Last close As at 05/08/2026
—
— 0.00 (0.00%)
Market capitalisation
—
Research: Healthcare
PDL reported Q318 revenues of $67.9m, up 8.2% compared to Q317 and up 45.8% sequentially, with that growth mainly due to an increase in the fair value of the Assertio (formerly Depomed) royalty rights. Noden Product revenue of $17.8m was up 17.9% compared to Q317 but was down 31.2% sequentially, mainly due to the bulk purchasing by distribution partner Orphan Pacific for the Japanese market launch in Q218. Importantly, PDL recently announced a $100m stock repurchase program which at current prices would buy back approximately 25% of the common shares outstanding.
Written by
PDL BioPharma |
Q318 results |
Financial update |
Pharma & biotech |
13 November 2018 |
Share price performance
Business description
Next events
Analysts
PDL BioPharma is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||
PDL reported Q318 revenues of $67.9m, up 8.2% compared to Q317 and up 45.8% sequentially, with that growth mainly due to an increase in the fair value of the Assertio (formerly Depomed) royalty rights. Noden Product revenue of $17.8m was up 17.9% compared to Q317 but was down 31.2% sequentially, mainly due to the bulk purchasing by distribution partner Orphan Pacific for the Japanese market launch in Q218. Importantly, PDL recently announced a $100m stock repurchase program which at current prices would buy back approximately 25% of the common shares outstanding.
Year |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/16 |
244.3 |
175.5 |
0.78 |
0.10 |
3.6 |
3.5 |
12/17 |
320.1 |
200.3 |
0.81 |
0.00 |
3.5 |
N/A |
12/18e |
189.4 |
66.1 |
0.46 |
0.00 |
6.2 |
N/A |
12/19e |
126.9 |
34.9 |
0.21 |
0.00 |
13.5 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Cost cutting at Noden improves profitability
In August, PDL announced that Noden would discontinue its 60+ person contract salesforce and instead contract with Archer Healthcare to focus on email, direct mail and telesales. As a result, Noden reduced sales and marketing expenses by $1.6m in Q318, while net income increased to $4.1m, up from $1.1m in Q317.
Continuing to look for acquisitions
The company is continuing to look for additional product acquisitions with a focus on commercial assets but also stated that it is looking at products that are still in development. The latter would represent a big change in strategy as the company has avoided such products and the large R&D expenditures that go with them. In our view, this move is unlikely as the company has historically been conservative in its acquisitions and price conscious even when it has liked an asset.
$100m stock repurchase program
In September, PDL announced a $100m share repurchase program, a course of action that has been promoted by certain investors. At current prices the program would enable PDL to repurchase around 25% of the common shares outstanding. Since March 2017, the company has bought back $55m worth of shares via share repurchase programs.
Valuation: $786m or $5.39 per share
We have adjusted our valuation from $783m or $5.39 per basic share to $786m or $5.39 per share. The increase in the total valuation is mainly due to a higher level of net cash, mitigated by slightly lower valuations for Noden and AcelRx. The value per share is unchanged due to a slightly higher number of shares.
Earnings
PDL reported Q318 revenues of $67.9m, up 8.2% compared to Q317 and up 45.8% sequentially. The growth in revenues was mainly due to an increase in the fair value of the Assertio (formerly Depomed) royalty rights following PDL’s purchase of Assertio’s remaining interest in those assets for $20m. Revenue associated with royalty rights totalled $42.2m during the quarter with $17.5m due to Assertio cash royalties and $31.6m due to a change in fair value of the Assertio royalty rights. The company also lowered its fair value estimates for AcelRx by $9.2m during the quarter to $68.3m due to lower expectations for that royalty stream.
Noden Product revenue of $17.8m was up 17.9% compared to Q317, but down 31.2% versus Q218. The sequential decline was mainly due to a $6.8m drop in Asian sales as the bulk purchasing by distribution partner Orphan Pacific for the Japanese market launch in Q218 subsided. As a reminder, Lee’s Pharmaceutical Holdings, which has licensed the rights to Tekturna/Rasilez in China, Hong Kong, Macau and Taiwan, is expected to launch in China in H119. Our current forecasts do not include any revenues for Tekturna/Rasilez in China, so any meaningful sales there could provide additional upside.
The company previously announced the decision to eliminate its 60+ person contract salesforce, and instead has contracted Archer Healthcare to focus on email, direct mail and telesales. As the contract salesforce had made little headway in reversing the exponential decline in prescriptions, the impact on prescriptions has been minimal but profitability has improved. The change took effect in August and in Q318 the company saved $1.8m in sales and marketing expenses. Net income for the Noden subsidiary increased to $4.1m during the quarter, up from $1.1m in Q317.
Additionally, LENSAR generated revenues of $6.6m in Q318, up 12% compared to Q218 with seven systems sold during the quarter. Profitability also improved with a quarterly loss of $0.9m versus $1.9m last quarter.
CEO retiring
The company announced that John McLaughlin, the CEO since December 2008, intends to retire at the end of 2018. He will be replaced by Dominique Monnet, PDL’s president, who has been with the company since September 2017. Mr Monnet was previously senior vice president and chief marketing officer at Alexion Pharmaceuticals, a now $28 billion company and prior to that he was at Amgen for 10 years where he held various commercial positions. It is unclear if the new CEO will lead to a change in strategy although at the results the company stated that it intends to look at potentially acquiring development stage assets, which is a change as PDL has previously focused on commercial stage assets. However, on the Q318 conference call, Mr Monnet reiterated that the company “will advance very cautiously in this area.”
Valuation
We have adjusted our valuation from $783m or $5.39 per basic share to $786m or $5.39 per share. The higher total valuation was mainly due to a higher level of net cash but was mitigated by slightly lower valuations for Noden and AcelRx. The value per share is unchanged as a slightly higher number of shares offsets the total valuation increase.
Exhibit 1: PDL valuation
Royalty/Note |
Type |
Expiration year |
PDL balance sheet carrying value ($m) |
NPV |
|
Queen et al |
Royalty |
2015 |
N/A |
N/A |
|
Assertio (formerly Depomed) |
Royalty on Glumetza and other products |
2024 |
$265.7 |
$281.8 |
|
VB |
Royalty on Spine Implant |
Undisclosed |
$13.9 |
$16.5 |
|
University of Michigan |
Royalty on Cerdelga |
2022 |
$27.5 |
$14.4 |
|
Wellstat |
Note (Impaired) |
Unknown |
$50.2 |
$50.2 |
|
Hyperion |
Note (Impaired) |
Unknown |
$1.2 |
$1.2 |
|
Lensar |
Equity |
N/A |
$53.1 |
||
Acelrx |
Royalty on Zalviso |
2027 |
$68.3 |
$73.4 |
|
Careview |
Note |
2022 |
$19.4 |
$20.5 |
|
Noden |
Equity |
N/A |
$40.1 |
$23.5 |
|
Kybella |
Royalty |
Unknown |
$2.9 |
$0.9 |
|
Total |
|
|
|
$535 |
|
Net cash (Q318) ($m) |
$251.0 |
||||
Total firm value ($m) |
$786 |
||||
Total basic shares (m) |
146.0 |
||||
Value per basic share ($) |
$5.39 |
||||
Total options |
0.0 |
||||
Total number of shares (m) |
146.0 |
||||
Diluted value per share ($) |
$5.39 |
||||
Source: Edison Investment Research, company reports
Financials
We have increased our estimated FY18 revenues to $189.4m from $176.1m, but decreased our estimated FY19 revenues to $126.9m from $145.5m. The increase in FY18 revenue estimates was due to the increase in the fair value of the Assertio royalties, partially offset by a lower than expected run rate for Noden. The decrease in FY19 revenues is due to our more conservative revenue forecasts for Noden. We have decreased our SG&A estimates to $69.6m from $74.0m for FY18, and to $72.4m from $76.9m for FY19, mainly due to cost cutting at Noden. The company ended the quarter with $401.0m in cash ($251.0m in net cash).
Exhibit 2: Financial summary
$000s |
2016 |
2017 |
2018e |
2019e |
||
Year end 31 December |
US GAAP |
US GAAP |
US GAAP |
US GAAP |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
244,301 |
320,060 |
189,361 |
126,862 |
Cost of Sales |
(4,065) |
(30,537) |
(45,163) |
(19,742) |
||
Gross Profit |
240,236 |
289,523 |
144,198 |
107,120 |
||
General & Administrative |
(43,287) |
(63,324) |
(69,614) |
(72,399) |
||
EBITDA |
|
|
193,129 |
218,818 |
71,757 |
31,894 |
Operating Profit (before amort. and except.) |
193,129 |
218,818 |
71,757 |
31,894 |
||
Intangible Amortisation |
(12,028) |
(24,689) |
(15,831) |
(15,831) |
||
Other |
0 |
0 |
0 |
0 |
||
Exceptionals |
(51,699) |
(349) |
(129,897) |
0 |
||
Operating Profit |
129,402 |
193,780 |
(73,971) |
16,063 |
||
Net Interest |
(17,679) |
(18,562) |
(5,676) |
2,972 |
||
Other |
(2,353) |
9,309 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
175,450 |
200,256 |
66,081 |
34,866 |
Profit Before Tax (FRS 3) |
|
|
109,370 |
184,527 |
(79,647) |
19,035 |
Tax |
(45,711) |
(73,826) |
1,490 |
(3,997) |
||
Deferred tax |
(0) |
(0) |
(0) |
(0) |
||
Profit After Tax (norm) |
129,739 |
126,430 |
67,571 |
30,868 |
||
Profit After Tax (FRS 3) |
63,659 |
110,701 |
(78,157) |
15,037 |
||
Minority interest |
(53) |
(47) |
0 |
0 |
||
Profit After Tax less Minority Interest (FRS 3) |
63,606 |
110,654 |
(78,157) |
15,037 |
||
Average Number of Shares Outstanding (m) |
163.8 |
155.4 |
146.5 |
149.5 |
||
EPS - normalised ($) |
|
|
0.78 |
0.81 |
0.46 |
0.21 |
EPS - FRS 3 ($) |
|
|
0.39 |
0.71 |
(0.53) |
0.10 |
Dividend per share (c) |
10.03 |
0.00 |
0.00 |
0.00 |
||
Gross Margin (%) |
98.3 |
90.5 |
76.1 |
84.4 |
||
EBITDA Margin (%) |
79.1 |
68.4 |
37.9 |
25.1 |
||
Operating Margin (before GW and except.) (%) |
79.1 |
68.4 |
37.9 |
25.1 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
818,949 |
611,827 |
448,927 |
342,571 |
Intangible Assets |
228,542 |
215,823 |
51,318 |
51,318 |
||
Tangible Assets |
1,631 |
16,369 |
12,430 |
14,348 |
||
Royalty rights |
402,318 |
349,223 |
348,525 |
250,938 |
||
Other |
186,458 |
30,412 |
36,654 |
25,968 |
||
Current Assets |
|
|
395,147 |
631,296 |
540,657 |
641,099 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
40,120 |
31,183 |
15,437 |
15,437 |
||
Cash |
147,154 |
527,266 |
446,407 |
546,849 |
||
Other |
207,873 |
72,847 |
78,813 |
78,813 |
||
Current Liabilities |
|
|
(130,315) |
(193,109) |
(46,672) |
(46,672) |
Creditors |
(7,016) |
(19,785) |
(9,011) |
(9,011) |
||
Short term borrowings |
0 |
(126,066) |
0 |
0 |
||
Other |
(123,299) |
(47,258) |
(37,661) |
(37,661) |
||
Long Term Liabilities |
|
|
(329,649) |
(204,124) |
(200,202) |
(200,202) |
Long term borrowings |
(232,443) |
(117,415) |
(124,614) |
(124,614) |
||
Other long term liabilities |
(97,206) |
(86,709) |
(75,588) |
(75,588) |
||
Net Assets |
|
|
754,132 |
845,890 |
742,710 |
736,797 |
Minority Interests |
0 |
0 |
0 |
0 |
||
Shareholder equity |
|
|
754,132 |
845,890 |
742,710 |
736,797 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
101,718 |
40,624 |
(9,700) |
(5,187) |
Net Interest |
0 |
0 |
0 |
0 |
||
Tax |
0 |
0 |
0 |
0 |
||
Capex |
(109,963) |
(1,297) |
(5,367) |
(1,269) |
||
Acquisitions/disposals |
13,082 |
128,415 |
76,581 |
102,410 |
||
Financing |
0 |
0 |
0 |
0 |
||
Dividends |
(16,583) |
(222) |
0 |
0 |
||
Other |
(47,629) |
212,592 |
(15,926) |
4,488 |
||
Net Cash Flow |
(59,375) |
380,112 |
45,588 |
100,442 |
||
Opening net debt/(cash) |
|
|
38,918 |
85,289 |
(283,785) |
(321,793) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Exchange rate movements |
0 |
0 |
0 |
0 |
||
Other |
13,004 |
(11,038) |
(7,580) |
(0) |
||
Closing net debt/(cash) |
|
|
85,289 |
(283,785) |
(321,793) |
(422,235) |
Source: PDL BioPharma accounts, Edison Investment Research
|
|
Research: Industrials
Solid State has announced the acquisition of Pacer Technologies, a value-added distributor of opto-electronic components and displays, for c £3.7m cash. Although the transaction is earnings enhancing, triggering a 4.0% uplift in the FY20 consensus EPS, the share price has not moved materially in response to the news and we believe the shares continue to trade at a significant discount to peers.