Cadus Pharmaceutical Corp. (KDUS) Message Board

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Biotech / Medical : Cadus Pharmaceutical Corp. (KDUS)

KDUS 1.600

0.0%

Jul 2 5:00 PM EST

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To: scaram(o)uche who wrote (565)	6/27/2001 2:42:35 PM
From: Jim H	of 1833

Jeff Berg Comments: Fellow Cadus Shareholders, Thank you all for your support and for voting for the proposal to return excess cash to shareholders. We lost. The results of the vote on the proposal were ~11% for and ~59% against. Other items from the shareholder meeting which you may find of interest: * Russell Glass claims to be spending half of his time working for Cadus even though he does not receive a salary or hold any stock. He claims that he is motivated by things other than money - fiduciary responsibility and reputation. * The only valid point for which the company has to keep the entire $25 million is that it is a magnet for deal flow and that a lower amount would limit the set of opportunities the company could look at. The company asserted that the proposal to return excess cash to shareholders would cause the company to fold and cease as a public entity. This is a completely undefendable assertion and when directly asked about it the answer came back that they need the cash to attract deal flow - which has nothing to do with folding the company. * Russell Glass was happy to entertain questions and gave a nice little speach about believing in shareholder democracy. * Glass expressed that there was "flexibility" about wether the cash would be used in or out of the bio-tech field. My best read is that it will probably be out of the bio-tech field in order to acquire assets with near term earnings potential with which to utilize the company's tax loss carryforwards. Acquiring a high upfront but rapidly declining earnings stream would do this most quickly - so I'm thinking an oil/gas investment might seem like a good fit to him. But I've got more oil/gas experience than he does. * The company's tax loss carryforwards are not impaired by a change in ownership. Apparently, the statement in the annual report about NOLs being subject to limitations due to ownership changes was a general statment which applies to everyone who has NOLs. * Glass stated that Cadus owns roughly 20% of Axiom Biotechnologies (by my calculations they own 24%). But Glass says that Cadus also has options to invest an additional $3-3.5 million in Axiom at prices slightly higher than its origional investment price (by my calculations this would give them somewhere near 40% of Axiom). For a point of reference Biacore and Arena invested at prices 50-80% higher than Cadus's investment (but these investments were made as part of other deals so they might not be a direct indication of value). Don't expect an IPO antime this year or next, Glass seems to think Axiom has a lot of work to do before they have something that could be brought to the public markets. * On the subject of potential royalties from OSI Pharmaceutical developments Glass was completely ignorant. He didn't even seem aware that this was an important asset of Cadus. He did conceed that if they did have these royalty rights and OSIP did develop a product from the technologies they purchased from Cadus that this would be a plesant surprise. I suppose there is nothing that Glass can do to enhance the value of this asset so perhaps he doesn't need to know about it. But if he is supposed to be making decisions about repurchasing shares or issuing shares in a merger then he should know what the potential of these royalties could be. * Russell Glass believes that finding the right deal for Cadus is more important than the speed with which something is done with the company. I agree with his sentiment. But if something has not transpired by next year expect to see additional shareholder actions taken. If you come across any ideas which may fit with Cadus's position please let me know and I will forward them to the company. Jeff Berg, CFA Cadus Shareholder

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