(Source: Business Wire)
Tang Capital Partners, LP ("Tang Capital") and Perceptive Life Sciences Master Fund Ltd. ("Perceptive") today announced that they have sent a letter to the shareholders of Penwest Pharmaceuticals Co. (NASDAQ: PPCO) ("Penwest" or the "Company"). The letter urges shareholders to vote for shareholder proposals brought by Tang Capital and Perceptive, including proposals to elect three nominees to Penwest's board of directors, amend the bylaws of Penwest and approve a shareholder resolution on the future direction of the Company. A copy of the letter, as well as more information about Tang Capital and Perceptive's shareholder proposals, can be found at www.penwestchange.com. The text of the letter follows.
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TANG CAPITAL PARTNERS, LP 4401 EASTGATE MALL SAN DIEGO, CA 92121
PERCEPTIVE LIFE SCIENCES MASTER FUND LTD. 499 PARK AVENUE, 25TH FLOOR NEW YORK, NY 10022
May 14, 2009
Dear Fellow Penwest Shareholder:
Tang Capital Partners, LP and its affiliates and Perceptive Life Sciences Master Fund Ltd. are the two largest shareholders of Penwest Pharmaceuticals Co. and together own 41.5% of the Company's outstanding common stock. We have some serious concerns about the conduct of Penwest's board of directors and the direction in which it is taking the Company and are writing to ask for your support on several critical matters at this year's annual meeting of shareholders, to be held on June 10, 2009. Specifically, we are seeking your vote on:
a) The election of our three nominees to the board of directors;
b) Two bylaw amendments that will require the board to be more responsive and accountable to the wishes of Penwest's shareholders; and
c) A shareholder resolution on the future direction of the Company.
OUR INTERESTS ARE ALIGNED WITH YOURS
As Penwest's two largest shareholders, we can assure you that our interests are aligned with yours. Like you, we have invested precious capital to obtain our equity position. Specifically, we have invested approximately $45 million to acquire our 41.5% stake in the Company.
By contrast, the current officers and directors of Penwest have invested virtually nothing in Penwest's stock dating all the way back to July 1, 2003, the date on which insider trading records first became readily available. Instead, this group of individuals has been busy taking money out of the Company. Since this date, this group has realized $2.2 million in profits from the sale of Penwest stock obtained through the exercise of stock options and restricted stock grants and has paid itself more than $7.5 million in cash compensation.
To state it plainly, we have one interest in mind, and that is to maximize the price of Penwest's stock so that we can maximize the return on our and your investment in the Company. Penwest's current officers and directors, on the other hand, appear more interested in maintaining the status quo so that they may continue to collect their generous compensation.
IN CONTRAST TO CURRENT LEADERSHIP, WE HAVE A TRACK RECORD OF MAKING MONEY FOR OUR INVESTORS
From the beginning, Tang Capital has been singularly focused on generating positive returns for its investors. Since its inception on September 3, 2002 through May 8, 2009, Tang Capital has generated a return for its investors, net of all fees and expenses, of 303%, for an annualized rate of return of 23%.
As we are sure you are acutely aware, the stock of Penwest has not fared as well. Since June 7, 2006, when Ms. Jennifer Good was appointed President and Chief Executive Officer, through May 8, 2009, Penwest's stock has declined 89%, for an annualized rate of return of negative 55%. The record of the Company's Chairman, Mr. Paul Freiman, is not much better. From May 8, 1997 to December 31, 2008, Mr. Freiman served as President and Chief Executive Officer of Neurobiological Technologies, Inc. (NASDAQ: NTII). During this period, the stock of Neurobiological Technologies, Inc. declined 97%, for an annualized rate of return of negative 27%.
WHAT WE ARE PROPOSING AND WHY
We believe it is time for a change. With a focus on maximizing the value of Penwest's stock for the benefit of all shareholders, we are seeking your support on the following proposals at the 2009 annual meeting.
Election of Directors
We believe it is time that the Company is governed by individuals that are more focused on and more capable of delivering positive returns for shareholders. As such, we are seeking your vote on the election of our three nominees to the board of directors, Kevin C. Tang, Joseph Edelman and Andrew D. Levin, M.D., Ph.D.
Kevin C. Tang. Mr. Tang is the founder and manager of Tang Capital and has an established record of delivering positive returns to its shareholders. He has eighteen years of experience evaluating biopharmaceutical companies in his current capacity as portfolio manager and his prior capacity as a biotechnology investment analyst. Mr. Tang also has considerable experience governing biopharmaceutical companies as a board member and currently serves as a director of two publicly traded companies, A.P. Pharma, Inc. (NASDAQ: APPA) and Ardea Biosciences, Inc. (NASDAQ: RDEA).
Joseph Edelman. Mr. Edelman is the founder and manager of Perceptive and also has an established record of delivering positive returns to the shareholders of his fund. He has nineteen years of experience evaluating biopharmaceutical companies in his current capacity as portfolio manager and his prior capacity as a biotechnology investment analyst.
Andrew D. Levin, M.D., Ph.D. Dr. Levin is a Principal at Tang Capital and has considerable expertise in evaluating the technical aspects of drug discovery and development programs. Prior to joining Tang Capital, he served as a Business Development Manager at Genzyme Corporation. Dr. Levin received his M.D. from Harvard Medical School and his Ph.D. from the Massachusetts Institute of Technology.
Bylaw Changes
Penwest's corporate governance is disgraceful; the Company has a history of not only ignoring shareholder interests, but, worse yet, actively suppressing shareholder input to avoid accountability.
Staggered board. Penwest has a classified, or "staggered," board, which means that only a minority of directors, in this case three of nine, stand for election each year.
