Neurobiological Technologies, Inc. (NDAQ: NTII) suspended its stroke drug development, which prompted at least one activist shareholder to demand that value be returned to shareholders. Highland Capital, which owns 17.6% of the firm, sent a letter to the board demanding that the company liquidate its assets and distribute the proceeds to shareholders. However, the company appears to be taking a different course of operation by hiring a new President and CEO.

"Following a thorough review of the interim data, it was determined that there was no group of patients in which Viprinex improved outcome, and therefore further development is not warranted," said Warren W. Wasiewski, Chief Medical Officer. "We are very disappointed that another potential treatment for this devastating disease has failed to show benefit for this patient population."

After the poor results, Neurobiological Technologies announced that it would begin reducing its workforce substantially in order to lower costs and preserve cash. However, Highland Capital learned that the company is seeking to hire a new COE and President, and that such action shows an intention to continue operations despite the lack of a viable new technology to create value in the future.

According to a Schedule 13D filing with the SEC:

Highland Capital delivered a letter to the Board requesting the expeditious wind down of the Issuer’s business. In the letter, Highland Capital expressed its belief that, due to the failure of the Viprinex program, the Issuer has no incremental value as an ongoing concern. Highland Capital expressed a strong belief that the only way to return value to the shareholders is through liquidation of the Issuer’s assets. The letter notes that the Issuer is seeking to hire a new CEO and President, and that such action shows an intention to continue operations. Highland Capital believes that the Board should immediately decide to liquidate the Issuer, and that hiring a new CEO and President is unnecessary if such action is to be taken.. Highland Capital expressly lists various assets, including cash, currently held by the Issuer which are all capable of near-term liquidation. Highland Capital asserts that it is the Issuer’s Board of Directors’ fiduciary duty to the public shareholders to liquidate these assets, wind down business, and return all proceeds to the public shareholders. Highland Capital expressed concern that the Board was considering “strategic options” to continue business which would result in the immediate degradation and eventual loss of all shareholder value.

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The market for location based GPS products is expected to increase 168% in 2008 with aggregate revenues for the sector growing by 169%, according to Gartner Research. The same research firm also predicted that the number of GPS subscribers would reach nearly 300 million with revenues expected to top $8 billion by 2011. So, what stocks should investors watch?

The most famous GPS stock is Garmin Ltd. (NDAQ: GRMN), which pioneered the idea of using GPS devices on automobiles to give directions. However, their success also bread a lot of competition that has now put pressure on its margins and growth rates. Moreover, GPS devices have become somewhat ubiquitous in new vehicles, so many manufactures just look for the cheapest.

The next big things in the GPS market are so-called personal location devices that can be used to keep track of children, the elderly, pets, vehicles and just about anything else. The pioneer of this industry is a small public company called Location Based Technology (OTC-BB: LBAS), which has produced the PocketFinder® line of devices. Check out PocketFinder.com to see their products.

The PocketFinder® line of products includes the smallest single-board GPS device on the market (about the size of an Oreo) along with award-winning personal GPS software that can run on many platforms. The product is set to be released in the first quarter of this year while the software has already been downloaded more than 10,000 times on many compatible smartphones, including the Apple iPhone.

PocketFinder® products and services can help customers triangulate a position and get directions to the device, calculate the distance traveled by and the speed of the device, alert when a pre-set boundary for the device has been violated, and much more via the unique software. The possibilities for these devices are endless between consumers tracking their children and pets and small businesses looking to track their assets!

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Penwest Pharmaceuticals (NDAQ: PPCO) may see some changes during the next annual meeting after a large shareholder proposed a new slate of directors for the board. Perceptive Life Sciences, Tang Capital Partners, and their affiliates collectively own 37.5% of the pharmaceutical company and nominated Joseph Edelman, Keven Tang, and Andrew Levin to the board at the 2009 annual meeting.

Investors should be careful before they vote in the new board members, however. Some rhetoric contained within a Schedule 13D filing with the SEC raises some questions. The funds commented:

While we strongly believe that changes to the board of directors are in the best interest of all shareholders of the company, … [we] may receive unique benefits if the nominees set forth herein are elected to the board. Such unique benefit will, if realized, result from the fact that the nominees are principals within our respective organizations and may be more receptive to our suggestions than any of the members of the board not affiliated with us.

These nominees may prove to perform better than the existing board, but the risk is that the principals will act in a more selfish way by promoting their own returns. Such deals could include financing deals between the company and hedge fund on above-market terms, the sale of assets to the hedge funds at below-market prices, and other actions that destroy shareholder value. The question for investor is: Is the risk worth it?

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