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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
AMENDMENT NO.1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission File No. 0-19529
ALTEON INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3304550
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
170 Williams Drive, Ramsey, New Jersey 07446
(Address of principal executive offices) (zip code)
(201) 934-5000
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
2
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant: $75,671,295 at February 28, 1997 based on the
last sales price on that date.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of February 28, 1997:
Class Number of Shares
- ----- ----------------
Common Stock, $.01 par value 15,709,825
Documents incorporated by reference: None
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Item 10. Directors and Executive Officers of the Registrant.
Information Regarding Directors
The current Board of Directors is comprised of the following persons:
Served as a
Director
Name Age Since Positions with the Company
- ---- --- ----- --------------------------
James J. Mauzey 48 1994 Chairman of the Board and
Chief Executive Officer
Jere E. Goyan 66 1993 President, Chief Operating
Officer and Director
Anthony Cerami 56 1993 Director
Marilyn G. Breslow 53 1988 Director
Robert N. Butler 70 1996 Director
Louis Fernandez 73 1991 Director
Mark Novitch 65 1994 Director
Alan J. Dalby 60 1994 Director
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The principal occupations and business experience, for at least the
past five years, of each director are as follows:
James J. Mauzey, Chairman and Chief Executive Officer, joined the
Company in March 1994. From November 1992 until he joined the Company, Mr.
Mauzey was a Corporate Division President of Bristol-Myers Squibb Company. Mr.
Mauzey has over 20 years of experience in the pharmaceutical industry. He began
his career at American Cyanamid Company's Lederle Laboratories Division, where
he held numerous sales, marketing and executive positions during his 17 years
with the company, serving as both Vice President of the Lederle Laboratories
U.S. Pharmaceutical Division and Vice President of the Lederle International
Division. Mr. Mauzey joined The Squibb Corporation as President of its U.S.
Pharmaceutical Group in 1989. Following the merger of Bristol-Myers Company and
Squibb Corporation, Mr. Mauzey was named President of Bristol-Myers Squibb
Company's newly integrated U.S. Pharmaceutical Division, where he was
responsible for Squibb Pharmaceuticals, Bristol Laboratories and Mead Johnson
Pharmaceuticals. In April 1992, Mr. Mauzey was named Senior Vice President,
Industry and Public Affairs, for the Bristol-Myers Squibb Worldwide
Pharmaceutical Group, an approximately $7 billion business unit.
Jere E. Goyan, Ph.D., has been the Company's President and Chief
Operating Officer since May 1993. He also served as the Company's Acting Chief
Executive Officer from June 1993 to February 1994 and as Senior Vice President,
Research and Development from January 1993 through May 1993. Dr. Goyan is
Professor Emeritus of Pharmacy and Pharmaceutical Chemistry and Dean Emeritus of
the School of Pharmacy, University of California, San Francisco ("UCSF"). He has
been on the faculty of the School of Pharmacy at UCSF since 1963. He took a
leave of absence from 1979 to 1981 to serve as Commissioner of Food and Drugs of
the U.S. Food and Drug Administration. Dr. Goyan is Past President of the
American Association of Pharmaceutical Scientists and the American Association
of Colleges of Pharmacy. He is a member of the Institute of Medicine of the
National Academy of Sciences and a Fellow of the American Association for the
Advancement of Science. Dr. Goyan is a director of ATRIX Laboratories, Inc.,
Emisphere Technologies, Inc., and SciClone Pharmaceuticals, Inc., each a
biopharmaceutical firm, and Boehringer Ingelheim Corporation, a pharmaceutical
company. He received his Ph.D. in pharmaceutical chemistry from the University
of California, Berkeley.
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Anthony Cerami, Ph.D., is a founder of the Company and has been
Chairman of the Scientific Advisory Board of the Company since December 1987 and
a member of the Company's Board of Directors since October 1993. In October
1996, he joined Cerami Consulting Corp., a biotechnology consulting corporation.
Dr. Cerami was the President of The Picower Institute for Medical Research,
which he helped established in October 1991, prior to his retirement from such
entity in September 1996. Prior to joining The Picower Institute for Medical
Research, he was Dean of Graduate and Postgraduate Studies at The Rockefeller
University since 1986, a Professor at The Rockefeller University since 1978 and
the Head of the Laboratory of Medical Biochemistry at The Rockefeller University
since 1972. Dr. Cerami has been elected to membership in the National Academy of
Sciences and the Institute of Medicine. He received his Ph.D. from The
Rockefeller University. Dr. Cerami has recently retired as a director of
Advanced Medical, Inc., a developer and manufacturer of infusion systems and
related technologies for the health care industry.
Marilyn G. Breslow has been a director of the Company since June 1988.
She has been a Portfolio Manager/Analyst for W.P. Stewart & Co., Inc., an
investment advisory firm in New York City, since 1990, and is a Principal and
Director of that firm. She was a General Partner of Concord Partners and a Vice
President of Dillon, Read & Co. Inc. from 1984 to 1990.
Robert N. Butler, M.D. was elected as a director of the Company in June
1996. He is the Director of the International Longevity Center (ILC-US), which
he co-founded in 1990, and Professor of Geriatrics at the Henry L. Schwartz
Department of Geriatrics and Adult Development at the Mount Sinai Medical
Center. From 1975 to 1982, he was the first and founding director of the
National Institute of Aging of the National Institutes of Health. In 1976, Dr.
Butler won the Pulitzer Prize for his book "Why Survive? Being Old in America."
He held the Brookdale Professorship of Geriatrics from 1982 to 1995 at the Mount
Sinai Medical Center. Dr. Butler serves on the board of Neurogen Corporation, a
development-stage biotechnology company working on anxiolytics; Geron
Corporation, a development-stage biotechnology company working on aging
(Telomeres); and Genesis Health Ventures, a leading eldercare company.
Louis Fernandez, Ph.D., was elected as a director of the Company in
August 1991. He was the Chairman of Celgene Corp., a company engaged in the
development of industrial products and processes using microbiology and enzyme
technologies, from June 1990 until May 1992. From August 1986 until June 1990,
he also served as the President and Chief Executive Officer of Celgene Corp. He
was a member of the Board of Directors of Monsanto Company from 1971 through
1986 and he served as its chairman from 1983 through 1986. Dr. Fernandez
currently is a director of A.G. Edwards, Inc., a financial services company,
Petrolite Corp., a chemical company and Boehringer Ingelheim Corporation, a
pharmaceutical company.
Mark Novitch, M.D., was elected as a director of the Company in June
1994. Dr. Novitch is a Professor of Health Care Sciences at The George
Washington University. He retired as Vice Chairman and Chief Compliance Officer
of the Upjohn Company in December 1993. Prior to joining Upjohn in 1985, he was
Deputy Commissioner of the U.S. Food and Drug Administration. Dr. Novitch is a
director of Guidant Corporation, a supplier of cardiology and minimally invasive
surgery products; Neurogen Corporation, a biopharmaceutical firm focused on
central nervous system disorders; Calypte Biomedical, a developer of urine-based
diagnostics; and Kos Pharmaceuticals, Inc., a developer of pharmaceutical
products for cardiovascular and respiratory conditions.
Alan J. Dalby was elected a director of the Company in December in
1994. Mr. Dalby is Chairman of Reckitt & Colman, plc, a household products
company. Mr.
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Dalby is the former Chairman and Chief Executive Officer and a
founder of Cambridge NeuroScience, Inc., an emerging pharmaceutical company
focused on neurobiology. Prior to joining Cambridge NeuroScience, Inc., he was
Executive Vice President and a member of the Board of Directors of SmithKline
Beckman Corporation, retiring in 1987. Mr. Dalby is a director of Medeva plc.
Information Regarding Officers
The following table identifies the current executive officers of the
Company:
Name Age Capacities in Which Served In Current Positions Since
---- --- -------------------------- --------------------------
James J. Mauzey 48 Chairman of the Board and March 1994
Chief Executive Officer
Jere E. Goyan 66 President, Chief Operating May 1993
Officer and Director
Kenneth I. Moch 42 Senior Vice President, February 1995
Finance and Business
Development and Chief
Financial Officer
Kenneth Cartwright 61 Senior Vice President, January 1994
Development and
Regulatory Affairs
Elizabeth A. O'Dell 37 Vice President, Finance and October 1993
Administration, Secretary
and Treasurer
Veronica Mallon 46 Vice President, Scientific January 1995
Communications and
Intellectual Property
The principal occupations and business experience of each officer which
is not serving as a director of the Company are as follows:
Kenneth I. Moch, Senior Vice President, Finance and Business
Development and Chief Financial Officer, joined Alteon in February 1995. From
1990 to 1995, he was President and C.E.O. of Biocyte Corporation, a cord blood
stem cell-based cellular therapy company. He was a co-founder and Managing
General Partner of Catalyst Ventures, a seed-stage venture capital partnership,
from 1988 through 1989. He served as Vice President of The Liposome Company,
Inc. from 1982 to 1988, and was involved in all aspects of that company's growth
from a start-up research laboratory into a publicly-held biopharmaceutical firm.
From 1980 until 1982, Mr. Moch was a management consultant with McKinsey &
Company, Inc.
Kenneth Cartwright, MB, ChB, MFCM, MRCPsych., has been Senior Vice
President, Development and Regulatory Affairs since January 1994. He joined
Alteon in May 1989 as Vice President, Clinical and Regulatory Affairs. Prior to
joining Alteon, Dr. Cartwright was Vice President, Clinical Research of American
Cyanamid Company, Lederle Laboratories from 1984 to 1989, where he was
responsible for worldwide development and implementation of strategical clinical
plans. From 1982 to 1984, he also served as Director of Clinical Research U.S.A.
From 1980 to 1982, Dr. Cartwright was Deputy Vice President and Marketing
Director, Pharmaceutical Division, Ciba-Geigy, Canada, Ltd., responsible for
product launch.
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From 1974 to 1980, he served as Medical Director where he was responsible for
clinical development and regulatory affairs. Dr. Cartwright received his MB,
ChB, from Liverpool University Medical School. He received his Membership of the
Faculty of Community Medicine (MFCM) and his Membership of the Royal College of
Psychiatrists (MRCPsych.) from Royal College of Physicians, London.
Elizabeth A. O'Dell has been Vice President, Finance and
Administration, Secretary and Treasurer since October 1993. She served as the
Company's Director of Finance from February 1993 to September 1993 and as the
Controller of the Company from February 1992 to February 1993. From November
1991 to January 1992 she was the Controller of Radiodetection Corp. She was the
Director of Internal Operations of Kratos Analytical, Inc. from May 1990 to
November 1991 and Controller from March 1987 to April 1990. Prior to that she
served for five years in public accounting in various positions at Coopers &
Lybrand and Deloitte & Touche.
Veronica Mallon, Ph.D., has been Vice President, Scientific
Communication and Intellectual Property since January 1995. She served as the
Company's Senior Director of Immunology from July 1994 to January 1995 and its
Director of Immunology from February 1990 to June 1994. From 1982 to 1990 she
worked as a Research Immunologist and Senior Scientist in the Oncology and
Immunology Discovery Group in the Medical Research Division of American Cyanamid
Company, Lederle Laboratories. She received her Ph.D. in Microbiology from the
University of Medicine and Dentistry of New Jersey/Rutgers Medical School. Dr.
Mallon's work has resulted in numerous publications in several scientific areas.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission ("SEC") and NASDAQ. Officers, directors and greater than ten
percent stockholders are required by SEC regulation to furnish the Corporation
with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for specified fiscal years, the Company
believes that all its officers, directors, and greater than ten percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during fiscal 1996 except that the Initial Statement of
Beneficial Ownership on Form 3 for Dr. Butler was filed late and a Form 4 for
four transactions for Dr. Cerami was filed late.
Item 11. Executive Compensation.
Directors' Compensation
Directors of the Company not compensated as employees receive $1,500
per meeting for their service to the Board. Furthermore, directors of the
Company not compensated as employees or consultants receive, upon election to
the Board, a stock option for 33,600 shares of Common Stock (subject to
adjustment if they received stock options upon appointment to the Board between
Annual Meetings of Stockholders to fill a vacancy or newly-created directorship)
at an exercise price equal to the fair market value of the Common Stock on the
date of grant. The stock options vest in three equal annual installments over
the director's term of
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service. All of the directors are reimbursed for their expenses for each Board
and committee meeting attended.
Executive Officers' Compensation
The following table sets forth certain information concerning the
annual and long-term compensation for the fiscal years ended December 31, 1996,
1995 and 1994 of the Company's chief executive officer, and the other four most
highly compensated executive officers of the Company who were serving as
executive officers at December 31, 1996 (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Stock
------------------------------- Option Awards All Other
Name and Principal Position Year Salary Bonus (number of shares) Compensation
- --------------------------- ---- -------- ----------- ------------------ ------------
James J. Mauzey .............. 1996 $300,000 $150,000(1) 150,000 $ --
Chairman of the Board and 1995 300,000 110,000(2) 20,000 45,823(4)
Chief Executive Officer 1994 245,577 200,000(3) 515,000 248,186(4)
Jere E. Goyan ................ 1996 $262,500 $ 50,000(5) 33,004 $ 54,000(6)
President and Chief Operating 1995 262,500 35,000 15,000 54,000(6)
Officer 1994 262,500 38,000 75,000 63,765(7)
Kenneth Cartwright ........... 1996 $194,922 -- 16,000 --
Senior Vice President, 1995 191,100 -- -- --
Regulatory Affairs 1994 182,000 -- 4,000 --
Kenneth I. Moch .............. 1996 $178,460 $ 30,000(8) 10,000 --
Senior Vice President, Finance 1995 141,964 55,000(9) 170,000 --
and Business Development and 1994 -- -- -- --
Elizabeth A. O'Dell .......... 1996 $109,307 -- 9,000 --
Vice President, Finance and 1995 112,815 -- 7,500 --
Administration, Secretary and 1994 109,148 -- 3,000 --
Treasurer
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(1) Represents a deferred performance bonus for the year ending December
31, 1996.
(2) Represents a deferred performance bonus for the year ending December
31, 1995.
(3) Includes a signing bonus of $100,000 and a deferred performance bonus
of $100,000 for the year ending December 31, 1994.
(4) Represents reimbursement for certain moving expenses and relocation
expenses.
(5) Represents a deferred performance bonus for the year ending December
31, 1996.
(6) Represents a housing allowance.
(7) Represents a housing allowance and reimbursement for certain moving
expenses and relocation expenses.
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(8) Represents a deferred performance bonus for the year ending December
31, 1996.
(9) Includes a signing bonus of $25,000 and a deferred performance bonus of
$30,000 for the year ending December 31, 1995.
The following table sets forth certain information concerning grants of
stock options during the fiscal year ended December 31, 1996, to the Named
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
Percentage Potential Realizable
of Total Value At Assumed
Options Exercise Annual Rates of Stock
Granted to or Base Price Appreciation for
Employees Price Option Term(1)
Options in Fiscal per Expiration ------------------------
Name Granted 1996 share Date 5% 10%
- ------------------- ------- --------- -------- ---------- ---- ----
James J. Mauzey(2) 150,000 35.9% $ 5.375 12/17/06 $ 507,046 $1,284,955
Jere E. Goyan(3) 33,004 7.9% $ 9.250 07/10/06 $ 191,993 $ 486,549
Kenneth Cartwright(4) 10,000 2.4% $ 5.375 12/17/06 $ 33,803 $ 85,664
6,000 1.4% $ 5.375 12/17/06 $ 20,282 $ 51,398
Kenneth I. Moch(5) 10,000 2.4% $ 5.375 12/17/06 $ 33,803 $ 85,664
Elizabeth A. O'Dell(6) 5,000 1.2% $ 5.375 12/17/06 $ 16,902 $ 42,832
4,000 1.0% $ 5.375 12/17/06 $ 13,521 $ 34,265
(1) The dollar amounts under these columns are the result of calculations
assuming that the price of Common Stock on the date of the grant of the
option increases at the hypothetical 5% and 10% rates set by the
Securities and Exchange Commission and therefore are not intended to
forecast possible future appreciation, if any, of the Company's stock
price over the option term of ten years.
(2) Includes 60,000 shares which shall become exercisable in equal monthly
installments of 5,000 shares commencing on March 1, 1999 and continuing
to vest on the first day of each month thereafter and 90,000 shares
which shall become exercisable upon the accomplishment of certain
performance related milestones.
(3) The shares shall become exercisable upon the accomplishment of certain
performance related milestones.
(4) Includes an option for 10,000 shares of which 2,500 shares became
exercisable on December 17, 1996 and 7,500 shares shall become
exercisable on December 17, 1998. Includes an option for 6,000 shares
which shall become exercisable on June 30, 1997.
(5) Includes 2,500 shares which became exercisable on December 17, 1996 and
7,500 shares which shall become exercisable on December 17, 1998.
(6) Includes an option for 5,000 shares of which 1,250 shares became
exercisable on December 17, 1996 and 3,750 shares shall become
exercisable on December
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17, 1998. Includes an option for 4,000 shares which shall become
exercisable on June 30, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to
exercises of options to purchase the Company's Common Stock during the fiscal
year 1996 by the Named Officers and unexercised options to purchase the
Company's Common Stock held by the Named Officers at December 31, 1996.
Number of Unexercised Value of Unexercised
Options Held at In-the-Money Options
Shares Value December 31, 1996 at December 31, 1996(1)
Acquired on Realized ---------------------------- ----------------------------
Name Exercise(#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
James J. Mauzey -- -- 240,032 444,968 $ 0 $ 0
Jere E. Goyan -- -- 199,961 256,643 $166,320 $ 0
Kenneth Cartwright -- -- 178,934 15,667 $743,273 $ 125
Kenneth I. Moch -- -- 109,529 70,471 $ 0 $ 0
Elizabeth A. O'Dell -- -- 35,332 19,668 $ 281 $ 94
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(1) Based on a price of $5.25, the closing price on the Nasdaq National
Market on December 31, 1996.
Compensation Committee Interlocks and Insider Participation
The persons who served as members of the Compensation Committee of the
Board of Directors during 1996 were Marilyn G. Breslow, Louis Fernandez, Ph.D.,
Frank H. Spiegel, Jr. (until his death on May 27, 1996), Mark Novitch, M.D. and
Robert N. Butler, M.D. None of the members of the Compensation Committee was an
officer, former officer or employee of the Company.
Compensation Committee Report on Executive Compensation
General Policies
The Compensation Committee (the "Committee") of the Board of Directors
is responsible for establishing and monitoring the general compensation policies
and compensation plans of the Company, as well as the specific compensation
levels for executive officers. It also makes recommendations to the Board of
Directors concerning the granting of options under the Company's Amended and
Restated 1987 Stock Option Plan and Amended 1995 Stock Option Plan. The
Committee currently consists of Mark Novitch, M.D., Marilyn G. Breslow, Robert
N. Butler, M.D. and Louis Fernandez, Ph.D., four non-employee directors of the
Company.
Under the supervision of the Committee, the Company has developed and
implemented compensation policies, plans and programs which (1) provide a total
compensation package which is intended to be competitive within the industry so
as to enable the Company to attract and retain high caliber executive personnel,
and (2) seek to align the financial interests of the Company's employees with
those of its stockholders by relying heavily on long-term incentive compensation
which is tied to performance.
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The primary components of executive compensation include base salary
and long-term equity incentives in the form of stock options. As the Company has
not yet generated any revenue from the sale of pharmaceutical products, the
Company relies on long-term incentive compensation to motivate employees and
retain cash for research projects. In determining the size of such stock options
to individual executives, the Committee considers a number of factors, including
the following: the level of an executive's job responsibilities; the executive's
past performance; the size and frequency of grants by comparable companies; the
executive's salary level; performance of the Company, as measured by the
accomplishment of key business development and clinical milestones; the size of
any prior grants; and achievement of designated milestones by the executive. The
Committee assigns no specific weight to any of the foregoing, other than
achievement of designated milestones by the executive, when making
determinations as to the size of stock option grants.
The Chief Executive Officer and the Chief Operating Officer are
responsible for the development of the annual salary plan for executive officers
other than themselves. The plan is based on industry and peer group comparisons
and national surveys and on performance judgments as to the past and expected
future contributions of the individuals. To maintain a competitive level of
compensation, the Company targets base salary at the mid to upper percentiles of
a comparative group composed of other biotechnology companies. Base salary may
exceed this level as a result of individual performance. The Committee reviews
the annual plan and makes recommendations for the Board of Directors, with any
modifications it deems appropriate. The Committee believes it has established
executive compensation levels which are competitive with companies in the
industry taking into account individual experience, performance of both the
Company and the individual, company size, location and stage of development.
Compensation of the Chief Executive Officer
Mr. Mauzey's compensation was determined on the basis of his expertise
and experience which include over 20 years of experience in the pharmaceutical
industry. Compensation awarded to Mr. Mauzey in 1996 included base salary, a
performance bonus based on the achievement of milestones (including, inter alia,
maintaining the Company's cash burn rate from operations at budget, completion
of a strategic plan, and filing a new investigational drug application with the
U.S. Food and Drug Administration) and stock options. Mr. Mauzey (and the
Company's Chief Operating Officer, Dr. Jere Goyan) has waived any increases in
base cash compensation for 1996 (and 1995) and instead has elected to receive
vested stock options.
Effective January 1, 1994, the Internal Revenue Code does not permit
corporations to deduct payment of certain compensation in excess of $1,000,000
to the chief executive officer and the four other most highly paid executive
officers. All compensation paid to the Company's executive officers for 1996
will be fully deductible and the Committee anticipates that amounts paid as cash
compensation will continue to be fully deductible because the amounts are
expected to be less than the $1,000,000 threshold. Under certain circumstances,
the executive officers may realize compensation upon the exercise of stock
options granted under the Company's stock option plans which would not be
deductible by
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the Company. The Company expects to take such action as is necessary to qualify
its stock option plans as "performance-based compensation," which is not subject
to the limitation, if and when the Committee determines that the effect of the
limitation on deductibility warrants such action.
Mark Novitch, M.D.
Marilyn Breslow
Robert N. Butler, M.D.
Louis Fernandez, Ph.D.
Shareholder Return Performance Presentation
Set forth below is a line graph comparing the yearly percentage change
in the cumulative total shareowner return on the Company's Common Stock to the
cumulative total return of the NASDAQ CRSP Total Return Index for the NASDAQ
Stock Market (U.S. Companies) (the "NASDAQ-US") and the NASDAQ Pharmaceutical
Stocks Index (the "NASDAQ-Pharm") for the period commencing December 31, 1991
and ended December 31, 1996.
Alteon Inc. Relative Stock Performance
31-Dec-91 31-Dec-92 31-Dec-93 31-Dec-94 31-Dec-95 31-Dec-96
Alteon Inc. 100.00 51.67 28.33 18.75 53.75 17.50
NASDAQ US 100.00 116.38 133.59 130.59 184.67 227.16
NASDAQ Pharm 100.00 83.22 74.17 55.83 102.13 102.24
Employment Agreements with Executive Officers
James J. Mauzey entered into a three year employment agreement with the
Company on February 28, 1994 which was amended on January 30, 1997 to extend the
term of employment through January 30, 2000. Under the terms of the agreement,
Mr. Mauzey serves as Chief Executive Officer and is currently entitled to an
annual salary of $300,000, which is subject to annual review by the Board of
Directors. Mr. Mauzey is also eligible, at the discretion of the Compensation
Committee to receive a bonus of up to $50,000 and stock options for each year
during the term of the agreement.
Jere E. Goyan entered into a three year employment agreement with the
Company on July 13, 1993, which was renewed on July 10, 1996 to extend the term
of employment through July 13, 1998. Under the agreement, he is currently
entitled to a salary of $262,500, which is subject to annual review by the Board
of Directors. Dr. Goyan is also eligible, at the discretion of the Board of
Directors, to receive a bonus of up to $50,000 for each of the fiscal years
ending December 31, 1996 and 1997.
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Kenneth I. Moch entered into a three year employment agreement with the
Company on February 27, 1995. Under the terms of the agreement, Mr. Moch is
currently entitled to an annual salary of $165,000, which is subject to annual
review by the Board of Directors.
Kenneth Cartwright entered into an employment agreement with the
Company on March 27, 1995, which was renewed on March 27, 1997 to extend the
term of employment through March 27, 2000. Under the agreement, he is currently
entitled to an annual salary of $194,922, which is subject to annual review by
the Board of Directors. Dr. Cartwright is also eligible, at the discretion of
the Board of Directors, to receive a bonus of up to $7,500 and a stock option
for up to 15,000 shares of Common Stock for the calendar year ending December
31, 1997.
Elizabeth A. O'Dell entered into a two year employment agreement with
the Company as of October 21, 1995. Under the agreement she is currently
entitled to an annual salary of $112,815, which is subject to annual review by
the Board of Directors.
Veronica Mallon entered into a two year employment agreement with the
Company as of January 17, 1995, which was amended on January 17, 1997 to extend
the term of employment through January 17, 2000. Under the amended agreement she
is currently entitled to an annual salary of $102,000, which is subject to
annual review by the Board of Directors. Ms. Mallon is also eligible, at the
discretion of the Board of Directors, to receive a bonus of up to $5,000 and a
stock option for up to 10,000 shares of Common Stock for the calendar year
ending December 31, 1997.
In addition to provisions in the above-described agreements requiring
each individual to maintain the confidentiality of Company information and
assign inventions to the Company, each of such executive officers has agreed
that during the terms of their respective agreements and for one year
thereafter, such person will not compete with the Company by engaging in any
capacity in any business which is competitive with the business of the Company.
Each of the above employment agreements provides that either party may terminate
the agreement upon 30 days prior written notice, subject to certain salary
continuation obligations of the Company if it terminates the agreements without
cause (As to Mr. Mauzey, 18 months if terminated within the first 18 months of
his employment and 12 months thereafter. As to Dr. Goyan, Mr. Moch, Dr.
Cartwright, Ms. O'Dell and Dr. Mallon, 6 months).
All employment agreements between the Company and its Vice Presidents
provide that all unvested stock options held by such Vice Presidents will vest
and become exercisable immediately in the event of a change in control of the
Company.
Change in Control Severance Benefits Plan
In February 1996, the Company adopted the Alteon Inc. Change in Control
Severance Benefits Plan (the "Severance Plan"). The Severance Plan was adopted
to protect and retain qualified employees and to encourage their full attention,
free from distractions caused by personal uncertainties and risks in the event
of a pending or threatened change in control of the Company. The Severance Plan
provides for severance benefits to employees upon certain terminations of
employment after or in connection with a change in control of the Company as
defined in the Severance Plan. Following a qualifying termination which occurs
as a result of a change in control, officers of the Company will be entitled to
continuation of (i) their base salary for a period of twenty-four months, and
(ii) all benefit programs and plans providing for health and insurance benefits
for a period of up to eighteen months. In addition, upon a change in control of
the
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Company all outstanding unexercisable stock options held by employees will
become exercisable.
401(k) Plan
In 1990, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering all of the Company's employees.
Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation by up to the statutorily prescribed annual limit ($9,500 in 1996)
and have the amount of such reduction contributed to the 401(k) Plan. The 401(k)
Plan does not require additional matching contributions to the Plan by the
Company on behalf of participants in the Plan. Contributions by employees to the
Plan and income earned on such contributions are not taxable to employees until
withdrawn from the 401(k) Plan. The Trustees under the 401(k) Plan, at the
direction of each participant, invest the assets of the 401(k) Plan in any of
five investment options.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
There were, as of February 28, 1997, approximately 293 holders of
record of the Company's Common Stock. The following table sets forth certain
information regarding the beneficial ownership of the Company's Common Stock as
of February 28, 1997 (i) by each person who is known to the Company to own
beneficially more than 5% of the Common Stock, and (ii) by each current director
and Named Officer, including the nominees, and by all current directors and
officers as a group.
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Amount and Nature of Percent of
Name of Beneficial Owner(1) Beneficial Ownership(1) Class(2)
- --------------------------- ----------------------- --------
(i) Certain Beneficial Owners:
Amerindo Investment Advisors Inc.
388 Market Street, Suite 950
San Francisco, CA 94111 ....................... 1,501,200 9.6%
Hoechst Marion Roussel, Inc.
9300 Ward Parkway
Kansas City, Missouri 64114 ................... 882,115 5.6%
Yamanouchi Pharmaceutical Co., Ltd.
3-11, Nihonbashi-honcho 2-chrome
Chuo-Ku, Tokyo 103 Japan ....................... 784,665 5.0%
(ii) Current Directors and Named Officers:
James J. Mauzey ................................... 260,036(3) 1.6%
Jere E. Goyan ..................................... 213,897(4) 1.3%
Marilyn G. Breslow ................................ 44,802(5) *
Robert N. Butler .................................. 0(6) *
Kenneth Cartwright ................................ 210,934(7) 1.3%
Anthony Cerami .................................... 602,308(8) 3.8%
Alan J. Dalby ..................................... 24,581(9) *
Louis Fernandez ................................... 56,004(10) *
Mark Novitch ...................................... 27,404(11) *
Kenneth I. Moch ................................... 115,820(12) *
Elizabeth A. O'Dell................................ 72,542(13) *
All current directors and officers as
a group (12 persons) .............................. 1,694,934(14) 9.9%
- ----------
* Less than one percent.
(1) Except as discussed below, none of these shares are subject to rights
to acquire beneficial ownership, as specified in Rule 13d-3(d)(1) under
the Securities Exchange Act of 1934, as amended, and the beneficial
owner has sole voting and investment power, subject to community
property law, where applicable.
(2) Applicable percentage of ownership is based on 15,709,825 shares of
Common Stock outstanding.
(3) Includes 260,036 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable
within 60 days after February 28, 1997. Does not include options to
purchase 424,964 shares of Common Stock granted to Mr. Mauzey.
(4) Includes 213,297 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable
within 60 days after February 28, 1997. Does not include options to
purchase 243,307 shares of Common Stock granted to Dr. Goyan.
(5) Includes 44,802 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable
within 60 days after February 28, 1997. Does not include options to
purchase 22,398 shares of Common Stock granted to Ms. Breslow.
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(6) Does not include an option to purchase 11,200 shares of Common Stock
granted to Dr. Butler.
(7) Includes 180,934 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable
within 60 days after February 28, 1997. Does not include options to
purchase 49,667 shares of Common Stock granted to Dr. Cartwright.
(8) Includes 268,366 Shares of Common Stock and 333,942 Shares of Common
Stock issuable to Dr. Cerami upon the exercise of options which were
exercisable as of February 28, 1997 or which will become exercisable
within 60 days after February 28, 1997. Does not include options to
purchase 83,118 Shares of Common Stock granted to Dr. Cerami. Dr.
Cerami and Dr. Helen Vlassara are husband and wife, but no longer live
together and an action for divorce has been commenced. Does not include
33,600 Shares of Common Stock held by Dr. Vlassara, 67,200 Shares of
Common Stock issuable to Dr. Vlassara upon the exercise of options
which were exercisable as of February 28, 1997, and 236,500 Shares of
Common Stock held by an irrevocable trust of which Dr. Cerami is the
settlor and Dr. Vlassara is a co-trustee and beneficiary.
(9) Includes 24,581 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or will become exercisable with 60
days after February 28, 1997. Does not include options to purchase
15,550 shares of Common Stock granted to Mr. Dalby.
(10) Includes 56,004 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable
within 60 days after February 28, 1997. Does not include options to
purchase 11,196 shares of Common Stock granted to Dr. Fernandez.
(11) Includes 22,404 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or will become exercisable within
60 days after February 28, 1997. Does not include options to purchase
11,196 shares of Common Stock granted to Dr. Novitch.
(12) Includes 115,820 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable
within 60 days after February 28, 1997. Does not include options to
purchase 64,180 shares of Common Stock granted to Mr. Moch.
(13) Includes 70,542 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable
within 60 days after February 28, 1997 and 2,000 shares of Common Stock
held by Ms. O'Dell's husband. Does not include options to purchase
34,458 shares of Common Stock granted to Ms. O'Dell.
(14) Includes 1,388,968 shares of Common Stock subject to options which were
exercisable as of February 28, 1997 or which will become exercisable
within 60 days after February 28, 1997. Does not include options to
purchase 1,039,388 shares of Common Stock granted to the officers and
directors.
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Item 13. Certain Relationships and Related Transactions.
Equity Transactions and Strategic Alliances
In July 1989, Alteon and Yamanouchi Pharmaceutical Co. Ltd.
("Yamanouchi") entered into a series of transactions pursuant to which the
parties formed a strategic alliance to develop and commercialize Alteon's
diabetes-related technology. Under this arrangement, the parties agreed to
collaborate on further research and development, Yamanouchi acquired an equity
interest in Alteon and Alteon granted to Yamanouchi an exclusive license to
commercialize Alteon's technology in Japan, South Korea, Taiwan and The People's
Republic of China. Under the strategic alliance with Yamanouchi, Yamanouchi paid
on Alteon's behalf $211,000 in 1996. See "Item 12. Security Ownership of Certain
Beneficial Owners and Management."
In December 1990, Alteon and Marion Merrell Dow, Inc., which was
subsequently acquired by an affiliate of Hoechst AG and renamed Hoechst Marion
Roussel, Inc. ("HMRI"), formed a strategic alliance to develop and commercialize
certain Alteon technology for therapeutics in the areas of diabetic and aging
complications. The arrangements included HMRI's acquisition of an equity
interest in Alteon, a research and development collaboration to conduct clinical
trials jointly, including those on pimagedine, an agreement for the joint
promotion and sale in North America of drugs developed pursuant to the
collaboration and a manufacturing and supply arrangement. Under the alliance
with HMRI, Alteon was reimbursed $1,015,000 in 1996. In 1996, the parties ended
their collaboration as a result of HMRI's continuing prioritization of its new
product pipeline, and the Company regained all rights granted to HMRI. See "Item
12. Security Ownership of Certain Beneficial Owners and Management."
Consulting Agreements
The Company has entered into consulting arrangements with key
consultants and members of its Scientific Advisory Board who advise the Company
about present and long-term scientific planning, research and development. In
September 1991, the Company entered into a four-year consulting agreement with
Dr. Anthony Cerami. Under this consulting agreement and the consulting
arrangement which has continued following the agreement's expiration, Dr. Cerami
is paid $100,000 per year to serve as Chairman of the Scientific Advisory Board
and perform general advisory and consulting services.
The Company is currently negotiating the terms of a three-year research
agreement with Cerami Consulting Corporation, pursuant to which Cerami
Consulting Corporation will conduct, and supervise third parties' participation
in, research and development of the Company's A.G.E. breaker technology and may
provide consulting services to the Company. Carla Cerami, daughter of Dr.
Anthony Cerami, who is a director of the Company, is the sole shareholder of
Cerami Consulting Corporation. It is anticipated that Dr. Anthony Cerami will
provide services to the Company under such agreement as an employee of Cerami
Consulting Corporation. The financial terms of such agreement have not yet been
determined.
Academic Research Agreement
In September 1991, the Company entered into an agreement with The
Picower Institute for Medical Research (The "Picower Institute"), a
not-for-profit biomedical science institution of which Dr. Cerami was President,
pursuant to which the Company agreed to provide funding in support of new
research. During 1994, 1995 and 1996, Alteon provided funding of $1,241,000,
$1,109,000 and $1,006,000 respectively. Effective November 30, 1996, the Company
terminated its
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funding of further research at The Picower Institute because of Dr. Cerami's
retirement from the Picower Institute.
Registration Rights
In December 1990, the Company, HMRI, Yamanouchi, the holders of each of
the common shares underlying certain Preferred Stock and certain holders of the
Common Stock, including Dr. Cerami, entered into an Amended and Restated
Registration and Right of First Offer Agreement (the "Rights Agreement")
pursuant to which the Company granted certain registration rights and rights of
first offer to certain stockholders. The Rights Agreement terminated March 1,
1997.
Indebtedness of Management
In July 1993 the Company lent $200,000 to Jere E. Goyan at an interest
rate equal to the prime rate as published in the Wall Street Journal, adjusted
quarterly, for the purpose of purchasing a home. The loan is secured by a second
mortgage on the premises purchased by Dr. Goyan. In July 1996 the terms of the
loan were amended so that interest will stop accruing as of July 1998 and the
principal and interest shall be paid in equal installments in July, 1998, 1999
and 2000. In the event an installment is not paid when due, interest shall
accrue at a rate of one percent per month until payment is made. As of March 1,
1997 the entire loan amount of $265,451, including accrued interest, remained
outstanding.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 29th day of April,
1997.
Alteon Inc.
By: /s/ James J. Mauzey
------------------------------
James J. Mauzey
Chairman of the Board and
Chief Executive Officer
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ James J. Mauzey Chairman of the Board, April 29, 1997
- ------------------------
James J. Mauzey Chief Executive Officer
and Director (principal executive officer)
/s/ Jere E. Goyan President, Chief Operating Officer and Director April 29, 1997
- ------------------------
Jere E. Goyan
/s/ Kenneth I. Moch Senior Vice President, Finance and Business April 29, 1997
- ------------------------
Kenneth I. Moch Development, and Chief Financial Officer
(principal financial officer)
/s/ Elizabeth A. O'Dell Vice President, Finance and Administration, April 29, 1997
- ------------------------
Elizabeth A. O'Dell Treasurer, and Secretary (principal accounting
officer)
- ------------------------ Director April __, 1997
Anthony Cerami
/s/ Marilyn G. Breslow Director April 29, 1997
- ------------------------
Marilyn G. Breslow
/s/ Mark Novitch Director April 23, 1997
- ------------------------
Mark Novitch
/s/ Louis Fernandez Director April 22, 1997
- ------------------------
Louis Fernandez
/s/ Alan J. Dalby Director April 29, 1997
- ------------------------
Alan J. Dalby
/s/ Robert N. Butler Director April 29, 1997
- ------------------------
Robert N. Butler
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