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PDL Biopharma Falls After Analyst Cuts Rating

From Associated Press (October 11, 2011)

NEW YORK -- Shares of PDL BioPharma Inc. may already have topped out, RBC Capital Markets said Tuesday, and company shares slid more than 2 percent.

THE SPARK: Analyst Jason Kantor downgraded shares of PDL to "Sector Perform" from "Outperform." He said the company is having trouble finding new sources of revenue and that it will need to spend more to complete a deal that will bring in more royalties. Kantor said PDL BioPharma is a low-risk stock, but he does not think it will exceed his price target of $6 per share in the near future.

THE BIG PICTURE: PDL helped develop the cancer drugs Avastin and Herceptin, the macular degeneration drug Lucentis, and asthma treatment Xolair, which are marketed by Roche, and the multiple sclerosis drug Tysabri, which is marketed by Elan Corp. The companies make royalty payments to PDL based on their sales of the drugs. Kantor said the company's current revenue stream will run out in 2015, although it could get more revenue from drugs that are still in development.

PDL is also involved with drug candidates including Elan and Johnson & Johnson's bapineuzumab, and trastuzumab-DM1, which combines Herceptin with a cell-killing agent developed by ImmunoGen Inc.

Kantor said greater numbers of private equity firms and drug companies are trying strategies similar to PDL's. That means the company faces more competition and it will have to spend more money to get new products. He said sales of Herceptin are growing, while Tysabri revenue should remain strong for years and Lucentis revenue should be strong for now. However Avastin revenue in breast cancer is falling.

SHARE ACTION: Shares of PDL BioPharma fell 15 cents to $5.55. The stock has traded between $4.66 and $6.70 in the last year, and since PDL reported its second-quarter result on July 28, the shares have fallen 7.8 percent.


Posted: October 2011