PDL announced on 6 July 2016 the closing of its equity investment in Noden Pharma, which concurrently acquired the Tekturna pharmaceutical brand from Novartis. Tekturna and Tekturna HCT are blood pressure medications with a combined revenue of $154m in 2015. Noden paid $110m for the brand on closing with an additional $89m due on the first year anniversary. In comparison, PDL made an equity investment of $75m and will provide $32m in a year for an 88% equity stake in Noden. According to management, the total financing needed by Noden is up to $334m and PDL is committed to providing this funding if other sources are unavailable.
PDL announced that Noden will require $334m financing in total. This includes the upfront fee of $110m, anniversary fees of $89m, $95m in potential milestones, and $40m in working capital. PDL has provided Noden with a $75m initial equity investment and a 60-day bridge loan up to $75m to cover the remaining portion of the upfront payment and the working capital until other financing can be sourced.
The company provided additional detail on the Noden commercial organization. Tekturna will be sold with a salesforce of 70 contract representatives. This force exceeds our initial estimates (of 10-20 internal reps), but the lack of overheads may translate to improved scalability and savings over the long run.
PDL announced that the formation of Noden was part of a strategy to capitalize on the large number of divestitures that are expected from big pharma and specialty pharma companies. PDL intends to opportunistically acquire additional assets in the near future.
We have increased our valuation of PDL to $1,119m or $6.78 per basic share (from $1,036m or $6.28) to include value from Noden. We currently value Noden at $259m, which is greater than our previous illustrative valuation of $245m, due to the scalability of the larger-than-expected contract salesforce. This corresponds to $227m for PDL’s equity share (88%), or $158m adjusted for the anniversary payment. This value is partially offset by the $75m purchase costs to PDL. We expect to update our valuation following the SEC filing of Tekturna commercial details and following initial sales reports for the drug following the transition.