Not since Motley Fool Hidden Gems pick Flamel Technologies (NASDAQ:FLML) has a Motley Fool newsletter selection generated as much investor activism against its current management team as Rule Breakers' PDL BioPharma (NASDAQ:PDLI).
Some activist investors like hedge fund Third Point have been calling for a sale of the drugmaker since early this year, and others like Highland Capital joined the chorus just this week.
Having co-founded PDL BioPharma 21 years ago, when it was called Protein Design Labs and was responsible for the key humanized monoclonal antibody patents from which PDL derives a majority of its revenue like AstraZeneca (NYSE:AZN) drug Synagis, Cary Queen is perhaps the most qualified noninsider to assess the current situation at PDL.
Queen has come out against recent and past actions by management and even runs a website www.fixpdl.com, detailing some of what he believes are the mistakes by PDL's current management team. Here's what he had to say to the Fool:
The Motley Fool: In a May letter to the directors of PDL, you mentioned that a lack of focus and out-of-control spending has been a problem at PDL. If you could, what would you change to improve the company?
Cary Queen: After recent events, the highest priority must be to recognize value for the shareholders by selling PDL, as investors aren't going to be interested in a 20-year-old, early stage R&D company. However, if PDL cannot be sold at an acceptable price, the most important change would be to replace the CEO, which is already being implemented. The new CEO should be bottom-line-oriented, should know how to run a company efficiently while avoiding lunatic schemes, and should focus on a very small number of R&D programs likely to bring results in the nearer term.
The Fool: Why did you resign from PDL's board of directors in 2006?
Queen: I wasn't renominated by the Nominating and Governance Committee of the Board, consisting at the time of Dr. Max Link, no longer with the company, and Dr. Pat Gage. That is, the Director (Max Link), who turned out to be right on almost every point, was not renominated, whereas the Director (Pat Gage) who was the leading cheerleader for the thoroughly discredited Management, was recently promoted to Executive Chairman. This indicates that PDL's problems are by no means behind it and reinforces the advisability of a quick sale.
The Fool: What are your thoughts on PDL's pipeline in the wake of the unexpected Nuvion failure?
Queen: I think daclizumab for multiple sclerosis is exciting, and I look forward to learning the detailed results of the first phase 2 trial shortly. The Company should search for ways to avoid conducting another phase 2 trial before beginning phase 3 trials, as that makes the timeline to market excessively long. Also, volociximab has a sound rationale, and there's a possibility of an upside surprise from one of the ongoing phase 2 cancer trials, which could certainly turn the company around if it's still independent.
The Fool: On fixpdl.com, you've come out against the move of PDL's headquarters and R&D facilities to the south bay and the expenses associated with the move. Is there any hope of reversing some of the future costs of the planned move, or are shareholders stuck with this deal and lease even after McDade resigns as CEO?
Queen: While I'm not privy to the detailed financial considerations that would go into such a decision, I suspect that with something like $100 million already spent on the build-out and with PDL having entered a long-term lease, it's no longer possible for the company itself to back out of the move. Sadly, the missing $100 million in cash and the expense of getting out of the lease will have to come out of the purchase price that PDL would otherwise receive from a buyer.
The Fool: Some shareholders have called for the other Protein Design Labs co-founder, Dr. Laurence Korn, to be given a role in the future on PDL's board of directors. Are you looking to take a more active role in the company as well in the future?
Queen: No, there's a time to move on. I wish my former colleagues at PDL the best of luck during this difficult period.
