PDLI

Hi All,

I would like to thank Saul, Bear, Denny, Tinker and many others for making this Board an excellent place to learn and invest. I am new on the Board but would like to get your opinion on this small company in the medical field, which I have owned stocks for several years.

Revenue 2014 2015 2016 2017
million 581 590 244 320
$/sh 1.88 2.03 .6 .67

Equity/Mil 113 460 696 751

Current: Stock price: $2.88
Book value: $5.54/shr
Cash at hand: $516 million
P/E: 4.01
income: $0.71

*The company is changing from royalty income to owning individual medical companies for product sales.
*Currently,it has two companies: Noden Pharma & Lensar. Recently they made an offer to buy Neos for $10.25/shr and was rejected. They are still actively looking to buy medical product company.
*They also bought back several million shares of their stock during the past 2 years, and plan to buy another $30 million.
The stock has been fluctuated from $2-4 in the past 2 years.

I do not understand why this medical company, with good positive earnings, is selling at 4 times of it’s growing earnings and about 50% of it’s book value.

Sorry, this is not a Saul’s stock, but it has the potential to double in a year. Thank you for your opinion.

Company web site. http://www.pdl.com

Good Lord! PDL, formerly PDLI was a Rule Breaker big in the early 2000s. They had a great looking drug for Crohns and related illnesses of the digestary tract.

There was always something wrong with it however. The drug data was very good. Competitive positioning excellent, but the share price never responded.

It did not feel right to me, so I sold it with a nice profit (at the time I held a three biotechs) and sure enough the drug blew up, out of the blue, in clinic.

There is almost always a problem when a stock seems too cheap given the facts and narratives. And I did, in real time bring this issue up. Cannot catch every disaster, but you can sense many of them.

Heck, I literally, on NPI posted about shorting AMD yesterday. Should have heeded my own advice - sigh.

But, yes, I know this company. I am not going to look at it further. If it is not something big enough and well known enough that we can get some real information I am not going to touch it.

Tinker

3 Likes

Thanks, Tinker.

Heck, I literally, on NPI posted about shorting AMD yesterday. Should have heeded my own advice - sigh.

Looks to me like AMD is down quite a bit less today than a lot of other companies, particularly NVDA and ANET…so maybe the opportunity hasn’t fully passed by.

Vol,

AMDis far more vulnerable to crypto currency. So perhaps the share price was previously hit in anticipation or this is not really a crypto concern.

But I don’t follow AMD , but surprising if that is the case.

Tinker

This Foolish article from June 2016 explains it pretty well and it nailed the dividend situation exactly! June 2016 was the last time they paid a dividend.

PDL BioPharma, Inc. Is Off 10% in 2016, and This Is a Big Reason Why

https://www.fool.com/investing/2016/06/20/pdl-biopharma-inc-…

Right now PDLI looks like Ben Graham cigar butt, an investing style that has gone out of style. 2017 might have been the bottom

http://softwaretimes.com/pics/pdli-03-19-2018.gif

There are many funds and institutions that are not allowed to buy penny stocks (under $4 or $5) making a recovery hard.

Denny Schlesinger

3 Likes

Danny, Thanks for the info.

Yahoo shows PDLI is 92.3% owned by institutions: Blackrock-14.7M; Vanguard-13M; Dimesional-10.4M; Renaissance-10M. The company is changing from only royalty income to owning companies with product sales.

What I don’t understand of this company:

Positive income yr after yr; Income is growing with 2 growing product companies;
$516M cash; book value-$5.54. Stock is still priced at 4X earning, 1/2 of book?

With $516M cash at hand, they have been actively looking to buy companies with product lines. The two that they own, Nodern Pharma & Lensar, are increasing sales with increasing sales people & marketing. I added more shares a couple of weeks ago at $2.60.

What I don’t understand of this company:

You are looking at the wrong things. Rather at the right things but at the wrong time. When they were living off patents they were paying a high dividend. Their dividend investors have sold out and tanked the stock. Since it is risky to buy falling knives new investors have yet to sign on. They are in transition. That’s why I pointed out that 2017 might have been the bottom.

The institutional investors most likely bought the stock in the previous cycle and never sold. It was a good company whose business model blew up. You might have found a diamond in the rough, this might be a good time to start nibbling.

One thing that investors must realize is that here are two forces tugging on stocks, the underlying intrinsic value of the company which is the force that creates the reversion to the mean, and investor sentiment which sometimes pulls in the other direction causing bubbles and busts.

Denny Schlesinger

2 Likes

I think that there is also a bit of the unknown that is holding it back. Where are they going to employ their cash? They tried to buy NEOS last year and that did not work out. What is their next target and will it provide the growth worthy of the outlay?

I think that until they make another acquisition or start paying a dividend, it is apt to stay range bound.

Not saying that it is not a good buy. I think that it is. It just needs a good catalyst to get some movement. Likely in the form of an acquisition.

1 Like

Could they buy products rather than whole companies?