Merrill. That first sentence is pretty wishy washy.
Assume business as usual, but anything possible now
We assume that in 6 months, PDL will look pretty much as it does today, with the
pipeline further along, a late-stage product candidate possibly in-licensed and
ularitide hopefully partnered. But in view of shareholder activism and pending
reviews by outside consultants, we can’t rule out a curveball in the form of major
strategic changes. Either way, we think the stock could benefit. Maintain Buy.
Shareholder activism (including co-founder) continues
Initiatives by Third Point against management and the Board and surprising
criticism by co-founder Cary Queen (inventor on PDL’s key patents) have
motivated PDL to improve transparency, analyze its spending, hire outside
consultants and consider strategic alternatives (which may be potentially good for
the stock).
Meanwhile, PDL needs to remain focused on pipeline
While DDW is not a “big” meeting yet for PDL, there will be presentations this
week on the encouraging long-term data for Nuvion (now in phase III) from earlier
phase I and I/II trials in severe ulcerative colitis and from a small phase Ila proof
of concept trial in moderate to severe Crohn’s disease. BiogenIDEC also provided
some details at its analyst day for the design of the daclizumab SELECT
monotherapy phase II trial in multiple sclerosis expected to begin in 2H07.
Expecting continued volatility, maintain Buy
We do not know whether PDL over the next 6-months will in-license a product
candidate, cut R&D spending, partner ularitide, spin out its royalty stream, strike a
settlement with Alexion, or be acquired -- among other possibilities, but we do
expect continued volatility on shareholder activism and maintain our Buy rating. |
