Tang Capital Partners' Proxy Statement for Vanda Pharmaceuticals Calls for Liquidation

Apr. 9.09 | About: Vanda Pharmaceuticals (VNDA)

Tang Capital Partners has filed a preliminary proxy statement for the Vanda Pharmaceuticals (Nasdaq: VNDA) 2009 Annual Meeting of Stockholders urging stockholders to support Tang Capital Partners’ slate of two director nominees, Kevin C. Tang and Andrew D. Levin, M.D., Ph.D.

We’ve been following VNDA (see our post archive here) because it’s trading below its net cash value and Tang Capital Partners (TCP), has called for the company to “cease operations immediately, liquidate [VNDA]’s assets and distribute all remaining capital to the Stockholders.” The stock is up 16.7% since we initiated the position from $0.78 to close yesterday at $0.91, which gives the company a market capitalization of $24.3M. We estimate the net cash value to be around 75% higher at $42.6M or $1.60 per share.

The company is hemorrhaging cash, so the investment turns on TCP’s ability to get control and staunch the bleeding. If TCP cannot get onto the board quickly or at all, the company will continue to burn cash and the investment will be a dud. VNDA has a staggered board, so this will make TCP’s task difficult.

The Background and reasons for the solicitation in the preliminary proxy statement is set out below:

Tang Capital has engaged in discussions with the Company and the Board with regards to the strategic direction of the Company. We believe that in order to maximize value for all stockholders, the Company must cease operations immediately, liquidate the Company’s assets and distribute all remaining capital to the Company’s stockholders.

Since the Company continues to operate as of the date of this Proxy Statement and has not publicly announced any plan of liquidation and dissolution, we believe the Board has rejected our proposal to immediately cease all operations, liquidate the Company’s assets and distribute all remaining capital to the Company’s stockholders. In light of the foregoing, and in order to preserve and maximize the diminishing value of the Company’s assets for the benefit of all stockholders, Tang Capital has nominated Kevin C. Tang and Andrew D. Levin, M.D., Ph.D. for election to the Board at the Annual Meeting and proposed a stockholder resolution to be voted on at the Annual Meeting whereby the stockholders will request that the Company cease operations immediately, liquidate the Company’s assets and distribute all remaining capital to the Company’s stockholders.

On February 13, 2009, Tang Capital delivered a letter (the “Letter”) to the Nominating and Governance Committee of the Company recommending Mr. Tang and Dr. Levin as nominees for election to the Board at the Annual Meeting. On the same date, Tang Capital also delivered a notice (the “Notice”) to the Company of its intention to, among other things, nominate Mr. Tang and Dr. Levin for election to the Board and propose the stockholder resolution described herein.

Since delivery of the Letter and Notice, the Board has failed to engage with Tang Capital in a dialogue on the merits of its recommendations. Tang Capital therefore decided to embark on this solicitation of proxies to elect the Nominees and approve the resolution described herein. See the information under the heading “Proposal 1 - Election of Directors” beginning on page • for additional information about the Nominees. Further, Tang Capital believes that the proposed resolution is the best way for the stockholders to let the Board know what the stockholders consider to be the best direction for the future of the Company in a manner that is quantitative, clear and indisputable.

Full Disclosure:

We do not have a holding in VNDA.