What: Shares of PDL Biopharma (PDLI), a biotech company that primarily generates royalties from its portfolio of pharmaceutical patents, jumped by more than 10% Tuesday morning after it released its fourth quarter earnings. 

So what: Total revenue for the period was $178.1 million, an increase of 52% when compared to the same quarter last year. The bulk of the company's revenue was generated from its Queens et al patents, which generated total revenue of $121 million during the quarter.

Net income for the period was $100.6 million, or $0.61 per diluted share, which was well ahead of the $0.54 that analysts were expecting and was up more than 90% year over year.

On its earnings call management also shared some good news related to its Depomed (ASRT 2.52%) royalty rights. The company had previously reported that an increase in distributor inventory levels had caused the company to not receive any royalty payments from the sale of Depomed products through the first nine months of 2015. Management confirmed that this situation has now been cleared up and reported that it received cash payments of more than $31 million during the quarter and the company confirms that they expect to receive royalty payments from the deal until 2023. Revenue from their Depomed assets is also tracking ahead of their original forecast, so they increased the value of this asset by $13 million during the quarter.

The combination of a better than expected profit and hearing that the Depomed deal is once again generating cash sent shares higher in early morning trading. 

Now what: While its good to see that PDL is getting some positive attention from the markets Tuesday, I think that investors have reason to remain cautious. For one, the company recently announced that it was slashing its quarterly dividend payment to $0.05 per share, down considerably from the $0.15 that it had paid out previously. The company stated that the move to preserve cash so they could pursue additional deals, which was likely to be the right move considering that they are still highly dependent on their Queen et al patents to generate revenue. Those patents expired in 2014 and the company's revenue is expected to plunge over the coming years as the revenue from those assets disappears. Still, the move likely caused dividend focused investors to flee.

It's also tough to know what to make of this company's near term future. Currently analysts are projecting that revenue will fall from $590 million in 2015 all the way to $73 million in 2017, which is a massive 87% drop in less than two years. While management stated that their 2016 prospects look "very strong," I think its wise to keep away from this stock until PDL proves that it can thrive without depending on revenue from its Queen et al patents.