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Executives

Jennifer Williams – Investor Relations

John McLaughlin – President and Chief Executive Officer

Cris Larson – Vice President and Chief Financial Officer

Analysts

Kimberly Lee – Global Hunter Securities LLC

Jason Kantor – RBC Capital Markets Corp.

Jason Zhang – BMO Capital Markets

Joel D. Sendek – Lazard Capital Markets

Charles Duncan – JMP Securities

Phil Nadeau – Cowen & Company, LLC

PDL BioPharma, Inc. (PDLI) Q4 2010 Earnings Call February 28, 2011 4:30 PM ET

Operator

Good afternoon and welcome to the PDL BioPharma’s Fourth Quarter 2010 Earnings Conference Call. Today’s call is being recorded. For opening remarks and introductions, I would now like to turn the call over to Jennifer Williams.

Jennifer Williams

Hello and thank you all for joining us today. Before we begin, let me remind you that the information we will cover today contains forward-looking statements regarding our financial performance and other matters and our actual results may differ materially from those expressed or implied in the forward-looking statements.

Factors that may cause differences between current expectations and actual results are described in our filings with the Securities and Exchange Commission, copies of which may be obtained in the Investor section on our web site at pdl.com.

The forward-looking statements made during this conference call should be considered accurate only as of the date of this call and although we may elect to update forward-looking statements from time to time in the future, we specifically disclaim any duty or obligation to do so, even as new information becomes available or other events occur in the future.

I’ll now turn the call over to John McLaughlin, President and CEO of PDL BioPharma.

John McLaughlin

Thanks, Jennifer, and good afternoon, everyone. Also with me today is Cris Larson, our Vice President and Chief Financial Officer. I’ll begin with a business update and then turn the call over to Cris to discuss our financial results.

The fourth quarter of 2010 and early 2011 have been very productive. We increased our royalty revenues quarter-over-quarter, as well as year-over-year. And over the course of the last month we’ve favorably resolved a number of challenges to the Queen et al patents in the United States and in Europe. The resolution of these legal matters will allow us to turn our concentrated efforts in 2011 to purchasing new royalty assets as part of our long-term strategy.

In addition today we announced we have moved from a special dividend policy to a regular quarterly dividend policy beginning in 2011. We believe at establishing a regular dividend policy will provide more consistent returns to our stockholders, while at the same time allowing us to manage our current and future cash flow.

To briefly review recent legal matters, earlier this month we reached a settlement with MedImmune resolving all disputes between the companies. This includes all issues involving at MedImmune’s product Synagis as well as our Queen et al patents.

Under the agreement we paid MedImmune $65 million on February 15, 2011 and we’ll pay them an additional $27.5 million by February 2012. No further payments will be owed by either party.

Importantly MedImmune also agreed to seize all support of any party involved in the European Patent Office or EPO opposition to our European patent. In related transaction, PDL through the wholly owned subsidiary of BTI Acquisitions Crop acquired BioTransplant, a bankrupt company. BioTransplant was one of the opponents in the appeal opposition before the EPO.

We subsequently instructed BioTransplant’s representative before the EPO to formally withdraw its opposition appeal. We believe that BioTransplant activities before the EPO were financially supported by MedImmune before our acquisition of the bankrupt company. We also announced the settlement agreement with UCB Pharma, which resolves all legal disputes between the companies.

We received $10 million from UCB in return for our agreement not to sue UCB for any royalties related to their product Cimzia. In addition UCB agreed to terminate pending patent interference proceedings before the U.S. Patent and Trademark Office ending all challenges to the Queen et al patents before the U.S. Patent Office. Equally important, UCB withdrew its opposition appeal to our European patents in EPO.

This morning we announced that we entered into a settlement agreement with Novartis that resolves all disputes between the companies. We agreed to dismiss our claims against Novartis in our Nevada lawsuit and Novartis agreed to withdraw its opposition appeal to our European patents in EPO.

Under the Term C agreement, we will pay Novartis an amount based on net sales of Lucentis during calendar year 2011 and beyond. We have not disclosed this amount, but we can tell you that it is less than the royalty amount Genentech pays us on the same sales of Lucentis and it is not currently material.

The settlement does not affect PDL’s claims against Genentech and Roche in the Nevada State court action. Finally this morning, we announced that the EPO has cancelled its appeal hearing, which was scheduled to begin today regarding our European Patent. Because all appellants have withdrawn from the appeals proceeding and the appeals proceeding was terminated the 2000 decision, upholding the claims of our European patent will become the final decision of the EPO.

In 2010, 35% of our revenues resulted from the sales of products that were made in Europe and sold outside of the United States and based on recent Roche announcements we anticipate that this percentage of revenues will increase in the future. Moving forward with the revolution of these legal challenges we have eliminated a number of uncertainties in our future cash flows and we are pleased to be able to focus on the creation of shareholder value. We continue to have discussions with a number of parties regarding new royalty assets and while we cannot disclose the specifics of any agreement until it’s final we can tell you that our ideal royalty assets are approved products.

We are looking primarily at biological agents with strong patent protection; we look forward to reporting our results in the future. At this time, I’d like to turn the call over to Cris Larson, our CFO to discuss the fourth quarter and full-year financial results.

Cris Larson

Thank you John, Total revenues for 2010 was $345 million as compared with $318 million in 2009. Excluding 2009 royalty revenues from sales of Synagis, comparable royalty revenues for 2010 increased 30% over 2009. Total revenue in the fourth quarter of 2010 was $76.1 million compared with $58.3 million through the same period of 2009, an increase of 31% year-over-year.

The growth in revenues for both the year and the quarter were primarily driven by increased sales of our licensed, via license fees of Avastin, Herceptin, Lucentis and Tysabri. Also contributing to the growth were increases in the amount of Herceptin and Avastin that are both made and sold outside of the United States.

Under our license agreement with Genentech we received a flat royalty rate of 3% for sales of product that are both manufactured and sold outside of the United States as compared to the tier royalty rates that we received from Genentech for product that is either made or sold in the United States. Following to 2010, all royalties for Avastin sales outside of the United States or for product that was manufactured in the United States.

Turning to expenses, total operating expenses for 2010 include the MedImmune settlement of $92.5 million, which we recognized in 2010 although the cash payments occur in 2011 and 2012 for total general and administrative expenses of $41.4 million. Total general and administrative expenses in 2009 were $21.1 million.

General and administrative expenses for 2010 increased $29.3 million in legal fees of which a significant portion was related to the litigation with MedImmune, the interference proceedings in the U.S. Patent and Trademark Office as well as the opposition appeal proceedings in the EPO.

In the fourth quarter of 2010 general and administrative expenses were $12.1 million compared with $5.5 million for the same period of 2009. During the fourth quarter we continue to execute on our corporate objective to restructure our capital and increase our financial flexibility.

In November we exchanged $92 million of the $228 million outstanding of our 2012 convertible notes for new convertible notes due in February 2015, pushing this debt out an additional three years. At the same time we placed an additional $88 million of the new 2015 convertible notes. As of December 31, 2010 we had a $133.5 million of our 2012 convertible notes and a $180 million of our 2015 convertible notes.

For the full year ended December 31, 2010 we also paid down $96 million of our $300 million non-recourse notes issued in 2009 and we fully retired our highly dilutive convertible notes due in 2023.

At the end of 2009 we had $200 million outstanding in the convertible notes due in 2023. In 2010 we repurchased $84 million of this debt, retake $4 million and converted a $112 million into shares of our common stock. Any gains and losses associated with our convertible note transactions are included in non-operating expense.

Net income in 2010 was $91.9 million or $0.54 per diluted share compared with net income of $189.7 million or $1.07 per diluted share in 2009. Net loss for the fourth quarter of 2010 was $24.5 million or $0.18 per diluted share compared with net income of $28.6 million or $0.17 per diluted share in the same period of 2009.

Adjusting net income for the legal settlement with MedImmune and the affects of the convertible note transaction in 2010 and 2009, non-GAAP net income in 2010 was $173.5 million or $0.97 per diluted share compared with non-GAAP net income of $195.8 million or $1.06 per diluted share in 2009.

Non-GAAP net income for the fourth quarter was $36.1 million or $0.20 per diluted share compared with non-GAAP net income of $30.2 million or $0.17 per diluted share in the same period of 2009. As John mentioned earlier, in response request from my stockholders and with additional clarity regarding the cash flows, we announces today the initiation of a regular quarterly dividend policy.

In 2011, we will pay a $0.l5 quarterly dividend on March 15, June 15, September 15 and December 15 to shareholders of record on March 8, June 8, September 8 and December 8 respectively.

Moving into 2012 and beyond, at the beginning of each fiscal year, our Board of Directors will review the company’s total annual dividend payment for the prior year and determine whether to maintain or change the quarterly dividend payment for the upcoming year.

The Board of Directors will consider our financial business condition, our projected cash flow, our liquidity needs, the economic outlook as well as the health and stability of the credit markets in this process.

Net cash provided by operating activities in 2010 with $184 million compared with $187 million in 2009. As of December 31, 2010, PDL had cash, cash equivalents and investments of $248 million as compared with $303 million at December 31, 2009.

Following our policy of providing quarterly revenue guidance in the third month of the quarter, we will be providing first quarter 2011 revenue guidance in early March.

I will now turn the call back to John.

John McLaughlin

Thanks, Cris. Operator, at this time we are ready to open the call for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question is from the line of Kim Lee with Global Hunter Securities. Please proceed.

Kimberly Lee – Global Hunter Securities LLC

Good afternoon. Quick question on what do you think of implications of today’s Novartis European settlement on the Roche/Genentech dispute?

John McLaughlin

Hi, Kim, this is John. So we think it strengthens our hand significantly in the sense that the 2007 decision to hold the patents in the claims of patents it will become a final decision of the patent office. So we think it strengthens our hands not only in terms of Nevada litigation, but also in terms of the strengths of patents in Europe overall.

Kimberly Lee – Global Hunter Securities LLC

Great. And just upside, downside here, what you see as the upside if the Genentech, if your patents are upheld for Europe and also what's the worst case if it’s not?

John McLaughlin

So to be clear, the patents have been upheld that the question in the Nevada litigation is whether or not by setting a fact challenging whether or not, they infringe the patents, they have reached 2003 settlement agreement. That's really a contractual dispute, not a patent dispute. And the damages there, there is a number of remedies, we have disclosed it. One of remedies is an increase in the royalty rates retroactively on products sold and we calculate that's about $1 billion, we put that in a public domain. That same work you raised increases prospectively that royalty rate is 3.75%.

We have not disclosed with that number, because there is a number of assumptions doing that calculation, but I think it is fair to say that the products have certainly been growing larger in terms of their revenues perspective basis then they were in earlier years. So we have decided to roll the number on a go forward basis. So some of those two numbers it’s consequential, absolutely there is risk to litigation, but there is a fair amount of upside there.

Kimberly Lee – Global Hunter Securities LLC

Fine, thank you.

Operator

Your next question is from the line of Jason Kantor with RBC Capital Markets. Please proceed.

Jason Kantor – RBC Capital Markets Corp.

Well, it sounds like you guys haven’t been too busy there. I think you got a lot done actually. I, my question is around the Novartis settlement. It’s a little bit confusing to me and you used to specifically with some help, maybe you can clarify a little bit. You say that it is not material now but you’re paying some things into the future. Is there a scenario under which it does get material in the future? How would you define material? And will these amounts be disclosed or calculated both in your future SEC filings?

John McLaughlin

So you got a couple of questions there Jason, let me try and work my way through them and let me apologize the outset by saying there isn’t a great deal more can say about the Novartis settlement. It’s subject to very strict guidance in terms of confidentiality. Needless to say if it was material at the current time then in fact we would have to actually disclose more information about it, it’s not currently. We’re not going to predict in the future whether or not it’s going to become material or not. I mean we generally use all standard of about 10% or thereabouts.

But again, I don’t want to get into predicting whether it’s not going to be mature enough because that’s dependent upon where the sales go and our bunch of other things that it could happen with respect to Lucentis. One question that has risen which I’ll address is to be clear, they’re paying us a sum of money and the sum of money we would pay back to them is less than the sum that they pay to us. Some people have confused by that and worried about whether or not it could be a negative. And the answer is, in no circumstance could it be a negative number. Obviously if at a point in time it were to become material we would so disclose the specific numbers and identify it as such.

Jason Kantor – RBC Capital Markets Corp.

So if we were to trying to model it the thing about this is essentially net reduction in your royalty from Lucentis?

John McLaughlin

That’s not a bad way to think about it.

Jason Kantor – RBC Capital Markets Corp.

Okay. And then in terms of this, the acquisition of BioTransplant, this shows up in your P&L in any particular way or this is, how do you see this?

John McLaughlin

It does not. It’s a company which has been in bankruptcy for five plus years. They have no ongoing operations. There are no ongoing liabilities that we assumed with it. We did pay a non material sum to acquire. As I say speaking into these definite bankruptcy for a while, the importance of it was, it was one of the parties being financially supported we believe by MedImmune that was challenging in the acquisition of European Patents.

Jason Kantor – RBC Capital Markets Corp.

And one last question, what plans do you have to continue to restructure your debt particularly the 2012 and I will get back in line.

John McLaughlin

It’s a great question and obviously Cris Larson, who is here has been very active in 2009 and 2010 in terms of looking in alternatives to restructure the capital, our capital structure. We will continue to do so, we haven’t given any guidance just specifically how we are going to do it but its something she is spending a significant amount of time looking at ways to optimize for the benefit of our shareholders.

Jason Kantor – RBC Capital Markets Corp.

Thank you.

John McLaughlin

Thank you.

Operator

Your next question is from the line of Jason Zhang with BMO.

Jason Zhang – BMO Capital Markets

Hey, thanks for taking my question. John if you could remind us, maybe go back to the MedImmune dispute and then talk maybe compare the contrasts as to your dispute with Roche, is there similarity between the two because another day you will settle with MedImmune, you end up actually paying some company that has been paying you for years. Anything that we have to worry about this dispute between you and also mentioned that the dispute is more about a contract, have they also used the infringement or patent as a reason for this legal action. I mean Roche, have they also used that?

John McLaughlin

Sure, so it’s a great question so let me, it’s a little complex but let me try and take a stab out of here. So, to be clear in the case of MedImmune there was a single claim at issue claim 28 which at least on some re-judgment was constricted in way that was unfavorable to us and we disagreed with, that claim has, does not cover or relate to any of the Genentech products that are under license.

In the MedImmune litigation, just in the patent claims, there were issues in terms of whether or not PDL had honored it’s obligation to treat MedImmune as the more favorite licensee. That’s a clause that was in the MedImmune agreement. It does not exist in the Genentech\Roche agreements.

So in the Genentech dispute so far, the issue is whether or not, they breached the settlement agreement. They have send us a fax questioning whether or not they infringe in Europe and we have responded that we believe that you can’t raise that question in the context of an SPC without actually challenging the underlying lenity of the patents.

And that’s the advice we got from all our foreign councils but the only real, the only legal dispute in terms of a court action between the parties right now is PDL suite in the State court of Nevada for breach of the 2003 settlement agreement which is really a contractual dispute. And at this point it doesn’t have any patent claims and I don’t know that I can envision the means where patent claims would be brought to bear in that. If at some point they took some other actions that could happen, I don’t know that I can speculate as to what they may or may not be doing at this point.

One could wonder whether or not in fact what they were waiting to see was whether or not our patents did survive the opposition appeal in Europe and now that question has been answered. In a way that would matter is matter it’s favorable for us in the best way they were waiting for unfavorable for them.

Jason Zhang – BMO Capital Markets

So basically if I try to understand from just a about an analyst point of view, is that you had a or PDL had a global settlement with Genentech in 2003 before adapting asking was approved and that result lower overall way for Genentech. And this dispute started because of the Roche, believe that global settlement did not include Roche and how was the incentive for this dispute.

I guess I have to go back and look at the press release you can just be remind us how this hosting started and help us understand how it is different from the dispute between you and MedImmune or maybe even and between you and Novartis?

John McLaughlin

Sure Jason. So in August, early August of 2010 without any prior notice we received a fax which basically said we Genentech are doing this are raising these questions at the help of Roche and Novartis, and we're questioning whether or not in fact the products made outside the United States infringe your European Patents. And we wrote back and said these matters questions of infringement of result in the 2003 settlement agreement, you are bound by the 2003 settlement agreement.

In fact because the SPC describes the product specifically, it calls it identify the product actually by its generic name, that you can’t challenge an SPC in terms of infringement, the only challenges in terms validity and that is the breach of the 2003 settlement agreement. And as I discussed in response to an earlier question, there are penalties for violating that. That is the trust of the State Court action in Nevada. It’s a breach of that 2003 settlement agreement and it's still in the early stages.

Jason Zhang – BMO Capital Markets

Okay. And then again try to understand the today’s settlement with Novartis and again it sounds like you basically wanted to conclude this chapter and you like to pay Novartis or even a future royalty so that the patent claim will be uphold and final, is that I guess the whole reasons for. It sounds like you are giving up future royalty that should pay to you and then by in repayment you got something that is uncertain and settle today?

John McLaughlin

So I think that is correct Jason and what we did was, we basically came to settlements with UCB, MedImmune and Novartis as well as they bought BioTransplant to reduce that uncertainty and assure a constant revenue stream on behalf of our shareholders.

Jason Zhang – BMO Capital Markets

Okay. I have one more and I will get back to the queue, because when first MedImmune suite come up and that sounds like just one off and nothing to worry and then we have Genentech, then we have Novartis, I'm just wondering anybody you still have Biogen Idec there, they are all paying substantial royalty to you. Is anywhere for us to be sure using your low judgment that this is it, because what else can we expect and I guess we have seen so many surprises during last year?

John McLaughlin

Yeah Jason I mean to use your word, they were surprise. So it’s a little hard to predict things that are surprises. Then I think what we can tell you is, there was concern about interferences before the Patent Office in United States, they are closed. There was concern about European Patent which represents 35% of our revenues potentially more in the future given this appeals opposition, its closed.

There were challenges with MedImmune. Are we happy with the terms it was resolved on? No, we were much happy, more favorable terms for the benefit of our shareholders but its now resolved. And in answer to your earlier questions, the claim that was put at issue there does not affect any of the Genentech/Roche products or Novartis products for that matter as their other ex-U.S. licenses.

So we think we’re closed off a bunch of those, we have had no communications from other licenses that would raise concerns, you identified Biogen Idec for example, we’ve not had a communication from them that raises a concern.

Jason Zhang – BMO Capital Markets

Okay thanks.

John McLaughlin

Sure.

Operator

Your next question is from the line of Joel Sendek with Lazard Capital Markets. Please proceed.

Joel D. Sendek – Lazard Capital Markets

Hi, thanks a lot. Let’s see. Two, I guess clarification question. On Novartis, the first is you mentioned your threshold for materiality is approximately 10%. So with that, can we interpret that to mean 10% of whatever the Lucentis is royalty would be materially or...

John McLaughlin

10% of our annual revenue.

Joel D. Sendek – Lazard Capital Markets

10% okay, all right.. Great, that’s helpful. And then, just to be totally clear on Lucentis. Since none of that is made and sold outside of the U.S., should we model it to still be in the form of a tier royalty structure for the sales of Lucentis?

John McLaughlin

It’s a good question Joe. So in their most recent, in Roche’s reports to the financial community about its 2010 results if you tick through their slide deck, they told us two important facts about the manufacture of Lucentis and the first fact is that their plant in Singapore to make Lucentis for sale in United States has been registered and will begin commercial productions for U.S. supply. It was registered in 2010, they expect to being supplying in 2011.

The other fact that they put forward was that they hope to have the plant registered for purposes of commercial supply in the European Union in 2011. That’s consistent with other messages they’ve given where they’ve suggested that 2011-2012 would be a transition year where they would no longer supply from South San Francisco and infact that Lucentis would be made ex-U.S.

And in net consequence, the portions that were made ex-U.S. and sold ex-U.S. would not be subject to tearing. The portions that were made ex-U.S. but sold U.S. would be subject to tearing.

Joel D. Sendek – Lazard Capital Markets

Okay, so while historically now that all of it is subject to tearing in the future, we actually could find that the gross amount that you get on Lucentis might actually increase relative to...

John McLaughlin

By virtue of the change in the sites of manufacturing yes.

Joel D. Sendek – Lazard Capital Markets

Yeah, okay, all right. let me try to go one step further, if that were to happen net of the amount that you have pay, would you be around even or would you be little bit behind you know, can you give us.

John McLaughlin

Not sure I understand your question but let me take a step at it and if I’m not doing a good job at answering it, jump back in and I’ll take a shot at it. So any number that we pay back to Novartis is always going to smaller than number they pay us.

Joel D. Sendek – Lazard Capital Markets

Okay. I'm just wondering if, all right I'm just trying to maybe trick you into give me the answer. I think that's good enough. I'll stop there. Thanks a lot.

John McLaughlin

I think I also have to be involved at that actually, sorry.

Joel D. Sendek – Lazard Capital Markets

That’s okay.

Operator

The next question is from the line of Charles Duncan with JMP Securities. Please proceed.

Charles Duncan – JMP Securities

Hi guys, thanks for taking my questions and congratulations on getting some of these things settled. My first question was for Cris perhaps regarding the legal expenses, we had a substantial amount of legal expenses projected in our model. Could you give us some sense as to the amount of legal expense that you can avoid going forward relative to some of the other things going on in, is it 50%, is it 75, is it 25%. Just give us some sense of that going forward?

Cris Larson

Sure, so in 2010 our total legal expenses were $29.3 million of which almost 90% of that was due to these legal issues that we’ve now resolved.

Charles Duncan – JMP Securities

Okay, that's helpful and then with regard to some of your call it (Inaudible) activities. You said sometime in the future you want to talk about them do you have a work to go or work to date is that mid-year, this year, is at the end of the year when would you like to get something on the books?

John McLaughlin

So Charles we’d like to get something on the books yesterday to be clear, but at this point it got to be a good deal. I mean we have alternative means for enhancing shareholder value in terms of increasing dividends, buying back shares. So we have other alternatives in front us, we don’t want to do a bad deal. There are some very attractive deals. We think we are getting kind of close on a couple, but as you will know from all your vast experience not deal is done till we end the deal and we’re not there yet.

Charles Duncan – JMP Securities

I got you but you’ve both so been busy with some of these other issues and I guess partial response to one of the previous answers what you know that you don’t know, getting a deal done, would that be I’ll call it something that you do out of strength and confidence and these issues being fully put to bed.

John McLaughlin

Yes it is and I think also another indicia that is the fact that we moved from the special dividend policy to a regular quarterly dividend policy.

Charles Duncan – JMP Securities

Okay, I appreciate the added colors. Sorry for the background noise.

John McLaughlin

No, thank you.

Operator

Your next question is from the line of Phil Nadeau with Cowen & Company. Please proceed.

Phil Nadeau – Cowen & Company, LLC

Yes and thanks for taking my questions. First on the Nevada litigation against Roche, I know you said it was in early stages, but are there any milestones that we can look forward to there over the next several quarters, what developments could come out of that firstly?

John McLaughlin

Sure. So we don't have a formal schedule from the court, I'm happy to speculate to what our likely schedule would look like, but just pay attention that we are speculate in the answers while it is asked. So there were some preliminary emotions that have been filed by Roche basically suggesting look we’re a foreign company, you don't have really jurisdiction over us and had to interpret certain causes in the contract over those around some re-judgment.

At some point, a judge will hear those, e-mail at the collecting of deposition and other information discovery. That’s probably not going to happens till the end of this quarter or early the second quarter. If it goes forward from there, it’s probably not likely to go trial until some point towards the end of the year or early next year. It is a State Court action in Nevada and there is not much more we can tell you than that at this point.

Phil Nadeau – Cowen & Company, LLC

Okay and this court case is strictly an offensive action by PDL, so if you win, perhaps you get their royalties or you get their economics. If you lose, is there a downside from this court case to the royalties that you were owed Roche?

John McLaughlin

No.

Phil Nadeau – Cowen & Company, LLC

Okay, and…

John McLaughlin

It’s simply a question of whether or not by virtue of them sending us back fax, it breached the 2003 settlement agreement.

Phil Nadeau – Cowen & Company, LLC

Okay now that the European Patents have been upheld and I guess will no longer be challenged, how is it possible that Roche could not pay you royalty. How could they get an SPC invalidated? Is it truly reliant upon the underlying patents being invalidated are there other subtleties of European Patent law that they can exploit.

John McLaughlin

Yeah, I don’t want to speculate to what Roche may or may not be doing I don’t know and obviously they are going to share that with us at this point, I mean what I can tell you is the FPC is derived from the European Patent, there is no means of challenge in the European Patents and the Patent Office anymore. It has been through a rigorous process at this point.

Our interpretation of 2003 settlement agreement is it bars them from challenging that the European Patents and it bars Genentech from assisting anybody in challenging that European Patent. So I don’t know that I can give you a good answer to the questions because it involves being in the head of Roche and that's not something we'd probably do.

Phil Nadeau – Cowen & Company, LLC

That's great. And then one last question, it seems like you’ve resolved most of the disputes beside from what’s going to Roche, are there any other disputes out there that you are still working on?

John McLaughlin

Yes, there is a very few minor disputes that are not material in terms of where we are, that I don’t even think we report them. There is nothing of the magnitude of what we're talking about here.

Phil Nadeau – Cowen & Company, LLC

Okay, so nothing that could really affect the royalties owed to you from your major payers?

John McLaughlin

No, no. The biggest dispute we have right now, which I would agree with your characterization is an offense to dispute is Nevada.

Phil Nadeau – Cowen & Company, LLC

Okay, great. Thanks for taking my questions.

John McLaughlin

Thank you.

Operator

And with no further questions in queue, I’d like to turn the call back to Mr. John McLaughlin for closing remarks.

John McLaughlin

Thanks to all for joining us on this call this afternoon. We look forward to seeing many of you at upcoming conferences. We will be presenting at the RBC Capital Markets Healthcare Conference on March 2, at 9:00 in New York City and at the Cowen and Company Healthcare Conference on March 9th at 11:00 am in Boston. Thanks again for participating and have a good day.

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