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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
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[ ] Preliminary Proxy Statement
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(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
AMYLIN PHARMACEUTICALS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
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Amylin logo
9373 Towne Centre Drive
San Diego, California 92121
To Our Stockholders,
Attached is a supplemental proxy for the annual meeting of Amylin
Pharmaceuticals, Inc. on May 20, 1998. I am writing to request that you vote in
favor of a special, Partial Stock Option Exchange Program for non-officer
employees, as more fully explained in the enclosed proxy material.
During the past few months, our Company has experienced several unexpected
events. Most recently, in March of this year, we announced that Johnson &
Johnson had notified the Company of its intent to terminate our collaboration to
develop the Company's patented pramlintide invention for the treatment of people
with diabetes. We responded to this surprise decision by reducing our workforce
by 25%, significantly cutting our non-personnel expenses and, most recently, by
implementing a salary deferral program. These actions, while supported by the
Amylin team, have created an environment in which we are vulnerable to losing
key employees to other companies. Headhunters are particularly active in times
where companies experience destabilizing events, and we are no exception to this
rule.
We have historically used stock options as a significant component of our
compensation program, both as an incentive to employees and to conserve salary
costs. In addition, we have granted such options to all employees, not just to
management. With the events of the last six months, many of these of these
options which are held by non-officer employees have greatly reduced or no value
in serving as an employee retention incentive. Nevertheless, we have not
considered repricing any options until just recently. We have done so with
maximum consideration of stockholder concerns regarding appropriate use of stock
options, and as a result have carefully designed the Partial Stock Option
Exchange Program described in your supplemental proxy to provide a balanced
solution to our situation.
A key element of this Partial Stock Option Exchange Program is a blackout
period, which runs from inception to June 30, 1999. This date was selected
because of its significance to the Company's stated goal of filing a European
marketing application for pramlintide during the first half of 1999. Any
employee who exchanges old options for new options must accept this blackout
period during which any new options may not be exercised. This includes
previously vested options that are exchanged. If an employee voluntarily leaves
during the blackout period, he or she forfeits the right to exercise all options
that were exchanged. We believe that the Partial Option Exchange Program will
greatly assist the Company in retaining our key employees and therefore is
strongly aligned with stockholder interests.
The Board of Directors, in defining the parameters of the Program, decided
to exclude from participation Executive Officers, Directors and consultants, and
limited the shares eligible for exchange in certain other ways. Of the total 5.9
million options currently outstanding under our 1991 Stock Option Plan, only 1.2
million are eligible for exchange in the Program. This represents 20% of the
outstanding options and less than 4% of the issued and outstanding shares of
common stock of the Company.
We hope you agree with the Board's decision and will vote to support
Proposal 5 on the supplemental proxy. We would appreciate your promptly
exercising your voting rights, and we apologize for the short time period for
you to consider this important issue.
Sincerely yours,
LOGO
JOSEPH C. COOK, JR.
Chairman and Chief Executive Officer
Amylin Pharmaceuticals, Inc.
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AMYLIN PHARMACEUTICALS, INC.
9373 TOWNE CENTRE DRIVE
SAN DIEGO, CALIFORNIA 92121
SUPPLEMENT TO PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed supplemental proxy (the "Supplemental Proxy") is solicited on
behalf of the Board of Directors of Amylin Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders to be
held on May 20, 1998, at 3:30 p.m., local time (the "Annual Meeting"), or at any
adjournment or postponement thereof. The Annual Meeting will be held at the
offices of the Company, located at 9360 Towne Centre Drive, San Diego,
California 92121. This proxy material is a supplement (a "Supplemental Proxy
Statement") to the Company's Proxy Statement for use at the Annual Meeting that
was mailed to stockholders of the Company on or about April 10, 1998 (the "Proxy
Statement") and the accompanying Notice of Annual Meeting. This Supplemental
Proxy Statement and the accompanying Supplemental Proxy should be read together
with the Company's Proxy Statement, which is hereby incorporated into this
Supplemental Proxy Statement by reference. The Company intends to mail this
Supplemental Proxy Statement and accompanying Supplemental Proxy card on or
about May 8, 1998 to all stockholders entitled to vote at the Annual Meeting.
The following proposal is in addition to Proposals 1 through 4 presented to
stockholders in the Proxy Statement. All stockholders are cordially invited to
attend the Annual Meeting in person. Whether or not you expect to attend the
meeting, please complete, date, sign and return the enclosed Supplemental Proxy
card as promptly as possible in order to ensure your representation at the
meeting with respect to the following Proposal 5. A return envelope (which is
postage prepaid if mailed in the United States) is enclosed for that purpose.
Even if you have given your proxy, you may still vote in person if you attend
the meeting. Please note, however, that if your shares are held of record by a
broker, bank or other nominee and you wish to vote at the meeting, you must
obtain from the record holder a proxy issued in your name.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on March
20, 1998 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on March 20, 1998, the Company had outstanding and entitled to
vote 32,453,364 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive
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office, 9373 Towne Centre Drive, San Diego, California 92121, a written notice
of revocation or a duly executed proxy bearing a later date, or it may be
revoked by attending the meeting and voting in person. Attendance at the meeting
will not, by itself, revoke a proxy.
PROPOSAL 5
APPROVAL OF PARTIAL OPTION EXCHANGE PROGRAM
FOR NON-OFFICER EMPLOYEES
In 1996, in response to stockholder feedback, the Company's Board of
Directors approved a policy regarding seeking shareholder approval for the
repricing of stock options granted under the Company's 1991 Stock Option Plan.
Despite a series of unexpected events over the last year which has driven our
stock price lower, the Company has held to its determination not to reprice
stock options, even though many options held by many employees were no longer of
significant present value because the option exercise price per share was much
higher than the price for Company stock on the open market. Unfortunately,
events during the first few months of 1998 created unusual circumstances for the
Company that required that the Board reconsider the issue of stock option
repricing. The Board of Directors now believes it is in the best interests of
the Company's stockholders to implement a partial option exchange program, the
details of which are described below, in order to motivate employees to remain
at the Company and provide an incentive for them to exert maximum efforts on
behalf of the Company and its stockholders. In light of these circumstances, the
Board of Directors has approved an amendment to its policy regarding stock
option repricing and approved a partial option exchange program limited to
options having a certain minimum price and limited to employees other than
Executive Officers. Neither members of the Board of Directors nor Executive
Officers of the Company are permitted to participate in the option exchange
program and the Board has reaffirmed its policy not to reprice options granted
to Executive Officers without prior stockholder approval.
The Board of Directors believes that the Company is at a very important
stage in development. During the past year there have been a number of
significant developments at the Company and a number of important changes for
employees. In August 1997, the Company reported that initial Phase III studies
of pramlintide, its lead product candidate that was invented and patented by it
for the treatment of diabetes, were not as strong as had been expected. In
November 1997, the Company announced a delay in its expected market launch
schedule for pramlintide. Most recently, in March 1998, the Company announced
that Johnson & Johnson had provided notice of its intent to terminate its
collaboration with the Company for the development and commercialization of the
Company's pramlintide invention.
In response to Johnson & Johnson's decision to terminate the pramlintide
collaboration, the Company had to make a number of difficult decisions,
including a decision to reduce the Company's workforce by approximately 25% in
order to conserve the Company's financial resources. Thus, the workforce
retained by the Company includes the most essential personnel required for the
Company to achieve its most immediate goals of completing clinical trials for
pramlintide and, if the data from these studies warrant, making filings for
regulatory approval in Europe and the United States. Thus, the Company believes
that retaining these employees is critical to the Company's potential success.
In addition to implementing the workforce reduction, the Company had to
take a number of other important actions to manage continued progress of its
pramlintide development program, including cutting costs, postponing the
initiation of non-pramlintide clinical trials, reducing the expenses of many
non-pramlintide research programs, and implementing tighter budget management
and cost controls.
Additionally, in April of this year, the Company sought to further reduce
costs by adopting a salary deferral program calling for employees to defer a
portion of their compensation until mid-1999. Specifically, senior level
employees were asked to defer at least 15% of their compensation into a salary
deferral plan where the value of their future benefits from the plan will be
determined based on the performance of the Company's stock price, and all
employees were encouraged to participate in a special offering under the
Company's existing Employee Stock Purchase Plan. These programs resulted in
still further cost savings by the Company.
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Although there is employee support for the steps taken by the Company to
conserve its resources, these measures, including the reduction in staff,
vigorous cost-cutting, and salary deferral programs, have all taken a toll on
employee optimism.
The Board of Directors believes that an option exchange program will
stabilize the Company's workforce, encourage employees to achieve the Company's
goals and enhance employee resolve.
The market price for the Company's Common Stock has declined significantly
since early 1997 from over $15.00 per share, putting many employees' options
"underwater," i.e., without present value because the price of the Company's
stock is lower that the option exercise price. On May 6, 1998, the closing price
of the Company's Common Stock was $5.625 per share and as recently as March 25,
1998 the closing price of the Company's Common Stock was $2.656. Of the options
to acquire approximately 5,900,000 shares of the Company's Common Stock
outstanding under the Company's 1991 Stock Option Plan at May 6, 1998, over
1,200,000 have an exercise price of $5.625 or higher per share, with many
options bearing exercise prices in excess of $14.00 per share. Accordingly, the
exercise price that many employees would have to pay in order to exercise their
options to buy stock substantially exceeds the current market price of $5.625 at
which anyone could buy stock. The Board of Directors believes that such
underwater or "out-of-the-money" stock options have significantly reduced
retention value for employees and in fact undermine the purpose for which they
were originally granted. Virtually all companies in the biotechnology industry
use stock options to attract and retain outstanding employees, and it is
important to recognize that there is substantial competition to obtain and/or
retain skilled and experienced scientists and managers in the industry.
Accordingly, stock option-based performance incentives are a particularly
important part of a competitive overall compensation package for employees of
the Company, and it is with these factors in mind that the Company has come to
review the matter of stock option prices for options previously granted.
The Board of Directors is concerned that the Company may be at risk of
losing valued employees because a large number of the outstanding stock options
are not providing incentives to the Company's employees, many of whom are
critical to assisting the Company to achieve its most immediate goal of
completing clinical trials of pramlintide in a timely manner. After careful
consideration of the market conditions, employee turnover, employee spirit and
the challenges and opportunities facing the Company, the Board of Directors
believes that this situation is likely to be more damaging to the Company and
its stockholders than the effect of an option exchange program. As a result, in
the good faith judgment of the Board of Directors, it is in the best interests
of stockholders of the Company to replace some "out-of-the-money" stock options
with options having an exercise price reflecting the current fair market value
of the Company's stock, thus restoring the opportunity for its non-Officer
employees to receive value in the near term by building the Company and causing
the market value of the Company to increase.
The Company has worked to structure this partial option exchange program in
such a manner as to align the interests of stockholders and employees. The
principal components of the option exchange program, including the unique
vesting feature it incorporates and the limitations on participation and the
options which may be exchanged, are described below.
The option exchange program approved by the Board of Directors is a partial
program permitting only employees other than Executive Officers of the Company
to exchange certain of their outstanding out-of-the-money options for new
options to acquire an equal number of shares at an exercise price equal to the
closing price for the Company's stock on the date the offers of employees to
exchange such options are accepted by the Company; provided, that such optionees
agree to a blackout period through June 30, 1999 with respect to such repriced
options. This blackout means that the repriced options cannot be exercised prior
to June 30, 1999. As a result, if an employee who elects to participate in the
repricing voluntarily leaves the Company prior to June 30, 1999, he will lose
the right to exercise any of the options that were repriced, even if the options
were fully vested prior to the repricing.
The vesting cliff provided by the blackout period is an important element
of the partial option exchange program. The June 30, 1999 date was selected by
the Board of Directors because of its significance to the Company's pramlintide
development program. Earlier this year, the Company announced that it planned to
accelerate, to the first half of 1999, the planned filing of the pramlintide
European marketing application for
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the treatment of people with type 1 diabetes. Thus, the Company believes that
employees who elect to participate in the option exchange program will be
encouraged to remain with the Company at least through the end of that important
period, and that will play a major role in assisting the Company in its effort
to achieve key milestones for employees and stockholders alike.
The price of the new stock options will be the fair market value of the
Company's Common Stock on the date of acceptance of employee exchange offers
approved by the Board of Directors, April 24, 1998. Options for a total of
972,000 shares of the Company's Common Stock have been offered for exchange by
employees under the partial option exchange program.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the meeting is requested
to approve the option exchange program. Abstentions will be counted toward the
tabulation of votes counted and will have the same effect as negative votes,
while broker non-votes will not be counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 5
OTHER MATTERS
Except for the matters previously presented in the Proxy Statement and this
Supplemental Proxy Statement, the Board of Directors knows of no other matters
that will be presented for consideration at the Annual Meeting. If any other
matters are properly brought before the meeting, it is the intention of the
persons named in the accompanying proxy to vote on such matters in accordance
with their best judgment.
By Order of the Board of Directors
LOGO
Joseph C. Cook, Jr.
Chairman of the Board
and Chief Executive Officer
May 7, 1998
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO: INVESTOR RELATIONS, AMYLIN
PHARMACEUTICALS, INC., 9373 TOWNE CENTRE DRIVE, SAN DIEGO, CALIFORNIA 92121.
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AMYLIN PHARMACEUTICALS, INC.
SUPPLEMENTAL PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 20, 1998
The undersigned hereby appoints Joseph C. Cook, Jr., and Bradford J.
Duft, and each of them, as attorneys and proxies of the undersigned, with full
power of substitution, to vote all of the shares of stock of Amylin
Pharmaceuticals, Inc. (the "Company") which the undersigned may be entitled to
vote at the Annual Meeting of Stockholders of the Company to be held at the
offices of the Company located at 9360 Towne Centre Drive, San Diego,
California, 92121, on Wednesday, May 20, 1998, at 3:30 p.m., local time, and at
any and all continuations, adjournments or postponements thereof, with all
powers that the undersigned would possess if personally present, upon and in
respect of the following matters and in accordance with the following
instructions, with discretionary authority as to any and all other matters that
may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
PROPOSAL 5, AS MORE SPECIFICALLY DESCRIBED IN THE SUPPLEMENTAL PROXY STATEMENT.
IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE
THEREWITH.
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 5.
PROPOSAL 5: To ratify the Company's implementation of a Partial Option Exchange
Program for Non-Executive Officers of the Company under the 1991
Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
DATED _____________________________, 1998
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Signature(s)
Please sign exactly as your name appears
hereon. If the stock is registered in the
names of two or more persons, each should
sign. Executors, administrators,
trustees, guardians and attorneys-in-fact
should add their titles. If signer is a
corporation, please give full corporate
name and have a duly authorized officer
sign, stating title. If signer is a
partnership, please sign in partnership
name by authorized person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY
IN THE ENCLOSED RETURN ENVELOPE WHICH IS POSTAGE
PREPAID IF MAILED IN THE UNITED STATES.
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