PDL BioPharma (PDLI) Guides Q3 Revs Ahead of Expectations

PDL BioPharma (Nasdaq: PDLI) announced revenue guidance for the third quarter ending September 30, 2014, of approximately $165 million, as compared with actual revenue of $100.2 million for the third quarter of 2013, an approximate 65 percent increase.

*** The Street sees Q3 revenue of $149.3 million.

The forecasted revenues for the third quarter of 2014 include royalty payments from PDL's licensees to the Queen et al. patents, net royalty payments from acquired royalty rights, the estimated change in fair value of the acquired royalty rights, and estimated interest revenue from notes receivable debt financings to late stage healthcare companies.

Queen et al. Royalties

Total royalties from the Queen et al. licenses for the third quarter of 2014 are estimated to be approximately $124 million, a 29% increase over the same period in 2013.

The forecasted growth in revenues is driven by increased second quarter 2014 sales for Avastin®, Herceptin®, Kadcyla®, Perjeta®, Tysabri® and Actemra® for which PDL receives royalties in the third quarter of 2014, along with a higher fixed royalty rate in 2014 over the blended fixed and tiered 2013 rate for Genentech-related products. Compared to the same period in 2013, reported worldwide sales for Avastin increased approximately 5 percent in the second quarter of 2014, Herceptin increased approximately 10 percent in the second quarter of 2014, Kadcyla increased approximately 95 percent in the second quarter of 2014 and Perjeta increased 266 percent in the second quarter of 2014. Reported worldwide sales for Tysabri, a Biogen Idec product, increased approximately 38 percent for the second quarter of 2014 compared to the same period in 2013, and Actemra, a Chugai/Roche product, increased approximately 50 percent for the second quarter of 2014 compared to the same period in 2013.

Revenue guidance for the third quarter of 2014 is net of an estimated payment due under the February 2011 settlement agreement with Novartis AG (Novartis). PDL pays to Novartis certain amounts based on net sales of Lucentis, made by Novartis, during calendar year 2011 and beyond. The amount paid is less than we receive in royalties on such sales.

The sales information presented above is based on information provided by PDL's licensees in their quarterly reports to the Company as well as from public disclosures made by PDL's licensees.

Acquired Royalty Rights

PDL estimates that royalty revenues from acquired rights will be approximately $28 million for the third quarter of 2014, which includes approximately $33 million in cash receipts from acquired royalties offered by a $5 million decrease in fair value of the royalty rights.

Currently, the majority of the revenue from acquired royalty rights is related to royalties from the sales of Glumetza®. PDL generally recognizes royalty revenues from Glumetza in the month received by us, that is, royalty revenues are generally recognized one month following the month in which sales by the licensees occurred.

Interest Revenue

Interest income related to interest from notes receivable that were previously reported outside of revenues as a component of "Interest and other income, net" in the condensed consolidated statements of income has been reclassified to "Interest revenue" as a component of revenue in the condensed consolidated statements of income. Forecasted interest revenue for the third quarter ending September 30, 2014, of approximately $12 million, compares actual interest revenue of $3 million for the third quarter of 2013, an approximate 300 percent increase.

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