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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(AMENDMENT NO. 1)
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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ALZA TTS RESEARCH PARTNERS, LTD.
(NAME OF SUBJECT COMPANY)
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ALZA TTS RESEARCH PARTNERS, LTD.
(NAME OF PERSON(S) FILING STATEMENT)
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CLASS A LIMITED PARTNERSHIP INTERESTS OF ALZA TTS RESEARCH PARTNERS, LTD.
(TITLE OF CLASS OF SECURITIES)
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NONE
(CUSIP NUMBER OF CLASS OF SECURITIES)
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DAVID R. HOFFMANN
PRESIDENT
ALZA DEVELOPMENT CORPORATION
950 PAGE MILL ROAD
P.O. BOX 10952
PALO ALTO, CALIFORNIA 94303
(650) 494-5300
(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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WITH A COPY TO:
MICHAEL R. JACOBSON, ESQ.
COOLEY GODWARD LPL
FIVE PALO ALTO SQUARE
3000 EL CAMINO REAL
PALO ALTO, CALIFORNIA 94306
(650) 843-5000
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INTRODUCTION
The following information amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
originally filed on December 4, 1997, by ALZA TTS Research Partners, Ltd., a
California limited partnership (the "Partnership"), relating to an unsolicited
tender offer by PharmaInvest, L.L.C., a Delaware limited liability company
(the "Bidder"), to purchase up to 1,400 units of Class A limited partnership
units of the Partnership (the "Units"). All capitalized terms used herein
without definition have the respective meanings set forth in the Schedule 14D-
9.
ITEM 2. TENDER OFFER OF THE BIDDER
On January 16, 1998, the Bidder filed Amendment No. 3 to its Tender Offer
Statement on Schedule 14D-1 which, among other things, increased the purchase
price (the "Purchase Price") offered by the Bidder for a Unit from $12,000 to
$13,200 (less any distributions received after December 31, 1997), extended
the Offer to February 2, 1998, and made specific that one of the Bidder's
objectives was to make a profit by purchasing Units for $13,200 per Unit.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) At a meeting of the Board of Directors of the General Partner (the
"Board") held on January 21, 1998, after considering, among other things, the
increased Purchase Price offered by the Bidder, the Board unanimously resolved
that the Board is continuing to make no recommendation and express no opinion
to Unitholders and is remaining neutral as to whether Unitholders should
tender or refrain from tendering all or any portion of the Units pursuant to
the Offer. Each Unitholder should consider, among other things, individual
liquidity needs and tax situations determining whether to tender. All
Unitholders should carefully consider the information set forth in Item 4(b)
below and Item 4(b) to the Scheduled 14D-9 filed on December 4, 1997 before
reaching a decision as to whether to tender.
(b) In reaching the conclusion set forth in Item 4(a) the General Partner
considered numerous factors, including the following:
(i) The General Partner has become aware that Securities Pricing and
Research, Inc. ("SPAR"), an appraisal firm, revised its independent report
on the valuation of the Units as of December 31, 1996 (the "SPAR Report").
The SPAR Report is available on the Internet at
http://www.spardata.com:2048/newdata/1996pub.nfs, and a copy of it has been
sent supplementally to Unitholders by the Bidder. According to a summary of
correspondence between SPAR and the Bidder set forth on the SPAR website,
SPAR revised the rounded net asset value and the rounded fair market value
of one Unit as of December 31, 1996 from $21,200 and $15,900, respectively,
to $16,900 and $12,700. This change was based on criticism by the Bidder of
SPAR's valuation methodology. The summary of correspondence on SPAR's
website does not, however, indicate that the Bidder discussed with SPAR any
of the factors set forth in the Schedule 14D-9, including the following:
(A) SPAR estimates the aggregate payments to Unitholders in 1997 at
$6.72 million but the actual aggregate amount distributed to
Unitholders in 1997 was approximately $8.46 million (approximately 26%
greater). Furthermore, the General Partner estimates that a
distribution of approximately $750 per Unit (approximately $2.4 million
in total) will be made in March 1998, representing excess cash received
in connection with third quarter royalties for Duragesic(R) and fourth
quarter royalties for Testoderm(R). Although there can be no assurance
that future distributions, if any, will increase or remain at this
level, based upon the assumption that distributions do continue at an
estimated $2.4 million per quarter, the total distributions for 1998
would equal approximately $9.6 million. This total would be
approximately $1.92 million (25%) more than SPAR's estimate of $7.68
million for 1998.
(B) The General Partner has determined that, subject to each
Unitholder's particular liquidity requirements and tax circumstances,
it may not be an optimal time for Unitholders to sell Units if the
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Unitholder believes that the expiration of the exclusive licenses
granted to ALZA for Testoderm(R) and Duragesic(R), which expire on July
26, 1998 and December 4, 1998, respectively, may cause ALZA to take
certain action, such as exercising the Purchase Option, in order to
secure its exclusive rights to one or both of these products.
(C) The Bidder is a sophisticated investor who would not be making
the Offer without an expectation of significant profit, either from
holding the Units or reselling them, upon exercise of the Purchase
Option or pursuant to some other offer from ALZA or other parties.
Furthermore, worldwide sales of Duragesic(R) were approximately $97
million, $135 million, $180 million and $187 million during 1994, 1995,
1996 and the first nine months of 1997, respectively. Certain factors
indicate that sales of Duragesic(R) may continue to grow for at least
several years in the future, thereby increasing royalty income to the
Partnership. Janssen began marketing Duragesic(R) in six additional
countries in 1996 and four additional countries in 1997, and
submissions for marketing clearance are on file in a number of other
countries. However, there can be no assurance that actual sales of
Duragesic(R) will grow or continue at historical rates. Janssen,
through its parent Johnson & Johnson, recently announced that
Duragesic(R) sales increased by 47% in the fourth quarter of 1997.
(ii) ALZA has publicly announced approval by the Food and Drug
Administration of a new testosterone product which will compete directly
with Testoderm(R). As noted in the Schedule 14D-9, the General Partner
believes competitive products, such as this product, will have an adverse
impact on Testoderm(R) sales within the next several years. However,
Testoderm(R) sales resulted in less than 2% of total royalties to the
Partnership in 1997.
The terms and conditions of the Offer have been determined and established
by the Bidder and not pursuant to negotiations or discussions with, or input
from, the Partnership or the General Partner. As noted in the Offer, the Offer
does provide liquidity and certainty to Unitholders who wish to achieve such
objectives at this time and is likely to be tax-advantaged relative to
continued receipt of distributions (although not necessarily to exercise of
the Purchase Option or other possible offers for the Units, if any). ADC has
not made any determination as to whether to exercise the Purchase Option, and
ADC will exercise the Purchase Option only if ALZA believes that doing so is
in the best interests of ALZA stockholders and ALZA causes ADC to do so.
Each Unitholder must make his, her or its own decision whether to tender
such record holder's Units, or any portion thereof, as the case may be, and in
what amount, if applicable. Unitholders are urged to carefully review all the
information contained in or incorporated by reference in the Offer, the
Schedule 14D-9 and the Partnership's publicly available annual, quarterly and
other reports, as well as the Partnership's communications with Unitholders.
Unitholders should note that transfer of Units requires the prior written
consent of ADC.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The response to Item 9 is hereby amended by addition the following new
Exhibit:
1.4 Form of Letter, dated January 23, 1998, from ALZA TTS Research Partners,
Ltd. to Limited Partners.
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SIGNATURES
After reasonable inquiry, and to the best of my knowledge, I certify that
the information set forth in this statement is true, complete and correct.
Dated: January 23, 1998
ALZA TTS RESEARCH PARTNERS, LTD.
By: ALZA DEVELOPMENT CORPORATION,
its General Partner
/s/ DAVID R. HOFFMANN
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David R. Hoffmann
President
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EXHIBIT 1.4
[ALZA TTS RESEARCH PARTNERS, LTD. LETTERHEAD]
January 23, 1998
Dear Limited Partner:
We are writing in response to materials you should have recently received
supplementing the unsolicited tender offer (the "Offer") being made for up to
1,400 Class A units of limited partnership interest ("Units"), or approximately
44% of the Units, in ALZA TTS Research Partners, Ltd. (the "Partnership"). The
current Offer being made by PharmaInvest, L.L.C. (the "Bidder") at $13,200 per
Unit (less any distributions made to the Limited Partners after December 31,
1997).
Attached is an Amendment (the "Amendment") dated January 23, 1998 to the
Schedule 14D-9 filed with the Securities and Exchange Commission on December 4,
1997. In it, the General Partner again takes the position that it makes no
specific recommendation and is remaining neutral as to whether Unitholders
should tender or refrain from tendering their Units in response to this revised
solicitation. In again reaching this conclusion, the General Partner has taken
into account that Securities Pricing and Research, Inc. ("SPAR") has reduced its
estimates of the rounded net asset value and fair market value of the Units at
December 31, 1996. These changes were made by SPAR in response to criticisms of
its methodology from the Bidder. However, it should also be noted that actual
1997 and expected 1998 distributions are substantially higher (approximately
26%) than those assumed in the SPAR report. You should carefully consider this
and the other information contained in the Amendment before making a decision
with respect to your Units.
YOU SHOULD REVIEW THE SCHEDULE 14D-9, AS AMENDED BY THE ATTACHED AMENDMENT,
CAREFULLY IN MAKING A DECISION REGARDING TENDER OF YOUR UNITS.
If you have any questions concerning this letter or the attached Amendment or
wish to receive another copy of our letter and the Schedule 14D-9 dated December
4, 1997, which remain essentially unchanged, please contact Patty Eisenhaur,
Investor Relations, at 650/494-5300.
Sincerely,
ALZA Development Corporation
General Partner
/s/ DAVID R. HOFFMANN
_________________________
David R. Hoffmann
President
This letter to Unitholders and the accompanying Schedule 14D-9, as amended,
contain forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, that are not historical facts and
which reflect numerous assumptions and involve a number of risks and
uncertainties. Forward-looking statements contained in the foregoing include
statements relating to, among other things, the marketing and sale of
Duragesic(R) and Testoderm(R), the royalties that may be derived by ALZA or the
Partnership from such sales, the occurrence and amount of any future
distributions made in connection therewith by the Partnership and any potential
action to be taken by ALZA in connection with the exercise of the Purchase
Option or otherwise. Among the factors which could cause actual results to
materially differ from those expressed by the General Partner are competitive
factors affecting the prices of and markets for Duragesic(R) and Testoderm(R),
pricing pressures affecting the pharmaceutical industry in general, unexpected
adverse patient reactions to Duragesic(R) or Testoderm(R), obtaining and
maintaining regulatory approval of Duragesic(R) and Testoderm(R) in their
respective target and existing markets, the performance of ALZA in marketing
Testoderm(R) and Janssen in marketing Duragesic(R), and other factors discussed
in the Partnership's documents and reports filed with the Securities and
Exchange Commission.
