UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended June 30, 1998,
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____ to _____.
Commission file number 0-18443
MEDICIS PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 52-1574808
--------------------------------- ------------------------------------
(State of other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
4343 East Camelback Road, Suite 250, Phoenix, AZ 85018-2700
- ------------------------------------------------ ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (602) 808-8800
Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock, $0.014 par value
Preference Share Purchase Rights
--------------------------------------
(Title of each Class)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form or any amendment
to this Form 10-K [ ].
The aggregate market value of the voting stock held on September 21, 1998 by
non-affiliates of the registrant was $581,148,692 (calculated by excluding all
shares held by executive officers, directors and holders known to the registrant
of five percent or more of the voting power of the registrant's Common Stock,
without conceding that such persons are "affiliates" of the Registrant for
purposes of the federal securities laws).
As of September 21, 1998, there were outstanding 18,496,377 shares of Class A
Common Stock $0.014 par value and 281,974 shares of Class B Common Stock $0.014
par value. Documents incorporated by reference:
Portions of the Proxy Statement for the Registrant's 1998 Annual Meeting of
Stockholders are incorporated herein by reference in Part III of this Form 10-K
to the extent stated herein.
-- 1 --
<PAGE>
PART III
The Annual Report on Form 10-K ("Form 10K") is hereby amended by including items
10-13 thereto as follows:
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors, Nominees and Executive Officers
The following biographical information is furnished with regard to
the directors and the executive officers.
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE POSITION SINCE EXPIRES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jonah Shacknai(1) 41 Chairman and Chief Executive Officer 1988 1998
Mark A. Prygocki, Sr. 32 Chief Financial Officer, Treasurer, and N/A N/A
Secretary
Arthur G. Altschul, Jr.(2) 34 Director 1992 2000
Richard L. Dobson, M.D.(2) 70 Director 1991 1999
Peter S. Knight, Esq. (1)(3) 47 Director 1997 1999
Michael A. Pietrangelo(1)(3) 56 Director 1990 1998
Philip S. Schein, M.D.(2) 59 Director 1990 2000
Lottie H. Shackelford(2) 57 Director 1993 1998
</TABLE>
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Stock Option and Compensation Committee
JONAH SHACKNAI is a founder of the Company and has served as its
Chairman and Chief Executive Officer since July 1988. From 1977 until late 1982,
Mr. Shacknai served as chief aide to the House of Representative's committee
with responsibility for health policy, and in other senior legislative
positions. During his service with the House of Representatives, Mr. Shacknai
drafted significant legislation affecting health care, environmental protection,
science policy, and consumer protection. He was also a member of the Commission
on the Federal Drug Approval Process, and the National Council on Drugs. From
1982 to 1988, as senior partner in the law firm of Royer, Shacknai, and Mehle,
Mr. Shacknai represented approximately 34 multinational pharmaceutical and
medical device concerns, as well as four major industry trade associations. He
provided these firms advice in areas of governmental regulation, strategic
planning, mergers and acquisitions, and marketing. Mr. Shacknai simultaneously
served in an executive position with Key Pharmaceuticals, Inc., prior to its
acquisition by Schering-Plough Corporation. Mr. Shacknai is Vice Chairman of the
Board of Directors of Delta Society, a public service organization promoting
animal-human bonds. He is also a director of GHBM Healthworld, an integrated
healthcare, marketing and communications concern, and a member of the Board of
Trustees of the National Public Radio Foundation. Mr. Shacknai serves as a
member of the National Arthritis and Musculoskeletal and Skin Diseases Advisory
Council of the National Institutes of Health, and the U.S.-Israel Science and
Technology Commission, both of which are federal cabinet-appointed positions.
MARK A. PRYGOCKI, SR., CPA, has served as Chief Financial Officer,
Treasurer, and Secretary since May 1995 and served as Controller of the Company
from October 1992 until May 1995. From July 1990 through October 1992, Mr.
Prygocki was employed by Salomon Brothers, Inc., an investment banking firm, as
an Accountant in the Regulatory Reporting Division. Mr. Prygocki was employed by
Ernst & Young LLP as a Senior Auditor in the Financial Service Division from
September 1988 through July 1990.
-- 2 --
<PAGE>
ARTHUR G. ALTSCHUL, JR., has been a director of the Company since
December 1992. He has worked in investment banking, venture capital, and as a
member of senior management of a publicly-traded healthcare concern. Mr.
Altschul is a founder and Co-Chairman of Diaz & Altschul Group, LLC, a merchant
banking organization which, through its subsidiaries, provides investment
banking and investment advisory services. Between 1985 and 1991, Mr. Altschul
worked in the Equity and Fixed-Income trading departments at Goldman, Sachs &
Co., was a founding limited partner of The Maximus Fund, LP, and worked in the
Equity Research department at Morgan Stanley & Co. From 1992 to 1996, Mr.
Altschul worked at SUGEN, Inc., most recently as Senior Director of Corporate
Affairs. SUGEN is a NASDAQ-traded biopharmaceutical company focused on cancer
research and drug development. Mr. Altschul serves on the Board of Directors of
General American Investors, Inc., a NYSE-traded closed-end investment company;
Delta Opportunity Fund, Ltd., an offshore investment fund which invests
primarily in private placements of publicly-traded technology companies;
Microbes Inc.; NY Council for Humanities; and Prototek II, Inc. Mr.
Altschul holds a B.Sc. from Columbia University in Computer Science.
RICHARD L. DOBSON, M.D., has been a director of the Company since
September 1991. He was a Professor of Dermatology at the Medical University of
South Carolina from 1980-1998 and he has been Professor Emeritus since July
1998. He is a past President of the American Board of Dermatology and a past
President of the American Academy of Dermatology. Dr. Dobson also served, as the
Editor-in-Chief of the Journal of the American Academy of Dermatology from
1988-1998.
PETER S. KNIGHT, ESQ., has been a director of the Company since June
1997. Mr. Knight has been a partner of the law firm of Wunder, Knight, Levine,
Thelen & Forscey since 1991, where he specializes in pharmaceutical,
environmental, and communication matters. In 1996, at the request of President
Clinton, Mr. Knight served as the National Campaign Manager for Clinton/Gore
'96. Mr. Knight served as the General Counsel and Secretary of the Company from
1989 to 1991. Mr. Knight currently serves on the Boards of COMSAT, Whitman
Education Group, Healthworld, and the Schroder Series Trust . He also serves on
the Board of the Center for National Policy, and the Vice President's Residence
Foundation.
MICHAEL A. PIETRANGELO has been a director of the Company since
October 1990. Admitted to the bar in New York, Tennessee and the District of
Columbia, he was an attorney with the Federal Trade Commission and later for
Pfizer, Inc., from 1967 to 1972. Joining Shering-Plough Corporation in Memphis,
Tennessee in 1972, Mr. Pietrangelo served in legal capacities first as Legal
Director and then Associate General Counsel. During that time he was also
appointed Visiting Professor of Law by the University of Tennessee and
University of Mississippi Schools of Pharmacy. In 1980, Mr. Pietrangelo left
corporate law and focused on consumer products management, serving in a variety
of executive positions at Shering-Plough Corporation prior to being named
President of the Personal Care Products Group in 1985. In 1989, he was asked to
join Western Publishing Group as President and Chief Operating Officer. From
1990 to 1994, Mr. Pietrangelo was the President and Chief Executive Officer of
CLEO, Inc., a Memphis-based subsidiary of Gibson Greetings, Inc., a manufacturer
of specialized paper products. In 1994, he accepted a position as President of
Johnson Products Co., a subsidiary of IVAX Corporation. He served in that
capacity until February 1998, when he returned to the practice of law with
Pietrangelo Cook PLC, based in Memphis, Tennessee.
PHILIP S. SCHEIN, M.D., has been a director of the Company since
October 1990. Dr. Schein was the Chairman and Chief Executive Officer of U.S.
Bioscience, Inc., a publicly held pharmaceutical company involved in the
development and marketing of chemotherapeutic agents, from 1987 to 1998. His
prior appointments included Scientific Director of the Vincent T. Lombardi
Cancer Research Center at Georgetown University, Vice President for Worldwide
Clinical Research and Development, SmithKline and French Labs. He has served as
President of the American Society of Clinical Oncology and has chaired the Food
and Drug Administration Oncology Drugs Advisory Committee. Dr. Schein presently
serves as a member of the National Cancer Advisory Board and as Adjunct
Professor of Medicine and Pharmacology at the University of Pennsylvania School
of Medicine.
LOTTIE H. SHACKELFORD has been a director of the Company since July
1993. Ms. Shackelford has been Executive Vice President of Global USA, Inc., a
government relations firm, since April 1994 and has been Vice Chair of the
Democratic National Committee since February 1989. Ms. Shackelford was Executive
Vice President of U.S.
-- 3 --
<PAGE>
Strategies, Inc., a government relations firm, from April 1993 to April 1994.
She was also Co-Director of Intergovernmental Affairs for the Clinton/Gore
presidential transition team between November 1992 and March 1993, Deputy
Campaign Manager of Clinton for President from February 1992 to November 1992,
and Executive Director, Arkansas Regional Minority Purchasing Council, from
February 1982 to January 1992. In addition, Ms. Shackelford has served in
various local government positions, including Mayor of Little Rock, Arkansas.
She also is a director of Philander Smith College, the Chapman Funds in
Baltimore, Maryland, and the Overseas Private Investment Corporation.
ITEM 11: EXECUTIVE COMPENSATION
The following table shows the annual compensation and long-term
compensation for each of the three most recent fiscal years for the Company's
Chief Executive Officer and the one other executive officer whose salary and
bonus for the most recent fiscal year exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
ANNUAL COMPENSATION -----------------------------
------------------- OTHER ANNUAL NUMBER OF LTIP
NAME AND POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jonah Shacknai 1998 437,000 400,000 -- 100,000
Chairman of the Board 1997 412,000 320,000 -- 78,751
and Chief Executive 1996 310,000 240,000 -- 171,431(1)
Officer
Mark A. Prygocki, Sr. 1998 150,000 150,000 -- 30,000
Chief Financial Officer, 1997 130,400 80,000 -- 22,500
Treasurer and Secretary 1996 94,600 50,000 -- 19,286(2)
</TABLE>
(1) Includes repriced options approved by the Stock Option and Compensation
Committee of the Board of Directors upon an independent recommendation and
in accordance with the Plans and previously issued to Mr. Shacknai for the
purchase of 208,929 shares of Class A Common Stock. Such options were
repriced to the closing market price of the Class A Common Stock on
September 30, 1995.
(2) Includes repriced options approved by the Stock Option and Compensation
Committee of the Board of Directors upon an independent recommendation and
in accordance with the Plans and previously issued to Mr. Prygocki for the
purchase of 18,483 shares of Class A Common Stock. Such options were
repriced to the closing market price of the Class A Common Stock on
September 30, 1995.
The Company has no defined benefit or defined contribution
retirement plans other than the Medicis Pharmaceutical Corporation 401(k)
Employee Savings Plan (the "401(k) Plan") established under Section 401(k) of
the Internal Revenue Code of 1986, as amended (the "Code"). Contributions to the
401(k) Plan are voluntary and all employees are eligible to participate. While
the 401(k) Plan provides for the ability of the Company to match certain
employee contributions, the Company has not made any matching contributions.
STOCK OPTIONS
The Plans provide for the grant to key employees and key consultants
of the Company options which qualify as incentive stock options under the Code
and non-qualified stock options. The Plans are administered by the Stock Option
and Compensation Committee appointed by the Board. The following table sets
forth certain information for the Company's last fiscal year with respect to
options to purchase shares of Class A Common Stock granted to certain executive
officers pursuant to the Plans:
-- 4 --
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZED VALUE AT
PERCENTAGE OF ASSUMED ANNUAL RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION FOR
NUMBER OF GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN OR BASE EXPIRATION ------------------------------
NAME GRANTED(#)(1) FISCAL YEAR PRICE ($/SH) DATE 0%($) 5%($) 10%($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jonah Shacknai NQ 100,000 16.0% 43.25 7/8/07 -- 2,719,969 6,892,936
Mark A. Prygocki, Sr. ISO 3,440 0.6% 43.25 7/8/07 -- 93,567 237,119
NQ 26,560 4.2% 43.25 7/8/07 722,424 1,830,781
------ -----
30,000 4.8%
====== =====
</TABLE>
(1) Of Mr. Shacknai's non-qualified options noted above, 33,333 vested on July
8, 1998; 33,333 vest on July 8, 1999; and 33,334 vest on July 8, 2000. Of
Mr. Prygocki's ISO's noted above, 210 vested on July 8, 1998; 210 vest on
July 8, 1999; 290 vest on July 8, 2000; 420 vest on July 8, 2001; and 2,310
vest on July 8, 2002. Of Mr. Prygocki's non-qualified options noted above,
5,790 vested on July 8, 1998; 5,790 vest on July 8, 1999; 5,710 vest on
July 8, 2000; 5,580 vest on July 8, 2001; and 3,690 vest on July 8, 2002.
(2) The potential realizable value portion of the foregoing table illustrates
amounts that might be realized upon exercise of the options immediately
prior to the expiration of their term, assuming the specified compounded
rates of appreciation on the Class A Common Stock, over the scheduled life
of the options. This schedule does not take into account provisions of
certain options providing for termination of the option following
termination of employment, nontransferability or vesting schedules. The
dollar amounts under these columns are the result of calculations at the 5%
and 10% rates set by the Securities and Exchange Commission and therefore
are not intended to forecast possible future appreciation, if any, of the
Company's stock price. The column indicating 0% appreciation is included to
reflect the fact that a zero percent gain in stock price appreciation from
the market price of the Class A Common Stock on the date of grant will
result in zero dollars for the optionee. No gain to the optionees is
possible without an increase in stock price, which will benefit all
stockholders commensurately. Dollar amounts shown are not discounted to
present value.
----------------------------------
The following table sets forth the number and value of unexercised
options held by the named individuals as of the end of the Company's last fiscal
year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
NUMBER OF VALUE OPTIONS AT FISCAL YEAR END AT FISCAL YEAR-END($)
SHARES ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE(1) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jonah Shacknai 0 0 284,435 201,139 9,353,497 2,464,065
Mark A. Prygocki, Sr. 16,000 767,395 16,945 58,128 500,433 675,900
</TABLE>
(1) The Company does not grant stock appreciation rights.
During the last fiscal year, 133 employees of the Company and six
non-employee directors of the Company were granted options to purchase an
aggregate of 651,728 shares of Common Stock under the Plans. As of June 30,
1998, 111 employees and all directors of the Company were participants in the
Plans. During the last fiscal year, an aggregate of 708,122 options to purchase
shares of Class A Common Stock had been granted to a total of 153 optionees
under the Plans and were outstanding, 27,000 of which had been granted to
non-employee directors as annual grants in accordance with the Plans. Certain of
such options are vested and others vest at various times through June 22, 2003.
Qualified and non-qualified stock options vest over a period determined at the
time the options are granted, ranging from 1 year to 5 years. The options are
generally granted at the fair market value on the date of the grant and are
exercisable at prices ranging from $1.55 to $54.00 per share.
----------------------------------
-- 5 --
<PAGE>
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS AND STOCKHOLDINGS OF MANAGEMENT
The information set forth below includes information as of September
14, 1998, regarding the shares of Capital Stock beneficially owned by (i) each
person who is known by the Company to own beneficially five percent (5%) or more
of the Capital Stock, (ii) each of the other present directors and executive
officers of the Company, and (iii) all directors and executive officers of the
Company as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------
CLASS A CLASS B PERCENTAGE OF PERCENTAGE
COMMON COMMON OUTSTANDING OF VOTING
NAME(1) STOCK STOCK CAPITAL STOCK POWER
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jonah Shacknai(2) 579,878 252,677 4.35% 14.31%
Mark A. Prygocki, Sr.(3) 31,764 -- * *
Arthur G. Altschul, Jr.(4) 17,173 -- * *
Richard L. Dobson, M.D.(5) 25,789 -- * *
Peter S. Knight, Esq.(6) 15,437 -- * *
Michael A. Pietrangelo(7) 45,776 -- * *
Philip S. Schein, M.D.(8) 9,321 -- * *
Lottie H. Shackelford(9) 22,173 -- * *
All executive officers and directors 746,833 252,677 5.17% 14.98%
as a group (8 persons)(10)
Pilgrim, Baxter and Associates
1255 Drummer's Lane, Suite 300
Wayne, PA 19087(11) 1,860,819 -- 9.91% 8.62%
Putnam Investments
One Post Office Square
Boston, MA 02109(11) 2,495,929 -- 13.29% 11.56%
</TABLE>
- ----------------------------
* Less than 1%.
-- 6 --
<PAGE>
(1) The address of each beneficial owner is c/o Medicis Pharmaceutical
Corporation, 4343 East Camelback Road, Suite 250, Phoenix, Arizona
85018-2700.
(2) Includes: 358,796 shares of Class A Common Stock subject to options granted
pursuant to the Plans which were exercisable as of September 14, 1998, or
which become exercisable within 60 days thereafter (November 13, 1998).
(3) Includes 31,464 shares of Class A Common Stock subject to options granted
pursuant to the Plans which were exercisable as of September 14, 1998, or
which become exercisable within 60 days thereafter (November 13, 1998).
(4) Includes 17,173 shares of Class A Common Stock subject to options granted
pursuant to the Plans which were exercisable as of September 14, 1998, or
which become exercisable within 60 days thereafter (November 13, 1998).
(5) Includes 21,774 shares of Class A Common Stock subject to options granted
pursuant to the Plans which were exercisable as of September 14, 1998, or
which become exercisable within 60 days thereafter (November 13, 1998).
Does not include 159 shares of Class A Common Stock owned by Dr. Dobson's
spouse, as to which shares Dr. Dobson disclaims beneficial ownership.
(6) Includes 12,000 shares of Class A Common Stock subject to options granted
pursuant to the Plans which were exercisable as of September 14, 1998, or
which become exercisable within 60 days thereafter (November 13, 1998).
(7) Includes 19,764 shares of Class A common Stock subject to options granted
pursuant to the Plans which were exercisable as of September 14, 1998, or
which become exercisable within 60 days thereafter (November 13, 1998).
(8) Includes 9,321 shares of Class A Common Stock subject to options granted
pursuant to the Plans which were exercisable as of September 14, 1998, or
which become exercisable within 60 days thereafter (November 13, 1998).
(9) Includes 22,173 shares of Class A Common Stock subject to options granted
pursuant to the Plans which were exercisable as of September 14, 1998, or
which become exercisable within 60 days thereafter (November 13, 1998).
(10) Includes an aggregate of 492,465 shares of Class A Common Stock subject to
options granted pursuant to the Plans which were exercisable as of
September 14, 1998, or which become exercisable within 60 days thereafter
(November 13, 1998), held by eight executive officers and directors.
(11) Based on Schedule 13G filed with the SEC.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Date: December 15, 1998
MEDICIS PHARMACEUTICAL CORPORATION
By: /s/ MARK A. PRYGOCKI, SR.
-----------------------------
Mark A. Prygocki, Sr.
Chief Financial Officer,
Treasurer and Secretary
-- 7 --
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------- -------------------------------------------- -----------------
<S> <C> <C>
/s/ JONAH SHACKNAI Chairman of the Board of Directors December 15, 1998
- ---------------------------- and Chief Executive Officer
Jonah Shacknai (Principal Executive Officer)
/s/ MARK A. PRYGOCKI, SR. Chief Financial Officer December 15, 1998
- ---------------------------- (Principal Financial and Accounting Officer)
Mark A. Prygocki, Sr.
Director
- ----------------------------
Arthur G. Altschul, Jr.
* Director December 15, 1998
- ----------------------------
Richard L. Dobson, M.D.
* Director December 15, 1998
- ----------------------------
Peter S. Knight, Esq.
* Director December 15, 1998
- ----------------------------
Michael A. Pietrangelo
* Director December 15, 1998
- ----------------------------
Philip S. Schein, M.D.
* Director December 15, 1998
- ----------------------------
Lottie Shackelford
*/s/ MARK A. PRYGOCKI, SR. December 15, 1998
- ----------------------------
Attorney-in-fact
</TABLE>
-- 8 --
