<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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
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)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
TRANSKARYOTIC THERAPIES, INC.
195 ALBANY STREET
CAMBRIDGE, MASSACHUSETTS 02139
(617) 349-0200
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1998
---------------------
The Annual Meeting of Stockholders of Transkaryotic Therapies, Inc. (the
"Company") will be held at the offices of Hale and Dorr LLP, 60 State Street,
Boston, Massachusetts on Tuesday, May 19, 1998 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 1999 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 March 23, 1998 will be
entitled to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors,
Daniel E. Geffken, SECRETARY
Cambridge, Massachusetts
April 15, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY
IS MAILED IN THE UNITED STATES.
<PAGE>
TRANSKARYOTIC THERAPIES, INC.
195 ALBANY STREET
CAMBRIDGE, MASSACHUSETTS 02139
------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1998
------------------------
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 of the Company to be
held on May 19, 1998 (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. If no choice is specified, proxies will be voted in
favor of the matters set forth in the accompanying Notice of Meeting. Any proxy
may be revoked by a stockholder at any time before its exercise by delivery of a
written revocation or a subsequently dated proxy to the Secretary of the Company
or by voting in person at the Annual Meeting.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED PROXY AND THE
COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1997 ARE
BEING MAILED TO STOCKHOLDERS ON OR ABOUT APRIL 15, 1998. THE COMPANY WILL, UPON
WRITTEN REQUEST OF ANY STOCKHOLDER, FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC"). PLEASE ADDRESS ALL SUCH REQUESTS
TO THE COMPANY, ATTENTION OF DIRECTOR, CORPORATE COMMUNICATIONS, 195 ALBANY
STREET, CAMBRIDGE, MASSACHUSETTS 02139.
VOTING SECURITIES AND VOTES REQUIRED
On March 23, 1998, 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 19,023,792 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 and voting at the meeting is required for the
election of directors.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of January 31, 1998,
regarding the ownership of the Company's Common Stock by (i) persons known by
the Company to own more than 5% of the outstanding shares, (ii) each of the
directors of the Company, (iii) each of the executive officers of the Company
named in the Summary Compensation Table and (iv) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES OF
COMMON PERCENTAGE OF
STOCK COMMON
BENEFICIALLY STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OUTSTANDING(2)
- ------------------------------------------------------------------------------------- ----------- -----------------
<S> <C> <C>
Warburg, Pincus Capital Company, L.P................................................. 4,349,152(3) 22.9%
c/o E. M. Warburg, Pincus & Co. LLC
466 Lexington Avenue, 10th Floor
New York, NY 10017-3147
Biotech Target S.A................................................................... 2,399,500(4) 12.7%
c/o BB Biotech AG
Vordergasse 3
8200 Schaffhausen
CH/Switzerland
Hoechst Marion Roussel, Inc.......................................................... 2,187,408(5) 11.6%
9300 Ward Parkway
Kansas City, MO 64114-1405
Putnam Investments, Inc.............................................................. 1,599,372(6) 8.4%
One Post Office Square
Boston, MA 02109
Christoph M. Adams, Ph.D............................................................. 36,927(7) *
Daniel E. Geffken.................................................................... 35,000(8) *
Kurt C. Gunter, M.D.................................................................. 27,814(9) *
William R. Miller.................................................................... 38,928(10) *
Rodman W. Moorhead, III.............................................................. 4,349,152(11) 22.9%
Richard F Selden, M.D., Ph.D......................................................... 749,731(12) 3.9%
James E. Thomas...................................................................... 4,349,152(11) 22.9%
Douglas A. Treco, Ph.D............................................................... 244,975(13) 1.3%
Peter Wirth.......................................................................... 5,000(14) *
All directors and executive officers as a group (9 individuals)...................... 5,487,527(15) 28.5%
</TABLE>
- ------------------------
* Percentage is less than 1% of the total number of outstanding shares of
Common Stock of the Company.
(1) The number of shares beneficially owned by each director or executive
officer is determined under rules of the SEC, and the 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
January 31, 1998 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
2
<PAGE>
inclusion herein of any shares deemed beneficially owned does not constitute
an admission of beneficial ownership of such shares.
(2) Number of shares deemed outstanding includes 18,935,847 shares outstanding
as of January 31, 1998, plus any shares subject to issuance upon exercise of
options held by the person or entity in question that were exercisable on or
exercisable within 60 days after January 31, 1998.
(3) 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
("EMWP"), manages Warburg. The members of EMWP are substantially the same as
the partners of WP. Lionel I. Pincus is the managing partner of WP and the
managing member of EMWP and may be deemed to control both WP and EMWP. WP,
as the sole general partner of Warburg, has a 20% interest in the profits of
Warburg. Rodman W. Moorhead, III, and James E. Thomas, directors of the
Company, are Managing Directors and members of EMWP and are 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. The information presented herein is as
reported in, and based in part upon, a Schedule 13G filed with the SEC by
Warburg, WP and EMWP on February 13, 1997. Each of Warburg, WP and EMWP
reported beneficial ownership of and sole voting and dispositive power with
respect to all of the shares listed as beneficially owned. 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").
(4) The information presented herein is as reported in, and based solely upon, a
Schedule 13D/A filed with the SEC on January 5, 1998 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
the shares listed as beneficially owned. These stockholders may be deemed to
be a group for purposes of Rule 13d-3 promulgated under the Exchange Act.
(5) The information presented herein is as reported in, and based in part upon,
a Schedule 13D/A filed with the SEC on January 9, 1997 by Hoechst Marion
Roussel, Inc., a Delaware corporation ("HMRI"), and HMR Pharma, Inc., a
Delaware corporation ("HMR Pharma"). HMR Pharma, a wholly owned subsidiary
of Hoechst Aktiengesellschaft, a German corporation, 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 the shares
listed as beneficially owned. 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.
(6) The information presented herein is as reported in, and based solely upon, a
Schedule 13G filed with the SEC on January 21, 1998 by Marsh & McLennan
Companies, a Delaware corporation ("M&MC"), Putnam Investments, Inc., a
Massachusetts corporation ("PI"), Putnam Investment Management, Inc., a
Massachusetts corporation ("PIM") and The Putnam Advisory Company, Inc., a
Massachusetts corporation ("PAC"). PI, which is a wholly-owned subsidiary of
M&MC, wholly owns PIM and PAC, each a registered investment adviser. PIM is
the investment adviser to the Putnam family of mutual funds, in which
capacity it has shared dispositive power with respect to 1,538,572
3
<PAGE>
shares of Common Stock. PAC is the investment adviser to PI's institutional
clients, in which capacity it has shared dispositive power with respect to
60,800 shares of Common Stock and shared voting power with respect to 36,400
shares of Common Stock. PI and M&MC disclaim beneficial ownership of all of
the shares listed as beneficially owned.
(7) Consists of 36,927 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1993 Long-Term
Incentive Plan.
(8) Consists of 35,000 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1993 Long-Term
Incentive Plan.
(9) Includes 27,714 shares of Common Stock issuable upon exercise of outstanding
stock options granted under the Company's 1993 Long-Term Incentive Plan.
(10) Includes 10,000 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1993 Long-Term
Incentive Plan.
(11) 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 (3) above.
(12) Includes 92,856 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1993 Long-Term
Incentive Plan.
(13) Includes 48,571 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1993 Long-Term
Incentive Plan.
(14) Consists of 5,000 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1993 Long-Term
Incentive Plan.
(15) Includes 256,068 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1993 Long-Term
Incentive Plan.
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.
At each meeting of the Company's stockholders at which directors are to be
elected, the Company has 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 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%, 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 (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 to that effect. Each nominee is
presently
4
<PAGE>
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, as of January 31, 1998, appears under "Security
Ownership of Certain Beneficial Owners and Management."
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
WILLIAM R. MILLER, age 69, 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 Company, which position he had held since 1985. Mr. Miller
is the Chairman of the Board of Directors of Vion Pharmaceuticals, Inc. and
SIBIA Neurosciences, Inc., a director of ImClone Systems, Inc., ISIS
Pharmaceuticals, Inc., St. Jude Medical, Inc., Westvaco Corporation and Xomed
Surgical Products, Inc., and serves as Vice Chairman of the Board of Directors
of Cold Spring Harbor Laboratory.
RODMAN W. MOORHEAD, III, age 54, has served as Chairman of the Board of
Directors since May 1992. Since 1973, he has been with E.M. Warburg, Pincus &
Co. LLC, a specialized financial services firm, where he currently serves as a
Senior Managing Director. He is also a director of NeXstar Pharmaceuticals,
Inc., Xomed Surgical Products, Inc., Coventry Corporation and a number of
privately held companies.
RICHARD F SELDEN, M.D., PH.D., age 39, 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.
JAMES E. THOMAS, age 37, has served as a Director and Secretary of the
Company since May 1992. Mr. Thomas has served as a Managing Director of E.M.
Warburg, Pincus & Co. LLC 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 47, 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 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.
5
<PAGE>
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 auditors. The Audit Committee met two times during
fiscal 1997 to review the effectiveness of the Company's public auditors during
the fiscal 1996 audit, to review the adequacy of the fiscal 1996 financial
statement disclosures, to review the 1997 audit plan, to discuss the Company's
internal control policies and procedures and to consider and recommend the
selection of the Company's independent public auditors. 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 1997. The members of the Compensation
Committee are Messrs. Miller and Moorhead. See "Report of the Compensation
Committee."
The Company does not have a nominating committee or a committee serving a
similar function. Nominations are made by and through the full Board of
Directors.
The Board of Directors held five meetings during fiscal 1997. 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, and at each annual meeting of stockholders. For the fiscal
year ending December 31, 1997, Mr. Miller earned $5,000 in director's fees.
Pursuant to the terms of an agreement with the Company, Mr. Wirth received
$50,000 for consulting services rendered to the Company during the fiscal year
ended December 31, 1997. 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 first business day 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 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
6
<PAGE>
to be eligible to retain options previously granted under the 1993 Directors'
Plan. The annual option grant under the Directors' Plan is to purchase 6,750
shares of Common Stock at an exercise price per share equal to the fair market
value on the date of grant.
As of January 31, 1998, 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 was 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
In May 1991, Richard F Selden, the President and Chief Executive Officer of
the Company, issued to the Company a promissory note in the principal amount of
$125,000 (the "Note"). As amended in June 1993, interest accrues on the
outstanding principal balance at a rate equal to one percent above the average
yield for one-year United States Treasury Bills (approximately 6.48% during the
year ended December 31, 1997) and is due and payable in arrears. The Board of
Directors has deferred the payment of outstanding principal and interest accrued
thereon since 1992. At December 31, 1997 and March 31, 1998 the outstanding
principal balance and interest accrued thereon was $146,584 and $148,320,
respectively. Dr. Selden has pledged 2,500 shares of the Company's Common Stock
to the Company to secure his obligations under the Note.
The Company is a party to license agreements with HMRI, whereby HMRI was
granted exclusive rights to make, use and sell, worldwide, two therapeutic
products produced under patent rights and technologies owned by the Company (the
"License Agreements"). The License Agreements provide for fees and milestone
payments to be paid by HMRI to the Company. During the fiscal year ended
December 31, 1997, HMRI paid $5,788,000 to the Company under the License
Agreements.
On September 23, 1996, the Company entered into an Agreement to Nominate
with 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
relating to its initial public offering, 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%, 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.
The Company is a party to a three year consulting agreement, dated November
1, 1996, with Peter Wirth, a director of the Company (the "Consulting
Agreement"), 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, which
option vests in three equal annual installments of 5,000 shares 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.
7
<PAGE>
In July 1997, in connection with a registered offering of an aggregate of
1,700,000 shares of Common Stock, the Company sold 500,000 shares of Common
Stock, at a price of $32.50 per share, to Biotech Target, a stockholder of the
Company, pursuant to the terms of a Purchase Agreement.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The table below sets forth certain compensation
information for the Chief Executive Officer of the Company and the four other
most highly compensated executive officers of the Company whose salary and bonus
for the fiscal year ended December 31, 1997 exceeded $100,000 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -----------------------
-------------------------------------- RESTRICTED
OTHER ANNUAL STOCK SECURITIES
COMPENSATION AWARDS UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) ($)(2) ($)(3) OPTIONS(#)
- -------------------------------------------------- ---- --------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard F Selden, M.D., Ph.D...................... 1997 $240,000 $135,000 -- -- --
President and Chief Executive Officer 1996 210,000 100,000 -- -- 128,571
1995 200,000 86,000 -- -- --
Douglas A. Treco, Ph.D............................ 1997 175,000 60,000 -- -- --
Senior Vice President, Research and Development 1996 152,000 30,000 -- -- 25,714
1995 134,000 30,000 -- -- --
Christoph M. Adams, Ph.D.......................... 1997 160,000 15,000 -- -- --
Vice President, Business Development 1996 152,000 6,000 -- -- 6,429
1995 142,000 17,500 $ 17,263(5) -- --
Daniel E. Geffken................................. 1997 146,244(6) 50,000 -- -- 100,000
Vice President, Finance and Chief Financial
Officer
Kurt C. Gunter, M.D............................... 1997 150,000 40,000 36,281(8) -- --
Vice President, Clinical and Regulatory Affairs 1996 63,654(7) 35,000 115,686(8) -- 64,286
<CAPTION>
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION ($)(4)
- -------------------------------------------------- ------------
<S> <C>
Richard F Selden, M.D., Ph.D...................... $ 4,945
President and Chief Executive Officer 3,945
4,659
Douglas A. Treco, Ph.D............................ 3,810
Senior Vice President, Research and Development 3,945
3,125
Christoph M. Adams, Ph.D.......................... 5,096
Vice President, Business Development 4,096
3,930
Daniel E. Geffken................................. 3,274
Vice President, Finance and Chief Financial
Officer
Kurt C. Gunter, M.D............................... 4,533
Vice President, Clinical and Regulatory Affairs 15,173(7)
</TABLE>
- ------------------------
(1) Bonuses indicated as earned in any fiscal year were generally paid in
January of the following fiscal year.
(2) In accordance with the rules of the SEC, Other Annual 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 fiscal
year indicated.
(3) No shares of restricted stock were awarded in the years ended December 31,
1997, 1996 and 1995. As of December 31, 1997, Dr. Treco held an aggregate of
11,572 shares of unvested restricted stock valued at $406,467. The value of
the restricted stock held by Dr. Treco at December 31, 1997 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, 1997 ($35.125) by
the number of shares held and subtracting the aggregate purchase price paid
by Dr. Treco for such shares. No dividends were paid in 1997, 1996 or 1995
on the outstanding shares of restricted stock.
(4) All Other Compensation includes the following: (a) the Company's
contributions for Drs. Selden, Treco and Adams, Mr. Geffken and Dr. Gunter
under the Company's 401(k) Plan in the amounts of $4,750, $3,464, $4,750,
$2,975 and $4,188, respectively, for fiscal 1997; and (b) the taxable
portion of group term life insurance premiums paid by the Company for
8
<PAGE>
Drs. Selden, Treco and Adams, Mr. Geffken and Dr. Gunter in the amounts of
$195, $346, $346, $299 and $345, respectively, for fiscal 1997.
(5) Other Annual Compensation consists of $10,082 for relocation expenses paid
to Dr. Adams and $7,181 for reimbursement of the related tax liability for
such relocation expenses.
(6) Mr. Geffken commenced employment with the Company in February 1997.
(7) Dr. Gunter commenced employment with the Company in July 1996. All Other
Compensation for 1996 includes the payment of $15,000 to Dr. Gunter in his
capacity as a consultant to the Company prior to his commencing employment.
(8) Other Annual Compensation consists of $19,229 and $61,314, in 1997 and 1996,
respectively, for relocation expenses paid to Dr. Gunter and $17,052 and
$54,372, in 1997 and 1996, respectively, for reimbursement of the related
tax liability for such relocation expenses.
OPTION GRANT TABLE. The following table sets forth certain information
regarding options granted during the fiscal year ended December 31, 1997 by the
Company to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
-------------------------------------------------------- ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED (#) FISCAL YEAR(2) ($/SHARE) DATE 5%($) 10%($)
- ------------------------------------------- ----------- --------------- ------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard F Selden, M.D., Ph.D. ............. -- -- -- -- -- --
Douglas A. Treco, Ph.D. ................... -- -- -- -- -- --
Christoph M. Adams, Ph.D. ................. -- -- -- -- -- --
Daniel E. Geffken.......................... 100,000(3) 43% $ 18.00 2/20/07 $1,132,010 $2,868,736
Kurt C. Gunter, M.D. ...................... -- -- -- -- -- --
</TABLE>
- ------------------------
(1) Potential realizable value is based on an assumption that the market price
of the stock will appreciate at the stated rate, compounded annually, from
the date of grant until the end of the 10-year term. These values are
calculated based on rules promulgated by the SEC and do not reflect the
Company's estimate or projection of future stock prices. Actual gains, if
any, on stock option exercises will be dependent upon the future performance
of the price of the Company's Common Stock, which will benefit all
stockholders proportionately.
(2) Calculated based on an aggregate of 233,858 options granted under the
Company's 1993 Long-Term Incentive Plan to employees during the fiscal year
ended December 31, 1997.
(3) This option was granted under the Company's 1993 Long-Term Incentive Plan.
Of the shares subject to this option, 10,000 shares vested immediately upon
grant and the remaining 90,000 shares vest in six equal annual installments
of 15,000 shares commencing on the first anniversary of the date of grant.
9
<PAGE>
OPTION EXERCISES AND YEAR-END VALUES. The following table sets forth
certain information concerning option exercises by Named Executive Officers
during the fiscal year ended December 31, 1997 and exercisable and unexercisable
stock options held by the Named Executive Officers as of December 31, 1997:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS
VALUE UNEXERCISED OPTIONS AT FISCAL
SHARES ACQUIRED REALIZED AT FISCAL YEAR-END(#) YEAR-END($)(2)
NAME ON EXERCISE (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------ ----------------- -------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Richard F Selden, M.D., Ph.D........ -- -- 21,428/107,143 $752,444/$3,762,326
Douglas A. Treco, Ph.D.............. -- -- 4,285/ 21,429 150,468/ 752,479
Christoph M. Adams, Ph.D............ 4,500 $ 130,653 22,285/ 31,073 782,538/ 1,091,128
Daniel E. Geffken................... 10,000 210,000 0/ 90,000 0/ 1,541,250
Kurt C. Gunter, M.D. ............... 3,000 103,387 7,714/ 53,572 270,877/ 1,881,181
</TABLE>
- ------------------------
(1) Value Realized represents the difference between the aggregate exercise
price of the option and the aggregate sale price of the underlying Common
Stock.
(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, 1997 ($35.125) and the exercise
price of the option, multiplied by the number of shares subject to the
option.
EMPLOYMENT AGREEMENTS
The Company is a party to employment agreements with each of the Named
Executive Officers. Each employment agreement contains provisions for
establishing the annual base salary and bonus for each such executive officer.
Pursuant to the terms of the employment agreements, the 1998 annual base salary
for each of Drs. Selden, Treco and Adams, Mr. Geffken and Dr. Gunter has been
established at $275,000, $220,000, $168,000, $190,000 and $165,000,
respectively. In addition, each of the Named Executive Officers are eligible to
receive an annual bonus based upon the achievement of individual and Company
goals. The employment agreements may be terminated by the executive or by the
Company. Under the terms of each such employment agreement, if the Company
terminates the executive's employment without cause (as defined therein), or, in
some cases, if the executive terminates his employment for certain reasons, the
Company is required to pay to such executive severance payments at the
executive's base salary rate for 12 months (18 months in the case of Dr. Selden)
(the "Severance Period"), to be reduced by an amount equal to the amount of any
other compensation earned by such individual during such Severance Period.
Certain of the employment agreements also provide for payments to be made to the
executive in the event of cessation of employment as a result of a disability.
Under each of the employment agreements, the executive shall be bound by certain
non-compete obligations for two years after termination of employment (one year
if the Company terminates such executive's employment other than for cause).
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
10
<PAGE>
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
1997 as they affected Dr. Selden, in his capacity as President and Chief
Executive Officer of the Company, and the Named Executive Officers.
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.
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 achievement of its goals and
objectives and the contribution of the executive to such achievements.
11
<PAGE>
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.
The number of shares of Common Stock subject to stock option grants is
generally intended to reflect the significance of the executive's current and
anticipated contributions to the Company. Since November 1996, 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. 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.
CHIEF EXECUTIVE OFFICER 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 1997, Dr. Selden's annual base salary was increased $30,000,
from $210,000 to $240,000. For fiscal 1998, Dr. Selden's base salary has been
set at $275,000. For fiscal 1997, Dr. Selden was also awarded a bonus of
$135,000 and, in January 1998, was granted an option to purchase 50,000 shares
of Common Stock at the then fair market value of $31.75 per share, which
compensation was based primarily upon advances in the Company's product
pipeline, the successful completion of a follow-on public offering of Common
Stock and the issuance of several patents to the Company.
12
<PAGE>
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended, 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 option 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 member of the Compensation Committee was at any time during 1997, or
formerly, an officer or employee of the Company or any subsidiary of the
Company. No executive officer of the Company has served as a director or member
of the Compensation Committee (or other committee serving an equivalent
function) of any other entity, one of whose executive officers served as a
director of or member of the Compensation Committee of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed by individuals
required to make filings ("Reporting Persons") pursuant to Section 16(a) of the
Exchange Act or written representations from certain Reporting Persons that no
Form 5 filing was required for such persons, the Company believes that during
fiscal 1997 all filings required to be made by its Reporting Persons were timely
made in accordance with the requirements of the Exchange Act.
13
<PAGE>
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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TRANSKARYOTIC THERAPIES,
INC. NASDAQ COMPOSITE--U.S. NASDAQ PHARMACEUTICAL
<S> <C> <C> <C>
10/17/96 $100 $100 $100
12/31/96 $123 $104 $100
12/31/97 $234 $127 $103
</TABLE>
<TABLE>
<CAPTION>
10/17/96 12/31/96 12/31/97
----------- ----------- -----------
<S> <C> <C> <C>
Transkaryotic Therapies, Inc........................................................ $ 100 $ 123 $ 234
Nasdaq Composite -- U.S............................................................. 100 104 127
Nasdaq Pharmaceutical............................................................... 100 100 103
</TABLE>
14
<PAGE>
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,
1998.
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.
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 1999 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Cambridge, Massachusetts not later than December 16, 1998 for inclusion in
the proxy statement for that meeting.
By Order of the Board of Directors,
Daniel E. Geffken, SECRETARY
April 15, 1998
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 IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED.
15
<PAGE>
TRANSKARYOTIC THERAPIES, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
To be held on May 19, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, revoking all prior proxies, hereby appoints Richard F
Selden and James E. Thomas, and each of them, with full power of substitution,
as Proxies to represent and vote as designated hereon all shares of stock of
Transkaryotic Therapies, Inc. (the "Company") which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders of
the Company to be held on Tuesday, May 19, 1998, at 10:00 a.m., Boston Time, at
the offices of Hale and Dorr LLP, 26th Floor, 60 State Street, Boston,
Massachusetts and at any adjournment thereof, with respect to the matters set
forth on the reverse side hereof.
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED RETURN ENVELOPE.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE>
DETACH HERE
X Please mark votes as in this example.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL
DIRECTOR NOMINEES.
1. To elect the following Directors for the ensuing year.
Nominees: William R. Miller, Rodman W. Moorhead, III, Richard F Selden, James
E. Thomas and Peter Wirth
____For ____Withheld
_____________________________
For all nominess except as noted above
MARK HERE IF YOU PLAN TO ATTEND THE MEETING _____
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW _____
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
Please sign exactly as name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. When signing as an
executor, administrator, trustee, guardian, or attorney, please give full
title as such. If a corporation, please give full corporate name by an
authorized officer. If a partnership, please sign in full partnership name
by an authorized person.
Signature:_______________________ Date:___________________________
Signature:_______________________ Date:___________________________
