Followers of PDL BioPharma
Much of the focus on PDL's turnaround has been directed at hedge fund Third Point, and its battle with PDL CEO Mark McDade. Recently, McDade announced his intention to resign both his executive post and his spot on the board of directors by the end of the year. The CEO said he was leaving "due to the personal toll created by the unsubstantiated rumors" from Third Point. But it's possible he may have simply seen the writing on the wall, and chosen to leave before he was ousted.
Earlier in September, Third Point notched another success in its battle against PDL's current management and board, when another member of the board of directors resigned. That makes two down on Third Point's scorecard of unwanted board members.
Third Point may also have recruited another ally. Ten days ago, fellow hedge fund SAC Capital disclosed a 5.1% stake in PDL. SAC Capital also invested in another Third Point turnaround target, Ligand Pharmaceuticals
Either directly or indirectly, Third Point also has PDL co-founder Cary Queen on its side. In an open letter four months ago, Queen demanded changes at the company.
In total, Third Point and SAC Capital collectively own more than 21% of PDL's outstanding shares. That's far more than any other shareholder, and with PDL directors and insiders holding a relatively paltry amount of shares, it's clear that come proxy voting time next June or July, more of PDL's existing board will likely depart.
Unfortunately, PDL structures its board of directors in a shareholder-unfriendly manner, in which only two or three of the eight board members are up for reelection every year. Next year's group does include the chairman of the board, L. Patrick Gage, whose ouster Third Point has publicly advocated, so it's fair to assume he'll be gone.
Between the three board seats up for reelection, McDade's resignation by the end of the year, and the other board member resignation earlier this month, Third Point and its allies could control at least five of the eight board positions in less than a year.
Third Point has made it clear on several occasions that it wants to pare down PDL, selling off the company's R&D portions while keeping its patents on royalties for humanized drugs like Genentech's
No matter what Third Point decides it wants to do with PDL, one thing is clear: A year from now, PDL will not be the same drugmaker that it is today. When I last tried to value PDL's assets, I concluded that the company was undervalued -- but only if it underwent big changes. With an overhaul of the board almost certainly underway, I'm now more confident than ever that a rearranged PDL will unlock greater value for shareholders.