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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No. 4)
Under the Securities Exchange Act of 1934*
PDL BioPharma, Inc.
-------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $0.01 per share
-------------------------------------------------------------
(Title of Class of Securities)
69329Y104
-------------------------------------------------------------
(CUSIP Number of Class of Securities)
Daniel S. Loeb
Third Point LLC
390 Park Avenue
New York, NY 10022
(212) 224-7400
-------------------------------------------------------------
(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
May 22, 2007
-------------------------------------------------------------
(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 11 Pages
- ------------------------------ --------------------
- ----------- --------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Third Point LLC I.D. #13-3922602
- ----------- --------------------------------------------------------------------
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
Delaware
- --------------------- --------- ------------------------------------------------
7 SOLE VOTING POWER
0
--------- ------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 11,400,000
OWNED BY --------- ------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH 0
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
11,400,000
- ----------- --------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
11,400,000
- ----------- --------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- ----------- --------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.8%
- ----------- --------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- ----------- --------------------------------------------------------------------
SCHEDULE 13D
- ------------------------------ --------------------
CUSIP No. 69329Y104 Page 3 of 11 Pages
- ------------------------------ --------------------
- ----------- --------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Third Point Offshore Fund, Ltd.
- ----------- --------------------------------------------------------------------
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
--------- ------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 7,339,400
OWNED BY --------- ------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH 0
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
7,339,400
- ----------- --------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
7,339,400
- ----------- --------------------------------------------------------------------
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%
- ----------- --------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- ----------- --------------------------------------------------------------------
SCHEDULE 13D
- ------------------------------ --------------------
CUSIP No. 69329Y104 Page 4 of 11 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
--------- ------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 11,400,000
OWNED BY --------- ------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH 0
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
11,400,000
- ----------- --------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
11,400,000
- ----------- --------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- ----------- --------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.8%
- ----------- --------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- ----------- --------------------------------------------------------------------
SCHEDULE 13D
- ------------------------------ --------------------
CUSIP No. 69329Y104 Page 5 of 11 Pages
- ------------------------------ --------------------
- ----------- --------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Jason Aryeh
- ----------- --------------------------------------------------------------------
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
62,783
--------- ------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 0
OWNED BY --------- ------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON WITH 62,783
--------- ------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- ----------- --------------------------------------------------------------------
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*
IN
- ----------- --------------------------------------------------------------------
This Amendment No. 4 to Schedule 13D ("Amendment No. 4") 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, Amendment
No. 3 thereto filed on April 18, 2007, and this Amendment No. 4, 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. 4
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 3. Source and Amount of Funds or Other Consideration.
Item 3 of the Schedule 13D is hereby amended and restated as follows:
The Funds expended an aggregate of approximately $226,611,028 of their own
investment capital to acquire the 11,400,000 shares of Common Stock held by
them. The Offshore Fund expended an aggregate of approximately $145,942,634 of
its own investment capital to acquire its 7,339,400 shares of Common Stock.
JALAA expended an aggregate of approximately $1,139,360 of its own investment
capital to acquire the 62,783 shares of Common Stock that it holds.
Item 4. Purpose of Transaction.
Item 4 of the Schedule 13D is hereby amended by adding the following
thereto:
On May 22, 2007, Third Point sent a letter to the unconflicted members of
the Company's Board of Directors (the "Unconflicted Directors"), consisting of
all members of the Board other than L. Patrick Gage, Ph.D., Chairman of the
Board of the
6
Company, and Mark McDade, Chief Executive Officer of the Company. Among other
things, Third Point's letter:
(i) advised the Unconflicted Directors of the results of Third
Point's investigation into several troubling management issues,
(ii) questioned the manner in which Dr. Gage and Mr. McDade have
screened communications between Third Point and the Board,
(iii) expressed Third Point's willingness to present its views
directly to the Board at the earliest possible date,
(iv) reiterated the reasons why the Board should be expanded to
accommodate Third Point representatives on the Board, and
(v) expressed the hope that the Unconflicted Directors would draw
the tough but necessary conclusion that the Board should no longer support Mr.
McDade as Chief Executive Officer of the Company.
In addition, Third Point's letter called for the removal of Dr. Gage
as Chairman of the Board, in light of his efforts as chief apologist for Mr.
McDade, and for the dismissal of Jeanmarie Guenot as Vice President, Corporate &
Business Development.
The May 22 letter from Third Point was sent to the Unconflicted
Directors following receipt by Third Point of a letter from Dr. Gage on May 16,
2007 and an unsatisfactory conference call the same day between representatives
of Third Point and Dr. Gage and Mr. McDade. The conference call with Dr. Gage
and Mr. McDade had been arranged after Third Point had sent to the full Board on
May 8, 2007 a private letter that, among other things, had reiterated Third
Point's prior demands that the Board terminate Mr. McDade as Chief Executive
Officer of the Company, add three shareholder representatives to the Board and
retain an investment bank to explore strategic alternatives for the Company.
A copy of Third Point's May 22, 2007 letter is attached to this
Schedule 13D as an exhibit and incorporated herein by reference in its entirety.
Item 5. Interest in Securities of the Issuer.
Items 5(a), 5(b) and 5(c) of the Schedule 13D are hereby amended by
the following:
(a) As of the date of this Amendment No. 4, the Management Company and Mr.
Loeb beneficially own 11,400,000 shares of Common Stock (the "Third Point
Shares"). The Third Point Shares represent 9.8% of the 116,603,643 shares of
Common Stock outstanding as of May 2, 2007, as reported in the Company's
Quarterly Report on Form
7
10-Q for the quarterly period ended March 31, 2007. The percentages used herein
and in the rest of this statement are calculated based upon this number of
outstanding shares.
As of the date of this Schedule 13D, the Offshore Fund directly
beneficially owns 7,339,400 shares of Common Stock, representing 6.3% of the
outstanding shares of Common Stock. None of the other individual Funds owns a
number of shares of Common Stock representing more than 5% of such total.
(b) The Management Company and Mr. Loeb share voting and dispositive power
over the 11,400,000 shares of Common Stock held by the Funds. The Management
Company, Mr. Loeb and the Offshore Fund share voting power and dispositive power
over the 7,339,400 shares of Common Stock held by the Offshore Fund. Mr. Aryeh
has sole voting power and dispositive power over the 62,783 shares of Common
Stock held by JALAA.
(c) Schedules A hereto sets forth certain information with respect to
transactions by the Funds (at the direction of the Management Company and Mr.
Loeb) in Common Stock since the most recent filing on Schedule 13D. Schedule B
hereto sets forth certain information with respect to transactions by the
Offshore Fund (at the direction of the Management Company and Mr. Loeb) in
Common Stock since the most recent filing on Schedule 13D.
All of the transactions set forth on Schedules A and B were effected in
open market transactions or, as indicated on Schedules A and B, through the
exercise of call options held by the Funds. Except as set forth on Schedules A
and B, since the most recent filing on Schedule 13D there were no transactions
in the Common Stock or options to purchase Common Stock effected by any of the
Management Company, Mr. Loeb, the Offshore Fund or Mr. Aryeh, nor, in the case
of the Management Company and the Offshore Fund and to the best of their
knowledge, any of their directors, executive officers, general partners or
members.
Item 7. Material to be Filed as Exhibits.
99.1. Letter, dated May 22, 2007, from Third Point to Samuel Broder, M.D.,
Karen A. Dawes, Bradford S. Goodwin, Laurence Jay Korn, Ph.D., Richard
Murray, Ph.D., and John S. Saxe, Esq., members of the Board of
Directors of the Company.
[Signatures on following page]
8
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: May 22, 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. 4 TO SCHEDULE 13D
WITH RESPECT TO PDL BIOPHARMA, INC.]
Schedule A
----------
(Transactions by the Funds in Common Stock
since the most recent filing on Schedule 13D)
Date Transaction Shares Price Per Share($)
---- ----------- ------ ------------------
- ---------------- ------------------- ------------------ ------------------------
04/20/07 BUY* 1,250,000 17.50
- ---------------- ------------------- ------------------ ------------------------
04/24/07 BUY 100,000 25.19
- ---------------- ------------------- ------------------ ------------------------
04/24/07 BUY 96,400 25.30
- ---------------- ------------------- ------------------ ------------------------
04/30/07 SELL (89,500) 25.26
- ---------------- ------------------- ------------------ ------------------------
04/30/07 BUY 89,500 25.26
- ---------------- ------------------- ------------------ ------------------------
05/18/07 BUY* 200,000 17.50
- ---------------- ------------------- ------------------ ------------------------
05/18/07 BUY** 203,600 20.00
- ---------------- ------------------- ------------------ ------------------------
* Pursuant to the exercise of call options having a strike price of $17.50 per
share.
** Pursuant to the exercise of call options having a strike price of $20.00 per
share.
Schedule B
(Transactions by the Offshore Fund in Common Stock
since the most recent filing on Schedule 13D)
Date Transaction Shares Price Per Share($)
---- ----------- ------ ------------------
- ---------------- ------------------- ------------------ ------------------------
04/20/07 BUY* 1,095,300 17.50
- ---------------- ------------------- ------------------ ------------------------
04/24/07 BUY 49,800 25.19
- ---------------- ------------------- ------------------ ------------------------
04/24/07 BUY 62,100 25.30
- ---------------- ------------------- ------------------ ------------------------
04/30/07 SELL (14,000) 25.26
- ---------------- ------------------- ------------------ ------------------------
05/18/07 BUY* 137,500 17.50
- ---------------- ------------------- ------------------ ------------------------
05/18/07 BUY** 132,600 20.00
- ---------------- ------------------- ------------------ ------------------------
* Pursuant to the exercise of call options having a strike price of $17.50 per
share.
** Pursuant to the exercise of call options having a strike price of $20.00 per
share.
Exhibit 99.1
[Third Point Letterhead]
May 22, 2007
Samuel Broder, M.D.
Ms. Karen A. Dawes
Mr. Bradford S. Goodwin
Laurence Jay Korn, Ph.D.
Richard Murray, Ph.D.
John S. Saxe, Esq.
PDL BioPharma, Inc.
34801 Campus Drive
Fremont, CA 94555
Dear Unconflicted Board Members:
We are writing in response to the May 16, 2007 letter to us from L. Patrick
Gage, Chairman of the Board of PDL BioPharma, Inc. ("PDLI" or the "Company"),
and to address Dr. Gage's woefully unsatisfactory answers to us on our
conference call of the same day. We had intended to respond to the issues raised
during that conference call in private correspondence with the Board; however,
the Company's public release of Dr. Gage's letter compels us to respond publicly
as well.
As you know, in our private letter to the Board two weeks ago, we demanded that
the Board promptly act in the best interest of PDLI and its shareholders by:
o terminating Mark McDade's employment as Chief Executive Officer,
o adding three shareholder representatives to the PDLI Board, and
o retaining an investment bank to explore strategic alternatives for the
Company.
Based on our continuing investigation, described below, into troubling PDLI
management issues (the "Investigation"), we must now also demand that Dr. Gage
be removed as Chairman of the Board and that Jeanmarie Guenot be dismissed as
PDLI's head of business development.
Results of the Investigation
- ----------------------------
In the course of the Investigation, we have spoken with dozens of current and
former PDLI employees (many of whom are, or were, at senior levels in the
Company, on both the corporate and scientific staffs); many senior managers of
peers, both larger and smaller, in the biotechnology space; current and former
managers and/or directors of
Unconflicted Board Members
PDL BioPharma, Inc.
May 22, 2007
Page 2
Corixa Corporation and Signature BioScience, Inc., where Mr. McDade spent eight
years prior to joining the Company; well-respected biotechnology industry
consultants; many private equity firms that invest in the biotechnology space;
and many others with knowledge of Mr. McDade's performance before and during his
tenure at PDLI. Based on this wide-ranging due diligence effort, we have reached
the following conclusions:
1) Mr. McDade may have committed significant ethical breaches during his
tenure as Chief Executive Officer of PDLI. The underlying circumstances
persist today and strongly suggest that Mr. McDade may have put his
personal interests above those of PDLI. While Dr. Gage's May 16 letter
refers to "various allegations and innuendo," more than a few current and
former employees of PDLI have described to us, both in writing and orally,
substantially identical concerns about very specific improprieties. To be
clear, we did not seek out this information - it was all offered to us
spontaneously by concerned parties. We were pleased to read in Dr. Gage's
letter of May 16 that the Board is investigating these matters, and we
trust and expect that your inquiry into Mr. McDade's conduct will proceed
expeditiously so that shareholder interests are not further jeopardized.
2) A number of our sources highlighted the circumstances under which Jeanmarie
Guenot, currently PDLI's head of business development, was hired; several
also reported widespread disbelief within the Company that Dr. Guenot was
qualified to advance through the ranks as she has. The sentiment expressed
to us was that no acceptable explanation can account for her initial
appointment or continued employment as head of business development. In
fact, the Investigation uncovered at least one senior executive who left
PDLI over what he considered unfairly favorable treatment of Dr. Guenot to
the detriment of the Company and its other employees. Given these
indications of an employee morale problem, as well as concerns that Dr.
Guenot's continued employment at PDLI is not in the best interests of the
Company's shareholders, we trust that you will focus on this issue as a
priority concern.
3) Many truly talented scientists at PDLI appear to have left the Company
during Mr. McDade's tenure for the following reasons: (A) Mr. McDade's
promotion of lesser-qualified scientists to senior positions within the
group; (B) the Company's lack of financial discipline; and (C) their view
that Mr. McDade's acquisitions and R&D development strategies were poorly
conceived and executed. Again, this conclusion is based on many incoming
calls, letters and emails from former senior scientists at the Company, as
well as the letter recently released by Cary Queen. While Dr. Gage would
characterize Dr. Queen's letter as the product of a "disgruntled employee,"
Dr. Queen is, as you know, highly regarded within the biotechnology and
investment communities, and an important consultant to PDLI. It is
virtually unprecedented for an ex-manager, board member, and company
founder to publicly release such a broadside against an incumbent
management, and it is therefore especially meaningful when it is done. We
trust that you have
Unconflicted Board Members
PDL BioPharma, Inc.
May 22, 2007
Page 3
given due consideration to the views and concerns Dr. Queen expressed in
his letter - his trenchant observations on a company he knows so well
deserve particular weight, and we cannot dismiss as a coincidence that they
reflect and reinforce the many letters that we have received from other
past and present PDLI employees.
4) Our due diligence has reinforced our already strong conviction that both
PDLI's internal financial team, and its external financial advisors,
strongly counseled Mr. McDade not to move corporate headquarters to Redwood
City from Fremont because of the disruption to the employee base, and
because they deemed the move to be both unnecessary and overly expensive.
Disturbingly, the correspondence we have received from current and former
PDLI employees has confirmed that this unnecessary move has already caused,
and will continue to cause, PDLI to lose significant scientific talent.
In conclusion, we have rarely, if ever, received as much unsolicited and
universally negative correspondence from past and current employees of one of
our portfolio companies - much of it coming from the senior scientist level -
than we have received with respect to PDLI. While Dr. Gage may attribute this to
"disgruntled employees," as one of the scientists who contacted us said, "the
dislike of McDade and his business decisions and favoritism definitely has a
meaningful p-value; it's definitely statistically significant."
The Full Board Gets Half the Story
- ----------------------------------
It appears from Dr. Gage's May 16 letter that he has decided merely to pay lip
service to our demands - by doing just the bare minimum possible to "move the
ball forward" - while continuing to string us along and further entrench an
undeserving management. This cynical course of action was in full evidence when
Dr. Gage disingenuously suggested in his letter that Third Point had "elected"
not to make a presentation at your recent Board meeting.
Nothing could be more misleading. After a two hour meeting with Dr. Gage and Mr.
McDade on May 7, it was mutually agreed that it would be unnecessary for us to
present our views to the full Board later in the week because we were assured
that Dr. Gage and Mr. McDade would do so. That joint decision followed
correspondence in which Dr. Gage insisted that we follow his prescribed
"agenda" for any Board presentation that we might make, which included questions
that we, as outsiders, would have no means of adequately addressing. Given the
constraints Dr. Gage and Mr. McDade sought to impose on our presentation to the
Board, and given their assurances that our concerns would be adequately
communicated to the Board, we agreed to forgo a Board presentation and to rely
on those assurances.
Unconflicted Board Members
PDL BioPharma, Inc.
May 22, 2007
Page 4
Since receiving Dr. Gage's May 16 letter, we have come to doubt that Dr. Gage
and Mr. McDade have fully and fairly presented our views to the Board. This
lapse calls to mind our significant doubt that Mr. McDade ever properly
disclosed to the Board what we understand to have been serious interest
expressed by at least one pharmaceutical company in purchasing PDLI at a
significant premium late last year. As we have said before, we are concerned
that Mr. McDade kept those discussions from the Board, and unilaterally caused
the discussions to end. We know for a fact that he now denies to investors that
such discussions took place.
We have, unfortunately, encountered similar CEO / Chairman teams in the past. By
this we mean an autocratic CEO and a Chairman who is the CEO's chief apologist
and, therefore, unable to look at any set of critical facts objectively (which
is why we argue that Mr. Gage must be removed from the Board as well). We know
from experience that it is virtually impossible to have a constructive dialogue
with such a twosome, and very difficult for other board members to break ranks
with them - despite well-founded concerns that the CEO and Chairman are not
acting in the best interests of shareholders.
In light of these doubts and the unhealthy dynamic of a CEO / Chairman team
screening communications between shareholders and the rest of the Board, we now
believe it is important for us to have a direct dialogue with all of PDLI's
directors - not just Pat and Mark. Accordingly, we remain prepared to present
our views to the Board at the earliest possible date, and to speak with each of
you individually also.
Strengthening the Board and the Company
- ---------------------------------------
We have said repeatedly that the PDLI Board is filled with very impressive
members of the scientific community, and that is why we suggested adding
additional members to the Board, rather than replacing current members. While we
are certainly highly knowledgeable about the scientific issues, our real
expertise is in running businesses (which includes intelligently imposing
financial discipline on corporate spending); making money for investors;
understanding what is, and is not, in the best interests of shareholders (the
owners of the Company); and understanding and communicating clearly with the
financial markets (unlike Mr. McDade's chronic inability to tell PDLI's story to
investors). These are all valuable traits that any board of directors, charged
solely with promoting the best interests of shareholders, should embrace. We
therefore remain certain that we can add substantial incremental value for
PDLI's shareholders by serving on the Company's Board - an assessment that the
directors, management teams and shareholders of Ligand Pharmaceuticals, Nabi
BioPharmaceuticals, Ception Pharmaceuticals and many companies outside the
biotechnology space can validate.
We would be pleased to provide any of you with multiple references at any of
these companies (we provided them to Mr. McDade almost two months ago, but he
never bothered to contact any of these references), who will attest to the
significant contributions we have made to each of those companies. We are also
confident that
Unconflicted Board Members
PDL BioPharma, Inc.
May 22, 2007
Page 5
virtually all Wall Street analysts who follow PDLI (as evidenced by their
research reports covering our involvement in the Company), a vast majority of
PDLI's shareholders (many of whom have telephoned us to express their support -
including several of the largest long-only shareholders) and a large number of
current and former PDLI employees (many of whom have also phoned to voice their
support) believe that our active involvement in the Company would be of
significant benefit for all constituencies.
Despite Dr. Gage's and Mr. McDade's repeated assertions, we do not believe that
the Board is unanimous in its support of Mr. McDade. We understand that some
Board members are, at least, privately questioning whether Mr. McDade is the
right person to lead PDLI given the poor financial performance of the Company,
the waning support of shareholders and the ethical and strategic concerns that
have now surfaced. It is perhaps telling that in his May 16 letter to us, Dr.
Gage retreated from purportedly speaking on behalf of the whole Board and
instead offered only his personal support for Mr. McDade. While we understand,
and have experienced first hand, how difficult it is for board members to break
ranks with their CEO and Chairman, we hope that most members of the Board can
draw the tough but necessary conclusion that continuing to support Mr. McDade is
the wrong decision for PDLI's shareholders.
We trust that you, as the unconflicted members of the Board, will quickly take
steps to do what is best for PDLI's shareholders. Any of you should feel free to
call us at any time should you any questions regarding the substance of this
letter or any of the other communications that we have had with the Company.
Sincerely,
/s/ Daniel S. Loeb
Daniel S. Loeb
cc: L. Patrick Gage, Ph.D.
Mark McDade