<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
GELTEX PHARMACEUTICALS, INC.
(Name of Registrant as Specified In Its Charter)
GELTEX PHARMACEUTICALS, INC.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 2
GELTEX PHARMACEUTICALS, INC.
Nine Fourth Avenue
Waltham, Massachusetts 02154
(781) 290-5888
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 27, 1998
Notice is hereby given that the 1998 Annual Meeting of Stockholders (the
"Meeting") of GelTex Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), will be held on Wednesday, May 27, 1998, at 9:30 a.m. at the Westin
Hotel, 70 Third Avenue, Waltham, Massachusetts, to consider and act upon the
following matters:
1. To elect two (2) members of the Board of Directors;
2. To approve an amendment to the Company's 1992 Equity Incentive Plan to
increase the aggregate number of shares of the Company's common stock as
to which awards may be granted by 750,000 shares; and
3. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
Only stockholders of record at the close of business on April 17, 1998
will be entitled to vote at the Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE YOUR
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING AND WISH TO VOTE IN
PERSON, YOUR PROXY WILL NOT BE USED.
By Order of the Board of Directors,
Elizabeth A. Grammer
Secretary
Waltham, Massachusetts
April 27, 1998
<PAGE> 3
GELTEX PHARMACEUTICALS, INC.
Nine Fourth Avenue
Waltham, Massachusetts 02154
(781) 290-5888
---------------
PROXY STATEMENT
---------------
GENERAL INFORMATION
The enclosed proxy card is solicited on behalf of the Board of Directors
of GelTex Pharmaceuticals, Inc. (the "Company") for use at the Company's 1998
Annual Meeting of Stockholders to be held on Wednesday, May 27, 1998, at 9:30
a.m. at the Westin Hotel, 70 Third Avenue, Waltham, Massachusetts, and at any
adjournments thereof (the "Meeting").
When the proxy card of a stockholder is duly executed and returned, the
shares represented thereby will be voted in accordance with the voting
instructions given on the proxy by the stockholder. If no voting instructions
are given on a signed proxy card with respect to one or more proposals, the
shares represented by that proxy card will be voted, with respect to the
election of directors, for the nominees named herein, and with respect to other
proposals, in accordance with the recommendations of the Board. Stockholders may
revoke their proxies at any time prior to any vote at the Meeting by written
notice of revocation to the Secretary of the Company at or before the Meeting,
by submission of a duly executed proxy card bearing a later date or by voting in
person by ballot at the Meeting.
This Proxy Statement and the enclosed proxy card are first being mailed
or otherwise furnished to all stockholders of the Company entitled to notice of
and to vote at the Meeting on or about April 27, 1998. The Annual Report to
Stockholders for the fiscal year ended December 31, 1997 is being mailed to the
stockholders with this Proxy Statement, but does not constitute a part hereof.
VOTING SECURITIES AND VOTES REQUIRED
Holders of the Company's common stock, $0.01 par value per share ("Common
Stock"), of record on the books of the Company at the close of business on April
17, 1998 (the "Record Date") are entitled to notice of and to vote at the
Meeting. On the Record Date, there were 16,689,173 shares of Common Stock issued
and outstanding, each of which entitles the holder to one vote on each matter
submitted to a vote at the Meeting.
The presence, in person or by proxy, of the holders of a majority of the
Company's outstanding Common Stock is necessary to constitute a quorum at the
Meeting. Pursuant to Delaware General Corporation Law and the Company's Restated
Certificate of Incorporation and Amended and Restated By-laws (the "By-laws"),
the directors are elected by a plurality of the votes properly cast at the
Meeting. Abstentions, votes withheld and broker non- votes will not be treated
as votes cast for this purpose and will not affect the outcome of the election.
A "broker non-vote" occurs when a registered broker holding a customer's shares
in the name of the broker has not received voting instructions on a matter from
the customer, is barred by applicable rules from exercising discretionary
authority to vote on the matter and so indicates on the proxy.
<PAGE> 4
The affirmative vote of the holders of a majority of the shares of Common
Stock present, or represented, and entitled to vote is required to approve the
proposed amendment to the 1992 Equity Incentive Plan (the "Equity Plan"). Broker
non-votes will not be counted as present, or represented, and entitled to vote
for these purposes and, therefore, will not affect the outcome of the voting on
these proposals. Abstentions will be counted as present, or represented, and
entitled to vote and, accordingly, will have the effect of negative votes.
SHARE OWNERSHIP
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of March 31, 1998 by (i) each person
known by the Company to own beneficially 5% or more of the Common Stock, (ii)
each Named Executive Officer (as defined in "Executive Compensation" below),
(iii) each director or nominee for director of the Company and (iv) all
directors, nominees for director and current executive officers of the Company
as a group:
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially Owned (1)
--------------------------
Beneficial Owner Shares Percent
- ---------------- ------ -------
<S> <C> <C>
The Equitable Companies........................... 3,524,872 21.1%
Incorporated (2)
787 Seventh Avenue
New York, New York 10019
West Highland Capital, Inc. (3)................... 1,000,000 6.0%
300 Drake's Landing Road
Suite 290
Greenbrae, California 94904
Mark Skaletsky (4)................................ 239,415 1.4%
W. Harry Mandeville, Ph.D. (5).................... 144,843 *
Joseph Tyler (6).................................. 67,499 *
Steven K. Burke, M.D. (7)......................... 55,727 *
Paul J. Mellett, Jr. (8).......................... 13,539 *
Robert J. Carpenter (9)........................... 197,517 1.2%
George M. Whitesides, Ph.D. (10).................. 138,000 *
Henri A. Termeer (11)............................. 114,505 *
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C> <C>
Jesse Treu, Ph.D. (12)............................... 15,680 *
J. Richard Crout (13)................................ 9,000 *
All directors and current executive officers ........ 793,383 4.7%
as a group (9 persons) (14)
</TABLE>
- --------------------
* Indicates less than 1%.
(1) Unless otherwise indicated in these footnotes, each stockholder has sole
voting and investment power with respect to the shares listed in the
table. Share ownership information includes shares of Common Stock
issuable pursuant to outstanding options that may be exercised within the
60-day period following March 31, 1998.
(2) Includes shares held by The Equitable Life Assurance Society of the
United States ("ELAS") and Alliance Capital Management L.P. ("ACM"). ELAS
and ACM are subsidiaries of The Equitable Companies Incorporated. This
information is based on a Schedule 13G dated February 10, 1998 filed with
the Securities and Exchange Commission for the aforementioned entities.
(3) Includes shares held by West Highland Capital, Inc. ("WHC"), Estero
Partners, LLC ("EP"), West Highland Partners, L.P. ("WHP") and Buttonwood
Partners, L.P. ("BP"). Mr. Gerhard is the sole director and executive
officer of WHC and the sole manger of EP. WHC, EP and Mr. Gerhard are the
general partners of WHP and BP, which are investment limited
partnerships, and have voting and dispositive authority over shares held
by WHP and BP. WHC has voting and dispositive authority over shares held
by its various investment advisory clients. This information is based on
a Schedule 13D dated January 9, 1997 filed with the Securities and
Exchange Commission for the aforementioned entities and person.
(4) Includes 184,415 shares subject to options exercisable within the 60-day
period following March 31, 1998. Of such shares, 34,251 are unvested and
would be subject to repurchase by the Company if such shares are
exercised before they have vested. Also includes 10,000 shares held by
Mr. Skaletsky's wife and 6,000 shares held by Mr. Skaletsky's children.
Mr. Skaletsky disclaims beneficial ownership of the shares held by his
wife and children.
(5) Includes 3,417 shares subject to a right of repurchase granted to the
Company, which will terminate as such shares vest. Also includes 65,000
shares subject to options exercisable by Dr. Mandeville within the 60-
day period following March 31, 1998. Of such shares, 11,584 are unvested
and would be subject to repurchase by the Company if such shares are
exercised before they have vested. Also includes 5,000 shares held by Dr.
Mandeville's children. Dr. Mandeville disclaims beneficial ownership of
the shares held by his children.
(6) Includes 34,999 shares subject to options exercisable by Mr. Tyler within
the 60-day period following March 31, 1998. Of such shares, 19,167 are
unvested and would be subject to repurchase by the Company if such shares
are exercised before they have vested.
3
<PAGE> 6
(7) Includes 13,333 shares subject to a right of repurchase granted to the
Company, which will terminate as such shares vest. Also includes 8,727
shares subject to options exercisable by Dr. Burke within the 60-day
period following March 31, 1998. Of such shares 1,867 are unvested and
would be subject to repurchase by the Company if such shares are
exercised before they have vested.
(8) Consists of shares subject to options exercisable by Mr. Mellett within
the 60-day period following March 31, 1998.
(9) Includes 8,000 shares subject to options exercisable by Mr. Carpenter
within the 60-day period following March 31, 1998.
(10) Includes 8,000 shares subject to options exercisable by Dr. Whitesides
within the 60-day period following March 31, 1998.
(11) Includes 8,000 shares subject to options exercisable by Mr. Termeer
within the 60-day period following March 31, 1998.
(12) Includes 8,000 shares subject to options exercisable by Dr. Treu within
the 60-day period following March 31, 1998.
(13) Includes 2,000 shares held in trust for the benefit of Dr. Crout's son.
Dr. Crout disclaims beneficial ownership of such shares. Also includes
4,000 shares subject to options exercisable by Dr. Crout within the
60-day period following March 31, 1998.
(14) See footnotes 4, 7 and 8-13 above. Includes 10,000 shares subject to
options exercisable by Edmund J. Sybertz within the 60-day period
following March 31, 1998.
PROPOSAL 1:
ELECTION OF DIRECTORS
In accordance with Section 2 of Article II of the By-laws, the Board has
fixed the number of directors to constitute the full Board at five for the
coming year. Article SIXTH of the Company's Restated Certificate of
Incorporation provides that the directors are to be divided into three classes,
which are to be as nearly equal in number as the then total number of directors
constituting the entire Board permits. At the Meeting, two Class II directors
will be elected to hold office for three years, each until their respective
successors are duly elected and qualified. The Board has nominated Henri Termeer
and Jesse Treu for election for a term of office expiring in 2001. Each of the
nominees is currently a director of the Company, and each of the nominees has
consented to be nominated and to serve if elected. If either of these nominees
is unable to serve as a director, the shares represented by the proxy will be
voted for the person, if any, who is designated by the Board to replace the
nominee. In the event that a vacancy occurs during the year, such vacancy may be
filled by the Board for the remainder of the full term.
The following table contains certain information about nominees for
election to the Board for directors and the continuing directors.
4
<PAGE> 7
<TABLE>
<CAPTION>
Present
Director Term
Name and Age Business Experience and Other Directorships Since Expires
- ------------ ------------------------------------------- ----- -------
NOMINEES FOR DIRECTORS:
CLASS II DIRECTORS
<S> <C> <C> <C>
Henri A. Termeer# Mr. Termeer has served as President of Genzyme 1992 1998
(age 52) Corporation, a human health care company, since
October 1983, Chief Executive Officer since
December 1985, and Chairman of the Board since
May 1988. For ten years prior to joining Genzyme,
Mr. Termeer held various management positions at
Baxter Travenol Laboratories, Inc., a manufacturer
of human health care products. Mr. Termeer is
also a director of Genzyme Transgenics
Corporation, Abiomed, Inc., AutoImmune, Inc.,
and Diacrin, Inc. and a trustee of Hambrecht &
Quist Healthcare Investors and Hambrecht & Quist
Life Sciences Investors.
Jesse Treu, Ph.D.* Dr. Treu has been a General Partner of the venture 1993 1998
(age 51) capital management firm, Domain Associates, since
1986. Dr. Treu is a director of Trimeris, Inc.,
Focal, Inc. and Ribogene, Inc.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
Present
Director Term
Name and Age Business Experience and Other Directorships Since Expires
- ------------ ------------------------------------------- ----- -------
<S> <C> <C> <C>
CONTINUING DIRECTORS:
CLASS I DIRECTOR
Robert J. Carpenter*+ Mr. Carpenter, a co-founder of the Company, 1991 1999
(age 53) has served as Chairman of the Board of the
Company since 1991. He is President of Boston
Medical Investors, Inc., an investment
firm. Mr. Carpenter served as President
and Chief Executive Officer of the
Company from 1991 to 1993. He served as
an Executive Vice President of Genzyme
Corporation, a human health care
company, from 1989 to 1991, and was
Chief Executive Officer and Chairman of
the Board of IG Laboratories, Inc., a
genetic testing service company, from
1989 to 1991. Prior to that, he was
Chairman, President and Chief Executive
Officer of Integrated Genetics, Inc., a
biotechnology company, which he joined
as President in 1981. He is a director
of Genzyme Corporation.
CLASS III DIRECTORS
J. Richard Crout, M.D.# Dr. Crout has served as President of Crout 1997 2000
(age 68) Consulting, a firm providing consulting
services to the pharmaceutical and
biotechnology industries, since 1994. From
1984 to 1994, Dr. Crout served as Vice
President, Medical and Scientific Affairs of
Boehringer Mannheim Pharmaceuticals Corporation,
a pharmaceutical company. Prior to that,
Dr. Crout served as Associate Director
for Medical Applications of Research at
the National Institutes of Health from
1982 to 1984 and as Director, Bureau of
Drugs, U.S. Food and Drug Administration
from 1973 to 1982.
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
Present
Director Term
Name and Age Business Experience and Other Directorships Since Expires
- ------------ ------------------------------------------- ----- -------
<S> <C> <C> <C>
Mark Skaletsky+ Mr. Skaletsky joined the Company in May 1993 as 1993 2000
(age 49) President, Chief Executive Officer and a Director
of the Company. He served as Treasurer of the
Company from August 1993 until May 1997. Mr.
Skaletsky previously served from 1988 to 1993 as
Chairman and Chief Executive Officer of Enzytech,
Inc., a biotechnology company, and from 1983 to
1988, as President and Chief Operating Officer of
Biogen, Inc, a biotechnology company. He is a
director of Isis Pharmaceuticals, Inc. and
LeukoSite, Inc.
</TABLE>
- --------------------
* Member of the Compensation Committee.
+ Member of the Nominating Committee.
# Member of the Audit Committee.
During the year ended December 31, 1997, the Board held seven meetings.
Each of the directors attended at least 75% of the Board meetings and meetings
of committees of the Board of which he was a member except George Whitesides,
who attended 70% of the aggregate of such meetings.
The Audit Committee, which currently consists of J. Richard Crout and
Henri Termeer, reviews with the Company's independent accountants the scope of
the annual audit, discusses the adequacy of internal accounting controls and
procedures, and performs general oversight with respect to the accounting
principles applied in the financial reporting of the Company. The Audit
Committee held one meeting in 1997.
The Compensation Committee currently consists of Robert Carpenter and
Jesse Treu. The Compensation Committee's functions are to recommend to the full
Board the amount, character and method of payment of compensation for all
executive officers and certain other key employees and consultants of the
Company and to administer the Company's equity incentive, stock option and stock
purchase plans. The Compensation Committee held two meetings in 1997.
The Nominating Committee currently consists of Robert Carpenter and Mark
Skaletsky. The function of the Nominating Committee is to recommend to the full
Board individuals to serve on the Company's Board of Directors. The Nominating
Committee will consider persons nominated by stockholders in accordance with the
procedures set forth in the Company's By-laws. See "Advance Notice Provisions
for Stockholder Proposals and Nominations." The Nominating Committee did not
meet in 1997.
7
<PAGE> 10
DIRECTOR COMPENSATION
All directors who are not employees of the Company, except Robert
Carpenter, receive $1,000 for each meeting of the Board of Directors in which
they participate. Mr. Carpenter receives $50,000 per year for his services as
Chairman of the Board.
All directors who are not employees of the Company (the "Eligible
Directors") are currently eligible to participate in the Director Plan. The
Director Plan provides for the automatic grant of options to purchase up to
110,000 shares of Common Stock at an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant. Upon his election or
re-election at the Company's annual meeting of stockholders, each Eligible
Director is granted options to purchase 4,000 shares of Common Stock for each
year of the term of office to which the director is elected (normally 12,000
shares for election to a three year term of office). In addition, upon the
election of an Eligible Director other than at an annual meeting of
stockholders, such director will automatically be granted an option to purchase
4,000 shares of Common Stock for each year or portion thereof for the term of
office to which he or she is elected. The options have a term of ten years and
become exercisable with respect to 4,000 shares on the date of each of the three
annual meetings of stockholders of the Company following the date of grant, so
long as the optionee is then a director of the Company. In addition to options
granted under the Director Plan, on December 11, 1997, Mr. Carpenter was granted
an option under the terms of the 1992 Equity Incentive Plan to purchase 25,500
shares of Common Stock at an exercise price of $27.0625 per share. The shares
subject to the option vest and become exercisable in three equal annual
installments commencing on the first anniversary of the date of grant.
EXECUTIVE COMPENSATION
The Compensation Committee Report set forth below describes the
compensation policies applicable to executive officers of the Company. The
following graph shows the cumulative stockholder return of the Company's Common
Stock from November 8, 1995 (the first trading day for the Company's Common
Stock) through December 31, 1997 as compared with that of the Nasdaq (U.S.
Companies) Index and the Nasdaq pharmaceutical stocks. The graph assumes that
the value of the investment in the Company's Common Stock and each of the
comparison groups was $100 on November 8, 1995 and assumes the reinvestment of
dividends. The Company has never declared a dividend on the Common Stock of the
Company. The stock price performance depicted in the graph below is not
necessarily indicative of future price performance.
8
<PAGE> 11
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG GELTEX PHARMACEUTICALS, INC.,
NASDAQ (U.S. COMPANIES) INDEX AND NASDAQ PHARMACEUTICALS INDEX (1) (2)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
8-Nov-95 31-Dec-95 31-Dec-96 31-Dec-97
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Geltex Pharmaceuticals, Inc. $100 $123 $243 $265
- --------------------------------------------------------------------------------
NASDAQ Stock Market (U.S.) $100 $101 $124 $152
- --------------------------------------------------------------------------------
NASDAQ Pharm. Stocks $100 $120 $121 $125
- --------------------------------------------------------------------------------
</TABLE>
- -----------------
(1) The fiscal year of the Company ends on December 31.
(2) The return to the Nasdaq Indexes commences on October 31, 1995.
9
<PAGE> 12
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") evaluates the performance of
management and determines compensation policies and levels. The full Board of
Directors reviews the Committee's recommendations regarding compensation of
executive officers. The Committee is also responsible for setting and
administering the Company's policies governing employee compensation and
administering the Company's Equity Plan and 1995 Employee Stock Purchase Plan.
The Committee met twice in 1997.
The Company's executive compensation programs are designed to attract and
retain executives capable of leading the Company to meet its business objectives
and to motivate them to enhance long-term stockholder value. Annual compensation
for the Company's executive officers consists of three elements: a base salary,
a cash incentive bonus and stock option grants.
Base Salaries. Base salaries for new executive officers are initially
determined by evaluating the responsibilities of the position held and the
experience of the individual. In making determinations regarding base salaries,
the Committee reviews a variety of industry surveys which provide information
about salary, bonus and stock awards. The performance of the companies surveyed
is not considered by the Committee. Based in part on this information, the
Committee generally sets salaries, including that of the Chief Executive
Officer, at levels comparable to competitive companies in similar industries.
Annual salary adjustments are made, based upon the recommendation of the
Company's Chief Executive Officer, to maintain salaries at competitive levels,
taking into account each officer's years of experience and individual
performance, and to maintain an equitable relationship between executive officer
salaries and overall salaries for the Company's other employees.
The determination of Mr. Skaletsky's base salary for 1997 was based on
the overall successful development of the Company during 1996. Mr. Skaletsky was
granted a base salary of $255,000 for 1997, an increase of 8.5% over his base
salary for 1996.
Bonus Compensation. The Company's executive officers are eligible to
receive an annual cash bonus, based on corporate and individual performance. The
Company achieved significant milestones in 1997, including: the filing of the
Company's first New Drug Application with the United States Food and Drug
Administration; the formation of a joint venture with Genzyme Corporation for
the final development and commercialization of RenaGel(R) phosphate binder; the
successful completion of a Phase II study with low doses of CholestaGel(R)
cholesterol reducer and lovastatin; and the commencement of Phase III clinical
trials of CholestaGel(R) cholesterol reducer in the United States. In
recognition of his leadership in the achievement of these milestones and his
contributions to the Company in 1997, Mr. Skaletsky was awarded a bonus in the
amount of $80,000.
Stock Options. Under the Equity Plan, stock options are granted to the
Company's executive officers. The Company uses its stock option program to
further align the interests of stockholders and management by creating a mutual
and substantial economic interest in the long-term appreciation of the Company's
Common Stock. New options are granted to existing members of management on an
annual basis to provide continuing financial incentive. Options are granted with
an exercise price equal to the fair market value of the Common Stock on the date
of grant. Options generally vest and become exercisable monthly over a four year
period commencing with the first month following the date of grant of the
option. Certain options granted under the Equity Plan, including some of the
10
<PAGE> 13
options granted to the Named Executive Officers, are subject to different
vesting schedules that are based on the achievement of certain milestone events.
In determining the size of option grants, the Committee evaluates the job level
of the executive, responsibilities to be assumed in the upcoming year, and
responsibilities and performance in prior years, and also takes into account the
size of awards granted to the officer in the past.
In 1997, Mr. Skaletsky received options to purchase 50,000 shares of
Common Stock at an exercise price of $27.00 per share.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits a publicly held company's tax deduction for compensation paid to
the Chief Executive Officer and the other four most highly paid officers.
Generally, amounts paid in excess of $1,000,000 to a covered executive in any
year cannot be deducted. Certain performance based compensation that has been
approved by stockholders is not subject to the limit. In order to maximize the
deductibility of compensation arising from certain awards under the Equity Plan,
the Company has limited the number of shares of Common Stock subject to options
that may be granted to any individual in any fiscal year under the Equity Plan
to 250,000 shares. The Committee will continue to assess the impact of Section
162(m) on its compensation practices and determine what further action, if any,
is appropriate.
By the GelTex Pharmaceuticals, Inc. Compensation Committee,
Robert Carpenter
Jesse Treu
11
<PAGE> 14
The following tables set forth certain compensation information for the
Chief Executive Officer of the Company and the four most highly compensated
individuals serving as executive officers of the Company at the end of 1997
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM ALL
ANNUAL COMPENSATION OTHER
COMPENSATION AWARDS COMPENSATION
-------------------- ---------- ------------
Securities
Underlying
Name and Principal Position Year Salary($) Bonus($) Options(#) ($)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mark Skaletsky, 1997 $255,981 $80,000 50,000 $2,200(1)
President and Chief Executive 1996 $234,692 $60,000 30,000 $2,200(1)
Officer 1995 $217,546 $50,000 105,000 $2,200(1)
Joseph Tyler, 1997 $155,797 $46,500 15,000 --
Vice President, 1996 $144,904 $35,000 15,000 --
Manufacturing(2) 1995 $105,000 $ 0 110,000 --
Steven K. Burke, 1997 $151,850 $45,000 17,000 --
Vice President, 1996 $132,169 $ 0 4,000 --
Clinical Development 1995 $122,935 $ 0 4,000 --
W. Harry Mandeville, 1997 $150,577 $45,000 15,000 --
Vice President, 1996 $131,865 $33,000 15,000 --
Chemical Technology 1995 $124,519 $20,000 75,000 --
Paul J. Mellett, Jr. 1997 $139,904 $27,000 50,000
Vice President, Finance
and Administration;
Chief Financial Officer
and Treasurer (3)
</TABLE>
- ----------
(1) Consists of life insurance premiums paid by the Company.
(2) Mr. Tyler joined the Company in April 1995.
(3) Mr. Mellett joined the Company in April 1997.
12
<PAGE> 15
The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1997 by the Company to the
Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------
Number of Potential Realizable Value at
Securities Percent of Total Assumed Annual Rates of
Underlying Options Granted Exercise or Stock Price Appreciation for
Options to Employees in Base Price Expiration Option Term(1)
Name Granted Fiscal Year ($/share) Date ----------------------------
(#)(1) 5%($) 10%($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mark Skaletsky 50,000 9.19% $27.00 10/29/07 $849,008 $2,151,552
Joseph Tyler 15,000 2.77% $27.00 10/29/07 $254,702 $645,466
Steven K. Burke 10,000 1.84% $18.25 08/15/07 $114,773 $290,858
7,000 1.28% $27.00 10/29/07 $118,860 $301,217
W. Harry Mandeville 15,000 2.77% $27.00 10/29/07 $254,702 $645,466
Paul J. Mellett, Jr.(3) 50,000 9.19% $20.00 04/07/07 $628,894 $1,593,742
</TABLE>
- ----------
(1) Option granted under the Equity Plan. Shares subject to the option vest
and become exercisable monthly over a four year period commencing one
month from the date of grant.
(2) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, in the price of the underlying Common Stock. No gain to the
optionees is possible without an increase in price of the underlying
Common Stock, which will benefit all stockholders proportionately.
(3) Mr. Mellett joined the Company in April 1997.
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<PAGE> 16
The following table sets forth certain information concerning option
exercises during 1997 and exercisable and unexercisable options held by the
Named Executive Officers as of December 31, 1997:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options at Options at
Fiscal Year- Fiscal Year-
Shares End (#) End ($)(1)
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable(2) Unexercisable(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mark Skaletsky 13,500 $299,875 176,083/110,417 $4,043,609/1,166,574
Joseph Tyler 12,500 $269,437 31,875/65,625 $ 734,636/1,101,887
W. Harry Mandeville 0 -- 39,375/65,625 $ 765,161/1,101,887
Steven K. Burke 0 -- 6,457/18,543 $ 94,992/112,007
Paul J. Mellett, Jr. 0 -- 8,332/41,668 $ 52,074/260,425
</TABLE>
- ----------
(1) Based on the difference between closing price of the underlying shares of
Common Stock on December 31, 1997 as reported by the Nasdaq National
Market ($26.25) and the option exercise price.
(2) Certain shares subject to exercisable options are unvested and would be
subject to repurchase by the Company if the options for such shares are
exercised before they are vested. See footnotes (4) - (8) to the table
under the heading "Share Ownership."
EMPLOYMENT AGREEMENTS
The Company entered into an at-will employment agreement with Paul
Mellett in March 1997. Pursuant to this agreement, Mr. Mellett is eligible to
receive his base salary for six months upon the termination without cause of his
employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert Carpenter and Jesse Treu served as members of the Company's
Compensation Committee throughout the fiscal year ended December 31, 1997, and
Barbara Piette served as a member of the Compensation Committee through May
1997. Mr. Carpenter served as President and Chief Executive Officer of the
Company from 1991 to 1993.
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<PAGE> 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1997, the Company entered into a joint venture with Genzyme
Corporation for the final development and commercialization of RenaGel(R)
phosphate binder (the "Joint Venture"). Under the agreement, Genzyme agreed to
pay the Company $25 million, consisting of a $15 million non-refundable payment
due upon receipt of marketing approval from the FDA, and a $10 million
non-refundable payment due one year after FDA approval. In connection with the
formation of the Joint Venture, Genzyme also purchased 100,000 shares of GelTex
Common Stock for $2.5 million in cash. The terms of the Joint Venture, require
the Company and Genzyme to each make capital contributions to the Joint Venture
in an amount equal to 50% of all costs and expenses associated with the
development and commercialization of RenaGel, including costs and expenses
incurred by either party in performing under the agreement, and the Company and
Genzyme will share equally in the profits generated from sales of the product.
In fiscal year 1997, the Company earned $9.2 million in revenue as reimbursement
from the Joint Venture, 50% of which was funded by Genzyme Corporation. Henri
Termeer is a director of the Company and is the President, Chief Executive
Officer and Chairman of Genzyme Corporation.
PROPOSAL 2
AMENDMENT OF 1992 EQUITY INCENTIVE PLAN
GENERAL
In June 1992, the Board of Directors adopted the Equity Plan, which was
approved by the Company's stockholders in May 1993. The Equity Plan was
subsequently amended so that the aggregate number of shares of Common Stock
reserved for issuance thereunder is currently 2,000,000 shares (including shares
subject to options already granted). The Equity Plan is designed to provide the
Company flexibility in awarding equity incentives by providing for multiple
types of incentives that may be awarded. The purpose of the Equity Plan is to
attract and retain key employees and directors of and consultants to the Company
and to enable them to participate in the long-term growth of the Company.
AMENDMENT
In April 1998, the Board of Directors voted, subject to stockholder
approval, to amend the Equity Plan to increase the aggregate number of shares of
Common Stock available thereunder by an additional 750,000 shares to an
aggregate of 2,750,000 shares, subject to adjustment for stock-splits and
similar capital changes. The Company believes that this increase is necessary
and appropriate to enable the Company to attract and retain the quality of
employees, directors, and consultants whose services are considered essential to
the Company's future progress, to encourage such employees', directors', and
consultants' ownership in the Company and to provide them with an incentive to
remain with the Company.
15
<PAGE> 18
ADMINISTRATION AND ELIGIBILITY
The Equity Plan provides for the grant of stock options (incentive and
nonstatutory), stock appreciation rights, performance shares, restricted stock,
or stock units for the purchase of shares of Common Stock. Awards under the
Equity Plan can be granted to officers, directors, employees, and other
individuals. The Equity Plan is typically administered by the Compensation
Committee which selects the participants and establishes the terms and
conditions of each option or other equity right granted under the Equity Plan,
including the exercise price, the number of shares subject to options or other
equity rights, and the time at which such options become exercisable. The
Compensation Committee has adopted guidelines for the number of options awarded
to each new employee of the Company, other than executive officers. The
guidelines may be changed by the Compensation Committee at any time. Subject to
certain limitations, the Compensation Committee may delegate to one or more
executive officers of the Company the power to make awards to participants who
are not subject to Section 16 of the Exchange Act. The Compensation Committee
has authorized Mr. Skaletsky to grant options to purchase up to 10,000 shares of
Common Stock each to such participants. The full Board of Directors has also
retained the right to make awards under the Equity Plan. The exercise price of
all "incentive stock options" ("ISOs") within the meaning of Section 422 of the
Code granted under the Equity Plan must be at least equal to the fair market
value of the option shares on the date of grant. The term of any ISO granted
under the Equity Plan may not exceed ten years.
As of April 1, 1998, approximately 75 employees were eligible to
participate in the Equity Plan. The closing price of the Company's Common Stock
as reported on the Nasdaq National Market on April 1, 1998 was $27.31.
EQUITY PLAN ACTIVITY
As of April 1, 1998, options to purchase an aggregate of 2,165,912 shares
of Common Stock had been granted under the Equity Plan, of which options to
purchase 189,316 shares had been cancelled. Options to purchase 611,580 shares
had been exercised as of such date, 26,584 of which have been repurchased by the
Company. As of such date, 49,988 shares remained available for the granting of
awards under the Equity Plan, not including the 750,000 shares added by the
amendment for which stockholder approval is being requested. No stock
appreciation rights or awards other than option grants have been granted under
the Equity Plan to date.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO STOCK OPTIONS
Incentive Stock Options. An optionee does not realize taxable income upon
the grant or exercise of an ISO under the Equity Plan. If no disposition of
shares issued to an optionee pursuant to the exercise of an ISO is made by the
optionee within two years from the date of grant or within one year from the
date of exercise, then (a) upon sale of such shares, any amount realized in
excess of the option price (the amount paid for the shares) is taxed to the
optionee as mid-term or long-term capital gain and any loss sustained will be a
mid-term or long-term capital loss and (b) no deduction is allowed to the
Company for Federal income tax purposes. The exercise of ISOs gives rise to an
adjustment in computing alternative minimum taxable income that may result in
alternative minimum tax liability for the optionee.
If shares of Common Stock acquired upon the exercise of an ISO are
disposed of prior to the expiration of the two-year and one-year holding periods
described above (a "disqualifying disposition") then (a) the optionee realizes
ordinary income in the year of disposition in an amount equal to the excess (if
any) of the fair market value
16
<PAGE> 19
of the shares at exercise (or, if less, the amount realized on a sale of such
shares) over the option price thereof and (b) the Company is entitled to deduct
such amount. Any further gain realized is taxed as a short-term, mid-term or
long-term capital gain and does not result in any deduction to the Company. A
disqualifying disposition in the year of exercise will generally avoid the
alternative minimum tax consequences of the exercise of an ISO.
Nonstatutory Stock Options. No income is realized by the optionee at the
time a nonstatutory option is granted. Upon exercise, (a) ordinary income is
realized by the optionee in an amount equal to the difference between the option
price and the fair market value of the shares on the date of exercise and (b)
the Company receives a tax deduction for the same amount. Upon disposition of
the shares, appreciation or depreciation after the date of exercise is treated
as a short-term, mid-term or long-term capital gain or loss and will not result
in any deduction by the Company.
BOARD RECOMMENDATION
The Board of Directors of the Company believes that the amendment to the
Equity Plan is in the best interest of the Company and its stockholders and
recommends a vote FOR the proposal to approve the amendment to the Equity Plan.
SECURITIES EXCHANGE ACT REPORTING
The Company's executive officers and directors are required under Section
16(a) of the Securities Exchange Act of 1934, as amended, to file report of
ownership of the Company's securities and changes in ownership with the
Securities and Exchange Commission. Copies of those reports must also be
furnished to the Company.
Based solely on a review of the copies of reports furnished to the
Company and written representations that no other reports were required, the
Company believes that during 1997 the executive officers and directors of the
Company complied with all applicable Section 16(a) filing requirements.
INFORMATION CONCERNING AUDITORS
The firm of Ernst & Young LLP, independent auditors, examined the
Company's financial statements for the fiscal year ended December 31, 1997. The
Board of Director has appointed Ernst & Young LLP as the Company's independent
accountants for the fiscal year ending December 31, 1998. Ernst & Young LLP has
served as the Company's independent accountants since its inception in 1991.
Representatives of Ernst & Young LLP are expected to be present at the Meeting
to respond to appropriate questions and will be given the opportunity to make a
statement should they desire to do so.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
In order for a stockholder proposal to be considered for inclusion in the
Company's proxy materials for the 1999 Annual Meeting of Stockholders, it must
be received by the Company no later than December 29, 1998. Proposals should be
sent to the attention of the Secretary at the Company's offices at Nine Fourth
Avenue, Waltham, Massachusetts 02154.
17
<PAGE> 20
ADVANCE NOTICE PROVISIONS FOR
STOCKHOLDER PROPOSALS AND NOMINATIONS
The By-laws of the Company provide that in order for a stockholder to
bring business before or propose director nominations at an annual meeting, the
stockholder must give written notice to the Company not less than 50 days nor
more than 75 days prior to the meeting. The notice must contain specified
information about the proposed business or each nominee and the stockholder
making the proposal or nomination. If less than 65 days notice or prior public
disclosure of the date of the annual meeting is given or made to stockholders,
the notice given by the stockholder must be received not later than the 15th day
following the day on which the notice of such annual meeting date was mailed or
public disclosure made, whichever first occurs.
EXPENSES OF SOLICITATION
The cost of soliciting proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company.
Proxies may be solicited by directors, officers or regular employees of the
Company by mail, by telephone, in person or otherwise. No such person will
receive additional compensation for such solicitation. In addition, the Company
will request banks, brokers and other custodians, nominees and fiduciaries to
forward proxy material to the beneficial owners of Common Stock and to obtain
voting instructions from such beneficial owners. The Company will reimburse such
firms for their reasonable expenses in forwarding proxy materials and obtaining
voting instructions.
OTHER MATTERS
The 1998 Annual Meeting of Stockholders is called for the purposes set
forth in the notice. The Board of Directors does not know of any matter for
action by the stockholders at the Meeting other than the matters described in
the notice. However, the enclosed proxy confers discretionary authority on the
persons named therein with respect to matters which are not known to the
directors at the date of printing hereof and which may properly come before the
Meeting. It is the intention of the persons named in the proxy to vote in
accordance with their best judgment on any such matter.
Whether or not you intend to be present at the Meeting, you are urged to
fill out, sign, date and return the enclosed proxy at your earliest convenience.
18
<PAGE> 21
GELTEX PHARMACEUTICALS, INC.
NINE FOURTH AVENUE, WALTHAM, MASSACHUSETTS 02154
PROXY FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
May 27, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned does hereby appoint Mark Skaletsky, Paul J. Mellett, Jr.
and Elizabeth A. Grammer, and each of them acting singly, the attorneys and
proxies of the undersigned, with full power of substitution, with all the
powers which the undersigned would possess if personally present, to vote all
of the shares of capital stock of GelTex Pharmaceuticals, Inc. (the "Company")
that the undersigned is entitled to vote at the Annual Meeting of Stockholders
of the Company to be held at the Westin Hotel, 70 Third Avenue, Waltham,
Massachusetts, on Wednesday, May 27, 1998 at 9:30 a.m., and at any and all
adjournments thereof, hereby acknowledging receipt of the Proxy Statement for
such meeting and revoking any proxy heretofore given with respect to such
shares.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER(S). IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2. IN THEIR DISCRETION, THE PROXIES ARE ALSO
AUTHORIZED TO VOTE UPON SUCH MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
-------------
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE) SEE REVERSE
SIDE
-------------
<PAGE> 22
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
GELTEX PHARMACEUTICALS, INC.
MAY 27, 1998
<TABLE>
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
__
A | X | Please mark your
| _ | votes as in this
example using
dark ink only.
FOR WITHHELD
all nominees for all nominees FOR AGAINST ABSTAIN
___ ___ ___ ___ ___
1. Proposal to | | | | NOMINEES: Henri A Termer 2. Proposal to amend the | | | | | |
elect directors |___| |___| Jesse Treu Company's 1992 Equity |___| |___| |___|
Incentive Plan to increase
the aggregate number of
shares of the Company's common
stock as to which awards may
FOR, except vote withheld from the following nominee(s): be granted under such plan
by 750,000 shares.
________________________________________________________ PLEASE SIGN, DATE AND MAIL THIS PROXY TODAY
___
| |
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |___|
Signature ________________________ Date: _____, 1998 Signature (if held jointly) ___________________ Date: _______, 1998
NOTE: Please sign exactly as name appears on stock certificate. When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign
in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized
person.
</TABLE>
