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
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 ss.240.14a-12
Inspire Pharmaceuticals, Inc.
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(Name of Registrant as Specified In Its Charter)
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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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[INSPIRE PHARMACEUTICALS, INC.
logo appears here]
April 20, 2001
To Our Stockholders:
You are most cordially invited to attend the 2001 Annual Meeting of
Stockholders of Inspire Pharmaceuticals, Inc. at 9:00a.m., local time, on
Friday, June 1, 2001, at the North Carolina Biotechnology Center, 15 T.W.
Alexander Drive, Research Triangle Park, North Carolina. Directions to the North
Carolina Biotechnology Center are enclosed.
The enclosed Notice of Meeting and Proxy Statement describes the
matters to be presented at the Annual Meeting.
It is important that your shares be represented at the Annual Meeting
to assure the presence of a quorum. Whether or not you plan to attend the Annual
Meeting, we hope that you will have your stock represented by signing, dating,
and returning your proxy in the enclosed envelope. Your stock will be voted in
accordance with the instructions you have given in your proxy.
Thank you for your continued support.
Sincerely,
CHRISTY L. SHAFFER
President and Chief Executive Officer
INSPIRE PHARMACEUTICALS, INC.
4222 Emperor Boulevard, Suite 470
Durham, North Carolina 27703-3466
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on June 1, 2001
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Dear Stockholders:
The Annual Meeting of the Stockholders of Inspire Pharmaceuticals, Inc.
will be held on June 1, 2001, at 9:00 a.m., at the North Carolina Biotechnology
Center, 15 T.W. Alexander Drive, Research Triangle Park, North Carolina
27709-3547, to:
(1) Elect two directors to serve until the Annual Meeting of the
Stockholders to be held in 2004 and until their successors have been
duly elected and qualified;
(2) Ratify the selection of PricewaterhouseCoopers LLP as our
independent auditors for the fiscal year ending December 31, 2001;
and
(3) Transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Only stockholders of record at the close of business on April 2, 2001 are
entitled to notice of, and to vote at, the Annual Meeting, or any adjournment or
adjournments thereof. A complete list of such stockholders will be open to the
examination of any stockholder at our executive offices at 4222 Emperor
Boulevard, Suite 470, Durham, North Carolina 27703-3466 for a period of 10 days
prior to the Annual Meeting and a copy shall be available for examination at the
time and place of the Annual Meeting. The Annual Meeting may be adjourned from
time to time without notice other than by announcement to such effect at the
Annual Meeting.
It is important that your shares be represented at the Annual Meeting. Your
shares cannot be voted unless they are represented by proxy or you make other
arrangements to have them represented at the Annual Meeting. Whether or not you
plan to attend the Annual Meeting, please fill in, date and sign the enclosed
proxy and return it promptly in the enclosed envelope. The prompt return of
proxies will ensure a quorum and save us the expense of further solicitation.
By Order of the Board of Directors,
Gregory J. Mossinghoff
Secretary
Durham, North Carolina
April 20, 2001
INSPIRE PHARMACEUTICALS, INC.
4222 Emperor Boulevard, Suite 470
Durham, North Carolina 27703-3466
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PROXY STATEMENT
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General.
These proxy materials are furnished in connection with the solicitation of
proxies by the Board of Directors of Inspire Pharmaceuticals, Inc., a Delaware
corporation, for use at our Annual Meeting of Stockholders (the "Annual
Meeting"), and at any continuation or adjournment thereof. The Annual Meeting
will be held June 1, 2001 at the North Carolina Biotechnology Center, 15 T.W.
Alexander Drive, Research Triangle Park, North Carolina 27709-3547 at 9:00 a.m.
We maintain principal executive offices at 4222 Emperor Boulevard, Suite
470, Durham, North Carolina 27703. This proxy statement and the accompanying
form of proxy are being mailed to stockholders on or about April 20, 2001. Our
Annual Report for 2000, including financial statements for the year ended
December 31, 2000, is being mailed to stockholders at the same time.
Stockholders Entitled To Vote.
Holders of shares of our common stock of record at the close of business on
April 2, 2001 are entitled to notice of, and to vote at, the Annual Meeting and
at any and all adjournments or postponements of the Annual Meeting. Each share
entitles its owner to one vote. The holders of a majority of the shares entitled
to vote at the Annual Meeting must be present in person or represented by proxy
in order to constitute a quorum for all matters to come before the Annual
Meeting. On the record date there were 25,666,390 shares outstanding. Our
Amended and Restated Certificate of Incorporation, as amended, does not provide
for cumulative voting.
Other than the election of directors, which requires a plurality of the
votes cast, each matter to be submitted to the stockholders requires the
affirmative vote of a majority of the votes cast at the meeting. For purposes of
determining the number of votes cast with respect to a particular matter, only
those cast "For" or "Against" are included. Abstentions and broker non-votes are
counted only for purposes of determining whether a quorum is present at the
meeting.
How To Vote.
If you are a stockholder of record (i.e. a stockholder who holds shares in
their own name), you can vote by signing, dating and returning your proxy card
in the enclosed postage-paid envelope. If you sign and return your proxy card
but do not give voting instructions, the shares represented by that proxy will
be voted as recommended by the Board of Directors.
If your shares are held in the name of a bank, broker or other holder of
record (that is, "street name"), you will receive instructions from the holder
of record that you must follow in order for your shares to be voted.
Changing Your Vote.
You may change your vote at any time before the proxy is exercised. If you
voted by mail, you may revoke your proxy at any time before it is voted by
executing and delivering a timely and valid later-dated
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proxy, by voting by ballot at the meeting or by giving written notice to the
Secretary of Inspire. Attendance at the Annual Meeting will not have the effect
of revoking a proxy unless you give proper written notice of revocation to the
Secretary before the proxy is exercised or you vote by written ballot at the
Annual Meeting.
Reduce Duplicate Mailings.
We are required to provide an Annual Report to all stockholders who receive
this proxy statement. If you are a stockholder of record and have more than one
account in your name or at the same address as other stockholders of record, you
may authorize us to discontinue mailings of multiple proxy statements, Annual
Reports and other information statements. To do so, mark the designated box on
each proxy card for which you wish to discontinue to receive duplicate
documents. Your consent to cease delivery of the Annual Report, proxy statements
and other information statements shall be effective for five (5) years or until
you revoke your consent. You may revoke your consent at any time by contacting
Gregory J. Mossinghoff, in writing, at our offices located at 4222 Emperor
Boulevard, Suite 470, Durham, North Carolina 27703-8466, or by calling (919)
941-9777. Delivery of individual copies of the documents shall resume within 30
days of receipt of your request.
Stockholder Proposals.
To be included in the Board of Directors' proxy statement and proxy card
for the 2002 Annual Meeting of Stockholders, a stockholder proposal must be
received by us on or before December 22, 2001. Proposals should be directed to
the attention of Gregory J. Mossinghoff at our offices located at 4222 Emperor
Boulevard, Suite 470, Durham, North Carolina 27703-3466.
In addition, if a stockholder wishes to present a proposal at our 2002
Annual Meeting which is not intended to be included in the proxy statement for
that meeting, we must receive written notice of the stockholder proposal by
March 6, 2002. If we do not receive timely notice of such a stockholder
proposal, we will retain discretionary authority to vote proxies on such
proposals even if it is not specifically reflected on the proxy card and
stockholders have not had an opportunity to vote on the proposal by proxy.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
At the Annual Meeting two directors are to be duly elected to hold office
until the Annual Meeting of Stockholders to be held in 2004 and until their
successors shall have been elected and qualified. The nominees for election to
the Board of Directors are Christy L. Shaffer, Ph.D. and Gregory J.
Mossinghoff.
Pursuant to our Amended and Restated Certificate of Incorporation, as
amended, the Board of Directors is divided into three classes, each class
consisting, as nearly as possible, of an equal number of directors. There are
currently seven members of the Board of Directors. Class A consists of Dr.
Shaffer and Andre L. Lamotte, Sc.D., whose terms will expire at the Annual
Meeting. Dr. Lamotte has indicated to the Board of Directors that he will not
stand for re-election at the Annual Meeting. The Nominating Committee of the
Board of Directors has nominated, and the Board of Directors has ratified, the
nomination of Dr. Shaffer and Mr. Mossinghoff for election at the Annual
Meeting. The Nominating Committee does not currently consider nominees
recommended by stockholders. Class B consists of Terrance G. McGuire and Jesse
I. Treu, Ph.D., whose terms will expire at the Annual Meeting of Stockholders
in 2002. Class C consists of Richard Boucher, M.D., H. Jefferson Leighton, Ph.D
and W. Leigh Thompson, M.D., Ph.D., D.Sc., whose terms will expire at the
Annual Meeting of Stockholders in 2003.
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Set forth below is certain information about the members of our Board of
Directors and the nominees, including their name, age and current positions:
Name Age Position
- ---------------------------------------- ----- --------------------------------------------------
Christy L. Shaffer, Ph.D ............. 43 President, Chief Executive Officer and Director
Gregory J. Mossinghoff ............... 40 Senior Vice President and Chief Business Officer,
Secretary and Treasurer
Terrance G. McGuire .................. 45 Chairman of the Board
Richard Boucher, M.D. ................ 56 Director
Andre L. Lamotte, Sc.D. .............. 53 Director
H. Jefferson Leighton, Ph.D .......... 55 Director
W. Leigh Thompson, M.D., Ph.D., D.Sc. 62 Director
Jesse I. Treu, Ph.D. ................. 54 Director
If the enclosed proxy is properly executed and received in time for the
Annual Meeting, it is the intention of the persons named in the proxy to vote
the shares represented thereby for the persons nominated for election as
directors unless authority to vote shall have been withheld. If any nominee
should refuse or be unable to serve, an event not anticipated, the proxy will be
voted for such person as shall be designated by the Board of Directors to
replace such nominee or, in lieu thereof, the Board of Directors may reduce the
number of directors. The Board of Directors has no reason to believe that the
nominees will be unable to serve if elected. The nominees have consented to
being named in this proxy statement and to serve if elected.
Set forth below is biographical information for each member of the Board of
Directors and each nominee for election to the Board of Directors, including a
summary of their background and principal occupations. If elected, each nominee
would serve until the Annual Meeting in 2004 and until his or her successor is
duly elected and qualified, or until such director's earlier death, resignation,
or removal.
Christy L. Shaffer, Ph.D., has served as our President, Chief Executive
Officer and as a director since January 1999. Dr. Shaffer joined us in June
1995 as our first full-time employee, Director, Clinical Operations. She was
promoted to Senior Director, Development in June 1996 and to Vice President,
Development and Chief Operating Officer in January 1998. Dr. Shaffer has over
ten years of experience in drug development within the pharmaceutical industry.
She previously served in a variety of positions in the clinical research
division of Burroughs Wellcome Co. including Associate Director of pulmonary
research in the department of pulmonary/critical care medicine during the
period from February 1995 to June 1995. Dr. Shaffer coordinated several IND
submissions and one NDA submission at Burroughs Wellcome. Dr. Shaffer received
a Ph.D. in pharmacology from the University of Tennessee and completed two
years of postdoctoral training in cardiovascular research in the Biochemistry
Department at the Chicago Medical School before her postdoctoral appointment at
University of North Carolina.
Gregory J. Mossinghoff has served as our Chief Business Office since
December 1999 and as our Senior Vice President since November 10, 2000. Mr.
Mossinghoff joined us in June 1998 as our Senior Director of Strategic Planning
and Operations and was promoted to Vice President, Corporate Development in
January 1999. Mr. Mossinghoff has also served as our Secretary since October
1998, and as our Treasurer since March 2000. In his current role he helps us
develop and realize strategic objectives, expand our corporate partnerships in
the United States and abroad, and oversee all business-related activities
including operations and finance. Before joining us, from February 1996 to June
1998, Mr. Mossinghoff was worldwide Director of Business Analysis at Glaxo
Wellcome plc. Before joining Glaxo Wellcome, Mr. Mossinghoff held various roles
with increasing responsibility at Hoffmann LaRoche Inc., from June 1988 to
February 1996, including Manager, Business Development and Strategic Planning
from 1994 to 1996. Mr. Mossinghoff received a B.A. degree in Economics from the
University of Virginia, Charlottesville, VA and an MBA in Financial Management &
Analysis from George Mason University, Fairfax, VA.
Terrance G. McGuire has served as our Chairman of the Board and a director
since October 1993, and is one of our four founders. He currently serves as
Chairman of the Compensation and Audit Committees of the
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Board and as a member of the Nominating Committee of the Board. He also served
as our Treasurer from October 1993 to March 2000. Since March 1986, he has been
a founding general partner of Polaris Venture Partners L.P. Since 1993, he has
served as a general partner of Alta V Management Partners L.P., which is the
general partner of Alta V Limited Partnership, a fund associated with Burr,
Egan, Deleage & Co. Mr. McGuire has also been general partner of Beta Partners
LP, a venture capital firm, since 1989. He is a director of Akamai
Technologies, Inc., Aspect Medical Systems, Inc., deCODE genetics, Inc.,
Wrenchead.com, Inc., Paradigm Genetics, Inc. and several other private
healthcare and information technology companies. Mr. McGuire received his B.S.
in Physics and Economics from Hobart College, his M.S. in Engineering from
Dartmouth College and his MBA from the Harvard Business School.
Richard Boucher, M.D. has served as a director since March 1995, and is a
Co-Chairman of our Scientific Advisory Board and a member of our Nominating
Committee. One of our four founders, Dr. Boucher is the William Rand Kenan
Professor of Medicine, Chief of Pulmonary Medicine and Director of the Cystic
Fibrosis/Pulmonary Research and Treatment Center at The University of North
Carolina at Chapel Hill School of Medicine. Dr. Boucher obtained his M.D. degree
from Columbia University College of Physicians and Surgeons. Following residency
training, he joined the Faculty of Medicine at The University of North Carolina
at Chapel Hill in 1977. Dr. Boucher has authored or co-authored more than 200
original research articles and more than 100 additional publications including
book chapters. He received the Doris Tulcin and Paul Di Sant'Agnese CF Research
Awards and the Julius Comroe Award from The American Physiology Society. He is
an established principal investigator with the National Institutes of Health,
and is a member of the American College of Physicians and the Association of
American Physicians. In recent years, Dr. Boucher has pioneered new approaches
for the treatment of cystic fibrosis.
Andre L. Lamotte, Sc.D. has served as a director since October 1993 and is
one of our four founders. Dr. Lamotte also currently serves as a member of our
Nominating Committee. In February 2001, Dr. Lamotte advised the Board of
Directors that he would not stand for re-election at the Annual Meeting. In
1989, Dr. Lamotte founded Medical Science Partners, which specializes in early
stage life sciences investments in affiliation with Harvard University and has
served as the managing general partner since such time. Before founding Medical
Science Partners, Dr. Lamotte served as a general manager at Pasteur Merieux
from April 1983 to April 1988. He also serves as the managing general partner
of Medical Science Partners II, L.P. and Medical Science II Co-Investment, L.P.
and general partner of New Medical Technologies. Dr. Lamotte is a director of
Ascent Pediatrics, Inc and deCODE genetics, Inc. Dr. Lamotte holds a Ph.D. in
chemistry from the Massachusetts Institute of Technology and an M.B.A. from
Harvard University.
H. Jefferson Leighton, Ph.D. has served as a director since October 1993
and is one of our four founders. He served as our President and Chief Executive
Officer from October 1993 until December 1995. Dr. Leighton also serves as a
member of our Audit Committee. Dr. Leighton has more than 20 years of
experience in large pharmaceutical companies in various research and
development positions. More recently, he has founded, reorganized, and merged
several small pharmaceutical companies including ICAgen Inc., Biodesign,
Neurologic and AdipoGenix Inc.
W. Leigh Thompson, M.D., Ph.D., D.Sc. has served as a director since April
1996. In December 1994, Dr. Thompson retired from Eli Lilly and Co. where he
served as chief scientific officer and a member of the management committee.
Dr. Thompson has enjoyed a distinguished career in both academic medicine and
the pharmaceutical industry and has published extensively, particularly in the
area of critical care medicine. He is a member of numerous corporate, academic,
and civic boards, and consults in the areas of health informatics, enterprise
strategic planning, and related areas. Since 1995, Dr. Thompson has been the
Chief Executive Officer of Profound Quality Resources, Ltd., a worldwide
scientific consulting firm. He is currently a director of Bioanalytical Systems
Inc., DepoMed Inc., Orphan Medical Inc., Guilford Pharmaceuticals, Inc., and
Medarex Inc.
Jesse I. Treu, Ph.D. has served as a director since March 1995 and is a
member of our Compensation and Audit Committees. He is a managing member of
Domain Associates, L.L.C. and has served in this or
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similar capacities with the firm since 1986. He has served as a director of
over 20 early-stage companies, eleven of which have so far become public
companies. He is currently a director of OraPharma, Inc. Before the formation
of Domain, Dr. Treau had 12 years of health care experience at General Electric
and Technicon Corporation in a number of research, marketing management and
corporate staff positions. Dr. Treu received his B.S. from Rensselaer
Polytechnic Institute and his M.A. and Ph.D. degrees in physics from Princeton
University.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE.
DIRECTOR COMPENSATION
Directors receive no cash compensation for their services as directors or
as members of committees. In 1996, we granted Dr. Thompson an option to purchase
27,428 shares of our common stock at an exercise price of $0.12 per share. In
March 2000, we granted each non-employee director an option to purchase 5,714
shares of our common stock at an exercise price equal to the initial public
offering price of the common stock, which was $12.00 per share. All such options
are subject to conditions relating to vesting and retention for each recipient's
participation on the Board of Directors. All directors are reimbursed for
expenses incurred in connection with attendance at Board of Directors and
committee meetings.
MEETINGS AND COMMITTEES OF THE BOARD
During the year ended December 31, 2000, there were six (6) meetings of the
Board of Directors. Each incumbent director attended at least 75% of the
meetings of the Board. The Board has established an Audit Committee, Nominating
Committee and a Compensation Committee.
The members of the Audit Committee are Mr. McGuire, as chairperson, Dr.
Treu and Dr. Leighton. Drs. Treu and Leighton are "independent" as defined by
the rules under listing standards of the NASD. Under the rules defining an
independent director, Mr. McGuire's service as our Treasurer from October 1993
through March 2000 may cause him to be considered as not independent. The rules
provide that one director who is not independent and not a current employee may
be appointed to our Audit Committee if the Board of Directors determines that
his membership on the Audit Committee is required by the best interest of
Inspire and our stockholders, and discloses in this proxy statement the nature
of the relationship which causes him to be not independent and the reasons for
the Board's determination.
The Board of Directors has determined that since Mr. McGuire's position as
Treasurer ceased in March 2000, and due to his training in economics, physics
(B.S.), engineering (M.S.) and business (M.B.A.), his past employment and
management experience in the biotechnology, private healthcare, information
technology and venture capital industries, including his service as director of
several public and private companies, that his knowledge of business and
experience in matters relevant to the functions of our Audit Committee is of
such unique value that it will be in the best interest of Inspire and our
stockholders to retain Mr. McGuire as a member of the Audit Committee and
thereby obtain the benefit of his expertise.
The Audit Committee assists the Board of Directors in fulfilling its
responsibilities of ensuring that management is maintaining an adequate system
of internal controls such that there is reasonable assurance that assets are
safeguarded and that financial reports are properly prepared; that there is
consistent application of generally accepted accounting principles; and that
there is compliance with management's policies and procedures. In performing
these functions, the Audit Committee meets periodically with the independent
auditors, management, and internal auditors to review their work and confirm
that they are properly discharging their respective responsibilities. In
addition, the Audit Committee recommends the independent auditors for
appointment by the Board of Directors. The Audit Committee met once during 2000.
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The Nominating Committee, which consists of Mr. McGuire, Dr. Boucher and
Dr. Lamotte, reviews the qualifications of and proposes candidates for
consideration for election to the Board of Directors or any committee of the
Board. The Nominating Committee met once during 2000.
The Compensation Committee currently consists of Mr. McGuire, as
chairperson, and Dr. Treu. The Compensation Committee administers our stock
plan, considers executive compensation of our key officers and compensation of
directors. The Committee considers and reviews and approves issues and matters
concerning the compensation of employees and consultants and the objectives and
policies instituted by the Board of Directors. The Compensation Committee met in
February 2001 to establish compensation for the year.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors has furnished the following
report, in accordance with rules recently established by the Securities and
Exchange Commission, for inclusion in this proxy statement.
The Audit Committee of the Board of Directors, which consists of Mr.
McGuire, as chairperson, Dr. Treu and Dr. Leighton, reviews the results and
scope of the annual audit and the services provided by the independent auditors.
The Audit Committee's responsibilities are described in a written charter
adopted by the Board of Directors, which is attached as Appendix A to this proxy
statement.
As part of its ongoing activities, the Audit Committee has:
o Reviewed and discussed with Inspire's management the audited consolidated
financial statements for the fiscal year ended December 31, 2000;
o Discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, Communications with
Audit Committees, as amended;
o Received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and has discussed with
the independent auditors their independence; and
o Considered the compatibility of non-audit services described in this
report with maintaining auditor independence.
The fees paid by Inspire to PricewaterhouseCoopers LLP ("PwC") for the
fiscal year ended December 31, 2000 were as follows:
Audit Fees
The independent auditor of Inspire during the fiscal year ended December
31, 2000 was PwC. The aggregate fees billed by PwC in connection with the review
of quarterly financial statements, and the audit of Inspire's financial
statements for the year ended December 31, 2000 to be included in its Annual
Report on Form 10-K were $47,500.
All Other Fees
The aggregate fees billed for all other services rendered to Inspire by PwC
for the fiscal year ended December 31, 2000 were $362,800. The fees relate to
recurring and non-recurring tax services, and non-recurring fees for services
provided during the due diligence process, review of financial information and
preparation of comfort letters coincident with Inspire's initial public
offering.
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Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Annual Report on Form 10-K for the fiscal year ended December
31, 2000.
Respectfully submitted,
Audit Committee
Terrance G. McGuire
H. Jefferson Leighton
Jesse Treu
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors has furnished the
following report, on executive compensation.
The Compensation Committee of the Board of Directors, which consists of Mr.
McGuire, as chairperson, and Dr. Treu, reviews and approves executive salaries
and bonuses, administers the Amended and Restated 1995 Stock Plan, as amended,
and approves any other compensation benefits of Inspire's executive officers. In
addition, the Compensation Committee consults with management regarding its
benefit plans and is responsible for reviewing overall compensation policies and
practices.
Compensation Philosophies
Inspire's executive compensation structure is designed to attract, retain
and award executives capable of leading Inspire to meet its business objectives
and to motivate executives to enhance long-term stockholder value.
The Compensation Committee seeks to provide competitive salaries based upon
individual performance together with annual cash bonuses, where appropriate,
based on Inspire's overall performance relative to is corporate objectives, the
executive's individual contributions and teamwork. In addition, the Compensation
Committee will typically grant stock options to an executive upon the
commencement of the executive's employment and annually thereafter in order to
strengthen the interest between such executives and Inspire's stockholders and
to give the executives the opportunity to reach the top compensation levels of
the market depending upon Inspire's performance, as reflected in the market
price of Inspire's common stock.
In 2000, executive compensation consisted of base salary, cash bonuses and
stock options. The following describes in more detail the elements of
compensation, which are part of the Compensation Committee's policies.
Base Salaries
Base salaries for executive officers are determined annually by reviewing
three key areas: (1) the pay practices of companies of similar size, market
capitalization and industry; (2) the skills and performance level of the
individual executive relative to targeted performance criteria; and (3)
Inspire's actual performance. The Committee reviews information about salary,
bonus and stock awards in related industries. Based in part on this information,
the Committee generally considers changes to existing base salaries, including
that of the Chief Executive Officer, at levels comparable to those established
by other emerging biopharmaceutical companies. Annual salary adjustments are
made, based upon a recommendation by the Chief Executive Officer, to maintain
salaries at competitive levels, taking into account each officer's experience
and individual performance, and to maintain an equitable relationship between
executive officer salaries and overall salaries
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for other employees. Base salaries for new executive officers are determined
with reference to such industry surveys and by evaluating the responsibilities
of the position held and the experience of the individual.
Bonuses
Cash bonuses are used on an exceptional basis to attract, retain and
motivate executives. When bonus payments are made, the executive's bonus is
based on Inspire's achievement of its major corporate objectives and the
executive's achievement of individual objectives and the contribution of the
executive to the overall success and achievements of the company and its
management team. In determining the level of the cash bonus during 2000, the
Compensation Committee considered certain significant accomplishments,
including: the advanced clinical development of INS365 Respiratory for the
treatment of chronic bronchitis, INS365 Ophthalmic for the treatment of dry eye
disease and INS316 Diagnostic to aid in the diagnosis of lung cancer and lung
infection; the pre-clinical development of INS37217 for the treatment of cystic
fibrosis and INS37217 Ophthalmic for the treatment of retinal disease;
additional research and development efforts with respect to other target
diseases where P2Y receptors may play important biological roles; the
establishment of strategic partnerships, including the collaboration with
Genentech, Inc. in December 1999; the successful completion of Inspire's initial
public offering; and other individual objectives.
Stock Options
The Compensation Committee believes that stock options are an excellent
long-term incentive for executives that aligns executive and stockholder
interests and assists in retention of key officers and employees. Stock options
granted under the Amended and Restated 1995 Stock Plan generally vest over four
years. The Compensation Committee has and may in the future determine to more
closely link the vesting of stock options with an executive's achievement of a
particular objective.
When determining stock option awards, the Compensation Committee considers
the executive's current responsibilities and contributions to Inspire's
performance, the anticipated contribution to meeting Inspire's long-term
strategic performance goals, their position with Inspire and industry practice
in companies of similar size, market and capitalization. The direct link between
the value of a stock option to an executive and an increase in the price of
Inspire's stock makes stock option awards a key method for aligning executive
compensation with stockholder value.
Chief Executive Officer Compensation
Dr. Shaffer's compensation is determined by the Compensation Committee
without Dr. Shaffer's participation, based upon the same factors as those used
by the Compensation Committee and management for other executives. Dr. Shaffer
participates in the same compensation arrangements available to the other senior
executives. Accordingly, her compensation also consists of an annual base
salary, a potential cash bonus, and stock options grants. The Compensation
Committee's general approach in establishing Dr. Shaffer's compensation is to be
competitive with the compensation paid to chief executive officers in peer
companies, but to have a significant percentage of her compensation based upon
performance criteria established by the Compensation Committee.
Dr. Shaffer's compensation for the year ended December 31, 2000 included
$223,299.84 in base salary, a cash bonus of $50,000 and a stock option to
purchase an aggregate of 114,285 shares of common stock at an exercise price of
$12.00, the price of Inspire's common stock in its initial public offering. In
determining the base salary in 2000, the Compensation Committee reviewed Dr.
Shaffer's salary in relation to the salaries of other chief executive officers
at emerging biopharmaceutical companies and Inspire's achievement of certain
goals during 1999, including: continued research and development efforts with
respect to its product candidates; the private placement of equity securities;
and the establishment of a strategic collaboration with Genentech, Inc.
8
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended, which is
referred to in this proxy statement as the Code, generally disallows a federal
income deduction to public companies for certain compensation over $1,000,000
paid to the company's chief executive officer and four other most highly
compensated executive officers. Qualifying performance-based compensation will
not be subject to the deduction limit if certain requirements are met. The
Compensation Committee intends to review the potential effects of Section 162(m)
periodically and intends to structure its stock option grants and certain other
equity-based awards in a manner that is intended to avoid disallowances under
Section 162(m) of the Code unless the Compensation Committee believes that such
compliance would not be in the best interests of Inspire or its stockholders.
Respectfully submitted,
Compensation Committee
Terrance G. McGuire
Jesse Treu
9
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Messrs. McGuire and
Treu, each of whom served on the Compensation Committee of the Board of
Directors during 2000. Mr. McGuire has served as Chairman of the Board since
October 1993 and previously served as Treasurer from October 1993 until March
2000. Otherwise, no member of the Compensation Committee was at any time during
2000, or formerly, an officer or employee, and no member of the Compensation
Committee had any relationship with Inspire requiring disclosure under Item 404
of Regulation S-K under the Exchange Act of 1934, as amended. No executive
officer has served as a director or member of the Compensation Committee (or
other committee serving an equivalent function) of any other entity, one of
whose executive officers served as a director of or member of the Compensation
Committee.
RELATIVE STOCK PERFORMANCE
Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on our common stock to the cumulative total
return of the NASDAQ Stock Market (U.S.) Index and the NASDAQ Biotechnology
Stock Index for the period commencing August 3, 2000, the commencement of
trading on the NASDAQ Market, and ended December 31, 2001:
[BAR CHART APPEARS HERE WITH THE FOLLOWING PLOT POINTS]
03-Aug-00 30-Sept-00 31-Dec-00
Inspire Pharmaceuticals, Inc. $100.00 $250.00 $217.19
NASDAQ Stock Market (U.S.) 100.00 97.28 65.20
NASDAQ Biotechnology 100.00 117.06 96.52
The graph assumes $100 was invested on August 3, 2000, in our common stock, and
each of the indices, and that dividends were reinvested. The comparisons in the
graph are required by the Securities and Exchange Commission and are not
intended to forecast or be indicative of possible future performance of our
common stock.
10
PROPOSAL NO. 2 -- RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has appointed PricewaterhouseCoopers LLP as the
independent auditors for the fiscal year 2001. Stockholder ratification of the
appointment is not required by our Amended and Restated Certificate of
Incorporation, as amended, or By-laws or otherwise, but the Board has decided to
ascertain the position of the stockholders on the appointment. The Board of
Directors will reconsider the appointment if it is not ratified. The affirmative
vote of a majority of the shares voted at the meeting is required for
ratification.
One or more representatives of PricewaterhouseCoopers LLP is expected to
attend the Annual Meeting and have an opportunity to make a statement and/or
respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS OR NOMINEES
The name, age and position of each person who is currently serving as an
executive officer and who served as an executive officer in 2000, and who is not
a director or a nominee is listed below, followed by summaries of their
background and principal occupations. Executive officers are elected annually,
and serve at the discretion of the Board of Directors.
Name Age Position
- ---------------------------------- ----- ----------------------------------------------
Donald J. Kellerman, Pharm.D. 46 Senior Vice President, Development
Benjamin R. Yerxa, Ph.D 35 Vice President, Discovery
Richard M. Evans, Ph.D. 41 Vice President, Pharmaceutical Development
Janet L. Rideout, Ph.D. 62 Former Senior Vice President, Discovery
Mary Beth Bennett 43 Vice President, Operations and Communications
Joseph K. Schachle 36 Vice President, Marketing and Sales
Donald J. Kellerman, Pharm.D. has served as our Senior Vice President,
Development since May 2000. He is responsible for all of our clinical
development programs and regulatory affairs. Dr. Kellerman joined us in July
1999 as Vice President, Development. Before joining us, Dr. Kellerman spent 11
years with Glaxo Wellcome, from August 1997 to July 1999 and from April 1988 to
August 1996, where he was director of various groups, including International
OTC, U.S. Infectious Diseases, and the Inhaled Corticosteroid Group. He was
clinical project leader for Flovent(R) from first U.S. clinical studies in 1989
to approval in 1996. From September 1996 to August 1997, he was Vice President
of Clinical Research at Sepracor, Inc., where he was project leader for the
Xopenex(R) NDA team. Before Glaxo Wellcome, Dr. Kellerman worked at E.R. Squibb
and Sons, Inc. and Ciba-Geigy Corporation on several cardiovascular products.
Dr. Kellerman holds a Doctor of Pharmacy and Bachelor of Science degree from
the University of Minnesota.
Benjamin R. Yerxa, Ph.D. has served as our Vice President, Discovery since
February 2000 and as a Co-Chairman of our Scientific Advisory Board since June
2000. Dr. Yerxa joined us in August 1995 and previously held several positions,
including Senior Director of Preclinical Programs. He supervises both the
biology and the chemistry discovery teams and all early preclinical drug
development activities. He created a new strategic opportunity for us by
developing the concept of ophthalmic uses for our core P2Y2 technology. Before
being promoted to the position of Senior Director of Preclinical Programs in
December 1999, Dr. Yerxa was Director of Preclinical Programs and, before that,
Senior Research Chemist. While in chemistry, he served as the preclinical
project leader for INS365. As a Senior Research Chemist his work focused on
designing and synthesizing new P2Y receptor agonists. Before joining us, from
October 1993 to August 1995, Dr. Yerxa was a Research Scientist at Burroughs
Wellcome Co. Dr. Yerxa worked at Biophysica, Inc. for over two years,
synthesizing radiocontrast agents. He developed scale-up procedures for the
industrial production of Oxilan(R), a marketed imaging product. Dr. Yerxa
received his Ph.D. in Organic Chemistry from UC Irvine in 1993.
11
Richard M. Evans, Ph.D. has served as our Vice President, Pharmaceutical
Development since June 2000. Dr. Evans joined us in October 1996 and has
previously held several positions. He is responsible for all activities related
to the manufacture, formulation development and testing of our products in
development and for the identification and development of relevant drug delivery
technologies. He also serves as Vice-Chair of the Inhalational Technology Focus
Group for the American Association of Pharmaceutical Scientists. Prior to
joining Inspire, Dr. Evans was Section Manager of Inhalational Dosage Forms at
Rhone-Poulenc Rorer. He has over 10 years experience in the pharmaceutical
industry, including positions at Delphi and Rhone-Poulenc Rorer. Dr. Evans holds
both a Bachelor of Pharmacy degree and a Doctorate in Pharmaceutical Chemistry,
in the field of inhalation drug delivery, from the Welsh School of Pharmacy,
University of Wales College of Cardiff.
Janet L. Rideout, Ph.D. served as our Senior Vice President, Discovery
from February 2000 until her retirement in September 2000. Dr. Rideout joined
us in 1995 as Director of Chemistry and was promoted to Senior Director,
Discovery, in June 1996 and Vice President, Discovery in January 1998. Before
joining us, Dr. Rideout spent more than 26 years at Burroughs Wellcome Co.,
ultimately serving as Associate Division Director of Organic Chemistry. Dr.
Rideout holds more than 40 patents, most notably as co-inventor for AZT
(Retrovir(R)). She is a member of three divisions of the American Chemical
Society, the New York Academy of Sciences, the American Association for the
Advancement of Science, and a Life Fellow and past member of the Board of
Directors of the American Institute of Chemists. She received the Distinguished
Chemist Award from the North Carolina Institute of Chemists in 1994. Dr.
Rideout received her Ph.D. in organic chemistry from the State University of
New York at Buffalo.
Mary Beth Bennett has served as our Vice President, Operations and
Communications since March 2001. As Vice President, Operations and
Communications, she manages a variety of areas for Inspire, including Human
Resources, Communications, Investor Relations and Operations. Mrs. Bennett comes
to Inspire from Glaxo Wellcome, where she served as Worldwide Director for R&D
Human Resources Effectiveness, Planning and Communication. Prior to her role in
human resources, Mrs. Bennett held various roles during her 13 years at Glaxo
Wellcome, including Worldwide Director for R&D Communications, Director of R&D
Operations and Department Head of Comparative Medicine. She also led
communications for major company redesign initiatives, and for the Glaxo
Wellcome merger. Mrs. Bennett holds a BA in Behavioral Science from National
Louis University and an MBA from Duke University.
Joseph K. Schachle joined us in April 2001 as our Vice President, Marketing
and Sales. Mr. Schachle is responsible for establishing a limited, high-value
marketing and sales infrastructure in North America to handle Inspire's
commercial efforts in various indications. Mr. Schachle has 12 years of industry
experience in marketing and sales at major pharmaceutical companies, having been
directly involved in the successful launch of more than a half-dozen major
products. Most recently, he served as Director of Marketing at GlaxoSmithKline
in the respiratory therapeutic area, with overall responsibility for the launch
of Advair(TM) for asthma in the United States. Over his nine-year tenure at
GlaxoSmithKline, Mr. Schachle held various positions in sales, marketing and new
product planning. These responsibilities included brand management of the CNS
products Imitrex(R), Amerge(R) and Wellbutrin SR(R) and the HIV products
Epivir(R), Retrovir(R) and Mepron(R). Prior to joining GlaxoSmithKline he was
with The Upjohn Company (now Pharmacia). Mr. Schachle holds a BBA in Marketing
from James Madison University and an MBA from Old Dominion University.
12
EXECUTIVE COMPENSATION
The following table shows, for the fiscal years ended December 31, 2000 and
1999, the annual and long-term compensation we paid to our (i) chief executive
officer, (ii) our four most highly compensated executive officers who were
serving at December 31, 2000, and (iii) one additional highly compensated
executive officer who was no longer serving as an executive officer at December
31, 2000 (collectively, the "named executive officers"). Following the rules of
the Securities and Exchange Commission, the compensation described in the table
does not include medical, group life insurance or some other benefits which are
available generally to all of our salaried employees.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
----------------------------------------- -------------
Other Annual Shares
Salary Bonus Compensation Underlying
Name and Principal Position Year ($) ($) ($) Options (#)
- ------------------------------------------------ ------ ----------- ---------- -------------- -------------
Christy L. Shaffer, Ph.D. ...................... 2000 $223,300 $50,000 -- 114,285
President, Chief Executive Officer and Director 1999 192,800 40,000 -- --
Gregory J. Mossinghoff ......................... 2000 184,820 50,000 -- 85,714
Chief Business Officer, Senior Vice President, 1999 139,667 42,000 -- 71,429
Secretary and Treasurer
Janet L. Rideout, Ph.D. ........................ 2000 153,437 3,873 -- --
Former Senior Vice President, Discovery 1999 138,417 42,600 -- 102,857
Donald J. Kellerman, Pharm.D. .................. 2000 171,050 50,000 -- 71,428
Senior Vice President, Development 1999 -- -- -- --
Benjamin R. Yerxa, Ph.D. ....................... 2000 154,041 40,000 -- 85,714
Vice President, Discovery 1999 -- -- -- --
Richard M. Evans, Ph.D. ........................ 2000 144,266 40,000 -- 28,571
Vice President, Pharmaceutical Development 1999 -- -- -- --
OPTION GRANTS IN 2000
The following grants of stock options were made to the named executive
officers during the fiscal year ended December 31, 2000.
Potential Realizable
% of Total Value of Assumed
Number of Options Annual Rates of Stock
Securities Granted to Price Appreciation for
Underlying Employees Exercise or Option Term (2)
Options In Fiscal Base Price Expiration ---------------------------
Name Granted (1) Year ($/Share) Date 5% 10%
- --------------------------------------- ------------- ----------- ------------ ----------- ----------- -------------
Christy L. Shaffer, Ph.D. ............. 114,285 15.3% $ 12.00 02/16/10 $862,852 $2,186,272
Gregory J. Mossinghoff ................ 85,714 11.4% 12.00 02/16/10 647,141 1,639,709
Janet L. Rideout, Ph.D. ............... -- -- -- -- -- --
Donald J. Kellerman, Pharm.D. ......... 71,428 9.5% 12.00 02/16/10 539,281 1,336,418
Benjamin R. Yerxa, Ph.D. .............. 85,714 11.4% 12.00 02/16/10 647,141 1,639,709
Richard M. Evans, Ph.D. ............... 28,571 3.8% 12.00 02/16/10 215,711 546,563
- --------
(1) All options in this table have been granted pursuant to our Amended and
Restated 1995 Stock Plan, as amended. The options have exercise prices equal
to the fair market value on the date of the grant. Each option is
exercisable as to one-quarter (1/4) of the shares underlying such option at
any time after February 28, 2001, as to one-forty-eighth (1/48) of the
shares each month for 35 months thereafter and as to the remaining shares on
the last month of vesting.
(2) The potential realizable value is calculated based on the fair market value
of our common stock on the date of the grant. These amounts only represent
certain assumed rates of appreciation established by the
13
SEC. There can be no assurance that the amounts reflected in this table or
the associated rates of appreciation will be achieved.
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END STOCK OPTION VALUES
The following table provides certain information as to certain stock
options exercisable by the named executive officers for the fiscal year ended
December 31, 2000, and the value of such options held by them at December 31,
2000, measured in terms of the closing price of our common stock on The NASDAQ
Stock Market on December 29, 2000 which was $26.063 per share.
Number of Value of Unexercised
Shares Unexercised Options at In-the-Money Options At
Acquired December 31, 2000 December 31, 2000
On Exercise Value ----------------------------- ----------------------------
Name (#) Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------- ------------- ----------------- ------------- --------------- ------------- --------------
Christy L. Shaffer, Ph.D. 40,000 $ 502,600.00 227,933 246,350 $5,885,247 $5,009,471
Gregory J. Mossinghoff ... -- -- 64,332 164,247 1,648,546 3,202,342
Janet L. Rideout, Ph.D. .. 124,057 1,193,787.40 0 51,429 0 1,318,794
Donald J. Kellerman,
Pharm.D. ............... -- -- 15,300 117,556 835,912 2,167,979
Benjamin R. Yerxa, Ph.D. . 1,000 28,377.50 42,245 118,852 1,090,281 2,058,488
Richard M. Evans, Ph.D ... 29,952 374,766.54 10,657 45,104 275,725 829,222
- --------
(1) Based on the fair market value of the common stock as established by the
Board of Directors.
14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of March 28, 2001, except as
otherwise indicated, by: (i) each of our directors; (ii) the named executive
officers; (iii) all beneficial owners of greater than 5% of our outstanding
common stock; and (iv) all of our directors and executive officers as a group
(unless otherwise indicated, all of such shares of common stock are held
beneficially and of record).
Number of Shares Percentage
Name and Address of Beneficial Owner Beneficially Owned Beneficially Owned(1)
- -------------------------------------------------------------------------- -------------------- ----------------------
Burr, Egan, Deleage Funds(2)
Burr, Egan, Deleage & Co.
One Post Office Square
Suite 3800, Boston, MA 02109 ............................................. 2,879,179 11.2%
Domain Partners Entities(3)
Domain Associates, L.L.C.
One Palmer Square, Suite 515
Princeton, N.J. 08542 .................................................... 2,594,985 10.1%
Medical Science Partners Entities(4)
c/o Medical Science Partners
161 Worcester Road, Suite 301
Framingham, MA 01701 ..................................................... 2,460,935 9.6%
InterWest Partners Entities(5)
InterWest Investors VII, LP
3000 Sand Hill Road
Bldg. 3, Suite 255
Menlo Park, CA 94025 ..................................................... 1,707,143 6.7%
Richard Boucher, M.D.(6) ................................................. 588,167 2.3%
Richard M. Evans, Ph.D.(7) ............................................... 54,733 *
Donald J. Kellerman, Pharm.D.(8) ......................................... 53,875 *
Andre L. Lamotte, Sc.D.(9) ............................................... 2,465,155 9.6%
H. Jefferson Leighton, Ph.D.(10) ......................................... 312,220 1.2%
Terrance G. McGuire(11) .................................................. 2,881,399 11.2%
Gregory J. Mossinghoff(12) ............................................... 102,594 *
Janet L. Rideout, Ph.D.(13) .............................................. 235,869 *
Christy L. Shaffer, Ph.D.(14) ............................................ 332,609 1.3%
W. Leigh Thompson, M.D., Ph.D., D.Sc.(15) ................................ 30,005 *
Jesse I. Treu, Ph.D.(16) ................................................. 2,597,205 10.1%
Benjamin R. Yerxa, Ph.D.(17) ............................................. 84,358 *
All directors and executive officers as a group (13 persons)(18) ......... 9,743,189 37.0%
- --------
* Less than one percent
(1) Applicable percentage of ownership is based on 25,666,390 shares of common
stock outstanding on March 28, 2001.
(2) The number of shares and the percentage of outstanding shares reported are
based upon information disclosed by Burr, Egan, Deleage & Co. on a Schedule
13G filed with the Securities and Exchange Commission on February 8, 2001.
The number includes 2,849,237 shares held by Alta V Limited Partnership and
29,942 shares held by Customs House Partners. Alta V Management Partners,
L.P. is the
15
general partner of Alta V Limited Partnership. Burr, Egan, Deleage & Co.
directly or indirectly provides investment advisory services to various
venture capital funds, including Alta V Limited Partnership and Customs
House Partners. See footnote (11) below.
(3) The number of shares and the percentage of outstanding shares reported are
based upon information disclosed by Domain Partners III, L.P. and DP III
Associates, L.P. on a Schedule 13G filed with the Securities and Exchange
Commission on February 13, 2001. The number includes 2,514,456 shares held
by Domain Partners III, L.P. and 80,529 shares held by DP III Associates,
L.P. One Palmer Square Associates III, L.P. is the general partner of
Domain Partners III, L.P. and DP III Associates, L.P. See footnote (16)
below.
(4) Includes 1,339,177 shares held by Medical Science Partners II, L.P.,
161,758 shares held by Medical Science I Co-Investment, L.P. and 960,000
shares held by NMT New Medical Technologies. Medical Science Partners is
the general partner of Medical Science Partners II, L.P. and the co-manager
of Medical Science I Co-Investment, L.P. See footnote (9) below.
(5) The number of shares and the percentage of outstanding shares reported are
based upon information disclosed by InterWest Partners VII, L.P., InterWest
Investors VII, L.P. and InterWest Management Partners VII LLC. on a
Schedule 13G filed with the Securities and Exchange Commission on February
12, 2001. It includes 1,633,054 shares held by InterWest Partners VII, L.P.
and 74,089 shares held by InterWest Investors VII, L.P. InterWest
Management Partners VII, LLC is the general partner of InterWest Partners
VII, L.P. and InterWest Investors VII, L.P.
(6) Includes 504,953 shares of common stock and 83,214 shares of common stock
underlying stock options granted to Dr. Boucher which will have vested
within sixty days after March 28, 2001. Does not include 36,785 shares of
common stock underlying stock options granted to Dr. Boucher which will not
have vested within sixty days after March 28, 2001.
(7) Includes 31,152 shares of common stock and 23,581 shares of common stock
underlying stock options granted to Dr. Evans which will have vested within
sixty days after March 28, 2001. Does not include 32,180 shares of common
stock underlying stock options granted to Dr. Evans which will not have
vested within sixty days after March 28, 2001.
(8) Includes 10,300 shares of common stock and 43,575 shares of common stock
underlying stock options granted to Dr. Kellerman which will have vested
within sixty days after March 28, 2001. Does not include 89,281 shares of
common stock underlying stock options granted to Dr. Kellerman which will
not have vested within sixty days after March 28, 2001.
(9) Includes 1,339,177 shares held by Medical Science Partners II, L.P.,
161,758 shares held by Medical Science I Co-Investment, L.P. and 960,000
shares held by NMT New Medical Technologies. Medical Science Partners is
the general partner of Medical Science Partners II, L.P. and the co-manager
of Medical Science I Co-Investment, L.P. Dr. Lamotte is a managing general
partner of Medical Science Partners. Dr. Lamotte is a director of NMT New
Medical Technology. Dr. Lamotte disclaims beneficial ownership of Medical
Science II Co-Investment, L.P.'s shares. Dr. Lamotte disclaims beneficial
ownership of NMT New Medical Technology's shares except to the extent of
his proportional pecuniary interest therein. Includes 1,000 shares of
common stock and 2,220 shares of common stock underlying stock options
granted to Dr. Lamotte which will have vested within sixty days after March
28, 2001. Also includes 1,000 shares of common stock held in the name of
Dr. Lamotte's minor son. Does not include 3,494 shares of common stock
underlying stock options granted to Dr. Lamotte which will not have vested
within sixty days after March 28, 2001.
(10) Includes 310,000 shares of common stock and 2,220 shares of common stock
underlying stock options granted to Dr. Leighton which will have vested
within sixty days after March 28, 2001. Does not include 3,494 shares of
common stock underlying stock options granted to Dr. Leighton which will
not have vested within sixty days after March 28, 2001.
(11) Includes 2,849,237 shares held by Alta V Limited Partnership, 29,942 shares
held by Customs House Partners and 2,220 shares of common stock underlying
stock options granted to Mr. McGuire which will have vested within sixty
days after March 28, 2001. Alta V Management Partners, L.P. is the general
partner of Alta V Limited Partnership. Burr, Egan, Deleage & Co. directly
or indirectly provides investment advisory services to various venture
capital funds, including Alta V Limited Partnership and
16
Customs House Partners. See footnote (2) above. Mr. McGuire is a general
partner of Alta V Management Partnership, L.P. In his capacity as a general
partner of the Alta V Management Partners, L.P., Mr. McGuire may be deemed
to share voting and investment powers with respect to the shares held by
Alta V Limited Partnership. Mr. McGuire disclaims beneficial ownership of
all of such shares held by Alta V Limited Partnership except to the extent
of his proportional pecuniary interest therein. Mr. McGuire also disclaims
beneficial ownership to all of the shares of Customs House Partners. Does
not include 3,494 shares of common stock underlying stock options granted
to Mr. McGuire which will not have vested within sixty days after March 28,
2001.
(12) Includes 102,594 shares of common stock underlying stock options granted to
Mr. Mossinghoff which will have vested within sixty days after March 28,
2001. Does not include 125,975 shares of common stock underlying stock
options granted to Mr. Mossinghoff which will not have vested within sixty
days after March 28, 2001.
(13) Includes 184,440 shares of common stock owned by Dr. Rideout and 51,429
shares of common stock underlying stock options granted to Dr. Rideout
which will have vested within 60 days of March 28, 2001.
(14) Includes 40,999 shares of common stock and 291,610 shares of common stock
underlying stock options granted to Dr. Shaffer which will have vested
within sixty days after March 28, 2001. Does not include 182,673 shares of
common stock underlying stock options granted to Dr. Shaffer which will not
have vested within sixty days after March 28, 2001.
(15) Includes 27,785 shares of common stock and 2,220 shares of common stock
underlying stock options granted to Dr. Thompson which will have vested
within sixty days after March 28, 2001. Does not include 3,494 shares of
common stock underlying stock options granted to Dr. Thompson which will
not have vested within sixty days after March 28, 2001.
(16) Includes 2,514,456 shares held by Domain Partners III, L.P., 80,529 shares
held by DP III Associates, L.P. and 2,220 shares of common stock
underlying stock options granted to Dr. Treu which will have vested within
sixty days after March 28, 2001. One Palmer Square Associates III, L.P. is
the general partner of One Palmer Square Associates III, L.P. and DP III
Associates, L.P. Jesse I. Treu, Ph.D. is a general partner of One Palmer
Square Associates III, L.P. See footnote (3) above. Dr. Treu shares voting
and investment power with respect to these shares and disclaims beneficial
ownership of such shares except to the extent of his proportional interest
therein. Does not include 3,494 shares of common stock underlying stock
options granted to Dr. Treu which will not have vested within sixty days
after March 28, 2001.
(17) Includes 53,055 shares of common stock and 31,303 shares of common stock
underlying stock options granted to Dr. Yerxa which will have vested within
sixty days after March 28, 2001. Does not include 87,068 shares of common
stock underlying stock options granted to Dr. Yerxa which will not have
vested within sixty days after March 28, 2001.
(18) Includes an aggregate of 638,406 shares of common stock underlying stock
options granted to all of the directors and executive officers as a group
which will have vested within sixty days after March 28, 2001. Also
contains 5,000 shares of common stock held by an executive officer who was
not a named executive officer.
CERTAIN TRANSACTIONS
We entered into a Consultation and Scientific Advisory Board Agreement with
Dr. Richard Boucher, a member of the Board of Directors, in March 1995. The
terms of the agreement provide that Dr. Boucher will serve as the Chairman of
our Scientific Advisory Board for an initial term of three years. The agreement
automatically renews itself thereafter for successive one year terms unless
terminated by either party. Under the agreement, Dr. Boucher also agreed to
consult on the field of airway diseases and the development of low molecular
weight molecules for therapeutic or diagnostic purposes. During the last fiscal
year, we paid Dr. Boucher $50,000 for his services. In addition, he received an
option to purchase 5,714 shares of our common stock at the exercise price of
$12.00 per share as partial compensation for his service.
17
In March 1995, we entered into a Sponsored Research Agreement with The
University of North Carolina at Chapel Hill. Under the agreement, we fund a
research program relating to uses of the P2Y receptor family. Dr. Boucher is
currently serve as one of the three principal investigators with respect to the
research. Inspire paid approximately $48,168 during the last fiscal year for the
research program under the agreement.
In March 2001, we entered into an Exclusive Option Agreement with Adenosine
Therapeutics, LLC. Pursuant to the agreement, we will conduct studies with two
compounds of Adenosine to evaluate the potential utility of the compounds for
certain ophthalmic applications. In addition, we paid Adenosine an option fee of
$100,000 to obtain an exclusive option to acquire an exclusive, worldwide
license to such compounds, or other compounds of Adenosine, for such
applications. Dr. H. Jefferson Leighton, a member of our Board of Directors,
currently also serves as a director of Adenosine and owns approximately 2.5% of
the total currently issued and outstanding shares of common stock of Adenosine.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Under the securities laws of the United States, directors, executive
officers and any person holding more than ten percent (10%) of our common stock
are required to report their ownership of common stock and any changes in that
ownership to the Securities and Exchange Commission on Forms 3, 4 and 5. Based
on our review of the copies of such forms we have received, all required reports
have been timely filed, except for two Forms 4 filed by Dr. Yerxa reporting a
total of four transactions, a Form 4 filed by Dr. Lamotte reporting two
transactions and a Form 4 reporting one transaction filed by each of Drs.
Shaffer, Evans and Kellerman.
CHANGE IN INDEPENDENT PUBLIC ACCOUNTANTS
In November 1999, the company dismissed KPMG LLP as its independent
accountants. The former independent accountants' report did not contain an
adverse opinion, a disclaimer of opinion or any qualifications or modifications
related to uncertainty, limitation of audit scope or application of accounting
principles. The former independent accountants' report does not cover any of our
financial statements in our Annual Report on Form 10-K for the year ended
December 31, 2000. There were no disagreements with the former public
accountants on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure regarding our financial
statements up through the matter of the disagreement in connection with their
report. In November 1999, Inspire retained PricewaterhouseCoopers LLP as its
independent public accountants. The decision to retain PricewaterhouseCoopers
LLP was approved by resolution of the Board of Directors. Before retaining
PricewaterhouseCoopers LLP, the company had not consulted with
PricewaterhouseCoopers LLP regarding accounting principles.
OTHER MATTERS
Management knows of no matters other than those described above that are to
be brought before the meeting. However, if any other matter properly comes
before the meeting, the persons named in the enclosed proxy will vote the proxy
in accordance with their best judgment on the matter.
We will bear the cost of preparing and mailing the enclosed material. We
may use the services of our officers and employees (who will receive no
additional compensation) to solicit proxies. We intend to request banks and
brokers holding shares of our common stock to forward copies of the proxy
materials to those persons for whom they hold shares and to request authority
for the execution of proxies. We will reimburse banks and brokers for their
out-of-pocket expenses. We have retained our transfer agent, Computershare Trust
Company, Inc., to aid in the solicitation, at an estimated cost of $1,600.
Certain information contained in this Proxy Statement relating to the
occupations and security holdings of our directors and officers is based upon
information received from the individual directors and officers.
We will furnish, without charge, a copy of our Annual Report on Form 10-K
for the year ended December 31, 2000, including financial statements and
schedules thereto, to each of our stockholders of record on April 2, 2001, upon
written request made to Gregory J. Mossinghoff, Senior Vice President and Chief
Business Officer, at our offices located at 4222 Emperor Boulevard, Suite 470,
Durham, North Carolina 27703-8466. A reasonable fee will be charged for copies
of requested exhibits.
18
Appendix A
INSPIRE PHARMACEUTICALS, INC.
AUDIT COMMITTEE CHARTER
Adopted: January 25, 2001
Organization
The Audit Committee is a committee of the Board of Directors. The Committee
shall be comprised of at least three directors, each of whom is independent of
management and the company. Members of the Audit Committee shall be considered
independent if they have no relationship to the company that may interfere with
the exercise of their independence from management and the company. One director
who is not considered independent under NASD Rule 4200 may be appointed to the
Audit Committee if the Board of Directors, under exceptional and limited
circumstances, determines that such director's membership on the Audit Committee
is required by the best interests of the company and its stockholders, and the
Board of Directors discloses the nature of the relationship and the reasons for
the Board's determination in the next annual proxy statement. All Audit
Committee members will be financially literate, and at least one member will
have accounting or related financial management expertise.
Purpose
The purpose of the Audit Committee is to assist the Board of Directors in
fulfilling its duty to the stockholders with respect to corporate accounting,
reporting practices, and financial reports. In so doing, it is the
responsibility of the Audit Committee to maintain a posture of effective and
independent oversight and to promote free and open communication among the
directors, the independent auditors and the financial management of the company.
Meetings
The Committee shall meet at least two times per year and maintain minutes
of each meeting. The chairperson shall report the matters discussed at each
meeting to the Board of Directors.
Responsibilities
Annual Audit
1. Recommend to the Board of Directors the independent auditors to be selected
to audit the financial statements of the company and any divisions and
subsidiaries it may have from time to time.
2. On the annual basis, obtain from the independent auditors a written
statement delineating all relationships between the auditor and the
company, as required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees); discuss with the auditors
any disclosed relationships or professional services that may impact on the
objectivity or independence of the auditors; and take, or recommend that
the Board of Directors take, appropriate action to ensure the independence
of the outside auditors.
3. Have a clear understanding with the independent auditors that they are
ultimately accountable to the Board of Directors and the Audit Committee,
as representatives of the stockholders, who have the ultimate authority to
select, evaluate, and if appropriate, terminate their services.
4. Meet with the independent auditors and financial management of the company
to review and approve the scope and timing of the annual audit and the
quarterly reviews for the current year and the independent auditor's
compensation.
A-1
5. At the conclusion of the annual audit, discuss with the independent
auditors and the financial management of the company the results of the
audit, including recommendations of the independent auditors and
management's response. Attention should be given to the following matters:
(a) the company's audited financial statements and related footnotes;
(b) matters which are required to be communicated to the Audit Committee
under SAS 61, including:
o Methods used to account for significant unusual transactions,
o The effect of significant accounting policies in controversial or
emerging areas for which there is a lack of authoritative guidance or
consensus,
o The process used by management in formulating particularly sensitive
accounting estimates and basis for the auditor's conclusions regarding
the reasonableness of those estimates, and
o Disagreements with management over the application of accounting
principles, the basis for management's accounting estimates, or the
disclosures in the financial statements;
(c) the adequacy and effectiveness of the accounting and financial controls
of the company. The Committee should elicit any recommendations for the
improvement of such internal controls or particular areas where new or
more detailed controls or procedures are desirable. Particular emphasis
should be given to the adequacy of internal controls to expose any
payments, transactions, or procedures that might be deemed illegal or
otherwise improper;
(d) the status of recommendations made in previous years by the independent
auditors; and
(e) recent or impending changes in accounting principles and disclosure
practices.
6. Meet separately with the independent auditors, without members of
management present, to discuss the following matters:
(a) the independent auditors' evaluation of the company's financial and
accounting personnel,
(b) the cooperation that the independent auditors received during the
course of the audit,
(c) the independent auditors' evaluation of the degree of aggressiveness or
conservatism of the company's accounting principles, the underlying
estimates, and the significant judgments made by management in
preparing financial statements,
(d) the clarity of the financial disclosures, and
(e) any other matters the auditors wish to raise.
7. Report the results of the annual audit to the Board of Directors. Such
report may include the attendance of the independent auditors at a full
meeting of the Board of Directors or, alternatively, the attendance of
other directors at the Audit Committee meeting at which the results of the
annual audit are presented.
Financial Reports
8. Review the proxy statement and the annual report on Form 10-K prior to its
submission to the SEC; determine that the independent auditors are
satisfied that the disclosures in these reports are consistent with the
company's audited financial statements.
A-2
9. Determine that, prior to filing, interim financial statements included in
quarterly reports on Form 10-Q have been reviewed by the independent
auditors under the standards of SAS 71 Interim Financial Review. The
objective of this review is not to perform an audit but rather to provide
the auditors with a basis for reporting whether material modifications
should be made for the interim financial statements to conform with GAAP.
The report of the auditor on this review must be filed with the Form 10-Q
report.
10. With the assistance of management, prepare an annual Audit Committee Report
for inclusion in the company's proxy statement and in the annual report on
Form 10-K stating whether: (1) the Audit Committee has reviewed and the
discussed the audited financial statements with management; (2) the Audit
Committee has discussed with the independent auditors the matters required
to be discussed by SAS 61; (3) the Audit Committee has received the written
disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1 and discussed with the
independent auditors the independent auditors' independence; and (4) based
on the review and discussions in (1)-(3) above, the Audit Committee
recommended to the Board of Directors that the audited financial statements
be included in the company's annual report on Form 10-K for the last fiscal
year for filing with the Securities and Exchange Commission. The annual
report must also state the name of each member of the company's Audit
Committee.
11. Assure that management includes in the proxy statement for the annual
meeting of stockholders a statement that the Audit Committee has a formal
written Charter; include a copy of this Charter as an appendix to the proxy
statement every three years, or sooner in the event of a significant
amendment to the Charter.
Other Duties
12. Obtain the full Board of Directors' approval of this Charter, and review
and reassess this Charter at least annually.
13. Beginning at such time as an internal audit function is warranted, review
and concur with management's appointment of a director of internal audit,
and include the internal audit function in this Charter.
14. Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
A-3
INSPIRE PHARMACEUTICALS, INC.
Revocable Proxy for 2001 Annual Meeting
This Proxy is Solicited on Behalf of The Board of Directors
The undersigned hereby appoints Christy L. Shaffer, Ph.D. and Gregory J.
Mossinghoff or any one of them, each with power of substitution, his or her
full and lawful agents and proxies to vote all shares of common stock which the
undersigned would possess if personally present at the Annual Meeting of
Stockholders (including all adjournments thereof) of Inspire Pharmaceuticals,
Inc. to be held on Friday, June 1, 2001, at 9:00 a.m. at the North Carolina
Biotechnology Center, 15 T. W. Alexander Drive, Research Triangle Park,
North Carolina 27709-3547.
STOCKHOLDERS ARE REQUESTED TO SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
The Board of Directors recommends a vote FOR each of the proposals listed
below and more fully described in the Notice of Annual Meeting of Stockholders
and proxy statement for the meeting (receipt of which is hereby acknowledged).
Unless otherwise specified, the vote represented by this proxy will be cast FOR
proposals 1, 2, and 3.
1. Election of Directors.
Nominees: Christy L. Shaffer, Ph.D. and Gregory J. Mossinghoff
(Mark Only One Box)
[ ] FOR both nominees (except as indicated below) [ ] WITHHOLD authority to vote for all nominees listed above
INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name on the space provided.
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2. Ratification of the selection of PricewaterhouseCoopers LLP as auditors for the fiscal year ending December 31, 2001.
[ ] For [ ] Against [ ] Abstain
3. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting.
PLEASE CHECK THE BOX below if you, and any persons related or unrelated to
you at the same address, are currently receiving multiple copies of the proxy
statement and Annual Report and You wish to cease future deliveries of the proxy
statement and Annual Report for the shares represented hereby. PLEASE NOTE you
will continue to receive a proxy card and be able to vote the shares represented
hereby and can revoke this consent at any time by following the procedures set
forth in the proxy statement.
[ ] I hereby CONSENT to discontinue delivery of the proxy statement and Annual
Report for the shares represented hereby.
PLEASE SIGN HERE exactly as your name appears on this proxy. When shares
are held by joint tenants, each joint tenant should sign. When signing as
attorney, executor, administrator, trustee, guardian or other fiduciary, please
give full title as such. If the signer is a corporation, please sign in full
corporate name by a duly authorized officer; if a partnership, please sign in
the partnership name by an authorized person.
Dated:
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Signature of Stockholder
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Signature if held jointly