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REJECT THE ATTEMPT BY A DISSIDENT SHAREHOLDER
TO DISRUPT THE COMPANY'S BUSINESS PLAN
AND FORCE ITS PREMATURE SALE
May 30, 2006
Dear Fellow Delcath Shareholder:
You may have recently received a shareholder letter from Laddcap Value
Partners LP and its principal Robert Ladd, a self-interested dissident
shareholder, asking you to support his short-sighted shareholder proposal to
explore a sale of Delcath Systems and to withhold support for the qualified
independent company directors who stand for re-election.
As we have stated in the proxy materials and shareholder letters previously
sent to you, we believe Ladd is driven only by what is in its own short-term
interests and by its selfish desire to extract a `quick profit' by selling the
Company NOW -- before the value of Delcath's key product can be properly
realized -- which is not in the best interests of the Company's shareholders.
YOUR BOARD BELIEVES THAT ITS PRIMARY OBLIGATION IS TO ENHANCE
SHAREHOLDER VALUE FOR ALL SHAREHOLDERS
In this regard, the Board regularly reviews the status of the Company's
progress toward obtaining pre-market approval from the U.S. Food and Drug
Administration (`FDA') for the use of the Company's medical device. The Board
believes that, if the Company obtains pre-market approval from the FDA, the
value of the Company's technology (and therefore the value of the Company) will
be substantially increased beyond what could reasonably be expected to be
obtained in a sale of the Company TODAY.
YOUR BOARD HAS AN OUTSTANDING TRACK RECORD
OF VALUE CREATION
The Company's results to date speak for themselves. During the past three
years under the direction of the current management and Board of Directors, the
Company has achieved significant increases in shareholder value, including:
o From May 15, 2003, near the completion of a public offering of the
Company's shares, the closing price for the Company's Common Stock was
$0.65 per share. On May 26, 2006, the Company's Common Stock had a
closing price of $4.99 per share.
o From May 15, 2003 to May 26, 2006, the market value per share of the
Company's Common Stock increased by approximately 668%.
o From the beginning of 2004 through the end of 2005, the Company has
raised approximately $16.6 million in new capital.
o On May 11, 2005, the Company announced that it had been granted
fast-track status by the FDA for its novel system for delivering high
dose chemotherapy to specific organs and body regions for treating
metastatic melanoma in the liver with melphalan, a currently approved
anticancer agent. The FDA's fast-track program is rarely granted and
is designed to facilitate development and expedite the review of new
drugs or, in the case of Delcath, a new drug-device combination,
having the potential to treat illnesses which currently lack adequate
therapy.
o On February 21, 2006, the Company entered into a Special Protocol
Assessment and Agreement with the FDA, a significant step toward
obtaining final FDA approval. The Company currently is undertaking its
final clinical studies on the way to obtaining FDA approval.
On the other hand, in contrast to the members of your Board who have held
Company shares for an extended period of time, the Company believes that Mr.
Ladd is a short-sighted investor who has acquired most of his position in the
last year in order to realize quick short-term profits. Shareholders should be
aware that despite the fact that Mr. Ladd currently has approximately 33% of
Laddcap's fund invested in Delcath's successful stock, the annual return for Mr.
Ladd's fund for 2006 through April 2006 is a meager 5.1%, and for all 2005 was
an embarrassing -1.7%, considerably below the performance of the rest of the
market.1 Institutional Shareholder Services Inc. (ISS), a leading provider of
proxy voting and corporate governance services, recommended all shareholders of
the Company vote AGAINST Mr. Ladd's shareholder proposal and the Company urges
you not to let Mr. Ladd's short-sighted, self-interested demands deprive the
Company of its exciting future prospects.
LADD'S OBLIGATION IS TO ACT IN THE BEST INTEREST OF LADD
YOUR BOARD'S OBLIGATION IS TO ACT IN YOUR BEST INTERESTS
REJECT LADD'S MISINFORMATION CAMPAIGN
Because Mr. Ladd is unable to identify any legitimate shortcomings in the
Company's successful business strategy, Mr. Ladd has instead resorted to
launching frivolous personal attacks against the Company's dedicated management
and Board, and is engaging in a campaign of misinformation and selective
disclosure. Your Board is comprised of a majority of independent directors and
they are committed to acting in the best interests of ALL Delcath shareholders.
Mr. Ladd, on the other hand, has no obligation to act in your best interests.
Over the past year, in addition to management having had numerous telephone
conversations with Mr. Ladd, the Company's President and Chief Executive
Officer, Mr. M.S. Koly, has met with Mr. Ladd on two separate occasions, once at
Mr. Ladd's offices and once at Delcath's headquarters. Unfortunately, after
these meetings, the Company determined that Mr. Ladd was not truly interested in
seeking enhanced shareholder value for all shareholders, but was more interested
in wasting the Company's time and resources by seeking to derail the Company's
focused business strategy purely so that Mr. Ladd could realize a short-term
profit on his recently-purchased shares, to the detriment of all other Company
shareholders and your Board's objective of maximizing long-term shareholder
value.
_____________
(1) Source: Laddcap Value Partners LP April 2006 update to investors. Annual
return for S&P SmallCap 600 for 2006 through April 2006 is 12.52% and for
all 2005 was 6.65%. Similarly, the annual return for Mr. Ladd's fund for
2004 was 0.7%, while the annual return for the S&P SmallCap 600 was 21.59%.
If Mr. Ladd were truly interested in seeking increased value for all
Company shareholders, he would not be focused on extraneous issues like the
immaterial litigation matters, on which the Company has expended minimal
resources, and with which Mr. Ladd seeks to disrupt and derail the Company's
focused and successful business strategy. DO NOT BE FOOLED. We believe Mr. Ladd
is acting solely in his own short-sighted self-interest to the detriment of all
Company shareholders. On the other hand, your Board will continue to work hard
to deliver to all Delcath shareholders the value they deserve.
YOUR BOARD IS COMPRISED OF EXPERIENCED DIRECTORS
WHO ARE COMMITTED TO ENHANCING SHAREHOLDER
VALUE FOR ALL SHAREHOLDERS
Your Board is comprised of experienced directors, a majority of whom are
independent and all of whom are committed to enhancing shareholder value for all
shareholders by continuing to produce results like those highlighted above.
Further, the compensation and stock option committee of the Board is made up
entirely of independent directors and is empowered by the Board to act
independently. While Mr. Ladd attempts to impugn both the qualifications and
character of the Company's Board by engaging in a campaign of insinuation and
selective disclosure, the reality is that the Company's Board is a board of the
highest integrity and has a wealth of experience including with development
stage companies, pharmaceuticals, medical research and the medical device
industry:
o Mr. M.S. Koly, the Company's President and CEO, is a former (i) Chief
Operating Officer of Repligen Corporation, a Nasdaq-listed
development-stage biopharmaceutical company focused on the development
of novel therapeutics for profound neuropsychiatric disorders and
autoimmune disease, (ii) President of Hydron Technologies, Inc.
(Europe), a research and development company focused on products and
medical applications utilizing its patented tissue oxygenation
technology, and (iii) President of Becton Dickinson Respiratory
Systems, a medical technology company that manufactures and sells a
broad range of medical supplies, devices, laboratory equipment and
diagnostic products.
o Dr. Samuel Herschkowitz, M.D., Chairman of the Board, is board
certified in psychiatry and neurology. He is a clinical professor at
New York University Medical Center and has held academic positions at
Beth Israel Hospital, Mount Sinai Medical School and Downstate Medical
Center. Dr. Herschkowitz is an experienced venture capital investor in
successful medical-industry companies and has served on the boards of
directors of multiple development-stage companies in the medical
industry.
o Mr. Victor Nevins was a founder of Max Abramson Enterprises and its
former CEO. Mr. Nevins guided Max Abramson Enterprises from its
infancy and turned it into a highly-successful medium-sized
conglomerate. Mr. Nevins is also a former trustee of the Flushing
Hospital and Medical Center.
o Mr. Mark Corigliano was a founder and has been Managing Director of
Coast Cypress Associates, a profitable company that designs and
implements microcomputer systems. Mr. Corigliano helped guide Coast
Cypress Associates through its developmental stages.
o Mr. Dan Isdaner is an accomplished entrepreneur and real estate
investor with business interests in Maine, New Jersey and Florida. Mr.
Isdaner is a director of Anchor Commercial Bank, a development-stage
private bank with almost $100 million is assets,
and has played an integral role in the early development of the bank.
Mr. Isdaner also developed and operates a highly-successful children's
summer camp in Maine.
THIS IS ALL ABOUT SHAREHOLDER VALUE -- PROTECT YOUR INVESTMENT
Despite your Board's outstanding record of value creation and the Company's
exciting future prospects, Mr. Ladd is asking you to withhold your vote for the
Delcath nominees at the Company's Annual Meeting and to vote for his
short-sighted shareholder proposal, that even ISS recommended all shareholders
of the Company vote AGAINST. Your Board has decades of experience managing
successful businesses in the medical device industry and other industries, and
it will continue taking the appropriate steps to deliver to Delcath shareholders
the value they deserve.
YOUR SUPPORT IS IMPORTANT
REJECT LADD
VOTE FOR THE COMPANY'S NOMINEES
VOTE AGAINST LADD'S PROPOSAL
We urge you to ignore Mr. Ladd's misinformation campaign and vote for the
Delcath nominees and against the short-sighted Ladd shareholder proposal.
Please vote by Telephone or by Internet today. Remember -- every share and
every vote counts! Alternatively, you may sign, date and mail your proxy card
previously sent to you. If you have any questions, please call MacKenzie
Partners, Inc., toll-free at (800) 322-2885 or collect at (212) 929-5500.
Thank you in advance for voting promptly.
Sincerely,
/s/ M.S. Koly
M.S. Koly
President and Chief Executive Officer
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.