VNDA Update - Tang Capital Partners submits SEC proxy statement

April 7, 2009 · No Comments

Tang Capital Partners LP, a major VNDA shareholder, has officially nominated two directors to the company’s board and indicated that it will propose a shareholder resolution to liquidate the company at the annual meeting. We started following VNDA on March 6, 2009, when we estimated the company’s liquidation value to be nearly $1.64/share.

 

In order to appoint 2 directors to the board, no voting threshold needs to be reached, so Tang’s resolution can be approved simply by having more “for” votes than “against”. We expect Tang’s resolution to pass since the top 10 institutional investors alone account for nearly 47% of the company’s voting shares. Insiders hold approximately 37% of the voting shares.

 

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According to the regulatory filing, shareholder Kevin Tang, managing director of Tang Capital Partners LP, has a 15% stake in the company, and has nominated himself and Andrew Levin for election to VNDA’s board. In February, VNDA rejected calls by Kevin Tang to liquidate the company, saying it still saw value in its development slate.

 

Relevant sections of the proxy statement can be found below.

 

  

BACKGROUND AND REASONS FOR THE SOLICITATION

 

 

Tang Capital has engaged in discussions with the Company and the Board with regards to the strategic direction of the Company.  We believe that in order to maximize value for all stockholders, the Company must cease operations immediately, liquidate the Company’s assets and distribute all remaining capital to the Company’s stockholders.

 

Since the Company continues to operate as of the date of this Proxy Statement and has not publicly announced any plan of liquidation and dissolution, we believe the Board has rejected our proposal to immediately cease all operations, liquidate the Company’s assets and distribute all remaining capital to the Company’s stockholders.  In light of the foregoing, and in order to preserve and maximize the diminishing value of the Company’s assets for the benefit of all stockholders, Tang Capital has nominated Kevin C. Tang and Andrew D. Levin, M.D., Ph.D. for election to the Board at the Annual Meeting and proposed a stockholder resolution to be voted on at the Annual Meeting whereby the stockholders will request that the Company cease operations immediately, liquidate the Company’s assets and distribute all remaining capital to the Company’s stockholders.

 

On February 13, 2009, Tang Capital delivered a letter (the “Letter”) to the Nominating and Governance Committee of the Company recommending Mr. Tang and Dr. Levin as nominees for election to the Board at the Annual Meeting. On the same date, Tang Capital also delivered a notice (the “Notice”) to the Company of its intention to, among other things, nominate Mr. Tang and Dr. Levin for election to the Board and propose the stockholder resolution described herein. 

 

Since delivery of the Letter and Notice, the Board has failed to engage with Tang Capital in a dialogue on the merits of its recommendations. Tang Capital therefore decided to embark on this solicitation of proxies to elect the Nominees and approve the resolution described herein.  See the information under the heading “Proposal 1 – Election of Directors” beginning on page • for additional information about the Nominees.  Further, Tang Capital believes that the proposed resolution is the best way for the stockholders to let the Board know what the stockholders consider to be the best direction for the future of the Company in a manner that is quantitative, clear and indisputable.

 

 

VOTING AND PROXY PROCEDURE

 

 

Quorum

 

The conduct of business at the Annual Meeting requires a quorum. According to the bylaws of the Company, the holders of a majority of all of the shares of stock entitled to vote at the Annual Meeting, present in person or by proxy, shall constitute a quorum for all purposes. Under applicable law, abstentions and “broker non-votes” count toward the quorum. A “broker non-vote” occurs when shares held of record by a bank, broker or other holders of record for a beneficial owner are deemed present at the meeting for purposes of a quorum, but are not voted on a particular proposal because that record holder does not have discretionary voting power for that particular proposal and has not received voting instructions from the beneficial owner on how to vote on such proposal.

 

Proposal 1: Election of Directors

 

The two nominees for election to the Board who receive the most votes cast in favor of their election at the Annual Meeting (also known as a “plurality” of the votes) will be elected. Abstentions, broker non-votes and withheld votes will have no effect on the outcome of director elections.

 

With respect to Proposal 1, the accompanying WHITE proxy card will be voted in accordance with the stockholder’s instructions on such WHITE proxy card.  Stockholders may vote for the Nominees by marking the proper boxes on the WHITE proxy card.  If no instructions are given with respect to this item, the WHITE proxy card will be voted FOR all Nominees.

 

Proposal 2: Approval of Stockholder Resolution

 

Proposal 2 will be approved by the stockholders if the votes cast FOR Proposal 2 exceed the votes cast AGAINST Proposal 2.  Abstentions and broker non-votes will have no effect on the outcome of the vote on Proposal 2.

 

With respect to Proposal 2, the accompanying WHITE proxy card will be voted in accordance with the stockholder’s instructions on such WHITE proxy card.  Stockholders may vote on the approval of the stockholder resolution by marking the proper box on the WHITE proxy card.  If no instructions are given with respect to this item, the WHITE proxy card will be voted FOR the stockholder resolution.

 

 

PROPOSAL 1 – ELECTION OF DIRECTORS

 

 

Tang Capital is seeking your support at the Annual Meeting to elect the Nominees.  The Board currently consists of seven members who are divided into three classes.  We are seeking your support at the Annual Meeting to elect the Nominees in opposition to the two individuals nominated by the Company.  If elected, each Nominee would hold office for a term expiring at the 2012 annual meeting of stockholders and will remain in office until his successor has been duly elected and qualified (or until the director’s death, resignation or removal).

 

Set forth below are the name, age, business address, present principal occupation, employment history and directorships of publicly held companies of each Nominee for at least the past five years.  Each of the Nominees is a citizen of the United States of America.  Each of the Nominees is independent under the independence standards applicable to the Company under paragraph (a)(1) of Item 407 of Regulation S-K.

 

Kevin C. Tang. Kevin C. Tang, is the Managing Director of Tang Capital Management, LLC, an investment firm focused on the health care industry that he founded in August 2002.  From September 1993 to July 2001, Mr. Tang held various positions at Deutsche Banc Alex. Brown, Inc., an investment banking firm, most recently serving as Managing Director and head of the firm’s life sciences research group.  Mr. Tang currently serves as a director of Ardea Biosciences, Inc. and A.P. Pharma, Inc. and serves on the board of two privately held companies.  Mr. Tang received his B.S. degree in Psychology from Duke University.  Mr. Tang’s business address is 4401 Eastgate Mall, San Diego, CA 92121.  Mr. Tang is 42 years old.

 

Andrew D. Levin, M.D., Ph.D.  Andrew D. Levin, M.D., Ph.D. has served as a Principal at Tang Capital Management, LLC, an investment firm focused on the health care industry, since April 2008.  From July 2007 to April 2008, Dr. Levin served as a Business Development Manager at Genzyme Corporation, a pharmaceutical company.  Dr. Levin received a B.S.E. degree in Mechanical Engineering from Princeton University, a Ph.D. in Bioengineering from the Massachusetts Institute of Technology and an M.D. from Harvard Medical School.  Dr. Levin’s business address is 4401 Eastgate Mall, San Diego, CA 92121.  Dr. Levin is 32 years old.

 

Under Delaware corporate law, the Board is charged with the management of the Company, including determining its strategic direction.  Tang Capital believes, therefore, that if the Nominees are elected they would be in a position, as directors of the Company, to influence the strategic direction of the Company in accordance with their fiduciary duties.

 

Categories: Activist · Activist Investing · Special Situations · Update · Value Investing
Tagged: Activist, Liquidation, Special Situations, Vanda Pharmaceuticals, VNDA

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