Penwest asks shareholders to reject dissident's slate on June 10

By Lisa Kerner

Charlotte, N.C., May 19 - Penwest Pharmaceuticals Co. asked its shareholders to vote for the company's director nominees and against proposals put forth by Tang Capital Management, LP and Perceptive Life Sciences Master Fund Ltd. at Penwest's annual meeting on June 10.

Tang Capital and Perceptive have rejected compromises to avoid a costly proxy contest and "are instead attempting to gain veto power and effective negative control over important board decisions that could stalemate Penwest's operations in order to carry out their own agenda," Penwest said in a Tuesday letter to shareholders.

Penwest said it is focused on maximizing the value of Opana ER, advancing the development of A0001, monetizing the value of its drug-delivery technologies and drug-formulation expertise and reducing costs.

Tang Capital and Perceptive, on the other hand, want to immediately wind down Penwest, the company told shareholders.

"In addition, the strategy is short-sighted, is less practical than the dissidents have led shareholders to believe, would take a long time to carry out and would adversely affect shareholder value," the letter said.

Pursuing the strategy could result in Penwest forfeiting approximately $91 million of available net operating loss carryforwards and jeopardize its listing on Nasdaq, said Penwest.

Last week, Tang Capital and Perceptive asked Penwest shareholders to elect their three director nominees, amend Penwest's bylaws and approve a shareholder resolution at the company's annual meeting.

Nominated by Tang Capital and Perceptive for election are:

• Kevin C. Tang, founder and manager of Tang Capital;

• Joseph Edelman, founder and manager of Perceptive; and

• Andrew D. Levin, M.D., Ph.D., a principal at Tang Capital.

The shareholders said they invested approximately $45 million to acquire a 41.5% stake in Penwest, compared to the current officers and directors of Penwest who have invested "virtually nothing in Penwest's stock dating all the way back to July 1, 2003."

As previously reported, Penwest named Edelman as a board nominee in its preliminary proxy statement. However, Edelman said he was never informed of the nomination.

In March, Tang Capital and Perceptive demanded to inspect the Danbury, Conn., pharmaceutical company's books and records in order to determine what, if any, additional proposals it should bring to a vote at the annual meeting.

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