PDL seeking new royalty assets; otherwise likely to wind-down in 2016

By Jennifer Lanning Drey

Savannah, Ga., June 27 - PDL BioPharma, Inc. is working to restructure its debt in order to make cash available for the acquisition of royalty assets, according to slides used in connection with a presentation given by the company on Monday to some of its stockholders and noteholders, as well as potential stockholders and noteholders.

The slides were also filed with the Securities and Exchange Commission.

PDL's primary assets are its antibody humanization patents and royalty assets, which consist of its Queen et al. patents and license agreements. The Queen et al. patents expire at the end of 2014 and are expected to cease to produce royalties in 2016.

Accordingly, the company can either purchase new royalty assets or look to wind-up operations in the 2016 timeframe, the slides said.

If PDL is able to purchase new royalty assets, it would ladder them like a bond portfolio with debt to be repaid by the end of 2015, the slides said.

The company would continue as long as it could generate a satisfactory return.

On the other hand, if unable to acquire royalty assets on attractive terms, the company would build cash to repay debt. It would use all excess cash to pay dividends and would wind-up the company in the 2016 timeframe.

PDL is continuously evaluating alternatives including dividends, capital restructure, share repurchases, a sale of the company and the purchase of commercial stage royalty generating assets, the slides said.

On May 16, PDL issued $155 million of 3.75% convertible senior notes due May 2015. The proceeds will be used to redeem the company's 2012 convertible senior notes at June 30.

PDL has a principal balance of $133 million of 2% convertible senior notes due February 2012. The redemption date is June 30, according to the slides.

PDL also has $180 million of 2.875% convertible senior notes due February 2015.

Additionally, on June 30 the company had a principal balance of $142 million of its 10.25% secured non-recourse notes. Approximately 40% of Genentech royalties are dedicated to quarterly principal and interest on those notes. After their retirement, securitized Genentech royalties will be retained by PDL, the slides said.

PDL is an Incline Village, Nev., biopharmaceutical company

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