<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
Corvas International, Inc.
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(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:
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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):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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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 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:
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2. Form, Schedule or Registration Statement No.:
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4. Date Filed:
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<PAGE>
[LOGO]
3030 Science Park Road
San Diego, California 92121
(619) 455-9800
April 16, 1999
Dear Stockholder:
The Annual Meeting of Stockholders will be held on Monday, May 24,
1999, at 3:00 p.m. at the Hilton La Jolla Torrey Pines located at 10950 North
Torrey Pines Road, La Jolla, California.
The formal notice of the Annual Meeting and the Proxy Statement have
been made a part of this invitation.
After reading the Proxy Statement, please complete, date, sign and
return promptly the enclosed Proxy. A postage-prepaid envelope is enclosed for
mailings originating within the United States. YOUR SHARES CANNOT BE VOTED
UNLESS YOU SIGN, DATE AND RETURN THE ENCLOSED PROXY OR ATTEND THE ANNUAL MEETING
IN PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, IT IS IMPORTANT
THAT YOU RETURN THE ENCLOSED PROXY TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED. Any stockholder returning the enclosed Proxy may revoke it prior to
its exercise by voting in person at the meeting or by filing with the Secretary
of the Company a written revocation or a duly executed Proxy bearing a later
date.
A copy of the Company's Annual Report to Stockholders is also enclosed.
Management and the Board of Directors look forward to seeing you at the
meeting.
Sincerely yours,
/s/ RANDALL E. WOODS
-------------------------------------
President and Chief Executive Officer
<PAGE>
CORVAS INTERNATIONAL, INC.
3030 SCIENCE PARK ROAD
SAN DIEGO, CALIFORNIA 92121
--------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MONDAY, MAY 24, 1999
TO THE STOCKHOLDERS OF CORVAS INTERNATIONAL, INC.:
Notice is hereby given that the Annual Meeting of Stockholders of
Corvas International, Inc., a Delaware corporation, (the "Company") will be held
at the Hilton La Jolla Torrey Pines located at 10950 North Torrey Pines Road, La
Jolla, California, on Monday, May 24, 1999 at 3:00 p.m., for the following
purposes:
1. To elect one director to hold office until the 2002 Annual Meeting of
Stockholders.
2. To ratify the selection of KPMG LLP as the Company's independent public
accountants for its fiscal year ending December 31, 1999.
3. To transact such other business as may properly come before the Annual
Meeting or any postponement or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice.
The Board of Directors has fixed the close of business on March 31,
1999 as the record date for determining the stockholders entitled to notice of,
and to vote at, the Annual Meeting and at any postponement or adjournment
thereof. A complete list of stockholders entitled to vote will be available at
the Corporate Secretary's office, 3030 Science Park Road, San Diego, California,
for ten days before the meeting.
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE
YOUR REPRESENTATION AT THE MEETING. 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 bring to the meeting a
letter from the broker, bank or other nominee confirming your beneficial
ownership of the shares. Additionally, in order to vote at the meeting, you must
obtain from the record holder a proxy issued in your name.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ M. WAINWRIGHT FISHBURN, JR.
-------------------------------
Corporate Secretary
San Diego, California
April 16, 1999
<PAGE>
CORVAS INTERNATIONAL, INC.
3030 SCIENCE PARK ROAD
SAN DIEGO, CALIFORNIA 92121
-------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MONDAY, MAY 24, 1999
-------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Corvas International, Inc., a Delaware corporation (the "Company" or "Corvas"),
for use at the Annual Meeting of Stockholders to be held on Monday, May 24,
1999, at 3:00 p.m. (the "Annual Meeting"), or at any postponement or adjournment
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at the Hilton La
Jolla Torrey Pines located at 10950 Torrey Pines Road, La Jolla, California.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies
including preparation, assembly, printing and mailing of this Proxy Statement,
the proxy and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, facsimile,
telegram or personal solicitation by directors, officers or other regular
employees of the Company. No additional compensation will be paid to directors,
officers or other regular employees for such services.
The Company intends to mail this Proxy Statement and accompanying proxy
card on or about April 16, 1999 to all stockholders entitled to vote at the
Annual Meeting.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of the Company's Common Stock, Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock at the
close of business on March 31, 1999 will be entitled to receive notice of, and
to vote at, the Annual Meeting. At the close of business on March 31, 1999, the
Company had outstanding and entitled to vote 15,141,588 shares of Common Stock,
1,000,000 shares of Series A Convertible Preferred Stock and 250,000 shares of
Series B Convertible Preferred Stock. Each holder of record of Common Stock,
Series A Convertible Preferred Stock and Series B Convertible Preferred Stock on
March 31, 1999 will be entitled to one vote for each share held on all matters
to be voted upon at the Annual Meeting.
1
<PAGE>
All votes will be tabulated by the inspector of election appointed for the
Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted toward 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 toward 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
Corporate Secretary of the Company at the Company's principal executive office,
3030 Science Park Road, 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 Annual Meeting and voting in person. Attendance at the Annual
Meeting will not, by itself, revoke a proxy.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of stockholders that are intended to be presented at the
Company's 2000 annual meeting of stockholders must be received by the Company no
later than December 17, 1999, which is 120 days prior to the first anniversary
of the mailing date of this Proxy Statement, in order to be considered for
inclusion in the proxy statement and proxy relating to that annual meeting.
Unless a stockholder who wishes to bring a matter before the stockholders
at the Company's 2000 annual meeting of stockholders notifies the Company of
such matter prior to March 2, 2000, management will have discretionary authority
to vote all shares for which it has proxies in opposition to such matter.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation and By-laws provide that the
Board of Directors shall be divided into three classes, each class consisting,
as nearly as possible, of one-third of the total number of directors, with each
class having a three-year term. Vacancies on the Board may be filled only by
persons elected by a majority of the remaining directors. A director elected by
the Board to fill a vacancy (including a vacancy created by an increase in the
size of the Board of Directors) shall serve for the remainder of the full term
of the class of directors in which the vacancy occurred and until such
director's successor is elected and qualified, or until such director's earlier
death, resignation or removal.
The Board of Directors is presently composed of seven members. Gerard Van
Acker retired from the Board on December 21, 1998, at which time the number of
authorized directors was reduced from eight to seven. There is one director
remaining in the class whose term of office expires in 1999. The nominee for
election, W. Leigh Thompson, Jr., M.D., Ph.D., was previously elected by the
stockholders. If elected at the Annual Meeting, such nominee would serve until
the 2002 annual meeting and until his successor is elected and has qualified, or
until such director's earlier death, resignation or removal.
2
<PAGE>
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the Annual Meeting. Shares
represented by executed proxies will be voted, if authority to do so is not
withheld, for the election of the nominee named below. In the event that the
nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose. The nominee for election has agreed to serve
if elected, and management has no reason to believe that the nominee will be
unable to serve.
Set forth below is biographical information for the nominee for election
at, and for each person whose term of office as a director will continue after,
the Annual Meeting.
NOMINEE FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2002 ANNUAL MEETING
(CLASS I)
W. LEIGH THOMPSON, JR., M.D., PH.D. Dr. Thompson, age 60, has served as a
director of the Company since January 1996. Dr. Thompson retired in December
1994 as Chief Scientific Officer of Eli Lilly and Company ("Eli Lilly"), a
pharmaceutical company, where he had served in various capacities since 1982. He
has been President and Chief Executive Officer of Profound Quality Resources,
Ltd., a consulting company, since January 1995 and serves on the Boards of
Directors of Chrysalis International Corporation (formerly DNX Corporation),
Guilford Pharmaceuticals, Inc., Orphan Medical, Inc., La Jolla Pharmaceutical
Company, Medarex, Inc., BAS, Inc., DepoMed, Inc. and Ontogeny, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE
NAMED NOMINEE.
BOARD OF DIRECTORS INFORMATION
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING (CLASS II)
JOHN H. FRIED, PH.D. Dr. Fried, age 69, was elected Chairman of the Board
in February 1997, and has served as a director of the Company since May 1992. He
has been President of Fried & Company, Inc., a biopharmaceutical consulting
firm, since March 1992. Dr. Fried served in various executive capacities at
Syntex Corporation ("Syntex"), a pharmaceutical company, from April 1964 to
March 1992. He served as President of Syntex Research, a subsidiary of Syntex,
from 1976 to March 1992, Senior Vice President of Syntex from 1981 to 1985, and
Vice Chairman of Syntex from 1985 to January 1993. Dr. Fried is also Chairman of
the Board of Alexion Pharmaceuticals, Inc.
MICHAEL SORELL, M.D. Dr. Sorell, age 51, has served as a director of the
Company since April 1996. Since March 1996, he has been the Managing Partner of
MS Capital, LLC, an advisement firm based in New York. From July 1986 to
February 1992, he was associated with Morgan Stanley & Co. ("Morgan Stanley"),
an investment banking firm, in various capacities, the last being principal.
From March 1992 to July 1994, he was a partner in a joint venture with Essex
Investment Management of Boston, an investment management firm. In August 1994,
he rejoined Morgan Stanley as the emerging growth strategist and principal where
he served until February 1996. Prior to that, he was on the staff of Memorial
Sloan-Kettering Cancer Center and worked in clinical development at
Schering-Plough Corporation ("Schering-Plough").
3
<PAGE>
NICOLE VITULLO. Ms. Vitullo, age 41, has served as a director of the
Company since April 1996. She was a Vice President from November 1992 to
November 1996, and has been a Senior Vice President since November 1996, of
Rothschild Asset Management Inc., which manages two publicly traded funds,
International Biotechnology Trust ("IBT") and Biotechnology Investments,
Limited. She served as Director of Corporate Communications at Cephalon, Inc., a
neuropharmaceutical company, from July 1991 to November 1992. Prior to that, she
was Manager, Healthcare Investments at Eastman Kodak Company. She also serves on
the Boards of Directors of Cytel Corporation, Anergen, Inc., Onyx
Pharmaceuticals Inc. and Cadus Pharmaceutical Corporation.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING (CLASS III)
M. BLAKE INGLE, PH.D. Dr. Ingle, age 56, has served as a director of the
Company since January 1994. Dr. Ingle was the President and Chief Executive
Officer of Canji, Inc., a biopharmaceutical company, from March 1993 to his
retirement in February 1996, when it was acquired by Schering-Plough Corporation
("Schering-Plough"). Prior to that, he was employed in a variety of capacities
with the IMCERA Group, Inc., a healthcare company, consisting of Mallinckrodt
Medical, Mallinckrodt Specialty Chemicals and Pitman Moore, from 1980 to 1993,
most recently serving as President and Chief Executive Officer. Dr. Ingle was a
director of Telios Pharmaceuticals, Inc. ("Telios"), a biotechnology company,
and was its Chief Executive Officer from December 1994 to January 1995. Telios
filed for protection under Chapter 11 in the Federal Bankruptcy Court in January
1995 and was subsequently acquired by Integra LifeSciences Corporation. He
currently serves on the Boards of Directors of Synbiotics Corporation, Vical,
Inc. and Inex Pharmaceuticals Corp., and is a member of the Board of Trustees at
The Burnham Institute.
R. DOUGLAS NORBY. Mr. Norby, age 63, has served as a director of the
Company since December 1997. Since October 1996, he has served as Executive Vice
President and Chief Financial Officer of LSI Logic Corporation ("LSI"), a
semiconductor company, and also serves on the Board of Directors of LSI. He
served as Senior Vice President and Chief Financial Officer at Mentor Graphics
Corporation, a software company, from July 1993 to November 1996, and as
President of Pharmetrix Corporation, a drug delivery company, from July 1992 to
September 1993. Previously, Mr. Norby held several positions including Senior
Vice President and Chief Financial Officer of Syntex, a pharmaceutical company,
President and Chief Operating Officer with Lucasfilm, and in various consulting
capacities for McKinsey & Company.
RANDALL E. WOODS. Mr. Woods, age 47, has served as President and Chief
Executive Officer and a director of Corvas since May 1996. Prior to joining
Corvas, Mr. Woods served as President of the U.S. Operations, Boehringer
Mannheim Pharmaceuticals Corporation ("Boehringer"), a pharmaceutical company,
from March 1994 to March 1996, and was Vice President of Marketing and Sales for
Boehringer from December 1993 to March 1994. From 1973 to December 1993, he
served in various capacities at Eli Lilly, a pharmaceutical company, where he
was most recently responsible for the marketing of hospital products.
4
<PAGE>
EXECUTIVE OFFICERS
Set forth below is information regarding the executive officers of the
Company as of April 2, 1999.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Randall E. Woods 47 President and Chief Executive Officer
George P. Vlasuk, Ph.D. 43 Executive Vice President, Research
and Development
Carolyn M. Felzer 42 Senior Director of Finance and
Assistant Corporate Secretary
</TABLE>
BACKGROUND OF EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
GEORGE P. VLASUK, PH.D. Dr. Vlasuk has served as the Company's Executive
Vice President, Research and Development since September 1996. Previously, Dr.
Vlasuk served as Vice President, Biological Research from January 1995 to
September 1996, as Executive Director, Molecular Pharmacology from July 1993 to
January 1995 and as Director, Molecular Pharmacology from July 1991 to July
1993. Before joining Corvas, he was employed for six years at Merck Sharp &
Dohme Research Laboratories, a pharmaceutical company, most recently as
Associate Director of Hematology Research. Dr. Vlasuk received his Ph.D. in
biochemistry from Kent State University.
CAROLYN M. FELZER. Ms. Felzer has served as Senior Director of Finance and
Assistant Corporate Secretary since December 1997. Previously, Ms. Felzer served
as the Company's Controller from January 1993 through December 1997 and as
Accounting Manager from July 1991 through January 1993. Prior to joining Corvas,
Ms. Felzer held various financial positions with private companies since
beginning her career at Peat, Marwick, Mitchell & Co., an accounting firm now
known as KPMG LLP. She received a B.S. in accounting from The Pennsylvania State
University and is a Certified Public Accountant.
BOARD COMMITTEES AND MEETINGS
During 1998, the Board of Directors held eight meetings and took action by
unanimous written consent without a meeting on two other occasions during the
year. The Company has three standing committees of the Board of Directors: a
Compensation and Stock Option Committee, an Audit Committee and an Executive
Committee. The Company does not have a standing Nominating Committee.
5
<PAGE>
For the period from January 1, 1998 through May 28, 1998, the Compensation
and Stock Option Committee consisted of Ms. Vitullo as Chairwoman and Dr.
Thompson. An action was taken by the Board on May 29, 1998 to add Mr. Norby to
this Committee. The Compensation and Stock Option Committee is authorized to
exercise all powers and authority of the Board of Directors in all compensation
matters, including the establishment of rates of salary, bonuses, retirement and
other compensation for all directors, officers and such other personnel of the
Company as the Board of Directors may from time to time designate. It also
exercises the authority of the Board of Directors in the administration of the
Company's 1991 Incentive and Compensation Plan (the "1991 Plan") and its
Employee Stock Purchase Plan ("ESPP"). The Compensation and Stock Option
Committee held five meetings during 1998.
For the period from January 1, 1998 through December 16, 1998, the Audit
Committee consisted of Mr. Van Acker as Chairman, Dr. Ingle and Dr. Sorell. In
anticipation of Mr. Van Acker's retirement from the Board effective December 21,
1998, an action was taken by the Board on December 17, 1998 to reconstitute this
Committee to consist of Mr. Norby as Chairman, Dr. Ingle and Dr. Sorell. The
Audit Committee oversees the Company's accounting and financial reporting
policies, makes recommendations to the Board of Directors regarding appointment
of independent accountants, reviews with the independent accountants the
accounting principles and practices followed by the Company and the adequacy
thereof, reviews the Company's annual audit and financial results and any
material change in accounting principles, policies and procedures, and makes
recommendations to the Board of Directors with regard to any of the preceding.
The Audit Committee held two meetings during 1998.
The Executive Committee consists of Dr. Fried as Chairman, Dr. Ingle and
Mr. Woods. The Executive Committee is authorized to exercise the full authority
of the Board of Directors except with respect to (i) those matters not permitted
under the Delaware General Corporation Law to be delegated to any committee,
(ii) approval of obligations of the Company in amounts greater than $100,000,
(iii) approval of annual operating plans, business plans and major strategic
decisions, and (iv) approval of other major transactions such as corporate
partnerships or financing plans. The Executive Committee did not hold any
meetings during 1998.
During 1998, all directors attended at least 75% of the Board of Directors
meetings held. During 1998, all members of committees of the Board attended at
least 75% of the Committee meetings in which they were entitled to participate,
except for Dr. Sorell, who attended one of the two Audit Committee meetings in
which he was entitled to participate.
PROPOSAL TWO
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of KPMG LLP ("KPMG") as the Company's independent auditors
for the fiscal year ending December 31, 1999, subject to ratification by the
stockholders at the Annual Meeting. KPMG has audited the Company's financial
statements since the Company's inception in March 1987. Representatives of KPMG
are expected to be present at the Annual Meeting. They will have an opportunity
to make a statement, if they desire to do so, and will be available to respond
to appropriate questions.
6
<PAGE>
Stockholder ratification of the selection of KPMG as the Company's
independent public accountants is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of KPMG to the
stockholders for ratification as a matter of good corporate practice. If the
stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board, in their discretion, may direct the
appointment of a different independent accounting firm at any time during the
year if they determine that such a change would be in the best interests of the
Company and its stockholders.
The affirmative vote of the holders of a majority of the shares represented
and entitled to vote at the Annual Meeting will be required to ratify the
selection of KPMG.
Abstentions will be counted toward 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 toward a quorum, but are not
counted for any purpose in determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL TWO.
7
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
5% STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 2, 1999 by each stockholder
known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of the Company's Common Stock. Unless otherwise indicated in
the footnotes to this table, each of the stockholders named in this table has
sole voting power and investment power with respect to the shares indicated as
being beneficially owned. Applicable percentages are based on 15,141,588 shares
of Common Stock outstanding, adjusted as required by rules promulgated by the
Securities and Exchange Commission (the "SEC"). Ownership information is based
upon information furnished by the respective entities.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED OWNED
---------------- ------------- ------------
<S> <C> <C>
BVF Inc.
Biotechnology Value Fund, L.P. (1)........................ 3,302,743 21.3%
One Sansome Street, 39th Floor
San Francisco, California 94104
Rothschild Asset Management Ltd.
International Biotechnology Trust plc (2)...................... 2,800,000 16.9%
Five Arrows House
St. Swithin's Lane
London EC4N 8NR
England
Wanger Asset Management, L.P.
227 West Monroe, Suite 3000
Chicago, Illinois 60606-5016
Acorn Investment Trust (3)................................ 1,508,000 10.0%
c/o State Street Bank & Trust
225 Franklin Street
Boston, Massachusetts 02110
Four Partners(4)............................................... 1,300,293 8.6%
c/o Thomas J. Tisch
667 Madison Avenue
New York, New York 10021
GIMV, N.V.(5).................................................. 1,142,857 7.5%
Karel Oomsstraat 37
2018 Antwerp, Belgium
</TABLE>
- --------------------------
8
<PAGE>
(1) Includes 375,000 shares of Common Stock issuable upon exercise of warrants
exercisable within 60 days of April 2, 1999. BVF Partners, L.P. ("BVF
Partners") and its general partner BVF Inc. ("BVF Inc.") beneficially own
and share voting and dispositive power over 3,302,743 shares.
Biotechnology Value Fund, L.P. ("BVF, L.P.") beneficially owns 1,557,506
shares of Common Stock and shares voting and dispositive power over the
1,557,506 shares with BVF Partners. BVF, L.P. disclaims beneficial
ownership of the shares beneficially owned by BVF Partners. The foregoing
is based on information contained in its Schedule 13D filed with the SEC
on September 9, 1998.
(2) Includes 1,400,000 shares of Common Stock issuable upon exercise of
warrants exercisable within 60 days of April 2, 1999. Ms. Vitullo is a
Senior Vice President of Rothschild Asset Management Inc., an affiliate of
Rothschild Asset Management Ltd., which manages the IBT fund, and
disclaims beneficial ownership of such shares owned by IBT.
(3) Acorn Investment Trust beneficially owns 1,508,000 shares of Common Stock
and shares voting and dispositive power over the 1,508,000 shares with
Wanger Asset Management, L.P. and its general partner Wanger Asset
Management Ltd.
(4) By virtue of their status as managing trustees of the trusts which are the
general partners of Four Partners, the trustees (Andrew H. Tisch, Daniel
R. Tisch, James S. Tisch and Thomas J. Tisch) may be deemed to have
indirectly shared power to vote and dispose, or direct the vote and
disposition, of all 1,300,293 shares of Common Stock owned by Four
Partners. The foregoing is based on information contained in its Schedule
13G filed with the SEC on February 12, 1999.
(5) Held by a subsidiary, Take Off Fonds, N.V.
The following table sets forth certain information regarding beneficial
ownership of the Company's Preferred Stock as of April 2, 1999 by each
stockholder known by the Company to be the beneficial owner of more than 5% of
the outstanding shares of the Company's Preferred Stock. Applicable percentage
is based on 1,000,000 shares of Series A Convertible Preferred Stock and 250,000
shares of Series B Convertible Preferred Stock outstanding.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED OWNED
---------------- ------------- ------------
<S> <C> <C>
Schering Corporation..................................... 1,250,000 100.0%
2000 Galloping Hill Road
Kenilworth, New Jersey 07033
</TABLE>
9
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of April 2, 1999 by (i) each director and
nominee for director, (ii) each of the Named Executive Officers, and (iii) all
directors and executive officers as a group. Except as otherwise indicated, the
Company believes that the beneficial owners of the Common Stock listed below,
based on information furnished by such owners, have sole investment and voting
power with respect to such shares, subject to community property laws where
applicable. Applicable percentages are based on 15,141,588 shares of Common
Stock outstanding, adjusted as required by rules promulgated by the SEC.
Ownership information is based upon information furnished by the respective
individuals, including any filings under Section 16 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
OWNED OWNED
------------ -------------
<S> <C> <C>
Nicole Vitullo(1)........................................... 2,803,750 16.9%
Randall E. Woods(2)......................................... 315,831 2.0%
John E. Crawford(3)......................................... 301,634 2.0%
George P. Vlasuk, Ph.D.(4).................................. 176,788 1.2%
John H. Fried, Ph.D.(5)..................................... 72,562 *
M. Blake Ingle, Ph.D.(6).................................... 28,500 *
W. Leigh Thompson, Jr., M.D., Ph.D.(7)...................... 7,500 *
Michael Sorell, M.D.(8)..................................... 3,750 *
R. Douglas Norby(9)......................................... 1,250 *
Jean S. Ellis............................................... -0- -0-
All directors and officers as group (11 persons)(10)........ 3,732,874 22.8%
</TABLE>
- ---------------------------
* Less than 1%.
10
<PAGE>
(1) Represents 3,750 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of April 2, 1999, 1,400,000 shares of Common
Stock beneficially owned by IBT and 1,400,000 shares of Common Stock
issuable to IBT upon exercise of warrants exercisable within 60 days of
April 2, 1999. Ms. Vitullo is a Senior Vice President of Rothschild Asset
Management Inc., an affiliate of Rothschild Asset Management Ltd., which
manages the IBT fund. Ms. Vitullo disclaims beneficial ownership of such
shares beneficially owned by IBT.
(2) Includes 310,937 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of April 2, 1999, and 3,894 shares of Common
Stock purchased by Mr. Woods through the ESPP.
(3) Includes 220,240 shares of Common Stock held in a trust for which Mr.
Crawford is both a trustee and a beneficiary, 1,586 shares of Common Stock
purchased through the ESPP, and 79,688 shares of Common Stock issuable
upon exercise of options exercisable within 60 days of April 2, 1999. Mr.
Crawford resigned from the Company effective April 3, 1998.
(4) Includes 173,257 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of April 2, 1999, and 1,388 shares of Common
Stock purchased by Dr. Vlasuk through the ESPP.
(5) Includes 65,062 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of April 2, 1999.
(6) Includes 17,500 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of April 2, 1999.
(7) Represents 7,500 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of April 2, 1999.
(8) Represents 3,750 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of April 2, 1999.
(9) Represents 1,250 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of April 2, 1999.
(10) Includes 2,079,935 shares of Common Stock issuable upon exercise of
warrants and options exercisable within 60 days of April 2, 1999. See
footnotes (1) through (9) above.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the directors and executive
officers of the Company, and persons who own more than 10% 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. Specific due dates for these reports have been
established, and the Company is required to disclose in this Proxy Statement any
failure to file by these dates during 1998. Officers, directors and greater than
10% stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during 1998, all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with except that one initial ownership report, on behalf of Ms.
Felzer, was filed late.
11
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are employees of the Company or who
are representatives of principal stockholders do not receive compensation for
service as directors or for service as members of any committee of the Board.
Dr. Ingle, Mr. Norby, Dr. Sorell and Dr. Thompson each currently receive
compensation at the rate of $12,000 per year for service as a non-employee
director who is not a representative of a principal stockholder of the Company.
Dr. Fried is compensated at the rate of $30,000 per year for service as Chairman
of the Board unaffiliated with any principal stockholder. During the fiscal year
ended December 31, 1998, the total compensation paid to outside directors in
connection with their service as directors was $78,000. The members of the Board
are also reimbursed for their expenses incurred in connection with attendance at
Board meetings in accordance with Company policy.
Pursuant to the 1991 Plan, each non-employee director of the Company also
receives an annual non-discretionary stock option grant to purchase 5,000 shares
of Common Stock at an exercise price equal to 85% of the fair market value of
the Common Stock on the date of the grant. Options granted to non-employee
directors under the 1991 Plan generally become exercisable at the rate of 25%
per year over four years, and have a term of ten years. In the event of a merger
of the Company with or into another corporation, or a consolidation, acquisition
of assets or other change-in-control transaction involving the Company, the
vesting of each option may accelerate for a period of 30 days prior to such
event and the option will terminate if not exercised prior to the consummation
of the transaction or each option will be assumed or an equivalent option will
be substituted by the successor corporation, if the Company is not the surviving
entity.
Options granted to the non-employee directors under the 1991 Plan are not
intended by the Company to qualify as incentive stock options under the Internal
Revenue Code of 1986, as amended (the "Code"), nor do they disqualify the
members of the Compensation and Stock Option Committee from granting stock
awards which, pursuant to Rule 16b-3, are exempt from the application of Section
16 of the Exchange Act. During the fiscal year ended December 31, 1998, the
Company granted options to purchase 5,000 shares of Common Stock to each
non-employee director of the Company. In the aggregate, 35,000 options were
granted at an exercise price of $3.6125 per share, which represents 85% of the
fair market value on the date of grant (based on the average of the high and low
sales price reported on The Nasdaq Stock Market for the date of grant). As of
April 2, 1999, options to purchase 306,000 shares have been granted to directors
under the 1991 Plan (net of cancellations), 42,500 options have been exercised
and 263,500 options remain outstanding.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth for the years ended December 31, 1998, 1997
and 1996 compensation awarded to, or paid to and earned by, the Company's Chief
Executive Officer, the two other most highly compensated executive officers at
December 31, 1998 (who were the only persons meeting the requirements to appear
in the table), and one executive officer who left the Company in 1998 (and would
otherwise have been an executive officer named in the table), whose salaries and
bonuses for services rendered to the Company during the fiscal year ended
December 31, 1998 were in excess of $100,000 (collectively, the "Named Executive
Officers"). Executive officers serve at the discretion of the Board of
Directors, subject to certain existing employment agreements. See "Employment
Agreements and Termination of Employment Agreements."
12
<PAGE>
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------- -------------
Name and Stock All Other
Principal Salary(1) Bonus Options(2) Compen-
Position Year ($) ($) (#) sation(3)($)
-------- ---- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Randall E. Woods(4) 1998 375,241 8,967 -0- 5,279
President and Chief 1997 315,000 110,796 125,000 194,898
Executive Officer 1996 192,000 6,025 375,000 88,447
George P. Vlasuk, Ph.D. 1998 250,000 -0- -0- 1,393
Executive Vice President 1997 200,000 -0- 100,000 1,245
Research and Development 1996 162,872 -0- 120,000 1,111
John E. Crawford(5) 1998 44,556 60,000 25,000(6) 150,617
Former Executive Vice 1997 150,000 -0- -0- 2,959
President and Chief 1996 137,000 10,000 30,000 2,820
Financial Officer
Jean S. Ellis (7) 1998 125,000 20,000 -0- 194
Former Executive Director,
Patents and Intellectual
Property
</TABLE>
- -------------------------
(1) Includes amounts earned but deferred into the Company's 401(k)
Compensation Deferral Savings Plan at the election of the executive
officer.
(2) To date, the Company has not issued any restricted stock awards or stock
appreciation rights to any executive officers.
(3) Includes amounts paid on behalf of executive officers for long-term
disability insurance premiums and excess group term life insurance
premiums. Also see footnote (5).
(4) The amount set forth under the column entitled "Bonus" for 1998 is
comprised of $8,967 of interest which would have been payable in 1998 under
an interest-free loan which the Company granted to Mr. Woods upon his hire
in 1996.
(5) Mr. Crawford resigned from the Company effective April 3, 1998. The amount
set forth under the column entitled "All Other Compensation" for 1998
includes $150,000 in accordance with the terms of Mr. Crawford's separation
agreement with the Company.
(6) The Company recognized $61,378 of compensation expense in connection with
this grant of 25,000 stock options to Mr. Crawford.
(7) Ms. Ellis was named an executive officer of the Company on April 3, 1998,
and resigned from the Company on January 18, 1999.
13
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The Company grants stock options to its executive officers and others
under its 1991 Plan. As of April 2, 1999, options to purchase a total of
1,812,772 shares had been granted and were outstanding under the 1991 Plan,
stock awards totaling 5,400 had been made under the 1991 Plan and options to
purchase 672,049 shares remained available for grant thereunder.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock
options granted to the Named Executive Officers during the year ended December
31, 1998:
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------
Number % of Potential Realizable Value
of Total at Assumed Annual
Shares Options Rates of Stock Price
Underlying Granted to Appreciation for
Options Employees Exercise Expira- Option Term (4), (5)
Granted in Fiscal Price tion --------------------
Name (#) (1) Year (2) ($/Share)(3) Date 5% 10%
---- ------- ----------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Woods -0-
Dr. Vlasuk -0-
Mr. Crawford(6) 25,000 20.4% $4.6875 4-2-01 $18,472 $38,789
Ms. Ellis(7) -0-
</TABLE>
- -------------------------
(1) These options have a maximum term of thirty-six months from the grant date,
and were fully vested and exercisable as of the date of grant.
(2) Based on an aggregate of 122,700 options granted to employees in 1998,
including the above grant. This is not necessarily indicative of the number
of options that will be granted in the future.
(3) The exercise price is equal to 100% of the fair market value of the Common
Stock on the date of grant, as determined by the Compensation and Stock
Option Committee.
(4) The 5% and 10% assumed rates of appreciation are suggested by the rules of
the SEC and do not represent the Company's estimate or projection of the
future Common Stock price. There is no assurance that any of the values
reflected in this table will be achieved. Actual gains, if any, on stock
option exercises and Common Stock holdings are dependent upon a number of
factors, including the future performance of the Common Stock, overall
market conditions and the timing of option exercises, if any.
14
<PAGE>
(5) The potential realizable value is calculated based on the term of the
option at the time of grant (3 years in this case). It is calculated by
assuming that the stock price on the date of grant appreciates at the
indicated annual rate, compounded annually for the entire term of the
option, and that the option is exercised and sold on the last day of its
term for the appreciated stock price. No gain to the optionee is possible
unless the stock price increases over the option term, which will benefit
all stockholders. For example, a stockholder who purchased one share of
stock on April 3, 1998 at $4.6875, held the stock for 3 years and sold it
on April 2, 2001 while the stock appreciated at 5% and 10% compounded
annually, would have profits of $0.74 and $1.55, respectively, on his
$4.6875 investment.
(6) Mr. Crawford resigned from the Company effective April 3, 1998.
(7) Ms. Ellis resigned from the Company on January 18, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information with respect to the
exercise of stock options by the Named Executive Officers during the fiscal year
ended December 31, 1998, and the number and value of securities underlying
unexercised options held by the Named Executive Officers as of December 31,
1998:
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1998 (#)(2) December 31, 1998 ($)(3)
------------------------ ----- ------------------------
Shares Value
Acquired On Realized
Name Exercise (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Woods -0- -0- 259,375 240,625 -0- -0-
Dr. Vlasuk -0- -0- 155,757 127,500 38,004 1,564
Mr. Crawford(4) 60,312 88,598 79,688 -0- 9,187 -0-
Ms. Ellis(5) -0- -0- 16,624 11,376 8,754 1,251
</TABLE>
- -------------------------
(1) Value realized is calculated on the basis of the fair market value of the
Company's Common Stock on the date of exercise minus the exercise price and
does not necessarily indicate that the optionee sold such stock.
(2) Includes options granted under the 1991 Plan, which generally vest over a
four-year period, 25% on the first anniversary of the grant date and 6.25%
each quarter thereafter until fully vested, and have a maximum term of ten
years from the grant date, subject to earlier termination upon the
optionee's cessation of service with the Company. Upon certain corporate
events resulting in a change in control, at the discretion of the Board of
Directors, (i) the outstanding options will be assumed or replaced by
substitute options granted by any surviving corporation or (ii) the
outstanding options will become exercisable for a minimum of 30 days prior
to such event.
15
<PAGE>
(3) Amounts reflected are based on the fair market value of the Company's
Common Stock at December 31, 1998 ($2.813) minus the exercise price of the
options.
(4) Mr. Crawford resigned from the Company effective April 3, 1998. In
accordance with the terms of Mr. Crawford's separation agreement with the
Company, all outstanding stock options held by Mr. Crawford were amended to
become fully vested as of April 3, 1998.
(5) Ms. Ellis resigned from the Company on January 18, 1999. On February 16,
1999, Ms. Ellis exercised 9,375 stock options.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AGREEMENTS
In March 1997, the Company entered into amended employment agreements
with Mr. Woods and Mr. Crawford, and entered into a new agreement with Dr.
Vlasuk. Under the agreements, the original base salaries for Mr. Woods, Mr.
Crawford and Dr. Vlasuk were $300,000, $150,000 and $200,000, respectively. Mr.
Crawford resigned from the Company effective April 3, 1998. Current salaries for
Mr. Woods and Dr. Vlasuk are $350,000 and $250,000, respectively. The agreements
allow, but do not require, changes in compensation from time to time. The
agreements provide that in the event the employment of the officer is terminated
without cause, or if the officer terminates his employment upon a change of
control of the Company (or within six months thereafter) or in the event of a
violation of the agreement by the Company, such officer is entitled to continue
to receive his then-current annual base salary and benefits for a period of one
year following termination and immediate vesting of all stock options held by
the officer. Upon such officer's death or total disability, as defined in the
agreement, the officer or his estate or personal representative shall be
entitled to receive his then-current base salary and benefits for a period of
three months.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE(1)
The Compensation and Stock Option Committee of the Board of Directors
(the "Committee") consists of Ms. Vitullo, Mr. Norby and Dr. Thompson. None of
the members have ever been officers or employees of the Company. The Committee
is responsible for setting and administering the Company's policies governing
employee compensation and administering the Company's employee benefit plans, as
well as reviewing and granting options to the executive officers and all
eligible employees. The Committee evaluates the performance of management and
determines compensation policies and levels. The full Board of Directors reviews
the Committee's recommendations regarding the compensation of executive officers
and has ultimate responsibility regarding compensation decisions. The Board
approved the Committee's recommendations in 1998.
- ----------------------
(1) The material in this Report is not "soliciting material," is not deemed
"filed" with the SEC and is not to be incorporated by reference into any filing
of the Company under the Securities Act of 1933, as amended, or the Exchange Act
whether made before or after the date hereof and irrespective of any
incorporation language contained in such filing.
16
<PAGE>
COMPENSATION PROGRAM
Annual compensation for the Company's executive officers consists of
three elements: a cash salary, stock option grants and the possibility of
receiving event-driven cash bonus awards. As in previous years, to make
compensation determinations, the Committee reviewed historical and current
compensation information of management at other biotechnology companies in
similar geographic areas and at similar stages of growth and development, as
well as a number of industry surveys regarding short- and long-term executive
compensation. This includes certain companies that are components of either or
both of the Nasdaq CRSP Total Return Index for The Nasdaq Stock Market ("Nasdaq
US") or Nasdaq Pharmaceutical Index ("Nasdaq Pharm"), the market indices
appearing in the performance graph included in this Proxy Statement. Based in
part on this information, the Committee generally sets salaries in the median
range for companies of comparable size in similar industries. The Committee also
considers the individual performance and responsibilities of the executive
officers. Currently, the executive officers are compensated at approximately the
median for comparable companies reviewed by the Committee or are slightly above
the median if that officer's experience and responsibilities are above the
average level described for the position surveyed.
In making executive compensation decisions, the Committee believes that
compensation of executives should be directly linked to overall Company progress
and performance and the long-term value created for its stockholders, as well as
individual performance. To this end, the Company's compensation programs,
including salary and incentives, seek to provide competitive compensation that
is reflective of both Company and individual performance. The Company considers
a number of factors, including the following, in determining the elements of
compensation for its executive officers.
- Compensation should be meaningfully related to the long-term value
created for stockholders.
- Compensation programs should support the short- and
long-term strategic goals and objectives of the Company.
- Compensation programs should reflect and promote the Company's
values, and reward individuals based on their contributions to the
Company's success.
- In order to attract and retain well-qualified executives, the
Company's compensation decisions take into account competitive pay
levels.
- While base compensation should be determined by individual
contribution, the actual amounts earned by executives in variable
compensation programs should be dictated by how the Company
performs.
BASE SALARY. The Committee's policy is to review the base salary for the Chief
Executive Officer and each of the Company's executive officers annually. The
Committee reviews executive salaries for other biotechnology companies at a
comparable stage of development and financial condition. The Committee also
reviews a number of criteria, including performance of the Company and the
individual executive, relative experience and responsibilities, and competitive
pay practices. Such criteria for the Company's current stage of development
include growth and strengthening of existing collaborative agreements,
achievement of product development milestones, progress in preclinical trials of
new lead compounds, progress in clinical research and new drug discovery
programs, continued presentation of information to the scientific community, and
recruitment and retention of key personnel. In consideration of the current
financing environment for emerging public biotechnology companies and the
Company's cash position at year-end, the Committee decided to preserve cash
resources and not to increase executive base salaries during 1999.
17
<PAGE>
STOCK OPTION GRANTS. The Company uses its stock option program to further align
the interests of stockholders and management by creating common incentives
related to the possession by management of a substantial economic interest in
the long-term appreciation of the Company's Common Stock. In February 1999, the
Committee granted options to executive officers based on performance and
contributions during the previous year. Items considered by the Committee were
the officer's position and responsibilities, the individual officer's
performance and contributions for the period reviewed, equity incentives paid to
comparable officers at similar companies, the number of previously granted
options, the absence of bonus awards or increases in base salary, and the desire
to provide greater incentives during 1999 to meet Company objectives.
BONUS AWARDS. The Committee has discretionary authority to award bonuses to
executive officers and to other key employees based on individual and Company
performance. The Committee reviews Company achievements and individual
performance including attainment of product research and development milestones,
maintaining and extending collaborative relationships, obtaining corporate
financing and controlling expenditures. To preserve the Company's cash reserves,
the Committee did not award bonuses to executive officers for 1998. For fiscal
year 1999, the Committee plans to establish a Management By Objectives ("MBO")
program for executive officers to help ensure critical goals of the organization
are met.
COMPANY PERFORMANCE/CHIEF EXECUTIVE OFFICER COMPENSATION. During 1998, Mr. Woods
led the Company's continued progress in its strategic planning, business
development programs and ongoing collaborations. In recognition of the
significant progress made in achieving the Company's 1998 goals, specifically
regarding clinical development and the renewal of key collaborations with the
Company's strategic alliance partners and the decision not to award Mr. Woods a
bonus or increase his base compensation despite the Company's achievements
during 1998, the Committee granted an option to purchase 50,000 shares of Common
Stock to Mr. Woods in February 1999. These options were granted at an exercise
price of $2.625 per share, which was the fair market value on the date of grant.
This brings Mr. Woods' total number of stock options outstanding to 550,000. No
increase to base salary or bonus were approved for 1999.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Code limits the Company to a deduction for
federal income tax purposes of no more than $1,000,000 of compensation paid to
certain Named Executive Officers in a taxable year. Compensation above
$1,000,000 may be deducted if it is "performance-based compensation" within the
meaning of the Code. The Committee has determined that stock options granted
under the 1991 Plan with an exercise price at least equal to the fair market
value of the Company's Common Stock on the date of grant shall be eligible to be
treated as "performance-based compensation."
Nicole Vitullo, Chairwoman
R. Douglas Norby
W. Leigh Thompson, Jr., M.D., Ph.D.
18
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON
The following graph compares the cumulative total stockholder return on
the Company's Common Stock for the five years ended December 31, 1998 to two
indices: The Nasdaq US and the Nasdaq Pharm. The total return for each of the
Company's stock, the Nasdaq US and the Nasdaq Pharm assumes the reinvestment of
dividends, although dividends have never been declared on the Company's Common
Stock. The Nasdaq US tracks the aggregate price performance of equity securities
of U.S. companies traded on The Nasdaq Stock Market. The Nasdaq Pharm tracks the
aggregate price performance of equity securities of pharmaceutical companies
listed under the Standard Industrial Classification ("SIC") code 283 (drugs) and
traded on The Nasdaq Stock Market. The Company's Common Stock is traded on The
Nasdaq Stock Market and is a component of both the Nasdaq US and the Nasdaq
Pharm.(1)
Comparison of Five Year Cumulative
Total Return on Investment(2)
CORVAS PROXY REPORT
PERFORMANCE MEASUREMENT COMPARISON
<TABLE>
<CAPTION>
Corvas NASDAQ US NASDAQ Pharm
Date Indexed Price Indexed Price Indexed Price
- --------------------------------------------------------------------------------------
Corvas NASDAQ US NASDAQ Pharm
----------------------------------------------
<S> <C> <C> <C>
Dec-93 100.000 100.000 100.000
Mar-94 83.333 95.797 81.562
Jun-94 69.444 91.318 71.191
Sep-94 55.556 98.881 80.181
Dec-94 47.222 97.752 75.262
Mar-95 41.667 106.578 81.484
Jun-95 55.556 121.911 94.768
Sep-95 100.000 136.596 118.413
Dec-95 125.000 138.256 138.040
Mar-96 122.222 144.699 143.630
Jun-96 108.333 195.131 139.526
Sep-96 102.778 162.052 142.729
Dec-96 125.000 170.015 138.469
Mar-97 122.222 160.793 131.507
Jun-97 144.444 190.265 141.970
Sep-97 113.889 222.402 159.253
Dec-97 86.111 208.299 142.976
Mar-98 111.111 243.772 157.167
Jun-98 91.667 250.543 145.667
Sep-98 45.844 226.846 137.694
Dec-98 62.511 293.520 182.773
</TABLE>
- ---------------------------------------
(1) The material in this Report is not "soliciting material," is not deemed
"filed" with the SEC and is not to be incorporated by reference into any filing
of the Company under the Securities Act of 1933, as amended, or the Exchange Act
whether made before or after the date hereof and irrespective of any
incorporation language contained in such filing.
(2) Assumes $100 invested on December 31, 1993 in the Company's Common Stock,
the Nasdaq US and the Nasdaq Pharm.
19
<PAGE>
CERTAIN TRANSACTIONS
In December 1994, Corvas entered into a strategic alliance agreement
with Schering-Plough to collaborate on the discovery and commercialization of
orally active thrombin inhibitor drugs for the prevention and treatment of
chronic cardiovascular disorders. Under the terms of the initial agreement,
Schering-Plough compensated the Company for certain costs of research and
preclinical development of thrombin inhibitors over a two-year period that ended
December 31, 1996. Schering-Plough assumed responsibility for certain
preclinical development, clinical trials and regulatory activities, and received
exclusive worldwide manufacturing and marketing rights for any resulting
thrombin inhibitors. In January 1997, Schering-Plough selected a clinical
development candidate, which resulted in a $3,000,000 milestone payment to
Corvas. In June 1998, Schering-Plough began a Phase I clinical trial of an oral
thrombin inhibitor, which triggered a $1,000,000 milestone payment to the
Company. In August 1998, the Company and Schering-Plough agreed to terminate
this collaboration.
In conjunction with the December 1994 agreement for oral thrombin
inhibitors, Schering-Plough acquired an exclusive option to expand its alliance
with the Company to include Factor Xa inhibitors. In December 1996,
Schering-Plough exercised this option and agreed to compensate Corvas for
certain costs of research and preclinical development of Factor Xa inhibitors
over a two-year period that originally ended December 31, 1998. In December
1998, Schering-Plough extended the funding of this program through September
1999 and expanded the scope of the program to encompass the development of both
Factor Xa and thrombin inhibitors. Schering-Plough, which is responsible for
preclinical development, all clinical trials and regulatory activities, has
exclusive worldwide marketing rights for any resulting Factor Xa inhibitors.
Corvas retained certain manufacturing rights and may in the future receive
milestone payments and royalties on sales of therapeutics resulting from this
alliance.
Upon execution of the initial agreement in 1994, Schering-Plough
purchased 1,000,000 shares of Series A Convertible Preferred Stock of the
Company, which resulted in net proceeds of $4,864,000. Upon exercise of the
Factor Xa option in 1996, Schering-Plough purchased 250,000 shares of Series B
Convertible Preferred Stock of the Company, which resulted in net proceeds of
$2,000,000. Schering-Plough beneficially owns all of the outstanding shares of
Series A and Series B Convertible Preferred Stock, or approximately 7.6% of the
outstanding securities of the Company on an as-converted basis. Revenue of
$5,000,000 was recognized under this agreement in 1998. Through the end of 1998,
Corvas has received a total of $28,000,000 from Schering-Plough as a result of
these programs. If all milestones remaining on the program are met, Corvas would
receive an additional $30,500,000 in milestone payments and research funding,
plus royalties on any sales of commercialized products.
In June 1997, the Company entered into an additional agreement with
Schering-Plough which covers the design and development of orally-bioavailable
inhibitors of a key protease believed to be necessary for hepatitis C virus
replication. Under the terms of this agreement, Schering-Plough received an
exclusive worldwide license for products developed from these inhibitors and is
responsible for all development, manufacturing and marketing of any resultant
products. Corvas recognized revenue from collaborative agreements of $1,575,000
in 1998 pursuant to this agreement. The initial term of the research program was
one year; Schering-Plough has exercised the first of its options to extend
funding through May 1999, and has one option remaining to extend the program for
an additional one-year period. Funding for each extension year is dependent on
the manpower applied to the program, within an established minimum and maximum.
The Company may also receive milestone payments as well as royalty payments on
product sales if products are successfully commercialized from this agreement.
There is no assurance that products will be successfully developed and
commercialized under any of these alliances.
20
<PAGE>
In June 1996, as a recruiting incentive, the Company loaned Mr. Woods
$200,000, interest-free, in connection with his relocation to San Diego County,
California. The loan was evidenced by an interest-free promissory note (the
"Original Note"), and was originally due on the earlier of (i) December 4, 1996,
(ii) the closing, or any transfer of, Mr. Woods' former residence (the "Former
Residence"), or (iii) within 90 days of Mr. Woods' termination of employment
with the Company. To further assist Mr. Woods in selling the Former Residence,
in December 1996, the Company agreed to extend the Original Note to be payable
on the earliest of (i) December 7, 1997, (ii) the closing, or any transfer of,
Mr. Woods' Former Residence, or (iii) within 90 days of Mr. Woods' termination
of employment with the Company.
In May 1997, the Company agreed to pay the difference between the
original purchase price paid by Mr. Woods and the sales price of the Former
Residence once sold, in an amount not to exceed $47,500. The Former Residence
was sold on August 28, 1997, and Mr. Woods paid $47,500 against the Original
Note, thereby reducing the outstanding balance to $152,500. Also on August 28,
1997, Mr. Woods executed an Amended and Restated Secured Promissory Note (the
"Amended Note") in the amount of $152,500 in favor of the Company. The Amended
Note, secured by the rights, title and interest in a lawsuit and any proceeds
thereof related to Mr. Woods' current residence (the "Lawsuit"), was due on the
earliest of (i) September 18, 1998, (ii) the settlement or other final
determination of the Lawsuit, or (iii) within 90 days of Mr. Woods' termination
of employment with the Company.
On October 6, 1998, Mr. Woods executed The First Amendment to Amended
and Restated Secured Promissory Note, which amended the maturity date of the
Amended Note to be the earliest of (i) August 28, 1999, (ii) the settlement or
other final determination of the Lawsuit, or (iii) within 90 days of Mr. Woods'
termination of employment with the Company.
In June 1998, in order to induce the early exercise of certain
warrants before the February 2002 expiration date, the Company offered holders
of warrants to purchase an aggregate of 3,000,000 shares of Common Stock of the
Company the ability to exercise their warrants within 45 days at a price of
$3.59 per share. The warrants were originally issued at a per share exercise
price of $6.00. A total of 1,025,000 shares of the Company's Common Stock were
issued in connection with the exercise of the exchanged warrants, which resulted
in net proceeds of $3,647,000 to the Company. The warrants were originally
issued under Rule 506 of the Securities Exchange Act of 1933, as amended, (the
"Securities Act") which was promulgated under Section 4(2) of the Securities Act
("Rule 506"). The warrants were exchanged pursuant to Rule 506 and Section 14 of
the Exchange Act and the rules and regulations promulgated under Section 14 that
govern private tender offers. No commissions or underwriting fees were paid in
connection with such transaction.
21
<PAGE>
In August 1998, through the filing of a 13D by BVF, L.P., the Company
became aware that BVF, L.P. had acquired a beneficial ownership in the Company
of greater than 20%, without the permission of the Company (an "Acquiring
Person"). Such ownership could potentially trigger certain rights to other
stockholders under the Rights Agreement dated September 18, 1997 between the
Company and American Stock Transfer and Trust Company as Rights Agent (the
"Rights Agreement"). After a review, the Board of Directors determined that BVF,
L.P. had inadvertently become an Acquiring Person, within the meaning of the
Rights Agreement. In order for BVF, L.P. to avoid being an Acquiring Person, the
Company exchanged a total of 375,000 warrants for 375,000 warrants. The
replacement warrants are substantially the same, including the per share
exercise price which remained at $6.00, except that the Company's right to call
the warrants was lowered from $18.00 to $15.00 per share and the net exercise
provision was eliminated for the period from the date of issuance, August 3,
1998, until August 3, 1999. The warrants were originally issued under Rule 506
and the warrants were exchanged pursuant to Section 4(2) of the Securities Act.
No commissions or underwriting fees were paid in connection with the warrant
exchange.
The Company has entered into indemnity agreements with certain officers
and directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein, for expenses, damages, judgments, fines and settlements such person may
be required to pay in actions or proceedings which such person is or may be made
a party by reason of their position as a director, officer or other agent of the
Company, and otherwise to the full extent permitted under Delaware law and the
Company's By-laws.
OTHER MATTERS
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
presented to the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
Whether or not you intend to be present at the Annual Meeting, we urge
you to return your signed proxy promptly.
By Order of the Board of Directors,
/s/ M. WAINWRIGHT FISHBURN, JR.
-------------------------------
Corporate Secretary
April 16, 1999
22
<PAGE>
CORVAS INTERNATIONAL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Randall E. Woods and George P. Vlasuk,
Ph.D. or either of them, each with full power of substitution, as proxies to
vote at the Annual Meeting of Stockholders of Corvas International, Inc. (the
("Company") to be held on Monday May 24, 1999 at 3:00 p.m., local time, at the
Hilton La Jolla Torrey Pines located at 10950 Torrey Pines Road, La Jolla,
California, and at any adjournment or adjournments thereof, hereby revoking any
proxies heretofore given, to vote all shares of Common Stock of the Company held
or owned by the undersigned as directed below, and in their discretion upon
such other matters as may come before the meeting.
THE PROXY WILL BE VOTED AS SPECIFIED, OR IF NO CHOICE IS SPECIFIED, WILL BE
VOTED FOR THE NOMINEE FOR ELECTION LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2. IF
SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE
THEREWITH.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEE FOR DIRECTOR LISTED AND IN
FAVOR OF PROPOSAL 2.
(TO BE SIGNED ON REVERSE SIDE)
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
CORVAS INTERNATIONAL, INC.
MONDAY, MAY 24, 1999
Please Detach and Mail in the Envelope Provided
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
FOR WITHHELD
1. Election of Directors. / / / /
Nominee: W. Leigh Thompson, Jr., M.D., Ph.D.
2. Ratification of KPMG LLP as the Company's independent public accountants for
fiscal year 1999.
FOR AGAINST ABSTAIN
/ / / / / /
SIGNATURES DATE
------------------------------------- -----------------------
NOTE: Please sign exactly as name appears heron. Joint owners each should sign.
When signing as attorney, executor, administrator, trustees or guardian, please
give full title as such.
