<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LA JOLLA PHARMACEUTICAL COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
LA JOLLA PHARMACEUTICAL COMPANY
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
--------------------------------------------------------------------
(2) Aggregate number of securities to which transactions 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:
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[ ] 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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(4) Date filed:
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<PAGE> 2
LA JOLLA PHARMACEUTICAL COMPANY
6455 NANCY RIDGE DRIVE
SAN DIEGO, CALIFORNIA 92121
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 1998
To the Stockholders of
LA JOLLA PHARMACEUTICAL COMPANY
The Annual Meeting of Stockholders of La Jolla Pharmaceutical
Company, a Delaware corporation (the "Company"), will be held at the Company's
offices at 6455 Nancy Ridge Drive, San Diego, California, on May 13, 1998, at
10:00 a.m. for the following purposes:
1. To elect a Board of six directors to serve until the next annual
meeting of stockholders of the Company and until their successors are elected
and qualified.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Company's Board of Directors has fixed the close of business on
March 17, 1998 as the record date for the determination of stockholders entitled
to notice of and to vote at the annual meeting.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. YOU
ARE URGED TO SIGN, DATE AND COMPLETE THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
IF YOU ATTEND THE MEETING AND WISH TO DO SO, YOU MAY VOTE YOUR SHARES IN PERSON
EVEN IF YOU HAVE SIGNED AND RETURNED YOUR PROXY CARD.
By Order of the Board of Directors
Wood C. Erwin
Secretary
San Diego, California
April 6, 1998
<PAGE> 3
LA JOLLA PHARMACEUTICAL COMPANY
6455 NANCY RIDGE DRIVE
SAN DIEGO, CALIFORNIA 92121
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1998
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of La Jolla Pharmaceutical
Company, a Delaware corporation (the "Company"), for use at the Company's 1998
Annual Meeting of Stockholders to be held on May 13, 1998 at 10:00 a.m. (the
"Meeting") and at any and all postponements and adjournments of the Meeting. The
Meeting will be held at the Company's offices at 6455 Nancy Ridge Drive, San
Diego, California. This Proxy Statement and the accompanying form of proxy will
be first mailed to stockholders on or about April 6, 1998.
The cost of preparing, assembling and mailing the Notice of Annual
Meeting of Stockholders, Proxy Statement and form of proxy and the cost of
soliciting proxies will be paid by the Company. The Company will pay brokers or
other persons holding stock in their names or the names of their nominees for
the reasonable expenses of forwarding soliciting material to their principals.
Proxies may be solicited in person or by telephone, telefax or other electronic
means by personnel of the Company who will not receive any additional
compensation for such solicitation. In addition, the Company has engaged
MacKenzie Partners, Inc. to assist in soliciting proxies for a fee of
approximately $2,500 plus reimbursement of reasonable out-of-pocket expenses.
VOTING
The close of business on March 17, 1998 has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Meeting. On that date there were 18,159,807 shares of the Company's Common
Stock outstanding. Each share is entitled to one vote on any matter that may be
presented for consideration and action by the stockholders at the Meeting. The
holders of a majority of the shares of Common Stock outstanding on the record
date and entitled to be voted at the Meeting, present in person or by proxy,
will constitute a quorum for the transaction of business at the Meeting and any
adjournments and postponements thereof.
Shares abstained or subject to a broker non-vote are counted as
present for the purpose of determining the presence or absence of a quorum for
the transaction of business. For proposals other than the election of directors,
abstentions are counted in tabulations of the votes cast on a proposal presented
to stockholders and generally have the same effect as a vote against the
proposal, whereas broker non-votes are not counted for purposes of determining
whether a proposal has been approved. With regard to the election of directors,
votes may be cast in favor of the director or withheld. Because directors are
elected by plurality, abstentions from voting and broker non-votes will be
entirely excluded from the vote and will have no effect on its outcome.
Each proxy submitted by a stockholder will, unless otherwise
directed by the stockholder in the proxy, be voted FOR election of the six
director nominees named herein. If a stockholder has submitted a proxy
appropriately directing how the shares represented thereby are to be voted, such
shares will be voted according to the stockholder's direction. Any stockholder
has the power to revoke his or her proxy at any time before it is voted at the
Meeting by submitting a written notice of revocation to the Secretary of the
Company or by filing a duly executed proxy bearing a later date. A proxy will
not be voted if the stockholder who executed it is present at the Meeting and
elects to vote the shares represented thereby in person.
The Board of Directors reserves the right to withhold any proposal
described herein from a vote at the Meeting if the Board of Directors deems a
vote on such proposal to be contrary to the best interests of the Company and
its stockholders. In such an event, the proposal withheld will be neither
adopted nor defeated.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of the Company's
Common Stock beneficially owned as of March 17, 1998 by those known by the
Company to be beneficial owners of more than five percent (5%) of the
outstanding shares of the Company's Common Stock, by each of the present
directors, by each of the executive officers named in the Summary Compensation
Table on page 6, and by all directors and executive officers of the Company as a
group. On March 17, 1998, there were 18,159,807 shares of Common Stock
outstanding. The number of shares beneficially owned is deemed to include shares
of the Company's Common Stock as to which the beneficial owner has or shares
either investment or voting power. Unless otherwise stated, and except for
voting powers held jointly with a person's spouse, the persons and entities
named in the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them. All information with
respect to beneficial ownership is based on filings made by the respective
beneficial owners with the Securities and Exchange Commission or information
provided to the Company by such beneficial owners.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership(1) Class
- ------------------------------------ ----------------------------- -------------
<S> <C> <C>
Biotech Target SA(2) 3,021,000 16.6%
Swiss Bank Tower
Panama 1
Republic of Panama
Abbott Laboratories 1,831,202 10.1%
100 Abbott Park Road
Abbott Park, Illinois 60064
State of Wisconsin Investment Board 1,522,500 8.4%
121 East Wilson
Madison, Wisconsin 53707
Allstate Insurance Company(3) 1,247,066 6.9%
Allstate Plaza G5D
Northbrook, Illinois 60062
New York Life Insurance Company(4) 1,145,608 6.3%
51 Madison Avenue
New York, New York 10010
Thomas H. Adams, Ph.D.(5) 33,000 *
Stephen M. Coutts, Ph.D.(6) 212,871 1.2%
Mark T. Edgar, Ph.D.(5) 26,300 *
William E. Engbers(5) 26,000 *
Steven B. Engle(7) 285,109 1.6%
Robert A. Fildes, Ph.D.(8) 64,902 *
Bonnie Hepburn, M.D.(5) 10,000 *
Joseph Stemler(9) 416,500 2.3%
W. Leigh Thompson, M.D., Ph.D.(5) 18,000 *
Peter G. Ulrich(10) 28,935 *
All directors and executive officers as a group (12 1,171,451 6.5%
persons)(11)
</TABLE>
- ----------
* Less than 1%
(1) Calculated pursuant to Rule 13d-3(d) under the Securities Exchange Act
of 1934, as amended. Shares not outstanding that are subject to options
or warrants exercisable by the holder thereof within 60 days of March
17, 1998 are deemed outstanding for the purposes of calculating the
number and percentage owned by such stockholder, but not deemed
outstanding for the purpose of calculating the percentage owned by each
other stockholder listed. Unless otherwise noted, all shares listed as
beneficially owned by a stockholder are actually outstanding.
(2) Wholly-owned subsidiary of BB Biotech AG, a Swiss corporation.
(3) Includes 140,429 shares issuable upon exercise of warrants.
(4) Includes 112,343 shares issuable upon exercise of warrants.
2
<PAGE> 5
(5) All shares are issuable upon exercise of stock options.
(6) Includes 204,000 shares issuable upon exercise of stock options.
(7) Includes 283,125 shares issuable upon exercise of stock options and 500
shares issuable upon exercise of warrants.
(8) Includes 31,000 shares issuable upon exercise of stock options and 2,101
shares issuable upon exercise of warrants.
(9) Includes 376,500 shares issuable upon exercise of stock options.
(10) Includes 25,000 shares issuable upon exercise of stock options.
(11) Includes 1,065,600 shares issuable upon exercise of stock options and
500 shares issuable upon exercise of warrants.
PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
The Company's directors are elected at each annual meeting of
stockholders. Currently, the number of authorized directors of the Company is
six. At the Meeting, six directors will be elected to serve until the next
annual meeting of stockholders and until their successors are elected and
qualified. If a quorum is present at the Meeting, the nominees receiving the
greatest number of votes up to the number of authorized directors will be
elected.
All of the nominees for election as directors at the Meeting set
forth in the table below are incumbent directors and were elected at the 1997
Annual Meeting of Stockholders. Each of the nominees has consented to serve as a
director if elected. Except to the extent that authority to vote for any
directors is withheld in a proxy, shares represented by proxies will be voted
FOR such nominees. In the event that any of the nominees for director should
before the Meeting become unable to serve if elected, shares represented by
proxies will be voted for such substitute nominees as may be recommended by the
Company's existing Board of Directors, unless other directions are given in the
proxies. To the Company's knowledge, all the nominees will be available to
serve.
The following biographical information is furnished with respect to
each of the six nominees for election at the Meeting.
<TABLE>
<CAPTION>
Nominee Age Principal Occupation Director Since
- -------------------------------- ------- ----------------------------------------------------- --------------
<S> <C> <C> <C>
Thomas H. Adams, Ph.D.(1) 55 Chairman Emeritus of the Board of Genta, Inc. 1991
William E. Engbers(2) 55 Director, Venture Capital, Allstate Insurance Company 1991
Steven B. Engle(3) 43 Chief Executive Officer and Chairman of the Board of the Company 1994
Robert A. Fildes, Ph.D.(4) 59 Former Chairman of the Board and Chief Executive Officer of 1991
ScotGen Biopharmaceuticals, Inc.
Joseph Stemler(5) 67 President, Chief Executive Officer and Chairman of the Board of 1989
Maret Corp.
W. Leigh Thompson, M.D., Ph.D.(6) 59 President and Chief Executive Officer of Profound Quality 1996
Resources, Ltd.
</TABLE>
- ----------
(1) DR. ADAMS is the founder and Chairman Emeritus of Genta, Inc., a
publicly held biotechnology company in the field of antisense
technology. Before assuming the role of Chairman Emeritus in 1997, Dr.
Adams served as Genta, Inc.'s Chief Executive Officer. Before founding
Genta, Dr. Adams founded Gen-Probe, Inc. in 1984 and served as its Chief
Executive Officer and Chairman until its acquisition by Chugai
Pharmaceuticals, Inc. in 1989. Before founding Gen-Probe, Dr. Adams was
Senior Vice President of Research and Development at Hybritech until
1984. Hybritech was later acquired by Eli Lilly and Co. in 1986. Dr.
Adams has also held management positions at Technicon Instruments and
the Hyland Division of Baxter Travenol. In addition, Dr. Adams currently
serves as a director of Life Technologies, Inc. and
3
<PAGE> 6
Biosite Diagnostics, Inc., each of which is a publicly held medical
research firm. Dr. Adams holds a Ph.D. in Biochemistry from the
University of California at Riverside.
(2) MR. ENGBERS became the director of Venture Capital for Allstate
Insurance Company in 1997 after serving as Venture Capital Manager since
1989. Before joining Allstate, he was a Vice President at Whitehead
Associates, an investment firm, from 1983 to 1987, and Chairman of the
Board of Plant Genetics, Inc., a publicly-traded biotechnology company,
from 1982 to 1989. Mr. Engbers also served as a director of Diametrics
Medical, Inc., a publicly held manufacturer and marketer of blood
chemistry testing systems, until June 1996. Mr. Engbers currently serves
as a director of DM Management, a publicly held women's apparel company,
Anthra Pharmaceuticals, Automotive Assistance, Cardiologic Systems,
Crystalline Matls., Hawaiian Wireless, Lanart, Inc., Periodontics, Inc.
and UroSurge, Inc. Mr. Engbers received a BBA degree in accounting from
Marshall University and has attended graduate business school at
Marshall and Seattle University.
(3) MR. ENGLE joined the Company in 1993 as Executive Vice President and
Chief Operating Officer. He assumed the offices of President, Director,
and Assistant Secretary in 1994, and became Chief Executive Officer in
July 1995 and Chairman of the Board in March 1997. From 1991 to 1993,
Mr. Engle served as Acting Chief Executive Officer, Acting Vice
President of Manufacturing and Vice President of Marketing for Cygnus
Therapeutic Systems, a publicly held company that develops and
manufactures delivery systems for therapeutic drugs. From 1987 to 1991
he was Chief Executive Officer of Quantum Management, a privately held
management consulting firm specializing in the pharmaceutical and
biotechnology industry. From 1984 to 1987, he was Vice President of
Marketing, Divisional General Manager, and Sales and Marketing Director
for Micro Power Systems, a privately held company that manufactures high
technology products including medical devices. From 1979 to 1984 he was
a Senior Management Consultant at Strategic Decisions Group and SRI
International, where he advised pharmaceutical, biotechnology and other
companies. Mr. Engle holds an MSEE and a BSEE in Biomedical Engineering
from the University of Texas.
(4) DR. FILDES was Chairman and Chief Executive Officer of ScotGen
Biopharmaceuticals, Inc., a privately held company in the field of human
monoclonal antibody technology, from 1993 until August 1997, at which
time ScotGen Biopharmaceuticals filed for Chapter 7 bankruptcy
protection under the federal bankruptcy laws. From 1990 to 1993, Dr.
Fildes was an independent consultant in the biopharmaceutical industry.
Dr. Fildes was the President and Chief Executive Officer of Cetus
Corporation from 1982 to 1990. Before his eight years at Cetus, Dr.
Fildes was the President of Biogen, Inc. from 1980 to 1982 and the Vice
President of Operations for the Industrial Division of Bristol-Myers
from 1975 to 1980. Dr. Fildes is also a director of Carrington
Laboratories, a publicly held company that develops and manufactures
products for wound and skin care, Atlantic Pharmaceuticals, a publicly
held company, and Cascade Oncogenics, Laboratory Skin Care, and Cytovax,
all privately held companies. Dr. Fildes holds a D.C.C. degree in
Microbial Bio-chemistry and a Ph.D. in Biochemical Genetics from the
University of London.
(5) MR. STEMLER currently serves as Chairman, President and Chief Executive
Officer of Maret Corp., a biopharmaceutical company. Before joining
Maret Corp. he served as Chairman and Chief Executive officer of Scholle
Corp., a manufacturer of aseptic packaging and systems. Mr. Stemler
served as Chairman of the Board of Directors of the Company from its
formation in May 1989 until March 1997, and also served as its Chief
Executive Officer until July 1995. Before the Company's formation, Mr.
Stemler served as President, Chief Executive Officer, and Chairman of
Quidel Corporation from 1985 to 1988, and as Chief Executive Officer and
Chairman of Quidel from 1988 to 1989. Quidel is a publicly held company
that develops, manufactures and markets rapid human diagnostic test
kits. From 1978 to 1985, he served as President of Bentley Laboratories
and, after Bentley's acquisition by American Hospital Supply Corporation
(AHSC), as President of AHSC's Bentley subsidiary. Mr. Stemler is
currently a director of Maret Corp., Sunrise Medical Inc., a publicly
held manufacturer and provider of medical products used in the
rehabilitation and recovery phases of patient care, Safeskin
Corporation, a publicly held manufacturer of surgical gloves, and
Scholle Corporation, a privately held company. Mr. Stemler is an
engineering graduate of Illinois Institute of Technology and also holds
advanced degrees in engineering and business administration.
(6) DR. THOMPSON has been President and Chief Executive Officer of Profound
Quality Resources, Ltd. since 1995. Prior to his present positions, Dr.
Thompson was Chief Scientific Officer with Eli Lilly and
4
<PAGE> 7
Company in 1994 and Executive Vice President and Group Vice President
with Lilly Research Laboratories from 1992 to 1994. Dr. Thompson also
serves as a director of Corvas International, Depo Med, DNX/Chrysalis,
GeneMedicine, Guilford Pharmaceutical, Medarex, and Orphan Medical,
Inc., each of which is a publicly held medical research firm. Dr.
Thompson holds a Ph.D. from the Medical University of South Carolina and
an M.D. from The Johns Hopkins University.
BOARD COMMITTEES AND MEETINGS
The Audit Committee of the Board of Directors currently consists of
Mr. Engbers and Mr. Stemler. The Audit Committee (a) reviews, prior to
publication, the Company's annual financial statements; (b) reviews the scope of
the current annual audit and fees therefor, and the results of the prior year's
audit; (c) reviews the Company's accounting and financial reporting practices;
(d) reviews the Company's system of internal accounting controls; (e) reviews
the scope of any other services to be performed by the independent auditors; (f)
recommends the retention or replacement of the independent auditors; (g) reviews
the adequacy of the Company's accounting and financial personnel resources; (h)
reviews and considers any other matters relative to the audit of the Company's
accounts and the preparation of its financial statements and reports that the
committee deems appropriate; and (i) reviews, acts on and reports to the Board
of Directors with respect to various financial reporting and accounting
practices and consults with the Company's independent auditors and management
with respect thereto.
The Compensation Committee of the Board of Directors currently
consists of Dr. Adams, Dr. Thompson and Dr. Fildes. The Compensation Committee
advises the Board of Directors with respect to various human resource matters,
including compensation, and administers the Company's stock incentive plans.
The Board of Directors acts as a committee of the whole with respect
to nominations for membership on the Board. The Board will consider nominees
recommended by stockholders, and stockholders desiring to make such a
recommendation should submit the name, address, telephone number, and
qualifications of the proposed nominee in writing to the Company's Secretary.
During the Company's fiscal year ended December 31, 1997, there were
five meetings of the Board of Directors, one telephonic meeting of the Audit
Committee, and one action by unanimous written consent of the Compensation
Committee. While a director, each of the current Board members attended 100% of
the meetings of the Board of Directors and meetings of the committees on which
he served during such period.
DIRECTORS' COMPENSATION
Directors who are also employees of the Company receive no extra
compensation for their service on the Board. Non-employee directors receive an
annual retainer of $5,000, fees of $1,000 per Board meeting attended in person
and $500 per telephonic meeting, and reimbursement of reasonable costs
associated with attendance at meetings of the Board and its committees.
Pursuant to the Company's 1994 Stock Incentive Plan, each
non-employee director of the Company automatically receives, upon becoming a
director, a one-time grant of an option to purchase up to 20,000 shares of the
Company's Common Stock at an exercise price equal to the fair market value of
the Common Stock on the date of the option's grant. These non-employee director
options have a term of ten years and become exercisable with respect to 25% of
the underlying shares on the grant date and with respect to an additional 25% of
the underlying shares on the date of each of the first three annual
stockholders' meetings following the grant date (or, if an annual meeting occurs
within six months after the grant date, then on the second, third and fourth
anniversaries of the grant date), if the recipient is then continuing as a
director for the ensuing year.
Each non-employee director also receives, upon each re-election to
the Board, an automatic annual grant of an option to purchase up to 5,000 shares
of the Company's Common Stock. These options have a term of ten years and an
exercise price equal to the fair market value of a share of the Company's Common
Stock on the date of grant. These options vest and become exercisable on the
earlier to occur of (i) the first anniversary of the grant date or (ii)
immediately prior to the annual meeting of stockholders of the Company next
following the grant date, if the director has served as a director from the
grant date to such earlier date.
Grants of non-employee directors' options count against the maximum
number of shares issuable under the Plan. Shares underlying non-employee
director options that expire or are terminated or canceled will again become
available for further awards under the Plan. In the event that a recipient of
non-employee director options
5
<PAGE> 8
ceases to be a director of the Company, all such options granted to him will be
exercisable, to the extent they were exercisable at the date directorship
ceased, for a period of 365 days or, if earlier, the expiration of the option
according to its terms. Vesting accelerates upon certain transactions including
dissolution, merger and change in control. The Plan provides that the exercise
price may be paid by Company loan or withholding of underlying stock, or
deferred until completion of broker-assisted exercise and sale transactions.
During the fiscal year ended December 31, 1997, 15,000 options were
issued to the Company's non-employee directors.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid for the last
three fiscal years to the Company's Chief Executive Officer and the other four
most highly compensated persons who were serving as executive officers of the
Company at the end of the fiscal year ended December 31, 1997 and whose total
annual salary and bonus for that fiscal year exceeded $100,000 (the "Named
Executive Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------- -------------
Securities
Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Options (#) Compensation ($)
- ----------------------------------------------- ------ ------------ ----------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Steven B. Engle 1997 246,737 10,000 25,000 --
Chief Executive Officer and 1996 222,461 -- 40,000 8,410
Chairman of the Board 1995 189,404 -- 110,000 --
Stephen M. Coutts, Ph.D. 1997 215,027 -- 10,000 --
Executive Vice President of 1996 186,250 -- 30,000 --
Research and Development 1995 174,808 -- 10,000 --
Peter G. Ulrich 1997 170,326 5,000 55,000 --
Executive Vice President(1) 1996 150,865 -- 20,000 --
1995 9,808 -- 45,000 15,000
Mark T. Edgar, Ph.D. 1997 155,863 -- 19,000 --
Vice President of Operations 1996 143,631 -- 15,000 --
1995 86,308 -- 31,000 10,000
Bonnie Hepburn, M.D. 1997 200,682 -- -- --
Vice President of Clinical 1996 130,769 -- 50,000 23,758
Development(2) 1995 -- -- -- --
</TABLE>
- ----------
(1) Mr. Ulrich joined the Company as Senior Vice President of Corporate
Development and Marketing on November 30, 1995. Accordingly, he received
compensation from the Company only for the period from November 30 to
December 31 in the fiscal year ended December 31, 1995.
(2) Dr. Hepburn joined the Company as Vice President of Clinical Development
on April 29, 1996. Accordingly, she did not earn or receive any
compensation from the Company until the fiscal year ended December 31,
1996.
6
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options
granted to the Named Executive Officers during the fiscal year ended December
31, 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------
Potential Realizable Value at
Number % of Total Assumed Annual Rates of Stock
of Securities Options Price Appreciation for
Underlying Granted to Exercise Option Term ($)(4)
Options Employees in Price Expiration -------------------------------
Name Granted(#)(1) Fiscal Year ($/share)(2) Date(3) 5% 10%
- ----------------- -------------- --------------- ------------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Steven B. Engle 25,000 8.0% 5.3125 02/06/07 83,525 211,669
Stephen M. Coutts 10,000 3.2% 4.375 05/13/07 27,514 69,726
Peter G. Ulrich 15,000 4.8% 5.3125 02/06/07 50,115 127,001
40,000 12.8% 5.3750 09/11/07 135,212 342,655
Mark T. Edgar 9,000 2.9% 4.3750 05/13/07 24,763 62,754
10,000 3.2% 4.7500 11/14/07 29,872 75,703
Bonnie Hepburn -- -- -- -- -- --
</TABLE>
(1) All options were granted under the Company's 1994 Stock Incentive Plan
and are exercisable with respect to 20% of the shares covered thereby
starting on the first anniversary of the grant date, and thereafter with
respect to an additional 20% of the shares covered thereby on each
successive anniversary date. The Plan is administered by the
Compensation Committee of the Board, which has broad discretion and
authority to construe and interpret the Plan and to modify outstanding
options.
(2) The exercise price and tax withholding obligations related to the
exercise may be paid by delivery of already owned shares or by offset of
the underlying shares, subject to certain conditions.
(3) All of the options were granted for a term of ten years, subject to
earlier termination upon certain events related to termination of
employment or a change in control of the Company.
(4) The potential realizable values listed are based on an assumption that
the market price of the Company's Common Stock appreciates at the stated
rate, compounded annually, from the date of grant to the expiration
date. The 5% and 10% assumed rates of appreciation are determined by the
rules of the Securities and Exchange Commission and do not represent the
Company's estimate of the future market value of the Common Stock.
Actual gains, if any, are dependent on the future market price of the
Company's Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth the number of shares acquired on
exercise of stock options and the aggregate gains realized on exercise during
the fiscal year ended December 31, 1997 by the Named Executive Officers. The
table also sets forth the number of shares covered by exercisable and
unexercisable options held by such executives on December 31, 1997, and the
aggregate gains that would have been realized had these options been exercised
on December 31, 1997, even though these options were not exercised, and the
unexercisable options could not have been exercised, on that date.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at Fiscal In-the-Money Options
Shares Acquired Value Year End (#) At Fiscal Year End (1)($)
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------- --------------- ------------ -------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
Steven B. Engle -- -- 261,542 113,458 569,769 63,101
Stephen M. Coutts -- -- 202,000 47,000 666,748 22,872
Peter G. Ulrich -- -- 22,000 98,000 13,125 27,188
Mark T. Edgar -- -- 18,000 47,000 13,374 14,686
Bonnie Hepburn -- -- 10,000 40,000 0 0
</TABLE>
7
<PAGE> 10
- ----------
(1) These amounts represent the difference between the exercise price of the
in-the-money options and the market price of the Company's Common Stock
on December 31, 1997 (the last trading day of 1997). The closing price
of the Company's Common Stock on that day on the Nasdaq National Market
was $4.50. Options are in-the-money if the market value of the shares
covered thereby is greater than the option exercise price.
EMPLOYMENT AND CONSULTING CONTRACTS
Stephen M. Coutts has an agreement with the Company entitling him to
receive nine months severance in the event of involuntary termination of
employment by the Company without cause. Further, if a change in control of the
Company occurs and Mr. Coutts employment is terminated without cause, in
addition to the severance payment, all employee stock options and other
performance awards granted to him before December 31, 1997 will automatically
vest and will become fully exercisable for a minimum period of one year
following the date of termination of his employment.
Peter G. Ulrich has an agreement with the Company which provides
that all options received pursuant to the Company's 1994 Stock Incentive Plan
prior to December 31, 1997 will vest and become fully exercisable if a change in
control of the Company occurs and his employment is terminated, his
responsibilities are materially reduced, or if his employment requires him to
relocate outside of the greater San Diego area.
Steven B. Engle has an employment contract with the Company that
provides for a minimum annual salary of $240,000 and entitles him to receive
twelve months severance and up to twelve months of medical, dental and life
insurance coverage in the event of (i) involuntary termination of his employment
by the Company without cause; (ii) if a change in control of the Company occurs
and (a) his employment is terminated, (b) his reporting responsibility changes
such that he does not report directly to the CEO or board of directors of the
surviving company on all matters, (c) that he has a material reduction in
responsibility or (d) is required to be employed other than in the San Diego
area. Also, all employee stock options and other performance awards granted to
Mr. Engle before December 31, 1997 shall automatically vest and become fully
excercisable as of the termination of his employment and shall remain
excercisable for a minimum period of one year.
Joseph Stemler has a consulting contract with the Company pursuant
to which he may perform consulting services for the Company from time to time as
requested by the Company's Chief Executive Officer in exchange for $1,500 per
day.
In addition, all of the Company's employees, including the Named
Executive Officers, are required to enter into Invention and Confidential
Information Agreements with the Company. These agreements are intended to
protect the Company's confidential information, including assignment to the
Company of inventions conceived by the employee in the course of his or her
employment with the Company. However, due to proscriptions on noncompetition
covenants under California law, neither the Company's executives nor its
employees are subject to any restriction on accepting employment with a
competitor of the Company if their employment with the Company terminates for
any reason.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the
"Committee") is composed of three non-employee directors and administers the
Company's executive compensation programs, including the Company's stock
incentive plans. The Company's executive compensation program is designed to
provide competitive levels of base compensation in order to attract, retain and
motivate high quality employees, tie individual total compensation to individual
performance and the success of the Company, and align the interests of the
Company's executive officers with those of its stockholders. In 1997, the
Company's executive compensation program consisted of base salary, selected
bonuses and stock option grants.
The Committee believes that the Company's ability to execute its
drug discovery programs and successfully bring products to market depends
heavily upon the quality of its top scientific and management personnel.
Accordingly, the Committee attempts to set base salary for the Company's
executive officers at levels that are competitive with compensation paid to top
executives of similarly situated biotechnology companies, and not significantly
below cash compensation available to the Company's key executives through
alternative employment. However, because of the Company's current and historical
need to conserve its cash resources,
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rewards for Company or individual performance have generally taken the form of
stock-based awards and, in 1997, limited bonuses.
The Committee administers the Company's 1994 Stock Incentive Plan,
pursuant to which the Company may grant various stock-based awards intended to
compensate Company personnel and align the interests of the recipients with
those of the Company's stockholders. To date, only stock options have been
granted under the Plan, although the Committee may, in the future, utilize other
types of incentive awards available under the Plan. The Committee also
administers options previously granted under the Company's 1989 Incentive Stock
Option Plan and 1989 Nonstatutory Stock Option Plan.
Because of the Company's need to conserve cash, the Committee has
used stock options to reward executives for individual and Company performance
and to provide incentives for vigorous pursuit of the Company's goals. In
general, executive officers receive a substantial grant of stock options upon
joining the Company. The Committee believes that these initial grants serve two
purposes. First, they help to make up for any discrepancy between the cash
compensation paid by the Company and salaries and bonuses available from more
established employers who would compete for the services of the Company's
executives. Second, the initial option grants are intended to give the
recipients a meaningful stake in the Company's long-term performance, with any
ultimate realization of significant value from those options being commensurate
with returns to stockholders on investments in the Company's stock.
In addition to initial grants, executive officers are eligible to
receive periodic option grants based upon the performance of the Company and
their individual progress and contributions. Such grants, if any, are determined
by the Committee with the input and recommendation of the Company's Chief
Executive Officer. In determining award levels, the Committee emphasizes Company
performance and the contributions made by individual executives to that
performance. The Committee believes that such a retrospective analysis is most
appropriate and practicable for a development-stage biopharmaceutical enterprise
like the Company, which operates in an uncertain environment and without the
same sorts of standard measures of performance as are available to more seasoned
companies.
The Company faces significant challenges in the coming years and
will rely heavily upon the Chief Executive Officer for leadership, strategic
direction and operational effectiveness. During the remainder of the decade, the
Company's goals include succeeding in clinical trials for LJP 394 and additional
drug candidates, forming additional strategic alliances, raising additional
financing, and building a strong organization to support the Company's
anticipated growth. The Chief Executive Officer will have ultimate
responsibility for these goals as part of maximizing stockholders' returns on
their investments in the Company and the Committee believes stockholders are
best served if the Chief Executive Officer has significant incentives to meet
these expectations. In 1997, the Chief Executive Officer received an option to
purchase up to 25,000 shares of Common Stock and a $10,000 bonus, primarily in
recognition of his success in formation of the Company's strategic alliance with
Abbott. The Committee set the Chief Executive Officer's options and bonus on the
basis of its qualitative evaluation of the Chief Executive Officer's
contributions. The Committee did not attempt to apply any specific quantitative
measures to the Chief Executive Officer's compensation, or to provide any
specific dollar value of option-based compensation to the Chief Executive
Officer, due to the difficulty of determining the long-term value of an
investment in the Company's stock.
COMPENSATION COMMITTEE
Thomas H. Adams, Ph.D.
W. Leigh Thompson, M.D., Ph.D.
Robert A. Fildes, Ph.D.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors
consists of Dr. Adams, Dr. Thompson and Dr. Fildes. No current member of the
Compensation Committee is a current or former officer or employee of the
Company. There are no Compensation Committee interlocks between the Company and
other entities involving the Company's executive officers and Board members who
serve as executive officers or Board members of such other entities.
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STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return
on the Company's Common Stock for the period from June 3, 1994 (the date on
which the Company's Common Stock was first publicly traded) and ending on
December 31, 1997 with the Center for Research in Securities Prices ("CRSP")
Total Return Index for the Nasdaq Stock Market (U.S. Companies) and the CRSP
Total Return Index for Nasdaq Pharmaceutical Stocks (comprising all companies
listed in the Nasdaq Stock Market under SIC 283). The graph assumes that $100
was invested on June 3, 1994 in the Company's Common Stock and each index and
that all dividends were reinvested. No cash dividends have been declared on the
Company's Common Stock. Although the graph would normally cover a five-year
period, the Company's Common Stock has been publicly traded only since June 3,
1994, so the graph commences as of such date. The comparisons in the graph are
required by the Securities and Exchange Commission and are not intended to
forecast or be indicative of possible future performance of the Company's Common
Stock.
[PERFORMANCE GRAPH]
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the directors and
officers of the Company and persons who own more than 10% of the Company's
equity securities are required to report their initial ownership of the
Company's equity securities and any subsequent changes in that ownership to the
Securities and Exchange Commission and the Nasdaq National Market. Specific due
dates for these reports have been established, and the Company is required to
disclose in this Proxy Statement any late filings during the fiscal year ended
December 31, 1997. To the Company's knowledge, based solely on its review of the
copies of such reports required to be furnished to the Company during the fiscal
year ended December 31, 1997, all of these reports were timely filed.
VOTE REQUIRED AND BOARD OF DIRECTORS RECOMMENDATION
With regard to the election of directors, votes may be cast in favor
of the director or withheld. Because directors are elected by plurality,
abstentions from voting and broker non-votes will be entirely excluded from the
vote and will have no effect on its outcome. If a quorum is present at the
Meeting, the nominees receiving the greatest number of votes up to the number of
authorized directors (six) will be elected. THE BOARD OF DIRECTORS RECOMMENDS
THAT STOCKHOLDERS VOTE FOR THE SIX NOMINEES FOR DIRECTOR DESCRIBED IN PROPOSAL
1.
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<PAGE> 13
STOCKHOLDER PROPOSALS
Stockholders who wish to have proposals for action at the Company's
1999 Annual Meeting of Stockholders considered for inclusion in next year's
proxy statement and form of proxy must cause their proposals to be received in
writing by the Company at its address set forth on the first page of this Proxy
Statement no later than December 6, 1998. Such proposals should be addressed to
the Company's Secretary, and may be included in next year's proxy materials if
they comply with certain rules and regulations promulgated by the Securities and
Exchange Commission.
OTHER MATTERS
The Board of Directors of the Company does not know of any other
matters that are to be presented for action at the Meeting. If any other matters
come before the Meeting or any adjournments and postponements thereof, the
persons named in the enclosed proxy will have the discretionary authority to
vote all proxies received with respect to such matters in accordance with their
judgment.
INDEPENDENT PUBLIC AUDITORS
By selection of the Company's Board of Directors, the firm of Ernst
& Young LLP has served as the Company's auditor since its incorporation in 1989.
The Board of Directors has again selected Ernst & Young LLP to serve as the
Company's independent auditors for the fiscal year ending December 31, 1998. One
or more representatives of Ernst & Young LLP are expected to be present at the
Meeting and will have any opportunity to make a statement if they so desire and
will be available to respond to appropriate questions.
ANNUAL REPORT
The Company's 1997 Annual Report to Stockholders has been mailed to
stockholders concurrently with this Proxy Statement, but such report is not
incorporated herein and is not deemed to be a part of this proxy solicitation
material.
San Diego, California
April 6, 1998
STOCKHOLDERS ARE URGED TO SPECIFY THEIR CHOICES ON, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS
HELPFUL, AND YOUR COOPERATION WILL BE APPRECIATED.
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<PAGE> 14
LA JOLLA PHARMACEUTICAL COMPANY
6455 Nancy Ridge Drive
San Diego, CA 92121
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Steven B. Engle and Peter G. Ulrich, and
each of them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote as designated on the reverse
all the shares of Common Stock of La Jolla Pharmaceutical Company (the
"Company") held of record by the undersigned on March 17, 1998 at the Annual
Meeting of Stockholders to be held on May 13, 1998, and at any postponements
and adjournments thereof. The proposals referred to on the reverse side of this
proxy are described in the Proxy Statement for the Annual Meeting of
Stockholders dated April 6, 1998.
CONTINUED ON THE REVERSE SIDE AND IS TO BE SIGNED
<PAGE> 15
<TABLE>
<CAPTION>
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
<S> <C> <C> <C>
[X] Please mark
your votes as
in this example
FOR all nominees WITHHOLD
listed at right AUTHORITY
(except as marked to to vote for all
the contrary below) nominees listed
at right
1. ELECTION [ ] [ ] Nominees: 2. In their discretion, the Proxies are
OF Thomas H. Adams, Ph.D. authorized to vote upon such other
DIRECTORS William E. Engbers business as may properly come before
(Instruction: To withhold authority to vote for any Steven B. Engle the meeting.
individual nominee, line through or otherwise Robert A. Flides, Ph.D.
strike out the nominee's name at right.) Joseph Stemler THIS PROXY, WHEN PROPERLY EXECUTED
W. Leigh Thompson, M.D., Ph.D. WILL BE VOTED IN THE MANNER
DIRECTED HEREON BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR
THE NOMINEES NAMED IN PROPOSAL 1.
PLEASE SIGN, DATE AND PROMPTLY RETURN THIS
PROXY CARD USING THE ENCLOSED ENVELOPE.
SIGNATURE ____________________________________ DATE _______________ SIGNATURE ________________________________ DATE ______________
IF HELD JOINTLY
Please sign exactly as your name appears hereon. When shares are held by joint tenants both should sign. When signing as the
attorney-in-fact, executor, administrator, trustee or guardian, please sign as such and include such title. 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.
</TABLE>
