Highland Capital pushes PDL BioPharma to sell, replace CEO and chairman

By Lisa Kerner

Charlotte, N.C., Sept. 26 - PDL BioPharma, Inc. investor Highland Capital Management, LP and its affiliates urged the company's board of directors to sell PDL BioPharma. In addition, the 4.7% stakeholders called for the immediate resignations of Dr. Patrick Gage as chairman and Mark McDade as chief executive officer in a Sept. 25 letter to the board.

Highland also recommended that:

• The board seek additional expertise in evaluating alternatives for the royalty stream;

• PDL BioPharma move to sell and not reconfigure into an early stage developmental company;

• Dr. Laurence Korn take over as chairman;

• An independent board member be added to fill the vacancy left by Dr. Samuel Broder's resignation; and

• PDL BioPharma issue a press release that "lucidly communicates" that it is "diligently and expeditiously working to sell the entire company."

Highland said it has "lost confidence in the current leadership's ability to maximize the value of PDL BioPharma's shares," citing "multiple sell-side research analyst downgrades and the 20% one-day decline in the share price subsequent to the perplexing August 28 conference call."

The investors said that, following conversations with PDL BioPharma board members, they believe "few board members fully comprehend the value of the company's royalty stream, let alone the complex financial alternatives that are available to realize the value of this unique asset."

Highland president and CEO Jim Dondero wrote, "As active participants in the pharmaceutical royalty monetization market we strongly disagree with Dr. Gage's misinformed opinion and, conversely, believe the diversification and size are precisely why the asset is so desirable. In fact, we believe the royalty stream's unique features may permit the use of several additional financial structures not available to smaller, single-drug royalty streams."

In addition, Highland would like to see PDL BioPharma make publicly available, as much as possible, the various agreements constituting the company's royalty stream.

Another PDL BioPharma investor, Third Point LLC, has also sought Gage's resignation, the firing of McDade and a sale of the Wilmington, N.C., pharmaceutical company.

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