SEC Filing | PDL BioPharma, Inc.

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pdli-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
			For the quarterly period ended June 30, 2020


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
			For transition period from to

Commission File Number: 000-19756

https://cdn.kscope.io/61fd9cacdd0aa90b6d84ff01002b9ca3-pdli-20200630_g1.jpg

PDL BIOPHARMA, INC.

(Exact name of registrant as specified in its charter)


Delaware			94-3023969
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

932 Southwood Boulevard

Incline Village, Nevada 89451

(Address of principal executive offices and Zip Code)

(775) 832-8500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:


Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	PDLI	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

As of July 31, 2020, there were 113,982,229 shares of the registrant’s Common Stock outstanding.

PDL BIOPHARMA, INC.

2020 Form 10-Q

Table of Contents

Page

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS (unaudited)

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019

Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2020 and 2019

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

Condensed Consolidated Statements of Stockholders Equity for the Three and Six Months Ended June 30, 2020 and 2019

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019

Notes to the Condensed Consolidated Financial Statements

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4.

CONTROLS AND PROCEDURES

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

ITEM 1A.

RISK FACTORS

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

ITEM 4.

MINE SAFETY DISCLOSURES

ITEM 5.

OTHER INFORMATION

ITEM 6.

EXHIBITS

SIGNATURES

We own or have rights to certain trademarks, trade names, copyrights and other intellectual property used in our business, including PDL BioPharma and the PDL logo, each of which is considered a trademark. All other company names, product names, trade names and trademarks included in this Quarterly Report on Form 10-Q are trademarks, registered trademarks or trade names of their respective owners.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PDL BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Revenues
Product revenue, net	$	4,099	$	5,268	$	8,115	$	10,004
Lease revenue	359		1,308		1,436		2,532
Service revenue	690		846		1,582		1,612

Royalties from Queen et al. patents	—		6		—		9

License and other	63		30		73		(3)
Total revenues	5,211		7,458		11,206		14,154
Operating expenses
Cost of product revenue (excluding intangible asset amortization)	2,639		4,929		5,499		8,729
Amortization of intangible assets	335		344		637		662
Severance and retention	3,579		—		22,313		—
General and administrative	9,719		8,695		22,471		17,005
Sales and marketing	1,237		1,861		2,487		3,435
Research and development	1,465		886		3,321		1,796





Total operating expenses	18,974		16,715		56,728		31,627
Operating loss from continuing operations	(13,763)		(9,257)		(45,522)		(17,473)
Non-operating expense, net

Interest and other income, net	69		1,650		582		3,524
Interest expense	(312)		(2,984)		(786)		(5,939)


Loss on extinguishment of convertible notes	—		—		(606)		—
Total non-operating expense, net	(243)		(1,334)		(810)		(2,415)
Loss from continuing operations before income taxes	(14,006)		(10,591)		(46,332)		(19,888)
Income tax benefit from continuing operations	(1,077)		(2,575)		(14,144)		(3,422)
Net loss from continuing operations	(12,929)		(8,016)		(32,188)		(16,466)
(Loss) income from discontinued operations before income taxes (including loss on classification as held for sale of $16,143 and $28,904 for the three and six months ended June 30, 2020, respectively)	(44,277)		4,830		(58,112)		23,517
Income tax (benefit) expense of discontinued operations	(6,878)		1,328		(7,961)		4,948
(Loss) income from discontinued operations	(37,399)		3,502		(50,151)		18,569
Net (loss) income	(50,328)		(4,514)		(82,339)		2,103
Less: Net loss attributable to noncontrolling interests	(357)		(95)		(645)		(158)
Net (loss) income attributable to PDL’s shareholders	$	(49,971)	$	(4,419)	$	(81,694)	$	2,261

Net (loss) income per share - basic
Net (loss) from continuing operations	$	(0.11)	$	(0.07)	$	(0.26)	$	(0.13)
Net (loss) income from discontinued operations	(0.32)		0.03		(0.42)		0.15
Net (loss) income attributable to PDL’s shareholders	$	(0.43)	$	(0.04)	$	(0.68)	$	0.02
Net (loss) income per share - diluted
Net (loss) from continuing operations	$	(0.11)	$	(0.07)	$	(0.26)	$	(0.13)
Net (loss) income from discontinued operations	(0.32)		0.03		(0.42)		0.15
Net (loss) income attributable to PDL’s shareholders	$	(0.43)	$	(0.04)	$	(0.68)	$	0.02
Weighted-average shares outstanding
Basic	115,908		118,285		119,402		123,484
Diluted	115,908		118,285		119,402		123,484

See accompanying notes.

PDL BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

(In thousands)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019

Net (loss) income	$	(50,328)	$	(4,514)	$	(82,339)	$	2,103

Other comprehensive loss, net of tax








Total other comprehensive loss, net of tax	—		—		—		—
Comprehensive (loss) income	(50,328)		(4,514)		(82,339)		2,103
Less: Comprehensive loss attributable to noncontrolling interests	(357)		(95)		(645)		(158)
Comprehensive (loss) income attributable to PDL’s shareholders	$	(49,971)	$	(4,419)	$	(81,694)	$	2,261

See accompanying notes.

PDL BIOPHARMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)


	June 30,		December 31,
	2020		2019
	(unaudited)		(Note 1)
Assets
Current assets:
Cash and cash equivalents	$	105,446	$	168,982



Accounts receivable, net	6,154		6,559

Notes receivable	52,598		52,583

Inventory	12,633		8,061
Assets held for sale (Note 2)	289,426		70,366
Prepaid and other current assets	29,291		7,344
Total current assets	495,548		313,895
Property and equipment, net	3,039		2,560



Notes receivable, long-term	636		827
Intangible assets, net	12,550		13,186
Long-term assets held for sale (Note 2)	—		377,491
Other assets	8,883		9,247
Total assets	$	520,656	$	717,206

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,524	$	2,675
Accrued liabilities	14,498		11,923

Liabilities held for sale (Note 2)	18,213		31,095






Total current liabilities	36,235		45,693
Convertible notes payable	13,507		27,250

Liabilities held for sale, long-term (Note 2)	—		120
Other long-term liabilities	50,913		50,865
Total liabilities	100,655		123,928

Commitments and contingencies (Note 13)

Stockholders’ equity:
Preferred stock, par value $0.01 per share, 10,000 shares authorized; no shares issued and outstanding	—		—
Common stock, par value $0.01 per share, 350,000 shares authorized; 113,945 and 124,303 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	1,139		1,243
Additional paid-in capital	(66,164)		(78,875)


Retained earnings	485,493		670,832
Total PDL stockholders’ equity	420,468		593,200
Noncontrolling interests	(467)		78
Total stockholders’ equity	420,001		593,278
Total liabilities and stockholders’ equity	$	520,656	$	717,206

See accompanying notes.

PDL BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)


	PDL Stockholders’ Equity
	Common Stock					Treasury Stock		Additional Paid-In Capital		Retained Earnings			Non-controlling Interest		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2019	124,302,616	$	1,243	$	—	$	(78,875)	$	670,832		$	78	$	593,278
Issuance of common stock, net of forfeitures	1,781,197	18		—		(18)		—			—		—
Stock-based compensation expense	—	—		—		14,453		—			—		14,453

Repurchase and retirement of common stock	(5,564,841)	(56)		(2,244)		—		(17,978)			—		(20,278)
Transfer of subsidiary shares to non-controlling interest	—	—		—		683		—			100		783
Extinguishment of convertible notes	—	—		—		(3,911)		—			—		(3,911)
Capped call transactions	—	—		—		801		—			—		801
Comprehensive loss:
Net loss	—	—		—		—		(31,723)			(288)		(32,011)

Total comprehensive loss	—	—		—		—		—			—		(32,011)
Balance at March 31, 2020	120,518,972	1,205		(2,244)		(66,867)		621,131			(110)		553,115
Issuance of common stock, net of forfeitures	183,903	2		—		458		—			—		460
Stock-based compensation expense	—	—		—		245		—			—		245

Repurchase and retirement of common stock	(6,758,147)	(68)		2,244		—		(21,267)			—		(19,091)
Noncash liquidating distribution	—	—		—		—		(64,400)			—		(64,400)

Comprehensive loss:
Net loss	—	—		—		—		(49,971)			(357)		(50,328)

Total comprehensive loss	—	—		—		—		—			—		(50,328)
Balance at June 30, 2020	113,944,728	$	1,139	$	—	$	(66,164)	$	485,493		$	(467)	$	420,001


	PDL Stockholders’ Equity
	Common Stock					Treasury Stock		Additional Paid-In Capital		Retained Earnings			Non-controlling Interest		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2018	136,512,522	$	1,365	$	(2,103)	$	(98,030)	$	828,547		$	—	$	729,779
Issuance of common stock, net of forfeitures	764,785	8		—		(8)		—			—		—
Stock-based compensation expense	—	—		—		1,169		—			—		1,169

Repurchase and retirement of common stock	(13,460,164)	(135)		613		—		(44,831)			—		(44,353)
Transfer of subsidiary shares to non-controlling interest	—	—		—		—		—			572		572
Comprehensive income:
Net income	—	—		—		—		6,680			(63)		6,617

Total comprehensive income	—	—		—		—		—			—		6,617
Balance at March 31, 2019	123,817,143	1,238		(1,490)		(96,869)		790,396			509		693,784
Issuance of common stock, net of forfeitures	37,996	—		—		—		—			—		—
Stock-based compensation expense	—	—		—		2,175		—			—		2,175

Repurchase and retirement of common stock	(8,185,970)	(81)		944		—		(26,897)			—		(26,034)
Transfer of subsidiary shares to non-controlling interest	—	—		—		229		—			(216)		13
Comprehensive loss:
Net loss	—	—		—		—		(4,419)			(95)		(4,514)

Total comprehensive loss	—	—		—		—		—			—		(4,514)
Balance at June 30, 2019	115,669,169	$	1,157	$	(546)	$	(94,465)	$	759,080		$	198	$	665,424

See accompanying notes.

PDL BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities
Net (loss) income	$	(82,339)	$	2,103
Less: (Loss) income from discontinued operations	(50,151)		18,569
Net loss from continuing operations	(32,188)		(16,466)
Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of convertible notes conversion option and debt issuance costs	485		3,876
Accreted interest on convertible note principal	38		—
Amortization of intangible assets	637		662
Amortization of right-of-use assets	370		362



Change in fair value of derivative assets	73		(3)


Loss on extinguishment of convertible notes	606		—
Other amortization and depreciation	867		1,509


Loss on disposal of property and equipment	316		—




Stock-based compensation expense	18,000		3,210

Deferred income taxes	(158)		9,353
Changes in assets and liabilities:
Accounts receivable	582		(3,532)


Prepaid and other current assets	(21,944)		5,614

Inventory	(5,991)		(1,138)
Other assets	67		406
Accounts payable	843		1,078

Accrued liabilities	3,360		1,155


Other long-term liabilities	266		167
Net cash (used in) provided by operating activities - continuing operations	(33,771)		6,253
Net cash used in operating activities - discontinued operations	1,688		(14,428)
Cash flows from investing activities