Fool contributor and health-care sector editor Brian Orelli is hanging out at the Bio International Convention this week. Stay tuned for news about the hot topics at the conference that will affect the industry and the stocks you invest in.

With a title like, "Welcome to the Brave New World of Activist Shareholders" how could this Foolish investor not go to the session? Problem was, no activist shareholders sat on the panel -- perhaps they were worried about eggs being thrown at them from the CEOs in the audience.

Fortunately, there were plenty of investors on the panel who described themselves as active investors. What's the difference? Activist investors throw a fit and try to get management changes when they're not happy, like Carl Icahn has done with ImClone Systems (NASDAQ:IMCL) and tried to do with Biogen Idec (NASDAQ:BIIB). When active investors aren't happy, they just sell their shares.

Before the proxy fights begin, investors in both camps share the same goal of building shareholder value. They work toward this by trying to advise management on how best to proceed with developing products. Activist investors at some point, however, might take more overt action, trying to persuade other investors to side with them so that they will be able to change the board.

Of course these large investors -- they're managing hundreds of millions, if not billions, of dollars -- aren't buying because they think today's prices correctly value the companies. No, sir. They think the companies are grossly undervalued. While they may be buying because they want change, the fact that they're undervalued should give hope for the little guy.

The investors on the panel argued that biotech is the perfect place to invest because there are so many companies with so few analysts. That leads to times when companies are ripe for the picking, as my Foolish colleague Brian Lawler argued about PDL Biopharma (NASDAQ:PDLI).

You don't need to take these investors' words for it. The proof that companies are often undervalued, at least to some, is seen by the prices they fetch through acquisitions. Look no further than the 84% premium that GlaxoSmithKline (NYSE:GSK) gave to investors in Sirtris Pharmaceuticals or Bristol-Myers Squibb's (NYSE:BMY) 233% premium for Kosan Biosciences.

What's the take-home message for Foolish investors? Investing in biotech companies that you thoroughly understand can make you serious bucks. But you probably already knew that.

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