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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
ISIS PHARMACEUTICALS, INC
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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ISIS PHARMACEUTICALS, INC.
2292 FARADAY AVENUE
CARLSBAD, CA 92008
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 6, 1997
TO THE STOCKHOLDERS OF ISIS PHARMACEUTICALS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Isis
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), will be held on
Friday, June 6, 1997, at 2:00 p.m. at the Company's offices at 2292 Faraday
Avenue, Carlsbad, California 92008, for the following purposes:
1. To elect three directors to serve for a three-year term and until
their successors are duly elected and qualified.
2. To ratify the selection of Ernst & Young LLP as independent auditors
of the Company for its fiscal year ending December 31, 1997.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 14, 1997,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment thereof.
By Order of the Board of Directors
B. Lynne Parshall
Secretary
Carlsbad, California
April 28, 1997
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
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ISIS PHARMACEUTICALS, INC.
2292 Faraday Avenue
Carlsbad, CA 92008
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of Isis
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held on June 6, 1997, at 2:00 p.m. (the
"Annual Meeting"), or at any adjournment thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting. The Annual Meeting will
be held at the Company's offices at 2292 Faraday Avenue, Carlsbad, California
92008.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, facsimile, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services.
The Company intends to mail this proxy statement and accompanying proxy
card on or about April 28, 1997, to all stockholders entitled to vote at the
Annual Meeting.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1998 Annual Meeting of Stockholders must be received by the Company no
later than December 22, 1997 in order to be included in the proxy statement and
proxy relating to such annual meeting.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April
14, 1997 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 14, 1997, the Company had outstanding and entitled to
vote 26,352,117 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 2292
Faraday Avenue, Carlsbad, California 92008, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
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PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and Bylaws provide that
the Board of Directors shall be divided into three classes, each class
consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Vacancies on the Board may
be filled only by persons elected by a majority of the remaining directors. A
director elected by the Board to fill a vacancy (including a vacancy created by
an increase in the Board) shall serve for the remainder of the full term of the
class of directors in which the vacancy occurred and until such director's
successor is elected and qualified.
The Board of Directors is presently composed of nine members with one
vacancy. Professor Christoph Hohbach resigned from the Board on December 13,
1996, at which time Stephen K. Carter was elected by the Board to fill the
vacancy created by Professor Hohbach's resignation. Dr. Carter resigned from the
Board on March 17, 1997, and the Board has not yet elected a replacement to fill
the vacancy created by his resignation.
There are three directors in the class whose term of office expires in
1997. All of the nominees for election to this class, Alan C. Mendelson, William
R. Miller and Christopher F. O. Gabrieli, are currently directors of the
Company. If elected at the Annual Meeting, each of the nominees would serve
until the 2000 annual meeting and until his successor is elected and has
qualified, or until his earlier death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the Annual Meeting. Shares
represented by executed proxies will be voted, if authority to do so is not
withheld, for the election of the three nominees named below. In the event that
any nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as the Board of Directors may propose. Each person nominated for
election has agreed to serve if elected, and the Board has no reason to believe
that any nominee will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2000 ANNUAL MEETING
Alan C. Mendelson, age 49, has served as a director of the Company since
January 1989. He was Secretary of the Company from January 1989 to November
1991. He has been a partner of Cooley Godward LLP, counsel to the Company
("Cooley Godward"), since January 1980. Mr. Mendelson also served as Acting
General Counsel of Cadence Design Systems, Inc., an electronic design automation
software company, from November 1995 to June 1996. He is also a director of
CoCensys, Inc., a biopharmaceutical company, Acuson Corporation, an ultrasound
equipment manufacturer, and Elexsys International, Inc., a manufacturer of
interconnect products used in advanced electronic equipment.
William R. Miller, age 68, has served as a director of the Company since
March 1991. In January 1991, he retired as Vice Chairman of the Board of
Directors of Bristol-Myers Squibb Company ("Bristol-Myers Squibb"), a
pharmaceutical company, which position he had held since 1985. He is Vice
Chairman of the Board of Trustees of the Cold Spring Harbor Laboratory. Mr.
Miller is also Chairman of the Board of SIBIA Neurosciences, Inc. ("SIBIA") and
of Vion Pharmaceuticals, Inc., both biotechnology companies. He is a director of
ImClone Systems, Inc., St. Jude Medical Inc., Transkaryotic Therapies, Inc.,
Westvaco Corporation, and Xomed Surgical Products, Inc., and is an Advisory
Director of Chugai Pharmaceuticals, Inc.
Christopher F. O. Gabrieli, age 37, has served as a director of the Company
since May 1994. He was a founder of the Company and previously served as a
director from January 1989 to May 1992. He is currently a manager of Deer II &
Co. LLC and of Deer III & Co. LLC, the general partners of Bessemer Venture
Partners II L.P. and Bessemer Venture Partners III L.P., affiliated venture
capital partnerships (collectively "Bessemer"),
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where he has worked since 1986. He is a director of Opta Food Ingredients, a
supplier of food ingredients, Epix Medical, Inc. ("Epix Medical"), a developer
of magnetic resonance imaging contrast agents, and several privately held health
care companies.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1998 ANNUAL MEETING
Stanley T. Crooke, M.D., Ph.D., age 52, was a founder of the Company and
has been its Chief Executive Officer and a director since January 1989 and
served as its President from January 1989 to May 1994. He was elected Chairman
of the Board in February 1991. From 1980 until January 1989, Dr. Crooke was
employed by SmithKline Beckman Corporation, a pharmaceutical company, most
recently as President of Research and Development of Smith Kline & French
Laboratories. Dr. Crooke is a director of SIBIA, GeneMedicine, Inc., a
biotechnology company, and Epix Medical and is an adjunct professor of
pharmacology at the Baylor College of Medicine and the University of California,
San Diego.
Mark B. Skaletsky, age 48, has served as a director since January 1989.
Since May 1993, Mr. Skaletsky has been President and Chief Executive Officer of
GelTex Pharmaceuticals, Inc., a biotechnology company. From April 1988 to
February 1993, Mr. Skaletsky was employed by Enzytech, Inc. ("Enzytech"), a
biotechnology company, in a variety of positions, including Chairman of the
Board and Chief Executive Officer from April 1988 to February 1993; Enzytech was
acquired by Alkermes, Inc. in 1992. Mr. Skaletsky is a director of Charles River
Labs, the Biotechnology Industry Organization ("BIO"), and the Massachusetts
Biotechnology Council.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
Daniel L. Kisner, M.D., age 50, has served as a director of the Company
since March 1991, Chief Operating Officer of the Company since February 1993 and
President since May 1994. He was Executive Vice President of the Company from
March 1991 until May 1994. From December 1988 until March 1991, he was Division
Vice President of Pharmaceutical Development for Abbott Laboratories, a
pharmaceutical company. He is also a director of Anesta Corporation, a drug
delivery company.
Larry Soll, Ph.D., age 54, has served as a director of the Company since
July 1992. He was Chairman of the Board of Directors of Synergen, Inc.,
("Synergen"), a biopharmaceutical company, which was acquired by Amgen, Inc.,
from 1986 to December 1994 and Chief Executive Officer of Synergen from April
1993 to May 1994. Dr. Soll is a trustee of Global Health Sciences, a closed-end
investment fund, and was a director of ImmuLogic Pharmaceutical Corporation, a
biotechnology company, from March 1993 to February 1997.
Joseph H. Wender, age 52, has served as a director of the Company since
January 1994. Mr. Wender is currently Senior Director of the Financial
Institutions Group at Goldman, Sachs & Co., an investment banking firm. He
joined Goldman, Sachs & Co. in 1971 and became a General Partner of that firm in
1982 and a Limited Partner in 1992.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1996, the Board of Directors held
five meetings. The Board has an Audit and Financing Committee, a Compensation
Committee and a Nominating Committee.
The Audit and Financing Committee recommends engagement of the Company's
independent auditors and approves services performed by such auditors, including
the review and evaluation of the Company's accounting system and its system of
internal controls in connection with the Company's annual audit. The Audit and
Financing Committee also reviews the Company's balance sheet, statement of
operations, cash flows and stockholders' equity for each interim period, and any
changes in accounting policy that have occurred during the interim period, and
assists the management of the Company in reviewing financing opportunities for
the Company in making recommendations to the Board, and in implementing
financing projects as approved by the Board. The Audit and Financing Committee
is composed of Messrs. Mendelson (Chairman), Wender and Skaletsky and met eight
times during the fiscal year ended December 31, 1996.
The Compensation Committee makes recommendations concerning executive
salaries and incentive compensation, awards stock options, bonus stock and
rights to purchase restricted stock under the Company's 1989 Stock Option Plan
(the "1989 Plan"), administers the Company's Employee Stock Purchase Plan and
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otherwise determines executive compensation levels and performs such other
functions regarding compensation as the Board may delegate. The Compensation
Committee is composed of Messrs. Skaletsky (Chairman), Miller and Wender and met
three times during the fiscal year ended December 31, 1996. Alan C. Mendelson
resigned from the Compensation Committee on May 31, 1996, at which time Joseph
H. Wender was elected.
The Nominating Committee interviews, evaluates, nominates and recommends
individuals for membership on the Company's Board of Directors and committees
thereof. The Nominating Committee will consider nominees recommended by
stockholders. The Nominating Committee is composed of two non-employee
directors: Mr. Mendelson and Dr. Soll and did not meet during the year.
During the fiscal year ended December 31, 1996, all directors, other than
Professor Hohbach, attended at least 80% of the meetings of the Board and the
committees on which they served, held during the period for which they were
directors or committee members.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten percent of the Company's Common Stock to file with
the Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations from its officers
and directors that no other reports were required, during the fiscal year ended
December 31, 1996, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent stockholders were complied
with.
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PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's financial statements since its inception in 1989.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Board will reconsider whether
or not to retain that firm. Even if the selection is ratified, the Board in its
discretion may direct the appointment of a different independent accounting firm
at any time during the year if the Board determines that such a change would be
in the best interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Ernst & Young LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of
the Company's Common Stock as of February 28, 1997 by: (i) each director and
nominee for director; (ii) each executive officer named in the Summary
Compensation Table under "Executive Compensation--Compensation of Executive
Officers;" (iii) all directors and executive officers of the Company as a group;
and (iv) all those known by the Company to be beneficial owners of more than
five percent of its Common Stock.
BENEFICIAL OWNERSHIP(1)
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BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF TOTAL (2)
---------------- ---------------- --------------------
Boehringer Ingelheim International GmbH..........................2,408,607 9.2
Binger Strasse 173
D-55216 Ingelheim Am Rhein
GERMANY
Novartis AG (3)..................................................2,257,053 8.6
CH-4002, Basel
SWITZERLAND
Christopher F. O. Gabrieli (4)...................................1,680,944 6.3
83 Walnut Street
Wellesley Hills, MA 02181
Bessemer Venture Partners (5)....................................1,536,465 5.7
1025 Old Country Road
Westbury, NY 11590
Stephen K. Carter (6)............................................ -- --
Stanley T. Crooke(7).............................................1,212,348 4.6
Daniel L. Kisner (8)............................................. 284,666 1.1
Alan C. Mendelson (9)............................................ 23,627 *
William R. Miller (10)........................................... 42,500 *
Mark B. Skaletsky (11)........................................... 28,500 *
Larry Soll (12).................................................. 40,750 *
Joseph H. Wender (13)............................................ 43,750 *
B. Lynne Parshall (14)........................................... 153,744 *
All directors and executive officers as a group (10 persons)(15).3,510,829 12.8
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* Less than one percent
(1) This table is based upon information supplied by directors, executive
officers and principal stockholders and Schedule 13Ds and 13Gs filed with
the SEC. Unless otherwise indicated in the footnotes to this table and
subject to community property laws where applicable, each of the
stockholders named in this table has sole voting and investment power with
respect to the shares indicated as beneficially owned.
(2) Applicable percentage ownership is based on 26,306,352 shares of Common
Stock outstanding on February 28, 1997.
(3) Novartis AG, a corporation registered in Switzerland, is the successor of
Ciba-Geigy Limited in which 2,219,000 shares are currently registered. All
shares of Common Stock of the Company that are owned by Novartis AG as
successor of Ciba-Geigy Limited will be transferred to Novartis Produkte
AG, a corporation
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registered in Switzerland and a wholly-owned subsidiary of Novartis AG.
Includes 38,053 shares held by Novartis Corporation, a New York
corporation (formerly known as Ciba-Geigy Corporation), that is a
wholly-owned subsidiary of Novartis AG.
(4) Includes 759,566 shares owned by Bessemer Venture Partners II L.P. ("BVP
II"), 335,485 shares held of record by Bessemer Venture Partners III L.P.
("BVP III") and 350 shares held of record by the Gabrieli Family
Foundation ("GFF"). Also includes 434,639 shares issuable upon exercise of
Class A Warrants held of record by BVP III and 1,123 shares issuable upon
exercise of Class A Warrants held of record by GFF. Mr. Gabrieli is a
manager of Deer II & Co. LLC, the general partner of BVP II, and of Deer
III & Co. LLC, the general partner of BVP III, and disclaims beneficial
ownership of the shares held of record by or issuable to BVP II and BVP
III except to the extent of his respective interests therein. Mr. Gabrieli
is a trustee of GFF and disclaims beneficial ownership of the shares held
of record by or issuable to GFF. Also includes an aggregate of 1,610
shares and an aggregate of 5,165 shares issuable upon exercise of Class A
Warrants held of record by seven stockholders who have agreed to vote such
shares as directed by BVP III; Mr. Gabrieli also disclaims beneficial
ownership of such shares. Also includes 2,246 shares issuable upon
exercise of Class A Warrants held by Mr. Gabrieli and 25,916 shares
issuable upon exercise of options held by Mr. Gabrieli that are
exercisable on or before April 29, 1997.
(5) Includes 759,566 shares held of record by BVP II, 335,485 shares held of
record by BVP III and 434,639 shares issuable upon exercise of Class A
Warrants held of record by BVP III. Also includes an aggregate of 1,610
shares and an aggregate of 5,165 shares issuable upon exercise of Class A
Warrants held of record by seven stockholders who have agreed to vote such
shares as directed by BVP III; BVP III disclaims beneficial ownership of
such shares.
(6) Excludes shares owned by Boehringer Ingelheim International GmbH ("BII").
Dr. Carter does not, directly or indirectly, have or share voting power or
investment power over the shares held by BII and, therefore, disclaims
beneficial ownership of such shares. Dr. Carter resigned from the
Company's Board on March 17, 1997.
(7) Includes 96,642 shares issuable upon exercise of options held by Dr.
Crooke that are exercisable on or before April 29, 1997 and 6,206 shares
issuable upon exercise of options held by his wife that are exercisable on
or before April 29, 1997.
(8) Includes 280,666 shares issuable upon exercise of options held by Dr.
Kisner that are exercisable on or before April 29, 1997 and 2,000 shares
each issuable upon exercise of options which Dr. Kisner transferred to his
son and daughter that are exercisable on or before April 29, 1997.
(9) Includes 310 shares held in a trust by Mr. Mendelson's wife for his son,
Jonathan, 310 shares held in trust by Mr. Mendelson's wife for his son,
David, and 18,000 shares issuable upon exercise of options held by Mr.
Mendelson that are exercisable on or before April 29, 1997. Mr. Mendelson
disclaims beneficial ownership of the shares held in trust by his wife for
his sons.
(10) Includes 2,500 shares issuable upon exercise of options held by Mr. Miller
that are exercisable on or before April 29, 1997.
(11) Includes 7,500 shares issuable upon exercise of options held by Mr.
Skaletsky that are exercisable on or before April 29, 1997.
(12) Includes 40,750 shares issuable upon exercise of options held by Dr. Soll
that are exercisable on or before April 29, 1997.
(13) Includes 16,750 shares issuable upon exercise of options held by Mr.
Wender that are exercisable on or before April 29, 1997.
(14) Includes 133,612 shares issuable upon exercise of options held by Ms.
Parshall that are exercisable on or before April 29, 1997.
(15) Includes shares described in the notes above, as applicable.
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EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
In the fiscal year ended December 31, 1996, each director of the Company or
one of its affiliates who is not otherwise an employee of the Company or any
affiliate (a "Non-Employee Director") received a fee of $15,000 (except that Dr.
Carter did not receive a fee for 1996); no additional compensation is paid for
attendance at Board or committee meetings. For 1996, the total compensation paid
to Non-Employee Directors was $105,000. The members of the Board of Directors
are also reimbursed for their expenses incurred in connection with attendance at
Board meetings in accordance with Company policy.
Each Non-Employee Director also receives stock option grants under the 1992
Non-Employee Directors' Stock Option Plan (the "Directors' Plan"). Only
Non-Employee Directors are eligible to receive options under the Directors'
Plan. Option grants under the Directors' Plan are non-discretionary. On July 1
of each year (or the next business day should such date be a weekend or
holiday), each Non-Employee Director is automatically granted under the
Directors' Plan an option to purchase 4,000 shares of Common Stock of the
Company. In addition, each new Non-Employee Director is granted an option to
purchase 18,000 shares of the Company's Common Stock upon initial election to
the Board of Directors. The exercise price of all such stock options granted is
equal to 100% of the fair market value of the Common Stock on the date such
option is granted.
In 1996, the Company granted options to purchase an aggregate of 46,000
shares of stock to Non-Employee Directors pursuant to automatic grants under the
Directors' Plan, including a grant of 18,000 shares granted to Dr. Carter upon
being elected to the Board of Directors. The fair market value of the Common
Stock on the date of these grants (and the exercise price of such options) was
$18.625 per share for all but the option to purchase 18,000 shares granted to
Dr. Carter, the exercise price of which was $18.00 per share (based in each case
on the closing sales price reported in the NASDAQ National Market on the date of
grant). As of February 28, 1997, none of these options had vested.
COMPENSATION OF EXECUTIVE OFFICERS AND OTHER EMPLOYEES
The following table shows for the fiscal years ending December 31, 1996,
1995 and 1994, certain compensation paid by the Company, including salary,
bonuses, stock options, and certain other compensation, to its Chief Executive
Officer and each of its two other most highly compensated executive officers
whose total annual salary and bonus exceeded $100,000 in the year ended December
31, 1996:
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SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
---------------------------------------- ----------------
Securities
Other Annual Underlying All Other
Name and Salary Bonus Compensation Options Compensation
Principal Position Year ($) ($) ($)(1)(2) (#) ($) (3)
- -------------------- ---- ------- ------- ------------ ---------------- ------------
Stanley T. Crooke 1996 280,344 98,119 0 40,000 0
Chairman and 1995 262,000 116,001 0 50,000 0
Chief Executive Officer 1994 244,860 123,409 0 0 0
Daniel L. Kisner 1996 257,280 77,185 0 25,000 0
President and 1995 242,719 92,112 0 30,000 0
Chief Operating Officer 1994 226,840 97,995 0 90,000 (4) 0
B. Lynne Parshall 1996 236,171 70,851 0 16,000 0
Executive Vice President 1995 214,743 67,745 0 85,000 (5) 0
& Chief Financial Officer 1994 195,834 72,072 0 0 0
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(1) As permitted by rules promulgated by the SEC, no amounts are shown where
such amounts constitute perquisites and do not exceed the higher of 10% of
the sum of the amount in the Salary and Bonus column and $50,000.
(2) None of the persons listed in the table held restricted stock as of
December 31, 1996.
(3) Does not include excess group term life insurance premiums which do not
exceed, for any individual, $3,000 and which were paid on the same basis
as was offered to all salaried employees.
(4) Represents the 90,000 options granted in connection to Dr. Kisner's
promotion to President on 5-24-94.
(5) Includes 60,000 options granted in connection to Ms. Parshall's promotion
to Executive Vice President on 12-14-95.
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STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 1989 Plan.
As of February 28, 1997, options to purchase a total of 6,132,558 shares had
been granted and were outstanding under the 1989 Plan and options to purchase
957,791 shares remained available for grant thereunder.
The following tables show for the fiscal year ended December 31, 1996
certain information regarding options granted to, exercised by and held at year
end by each of the executive officers named in the Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
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Potential Realizable
Number of % of Total Value at Assumed
Securities Options Annual Rates of Stock
Underlying Granted to Price Appreciation for
Options Employees Base Aggregate Option Term (3)
Granted in Fiscal Price Dollar Expiration -----------------------
Name (#)(1) Year(2) ($/Sh) Value Date 5% ($) 10% ($)
- ------------------- ---------- ---------- ------ ----------- ------------- --------- -----------
Stanley T. Crooke 40,000 3.10 13.125 525,000 12-31-05 330,055 836,359
Daniel L. Kisner 25,000 1.94 13.125 328,125 12-31-05 206,285 522,725
B. Lynne Parshall 16,000 1.24 13.125 210,000 12-31-05 132,022 334,544
- ----------
(1) Options granted in 1996 vest over a four-year period: 25% after the first
year and 2.08% per month thereafter.
(2) Based on options to purchase an aggregate of 1,291,715 shares granted in
1996. Represents the number of options granted under the 1989 Plan in 1996
and is not necessarily indicative of the number of options that will be
granted in the future.
(3) The potential realizable value is calculated based on the term of the
option at its time of grant.
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13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options at
Options at FY-End
Shares FY-End(#) ($)(2)
Shares Value ---------------------- ------------------------------
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) (1) Unexercisable Unexercisable
- ------------------- -------------- ------------------ ---------------------- ------------------------------
Stanley T. Crooke 38,500 $680,688 14,750 /250 $139,756 /$2,369
1,642 /0 $15,558 /$0
23,500 /6,500 $209,620 /$57,980
0 /25,000 $0 /$288,500
18,000 /12,000 $202,500 /$135,000
9,583 /15,417 $134,162 /$215,838
9,583 /15,417 $134,162 /$215,838
0 /40,000 $0 /$195,000
Daniel L. Kisner 40,000 $789,259 170,000 /0 $2,938,571 /$0
4,097 /70 $41,994 /$718
0 /50,000 $0 /$437,500
17,625 /4,875 $171,844 /$47,531
0 /25,000 $0 /$303,125
17,500 /7,500 $196,875 /$84,375
45,000 /45,000 $489,375 /$489,375
5,750 /9,250 $80,500 /$129,500
5,750 /9,250 $80,500 /$129,500
0 /25,000 (3) $0 /$121,875
B. Lynne Parshall 36,937 $469,553 18,666 /1,334 $177,327 /$12,673
59,728 /0 $731,668 /$0
0 /47,500 (4) $0 /$415,625
14,099 /3,901 $137,465 /$38,035
0 /25,000 $0 /$303,125
12,000 /8,000 $135,000 /$90,000
1,750 /9,251 $24,500 /$129,514
1,167 /6,167 $16,338 /$86,338
12,000 /48,000 $64,500 /$258,000
0 /16,000 $0 /$78,000
- ----------
(1) Fair market value of the Company's Common Stock on the date of exercise
minus the exercise price.
(2) Fair market value of the Company's Common Stock at December 31, 1996
($18.00) multiplied by the applicable number of shares minus the aggregate
exercise price of the options for such number of shares.
(3) Includes 2,000 options, each, transferred to Dr. Kisner's son and
daughter.
(4) Includes 2,000 options, each, transferred to Ms. Parshall's daughters.
Does not include options for 2,500 in aggregate transferred to Ms.
Parshall's father and brother for which Ms. Parshall disclaims beneficial
ownership.
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14
COMPENSATION COMMITTEE REPORT(1)
The Compensation Committee of the Board of Directors (the "Committee")
consists of Mark B. Skaletsky (Chairman), William R. Miller and Joseph H.
Wender, none of whom are currently officers or employees of the Company. The
Committee is responsible for setting and administering the Company's policies
governing employee compensation and administering the Company's employee benefit
plans, including the 1989 Plan and the Employee Stock Purchase Plan. The
Committee evaluates the performance of management and determines compensation
policies and levels. The full Board of Directors reviews the Committee's
recommendations regarding the compensation of executive officers.
The Company's executive compensation programs are designed to attract and
retain executives capable of leading the Company to meet its business objectives
and to motivate them to enhance long-term stockholder value. Annual compensation
for the Company's executive officers consists of three elements: a cash salary,
a cash incentive bonus and stock option grants.
As in previous years, the Committee reviewed historical and current salary,
bonus and stock award information for other comparable companies in similar
geographic areas and at similar stages of growth and development. The group of
comparable companies is not necessarily the same as the companies included in
the market indices included in the performance graph in this Proxy Statement.
The Committee also reviewed a variety of industry surveys which provided
additional information about short- and long-term executive compensation. The
Committee reviews this information throughout the year when and as it becomes
available. Based in part on this information, the Committee generally sets
salaries, including that of the Chief Executive Officer, at levels comparable to
competitive companies of comparable size in similar industries. The Company's
management by objective bonus program is tied to both individual and Company
performance. The total size of the bonus pool is based upon the Company's
performance in meeting its performance objectives for the year, taking into
account changes discussed and agreed to by the Committee during the course of
the year. Individual bonus amounts are based on a combination of corporate
performance and individual performance.
The Company uses its stock option program to further align the interests of
stockholders and management by creating common incentives related to the
possession by management of a substantial economic interest in the long-term
appreciation of the Company's Common Stock. New options are granted to existing
members of management on an annual basis to provide a continuing financial
incentive. The size of option grant is related to the executive's position and
performance in the previous year.
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
executive officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code. The Compensation Committee has determined that stock options granted under
the Company's 1989 Plan with an exercise price of at least equal to the fair
market value of the Company's Common Stock on the date of grant will be treated
as performance-based compensation.
1996 was a year in which the Company continued to advance development of
its drug candidates. It continued progress in Phase III clinical trials for ISIS
2922, its compound to treat cytomegalovirus-induced retinitis in AIDS patients.
The Company also completed Phase IIa trials of ISIS 2302, a compound that
inhibits intercellular adhesion molecule-1 (ICAM-1) in Crohn's disease, and
continued progress in Phase II in four other indications: ulcerative colitis;
psoriasis; rheumatoid arthritis; and renal transplant rejection. In addition,
the Company continued preclinical development in other compounds to treat cancer
and Hepatitis C.
Isis entered Phase I clinical trials on ISIS 3521/CPG64128A, one of its two
cancer compounds targeting solid tumor cancers, in February of 1996, and began
Phase I clinical trials on ISIS 5132/CPG69846A, the other cancer compound, in
April 1996. Both trials have continued to make progress. The Company also filed
an IND on ISIS 5320 to treat HIV in October 1996 and initiated clinical trials
in early 1997.
- --------
(1) The material in this report is not "soliciting material," is not deemed
filed with the SEC and is not to be incorporated by reference in any filing
of the Company under the Securities Act of 1933, as amended (the "1933
Act"), or the Exchange Act.
12
15
Isis' research continues to proceed well. The Company's patenting strategy
continued to bear fruit with 42 additional patents issued in 1996. The Company's
relationships with its collaborative partners have continued positively. In
1996, the Company achieved the milestone of the completion of its Phase IIa
Crohn's disease study and received a $10 million milestone payment in the form
of an equity investment from BII. In October and December of 1996, the Company
also accessed the line of credit provisions of the agreement with BII to draw
down $16.2 million of the $40 million line of credit available.
The Company's continued focus on financial controls resulted in a favorable
operating expense profile at a level which was significantly lower than the
Company's 1996 original budget.
The Company continued its focus on manufacturing scale-up by forging
successful relationships with industry vendors which, in combination with Isis'
efforts, significantly decreased the cost and increased the scale of
manufacturing in 1996 while also improving the quality and precision of
purification and analytical methods.
The Compensation Committee approved a 10.6% salary increase for Dr. Crooke
for 1997. As a matter of course, the Company does not expect that it will be
able to achieve all the objectives set for the year; and in 1996, the Company
met or exceeded most of its performance objectives. The Committee continues to
believe that a significant cash bonus program to reward performance is an
appropriate method of executive compensation, with relatively more modest
increases in base compensation. The Committee approved a bonus of $98,119 for
Dr. Crooke, which was 100% of the 35% bonus guideline for the CEO under the
Company's management by objective (MBO) program, based on the Company performing
at the level of 100% of its achievement of objectives, and Dr. Crooke performing
at 100% of his achievement of personal objectives. In January 1997, the
Committee also approved an option for 22,500 shares of stock for Dr. Crooke,
which is within the guidelines for the CEO under Isis' annual stock option grant
program.
Mark B. Skaletsky, Chairman
William R. Miller
Joseph H. Wender
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, during the fiscal year ended December 31, 1996, the
Company's Compensation Committee was composed of Messrs. Skaletsky, Miller and
Wender. Mr. Mendelson resigned from the Compensation Committee on May 31, 1996,
at which time Mr. Wender replaced him. Mr. Mendelson was Secretary of the
Company from January 1989 to November 1991. He has been a partner of Cooley
Godward since 1980. As of February 29, 1997, Mr. Mendelson beneficially owned
23,627 shares of Common Stock (see "Security Ownership of Certain Beneficial
Owners and Management"). Fees paid by the Company to Cooley Godward during the
fiscal year ended December 31, 1996 for legal services rendered to the Company
did not exceed five percent of Cooley Godward's gross revenues for such fiscal
year.
13
16
PERFORMANCE MEASUREMENT COMPARISON(1)
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG ISIS PHARMACEUTICALS
THE NASDAQ COMPOSITE INDEX (TOTAL RETURN)
THE CHICAGO BOARD OF OPTIONS BIOTECHNOLOGY INDEX
[GRAPH]
Dec. 1991 Dec. 1992 Dec. 1993 Dec. 1994 Dec. 1995 Dec. 1996
Isis 100 67 49 29 95 131
NASDAQ Composite Index 100 116 134 130 183 224
CBO-Biotechnology Index 100 78 58 51 83 79
The above table and chart assume $100 invested on December 31, 1991 in the
Company's Common Stock, the NASDAQ Composite Index (Total Return) and the
Chicago Board of Options Biotechnology Index. Total return assumes reinvestment
of dividends.
- ----------
(1) This Section is not "soliciting material," is not deemed filed with the SEC
and is not to be incorporated by reference in any filing of the Company
under the 1933 Act or the Exchange Act.
14
17
CERTAIN TRANSACTIONS
In 1996, the Company achieved a milestone specified under the terms of
its collaborative agreement with BII. As a result of this accomplishment, in
December 1996, BII purchased 409,000 shares of Common Stock for $10 million in
cash. The Company borrowed $16.2 million under a $40 million line of credit made
available under the terms of its collaborative agreement with BII. The funds
will be used for the purpose of funding research and development costs
associated with the collaboration. Borrowings under the line of credit bear
interest at the seven year US interbanking rate plus 2.0%, determined at the
time each advance is made. Interest payments are due twice each year with
principal repayment due seven years after the advance date. The principal may be
repaid in cash or stock, at the Company's option. If the Company elects to repay
the loan in shares of Isis Common Stock, repayment will be made at a share price
equal to 90% of the average market value over the 20 trading days preceding the
maturity date. The balance under this line of credit as of December 31, 1996 was
$16.2 million.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
B. Lynne Parshall
Secretary
April 28, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 IS AVAILABLE WITHOUT
CHARGE UPON WRITTEN REQUEST TO: B. LYNNE PARSHALL, SECRETARY, ISIS
PHARMACEUTICALS, INC., 2292 FARADAY AVENUE, CARLSBAD, CALIFORNIA 92008.
15
18
ISIS PHARMACEUTICALS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 6, 1997
The undersigned hereby appoints STANLEY T. CROOKE and B. LYNNE PARSHALL,
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of Isis Pharmaceuticals,
Inc. (the "Company") which the undersigned may be entitled to vote at the
Annual Meeting of Stockholders of the Company to be held at the Company's
offices at 2292 Faraday Avenue, Carlsbad, California 92008 on Friday, June 6,
1997 at 2:00 p.m., and at any and all continuations and adjournments thereof,
with all powers that the undersigned would possess if personally present, upon
and in respect of the following matters and in accordance with the following
instructions, with discretionary authority as to any and all other matters that
may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2 AS MORE SPECIFICALLY DESCRIBED
IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL
BE VOTED IN ACCORDANCE THEREWITH.
(Continued on other side) -------------
SEE REVERSE
SIDE
-------------
19
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
ISIS PHARMACEUTICALS, INC.
June 6, 1997
- PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED -
- --------------------------------------------------------------------------------
PLEASE MARK YOUR
A [X] VOTES AS IN THIS
EXAMPLE
FOR all nominees listed at right (except as marked to the contrary below)
PROPOSAL 1: to elect three directors to hold office until the 2000 Annual
Meeting of Stockholders. [ ]
WITHHOLD AUTHORITY to vote for all nominees listed at right. [ ]
To withhold authority to vote for any nominee(s), write such
nominee(s) name(s) below:
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED
BELOW.
NOMINEES: Alan C. Mendelson
William R. Miller
Christopher F.O. Gabrielli
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 2: To ratify the selection of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December 31,
1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please vote, date and promptly return this proxy in the enclosed return
envelope which is postage prepaid if mailed in the United States.
SIGNATURE__________________________________________ DATE__________________
SIGNATURE__________________________________________ DATE__________________
(SIGNATURE IF HELD JOINTLY)
NOTE: Please sign exactly as your name appears hereon. If the stock is
registered in the names of two or more persons, each should sign. Executors,
administrators, trustees, guardians and attorneys-in-fact should add their
titles. If signer is a corporation, please give full corporate name and have a
duly authorized officer sign, include title. If a partnership, please sign in
partnership name by authorized person.
