RBC stated that selling in PDL BioPharma Inc (NASDAQ:PDLI) stock has been overdone. The prospective haircut to future revenue that company faces from Eli Lilly’s solanezumab flop is already priced into the shares price. The company was eligible to get royalties on solanezumab sales. Recent sell-off is stated as an overreaction by analysts with Novartis hypertension drug Tekturna seen as the near-term catalyst, which the firm owns a piece of via its preliminary equity investment of $75 million in Noden Pharma DAC. The firm projects to invest an additional $64 million by next year.
PDL BioPharma released its promising PR few months ago wherein it stated that it has closed a preliminary investment in Noden Pharma DAC, a new privately-held firm domiciled in Ireland, and an associate. At that time Noden confirmed on transaction completion related to a purchase deal with Novartis AG to buy exclusive worldwide rights to make, market, and offer the branded prescription medicinal product under the name Tekturna HCT ® and Tekturna® in the U.S. and Rasilez HCT® and Rasilez® in the rest of the world.
The offering’s active ingredient is ‘aliskiren’, which is suggested for the cure of hypertension. The medication was initially marketed by Novartis and had international sales in FY2015 of $154 million. The waiting duration under the “Hart-Scott-Rodino Antitrust Improvements Act” pertinent to the procurement has expired, satisfying the last remaining terms to close the deal. PDL BipPharma’s investment will eventually result in an 88% equity interest in Noden. Provided this expected majority ownership by company, the financial statements of Noden are consolidated with PDL, which is projected to be immediately accretive to company’s cash earnings.
During that period, John P. McLaughlin, the CEO of PDL BioPharma, said that they are delighted to report the equity investment transaction completion with Noden and consider that this deal showcases a paradigm shift for them. While they will continue expand income generating assets, the investment in Noden offers another base for value creation.