PDL Biopharma, Inc. (
F2Q11 Earnings Call
July 27, 2011 11:30 a.m. ET
John McLaughlin – President and CEO
Cris Larson – Vice President and CFO
Jennifer Williams – IR
Joel Sendek – Lazard Capital Markets
Charles Duncan – JMP Securities
Jason Kantor – RBC Capital Markets
Phil Nadeau – Cowen & Company
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Good afternoon and welcome to PDL Biopharma’s Second Quarter 2011 Earnings Conference Call. Today’s call is being recorded. For opening remarks and introductions I would now like to turn the call over to Jennifer Williams.
Thank you all for joining us today. Before we begin, let me remind you that the information we will cover today contains forward-looking statements regarding our financial performance and other matters and our actual results may differ materially from those expressed or implied in the forward-looking statements. Factors that may cause differences between current expectations and actual results are described in our filings with the Securities and Exchange Commission, copies of which maybe obtained in the Investor Section on our website at pdl.com.
The forward-looking statements made during this conference call should be considered accurate only as of the date of this call and although we may elect to update forward-looking statements from time to time in the future, we specifically disclaim any duty or obligation to do so, even as new information becomes available or other events occur in the future.
I’ll now turn the call over to John McLaughlin, President and CEO of PDL BioPharma.
Thank you Jennifer and good afternoon everyone. Also with me today is Cris Larson, our Vice President and Chief Financial Officer. I will begin with the business update and then turn the call over to Cris to discuss our financial results. I’d like to take a few minutes to take you on the Genentech Ruling dispute. By way of review, in August 2010, we received a letter from Genentech, sent on behalf of Roche and Novartis, asserting that Avastin, Herceptin, Lucentis and Xolair® do not infringe our supplementary protection certificates also known as (SPCs) granted to us by various countries in Europe for each of these products, they asked for response to these assertions.
The SPCs covering these products effectively extend the patent protection for our European Patent until December 2014, except that the SPCs for Herceptin will generally expire in July 2014. We responded to Genentech, stating that we believe its assertions of non-infringement are without merit and that we disagreed fundamentally with its assertions of non-infringement with respect to the Genentech Products.
In August 2010, we filed a complaint in the Second Judicial District of Nevada against Genentech and Roche seeking to enforce our rights under our 2003 settlement agreement with Genentech and seeking an order from the court declaring that Genentech is obligated to pay us royalties on sales of the Genentech Products that are manufactured and sold outside of the United States.
We’re pleased to report in July that the court ruled in favor on the two motions to dismiss filed by Genentech and Roche in our lawsuit related to 2003 settlement agreement. Specifically the court denied Roche and Genentech’s motion to dismiss four of the five claims for relief and, further, denied Roche’s separate motion to dismiss for lack of personal jurisdiction of Roche. The court did dismiss one of our claims that Genentech committed a bad-faith breach of the covenant of good faith and fair dealing stating that, based on the current state of the pleadings, no “special relationship” had been established between Genentech and us, as required under Nevada law.
The effect of the Court’s July ruling is that we are permitted to continue to pursue its claims. First that Genentech is obligated to pay us royalties on international sales of the Genentech Products. Second, the Genentech, by challenging, at the behest of Roche and Novartis, whether our SPCs cover the Genentech Products breached its contractual obligations to us under the 2003 settlement agreement. Third, the Genentech breached the implied covenant of good faith and fair dealing with respect to the 2003 settlement agreement and announced that Roche intentionally and knowingly interfered with our contractual relationship with Genentech in conscious disregard of our rights.
We are seeking compensatory damages, including liquidated damages and other monetary remedies set forth in 2003 settlement agreement, punitive damages and attorney’s fees as a result of Genentech and Roche’s conduct. Its important to note that the ultimate outcome of this litigation is uncertain and we may not be successful in all our allegations.
During the second quarter, we continue pursue several royalty assets purchase opportunities that we believe would increase the return to our shareholders. While we are not reporting anything specific to-date, we look forward to keeping you apprised of our progress in the months ahead.
In addition, we issued new convertible notes due in May 2015 and with the proceeds from those notes, we’re deeming all of our convertible notes which were due in February 2012. While we could have retained the 2012 notes, we pursue these transactions to free of our cash for the purchase of new royalty assets.
At this time, I’d like to turn the call over to Cris Larson to discuss our second quarter financial results.
Thank you, John. Total revenues for the second quarter of 2011 were $122.1 million compared with $120.3 million in second quarter of 2010. Royalty revenues for the second quarter increased 1% over the comparable quarter of 2010.