Depomed Inc (NASDAQ:DEPO) gained heading into the close of last week on rumors that it is dressing itself up for a buyout, and reports suggesting that the company is already accepting bids on its assets. Many reading will remember the failed efforts of Horizon Pharma PLC (NASDAQ:HZNP) last year, and at the time, it seemed as though the former was successful in overcoming what appeared to be an attempt at a hostile takeover by the latter. Fats forward a few quarters, however, and things don’t look that simple. A call for a special meeting of shareholders (which just got scheduled – we’ll get to this shortly) coupled with a letter to shareholders from one of the company’s biggest backers shed a little light on to the situation, and it now looks as though Depomed is potentially being held back by its board of directors.

Here’s what we know, and what we expect to play out near term.

First, a bit of background. Depomed is a California based healthcare company with a focus on pain management. Its lead product, Nucynta, a chronic pain medication, accounts for the vast majority of the company’s revenues, and is currently the focus of a patent infringement lawsuit that Depomed is heavily reliant on winning. Essentially, other companies are trying to develop generic versions of the drug, and Depomed is trying to stop them. History tells us that the legal system generally favors the company holding the patent in this situation (although this isn’t without exception) so the near term legal issues, while a necessary concern, aren’t an immediate value factor.

So what happened with the hostile takeover?

Horizon offered to buy out the company for what amounted to a 60% premium on Depomed’s then-share price, but the board of directors activated a poison pill and stopped Horizon in its tracks. A poison pill isn’t an uncommon practice at this end of the biotech space, and it can sometimes work in a smaller company’s favor. In this instance, however, it looks as thought the activation is favorable to the board, but not the shareholders.

A 60% premium for a company that is heavily reliant on one pain management product is a great price. Throw in the fact that the product is under legal scrutiny, and that Horizon (reportedly) was willing to build on its offer, and something doesn’t look right.

This is where the shareholders come in. Starboard Value LP, which owns 9.8% of the drug maker, is seeking to completely oust the current board, and replace it with one of its own. The directive of this fresh board would be clear and simple: oversee a fair and transparent sale process that ensures maximum value for shareholders.

Starboard doesn’t think the current board is capable of doing this, and the overhaul seems like the only answer to the problem if this is the case.

So what’s next?

Well, the latter has just set a data for a special meeting, having picked up more than enough support from shareholders to do so. The meeting, just announced, will take place on November 15, 2016, and will provide a forum from within which shareholders of all size positions will vote who they want to represent the company at board level between now and any potential near term sale – the current team, which essentially vetoed the Horizon deal and could just as easily do the same again with future bids, or a new team (which readers can read more about in Starboard’s letter to the shareholders here), which Starboard believes is far better suited for the job.

It’s going to be an interesting ride. We believe that – in the event of a sale – a board of fresh faces would likely be the best bet for shareholders. We also think that there’s probably room for one or two of the old board to take a position on the new, but if this is going to happen, they will have to be removed from their positions first, and then reinstated post removal.

Either way, shareholders are in for some volatility. If the company can pick up a bid at or above the Horizon price, there’s every chance it will jump on it.

One to keep an eye on going forward.