Company Update (NASDAQ:PDLI): Here’s Why PDL BioPharma Inc Shares Are Slumping 15% Today

PDL BioPharma Inc (NASDAQ:PDLI) are having a rough day, after the drug maker announced the closing of its previously announced offering of convertible senior unsecured notes due December 1, 2021 (2021 Notes). PDL issued $150.0 million aggregate principal amount of 2021 Notes. In addition, PDL has granted the underwriters an option to purchase up to an additional $22.5 million aggregate principal amount of the 2021 Notes to cover overallotments.

PDL BioPharma shares reacted to the news, falling nearly 15% in Wednesday’s trading session.

The 2021 Notes bear interest at a rate of 2.75% per year payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2017. The 2021 Notes are not redeemable prior to maturity. The 2021 Notes are convertible, only during certain periods and subject to certain circumstances, into cash, shares of PDL’s common stock or a combination of cash and shares of PDL’s common stock. The conversion rate of the 2021 Notes will initially be 262.2951 shares of common stock per $1,000 principal amount of the 2021 Notes, equivalent to an initial conversion price of approximately $3.81 per share of common stock, in each case subject to adjustment.

In connection with the 2021 Notes offering, PDL entered into a capped call transaction with an affiliate of RBC Capital Markets(the Counterparty).  The capped call transaction is generally expected to offset potential dilution to PDL’s common stock and/or any cash payments PDL will be required to make in excess of the principal amount upon the conversion of the relevant 2021 Notes, with such offset subject to a cap.  The cap price of the capped call transactions entered into with respect to the 2021 Notes will initially be $4.88, which represents a premium of approximately 60% over the NASDAQ closing price on November 16, 2016.

The net proceeds from the offering were approximately $145.8 million after deducting the underwriters’ discounts, and other estimated offering expenses.  PDL used $14.4 million to fund the cost of the previously announced capped call transaction. PDL used approximately $121.5 million of the net proceeds from the offering to repurchase $120.0 million principal amount of PDL’s outstanding 4.00% convertible senior notes due 2018 plus approximately $1.5 million of accrued interest. (Original Source)

On the ratings front, Cowen analyst Phil Nadeau reiterated a Hold rating on PDLI, in a report issued on November 3. According to, Nadeau has a yearly average return of 1.7%, a 45% success rate, and is ranked #1494 out of 4240 analysts.

PDL BioPharma, Inc. produces and markets biopharmaceutical products. It focuses on intellectual property asset management, investing in new royalty bearing assets and maximizing the value of its patent portfolio and related assets. The company manages a portfolio of patents and royalty assets, consisting of its Queen et al. patents, license agreements with various biotechnology and pharmaceutical companies, and royalty and other assets acquired.