PDL: Cook Williams Communications, Inc

The following excerpt is from the company's SEC filing.

775-832-8500

360-668-3701

Peter.Garcia@pdl.com

jennifer@cwcomm.org

PDL BioPharma Announces

Second

Quarter 2017 Financial Results

Total Revenues Increased by

for 2Q17 and YTD 2017, respectively

INCLINE VILLAGE, NV,

August 3, 2017

– PDL BioPharma, Inc. (PDL or the Company) (NASDAQ: PDLI) today reported financial results for the second quarter ended June 30, 2017 including:

Total revenues of

$143.8 million

$189.3 million

for the three and six months ended June 30, 2017, respectively.

GAAP diluted EPS of

GAAP net income attributable to PDL’s shareholders of

$60.4 million

$67.7 million

Non-GAAP net income attributable to PDL’s shareholders of

$40.2 million

$53.5 million

for the three and six months ended June 30, 2017. A full reconciliation of all components of the GAAP to non-GAAP financial results can be found in Table 4 at the end of the release.

Revenue Highlights

for the three months ended June 30, 2017 included:

Royalties from PDL’s licensees to the Queen et al. patents of

$16.3 million

, which consisted of royalties earned on sales of Tysabri

under a license agreement;

Net royalty payments from acquired royalty rights and a change in fair value of the royalty rights assets of

$83.7 million

, which consisted of the change in estimated fair value of our royalty right assets, primarily related to Depomed, Inc., University of Michigan, AcelRx Pharmaceuticals, Inc. and Kybella;

Interest revenue from notes receivable financings to kaléo and CareView Communications of

$5.5 million

Product revenues of

$18.8 million

$16.2 million

from sales of Tekturna

and Tekturna HCT

in the United States, Rasilez

and Rasilez HCT

in the rest of the world (collectively, the Noden Products) and

$2.6 million

for sales and leasing of the LENSAR Laser System.

increased

583 percent

for the three months ended June 30, 2017, when compared to the same period in 2016.

The increase in royalties from PDL’s licensees to the Queen et al. patents is due to the increased royalties on Tysabri

from Biogen, Inc.

The increase in royalty rights - change in fair value was primarily due to the current period increase in fair value of the Depomed, Inc. royalty asset by $87.0 million.

PDL received

$34.6 million

in net cash royalties from its royalty rights in the second quarter of 2017, compared to $14.7 million for the same period of 2016. The increase in cash royalties is mainly due to the launch of the authorized generic for Glumetza

in February 2017 sold by Valeant Pharmaceuticals International, inc. (Valeant) subsidiary, oceanside Pharmaceuticals, Inc. PDL received royalties on the authorized generic equivalents under the same terms as the branded Glumetza, retroactive to February 2017.

The decrease in interest revenues was primarily due to the early repayment of the Paradigm Spine, LLC note receivable investment.

Product revenues were derived from sales of the Noden Products, which PDL did not begin to recognize until the third quarter of 2016, and the sale and lease of the LENSAR Laser System, which PDL did not begin to recognize until May 11, 2017.

License and other revenue increased by

$19.2 million

primarily due to a $19.5 million payment from Merck as part of the previously announced settlement agreement to resolve the patent infringement lawsuits related to Keytruda

52 percent

for the six months ended June 30, 2017, when compared to the same period in 2016.

The decrease in royalties from PDL’s licensees to the Queen et al. patents is due to the expiration of the patent license agreement with Genentech, Inc.

The increase in royalty rights - change in fair value was primarily due to the current period increase in fair value of the Depomed, Inc. royalty asset by $93.5 million.

$48.1 million

in net cash royalties from its royalty rights in the six months ended June 30, 2017, compared to $31.9 million for the same period of 2016.

The decrease in interest revenues was primarily due to the early repayment of the Paradigm Spine, LLC note receivable investment and ceasing to recognize interest from the LENSAR note receivable.

Product revenue variances were the same as the three months ended June 30, 2017.

Operating Expense Highlights

Operating expenses were

$31.1 million

for the three months ended June 30, 2017, compared to

$9.9 million

for the same period of 2016. The increase in operating expenses for the three months ended June 30, 2017, as compared to the same period in 2016, was primarily a result of the $18.9 million in expenses related to the Noden operations, including $7.4 million of non-cash intangible asset amortization and a change in fair value of contingent consideration, and $3.8 million in LENSAR operating activities since the business acquisition on May 11, 2017.

$58.0 million

for the six months ended June 30, 2017, compared to

$19.8 million

for the same period of 2016. The increase in operating expenses for the six months ended June 30, 2017, as compared to the same period in 2016, was primarily a result of the $34.4 million in expenses related to the Noden operations, including $14.8 million of non-cash intangible asset amortization and a change in fair value of contingent consideration, and $3.8 million in LENSAR operating activities.

Recent Developments

PDL completed its $30 million share repurchase program, purchasing 13.347 million shares during the four-month period from the initial announcement in March 2017 through completion in June 2017.

In July 2017, PDL received a royalty payment from Valeant in the amount of $6.6 million for royalties earned on sales of Glumetza for the month of June. The royalty payment included royalties related to the authorized generic version of Glumetza. This payment will be recorded as part of PDL’s third quarter of 2017 revenue.

Other Financial Highlights

PDL had cash, cash equivalents, short-term investments and other investments of

$435.3 million

at June 30, 2017, compared to

$242.1 million

at December 31, 2016.

Net cash provided by operating activities in the six months ended June 30, 2017 was

$61.6 million

, compared with

$94.8 million

in the same period in 2016

PDL anticipates an estimated cash tax rate of 15% as the company begins to utilize available tax operating loss carry forwards and credits and expects an effective tax rate of approximately 47% in fiscal 2017, which is dependent on the mix and timing of income.

Conference Call and Webcast Details

PDL will hold a conference call to discuss financial results at 4:30 p.m. Eastern Time today, August 3, 2017.

To access the live conference call via phone, please dial (800) 668-4132 from the United States and Canada or (224) 357-2196 internationally. The conference ID is 51927827. Please dial in approximately 10 minutes prior to the start of the call. A telephone replay will be available beginning approximately one hour after the call through one week following the call, and may be accessed by dialing (855) 859-2056 from the United States and Canada or (404) 537-3406 internationally. The replay passcode is 51927827.

To access the live and subsequently archived webcast of the conference call, go to the Company’s website at http://www.pdl.com and go to “Events & Presentations.” Please connect to the website at least 15 minutes prior to the call to allow for any software download that may be necessary.

About PDL BioPharma, Inc.

We seek to provide a significant return for our shareholders by acquiring and managing a portfolio of companies, products, royalty agreements and debt facilities in the biotech, pharmaceutical and medical device industries. In 2012, we began providing alternative sources of capital through royalty monetizations and debt facilities, and in 2016, we began acquiring commercial-stage products and launching specialized companies dedicated to the commercialization of these products. To date, we have consummated 17 of such transactions, of which nine are active and outstanding. We have two debt transactions outstanding, representing deployed and committed capital of

$170.0 million

$190.0 million

, respectively: CareView and kaléo; we have one hybrid royalty/debt transaction outstanding, representing deployed and committed capital of

$44.0 million

: Wellstat Diagnostics; and we have five royalty transactions outstanding, representing deployed and committed capital of

$396.1 million

$397.1 million

, respectively: KYBELLA

, AcelRx, University of Michigan, Viscogliosi Brothers and Depomed. Our equity and loan investments in Noden represent deployed and committed capital of

$179.0 million

$202.0 million

NOTE: PDL, PDL BioPharma, the PDL logo and the PDL BioPharma logo are trademarks or registered trademarks of, and are proprietary, to PDL BioPharma, Inc. which reserves all rights therein.

Forward-looking Statements

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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. Important factors that could impair the value of the Company’s royalty assets, restrict or impede the ability of the Company to invest in new royalty bearing assets and limit the Company’s ability to pay dividends are disclosed in the risk factors contained in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission, filed with the Securities and Exchange Commission on March 1, 2017. All forward-looking statements are expressly qualified in their entirety by such factors. We do not undertake any duty to update any forward-looking statement except as required by law.

TABLE 1

PDL BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME DATA

(In thousands, except per share amounts)

Three Months Ended

Six Months Ended

Royalties from Queen et al. patents

16,285

14,232

30,441

135,687

Royalty rights - change in fair value

83,725

96,871

(27,957

10,917

16,307

Product revenue, net

18,829

31,410

19,536

19,636

143,835

21,047

189,275

124,171

Operating Expenses

Cost of product revenue (excluding intangible amortization)

Amortization of intangible assets

12,163

General and administrative expenses

11,288

23,864

16,797

Sales and marketing

Research and development

Change in fair value of anniversary payment and contingent consideration

Acquisition-related costs

Total operating expenses

31,055

57,990

19,756

Operating income

112,780

11,137

131,285

104,415

Non-operating expense, net

Interest and other income, net

Interest expense

(5,015

(4,461

(9,986

(9,011

Gain on bargain purchase

Total non-operating expense, net

(4,332

(3,227

(8,769

Income before income taxes

114,312

128,058

95,646

Income tax expense

53,873

60,425

35,611

Net income

60,439

67,633

60,035

Less: Net (loss)/income attributable to noncontrolling interests

Net income attributable to PDL’s shareholders

67,680

Net income per share

Diluted

Shares used to compute income per basic share

155,654

163,791

159,677

163,729

Shares used to compute income per diluted share

156,394

164,029

160,168

163,920

Cash dividends declared per common share

TABLE 2

CONDENSED CONSOLIDATED BALANCE SHEET DATA

(Unaudited)

(In thousands)

December 31,

Cash, cash equivalents and short-term investments

435,323

242,141

Total notes receivable

217,193

270,950

Total royalty rights - at fair value

342,958

402,318

Total assets

1,301,971

1,215,387

Total convertible notes payable

237,837

232,443

Total stockholders’ equity

818,798

755,423

TABLE 3

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW DATA

Adjustments to reconcile net income to net cash provided by (used in) operating activities

(44,789

25,969

Changes in assets and liabilities

38,768

61,612

94,752

TABLE 4

GAAP to NON-GAAP RECONCILIATION:

NET INCOME AND DILUTED EARNINGS PER SHARE

(In thousands, except per share amount)

A reconciliation between net income on a GAAP basis and on a non-GAAP basis is as follows:

GAAP net income attributed to PDL’s shareholders as reported

Adjustments to Non-GAAP net income (as detailed below)

(20,225

10,984

(14,159

40,164

Non-GAAP net income attributed to PDL’s shareholders

40,214

15,132

53,521

100,199

An itemized reconciliation between net income on a GAAP basis and on a non-GAAP basis is as follows:

Adjustments:

Mark-to-market adjustment to fair value assets

(49,157

15,543

(48,809

59,866

Non-cash interest revenues

(2,276

Non-cash stock-based compensation expense

Non-cash debt offering costs

Mark-to-market adjustment on warrants held

Amortization of the intangible assets

Mark-to-market adjustment of anniversary payment and contingent consideration

Income tax effect related to above items

18,008

(7,023

12,657

(23,791

Total adjustments

Use of Non-GAAP Financial Measures

We supplement our consolidated financial statements presented on a GAAP basis by providing additional measures which may be considered “non-GAAP” financial measures under applicable SEC rules. We believe that the disclosure of these non-GAAP financial measures provides our investors with additional information that reflects the amounts and financial basis upon which our management assesses and operates our business. These non-GAAP financial measures are not in accordance with generally accepted accounting principles and should not be viewed in isolation or as a substitute for reported, or GAAP, net income, and diluted earnings per share, and are not a substitute for, or superior to, measures of financial performance performed in conformity with GAAP.

“Non-GAAP net income“ is not based on any standardized methodology prescribed by GAAP and represent GAAP net income adjusted to exclude (1) mark-to market adjustments related to the fair value election for our investments in royalty rights presented in our earnings, which include the fair value re-measurement of future discounted cash flows for each of the royalty rights assets we have acquired, (2) non-cash interest revenue from notes receivable (3) stock-based compensation expense, (4) non-cash interest expense related to PDL debt offering costs, (5) mark-to market adjustments related to warrants held, (6) mark-

to-market adjustment related to acquisition-related contingent considerations, (7) amortization of intangible assets, and to adjust (7) the related tax effect of all reconciling items within our reconciliation of our GAAP to Non-GAAP net income. Non-GAAP financial measures used by PDL may be calculated differently from, and therefore may not be comparable to, non-GAAP measures used by other companies.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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Other recent filings from the company include the following:

PDL BioPharma's President just picked up 240,200 shares - Sept. 13, 2017
PDL BioPharma's President just declared 0 ownership of the company. - Sept. 13, 2017
Securities to be offered to employees in employee benefit plans - Sept. 12, 2017
PDL: Cook Williams Communications, Inc - Sept. 11, 2017
Current report, items 7.01 and 9.01 - Sept. 11, 2017

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