<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
Sibia Neurosciences, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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:
<PAGE> 2
SIBIA NEUROSCIENCES, INC.
505 COAST BOULEVARD SOUTH
SUITE 300
LA JOLLA, CALIFORNIA 92037-4641
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1998
TO THE STOCKHOLDERS OF SIBIA NEUROSCIENCES, INC.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of SIBIA NEUROSCIENCES, INC., a Delaware corporation (the
"Company"), will be held on Wednesday, May 20, 1998, at 5:00 p.m. Pacific
Daylight Savings Time, at Lieb Auditorium, 505 Coast Boulevard South, Suite 300,
La Jolla, California 92037, for the following purposes:
1. To elect two directors to hold office until the 2001 Annual Meeting of
Stockholders.
2. To ratify the selection of Price Waterhouse LLP as independent auditors
of the Company for its fiscal year ending December 31, 1998; and
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 1, 1998 as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ FREDERICK T. MUTO
Frederick T. Muto
Secretary
La Jolla, California
April 20, 1998
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO
ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING. A RETURN ENVELOPE (WHICH IS
POSTAGE PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE.
EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND
THE ANNUAL MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD
BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST
OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 3
SIBIA NEUROSCIENCES, INC.
505 COAST BOULEVARD SOUTH
SUITE 300
LA JOLLA, CALIFORNIA 92037-4641
------------------------
PROXY STATEMENT
------------------------
FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of SIBIA Neurosciences, Inc., a Delaware corporation (the "Company" or
"SIBIA"), for use at the 1998 Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Wednesday, May 20, 1998, at 5:00 p.m., Pacific Daylight
Savings Time, or at any adjournment or postponement thereof, for the purposes
set forth herein and in the accompanying Notice of Annual Meeting. The Annual
Meeting will be held at Lieb Auditorium, 505 Coast Boulevard South, Suite 300,
La Jolla, California 92037. The Company intends to mail this proxy statement and
accompanying proxy card on or about April 20, 1998, to all stockholders entitled
to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing, and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telefacsimile, or personal
solicitation by directors, officers or other regular employees of the Company
or, at the Company's request, a professional proxy solicitation firm. No
additional compensation will be paid to directors, officers or other regular
employees for such services, but any professional proxy solicitation firm used
by the Company will be paid its customary fee.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April 1,
1998 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 1, 1998, the Company had outstanding and entitled to
vote 9,376,999 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes will be
counted towards a quorum but will not be counted for any purpose in determining
whether a matter has been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 505 Coast
Boulevard South, Suite 300, La Jolla, California 92037-4641, a written notice of
revocation
<PAGE> 4
or a duly executed proxy bearing a later date, or it may be revoked by attending
the Annual Meeting and voting in person. Attendance at the Annual Meeting will
not, by itself, revoke a proxy.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company
not later than December 21, 1998 in order to be included in the proxy statement
and proxy relating to such annual meeting. Stockholders are also advised to
review the Company's Bylaws, which contain additional requirements with respect
to advance notice of stockholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides that the Board
shall be divided into three classes with staggered three-year terms. Vacancies
on the Board may be filled only by persons elected by a majority of the
remaining directors. A director elected by the Board to fill a vacancy
(including a vacancy created by an increase in the number of directors to serve
on the Board) shall serve for the remainder of the full term of the class of
directors in which the vacancy occurred and until such director's successor is
elected and qualified.
Pursuant to the Company's Bylaws, the Company has authorized seven
directors to serve on the Board. There are presently seven directors serving on
the Board and no vacancies.
There are two (2) directors in the class whose term of office expires as of
the Annual Meeting (Class I). Each of the nominees for election to this class,
William T. Comer, Ph.D. and Gunnar Ekdahl, is currently a director of the
Company. Dr. Comer was elected to the Board in 1991 while Mr. Ekdahl was elected
to the Board in 1995. If elected at the Annual Meeting, each of Dr. Comer and
Mr. Ekdahl will serve until the 2001 Annual Meeting of Stockholders and until
his or her successor is elected and has qualified, or until such director's
earlier death, resignation or removal.
Election of the nominees will require the affirmative vote of a plurality
of the shares of Common Stock present in person or represented by proxy and
entitled to vote at the Annual Meeting. Shares represented by executed proxies
will be voted, if authority to do so is not withheld, for the election of Dr.
Comer and Mr. Ekdahl. Dr. Comer and Mr. Ekdahl have each agreed to serve if
elected, and management has no reason to believe that either nominee will be
unable to serve. In the event that either of Dr. Comer or Mr. Ekdahl should be
unavailable to serve as a result of an unexpected occurrence, such shares will
be voted (unless the proxy card is marked to the contrary) for the election of
such substitute nominee or nominees, if any, as management may recommend. It is
believed that all officers and directors of the Company will vote their
respective shares in favor of Dr. Comer and Mr. Ekdahl.
Set forth below is biographical information for each person nominated for
election to serve in Class I for a three-year term expiring at the 2001 Annual
Meeting and each person whose term of office as a director will continue after
the Annual Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING
Dr. William T. Comer, 62, has been President, Chief Executive Officer and a
director of SIBIA since 1991. Prior to joining SIBIA, Dr. Comer worked for
Bristol-Myers Squibb Company, a publicly-held pharmaceutical company
("Bristol-Myers Squibb"), for nearly 30 years in various scientific and
management positions. He served as Executive Vice President, Science &
Technology, and then as President, Pharmaceutical Research & Licensing at
Bristol-Myers Squibb from 1989 until 1990. Thereafter, he served as Senior Vice
President, Strategic Management -- Pharmaceuticals and Nutritionals at
Bristol-Myers Squibb until 1991. Dr. Comer is currently a director of Cytel
Corporation, a publicly-held biotechnology company, the University of
California, San Diego ("UCSD") Cancer Center Foundation and The San Diego
Chamber Orchestra. He
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is also a member of the Governor's Council on Biotechnology, the Executive
Committee of BIOCOM and the UCSD Industrial Advisory Committee for the
Department of Chemistry and Biochemistry. Dr. Comer received a B.A. degree from
Carleton College and a Ph.D. in Organic Chemistry and Pharmacology from the
University of Iowa.
Mr. Gunnar Ekdahl, 55, has been a director of the Company since 1995. He
was appointed Chairman of the Board of Directors of Skandigen AB in 1995. Mr.
Ekdahl has extensive experience with Swedish finance and investment companies
and was President and Chief Executive Officer of Latour AB from 1985 to 1992,
with controlling holdings in large Swedish industrial companies. Mr. Ekdahl has
been active as a non-executive board member of several Swedish companies,
including Chairman of Arcona AB, G&L Beijer AB, Lofbergs Lila AB, and Philipson
Bil AB. Mr. Ekdahl received his B.A. from the Stockholm School of Economics in
1966.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
Mr. Frederick B. Rentschler, 58, has been a director of the Company since
January 1993. Since 1990, he has been a director of several U.S. companies,
including The Salk Institute for Biological Studies ("The Salk Institute"). In
addition, during 1990, he was President and Chief Executive Officer of Northwest
Airlines. From 1986 to 1987, Mr. Rentschler held several positions at Beatrice
Company, the most recent being President and Chief Executive Officer. From 1980
to 1984, Mr. Rentschler was President and Chief Executive Officer of Hunt-Wesson
Foods, Inc. Prior to joining Hunt-Wesson Foods, Inc., Mr. Rentschler was
President and a director of Armour International from 1976 to 1977 and President
of Armour-Dial from 1977 to 1979. In addition, Mr. Rentschler is a director of
International Game Technology, Inc. and Bionutrics, Inc. Mr. Rentschler received
his B.A. from Vanderbilt University and his M.B.A. from Harvard Business School.
He joined The Salk Institute Board of Trustees in 1988 and has been Chairman of
the Board of Trustees since 1995.
Dr. James D. Watson, 69, has been a director of the Company since 1992. Dr.
Watson served as director of the Cold Spring Harbor Laboratory from 1968 to
1994, at which time he was appointed President. From 1956 to 1976, Dr. Watson
was a member of the Department of Biology (then Molecular Biology) at Harvard
University. Between 1988 and 1992, he directed the National Center for Human
Genome Research at the National Institute of Health. In 1962, Dr. Watson, along
with Drs. Francis H.C. Crick and Maurice Wilkins, was awarded the Nobel Prize in
Physiology or Medicine for discovering the structure of deoxyribonucleic acid.
Dr. Watson has won numerous awards in addition to the Nobel Prize and is a
member of the U.S. National Academy of Sciences, the Royal Society in London,
the Danish Academy of Arts and Sciences and the Academy of Sciences of Russia.
Dr. Watson holds a B.S. from the University of Chicago and a Ph.D. from Indiana
University and he has also received honorary degrees from 21 colleges and
universities. He is a director of the Pall Corporation and a director of
Diagnostic Products Corporation.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
Dr. Stanley T. Crooke, 53, has been a director of the Company since 1992.
He is the founder of Isis Pharmaceuticals, Inc., a publicly-held biotechnology
company, and has been its Chief Executive Officer since its inception in 1989
and Chairman of the Board of Directors since 1991. From 1980 until 1989, Dr.
Crooke was employed by SmithKline Beckman Corporation, a publicly-held
pharmaceutical company, most recently as President of Research and Development
of SmithKline & French Laboratories. Dr. Crooke received a Ph.D. and an M.D.
from Baylor College of Medicine. He is Chairman of the Board of Directors of
GeneMedicine, Inc. a publicly-held biotechnology company, a director of EPIX
Medical, Inc. and is an Adjunct Professor of Pharmacology at UCSD.
Mr. William R. Miller, 69, has been a director of the Company since 1991
and Chairman of the Board of Directors since 1992. In 1991, he retired as Vice
Chairman of the Board of Directors of Bristol-Myers Squibb,
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after six years in the position. Mr. Miller is a director of ImClone Systems,
Inc., Isis Pharmaceuticals, Inc., St. Jude Medical, Inc., TransKaryotic
Therapies, Inc., Westvaco Corporation and Xomed Surgical Products, Inc. He is
Chairman of the Board of Directors of Vion Pharmaceuticals, Inc. Mr. Miller is
Vice Chairman of the Board of Trustees of the Cold Spring Harbor Laboratory and
a past Chairman of the Board of Directors of Pharmaceutical Manufacturers
Association. Mr. Miller is a Trustee of the Manhattan School of Music,
Metropolitan Opera Association, Opera Orchestra of New York, a member of Oxford
University Chancellor's Court of Benefactors; Honorary Fellow of St. Edmund
Hall, and Chairman of the English-Speaking Union of the United States.
Dr. Jeffrey F. McKelvy, 50, was appointed as an Executive Vice President
and Chief Scientific Officer and a director of the Company in April 1998. Prior
to his joining the Company, Dr. McKelvy was Senior Vice President, Neuroscience
of Allelix Biopharmaceuticals, Inc. and President of Allelix Neuroscience, Inc.
since 1997. In 1994, Dr. McKelvy founded Trophix Pharmaceuticals, Inc. and
served as its Chairman and Chief Executive Officer. In 1992, Dr. McKelvy joined
Novartis AG (formerly CIBA-Geigy) as Vice President of the CNS Strategic
Business Unit with responsibility for all aspects of the company's CNS
portfolio. Dr. McKelvy spent 18 years in academic neuroscience, lastly as
Professor of Neurobiology, Molecular Biology and Psychiatry at State University
of New York Stony Brook and Chairman of the Neuroscience Research Review
Committee of the National Institute of Mental Health. Dr. McKelvy received his
Ph.D. in Biochemistry from Johns Hopkins University.
BACKGROUND OF NON-DIRECTOR EXECUTIVE OFFICERS
Mr. Michael J. Dunn, 42, has been with the Company since its inception. He
has served as Vice President, Business Development since August 1995. From 1992
to 1995, he was Director, Business Development and was Manager of Business
Development from 1991 to 1992. He received a B.A. from the University of Chicago
and an M.B.A. from the University of San Diego.
Dr. G. Kenneth Lloyd, 53, has served as the Company's Vice President,
Pharmaceuticals -- Biology since 1994. He joined the Company in 1992. Beginning
in 1977, Dr. Lloyd worked for Synthelabo S.A. where he held various management
positions culminating with six years as Associate Director, Biology with
responsibility for nervous system, cerebrovascular, bronchopulmonary,
gastrointestinal and inflammation research. From 1990 to 1992, Dr. Lloyd was
Assistant Vice President of Research and Director of Research (U.K.) for
Wyeth-Ayerst Research. Dr. Lloyd serves on the Scientific Advisory Boards of
Epigenesis and the Huntington Chorea Society of Canada. He received his B.S. and
M.S. from McGill University and a Ph.D. from the University of Toronto. He held
a postdoctoral position at F. Hoffman-La Roche & Co. Ltd. in Basel, Switzerland.
Dr. David E. McClure, 50, has served as the Company's Vice President,
Clinical Development and Regulatory since 1996. From 1992 to 1996, Dr. McClure
served as Director, Product Development and Project Management at Molecular
Biosystems, Inc. From 1988 to 1992, he served as Assistant Director, Oncology
Clinical and Medical Affairs, and as Senior Project Development Manager, Drug
Development Department at ICI Pharmaceuticals Group. From 1983 to 1988, Dr.
McClure served as Development Team Chairperson and Section Head, Medicinal
Chemistry at McNeil Pharmaceutical (Johnson & Johnson). He started his career at
Merck Research Laboratories as a medicinal chemist. He received his B.S. in
Chemistry from Nebraska Wesleyan University, a Ph.D. in Organic Chemistry from
Stanford University, and conducted post-doctoral work from 1973 to 1975 at
Columbia University.
Dr. Ian A. McDonald, 50, has served as the Company's Vice President,
Pharmaceuticals -- Chemistry since 1994. He joined the Company as Director of
Chemistry in 1993. He has held senior scientist positions at the State Health
Laboratory Service in Perth, Australia, at the Australian National University;
the Centre de Recherche Merrell International, Strasbourg, France; and he was a
Group Leader and Senior Research Scientist, Marion Merrell Dow Research
Institute (formerly Merrell Dow), Cincinnati, Ohio during the period 1985 to
1993. He received his B.S. and Ph.D. from the School of Chemistry, the
University of Western Australia. He completed his postdoctoral studies at the
Organic Chemistry Institute of the University of Zurich, Switzerland.
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Mr. Thomas A. Reed, 41, has been with the Company since its inception. He
has been Vice President, Finance/Administration and Chief Financial Officer
since 1995. From 1991 to 1995, he was Director, Finance and was Manager of
Business and Market Evaluation from 1989 to 1991. He received his B.A. from the
University of California, Berkeley and his M.B.A. from the University of San
Diego.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1997, the Board held nine
meetings. During the fiscal year ended December 31, 1997, each member of the
Board attended 75% or more of the aggregate number of meetings of the Board and
committees of the Board on which he served, held during the period for which he
was a director or committee member, respectively. The Board has an Audit
Committee, a Compensation and Stock Option Committee and a Non-Officer Stock
Option Committee.
The Audit Committee is composed of two non-employee directors: Dr. Crooke
and Mr. Rentschler. The Audit Committee meets with the Company's independent
auditors at least annually to review the results of the annual audit and discuss
the financial statements, recommends to the Board the independent auditors to be
retained, and receives and considers the auditors' comments as to controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. The Audit Committee met two times during fiscal
year 1997.
The Compensation and Stock Option Committee is composed of three
non-employee directors: Messrs. Ekdahl and Miller and Dr. Watson. The
Compensation and Stock Option Committee makes recommendations to the Board
concerning salaries and incentive compensation, awards stock options to
employees and consultants under the Company's stock option plan and otherwise
determines compensation levels and performs such other functions regarding
compensation as the Board may delegate. The Compensation and Stock Option
Committee met four times during fiscal year 1997.
The Board's Non-Officer Stock Option Committee consists of Dr. Comer as the
sole member. The function of the Non-Officer Stock Option Committee is to review
and approve stock option grants under the Company's 1996 Equity Incentive Plan
in accordance with guidelines approved by the Board to eligible persons under
the plan that are not subject to Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), by reason of their status as an officer,
director or stockholder of the Company. The Non-Officer Stock Option Committee
did not meet during fiscal year 1997.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board has selected Price Waterhouse LLP as the Company's independent
auditors for the fiscal year ending December 31, 1998 and has further directed
that management submit the selection of independent auditors for ratification by
the stockholders of the Company at the Annual Meeting. Representatives of Price
Waterhouse LLP are expected to be present at the Annual Meeting, will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
Stockholder ratification of the selection of Price Waterhouse LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Price Waterhouse
LLP to the stockholders for ratification as a matter of good corporate practice.
If the stockholders fail to ratify the selection, the Audit Committee and the
Board will reconsider whether or not to retain Price Waterhouse LLP. Even if the
selection is ratified, the Audit Committee and the Board in their discretion may
direct the appointment of different independent auditors at any time during the
year if they determine that such a change would be in the best interests of the
Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and voting at the Annual Meeting will be required
to ratify the selection of Price Waterhouse LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of January 31, 1998 (except as noted below) by:
(i) each director; (ii) each of the executive officers named in the Summary
Compensation Table; (iii) all directors and executive officers of the Company as
a group; and (iv) all those known by the Company to be beneficial owners of more
than five percent of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
------------------------------------
BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF TOTAL
---------------- ---------------- ----------------
<S> <C> <C>
The Salk Institute for Biological Studies
10010 North Torrey Pines Road
La Jolla, California 92037................................ 1,983,461 21.2%
Novartis AG
CH-4002 Basel
Switzerland............................................... 1,035,324 11.1%
Skandigen AB
Norrlandsgatan 15
111 43 Stockholm, Sweden.................................. 986,696 10.5%
Bristol-Myers Squibb Company
345 Park Avenue
New York, NY 10154........................................ 658,000 7.0%
Biotechnology Value Fund, L.P.(2)
333 West Wacker Drive, Suite 1600
Chicago, IL 60606......................................... 553,000 5.9%
State of Wisconsin Investment Board
P.O. Box 7842
Madison, WI 53707......................................... 482,300 5.1%
William T. Comer, Ph.D.(3).................................. 334,679 3.5%
Michael M. Harpold, Ph.D.(4)................................ 122,252 1.3%
William R. Miller(5)........................................ 60,375 *
G. Kenneth Lloyd, Ph.D.(6).................................. 58,971 *
Ian A. McDonald, Ph.D.(7)................................... 54,799 *
Thomas A. Reed(8)........................................... 62,694 *
David E. McClure, Ph.D.(9).................................. 10,675 *
Stanley T. Crooke, M.D., Ph.D.(10).......................... 17,250 *
James D. Watson, Ph.D.(11).................................. 40,500 *
Michael J. Dunn(12)......................................... 54,655 *
Frederick B. Rentschler(13)................................. 26,250 *
Gunnar Ekdahl(14)........................................... 20,500 *
Jeffrey F. McKelvy, Ph.D.(15)............................... 0 *
All executive officers and directors as a group (13
persons)(16).............................................. 863,600 8.9%
</TABLE>
- ---------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G, if any, filed with the
Securities and Exchange Commission (the "SEC"). Unless otherwise indicated
in the footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
9,368,294 shares outstanding on January 31, 1998, adjusted as required by
the rules promulgated by the SEC.
(2) BVF Partners L.P., a Delaware limited partnership ("Partners"), is the
general partner of Biotechnology Value Fund, L.P., a Delaware limited
partnership ("BVF"). BVF Inc., a Delaware corporation
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("BVF Inc."), is an investment adviser to and the general partner of
Partners. Mark N. Lampert, an individual, is the sole stockholder, sole
director and an officer of BVF Inc. BVF may be deemed to have beneficial
ownership of 323,000 shares of Common Stock of the Company, and Partners
and BVF Inc. may be deemed to have beneficial ownership of 553,000 shares
of Common Stock of the Company. BVF shares voting and dispositive power
over the 323,000 shares of Common Stock it beneficially owns with Partners.
Partners and BVF Inc. share voting and dispositive power over the 553,000
shares of Common Stock they beneficially own with, in addition to BVF, the
managed accounts on whose behalf Partners, as investment managers,
purchased such shares.
(3) Includes 76,179 shares subject to options exercisable within 60 days of
January 31, 1998.
(4) Includes 46,442 shares subject to options exercisable within 60 days of
January 31, 1998.
(5) Includes 7,500 shares subject to options exercisable within 60 days of
January 31, 1998.
(6) Includes 43,266 shares subject to options exercisable within 60 days of
January 31, 1998.
(7) Includes 43,799 shares subject to options exercisable within 60 days of
January 31, 1998.
(8) Includes 9,957 shares subject to options exercisable within 60 days of
January 31, 1998.
(9) Includes 9,415 shares subject to options exercisable within 60 days of
January 31, 1998.
(10) Includes 16,250 shares subject to options exercisable within 60 days of
January 31, 1998.
(11) Includes 11,125 shares subject to options exercisable within 60 days of
January 31, 1998.
(12) Includes 38,745 shares subject to options exercisable within 60 days of
January 31, 1998.
(13) Includes 26,250 shares subject to options exercisable within 60 days of
January 31, 1998. Does not include 1,983,461 shares beneficially owned by
The Salk Institute. Mr. Rentschler is currently the Chairman of the Board
of Trustees for The Salk Institute for Biological Studies.
(14) Includes 14,500 shares subject to options exercisable within 60 days of
January 31, 1998. Does not include 986,696 shares beneficially owned by
Skandigen AG, of which Mr. Ekdahl is the Chairman of the Board.
(15) Jeffrey F. McKelvy, Ph.D., joined the Company as a director and Executive
Vice President and Chief Scientific Officer in April 1998. Dr. McKelvy did
not beneficially own any securities of the Company as of January 31, 1998.
(16) Includes 343,428 shares subject to options exercisable within 60 days of
January 31, 1998.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities (the "10% Stockholders"), to file with
the Securities and Exchange Commission (the "SEC") initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors and greater than ten percent stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
officers, directors, and 10% Stockholders complied with all Section 16(a) filing
requirements applicable to them.
7
<PAGE> 10
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Currently, each non-employee director of the Company receives an annual
retainer of $15,000, while the Chairman of the Board receives $25,000. The
members of the Board are also eligible for reimbursement for their expenses
incurred in connection with attendance at Board meetings in accordance with
Company policy. Furthermore, during fiscal year 1997, certain non-employee
directors also received compensation for their services as members of the
Company's Scientific Advisory Board.
In the fiscal year ended December 31, 1997, the total cash compensation
paid to non-employee directors for service on the Board and/or committees of the
Board was as follows. Dr. Crooke -- $15,000; Mr. Ekdahl -- $15,000; Mr.
Miller -- $25,000; Mr. Rentschler -- $15,000; Dr. Watson -- $15,000. In addition
Dr. Watson received $10,000 for his service on the Company's Scientific Advisory
Board.
In addition to cash compensation, non-employee directors are eligible to
receive certain grants of options to purchase Common Stock of the Company. See
"Employee Benefit Plans -- 1996 Non-Employee Directors' Stock Option Plan."
During fiscal year 1997, the Company granted an option to purchase 3,000
shares of Common Stock of the Company to each non-employee director and an
option to purchase 5,000 shares of Common Stock of the Company to the Chairman
of the Board at an exercise price per share of $6.50. The fair market value of
the Company's Common Stock on the date of grant was $6.50 per share (based upon
the closing sales price reported in the Nasdaq National Market System on the
date of grant). As of January 31, 1998, options to purchase 105,750 shares of
Common Stock of the Company granted to the non-employee directors had been
exercised.
8
<PAGE> 11
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal years ending December 31, 1995,
1996 and 1997, compensation awarded or paid to, or earned by the Company's Chief
Executive Officer and its six other most highly compensated executive officers
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS(2)
---------------------------------------------- -----------------
OTHER ANNUAL ALL OTHER
FISCAL COMPENSATION SHARES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS(#)(3) ($)(4)
- ----------------------------- ------ ---------- --------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
William T. Comer, Ph.D....... 1997 261,756 63,000 -- 12,825 4,916
Chief Executive Officer and 1996 249,000 28,800 -- 15,040 4,491
President 1995 237,200 18,000 -- 12,925 3,608
Michael M. Harpold,
Ph.D.(8)................... 1997 191,400 37,000 -- 8,950 5,680
Vice President, Research 1996 182,500 16,000 -- 8,225 5,253
1995 174,875 9,650 -- 7,050 5,530
G. Kenneth Lloyd, Ph.D....... 1997 187,500 40,000 10,000(5) 8,950 5,677
Vice President, 1996 178,000 15,200 10,000(5) 8,225 5,248
Pharmaceuticals -- Biology 1995 170,250 9,000 10,000(5) 6,815 5,505
Ian A. McDonald, Ph.D........ 1997 161,000 32,100 10,000(5) 8,950 5,548
Vice President, 1996 153,250 13,300 10,000(5) 7,050 5,144
Pharmaceuticals -- Chemistry 1995 146,000 9,150 10,000(5) 5,875 5,139
Michael J. Dunn.............. 1997 124,500 30,000 -- 8,950 4,360
Vice President, 1996 113,000 7,500 -- 4,700 3,865
Business Development 1995 86,100 4,700 -- 15,275(6) 3,027
Thomas A. Reed............... 1997 135,250 30,000 -- 8,950 4,736
Vice President, 1996 123,500 9,700 -- 4,700 4,224
Finance/Administration and 1995 98,000 5,200 -- 15,745(6) 3,447
Chief Financial Officer
David E. McClure, Ph.D....... 1997 158,750 20,000 -- 5,198 5,556
Vice President, Clinical 1996 51,667(7) 10,000(7) -- 33,500(7) --
Development and Regulatory 1995 -- -- -- -- --
</TABLE>
- ---------------
(1) As permitted by rules promulgated by the SEC, no amounts are shown with
respect to certain perquisites where such amounts do not exceed the lesser
of (i) 10% of the sum of the amounts reflected in the salary and bonus
columns, and (ii) $50,000.
(2) None of the Named Executive Officers held restricted stock awards as of
December 31, 1997.
(3) Unless otherwise noted, all options were granted under the Company's 1996
Equity Incentive Plan or 1992 Stock Option Plan.
(4) All amounts include the value of group term life insurance premiums paid and
matching 401(k) Plan contributions paid on behalf of the Named Executive
Officers.
(5) Includes forgiveness of $10,000 of principal amount owed to the Company for
certain indebtedness.
(6) Includes options to purchase up to 11,750 shares of the Company's Common
Stock granted pursuant to the Company's Management Change of Control Plan.
(7) Dr. McClure joined the Company in September 1996. Salary amount represents
the total amount of base salary actually paid to Dr. McClure in 1996. Dr.
McClure's annual base salary for 1996 was $155,000. Bonus amount of $10,000
represents Dr. McClure's sign-on bonus. Upon joining the Company, Dr.
McClure was granted an option to purchase 33,500 shares of Common Stock of
the Company at an exercise price of $6.63 per share. The option vests and
becomes exercisable in four equal annual installments commencing on
September 1, 1997.
(8) Dr. Harpold ceased serving as Vice President, Research in April 1998.
9
<PAGE> 12
STOCK OPTION GRANTS AND EXERCISES
The Company currently grants options to its executive officers under its
1996 Equity Incentive Plan (the "1996 Plan"). The following tables show, for the
fiscal year ended December 31, 1997, certain information regarding options
granted to, exercised by, and held at year end by, the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO MARKET OPTION TERM($)(3)
OPTIONS EMPLOYEES IN EXERCISE VALUE ON EXPIRATION --------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) PRICE($/SH)(3) GRANT DATE DATE 5% 10%
---- ------------- -------------- -------------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
William T. Comer, Ph.D.......... 12,825 5.6% $6.50 $6.50 6/4/07 52,426 132,858
Michael M. Harpold, Ph.D........ 8,950 3.9% 6.50 6.50 6/4/07 36,586 92,716
G. Kenneth Lloyd, Ph.D.......... 8,950 3.9% 6.50 6.50 6/4/07 36,586 92,716
Ian A. McDonald, Ph.D........... 8,950 3.9% 6.50 6.50 6/4/07 36,586 92,716
Michael J. Dunn................. 8,950 3.9% 6.50 6.50 6/4/07 36,586 92,716
Thomas A. Reed.................. 8,950 3.9% 6.50 6.50 6/4/07 36,586 92,716
David E. McClure, Ph.D.......... 5,198 2.3% 6.50 6.50 6/4/07 21,248 53,848
</TABLE>
- ---------------
(1) Options were granted under the Company's 1996 Plan. The options vest 20% on
date of grant and 20% annually over the next 4 years.
(2) Based on options to purchase 230,392 shares of the Company's Common Stock
granted to employees, including Named Executive Officers, under the 1996
Plan during fiscal year 1997.
(3) The potential realizable value is calculated based on the term of the option
at its time of grant, which in each case is 10 years. It is calculated
assuming that the stock price on the date of grant appreciates at the
indicated annual rate, compounded annually for the entire term of the option
and that the option is exercised and sold on the last day of its term for
the appreciated stock price. These amounts represent certain assumed rates
of appreciation only, in accordance with the rules of the SEC, and do not
reflect the Company's estimate or projection of future stock price
performance. Actual gains, if any, are dependent on the actual future
performance of the Company's Common Stock and no gain to the optionee is
possible unless the stock price increases over the option term, which will
benefit all stockholders.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AS
OPTIONS AT OF DECEMBER 31, 1997
SHARES DECEMBER 31, 1997(#)(2) ($)(3)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
William T. Comer, Ph.D........ 0 0 66,838/77,352 $349,287/$361,238
Michael M. Harpold, Ph.D...... 0 0 41,156/47,694 214,376/219,117
G. Kenneth Lloyd, Ph.D........ 29,564 173,224 38,038/47,577 196,830/218,526
Ian A. McDonald, Ph.D......... 3,500 24,133 59,392/45,933 311,223/210,702
Michael J. Dunn............... 0 0 36,043/42,467 189,578/194,142
Thomas A. Reed................ 14,688 71,971 7,078/42,761 25,635/195,612
David E. McClure, Ph.D........ 0 0 9,415/29,283 0/0
</TABLE>
- ---------------
(1) Calculation of value realized is based on the fair market value of the
Company's Common Stock on the date of exercise minus the exercise price.
Includes (i) the value of shares acquired upon the exercise of options prior
to the Company's initial public offering of Common Stock in May 1996,
whereby the fair market value of the Company's shares was determined solely
by the Board of Directors on such date, and (ii) the value of shares
acquired upon exercise of options after the Company's initial public
offering
10
<PAGE> 13
whereby the fair market value on the date of exercise was equal to the
closing sales price of the Company's Common Stock as reported on the Nasdaq
National Market. Does not reflect any losses that may have been incurred as
a result of exercises of "out-of-the-money" options.
(2) Includes both "in-the-money" and "out-of-the-money" options. "In-the-money"
options are options with an exercise price below the fair market value of
the Company's Common Stock.
(3) Calculation based on the fair market value of the Company's Common Stock at
December 31, 1997 ($6.50), minus the exercise price.
CHANGE IN CONTROL ARRANGEMENTS
As of March 31, 1998, the Company's Management Change of Control Plan (the
"Change of Control Plan") is applicable to William T. Comer, Michael J. Dunn,
Michael M. Harpold, G. Kenneth Lloyd, Ian A. McDonald, Thomas A. Reed and, with
respect to certain provisions and David E. McClure. The Change of Control Plan
generally provides for the payment of benefits to its participants upon the
occurrence of certain defined change of control events. Among the benefits
provided are generally: (i) cash bonuses of up to 25% of annual base salary,
depending on the valuation of the Company at the time of the change of control;
(ii) acceleration of vesting of certain stock options granted to certain
participants; (iii) severance payments of up to two times annual base salary,
depending on the participant's position with the Company at the time of a change
of control; and (iv) the payment of health insurance premiums and outplacement
expenses incurred upon a change of control.
Under the Change of Control Plan, a "change of control" of the Company is
deemed to have occurred upon the consummation of a merger or consolidation in
which the Company is not the surviving entity (other than a transaction the
principal purpose of which is to change the jurisdiction of the Company's
incorporation), the sale, transfer or other disposition of all or substantially
all of the assets of the Company or a reverse merger in which the Company is the
surviving entity, but in which 50% or more of the Company's outstanding voting
stock is transferred to holders different from those who held such stock
immediately prior to such merger.
EMPLOYMENT AGREEMENTS
Effective April 1998, the Company entered into an employment agreement (the
"Employment Agreement") with Dr. Jeffrey McKelvy whereby Dr. McKelvy agreed to
serve as the Company's Executive Vice President and Chief Scientific Officer.
Under the Employment Agreement, Dr. McKelvy will receive an annual base salary
of $250,000 and will be eligible to receive a discretionary performance-based
cash bonus of up to 20% of such base salary. In addition, Dr. McKelvy was
granted a stock option under the Company's 1996 Equity Incentive Plan to acquire
up to 100,000 shares of the Company's Common Stock at an exercise price of $5
per share. Such options vest at an annual rate of 25% over a period of four
years from the date of grant. Dr. McKelvy also received a sign-on bonus of
$30,000 and is eligible to receive a loan from the Company of up to $100,000 to
assist him in relocating to San Diego, the principal and interest of such loan
to be forgiven over a period of five years based upon the achievement of
personal and Company objectives. The Employment Agreement is terminable at any
time for any reason or no reason by either party.
EMPLOYEE BENEFIT PLANS
1996 EQUITY INCENTIVE PLAN
In February 1996, the Board of Directors adopted the Company's 1996 Plan
under which 1,513,141 shares of Common Stock are reserved for issuance pursuant
to the exercise of stock awards granted to employees, directors and consultants.
The 1996 Plan was adopted by the Board to replace the Company's 1981 Employee
Stock Option Plan (the "1981 Plan") and its 1992 Stock Option and Restricted
Stock Plan (the "1992 Plan," and, together with the 1981 Plan, the "Prior
Plans"). The 1981 Plan terminated by its terms in 1991; provided, however, that
options outstanding under the 1981 Plan will be exercisable according to their
terms. The 1992 Plan was terminated upon the closing of the Company's initial
public offering and no further options were to be issued thereunder; provided,
however, that options outstanding under the 1992 Plan would
11
<PAGE> 14
be exercisable according to their terms. The 1996 Plan will terminate in
February 2006, unless sooner terminated by the Board.
The 1996 Plan provides a means by which selected officers and employees of
and consultants to the Company and its affiliates could be given an opportunity
to receive stock in the Company, to assist in retaining the services of
employees holding key positions, to secure and retain the services of persons
capable of filling such positions and to provide incentives for such persons to
exert maximum efforts for the success of the Company. As of January 31, 1998,
all of the Company's 116 employees were eligible to participate in the 1996
plan.
The 1996 Plan permits the granting of options intended to qualify as
incentive stock options ("Incentive Options") within the meaning of Section 422
of the Internal Revenue Code of 1986 (the "Code") to employees (including
officers and employee directors) and options that do not so qualify
("Nonstatutory Options," and, together with Incentive Options, the "Options") to
employees (including officers and employee directors) and consultants (including
non-employee directors). In addition, the 1996 Plan permits the granting of
stock appreciation rights ("SARs") appurtenant to or independently of Options,
as well as stock bonuses and rights to purchase restricted stock (Options, SARs,
stock bonuses and rights to purchase restricted stock are hereinafter referred
to as "Stock Awards"). No person shall be eligible to be granted Options and
SARs covering more than 500,000 shares of Common Stock in any 12-month period.
In June 1997, the Board amended the 1996 Plan to provide for acceleration
of vesting of options outstanding under such plan held by any employee of the
Company who within 12 months following certain defined change of control events
either (i) is terminated by the Company without cause or (ii) terminates his or
her employment with the Company for good reason (as defined in such plan). The
definition of "change of control" under the 1996 Plan is identical to the
definition thereof under the Change of Control Plan. The amendment was designed
to deter hostile takeovers and may have the effect of delaying or preventing a
change in control of the Company
As of January 31, 1998, the Company had granted Options to purchase up to
398,895 shares of Common Stock under the 1996 Plan. No other Stock Awards have
been granted or awarded under the 1996 Plan.
EMPLOYEE STOCK PURCHASE PLAN
In February 1996, the Board of Directors adopted, and the stockholders
subsequently approved, the Employee Stock Purchase Plan (the "Purchase Plan").
The purpose of the Purchase Plan is to assist the Company in retaining the
services of its employees, to secure and retain the services of new employees
and to provide incentives for such persons to exert maximum efforts for the
success of the Company. The Purchase Plan provides a means by which employees of
the Company and its affiliates may purchase Common Stock of the Company at a
discount through accumulated payroll deductions. The rights to purchase Common
Stock granted under the Purchase Plan are intended to qualify as options issued
under an "employee stock purchase plan" as that term is defined in Section
423(b) of the Code. The maximum number of shares of Common Stock that may be
issued under the Purchase Plan is 500,000. As of January 31, 1998, all of the
Company's 116 employees were eligible to participate in the Purchase Plan.
Under the Purchase Plan, the Board may provide for the grant of rights to
purchase Common Stock to eligible employees (an "Offering") on a date or dates
to be selected by the Board of Directors. The first Offering under the Purchase
Plan began May 9, 1996, the effective date of the Company's initial public
offering, and extends until April 30, 1998. Subsequent Offerings will commence
on May 1 every year, beginning with calendar year 1998 and shall end on the day
prior to the first anniversary of the date the Offering commences. As of January
31, 1998, the Company had issued 31,229 shares of Common Stock to employees
under the Purchase Plan.
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
In February 1996, the Board of Directors adopted, and the stockholders
subsequently approved, the 1996 Non-Employee Directors' Stock Option Plan (the
"Directors' Plan"). The purpose of the Directors' Plan is to
12
<PAGE> 15
attract and retain the services of persons capable of serving as non-employee
directors on the Board of Directors and to provide incentives for such persons
to exert maximum efforts to promote the success of the Company. The Directors'
Plan provides for the automatic grant of nonstatutory stock options to purchase
shares of Common Stock to non-employee directors of the Company. The maximum
number of shares of Common Stock that may be issued pursuant to options granted
under the Directors' Plan is 235,000. Option grants under the Directors' Plan
are non-discretionary.
Under the Directors' Plan, each person who for the first time becomes a
non-employee director shall be granted upon the date of his or her initial
election to the Board of Directors, an option to purchase 10,000 shares of
Common Stock of the Company. In addition, on the date of each annual meeting of
stockholders, each non-employee director who is reelected at such meeting shall
be granted an option to purchase 3,000 shares of Common Stock of the Company;
provided, however, that a non-employee director who is then serving as the
Chairman of the Board shall be granted an option to purchase 5,000 shares of
Common Stock of the Company. As of January 31, 1998, options to purchase 37,000
shares had been granted under the Directors' Plan. Options granted under the
Directors' Plan are not intended to qualify as Incentive Options.
401(k) PLAN
The Company adopted a tax-qualified employee savings and retirement plan
under Section 401(k) of the Code (the "401(k) Plan") covering all of the
Company's employees. Pursuant to the 401(k) Plan, employees may elect to reduce
their current compensation by up to 9% of their salaries, but not in excess of
the statutory prescribed annual limit ($10,000 in 1998) and have the amount of
such reduction contributed to the 401(k) Plan. The Company currently matches 50%
of employee contributions up to 6% of an employee's salary, limited to the
maximum contribution allowable for income tax purposes. Employer contributions
vest proportionally over five years of service. The 401(k) Plan may be amended
or discontinued at any time by the Company.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION(1)
The Company's executive compensation program is administered by the
Compensation and Stock Option Committee (the "Committee") of the Board. The
Committee is appointed by the Board and is comprised of three non-employee
directors. The non-employee directors that served on the Committee during fiscal
year 1997 were Messrs. Miller and Ekdahl and Dr. Watson.
The Committee is responsible for establishing and maintaining the Company's
policies governing employee compensation and administering the Company's
employee benefit plans. More specifically, the Committee establishes
compensation packages, bonus programs and employee benefit plans. In addition,
the Committee reviews and approves proposals made by management with respect to
the adoption of new plans or modification to existing plans, compensation
packages involving amounts over $100,000 per year and modifications to the bonus
plans.
COMPENSATION PHILOSOPHY
The Company's executive compensation philosophy strongly links management
pay with both the individual's and the Company's annual and long-term
performance. The Company's current compensation programs are designed to
attract, motivate, and retain senior management by providing compensation
packages that are competitive with local and national biotech companies. The
Company engages outside consultants to advise it with respect to its
compensation programs and consults various industry compensation
- ---------------
(1)The material in this report is not "soliciting material," is not deemed
filed with the SEC and is not to be incorporated by reference into any filing of
the Company under the Securities Act of 1933, as amended, or the Exchange Act
whether made before or after the date hereof and irrespective of any general
incorporation language contained in such filing.
13
<PAGE> 16
surveys including the Biotechnology Employee Development Coalition and Radford
National Salary and Benefits surveys.(2)
During the first quarter of each year, the Company's management proposes to
the Committee specific Company-wide objectives to be used as benchmark
performance indicators for that year. The Committee uses such objectives to
evaluate the Company's overall performance for the year, and subjectively
assesses each individual's contribution to such performance. Corporate
objectives for 1997 included: (i) continuing advancement of SIB-1508Y through
clinical trials; (ii) securing additional strategic alliances to provide funding
for the Company's various Discovery and Development Programs; and (iii)
selecting lead compounds based on the Company's various Drug Discovery Platforms
and (iv) advancing the technology licensing program for the Company's various
Drug Discovery Technologies.
COMPONENTS OF EXECUTIVE COMPENSATION.
The components of the Company's executive compensation packages and the
objective criteria on which they are based are as follows:
Base Salary. With respect to determining the base salary of executive
officers, the Committee considers a variety of factors including the executive's
prior relevant experience, the level of responsibility, the individual's
performance, and the salaries of similar positions in the Company compared with
the salaries set forth in the local Biotechnology Employee Development Coalition
and Radford National Salary and Benefits surveys. Based on the foregoing factors
and the data generated in the surveys, the Committee then sets target salary
levels applicable to each executive officer.
The Committee believes that its process for determining and adjusting the
base salary of executive officers is consistent and equitable with sound
personnel practices and the Company's compensation philosophy. Annual
adjustments in base salaries are determined consistent with the foregoing and
typically are made at the end of the first quarter.
Annual Cash Bonuses. Annual cash bonus awards are an integral component of
an executive's overall compensation package and are intended to maintain
competitive compensation levels with other leading biotechnology companies as
well as to reinforce team building and provide a merit-based means of earning
additional compensation. The amount of each executive's cash bonus is determined
each year subjectively by the Committee based upon the factors outlined above
for base salary with the goal of establishing combined base salary and bonus
within the range of salary levels determined using the surveys. During the
fiscal year 1997, cash bonuses were paid to all executive officers of the
Company.
Equity Incentive Awards. Generally, the Company grants equity incentive
awards in the form of stock options to executive officers concurrent with their
joining the Company. The amount of such grants are intended to reflect a new
hires level of experience and position for which such person was hired. In
addition, annual grants of stock options are made with the objective to
strengthen the mutuality of interest between management and the Company's
stockholders. Grants made under the 1996 Equity Incentive Plan generally have a
term of 10 years and are normally tied to the market valuation of the Company's
Common Stock, thereby providing an additional incentive for executives to build
stockholder value. In addition, grants are generally subject to vesting over
four years, with vesting tied to continued employment. Executives receive value
from these grants only if strategic goals are achieved and the Company's Common
Stock appreciates accordingly. This component of an executive's compensation
package is intended to retain and motivate executives to improve long-term stock
market performance. Additional long-term incentives are provided through the
Company's Employee Stock Purchase Plan in which all eligible employees may
participate.
- ---------------
(2)The companies included in the survey are not necessarily the same as the
companies included in the market indices included in the performance graph in
this Proxy Statement. Although the compensation (salary and bonus) surveys
referred to above and the market indices included in the performance graph are
broad and include companies in related industries, the surveys and indices were
created for different purposes and accordingly are not comparable.
14
<PAGE> 17
The level of the annual discretionary stock awards are based, in part, on
the executive's level of contribution to the Company during the prior year as
determined by the Committee using the factors specified above. The terms of the
Company's equity incentive plans pursuant to which it grants options to its
executive officers is comparable, in all material respects, to equity incentive
plans generally employed in the industry and the Company believes are
competitive and reasonable.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee uses the same procedures described above in setting the total
compensation package paid to the Company's Chief Executive Officer. The Chief
Executive Officer's total salary is based on comparisons with other companies
included in the surveys referred to above. In awarding annual stock options, the
Committee considers the Chief Executive Officer's performance with respect to
objective criteria established by the Committee and overall contribution to the
Company during the prior year. During 1997, the Chief Executive Officer was paid
a base salary of $261,756, a cash bonus of $63,000 and was granted options to
purchase 12,825 shares of Common Stock of the Company. The Committee believes
that the total compensation package received by the Chief Executive Officer for
fiscal year 1997 was competitive within the industry and reflected his overall
contribution to the Company.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
Named Executive Officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code.
The statute containing this law and the applicable regulations offer a
number of transitional exceptions to the 162(m) limitations on deductions for
pre-existing compensation plans, arrangements and binding contracts. As a
result, the Committee believes that at the present time it is quite unlikely
that the compensation paid to any Named Executive Officer in a taxable year
which is subject to the deduction limit will exceed $1 million. Therefore, the
Committee has not yet established a policy for determining which forms of
incentive compensation awarded to its executive officers shall be designed to
qualify as "performance-based compensation." The Committee intends to continue
to evaluate the effects of the statute and to comply with Section 162(m) of the
Code in the future to the extent consistent with the best interests of the
Company and its stockholders.
SUBMITTED BY THE COMPENSATION AND STOCK OPTION COMMITTEE OF THE BOARD OF
DIRECTORS
Gunnar Ekdahl
William R. Miller
James D. Watson
15
<PAGE> 18
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows a comparison of cumulative total stockholder
returns on an investment of $100 in cash for the period from May 9, 1996 (the
effective date of the Company's initial public offering) to December 31, 1997
for the (i) Company's Common Stock, (ii) Nasdaq Stock Market Index, (iii) Nasdaq
Pharmaceutical Stock Index, and (iv) NeuroInvestment Index.
COMPARISON OF CUMULATIVE TOTAL RETURN ON INVESTMENT
<TABLE>
<CAPTION>
NASDAQ
MEASUREMENT PERIOD SIBIA NASDAQ STOCK PHARMACEUTICAL NEUROINVESTMENT
(FISCAL YEAR COVERED) NEUROSCIENCES MARKET INDEX STOCK INDEX INDEX
<S> <C> <C> <C> <C>
10-MAY-96 100 100 100 100
26-JUN-96 71 100 92 88
31-DEC-96 69 109 92 89
30-JUN-97 60 122 94 75
31-DEC-97 60 133 95 66
</TABLE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
In February 1996, William T. Comer, President, Chief Executive Officer and
a director of the Company, exercised an option to purchase 258,500 shares of
Common Stock pursuant to the Company's 1981 Employee Stock Option Plan at an
exercise price of $2.13 per share for a total purchase price of $550,000. In
accordance with the terms of the 1981 Employee Stock Option Plan, such purchase
price was paid in cash in the amount of $11,000 and by delivery of a
full-recourse promissory note payable in the principal amount of $539,000 and
bearing interest at 7% per annum. Such note was paid in full in May 1997.
In July 1992, the Company loaned to Dr. Harpold $43,600 pursuant to a
promissory note bearing interest at the rate of 7.5% per annum. In February
1996, the Company loaned to Dr. Harpold $44,100 as the purchase price for
certain options to purchase Common Stock of the Company pursuant to a promissory
note bearing
- ---------------
1 This section is not "soliciting material," is not deemed "filed" with the SEC
and is not to be incorporated by reference in any filing of the Company under
the Securities Act of 1933, as amended, or the Exchange Act whether made
before or after the date hereof and irrespective of any general incorporation
language in any such filing.
16
<PAGE> 19
interest at the rate of 7.0% per annum. As of March 31, 1998, the total amount
of principal and interest outstanding under the promissory notes was $95,048.
OTHER MATTERS
The Board knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ FREDERICK T. MUTO
Frederick T. Muto,
Secretary
April 20, 1998
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1997 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO: THOMAS A. REED, CHIEF
FINANCIAL OFFICER, SIBIA NEUROSCIENCES, INC., 505 COAST BOULEVARD SOUTH, SUITE
300, LA JOLLA, CALIFORNIA 92037-4641.
17
<PAGE> 20
SIBIA NEUROSCIENCES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1998
The undersigned hereby appoints William T. Comer and Thomas A. Reed, and
each of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of SIBIA Neurosciences, Inc.
(the "Company") which the undersigned may be entitled to vote at the 1998 Annual
Meeting of Stockholders of the Company to be held at Lieb Auditorium, 505 Coast
Boulevard South, Suite 300, La Jolla, California on Wednesday, May 20, 1998 at
5:00 p.m., Pacific Daylight Savings Time, and at any and all postponements,
continuations and adjournments thereof, with all powers that the undersigned
would possess if personally present, upon and in respect of the following
matters and in accordance with the following instructions, with discretionary
authority as to any and all other matters that may properly come before the
meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
MANAGEMENT RECOMMENDS A VOTE FOR ALL NOMINEES FOR DIRECTOR LISTED BELOW.
PROPOSAL 1: To elect directors to hold office until the 2001 Annual Meeting of
Stockholders.
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to
(except as marked to the contrary vote for all nominees
below). listed below.
NOMINEES: William T. Comer
Gunnar Ekdahl
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S) WRITE SUCH NOMINEE'S(S')
NAME(S) BELOW:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Continued and to be signed on other side)
<PAGE> 21
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 2: To ratify the selection of Price Waterhouse LLP as independent
auditors of the Company for its fiscal year ending December 31,
1998.
/ / FOR / / AGAINST / / ABSTAIN
DATED , 1998
--------------- --------------------------------------
--------------------------------------
SIGNATURE(S)
Please sign exactly as your name appears
hereon. If the stock is registered in the
names of two or more persons, each should
sign. Executors, administrators, trustees,
guardians and attorneys-in-fact should add
their titles. If signer is a corporation,
please give full corporate name and have a
duly authorized officer sign, stating title.
If signer is a partnership, please sign in
partnership name by authorized person.
