SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
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Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
Diacrin, Inc.
(Name of Registrant as Specified In Its Charter)
Diacrin, Inc.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-(6)i(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE>
Diacrin, Inc.
Building 96, 13th Street
Charlestown Navy Yard
Charlestown, MA 02129
Notice of 1999 Annual Meeting of Stockholders
To be Held on June 15, 1999
The Annual Meeting of Stockholders of Diacrin, Inc. (the "Company")
will be held at the offices of Hale and Dorr LLP, 60 State Street, 31st Floor,
Boston, MA 02109 on Tuesday, June 15, 1999 at 10:00 a.m., local time, to
consider and act upon the following matters:
1. To elect seven directors for a one-year term;
2. To ratify the selection of Arthur Andersen LLP as the Company's
independent auditors for fiscal 1999; and
3. 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 23, 1999 will
be entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of
Directors,
Steven D. Singer, Secretary
Charlestown, Massachusetts
April 30, 1999
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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 ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE
PROXY IS MAILED IN THE UNITED STATES.
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<PAGE>
Diacrin, Inc.
Proxy Statement for the 1999 Annual Meeting of Stockholders
To be Held on June 15, 1999
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Diacrin, Inc. (the "Company") for use at
the Annual Meeting of Stockholders to be held on June 15, 1999 and at any
adjournment of that meeting. All proxies will be voted in accordance with the
stockholders' instructions, and if no choice is specified, the 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.
At the close of business on April 23, 1999, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, there were
outstanding and entitled to vote 14,357,493 shares of Common Stock (constituting
all of the outstanding voting stock of the Company). Each share of Common Stock
entitles the holder to one vote.
The Company's Annual Report for 1998 was mailed to stockholders, along
with this Notice, Proxy Statement and Proxy, on or about April 30, 1999.
Votes Required
The affirmative vote of the holders of a plurality of the shares of
Common Stock present (either in person or by proxy) and entitled to vote is
required for the election of directors. The affirmative vote of the holders of a
majority of the shares of Common Stock present (either in person or by proxy)
and entitled to vote is required to ratify the selection of Arthur Andersen LLP
as the Company's independent auditors for the current year.
Shares of Common Stock represented in person or by proxy (including
shares which abstain or do not vote with respect to one or more of the matters
presented for stockholder approval), will be counted for purposes of determining
whether a quorum is present at the Annual Meeting. Abstentions will be treated
as shares that are present and entitled to vote for purposes of determining the
number of shares present and entitled to vote with respect to any particular
matter, but will not be counted as a vote in favor of such matter. Accordingly,
an abstention will have the same effect as a vote against the matter. If a
broker or nominee holding stock in "street name" indicates on the proxy that it
does not have discretionary authority to vote as to a particular matter, those
shares will not be considered as present and entitled to vote with respect to
matters requiring a majority of shares present and entitled to vote.
Accordingly, a "broker non-vote" on a matter has no effect on the voting of such
matter.
Principal Stockholders
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of March 31, 1999 by (i) each director
or nominee for director of the Company, (ii) each executive officer of the
Company named in the Summary Compensation Table set forth under the caption
"Executive Compensation" below, (iii) all current directors and executive
officers
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<PAGE>
as a group and (iv) each person known to the Company to be the
beneficial owner of more than 5% of the shares outstanding.
<TABLE>
<CAPTION>
Number of Shares Percentage of Outstanding
Beneficially Shares (2)
Name and Address Owned (1)
<S> <C> <C>
HealthCare Ventures II, L.P. 3,196,385(3) 22.3%
44 Nassau Street
Princeton, NJ 08542
HealthCare Ventures III, L.P. 994,078(3) 6.9%
44 Nassau Street
Princeton, NJ 08542
HealthCare Ventures IV, L.P. 291,922(3) 2.0%
44 Nassau Street
Princeton, NJ 08542
Rho Management Trust II 1,592,887(4) 11.0%
c/o Rho Management Company, Inc.
767 Fifth Avenue
New York, NY 10153
Hudson Trust 1,342,680(5) 9.4%
c/o Summit Asset Management Co., Inc.
666 Plainsboro Road
Suite 445
Plainsboro, NJ 08536
State of Wisconsin Investment Board 1,285,000(6) 8.6%
P. O. Box 7842
Madison, WI 53707
Thomas H. Fraser, Ph.D. 604,738(7) 4.2%
Zola P. Horovitz, Ph.D. 15,250(8) *
John W. Littlechild 4,482,385(3) 31.2%
Stelios Papadopoulos, Ph.D. 200,000 1.4%
Joshua Ruch 1,779,587(9) 12.4%
Henri A. Termeer 39,000(10) *
Christopher T. Walsh, Ph.D. 7,500(11) *
E. Michael Egan 124,164(12) *
Kevin Kerrigan 2,725(13) *
All directors and executive 7,255,349(14) 49.5%
officers as a group (9 persons)
- ----------------------------------------------------------
- ----------------------------------------------------------
* Less than 1%
</TABLE>
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<PAGE>
(1) The inclusion herein of any shares as beneficially owned does not
constitute an admission of beneficial ownership of those shares.
Unless otherwise indicated below, the persons in the above table have
sole voting and investment power with respect to all shares
beneficially owned by them.
(2) Number of shares deemed outstanding for purposes of calculating these
percentages includes 14,355,493 shares outstanding as of March 31,
1999, plus any shares subject to options or warrants held by the
person or entity in question that are currently exercisable or
exercisable within 60 days after March 31, 1999.
(3) John W. Littlechild is a general partner of HealthCare Partners II,
L.P. ("HCPII"), HealthCare Partners III, L.P. ("HCPIII") and
HealthCare Partners IV, L.P. ("HCPIV"), the general partner of
HealthCare Ventures II, L.P. ("HCVII"), HealthCare Ventures III, L.P.
("HCVIII") and HealthCare Ventures IV, L.P. ("HCVIV"), respectively.
Mr. Littlechild, together with James H. Cavanaugh, Harold R. Werner
and William Crouse, the other general partners of HCPII, share voting
and investment control with respect to shares owned by HCVII. Mr.
Littlechild, together with Dr. Cavanaugh, Messrs. Werner, Crouse and
Mark Leschly, the other general partners of HCPIII and HCPIV, share
voting and investment control with respect to shares owned by HCVIII
and HCVIV, respectively. Mr. Littlechild does not own any shares of
the Company's capital stock in his individual capacity.
(4) Rho Management Partners, L.P. may be deemed the beneficial owner of
such shares pursuant to an investment advisory agreement that confers
sole voting and investment control over such shares to Rho Management
Partners, L.P.
(5) Mr. B. Diethelm Honer may be deemed to (i) beneficially own the shares
held by Hudson Trust ("Hudson"), (ii) retain voting and dispositive
rights for these shares, and (iii) retain the right to revoke these
shares from Hudson.
(6) Includes Common Stock Purchase Warrants originally issued on February
12, 1996 ("Public Offering Warrants") to purchase 650,000 shares of
Common Stock.
(7) Includes 108,750 shares of Common Stock issuable upon exercise of
outstanding stock options exercisable within 60 days of March 31,
1999. Includes Public Offering Warrants to purchase 12,500 shares of
Common Stock.
(8) Includes 11,250 shares of Common Stock issuable upon exercise of
outstanding stock options exercisable within 60 days of March 31,
1999.
(9) Mr. Ruch is a controlling person of Rho Management Partners, L.P. and
may be deemed the beneficial owner of the shares held by Rho
Management Trust II. In addition, Mr. Ruch exercises investment and
voting authority over 186,700 shares directly for his own account, for
the account of family members or for the account of other clients of
Rho Management Partners, L.P.
(10) Includes 26,250 shares of Common Stock issuable upon exercise of
outstanding stock options exercisable within 60 days of March 31,
1999. Includes Public Offering Warrants to purchase 5,000 shares of
Common Stock.
(11) Includes 7,500 shares of Common Stock issuable upon exercise of
outstanding stock options exercisable within 60 days of March 31,
1999.
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<PAGE>
(12) Includes 119,995 shares of Common Stock issuable upon exercise of
outstanding stock options exercisable within 60 days of March 31,
1999.
(13) Includes 1,000 shares of Common Stock issuable upon exercise of
outstanding stock options exercisable within 60 days of March 31,
1999. Includes Public Offering Warrants to purchase 1,725 shares of
Common Stock.
(14) Includes 274,745 shares of Common Stock issuable upon exercise of
outstanding stock options exercisable within 60 days of March 31,
1999. Includes Public Offering Warrants to purchase 19,225 shares of
Common Stock.
PROPOSAL ONE: ELECTION OF DIRECTORS
The Company's By-Laws provide that the Board of Directors shall fix the
number of directors to constitute the Board. The Board of Directors has fixed
the number of directors at seven to serve until the 2000 Annual Meeting of
Stockholders. The persons named in the accompanying proxy will vote to elect the
seven nominees named in the table below as directors (unless authority to vote
for one or more of the persons named in the table below is specifically
withheld), to serve until the 2000 Annual Meeting of Stockholders and until
their successors are elected and qualified, or until their earlier death,
resignation or removal. All of the nominees have indicated their willingness to
serve, if elected, but if any should be unable or unwilling to serve, proxies
may be voted for a substitute nominee designated by the Board of Directors.
The following table sets forth, for each nominee for director of the
Company, his name and age, his positions with the Company, his principal
occupation and business experience during the past five years and the year of
the commencement of his term as a director of the Company.
<TABLE>
<CAPTION>
Year First Principal Occupation or
Became a Employment During Past Five
Name Age Director Years and Current Directorships
<S> <C> <C> <C>
Thomas H. Fraser, Ph.D. 51 1990 President, Chief Executive Officer and
Director of the Company since 1990.
Zola P. Horovitz, Ph.D. 64 1994 Vice President, Business Development and
Planning from 1991 to 1994 of Bristol-Myers
Squibb Pharmaceutical Group; Chairman of the
Board of Directors of Magainin
Pharmaceuticals. Also Director of Avigen
Inc., BioCryst Pharmaceuticals, Clinicor,
Roberts Pharmaceuticals, Procept, Inc., and
Synaptic Pharmaceuticals, Inc., all
biotechnology companies.
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<PAGE>
Year First Principal Occupation or
Became a Employment During Past Five
Name Age Director Years and Current Directorships
John W. Littlechild 47 1992 Principal, HealthCare Ventures LLC ("HCV"),
a venture capital management company,
since 1992; Director of Orthofix
International N.V., a medical devices
company, and Director of Avant
Immunotherapeutics, a biotechnology
company.
Stelios Papadopoulos, Ph.D. 50 1991 Chairman of PaineWebber Development
Corporation, a subsidiary of PaineWebber
Incorporated ("PaineWebber"), which is
engaged in investment banking and securities
brokerage. Dr. Papadopoulos joined
PaineWebber in 1987.
Joshua Ruch 49 1998 Chairman and CEO of Rho Management Company,
Inc., an investment advisory firm with which
he has been affiliated since 1981.
Henri A. Termeer 53 1996 President and Director since 1983, Chief
Executive Officer since 1985 and Chairman of
the Board of Directors since 1988 of Genzyme
Corporation; Director of Abiomed, Inc.,
AutoImmune Inc., GelTex Pharmaceuticals
Inc., and Genzyme Transgenics Corporation,
all biotechnology companies and, a trustee
of Hambrecht & Quist Healthcare Investors
and of Hambrecht & Quist Life Sciences
Investors.
Christopher T. Walsh, Ph.D. 55 1997 Professor of Biological Chemistry and
Molecular Pharmacology at Harvard Medical
School since 1987 and Chair of that
department from 1987 to 1995; President of
the Dana-Farber Cancer Institute from 1992
to 1995; Director of LeukoSite, Inc., a
biotechnology company.
</TABLE>
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<PAGE>
Meetings of Board of Directors and Committees
During 1998, the Board of Directors held six meetings. Each director
attended at least 75% of the aggregate of the number of Board meetings and the
number of meetings held by the committee on which he then served.
The Company has a Compensation Committee composed entirely of directors
who are not employees of the Company. The Committee provides recommendations to
the Board regarding compensation programs of the Company, administers the
Company's stock option plans and is authorized to grant stock options under such
plans to officers and directors of the Company. In addition, this Committee
approves the compensation paid to the President and Chief Executive Officer and
other executive officers of the Company. The Compensation Committee met once
during 1998. The current members of the Compensation Committee are Messrs.
Littlechild and Termeer and Dr. Papadopoulos.
The Company has an Audit and Finance Committee which provides the
opportunity for direct contact between the Company's independent auditors and
the Board, reviews the effectiveness of the auditors during the annual audit,
monitors the Company's internal accounting control policies and procedures,
oversees financial reporting to shareholders, oversees the ethical behavior of
management, and considers and recommends the selection of the Company's
independent auditors. The Audit and Finance Committee met two times during 1998.
The current members of the Audit and Finance Committee are Drs. Fraser,
Papadopoulos and Horovitz.
Directors' Compensation
Drs. Horovitz and Walsh each receive $2,000 plus expenses per board
meeting attended plus an additional $4,000 annually for consultative work
performed. No other directors receive any cash compensation for services on the
Board of Directors.
On June 15, 1998, Messrs. Littlechild, Ruch and Dr. Papadopoulos were
each granted an option to purchase 20,000 shares of Common Stock under the
Company's 1997 Stock Option Plan. In addition, Drs. Horovitz, Walsh and Mr.
Termeer were each granted an option to purchase 6,000 shares of Common Stock
under the 1997 Stock Option Plan. All grants were at an exercise price of $7.125
per share, which equaled fair market value on the date of grant, and may be
exercised on a cumulative basis as to 25% of the shares on the first anniversary
of the date of grant and an additional 25% at the end of each one-year period
thereafter.
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<PAGE>
Executive Compensation
Summary Compensation Table. The following table sets forth certain
information with respect to the annual and long-term compensation for each of
the last three fiscal years of the Company's Chief Executive Officer and the two
other executive officers of the Company during 1998 (the "Named Officers"):
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation (1)
Awards
-------------------------------------
Name and Securities Underlying
Principal Position Year Salary($)(2) Bonus($)(3) Options/SARS(#)
<S> <C> <C> <C> <C>
Thomas H. Fraser 1998 $ 250,000 $ 35,000 25,000
President and Chief 1997 240,000 45,000 50,000 (5)
Executive Officer 1996 230,400 55,000 --
E. Michael Egan 1998 180,000 25,000 20,000
Senior Vice President 1997 170,000 30,000 20,000
of Corporate Development 1996 150,000 36,000 20,000
Mark J. Fitzpatrick (4) 1998 102,000 4,000 --
Former Vice President 1997 100,000 11,000 15,000
of Finance and 1996 89,183 15,000 15,000
Administration and
Chief Financial Officer
</TABLE>
- ------------------------------
(1) The Company does not have a long-term compensation program that
includes long-term incentive payouts. No restricted stock awards or
stock appreciation rights were granted to any of the Named Officers
during fiscal 1998.
(2) Amounts shown include cash compensation earned and received by the
Named Officers as well as amounts earned but deferred at the election
of these officers to the Company's 401(k) Plan.
(3) Unless otherwise noted, amounts in this column represent bonuses paid
or accrued under the annual management bonus plan.
(4) Mr. Fitzpatrick was an executive officer of the Company from November
1996 until November 1998.
(5) Amount includes 20,000 options granted in 1997 in recognition of
fiscal 1996 performance.
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<PAGE>
Option Grants Table. The following table sets forth certain information
regarding options granted during the fiscal year ended December 31, 1998 to the
Named Officers:
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------
Number of Potential Realizable Value
Securities Percent of at Assumed Annual Rates of
Underlying Total Options Stock Price Appreciation for
Options Granted to Exercise or Option Term (2)
Granted (#) Employees in Base Price Expiration ------------------------------
Name (1) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
---- ------------ ----------- ------------ ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Thomas H. Fraser 25,000 13% $5.25 12/21/08 $74,926 $197,052
E. Michael Egan 20,000 11% $5.25 12/21/08 $59,940 $157,641
Mark J. Fitzpatrick 0 -- -- -- -- --
</TABLE>
(1) No stock appreciation rights were granted during fiscal 1998.
Options granted in 1998 become exercisable in four equal annual
installments, commencing 12 months after the date of grant.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term.
These gains are based on assumed rates of stock price appreciation
of 5% and 10% compounded annually from the date the respective
options were granted to their expiration date. Actual gains, if
any, on stock option exercises will depend on the future
performance of the Common Stock and the date on which the options
are exercised.
Aggregated Option Exercises and Year-End Option Table. The following
table sets forth certain information regarding aggregate option exercises during
the fiscal year ended December 31, 1998 and the number and value of unexercised
stock options held as of December 31, 1998 by the Named Officers:
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
FY-End (#) at FY-End ($) (2)
------------------- -----------------
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) (1) Unexercisable Unexercisable
---- ------------------ -------------- ----------------------- ------------------
<S> <C> <C> <C> <C>
Thomas H. Fraser 15,293 $122,992 108,750 / 63,750 $362,467 / $45,561
E. Michael Egan - - 119,995 / 52,500 466,967 / 47,795
Mark J. Fitzpatrick 2,017 11,865 25,775 / 0 80,016 / 0
</TABLE>
(1) Represents the difference between the exercise price and the value of
the Common Stock on the date of exercise.
(2) Based on the value of the Common Stock on December 31, 1998 ($5.938
per share), less the option exercise price.
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<PAGE>
Employment Agreements
Dr. Fraser has entered into an employment agreement with the Company,
dated February 6, 1990, providing for an annual salary plus bonus as determined
by the Board of Directors. The Company has agreed with Dr. Fraser to continue to
pay his then current salary for a period of six months if his employment is
terminated without cause by the Company. Dr. Fraser has also agreed not to
compete with the Company for one year following termination of his employment.
At the Company's election, this non-competition provision can be extended for an
additional two-year period upon the payment of additional consideration.
Report of the Compensation Committee
The Company's executive compensation program is administered by the
Compensation Committee, which during 1998 consisted of Messrs. Littlechild and
Termeer, and Dr. Papadopoulos, none of whom is an officer or employee of the
Company. The Committee reviews and approves the salaries and incentive
compensation of the Chief Executive Officer and the other executive officers of
the Company.
The objectives of the Company's executive compensation program are as
follows:
o provide an incentive for the achievement of strategic goals and
objectives of the Company
o support the pay-for-performance concept by tying executive
compensation to the Committee's subjective determination of the
quality of performance for the preceding fiscal year
o attract and retain key executives essential to the long-term success
of the Company
o align the executive officers' interests with the long-term interests
of the stockholders
The Company's executive compensation program consists of three
principal elements-- base salary, an annual management cash bonus and incentive
stock options.
Given that the Company is in the process of developing its initial
products, the Committee does not believe that the use of profit levels as a
measure of the Company's achievements or as a basis for compensation decisions
is appropriate. However, the ability to control losses without compromising the
progress of the Company's product development programs is considered by the
Committee.
The Chief Executive Officer submits for the Committee's consideration
at the end of the fiscal year the amount of proposed compensation (following
fiscal year base salary, current fiscal year cash bonus and stock option awards)
for himself and for the Company's other executive officers. The factors
considered by the Chief Executive Officer in making his recommendations to the
Committee were the Board of Directors' prior evaluation of the Company's success
in meeting its strategic objectives during the most recent fiscal year and the
Chief Executive Officer's subjective evaluation of each executive officer's
individual performance. The Committee acts upon the recommendations made with
respect to the executive officers after weighing the Board of Directors'
evaluation of the Company's overall achievements for the year, the Chief
Executive Officer's discussion of each executive officer's individual
performance for the year and each executive officer's current level of
compensation. The Committee members, based upon their active
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<PAGE>
professional involvement with other companies within the Company's industry, are
also able to assess whether proposed compensation levels are in keeping with
industry norms.
The Committee applies the same criteria in evaluating the Chief
Executive Officer's cash compensation as that applied to the other executive
officers of the Company as previously explained. The base salary for fiscal 1998
of the President and Chief Executive Officer of the Company was increased by
$10,000 to $250,000. On December 21, 1998, the Compensation Committee granted
Dr. Fraser options to purchase 25,000 shares of Common Stock at a per share
exercise price of $5.25 for his performance during the 1998 fiscal year. The
options were granted at an exercise price equal to the fair market value of the
Company's Common Stock on the date of grant and vest in four annual installments
commencing one year following the date of grant as long as Dr. Fraser remains
employed by the Company. In awarding such options to Dr. Fraser, the Special
Stock Option Administration Committee subjectively considered the compensation
criteria discussed above as well as its interests in providing incentive for
long-term performance, promoting retention of employees and further aligning the
interests of the Chief Executive Officer with that of the stockholders.
The Company does not believe that section 162(m) of the Internal
Revenue Code of 1986, as amended, which disallows a tax deduction for certain
compensation in excess of $1 million, will generally have an effect on the
Company.
Compensation Committee
John W. Littlechild
Stelios Papadopoulos
Henri Termeer
Compensation Committee Interlocks and Insider Participation
Mr. Termeer, a director and member of the Compensation Committee of the
Board, is the President, Chief Executive Officer and Chairman of the Board of
Genzyme. During 1998, the Company recognized $3,623,249 in revenues, all of
which was from a joint venture with Genzyme. Revenues recognized from the joint
venture are funded by Genzyme in accordance with the terms of the joint venture
agreement and are currently expected to represent all of the Company's revenues
in 1999.
Certain Relationships and Related Transactions
HCVII, HCVIII and HCVIV owned 22.3%, 6.9% and 2.0% of the outstanding
capital stock of the Company as of March 31, 1999, respectively. HCVII, HCVIII
and HCVIV are limited partnerships which were formed to provide capital to
companies in the health care fields. HCPII, HCPIII and HCPIV are limited
partnerships which serve as the general partner of HCVII, HCVIII and HCVIV,
respectively. John Littlechild, a director of the Company, is a general partner
of HCPII, HCPIII and HCPIV and is a Principal of HealthCare Ventures LLC
("HCV"), the management company for HCVII, HCVIII and HCVIV. Mr. Littlechild is
an officer of HCV. See "Principal Stockholders."
Rho Management Trust II ("Rho") which owned 11.0% of the outstanding
capital stock of the Company as of March 31, 1999, also holds approximately
18.9% and 54.3% of the outstanding
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<PAGE>
limited partnership interests in HCVII and HCVIV, respectively. An affiliate of
Rho is also a limited partner of HCPII, HCPIII and HCPIV. Joshua Ruch, director
of the Company, is a controlling person of Rho. See "Principal Stockholders."
Hudson, which owned 9.4% of the outstanding capital stock of the
Company as of March 31, 1999, also holds approximately 6.0% and 11.9% of the
outstanding partnership interests in HCVII and HCVIV, respectively. Hudson is
also a limited partner of HCPII.
In February 1998, the Company completed a private placement of
1,027,027 shares of its common stock at $9.25 per share to three investors
including Rho and Hudson.
In September 1996, the Company and Genzyme Corporation ("Genzyme")
formed a joint venture to develop and commercialize the Company's
NeuroCell(TM)-PD and NeuroCell(TM)-HD products for transplantation into patients
with advanced Parkinson's disease and Huntington's disease, respectively. Under
the terms, and subject to certain conditions, of the joint venture agreement,
which was effective October 1, 1996, Genzyme has agreed to provide 100% of the
first $10 million in funding and 75% of the following $40 million in funding for
the development and commercialization of the two products. All costs incurred in
excess of $50 million are to be shared equally between Genzyme and the Company
in accordance with the terms of the agreement. Any profits of the joint venture
will be shared equally by the two parties. Mr. Termeer, a director of the
Company, is the President, Chief Executive Officer and Chairman of the Board of
Genzyme. During 1998, the Company recognized $3,623,249 in revenues, all of
which was from the joint venture with Genzyme. Revenues recognized from the
joint venture are funded by Genzyme in accordance with the terms of the joint
venture agreement and are currently expected to represent all of the Company's
revenues in 1999.
Stock Performance Graph
The following graph compares, for the period commencing August 12, 1996
(the date of which the Company's common stock commenced trading on the Nasdaq
Stock Market) and ending on December 31, 1998, the total return of the Company's
Common Stock with the total return of (i) The Nasdaq Stock Market (U.S.) and
(ii) the Nasdaq Pharmaceuticals index, assuming the investment of $100 on August
12, 1996 and reinvestment of all dividends. The Company has not paid any
dividends on its Common Stock.
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<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG DIACRIN, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE NASDAQ PHARMACEUTICALS INDEX
[Stock Performance Graph]
Cumulative Total Return
-------------------------------------
8/12/96 12/31/96 12/31/97 12/31/98
DIACRIN, INC. DCRN 100 141 140 82
NASDAQ STOCK MARKET-US NAS 100 113 139 195
NASDAQ PHARMACEUTICALS NAP 100 109 112 144
* $100 INVESTED ON 8/12/96 IN STOCK OR INDEX - INCLUDING INVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
For the period from February 12, 1996 (the effective date of the
Company's initial public offering) until August 9, 1996, the Company's Units
(each of which consisted of one share of Common Stock and one Common Stock
Purchase Warrant) traded on the Nasdaq Stock Market. The trading range of the
Unit during this six month period was between $8.00 and $14.75. The Unit was
offered at $8.00 on February 12, 1996 and closed at $10.50 on August 9, 1996
(the last trading date before the Common Stock and the Common Stock Purchase
Warrant began to trade separately).
PROPOSAL TWO: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Arthur Andersen LLP as
the Company's independent auditors for the current fiscal year. Arthur Andersen
LLP has served as the Company's independent auditors since the Company's
inception. Although stockholder approval of the Board of Directors' selection of
Arthur Andersen LLP is not required by law, the Board of Directors believes that
it is advisable to give stockholders an opportunity to ratify this selection. If
this proposal is not approved at the Annual Meeting, the Board of Directors will
reconsider its selection of Arthur Andersen LLP.
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<PAGE>
Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting and 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
The Board of Directors does not know of any other matters which may
come before the Annual Meeting. However, if any other matters are properly
presented to the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise act, in accordance with their judgment
on such matters.
All costs of solicitation 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, or
otherwise, to obtain proxies. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting material to the owners of stock held in
their names, and, as required by law, the Company will reimburse them for their
reasonable out-of-pocket expenses in this regard.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and persons who own more
than ten percent of a registered class of the Company's equity securities to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors and greater than ten percent beneficial
owners are required to furnish the Company with copies of all Section 16(a)
forms that they file.
To the Company's knowledge, based on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1998, all
Section 16(a) filing requirements applicable to the Company's officers,
directors and greater than ten percent beneficial owners were complied with.
Annual Report on Form 10-K
A copy of the Company's Annual Report on Form 10-K is available without
charge upon written request to: Controller, Diacrin, Inc., Building 96, 13th
Street, Charlestown Navy Yard, Charlestown, MA 02129.
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<PAGE>
Proposals for the 2000 Annual Meeting
Any proposal that a stockholder wishes to be considered for inclusion
in the Company's proxy statement and proxy card for the 2000 Annual Meeting of
Stockholders must be received by the Company Secretary at its offices in
Charlestown, MA not later than January 1, 2000.
In addition, if a stockholder of the Company wishes to present a
proposal at the 2000 Annual Meeting of Stockholders, but does not wish to have
the proposal considered for inclusion in the Company's proxy statement and proxy
card, such stockholder must give written notice to the Secretary of the Company
at the Company's address in Charlestown, MA by March 11, 2000. If a stockholder
fails to provide timely notice of a proposal to be presented at the 2000 Annual
Meeting of Stockholders, the proxies designated by the Board of Directors of the
Company will have discretionary authority to vote on any such proposal which may
come before the meeting.
By Order of the Board of
Directors,
Steven D. Singer, Secretary
April 30, 1999
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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 IS
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
- --------------------------------------------------------------------------------
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<PAGE>
PROXY
DIACRIN, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
To be held June 15, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY
The undersigned, having received notice of the meeting and management's proxy
statement therefor, and revoking all prior proxies, hereby appoint(s) Thomas H.
Fraser, Kevin Kerrigan and Steven D. Singer, and each of them, with full power
of substitution, as proxies to represent and vote as designated herein all
shares of stock of Diacrin, 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 at the offices of Hale and Dorr LLP, 60 State Street,
31st Floor, Boston, MA 02109 on Tuesday, June 15, 1999 at 10:00 a.m., local
time, and at any adjournment thereof. In their discretion, the proxies are
authorized to vote upon such other matters as may properly come before the
meeting or any adjournment thereof. THIS PROXY WHEN PROPERLY EXECUTED WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3. 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. 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. Election of Directors Nominees: Thomas H. Fraser
[ ] FOR all nominees Zola P. Horovitz
(except as marked below) John W. Littlechild
Stelios Papadopoulos
[ ] WITHHELD from all nominees Joshua Ruch
Henri A. Termeer
Christopher T. Walsh
2. To ratify the selection of Arthur Andersen LLP, as the Corporation's
independent auditors for fiscal 1999.
For [ ] Against [ ] Abstain [ ]
3. To Transact such other business as may properly come before the
meeting or any adjournment thereof.
For [ ] Against [ ] Abstain [ ]
Signature Date
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Signature Date
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NOTE: 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.
