PDL BioPharma Is A Solid Biotech Investment In A Friendly Regulatory Environment

PDL BioPharma (NASDAQ:PDLI) acquires and manages products, royalty agreements and debt facilities in the biotech space. It is in the process of changing its business into a specialty pharma holding company, similar to Valeant Pharmaceuticals (NYSE:VRX), Perrigo (NASDAQ:PRGO), Horizon (NASDAQ:HZNP), and Depomed (NASDAQ:DEPO). Most of these types of companies, including PDLI, have taken hits recently. Specialty pharma companies have overextended themselves with debt from drug acquisitions, and due to public outcry and controversy in Washington, they aren't able to raise drug prices substantially anymore. This has resulted in the prices and multiples of specialty pharma products going down. This opens up the opportunity for PDLI to make an acquisition of a pharma asset at a good price in the near future, which it plans to do. PDLI is also aggressively selling its recently acquired flagship product, hypertension drug Tekturna, in the United States with a large sales force of 40 reps.

Biotech ETFs like IBB have done very well in the last couple of weeks. This is because Washington drafted an executive order that calls for easing regulatory hurdles for the drug industry. It is an industry-friendly stance, and doesn't call for drug pricing cuts as was expected by many healthcare investors. This is good news for pharma stocks and specifically for PDLI, as it's currently negotiating with copayers for its drug Tekturna. This bill also gives PDLI some wiggle room to increase the price a little for Tekturna as it sees fit.

Tekturna - A Drug That Generates Good Cash Flow

PDL's Strategy With Tekturna

PDLI acquired Tekturna from Novartis (NYSE:NVS) in June 2016 for $110M up front, plus $89M on the first-year anniversary, and up to $95M in milestone payments based on sales performance. Tekturna is being sold under PDLI's subsidiary Noden Pharma. PDLI owns 98%, practically all, of Noden. Tekturna is a specialty drug that probably will never generate more than $200-300M per year in sales. But it is a solid revenue generator and fits in well with PDLI's culture of having consistent revenue streams, just like the revenue streams from its royalty and interest revenues.

Tekturna was created by Novartis and it got FDA approved on March 6, 2007. When it got approved, it was expected to be a blockbuster drug with peak sales in the billions. However, the drug has gone through many setbacks since approval.

1 2 3 4
View single page >> |

Disclosure: We are long PDLI.

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.