<PAGE> 1
MAGAININ PHARMACEUTICALS INC.
5110 Campus Drive
Plymouth Meeting, PA 19462
-------------------------------
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MAY 7, 1997
-------------------------------
TO THE STOCKHOLDERS OF
MAGAININ PHARMACEUTICALS INC.:
Notice is hereby given that the 1997 annual meeting of stockholders
(the "Annual Meeting") of MAGAININ PHARMACEUTICALS INC. (the "Company" or
"Magainin") will be held at the DoubleTree Guest Suites Hotel, 640 West
Germantown Pike, Plymouth Meeting, Pennsylvania 19462 on May 7, 1997, at 10:00
a.m., local time, for the following purposes:
1. To elect seven directors; and
2. To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
Only stockholders of record as of the close of business on March 14,
1997 will be entitled to notice of the Annual Meeting and to vote at the Annual
Meeting and any adjournments thereof. A list of stockholders of the Company as
of the close of business on March 14, 1997 will be available for inspection
during normal business hours for ten days prior to the Annual Meeting at the
Company's executive offices at 5110 Campus Drive, Plymouth Meeting, PA 19462.
By order of the board of directors,
Michael R. Dougherty
Secretary
Plymouth Meeting, Pennsylvania
March 27, 1997
EACH STOCKHOLDER IS URGED TO COMPLETE, SIGN AND RETURN
THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES. IF A STOCKHOLDER
DECIDES TO ATTEND THE MEETING, HE OR SHE MAY, IF SO DESIRED,
REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
<PAGE> 2
MAGAININ PHARMACEUTICALS INC.
5110 Campus Drive
Plymouth Meeting, PA 19462
-------------------------------
PROXY STATEMENT
FOR
1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MAY 7, 1997
-------------------------------
This proxy statement and the accompanying form of proxy are being
mailed on or about March 27, 1997 to the stockholders of Magainin
Pharmaceuticals Inc. (the "Company" or "Magainin"). These materials are being
furnished in connection with the solicitation by the board of directors of the
Company of proxies to be voted at the 1997 Annual Meeting of Stockholders (the
"Annual Meeting") to be held at the DoubleTree Guest Suites Hotel, 640 West
Germantown Pike, Plymouth Meeting, Pennsylvania 19462 on May 7, 1997, at 10:00
a.m., local time, and at any adjournments thereof.
At the Annual Meeting, stockholders of the Company will be asked to
vote upon the election of seven directors.
The cost of solicitation of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by telephone by
officers and directors and a small number of regular employees of the Company
who will not be specially compensated for such services. The Company also will
request banks and brokers to solicit proxies from their customers, where
appropriate, and will reimburse such persons for reasonable expenses incurred in
that regard.
The Company's annual report to stockholders for the year ended December
31, 1996, including financial statements, is being mailed to stockholders with
this proxy statement but does not constitute a part of this proxy statement.
VOTING AT THE MEETING
Holders of record of shares of the Company's Common Stock, par value
$.002 per share ("Common Stock"), at the close of business on March 14, 1997 are
entitled to vote at the Annual Meeting. As of that date, there were 19,363,943
shares of Common Stock outstanding. Each stockholder entitled to vote shall have
the right to one vote for each share of Common Stock outstanding in such
stockholder's name.
The Company presently has no other class of stock outstanding and
entitled to be voted at the Annual Meeting. The presence in person or by proxy
of stockholders entitled to cast a majority of all votes entitled to be cast at
the Annual Meeting will constitute a quorum.
Shares cannot be voted at the Annual Meeting unless the holder of
record is present in person or by proxy. The enclosed form of proxy is a means
by which a stockholder may authorize the voting of his, her, or its shares at
the Annual Meeting.
Directors are to be elected at the Annual Meeting by a plurality of the
votes cast by holders of Common Stock present in person or represented by proxy
at the Annual Meeting and entitled to vote. Votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect other than for purposes of determining the presence of a
quorum.
<PAGE> 3
Stockholders are urged to specify their choices by marking the appropriate boxes
on the enclosed proxy card. The shares of Common Stock represented by each
properly executed proxy will be voted at the Annual Meeting in accordance with
each stockholder's directions. If no choice has been specified and the enclosed
proxy card is properly executed and returned, the shares will be voted as
recommended by the board of directors. If any other matters are properly
presented to the Annual Meeting for action, the proxy holders will vote the
proxies (which confer discretionary authority to vote on such matters) in
accordance with their best judgment.
Execution of the accompanying proxy will not affect a stockholder's
right to attend the Annual Meeting and vote in person. Any stockholder giving a
proxy has the right to revoke it by giving written or oral notice of revocation
to the Secretary of the Company, or by delivering a subsequently executed proxy,
at any time before the proxy is voted.
The Company believes that brokers who hold shares in street name for
customers have the authority, under the rules of the various stock exchanges, to
vote those shares with respect to the election of directors, if they have not
received instructions from the beneficial owner. A failure by brokers to vote
those shares will have no effect in the outcome of the election of directors, as
the directors are to be elected by a plurality of the votes cast.
Your proxy vote is important. Accordingly, you are asked to complete,
sign and return the accompanying proxy card whether or not you plan to attend
the Annual Meeting. If you plan to attend the Annual Meeting to vote in person
and your shares are registered with the Company's transfer agent in the name of
a broker or bank, you must secure a proxy from your broker or bank assigning
voting rights to you for your shares of Common Stock.
2
<PAGE> 4
ELECTION OF DIRECTORS
The board of directors of the Company consists of such number of
directors as is fixed from time to time by resolutions adopted by the board. At
the Annual Meeting, seven directors are to be elected. The term of office for
each director will expire at the 1998 annual meeting of stockholders, and each
director will hold office until the election and qualification of the director's
successor or until the director's earlier death, removal or resignation.
The board of directors, upon the recommendation of the nominating
committee, has nominated for election as directors of the Company Mr. Moorin,
Drs. Zasloff, Canavan, Horovitz, and Sanders, Mr. Shapiro and Dr. Wyngaarden.
All nominees are presently directors of the Company whose terms expire at the
Annual Meeting.
All nominees have consented to be named and to serve if elected. Unless
otherwise instructed by the stockholders, the persons named in the proxies will
vote the shares represented thereby for the election of such nominees. The board
of directors believes all nominees will be able to serve as directors; if this
should not be the case, however, the proxies may be voted for one or more
substitute nominees to be designated by the board of directors or the board may
decide to reduce the number of directors. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
-----------------------------------------------------------
NOMINEES FOR ELECTION
-----------------------------------------------------------
<TABLE>
<CAPTION>
YEAR FIRST BECAME DIRECTOR, PRINCIPAL OCCUPATIONS DURING
NAME OF DIRECTOR AGE PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
- ---------------- --- -----------------------------------------
<S> <C> <C>
Jay Moorin 45 Mr. Moorin has served as President and Chief Executive Officer
of the Company and as a director since 1991. In July 1996, Mr.
Moorin was appointed Chairman of the Board. Prior to joining
the Company, Mr. Moorin served as a Managing Director at
Bear, Stearns & Co., Inc. and was responsible for healthcare
investment banking and other services to the pharmaceutical and
distribution industry. Mr. Moorin was employed in other
capacities by Bear, Stearns from 1988 to 1990. From 1983 to
1988, Mr. Moorin was employed by E.R. Squibb & Co., Inc.
("Squibb"), where he joined Squibb as its first Corporate National
Accounts Director and subsequently was promoted to Business
Area Director and Vice President of Marketing and Business
Development at SquibbMark, a division of Squibb.
Michael A. 51 Dr. Zasloff has served as a director of the Company and
Zasloff, Chairman of the Scientific Advisory Board since 1988. Dr.
M.D., Ph.D. Zasloff has served as Executive Vice President of the Company
and President of the Magainin Research Institute, a division of
the Company, since July 1992. In July 1996, Dr. Zasloff was
appointed Vice Chairman of the Board. From 1988 until Dr. Zasloff
joined the Company on a full-time basis in July 1992, Dr. Zasloff
was the Company's Chief Scientific Advisor and served as the
Charles E.H. Upham Professor, Department of Pediatrics and Genetics,
University of Pennsylvania School of Medicine, and Chief, Division
of Human Genetics and Molecular Biology, The Children's Hospital of
Philadelphia. From 1982 until 1988, Dr. Zasloff was Chief, Human
Genetics Branch, National Institute of Child Health and Human
Development, National Institutes of Health. Dr. Zasloff currently
also serves as Adjunct Professor, Department of Human Genetics and
Orthopedics, University of Pennsylvania School of Medicine.
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
YEAR FIRST BECAME DIRECTOR, PRINCIPAL OCCUPATIONS DURING
NAME OF DIRECTOR AGE PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
- ---------------- --- -----------------------------------------
<S> <C> <C>
Bernard Canavan, 61 Dr. Canavan has served as a director of the Company since 1994.
M.D. Dr. Canavan was employed by American Home Products
Corporation for over twenty-five years. From June 1990 until his
retirement in January 1994, he was President of American Home
Products Corporation and was responsible for all operations,
including its pharmaceutical businesses worldwide. Previously, Dr.
Canavan was Chairman and Chief Executive Officer of American
Home Products' pharmaceutical company, Wyeth-Ayerst
Laboratories. Dr. Canavan is also a director of Alpha-Beta
Technology, Inc.
Zola P. Horovitz, 62 Dr. Horovitz has served as a director of the Company since 1995.
Ph.D. Dr. Horovitz was employed by Bristol-Myers Squibb Company
("Bristol-Myers") and its predecessor, Squibb Corporation, for
over thirty years. At the time of his retirement in 1994, Dr.
Horovitz was Vice President of Business Development at Bristol-
Myers. Dr. Horovitz is currently a consultant to the
pharmaceutical and biotechnology industry, and is a director of
Avigen, Inc., Clinicor Inc., Procept, Inc., Synaptic Pharmaceutical
Corporation, Diacrin, Inc., BioCryst Pharmaceuticals, Inc. and
Roberts Pharmaceutical Corporation.
Charles A. 64 Dr. Sanders has served as a director of the Company since
Sanders, September 1996. Dr. Sanders is the retired Chairman and Chief
M.D. Executive Officer of Glaxo Inc., where he was employed from
1989 to 1995. Previously, Dr. Sanders was Vice Chairman of
Squibb Corporation and also served as General Director of
Massachusetts General Hospital. Dr. Sanders is also a director of
Vertex Pharmaceuticals Incorporated and StaffMark, Inc.
Robert F. Shapiro 62 Mr. Shapiro has served as a director of the Company since
September 1996. Since 1988, Mr. Shapiro has served as President
of RFS & Associates, Inc., a private investment and consulting
firm. Previously, Mr. Shapiro served as President and Co-
Chairman of Wertheim Schroder & Co., Inc. and Chairman of
New Street Capital Corporation, investment banking firms. Mr.
Shapiro is also a director of American Buildings Company, The
Burnham Fund, Inc., Equitable Capital Partners, L.P. and The
TJX Companies, Inc.
James B. 72 Dr. Wyngaarden has served as a director of the Company since
Wyngaarden, M.D. September 1996. From 1990 to 1994, Dr. Wyngaarden was
Foreign Secretary of the National Academy of Sciences and
Institute of Medicine. Dr. Wyngaarden previously served in
several capacities, including as the Director of the National
Institutes of Health. Dr. Wyngaarden is a director of Hybridon,
Inc. and Human Genome Sciences, Inc. and is also a member of
Magainin's Scientific Advisory Board.
</TABLE>
4
<PAGE> 6
GENERAL INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The board of directors of the Company met on five occasions during
1996. The Delaware General Corporation Law provides that the board of directors,
by resolution adopted by a majority of the entire board, may designate one or
more committees, each of which shall consist of one or more directors. The board
of directors elects from its members an Audit Committee, Compensation Committee,
Executive Committee and Nominating Committee. Each director attended at least
75% of the aggregate of the meetings of the board of directors held during the
period for which he was a director and the meetings of the committee or
committees on which he served during such period.
Audit Committee. The Audit Committee is responsible for providing
general oversight with respect to the accounting principles employed in
Magainin's financial reporting. The Audit Committee meets at least annually with
the Company's principal financial and accounting officers and independent public
accountants to review the scope of auditing procedures, the Company's policies
relating to internal auditing and accounting procedures and controls, and to
discuss results of the annual audit of the Company's financial statements. The
Audit Committee met once during 1996. The Audit Committee is currently composed
of two non-employee directors, Dr. Horovitz and Mr. Shapiro.
Compensation Committee. The Compensation Committee has general
supervisory power over, and the power to grant options under, the Company's
stock option plans. In addition, the Compensation Committee recommends to the
board the compensation of the Company's Chief Executive Officer, reviews and
takes action on the recommendations of the Chief Executive Officer as to the
compensation of the Company's other officers and key personnel, approves the
grants of any bonuses to officers, and reviews other compensation matters
generally. The current members of the Compensation Committee are Drs. Canavan
and Sanders. The Compensation Committee met four times during 1996.
Executive Committee. The Executive Committee may exercise, with certain
exceptions, all of the authority of the board in the management of the business
and affairs of the Company. The Executive Committee is intended to serve in the
event that action must be taken by the board of directors at a time when
convening a meeting of the entire board is not feasible. During 1996, the
Executive Committee met two times. The current members of the Executive
Committee are Mr. Moorin and Dr. Horovitz.
Nominating Committee. The Nominating Committee is authorized to
consider candidates for directors of the Company. The Nominating Committee is
currently composed of Mr. Moorin and Dr. Wyngaarden. The Nominating Committee
met once during 1996. It is the policy of the Nominating Committee to consider
director nominees recommended by stockholders. Any such recommendation, together
with the nominee's qualifications and consent to being considered as a nominee,
should be sent in writing to the Nominating Committee in care of the Secretary
of the Company.
Dr. James H. Cavanaugh, a director of the Company who is not standing
for re-election, served as a member of the Company's Compensation, Executive and
Nominating Committees during 1996.
5
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 1, 1997
(except as otherwise noted) regarding the ownership of Common Stock (i) by each
person known by the Company to be the beneficial owner of more than five percent
of the outstanding Common Stock, (ii) by each director of the Company, (iii) by
each executive officer of the Company named in the Summary Compensation Table
included elsewhere in this proxy statement and (iv) by all current executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES BENEFICIALLY PERCENTAGE
BENEFICIAL OWNER OWNED (1) OF CLASS (2)
- ---------------- --------- ------------
<S> <C> <C>
Amerindo Investment Advisors Inc.
780 Third Avenue, Suite 3204
New York, NY 10017 ......................... 1,422,500(3) 7.4%
First Union Corporation
One First Union Center
Charlotte, NC 28288 ........................ 1,096,245(4) 5.7%
FMR Corporation
82 Devonshire Street
Boston, MA 02109 ........................... 1,671,100(5) 8.6%
Oracle Partners, L.P.
135 East 57th Street, 30th Floor
New York, NY 10022 ......................... 1,134,900(6) 5.9%
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109 ................ 2,002,300(7) 10.3%
Jay Moorin ................................. 691,362(8) 3.4%
Michael A. Zasloff, M.D., Ph.D. ............ 445,570(9) 2.3%
Michael R. Dougherty ....................... 91,500(10) *
Roy C. Levitt, M.D. ........................ 50,625(11) *
Thomas J. Bigger ........................... -- 0.0%
Paul A. Litka, M.D. ........................ 13,000(12) *
Bernard Canavan, M.D. ...................... 12,500(13) *
Zola P. Horovitz, Ph.D. .................... 11,250(14) *
Charles A. Sanders, M.D. ................... -- 0.0%
Robert F. Shapiro .......................... 15,000(15) *
James B. Wyngaarden, M.D. .................. 500 *
All current executive officers and directors
as a group (12 persons) .................. 1,331,307(16) 6.5%
</TABLE>
* Less than one percent.
6
<PAGE> 8
(1) Nature of ownership consists of sole voting and investment power unless
otherwise indicated. The number of shares indicated includes shares
issuable upon the exercise of outstanding stock options and warrants
held by each individual or group to the extent such options and
warrants are exercisable within sixty days of March 1, 1997.
(2) The percentage for each individual or group is based on the aggregate
of the shares outstanding as of March 1, 1997 (19,363,943 shares) and
all shares issuable upon the exercise of outstanding stock options and
warrants held by such individual or group to the extent such options
and warrants are exercisable within sixty days of March 1, 1997.
(3) This information is presented in reliance on information disclosed in a
Schedule 13G/A filed by Amerindo Investment Advisors Inc. ("Amerindo")
with the Securities and Exchange Commission (the "SEC") reporting as of
December 31, 1996. Of the shares reported, Amerindo has shared
dispositive power and shared voting power in respect to all shares, and
disclaims beneficial ownership of all such shares.
(4) This information is presented in reliance on information disclosed in a
Schedule 13G filed by First Union Corporation with the SEC reporting as
of December 31, 1996.
(5) This information is presented in reliance on information disclosed in a
Schedule 13G filed by FMR Corporation ("FMR") with the SEC reporting as
of December 31, 1996. Of the shares reported, FMR has sole voting power
in respect of 253,000 shares, and sole dispositive power of 1,671,100
shares.
(6) This information is presented in reliance on information disclosed in a
Schedule 13D filed by Larry Feinberg, a general partner of Oracle
Partners, L.P. ("Oracle") with the SEC reporting as of April 26, 1996.
Of the shares reported, Oracle has shared voting power and shared
dispositive power in respect of 39,000 shares.
(7) This information is presented in reliance on information disclosed in a
Schedule 13G/A filed by Wellington Management Company, LLP
("Wellington") with the SEC reporting as of December 31, 1996. Of the
shares reported, Wellington shared dispositive power in respect of all
such shares, and shared voting power in respect of 852,800 shares.
(8) Represents 690,862 shares of Common Stock issuable upon exercise of
options. Includes 500 shares owned by Mr. Moorin's wife as to which
shares Mr. Moorin disclaims beneficial ownership.
(9) Includes 243,258 shares of Common Stock issuable upon exercise of
options and 30,000 shares of Common Stock held by trusts for the
benefit of certain members of Dr. Zasloff's family.
(10) Represents 91,500 shares of Common Stock issuable upon exercise of
options.
(11) Includes 37,500 shares of Common Stock issuable upon exercise of
options, and 8,500 shares issuable to Dr. Levitt.
(12) Represents 13,000 shares of Common Stock issuable upon exercise of
options.
(13) Represents 12,500 shares of Common Stock issuable upon exercise of
options.
(14) Represents 11,250 shares of Common Stock issuable upon exercise of
options.
(15) Includes 5,000 shares owned by Mr. Shapiro's wife, as to which shares
Mr. Shapiro disclaims beneficial ownership.
(16) See (8), (9), (10), (11), (12), (13), (14) and (15) above.
7
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth for the years ended December 31, 1996, 1995 and
1994 certain compensation paid by the Company to its Chief Executive Officer and
the five other most highly paid executive officers of the Company whose cash
compensation exceeded $100,000 for the year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
ANNUAL LONG TERM ALL OTHER
COMPENSATION COMPENSATION COMPENSATION
------------ ------------ ------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SECURITIES UNDERLYING
--------------------------- ---- ------ ----- OPTIONS/ SARS
-------------
<S> <C> <C> <C> <C> <C>
Jay Moorin ............................... 1996 $266,500 $125,000 105,000 -0-
Chairman, President and Chief Executive 1995 246,016 115,000 45,000 -0-
Officer 1994 230,625 40,000 33,000 -0-
90,000(1) -0-
- ----------------------------------------------------------------------------------------------------------------
Michael A. Zasloff, M.D., Ph.D ........... 1996 $225,072 $ 90,000 95,000 -0-
Vice Chairman, Executive Vice President 1995 203,112 70,000 35,000 -0-
1994 191,932 23,000 28,000 -0-
- ----------------------------------------------------------------------------------------------------------------
Michael R. Dougherty ..................... 1996 $197,380 $ 77,000 90,000 -0-
Executive Vice President and 1995 175,928 70,000 30,000 -0-
Chief Financial Officer 1994 153,750 18,000 60,000 -0-
72,000(1) -0-
- ----------------------------------------------------------------------------------------------------------------
Roy C. Levitt, M.D ...................... 1996 $194,063 (2) $ 77,000 95,000 $27,800 (5)
Executive Vice President 1995 -0- -0- 150,000
- ----------------------------------------------------------------------------------------------------------------
Thomas J. Bigger ......................... 1996 $105,000 (3) $ 30,000 125,000 $29,500 (5)
Senior Vice President
- ----------------------------------------------------------------------------------------------------------------
Paul A. Litka, M.D ....................... 1996 $167,144 $ 45,000 60,000 -0-
Senior Vice President 1995 112,500 12,000 52,000 -0-
</TABLE>
- ----------
(1) Represents options received pursuant to the Company's Option Exchange
Program in December 1994. In each case, the named individual forfeited
a greater number of options, exercisable at a higher price, in exchange
for such new options.
(2) Dr. Levitt joined the Company in January 1996.
(3) Mr. Bigger joined the Company in July 1996.
(4) Dr. Litka joined the Company in April 1995.
(5) These amounts represent payments relating to relocation expenses.
8
<PAGE> 10
The following table summarizes stock options granted during 1996 to the persons
named in the Summary Compensation Table.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS (1) OPTION TERM(2)
------------------------------------------------------------- ------------------------
Percent of
Total Options
Granted to
Options Employees in Exercise Expiration
Name Granted 1996 Price Date 5% 10%
---- ------- ---- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Jay Moorin......................... 105,000 14.8% $10.50 June 28, 2006 $693,356 $1,757,101
----------------------------------------------------------------------------------------------
Michael A. Zasloff, M.D., Ph.D. ... 95,000 13.4% $10.50 June 28, 2006 $627,322 $1,589,758
----------------------------------------------------------------------------------------------
Michael R. Dougherty............... 90,000 12.7% $10.50 June 28, 2006 $594,305 $1,506,087
----------------------------------------------------------------------------------------------
Roy C. Levitt, M.D................. 45,000 6.3% $10.50 June 28, 2006 $297,153 $ 753,043
50,000 7.1% $11.63 Sept. 27, 2006 $365,702 $ 926,761
----------------------------------------------------------------------------------------------
Thomas J. Bigger................... 125,000 17.7% $10.50 June 28, 2006 $825,424 $2,091,787
----------------------------------------------------------------------------------------------
Paul A. Litka, M.D................. 60,000 8.5% $10.50 June 28, 2006 $396,204 $1,004,058
</TABLE>
- ----------
(1) Options are non-qualified stock options to acquire shares of Common
Stock with a stated term of ten years, vesting in four or five annual
installments beginning one year after the date of grant. If a "change
in control" (as defined in the 1992 Option Plan) were to occur, these
options would become immediately exercisable in full.
(2) Potential Realizable Values are based on an assumption that the stock
price of the Common Stock starts equal to the exercise price shown for
each particular option grant and appreciates at the annual rate shown
(compounded annually) from the date of grant until the end of the term
of the option. These amounts are reported net of the option exercise
price, but before any taxes associated with exercise or subsequent sale
of the underlying stock. The actual value, if any, an optionholder may
realize will be a function of the extent to which the stock price
exceeds the exercise price on the date the option is exercised and also
will depend on the optionholder's continued employment through the
vesting period. The actual value to be realized by the optionholder may
be greater or less than the values estimated in this table.
9
<PAGE> 11
The following table summarizes option exercises during 1996 and the
value of vested and unvested options for the persons named in the Summary
Compensation Table at December 31, 1996. Year-end values are based upon a price
of $9.63 per share, which was the closing sales price of a share of the
Company's Common Stock on December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST YEAR AND
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, 1996 DECEMBER 31, 1996
---------------------------- ----------------------------
SHARES ACQUIRED
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jay Moorin............ - - 690,862 177,750 $5,066,565 $313,695
--------------------------------------------------------------------------------------------------
Michael A. Zasloff - - 243,258 157,500 $1,725,412 $224,213
M.D., Ph.D............
--------------------------------------------------------------------------------------------------
Michael R. Dougherty.. - - 91,500 160,500 $ 512,670 $338,490
--------------------------------------------------------------------------------------------------
Roy C. Levitt, M.D.... - - 37,500 207,500 $ 18,938 $ 56,813
--------------------------------------------------------------------------------------------------
Thomas J. Bigger...... - - - 125,000 - -
--------------------------------------------------------------------------------------------------
Paul A. Litka, M.D... - - 13,000 99,000 $ 67,500 $202,500
--------------------------------------------------------------------------------------------------
</TABLE>
The Company does not currently grant any long-term incentives, other
than stock options, to its executives or other employees. Similarly, the Company
does not sponsor any defined benefit or actuarial plans at this time.
EMPLOYMENT AGREEMENTS
In 1991, the Company entered into an employment agreement with Mr.
Moorin, pursuant to which, among other things, Mr. Moorin was granted an option,
which is currently exercisable in full, to acquire 595,612 shares of Common
Stock at an exercise price of $2.00 per share. These options will remain
exercisable through 2001, notwithstanding the earlier termination of Mr.
Moorin's employment relationship with the Company.
The Company has entered into an employment agreement with Dr. Zasloff
pursuant to which, among other things, Dr. Zasloff will receive a $50,000 bonus
upon approval by the Food and Drug Administration of the first product developed
by the Company under his direction. After the initial one-year term, which ended
June 30, 1993, the agreement is renewed automatically for successive one-year
terms unless terminated by either party upon prior notice. The Company also
entered into a restricted stock purchase agreement pursuant to which the Company
granted Dr. Zasloff an option, which is currently exercisable in full, to
acquire 137,758 shares of Common Stock at an exercise price of $.002 per share.
These options remain exercisable through 1998, notwithstanding the earlier
termination of Dr. Zasloff's employment relationship with the Company.
In January 1996, the Company entered into an employment agreement with
Dr. Levitt pursuant to which, among other things, Dr. Levitt will receive up to
an additional 75,000 options in the event certain milestones are achieved in Dr.
Levitt's area of research.
In July 1996, the Company entered into an employment agreement with Mr.
Bigger pursuant to which Mr. Bigger will receive up to an additional 25,000
options in the event certain milestones are achieved relating to business
development.
10
<PAGE> 12
The Company's executive officers are all entitled to receive six to
twelve months' base salary in the event that their employment is terminated by
the Company without "cause." In addition, in the event that Dr. Levitt is
terminated prior to January 1, 2001 for reasons other than "cause", the Company
will be obligated to pay royalties to Dr. Levitt with respect to certain
intellectual property transferred by Dr. Levitt to the Company.
COMPENSATION OF DIRECTORS
All non-employee directors receive an annual fee of $15,000 for their
services to the Company as directors, and are reimbursed for expenses incurred
in connection with attending meetings of the board of directors.
In March, 1995, Dr. Horovitz entered into a Consulting Agreement with
the Company in the field of business development and strategic planning, which
provides for an annual fee of $45,000. The term of this Agreement is for one
year, renewable upon mutual agreement of both parties. This agreement expires in
March 1997.
Under the terms of the 1992 Option Plan, as amended, each non-employee
director is entitled to receive a grant of options to purchase 15,000 shares of
Common Stock upon first becoming a member of the board of directors. In
addition, the 1992 Option Plan provides for the grant, on the date of each
annual meeting of stockholders, of options to purchase 5,000 shares of Common
Stock to each non-employee director in office after the annual election of
directors (other than those non-employee directors who first commence their
service as directors upon election by stockholders at such meeting).
The following Compensation Committee Report and the
Comparative Stock Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this
Proxy Statement into any filing under the Securities Act of 1933, as
amended, or under the Securities Exchange Act of 1934, as amended,
except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under
such Acts.
COMPENSATION COMMITTEE REPORT
Compensation Philosophy
The Compensation Committee of the board of directors (the "Compensation
Committee") believes that a well designed compensation program should align the
goals of the stockholders with the goals of the executive, and that a
significant portion of the executives' compensation, over the long term, should
be dependent upon the value created for the stockholders. However, the
Compensation Committee recognizes that, in the short-term, the value of the
Company will be affected by many factors, some transient in nature and beyond
the control of the Company's executives. This is especially true in the
biotechnology industry which is characterized by a large number of small
companies, long product lead times, highly volatile stock prices and few
commercial products. In order to attract and retain qualified executives in such
an environment, the Compensation Committee attempts to create a balanced
compensation package by combining components based upon the achievement of
long-term value for stockholders with components based upon the achievement of
shorter-term strategic goals. These goals generally include the progress of
research and drug development programs, adherence to budgets, strengthening of
the Company's financial position and success in entering into appropriate
business collaborations. The Compensation Committee expects that the achievement
of these shorter-term goals will contribute to the long-term success of the
Company. In light of the Company's need to develop its technology into viable
products, progress toward achievement of research and development objectives is
the most significant individual factor considered in determining compensation
levels.
The Company competes against both biotechnology companies and
pharmaceutical companies in the hiring and retention of qualified personnel.
Particularly as compared to the pharmaceutical industry, the cash compensation
of the Company's executives is below those levels available to executives of
similar background and experience. Likewise, the Company does not offer the type
of retirement benefits often available at such other entities. The Company must
therefore place greater emphasis on long-term compensation, principally
including the grant of stock options.
11
<PAGE> 13
The Company's compensation program for executive officers comprises
base salary, performance bonuses, longer-term incentive compensation in the form
of stock options, and benefits available generally to all of the Company's
employees. The process utilized by the Committee in determining executive
officer compensation levels for each of these components is based on the
Committee's subjective judgement, and the other factors noted herein.
Compensation Components
Base Salary. Base salary levels for the Company's executive officers
are reviewed on an annual basis by the Compensation Committee. In conducting
this review, the Compensation Committee considers the various items noted above,
including competitive factors and industry trends, as well as performance within
the Company, and changes in job responsibility. The Committee also reviews
certain compensation information publicly available and gathered informally, and
considers salary history at the Company. In 1996, Mr. Moorin's base salary was
increased by 8%, from $256,250 to $276,750. Certain other executive officers
received increases in base salary of up to 17%, in recognition of promotions and
increases in job responsibility.
Performance Bonus Compensation. The Compensation Committee annually
considers awards of cash bonuses to executives in order to provide a direct
financial incentive to achieve Company and individual objectives, generally
related to the goals described above. Specific objectives are determined yearly
as part of the Company's annual operating plan and budget. The granting of any
such bonus is totally discretionary and is determined based upon the
Compensation Committee's evaluation of each executive's performance in attaining
such corporate and individual goals and objectives.
In determining to award cash bonuses to the Company's executive
officers in 1996, the Committee noted the Company's achievement of several
objectives and milestones, including:
(i) the completion of a successful initial, pivotal trial
of Cytolex(TM) (MSI-78) for the treatment of
infection in diabetic foot ulcers, and the management
of a second pivotal trial in the same indication;
(ii) the expansion of the Company's technology platform
into the asthma genomics area, and the identification
of two candidate genes believed critical in the
pathogenesis of asthma; and
(iii) the progress of the Company's aminosterol program to
the preclinical development stage.
Mr. Moorin was awarded a cash bonus of $125,000 in 1996. In arriving at
this award, the Committee considered the factors noted above, and also
considered the increased operating responsibilities of Mr. Moorin, and other
senior managers, as a result of senior management transition at the Company. The
Committee also reviews certain cash compensation survey materials and noted that
Mr. Moorin's base salary and cash bonus places Mr. Moorin in approximately the
second quartile level of compensation in the biopharmaceutical industry, a level
the Committee considers appropriate. Some but not all of the companies in the
compensation survey are included in the Index of NASDAQ Pharmaceutical Stocks
in the Comparative Stock Performances Graph.
Stock Option Grants. The 1992 Option Plan is the Company's long-term
equity incentive plan for executive officers and other selected employees. The
objective of the plan is to align the long-term financial interests of the
option holder with the financial interests of the Company's stockholders. Stock
option exercise prices are set at prevailing market price at the time of grant,
and stock options will only have value if the Company's stock price increases.
The Company, as with all development-stage biopharmaceutical companies, relies
heavily upon its long-term equity incentive plan. Without such incentives, it
would not be possible to attract and retain qualified managers or scientists.
The Compensation Committee generally considers additional stock option grants on
an annual basis as a means to continue to incentivise the Company's senior
managers to work toward increasing stockholder value, however, the granting of
any such options is totally discretionary.
Options to purchase an aggregate of 570,000 shares of the Company's
Common Stock were awarded in 1996 to the Company's executive officers, including
a grant of 105,000 shares to Mr. Moorin. The Committee established a vesting
period of five years for options to purchase 205,000 of such shares, including
55,000 shares granted to Mr. Moorin, as opposed to the four year vesting period
established for all other option grants at the
12
<PAGE> 14
Company. This extended vesting period is intended to enhance the retention
aspects of the option grants. The exercise price of the options was the fair
market value of the Company's Common Stock on the date of grant. In awarding
such options to Mr. Moorin, the Compensation Committee considered the various
factors noted above, as well as the fact that the majority of Mr. Moorin's
existing options are vested, and that additional awards will serve the purpose
of continuing to incentivise Mr. Moorin to build value within the Company over
an extended period.
Payments during 1996 to the Company's executives under the various
programs discussed above were made with regard to the provisions of Section
162(m) of the Code which became effective on January 1, 1994. Section 162(m)
limits the deduction that may be claimed by a "public company" for compensation
paid to certain individuals to $1 million, except to the extent that any excess
compensation is "performance-based compensation." In accordance with current
regulations, the amounts received upon the exercise of stock options under the
1992 Option Plan will qualify as "performance-based compensation".
COMPENSATION COMMITTEE
James H. Cavanaugh, Ph.D.
Bernard Canavan, M.D.
February 11, 1997
13
<PAGE> 15
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative total stockholder return of (i) the
NASDAQ Stock Market (U.S.) Index (the "NASDAQ Index"), and (ii) the Index of
NASDAQ Pharmaceutical Stocks (the "Pharmaceutical Index"), assuming an
investment of $100 on December 31, 1991 in each of the Common Stock of the
Company, the stocks comprising the NASDAQ Index and the stocks comprising the
Pharmaceutical Index, and further assuming reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG MAGAININ PHARMACEUTICALS INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE NASDAQ PHARMACEUTICAL INDEX
<TABLE>
<CAPTION>
MAGAININ
MEASUREMENT PERIOD PHARMACEUTICALS NASDAQ STOCK NASDAQ
(FISCAL YEAR COVERED) INC. MARKET- US PHARMACEUTICAL
<S> <C> <C> <C>
DEC-91 100 100 100
DEC-92 90 116 83
DEC-93 141 134 74
DEC-94 28 131 56
DEC-95 135 185 102
DEC-96 102 227 99
</TABLE>
* $100 INVESTED ON 12/31/91 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
14
<PAGE> 16
INFORMATION CONCERNING INDEPENDENT ACCOUNTANTS
Richard A. Eisner & Company, LLP has served as the Company's
independent accountants since the Company's inception in June 1987. The Company
has requested that a representative of Richard A. Eisner & Company, LLP attend
the Annual Meeting. Such representative will have an opportunity to make a
statement, if he or she desires, and will be available to respond to appropriate
questions of stockholders.
OTHER MATTERS
The board of directors is not aware of any matters not set forth herein
that may come before the meeting. If, however, further business properly comes
before the meeting, the persons named in the proxies will vote the shares
represented thereby in accordance with their judgment.
SECTION 16(a) REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than
ten-percent of a registered class of the Company's equity securities, to file
with the SEC initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater-than-ten-percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file. Based solely on
its review of the copies of such reports received by the Company, the Company
believes that during the year ended December 31, 1996 all filing requirements
applicable to its officers, directors and ten-percent stockholders were
satisfied except that James H. Cavanaugh, a director not standing for
re-election did not file a Form 4 required to be filed by October 10, 1996
until February 1997.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for
stockholder action at annual meetings in accordance with regulations adopted by
the SEC. To be considered for inclusion in the proxy statement and form of proxy
relating to the 1998 annual meeting, such proposals must be received by the
Company no later than November 27, 1997. Proposals should be directed to the
attention of the Secretary of the Company.
ANNUAL REPORT ON FORM 10-K
The Company will furnish without charge to each person whose proxy is
being solicited, upon the written request of such person, a copy of the
Company's annual report on Form 10-K for the year ended December 31, 1996,
including the financial statements, but excluding exhibits. Requests for copies
of such report should be directed to the Company, Attention: Investor Relations.
By order of the board of directors,
Michael R. Dougherty
Secretary
March 27, 1997
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<PAGE> 17
PROXY MAGAININ PHARMACEUTICALS INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS, MAY 7, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jay Moorin and Michael R.
Dougherty, or any one of them acting singly, with full power of
substitution, the proxy or proxies of the undersigned to attend the
Annual Meeting of Stockholders of Magainin Pharmaceuticals Inc. to be
held on May 7, 1997, and any adjournments thereof, to vote all shares
of stock that the undersigned would be entitled to vote if personally
present in the manner indicated below and on the reverse side, and on
any other matters properly brought before the meeting or any
adjournments thereof, all as set forth in the March 27, 1997 proxy
statement.
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL NOMINEES.
Election of the following nominees as directors: Jay Moorin, Michael
A. Zasloff, Bernard Canavan, Zola P. Horovitz, Charles A. Sanders,
Robert F. Shapiro, and James B. Wyngaarden.
<TABLE>
<S> <C> <C>
For all nominees Withhold for all nominees Withhold for the following only: (Write the names of the nominee(s) in the
space below)
[ ] [ ]
-------------------------------------------------------------------------------
</TABLE>
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE DATE, SIGN AND RETURN
PROMPTLY.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF
ANNUAL MEETING, PROXY STATEMENT AND ANNUAL REPORT OF MAGAININ
PHARMACEUTICALS INC.
(Signature should be exactly as
name or names appear on this
proxy. If stock is held
jointly, each holder should
sign. If signing is by
attorney, executor,
administrator, trustee or
guardian, please give full
title.)
Dated: , 1997
-------------------
-------------------------------
Signature
-------------------------------
Signature if held jointly
I plan to attend the
meeting: Yes [ ] No [ ]
THIS PROXY WILL BE VOTED FOR ALL NOMINEES UNLESS OTHERWISE INDICATED, AND IN THE
DISCRETION OF THE PROXIES ON ALL OTHER MATTERS PROPERLY BROUGHT BEFORE THE
MEETING.
