PDL BioPharma, Inc. (PDL) entered into an agreement with Roche (RHHBY) to settle all outstanding legal disputes between them. The settlement includes the Nevada litigation and arbitration proceedings related to the audit of royalties on sales.
As per the agreement, effective retroactively to Aug 15, 2013, PDL BioPharma will be receiving a fixed royalty rate of 2.125% on global sales of Avastin, Herceptin, Lucentis Xolair, Kadcyla and Perjeta from Roche. Previously, royalties on Roche’s products were tiered 1–3% in the U.S. and flat 3% in the ex-U.S. markets.
PDL BioPharma is expected to receive royalties on worldwide sales of Avastin, Herceptin, Xolair, Perjeta and Kadcyla occurring on or before Dec 31, 2015 and on ex-U.S. sales of Lucentis occurring on or before Dec 28, 2014. Roche will not pay any royalty on U.S. sales of Lucentis that occurred after Jun 30, 2013. Meanwhile, the royalty rate on Gazyva remains unchanged. PDL BioPharma is expected to recognize royalties till the first quarter of 2016.
The agreement also prevents Roche from challenging the validity of PDL's Queen patents, including the supplementary protection certificates (SPCs) in Europe. The agreement also prohibits Roche from contesting patent coverage for Avastin, Herceptin, Lucentis, Xolair, Perjeta, Kadcyla and Gazyva and from assisting any third party in challenging PDL's Queen patents and SPCs.
The settlement comes as a huge relief to both parties, particularly for PDL BioPharma. The company has been struggling with the Roche dispute for a long time now. However, we are still concerned about PDL BioPharma’s future revenue stream once the royalty payments dry up.
PDL BioPharma currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks include Affymetrix Inc. (AFFX) and Actelion Ltd. (ALIOF). Both stocks hold a Zacks Rank #1 (Strong Buy).
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