PDL Biopharma (PDLI) 8-K/A Results of Operations and Financial Condition

Exhibit 99.3

PDL BIOPHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended March 31,
	2007			2006
REVENUES:
Product sales, net		49,127			37,547
Royalties		48,595			43,970
License, collaboration and other		10,261			9,695
Total revenues		107,983			91,212
COSTS AND EXPENSES:
Cost of product sales		24,998			22,959
Research and development		55,625			58,586
Selling, general and administrative		37,941			35,344
Other acquisition-related charges		1,436			1,118
Total costs and expenses		120,000			118,007
Operating loss		(12,017	)		(26,795	)
Interest and other income, net		5,032			3,330
Interest expense		(3,557	)		(2,650	)
Loss before income taxes		(10,542	)		(26,115	)
Income tax expense		64			115
Net loss	$	(10,606	)	$	(26,230	)
NET LOSS PER SHARE:
Basic and diluted	$	(0.09	)	$	(0.23	)
Weighted average shares — basic and diluted		115,104			112,472

In addition to the consolidated financial statements presented in accordance with GAAP, PDL uses non-GAAP measures of operating performance, which are adjusted from results based on GAAP to exclude amortization of intangible assets; depreciation of property and equipment; stock-based compensation expense; interest income and other, net; interest expense; income taxes and certain other miscellaneous items. PDL believes that the non-GAAP results provide added insight into its performance by focusing on results generated by its ongoing operations. PDL uses the non-GAAP results when assessing the performance of its ongoing operations, in making resource allocation decisions and for planning and forecasting. Additionally, PDL considers these non-GAAP results in awarding bonus and other incentive compensation to its employees, including management. The non-GAAP financial measures should be considered as a supplement to, not as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures.

PDL BIOPHARMA, INC.

NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS⁽¹⁾

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended March 31,
	2007		2006
REVENUES:
Product sales, net	$	49,127	$	37,547
Royalties		48,595		43,970
License, collaboration and other		10,261		9,695
Total revenues		107,983		91,212
COSTS AND EXPENSES:
Cost of product sales		16,626		12,394
Research and development		47,432		47,609
Selling, general and administrative		33,135		27,961
Non-GAAP costs and expenses		97,193		87,964
Non-GAAP net income	$	10,790	$	3,248
NON-GAAP NET INCOME PER SHARE:
Basic	$	0.09	$	0.03
Weighted average shares — basic		115,104		112,472
Diluted	$	0.09	$	0.03
Weighted average shares — diluted(2)		117,765		118,287

(1) These non-GAAP condensed consolidated statements of operations exclude amortization of intangible assets; depreciation of property and equipment; stock-based compensation expense; interest income and other, net; interest expense; income taxes and certain other miscellaneous items that were not classified in the foregoing categories and are identified below.

During the three months ended March 31, 2007, the miscellaneous excluded items consisted of other acquisition-related charges of $1.4 million related to the operations of ESP Pharma Holding Company, Inc. prior to the Company’s acquisition of ESP Pharma on March 23, 2005, primarily product returns, as well as returns of Retavasefor sales made prior to the Company’s acquisition of the rights to the product from Centocor, Inc. on the same date. During the three months ended March 31, 2006, the miscellaneous excluded items consisted of (a) other acquisition-related charges of $1.1 million and (b) a $4.1 million charge for payments to Wyeth in consideration of Wyeth’s consent to the Company’s transfer of the Company’s rights to the off-patent branded products.

(2) These weighted average shares exclude the impact of 12.4 million shares and 10.6 million shares of common stock underlying the convertible notes the Company issued in July 2003 and February 2005, respectively.

PDL BIOPHARMA, INC.

RECONCILIATION OF NON-GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS TO GAAP

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended March 31, 2007
			Adjustments
	Non-GAAP Results		Amortization of Intangible Assets			Depreciation of Property and Equipment			Stock-Based Compensation Expenses			Other Excluded Items			GAAP Results As Reported
REVENUES:
Product sales, net	$	49,127	$	—		$	—		$	—		$	—		$	49,127
Royalties		48,595		—			—			—			—			48,595
License, collaboration and other		10,261		—			—			—			—			10,261
Total revenues		107,983		—			—			—			—			107,983
COSTS AND EXPENSES:
Cost of product sales		16,626		8,372			—			—			—			24,998
Research and development		47,432		412			4,918			2,863			—			55,625
Selling, general and administrative		33,135		—			2,460			2,346			—			37,941
Other acquisition-related charges		—		—			—			—			1,436			1,436
Total costs and expenses		97,193		8,784			7,378			5,209			1,436			120,000
Operating income (loss)		10,790		(8,784	)		(7,378	)		(5,209	)		(1,436	)		(12,017	)
Interest and other income, net		—		—			—			—			5,032			5,032
Interest expense		—		—			—			—			(3,557	)		(3,557	)
Income (loss) before income taxes		10,790		(8,784	)		(7,378	)		(5,209	)		39			(10,542	)
Income tax expense		—		—			—			—			64			64
Net income (loss)	$	10,790	$	(8,784	)	$	(7,378	)	$	(5,209	)	$	(25	)	$	(10,606	)
NET INCOME (LOSS) PER SHARE:
Basic	$	0.09													$	(0.09	)
Weighted average shares — basic		115,104														115,104
Diluted	$	0.09													$	(0.09	)
Weighted average shares — diluted		117,765														115,104
	Three Months Ended March 31, 2006
			Adjustments
	Non-GAAP Results		Amortization of Intangible Assets			Depreciation of Property and Equipment			Stock-Based Compensation Expenses			Other Excluded Items			GAAP Results As Reported
REVENUES:
Product sales, net	$	37,547	$	—		$	—		$	—		$	—		$	37,547
Royalties		43,970		—			—			—			—			43,970
License, collaboration and other		9,695		—			—			—			—			9,695
Total revenues		91,212		—			—			—			—			91,212
COSTS AND EXPENSES:
Cost of product sales		12,394		10,565			—			—			—			22,959
Research and development		47,609		487			7,052			3,438			—			58,586
Selling, general and administrative		27,961		—			552			2,708			4,123			35,344
Other acquisition-related charges		—		—			—			—			1,118			1,118
Total costs and expenses		87,964		11,052			7,604			6,146			5,241			118,007
Operating income (loss)		3,248		(11,052	)		(7,604	)		(6,146	)		(5,241	)		(26,795	)
Interest and other income, net		—		—			—			—			3,330			3,330
Interest expense		—		—			—			—			(2,650	)		(2,650	)
Income (loss) before income taxes		3,248		(11,052	)		(7,604	)		(6,146	)		(4,561	)		(26,115	)
Income tax expense		—		—			—			—			115			115
Net income (loss)	$	3,248	$	(11,052	)	$	(7,604	)	$	(6,146	)	$	(4,676	)	$	(26,230	)
NET INCOME (LOSS) PER SHARE:
Basic	$	0.03													$	(0.23	)
Weighted average shares — basic		112,472														112,472
Diluted	$	0.03													$	(0.23	)
Weighted average shares — diluted		118,287														112,472