EX-99.3 4 pdli-201611038xkex993.htm INFORMATION SHEET Exhibit

Exhibit 99.3

PDL BioPharma, Inc.
Q3 2016
November 3, 2016

Following are some of the key points regarding PDL’s third quarter 2016 financial and business results.

Highlighted Financial Results from Q3 2016
•
Total revenues of $53.6 million and $177.8 million for the three and nine months ended September 30, 2016, respectively.
•
GAAP diluted EPS of $0.08 and $0.45 for the three and nine months ended September 30, 2016, respectively.
•
GAAP net income attributable to PDL's shareholders of $13.9 million and $73.9 million for the three and nine months ended September 30, 2016, respectively.
•
Non-GAAP net income of $18.9 million and $118.2 million for the three and nine months ended September 30, 2016, respectively.

The largest component of the difference in non-GAAP net income compared to GAAP net income is the exclusion of (i) the mark-to-market reduction in fair value of our investments in royalty rights and (ii) the amortization of intangible assets. A full reconciliation of all components of the GAAP to non-GAAP quarterly financial results can be found in Table 4 at the end of our press release.
Updates on royalty-bearing products relating to Queen et al. Patents

Tysabri® (Approved royalty-bearing product relating to Queen et al. patents)
•
Continue to receive royalties on Tysabri from Biogen with respect to sales of the licensed product manufactured prior to patent expiry in jurisdictions providing patent protection licenses.
•
Q3 2016 PDL royalty revenue was $15.0 million based upon Biogen’s sales from Q2 2016.
•
Historical royalty and sales data is listed [in the table below.]

Solanezumab (Unapproved royalty-bearing product relating to Queen et al. patents)
•
Lilly reported that completed enrollment and continuing patient follow up on Phase 3 clinical trial.
•
Top line data from Phase 3 trial in mild Alzheimer’s disease expected in December 2016. Lilly expected to file for product approval in 1H17 if data are positive.
•
PDL has a 2% know-how royalty on solanezumab which runs for 12.5 years from the date of its first sale.

Noden Pharma
•
On July 1, 2016, Noden Pharma DAC, a newly-formed company organized under the laws of Ireland purchased from Novartis the exclusive worldwide rights to manufacture, market, and sell the branded prescription medicine product sold under the name Tekturna® and Tekturna HCT® in the United States and Rasilez® and Rasilez HCT® in the rest of the world (collectively the "Noden Products") and certain related assets and will assume certain related liabilities in exchange for the following cash commitments: $110.0 million paid on July 1, 2016, the closing date of the acquisition, $89.0 million payable on the first anniversary of the closing date and up to $95.0 million of additional cash consideration contingent on achievement of sales targets and the date of the launch of a generic drug containing the pharmaceutical ingredient aliskiren.
•
On July 1, 2016, PDL entered into an investment and stockholders’ agreement with Noden Pharma DAC and an affiliate and certain members of Noden’s management. PDL acquired an approximately 99% equity stake and obtained the majority voting power of Noden, for a total cash consideration of $75.0 million. It is expected that PDL’s equity ownership stake will ultimately be reduced to 88% upon the vesting of shares granted to Noden's noncontrolling interest holders.

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PDL BioPharma, Inc.
Q3 2016
November 3, 2016


•
In July 2016, Noden began earning profits on the sale of Tekturna, Tekturna HCT, Rasilez and Rasilez HCT. During the transitional service period, we expect to receive monthly reporting from Novartis, that is, generally after Novartis has sold the Noden Products. We recognize revenue when we can reliably estimate such amounts and collectability is reasonably assured.
•
Product revenues were derived from sales of the Noden Products. Pursuant to the purchase agreement, when Noden Pharma DAC (Noden) acquired the exclusive worldwide rights to manufacture, market, and sell the Noden Products from Novartis. Novartis was required to continue distributing the Noden Products during the third quarter of 2016 and transferred profits with Noden on a net basis (i.e. net of cost of manufacturing and a fee to Novartis). Noden is commercializing the products in the U.S. as of the fourth quarter of 2016.

Updates on Income Generating Assets

Royalty Rights Assets
The following table provides additional details with respect the fair value of the PDL royalty rights assets as of December 31, 2015 and with changes to September 30, 2016 as reflected in our Balance Sheet:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value as of
 
New Royalty
 
Royalty Rights -
 
Fair Value as of
 
 
Dec. 31, 2015
 
Assets
 
Change in Fair Value
 
Sept. 30, 2016
 
Depomed
$
191,865
 
 
$
0
 
 
 
$
(57,559
)
 
 
$
134,306
 
VB
17,133
 
 
0
 
 
 
(2,328
)
 
 
14,805
 
U-M
70,186
 
 
0
 
 
 
(5,549
)
 
 
64,637
 
ARIAD
50,041
 
 
50,000
 
 
 
103
 
 
 
100,144
 
AcelRx
67,437
 
 
0
 
 
 
6,612
 
 
 
74,049
 
Avinger
2,542
 
 
0
 
 
 
(667
)
 
 
1,875
 
KYBELLA
0
 
 
9,500
 
 
 
276
 
 
 
9,776
 
 
$
399,204
 
 
$
59,500
 
 
 
$
(59,112
)
 
 
$
399,592
 

The following table provides additional details with respect PDL royalty rights - change in fair value for the nine months ended September 30, 2016 and reflected in our Income Statement:
 
 
 
 
Change in
 
Royalty Rights -
 
 
Cash Royalties
 
Fair Value
 
Change in Fair Value
Depomed
$
38,383
 
 
$
(57,559
)
 
$
(19,176
)
 
VB
 
1,142
 
 
 
(2,328
)
 
 
(1,186
)
 
U-M
 
2,199
 
 
 
(5,549
)
 
 
(3,350
)
 
ARIAD
4,575
 
 
103
 
 
 
4,678
 
 
AcelRx
3
 
 
6,612
 
 
 
6,615
 
 
Avinger
915
 
 
(667
)
 
 
248
 
 
KYBELLA
23
 
 
276
 
 
 
299
 
 
 
$
47,240

 
$
(59,112
)
 
 
$
(11,872
)
 


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PDL BioPharma, Inc.
Q3 2016
November 3, 2016


Updates on Royalty Rights Assets
Depomed, Inc.
•
We have reduced the fair value of the Depomed royalty rights year to date 2016 by $57.6 million, primarily due to a reduction in Glumetza royalties received and a reduction in future cash flows due to lower projected demand data, greater erosion of market share due to the launch of a generic, and higher gross-to-net adjustments for Glumetza. As you will recall, Glumetza was marketed by Salix until its acquisition by Valeant. Because we have limited information from Valeant, we employ an independent third party consulting group to assist us in our quarterly evaluation of Glumetza and the other Depomed products on which we receive or will receive royalties. In February and August 2016, generic competitors to Glumetza launched as expected. The impact of the generic on pricing and gross-to-net has been greater than typical generic models would predict.

•
PDL received a $6 million milestone payment for FDA approval of Jentadueto® XR in the second quarter of 2016. Jentadueto XR is the third approved product for which we will receive royalties from our Depomed royalty rights assets. We expect to begin receiving royalties on Jentadueto XR in the fourth quarter of 2016.

•
On September 21, 2016, the Company obtained a notification indicating that the FDA approved Invokamet XR for use in patients with Type 2 diabetes. The product approval triggered a $5.0 million approval milestone payment to the Company. Based on the FDA approval and expected product launch, the Company adjusted the timing of future cash flows and discount rate used in the discounted cash flow model at September 30, 2016.

•
Since PDL’s acquisition of the Depomed royalty rights in October 2013, PDL has received $185.6 million in net cash payments.

•
PDL and Depomed are in the process of conducting a royalty audit on Glumetza royalties owed by Valeant.

•
Glumetza royalty payment for October 2016 is $8 million, which will be included in PDL’s fourth quarter results. 

ARIAD Pharmaceuticals, Inc.
•
On July 28, 2016, PDL funded the second tranche of $50 million to ARIAD. This agreement was entered into in July 2015, in exchange for royalties on the net revenues of Iclusig. As a result of the second tranche payment, under the terms of the ARIAD Royalty Agreement, PDL’s royalty percentage increased to 5.0% of the U.S. and European net revenues of Iclusig and 5.0% of the payments ARIAD receives elsewhere in the world until December 31, 2018.  Beginning January 1, 2019 and thereafter, the royalty rate will increase to 6.5% in all jurisdictions and continue until December 31, 2033, subject to a put option of PDL upon the occurrence of specified events and a call option of ARIAD.

•
On October 31, 2016, Ariad reported that its application for approval for brigatinib had been accepted for filing by the FDA and was granted Priority Review. Brigatinib is a backup source of repayment to PDL in the Ariad transaction.

KYBELLA Royalty Agreement
•
On July 8, 2016, PDL entered into a royalty purchase agreement with an individual, whereby the Company acquired that individual's rights to receive certain royalties on sales of KYBELLA® by Allergan, in exchange for a $9.5 million cash payment and up to $1.0 million in future milestone payments based upon product sales targets. The first revenues on this transaction were recognized in Q3 2016.




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PDL BioPharma, Inc.
Q3 2016
November 3, 2016


Notes Receivable
The following tables present the carrying value and fair value of notes receivevable held by PDL:
 
 
September 30, 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

 
 
$
—

 
 
$
52,688
 
 
$
50,191
 
 
$
—

 
 
$
55,970
 
Hyperion note receivable
1,200
 
 
—
 
 
 
1,200
 
 
1,200
 
 
—
 
 
 
1,200
 
LENSAR note receivable
43,909
 
 
—
 
 
 
43,909
 
 
42,271
 
 
—
 
 
 
42,618
 
Direct Flow Medical note receivable
60,111
 
 
—
 
 
 
62,484
 
 
51,852
 
 
—
 
 
 
51,992
 
Paradigm Spine note receivable
—
 
 
—
 
 
 
0
 
 
53,973
 
 
—
 
 
 
54,250
 
kaléo note receivable
146,707
 
 
—
 
 
 
143,884
 
 
146,778
 
 
—
 
 
 
146,789
 
CareView note receivable
18,879
 
 
—
 
 
 
20,168
 
 
18,640
 
 
—
 
 
 
19,495
 
Total
 
$
320,997

 
 
$
—

 
 
$
324,333
 
 
$
364,905
 
 
$
—

 
 
$
372,314
 

Updates on Notes Receivable

Wellstat Diagnostics, LLC
•
On July 29, 2016, the Supreme Court of New York issued its Memorandum of Decision granting the Company’s motion for summary judgment and denying the Wellstat Diagnostics Guarantors’ cross-motion for summary judgment.  The Supreme Court of New York held that the Wellstat Diagnostics Guarantors are liable for all “Obligations” owed by Wellstat Diagnostics to PDL.  It did not set a specific dollar amount due, but ordered that a judicial hearing officer or special referee be designated to determine the amount of the Obligations owing, and awarded PDL its attorneys’ fees and costs in an amount to be determined.  The Supreme Court of New York has also set a hearing on August 23, 2016 to consider the implication of the status quo ante instruction on certain actions of the Wellstat Diagnostics Guarantors and whether to issue a writ of attachment.

•
On September 1, 2016, the Company filed a motion for relief pursuant to New York law (i) restraining the Wellstat Diagnostics Guarantors from making any sale, assignment, transfer or interference in any of their property, or from paying over or otherwise disposing of any debt, and (ii) authorizing the Company to examine the assets of each of the Wellstat Diagnostics Guarantors.

•
On October 5, 2016, the Wellstat Diagnostics Guarantors filed a motion for leave of the court to assert counterclaims against the Company, and certain officers and consultants of the Company, for (i) breach of fiduciary duty, (ii) intentional interference with prospective economic advantage, (iii) breach of the duty of good faith and fair dealing, and negligent misrepresentation. A hearing has been scheduled by the court regarding such motions and counterclaims for November 14, 2016.


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PDL BioPharma, Inc.
Q3 2016
November 3, 2016


•
On October 24, 2016, in response to a request from the Wellstat Guarantors’ to stay the damages hearing pending resolution of the Wellstat Guarantors’ appeal of the Supreme Court’s summary judgment against them by the Appellate Division, a single justice of the Appellate Division granted a temporary stay of all proceedings before the Supreme Court until the Wellstat Guarantors’ motion to stay can be addressed by a three judge panel of the Appellate Division. The motion for a stay will be fully briefed and submitted for decision by the motions panel on November 9, 2016.

Direct Flow Medical, Inc.
•
On July 15, 2016, PDL and Direct Flow Medical entered into the fifth Amendment and Limited Waiver to the Credit Agreement. PDL funded an additional $1.5 million to Direct Flow Medical in the form of a note with substantially the same interest and payment terms as the existing loans and a conversion feature whereby the $1.5 million loan would convert into equity of Direct Flow Medical upon the occurrence of certain events.

•
On September 12, 2016, the Company and Direct Flow Medical entered into the sixth amendment and limited waiver to the credit agreement under which the Company funded an additional $1.5 million to Direct Flow Medical in the form of a note with substantially the same interest and payment terms as the existing loans. In addition, Direct Flow Medical agreed to issue to the Company a specified amount of warrants to purchase shares of convertible preferred stock at an exercise price of $0.01 per share.

•
On September 30, 2016, the Company and Direct Flow Medical entered into the tenth limited waiver to the credit agreement where the parties agreed, among other things, to (i) delay payment on all overdue interest payments until October 31, 2016, (ii) waive the initial principal repayment until October 31, 2016 and (iii) continue to waive the liquidity requirements until October 31, 2016. Further, Direct Flow Medical agreed to issue to the Company a specified amount of warrants to purchase shares of convertible preferred stock at an exercise price of $0.01 per share.

•
On October 31, 2016 the Company agreed to extend the waivers described above until November 30, 2016 and is exploring its options while Direct Flow Medical continues to seek additional financing.

Paradigm Spine Credit Agreement
•
On August 26, 2016, the Company received $57.5 million in connection with the prepayment of the loans under the Paradigm Spine Credit Agreement, which included a repayment of the full principal amount outstanding of $54.7 million, plus accrued interest and a prepayment fee.

kaleo, Inc.
•
PDL entered into a secured note purchase agreement with Accel 300, a wholly-owned subsidiary of kaléo, which as of June 30, 2016, had a principal balance of $144.8 million due to PDL. Interest payments due have been paid on time and in full through the second quarter of 2016, and kaléo has indicated that it intends to make payments due to PDL under the note agreement until Auvi-Q is returned to the market.
•
In October 2016, kaleo announced that Auvi-Q will be reintroduced to the market in the first half of 2017. kaleo indicated that the manufacturing problems experienced when Sanofi was making the product have been resolved by kaleo’s investment in an extensive new, automated manufacturing process that uses a production line composed entirely of robots with more than one hundred quality checks.




Page 5
PDL BioPharma, Inc.
Q3 2016
November 3, 2016


Forward-looking Statements
This document 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 income generating 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, as updated by subsequent quarterly reports filed with the Securities and Exchange Commission, as updated by subsequent filings. 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.


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PDL BioPharma, Inc.
Q3 2016
November 3, 2016


Queen et al. Royalties
Royalty Revenue by Product ($ in 000's) *
Tysabri
Q1
Q2
Q3
Q4
Total
2016
13,970

14,232

14,958

—

43,160

2015
14,385

13,614

13,557

14,031

55,587

2014
12,857

13,350

16,048

15,015

57,270

2013
12,965

13,616

11,622

12,100

50,304

2012
11,233

12,202

11,749

12,255

47,439

2011
9,891

10,796

11,588

11,450

43,725

2010
8,791

8,788

8,735

9,440

35,754

2009
6,656

7,050

7,642

8,564

29,912

2008
3,883

5,042

5,949

6,992

21,866

2007
839

1,611

2,084

2,836

7,370

2006
—

—

—

237

237

* As reported to PDL by its licensees. Totals may not sum due to rounding.



Page 7
PDL BioPharma, Inc.
Q3 2016
November 3, 2016



Queen et al. Sales Revenue
Reported Licensee Net Sales Revenue by Product ($ in 000's) *
Tysabri
Q1
Q2
Q3
Q4
Total
2016
465,647

474,379

498,618

—

1,438,644

2015
479,526

453,786

451,898

467,735

1,852,945

2014
428,561

442,492

534,946

500,511

1,906,510

2013
434,677

451,358

387,407

403,334

1,676,776

2012
374,430

401,743

391,623

408,711

1,576,508

2011
329,696

356,876

388,758

381,618

1,456,948

2010
293,047

287,925

293,664

316,657

1,191,292

2009
221,854

229,993

257,240

285,481

994,569

2008
129,430

163,076

200,783

233,070

726,359

2007
30,468

48,715

71,972

94,521

245,675

2006
—

—

—

7,890

7,890

* As reported to PDL by its licensee. Dates in above charts reflect when PDL receives
royalties on sales. Sales occurred in the quarter prior to the dates in the above charts.
Totals may not sum due to rounding.
 


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