<PAGE>
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
MARGAININ PHARMACEUTICALS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Rule 14a-6( ) (2)
<PAGE>
MAGAININ PHARMACEUTICALS INC.
5110 CAMPUS DRIVE
PLYMOUTH MEETING, PA 19462
__________________
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 1999
__________________
TO THE STOCKHOLDERS OF
MAGAININ PHARMACEUTICALS INC.:
Notice is hereby given that the 1999 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 18, 1999, at 10:00 a.m., local time,
for the following purposes:
1. To elect eight 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 22, 1999 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 22, 1999 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, Pennsylvania 19462.
By order of the board of directors,
/s/ Michael R. Dougherty
Michael R. Dougherty
Secretary
Plymouth Meeting, Pennsylvania
April 12, 1999
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>
MAGAININ PHARMACEUTICALS INC.
5110 CAMPUS DRIVE
PLYMOUTH MEETING, PA 19462
__________________
PROXY STATEMENT FOR
1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 1999
__________________
This proxy statement and the accompanying form of proxy are being mailed on
or about April 12, 1999 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 1999 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 18, 1999, 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 eight 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,
1998, including financial statements, is being mailed to stockholders with this
proxy statement, but does not constitute a part of this proxy statement. A copy
of the Company's Annual Report on Form 10-K for the year ended December 31,
1998, as filed with the Securities and Exchange Commission, is available without
charge upon written request to Investor Relations, Magainin Pharmaceuticals
Inc., 5110 Campus Drive, Plymouth Meeting, PA, 19462.
VOTING AT THE MEETING
Holders of record of shares of the Company's Common Stock at the close of
business on March 22, 1999 (the "Record Date") are entitled to vote at the
Annual Meeting. As of the Record Date, there were 22,911,616 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. 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. Stockholders are urged to specify their choices by marking the
appropriate boxes on the enclosed proxy card. 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.
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. With regard to the election of
1
<PAGE>
directors, votes may be cast in favor of a director nominee 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.
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 that are member firms of the New York
Stock Exchange and who hold shares in street name for customers have the
authority 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>
ELECTION OF DIRECTORS
The board of directors of the Company consists of such number of directors
as is fixed from time to time by resolution adopted by the board of directors.
At the Annual Meeting, eight directors are to be elected. The term of office for
each director elected at the Annual Meeting will expire at the Company's 2000
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 Dr. Zola P. Horovitz, Dr. Bernard Canavan, Michael R.
Dougherty, Dr. Roy C. Levitt, Dr. Charles A. Sanders, Robert F. Shapiro, Dr.
James B. Wyngaarden and Dr. Michael A. Zasloff for election as directors of the
Company to serve until the 2000 Annual Meeting of Stockholders. 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
NAMED BELOW.
__________________
NOMINEES FOR ELECTION
__________________
<TABLE>
<CAPTION>
YEAR FIRST
BECAME
NAME OF DIRECTOR AGE DIRECTOR PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
- ---------------- --- ---------- ----------------------------------------------------------------------
<S> <C> <C> <C>
Zola P. Horovitz, Ph.D..... 64 1995 Dr. Horovitz has served as Chairman of the Board of Directors since August 1998, and
a director of the Company since 1995. 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 industries, and is a director of Avigen, Inc.,
Clinicor, Inc., Procept, Inc., Synaptic Pharmaceutical Corporation, Diacrin, Inc.,
BioCryst Pharmaceuticals, Inc. and Roberts Pharmaceutical Corporation.
Bernard Canavan, M.D....... 63 1994 Dr. Canavan has served as a director of the Company since 1994. Dr. Canavan was
employed by American Home Products Corporation for over twenty-five years until his
retirement in February 1994. From June 1990 until 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 Corporation's pharmaceutical
company, Wyeth-Ayerst Laboratories. Dr. Canavan is also a director of Alpha-Beta
Technology, Inc. and BioChem Pharma Inc.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
BECAME
NAME OF DIRECTOR AGE DIRECTOR PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
- ---------------- --- ---------- ----------------------------------------------------------------------
<S> <C> <C> <C>
Michael R. Dougherty....... 41 1997 Mr. Dougherty has served as President and Chief Executive Officer of the Company
since August 1998. Mr. Dougherty served as Executive Vice President of the Company
from March 1995 through August 1998, and as a Director since August, 1997. From
August 1993, when he joined the Company, until March 1995, Mr. Dougherty served as
Senior Vice President. Mr. Dougherty has served as Chief Financial Officer of the
Company since August 1993. Prior to joining the Company, Mr. Dougherty served in the
following capacities at Centocor, Inc. (a biopharmaceutical company): Senior Vice
President, Chief Financial Officer and Treasurer, from February 1992 to August 1993,
Vice President Corporate Finance from May 1990 to February 1992 and Treasurer from
June 1986 to May 1990.
Roy C. Levitt, M.D......... 45 1997 Dr. Levitt has served as Executive Vice President and Chief Operating Officer of the
Company since August 1998. Dr. Levitt was appointed head of Research and Development
at the Company, and a Director in August, 1997. Dr. Levitt has served as Executive
Vice President since joining the Company in January 1996. Prior to joining the
Company, Dr. Levitt was a faculty member at Johns Hopkins University in the Department
of Anesthesiology and Critical Care Medicine, from 1986 to 1995, in Neurological
Surgery from 1995 to 1996 and in Environmental Health Sciences from 1988 to 1996.
Charles A. Sanders, M.D.... 67 1996 Dr. Sanders has served as a director of the Company since September 1996. Dr. Sanders
is the retired Chairman and Chief 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 a director of Scios Inc., Vertex Pharmaceuticals Incorporated, StaffMark,
Inc., Kendle International Inc., Pharmacopeia, Inc. and Trimeris, Inc.
Robert F. Shapiro.......... 64 1996 Mr. Shapiro has served as a director of the Company since September 1996. In 1997, Mr.
Shapiro joined Klingenstein, Fields and Co., LLC, an investment management firm, as
Vice Chairman and Partner. Since 1988, Mr. Shapiro has also 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 a director of
American Buildings Company, The Burnham Fund, Inc., Equitable Capital Partners, L.P.
and The TJX Companies, Inc.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
BECAME
NAME OF DIRECTOR AGE DIRECTOR PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
- ---------------- --- ---------- ----------------------------------------------------------------------
<S> <C> <C> <C>
James B. Wyngaarden, M.D... 74 1996 Dr. Wyngaarden has served as a director of the Company since September 1996. Since
1998, Dr. Wyngaarden has served as a Professor of Medicine at Duke University Medical
School. Since 1996, Dr. Wyngaarden has been a partner in the Washington Advisory
Group, a consulting firm. From 1995 to 1997, Dr. Wyngaarden was a Senior Associate
Dean, International Affairs, University of Pennsylvania Medical School. From 1990 to
1994, Dr. Wyngaarden was Foreign Secretary of the U.S. National Academy of Sciences
and Institute of Medicine. From 1990 to 1994, Dr. Wyngaarden also served as Associate
Dean at Duke University Medical School. 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.
Michael A. Zasloff, M.D.,
Ph.D...................... 53 1988 Dr. Zasloff has served as Executive Vice President 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, at the University of Pennsylvania School of
Medicine, and Chief, Division of Human Genetics and Molecular Biology, at the
Children's Hospital of Philadelphia. From 1982 until 1988, Dr. Zasloff was Chief,
Human Genetics Branch, National Institutes of Child Health and Human Development, at
the National Institutes of Health. Dr. Zasloff currently also serves as Adjunct
Professor, Department of Human Genetics and Orthopedics, at the University of
Pennsylvania School of Medicine.
</TABLE>
5
<PAGE>
GENERAL INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The board of directors of the Company met on five occasions during 1998.
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 annually elects from its members an Executive Committee, Audit
Committee, Compensation Committee and Nominating Committee. Each director
attended in the aggregate at least 75% 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.
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. The Executive Committee
met three times during 1998. The current members of the Executive Committee are
Mr. Dougherty and Dr. Horovitz.
Audit Committee. The Audit Committee is responsible for providing general
oversight with respect to the accounting principles employed in the Company'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 three times during 1998. The current members of the Audit
Committee are Dr. Horovitz and Mr. Shapiro, both non-employee members of the
board of directors.
Compensation Committee. The Compensation Committee has general supervisory
power over, and the power to grant awards under, the Company's equity
compensation plans. In addition, the Compensation Committee recommends to the
board the compensation of the Company's President and Chief Executive Officer,
reviews and takes action on the recommendations of the President and 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 Compensation Committee met eight times
during 1998. The current members of the Compensation Committee are Dr. Canavan
and Dr. Sanders.
Nominating Committee. The Nominating Committee is authorized to consider
candidates for directors of the Company. 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. The Nominating Committee did not hold
any meetings during 1998. The current members of the Nominating Committee are
Mr. Dougherty and Dr. Wyngaarden.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 22, 1999
(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 PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED(1) CLASS(2)
- ---------------- --------------------- --------
<S> <C> <C>
Wellington Management Company, LLP("Wellington")(3)(4)...................... 3,119,900 12.7%
75 State Street
Boston, MA 02109
Vanguard Specialized Funds-Vanguard Health Care Fund("Vanguard")(3)(4)...... 1,278,100 5.2%
P.O. Box 2600
Valley Forge, PA 19482
Healthcare Ventures V, L.P.("Healthcare Ventures")(3)(5).................... 2,073,500 8.4%
Healthcare Partners V, L.P.("Healthcare Partners")(3)(5).................... 2,073,500 8.4%
James H. Cavanaugh, Ph.D.(3)(5)(6).......................................... 2,217,037 9.0%
Harold R. Werner (3)(5)(6).................................................. 2,219,575 9.0%
John W. Littlechild (3)(5)(6)............................................... 2,214,716 9.0%
William Crouse (3)(5)(6).................................................... 2,214,716 9.0%
Mark Leschly (3)(5)......................................................... 2,073,500 8.4%
Larry N. Feinberg (3)....................................................... 1,790,300 7.3%
c/o Oracle Investment Management Inc.
712 Fifth Avenue, 45th Floor
New York, NY 10019
Jay Moorin (7).............................................................. 817,362 3.3%
Michael A. Zasloff, M.D., Ph.D.(8).......................................... 551,320 2.2%
Michael R. Dougherty (9).................................................... 212,000 *
Roy C. Levitt, M.D.(10)..................................................... 195,625 *
Thomas J. Bigger (11)....................................................... 72,500 *
Robert F. Shapiro (12)...................................................... 65,000 *
Kenneth J. Holroyd, M.D.(13)................................................ 37,875 *
Zola P. Horovitz, Ph.D.(14)................................................. 31,250 *
Bernard Canavan, M.D.(15)................................................... 27,250 *
Charles A. Sanders, M.D.(16)................................................ 15,000 *
James B. Wyngaarden, M.D.(16)............................................... 10,500 *
All current executive officers and directors as a group (10 persons)(17).... 1,187,820 4.8%
</TABLE>
- ------------
* Less than one percent.
(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 22, 1999.
(2) The percentage for each individual or group is based on the aggregate of
the shares outstanding as of March 22, 1999 (22,911,616 shares) and all
shares issuable upon the exercise of outstanding stock options and warrants
held
7
<PAGE>
by such individual or group to the extent such options and warrants are
exercisable within sixty days of March 22, 1999.
(3) This information is presented in reliance on information disclosed in a
Schedule 13G filed with the Commission and reporting as of December 31,
1998.
(4) Of the shares reported, Wellington shares dispositive power with respect to
all 3,119,900 shares and shares voting power with respect to 1,644,100
shares. The Wellington shares include 1,278,100 shares reported separately
by Vanguard for which shared dispositive power was claimed by Vanguard.
(5) Healthcare Ventures is a Delaware limited partnership of which Healthcare
Partners is the general partner. Dr. Cavanaugh and Messrs. Werner,
Littlechild, Crouse and Leschly are general partners of Healthcare
Partners. The business address for Healthcare Ventures, Healthcare
Partners, Dr. Cavanuagh, and Messrs. Werner and Crouse is 44 Nassau Street,
Princeton, NJ 08542. The business address for Messrs. Littlechild and
Leschly is One Kendall Square, Building 300, Cambridge, MA 02139.
Beneficial ownership reported includes 2,073,500 shares held by Healthcare
Ventures. Voting and dispositive power are shared among Healthcare
Ventures, Healthcare Partners, Dr. Cavanuagh and Messrs. Werner,
Littlechild, Crouse and Leschly.
(6) Beneficial ownership includes warrants to purchase 141,216 shares, for
which voting and dispositive power are shared among Dr. Cavanaugh and
Messrs. Werner, Littlechild and Crouse.
(7) To the best of the Company's knowledge, this includes 816,862 shares of
Common Stock issuable upon exercise of options, and 500 shares owned by Mr.
Moorin's wife as to which shares Mr. Moorin disclaimed beneficial
ownership.
(8) Includes 211,250 shares of Common Stock issuable upon exercise of options,
172,312 shares of Common Stock held by Mr. Zasloff's wife and 30,000 shares
of Common Stock in trusts for the benefit of certain members of Dr.
Zasloff's family.
(9) Includes 207,000 shares of Common Stock issuable upon exercise of options.
(10) Includes 172,500 shares of Common Stock issuable upon exercise of options
and 2,120 shares of Common Stock held in accounts of family members.
(11) Represents 72,500 shares of Common Stock issuable upon exercise of options.
(12) Includes 10,000 shares of Common Stock issuable upon exercise of options,
5,000 shares of Common Stock held in an account for a foundation for which
Mr. Shapiro is a trustee, and 10,000 shares owned by Mr. Shapiro's wife, as
to which shares Mr. Shapiro disclaims beneficial ownership.
(13) Includes 28,875 shares of Common Stock issuable upon exercise of options
and 9,000 shares of Common Stock held in a joint account where voting and
investment power are shared.
(14) Includes 27,500 shares of Common Stock issuable upon exercise of options.
(15) Includes 26,250 shares of Common Stock issuable upon exercise of options.
(16) Includes 10,000 shares of Common Stock issuable upon exercise of options.
(17) See (8) through (16) above.
8
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth for the years ended December 31, 1998, 1997 and
1996 certain compensation paid by the Company to its Chief Executive Officer,
the four other most highly paid executive officers of the Company as of December
31, 1998 and its former Chief Executive Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION STOCK SECURITIES UNDERLYING ALL OTHER
----------------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS ISSUED OPTIONS/SARS COMPENSATION
- ------------------------------------ ---- ------------ -------- ----------- --------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Dougherty................ 1998 $246,132 $ 40,000 $ 0 170,000 $ 0
President, Chief Executive Officer 1997 215,507 66,000 0 50,000 0
and Chief Financial Officer 1996 197,380 77,000 0 90,000 0
Roy C. Levitt, M.D.................. 1998 $246,164 $ 30,000 $37,188 (1) 150,000 $ 0
Executive Vice President and 1997 230,098 66,000 0 60,000 0
Chief Operating Officer(3) 1996 194,063 77,000 0 95,000 27,800 (2)
Michael A. Zasloff, M.D., Ph.D...... 1998 $250,350 $ 20,000 $ 0 60,000 $ 0
Vice Chairman and Executive 1997 237,356 67,000 0 40,000 0
Vice President 1996 225,072 90,000 0 95,000 0
Thomas J. Bigger.................... 1998 $223,860 $ 5,000 $ 0 20,000 $ 0
Senior Vice President (3) 1997 214,200 40,000 0 27,000 0
1996 105,000 30,000 0 125,000 29,500 (2)
Kenneth J. Holroyd, M.D............. 1998 $196,646 $ 20,000 $ 0 120,000 $ 0
Senior Vice President (4)
Jay Moorin.......................... 1998 $171,124 (5) $ 0 $ 0 0 $ 0
Former Chairman, President and 1997 294,053 100,000 0 70,000 0
Chief Executive Officer 1996 266,500 125,000 0 105,000 0
</TABLE>
- -------------
(1) Dr. Levitt was issued 8,500 shares of Common Stock in July, 1998 pursuant to
his employment agreement.
(2) Payments made for reimbursement of relocation expenses.
(3) Dr. Levitt joined the Company in January 1996, and Mr. Bigger joined the
Company in July 1996.
(4) Dr. Holroyd joined the Company in February 1997 and was appointed an
executive officer in 1998. Pursuant to SEC rules, no information regarding
his compensation for years prior to his appointment as an executive officer
is required.
(5) Mr. Moorin ceased to be an executive officer and director upon his
resignation from the Company on August 3, 1998. Mr. Moorin's 1998
compensation as shown above represents salary through August 3, 1998, and is
equivalent to an annual salary of $293,355. Mr. Moorin is currently retained
as a consultant to the Company. See "Other Compensation."
9
<PAGE>
The following table sets forth certain information regarding stock options
granted during 1998 to the persons named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
---------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
NUMBER OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
OPTIONS EMPLOEES EXERCISE EXPIRATION FOR OPTION TERM(2)
---------------------
NAME GRANTED IN 1998 PRICE DATE 5% 10%
- ---- ---------- ---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Dougherty.............. 70,000 8% $4.63 7/13/2008 $203,605 $515,974
100,000 11% $3.25 12/14/2008 $204,391 $517,996
Roy C. Levitt, M.D................ 60,000 7% $4.63 7/13/2008 $174,518 $442,264
90,000 10% $3.25 12/14/2008 $183,952 $466,170
Michael A. Zasloff, M.D., Ph.D.... 40,000 4% $5.75 7/24/2008 $144,646 $366,561
20,000 2% $3.25 12/14/2008 $ 40,878 $103,593
Thomas J. Bigger.................. 20,000 2% $5.75 7/24/2008 $ 72,323 $183,280
Kenneth J. Holroyd, M.D........... 50,000 5% $5.56 6/16/2008 $165,085 $418,357
30,000 3% $5.75 7/24/2008 $108,484 $274,921
40,000 4% $3.25 12/14/2008 $ 81,756 $207,187
Jay Moorin (3).................... 0 0% $0.00 -- $ 0 $ 0
</TABLE>
(1) Options are non-qualified stock options to acquire shares of Common Stock
with a stated term of ten years, vesting in four annual installments
beginning one year after the date of grant. If a "change in control" (as
defined in the 1992 Stock Option Plan and 1998 Equity Compensation 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 option holder 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 option holder's
continued employment through the vesting period. The actual value to be
realized by the option holder may be greater or less than the values
estimated in this table.
(3) Mr. Moorin ceased to be an executive officer and director upon his
resignation from the Company on August 3, 1998.
10
<PAGE>
The following table sets forth certain information regarding stock option
exercises during 1998 and the value of vested and unvested options for the
persons named in the Summary Compensation Table as of December 31, 1998. Year-
end values are based upon a price of $3.188 per share, which was the closing
market price of a share of the Company's Common Stock on December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED ON VALUE DECEMBER 31, 1998 DECEMBER 31, 1998
------------------------------ ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- --------- ----------- ----------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Michael R. Dougherty............. 0 $ 0 207,000 265,000 $ 0 $0
Roy C. Levitt, M.D............... 0 $ 0 172,500 282,500 $ 0 $0
Michael A. Zasloff, M.D., PhD.... 137,758 $843,768 211,250 151,750 $ 0 $0
Thomas J. Bigger................. 0 $ 0 69,375 103,125 $ 0 $0
Kenneth J. Holroyd, M.D.......... 0 $ 0 28,275 156,625 $ 0 $0
Jay Moorin(1).................... 0 $ 0 816,862 121,750 $707,587 $0
</TABLE>
(1) Mr. Moorin ceased to be an executive officer and director upon his
resignation from the Company on August 3, 1998.
OTHER COMPENSATION
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 U.S. Food and Drug Administration of the first product developed
by the Company under his direction.
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 a
certain area of research.
In July 1996, the Company entered into an employment agreement with Mr. Bigger
pursuant to which Mr. Bigger is eligible to receive up to an additional 12,500
options in the event certain milestones are achieved relating to business
development activities.
In August 1998, the Company entered into a consulting agreement with Mr.
Moorin in connection with his resignation from the Company. The agreement covers
the period August 1998 to August 1999 and provides for cash compensation to Mr.
Moorin of $343,355, a continuation of Mr. Moorin's stock options through the
term of the consulting agreement, and payments equal to the cost of health
insurance for a twelve month period. Under a previous agreement 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. This option will
remain exercisable through 2001, notwithstanding the termination of Mr. Moorin's
employment relationship with the Company.
The 1998 Equity Compensation Plan provides for the issuance of up to 375,000
shares of Common Stock. In 1998 the Company reserved a total of 146,000 shares
for issuance under the Plan, as follows: 50,000 shares to Mr. Dougherty, 36,000
shares to Dr. Levitt, 20,000 shares to Dr. Zasloff, 20,000 shares to Mr. Bigger
and 20,000 shares to Dr. Holroyd subject to certain conditions. Shares will be
issued to each executive officer at a rate of 25% each year beginning in July
1999, provided that the officer is still employed by the Company.
The Company does not currently grant any long-term incentives, other than
stock options and awards, to its executives or other employees. Similarly, the
Company does not sponsor any defined benefit or actuarial plans at this time.
11
<PAGE>
The Company's executive officers are 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. As Chairman of
the Board, Dr. Horovitz receives an additional annual fee of $45,000.
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 executive 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 process 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 with 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 and awards.
The Company's compensation program for executive officers is comprised of base
salary, performance bonuses, longer-term incentive compensation in the form of
stock options and awards, and benefits available generally to all of the
Company's employees. The process utilized by the Compensation Committee in
determining executive officer compensation levels for each of these components
is based on the Compensation Committee's subjective judgement, and the other
factors noted herein.
12
<PAGE>
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 Compensation Committee also
reviews certain compensation information publicly available and gathered
informally, including merit increase data, and considers salary history at the
Company.
In 1998, Mr. Dougherty's base salary was increased from $220,763 to $270,000,
principally reflecting the promotion of Mr. Dougherty from Executive Vice
President and Chief Financial Officer to President and Chief Executive Officer,
with the resulting increases in responsibilities commensurate with this
promotion. Other members of senior management also received salary increases in
consideration of promotions and increases in responsibilities within the
Company.
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 executives' performance in attaining such corporate and
individual goals and objectives.
In determining to award cash bonuses to the Company's executive officers in
1998, the Compensation Committee noted the Company's achievement of several
objectives and milestones, including:
(i) The filing of a New Drug Application ("NDA") with the Food And Drug
Administration ("FDA") for the Company's lead product development
candidate, pexiganan acetate,
(ii) The progress of Phase I clinical studies of squalamine,
(iii) The progress of the Company's recombinant manufacturing program for
pexiganan acetate, and
(iv) The progress of the asthma genomics program, including the Company's
strategic alliance with Genentech, Inc.
At the same time, the Compensation Committee considered the areas of
disappointing performance in 1998, including the price performance of the
Company's Common Stock. Based on such assessment, bonuses awarded were
significantly less than amounts awarded in prior years. Mr. Dougherty's 1998
cash bonus was $40,000.
With respect to base salary and performance bonus compensation, the Committee
also reviews certain cash compensation survey materials and noted that Mr.
Dougherty's base salary and cash bonus places Mr. Dougherty in approximately the
50th percentile of compensation in the biopharmaceutical industry. Some, but not
all of the companies in the compensation survey are included in the Index of
Nasdaq Pharmaceutical Stocks in the Comparative Stock Performance Graph.
Stock Option Grants. The objective of option grants 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 the 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 biopharmaceuticals
companies, relies heavily upon stock option grants. Without such incentives, it
would not be possible to attract and retain qualified managers or scientists.
The Compensation Committee generally considers 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. In order to assess competitive factors, the
Committee also analyzes data relating to option grants being awarded to
executives of other biopharmaceutical companies.
13
<PAGE>
The Compensation Committee made grants to executive officers aggregating
460,000 shares in total. The exercise price of all grants was the fair market
value on the date of grant. Mr. Dougherty was awarded options to purchase
170,000 shares in 1998, principally reflecting the increase in responsibilities
commensurate with his promotion in 1998 to Chief Executive Officer. The
committee also took note of the fact that Mr. Dougherty's and other executive
officers' prior option awards were exercisable at prices in excess of the
current value of the Company's Common Stock, and determined that additional
awards were appropriate to continue to incentivise the management group to build
value within the Company.
The Committee also determined to make restricted stock grants to executive
officers in 1998, aggregating 146,000 shares in total, including 50,000 shares
to Mr. Dougherty. The grants vest at the rate of 25% per year over the next four
years. The Committee believes such grants provide an additional alignment of the
long term financial interest of the Company's management with the Company's
stockholders.
In connection with the resignation of Mr. Moorin, former Chairman, President
and Chief Executive Officer of the Company in August 1998, the Board of
Directors negotiated a consulting agreement with Mr. Moorin covering the period
from August 1998 through August 1999. This agreement provides for:
(i) Cash compensation to Mr. Moorin of $343,355 over the twelve month
period,
(ii) Continuation of Mr. Moorin's stock options through the term of the
consulting agreement, and
(iii) Payments to Mr. Moorin equal to the cost of health insurance purchased
by Mr. Moorin for a twelve month period.
The Board determined that such a consulting agreement was appropriate in order
to retain, on a limited basis, the services of Mr. Moorin.
Payments during 1998 to the Company's executives under the various programs
discussed above were made in accordance with 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 realized upon the exercise of stock options will
qualify as performance-based compensation.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Bernard Canavan, M.D.
Charles A. Sanders, M.D.
February 17, 1999
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Dr. Canavan and Dr. Sanders.
There are currently no compensation committee interlocks with any other
companies or insider participation on the Compensation Committee.
14
<PAGE>
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return of 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, 1993 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. The graph
commences as of December 31, 1993.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG MAGAININ PHARMACEUTICALS INC.,
THE NASDAQ STOCK MARKET (U.S) 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-93 100 100 100
DEC-94 20 98 75
DEC-95 95 138 138
DEC-96 70 170 138
DEC-97 59 209 293
DEC-98 23 143 183
* $100 INVESTED ON 12/31/93 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDED DECEMBER 31.
</TABLE>
15
<PAGE>
INFORMATION CONCERNING INDEPENDENT ACCOUNTANTS
Richard A. Eisner & Company, L.L.P. served as the Company's independent
accountants from the Company's inception in June 1987 through 1998. In January
1999, the Company replaced Richard A. Eisner & Company, LLP as its independent
public accountants and auditors, and engaged KPMG LLP to serve as its
independent public accountants and auditors beginning with the audit of the year
ended December 31, 1998. The replacement of Richard A. Eisner & Company, LLP and
the engagement of KPMG LLP was approved by the Audit Committee of the Board of
Directors. The Company filed a Current Report on Form 8-K disclosing this change
in January 1999. The Company has requested that a representative of KPMG 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) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 Securities
and Exchange Commission 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 Securities
and Exchange Commission 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 and written representations from certain
reporting persons that no Forms 5 were required for those persons, the Company
believes that during the year ended December 31, 1998, all filing requirements
applicable to its officers, directors and ten-percent stockholders were
satisfied.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at annual meetings in accordance with regulations adopted by the
Securities and Exchange Commission. To be considered for inclusion in the proxy
statement and form of proxy relating to the 2000 annual meeting, such proposals
must be received by the Company no later than November 30, 1999. Proposals
should be directed to the attention of the Secretary of the Company.
By Order of the Board of Directors,
MICHAEL R. DOUGHERTY
Secretary
March 31, 1999
16
<PAGE>
PROXY MAGAININ PHARMACEUTICALS INC. PROXY
Annual Meeting of Stockholders, May 18, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael R. Dougherty and Zola P. Horovitz, or
either 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 18, 1999, 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 April 12, 1999 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.
1. Election of the following nominees as directors: Zola P. Horovitz, Ph.D.,
Bernard Canavan, M.D., Michael R. Dougherty, Roy C. Levitt, M.D., Charles A.
Sanders, M.D., Robert F. Shapiro, James B. Wyngaarden, M.D. and Michael A.
Zasloff, M.D., Ph.D.
For all Withhold for Withhold for the following only: (Write
nominees all nominees the names of the nominee(s) in the space
below)
[_] [_] -------------------------------------------
THIS PROXY IS CONTINUED ON THE REVERSE SIDE, PLEASE DATE, SIGN AND RETURN
PROMPTLY.
<PAGE>
2. To vote on such other matters that may properly come before the meeting.
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________________, 1999
------------------------------------
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.
