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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AMENDMENT NO. 3
PAINEWEBBER R&D PARTNERS II, L.P.
(Name of subject company)
BIOROYALTIES, 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)
695922 20 3
(CUSIP Number)
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PABLO LEGORRETA, DAVE MADDEN
BIOROYALTIES, L.L.C.
70 E. 55th St., 23rd Floor
New York, NY 10022
(800) 600-1450
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COPIES TO:
F. GEORGE DAVITT, ESQ.
TESTA, HURWITZ & THIBEAULT, LLP
HIGH STREET TOWER
125 HIGH STREET
BOSTON, MA 02110
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This Amendment No. 3 amends and supplements the Tender Offer
Statement, as amended, on Schedule 14D-1, as amended, filed by BioRoyalties,
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., a Delaware
limited liability company and the sole member of the Purchaser,
relating to the offer by Purchaser to purchase outstanding Units of
Limited Partnership Interest (the "Units"), of PaineWebber R&D Partners II,
L.P. (the "Partnership"), a Delaware limited partnership, at $3,650 per Unit,
net to the seller in cash, on the terms and subject to the conditions set
forth in the Offer to Purchase, dated August 15, 1997 (the "Offer to
Purchase"), and in the related Letter of Transmittal and any amendments or
supplements thereto, copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), respectively (which collectively constitute the "Offer"). Those
sections of the Offer amended and supplemented by the Supplement dated
September 24, 1997 are hereby incorporated by reference in the Items of the
Schedule in which such sections are referred to.
The Offer is hereby amended so that the number of Units which the
Purchaser is offering to purchase is limited to 4,000 Units.
As of 5:00 p.m., Eastern Standard time on Tuesday, September 23, 1997,
approximately 792.5 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 October 7, 1997.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
Item 11 is hereby amended as follows:
(a)(7) Supplement to Offer to Purchase dated September 24, 1997.
(a)(8) Cover Letter from Royalties, L.L.C. dated September 24, 1997.
(a)(9) Press Release dated September 24, 1997.
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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: September 24, 1997 BIOROYALTIES, L.L.C.
By: /s/ David Madden
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Title: Managing Member of Pharmaceutical
Partners, L.L.C., the Manager
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PHARMACEUTICAL ROYALTIES, L.L.C.
By: /s/ Pablo Legorreta
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Title: Managing Member of Pharmaceutical
Partners, L.L.C., the Manager
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PHARMACEUTICAL ROYALTY
INVESTMENTS LTD.
By: /s/ Pablo Legorreta
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Title: Managing Member of Pharmaceutical
Partners, L.L.C., the Manager
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PHARMACEUTICAL PARTNERS, L.L.C.
By: /s/ Pablo Legorreta
---------------------------------
Title: Managing Member
---------------------------------
2
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
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(a)(7) Supplement to Offer to Purchase dated September 24, 1997
(a)(8) Cover Letter from BioRoyalties, L.L.C. dated September 24, 1997
(a)(9) Press Release dated September 24, 1997
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SUPPLEMENT TO
OFFER TO PURCHASE FOR CASH
UP TO 4,000 UNITS OF LIMITED PARTNERSHIP INTEREST
OF
PAINEWEBBER R&D PARTNERS II, L.P.
AT
$3,650 NET PER UNIT
BY
BIOROYALTIES, L.L.C.
The following information amends and supplements the Offer to Purchase
dated August 15, 1997 of BioRoyalties, L.L.C., a Delaware limited liability
company (the "Purchaser" or "Bioroyalties"), 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., to purchase up to 4,000 units
of limited partnership interest (the "Units") in PaineWebber R&D Partners II,
L.P., a Delaware limited partnership (the "Partnership"), for cash
consideration per Unit of $3,650, upon the terms and subject to the
conditions set forth in the Offer to Purchase, this Supplement, and the
related Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "Offer"). Except
as set forth in this Supplement, the terms and conditions previously set
forth in the Offer to Purchase and Letter of Transmittal remain applicable in
all respects to the Offer. Capitalized terms used but not defined in this
Supplement have the meanings assigned in the Offer to Purchase.
RISK FACTORS
- Although the Purchaser cannot predict the future value of the
Partnership's assets or future trading 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 main asset. The Manager has stated that it
estimates the fair value of a Unit to be between $5,555 and $6,955, and
the Purchaser has offered $3,650 per Unit. The Manager's valuation is a
range of estimates based on assumptions that have not been made available
to you or the Purchaser and that may or may not prove to be true. The
General Partner has stated that "[it] and the Partnership are unable to
provide any assurance that the actual value that may be realized by the
Partnership or any limited partner would be as indicated by such range of
values."
- 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 payment
stream. 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. According to the General Partner, "[t]he Units are illiquid, so
there is no efficient trading market for the Units [and]the prices that
may be realized by a seller in such market . . . have historically been
and may be lower than the price [the Purchaser] is offering." The Offer
provides each Holder the opportunity to liquidate his or her
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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).
- At year-end 1996, a limited partner who has held Units since the
inception of the Partnership (an "Original Holder") has incurred
cumulative net passive activity losses of approximately $5,882 per Unit.
The sale of Unit(s) by an Original Holder that has not already used these
losses in prior years to offset passive activity income from other
investments may enable such holder to use the losses this year to the
extent such sale is a "complete disposition" of such holder's Unit(s). As
a result, the gain from the sale ($3,650 per Unit, in the case of an
Original Holder or holder with zero basis in the Units) may be entirely
offset and therefore not taxed. In addition, the remaining passive
activity loss for such limited partner (approximately $2,232 per Unit, in
the case of an Original Holder or holder with zero basis in the Units)
may be used to offset other income. However, such offsets would not be
available to an Original Holder who has previously used such losses to
offset other income.
BIOROYALTIES IS NOT MAKING ANY REPRESENTATION OR EXPRESSING ANY OPINION
AS TO THE TAX CONSEQUENCES OF SELLING UNITS. ACTUAL TAX CONSEQUENCES WILL
DEPEND ON EACH HOLDER'S PARTICULAR TAX SITUATION, INCLUDING, BUT NOT LIMITED
TO, THE LENGTH OF TIME THE HOLDER HAS HELD THE UNITS AND THE HOLDER'S STATUS
AS A U.S. TAX RESIDENT. EACH HOLDER IS STRONGLY URGED TO CONSULT HIS OR HER
TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THIS OFFER.
According to a Quarterly Report on Form 10-Q for the quarter ended June
30, 1997 filed by the Partnership, 8,257 Units were issued and outstanding.
The Offer is subject to proration if more than 4,000 units are tendered. The
Purchaser is amending the Offer to limit the number of units which it is
offering to purchase because, as stated in the Partnership's Schedule 14D-9
with respect to the Offer, the General Partner cannot consent to any sale of
Units in the Offer aggregating more than 4,084.5 Units, or 49.47% of the
outstanding Units. See Section 2 of 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 October 7, 1997.
The Offer is conditioned upon, among other things, Purchaser being
satisfied, in its reasonable discretion prior to the Expiration Date, that,
upon purchase of 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. See Sections 2 and 14 of the
Offer.
Purchaser determined the Purchase Price by dividing the sum of (i)
Purchaser's own estimate of the present value of future cash flows that may
be derived from the Partnership's holdings and (ii) Purchaser's own estimate
of the current market value of the Partnership's marketable securities, by
the number of Units outstanding. In addition, the Purchaser compared the
Purchase Price to the recent trading prices for the small number of Units
that have been sold through partnership matching services. All of the
information considered by the Purchaser in determining the Purchase Price is
publicly available.
The principal assets of the Partnership are rights to receive contingent
payments based on sales of one pharmaceutical product in which the
Partnership has a direct interest and sales of a pharmaceutical product and
medical device in which the Partnership has an indirect interest through
investments in the limited partnerships that have such payment rights. The
Partnership also has cash and marketable securities, as well as warrants to
purchase shares of publicly traded companies, the values of which were
estimated by the Purchaser to be approximately the market value in the case
of cash and marketable securities and the intrinsic value, less a 20%
discount for illiquidity, in the case of warrants for which there is no
public market.
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The Purchaser believes the most valuable asset of the Partnership is its
right to receive payments through 2007 based on sales of ReoPro, a product
developed by Centocor Inc. and marketed by Eli Lilly & Co. In addition to
the expected future payments derived from the sale of ReoPro, the Purchaser
estimated the amount of payments that may be paid to the Partnership pursuant
to a proposed settlement of litigation between the Partnership and Centocor
regarding the basis of calculating payments owed to the Partnership.
Purchaser also considered the risks inherent in these future cash flows,
including (i) the dependence on the sales of a single product and (ii) the
absence of any market for the asset or for the Partnership units. Based on
this analysis, the Purchaser estimated the value of the Partnership's
interest in ReoPro to be approximately $25.0 million.
One of the Partnership's indirect investments is its limited partnership
interest in Genzyme Development Partners, L.P. ("GDP"), which entitles it to
receive profits from a joint venture that manufactures and markets Seprafilm,
a medical device. Since Seprafilm's introduction in 1995, no sales have been
reported in Genzyme's publicly available financial statements. Genzyme has
publicly stated that there will be no distributions resulting from Seprafilm
in 1997 and that the joint venture is not producing any profits. Genzyme has
an option to purchase the limited partnership interest for a lump sum payment
and payments based on the future sale of Seprafilm. Purchaser believes that
there is a significant risk that Genzyme will not exercise this purchase
option. As a result, the Purchaser placed a nominal value of $1.0 million on
the Partnership's limited partnership interest in GDP.
The Partnership's other indirect investment is its limited partnership
interest in Synergen Clinical Partners, L.P. ("SCP") which funded the
research and development for IL-1ra, a drug in phase II clinical testing for
rheumatoid arthritis. SCP is involved in class action litigation for which a
settlement has been proposed. This settlement would result in the
liquidation of the Partnership's interest in SCP, and the Purchaser has
valued the Partnership's limited partnership interest in SCP at $1.4 million,
which is its proportionate interest of the cash component of the proposed
settlement proceeds.
The Purchaser's $30.0 million valuation of the Partnership's assets at
June 30, 1997 can be summarized as follows:
ASSET PURCHASER'S ESTIMATE OF
VALUE (IN MILLIONS)
Cash and Equivalents $ 1.1
Equity Securities 0.1
Warrants 1.4
ReoPro Contingent Payment Rights 25.0
Genzyme Clinical Partners, L.P. interest 1.0
Synergen Clinical Partners, L.P. interest 1.4
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Total $ 30.0
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Per Unit $3,633
The value of $30.0 million represents $3,633 per Unit based on the 8,257
Units reported outstanding. Purchaser rounded $3,633 to $3,650 to arrive at
the Purchase Price. The May/June, 1997 issue of the Partnership Spectrum, an
independent third-party industry publication that tracks recent trades in
certain limited partnership interests, indicates that 3.0 Units traded in the
period April 1, 1997 through May 31, 1997 at prices between $2,200 and
$2,301.38 per Unit, with a weighted average of $2,267.58 per Unit.
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No third party was retained by the Purchaser to value the Units or to
render any fairness opinion with respect to the Purchase Price. No
representation is made as to the fairness of the Purchase Price. No other
valuation analysis was performed or used, including any liquidation value or
net asset value analysis.
The Introduction of the Offer is hereby amended by inserting the
following paragraph in place of the fifth paragraph:
INTRODUCTION
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. See Sections 2 and 14.
Section 2 of the Offer to Purchase is hereby amended by inserting the
following paragraphs in place of the current first, second and third
paragraphs:
2. ACCEPTANCE FOR PAYMENT AND PAYMENT
If more than 4,000 Units are validly tendered on or prior to the
Expiration Date and not properly withdrawn on or prior to the Expiration
Date, the Purchaser will only accept for payment, upon the terms and subject
to the conditions of the Offer, and pay for an aggregate of 4,000 Units so
tendered, pro rata according to the number of Units validly tendered and not
properly withdrawn on or prior to the Expiration Date, with appropriate
adjustments to avoid purchases in fractions of other than half Units. If the
number of Units validly tendered and not properly withdrawn on or prior to
the Expiration Date is less than or equal to 4,000 Units, the Purchaser will
purchase all Units so tendered and not properly withdrawn, upon the terms and
subject to the conditions of the Offer.
In the event that proration is required, the Purchaser will promptly
announce the final results of such proration after the Expiration Date.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such
extension or amendment), Purchaser will accept for payment (and thereby
purchase) and pay for all Units which are validly tendered (and not properly
withdrawn) prior to the Expiration Date, promptly following the Expiration
Date. Subject to the applicable rules of the Commission, including Rule
14e-1(c), Purchaser expressly reserves the right to delay acceptance for
payment of or payment for Units pending receipt of any regulatory approval
specified in Section 15 or in order to comply, in whole or in part, with any
other applicable law or government regulation. See Sections 14 and 15.
Section 3 of the Offer to Purchase is hereby amended by restating the
following paragraphs:
3. PROCEDURE FOR TENDERING UNITS
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for
payment of any tender of Units pursuant to any of the procedures described
above will be determined by Purchaser in its reasonable discretion, which
determination shall be final and binding on all parties. Purchaser reserves
the absolute right to reject any or all tenders of Units determined not to be
in proper form or the acceptance of or payment for which may, in the opinion
of counsel, be unlawful and reserves the absolute right to waive any defect
or irregularity in any tender of Units. Purchaser also reserves the absolute
right to waive or amend any or all of the conditions of the Offer prior to
the Expiration Date. Purchaser's interpretation of the terms and conditions
of the Offer (including the Letter of Transmittal and its instructions) will
be final and binding
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on all parties. No tender of Units will be deemed to have been validly made,
until all defects and irregularities have been cured or waived. None of
Purchaser, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
APPOINTMENT AS PROXY. By executing and delivering the 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,
in the manner set forth in the Letter of Transmittal, 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 reasonable 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 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.
Section 4 of the Offer to Purchase is hereby amended by inserting the
following paragraph in place of the third paragraph:
4. WITHDRAWAL RIGHTS
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary
at its address set forth on the back cover or this Offer to Purchase. Any
such notice of withdrawal must specify the name of the persons who tendered
the Units to be withdrawn, the number of Units to be withdrawn and the name
of the registered Holder, if different from that of the person who tendered
the Units. All questions as to the form and validity (including time of
receipt) of notices of withdrawal will be determined by Purchaser, in its
reasonable discretion, whose determination will be final and binding on all
parties. No withdrawal of Units will be deemed to have been made properly
until all defects and irregularities have been cured or waived. None of
Purchaser, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failing to give such
notification.
Section 14 of the Offer to Purchase is hereby amended by inserting the
following paragraphs in place of the first, fifth and last paragraphs:
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any application rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered Units
promptly after expiration or termination of the Offer), to pay for any Units
tendered, and may postpone the acceptance for payment or, subject to the
restriction referred to above, payment for any Units tendered, and may amend
or terminate the Offer if, (i) Purchaser is not satisfied, prior to the
Expiration Date, in its reasonable discretion, that, upon purchase of the
Units pursuant to the Offer, it and/or its nominee will have full rights to
ownership as to all such Units and that it or its nominee will become
assignees of the purchased Units and a substitute limited partner with
respect to all such Units, (ii) all material regulatory and related approvals
have not been obtained or made on terms reasonably satisfactory to Purchaser
prior
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to the Expiration Date, or (iii) at any time prior to the Expiration Date any
of the following events shall occur or shall be deemed by Purchaser to have
occurred:
(D) Any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, financial condition, results
of operations, or prospects of the Partnership which, in the reasonable
discretion of the Purchaser, is, or may be, materially adverse to the
Partnership, or the Purchaser shall become aware of any fact (including
without limitation any such change or development) which, in the reasonable
judgment of the Purchaser, has, or may have, materially adverse significance
with respect to the Partnership;
The foregoing conditions are for the sole benefit of Purchaser and its
affiliates and may be asserted by Purchaser regardless of the circumstances
(other than any action or inaction by Parent, Purchaser or any of their
affiliates) giving rise to any such condition or may be waived by Purchaser,
in whole or in part, from time to time prior to the Expiration Date in its
reasonable discretion. The failure by Purchaser at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right and
each such right shall be deemed an ongoing right and may be asserted at any
time and from time to time. Any reasonable determination by Purchaser
concerning any of the events described herein shall be final and binding.
September 24, 1997 BIOROYALTIES, L.L.C.
PHARMACEUTICAL ROYALTIES, L.L.C.
PHARMACEUTICAL ROYALTY INVESTMENTS LTD.
PHARMACEUTICAL PARTNERS, L.L.C.
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Exhibit (a)(8)
September 24, 1997
To Limited Partners of PaineWebber R&D Partners II, L.P.:
Accompanying this letter is an amendment to the Offer to purchase units of
the limited partnership interest (the "Units") of PaineWebber R&D Partners
II, L.P. made by BioRoyalties, L.L.C. on August 15, 1997. This amendment
reflects changes to the disclosure document previously sent to you, including
limiting the number of Units which BioRoyalties is offering to purchase to
4,000, but does not change the $3,650 per Unit purchase price. As a result
of the amendment, we are extending the Offer to Midnight (Eastern Standard
time) on October 7, 1997.
Thank you for taking the time to consider the Offer.
Very truly yours,
BioRoyalties, L.L.C.
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Exhibit (a)(9)
BIOROYALTIES, L.L.C. EXTENDS TENDER OFFER
NEW YORK, NEW YORK, (September 24, 1997) ....... BioRoyalties, L.L.C., has
announced that its offer to purchase outstanding units of limited partnership
interest (the "Units") of PaineWebber R&D Partners II, L.P. for $3,650 net
per Unit has been extended and is now scheduled to expire at 12:00 Midnight,
(Eastern Standard time), on October 7, 1997. As of 5:00 p.m. on September
23, 1997, approximately 792.5 Units had been tendered and not withdrawn. In
addition, BioRoyalties amended its offer to limit the number of units which
it is offering to purchase to 4,000 Units.
For additional information, contact The Herman Group, Inc., the
Information Agent/Depository for the Offer at (800) 243-3399.
