SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[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, 1995
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from ___________ to ___________
Commission File No. 0-16132
CELGENE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-2711928
- -------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification)
incorporation or organization)
7 Powder Horn Drive
Warren, New Jersey 07059
- --------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(908) 271-1001
----------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Common Stock, par value $.01 per share
--------------------------------------
(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/A or any
amendment to this Form 10-K/A.[ ]
Aggregate market value of voting stock held by non-affiliates of registrant as
of March 1, 1995: $145,294,006.
Number of shares of Common Stock outstanding as of March 1, 1996: 9,044,981
CELGENE CORPORATION
ANNUAL REPORT ON FORM 10-K/A
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TABLE OF CONTENTS
PART III
Item No. Page
10. Directors and Executive Officers of the
Registrant....................................................3
11. Executive Compensation..........................................5
12. Security Ownership of Certain Beneficial
Owners and Management............................ ...........10
13. Certain Relationships and Related
Transactions.................................................11
Independent Auditors' Report..........................................12
Signatures............................................................13
2
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Each director holds office (subject to the Corporation's By-Laws) until
the next annual meeting of stockholders and until his successor has been elected
and qualified. There are no family relationships between any of the directors
and executive officers of the Company. The information concerning the nominees
and their security holdings has been furnished by them to the Corporation.
Principal Occupation During
the past Five Years, any Year First
Office held in the Corporation, Elected
Name Age and Other Directorships a Director
- ---- --- ----------------------- -----------
John W. Jackson 51 Chairman of the Board and Chief Executive 1996
Officer of the Corporation since January,
1996. Founder and President of Gemini
Medical, a consulting firm which specialized
in services to start-up medical device and
biotechnology companies and investment
advice, from February 1991 to January 1996;
President of the worldwide Medical Device
Division of American Cyanamid from February
1986 to January 1991; various international
positions, including Vice
President-International for American
Cyanamid from 1978 to 1986; several human
health marketing positions at Merck &
Company from 1971 to 1978.
Sol J. Barer 49 President of the Corporation since October 1994
1993 and Chief Operating Officer of the
Corporation since March 1994; Senior Vice
President - Science and Technology and Vice
President/General Manager Chiral Products of
the Corporation from October 1990 to October
1993; and Vice President - Technology of the
Corporation from September 1987 to October
1990.
Frank T. Cary 75 Chairman of the Executive Committee of the 1986
Board since June 1990; Chairman of the Board
of the Corporation from July 1986 to July
1990; Former Chairman of the Board and Chief
Executive Officer of International Business
Machines Corporation, a computer and
business equipment manufacturer, from 1973
to 1981; director of Cygnus Therapeutic Systems,
ICOS Corporation, Lincare Inc., SPS Transaction
Services, Inc., Lexmark International, SEER
Technologies, Inc., ONCORx and Teltrend, Inc.
3
Principal Occupation During
the past Five Years, any Year First
Office held in the Corporation, Elected
Name Age and Other Directorships a Director
- ---- --- ----------------------- -----------
Arthur Hull Hayes, Jr. 62 President and chief operating officer of 1995
MediScience Associates, Inc., a consulting
organization that works with pharmaceutical
firms, biomedical companies and foreign
governments, since July 1991; partner in
IssueSphere, a public affairs firm that
focuses on health science issues, since
November 1995; professor in medicine,
pharmacology and family and community medicine
at New York Medical College; clinical
professor of medicine and pharmacology at the
Pennsylvania State University College of
Medicine; President and Chief Executive
Officer of E.M. Pharmaceuticals, a unit of E.
Merck AG, from 1986 to 1990; Commissioner of
the U.S. Food and Drug Administration from
1981 to 1983; director of Myriad Genetics,
Inc. and NaPro BioTherapeutics, Inc.
Richard C. E. Morgan 51 A general partner of Wolfensohn Partners 1987
L.P., a venture capital partnership and the
general partner of Wolfensohn Associates L.P.,
since 1986; Chairman, Chief Executive Officer,
and director of Lasertechnics, Inc.; director
of Liposome Technology Inc.; Chairman and
director of MediSense, Inc.; director of
SEQUUS Pharmaceuticals, Inc.; and Chairman and
director of Quidel Corp.
Walter L. Robb 68 Private consultant and President of Vantage 1992
Management Inc., a consulting and
investor services company, since January 1993;
Senior Vice President for Corporate Research
and Development of General Electric Company, a
consumer and industrial products company and
broadcaster, and a member of its Corporate
Executive Council from 1986 to December 1992;
Chairman of the Board of Neopath, Inc.;
director of Marquette Electronics, Inc. and
Cree Research Inc.
Lee J. Schroeder 67 President of Lee Schroeder & Associates, 1995
Inc., pharmaceutical business consultants
since 1985; director of FirsTier Bank Lincoln,
N.A., Harris Technology Group, Inc., Bryan
Memorial Hospital, MGI Pharmaceutical, Inc.,
Ascent Pharmaceuticals, and Interneuron
Pharmaceuticals, Inc.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, the Corporation's
directors, executive officers, and any persons holding more than 10 percent of
the Common Stock are required to report their ownership of Common Stock and any
changes in that ownership, on a timely basis, to the Securities and Exchange
Commission. Based on material provided to the Corporation, all such required
reports were filed on a timely basis in 1995 except for the Initial Statement of
Beneficial Ownership on Form 3 for Dr. Hayes, which report was filed
approximately three weeks late.
4
ITEM 11 EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table contains information about the compensation paid by
the Corporation for services rendered in all capacities during the three years
ended December 31, 1995 to the Chief Executive Officer of the Corporation and
each of the most highly paid executive officers of the Corporation who earned
more than $100,000.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL --------------------------------
COMPENSATION AWARDS
------------ --------------------------------
RESTRICTED
STOCK OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY($) AWARD(S)($)(1) SARS(#)
--------------------------- ---- --------- -------------- --------
Richard G. Wright................... 1995 $486,250(2) -- 0
Former Chief Executive Officer 1994 $195,288(3) -- 150,000
and Chairman of the 1993 ------ -- --
Board
Sol J. Barer........................ 1995 $200,000 -- 0
President and Chief Operating 1994 197,000 -- 54,080
Officer 1993 180,000 -- 30,000
- -------------------
(1) No restricted stock awards were granted to either Mr. Wright or Dr.
Barer during the last three years, and neither Mr. Wright nor Dr. Barer
held any shares of Common Stock subject to restricted stock awards at
December 31, 1995.
(2) Pursuant to his employment arrangement with the Corporation, in 1995 Mr.
Wright was paid a salary of $236,250. Mr. Wright retired from the
Corporation on December 31, 1995 and received a lump-sum payment of
$250,000 in January, 1996. The Board of Directors also provided for
early vesting of 50,000 options, which were scheduled to vest in March
1996 and would otherwise have been canceled. The Board also permitted
Mr. Wright to exercise all of his options over the ten year life of the
original grant, whereas he otherwise would have been required to
exercise the options within three months of the date of his retirement.
(3) Mr. Wright commenced his employment with the Corporation in March 1994.
Accordingly, the 1994 number reflects a partial year's salary and a
relocation allowance in the amount of $18,750.
5
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Sol J. Barer, President and Chief Operating Officer of the Corporation,
is a party to an employment agreement with the Corporation expiring in September
1996. Pursuant to such agreement, Dr. Barer receives an annual salary of
$200,000, subject to increase upon annual review. Except under certain
circumstances, the Corporation may not terminate this agreement without 12
months' prior notice to Dr. Barer. Additionally, pursuant to Dr. Barer's
employment agreement, he will be entitled to receive a cash payment equal to
2.99 times his base salary in the event of the termination of Dr. Barer's
employment as a result of (i) his disability, (ii) the occurrence of certain
events subsequent to a change in control of the Corporation (as defined in such
agreement), or (iii) certain material breaches by the Corporation of such
agreement.
If during the two-year period following a change in control of the
Corporation (as defined in the Corporation's 1992 Long-Term Incentive Plan), (i)
there is a change in an employee's title or a significant change in the nature
or scope of his employment or duties and such person terminates his employment
within 90 days following such change or (ii) the recipient's employment by the
Corporation is terminated without cause (as defined), then all of the options
held by such employee then outstanding will become immediately and fully
exercisable, and all restrictions applicable to restricted stock automatically
will terminate.
STOCK OPTIONS
No stock options or stock appreciation rights ("SARs") were granted to
the named executive officers during the year ended December 31, 1995 and there
were no options or SARs exercised by such officers during 1995. As of December
31, 1995 no SARs were outstanding.
The following table sets forth information with respect to options held
as of December 31, 1995 by each of the named executive officers.
FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
------------------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Richard G. Wright............ 100,000 50,000 $ 650,000 $325,000
Sol J. Barer................. 126,974 48,346 637,078 266,262
- -------------------
(1) Represents the difference between the closing market price of the Common
Stock as reported by NASDAQ on December 31, 1995 of $13.375 per share
and the exercise price per share of in-the-money options multiplied by
the number of shares underlying the in-the-money options.
6
DIRECTOR COMPENSATION
Directors do not receive salaries or cash fees for serving as directors
nor do they receive any cash compensation for serving on committees; however,
all members of the Board of Directors who are not employees of the Corporation
("Non-Employee Directors") are reimbursed for their expenses for each meeting
attended and are eligible to receive stock options pursuant to the 1995
Non-Employee Directors' Plan (the "1995 Directors' Plan").
The 1995 Directors' Plan was adopted by the Board of Directors on April
5, 1995, and approved by Corporation's stockholders at the 1995 Annual Meeting
of Stockholders. The 1995 Directors' Plan provides for the granting to
Non-Employee Directors of non-qualified options to purchase an aggregate of not
more than 250,000 shares (subject to adjustment in certain circumstances) of
Common Stock.
Under the 1995 Directors' Plan, each Non-Employee Director as of April
5, 1995 was granted a non-qualified option to purchase 20,000 shares of Common
Stock, and each new Non-Employee Director upon the date of his election or
appointment will be granted a non-qualified option to purchase 20,000 shares of
Common Stock. These initial options vest in four equal annual installments
commencing on the first anniversary of the date of grant, assuming the
Non-Employee Director remains a director.
Upon the date of the 1995 Annual Meeting of Stockholders, each
Non-Employee Director was also granted a non-qualified option to purchase 6,000
shares of Common Stock. Upon the date of the Annual Meeting of Stockholders each
year after 1995, each Non-Employee Director will be granted a non-qualified
option to purchase 10,000 shares of Common Stock (or a pro rata portion thereof
if the director did not serve the entire year since the date of the last annual
meeting). These options vest in full on the date of the first Annual Meeting of
Stockholders held following the date of the grant, assuming the Non-Employer
Director is a director on that date.
All options granted pursuant to the 1995 Directors' Plan will expire no
later than 10 years from the date of grant and no options may be granted after
June 16, 2005. If a Non-Employee Director terminates his service on the Board of
Directors for any reason, options which were exercisable on the date of
termination and which have not expired may be exercised at any time until the
date of expiration of such options. In addition, if there is a change of control
and within two years thereafter, a director is removed without cause (as
defined) or is not nominated for election by the Corporation's stockholders, all
unvested portions of a stock option will automatically vest.
In 1995, pursuant to the 1995 Directors' Plan, each of Messrs. Cary,
Morgan, Robb and Schroeder received an option to purchase 20,000 shares of
Common Stock at an exercise price of $5.75 per share, the fair market value of
the stock on the date of the grant, and each also received an option to purchase
6,000 shares of Common Stock at an exercise price of $8.125 per share, the fair
market value of the stock on the date of the grant. Upon his election as a
director in December 1995, Mr. Hayes received an option to purchase 20,000
shares of Common Stock at an exercise price of $10.50 per share, the fair market
value of the stock on the date of the grant.
REPORT OF THE MANAGEMENT COMPENSATION AND DEVELOPMENT COMMITTEE
The Compensation Committee determines the Corporation's executive
compensation policies. The Compensation Committee determines the compensation of
the Corporation's executive officers and approves and oversees the
administration of incentive compensation programs for all employees including
executive officers. The Compensation Committee is composed solely of outside
directors.
Executive Compensation Policies and Programs
The Corporation's executive compensation program is part of a
company-wide program covering all employees. The program's goals are to attract,
retain, and motivate employees, and it utilizes incentives such that employees
and stockholders share the same risks. The compensation program is designed to
link compensation to performance. A portion of each employee's compensation
relates to the grant of stock options, and such grants are based on the
successful attainment of strategic corporate, business unit, and individual
goals. As the Corporation has
7
not as yet attained significant commercial revenues, goals are set which relate
to the successful attainment of strategic events.
The Corporation does not have a pension plan or other capital
accumulation program. Grants of stock options are therefore of great importance
to executives as well as all employees. Any long-term value to be derived from
such grants will be consistent with stockholder gains.
Executive and employee compensation includes salary, employment-related
benefits, and long-term incentive compensation:
Salary. Salaries are set competitively relative to the chemical,
biotechnology, and pharmaceutical industries -- industries with which the
Corporation competes for its highly skilled personnel. Individual experience and
performance is considered when setting salaries within the range for each
position. Annual reviews are held and adjustments are made based on attainment
of individual goals.
Benefits. All employees are eligible for similar benefits, such as
health, disability, and life insurance.
Long-Term Incentive Compensation. An incentive compensation program is
established annually. The purpose of this program is to provide financial
incentives to executives and employees to achieve annual corporate, business
unit, and individual goals. The incentive program also aligns executive and
employee interests with those of stockholders by using grants of stock options.
Such grants vest over time thereby encouraging continued employment with the
Corporation. The size of grants is tied to comparative biotechnology industry
practices. To determine such comparative data, the Corporation relies on outside
compensation consultants, the Corporation's auditors, and third party industry
surveys.
Under the Corporation's 1995 incentive program, it was agreed, subject
to the achievement of certain goals in 1995 by the Corporation, that the
Corporation would grant at a future date options to purchase shares of common
stock. A similar incentive program has been designed for 1996 based on
attainment of corporate, business unit, and individual goals. The program is
open to all regular full-time employees, other than the executive officers of
the Corporation.
Chief Executive Officer Compensation. Pursuant to Mr. Wright's
arrangement with the Corporation entered into on March 18, 1994, Mr. Wright
received a salary of $236,250 for 1995 . Mr. Wright did not participate in the
1995 Incentive Program. Mr. Wright's long-term incentive derived from the grant
of stock options to purchase 150,000 shares of Common Stock awarded to him at
the time he began serving as Chief Executive Officer. In consideration of his
service to the Corporation, the Board of Directors also approved a payment to
Mr. Wright of $250,000 upon his retirement from the Corporation at December 31,
1995. The Board of Directors also provided for Mr. Wright to retain 50,000
options, which vested as scheduled in March 1996 and would otherwise have
been canceled. The Board also amended Mr. Wright's stock option agreement to
permit him to exercise all of his options over the ten year life of the original
grant, rather than within three months of the date of his retirement as provided
for originally in his option.
Members of the Management
Compensation and Development Committee
Richard C.E. Morgan, Chairman
Frank T. Cary
Walter L. Robb
Lee J. Schroeder
8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Richard C. E.
Morgan, Chairman, Frank T. Cary, Walter L. Robb, and Lee J. Schroeder. Richard
C. E. Morgan is a general partner of Wolfensohn Partners L.P., which is the
general partner of Wolfensohn Associates L.P. In connection with the purchase of
Common Stock in a private placement in 1986, Wolfensohn Associates L.P. received
certain demand and "piggyback" registration rights with respect to the Common
Stock purchased by it under certain conditions.
PERFORMANCE GRAPH
The following graph shows changes over the past five years in the value
of $100 invested in: 1) the Corporation's Common Stock; 2) the Standard & Poor's
500 Index; and 3) the NASDAQ Pharmaceutical Index.
The graph shows the value of $100 invested on December 31, 1990 in the
Corporation's Common Stock or in one of the indexes, as applicable, including
reinvestment of dividends, at December 31 for each of 1991-1995.
The following table indicates the values plotted on the graph:
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
Celgene Corporation 100 235 202 108 87 206
S&P 500 Index 100 130 140 155 157 215
NASDAQ Pharmaceutical Index 100 266 221 197 148 271
9
ITEM 12 BENEFICIAL OWNERSHIP OF DIRECTORS AND MANAGEMENT
The table below sets forth the beneficial ownership of the Common Stock
as of March 31, 1996 (i) by each director, (ii) by each of the executive
officers named in the "Summary Compensation Table," and (iii) by all directors
and executive officers of the Corporation as a group.
Amount and Nature of
Beneficial Ownership
of Common Stock as Percent
Name Position of March 31, 1996 of Class
- ---- -------- ----------------- --------
John W. Jackson Chairman of the Board and 83,733(1)(2) *
Chief Executive Officer
Sol J. Barer President, Chief Operating 153,334(1) 1.7%
Officer, and a Director
Frank T. Cary Director 65,000(1) *
Arthur Hull Hayes, Jr. Director - (1) *
Richard C.E. Morgan Director 292,055(1)(3) 3.2%
Walter L. Robb Director 21,000(1) *
Lee J. Schroeder Director 5,000(1) *
Richard G. Wright Former Chairman of the 150,000(1) 1.6%
Board and former Chief
Executive Officer
All directors and current executive officers of the
Corporation as a group (seven persons) 620,122(4) 6.8%
- ---------
* Less than one percent (1%).
(1) Includes shares of Common Stock which the directors and executive
officers had the right to acquire through the exercise of options within
60 days of March 31, 1996, as follows: John W. Jackson - 83,333; Sol J.
Barer - 153,334 shares; Frank T. Cary - 40,000 shares; Richard C.E.
Morgan - 35,000 shares; Walter L. Robb - 13,000; and Richard G. Wright -
150,000 shares. Does not include shares of Common Stock which the
directors and executive officers had the right to acquire through the
exercise of options not exercisable within 60 days of March 31, 1996, as
follows: John W. Jackson - 166,667; Sol J. Barer - 94,486; Frank T. Cary
- 21,000; Arthur Hull Hayes, Jr. - 20,000; Richard C.E. Morgan - 21,000
shares; Walter L. Robb - 21,000; and Lee Schroeder - 21,000 shares.
Includes as to Walter L. Robb, 4,000 shares of Common Stock subject to
restricted stock awards, 1,334 of which shares were subject to
forfeiture as of March 31, 1996.
(2) Includes 400 shares owned by Donald M. Jackson, the son of Mr. Jackson,
as to which shares Mr. Jackson disclaims beneficial ownership.
(3) Includes 252,055 shares of Common Stock owned by Wolfensohn Associates
L.P., of which Wolfensohn Partners L.P. is the general partner. Mr.
Morgan is a general partner of Wolfensohn Partners L.P. Mr. Morgan's
indirect pecuniary interest in such shares of Common Stock, within the
meaning of Rule 16a-1(a)(2)(ii)(B) under the Securities Exchange Act of
1934, is significantly less than the amount disclosed. Mr. Morgan
otherwise disclaims beneficial ownership of such shares of Common Stock
owned by Wolfensohn Associates L.P.
(4) Includes or excludes, as the case may be, shares of Common Stock as
indicated in the preceding footnotes.
10
ITEM 13 CERTAIN TRANSACTIONS
Richard C. E. Morgan is a general partner of Wolfensohn Partners L.P.,
which is the general partner of Wolfensohn Associates L.P. In connection with
the purchase of Common Stock in a private placement in 1986, Wolfensohn
Associates L.P. received certain demand and "piggyback" registration rights with
respect to the Common Stock purchased by it under certain conditions.
11
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
CELGENE CORPORATION:
We have audited the accompanying balance sheets of Celgene Corporation
as of December 31, 1995 and 1994, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted audited
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Celgene Corporation
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1995 in
conformity with generally accepted accounting principles.
As discussed in note 2 to the financial statements, the Company adopted
the provisions of the Financial Accounting Standard Board's Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," effective January 1, 1994.
/s/ KPMG PEAT MARWICK LLP
Short Hills, New Jersey
February 17, 1996, except as
to note 12, which is as of
March 13, 1996
12
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.
CELGENE CORPORATION
By /s/ John W. Jackson
-------------------------
John W. Jackson
Chairman of the Board and
Chief Executive Officer
Date: April 29, 1996
13