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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
CYPROS PHARMACEUTICAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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CYPROS PHARMACEUTICAL CORPORATION
2714 LOKER AVENUE WEST
CARLSBAD, CALIFORNIA 92008
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, JANUARY 28, 1997
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Cypros
Pharmaceutical
Corporation (the "Company") will be held at the Company's executive offices,
2714 Loker Avenue West, Carlsbad, California 92008 on Tuesday, January 28, 1997
at 10:00 a.m. (local time), for the following purposes:
(1) To elect members of the Board of Directors to serve for the
ensuing year and until their successors are elected;
(2) To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending July 31, 1997; and
(3) To transact such other business as may properly come before the
meeting or any adjournments and postponements thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on November 29, 1996
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting. Only holders of the Company's Common Stock at
the close of business on the record date are entitled to vote at the Annual
Meeting.
By Order of the Board of Directors,
David W. Nassif, Secretary
Carlsbad, California
December 2, 1996
YOUR VOTE IS IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. HOWEVER, EVEN IF
YOU DO PLAN TO ATTEND, PLEASE PROMPTLY COMPLETE, SIGN, DATE AND MAIL THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES. RETURNING A SIGNED PROXY WILL NOT PREVENT YOU FROM VOTING IN
PERSON AT THE ANNUAL MEETING, IF YOU SO DESIRE, BUT WILL HELP THE COMPANY SECURE
A QUORUM AND REDUCE THE EXPENSE OF ADDITIONAL PROXY SOLICITATION. PLEASE NOTE,
HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE ANNUAL MEETING, YOU MUST OBTAIN FROM THE
RECORDHOLDER A PROXY ISSUED IN YOUR NAME.
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CYPROS PHARMACEUTICAL CORPORATION
2714 LOKER AVENUE WEST
CARLSBAD, CALIFORNIA 92008
------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, JANUARY 28, 1997
------------------------
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is furnished to the shareholders of Cypros
Pharmaceutical Corporation, a California corporation (the "Company"), in
connection with the solicitation of proxies by and on behalf of the Board of
Directors of the Company. The proxies solicited hereby are to be voted at the
Annual Meeting of Shareholders of the Company (the "Annual Meeting") to be held
at the Company's executive offices on January 28, 1997 at 10:00 a.m. (local
time), and at any and all adjournments and postponements thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders.
The executive offices of the Company are located at 2714 Loker Avenue West,
Carlsbad, California 92008. The telephone number is 619-929-9500. This Proxy
Statement and the accompanying form of proxy will be mailed to shareholders
entitled to vote at the Annual Meeting on or about December 6, 1996.
A form of proxy is enclosed for your use. The shares represented by each
properly executed, unrevoked proxy will be voted as directed by the shareholder
for the nominees to the Board of Directors and for any other matter to be
brought before the shareholders. If no direction is made, the shares represented
by each properly executed proxy will be voted for management's nominees for the
Board of Directors and for each other matter brought before the shareholders.
Any proxy given may be revoked at any time prior to the exercise thereof by
filing with the Secretary of the Company at the Company's executive offices a
written instrument revoking such proxy or by the filing of a duly executed proxy
bearing a later date. Any shareholder present at the Annual Meeting who has
given a proxy may withdraw it and vote his shares in person if such shareholder
so desires. Attendance at the meeting will not, by itself, revoke a proxy.
It is contemplated that the solicitation of proxies will be made primarily
by mail. The Company will make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy material to the
beneficial owners of the shares and may reimburse them for their expenses in so
doing. Should it appear desirable to do so in order to ensure adequate
representation of shares at the Annual Meeting, officers, agents and employees
of the Company may communicate with shareholders, banks, brokerage houses and
others by telephone, telegraph, or in person to request that proxies be
furnished. No additional compensation will be paid to directors, officers or
other regular employees of the Company for such services. All expenses incurred
in connection with this solicitation, including preparation, assembly, printing
and mailing of this Proxy Statement, will be borne by the Company. The Company
has no present plans to hire special employees or paid solicitors to assist in
obtaining proxies, but reserves the option of doing so if it should appear that
a quorum otherwise might not be obtained.
Only holders of record of the Company's Common Stock, no par value, at the
close of business on November 29, 1996, are entitled to notice of and to vote at
the Annual Meeting. As of November 29, 1996, the Company had issued and
outstanding 11,613,748 shares of Common Stock.
Each share of Common Stock is entitled to one vote on all matters to be
voted upon at the Annual Meeting. At the Annual Meeting, with respect to the
election of directors only, each shareholder will have the right to cumulate
votes for any candidate or candidates whose name(s) have been placed in
nomination prior to voting, provided such shareholder has given notice at the
Annual Meeting prior to the voting for Directors
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of the shareholder's intention to cumulate votes. If any one shareholder has
given such notice, all shareholders may cumulate their votes. If any such notice
is given, then management intends to cumulate votes for all shares for which it
holds proxies at the Annual Meeting. If such cumulative voting rights are
exercised, each share will have the number of votes for Directors which equals
the number of Directors to be elected (five). Such votes may be cast for one
nominee or allocated among two or more nominees. Unless the proxy holders are
otherwise instructed, shareholders, by means of the accompanying proxy, will
grant the proxy holders discretionary authority to cumulate votes. In the event
that the Board of Directors deems it appropriate, proxies may be cumulated and
distributed unequally among the five nominees identified herein in order to
ensure the election of the maximum number of such nominees. The five nominees
receiving the highest number of votes at the Annual Meeting will be elected.
Votes at the Annual Meeting, including those cast in person or by proxy,
will be tabulated by the Inspector of Elections appointed by the Board of
Directors, who will separately tabulate affirmative and negative votes,
abstentions and non-votes. Abstentions from voting and broker non-votes will be
counted for purposes of determining the existence of a quorum, but are not
counted for any purpose in determining whether a matter has been approved.
PROPOSAL 1 -- ELECTION OF DIRECTORS
NOMINEES
Directors are elected at each annual meeting of shareholders and hold
office until the next annual meeting of shareholders or until their respective
successors are elected and qualified, or until such Director's earlier death,
resignation or removal. The Board of Directors is presently composed of five
members. The following persons are nominees for election as Directors of the
Company, have each consented to serve as a Director if elected and are presently
serving as Directors of the Company: Dr. Paul J. Marangos, Robert F. Alnutt,
Digby W. Barrios, Virgil D. Thompson and Dr. Robert A. Vukovich.
The five candidates receiving the highest number of affirmative votes cast
at the meeting will be elected Directors of the Company. Management proxies will
be voted FOR the election of all of the above-named nominees unless the
shareholder indicates that the proxy shall not be voted for all or any one of
the nominees. If for any reason any nominee should, prior to the Annual Meeting,
become unavailable for election as a Director, an event not now anticipated, the
proxies will be voted for such substitute nominee, if any, as may be recommended
by management. In no event, however, shall the proxies be voted for a greater
number of persons than the number of nominees named.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION
OF THE ABOVE NOMINEES.
Set forth below is certain information with respect to the nominees for
Director of the Company:
NAME AGE POSITION
- ----------------------------------- --- --------------------------------------------
Paul J. Marangos, Ph.D. ........... 49 Chairman of the Board, President, Chief
Executive Officer and Director
Robert F. Allnutt(1)............... 61 Director
Digby W. Barrios................... 58 Director
Virgil Thompson(2)................. 57 Director
Robert A. Vukovich, Ph.D.(1)(2).... 53 Director
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(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
PAUL J. MARANGOS, Ph.D., has been President and Chairman of the Board since
he co-founded the Company in November 1990. He became the Chief Executive
Officer of the Company in February 1993.
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From April 1988 to November 1990, he was Senior Director of Research at Gensia
Pharmaceuticals, Inc., a biotechnology company. From 1980 to 1988, he was Chief
of Neurochemistry in the Biological Psychiatry Branch, National Institute of
Mental Health. Dr. Marangos obtained his doctorate in biochemistry from the
University of Rhode Island and did his post-doctoral work at the Roche Institute
of Molecular Biology. He has published 250 research papers and four books in the
field of biochemistry and pharmacology and is the recipient of the A.E. Bennett
Award in Biological Psychiatry (1980). Dr. Marangos' most recent book published
in July 1992 is entitled Emerging Strategies in Neuroprotection. He is a member
of the Society for Neuroscience and the American Academy for the Advancement of
Science. Dr. Marangos is the founding editor of the Journal of Molecular
Neuroscience published by Humana Press.
ROBERT F. ALLNUTT has been a Director of the Company since November 1996.
He has been a management consultant since February 1995. Mr. Allnutt was
Executive Vice President of the Pharmaceutical Manufacturers Association from
May 1985 until February 1995. Mr. Allnutt is also a director of Cortex
Pharmaceuticals, Inc., a developer of pharmaceuticals to treat age-related
degenerative diseases and disorders, and Penederm, Inc., a developer and
marketer of specialized dermatology products.
DIGBY W. BARRIOS has been a Director of the Company since February 1993. He
has been a management consultant since June 1992. Mr. Barrios held various
management positions at Boehringer Ingelheim Corporation, a manufacturer of
pharmaceuticals and fine chemicals, from January 1983 to June 1992, the last
five years of which he was President and Chief Executive Officer. He is also a
director of Roberts Pharmaceutical Corporation, an international pharmaceutical
company, which licenses, acquires, develops and commercializes post-discovery
drugs in selected therapeutical categories, and Sepracor, Inc., which develops
improved chemical entities that are enhanced forms of existing, widely sold
pharmaceuticals.
VIRGIL D. THOMPSON has been a Director of the Company since January 1996.
He has been the President and Chief Executive Officer and a member of the Board
of Directors of Cytel Corporation since January 1996. He was the President and
Chief Executive Officer of CIBUS Pharmaceutical, Inc. from July 1994 to January
1996. Prior thereto, he was the President of Syntex Laboratories, Inc.
("Syntex") from August 1991 to August 1993 and an Executive Vice President of
Syntex from March 1986 to August 1991. Mr. Thompson is also a director of
Biotechnology General Corporation, which develops, manufactures and markets
genetically-engineered and other products for human health care, and Aradigm
Corporation, which develops non-invasive pulmonary drug delivery products.
ROBERT A. VUKOVICH, PH.D., has been a Director of the Company since August
1992. Since 1983, he has been Chairman of the Board, President and Chief
Executive Officer of Roberts Pharmaceutical Corporation. Prior thereto, he was
the Director of the Division of Developmental Therapeutics for Revlon Health
Care Group from 1979 to 1983. Dr. Vukovich received a doctorate in pharmacology
and pathology from Jefferson Medical College, Philadelphia.
MEETINGS; ATTENDANCE; COMMITTEES
The Board of Directors held 10 meetings during the fiscal year ended July
31, 1996. Each of the Directors attended at least 75% of the aggregate number of
meetings of the Board and of the committees on which he served, held during the
period for which he was a director or committee member, respectively. The Board
of Directors has an Audit Committee, which met twice during the last fiscal
year, and a Compensation Committee, which met twice during the last fiscal year.
The Board does not have a Nominating Committee. In practice, the entire Board
performs the function of a Nominating Committee.
The Audit Committee of the Board of Directors is responsible for reviewing
and supervising the financial controls of the Company, including the selection
of the Company's auditors, the scope of the audit procedures, the nature of the
services to be performed by and the fees to be paid to the Company's independent
auditors, and any changes in the accounting standards of the Company. The Audit
Committee meets with the Company's independent auditors twice annually. The
Audit Committee is composed of two non-employee directors: Mr. Alnutt and Dr.
Vukovich.
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The Compensation Committee of the Board of Directors is responsible for
setting the initial salary and stock option grant for new executive officers,
for making salary adjustments, awarding bonuses and/or additional stock option
grants to executive officers, and for developing incentive compensation programs
for such officers. The Compensation Committee is composed of two non-employee
directors: Mr. Thompson and Dr. Vukovich.
DIRECTOR COMPENSATION
The Company compensates its non-employee Directors for their service on the
Board with an annual grant of 10,000 stock options under the 1993 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"). Options granted under the
Directors' Plan have an exercise price equal to 85% of the fair market value of
the Common Stock (as determined by the Board) on the date of the grant and vest
in 48 equal monthly installments commencing on the date of the grant, provided
the non-employee Director serves continuously on the Board during the month. The
Company also reimburses its directors who are not employees for their reasonable
expenses incurred in attending meetings. No additional fees are paid for
participation in committee meetings. Directors who are officers of the Company
receive no additional compensation for Board service. Therefore, Dr. Marangos
received no additional compensation for Board service in fiscal 1996.
PROPOSAL 2 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Pursuant to the recommendation of its Audit Committee, the Board of
Directors has appointed Ernst & Young LLP as independent auditors of the Company
for the fiscal year ending July 31, 1997, subject to ratification of such
appointment by the shareholders. Ernst & Young LLP has audited the Company's
financial statements and prepared its federal and state tax returns since 1992.
A representative of Ernst & Young LLP will be available at the Annual Meeting to
respond to appropriate questions or make such statements as such representative
deems appropriate.
Shareholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the shareholders for ratification as a matter of good corporate practice. If
the shareholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its shareholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Ernst & Young LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE SELECTION OF ERNST & YOUNG LLP.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain compensation paid by the Company to
its Chief Executive Officer and each of the other most highly compensated
current executive officers of the Company who earned more
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than $100,000 in the fiscal year ended July 31, 1996 (collectively, the "Named
Executive Officers") for services rendered to the Company for the fiscal years
ended July 31, 1996, 1995 and 1994(1):
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY
- ------------------------------------------ ------ ------------
Paul J. Marangos...................................................... 1996 $195,000
Chairman, President and 1995 $183,462
Chief Executive Officer 1994 $165,000
Anthony W. Fox........................................................ 1996 $165,038
Vice President of Drug Development 1995 $151,058
David W. Nassif....................................................... 1996 $133,269
Vice President, Chief Financial Officer 1995 $118,846
and Secretary
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(1) For the fiscal year ended July 31, 1994, no executive officer of the Company
other than the Chief Executive Officer received cash compensation of more
than $100,000.
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under the 1992 Stock
Option Plan (the "1992 Plan").
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant any stock options to the Named Executive Officers
during the fiscal year ended July 31, 1996.
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table presents certain information with respect to option
exercises during the fiscal year ended July 31, 1996 by each of the Named
Executive Officers and the value at July 31, 1996 of unexercised options held by
such individuals. The value of unexercised options reflects the increase in
market value of the Company's Common Stock from the date of grant through July
31, 1996 (the last trade in the Company's Common Stock on that date was executed
at $4.50 per share). The value actually realized upon future option exercises by
the Named Executive Officers will depend on the value of the Company's Common
Stock at the time of exercise.
AGGREGATED OPTION EXERCISES IN 1996 FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING OPTIONS AS OF IN-THE-MONEY OPTIONS AT
ACQUIRED FY-END(#)(1) FY-END($)(2)
IN VALUE --------------------------- -----------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ----------- -------- ----------- ------------- ----------- -------------
Paul J. Marangos(CEO)...... None None None None -- --
Anthony W. Fox............. None None 81,249 68,751 -- --
David W. Nassif............ None None 77,864 47,136 $ 146,745 $54,505
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(1) Includes both in-the-money and out-of-the-money options. "In-the-money"
options are options with exercise prices below the market price of the
Company's Common Stock.
(2) Based on the fair market value of the underlying shares on the last day of
the fiscal year less the exercise or base price. Excludes out-of-the-money
options.
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EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Dr. Marangos has an employment agreement with the Company until August
1997, pursuant to which he is employed as Chairman of the Board of Directors,
President and Chief Executive Officer of the Company at an annual salary of
$195,000 per year. Pursuant to an amendment executed in October 1996, the
expiration date of the agreement was extended through August 31, 1999 and Dr.
Marangos' salary was increased to $216,500. Dr. Marangos' employment agreement
contains certain provisions concerning maintenance of confidential information
of the Company and assignment of inventions by the Company. In the event that
the Company terminates Dr. Marangos' employment with or without cause in
accordance with the agreement, Dr. Marangos is entitled to continue to receive
base salary and benefits for a period of 12 months following termination.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)
Compensation Philosophy
The Company's executive compensation programs are designed to attract and
retain executives capable of leading the Company to meet its business objectives
and to motivate them to enhance long-term shareholder value. The Company's
compensation of executive officers generally has been comprised of a cash salary
and stock option grants under the 1992 Plan.
Base Salary
The Compensation Committee uses a number of factors in setting the base
salary of a new executive officer, including the officer's credentials and
previous compensation package and the average salary for such position as
reported in various industry group surveys that the Compensation Committee uses.
The surveys that the Compensation Committee uses generally include companies
that are in the development stage with no more than 50 employees, a narrower
group of companies than those in the Nasdaq Pharmaceutical Stocks group shown on
the Company's Stock Price Performance Graph. Subsequent salary increases are
based upon reviews of each officer's performance in helping the Company to
achieve its business objectives, including the advancement of its clinical and
research programs, product acquisitions, sales growth, capital raising and cost
containment, and ultimately, the performance of the Company's stock price. The
Company's financial position is also a factor that is considered by the
Compensation Committee.
Stock Option Grants
Each incoming executive officer is given a stock option grant under the
1992 Plan at the time of employment in order to provide a long-term incentive
and align executive officer and shareholder long-term interests by creating a
direct link between executive compensation and shareholder return. Stock options
are granted at an exercise price equal to the fair market value of the Company's
Common Stock on the date of the grant. In order to facilitate long-term
incentives through the option grants, options are generally subject to monthly
vesting over a 48-month period and are exercisable for 10 years.
The initial grant and any subsequent grants to an executive officer is
determined by the Compensation Committee in much the same way that the officer's
base salary is determined.
Chief Executive Officer
The increase in the annual salary of Dr. Marangos to $216,500 in October
1996 was based upon a decision of the Compensation Committee after evaluating
his performance since March of 1995, the date of his last evaluation, and
conducting a comparison of his compensation package with that of Chief Executive
Officers of other publicly held biopharmaceutical companies. Critical to the
Committee's decision was (a) the acquisition of Glofil and Inulin and their
subsequent increase in sales, (b) the building of the Company's operational
base, including the sales and marketing and customer service force and the
opening of the Company's licensed drug distribution facility, (c) the continued
progress of the Company's pre-clinical and
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clinical programs, (d) the raising of $9 million in additional capital for the
Company, and (d) the containment of costs throughout this period of rapid
growth.
Chief Executive Officer Bonus
The employment agreement for the Chief Executive Officer allows for the
payment of an annual bonus in the sole discretion of the Compensation Committee,
based upon the annual performance evaluation for such officer. While the Company
and Dr. Marangos met most of their goals and objectives for the 1996 fiscal
year, the Compensation Committee determined that the Company was not in a
position to pay Dr. Marangos a cash bonus. For this same reason, the Company has
not yet instituted a cash bonus plan for the Company's other executive officers.
The Compensation Committee did approve a grant to Dr. Marangos of options on
25,000 shares of Common Stock under the 1992 Plan with the same general terms
set forth above.
Section 162(m) of the Internal Revenue Code
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to certain
Named Executive Officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code.
The Compensation Committee has determined that stock options granted under
the 1992 Plan with an exercise price at least equal to the fair market value of
the Company's Common Stock on the date of grant shall be treated as
"performance-based compensation."
Compensation Committee
Virgil D. Thompson
Robert A. Vukovich
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(1) The material in this report and in the following stock price performance
presentation is not soliciting material, is not deemed filed with the U.S.
Securities and Exchange Commission (the "SEC") and is not incorporated by
reference in any filing of the Company under the Securities Act of 1933 as
amended, or the Exchange Act, whether made before or after the date of this
Proxy Statement and irrespective of any general incorporation language in
such filing.
STOCK PRICE PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock, based on its market price and assuming
reinvestment of dividends, with the cumulative total return of companies on the
Nasdaq Stock Market (U.S. common stocks) and the Nasdaq Pharmaceutical Stocks
group for the period beginning November 30, 1992 (the end of the month in which
the Company's Common Stock first began trading) through the Company's fiscal
year ended July 31, 1996. The Company's Common Stock was initially offered to
the public and subject to securities registration on November 3, 1992. This
graph assumes that the value of the investment in the Company's Common Stock and
each of the
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comparison groups was $100 on November 30, 1992 and that all dividends were
reinvested at the time they were paid.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
CYPROS PHARMACEUTICAL CORPORATION, THE NASDAQ STOCK MARKET AND
NASDAQ PHARMACEUTICAL STOCKS
MEASUREMENT PERIOD NASDAQ
(FISCAL YEAR COVERED) CYPROS NASDAQ COMPOSITE PHARMACEUTICALS
11/30/92 100 100 100
7/30/93 64 108 73
7/29/94 131 110 65
7/30/95 231 155 92
7/30/96 115 170 109
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of November 21, 1996 by (i) all
persons known by the Company to own beneficially 5% or more of the outstanding
shares of the Company's Common Stock, (ii) each nominee for Director, (iii) the
Named Executive Officers, and (iv) all officers and directors of the Company as
a group. Except as otherwise indicated, the Company believes that the beneficial
owners of the Common Stock listed below, based on information furnished by such
owners, have sole investment and voting power with respect to such shares,
subject to community property laws where applicable.
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS BENEFICIALLY OWNED OF TOTAL
- --------------------------------------------------------------- ------------------ ----------
Paul J. Marangos(1)............................................ 1,622,020 14.0%
2714 Loker Avenue West
Carlsbad, California 92008
Bernard B. Levine(2)........................................... 1,283,832 11.0
P.O. Box 2635
La Jolla, CA 92038-2635
Robert F. Allnutt(3)........................................... 1,520 *
Digby W. Barrios(4)............................................ 77,625 *
Virgil D. Thompson(5).......................................... 5,729 *
Robert A. Vukovich(6).......................................... 119,187 1.0
Anthony W. Fox(7).............................................. 100,478 *
David W. Nassif(8)............................................. 92,916 *
All officers and directors, as a group (8 persons)(9).......... 2,037,141 17.0
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* Less than one percent.
(1) Includes 1,562 shares issuable upon options exercisable within 60 days.
(2) Includes 10,750 shares issuable upon options exercisable within 60 days.
(3) Includes 520 shares issuable upon options exercisable within 60 days.
(4) Includes 72,625 shares issuable upon options exercisable within 60 days.
(5) Includes 5,729 shares issuable upon options exercisable within 60 days.
(6) Includes 79,187 shares issuable upon options exercisable within 60 days.
(7) Includes 96,874 shares issuable upon options exercisable within 60 days.
(8) Includes 91,821 shares issuable upon options exercisable within 60 days.
(9) Includes 362,381 shares issuable upon options exercisable within 60 days.
TRANSACTIONS WITH RELATED PARTIES
During the fiscal year ended July 31, 1996, the Company issued
non-qualified stock option grants to two of its Board members, Dr. Bernard B.
Levine and Dr. Robert A. Vukovich, under the 1992 Plan. One grant to Dr. Levine
of options on 34,000 shares was in recognition of Board service for the
preceding three years. Dr. Levine was not eligible for either an original grant
or an annual grant under the Directors' Plan for Board service. A second grant
to Dr. Levine and a grant to Dr. Vukovich, each one for options on 35,000
shares, represented recognition of their substantial efforts on behalf of the
Company in furthering the Company's business development and clinical programs.
All three of these grants have 24-month vesting provisions, 10-year lives and
exercise prices at a 15% discount to the market price on the date of the grant.
Since both Dr. Levine and Dr. Vukovich were members of the Audit Committee at
the time of these grants, these grants were approved unanimously by the Board of
Directors with Dr. Levine and Dr. Vukovich absent from the deliberations.
9
12
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the directors and executive
officers of the Company and persons who own more than ten percent of the
Company's Common Stock (i) to file with the SEC and the National Association of
Securities Dealers, Inc. initial reports of ownership and reports of changes in
ownership of the Company's Common Stock and (ii) to furnish the Company with a
copy of each such report.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended July 31, 1996, all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders are advised that any shareholder proposal intended for
consideration at the 1998 Annual Meeting must be received by the Company, at the
address set forth on the first page of this Proxy Statement, no later than
August 8, 1997, to be included in the proxy material for the 1998 Annual
Meeting. It is recommended that shareholders submitting proposals direct them to
the Secretary of the Company and utilize certified mail, return receipt
requested, in order to ensure timely delivery.
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended July 31, 1996, as filed with the SEC, including the financial statements
and financial statement schedules but excluding exhibits, is being provided to
shareholders together with this Proxy Statement. Upon written request, the
Company will furnish to shareholders a copy of the exhibits to such Annual
Report on Form 10-K, upon payment of a fee limited to the Company's reasonable
expenses in furnishing such exhibits. Such requests should be directed to the
Chief Financial Officer, at the Company's executive offices, 2714 Loker Avenue
West, Carlsbad, California 92008.
OTHER MATTERS
The Board of Directors knows of no matter to come before the Annual Meeting
other than as specified herein. If other business should, however, be properly
brought before the Annual Meeting, the persons voting the proxies will vote them
in accordance with their best judgment.
THE SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN PROMPTLY THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors,
David W. Nassif, Secretary
Carlsbad, California
December 2, 1996
10
13
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
CYPROS PHARMACEUTICAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints PAUL J. MARANGOS and DAVID W. NASSIF, and each of
them, proxies with full power of substitution, to vote all shares of Common
Stock of Cypros Pharmaceutical Corporation (the "Company"), which the
undersigned is entitled to vote, at the Annual Meeting of Shareholders of Cypros
to be held at Cypros's offices, 2714 Loker Avenue West, Carlsbad, California on
Tuesday, January 28, 1997 at 10:00 a.m. local time, and at all adjournments
thereof, upon the following matters:
The Board of Directors recommends votes for:
(1) Election of Paul J. Marangos, Robert F. Allnutt, Digby W. Barrios, Virgil D.
Thompson and Robert A. Vukovich as Directors of the Company to serve until
the 1998 Annual Meeting or until their successors are elected and qualified.
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed above
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
(2) To ratify the selection of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending July 31, 1997
[ ] FOR [ ] AGAINST [ ] WITHHOLD
14
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE NOMINEES LISTED ABOVE. IF ANY NOMINEE NAMED ABOVE DECLINES OR IS
UNABLE TO SERVE AS A DIRECTOR, THE PERSONS NAMED AS PROXIES SHALL HAVE FULL
DISCRETION TO VOTE FOR ANY OTHER PERSON WHO MAY BE NOMINATED. WHEN PROPERLY
EXECUTED, THIS PROXY ALSO AUTHORIZES THE PROXY HOLDERS TO ACT IN ACCORDANCE WITH
THEIR DISCRETION UPON ALL MATTERS INCIDENT TO THE CONDUCT OF THE MEETING AND
UPON OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated:
- ------------------------------ ------------------------------------
Signature
------------------------------------
Print Name
------------------------------------
Signature (if held jointly)
------------------------------------
Print Name
Please sign exactly as your name
appears hereon. If the stock is
registered in the names of two or
more persons, each should sign.
Executors, administrators, trustees,
guardians and attorneys-in-fact
should add their titles. If signer
is a corporation, please give full
corporate name and have a duly
authorized officer sign, stating
title. If signer is a partnership,
lease sign in partnership name by
authorized person.
PLEASE VOTE, DATE AND PROMPTLY
RETURN THIS PROXY IN
THE ENCLOSED RETURN ENVELOPE WHICH
IS POSTAGE
PREPAID IF MAILED IN THE UNITED
STATES.
