SANGSTAT MEDICAL CORP, DEF 14C, 1999-06-24

SANGSTAT MEDICAL CORP
DEF 14C, 1999-06-24
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Soliciting Material Pursuant to
sec.240.14a-11(c) or sec.240.14a-12
[ ] Definitive Proxy Statement [ ] Confidential, for Use of the
Commission Only
[X] Definitive Additional Materials (as permitted by Rule 14a-6(e)(2))

SANGSTAT MEDICAL CORPORATION
- --------------------------------------------------------------------------------
(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.

[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

[ ] 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:

<PAGE>

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
July 22, 1999

TO THE STOCKHOLDERS OF SANGSTAT MEDICAL CORPORATION:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of SangStat
Medical Corporation (the "Company"), a Delaware corporation, will be held on
July 22, 1999 at 10:00 a.m. local time, at the offices of the Company, located
at 6300 Dumbarton Circle, Fremont, California, 94555, for the following
purposes, as more fully described in the Proxy Statement accompanying this
Notice:

1. To elect directors to serve for one-year terms or until their
successors are elected;

2. To approve an amendment and restatement of the Company's 1993 Stock
Option Plan to increase the number of shares of Common Stock authorized for
issuance thereunder by 500,000 shares;

3. To approve an amendment and restatement of the Company's 1996
Non-Employee Directors Stock Option Plan to increase the number of shares
of Common Stock authorized for issuance thereunder by 250,000 shares, to
increase the number of options to purchase shares of Common Stock granted
to directors and to permit directors to receive their annual retainer in
the form of additional stock options;

4. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending December 31, 1999; and

5. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.

Only stockholders of record at the close of business on June 18, 1999 are
entitled to notice of and to vote at the Annual Meeting. The stock transfer
books will not be closed between the record date and the date of the meeting.

All stockholders are cordially invited to attend the meeting in person.
Whether or not you plan to attend, please sign and return the enclosed Proxy as
promptly as possible in the envelope enclosed for your convenience. Should you
receive more than one proxy because your shares are registered in different
names and addresses, each proxy should be signed and returned to ensure that
all your shares will be voted. You may revoke your proxy at any time prior to
the Annual Meeting. If you attend the Annual Meeting and vote by ballot, your
proxy will be revoked automatically and only your vote at the Annual Meeting
will be counted.

Sincerely,

Philippe Pouletty, M.D. Jean-Jacques Bienaime
Chairman of the Board President and Chief Executive Officer

June 22, 1999

YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY, AND COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED
ENVELOPE.

<PAGE>

PROXY STATEMENT

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
------
<S> <C>
PROXY STATEMENT ...................................................... 1
MATTERS TO BE CONSIDERED AT ANNUAL MEETING ........................... 3
PROPOSAL ONE--ELECTION OF DIRECTORS .............................. 3
PROPOSAL TWO--APPROVAL OF AMENDMENT AND RESTATEMENT OF
THE COMPANY'S 1993 STOCK OPTION PLAN .............................. 5
PROPOSAL THREE--APPROVAL OF AMENDMENT AND RESTATEMENT OF
THE COMPANY'S 1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN ...... 10
PROPOSAL FOUR--RATIFICATION OF INDEPENDENT AUDITORS ............... 14
OTHER MATTERS ......................................................... 14
OWNERSHIP OF SECURITIES ............................................. 15
EXECUTIVE COMPENSATION AND RELATED INFORMATION ........................ 17
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION ............... 20
COMPARISON OF STOCKHOLDER RETURN .................................... 23
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 ... 24
ANNUAL REPORT ......................................................... 24
FORM 10-K ............................................................ 24
</TABLE>

<PAGE>

SANGSTAT MEDICAL CORPORATION
6300 DUMBARTON CIRCLE
FREMONT, CALIFORNIA 94555

---------------------

PROXY STATEMENT
---------------------

FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held On July 22, 1999

The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors of SangStat Medical Corporation, a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders to be held on July
22, 1999 (the "Annual Meeting"). The Annual Meeting will be held at 10:00 a.m.
local time, at the offices of the Company located at the address above. These
proxy solicitation materials will be mailed on or about June 25, 1999, to all
stockholders entitled to vote at the Annual Meeting.

Voting

The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice and are described in more
detail in this Proxy Statement. On June 18, 1999, the record date for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, 16,931,239 shares of the Company's common stock, $0.001 par value
("Common Stock"), were issued and outstanding. No shares of the Company's
preferred stock were outstanding. Each stockholder is entitled to one vote for
each share of Common Stock held by such stockholder on June 18, 1999.
Abstentions and broker non-votes are counted as present for the purpose of
determining the presence or absence of a quorum for the transaction of business
at the Annual Meeting. Directors are elected by a plurality vote. Since votes
are cast in favor of or withheld from each nominee, abstentions will have no
effect on the outcome. Each of the other proposals requires an affirmative vote
of a majority of shares present in person or represented by proxy at the Annual
Meeting and entitled to vote on such proposal. Abstentions will have the same
effect as negative votes, while broker non-votes are not included in the total
number of votes cast on a proposal and therefore will not be counted for
purposes of determining whether a proposal has been approved. All votes will be
tabulated by the inspector of election appointed for the meeting, who will
separately tabulate affirmative and negative votes, abstentions and broker
non-votes.

Revocability of Proxies
You may revoke or change your Proxy at any time before the Annual Meeting
by filing with the Secretary of the Company, at the Company's principal
executive offices, a notice of revocation or another signed Proxy with a later
date. You may also revoke your Proxy by attending the Annual Meeting and voting
in person.

Solicitation
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional solicitation materials furnished to stockholders. Copies of
solicitation materials will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs in
forwarding the solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by a solicitation by
telephone, telegram, or other means by directors, officers or employees. No
additional compensation will be paid to those individuals for any such
services. The Company has engaged Corporate Investors Communications, Inc.
("CIC") to provide routine advice and services for proxy solicitation. CIC will
receive a fee of approximately $4,500 for such advice and services which will
be paid by the Company.

<PAGE>

Deadline for Receipt of Stockholder Proposals
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2000 Annual Meeting must be received no
later than February 26, 2000, in order that they may be included in the proxy
statement and form of proxy relating to that meeting.

<PAGE>

MATTERS TO BE CONSIDERED AT ANNUAL MEETING

PROPOSAL ONE--ELECTION OF DIRECTORS
General

The Board of Directors has selected seven nominees, all of whom are
currently serving as directors of the Company. The names of the persons who are
nominees for director and their positions with the Company as of May 31, 1999
are set forth in the table below. Each person nominated for election has agreed
to serve if elected, and management has no reason to believe that any nominee
will be unavailable to serve. In the event any nominee is unable or declines to
serve as a director at the time of the Annual Meeting, the proxies will be
voted for any nominee who may be designated by the present Board of Directors
to fill the vacancy. Unless otherwise instructed, the proxy holders will vote
the proxies received by them FOR the nominees named below. The seven candidates
receiving the highest number of affirmative votes of the shares represented and
voting on this particular matter at the Annual Meeting will be elected
directors of the Company, to serve their respective terms and until their
successors have been elected and qualified.

<TABLE>
<CAPTION>
Positions and Offices Held Director
Nominee Age with the Company Since
- --------------------------------- ----- ---------------------------- ----------
<S> <C> <C> <C>
Philippe Pouletty ...... 41 Chairman of the Board 1988
Jean-Jacques Bienaime 45 President, Chief Executive 1999
Officer and Director
Fredric J. Feldman ... 59 Director 1992
Elizabeth Greetham ... 49 Director 1996
Richard D. Murdock ... 52 Director 1993
Andrew J. Perlman ... 51 Director 1992
Vincent R. Worms ...... 46 Director 1991
</TABLE>

Business Experience of Directors

Philippe Pouletty, M.D., 41, founded SangStat in 1988, has been a director
since 1988 and has served as Chairman since February 1995. From 1988 to 1998,
Dr. Pouletty also served as Chief Executive Officer. Dr. Pouletty has an M.D.
from the University of Paris VI. He holds an M.S. in immunology and an M.S. in
virology from Institute Pasteur. Dr. Pouletty conducted research as a
post-doctoral fellow at
Stanford University. He serves as Vice-President of Fondation Transvie, a
non-profit foundation for xenotransplantation.

Jean-Jacques Bienaime, 45, has been President and Chief Operating Officer
of the Company since June 1998 and became Chief Executive Officer on February
1, 1999. He was elected to the Board of Directors in March 1999. From September
1992 to May 1998 Mr. Bienaime was with Rhone Poulenc Rorer, Inc., a
pharmaceutical company, rising to the position of Senior Vice President,
Corporate Marketing and Business Development. He is currently a member of the
board of Fox Chase Cancer Center and Aerogen Inc. Mr. Bienaime received his
degree in economics from Ecole Superieure de Commerce de Paris in France and a
M.B.A. from The Wharton School, University of Pennsylvania.

Fredric J. Feldman, Ph.D., 59, has been a director of the Company since
March 1992. He is currently CEO and a Director of Biex, Inc., a women's
healthcare company, and a director of OrthoLogic Corporation and Oncogenetics,
Inc. From 1992 to 1995 he was Chairman and CEO of Oncogenetics, Inc. Dr.
Feldman has a Ph.D. in Analytical Chemistry from the University of Maryland and
a B.S. in Chemistry from Brooklyn College of City University of New York.

Elizabeth Greetham, 49, has been a director of the Company since September
1996. She is currently Portfolio Manager of Life Sciences L.P. Funds and
handles analytical responsibilities for all healthcare investments for the
Institutional, Mutual and High Individual Net Worth Accounts at Weiss, Peck &
Greer Investments, where she has been employed since 1992. Ms. Greetham also
serves as a director of various pharmaceutical companies, including Guilford
Pharmaceutical, Inc., Sequus Pharmaceuticals, Chini Chem Development, Inc. and
PathoGenesis Corp. Ms. Greetham received an M.A. with honors in Economics from
Edinburgh University.

<PAGE>

Richard D. Murdock, 52, has been a director of the Company since October
1993. Mr. Murdock has been the President and Chief Executive Officer and a
director of Kyphon, Inc., an orthopedic medical device Company, since December
1998. From September 1991 to October 1998, Mr. Murdock served as the Chief
Executive Officer and a director of CellPro, Incorporated, a public
biotechnology company. From August to December 1991, he was CellPro's Vice
President of Marketing and Corporate Development and in December 1991 he was
appointed President. Mr. Murdock received a B.S. in Zoology from the University
of California at Berkeley in 1969.

Andrew J. Perlman, M.D., Ph.D., 51, has been a director of the Company
since December 1992. Dr. Perlman has been the Vice President, Medical Research
and Corporate Development at Tularik, Inc., a private biotechnology company,
since January 1993. From 1987 to 1993, Dr. Perlman served in various positions
at Genentech, Inc., most recently as Senior Director, Clinical Research. Dr.
Perlman has an M.D. and a Ph.D. in Physiology from New York University.

Vincent R. Worms, 46, has been a director of the Company since October
1991. Mr. Worms has been a General Partner of Partech International since 1982.
He has an engineering degree from Ecole Polytechnique in Paris, and an M.S.
degree from the Massachusetts Institute of Technology. Mr. Worms is presently a
director of Business Objects.

The Company's bylaws authorize the Board of Directors to fix the number of
directors by resolution. The number is currently fixed at seven. All directors
hold office until the next annual meeting of stockholders and until their
successors have been elected and qualified. Officers are appointed to serve at
the discretion of the Board of Directors. There are no family relationships
among executive officers or directors of the Company.

Board Committees and Meetings
During the fiscal year ended December 31, 1998, the Board of Directors
held five meetings. The Board of Directors has an Audit Committee and a
Compensation Committee. Each of the directors attended or participated in 75%
or more of the aggregate of (i) the total number of meetings of the Board of
Directors (held during the period he or she served) and (ii) the total number
of meetings held by all committees on which he or she served (held during the
period he or she served) during the past fiscal year.

The Audit Committee currently consists of two directors, Fredric Feldman
and Vincent Worms, and is primarily responsible for approving the services
performed by the Company's independent auditors and reviewing their reports
regarding the Company's accounting practices and systems of internal accounting
controls. The Audit Committee held one meeting during the last fiscal year.

The Compensation Committee currently consists of three directors, Andrew
J. Perlman, Elizabeth Greetham and Vincent Worms, and is primarily responsible
for reviewing and approving the Company's general compensation policies and
setting compensation levels for the Company's executive officers. The
Compensation Committee also has the exclusive authority to administer the
Company's 1993 Stock Option Plan (the "1993 Plan") and make option grants
thereunder. The Compensation Committee held two meetings during the last fiscal
year.

Director Compensation
Effective January 1, 1999, the non-employee directors receive an annual
retainer of $15,000, paid in quarterly installments. No additional compensation
is paid for meeting attendance or committee membership. However, Dr. Perlman
received a total of $4,312 during 1998 for consulting services provided to the
Company.

The non-employee directors also receive automatic grants of options to
purchase shares of Common Stock pursuant to the 1996 Non-Employee Directors
Stock Option Plan (the "Directors Plan"). Moreover, the Directors Plan permits
non-employee directors to convert their annual cash retainer into additional
options to purchase shares of Common Stock. Please refer to "Proposal
Three--Approval of Amendment and Restatement of the Company's 1996 Non-Employee
Directors Stock Option Plan" for information regarding the automatic option
grants and the election to receive additional options in lieu of retainer
payments.

Recommendation of the Board of Directors
The Board of Directors recommends that the stockholders vote FOR the
election of each of the above nominees.

<PAGE>

PROPOSAL TWO--APPROVAL OF AMENDMENT AND
RESTATEMENT OF THE COMPANY'S 1993
STOCK OPTION PLAN

1993 STOCK OPTION PLAN

The Company's stockholders are being asked to approve the amendment and
restatement of the 1993 Plan. The following is a summary of the principal
features of the 1993 Plan, as amended. The summary, however, does not purport
to be a complete description of all provisions of the 1993 Plan. Any
stockholder of the Company who wishes to obtain a copy of the actual plan
document may do so upon written request to the Corporate Secretary at the
Company's principal executive offices in Fremont, California.

PLAN DESCRIPTION
Share Reserve
A total of 3,892,200 shares of Common Stock has been reserved for issuance
over the term of the 1993 Plan, assuming stockholder approval of the
500,000-share increase. The share reserve is automatically increased by 400,000
shares on January 1 of each year. In no event may any one participant in the
1993 Plan be granted stock options and separately exercisable stock
appreciation rights for more than 700,000 shares in the aggregate over the term
of the 1993 Plan, exclusive, however, of any stock options or stock
appreciation rights granted prior to January 1, 1995.

In the event any change is made to the outstanding shares of Common Stock
by reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to (i) the maximum number and class of securities issuable under the 1993
Plan, (ii) the maximum number and class of securities for which any one
participant may be granted stock options and separately exercisable stock
appreciation rights under the 1993 Plan and (iii) the number and class of
securities and the exercise price per share in effect under each outstanding
option.

Should an option expire or terminate for any reason prior to exercise in
full or be canceled in accordance with the provisions of the 1993 Plan, the
shares subject to the portion of the option not so exercised or canceled will
be available for subsequent issuance under the 1993 Plan. Unvested shares
issued under the 1993 Plan and subsequently repurchased by the Company at the
option exercise price paid per share will also be added back to the share
reserve and will accordingly be available for subsequent issuance, except for
incentive stock option grants under the 1993 Plan. Shares subject to any option
surrendered in accordance with the stock appreciation right provisions of the
1993 Plan will not be available for subsequent issuance.

Plan Administration
The 1993 Plan will be administered by the Compensation Committee of the
Board. This committee (the "Plan Administrator") will have complete discretion
(subject to the provisions of the 1993 Plan) to set the terms of each option
grant under the 1993 Plan.

Eligibility
Employees of the Company or any parent or subsidiary, non-employee members
of the Board or the board of directors of any parent or subsidiary corporation,
and consultants and other independent advisors in the service of the Company or
its parent or subsidiary corporations are eligible to participate in the 1993
Plan. Non-employee members of the Board are also eligible to participate in the
1996 Non-Employee Directors Stock Option Plan.

As of May 31, 1999, thirteen executive officers, six Board members and 230
other employees were eligible to participate in the 1993 Plan.

Valuation
The fair market value per share of Common Stock on any relevant date under
the 1993 Plan will be the closing selling price per share on that date on the
Nasdaq National Market. On June 14, 1999, the closing selling price per share
was $15.813.

<PAGE>

Option Terms

Options granted under the 1993 Plan will have an exercise price per share
not less than 100% of the fair market value per share of Common Stock on the
option grant date. No granted option will have a term in excess of 10 years.
The options will generally become exercisable in a series of installments over
the optionee's period of service with the Company.

Upon cessation of service, the optionee will have a limited period of time
in which to exercise his or her outstanding options for any shares in which the
optionee is vested at that time. The Plan Administrator will have complete
discretion to extend the period following the optionee's cessation of service
during which his or her outstanding options may be exercised and/or to
accelerate the exercisability or vesting of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of
service.

The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:

Tandem stock appreciation rights provide the holders with the right to
surrender their options for an appreciation distribution from the Company
equal in amount to the excess of (a) the fair market value of the vested
shares of Common Stock subject to the surrendered option over (b) the
aggregate exercise price payable for those shares. Such appreciation
distribution may, at the discretion of the Plan Administrator, be made in
cash or in shares of Common Stock.

Limited stock appreciation rights may be provided to one or more
non-employee Board members or officers of the Company as part of their
option grants. Any option with such a limited stock appreciation right may
be surrendered to the Company upon the successful completion of a hostile
tender offer for more than 50% of the Company's outstanding voting stock.
In return for the surrendered option, the officer will be entitled to a
cash distribution from the Company in an amount per surrendered option
share equal to the excess of (a) the highest price paid per share of Common
Stock in connection with the tender offer over (b) the exercise price
payable for such share.

No optionee is to have any stockholder rights with respect to the option
shares until the optionee has exercised the option and paid the exercise price
for the purchased shares. Options are generally not assignable or transferable
other than by will or the laws of inheritance following the optionee's death
and, during the optionee's lifetime, the option may be exercised only by such
optionee. However, the Plan Administrator may allow nonstatutory options to be
transferred or assigned during the optionee's lifetime to one or more members
of the optionee's immediate family or to a trust established exclusively for
one or more such family members, to the extent such transfer or assignment is
in furtherance of the optionee's estate plan.

The shares of Common Stock acquired upon the exercise of one or more
options may be unvested and subject to repurchase by the Company, at the
original exercise price paid per share, if the optionee ceases service with the
Company prior to vesting in those shares. The Plan Administrator will have
complete discretion to establish the vesting schedule to be in effect for any
such unvested shares and, in certain circumstances, may cancel the Company's
outstanding repurchase rights with respect to those shares and thereby
accelerate the vesting of the shares.

The Plan Administrator will also have the authority to effect the
cancellation of outstanding options under the 1993 Plan and to issue
replacement options with an exercise price based on the fair market price of
Common Stock at the time of the new grant.

Acceleration

In the event that the Company is acquired by merger or asset sale, each
outstanding option under the 1993 Plan which is not to be assumed by the
successor corporation will automatically accelerate in full. Any options
assumed in connection with such acquisition may, in the Plan Administrator's
discretion, be subject to immediate acceleration in the event the individual's
service with the successor entity is subsequently terminated within a specified
period following the acquisition. The Plan Administrator will have the
discretionary authority to structure one or more option grants under the 1993
Plan so that those

<PAGE>

options will, in connection with a change in control of the Company (whether by
successful tender offer for more than 50% of the outstanding voting stock or a
change in the majority of the Board by one or more contested elections for
Board membership), automatically accelerate in full, with such acceleration to
occur either at the time of such change in control or upon the subsequent
termination of the
individual's service.

The acceleration of vesting upon a change in the ownership or control of
the Company may be seen as an antitakeover provision and may have the effect of
discouraging a merger proposal, a takeover attempt or other efforts to gain
control of the Company.

Exercise Price and Financial Assistance
The exercise price may be paid in cash, by check, in shares of Common
Stock or by any combination of cash, check and shares. Options may also be
exercised through a same-day sale program, pursuant to which a designated
brokerage firm is to effect the immediate sale of the shares purchased under
the option and pay over to the Company, out of the sale proceeds on the
settlement date, sufficient funds to cover the exercise price for the purchased
shares plus all applicable withholding taxes. The Plan Administrator may also
assist any optionee (including an officer or director) in the exercise of his
or her outstanding options by (i) authorizing a Company loan to the optionee,
or (ii) permitting the optionee to pay the exercise price in installments over
a period of years. The Plan Administrator will have complete discretion to
determine the terms of any such financial assistance. However, the maximum
amount of financing provided any individual may not exceed the cash
consideration payable for the purchased shares plus all applicable taxes. Any
such financing may be subject to forgiveness in whole or in part, at the
discretion of the Plan Administrator, over the optionee's period of service.

Special Tax Election
The Plan Administrator may provide one or more holders of options or
unvested shares with the right to have the Company withhold a portion of the
shares otherwise issuable to such individuals in satisfaction of the tax
liability incurred by such individuals in connection with the exercise of those
options or the vesting of those shares. Alternatively, the Plan Administrator
may allow such individuals to deliver previously acquired shares of Common
Stock in payment of such tax liability.

Option Grants
As of May 31, 1999, options covering 2,328,083 shares of Common Stock were
outstanding under the 1993 Plan, 1,157,388 shares remained available for future
option grant assuming stockholder approval of the 500,000-share increase which
forms part of this Proposal, and 733,491 shares have been issued under the 1993
Plan in connection with option exercises.

Amendment and Termination
The Board may amend or modify the 1993 Plan in any or all respects
whatsoever, subject to any stockholder approval required under applicable law
or regulation. The Board may terminate the 1993 Plan at any time, and the 1993
Plan will in all events terminate on October 11, 2003.

FEDERAL INCOME TAX CONSEQUENCES

Option Grants
Options granted under the 1993 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
nonstatutory options which are not intended to meet such requirements. The
federal income tax treatment for the two types of options differs as follows:

Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made

<PAGE>

the subject of a taxable disposition. For Federal tax purposes, dispositions
are divided into two categories: qualifying and disqualifying. A qualifying
disposition occurs if the sale or other disposition is made after the optionee
has held the shares for more than two years after the option grant date and
more than one year after the exercise date. If either of these two holding
periods is not satisfied, then a disqualifying disposition will result.

Upon a qualifying disposition, the optionee will recognize long-term
capital gain in an amount equal to the excess of (i) the amount realized upon
the sale or other disposition of the purchased shares over (ii) the exercise
price paid for the shares. If there is a disqualifying disposition of the
shares, then the excess of (i) the fair market value of those shares on the
exercise date over (ii) the exercise price paid for the shares will be taxable
as ordinary income to the optionee. Any additional gain or loss recognized upon
the disposition will be recognized as a capital gain or loss by the optionee.

If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.

Nonstatutory Options. No taxable income is recognized by an optionee upon
the grant of a nonstatutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.

If the shares acquired upon exercise of the nonstatutory option are
unvested and subject to repurchase by the Company in the event of the
optionee's termination of service prior to vesting in those shares, then the
optionee will not recognize any taxable income at the time of exercise but will
have to report as ordinary income, as and when the Company's repurchase right
lapses, an amount equal to the excess of (i) the fair market value of the
shares on the date the repurchase right lapses over (ii) the exercise price
paid for the shares. The optionee may, however, elect under Section 83(b) of
the Internal Revenue Code to include as ordinary income in the year of exercise
of the option an amount equal to the excess of (i) the fair market value of the
purchased shares on the exercise date over (ii) the exercise price paid for
such shares. If the Section 83(b) election is made, the optionee will not
recognize any additional income as and when the repurchase right lapses.

The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised nonstatutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee.

Stock Appreciation Rights

An optionee who is granted a stock appreciation right will recognize
ordinary income in the year of exercise equal to the amount of the appreciation
distribution. The Company will be entitled to an income tax deduction equal to
such distribution for the taxable year in which the ordinary income is
recognized by the optionee.

Deductibility of Executive Compensation

The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises of nonstatutory options with exercise prices equal to the fair market
value of the option shares on the grant date will qualify as performance-based
compensation for purposes of Internal Revenue Code Section 162(m) and will not
have to be taken into account for purposes of the $1 million limitation per
covered individual on the deductibility of the compensation paid to certain
executive officers of the Company. Accordingly, all compensation deemed paid
with respect to those options should remain deductible by the Company without
limitation under Internal Revenue Code Section 162(m).

<PAGE>

PLAN BENEFITS

Awards under the 1993 Plan are discretionary. Therefore, it is not
possible to determine the benefits that will be received in the future by
participants in the 1993 Plan or the benefits that would have been received by
such participants if the 1993 Plan, as amended, had been in effect in 1998. No
grants have been made with respect to the additional 500,000 shares for which
approval is requested at the Annual Meeting.

Recommendation of the Board of Directors
The Board of Directors recommends that the stockholders vote FOR the
approval of the amendment and restatement of the 1993 Stock Option Plan.

<PAGE>

PROPOSAL THREE--APPROVAL OF AMENDMENT AND RESTATEMENT OF
THE COMPANY'S 1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

The Company's stockholders are being asked to approve the amendment and
restatement of the Directors Plan, pursuant to which 500,000 shares of Common
Stock have been reserved for issuance, assuming stockholder approval of the
250,000-share increase. The Directors Plan is intended to serve as a special
equity incentive program for the non-employee members of the Company's Board of
Directors (the "Board"). The Directors Plan was adopted by the Board on July
24, 1996 (the "Effective Date"), and amended by the Board on October 7, 1998
(the "Amendment Date"), subject to stockholder approval of this Proposal at the
Annual Meeting.

The following is a summary of the principal features of the Directors
Plan, as amended. The summary, however, does not purport to be a complete
description of all provisions of the Directors Plan. Any stockholder of the
Company who wishes to obtain a copy of the actual plan document may do so upon
written request to the Corporate Secretary at the Company's principal executive
offices in Fremont, California.

Share Reserve

A reserve of 500,000 shares of Common Stock has been set aside for
issuance over the 10-year term of the Directors Plan, assuming stockholder
approval of the 250,000-share increase. Should any options granted under the
Directors Plan terminate prior to exercise in full, the shares subject to the
unexercised portion of those options will be available for subsequent option
grants. In addition, any unvested shares issued under the Directors Plan and
subsequently repurchased by the Company at the option exercise price paid per
share pursuant to the Company's repurchase rights will be added back to the
number of shares of Common Stock reserved for issuance under the Directors Plan
and will accordingly be available for subsequent option grants. However, shares
subject to any option surrendered for a cash settlement will not be available
for subsequent issuance.

Eligibility

Only the non-employee members of the Board are eligible to participate in
the Directors Plan. As of May 31, 1999, six Board members were eligible to
participate.

Valuation

The fair market value per share of Common Stock on any relevant date under
the Directors Plan will be the closing selling price per share on that date on
the Nasdaq National Market. On June 14, 1999, the closing selling price per
share was $15.813.

Automatic Option Grants

All automatic option grants under the Directors Plan will be made in
compliance with the express provisions of the Directors Plan. Accordingly,
stockholder approval of this Proposal will also constitute pre-approval of each
option granted pursuant to the provisions of the Directors Plan summarized
below and the subsequent exercise of that option in accordance with those
provisions.

1. Each automatic option grant will have an exercise price per share equal
to 100% of the fair market value per share of Common Stock on the option grant
date. Each option will have a term of 10 years measured from the option grant
date, subject to earlier termination if the optionee leaves the Board.

2. Each automatic option grant will be immediately exercisable for any or
all the option shares, but any unvested shares purchased by the optionee under
that grant will be subject to repurchase by the Company, at the exercise price
paid per share, if the optionee's service on the Board ends before he or she
vests in those shares. The shares vest as described below.

3. Each individual serving as an eligible non-employee Board member on the
Effective Date was granted on that date an option for either 14,000 shares of
Common Stock, if such individual had not previously received an option grant
from the Company in connection with his or her service on the Board,

<PAGE>

or 9,000 shares if such individual had previously received such an option
grant. The shares subject to the option grants made on the Effective Date
vested in two equal annual installments as the optionee completed two years of
Board service following the Effective Date.

4. Each individual who first becomes a non-employee Board member after the
Effective Date, whether upon appointment by the Board or election by the
stockholders, will automatically be granted, at the time of his or her initial
election or appointment to the Board, an option for 19,000 shares of Common
Stock, provided such individual has not previously been in the Company's
employ. The shares subject to these option grants will vest as follows: 25% of
the option shares will vest as the optionee completes one year of Board service
after the automatic grant date, and the balance of the option shares will vest
in a series of 36 successive equal monthly installments over the three years of
Board service thereafter.

5. On the date of the 1997 and 1998 Annual Stockholders Meetings, each
individual who continued to serve as a non-employee Board member was
automatically granted an option to purchase 3,000 shares of Common Stock,
provided that the individual had served as a non-employee Board member for at
least six months. Non-employee Board members who had previously served in the
Company's employ were eligible for these 3,000-share option grants. The shares
subject to these option grants will vest as follows: 25% of the option shares
will vest as the optionee completes one year of Board service after the
automatic grant date, and the balance of the option shares will vest in a
series of 36 successive equal monthly installments over the three years of
Board service thereafter.

6. On the date of each Annual Stockholders Meeting, beginning with the
1999 Annual Meeting, each individual who is to continue to serve as a
non-employee Board member will automatically be granted an option to purchase
4,000 shares of Common Stock, provided that the individual has served as a
Board member (whether or not he or she was an employee) for at least 24 months.
There will be no limit on the number of 4,000-share option grants that any one
non-employee Board member may receive over his or her period of Board service,
and non-employee Board members who have previously served in the Company's
employ will be eligible for these 4,000-share option grants. The shares subject
to these option grants will be fully vested at all times.

7. Each individual who served as an eligible non-employee Board member on
the Amendment Date was granted on that date an option for 10,000 shares of
Common Stock. The shares subject to these option grants will vest in a series
of 24 successive equal monthly installments over the two years of Board service
measured from the automatic grant date, except that they vest in full upon
approval of SangCya oral solution ANDA and Thymoglobulin PLA by the U.S. Food
and Drug Administration (the "FDA").

8. At all times after FDA approval of SangCya oral solution ANDA and
Thymoglobulin PLA, the vesting of all shares subject to automatic option grants
outstanding on the Amendment Date will be determined by adding 12 months to the
optionee's actual period of Board service.

9. The shares subject to each automatic option grant will immediately vest
upon (a) the optionee's death, permanent disability or retirement while serving
as a Board member, (b) an acquisition of the Company by a merger involving a
change in ownership of more than 50% of the Company's outstanding voting
securities or by a sale of all or substantially all of the Company's assets,
(c) the successful completion of a tender offer for more than 50% of the
Company's outstanding voting securities or (d) a change in the majority of the
Board as a result of one or more contested elections for Board membership.
"Retirement" means leaving the Board after completing five years of service as
a Board member and attaining age 55.

10. If the optionee's service as a Board member ends because of death,
permanent disability or retirement, then options granted under the Directors
Plan on or after the Amendment Date will remain exercisable for the entire
balance of the option term. In all other cases, options will remain exercisable
for 12 months after the optionee's service as a Board member ends. During the
applicable post-termination exercise period, an option may not be exercised for
more than the number of option shares (if any) in which the Board member was
vested upon leaving the Board.

11. Upon the successful completion of a hostile tender offer for more than
50% of the Company's outstanding voting stock, each outstanding automatic
option grant may be surrendered to the Company

<PAGE>

for a cash distribution per surrendered option share in an amount equal to the
excess of (a) the highest price per share of Common Stock paid in connection
with such tender offer over (b) the exercise price payable for such share.

Elective Conversion of Cash Fees Into Options
Effective July 1, 1999, a non-employee Board member may elect to receive
all or part his or her basic retainer payments, not including any meeting fees,
from the Company in the form of nonstatutory stock options. If a Board member
makes an election to receive options in lieu of a cash retainer (an "Option
Election"), then the options will automatically be granted to him or her under
the Directors Plan. An Option Election may apply to any period from one to five
consecutive calendar years. For this purpose, (a) the period from July 1, 1999,
to December 31, 1999, will be treated as a calendar year for all Board members
in office on July 1, 1999, and (b) the period from a Board member's first day
of Board service to the last day of the same calendar year will be treated as a
calendar year for all Board members not in office on July 1, 1999. An Option
Election must be filed with the Company on the prescribed form before the first
day of the period to which the Option Election applies. An Option Election will
be irrevocable with respect to the period to which it applies, but a different
Option Election may be made with respect to a subsequent period by filing a new
form with the Company before the first day of the subsequent period.

The number of options to be granted to Board members in lieu of cash
retainers will be calculated by applying the Black-Scholes option valuation
model, using the assumptions used by the Company's independent auditors for
purposes of the Company's financial reports. In determining the number of
options to be granted to Board members in lieu of cash retainers, the amount of
the retainer will be deemed to remain the same for the entire period covered by
the Option Election. (If the amount of the retainer is increased during the
period covered by the Option Election, the incremental amount will be paid in
cash without regard to any Option Election.) The options will be granted on the
first day of the period to which the Option Election applies. The terms of the
options will be the same as the terms of the annual 4,000-share grants
summarized above, except for the vesting provision described below.

The options granted to Board members in lieu of cash retainers will be
immediately exercisable for any or all of the option shares. However, any
shares purchased under the options will be subject to repurchase by the
Company, at the exercise price paid per share, if the director's Board service
ends before he or she vests in the shares. The vested portion of the shares
subject to the options will be equal to a fraction. The numerator of the
fraction will be the amount of the cash retainer that would have been paid to
the Board member from the beginning of the period to which his or her Option
Election applies to the date when he or she leaves the Board. The denominator
of the fraction will be the total amount of the cash retainers that would have
been paid to the Board member for the entire period to which his or her Option
Election applies. The accelerated-vesting provisions described above will not
apply to options granted in lieu of cash retainers.

Changes in Capitalization
In the event that any change is made to the outstanding shares of Common
Stock by reason of any merger, consolidation or reorganization of the Company
or any recapitalization, stock dividend, stock split, combination of shares,
exchange of shares or other change in corporate structure effected without the
Company's receipt of consideration, appropriate adjustments will be made to (a)
the maximum number and/or class of securities available for issuance under the
Directors Plan, (b) the number and/or class of securities and exercise price
per share in effect under each outstanding option under the Directors Plan and
(c) the number and/or class of securities for which option grants are to be
made in the future to newly elected or continuing non-employee Board members.
All adjustments to the outstanding options under the Directors Plan will be
designed to preclude the enlargement or dilution of participant rights and
benefits under those options.

Amendment and Termination
The Board may amend or modify the Directors Plan in any or all respects
whatsoever, subject to any stockholder approval required under applicable laws
or regulations. The Board may terminate the Directors Plan at any time, and the
Directors Plan will in all events terminate on July 23, 2006.

<PAGE>

Federal Income Tax Consequences
Options granted under the Directors Plan will be nonstatutory stock
options, which are not intended to satisfy the requirements of Section 422 of
the Internal Revenue Code of 1986. The Federal income tax treatment for such
options is as follows:

No taxable income is recognized by an optionee upon the grant of a
nonstatutory option. The optionee will in general recognize ordinary income, in
the year in which the option is exercised, equal to the excess of the fair
market value of the purchased shares on the exercise date over the exercise
price paid for the shares.

If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the
optionee's termination of service prior to vesting in those shares, then the
optionee will not recognize any taxable income at the time of exercise but will
have to report as ordinary income, as and when the Company's repurchase right
lapses, an amount equal to the excess of (a) the fair market value of the
shares on the date the repurchase right lapses over (b) the exercise price paid
for the shares. The optionee may, however, elect under Section 83(b) of the
Internal Revenue Code to include as ordinary income in the year of the option
exercise an amount equal to the excess of (a) the fair market value of the
purchased shares on the exercise date over (b) the exercise price paid for such
shares. If the Section 83(b) election is made, the optionee will not recognize
any additional income as and when the repurchase right lapses.

New Plan Benefits
The table below lists the option grants that have been made from the
Amendment Date through April 1, 1999, under the Directors Plan. None of these
options will become exercisable unless the stockholders approve this Proposal.

<TABLE>
<CAPTION>
Number of
Date of Option Exercise
Non-Employee Board Member Grant Shares Price
- ------------------------------------ --------- ---------- ----------
<S> <C> <C> <C>
Fredric J. Feldman ...... 10/7/98 10,000 $ 19.75
Elizabeth Greetham ...... 10/7/98 10,000 19.75
Richard Murdock ......... 10/7/98 10,000 19.75
Andrew Perlman ......... 10/7/98 10,000 19.75
Gordon Russell ......... 10/7/98 10,000 19.75
Vincent R. Worms ......... 10/7/98 10,000 19.75
</TABLE>

In the event that non-employee Board members elect to receive options in
lieu of their retainer payments for periods commencing on July 1, 1999 as
described above, such options will be granted on July 1, 1999 under the
Directors Plan. In addition, at the Annual Meeting, each non-employee Board
member who has completed at least two years of service as a director will
receive an option under the Directors Plan to purchase 4,000 shares of Common
Stock. Each such option grant will have an exercise price per share equal to
the fair market value per share of Common Stock on the grant date. No grants
have been made with respect to the additional 250,000 shares for which approval
is requested at the Annual Meeting.

Recommendation of the Board of Directors
The Board of Directors recommends that the stockholders vote FOR the
approval of the amendment and restatement of the 1996 Non-Employee Directors
Stock Option Plan.

<PAGE>

PROPOSAL FOUR--RATIFICATION OF INDEPENDENT AUDITORS

The Board of Directors has appointed the firm of Deloitte & Touche LLP,
independent public auditors for the Company during fiscal year 1998, to serve
in the same capacity for the fiscal year ending December 31, 1999, and is
asking the stockholders to ratify this appointment. The affirmative vote of the
holders of a majority of the shares represented by proxy and voting at the
Annual Meeting is required to ratify the selection of Deloitte & Touche LLP.

In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board of Directors in its discretion may direct the appointment of a different
independent auditing firm at any time during the year if the Board of Directors
believes that such a change would be in the best interests of the Company and
its stockholders.

A representative of Deloitte & Touche LLP is expected to be present at the
Annual Meeting, will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond to appropriate questions.

Recommendation of the Board of Directors
The Board of Directors recommends that the stockholders vote FOR the
ratification of the selection of Deloitte & Touche LLP to serve as the
Company's independent auditors for the fiscal year ending December 31, 1999.

OTHER MATTERS

The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend. Discretionary authority with respect to such other matters is
granted by the execution of the enclosed Proxy.

<PAGE>

OWNERSHIP OF SECURITIES

The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's Common Stock as of
May 31, 1999 by (i) all persons who are beneficial owners of five percent (5%)
or more of the Company's Common Stock, (ii) each director and nominee for
director, (iii) the Company's Chief Executive Officer and the four other most
highly paid executive officers as of May 31, 1999, and (iv) all directors and
executive officers as a group. Unless otherwise indicated, each of the
stockholders has sole voting and investment power with respect to the shares
beneficially owned, subject to community property laws, where applicable.

<TABLE>
<CAPTION>
Number of Shares Percentage of Shares
Beneficially Beneficially
Name and Address (as required) of Beneficial Owner Owned (#) Owned (%)
- -------------------------------------------------- ------------------ ----------------------
<S> <C> <C>
Jean-Jacques Bienaime (1) ............... 301,000 1.7%
SangStat Medical Corporation
6300 Dumbarton Circle
Fremont, California 94555
David Winter, M.D. (2) .................. 130,500 *
Ralph Levy (3) ........................... 87,166 *
Hana Berger-Moran, Ph.D. (4) ............ 20,793 *
Raymond J. Tesi, M.D. (5) ............... 57,000 *
Philippe Pouletty, M.D. (6) ............... 495,981 2.8%
Fredric J. Feldman, Ph.D. (7) ............ 42,525 *
Elizabeth Greetham (8) .................. 255,000 1.5%
Richard D. Murdock (9) .................. 25,000 *
Andrew J. Perlman, M.D., Ph.D. (10) ...... 36,400 *
Vincent R. Worms (11) ..................... 702,433 4.0%
All directors and officers as a group
(19 persons) (12) ..................... 2,404,834 12.4%
</TABLE>

- ------------
* Does not exceed one percent.

(#) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and generally
includes voting or investment power with respect to securities. Shares of
Common Stock subject to options which are currently exercisable or
convertible or which will become exercisable or convertible within sixty
(60) days after May 31, 1999 are deemed outstanding for computing the
beneficial ownership of the person holding such option but are not
outstanding for computing the beneficial ownership of any other person.
Except as indicated by footnote, and subject to community property laws
where applicable, the persons named in the table above have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.

(1) Represents options to purchase 301,000 shares granted under the Option
Plan.

(2) Includes options to purchase 109,000 shares granted under the Option Plan.

(3) Represents options to purchase 87,166 shares granted under the Option
Plan.

(4) Represents options to purchase 20,793 shares granted under the Option
Plan. Dr. Moran resigned as Senior Vice President, Regulatory Affairs,
effective April 30, 1999.

(5) Represents options to purchase 57,000 shares granted under the Option
Plan.

(6) Represents options to purchase 495,981 shares granted under the Option
Plan.

(7) Includes 13,125 shares held by the Feldman family trust and options to
purchase 29,400 shares granted under the Option Plan.

<PAGE>

(8) Includes 220,000 shares held by Weiss, Peck & Greer Investments. Ms.
Greetham, a director of the Company, handles all healthcare investments
for the Institutional, Mutual and High Individual Net Worth Accounts at
Weiss, Peck & Greer Investments, and may be deemed to share voting and
investment power in such shares arising from her interest in the entity
above. Ms. Greetham disclaims beneficial ownership of such shares, except
to the extent of her interest in the entity referred to above. The shares
beneficially owned by Ms. Greetham include options to purchase 35,000
shares granted under the Option Plan.

(9) Represents options to purchase 25,000 shares granted under the Option
Plan.

(10) Represents options to purchase 36,400 shares granted under the Option
Plan.

(11) Includes 689,433 shares held by Partech International Inc. Mr. Worms, a
director of the Company, may be deemed to share voting and investment
power in such shares arising from his interests in the aforementioned
entity. Mr. Worms disclaims beneficial ownership of such shares, except to
the extent of his interests in the aforementioned entity. The shares
beneficially owned by Mr. Worms include options to purchase 13,000 shares
granted under the Option Plan.

(12) Includes options to purchase 1,486,901 shares granted under the Option
Plan.

<PAGE>

EXECUTIVE COMPENSATION AND RELATED INFORMATION

Summary Compensation Table
The following table provides certain summary information concerning the
compensation earned by the Company's Chief Executive Officer and the four other
most highly compensated executive officers of the Company serving as such as of
the end of the last fiscal year whose salary and bonus for such year were in
excess of $100,000 for services rendered in all capacities to the Company and
its subsidiaries for the 1998, 1997 and 1996 fiscal years. Such individuals
hereafter will be referred to as the Named Executive Officers. No other
executive officer who would have otherwise been includable in such table on the
basis of salary and bonus earned for the 1998 fiscal year resigned or
terminated employment during that fiscal year.

<TABLE>
<CAPTION>
Long-Term
Compensation
--------------
Awards
--------------
Annual Compensation
-------------------------- Securities
Underlying
Name and Principal Position Year Salary ($) Bonus ($) Options (#)
- ------------------------------------------ ---------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Philippe Pouletty ..................... 1998 $310,615 -- 265,184
Chairman of the Board and 1997 280,000 $ 71,400 100,000
Chief Executive Officer (1) 1996 250,000 110,000 35,000
David Winter ........................... 1998 170,000 33,660 1,000
President and Chief Executive Officer, 1997 170,000 30,600 --
Human Organ Sciences, Inc. (2) 1996 170,000 31,620 --
Ralph Levy .............................. 1998 171,450 24,860 21,000
Senior Vice President, Operations 1997 158,500 19,625 30,666
1996 142,708 29,255 10,500
Hana Berger Moran (3) .................. 1998 160,827 15,345 29,206
Senior Vice President, Regulatory Affairs 1997 142,042 15,447 15,840
1996 124,763 19,182 10,500
Raymond J. Tesi, M.D. .................. 1998 172,424 29,528 1,000
Senior Vice President, Marketing 1997 (4) 110,000 19,965 38,000
</TABLE>

- ------------
(1) Effective February 1, 1999 Dr. Pouletty resigned as Chief Executive Officer
of the Company. Jean-Jacques Bienaime was appointed by the Board as Chief
Executive Officer of the Company, effective February 1, 1999.
(2) Mr. Winter served as President and Chief Operating Officer of the Company
from February 20, 1995 to June 1, 1998. Effective June 2, 1998, Mr. Winter
became the President and Chief Executive Officer of Human Organ Sciences,
Inc., a wholly-owned subsidiary of the Company.
(3) Dr. Moran resigned as Senior Vice President, Regulatory Affairs, effective
April 30, 1999.
(4) Dr. Tesi was appointed by the Board as Senior Vice President, Marketing,
effective May 1, 1997.

<PAGE>

Option Grants in Last Fiscal Year
The following table shows, with respect to the Named Executive Officers,
certain information concerning the grant of stock options in 1998. No stock
appreciation rights were granted during 1998.

<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------------
Number of Potential Realizable
Securities Percentage of Value at Assumed
Underlying Total Options Annual Rates of Stock
Options Granted to Price Appreciation for
Option Term(4)
Granted Employees in Exercise Expiration --------------------------
Name (#)(1) Fiscal Year(2) Price Date ($/Sh)(3) Date 5% ($) 10% ($)
- ------------------------------ ------------ ---------------- ---------------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Philippe Pouletty ......... 161,184 11.8 $ 33.00 05/06/08 $8,664,208 $13,796,303
3,000 0.2 28.19 07/22/08 137,756 219,353
101,000 7.4 19.75 10/07/08 3,249,238 5,173,868
David Winter ............... 1,000 -- 19.75 10/07/08 32,171 51,226
Ralph Levy .................. 21,000 1.5 19.75 11/01/08 675,584 1,075,755
Hana Berger Moran (5) ...... 8,206 0.6 33.00 05/06/08 441,101 702,380
21,000 1.5 19.75 10/07/08 675,584 1,075,755
Raymond J. Tesi ............ 1,000 -- 19.75 10/07/08 32,171 51,226
</TABLE>

- ------------
(1) Each option will vest in forty-eight successive equal monthly installments
over the optionee's continued service with the Company measured from the
vesting start date, except as follows: the 101,000 options granted Dr.
Pouletty, 11,000 of the options granted to Mr. Levy and Dr. Moran, and the
1,000 options granted to Drs. Winter and Tesi on October 7, 1998 are all
on a six year vesting schedule, subject to acceleration, if certain
milestones are met.
(2) Based on an aggregate of 1,363,757 options granted to employees and Board
members in 1998, including options granted to the Named Executive
Officers.
(3) The exercise price may be paid in cash, in shares of Common Stock valued at
fair market value on the exercise date, or through a cashless exercise
procedure involving a same-day sale of the purchased shares. The Company
may also finance the option exercise by lending the optionee sufficient
funds to pay the exercise price for the purchased shares and the federal
and state income or employment tax liability incurred by the optionee in
connection with such exercise. The optionee may be permitted, subject to
the approval of the Plan Administrator, to apply a portion of the shares
purchased under the option (or to deliver existing shares of Common Stock)
in satisfaction of such liability.
(4) Potential realizable value is based on the assumption that the price per
share of Common Stock appreciates at the assumed 5% and 10% annual rates
of appreciation (compounded annually) over the option terms. There is no
assurance that those assumed annual rates of stock price appreciation will
actually be realized.
(5) Dr. Moran resigned as Senior Vice President, Regulatory Affairs, effective
April 30, 1999.

<PAGE>

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth information concerning option exercises and
option holdings for the fiscal year ended December 31, 1998 with respect to the
Named Executive Officers. Except as set forth below, no options or stock
appreciation rights were exercised by any such individual during such year, and
no stock appreciation rights were outstanding on December 31, 1998.

<TABLE>
<CAPTION>
Value of Unexercised In-the-
Value Number of Securities Money Options at FY-End ($)
Realized ($) Underlying Unexercised (Market price of shares at
Shares (Market price Options at Fiscal FY-End ($21.25) less
Year-End (#) exercise price)
Acquired on at exercise less -------------------------------- -----------------------------
Exercise (#) exercise price) Exercisable(1) Unexercisable Exercisable Unexercisable
-------------- ------------------ ---------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Philippe Pouletty ......... 125,963 $2,558,955 356,797 0 $2,722,024 0
David Winter ............... 6,000 111,540 114,000 0 1,767,125 0
Ralph Levy .................. 0 0 114,286 0 1,154,499 0
Hana Berger Moran (2) ...... 0 0 82,840 0 646,050 0
Raymond J. Tesi ............ 0 0 39,000 0 49,000 0
</TABLE>

- ------------
(1) The options are immediately exercisable for all the option shares, but any
shares purchased under those options will be subject to repurchase by the
Company, at the exercise price paid per share, upon the optionee's
cessation of service prior to vesting in those shares. As of December 31,
1998, Dr. Pouletty is vested in 228,105 of his options shares, Dr. Winter
is vested in 108,790 shares, Mr. Levy is vested in 72,058 shares, Dr.
Moran is vested in 43,086 shares and Dr. Tesi is vested in 12,124 shares.
(2) Dr. Moran resigned as Senior Vice President, Regulatory Affairs, effective
April 30, 1999.

Employment Contracts, Termination of Employment Arrangements and Change in
Control Agreements None of the Company's executive officers have
employment agreements with the Company, and their employment with the Company
may be terminated at any time at the discretion of the Board of Directors.
However, the Compensation Committee of the Board of Directors has authority as
Plan Administrator of the Company's 1993 Stock Option Plan to provide for the
accelerated vesting of the shares of Common Stock subject to outstanding
options held by the Chief Executive Officer and the Company's other executive
officers, whether granted under that plan or any predecessor plan, in the event
their employment were to be terminated (whether involuntarily or through a
forced resignation) following (i) an acquisition of the Company by merger or
asset sale, or (ii) a hostile takeover of the Company effected through a
successful tender offer for more than 50% of the Company's outstanding Common
Stock or through a change in the majority of the Board as a result of one or
more contested elections for Board membership.

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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors (the "Committee")
sets the compensation of the Chief Executive Officer and the Company's other
executive officers, reviews the design, administration, and effectiveness of
compensation programs for other key executives, and approves stock option
grants for all executive officers. The Committee, serving under a charter
adopted by the Board of Directors, is composed entirely of outside directors
who have never served as officers of the Company.

Compensation Philosophy and Objectives
The Company operates in the extremely competitive and rapidly changing
biotechnology industry. The Committee believes that the compensation programs
for executive officers of the Company should be designed to attract, motivate,
and retain talented executives responsible for the success of the Company and
should be determined within a competitive framework and based on the
achievement of corporate objectives and individual performance. Within this
overall philosophy, the Committee's objectives are to:

* Offer a total compensation program that takes into consideration
the compensation practices of a specifically identified peer
group of companies (the "Peer Companies") located in the same
geographic area and of small to medium market capitalization with
which the Company competes for executive talent.

* Provide annual variable incentive awards that take into account
the Company's performance relative to corporate objectives and
the performance of the Peer Companies and that are also based on
the attainment of personal goals.

* Align the financial interests of executive officers with those of
stockholders by providing significant equity-based, long-term
incentives.

Compensation Components and Process
Each executive officer's compensation package is comprised of three
elements: (i) base salary that is competitive with the compensation levels in
effect at the Peer Companies and is based on the Committee's assessment of the
individual's performance, (ii) annual variable performance awards payable in
cash and tied to the Company's attainment of corporate objectives and the
officer's achievement of personal goals and (iii) long-term stock-based
incentive awards designed to strengthen the mutuality of interests between the
executive officers and the Company's stockholders. As an officer's level of
responsibility and accountability within the Company increases over time, a
greater portion of his or her total compensation is intended to be dependent
upon Company and personal performance and stock price appreciation rather than
upon base salary.

Factors
The principal factors taken into account in establishing each executive
officer's compensation package for the 1998 fiscal year are summarized below.
The Committee may, however, apply entirely different factors for future fiscal
years.

Base Salary. The Committee determines the base salary levels for the
executive officers on the basis of the individual's performance, internal
comparability considerations and the base salary levels in effect for
comparable positions at the Peer Companies. The base salary level for executive
officers is currently at or below the median level determined for such
individuals on the basis of the external salary data compiled for the Peer
Companies. The number of companies taken into account as Peer Companies is less
than the number of companies included in the BioCentury 100 Stock Index and the
Hambrecht & Quist Biotechnology Index which are used in the Performance Graph
appearing later in this Proxy Statement for comparative stockholder return
purposes. However, the Committee believes this smaller group of Peer Companies
gives a more accurate indication of the market for executive services in which
the Company competes.

Salaries are reviewed on an annual basis, and adjustments to each
executive officer's base salary are based upon individual performance and
increases in salary levels at the Peer Companies.

<PAGE>

Annual Incentive Compensation. An annual bonus may be earned by each
executive officer based upon the achievement of personal and Company
performance goals. Such goals are established at the commencement of each
calendar year and may vary from year to year. Since the Company is in the
development stage, the use of traditional performance milestones (such as
profit levels and return on equity) as the basis for such incentive
compensation was not considered appropriate. Instead, the incentive awards for
the 1998 fiscal year were tied to the achievement of pre-defined personal and
corporate performance targets. The Company performance goals for 1998 (for
which 50% of the individual's target bonus could be earned) were (i)
procurement of additional capital, (ii) licensing a therapeutic product, (iii)
completing specified R&D goals, (iv) achievement of specified sales levels and
(v) achievement of certain organizational goals. Personal goals are related to
the functional responsibility of each executive officer and his or her
department. The Committee and the Board jointly determine whether or not each
Company performance goal has been achieved. The Committee determines whether
the Chief Executive Officer has achieved his personal performance goals, and
the Chief Executive Officer similarly reviews the performance goals achieved by
other executive officers and reports his recommendations to the Committee.

Long-Term, Equity-Based Incentive Awards. The goal of the Company's
long-term equity-based incentive awards is to align the interests of executive
officers with those of the stockholders and to provide each executive officer
with a significant incentive to manage the Company from the perspective of an
owner with an equity stake in the business. The Committee determines the size
of long-term, equity-based incentives according to each executive's position
within the Company and sets a level it considers appropriate to create a
meaningful opportunity for stock ownership. In addition, the Committee takes
into account an individual's recent performance, his or her potential for
future responsibility and promotion, comparable awards made to individuals in
similar positions with the Peer Companies, and the number of unvested options
held by each individual at the time of the new grant. The relative weight given
to each of these factors varies among individuals at the Committee's
discretion.

During fiscal 1998, the Committee made option grants to Messrs. Pouletty,
Levy, Buelow and Moran under the Company's Stock Option Plan. Each grant allows
the officer to acquire shares of the Company's common stock at a fixed price
per share (the market price on the grant date) over a specified period of time.
Specifically, the shares subject to each option vest in periodic installments
over a four-year period, contingent upon the executive officer's continued
employment with the Company. Accordingly, the option will provide a return only
if the officer remains with the Company and then only if the market price
appreciates over the option term.

CEO Compensation
Dr. Pouletty's base salary was established through an evaluation of his
performance and the salary levels in effect for similarly situated chief
executive officers at the Peer Companies. In setting Dr. Pouletty's base
salary, it was the Committee's intent to provide him with a level of stability
and certainty each year and not have this particular component of compensation
affected to any significant degree by Company performance factors.

Dr. Pouletty's 1998 fiscal year incentive compensation did not include any
dollar guarantees. He did not receive a bonus award during fiscal year 1998.
The option grants made to Dr. Pouletty were in recognition of his performance
and were intended to provide him with a continuing incentive to remain with the
Company and contribute to the Company's success. The options will be of value
to Dr. Pouletty only if the market price of the Company's common stock
appreciates over the option term.

Mr. Bienaime's base salary is established through an evaluation of his
performance and the salary levels in effect for similarly situated chief
executive officers at the Peer Companies. In setting Mr. Bienaime's base
salary, it is the Committee's intent to provide him with a level of stability
and certainty each year and not have this particular component of compensation
affected to any significant degree by Company performance factors.

Compliance with Internal Revenue Code Section 162(m)
As a result of Section 162(m) of the Code, which was enacted into law in
1993, the Company will not be allowed a federal income tax deduction for
compensation paid to certain officers, to the extent that

<PAGE>

compensation exceeds one million dollars per officer in any one year. This
limitation will apply to all compensation which is not considered to be
performance-based. Compensation which does qualify as performance-based
compensation will not have to be taken into account for purposes of this
limitation. The Company previously obtained stockholder approval to certain
amendments to the 1993 Stock Option Plan that were designed to ensure that any
compensation deemed paid in connection with the exercise of stock options
granted under that plan would qualify as performance-based compensation.

The cash compensation paid to the Company's executive officers during
fiscal 1998 did not exceed the one million dollar limit per officer, nor is the
cash compensation to be paid to the Company's executive officers for the 1999
fiscal year expected to reach that level. Because it is very unlikely that the
cash compensation payable to any of the Company's executive officers in the
foreseeable future will approach the one million dollar limitation, the
Committee has decided not to take any action at this time to limit or
restructure the elements of cash compensation payable to the Company's
executive officers. The Committee will reconsider this decision should the
individual compensation of any executive officer ever approach the one million
dollar level.

Compensation Committee

Andrew J. Perlman
Vincent Worms
Elizabeth Greetham

Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee of the Company's Board of
Directors are as named above in the Compensation Committee Report. No member of
the Committee was at any time during the 1998 fiscal year or at any other time
an officer or employee of the Company.

No executive officer of the Company served on the board of directors or
compensation committee of any entity which has one or more executive officers
serving as a member of the Company's Board or Compensation Committee.

<PAGE>

COMPARISON OF STOCKHOLDER RETURN

The graph depicted below reflects a comparison of the cumulative total
return (change in stock price plus reinvestment dividends) of the Company's
Common Stock with the cumulative total returns of the Nasdaq Stock Market
Index, the BioCentury 100 Stock Index and the Hambrecht & Quist Biotechnology
Index.2 The BioCentury 100 Stock Index has been included this year because of
its greater focus on companies in an early stage of development and with market
capitalization similar to SangStat Medical Corporation. The graph covers the
period from December 14, 1993, the date the Company's initial public offering
commenced, through the fiscal year ended December 31, 1998 as well as the first
three months of the Company's 1999 fiscal year.

The graph assumes that $100 was invested on December 14, 1993 in the
Company's Common Stock and in each index and that all dividends were
reinvested. No cash dividends have been declared on the Company's Common Stock.

[GRAPHIC OMITTED]

- ------------

(1) The performance graph and all of the material in the Compensation Committee
Report is not deemed filed with the Securities and Exchange Commission,
and is not incorporated by reference to any filing of the Company under
the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, whether made before or after the date of this Proxy Statement and
irrespective of any general incorporation language in any such filing.
(2) Stockholder returns over the indicated period should not be considered
indicative of future
stockholder returns.

<PAGE>

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and any persons holding more than ten
percent of the Company's Common Stock to file reports of ownership and changes
in ownership with the Securities and Exchange Commission ("SEC"). Directors,
executive officers and greater than ten percent stockholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. Based upon (i) the copies of Section 16(a) reports which the Company
received from such persons for their 1998 fiscal year transactions in the
Common Stock and their Common Stock holdings and (ii) the written
representations received from one or more of such persons that no annual Form 5
reports were required to be filed by them for the 1998 fiscal year, the Company
believes that all reporting requirements under Section 16(a) for such fiscal
year
were met in a timely manner by its executive officers, Board members and
greater than ten percent stockholders.

ANNUAL REPORT

A copy of the Annual Report of the Company for the fiscal year ended
December 31, 1998 has been mailed concurrently with this Proxy Statement to all
stockholders entitled to notice of and to vote at the Annual Meeting. The
Annual Report is not incorporated into this Proxy Statement and is not
considered proxy soliciting material.

FORM 10-K

The Company filed an Annual Report on Form 10-K with the SEC. Stockholders
may obtain a copy of these reports, without charge, by writing to Carole
Nuechterlein, Secretary, at the Company's executive offices at 6300 Dumbarton
Circle, Fremont, California 94555.

THE BOARD OF DIRECTORS OF
SANGSTAT MEDICAL CORPORATION