8SCHEDULE 14A INFORMATION
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DELCATH SYSTEMS, INC.
(Name of Registrant as Specified In Its Charter)
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[GRAPHIC OMITTED]
Company Contact: Investor Contacts:
Delcath Systems, Inc. Todd Fromer / Garth Russell
M. S. Koly, Chief Executive Officer KCSA Worldwide
203-323-8668 (212) 896-1215 / (212) 896-1250
www.delcath.com tfromer@kcsa.com / grussell@kcsa.com
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Media Contact:
Lewis Goldberg
KCSA Worldwide
(212) 896-1216
lgoldberg@kcsa.com
------------------ FOR IMMEDIATE RELEASE
DELCATH SYSTEMS COMMENCES MAILING TO SHAREHOLDERS
Urges Shareholders NOT to Sign Any Blue Consent Cards
STAMFORD, Conn., August 22, 2006 -- Delcath Systems, Inc. (NASDAQ: DCTH) today
announced that it has commenced mailing of its definitive consent revocation
materials in connection with Laddcap Value Partners LP's consent solicitation to
replace Delcath's Board of Directors with Laddcap's handpicked nominees.
Delcath urges all shareholders to discard any blue consent cards they receive
from Laddcap and SIGN, DATE and RETURN the GOLD consent revocation card being
mailed today.
Delcath today mailed the following letter to its shareholders, which accompanies
its definitive consent revocation materials:
August 22, 2006
Dear Fellow Delcath Shareholders,
As you know, Laddcap Value Partners is seeking your written consent to replace
the entire Board of Directors of Delcath Systems with its own hand-picked slate
of directors. Despite our previous efforts to negotiate in good faith with
Laddcap to reach an amicable agreement, Laddcap's principal, Mr. Robert Ladd,
remains relentless in his efforts to remove your current Board of Directors,
which will, if successful, necessitate my departure as the Company's Chief
Executive Officer.
If you give Laddcap your written consent, you are in effect voting on the future
leadership of Delcath Systems. You are not required to act on Laddcap's blue
consent card, but if you are
considering it, we want to share our plan for maximizing shareholder value and
alert you to the serious concerns we have regarding Mr. Ladd and his proposed
slate of hand-picked nominees.
YOUR BOARD OF DIRECTORS HAS AN OUTSTANDING
TRACK RECORD OF VALUE CREATION
We believe it is important to note that the current Board and management team,
including myself, have a heavily vested interest in Delcath, with a combined
total of 3.2 million shares.(1) This represents more shares than Laddcap
controls and we believe, as long-term shareholders, that we are more aligned
with the best interests of all of Delcath's shareholders, both large and small.
Another important fact is that when Delcath's current independent Board members
joined the Company at the end of October 2001, the Company's shares were trading
at approximately $1.00. Since that time, through July 26, 2006, the day before
Laddcap commenced its consent solicitation, the market value per share of the
Company's common stock has continued to grow, increasing by approximately
469%.(2) We believe the work we have done to raise the share price over the past
few years is only just the beginning and we can continue to increase
shareholders' return on investment.
The Board of Directors and management of Delcath are making every effort to
address shareholders' concerns that were raised at our annual meeting:
o We have retained C.E. Unterberg, Towbin, a reputable and established
investment bank with decades of experience in the healthcare industry.
We are working closely with them to explore additional and alternative
means of maximizing value for our shareholders.
o We remain on track to expand the Board of Directors with the addition
of one new Board member by September 30th and a second new Board
member before the end of the year.
o We are working closely with the National Cancer Institute (NCI) to
influence the number of sites participating in our pivotal Phase III
trial using Melphalan. Recently we successfully added the Methodist
Health Care System in placeStateTexas to our Phase III clinical trial
using Doxorubicin, raising awareness for the Delcath system in the
healthcare community.
o We believe that the help of a strategic advisor, the strengthening of
our Board and the growing awareness of the Delcath system will help us
drive success as we execute our long-term strategy.
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(1) This number includes 1,332,300 shares of Common Stock issuable upon exercise
of vested stock options granted to directors and executive officers pursuant to
our various stock option plans.
(2) In addition, since May 15, 2003, near the completion of a public offering of
the Company's shares, through July 26, 2006, the day before Laddcap commenced
its consent solicitation, the market value per share of the Company's Common
Stock has continued to grow, increasing by approximately 916%. In contrast, the
annual return for Mr. Ladd's underperforming hedge fund for 2006 through April
2006 was 5.1%, for all 2005 was -1.7%, and for 2004 was 0.7%, each considerably
below the performance of the rest of the market. Source: Laddcap Value Partners
LP April 2006 update to investors. Annual return for S&P SmallCap 600 for 2006
through April 2006 was 12.52%, for all 2005 was 6.65%, and for 2004 was 21.59%.
o We are also pleased to have recently announced that Dr. Seymour Fein,
M.D. has assumed the newly developed role of Chief Scientific Officer
in addition to continuing his role as Medical Director. Dr. Fein is
board certified in both oncology and internal medicine. He has been a
Delcath supporter for a number of years, and currently is, and will
remain Medical Director and a member of the Company's Scientific
Advisory Board. Dr. Fein's extensive background in developing cancer
therapies and medical devices, and work towards achieving FDA
approval, will help strengthen Delcath's already experienced
management team. The new Chief Scientific Officer role will encompass
the duties of the position of Chief Technical Officer, which was
previously held by Dr. Samuel Herschkowitz. Dr. Herschkowitz will
remain as the Chairman of the Board of Directors.
YOUR BOARD REMAINS FOCUSED ON DELCATH'S CORE MISSION
Until we attain an approval from the FDA, we are a development-stage company and
must remain focused on completing our trials. The most important of these trials
is the current Phase III study using Melphalan that is underway at the NCI. We
have worked very hard over the years in developing a strong relationship with
the NCI and convincing the FDA to grant Fast Track Status for the Phase III
Melphalan trial. The greatest hurdle we have overcome was coming to terms with
the FDA on a special protocol for administering Melphalan using the Delcath
system to cancer patients in a non-blind study. After more than a year of
discussions, we received an official Special Protocol Assessment (SPA) giving
Delcath what is in effect a binding contract with the FDA to speed the approval
process once our Phase III trial is complete. Until we received the SPA just a
few months ago, we could not commence our Phase III study without losing some of
the benefits of our Fast Track Status. Even with the Phase III study now
underway, Delcath is not able to add new sites directly. Rather, the NCI must
approve any expansion of the study to new sites. To the extent that we can add
value to this process by suggesting potential sites for inclusion in the study,
we have been as active as possible. Unfortunately, since our Phase III trial
commenced, we have spent a great deal of time defending Delcath from Laddcap's
hostile takeover attempt, which we believe, if successful, will jeopardize
everything we have worked so hard for to this point.
DON'T LET YOUR COMPANY FALL INTO THE HANDS
OF LADDCAP'S SUSPECT NOMINEES
PROTECT YOUR INVESTMENT
Now that Ladd's consent solicitation is underway, it is important for
shareholders to understand the realities surrounding Mr. Ladd's plans, his
misstatements and the startling facts surrounding Jonathan Foltz, a former
employee of Delcath and the only member of Ladd's slate of directors that would
represent any continuity at the company should our current Board be removed.
Before you sign Ladd's blue consent card, please consider the following:
o We believe that Mr. Ladd's previous actions (actions that we have
described in the Consent Revocation Statement that accompanies this
letter) demonstrate that he is attempting to seize control of Delcath
in order to force a "quick sale" of the Company.
o Mr. Ladd's underperforming hedge fund, Laddcap Value Fund, despite
substantial paper profits in Delcath, has substantially underperformed
the market for the past two years. Today, Mr. Ladd finds himself with
almost 40% of his investors' capital in one stock - Delcath Systems.
Understanding as he must that Delcath's pivotal Phase III Melphalan
trial can take as much as 18 to 24 months to reach its conclusion, a
substantial portion of his capital would have to remain in Delcath
shares.
o For Mr. Ladd, we believe that a sale of the entire company at once
will provide him with liquidity and short-term profits, while
depriving other Delcath shareholders of the long-term value of their
stock. Certainly, we believe that Mr. Ladd is working in his own best
interest and the short-term interests of Laddcap, which interests are
different than those of Delcath's long-term shareholders.
o Furthermore, Laddcap is in uncharted territory with this strategy.
Laddcap has never attempted to seize control of a public company in
the past, much less attempted to run one. Do you as shareholders
really believe that Delcath will be better off with the manager of a
small, underperforming hedge fund and his board of handpicked nominees
leading the way?
o Mr. Ladd's proposed slate of nominees is a cause for great concern. If
trust is an important factor in corporate governance, how are
shareholders supposed to trust a board with members such as Jonathan
Foltz, a man who has been sued by Delcath for misappropriation and
theft of Delcath's highly confidential trade secrets, unfair trade
practices, breach of loyalty and other serious claims, and who
himself, as recently as April of 2006, described Mr. Ladd's
accusations against the Company as "absurd" and complained of Mr.
Ladd's "bullying tactics"?(3) We cannot help but wonder if a
consulting fee from Laddcap, the allure of a position as Delcath's
Chief Executive Officer if Mr. Koly leaves, and reimbursement for
legal and office expenses by Laddcap contributed to Mr. Foltz's
apparent change of mind.
o We believe that Laddcap has also misled shareholders. Laddcap issued
proxy materials prior to our annual meeting that included a valuation
of Delcath rendered by two "investment banks" that had never filed
such a valuation for any company with the Securities and Exchange
Commission. Laddcap claimed in its proxy materials that these
"investment banks," Glocap Funding LLC and Fulcrum Global Partners
LLC, were "reputable and established" firms. They are not. In fact, on
June 6, 2006, one day before Fulcrum issued its valuation opinion of
the Company, the New York Post reported that Fulcrum had "shut its
books and resigned from the National Association of Securities
Dealers." We feel this only proves to what great lengths Laddcap has
gone to influence your votes. Even though we alerted shareholders to
these shocking facts weeks ago, as of this date, Laddcap has never
attempted to explain or rebut these charges. Fortunately, a Federal
judge has temporarily restrained Mr. Ladd from acting on his consent
solicitation pending further court proceedings.
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(3) Source: Email from Jonathan Foltz to the Company's public relations firm,
dated April 18, 2006.
o We are surprised that Laddcap would request Delcath shareholders'
consent to remove your duly-elected, proven Board in order to replace
them with a slate of nominees with suspect qualifications, including
one nominee, Mr. Paul Nicholls, who filed for personal bankruptcy in
2002, and, at the time he filed for bankruptcy, was paying $2,500 per
month in "rent" to his wife at an apartment building owned by her and
appraised at over $3 million. Mr. Nicholls' bankruptcy stemmed from a
debt he amassed on credit cards, including credit cards issued by
luxury retailers such as Bloomingdale's, Bergdorf Goodman and Macy's,
not as Laddcap would have you believe, because of his serious battle
with cancer. Laddcap's slated board also includes Mr. Fred Zeidman,
who served as a member of the audit and compensation committees of the
board of directors of Seitel Corporation, during the period in which
Seitel misstated earnings for seven quarters and subsequently filed
for bankruptcy. Mr. Zeidman was named in seven shareholder derivative
lawsuits stemming from Seitel's misstatements of earnings and eventual
bankruptcy.
o Laddcap claims that it has a plan for Delcath. In reality, however,
Laddcap conspiring with Mr. Foltz, is merely regurgitating the same
exact strategies and plans that Delcath has been presenting to
investors in meetings and conference calls for over a year. Laddcap
will have you believe that Delcath has no plan for commercializing the
Delcath system, and this too is not correct. We clearly understand
that the leadership of Delcath needs to communicate to investors our
strategy for attacking the $1 billion market which the Delcath system
can address, if and when it is approved by the FDA. As that milestone
nears, we will bring aboard an experienced executive team that has a
proven track record of success in the commercialization of medical
devices to supplement the experience of our current management. In the
interim, we are focused on identifying partnership opportunities to
leverage and possibly monetize our intellectual property, particularly
our patents to develop therapies for other organs in the body. With
the help of an expanded Board and our strategic advisors at C.E.
Unterberg, Towbin, we believe that we can make substantial progress
towards reaching these goals.
YOUR SUPPORT IS IMPORTANT
Delcath was founded in 1988 by a team of physicians searching for a treatment
for liver cancer. Liver cancer is one of the most prevalent and lethal forms of
cancer. The American Cancer Society estimates that approximately 1,400,000 new
cases of cancer will be diagnosed in 2006, including approximately 220,000 newly
diagnosed cases of metastatic cancers in the liver, and approximately 18,510
newly diagnosed cases of primary liver cancer. Your Board is singularly united
in its commitment to the successful achievement of Delcath's mission and the
Delcath system. Do not let Laddcap deprive you of the full value of your Delcath
shares. If Laddcap is successful in taking over Delcath, we believe it will sell
the Company before it ever reaches FDA approval. DO NOT BE FOOLED.
We urge you to reject Laddcap's efforts to take control of your Company. Please
discard any blue consent cards that you may receive from Laddcap and SIGN, DATE
and RETURN the enclosed GOLD consent revocation card TODAY.
Thank you for your continued support.
M.S. Koly
President and Chief Executive Officer
If you have any questions, please call MacKenzie Partners, Inc., toll-free
at (800) 322-2885 or collect at (212) 929-5500.
This letter contains forward-looking statements, which are subject to certain
risks and uncertainties that can cause actual results to differ materially from
those described. Factors that may cause such differences include, but are not
limited to, uncertainties relating to our ability to successfully complete Phase
III clinical trials and secure regulatory approval of our current or future
drug-delivery system and uncertainties regarding our ability to obtain financial
and other resources for any research, development and commercialization
activities. These factors, and others, are discussed from time to time in our
filings with the Securities and Exchange Commission. You should not place undue
reliance on these forward-looking statements, which speak only as of the date
they are made. We undertake no obligation to publicly update or revise these
forward-looking statements to reflect events or circumstances after the date
they are made.
On August 17, 2006, Laddcap filed a definitive consent solicitation statement
with the SEC relating to Laddcap's proposal to, among other things, remove the
current Board of Directors and replace them with Laddcap's nominees. In
response, on August 21, 2006, Delcath filed a definitive consent revocation
statement on Form DEFC14A (the "Definitive Consent Revocation Statement") with
the SEC in opposition to Laddcap's consent solicitation. Delcath shareholders
should read the Definitive Consent Revocation Statement (including any
amendments or supplements thereto) because it contains additional information
important to the shareholders' interests in Laddcap's consent solicitation.
The Definitive Consent Revocation Statement and other public filings made by
Delcath with the SEC are available free of charge at the SEC's website at
www.sec.gov. Delcath also will provide a copy of these materials free of charge
upon request to Delcath Systems, Inc., Attention: M.S. Koly, Chief Executive
Officer, (203) 323-8668.