<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant / /
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 Section240.14a-11(c) or
Section240.14a-12
</TABLE>
<TABLE>
<S> <C>
VALENTIS, INC.
- -----------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/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:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
<PAGE>
VALENTIS, INC.
863A MITTEN ROAD
BURLINGAME, CALIFORNIA 94010
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 7, 1999
------------------------
To the Stockholders of VALENTIS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
VALENTIS, INC., a Delaware corporation (the "Company"), will be held on Tuesday,
December 7, 1999, at 10:00 a.m. local time at the offices of the Company,
863A Mitten Road, Burlingame, California 94010 for the following purpose:
1. To elect three directors to hold office until the 2002 Annual Meeting
of Stockholders.
2. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending June 30, 2000.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing 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 October 25, 1999,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ Patrick A. Pohlen
Patrick A. Pohlen
Secretary
Burlingame, California
November 8, 1999
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
VALENTIS, INC.
863A MITTEN ROAD
BURLINGAME, CALIFORNIA 94010
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 7, 1999
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Valentis, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on December 7, 1999, at 10:00 a.m. local time
(the "Annual Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting. The
Annual Meeting will be held at the offices of the Company, 863A Mitten Road,
Burlingame, California 94010. The Company intends to mail this proxy statement
and accompanying proxy card on or about November 8, 1999, to all stockholders
entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on
October 25, 1999 will be entitled to notice of and to vote at the Annual
Meeting. At the close of business on October 25, 1999, the Company had
outstanding and entitled to vote 26,413,675 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 863A
Mitten Road, Burlingame, California 94010, a written notice of revocation or a
duly
<PAGE>
executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the Company's
1999 Annual Meeting of Stockholders must be received by the Company not later
than June 30 1999, in order to be included in the proxy statement and proxy
relating to that Annual Meeting. Stockholders are also advised to review the
Company's Bylaws, which contain additional requirements with respect to advance
notice of stockholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and Bylaws provide that
the Board of Directors shall be divided into three classes, each class
consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Vacancies on the Board may
be filled only by persons elected by a majority of the remaining directors. A
director elected by the Board to fill a vacancy (including a vacancy created by
an increase in the Board of Directors) shall serve for the remainder of the full
term of the class of directors in which the vacancy occurred and until such
director's successor is elected and qualified.
The Board of Directors is presently composed of eight members. There are
three directors in the class whose term of office expires in 1999. One of the
board members was appointed by the Board in March 1998. The two additional
nominees were on the boards of directors of GeneMedicine, Inc. and PolyMASC
Pharmaceuticals plc, respectively, each a company with which Valentis completed
a merger in 1999. If elected at the Annual Meeting, each of the nominees would
serve until the 2002 annual meeting and until his or her successor is elected
and has qualified, or until such director's earlier death, resignation or
removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed proxies will be voted, if authority to do so is not withheld, for the
election of the three nominees named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2002 ANNUAL MEETING
STANLEY T. CROOKE, M.D., PH.D.
Stanley T. Crooke, M.D., Ph.D., has served as a director of the Company
since March 1999. He previously served as a director of GeneMedicine, Inc.
("GeneMedicine"), a biotechnology company which merged with Valentis in March
1999 from March 1992 to March 1996, and as Chairman of the Board from
March 1996 to March 1999. Dr. Crooke has been Chief Executive Officer and a
director of Isis Pharmaceuticals, Inc. ("Isis"), a biotechnology company, since
he co-founded Isis in January 1989, and he has served as Chairman of the Board
of Isis since February 1991. From 1980 until January 1989, Dr. Crooke was
employed by SmithKline Beacham Corporation ("SmithKline"), a pharmaceutical
company, most recently as President of Research and Development of SmithKline &
French Laboratories. Dr. Crooke is a member of the Board of Directors of SIBIA
Neurosciences, Inc., EPIX Medical Inc., and Isis Pharmaceuticals, Inc.
Dr. Crooke received a Ph.D. in Pharmacology and an M.D. from Baylor College
2
<PAGE>
of Medicine, where he served for a number of years as Adjunct Professor of
Pharmacology. He currently serves as Adjunct Professor of Pharmacology at the
University of California, San Diego.
PATRICK G. ENRIGHT
Patrick G. Enright is a partner at Diaz & Altschul Group, LLC, a privately
held merchant bank, and has been a director of the Company since March 1998.
From March 1995 to February 1998, Mr. Enright served in various executive
positions at the Company, including Senior Vice President, Corporate Development
and Chief Financial Officer. From September 1993 to June 1994, Mr. Enright was
Senior Vice President of Finance and Business Development for Boehringer
Mannheim Therapeutics ("Boehringer Mannheim"), a pharmaceutical company and a
subsidiary of Corange Ltd. From September 1989 to September 1993, Mr. Enright
was employed at PaineWebber Incorporated, an investment banking firm, where he
became a Vice President in January 1992. Mr. Enright received his M.B.A. from
the Wharton School of Business at the University of Pennsylvania and his B.S. in
biological sciences from Stanford University.
GILLIAN E. FRANCIS, M.B., D.SC. (MED), FRCPATH
Gillian E. Francis, M.B., D.Sc. (Med), FRCPath, has served as a director of
the Company since September 1999. Dr. Francis is Managing Director of PolyMASC
Pharmaceuticals plc, a wholly-owned subsidiary of Valentis ("PolyMASC"). From
December 1995 to August 1999, Dr. Francis was Chief Executive Officer of
PolyMASC. Currently Dr. Francis is on full secondment from Royal Free and
University College Medical School (part of the University of London) to
PolyMASC. From 1994 to present, Dr. Francis has been Head of Department of
Molecular Cell Pathology, Royal Free Hospital School of Medicine and Honorary
Consultant, Royal Free Hospital. In December 1995, Dr. Francis was seconded as
CEO, PolyMASC, maintaining post as Head of Molecular Cell Pathology (without
active duties).
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
RUSSELL C. HIRSCH, M.D., PH.D.
Russell C. Hirsch, M.D., Ph.D., has served as a director of the Company
since August 1993. He joined Mayfield in 1992, and has been a managing member of
several venture capital funds affiliated with Mayfield since 1995. From 1984 to
1992, Dr. Hirsch conducted research in the laboratories of Nobel Laureate Harold
Varmus, M.D., and Don Ganem, M.D., at the University of California, San
Francisco. Dr. Hirsch received his M.D. and Ph.D. in biochemistry from the
University of California, San Francisco.
RAJU KUCHERLAPATI, PH.D.
Raju Kucherlapati, Ph.D., has served as a director of the Company since
March 1995. Dr. Kucherlapati has served as the Lola and Saul Kramer Professor
and Chairman of the Department of Molecular Genetics at Albert Einstein College
of Medicine since 1989. He was a founder of both Cell Genesys, Inc., a
biotechnology company and Millennium Pharmaceuticals, Inc., a biopharmaceutical
company ("Millenium"). He serves on the Board of Directors of Abgenix, Inc., a
biopharmaceutical company, and Millennium. Dr. Kucherlapati received his Ph.D.
from the University of Illinois.
3
<PAGE>
BERT W. O'MALLEY, M.D.
Bert W. O'Malley, M.D., has served as a director of the Company since March
1999. Previously, Dr. O'Malley was one of GeneMedicine's founders, and served as
a director of GeneMedicine from April 1998 to March 1999. Dr. O'Malley has been
Chairman of the Department of Cell Biology at Baylor College of Medicine and a
Director of the Baylor Center for Population Research and Reproductive Biology
since 1973. He is a member of the National Academy of Science and the Institute
of Medicine and the author of more than 500 scientific publications.
Dr. O'Malley's scientific work has included major achievements in the areas of
medical endocrinology and reproduction with potentially broad application to the
diagnosis of human genetic diseases and the treatment of breast and prostatic
cancer. His work includes the invention of Genemedicine's proprietary
GeneSwitch-TM- technology of the therapeutic protein produced by a gene
medicine. Dr. O'Malley holds a B.S. and a M.D. degree from the University of
Pittsburgh.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2001 ANNUAL MEETING
BENJAMIN F. MCGRAW III, PHARM.D.
Benjamin F. McGraw, III, Pharm.D., joined the Company as President, Chief
Executive Officer and director in September 1994 and became Chairman of the
Board of Directors in February 1997. From April 1993 to September 1994,
Dr. McGraw was Corporate Vice President for Corporate Development for
Allergan, Inc., a pharmaceutical company. From November 1990 to April 1993, he
served as President of MedTech Trends, Inc., an investment advisory company.
From November 1991 to April 1993, Dr. McGraw was President of Carerra Capital
Management, Inc., an investment company, where he was the fund manager for a
limited partnership that invested in health care companies. From July 1989 to
November 1990, Dr. McGraw was Vice President, Development at Marion Merrell
Dow, Inc., a pharmaceutical company. From November 1987 to July 1989, he was
Vice President, Development at Marion Laboratories, Inc., a pharmaceutical
company. Dr. McGraw received his Doctor of Pharmacy from the University of
Tennessee Center for the Health Sciences, where he also completed a clinical
practice residency.
ARTHUR M. PAPPAS
Arthur M. Pappas has served as a director of the Company since March 1999.
From January 1995 to March 1999, Mr. Pappas served as a director of
GeneMedicine. Mr. Pappas is Chairman and Chief Executive Officer of A. M.
Pappas & Associates, LLC ("A. M. Pappas"), an international consulting,
investment and venture company that works with life science companies, products
and related technologies. Prior to founding A. M. Pappas in 1994, he was a
director of Glaxo Holdings plc with executive responsibilities for operations in
Asia Pacific, Latin America, and Canada. In this capacity, he was Chairman and
Chief Executive of Glaxo Far East (Pte) Ltd. and Glaxo Latin America Inc., as
well as Chairman of Glaxo Canada Inc. He has held various senior executive
positions with Abbott Laboratories International Ltd., Merrell Dow
Pharmaceuticals, and the Dow Chemical Company, in the United States and
internationally. Mr. Pappas is a director of Quintiles Transnational Corp., a
leading full-service drug development organization, Embrex, Inc., a research and
development company specializing in poultry in-the-egg delivery systems, and
KeraVision, Inc., a company developing products for reversible vision correction
surgery. Mr. Pappas received a B.S. in Biology from Ohio State University and an
M.B.A. in Finance from Xavier University.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended June 30, 1999, the Board of Directors held
eight meetings. The Board has an Audit Committee and a Compensation Committee.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent
4
<PAGE>
auditors to be retained; and receives and considers the accountants' comments as
to controls, adequacy of staff and management performance and procedures in
connection with audit and financial controls. The Audit Committee is composed of
two non-employee directors: Mr. Enright and Dr. Hirsch. The Audit Committee did
not meet in fiscal year ended June 30, 1999.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee is composed of two non-employee
directors: Drs. Crooke and Kucherlapati. The Compensation Committee met twice
during such fiscal year.
During the fiscal year ended June 30, 1999, each Board member attended 75%
or more of the aggregate of the meetings of the Board and of the committees on
which he served, held during the period for which he was a director or committee
member, respectively.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending June 30, 2000 and has further
directed that management submit the selection of independent auditors for
ratification by the stockholders at the Annual Meeting. Ernst & Young LLP has
audited the Company's financial statements since 1994. Representatives of
Ernst & Young LLP 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.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders 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 stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Ernst & Young LLP. Abstentions will be
counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
5
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of August 31, 1999 by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table; (iii) all executive officers and directors of the Company as
a group; and (iv) all those known by the Company to be beneficial owners of more
than five percent of its Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
------------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
- ---------------- ----------- ----------
<S> <C> <C>
Entities Affiliated with Roche Holding Ltd(2) .......... 1,713,665 6.50
Grenzacherstrasse 124, CH-4070
Basel, Switzerland
Stanley T. Crooke, M.D., Ph.D.(3)....................... 25,235 *
Patrick G. Enright(4)................................... 202,832 *
Gillian E. Francis, M.B. D.Sc. (Med), FRCPath........... 625,014 2.37
Russell C. Hirsch, M.D., Ph.D.(5)....................... 6,633 *
Kenneth R. Lynn......................................... -- *
Raju Kucherlapati, Ph.D.(6)............................. 21,666 *
Benjamin F. McGraw, III, Pharm. D.(7)................... 406,703 1.54
Bert W. O'Malley, M.D.(8)............................... 74,303 *
Arthur M. Pappas........................................ 3,997 *
Rodney Pearlman, Ph.D.(9)............................... 137,499 *
Kathryn N. Stankis(10).................................. 30,592 *
Bennet L. Weintraub(11)................................. 35,075 *
All executive officers and directors 1,569,549 5.96
as a group (12 persons)(12)...........................
</TABLE>
- ------------------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G if any filed with the
Securities and Exchange Commission (the "SEC"). Unless otherwise indicated
in the footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
26,343,816 shares outstanding on August 31, 1999, adjusted as required by
rules promulgated by the SEC.
(2) Includes 611,785 shares and 1,101,880 shares of Common Stock beneficially
held by Syntex Corporaiton ("Syntex") and Corange International Limited
("Corange"), respectively. Syntex and Corange are affiliates of Roche
Holding Ltd., a Swiss Corporation.
(3) Includes 14,631 shares Dr. Crooke has the right to acquire pursuant to
outstanding options exercisable within 60 days.
(4) Includes 2,000 shares held by Enright Capital Advisors, an investment
partnership of which Mr. Enright is a partner. Mr. Enright disclaims
beneficial ownership of all such shares owned by the foregoing partnership
except to the extent of his proportionate pecuniary interest therein. Also
includes 88,333 shares Mr. Enright has the right to acquire pursuant to an
option exercisable within 60 days.
6
<PAGE>
(5) Includes 8,833 shares Dr. Hirsch has the right to acquire pursuant to
outstanding options exercisable within 60 days.
(6) Includes 21,666 shares Dr. Kucherlapati has the right to acquire pursuant
to options exercisable within 60 days.
(7) Includes 373,333 shares Dr. McGraw acquired pursuant to the exercise of
stock options, 29,098 of which will be subject to repurchase by the Company
as of October 30, 1999.
(8) Includes 40,390 shares Dr. O'Malley has the right to acquire pursuant to
outstanding options exercisable within 60 days.
(9) Includes 112,499 shares Dr. Pearlman acquired pursuant to the exercise of
stock options, 1,823 of which will be subject to repurchase by the Company
as of October 30, 1999. Also includes 26,040 shares Dr. Pearlman has the
right to acquire pursuant to option exercisable within 60 days, 1,823 which
will be subject to repurchase by the Company on such date, if issued.
(10) Includes 15,794 shares Ms. Stankis has the right to acquire pursuant to
outstanding options exercisable within 60 days.
(11) Includes 28,332 shares Mr. Weintraub has the right to acquire pursuant to
outstanding option exercisable within 60 days.
(12) Includes 224,019 shares subject to options exercisable within 60 days.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent 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. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended June 30, 1999, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with, except that Mr.
Lynn failed to timely file his initial report on Form 3. Mr. Lynn filed such
report shortly after being notified of the failure to timely file.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives a quarterly retainer of
$3,000 and a per meeting fee of $1,000. The members of the Board of Directors
are also eligible for reimbursement for their expenses incurred in connection
with attendance at Board meetings in accordance with Company policy.
Under the Directors' Plan, on the date of the annual stockholders' meeting
of each year, each member of the Company's Board of Directors who is not an
employee of the Company will automatically be granted under the Company's 1998
Non-Employee Director, without further action by the Company, the Board of
Directors or the stockholders of the Company, an option to purchase 10,000
shares of Common Stock of the Company. In addition, each new non-employee
director will receive a one time grant to purchase 25,000 shares of Common Stock
on the date of the annual stockholders' meeting at which such new director is
elected to the Board of Directors. The exercise price of the options granted to
the non-employee directors is 100% of the fair market value of the Common Stock
subject to the option on the date of the option grant.
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COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal years ended June 30, 1999 and 1998,
compensation awarded or paid to, or earned by, the Company's Chief Executive
Officer and its other four most highly compensated executive officers at
June 30, 1999 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) (#) ($)(2)
- --------------------------- -------- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Benjamin F. McGraw III, Pharm.D. .... 1999 318,425 30,000 -- 60,000 1,790
Chairman, Chief Executive Officer 1998 275,002 -- -- -- 656
and President
Bennet L. Weintraub(3) .............. 1999 172,622 -- -- -- 613
Chief Financial Officer and Vice 1998 13,077 -- -- 80,000 --
President, Finance
Kenneth R. Lynn(4) .................. 1999 89,375 -- -- 85,000 296
Senior Vice President, Corporate 1998 -- -- -- -- --
Development and Legal Affairs
Rodney Pearlman, Ph.D. .............. 1999 215,391 20,000 -- 37,508 991
Senior Vice President, Research and 1998 179,999 -- -- -- 279
Development
Kathryn N. Stankis(5) ............... 1999 42,993 86,268 -- 22,840 150
Vice President, Human Resources 1998 -- -- -- -- --
</TABLE>
- ------------------------
(1) As permitted by rules promulgated by the SEC, no amounts are shown where the
amounts constitute perquisites and do not exceed the higher of 10% of the
sum of the salary and bonus column and $50,000.
(2) Represents insurance premiums paid by the Company with respect to group life
insurance for the benefit of the Named Executive Officers.
(3) Represents actual compensation received by Mr. Weintraub during fiscal year
ended June 30, 1998. Mr. Weintraub joined the Company in May 1998. His
annualized salary for fiscal year ended June 30, 1998 was $172,622.
(4) Represents actual compensation received by Mr. Lynn during fiscal year ended
June 30, 1999. Mr. Lynn joined the Company in January 1999. His annualized
salary for fiscal year ended June 30, 1999 was $195,000.
(5) Represents actual compensation received by Ms. Stankis during fiscal year
ended June 30, 1999. Ms. Stankis joined the Company in March 1999. Her
annualized salary for fiscal year ended June 30, 1999 was $145,193.
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its Incentive
Plan. As of August 31, 1999, options to purchase a total of 1,443,039 shares
were outstanding under the Incentive Plan and options to purchase
680,636 shares remained available for grant thereunder.
8
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The following tables show for the fiscal year ended June 30, 1999, certain
information regarding options granted to, exercised by, and held at year end by,
Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
--------------------------------------------------------- STOCK
NUMBER OF % OF TOTAL PRICE APPRECIATION
SECURITIES OPTIONS FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(1)
OPTION EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED (#) FISCAL YEAR(2) ($/SH) (#)(3) DATE 5% ($) 10% ($)
- ---- ----------- -------------- ------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Benjamin F. McGraw III, Pharm.D...... 60,000 10.48 5.88 09/15/08 222,264 560,952
Bennet L. Weintraub.................. -- -- -- -- -- --
Kenneth R. Lynn...................... 85,000 14.85 6.13 1/11/09 328,262 828,470
Rodney Pearlman, Ph.D................ 37,500 6.55 5.88 09/15/08 138,915 350,595
Kathryn N. Stankis................... 3,426 .60 5.14 7/11/08 11,094 27,999
14,275 2.49 4.38 8/3/08 39,390 99,414
5,139 .90 4.38 11/2/08 14,181 35,789
</TABLE>
- ------------------------
(1) Reflects the value of the stock option on the date of grant assuming
(i) for the 5% column, a five-percent annual rate of appreciation in the
Company's Common Stock over the ten-year term of the option and (ii) for the
10% column, a ten-percent annual rate of appreciation in the Company's
Common Stock over the ten-year term of the option, in each case without
discounting to net present value and before income taxes associated with the
exercise. The 5% and 10% assumed rates of appreciation are based on the
rules of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future Common Stock price. The
amounts in this table may not necessarily be achieved.
(2) Based on options to purchase 572,460 shares of the Company's Common Stock
granted in fiscal year ended June 30, 1999.
(3) All options were granted at the fair market value at the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ON REALIZED OPTIONS AT JUNE 30, 1999 AT JUNE 30, 1999(2)
NAME EXERCISE (#) ($)(1) (#) EXERCISABLE/UNEXERSISABLE ($) EXERCISABLE/UNEXERCISABLE
- ---- ------------ --------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Benjamin F. McGraw III,
Pharm.D..................... -- -- 0/60,000 0/0
Bennet L. Weintraub........... -- -- 21,666/58,334 0/0
Kenneth R. Lynn............... -- -- 0/85,000 0/0
Rodney Pearlman, Ph.D......... -- -- 14,583/47,917 24,773/0
Kathryn N. Stankis............ -- -- 25,086/21,696 0/0
</TABLE>
- ------------------------
(1) Fair Market Value of the Company's Common Stock on date of exercise minus
the exercise price.
(2) Fair Market Value of the Company's Common Stock on June 30, 1999 ($3.1988)
minus the exercise price of the options.
9
<PAGE>
EMPLOYMENT AGREEMENTS
The Company entered an employment offer letter (the "Offer Letter") with
Kenneth R. Lynn to employ Mr. Lynn as Senior Vice President, Corporate
Development and Legal Affairs. Under the terms of the Offer Letter, Mr. Lynn
receives an annual salary of $195,000. Mr. Lynn also received one stock option
grant covering an aggregate of 85,000 shares of Common Stock, pursuant to the
terms of the Company's Incentive Plan. In the event the Company terminates
Mr. Lynn's employment because of Mr. Lynn's determination not to relocate to a
site more than 25 miles from his home in the Denver area at the request of the
Company, then the Company has agreed to pay Mr. Lynn one year's severance based
on his then effective salary. In addition, Mr. Lynn will receive six months
accelerated vesting of his stock options and the Company will pay his health
care insurance premiums for six months.
The Company also entered an employment agreement with Kathryn N. Stankis to
employ Ms. Stankis as Vice President, Human Resources. Pursuant to the terms of
the Agreement, Ms. Stankis remains eligible to receive certain severance
benefits made available to her under the GeneMedicine Change of Control
Severance Plan in effect prior to the merger in March 1999 for a period of
twelve months after the effective date of the merger.
10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT(1)
The Compensation Committee of the Board of Directors ("Committee") is
composed of Drs. Crooke and Kucherlapati, neither of whom are currently officers
or employees of the Company. The Committee is responsible for establishing the
Company's compensation programs for all employees, including executives. For
executive officers, the Committee evaluates performance and determines
compensation policies and levels, as the Board requests.
EXECUTIVE COMPENSATION
We design our executive compensation programs to attract and retain
executives who can lead Valentis to meet its business objectives and to motivate
them to enhance long-term stockholder value. The executive officers' annual
compensation consists of three elements: cash salary, a cash incentive bonus and
stock option grants.
To determine fair compensation, the Compensation Committee reviews
historical and current salary, bonus and stock award information for other
comparable companies in similar geographic areas and at similar stages of growth
and development. The group of comparable companies is not necessarily the same
as the companies included in the market indices included in the performance
graph on page 13. The Compensation Committee also reviews a variety of industry
surveys throughout the year, which provide additional information about short
and long-term executive compensation. Based in part on this information, the
Compensation Committee generally sets salaries, including that of the Chief
Executive Officer, at levels comparable to competitive companies of comparable
size in similar industries. We structure our management by bonus program around
both individual and Company performance. We base the total size of the bonus
pool on our success in meeting performance goals for the year, accounting for
changes the Compensation Committee discussed and agreed to during the course of
the year.
We use the stock option program to give management employees a substantial
economic interest in the long-term appreciation of our Common Stock. We grant
existing members of management new options on an annual basis to provide a
continuing financial incentive. The size of the option grant is related to the
executive's position and performance in the previous year.
KEY ACCOMPLISHMENTS FOR FISCAL 1999
We had the following achievements during Fiscal 1999 to further advance our
business objectives:
- We completed a merger with GeneMedicine, Inc. in March 1999, strengthening
our position as a leading gene therapy company.
- Together with our manufacturing partner, DSM Biologics, we completed a
large-scale 3,000 liter manufacturing run at DSM's facility in Montreal,
Quebec, Canada, thereby triggering a $250,000 milestone payment from DSM
to Valentis.
- We entered into an agreement to merge with PolyMASC Pharmaceuticals plc,
which merger strengthened the Company's technology platforms, added
additional partners and diversified the Company's portfolio of products in
clinical and preclinical development (this merger was completed in August
1999).
- ------------------------
(1) Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the
Exchange Act that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following report and performance graph
on page 13 shall not be incorporated by reference into any such filings. The
Committee's objective is to set executive compensation at competitive levels
when compared to other companies in the biotechnology industry. The primary
components of executive compensation are base salary, annual incentives and
long-term equity incentives.
11
<PAGE>
- We initiated a Phase II clinical trial with our Interleukin-2 (IL-2) gene
therapy for the treatment of squamous cell carcinoma for the head and
neck.
- We initiated a Phase I/II clinical trial with our Interleukin-12 (IL-12)
gene therapy for the treatment of squamous cell carcinoma for the head and
neck.
CHIEF EXECUTIVE OFFICER COMPENSATION
Dr. McGraw's salary during fiscal year end June 30, 1999 as President, Chief
Executive Officer and Chairman was $318,425. Following the Committee's review of
Dr. McGraw's performance and the Company's performance during fiscal year ended
June 30, 1999, the Committee set Dr. McGraw's annual salary for fiscal year
ending June 30, 2000 at $327,978. In addition, the Compensation Committee
approved a bonus of $50,000 in July 1999 for Dr. McGraw. In September 1998, the
Committee also approved a stock option grant for 60,000 shares of Common Stock
for Dr. McGraw, which is within the guidelines for the CEO under our annual
stock options grant program. In approving Dr. McGraw's compensation, the
Committee took into account (i) Dr. McGraw's past performance as President, CEO
and Chairman of the Board of the Company, (ii) the scope of Dr. McGraw's
responsibilities, and (iii) the Board's assessment of the Company's achievement
of its performance objectives.
FEDERAL TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code (the "Code") limits the Company
to a deduction for federal income tax purposes of no more than 1 million of
compensation paid to certain Named Executive Officers in a taxable year.
Compensation above $1 million may be deducted if it is "performance-based
compensation" within the meaning of the Code.
The statute containing this law and the applicable Treasury regulations
offer a number of transitional exceptions to this deduction limit for
pre-existing compensation plans, arrangements and binding contracts. As a
result, the Compensation Committee believes that at the present time it is quite
unlikely that the compensation paid to any named Executive Officer in a taxable
year which is subject to the deduction limit will exceed $1 million. Therefore,
the Compensation Committee has not yet established a policy for determining
which forms of incentive compensation awarded to its Named Executive Officers
shall be designed to qualify as "performance-based compensation." The
Compensation Committee intends to continue to evaluate the effects of the
statute and any applicable Treasury regulations and to comply with Code
Section 162(m) in the future to the extent consistent with the best interests of
the Company.
CONCLUSION
A significant portion of the Company's compensation program and
Dr. McGraw's compensation are contingent on Company performance, and realization
of benefits is closely linked to increases in long-term stockholder value. The
Company remains committed to this philosophy of pay for performance, recognizing
that the competitive market for talented executives and the volatility of the
Company's business may result in highly variable compensation for a particular
time period.
COMPENSATION COMMITTEE
Stanley T. Crooke, M.D., Ph.D.
Raju Kucherlapati, Ph.D.
12
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows the total stockholder return of an investment of
$100 in cash on September 15, 1997 for (i) the Company's Common Stock, (ii) the
Nasdaq Stock Market-U.S. Index (the "Nasdaq Stock Market-U.S.") and (iii) the
Nasdaq Pharmaceutical Index (the "Nasdaq Pharmaceutical"). All values assume
reinvestment of the full amount of all dividends and are calculated as of
September 30, 1999:
COMPARISON OF CUMULATIVE TOTAL RETURN ON INVESTMENT
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
09/15/97 09/30/97 12/31/97 03/31/98 06/30/98 09/30/98 12/30/98 03/30/99 06/30/99 09/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Valentis 100.0 137.5 118.8 77.1 63.5 42.7 42.7 34.4 31.8 42.2
NASDAQ Composite Index 100.0 103.1 96.1 112.3 115.9 103.6 134.1 150.6 164.3 168.0
NASDAQ Biotechnology Index 100.0 104.7 92.8 103.6 97.1 97.5 133.9 152.5 155.3 180.4
</TABLE>
- ------------------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the 1933 Act or the 1934 Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such
filing.
13
<PAGE>
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with certain officers and
directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein, for expenses, damages. Judgments, fines and settlements he may be
required to pay in actions or proceedings which he is or may be made a party by
reason of his position as a director, officer or other agent of the Company, and
otherwise to the full extent permitted under Delaware law and the Company's
By-laws.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
For further information about Valentis, Inc., please request a copy of our
Annual Report on Form 10-K which we previously filed with the Securities &
Exchange Commission, and is available free of charge. Please send written
requests to:
Valentis, Inc.
863A Mitten Rd.
Burlingame, CA 94010
Attn: Investor Relations
By Order of the Board of Directors
/s/ Patrick A. Pohlen
Patrick A. Pohlen
Secretary
November 8, 1999
14
<PAGE>
1566-PS-99
<PAGE>
PROXY
VALENTIS, INC.
863A MITTEN ROAD
BURLINGAME, CALIFORNIA 94010
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Bennet L. Weintraub and Patrick A.
Pohlen or either of them, each with the power of substitution, and hereby
authorizes them to represent and to vote, as designated on the reverse side,
all shares of common stock of Valentis, Inc. (the "Company") held of record
by the undersigned on October 25, 1999 at the Annual Meeting of Stockholders
to be held on December 7, 1999 and any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED, IF NO
DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE
VOTED FOR SUCH PROPOSAL.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE, NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE>
Dear Stockholder:
Please take note of the important information enclosed with this Proxy. There
are a number of issues related to the operation of the Company that require
your immediate attention.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on the proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your prompt consideration of
these matters.
Sincerely,
Valentis, Inc.
DETACH HERE
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED IN
PROPOSAL 1 BELOW AND A VOTE FOR PROPOSAL 2.
<TABLE>
<S><C>
FOR AGAINST ABSTAIN
1. Election of Directors 2. To ratify the selection of Ernst / / / / / /
Nominees: Stanley T. Crooke, M.D., Ph.D., Patrick G. Enright, & Young LLP as independent
Gillian E. Francis, M.B., D.Sc. (Med), FRCPath auditors of the Company.
FOR 3. In their discretion, the proxies are authorized to
all nominees vote upon any other business that may properly
(except as / / / / WITHHELD come before the meeting.
marked to the
contrary below) MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
- ------------------------------------------------
For all nominees except as noted above. Please sign exactly as name appears hereon. Joint owners
should each sign. Executors, administrators, trustees,
guardians or other fiduciaries should give full title as
such. If signing for a corporation, please sign in full
corporate name by a duly authorized officer.
Signature: Date: Signature: Date:
-------------------------- ---------------- ---------------------------- ------------------
</TABLE>
