"Fixing" Ligand: Round 2

One activist hedge fund's trash, it appears, is another activist hedge fund's treasure.

SAC Capital announced in a recent filing with the Securities and Exchange Commission that it has acquired 5.1 million shares, or a 5 percent stake, in San Diego-based Ligand Pharmaceuticals.

SAC, which is run by Steve Cohen, has recently taken up an activist investment strategy by buying up large stakes in companies with the hopes of forcing change in order to boost shares.

But the tiny Ligand, with a market cap under $600 million, is all too familiar with the activist scene.

In March of this year, the activist manager Daniel Loeb of Third Point sold 5.7 million shares of Ligand stock and stepped down from its board after waging a 16-month battle at the company.

During that time, the company cut its workforce by 76 percent, replaced its managers, issued a large shareholder dividend, and sold its cancer drug division for $480 million.

Loeb bought his shares at prices between $7.40 and $8.02, and sold most of them for $10.54.

"Now that we have brought outstanding new management and directors into Ligand, and have successfully repositioned the company, it is no longer necessary for Third Point to have three board representatives," Loeb said when he relinquished two of the three board seats he held in March.

Successfully repositioned? Since March, the company has seen its share price plummet to $5.65, so low that Steve Cohen found it irresistibly ill-positioned.

But Loeb is surely well aware of that fact. As of the end of the first quarter, Third Point still owned 2 million shares of the company. Factoring in the $2.50 per share dividend payout he received, his remaining investment is about at break-even.

Would Loeb admit defeat by unloading his remaining shares for little or no profit? Unlikely, now that Cohen has entered the picture.

As for Ligand, those employees it has left could well be bracing for a Cohen-Loeb combo attack unlike anything another little target has ever experienced.

by Megan Barnett