What happened

Shares of PDL BioPharma Inc. (NASDAQ:PDLI), a biopharma royalty company, are surging Friday in response to the positive second-quarter earnings report it issued after the bell Thursday. A quarterly net profit that was 827% higher than the company recorded during the first three months this year encouraged the market to boost the stock 15.7% higher as of 12:38 p.m. EDT on Friday. 

So what 

Viewed over a longer timeline, the Q2 results weren't terrific, but they were far better than the dismal figures PDL BioPharma has produced recently. For  the 12-month period that ended in March, the company reported a paltry $15 million in net income.

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Image source: Getty Images.

It's no wonder, then, that investors are cheering the $60.4 million in net income reported Thursday. If you're wondering why the stock isn't rocketing even higher, glance below the headline figures, and you'll see signs that the company isn't poised to return to its former glory days.

Now what

During the first quarter, PDL BioPharma revalued previously acquired royalty rights. For example, the company is entitled to royalties on sales of Glumetza brand extended release metformin tablets, and combination diabetes treatments containing slow-release metformin sold by a handful of pharmaceutical giants.

PDL Biopharma's success this year is almost entirely due to management changing its estimated value of Glumetza and other royalty streams $96.9 million higher in the first half of 2017. Strip away estimated changes in fair value of royalty assets, which the company reports as revenue, and you'll see the company's top line has fallen from $152.1 million during the first half of 2016, to just $92.4 million during the first half 2017.    

Every company has a choice between reporting results in a clear, easy-to-follow manner or engaging in unnecessary obfuscation. Until PDL BioPharma begins to show clear signs that it can return to growth, this a drug stock I wouldn't touch with a 10-foot pole.