PDL BioPharma (PDLI), a small-cap biopharmaceutical company, derives most of its revenue in royalties from drug giants like Roche Holdings (RHHBY) and Novartis (NVS) on global net sales of products such as Avastin, Herceptin and Tysabrit’s.
That royalty stream helps fund the generous dividend of 6.7%, but it does come with risks. After all, when you manage a portfolio of patents … well, patents eventually expire, so the pipeline constantly needs to be replenished.
Fortunately, the current portfolio has been very good to investors this year. PDLI is up 35% for the year-to-date on a price basis. Throw in the dividend, and the total return comes to 38%.
Shares also look to offer an uncommonly good value, with PDLI sporting a forward price-to-earnings multiple (P/E) of just more than 4, despite having a strong long-term growth forecast of 14%.
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