Making the transition from an R&D company without products to a fully integrated drug company that develops and sells drugs is a big step in the biotech industry. It often marks the turning point where a company can begin to create long-term value for its shareholders instead of just burning up investor capital. Protein Design Labs (NASDAQ:PDLI) is rapidly progressing through this metamorphosis.

Protein Design Labs owns key patents on antibody humanization technology, and because of this intellectual property estate, the company receives royalty payments on the sales of antibody drugs from companies such as Genentech (NYSE:DNA) and MedImmune (NASDAQ:MEDI). A year ago, PDL had this nice royalty stream and an interesting drug in development called Nuvion. Other than that, though, there wasn't much to be excited about in the near term.

For a small biotech, that was pretty good, and I liked the company's prospects enough to make it a formal recommendation for Motley Fool Rule Breakers. I'm happy to report that I like the company even more now than I did a year ago. The reason is that PDL has added commercial products to its lineup. No longer are PDL's investors waiting for future drug sales. They are right around the corner, just awaiting the completion of PDL's acquisition of ESP Pharma.

Taking into consideration the sales of drugs brought in through ESP Pharma, PDL announced yesterday that 2005 revenues are expected to come in at approximately $250 million, a 150% increase over last year. It is also a significant accomplishment, since there aren't too many biotech companies that have crossed that sales threshold.

This is the beginning of an era in which PDL's investors can focus on the financial statements as much as the drug pipeline. The company expects to become cash flow positive in the second half of next year, and I think it will hit that goal -- especially since that guidance does not include yesterday's good news from Genentech on Avastin. Avastin should see increased use in non-small cell lung cancer in addition to sales in its current market, colorectal cancer. Since PDL receives a royalty on Avastin sales, this represents additional upside.

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Motley Fool Rule Breakers biotech analyst Charly Travers owns shares of Protein Design Labs. The Motley Fool has a disclosure policy.