<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 (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
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INKINE PHARMACEUTICAL COMPANY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
INKINE PHARMACEUTICAL COMPANY, INC.
Sentry Park East
1720 Walton Road, Suite 200
Blue Bell, PA 19422
-------------------------------
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
NOVEMBER 2, 1998
TO THE SHAREHOLDERS OF
INKINE PHARMACEUTICAL COMPANY, INC.:
Notice is hereby given that the 1998 annual meeting of shareholders
(the "Annual Meeting") of INKINE PHARMACEUTICAL COMPANY, INC. (the "Company" or
"InKine") will be held at the DoubleTree Guest Suites Hotel, 640 West Germantown
Pike, Plymouth Meeting, Pennsylvania 19462 on November 2, 1998, at 10:00 a.m.,
local time, for the following purposes:
1. To elect seven directors;
2. To ratify the selection of KPMG Peat Marwick LLP as
independent auditors of the Company for its fiscal year ending
June 30, 1999; and
3. To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
Only shareholders of record as of the close of business on September 3,
1998 will be entitled to notice of the Annual Meeting and to vote at the Annual
Meeting and any adjournments thereof. A list of shareholders of the Company as
of the close of business on September 3, 1998 will be available for inspection
during normal business hours for ten days prior to the Annual Meeting at the
Company's executive offices at Sentry Park East, 1720 Walton Rd., Suite 200,
Blue Bell, Pennsylvania 19422.
By order of the Board of Directors,
Robert F. Apple
Secretary
Blue Bell, Pennsylvania
October 1, 1998
EACH SHAREHOLDER IS URGED TO COMPLETE, SIGN AND RETURN
THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES. IF A SHAREHOLDER
DECIDES TO ATTEND THE MEETING, HE OR SHE MAY, IF SO DESIRED,
REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
<PAGE> 3
INKINE PHARMACEUTICAL COMPANY, INC.
Sentry Park East
1720 Walton Road, Suite 200
Blue Bell, PA 19422
PROXY STATEMENT
FOR
1998 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
NOVEMBER 2, 1998
This proxy statement and the accompanying form of proxy are being
mailed on or about October 1, 1998, to the shareholders of InKine Pharmaceutical
Company, Inc. (the "Company" or "InKine"). These materials are being furnished
in connection with the solicitation by the Board of Directors of the Company of
proxies to be voted at the 1998 Annual Meeting of Shareholders (the "Annual
Meeting") to be held at the DoubleTree Guest Suites Hotel, 640 West Germantown
Pike, Plymouth Meeting, Pennsylvania 19462 on November 2, 1998, at 10:00 a.m.,
local time, and at any adjournments thereof.
At the Annual Meeting, shareholders of the Company will be asked to
vote upon (i) the election of seven directors and (ii) the ratification of the
selection of KPMG Peat Marwick LLP as independent auditors of the Company. If
other matters properly come before the Annual Meeting, however, the persons
named in the accompanying proxy intend to vote thereon in accordance with their
judgment.
The cost of solicitation of proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by telephone by
officers and directors and a small number of regular employees of the Company
who will not be specially compensated for such services. The Company also will
request banks and brokers to solicit proxies from their customers, where
appropriate, and will reimburse such persons for reasonable expenses incurred in
that regard.
The Company's annual report to shareholders on form 10-KSB, for the
year ended June 30, 1998, including financial statements, is being mailed to
shareholders with this proxy statement but does not constitute a part of this
proxy statement.
VOTING AT THE MEETING
Only holders of record of shares of the Company's Common Stock, par
value $.0001 per share ("Common Stock"), at the close of business on September
3, 1998, the record date, are entitled to vote at the Annual Meeting. As of that
date, there were 22,703,175 shares of Common Stock outstanding. Each shareholder
entitled to vote shall have the right to one vote for each share of Common Stock
outstanding in such shareholder's name.
Shares cannot be voted at the Annual Meeting unless the holder of
record is present in person or by proxy. The enclosed form of proxy is a means
by which a shareholder may authorize the voting of his, her, or its shares at
the Annual Meeting.
The Company presently has no other class of stock outstanding and
entitled to be voted at the Annual Meeting. The presence in person or by proxy
of shareholders entitled to cast a majority of all votes entitled to be cast at
the Annual Meeting will constitute a quorum. If a broker that is a record holder
of Common Stock does not return a signed proxy, the shares of Common Stock
represented by such proxy will not be considered present at the Meeting and will
not be counted toward establishing a quorum. If a broker that is a record holder
of Common Stock does
2
<PAGE> 4
return a signed proxy, but is not authorized to vote on one or more matters
(each such matter, a "broker non-vote"), the shares of Common Stock represented
by such proxy will be considered present at the Meeting for purposes of
determining the presence of a quorum.
Assuming a quorum is present, (i) directors of the Corporation will be
elected by a plurality of the votes cast by shareholders present, in person or
by proxy, and entitled to vote for the election of directors at the Annual
Meeting, and (ii) the affirmative vote of a majority of the votes cast by
shareholders present, in person or by proxy, and entitled to vote at the Annual
Meeting will be required for the ratification of the appointment of the auditors
for the current fiscal year. Abstentions and broker non-votes will have no
effect on the outcome of the election of directors or the ratification of the
appointment of the auditors.
Shareholders are urged to specify their choices by marking the
appropriate boxes on the enclosed proxy card. The shares of Common Stock
represented by each properly executed proxy will be voted at the Annual Meeting
in accordance with each shareholder's directions. If no choice has been
specified and the enclosed proxy card is properly executed and returned, the
shares will be voted "FOR" the nominees for election as directors named under
the caption "Election of Directors" and "FOR" the ratification of the
appointment of KPMG Peat Marwick LLP as the Company's auditors for the year
ending June 30, 1999. If any other matters are properly presented at the Annual
Meeting for action, the proxy holders will vote the proxies (which confer
discretionary authority to vote on such matters) in accordance with their
judgment.
Execution of the accompanying proxy will not affect a shareholder's
right to attend the Annual Meeting and vote in person. Any shareholder giving a
proxy has the right to revoke it by giving written or oral notice of revocation
to the Secretary of the Company, or by delivering a subsequently executed proxy,
at any time before the proxy is voted.
Your proxy vote is important. Accordingly, you are asked to complete,
sign and return the accompanying proxy card whether or not you plan to attend
the Annual Meeting. If you plan to attend the Annual Meeting to vote in person
and your shares are registered with the Company's transfer agent in the name of
a broker or bank, you must secure a proxy from your broker or bank assigning
voting rights to you for your shares of Common Stock.
3
<PAGE> 5
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of such number of
directors (no less than three) as is fixed from time to time by resolutions
adopted by the board. At the Annual Meeting, seven directors are to be elected.
The term of office for each director will expire at the 1999 annual meeting of
shareholders, and each director will hold office until the election and
qualification of the director's successor or until the director's earlier death,
removal or resignation.
The Board of Directors, upon the recommendation of the Nominating
Committee, has nominated for election as directors of the Company Dr. Leonard S.
Jacob, J.R. LeShufy, Steven B. Ratoff, Thomas P. Stagnaro, Dr. Robert A.
Vukovich, Dr. Jerry A. Weisbach and Dr. Taffy J. Williams. All nominees are
presently directors of the Company whose terms expire at the Annual Meeting.
All nominees have consented to be named and to serve if elected. Unless
otherwise instructed by the shareholders, the persons named in the proxies will
vote the shares represented thereby for the election of such nominees. The Board
of Directors believes all nominees will be able to serve as directors; if this
should not be the case, however, the proxies may be voted for one or more
substitute nominees to be designated by the Board of Directors, or the board may
decide to reduce the number of directors. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED BELOW.
NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGE YEAR FIRST BECAME DIRECTOR, PRINCIPAL OCCUPATIONS DURING
PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
- ----------------------------- ---- ---------------------------------------------------------------
<S> <C> <C>
Leonard S. Jacob, M.D., Ph.D. 49 Dr. Jacob has served as Chairman and Chief Executive Officer of the Company
since November 1997. Prior to joining the Company, Dr. Jacob served as the
President and Chief Executive Officer of Sangen Pharmaceutical Company and as
a consultant to various biotechnology companies from June 1996. From 1989 to
1996, Dr. Jacob, as a co-founder of Magainin Pharmaceuticals Inc.
("Magainin"), served as Chief Operating Officer and was responsible for
setting Magainin's technical and operational strategy. From 1980 to 1988,
Dr. Jacob was employed by SmithKline and French Laboratories where he served
as Worldwide Vice President and a member of SmithKline Beecham's Corporate
Management Committee.
J.R. LeShufy 74 Mr. LeShufy has served as a director of the Company since December 1995. Mr.
LeShufy served as the Vice President of Investor Relations of the Company
from September 1994 to November 1997. He currently serves as President and
Chairman of the Board of Trilenium Corporation, a technology company. He has
been an independent investor and a business consultant for more than five
years.
</TABLE>
4
<PAGE> 6
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGE YEAR FIRST BECAME DIRECTOR, PRINCIPAL OCCUPATIONS DURING
PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
- ----------------------------- ---- ---------------------------------------------------------------
<S> <C> <C>
Steven B. Ratoff 56 Mr. Ratoff has served as a director of the Company since February 1998. He
has served as Executive Vice President and Chief Financial Officer for
Brown-Forman Corporation, a diversified producer and manufacturer of fine
quality consumer products, since January 1995. Mr. Ratoff was self-employed
as a real estate investor from February 1992 to December 1994. Previously
Mr. Ratoff served as Senior Vice President, Finance at Bristol-Myers Squibb.
Mr. Ratoff currently serves as a director of Lima Labs, Inc.
Thomas P. Stagnaro 55 Mr. Stagnaro has served as a director of the Company since November 1997. He
served as President and Chief Executive Officer of 3-Dimensional
Pharmaceuticals from May 1996 to August 1998, and Executive Vice President of
North American Biologicals Inc. ("NABI") from November 1995 to May 1996. Mr.
Stagnaro served as President and Chief Executive Officer of Univax Biologics
("Univax") from October 1989 to November 1995 when Univax merged into NABI.
Robert A. Vukovich, Ph.D. 55 Dr. Vukovich has served as a director of the Company since August 1998. In
1983, Dr. Vukovich founded Roberts Pharmaceutical Corporation ("Roberts")
where he served as President and Chief Executive Officer and is currently
Executive Chairman. Prior thereto, he was the Director of the Division of
Developmental Therapeutics for Revlon HealthCare Group from 1979 to 1983. Dr.
Vukovich currently serves as a director of Cypros Pharmaceuticals, Inc.,
Biotransplant, Inc., Pacific Pharmaceuticals, Inc. and Roberts.
Jerry A. Weisbach, Ph.D. 64 Dr. Weisbach has served as a director of the Company since November 1997.
Dr. Weisbach has been a consultant to pharmaceutical and biotechnology
companies since July 1994. From 1988 to July, 1994 he was Director of
Technology Transfer and adjunct professor at the Rockefeller University. Dr.
Weisbach served as Vice President of Warner Lambert Company from 1981 to 1987
and President of its Pharmaceutical Research Division from 1979 to 1987. He
was responsible for all pharmaceutical research and development activities of
Warner Lambert. Prior to joining Warner Lambert in 1979, Dr. Weisbach was
employed at SmithKline and French Laboratories where he was Vice President,
Research. Dr. Weisbach has served as a director of Neose Technologies Inc. (a
biotechnology company) since 1992 and The RiceX Company (a food technology
company) since 1997.
Taffy J. Williams, Ph.D. 49 Dr. Williams has served as a director of the Company since December 1995 and
as President and Chief Operating Officer since November 1997. Prior to the
Company's reorganization in November 1997, he served as President and Chief
Executive Officer from December 1995 and as Chairman of the Board from March
1997. From 1992 to December 1995 he served as Vice President of Research at
Magainin Pharmaceuticals, Inc., where he directed research on new classes of
pharmacological agents for topical and systemic use. Prior thereto he had
been employed by the Naval Medical Research Institute for approximately 14
years, initially as a principal investigator and then as Director of its
Septic Shock Research Program.
</TABLE>
5
<PAGE> 7
GENERAL INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company met on four occasions since the
reorganization of the Company in November 1997. The New York General Corporation
Law provides that the Board of Directors, by resolution adopted by a majority of
the entire board, may designate one or more committees, each of which shall
consist of one or more directors. The Board of Directors elects from its members
an Audit Committee, Compensation Committee, Executive Committee and Nominating
Committee. Each director attended at least 75% of the aggregate of the meetings
of the Board of Directors held during the period for which he was a director and
the meetings of the committee or committees on which he served during such
period.
Audit Committee. The Audit Committee is responsible for providing
general oversight with respect to the accounting principles employed in InKine's
financial reporting. The Audit Committee meets at least annually with the
Company's principal financial and accounting officer and independent public
accountants to review the scope of auditing procedures, the Company's policies
relating to internal auditing and accounting procedures and controls, and to
discuss results of the annual audit of the Company's financial statements. The
Audit Committee met once since its formation in November 1997. The Audit
Committee is currently composed of three non-employee directors, Mr. LeShufy,
Mr. Ratoff and Mr. Stagnaro.
Compensation Committee. The Compensation Committee has general
supervisory power over, and the power to grant options under, the Company's
stock option plans. In addition, the Compensation Committee recommends to the
board the compensation of the Company's Chief Executive Officer, reviews and
takes action on the recommendations of the Chief Executive Officer as to the
compensation of the Company's other officers and key personnel, approves the
grants of any bonuses to officers, and reviews other compensation matters
generally. The Compensation Committee met four times since its formation in
November 1997. The current members of the Compensation Committee are Mr. LeShufy
and Dr. Weisbach.
Executive Committee. The Executive Committee may exercise, with certain
exceptions, all of the authority of the board in the management of the business
and affairs of the Company. The Executive Committee is intended to serve in the
event that action must be taken by the Board of Directors at a time when
convening a meeting of the entire board is not feasible. The Executive Committee
has not convened since its formation in November 1997. The current members of
the Executive Committee are Drs. Jacob and Weisbach and Mr. Stagnaro.
Nominating Committee. The Nominating Committee is authorized to
consider candidates for directors of the Company. The Nominating Committee met
once since its formation in November 1997. It is the policy of the Nominating
Committee to consider director nominees recommended by shareholders. Any such
recommendation, together with the nominee's qualifications and consent to being
considered as a nominee, should be sent in writing to the Nominating Committee
in care of the Secretary of the Company. The Nominating Committee is currently
composed of Dr. Jacob, Mr. Ratoff and Mr. Stagnaro.
6
<PAGE> 8
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP ("KPMG") as
the Company's independent auditors for the fiscal year ending June 30, 1999, and
has further directed that management submit the selection of independent
auditors for ratification by the shareholders at the Annual Meeting. KPMG
audited the Company's financial statements for the first time in 1998.
Representatives of KPMG are expected to be present at the Annual Meeting; will
have an opportunity to make a statement if they so desire and will be available
to respond to appropriate questions.
The independent auditors of the Company for fiscal year 1997 and prior
thereto were Richard A. Eisner & Company, LLP ("Eisner & Company"). Upon the
recommendation of the Audit Committee of the Company's Board of Directors,
Eisner & Company was dismissed effective February 2, 1998. The report by Eisner
& Company on the financial statements of the Company at and for the year ended
June 30, 1997 contained an explanatory paragraph concerning the Company's
ability to continue as a going concern. The decision to change accountants
resulted from developments since the end of fiscal year 1997, including the
completion of a private placement of common stock for gross proceeds of $17
million, the acquisitions of CorBec Pharmaceuticals, Inc. and Sangen
Pharmaceutical Company, and the restructuring of the Company's management. The
Audit Committee's action did not result from any disagreement or advice given on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure. The Company solicited proposals from three
auditing firms, including Eisner & Company. KPMG Peat Marwick LLP was chosen as
a result of this process, and was engaged by the Company as its principal
auditors on February 2, 1998.
Stockholder ratification of the selection of KPMG as the Company's
independent auditors is not required by the Company's By-laws or otherwise.
However, the Board is submitting the selection of KPMG to the shareholders for
ratification as a matter of good corporate practice. If the shareholders fail to
ratify the selection, the Audit Committee and the Board will reconsider whether
or not to retain that firm. Even if the selection is ratified, the Audit
Committee and the Board in their discretion may direct the appointment of
different independent auditors at any time during the year if they determine
that such a change would be in the best interests of the Company and its
shareholders.
The affirmative vote of a majority of the votes cast in person or by
proxy at the meeting will be required to ratify the selection of KPMG.
Abstentions will NOT be counted toward the tabulation of votes cast on the
proposal. Broker non-votes will be counted towards a quorum, but will not be
counted for any purpose in determining whether this matter has been approved.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
SELECTION OF KPMG AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE YEAR ENDING JUNE
30, 1999.
7
<PAGE> 9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of September 3,
1998 regarding the ownership of Common Stock (i) by each person known by the
Company to be the beneficial owner of more than five percent of the outstanding
Common Stock, (ii) by each director of the Company, (iii) by each executive
officer of the Company named in the Summary Compensation Table included
elsewhere in this proxy statement and (iv) by all current executive officers and
directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE
BENEFICIAL OWNERSHIP OF CLASS (2)
BENEFICIAL OWNER OWNED (1) ------------
- ---------------- ---------------------
<S> <C> <C>
Leonard S. Jacob, M.D., Ph.D. (3)........................... 2,410,223 (4) 9.6%
Veron International, Ltd. (5)............................... 1,500,000 6.61%
Biotechnology Development Fund, L.P. (6).................... 1,495,000 (7) 6.58%
Taffy J. Williams, Ph.D. ................................... 1,017,306 (8) 4.3%
Robert F. Apple ............................................ 3,500 *
Garrett E. Bergman, M.D. ................................... 8,000 *
J. R. LeShufy .............................................. 7,500 (9) *
Steven B. Ratoff ........................................... 107,500(10) *
Thomas P. Stagnaro ......................................... 9,500(11) *
Robert A. Vukovich, Ph.D. .................................. 7,500(12) *
Jerry A. Weisbach, Ph.D. ................................... 40,833(13) *
All current executive officers and directors as a group
(9 persons)............................................... 3,611,412 13.8%
- --------------------------------------
</TABLE>
* Less than one percent.
(1) The number of shares indicated includes shares issuable upon the
exercise of outstanding stock options and warrants held by each
individual or group to the extent such options and warrants are
exercisable within sixty days of September 3, 1998.
(2) The percentage for each individual or group is based on the aggregate
of the shares outstanding as of September 3, 1998 (22,703,175 shares)
and all shares which the listed beneficial owner has the right to
acquire within sixty days of September 3, 1998, from options and
warrants.
(3) The address for this shareholder is Sentry Park East, 1720 Walton Road,
Blue Bell, PA 19422.
(4) Includes 2,371,773 shares of Common Stock issuable upon exercise of
options. Of these shares, 2,056,773 shares originally were subject to
the Company's right to repurchase at a nominal price, which right
expires ratably over a 36-month period that commenced on November 7,
1997. As of September 3, 1998, 1,542,580 shares were subject to this
right.
(5) The address for this shareholder is 77 Mody Road, Tsimshatsui East,
Kowloon, Hong Kong.
(6) The address for this shareholder is 575 High Street, Suite 201, Palo
Alto, CA 94301.
(7) This information is presented in reliance on information disclosed in a
Schedule 13-G filed by this shareholder.
(8) Includes 1,007,306 shares of Common Stock issuable upon exercise of
options.
(9) Consists entirely of shares of Common Stock issuable upon exercise of
options.
(10) Includes 7,500 shares of Common Stock issuable upon exercise of
options.
(11) Includes 7,500 shares of Common Stock issuable upon exercise of
options.
(12) Consists entirely of shares of Common Stock issuable upon exercise of
options.
(13) Consists entirely of shares of Common Stock issuable upon exercise of
options.
8
<PAGE> 10
EXECUTIVE OFFICERS OF THE COMPANY
The current executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Leonard S. Jacob, M.D., Ph.D. 49 Chairman and Chief Executive Officer
Taffy J. Williams, Ph.D. 49 President and Chief Operating Officer
Robert F. Apple 32 Vice President, Finance and Administration
Garret Bergman, M.D. 52 Vice President, Clinical Research & Regulatory
Affairs
</TABLE>
Leonard S. Jacob, M.D., Ph.D. See "Election of Directors."
Taffy J. Williams, Ph.D. See "Election of Directors."
Robert F. Apple has served as Vice President, Finance and
Administration of the Company since December 1997. Prior to joining the Company,
Mr. Apple was employed by Magainin Pharmaceuticals, Inc. from July 1995 where he
held the position of Corporate Controller and was responsible for managing
financial and administrative functions. From May 1994 until July 1995, Mr. Apple
was employed by Liberty Technologies, Inc. (a technology company) as Corporate
Controller. From August 1988 until May 1994, Mr. Apple was employed by Arthur
Andersen and Company LLP where he held various positions of increasing
responsibility.
Garrett Bergman, M.D. has served as Vice President, Clinical Research
and Regulatory Affairs, of the Company since November 1997. Prior to joining the
Company, Dr. Bergman served as Vice President, Clinical and Regulatory Affairs
of Chimeric Therapies Inc from January 1997. From 1989 to January 1997, Dr.
Bergman was employed by Centeon, L.L.C. (formerly Armour Pharmaceutical Co.)
where he held a number of positions of increasing responsibility including
Senior Director, Medical and Scientific Affairs where he was responsible for the
clinical development and regulatory approval of several drugs.
Officers are elected or appointed by the Board of Directors to serve
until the appointment or election and qualification of their successors or their
earlier termination or resignation.
9
<PAGE> 11
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY OF COMPENSATION
The following table sets forth for the fiscal years ended June 30,
1998, 1997 and 1996 a summary of all compensation paid by the Company to its
Chief Executive Officer and the other executive officers of the Company whose
cash compensation exceeded $100,000 for the fiscal year ended June 30, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION SECURITIES
------------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS COMPENSATION
- --------------------------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Leonard S. Jacob, M.D., Ph.D. .... 1998 $150,000(1) -0- 2,356,773 $1,696(5)
Chairman and Chief
Executive Officer ---------------------------------------------------------------------------------------------
Robert F. Apple .................. 1998 $72,917(2) $12,500(4) 50,000 $843(5)
Vice President ---------------------------------------------------------------------------------------------
Garrett E. Bergman, M.D. ......... 1998 $116,667(3) $ 8,750(4) 74,500 $1,317(5)
Vice President ---------------------------------------------------------------------------------------------
Taffy J. Williams, Ph.D. ......... 1998 $194,900 -0- 1,071,182 $1,506(5)
President and Chief 1997 185,000 22,500 540,000 -0-
Operating Officer 1996 165,833 8,250 60,000 $16,600(6)
</TABLE>
- ----------------------------
(1) Dr. Jacob became employed by the Company in November 1997.
(2) Mr. Apple became employed by the Company in December 1997.
(3) Dr. Bergman became employed by the Company in November 1997.
(4) Represents a sign on bonus under contract.
(5) Represents the Company's contributions to the named individual's 401(k)
retirement plan.
(6) Represents a non-accountable expense allowance equal to 10% of base
salary.
10
<PAGE> 12
STOCK OPTION GRANTS
The following table summarizes stock options granted during the
fiscal year ended June 30, 1998 to the persons named in the Summary Compensation
Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS (1) OPTION TERM (2)
----------------------------------------------------------------- ---------------------------
Percent of Total
Options Granted Exercise
Options to Employees in Price Expiration
Name Granted Fiscal Year 1998 Per Share Date 5% 10%
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Leonard S. Jacob, M.D., Ph.D. .. 1,200,000 33% $0.61 11/6/07 $460,351 $1,166,619
1,156,773 31% $1.00 11/6/07 727,488 1,843,598
-------------------------------------------------------------------------------------------------
Robert F. Apple ................ 50,000 1% $1.00 1/29/08 $31,445 $79,687
-------------------------------------------------------------------------------------------------
Garrett E. Bergman, M.D. ....... 74,500 2% $1.00 1/29/08 $46,853 $118,734
-------------------------------------------------------------------------------------------------
Taffy J. Williams, Ph.D. ....... 1,071,182 29% $1.00 11/6/07 $673,661 $1,707,122
</TABLE>
- ------------------------------
(1) Options are both incentive stock options and non-qualified stock
options to acquire shares of Common Stock with a stated term of ten
years, vesting immediately, monthly, or in four annual installments
beginning after the date of grant. If a "change in control" (as defined
in the Stock Option Plan) were to occur, these options would become
immediately exercisable in full.
(2) Potential Realizable Values are based on an assumption that the stock
price of the Common Stock starts equal to the exercise price shown for
each particular option grant and appreciates at the annual rate shown
(compounded annually) from the date of grant until the end of the term
of the option. These amounts are reported net of the option exercise
price, but before any taxes associated with exercise or subsequent sale
of the underlying stock. The actual value, if any, an optionholder may
realize will be a function of the extent to which the stock price
exceeds the exercise price on the date the option is exercised and also
will depend on the optionholder's continued employment through the
vesting period. The actual value to be realized by the optionholder may
be greater or less than the values estimated in this table.
11
<PAGE> 13
The following table summarizes option exercises during
the fiscal year ended June 30, 1998 and the value of vested and unvested options
for the persons named in the Summary Compensation Table at June 30, 1998.
Year-end values are based upon a price of $1.28 per share, which was the closing
sales price of a share of the Company's Common Stock on June 30, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT JUNE 30, 1998 JUNE 30, 1998
----------------------------- ------------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leonard S. Jacob, M.D., Ph.D...... - - 2,371,773(1) -0- $1,128,346 $ 0
--------------------------------------------------------------------------------------------
Robert F. Apple .................. - - 0 50,000 $ -0- $ 14,000
--------------------------------------------------------------------------------------------
Garrett E. Bergman, M.D. ......... - - 0 74,500 $ -0- $ 21,000
--------------------------------------------------------------------------------------------
Taffy J. Williams, Ph.D. ......... - - 888,285 882,897 $ 456,220 $ 249,711
--------------------------------------------------------------------------------------------
</TABLE>
(1) 2,056,773 of the underlying shares originally were subject to the
Company's right to repurchase at a nominal price, which right expires
ratably over a 36-month period that commenced on November 7, 1997. As
of June 30, 1998, 1,656,845 shares were subject to this right.
The Company does not currently grant any long-term incentives, other
than stock options, to its executives or other employees. Similarly, the Company
does not sponsor any defined benefit or actuarial plans at this time.
EMPLOYMENT AGREEMENTS
In November 1997, the Company entered into a three-year employment
agreement with Dr. Jacob, Chairman and Chief Executive Officer of the Company.
Under the agreement, Dr. Jacob is entitled to a base annual salary of $225,000,
which may be increased at the discretion of the Board of Directors. In addition,
Dr. Jacob is eligible for an annual bonus as the board or the Compensation
Committee may determine. Such bonus shall be at least $56,250 for the first year
of the agreement. The agreement provides that Dr. Jacob will be entitled to
other customary fringe benefits generally available to executive employees of
the Company. The agreement also provides that Dr. Jacob will receive severance
benefits in the event the Company terminates his employment other than for
cause. If such termination is (i) during the first year of Dr. Jacob's
employment, the Company will pay him an amount equal to 100% of his base annual
salary, (ii) during the second year of his employment, the Company will pay him
an amount equal to 150% of his base annual salary and (iii) during the third
year of his employment, the Company will pay him an amount equal to 200% of his
base annual salary. In addition, all of Dr. Jacob's stock options become
immediately exercisable upon his termination if it is other than for cause.
In November 1997, the Company entered into a three-year employment
agreement with Dr. Williams, President and Chief Operating Officer of the
Company. Under the agreement, Dr. Williams is entitled to a base annual salary
of $200,000, which may be increased at the discretion of the Board of Directors.
In addition, Dr. Williams is eligible for an annual bonus as the board or the
Compensation Committee may determine. Such bonus shall be at least $34,000 for
the first year of the agreement. The agreement provides that Dr. Williams will
be entitled to other customary fringe benefits generally available to executive
employees of the Company. The agreement also provides that Dr. Williams will
receive severance benefits in the event the Company terminates his employment
other than for cause. If such termination is (i) during the first year of Dr.
Williams' employment, the Company will pay him an amount equal to 100% of his
base annual salary, (ii) during the second year of his
12
<PAGE> 14
employment, the Company will pay him an amount equal to 150% of his base annual
salary and (iii) during the third year of his employment, the Company will pay
him an amount equal to 200% of his base annual salary. In addition, all of Dr.
Williams' stock options become immediately exercisable upon his termination if
it is other than for cause.
The Company's other executive officers are all entitled to receive
six to twelve months' base salary in the event that their employment is
terminated by the Company without "cause."
COMPENSATION OF DIRECTORS
All non-employee directors receive a fee of $1,500 per Board of
Director's meeting for their services to the Company as directors, and are
reimbursed for expenses incurred in connection with attending these meetings.
Each non-employee director receives options to purchase 37,500 shares
of Common Stock upon first becoming a member of the Board of Directors. In
addition, on the date of each annual meeting of shareholders, each non-employee
director reelected at such annual meeting receives options to purchase 7,500
shares of Common Stock.
In November 1997, Dr. Weisbach entered into a Consulting Agreement
with the Company in the field of business development and strategic planning,
which provides for Dr. Weisbach to receive an annual fee of $50,000. The term of
this Agreement is for one year, renewable upon mutual agreement of both parties.
The Company expects to renew this agreement upon its expiration in November
1998.
In August 1998, Mr. Stagnaro entered into a Consulting Agreement with
the Company in the field of business development which provides for Mr. Stagnaro
to receive hourly fees for services. The term of this Agreement is for one year,
renewable upon mutual agreement of both parties. The Company made no payments to
Mr. Stagnaro under this Consulting Agreement in fiscal year 1998.
13
<PAGE> 15
The following Compensation Committee Report and the Comparative Stock
Performance Graph shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
COMPENSATION COMMITTEE REPORT
Compensation Philosophy
The Compensation Committee of the Board of Directors (the
"Compensation Committee") believes that a well designed compensation program
should align the goals of the executives of the Company with the goals of the
shareholders, and that a significant portion of the executives' compensation,
over the long term, should be dependent upon the value created for the
shareholders. However, the Compensation Committee recognizes that, in the
short-term, the value of the Company will be affected by many factors, some
transient in nature and beyond the control of the Company's executives. This is
especially true in the biotechnology industry which is characterized by a large
number of small companies, long product lead times, highly volatile stock prices
and few commercial products. In order to attract and retain qualified executives
in such an environment, the Compensation Committee attempts to create a balanced
compensation package by combining components based upon the achievement of
long-term value for shareholders with components based upon the achievement of
shorter-term strategic goals. These goals generally include the progress of
clinical programs, adherence to budgets, strengthening of the Company's
financial position and success in entering into appropriate business
collaborations. The Compensation Committee expects that the achievement of these
shorter-term goals will contribute to the long-term success of the Company. In
light of the Company's need to develop its technology into viable products,
progress toward achievement of research and development objectives is the most
significant individual factor considered in determining compensation levels.
The Company competes against both biotechnology companies and
pharmaceutical companies in the hiring and retention of qualified personnel.
Particularly as compared to the pharmaceutical industry, the cash compensation
of the Company's executives is below those levels available to executives of
similar background and experience. Likewise, the Company does not offer the type
of retirement benefits often available at such other entities. The Company must
therefore place greater emphasis on long-term compensation, principally
including the grant of stock options.
The Company's compensation program for executive officers comprises
base salary, performance bonuses, longer-term incentive compensation in the form
of stock options, and benefits available generally to all of the Company's
employees. The process utilized by the Committee in determining executive
officer compensation levels for each of these components is based on the
Committee's subjective judgment, and the other factors noted herein.
Compensation Components
Base Salary. Base salary levels for the Company's executive officers
are reviewed on an annual basis by the Compensation Committee. In conducting
this review, the Compensation Committee considers the various items noted above,
including competitive factors and industry trends, as well as performance within
the Company, and changes in job responsibility. The Committee also reviews
certain compensation information publicly available and gathered informally, and
considers salary history at the Company. Since joining the Company in 1997, Dr.
Jacob's salary has not changed. Certain other executive officers received
increases in base salary of up to 14%, in recognition of promotions and
increases in job responsibility.
Performance Bonus Compensation. The Compensation Committee annually
considers awards of cash bonuses to executives in order to provide a direct
financial incentive to achieve Company and individual objectives, generally
related to the goals described above. Specific objectives are determined yearly
as part of the Company's annual operating plan and budget. The granting of any
such bonus is totally discretionary and is
14
<PAGE> 16
determined based upon the Compensation Committee's evaluation of each
executive's performance in attaining such corporate and individual goals and
objectives.
Dr. Jacob has not been awarded a cash bonus since joining the Company
in November 1997. Under an employment contract Dr. Jacob is guaranteed a minimum
bonus of $56,250 in his first year of employment.
Stock Option Grants. The Stock Option Plan is the Company's long-term
equity incentive plan for executive officers and other selected employees. The
objective of the plan is to align the long-term financial interests of the
option holder with the financial interests of the Company's shareholders. Stock
option exercise prices are set at prevailing market price at the time of grant,
and stock options will only have value if the Company's stock price increases.
The Company, as with all development-stage biopharmaceutical companies, relies
heavily upon its long-term equity incentive plan. Without such incentives, it
would not be possible to attract and retain qualified managers or other
employees. The Compensation Committee generally considers additional stock
option grants on an annual basis as a means to continue to incentivise the
Company's senior managers to work toward increasing shareholder value, however,
the granting of any such options is totally discretionary.
Options to purchase an aggregate of 3,552,455 shares of the Company's
Common Stock were awarded in fiscal year 1998 to the Company's executive
officers, including a grant of 2,356,773 shares to Dr. Jacob. Dr. Jacob's
options vested immediately. The exercise price of the options was the fair
market value of the Company's Common Stock on the date of grant. The Company
granted Dr. Jacob's options to him in connection with the reorganization of the
Company in November 1997 pursuant to negotiated agreements between the Company
and Dr. Jacob. Of these options, 300,000 were granted in connection with the
Company's purchase of Sangen Pharmaceutical Company from Dr. Jacob and 2,056,773
were granted in connection with Dr. Jacob becoming employed by the Company as
its Chief Executive Officer.
Payments during fiscal year 1998 to the Company's executives under
the various programs discussed above were made with regard to the provisions of
Section 162(m) of the Code which became effective on January 1, 1994. Section
162(m) limits the deduction that may be claimed by a "public company" for
compensation paid to certain individuals to $1 million, except to the extent
that any excess compensation is "performance-based compensation." In accordance
with current regulations, the Company believes the amounts received upon the
exercise of stock options under the Stock Option Plan will qualify as
"performance-based compensation."
COMPENSATION COMMITTEE
J. R. LeShufy
Jerry A. Weisbach, Ph. D.
August 3, 1998
15
<PAGE> 17
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on
the Company's Common Stock for the period beginning on the Company's initial
public offering on May 3, 1995 through June 30, 1998 with the cumulative total
shareholder return of (i) the Nasdaq Stock Market (U.S.) Index (the "Nasdaq
Index"), and (ii) the Index of Nasdaq Pharmaceutical Stocks (the "Pharmaceutical
Index") for the same period. The comparison assumes an investment of $100 on May
3, 1995 in each of the Common Stock of the Company, the stocks comprising the
Nasdaq Index and the stocks comprising the Pharmaceutical Index and further
assumes reinvestment of dividends.
Research Data Group Peer Group Total Return Worksheet
Inkine Pharmaceutical Inc (INKP)
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------------------
5/3/95 6/95 6/96 6/97 6/98
<S> <C> <C> <C> <C> <C>
INKINE PHARMACEUTICAL COMPANY, INC. ..100.00 127.27 59.09 150.00 93.18
NASDAQ STOCK MARKET (U.S.)............100.00 110.89 142.38 173.11 228.43
NASDAQ PHARMACEUTICAL.................100.00 113.12 166.58 169.48 173.91
</TABLE>
CERTAIN TRANSACTIONS
On November 7, 1997, the company acquired from Dr. Jacob all the
outstanding shares of capital stock of Sangen Pharmaceutical Company. This
transaction occurred in connection with the reorganization of the Company. In
connection with this reorganization, Dr. Jacob entered into a three-year
employment agreement (subject to renewal) with the Company and Dr. Jacob
received ten-year options to purchase (i) 1,200,000 shares of the Company's
Common Stock for $.61 per share and (ii) 1,171,773 shares of Common Stock for
$1.00 per share. Of all the shares underlying these options, 2,056,773 shares
originally were subject to the Company's right to repurchase at a nominal price,
which right expires ratably over a 36-month period that commenced on November 7,
1997.
16
<PAGE> 18
INFORMATION CONCERNING INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP has served as the Company's independent
accountants since February 1998. The Company has requested that a representative
of KPMG Peat Marwick LLP attend the Annual Meeting. Such representative will
have an opportunity to make a statement, if he or she desires, and will be
available to respond to appropriate questions of shareholders.
OTHER MATTERS
The Board of Directors is not aware of any matters not set forth
herein that may come before the meeting. If, however, further business properly
comes before the meeting, the persons named in the proxies will vote the shares
represented thereby in accordance with their judgment.
SECTION 16(a) REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
a registered class of the Company's equity securities to file with the SEC
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Such persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of the copies of such reports received by the
Company, the Company believes that during the year ended June 30, 1998 all
filing requirements applicable to its officers, directors and 10% shareholders
were satisfied, except that Mr. LeShufy failed to file Forms 4 and 5 with
respect to one transaction in June 1998.
SHAREHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Shareholders may submit proposals on matters appropriate for
shareholder action at annual meetings in accordance with regulations adopted by
the SEC. To be considered for inclusion in the proxy statement and form of proxy
relating to the 1999 annual meeting, such proposals must be received by the
Company no later than June 1, 1999. Proposals should be directed to the
attention of the Secretary of the Company.
ANNUAL REPORT ON FORM 10-KSB
The Company has furnished without charge to each person whose proxy
is being solicited, a copy of the Company's annual report on Form 10-KSB, for
the year ended June 30, 1998, including the financial statements, but excluding
exhibits. Requests for additional copies of such report should be directed to
the Company, Attention: Investor Relations.
By order of the Board of Directors,
Robert F. Apple
Secretary
October 1, 1998
17
<PAGE> 19
PROXY INKINE PHARMACEUTICAL COMPANY, INC. PROXY
ANNUAL MEETING OF SHAREHOLDERS, NOVEMBER 2, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Leonard S. Jacob, M.D., Ph.D. and Robert F.
Apple, or either one of them acting singly, with full power of substitution, the
proxy or proxies of the undersigned to attend the Annual Meeting of Shareholders
of InKine Pharmaceutical Company, Inc. to be held on November 2, 1998, and any
adjournments thereof, to vote all shares of stock that the undersigned would be
entitled to vote if personally present in the manner indicated below and on the
reverse side, and on any other matters properly brought before the meeting or
any adjournments thereof, all as set forth in the October 1, 1998 Proxy
Statement.
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL NOMINEES AND FOR
PROPOSAL 2.
1. Election of the following nominees as directors: Leonard S. Jacob, M.D.,
Ph.D., J.R. LeShufy, Steven B. Ratoff, Thomas P. Stagnaro, Robert A.
Vukovich, Ph.D., Jerry A. Weisbach, Ph.D., Taffy J. Williams, Ph.D.
<TABLE>
<C> <C> <S>
FOR ALL NOMINEES WITHHOLD FOR ALL NOMINEES Withhold for the following only: (Write the names of the
[ ] [ ] nominee(s) in the space below)
------------------------------------------------------------
</TABLE>
2. Ratification of selection of KPMG Peat Marwick LLP as Independent Auditors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THIS PROXY IS CONTINUED ON THE REVERSE SIDE, PLEASE DATE, SIGN AND RETURN
PROMPTLY.
<PAGE> 20
3. To vote on such other matters that may properly come before the meeting.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING,
PROXY STATEMENT AND ANNUAL REPORT OF INKINE PHARMACEUTICAL COMPANY INC.
(Signature should be
exactly as name or names
appear on this proxy. If
stock is held jointly, each
holder should sign. If
signing is by attorney,
executor, administrator,
trustee or guardian, please
give full title.)
Dated , 1998
---------------------------
Signature
---------------------------
Signature if held jointly
I plan to attend the meeting: Yes [ ] No [ ]
THIS PROXY WILL BE VOTED FOR ALL NOMINEES AND FOR THE ABOVE MATTERS UNLESS
OTHERWISE INDICATED,
AND IN THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS PROPERLY BROUGHT
BEFORE THE MEETING.
<PAGE> 21
EXHIBIT INDEX
Letter of Richard A. Eisner & Co., LLP (filed as an Exhibit to the Company's
Form 8-K dated February 2, 1998 and incorporated herein by reference)
-2-
