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Daniel S. Loeb, who runs the hedge fund known as Third Point LLC, sent a letter to Acorda Therapeutics (NASDAQ:ACOR), telling the company it would be better for shareholders if the company tried to find a buyer. There was no ultimatum.
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Third Point is known as an “activist” hedge fund. It agitates for change when it thinks the executives of the company begin running the company for themselves, rather than shareholders. So far, it has not alleged any nefarious motives against the management of Acorda. It has managed a 29% annual return since it was founded in 1995.

Acorda is one of the most successful biotech IPOs of 2006. Acorda priced very modestly at $6 per share in February of 2006, and then the stock started a downward trend that took it to almost $2 per share in September. acordaNothing very auspicious there. But then Acorda announced that Fampridine-SR produced a very significant improvement in the walking distance of patients with multiple sclerosis.

The stock shot up to $24, and it closed Friday, six months later, at $24.17. What’s not to like about a stock that has given its IPO investors a 300% return in one year? Loeb alleges that Acorda’s plan to promote Fampridine in the U.S. will end up costing the company more than it could achieve through an outright sale of the company.

Also, before Fampridine is approved, it must successfully complete another Phase III trial. Loeb says that the FDA approval process and subsequent marketing would be better handled by a large biotech/pharma that has more experience and an established sales force. Rather than stressing the economic benefits for shareholders, Loeb talks about getting Fampridine SR into the hands of patients more quickly.

Further, Third Point does not support finding a European partner for the drug, because that move would diminish the appeal of the drug to a multi-national company. Acorda has said it will seek to find a European partner for Fampridine, while marketing the drug in the U.S. by itself.

Third Point holds, or represents the holders of, 9.9% of the common shares of Acorda. It has $4 billion in assets under management.

Last year, Third Point forced Ligand (NASDAQ:LGND) to sell off its marketed drugs for $470 million and become, once again, a development stage company. Third Point was also part of a group of hedge funds that engineered the departure of the CEO at Nabi Biopharmaceuticals (NASDAQ:NABI) and asked an investment banker for help finding a buyer for the company.

ACOR 1-yr chart

acor chart

Disclosure: none.

Source: Activist Hedge Fund Seeks Sale of Acorda