<PAGE> 1
SCHEDULE 14A INFORMATION
(RULE 14a-101)
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 Rule 14a-11(c) or Rule 14a-2
Diatide, 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:
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<PAGE> 2
DIATIDE, INC.
NINE DELTA DRIVE
LONDONDERRY, NEW HAMPSHIRE 03053
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1997
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
Diatide, Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, May 21, 1997 at 10:00 a.m. at the offices of Hale and Dorr LLP, 60
State Street, Boston, Massachusetts (the "Meeting") for the purpose of
considering and voting upon the following matters:
1. To elect three Class I Directors for the ensuing three years;
2. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for the current year; and
3. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.
The Board of Directors has fixed the close of business on Thursday, April
10, 1997 as the record date for the determination of stockholders entitled to
notice of and to vote at the Meeting and at any adjournments thereof.
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1996, which contains financial statements and other information of
interest to stockholders, accompanies this Notice and the enclosed Proxy
Statement.
By order of the Board of Directors,
Ronald B. Kinder, Secretary
April 25, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE TO ASSURE
REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED BE AFFIXED IF THE
PROXY IS MAILED IN THE UNITED STATES.
<PAGE> 3
DIATIDE, INC.
NINE DELTA DRIVE
LONDONDERRY, NEW HAMPSHIRE 03053
------------------------
PROXY STATEMENT
------------------------
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Diatide, Inc. (the "Company") for the
Annual Meeting of Stockholders to be held on Wednesday, May 21, 1997 at 10:00
a.m. at the offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts
and at any adjournments thereof (the "Meeting").
All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
the matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before its exercise by delivery of a
written revocation or a subsequently dated proxy to the Secretary of the Company
or by voting in person at the Meeting. Attendance at the Meeting will not itself
be deemed to revoke a proxy unless the stockholder gives affirmative notice at
the Meeting that the stockholder intends to revoke the proxy and vote in person.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED PROXY AND THE
COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1996 ARE
BEING MAILED TO STOCKHOLDERS ON OR ABOUT APRIL 25, 1997. THE COMPANY WILL, UPON
WRITTEN REQUEST OF ANY STOCKHOLDER, FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), WITHOUT EXHIBITS. PLEASE ADDRESS
ALL SUCH REQUESTS TO THE COMPANY, ATTENTION OF DANIEL F. HARRINGTON, CHIEF
FINANCIAL OFFICER, NINE DELTA DRIVE, LONDONDERRY, NEW HAMPSHIRE 03053. EXHIBITS
TO SUCH FORM 10-K WILL BE PROVIDED UPON WRITTEN REQUEST AND PAYMENT OF AN
APPROPRIATE PROCESSING FEE.
VOTING SECURITIES AND VOTES REQUIRED
On April 10, 1997, the record date for determination of stockholders
entitled to notice of and to vote at the Meeting, there were outstanding and
entitled to vote an aggregate of 10,460,928 shares of Common Stock of the
Company, $.001 par value per share (the "Common Stock"). Each share entitles the
record holder to one vote on each of the matters to be voted upon at the
Meeting.
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting shall constitute a quorum for
the transaction of business at the Meeting. Shares of Common Stock present in
person or represented by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented for stockholder approval)
will be counted for purposes of determining whether a quorum is present at the
Meeting.
The affirmative vote of the holders of a plurality of the votes cast by the
stockholders entitled to vote at the Meeting is required for the election of
directors. The affirmative vote of the holders of a majority of the shares of
Common Stock present or represented by proxy and voting on the matter is
required for the ratification of the selection of the Company's independent
auditors.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter, and will also not
be counted as votes cast or shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on a matter
that requires the affirmative vote of a certain percentage of the votes cast or
shares voting on a matter.
2
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 15, 1997,
regarding the beneficial ownership of shares of the Company's Common Stock by
(i) each person or entity known by the Company to own beneficially more than 5%
of the outstanding shares of Common Stock, (ii) each director and director
nominee of the Company, (iii) the Chief Executive Officer and the other
executive officers listed in the Summary Compensation Table below (the "Named
Executive Officers"), and (iv) the directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP(1)
-----------------------
NUMBER PERCENT
OF SHARES OF CLASS
--------- ---------
<S> <C> <C>
5% STOCKHOLDERS
Funds Managed by Burr, Egan, Deleage & Co...................... 1,511,319(2) 14.5%
One Embarcadaro Center
Suite 4050
San Francisco, CA 94111
Nycomed Imaging AS............................................. 1,500,000 14.4%
Nycoveien 1-2
N-0401 Oslo, Norway
Entities affiliated with DLJ Capital Corporation............... 1,135,952(3) 10.9%
c/o ML Ventures II, L.P.
3000 Sand Hill Road
Building 4, Suite 270
Menlo Park, CA 94025-7114
Medical Science Partners Group................................. 1,028,830(4) 9.9%
20 William Street
Suite 250
Wellesley, MA 02181
Chase Venture Capital Associates, L.P.......................... 651,000 6.2%
380 Madison Avenue
12th Floor
New York, NY 10019
Entities affiliated with Chemicals and Materials Enterprise
Associates, L.P.............................................. 617,895(5) 5.9%
One Cleveland Center, Suite 2700
Cleveland, OH 44114
DIRECTORS AND DIRECTOR NOMINEES(6)
Gustav Christensen............................................. 27,000(7) *
Robert E. Curry................................................ 1,135,952(8) 10.9%
Richard T. Dean................................................ 353,674(9) 3.3%
Jean Deleage................................................... 1,511,319(10) 14.5%
Hirsch Handmaker............................................... 35,280(11) *
Robert S. Lees................................................. 165,487(12) 1.6%
Joseph F. Lovett............................................... 1,037,670(13) 9.9%
Donald L. Murfin............................................... 617,895(14) 5.9%
Daniel L. Peters............................................... 1,500,000(15) 14.4%
OTHER NAMED EXECUTIVE OFFICERS(6)
Edward M. Aten................................................. 12,000 *
Ronald B. Kinder............................................... 50,700(16) *
Mark A. Attarian............................................... 36,000 *
All directors and executive officers as a group (10 persons)... 6,411,697(17) 60.1%
</TABLE>
3
<PAGE> 5
- ---------------
* Represents less than 1% of the outstanding shares of Common Stock of the
Company.
(1) The number of shares beneficially owned by each director and executive
officer is determined under rules promulgated by the Securities and
Exchange Commission, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which an individual or group has sole
or shared voting power or investment power and also any shares which an
individual or group has the right to acquire within 60 days after March 15,
1997 through the exercise of any stock option or other right. The inclusion
herein of such shares, however, does not constitute an admission that the
named stockholder is a direct or indirect beneficial owner of such shares.
Unless otherwise indicated, each person or group named in the table has
sole voting and investment power (or shares such power with his or her
spouse) with respect to all shares of capital stock listed as owned by such
person or entity.
(2) Consists of 1,278,129 shares held by Alta IV Limited Partnership ("Alta
IV") and 233,190 shares held by C.V. Sofinnova Partners Five ("C.V.
Sofinnova"). Burr, Egan, Deleage & Co. ("Burr, Egan") serves as the
investment advisor to Alta IV and C.V. Sofinnova. The respective General
Partners of Alta IV and C.V. Sofinnova exercise sole voting and investment
power with respect to the shares held by each fund, and the principals of
Burr, Egan disclaim beneficial ownership of all shares held by Alta IV and
C.V. Sofinnova, except as to their pecuniary interests therein.
(3) Consists of 809,704 shares held by ML Venture Partners II, L.P. ("ML
Ventures"), 281,647 shares held by Sprout Capital VI, L.P. ("Sprout
Capital") and 44,601 shares held by DLJ Capital Corporation ("DLJ
Capital"). These entities are affiliates under common control.
(4) Consists of 919,089 shares held by Medical Science Partners, L.P. ("MSP"),
96,154 shares held by Medical Science Partners II, L.P. ("MSP II") and
13,587 shares held by Medical Science II Co-Investment L.P. ("MS
Co-Investment"). MSP, MSP II and MS Co-Investment are affiliates under
common control.
(5) Consists of 257,456 shares held by Chemical and Materials Enterprise
Associates, L.P. ("CMEA") and 360,439 shares held by New Enterprise
Associates V, L.P. ("NEA"), which are affiliated funds whose General
Partners have overlapping General Partners. The respective General Partners
of CMEA and NEA exercise sole voting and investment power with respect to
the shares held by each fund.
(6) The address for each of the directors, director nominees and Named
Executive Officers is c/o Diatide, Inc., Nine Delta Drive, Londonderry, New
Hampshire 03053.
(7) Includes 4,800 shares subject to outstanding stock options held by Mr.
Christensen, which are exercisable within the 60-day period following March
15, 1997 and 7,200 shares held by Commonwealth BioVentures, Inc. Profit
Sharing Plan in an account of which Mr. Christensen is the beneficiary.
(8) Consists of 809,704 shares held by ML Ventures, 281,647 shares held by
Sprout Capital and 44,601 shares held by DLJ Capital. Dr. Curry is a
General Partner of Sprout Group, a division of DLJ Capital. ML Ventures is
an affiliate of Sprout Capital, and Dr. Curry may be considered a
beneficial owner of the shares beneficially owned by ML Ventures, Sprout
Capital and DLJ Capital, although Dr. Curry disclaims beneficial ownership
of such shares, except as to his pecuniary interests therein.
(9) Includes 173,287 shares subject to outstanding stock options held by Dr.
Dean, which are exercisable within the 60-day period following March 15,
1997.
(10) Consists of 1,278,129 shares held by Alta IV and 233,190 shares held by
C.V. Sofinnova. Dr. Deleage is a Vice President of Burr, Egan, the
investment advisor to Alta IV and C.V. Sofinnova, and a general partner of
Alta IV Management Partners, L.P., the general partner of Alta IV, and may
be considered a beneficial owner of the shares beneficially owned by Alta
IV and C.V. Sofinnova, although Dr. Deleage disclaims beneficial ownership
of such shares, except as to his pecuniary interests therein.
(11) Consists of 34,200 shares held by Healthcare Technology Group, an entity of
which Dr. Handmaker is the principal, and 1,080 shares subject to
outstanding stock options held by Dr. Handmaker, which are exercisable with
the 60-day period following March 15, 1997.
4
<PAGE> 6
(12) Includes 2,400 shares subject to outstanding stock options held by Dr.
Lees, which are exercisable within the 60-day period following March 15,
1997.
(13) Includes 919,089 shares held by MSP, 96,154 shares held by MSP II and
13,587 shares held by MS Co-Investment. Mr. Lovett is a General Partner of
the general partner of MSP, MSP II and MS Co-Investment and may be
considered a beneficial owner of the shares beneficially owned by such
entities, although Mr. Lovett disclaims beneficial ownership of such
shares, except as to his pecuniary interests therein.
(14) Consists of 257,456 shares held by CMEA and 360,439 shares held by NEA. Mr.
Murfin is a general partner of CMEA and a Special Partner of NEA and may be
considered a beneficial owner of the shares beneficially owned by CMEA and
NEA, although Mr. Murfin disclaims beneficial ownership of such shares,
except as to his pecuniary interests therein.
(15) Consists of 1,500,000 shares held by Nycomed Imaging AS ("Nycomed"). Mr.
Peters is the President and a director of Nycomed Inc., a subsidiary of
Nycomed ASA, Nycomed's parent company, and may be considered a beneficial
owner of the shares beneficially owned by Nycomed, although Mr. Peters
disclaims beneficial ownership of such shares.
(16) Includes 49,200 shares subject to outstanding stock options held by Mr.
Kinder, which are exercisable within the 60-day period following March 15,
1997.
(17) See Notes (7) through (10) and (12) through (16) above.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Company currently has a classified Board of Directors consisting of two
Class I Directors, three Class II Directors, and three Class III Directors. At
each annual meeting of stockholders, directors are elected for a full term of
three years to succeed those whose terms are expiring. The Class II Directors
will be elected at the 1998 Annual Meeting for a three-year term expiring at the
2001 Annual Meeting; and the Class III Directors will be elected at the 1999
Annual Meeting for a three-year term expiring at the 2002 Annual Meeting.
The persons named in the enclosed proxy will vote to elect, as Class I
Directors, Gustav A. Christensen, Hirsch Handmaker and Donald L. Murfin, the
three director nominees named below, unless the proxy is marked otherwise.
Messrs. Christensen and Murfin are currently directors of the Company. In April
1997, the Board of Directors nominated Dr. Handmaker for election as a Class I
director.
Each Class I director will be elected to hold office until the annual
meeting of stockholders to be held in 2000 and until his successor is elected
and qualified. Each of the nominees has indicated his willingness to serve, if
elected; however, if any nominee should be unable to serve, the person acting
under the proxy may vote the proxy for a substitute nominee designated by the
Board of Directors. The Board of Directors has no reason to believe that any of
the nominees will be unable to serve if elected.
Set forth below are the name and age of each member of the Board of
Directors, including those who are nominees for election as Class I Directors,
his principal occupation and business experience during the past five years, the
names of other publicly held companies of which he serves as a director and the
year of the commencement of his term as a director of the Company.
5
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, OTHER
DIRECTOR BUSINESS EXPERIENCE DURING PAST FIVE
NAME AGE SINCE YEARS AND OTHER DIRECTORSHIPS
- ------------------------------- --- -------- -------------------------------------------------
<S> <C> <C> <C>
NOMINEES FOR TERMS EXPIRING
IN 1997 (CLASS I DIRECTORS)
Gustav A. Christensen.......... 49 1990 Chairman of the Board of Directors of Alpha-Beta
Technologies, Inc., a biotechnology company,
since 1991. From 1988 to 1990, President and
Chief Executive Officer of Immulogic
Pharmaceutical Corporation, a biotechnology
company, and from 1983 to 1988, Senior Vice
President of Commercial Affairs and Vice
President of Marketing and Business Development
for Genetics Institute, Inc., a biotechnology
company.
Hirsch Handmaker, M.D.......... 56 -- Executive Director of the Arizona Institute of
Nuclear Medicine (the "Arizona Institute") and
Medical Director of Papago Imaging, a medical
imaging company, since 1994. From 1972 to 1994,
Director of Nuclear Medicine at the Children's
Hospital of San Francisco and its successor, the
California Pacific Medical Center. From 1983 to
1987, President and Chairman of Diagnostic
Networks, Inc., a healthcare company. From 1974
to 1982, President and Chairman of RadPharm,
Inc., a healthcare company subsequently sold to
Mallinckrodt, Inc., a healthcare products and
specialty chemicals company ("Mallinckrodt").
Diplomate of the American Boards of Radiology and
Nuclear Medicine and a Fellow of the American
College of Nuclear Physicians.
Donald L. Murfin............... 53 1993 General Partner of Chemicals and Materials
Enterprise Associates, L.P., a venture capital
firm affiliated with New Enterprise Associates V,
L.P., of which he is a Special Partner, since
1989. From 1979 to 1988, President and a Director
of Lubrizol Enterprises, Inc., a venture develop-
ment company, and from 1985 to 1988, Vice
President of The Lubrizol Corporation, its parent
company. Trustee of the Edison Biotechnology
Center and member of the Board of Directors of
Genentech, Inc.
DIRECTORS WHOSE TERMS EXPIRE
IN 1998 (CLASS II DIRECTORS)
Robert E. Curry, Ph.D.......... 50 1992 General Partner of the Sprout Group, a venture
capital firm, since 1991. From 1984 to 1991,
served in a variety of positions at Merrill Lynch
R&D Management Inc. and Merrill Lynch Venture
Capital, Inc., most recently as General Partner
and President of ML Venture Partners II, L.P., a
venture capital firm and as General Partner and
President of ML Technology Ventures. Member of
the Board of Directors of Biocircuits, Corp.,
Connective Therapeutics, Inc., and Photon
Technology International, Inc.
Jean Deleage, Ph.D............. 56 1990 Managing General Partner of Burr, Egan, Deleage &
Co., a venture capital firm, since 1979. Member
of the Board of Directors of DepoTech
Corporation, OraVax, Inc., Flamel Technologies
S.A., Genset S.A., and JTS Corporation.
</TABLE>
6
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION, OTHER
DIRECTOR BUSINESS EXPERIENCE DURING PAST FIVE
NAME AGE SINCE YEARS AND OTHER DIRECTORSHIPS
- ------------------------------- --- -------- -------------------------------------------------
<S> <C> <C> <C>
Joseph F. Lovett............... 48 1990 General Partner of Medical Science Ventures,
L.P., the general partner of Medical Science
Partners, L.P., a venture capital firm, since
1988. From 1985 to 1988, Senior Vice President of
Damon Biotech, a biotechnology company. From 1980
to 1985, served in a variety of positions at
Mallinckrodt, most recently as Vice President and
General Manager of in vivo imaging.
DIRECTORS WHOSE TERMS EXPIRE
IN 1999 (CLASS III DIRECTORS)
Richard T. Dean, Ph.D.......... 49 1990 President, Chief Executive Officer and a Director
since April 1990, and a founder of the Company.
Director of Radiopharmaceutical Research and
Development at Centocor, Inc., a pharmaceutical
company from 1986 to 1990. From 1981 to 1986,
served in a variety of positions at Mallinckrodt,
most recently as Associate Director, Diagnostic
Chemistry Research and Development.
Robert S. Lees, M.D............ 62 1990 A founder of the Company. Professor of Health
Sciences and Technology in the
Harvard-Massachusetts Institute of Technology
Division of Health Sciences and Technology since
1988 and President of the Boston Heart Foundation
since 1985. Director and founder of the
Arteriosclerosis Center at the Massachusetts
Institute of Technology ("MIT") since 1973.
Professor at MIT since 1968 and Harvard
University since 1988.
Daniel L. Peters............... 45 1996 President and a Director of Nycomed Inc., a
diagnostic imaging contrast agent company, since
October 1994. From 1991 to 1994, served in a
variety of positions at Sanofi-Winthrop, a
pharmaceutical management company, most recently
as President.
</TABLE>
For information relating to shares of Common Stock beneficially owned by
each of the directors, see "Security Ownership of Certain Beneficial Owners and
Management."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Such persons are required by Commission regulations to furnish the Company with
copies of all Section 16(a) forms filed by such person with respect to the
Company.
Based solely on its review of copies of reports filed by reporting persons
pursuant to Section 16(a) of the Exchange Act, or written representations from
reporting persons that no Form 5 filing was required for such person, the
Company believes that, during 1996, all filings required to be made by reporting
persons of the Company were timely made in accordance with the requirements of
the Exchange Act, other than a filing by Richard T. Dean with respect to a sale
transaction, a filing by Daniel F. Harrington with respect to a stock option
grant, and filings by Joseph F. Lovett and Medical Science Partners, L.P., with
respect to the exercise of warrants, which were not made on a timely basis.
7
<PAGE> 9
BOARD AND COMMITTEE MEETINGS
The Board of Directors met six times (including by telephone conference and
by written consent) during 1996. All directors attended at least 75% of the
meetings of the Board of Directors and the meetings of the committees on which
they served.
The Board of Directors has a Compensation Committee, which makes
recommendations concerning salaries and incentive compensation for employees of
and consultants to the Company, establishes and approves salaries and incentive
compensation for certain senior officers and employees and administers and
grants stock options pursuant to the Company's stock option plans. The
Compensation Committee held one meeting during 1996. The members of the
Compensation Committee are Dr. Curry, Mr. Lovett and Mr. Peters.
The Board of Directors has an Audit Committee, which reviews the results
and scope of the audit and other services provided by the Company's independent
public accountants. The Audit Committee held two meetings during 1996. The
members of the Audit Committee are Messrs. Christensen and Murfin and Dr.
Deleage.
The Company does not have a nominating committee or a committee serving a
similar function. Nominations are made by and through the full Board of
Directors.
COMPENSATION OF DIRECTORS
Each non-employee director is paid $1,500 for personal or telephonic
attendance at a Board or committee meeting. Other directors are not entitled to
compensation in their capacities as directors. All of the directors are
reimbursed for their expenses incurred in connection with their attendance at
Board and committee meetings.
In addition, Dr. Lees received approximately $40,000 in compensation in the
year ended December 31, 1996 in connection with the provision of certain
consulting services to the Company.
In January 1996, the Company adopted the 1996 Director Stock Option Plan
(the "Director Plan"). Under the terms of the Director Plan, options to purchase
5,000 shares of Common Stock were granted to each director of the Company other
than Dr. Dean as of June 12, 1996 at an exercise price of $8.50 per share. The
Director Plan also provides that options to purchase 5,000 shares of Common
Stock will be granted to each new director upon his or her initial election to
the Board of Directors. Upon the election of Mr. Daniel L. Peters to the Board
of Directors on December 18, 1996, Mr. Peters was granted an option to purchase
5,000 shares of Common Stock at an exercise price of $7.125 per share. Annual
options to purchase 2,500 shares of Common Stock will be granted to each
eligible director on May 1 of each year commencing in 1997. All options will
vest on the first anniversary of the date of grant; provided, that the
exercisability of these options will be accelerated upon the occurrence of a
change in control of the Company (as defined in the Director Plan). A total of
250,000 shares of Common Stock may be issued upon the exercise of stock options
granted under the Director Plan. The exercise price of options granted under the
Director Plan will equal the closing price of the Common Stock on the date of
grant.
8
<PAGE> 10
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth the compensation for the fiscal years ended
December 31, 1996 ("fiscal 1996") and December 31, 1995 for the Company's Chief
Executive Officer and the Company's three other most highly compensated
executive officers (other than the Chief Executive Officer) whose total annual
salary and bonus exceeded $100,000 in fiscal 1996 (the Chief Executive Officer
and such other executive officers are hereinafter referred to as the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
--------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(1) SALARY BONUS COMPENSATION OPTIONS COMPENSATION(2)
- ------------------------------ -------- ------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard T. Dean............... 1996 $207,500 $40,000 $4,998(3) -- $ 1,000
President, Chief Executive 1995 197,125 47,125 7,033(3) 60,000 957
Officer and Treasurer
Edward M. Aten................ 1996 163,625 -- 57,438(4) -- --
Vice President of Medical 1995 170,000 -- -- 60,000 --
Affairs
Ronald B. Kinder.............. 1996 152,607 -- 650(3) -- 2,289
Executive Vice President and 1995 144,930 -- 600(3) 15,000 2,210
Chief Operating Officer
Mark A. Attarian(5)........... 1996 125,721 -- 166(3) -- 1,886
Former Chief Financial 1995 125,000 -- 312(3) 0 1,875
Officer
</TABLE>
- ---------------
(1) In accordance with the rules of the SEC, this table and the stock option
exercise table which follows present information concerning the Company's
CEO and its other most highly compensated executive officers whose total
annual salary and bonus exceed $100,000 (determined by reference to total
annual salary and bonus earned by such officers) for fiscal 1996. Daniel F.
Harrington, who joined the Company as Chief Financial Officer in December
1996, currently receives an annual salary of $165,000 and would have been
included in this table if he had served in such position during all of
fiscal 1996. On December 16, 1996, pursuant to the Company's 1992 Stock
Option Plan, Mr. Harrington was granted incentive and non-statutory stock
options to purchase an aggregate of 100,000 shares of Common Stock at an
exercise price of $7.0625 per share. These stock options are currently
exercisable with respect to 20,000 of the shares covered thereby and will
become exercisable with respect to the balance of the shares covered thereby
in five equal annual installments, in arrears, commencing on December 16,
1997. The exercisability of these stock options may be accelerated in the
event of a change in control of the Company.
(2) Represents amounts contributed by the Company pursuant to its 401(k) Plan.
(3) Represents the dollar value of insurance premiums paid by the Company with
respect to life insurance for the benefit of the Named Executive Officers.
(4) Represents amount paid by the Company for relocation costs, including
related tax adjustments.
(5) Mr. Attarian resigned as Chief Financial Officer of the Company in September
1996.
Employment Agreement
The Company is a party to an employment agreement with Dr. Dean for the
period commencing April 2, 1990 and ending April 2, 1998, subject to automatic
extension for additional one-year periods unless either Dr. Dean or the Company
provides written notice to the contrary to the other party at least six months
prior to the expiration of the employment period. Under this agreement, Dr. Dean
is currently entitled to receive an
9
<PAGE> 11
annual base salary of $200,000, as it may be adjusted in the discretion of the
Board of Directors or as a result of changes in the U.S. Consumer Price Index,
and an annual cash bonus equal to up to 25% of his annual base salary based on
the attainment of management objectives determined by the Board of Directors in
its sole discretion. In the event Dr. Dean's employment is terminated (i) by the
Company without cause, (ii) due to nonrenewal of the employment agreement by the
Company or (iii) by Dr. Dean following a change in control of the Company or the
significant diminution in his authority or responsibility, he will continue to
receive his annual base salary during the one-year period commencing on the date
of termination. In the event of a change in control of the Company (as defined
in his option agreements), all outstanding unvested options held by Dr. Dean
will become immediately vested.
The Company has also entered into a registration rights agreement with Dr.
Dean that provides that in the event the Company proposes to register any of its
securities under the Securities Act of 1933, as amended, at any time, with
certain exceptions, Dr. Dean shall be entitled to include the shares of Common
Stock held by him in such registration, subject to the right of the managing
underwriter of any underwritten offering to exclude from such registration for
marketing reasons some or all of such shares.
Option Grants Table
The Company did not grant any stock options to any of the Named Executive
Officers in fiscal 1996.
Aggregated Option Exercises and Year-End Option Table
The following table sets forth certain information regarding each exercise
of a stock option during fiscal 1996 by each of the Named Executive Officers and
the number and value of unexercised options held by each of the Named Executive
Officers on December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SHARES NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED OPTIONS
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------- ----------- -------- --------------------------- -----------------------------
<S> <C> <C> <C> <C>
Richard T. Dean....... 5,400 $ 34,538(2) 166,687/48,000 $ 1,129,884/310,000
Edward M. Aten........ -- -- 0/60,000 0/327,500
Ronald B. Kinder...... -- -- 31,800/55,200 $ 212,575/367,300
Mark A. Attarian...... 36,000 228,000(3) 0/0 0/0
</TABLE>
- ---------------
(1) The closing price for the Common Stock as reported by the Nasdaq National
Market (the "NNM") on December 31, 1996 (the last day of trading in 1996)
was $7.125. Value is calculated on the basis of the difference between the
option exercise price and $7.125, multiplied by the number of shares of
Common Stock underlying the option.
(2) Value realized is calculated on the basis of the difference between the
option exercise price ($0.67) and the closing price for the Common Stock as
reported by the NNM on December 16, 1996 ($7.06), the date of exercise,
multiplied by the number of shares of Common Stock acquired upon exercise.
(3) Value realized is calculated on the basis of the difference between the
option exercise price ($0.42) and the closing price for the Common Stock as
reported by the NNM on September 3, 1996 ($6.75), the date of exercise,
multiplied by the number of shares of Common Stock acquired upon exercise.
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<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors is
responsible for establishing compensation policies with respect to the Company's
executive officers, including the Chief Executive Officer and the other
executive officers named in the Summary Compensation Table, and setting the
compensation for these individuals.
The Compensation Committee seeks to achieve three broad goals in connection
with the Company's executive compensation programs and decisions regarding
individual compensation. First, the Compensation Committee structures executive
compensation programs in a manner that the Committee believes will enable the
Company to attract and retain key executives. Second, the Compensation Committee
establishes compensation programs that are designed to reward executives for the
achievement of business objectives of the Company and/or the individual
executive's particular area of responsibility. By tying compensation in part to
achievement, the Compensation Committee believes that a performance-oriented
environment is created for the Company's executives. Finally, the Company's
executive compensation programs are intended to provide executives with an
equity interest in the Company so as to link a portion of the compensation of
the Company's executives with the performance of the Company's Common Stock.
The compensation programs for the Company's executives established by the
Compensation Committee consist principally of two elements based upon the
foregoing objectives: base salary and a stock-based equity incentive in the form
of participation in the Company's stock option plans.
In establishing base salaries for the executive officers, including the
Chief Executive Officer, the Compensation Committee monitors salaries at other
companies, particularly those that are in the same industry as the Company or
related industries and/or located in the same general geographic area as the
Company, considers historic salary levels of the individual and the nature of
the individual's responsibilities and compares the individual's base salary with
those of other executives at the Company. To the extent determined to be
appropriate, the Compensation Committee also considers general economic
conditions, the Company's financial performance and the individual's
performance. In 1996, Dr. Dean's base salary was as specified in his Employment
Agreement with the Company.
The Compensation Committee uses stock options as a significant element of
the compensation package of the Company's executive officers, including the
Chief Executive Officer, because they provide an incentive to executives to
maximize stockholder value and because they reward the executives only to the
extent that stockholders also benefit. It is not the policy of the Compensation
Committee, however, to grant stock options to executives annually, and the
timing of such grants depends upon a number of factors, including new hires of
executives, the executives' current stock and option holdings and such other
factors as the Compensation Committee deems relevant. In 1996, after reviewing
the Company's executive officers' stock and option holdings, the Compensation
Committee determined not to grant any stock options to the Company's executive
officers. When granting stock options, it has generally been the policy of the
Compensation Committee to fix the exercise price of such options at 100% of the
fair market value of the Common Stock on the date of grant.
In addition to base salary and stock options, the Compensation Committee
also considers the payment of cash bonuses as part of its compensation program.
In this regard, the Compensation Committee determined to pay a cash bonus of
$40,000 to Dr. Dean for 1996. This bonus, which was consistent with bonuses
previously paid to Dr. Dean, was paid in recognition of Dr. Dean's leadership of
the Company in attaining its 1996 performance goals, including the completion of
its initial public offering and other accomplishments in areas such as product
development and enhancement of the Company's patent position.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), enacted in 1993, generally disallows a tax deduction to public
companies for compensation over $1,000,000 paid to its chief executive officer
and its four other most highly compensated executive officers. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. In this regard, the Company has limited the number
of shares subject to stock options which may be granted to Company employees in
a manner that complies with the performance-based requirements of Section
162(m). Based on the compensation awarded to Dr. Dean and the other executive
officers of the Company, it does not appear
11
<PAGE> 13
that the Section 162(m) limitation will have a significant impact on the Company
in the near term. While the Committee does not currently intend to qualify its
incentive awards as a performance-based plan, it will continue to monitor the
impact of Section 162(m) on the Company.
COMPENSATION COMMITTEE
Robert E. Curry
Joseph F. Lovett
Daniel L. Peters
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Compensation Committee are Dr. Curry,
Mr. Lovett and Mr. Peters. No executive officer of the Company has served as a
director or member of the compensation committee (or other committee serving an
equivalent function) of any other entity, one of whose executive officers served
as a director of or member of the Compensation Committee of the Company.
Since January 1, 1996, the Company has entered into or engaged in certain
transactions with Nycomed, an entity of which Mr. Peters is an affiliate, and
with the Medical Science Partners Group, entities of which Mr. Lovett is an
affiliate. See "Certain Relationships and Related Transactions."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1996, the Company has entered into or engaged in the
following transactions with the following directors, director nominees,
executive officers and stockholders who beneficially own more than 5% of the
outstanding Common Stock of the Company ("5% Stockholders"), and affiliates of
such directors, director nominees, officers and 5% Stockholders.
In August 1995, the Company and Nycomed entered into a strategic alliance
relating to the Company's radiolabelled peptide imaging products ("Techtides").
The strategic alliance contemplates research and development support and a
marketing collaboration. Under the strategic alliance, the Company granted
Nycomed options to co-promote Techtides in the United States and to distribute
and license Techtides in Europe, South Africa and certain countries in the
Middle East. In May 1996, Nycomed exercised its co-promotion and licensing
options with respect to the Company's P829 Techtide. During the year ended
December 31, 1996, Nycomed paid to the Company an aggregate of $2,500,000 under
its collaborative agreements with Nycomed as research and development support
and option exercise payments.
In September 1995, the Company entered into a Clinical Services Agreement
with Certus International, Inc. ("Certus"), an affiliate of Dr. Aten, pursuant
to which Certus agreed to supervise the Company's clinical trials of P829. Under
this agreement, the Company agreed to pay Certus up to a total of $629,000 upon
the achievement of certain milestones in connection with the clinical trials and
a bonus depending on how promptly such milestones are achieved. In February
1996, the Company entered into a Data Management Agreement with Certus pursuant
to which Certus agreed to provide data management services with respect to the
Company's clinical trials of its P280 Techtide. Under the terms of this
agreement, the Company agreed to pay Certus up to a total of $364,800 upon the
achievement of certain milestones in connection with the data management. In
April 1996, the Company entered into a second Clinical Services Agreement with
Certus pursuant to which Certus agreed to supervise and provide data management
services with respect to the Company's clinical trials of Sn-117m DTPA. Under
the terms of this agreement, the Company agreed to pay Certus up to $1,780,500
upon the achievement of certain milestones in connection with the clinical
trials. This agreement was amended in January 1997 to reduce the scope of
services to be performed by Certus. The Company has also retained Certus to
perform certain other consulting services, including review of clinical trial
protocols and clinical trial data management, in connection with certain of the
Company's other clinical trials. During fiscal 1996, the Company paid to Certus
a total of $1,034,902 under these agreements.
In November 1996, the Company issued an aggregate of 49,089 shares of its
Common Stock to certain members of the Medical Science Partners Group and an
aggregate of 49,089 shares of its Common Stock to
12
<PAGE> 14
certain funds managed by Burr, Egan, Deleage & Co. upon the exercise of warrants
issued to such entities in 1991 in connection with a bridge financing of the
Company. Such warrants were exercised at a purchase price of $3.33 per share.
The Company is a party to a number of clinical trial agreements with the
Arizona Institute, an organization for which Dr. Handmaker serves as Executive
Director, each of which provides for the Arizona Institute to act as a site for
clinical trials of the Company's products and provides that Dr. Handmaker will
serve as principal investigator in connection with the conduct of the clinical
trials at the site. During fiscal 1996, the Company paid to the Arizona
Institute a total of $134,400 under those agreements. During fiscal 1996, the
Company also paid Healthcare Technology Group, an entity of which Dr. Handmaker
is the principal, a total of $48,214 pursuant to a consulting agreement between
Healthcare Technology Group and the Company, and on January 3, 1997 granted
Healthcare Technology Group options under the Company's 1992 Stock Option Plan
to purchase 30,000 shares of Common Stock at an exercise price of $7.375 per
share. Such options will become exercisable in five equal annual installments in
arrears commencing on January 3, 1998.
For a description of the employment arrangements between the Company and
its Chief Executive Officer, see "Compensation of Executive Officers" above. For
a description of stock options granted to, and other compensation paid to,
directors of the Company, see "Compensation of Directors" above.
The Company believes that the terms of the transactions described above
were no less favorable than the Company could have obtained from unaffiliated
third parties.
13
<PAGE> 15
STOCK PERFORMANCE GRAPH
The stock performance graph below compares the cumulative stockholder
return on the Common Stock of the Company for the period from June 12, 1996 (the
date of the Company's initial public offering) through December 31, 1996 with
the cumulative total return on (i) the S&P 500 Index and (ii) the Nasdaq
Pharmaceutical Index (the "Nasdaq Index"). This graph assumes the investment of
$100 in the Company's Common Stock (at the initial public offering price), the
S&P 500 Index and the Nasdaq Index on June 12, 1996 and assumes dividends are
reinvested. Prior to June 12, 1996, the Company's Common Stock was not
registered under the Exchange Act.
COMPARATIVE TOTAL RETURNS DIATIDE, INC., S&P 500 INDEX, NASDAQ INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) DIATIDE, INC. S&P 500 INDEX NASDAQ INDEX
<S> <C> <C> <C>
6/12/96 100.00 100.00 100.00
12/31/96 83.82 112.11 90.08
</TABLE>
PROPOSAL 2 -- RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as auditors of the
Company for the year ending December 31, 1997, subject to ratification by
stockholders at the Meeting. If the stockholders do not ratify the selection of
Ernst & Young LLP, the Board of Directors will reconsider the matter. A
representative of Ernst & Young LLP, which served as auditors for the year ended
December 31, 1996, is expected to be present at the Meeting, to respond to
appropriate questions, and to make a statement if he or she so desires.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any proposal that a stockholder intends to present at the 1998 Annual
Meeting of Stockholders must be submitted to the Secretary of the Company at its
offices, Nine Delta Drive, Londonderry, New Hampshire 03053, no later than
December 24, 1997 in order to be considered for inclusion in the Proxy Statement
relating to that meeting.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
for consideration at the Meeting other than that described above. However, if
any other business should come before the Meeting, it is
14
<PAGE> 16
the intention of the persons named in the enclosed Proxy to vote, or otherwise
act, in accordance with their best judgment on such matters.
The Company will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular employees
may, without additional remuneration, solicit proxies by telephone, telegraph,
facsimile and personal interviews. The Company will also request brokerage
houses, custodians, nominees and fiduciaries to forward copies of the proxy
material to those persons for whom they hold shares and request instructions for
voting the Proxies. The Company will reimburse such brokerage houses and other
persons for their reasonable expenses in connection with this distribution.
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
By Order of the Board of Directors,
Ronald B. Kinder, Secretary
April 25, 1997
15
<PAGE> 17
DETACH HERE
DIATIDE, INC.
ANNUAL MEETING OF STOCKHOLDERS - MAY 21, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY
P
The undersigned, revoking all prior proxies, hereby appoint(s) Richard
T. Dean, Daniel F. Harrington and Ronald B. Kinder, and each or any of
R them, as proxies of the undersigned (with full power of substitution in
them and each of them) to attend and represent the undersigned at the
Annual Meeting of Stockholders of Diatide, Inc. (the "Company") to be held
O at the offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts
02109, on Wednesday, May 21, 1997 at 10:00 a.m. (local time), and any
adjourned sessions thereof, and there to act and vote, as indicated, upon
X all matters referred to on the reverse side and described in the proxy
statement relating to the Meeting, all shares of Common Stock of the
Company which the undersigned would be entitled to vote or act upon, with
Y all powers the undersigned would possess, if personally present at the
Meeting and at any adjourned sessions thereof. Each of the following
matters is being proposed by the Board of Directors of the Company. All
capitalized terms used in this proxy and not defined herein shall have the
meaning ascribed them in the proxy statement relating to the Meeting.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON OTHER
MATTERS AS PROPERLY MAY COME BEFORE THE MEETING, OR ANY ADJOURNMENT
THEREOF.
-------------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-------------
<PAGE> 18
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO ANY ELECTION TO
OFFICE OR PROPOSAL SPECIFIED BELOW, THIS PROXY WILL BE VOTED FOR SUCH
ELECTION TO OFFICE OR PROPOSAL.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
1. Election of Class 1 Directors. 2. Ratification of the selection of Ernst [ ] [ ] [ ]
& Young LLP as the Company's
NOMINEES: Gustav A. Christensen, Donald L. Murfin, independent auditors for the current year.
and Hirsch Handmaker
FOR WITHHELD
[ ] [ ] MARK HERE
FOR ADDRESS [ ]
CHANGE AND
[ ] NOTE AT RIGHT
--------------------------------------------
(INSTRUCTION: TO WITHHOLD AUTHORITY TO
VOTE FOR ANY INDIVIDUAL NOMINEE, MARK Attendance of the undersigned at the Meeting or at any adjourned
THIS BOX AND PRINT THE NOMINEE(S) NAME(S) session thereof will not be deemed to revoke this proxy unless the
ON THE LINE PROVIDED ABOVE. YOUR SHARES undersigned shall affirmatively indicate thereat the intention of the
WILL BE VOTED FOR THE REMAINING NOMINEE(S).) undersigned to vote said shares in person. If the undersigned hold(s)
any of the shares of the Company in a fiduciary, custodial or joint
capacity or capacities, this proxy is signed by the undersigned in
every such capacity as well as individually.
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE
ENCLOSED POST-PAID RETURN ENVELOPE.
Please sign name(s) exactly as appearing hereon. When signing as
attorney, executor, administrator or other fiduciary, please give your
full title as such. Joint owners should each sign personally.
Signature: Date: Signature: Date:
------------------------------------ ------------- ------------------------------------ -------------
</TABLE>
