Merrill, 3/05
No Sale; planning distributions to shareholders, R&D focus
PDL announced it: 1) will NOT be selling the company; 2) will distribute to
shareholders at least $500mn (~$4 per share) from the recent asset sales; 3) will
look to distribute 50% or more of the after tax value of the antibody royalty stream;
4) will significantly lower headcount; 5) will search for a CEO and; 6) will focus on
its antibody pipeline. Pending the management conf. call at 8:30 am EST, we
lowered our price objective to $19 from $25, but maintain Buy.
Back to the future: a profitable antibody development co.
Looking past the presumed investor disappointment over the Non-Sale, PDL
plans to reduce headcount to ~300 (from 800) and lower annualized operating
expenses to ~$150mn (from $340mn). Thus, combined with its growing antibody
royalty stream (‘08E $260mn), PDL should have steady bottom line growth.
Plans to monetize royalties for shareholders
PDL is examining ways to monetize the royalty stream, including: 1) sale of the
right to receive future royalties, 2) securitization; or 3) distribution of securities
related to the royalty stream. (We estimate the royalties are worth ~$15/share.)
Initial changes to EPS estimates pending further details
After accounting for PDL’s 4Q results, reported separately with EPS of $0.04,
lower than our $0.15, we lowered our EPS estimates (ex-charges) to $0.65 from
$0.84 in ’08, to $1.04 from $1.06 in ’09 and to $1.22 from $1.26 in ’10.
Lowered P.O. to $19, maintain Buy
Pending further details on PDL’s plans, we lowered our P.O. to $19 from $25 after
removing valuation for the planned distribution of proceeds from the asset sales |
