Merrill
PDL’s ’07 royalties off to good start on Genentech’s sales
PDL receives royalties on a one quarter lag basis on worldwide sales of Avastin,
Herceptin, Xolair, Raptiva and Lucentis. Thus, Genentech’s strong 4Q06 results
should bode well for PDL’s 2007 royalty revenue. Maintain Buy.
Avastin & Lucentis higher than expected
Avastin and Lucentis sales, in particular, were strong in 4Q06 at $490mn (est.
$451mn) and $217mn (est. $197mn), respectively. We currently estimate that
Avastin and Lucentis will account for about 31% and 3% of PDL’s royalties,
respectively, in 2006, but they will represent a bigger portion in 2007, rising to
33% and 10%, respectively.
Maintain estimates but 2007 shaping up well
PDL also receives royalties on Roche’s ex-US sales of Genentech’s antibodies,
plus MEDI’s Synagis and BiogenIDEC’s Tysabri. Thus, while we are maintaining
our royalty estimates pending PDL’s 4Q06 quarterly report and results for these
products, 2007 is shaping up well for PDL. We currently estimate royalty revenue
of $187mn in 2006, $267mn in 2007 and $342mn in 2008. |
