PDL BioPharma Shares Popped: What You Need to Know (NVS, PDLI)

PDL BioPharma Shares Popped: What You Need to Know

By Cindy Johnson | More Articles
February 28, 2011 | Comments (0)

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: PDL BioPharma, (Nasdaq: PDLI ) popped 19% in intraday trading today after announcing plans to begin paying a quarterly dividend of $0.15 per share and an agreement with Novartis AG (NYSE: NVS ) that resolves a legal dispute between the two companies.

So what: Novartis markets an eye-care drug that uses patented PDLI technology in Europe. Novartis has agreed not to challenge PDLI's patent in Europe, while PDLI has agreed to pay Novartis a portion of European sales of the drug.

Now what: The Novartis agreement reduces risk to the outlook and provides potential for higher sales in Europe. Initiating a dividend, which management teams hate to cancel, signals confidence in PDLI's outlook. On a less positive note, PDLI remains in a legal dispute with its US marketing partners and has missed consensus EPS estimates for four consecutive quarters. The stock appears compelling at a P/E ratio of 5.6x, but the risks are high.

Interested in more info on PDLI? Add it to your watchlist by clicking here.

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Fool contributor Cindy Johnson owns shares of PDL BioPharma, (Nasdaq: PDLI ) ...woo-hoo! We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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