<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
the Commission Only
[X] Definitive Proxy Statement (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Transkaryotic Therapies, Inc.
-------------------------------------------
(Name of Registrant as Specified in Its Charter)
-------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
TRANSKARYOTIC THERAPIES, INC.
195 ALBANY STREET
CAMBRIDGE, MASSACHUSETTS 02139
(617) 349-0200
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 12, 1997
------------------------
The Annual Meeting of Stockholders of Transkaryotic Therapies, Inc. (the
"Company") will be held at The Royal Sonesta Hotel, 5 Cambridge Parkway,
Cambridge, Massachusetts 02142 on Thursday, June 12, 1997 at 10:00 a.m., Eastern
Standard Time, to consider and act upon the following matters:
1. To elect five directors to serve until the 1998 Annual Meeting of
Stockholders.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on April 18, 1996 will be
entitled to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors,
James E. Thomas, Secretary
Cambridge, Massachusetts
April 30, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED VOTER INSTRUCTION CARD AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE
AFFIXED IF THE VOTER INSTRUCTION CARD IS MAILED IN THE UNITED STATES.
<PAGE> 3
TRANSKARYOTIC THERAPIES, INC.
195 ALBANY STREET
CAMBRIDGE, MASSACHUSETTS 02139
------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 12, 1997
------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Transkaryotic Therapies, Inc. (the
"Company") for use at the Annual Meeting of Stockholders to be held on June 12,
1997 (the "Annual Meeting") and at any adjournment of the Annual Meeting. All
shares of Common Stock will be voted in accordance with the stockholders'
instructions. Any proxy may be revoked by a stockholder at any time before its
exercise by delivery of written revocation to The First National Bank of Boston,
c/o Boston EquiServe, Proxy Services, P.O. Box 9379, Boston, Massachusetts
02205-9954.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1996 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
EXCEPT FOR EXHIBITS, IS BEING MAILED TO STOCKHOLDERS WITH THE MAILING OF THIS
NOTICE AND PROXY STATEMENT ON OR ABOUT APRIL 30, 1997.
VOTING SECURITIES AND VOTES REQUIRED
On April 18, 1997, the record date for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting, there were outstanding
and entitled to vote an aggregate of 16,662,686 shares of Common Stock of the
Company, $.01 par value per share (the "Common Stock"). Stockholders are
entitled to one vote per share.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the meeting shall be
necessary to constitute a quorum for the transaction of business. Abstentions
and broker non-votes will be considered as present for quorum purposes but will
not be counted as votes cast. Accordingly, abstentions and "broker non-votes"
will have no effect on the voting on a matter that requires the affirmative vote
of a certain percentage or a plurality of the votes cast or shares voting on a
matter.
The affirmative vote of the holders of a plurality of the shares of Common
Stock present or represented at the meeting is required for the election of
directors.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 1, 1997, regarding
the ownership of the Company's Common Stock by (i) the only persons known by the
Company to own more than five percent of the outstanding shares, (ii) all
directors and nominees of the Company, (iii) each of the executive officers of
the Company named in the Summary Compensation Table (the "Named Executive
Officers") and (iv) all directors and executive officers of the Company as a
group. The number of shares beneficially owned by each director or executive
officer is determined under rules of the Securities and Exchange Commission, and
the
<PAGE> 4
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rules, beneficial ownership includes any shares as to which
the individual has the sole or shared voting power or investment power and also
any shares which the individual has the right to acquire within 60 days of March
1, 1997 through the exercise of any stock option or other right. Unless
otherwise indicated, each person has sole investment and voting power (or shares
such power with his or her spouse) with respect to the shares set forth in the
following table. The inclusion herein of any shares deemed beneficially owned
does not constitute an admission of beneficial ownership of such shares.
<TABLE>
<CAPTION>
PERCENTAGE
SHARES OF OF
COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OWNED(1)
- ---------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Warburg, Pincus Capital Company, L.P. .......................... 5,929,486(2) 34.62%
c/o E. M. Warburg, Pincus & Co. LLC
466 Lexington Avenue, 10th Floor
New York, NY 10017-3147
Hoechst Marion Roussel, Inc. ................................... 2,187,408(3) 13.14%
9300 Ward Parkway
Kansas City, MO 64114-1405
Biotech Target S.A. ............................................ 1,300,000(4) 7.81%
c/o BB Biotech AG
Vordergasse 3
8200 Schaffhausen
CH/Switzerland
Christoph M. Adams, Ph.D........................................ 26,785(5) *
William R. Miller............................................... 28,928 *
Rodman W. Moorhead, III......................................... 5,929,486(6) 34.62%
Richard F Selden, M.D., Ph.D. .................................. 828,303(7) 4.97%
James E. Thomas................................................. 5,929,486(6) 34.62%
Douglas A. Treco, Ph.D. ........................................ 240,689(8) 1.45%
Peter Wirth..................................................... 0 *
All directors and executive officers as a group (9
individuals).................................................. 7,064,191(9) 41.09%
</TABLE>
- ---------------
* Percentage is less than 1% of the total number of outstanding shares of
Common Stock of the Company.
(1) Number of shares deemed outstanding includes 16,649,460 shares outstanding
as of March 1, 1997, plus any shares subject to issuance upon exercise of
options or warrants held by the person or entity in question that are
currently exercisable or exercisable within 60 days after March 1, 1997.
(2) The sole general partner of Warburg, Pincus Capital Company, L.P.
("Warburg") is Warburg, Pincus & Co., a New York general partnership ("WP").
E.M. Warburg, Pincus & Co. LLC, a New York limited liability company ("EMW
LLC"), through a wholly-owned subsidiary, manages Warburg. WP owns all of
the outstanding stock of EMW LLC and, as the sole general partner of
Warburg, has a 20% interest in the profits of Warburg. EMW LLC owns 0.9% of
the limited partnership interests in Warburg. Lionel I. Pincus is the
managing partner of WP and the managing member of EMW LLC and may be deemed
to control both WP and EMW LLC. The members of EMW LLC are substantially the
same as the partners of WP. Rodman W. Moorhead, III, Chairman of the Board
of Directors, and James E. Thomas, a director of the Company, are Managing
Directors and members of EMW LLC and general partners of WP. As such,
Messrs. Moorhead and Thomas may be deemed to have an indirect pecuniary
interest in an indeterminate portion of the shares beneficially owned by
Warburg and WP. This includes 478,966 shares which may be acquired within 60
days of March 1, 1997 by each of Warburg, WP and EMW LLC upon
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<PAGE> 5
the exercise of outstanding warrants. The information presented herein is as
reported in, and based solely upon, a Schedule 13G filed with the Commission
by Warburg, WP and EMW LLC on February 13, 1997. Each of Warburg, WP and EMW
LLC reported beneficial ownership of and sole voting and dispositive power
with respect to all of such shares. These stockholders may be deemed to be a
group for purposes of Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
(3) The information presented herein is as reported in, and based solely upon, a
Schedule 13D/A filed with the Commission on January 9, 1997 by Hoechst
Marion Roussel, Inc., a Delaware corporation ("HMRI"), and HMR Pharma, Inc.,
a Delaware corporation . HMR Pharma, a wholly owned subsidiary of Hoechst
Aktiengesellschaft, a German corporation ("Hoechst AG"), beneficially owns
98.2% of the outstanding common stock of HMRI. HMRI reported beneficial
ownership of and sole voting and dispositive power with respect to all of
such shares. HMR Pharma disclaims beneficial ownership of all such shares
within the meaning of Rule 13d-3 under the Exchange Act. These stockholders
may be deemed to be a group for purposes of Rule 13d-3 promulgated under the
Exchange Act.
(4) The information presented herein is as reported in, and based solely upon, a
Schedule 13G filed with the Commission on February 21, 1997 by Biotech
Target S.A., a Panamanian corporation ("Biotech Target"), and BB Biotech AG,
a Swiss corporation ("BB Biotech"). Biotech Target is a wholly owned
subsidiary of BB Biotech. Each of Biotech Target and BB Biotech reported
beneficial ownership of and shared voting and dispositive power with respect
to all of such shares. These stockholders may be deemed to be a group for
purposes of Rule 13d-3 promulgated under the Exchange Act.
(5) Includes 26,785 shares of Common Stock issuable upon exercise of outstanding
stock options granted under the Company's 1993 Equity Incentive Plan.
(6) All of the shares indicated as owned by Messrs. Moorhead and Thomas are
owned directly by Warburg and are included herein because of the affiliation
of Messrs. Moorhead and Thomas with Warburg. Messrs. Moorhead and Thomas
disclaim beneficial ownership of these shares within the meaning of Rule
13d-3 under the Exchange Act. See Note (2) above.
(7) Includes 21,428 shares of Common Stock issuable upon exercise of outstanding
stock options granted under the Company's 1993 Equity Incentive Plan.
(8) Includes 4,285 shares of Common Stock issuable upon exercise of outstanding
stock options granted under the Company's 1993 Equity Incentive Plan. Also
includes 17,357 shares of Restricted Stock, of which 5,785, 5,786 and 5,786
shares will vest on June 16, 1997, 1998 and 1999, respectively.
(9) Includes 62,498 shares of Common Stock issuable upon exercise of outstanding
stock options granted under the Company's 1993 Equity Incentive Plan. Also
includes 478,966 shares which may be acquired within 60 days of March 1,
1997 by each of Warburg, WP and EMW LLC upon the exercise of outstanding
warrants.
ELECTION OF DIRECTORS
Directors are to be elected at the Annual Meeting. The Board of Directors
has fixed the number of directors at five for the coming year. The Company's
By-laws provide that the directors of the Company will be elected at each annual
meeting of the Company's stockholders to serve until the next annual meeting of
stockholders or until their successors are duly elected and qualified. Pursuant
to the Company's By-laws, the Board of Directors may from time to time after the
Annual Meeting elect additional directors.
At each meeting of the Company's stockholders at which directors are to be
elected, the Company agreed to nominate, recommend the election by the Company's
stockholders and use its best efforts to effect the
3
<PAGE> 6
election to the Board of Directors of the Company of (i) two individuals
designated by Warburg, so long as Warburg beneficially owns at least 20% of the
outstanding Common Stock of the Company and (ii) one individual designated by
Warburg, so long as Warburg beneficially owns at least 10% or more, but less
than 20%, of the outstanding Common Stock of the Company.
The Board of Directors recommends that the nominees named below be elected
directors of the Company. The persons named in the enclosed proxy card (Richard
F Selden and James E. Thomas) will vote to elect the five nominees named below
as Directors of the Company unless authority to vote for the election of any or
all of the nominees is withheld by marking the proxy card to that effect. Each
nominee is presently serving as a director and has consented to being named in
this Proxy Statement and to serve if elected. If for any reason any nominee
should become unavailable for election prior to the Annual Meeting, the person
acting under the proxy may vote the proxy for the election of a substitute. It
is not presently expected that any of the nominees will be unavailable.
Set forth below are the name, age and length of service as a director for
each member of the Board of Directors and the positions and offices held by him,
his principal occupation and business experience during the past five years and
the names of other publicly-held companies of which he serves as a director.
Information with respect to the number of shares of Common Stock beneficially
owned by each director, directly or indirectly, as of March 1, 1997, appears
under "Security Ownership of Certain Beneficial Owners and Management."
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
RICHARD F SELDEN, M.D., PH.D., age 38, is the founder of the Company. He
has served as Chief Scientific Officer, Chairman of the Scientific Advisory
Board and a Director since the Company's inception in 1988 and as President and
Chief Executive Officer since June 1994. Prior to founding the Company, Dr.
Selden was an Instructor in pediatrics at Harvard Medical School. He received an
A.B. in Biology from Harvard College, an A.M. in Biology from the Harvard
University Graduate School of Arts and Sciences, a Ph.D. in genetics from the
Division of Medical Sciences at Harvard Medical School and an M.D. from Harvard
Medical School.
WILLIAM R. MILLER, age 68, has served as a Director since September 1991.
In January 1991, he retired as Vice Chairman of the Board of Directors of
Bristol-Myers Squibb, which position he had held since 1985. Mr. Miller is the
Chairman of the Board of Directors of Vion Pharmaceuticals, Inc. and SIBIA
Neuro-sciences, Inc., a director of ImClone Systems, Inc., Isis Pharmaceuticals,
Inc., St. Jude Medical, Inc., Westvaco Corporation and Xomed Surgical Products,
Inc., an Advisory Director of Chugai Pharmaceuticals, Inc. and serves as Vice
Chairman of Cold Spring Harbor Laboratory.
RODMAN W. MOORHEAD, III, age 53, has served as Chairman of the Board of
Directors since May 1992. Since 1973, he has been with E.M. Warburg, Pincus &
Co. LLC ("Warburg, Pincus"), a specialized financial services firm, where he
currently serves as a Senior Managing Director. He is also a director of NeXstar
Pharmaceuticals, Inc., Value Health, Inc., Xomed Surgical Products, Inc. and a
number of privately held companies.
JAMES E. THOMAS, age 36, has served as a Director and Secretary of the
Company since May 1992. Mr. Thomas has served as a Managing Director of Warburg,
Pincus since January 1994, and prior to that served as Vice President from 1991
to 1994 and Associate from 1989 to 1991. Mr. Thomas is also a director of
Anergen, Inc., Celtrix Pharmaceuticals, Inc., Menley & James Laboratories, Inc.,
Xomed Surgical Products, Inc. and a number of privately held companies.
PETER WIRTH, age 46, has served as a Director since February 1997. Mr.
Wirth has served as Executive Vice President and Chief Legal Officer of Genzyme
Corporation since October 1996. From January 1996 to
4
<PAGE> 7
October 1996, Mr. Wirth served as Senior Vice President and General Counsel of
Genzyme. Mr. Wirth was a partner of Palmer & Dodge LLP, a Boston, Massachusetts
law firm, from 1982 through October 1996. Mr. Wirth remains Of Counsel to Palmer
& Dodge LLP.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF
THE FIVE NOMINEES DESCRIBED ABOVE.
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board of Directors, which
reviews the results and scope of the audit and other services provided by the
Company's independent public accountants. The Audit Committee met one time
during fiscal 1996 to review the effectiveness of the public accountants during
the fiscal 1995 audit, to review the adequacy of the fiscal 1995 financial
statement disclosures, to discuss the Company's internal control policies and
procedures and to consider and recommend the selection of the Company's
independent public accountants. The members of the Audit Committee are Messrs.
Miller and Thomas.
The Company also has a standing Compensation Committee of the Board of
Directors, which makes recommendations concerning salaries of each employee of
the Company entitled to a salary in excess of $150,000 and which exercises the
authority of the Board with respect to all incentive or stock option plans or
arrangements established by the Company, including the grant of stock options
and the issuance of restricted shares to employees. The Compensation Committee
is also responsible for establishing and modifying the compensation of all
corporate officers of the Company (including compensation pursuant to stock
options and other employee benefit plans and arrangements), adoption and
amendment of all stock option and other employee benefit plans and arrangements
and the engagement of, terms of any employment agreements and arrangements with,
and termination of, all corporate officers of the Company. The Compensation
Committee met one time during fiscal 1996. The members of the Compensation
Committee are Messrs. Miller and Moorhead. See "Report of the Compensation
Committee."
The Board of Directors held six meetings during fiscal 1996. Each director
attended 100% of the meetings of the Board of Directors and all committees of
the Board on which he served.
DIRECTORS' COMPENSATION
In general, the Company does not compensate directors for service as
directors but reimburses them for expenses incurred in connection with
attendance at meetings of the Board of Directors and committees thereof. Mr.
Miller is paid $1,000 for attendance at each meeting of the Board, other than
telephonic meetings. For the fiscal year ending December 31, 1996, Mr. Miller
earned $4,000 in director's fees. Pursuant to the terms of an agreement with the
Company, Mr. Wirth received $12,500 for consulting services rendered to the
Company during the fiscal year ended December 31, 1996. See "Certain
Transactions."
Directors who are not employees of the Company ("Nonemployee Directors")
are entitled to participate in the Company's 1993 Non-Employee Directors' Stock
Option Plan (the "1993 Directors' Plan") which is administered by the
Compensation Committee of the Board of Directors. The 1993 Directors' Plan
provides for an automatic option grant on the date immediately following each
annual meeting of stockholders to each director who (i) is not an employee of
the Company or of any subsidiary, affiliate or five or more percent stockholder
of the Company and (ii) does not own or hold any Common Stock which was
purchased prior to the approval of the 1993 Directors' Plan and which remains,
at the time the director is being considered for eligibility for any specific
grant under the 1993 Directors' Plan, subject to substantial risk of forfeiture
under an agreement entered into with the Company. Any director who becomes such
an employee shall cease to be
5
<PAGE> 8
eligible for any further option grants under the 1993 Directors' Plan while such
an employee, but shall not, by reason of becoming such an employee, cease to be
eligible to retain options previously granted under the 1993 Directors' Plan.
As of March 1, 1997, no awards had been made under the 1993 Directors'
Plan. Currently, Messrs. Miller and Wirth are eligible to receive option grants
under the 1993 Directors' Plan. However, in lieu of an option grant under the
1993 Directors' Plan, Mr. Miller will be granted options under the Company's
1993 Long-Term Incentive Plan. In addition, in lieu of an option grant under the
1993 Directors' Plan, Mr. Wirth is compensated as a consultant to the Company.
See "Certain Transactions."
CERTAIN TRANSACTIONS
On September 23, 1996, the Company entered into an Agreement to Nominate
with Warburg, Pincus Capital Company, L.P. ("Warburg"), a stockholder of the
Company, under which, commencing on October 16, 1996, the effective date of the
Company's Registration Statement on Form S-1, at each meeting of the Company's
stockholders at which directors are to be elected, the Company agreed to
nominate, recommend the election by the Company's stockholders and use its best
efforts to effect the election to the Board of Directors of the Company of (i)
two individuals designated by Warburg, so long as Warburg beneficially owns
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least
20% of the outstanding Common Stock of the Company and (ii) one individual
designated by Warburg, so long as Warburg beneficially owns (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) at least 10% or more, but less
than 20%, of the outstanding Common Stock of the Company. Messrs. Moorhead and
Thomas have been nominated by the Company for election as directors at the
Annual Meeting pursuant to the Agreement to Nominate.
Pursuant to the provisions of the Class D Preferred Stock Purchase
Agreement between the Company and HMRI, on October 22, 1996, the closing date of
the Company's initial public offering, the Company sold to HMRI 333,333 shares
of Common Stock at the initial public offering price of $15.00 per share for
aggregate consideration of approximately $5 million. In addition, with respect
to such shares, the Company granted to HMRI one demand registration right
exercisable after the expiration of the 180-day "lock-up" period that commenced
on October 16, 1996, the date on which the Company's registration statement was
declared effective by the Securities and Exchange Commission, on substantially
the same terms and conditions as the rights contained in a certain Registration
Rights Agreement by and among the Company and certain stockholders named
therein.
The Company entered into a three-year consulting agreement, dated November
1, 1996 (the "Consulting Agreement") with Peter Wirth, a director of the
Company, pursuant to which he provides consulting services to the Company. Under
the Consulting Agreement, Mr. Wirth was granted an option to purchase 15,000
shares of Common Stock at an exercise price of $15.00 per share vesting in three
equal annual installments beginning on the first anniversary of the date of the
Consulting Agreement. Mr. Wirth also receives an annual fee in the amount of
$50,000 paid quarterly in arrears. In January 1997, the Company paid to Mr.
Wirth $12,500 in fees for consulting services rendered to the Company in the
fiscal year ended December 31, 1996.
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<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The table below sets forth certain
compensation information for the Chief Executive Officer of the Company and the
other executive officers of the Company whose salary and bonus for the fiscal
year ended December 31, 1996 exceeded $100,000 (collectively, the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-----------------------
RESTRICTED
ANNUAL COMPENSATION(1) STOCK SECURITIES ALL OTHER
------------------------------ AWARDS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(2) ($)(3) OPTIONS(#) ($)(4)
- -------------------------------------- ---- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard F Selden, M.D., Ph.D.......... 1996 $210,000 $100,000 -- 128,571 $ 10,499
President and Chief Executive
Officer 1995 200,000 86,000 -- -- 4,659
Douglas A. Treco, Ph.D................ 1996 152,000 30,000 -- 25,714 3,945
Senior Vice President, Research and 1995 134,000 30,000 -- -- 3,125
Development
Christoph M. Adams, Ph.D.............. 1996 152,000 6,000 -- 6,429 4,096
Vice President, Business Development 1995 142,000 17,500 -- -- 21,193(5)
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted in those instances where the aggregate amount of such
perquisites and other personal benefits constituted less than the lesser of
$50,000 or 10% of the total amount of annual salary and bonus for the
executive officer for the year ended December 31, 1996.
(2) Bonuses earned in the year ended December 31, 1996 were paid in 1997.
Bonuses earned in the year ended December 31, 1995 were paid in 1996.
(3) No shares of restricted stock were awarded in the years ended December 31,
1996 and 1995. As of December 31, 1996, Dr. Treco held an aggregate of
17,357 shares of unvested restricted stock valued at $320,969.50. The value
of the restricted stock held by Dr. Treco at December 31, 1996 was
determined by multiplying the last reported sales price of the Company's
Common Stock as reported by the Nasdaq National Market on December 31, 1996
($18.50) by the number of shares held and subtracting the aggregate purchase
price paid by Dr. Treco for such shares. No dividends were paid in 1996 or
1995 on the outstanding shares of restricted stock.
(4) Includes the following: (a) the Company's contributions for Drs. Selden,
Treco and Adams under the Company's 401(k) Plan in the amount of $3,750 each
for fiscal 1996, and $3,750, $2,945, and $3,750, respectively, for fiscal
1995; and (b) the taxable portion of group term life insurance premiums paid
by the Company for Drs. Selden, Treco and Adams in the amounts of $195, $195
and $346, respectively, for fiscal 1996, and $180 each for fiscal 1995.
(5) Includes reimbursement by the Company for costs associated with relocation.
7
<PAGE> 10
OPTION GRANT TABLE. The following table sets forth certain information
regarding options granted during the fiscal year ended December 31, 1996 by the
Company to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
NUMBER OF --------------------------- ANNUAL RATES OF
SECURITIES PERCENT OF MARKET STOCK PRICE
UNDERLYING TOTAL OPTIONS EXERCISE PRICE ON APPRECIATION
OPTIONS GRANTED TO OR DATE OF FOR OPTION TERM(1)
GRANTED EMPLOYEES IN BASE PRICE GRANT EXPIRATION ----------------------------------
NAME (#)(2) FISCAL YEAR(3) ($/SHARE) ($/SHARE) DATE 0%($) 5%($) 10%($)
- ------------------------- ---------- -------------- ---------- --------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard F Selden, M.D.,
Ph.D.................... 128,571 16.6% $ 0.01 $6.22 1/17/06 $798,426 $1,300,552 $2,070,911
Douglas A. Treco,
Ph.D................... 25,714 3.3% 0.01 6.22 1/17/06 159,684 260,108 414,179
Christoph M. Adams,
Ph.D................... 6,429 0.8% 0.01 6.22 1/17/06 39,924 65,032 103,553
</TABLE>
- ---------------
(1) Potential realizable value is based on an assumption that the market price
of the stock will appreciate at the stated rate, compounded annually, from
the date of grant until the end of the 10-year term. These values are
calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate or projection of future
stock prices. Actual gains, if any, on stock option exercises will be
dependent upon the future performance of the price of the Company's Common
Stock, which will benefit all stockholders proportionately.
(2) Options granted under the Company's 1993 Long-Term Incentive Plan. The
shares subject to these options vest in six equal annual installments
commencing on the first anniversary of the date of grant.
(3) Calculated based on an aggregate of 774,468 options granted under the
Company's 1993 Long-Term Incentive Plan to employees during the fiscal year
ended December 31, 1996.
OPTION EXERCISES AND YEAR-END VALUES. The following table sets forth
certain information concerning exercisable and unexercisable stock options held
by the Named Executive Officers as of December 31, 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(2)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Richard F Selden, M.D., Ph.D........... 0 128,571 $ 0 $ 2,377,278
Douglas A. Treco, Ph.D................. 0 25,714 0 475,452
Christoph M. Adams, Ph.D............... 17,143 40,715 316,974 752,820
</TABLE>
- ---------------
(1) No options were exercised during the fiscal year ended December 31, 1996 by
the Named Executive Officers.
(2) Value of unexercised in-the-money options represents the difference between
the last reported sales price of the Company's Common Stock as reported by
the Nasdaq National Market on December 31, 1996 ($18.50) and the exercise
price of the option, multiplied by the number of shares subject to the
option.
8
<PAGE> 11
EMPLOYMENT AGREEMENTS
The Company is a party to employment agreements with certain of its
executive officers, including Drs. Selden, Adams and Treco. Each employment
agreement contains provisions for establishing the annual base salary of each
executive officer. Pursuant to the terms of the employment agreements, the 1997
annual base salary for each of Drs. Selden, Treco and Adams has been established
at $240,000, $175,000 and $160,000, respectively. Under the terms of such
employment agreements, if the employment of Drs. Selden, Treco or Adams is
terminated without cause, the Company is required to pay to such executive
severance payments at the executive's base salary rate for 18 months in the case
of Dr. Selden and 12 months in the case of Drs. Treco and Adams (a "Severance
Period"), to be reduced by an amount equal to the amount of any other
compensation earned by such individual during such Severance Period. The
executive shall be bound by certain non-compete obligations for two years after
termination of the employment or such longer period during which severance
payments are paid under the employment agreement.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Company's Board of Directors is
responsible for establishing compensation policies with respect to the Company's
executive officers. The objectives of the Company's executive compensation
program are to establish compensation levels designed to enable the Company to
attract, retain and reward executive officers who contribute to the long-term
success of the Company so as to enhance stockholder value. The Compensation
Committee makes decisions each year regarding executive compensation, including
annual base salaries, bonus awards, stock option grants and restricted stock
awards. Stock option grants and restricted stock awards are key components of
the executive compensation program and are intended to provide executives with
an equity interest in the Company so as to link a meaningful portion of the
compensation of the Company's executives with the performance of the Company's
Common Stock. This report is submitted by the Compensation Committee and
addresses the compensation policies for fiscal 1996 as they affected Dr. Selden,
in his capacity as President and Chief Executive Officer of the Company, and the
two executive officers other than Dr. Selden who, for 1996, were the only other
executive officers whose combined salary and bonus exceeded $100,000.
Compensation Philosophy
The Company's executive compensation philosophy is based on the belief that
competitive compensation is essential to attract, motivate and retain highly
qualified and industrious employees. The Company's policy is to provide total
compensation that is competitive for comparable work and comparable corporate
performance. The compensation program includes both motivational and
retention-related compensation components. Bonuses are included to encourage
effective performance relative to current plans and objectives. Stock options
are included to help retain productive people and to more closely align their
interests with those of stockholders.
In executing its compensation policy, the Company seeks to relate
compensation with the Company's financial performance and business objectives,
reward high levels of individual performance and tie a significant portion of
total executive compensation to both the annual and long term performance of the
Company. While compensation survey data are useful guides for comparative
purposes, the Company believes that a successful compensation program also
requires the application of judgment and subjective determinations of individual
performance, and to that extent the Compensation Committee applies judgment in
reconciling the program's objectives with the realities of retaining valued
employees.
9
<PAGE> 12
Executive Compensation Program
Annual compensation for the Company's executives consists of three
principal elements: base salary, cash bonus and stock options and restricted
stock awards.
Base Salary and Cash Bonus
In setting the annual base salaries for the Company's executives, the
Compensation Committee reviews the aggregate salary and bonus compensation
for individuals in comparable positions with other companies, including
competitors of the Company, and adjusts such amounts to reflect individual
performance. Many of these companies are biotechnology and pharmaceutical
companies, some of which are engaged in the research, development,
manufacture and sale of therapeutic proteins. The Company also regularly
compares the salary levels of its executive officers with other leading
companies through reviews of survey and proxy statement data.
Increases in annual base salary are based on a review and evaluation
of the performance of the department or activity for which the executive
has responsibility, the impact of that department or activity on the
Company and the skills and experience required for the job, coupled with a
comparison of these elements with similar elements for other executives
both inside and outside the Company.
Cash bonuses are tied directly to the Company's financial performance
and the contribution of the executive to such performance.
Equity Ownership
Executive officer compensation also includes long-term incentives
afforded by options to purchase shares of Common Stock and restricted stock
awards. The purposes of the Company's stock ownership program are to (i)
highlight and reinforce the mutuality of long-term interests between
employees and the stockholders and (ii) to assist in the attraction and
retention of critically important key executives, managers and individual
contributors who are essential to the Company's growth and development.
The Company's stock programs include long vesting periods to optimize
the retention value of these options and to orient the Company's executive
officers to longer term success. Generally, stock options vest in equal
annual installments over six years commencing on the first anniversary of
the date of grant, and, if employees leave the Company before these vesting
periods, they forfeit the unvested portions of these awards. While the
Company believes that these longer vesting periods are in the best interest
of stockholders, they may result in an increased number of outstanding
options compared to companies with shorter vesting schedules.
The number of shares of Common Stock subject to stock options grants
is generally intended to reflect the significance of the executive's
current and anticipated contributions to the Company. Until November 1996
the exercise price of options granted by the Company was $.01 per share.
Since then, the exercise price of options granted by the Company has been
determined at the discretion of the Compensation Committee, although it has
generally been set at 100% of the fair market value per share on the date
of grant. Prior to determining the January 1996 option grants to the
Company's executives, the Compensation Committee considered the equity
compensation policies of competitors and other companies, both privately
held and publicly traded, with comparable capitalizations. The value
realizable from exercisable options is dependent upon the extent to which
the Company's performance is reflected in the price of the Company's Common
Stock at any particular point in time. However, the decision as to whether
such value will be realized through the exercise of an option in any
particular year is primarily determined by each individual within the
limits of the vesting schedule and not by the Compensation Committee.
10
<PAGE> 13
DR. SELDEN'S 1996 COMPENSATION
The Compensation Committee has set Dr. Selden's total annual compensation,
including compensation derived from the Company's cash bonus and stock option
programs, at a level it believes to be competitive with the chief executive
officers of similarly capitalized biotechnology and pharmaceutical companies.
Dr. Selden, in his capacity as President and Chief Executive Officer, is
eligible to participate in the same executive compensation program available to
the Company's other senior executives.
During fiscal 1996, Dr. Selden's annual base salary was increased $10,000
from $200,000 to $210,000. He was awarded a fiscal 1996 bonus of $100,000, which
was based primarily upon the successful achievement of milestones under the
license agreements with Hoechst Marion Roussel, Inc., the successful completion
of a private equity investment, and the successful completion of the Company's
initial public offering.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Code, enacted in 1993, generally disallows a tax
deduction to public companies for compensation over $1 million paid to its chief
executive officer and its four other most highly compensated executive officers.
However, qualifying performance-based compensation will not be subject to the
deduction limit if certain requirements are met. The Company currently intends
to structure its stock options grants to executive officers in a manner that
complies with these performance-based requirements.
COMPENSATION COMMITTEE
William R. Miller
Rodman W. Moorhead, III
COMPENSATION COMMITTEE AND INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Miller and Moorhead.
No executive officer of the Company is a member of the Compensation Committee.
11
<PAGE> 14
STOCK PERFORMANCE GRAPH
The following graph compares cumulative total stockholder return on the
Company's Common Stock since October 17, 1996, the date of the Company's initial
public offering, with the cumulative total return for the Nasdaq Composite Index
and the Nasdaq Pharmaceutical Index. This graph assumes the investment of $100
on October 17, 1996 in the Company's Common Stock, the Nasdaq Composite Index
and the Nasdaq Pharmaceutical Index and assumes dividends are reinvested.
<TABLE>
<CAPTION>
Measurement Period Transkaryotic Nasdaq Composite- Nasdaq
(Fiscal Year Covered) Therapies, Inc. -U.S. Pharmaceutical
<S> <C> <C> <C>
10/17/96 100.00 100.00 100.00
10/31/96 100.00 97.57 98.74
11/30/96 120.00 103.65 97.22
12/31/96 126.67 103.41 100.25
</TABLE>
OTHER INFORMATION
ACCOUNTING MATTERS
The Board of Directors has selected the independent accounting firm of
Ernst & Young LLP to audit the accounts of the Company for the year ended
December 31, 1997.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting. They will have the opportunity to make a statement if they
desire to do so and will also be available to respond to appropriate questions
from stockholders.
OTHER MATTERS
Management does not know of any other matters which may come before the
meeting. However, if any other matters are properly presented to the meeting, it
is the intention of persons named in the accompanying proxy to vote, or
otherwise act, in accordance with their judgment on such matters.
12
<PAGE> 15
All costs of solicitations of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting material to the owners of stock held in
their names, and the Company will reimburse them for their out-of-pocket
expenses in this connection.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Cambridge, Massachusetts not later than December 31, 1997 for inclusion in
the proxy statement for that meeting.
By Order of the Board of Directors,
James E. Thomas, Secretary
April 30, 1997
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING. WHETHER
OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY OR VOTING INSTRUCTION CARD IN THE ACCOMPANYING ENVELOPE. PROMPT
RESPONSE WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR
COOPERATION WILL BE APPRECIATED.
13
<PAGE> 16
DETACH HERE
TRANSKARYOTIC THERAPIES, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 12, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P OF THE COMPANY AND SHOULD BE RETURNED AS SOON AS POSSIBLE TO
THE FIRST NATIONAL BANK OF BOSTON, C/O BOSTON EQUISERVE,
R PROXY SERVICES, P.O. BOX 9379,
BOSTON, MASSACHUSETTS 02205-9954.
O
The undersigned, having received notice of the meeting and management's
X proxy statement therefor, and revoking all prior proxies, hereby appoint(s)
Richard F Selden and James E. Thomas, and each of them, attorneys or
Y attorney of the undersigned (with full power of substitution in them and
each of them) for and in the name(s) of the undersigned to attend the
Annual Meeting of Stockholders of TRANSKARYOTIC THERAPIES, INC. (the
"Company") to be held at The Royal Sonesta Hotel, 5 Cambridge Parkway,
Cambridge, Massachusetts 02142 on Thursday, June 12, 1997 at 10:00 a.m.
Eastern Standard Time, and any adjourned sessions thereof, and there to vote
and act upon the following matters in respect of all shares of stock of the
Company which the undersigned will be entitled to vote or act upon, with
all the powers the undersigned would possess if personally present.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
The proxy when properly executed will be voted in the manner described
herein by the undersigned stockholder. THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH
RESPECT TO ANY PROPOSAL, THIS PROXY WILL BE VOTED FOR SUCH PROPOSAL.
Attendance of the undersigned at the meeting or at any adjournment thereof
will not be deemed to revoke this proxy unless the undersigned shall
revoke this proxy in writing.
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
<PAGE> 17
DETACH HERE
[X] Please mark
votes as in
this example.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THIS PROXY IN THE ACCOMPANYING ENVELOPE.
1. To elect the following Directors (except as marked below):
Nominees: William R. Miller, Rodman W. Moorhead, III,
Richard F Selden, James E. Thomas and Peter Wirth.
[ ] FOR ALL NOMINEES [ ] WITHHELD FROM ALL NOMINEES
[ ] ________________________________________________________
(Instruction: To vote against an individual nominee,
write the name of such nominee(s) in the space
provided above.)
2. To transact such other business as may properly come before the meeting or
any adjournment thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
MARK HERE [ ] MARK HERE [ ]
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
OWNERS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
Signature: _______________ Date: ______ Signature: _______________ Date: ______
