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 Materual 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 of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on whic 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, Massachusetts 02129
Notice of 2000 Annual Meeting of Stockholders
To Be Held on June 29, 2000
The 2000 Annual Meeting of Stockholders of Diacrin, Inc. (the
"Company") will be held at the offices of Hale and Dorr LLP, 60 State Street,
Boston, Massachusetts on Thursday, June 29, 2000 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 2000; 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 May 24, 2000 will be
entitled to notice of and to vote at the meeting or any adjournment thereof. The
stock transfer books of the Company will remain open for the purchase and sale
of the Company's Common Stock.
By Order of the Board of Directors,
Steven D. Singer, Secretary
Charlestown, Massachusetts
May 24, 2000
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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 AT THE MEETING. NO POSTAGE NEED BE AFFIXED
IF THE PROXY IS MAILED IN THE UNITED STATES.
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<PAGE>
Diacrin, Inc.
Building 96, 13th Street
Charlestown Navy Yard
Charlestown, Massachusetts 02129
Proxy Statement for the 2000 Annual Meeting of Stockholders
To Be Held on June 29, 2000
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 29, 2000 (the "Annual
Meeting") and at any adjournment or adjournments 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.
The Company's Annual Report for 1999 was mailed to stockholders, along
with these proxy materials, on or about May 24, 2000.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1999, as filed with the Securities and Exchange Commission, except
for exhibits, will be furnished without charge to any stockholder upon written
request of Investor Relations, Diacrin, Inc., Building 96, 13th Street,
Charlestown Navy Yard, Charlestown, Massachusetts 02129.
Securities and Votes Required
At the close of business on May 24, 2000, the record date for the
determination of stockholders entitled to vote at the Annual Meeting, there were
outstanding and entitled to vote 17,908,659 shares of common stock, $0.01 par
value per share (the "Common Stock") (constituting all of the outstanding voting
stock of the Company). Each share of Common Stock entitles the holder to one
vote.
Under the Company's Bylaws, the holders of a majority of the shares of
Common Stock issued, outstanding and entitled to vote on any matter shall
constitute a quorum with respect to that matter at the Annual Meeting. Shares of
Common Stock present in person or represented by proxy (including shares which
abstain or do not vote with respect to one or more of the matters represented
for stockholder approval) will be counted for purposes of determining whether a
quorum is present. 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.
<PAGE>
Shares of Common Stock which abstain from voting as to a particular
matter, and shares held in "street name" by brokers or nominees, who indicate on
their proxies that they do not have discretionary authority to vote such shares
as to a particular matter, will not be counted as votes in favor of such matter,
and will also not be counted as votes cast or shares voting on such matter.
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 of
the votes cast or shares voting on a matter, such as the election of the
directors and the ratification of independent accountants.
Principal Stockholders
The following table sets forth the beneficial ownership of the Company's
Common Stock as of May 1, 2000 by:
- each person who is known to beneficially own more than 5% of the Company's
Common Stock;
- each director or nominee for director of the Company;
- each executive officer of the Company named in the Summary Compensation
Table under the heading "Executive Compensation" below; and
- all executive officers and directors of the Company as a group.
Unless otherwise noted, each person or group has sole voting and
investment power of the shares listed. The inclusion of any shares listed below
as beneficially owned does not constitute an admission of beneficial ownership
of those shares.
The "Options/Warrants" column reflects shares of the Company's Common
Stock subject to options or warrants which are exercisable within 60 days after
May 1, 2000. The shares of the Company's Common Stock which are subject to
options or warrants are deemed to be outstanding for the purpose of computing
the percentage of ownership of the person holding such options or warrants, but
are not deemed to be outstanding for computing the percentage of ownership of
any other person. As of May 1, 2000, there were 17,908,659 shares of Common
Stock outstanding.
<TABLE>
<CAPTION>
Number of Shares
Beneficially Owned Percentage of
Name and Address Shares Options/Warrants Shares Owned
---------------- ------ ---------------- ------------
<S> <C> <C> <C>
HealthCare Ventures II, L.P. (1).............. 3,196,385 -- 17.8%
HealthCare Ventures III, L.P. (1)............. 994,078 -- 5.6
HealthCare Ventures IV, L.P. (1).............. 291,922 -- 1.6
Rho Management Trust II (2)................... 1,592,887 -- 8.9
Hudson Trust (3).............................. 1,342,680 -- 7.5
State of Wisconsin Investment Board (4)....... 1,765,500 650,000 13.0
Thomas H. Fraser, Ph.D........................ 483,488 146,250 3.5
Zola P. Horovitz, Ph.D........................ 4,000 16,125 *
John W. Littlechild (1)....................... 4,482,385 10,000 25.1
Stelios Papadopoulos, Ph.D.................... 200,000 10,000 1.2
Joshua Ruch (5)............................... 1,759,587 10,000 9.9
Henri A. Termeer.............................. 7,750 44,250 *
Christopher T. Walsh, Ph.D.................... -- 14,250 *
E. Michael Egan............................... 4,169 142,495 1.0
All directors and executive officers as a
group (9 persons)............................. 6,941,379 408,020 40.1
</TABLE>
<PAGE>
- -------------------------------------
* Less than 1.0%
(1) 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, HCPIII and HCPIV, share voting and investment control with
respect to shares owned by HCVII, HCVIII, and HCVIV, respectively. Mr.
Littlechild does not own any shares of the Company's capital stock in his
individual capacity. The address of HealthCare Ventures II, III and IV,
L.P. is 44 Nashua Street, Princeton, New Jersey 08542.
(2) Rho Management Partners, L.P. may be deemed the beneficial owner of these
shares pursuant to an investment advisory agreement that confers sole
voting and investment control over such shares to Rho Management Partners,
L.P. The address of Rho Management Trust II is c/o Rho Management Company,
Inc., 152 West 57th Street, New York, New York 10019.
(3) The address of Hudson Trust is c/o Summit Asset Management Co., Inc., 47
Hulfish Street, Suite 420, Princeton, New Jersey 08542.
(4) The address of the State of Wisconsin Investment Board is P.O. Box 7842,
Madison, Wisconsin 53707.
(5) 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
166,700 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.
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 2001 Annual Meeting of
Stockholders.
The persons named in the enclosed proxy will vote to elect as directors
the seven nominees named below, unless the proxy is marked otherwise. If a
stockholder returns a proxy without contrary instructions, the persons named as
proxies will vote to elect as directors the nominees named below, each of whom
is currently a member of the Board of Directors of the Company.
Each director will be elected to hold office until the 2001 Annual
Meeting of Stockholders and until his successor is duly elected and qualified.
The nominees have indicated their willingness to serve, if elected; however, if
any nominee should be unable to serve, the shares of Common Stock represented by
proxies may be voted for a substitute nominee designated by the Board of
Directors.
Set forth below is the name and age of each member of the Board of
Directors, the positions and offices held by him, his principal occupation and
business experience during the past five years, the names of other publicly held
companies of which he serves as a director and the year of the commencement of
his term as a director of the Company. Information with respect to the number of
shares of Common Stock beneficially owned by each director, directly or
indirectly, as of May 1, 2000, appears above under the heading "Principal
Stockholders." There are no family relationships between or among any officers
or directors of the Company.
<PAGE>
<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. 52 1990 President, Chief Executive Officer and
Director of the Company since 1990.
Zola P. Horovitz, Ph.D. 65 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; Director of Avigen Inc.,
BioCryst Pharmaceuticals, Clinicor, Inc.,
HeavenlyDoor.com, Shire Pharmaceuticals and
Synaptic Pharmaceuticals, Inc.
John W. Littlechild 48 1992 Principal, HealthCare Ventures LLC, a
venture capital management company,
since 1992; Director of Orthofix
International N.V., a medical device
company; Director of AVANT
Immunotherapeutics, a biotechnology company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year First Principal Occupation or
Became a Employment During Past Five
Name Age Director Years and Current Directorships
<S> <C> <C> <C>
Stelios Papadopoulos, Ph.D. 51 1991 Managing Director at SG Cowen Securities
Corporation; prior to joining SG Cowen
Securities Corporation in February 2000,
Chairman of PaineWebber Development
Corp., a PaineWebber subsidiary.
Joshua Ruch 50 1998 Chairman and Chief Executive Officer of Rho
Management Company, Inc., an investment
advisory firm with which he has been
affiliated since 1981.
Henri A. Termeer 54 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; trustee of
Hambrecht & Quist Healthcare Investors and
of Hambrecht & Quist Life Sciences Investors.
Christopher T. Walsh, Ph.D. 56 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.
</TABLE>
<PAGE>
Meetings of Board of Directors and Committees
During 1999, the Board of Directors held eight meetings. Each director,
other than Henri Termeer, attended at least 75% of the meetings of the Board and
of the committees 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 1999. The current members of the Compensation Committee are Messrs.
Littlechild and Termeer and Dr. Papadopoulos. See "Report of the Compensation
Committee" below.
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 stockholders, oversees the ethical behavior of
management, and considers and recommends the selection of the Company's
independent auditors. The Audit and Finance Committee met once during 1999. The
current members of the Audit and Finance Committee are Drs. Fraser, Papadopoulos
and Horovitz. The Company does not have a Nominating Committee or a committee
serving similar functions. Nominations are made by and through the full Board of
Directors.
Director Compensation
Drs. Horovitz and Walsh each receive $2,000 plus expenses per board
meeting attended plus an additional $4,000 annually for consulting work
performed on behalf of the Company. No other directors receive any cash
compensation for services on the Board of Directors.
On September 13, 1999, all non-employee directors were granted an
option to purchase 6,000 shares of Common Stock under the Company's 1997 Stock
Option Plan at an exercise price of $5.13 per share. The options may be
exercised on a cumulative basis as to 25% of the shares on the first anniversary
of the date of grant and an additional 25% at the end of each one-year period
thereafter.
<PAGE>
Executive Compensation
Summary Compensation Table. The following table sets forth certain
information with respect to the annual and long-term compensation for each of
the last three fiscal years of the Company's Chief Executive Officer and one
other executive officer (the "Named Officers"):
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards
-------------------------------------
Name and Securities Underlying
Principal Position Year Salary($)(1) Bonus($)(2) Options
<S> <C> <C> <C> <C>
Thomas H. Fraser 1999 $ 260,000 $ 40,000 25,000
President and Chief 1998 250,000 35,000 25,000
Executive Officer 1997 240,000 45,000 50,000 (3)
E. Michael Egan 1999 $ 190,000 $ 30,000 20,000
Senior Vice President 1998 180,000 25,000 20,000
of Corporate Development 1997 170,000 30,000 20,000
</TABLE>
- ------------------------------
(1) 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.
(2) Amounts in this column represent bonuses paid or accrued under the annual
management bonus plan.
(3) Amount includes 20,000 options granted in 1997 in recognition of fiscal
1996 performance.
<PAGE>
Option Grants Table. The following table sets forth certain information
regarding options granted during the fiscal year ended December 31, 1999 to the
Named Officers:
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------
Potential Realizable Value
Number of Percent of at Assumed Annual Rates of
Securities Total Options Stock Price Appreciation
Underlying Granted to Exercise or for Option Term (2)
Options Employees in Base Price Expiration ----------------------------
Name Granted (#) (1) Fiscal Year ($/Sh) Date 5%($) 10%($)
----- --------------- ----------- ----------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Thomas H. Fraser 25,000 14% $6.25 12/30/09 $98,265 $249,022
E. Michael Egan 20,000 11% $6.25 12/30/09 $78,612 $199,218
</TABLE>
(1) Options granted in 1999 become exercisable in four equal annual
installments, commencing 12 months after the date of grant.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock and the date on which
the options are exercised.
Aggregated Option Exercises and Year-End Option Table. The following
table sets forth certain information regarding aggregate option exercises during
the fiscal year ended December 31, 1999 and the number and value of unexercised
stock options held as of December 31, 1999 by the Named Officers:
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Fiscal Year-End (#) Fiscal Year-End ($) (2)
---------------------- -------------------------
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) (1) Unexercisable Unexercisable
----------- --------------- -------------- ----------------- --------------------------
<S> <C> <C> <C> <C>
Thomas H. Fraser - - 133,750 / 63,750 $453,437 / $29,686
E. Michael Egan - - 142,495 / 50,000 570,475 / 23,750
</TABLE>
(1) Represents the difference between the exercise price and the value of the
Company's Common Stock on the date of exercise.
(2) Based on the value of the Company's Common Stock on December 31, 1999
($6.50 per share), less the option exercise price.
<PAGE>
Employment Agreements
The Company has entered into a letter agreement with Dr. Fraser 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 it terminates his
employment without cause. 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.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), 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.
Based solely on its review of the copies of such reports received or
written representations that no other reports were required, the Company
believes that, during the fiscal year ended December 31, 1999, its officers,
directors and ten-percent stockholders complied with all Section 16(a) filing
requirements applicable to such individuals.
Report of the Compensation Committee
The Company's executive compensation program is administered by the
Compensation Committee (the "Committee"), which is composed of three directors
who are neither employees nor officers 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; and
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.
<PAGE>
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 Committee considers the ability to control losses
without compromising the progress of the Company's product development programs.
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 are 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 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 this same criteria in evaluating the Chief
Executive Officer's cash compensation as that applied to the other executive
officers of the Company. The base salary for fiscal 1999 of the President and
Chief Executive Officer of the Company was increased by $10,000 to $260,000. On
December 30, 1999, the Compensation Committee granted Dr. Fraser an option to
purchase 25,000 shares of Common Stock at a per share exercise price of $6.25
for his performance during the 1999 fiscal year. The option was granted at an
exercise price equal to the fair market value of the Company's Common Stock on
the date of grant and vests in four annual installments commencing one year
following the date of grant as long as Dr. Fraser remains employed by the
Company. In awarding this option to Dr. Fraser, the Committee subjectively
considered the compensation criteria discussed above as well as its interests in
providing incentives 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
<PAGE>
Compensation Committee Interlocks and Insider Participation
Mr. Termeer serves on the Company's Compensation Committee. In
September 1996, the Company's formed a joint venture with Genzyme Corporation 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 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 the Company
and Genzyme 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 member
of the Company's Board of Directors, is President, Chief Executive Officer and
Chairman of the Board of Genzyme. The Company has recorded approximately $12.4
million in revenue from the joint venture since it commenced. Revenues
recognized from the joint venture and funded by Genzyme in accordance with the
terms of the joint venture agreement are currently expected to represent a
substantial majority of the Company's revenues in 2000.
Certain Relationships and Related Transactions
In September 1996, the Company formed a joint venture with Genzyme
Corporation 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 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 member of the Company's Board of Directors, is the
President, Chief Executive Officer and Chairman of the Board of Genzyme. During
1999, the Company recognized $2,970,846 in revenues, all of which were from the
joint venture with Genzyme. Revenues recognized from the joint venture and
funded by Genzyme in accordance with the terms of the joint venture agreement
are currently expected to represent a substantial majority of the Company's
revenues in 2000.
Stock Performance Graph
The following graph compares, for the period commencing August 12, 1996
(the date on which the Company's Common Stock commenced trading on the Nasdaq
Stock Market) and ending on December 31, 1999, 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. This graph assumes the investment of $100
on August 12, 1996 in the Company's Common Stock (at the initial public offering
price) and each of the indices listed above, and assumes dividends are
reinvested. The Company has not paid any dividends on its Common Stock.
<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 12/31/99
DIACRIN, INC. DCRN $100 $141 $140 $ 82 $ 90
NASDAQ STOCK MARKET-US NAS 100 113 139 195 353
NASDAQ PHARMACEUTICALS NAP 100 109 112 144 267
* $100 INVESTED ON 8/12/96 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS.
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 Units
during this six month period was between $8.00 and $14.75. The Units were
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.
<PAGE>
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting to be available to respond to appropriate questions from
stockholders and to make a statement if they desire to do so.
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.
Subject to the terms and conditions set forth herein, all Proxies received
by the Company will be effective, notwithstanding any transfer of the shares to
which such Proxies relate, unless at or prior to the Annual Meeting the Company
receives a written notice of revocation signed by the person who, as of the
record date, was the registered holder of such shares. The Notice of Revocation
must indicate the certificate number and number of the shares to which such
revocation relates and the aggregate number of shares represented by such
certificate(s).
<PAGE>
Proposals for the 2001 Annual Meeting
In order to be included in proxy materials for the 2001 Annual Meeting of
Stockholders, pursuant to Rule 14(a)-8 under the Exchange Act, stockholders'
proposed resolutions must be received by the Company at its offices, Building
96, 13th Street, Charlestown Navy Yard, Charlestown, Massachusetts 02129 on or
before January 25, 2001. The Company suggests that proponents submit their
proposals by certified mail, return receipt requested, addressed to the
Secretary of the Company.
If a stockholder of the Company wishes to present a proposal before the
2001 Annual Meeting of Stockholders, pursuant to Rule 14(a)-4 under the Exchange
Act, such stockholder must give written notice to the Secretary of the Company
at the address noted above. The Secretary must receive such notice at least 45
days prior to the anniversary of the mailing of this year's proxy materials,
which would be April 9, 2001. If a stockholder fails to provide timely notice of
a proposal to be presented at the 2001 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.
By Order of the Board of Directors,
Steven D. Singer, Secretary
May 24, 2000
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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.
- --------------------------------------------------------------------------------
<PAGE>
Appendix A
PROXY
DIACRIN, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
To be held June 29, 2000
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,
Boston, MA 02109 on Thursday, June 29, 2000 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 Company's
independent auditors for fiscal 2000.
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 ___________________
Signature________________________________ Date ___________________
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.
