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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
CELL GENESYS, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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CELL GENESYS, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 2, 1999
TO THE STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders of Cell
Genesys, Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, June 2, 1999 at 10:00 a.m., local time, at the Company's offices at
342 Lakeside Drive, Foster City, California, for the following purposes:
1. To elect directors to serve until the next annual meeting of
stockholders or until their successors are elected.
2. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending December 31, 1999.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
These items of business are more fully described in the Proxy Statement
accompanying this notice.
Only stockholders of record at the close of business on April 8, 1999 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, please mark, sign, date
and return the enclosed proxy card as soon as possible in the postage-prepaid
envelope enclosed for that purpose. Any stockholder attending the meeting may
vote in person even if the stockholder has returned a proxy.
Sincerely,
/s/ Matthew J. Pfeffer
Matthew J. Pfeffer
Foster City, California Assistant Secretary
April 28, 1999
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
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CELL GENESYS, INC.
342 LAKESIDE DRIVE
FOSTER CITY, CA 94404
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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the board of directors of Cell
Genesys, Inc., a Delaware Corporation, ("Cell Genesys" or the "Company") for use
at the Annual Meeting of Stockholders to be held on Wednesday, June 2, 1999 at
10:00 a.m., local time, or at any adjournment of the meeting, for the purposes
set forth in this Proxy Statement and in the accompanying Notice of Annual
Meeting of Stockholders. The annual meeting will be held at the Company's
offices at 342 Lakeside Drive, Foster City, California 94404. The Company's
telephone number is (650) 425-4400.
These proxy solicitation materials were mailed on or about April 28, 1999
together with the Company's 1998 Annual Report to Stockholders, to all
stockholders entitled to vote at the meeting.
RECORD DATE
Stockholders of record at the close of business on April 8, 1999 (the
"Record Date") are entitled to notice of and to vote at the meeting. At the
Record Date, 30,990,470 shares of the Company's common stock were issued and
outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or time or by
attending the meeting and voting in person.
VOTING AND SOLICITATION
Every stockholder voting in the election of directors may cumulate such
stockholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of shares held by such
stockholder, or distribute the stockholder's votes on the same principle among
as many candidates as the stockholder may select, provided that votes cannot be
cast for more candidates than the number of directors to be elected. However, no
stockholder shall be entitled to cumulate votes unless the candidate's name has
been placed in nomination prior to the voting and the stockholder, or any other
stockholder, has given notice at the meeting prior to the voting of the
intention to cumulate the stockholder's votes. On all other matters, each share
has one vote.
The cost of soliciting proxies will be borne by the Company. Proxies may
also be solicited by certain of the Company's directors, officers and employees,
without additional compensation, personally or by telephone, facsimile or
letter.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
A quorum is required for the transaction of business during the annual
meeting. A quorum is present when a majority of shareholder votes are present in
person or by proxy. Shares that are voted "FOR", "AGAINST" or "WITHHELD" on a
matter are treated as being present at the meeting for purposes of establishing
a quorum and are also treated as shares cast by the common stock present in
person or represented by proxy at the annual meeting and entitled to vote on the
subject matter (the "Votes Cast").
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The Company will count abstentions for purposes of determining both (i) the
presence or absence of a quorum for the transaction of business and (ii) the
total number of Votes Cast with respect to a proposal (other than the election
of directors). Abstentions will have the same effect as a vote against the
proposal.
Broker non-votes will be counted for purposes of determining the presence
or absence of a quorum for the transaction of business. Broker non-votes will
not be counted for purposes of determining the number of Votes Cast with respect
to the particular proposal. Thus, a broker non-vote will not have any effect on
the outcome of the voting on a proposal.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at next year's annual meeting must be received by the
Company no later than December 31, 1999 in order that they may be included in
the proxy statement and form of proxy relating to the 2000 annual meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
Seven directors are to be elected at the annual meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
Company's seven nominees named below, all of whom are presently directors of the
Company. If any nominee of the Company is unable or declines to serve as a
director at the time of the annual meeting, the proxies will be voted for any
nominee designated by the present board of directors (the "Board") to fill the
vacancy. If additional persons are nominated for election as directors, the
proxy holders intend to vote all proxies received by them in such a manner in
accordance with cumulative voting (if applicable) as will assure the election of
as many of the nominees listed below as possible, and, in such event, the
specific nominees to be voted for will be determined by the proxy holders. Raju
S. Kucherlapati, Ph.D., will not seek election for the upcoming term of office.
Dr. Kucherlapati has been a director of Cell Genesys since 1988 and we thank him
for his service during these past 11 years.
The Company is not presently aware of any other nominee who will be unable
or will decline to serve as a director. The term of office of each person
elected as a director will continue until the next annual meeting of
stockholders or until a successor has been elected and qualified.
The names of the nominees and certain information about them as of the
Record Date, are set forth below.
DIRECTOR
NAMES OF NOMINEES AGE PRINCIPAL OCCUPATION SINCE
----------------- --- -------------------- --------
Stephen A. Sherwin, M.D.............. 50 Chairman of the Board, President and Chief 1990
Executive
Officer of the Company
David W. Carter...................... 60 Chairman of the Board of Xenogen Corporation 1997
James M. Gower....................... 51 Chief Executive Officer and Chairman of the Board 1996
of
Rigel, Inc.
Joseph E. Maroun..................... 69 Retired Senior Vice President, 1995
President -- International
Group, Bristol-Myers Squibb
John T. Potts, Jr., M.D.............. 67 Director of Research, Massachusetts General 1997
Hospital
Eugene L. Step....................... 70 Retired Executive Vice President, President -- 1993
Pharmaceutical Division, Eli Lilly & Co.
Inder M. Verma, Ph.D................. 51 Professor of Molecular Biology and Virology, The 1997
Salk Institute Laboratory of Genetics
Dr. Sherwin has served as president, chief executive officer and a director
of the Company since March 1990. In March 1994, Dr. Sherwin was elected to the
additional position of chairman of the Company's board of directors. Dr. Sherwin
also is chairman of the board of Abgenix, Inc., a position he has held since
1996.
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From 1983 to 1990, Dr. Sherwin held various positions at Genentech, Inc., a
biotechnology company, most recently as vice president of clinical research.
Prior to 1983, Dr. Sherwin held various positions on the staff of the National
Cancer Institute. Dr. Sherwin also currently serves as an associate clinical
professor of medicine at the University of California, San Francisco, a position
he has held since 1986, and he currently is a director of Neurocrine
Biosciences, Inc. and the California Healthcare Institute, a non-profit
institution. Dr. Sherwin holds a B.A. from Yale University in biology and an
M.D. from Harvard Medical School.
Mr. Carter has served as a director of Cell Genesys since May 1997. Mr.
Carter has served as chairman of the board of directors of Xenogen Corporation
since November 1997. Previously, Mr. Carter served as president, chief executive
officer and chairman of the board of directors of Somatix Therapy Corporation
("Somatix"). Prior to joining Somatix in 1991, he was president and chief
operating officer of Northfield Laboratories. Mr. Carter currently serves as a
director of Immunogen, Inc. Mr. Carter received a B.A. and M.B.A. from Indiana
University.
Mr. Gower has served as a director of Cell Genesys since July 1996. In
1996, Mr. Gower became chairman and chief executive officer of Rigel, Inc. From
1992 to 1996 Mr. Gower served as president and chief executive officer of
Tularik, Inc. From 1981 to 1990, he was with Genentech, Inc., most recently as
senior vice president responsible for sales, marketing, business development and
product planning. From 1972 to 1981, Mr. Gower served in a variety of positions
in sales and marketing at American Hospital Supply Corporation, including as
vice president of marketing in the latter four years. Mr. Gower also is a
director of Terrapin, Inc., a privately held biotechnology company. Mr. Gower
received a B.S. degree in operations research and an M.B.A. from the University
of Tennessee.
Mr. Maroun was appointed a director of the Company in June 1995. Mr. Maroun
spent 30 years with Bristol-Myers Squibb, serving until his retirement in 1990,
when he was president of the international group, senior vice president of the
corporation, and a member of its policy committee. He also previously managed
operations for Bristol-Myers Squibb in Latin America, Canada, Japan, the Far
East and Europe. In addition, Mr. Maroun was chairman of the international
section of the Pharmaceutical Manufacturers Association, and chaired various
administrative and executive committees. He also headed the U.S. Japan
Pharmaceutical Advisory Group. Mr. Maroun received his B.A. degree from the
University of the Witwatersrand, Johannesburg.
Dr. Potts has served as a director of Cell Genesys since May 1997.
Previously, Dr. Potts had served as a director of Somatix since March 1995. His
career spans 40 years of distinguished service in science and medicine. He
earned his M.D. in 1957 from the University of Pennsylvania, then trained at
Massachusetts General Hospital and National Heart Institute. At the National
Institutes of Health, he became head of the section on polypeptide hormones
prior to becoming chief of endocrinology at Massachusetts General Hospital in
1968. Dr. Potts served as physician-in-chief at Massachusetts General Hospital
and Jackson Distinguished Professor of Clinical Medicine at Harvard Medical
School from 1981 to 1996. In September 1996, Dr. Potts moved from the post of
physician-in-chief to director of research at Massachusetts General Hospital and
Jackson Distinguished Professor of Clinical Medicine. He is also a member of the
board of directors of Genentech, Inc.
Mr. Step was appointed a director of the Company in March 1993. From 1973
to 1992, Mr. Step served in various positions in senior management of Eli Lilly
and Company, most recently as executive vice president, president of the
pharmaceutical division and a member of the board of directors and its executive
committee. Mr. Step is a past chairman of the board of the Pharmaceutical
Manufacturers Association and a past president of the International Federation
of Pharmaceutical Manufacturers Association. Mr. Step is also a director of
Scios, Inc., Medco, Inc., Guidant Corporation, Pathogenesis Corporation and DBT
Online Inc. Mr. Step holds a B.A. degree in economics from the University of
Nebraska and an M.S. in finance and accounting from the University of Illinois.
Dr. Verma has served as a director of Cell Genesys since May 1997.
Previously, Dr. Verma had served as a director of Somatix since June 1996. Dr.
Verma is co-director of the laboratory of genetics, The Salk Institute. He
joined The Salk Institute in 1974. In 1995, the National Institutes of Health
selected Dr. Verma to chair a committee reviewing the scope and advancement of
gene therapy. Currently, Dr. Verma is also an
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adjunct professor, department of biology, at the University of California, San
Diego and has been a member of the faculty since 1979. Dr. Verma is also a
member of the National Academy of Sciences.
There are no family relationships between directors or executive officers
of the Company.
REQUIRED VOTE
The seven nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them will be elected
as directors.
BOARD MEETINGS AND COMMITTEES
The board of directors of the Company held a total of nine meetings during
the fiscal year ended December 31, 1998. Each director attended at least
seventy-five percent of the meetings of the board of directors and each
committee on which he served during 1998.
The board of directors has an audit committee and a compensation committee.
It does not have a nominating committee or a committee performing the functions
of a nominating committee.
The audit committee of the board of directors met seven times during fiscal
year 1998 and currently consists of Messrs. Dr. Potts and Mr. Step. The audit
committee recommends engagement of the Company's independent auditors, and is
primarily responsible for reviewing and approving the scope of the audit and
other services performed by the Company's independent auditors and for reviewing
and evaluating the Company's accounting principles and its systems of internal
accounting controls.
The compensation committee of the board of directors, which consists of
directors Gower and Step, met three times during fiscal year 1998. The
compensation committee reviews and approves the Company's compensation policies
as well as the compensation of, and grant of stock options to, the executive
officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's compensation committee is composed of directors Gower and
Step, neither of whom is or has been an officer or employee of the Company. The
compensation committee makes recommendations to the board of directors
concerning salaries and incentive compensation for officers of the Company. Dr.
Sherwin, chairman of the board and chief executive officer of the Company, is
not a member of the compensation committee and cannot vote on matters decided by
the Committee. He participates in compensation committee discussions regarding
salaries and incentive compensation for all employees of and consultants to the
Company, except that Dr. Sherwin is excluded from discussions regarding his own
salary and incentive compensation. No interlocking relationship exists between
the Company's board of directors or compensation committee and the board of
directors or compensation committee of any other party, nor has such
relationship existed in the past.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The board of directors has selected Ernst & Young LLP, independent
auditors, to audit the financial statements of the Company for the fiscal year
ending December 31, 1999. Ernst & Young LLP has audited the Company's financial
statements since the year ended December 31, 1989. Representatives of Ernst &
Young LLP are expected to be present at the meeting with the opportunity to make
a statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
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REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock voting in person or by proxy on this proposal at the
annual meeting is required to approve the appointment of the independent
auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
OTHER INFORMATION
STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of
the Company as of March 31, 1999 by: (a) each person known to the Company who
beneficially owns five percent or more of the outstanding shares of its Common
Stock; (b) each director; (c) each of the executive officers named in the
Summary Compensation Table below; and (d) all directors and executive officers
as a group:
SHARES
BENEFICIALLY PERCENTAGE (%)
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(1) BENEFICIALLY OWNED(2)
--------------------------------------- ------------ ---------------------
Hoechst Marion Roussel, Inc.(3)............................. 2,750,000 8.87
9300 Ward Parkway
Kansas City, MO 64114
David W. Carter(4).......................................... 252,931 *
James M. Gower(5)........................................... 36,250 *
Raju S. Kucherlapati, Ph.D.(6).............................. 260,086 *
Joseph E. Maroun(7)......................................... 66,200 *
John T. Potts, Jr., M.D.(8)................................. 29,625 *
Stephen A. Sherwin, M.D.(9)................................. 812,970 2.62
Eugene L. Step(10).......................................... 76,000 *
Inder M. Verma, Ph.D.(11)................................... 101,081 *
Dale G. Ando, M.D.(12)...................................... 57,829 *
David F. Broad, Ph.D.(13)................................... 70,720 *
Mitchell H. Finer, Ph.D.(14)................................ 117,591 *
Kathleen Sereda Glaub(15)................................... 94,774 *
Bruce A. Hironaka(16)....................................... 96,513 *
All executive officers and directors as a group (15
persons)(17).............................................. 2,204,937 7.11
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* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons named in the table, to the Company's knowledge, have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Percentage of beneficial ownership is based on 30,997,369 shares of Common
Stock outstanding as of March 31, 1999. Shares of Common Stock subject to
options or warrants currently exercisable, or exercisable within 60 days,
are deemed outstanding for computing the percentage of the person holding
such options but are not deemed outstanding for computing the percentage of
any other person.
(3) Includes 750,000 shares subject to a warrant, which is exercisable at $13
per share.
(4) Includes 247,156 shares subject to options, which are exercisable within 60
days after March 31, 1999.
(5) Includes 36,250 shares subject to options, which are exercisable within 60
days after March 31, 1999.
(6) Includes 86,000 shares subject to options, which are exercisable within 60
days after March 31, 1999.
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(7) Includes 45,000 shares subject to options, which are exercisable within 60
days after March 31, 1999.
(8) Consist of 29,625 shares subject to options, which are exercisable within
60 days after March 31, 1999.
(9) Includes 500,874 shares subject to options, which are exercisable within 60
days after March 31, 1999. Additionally, includes 27,500 shares held in
irrevocable trust for Dr. Sherwin's child for which he disclaims beneficial
ownership.
(10) Consist of 76,000 shares subject to options, which are exercisable within
60 days after March 31, 1999.
(11) Includes 52,885 shares subject to options, which are exercisable within 60
days after March 31, 1999.
(12) Includes 56,145 shares subject to options, which are exercisable within 60
days after March 31, 1999.
(13) Consist of 70,720 shares subject to options, which are exercisable within
60 days after March 31, 1999.
(14) Includes 108,283 shares subject to options, which are exercisable within 60
days after March 31, 1999.
(15) Includes 92,187 shares subject to options, which are exercisable within 60
days after March 31, 1999. Ms. Glaub has resigned effective September 15,
1998, but continued in service as a consultant through March 31, 1999.
(16) Includes 90,408 shares subject to options, which are exercisable within 60
days after March 31, 1999.
(17) Includes 1,662,234 shares subject to options, which are exercisable within
60 days after March 31, 1999.
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EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation of the Company's chief executive officer ("CEO") and each of the
four other most highly compensated executive officers plus one additional
officer, Kathleen Sereda Glaub, who resigned her position with the Company
effective September 15, 1998, who would otherwise have been included among the
four other most highly compensated officers (collectively, the "Named Officers")
for services in all capacities as officers to the Company during fiscal years
1996, 1997 and 1998.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -------------
----------------------------- SECURITIES
NAME AND BONUS UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) ($)(1) OPTIONS(#)(2) COMPENSATION $
------------------ ---- ---------- ------- ------------- --------------
Stephen A. Sherwin, M.D............. 1998 378,525 100,000 250,000(4) --
Chairman, President and 250,000(3)
Chief Executive Officer 1997 360,500 60,000 --
160,000(3)
1996 350,000 80,000 100,000 --
Dale G. Ando M.D.................... 1998 181,000 29,000 22,500 --
Vice President, Clinical Research 122,500(3)
and Regulatory Affairs 1997 80,881(6) 100,000 --
David F. Broad, Ph.D................ 1998 180,000 29,000 45,000 --
Vice President, 117,000(3)
Development and Manufacturing 1997 168,500 45,000 --
57,000(3)
1996 137,306 22,500 12,000 --
Mitchell H. Finer, Ph.D............. 1998 203,500 32,500 60,000
Vice President, Research 139,000(3) --
1997 184,300 45,000
57,000(3) --
1996 144,454 24,000 12,000
Bruce A. Hironaka................... 1998 187,500 47,000 45,000
Vice President, 136,575(3) --
Corporate Development 1997 172,375 45,000
61,575(3) --
1996 142,284 22,500 16,575
Kathleen Sereda Glaub............... 1998 183,879 100,000 23,541(5)
Former Senior Vice President 1997 212,000 50,000 --
and Chief Financial Officer 125,000(3)
1996 200,000 56,000 75,000 --
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(1) These bonuses, which were awarded for and accrued in the year noted, were
paid in the subsequent year.
(2) Cell Genesys has no restricted stock awards, stock appreciation rights or
long-term incentive plan payouts.
(3) During 1997 and 1998, a majority of employees, including officers,
surrendered and cancelled certain previously granted options in exchange for
new options at a revised price. See also "Compensation Committee Report on
Executive Compensation".
(4) Of the options held by Dr. Sherwin, 250,000 were excluded from repricing and
were retained at their original option price which is higher than the
repriced options discussed in note (3) above.
(5) Ms. Glaub terminated her employment with the Company on September 15, 1998.
During 1998, following her resignation, $23,541 was paid for her consulting
services to the company.
(6) Dr. Ando joined the company as Vice President, Clinical Research on July 15,
1997.
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options to the Named
Officers in fiscal year 1998:
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATE OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM($)(3)
OPTIONS EMPLOYEES IN PRICE ($) EXPIRATION ----------------------
NAME GRANTED(1) 1998(2) (PER SHARE) DATE 5% 10%
---- ---------- ------------- ----------- ---------- --------- ---------
Stephen A. Sherwin,
M.D. ................... 250,000 8.5 7.500 2/19/08 1,179,177 2,988,267
250,000(5) 8.5 4.125 11/6/08 648,548 1,643,547
Dale G. Ando, M.D. ....... 22,500(4) 0.8 7.500 2/19/08 106,126 268,944
122,500(5) 4.2 4.125 11/6/08 317,788 805,338
David F. Broad, Ph.D...... 45,000(4) 1.5 7.500 2/19/08 212,252 537,888
117,000(5) 4.0 4.125 11/6/08 303,520 769,180
Mitchell H. Finer,
Ph.D.................... 60,000(4) 2.0 7.500 2/19/08 283,003 717,184
139,000(5) 4.7 4.125 11/6/08 360,593 913,812
Bruce A. Hironaka......... 45,000(4) 1.5 7.500 2/19/08 212,252 537,888
136,575(5) 4.6 4.125 11/6/08 354,302 897,870
Kathleen Sereda Glaub..... 100,000 3.4 7.500 2/19/08 471,671 1,195,307
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(1) Options granted under the Incentive Plan have a maximum term of ten years
but may be terminated earlier upon termination of employment. Shares vest
over a four-year period at the rate of 1/48 per month.
(2) Based on an aggregate of 2,940,110 options granted to employees in 1998,
which included 1,765,835 cancelled on 11/6/98 in exchange for new options
with an option price of $4.125.
(3) The potential realizable value is calculated based on the ten-year term of
the option and the fair market value of the common stock at the time the
option was granted, compounded annually. The 5% and 10% assumed annualized
rates of compound stock price appreciation are provided in compliance with
the rules of the SEC and are not meant to represent the Company's estimate
or a projection by the Company of future common stock prices.
(4) Consists of options granted 2/19/98, which were later cancelled on 11/6/98
in exchange for new options with an option price of $4.125. The 250,000
options granted to Dr. Sherwin on 2/19/98 were excluded from repricing and
were retained at their higher original option price.
(5) Consists of options granted in exchange for the surrender of options granted
prior to 1998 as part of a general option exchange for all company
employees.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth certain information concerning option
exercises in 1998 and unexercised options held as of December 31, 1998 by the
Named Officers.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED REALIZED OPTIONS AT DECEMBER 31, 1998 OPTIONS AT DECEMBER 31,1998
NAME ON EXERCISE ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE($)(2)
---- ----------- -------- ---------------------------- -------------------------------
Stephen A. Sherwin, M.D. ....... -- -- 247,750 / 442,500 660,750 / 468,750
Dale G. Ando M.D. .............. -- -- 0 / 122,500 0 / 229,688
David F. Broad, Ph.D. .......... -- -- 0 / 117,000 0 / 219,375
Mitchell H. Finer, Ph.D. ....... 5,670 41,533 22,250 / 139,000 108,000 / 260,625
Bruce A. Hironaka............... -- -- 0 / 136,575 0 / 256,078
Kathleen Sereda Glaub........... -- -- 207,027 / 0 0 / 0
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(1) Fair market of the underlying securities minus the aggregate exercise price
of the option.
(2) Fair market value of the underlying securities at December 31, 1998 less the
exercise price, based on a closing stock price of $6.00.
COMPENSATION OF DIRECTORS
Beginning July 1, 1995, non-employee directors became eligible to receive
for their services as directors of the Company a $15,000 annual retainer and
$1,000 fee for each board meeting attended as well as reimbursement of expenses
incurred in attending board meetings. In addition, the Company's 1989 Incentive
Stock Plan, as amended, provides for the automatic grant of 30,000 shares of
common stock, vesting ratably over 48 months, to each non-employee director
(currently six persons) every four years on the day following the annual meeting
of stockholders beginning with the 1995 annual meeting. The exercise price of
all options granted is the fair market value at the time of grant. In addition,
Dr. Kucherlapati, Dr. Potts and Dr. Verma also serve on the Company's Scientific
Advisory Board. The Company provides a stock option grant of 10,000 shares,
vesting ratably over 48 months, to each non-employee member of the Scientific
Advisory Board.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL AGREEMENTS
Since the time of his initial employment in March 1990 the Company has
agreed to maintain Dr. Sherwin's salary for twelve months after termination of
his employment with the Company, unless the Company terminates Dr. Sherwin for
cause or he terminates his employment voluntarily.
During 1997 the Company implemented change in control agreements for
certain executive officers. Under these agreements, the Company has agreed to
provide: Dale G. Ando, M.D., David F. Broad, Ph.D., Mitchell H. Finer, Ph.D.,
Bruce A. Hironaka and Christine McKinley with severance payments in an aggregate
amount equal to twelve months salary plus bonus and certain employee benefits,
following a change in control of the Company and termination without cause by
the company or upon constructive termination. Also under a similar change of
control agreement, the Company has agreed to provide Dr. Sherwin with severance
payments in an aggregate amount equal to two years salary plus bonus and certain
employee benefits. Included in Dr. Sherwin's change in control agreement is a
provision for payments by the Company of certain taxes that may be incurred as a
consequence of the agreement. Dr. Sherwin's change of control agreement, when
applicable, will supersede his employment contract.
CERTAIN TRANSACTIONS
In September 1996, while a director of Somatix, Dr. Verma received a
$400,000 loan from Somatix, secured by his shares of Somatix common stock. Cell
Genesys assumed Dr. Verma's loan following its acquisition of Somatix. Dr.
Verma's shares of common stock in Cell Genesys now secure the loan. The loan
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bears interest at 8.5% per annum and is due and payable in full on September 1,
2001. As of December 31, 1998 the outstanding balance of the loan was $300,000.
The Company retains certain directors under scientific consulting
agreements. During 1998, Dr. Verma earned $50,000 of which $25,500 was applied
to the payment of interest on his loan from the Company, described above.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions regarding compensation of the Company's executive officers are
made by the Cell Genesys Compensation Committee of the board of directors (the
"Compensation Committee"). The Compensation Committee is comprised of two
non-employee directors, Messrs. Gower and Step. The Compensation Committee is
responsible for setting compensation policy and determining the annual
compensation of the executive officers of Cell Genesys, including base salaries,
bonuses, if any, and stock options. Cell Genesys' executive pay programs are
designed to attract and retain executives who will contribute to Cell Genesys'
long-term success, to reward executives for achieving both short- and long-term
goals of Cell Genesys, to link executive and stockholder interests through
equity-based compensation plans, and to provide a compensation package that
recognizes both individual contributions and company performance. A substantial
portion of each executive's total compensation is intended to be variable and to
relate to, and be contingent upon, performance. The Compensation Committee
evaluates the performance and determines the compensation of the chief executive
officer and other executive officers of Cell Genesys annually, based upon
individual performance and the achievement of corporate goals.
GENERAL COMPENSATION POLICY
Cell Genesys' executive compensation programs seek to accomplish several
major goals:
- To recruit and retain highly qualified executive officers by offering
overall compensation that is competitive with that offered for comparable
positions in companies in the biotechnology industry of comparable size
and at a comparable stage of development.
- To motivate executives to achieve important business and performance
objectives and to reward them when such objectives are met; and
- To align the interests of executive officers with the long-term interests
of stockholders through participation in the Company's stock option plan.
The achievement of these goals is based on a mix of compensation elements,
as described below:
BASE SALARY: Base salaries for all employees, including executive officers,
are determined based on an established job grade and salary matrix that is
designed to provide a base salary that is competitive with comparable companies.
In monitoring the job grade and salary matrix, the Compensation Committee
compared compensation information derived from surveys including compensation
levels for companies of similar size and stage of development. Included in the
survey are some, but not all of the companies included in the Nasdaq
Pharmaceutical Index, with the primary focus on biotechnology companies at a
similar stage in the San Francisco Bay Area which may compete for the same pool
of employees. The assessment confirmed that Cell Genesys' base compensation was
comparable to the industry averages.
Adjustments to each individual's base salary, including executive officers,
are made in connection with annual performance reviews. The amounts of such
increases are calculated using merit increase guidelines based on the employee's
position within the relevant compensation range and the results of their
performance review. The recommended percentage increases are adjusted annually
to reflect the compensation committee's assessment of appropriate salary
adjustments given the results of competitive surveys and general economic
conditions.
PERFORMANCE BASED INCENTIVE PLAN: Officers and other key employees may earn
an annual bonus, set as a percentage of base salary, based on the achievement of
individual objectives and corporate goals. Corporate
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goals are established at the start of each year in conjunction with the
Compensation Committee and the full board of directors. Awards made to executive
officers are based upon the achievement of corporate goals as well as the
department goals of the individual officers. These goals may include progress
made in preclinical programs and clinical trials, strategic alliances, financing
activities and the financial results of Cell Genesys. Cell Genesys' compensation
policy with respect to annual bonus was also compared to relevant market data
and found to be comparable to industry averages. From time to time the
Compensation Committee may elect to defer an annual cash bonus and employ
increased stock based compensation in order to conserve the Company's financial
resources and retain key employees and align the interests of the employees with
those of the stockholders.
STOCK-BASED INCENTIVE COMPENSATION: Stock options enable Cell Genesys to
provide long-term incentives to its employees, which align the interests of all
employees, including the executive officers, with those of the stockholders.
Options are exercisable in the future at the fair market value at the time of
grant, so that an option holder is rewarded only by the appreciation in price of
the Cell Genesys common stock. Stock options are granted upon commencement of
employment and generally have a four-year vesting period and expire ten years
after the date of grant. Periodic grants of stock options are generally made
annually to all eligible employees based on performance, with additional grants
made to certain employees following a significant change in job responsibility,
scope or title. Guidelines for the number of options granted to each eligible
employee are determined by the Compensation Committee based on several factors,
including a valuation analysis reflecting market-based compensation, salary
grade and the performance of each participant. The size of the resulting grants
developed under this procedure are targeted to be at or above competitive levels
as a reflection of both providing an incentive for favorable performance of Cell
Genesys, as well as the risk attached to the future growth of the biotechnology
industry.
CEO COMPENSATION
Dr. Sherwin's compensation for fiscal 1998 is consistent with the
compensation policy of Cell Genesys described above and the Compensation
Committee's evaluation of his overall leadership and management of the company.
1998 was a year of significant accomplishment for Cell Genesys both with respect
to product development and business activities. Under Dr. Sherwin's leadership,
the company completed several clinical trials of its AIDS and cancer gene
therapy programs. In addition, the company conducted successful preclinical
studies in earlier stage preclinical programs in cardiovascular disease,
hemophilia and Parkinson's disease gene therapy. A major accomplishment for the
business during 1998 was the successful conclusion of a corporate collaboration
with the pharmaceutical division of Japan Tobacco for certain of Cell Genesys'
GVAX(TM) cancer vaccine products. This collaboration is expected to provide
substantial financial resources to the company for the further development of
these products and will contribute significantly to maintaining the company's
financial strength as it focuses on the goal of bringing a lead product program
to market. The new GVAX(TM)collaboration together with other corporate
collaborations in gene therapy and in the company's gene activation licensing
program contributed to approximately $24 million in revenues during 1998 and a
year-end cash balance of approximately $53 million. In addition, the Company
validated its long-term strategy of creating shareholder value through its
minority owned subsidiary Abgenix, Inc. and was able to raise approximately $9
million through the sale of a portion of its ownership of Abgenix, Inc. Cell
Genesys ended 1998 financially strong and well poised to continue to advance its
lead product programs. Throughout the past year, Dr. Sherwin has continued to
ensure that Cell Genesys' assets are utilized effectively and to their best
advantage while continuing to optimally manage Cell Genesys' financial
resources. Dr. Sherwin's compensation during 1998 reflects his leadership and
management and the achievements of Cell Genesys during the past year.
OPTION EXCHANGE PROGRAM
During 1998, the Compensation Committee determined that as a result of a
variety of factors, many of which were external to the company, including the
state of the biotechnology industry as a whole, many of the company's employees
were holding options priced substantially above then current market prices.
Accordingly, the Compensation Committee recommended and the board of directors
approved an option exchange in
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order to ensure that the stock-based incentive compensation could achieve its
primary objective of retaining key employees. The option exchange was effective
in November 1998 under the following conditions: (a) all employees were
eligible; (b) the prior and future vesting period for the new grant would be the
same as for the exchanged grants; and (c) participants would not be eligible to
exercise the new options for 6 months or until May 6, 1999, and (d) the new
grants would be priced at $4.125, which was equal to the then market price.
Approximately 1,751,000 shares were exchanged under this program, which included
options previously granted to executive officers. Of the options held by Dr.
Sherwin, 250,000 were excluded from repricing and were retained at their higher
original option price.
TEN YEAR OPTION EXCHANGE
The following table sets forth certain information regarding the exchange
of stock options held by executive officers during the preceding ten years:
NUMBER OF
SECURITIES MARKET PRICE LENGTH OF ORIGINAL
UNDERLYING OF STOCK AT EXERCISE PRICE OPTION TERM
OPTIONS TIME OF AT TIME OF NEW REMAINING AT DATE OF
DATE OF REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME REPRICING AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) AMENDMENT
---- --------- ----------- ------------ -------------- -------- --------------------
Dale G. Ando, M.D........ 11/6/98 100,000 4.13 5.88 4.13 8 years, 9 months
Vice President,
Clinical 11/6/98 22,500 4.13 7.50 4.13 9 years, 4 months
Research & Regulatory
Affairs
David F. Broad, Ph.D. ... 6/5/97 12,000 5.63 10.13 7.00 8 years, 8 months
Vice President, 6/5/97 45,000 5.63 8.06 7.00 9 years, 8 months
Development and 11/6/98 15,000 4.13 6.63 4.13 6 years, 3 months
Manufacturing 11/6/98 57,000 4.13 7.00 4.13 8 years, 7 months
45,000 4.13 7.50 4.13 9 years, 4 months
Mitchell H. Finer,
Ph.D. ................. 2/16/95 7,500 6.63 11.00 7.00 8 years
Vice President, 6/5/97 12,000 5.63 10.13 7.00 8 years, 8 months
Research 6/5/97 45,000 5.63 8.06 7.00 9 years, 8 months
11/6/98 14,500 4.13 6.63 4.13 6 years, 3 months
11/6/98 7,500 4.13 7.00 4.13 6 years, 3 months
11/6/98 57,000 4.13 7.00 4.13 8 years, 7 months
11/6/98 60,000 4.13 7.50 4.13 9 years, 4 months
Kathleen Sereda Glaub.... 2/16/95 100,000 6.63 18.00 7.00 8 years, 7 months
Former Senior Vice 6/5/97 75,000 5.63 10.13 7.00 8 years, 8 months
President & 6/5/97 50,000 5.63 8.06 7.00 9 years, 8 months
Chief Financial Officer
Bruce A. Hironaka........ 2/16/95 30,000 6.63 9.50 7.00 9 years, 7 months
Vice President, 6/5/97 16,575 5.63 10.13 7.00 8 years, 8 months
Corporate Development 6/5/97 45,000 5.63 8.06 7.00 9 years, 8 months
11/6/98 30,000 4.13 7.00 4.13 6 years, 3 months
11/6/98 61,575 4.13 7.00 4.13 8 years, 7 months
11/6/98 45,000 4.13 7.50 4.13 9 years, 4 months
Christine McKinley....... 2/16/95 40,000 6.63 9.50 7.00 9 years, 7 months
Vice President, 6/5/97 12,700 5.63 10.13 7.00 8 years, 8 months
Human Resources 6/5/97 45,000 5.63 8.06 7.00 9 years, 8 months
11/6/98 40,000 4.13 7.00 4.13 6 years, 3 months
11/6/98 57,700 4.13 7.00 4.13 8 years, 7 months
11/6/98 45,000 4.13 7.50 4.13 9 years, 4 months
Matthew J. Pfeffer....... 11/6/98 36,000 4.13 6.63 4.13 7 years, 9 months
Chief Financial Officer 11/6/98 4,875 4.13 7.00 4.13 8 years, 7 months
11/6/98 12,000 4.13 7.50 4.13 9 years, 4 months
Stephen A. Sherwin,
M.D. .................. 2/16/95 100,000 6.63 9.75 7.00 9 years, 5 months
Chairman of the Board, 6/5/97 100,000 5.63 10.13 7.00 8 years, 8 months
President and 6/5/97 60,000 5.63 8.06 7.00 9 years, 8 months
Chief Executive Officer 11/6/98 100,000 4.13 7.00 4.13 6 years, 3 months
11/6/98 150,000 4.13 7.00 4.13 8 years, 7 months
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COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
As a result of Section 162(m) of the Internal Revenue Code, which was
enacted into law in 1993, the Company may not take a federal income tax
deduction for compensation paid to certain executive officers, to the extent
that compensation exceeds $1 million per officer in any one year. This
limitation became effective for each year beginning after December 31, 1993 and
applies to all compensation paid to the covered executive officers which is not
considered to be performance-based. Compensation that does qualify as
performance-based compensation will not have to be taken into account for
purposes of this limitation.
The cash compensation paid to the Company's executive officers during 1998
did not exceed the $1 million limit per officer, nor is the cash compensation to
be paid to the Company's executive officers for 1999 expected to reach that
level. Because it is very unlikely that the cash compensation payable to any of
the Company's executive officers in the foreseeable future will approach the $1
million limitation, the Compensation Committee has decided not to take any
action at this time to limit or restructure the elements of cash compensation
payable to the Company's executive officers. The Committee will reconsider this
decision should the individual compensation of any executive officer ever
approach the $1 million level.
The foregoing report has been submitted by the undersigned in our capacity
as members of the Compensation Committee of the Company's board of directors.
Members of the Compensation Committee
James M. Gower
Eugene L. Step
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STOCK PERFORMANCE GRAPH
STOCKHOLDER RETURN COMPARISON
The graph below compares the cumulative total return on the Company's
common stock for fiscal years 1998, 1997, 1996, 1995 and 1994 and the fiscal
year period commencing January 26, 1993 (the date on which the Company's common
stock was first publicly traded) and ending December 31, 1998 compared to the
CRSP Total Return Index for the Nasdaq National Market (U.S. companies) and the
CRSP Total Return Index for the Nasdaq Pharmaceutical Stocks (SIC 283). The
stock price performance shown on the graph below is not necessarily indicative
of future price performance.
COMPARISON OF CUMULATIVE STOCKHOLDER RETURN*
CELL GENESYS, INC. NASDAQ - US NASDAQ PHARMACEUTICAL
------------------ ----------- ---------------------
12/31/92 100.00 100.00 100.00
102.00 97.00 76.00
6/29/93 123.00 99.00 81.00
164.00 108.00 87.00
12/30/93 177.00 110.00 95.00
132.00 105.00 77.00
6/29/94 84.00 100.00 67.00
89.00 109.00 76.00
12/30/94 75.00 107.00 71.00
50.00 117.00 77.00
9/29/95 41.00 134.00 90.00
57.00 150.00 112.00
12/30/95 91.00 152.00 131.00
69.00 159.00 136.00
6/29/96 69.00 172.00 132.00
63.00 178.00 135.00
12/30/96 83.00 187.00 131.00
56.00 177.00 124.00
6/29/97 45.00 209.00 134.00
72.00 244.00 151.00
12/30/97 77.00 229.00 135.00
60.00 268.00 149.00
6/29/98 78.00 276.00 138.00
29.00 250.00 130.00
12/30/98 55.00 322.00 173.00
* Assumes $100 invested on January 26, 1993 in the Company's common stock and in
each index listed above. The total return for the Company's common stock and
the indices used assumes the reinvestment of dividends, even though dividends
have never been declared on the Company's common stock.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors and persons who own more than ten percent of a registered class of
the Company's equity securities, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Executive
officers, directors and 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 review of the copies of such
reports furnished to the Company or written representations that no other
reports were required), during the fiscal year ended December 31, 1998, all
executive officers, directors and ten percent stockholders complied with all
Section 16(a) filing requirements.
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OTHER MATTERS
The Company knows of no other matters to be submitted at the annual
meeting. If any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares they
represent as the board of directors may recommend.
It is important that your shares be represented at the meeting, regardless
of the number of shares, which you hold. Please complete, date, execute and
return, at your earliest convenience, the accompanying proxy card in the
envelope, which has been enclosed.
THE BOARD OF DIRECTORS
Dated: April 28, 1999
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1163-PS-99
19
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CELL GENESYS, INC.
1999 ANNUAL MEETING OF STOCKHOLDERS
JUNE 2, 1999
The undersigned stockholder of Cell Genesys, Inc., a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated April 28, 1999, and hereby appoints Stephen A.
Sherwin, M.D. and Matthew J. Pfeffer, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the 1999 Annual
Meeting of Stockholders of Cell Genesys, Inc. to be held on June 2, 1999 at
10:00 a.m., local time, at 342 Lakeside Drive, Foster City, CA 94404, and at any
adjournments thereof, and to vote all shares of Common Stock which the
undersigned is entitled to vote on the matters set forth on the reverse side.
- ---------------- ----------------
SEE REVERSE SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE
- ---------------- ----------------
20
Please mark
[X] votes as in
this example.
1. ELECTION OF DIRECTORS:
Nominees: David W. Carter;
James M. Gower; Joseph E. Maroun;
John T. Potts, Jr., M.D.; Stephen A. Sherwin, M.D.; 2. Proposal to ratify the appointment of FOR AGAINST ABSTAIN
Eugene L. Step; Inder M. Verma, Ph.D. Ernst & Young LLP as independent [ ] [ ] [ ]
auditors for the 1999 fiscal year.
FOR WITHHELD
[ ] [ ]
[ ] ______________________________________
For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign this proxy exactly as your name(s) appear(s) hereon.
Joint owners should sign personally. An attorney, administrator,
trustee, executor, guardian or other person signing in a
representative capacity should indicate the name of the corporation
and such officer's capacity.
Signature:_________________________Date:__________________Signature:__________________________Date:_______________________________