Loeb's Third Point Said There Was a $20/Share Offer for Maguire Properties (MPG)

In an amended 13D filing on Maguire Properties Inc. (NYSE: MPG), Daniel Loeb's Third Point LCC, an 8.8% holder, said they are in receipt of a letter indicating that a viable third party recently approached the Company with a proposal to acquire all of the outstanding shares of the Company for approximately $20 per share in cash. Third Point said although the proposal has been withdrawn, the proposal can still be converted into a fully-financed, unconditional offer if the Company takes certain steps.

From the Filing:

"The Reporting Persons are in receipt of a letter indicating that a viable third party (the "Acquirer") recently approached the Company with a proposal to acquire all of the outstanding shares of the Company for approximately $20 per share in cash (or, at the shareholder's option, stock in the resulting entity) (the "Proposal"). According to the Reporting Persons' information, although it has been withdrawn, the Proposal can still be converted into a fully-financed, unconditional offer if the Company takes steps which the Reporting Persons believe would have no negative financial or commercial implications to the Company. The Reporting Persons believe it is in the shareholders' best interests for the Company to assist the Acquirer, and any other viable bidder who may surface, in preparing for a premium offer for the Company. While a board of directors certainly has the right to determine whether it wants to sell the company it oversees, shareholders have the right to choose a board of directors whose interests are aligned with their own. The Reporting Persons will not support a board that does not exercise its fiduciary obligation to maximize shareholder value and will take whatever steps necessary to protect and maximize their investment in the Company."

Loeb's Third Point Gets Active With Maguire Properties (MPG) Following Failed Sale

In a 13D filing after the close on Maguire Properties (NYSE: MPG), Daniel Loeb's Third Point disclosed a 7.1% stake (3,350,000 shares) in the Company. At the quarter ended December 31, 2007, Third Point did not show a stake in Maguire.

Loeb's firm paid approximately $76,044,482 to acquire the 3,350,000 shares, which works out to about $22.70 per share. MPG is currenty trading at around $16. The stock sank 16% last Friday after the company said it will no longer pursue a sale.

From the filing: "The Common Stock was acquired by Third Point without any purpose or effect of changing or influencing control of the Company. However, as a result of the announcement by the Company on March 28, 2008, that its review of strategic alternatives no longer includes the active pursuit of a possible sale of the Company, Third Point may no longer be deemed to have acquired or to beneficially own the Shares with no such purpose or effect.

Third Point may engage in communications with other shareholders of the Company, knowledgeable industry or market observers, members of the board of directors or management of the Company or other representatives of the Company regarding the Company, including but not limited to its operations, strategy, management, capital structure and the strategic alternatives that may be available to the Company."

Maguire Properties, Inc., a real estate investment trust (REIT), engages in the ownership, management, acquisition, and development of office and real estate properties primarily in California.

Obrem Capital Boosts Stake In Micrel (MCRL), Requests Special Meeting to Replace Board

In an amended 13D filing this morning on Micrel Inc. (Nasdaq: MCRL), Obrem Capital Management, a 14.9% owner, said they are disappointed by the Board's purported adoption of the Rights Plan. In response, Obrem sent a letter to the company requesting a special meeting of shareholders for the purpose of replacing the members of the current Board with their recommendations. The firm provided data on six individuals nominated for election to the Company’s board of directors.

Earlier in the month, Obrem Capital sent a letter to the company saying they believe that the shares are substantially undervalued and that the Board should explore strategic alternatives, including pursuing the sale of the entire company.

Obrem Capital is a hedge fund founded by 30 year old Andrew Rechtschaffen. Rechtschaffen started Obrem Capital after leaving Ken Griffin's Citadel Investment Group in 2005. Rechtschaffen was the subject of controversy when he joined Citadel from hedge fund Greenlight Capital. Activist investor Daniel Loeb of Third Point LLC took exception to Griffin poaching Rechtschaffen from his friend David Einhorn's Greenlight. This prompted Loeb to send a nasty letter to Griffin, saying he should stay away from his employees and the employees of his allies if he knows what is good for him.

Loeb's Third Point LLC Shows New Stake in AK Steel (AKS), Raises CCU, Lowers DDS

Daniel Loeb's Third Point LLC released their 13F for the quarter ended December 31, 2007 yesterday afternoon.

Here are a few highlights:

* New 700,000 share stake in AK Steel Holding Corp. (NYSE: AKS)

* Raises stake in Clear Channel Communications Inc. (NYSE: CCU) from 2,750,000 to 3,500,000

* Lowers stake in Dillard's Inc. (NYSE: DDS) from 2,400,000 to 1,750,000

The full summary of Loeb's 13F is available at our main site here

Highland Capital Wants PDL BioPharma (PDLI) To Hire A New Advisor For Sale Process

In an amended 13D filing today on PDL BioPharma (Nasdaq: PDLI) today, 7% holder Highland Capital Management, L.P. disclosed a letter to the company saying they are closely monitoring the sale process and recommended the Board of Directors engage a new financial advisor with substantial experience and competence to maximize the value the company's pharmaceutical royalty stream asset. The firm said the company's current advisor, Merrill Lynch, is not qualified.

Highland Capital said Merrill Lynch appears incapable or unwilling to market the royalty stream to all appropriate buyers, which they believe will impair the value of the asset. Highland Capital named a number of firms, including themselves, that desire to be included in the auction.

Highland Capital said, "The recent sell down by your most vocal shareholder should not invite the Board of Directors to ignore its fiduciary duty to the company's owners." Highland is clearly pointing to Daniel Loeb's Third Point LLC, which recently sold its entire stake in the PDL.

Shares of PDL are up 2% top $18.39 today.

Copy of the Letter:

Ladies and Gentlemen:

We acknowledge the progress the Board of Directors has made towards achieving the objectives outlined in the October 1st press release and continue to believe that an expeditious sale of PDL Biopharma, Inc. (“PDL”) as a whole or the monetization of its key assets will generate significant value for shareholders. As you are obviously aware, the recent sell-off in the stock has further widened the gap between the company’s public-market valuation and intrinsic value, making the Board of Director’s task even more relevant. The recent sell down by your most vocal shareholder should not invite the Board of Directors to ignore its fiduciary duty to the company’s owners. Rest assured that Highland is closely monitoring the process with a view towards protecting our investor’s best interests.

In our previous communication we encouraged the Board of Directors to retain additional expertise in evaluating its most valuable asset, the royalty stream. As you know, PDL’s royalty stream is a complex financial asset most comparable to a bond and in our opinion should be marketed as such if maximum value is to be achieved. Thus, we recommend that the Board of Directors engage an advisor with substantial experience and demonstrable competence with these esoteric assets. We do not believe the advisor selected by the Board of Directors is so qualified. When pressed on a recent conference call, Merrill Lynch could not name a single successful pharmaceutical royalty securitization transaction it had consummated. Their status as a leader in the mortgage securitization marketplace is irrelevant given the unique cash flow characteristics and buyer pool of pharmaceutical royalty streams.

While the current advisor’s lack of experience with pharmaceutical royalties is reason enough to seek additional counsel, recent developments lead us to believe that the Board of Directors should seek additional assistance immediately. Pointedly, the current advisor appears incapable or unwilling to market the royalty stream to all appropriate buyers, which we believe will impair the value of the asset. In fact, we understand that many well-known leading buyers of pharmaceutical royalty streams have been denied diligence materials to assist them with valuing the asset. Based on our experience, a substantial universe of savvy, well-capitalized investors would include Farallon Capital Management, HBK Investments, QVT Financial, Marathon Asset Management, Perry Capital, McDonnell Investment Management, Taconic Capital Advisors, and Apollo Investment Corp; these parties and others should be given the full opportunity to enter into a confidentiality agreement in order to evaluate the company’s assets. Furthermore, Highland Capital Management has been excluded from this process, which we find particularly concerning given our status as a significant equity owner and participant in the pharmaceutical royalty securitization market. Highland Capital Management desires to be included in this auction, is willing to sign a confidentiality agreement, and will dedicate substantial resources to evaluate these assets in a most expeditious manner. We believe the prosecution of the asset sales thus far to be a breach of fiduciary responsibility by both Merrill Lynch and the Board of Directors.

Finally, we believe the current advisor may be rushing to achieve a transaction that we would view as suboptimal. It is our understanding that the final bid date for the royalty auction has been set for December 19th. Additionally, based on our market reconnaissance, we believe that the field of bidders has been effectively limited to one party, leading us to believe that the process is not competitive and will result in a suboptimal outcome if allowed to proceed. We believe the auction should be conducted in early 2008, with a pre-arranged financing package available for any potential buyer — a successful royalty stream auction tool that a more experienced advisor routinely provides.

With the proper guidance, we believe the Board of Directors can deliver an optimal outcome to shareholders. We reiterate our demand that the Board of Directors take appropriate actions to honor its fiduciary obligations to PDL’s shareholders.

Sincerely,

Jim Dondero

President and CEO

Highland Capital Management

Loeb's Third Point LLC Lowers Stake in Atmel (ATML) Below 5%

In an amended 13D filing after the close Friday on Atmel (Nasdaq: ATML), Daniel Loeb's Third Point LLC disclosed they lowered their stake in the company to 4.99% (22.4 million shares).

Loeb's firm held 35 million shares of Atmel at the quarter ended September 30, 2007.

Loeb's firm sold large blocks of Atmel stock from 10/11 thru 11/30 at prices from $5.80-$4.39.

Because Loeb's firm is below the 5% threshold, he will not be required to file updated 13Ds on the position.

Atmel has not been a winning trade for Loeb. The original 13D, filed in July, showed Loeb paid an average of about $5.45 per share for the stock. It is currently at $4.42.

Loeb's Third Point Discloses 8% Stake in TXCO Resources (TXCO), Plans to Nominate 3 To Board

In a 13D filing on TXCO Resources, Inc. (Nasdaq: TXCO), Daniel Loeb's Third Point LLC disclosed an 8% stake (2,750,000 shares) in the company. Loeb said the stock is undervalued and he cited concerns about the Company's ability to manage the opportunities of its development projects. Loeb intends to nominate three invididuals to the company's board of directors.

Loeb's spent approximately $34,536,430 to acquire the 2,750,000 shares the hold (about $12.56 per share).

TXCO Resources Inc. is engaged in the exploration, exploitation, development, production and acquisition of onshore domestic oil and gas reserves.

Loeb's Third Point Lowers Stake in PDL BioPharma (PDLI) to 5.1%

In an amended 13D filing on PDL BioPharma, Inc. (Nasdaq: PDLI), Daniel Loeb's Third Point LLC disclosed a 5.1% stake (6,000,000 shares) in the company. This is down from the 9.7% stake (11,300,000 shares) he disclosed in a prior filing.

Third Point sent a letter to the Board of Directors in which it acknowledged positive developments relating to the Company's announced intentions to commence a sale process but expressed concern that the Board does not include a Third Point representative and that the Company is being led by L. Patrick Gage as Interim Chief Executive Officer. In the letter, Third Point reiterated its belief that the shares remain undervalued and stated that, as one of the Company's largest shareholders, it will be carefully tracking developments at the Company and assessing its options.

A Copy of the Letter:

PDL Board Members:

We are encouraged by PDL's October 1st press release announcing that the Board will actively seek the sale of the entire Company or all of its component pieces. We are also pleased with the progress apparently being made by the Merrill Lynch investment bankers in spear heading this process and advancing it expeditiously to a successful conclusion.

Despite these positive developments, we are disappointed that the sale process is still being led by a Board that does not include a Third Point representative, and that Patrick Gage remains the Company's CEO, despite having demonstrated his unsuitability. Accordingly, although we remain convinced that PDLI shares are undervalued, and that a sale will maximize shareholder value, in light of your continuing refusal to provide us with a voice in the Company's affairs through a Board seat, we have reduced our position.

Despite the reduction in our PDLI position, we have maintained a holding above the 13D filing threshold, and remain one of the Company's largest shareholders. We will be carefully watching developments, and assessing our options, as events unfold.

Sincerely,
Daniel S. Loeb

PDL BioPharma (PDLI) Yields To Activists Pressure

Activist-target PDL BioPharma, Inc. (NASDAQ: PDLI) is trading 7.5% higher today following news, after the close, that the company will seek offers for the sale of the company as a whole or of its key assets. The company also announced that Mark McDade has stepped down from his position as chief executive officer and a director effective immediately.

PLDI has been an activist target of Dan Loeb's Third Point LLC and Highland Capital Management. In addition, Stevie Cohen's SAC Capital owns a 'passive investment' in PDLI.

Both activist groups have been calling for McDade's head and a sale of the company as a whole. The one thing the firms didn't get was the head of Chairman L. Patrick Gage, who will now also take over as interim CEO.

Wachovia's analyst sees the stock worth up to $25 per share in a deal. Some have estimated the stock could be worth north of $30. The stock is currently at $23.

Highland Capital Joins Loeb In Calling For a Sale of PDL BioPharma (PDLI)

Highland Capital Management has joined Dan Loeb's Third Point LLC in calling for a sale of PDL BioPharma, Inc. (NASDAQ: PDLI).

Highland Capital, which hold approximately 4.7% of the common shares outstanding of PDL, delivered a letter to the company's Board of Directors urging the Board to proactively pursue a sale of the entire company and called for the immediate resignations of Dr. Patrick Gage as Chairman and Mark McDade as chief executive officer.

A Copy of Highland Capital's Letter:

Ladies and Gentlemen:

As you know, through its affiliates and managed accounts, Highland Capital Management, L.P. owns approximately 4.7% of the common stock of PDL Biopharma, Inc. ("PDL").

Over the past three weeks we have contacted each of you to express our displeasure with the ambiguous message conveyed on the August 28th conference call, to voice additional concerns, and to offer recommendations that we believe will maximize the value of PDL's substantial assets. We have concurrently consulted various advisors, Wall Street and other shareholders that have provided additional perspective into PDL's current situation. We applaud the efforts that you have made to investigate Mr. McDade's questionable acts and to identify new leadership to guide PDL toward the maximization of shareholder value. Unfortunately, we believe this process has stalled.

After carefully evaluating the information we have gathered and considering the recent resignation of Dr. Samuel Broder from PDL's Board of Directors, we insist the Board move rapidly to undertake deliberate action to maximize shareholder value and to mitigate the franchise deterioration that occurs when direction is unclear and alternatives are unexplored. We strongly recommend the following actions:

-- The Board should seek additional expertise in evaluating the complex alternatives available for the royalty stream.

-- The Board should proactively pursue selling the entire company, either in a single or multiple transactions. Given PDL's lackluster R&D track record, we adamantly oppose anyeffort to reconfigure PDL into an early stage developmental company.

-- PDL should clearly communicate to the market that it is proactively working to sell the entire company.

-- Dr. Patrick Gage should promptly resign as Chairman of PDL's Board of Directors.

-- Dr. Laurence Korn should take over the role of Chairman.

-- Mark McDade should immediately resign as CEO and depart the company entirely. We view Mr. McDade as an impediment to the strategic review process.

-- An independent Board member should be added to fill the vacancy left by Dr. Broder. This individual should possess a thorough understanding of his role as a shareholder advocate as well as experience in biopharmaceutical M&A.

Public Market Valuation Remains Well Below Private-Market Value of Assets

Bluntly, we have lost confidence in the current leadership's ability to maximize the value of PDL's shares. Our views were confirmed by the multiple sell-side research analyst downgrades and the 20% one-day decline in the share price subsequent to the perplexing August 28th conference call. While the share price has modestly recovered from the sizeable one-day decline, management's inability to clearly articulate a plan to maximize shareholder value gives us little confidence that the current regime is capable of pursuing the steps necessary to realize the significant intrinsic value of PDL's substantial assets.

Following the recent decline, shares are trading at a sizeable discount to the private-market value of the underlying assets, which we conclude is driven by investor confusion regarding the company's strategy, poor understanding of the royalty stream's value, and trepidation that current management will further erode value. Strikingly, we estimate that shares of PDL are currently priced at a value ranging from a modest premium to a slight discount to the private-market value of the company's royalty stream, an asset that current leadership had little role in developing.

Subsequent to our conversations we have concluded that 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. We were particularly surprised by Dr. Gage's preconceived notion that alternatives available to monetize single-drug royalties were not appropriate for the company's large and diverse cash flow stream. 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. Given the obvious confusion surrounding the company's largest and most valuable asset, we encourage the Board to seek additional expertise in evaluating the available options. We have made each of you aware of a third party that possesses an extensive track record of successful pharmaceutical royalty transactions and recommend that this third party is permitted to present to the full Board as soon as possible.

Additionally, we encourage PDL to make publicly available as much information as contractually permitted regarding the various agreements constituting the company's royalty stream. While several parties have valued the cumulative royalty stream at approximately $2.0 billion, we believe this estimate is most valid for the eight existing royalties as well as potential flows from publicly disclosed molecules that are currently in clinical development. Of course, these royalties are the result of the company's Queen Patents and will cease when the patents expire in 2014. Additionally, we understand PDL may receive potentially sizeable cash flows associated with agreements that govern antibodies humanized by PDL. We understand that these agreements call for a royalty rate that is slightly higher than the rate on current royalties, and lasting 10 to 15 years post-commercialization. We are confident that the investing community is not currently considering this potentially valuable optionality. We believe data surrounding these agreements was publicly discussed by prior leadership and we are mystified that current management has not described these potentially lucrative arrangements to investors. The failure to clearly communicate as much information as possible about the various agreements increases our skepticism that the current regime fully grasps the value of its most prized asset.

Board Should End Confusion and Clearly Articulate a Desire to Sell PDL

"Due to insufficient efficacy and an inferior safety profile observed in a recent data monitoring committee evaluation of the RESTORE 1 trial evaluating Nuvion in steroid-refractory ulcerative colitis, PDLI has decided to terminate the Nuvion Phase 3 program. Given the challenges facing development of this agent over the past six years we have been following the company, we highly doubt this antibody will ever reach the market for treatment of any indication. In our view, this major blow calls into question PDLI's capability to ever bring a product to the market and significantly changes Street perception of PDLI as a clinical development enterprise."

Given these concerns we strongly oppose any attempt to reconfigure PDL into an early-stage biopharmaceutical company, and instead advocate the immediate sale of the company, in full or in multiple transactions, to entities that are more capable of exploiting the various assets. We believe numerous buyers exist for each of the company's individual assets and are encouraged by management's initial decision to divest the company's commercial products. That said, multiple parties may have the desire and ability to acquire the entire company, and we trust the Board and its advisors will proactively pursue the full range of alternatives in order to maximize shareholder value.

Furthermore, in order to repair the damage done by the August 28th conference call, we recommend that PDL issue a press release that lucidly communicates to the investing public that it is diligently and expeditiously working to sell the entire company. If the message is clearly conveyed and earnestly pursued, we believe the majority of shareholders will provide the Board with sufficient breathing room to consummate a transaction. And, given the scarcity value of PDL's antibody platform as well as the burgeoning market for pharmaceutical royalty streams, the demand for these assets will only increase.

Dr. Korn Should Be Named Chairman of the Board; Additional Qualified Board Member Should be Added; McDade Should Resign Immediately

Following substantial due diligence and internal debate we have concluded that Dr. Patrick Gage lacks the experience, skills, and pragmatism to maximize the value of the company's diverse assets. We concede that Dr. Gage's scientific credentials are noteworthy, however, we strongly disagree that his time at Wyeth or his current position as Chairman of micro-cap Neose Technologies qualifies him to lead the assessment of the complex alternatives currently being evaluated by the Board. By his own admission, Dr. Gage volunteered that his strongest skills were scientific in nature and indicated that other Board members were more capable of discussing PDL's prized royalty stream. We find it inconceivable that an individual who admittedly does not posses a thorough comprehension of the company's most valuable asset is chairing the Board at this juncture.

During the same conversation we were dismayed to hear that Dr. Gage has no interest in proactively seeking potential suitors for the company, although indicated that he would talk to an interested party if he were contacted. We view this commentary as well as Dr. Gage's ambiguous statements on the August 28th conference call as demonstrating an apathetic stance towards the owners of PDL. Given Dr. Gage's refusal to proactively pursue shareholder friendly actions, we request that he promptly resign as Chairman of the company.

We request that Dr. Laurence Korn be named to replace Dr. Gage as Chairman of PDL. Dr. Korn presided over the company when the majority of intellectual property and antibody humanization agreements were consummated, thus he likely possesses an intimate knowledge of the true value of the company's royalty stream. Additionally, his keen familiarity with the company's various partnership agreements makes him the logical candidate to proactively court potential suitors and achieve the highest possible bid for the company.

Furthermore, we recommend that the vacancy left by Dr. Samuel Broder be filled promptly by an acceptable candidate. During our due diligence, several parties described Dr. Broder as a rational individual with a thorough appreciation for his role as a shareholder advocate. As such, we view his abrupt departure with concern and therefore insist that the Board rapidly identify a replacement, who will appropriately represent the company's owners as discussions are held with potential suitors. This individual should have demonstrated expertise in biopharmaceutical M&A.

Finally, we believe Mark McDade should immediately resign as CEO and leave the company entirely. Sufficient demand exists for the company's commercial assets and we do not believe his "expertise" is needed to achieve the asset's maximum value. Furthermore, we believe Mr. McDade is an impediment to the strategic review process and his lingering with the company pending the effectiveness of resignation only exacerbates the uncertain direction of the company. He has caused enough shareholder angst and should not be permitted to continue his destruction of shareholder value.

We have attempted to, and will remain available to, discuss the recommendations put forth in this letter. That said, we believe the time for dialogue has ended and encourage each of you to honor your fiduciary obligations to the company and its shareholders by expeditiously implementing our recommendations in order to protect shareholder value. Rest assured Highland Capital Management will proactively pursue all available avenues and remedies to maximize shareholder value and protect the return of our investors.

Sincerely,
Jim Dondero
President and CEO
Highland Capital Management

Loeb's Third Point LLC More Than Doubles Stake in EXCO Resources (XCO)

In a 13G filing on EXCO Resources Inc. (NYSE: XCO), Daniel Loeb's Third Point LLC disclosed an 8.3% stake (9,088,157 shares) in the company. This is up from the 4,300,000 share stake the firm held at the quarter ended June 30, 2007.

A 13G indicates a 'passive investment', but Daniel Loeb is best known as an activist investor.

Fir Tree Partners Plans To Vote Against Plains Exploration's (PXP) Acquisition of Pogo Producing (PPP)

In a 13D filing on Plains Exploration & Production Company (NYSE: PXP) earlier today, 9% holder Fir Tree Partners said they plan to vote against the previously announced acquisition proposal of Pogo Producing Company (NYSE: PPP).

The firm said, "Our decision is based upon detailed financial analysis which suggests that a termination of the transaction could result in PXP’s share price appreciating by 70% or more over the ensuing year. Large scale share repurchases are a much more efficient use of shareholder capital given the extreme decline in PXP’s share price that was sparked by the announcement of the PPP deal and the negative natural gas price environment which makes PPP a less attractive/less valuable asset."

NOTE: Daniel Loeb's Third Point LLC is a large holder (7.9%) of Pogo Producing, and led the push to get the company sold. Third Avenue Management also owns a large stake (7%)

A Copy of the Letter:

Dear Mr. Flores (Chair/Pres/CEO),

We are writing to inform you that we currently own, or have the right to control, approximately 9% of Plains Exploration & Production Company (“PXP”) shares and plan to vote against the previously announced acquisition proposal of Pogo Producing Company (“PPP”).

Our decision is based upon detailed financial analysis which suggests that a termination of the transaction could result in PXP’s share price appreciating by 70% or more over the ensuing year. Large scale share repurchases are a much more efficient use of shareholder capital given the extreme decline in PXP’s share price that was sparked by the announcement of the PPP deal and the negative natural gas price environment which makes PPP a less attractive/less valuable asset.

We would like to start by saying we believe the management team at PXP is world class and has done a tremendous job of creating value for shareholders over the past 5 years. Importantly, it has demonstrated an impressive track record of both reserves growth and earnings growth which has translated into meaningful share price appreciation.

When the Pogo deal was announced in July, it initially appeared that it may have been reasonably attractive (though we would have preferred share repurchases) based on (i) the level of near-term cash flow accretion to PXP shares and (ii) the ability to acquire diversified reserves that would help build a best-in-class MLP. Since the announcement, the macro environment and industry fundamentals have changed materially. Most importantly, PXP has lost ~$1 billion in shareholder value as a result of the announcement. In the absence of the deal, we believe PXP could opportunistically repurchase 20-25 million shares (or 30% of the company) with proceeds from asset divestitures. Importantly, such repurchases would not compromise the financial flexibility of the company and it would maintain a Net Debt / EBITDA ratio in the 2.0-2.5x target range.

We believe the deal is no longer attractive to PXP shareholders for the following reasons:

1. Poor Deal Economics – PXP is the cheapest publicly traded exploration and production company of scale in the United States. Even prior to the deal, the market had given PXP minimal credit for its non-cash flow generating portfolio of Gulf of Mexico assets and California real estate, which it planned to divest. When adjusting PXP’s capitalization for the value of these non-core assets, PXP appears significantly cheaper than the target PPP and tremendously cheaper than its publicly traded comparable companies.

TABLE

2. Capital Markets Turmoil – The recent correction in the capital markets has materially lowered the value of the Pogo asset base as the equity markets have weakened by 5% and NYMEX natural gas prices are down 5-10% across the curve. The natural gas-weighted asset portfolio of Pogo has been especially impacted by the current environment and the unhedged earnings power of the business has been compromised. Specifically, we believe Pogo’s 2008E EBITDA will be off greater than 10% from levels pre-announcement based on current market pricing. Meanwhile, oil has been generally strong both benefiting PXP’s oil-heavy asset base, while the deep and liquid forward markets provide ample opportunity to hedge production forward.

3. PXP Standalone Assets Attractive for MLP – We strongly support management’s stated plans to move forward with its previously announced MLP formation. PXP’s existing oil-based, long-lived mature properties are ideal for placement into an upstream MLP. While the PPP assets would provide geographic diversity to the current PXP portfolio, we don’t believe this diversity would be awarded with a higher public market valuation. Further, upon completion of PXP’s MLP formation, the Partnership will provide a superior acquisition vehicle for proved developed producing assets similar to Pogo’s.

Importantly, we believe PXP will generate over ~$1 billion in after-tax proceeds over the next twelve months from the opportunistic sale of its non-core assets. Accordingly, the company could use the proceeds from these divestitures to repurchase 20-25 million shares. Assuming the company was valued at comparable company levels, PXP shares would be worth $70-75, representing 70-90% upside from current share levels. We believe upside remains to this valuation if the company successfully completes the formation of an upstream master limited partnership.

TABLE

In our view, the steps outlined above will generate much greater value for PXP shareholders than the path you are currently pursuing. We are available to discuss these issues further at your convenience. We look forward to the continued success of PXP under your stewardship.

Kind regards,
Andrew Fredman
Clinton Biondo

Loeb To Candela (CLZR): "No Really, I Am a Passive Investor"

In a 13D filing on Candela Corp. (Nasdaq: CLZR) Dan Loeb's Third Point LLC disclosed a 9.8% stake in the company and a dispute over the 'passive investor' status of their investment. In May, Third Point initially disclosed a large stake in the company (8.7%) via a 13G (passive) filing.

Third Point said they recently received a letter from the outside counsel of the company, claiming that the firm demanded the company immediately pursue a process to sell and therefore were not "passive investors" and were required to file a 13D with the SEC. Third Point contends that view.

Third Point said in an August conversation with the company's CEO, one of their representatives suggested that the Company should consider pursuing strategic alternatives, but did not suggest or demand that the Company take any particular action, including putting itself up for sale.

Third Point said in light of receipt of the letter from the company's counsel, they have filed this Schedule 13D.

OSS Capital Raises Stake in Flamel Technologies (FLML)

In an amended 13D filing on Flamel Technologies SA (Nasdaq: FLML), OSS Capital Management disclosed they raised their stake in the company to 26.5% (6,346,047 shares). In an August 13D/A filing the firm disclosed a 25.6% stake (6,151,047 shares) in the company.

Shares of FLML are up 7% today.

Dan Loeb's ThirdPoint LLC has a 9.2% 'passive' stake in Flamel and the company is already under activist pressure from Redwood Asset Management, which is calling for a sale.

Loeb Builds Up 9% Passive Stake in Bausch & Lomb (BOL), May Let Others Take the Lead on Activism

In a 13G filing after the close on Bausch & Lomb Inc. (NYSE: BOL), Daniel Loeb's Third Point LLC disclosed a 9% stake (5,000,000 shares) in the company. Loeb's firm held a 1,605,000 share stake in BOL at the quarter ended 06/30/07.

Bausch & Lomb is currently in a definitive merger agreement with Warburg Pincus to be acquired for $65 per share. Rival Advanced Medical Optics Inc. (NYSE: EYE) recently withdrew its $75 per share offer for Bausch & Lomb.

The 13G filing indicates a passive stake, but Loeb is considered an activist investor.

So what does Loeb have up his sleeve for Bausch & Lomb? If Loeb had immediate intentions to rattle management he would have had to file a 13D, so the 13G indicates Loeb prefers to take a 'wait and see' approach.

One thought is that Loeb could be letting another firm take the lead. In the past, Stevie Cohen's SAC Capital filed a 13D on Bausch & Lomb. Loeb could be giving the Wall Street icon first dibs to grill management on its dumb decision to pursue a $65 deal with a private equity firm when a $75 deal was on the table. Cohen cut his stake in BOL below 5% in July and held less than 1 million shares as of July 10, 2007, but it is conceivable that Cohen is still involved with the stock given its recent pullback. Other firms could also be involved.

Loeb Gets The Head of PDLI's McDade

Dan Loeb got his wish today - the head of PDL BioPharma, Inc. (Nasdaq: PDLI) CEO Mark McDade.

"PDL BioPharma, announced that a three-month internal investigation of the company's chief executive officer (CEO), Mark McDade, found no credible evidence of improper personal conduct or breach of fiduciary duty by McDade to corroborate the various allegations investigated. The company also announced that McDade, following the investigation and due to the personal toll created by the unsubstantiated rumors and related investigation, has decided to step down as CEO and a member of the board by the end of 2007."

Loeb's Third Point LLC has also been pushing for a sale of PDLI. So today's announcement could re-ignite takeover talk on the stock.

Here is some backround of the Loeb/McDade saga

Summary of Loeb's Third Point LLC 13F

Daniel Loeb's Third Point LLC issued their latest 13F for the quarter ended June 30, 2007:

New Stakes:

Abraxas Petroleum Corp. (AMEX: ABP) 1,207,572 shares, Aeroflex Inc. (Nasdaq: ARXX) 1,260,000 shares, Apartment Investment & Management Co. (NYSE: AIV) 755,000 shares, Applera Corp-Applied Biosystems Group (NYSE: ABI) 200,000 shares, Atmel Corp. (Nasdaq: ATML) 24,400,000 shares, BEA Systems Inc. (Nasdaq: BEAS) 9,650,000 shares, BioFuel Energy Corp. (Nasdaq: BIOF) 1,250,000 shares, CIT Group Inc. (NYSE: CIT) 750,000 shares, Citadel Broadcasting Corporation (NYSE: CDL) 4,396,163 shares, Clear Channel Communications Inc. (NYSE: CCU) 2,750,000 shares, Cypress Bioscience Inc. (Nasdaq: CYPB) 100,000 shares, Dillard's Inc. (NYSE: DDS) 1,000,000 shares, Dominion Resources Inc. (NYSE: D) 400,000 shares, Douglas Emmett Inc (NYSE: DEI) 2,750,000 shares, Greenlight Capital Re, Ltd. (Nasdaq: GLRE) 800,000 shares, Herbalife Ltd. (NYSE: HLF) 1,000,000 shares, Home Solutions of America Inc. (Nasdaq: HSOA) 100,000 share PUT, ICICI Bank Ltd. (NYSE: IBN) 1,110,000 shares, Invesco Plc (NYSE: IVZ) 850,000 shares, Linn Energy, LLC (Nasdaq: LINE) 1,733,331 shares, Medis Technologies Ltd. (Nasdaq: MDTL) 100,000 shares, NuStar GP Holdings LLC (NYSE: NSH) 2,000,000 units, OM Group Inc. (NYSE: OMG) 2,050,000 shares, Post Properties Inc. (NYSE: PPS) 165,000 shares, T. Rowe Price Group, Inc. (Nasdaq: TROW) 100,000 shares PUT, Symantec Corporation (Nasdaq: SYMC) 500,000 shares, UBS AG (NYSE: UBS) 150,000 shares, United Therapeutics Corp. (Nasdaq: UTHR) 250,000 shares, Vantage Energy Services, Inc. (AMEX: VTG) 1,875,000 shares, Veeco Instruments Inc. (Nasdaq: VECO) 1,425,000 shares, Victory Acquisition Corp. (AMEX: VRY) 2,200,000 shares, Willbros Group Inc. (NYSE: WG) 1,500,000 shares

Raised Stakes: Acadia Pharmaceuticals Inc. (Nasdaq: ACAD) from 350,000 shares to 475,000 shares, Alkermes, Inc. (Nasdaq: ALKS) from 750,000 shares to 2,835,000 shares, ATP Oil & Gas Corp. (Nasdaq: ATPG) from 2,000,000 shares to 2,500,000 shares, Eddie Bauer Holdings, Inc. (Nasdaq: EBHI) from 1,200,000 shares to 1,425,000 shares, Bausch & Lomb Inc. (NYSE: BOL) from 300,000 shares to 1,605,000 shares, Candela Corp. (Nasdaq: CLZR) from 1,275,000 shares to 2,120,000 shares, Charming Shoppes Inc. (Nasdaq: CHRS) from 2,2000,000 shares to 5,250,000 shares, CSX (NYSE: CSX) from 1,300,000 shares to 2,000,000 shares, CV Therapeutics, Inc. (Nasdaq: CVTX) from 1,350,000 shares to 5,900,000 shares, Cypress Semiconductor Corporation (NYSE: CY) from 750,000 shares to 5,300,000 shares, DAIMLERCHRYSLER (NYSE: DAI) from 322,000 shares to 447,000 shares, DepoMed Inc. (Nasdaq: DEPO) from 325,000 shares to 4,735,000 shares, Flamel Technologies SA (Nasdaq: FLML) from 225,000 shares to 920,000 shares, Freedom Acquisition Holdings Inc. (NYSE: FRH) from 1,500,000 shares to 2,700,000 shares, Granite Construction Inc. (NYSE: GVA) from 1,350,000 shares to 3,500,000 shares, Infineon Technologies AG (NYSE: IFX) from 1,800,000 shares to 2,600,000 shares, Nabi Biopharmaceuticals (Nasdaq: NABI) from 5,750,000 shares to 6,890,000 shares, Norfolk Southern Corp. (NYSE: NSC) from 1,250,000 shares to 1,350,000 shares, Northern Orion Resources Inc. (AMEX: NTO) from 7,600,000 shares to 8,600,000 shares, NYSE Euronext, Inc. (NYSE: NYX) from 1,650,000 shares to 4,849,700 shares, PDL BioPharma Inc. (Nasdaq: PDLI) from 8,450,000 shares to 11,400,000 shares, Questar Corp. (NYSE: STR) from 325,000 shares to 3,500,000 shares, Synovus Financial Corp. (NYSE: SNV) from 5,500,000 shares to 7,375,000 shares, Tronox Inc. (NYSE: TRX) from 450,000 shares to 2,500,000 shares, Union Pacific Corp. (NYSE: UNP) from 500,000 shares to 700,000 shares

Lowered Stakes:

Acorda Therapeutics, Inc. (Nasdaq: ACOR) from 2,290,000 shares to 1,000,000 shares, AEP Industries Inc. (Nasdaq: AEPI) from 1,000,000 to 0, Alexion Pharmaceuticals, Inc. (Nasdaq: ALXN) from 400,000 shares to 0, BearingPoint (NYSE: BE) from 3,000,000 to 0, Bristol-Myers Squibb Co. (NYSE: BMY) 200,000 to 0, Cephalon Inc. (Nasdaq: CEPH) from 375,000 shares to 200,000 shares, Clearwire Corporation (Nasdaq: CLWR) 150,000 shares to 0, Embarq Corp. (NYSE: EQ) from 325,000 shares to 225,000 shares, Euroseas, Ltd. (ESEA) from 262,212 shares to 0, FMC Corp. (NYSE: FMC) from 700,000 shares to 0, FEI Co. (Nasdaq: FEIC) from 2,130,000 shares to 1,950,000 shares, General Motors Corporation (NYSE: GM) from 1,000,000 to 0, ICO GLOBAL COMM CL A (Nasdaq: ICOG) from 4,500,000 shares to 2,245,000 shares, Invitrogen Corp. (Nasdaq: IVGN) from 800,000 shares to 750,000 shares, Koninklijke Philips Electronics NV (NYSE: PHG) from 685,000 shares to 400,000 shares, Leap Wireless International Inc. (Nasdaq: LEAP) from 750,000 shares to 575,000 shares, Martin Marietta Materials Inc. (NYSE: MLM) from 2,575,000 shares to 550,000 shares, Mastercard Incorporated (NYSE: MA) from 1,900,000 shares to 1,600,000 shares, MDS, Inc. (NYSE: MDZ) from 1,350,00 shares to 0, Molex Inc. (Nasdaq: MOLX) 475,000 shares to 181,700 shares, Motorola Inc. (NYSE: MOT) 3,000,000 shares to 0, Neurochem Inc. (Nasdaq: NRMX) from 250,000 to 0, Neurocrine Biosciences Inc. (Nasdaq: NBIX) from 1,215,000 shares to 0, Onyx Pharmaceuticals Inc. (Nasdaq: ONXX) from 1,080,000 shares to 500,000 shares, Plains Exploration & Production Company (NYSE: PXP) from 2,000,000 shares to 0, QIMONDA AG (NYSE: QI) from 400,000 shares to 0 ,QUALCOMM (Nasdaq: QCOM) from 500,000 shares to 0, Ryerson Inc. (NYSE: RYI) from 1,975,000 shares to 0, SAIC, Inc. (NYSE: SAI) from 300,000 shares to 0, Sears Holdings Corporation (Nasdaq: SHLD) from 500,000 shares to 0, SunPower Corporation (Nasdaq: SPWR) from 559,800 shares to 336,800 shares, Talisman Energy Inc. (NYSE: TLM) from 3,750,000 shares to 1,000,000 shares, Temple-Inland Inc. (NYSE: TIN) from 300,000 shares to 0, Tronox Inc. (NYSE: TRX) from 900,000 shares to 0, Verigy, Ltd. (Nasdaq: VRGY) 900,000 shares to 800,000 shares

Maintained Stakes:

Ariad Pharmaceuticals Inc. (Nasdaq: ARIA), Burlington Northern Santa Fe Corp. (NYSE: BNI), CBS CORP CL B (NYSE: CBS), Chipotle Mexican Grill, Inc. (NYSE: CMG), Coleman Cable, Inc. (Nasdaq: CCIX), Core-Mark Holding Company, Inc. (Nasdaq: CORE), Dade Behring Holdings Inc. (Nasdaq: DADE), EXCO Resources Inc. (NYSE: XCO), Flow International Corp. (Nasdaq: FLOW), Harrah's Entertainment Inc. (NYSE: ET), IHOP Corp. (NYSE: IHP), Kansas City Southern (NYSE: KSU), Ligand Pharmaceuticals Inc. (Nasdaq: LGND), Loral Space & Communications, Inc. (Nasdaq: LORL), Massey Energy Co. (NYSE: MEE), Pogo Producing Co. (NYSE: PPP)

Loeb's Third Point Raises Stake in Cypress Semi (CY) to 5.1%, Wants Undervaluation of Semi Biz Addressed Sooner

In a 13D filing on Cypress Semiconductor (NYSE: CY), Daniel Loeb's Third Point LLC disclosed a 5.1% stake (7,674,000 shares) in the company. This is up from the 750,000 share stake the firm held at the quarter ended March 31, 2007.

Loeb's firm said the the implied value of the semiconductor business has declined 15% and it is time for management and the Board to aggressively pursue various strategies that should cause the significant value of the Company's semiconductor business to be fully reflected in the price.

The firm notes that while management has committed to distributing the Company's stake in Sunpower (Nasdaq: SPWR) no later than 2009, they believe that there are tax-efficient mechanisms to do so sooner and believe that the Board should expedite its review of these mechanisms in order to implement as soon as practicable a strategy that will allow the Company's shareholders to realize the value of the semiconductor business well before 2009.

The firm belives the implied valuation of the semiconductor business is understated by at least 50%. The firm also said the implied valuation of the semiconductor business is well less than one-half of the valuation that they understand was ascribed to it during advanced LBO discussions that took place in the fall of 2006. The firm said this business has only become more valuable since.

The firm said if the undervaluation of the semiconductor business is addressed, the market price of the common stock could increase 25% from current levels.

From the Filing:

The Reporting Persons generally support the existing strategy of the Company and believe that the Company's management team and its Board of Directors (the "Board") have, since the beginning of 2006, been very effective in identifying and enhancing the value of Sunpower for the benefit of the Company's shareholders (which the Reporting Persons believe has already been reflected in the valuation of the Common Stock) and in significantly increasing the value of the Company's semiconductor business (which the Reporting Persons believe has not yet been reflected in the valuation of the Common Stock).Specifically, the Company's management has taken important steps in divesting money-losing, underperforming, non-core and commodity semiconductor units over the past 18 months and in materially reducing the physical infrastructure associated with the semiconductor business, resulting in a large and permanent reduction in capital spending requirements. The Company's management has also refocused the semiconductor business on fast-growing, value-added and higher-margin products, which the Reporting Persons believe will result in strong free cash flow generation by that business. In addition, from a corporate finance perspective, the Company has "refinanced" its convertible debt advantageously and sold Sunpower shares, allowing it to repurchase Common Stock on an opportunistic and accretive basis.

However, during this same period, as management has made these many positive strategic moves, the implied value of the semiconductor business embedded within the Common Stock market price has declined by about 15%,significantly under performing the semiconductor indices, which have risen. Given this sustained period of under performance by the "semiconductor portion" of the Common Stock, and given that further buybacks of Common Stock at current levels would not be nearly as accretive as those in the past, (as Sunpower now makes up roughly 80% of the value of the Common Stock), we believe that it is time for management and the Board to aggressively pursue various strategies that shouldcause the significant value of the Company's semiconductor business to be fully reflected in the market price of the Common Stock. While the Reporting Persons appreciate that management has committed to distributing the Company's stake in Sunpower no later than 2009, the Reporting Persons believe that there are tax-efficient mechanisms to do so sooner and believe that the Board (which the Reporting Persons understand is well aware of these issues)should expedite its review of these mechanisms in order to implement as soon as practicable a strategy that will allow the Company's shareholders to realize the value of the semiconductor business well before 2009.

The Reporting Persons intend to make themselves available to the Board to discuss in depth their views on this extremely important issue, as well as the metrics by which the Reporting Persons have concluded that the financial markets are materially undervaluing the Company's semiconductor business today. In general, the Reporting Persons observe that the implied value of the Company's semiconductor business (as measured by the total market capitalization of the Company, minus the value of the Sunpower holdings, minus the net cash position at the semiconductor business) currently stands at roughly $800 million. The Reporting Persons believe that this implied valuation understates by at least50% the fundamental value of the Company's semiconductor business, based on key metrics such as price-to-sales, price-to-earnings and free-cash flow-yield - as compared to its relevant semiconductor peers. Moreover, the Reporting Persons believe that the current implied valuation of the Company's semiconductor business is well less than one-half of the valuation the Reporting Persons understand was ascribed to it during advanced LBO discussions that took place in the fall of 2006 - and that this business has only become more valuable since.Given their belief that this valuation "disconnect" could persist until a distribution date for the Company's Sunpower holdings draws nearer, the Reporting Persons believe that the Cypress Board must expeditiously continue to follow its successful path of doing what is best for the Company's shareholders,which has already resulted in significant gains for stakeholders. Specifically,the Reporting Persons ask that the Board immediately consider all means to cause the full value of the Company's semiconductor business to be appropriately reflected in the current share price - which the Reporting Persons believe could result in an increase in the market price of the Common Stock of 25% from current levels.

Biglari Calls Applebee's (APPB) Deal Undervalued, Attacks SEC-Chief Turned Activist Breeden

There is an interesting situation developing in Applebee's!

Activist investors Sardar Biglari, Chairman and CEO of The Lion Fund, L.P. and Western Sizzlin, said he intends to vote against the acquisition of Applebee's (Nasdaq: APPB) by IHOP (NYSE: IHP), calling the $25.50 per share offer below the fair value of the Company.

Biglari said, "I believe Applebee's board has made a grave mistake in agreeing to an undervalued bid for the entire company. This arrangement is most alarming because new board members promised to protect shareholders' interests, yet they have not verbalized any opposition to this ill-advised transaction." (NOTE: This looks like an attack on ex-SEC Chief turned activist Richard Breeden, who was awarded two board seats in April)

Biglari's group holds 1,019,000 shares of Applebee's, about 1.4%.

If you remember, Biglari was successful in unlocking value at Friendly Ice Cream (AMEX: FRN), which recently announced a deal to be acquired by affiliates of Sun Capital Partners, Inc. for $15.50 per share.

To make matters even more interesting - activist investor Daniel Loeb's Third Point LLC owns a 7.2% stake in IHOP.

A Copy of Sardar Biglari's Press Release:

Sardar Biglari, Chairman and CEO of The Lion Fund, L.P. and Western Sizzlin Corp. (OTC Bulletin Board: WSZL), announced today that he intends to vote against Applebee's International, Inc. (Nasdaq: APPB) proposed transaction with IHOP Corp. (NYSE: IHP).

Mr. Biglari Issued the Following Statement Explaining Why He Intends to Vote Against the Transaction:

I want to express to you my concerns about the possible sale of Applebee's (" Applebee's" or the "Company") to IHOP Corp. ("IHOP") for $25.50 per share in cash, a price which I believe is below the fair value of the Company. I believe Applebee's board has made a grave mistake in agreeing to an undervalued bid for the entire company. This arrangement is most alarming because new board members promised to protect shareholders' interests, yet they have not verbalized any opposition to this ill-advised transaction.

My assertions appear supported by the market's response to the announcement of the proposed transaction. On July 13, 2007, the business day prior to the announcement of the transaction, IHOP's and Applebee's stocks closed at $56.25 and $24.38, respectively. Since that announcement, IHOP's market value has jumped by approximately 16%, or $153 million, to $65.02 per share as of yesterday's close of business. However, the stock price of Applebee's, the acquiree, enjoyed virtually no premium, nay less than 1%, as of yesterday's close of business. Usually, it's the selling company, not the buying one, whose stock price appreciates substantially. Clearly, the proposed acquisition price does not reflect the fair value of Applebee's stock, and the substantial inherent value of Applebee's is being transferred to IHOP shareholders, as evidenced by the sizable increase in IHOP's market capitalization. In other words, we believe that if Applebee's undertook the same initiatives as IHOP has in mind, the appreciation IHOP recently gained would, at the very minimum, shift to Applebee's.

Incidentally, we like IHOP's plan to convert Applebee's to a nearly pure franchising model. The future of Applebee's resides in its franchisees. The decision to refranchise would yield several long-term strategic advantages. Applebee's should be in the franchising business for the cogent reason that it would achieve higher profit margins, assume less risk, and require very little in capital expenditures -- all strategic moves leading to healthy cash flows and high returns on capital. Unfortunately, if the transaction is approved, IHOP's, not Applebee's, shareholders are going to realize the benefits of transforming the Company into an asset-light firm.

We believe the proposed transaction represents a losing exercise for the shareholders of Applebee's. As shareholders, we are obliged to ask how Applebee's can be sold at a mere 5.2% premium over the share price as of the trading day (February 12, 2007) before the Company announced that it was exploring strategic alternatives.

We think Applebee's shareholders would realize considerably more money if the Company carries out the refranchising strategy as outlined by IHOP rather than permitting the sale to go through at the currently agreed price.

As Chairman and CEO of The Lion Fund, L.P. and Western Sizzlin Corp., I represent 1,019,000 shares of the outstanding common stock of Applebee's ( including shares of common stock underlying over-the-counter American-style call options). Because of our discontent with the proposed transaction, we are currently exploring all of our options. This Press Release is not a proxy solicitation.

SOURCE Western Sizzlin Corp.

Loeb's Third Point Reiterated its Demand That PDL BioPharma (PDLI) CEO Be Terminated; Notes Banker Hired

In an amended 13D filing on PDL BioPharma, Inc. (Nasdaq: PDLI), Daniel Loeb's Third Point LLC, a 9.8% holder, reiterated its demand that Mark McDade be terminated immediately as CEO of the Company.

Third Point also indicated its support for a recent directive evidently given to an investment bank to explore strategic alternatives, but expressed the belief that the process will be ineffective so long as Mr. McDade remains CEO.

A Copy of the Letter:

Dear PDL Non-Management Board Members:

We are dismayed by the lack of progress that the Board has made in addressing the concerns that we have set forth, most recently in our meeting in Palo Alto on June 19th. In the four weeks that have elapsed since that meeting, the only official communication that we have received from the Company has been a cursory "form letter" from Patrick Gage. Although we understand that you recently directed your financial and business advisors to explore all options to increase shareholder value, we believe that directive will prove futile so long as Mr. McDade remains CEO.

Accordingly, it is critical that you, the non-management directors, exercise your fiduciary duty and finally take action: terminate Mr. McDade before he is allowed to destroy shareholder value at our Company for even one more day. For the many reasons of which you have been apprised, and understand well, as long as you allow Mark McDade to remain as Chief Executive Officer of PDL BioPharma ("PDL", or "the Company") you are not acting in the best interests of, nor fulfilling your fiduciary duty to, PDL's shareholders.

We know that most of you understand the "chain of command" at companies incorporated in Delaware. However, if there is any uncertainty concerning directors' legal responsibilities, we suggest that you consult immediately with your counsel at DLA Piper, who will certainly confirm to you that:

1) A board of directors must work for, and only for, the company's
shareholders,
2) A company's management team serves at the discretion of the board of
directors and
3) The board of directors is responsible for ensuring that a company's
management team works effectively and in the best interests of the
company's shareholders

Too often we've come across public company directors who don't understand or accept these legal principles, and, in fact, believe instead that they work for, or as equal partners with, a company's management team. We fear, based on empirical evidence, that a minority of the PDL Board members may still hold those erroneous beliefs. As you can imagine, it is in such situations, wherein directors become too closely aligned with senior management, and thus fail to police them properly, that ineffective and/or unethical managers are often allowed to remain in office despite the obvious destruction of shareholder value they cause.

We trust that you are well aware of, and have paid especially close attention to, the recent shareholder-friendly initiatives undertaken by both the boards of Pfizer and Schering-Plough. It is now time for each of you to fulfill your own fiduciary obligations by immediately taking the necessary and obvious " shareholder-friendly" actions to benefit PDL's shareholders.

Many Reasons for McDade's Immediate Dismissal from PDLI

Mr. McDade's record of incompetence, egregiously bad business judgment and serious ethical lapses has been well documented by one of PDL's founders, numerous current and former employees, as well as by Third Point. These concerns undoubtedly have been weighing on your minds as you have been considering the future of the Company. It is abundantly clear that the most immediate, positive, obvious and profoundly shareholder-friendly action that you can and should take is to remove Mark McDade as CEO of our Company. We have presented you with overwhelming evidence, both professional and personal, as to why Mr. McDade's continued employment as CEO of PDL is unquestionably against the best interests of the Company's shareholders, and we know that you have uncovered additional supportive evidence and sources during your ongoing months- long investigation.

Specifically:
1) We have presented you and your advisors with evidence that Mr. McDade
was engaged in discussions with a large pharmaceutical company for
approximately six months in late 2006 and early 2007 that could have
led to an acquisition of PDL in the $32-$34 per share range (or more,
as this was just the initial indicated range). As we have discussed,
at least two in-person meetings were held at the CEO-to-CEO level, many
additional discussions took place with the potential acquirer's
business development head and other senior managers, and investment
bankers were involved in these discussions (which were clearly aimed at
an acquisition of the Company rather than simply partnering
discussions). As we have related to you, we believe that the deal did
not transpire because Mr. McDade insisted on being the only point of
contact at PDL until the very end of the process, was unresponsive to
due diligence demands and was unreasonable in his dealings with this
company.

While we do not believe that $32-$34 is a fair valuation for PDL, we
are very troubled - in fact, astonished - that Mr. McDade kept the
existence of these advanced discussions a secret from the Board, thus
preventing you from fulfilling your fiduciary duties by deciding how
best to handle this process for the benefit of PDL's shareholders.
And, indeed, how do we know whether there have been similar situations
where the Board was kept in the dark, to the collective detriment of
the Company and its shareholders? We believe that this episode alone
is grounds for dismissal of Mr. McDade, as he breached his duty to keep
the Board fully informed of material developments at the Company that
could significantly impact shareholder value, and because he
demonstrated that he cannot be trusted going forward to reveal to the
Board other material information that might be best for shareholders -
versus his own self-interest.

2) We have also provided you with evidence that Mr. McDade did not fully
and honestly communicate to the Board the advice that he received from
the Company's internal and external financial advisors not to move
PDL's corporate headquarters to Redwood City. As we have noted in
previous letters, and as is supported in correspondence that we have
forwarded to you from PDL employees (as well as your own due diligence
on this matter), this move will unnecessarily cost the Company $100
million in up-front costs in addition to significant ongoing
incremental operating expenses. Clearly this money could have been far
better utilized to benefit shareholders by advancing the Company's
pipeline. In addition, many important employees have already left PDL
as a result of the pending move, and many others plan to resign once
the move takes place later this year.

3) We have provided you with some of the considerable unsolicited incoming
correspondence and contacts (unprecedented in our history in both
volume and universally negative sentiment!) showing that PDL has been,
and continues to be, an increasingly dysfunctional company under Mr.
McDade's stewardship. As you are further aware, both from us and your
own investigation, the Company has lost a disproportionate number of
senior employees under Mr. McDade (and Rich Murray as well) in all
areas of the Company - but most alarmingly within the scientific staff.
These employees were either forced out by, or left as a result of,
current management's blatant favoritism and poor strategic vision and
execution. As a result, virtually all of the senior scientists who
developed the critical and innovative technologies that formed the
foundation of PDL are no longer at the Company. Our correspondents and
contacts have universally reported that PDL's work environment is rife
with employee unhappiness and self-interested management, one in which
blind loyalty to Mr. McDade is rewarded over competence, and that PDL
is a company with no coherent regulatory or R&D strategy, in which
senior management is not accessible to subordinates (even those also at
senior levels) and is detached from day-to-day operations. And only
favoritism, or worse, seems to be capable of explaining the mysterious
rise of Jeanmarie Guenot, and, before her, Laurie Torres. To the
extent that the Board continues to retain Mr. McDade, it must shoulder
the ultimate blame for this dysfunctional work environment.

4) As you know, Mr. McDade has consistently disappointed the financial
community by missing the earnings and sales projections and product
development timelines that he has forecast, and has consistently
exceeded expense (both SG&A and R&D) estimates. Moreover, Mr. McDade
has been grossly ineffective in communicating "the PDL story" to the
investment community. Consequently, since our first SEC filing over
four months ago the vast majority of "sell side" research analysts have
spoken out in favor of Third Point's proposals for the Company; you
are, of course, well aware of this, as we've shared many of these
reports with you. However, the fallout from Mr. McDade's mismanagement
and credibility deficit can be seen most clearly in the stock charts we
provided to you as part of our comprehensive 75-page board meeting
handout last month (the summary page of which is attached as an exhibit
to this letter) - PDL's stock has performed woefully in recent years
(before Third Point's investment in the stock was made public),
relative to the stocks of its partners, biotech peers, and the markets
in general. The quantifiable expression of the stock market's view of
the "McDade liability" is that when we accumulated our stake in PDL the
enterprise value of the Company was BELOW the net present value of the
Company's current royalty streams (and we believe it is now trading at
just a small premium to the value of these royalties). In other words,
up until the public revelation of our involvement in PDL's stock (i.e.,
until investors believed that there was hope that change was on the
way), investors ascribed NEGATIVE value to everything in the Company
other than the royalties from the Queen patent portfolio. There is no
better measure of Mr. McDade's value destruction and lack of
credibility with the investment community than the fact that, in the
aggregate, investors believe that PDL's specialty pharma products,
NOLs, real estate, technology platform and entire R&D pipeline have a
negative value in Mr. McDade's hands!

5) Mr. McDade lacks the ability to communicate with the investment
community effectively in part because he has a poor understanding of
even basic financial concepts - another major concern we have
communicated to the PDL Board many times. As we have discussed, he was
puzzled when we discussed the concept of internal rate of return (IRR)
analyses on research and development projects, and indeed called us
back to ask what we meant by this. He readily admitted to us that he
has not properly thought through nor effectively utilized PDL's tax
credits, which has and will result in reduced value for PDL
shareholders. (We do not mean to suggest that PDL's CEO must be a tax
expert - all we expect is that he or she take ownership of the issue
and develop a plan with the appropriate experts rather than ignoring an
important and readily exploitable Company asset.)

Also, as you know, Mr. McDade was the driving force behind PDL's
controversial decision to purchase ESP Pharma, which soon thereafter
resulted in asset writedowns. Incredibly, and embarrassingly, as
recently as two weeks ago Mr. McDade tried to spin the ESP acquisition
to the financial community as a success story - rather than properly
admitting that while it might have made some sense strategically at the
time the deal was struck, given Messrs. McDade and Murray's abject
failure to advance the PDL pipeline effectively, it has ceased to make
sense for the Company and has been, therefore, indisputably
disappointing.

Of course, as evidence of Mr. McDade's lack of financial acumen one
need only look at his demonstrated propensity to overspend wildly. We
have already presented you with our analysis (corroborated by multiple
brokerage research reports that were also included in our information
package, as well as the study being performed by Bain at our request)
showing that PDL is massively overspending on R&D and SG&A versus peer
biotech companies and pointing out that these ratios will soon become
astronomical when PDL's specialty pharma revenues decline as patents
begin to expire in a couple of years - despite what Messrs. McDade and
Gage would have you believe through their attempted manipulation of
numbers. This is, unfortunately, not just an isolated example of his
overspending. Another sobering example is Mr. McDade's experience as
CEO of Signature BioScience directly prior to his joining PDL.
Specifically, we suggest that you read again (and PDL investors not
familiar with Mr. McDade's history as a CEO should read for the first
time) the East Bay Business Times story dated February 15, 2002
entitled "Biotech firm makes deals in new strategy." (1) In this
story (included in your packages along with other stories and
correspondence regarding Mr. McDade's background), you have undoubtedly
noted that the "gameplan" Mr. McDade laid out for Signature is
disquietingly similar to the one he has been trying to implement at
PDL: imprudently and unproductively overspending on R&D and to acquire
products, building headcount exponentially and squandering much-needed
corporate capital by moving unnecessarily to a fancy new corporate
headquarters. What the story doesn't say is that within a year
Signature went bankrupt, in no small part as a result of Mr. McDade's
out-of-control spending. Mr. McDade's stewardship at PDL has shown
that he clearly has not learned his lesson about out-of-control
spending. We sincerely hope that you are struck by the similarities
here and will not allow history to repeat itself at PDL.

6) Lastly, we have presented you with copious correspondence from current
and former PDL employees charging that Mr. McDade has committed serious
ethical breaches at PDL that have compromised the interests of PDL's
shareholders. Specifically, we believe, based on numerous incoming
emails, faxes and telephone calls, as well as our own diligence, that
Mr. McDade has promoted unqualified people to senior positions within
PDL (or allowed them to maintain their jobs) as the result of personal
relationships, not job-based performance. As you are aware, these
issues have often been described as "open secrets" within PDL. While
Mr. McDade's personal life should be just that - "personal" - it has
become a concern of ours (and should be of yours) due to apparent
serious breaches of corporate policy that, most importantly, appear to
have seriously harmed PDL's shareholders.

Each of the six issues above is cause for the immediate dismissal of Mr. McDade and compelling evidence that he is not the right person to lead PDL. In addition, we note that Mr. McDade failed to discuss certain litigation strategies with the Board which apparently led to the resignation of the PDL Board's former Chairman earlier this year; and, he has attempted, unsuccessfully, to sell the investment community on his long-term plan for PDL while at the same time selling significant amounts of his own stock. We also want to remind you that while we have been communicating with the PDL Board about our concerns for over four months, we have had raised these same concerns directly with Mr. McDade for over a year.

In contrast to Mr. McDade's gross and unarguable incompetence, we continue to be impressed with the industry backgrounds and accomplishments of the non- management members of the PDL Board - and appreciate the good reputations that you have built during your respective careers in this field. Again, we urge you to uphold your obligations as shareholder fiduciaries by immediately removing Mr. McDade as CEO before he can further tarnish this Company - and its Board - with the negative and embarrassing reputation that he has so unfortunately earned.

The McDade Investigation

While we were happy to learn that the Audit Committee has recently brought on Latham & Watkins to assist in the ongoing investigation of Mark McDade, we remain concerned about the thoroughness of the investigation, which has already taken many months. Specifically (and we believe that others involved share these concerns), we believe that the attorney initially retained to conduct the investigation, and still responsible for most of it: 1) is not sufficiently qualified to run an investigation of this scope and importance, 2) may not be truly independent, as we fear that PDL's regular corporate counsel may have played an important role in the retention of the investigating firm, 3) has failed to ask pertinent and obvious questions of the interviewees, 4) has been extremely passive in her approach to the investigation (for instance, key former executives and Board members of PDL were not contacted until at least a month into the investigation), 5) has still not contacted important financial advisors with knowledge of the issues being examined, 6) had still not spoken with Mark McDade or other senior executives of PDL as of two weeks ago, 7) was unable to supply the Audit Committee with the arrest record of a key employee whose termination we also support, 8) does not possess the necessary investigative skills, nor mandate to bring in specialists, and 9) has not investigated PDL's or other email systems that are likely to yield important evidence.

We find these lapses impossible to comprehend if this is truly intended to be an earnest investigation. While we are deeply troubled by the negligence exhibited in the investigation, we do want to state clearly that Mr. McDade's removal as CEO should not wait until the conclusion of this investigation; for all of the reasons delineated earlier in this letter (lack of candor with the Board on issues critical to creating/destroying shareholder value, mass exodus of talented personnel from the Company, with more coming imminently; loss of credibility with the financial community; inability to create value for shareholders over many years, etc.), Mr. McDade should unequivocally be removed immediately as CEO regardless of the timing or results of the investigation, while the investigation should be continued as necessary to support the legal argument of terminating Mr. McDade for cause.

It was undoubtedly clear to all of you, given the inexplicably discourteous way that we (by far PDL's largest shareholder) were treated by your Chairman during our meeting last month (which led to one of you taking him to task for it during the meeting) that our views and conversations had not been accurately portrayed to you by Messrs. McDade and Gage in the months leading up to the meeting. We believe that our meeting cleared up these biased, self-interested characterizations and trust, then, that the Board now understands that based on substantial persuasive evidence we are simply asking you to take actions in the best interest of ALL PDL shareholders. Again, to highlight, these actions are to 1) terminate Mr. McDade immediately, and then promptly thereafter, 2) empower a truly independent investment banker to conduct a full and unbiased study of all possible strategic outcomes for shareholders, so that the Board is in full possession of such analysis before making any further critical decisions (as you know, in our handout we presented you with our latest analysis showing that PDLI is worth over $40 per share to a strategic buyer - our due diligence with potential acquirers subsequent to our meeting has confirmed this. However, we are open to whatever outcome is best for PDL shareholders, so long as a true and thorough process, and careful review by the Board, is first conducted.).

As you all know, we have many other specific concerns related to the fact that PDL shareholders' best interests have clearly been given short-shrift under Mr. McDade. However, as we believe that many of these issues will be remedied by terminating Mr. McDade's employment, we will agree to hold off for the very near-term on raising these issues publicly in anticipation of the PDL Board deciding to take immediate action to fulfill its fiduciary duties.

Sincerely,

Daniel S. Loeb

Outline for Meeting with PDL Biopharma Directors on 6/19/07

A. Lack of Financial Discipline:

1. R&D as a percentage of product sales is 126% in 2007, 126% 2008E
& 124% in 2009E

a. Most industry comps are <30%,>

b. No comparables even approach PDL's (as Queen patent royalties are not product sales) (additional analysis provided in package)

2. R&D has increased by >41/2X since 2002 (Mark McDade's tenure)
from $58M to $265M

a. Extraordinary R&D expense increase has been (counter-
intuitively) accompanied by a sharp decrease in R&D
productivity, as no NCE's discovered since 2002 have
progress past PI development

3. SG&A has increased by >31/4X, $32M to $105M, since 2004, the
year prior to the ESP acquisition

a. Extraordinary SG&A increase has unfortunately been
accompanied by increasingly negative Free Cash Flow:
($10M) in 2005 to ($25M) in 2007E (ML)

b. Since the ESP acquisition, the percentage increase in
SG&A, 228%, is triple the increase in (ESP) product
sales 69% (incl. Retavase)

c. Headcount has tripled since 2002

B. Inability to Deliver on Plan/Expectations:

1. Ularitide clinical development & partnership delayed (PII
results were released in 4/05)

2. Nuvion development delayed (PI/II results released in 5/05,
PII/III trials continue to enroll)

3. Consistently misses EPS & revenue expectations (despite
providing company guidance)

C. Circumvention of the Board:

1. Acquisition negotiations with major pharma (in H2 '06) not
disclosed to Board of Directors

2. Lawsuit filed without thoroughly venting with Chairman/Board
(led to exodus of PDL's Chairman who stayed with Alexion).

3. Internal & external financial advisors counseled McDade against
moving headquarters

D. Support for Third Point's Position from Multiple Constituencies:

1. Dr. Cary Queen's public letter & website- http://www.fixpdl.com/

2. Respected biotech CEO, Jean-Jacques Bienaime, proactively joins
Third Point's effort

3. Plethora of employee correspondence (copies provided in package)

4. Wall Street sell-side analysts: Merrill Lynch, Prudential,
Wachovia, Deutsche Bank, Susquehana, Leerink Swan (copies
provided in package)

5. Preponderance of shareholders, incl. largest during past decade,
support Third Point

6. Stock price appreciation follows Third Point's involvement
(events graph provided)

E. Reasons to Add 3 Third Point Nominees to PDL Board:

1. Experience making money for our investors- grown assets from $6M
to $6B in 12 years

2. Experience restructuring biotech companies, i.e. Ligand, Nabi,
Ception (Fulcrum)

3. Experience working collegially & productively with
existing/legacy boards

4. Abundance of value-added industry contacts, incl. CEO's, BD
execs, analysts, IB's

5. Bring a differentiated, Wall Street oriented

perspective/expertise to augment the existing Board member's
scientific, legal & operational expertise

6. PDL's shareholders & analysts have spoken with their wallets and
their recommendations

Solutions:

1) Add 3 Third Point nominees to PDL's Board of Directors

2) Slow the progression of the Ularitide & Nuvion Partnerships
until all alternatives are considered. Note that antibody
company valuations (i.e. Medimune $15B, Domantis $454 {pre-
clinical assets}, Cambridge Antibody $1.2B {3% royalty on
Humira}) far exceed that of specialty pharma companies
(additional analysis provided in package).

3) Replace Mark McDade as CEO