TKT Issues Open Letter to Stockholders Board of Directors Urges TKT
Stockholders to Vote 'FOR' Shire Transaction CAMBRIDGE, Mass., July
12 /PRNewswire-FirstCall/ -- Transkaryotic Therapies, Inc.
(NASDAQ:TKTX) today issued an open letter to its stockholders
urging them to vote "FOR" the proposed transaction with Shire
Pharmaceuticals Group plc. On April 21, 2005 TKT and Shire entered
into an agreement under which Shire has agreed to pay $37 in cash
for each share of TKT common stock, or approximately $1.6 billion
in aggregate value. As previously announced, the TKT stockholder
vote will be held at a special meeting on July 27, 2005, at 9:00
a.m. ET. Voting instructions for the special meeting are available
at the end of the letter to stockholders which follows: Dear TKT
Stockholders: As you know, on July 27, 2005 stockholders of
Transkaryotic Therapies, Inc. will have the opportunity to vote on
the merger agreement with Shire Pharmaceuticals Group plc announced
on April 21, 2005. This transaction is the result of a rigorous
process by the TKT Board of Directors designed to maximize
stockholder value, and we believe it represents the best possible
price and optimal timing for stockholders. Our Board of Directors
strongly urges you to vote in favor of the proposed merger.
Rigorous Board Process The Board takes its fiduciary duty to
deliver maximum value to our stockholders with the utmost
seriousness. We have worked diligently, carefully, and
deliberatively to maximize the value of your investment in TKT.
Prior to recommending this merger, we sought out the best
professional advice available, thoroughly considered the
alternatives, and designed a transaction that we believe fully
serves and protects the interests of our stockholders. At the time
Shire approached us in October 2004, we were operating the company
to build value as an independent entity. We believed that we were
unlikely to be able to garner a significant acquisition premium for
our stockholders, because of our very unique and specialized
business model. Only a handful of major companies are interested in
the types of rare genetic diseases that are our focus. Of those,
some could not easily pursue a merger with us for anti-trust
reasons. Of the very small number of companies that might remain as
potential acquirers, few, if any, would have the type of commercial
presence necessary to commercialize and fully value Dynepo(TM),
TKT's Gene-Activated(R) erythropoietin protein, which will compete
directly with several of the world's largest pharmaceutical and
biotechnology companies. Thus, we felt that there would be few, if
any, buyers willing to pay a strategic premium for our entire
product portfolio. When approached by Shire, a qualified buyer with
a willingness and ability to value the full breadth of our assets
and capabilities, we recognized the possibility of delivering an
attractive acquisition premium to our stockholders. Although we did
not consider Shire's initial offer of $29-$31 per share to be
adequate, we were determined to follow a careful and deliberative
process that would ascertain the best possible price available from
Shire and any other potentially interested parties, while
maintaining the ability of our company to thrive independently if
we did not consummate a merger. With that goal in mind, we followed
an extensive process that included more than twenty meetings of our
board and the transaction committee of our board to plan our
negotiations and deliberate on our decisions. We sought out the
best possible outside advisors, engaging three prominent law firms
and two nationally recognized investment banking firms. We took
affirmative steps to obtain unbiased advice, including negotiating
fee arrangements with all three of our law firms and one of the two
investment banking firms that were not linked in anyway to the
completion of a transaction. We negotiated hard with Shire to
obtain its best price, rejecting Shire's first two written offers
as inadequate, suspending negotiations until Shire was willing to
commit to an attractive valuation, and staging access to diligence
information to protect our company's ability to execute its
business throughout this period. We aggressively pursued a
potential out-licensing arrangement for Dynepo (an integral part of
our standalone business plan) with multiple third parties, in
parallel with our negotiations with Shire, creating a competitive
environment designed to maximize stockholder value. We performed a
pre-announcement market check of other potential acquirers,
reaching out directly to the two third parties that, based on the
input of our financial advisor, SG Cowen & Co., LLC and the
views of our senior management, we judged to be the most likely and
qualified potential alternative buyers of our business. Neither
company indicated any interest in discussing a transaction with us.
And as discussed below, we designed the structure and timing of the
merger agreement to guarantee that any possible better acquisition
offers would be received and evaluated. Our recommendation in favor
of the merger with Shire reflects our confidence that the process
we have followed was set up to deliver stockholder value, and we
firmly believe the result we have obtained -- the value, timing,
and structure of the transaction -- is in the best interests of our
stockholders. Attractive Price After careful deliberation and
analysis, we believe that the acquisition price of $37 per share in
cash, or approximately $1.6 billion, represents a full and fair
value for our company. This conclusion is based on everything we
know about our business as of today, including the positive
top-line results of iduronate-2-sulfatase, or I2S, TKT's enzyme
replacement therapy for Hunter syndrome, reported on June 20, 2005.
We base this assessment on a range of widely-accepted valuation
methodologies, performed not only by us and by our management, but
also by our financial advisor SG Cowen and by Banc of America
Securities, whom we retained to provide an independent fairness
opinion. It is imperative to note that all of the financial
analyses upon which we relied in making our original judgment that
this transaction is in the best interests of stockholders, and upon
which we continue to rely today, were based on our management's
base case projections which assumed positive clinical trial results
for the I2S program for Hunter syndrome. On April 21, 2005, when we
approved the merger, we would not have accepted, nor recommended to
our stockholders that they accept, any price that did not provide
full value for I2S with the assumption of positive clinical trial
results. Having approached our deliberations and our decision in
that manner, the recently announced positive I2S clinical trial
results simply serve to reinforce the basis upon which our original
decision and recommendation were made. The financial analyses of
both SG Cowen and Banc of America, including their respective
fairness opinions, are described in detail in our merger proxy
statement dated June 27, 2005. We encourage you to review these
descriptions carefully. Here, we draw your attention to certain
considerations that significantly impacted our deliberations on
value. We cite SG Cowen's analyses in the discussion below. We also
note that the analyses contained in Banc of America's fairness
opinion came to similar results. -- Transaction premium. The $37
per share price provides a very attractive premium to the recent
trading values of TKT's stock prior to the merger announcement. Of
note, this price represents a 113% premium to the price of our
stock on October 13, 2004, the date of initiation of discussions
between TKT and Shire, and a 54% premium to the price of our stock
on March 29, 2005, the date of the Board meeting where we
determined that an offer of $37 per share from Shire would be
attractive to our stockholders, again, assuming positive I2S
clinical trial results. -- Precedent Transactions Analyses to
estimate potential acquisition value. Using base case financial
forecasts provided by our management, which assume positive I2S
clinical trial results as well as the successful commercialization
of all other pipeline programs, SG Cowen estimated our company's
potential acquisition value, based on precedent acquisitions in our
industry. SG Cowen arrived at an acquisition value range of $15.78
to $28.27 per share. -- Discounted Cash Flow ("DCF") analyses to
estimate standalone company value. Again using management's base
case forecasts, and again assuming positive I2S clinical trial
results and the successful commercialization of all other pipeline
programs, SG Cowen performed a discounted cash flow analysis of our
company as an independent entity which yielded a range of
standalone value for our company of $21.56 to $36.76 per share. It
is important to note that the Board relied most heavily on
management's base case projections, which assume positive I2S
clinical trial results and the successful commercialization of all
pipeline programs -- including GA-GCB (Gene-Activated(R)
glucocerebrosidase for the treatment of Gaucher disease) and the
early-stage research programs. Our management's base case
projections, and the financial analyses performed based on those
projections, indicate that this acquisition will deliver an
attractive premium to the value of the company on a standalone
basis and fully reflects the value that one might have expected to
receive in an acquisition of the company, based on an analysis of
precedent transactions. Optimal Timing We believe that we executed
the merger agreement at precisely the right time -- in fact at the
only time when this attractive acquisition premium could have been
delivered to our stockholders. The merger price of $37 per share
fully values our business, including Dynepo and I2S (with the
clinical trial results assumed to be positive). Because of the
immediate need to secure a commercial partnership for Dynepo, such
full value would have been less likely to be available through an
acquisition of the company in the future, as discussed below. As
the Board deliberated on the merits of an all-cash acquisition
versus remaining independent, we were acutely conscious of the
challenges and risks that we would face as an independent company,
including, but not limited to, significant ongoing financing
requirements(1), the commercialization requirements for Dynepo and
I2S, the fact that most of our pipeline is at an early preclinical
stage, and active litigation in the form of a class action lawsuit,
patent litigation, and a formal investigation by the Securities and
Exchange Commission. In particular, as of early 2005, our company
faced an immediate need to find a commercialization partner for
Dynepo, one of our critical assets. We do not have the commercial
strength and resources to launch Dynepo as an independent company.
With entrenched competition from several far larger companies, we
need a commercialization partner with the right resources and
capabilities. The investment required to scale-up manufacturing of
this product is substantial, and until we find a partner, we are
bearing that entire investment ourselves. Additionally, the window
in time to successfully launch this product is narrow, as a number
of companies intend to introduce "follow-on" erythropoietin
products into the European market in the near future. Simply
stated, we needed to find a partner in early 2005 and begin launch
preparations, or the value of our important Dynepo program would be
reduced. By April 2005, at the same time that we were engaged in
final merger negotiations with Shire, we had explored a full range
of Dynepo partnering alternatives and had advanced the most
favorable of those alternatives to the point where a Dynepo
commercialization agreement was ready to be signed. Shire informed
us that if we were to license Dynepo to any third party, Shire
would no longer be interested in acquiring our company, as Dynepo
was one of the key assets that Shire sought to obtain by acquiring
TKT. We recognized, and were advised by SG Cowen, that if we
licensed Dynepo to a partner, our value as a potential strategic
acquisition target not only to Shire, but also to most if not all
other companies in our industry, would be reduced. This stands to
reason: once we granted the Dynepo commercial rights to a partner,
we would then only collect milestones and royalties on the product,
while our partner would garner the majority of the future profits.
The strategic value of Dynepo, and a large portion of the profit
stream, would no longer be available to any potential acquirer of
TKT, which would diminish the likelihood of anyone being willing to
pay a strategic premium for our business. Neither Shire nor the
potential Dynepo partner was willing to wait, and our own
stockholders' interests were not served by waiting. In short, we
needed to choose between the acquisition, and its attractive cash
premium that afforded full value for all of our assets including
Dynepo and I2S (with the clinical trial data assumed to be
positive), or the Dynepo partnership, which could serve to reduce
the value available to our stockholders in any future acquisition
of our company. We could not do both, and we could not afford to do
neither. In response to this challenge, we designed a process that
we are convinced has produced the best possible acquisition value
for the company. We do not believe that waiting would have led to a
better acquisition value, because we did not need to wait for
positive clinical trial results to deliver to our stockholders the
full value of those results and an attractive strategic acquisition
premium. As discussed above, we believe that the Shire offer of $37
per share represents a full and fair premium to our stockholders
assuming positive I2S clinical trial results. Throughout our
negotiations with Shire, they were well aware that we were
evaluating a Dynepo partnership with a global pharmaceutical
company as an alternative to their merger proposal. We believe
Shire recognized that the situation was highly competitive, and
that our Board would accept nothing less than a full valuation
reflecting an assumption of positive I2S clinical trial results.
Thus, we are convinced that our negotiations, during which we twice
rejected Shire's lower offers and once suspended discussions
altogether, succeeded in extracting what we believe to be the best
value for our company. Moreover, by structuring and timing the
merger agreement precisely as we did, we preserved the opportunity
to entertain offers from third parties that could provide better
value to our stockholders. We were fully aware that our top-line
I2S clinical trial results would be made public prior to the
consummation of the transaction, providing an opportunity for any
third party to come forward with a more favorable acquisition
proposal with the full benefit of knowledge of the I2S clinical
trial results. If there is a potential acquirer willing to make a
proposal that is superior to Shire's, subject to paying the
break-up fee, we will be able to present and recommend this
alternative to our stockholders. To date, no such approaches have
been received. As one final point on timing, some observers have
noted that just as the timing of the Shire transaction provides the
opportunity for higher acquisition offers for TKT to emerge
following the announcement of positive top-line I2S clinical trial
results, it also provides the Shire stockholders the opportunity to
vote on the transaction after seeing the top-line I2S results. Had
the results been negative, the Shire stockholders could conceivably
have voted down the transaction for that reason. In fact, as a
Board, we deliberated on this point at great length, and took great
care to design a transaction that protected our stockholders
against this (now purely hypothetical) contingency. Under the
agreed transaction, Shire not only committed to pay full value for
the company under the assumption of positive I2S results, but also
committed to make very substantial payments to TKT in the event the
Shire stockholders were to vote down the deal. If that were to
happen, Shire would automatically be obligated to pay us $490
million in cash -- $40 million as a break-up fee, and $450 million
to license Dynepo, significantly more cash and greater value than
we believe we would have received from any alternative Dynepo
partnership outside of the context of the Shire acquisition.(2)
Thus, we concluded that the Shire transaction ensured that our
stockholders would be better off for our having entered into the
merger agreement, no matter what happened with the I2S clinical
trial results. We Urge You to Vote in Favor of the Merger We are
proud of what our company has accomplished and the value it has
delivered to stockholders, and we are proud of the transaction we
have constructed with Shire. We firmly believe it provides the best
possible price to our stockholders, with the right structure and at
the right time. We strongly urge you to vote in favor. Sincerely,
TKT Board of Directors Voting Instructions If you have any
questions or require assistance in voting your shares, please call:
INNISFREE M&A INCORPORATED TOLL-FREE, at 1-877-825-8619.
IMPORTANT NOTE: If you hold your shares through a bank or broker,
you may be able to vote by telephone, or via the Internet. Please
call Innisfree for assistance. About TKT Transkaryotic Therapies,
Inc. is a biopharmaceutical company primarily focused on
researching, developing and commercializing treatments for rare
diseases caused by protein deficiencies. Within this focus, the
company markets Replagal(TM), an enzyme replacement therapy for
Fabry disease, and is developing treatments for Hunter syndrome and
Gaucher disease. In addition to its focus on rare diseases, TKT
intends to commercialize Dynepo(TM), its Gene-Activated(R)
erythropoietin product for anemia related to kidney disease, in the
European Union. TKT was founded in 1988 and is headquartered in
Cambridge, Massachusetts, with additional operations in Europe,
Canada and South America. Additional information about TKT is
available on the company's website at http://www.tktx.com/.
Important Additional Information Has Been Filed with the SEC This
communication may be deemed to be soliciting material in respect of
the proposed transaction with Shire. In connection with the
proposed transaction with Shire, TKT has filed with the SEC and
mailed to its stockholders a definitive proxy statement. The
definitive proxy statement contains important information about
TKT, the transaction and related matters. Investors and security
holders are urged to read carefully the definitive proxy statement.
Investors and security holders are able to obtain free copies of
the definitive proxy statement and other documents filed by TKT
with the SEC through the web site maintained by the SEC at
http://www.sec.gov/. In addition, investors and security holders
may obtain free copies of the definitive proxy statement from TKT
by contacting Corporate Communications, 700 Main Street, Cambridge,
Massachusetts 02139. TKT, and its directors and executive officers,
may be deemed to be participants in the solicitation of proxies in
respect of the proposed transactions with Shire. Information
regarding TKT's directors and executive officers is contained in
TKT's Annual Report on Form 10-K for the year ended December 31,
2004, as amended on May 2, 2005, its Quarterly Report on Form 10- Q
for the quarter ended March 31, 2005, its proxy statement for its
2004 Annual Meeting of Stockholders dated April 27, 2004, its
Current Reports on Form 8-K dated March 30, 2005, April 15, 2005
and April 27, 2005 and its definitive proxy statement relating to
the proposed transaction with Shire dated June 27, 2005, each of
which is filed with the SEC. As of May 16, 2005, TKT's directors
and executive officers and their affiliates, including Warburg
Pincus Equity Partners, L.P., beneficially owned approximately
5,523,536 shares, or approximately 15.3%, of TKT's common stock.
All outstanding options for TKT common stock, whether or not
vested, including those held by current directors and executive
officers, will be cashed out in the merger based on the $37 per
share purchase price. In addition, Shire has committed to
maintaining TKT's 2005 Management Bonus Plan, in which TKT
executive officers participate, in accordance with its current
terms in respect of the 2005 performance year. Following the
merger, Shire has agreed to provide certain retention and severance
benefits to TKT's employees, including its executive officers.
Additional information regarding the interests of potential
participants is included in the definitive proxy statement related
to the proposed transaction and other documents filed by TKT with
the SEC. Safe Harbor for Forward-Looking Statements This press
release contains forward-looking statements regarding the proposed
transaction between Shire and TKT, and statements regarding the
company's financial outlook, as well as statements about future
expectations, beliefs, goals, plans or prospects, including
statements containing the words "believes," "anticipates," "plans,"
"expects," "estimates," "intends," "should," "could," "will,"
"may," and similar expressions. There are a number of important
factors that could cause actual results to differ materially from
those indicated by such forward-looking statements, including the
failure of TKT and Shire to consummate the proposed merger for any
reason, including the failure of the TKT shareholders or Shire
shareholders to approve the proposed transaction, and including
other factors set forth under the caption "Certain Factors That May
Affect Future Results" in the company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2005, which are on file with
the SEC and which factors are incorporated herein by reference.
While the company may elect to update forward-looking statements at
some point in the future, the company specifically disclaims any
obligation to do so, even if its expectations change. (1) TKT is
currently generating substantial losses and expects to continue to
do so at least through 2006. We expect that, if we were to remain
independent, we would end 2005 with between $40 and $60 million in
cash, not including the impact of any break-up fee that might be
payable in connection with the Shire transaction. Consequently, if
the merger is not consummated, we would anticipate needing to
complete a significant financing by the fourth quarter of this
year. (2) It is important to note that the $40 million break fee
and $450 million Dynepo license ($84 million of which would be paid
to Sanofi-Aventis) are payable by Shire to TKT if Shire's
stockholders vote down the merger, but not if TKT stockholders vote
down the merger. If TKT's stockholders vote down the merger, TKT
will retain rights to Dynepo and will receive no payments from
Shire. Gene-Activated(R) is a registered trademark and Replagal(TM)
is a trademark of Transkaryotic Therapies, Inc. Dynepo(TM) is a
trademark of Sanofi-Aventis SA. For More Information Contact:
Justine E. Koenigsberg Daniella M. Lutz Senior Director, Manager,
Corporate Communications Corporate Communications (617) 349-0271
(617) 349-0205 http://www.newscom.com/cgi-bin/prnh/19990913/TKTLOGO
http://photoarchive.ap.org/ DATASOURCE: Transkaryotic Therapies,
Inc. CONTACT: Justine E. Koenigsberg, Senior Director,
+1-617-349-0271 Daniella M. Lutz, Manager, +1-617-349-0205, both of
Corporate Communications for Transkaryotic Therapies Web site:
http://www.tktx.com/ Company News On-Call:
http://www.prnewswire.com/comp/120657.html
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