SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No. 3)
Under the Securities Exchange Act of 1934*
PDL BioPharma, Inc.
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(Name of Issuer)
Common Stock, par value $0.01 per share
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(Title of Class of Securities)
69329Y104
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(CUSIP Number of Class of Securities)
Daniel S. Loeb
Third Point LLC
390 Park Avenue
New York, NY 10022
(212) 224-7400
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Copies to:
Michael A. Schwartz, Esq.
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019-6099
(212) 728-8000
April 17, 2007
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(Date of Event which Requires
Filing of this Schedule)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box: [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 240.13d-7 for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
SCHEDULE 13D
- ---------------------------------- ----------------------------
CUSIP No. 69329Y104 Page 2 of 8 Pages
- ---------------------------------- ----------------------------
- ----------- --------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Third Point LLC I.D. #13-3922602
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
- ----------- --------------------------------------------------------------------
3 SEC USE ONLY
- ----------- --------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------- --------- ------------------------------------------------
7 SOLE VOTING POWER
0
--------- ------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF SHARES
BENEFICIALLY OWNED 11,203,600
BY EACH REPORTING --------- -------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
0
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
11,203,600
- ----------- --------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
11,203,600
- ----------- --------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- ----------- --------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.7%
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14 TYPE OF REPORTING PERSON*
OO
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SCHEDULE 13D
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CUSIP No. 69329Y104 Page 3 of 8 Pages
- ---------------------------------- ----------------------------
- ----------- --------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Third Point Offshore Fund, Ltd.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
- ----------- --------------------------------------------------------------------
3 SEC USE ONLY
- ----------- --------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- ----------- --------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- ----------- --------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
- --------------------- --------- ------------------------------------------------
7 SOLE VOTING POWER
0
--------- ------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF SHARES
BENEFICIALLY OWNED 7,241,500
BY EACH REPORTING --------- -------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
0
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
7,241,500
- ----------- --------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
7,241,500
- ----------- --------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- ----------- --------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.3%
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14 TYPE OF REPORTING PERSON*
OO
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SCHEDULE 13D
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CUSIP No. 69329Y104 Page 4 of 8 Pages
- ---------------------------------- ----------------------------
- ----------- --------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Daniel S. Loeb
- ----------- --------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
- ----------- --------------------------------------------------------------------
3 SEC USE ONLY
- ----------- --------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- ----------- --------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- ----------- --------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------- --------- ------------------------------------------------
7 SOLE VOTING POWER
0
--------- ------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF SHARES
BENEFICIALLY OWNED 11,203,600
BY EACH REPORTING --------- -------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
0
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
11,203,600
- ----------- --------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
11,203,600
- ----------- --------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- ----------- --------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.7%
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14 TYPE OF REPORTING PERSON*
IN
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SCHEDULE 13D
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CUSIP No. 69329Y104 Page 5 of 8 Pages
- ---------------------------------- ----------------------------
- ----------- --------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Jayson Aryeh
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
- ----------- --------------------------------------------------------------------
3 SEC USE ONLY
- ----------- --------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- ----------- --------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- ----------- --------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------- --------- ------------------------------------------------
7 SOLE VOTING POWER
0
--------- ------------------------------------------------
8 SHARED VOTING POWER
NUMBER OF SHARES
BENEFICIALLY OWNED 62,783
BY EACH REPORTING --------- -------------------------------------------------
PERSON WITH 9 SOLE DISPOSITIVE POWER
0
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
62,783
- ----------- --------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
62,783
- ----------- --------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- ----------- --------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.05%
- ----------- --------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
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This Amendment No. 3 to Schedule 13D ("Amendment No. 3") amends the
Schedule 13D filed on March 5, 2007 (as amended by Amendment No. 1 thereto filed
on March 21, 2007, Amendment No. 2 thereto filed on April 11, 2007, and this
Amendment No. 3, the "Schedule 13D") and is being filed on behalf of Third Point
LLC, a Delaware limited liability company (the "Management Company" or "Third
Point"), Third Point Offshore Fund, Ltd., a Cayman Islands limited liability
exempted company (the "Offshore Fund"), Daniel S. Loeb, an individual ("Mr.
Loeb", and together with the Management Company and the Offshore Fund, the
"Third Point Reporting Persons"), and Jason Aryeh, an individual ("Mr. Aryeh",
and together with the Third Point Reporting Persons, the "Reporting Persons").
This Amendment No. 3 relates to the common stock, par value $0.01 per share (the
"Common Stock"), of PDL BioPharma, Inc., a Delaware corporation (the "Company").
The Management Company is the investment manager or adviser to a variety of
hedge funds and managed accounts (such funds and accounts, including the
Offshore Fund, the "Funds"). The Funds directly own the Common Stock to which
this Schedule 13D relates, and Mr. Loeb and the Management Company may be deemed
to have beneficial ownership over such Common Stock by virtue of the authority
granted to them by the Funds to vote and to dispose of the securities held by
the Funds, including the Common Stock. Mr. Aryeh may be deemed to have
beneficial ownership of the shares of Common Stock directly owned by JALAA
Equities, LP ("JALAA") by virtue of his ability to vote and/or to dispose of the
securities held by JALAA, including the Common Stock.
Item 4. Purpose of Transaction.
Item 4 of the Schedule 13D is hereby amended by adding the following
thereto:
On April 17, 2007, Third Point sent a letter to Mark McDade, Chief
Executive Officer of the Company, and to the other members of the Board of
Directors of the Company (the "Board"), communicating its displeasure with the
response of the Company to Mr. Loeb's previous letter of April 11. Third Point
expressed its deep dissatisfaction with, among other things, the continuing
failure of the Board to address the legitimate concerns of shareholders
regarding the Company's corporate spending and performance, including the
Company's failures to meet revenue and earnings expectations and product
development timelines. In the letter, Third Point emphasized its belief that it
is time for new leadership at the Company and repeated its call for the Board to
terminate Mr. McDade immediately as Chief Executive Officer of the Company and
to explore all options to maximize value for the benefit of the Company's
shareholders. Additionally, Third Point demanded that Company founder Laurence
Korn be promoted to acting Chief Executive Officer and Chairman and reiterated
its request for representation on the Board. Third Point agreed in the letter to
meet with the entire Board in the next two weeks, but without Mr. McDade. In the
6
letter, Third Point made clear that it intends to continue its efforts to have
the Board immediately remove Mr. McDade and engage an investment bank to explore
strategic alternatives.
A copy of the letter is attached to this Schedule 13D as an exhibit and
incorporated herein by reference in its entirety.
Item 7. Material to be Filed as Exhibits.
99.1. Letter, dated April 17, 2007, from Third Point to Mark McDade, Chief
Executive Officer of the Company, and the Board of Directors of the
Company.
[Signatures on following page]
7
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: April 18, 2007
THIRD POINT LLC
By: Daniel S. Loeb,
Chief Executive Officer
By: /s/ Justin Nadler
-------------------------------------------
Name: Justin Nadler
Title: Attorney-in-Fact
THIRD POINT OFFSHORE FUND, LTD.
By: Daniel S. Loeb,
Director
By: /s/ Justin Nadler
-------------------------------------------
Name: Justin Nadler
Title: Attorney-in-Fact
DANIEL S. LOEB
By: /s/ Justin Nadler
-------------------------------------------
Name: Justin Nadler
Title: Attorney-in-Fact
/s/ Jason Aryeh
------------------------------------------------
Jason Aryeh
[SIGNATURE PAGE TO AMENDMENT NO. 3 TO SCHEDULE 13D
WITH RESPECT TO PDL BIOPHARMA, INC.]
[Third Point Letterhead]
April 17, 2007
Mr. Mark McDade, CEO
L. Patrick Gage, Chairman
John S. Saxe
Laurence Jay Korn
Karen A. Dawes
Bradford S. Goodwin
George M. Gould
Samuel Broder
PDL BioPharma Inc.
34801 Campus Drive
Fremont, CA 94555
Dear Board of Directors:
We are in receipt of the cursory letter dated April 11th sent in response to our
detailed letter of the same day. We are very disappointed with both that letter
and the subsequent private letter that we received from PDL BioPharma's ("PDLI"
or the "Company") Chairman, L. Patrick Gage, the following day - in which he
offered us the opportunity to "meet and greet" the Board. Both letters
unthinkingly endorse the status quo and turn a blind eye to concerns that we and
other shareholders have raised repeatedly: the Company's failure to meet revenue
and earnings expectations, and product development timelines, as well as PDLI's
excessive R&D and SG&A spending. Under these circumstances, and in light of Mr.
McDade's significant professional disappointments at PDLI and at previous
employers, we have grave concern about Mr. McDade's management skills and
suitability to serve as CEO. We ask that in the best interest of the Company and
its shareholders he step down with immediate effect.
We believe that if the Board were to focus on Mr. McDade's current performance
as well as past missteps which portend no better result here, they would agree
with our well-founded concerns: It is time for new leadership at PDLI, either in
the form of new, more-capable management or through a restructuring or sale of
the Company. We discussed in our previous letters Mr. McDade's unnecessary
spending on the Company's corporate headquarters as well as wasteful R&D and
SG&A spending. What we have learned since then confirms our view that Mr. McDade
is simply not sufficiently competent to lead PDLI. A former management-level
employee wrote the following, which reflects the results of our Investigation:
"McDade's past imperious behavior and business failures as a key
manager and CEO in both pharma and biotechnology (are) well known, and
his abrasive personality resonates throughout the industry... For PDLI
to move forward and become a successful company McDade (has) to go ...I
applaud your efforts to fire McDade and resurrect the outstanding
potential of this Company. I look forward to your success in
reconfiguring both the Board and focus of PDL."
Mr. McDade's past experiences at both Signature BioScience and Corixa
Corporation demonstrate that his apparent fixation on the long-term can have
dangerous consequences. Signature folded in early 2003 (just after Mr. McDade
had jumped ship). The Signature saga is especially cautionary because Signature
followed a similar path to that which PDLI is pursuing, falling victim to
excessive spending (remarkably, just as at PDLI, Mr. McDade signed an expensive
lease in 2001 - the second largest lease in San Francisco that year - to move
Signature to larger and nicer quarters - right before the Company folded), poor
acquisitions and poor execution. Similarly, Corixa shareholders who were
unfortunate to have believed in the promise of a "long-term strategy" - like
that pursued by PDLI - were taken out in 2005 at a little over $4 per share -
near all-time lows, and down almost 95% from its highs.
Given this history, it is difficult to understand why Mr. McDade was hired at
all by PDLI, and more confounding still that the Board is allowing him to commit
the same mistakes here and pursue the same failed strategy. As we have
repeatedly warned, it is typical for underperforming managements to hide behind
"the long-term," because if the timeframe is undefined, then it is impossible to
fail. We have no doubt that PDLI is already so far off track that, were the
Company left to its own devices, Vision 2010 would soon become Vision 2015.
Regardless, we believe that five years falls well within the definition of
"long-term," and during Mr. McDade's tenure of that duration as CEO he has yet
again presided over or pursued poor strategic decisions, displayed ineffective
execution and engaged in massive overspending.
We also ask that you strongly consider the views of other shareholders as well
as the opinions of respected sell side analysts such as those from Prudential
and Merrill Lynch who have supported our views that PDLI needs to significantly
rationalize its spending and that Mr. McDade lacks the necessary qualification
for leadership of PDLI. We would also advise the Board to interview PDLI
employees and ex-employees at all levels, who have called or written to voice
support for the positions we have articulated. (In fact, this additional
information supports the view that PDLI is far more poorly managed than we had
previously believed - and that the headquarters move to Redwood City will be
more disruptive to the workforce than we had imagined.)
Accordingly, we request that Mr. McDade resign and that Company founder and
board member Laurence Korn be immediately installed as acting chief executive
officer and chairman.
We also reiterate our request for Board seats. In this regard, we were
disappointed to learn that Mr. McDade summarily dismissed all of our Board
nominees as "unqualified" without contacting a single one of the references we
provided for each. If Mr. McDade
had made those inquiries as we requested, and had learned first-hand of the
valuable work that we and our nominees have done -- at Ligand Pharmaceuticals
and Nabi Biopharmaceuticals on behalf of all shareholders of those companies --
we believe that he and the other Board members would have come to a different
conclusion, which would benefit all shareholders.
It is clear that the current Board must be augmented. While the current Board
has presided over the company, the stock has underperformed relative to its
peers, partners, and the broad market indices in general; during the same
period, it is hardly surprising that Board members have collectively owned only
a small outright position in PDLI stock (and have, in aggregate, been
substantial net sellers of the stock, especially Mr. McDade, with no outright
purchases of the stock by insiders for almost two years).
The current Board cannot simply ignore the desires of the Company's shareholders
for significant change. The events that transpired at MedImmune last Thursday
are instructive here. MedImmune's Board engaged Goldman Sachs to explore a sale
of the Company, among other strategic alternatives, "because of interest from
drugmakers and pressure from shareholders. The combination of buyout interest
and unhappy shareholders all forced the board to pursue this action." We believe
you are in the same position. As noted in our previous letter, we are concerned
that Mr. McDade has received an inquiry from a potential buyer of the Company,
which may not have been fully considered and explored by the Board Additionally,
many shareholders have communicated their disappointment with the share price,
which has rallied only since our involvement, as investors have begun to expect
that change is on the way. We hope that you will take careful note of the fact
that the MedImmune Board is honoring its fiduciary and legal duties by not
locking into a single, risky strategy, but is instead exploring all
possibilities to determine what is best for shareholders. The PDLI Board should
act in a similar fashion, in accordance with its fiduciary duties to
shareholders.
Although we are very concerned that your continued offer to meet with us in
person may be a "red-herring" designed to continue to buy time, we nonetheless
will meet with the entire Board within the next two weeks, but without Mr.
McDade. To reiterate, we have had an ongoing dialogue with PDLI management for a
year to voice our concerns, as well as having conducted a recent series of calls
with Mr. McDade on these issues and the time for the Board to act is now; we
will resist any efforts to unnecessarily delay implementing the requested
governance and management changes.
Our willingness to meet should not however be construed as a license for the
Board to drag its feet in responding to shareholder demands . Nor will we be
dissuaded by further bromides such as the following statement that was included
in your responses to us last week:
"As a publicly traded biotechnology company our key aim is to maximize
long-term value for all of our stockholders .... We believe the
Company's current strategy will deliver significant stockholder value
both in the near-term and the long-term."
Unfortunately, this is the same hollow promise that we would likely have heard
from you 4 1/2 years ago - and the stock (prior to our investment) has been flat
since then.
Notwithstanding Mr. Gage's support for Mr. McDade, we remain hopeful that the
Board is composed of individuals who understand their fiduciary duty and are
able to exercise due care in making decisions on shareholders' behalf. In
particular, we appreciate a conversation we had with Dr. Broder, and were
impressed by his intelligence and admirable career in science and public
service. Similarly, we believe that Company founder Laurence Korn must regret
the decision to have entrusted his life's work to the hands of Mr. McDade and
that he would welcome the opportunity to assume the role of CEO.
In sum, we ask the Board to look past personal loyalty to Mr. McDade and think
objectively about his performance and about the Board's duty to shareholders. We
are confident that you will come to the conclusion that Mr. McDade must go and
that an investment bank should be engaged to explore strategic alternatives
expeditiously.
Sincerely,
/s/ Daniel S. Loeb
Third Point LLC