May 19, 1999
Dear Shareholder:
The Annual Meeting of Shareholders of Aphton Corporation will be held on
Wednesday, June 16, 1999, at 9:00 A.M. at the offices of White & Case, located
at First Union Financial Center, 200 South Biscayne Boulevard, Miami, Florida
33131-2352.
The Notice of Annual Meeting and the Proxy Statement are enclosed herewith.
Shareholders will be asked to elect one director in one class. The Class 1
nominee is Robert S. Basso whose term of office would expire at the 2002 Annual
Meeting of Shareholders. Your Board of Directors recommends that you vote "for"
this nominee.
Please review the Proxy Statement and at your earliest convenience sign, date
and return the enclosed proxy card so that your shares will be represented at
the meeting. A prepaid return envelope is enclosed for this purpose.
Yours truly,
/s/ Philip C. Gevas
Philip C. Gevas
Chairman, President and Chief Executive Officer
PCG/me
encl.
<PAGE>
May 19, 1999
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 16, 1999
The Annual Meeting of Shareholders of Aphton Corporation, a Delaware
corporation, will be held at the offices of White & Case, located at First Union
Financial Center, 200 South Biscayne Boulevard, Miami, Florida 33131-2352, on
Wednesday, June 16, 1999, at 9:00 A.M. for the following purposes:
(1) To elect one director in one class to hold office until the 2002
Annual Meeting of Shareholders and thereafter until their successor is
duly elected and qualified;
(2) To transact such other business as may properly come before the
meeting.
On any business day from June 2, 1999 until June 15, 1999, during ordinary
business hours, shareholders may examine the list of shareholders for any
purpose germane to the meeting at the Office of the Company's attorneys, White &
Case, First Union Financial Center, 200 South Biscayne Boulevard, Miami, Florida
33131.
The Board of Directors has fixed the close of business on Wednesday, May 5,
1999, as the record date for determination of shareholders entitled to be
notified and to vote at the Annual Meeting.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. TO ENSURE
YOUR REPRESENTATION AT THE MEETING, THE BOARD REQUESTS THAT YOU SIGN, DATE AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING SELF-ADDRESSED, STAMPED ENVELOPE.
YOUR PROXY WILL NOT BE USED IF YOU ARE PRESENT AT THE MEETING AND WISH TO VOTE
YOUR SHARES PERSONALLY.
By Order of the Board of Directors
/s/ Philip C. Gevas
Philip C. Gevas
Chairman, President and
Chief Executive Officer
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OF APHTON CORPORATION
June 16, 1999
INTRODUCTION
This Proxy Statement is being mailed on or about May 19, 1999, to shareholders
of Aphton Corporation (the "Company") in connection with the solicitation of
Proxies by the Company's Board of Directors for use at the Company's Annual
Meeting of Shareholders to be held on June 16, 1999, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of Shareholders. The
accompanying proxy, and all expenses incident to the solicitation, are to be
paid by the Company.
The persons named in the accompanying proxy have advised the Company that they
intend to vote the proxies received by them in their discretion for as many
director nominees as the votes represented by such proxies are entitled to elect
(see "Election of Directors"). Any shareholder may revoke his or her proxy at
any time prior to its use by filing with the Secretary of the Company a written
notice of revocation or a duly executed proxy bearing a later date.
Only shareholders of record at the close of business on Wednesday, May 5, 1999,
will be entitled to notice of and to vote at the meeting or any adjournments
thereof. At such record date, the Company had outstanding and entitled to vote
14,433,384 shares of common stock. Each share of stock is entitled to one vote
on all matters.
ELECTION OF DIRECTORS
The Company's Board of Directors presently consists of four directors. The
person who is elected director will hold office until the 2002 Annual Meeting of
Shareholders and thereafter until their successor is duly elected, and
qualified.
Set forth below is the names and principal occupations of those persons who are
presently directors of the Company, and the respective number of shares of
voting stock of the Company beneficially owned, directly or indirectly, by them
and by all directors and officers as a group as of May 5, 1999, according to
information furnished to the Company by such persons. Mr. Robert S. Basso is the
Class 1 nominee for election.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
YEAR FIRST OWNED AS OF
NAME AND PRINCIPAL OCCUPATION AGE ELECTED MAY 5, 1999 PERCENT OF CLASS
----------------------------- --- ------- ------------ ----------------
<S> <C> <C> <C> <C>
Philip C. Gevas, Class 3
Chairman, President and
Chief Executive Officer
Aphton Corporation 65 1981 1,859,050 12.9
William A. Hasler, Class 3
Co-Chief Executive Officer
and Vice-Chairman
Aphton Corporation 57 1991 35,000 (1)
Robert S. Basso, Class 1
President Correspondent Services
Corporation. 54 1988 30,166 (1)
Nicholas John Stathis, Class 2
Attorney 75 1994 50,000 (1)
All Directors and Officers
as a group (12 persons) 2,088,416 14.5
- ----------------------------
(1) Less than 1% of total outstanding shares.
</TABLE>
Mr. Gevas has served the Company and continues to serve in the capacities of
Chairman, President and Chief Executive Officer and has been a director of the
Company since its inception. William A. Hasler was elected Vice Chairman in
October, 1996 and has been a director of the Company since October, 1991. Mr.
Hasler was appointed Co-Chief Executive Officer of Aphton Corporation in July,
1998. Previously, he was the Dean of both the Graduate and Undergraduate Schools
of Business at the University of California, Berkeley since 1991. Prior thereto,
Mr. Hasler was Vice Chairman of KPMG Peat Marwick, responsible for management
consulting worldwide. Mr. Hasler also is a director of Solectron Corporation,
Walker Interactive Systems, TCSI Corporation, Tenera, Inc. and is a Public
Governor of the Pacific Exchange. Mr. Basso has been a director of the Company
since February, 1988. He has been employed in his present capacities with
Correspondent Services Corporation since January, 1990. Prior thereto, for more
than ten years, Mr. Basso was employed by Merrill Lynch as President of a
wholly-owned subsidiary and in other executive management capacities. Nicholas
John Stathis, Esq. has been a director of the Company since January, 1994. Mr.
Stathis is retired from the law firm of White & Case, where he was of counsel
from 1989 to 1993. Prior to that he was partner, Botein, Hays & Sklar, from 1984
to 1989.
Directors do not receive any fees for services on the Board. Board members are
reimbursed for their expenses for each meeting attended.
If for any reason Mr. Basso should not be available as a candidate for director,
an event that the Board of Directors does not anticipate, the persons named in
the enclosed proxy will vote for such other candidate as may be nominated by the
Board and discretionary authority to do so is included in the Proxy.
COMMITTEE MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors held six general meetings and three committee
meetings during the year ended January 31, 1999. The Board of Directors has two
standing committees: an Audit Committee, consisting of Messrs. Basso (Chairman),
Hasler and Stathis; and a Compensation Committee, consisting of Messrs. Basso
(Chairman) and Stathis. The Audit Committee reviews the financial statements of
the Company, reviews the independent accountants' scope of engagement,
performance and fees and reviews the adequacy of the Company's internal
financial control procedures. This Committee held three meetings during fiscal
1999. The Compensation Committee reviews and recommends remuneration
arrangements for various key executives. This Committee held three meetings
during fiscal 1999. Each Committee member attended all of the meetings of the
Committee on which he was a member during fiscal 1998.
THE COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board approves compensation objectives, policy
and compensation for the Company's executive officers, including the individuals
named in the Summary Compensation table below.
The Compensation Committee is comprised of Messrs. Basso and Stathis.
The Compensation Committee seeks to provide rewards which are closely linked to
Company and individual performance and ensure that compensation is at a level
which enables the Company to attract and retain the high quality employees it
needs. In addition, the committee considers performance factors particular to
each executive officer, such as the performance where such officer had
responsibility and individual managerial accomplishments.
Compensation of the Chief Executive Officer
The Compensation Committee believes that Mr. Gevas' total compensation as Chief
Executive Officer reflects his performance in meeting or exceeding the goals
established by the Committee.
In determining Mr. Gevas' total compensation, the Compensation Committee
considered the Company's overall performance and Mr. Gevas' individual
performance by the measures described above for determining executive officers'
compensation. It also considered the compensation and company performance of the
chief executive officers of other leading companies, as well as incentives for
future performance.
The Company's performance as measured in the context of the
biotechnology/biopharmaceutical industry and Mr. Gevas' contributions thereto,
both management and scientific, have met or exceeded the Company objectives.
This performance included the structuring and negotiation with another
significant pharmaceutical company for a strategic alliance. The following stock
price performance graph is provided as required by the Securities and Exchange
Commission. The graph compares the Company's stock price appreciation with the
stock price appreciation of both the Nasdaq Composite Index and a peer group of
biotechnology/ biopharmaceutical companies which, like Aphton, had an initial
public offering (IPO) during 1991, and includes the measurement point as defined
and required by the SEC.
The foregoing report has been furnished by the Compensation Committee consisting
of Messrs. Basso (Chairman) and Stathis.
STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a comparison of the cumulative total stockholder
return (change in stock price) of Aphton's Common Stock with the CRSP Total
Return Index for the Nasdaq Stock Market (the Nasdaq Composite Index) and a Peer
Group composed of other biotechnology/biopharmaceutical companies which had IPOs
during the same year as Aphton (and are still publicly traded). The following
graph commences in 1991, with a $100 investment in the Company, the Nasdaq index
and the Peer Group (whose composition reflects the average of the share values
as reported on the dates shown). Five year graphic comparisons are required by
the Securities and Exchange Commission (SEC). An additional comparison
commencing with a $100 investment in the Company, the Nasdaq index and the Peer
Group at the required measurement date of January 31, 1993 is included. These
graphs are not intended to forecast or be indicative of possible future
performances of the Company's Common Stock.
Aphton believes that the best date for Aphton shareholders to begin comparisons
is the first date of trading in the Company's stock. Aphton also believes that
the best peer group for graphic comparisons is the biotechnology/
biopharmaceutical companies which, like Aphton, had IPOs during 1991 (the
initial date of investments of $100). However, Aphton is not aware of any such
published "third-party" index or listing; thus, the Peer Group names and graph
was prepared by the Company based on data provided to Aphton by Nasdaq. The Peer
Group is composed of Cygnus Therapeutic Systems, Regeneron Pharmaceuticals,
Cephalon Inc., Medimmune Inc., Isis Pharmaceuticals, ImmuLogic Pharmaceutical,
ICOS Corp., Cambridge NeuroScience, Genelabs Technologies, COR Therapeutics,
Curative Technologies, Alkermes, Osteotech, Vertex, Genetic Therapy, Biomatrix,
IDEC Pharmaceuticals, Sepracor Inc., CellPro Inc., Anergen Inc., Alteon Inc.,
ImClone Systems, Cytel, Magainin Pharmaceuticals and Genta. Other
biotechnology/biopharmaceutical companies which had IPOs in 1991 are not
included here if they no longer exist or are no longer publicly traded. Because
of this, Aphton's relative stock price performance is negatively impacted from
what is commonly called in the financial industry a "survivor bias."
[TABLE]
<TABLE>
<CAPTION>
1991 1/31 1/29 1/31 1/31 1/31 1/31 1/30 1/29
PERIOD FROM IPO IPO 1992 1993 1994 1995 1996 1997 1998 1999
--------------- --- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aphton Corporation 100 304 220 350 139 146 318 177 223
All US & Foreign on NASDAQ* 100 131 147 171 161 227 296 348 535
Biotech Peer Group 100 160 136 118 63 133 128 139 179
1/31 1/31 1/31 1/31 1/30 1/29
FIVE YEARS ENDED 1/31/99 1994 1995 1996 1997 1998 1999
------------------------- ---- ---- ---- ---- ---- ----
Aphton Corporation 100 40 42 91 51 64
All US & Foreign on NASDAQ* 100 94 133 173 204 312
Biotech Peer Group 100 53 113 108 118 152
</TABLE>
EXECUTIVE COMPENSATION
The following table sets forth, for each of the last five fiscal years, the
annual compensation paid by the Company, together with long-term and other
compensation, for the Chief Executive Officer, the Co-Chief Executive Officer
and the other highest compensated Executive Officers of the Company in all
capacities in which they served.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------- --------------------------------------
AWARDS PAYOUTS
---------------------- -----------
OTHER LONG-TERM
FISCAL ANNUAL RESTRICTED INCENTIVE ALL OTHER
NAME, AGE AND PERIOD COMPEN- STOCK OPTIONS/ PLAN COMPEN-
PRINCIPAL POSITION END SALARY($) BONUS($) SATION($) AWARD(s)($) SARs(#) PAYOUTS($) SATION($)
- ------------------------ --- --------- -------- --------- ----------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Philip C. Gevas (65) 1999 200,000 200,000 - - - - -
Chief Executive *1998 150,000 200,000 - - - - -
Officer, President and 1997 200,000 200,000 - - - - -
Chief Financial Officer 1996 200,000 200,000 - - - - -
1995 180,000 200,000 - - - - -
William A. Hasler (57), 1999 105,000 - - - - - -
Vice Chairman of the (Note 1) (Note 2)
Board of Directors and
Co-Chief Executive
Officer
Dov Michaeli, M.D., 1999 150,000 60,000 - - - - -
Ph.D. (61) Senior Vice *1998 112,500 60,000 - - - - -
President, Director of 1997 150,000 60,000 - - - - -
Medical Science 1996 150,000 60,000 - - - - -
1995 150,000 60,000 - - - - -
Paul Broome, MB., 1999 135,000 30,000 - - - - -
Ch.B., MFPM (47) *1998 93,750 30,000 - - - - -
Vice President and 1997 135,000 30,000 - - - - -
Medical Director, 1996 132,300 26,450 - - - - -
Clinical Trials and 1995 112,500 25,000 - - - - -
Regulatory Affairs - -
Richard Ascione, 1999 125,000 30,000 - - - - -
Ph.D.(61) Vice *1998 87,500 25,000 - - -
President, Director of 1997 125,000 25,000 - - - - -
Laboratory of 1996 125,000 25,000 - - - - -
Molecular Medicine 1995 112,500 25,000 - - - - -
- ----------------------------------------
Note 1. For the seven months ended January 31, 1999
Note 2. Subsequent to January 31, 1999, Mr. Hasler was granted 150,000 warrants
to purchase common stock.
*Nine month fiscal period ended January 31, 1998
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
No options or stock appreciation rights were granted during the year ended
January 31, 1999.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information concerning the unexercised options
held as of the end of the fiscal year. None of these officers exercised options
during the fiscal year.
<TABLE>
<CAPTION>
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTION/SAR VALUE
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/ IN-THE-MONEY OPTIONS/
SARs AT FY-END(#) SARs AT FY-END($)(1)
SHARES ---------------------------- ----------------------
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip C. Gevas - - 600,000 - - -
Dov Michaeli, M.D, Ph.D. - - 370,000 - 1,537,500 -
Richard Ascione, Ph.D. - - - 50,000 - -
Paul Broome, MB., Ch.B., MFPM - - - 50,000 - -
(1) Market value of shares covered by in-the-money options on January 31, 1999,
less option exercise price. Options are in-the-money if the market value of
the shares covered thereby is greater than the option exercise price. The
market value is the closing price at January 31, 1999, as quoted by Nasdaq.
</TABLE>
LONG-TERM INCENTIVE PLANS - AWARDS IN FISCAL YEAR
No long-term incentive plan awards were granted during the year ended January
31, 1999.
PRINCIPAL SHAREHOLDERS
To the Company's knowledge, except as hereinafter described, no single
shareholder of record owned or beneficially owned, as of May 5, 1999, more than
5% of the Company's common stock. As of May 5, 1999, Cede & Co., a nominee of
securities depositories for various segments of the financial industry, held
approximately 9,930,000 shares, representing approximately 69% of the Company's
outstanding common stock, none of which was owned beneficially by Cede & Co. The
Company believes that each of the entities or individuals named below
beneficially owns 5% or more of the Company's common stock, based on a review of
filings made with the SEC.
NAME AND ADDRESS OF
BENEFICIAL OWNER NUMBER OF SHARES % OF COMMON STOCK
------------------- ---------------- -----------------
Smith Barney Mutual Funds Management, Inc 1,481,900 10.3
388 Greenwich Street
Legal Dept, 20th Floor
New York, New York 10013
Philip C. Gevas 1,859,050 12.9
P. O. Box 1049
Woodland, CA 95776
Richard L. Littenberg, M.D. 1,146,250 7.9
P. O. Box 1049
Woodland, CA 95776
Robert J. Scibienski, Ph.D. 1,413,800 9.8
P. O. Box 1049
Woodland, CA 95776
All Executive Officers and 2,088,416 14.5
Directors as a group (7 persons)
SHAREHOLDER PROPOSALS
If a shareholder intends to have a proposal presented at the next Annual Meeting
of Shareholders, such a proposal must be received by the Company at its
principal executive offices prior to the end of fiscal year 1999.
MISCELLANEOUS
PricewaterhouseCoopers LLP has been the Company's independent accountants for a
number of years and has been selected to continue in such capacity for the
current fiscal year. It is anticipated that a representative from
PricewaterhouseCoopers LLP will be available to answer questions raised at the
Annual Meeting of Shareholders and will be afforded the opportunity to make any
statements the representative may desire to make.
The Board of Directors knows of no other matters that are likely to come before
the meeting. If any such matters should properly come before the meeting,
however, it is intended that the persons named in the accompanying form of proxy
will vote such proxy in accordance with their best judgment on such matters.
By Order of the Board of Directors
/s/ Philip C. Gevas
Philip C. Gevas
Chairman and Secretary
