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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
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 (Amendment No. )
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
[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
TARGETED GENETICS CORPORATION
---------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
---------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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: ______________ (3) Filing Party: _______________
(2) Form, Schedule or (4) Date Filed: ________________
Registration Statement No. ___________
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[LOGO OF TARGETED GENETICS CORPORATION]
April 10, 2000
Dear Shareholder:
You are cordially invited to attend Targeted Genetics Corporation's 2000
Annual Meeting of Shareholders. The annual meeting will be held on Friday, May
12, 2000, at 8:30 a.m. local time, at the Washington Athletic Club, 1325 Sixth
Avenue, Seattle, Washington.
At the annual meeting, you will be asked to elect three directors to
Targeted Genetics' board of directors.
TARGETED GENETICS' BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
ELECTION OF THE NOMINEES FOR DIRECTOR.
You should read carefully the accompanying Notice of Annual Meeting of
Shareholders and the proxy statement for additional information.
Whether or not you plan to attend the annual meeting, please complete, sign
and date the enclosed proxy card and return it promptly in the enclosed
postage-prepaid envelope. Your stock will be voted in accordance with the
instructions you give in your proxy. If you attend the annual meeting, you may
vote in person if you wish, even if you previously returned your proxy card.
Your prompt cooperation is greatly appreciated.
Sincerely,
/s/ H. Stewart Parker
H. Stewart Parker
President and Chief Executive
Officer
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD.
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TARGETED GENETICS CORPORATION
1100 Olive Way, Suite 100
Seattle, Washington 98101
NOTICE OF THE 2000 ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 12, 2000
TO THE SHAREHOLDERS OF TARGETED GENETICS CORPORATION:
We will hold the 2000 Annual Meeting of Shareholders of Targeted Genetics
Corporation on Friday, May 12, 2000, at 8:30 a.m. local time, at the
Washington Athletic Club, 1325 Sixth Avenue, Seattle, Washington, for the
following purpose:
1. To elect three Class 3 directors to Targeted Genetics' board of
directors, to hold office until the third annual meeting of shareholders
following this election or until their successors are elected and
qualified.
2. To transact such other business as may properly come before the annual
meeting or any adjournments or postponements of the annual meeting.
These items of business are more fully described in the proxy statement
accompanying this notice. The board of directors has fixed the close of
business on March 20, 2000, as the record date for the determination of
shareholders entitled to notice of and to vote at the annual meeting. Only
shareholders of record on the record date are entitled to notice of and to
vote at the annual meeting and any adjournments or postponements of the annual
meeting.
The directors elected will be the three candidates receiving the greatest
number of votes cast, in person or by proxy, at the annual meeting.
You are cordially invited to attend the annual meeting. To assure your
representation at the annual meeting, however, you should complete, sign,
date, and return the enclosed proxy card as promptly as possible in the
enclosed postage prepaid envelope. Your shares will be voted in accordance
with the instructions you give in your proxy. You may revoke your proxy at any
time before it is voted by signing and returning a proxy for the same shares
bearing a later date, by filing with the Secretary of Targeted Genetics a
written revocation bearing a later date or by attending the annual meeting and
voting in person.
By Order of the Board of Directors
/s/ James A. Johnson
James A. Johnson
Secretary
Seattle, Washington
April 10, 2000
<PAGE>
TARGETED GENETICS CORPORATION
----------------
PROXY STATEMENT
This proxy statement is being furnished to holders of shares of common stock
of Targeted Genetics Corporation, a Washington corporation, in connection with
the solicitation of proxies by our board of directors for use at our 2000
Annual Meeting of Shareholders and at any adjournments or postponements of the
annual meeting. We will hold the annual meeting on Friday, May 12, 2000 at the
Washington Athletic Club, 1325 Sixth Avenue, Seattle, Washington, at 8:30 a.m.
local time. The approximate date of the mailing of this proxy statement and
the accompanying proxy is April 12, 2000.
Matters to Be Considered at the Annual Meeting
At the annual meeting, shareholders of record of Targeted Genetics as of the
close of business on March 20, 2000 will consider and vote on (1) the election
of three Class 3 directors to the board, to hold office until the third annual
meeting of shareholders following this election and until their successors are
elected and qualified; and (2) such other business as may properly come before
the annual meeting or any adjournments or postponements of the annual meeting.
THE BOARD RECOMMENDS THAT OUR SHAREHOLDERS VOTE "FOR" ELECTION OF THE
NOMINEES FOR DIRECTOR.
Record Date; Shares Entitled to Vote; Vote Required
Only our shareholders of record at the close of business on the record date,
March 20, 2000, are entitled to notice of and to vote at the annual meeting.
We have one class of voting securities outstanding, which is designated as
common stock, and each share of common stock is entitled to one vote. As of
the record date, 36,362,679 shares of common stock were issued and
outstanding. The presence, in person or by proxy, of the holders of a majority
of the shares of common stock entitled to vote is necessary to constitute a
quorum for the transaction of business at the annual meeting.
The directors elected at the annual meeting will be the three candidates
receiving the greatest number of votes cast by the holders of shares of common
stock present, in person or by proxy, at the annual meeting. Holders of shares
of common stock are not entitled to cumulate votes in the election of
directors. As of the record date, our directors and executive officers and
their affiliates may be deemed to be the beneficial owners of approximately
15% of the outstanding shares of our common stock. Each of our directors and
executive officers plans to vote or direct the vote of all shares of common
stock over which he or she has voting control in favor of the election of the
nominees for director.
Abstentions and broker nonvotes will have no effect on the election of
directors since they will not represent votes cast for the purpose of voting
for the election of directors.
Proxies
Shares of common stock represented by properly executed proxies we receive
at or before the annual meeting that have not been revoked will be voted at
the annual meeting in accordance with the instructions contained in the proxy.
Shares of common stock represented by properly executed proxies for which no
instruction is given will be voted "FOR" the election of the nominees for
director. To ensure that your shares
<PAGE>
are voted, please complete, sign, date and return promptly the enclosed proxy
card in the postage-prepaid envelope we have provided. You may revoke a proxy
by
. submitting a later-dated proxy for the same shares at any time before
the vote on the election of the nominees for director;
. delivering written notice of revocation to the Secretary of Targeted
Genetics at any time before the vote; or
. attending the annual meeting and voting in person. Mere attendance at
the annual meeting will not in and of itself revoke a proxy.
If the annual meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the annual meeting all proxies will be voted in the
same manner as the proxies would have been voted at the original convening of
the annual meeting (except for any proxies that have at that time effectively
been revoked or withdrawn), even if the proxies had been effectively voted on
the same or any other matter at a previous meeting.
Proxy Solicitation
We will bear the cost of soliciting proxies from our shareholders. In
addition to solicitation by mail, our directors, officers and employees may
solicit proxies by telephone, facsimile or otherwise. We will not additionally
compensate our directors, officers and employees for this solicitation but
will reimburse them for out-of-pocket expenses they incur. We will reimburse
brokerage firms, fiduciaries and other custodians who forward soliciting
material to the beneficial owners of shares of common stock held of record by
them for the reasonable expenses they incur in forwarding the material.
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PROPOSAL
ELECTION OF DIRECTORS
Our Amended and Restated Bylaws provide that our board of directors shall be
composed of not less than one nor more than nine directors. At present, we
have seven directors, each of whom is placed into one of three classes such
that, to the extent possible, there is an equal number of directors in each
class. At the first election of directors to the classified Board, which took
place in 1994, each Class 1 director was elected to serve a one-year term,
each Class 2 director was elected to serve a two-year term and each Class 3
director was elected to serve a three-year term. Every director subsequently
elected to the Board generally holds office for a three-year term and until
his or her successor is elected and qualified. However, if a director resigns
from the board before the expiration of his or her term, the director elected
or appointed to fill the resulting vacancy may be designated to a class such
that he or she initially must be elected to a shorter term.
At the annual meeting, three Class 3 directors are to be elected, each to
hold office for a three year term Nelson L. Levy, H. Stewart Parker and Mark
Richmond have been nominated for election to the Board as Class 3 directors.
Dr. Levy has been nominated to fill the vacancy left by the resignation of
Martin Sutter as director. We intend to cast votes in accordance with the
accompanying proxy for the election of these nominees unless contrary
instructions are received. If any nominee should become unavailable for any
reason, we intend to cast votes for a substitute nominee designated by the
board. The board has no reason to believe that any of the nominees named will
be unable to serve if elected.
Nominees
Nelson L. Levy (age 58) has been a director of Targeted Genetics since May
1999. Since 1993, Dr. Levy has served as chairman of the board and chief
executive officer of CoreTechs Corporation, a private consulting firm that
focuses on the development of early stage technologies. From 1992 to 1993, he
served as president of Fujisawa Pharmaceutical Company, the American
subsidiary of Japan's third-largest pharmaceutical company. From 1984 to 1992
he served as chief executive officer of CoreTechs Corporation. Before serving
as vice president for Pharmaceutical Research at Abbott Laboratories from 1981
to 1983, Dr. Levy was a tenured professor of microbiology and immunology at
Duke University. He serves on the board of directors of Zonagen, Inc. and
several privately held companies and serves on the scientific advisory boards
of several biotechnology companies. Dr. Levy received his B.A. from Yale
University, his M.D. from Columbia University and his Ph.D. from Duke
University.
H. Stewart Parker (age 44) managed the formation of Targeted Genetics as a
wholly owned subsidiary of Immunex Corporation and has been president, chief
executive officer and a director since Targeted Genetics' inception in 1989.
She served in various capacities at Immunex from August 1981 through December
1991, most recently as vice president, corporate development. Ms. Parker also
served as president and a director of Receptech Corporation, a company formed
by Immunex in 1989 to accelerate the development of soluble cytokine receptor
products, from February 1991 to January 1993. Ms. Parker is currently a member
of the board of directors and the executive committee of BIO, the primary
trade organization representing the biotechnology industry. She received her
B.A. and M.B.A. from the University of Washington.
Mark Richmond (age 69) has been a director of Targeted Genetics since July
1996. He is a business consultant and a research fellow of the School of
Public Policy, University College London. From January 1993 until his
retirement in February 1996, Dr. Richmond served as director of research at
Glaxo Wellcome plc (previously Glaxo plc), a pharmaceutical company. From
October 1990 until December 1993, he served as chairman of the Science and
Engineering Research Council, London. Dr. Richmond serves on the board of
directors of Genentech, Inc. and several privately held biotechnology
companies. He received his Ph.D. and D.Sc. from Cambridge University, England.
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Continuing Directors--Terms Expire 2001
Jack L. Bowman (age 67) has served as a director of Targeted Genetics since
March 1997. From 1987 until his retirement in January 1994, Mr. Bowman was a
company group chairman at Johnson & Johnson, with primary responsibility for a
group of companies in the diagnostic, blood glucose monitoring and
pharmaceutical businesses. From 1980 to 1987, Mr. Bowman held various
positions at American Cyanamid Company, a pharmaceutical company, most
recently as executive vice president. Mr. Bowman served as a member of the
board of trustees of The Johns Hopkins University and currently serves as a
director of Cell Therapeutics, Inc., Celgene Corporation, Cellegy
Pharmaceuticals, Inc., CytRx Corporation, NeoRx Corporation and Osiris
Therapeutics Inc.
Jeremy L. Curnock Cook (age 51) has been a director of Targeted Genetics
since July 1995 and was elected chairman of the board in February 1998. Mr.
Cook founded the International Biochemicals Group in 1975, which he sold to
Royal Dutch Shell in 1985, serving as managing director until 1987. He is a
director of Rothschild Asset Management Limited and has been responsible for
the Rothschild Bioscience Unit since 1987. He is also a director of Cell
Therapeutics, Inc., Creative BioMolecules Inc. and Ribozyme Pharmaceuticals
Inc., as well as several public and privately held companies outside the
United States, including International Biotechnology Trust plc (U.K.). Mr.
Cook received his M.A. in Natural Sciences from Trinity College, Dublin.
Continuing Directors--Terms Expire 2002
James D. Grant (age 67) has been a director of Targeted Genetics since
February 1993. Mr. Grant served as chief executive officer of T Cell Sciences,
Inc., a biotechnology company, from 1986 to 1992 and as chairman of the board
from 1986 until his retirement in 1997. He was vice president of CPC
International, Inc., a multinational food and industrial products company,
from 1972 to 1986. Mr. Grant served as deputy commissioner of the Food and
Drug Administration (the "FDA") from 1969 to 1972, and was vice chairman of
the Advisory Committee on the FDA from 1990 to 1991. Mr. Grant currently
serves on the board of directors of Biocompatibles, Ltd. (U.K.) and
International Biotechnology Trust plc (U.K.).
Louis P. Lacasse (age 43) has been a director of Targeted Genetics since May
1998. Mr. Lacasse has served as president of GeneChem Management, Inc.,
manager of GeneChem Technologies Venture Fund L.P., a venture capital fund,
since May 1997. He served as vice president (Healthcare and Biotechnology) of
SOFINOV, an investment subsidiary of Caisse de depot et placement du Quebec,
from July 1987 to May 1997. Mr. Lacasse has previously served on the boards of
a number of private and public companies, including Biochem Pharma Inc., and
he currently serves on the boards of several privately held biotechnology
companies.
Director Compensation
Directors who are employees of Targeted Genetics do not receive any fee for
their services as directors. We pay directors who are not employees of
Targeted Genetics meeting attendance fees of $1,000 for each board meeting
attended in person, $500 for each telephonic board meeting and $500 for each
committee meeting held separately from a board meeting, whether in-person or
telephonic. We also grant our nonemployee directors stock options under our
nonemployee director stock option grant program in our 1999 Stock Option Plan
and reimburse them for travel expenses they incur in attending meetings.
Committees of the Board and Meetings
We have established standing committees of the board, including audit,
compensation and nominating committees. Each of these committees is
responsible to the full board, and its activities are therefore subject to
approval of the board. The functions performed by these committees can be
summarized as follows.
Audit Committee. The audit committee reviews our corporate accounting and
reporting practices, internal accounting controls, audit plans and results,
investment policies and financial reports to ensure that our assets
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are appropriately safeguarded and to ensure the quality and integrity of our
financial records. In addition, the audit committee recommends to the board
the independent auditors to be retained by Targeted Genetics. The members of
this committee are Jeremy L. Curnock Cook, Louis P. Lacasse and Nelson L.
Levy. The audit committee met twice during 1999.
Compensation Committee. The compensation committee establishes salaries,
incentives and other forms of compensation for our directors and officers.
This committee also administers our various incentive compensation and benefit
plans, including stock option plans, and recommends the establishment of
policies relating to the incentive compensation and benefit plans. The members
of this committee are Jack L. Bowman, James D. Grant and Mark P. Richmond.
This committee met once during 1999.
Nominating Committee. The nominating committee makes recommendations to the
board concerning the desired qualifications of prospective candidates to fill
vacancies on the board. The members of this committee are H. Stewart Parker
and James D. Grant. This committee did not meet in 1999. The nominating
committee will consider shareholder recommendations for director-nominees that
are submitted in accordance with the procedures established in our bylaws.
During 1999, there were eight meetings of the Board, four of which were held
telephonically. With the exception of Mr. Curnock Cook and Mr. Richmond, each
of our directors was in attendance at 75% or more of the total number of board
meetings held during that director's service on the board. Each of the
directors was in attendance at all of the committee meetings held during the
director's service on the applicable committee.
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EXECUTIVE COMPENSATION
Compensation Summary
The following table lists all compensation earned during 1999, 1998 and 1997
by our chief executive officer and our other executive officers whose salary
and bonus exceeded $100,000 for 1999 (collectively, the "Named Executive
Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual ------------
Compensation Securities
----------------- Underlying All Other
Name and Principal Position Year Salary Bonus Options Compensation
--------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
H. Stewart Parker........... 1999 $265,000 $104,675 133,079 $2,716(1)
President and Chief 1998 229,000 57,250 95,875 593
Executive Officer 1997 216,000 -- 60,196 2,783
Barrie J. Carter, Ph.D. .... 1999 185,000 58,460 67,411 3,052(2)
Executive Vice President 1998 174,000 34,800 59,300 1,365
and Director of Research 1997 167,000 -- 37,081 3,527
and Development
James A. Johnson............ 1999 180,500 57,038 61,600 2,716(3)
Senior Vice President, 1998 159,000 23,850 54,152 640
Finance and Administration, 1997 152,500 -- 33,950 2,783
Chief Financial Officer,
Treasurer and Secretary
</TABLE>
- --------
(1) All Other Compensation consists of matching contributions to a 401(k)
savings plan of $2,500 in 1999, $185 in 1998 and $2,375 in 1997 and
excess life insurance premiums of $216 in 1999 and $408 in 1998 and 1997.
(2) All Other Compensation consists of matching contributions to a 401(k)
savings plan of $2,500 in 1999, $213 in 1998 and $2,375 in 1997 and
excess life insurance premiums of $552 in 1999 and $1,152 in 1998 and
1997.
(3) All Other Compensation consists of matching contributions to a 401(k)
savings plan of $2,500 in 1999, $232 in 1998 and $2,375 in 1997 and
excess life insurance premiums of $216 in 1999 and $408 in 1998 and 1997.
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Option Grants in 1999
The following table provides information regarding options granted to the
Named Executive Officers during 1999.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential
Individual Grants Realizable Value
------------------------------------------- at Assumed Annual
Percent of Rates of Stock
Number of Total Options Price
Shares Granted to Appreciation for
Underlying Employees in Exercise Option Term(3)
Options Last Fiscal Price Expiration -----------------
Name Granted(1) Year(2) ($/Share) Date 5%($) 10%($)
- ---- ---------- ------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
H. Stewart Parker....... 133,079 18.3% $2.25 1/21/2009 $188,307 $477,208
Barrie J. Carter,
Ph.D. ................. 67,411 9.3 2.25 1/21/2009 95,387 241,729
James A. Johnson........ 61,600 8.5 2.25 1/21/2009 87,164 220,891
</TABLE>
- --------
(1) Options are granted at the fair market value on the date of grant and
vest over four years, with 6.25% of each grant becoming exercisable
quarterly, beginning three months after the date of grant. Certain
changes in control of Targeted Genetics can trigger accelerated vesting
of stock options and rights to related payments.
(2) We granted options to purchase 727,765 shares of common stock to our
employees during 1999.
(3) The dollar amounts under these columns are calculated based on assumed
rates of appreciation of 5% and 10% and are not intended to forecast
future appreciation. The Named Executive Officers will realize no value
if our stock price does not exceed the exercise price of the options.
Option Exercises in 1999 and 1999 Option Values
The following table provides information regarding unexercised options held
as of December 31, 1999 by the Named Executive Officers. None of these
individuals exercised any options during 1999.
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Total Number of Value of Unexercised
Unexercised Options at In-the-Money Options at
Fiscal Year-End(#) Fiscal Year-End($)(1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
H. Stewart Parker........... 210,866 242,992 $216,119 $336,135
Barrie J. Carter, Ph.D. .... 115,383 139,503 45,080 187,445
James A. Johnson............ 129,218 127,567 98,782 171,227
</TABLE>
- --------
(1) The value of the unexercised options is calculated based on the closing
share price of our common stock on the Nasdaq National Market on December
31, 1999, which was $3.94 per share.
Change in Control Arrangements
Senior Management Employment Agreements. In October 1996, we entered into
Senior Management Employment Agreements with each of Ms. Parker, Dr. Carter
and Mr. Johnson. These agreements provide that upon a "change in control" (as
that term is defined in the agreements), each of these executives will be
entitled to receive an annual base salary of no less than his or her salary in
effect before the change in control and an annual bonus at least equal to the
average of his or her annual bonuses for the three prior years. In addition,
each of these executives will be entitled to insurance coverage and other
employee benefits no less favorable than our benefits in effect before the
change in control. If during the two-year period after a change in control we
terminate the employment of any of these executives for any reason other than
death, disability or "cause" or the executive terminates his or her employment
for "good reason" (as these terms are defined in the
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agreements), the terminated executive will be entitled to specified additional
benefits, including a lump-sum payment equal to one and one-half (or, in the
case of Ms. Parker, two times) of the sum of (1) that executive's annual
salary before the change in control (or on the date of termination, if the
executive's salary is higher on that date) and (2) a percentage of that salary
equal to the executive's percentage bonus for the year before the change in
control. If no such bonus was paid or if the bonus cannot be determined, the
applicable percentage will be 10%. In addition, the terminated executive will
be entitled to be paid an amount sufficient to compensate the executive for
any excise tax, including interest and penalties, imposed under Section 4999
of the Code and will be entitled to continuation of life insurance,
disability, health, dental and other similar employee benefits for one year
after termination. The Senior Management Employment Agreements may be
terminated with 30 days' prior written notice, but we will remain liable for
any obligations arising before the termination.
Option Plans. Our Restated 1992 Stock Option Plan, which has been suspended,
and the our 1999 Stock Option Plan both contain provisions that could result
in the accelerated vesting of options granted under those plans in the event
of a "change in control," as that term is defined in the option plans.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation committee of our board of directors (the "Committee")
currently consists of Jack L. Bowman, James D. Grant and Mark P. Richmond, all
of whom are nonemployee directors. The Committee is responsible for our
executive compensation program and for administering our option plans. On an
annual basis, the Committee evaluates the performance and compensation of our
executive officers.
Our executive compensation philosophy is to pay competitively to attract
qualified executive personnel capable of leading Targeted Genetics to
achieving our business objectives, retain and motivate these executives to
achieve superior performance, link individual compensation to individual and
company performance, and align executives' financial interests with those of
our shareholders.
Our executive compensation program includes the following components:
. competitive base salaries that target the 50th percentile of base
salaries paid by other biotechnology companies of comparable size and
mission with which we compete for qualified executives;
. annual bonuses that are structured to encourage executives to focus on
achieving important short-term corporate objectives; and
. long-term incentives in the form of stock option grants, which provide
financial rewards on the same basis as those realized by our
shareholders.
Base Salaries and Bonuses. On January 18, 1999, the Committee met to
consider the compensation levels of our executive officers, which were
reviewed in comparison to: (1) Radford Associates' 1998 Biotechnology
Compensation Survey Report, a published survey of salaries paid by 401
companies within the biotechnology industry, with a subset of data for
companies with 51 to 149 employees; (2) Top Five Data Services' 1998 Report on
Executive Compensation in the Biopharmaceutical Industry, a survey of 388
publicly traded companies engaged in research, development, manufacture or
distribution of drugs, therapies or diagnostic products; and (3) the salary
levels of executives at the following publicly traded "peer group" companies:
Ariad Pharmaceuticals, Inc., Avigen, Inc., Cell Genesys, Inc., GeneMedicine,
Inc., Megabios Corp., Onyx Pharmaceuticals, Inc., Ribozyme Pharmaceuticals,
Inc. and Vical Incorporated.
After review and analysis of the industry data described above, the
Committee concluded that Ms. Parker's base salary was substantially below the
targeted 50th percentile compared to all available benchmarks. Accordingly,
the Committee directed a 16% increase in Ms. Parker's base salary to $265,000,
which placed her salary at approximately 96% of the 1998 benchmark. Next, the
Committee reviewed the base salaries of Dr. Carter and Mr. Johnson and
concluded that both were near the targeted 50th percentile. The Committee
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recommended a 6% increase in Dr. Carter's base salary, to $185,000, which put
it at approximately 99% of the 1998 benchmark. The Committee recommended a 13%
increase in Mr. Johnson's base salary, to $180,500, reflecting both a market
adjustment and his promotion to Senior Vice President, Finance and
Administration. This increase put Mr. Johnson's base salary at approximately
109% of the 1998 benchmark.
On January 20, 2000, the Committee met to evaluate the performance of our
executive officers with respect to our corporate objectives that were set in
early 1999. The primary objectives covered completion of transactions to
strengthen the company financially and strategically; progress in the
development of tgAAV-CF according to plan; development of product pipeline
opportunities; and conservation of cash resources. The first objective,
related to strategic and financial transactions, was weighted significantly
more than the other three objectives. Performance relative to these four
objectives was the basis for payout of the executive officers' target bonus.
In addition, the target bonus could be increased by up to 100% based on the
generation of return on investment to our shareholders, as measured by our
stock price performance during the year. The Committee concluded that the
executive officers had performed well in 1999 and that all of the identified
corporate objectives had been substantially achieved. However, given that
certain cash inflows, some of which are contingent on future events, will not
occur until mid-2000, the Committee recommended that bonuses be paid to our
executive officers at 79% of target amounts, which were 25% of 1999 base
salaries for Ms. Parker and 20% for Dr. Carter and Mr. Johnson. The Committee
resolved to revisit the remaining 21% of target bonuses at mid-year 2000,
based on the actual cash inflows realized at that time. Furthermore, since our
share price increased by more than 200% during the year, as measured by a 20-
day average price in late December and early January, the target bonus payout
was increased by 100% for each executive officer.
Stock Option Grants. We grant stock options to provide a long-term incentive
opportunity that is directly linked to an increase in shareholder value.
Options generally have been granted with an exercise price equal to the market
value of our common stock on the date of the grant, have a term of ten years
and become exercisable over a four-year period beginning on the date of grant.
To encourage stock retention, we grant all options as incentive stock options
to the maximum extent possible under the Code.
The Committee uses a formula to establish the number of stock option grants
to be awarded annually to our executives, as follows: the number of shares on
which options are to be awarded equals the executive's base salary (multiplied
by 125% in the case of Ms. Parker), adjusted upward or downward depending on
company performance, divided by the closing price of our common stock on the
award date or an average of closing prices of our stock over the twenty-day
period ending on the award date. For 1999, the formula was not adjusted for
company performance and the divisor for the formula was the closing price of
the our common stock on the date of the stock option grant. The resulting
share amounts awarded in January 2000 were 38,686 shares for Ms. Parker,
21,606 shares for Dr. Carter and 21,080 shares for Mr. Johnson.
Section 162(m) of the Internal Revenue Code limits the tax deductibility by
a corporation of compensation in excess of $1 million paid to its chief
executive officer and any other of its four most highly compensated executive
officers. Compensation that qualifies as "performance-based," however, is
excluded from the $1 million limit. The Committee does not presently expect
total cash compensation payable for salaries to exceed the $1 million limit
for any individual executive. In addition, our stock option plans are designed
to qualify as performance-based compensation that is fully deductible by us
for income tax purposes. The Committee will continue to monitor the
compensation levels potentially payable under our other compensation programs,
but intends to retain the flexibility necessary to provide total compensation
in line with competitive practice, our compensation philosophy and the best
interests of Targeted Genetics.
Compensation Committee
Jack L. Bowman
James D. Grant
Mark P. Richmond
9
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
return for Targeted Genetics, the Nasdaq Stock Market Total Return Index and a
peer group composed of Avigen, Inc., Cell Genesys, Inc., Collateral
Therapeutics, Inc., GeneMedicine, Inc., Genetic Therapy, Inc., Megabios Corp.,
Onyx Pharmaceuticals, Inc., Somatix Therapy Corporation, Transgene SA,
Viagene, Inc., and Vical Incorporated ("Gene Therapy Peer Group"). Since there
is no widely recognized standard industry group comprised of Targeted Genetics
and peer companies, this peer group is composed of companies that are or were
in the gene therapy business and that we believe to be companies that analysts
have frequently used to compare with an investment in Targeted Genetics. The
graph shows the value of $100 invested on December 30, 1994 in our common
stock, the Gene Therapy Peer Group and the Nasdaq Stock Market Total Return
Index.
Comparison of Cumulative Total Return Among Targeted Genetics
Corporation, Gene Therapy Peer Group and the Nasdaq Stock Market
Total Return Index
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
Dec. 30, Dec. 29, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1994 1995 1996 1997 1998 1999
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Targeted Genetics....... $100.00 $107.14 $ 85.71 $ 50.00 $ 25.00 $ 75.00
- ----------------------------------------------------------------------------------
Gene Therapy Peer Group. $100.00 $433.70 $339.34 $228.37 $148.35 $345.62
- ----------------------------------------------------------------------------------
Nasdaq Stock Market..... $100.00 $141.34 $173.89 $213.07 $300.25 $542.43
</TABLE>
10
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table provides information with respect to the beneficial
ownership of shares of our common stock as of March 10, 2000 by
. each person that we know beneficially owns more than 5% of our common
stock;
. each of our directors;
. each of the Named Executive Officers; and
. all of our directors and executive officers as a group.
The percentage ownership data is based on 36,344,346 shares of our common
stock outstanding as of March 10, 2000. Under the rules of the Securities and
Exchange Commission ("SEC"), beneficial ownership includes shares over which
the indicated beneficial owner exercises voting and/or investment power.
Shares of common stock subject to options that are currently exercisable or
will become exercisable within 60 days are deemed outstanding for computing
the percentage ownership of the person holding the option, but are not deemed
outstanding for purposes of computing the percentage ownership of any other
person. Except as otherwise noted, we believe that the beneficial owners of
the shares of common stock listed below have sole voting and investment power
with respect to all shares beneficially owned, subject to applicable community
property laws.
<TABLE>
<CAPTION>
Percent of
Name and Address of Amount and Nature of Common Stock
Beneficial Owner Beneficial Ownership Outstanding
------------------- -------------------- ------------
<S> <C> <C>
5% Owners:
International Biotechnology Trust plc... 4,664,286(1) 12.5%
c/o Rothschild Asset Management Limited
Five Arrows House
St. Swithin's Lane
London, England EC4N 8NR
SOFINOV................................. 3,800,000(2) 10.1%
1981, avenue McGill College
Montreal, Quebec H3A 3C7
The Equitable Life Assurance Society.... 2,692,200(1) 7.2%
City Place House
55 Basinghall Street
London, England EC2V 5DR
Immunex Corporation..................... 2,613,122 7.2%
51 University Street
Seattle, WA 98101
GeneChem Technologies Venture Fund
L.P. .................................. 2,450,185(1) 6.6%
c/o GeneChem Management Inc.
1001 De Maisonneuve Boulevard West
Suite 920
Montreal, Quebec H3A 3C8
Elan International Services, Ltd. ...... 2,148,899 5.9%
102 St. James Court
Flatts
Smiths FL 04
Bermuda
Directors and Executive Officers:
H. Stewart Parker....................... 442,830(3) 1.2%
Barrie J. Carter, Ph.D. ................ 281,320(4) *
James A. Johnson........................ 168,273(5) *
Jack L. Bowman.......................... 25,000(6) *
Jeremy Curnock Cook..................... 4,702,619(7) 12.9%
James D. Grant.......................... 28,333(8) *
Louis P. Lacasse........................ 2,461,852(9) 6.6%
Nelson L. Levy, Ph.D., M.D. ............ 5,000(6) *
Mark Richmond, Ph.D., D.Sc. ............ 5,000(6) *
All directors and executive officers as
a group (9 persons) 8,120,227(10) 19.6%
</TABLE>
11
<PAGE>
- --------
* Less than 1%.
(1) Includes warrants to purchase 1,000,000 shares of common stock.
(2) Includes warrants to purchase 1,333,333 shares of common stock.
(3) Includes 276,075 shares subject to options that are exercisable within
60 days of March 10, 2000.
(4) Includes 154,655 shares subject to options that are exercisable within
60 days of March 10, 2000.
(5) Includes 165,273 shares subject to options that are exercisable within
60 days of March 10, 2000.
(6) Represents shares subject to options that are exercisable within 60 days
of March 10, 2000.
(7) Represents 3,664,286 shares of common stock owned by International
Biotechnology Trust plc ("IBT"), an investment trust whose shares are
traded on the London Stock Exchange; warrants held by IBT to purchase
1,000,000 shares of common stock; and 38,333 shares subject to options
that are exercisable within 60 days of March 10, 2000. Mr. Cook is a
management director of Rothschild Asset Management Limited, the
investment manager and secretary of IBT, and therefore has power to
direct IBT's investments. Mr. Cook disclaims beneficial ownership of the
securities owned by IBT.
(8) Includes 16,333 shares subject to options that are exercisable within 60
days of March 10, 2000.
(9) Represents 1,450,185 shares of common stock owned by GeneChem
Technologies Venture Fund L.P. ("GeneChem"); warrants held by GeneChem
to purchase 1,000,000 shares of common stock; and 11,667 shares subject
to options that are exercisable within 60 days of March 10, 2000.
Mr. Lacasse is President of GeneChem Management Inc., the manager of
GeneChem, and thereby has power to vote the securities. Mr. Lacasse
disclaims beneficial ownership of the securities owned by GeneChem.
(10) Includes 3,664,286 shares of common stock owned by IBT; warrants held by
IBT to purchase 1,000,000 shares of common stock; 1,450,185 shares of
common stock owned by GeneChem; warrants held by GeneChem to purchase
1,000,000 shares of common stock; and 687,336 shares subject to options
that are exercisable within 60 days of March 10, 2000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires our executive
officers, directors and holders of 10% or more of a registered class of our
equity securities to file reports of ownership and changes in ownership with
the Securities and Exchange Commission. SEC regulations require our executive
officers, directors and greater-than-10% shareholders to give us copies of all
Section 16(a) forms they file with the SEC.
Based solely on our review of the copies of these forms received by us, or
written representations from reporting persons that no such forms were
required for those persons, we believe that during calendar year 1999 our
executive officers, directors and greater-than-10% shareholders complied with
all applicable filing requirements, other than a late filing relating to one
transaction in December 1999 by H. Stewart Parker, our president, chief
executive officer and director.
12
<PAGE>
INDEPENDENT AUDITORS
Representatives of Ernst & Young LLP, our independent auditors, are expected
to attend the annual meeting and will be available to respond to appropriate
questions from shareholders.
OTHER BUSINESS
We do not intend to present any business at the annual meeting other than
the election of directors described in the accompanying Notice of Annual
Meeting of Shareholders, and we have no present knowledge that any other
person intends to present business at the annual meeting. If, however, other
matters requiring the vote of the shareholders properly come before the annual
meeting or any adjournment or postponement of the annual meeting, the persons
named in the accompanying form of proxy will have discretionary authority to
vote the proxies held by them in accordance with their judgment as to those
matters.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Under the SEC's proxy rules, shareholder proposals that meet specified
conditions may be included in our proxy statement and proxy for a particular
annual meeting. Shareholders that intend to present a proposal at our 2001
annual meeting must give us notice of the proposal not later than January 12,
2001 for the proposal to be considered for inclusion in the proxy materials
for that meeting. Shareholders that intend to present a proposal that will not
be included in the proxy materials must give us notice of the proposal at
least 60 days but not more than 90 days before the date of the 2001 annual
meeting.
ANNUAL REPORT AND FORM 10-K
Copies of our 2000 Annual Report to Shareholders and Annual Report on Form
10-K for the year ended December 31, 1999 are being mailed with this proxy
statement to each shareholder of record. If you did not receive a copy of the
Annual Report or Form 10-K, you may obtain one without charge by writing or
calling Investor Relations, Targeted Genetics Corporation, 1100 Olive Way,
Suite 100, Seattle, Washington 98101, (206) 623-7612.
13
<PAGE>
Please mark
your vote [X]
as indicated
The Board of Directors recommends a vote "FOR the Nominees" in item 1.
(1) ELECTION OF THREE CLASS 3 DIRECTORS FOR the WITHHOLD
Nominees: Nelson L. Levy, Nominees AUTHORITY
H. Stewart Parker and [_] to vote for the
Mark Richmond Nominees
[_]
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER IN THE SPACE PROVIDED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED "FOR THE NOMINEES" ITEM 1.
WITHHOLD for the following only: (write the name of the nominee in the
space below)
I plan to attend the Annual Meeting [ ]
_____
| Please sign exactly as your name appears
| hereon. Attorneys, trustees, executors and
other fiduciaries acting in a representative
capacity should sign their names and give
their titles. An authorized person should
sign on behalf of corporations, partnerships,
associations, etc. and give his or her title.
If your shares are held by two or more
persons, each person must sign. Receipt of
the notice of meeting and proxy statement is
hereby acknowledged.
Date Signature(s)
---------------------- ---------------------------------
Date Signature(s)
---------------------- ---------------------------------
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
<PAGE>
TARGETED GENETICS CORPORATION
This Proxy is solicited by Targeted Genetics' board of directors for the
Annual Meeting of Shareholders to be held on May 12, 2000
The undersigned hereby appoint(s) H. Stewart Parker and James A. Johnson,
and each of them, as proxies, with full power of substitution, to represent and
vote as designated all shares of common stock of Targeted Genetics Corporation
held of record by the undersigned on March 20, 2000 at the Annual Meeting of
Shareholders of Targeted Genetics to be held at the Washington Athletic Club,
1325 Sixth Avenue, Seattle, Washington, at 8:30 a.m. on Friday, May 12, 2000,
with authority to vote upon the matter listed below and with discretionary
authority as to any other matters that may properly come before the meeting or
any adjournment or postponement thereof.
IMPORTANT--PLEASE DATE AND SIGN ON THE OTHER SIDE
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
