PDL BioPharma's Royalties Help, Heavy Partner Reliance Hurts

On May 29, we issued an updated research report on PDL BioPharma, Inc. PDLI.

PDL BioPharma is currently focused on acquiring and managing income-generating assets and maximizing value for stockholders.

The company also has royalty agreements with several companies whereby it is entitled to royalty rights on product sales. PDL BioPharma receives royalties from the sales of approved products of these companies. Such royalty agreements comprise the company’s revenue stream and help enhance its financial position.

Shares of PDL BioPharma have inched up 2% so far this year, outperforming the industry’s increase of 0.9%.

PDL BioPharma has made a strategic shift under which, the company will make equity investments in product-focused companies. The company has a majority ownership in Noden Pharma and receives revenues from the sales of Noden products — Tekturna and Tekturna HCT — in the United States. Notably, Noden Pharma closed an asset purchase agreement with Novartis NVS whereby it acquired exclusive global rights to manufacture, market and sell Tekturna.

Notably, in April 2019, PDL BioPharma invested $30 million in Evofem Biosciences, Inc. EVFM, representing the first tranche of a planned $60-million transaction. The company currently has an approximate 20% ownership in Evofem. This investment is a good strategic fit and will create an attractive value for PDL BioPharma’s shareholders.

Evofem is a biopharmaceutical company, which develops products for women's sexual and reproductive health. Its lead investigational drug product, Amphora, is an on-demand, non-hormonal gel contraceptive for women.

However, we remain concerned about PDL BioPharma’s revenue stream for the future. The company is heavily dependent on its partners for royalty revenues. The same from Biogen’s BIIB multiple sclerosis drug, Tysabri, is getting depleted of late due to weak product supplies. On first-quarter 2019 conference call, PDL BioPharma stated that it does not expect to report any meaningful Tysabri royalty revenues in the future quarters of 2019.

Moreover, in March 2019, the authorized generic version of Tekturna (150 mg/300 mg tablets) was launched in the United States by the privately held company, Prasco LLC, which is hurting PDL BioPharma’s revenues from the sales of this authorized generic product.

Amid such circumstances, PDL BioPharma’s royalty revenues could be materially and adversely impacted and have an unfavorable effect on the company’s growth prospects.

PDL BioPharma, Inc. Price and Consensus

PDL BioPharma, Inc. Price and Consensus

PDL BioPharma, Inc. price-consensus-chart | PDL BioPharma, Inc. Quote

Zacks Rank

PDL BioPharma currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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