Attached files
| file | filename |
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| 8-K - PDL BIOPHARMA, INC. | v204328_8k.htm |
| EX-99.2 - PDL BIOPHARMA, INC. | v204328_ex99-2.htm |
| EX-99.1 - PDL BIOPHARMA, INC. | v204328_ex99-1.htm |
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THIRD
QUARTER UPDATE
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December
2010
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During
the third quarter of 2010 we continued to post an increase in royalty revenue
and we further strengthened our capital structure. In addition, we
responded to the August fax that we received from Genentech and are prepared to
defend our intellectual property rights in national and international
settings.
Increased
Third Quarter 2010 Royalty Revenue
Revenue
report for Q3-2010 and royalty revenue update. >> read
Fourth
Quarter 2010 Revenue Guidance
On
December 1, 2010, we announced Q4-2010 revenue guidance of $74 million. >> read
Update
on Genentech / Roche
Update on
litigation and recent communications with Genentech / Roche. >> read
Updates
on Licensed Products
Brief
reports on products under license to PDL and regulatory
approvals. >>read
Strengthening
our Capital Structure
Creating
a better capital structure for our shareholders. >> read
Dividends
We paid
the second of two dividends in 2010 of $0.50 per share on October 1, 2010 to all
stockholders of record as of September 15, 2010. We plan to announce
our 2011 dividend policy in the first quarter of 2011.
In
closing, we will continue to evaluate alternatives to increase return for our
stockholders and we intend to vigorously defend our intellectual property rights
in the United States and internationally. We will keep you apprised of our
progress.
Sincerely,
John P.
McLaughlin
President
and Chief Executive Officer
PDL
BioPharma, Inc.
December
2010
1
Complete
Articles
Increased
Royalty Revenue
Total
revenue for the third quarter of 2010 was $86.4 million as compared with $71.4
million for the third quarter of 2009, an increase of 21 percent year over
year. Revenue growth was driven largely by increased second quarter
2010 sales by our licensees of Avastin®, Herceptin®, Lucentis®, and Tysabri® for
which PDL received royalties in the third quarter of 2010. The
royalty payment from Genentech included royalties generated on both U.S. and
ex-U.S. manufactured products and sales.
Sales of
Avastin, Herceptin and Lucentis are subject to a tiered royalty rate for product
that is made or sold in the United States and a flat royalty rate of three
percent for product that is manufactured and sold outside of the United
States. The net sales thresholds and the applicable royalty rates for
product that is made or sold in the United States are outlined below:
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Royalty Rate
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Net
sales up to $1.5 billion
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3.0%
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Net
sales between $1.5 billion and $2.5 billion
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2.5%
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Net
sales between $2.5 billion and $4.0 billion
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2.0%
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Net
sales exceeding $4.0 billion
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1.0%
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Reported
sales of Avastin and Herceptin, which are sold by Genentech in the U.S. and by
Roche outside of the U.S., increased 11 percent and six percent, respectively,
in the second quarter of 2010, when compared to the same period for the prior
year. Roche recently reported that global sales of Avastin for
advanced colorectal, breast, lung and kidney cancer, and for relapsed
glioblastoma, rose 14 percent in the first half of 2010 driven by uptake in
colorectal, breast and/or lung cancer. Roche also reported that
global sales of Herceptin for HER2-postive breast cancer and advanced stomach
cancer increased eight percent in the first half of 2010 driven by further
penetration in the early and metastatic breast cancer settings, particularly in
emerging markets. Additionally, first signs of uptake in Europe of
Herceptin in HER2-postive advanced stomach cancer were seen following approval
of this new indication in January of this year.
Reported
sales of Lucentis, which is sold by Genentech in the U.S. and by Novartis
outside of the U.S., increased 34 percent when compared to the same period for
the prior year. Lucentis is approved for the treatment of age related
macular degeneration in the United States and in Europe and received approval
for the treatment of macular edema following retinal vein occlusion in June 2010
in the United States. Second quarter 2010 sales grew by 30 percent in
the United States and by 38 percent internationally.
Reported
sales of Tysabri, which is sold by Elan in the U.S. and by Biogen Idec outside
of the U.S., increased 14 percent in the second quarter of 2010 when compared to
the same period for the prior year. Elan recently announced that at
the end of June 2010, approximately 52,700 patients were on therapy worldwide
representing an increase of 22 percent over the approximately 43,300 patients
who were on the therapy at the end of June 2009. Tysabri royalties
are determined at a flat rate as a percent of sales regardless of location of
manufacture or sale.
2
The sales
information presented above is based on information provided by PDL’s licensees
in their quarterly reports to the Company as well as from public disclosures
made by PDL’s licensees.
Q4-2010
Revenue Guidance
On
December 1, 2010, we announced Q4-2010 revenue guidance of $74 million, as
compared with actual results of $58.3 million for the fourth quarter of 2009, a
27 percent year-over-year increase. The growth is primarily driven by
increased third quarter 2010 sales of Avastin, Herceptin, Lucentis and Tysabri
for which PDL receives royalties in the fourth quarter of 2010. The
royalty payment received from Genentech included royalties generated on all
worldwide sales.
Update
on Genentech / Roche
In
August, we received a letter from Genentech, which was sent at the request of
Roche and Novartis, stating that Avastin, Herceptin, Lucentis and
Xolair® (the Genentech products) do not infringe PDL’s supplementary protection
certificates (SPCs) applied for and granted by various countries in Europe to
PDL. SPCs are intended to extend the duration of patent life to
compensate for some of the patent time lost while seeking government approval to
market a drug. Roche and Novartis are responsible for sales of the
Genentech products outside of the United States.
The
letter asked for PDL’s views on the matter and does not describe what actions,
if any, Genentech intends to take. The letter refers only to those
products both manufactured and sold outside the United States. It does not
suggest that the Genentech products do not infringe PDL’s U.S. patents that
cover products made in the United States and sold anywhere in the
world.
It is
important to note that we received our regular quarterly payment from Genentech
following the receipt of the letter including royalties generated on all
worldwide sales of the Genentech products. We have received two
regular quarterly royalty payments since Genentech sent us the fax in
mid-August. Both payments included royalties generated on all
worldwide sales. We believe that our SPCs are valid and we believe
that Genentech owes us royalties on sales of their products on a worldwide
basis.
In
response to the letter, we replied to Genentech stating that we believe their
declarations are without merit. We disagree fundamentally with the claim that
their products do not infringe our patents. We have had discussions
with Genentech regarding this matter and would like to reach a satisfactory
outcome for both parties. If no mutually agreeable resolution can be
reached, however, we are prepared to vigorously enforce our rights.
To that
end, we filed a claim in Nevada, naming Genentech, Roche and Novartis as
defendants. In 2003, Genentech and PDL entered into a settlement
agreement to resolve the intellectual property disputes between the two
companies once and for all. This agreement restricts Genentech’s
right to challenge the validity of our patents. Violations of the settlement
agreement require Genentech to pay up to $1 billion in damages. The
settlement agreement calculates the damages by applying a 3.75% royalty rate on
all past sales of Genentech products that were made in the U.S. and sold
anywhere in the world and also adds interest. In addition, the settlement
agreement states PDL can end the license agreement with Genentech or
receive a flat royalty of 3.75% on all future sales of the Genentech products
made in the United States and sold anywhere in the world.
3
In our
complaint filed in Nevada, we state that the letter we received from Genentech
as requested by Roche and Genentech violates Genentech’s requirements under the
2003 settlement agreement. We also stated that Roche and Novartis
interfered with the contract between PDL and Genentech
deliberately. We have asked the court to rule that Genentech has an
obligation to pay royalties to PDL on international sales of its products
covered under the SPC’s. In addition, we are asking the court to find
that Genentech should pay additional damages for violating the agreement and pay
the legal costs to resolve this dispute.
In
November, Genentech and Roche asked the courts to dismiss our filing because
they believe that the 2003 settlement agreement apply only to PDL’s U.S. patents
and does not cover international intellectual property
disputes. Genentech and Roche also asked the courts to dismiss PDL’s
filing because they do not believe Nevada has authority over Roche, which is
based in Switzerland and California. PDL disagrees with both requests
and we intend to defend our intellectual property rights
forcefully. Novartis has not yet responded to our filing, but is
expected to reply in December 2010.
Overall,
we would like to resolve the dispute in a mutually agreeable manner to all
parties. If we need to go to court to defend our position we are ready to do
so. However, it can be very expensive, can take a long time and can
be risky. We encourage you to learn more about the Genentech
matter. You can find more information in our Form 10-Q document,
which was filed with the Securities and Exchange Commission on November 9,
2010.
Updates
on Licensed Products
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·
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ACTEMRA®: Chugai/Roche’s drug ACTEMRA (marketed as RoACTEMRA in
Europe) is a prescription medication called an interleukin-6 (IL-6)
receptor inhibitor. ACTEMRA is used to treat adults with
moderately to severely active rheumatoid arthritis (RA) after at least one
other medicine called a tumor necrosis factor (TNF) antagonist has been
used and did not work well. On October 19,
2010, Roche submitted a supplemental Biologics License Application (sBLA)
to the U.S. Food and
Drug Administration (FDA) and European Medicines Agency
(EMA) to expand the
uses of ACTEMRA to include the treatment of systemic
Juvenile Idiopathic
Arthritis (sJIA)
which affects
children who are less than 16 years old and makes the joints inflamed and
stiff for more than six weeks. “Idiopathic” means that we do not know the
cause of the disease. On November 7, 2010, Genentech
announced positive updated data from a Phase 3 study showing that 85% (64/75)
children with sJIA receiving ACTEMRA experienced a 30% improvement in the
signs and symptoms and an absence of fever after three months of therapy
compared with 24%
(18/37) of children receiving
placebo.
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·
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AVASTIN: Genentech/Roche’s drug Avastin is approved for
treatment of multiple cancers including
advanced colorectal, lung, kidney and glioblastoma. It was also
approved under a
special procedure known as accelerated approval for
first line (or first time) treatment of HER2-negative breast
cancer. Avastin received this accelerated approval based
on promising preliminary clinical trial results and a commitment to
conduct further studies. Based on additional Avastin breast cancer studies
that failed to show a meaningful
survival benefit, an
FDA advisory committee of experts recently recommended that the accelerated approval for
first line treatment
for HER2-negative breast cancer be removed from the U.S. label for Avastin. On October 18, 2010, the National
Comprehensive Cancer Network reaffirmed its existing recommendation for
the use of Avastin in HER2-negatrive metastatic breast cancer.
In mid-September, the FDA extended
the review period for Genentech’s sBLA for Avastin in previously
untreated advanced HER2-negative breast cancer until December 17,
2010.
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HERCEPTIN: Genentech/Roche’s
drug Herceptin was first approved in 1998 for the treatment of
HER2-positive breast cancer. HER2 stands for Human Epidermal
growth factor Receptor 2. Each normal breast cell contains copies of
the HER2 gene, which helps normal cells grow. The HER2 gene is found
in the DNA of a cell, and this gene contains the information for making
the HER2 protein. HER2-positive cells have more of the HER2
protein on them than healthy cells. On October 20, 2010, Roche
announced that the FDA approved Herceptin in combination with chemotherapy
for HER2-positive metastatic cancer of the stomach or gastro-esophageal
junction, for patients who have not received prior
treatment. The EMA approved Herceptin for this indication in
January 2010.
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·
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TRASTUZUMAB-DM1
(T-DM1): T-DM1 is an experimental, antibody-drug conjugate
being developed by Genentech/Roche that links Herceptin to the cell
killing agent, DM1. This approach is designed to increase the already
significant tumor fighting ability of Herceptin by coupling it with an
additional cell killing agent that is efficiently and simultaneously
delivered to the targeted cancer cells by the antibody. In July
2010, Genentech/Roche submitted an application for approval known as a BLA
to the FDA for T-DM1, a Herceptin conjugate, for the treatment of people
with an aggressive form of breast cancer known as HER2-positive breast
cancer and hoped for accelerated approval as early as 2011. The
focus of the request for approval for this exciting therapy is third line
treatment, i.e. patients who have previously received multiple medicines
and chemotherapies and whose breast cancer is no longer responding to such
treatments.
|
On August
25, 2010, the FDA issued a “Refuse to File” letter for rejecting accelerated
approval for T-DM1 BLA. Genentech/Roche plan to continue their
ongoing Phase 3 trial for this drug and plan to submit a new BLA in
mid-2012. On October 13, Genentech/Roche announced preliminary, six month
results from a Phase 3 trial in second line HER2-postive breast cancer patients
which showed that 48 percent of women treated with T-DM1 had their tumors shrink
compared with 41 percent of those taking the combination of Herceptin and
Taxotere. Among the women taking the standard therapy, 75 percent had
side effects of grade 3 or higher on a 5-point scale, compared with 37 percent
of those getting T-DM1.
Strengthening
our Capital Structure
Over the
last several months, we have accomplished three milestones toward strengthening
our capital structure. At the beginning of the year, we had two
convertible notes, one due in 2012 and one due in 2023. First, we repurchased,
retired or converted all of the 2023 notes which are now fully
retired. Next, we exchanged $92 million of the 2012 notes for notes
due in 2015. This transaction extends the timeline for repayment of
this debt by three years. We entered into this transaction because we
believe the benefit of having the additional financial flexibility substantially
outweighs the small increase in the 7/8ths of a
percentage point of interest that we will need to pay for this
debt. Finally, we placed an additional $88 million of the new 2015
notes, further increasing our free cash available for acquiring additional
royalty-generating assets, buying back remaining 2012 convertible debt or buying
back stock to improve stockholder value.
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