SOURCE: PDL BioPharma, Inc

March 04, 2008 16:18 ET

PDL BioPharma Reports Fourth Quarter and Full Year 2007 Financial Results

REDWOOD CITY, CA--(Marketwire - March 4, 2008) - PDL BioPharma, Inc. (PDL) (NASDAQ: PDLI) today reported financial results for the fourth quarter and full year ended December 31, 2007. These financial results are summarized below and are included in the financial statements accompanying this press release.

For all periods presented, the results of the company's commercial and cardiovascular operations reporting unit, which includes all activities related to the Cardene®, Retavase®, and IV Busulfex® marketed products and the ularitide development-stage product, have been presented as discontinued operations. In December 2007, the company entered into an asset purchase agreement with Otsuka Pharmaceutical Co., Ltd. under which PDL agreed to sell the rights to IV Busulfex. In February 2008, the company entered into an asset purchase agreement with EKR Therapeutics, Inc. for the sale of PDL's Cardene and Retavase commercial products, as well as for ularitide, a development-stage product. The discontinued operations presentation consolidates the results of the commercial and cardiovascular operations, including net product sales, cost of product sales and selling expenses, the significant majority of the company's marketing expenses and certain research and development expenses and general and administrative expenses, into a single line item in the statement of operations.

Summary of Financial Results

--  Total revenues from continuing operations, which exclude net product
    sales, for the full year 2007 were $258.9 million compared to $249.1
    million for the full year 2006.  Total revenues for the fourth quarter
    of 2007 were $49.8 million compared to $59.8 million in the same
    period of 2006.

    --  Royalty revenues for the full year 2007 were $221.1 million
        compared to $184.3 million in the prior year.  Royalty revenues for
        the fourth quarter of 2007 were $37.5 million compared with $43.8
        million in the comparable period in 2006.  Higher net sales were
        reported by PDL's antibody product licensees in 2007 as compared to
        2006.  However, the effective average royalty rate earned by the
        company on sales reported by Genentech, Inc., one of PDL's
        licensees, in the fourth quarter and full year 2007 periods was
        lower than in the comparable 2006 periods as a result of the tiered
        fee structure under the company's license agreement with Genentech.
        In addition, the percentage of ex-U.S. sold Herceptin® product
        manufactured outside the U.S. declined significantly in the 2007
        periods as compared to the 2006 periods, resulting in a greater
        percentage of such sales being subject to the tiered fee structure
        and not the higher, fixed royalty rate that applies to products
        that are both sold and manufactured outside the U.S.

    --  License, collaboration and other revenues were $37.8 million for
        the full year 2007 compared to $64.8 million for the full year
        2006, and $12.2 million for the fourth quarter of 2007 compared to
        $16.0 million for the same period of 2006.  These decreases were
        due primarily to the acceleration of $20.5 million in previously
        deferred revenue in 2006 related to the termination of the
        collaborations with Roche for daclizumab in asthma and transplant
        maintenance.  In addition, revenue related to reimbursement for R&D
        services decreased in 2007 as compared to the 2006 comparable
        periods as a result of lower R&D expenses incurred under the
        company's collaboration agreement with Biogen Idec and the
        termination of the collaborations with Roche.  In the fourth
        quarter of 2007, PDL earned and recognized a $5.0 million milestone
        payment from Biogen Idec related to the daclizumab CHOICE trial in
        multiple sclerosis.

--  GAAP net loss, which includes the results of discontinued operations,
    for the full year 2007 was $21.1 million, or $0.18 per basic and
    diluted share, compared with a GAAP net loss of $130.0 million, or
    $1.14 per basic and diluted share, for the full year 2006.  GAAP net
    loss for the fourth quarter of 2007 was $15.6 million, or $0.13 per
    basic and diluted share, compared with a GAAP net loss of $89.7
    million, or $0.78 per basic and diluted share, for the comparable 2006
    period.  Discontinued operations in the fourth quarter of and full year
    2006 included $72.1 million and $73.8 million, respectively, in
    impairment charges related to the company's Retavase product rights
    intangible assets.

--  Non-GAAP net income, which includes the results of discontinued
    operations, for the full year 2007 was $72.2 million, or $0.61 per
    diluted share.  Non-GAAP net income was $56.0 million, or $0.48 per
    diluted share, for the full year 2006.  Non-GAAP net income for the
    fourth quarter of 2007 was $5.1 million, or $0.04 per diluted share,
    compared to non-GAAP net income of $6.1 million, or $0.05 per diluted
    share, in the fourth quarter of 2006.

--  Cash flow generated from operating activities for the full year 2007
    was $67.0 million, compared with $78.8 million for the full year 2006.
    Cash, cash equivalents, marketable securities and restricted cash and
    investments totaled approximately $440.8 million at December 31, 2007
    compared to $426.3 million at December 31, 2006.

Costs and Expenses Expected to Decrease Following Restructuring

Subsequent to the completion of the company's asset sale transactions and as a result of the restructuring announced separately today, PDL expects its future operating costs to be significantly lower than historical levels.

As noted above, total costs and expenses from continuing operations as presented in the financial statements accompanying this release for the 2007 and 2006 periods do not include the results of the commercial and cardiovascular operations. Supplemental information for the discontinued operations is provided in the financial statements accompanying this press release. Included in discontinued operations are net product sales, cost of product sales, selling expenses, the significant majority of the company's marketing expenses, certain research and development expenses, primarily development costs related to the company's Cardene lifecycle management and ularitide programs, and certain general and administrative expenses.

Company to File Annual Report on Form 10-K

As stated in its recent Form 12b-25 filing, the company expects that it will file its Annual Report on Form 10-K for the fiscal year ended December 31, 2007 on or before March 15, 2007 and therefore expects to remain current in its filing obligations.

Non-GAAP Financial Information

The non-GAAP financial measures in this press release exclude depreciation of property and equipment, stock-based compensation expense, amortization of intangible assets, asset impairment charges, restructuring charges, interest income and other, net, interest expense, income taxes and certain other items that would otherwise be included if measured in accordance with generally accepted accounting principles (GAAP). PDL believes that the non-GAAP financial measures presented in this press release are useful for investors because these measures provide added insight into PDL's performance by focusing on results generated by its ongoing operations. In addition, PDL uses these non-GAAP financial measures when assessing the performance of its ongoing operations, in making resource allocation decisions and for planning and forecasting. PDL also considers these non-GAAP results in awarding bonus and other incentive compensation to its employees, including management. The non-GAAP financial measures should be considered as a supplement to, not as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. A description of the non-GAAP financial measures for the periods presented and a reconciliation of this information to the GAAP financial measures are included in the attached financial tables.

Forward-looking Statements

This press release contains forward-looking statements, including regarding PDL's expectation regarding future operating expenses and filing of it Annual Report on Form 10-K for the fiscal year ended December 31, 2007 on or before March 15, 2007, which involve risks and uncertainties and PDL's actual results may differ materially from those, express or implied, in the forward-looking statements. 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 include the ability of the company to implement cost reductions efforts within expected time frames, changes in PDL's development plans, unexpected litigation or other disputes and the occurrence of other unexpected events that could affect actual expenses, as well as those discussed in PDL's filings with the Securities and Exchange Commission (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 http://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 biopharmaceutical company focused on the discovery and development of novel antibodies in oncology and select immunologic diseases. For more information, please visit http://www.pdl.com.

NOTE: PDL BioPharma and the PDL BioPharma logo are considered trademarks and Cardene and Busulfex are registered U.S. trademarks of PDL BioPharma, Inc.; PDL BioPharma, Inc. has a license from Centocor, Inc. to use the trademark Retavase, which is a registered U.S. trademark.

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

                                 Three Months Ended        Year Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ---------
REVENUES:
  Royalties                     $  37,518  $  43,753  $ 221,088  $ 184,277
  License, collaboration and
   other                           12,239     16,038     37,837     64,792
                                ---------  ---------  ---------  ---------
    Total revenues                 49,757     59,791    258,925    249,069

COSTS AND EXPENSES:
  Research and development         52,351     49,444    204,175    209,311
  General and administrative       22,165     14,340     67,367     53,317
  Restructuring charges               537          -      6,668          -
  Asset impairment charges            182          -      5,513        900
                                ---------  ---------  ---------  ---------
    Total costs and expenses       75,235     63,784    283,723    263,528
                                ---------  ---------  ---------  ---------
    Operating loss                (25,478)    (3,993)   (24,798)   (14,459)

Interest income and other, net      4,019      5,268     19,362     17,704
Interest expense                   (3,440)    (3,605)   (13,708)   (13,070)
                                ---------  ---------  ---------  ---------
    Loss from continuing
     operations before income
     taxes                        (24,899)    (2,330)   (19,144)    (9,825)
Income tax expense (benefit)         (399)       323        247        941
                                ---------  ---------  ---------  ---------
    Loss from continuing
     operations                   (24,500)    (2,653)   (19,391)   (10,766)
Discontinued operations, net of
 income taxes (1)                   8,919    (87,055)    (1,670)  (119,254)
                                ---------  ---------  ---------  ---------
    Net loss                    $ (15,581) $ (89,708) $ (21,061) $(130,020)
                                =========  =========  =========  =========

NET LOSS PER BASIC AND DILUTED
 SHARE:
Loss from continuing operations $   (0.21) $   (0.02) $   (0.17) $   (0.09)
                                =========  =========  =========  =========
Discontinued operations         $    0.08  $   (0.76) $   (0.01) $   (1.05)
                                =========  =========  =========  =========
    Net loss                    $   (0.13) $   (0.78) $   (0.18) $   (1.14)
                                =========  =========  =========  =========

WEIGHTED-AVERAGE SHARES - BASIC
 AND DILUTED                      117,139    114,403    116,365    113,571
                                =========  =========  =========  =========


(1)  During the fourth quarter of 2007, based on the significant interest
demonstrated and the offers we received for our Cardene, Retavase and IV
Busulfex commercial products and our ularitide development-stage
cardiovascular product (together, the Commercial and Cardiovascular
Assets), we elected to proceed with the sale of these assets separate from
the sale of the entire Company.  As a result, the financial results of the
Commercial and Cardiovascular Operations have been presented as
discontinued operations for all periods presented. Discontinued operations
are reported as a separate component within the Consolidated Statement of
Operations outside of income (loss) from continuing operations. As a
result, we no longer report net product sales, cost of product sales, or
selling and marketing expenses, all of which related to the Commercial and
Cardiovascular Operations, separately in the Consolidated Statements of
Operations.

In addition to the consolidated financial statements presented in
accordance with GAAP, PDL uses non-GAAP measures of operating performance,
which are adjusted from results based on GAAP to exclude depreciation of
property and equipment; stock-based compensation expense; amortization of
intangible assets; interest income and other, net; interest expense; income
taxes and certain other miscellaneous items.  PDL believes that the non-
GAAP results provide added insight into its performance by focusing on
results generated by its ongoing operations.  PDL uses the non-GAAP results
when assessing the performance of its ongoing operations, in making
resource allocation decisions and for planning and forecasting.
Additionally, PDL considers these non-GAAP results in awarding bonus and
other incentive compensation to its employees, including management.  The
non-GAAP financial measures should be considered as a supplement to, not as
a substitute for, or superior to, the measures of financial performance
prepared in accordance with GAAP.  Investors are encouraged to review the
reconciliation of the non-GAAP financial measures to their most directly
comparable GAAP financial measures.



                            PDL BIOPHARMA, INC.
  RECONCILIATION OF NET INCOME (LOSS) TO NON-GAAP NET INCOME (LOSS) (1)
                 (in thousands, except per share amounts)
                                (unaudited)

                                 Three Months Ended        Year Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ---------

GAAP net loss                   $ (15,581) $ (89,708) $ (21,061) $(130,020)
                                =========  =========  =========  =========

RECONCILING ITEMS:
  Depreciation                      9,439      7,274     32,150     30,816
  Amortization of intangibles       5,993     11,679     32,341     44,854
  Stock-based compensation          6,114      5,853     20,578     23,648
  Other acquisition-related
   charges                             12        289      1,893      6,199
  Restructuring charges (2)           538          -      6,668          -
  Asset impairment charges (3)        182     72,094      5,513     74,650
  Other miscellaneous charges (4)       -          -          -      9,744
  Interest (income)/expense, net   (1,254)    (1,663)    (6,329)    (4,634)
  Income tax expense (benefit)       (304)       326        468        767
                                ---------  ---------  ---------  ---------
    Total reconciling items        20,720     95,852     93,282    186,044
                                ---------  ---------  ---------  ---------
Non-GAAP net income             $   5,139  $   6,144  $  72,221  $  56,024
                                =========  =========  =========  =========

NON-GAAP NET INCOME PER SHARE:
  Basic                         $    0.04  $    0.05  $    0.62  $    0.49
                                =========  =========  =========  =========
  Weighted average shares --
   basic                          117,139    114,403    116,365    113,571
                                =========  =========  =========  =========

  Diluted                       $    0.04  $    0.05  $    0.61  $    0.48
                                =========  =========  =========  =========
  Weighted average shares --
   diluted (5)                    118,498    117,552    118,011    117,447
                                =========  =========  =========  =========


(1) Non-GAAP net income excludes depreciation of property and equipment,
amortization of intangible assets, stock-based compensation expense, other
acquisition-related charges, which primarily represent product sales
returns that relate to operations prior to our acquisitions of ESP Pharma
and the Retavase product in March 2005; restructuring charges; asset
impairment charges;  interest income and other, net; interest expense;
income taxes; and certain other miscellaneous charges that were not
classified in the foregoing categories and are identified below.

(2) During the year ended December 31, 2007, restructuring charges related
to a reduction in force undertaken in the Company’s manufacturing facility,
in the third and fourth quarters of 2007, plus certain facilities-related
charges taken for certain leased facilities vacated during the year.

(3) During the year ended December 31, 2007, asset impairment charges
included $5.0 million recognized during the second quarter of 2007 related
to previously owned property in Fremont, California, which was part of our
corporate headquarters prior to our move to Redwood City, California in the
fourth quarter of 2007.

(4) During the year ended December 31, 2006, the miscellaneous excluded
charges consisted of (i) a $5.6 million charge in connection with the
company's acquisition in September 2006 of certain Cardene-related rights
from Roche and (ii) a $4.1 million charge for payments to Wyeth in
consideration of Wyeth’s consent to the Company’s transfer of the Company's
rights to the off-patent branded products during the first quarter of 2006.

(5) Diluted weighted average shares on a non-GAAP basis exclude the impact
of 12.4 million shares and 10.6 million shares of common stock underlying
the convertible notes the Company issued in July 2003 and February 2005,
respectively.




                            PDL BIOPHARMA, INC.
          SUPPLEMENTAL INFORMATION ON DISCONTINUED OPERATIONS (1)
                 (in thousands, except per share amounts)
                                (unaudited)

                                 Three Months Ended        Year Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2007       2006       2007       2006
                                ---------- ---------  ---------  ---------
REVENUES:
  Product sales, net:
    Cardene                     $   43,483 $  31,843  $ 155,510  $ 109,689
    Busulfex                         7,886     7,161     30,170     24,062
    Retavase                         5,896     9,047     18,486     30,833
    Off-patent products                  -         -          -      1,117
                                ---------- ---------  ---------  ---------
      Total revenues from
       discontinued
       operations                   57,265    48,051    204,166    165,701

COSTS AND EXPENSES:
  Cost of product sales             20,990    24,418     81,339     86,292
  Other operating expenses (R&D
   and SG&A)                        27,924    38,302    123,058    118,888
  Other acquisition-related
   charges                              12       289      1,893      6,199
  Asset impairment charges               -    72,094          -     73,750
                                ---------- ---------  ---------  ---------
    Costs and expenses from
     discontinued operations        48,926   135,103    206,290    285,129
                                ---------- ---------  ---------  ---------
  Other Income                         675         -        675          -
                                ---------- ---------  ---------  ---------
    Pre-tax income (loss) from
     discontiuned operations         9,014   (87,052)    (1,449)  (119,428)
                                ---------- ---------  ---------  ---------
  Income taxes on discontinued
   operations                           95         3        221       (174)
                                ---------- ---------  ---------  ---------
    Income (loss) from
     discontinued operations    $    8,919 $ (87,055) $  (1,670) $(119,254)
                                ========== =========  =========  =========


(1) During the fourth quarter of 2007, based on the significant interest
demonstrated and the offers we received for our Cardene, Retavase and IV
Busulfex commercial products and our ularitide development-stage
cardiovascular product (together, the Commercial and Cardiovascular
Assets), we elected to proceed with the sale of these assets separate from
the sale of the entire Company.  As a result, the financial results of the
Commercial and Cardiovascular Operations have been presented as
discontinued operations for all periods presented. Discontinued operations
are reported as a separate component within the Consolidated Statement of
Operations outside of income (loss) from continuing operations. As a
result, we no longer report net product sales, cost of product sales, or
selling and marketing expenses, all of which related to the Commercial and
Cardiovascular Operations, separately in the Consolidated Statements of
Operations.



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

                                                December 31,  December 31,
                                                    2007          2006
                                                ------------  ------------
Cash, cash equivalents, marketable
 securities and restricted cash                 $    440,788  $    426,285
Total assets                                    $  1,192,192  $  1,141,893
Total stockholders' equity                      $    507,610  $    467,541


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

                                                        Year Ended
                                                       December 31,
                                                --------------------------
                                                    2007          2006
                                                ------------  ------------
Net loss                                        $    (21,061) $   (130,020)
Adjustments to reconcile net loss to net cash
 provided by operating activities                     93,689       177,265
Changes in assets and liabilities                     (5,655)       31,525
                                                ------------  ------------
Net cash provided by operating activities       $     66,973  $     78,770
                                                ============  ============

Contact Information

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

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