Published:
PDL BioPharma Reports First Quarter 2008 Financial Results
PDL BioPharma, Inc. (PDL) (NASDAQ: PDLI)
today reported financial results for the quarter ended March 31, 2008. The
results of the company's commercial and cardiovascular operations segment
are presented as discontinued operations. The assets related to this
segment were sold in March 2008. The financial results for continuing and
discontinued operations are summarized below and are included, in addition
to supplemental information, in the financial tables accompanying this
press release.
Summary of Financial Results
-- Total revenues from continuing operations, which exclude net product
sales, for the first quarter of 2008 were $57.3 million compared to
$58.9 million in the same period of 2007.
-- Royalty revenues for the first quarter of 2008 were $50.0
million compared to $48.6 million in the comparable period in
2007, an increase driven primarily by higher royalties earned
on sales of Tysabri® and Synagis®, partially offset by a
decrease in royalties received from sales of products marketed
by Genentech, Inc. Although Genentech reported higher product
sales from its royalty-bearing products, the decrease in
royalties received from these product sales during the first
quarter of 2008 was primarily due to a significant decline in
the amount and percentage of Herceptin® product manufactured
and sold outside the U.S. This resulted in a greater percentage
of Herceptin product sales in the current period being subject
to the tiered fee royalty structure as opposed to the higher,
fixed royalty rate that applies to Genentech products that are
both manufactured and sold outside the U.S. In addition, of
Genentech product sales subject to the tiered fee royalty
structure, royalties were received on sales in both the third
and fourth tiers in the first quarter of 2007, while in the
first quarter of 2008, all royalties received were based on
product sales at the fourth and lowest tier.
-- License, collaboration and other revenues were $7.4 million for
the first quarter of 2008 compared to $10.3 million for the
same period of 2007. In the first quarter of 2007, the company
recognized $4.9 million in revenue related to its previous
collaboration with Roche for daclizumab in transplant
maintenance.
-- Total costs and expenses from continuing operations for the first
quarter of 2008 were $27.6 million and were net of a $49.7 million
gain recognized upon the sale of the company's biologics
manufacturing facility in March 2008. The costs and expenses from
continuing operations for this period included all of the costs related
to employees subsequently impacted by the company's restructuring
announced on March 4 for substantially all of the quarter, as well as
the costs, including employee-related costs, for the manufacturing
facility prior to the close of that transaction on March 13. Total
costs and expenses from continuing operations for the first quarter of
2007 were $60.1 million.
-- Research and development (R&D) expenses decreased to $47.7
million for the first quarter of 2008 from $48.1 million for
the same period of 2007. This decrease was attributable
primarily to reduced spending for the company's Nuvion® and
PDL192 programs, partially offset by increased spending for the
HuLuc63 and daclizumab programs.
-- General and administrative (G&A) expenses were $20.4 million
for the first quarter of 2008, compared to $12.0 million for
the prior year comparable period. This increase was primarily
due to higher legal and professional services costs.
-- PDL recognized a gain of $49.7 million for the first quarter of
2008 related to the sale of the biologics manufacturing
facility in Minnesota.
-- As a result of a restructuring plan announced in March 2008,
the company incurred restructuring charges in the first quarter
of 2008 of $5.6 million related to post-termination benefits
for employee terminations resulting from the restructuring, as
well as asset impairment charges of $3.5 million related to
research and information technology assets from which the
company expected to derive no future benefit.
-- Income from continuing operations, after taxes, for the first quarter
of 2008 was $29.6 million, or $0.25 per basic and $0.23 per diluted share,
compared to $216,000, or $0.00 per basic and diluted share, in the
comparable 2007 period.
-- Loss from discontinued operations, net of income taxes, for the first
quarter of 2008 was $91.5 million, or $0.78 per basic and $0.65 per diluted
share, compared to $10.8 million, or $0.09 per basic and diluted share, in
the first quarter of 2007. Loss from discontinued operations in the first
quarter of 2008 included a $64.6 million loss recognized on the sale of the
commercial and cardiovascular assets. Supplemental information for the
components of discontinued operations is provided in the financial tables
accompanying this press release.
-- Net loss for the first quarter of 2008, which includes the results
from continuing and discontinued operations, was $61.9 million, or $0.53
per basic and $0.42 per diluted share, compared with a net loss of $10.6
million, or $0.09 per basic and diluted share, for the comparable 2007
period.
-- Cash, cash equivalents, marketable securities and restricted cash and
investments totaled approximately $946.9 million at March 31, 2008 compared
to $440.8 million at December 31, 2007. The cash balance at March 31, 2008
included the net proceeds received from the sales of the company's
commercial and cardiovascular assets and the biologics manufacturing
facility in March 2008, from which a special cash dividend of $507.0
million was declared for stockholders of record as of May 5, 2008.
Recent Updates
On March 4, PDL announced that following an extended strategic review and
solicitation of interest in the company and its assets, the board of
directors decided it would no longer actively pursue the sale of the
company or of the company's biotechnology discovery and development assets.
In conjunction with that decision, the company commenced a restructuring to
execute a substantial workforce reduction of approximately 250 positions
over the next 12 months, at which time the company expects to have
approximately 300 employment positions. This workforce reduction is in
addition to the reductions of approximately 320 positions resulting from
the sales of the company's commercial and cardiovascular assets and the
biologics manufacturing facility.
On March 7 and March 13, PDL completed the sale of the commercial and
cardiovascular assets and the biologics manufacturing facility,
respectively.
On March 31, PDL submitted a post-approval study for a new Cardene
formulation to the U.S. FDA. Under the terms of the asset purchase
agreement with EKR Therapeutics, PDL would receive a $25 million milestone
upon approval of a new Cardene formulation, in addition to sales milestones
and future royalties based on sales of the new formulation.
On April 10, PDL declared a special cash dividend of $4.25 per share of
common stock derived from the proceeds from the company's sales of its
commercial and cardiovascular assets and its biologics manufacturing
facility. The dividend totaled $507.0 million.
On April 10, PDL also announced that it intends to separate its
biotechnology operations from its antibody humanization royalty assets by
spinning off its biotechnology assets into a separate publicly traded
company, to enable investors to invest in and realize the benefits of each
asset independently. PDL will not retain any equity in the spin-off
company. PDL expects the separation to be completed by the end of 2008.
Additional details regarding the structure, leadership and financial
operations of the two companies that would result from the spin-off
transaction will be disclosed at a later time.
On April 13, PDL presented preclinical data for PDL192, a novel humanized
antibody, at the American Association for Cancer Research Annual Meeting in
San Diego. These data supported the April 29 filing of an investigational
new drug application (IND) with the Food and Drug Administration for this
drug candidate in solid tumor indications.
On April 16, researchers presented 44-week follow-up data for the
daclizumab phase 2 CHOICE trial in multiple sclerosis during a plenary
session at the American Academy of Neurology 60th Annual Meeting in
Chicago.
In April, PDL and its collaborator, Biogen Idec, discontinued the phase 2
monotherapy trial of volociximab in patients with third-line ovarian cancer
because the specified efficacy threshold was not met based on interim data.
The companies continue to evaluate volociximab in the ongoing phase 2
combination trial with doxorubicin in patients with second-line ovarian
cancer and in phase 1 trials in non-small cell lung cancer.
2008 Financial Outlook
As announced on April 10, 2008, PDL anticipates its 2008 royalty revenues
to be $240 million to $260 million. Currently, royalty revenues are earned
on worldwide net sales of eight antibody products licensed under PDL's
antibody humanization patents: Avastin®, Herceptin, Xolair®, Raptiva®
and Lucentis® antibody products from Genentech; Synagis antibody product
from MedImmune, Inc.; Tysabri antibody product from Elan Pharmaceuticals,
Inc.; and Mylotarg® antibody product from Wyeth. PDL also expects to
receive royalty revenues on potential future sales of two additional
antibody products that are licensed under the company's humanization
patents: Cimzia® from UCB S.A., which was approved for marketing in
April 2008, and Actemra® from Hoffman La-Roche, which is currently in
registration.
PDL's 2008 R&D investments will include three novel antibody products in
the clinic and one expected to enter the clinic in the second half of 2008:
daclizumab for the treatment of multiple sclerosis (MS) and asthma, for
which the company has presented positive data from placebo-controlled phase
2 clinical trials in each indication; volociximab (M200), currently in
phase 1/2 studies targeted at various solid tumors; the HuLuc63 antibody
under phase 1 investigation in multiple myeloma; and PDL192, another
antibody with potential in solid tumors for which the company filed an IND
in April 2008. PDL is co-developing daclizumab in MS, and volociximab in
all indications, with Biogen Idec.
In connection with the current restructuring activities and the planned
spin-off of the biotechnology operations, PDL continues to further
streamline its operations and evaluate additional opportunities to reduce
its operating expenses. The company intends to provide financial guidance
for these biotechnology operations in conjunction with the planned spin-off
transaction.
Forward-looking Statements
This press release contains forward-looking statements, including PDL's:
Plan to separate its biotechnology operations from its antibody
humanization royalty assets by spinning off its biotechnology assets into a
separate publicly traded company by the end of 2008;
Expectations regarding royalty revenues it anticipates receiving in 2008
and from potential future sales, including expectations of royalties from
Roche's Actemra antibody product and UCB's Cimzia antibody product;
Continuation of the phase 2 combination trial of volociximab with
doxorubicin in patients with second-line ovarian cancer and the phase 1
trials of volociximab in non-small cell lung cancer; and
Expectations regarding workforce reductions and further streamlining of
operations.
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;
PDL's royalty revenue expectations depend on the success and timing of
sales royalty-bearing products by PDL's licensees, including in particular
the continued success of Genentech's Avastin and Herceptin antibody
products as well as the seasonality of sales of Synagis antibody product
from MedImmune, which could be adversely impacted by the availability of
drug supply, changes in the markets for these products due to alternative
treatments, other actions by competitors or regulatory actions;
Roche's Actemra antibody product may not be approved for marketing and PDL
would not receive any royalty revenue with respect to this antibody
product;
The royalties PDL may receive from royalty-bearing sales of antibody
products could be adversely impacted by lack of market penetration,
availability of drug supply, changes in the markets for these products due
to alternative treatments, other actions by competitors or regulatory
actions;
Alternative transactions or opportunities could arise or be pursued which
would alter the timing or advisability of anticipated or planned
transactions, including the proposed spin-off; and
The ability of PDL to execute on planned workforce reductions and to
identify and implement cost reductions.
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 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 immunologic diseases.
For more information, please visit http://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. and Busulfex is a registered trademark
of Otsuka Pharmaceutical Co., Ltd. PDL BioPharma, Inc. has a license from
Centocor, Inc. to use the trademark Retavase, which is a registered
trademark. Herceptin, Avastin, Lucentis and Raptiva are registered
trademarks of Genentech, Inc. Xolair is a registered trademark of Novartis
AG. Synagis is a registered trademark of MedImmune, Inc. Mylotarg is a
registered trademark of Wyeth. Tysabri is a registered trademark of Elan
Pharmaceuticals, Inc. Cimzia is a registered trademark of UCB Pharma S.A.
Actemra is a registered trademark of Chugai Seiyaku Kabushiki Kaisha
Corporation.
PDL BIOPHARMA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31
--------------------
2008 2007
--------- ---------
REVENUES:
Royalties $ 49,955 $ 48,595
License, collaboration and other 7,374 10,261
--------- ---------
Total revenues 57,329 58,856
COSTS AND EXPENSES:
Research and development 47,681 48,091
General and administrative 20,443 11,994
Gain on sale of assets (49,671) -
Restructuring charges 5,629 -
Asset impairment charges 3,521 -
--------- ---------
Total costs and expenses 27,603 60,085
--------- ---------
Operating income (loss) 29,726 (1,229)
Interest income and other, net 4,867 5,032
Interest expense (3,989) (3,557)
--------- ---------
Income from continuing operations before income
taxes 30,604 246
Income tax expense 1,004 30
--------- ---------
Income from continuing operations 29,600 216
Loss from discontinued operations, net of income
taxes (1) (91,475) (10,822)
--------- ---------
Net loss $ (61,875) $ (10,606)
========= =========
INCOME (LOSS) PER BASIC SHARE:
Income from continuing operations $ 0.25 $ 0.00
Loss from discontinued operations (0.78) (0.09)
--------- ---------
Net loss $ (0.53) $ (0.09)
========= =========
INCOME (LOSS) PER DILUTED SHARE:
Income from continuing operations $ 0.23 $ 0.00
Loss from discontinued operations (0.65) (0.09)
--------- ---------
Net loss $ (0.42) $ (0.09)
========= =========
WEIGHTED-AVERAGE SHARES - BASIC 117,525 115,104
========= =========
WEIGHTED-AVERAGE SHARES - DILUTED 141,232 117,765
========= =========
(1) During the fourth quarter of 2007, we elected to proceed with the sale
of our Cardene, Retavase and IV Busulfex commercial products and our
ularitide development-stage cardiovascular product (together, the
Commercial and Cardiovascular 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 from continuing operations. We no longer report net product
sales, cost of product sales, selling and marketing expenses, or the loss
on the sale of these assets, all of which related to the Commercial and
Cardiovascular Operations, separately in the Consolidated Statements of
Operations. The sale of these assets was completed on March 7, 2008.
PDL BIOPHARMA, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(in thousands)
(unaudited)
Three Months
Ended
March 31,
----------------
2008 2007
------- --------
Depreciation 8,001 7,377
Amortization of intangibles 412 8,783
Stock-based compensation 6,149 5,239
Other acquisition-related charges - 1,436
Restructuring charges (1) 7,386 -
Asset impairment charges (2) 3,521 -
Gain on sale of manufacturing assets (3) 49,671 -
Loss on sale of commercial and cardiovascular assets (4) (64,568) -
(1) During the quarter ended March 31, 2008, restructuring charges related
to i) costs of a reduction in force undertaken in conjunction with a
restructuring plan announced on March 4, 2008 to reduce the overall
headcount to approximately 300 employees over the next 12 months, and
ii) costs related to the termination of certain employment positions in
connection with the sale of the Commercial and Cardiovascular Assets,
which are reflected in Discontinued Operations.
(2) Asset impairment charges recognized in the first quarter of 2008
related to certain assets that were deemed to have no future value as
a result of the restructuring announced on March 4, 2008.
(3) The sale of the manufacturing facility closed on March 13, 2008.
(4) The sale of the Commercial and Cardiovascular Assets closed on
March 7, 2008.
PDL BIOPHARMA, INC.
SUPPLEMENTAL INFORMATION ON DISCONTINUED OPERATIONS (1)
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,
--------------------
2008 2007
--------- ---------
REVENUES:
Product sales, net:
Cardene $ 30,755 $ 34,549
Busulfex 4,410 7,713
Retavase 4,194 6,865
--------- ---------
Total revenues from discontinued operations 39,359 49,127
COSTS AND EXPENSES:
Cost of product sales 12,007 24,998
Other operating expenses (R&D and G&A) 24,475 33,480
Loss on sale of assets 64,568 -
Restructuring charges 1,757 -
Other acquisition-related charges - 1,436
--------- ---------
Costs and expenses from discontinued operations 102,807 59,914
--------- ---------
Loss from discontinued operations before income
taxes (63,448) (10,787)
--------- ---------
Income taxes on discontinued operations 28,027 35
--------- ---------
Loss from discontinued operations $ (91,475) $ (10,822)
========= =========
(1) Loss from discontinued operations reflects the operating results of
the Commercial and Cardiovascular Assets, which were divested on
March 7, 2008.
PDL BIOPHARMA, INC.
CONSOLIDATED BALANCE SHEET DATA
(in thousands)
(unaudited)
March 31, December 31,
2008 2007
------------ ------------
Cash, cash equivalents, marketable securities
and restricted cash $ 946,908 $ 440,788
Total assets $ 1,117,614 $ 1,192,192
Total stockholders' equity $ 478,623 $ 507,610
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