Exhibit 99.(A)(1)
ALZA CORPORATION
EXERCISE OF OPTION TO PURCHASE ALL
CLASS A COMMON STOCK OF
CRESCENDO PHARMACEUTICALS CORPORATION
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NOTICE TO STOCKHOLDERS OF
CRESCENDO PHARMACEUTICALS CORPORATION
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This information is disseminated pursuant to Rule 13e-3 of the Securities
Exchange Act of 1934, as amended.
This transaction has not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the fairness or merits
of such transaction nor upon the accuracy or adequacy of the information
contained in this document. Any representation to the contrary is unlawful.
SUMMARY OF TERMS
ALZA Corporation wishes to advise holders of the Class A Common Stock of
Crescendo Pharmaceuticals Corporation that, on September 29, 2000, ALZA
exercised its option to purchase all of the issued and outstanding shares of
Class A Common Stock of Crescendo (the "Purchase Option") as provided in
Crescendo's Restated Certificate of Incorporation filed with the Secretary of
State of the State of Delaware on September 4, 1997 (the "Restated
Certificate").
. Closing Date--The closing date for this purchase will be November 13,
2000, subject to extension if necessary to obtain governmental consents
(the "Closing Date").
. Aggregate Purchase Price--The purchase price for all issued and
outstanding shares of Class A Common Stock is $100 million. As of
September 29, 2000, there are 4,853,509 shares of Class A Common Stock
issued and outstanding. Options to purchase an additional 80,000 shares
of Class A Common Stock will be exercisable prior to the Closing Date.
. Per Share Purchase Price--Assuming all options are exercised, you will
receive approximately $20.27 for each share of Class A Common Stock that
you hold as of the close of business on the Closing Date.
. Payment of the Purchase Price--In accordance with the Restated
Certificate, ALZA will deposit $100 million with Fleet National Bank (the
"Payment Agent") on or before the Closing Date and will provide the
Payment Agent with an irrevocable direction to pay these funds to the
holders of Crescendo Class A Common Stock as of the close of business on
the Closing Date. AFTER COMPLYING WITH THESE CONDITIONS, OWNERSHIP OF ALL
CRESCENDO CLASS A COMMON STOCK WILL AUTOMATICALLY TRANSFER TO ALZA ON THE
CLOSING DATE. If you physically hold your Class A Common Stock
certificates, the Payment Agent will be instructing you on how to submit
your certificates for payment. You will receive your payment from the
Payment Agent after you submit the certificates. If you hold your Class A
Common Stock in book entry form, you will automatically receive payment.
If you hold your Class A Common Stock in a brokerage account, your broker
will credit your account with the purchase price. See "Contracts,
Arrangements or Understandings With Respect to Crescendo's Class A Common
Stock" on page __.
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Nature of Disclosure
ALZA Corporation ("ALZA") is providing this information to the security
holders of Crescendo Pharmaceuticals Corporation ("Crescendo") in compliance
with Rule 13e-3 of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"). Notwithstanding the provision of this information, ALZA
disclaims application of Rule 13e-3 of the Exchange Act to the transaction
described herein.
Special Factors:
Purpose
The purpose of this transaction is to acquire the rights to all products and
product candidates developed or under development by ALZA without incurring
ongoing royalty obligations to Crescendo pursuant to the Development Agreement
between ALZA and Crescendo dated September 5, 1997 (the "Development
Agreement"). ALZA believes that it is in the best interests of ALZA and ALZA's
stockholders to exercise the Purchase Option at this time.
ALZA holds an option to license each of the individual products being
developed by ALZA on behalf of Crescendo and has exercised its option with
respect to three of these products. However, such licenses obligate (and such
future licenses would obligate) ALZA to make significant product payments to
Crescendo. Therefore, maintaining the existing licenses in place and
potentially exercising the license option with respect to individual products
in the future were not considered by ALZA to be the most effective and
comprehensive means to acquire all of Crescendo's products and product
candidates.
The transaction was structured pursuant to the terms of the Purchase Option
set forth in Crescendo's Restated Certificate. This transaction is being
undertaken at this time because ALZA expects that Crescendo's Available Funds
may drop below $2.5 million by the end of the year 2000, thereby triggering the
deadline for exercise of the Purchase Option. Consequently, AlZA's directors
determined, for the reasons described above, that exercise of the Purchase
Option at this time was in the best interests of ALZA and its stockholders.
Consequences
The transaction reported herein will cause Crescendo to become a wholly-
owned subsidiary of ALZA. Crescendo will be de-listed from the Nasdaq National
Market and will have its public reporting obligations suspended. As a result
ALZA will indirectly own all of the assets of Crescendo.
The transaction reported herein will cause each stockholder of Class A
Common Stock to dispose of his or her Class A Common Stock for consideration
equal to that stockholder's pro rata share of the exercise price identified
above.
The federal income tax consequences to Crescendo stockholders under the
Internal Revenue Code of 1986, as amended (the "Code"), with respect to the
cash received for their Class A Common Stock are generally as described below.
This discussion is intended only to provide general information to stockholders
that are subject to United States federal income tax; it may not address all
relevant federal income tax consequences to such persons or to other categories
of stockholders, e.g., foreign persons, dealers in securities, stockholders
that are exempt from federal income tax, stockholders who received their
Crescendo stock by the exercise of an option, or as compensation or
stockholders who do not hold their Class A Common Stock as capital assets. This
discussion is based upon present federal income tax laws and does not attempt
to anticipate changes of law. This discussion does not address state, local or
foreign tax considerations. ALL HOLDERS OF CLASS A COMMON STOCK ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS.
Holders of Class A Common Stock will have a capital gain or loss due to
ALZA's exercise of the Purchase Option equal to the difference between (a) the
amount of the cash received, and (b) their basis in the
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Class A Common Stock surrendered. Gain or loss due to the exercise of the
Purchase Option should be long-term if the Class A Common Stock has been held
for more than one year at the time of exercise of the Purchase Option. The
Internal Revenue Service may assert, however, that the holding period of the
Class A Common Stock does not begin until the date the Purchase Option was
exercised and that capital gain or loss upon exercise of the Purchase Option is
therefore short-term. Limitations may apply to deduction of capital loss.
To the extent that a holder of Class A Common Stock has not provided or does
not provide a correct taxpayer identification number on IRS Form W-9 or a
substitute therefor, such holder may be subject to backup withholding by ALZA.
Fairness
ALZA reasonably believes that the transaction reported herein is fair to the
holders of Crescendo Class A Common Stock. None of ALZA's directors dissented
to the transaction. Julian N. Stern abstained from voting on such transaction
because he owns shares of Crescendo Class A Common Stock. Two additional ALZA
directors who own shares of Crescendo Class A Common Stock, Isaac Stein and
Dean O. Morton, did not participate in the ALZA board meeting at which the
transaction was approved.
The material factor upon which this belief is based is set forth below.
Stockholder Awareness of Purchase Option
Initial public holders of the Class A Common Stock received such stock as a
dividend from ALZA in 1997. The Purchase Option was a feature of the Class A
Common Stock at that time and was described in the prospectus dated September
5, 1997, distributed in connection with the distribution of the Class A Common
Stock. The Purchase Option was also set forth in the Restated Certificate,
which was publicly filed both with the Delaware Secretary of State and the
Securities and Exchange Commission (the "Commission") prior to the
distribution. Pursuant to the Restated Certificate, the stock certificates for
the Class A Common Stock were legended to put the holders thereof on further
notice about the Purchase Option. Stockholders were also advised of the
Purchase Option in each Form 10-K and Form 10-Q public filing made by Crescendo
and in each Form 10-K filing made by ALZA with the Commission since Crescendo's
formation. Accordingly, the Purchase Option was present in the initial public
distribution of the Class A Common Stock, was disseminated in Crescendo's
charter documents, was discussed in each of Crescendo's periodic filings and in
ALZA's periodic filings and was legended on each physical stock certificate
issued for the Class A Common Stock. As a result, every holder of Crescendo
Class A Common Stock received substantial notice as to the terms of the
Purchase Option prior to making any investment decision with respect to the
Class A Common Stock.
ALZA decided to pay the exercise price to holders of Crescendo Class A
Common Stock in cash, instead of stock, because ALZA had sufficient cash
available, and the payment of cash would not be dilutive to the stockholders of
ALZA. ALZA reasonably believes the form of such payment to be fair to holders
of Crescendo Class A Common Stock.
The Restated Certificate does not require any approval of the stockholders
of Crescendo for the exercise of the Purchase Option.
After making reasonable inquiry of management of Crescendo, ALZA believes
that no directors of Crescendo have retained an unaffiliated representative to
act solely on behalf of any security holders of Crescendo as no action is
required by either of Crescendo's directors or Crescendo's security holders to
effect the Purchase Option.
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Reports
Neither ALZA nor, to the best of ALZA's knowledge after reasonable inquiry
of Crescendo, Crescendo, has received any report, opinion (other than an
opinion of counsel) or appraisal from an outside party which is materially
related to the transaction described herein.
Identification and Securities of Crescendo
The issuer of the class of equity security which is the subject of this
filing and the address of its principal executive offices is:
Crescendo Pharmaceuticals Corporation
2000 Charleston Road, Suite 300
Mountain View, CA 94043
The exact title of the class of security which is the subject of this filing
is Class A Common Stock, par value $0.01, of Crescendo. The amount of Class A
Common Stock outstanding as of September 29, 2000, the most recent practicable
date hereof, is 4,853,509. The approximate number of holders of record of such
Class A Common Stock as of September 29, 2000, the most recent practicable date
hereof, is 4,676.
The principal market in which the Class A Common Stock is being traded is
the Nasdaq National Market. The range of high and low bid quotations for the
Class A Common Stock for each quarterly period during the past two years is:
Period High Low
------ ------ ------
September 30, 1998........................................... 13.188 12.250
December 31, 1998............................................ 13.875 12.250
March 31, 1999............................................... 16.313 13.500
June 30, 1999................................................ 17.500 14.188
September 30, 1999........................................... 18.500 17.125
December 31, 1999............................................ 18.750 17.438
March 31, 2000............................................... 20.000 17.625
June 30, 2000................................................ 20.625 18.250
On August 23, 2000, Crescendo announced a cash dividend on all Crescendo
Class A and Class B Common Stock in the amount of $0.49 per share payable on
September 29, 2000 to stockholders of record at the close of business on
September 5, 2000.
To the best of ALZA's knowledge, after making reasonable inquiry, Crescendo
has not paid any other dividends on the Class A Common Stock in the past two
years.
Crescendo is restricted from paying any dividends on the Class A Common
Stock if, after payment of such dividend, the amount of Crescendo's cash, cash
equivalents and short-term and long-term investments would be less than the
amount of Available Funds as such phrase is defined in the Restated Certificate
remaining after expenditures pursuant to the Development Agreement as of the
date of such dividend.
Identification of ALZA:
This filing is being made by ALZA. ALZA's principal business is
pharmaceutical research and development. The address of its principal executive
offices are:
ALZA Corporation
1900 Charleston Road, P.O. Box 7210
Mountain View, CA 94039-7210
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During the last five years, ALZA has not been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors). During the
last five years, ALZA has not been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction which resulted in a judgment,
decree or final order enjoining further violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such laws.
Past Contacts, Transactions or Negotiations:
The nature and approximate amount in dollars of any transaction between ALZA
and Crescendo which has occurred during the past two years are as follows:
(a) From July 1, 1998 through June 30, 2000, Crescendo paid
approximately $182.5 million to ALZA pursuant to the Development Agreement,
as amended, whereby ALZA was retained by Crescendo to perform certain
research and development activities directed toward the selection and
development of pharmaceutical products.
(b) From July 1, 1998 through June 30, 2000, Crescendo paid
approximately $400,000 to ALZA pursuant to a Services Agreement (the
"Services Agreement") dated September 5, 1997 between ALZA and Crescendo
whereby ALZA was retained by Crescendo to supply certain administrative
services to Crescendo in exchange for payment of ALZA's costs in the
provision of such services.
(c) From July 1, 1998 through June 30, 2000, Crescendo paid
approximately $13.4 million to ALZA pursuant to a Technology License
Agreement (the "Technology License Agreement") dated September 5, 1997
between ALZA and Crescendo, whereby ALZA licensed certain proprietary
technology to Crescendo.
(d) ALZA and Crescendo entered into a License Option Agreement (the
"License Option Agreement") dated September 5, 1997 whereby Crescendo
granted ALZA an option to license certain products from Crescendo. No
amounts have been paid by either of ALZA or Crescendo to the other party
pursuant to this agreement in the past two years except as set forth in
sections (e)-(g) below.
(e) In December of 1998, ALZA exercised its option to obtain a worldwide
license to OROS(R) oxybutynin (Ditropan XL(R)) from Crescendo. ALZA
launched the product in the United States on February 1, 1999. Under the
terms of the license agreement between Crescendo and ALZA, Crescendo will
receive payments from ALZA based on worldwide net sales of the product.
Since the option exercise, ALZA has paid Crescendo approximately $4.8
million under such license agreement.
(f) On March 3, 2000, ALZA exercised its option to obtain a worldwide
license to DUROS(R) leuprolide (Viadur(TM)) from Crescendo. Under the terms
of the license agreement between Crescendo and ALZA, Crescendo will receive
payments from ALZA based on worldwide net sales of the product. On April 5,
2000, ALZA announced that it had entered into a U.S. commercialization
agreement for Viadur with Bayer Corporation ("Bayer"). Under the terms of
its license agreement with ALZA, Crescendo will receive payments from ALZA
based on Bayer's net sales of the product.
(g) On August 1, 2000, ALZA exercised its option to obtain a worldwide
license to OROSR methylphenidate (Concerta(R)) from Crescendo. Under the
terms of the license agreement between Crescendo and ALZA, Crescendo will
receive payments from ALZA based on worldwide net sales of the product. On
April 18, 2000, ALZA announced that it had entered into an agreement with
McNeil Consumer Healthcare, a Johnson & Johnson company, to co-promote the
product in the United States. The product was launched in the third quarter
of 2000.
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Terms of the Transaction:
ALZA exercised its option to purchase all of Crescendo's Class A Common
Stock (the "Purchase Option") on September 29, 2000 by delivering an exercise
notice to Crescendo. The exercise price of the Purchase Option is $100 million,
subject to final purchase adjustments. ALZA exercised the Purchase Option by
sending an exercise notice to Crescendo which set forth the exercise price and
Closing Date. ALZA will deposit the exercise price with Fleet National Bank, as
payment agent, on or prior to the Closing Date. Promptly following the closing
date, the payment agent will distribute the exercise price pro rata to each
holder of Class A Common Stock determined as of the close of business on the
Closing Date.
In accordance with the terms of the Restated Certificate, the stockholders
of the Class A Common Stock do not need to take any steps to approve the
purchase. Title to the Class A Common Stock will automatically vest in ALZA on
the Closing Date and the exercise price will be paid to such stockholders in
accordance with their respective interests.
Plans or Proposals of ALZA:
Subsequent to the purchase of the Class A Common Stock by ALZA, Crescendo
will be a wholly-owned subsidiary of ALZA. ALZA anticipates de-listing
Crescendo from the Nasdaq National Market and suspending its reporting
requirements with the Securities and Exchange Commission by filing a Form 15.
ALZA intends to replace Crescendo's officers and directors with ALZA employees.
Interest in Securities of Crescendo:
As of September 29, 2000, no shares of Class A Common Stock of Crescendo are
beneficially owned by ALZA, by any pension, profit sharing or similar plan of
ALZA or, to ALZA's knowledge after reasonable inquiry, by any executive officer
and director of ALZA, any person controlling ALZA or any executive officer of
any corporation ultimately in control ALZA or by any associate or majority
owned subsidiary of ALZA except as set forth below. Each of the persons listed
below holds less than 0.1 percent of the shares of Crescendo Class A Common
Stock outstanding on such date.
Immediately
Direct Indirect Exercisable
Name Ownership Ownership Options
---- --------- --------- -----------
James R. Butler........................... 100 -0- -0-
Bruce C. Cozadd........................... 135 -0- -0-
Harold E. Fethe........................... 200 -0- -0-
Matthew K. Fust........................... 31 -0- -0-
Ronald P. Haak............................ 79 -0- -0-
Dean O. Morton............................ 1000 -0- -0-
Robert M. Myers........................... 10 -0- -0-
Dr. Samuel R. Saks........................ 312(1) -0- -0-
Peter D. Staple........................... 86 -0- -0-
Isaac Stein............................... 580 -0- -0-
Julian N. Stern........................... 4696 -0- -0-
Daniel N. Swisher, Jr. ................... 36 -0- -0-
Janne Wissel.............................. 336 -0- -0-
- --------
(1) Shares listed are subject to restrictions on disposition which lapse on
January 17, 2001.
As of September 29, 2000 ALZA's 401(k) tax deferral investment plan owned
37,006 shares of Class A Common Stock.
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Contracts, Arrangements or Understandings With Respect to Crescendo's Class A
Common Stock:
Article FIFTH of the Restated Certificate provides ALZA with the Purchase
Option. The Purchase Option provides that ALZA may purchase all, but not less
than all, of the issued and outstanding Class A Common Stock at any time prior
to the earlier of: (i) 60 days after Crescendo provides ALZA with a statement
that, as of the end of any calendar month, there are less than $2.5 million of
Available Funds remaining after expenditures pursuant to the Development
Agreement, accompanied by a report of Crescendo's independent auditors stating
that nothing has come to their attention indicating that there are $2.5 million
or more of Available Funds remaining at that date; or (ii) January 31, 2002
(subject to certain extension rights). ALZA may exercise the Purchase Option at
any time prior to such expiration date by mailing an exercise notice to
Crescendo. This exercise notice must identify certain information, including a
closing date for the purchase and the exercise price and form of consideration
to be paid to Crescendo stockholders. The closing date must be within 60 days
of the exercise date but may be extended by ALZA in certain circumstances
outlined in the Restated Certificate, such as the need for regulatory
clearance. ALZA exercised the Purchase Option by providing the foregoing
exercise notice to Crescendo on September 29, 2000. The Closing Date is subject
to extension as necessary to obtain governmental consent to the stock purchase.
From the date of exercise of the Purchase Option until the Closing Date,
Crescendo is prohibited by the terms of the Restated Certificate from engaging
in any extraordinary corporate activity without the prior written consent of
ALZA.
Article FOURTH of the Restated Certificate provides that as soon as ALZA
exercises the Purchase Option, Crescendo's board shall cease to be classified,
the number of authorized Crescendo directors shall be increased in accordance
with a formula set forth in the Restated Certificate and the holders of
Crescendo's Class B Common Stock (currently ALZA) shall have the sole right to
appoint the directors thereafter.
Within 15 business days after the mailing of the exercise notice to
Crescendo, Crescendo must provide ALZA with a status statement containing
certain financial information. This financial information includes all actual
and contingent liabilities of Crescendo. ALZA then may reduce the exercise
price by the amount of such liabilities. It is not anticipated that any
reduction will occur in the current circumstances of this transaction.
ALZA must designate a payment agent who will distribute the exercise price
to the Crescendo stockholders. ALZA must also deposit both the exercise price,
and irrevocable instructions to pay the exercise price to Crescendo
stockholders of record as of the close of business on the Closing Date, with
the payment agent on or prior to the Closing Date. ALZA has designated Fleet
National Bank as Payment Agent.
On the Closing Date, title to the Class A Common Stock will automatically
transfer to and vest in ALZA without further act of any person. Registered
stockholders who hold physical stock certificates must submit their
certificates to the Payment Agent in order to receive the pro rata exercise
price, whereas registered stockholders who hold their shares in book entry form
will automatically receive payment by check. Stockholders who hold their shares
in a brokerage account will have the relevant account automatically credited by
the broker.
Other Provisions of the Transaction:
Appraisal rights are not afforded under either applicable law or the
Restated Certificate to Crescendo stockholders in respect of the exercise of
the Purchase Option and none will be afforded by either of ALZA or Crescendo.
ALZA is not aware of any rights available to objecting holders of Class A
Common Stock under applicable law.
ALZA is unaware, after making reasonable inquiry of Crescendo, of any grant
of access to unaffiliated security holders to the corporate files of either
Crescendo or ALZA or the appointment of counsel or appraisal services for
unaffiliated security holders at the expense of either Crescendo or ALZA.
Transaction Expenses:
ALZA's reasonably itemized statement of expenses for the transaction
includes filing fees of $20,000, printer fees of approximately $5,000,
accounting fees of approximately $5,000 and legal fees of approximately
$50,000. Crescendo will not be responsible for paying any or all of such
expenses.
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Source of Transaction Funds:
The source of funds to pay the exercise price and the transaction expenses
is ALZA's cash, cash equivalents and marketable securities.
Summary of Financial Statements:
Selected Consolidated Financial Data
Set forth below is a summary of Crescendo's selected consolidated financial
data, which has been excerpted or derived from the information contained in
Crescendo's Annual Report on Form 10-K and Form 10-K/A for the year ended
December 31, 1999, and its Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2000. More comprehensive information is included in such
reports and other documents filed by Crescendo with the Commission, and the
following information should be read in conjunction with such reports and other
documents and the financial information (including any related notes and
Management's Discussion and Analysis of Financial Condition and Results of
Operations) contained therein.
Statement of Income Data:
(in millions, except per share amounts)
Year ended
December 31,
------------- Six Months ended
1998 1999 June 30, 2000
------ ------ ----------------
Total revenues.............................. $13.9 $ 9.8 $ 4.4
Net loss.................................... $95.8 $88.4 $38.3
Loss per share.............................. $19.29 $17.89 $ 7.88
Ratio of earnings to fixed changes.......... N/A N/A N/A
Balance Sheet Data:
(in millions, except per share amounts)
December 31, 1999 June 30, 2000
----------------- -------------
Working capital............................ $54.1 $31.6
Total assets............................... 98.1 61.6
Total stockholders' equity................. 85.8 46.3
Book value per share....................... 17.62 9.57
Note to Selected Consolidated Financial Data:
(1) Crescendo had no material fixed charges for the periods presented.
Conclusion:
If you have any questions with respect to this transaction, please contact
ALZA Investor Relations at (650) 564-5222.
ALZA and Crescendo wish to thank you for your investment and interest in
Crescendo. We sincerely hope that you are pleased with your return on this
investment.
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