DANBURY, Conn., May 19, 2009 (GLOBE NEWSWIRE) -- Penwest Pharmaceuticals Co. (Nasdaq:PPCO) today sent a letter to its shareholders in connection with the Company's annual meeting to be held on June 10, 2009. Penwest urges shareholders to vote "FOR" Penwest's director nominees on the WHITE proxy card and "AGAINST" the shareholder proposals put forth by Tang Capital Management, L.P. and Perceptive Life Sciences Master Fund Ltd.
The full text of the letter from Paul E. Freiman, Chairman, and Jennifer L. Good, President and Chief Executive Officer, follows:
May 19, 2009
VOTE FOR SHAREHOLDER VALUE -
OR VOTE TO CALL IT QUITS
Dear Fellow Penwest Shareholder:
Tang Capital Management and Perceptive Life Sciences are engaging in a proxy contest to try to elect some of their in-house personnel to the Penwest Board of Directors at our annual meeting on June 10. They have rejected compromises that could have avoided this costly contest and are instead attempting to gain veto power and effective negative control over important Board decisions that could stalemate Penwest's operations in order to carry out their own agenda for your Company.
YOU HAVE A SIMPLE CHOICE
In this proxy contest, you are being asked to make a clear choice between two diametrically opposed views about the Company's strategy and future:
* The Penwest Board of Directors established a narrowed business
plan for 2009 intended to both build shareholder value in the
short term and prepare the Company for long-term growth. Under
this plan, the Company is focused on maximizing the value of
Opana(r) ER, advancing the development of A0001 through proof of
concept, monetizing the value of our proven drug delivery
technologies and drug formulation expertise, and aggressively
reducing our costs. We believe these initiatives can build value
for all shareholders and that it would be a mistake to end them
prematurely.
Importantly, we are committed to shutting down any program that we
determine is not succeeding. For instance, if our findings from
the A0001 proof of concept trials over the next several months do
not support further development of the drug, we will promptly
discontinue this program.
* The dissidents, on the other hand, want to immediately wind down
the Company's operations. We believe this strategy ignores the
value of the assets the Company has developed and the value it can
create with them in the near term. In addition, the strategy is
short-sighted, is less practical than the dissidents have led
shareholders to believe, would take a long time to carry out and
would adversely affect shareholder value. For example, pursuing it
could result in our forfeiting approximately $91 million of
available net operating loss carryforwards and jeopardizing our
listing on NASDAQ.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
THE ELECTION OF THE COMPANY'S NOMINEES AND "AGAINST" THE DISSIDENTS'
PROPOSALS ON THE ENCLOSED WHITE PROXY CARD.
We believe that, just as there are clear distinctions between these two strategies, there are sharp differences between the parties who support them. It is important for you to be aware of key facts regarding the proponents of the opposing strategies.
TANG CLAIMS TO BE
LOOKING OUT FOR THE INTERESTS OF PENWEST'S SHAREHOLDERS -
BUT A CLOSER LOOK AT HIS ACTIONS IN OTHER COMPANIES
IS REVEALING
* The recent fiasco at Vanda Pharmaceuticals graphically
demonstrates Mr. Tang's poor judgment concerning a company's
strategy and prospects, and the potential value of a product
candidate. After launching a proxy fight against Vanda in
February to force the immediate wind down of that company's
operations, Tang Capital suddenly abandoned its campaign earlier
this month right after Vanda announced that the FDA had granted
marketing approval of its schizophrenia drug Fanapt -- a product
whose alleged poor chances for approval were central to Mr. Tang's
flawed thesis about Vanda's prospects going forward.
* Mr. Tang has given a misleading account of how events played out
at Ardea Biosciences, another company with which he is involved.
He tries to take credit for the "swift and effective" wind down of
Ardea's operations as evidence of the feasibility of his proposed
strategy for Penwest. But the reality is that Ardea had
$50 million of cash that was never distributed to shareholders as
he proposes that Penwest do. Instead, Ardea used its cash to
acquire new assets, rebuilt its business and prospered. An
inconvenient truth for Mr. Tang, the Ardea case shows the
potential value to shareholders of investing in promising assets --
rather than prematurely halting operations. If Mr. Tang had
implemented at Ardea the strategy he is pursuing with Penwest,
Ardea shareholders would never have received that value.
THE PENWEST BOARD HAS THE RIGHT SKILLS, EXPERTISE AND FOCUS TO
BUILD SHAREHOLDER VALUE
Penwest's Board is highly qualified and fully committed to protecting the interests of all shareholders:
* Since 2006, we have been building a Board composed of experienced,
highly-qualified directors who have been successful leading
companies in the biotechnology and pharmaceutical industries and
who bring valuable skills to our Company. After this election,
assuming our nominees are elected, only three of our directors
will have served on the Board for more than three years. If our
nominees are elected, a valuable combination of scientific,
regulatory, medical, commercial, strategic and financial expertise
will be represented on the Board.
* W. James O'Shea, our nominee who is a current director, is an
experienced pharmaceutical executive and a highly-respected,
independent industry expert with a strong track record in hands-on
executive and operating roles at public companies. During his
tenure as President and Chief Operating Officer, and then as Vice
Chairman, of Sepracor Inc., a research-based pharmaceutical
company, from 1999 to 2007, Sepracor's annual revenues grew from
$22.7 million to $1.2 billion. This revenue growth was led by the
re-launch of Xopenex, which generated annual revenues of
approximately $440 million at their highest level, and the launch
of Lunesta, which peaked at full-year sales of approximately
$600 million. Mr. O'Shea was responsible for the launches and
commercial oversight of both products.
* Importantly, as demonstrated by our recommendation that you vote
to elect as a director Joseph Edelman, a member of the dissident
slate, the Penwest Board is not opposed to considering alternative
views. We believe that this nomination reflects your Company's
balanced, reasonable approach to ensuring that the dissidents'
views will be represented in its decision making while not
affording them the veto power over the Company's operations that
they are seeking.
* While the dissidents want you to believe that the Board's recent
adoption of a limited-duration shareholder rights plan means that
we are entrenched, the fact is that we put a rights plan back in
place for 15 months in order to ensure that all Penwest
shareholders have the opportunity to benefit from our initiatives
to build shareholder value this year and into 2010. We believe
that the limited duration plan will give the Company an
appropriate amount of time to execute its strategy. We have
purposely provided in the rights plan that the plan will expire on
July 1, 2010, unless shareholders decide to extend it beyond that
date.
TANG CAPITAL'S QUESTIONABLE TACTICS IN THIS CONTEST SHOULD CONCERN
PENWEST'S SHAREHOLDERS
We believe that Tang Capital's questionable tactics in this proxy contest make its in-house personnel unsuitable candidates for your Board.
* Tang Capital has twice offered in writing to give the Company's directors personally the A0001 asset and business opportunity for their own financial benefit without their having to pay the Company anything. Of course, this is not appropriate and not something your directors would ever consider. We would never seek to profit personally from a Company asset. * Mr. Tang proposed to the Company's CEO that a majority of the Board resign, in exchange for severance payments, so that the dissidents could immediately gain complete control of the Company. We have never had severance payments for departing directors. Your Board is committed to doing the job it was elected to do, and will not abandon its fiduciary duty. * Mr. Tang rejected the offer to discuss a compromise slate of Board seats as a compromise to avoid this unnecessary and distracting proxy fight -- because he wants as much immediate control as he can get. * The dissidents have caused your Company to incur significant costs resulting from this proxy contest and their related litigation. As part of their tactics, they have filed three separate lawsuits against the Company (one of which has since been dropped). The demands of defending against this litigation are not only onerous for the Board and management but also costly for the Company and its shareholders. Our estimated cost to defend this litigation and proxy contest is approximately the same as the cost to run a Phase IIa proof of concept trial for A0001, which the dissidents are so vigorously trying to stop, claiming that it is a "waste of corporate assets." Isn't this ironic?
We believe that Tang Capital's interests are not aligned with those of many of Penwest's long-term shareholders due to its low cost basis of $1.32 for its Penwest shares and its accumulation of more than 21% of Penwest's outstanding shares within the past five months. Almost immediately after acquiring its shares, Tang Capital filed a Schedule 13D and declared itself an activist.
PROTECT YOUR INVESTMENT
We have significantly improved the Company's financial performance, including sharply reducing costs. We are successfully implementing our strategy with focused goals for 2009, and expect to be profitable on a quarterly basis in the fourth quarter this year and for the full year in 2010. Don't let the value of your investment in Penwest be prematurely capped, just when we are about to achieve profitability and are close to better understanding the potential value of the Company's A0001 asset.
PLEASE USE THE WHITE PROXY CARD TO VOTE TODAY - BY TELEPHONE, BY INTERNET OR BY SIGNING, DATING AND RETURNING THE ENCLOSED WHITE PROXY CARD. YOUR BOARD URGES YOU NOT TO SIGN OR RETURN ANY GOLD OR OTHER PROXY CARD SENT TO YOU BY TANG CAPITAL OR PERCEPTIVE.
The contrast between the two strategies is stark, as are the differences in the ways the two parties involved conduct themselves. The choice is yours. Your Board is convinced that we are following the right path for Penwest to build value for all shareholders. We strongly believe that the dissidents' immediate wind down strategy is contrary to the interests of Penwest and its shareholders.
Sincerely, Paul E. Freiman Jennifer L. Good Chairman President and Chief Executive Officer
About Penwest Pharmaceuticals
Penwest is a drug development company focused on identifying and developing products that address unmet medical needs, primarily for rare disorders of the nervous system. Penwest is currently developing A0001, a coenzyme Q analog drug candidate for inherited mitochondrial respiratory chain diseases. Penwest is also applying its drug delivery technologies and drug formulation expertise to the formulation of product candidates under licensing collaborations with partners.
Penwest Forward-Looking Statements
The matters discussed herein contain forward-looking statements that involve risks and uncertainties, which may cause the actual results in future periods to be materially different from any future performance suggested herein. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words, "believes," "anticipates," "plans," "expects," "intends," "potential," "appears," "estimates," "projects," "targets," "may," "could," and similar expressions are intended to identify forward-looking statements. Important factors that could cause results to differ materially include: risks relating to the commercial success of Opana ER, including our reliance on Endo Pharmaceuticals Inc. for the commercial success of Opana ER and risks of generic competition; the need for capital; regulatory risks relating to drugs in development, including the timing and outcome of regulatory submissions and regulatory actions; uncertainty of success of collaborations; the timing of clinical trials; whether the results of clinical trials will warrant further clinical trials, warrant submission of an application for regulatory approval of, or warrant the regulatory approval of, the product that is the subject of the trial; whether the patents and patent applications owned by us will protect the Company's products and technology; actual and potential competition; and other risks as set forth under the caption Risk Factors in Penwest's Annual Report on Form 10-Q filed with the Securities and Exchange Commission on May 11, 2009, which risk factors are incorporated herein by reference.
The forward-looking statements contained in this press release speak only as of the date of the statements made. Penwest disclaims any intention or obligation to update any forward-looking statements, and these statements should not be relied upon as representing the Company's estimates or views as of any date subsequent to the date of this letter.
TIMERx is a registered trademark of Penwest. All other trademarks referenced herein are the property of their respective owners.
INFORMATION CONCERNING PARTICIPANTS
Information required to be disclosed with regard to the Company's directors, director nominees, officers and employees who, under the rules of the Securities and Exchange Commission (the "SEC"), are considered to be "participants" in the Company's solicitation of proxies from its stockholders in connection with its 2009 Annual Meeting of Stockholders (the "Annual Meeting") may be found in the Company's Proxy Statement for its 2009 Annual Meeting of Stockholders, as filed with the SEC on May 7, 2009 (the "2009 Proxy Statement").
Security holders may obtain a free copy of the 2009 Proxy Statement and other documents (when available) that the Company files with the SEC at the SEC's website at www.sec.gov. Security holders may also obtain a free copy of these documents by writing the Company at Penwest Pharmaceuticals Co., 39 Old Ridgebury Road, Suite 11, Danbury, CT 08610, attn: Controller, or by telephoning the Company at (877) 736-9378.
We have circulated a WHITE proxy card together with our definitive proxy statement. We urge shareholders to vote FOR our nominees on the WHITE proxy card and not to sign or return a green, gold or other colored proxy card to the Company.