On May 3, 2017 PDL BioPharma, Inc. (PDL or the Company) (NASDAQ: PDLI) reported financial results for the first quarter ended March 31, 2017 (Press release, PDL BioPharma, MAY 3, 2017, View Source [SID1234518812]).

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Total revenues of $45.4 million for the three months ended March 31, 2017.
GAAP diluted EPS of $0.04 for the three months ended March 31, 2017.

GAAP net income attributable to PDL’s shareholders of $7.2 million for the three months ended March 31, 2017.
Non-GAAP net income attributable to PDL’s shareholders of $13.2 million for the three months ended March 31, 2017. A full reconciliation of all components of the GAAP to non-GAAP financial results can be found in Table 4 at the end of the release.
"We have had a number of positive events related to our income generating assets this year which have resulted in significant cash infusions, including the repayment of the ARIAD investment and the successful settlement of litigation related to Keytruda," said John P. McLaughlin, president and chief executive officer of PDL. "With a cash balance of over $400 million, and a nimble business development process, we are poised to acquire additional specialty pharma drug products in 2017."

Recent Developments
In April 2017, the Company entered into a settlement agreement with Merck to resolve the patent infringement lawsuit between the parties pending in the U.S. District Court for the District of New Jersey related to Merck’s Keytruda humanized antibody product. Under the terms of the agreement, Merck will pay the Company a one-time, lump-sum payment of $19.5 million, and the Company will grant Merck a fully paid-up, royalty-free, non-exclusive license to certain of the Company’s Queen et al. patent rights for use in connection with Keytruda as well as a covenant not to sue Merck for any royalties regarding Keytruda. In addition, the parties agreed to dismiss all claims in the relevant legal proceedings. The payment of $19.5 million is expected to be recognized as license revenue for the second quarter ending June 30, 2017.

On March 1, 2017, the Company announced that its board of directors has authorized the repurchase of up to $30.0 million of the Company’s common stock through March 2018. As of March 31, 2017, the Company has repurchased a total of 3.9 million shares of its common stock in open market transactions under the share repurchase program for an aggregate purchase price of $8.5 million, or an average cost of $2.16 per share. From April 1, 2017 to April 28, 2017, the Company repurchased 3.7 million shares of its common stock under the share repurchase program at a weighted average price of $2.16 per share for a total of $7.9 million. Since the inception of the share repurchase program in March 2017, the Company has repurchased 7.6 million shares of its common stock for a total of $16.4 million.

In April 2017, PDL received a royalty payment from Valeant Pharmaceuticals International, Inc. in the amount of $8.5 million for royalties earned on sales of Glumetza for the month of March. The monthly royalty payment was a result of lower reported gross to net deductions. This payment will be recorded in the second quarter of 2017.
Revenue Highlights

Total revenues of $45.4 million for the three months ended March 31, 2017 included:
Royalties from PDL’s licensees to the Queen et al. patents of $14.2 million, which consisted of royalties earned on sales of Tysabri under a license agreement;

Net royalty payments from acquired royalty rights and a change in fair value of the royalty rights assets of $13.1 million, which consisted of the change in estimated fair value of our royalty right assets, primarily related to the Depomed, Inc., University of Michigan, ARIAD and AcelRx Pharmaceuticals, Inc.;

Interest revenue from notes receivable financings to kaléo and CareView Communications of $5.5 million; and
Product revenues of $12.6 million from sales of Tekturna and Tekturna HCT in the United States of $9.7 million and Rasilez and Rasilez HCT in the rest of the world (collectively, the Noden Products) of $2.9 million.
Total revenues decreased by 56 percent for the three months ended March 31, 2017, when compared to the same period in 2016.

The decrease in royalties from PDL’s licensees to the Queen et al. patents is due to the period ended March 31, 2016 being the last quarter in which PDL received royalties from Genentech, Inc.
The increase in royalty rights – change in fair value was primarily due to the prior year decrease in fair value of the Depomed, Inc. royalty asset.

PDL received $13.5 million in net cash royalties from its royalty rights in the first quarter of 2017, compared to $17.2 million for the same period of 2016.

The decrease in interest revenues was primarily due to the early repayment of the Paradigm Spine, LLC note receivable investment and the non-accrual status of the LENSAR, Inc. note receivable investment.
Product revenues were derived from sales of the Noden Products, which PDL did not begin to recognize until the third quarter of 2016.

Operating Expense Highlights
Operating expenses were $26.9 million for the three months ended March 31, 2017, compared to $9.8 million for the same period of 2016. The increase in operating expenses for the three months ended March 31, 2017, as compared to the same period in 2016, was primarily a result of the $15.5 million in expenses related to the Noden operations, including $7.5 million of non-cash intangible asset amortization and a change in fair value of contingent consideration.

Other Financial Highlights
PDL had cash, cash equivalents, and short-term investments of $409.3 million at March 31, 2017, compared to $242.1 million at December 31, 2016. The current cash balance includes a $111.3 million payment from ARIAD as a result of PDL’s exercise of its put option under the ARIAD royalty agreement.
Net cash provided by operating activities in the three months ended March 31, 2017 was $45.8 million, compared with $92.5 million in the same period in 2016.