Last week, biopharmaceutical PDL BioPharma
PDL had a small setback this quarter with its pipeline when its partner, Roche, decided to discontinue the co-development of Daclizumab for asthma. This put a one-time $19 million gain on PDL's income statement, which was responsible for about $0.16 of the $0.23 a share in non-GAAP profits for the company this quarter.
One thing I don't really like is how PDL accounted for that $0.23 a share. This quarter, PDL excluded one-time expenses associated with its acquisition of a drug from Roche, yet accounted for a one-time gain in its non-GAAP earnings resulting from no more need to defer the aforementioned revenue associated with the Roche asthma collaboration. It's no problem if a company is going to exclude one-time items for its non-GAAP results, but it should exclude not only one-time expenses but one-time gains as well -- if it wants to be fair and avoid giving the appearance of massaging perceptions.
I'm probably making too big a deal over this one item, and to be fair, one of the first things mentioned on the conference call was the fact that the recognition of the Roche revenues was a one-time item. Sometimes, though, what the perceptions of a company's actions say about how it's being managed is more important than the actions' reflection on the company's financial results.
I'll give PDL a pass this time, but it's important that management teams of biopharmaceutical companies don't get in the habit of exaggerating or overpromising on their results or timelines. PDL has had a habit of being over-optimistic on its development timelines and underestimating costs multiple times in the past several years, most recently extending the Nuvion and Ularitide development timelines.
In the long run, I really like PDL's pipeline and prospects, but it's tough to invest in a biopharmaceutical company and estimate its fair value when the timelines for its drugs in development are constantly being pushed back significantly. Maybe a little more conservatism is in order for PDL's management in all areas of the company's performance, as it's much better to underpromise and over-deliver than to do the reverse.