An update on several fronts
In its Q315 earnings release, PDL BioPharma Inc (O:PDLI) announced that Valeant may not have met some of the contractual obligations of its Depomed royalty agreement and PDL is now expecting to begin a royalty audit process by the end of the year. In addition, due to the recall of the Auvi-Q allergy injector on 28 October, there is a question about the Kaleo note, as a long absence from the market could lead to constraints in cash flow from that company. We do not believe any of these issues is major and at this stage are not making any significant changes to our forecasts. More recently, PDL announced that LENSAR, a company that had been put up for sale, was sold, reviving that investment, which had been impaired.
Valeant has not been reporting or paying on time
Valeant is contractually obliged to report and pay monthly royalties on Glumetza, but appears to have failed to do so. PDL did not receive any payments in Q315, although it did receive payment in late October. In response to this and to other issues (note that Valeant acquired Glumetza via its takeover of Salix, which had been guilty of massive channel stuffing), PDL expects to initiate a royalty audit process by the end of 2015. The timing of its conclusion is unclear.
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