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Biotech / Medical : Depotech(depo)
DEPO 7.300+1.7%Aug 14 5:00 PM EST
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To: Dr. John M. de Castro who wrote (882)2/22/1999 10:37:00 PM
From: rkrw  Read Replies (1) of 887
 
John,
I voted in favor of the merger.

I respectfully disagree with your opinions. I enjoy reading merger proxies because they review the details and timing of how the merger took place. Essentially Depo put itself up for bid in the aftermath of the initial FDA rejection. They received scant interest with only one bidder emerging, SkyePharma. As is typical the price was negotiated back and forth and the final price with the contingencies was agreed upon.

A few items I think you are misjudging:
1. The perilous financial condition of Depo. The stock wasn't at a buck solely because of FDA rejections. They were close to bankruptcy and in noncompliance with their debt covenants. They chose to deal with SkyePharma and its contingent laden deal rather than spin the roulette and risk compounding the disaster. They certainly could have gone the RegD route and issued convertible notes at a discount and wisely chose not to. There was no promise that DepoCyt would receive approval and further even with approval it was unlikely to ease their cash pressures to any significant degree. DepoCyt is a very small market drug and I believe you are significantly overestimating its market potential.
2. The power of merging with a stronger company. SkyePharma appears to be astute, financially capable and on the cusp of profitability. They also have a broad delivery platform and numerous, strong big pharma partners. I will now own a stake in a far superior company, with stronger management, well financed and with several means to profitability in the short and long term.

Bottom line is voting in favor of the merger is a no-brainer. Depo management for all the flak they caught, made the wise decision and sold to a good company with solid prospects; took control of the Depocyt application from Chiron and managed to complete a 180 with the ODAC committee, hopefully final FDA approval will be forthcoming. Should all the contingencies hit and I believe they will, the final tally will be an ultimate valuation of some 400% or greater premium to the market price prior to the merger and further we'll hold shares in a far more dynamic company.
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