How much do you trust management to invest your cash? That's a question you have to ask of any company with a stockpile of cash. But it's especially important for investors in PDL Biopharma (Nasdaq: PDLI), in which management doesn't have much else to do.

PDL was split off from its drug developing sister, Facet Biotech, which Abbott Labs (NYSE: ABT) eventually bought. What's left in PDL is a set of patents that contribute revenue from drugmakers producing humanized monoclonal antibody drugs. Roche's Herceptin, Lucentis, and Avastin, and Tysabri from Elan (NYSE: ELN) and Biogen Idec (Nasdaq: BIIB) all contributed to the $83 million that PDL brought in during the first quarter.

Having resolved patent disputes with AstraZeneca (NYSE: AZN), UCB, and Novartis (NYSE: NVS) over the last few months, PDL is all set to collect its royalties and pay out the cash at a dividend that currently sits at 9.7%.

Except PDL has $193 million in cash that management is planning on using to acquire additional royalty streams. Like those late-night commercials offering to give you up-front cash in exchange for signing over your monthly lawsuit settlement payments, PDL is looking for desperate universities or drug companies that would rather have cash now than payments over time.

There are certainly opportunities available. A few years ago, Vertex Pharmaceuticals (Nasdaq: VRTX) monetized the royalty stream it was getting from GlaxoSmithKline for HIV treatment Lexiva, which it helped develop and was collecting royalties on.

The trick is to find patents that are secure and a royalty stream that's predictable. The former requires good lawyers; the latter can be a bit of a gamble. Who knows how sales of a drug are going to pan out over the five or 10 years that might be left on a royalty stream?

If management makes good choices, PDL could be worth more than where investors are currently valuing it. Just realize that the dividend will have to increase or PDL will have to return assets to investors in order for investors to make back their current investment before the current patent portfolio expires in December 2014.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.