<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
NEXSTAR PHARMACEUTICALS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) 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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[NEXSTAR LOGO]
NEXSTAR PHARMACEUTICALS, INC.
2860 WILDERNESS PLACE
BOULDER, COLORADO 80301
April 17, 1998
To Our Stockholders:
On behalf of the Board of Directors, I am pleased to invite you to attend
the Annual Meeting of Stockholders of NeXstar Pharmaceuticals, Inc. to be held
on Wednesday, May 27, 1998, at 8:30 a.m. at the Hotel Boulderado, 2115 13th
Street, Boulder, Colorado.
The business to be acted on at the meeting is listed in the Notice of
Annual Meeting of Stockholders and is described more fully in the attached Proxy
Statement. Management will report on current operations and there will be an
opportunity for discussion concerning the Company and its activities.
I urge you to sign and return the enclosed proxy card in the envelope
provided to ensure that your shares of the Company's Common Stock will be
represented and voted at the Annual Meeting. You may attend the Annual Meeting
and vote in person even if you have previously returned your proxy card.
I look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ PATRICK J. MAHAFFY
PATRICK J. MAHAFFY
President and Chief Executive
Officer
<PAGE> 3
[NEXSTAR LOGO]
NEXSTAR PHARMACEUTICALS, INC.
2860 WILDERNESS PLACE
BOULDER, COLORADO 80301
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 27, 1998
The Annual Meeting of Stockholders of NeXstar Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), will be held on Wednesday, May 27, 1998,
at 8:30 a.m., Mountain Daylight Time, at the Hotel Boulderado, 2115 13th Street,
Boulder, Colorado, for the following purposes:
1. To elect seven (7) directors of the Company for one-year terms and until
their respective successors are duly elected and qualified;
2. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending December 31, 1998; and
3. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
The Board of Directors has fixed March 29, 1998 as the record date for
determining stockholders entitled to vote at and to receive notice of the Annual
Meeting.
By order of the Board of Directors,
/s/ LARRY W. SMITH
LARRY W. SMITH
Secretary
Boulder, Colorado
April 17, 1998
YOU ARE URGED TO SIGN AND DATE THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY
SO THAT YOUR SHARES OF COMMON STOCK MAY BE REPRESENTED AND VOTED AT THE ANNUAL
MEETING.
<PAGE> 4
NEXSTAR PHARMACEUTICALS, INC.
2860 WILDERNESS PLACE
BOULDER, COLORADO 80301
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 27, 1998
------------------------
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of NeXstar Pharmaceuticals, Inc., a Delaware
corporation ("NeXstar Pharmaceuticals" or the "Company"), for use at the Annual
Meeting of Stockholders of the Company, to be held on Wednesday, May 27, 1998
(the "Annual Meeting"), at 8:30 a.m., Mountain Daylight Time, at the Hotel
Boulderado, 2115 13th Street, Boulder, Colorado, for the purposes set forth in
the accompanying Notice of Annual Meeting of Stockholders.
The Board of Directors has fixed March 29, 1998 as the record date (the
"Record Date") for the determination of the holders of the Company's Common
Stock, $0.01 par value ("Common Stock"), entitled to vote at the Annual Meeting
and any adjournments or postponements thereof. On the Record Date, 27,492,161
shares of Common Stock were outstanding and entitled to vote at the Annual
Meeting. Holders of shares of Common Stock on the Record Date are entitled to
one vote for each share held. The presence at the Annual Meeting, either in
person or by proxy, of a majority of the outstanding shares entitled to vote
shall constitute a quorum for the transaction of business.
Any stockholder giving a proxy has the power to revoke that proxy at any
time before it is voted. A proxy may be revoked by filing with the Secretary of
the Company either a written revocation or a duly executed proxy bearing a date
subsequent to the date of the proxy being revoked. Any stockholder may attend
the Annual Meeting and vote in person, whether or not such stockholder has
previously submitted a proxy.
The cost of preparing, assembling, printing and mailing the Proxy
Statement, the Notice of Annual Meeting and the enclosed form of Proxy will be
borne by the Company. The Company will request banks, brokers, dealers and
voting trustees or other nominees to solicit their customers who are beneficial
owners of shares listed of record in names of nominees and will reimburse them
for the reasonable out-of-pocket expenses of such solicitations.
This Proxy Statement and the accompanying proxy are first being sent or
given to the Company's stockholders on or about April 20, 1998.
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as to the beneficial
ownership of each person known to the Company to own more than 5% of the
Company's outstanding Common Stock as of March 31, 1998. The information set
forth below is based on information furnished by such beneficial owners to the
Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS
------------------- ------------------- ---------
<S> <C> <C>
Warburg, Pincus Investors, L.P. ........................... 4,412,755 16.0%
466 Lexington Avenue
New York, New York 10017(1)
Warburg, Pincus Capital Partners Liquidating Trust......... 3,912,767 14.2%
466 Lexington Avenue
New York, New York 10017(1)
Rodman W. Moorhead, III.................................... 8,325,522 30.1%
466 Lexington Avenue
New York, New York 10017(1)(2)
State of Wisconsin Investment Board........................ 2,592,000 9.4%
P.O. Box 7842
Madison, Wisconsin 53707
</TABLE>
- ---------------
(1) The sole general partner of Warburg, Pincus Investors, L.P. ("WPI") is
Warburg, Pincus & Co., a New York general partnership ("WP"). E.M. Warburg,
Pincus & Co., LLC, a New York limited liability company ("EMW LLC"), manages
WPI. The members of EMW LLC are substantially the same as the partners of
WP. Lionel I. Pincus is the managing partner of WP and the managing member
of EMW LLC and may be deemed to control both WP and EMW LLC. WP has a 20%
interest in the profits of WPI as the general partner. WP has an
approximately 26% interest in the assets held by Warburg, Pincus Capital
Partners Liquidating Trust ("WPCP"). The trustees of WPCP are Lionel I.
Pincus, John L. Vogelstein and Stephen Distler. Each of Messrs. Pincus,
Vogelstein and Distler disclaims beneficial ownership of any shares of
Common Stock beneficially owned by WPCP. By reason of the provisions of Rule
16a-1 under the Securities Exchange Act of 1934 ("Rule 16a-1"), WP and EMW
LLC may be deemed to be beneficial owners of the Common Stock and warrant
held by WPI and WP may be deemed to be a beneficial owner of the Common
Stock held by WPCP, although both WP and EMW LLC disclaim beneficial
ownership of such securities except to the extent of any indirect pecuniary
interest therein. Mr. Rodman W. Moorhead, III, a director of the Company, is
a Senior Managing Director and member of EMW LLC and a general partner of
WP. As such, Mr. Moorhead may be deemed to have an indirect pecuniary
interest (within the meaning of Rule 16a-1) in an indeterminate portion of
the shares beneficially owned by WPI, WPCP and WP. The totals for WPI and
Mr. Moorhead include 125,000 shares of Common Stock reserved for issuance
upon the exercise of a warrant held by WPI.
(2) All of the shares indicated as owned by Mr. Moorhead are owned directly by
WPI and WPCP and are included because of Mr. Moorhead's affiliation with WPI
and WPCP. Mr. Moorhead disclaims "beneficial ownership" of these shares
within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934.
See Footnote (1) above.
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<PAGE> 6
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of Common Stock
beneficially owned (or deemed to be beneficially owned pursuant to the rules of
the Securities and Exchange Commission) as of March 31, 1998 by each director of
the Company, the Company's chief executive officer and the four other most
highly compensated executive officers of the Company and the directors and all
of the executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME OWNED(1) OF CLASS
---- ------------ --------
<S> <C> <C>
Lawrence M. Gold, Ph.D.(2).................................. 877,466 3.2%
John D. Baldeschwieler, Ph.D.(3)............................ 149,827 *
Judith A. Hemberger, Ph.D.(4)............................... 5,000 *
David I. Hirsh, Ph.D.(5).................................... 49,016 *
Roger G. Kennedy(6)......................................... 34,867 *
Patrick J. Mahaffy(7)....................................... 489,750 1.8%
Rodman W. Moorhead, III(8).................................. 8,325,522 30.1%
Michael E. Hart(9).......................................... 78,757 *
Crispin G.S. Eley, D. Phil.(10)............................. 83,644 *
George B. Herron(11)........................................ 56,887 *
All directors and executive officers as a group (19
persons)(12).............................................. 10,441,256 37.1%
</TABLE>
- ---------------
* Less than 1% of the Company's outstanding Common Stock.
(1) Unless otherwise indicated, each person listed as the beneficial owner of
shares of Common Stock has the sole voting power and investment power with
respect to such shares.
(2) The amount shown includes 85,000 shares of Common Stock held by members of
Dr. Gold's immediate family in which shares Dr. Gold disclaims beneficial
ownership.
(3) The amount shown includes 88 shares of Common Stock owned by Dr.
Baldeschwieler's spouse in which shares Dr. Baldeschwieler disclaims
beneficial ownership. The amount shown includes 55,000 shares of Common
Stock owned by the John D. Baldeschwieler, Inc. Profit Sharing Trust and
1,911 shares owned by the John D. Baldeschwieler, Inc. Pension Trust, in
which trusts Dr. Baldeschwieler is the sole trustee and sole beneficiary.
The amount shown also includes options to purchase 24,500 shares of Common
Stock which are exercisable within 60 days. The amount shown does not
include options held by Dr. Baldeschwieler to purchase 2,500 shares of
Common Stock which are not exercisable within 60 days.
(4) The amount shown represents options to purchase Common Stock which are
exercisable within 60 days. The amount does not include options held by Dr.
Hemberger to purchase 5,000 shares of Common Stock which are not
exercisable within 60 days.
(5) The amount shown includes 5,352 shares of Common Stock owned by Dr. Hirsh's
wife and 704 shares owned by Dr. Hirsh's sons in which shares Dr. Hirsh
disclaims beneficial ownership. The amount also includes 1,980 shares of
Common Stock which are owned as a joint tenant with Dr. Hirsh's wife. The
amount shown includes options to purchase 17,500 shares of Common Stock
which are exercisable within 60 days. The amount shown does not include
options held by Dr. Hirsh to purchase 2,500 shares of Common Stock which
are not exercisable within 60 days.
(6) The amount shown includes 29,867 shares held in trust, including 17,899
shares held in trust in which Mr. Kennedy is the primary trustee. The
amount shown also includes options to purchase 5,000 shares of Common Stock
which are exercisable within 60 days. The amount shown does not include
options held by Mr. Kennedy to purchase 5,000 shares of Common Stock which
are not exercisable within 60 days.
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<PAGE> 7
(7) The amount shown includes options to purchase 56,250 shares of Common Stock
which are exercisable within 60 days. The amount shown does not include
options held by Mr. Mahaffy to purchase 88,750 shares of Common Stock which
are not exercisable within 60 days.
(8) All of the shares indicated as owned by Mr. Moorhead are owned directly by
WPI and WPCP and are included because of Mr. Moorhead's affiliation with
WPI and WPCP. Mr. Moorhead disclaims "beneficial ownership" of these shares
within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934.
See Footnotes (1) and (2) under "Stock Ownership of Certain Beneficial
Owners."
(9) The amount shown represents 437 shares of Common Stock credited to Mr.
Hart's account under the Company's 401(k) Retirement Savings Plan (the
"Company's 401(k) Plan") and options to purchase 78,320 shares of Common
Stock which are exercisable within 60 days. The amount shown does not
include options held by Mr. Hart to purchase 6,750 shares of Common Stock
which are not exercisable within 60 days.
(10) The amount shown includes 2,979 shares of Common Stock credited to Dr.
Eley's account under the Company's 401(k) Plan and options to purchase
68,035 shares of Common Stock which are exercisable within 60 days. The
amount shown also includes 2,904 shares of Common Stock owned jointly with
Dr. Eley's father in which shares Dr. Eley disclaims beneficial ownership.
The amount shown does not include options held by Dr. Eley to purchase
29,225 shares of Common Stock which are not exercisable within 60 days.
(11) The amount shown includes 37 shares of Common Stock credited to Mr.
Herron's account under the Company's 401(k) Plan and options to purchase
50,850 shares of Common Stock which are exercisable within 60 days. The
amount shown does not include options held by Mr. Herron to purchase 18,750
shares of Common Stock which are not exercisable within 60 days.
(12) The amount shown includes 512,955 shares of Common Stock issuable upon
options exercisable within 60 days.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Board of Directors of the Company consists of seven members.
Accordingly, at the Annual Meeting, seven directors will be elected to hold
office for one-year terms and until their successors have been elected and
qualified. The election of each nominee as a director requires the affirmative
vote of a majority of the shares of Common Stock represented in person or by
proxy and entitled to vote at the Annual Meeting. Shares represented by the
accompanying proxy will be voted FOR the election of the seven nominees unless
the proxy is marked in such a manner as to withhold authority to vote. Votes
withheld and broker non-votes are not counted toward a nominee's total. In the
event that any nominee for election as director becomes unavailable to serve, it
is intended that votes will be cast, pursuant to the enclosed proxy, for such
substitute nominee as may be nominated by the Company. The Company is not aware
of any nominee who will be unable to or for good cause will not serve as a
director. Certain information regarding each nominee is set forth below.
NOMINEES
LAWRENCE M. GOLD, PH.D.
Dr. Gold, 56, a founder of the Company, has been a director of the Company
since its inception in 1991 and has served as Chairman of the Board of Directors
since February 1993. He was Executive Vice President of Research and Development
of NeXstar Pharmaceuticals from March 1991 to February 1995. In February 1995,
Dr. Gold was named Chief Scientific Officer of the Company. Dr. Gold was
Chairman of the Department of Molecular, Cellular and Developmental Biology at
the University of Colorado at Boulder ("CU") from 1988 to 1992. In addition to
his full-time duties at the Company, Dr. Gold has been a professor at CU since
1970 and has received the CU Distinguished Lectureship Award. From January 1981
to June 1988, Dr. Gold served as Founder and Co-Director of Research for
Synergen, Inc., a biopharmaceutical
4
<PAGE> 8
company located in Boulder, Colorado. Dr. Gold is a recipient of the National
Institutes of Health Merit Award and Career Development Award. Dr. Gold received
an A.B. in Biochemistry from Yale University and a Ph.D. in Biochemistry from
the University of Connecticut. Dr. Gold is a member of the National Academy of
Sciences.
JOHN D. BALDESCHWIELER, PH.D
Dr. Baldeschwieler, 64, is a founder of Vestar, Inc. ("Vestar"), which
merged with the Company in February 1995, and served as Chairman of the Vestar
Board of Directors from Vestar's inception in April 1981 to January 1993 and as
a director through February 1995. He has served as a director of NeXstar
Pharmaceuticals since February 1995. He is currently a Professor of Chemistry at
the California Institute of Technology and was Chairman of the Division of
Chemistry and Chemical Engineering from 1973 to 1978. Dr. Baldeschwieler was
Deputy Director of the Office of Science and Technology, Executive Office of the
President from 1971 to 1973, and previously served on the faculties of Stanford
and Harvard Universities. He received a Ph.D. in Physical Chemistry from the
University of California at Berkeley. Dr. Baldeschwieler is a member of the
National Academy of Sciences and the American Philosophical Society.
JUDITH A. HEMBERGER, PH.D.
Dr. Hemberger, 50, has been a consultant for, and a director of, the
Company since 1997. She served as the Senior Vice President, Global Drug
Regulatory Affairs, for Hoechst Marion Roussel, Inc. from 1995 until 1997 after
serving as Vice President, Global Medical Affairs and Commercial Development;
Vice President, Global Regulatory and Medical Affairs; Vice President, Global
Regulatory Affairs and Scientific Communications; and Vice President, Regulatory
Affairs and Scientific Communications for Marion Merrell Dow Inc. from 1989 to
1995. From 1979 to 1989, Dr. Hemberger served in various capacities at Marion
Laboratories, Inc., including as Vice President, Regulatory Affairs and
Scientific Communications. She received a B.S. from Mount St. Scholastica
College, an M.B.A. from Rockhurst College and a Ph.D. from the University of
Missouri.
DAVID I. HIRSH, PH.D.
Dr. Hirsh, 58, has been a director of NeXstar Pharmaceuticals since
February 1993. He currently is the Robert Wood Johnson, Jr. Professor and
Chairman of the Department of Biochemistry and Molecular Biophysics at Columbia
University's College of Physicians and Surgeons. Dr. Hirsh has been a professor
at Columbia University since July 1990. Dr. Hirsh received a B.A. in Biology
from Reed College and a Ph.D. in Biochemistry from Rockefeller University.
ROGER G. KENNEDY
Mr. Kennedy, 71, has been a director of the Company since 1997. He served
as the Director of the U.S. National Park Service from 1993 to March 1997 after
having served as the Director of the National Museum of American History of the
Smithsonian Institution from 1979 to 1993. Prior to his association with the
Smithsonian Institution, Mr. Kennedy was Vice President, Finance and Senior
Financial Officer of The Ford Foundation. He has been a member of the Finance
Committee of the American Association for the Advancement of Science, chairman
of several finance committees for major foundations and a financial advisor to
many universities, including Harvard, Princeton, Stanford and Yale. In addition,
Mr. Kennedy served on the Vestar Board of Directors from 1989 to 1993.
PATRICK J. MAHAFFY
Mr. Mahaffy, 35, has been President and Chief Executive Officer of NeXstar
Pharmaceuticals since June 1992 and has served as a director since the Company's
inception in 1991. Prior to joining NeXstar Pharmaceuticals, Mr. Mahaffy was
employed beginning in 1986 by E.M. Warburg, Pincus & Co., LLC, a specialized
financial services firm, where he last served as a Vice President. Mr. Mahaffy
received a B.A. in
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<PAGE> 9
International Affairs from Lewis and Clark College and an M.A. in International
Affairs from Columbia University.
RODMAN W. MOORHEAD, III
Mr. Moorhead, 54, has served as a director of NeXstar Pharmaceuticals since
June 1992 and was a director of Vestar from 1984 to February 1995. He has been
employed since 1973 by E.M. Warburg, Pincus & Co., LLC., where he currently
serves as a Senior Managing Director. He is a director of: Coventry Corporation,
a multi-market health maintenance organization; Transkaryotic Therapies, Inc., a
gene therapy company; Xomed Surgical Products, a surgical devices and
ophthalmology products company; and a number of privately held companies. He is
also a trustee of ElderTrust, a healthcare real estate investment trust. Mr.
Moorhead received an A.B. and an M.B.A. from Harvard University. He is a trustee
of The Taft School and a member of the Overseers' Committee on University
Resources, Harvard College.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE SEVEN
DIRECTORS NAMED ABOVE.
AGREEMENTS REGARDING DIRECTOR NOMINATIONS
Mr. Moorhead serves as a director of the Company pursuant to certain
provisions of an agreement between the Company, Warburg, Pincus Investors, L.P.
("WPI"), Dr. Gold and others which provide that the Company will nominate and
use its best efforts to have elected up to two directors, designated by WPI
while WPI owns more than 20% of the outstanding Common Stock or one director
while it owns more than 10% of the outstanding Common Stock but less than 20%.
Currently, WPI has designated one director, Mr. Moorhead, to serve on the
Company's Board of Directors. Certain provisions of the same agreement provide
that the Company will nominate and use its best efforts to have elected as a
director one person designated by Dr. Gold if Dr. Gold were to increase his
ownership to more than 10% of the outstanding Common Stock. Pursuant to Mr.
Mahaffy's employment agreement with the Company, dated May 1, 1992, the Company
will nominate and use its best efforts to have him elected as a director so long
as he remains the Company's President and Chief Executive Officer.
DIRECTOR STANDARD OF CARE
The Company's Certificate of Incorporation provides that, to the fullest
extent permitted by Delaware law, the Company's directors shall not be liable
for monetary damages for breach of the directors' fiduciary duty of care to the
Company and its stockholders. These provisions do not eliminate the duty of
care, and in appropriate circumstances equitable remedies such as injunction,
rescission or other forms of non-monetary relief would remain available under
Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company, for acts
or omissions not taken or made in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware law. These
provisions also do not affect a director's responsibilities under any other
laws, such as federal securities laws.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors met six times during the fiscal year ended
December 31, 1997. During 1997, each incumbent director attended at least 75% of
the total number of meetings of the Board of Directors and committees of the
Board of Directors on which he or she served during the period the director was
a member of the Board.
The Company's Board of Directors has two standing committees, the Audit
Committee and the Compensation Committee, both appointed in August 1993. The
Audit Committee currently consists of Dr. Hemberger and Mr. Kennedy and the
Compensation Committee currently consists of Mr. Moorhead and Dr. Hirsh.
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<PAGE> 10
The principal responsibilities of the Audit Committee include recommending
the selection of the Company's independent auditors, reviewing with the
independent auditors their audit scope and fees and advising the Board of
Directors from time to time on the financial affairs of the Company. The Audit
Committee held three formal meetings during 1997, which all committee members
attended.
The principal functions of the Compensation Committee include reviewing
basic compensation arrangements for senior management, approving incentive
compensation and stock option awards to management personnel and others and
advising the Board of Directors from time to time on the organization and
structure of the management of the Company. See -- "Report of the Compensation
Committee of the Board of Directors." The Compensation Committee held four
formal meetings during 1997, each of which was attended by both Committee
members.
COMPENSATION OF DIRECTORS AND RELATED TRANSACTIONS
The Company pays each director, who is not an employee of the Company or an
employee of an affiliate of the Company, $1,000 for each meeting of the Board of
Directors or a committee of the Board of Directors that he or she attends in
person and $500 for each meeting that he or she attends by telephone; provided
that, a director does not receive any compensation for attending a committee
meeting that occurs on the same day as a meeting of the entire Board of
Directors. Directors are also reimbursed for their out-of-pocket expenses
incurred in attending meetings. Outside directors (non-employee directors who
are not affiliated with Warburg, Pincus & Co. ("WP")) are eligible to receive an
annual stock option grant under the Company's 1995 Director Option Plan (the
"Director Plan"). Under the Director Plan, each new outside director of the
Company is entitled to receive an option for 10,000 shares of the Company's
Common Stock on the date on which such person first becomes an outside director.
In addition, each outside director who has served on the Board of Directors for
at least six months automatically is entitled to receive an option grant for
5,000 shares of Common Stock on the last business day prior to each annual
meeting of stockholders of the Company. The options have a term of ten years, an
exercise price equal to 100% of the fair market value of the Common Stock on the
date of grant and vest 50% on each anniversary date of the two years following
the grant date; provided that, the optionee is still a director of the Company
on the date of vesting. All options held by a director terminate if they are not
exercised within two years of such director's ceasing to be a director of the
Company. Options for up to 500,000 shares of Common Stock have been reserved for
issuance under the Director Plan. In 1997, each of Dr. Baldeschwieler and Dr.
Hirsh received an option grant for 5,000 shares of Common Stock and each of Dr.
Hemberger and Mr. Kennedy received an option grant for 10,000 shares of Common
Stock.
During 1997, the Company contributed $250,000 to the CU laboratory of Dr.
Gold. In addition, the Company purchased $8,551 of supplies for Dr. Gold's
laboratory at CU. The Company has exclusive commercial rights in all of the
research occurring in Dr. Gold's laboratory.
During 1997, Dr. Baldeschwieler received $22,000 for technical and
scientific services performed pursuant to a consulting agreement with the
Company which was terminated in 1997. The Company also contributed $5,000 to Dr.
Baldeschwieler's laboratory at the California Institute of Technology during
1997.
During 1997, Dr. Hemberger received $5,000 for technical and scientific
services performed as a consultant for the Company. Dr. Hemberger entered into
an agreement with the Company in January 1998 pursuant to which she receives
$1,500 per day for consulting services which she provides to the Company.
Mr. Moorhead serves as Senior Managing Director of E.M. Warburg Pincus &
Co., LLC ("EMW LLC") and is a general partner of WP, which is the beneficial
owner of more than 10% of the Common Stock of the Company. In March 1997, WPI,
which is managed by EMW LLC and which is an owner of more than 10% of the Common
Stock, received a warrant to acquire 125,000 shares of Common Stock at a
purchase price of $12.50 per share in return for an affiliate of WPI
guaranteeing a credit line entered into by the Company (the "Credit Line").
Under the Credit Line, which was terminated in July 1997, the Company was
permitted to borrow up to $15 million. Dr. Baldeschwieler and Dr. Hirsh are
members of the Technical Advisory Board of EMW LLC.
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<PAGE> 11
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the federal securities laws, directors, certain officers and 10%
stockholders of the Company are required to report to the Securities and
Exchange Commission, by specific dates, transactions and holdings in the
Company's stock. To the Company's knowledge, all filing requirements applicable
to its directors and officers and 10% stockholders were complied with during
1997 except that Mr. Anthony D. Caracciolo, Warburg, Pincus Capital Partners,
L.P. and Warburg, Pincus Capital Partners Liquidating Trust each filed a report
approximately one month late.
EXECUTIVE COMPENSATION
The information below is provided with respect to the compensation of the
Company's Chief Executive Officer and the four other most highly compensated
executive officers of the Company (collectively, the "Named Officers") for the
fiscal year ended December 31, 1997 and the two immediately preceding fiscal
years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------- ----------------------- -------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
POSITION(S) YEAR ($) ($) ($) ($) (#)(1) ($) ($)
------------------ ---- ------- ------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Patrick J. Mahaffy.............. 1997 300,000 60,000 -- -- 20,000 -- 3,808(2)
President and Chief 1996 250,008 90,000 -- -- 25,000 -- 3,176(2)
Executive Officer 1995 230,000 100,000 -- -- 100,000 -- 630(2)
Lawrence M. Gold................ 1997 300,000 60,000 -- -- -- -- 11,500(3)
Chairman of the Board and 1996 250,008 90,000 -- -- -- -- 6,596(3)
Chief Scientific Officer 1995 230,000 100,000 -- -- -- -- 4,658(3)
Crispin G.S. Eley(4)............ 1997 200,000 50,000 -- -- 18,600 -- 3,709(5)
Vice President, Pharmaceutical 1996 161,138 59,536 -- -- 7,500 -- 2,500(5)
Operations 1995 131,039 75,163 -- -- 10,000 -- 2,500(5)
George B. Herron(4)............. 1997 185,000 42,550 -- -- 10,000 -- 3,121(7)
Vice President, Sales and 1996 145,000 53,650 -- -- 5,000 -- --
Marketing 1995 88,636 60,000 183,581(6) -- 10,000 -- 185(7)
Michael E. Hart(4).............. 1997 180,000 36,000 -- -- 6,750 -- 3,268(9)
Vice President and 1996 166,952 50,086 5,086(8) -- -- -- 2,500(9)
Chief Financial Officer 1995 137,571 55,028 285,181(8) -- -- -- 1,474(9)
</TABLE>
- ---------------
(1) In addition to these amounts, Dr. Eley, pursuant to the Company's 1994
Employee Stock Purchase Plan, in 1995 acquired 166 shares of Common Stock,
for $7.23 per share, in 1996 acquired 313 shares of Common Stock, at an
average per share price of $13.39, and in 1997 acquired 1,859 shares of
Common Stock, at an average per share price of $10.76.
(2) Includes payments of $630, $676 and $540 for 1995, 1996 and 1997,
respectively, of insurance premiums for a term life insurance policy
purchased by NeXstar Pharmaceuticals for the benefit of Mr. Mahaffy's estate
in the amount of $500,000 and matching contributions of $2,500 in each of
1996 and 1997 to the Company's 401(k) Plan.
(3) Represents payments of $4,658, $4,096 and $9,000 for 1995, 1996 and 1997,
respectively, of insurance premiums for a term life insurance policy
purchased by NeXstar Pharmaceuticals for the benefit of Dr. Gold's estate in
the amount of $1.0 million and matching contributions of $2,500 in each of
1996 and 1997 to the Company's 401(k) Plan.
(4) Represents compensation received on and after February 21, 1995. Prior to
February 21, 1995, Messrs. Eley, Herron and Hart were employed by Vestar,
Inc.
(5) Includes matching contributions to the Company's 401(k) Plan of $2,500 in
each of 1995, 1996 and 1997 and a payment of $918 in 1997 of a premium for a
life insurance policy.
8
<PAGE> 12
(6) Includes $108,208 to reimburse Mr. Herron for his costs in connection with
his relocation from the Company's offices in San Dimas, California to the
Company's principal executive offices. This amount also includes $75,373
representing a tax gross-up of relocation costs paid to Mr. Herron.
(7) Includes a matching contribution to the Company's 401(k) Plan of $2,500 in
1997 and a payment of $185 in 1995 of a premium for a life insurance policy.
(8) Includes $156,800 paid to Mr. Hart in 1995 to reimburse Mr. Hart for his
costs in connection with his relocation from the Company's offices in San
Dimas, California to the Company's principal executive offices. These
amounts also include $128,381 and $5,086 for 1995 and 1996, respectively,
representing a tax gross-up of relocation costs paid to Mr. Hart.
(9) Includes matching contributions to the Company's 401(k) Plan of $1,474,
$2,500 and $2,500 in 1995, 1996 and 1997, respectively.
OPTIONS GRANTED IN FISCAL YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS EXERCISE OR STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO BASE PRICE FOR OPTION TERM($)
OPTIONS GRANTED EMPLOYEES IN ($/SHARE) EXPIRATION ------------------------
NAME (#) FISCAL YEAR (1) DATE 5%(2) 10%(2)
---- --------------- ------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Patrick J. Mahaffy(3).... 20,000 2.3 12.875 12/10/05 122,945 294,474
Lawrence M. Gold......... -- -- -- -- -- --
Crispin G.S. Eley(4)..... 15,000 1.7 16.750 9/17/05 119,961 287,327
3,600 0.4 12.875 12/10/05 22,130 53,005
George B. Herron(3)...... 10,000 1.2 12.875 12/10/05 61,472 147,237
Michael E. Hart(3)....... 6,750 0.8 12.875 12/10/05 41,494 99,385
</TABLE>
- ---------------
(1) The exercise price of all of the options was the fair market price of the
Company's Common Stock on the date of the grant of the options.
(2) In accordance with Securities and Exchange Commission rules, these columns
show gains that might exist for the respective options, assuming the market
price of the Company's Common Stock appreciates from the date of grant over
a period of eight years at the annual rate of five and ten percent,
respectively. If the stock price does not increase above the exercise price,
compensation to the Named Officers will be zero.
(3) These options were granted on December 10, 1997 and vest 25% on each of the
first four anniversary dates of the date of grant.
(4) An option for 15,000 shares was granted on September 17, 1997 and an option
for 3,600 shares was granted on December 10, 1997. Each option vests 25% on
each of the first four anniversary dates of the date of grant.
9
<PAGE> 13
AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED DECEMBER 31, 1997 AND FY-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FY-END(#) FY-END($)(1)
ACQUIRED ------------------------- -------------------------
NAME ON EXERCISE(#) VALUE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------------- ----------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Patrick J. Mahaffy... -- -- 56,250/88,750 0/0
Lawrence M. Gold..... -- -- -- --
Crispin G.S. Eley.... -- -- 67,559/29,701 212,908/546
George B. Herron..... 6,000 48,000 50,447/19,153 141,715/463
Michael E. Hart...... -- -- 77,972/7,098 269,296/400
</TABLE>
- ---------------
(1) Value is calculated by (i) subtracting the exercise price per share from the
year-end market value of $11.375 per share and (ii) multiplying the result
in clause (i) by the number of shares subject to the option. Options that
have an exercise price equal to or greater than the fiscal year-end market
value are not included in the value calculation.
EMPLOYMENT CONTRACTS AND LOANS TO NAMED OFFICERS
Mr. Mahaffy and the Company entered into a letter agreement in May 1992
which outlines the terms of Mr. Mahaffy's employment with the Company. Mr.
Mahaffy presently receives a base salary of $300,000 per annum, subject to
periodic review and adjustment by the Board of Directors based upon Mr.
Mahaffy's performance. Mr. Mahaffy is also eligible for annual bonuses
determined by and in the discretion of the Board of Directors. The Company has
also purchased a $500,000 term life insurance policy for the benefit of Mr.
Mahaffy's estate. If Mr. Mahaffy's employment is terminated without cause, he
will receive a severance package as determined by the Board of Directors in its
reasonable discretion.
Dr. Gold has an employment agreement with the Company which expires on
February 14, 2001, unless terminated by either party prior to such date. Unless
earlier terminated, the term of Dr. Gold's employment agreement is extended one
year on each February 14. Pursuant to the terms of the employment agreement, Dr.
Gold's base salary is determined by the Board of Directors, but will always be
greater than $200,000 per annum unless Dr. Gold agrees otherwise. Dr. Gold
presently receives an annual salary of $300,000. In addition to the minimum
salary required by Dr. Gold's employment agreement, Dr. Gold is eligible to
participate in such fringe benefits as are generally made available to
executives of the Company, including any incentive compensation programs which
may be developed from time to time during the term of Dr. Gold's employment
agreement. The Company has also purchased a $1,000,000 term life insurance
policy for the benefit of Dr. Gold's estate. Dr. Gold can terminate his
obligations under the employment agreement at any time upon 30 days' written
notice. The Company can terminate Dr. Gold's employment (i) in the event of
physical or mental incapacitation, (ii) if Dr. Gold joins the faculty of an
academic institution other than CU or (iii) with or without cause. If Dr. Gold's
employment is terminated pursuant to clause (i) above, he will be entitled to
receive severance pay for the balance of the term of his employment agreement at
the rate of 75% of his salary at the time his employment is terminated, reduced
by applicable payroll taxes and the amount he receives during such period under
any disability insurance policy or plan maintained by the Company or under
Social Security or similar laws. If the Company terminates Dr. Gold's employment
without cause, Dr. Gold will be entitled to receive severance pay for the
balance of the term of the employment agreement at the rate of 100% of his
salary in effect at the time his employment is terminated, reduced by applicable
payroll taxes. If the Company terminates Dr. Gold's employment for cause or
pursuant to clause (ii) above, then Dr. Gold will not be entitled to receive any
severance pay.
In June 1994, Vestar loaned $80,000 to Dr. Crispin Eley who was appointed
an executive officer of the Company on February 22, 1995. The amount has an
interest rate of 7.25% per annum and is due on June 29, 1998.
10
<PAGE> 14
In February 1998, the Company loaned $161,488 to Dr. Bruce Eaton who is the
Company's Vice President, Chemistry. The loan has an interest rate of 8.5% per
annum and is due on January 21, 2002.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee (the "Committee") of the Company's Board of
Directors establishes the general compensation policies of NeXstar
Pharmaceuticals, including reviewing the salary levels of and bonus payments to
NeXstar Pharmaceuticals' executive officers. The Committee also administers the
Company's 1993 Incentive Stock Plan (the "Incentive Stock Plan") and the 1994
Employee Stock Purchase Plan (the "Employee Stock Plan"). Committee members
during 1997 were Mr. Rodman W. Moorhead, III and Dr. David I. Hirsh, both of
whom are non-employee directors.
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 that might incorporate this Proxy Statement or future
filings with the Securities and Exchange Commission, in whole or in part, this
Report of the Compensation Committee of the Board of Directors and the Common
Stock Performance Graph which follows shall not be deemed to be incorporated by
reference into any such filing.
OBJECTIVES OF COMPENSATION POLICY
The objectives of NeXstar Pharmaceuticals' executive compensation policy
are to (i) attract and retain highly qualified personnel, including executives,
scientists and administrative, marketing and medical/regulatory personnel with
sufficient experience in the highly competitive biotechnology and pharmaceutical
market; (ii) motivate and provide incentive to the Company's executive officers;
(iii) recognize and reward outstanding performance; and (iv) align the interests
of NeXstar Pharmaceuticals' executive officers with the interests of NeXstar
Pharmaceuticals' stockholders in maximizing the value of NeXstar
Pharmaceuticals.
The Committee believes that the compensation paid to its executive officers
should be linked with each individual's personal performance and the overall
performance of NeXstar Pharmaceuticals. In particular, the Committee believes
that a significant portion of each executive officer's compensation should be
contingent upon the performance of the Company and the executive officer against
an annual budget established for each of the Company and the executive officer.
In view of NeXstar Pharmaceuticals' stage of development and the nature of
the industry in which it conducts business, many of the traditional measures of
corporate performance, such as earnings growth, are generally inapplicable in,
or not appropriate standards for, evaluating the performance of NeXstar
Pharmaceuticals or most of its executives. Rather, in assessing compensation
levels for NeXstar Pharmaceuticals' executive officers, in addition to
individual performance, the Committee measures the Company's success in its
research and development programs, in achieving medical and regulatory
milestones, in developing marketing and manufacturing capabilities, in raising
capital necessary to fund the Company's activities and in such other matters as
the Committee deems important to the Company. In evaluating these factors, the
Committee does not assign relative rankings to each, but makes a subjective
determination based on a collective consideration of all such factors.
The Committee also reviews the compensation of all executive officers by
comparing their compensation to executive compensation in other corporations as
reported in salary survey data, including in surveys prepared for the Company,
and other publicly available information. In making such comparisons, the
Committee takes into account the compensation at companies with similar (a)
market capitalization; (b) numbers of approved products and products in clinical
and preclinical development; (c) levels and quality of research; (d) current and
potential product revenues; and (e) organizational complexity, including the
number of employees, number of office locations and level of integration of
operations. The Committee believes that the Company has many of the attributes
of its much larger competitors (i.e., it is an integrated biopharmaceutical
company that has its own manufacturing and worldwide marketing operations as
well as two currently approved products), but also has many attributes of
smaller research and development oriented companies which do not have integrated
operations and multiple approved products. In determining 1997 and
11
<PAGE> 15
1998 compensation levels, the Committee did not adopt a policy of targeting
specific compensation percentile rankings against a peer group of executives,
but did attempt to fix cash and other executive compensation at levels in line
with those which the Committee would expect to be paid to executives at
corporations similar to the Company.
The Committee has endorsed the policy that a significant portion of each
executive officer's compensation should be contingent upon the performance of
the Company and the officer. A significant portion of each executive officer's
compensation is therefore in the form of a discretionary bonus payment with two
thirds of the potential bonus for Mr. Mahaffy and Dr. Gold being based on the
Company's performance in meeting its budget. In the case of the Company's other
executive officers, 50% of each executive officer's potential bonus is based on
the Company's performance in meeting its budget and the executive officer's
contribution in assisting the Company in meeting its budget. Potential bonuses
for 1997 were limited and for 1998 are limited to 35% of base salary for the
executive officers.
The Committee believes that the Company's overall compensation program is
appropriate and competitive and that the compensation levels of the Company's
executives are appropriate relative to corporate performance and the
compensation level of persons in similar positions with comparable corporations.
IMPLEMENTATION OF COMPENSATION POLICY
In order to achieve the objectives of its current compensation policy,
NeXstar Pharmaceuticals compensates its executive officers through three
principal means: base salary, cash bonus payments and stock options.
Base Salary. The Committee attempts to establish base salary levels for
NeXstar Pharmaceuticals' executive officers that are competitive with the
compensation paid to executive officers of other comparable companies in the
biotechnology and pharmaceutical industry. In establishing these salary levels,
the Committee has relied upon salary survey data and other publicly available
information. The Committee also considers the experience of each executive
officer as well as his or her past performance and expected future performance.
Bonus Payments. Annual bonus payments are discretionary and the amount of
the payments is generally based on the progress which NeXstar Pharmaceuticals
has made during the prior year and the performance of the applicable executive
officer. The Company's annual budget is established at the beginning of each
fiscal year. Two thirds of the potential bonus for each of Mr. Mahaffy and Dr.
Gold is based on the Company's performance in meeting its budget. In the case of
the Company's other executive officers, 50% of each executive officer's
potential bonus is based on the Company's performance in meeting its budget and
the executive officer's contribution in assisting the Company in meeting its
budget. The remaining portion of each executive officer's potential bonus is
based on other factors, including the general performance of the Company and the
executive officer, the accomplishments of the executive officer's group or
department during the fiscal year and the level and difficulties of the
executive officer's responsibilities. Bonus payments are intended to provide
additional incentive to NeXstar Pharmaceuticals' executive officers and to
reward performance. Potential bonuses for 1998 are limited to 35% of base salary
for each executive officer. For the fiscal year ended December 31, 1997,
potential bonuses were limited to 35% of base salary for each executive officer.
The actual bonuses earned by all of the executive officers of the Company for
the fiscal year ended December 31, 1997 averaged 20% of base salary.
Stock Options. In order to attract, retain and motivate executive officers,
as well as other employees, NeXstar Pharmaceuticals adopted the Incentive Stock
Plan. Pursuant to the Incentive Stock Plan, option grants have been priced at
fair market value on the date of grant, vest over a period of four years and
have a term of eight years for the Company's U.S. employees and five years for
non-U.S. employees. Grants are generally made to employees, including executive
officers, on the date of the first meeting of the Committee after such
employee's date of hire and are based on salary level and position. All
employees, including executive officers, are eligible for subsequent
discretionary grants which are generally based on either individual and/or
corporate performance. Through the grant of stock options, NeXstar
Pharmaceuticals seeks to align the interests of its executive officers with the
interests of its stockholders. During 1997, pursuant to the
12
<PAGE> 16
Incentive Stock Plan, the Company granted options to acquire a total of 171,000
shares of its Common Stock to its executive officers at an average exercise
price of $12.39 per share. Additionally, the Company, pursuant to the Incentive
Stock Plan, granted options to acquire 693,110 shares of Common Stock to
individuals other than executive officers.
Executive officers of the Company also are permitted to participate in the
Stock Purchase Plan, which is open to all of the Company's full-time U.S.
employees and most of the Company's non-U.S. employees. The Employee Stock Plan
enables the Company's employees, including executive officers, to acquire the
Company's Common Stock at a discount to the market price by allocating up to 10%
of their base salary (subject to certain limits) to the acquisition of such
stock.
TAX CONSIDERATIONS
As part of its review, the Committee considers the anticipated tax effects
on the Company and its employees of the payments made and benefits granted to
the Company's officers. The Company's ability to deduct some types of
compensation may depend upon the timing of an executive's vesting or exercise of
previously granted rights. Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), places a limit of $1 million on the amount of
compensation (other than qualifying performance-based and other types of
compensation meeting certain requirements set forth in Section 162(m)) that may
be deducted by the Company in any year with respect to the Company's chief
executive officer and four other most highly compensated officers. Option grants
under the Incentive Stock Plan meet the requirements for deductibility as
performance-based compensation under Section 162(m). While the Committee
considers various alternatives to preserve the deductibility of compensation
payments to the Company's executive officers to the extent reasonably
practicable, the Committee will not necessarily limit executive compensation to
that which is deductible under Section 162(m). To date, the Company has not been
limited in taking any deductions as a result of Section 162(m).
KEY EXECUTIVE OFFICER COMPENSATION
Mr. Mahaffy's base salary for 1997 was, and for 1998 has been set at,
$300,000. In determining Mr. Mahaffy's compensation, the Committee considered
the Company's success in meeting its 1997 goals and budget and the Company's
1997 achievements, including the approval of AmBisome in the United States as a
primary therapy for patients with a low white blood cell count (febrile
neutropenia) who have a presumed fungal infection and as a secondary treatment
for fungal infections that do not respond to amphotericin B treatment; the
Company's settlement of its lengthy legal proceedings with The Liposome Company,
Inc. ("TLC") involving claims by TLC that the Company's method of freeze drying
AmBisome infringed certain TLC patents; the Company's continued progress in its
research and development of SELEX process-derived compounds and the Company's
Parallel SELEX process; continued growth in the number of vials of AmBisome
sold; the Company's launch of a new commercial business unit, NeXstar Technology
Products, to manufacture and market specialty chemicals and process technologies
to enhance the research and development of biomacromolecules (including
oligonucleotides); and the Company's successful sale of $80 million of 6 1/4%
Convertible Subordinated Debentures due 2004. The Committee also bases Mr.
Mahaffy's compensation on the complexity of the Company compared to other
biotechnology companies, taking into account that NeXstar Phamaceuticals
manufactures and markets its own products and is engaged in drug discoveries
using a broad range of diverse technologies. In addition, the Committee based
Mr. Mahaffy's salary level on available salary survey data and other publicly
available information relating to companies which the Committee considered to be
comparable to NeXstar Pharmaceuticals. In January 1998, Mr. Mahaffy was also
awarded a bonus of $60,000 in recognition of his performance and efforts in
1997. In addition, on December 10, 1997, Mr. Mahaffy received an option grant
for 20,000 shares of Common Stock with an exercise price of the then market
price of $12.875 per share. The options vest 25% each year on the anniversary
date of the grant and have a term of eight years. The options were granted in an
effort to further align Mr. Mahaffy's interests with those of the stockholders.
13
<PAGE> 17
Dr. Gold's base salary in 1997 was, and for 1998 has been set at, $300,000.
In determining Dr. Gold's salary, the Committee also considered factors similar
to those considered in determining Mr. Mahaffy's compensation. Dr. Gold was also
awarded a bonus of $60,000 in January 1998 in recognition of his 1997
performance and his efforts in connection with the progress made by the Company
in connection with the Company's diverse technologies.
COMPENSATION COMMITTEE
RODMAN W. MOORHEAD, III, Chairman
DAVID I. HIRSH
14
<PAGE> 18
COMMON STOCK PERFORMANCE GRAPH
The following graph compares the cumulative return on the Company's Common
Stock since its initial public offering on January 28, 1994 through December 31,
1997 with the cumulative total return of the Nasdaq Composite (US) and the CBOE
Biotech Index assuming a $100 investment at January 28, 1994 and reinvestment of
dividends. The Company's Common Stock is listed on the Nasdaq National Market.
TOTAL RETURN TO STOCKHOLDERS
(ASSUMES $100 INVESTMENT ON JANUARY 28, 1994)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPH
<TABLE>
<CAPTION>
NeXstar Nasdaq
Measurement Period Pharmaceuticals, Composite CBOE
(Fiscal Year Covered) Inc. (US) Biotech Index
<S> <C> <C> <C>
1/28/94 100 100 100
12/30/94 49 94 80
12/29/95 141 133 131
12/31/96 130 163 125
12/31/97 99 199 124
</TABLE>
PROPOSAL 2 -- RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS THE INDEPENDENT AUDITORS FOR THE 1998 FISCAL YEAR
Ernst & Young LLP has served as the independent auditors for the Company
since 1991, and upon recommendation of the Audit Committee of the Board of
Directors, the Company has appointed Ernst & Young LLP as its independent
auditors for the fiscal year ending December 31, 1998. Ratification of the
appointment of Ernst & Young LLP as the Company's independent auditors for the
1998 fiscal year requires the affirmative vote of a majority of the shares of
Common Stock represented in person or by proxy and entitled to vote at the
Annual Meeting. If no choice is specified or "Abstain" is not marked, proxies
will be voted FOR the ratification of the appointment of Ernst & Young LLP.
Abstentions and broker non-votes will be counted as present for purposes of
determining whether a quorum is present, and broker non-votes will not be
treated as entitled to vote on this matter at the Annual Meeting.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and will be available to respond to appropriate questions. Such
representatives of Ernst & Young LLP will also have the opportunity to make a
statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1998.
15
<PAGE> 19
MISCELLANEOUS
STOCKHOLDER PROPOSALS
Stockholder proposals complying with the applicable rules under the
Securities and Exchange Act of 1934 intended to be presented at the 1999 Annual
Meeting of Stockholders of the Company must be received by the Company by
December 22, 1998 to be eligible for inclusion in the Company's proxy materials
for such meeting. Such proposals should be directed to the Secretary of the
Company at the principal executive offices of the Company.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not aware
of any other business to be presented at the Annual Meeting. If any other
matters properly come before the meeting, the proxy holders intend to vote the
proxies in accordance with their best judgment on such matters.
1997 ANNUAL REPORT AND FORM 10-K
A COPY OF THE COMPANY'S 1997 ANNUAL REPORT TO STOCKHOLDERS AND A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "FORM 10-K") ACCOMPANY
THIS PROXY STATEMENT. ADDITIONAL COPIES OF THE FORM 10-K WILL BE FURNISHED TO
STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST. REQUESTS SHOULD BE ADDRESSED
TO NEXSTAR PHARMACEUTICALS, INC., 2860 WILDERNESS PLACE, BOULDER, COLORADO
80301, ATTENTION: INVESTOR RELATIONS.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Larry W. Smith
Larry W. Smith
Secretary
Boulder, Colorado
April 17, 1998
16
<PAGE> 20
NEXSTAR PHARMACEUTICALS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
MAY 27, 1998
The undersigned stockholder of NeXstar Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), hereby (1) acknowledges receipt of the Notice of
Annual Meeting of Stockholders of the Company, to be held at the Hotel
Boulderado, Boulder, Colorado on May 27, 1998 at 8:30 a.m., M.D.T., and the
Proxy Statement in connection therewith and (2) appoints Patrick J. Mahaffy,
Michael E. Hart and Larry W. Smith, or any of them, the true and lawful
attorneys, agents and proxies of the undersigned, with full power of
substitution to vote all of the shares of the Company's common stock, par value
$0.01 per share, which the undersigned may be entitled to vote at the Annual
Meeting of Stockholders of the Company to be held on May 27, 1998, and at any
adjournments or postponements of such meeting, with all powers which the
undersigned would possess if personally present, for the following purposes:
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 21
Please mark [X]
your votes as
indicated in
this example
1. To elect seven (7) directors of the Company for one-year terms and
until their respective successors are elected and qualified:
FOR ALL WITHHOLD
NOMINEES FOR ALL
(except as marked
to the contrary)
[ ] [ ]
LAWRENCE M. GOLD, Ph.D., JOHN D. BALDESCHWIELER, Ph.D.,
JUDITH A HEMBERGER, Ph.D., DAVID I. HIRSCH, Ph.D., ROGER
G. KENNEDY, PATRICK J. MAHAFFY, RODMAN W. MOORHEAD, III
INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name in the
space provided below.
- ----------------------------------------------------------
2. To ratify the appointment of Ernst & Young LLP
as independent auditors of the Company for the
fiscal year ending December 31, 1998:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To transact such other business as may properly
come before the meeting or any adjournments or
postponements thereof:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Check here if you plan
to attend the meeting
[ ]
Signature(s) Signature if held jointly
---------------------- ---------------------
Date , 1998
---------
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, 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.
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NEXSTAR PHARMACEUTICALS, INC.
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, MAY 27, 1998
8:30 A.M. - M.D.T.
BEING HELD AT
HOTEL BOULDERADO
2115 13TH STREET
BOULDER, COLORADO
