PDL BioPharma responds to Third Point's criticism, asks Loeb to be nicer going forward

By Lisa Kerner

Charlotte, N.C., May 17 - PDL BioPharma, Inc. responded to three main concerns recently raised by shareholder Daniel Loeb, head of Third Point LLC.

"First, we do agree with your premise that our board would benefit from additional expertise provided by a director with strong institutional investor experience, particularly in the area of life sciences," board chairman L. Patrick Gage wrote in a letter to Loeb that was included in an 8-K filing with the Securities and Exchange Commission. As a result, the board has hired an outside search firm to evaluate candidates, including those named by Loeb, while working through the board's recruitment process.

"Second, since we take our fiduciary and legal responsibilities seriously and have been listening to you and other investors, we have increased the level and time that we routinely spend reviewing the core elements of our corporate strategy," Gage's letter stated.

And third, Gage said PDL's research and development, as well as its selling, general and administrative expenses, are in line with biotech peer companies. However, the board is using a consulting firm to assess allocation costs and to prioritize the company's portfolio.

Gage reiterated to Loeb that the board is listening to him, but it is disappointed that the shareholder did not provide more specific support for his recommendations. In addition, Gage said that in order to work productively, "we ask that our interactions be objective, analytical and business-focused and not include personal allegations and other distractions that are detrimental to building the value of our company."

The company invited Loeb to attend the June 20 shareholder meeting, and Gage said Loeb is welcome "to present in person any additional thoughts or recommendations to the full PDL board." Gage also reiterated "firm support" for the management team, including chief executive Mark McDade, while looking into Loeb's "various allegations and innuendo" regarding the company head.

Loeb's most recent attempt to oust the CEO included support from PDL co-founder and shareholder Cary Queen, according to a prior SEC filing.

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.

Queen cited the company's unchecked spending; especially research and development spending that rose 350% in less than five years. He 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.

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

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