PDL BioPharma (NDAQ:PLDI) may face more shareholder scrutiny after activist hedge fund Third Point blasted L. Patrick Gage's response to their previous letter and expressed their concerns over the company's "woefully unsatisfactory" answers to the hedge fund's questions during a conference call on the same day. Moreover, the hedge fund's continuing investigation into the company's management and board members have uncovered more serious issues that must be addressed.

Third Point first contacted the company two weeks ago (read article) and demanded that the company (1) terminate Mark McDade's employment as CEO, (2) add three shareholder representatives to the company's board and (3) retain an investment bank to explore strategic alternatives. Moreover, based on their continuing investigation, they now also demand that the company remove Mr. Gage and Jeanmarie Guenot from their positions within the company.

Third Point has uncovered several ethical problems within the company's board and management that must be addressed in order to ensure that the company can move forward unencumbered with ineffective and/or detrimental management. These problems were uncovered during interviews with dozens of ex-employees, industry peers, industry analysts and former employers of key management personnel that are being investigated.

The hedge fund's investigations began with Mr. McDade, who has reportedly committed several ethical violations by putting his own interests ahead of the company's interests. Subsequently, the hedge fund discovered that the circumstances surrounding Jeanmarie's rise up the corporate ladder are also plagued with ethical violations. These two key personnel have led to key scientific personnel leaving the company and an ever-expanding list of expenses. Combined, these factors are significantly affecting shareholder value.

The company responded by saying that Third Point's issues with the board and management would be discussed with the entire board, who would then make a decision on behalf of shareholders. However, the hedge fund is now concerned that Mr. McDade and Dr. Gage (the CEO and Chairman) are not accurately conveying the hedge fund's concerns to the board; rather, they are helping eachother remain in power by hiding the story from the other half of the board.

Third Point contends that these issues can only be solved by ridding the board and management personnel that are causing the problems, strengthening the board with additional shareholder representation and hiring an investment bank to help the company explore strategic alternatives to assist shareholders in unlocking the value concealed for so long by management. Whether or not this materializes remains to be seen, but this fight is definitely one to keep an eye on!

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