As I wrote yesterday, Genentech (NYSE:DNA) had a pretty robust second quarter with a number of its products. While that is Genentech's good fortune, there is a trickle-down benefit to Protein Design Labs (NASDAQ:PDLI) as several of Genentech's products are under licenses to PDL's antibody humanization patents.

Whether or not Genentech was going to pay up was a big dispute late last year, though ultimately the companies settled peacefully. Where the situation stands now is that Genentech pays PDL a royalty on sales of Avastin, Herceptin, Raptiva, and Xolair. Herceptin is a solid product, Avastin looks to be a blockbuster, and Xolair appears promising as well. Pretty soon, royalties from these drugs could generate a lucrative income stream for PDL.

While I'm not privy to the exact terms of the arrangement, I believe from speaking with PDL in the past that a current royalty rate in the range of 3-4% of sales is in the ballpark. Though under the renegotiated terms between the two companies, the rate is tiered and will decrease as undisclosed sales levels are attained.

In the most recent quarter, sales of the four products covered in this arrangement totaled $308 million. Since three of the drugs are in their first year on the market, this should grow at a fast clip. I expect that sales over the next four quarters will be close to $1.5 billion.

Using a royalty rate of 3%, PDL stands to receive approximately $50 million over the next 12 months if that sales level is attained. This revenue will only continue to grow in the future as Avastin and Xolair ramp toward peak sales. Add in the royalty payments received from MedImmune's (NASDAQ:MEDI) Synagis and PDL should be booking over $100 million annually in royalty payments in the near future.

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Fool contributor Charly Travers owns shares of Protein Design Labs.