PDL BioPharma
(NDAQ:PDLI) shares moved up marginally after Cary Queen announced
support for Third Point's proposals for a new direction at PDL in an
open letter to the company's board of directors. Daniel Loeb's Third
Point first made their
proposals back in March of this year and we are still waiting for a response from the company.
Why
is this support important? Well, Cary Queen is not only the co-founder
of the company, but also inventor of the patents from which PDL derives
much of its revenues, a significant shareholder and a senior executive
and director of PDL for most of its history. She clearly has a lot of
history with the company and a good idea of how they can unlock
shareholder value.
Cary Queen insists that PDL's problem is
quite clear. The BTK index, which comprises many of PDL's competitors
and comparable companies, climbed 43% between 2004 and 2006. Meanwhile,
PDL's royalty and license income grew by 250% from $72 million to $249
million. Yet somehow PDL's stock price fell by 15%!
Many
dissident shareholders, including Queen, believe that if PDL management
had simply let more of the dramatic revenue increase reach the bottom
line while focusing on timely development of PDL's own products, the
result would have been far better. Instead, management's lack of focus,
critical product development delays, out-of-control spending, and
ill-advised acquisition of ESP Pharma led to value destruction and
shareholder confusion.
The chances of a response from the board
of directors greatly increased with the addition of Cary Queen. Many
investors are now hoping that Daniel Loeb's confrontational nature
combined with Cary Queen's close relationship to the company will be
enough of a catalyst for the board of directors to pursue some
long-term changes to enhance shareholder value. These factors make PDLI
a stock
worth watching!
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