PDL Biopharma Inc. (NDAQ:PDLI) moved up marginally after activist investor Third Point disclosed a 9.8% stake in the company and asked the unconflicted directors of PDL BioPharma to conclude their investigation into CEO McDade's suspected ethical and business breaches as quickly as possible. The hedge fund also nominated BioMarin Pharmaceuticals CEO Jean-Jacques Bienaime to their proposed slate of directors.

The letter address to board members was a follow up to one sent out privately three weeks earlier. In the letter, Third Point suggested that shareholders could best be served through the termination of CEO McDade, the addition of three shareholder representatives to the company's board, and finally the hiring of an investment bank to explore strategic options for the company.

The adoption of these three recommendations would substantially increase the company's share price. Obviously, if the company formally announced that it was exploring a possible sale it would cause a quick jump while the firing of McDade and inclusion of shareholder representation on the board is definition bullish in the long-term.

The problem is simply the McDade has tight control over the board as well as management - a classic agency problem. The only way to effect change may be through a proxy fight, which is always a possibility with Third Point. Combined, these factors make PDLI a stock worth watching!

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