|
ý
|
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
For the quarterly period ended March 31, 2016
|
¨
|
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
For transition period from to
|
|
|
Delaware
|
94-3023969
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
Large accelerated filer
ý
|
Accelerated filer
¨
|
Non-accelerated filer
¨
|
Smaller reporting company
¨
|
(Do not check if a smaller reporting company)
|
|
Page
|
|
GLOSSARY OF TERMS AND ABBREVIATIONS (as used in this document)
|
||
|
||
PART I - FINANCIAL INFORMATION
|
||
|
|
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
|
|
|
|
|
Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2016 and 2015
|
|
|
|
|
|
Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2016 and 2015
|
|
|
|
|
|
Condensed Consolidated Balance Sheets at March 31, 2016, and December 31, 2015
|
|
|
|
|
|
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015
|
|
|
|
|
|
Notes to the Condensed Consolidated Financial Statements
|
|
|
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
|
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
|
|
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
|
|
||
PART II - OTHER INFORMATION
|
||
|
|
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
|
|
|
|
ITEM 1A.
|
RISK FACTORS
|
|
|
|
|
ITEM 6.
|
EXHIBITS
|
|
|
|
|
SIGNATURES
|
Abbreviation/term
|
|
Definition
|
|
|
|
'216B Patent
|
|
European Patent No. 0 451 216B
|
'761 Patent
|
|
U.S. Patent No. 5,693,761
|
AbbVie
|
|
AbbVie Biotherapeutics, Inc.
|
Accel 300
|
|
Accel 300, LLC, a wholly-owned subsidiary of kaléo
|
AcelRx
|
|
AcelRx Pharmaceuticals, Inc.
|
AcelRx Royalty Agreement
|
|
Royalty Interest Assignment Agreement, dated September 18, 2015, between PDL and AcelRx
|
Alphaeon
|
|
ALPHAEON Corporation
|
APIC
|
|
Additional paid-in-capital
|
ARIAD
|
|
ARIAD Pharmaceuticals, Inc.
|
ARIAD Royalty Agreement
|
|
Royalty Interest Assignment Agreement, dated July 28, 2015, between PDL and ARIAD
|
ARIAD Royalty Rights
|
|
The right to receive specified royalties on ARIAD’s Net Revenues (as defined in the ARIAD Royalty Agreement) generated by the sale, distribution or other use of ARIAD’s product Iclusig
®
(ponatinib)
|
ASC
|
|
Accounting Standards Codification
|
ASU
|
|
Accounting Standards Update
|
Avinger
|
|
Avinger, Inc.
|
Avinger Credit and Royalty Agreement
|
|
Credit Agreement, dated April 18, 2013, between PDL and Avinger
|
AxoGen
|
|
AxoGen, Inc.
|
AxoGen Royalty Agreement
|
|
Revenue Interests Purchase Agreement, dated as of October 5, 2012, between PDL and AxoGen
|
Biogen
|
|
Biogen, Inc.
|
CareView
|
|
CareView Communications, Inc.
|
Chugai
|
|
Chugai Pharmaceutical Co., Ltd.
|
Depo DR Sub
|
|
Depo DR Sub, LLC, a wholly-owned subsidiary of Depomed
|
Depomed
|
|
Depomed, Inc.
|
Depomed Royalty Agreement
|
|
Royalty Purchase and Sale Agreement, dated as of October 18, 2013, among Depomed, Depo DR Sub and PDL
|
Direct Flow Medical
|
|
Direct Flow Medical, Inc.
|
Durata
|
|
Collectively, Durata Therapeutics Holding C.V., Durata Therapeutics International B.V. and Durata Therapeutics, Inc. (parent company)
|
EBITDA
|
|
Earnings before interest, taxes, depreciation and amortization
|
Elan
|
|
Elan Corporation, PLC
|
EPO
|
|
European Patent Office
|
ex-U.S.-based Manufacturing and Sales
|
|
Products that are both manufactured and sold outside of the United States
|
ex-U.S.-based Sales
|
|
Products that are manufactured in the United States and sold outside of the United States
|
Facet
|
|
Facet Biotech Corporation. In April 2010, Abbott Laboratories acquired Facet and later renamed the company Abbott Biotherapeutics Corp., and in January 2013, Abbott Biotherapeutics Corp. was renamed AbbVie and spun off from Abbott Laboratories as a subsidiary of AbbVie Inc.
|
FASB
|
|
Financial Accounting Standards Board
|
FDA
|
|
U.S. Food and Drug Administration
|
February 2015 Notes
|
|
2.875% Convertible Senior Notes due February 15, 2015, fully retired at September 30, 2013
|
February 2018 Notes
|
|
4.0% Convertible Senior Notes due February 1, 2018
|
GAAP
|
|
U.S. Generally Accepted Accounting Principles
|
Genentech
|
|
Genentech, Inc.
|
Genentech Products
|
|
Avastin
®
, Herceptin
®
, Lucentis
®
, Xolair
®
, Perjeta
®
and Kadcyla
®
|
Genzyme
|
|
Genzyme Corporation (a Sanofi company)
|
Hyperion
|
|
Hyperion Catalysis International, Inc.
|
IRS
|
|
Internal Revenue Service
|
kaléo
|
|
kaléo, Inc. (formerly known as Intelliject, Inc.)
|
kaléo Revenue Interests
|
|
100% of the royalties from kaléo’s first approved product, Auvi-Q™ (epinephrine auto-injection, USP) (known as Allerject in Canada) and 10% of net sales of kaléo’s second proprietary auto-injector based product, EVZIO (naloxone hydrochloride injection), collectively
|
KMPG
|
|
KPMG, LLP
|
LENSAR
|
|
LENSAR, Inc.
|
Lilly
|
|
Eli Lilly and Company
|
March 2015 Term Loan
|
|
Term Loan borrowed under the Credit Agreement, dated as of March 30, 2015, among PDL, the Royal Bank of Canada and lenders thereto, fully retired on February 12, 2016
|
May 2015 Notes
|
|
3.75% Senior Convertible Notes due May 2015, fully retired on May 1, 2015
|
Merck
|
|
Merck & Co., Inc.
|
Michigan Royalty Agreement
|
|
Royalty Purchase and Sale Agreement, dated as of November 6, 2014, between The Regents of the University of Michigan and PDL
|
New LENSAR
|
|
LENSAR, LLC a wholly-owned subsidiary of Alphaeon (formerly known as Lion Buyer LLC)
|
Novartis
|
|
Novartis AG
|
OCI
|
|
Other Comprehensive Income (Loss)
|
Paradigm Spine
|
|
Paradigm Spine, LLC
|
Paradigm Spine Credit Agreement
|
|
Paradigm Spine Credit Agreement, dated February 14, 2014, between Paradigm Spine and the Company
|
PDL, we, us, our, the Company
|
|
PDL BioPharma, Inc.
|
Queen et al. patents
|
|
PDL's patents in the United States and elsewhere covering the humanization of antibodies
|
Roche
|
|
F. Hoffman LaRoche, Ltd.
|
Salix
|
|
Salix Pharmaceuticals, Inc.
|
Santarus
|
|
Santarus, Inc.
|
SDK
|
|
Showa Denka K.K.
|
SEC
|
|
Securities and Exchange Commission
|
Series 2012 Notes
|
|
2.875% Series 2012 Convertible Senior Notes, fully retired on February 15, 2015
|
Settlement Agreement
|
|
Settlement Agreement between and among PDL, Genentech and Roche, dated January 31, 2014
|
SPCs
|
|
Supplementary Protection Certificates
|
SPC Products
|
|
Avastin, Herceptin, Lucentis, Xolair and Tysabri
|
Spin-Off
|
|
The spin-off by PDL of Facet
|
Takeda
|
|
Takeda Pharmaceuticals America, Inc.
|
U-M
|
|
University of Michigan
|
Valeant Pharmaceuticals
|
|
Valeant Pharmaceuticals International, Inc.
|
VB
|
|
Viscogliosi Brothers, LLC
|
VB Royalty Agreement
|
|
Royalty Purchase and Sale Agreement, dated as of June 26, 2014, between VB and PDL
|
VWAP
|
|
Volume-weighted average share price
|
Wellstat Diagnostics
|
|
Wellstat Diagnostics, LLC
|
Wellstat Diagnostics Borrower Notice
|
|
A notice of default to Wellstat Diagnostics, due to, inter alia, its ongoing failure to pay its debts as they became due and Wellstat Diagnostics' failure to comply with certain covenants included in the first amendment to amended and restated credit agreement by the deadlines to which the parties had agreed
|
Wellstat Diagnostics Guarantor Notice
|
|
A notice to each of the guarantors of Wellstat Diagnostics' obligations to the Company under the credit agreement
|
Wellstat Diagnostics Guarantors
|
|
Some or all of: Samuel J. Wohlstadter; Nadine H. Wohlstadter; Duck Farm, Inc.; Hebron Valley Farms, Inc.; HVF, Inc.; Hyperion Catalysis EU Limited; Hyperion; NHW, LLC; Wellstat AVT Investment, LLC; Wellstat Biocatalysis, LLC; Wellstat Biologics Corporation; Wellstat Diagnostics; Wellstat Immunotherapeutics, LLC; Wellstat Management Company, LLC; Wellstate Opthalmics Corporation; Wellstat Therapeutics Corporation; Wellstat Therapeutics EU Limited; Wellstat Vaccines, LLC; and SJW Properties, Inc.
|
Wellstat Diagnostics Note Receivable and Credit Agreement
|
|
Senior Secured Note receivable among the Company and the holders of the equity interests in Wellstat Diagnostics, as amended, and Credit Agreement between Wellstat Diagnostics and the Company, dated November 2, 2012, as amended
|
Wellstat Diagnostics Petition
|
|
An Ex Parte Petition for Appointment of Receiver with the Circuit Court of Montgomery County, Maryland
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2016
|
|
2015
|
||||
Revenues
|
|
|
|
|
||||
Royalties from Queen et al. patents
|
|
$
|
121,455
|
|
|
$
|
127,810
|
|
Royalty rights - change in fair value
|
|
(27,102
|
)
|
|
11,362
|
|
||
Interest revenue
|
|
8,964
|
|
|
10,534
|
|
||
License and other
|
|
(193
|
)
|
|
—
|
|
||
Total revenues
|
|
103,124
|
|
|
149,706
|
|
||
|
|
|
|
|
||||
Operating expenses
|
|
|
|
|
|
|
||
General and administrative
|
|
9,846
|
|
|
7,666
|
|
||
Operating income
|
|
93,278
|
|
|
142,040
|
|
||
|
|
|
|
|
||||
Non-operating expense, net
|
|
|
|
|
|
|
||
Interest and other income, net
|
|
113
|
|
|
86
|
|
||
Interest expense
|
|
(4,550
|
)
|
|
(8,610
|
)
|
||
Total non-operating expense, net
|
|
(4,437
|
)
|
|
(8,524
|
)
|
||
|
|
|
|
|
||||
Income before income taxes
|
|
88,841
|
|
|
133,516
|
|
||
Income tax expense
|
|
32,954
|
|
|
49,018
|
|
||
Net income
|
|
$
|
55,887
|
|
|
$
|
84,498
|
|
|
|
|
|
|
||||
Net income per share
|
|
|
|
|
|
|
||
Basic
|
|
$
|
0.34
|
|
|
$
|
0.52
|
|
Diluted
|
|
$
|
0.34
|
|
|
$
|
0.50
|
|
|
|
|
|
|
||||
Weighted average shares outstanding
|
|
|
|
|
|
|
||
Basic
|
|
163,701
|
|
|
162,829
|
|
||
Diluted
|
|
163,835
|
|
|
170,412
|
|
||
|
|
|
|
|
||||
Cash dividends declared per common share
|
|
$
|
0.05
|
|
|
$
|
0.60
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2016
|
|
2015
|
||||
|
|
|
|
|
||||
Net income
|
|
$
|
55,887
|
|
|
$
|
84,498
|
|
|
|
|
|
|
||||
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
||
Change in unrealized gains on investments in available-for-sale securities:
|
|
|
|
|
||||
Change in fair value of investments in available-for-sale securities, net of tax
|
|
107
|
|
|
(38
|
)
|
||
Adjustment for net (gains) losses realized and included in net income, net of tax
|
|
(124
|
)
|
|
—
|
|
||
Total change in unrealized gains on investments in available-for-sale securities, net of tax
(a)
|
|
(17
|
)
|
|
(38
|
)
|
||
Change in unrealized gains (losses) on cash flow hedges:
|
|
|
|
|
||||
Change in fair value of cash flow hedges, net of tax
|
|
—
|
|
|
5,668
|
|
||
Adjustment to royalties from Queen et al. patents for net (gains) losses realized and included in net income, net of tax
|
|
(1,821
|
)
|
|
(669
|
)
|
||
Total change in unrealized losses on cash flow hedges, net of tax
(b)
|
|
(1,821
|
)
|
|
4,999
|
|
||
Total other comprehensive income (loss), net of tax
|
|
(1,838
|
)
|
|
4,961
|
|
||
Comprehensive income
|
|
$
|
54,049
|
|
|
$
|
89,459
|
|
|
March 31,
|
|
December 31,
|
||||
|
2016
|
|
2015
|
||||
|
(unaudited)
|
|
(Note 1)
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
290,650
|
|
|
$
|
218,883
|
|
Short-term investments
|
1,306
|
|
|
1,469
|
|
||
Deferred tax assets
|
—
|
|
|
981
|
|
||
Notes receivable
|
84,615
|
|
|
58,398
|
|
||
Prepaid and other current assets
|
607
|
|
|
2,979
|
|
||
Total current assets
|
377,178
|
|
|
282,710
|
|
||
|
|
|
|
||||
Property and equipment, net
|
22
|
|
|
31
|
|
||
Royalty rights - at fair value
|
354,881
|
|
|
399,204
|
|
||
Notes and other receivables, long-term
|
287,241
|
|
|
306,507
|
|
||
Long-term deferred tax assets
|
26,358
|
|
|
16,172
|
|
||
Other assets
|
9,695
|
|
|
7,581
|
|
||
Total assets
|
$
|
1,055,375
|
|
|
$
|
1,012,205
|
|
|
|
|
|
||||
Liabilities and Stockholders' Equity
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
662
|
|
|
$
|
394
|
|
Accrued liabilities
|
7,253
|
|
|
8,009
|
|
||
Accrued income taxes
|
21,019
|
|
|
3,372
|
|
||
Term loan payable
|
—
|
|
|
24,966
|
|
||
Total current liabilities
|
28,934
|
|
|
36,741
|
|
||
|
|
|
|
||||
Convertible notes payable
|
230,850
|
|
|
228,862
|
|
||
Other long-term liabilities
|
53,060
|
|
|
50,650
|
|
||
Total liabilities
|
312,844
|
|
|
316,253
|
|
||
|
|
|
|
||||
Commitments and contingencies (Note 8)
|
|
|
|
|
|
||
|
|
|
|
||||
Stockholders' equity:
|
|
|
|
|
|
||
Preferred stock, par value $0.01 per share, 10,000 shares authorized; no shares issued and outstanding
|
—
|
|
|
—
|
|
||
Common stock, par value $0.01 per share, 350,000 shares authorized; 165,115 and 164,287 shares issued and outstanding at March 31, 2016, and December 31, 2015, respectively
|
1,651
|
|
|
1,643
|
|
||
Additional paid-in capital
|
(117,205
|
)
|
|
(117,983
|
)
|
||
Accumulated other comprehensive income
|
418
|
|
|
2,256
|
|
||
Retained earnings
|
857,667
|
|
|
810,036
|
|
||
Total stockholders' equity
|
742,531
|
|
|
695,952
|
|
||
Total liabilities and stockholders' equity
|
$
|
1,055,375
|
|
|
$
|
1,012,205
|
|
|
Three Months Ended March 31,
|
||||||
|
2016
|
|
2015
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net income
|
$
|
55,887
|
|
|
$
|
84,498
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||
Amortization of convertible notes and term loan offering costs
|
2,461
|
|
|
4,066
|
|
||
Change in fair value of royalty rights - at fair value
|
27,102
|
|
|
(11,362
|
)
|
||
Change in fair value of derivative asset
|
329
|
|
|
—
|
|
||
Other amortization, depreciation and accretion of embedded derivative
|
9
|
|
|
10
|
|
||
Gain on sale of available-for-sale securities
|
(136
|
)
|
|
—
|
|
||
Stock-based compensation expense
|
786
|
|
|
501
|
|
||
Deferred income taxes
|
(8,215
|
)
|
|
3,343
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
|
||
Receivables from licensees and other
|
—
|
|
|
300
|
|
||
Prepaid and other current assets
|
(430
|
)
|
|
(6,396
|
)
|
||
Accrued interest on notes receivable
|
(1,951
|
)
|
|
(2,594
|
)
|
||
Other assets
|
(2,439
|
)
|
|
11
|
|
||
Accounts payable
|
268
|
|
|
297
|
|
||
Accrued liabilities
|
(1,169
|
)
|
|
(1,081
|
)
|
||
Accrued income taxes
|
17,647
|
|
|
(3,293
|
)
|
||
Other long-term liabilities
|
2,357
|
|
|
3,546
|
|
||
Net cash provided by operating activities
|
92,506
|
|
|
71,846
|
|
||
Cash flows from investing activities
|
|
|
|
|
|
||
Proceeds from sales of available-for-sale securities
|
273
|
|
|
—
|
|
||
Proceeds from royalty rights - at fair value
|
17,221
|
|
|
938
|
|
||
Purchase of notes receivable
|
(5,000
|
)
|
|
—
|
|
||
Net cash provided by investing activities
|
12,494
|
|
|
938
|
|
||
Cash flows from financing activities
|
|
|
|
|
|
||
Proceeds from term loan
|
—
|
|
|
100,000
|
|
||
Repurchase of convertible notes
|
—
|
|
|
(22,337
|
)
|
||
Payment of debt issuance costs
|
—
|
|
|
(607
|
)
|
||
Repayment of term loan
|
(25,000
|
)
|
|
—
|
|
||
Cash dividends paid
|
(8,233
|
)
|
|
(24,549
|
)
|
||
Net cash provided by (used in) financing activities
|
(33,233
|
)
|
|
52,507
|
|
||
Net increase in cash and cash equivalents
|
71,767
|
|
|
125,291
|
|
||
Cash and cash equivalents at beginning of the period
|
218,883
|
|
|
291,377
|
|
||
Cash and cash equivalents at end of period
|
$
|
290,650
|
|
|
$
|
416,668
|
|
|
|
|
|
||||
|
|
|
|
||||
Supplemental cash flow information
|
|
|
|
|
|
||
Cash paid for income taxes
|
$
|
22,000
|
|
|
$
|
52,000
|
|
Cash paid for interest
|
$
|
5,001
|
|
|
$
|
6,332
|
|
Stock issued to settle debt
|
$
|
—
|
|
|
$
|
9,794
|
|
Warrants received for notes receivable
|
$
|
443
|
|
|
$
|
—
|
|
|
|
|
|
Three Months Ended March 31,
|
||||
Licensee
|
|
Product Name
|
|
2016
|
|
2015
|
||
Genentech
|
|
Avastin
|
|
38
|
%
|
|
26
|
%
|
|
|
Herceptin
|
|
38
|
%
|
|
25
|
%
|
|
|
Xolair
|
|
13
|
%
|
|
7
|
%
|
|
|
|
|
|
|
|
||
Biogen
|
|
Tysabri
®
|
|
14
|
%
|
|
10
|
%
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
Net Income per Basic and Diluted Share:
|
|
2016
|
|
2015
|
||||
(in thousands except per share amounts)
|
|
|
|
|
||||
Numerator
|
|
|
|
|
||||
Income used to compute net income per basic and diluted share
|
|
$
|
55,887
|
|
|
$
|
84,498
|
|
|
|
|
|
|
||||
Denominator
|
|
|
|
|
|
|
||
Total weighted average shares used to compute net income per basic share
|
|
163,701
|
|
|
162,829
|
|
||
Restricted stock outstanding
|
|
134
|
|
|
28
|
|
||
Effect of dilutive stock options
|
|
—
|
|
|
18
|
|
||
Assumed conversion of Series 2012 Notes
|
|
—
|
|
|
666
|
|
||
Assumed conversion of warrants
|
|
—
|
|
|
1,927
|
|
||
Assumed conversion of May 2015 Notes
|
|
—
|
|
|
4,944
|
|
||
Shares used to compute net income per diluted share
|
|
163,835
|
|
|
170,412
|
|
||
|
|
|
|
|
||||
Net income per share - basic
|
|
$
|
0.34
|
|
|
$
|
0.52
|
|
Net income per share - diluted
|
|
$
|
0.34
|
|
|
$
|
0.50
|
|
|
|
March 31, 2016
|
|
December 31, 2015
|
||||||||||||||||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Money market funds
|
|
$
|
199,546
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
199,546
|
|
|
$
|
94,801
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
94,801
|
|
Corporate securities
|
|
—
|
|
|
1,306
|
|
|
—
|
|
|
1,306
|
|
|
—
|
|
|
1,469
|
|
|
—
|
|
|
1,469
|
|
||||||||
Foreign currency hedge contracts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,802
|
|
|
—
|
|
|
2,802
|
|
||||||||
Warrants
|
|
—
|
|
|
656
|
|
|
443
|
|
|
1,099
|
|
|
—
|
|
|
984
|
|
|
—
|
|
|
984
|
|
||||||||
Royalty rights - at fair value
|
|
—
|
|
|
—
|
|
|
354,881
|
|
|
354,881
|
|
|
—
|
|
|
—
|
|
|
399,204
|
|
|
399,204
|
|
||||||||
Total
|
|
$
|
199,546
|
|
|
$
|
1,962
|
|
|
$
|
355,324
|
|
|
$
|
556,832
|
|
|
$
|
94,801
|
|
|
$
|
5,255
|
|
|
$
|
399,204
|
|
|
$
|
499,260
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
(in thousands)
|
|
2016
|
|
2015
|
||||
|
|
|
|
|
||||
Total change in fair value for the period included in earnings for assets held at the end of the reporting period
|
|
$
|
(27,102
|
)
|
|
$
|
11,362
|
|
|
|
March 31, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
|
|
Carrying Value
|
|
Fair Value
Level 2
|
|
Fair Value
Level 3
|
|
Carrying Value
|
|
Fair Value
Level 2
|
|
Fair Value
Level 3
|
||||||||||||
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Wellstat Diagnostics note receivable
|
|
$
|
50,191
|
|
|
$
|
—
|
|
|
$
|
53,670
|
|
|
$
|
50,191
|
|
|
$
|
—
|
|
|
$
|
55,970
|
|
Hyperion note receivable
|
|
1,200
|
|
|
—
|
|
|
1,200
|
|
|
1,200
|
|
|
—
|
|
|
1,200
|
|
||||||
LENSAR note receivable
|
|
43,909
|
|
|
—
|
|
|
44,573
|
|
|
42,271
|
|
|
—
|
|
|
42,618
|
|
||||||
Direct Flow Medical note receivable
|
|
56,934
|
|
|
—
|
|
|
56,640
|
|
|
51,852
|
|
|
—
|
|
|
51,992
|
|
||||||
Paradigm Spine note receivable
|
|
54,151
|
|
|
—
|
|
|
55,023
|
|
|
53,973
|
|
|
—
|
|
|
54,250
|
|
||||||
kaléo note receivable
|
|
146,754
|
|
|
—
|
|
|
145,533
|
|
|
146,778
|
|
|
—
|
|
|
146,789
|
|
||||||
CareView note receivable
|
|
18,717
|
|
|
—
|
|
|
20,128
|
|
|
18,640
|
|
|
—
|
|
|
19,495
|
|
||||||
Total
|
|
$
|
371,856
|
|
|
$
|
—
|
|
|
$
|
376,767
|
|
|
$
|
364,905
|
|
|
$
|
—
|
|
|
$
|
372,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
February 2018 Notes
|
|
$
|
230,850
|
|
*
|
$
|
220,570
|
|
|
$
|
—
|
|
|
$
|
228,862
|
|
*
|
$
|
197,946
|
|
|
$
|
—
|
|
March 2015 Term Loan
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,966
|
|
|
—
|
|
|
25,000
|
|
||||||
Total
|
|
$
|
230,850
|
|
|
$
|
220,570
|
|
|
$
|
—
|
|
|
$
|
253,828
|
|
|
$
|
197,946
|
|
|
$
|
25,000
|
|
Summary of Cash and Available-For-Sale Securities
|
|
Adjusted Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Estimated Fair Value
|
|
Cash and Cash Equivalents
|
|
Short-Term Investments
|
||||||||||||
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash
|
|
$
|
91,104
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
91,104
|
|
|
$
|
91,104
|
|
|
$
|
—
|
|
Money market funds
|
|
199,546
|
|
|
—
|
|
|
—
|
|
|
199,546
|
|
|
199,546
|
|
|
—
|
|
||||||
Corporate securities
|
|
663
|
|
|
643
|
|
|
—
|
|
|
1,306
|
|
|
—
|
|
|
1,306
|
|
||||||
Total
|
|
$
|
291,313
|
|
|
$
|
643
|
|
|
$
|
—
|
|
|
$
|
291,956
|
|
|
$
|
290,650
|
|
|
$
|
1,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash
|
|
$
|
124,082
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
124,082
|
|
|
$
|
124,082
|
|
|
$
|
—
|
|
Money market funds
|
|
94,801
|
|
|
—
|
|
|
—
|
|
|
94,801
|
|
|
94,801
|
|
|
—
|
|
||||||
Corporate securities
|
|
799
|
|
|
670
|
|
|
—
|
|
|
1,469
|
|
|
—
|
|
|
1,469
|
|
||||||
Total
|
|
$
|
219,682
|
|
|
$
|
670
|
|
|
$
|
—
|
|
|
$
|
220,352
|
|
|
$
|
218,883
|
|
|
$
|
1,469
|
|
Euro Forward Contracts
|
|
December 31, 2015
|
||||||||||
|
|
|
|
|
|
(In thousands)
|
||||||
Currency
|
|
Settlement Price
($ per Euro)
|
|
Type
|
|
Notional Amount
|
|
Fair Value
|
||||
Euro
|
|
1.260
|
|
Sell Euro
|
|
$
|
16,500
|
|
|
$
|
2,802
|
|
Cash Flow Hedge
|
|
Location
|
|
March 31,
2016 |
|
December 31,
2015 |
||||
(In thousands)
|
|
|
|
|
|
|
||||
Euro forward contracts
|
|
Prepaid and other current assets
|
|
$
|
—
|
|
|
$
|
2,802
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2016
|
|
2015
|
||||
(In thousands)
|
|
|
|
|
||||
Net gain (loss) recognized in OCI, net of tax
(1)
|
|
$
|
—
|
|
|
$
|
5,668
|
|
Gain (loss) reclassified from accumulated OCI into "Queen et al. royalty revenue," net of tax
(2)
|
|
$
|
1,821
|
|
|
$
|
669
|
|
|
|
March 31,
2016 |
|
December 31,
2015 |
||||
(In thousands)
|
|
|
|
|
||||
Compensation
|
|
$
|
2,933
|
|
|
$
|
1,979
|
|
Interest
|
|
1,643
|
|
|
4,107
|
|
||
Deferred revenue
|
|
541
|
|
|
87
|
|
||
Dividend payable
|
|
143
|
|
|
184
|
|
||
Legal
|
|
1,218
|
|
|
730
|
|
||
Other
|
|
775
|
|
|
922
|
|
||
Total
|
|
$
|
7,253
|
|
|
$
|
8,009
|
|
|
|
|
|
Principal Balance Outstanding
|
|
Carrying Value
|
|
||||||||
|
|
|
|
March 31,
|
|
March 31,
|
|
December 31,
|
|
||||||
Description
|
|
Maturity Date
|
|
2016
|
|
2016
|
|
2015
|
|
||||||
(In thousands)
|
|
|
|
|
|
|
|
|
|
||||||
Convertible Notes
|
|
|
|
|
|
|
|
|
|
||||||
February 2018 Notes
|
|
February 1, 2018
|
|
$
|
246,447
|
|
|
$
|
230,850
|
|
*
|
$
|
228,862
|
|
*
|
March 2015 Term Loan
|
|
February 15, 2016
|
|
$
|
—
|
|
|
—
|
|
|
24,966
|
|
|
||
Total
|
|
|
|
|
|
|
$
|
230,850
|
|
|
$
|
253,828
|
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
(In thousands)
|
|
2016
|
|
2015
|
||||
Contractual coupon interest
|
|
$
|
—
|
|
|
$
|
80
|
|
Amortization of debt issuance costs
|
|
—
|
|
|
13
|
|
||
Amortization of debt discount
|
|
—
|
|
|
76
|
|
||
Total
|
|
$
|
—
|
|
|
$
|
169
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
(In thousands)
|
|
2016
|
|
2015
|
||||
Contractual coupon interest
|
|
$
|
—
|
|
|
$
|
1,454
|
|
Amortization of debt issuance costs
|
|
—
|
|
|
326
|
|
||
Amortization of debt discount
|
|
—
|
|
|
1,357
|
|
||
Total
|
|
$
|
—
|
|
|
$
|
3,137
|
|
•
|
During any fiscal quarter ending after the quarter ended June 30, 2014, if the last reported sale price of our common stock for at least
20
trading days in a period of
30
consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter exceeds
130%
of the conversion price for the notes on the last day of such preceding fiscal quarter;
|
•
|
During the five business-day period immediately after any five consecutive trading-day period, which we refer to as the measurement period, in which the trading price per
$1,000
principal amount of notes for each trading day of that measurement period was less than
98%
of the product of the last reported sale price of our common stock and the conversion rate for the notes for each such day;
|
•
|
Upon the occurrence of specified corporate events as described further in the indenture; or
|
•
|
At any time on or after August 1, 2017.
|
(In thousands)
|
|
March 31, 2016
|
|
December 31, 2015
|
||||
Principal amount of the February 2018 Notes
|
|
$
|
246,447
|
|
|
$
|
246,447
|
|
Unamortized discount of liability component
|
|
(15,597
|
)
|
|
(17,585
|
)
|
||
Net carrying value of the February 2018 Notes
|
|
$
|
230,850
|
|
|
$
|
228,862
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
(In thousands)
|
|
2016
|
|
2015
|
||||
Contractual coupon interest
|
|
$
|
2,464
|
|
|
$
|
3,000
|
|
Amortization of debt issuance costs
|
|
438
|
|
|
543
|
|
||
Amortization of debt discount
|
|
1,550
|
|
|
1,747
|
|
||
Total
|
|
$
|
4,452
|
|
|
$
|
5,290
|
|
|
|
March 31,
|
|
December 31,
|
||||
|
|
2016
|
|
2015
|
||||
(In thousands)
|
|
|
|
|
||||
Accrued lease liability
|
|
$
|
10,700
|
|
|
$
|
10,700
|
|
Long-term incentive accrual
|
|
2,142
|
|
|
1,318
|
|
||
Uncertain tax positions
|
|
39,989
|
|
|
38,467
|
|
||
Dividend payable
|
|
229
|
|
|
165
|
|
||
Total
|
|
$
|
53,060
|
|
|
$
|
50,650
|
|
|
|
|
|
Restricted Stock Awards
|
||||||
(In thousands except per share amounts)
|
|
Shares Available for Grant
|
|
Number of Shares Outstanding
|
|
Weighted Average Grant-date Fair Value Per Share
|
||||
Balance at December 31, 2015
|
|
4,684
|
|
|
586
|
|
|
$
|
7.13
|
|
Granted
|
|
(828
|
)
|
|
828
|
|
|
3.21
|
|
|
Balance at March 31, 2016
|
|
3,856
|
|
|
1,414
|
|
|
$
|
4.82
|
|
|
|
Unrealized gains (losses) on available-for-sale securities
|
|
Unrealized gains on cash flow hedges
|
|
Total Accumulated Other Comprehensive Income
|
||||||
(In thousands)
|
|
|
|
|
|
|
||||||
Beginning Balance at December 31, 2015
|
|
$
|
435
|
|
|
$
|
1,821
|
|
|
$
|
2,256
|
|
Activity for the three months ended March 31, 2016
|
|
(17
|
)
|
|
(1,821
|
)
|
|
(1,838
|
)
|
|||
Ending Balance at March 31, 2016
|
|
$
|
418
|
|
|
$
|
—
|
|
|
$
|
418
|
|
Licensee
|
|
Product Names
|
Genentech
|
|
Avastin
|
|
|
Herceptin
|
|
|
Xolair
|
|
|
Lucentis
|
|
|
Perjeta
®
|
|
|
Kadcyla
®
|
|
|
|
Biogen
|
|
Tysabri
|
|
|
|
Chugai
|
|
Actemra
®
|
|
|
|
Roche
|
|
Gazyva
®
|
|
|
|
Takeda
|
|
Entyvio
®
|
•
|
treatment of adult patients with T315I-positive chronic myeloid leukemia (chronic phase, accelerated phase, or blast phase) or T315I-positive Philadelphia chromosome positive acutelymphoblastic leukemia (Ph+ ALL).
|
•
|
treatment of adult patients with chronic phase, accelerated phase, or blast phase chronic myeloid leukemia or Ph+ ALL for whom no other tyrosine kinase inhibitor (TKI) therapy is indicated.
|
|
|
Three Months Ended
|
|
Change from Prior
|
||||||
|
|
March 31,
|
|
|||||||
|
|
2016
|
|
2015
|
|
Year %
|
||||
(Dollars in thousands)
|
|
|
|
|
|
|
||||
Revenues
|
|
|
|
|
|
|
||||
Royalties from Queen et al. patents
|
|
$
|
121,455
|
|
|
$
|
127,810
|
|
|
(5%)
|
Royalty rights - change in fair value
|
|
(27,102
|
)
|
|
11,362
|
|
|
(339%)
|
||
Interest revenue
|
|
8,964
|
|
|
10,534
|
|
|
(15%)
|
||
License and other
|
|
(193
|
)
|
|
—
|
|
|
N/M
|
||
Total revenues
|
|
$
|
103,124
|
|
|
$
|
149,706
|
|
|
(31%)
|
|
|
|
|
Three Months Ended
|
||||
|
|
|
|
March 31,
|
||||
Licensee
|
|
Product Name
|
|
2016
|
|
2015
|
||
Genentech
|
|
Avastin
|
|
38
|
%
|
|
26
|
%
|
|
|
Herceptin
|
|
38
|
%
|
|
25
|
%
|
|
|
Xolair
|
|
13
|
%
|
|
7
|
%
|
|
|
|
|
|
|
|
||
Biogen
|
|
Tysabri
|
|
14
|
%
|
|
10
|
%
|
|
|
Three Months Ended
|
|
Change from Prior
|
||||||
|
|
March 31,
|
|
|||||||
|
|
2016
|
|
2015
|
|
Year %
|
||||
(In thousands)
|
|
|
|
|
|
|
||||
General and administrative
|
|
$
|
9,846
|
|
|
$
|
7,666
|
|
|
28%
|
Percentage of total revenues
|
|
10
|
%
|
|
5
|
%
|
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2016
|
|
2015
|
||||
Net income per share - basic
|
$
|
0.34
|
|
|
$
|
0.52
|
|
Net income per share - diluted
|
$
|
0.34
|
|
|
$
|
0.50
|
|
•
|
During any fiscal quarter ending after the quarter ended June 30, 2014, if the last reported sale price of our common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter exceeds
130%
of the conversion price for the notes on the last day of such preceding fiscal quarter;
|
•
|
During the five business-day period immediately after any five consecutive trading-day period, which we refer to as the measurement period, in which the trading price per
$1,000
principal amount of notes for each trading day of that measurement period was less than
98%
of the product of the last reported sale price of our common stock and the conversion rate for the notes for each such day;
|
•
|
Upon the occurrence of specified corporate events as described further in the indenture; or
|
•
|
At any time on or after August 1, 2017.
|
Dated:
|
May 4, 2016
|
|
PDL BIOPHARMA, INC. (REGISTRANT)
|
|
|
|
|
|
|
|
|
/s/ John P. McLaughlin
|
|
|
John P. McLaughlin
|
|
|
President and Chief Executive Officer (Principal Executive Officer)
|
|
/s/ Peter S. Garcia
|
|
|
Peter S. Garcia
|
|
|
Vice President and Chief Financial Officer (Principal Financial Officer)
|
|
/s/ Steffen Pietzke
|
|
|
Steffen Pietzke
|
|
|
Controller and Chief Accounting Officer (Principal Accounting Officer)
|
|
#
|
Filed herewith.
|
*
|
Management contract or compensatory plan or arrangement
|
**
|
This certification accompanies the Quarterly Report on Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.
|
1.
|
Eligibility
|
2.
|
Performance Goals
|
3.
|
Incentive
|
4.
|
Adjustments
|
5.
|
Change in Control
|
6.
|
409A
|
7.
|
162(m)
|
8.
|
Miscellaneous
|
|
|
Title
|
|
Target Cash Payment
|
Value of Restricted Stock Award
|
John P. McLaughlin
|
|
President and Chief Executive Officer
|
|
$3,000,000
|
$1,300,000
|
Peter Garcia
|
|
Vice President, Chief Financial Officer
|
|
$759,229
|
$325,384
|
Christopher L. Stone
|
|
Vice President, General Counsel and Secretary
|
|
$765,310
|
$327,990
|
Danny Hart
|
|
Vice President, Business Development
|
|
$710,500
|
$304,500
|
Steffen Pietzke
|
|
Controller & Chief Accounting Officer
|
|
$233,920
|
$100,254
|
Nathan Kryszak
|
|
Senior Counsel and Assistant Secretary
|
|
$328,020
|
$140,580
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2016
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
|||||||||||||
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income before income taxes
|
|
$
|
307,428
|
|
|
$
|
327,133
|
|
|
$
|
401,876
|
|
|
$
|
501,272
|
|
|
$
|
530,138
|
|
|
$
|
88,841
|
|
Add: fixed charges
|
|
36,153
|
|
|
29,097
|
|
|
24,931
|
|
|
39,274
|
|
|
27,123
|
|
|
4,566
|
|
||||||
Earnings
|
|
$
|
343,581
|
|
|
$
|
356,230
|
|
|
$
|
426,807
|
|
|
$
|
540,546
|
|
|
$
|
557,261
|
|
|
$
|
93,407
|
|
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
1
|
|
$
|
36,102
|
|
|
$
|
29,036
|
|
|
$
|
24,871
|
|
|
$
|
39,211
|
|
|
$
|
27,059
|
|
|
$
|
4,550
|
|
Estimated interest portion of rent expense
2
|
|
51
|
|
|
61
|
|
|
60
|
|
|
63
|
|
|
64
|
|
|
16
|
|
||||||
Fixed charges
|
|
36,153
|
|
|
$
|
29,097
|
|
|
$
|
24,931
|
|
|
$
|
39,274
|
|
|
$
|
27,123
|
|
|
$
|
4,566
|
|
|
Ratio of earnings to fixed charges
|
|
9.50
|
|
|
12.24
|
|
|
17.12
|
|
|
13.76
|
|
|
20.55
|
|
|
20.46
|
|
Date:
|
May 4, 2016
|
|
|
|
|
/s/ John P. McLaughlin
|
|
|
John P. McLaughlin
President and Chief Executive Officer
(Principal Executive Officer)
|
|
Date:
|
May 4, 2016
|
|
|
|
|
/s/ Peter S. Garcia
|
|
|
Peter S. Garcia
Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
By:
|
|
|
|
/s/ JOHN P. MCLAUGHLIN
|
|
|
John P. McLaughlin
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
By:
|
|
|
|
/s/ PETER S. GARCIA
|
|
|
Peter S. Garcia
|
|
|
Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
(1)
|
This certification accompanies the Quarterly Report on Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of PDL BioPharma, Inc. under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing. A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to PDL BioPharma, Inc. and will be retained by PDL BioPharma, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
|