SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) 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 Section 240.14a-11(c) or Section 240.14a-12
MEDCO RESEARCH INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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>
MEDCO RESEARCH INC.
--------------------------------------------
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
To be Held on May 26, 1999
--------------------------------------------
DEAR SHAREHOLDER:
Notice is hereby given that the annual meeting of shareholders (the
"Annual Meeting") of Medco Research, Inc. (the "Company") will be held at the
Millennium Hilton -- 55 Church Street, New York, New York at 10:00 a.m. on May
26, 1999 for the following purposes, as more fully described in the attached
Proxy Statement:
1. To elect six directors of the Company to serve until the next annual
meeting of shareholders;
2. To ratify the appointment of PricewaterhouseCoopers, LLP as independent
accountants for the Company; and
3. To consider and act upon such other matters as may properly come before
the meeting.
The Board of Directors has fixed the close of business on March 29, 1999
as the record date for determining the shareholders entitled to notice of and
to vote at the Annual Meeting or at any adjournment thereof.
You are cordially invited to attend the Annual Meeting in person. In order
to ensure your representation at the Meeting, however, please promptly
complete, date, sign, and return the enclosed proxy in the accompanying
envelope. A majority of the outstanding shares of Common Stock must be
represented (in person or by proxy) at the Annual Meeting in order that
business may be transacted. Therefore, your promptness in returning the
completed and signed proxy will help to ensure that the Company will not have
to bear the expense of undertaking a second solicitation. A shareholder who
executes and returns the accompanying proxy may revoke such proxy at any time
before it is voted at the Annual Meeting by complying with the procedures set
forth in the following Proxy Statement under "General Information."
By Order of the Board of Directors
ADAM C. DERBYSHIRE
Secretary
Cary,
North Carolina 27513
March 29, 1999
<PAGE>
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MEDCO RESEARCH, INC.
-----------------------------------
PROXY STATEMENT FOR ANNUAL MEETING
TO BE HELD MAY 26, 1999
-----------------------------------
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of Medco
Research, Inc. (the "Company") for use at the annual meeting of shareholders
(the "Annual Meeting") to be held May 26, 1999, and any adjournment of the
Annual Meeting, and it will be voted by the proxy holders in accordance with
the instructions given in the proxy if it is returned and received in time for
the Annual Meeting, is duly executed and is not revoked. If no direction is
given in the proxy, it will be voted "For" (i) the election of the directors
nominated by the Board and (ii) the ratification of the appointment of
PricewaterhouseCoopers, LLP as the Company's independent accountants. With
respect to any other item of business that may come before the Annual Meeting,
the proxy holders will vote the proxy in accordance with their best judgment,
and they also will have discretionary authority to cumulate votes in the
election of directors in the event any shareholder gives notice of his or her
intention to cumulate votes for directors of the Company. So far as the Company
is aware, no matters will be presented to the Meeting for action on the part of
the shareholders other than those stated in the foregoing Notice.
A proxy may be revoked at any time before it has been exercised by written
notice of revocation given to the Secretary of the Company, by executing and
delivering to the Secretary a proxy dated as of a later date than the enclosed
proxy, or by attending the Annual Meeting and voting in person. Attendance at
the Meeting will not in and of itself revoke a proxy.
Abstentions will be deemed to be present at the Meeting for purposes of
determining a quorum and will be counted as voting (but not "for" or "against")
with regard to the issue to which the abstention relates. Any "broker non-vote"
also will be deemed to be present for quorum purposes, but will not be counted
as voting with regard to the issue to which it relates. Thus, an abstention
will have the same effect as a vote "against" such issue while a broker
non-vote will have no effect.
Holders of record of Common Stock at the close of business on March 29,
1999 are entitled to vote at the Annual Meeting. There were 10,322,145 shares
of Common Stock outstanding as of the record date. The presence, in person or
by proxy, of shareholders entitled to cast at least a majority of the votes
entitled to be cast by all shareholders will constitute a quorum for the
transaction of business at the Annual Meeting.
Shareholders are entitled to cast one vote per share on each matter
presented for consideration and action by the shareholders. With respect to the
election of directors, however, shareholders may cumulate their votes.
Cumulative voting permits each shareholder to cast a total number of votes
equal to the number of directors to be elected multiplied by the number of
shares actually owned. All of the votes may be cast for one nominee, may be
divided equally among the nominees or may be divided among the nominees in any
other manner. However, a shareholder may cumulate votes for one or more
nominees only if the nominees' names are placed in nomination prior to voting
and any shareholder gives notice at the meeting, prior to the voting, of his or
her intention to cumulate votes. If any shareholder gives such notice, all
shareholders may cumulate their votes for the nominees.
This Proxy Statement, together with the accompanying proxy, is first being
mailed to shareholders on or about March 31, 1999.
ELECTION OF DIRECTORS
(Item 1)
The Board of Directors
The Company's business is managed under the direction of its Board of
Directors. The Board of Directors has designated as nominees for election the
six directors currently serving on the Board. See "Nominees for Director" below
for profiles of the nominees.
All of the nominees have indicated a willingness to serve as directors,
but if any of them should decline or be unable to act as a director, the proxy
holders will vote for the election of another person or persons as the Board of
Directors recommends. The Company has no reason to believe that any nominee
will be unavailable. In the event that any shareholder gives notice at the
Annual Meeting of his or her intention to cumulate votes for the election of
directors, the proxy holders in their discretion may cumulate the votes
represented by the proxies. The proxy holders may cast such votes entirely for
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one nominee or split their votes among such number of nominees as they may
determine in their discretion. Proxies received cannot be voted for a greater
number of persons than the number of nominees for election as directors.
The Board recommends a vote FOR and solicits proxies in favor of the
nominees named below. Nominees receiving the highest number of affirmative
votes cast, up to the number of directors to be elected, will be elected as
directors. The proxy holders will vote the proxies for the above nominees.
Directors are to be elected to hold office until the next annual meeting of
shareholders and until their successors are elected and qualified, or until
earlier resignation or removal.
Nominees for Director
William M. Bartlett, age 66, has served as a Director of the Company since
September 1992. Since then Mr. Bartlett has been an independent health care
business consultant. He currently is a director of Vysis, Inc., a public
genomic diagnostic research company. From 1990 to 1992, Mr. Bartlett served as
the Chief Operating Officer of McDermott, Will & Emory, a large Chicago-based
law firm. From 1982 to 1990, he served as the President, Chief Executive
Officer and a Director of Kewaunee Scientific Corporation, a manufacturer of
scientific laboratory furniture and equipment. Prior to that, Mr. Bartlett
served as a Corporate Vice President, President and Chief Executive Officer of
G.D. Searle & Company's Medical Products Group, and at American Hospital Supply
Corporation as President of the Atlantic International Division, and as
President of the V. Mueller Surgical Instrument Division. Mr. Bartlett has a
BSCE from Duke University and an Advanced Marketing Certification from the
Kellogg School of Northwestern University.
Roger D. Blevins, Pharm. D., age 43, has been the President and Chief
Executive Officer of the Company since February 1998. Previously, he has served
as President and Chief Operating Officer from June 1995, Vice President of
Research and Development from October 1990, and Director of Cardiovascular
Research from July 1988. Prior to joining the Company, Dr. Blevins was Research
Associate (1982-1984), Associate Director (1984-1986) and Director (1986-1988),
Center for Cardiovascular Research, Department of Medicine, Sinai Hospital of
Detroit and was Assistant Professor, School of Pharmacy, Wayne State University
(1984-1988). Dr. Blevins received his Bachelor of Science (1980) and Doctor of
Pharmacy (1982) degrees from Wayne State University in Detroit, Michigan.
Jay N. Cohn, M.D., age 68, joined the Company as a Director in May 1996.
He is Professor of Medicine, Cardiovascular Division, Department of Medicine,
University of Minnesota Medical School, and holds a staff appointment at the VA
Medical Center in Minneapolis. Dr. Cohn is the author of over 500 scientific
publications and is currently editor-in-chief of the Journal Of Cardiac
Failure. He is internationally recognized for contributions to the management
of cardiovascular diseases and holds several patents on inventions aimed at
improving diagnostic and therapeutic approaches to heart failure and
hypertension. He is Immediate Past-President of the American Society of Heart
Failure and Immediate Past-President of the International Society of
Hypertension. He received his M.D. from Cornell University in 1956, and is a
Fellow of the American College of Physicians, the American College of
Cardiology, and the American Association for the Advancement of Science.
Mark B. Hirsch, age 52, joined the Company as a Director in May 1996. Mr.
Hirsch is currently a consultant to the Biotech Industry. From December 1996 to
June 1997, Mr. Hirsch was the Chief Executive Officer and President of RedCell,
Inc. From May 1996 to December 1996, he was Executive Vice President and Chief
Financial Officer of RedCell, Inc. From April 1993 to April 1996, he was Vice
President, Corporate Development, of CV Therapeutics. From 1991 to March 1993,
Mr. Hirsch was Vice President of Business Development and Chief Financial
Officer of Arris Pharmaceutical Corporation. From 1988 to 1991, Mr. Hirsch was
a partner at Montgomery Medical Ventures, L.P. II. From 1985 to 1988, he was
Vice President of Business Development of Genentech, Inc. From 1969 to 1985,
Mr. Hirsch held several positions with American Hospital Supply Corporation,
including Vice President of American's Hospital Sector. Mr. Hirsch received a
B.S. in accounting from the University of Illinois, and he is a certified
public accountant.
Eugene L. Step, age 70, has served as a Director of the Company since
January 1993. He currently serves as a Director of Scios, Inc., Cell-Genesis,
Inc., DBT Online Inc., Guidant Corp., and Pathogenesis, Inc. He served as
Executive Vice President and President of the Pharmaceutical Division of Eli
Lilly and Company from 1986 until his retirement in 1992. From 1973 through
1985, he also served as President of that company's Pharmaceutical Division.
Mr. Step served as a member of the Board of Directors and Executive Committee
of Eli Lilly and Company from 1973 through 1992. Mr. Step has a B.A. degree in
Economics from the University of Nebraska and a M.S. degree in Accounting and
Finance from the University of Illinois.
2
<PAGE>
Richard C. Williams, age 55, has served as a Director of the Company since
January 1991 and as Chairman of the Company's Board of Directors since October
1992. Mr. Williams has been President of Conner-Thoele Limited, a consulting
and financial advisory firm which services the health care and pharmaceutical
industries, since March 1989. Mr. Williams also serves as a Director of
Immunomedics, Inc., a biopharmaceutical research company, and as co-chairman
and a Director of Vysis, Inc., a public genomic diagnostic research company.
From November 1983 to March 1989, Mr. Williams served as Vice President-Finance
and Chief Financial Officer of Erbamont N.V., a pharmaceutical company. Prior
to that, he served in various financial executive positions with Field
Enterprises, Inc., a real estate and communications company, and with Abbott
Laboratories, UNC Resources, and American Hospital Supply Corporation. He is
also a Director of Centaur, Inc., a private equine diagnostic company. Mr.
Williams has a B. A. degree from DePauw University and an MBA from the Wharton
School of Business.
Compensation and Committees of the Board of Directors
The Company pays its Chairman of the Board and each director who is not a
full-time employee of the Company an annual retainer of $50,000 and $16,000,
respectively, which the Company pays quarterly. Each such director is also paid
$1,000 per diem for each Board meeting and the Annual Shareholders Meeting
attended by that director and $400 for each Board or Board Committee meeting
held by telephone conference call lasting up to two hours but greater than a
half hour and $600 for each such meeting lasting more than two hours. Directors
also are reimbursed for their travel expenses incurred to attend meetings.
Pursuant to the Company's stock option plans, directors who are not full-time
employees of the Company automatically are granted an option to purchase 5,000
shares of the Company's Common Stock upon reelection as a director at the
Annual Meeting of Shareholders. In addition, in order to attract experienced
individuals, new directors joining the Board of Directors automatically are
granted an option to purchase 20,000 shares of the Company's Common Stock if
they are not full-time employees of the Company. All such director options have
a term of ten years, are granted at an exercise price equal to the fair market
value of such shares on the date of grant of such options, and vest in full
after one year.
Mr. Richard C. Williams, Chairman of the Board, continued to provide
consulting services to the Company through September 30, 1998, pursuant to a
consulting agreement which commenced December 1, 1994 and terminated on
September 30, 1998. For his consulting services in 1998, the Company paid Mr.
Williams $108,000 as well as related travel expenses. See "Certain
Transactions" below.
During the year ended December 31, 1998, the Board of Directors met on
four occasions. A number of matters that otherwise would have been addressed in
separate meetings of the Compensation Committee, Finance and Audit Committee,
Corporate Governance Committee, and Executive Committee of the Board of
Directors during that period were instead addressed at Board meetings. Each
director attended at least 75% of the meetings of the Board and those
committees on which the director served.
A Compensation Committee of the Board of Directors, currently consisting
of Messrs. Hirsch, Bartlett and Dr. Cohn, administers the Company's stock
option plans, votes on matters concerning participation in these plans and
makes recommendations to the entire Board of Directors as to, or itself
approves, other matters of compensation of officers. The Compensation Committee
took action on one occasion by written consent during the year ended December
31, 1998.
The Finance and Audit Committee of the Board of Directors, whose members
currently are Messrs. Bartlett, Hirsch and Step, reviews certain financial and
audit matters relating to the Company. The Finance and Audit Committee held one
meeting during the year ended December 31, 1998.
The Corporate Governance Committee of the Board of Directors, whose
members currently are Messrs. Step, Williams and Dr. Cohn. A Corporate
Governance Committee makes recommendations to the full Board of Directors
concerning nominees for election as directors of the Company. In making its
recommendations, the Corporate Governance Committee will consider as potential
nominees persons recommended by the Company's shareholders. Any such
recommendations should be in writing and should be mailed or delivered to the
Company, marked for the attention of the Company's Secretary, on or before the
date for receipt of shareholder proposals for the next annual meeting. See
"Shareholder Proposals for the 2000 Annual Meeting".
3
<PAGE>
RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(Item 2)
The Company, upon the recommendation of the Finance and Audit Committee
which was approved by the Board of Directors, unanimously recommends
ratification of the appointment of PricewaterhouseCoopers, LLP as the
independent public accountants to serve as auditors to examine the Company's
financial statements for the 1999 fiscal year. PricewaterhouseCoopers, LLP has
served as the Company's independent accountants since January 1997. Neither
such firm nor any of its associates has any relationship with the Company
except in their capacity as auditors.
The Board recommends that the shareholders vote FOR the ratification of
PricewaterhouseCoopers, LLP as the Company's independent accountants. The
affirmative vote of the holders of at least a majority of the Common Stock
present in person, or represented by proxy, at the Annual Meeting and entitled
to vote on this proposal is required to approve such ratification. For this
purpose, abstentions will be counted as votes against and broker non-votes will
not be treated as voting on the proposal. The persons named in the accompanying
proxy will vote in accordance with the choice specified thereon, or, if no
choice is properly indicated, in favor of the ratification of the appointment
of PricewaterhouseCoopers, LLP.
A representative of PricewaterhouseCoopers, LLP is expected to attend the
Annual Meeting and to be available to respond to appropriate questions raised
during the Annual Meeting. The representative will also have an opportunity to
make a statement during the Meeting if the representative so desires.
EXECUTIVE COMPENSATION
Executive Officers
In addition to Dr. Blevins, President and Chief Executive Officer who
serves as a director of the Company, the following person is an executive
officer of the Company:
Glenn C. Andrews, CFA, age 48, is the Executive Vice President, Finance
and Administration, Chief Financial Officer and Treasurer of the Company. He
joined the Company as Vice President and Chief Financial Officer in July 1996.
From September 1995 to July 1996 he was Vice President, Planning and Analysis
of Coastal Physician Group, Inc. From September 1984 to September 1995, he was
employed by Burroughs Wellcome Co. where he served as Treasurer from 1992 to
1995 and as Director of Business Analysis and Planning from 1989 to 1992. Mr.
Andrews received his B.S. degree in 1974 and MBA in 1977 from the University of
Tennessee.
Incentive Compensation Plan
In 1991 the Company adopted a Management Incentive Plan (the "Incentive
Plan") to provide additional cash compensation to key Company executives based
on their individual performance as well as the financial performance of the
Company. Incentive Plan participants must be approved by the Compensation
Committee of the Board of Directors, which establishes annual ceiling amounts
of distributions under the Incentive Plan for each participant based on such
individual's annual salary. Distributions are based 90% on the Company's
achievement of its corporate objectives and 10% based on the Committee's
evaluation of the participant's achievement during the year of his or her
individual objectives.
Report of the Compensation Committee for 1998 Executive Compensation
The Compensation Committee of the Board of Directors, which is composed
entirely of directors who have never been employees of the Company, is
responsible for setting and administering the policies and programs that govern
both annual and long-term compensation.
In 1991 the Company adopted a Management Incentive Plan (the "Incentive
Plan") to provide additional cash compensation to key Company executives based
on their individual performance as well as the financial performance of the
Company. Plan participants must be approved by the Compensation Committee,
which establishes annual ceiling amounts of distributions under the Incentive
Plan for each participant based on such individual's annual salary. The
executive compensation program is designed to align compensation with the
Company's business strategy, values and management initiatives.
In 1996 the Company retained the Human Strategies Group of Deloitte &
Touche, LLP to conduct a comprehensive comparative study (the "Comparative
Study") of the Company's compensation, annual and long-term components, and
benefits programs for its executive officers and other employees. This
Comparative Study was highly utilized by the Company with respect to 1998
compensation and benefits programs, and is intended to be the basis of such
programs for the next year, subject to the Committee's annual reviews for
possible adjustment. By having a significant amount of compensation
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in the form of annual bonus and stock options awarded at the discretion of the
Committee based 10% on each executive's performance of his or her own set of
individual objectives and 90% on the Company's achievement of its corporate
objectives, as described below, the program is intended to:
Provide incentive to implement the Company's annual objectives and
long-term strategy aligned with the interests of shareholders;
Reward superior performance; and
Help attract and retain key executives critical to the long-term success
of the Company.
The Company's executive compensation program consists of two key elements:
(1) an annual component, i.e., base salary and annual bonus, and (2) a
long-term component, i.e. stock options. The amount of salary, bonus and
options granted for 1998 was determined by, among other measures, comparison
with the data in the Comparative Study, as described above, with the goal of
providing total compensation that approximates the median of the range of the
compensation, both in the aggregate and for each compensation component,
reported in the Comparative Study to have been paid by comparable companies.
The program substantially rewards the management team if the Company achieves
its corporate objectives, and it also recognizes meaningful differences in
individual performance and offers the opportunity to earn rewards when merited
by individual performance.
For 1998 the Board of Directors determined that the Company's corporate
objectives were 102.5% achieved, and the Compensation Committee determined that
achievement of individual objectives were 100% achieved.
The policies with respect to each of these elements, as well as the basis
for determining the 1998 compensation of the Company's Chief Executive Officer,
are described below.
(1) Annual Component: Base Salary and Annual Bonus
Base Salary. Base salaries for executive officers are determined by the
Committee with reference to the salary range for each position as reflected by
the associated job description and a general assessment of the executive's
performance, experience and potential. The Committee establishes these salaries
annually or in connection with the officer's employment agreement, if any.
Annual Bonus. An annual bonus may be paid to executive officers following
the end of each fiscal year, up to a maximum percentage of base salary as
determined by the Committee for such year either in accordance with their
respective employment agreements, if any, or otherwise based on the job
description. The percentage of base salary is 40% for the Chief Executive
Officer and 30% for other executive officers. These bonus percentages were
consistent with the information provided in the Comparative Study. Ninety
percent (90%) of the bonus is based on the Company's achievement of its
corporate objectives, and 10% of the bonus is awarded based on the Committee's
evaluation of the officer's achievement during the year of his or her
individual objectives. The Committee allows up to 125% of the named executive
officer's bonus to be awarded based on comparable over-achievement of corporate
and individual objectives; however, no bonus is awarded in respect of the
achievement of corporate and individual objectives unless at least 67% and 80%,
respectively, of the corporate or individual objectives is achieved. All
objectives were approved by the President and Chief Executive Officer of the
Company except that his objectives were approved by the Committee and the
entire Board.
(2) Long-Term Component:
Stock Options. In 1993, the Committee established levels for the amount of
annual stock options to be granted to the Chief Executive Officer and other
executive positions. Data in the Comparative Study confirmed these levels to
approximate the median of the range of the awards reported to have been paid by
comparable companies (up to 65,000 shares for the President and 40,000 shares
for Vice Presidents/Officers). The Committee awards options exercisable for a
period of 10 years to buy a number of shares of the Company's Common Stock at a
price equal to the market price of the stock on the date of grant. For 1999
option grants, the Committee considered such events and factors which occurred
during the year and took into account the accomplishment of corporate and
individual objectives. For 1999 annual option grants, made on December 9, 1998,
25% of the options awarded vest on and after the first anniversary date of the
grant, 25% vest on and after the second anniversary date of the grant, 25% vest
on and after the third anniversary of the grant date, and the remaining 25%
vest on and after the fourth anniversary of the grant date. The Committee
allows up to 125% of the named executive officers' option grant to be awarded
based on comparable over-achievement of corporate and individual objectives,
however, no option grant shall be awarded in respect of the achievement of
corporate and individual objectives unless at least 67% and 80%, respectively,
of the corporate or individual objectives is achieved. The Committee believes
that, because
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these options gain value only to the extent the price of the Company's Common
Stock increases above the option exercise price during the life of the option,
management's equity participation offers a significant incentive and helps
create a long-term partnership between management/owners and other
shareholders.
The Committee set the 1998 annual and long-term compensation for Dr.
Blevins near the median of the range paid by then comparable companies.
Effective March 1, 1998, his annual salary was increased to $275,000, and his
1999 option grant was 65,000 shares, which are to be earned and vested as
described above. His performance bonus was adjusted to a potential of up to 40%
of base salary. The Committee determined that Dr. Blevins was entitled to
102.5% of his bonus, based 90% on the Company's 102.5% achievement of its
corporate objectives and 10% on Dr. Blevins' 100% achievement of his individual
objectives: (1) increasing shareholder value; (2) providing for
commercialization of products; and (3) generating non-royalty revenue.
The Compensation Committee of the Board of Directors
Mark B. Hirsch, Chairman
Jay N. Cohn, M.D.
William M. Bartlett
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Summary Compensation
The following Summary Compensation Table reflects certain information
regarding the most highly compensated executive officers whose total annual
salary and bonus for the last completed fiscal year exceeded $100,000 (the
"named executive officer").
Summary Compensation Table
Annual Compensation
<TABLE>
<CAPTION>
Bonus Other Long-Term Compensation
Earned Annual Securities Underlying All Other
Name & Principal Position Year Salary ($) ($)(1) Compensation ($) Options/SAR's (#) Compensation ($)
- ----------------------------- ------ ------------ --------- ------------------ ----------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Roger D. Blevins, Pharm. D. 1998 272,424 111,422 -- 65,000(2) --
President & Chief 1997 230,000 69,902 -- 95,000(3) --
Executive Officer 1996 230,000 70,003 -- 185,000(4) --
Glenn C. Andrews, CFA 1998 166,920 51,203 -- 40,000(5) --
Executive Vice President, 1997 156,000 41,340 -- 69,500(6)
Finance & Administration, 1996 75,000 (7) 22,239 -- 40,000(8) --
Chief Financial Officer and
Treasurer
</TABLE>
- ---------
1. Represents the amount earned by the named executive officer pursuant to the
Company's Incentive Plan. See Incentive Compensation Plan, above, for a
brief description of the Plan.
2. The options granted to Dr. Blevins consisted of 65,000 shares associated
with the 1999 annual grant made on December 9, 1998.
3. The options granted to Dr. Blevins consisted of 45,000 shares associated
with the 1997 annual grant made on February 10, 1997 and 50,000 shares
associated with the 1998 annual grant made on November 12 1997.
4. The options granted to Dr. Blevins consisted of 65,000 shares associated
with the 1996 annual grant and 120,000 shares upon the signing of a three
year employment agreement. See Employment Contracts; Termination of
Employment and Change-in-Control Arrangements, below, for a description of
Dr. Blevins' employment agreement.
5. The options granted to Mr. Andrews consisted of 40,000 shares associated
with the 1999 annual grant made on December 9, 1998.
6. The options granted to Mr. Andrews consisted of 39,500 shares associated
with the 1997 annual grant made on February 10, 1997 and 30,000 shares
associated with the 1998 annual grant made on November 12, 1997.
7. Mr. Andrews joined the Company as Chief Financial Officer July 1, 1996 with
an annual base salary of $150,000.
8. The options granted to Mr. Andrews of 40,000 shares was associated with
joining the Company July 1, 1996.
Stock Option Grants And Exercises In 1998
The following table sets forth information regarding the number of stock
options that were granted during the calendar year ended December 31, 1998 to
the named executive officers. In addition, in accordance with the rules of the
Securities and Exchange Commission, the table shows the alternative grant date
valuation for option grants in 1998.
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs Exercise Grant
Underlying Granted to or Base Date
Options/SARs Employees in Price Expiration Present
Granted (#)(1) Fiscal Year ($/Sh) Date Value (2)
---------------- -------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Roger D. Blevins ......... 65,000 19% 20.06 12/09/08 583,329
Glenn C. Andrews ......... 40,000 12% 20.06 12/09/08 358,972
</TABLE>
- ---------
1. For 1999 annual option grants, made on December 9, 1998, 25% of the options
awarded vest on and after the first anniversary date of the grant, 25% vest
on and after the second anniversary date of the grant, 25% vest on and
after the third anniversary of the grant date, and the remaining 25% vest
on and after the fourth anniversary of the grant date.
2. In accordance with the Securities and Exchange Commission rules, the
Black-Scholes option pricing model was chosen to estimate the grant date
present value of the options set forth in the above table. The fair value
of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions for
grants in 1998: dividend yield zero; expected volatility of 43%; risk-free
interest rate of 5%; and expected life of five years.
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The real value of the options in the above table depends upon the actual
performance of the stock underlying the options during the applicable
period.
The following table sets forth information regarding the exercise of
options and the numbers of unexercised stock options held by named executive
officers at December 31, 1998:
Aggregated Option/SAR Exercises in 1998
and Option/SAR Values at December 31, 1998
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money
Shares Options/SARs at Options/SARs at
Acquired on Value Fiscal Year-End Fiscal Year-End ($)(2)
Exercise Realized ----------------------------- -----------------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------- ------------- --------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Roger D. Blevins ......... -- -- 244,675 200,325 3,576,619 2,316,194
Glenn C. Andrews ......... -- -- 67,250 82,250 983,594 727,344
</TABLE>
- ---------
(1) The computation of the value realized amount is the aggregate difference
between the option exercise price and the market closing price of the
Company's Common Stock on the New York Stock Exchange on the dates of
exercise.
(2) The computation of the value of unexercised in-the-money options is the
aggregate difference between the option exercise price and the December
31, 1998 closing price of the Company's Common Stock on the New York Stock
Exchange.
Employment Contracts; Termination Of Employment And Change-In-Control
Arrangements
On September 26, 1996 the Company signed a three-year employment agreement
with Dr. Blevins to serve as the Company's President and Chief Operating
Officer. The Company agreed to pay Dr. Blevins a $230,000 annual base salary
which is subject to annual merit adjustments, a bonus of up to 35% of his base
salary determined at the discretion of the Board of Directors and annual awards
of stock options of up to 65,000 shares determined at the discretion of the
Board of Directors. As an inducement to Dr. Blevins to enter into this
agreement the Company granted him a one-time nonqualified stock option to
purchase 120,000 shares at the September 26, 1996 fair market value price of
$8.625, which vests and becomes exercisable on the third anniversary of the
date of grant, e.g., September 26, 1999; provided, however, that the vesting of
50% of the option accelerates to the day immediately following the twentieth
consecutive trading day on which the closing price of the Company's Common
Stock exceeds $20 per share, and the remaining 50% accelerates to the day
immediately following the twentieth consecutive trading day in which such
closing price exceeds $25 per share. In accordance with such accelerated
vesting provision, during the second quarter of 1998 Dr. Blevins was vested in
such options to purchase 60,000 shares exercisable at $8.625 each.
The Company's policy provides benefits to the named executive officers in
the event of a "change-in-control" of the Company. The term "Change-in-Control"
generally is defined to mean: (i) the acquisition (including as a result of a
merger) by any person or persons acting in concert of beneficial ownership,
directly or indirectly, of securities of the Company representing more than 33%
of the combined voting power of the then outstanding voting securities of the
Company or (ii) the failure of the individuals who, as of February 6, 1998
constituted the Board of Directors of the Company (the "Incumbent Board"), or
thereafter were nominated for election to the Board of Directors by the vote of
at least two-thirds of the directors then comprising the Incumbent Board, to
constitute at least a majority of the Board of Directors subsequent to such
date. In the event of a "change-in-control", the Company (1) in accordance with
its then prevailing payroll practices, shall continue to pay their prevailing
annual base salary and an amount equal to the average of the annual cash
performance bonus the Company paid to the executive officers in the preceding
three years, for 2.99 years, (2) shall continue to provide for their
participation, to the extent permitted by applicable law or insurance policy
contract, in its group life, hospital, medical and disability insurance plans,
and any retirement, pension or death benefit plans ("Benefit Plans") for the
duration of the severance period or until such earlier time as they obtain
employment which provides reasonable similar health and medical coverage (3)
shall provide full outplacement services for 12 months; provided, however, that
they shall have the option to receive the gross amount of the amounts payable
to them on account of their base salary and bonus, less withholdings and
deductions as required by applicable law, in a lump sum at any time during the
severance period, in which event their participation in and coverage under the
Benefit Plans, and their entitlement to outplacement services, each shall
terminate and (4) shall provide for accelerated and immediate vesting of all
outstanding options. The Company also has agreed to pay Mr. Andrews an amount
equal to the difference between $14.25 and the closing price of the Company's
Common Stock on the day any "change-in-control" occurs, multiplied by 30,000.
8
<PAGE>
The Company's policy in the event of the named executive officers'
discharge without cause is as follows: "Discharge without cause" is defined as
the termination of the employment of the named executive officers without "due
cause", any material reduction in their duties or authority or a more than 30%
reduction in their annual base salary from that for the immediately preceding
fiscal year. The term "due cause" is defined as the named executive officers'
material breach of any of the terms of their agreements with the Company,
willful gross negligence in carrying out their duties or commission of an act
of willful gross misconduct which has resulted in material harm to the Company,
as determined in good faith by the Board of Directors. In the event of
discharge without cause, the Company shall continue to pay such officers'
annual base salary for 12 months and to provide for their participation in the
Benefit Plans until they obtain employment which provides reasonably similar
health and medical coverage. The Company also shall provide such officers full
outplacement services for 12 months. In respect of the year of such discharge,
they also shall be entitled to receive, pro rated based on the number of
completed months of service during the year of discharge, their cash bonus and
the discretionary performance-based options they earned, in each case as
determined by the Compensation Committee using the performance level of such
officers and the Company for the prior year as their respective performance
levels for the year of discharge.
Other Benefits Plans
The Company sponsors an IRS approved 401(K) retirement plan. Employees
become eligible to participate in the plan beginning on the enrollment date
coinciding with or following 90 days of employment. Enrollment periods are
limited to January 1, April 1, July 1 and October 1 of each year. The 401(K)
plan allows employees to contribute a portion of their pre-tax earnings into
their own retirement account. Eligible employees may contribute between 2% and
15% of their annual income up to the annual limits established by the IRS
yearly. The Board of Directors authorized the Company, for those years in which
it achieves the performance goals established in advance by the Compensation
Committee, to match 50% of each employee's annual plan contribution up to a
maximum of 2% of the salary of such employee, limited to a maximum $160,000
annual salary, such Company contributions to vest equally over the first four
years of service.
Certain Transactions
Mr. Williams, Chairman of the Board, received direct remuneration from the
Company of $100,000 in February 1999 in connection with the performance of the
Company. See "Compensation and Committees of the Board of Directors" above.
9
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth as of March 15, 1999 the number and
percentage ownership of the Company's voting securities by all persons
(including any "group" as that term is defined in Section 13(d)(3) of the
Securities Exchange Act of 1934) known to the Company to own beneficially more
than 5% of the Company's Common Stock, being the only outstanding class of the
Company's voting securities, based upon reports filed by each of such persons
with the Securities and Exchange Commission, and the number and percentage
ownership of the Company's equity securities so owned by each director, each
executive officer named in the compensation tables in this Proxy Statement and
by all directors and such executive officers as a group. Except as otherwise
indicated, and subject to applicable community property and similar laws, each
of the persons named has sole voting and investment power with respect to the
securities owned by him. An asterisk denotes beneficial ownership of less than
1%.
<TABLE>
<CAPTION>
Number of Shares Percent of
Name And Address Beneficially Owned Common Stock
- -------------------------------------------------- -------------------- -------------
<S> <C> <C>
Fidelity Management & Research Corporation 1,141,780 11.07
82 Devonshire Street
Boston, Massachusetts 02109
State of Wisconsin ...................... 978,800 9.49
Investment Board
P.O. Box 7842
Madison, Wisconsin 53707
Glenn C. Andrews ........................ 88,000 (1) *
Roger D. Blevins, Pharm.D. .............. 279,432 (2) 2.71
William M. Bartlett ..................... 33,120 (3) *
Jay N. Cohn, M.D ........................ 26,000 (4) *
Mark B. Hirsch .......................... 26,000 (5) *
Eugene L. Step .......................... 32,000 (6) *
Richard C. Williams ..................... 126,200 (7) 1.22
All Directors and Executive Officers of the
Company as a Group (seven persons) .... 610,752 (8) 5.92
</TABLE>
- ---------
(1) Includes 87,000 shares subject to currently exercisable options held by Mr.
Andrews.
(2) Includes 267,175 shares subject to currently exercisable options held by
Dr. Blevins.
(3) Includes 26,000 shares subject to currently exercisable options held by Mr.
Bartlett.
(4) Includes 26,000 shares subject to currently exercisable options held by Dr.
Cohn.
(5) Includes 26,000 shares subject to currently exercisable options held by Mr.
Hirsch.
(6) Includes 32,000 shares subject to currently exercisable options held by Mr.
Step.
(7) Includes 12,000 shares subject to currently exercisable options held by Mr.
Williams.
(8) Includes an aggregate of 476,175 shares subject to currently exercisable
options held by directors and executive officers of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission") and the New York Stock Exchange. Officers, directors and
greater than ten percent shareholders are required by Securities and Exchange
Commission regulation to furnish the Company with copies of all Section 16(a)
forms they file. Based solely on review of the copies of such forms furnished
to the Company, or written representations that no Form 5 were required, the
Company believes that during the year ended December 31, 1998, all Section
16(a) filing requirements applicable to its officers and directors were
complied with.
10
<PAGE>
PERFORMANCE GRAPH
Set forth below is a performance graph, comparing the yearly cumulative
total stockholder return on the Company's Common Stock with the yearly
cumulative total stockholder return on stocks included in the Russell 2000
Index, a broad equity market index, and the yearly cumulative total stockholder
return weighted by market capitalization at the beginning of each period for
which a return is indicated on stocks included in the Company's Industry Peer
Index. In order to more accurately represent the Company's performance
vis-a-vis a broad equity market and its industry, as well as against companies
that compare better to the Company with respect to profitability and growth in
profitability, the Company selected a different broad equity market comparison
index and a different industry comparison index from the prior year indices.
The Company selected the Russell 2000 as its new broad equity market index
because it consists of companies that compare better to the Company with
respect to market capitalization and asset size. The new Industry Peer Index is
made up of the 15 U.S. pharmaceutical and biotechnological companies listed
below. The Company compared, graphically and in the indexed cumulative returns
table below, the total return with that of both the newly selected Industry
Peer Index and the old Industry Peer Index. The investment comparisons assume
the base year (1993) is equal to an index of 100. Each of the cumulative total
returns was computed assuming the reinvestment of stock dividends. The years
compared are 1994, 1995, 1996, 1997 and 1998 calendar years.
Graphic appears here, the plot points are as follows:
TOTAL RETURN TO STOCKHOLDERS
REINVESTED DIVIDENDS
INDEXED CUMULATIVE RETURNS
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
------ ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Medco Research, Inc. ............ 100 75.21 68.60 69.42 92.56 171.90
New Industry Peer Index (1) ..... 100 98.74 183.13 268.70 272.95 396.77
Russell 2000 Index .............. 100 98.19 126.11 147.05 179.90 174.86
Old Industry Peer Index (2) ..... 100 50.34 89.44 103.54 103.14 78.41
S&P 500 Index ................... 100 101.32 139.40 171.41 228.59 293.92
</TABLE>
(1) The following companies are included in the Company's New Industry Peer
Index which is calculated based on the return of each company weighted
according to the company's stock market capitalization at the beginning of
each period for which a return is indicated: Akorn Inc., Bio-Technology
General, Biogen Inc., Biomatrix Inc., Centocor Inc., Dura Pharmaceuticals
Inc., Jones Pharma Inc., K-V Pharmaceutical, Medicis Pharmaceutical,
Neurogen Corp., Polymedica Corp., Sonus Pharmaceuticals Inc., Theragenics
Corp., Theratech Inc., Unimed Pharmaceuticals.
11
<PAGE>
(2) The following companies are included in the Company's Old Industry Peer
Index which is calculated based on the return of each company weighted
according to the company's stock market capitalization at the beginning of
each period for which a return is indicated: Abaxis Inc., Accumed
International Inc., Advanced Magnetics Inc., Alkermes Inc., Alteon Inc.,
Aronex Pharmaceuticals, Atrix Labs Inc., Avanir Pharmaceuticals, Avant
Immunotherapeutics, Boston Life Sciences, Cambridge Neuroscience Inc.,
CIMA Labs Inc., Columbia Laboratories, Corvas International, Cytel Corp.,
Dynagen, Emisphere Technologies, Epitope Inc., Geltex Pharmaceuticals
Inc., Genome Therapeutics Corp., Guildford Pharmaceuticals Inc.,
Immunomedics Inc., Inhale Therapeutic Systems, Insite Vision, Macrochem
Corporation, Medicis Pharmaceuticals, Metra Biosystems Inc., MGI Pharma
Inc., Neoprobe Corp., NeoRx Corp., OSI Pharmaceuticals Inc.,
Pharmacyclics, Pharmos Corporation, Polymedica Industries Inc., Sciclone
Pharmaceuticals Inc., Shaman Pharmaceuticals Inc., Sonus Pharmaceuticals
Inc., Technical Chemicals & Products, Techniclone Corp., and Theragenics
Corp.
OTHER MATTERS
Management of the Company does not know of any matter to be acted upon at
the Annual Meeting other than the matters described above. If any other matter
properly comes before the Annual Meeting, however, the proxy holders will vote
the proxies thereon in accordance with their best judgment.
PROXY SOLICITATION
A copy of the Company's Annual Report for the year ended December 31, 1998
accompanies this Proxy Statement.
The cost of soliciting the proxies will be borne by the Company. This
Proxy Statement and the accompanying materials, in addition to being mailed
directly to shareholders, will be distributed through brokers, custodians,
nominees, and other like parties to beneficial owners of shares of Common
Stock. The Company will, upon request, reimburse such parties for their charges
and expenses in connection therewith.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholder proposals intended to be presented at the 2000 annual meeting
of shareholders of the Company must be received by February 18, 2000. Such
proposals should be addressed to the Secretary of the Company.
March 29, 1999
12
********************************** APPENDIX ************************************
FOR WITHHOLD
all the all the
nominees nominees
1. Election of Directors [ ] [ ]
Nominees: 1. William M. Bartlett
2. Roger D. Blevins, Pharm.D.
3. Jay N. Cohn, M.D.
4. Mark B. Hirsch
5. Eugene L. Step
6. Richard C. Williams
To withhold authority to vote for any individual nominee, write that number from
the list at right on the line below.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Proposal to ratify the appointment of [ ] [ ] [ ]
PricewaterhouseCoopers LLP as
independent Accountants.
3. In their discretion, the proxy holder is [ ] [ ] [ ]
authorized to vote upon such other business
as may properly come before the meeting
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER, IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" PROPOSAL 1 AND 2.
PLEASE PROMPTLY MARK, SIGN, DATE AND RETURN THIS PROXY USING THE ENCLOSED
ENVELOPE.
Signature Date
----------------------------- -------------
Date
----------------------------- -------------
SIGNATURE, IF HELD JOINTLY
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian please Give full title as such. If a corporation, please
sign in full corporate name by the President or other authorized officer. If a
partnership, please sign in partnership name by an authorized partner.
MEDCO RESEARCH, INC.
7001 WESTON PARKWAY, SUITE 300
CARY, NORTH CAROLINA 27513
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Richard C. Williams, and William M. Bartlett,
and each or either of them as proxy holders with power to appoint his substitute
and hereby authorizes the proxy holders to represent and vote, as designated on
the reverse side of this proxy card, all the shares of Common Stock of Medco
Research, Inc. held of record by the undersigned on March 29, 1999, at 10:00 am
local time at the annual meeting of shareholders to be held on May 26, 1999, or
any adjournment thereof.
