Ebb & Flow

Investors lopped off one-third of PDL Biopharma's value last Wednesday after the company announced late Tuesday that it was taking itself off the auction block after failing to receive any firm offers to purchase its biotech R&D business.

The $600 million decline in market cap - the shares fell $5.13 (32%) to $10.71 on Wednesday - accounts for the $500 million that PDL plans to distribute to shareholders from the sale of its marketed products and manufacturing facility over the last few months. Those transactions brought in $525 million in cash with the potential for an additional $85 million in milestones and royalties. The remaining $25 million will cover tax and transaction costs (see BioCentury, Feb. 25).

PDL (NASDAQ:PDLI) also said it plans to return to shareholders cash covering at least 50% of the value of its future antibody humanization royalties from currently marketed licensed products net of corporate taxes.

"As with our previous asset transactions, we intend to distribute the proceeds from the royalty transaction or transactions to our stockholders," Board Chair Karen Dawes said on a conference call.

PDL is still determining the structure of the distribution and whether it would occur in a single payout or in multiple distributions over time.

In 2007, PDL brought in $221 million via those patents; a figure the company expects to increase annually until the underlying Queen patent expires at the end of 2014.

Without any annual increase, roughly $110 million a year would go to shareholders over the seven-year period, or $770 million. Together with the $500 million payout, that implies PDL might return $1.27 billion, or $10.85 a share, to shareholders, a figure only slightly above its $1.25 billion market cap at Wednesday's close.

Trimmed to focus

PDL would be left with the $440 million in cash it had at Dec. 31 to fund the remainder of the company, which is focused on three clinical-stage antibodies.

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