Third Point gets boost from PDL co-founder Cary Queen in attempt to oust CEO

By Lisa Kerner

Charlotte, N.C., May 7 - PDL BioPharma Inc.'s largest shareholder, Third Point LLC, led by Daniel S. Loeb, gained support from PDL co-founder and shareholder Cary Queen in a call for chief executive officer Mark McDade's resignation.

Over the past few weeks, Loeb has called for the CEO to resign, demanded the company grant board seats to Third Point nominees, and suggested the possible sale of the company.

"I write to you in support of the proposals of Third Point LLC for a new direction at PDL that emphasizes efficiency, focus on product development, and profitability, under the leadership of a new chief executive officer," Queen, president of Nevada Venture Associates, said in a letter to PDL's board of directors.

Queen cites a comparison graph available at FixPDL.com as evidence of the company's need for a change. The graph compares PDL's royalty and license revenues with its stock price and the BTK index in the years 2004 through 2006.

"The astonishing underperformance of PDL relative to competitors and to PDL's own potential can only be a result of a complete breakdown in the strategy of the chief executive officer, Mr. Mark McDade, and of the confidence of the investor community in his ability to lead the company," Queen wrote.

"The reasons for the problem are no less clear: lack of focus that has led to critical product development delays, out-of-control spending, and an especially ill-considered acquisition of ESP Pharma," a move Queen said he vehemently opposed.

Queen noted that the two-year delay of the company's key product Nuvion, which "is critical for the future of the company," was blamed on the chief medical officer. "I am convinced that the root cause for this major failure was the multiple, conflicting demands imposed on the management team and especially the clinical department by the CEO," Queen asserted in his letter.

PDL's co-founder also cited the company's unchecked spending; especially research and development spending that rose 350% in less than five years.

Queen described as "incomprehensible" McDade's decision to abandon PDL's established facilities in Fremont, Calif., and relocate more than 500 employees to new facilities on the Silicon Valley side of the San Francisco Bay. On April 11, Loeb called the decision to build out PDL's "absurdly large and unnecessary new corporate headquarters" at the cost of almost $100 million appalling and said the build out of leased space into a "Taj Mahal" was done to shorten McDade's commute.

Finally, Queen urged board members to ask themselves several key questions about the company to justify keeping McDade as chief executive officer. "Has the performance of PDL's stock price over the past three years been satisfactory to you? Has the departure since Mr. McDade arrived of virtually every executive and key person who built PDL, down to the staff scientist level and up to the chairman of the board, indicative of a well-respected CEO and well-run company? Simply put, can things go on this way?"

Queen, who also serves a consultant to the Wilmington, N.C., pharmaceutical company, reiterated that he does not believe there is a conflict between his role as consultant and his role as an activist.

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