<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AMENDMENT NO. 3
ALZA TTS RESEARCH PARTNERS, LTD.
(Name of subject company)
PHARMAINVEST, L.L.C.
PHARMACEUTICAL ROYALTIES, L.L.C.
PHARMACEUTICAL ROYALTY INVESTMENTS LTD.
PHARMACEUTICAL PARTNERS, L.L.C.
(Bidder)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of class of securities)
NONE
(CUSIP Number)
------------------------
PABLO LEGORRETA, DAVE MADDEN
PHARMAINVEST, L.L.C.
70 E. 55th St., 23rd Floor
New York, NY 10022
(800) 600-1450
------------------------
COPIES TO:
F. GEORGE DAVITT, ESQ.
TESTA, HURWITZ & THIBEAULT, LLP
HIGH STREET TOWER
125 HIGH STREET
BOSTON, MA 02110
------------------------
CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE
$18,480,000 $3,696
* Estimated for purposes of calculating the amount of the filing fee only.
The amount assumes the purchase of 1,400 units of limited partnership
interest (the "Units") of the subject company at $13,200 per Unit in cash.
/X/ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount Previously Filing Paid: $3,360 Filing Party: PharmaInvest,
Form or Registration No: Schedule 14D-1 L.L.C.
Date filed: November 20, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
This Amendment No. 3 amends and supplements the Tender Offer Statement,
as amended, on Schedule 14D-1, as amended, ("Schedule 14D-1") as filed by
PharmaInvest, L.L.C., a Delaware limited liability company (the "Purchaser")
on behalf of Pharmaceutical Royalties, L.L.C., a Delaware limited liability
company, and Pharmaceutical Royalty Investments Ltd., a Bermuda company
(collectively the "Funds"), and on behalf of Pharmaceutical Partners, L.L.C.
The Purchaser is now offering to purchase up to 1,400 outstanding units of
limited partnership interest (the "Units") in ALZA TTS Research Partners,
Ltd., a California Limited Partnership (the "Partnership"), for cash
consideration per Unit of $13,200 (the "Purchase Price") upon the terms and
subject to the conditions set forth in the Offer to Purchase as amended and
supplemented by the Supplement dated as of January 16, 1998 (the
"Supplement") and in the related Letters of Transmittal (which, together with
the Offer to Purchase and the Supplement with any amendments thereto,
collectively constitute the "Offer"). Those sections of the Offer amended and
supplemented by the Supplement are hereby incorporated by reference in the
Items of Schedule 14D-1 in which such sections are referred to.
As of 5:00 p.m., Eastern Standard Time on Thursday, January 15, 1998,
approximately 21 Units have been tendered in the Offer.
The Expiration Date of the Offer is hereby amended so that the Offer will
expire at 12:00 midnight, Eastern Standard Time on February 2, 1998.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
Item 11 is hereby amended as follows:
(a)(6) Supplement to the Offer to Purchase dated January 16, 1998
(a)(7) Revised Letter of Transmittal and Instructions
(a)(8) Cover Letter from PharmaInvest, L.L.C. dated January 16, 1998
(a)(9) Press Release dated January 16, 1998
2
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: January 16, 1998
PHARMAINVEST, L.L.C.
By: /s/ PABLO LEGORRETA
-----------------------------------------
Title: Managing Member of
Pharmaceutical Partners, L.L.C., the Manager
---------------------------------------------
PHARMACEUTICAL ROYALTIES, L.L.C.
By: /s/ PABLO LEGORRETA
-----------------------------------------
Title: Managing Member of
Pharmaceutical Partners, L.L.C., the Manager
---------------------------------------------
PHARMACEUTICAL ROYALTY
INVESTMENTS LTD.
By: /s/ PABLO LEGORRETA
-----------------------------------------
Title: Managing Member of
Pharmaceutical Partners, L.L.C., the Manager
---------------------------------------------
PHARMACEUTICAL PARTNERS, L.L.C.
By: /s/ PABLO LEGORRETA
-----------------------------------------
Title: Managing Member
---------------------------------------------
3
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- --------- -----------------------------------------------------------------
(a)(6) Supplement to the Offer to Purchase dated January 16, 1998
(a)(7) Revised Letter of Transmittal and Instructions
(a)(8) Cover Letter from PharmaInvest, L.L.C. dated January 16, 1998
(a)(9) Press Release dated January 16, 1998
<PAGE>
SUPPLEMENT, DATED JANUARY 16, 1998,
TO THE OFFER TO PURCHASE, DATED NOVEMBER 20, 1997
PHARMAINVEST, L.L.C.
HAS INCREASED THE PRICE OF
ITS OFFER TO PURCHASE FOR CASH
UP TO 1,400 OUTSTANDING UNITS OF
LIMITED PARTNERSHIP INTEREST
OF
ALZA TTS RESEARCH PARTNERS, LTD.
TO
$13,200 PER UNIT
The following information amends and supplements the Offer to Purchase (the
"Offer to Purchase") dated November 20, 1997, as amended, of PharmaInvest,
L.L.C., a Delaware limited liability company (the "Purchaser"), on behalf of
Pharmaceutical Royalties, L.L.C., a Delaware limited liability company, and
Pharmaceutical Royalty Investments Ltd., a Bermuda company (collectively, the
"Funds"), and on behalf of Pharmaceutical Partners, L.L.C. Pursuant to this
Supplement, the Purchaser is now offering to purchase up to 1,400 outstanding
units of limited partnership interest (the "Units") in ALZA TTS Research
Partners, Ltd., a California limited partnership (the "Partnership"), for cash
consideration per Unit of $13,200 (the "Purchase Price"), upon the terms and
subject to the conditions set forth in the Offer to Purchase, as amended and
supplemented by this Supplement, and in the related Letters of Transmittal
(which, together with the Offer to Purchase and this Supplement with any
amendments or supplements hereto or thereto, collectively constitute the
"Offer"). The Purchase Price will be automatically reduced by the aggregate
amount of the value of any cash or asset distributions made or declared by the
Partnership on or after December 31, 1997 and prior to the date on which the
Purchaser pays the Purchase Price for the tendered Units.
Except as set forth in this Supplement or in the revised (pink) Letter of
Transmittal, the terms and conditions previously set forth in the Offer to
Purchase remain applicable in all respects to the Offer, and this Supplement
should be read in conjunction with the Offer to Purchase and the revised (pink)
Letter of Transmittal. Capitalized terms used but not defined in this Supplement
have the meanings assigned to them in the Offer to Purchase.
RISK FACTORS
- - Although the Purchaser cannot predict the future value of the Partnership's
assets or future selling prices of the Units, the Purchase Price could differ
significantly from the proceeds that would be realized by holding the Units
for the entire life of the expected payment stream of the Partnership's
assets.
- - The Purchaser is making the Offer with a view to making a profit. Accordingly,
there may be a conflict between the desire of the Purchaser to acquire the
Units at the Purchase Price and the value of the expected payment stream of
the Partnership's assets. There can be no assurance that the Purchase Price
will be more or less than such value.
- - No independent person has been retained by the Purchaser or any of its
affiliates to value or make any appraisal of the Units or to render any
opinion with respect to the fairness of the Purchase Price and no
representation is made with respect to the fairness of the Purchase Price.
- - Although there are limited resale mechanisms available to Holders through
partnership matching services, there is no formal trading market for the
Units. The Offer provides each Holder the opportunity to liquidate his or her
investment in the Partnership without transfer fees and transaction costs
generally incurred in secondary market sales (which can range from 5% to 8.75%
of the sale price).
THE EXPIRATION DATE OF THE OFFER IS HEREBY AMENDED SO
THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON
FEBRUARY 2, 1998, UNLESS THE OFFER IS EXTENDED.
-------------------
<PAGE>
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, PURCHASER BEING SATISFIED,
PRIOR TO THE EXPIRATION DATE, IN ITS REASONABLE DISCRETION, THAT, UPON PURCHASE
OF THE UNITS PURSUANT TO THE OFFER, IT, THE FUNDS AND/OR THEIR NOMINEE WILL HAVE
FULL RIGHTS TO OWNERSHIP AS TO ALL SUCH UNITS AND THAT THE GENERAL PARTNER WILL
CONSENT TO IT, THE FUNDS OR THEIR NOMINEE BECOMING ASSIGNEES OF THE PURCHASED
UNITS AND A SUBSTITUTE LIMITED PARTNER WITH RESPECT TO ALL SUCH UNITS. THE OFFER
IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS CONTAINED IN THE OFFER TO PURCHASE,
THIS SUPPLEMENT, THE LETTERS OF TRANSMITTAL AND RELATED DOCUMENTS. SEE SECTIONS
2 AND 14 OF THE OFFER TO PURCHASE.
EACH HOLDER IS URGED TO READ CAREFULLY THE ENTIRE OFFER TO PURCHASE, THIS
SUPPLEMENT, THE LETTERS OF TRANSMITTAL AND RELATED DOCUMENTS.
<PAGE>
-------------------
IMPORTANT
Any Holder wishing to tender all or a portion of his or her Units should
complete and sign one of the Letters of Transmittal which accompany the Offer to
Purchase or this Supplement in accordance with the Instructions attached to the
Letters of Transmittal, mail or deliver one of the Letters of Transmittal and
any other required documents to the Depositary at its address set forth on the
back covers of this Supplement and the Offer to Purchase, and tender those Units
pursuant to the procedures for transfer set forth in Section 3 and the
Instructions attached to the Letters of Transmittal.
There is no established trading market for the Units. The Purchase Price has
been established by the Purchaser, in its sole discretion. No independent
opinion, report or appraisal related to the valuation of the Units has been
obtained by the Purchaser.
Questions and requests for assistance may be directed to the Information
Agent or the Purchaser at their respective addresses and telephone numbers set
forth in the Instructions attached to the Letters of Transmittal and on the back
covers of this Supplement and the Offer to Purchase. Requests for additional
copies of this Supplement, the Offer to Purchase, the revised (pink) Letter of
Transmittal and other related materials may be directed to the Information Agent
or the Purchaser.
-------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
INTRODUCTION...................................................................................................... 5
1. Amended Terms of the Offer............................................................................. 6
3. Procedure for Tendering Units.......................................................................... 6
6. Price Range of the Units............................................................................... 7
8. Certain Information Concerning the Partnership......................................................... 7
10. Source and Amount of Funds............................................................................. 7
17. Miscellaneous.......................................................................................... 8
</TABLE>
<PAGE>
To Holders of Units of Limited Partnership Interest in ALZA TTS Research
Partners, Ltd.:
INTRODUCTION
The following information amends and supplements the Offer to Purchase (the
"Offer to Purchase") dated November 20, 1997, as amended, of PharmaInvest,
L.L.C., a Delaware limited liability company (the "Purchaser"), on behalf of
Pharmaceutical Royalties, L.L.C., a Delaware limited liability company, and
Pharmaceutical Royalty Investments Ltd., a Bermuda company (collectively, the
"Funds"), and on behalf of Pharmaceutical Partners, L.L.C. Pursuant to this
Supplement, the Purchaser is now offering to purchase up to 1,400 outstanding
units of limited partnership interest (the "Units") in ALZA TTS Research
Partners, Ltd., a California limited partnership (the "Partnership"), for cash
consideration per Unit of $13,200 (the "Purchase Price"), upon the terms and
subject to the conditions set forth in the Offer to Purchase, as amended and
supplemented by this Supplement, and in the related Letters of Transmittal
(which, together with the Offer to Purchase and this Supplement with any
amendments or supplements hereto or thereto, collectively constitute the
"Offer"). The Purchase Price will be automatically reduced by the aggregate
amount of the value of any cash or asset distributions made or declared by the
Partnership on or after December 31, 1997 and prior to the date on which the
Purchaser pays the Purchase Price for the tendered Units.
Except as set forth in this Supplement or in the revised (pink) Letter of
Transmittal, the terms and conditions previously set forth in the Offer to
Purchase remain applicable in all respects to the Offer and this Supplement
should be read in conjunction with the Offer to Purchase and the revised (pink)
Letter of Transmittal. Capitalized terms used but not defined in this Supplement
have the meanings assigned to them in the Offer to Purchase.
The following information should be considered in evaluating the Offer:
- - AT $13,200 PER UNIT, PURCHASE PRICE IS $500 HIGHER THAN INDEPENDENT THIRD
PARTY VALUATION. ALZA Development Corporation, the General Partner of the
Partnership, referenced in its previous correspondence a valuation of ALZA TTS
prepared by SECURITIES PRICING AND RESEARCH, INC. ("SPAR"), an independent
appraiser that specializes in valuing partnerships. Subsequent to the General
Partner correspondence, SPAR revised downward its "Fair Market Value" of the
Units to $12,700. A copy of the SPAR valuation is attached hereto as Exhibit
1.
- - POTENTIAL TAX BENEFIT, ENHANCED BY RECENT REDUCTION IN CAPITAL GAIN RATES TO
20%. If you retain your Units, distributions made to you should be taxed as
ordinary income, at federal rates of up to 39.6% for individuals. If you sell
your Units, the resulting gain should be taxed at capital gain rates,
currently 20% for most individuals disposing of capital assets held more than
18 months. If you have held your Units since the original offering you will
generally have no basis in the Units. As a result, all or substantially all of
the Purchase Price should be taxable at lower capital gain rates. PHARMAINVEST
IS NOT EXPRESSING AN OPINION AS TO THE TAX CONSEQUENCES OF TENDERING UNITS.
HOLDERS ARE STRONGLY ADVISED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
TAX CONSEQUENCES OF ACCEPTING THE OFFER.
Below is a summary of the SPAR valuation, comparing it to the Offer. SPAR
arrives at a "Net Asset Value" per Unit of $16,900 pre-tax, which represents the
current value of a stream of growing payments that you may receive over the next
9 years discounted at a 10% discount rate. In other words, a Holder willing to
maintain an illiquid investment over a 9 year period and willing to accept a 10%
return per year should realize over the years approximately $16,900 per Unit.
Thus, on a pre-tax basis the $13,200 Offer appears to be not attractive.
However, as shown below, because of the significantly higher taxes paid on
distributions (39.6% ordinary income rate) versus the taxes paid on the sale
(20% capital gain rate), on an after tax basis our Offer results in net
after-tax proceeds of $10,560 per Unit which compares favorably with SPAR's "Net
Asset Value" on an after-tax basis of $10,210 per Unit. A Holder that is or will
be taxed at marginal federal income tax rates that are lower than 39.6% will
receive greater net after tax
5
<PAGE>
distributions. SPAR also calculates a "Fair Market Value" of $12,700 per Unit,
which takes into consideration the lack of a liquid market for the Units as well
as other risk factors inherent in the investment. In other words, SPAR concludes
that the "Fair Market Value" for a Holder who is not willing to maintain an
illiquid investment over 9 years is $12,700 on a pre-tax basis; the $13,200
Offer exceeds this value by $500 ($13,200 - $12,700). Furthermore, on an
after-tax basis the Offer substantially exceeds the SPAR "Fair Market Value" by
$2,890 ($10,560 - $7,670).
<TABLE>
<CAPTION>
PHARMAINVEST
OFFER
ACCEPTING THE OFFER: (PER UNIT)
- ------------------------------------------------------------------ ---------------
<S> <C>
Purchase Price $ 13,200
Less: federal capital gains tax (@ 20%) (2,640)
-------
Net after-tax proceeds $ 10,560
</TABLE>
<TABLE>
<CAPTION>
SPAR VALUATION
(PER UNIT)
-----------------------
NET ASSET FAIR MARKET
RETAINING YOUR UNITS: VALUE VALUE
- ---------------------------------------------------------- --------- -----------
<S> <C> <C>
Estimated Net Present Value (NPV) of future distributions $16,900 $12,700
Less: federal ordinary income tax (@ 39.6%) (6,690) (5,030)
--------- -----------
Estimated NPV of net after-tax distributions $10,210 $ 7,670
</TABLE>
THE PREVIOUS ANALYSIS SHOULD NOT BE CONSTRUED AS A RECOMMENDATION BY THE
PURCHASER TO ACCEPT OR DECLINE THE OFFER. THE PURCHASER IS MAKING NO
REPRESENTATION AS TO THE TAX CONSEQUENCES OF TENDERING UNITS. EACH HOLDER IS
STRONGLY URGED TO CONSULT HIS OR HER TAX ADVISOR. THE PURCHASER HAS NO
AFFILIATION WITH SPAR AND DOES NOT ENDORSE THE SPAR VALUATION. IN ADDITION, THE
PURCHASER HAS NOT ENGAGED SPAR TO PREPARE THE SPAR VALUATION. THE SPAR VALUATION
IS NOT RELATED TO THE OFFER. HOWEVER, ALZA DEVELOPMENT CORPORATION, THE GENERAL
PARTNER OF THE PARTNERSHIP, REFERENCED IN ITS PREVIOUS CORRESPONDENCE THIS
VALUATION.
1. AMENDED TERMS OF THE OFFER.
The price per Unit to be paid pursuant to the Offer has been increased to
$13,200 per Unit from $12,000 per Unit, net to the seller in cash. Upon the
terms and subject to the conditions of the Offer, Purchaser will accept for
payment (and thereby purchase) up to 1,400 Units that are tendered and not
withdrawn in accordance with Section 4 prior to the Expiration Date. All Holders
whose Units are validly tendered and not withdrawn and accepted for payment
pursuant to the Offer (including Units tendered prior to the date of this
Supplement) will receive the increased Offer Price in respect of each Share so
tendered and accepted. The Expiration Date will now expire at 12:00 midnight,
Eastern Standard time, on Monday, February 2, 1998 unless Purchaser, in
accordance with the terms of the Offer shall have extended the period during
which the Offer is open, in which event the term "Expiration Date" means the
latest time and date at which the Offer, as so extended, expires. All references
to the Offer and the Purchase Price in this Supplement, the Offer to Purchase
and any Letter of Transmittal are deemed to refer to the Offer as amended above
and the foregoing increased Purchase Price, respectively.
3. PROCEDURE FOR TENDERING UNITS.
Procedures for tendering Units are set forth in Section 3 of the Offer to
Purchase.
Tendering Holders may continue to use the original (blue) Letter of
Transmittal previously circulated with the Offer to Purchase, or the revised
(pink) Letter of Transmittal circulated with this Supplement. While the original
Letter of Transmittal refers only to the Offer to Purchase, Holders using such
document to tender their Units will nevertheless receive $13,200 for each Unit
validly tendered and not properly withdrawn and accepted for payment pursuant to
the Offer, subject to the conditions of the Offer.
6
<PAGE>
HOLDERS WHO HAVE PREVIOUSLY VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN
THEIR UNITS PURSUANT TO THE OFFER ARE NOT REQUIRED TO TAKE ANY FURTHER ACTION TO
RECEIVE, SUBJECT TO THE CONDITIONS OF THE OFFER, THE INCREASED OFFER PRICE OF
$13,200 PER UNIT, IF THE UNITS ARE ACCEPTED FOR PAYMENT AND PAID FOR BY
PURCHASER PURSUANT TO THE OFFER (EXCEPT SUCH ACTION AS MAY BE REQUIRED BY THE
PROCEDURE FOR GUARANTEED DELIVERY IF SUCH PROCEDURE WAS UTILIZED).
6. PRICE RANGE OF THE UNITS.
Section 6 of the Offer to Purchase is hereby amended by inserting the
following paragraph in place of the last paragraph:
The Purchase Price represents the price at which the Purchaser is willing to
purchase Units. No independent person has been retained to evaluate or render
any opinion with respect to the fairness of the Purchase Price and no
representation is made by the Purchaser or any affiliate of the Purchaser as to
such fairness. The Purchaser did not attempt to obtain current independent
valuations or appraisals of the underlying assets owned by the Partnership. The
Purchaser made its own determination of the Purchase Price based on
publicly-available information. The Purchaser did not obtain any third party
appraisal or valuation in determining the Purchase Price because the Purchaser's
business is identifying and acquiring royalty interests that derive cash flow
from the sales of biotechnology and pharmaceutical products. Accordingly, the
Purchaser believes it has sufficient knowledge to make its own determination of
the Purchase Price without the assistance or opinion of any third party. Other
measures of the value of the Units may be relevant to Holders. See Section 8.
HOLDERS ARE URGED TO CONSIDER CAREFULLY ALL OF THE INFORMATION CONTAINED HEREIN
AND CONSULT WITH THEIR OWN ADVISORS, TAX, FINANCIAL OR OTHERWISE, IN EVALUATING
THE TERMS OF THE OFFER BEFORE DECIDING WHETHER TO TENDER UNITS.
8. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP.
Section 8 of the Offer to Purchase is hereby amended by inserting the
following paragraph after the paragraph entitled THE PARTNERSHIP'S ASSETS AND
BUSINESS and before the paragraph entitled DETERMINATION OF PURCHASE PRICE OF
UNITS:
PREVIOUS TENDER OFFERS. In determining the Purchase Price, the Purchaser is
aware of at least one previous tender offer by a third party for the Units. Such
tender offer was made in the first half of 1997. Although such tender offer was
made prior to the Purchaser becoming a limited partner in the Partnership, the
Purchaser believes that the purchase price in such tender offer was $6,000 per
Unit. To the Purchaser's knowledge, such tender offer was made for up to 4.9% of
the Units. The Purchaser believes that such purchase price is low and, in
comparison, the Purchase Price in the Offer is materially greater than such
tender offer price.
10. SOURCE AND AMOUNT OF FUNDS.
Section 10 of the Offer to Purchase is hereby amended and restated by
inserting the following paragraphs in place of the current paragraph:
As a result of the increase in the Purchase Price, Purchaser estimates that
the maximum amount of funds required to purchase Units pursuant to the Offer and
to pay related costs and expenses will be approximately $19.0 million. All
amounts required for the purchase of Units and to pay related costs and expenses
will be funded from existing cash balances of the Purchaser and the Funds.
As of January 16, 1998, the Purchaser and the Funds have existing cash
balances, net of debt and other liabilities, approximating $20 million. In
addition, as of such date, the Purchaser and the Funds have no binding
commitments that would require using any material amount of such existing cash
balances.
7
<PAGE>
The Manager of the Purchaser, Pharmaceutical Partners, LLC, is also the
Manager of each of the Funds. In connection with the Offer, the Manager has
discretion to invest cash balances of the Purchaser and the Funds without
obtaining the consent of any Fund investor or any third party.
17. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) Holders residing in any jurisdiction in which the making of the Offer
or the acceptance thereof would not be in compliance with the securities, blue
sky or other laws of the jurisdiction. However, Purchaser may, in its
discretion, take such action as it may deem necessary to make the Offer in any
jurisdiction and extend the Offer to Holders. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer will be deemed to be made on behalf of the Purchaser
by one or more registered brokers or dealers that are licensed under the laws of
the jurisdiction.
Purchaser has filed with the Commission the Schedule 14D-1 pursuant to Rule
14d-1 under the Exchange Act containing certain additional information with
respect to the Offer. The Schedule and any amendments to the Schedule, including
exhibits, may be examined and copies may be obtained from the principal office
of the Commission in the manner set forth in Section 9 above (except that they
will not be available at the regional offices of the Commission).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR
IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, THE INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
January 16, 1998
PHARMAINVEST, L.L.C.
PHARMACEUTICAL ROYALTIES, L.L.C.
PHARMACEUTICAL ROYALTY INVESTMENTS LTD.
PHARMACEUTICAL PARTNERS, L.L.C.
8
<PAGE>
Facsimile copies of either Letter of Transmittal, properly completed and
duly signed, will be accepted. Either Letter of Transmittal and any other
required documents should be sent or delivered by each Holder or his or her
broker, dealer, commercial bank, trust company or other nominee to the
Depositary or the Purchaser, at one of the addresses set forth below:
THE DEPOSITARY FOR THE OFFER IS:
STATE STREET BANK AND TRUST COMPANY
CORPORATE REORGANIZATION
<TABLE>
<CAPTION>
BY TELEPHONE: BY MAIL: BY FACSIMILE:
<S> <C> <C>
(800) P.O. Box 9061 (781)
426-5523 Boston, MA 02205 794-6352
(781)
794-6388
BY OVERNIGHT OR EXPRESS
MAIL:
70 Campanelli Drive
Braintree, MA 02184
</TABLE>
THE INFORMATION AGENT FOR THE OFFER IS:
MACKENZIE PARTNERS, INC.
<TABLE>
<CAPTION>
BY TELEPHONE: BY MAIL: BY FACSIMILE:
<S> <C> <C>
(800) 156 Fifth Avenue (212)
322-2885 New York, NY 10010 929-0308
(212)
929-5500
</TABLE>
THE PURCHASER IS:
PHARMAINVEST, L.L.C.
<TABLE>
<CAPTION>
BY TELEPHONE: BY MAIL: BY FACSIMILE:
<S> <C> <C>
(800) 70 East 55th Street, (212)
600-1450 23rd Floor 751-9324
(212) New York, NY 10022 (212)
751-9300 759-9157
BY E-MAIL:
[email protected]
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent or Purchaser. Additional copies of this Supplement, the Offer to Purchase,
either Letter of Transmittal and other tender offer materials may be obtained
from the Information Agent or the Purchaser and will be furnished promptly at
Purchaser's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
<PAGE>
EXHIBIT 1
SPAR VALUATION
STANDARD REPORT
PARTNERSHIP NAME: ALZA TTS Research Partners
TAX ID NUMBER: 94-2863497
NASD TICKER: ZZFXJ
ORIGINAL PURCHASE PRICE PER UNIT: $5,000
ROUNDED NET ASSET VALUE PER UNIT: $16,900
ROUNDED FAIR MARKET VALUE PER UNIT: $12,700
VALUATION DATE: 12/31/96
OVERVIEW: the Partnership, organized on December 30, 1982, was formed for
the purpose of developing and eventually licensing products ("TTS Partnership
Products") combining certain generic drug compounds in specified areas of
therapy with ALZA's proprietary transdermal therapeutic system technology. ALZA
Development Corporation, the general partner of the Partnership, is a
wholly-owned subsidiary of ALZA Corporation ("ALZA").
According to Item 1 of the Partnership's 1996 10-K (a copy of which is
included in Tab 4 of the Full Report), the Partnership entered into a research
and development agreement (the "Development Contract") with ALZA for the
development of TTS Partnership Products. ALZA is in the business of research and
development of therapeutic systems for controlled drug delivery. The Partnership
was involved in two major product development programs, TTS-fentanyl and
TTS-testosterone.
In August 1990, TTS-fentanyl (which is being marketed under the trade name
Duragesic) was cleared for marketing by the United States Food and Drug
Administration ("FDA") for management of severe chronic pain when opioid
analgesia is indicated, such as in the management of cancer pain.
TTS-testosterone is a controlled release dosage form of the major male
hormone testosterone designed to re-establish in hypogonadal males, the plasma
concentrations of testosterone observed in healthy young males. TTS-testosterone
was cleared for marketing in the United States in October 1993.
The Partnership granted ALZA an option (the "License Option") to acquire a
license for any and all of the TTS Partnership Products, on a product by product
basis. When the License Option is exercised for a TTS Partnership Product, ALZA
acquires a worldwide license, including right to sublicense, make, use and sell
such product. The license is exclusive for a period of thirteen years after the
actual reduction to practice of the product and nonexclusive thereafter. Under
each license, ALZA would make payments to the Partnership based on ALZA's and
its affiliates' and sublicensees' sales of the licensed product.
In 1990, ALZA exercised its License Option for the Duragesic and Testoderm
products. Under the terms of the agreements between ALZA and the Partnership,
the payments to the Partnership under the license for each of the products will
be reduced in proportion to the development costs of the product not funded by
the Partnership. In accordance with the agreements, the Partnership is entitled
to receive 4% of net sales of the Duragesic and Testoderm products.
According to Item 1 of the Partnership's 1996 10-K, the general partner has
the option to purchase all of the Units in the Partnership for $120,000,000,
less an amount equal to all cash distributed to the Limited partners by the
Partnership. The exercise price may be paid in cash, ALZA common stock, or a
combination, at the option of the general partner. The general partner is under
no obligation to exercise
<PAGE>
the Purchase Option, and the general partner will exercise the Purchase Option
only if ALZA deems such exercise to be in its best interest.
According to Section 8 of an "Offer to Purchase for Cash Up to 1,400
Outstanding Units of Limited Partnership Interest" (a copy of which is included
in Tab 4 of the Full Report), the Partnership receives a 4% royalty on net sales
of the two products until the expiration of the patents for the products in
April 2006 for Duragesic and February 2005 for Testoderm. ALZA has indicated in
oral communications with the purchaser that it will establish a liquidating
trust to ensure royalties are paid and received by the partners of the
Partnership since the Partnership is scheduled to dissolve in 2004, prior to the
expiration of the patents.
HISTORICAL FINANCIAL PERFORMANCE. Shown below is a summary of key
Partnership financial data for the past three years:
<TABLE>
<CAPTION>
'96 ACTUAL '95 ACTUAL '94 ACTUAL
------------ ------------ ------------
<S> <C> <C> <C>
Total Income............................................................ $ 6,294,396 $ 4,461,900 $ 3,178,312
Net Income.............................................................. 6,207,848 4,361,647 3,082,860
Cash Flow From Operations............................................... 6,207,848 4,361,647 3,043,006
Payments................................................................ 6,097,442 4,306,401 3,032,608
Current Assets.......................................................... 77,586 48,245 28,155
Total Liabilities....................................................... 146,381 227,446 262,602
</TABLE>
THE FAIR MARKET VALUE OF THE UNDERLYING ASSET(S). The value of the
Partnership is derived from the present value of the future distributions the
Partnership is to receive until the expiration of the patents as discussed
above. Since secondary market investors of partnerships such as this focus on
the distributions they likely would receive by virtue of becoming an investor,
the value of an interest in the Partnership is correlated directly to its
ability to produce future distributions.
From a valuation standpoint, a partnership such as this is similar to a
self-liquidating security like a "Ginnie Mae" mortgage bond. Its value is a
function of its ability to produce cash distributions during the remaining term;
it will have no value at end of the term. The value of this type of partnership
is obtained by discounting the future cash flow the Partnership is likely to
receive during the balance of the term.
According to the Partnership's 1996 financial statements (a copy of which is
included in Tab 4 of the Full Report), the following levels of revenues and
distributions for the past three years are:
<TABLE>
<CAPTION>
PAYMENTS TO
YEAR TOTAL INCOME PARTNERS
- --------- ------------ -------------------
<S> <C> <C>
1994 $3,178,312 $ 3,032,608
1995 4,461,900 4,306,401
1996 6,294,396 6,097,442
</TABLE>
Based on these historical results, the Limited Partners have received an
average annual payment of 96% of the Partnership's total income. Therefore, we
estimate future levels of Partnership distributions to the Partnership through
the year 2006 (when the last patent expires) will be as follows:
<TABLE>
<CAPTION>
YEAR INCOME PAYMENT
- ------------- ------------- ------------
<S> <C> <C>
1997 $ 7,000,000 $ 6,720,000
1998 8,000,000 7,680,000
1999 9,000,000 8,640,000
2000-2006 10,000,000 9,600,000
</TABLE>
The present value of these future distributions may be derived by
discounting these estimated future distributions at a 10% rate. The present
value of the Partnership's future distributions to the Partnership as calculated
above is $54,061,623. This represents the Partnership's gross value.
Other than its patents and/or research, the Partnership's 12/31/96 balance
sheets list Partnership liabilities of $146,381, and current assets of $77,586.
Therefore we conclude that the Partnership's equity as of the Valuation Date was
$53,992,828.
<PAGE>
NET ASSET VALUE PER UNIT. From the information provided, this appraiser is
unable to ascertain with confidence how much cash has been distributed to the
partners since the inception of the Partnership; and to determine whether cash
payments made (if any) constituted (1) distributions of operating profits or (2)
returns of capital. This information must be known in order to properly
calculate allocations of cash pursuant to the Partnership Agreement.
Consequently (unless explicitly stated otherwise below), SPAR assumes that
all prior cash payments made to the partners (if any) have been distributions of
operating cash flow and not returns of capital; and that none of the partners'
capital has been returned to date. PLEASE NOTE THAT THE CURRENT STATUS OF AN
INVESTOR'S CAPITAL ACCOUNT IS LIKELY TO DIFFER FROM SPAR'S ASSUMPTION. The user
of this report is strongly encouraged to contact the General Partner directly to
verify the current status of any investor's capital account; and to adjust the
value conclusions set forth in this report accordingly. The differences in value
attributable solely to this factor may be substantial.
Note 1 of the Partnership's 1996 financial statements indicates the
Partnership Agreement provides for 95% of net income to be allocated to the
Class A limited partners. However, since this appraiser utilized net payments to
the limited partners in determining a valuation, we will assume that the limited
partners will be entitled to 100% of the future distributions as calculated in
this analysis.
On the Valuation Date, Partnership equity was determined above to be
$53,992,828. Since there are 3,200 limited partnership Units, the "Net Asset
Value" of one Unit (that is, the cash the Unitholder would receive were the
Partnership's assets to be liquidated on the Valuation Date) is $16,873. We
round this figure to $16,900.
FAIR MARKET VALUE PER UNIT. Since the Unit is not a direct interest in the
asset, but instead is a security issued by a closely-held business enterprise,
it is subject to discount for "lack of control" and "lack of marketability". We
concluded a 25% discount is appropriate in this case. Accordingly, the $16,873
gross value of the Unit (rounded to $16,900) is discounted 25%, to $12,655. We
round off the figure to $12,700. This represents the Unit's fair market value.
The fair market value of an investor's interest is computed by multiplying
the number of Units owned by the fair market value per Unit as determined by
SPAR.
RECENT SECONDARY MARKET TRADES. During 1996, secondary market trading
activity involving Units of the Partnership were reported in the SECONDARY
SPECTRUM newsletter (published by Partnership Profiles, Inc. of Dallas, Texas)
and/or THE INVESTMENT ADVISOR magazine (published by Charter Financial
Publishing of Shrewsbury, New Jersey) as follows:
<TABLE>
<CAPTION>
WEIGHTED AVG. HIGH TRADE LOW TRADE # OF UNITS
DATE TRADED PRICE PRICE PRICE TRADED
- ------------------------------------------------------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
February-March '96........................................... $ 4,150.00 $ 1,950.00 1
August-September '96......................................... $ 6,707.95 $ 4,149.00 2
October-November '96......................................... $ 6,800.00 $ 4,149.00 14
December '96-January '97..................................... $ 9,646.00 $ 4,149.00 11
</TABLE>
It should be noted the trade price is the price at which someone bought
Units, including sales commissions paid to an intermediary. The proceeds
received by the seller was likely somewhat less. Furthermore, other trades may
have occurred without being reported in either publication.
CONTINGENT AND LIMITING CONDITIONS. The Full Report from which this
Standard Report has been distilled was prepared pursuant to the valuation
standards set forth in Revenue Ruling 59-60. This Standard Report omits
important information found in the Full Report. The reader is cautioned to
obtain a Full Report before relying on the information presented herein. Both
the Standard Report and the Full Report are qualified pursuant to contingent and
limiting conditions as set forth in the Full Report.
TAX BENEFITS (IF ANY) GIVEN NO WEIGHT. Because each partner's tax situation
is unique, the same unit of partnership income or loss could produce a
beneficial result for one investor yet a detrimental result for another. Because
one cannot assume a hypothetical buyer will need the tax benefits a partnership
interest may offer, in this appraiser's calculation of fair market value no
weight has been assigned to the tax effects produced by the partnership.
<PAGE>
LETTER OF TRANSMITTAL
TO
TENDER UNITS OF LIMITED PARTNERSHIP INTEREST
IN
ALZA TTS RESEARCH PARTNERS, LTD.
PURSUANT TO THE OFFER TO PURCHASE DATED NOVEMBER 20, 1997
BY
PHARMAINVEST, L.L.C.
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT,
EASTERN TIME, ON FEBRUARY 2, 1998 (THE "EXPIRATION DATE") UNLESS SUCH OFFER IS
EXTENDED.
The undersigned hereby tender(s) to PharmaInvest, L.L.C., a Delaware limited
liability company (the "Purchaser"), the number of units of limited partnership
interest ("Units") in ALZA TTS Research Partners, Ltd., a California limited
partnership (the "Partnership"), specified below, pursuant to the Purchaser's
offer to purchase up to 1,400 of the 3,200 issued and outstanding Units at a
purchase price of $13,200 per Unit, net to the seller in cash (the "Purchase
Price"), without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated November 20, 1997, as amended, (the
"Offer to Purchase"), and this Letter of Transmittal (the "Letter of
Transmittal"), which, together with the Offer to Purchase and any supplements,
modifications or amendments thereto, constitute the Offer (the "Offer"), all as
more fully described in the Offer to Purchase. HOLDERS WHO TENDER THEIR UNITS
WILL NOT BE OBLIGATED TO PAY ANY COMMISSIONS OR PARTNERSHIP TRANSFER FEES.
Receipt of the Offer to Purchase is hereby acknowledged. Capitalized terms used
but not defined herein have the respective meanings ascribed to them in the
Offer to Purchase.
By executing and delivering this Letter of Transmittal, a tendering Holder
irrevocably appoints designees of Purchaser as his or her attorneys-in-fact and
proxies, with full power of substitution, to the full extent of the Holder's
rights with respect to the Units (and with respect to any and all other
securities issued or issuable in respect of such Units on or after the date
hereof) tendered by the Holder. All such powers of attorney and proxies will be
considered coupled with an interest in the tendered Units and all prior powers
of attorney and proxies given by the Holder with respect to the Units will be
revoked, without further action, and no subsequent powers of attorney and
proxies may be given (and, if given, will not be deemed effective) by the
Holder. Designees of Purchaser will be empowered to exercise all voting and
other rights of the Holder with respect to such Units as they in their sole
discretion may deem proper, including, without limitation, in respect of any
annual or special meeting of the Holders, or any adjournment or postponement of
any such meeting, or in connection with any action by written consent in lieu of
any such meeting or otherwise. Purchaser reserves the absolute right to require
that, in order for Units to be validly tendered, immediately upon Purchaser's
acceptance for payment of the Units, Purchaser must be able to exercise full
voting and other rights with respect to the Units.
Pursuant to such appointment as proxies and attorneys-in-fact, the Purchaser
and its designees each will have the power, among other things, (i) to seek to
transfer ownership of such Units on the books and records of the Partnership
(and execute and deliver any accompanying evidences of transfer and authenticity
any of them may deem necessary or appropriate in connection therewith,
including, without limitation, any documents or instruments required to be
executed under the Partnership Agreement or a "Transferor's (Sellers)
Application for Transfer" created by the NASD, if required), (ii) upon receipt
by the Depositary (as the tendering Holder's agent) of the Purchase Price, to be
allocated Tax Credits and tax losses and to receive any and all distributions
made by the Partnership after December 31, 1997 in respect of the Units tendered
by such Holder and accepted for payment by the Purchaser, regardless of the fact
that the record date for any such distribution may be a date prior to or after
the Expiration Date, (iii) the right to transfer or assign, in whole or from
time to time in part, to any third party, the right to purchase Units tendered
pursuant to the Offer, together with its rights under the Letter of Transmittal,
but any such transfer or assignment will not relieve the assigned party of its
obligations under the Offer or prejudice the right of tendering Holders to
receive payment for Units validly tendered and accepted for payment pursuant to
the Offer, and (iv) to execute and deliver to the Partnership, the General
Partner and/or designee (as the case may be) a change of address form
instructing the Partnership to send any and all future distributions to which
the Purchaser is entitled pursuant to the terms of the Offer in respect of
tendered Units to the address specified in such form and to endorse any check
payable to or upon the order of such Holder representing a distribution, if any,
to which the Purchaser is entitled pursuant to the terms of the Offer, in each
case on behalf of the tendering Holder. This power of attorney shall not be
affected by the subsequent mental disability of the Holder, and the Purchaser
shall not be required to post bond in any nature in connection with this power
of attorney. The Purchaser may assign such power of attorney to any person with
or without assigning the related Units with respect to which such power of
attorney was granted. If legal title to the Units is held through an IRA or
KEOGH or similar account, the Holder understands that this Letter of Transmittal
must be signed by the custodian of such IRA or KEOGH account and the Holder
hereby authorizes and directs the custodian of such IRA or KEOGH to confirm this
Letter of Transmittal.
By executing this Letter of Transmittal, the undersigned represents that
either (a) the undersigned is not a plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code"), or an entity deemed
to hold "plan assets" within the meaning of 29 C.F.R. Section2510.3-101 of any
such plan; or (b) the tender and acceptance of Units pursuant to the Offer will
not result in a non-exempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code.
(Continued on Reverse Side)
<TABLE>
<CAPTION>
TOTAL
PURCHASE PRICE
NUMBER OF NUMBER OF(1) PURCHASE PRICE(2) IF ALL UNITS
UNITS OWNED UNITS TENDERED PER UNIT TENDERED
----------- -------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
(1) If no indication is marked above, all Units held will be deemed to
have been tendered.
(2) Reduced by the amount of any distributions made by the Partnership
after December 31, 1997.
</TABLE>
(PLEASE INDICATE CHANGES OR CORRECTIONS TO THE ADDRESS ABOVE, IF NECESSARY.)
<PAGE>
By executing this Letter of Transmittal, the undersigned represents that
this transfer has not been effected through an established securities market or
through a broker-dealer or matching agent which makes a market in Units or which
provides a widely available, regular and on-going opportunity to the Holder of
Units to sell or exchange their Units through a public means of obtaining or
providing information of offers to buy, sell or exchange Units.
The undersigned recognizes that if proration is required pursuant to the
terms of the Offer, the Purchaser will accept for payment from among those Units
validly tendered and not properly withdrawn on or prior to the Expiration Date,
the maximum number of Units permitted pursuant to the Offer on a pro rata basis
with adjustments to avoid purchases which would violate the terms of the Offer,
based upon the number of Units validly tendered prior to the Expiration Date and
not properly withdrawn.
The undersigned understands that a tender of Units to the Purchaser will
constitute a binding agreement between the undersigned and the Purchaser upon
the terms and subject to the conditions of the Offer. The undersigned recognizes
that under certain circumstances set forth in Section 2 ("Proration; Acceptance
for Payment for Units") and Section 14 ("Conditions of the Offer") of the Offer
to Purchase, the Purchaser may not be required to accept for payment any of the
Units tendered hereby. In such event, the undersigned understands that any
Letter of Transmittal for Units not accepted for payment will be destroyed by
the Purchaser. Except as stated in Section 4 ("Withdrawal Rights") of the Offer
to Purchaser, this tender is irrevocable, provided Units tendered pursuant to
the Offer may be withdrawn at any time prior to the Expiration Date. The
undersigned acknowledges that (i) upon acceptance of, and payment for, tendered
Units, the undersigned shall no longer be entitled to any benefits as a Holder.
<TABLE>
<S> <C>
SIGNATURE BOX--PUBLIC NOTARY
Please sign exactly as your name is printed on the front of The Internal Revenue Service does not require your consent to any
this Letter of Transmittal. For joint owners, each joint provision of this document other than the certifications required to
owner must sign. (SEE INSTRUCTION 2.) The signatory hereto avoid backup withholding.
hereby certifies under penalties of perjury that the address X
as printed or corrected on the front of this Letter of --------------------------------------------------------------------
Transmittal and the Taxpayer Identification Number (i.e., (Signature of Holder) (Date)
the social security number) furnished in the blank provided X
in this Signature Box is correct. The undersigned hereby --------------------------------------------------------------------
represents and warrants for the benefit of the Partnership Taxpayer Identification Number (See Instruction 4)
and the Purchaser that the Holder owns the Units tendered X
hereby and has full power and authority to validly tender, --------------------------------------------------------------------
sell, assign, transfer, convey and deliver the Units (Signature of Co-Holder) (Date)
tendered hereby and that when the same are accepted for (Title)
payment by the Purchaser, the Purchaser will acquire good, --------------------------------------------------------------------
marketable and unencumbered title thereto, free and clear of Telephone (Day) ( ) Telephone (Eve) ( )
all liens, restrictions, charges, encumbrances, conditional -------------------------- --------------------------
sales agreements or other obligations relating to the sale Notary Public Stamp:
or transfer thereof, and such Units will not be subject to --------------------------------------------------------------------
any adverse claims, and that the transfer and the assignment Authorized Signature:
contemplated herein is in compliance with all applicable --------------------------------------------------------------------
laws and regulations and not in conflict with the
Partnership Agreement. All authority herein conferred or
agreed to be conferred shall survive the death or incapacity
of the undersigned and any obligations of the undersigned
shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
</TABLE>
TAX CERTIFICATIONS
SUBSTITUTE FORM W-9
(SEE INSTRUCTION 4)
The person signing this Letter of Transmittal hereby certifies the following to
the Purchaser under penalties of perjury:
(i) The Taxpayer Identification Number ("TIN") furnished in the space provided
for that purpose in the Signature Box of this Letter of Transmittal is the
correct TIN of the Holder; or if this box / / is checked, the Holder has applied
for a TIN. If the Holder has applied for a TIN, a TIN has not been issued to the
Holder, and either: (a) the Holder has mailed or delivered an application to
receive a TIN to the appropriate Internal Revenue Service ("IRS") Center or
Social Security Administration Office, or (b) the Holder intends to mail or
deliver an application in the near future, it is hereby understood that if the
Holder does not provide a TIN to the Purchaser within sixty (60) days 31% of all
reportable payments made to the Holder thereafter will be withheld until a TIN
is provided to the Purchaser; and
(ii) Unless this box / / is checked, the Holder is not subject to backup
withholding either because the Holder: (a) is exempt from backup withholding,
(b) has not been notified by the IRS that the Holder is subject to backup
withholding as a result of a failure to report all interest or dividends, or (c)
has been notified by the IRS that such Holder is no longer subject to backup
withholding.
Note: Place an "X" in the box in (ii) above, ONLY if you are unable to certify
that the Holder is not subject to backup withholding.
PLEASE CAREFULLY READ THE FOLLOWING INSTRUCTIONS FOR THIS LETTER OF TRANSMITTAL
FOR INFORMATION CALL THE INFORMATION AGENT, MACKENZIE PARTNERS, AT
(800) 322-2885
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT,
EASTERN TIME, ON FEBRUARY 2, 1998 (THE "EXPIRATION DATE") UNLESS SUCH OFFER IS
EXTENDED.
- --------------------------------------------------------------------------------
1. DELIVERY OF LETTER OF TRANSMITTAL. For convenience in responding to the
Offer, a pre-addressed, postage-paid envelope has been enclosed with the Offer
to Purchase. HOWEVER, TO ENSURE RECEIPT OF THE LETTER OF TRANSMITTAL IT IS
SUGGESTED THAT YOU USE OVERNIGHT COURIER DELIVERY OR, IF THE LETTER OF
TRANSMITTAL IS TO BE DELIVERED BY UNITED STATES MAIL, THAT YOU USE CERTIFIED
OR REGISTERED MAIL, RETURN RECEIPT REQUESTED.
TENDER REQUIREMENTS. To be effective, a duly completed and signed Letter of
Transmittal, and any other required documents must be received by the
Depositary at the address set forth below before the Expiration Date, unless
extended. Letters of Transmittal which have been duly executed, but where no
indication is marked in the "No. of Units Tendered" space, shall be deemed to
have tendered all Units pursuant to the Offer.
<TABLE>
<S> <C>
BY MAIL, COURIER OR State Street Bank and Trust Company
HAND DELIVERY 70 Campanelli Drive
Braintree, MA 02184
FOR ADDITIONAL INFORMATION (800) 426-5523
CALL:
</TABLE>
UNITS IN BROKERAGE ACCOUNT. All Units are registered in the records of the
Partnership in the name of the tendering Holder (or Custodian for the
tendering Holder, if a retirement account). In order to accept the Offer and
tender Units, the Letter of Transmittal should be completed only by the
Holder(s) listed on the front of the Letter of Transmittal and returned
directly to the Depositary at the address listed above. Therefore, the Letter
of Transmittal need not be submitted through a broker or brokerage firm.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER AND DELIVERY WILL
BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
2. SIGNATURE REQUIREMENTS.
INDIVIDUAL AND JOINT OWNERS. After carefully reading and completing the
Letter of Transmittal, in order to tender Units, Holders must sign at the "X"
in the SIGNATURE BOX of the Letter of Transmittal. The signature(s) must
correspond exactly with the name printed (or corrected) on the front of the
Letter of Transmittal, without any change whatsoever. If any Units are
registered in the names of two or more joint Holders, all such Holders must
sign the Letter of Transmittal.
CUSTODIANS, TRUSTEES, CORPORATIONS AND FIDUCIARIES. Custodian(s) and/or
trustee(s) (if the Units are held in an IRA, KEOGH, pension or similar
account), or executors, administrators, guardians, attorneys-in-fact, officers
of a corporation, authorized partner of a partnership or other persons acting
in a fiduciary or representative capacity must sign at the "X" in the
SIGNATURE BOX and must submit proper evidence satisfactory to the Purchaser of
their authority to so act. (See Instruction 3 herein).
PUBLIC NOTARY. All signatures on the Letter of Transmittal must be notarized
by a Public Notary.
3. DOCUMENTATION REQUIREMENTS. In addition to information required to be
completed on the Letter of Transmittal, additional documentation may be
required by the Purchaser under certain circumstances including, BUT NOT
LIMITED TO THOSE LISTED BELOW. Questions on documentation should be directed
to The Depositary at (800) 426-5523. ALL SIGNATURES MUST BE NOTARIZED (SEE
INSTRUCTION 2).
<TABLE>
<S> <C>
DECEASED OWNER (JOINT TENANT) -- Certified Copy of Death Certificate.
DECEASED OWNER (OTHERS) -- Certified Copy of Death Certificate. (SEE ALSO
EXECUTOR/ADMINISTRATOR/GUARDIAN BELOW).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
EXECUTOR/ADMINISTRATOR/GUARDIAN -- Certified Copies of Court Appointment Documents for Executor or
Administrator dated within 60 days; and
(i) A copy of applicable provisions of the Will (Title Page,
Executor(s) powers, asset distribution);
OR
(ii) Certified copy of Estate distribution documents.
ATTORNEY-IN-FACT -- Current Power of Attorney.
CORPORATIONS/PARTNERSHIPS -- Certified copy of Corporate Resolution(s), (with raised
corporate seal), or other evidence of authority to act.
Partnerships should furnish copy of Partnership Agreement.
TRUST/PENSION PLANS -- Copy of cover page of the Trust or Pension Plan, along with
copy of the section(s) setting forth names and powers of
Trustee(s) and any amendments to such sections or appointment
of Successor Trustee(s).
</TABLE>
4. TAX CERTIFICATIONS. Holders tendering Units to the Purchaser pursuant to
the Offer must certify correctness of the address as printed or corrected on
the front of the Letter of Transmittal and his, her or its Taxpayer
Identification Number ("TIN") as inserted in the Signature Box.
SUBSTITUTE FORM W-9.
PART (I), TAXPAYER IDENTIFICATION NUMBER -- The persons signing this Letter of
Transmittal must provide to the Purchaser the Holder's correct TIN and certify
its correctness as inserted in the Signature Box, under penalties of perjury.
If a correct TIN is not provided, penalties may be imposed by the Internal
Revenue Service ("IRS"), in addition to the Holder's being subject to Backup
Withholding.
PART (II), BACKUP WITHHOLDING -- in order to avoid 31% federal income tax
Backup Withholding, the person signing this Letter of Transmittal must
certify, under penalties of perjury, that such Holder is not subject to Backup
Withholding. Certain Holders (including, among others, all Corporations and
certain exempt non-profit organizations) are not subject to Backup
Withholding. Backup Withholding is not an additional tax. If withholding
results in an overpayment of taxes, a refund may be obtained from the IRS. DO
NOT CHECK THE BOX IN THE SUBSTITUTE FORM W-9 PART (ii), UNLESS YOU HAVE BEEN
NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING.
When Determining the TIN to Be Furnished, Please Refer to the Following NOTE
as a Guideline:
INDIVIDUAL ACCOUNTS should reflect their own TIN. JOINT ACCOUNTS should
reflect the TIN of the person whose name appears first. TRUST ACCOUNTS should
reflect the TIN assigned to the Trust. IRA CUSTODIAL ACCOUNTS should reflect
the TIN of the custodian (not necessary to obtain). CUSTODIAL ACCOUNTS FOR THE
BENEFIT OF MINORS should reflect the TIN of the minor. CORPORATIONS OR OTHER
BUSINESS ENTITIES should reflect the TIN assigned to that entity.
5. VALIDITY OF LETTER OF TRANSMITTAL. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of a Letter of
Transmittal will be determined by the Purchaser and such determination will be
final and binding. The Letter of Transmittal will not be valid until any
irregularities have been cured or waived. Neither the Purchaser nor The
Depositary is under any duty to give notification of defects in a Letter of
Transmittal and neither will incur liability for failure to give such
notification.
6. CONDITIONAL TENDERS. No alternative, conditional or contingent tenders will
be accepted.
7. ASSIGNEE STATUS. Assignees of Holders must provide documentation to the
Information Agent/Depositary which demonstrates, to the satisfaction of the
Purchaser, such person's status as an Assignee.
- --------------------------------------------------------------------------------
EACH HOLDER IS URGED TO READ CAREFULLY THE ENTIRE OFFER TO PURCHASE, THE LETTER
OF TRANSMITTAL AND RELATED DOCUMENTS BEFORE MAKING A DECISION TO TENDER.
- --------------------------------------------------------------------------------
<PAGE>
PHARMAINVEST, L.L.C.
January 16, 1998
PURCHASE PRICE INCREASED TO $13,200 PER UNIT
Dear Limited Partner in ALZA TTS Research Partners:
PharmaInvest is pleased to inform you that it is increasing its Purchase
Price from $12,000 to $13,200 per Unit, and is extending the Offer to February
2, 1998.
RISK FACTORS:
- Although the Purchaser cannot predict the future value of the
Partnership's assets or future selling prices of the Units, the Purchase
Price could differ significantly from the proceeds that would be realized
by holding the Units for the entire life of the expected payment stream of
the Partnership's assets.
- The Purchaser is making the Offer with a view to making a profit.
Accordingly, there may be a conflict between the desire of the Purchaser
to acquire the Units at the Purchase Price and the value of the expected
payment stream of the Partnership's assets. There can be no assurance that
the Purchase Price will be more or less than such value.
- No independent person has been retained by the Purchaser or any of its
affiliates to value or make any appraisal of the Units or to render any
opinion with respect to the fairness of the Purchase Price and no
representation is made with respect to the fairness of the Purchase Price.
- Although there are limited resale mechanisms available to Holders through
partnership matching services, there is no formal trading market for the
Units. The Offer provides each Holder the opportunity to liquidate his or
her investment in the Partnership without transfer fees and transaction
costs generally incurred in secondary market sales (which can range from
5% to 8.75% of the sale price).
We ask you to also consider the following information in evaluating our
Offer. To assist you in your analysis, we enclose an attachment discussing our
Offer, potential tax benefits and the SPAR valuation.
- AT $13,200 PER UNIT, PURCHASE PRICE IS $500 HIGHER THAN INDEPENDENT THIRD
PARTY VALUATION. ALZA Development Corporation, the General Partner of the
Partnership, referenced in its previous correspondence a valuation of ALZA
TTS Research Partners prepared by SECURITIES PRICING AND RESEARCH, INC.
("SPAR"), an independent appraiser that specializes in valuing
partnerships. Subsequent to the General Partner correspondence, SPAR
revised downward its "Fair Market Value" of the Units to $12,700. We have
enclosed a copy of the SPAR valuation for your review.
- POTENTIAL TAX BENEFIT, ENHANCED BY RECENT REDUCTION IN CAPITAL GAIN RATES
TO 20%. If you retain your Units, distributions made to you should be
taxed as ordinary income, at federal rates of up to 39.6% for individuals.
If you sell your Units, the resulting gain should be taxed at capital gain
rates, currently 20% for most individuals disposing of capital assets held
more than 18 months. If you have held your Units since the original
offering you will generally have no basis in the Units. As a result, all
or substantially all of the Purchase Price should be taxable at lower
capital gain rates. PHARMAINVEST IS NOT EXPRESSING AN OPINION AS TO THE
TAX CONSEQUENCES OF TENDERING UNITS. HOLDERS ARE STRONGLY ADVISED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF
ACCEPTING THE OFFER.
THE OFFER AND WITHDRAWAL RIGHTS WILL NOW EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME ON FEBRUARY 2, 1998, unless further extended. All other terms and
conditions remain as set forth in the Offer to Purchase and the Letter of
Transmittal, a copy of which is enclosed with this supplement. If you have
already tendered your Units, we anticipate making payment within 30 days after
the new Expiration Date. Should you have any questions please call our
information agent MacKenzie Partners (800-322-2885).
Very truly yours,
PharmaInvest, L.L.C.
70 EAST 55(TH) STREET, NEW YORK, NEW YORK 10023
<PAGE>
ANALYSIS OF PHARMAINVEST OFFER, POTENTIAL TAX BENEFITS AND THE SPAR VALUATION
ALZA Development Corporation, the General Partner of the Partnership, referenced
in its previous correspondence a valuation of ALZA TTS Research Partners
prepared by SECURITIES PRICING AND RESEARCH, INC. ("SPAR"), an independent
appraiser that specializes in valuing partnerships. Subsequent to the General
Partner's correspondence, SPAR revised downward its "Fair Market Value" of the
Units to $12,700. For your convenience below, you will find an analysis of
PharmaInvest's Offer, related potential tax benefits and the SPAR valuation.
<TABLE>
<CAPTION>
ACCEPTING THE OFFER: PHARMAINVEST OFFER (PER UNIT)
Purchase Price $ 13,200
<S> <C>
Less: federal capital gains tax (@ 20%) (2,640)
-------
Net after-tax proceeds $ 10,560
</TABLE>
<TABLE>
<CAPTION>
SPAR VALUATION (PER
RETAINING YOUR UNITS: UNIT)
------------------------
<S> <C> <C>
Net Asset Fair Market
Value Value
----------- -----------
Estimated Net Present Value (NPV) of future distributions $ 16,900 $ 12,700
Less: federal ordinary income tax (@ 39.6%) (6,690) (5,030)
----------- -----------
Estimated NPV of net after-tax distributions $ 10,210 $ 7,670
</TABLE>
- -- SPAR's "Net Asset Value" per Unit of $16,900 pre-tax, represents the current
value of a stream of payments that you may receive over the next 9 years
which have been discounted at a 10% discount rate.
- A Holder willing to maintain an illiquid investment over a 9 year period
and willing to accept a 10% return per year should realize over the years
approximately $16,900 present value per Unit. Thus, on a pre-tax basis our
$13,200 Offer appears to be not attractive.
- However, as shown above, because of the significantly higher taxes paid on
distributions (up to 39.6% ordinary income rate) versus the taxes paid on
a sale (20% capital gain rate), on an after tax basis our Offer results in
net after-tax proceeds of $10,560 per Unit which compares favorably with
SPAR's "Net Asset Value" on an after-tax basis of $10,210 per Unit. A
Holder that is or will be taxed at marginal federal income tax rates that
are lower than 39.6% will receive greater net after tax distributions than
the amounts shown above.
- -- SPAR also calculates a "Fair Market Value" of $12,700 per Unit, which takes
into consideration the lack of a liquid market for the Units as well as
other risk factors inherent in the investment.
- SPAR concludes that the "Fair Market Value" for a Holder who is not
willing to maintain an illiquid investment over 9 years is $12,700 on a
pre-tax basis; our $13,200 Offer exceeds this value by $500 ($13,200 vs
$12,700) per Unit.
- Furthermore, on an after-tax basis our Offer substantially exceeds the
SPAR "Fair Market Value" by $2,890 ($10,560 vs $7,670) per Unit.
- --------------------------------------------------------------------------------
THE PREVIOUS ANALYSIS SHOULD NOT BE CONSTRUED AS A RECOMMENDATION BY
PHARMAINVEST TO ACCEPT OR DECLINE THE OFFER. PHARMAINVEST IS MAKING NO
REPRESENTATION AS TO THE TAX CONSEQUENCES OF TENDERING UNITS. EACH HOLDER IS
STRONGLY URGED TO CONSULT HIS OR HER TAX ADVISOR. PHARMAINVEST HAS NO
AFFILIATION WITH SPAR AND DOES NOT ENDORSE THE SPAR VALUATION. IN ADDITION,
PHARMAINVEST HAS NOT ENGAGED SPAR TO PREPARE THE SPAR VALUATION. THE SPAR
VALUATION IS NOT RELATED TO THE OFFER. HOWEVER, ALZA DEVELOPMENT CORPORATION,
THE GENERAL PARTNER OF THE PARTNERSHIP, REFERENCED IN ITS PREVIOUS
CORRESPONDENCE THIS VALUATION.
<PAGE>
Exhibit (a)(9)
PHARMAINVEST, L.L.C. INCREASES OFFER PRICE
AND EXTENDS TENDER OFFER
NEW YORK, NEW YORK (January 16, 1998).......PharmaInvest, L.L.C.
has increased its offer price to purchase up to 1,400 of the outstanding
units of limited partnership interest of ALZA TTS Research Partners, Ltd. to
$13,200 per unit. In addition, PharmaInvest's offer to purchase has been
extended and is now scheduled to expire at 12:00 Midnight (Eastern Standard
Time) on February 2, 1998. As of 5:00 p.m. on January 15, 1998,
approximately 21 Units had been tendered and not withdrawn.
For additional information, contact MacKenzie Partners, Inc., the
Information Agent, at (800) 322-2885.
