Letter to unpaid creditors and shareholders of Introgen Therapeutics, Inc.: The purpose of this letter is to update you on the events surrounding Introgen Therapeutics (“Introgen”, or the “Company”) over the last several months, as well as what that means to you as an unpaid creditor or shareholder of the Company. On November 26, 2008, regulatory challenges which the Company faced with its Advexin filings, the Company’s overall financial condition, and an extremely difficult external financing marketplace led to the resignation of almost all of the senior management of the Company as well as a drastic down-sizing of personnel and expenditures. Shortly thereafter, on December 3, 2008, Introgen’s board of directors elected to seek creditor protection under Chapter 11 of the U.S. Bankruptcy Code. On December 9, 2008, the Company’s shares were delisted from NASDAQ. Since that time, the Company and its bankruptcy attorneys have worked diligently to maximize the value that both creditors and shareholders will realize through the Chapter 11 proceedings. Below is a summary of the state of disposition of the assets of the Company, and the means by which creditors and shareholders will ultimately see a return on their existing debts and prior investments in Introgen: On April 7, 2009, the bankruptcy court conducted an auction for different groupings of assets of Introgen Therapeutics, Inc. and Introgen Technical Services, Inc. (the contract manufacturing operation created by Introgen in 2008 as a means to extract value for Introgen’s GMP manufacturing infrastructure). On April 24, the bankruptcy court selected Western General Holdings, a company with no ownership by any Introgen director, officer, or employee, or an assignee of Western General, as the purchaser of all assets related to the Introgen Technical Services contract development and manufacturing business. The terms of this court order call for Western General to pay to Introgen $50,000 and a 3% payout on gross revenues earned from months 18 to 60, not to exceed $5 million. This sale is scheduled to close on June 1, 2009. The new owner intends to rename the company Vivante GMP Solutions, Inc., and hire several of the past Introgen/Introgen Technical Services employees, including Introgen CEO David Enloe, who would at that time resign from Introgen and Introgen Technical Services. For creditors and shareholders of Introgen stock, this sale represents, via the payout mechanism, an opportunity to recoup some part of the debts and investment in Introgen shares. Also on April 7, 2009, the auction resulted in the sale of Introgen’s production-related intellectual property assets to Crucell BV, a biotechnology company based in The Netherlands (www.crucell.com). The terms of this agreement called for Crucell to pay Introgen $425,000 plus a 35% royalty on any license fees generated from the Introgen patents. Additionally, the terms of the Crucell agreement provide Western General (Vivante) clear, royalty-free use of the patents in the conduct of its business, provided that Western General’s clients will be required to have a license for commercial sales of products that use this IP. Lastly, the sale agreement also granted to Western General (Vivante) a license to Crucell’s PER.C6 cell line for its clients’ use in preclinical and phase 1 human clinical studies. This sale closed on May 15, 2009. The up-front sale amount as well
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as the ongoing license fee payments will provide an additional means by which unpaid debts and investment in Introgen shares can be recovered. On May 5, 2009, the bankruptcy court converted the Chapter 11 filing for Introgen’s subsidiary TMX Realty to a Chapter 7 liquidation and the ground lease and improvements thereon were returned to the mortgage holder, Compass Bank. Effectively, this severed the largest creditor from the total pool of creditors of Introgen, thus further maximizing the potential recovery to Introgen’s creditors and shareholders. The last assets of the company to be disposed of are the therapeutic portfolio, principally that of Advexin. At the auction, the Company determined that there were no viable offers for the Advexin portfolio and withdrew its sales motion for these assets. The Company is continuing to discuss the sale of Advexin with possible investor groups and purchasers but has not yet received an offer that meets minimum criteria for buyer capitalization, future royalty streams, and up-front value to the estate. The Company believes that the financial crisis, tight credit markets and variable interest in biotechnology assets in particular have negatively impacted its ability to realize the value of these assets in the short term. Pending the finalization of an acceptable offer, all Advexin and other portfolio files have all been safely relocated to one central location in order to protect the integrity of the data and documentation supporting the ongoing development of Advexin. The Company is working to finalize a transaction which will maximize the return to the unpaid creditors of the Company and shareholders of Introgen stock. This may be achieved both through the up-front purchase price negotiated as well as success-based milestones and royalties on commercial sales. In no event will the Company simply abandon or destroy these assets; it will continue to maintain both the physical and intellectual property assets pending an acceptable sale.
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In the coming weeks, the Company intends to propose a plan of reorganization that will establish a Liquidating Trust with an independent, court-appointed trustee to administer the ongoing activities related to the collection of fees under the sales transactions above and the subsequent distribution of those funds to unpaid creditors and shareholders. The plan process requires notice to all creditors and shareholders and will take several months to complete. The anticipated structure of the Liquidating Trust will result in unpaid creditors and shareholders being assigned a two-tier ownership position in the Trust based on size of unpaid debts of the Company and then, subordinately, number of Introgen shares owned. Introgen hopes this letter helps clarify the state of affairs related to your unpaid debts and/or your Introgen shares. The Company remains hopeful that its drug portfolio, and Advexin in particular, can ultimately help cancer patients worldwide. Throughout our clinical studies, many patients with nowhere else to turn were helped by our drugs’ unique mechanisms of addressing their cancer at a molecular level. Your support of these efforts truly improved the lives of many. Thank you.
For more information, as well as details of Chapter 11 filings, etc., please visit www.munsch.com/introgen.
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