SC Fundamental Urges Corvas International to Stop Spending, Cancel Merger, and Liquidate
Thursday March 6, 4:30 pm ET
NEW YORK, March 6 /PRNewswire/ -- Private investment firm SC Fundamental LLC announced today that it sent a letter to the board of directors of Corvas International, Inc. (Nasdaq: CVAS - News) urging the board "to (i) immediately curtail all company spending to preserve cash, (ii) negotiate an immediate termination of the merger agreement with Dendreon which we view as certain to fail in a shareholder vote, and (iii) barring a transaction with superior value, pursue a prompt liquidation of the company including a substantial initial distribution of the company's cash to it owners." SC Fundamental and its affiliates hold over 600,000 shares of Corvas.
Contact: SC FUNDAMENTAL LLC
David Hurwitz
(212) 888-9100
The following is SC Fundamental LLC's letter to Corvas International Board of Directors:
March 6, 2003
The Board of Directors
Corvas International, Inc.
3030 Science Park Road
San Diego, CA 92121
By Fax: (858)455-7895 and FedEx
Ladies and Gentlemen:
Our affiliates own over 600,000 shares of the common stock of Corvas. This morning, we met with Randall E. Woods, President and CEO of Corvas, Mitchell H. Gold, CEO of Dendreon, Martin A. Simonetti, CFO of Dendreon, and a representative of SG Cowen. The purpose of this meeting was to understand the rationale behind the proposed merger of Dendreon and Corvas.
We were quite distressed by what we learned in the meeting and call upon you, as the directors of Corvas, to (i) immediately curtail all company spending to preserve cash, (ii) negotiate an immediate termination of the merger agreement with Dendreon, which we view as certain to fail in a shareholder vote, and (iii) barring a transaction with superior value, pursue a prompt liquidation of the company including a substantial initial distribution of the company's cash to it owners.
In our meeting, following a presentation by Dr. Gold of Dendreon's business and his view of the synergies of the proposed transaction, we discussed the value of the proposed transaction as compared to Corvas's cash value per share, net of debt. My colleague, David Hurwitz, and I then posited some alternative scenarios including (i) a substantial distribution of cash to the shareholders of Corvas followed by a merger at a revised ratio or (ii) an opportunity for the Corvas shareholders to exchange their shares for either a proportional amount of company cash or shares in the combined company at the currently proposed ratio. Dr. Gold then told us that Dendreon was not going to renegotiate the transaction, that it had until mid-August to close the merger, and that, in the meantime, Corvas would be burning cash and expending transaction fees leaving it with a prospective liquidation alternative of $0.80 per share. He presented a clear ultimatum-either take the proposed transaction or get very little in an eventual liquidation.
We find both his ultimatum and the thinking behind it appalling. The choice is not between the proposed transaction or a future liquidation value of $0.80 per share. It is between the proposed transaction and the current reality, including the current cash balance. Corvas does not need to dissipate its cash nor do the shareholders need to sell their company in a transaction which fails to maximize value.
Since 1987, Corvas has expended roughly $150 million (based on the company's accumulated deficit) in attempts to develop various biotherapies. Based on the economics of the proposed Dendreon transaction, these biotherapies and their associated technologies currently have a negative value as Dendreon is acquiring Corvas for less than its current net cash. There can be no more compelling case for an immediate cessation of all of Corvas' R & D activity and, indeed, of all company activity other than attempts to sell its technology for a positive value and liquidate.
As directors, you are legally bound to act as fiduciaries for the shareholders. Particularly in view of the near certainty that the Corvas shareholders will reject the Dendreon merger, we believe that in permitting the continued dissipation of the company's cash you would fail to fulfill such duty. As such, we believe it is imperative to (i) stop the spending, (ii) terminate the merger, and (iii) pursue a liquidation to maximize value for the shareholders.
Sincerely,
Neil H. Koffler |
