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SCIOS INC.
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(Name of Registrant as specified in its charter)
RANDAL J. KIRK
RJK, L.L.C.
KIRKFIELD, L.L.C.
THE KIRK FAMILY INVESTMENT PLAN
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PRESS RELEASE
Media Contact: Caroline Gentile/Robert Siegfried
Kekst and Company
212-521-4800
Investor Contact: Paul Schulman
Corporate Investor Communications
201-896-5690
SCIOS' BOARD URGED TO MEET WITH LARGEST STOCKHOLDER
ABOUT PLAN TO BUILD STOCKHOLDER VALUE
RADFORD, VA, January 18, 2000 - The following letter was sent today to
Donald B. Rice, Chairman of the Board of Directors of Scios Inc. (NASDAQ:
SCIO) from Randal J. Kirk, one of Scios' largest stockholders, offering to
meet with Mr. Rice and other members of the Scios Board to move forward
with a strategic plan to grow the Company and provide both immediate and
long-term value to stockholders. The following is a copy of the letter sent
by Mr. Kirk to Mr. Rice:
THIRD SECURITY, L.L.C.
The Governor Tyler
1902 Downey Street
Radford, Virginia 24141
January 18, 2000
Dr. Donald B. Rice
Chairman of the Board
of Scios Inc.
820 West Maude Ave.
Sunnyvale, California 94086
Dear Dr. Rice:
I hope that you will agree that building stockholder value for
Scios and maximizing the Company's ability to capitalize on its assets to
achieve this objective are in the best interests of Scios and all Scios
stockholders. This certainly is my goal, and I would expect it to be the
goal of the present Scios Board as well. Let me propose, therefore, a
meeting with you and other interested members of Scios' Board to try to
work together to develop a program that serves the long-term best interests
of stockholders with respect to the future strategic direction of Scios.
Such a meeting can be a constructive first step toward our amicably working
together on behalf of the Company and all its stockholders.
Specifically, I am concerned, as one of Scios' largest
stockholders, that management's current business plan is both high-risk and
creates no reasonable opportunity for profitability or for increasing
stockholder value. I am concerned that the present strategic reliance on
the hope that Natrecor succeeds on its second FDA submission is flawed
because such a strategy (1) fails to recognize and repair the lack of
credibility of Scios within the pharmaceutical and investment communities;
(2) fails to articulate how this Company would make productive use of any
proceeds ultimately realized from Natrecor; and (3) fails to maximize the
value of the other significant assets of the Company.
I believe the Company needs to adopt a more targeted and
financially rigorous approach which would focus on Natrecor and other
programs for which funds are legally committed or which have a realistic
prospect of becoming commercially viable or profitably licensed in the near
term. The approach I propose also would include using the savings from the
curtailment of the more speculative and longer-range R&D efforts and other
cost cutting measures to recapitalize the Company in a manner that will
immediately enhance stockholder value.
I have several specific ideas for implementing this targeted
approach that I would be most willing to discuss with you in detail. They
include:
1. If legally and operationally feasible, separate the psychiatric
marketing business from the rest of Scios in a tax efficient
manner;
2. Eliminating all non-funded R&D that is not legally committed,
except for Natrecor and other products that have significant
potential for near term commercial viability;
3. Using a significant portion of available cash resources
(including the savings from curtailment of R&D) for a
substantial repurchase of Company shares, either through
accelerated open-market purchases or a Dutch auction self
tender offer; and
4. Aggressively marketing or otherwise rationalizing the Company's
intellectual property estate.
A program such as this is a win for all concerned - Scios,
stockholders, and employees. And, as importantly, it should better position
Scios for the long-term. I believe that, if you and your colleagues are
willing to do what is best for Scios and stockholders, our joint
development of a plan incorporating these ideas makes sound business sense.
If a mutually agreeable plan to more rapidly build Scios
stockholder value were in place, I would end my proxy solicitation in
return for minority Board representation, which would not require the
replacement of any existing director. For example, the Board could be
expanded by two, for a total of nine directors with Larry Horner, who has
our mutual respect, and myself being appointed to the Board.
You and your colleagues can be assured that the proxy
solicitation I have commenced is not an attempt by me to gain control of
the Company for any personal advantage. Despite my contrary written
assurances, you have supposed that I am interested in pursuing some type of
business relationship concerning Lotus Biochemical but this is absolutely
untrue. Rather, my interest is that of a stockholder who wants to restore
investor confidence in the Company through programs that will allow it to
become profitable and increase stockholder value in the near term, while
realizing full value for its significant intellectual property estate in
the longer term.
Please inform me at your earliest convenience regarding my
offer to meet with you and your colleagues on the Board. I would welcome
the opportunity to discuss in greater detail how these ideas or suitable
alternatives might be implemented and to discuss any concerns or ideas the
Company might have. I sincerely hope that we can meet and work together for
the benefit of Scios and its stockholders to resolve this matter in a
prompt and constructive manner. Since time is of the essence, I request
that you respond to me as soon as possible, but no later than January 24,
2000.
I look forward to your reply.
Very truly yours,
/s/ Randal J. Kirk
Randal J. Kirk
cc: Board of Directors of Scios Inc.