Dan Loeb, who heads up the hedge fund Third Point LLC, upped his position in PDL BioPharma (NASDAQ:PDLI) to 9.7% and released a broadside against the CEO of the company, calling for his termination if he does not resign voluntarily.
In the letter, Loeb makes several allegations about the $100 million corporate facility that McDade is building in Redwood City to house the PDL operations. Loeb repeatedly called it a “Taj Mahal.” Loeb says that McDade lives close by, and he was sick of commuting through San Francisco and across the bay to Fremont (the letter has a link to a map showing how the corporate move will improve McDade’s commute).
Besides costing the company a lot of money, Loeb says the move will be a disaster for the majority of PDL employees, who live closer to the existing facility. In a corporate report, the auditors expressed a concern about the turnover that will result from the move. Loeb says that a prevailing concern for McDade is the slip for his yacht in the boatyard that adjoins the new facility.
The space is leased, but PDL is spending $100 million on the buildout.
Loeb further said that McDade rejected out of hand a $30 per share buyout bid from a large pharma without taking the offer to the board. After disappointing investors with its revenue/earnings in Q1 of 2006, the stock dropped from $30 to the $20 range.
Loeb proposes that PDL be split into two separate, publicly traded companies, one a commercial operation, the other an R&D outfit. Loeb thinks the ESP Pharma acquisition of a few years ago was a waste of money, and he would like to segregate that part of the company from its traditional business. PDL has a revenue stream based on its ability to humanize monoclonal antibodies for other biotechs. PDL uses that revenue to underwrite its own drug development activities (see story).
Loeb has proposed four board members for PDL, but McDade rejected them because he felt they were not qualified, although he agreed - reluctantly - to one. Loeb said he would not settle for less than two and responded with a list of 12 people, all senior level executives or people already serving on other boards. McDade said they were unqualified.
At that point, Loeb decided that the only way he was going to get a hearing was to go public with his concerns about PDL BioPharma.
McDade was installed as CEO in 2002.
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