on sale of
 manufacturing assets       $        -  $        -  $   49,671  $        -
Loss on sale of commercial
 and cardiovascular
 assets (1)                 $        -  $        -  $  (64,568) $        -


(1) Portions of depreciation, amortization of intangibles, stock based
    compensation and restructuring charges as well as all of the other
    acquisition-related charges and the loss on sale of the commercial
    and cardiovascular assets have been allocated to discontinued
    operations in the accompanying consolidated statements of
    operations.




                            PDL BIOPHARMA, INC.
         SUPPLEMENTAL FINANCIAL INFORMATION ON DISCONTINUED OPERATIONS
                              (in thousands)
                                (unaudited)

                              Three Months Ended      Six Months Ended
                                    June 30,               June 30,
                            ----------------------  ----------------------
                               2008        2007        2008        2007
                            ----------  ----------  ----------  ----------
Total revenues              $      375  $   48,962  $   39,734  $   98,089
Total costs and expenses        (5,188)    (49,428)   (107,995)   (109,342)
Income tax expense             (12,024)       (140)    (40,052)       (176)
                            ----------  ----------  ----------  ----------
  Net loss                  $  (16,837) $     (606) $ (108,313) $  (11,429)
                            ==========  ==========  ==========  ==========




                            PDL BIOPHARMA, INC.
                      CONSOLIDATED BALANCE SHEET DATA
                              (in thousands)
                                (unaudited)


                                                    June 30,   December 31,
                                                      2008         2007
                                                  -----------  -----------
Cash, cash equivalents, marketable securities and
 restricted cash                                  $   493,702  $   440,788
Total assets                                      $   654,111  $ 1,192,192
Total stockholders' equity                        $    27,100  $   507,610




                   CONSOLIDATED STATEMENT OF CASH FLOW DATA
                              (in thousands)
                                (unaudited)

                                                      Six Months Ended
                                                          June 30,
                                                  ------------------------
                                                      2008        2007
                                                  -----------  -----------
Net income (loss)                                 $   (27,943) $       305
Adjustments to reconcile net loss to net cash
 provided by operating activities                      42,683       48,930
Changes in assets and liabilities                      (7,226)      (3,340)
                                                  -----------  -----------
  Net cash provided by operating activities       $     7,514  $    45,895
                                                  ===========  ===========

Contact Information

  • Contacts:

    Ami Knoefler
    Corporate and Investor Relations
    (650) 454-2331
    Email Contact

    Jean Suzuki
    Investor Relations
    (650) 454-2648
    Email Contact