SciClone Pharmaceuticals DEF 14A 2009
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant ¨
Check the appropriate box:
SciClone Pharmaceuticals, Inc.
(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):
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
By order of the Board of Directors
FRIEDHELM BLOBEL. PH.D.
President and Chief Executive Officer
Foster City, California
May 1, 2009
TABLE OF CONTENTS
This Proxy Statement is furnished in connection with the solicitation by the Board of Directors (the Board) of SciClone Pharmaceuticals, Inc., a Delaware corporation (we, SciClone or the Company), of proxies in the enclosed form for use in voting at our 2009 Annual Meeting of Stockholders (the Annual Meeting) to be held at the Marriott San Mateo/San Francisco Airport at 1770 S. Amphlett Blvd., San Mateo, California 94402 on Tuesday, June 9, 2009, at 10:00 a.m., local time, and any adjournment or postponement thereof.
Definitive copies of this Proxy Statement, the enclosed proxy card and our 2008 Annual Report to Stockholders are expected to first be sent or given to stockholders on or about May 1, 2009.
Only stockholders of record as of the close of business on April 24, 2009 will be entitled to vote at the Annual Meeting and any adjournment thereof. As of that time, we had 46,219,562 shares of Common Stock outstanding, all of which are entitled to vote with respect to all matters to be acted upon at the Annual Meeting. Each stockholder of record as of that date is entitled to one vote for each share of Common Stock held by him or her. Our Bylaws provide that a majority of all of the shares of the stock entitled to vote, whether present in person or represented by proxy, shall constitute a quorum for the transaction of business at the meeting. Except as noted below, votes for and against, abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum.
A broker non-vote occurs when a broker submits a proxy card with respect to shares held in a fiduciary capacity (typically referred to as being held in street name) but declines to vote on a particular matter because the broker has not received voting instructions from the beneficial owner. Under the rules that govern brokers who are voting with respect to shares held in street name, brokers have the discretion to vote such shares on routine matters, but not on non-routine matters. Routine matters include the election of directors, increases in authorized common stock for general corporate purposes and ratification of auditors. Non-routine matters include approval of and amendments to stock plans.
Solicitation of Proxies
We will bear the cost of soliciting proxies. In addition to soliciting stockholders by mail through our employees, we will request banks, brokers and other custodians, nominees and fiduciaries to solicit customers for whom they hold our stock and will reimburse them for their reasonable, out-of-pocket costs. We may use the services of our officers, directors and others to solicit proxies, personally or by telephone, without additional compensation.
Voting of Proxies
The shares represented by the proxies received, properly voted by phone, via the Internet or properly marked, signed, dated and not revoked will be exercised at the Annual Meeting. All shares represented by a proxy will be voted, and where a proxy specifies a stockholders choice with respect to any matter to be acted upon, the shares will be voted in accordance with that specification. If no choice is indicated on the proxy, the shares will be voted in favor of the proposal, and as the proxy holders deem advisable on other matters that may come before the meeting. A stockholder giving a proxy has the power to revoke his or her proxy at any time before it is exercised by delivering to SciClone (Attention: Friedhelm Blobel, Ph.D.) a written instrument revoking the proxy or a duly executed proxy with a later date or by attending the meeting and voting in person.
ELECTION OF DIRECTORS
At the Annual Meeting, stockholders will elect eight (8) directors to serve until the next Annual Meeting of Stockholders and until their respective successors are elected and qualified. The nominees for election by the stockholders to those eight positions are all current members of the Board of Directors: Dean S. Woodman, Friedhelm Blobel, Robert Camerini, Richard J. Hawkins, Trevor M. Jones, Gregg A. Lapointe, Ira D. Lawrence and Jon S. Saxe. If elected, the nominees will serve as directors until our Annual Meeting of Stockholders in 2010 and until their successors are elected and qualified. If any of the nominees declines to serve or becomes unavailable for any reason, or if a vacancy occurs before the election (although we know of no reason to anticipate that this will occur), the proxies may be voted for such substitute nominees as we may designate.
Assuming a quorum is present, the eight nominees receiving the highest number of affirmative votes will be elected as directors. Abstentions and broker non-votes will each be counted as present for purposes of determining a quorum but will not have any effect on the vote.
The names of the nominees, their ages as of the date of this proxy statement and certain other information about them are set forth below:
Dean S. Woodman was elected Chairman of our Board of Directors in February 2005, and has been a Director since August 2000. Mr. Woodman was an investment banker for over four decades. From July 1989 to June 1999, he was a Managing Director of Furman Selz, an investment banking firm acquired in 1999 by ING Barings L.L.C. Mr. Woodman was a Managing Director in the investment banking group of Hambrecht & Quist (now JPMorgan Chase) from October 1984 to March 1988. He was a founding partner of Robertson Colman
Stephens & Woodman, an investment banking firm, in 1978, and of Woodman Kirkpatrick & Gilbreath, an investment banking firm, in 1982. Mr. Woodman worked in the investment banking division of Merrill Lynch for 23 years where he spent 16 years as director of West Coast corporate finance until 1978. He is currently a director of both MarineMax, Inc. (NYSE: HZO) and Medallion Bank, a wholly-owned subsidiary of Medallion Financial Corp (NASDAQ: TAXI).
Friedhelm Blobel, Ph.D. has served as our President, Chief Executive Officer and as a Director since June 2006. From July 2000 to 2006, Dr. Blobel was President, CEO and a Director of Gryphon Therapeutics, Inc., a South San Francisco based biopharmaceutical company. Prior to joining Gryphon Therapeutics in July 2000, Dr. Blobel spent more than two decades as an executive with the Hoechst Group and the Boehringer Mannheim Group including responsibilities in the areas of diabetes and in vitro diagnostics. His roles at these companies included Group President of several product divisions, Chief Technology Officer and General Manager in Tokyo, Japan of a marketing and sales joint venture between Boehringer and Yamanouchi Pharmaceuticals (now Astellas Pharma, Inc.), Senior Vice President of Research and Development Diabetes and Patient Care in Mannheim, Germany as well as in Indianapolis, Indiana. Dr. Blobel earned his doctorate degree (Dr.rer.nat.; a Ph.D. equivalent) with a dissertation in Biochemistry and Microbiology from the University of Hohenheim, Germany and holds an advanced degree in Chemistry from the University of Stuttgart, Germany.
Roberto Camerini, M.D. has served as a Director since March 2009. Dr. Camerini has served since April 2000 as the Head of Clinical Research II Worldwide Drug Development for Sigma-Tau Industrie Farmaceutiche Riunite S.p.A., a wholly-owned subsidiary of Sigma-Tau Finanzaria S.p.A., a privately-held pharmaceutical company based in Italy. From 1993 to 1998, Dr. Camerini served as Project Leader Clinical Pharmacology for Serono S.p.A and from 1991 to 1993 as Medical Researcher for Abbott Laboratories S.pA. He is a co-founder of, and has served as a member of the Board of Directors of, the Italian Network for Tumor Biotherapy since 2005. Dr. Camerini has a degree cum laude in medicine and an advanced degree in liver and metabolic diseases, both from Sapienza University of Rome, Italy.
Richard J. Hawkins has served as a Director since October 2004. Mr. Hawkins serves as the Chairman and CEO of LabNow, Inc., a privately-held company he founded in September 2003 that develops lab-on-a-chip sensor technology to be used in point-of-care diagnostic testing systems. From 1992 to 2000, Mr. Hawkins co-founded and served as Chairman of Sensus Drug Development, which developed and received regulatory approval for SOMAVERT®, a growth hormone antagonist approved for the treatment of acromegaly and now marketed by Pfizer in both the United States and Europe. In 1982, Mr. Hawkins founded Pharmaco, a clinical research organization (CRO) that in 1991 was merged with the predecessor of PPD-Pharmaco, one of the largest CROs in the world today. Mr. Hawkins graduated cum laude with a B.S. in Biology from Ohio University.
Trevor M. Jones, Ph.D., C.B.E. has served as a Director since March 2009. Dr. Jones served as the Director General of the Association of the British Pharmaceutical Industry, or ABPI, an association representing the interests of approximately 75 British and international pharmaceutical companies, from 1994 through his retirement in August 2004. From 1987 to 1994, Dr. Jones was a main board director at Wellcome plc, which subsequently merged to ultimately become GlaxoSmithKline plc. Dr. Jones was recognized in the Queens Honors List and holds the title of Commander of the British Empire. He is also a fellow of the Royal Society of Chemistry, a fellow of the Royal Society of Medicine, a fellow of the Royal Pharmaceutical Society, an honorary fellow of the Royal College of Physicians and of its Faculty of Pharmaceutical Medicine and an honorary fellow of the British Pharmacological Society. Dr. Jones is Chairman of the board of directors of ReNeuron Group plc, a UK-based adult stem cell research and development company and Synexus Ltd., a clinical study recruitment and management specialist organization. He is a board member of Allergan, Inc. (NYSE: AGN), a multi-specialty healthcare company, Merlin Biosciences Fund II, a specialized venture investor in life sciences companies, NextPharma Technologies Holdings Ltd., a contract manufacturer in Europe for the pharmaceutical and health care industries, Sigma-Tau Finanziaria S.p.A., and Verona Pharma plc, a biotechnology company dedicated to research in respiratory diseases. Dr. Jones is a founder of the Geneva-based public-private partnership, Medicines for Malaria Venture and a founder and board member of the UK Stem Cell Foundation. He received his bachelor
of pharmacy degree and Ph.D. from the University of London and is currently a visiting professor at Kings College, London.
Gregg Anthony Lapointe has served as a Director since March 2009. Mr. Lapointe has served as Chief Executive Officer of Sigma-Tau Pharmaceuticals, Inc., the U.S. wholly-owned subsidiary of Sigma-Tau Finanziaria S.pA., since April 2008. He served as Chief Operating Officer of Sigma-Tau Pharmaceuticals, Inc. from November 2003 to March 2008. Mr. Lapointe is a Certified Public Accountant in the United States and a Chartered Accountant in Canada. He holds a Bachelor of Commerce degree from Concordia University of Montreal, a Graduate Diploma in Public Accountancy from McGill University of Montreal and an M.B.A. from Duke University.
Ira D. Lawrence, M.D., has served as a Director since June 2005. Dr. Lawrence is Chief Medical Officer and Senior Vice President of Research and Development at Medicis Pharmaceutical Corporation (NYSE: MRX). From June 2005 until May 2006, Dr. Lawrence served as our President and Chief Executive Officer. From 1995 to 2005, Dr. Lawrence was employed with Fujisawa Healthcare, Inc. (subsequently merged with Yamanouchi Pharmaceutical Co. to form Astellas Pharma, Inc.), most recently as Senior Vice President of Research and Development. From 1993 to 1995, Dr. Lawrence served as Vice President of Research and Development at GenDerm Corporation. Dr. Lawrence was the Associate Director of Clinical Studies, Immunology at Fujisawa Healthcare, Inc. from 1991 to 1993. Prior to 1991, Dr. Lawrence practiced internal medicine and allergy/clinical immunology, most recently as the Assistant Chief of Staff at the Veterans Administration Lakeside Medical Center and Assistant Professor at Northwestern University Medical School. Dr. Lawrence earned his M.D. degree, from the Hahnemann Medical College (now Drexel University College of Medicine) and his B.A. from Temple University. Dr. Lawrence completed his internship and residency in internal medicine at Northwestern University and his fellowship at the Division of Allergy and Clinical Immunology at the Johns Hopkins University School of Medicine.
Jon S. Saxe, has served as a Director since August 2000. Mr. Saxe was President of PDL BioPharma, Inc. (formerly Protein Design Labs, Inc.) (NASDAQ: PDLI) from 1995 to early-1999. From 1993 to 1995, Mr. Saxe was President of Saxe Associates, Inc., consultants to venture capital firms and biotechnology, diagnostic, and pharmaceutical companies. He was the President and CEO of Synergen, Inc., a biotechnology company, from 1989 to 1993. Mr. Saxe is former Vice President, Licensing and Corporate Development and Head of Patent Law for Hoffmann-LaRoche Inc., where he worked for almost 30 years. Mr. Saxe received his J.D. from George Washington University School of Law and his LL.M. from New York University School of Law. He serves as a director of other public and private companies, including Durect Corporation (NASDAQ: DRRX). Mr. Saxe also serves as chairman of Entelos, Inc., a company listed on Alternative Investment Market of the London Stock Exchange plc, but not a United States public company.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE.
Each director serves a one-year term that expires at the Annual Meeting. Each of Dr. Camerini, Dr. Jones and Mr. Lapointe were appointed as directors in March 2009 and will have therefore served less than one year as a director prior to the Annual Meeting. The terms of each of John D. Baxter, M.D. and Rolf H. Henel expire at the Annual Meeting and neither Dr. Baxter or Mr. Henel are standing for re-election to the Board of Directors.
The Board of Directors has determined that, as of the Annual Meeting, each of the director nominees, other than Dr. Blobel, our President and Chief Executive Officer, has no relationship which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and is an independent director as defined by the applicable NASDAQ rules.
Dr. Camerini, Dr. Jones and Mr. Lapointe are all affiliates of Sigma Tau Finanzaria, Sp.A., SciClones largest stockholder, which beneficially owns in excess of twenty percent (20%) of SciClones outstanding Common Stock. Accordingly, none of Dr. Blobel, Dr. Camerini, Dr. Jones or Mr. Lapointe qualify as independent directors under the rules and regulations of the Securities and Exchange Commission (the SEC) which govern the composition of SciClones Audit Committee.
In the course of the Board of Directors determination regarding the independence of each non-management director, it considered any transactions, relationships and arrangements as required by the applicable NASDAQ Marketplace Rules and the rules and regulations of the SEC.
Our independent directors meet in regularly scheduled executive sessions at which only independent directors are present. No single director has been designated by the Board to act as the presiding director for such executive sessions.
Board Meetings and Committees
The Board of Directors has:
The Board of Directors held eleven meetings during the year ended December 31, 2008. All then-incumbent directors attended at least 75% of meetings of the Board of Directors and of each committee on which he served.
The following table sets forth the committees of the Board and the members of each committee as of the date that this proxy statement was first mailed to our stockholders:
Audit Committee. The members of the Audit Committee during 2008 were Mr. Saxe (chairman), Mr. Hawkins and Mr. Woodman. Each member of the Audit Committee during 2008 was independent for purposes of both the NASDAQ Marketplace Rules and the rules and regulations of the SEC, as they apply to audit committee members. The Board of Directors has determined that Mr. Woodman is an audit committee financial expert, as defined in the rules and regulations of the SEC.
Under the terms of its written charter, the Audit Committee:
Additional information regarding the Audit Committee may be found in the section entitled Report of the Audit Committee included with this Proxy Statement.
Compensation Committee. The members of the Compensation Committee during 2008 were Mr. Henel (chairman), Dr. Baxter and Mr. Hawkins. Dr. Jones was appointed to the Compensation Committee in March 2009. Each member of the Compensation Committee is independent for purposes of the NASDAQ Marketplace Rules. The Compensation Committee recommends to the full board the salary and bonus earned by the President and Chief Executive Officer, reviews and recommends to the full board salary and bonus levels for other
executive officers, approves stock option grants to executive officers and approves all employment, severance and change-in-control agreements applicable to executive officers. The Compensation Committee may from time to time delegate duties or responsibilities to subcommittees or to one member of the Committee.
Each year, at the request of the Compensation Committee, our President and Chief Executive Officer provides compensation recommendations for each of the executive officers. In 2008, the Compensation Committee engaged Setren, Smallberg & Associates, Inc., an independent compensation consultant, to advise the Committee regarding optimal allocation of the different elements of executive officer compensation and recommended target amounts for each element of compensation. Taking these recommendations together, the Compensation Committee is responsible for determining and approving all compensation for our executive officers. For more information on the responsibilities and activities of the Compensation Committee, including the committees processes for determining executive compensation, see Compensation Discussion and Analysis .
Nominating and Corporate Governance Committee. The members of the Nominating and Corporate Governance Committee during 2008 were Mr. Henel (chairman), Mr. Saxe and Mr. Woodman. Dr. Lawrence was a member until June 2008, when he resigned from the committee following the 2008 Annual Meeting of Stockholders. Dr. Jones was appointed to the Nominating and Corporate Governance Committee in March 2009. Each member of the Nominating and Corporate Governance Committee was independent for purposes of the NASDAQ Marketplace Rules, except Dr. Lawrence, who was a member pursuant to the exceptional and limited circumstances exception to such NASDAQ Marketplace Rules. The Nominating and Corporate Governance Committee considers qualified candidates for nomination for election to the Board of Directors and makes recommendations concerning such candidates, develops corporate governance principles for recommendation to the Board of Directors and oversees the regular evaluation of our directors.
Business Development Committee. The members of the Business Development Committee during 2008 were Mr. Woodman (chairman), Dr. Baxter, Dr. Lawrence and Mr. Saxe. Mr. Lapointe was appointed to the Business Development Committee in March 2009. The primary responsibilities of the Business Development Committee are to review and assess our business development activities, including, recommending to the Board of Directors, as appropriate, new business strategies, such recommendations to include long-term plans for growth and expansion and to review, monitor and recommend to the Board of Directors new business opportunities, including potential mergers, acquisitions, divestitures, investments and other similar transactions.
Scientific Review Committee. In March 2009, the Board created a Scientific Review Committee comprised of Dr. Lawrence (chairman), Dr. Camerini and Mr. Hawkins to:
Committee Charters and Other Corporate Governance Materials
The Board has adopted a written charter for each of the standing committees described above. The Board has also adopted a written Corporate Code of Conduct that applies to all of our officers, directors, employees, contract workers and anyone who conducts business with us. In addition, the Board has adopted written Corporate Governance Guidelines that address the composition of the Board, criteria for Board membership and other Board governance matters. Links to these materials, other than the Business Development Committee Charter and the Scientific Review Committee Charter, are available in the Investor Relations section of our website at www.sciclone.com.
Consistent with its charter, the Nominating and Corporate Governance Committee evaluates and recommends to the Board of Directors director nominees for each election of directors.
In fulfilling its responsibilities, the Nominating and Corporate Governance Committee has approved a Policy Regarding Director Nominations, pursuant to which the Committee considers the following factors in reviewing possible candidates for nomination as director:
The Nominating and Corporate Governance Committees goal is to assemble a Board of Directors that brings a variety of perspectives and skills derived from high quality business and professional experience. Directors should possess the highest personal and professional ethics, integrity and values, and be committed to representing the best interests of our stockholders. They must also have an inquisitive and objective perspective and mature judgment. Director candidates must have sufficient time available in the judgment of the Nominating and Corporate Governance Committee to perform all Board and Committee responsibilities. Directors are expected to prepare for, attend, and participate in all Board and applicable Committee meetings.
Other than the foregoing, there are no stated minimum criteria for director nominees, although the Nominating and Corporate Governance Committee may also consider such other factors as it may deem, from time to time, are in the best interests of SciClone and its stockholders. The Nominating and Corporate Governance Committee believes that it is preferable that at least one member of the Board meet the criteria for an audit committee financial expert as defined by SEC rules. Under applicable listing requirements, at least a majority of the members of the Board must meet the definition of independent director. The Nominating and Corporate Governance Committee also believes that it is appropriate for one or more key members of our management to participate as members of the Board.
Identifying and Evaluating Candidates for Nomination as Director
The Nominating and Corporate Governance Committee has adopted procedures providing for the annual evaluation by the committee of the current members of the Board of Directors whose terms are expiring and who are willing to continue in service, against the criteria set forth above in determining whether to recommend these directors for election. Under the procedures it adopted, the Nominating and Corporate Governance Committee has initiated the regular assessment of the optimum size of the Board and its committees and the needs of the Board for various skills, background and business experience in determining if the Board requires additional candidates for nomination.
Candidates for nomination as director come to the attention of the Nominating and Corporate Governance Committee from time to time through incumbent directors, management, stockholders or third parties. These candidates may be considered at meetings of the Nominating and Corporate Governance Committee at any point during the year. Such candidates are evaluated against the criteria set forth above. If the Nominating and Corporate Governance Committee believes at any time that it is desirable that the Board consider additional candidates for nomination, the Committee may poll directors and management for suggestions or conduct research to identify possible candidates and may engage, if the Nominating and Corporate Governance Committee believes it is appropriate, a third party search firm to assist in identifying qualified candidates.
The Nominating and Corporate Governance Committee will evaluate any recommendation for director nominee proposed by a stockholder. In order to be evaluated in connection with the Nominating and Corporate Governance Committees established procedures for evaluating potential director nominees, any recommendation for director nominee submitted by a stockholder must be sent in writing to the Corporate Secretary, SciClone Pharmaceuticals, Inc., 950 Tower Lane, Suite 900, Foster City, CA 94404, not less than 120 days prior to the anniversary of the date proxy statements were mailed to stockholders in connection with the prior years annual meeting of stockholders and must contain the following information:
In addition, under our Bylaws, stockholders are permitted to nominate directors for consideration at an annual meeting. A stockholder nomination for a director to be elected at an annual meeting must be sent in writing to the Corporate Secretary, SciClone Pharmaceuticals, Inc., 950 Tower Lane, Suite 900, Foster City, CA 94404, not less than 120 days prior to the anniversary of the date proxy statements were mailed to stockholders in connection with the prior years annual meeting of stockholders and must contain the following information:
All directors and director nominees must submit a completed form of the directors and officers questionnaire as part of the nominating process. The evaluation process may also include interviews and additional background and reference checks for non-incumbent nominees, at the discretion of the Nominating and Corporate Governance Committee.
The Nominating and Corporate Governance Committee will evaluate incumbent directors, as well as candidates for director nominee submitted by directors, management and stockholders consistently using the foregoing criteria and will select the nominees that, in the Committees judgment, best suit the needs of the Board at that time.
Communications by Stockholders with Directors
Stockholders may communicate with any and all Company directors by transmitting correspondence by mail, facsimile or email, addressed as follows:
Chairman of the Board
or Board of Directors
or [individual director]
c/o Corporate Secretary
SciClone Pharmaceuticals, Inc.
950 Tower Lane, Suite 900
Foster City, CA 94404
Fax: (650) 358-3469
The Corporate Secretary maintains a log of such communications and will transmit as soon as practicable such communications to the identified director addressee(s), unless there are safety or security concerns that mitigate against further transmission of the communication as determined by the Corporate Secretary. The Board of Directors or individual directors so addressed will be advised of any communication withheld for safety or security reasons as soon as practicable. The Corporate Secretary will relay all communications to directors absent safety or security issues.
Director Attendance at Annual Meetings
We believe that it is desirable that directors attend our annual meeting of stockholders. Our policy is to schedule our Annual Meeting of Stockholders at a time and date to maximize attendance by directors taking into account the directors schedules. Of the seven directors then in office, four attended the 2008 Annual Meeting of Stockholders.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee during 2008 has been an officer or employee of SciClone or any of its subsidiaries, or has had any relationship requiring disclosure by SciClone under the rules and regulations of the SEC. No interlocking relationships existed during 2008 between any member of the Compensation Committee and any member of any other companys board of directors or compensation committee.
Compensation of Directors
Directors who are employees of SciClone do not receive any compensation for their services as directors. During 2007 and 2008, each non-employee director is entitled to an annual retainer of $30,000, plus payment of out-of-pocket expenses relating to their service as Board members. In addition, directors receive the following additional annual payments for service on the committees of the Board of Directors:
In addition, our Chairman of the Board (currently Mr. Woodman) receives an additional annual payment of $22,000.
Non-employee directors also receive an option grant of 50,000 shares upon election to the Board and an annual option grant of 30,000 shares upon their re-election. Each option has a term of ten years and an exercise price equal to the closing price of our Common Stock as quoted on the NASDAQ Global Market on the grant date of such option. Initial option grants vest in three equal annual installments. Annual stock option grants vest in twelve equal monthly installments. In the event of a change in control, any unexercisable or unvested portions of any outstanding options are immediately exercisable and vested in full as of the date 10 days prior to the change in control, regardless of whether the option is assumed or substituted for by the acquirer.
Under our 2004 Outside Directors Stock Option Plan:
The following table sets forth information concerning the aggregate compensation earned during 2008 by each individual who served as a director at any time during 2008:
2008 Director Compensation
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP has served as our independent registered public accounting firm since 1991 and has been appointed by the Board to continue as our independent registered public accounting firm for the fiscal year ending December 31, 2009. In the event that ratification of this selection of auditors is not approved by a majority of the shares of Common Stock voting at the Annual Meeting in person or by proxy, management will review its future selection of our independent registered public accounting firm.
A representative of Ernst & Young LLP is expected to be present at the Annual Meeting. This representative will have an opportunity to make a statement and will be available to respond to appropriate questions.
Principal Accountant Fees
The following table sets forth the aggregate fees billed to us for the fiscal years ended December 31, 2008 and December 31, 2007 by our principal accounting firm, Ernst & Young LLP:
Audit fees consist of fees billed for professional services rendered for the audit of our consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Ernst & Young LLP in connection with statutory and regulatory filings or engagements. Ernst & Young LLP did not perform audit-related, tax or other services for us.
The Audit Committees charter requires the Audit Committee to approve in advance the engagement of the independent registered public accounting firm and the fees and other terms of any such engagement for all audit services and non-audit services. Pre-approval is provided for in the Audit Committees charter if the Committee establishes policies and procedures therefore and (i) any pre-approval is detailed as to the particular service or category of services and (ii) the independent auditor and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditor in accordance with such pre-approval. During fiscal years 2007 and 2008, no fees were approved by the Audit Committee pursuant to the de minimis exception established by the SEC.
Stockholder ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm is not required by our bylaws or otherwise. The Board of Directors, however, is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate governance. If the stockholders fail to ratify the selection, the Audit Committee and the Board of Directors will reconsider whether or not to retain Ernst & Young LLP. Even if the selection is ratified, the Audit Committee or the Board of Directors in their discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in our best interests or in the best interests of our stockholders.
The selection of Ernst & Young LLP as independent registered public accounting firm will be deemed to have been ratified by the stockholders upon the affirmative vote of a majority of the votes cast affirmatively or negatively on the proposal at the Annual Meeting, as well as the presence of a quorum representing a majority of the shares of Common Stock of SciClone entitled to vote at the Annual Meeting, present in person or represented by proxy. Abstentions and broker non-votes will each be counted as present for purposes of determining a quorum but will not have any effect on the outcome of the proposal.
Recommendation of the Board of Directors:
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS SCICLONES INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2009.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to beneficial ownership of shares of our Common Stock as of March 31, 2009 by:
The following table is based upon information supplied by officers, directors and principal stockholders and Schedules 13D and 13G filed with the SEC and information supplied by our transfer agent, BNY Mellon Shareowner Services, as of the most recent practicable date. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 46,219,562 shares outstanding on March 31, 2009, provided that any additional shares of common stock that a stockholder has the right to acquire within 60 days after March 31, 2009 pursuant to grants of stock options or awards of restricted stock are deemed to be outstanding and beneficially owned by the person holding such options or restricted stock for the purpose of computing the number of shares beneficially owned and the percentage ownership of such person, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated below, the address for the persons and entities listed below is 950 Tower Lane, Suite 900, Foster City, California 94404.
The following table sets forth the name, age and title for each of our executive officers:
Friedhelm Blobel, Ph.D. is one of our directors as well as our President & Chief Executive Officer, and, as such, his biographical information is included above under Election of Directors.
Gary S. Titus has served as our Chief Financial Officer and Senior Vice President, Finance since December, 2008. Mr. Titus previously served as Senior Vice President of Finance and Chief Financial Officer at Kosan Biosciences, which was acquired by Bristol-Myers Squibb Company in May 2008, from September 2006 until September 2008. Mr. Titus joined Nuvelo, Inc. in January 2003 and served as Chief Financial Officer and Vice President from October 2005 to September 2006. Mr. Titus has also held positions at life sciences companies including Metabolex, Inc., Intrabiotics Pharmaceuticals, Inc., and LifeScan, Inc., a division of Johnson & Johnson. Mr. Titus holds a Bachelors of Science degree in Accounting from the University of South Florida and a Bachelor of Science degree in Finance from University of Florida and is a Certified Public Accountant. He also completed the Global BioExecutive Program at UC Berkeleys Haas School of Business and is a member of several professional organizations.
Hans P. Schmid is the President and Managing Director of SciClone Pharmaceuticals International, Ltd. and has been with SciClone since 2001. Mr. Schmid was Chief Financial Officer from December 1999 to April 2001 for Questcor Pharmaceuticals, Inc. (NASDAQ: QCOR), a specialty pharmaceutical company, and Senior Vice President, International Business Development from February 1997 to September 1999 for Oread, Inc., a contract pharmaceutical company. From 1985 to 1997 he worked at Syntex Corporation as Vice President of Finance and Administration for Pharmaceutical Operations Asia/Pacific region and at F. Hoffmann-LaRoche as Senior Vice President, Finance and Head of Administrative Services for Roche Bioscience. Previously he held financial and operational positions with Itel Corporation in Germany, Japan, England and the U.S. Mr. Schmid holds a Bachelors of Arts in General Business Administration from the Commercial Trade School, Lucerne, Switzerland.
Israel Rios, M.D. has served as our Senior Vice President, Medical Affairs and Chief Medical Officer since October 2005. In this capacity, he is responsible for the design and oversight of all clinical trials and the evaluation of new development candidates. From 2003 to 2005 he served as Vice President of Clinical Affairs for Dendreon Corporation, a biotechnology company. From 1993 to 2000, Dr. Rios was at Berlex Laboratories (the U.S. affiliate of Schering AG of Germany) most recently as Vice President of Oncology Development. From 1984 to 1993, Dr. Rios was Director of Anti-Infective Clinical Research at Marion Merrill Dow, Inc. where he directed the clinical development and helped manage the New Drug Application submissions of several anti-infective products. From 1978 to 1984, Dr. Rios held several positions at Bristol-Myers Squibb Company, most recently as Director of Clinical Research. Dr. Rios earned his M.D. degree at the Central University of Venezuela. He completed his internship and residency in internal medicine at Mount Sinai Hospital in Hartford, Connecticut, and his fellowship in infectious diseases at Hartford Hospital in Hartford, Connecticut.
Principal Financial Officer and Principal Accounting Officer
Until April 2008, Richard A. Waldron served as our Executive Vice President, Chief Financial Officer and Secretary. In April 2008, we entered into a Consulting and Resignation Agreement and General Release of All Claims with Mr. Waldron. Under this agreement, Mr. Waldron resigned from employment with us but remains available to consult with us on a limited capacity for up to one year thereafter. Upon Mr. Waldrons resignation, Mr. Blobel assumed the duties of interim principal financial officer. Ivan Hui continued as our principal accounting officer and subsequently was promoted to the position of Assistant Vice President, Finance, a position that he continues to hold. Gary S. Titus joined SciClone as Chief Financial Officer and Senior Vice President, Finance and, concurrently, became SciClones principal financial officer. Although neither Mr. Waldron or Mr. Hui are executive officers of SciClone, their employment arrangements during 2008 are disclosed herein.
The Compensation Committee of the Board of Directors administers our executive compensation and benefit programs. The Committee comprises exclusively independent directors and oversees all compensation and benefit programs and actions that affect our executive officers.
We are committed to developing and commercializing innovative products to treat life-threatening diseases. We are engaged in a competitive industry, and to accomplish this objective, we design our compensation programs to attract, motivate and retain qualified executives dedicated to working towards our short and long-term corporate goals. People are one of our key assets, and we seek to hire employees and executives who share our corporate vision and values and have the skills and motivation to execute on our corporate strategy. In our dynamic work environment, we foster the following corporate values:
Our corporate culture emphasizes high ethical standards and accountability while encouraging our executives and our employees to innovate and create in executing our corporate strategy in a highly competitive environment. We seek professionals from diverse backgrounds, to work in teams, to add balanced perspectives to our work. Our executive officers and senior employees aim to provide leadership and to provide professional development opportunities and motivation for our employees on a continual basis.
The Compensation Committee administers the compensation programs for our executive officers while considering this competitive environment, but we believe that part of the compensation paid to our executive officers should also be dependent upon our financial performance and the value that we create for our stockholders. Our total compensation package seeks to align an executives performance with our stockholders interests, measured over the short and the long-term. Accordingly, the Compensation Committee aims to balance a fixed cash base salary with variable cash and equity incentives to motivate each executive to reach his individual objectives as well as our overall corporate objectives.
Objectives of Our Compensation Program
The primary objective of our compensation programs for our executive officers is to attract and retain qualified executives and employees of outstanding ability and potential and to motivate them to achieve their individual objectives as well as our overall corporate goals, with a focus on creating value for our stockholders. In addition to the primary objectives of attracting and retaining qualified executives, the other objectives of our compensation program include the following:
What Our Compensation Program is Designed to Reward
Our compensation program is designed to reward performance measured over a short and long-term basis. We seek to align our executives performance with the interests of our stockholders. Base salaries, annual cash incentives and the vesting of our options and retirement plans encourage executive retention and provides a balance between short and long-term elements of compensation.
We generally set corporate objectives at the beginning of the fiscal year, against which the performance of our executives is evaluated for determining increases in compensation for the subsequent fiscal year. Our corporate objectives typically include the progress of sales growth in China, advancement of clinical and regulatory programs, successful commercialization activities, management of costs and expenses and attainment of necessary capital resources.
For 2008, our corporate goals included the following:
Compensation Process, Role of Management
As mentioned above in Corporate Governance Board Meetings and Committees Compensation Committee, the Compensation Committee is responsible for determining and approving all compensation for our executive officers. Pursuant to its charter, the Compensation Committee recommends to the full Board the salary and bonus earned by the President and Chief Executive Officer, reviews and recommends to the full Board salary and bonus levels for other executive officers, approves stock option grants to executive officers and approves all employment, severance and change-in-control agreements applicable to executive officers. Our Chief Executive
Officer assists the Compensation Committee in its deliberations with respect to the compensation payable to our other executive officers, and typically recommends specific compensation packages for our executive officers based upon his assessment and evaluation of their performance for the prior year.
Following the end of each fiscal year, our Chief Executive Officer evaluates executive officer performance for the prior fiscal year, other than his own performance, and discusses the results of such evaluations with the Compensation Committee. The Chief Executive Officer assesses each executive officers performance for the prior fiscal year based upon subjective factors concerning such officers individual business goals and objectives, and the contributions made by the executive officer to our overall results. The Chief Executive Officer then makes specific recommendations to the Compensation Committee for adjustments of base salary, target bonus, and equity awards, if appropriate, as part of the compensation packages for each executive officer, other than himself, for the next fiscal year.
The Compensation Committee reviews the performance of the Chief Executive Officer and determines all compensation for the Chief Executive Officer. The Chief Executive Officer was not present at the time the Compensation Committee reviewed his performance and discussed his compensation for 2008 or 2009.
Independent Compensation Consultants, Peer Group Selection and Benchmarking
For both 2008 and 2009, the Compensation Committee reviewed survey data of compensation packages at comparable companies in connection with its determination of executive officer compensation for 2008 and 2009. The Compensation Committees policy is to conduct an in-depth assessment using detailed data every other year, while using only summary data in the intervening year. The Compensation Committee has retained Setren, Smallberg & Associates, Inc. (Setren), an independent compensation consultant to conduct an assessment of our executive officer compensation and advise the Committee regarding optimal allocation of the different elements of executive officer compensation among base salary, bonuses and equity and to recommend target amounts for each element of compensation.
In carrying out its in-depth assessment for 2008, Setren relied on the Radford Global Life Sciences Survey from Radford Surveys and Consulting, a division of Aon Corporation and an independent compensation consulting firm (Radford), which includes the average, median and range amounts of base salary, annual cash incentives and long-term equity incentives from comparable pharmaceutical, biotechnology and medical device companies. Of the 500 companies included in this Radford survey, Setren used the subset of data from 129 Northern California companies (Radford Group) to compare the compensation of our executive officers and employees, as Setren believes this comparable group best represents the companies with which we compete for executive and professional talent. The Compensation Committee typically targets the amount of each element of compensation at approximately the 50th percentile of the Radford Group, and confirms the applicability of this level by reference to the results of the review of compensation information. Setren supplemented the Radford data with its own survey of publicly available information filed by a group of the following peer companies (Setren Peer Data) we suggested:
For 2008, Setren compared the current compensation (base salary, annual cash incentives and long term equity incentives) of each of our executive officers and other management level employees to the median and
75th percentile of each of the Radford Group and the Setren Peer Data. Based on the results of its review of comparable data, Setren recommended adjustment to base salary, bonus or equity compensation levels for each of our executive officers wherever current levels appeared out of line.
For 2009, Setren used summary Radford data with respect to base salary and annual cash incentives. However, with respect to long-term equity incentives, Setren relied upon studies that Setren had previously conducted for biotechnology firms with characteristics similar to SciClone.
For both 2008 and 2009, after reviewing Setrens recommendations and the recommendations of our Chief Executive Officer, the Compensation Committee approved the amount of each element of compensation for our executive officers. The Compensation Committee reaffirmed its decision in prior years to initially target the amount of each element of compensation at approximately the 50th percentile of the Radford Group, but varied compensation levels for individual executive officers above or below this 50th percentile target based on length of experience, individual performance, contribution to corporate performance and extent to which the actual job function relates to the comparative group.
By basing our compensation on the compensation data from comparable companies and offering increased compensation for individual and corporate performance, we aim to attract and retain talent and provide incentives to reach the corporate and individual performance objectives.
Elements of Our Compensation Program and How Each Element is Chosen
The key elements of our compensation program for executives and employees consist of base salary, annual cash incentives and long-term equity incentives. Our compensation package also includes a comprehensive benefits package of healthcare, disability and insurance coverage as well as an employee-funded, employer-matched retirement plan. Our equity and retirement plans have vesting schedules to encourage employee retention and a long-term commitment towards advancing our corporate objectives. The elements of our compensation programs are varied to achieve the following balances:
Elements of SciClones Compensation Program
Base salaries for executive officers and employees are targeted at a competitive market median, being the 50th percentile of the Radford Group, on a position-by-position basis with individual variations explained by differences in experience, skills and sustained performance. The Compensation Committee generally reviews the executive officers salaries on an annual basis.
When setting compensation for 2008, the Compensation Committee discussed the Setren compensation survey and the Radford Group data described above, the details of the survey data as it relates to each of our executive officers, and for the executive officers other than himself, the recommendations of our Chief Executive Officer. In addition, a representative of Setren participated in person and noted that the salary proposals were within the median range of comparable company data. The Compensation Committee also noted the guidelines recommended by our Chief Executive Officer for 2008 applicable to non-officer employees and reviewed data from Setren that indicated proposed increases of approximately 4.5% were within the average increase of 4.5%-5.0% for companies located within the San Francisco Bay Area. After reviewing all the above, the Compensation Committee approved the 2008 base salary for each of our executive officers. When setting compensation for 2008, the Compensation Committee did not adjust Mr. Waldrons base salary and did not specifically examine Mr. Huis base salary.
In February 2009, the Compensation Committee again undertook a review of base salaries, including reliance in part upon a written update from Setren based upon summary data. Following the recommendation of
the Chief Executive Officer to forego any salary adjustment for the 2009 calendar year for any SciClone employee in view of the overall economic situation facing our industry, the Compensation Committee elected to apply this policy also to the executive officers and accordingly to keep the salaries of our executive officers the same as for 2008.
Annual Cash Incentives
We provide annual cash incentives in the form of cash bonuses intended to motivate employees to achieve our overall corporate goals and their individual employee objectives. For executive officers, these annual cash incentives account for a significant percentage of each executive officers potential compensation, putting a significant percentage of total compensation at risk based on achievement of both corporate and individual objectives. Employees are also eligible to receive annual cash incentives, which typically account for a smaller percentage of total compensation. At the beginning of the fiscal year, the Compensation Committee established the annual cash incentive targets, determined as a percentage of base salary, for each of our executive officers. For Dr. Blobel and Mr. Schmid, the percentage of base salary comprising the cash bonus that could be achieved in the fiscal year were agreed in their respective offer letters for employment or employment agreements, as amended. In addition, in its 2008 review of the Radford Group, together with its review of the public filings by the Setren Peer Data companies, Setren reviewed the size of the bonuses payable to our executive officers, and found that the most recent bonuses paid were strong relative to both comparable groups.
For both 2008 and 2009, the initial target percentage for our current President and Chief Executive Officer, Dr. Blobel remained 40% of base salary and the initial target percentages for both Mr. Schmid and Dr. Rios remained 30% of base salary. Cash incentive bonuses are paid pursuant to our executive incentive plan, and earned only if we achieved annual corporate objectives established by the Board. Our 2008 corporate objectives under the executive incentive plan were as follows, weighted as indicated: (i) sales targets and cash balances (52.5%), (ii) operational goals relating to organization capability and investor relations (30%), and (iii) commercial, regulatory, product acquisition and research and development goals (17.5%). No separate individual objectives are established for Dr. Blobel. Dr. Blobel establishes individual objectives, in addition to these corporate objectives, against which performance of the other executive officers is evaluated. Executive officers may earn up to 150% of their individual cash incentive target depending upon the Committees assessment of performance in relation to their predetermined objectives.
The actual cash incentive award earned is determined by the Committees judgment in its discretion of the relative attainment of our overall corporate performance objectives, the relative attainment of individual employee performance objectives, and the individuals performance in relation to the objectives subject to targeted overall compensation. Cash incentive awards are typically paid in the year following the year for which performance is evaluated. No threshold performance against the established objectives is required to be reached before bonuses are earned under the plan.
In February 2009, the Compensation Committee reviewed the 2008 performance of our executive officers against corporate and individual objectives. Dr. Blobel reviewed the performance of each of the executive officers, and proposed the bonuses payable under our executive incentive plan. The Compensation Committee also reviewed an updated report from Setren on officer compensation measures as proposed by Dr. Blobel and noted that the compensation proposals with respect to bonuses, as well as equity incentive adjustments, were within the approximate median range of, or slightly below, comparable company data.
The actual bonuses paid for 2008 varied depending on the extent to which actual performance met, exceeded, or fell short of the applicable executive officers 2008 individual objectives, as determined by the Compensation Committee, which used in part the recommendations of Dr. Blobel. The Compensation Committee found that in 2008, we increased revenues, obtained debt financing and managed our cash balance carefully, increased analyst coverage of SciClone and put in place the structure for additional investment in our Chinese business. However, the Compensation Committee also found that no first commercial revenues of DC Bead
occurred, no additional products were acquired for sale in China and no new partnering agreements were consummated for our products generally.
Based on the achievement of the corporate performance objectives set forth above and completion of individual objectives in 2008, the Compensation Committee approved a $159,120 bonus for Dr. Blobel (36% of 2008 base salary, compared to the 40% target established by the Compensation Committee at the beginning of 2008). In approving this amount, the Compensation Committee increased Dr. Blobels bonus amount from 85.75% to 90% of his potential maximum target bonus based upon Dr. Blobels substantial effort and leadership accomplishments during 2008. The Compensation Committee approved a $140,000 bonus for Mr. Schmid (44% of 2008 base salary, compared to his 30% target) based in part upon Mr. Schmid exceeding expectations with respect to the performance of SciClones international operations. The Compensation Committee further approved a bonus of $100,000 for Dr. Rios (32% of 2008 salary compared to his 30% target). The Compensation Committee also approved a bonus for Mr. Hui of $20,000 and a one-time bonus of $50,000 for his additional efforts as a result of the departure of our former chief financial officer (an aggregate of 38% of 2008 base salary, compared to his 20% target bonus established by SciClone). Mr. Titus did not receive a bonus as he only recently joined us in December 2008. As part of his settlement agreement in connection with the cessation of his employment with us, Mr. Waldron received $25,875 in bonus pro-rated for 2008.
Long-Term Cash Incentives
Under the terms of a Long Term Incentive Plan (LTIP) contained in the employment agreement that we entered into with Dr. Blobel in 2006 upon his commencement of employment with us, the Compensation Committee was obligated to consider an award to Dr. Blobel of a special cash bonus of up to $300,000, based on achievement of corporate performance targets over the years 2006 through 2008. In April 2009, the Compensation Committee evaluated Dr. Blobels performance for the three-year period and declared a bonus to Dr. Blobel of $280,350.
Separately, the Compensation Committee also approved a new LTIP period for the fiscal years ending December 31, 2009, 2010 and 2011 with a maximum aggregate target amount at the end of the three year period of $450,000. As with the former LTIP period, any payment under the LTIP at the end of the three year period is subject to the Compensation Committees assessment of the achievement of certain performance goals mutually established between the Compensation Committee and Dr. Blobel. The Compensation Committee significantly increased the maximum potential amount under the amended LTIP in order to recognize the progress that SciClone has made since Dr. Blobel joined as our Chief Executive Officer, the competitive market for salaries for Chief Executive Officers and to provide a further incentive to Dr. Blobel to increase the long term value of SciClone for its stockholders.
Long-Term Equity Incentives
We provide long-term equity incentives to motivate employees to achieve individual and corporate objectives and align interests of employees with those of stockholders. Our long-term equity incentives for executive officers and employees currently consist of options and other rights to purchase shares of our Common Stock granted under our equity plans. Stock options granted under equity plans generally vest over a four-year period, providing incentive to create value for our stockholders over the long-term since the full benefit of the option cannot be realized unless the employee remains with us and stock price appreciation occurs over a number of years. The Compensation Committee has typically granted options to employees upon commencement of employment and has occasionally granted additional options following a significant change in job responsibility, scope or title or a particularly noteworthy corporate or individual achievement. For any newly-hired executive officer, any promotion to executive officer or any other grant, the size of the equity grant is determined by analyzing comparable compensation data from biotechnology companies, as described above under Independent Compensation Consultants, Peer Group Selection and Benchmarking . During 2008 and 2009, our executive officers were each granted stock options based on the Committees evaluation of individual contribution to achievement of corporate performance goals during 2007 and 2008, respectively.
The review of our executive compensation completed by Setren in early 2008 found that the equity position held by Dr. Blobel remained below those of similar executive officers at the peer group companies making up the Setren Peer Data. Accordingly, after reviewing the achievement of corporate goals and objectives, and considering that an equity grant had not been made to Dr. Blobel in 2007, Dr. Blobel was granted an option in March 2008 for an additional 300,000 shares. The option will vest, provided Dr. Blobel is still employed by us, upon our common stock trading publicly for at least 30 consecutive calendar days at or greater than a target closing price per share as reported on the NASDAQ Global Market (a Trading Price Goal), of
Each price shall be adjusted for stock dividends, stock splits or similar changes in our capital structure. If a Trading Price Goal is not achieved on or before the respective target, the corresponding portion of the option will not vest and will terminate upon such date.
In February 2009, the Compensation Committee again reviewed the equity compensation arrangements for Dr. Blobel. Among other factors, the Compensation Committee reviewed written information from Setren that indicated that Dr. Blobels equity incentive arrangements were within the median range of comparable company data. However, upon further analysis and consideration, including with regard to SciClones financial performance in 2008 and the goal of the Compensation Committee to closely tie Dr. Blobels compensation with the long-term creation of value in SciClone, the Compensation Committee approved an option grant of 300,000 shares to Dr. Blobel. The option has time-based vesting contingent upon Dr. Blobels continued service to SciClone. Under SciClones standard policy, one quarter of the option vests on the first anniversary of the date of grant, with the remaining portion of the option thereafter vesting monthly in 36 equal amounts.
Also in March 2008, based solely upon the achievement of corporate goals and objectives during 2007, Mr. Schmid received an option grant of 80,000 shares, Dr. Rios received an option grant for 100,000 shares and Mr. Hui received an option grant of 40,000 shares. In March 2009, Mr. Schmid received an option grant of 125,000 shares, Dr. Rios received an option grant for 65,000 shares and Mr. Hui received an option grant of 60,000 shares. All of these option grants are subject to SciClones standard vesting schedule for time-based vesting. In addition, in March 2009, Mr. Schmid also received an option grant for 125,000 shares and Dr. Rios received an option grant for 65,000 shares, the vesting for both of which is subject to the achievement of certain corporate performance metrics.
The Boards policy is that the grant date of stock options granted at a meeting of the Compensation Committee or the Board of Directors held between the end of any fiscal quarter and the public announcement of the financial results of such quarter, be a pre-determined number of days after such public announcement of financial results. The Boards grants of options in 2008 and 2009 complied with this policy.
At present, we do not have any equity or security ownership requirements for our executive officers.
Change in Control and Termination Benefits
We have, from time to time, entered into offer letters or employment agreements that contain certain benefits payable upon termination in certain situations. All such benefits extended to our executive officers are approved by the Compensation Committee in order to be competitive in our hiring and retention of executive
officers, in comparison with other biotechnology companies of similar size with which we compete for talent. All such agreements with the Named Executive Officers are described in Potential Payments upon Termination or Change-in-Control elsewhere in this Executive Compensation and Other Matters section of this proxy statement.
We have entered into Change in Control Agreements with our Named Executive Officers with the goal of retaining such executive officers during the pendency of a proposed change of control transaction, and in order to align the interests of the executive officers with our stockholders in the event of a change in control. We believe that a proposed or actual change in control transaction can adversely impact the morale of officers and create uncertainty regarding their continued employment. Without the benefits under the Change in Control Agreements, executive officers may be tempted to leave our employment prior to the closing of the change in control, especially if they do not wish to remain with the entity after the transaction closes, and any such departures could jeopardize the consummation of the transaction or our interests if the transaction does not close and we remain independent. The Compensation Committee believes that these benefits therefore serve to enhance stockholder value in the transaction, and align the executive officers interests with those of our stockholders in change in control transactions. A description of the terms and conditions of such Change in Control Agreements is set forth in Potential Payments upon Termination or Change-in-Control elsewhere in this Executive Compensation and Other Matters section of this proxy statement.
In its deliberations regarding compensation for 2008, the Compensation Committee considered the impact of Section 162(m) of the Internal Revenue Code adopted under the Omnibus Budget Reconciliation Act of 1993, which disallows a deduction for any publicly-held corporation for individual compensation exceeding $1,000,000 in any taxable year for the Chief Executive Officer and four other most highly compensated executive officers, unless such compensation meets the requirements for the performance-based exception to the general rule. Income resulting from options granted under the 1995 Equity Incentive Plan and 2005 Equity Incentive Plan should qualify as an exception. The Compensation Committee does not believe that other components of our compensation will be likely to exceed $1,000,000 for any executive officer in the foreseeable future and therefore concluded that no further action with respect to qualifying this compensation for deductibility was necessary at this time. In the future, the Compensation Committee will continue to evaluate the advisability of qualifying its executive compensation for deductibility of such compensation. The Compensation Committees policy is to qualify its executive compensation for deductibility under applicable tax laws as practicable.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement with management. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in SciClones Annual Report on Form 10-K for the year ended December 31, 2008 and this proxy statement. The material in this report shall not be deemed to be soliciting material or filed with the SEC, will be deemed furnished in SciClones Annual Report on Form 10-K for the year ended December 31, 2008, and will not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, as a result of furnishing the disclosure in this manner.
Respectfully submitted by the Compensation Committee,
Rolf H. Henel, John D. Baxter, Richard J. Hawkins and Trevor M. Jones
Summary Compensation Table
The following table sets forth information concerning the compensation earned during the fiscal years ended December 31, 2008, 2007 and 2006 by our Chief Executive Officer, any individual who served as our Chief Financial Officer or principal financial officer or a similar position and our other most highly-compensated executive officers:
2008 Summary Compensation Table
Grants of Plan-Based Awards
The following table sets forth certain information with respect to stock and option awards and other plan-based awards, including non-equity incentive awards, granted during the fiscal year ended December 31, 2008 to our Named Executive Officers.
2008 Grants of Plan-Based Awards
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information with respect to the value of all unexercised options previously awarded to our Named Executive Officers as of December 31, 2008:
Outstanding Equity Awards at December 31, 2008
Option Exercises and Stock Vested During Last Fiscal Year
No options were exercised by our Named Executive Officers during 2008, and no shares of restricted stock granted to our Named Executive Officers vested during 2008.
Pension Benefits and Nonqualified Deferred Compensation Plans
We do not have any plans with any of the Named Executive Officers that provide for payments or other benefits at, following, or in connection with retirement. We do not have any defined contribution or other plan with any of the Named Executive Officers that provides for the deferral of compensation on a basis that is not tax qualified.
Potential Payments upon Termination or Change-in-Control
We have entered into the following agreements that will require us to provide compensation to the respective Named Executive Officers in the event of a termination of employment or a change in control of SciClone:
Friedhelm Blobel, Ph.D.
In June 2006, we entered into with Dr. Blobel a Consulting Services Agreement, an Employment Agreement and a Change in Control Agreement (together, the Blobel Agreements). The Blobel Agreements provide in the event of a termination of his employment without Cause, as defined in the Change in Control Agreement, Dr. Blobel is entitled to, as severance, base salary for a period of 12 months following the date of termination, payable on our ordinary payroll dates and subject to compliance with Section 409A of the Tax Code, less applicable withholding, and certain health care benefits. In the event Dr. Blobel is subject to a Constructive Termination or termination without Cause, within one year following a Change in Control of SciClone (a Change of Control Acceleration Event), he will be entitled to severance pay equal to one hundred fifty percent (150%) of his annual base salary as in effect at the time of such termination, payable within thirty (30) days and subject to compliance with Section 409A of the Tax Code, less applicable withholding, the immediate 100% vesting of his initial option to purchase 400,000 shares of Common Stock that was issued pursuant to the Employment Agreement, and the extension of the exercise period for any unexercised portion of all nonstatutory stock options held by him as at the date of such termination to be 12 months after the date of such termination. If Dr. Blobel voluntarily resigns or is terminated for Cause, he will not be entitled to any severance payment or acceleration of vesting of his unvested options.
In April 2009, the Compensation Committee re-examined certain aspects of the Blobel Agreements and determined that, in order to more closely match Dr. Blobels arrangements with those of similar officers at comparable companies, certain amendments to the Blobel Agreements were required, as the Blobel Agreements did not encompass either Dr. Blobels LTIP or any options with time-based vesting that are granted to Dr. Blobel after he joined SciClone in 2006. Specifically, when Dr. Blobel joined SciClone in 2006, he was granted stock options with both time-based vesting contingent upon his continued service with SciClone as well as options that vest based upon the achievement of certain performance metrics. The vesting on stock options subject to time-based vesting accelerates and vests in full upon a Change of Control Acceleration Event. However, acceleration for stock option vesting applied only to Dr. Blobels first option grant with time-based vesting and did not extend to all unvested options subject to time-based vesting.
Under the amendment to Dr. Blobels Change of Control Agreement:
Gary S. Titus
On November 21, 2008, we entered into an offer letter with Gary S. Titus regarding his employment as Chief Financial Officer and Senior Vice President, Finance. Under the offer letter, Mr. Titus will receive an annual base salary of $340,000 and be eligible for an annual cash incentive and other benefits that are generally provided to our executives. The annual cash bonus is targeted at 30% of his base salary and will be earned depending upon performance in relation to predetermined management objectives. Mr. Titus was also provided with a $25,000 sign-on bonus less applicable withholding tax. The offer letter also included an option grant of (i) 75,000 shares of our common stock to vest over a forty-eight month period and (ii) 75,000 shares of our common stock that will vest based on Mr. Titus achievement of business objectives. We also entered into a Change of Control agreement with Mr. Titus dated December 8, 2008, under which Mr. Titus is entitled, following a Change of Control Acceleration Event to a severance payment equal to twelve months of his then current base salary as well as the immediate vesting of all unvested options granted to Mr. Titus.
Hans P. Schmid
In May 2001, we entered into an offer letter with Mr. Schmid regarding his employment. In February 2006, SciClone Pharmaceuticals International, Ltd. (our wholly owned subsidiary) and Mr. Schmid entered into an amendment to Mr. Schmids offer letter. Pursuant to such amendment, in the event of his termination without Cause (as defined in the original offer letter) and subject to certain limitations, Mr. Schmid will be entitled to receive a severance equal to 12 months of this then-current base salary. Under the May 2001 offer letter, Cause is defined as Mr. Schmids termination for any of the following reasons: (i) theft, dishonesty, misconduct or falsification of any employment or SciClone records; (ii) improper disclosure of SciClones confidential or proprietary information; (iii) any action by him which has a material detrimental effect on SciClones reputation or business; (iv) his failure or inability to perform any assigned duties reasonably expected of him after written notice from SciClone to Mr. Schmid of, and a reasonable opportunity to cure, such failure or inability; (v) his conviction (including any plea of guilty or no contest) for any criminal act that impairs his ability to perform his duties for SciClone; or (vi) his death or disability.
In April 2003, we entered into a Change in Control Agreement with Mr. Schmid. In the event Mr. Schmid is subject to a Constructive Termination or termination without Cause, within one year following a Change in Control of SciClone, he will be entitled to severance pay equal to one hundred percent (100%) of his annual base salary as in effect at the time of such termination, payable within thirty (30) days, less applicable withholding and the immediate 100% vesting of his outstanding options subject to time-based vesting. If Mr. Schmid voluntarily resigns or is terminated for Cause, he will not be entitled to any severance payment or acceleration of vesting of his unvested options.
Israel Rios, M.D.
In May 2007, we entered into a Change in Control Agreement with Dr. Rios. In the event Dr. Rios is subject to a Constructive Termination or termination without Cause, within one year following a Change in Control of SciClone, he will be entitled to severance pay equal to seventy-five percent (75%) of his annual base salary as in effect at the time of such termination, payable within thirty (30) days, less applicable withholding and the immediate 100% vesting of his outstanding options that are subject to time-based vesting. If Dr. Rios voluntarily resigns or is terminated for Cause, he will not be entitled to any severance payment or acceleration of vesting of his unvested options.
In May 2008, we entered into a Change in Control Agreement with Mr. Hui. In the event Mr. Hui is subject to a Constructive Termination or termination without Cause, within one year following a Change in Control of SciClone, he will be entitled to severance pay equal to seventy-five percent (75%) of his annual base salary as in effect at the time of such termination, payable within thirty (30) days, less applicable withholding and the immediate 100% vesting of his outstanding options. If Mr. Hui voluntarily resigns or is terminated for Cause, he will not be entitled to any severance payment or acceleration of vesting of his unvested options.
Certain Definitions Used in Change of Control Agreements
For the Change in Control Agreements for Dr. Blobel, Mr. Titus, Mr. Schmid, Dr. Rios and Mr. Hui:
disability, health, dental, medical, savings, profit sharing, stock purchase and retirement plans, if any, in which they were participating immediately prior to the date of the Change in Control, or in substantially similar plans or programs, or (2) provide them with all other fringe benefits (or substantially similar benefits), including, but not limited to, relocation benefits which they were receiving immediately prior to the date of the Change in Control.
Using each Named Executive Officers current base salary, the maximum total payments to each Named Executive Officer under the termination circumstances described above, as of December 31, 2008 would be as follows:
Potential Payments upon Termination or Change in Control
Sigma-Tau Finanziaria, Sp.A.
Our European marketing and development partner, Sigma-Tau, beneficially owned approximately 21.3% of our stock as of March 31, 2009. Sigma-Tau has conducted trials in Europe for the treatment of malignant melanoma and hepatitis C and we have various licensing and development obligations to them. In 2004, we amended our existing agreement with Sigma-Tau to provide for Sigma-Tau to undertake an HCV trial in Europe in exchange for our agreement to provide approximately $2,500,000 in funding and other assistance for the trial. Further information on our commercial relationship with Sigma-Tau is contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, including under the heading Managements Discussion and Analysis of Financial Condition and Results of Operations.
As permitted in the previously-disclosed Rights Agreement dated as of December 19, 2006 between SciClone and Mellon Investor Services LLC (the Rights Agreement), on September 10, 2007, our Board of Directors approved a potential increase in the number of shares of our Common Stock beneficially owned by Sigma Tau, together with all its Affiliates and Associates (each as defined in the Rights Agreement), so long as (i) Sigma Tau, its Affiliates or Associates, become the beneficial owners of such additional shares on or before September 10, 2008, and (ii) such increase does not exceed 5,000,000 shares above the number of shares already beneficially owned by Sigma Tau and its Affiliates and Associates as of September 10, 2007 (as limited by subsections (i) and (ii) of this sentence, a Sigma Tau Ownership Increase). We have no agreement or arrangement with, nor any commitment from, Sigma Tau or any of its Affiliates or Associates with respect to any increase in their beneficial ownership of shares of our Common Stock. If the Board had not provided such prior approval of a Sigma Tau Ownership Increase, then the date of the occurrence of any increase in beneficial ownership by Sigma Tau, if any, would constitute a Distribution Date (as defined in the Rights Agreement) and would trigger certain events under the Rights Agreement, including without limitation the exercisability of the Rights (as defined in the Rights Agreement); however, because the Board has provided such prior approval, such events will not be triggered under the Rights Agreement in the event of a Sigma Tau Ownership Increase, if any.
On March 30, 2009, we entered into a settlement agreement (the Settlement Agreement) with the affiliates of Sigma-Tau (the Sigma-Tau Group). SciClone issued a press release on March 31, 2009 (the Press Release), announcing the execution of the Settlement Agreement and a commercial agreement referred to herein as the Zadaxin Agreement, as well as certain actions that we have taken to implement the provisions of the Settlement Agreement. The Press Release, Settlement Agreement and Zadaxin Agreement are exhibits to our Current Report on Form 8-K which we filed with the SEC on April 1, 2009.
Under the Settlement Agreement, we (i) increased the size of the Board from seven (7) to ten (10) members and (ii) appointed Dr. Camerini, Dr. Jones and Mr. Lapointe to fill the vacancies on the Board. SciClone also agreed that the Board and the applicable committees of the Board will nominate no more than eight members (8) for election to the Board at the 2009 Annual Meeting and will:
SciClone also agreed to hold the 2009 Annual Meeting of Stockholders no later than June 15, 2009 and the 2010 Annual Meeting of Stockholders during the second week of June 2010, subject only to those reasonable delays, if any, which are necessitated by the selection by the Sigma-Tau Group of any replacement directors, as described in the next paragraph.
Additionally, SciClone agreed that, while any of Dr. Camerini, Dr. Jones or Mr. Lapointe remain in office, if any of them resign or is otherwise unable to serve as a director or is removed for cause as a director, the Sigma-Tau Group will have the right to designate and substitute a person or persons for appointment to the Board as a replacement director, subject to evaluation and approval by SciClones Nominating and Corporate Governance Committee in good faith.
SciClone and Sigma-Tau Industrie Farmaceutiche Riunite S.p.A. (STI), a subsidiary of Sigma-Tau, signed the Zadaxin Agreement in connection with their pre-existing license agreement relating to thymosin alpha 1. Under the Zadaxin Agreement, STI will, at its cost, lead all future development activities for thymosin alpha 1 for treating Hepatitis C Virus (HCV) in the territory defined in the pre-existing license agreement (which, as amended, is collectively identified as Exhibits 10.23 through 10.26 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2008) and exclusively interact with European regulatory agencies responsible for the approval of thymosin alpha 1 for the treatment of HCV.
The Zadaxin Agreement also provides that SciClone and SciClone Pharmaceuticals International Ltd., a SciClone subsidiary, will work together with STI, at their respective costs, to find one or more third parties willing to fund further development and commercialization activities for thymosin alpha 1 in the United States and Europe (other than in Italy, where STI retains its pre-existing exclusive license) for treating malignant melanoma and will cooperate in developing mutually acceptable licensing or other agreements for such third party development and commercialization.
On March 28, 2009, contingent on, and in contemplation of, the execution of the Settlement Agreement and the Zadaxin Agreement by all parties thereto, the Board approved, pursuant to Section 1(a) of the Rights
Agreement, the acquisition of beneficial ownership of shares of Common Stock by Dr. Camerini, Dr. Jones and Mr. Lapointe (including, for this purpose, any successors designated by the Sigma-Tau Group and approved by the Board under the Settlement Agreement) resulting solely from grants of stock options or other equity interests (Director Equity Grants). The stated intent of such exemption was that such beneficial ownership shall not, by itself, cause any member of the Sigma-Tau Group or any Affiliate or Associate (as each of such terms is defined in the Rights Plan) of any such member to become an Acquiring Person, or to give rise to a Stock Acquisition Date, a Flip-In Event or a Flip-Over Event (as each of those terms is defined in the Rights Agreement).
The Board took this action in order to enable Dr. Camerini, Dr. Jones and Mr. Lapointe to receive Director Equity Grants, as approved by the Board or its Compensation Committee, on the same basis as all other members of the Board who are not employees of SciClone in respect of their service on the Board or any of its Committees. It was expressly determined by the Board that this exemption should have no application to the acquisition of beneficial ownership of any shares of SciClone Common Stock by any member of the Sigma-Tau Group, or any associate or affiliate of any such member, arising from any other fact or circumstance than the receipt of Director Equity Grants by Dr. Camerini, Dr. Jones and Mr. Lapointe.
Other Transactions and Policy
Other than (a) transactions with Sigma-Tau and (b) agreements described elsewhere under this Executive Compensation and Other Matters section of this proxy statement on Schedule 14A, since January 2007, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which SciClone was or is to be a participant in which the amount involved exceeds $120,000, and in which any director, executive officer or holder of more than 5% of any class of voting securities of SciClone and members of such persons immediate family had or will have a direct or indirect material interest.
Under the charter of the Audit Committee of our Board of Directors, the Audit Committee has the responsibility and duty to review and approve all related-party transactions, other than those previously reviewed and approved by (i) an independent committee of the Board of Directors, or (ii) an independent majority of the Board, after reviewing each such transaction for potential conflicts of interest and other improprieties. Pursuant to our Corporate Code of Conduct and Reporting (Whistle Blowing) of Perceived or Alleged Violations (our Code of Conduct), our executive officers and directors, including their immediate family members, are required to report any actual or potential conflict of interests to a supervisor, who in turn is required to refer all such reports to the Chief Executive Officer, the Chief Financial Officer or the Chair of the Audit Committee. Our Code of Conduct provides a non-exhaustive list of examples of actual or potential conflicts with respect to the persons subject to the Code of Conduct, including without limitation:
Indebtedness of Management
No director, executive officer, member of such persons immediate family, corporation or organization of which such person is an executive officer or partner or is the beneficial owner of 10% or more of any class of equity securities, or trust or other estate in which any such person has a substantial beneficial interest or serves as a trustee, has been indebted to us or any of our subsidiaries at any time since January 2006 in an amount in excess of $60,000, other than as may be described in Transactions with related Persons.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers, directors and persons who beneficially own more than 10% of our Common Stock to file initial reports of ownership and reports of changes in ownership with the SEC. These persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms that they file.
Based solely on our review of the forms furnished to it and written representations from certain reporting persons, we believe that all filing requirements applicable to its executive officers, directors and persons who beneficially own more than 10% of our common stock were complied with during 2008.
EQUITY COMPENSATION PLAN INFORMATION
As of December 31, 2008, we maintained seven compensation plans that provide for the issuance of common stock to officers and other employees, directors and consultants. These consist of the 1991 Stock Plan, the 1992 Stock Plan, the 1995 Equity Incentive Plan, the 1995 Nonemployee Director Stock Option Plan, the 1996 Employee Stock Purchase Plan, the 2004 Outside Directors Stock Option Plan and the 2005 Equity Incentive Plan. All of these plans have been approved by our stockholders. We do not currently maintain any compensation plans that have not been approved by the stockholders. The following table sets forth information regarding outstanding options and shares reserved for future issuance under the foregoing plans as of December 31, 2008.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees our financial reporting process on behalf of the Board of Directors. Our management has the primary responsibility for the financial statements and the reporting process, including internal control systems. Our independent registered public accounting firm, Ernst & Young LLP, is responsible for expressing an opinion as to the conformity of our audited financial statements with United States generally accepted accounting principles.
The Audit Committee consists of three directors each of whom, in the judgment of the Board, is an independent director as defined in the listing standards for The NASDAQ Stock Market. The Audit Committee held six meetings during 2008. The Audit Committee acts pursuant to a written charter that has been adopted by the Board of Directors. This charter is available in the Investor Relations section of our website at www.sciclone.com . The Audit Committee reviews and reassesses at least annually the adequacy of the Charter.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, for preparing our financial statements and for the public reporting process. Our independent registered public accounting firm, Ernst & Young LLP, is responsible for expressing opinions on the conformity of our audited financial statements with United States generally accepted accounting principles and on managements assessment of the effectiveness of our internal control over financial reporting. In addition, Ernst & Young LLP expresses its own opinion on the effectiveness of our internal control over financial reporting.
In this context, the Audit Committee has reviewed and discussed our audited financial statements with management. The Audit Committee has discussed with Ernst & Young LLP all matters required to be discussed by Statement of Auditing Standards No. 114, The Auditors Communication With Those Charged With Governance, which includes, among other items, matters related to the conduct of the audit of our financial statements. The Audit Committee has met with Ernst & Young LLP, with and without management present, to discuss the overall scope of Ernst & Young LLPs audit, the results of its examinations, its evaluations of our internal controls and the overall quality of its financial reporting. The Audit Committee meets with the outside auditors each quarter, and typically meets with them independently each quarter.
The Audit Committee has also received from Ernst & Young LLP a formal written statement describing all relationships between the auditors and SciClone that might bear on the auditors independence consistent with Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), discussed with the auditors any relationships that may impact their objectivity and independence and, having been informed that no such relationships exist between Ernst & Young LLP and SciClone, satisfied itself as to the auditors independence. In evaluating the auditors independence, the Audit Committee noted that Ernst & Young LLP did not provide any consulting services to SciClone.
The Audit Committee requires that all audit and permissible non-audit services be submitted to it for review and approval in advance.
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 SciClones Annual Report on Form 10-K for the year ended December 31, 2008.
YEAR 2010 STOCKHOLDER PROPOSALS
We welcome comments or suggestions from our stockholders. Under our Bylaws, in order for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in writing to SciClones Secretary. To be timely, a stockholder proposal to be presented at an annual meeting shall be received at our principal executive offices not less than 120 calendar days in advance of the date that our proxy statement was released to stockholders in connection with the previous years annual meeting of stockholders, except that if no annual meeting was held in the previous year or the date of the annual meeting has been advanced by more than 30 calendar days from the date contemplated at the time of the previous years proxy statement, then notice must be received not later than the close of business on the tenth day following the day on which the date of the annual meeting is publicly announced.
Proposals of stockholders intended to be presented at our 2010 Annual Meeting of Stockholders must be received by Corporate Secretary , SciClone Pharmaceuticals, Inc., 950 Tower Lane, Suite 900, Foster City, California 94404, no later than January 1, 2010, and must satisfy the conditions established by the SEC for stockholder proposals to be included in our proxy statement for the meeting.
At the date of this Proxy Statement, the Board of Directors knows of no other business that will be presented at the Annual Meeting other than as described in this Proxy Statement. If any other matter or matters are properly brought before the Annual Meeting, or any adjournment or postponement of the Annual Meeting, it is the intention of the persons named in the accompanying form of proxy to vote the proxy on such matters in accordance with their best judgment.
It is important that the proxies be voted promptly and that your shares be represented. Please vote your shares at your earliest convenience by phone, via the internet or by completing, signing, dating and returning the enclosed proxy card in the enclosed postage-paid envelope.
By order of the Board of Directors
Friedhelm Blobel, Ph.D.
President and Chief Executive Officer
Foster City, California
May 1, 2009
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A Vote FOR the following proposals is recommended by the Board of Directors:
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