Nabi Biopharmaceuticals (NDAQ:NABI) is under increasing pressure to expand its contract with Bank of America to include a possible sale of the company. Third Point, an activist hedge fund and majority holder of the company, sent their demands to management today in a 13D/A filing with the SEC. The meeting to decide if this new course of action should be implemented is due to take place on September 15th.

To understand why there is a problem with NABI, we must first look at the past. In their lengthy letter attached to the 13D filing, Third Point elaborated on their history with the company:

"When we first became Ligand shareholders last year our thesis was similar to that driving our Nabi investment: Ligand was an asset-rich company with value substantially above what Wall Street was giving it credit for, but the value of its assets was obscured by poor management and imprudent capital allocation decisions. When we concluded that it was highly unlikely that these values would ever be realized under existing management and Ligand's business plan, and that there was indeed a substantial risk that continued cash burn might eventually force management to sell off the company's valuable assets at fire sale prices, we demanded that Ligand immediately initiate a process to maximize shareholder value. The result is striking: the stock is up by 30% since we became involved; just last week Ligand announced the sales of its two commercial operations at extremely attractive prices; and the company has never been in a stronger financial position, nor had a more exciting future. Due to our direct and substantial involvement in the value maximization process, significant cash should be returned to Ligand's shareholders shortly, and the prospects for the "new" company's remaining R&D pipeline and partnered products is tremendously exciting."

The hedge fund also noted how unresponsive and evasive CEO Tom McLain was in dealing with shareholders. In particular, Third Point had difficulty obtaining access to the company's books needed to complete a valuation of NABI to determine the best course of action. However, the fund noted that they "will not be deterred by the Company's attempts to ignore its shareholders and hide behind legal facades". At the end of the letter, Third Point summed up its argument:

"In sum, it is irrefutable that a majority of your shareholders vehemently oppose the long-term, highly-risky strategic plan that you continue to force upon us against our collective will (while, once again, you undertake very little risk yourselves due to your negligible outright holdings in the stock). You have had six months now to do your research and come to the only accurate conclusion - i.e., if you truly take your fiduciary, legal and moral obligations seriously you will agree to act upon the will of the majority of Nabi shareholders (many of whom have apparently now communicated with you directly) and empower BofA to explore all possibilities to maximize the significant asset values embedded within Nabi. As Mr. McLain has explained to us himself, it is very difficult for a small biotechnology company to succeed in the marketplace today. We agree, and when that company is not strongly capitalized and extremely well managed - Nabi being neither of these - it is nearly impossible. It is time that you finally acknowledge this and, should this prove to be the optimal outcome, place our valuable assets, at a substantial premium, in the hands of stronger operators."

If this proposal goes through, then there is a chance the company could be put up for sale at a substancial premium to its current market price. This makes it a stock definitely worth watching!

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