PALATIN TECHNOLOGIES INC
10-Ks and 10-Qs
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment No. __)
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))
☒
Definitive Proxy Statement
☐
Definitive Additional Materials
☐
Soliciting Material under Rule 14a-12
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Palatin
Technologies, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment of Filing
Fee (Check the appropriate box):
☒ No
fee required
☐ Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title
of each class of securities to which transaction
applies:
(2) Aggregate
number of securities to which transaction applies:
(3) Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule
0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed
maximum aggregate value of transaction:
(5) Total
fee paid:
☐ Fee
paid previously with preliminary materials.
☐ Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
(1) Amount
Previously Paid:
(2) Form,
Schedule or Registration Statement No.:
(3) Filing
Party:
(4) Date
Filed:
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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date
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Thursday, June 20,
2019
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time
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9:00 a.m., Eastern
Time
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place
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Palatin’s
offices, 4B Cedar Brook Drive, Cedar Brook Corporate Center,
Cranbury, New Jersey 08512
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record date
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April 22,
2019
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items of business
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(1) election of
eight directors nominated by our board of directors;
(2) ratification of
appointment of our independent registered public accounting firm
for the fiscal year ending June 30, 2019;
(3) to approve, on
an advisory, non-binding basis, the frequency of future advisory
votes on the compensation of our named executive officers (every
year, every two years or every three years)
(“say-on-frequency”);
(4) to approve, on
an advisory, non-binding basis, the compensation of our named
executive officers (“say-on-pay”); and
(5) any other
matters properly brought before the meeting or any adjournment or
postponement thereof.
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stockholder list
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A list of all
stockholders entitled to vote at the meeting will be available for
examination by any stockholder, for any purpose germane to the
meeting, during ordinary business hours for 10 days before the
meeting, at our offices, Cedar Brook Corporate Center, 4B Cedar
Brook Drive, Cranbury, New Jersey 08512.
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By order of the
board of directors,
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Stephen T. Wills
,
Secretary
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May 6,
2019
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The approximate
date of mailing of the Notice Regarding the Availability of Proxy
Materials to our stockholders is May 10, 2019, and this proxy
statement, proxy card and annual report, including our annual
report on Form 10-K for the fiscal year ended June 30, 2018, will
be available to our stockholders on www.proxyvote.com on that same
date. On or about that date, we will also begin mailing paper
copies of our proxy materials to our registered holders and to our
beneficial holders who request paper copies.
ii
Important Notice Regarding the Availability of Proxy
Materials
for the Stockholder Meeting to Be Held on June 20,
2019:
The proxy statement, proxy card and annual report to security
holders, including our annual report on Form 10-K for the fiscal
year ended June 30, 2018, are available at
www.proxyvote.com.
PALATIN TECHNOLOGIES, INC.
2019 ANNUAL MEETING
Table of Contents
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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ii
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VOTING PROCEDURES AND SOLICITATION
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1
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ITEM ONE: ELECTION OF DIRECTORS
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6
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THE NOMINEES
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6
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ITEM TWO: RATIFICATION OF APPOINTMENT OF KPMG LLP AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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15
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REPORT OF THE AUDIT COMMITTEE
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16
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ITEM THREE: ADVISORY APPROVAL ON THE FREQUENCY OF HOLDING FUTURE
ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
(“SAY-ON-FREQUENCY”)
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18
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ITEM FOUR: ADVISORY APPROVAL OF THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS
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19
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EXECUTIVE COMPENSATION
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21
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EXECUTIVE OFFICERS
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26
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STOCK OWNERSHIP INFORMATION
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35
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
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35
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BENEFICIAL OWNERSHIP OF MANAGEMENT AND OTHERS
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35
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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37
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OTHER ITEMS OF BUSINESS
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37
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STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
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38
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iii
4B Cedar Brook Drive
Cranbury, New Jersey 08512
(609) 495-2200
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 20, 2019
Important Notice Regarding the Availability of Proxy
Materials
for the Stockholder Meeting to Be Held on June 20,
2019:
The proxy statement, proxy card and annual report to security
holders, including our annual report on Form 10-K for the fiscal
year ended June 30, 2018, are available at
www.proxyvote.com.
YOUR VOTE IS IMPORTANT
Whether
or not you plan to attend the meeting, please act as soon as
possible to vote your shares. Your prompt voting may save us the
expense of following up with a second mailing. Beginning on or
about May 10, 2019, we are sending proxy materials to stockholders
of record at the close of business on April 22, 2019. If your
shares are registered directly in your name with our transfer
agent, American Stock Transfer & Trust Company, LLC, you are
considered, with respect to those shares, the “stockholder of
record.” We are sending a Notice Regarding the Availability
of Proxy Materials (the “Notice”) to beneficial owners
of our stock beginning on or about May 10, 2019. If your shares are
held in a stock brokerage account or by a bank or other holder of
record (a “brokerage firm”), you are considered the
“beneficial owner” of the shares held in street name.
Beneficial owners may view proxy materials online and may also
request and receive a paper or e-mail copy of the proxy materials
by following the instructions provided in the Notice.
1
METHODS OF VOTING
If you
are a beneficial owner, you may be eligible to vote your shares
electronically over the Internet or by telephone. Many brokerage
firms participate in the Broadridge Investor Communications
Services online program. This program provides eligible
stockholders that hold shares in street name the opportunity to
vote via the Internet or by telephone. Whether or not your
brokerage firm is participating in Broadridge’s program, your
proxy materials will contain voting instructions. If you are a
stockholder of record or if you are a beneficial owner whose
brokerage firm participates in Broadridge’s program, there
are three ways to vote before the meeting:
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By Internet – www.proxyvote.com.
If you have Internet access, you may transmit your voting
instructions up until 11:59 p.m., Eastern Time, the day before the
meeting date, that is, June 19, 2019. Go to www.proxyvote.com. You
must have your proxy card or Notice in hand when you access the web
site and follow the instructions to obtain your records and to
create an electronic voting instruction form.
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By telephone – 1-800-690-6903.
You
may vote using any touch-tone telephone to transmit your voting
instructions up until 11:59 p.m., Eastern Time, the day before the
meeting date, that is, June 19, 2019. Call 1-800-690-6903 toll
free. You must have your proxy card or Notice in hand when you call
this number and then follow the instructions.
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By mail –
Mark, sign and date your
proxy card and return it in the postage-paid envelope we have
provided. If you did not receive a proxy copy, you may request
proxy materials, including a proxy card, by following the
instructions in the Notice.
If you
voted by Internet or telephone or sent in a proxy card and also
attend the meeting in person, the proxy holders will vote your
shares as you previously instructed unless you inform the Secretary
at the meeting that you wish to vote in person.
REVOKING OR CHANGING A PROXY
You may
revoke your proxy or change your vote by
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voting again by
proxy over the Internet or by telephone until 11:59 p.m. on June
19, 2019 (only your last Internet or telephone vote will be
counted);
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signing and
returning another proxy card on a later date;
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sending written
notice of revocation or change to the Secretary at our offices, 4B
Cedar Brook Drive, Cranbury, New Jersey 08512; or
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informing the
Secretary and voting in person at the meeting.
To be
effective, a later-dated proxy or written revocation or change must
arrive at our corporate offices before the start of the
meeting.
If you
are a beneficial owner, you may submit new voting instructions by
following the instructions from the brokerage firm that holds your
shares, or by obtaining a legal proxy from the brokerage firm that
holds your shares giving you the right to vote the shares. You may
vote in person at the meeting only if you are the stockholder of
record or if you are a beneficial owner and have obtained a legal
proxy from the brokerage firm that holds your shares.
2
PROXY SOLICITATION
We are
soliciting proxies on behalf of the board of directors, and we will
pay all costs of preparing, printing and mailing the proxy
materials. In addition to mailing proxy materials, our officers and
employees may solicit proxies by telephone, fax, e-mail or
Internet, without receiving any additional compensation for their
services. We have requested brokers, banks and other fiduciaries to
forward proxy materials to the beneficial owners of our stock and
will pay for their reasonable expenses in forwarding proxy
materials to such beneficial owners. We have engaged Alliance
Advisors, LLC to assist in the solicitation of proxies and provide
related advice and informational support for a service fee and the
reimbursement of customary disbursements that are not expected to
exceed $18,500 in the aggregate.
Proxies
and ballots will be received and tabulated by Broadridge Financial
Solutions, Inc. (“Broadridge”), and Broadridge or its
designee will serve as our Inspector of Election.
HOW PROXIES ARE VOTED
The
proxy holders are Carl Spana, Ph.D., our chief executive officer,
president and a director, and Stephen T. Wills, our chief financial
officer, chief operating officer, executive vice president,
secretary and treasurer. The proxy holders will vote your shares
according to your instructions on the proxy card or your Internet
or telephone instructions. If a signed proxy card does not contain
instructions, the proxy holders will vote the shares FOR the
election of the director nominees listed on the card; FOR ratifying
the appointment of KPMG LLP as our independent registered public
accounting firm for the fiscal year ending June 30, 2019; FOR
approval of an annual frequency of holding future advisory votes on
the compensation of our named executive officers; FOR approval of
the compensation of our named executive officers; and in their
discretion, on any other business which may properly come before
the meeting.
VOTING RIGHTS, SHARES OUTSTANDING AND VOTES PER SHARE
Holders
of common stock and of Series A preferred stock at the close of
business on the record date of April 22, 2019 are entitled to vote
at the meeting:
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Common stock:
203,062,848 shares outstanding, one vote per share;
and
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Series A preferred
stock: 4,030 shares outstanding with approximately 15 votes per
share, a total of 61,335 votes.
There
are no rights of appraisal or similar rights of dissenters with
respect to the items of business at this meeting.
3
QUORUM AND VOTES REQUIRED
A
majority of the votes of shares of common stock and Series A
preferred stock, in each case outstanding on April 22, 2019, the
record date, with the Series A preferred stock counted on an as if
converted to common stock basis, represented at the meeting in
person or by proxy, constitutes a quorum. Abstentions and broker
non-votes will count towards the quorum. If your shares are held in
street name and you do not provide voting instructions to the
brokerage firm that holds your shares, the brokerage firm can, in
its discretion, vote your unvoted shares on matters on which it is
permitted to exercise authority (“routine” matters). A
broker non-vote occurs when a broker, bank or other holder of
record holding shares for a beneficial owner does not vote on a
particular proposal because it does not have discretionary voting
power for that particular item, or chooses not to vote, and has not
received instructions from the beneficial owner. Common stock and
Series A preferred stock will vote together as one class on the
items of business listed on the proxy card. The votes required are
as follows:
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Item One
: Directors are elected
by a plurality of votes cast, so the eight nominees receiving the
most votes will be elected. Stockholders who do not wish to vote
for one or more of the individual nominees may withhold their
authority to vote in the manner provided on the proxy card or
Internet or telephone voting systems. Brokerage firms do not have
authority to vote customers’ unvoted shares held by firms in
street name for the election of directors. As a result, any shares
not voted by a beneficial owner will be treated as a broker
non-vote. Such broker non-votes or abstentions will have no effect
on the results of this vote.
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Item Two
: Ratifying the
appointment of our independent registered public accounting firm
for the fiscal year ending June 30, 2019 requires a majority of the
votes cast on that item. Brokerage firms have authority to
discretionarily vote customers’ unvoted shares held in street
name on this proposal. Abstentions and broker non-votes will count
neither for nor against the proposal.
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Item Three
: Advisory approval
on the frequency of holding future advisory votes on the
compensation of our named executive officers (one year, two years
or three years) will be determined based on which of the three
choices receives the most votes. Abstentions and broker non-votes
will count neither for nor against the proposal.
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Item Four
: Advisory approval of
say-on-pay for named executive officers (yes or no) will be
determined based on which of the two choices receives the most
votes. Abstentions and broker non-votes will count neither for nor
against the proposal.
WHAT IS THE EFFECT OF NOT CASTING YOUR VOTE?
If you
hold your shares in street name, it is critical that you cast your
vote if you want to be counted for the election of directors in
Item One. Your brokerage firm will not have discretionary authority
to vote for election of directors in Item One. If you hold your
shares in street name and you do not provide instructions on how to
vote for election of directors, no votes may be cast for election
of directors on your behalf.
4
Your
brokerage firm cannot vote your uninstructed shares in their
discretion on any other matter unless it is considered
“routine.” Item Two, ratifying the appointment of our
independent registered public accounting firm, is a routine
proposal, and your brokerage firm will have discretionary authority
to vote on Item Two. If you hold your shares in street name and you
do not instruct your brokerage firm how to vote, your brokerage
firm may vote for Item Two.
Item
Three, an advisory approval on the frequency of holding future
advisory votes on the compensation of our named executive officers,
and Item Four, advisory approval on say-on-pay for our named
executive officers, are not considered routine. Your brokerage firm
will not have discretionary authority to vote on Items Three or
Four. If you hold your shares in street name and you do not provide
instructions on how to vote, then no vote will be cast on these
items on your behalf.
If you
are a stockholder of record and you do not cast your vote, no votes
will be cast on your behalf on any of the items of business at the
annual meeting.
IS VOTING CONFIDENTIAL?
We will
keep all the proxies, ballots and voting tabulations private. We
only let Broadridge examine these documents. Management will not
know how you voted on a specific proposal unless it is necessary to
meet legal requirements. Broadridge will, however, forward to
management any written comments you make on the proxy
card.
HOUSEHOLDING OF ANNUAL DISCLOSURE DOCUMENTS
To
reduce the expense of delivering duplicate proxy materials to
stockholders who may have more than one account holding our stock
who share the same address, we have adopted a procedure approved by
the Securities and Exchange Commission (“SEC”) called
“householding.” Under this procedure, one Notice or a
single set of our annual report and proxy statement will be sent to
any household at which two or more of our stockholders reside, if
we or your broker believe that the stockholders are members of the
same family. Householding benefits both you and us. It reduces the
volume of duplicate information received at your household and
helps to reduce our expenses. The procedure applies to our annual
reports, proxy statements, other proxy materials and information
statements. Once you receive notice from your broker or from us
that communications to your address will be
“householded,” the practice will continue until you are
otherwise notified or until you revoke your consent to the
practice. Each stockholder will continue to have access to and
utilize separate proxy voting instructions.
If you
do not wish to participate in “householding” and would
like to receive your own set of any or all of our annual disclosure
documents, or if you share an address with another Palatin
stockholder and together both of you would like to receive only a
single set of our annual disclosure documents, please contact
Broadridge Financial Solutions, Inc., either by calling toll-free
at (800) 542-1061, or by writing to Broadridge Financial Solutions,
Inc. Householding Department, 51 Mercedes Way, Edgewood, New York
11717. Alternatively, if your brokerage firm or other nominee holds
your Palatin shares, you may contact your broker or other nominee
directly and inform them of your request. Be sure to include your
name, the name of your brokerage firm and your account
number.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5
ITEM ONE: ELECTION OF DIRECTORS
The
board has nominated the following eight persons as directors to
serve until the next annual meeting and until their successors have
been duly elected. Each of the nominees is currently a director of
Palatin. The eight nominees who receive the most votes will be
elected as directors to serve until the next annual meeting, or
until their successors are elected and qualified.
Unless
otherwise instructed, the proxy holders will vote the proxies
received by them for the eight nominees named below. If any nominee
is unable or declines to serve as director at the time of the
Annual Meeting, the proxies will be voted for any nominee who is
designated by our present board to fill the vacancy, or the board
may reduce the number of directors.
Nominees for Election as Directors.
The board unanimously
adopted a resolution proposing the nominees set forth below for
election as directors of Palatin for the next year.
THE NOMINEES
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Name
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Age
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Position with Palatin
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Carl
Spana, Ph.D.
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56
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Chief
Executive Officer, President and a Director
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John
K.A. Prendergast, Ph.D. (3)
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65
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Director, Chairman
of the Board of Directors
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Robert
K. deVeer, Jr. (1) (2)
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73
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Director
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J.
Stanley Hull (1) (2)
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66
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Director
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Alan W.
Dunton, M.D. (1) (2)
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64
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Director
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Angela
Rossetti (1) (3)
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66
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Director
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Arlene
M. Morris (2) (3)
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67
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Director
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Anthony
M. Manning, Ph.D. (3)
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57
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Director
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(1)
Member of the audit
committee.
(2)
Member of the
compensation committee.
(3)
Member of the
nominating and corporate governance committee.
CARL SPANA,
Ph.D., co-founder of Palatin, has been our Chief Executive Officer
and President since June 14, 2000. He has been a director of
Palatin since June 1996 and has been a director of our wholly-owned
subsidiary, RhoMed Incorporated, since July 1995. From June 1996
through June 14, 2000, Dr. Spana served as an executive vice
president and our chief technical officer. From June 1993 to June
1996, Dr. Spana was vice president of Paramount Capital
Investments, LLC, a biotechnology and biopharmaceutical merchant
banking firm, and of The Castle Group Ltd., a medical venture
capital firm. Through his work at Paramount Capital Investments and
The Castle Group, Dr. Spana co-founded and acquired several private
biotechnology firms. From July 1991 to June 1993, Dr. Spana was a
Research Associate at Bristol-Myers Squibb, a publicly-held
pharmaceutical company, where he was involved in scientific
research in the field of immunology. He was previously a member of
the board of the life science company AVAX Technologies, Inc. Dr.
Spana received his Ph.D. in molecular biology from The Johns
Hopkins University and his B.S. in biochemistry from Rutgers
University.
6
Dr.
Spana’s qualifications for our board include his scientific
expertise, leadership experience, business judgment and industry
knowledge. As a senior executive of Palatin for over twenty years,
he provides in-depth knowledge of our company, our drug products
under development and the competitive and corporate partnering
landscape.
JOHN
K.A. PRENDERGAST, Ph.D., co-founder of Palatin, has served as the
non-executive Chairman of the board since June 14, 2000, and as a
director since August 1996. While Mr. Prendergast has served as a
member of the board, he does not, and has not, served in a
management or operational role with the company. Dr. Prendergast
has been president and sole stockholder of Summercloud Bay, Inc.,
an independent consulting firm providing services to the
biotechnology industry, since 1993. Dr. Prendergast is lead
director of Heat Biologics, Inc., a publicly traded clinical stage
immunotherapy company, and a director of Recce Pharmaceuticals
Ltd., a publicly traded Australian pharmaceutical company
developing antibiotic drugs. He was previously a member of the
board of the life science companies AVAX Technologies, Inc.,
Avigen, Inc. and MediciNova, Inc. From October 1991 through
December 1997, Dr. Prendergast was a managing director of The
Castle Group Ltd., a medical venture capital firm. Dr. Prendergast
received his M.Sc. and Ph.D. from the University of New South
Wales, Sydney, Australia and a C.S.S. in administration and
management from Harvard University.
Dr.
Prendergast brings a historical perspective to our board coupled
with extensive industry experience in corporate development and
finance in the life sciences field. His prior service on other
publicly traded company boards provides experience relevant to good
corporate governance practices.
ROBERT
K. deVEER, Jr. has been a director of Palatin since November 1998.
Since January 1997, Mr. deVeer has been the president of deVeer
Capital LLC, a private investment company. He was a director of
Solutia Inc., a publicly-held chemical-based materials company,
until its merger with Eastman Chemical Company in July 2012. From
1995 until his retirement in 1996, Mr. deVeer served as Managing
Director, Head of Industrial Group, at New York-based Lehman
Brothers. From 1973 to 1995, he held increasingly responsible
positions at New York-based CS First Boston, including Head of
Project Finance, Head of Industrials and Head of Natural Resources.
He was a managing director, member of the investment banking
committee and a trustee of the First Boston Foundation. He received
a B.A. in economics from Yale University and an M.B.A. in finance
from Stanford Graduate School of Business.
Mr.
deVeer has extensive experience in investment banking and corporate
finance, including the financing of life sciences companies, and
serves as the audit committee’s financial
expert.
J.
STANLEY HULL has been a director of Palatin since September 2005.
Mr. Hull has over three decades of experience in the field of
sales, marketing and drug development. Mr. Hull joined
GlaxoSmithKline, a research-based pharmaceutical company, in
October 1987 and retired as Senior Vice President, Pharmaceuticals
– North America in May 2010. Mr. Hull was responsible for all
commercial activities including sales, marketing, sales training
and office operations. Previously Mr. Hull served in the R&D
organization of Glaxo Wellcome as Vice President and Worldwide
Director of Therapeutic Development and Product Strategy –
Neurology and Psychiatry. Prior to his service in the R&D
organization he was Vice President of Marketing – Infectious
Diseases and Gastroenterology for Glaxo Wellcome-U.S. Mr. Hull
started his career in the pharmaceutical industry with SmithKline
and French Laboratories in 1978. Mr. Hull received his B.S. in
business administration from the University of North Carolina at
Greensboro.
Mr.
Hull has extensive experience in commercial operations, development
and marketing of pharmaceutical drugs and corporate alliances
between pharmaceutical companies and biotechnology
companies.
ALAN W.
DUNTON, M.D., has been a director of Palatin since June 2011. He
founded Danerius, LLC, a biotechnology consulting company, in 2006.
From November 2015 through March 2018 he was senior vice president
of research, development and regulatory affairs for Purdue Pharma
L.P., with responsibilities for overall research strategy and
development programs. From January 2007 to March 2009, Dr. Dunton
served as president and chief executive officer of Panacos
Pharmaceuticals Inc. and he served as a managing director of
Panacos from March 2009 to January 2011. Dr. Dunton is currently a
member of the board of directors of the publicly traded companies
Regeneus Ltd, an Australian company traded on the Australian
Securities Exchange, Oragenics, Inc. and CorMedix Inc. He
previously served on the board of directors of the publicly traded
companies Targacept, Inc., EpiCept Corporation (as Non-Executive
Chairman), Adams Respiratory Therapeutics, Inc. (acquired by
Reckitt Benckiser Group plc), MediciNova, Inc. and Panacos
Pharmaceuticals, Inc. Dr. Dunton has served as a director or
executive officer of various pharmaceutical companies, and from
1994 to 2001, Dr. Dunton was a senior executive in various
capacities in the Pharmaceuticals Group of Johnson & Johnson,
including president and managing director of the Janssen Research
Foundation, the primary global R&D organization for Johnson
& Johnson. Dr. Dunton received his M.D. degree from New York
University School of Medicine, where he completed his residency in
internal medicine. He also was a Fellow in Clinical Pharmacology at
the New York Hospital/Cornell University Medical
Center.
Dr.
Dunton has extensive drug development, regulatory and clinical
research experience, having played a key role in the development of
more than 20 products to regulatory approval, and also has
extensive experience as an executive and officer for both large
pharmaceutical companies and smaller biotechnology and
biopharmaceutical companies.
7
ANGELA
ROSSETTI has been a director of Palatin since June 2013. Ms.
Rossetti consults with pharmaceutical companies, including
consultation on rare disease indications and utilization in low-
and middle-income markets. From June 2015 through July 2017, she
served as Executive Vice President of Cell Machines, Inc., an early
stage biopharmaceutical company developing novel protein therapies.
Previously, Ms. Rossetti served in pharmaceutical marketing,
communications and financial roles, including as Vice President at
Pfizer Inc., where she led a global commercial medicine team for
smoking cessation, and as an Assistant Vice President at Wyeth,
managing a global hemophilia business. Previously, she was
President of Ogilvy Healthworld, an advertising business in the
pharmaceutical and biotechnology sectors, and served on the Biotech
and Pharmaceutical Advisory Board of Danske Capital for six years.
Ms. Rossetti graduated from a joint program of the Albert Einstein
College of Medicine and Benjamin N. Cardozo School of Law with an
M.S.in Bioethics in 2014, has an M.B.A. in Finance from Columbia
University Graduate School of Business and a B.A. in Biology from
the University of Pennsylvania, and is an adjunct Assistant
Professor at New York Medical College.
Ms.
Rossetti has extensive experience in worldwide development and
marketing of specialty pharmaceuticals, including prefilled syringe
products, in communications and development of commercialization
plans and in pharmaceutical and biotechnology finance.
ARLENE
M. MORRIS has been a director of Palatin since June 2015. Since May
2015 she has served as the chief executive officer of Willow
Advisors, LLC. From April 2012 until May 2015 she was President and
Chief Executive Officer of Syndax Pharmaceuticals, Inc., a
privately held biopharmaceutical company focused on the development
and commercialization of an epigenetic therapy for
treatment-resistant cancers, and was a member of the board of
directors from May 2011 until May 2015. From 2003 to January 2011,
Ms. Morris served as the President, Chief Executive Officer and a
member of the board of directors of Affymax, Inc., a publicly
traded biotechnology company. Ms. Morris has also held various
management and executive positions at Clearview Projects, Inc., a
corporate advisory firm, Coulter Pharmaceutical, Inc., a publicly
traded pharmaceutical company, Scios Inc., a publicly traded
biopharmaceutical company, and Johnson & Johnson, a publicly
traded healthcare company. She is currently a member of the board
of directors of Viveve Medical, Inc., a publicly traded female
healthcare medical device company, miRagen Therapeutics, Inc., a
publicly traded microRNA therapeutics company, and Neovacs, SA, a
French publicly traded biotechnology company, and was a director of
Biodel Inc., a publicly traded specialty pharmaceutical company,
from 2015 until its merger with Albireo Limited in 2016, and
Dimension Therapeutics, Inc., a publicly traded gene therapy
company, until its acquisition by Ultragenyx Pharmaceutical Inc. in
2017. Ms. Morris received a B.A. in Biology and Chemistry from
Carlow College.
Ms.
Morris has extensive experience in the biotechnology industry,
including prior leadership positions, senior management and board
service, and experience as chief executive officer of companies
with product candidates in phase 3 clinical trials.
ANTHONY
M. MANNING, Ph.D., has been a director of Palatin since September
2017. Since 2013, Dr. Manning has been senior vice president of
research, and since 2018 chief scientific officer, at Momenta
Pharmaceuticals, Inc., a publicly traded biopharmaceutical company
developing innovative therapeutics for rare immune-related
diseases. From 2011 to 2013, he was senior vice president of
research and development at Aileron Therapeutics, Inc., a publicly
traded biopharmaceutical company developing stapled peptide
therapeutics for cancers and other diseases. From 2007 to 2011, he
was vice president and head of inflammation and autoimmune diseases
research at Biogen, Inc., a publicly traded biopharmaceutical
company developing medicines for neurological and neurodegenerative
conditions. From 2002 to 2007, he was vice president and global
therapy area head for Inflammation, Autoimmunity and
Transplantation Research at Roche Pharmaceuticals, the
pharmaceutical division of Roche Holding AG, and from 2000 to 2002
he was vice president of Pharmacia, a global pharmaceutical company
acquired by Pfizer in 2002. Dr. Manning received his Ph.D., M.Sc.
and B.Sc. from the University of Otago, Dunedin, New
Zealand.
Dr.
Manning has extensive experience in translational research and
development of new pharmaceutical products, and in pharmaceutical
and biotechnology research, development and business
strategy.
8
RECOMMENDATION OF THE BOARD
The board recommends a vote FOR the election of the eight nominees
listed above.
Board Composition and Nominating Process
The
nominating and corporate governance committee conducts an annual
director performance evaluation process and proposes nominees for
election as directors. Nominees must be well-regarded and
experienced participants in their field(s) of specialty, familiar
with our business, willing to devote the time and attention
necessary to deepen and refine their understanding of Palatin and
the issues we face, and must have an understanding of the demands
and responsibilities of service on a public company board of
directors. The committee considers individual merits, such as
personal integrity and sound judgment, business and professional
skills and experience, independence, knowledge of the industry in
which we operate, possible conflicts of interest, diversity, the
extent to which the candidate would fill a present need on the
board and concern for the long-term interests of the stockholders.
While we do not have a formal diversity policy, to ensure that the
board of directors benefits from diverse perspectives, the
committee seeks qualified nominees from a variety of backgrounds,
including candidates of gender and ethnic diversity. Twenty-five
percent of the nominees to the board of directors are female. The
committee also considers each candidate in relation to existing or
other potential members of the board, with a view to establishing a
well-rounded, diverse, knowledgeable, and experienced
board.
The
board amended its written charter for the nominating and corporate
governance committee effective October 1, 2013 to provide that
directors will not be nominated for election to the board after
their 75
th
birthday, although the full board, upon the recommendation of the
committee, may nominate candidates over 75 years of age in special
circumstances. There are no nominees for director who are over 75
years of age.
The
committee will consider stockholder recommendations of nominees if
they are accompanied by a comprehensive written resume of the
recommended nominee’s business experience and background, and
a signed consent from the recommended nominee stating that he or
she is willing to be considered as a nominee and, if nominated and
elected, will serve as a director. The committee will consider
candidates recommended by stockholders on the same basis as
candidates from other sources. The committee may retain outside
consultants to assist in identifying suitable director candidates.
Stockholders may send their written recommendations with the
required documentation to our executive offices at 4B Cedar Brook
Drive, Cranbury, NJ 08512, Attention: Secretary.
Director Independence
The
board of directors has determined that all the directors and
nominees except for Dr. Spana (our Chief Executive Officer and
President) are independent directors, as defined in the listing
standards of the NYSE American, on which our common stock is
listed.
9
The Board and Its Committees
Committees and meetings
. The board has
an audit committee, a compensation committee and a nominating and
corporate governance committee. During the fiscal year ended June
30, 2018, or fiscal 2018, the board met five times, the audit
committee met four times, the compensation committee met three
times and the nominating and corporate governance committee met two
times. Each director attended at least 75% of the total number of
meetings of the board and committees of the board on which he
served. The independent directors meet in executive sessions at
least annually, following the annual board meeting, and typically
meet in executive session at each board meeting. We do not have a
policy requiring our directors to attend stockholder meetings.
Except for Drs. Prendergast and Spana, the directors did not attend
the annual meeting of stockholders held on June 26,
2018.
Audit committee
. The audit committee
reviews the engagement of the independent registered public
accounting firm and reviews the independence of the independent
registered public accounting firm. The audit committee also reviews
the audit and non-audit fees of the independent registered public
accounting firm and the adequacy of our internal control
procedures. The audit committee is currently composed of four
independent directors, Mr. deVeer (chair), Dr. Dunton, Ms. Rossetti
and Mr. Hull. The board has determined that the members of the
audit committee are independent, as defined in the listing
standards of the NYSE American, and satisfy the requirements of the
NYSE American as to financial literacy and expertise. The board has
determined that at least one member of the committee, Mr. deVeer,
is the audit committee financial expert as defined by Item 407 of
Regulation S-K. The responsibilities of the audit committee are set
forth in a written charter adopted by the board and updated as of
October 1, 2013, a copy of which is available on our web site at
www.palatin.com.
Compensation committee.
The
compensation committee reviews and recommends to the board on an
annual basis employment agreements and compensation for our
officers, directors and some employees, and administers our 2011
Plan and the options still outstanding which were granted under
previous stock option plans. The compensation committee is composed
of Dr. Dunton (chair), Ms. Morris and Messrs. deVeer and Hull. The
board has determined that the members of the compensation committee
are independent, as defined in the listing standards of the NYSE
American. Our Chief Executive Officer aids the compensation
committee by providing annual recommendations regarding the
compensation of all executive officers, other than himself. Our
Chief Financial Officer supports the committee in its work by
gathering, analyzing and presenting data on our compensation
arrangements, and providing such data to our independent
compensation advisor.
The
responsibilities of the compensation committee are set forth in a
written charter adopted by the board effective October 1, 2013, a
copy of which is available on our web site at www.palatin.com. The
committee administers our 2011 Plan, under which it has delegated
to an officer its authority to grant stock options to employees and
to a single-member committee of the board its authority to grant
restricted stock units to officers and to grant options and
restricted stock units to our consultants, but in either instance
not to grant options or restricted stock units to themselves, any
member of the board or officer, or any person subject to Section 16
of the Exchange Act.
10
Nominating and corporate governance
committee.
The nominating and corporate governance committee
assists the board in recommending nominees for directors, and in
determining the composition of committees. It also reviews,
assesses and makes recommendations to the board concerning policies
and guidelines for corporate governance, including relationships of
the board, the stockholders and management in determining our
direction and performance. The responsibilities of the nominating
and corporate governance committee are set forth in a written
charter adopted by the board and updated as of October 1, 2013, a
copy of which is available on our web site at www.palatin.com. The
nominating and corporate governance committee is composed of Dr.
Prendergast (chair), Mss. Rossetti and Morris and Dr. Manning, each
of whom meets the independence requirements established by the NYSE
American.
Duration of Office.
Unless a director
resigns, all directors hold office until the next annual meeting of
stockholders or until their successors have been elected and
qualified. Directors serve as members of committees as the board
determines from time to time.
Communicating with Directors
Generally,
stockholders or other interested parties who have questions or
concerns should contact Stephen T. Wills, Secretary, Palatin
Technologies, Inc., 4B Cedar Brook Drive, Cranbury, NJ 08512.
However, any stockholder or other interested party who wishes to
address questions regarding our business directly to the board of
directors, or any individual director, including the Chairman or
non-management directors as a group, can direct questions to the
board members or a director by regular mail to the Secretary at the
address above or by e-mail at boardofdirectors@palatin.com.
Stockholders or other interested parties may also submit their
concerns anonymously or confidentially by postal mail.
Communications are
distributed to the board, or to any individual directors as
appropriate, depending on the facts and circumstances outlined in
the communication, unless the Secretary determines that the
communication is unrelated to the duties and responsibilities of
the board, such as product inquiries, resumes, advertisements or
other promotional material. Communications that are unduly hostile,
threatening, illegal or similarly unsuitable will also not be
distributed to the board or any director. All communications
excluded from distribution will be retained and made available to
any non-management director upon request.
Board Role in Risk Oversight
Our
board, as part of its overall responsibility to oversee the
management of our business, considers risks generally when
reviewing our strategic plan, financial results, business
development activities, legal and regulatory matters. The board
satisfies this responsibility through regular reports directly from
our officers responsible for oversight of particular risks. The
board’s risk management oversight also includes full and open
communications with management to review the adequacy and
functionality of the risk management processes used by management.
The board’s role in risk oversight has no effect on the
board’s leadership structure. In addition, committees of the
board assist in its risk oversight responsibility,
including:
●
The audit committee
assists the board in its oversight of the integrity of the
financial reporting and our compliance with applicable legal and
regulatory requirements. It also oversees our internal controls and
compliance activities, and meets privately with representatives
from our independent registered public accounting
firm.
●
The compensation
committee assists the board in its oversight of risk relating to
compensation policies and practices. The compensation committee
annually reviews our compensation policies, programs and
procedures, including the incentives they create and mitigating
factors that may reduce the likelihood of excessive risk taking, to
determine whether they present a significant risk to our
company.
11
Board Leadership Structure
Since
2000, the roles of chairman of the board and chief executive
officer have been held by separate persons. John K.A. Prendergast,
Ph.D., a non-employee director, has served as Chairman of the board
since June 2000. Carl Spana, Ph.D., has been our Chief Executive
Officer and President since June 2000. Generally, the Chairman is
responsible for advising the Chief Executive Officer, assisting in
long-term strategic planning, and presiding over meetings of the
board, and the Chief Executive Officer, together with our Chief
Financial Officer and Chief Operating Officer, is responsible for
leading our day-to-day performance and operations. While we do not
have a written policy with respect to separation of the roles of
chairman of the board and chief executive officer, the board
believes that the existing leadership structure, with the
separation of these roles, provides several important advantages,
including: enhancing the accountability of the chief executive
officer to the board; strengthening the board’s independence
from management; assisting the board in reaching consensus on
particular strategies and policies; and facilitating robust
director, board, and executive officer evaluation
processes.
Code of Corporate Conduct and Ethics
We have
adopted a code of corporate conduct and ethics, updated as of March
11, 2016, that applies to all of our directors, officers and
employees, including our Chief Executive Officer and Chief
Financial Officer. You can view the code of corporate conduct and
ethics at our website, www.palatin.com. We will disclose any
amendments to, or waivers from, provisions of the code of corporate
conduct and ethics that apply to our directors, principal executive
and financial officers in a current report on Form 8-K, unless the
rules of the NYSE American permit website posting of any such
amendments or waivers.
12
DIRECTOR COMPENSATION
The
following table sets forth the compensation we paid to all
directors during fiscal 2018, except for Dr. Spana, whose
compensation is set forth below in the Fiscal 2018 Summary
Compensation Table and related disclosure. Dr. Spana did not
receive any separate compensation for his services as a
director.
|
Name
|
Fees earned or paid in cash ($)
|
Stock awards ($) (1) (2)
|
Option awards
($) (1) (2)
|
Total ($)
|
|
John K.A.
Prendergast, Ph.D.
|
97,500
|
107,000
|
68,552
|
273,052
|
|
Robert K. deVeer,
Jr.
|
62,500
|
53,500
|
34,275
|
150,275
|
|
J. Stanley
Hull
|
55,000
|
53,500
|
34,275
|
142,775
|
|
Alan W. Dunton,
M.D.
|
62,500
|
53,500
|
34,275
|
150,275
|
|
Angela
Rossetti
|
52,500
|
53,500
|
34,275
|
140,275
|
|
Arlene
Morris
|
52,500
|
53,500
|
34,275
|
140,275
|
|
Anthony Manning,
Ph.D.
|
30,885
|
67,750
|
44,043
|
142,678
|
(1)
The aggregate
number of shares underlying option awards and stock awards
outstanding at June 30, 2018 for each director was:
|
|
Option awards
|
Stock awards
|
|
Dr.
Prendergast
|
604,750
|
226,000
|
|
Mr.
deVeer
|
332,500
|
108,000
|
|
Mr.
Hull
|
329,000
|
108,000
|
|
Dr.
Dunton
|
262,000
|
98,000
|
|
Ms.
Rossetti
|
214,500
|
88,000
|
|
Ms.
Morris
|
169,500
|
78,000
|
|
Dr.
Manning
|
97,000
|
97,000
|
(2)
Amounts in these
columns represent the aggregate grant date fair value for stock
awards and option awards. For a description of the assumptions we
used to calculate these amounts, see Note 14 to the consolidated
financial statements included in our annual report on Form 10-K for
the year ended June 30, 2018 (our “Annual Report”).
Amounts in this column include options granted on June 26, 2018 for
our current fiscal year ending June 30, 2019.
Non-Employee Directors’ Equity
Grants.
Our non-employee directors receive an annual equity
grant at the board meeting closest to the beginning of each fiscal
year, or such other date as may be determined by the
board.
On June
20, 2017, the Chairman of the board received 108,000 restricted
stock units, which vested on June 20, 2018, and an option to
purchase 108,000 shares of common stock, and each other serving
non-employee director received 54,000 restricted stock units, which
vested on June 20, 2018, and an option to purchase 54,000 shares of
common stock. All of the options have an exercise price of $0.37
per share, the closing price of our common stock on the date of
grant, vest in twelve monthly installments beginning on July 31,
2017, expire ten years from the date of grant and provide for
accelerated vesting in the event of involuntary termination as a
director following a change in control, with exercise permitted
following accelerated vesting for up to the earlier of one year
after termination or the expiration date of the
option.
13
On
December 12, 2017, the board ratified the compensation committee
determination that additional equity grants were necessary in order
to reward, motivate and retain the non-employee directors, based in
part on the report of Hay Group (defined below), which is discussed
under Executive Compensation, which reviewed non-employee director
compensation in peer companies. Based on a review of this report,
the board determined that equity compensation for non-employee
directors was below median for the peer group. As a result, the
board granted the Chairman of the board 60,000 restricted stock
units and an option to purchase 60,000 shares of common stock, and
the other serving non-employee directors, other than Dr. Manning,
received 30,000 restricted stock units and an option to purchase
30,000 shares of common stock, with Dr. Manning receiving 15,000
restricted stock units and an option to purchase 15,000 shares of
common stock. These grants were intended to bring the equity
component of our non-employee director compensation program closer
to the market median level of our peers.
The
restricted stock units vest as to one-third of the total award on
each of the first, second and third anniversary of the grant date,
conditioned on continued service as a director through the
applicable vesting dates. All of the options have an exercise price
of $0.85 per share, the closing price of our common stock on the
date of grant, vest as to one-third of the total award on each of
the first, second and third anniversary of the grant date, expire
ten years from the date of grant and provide for accelerated
vesting in the event of involuntary termination as a director
following a change in control, with exercise permitted following
accelerated vesting for up to the earlier of one year after
termination or the expiration date of the option.
On June
26, 2018, the Chairman of the board received 56,000 restricted
stock units which vest on June 26, 2019, and an option to purchase
56,000 shares of common stock, and each other serving non-employee
director received 28,000 restricted stock units which vest on June
26, 2019, and an option to purchase 28,000 shares of common stock.
All of the options have an exercise price of $1.00 per share, the
closing price of our common stock on the date of grant, vest in
twelve monthly installments beginning on July 31, 2018, expire ten
years from the date of grant and provide for accelerated vesting in
the event of involuntarily termination as a director following a
change in control, with exercise permitted following accelerated
vesting for up to the earlier of one year after termination or the
expiration date of the option.
Non-Employee Directors’ Cash
Compensation
. Dr. Prendergast serves as Chairman of the
board and for fiscal 2018 received an annual retainer of $87,500,
payable quarterly. Other non-employee directors received an annual
base retainer of $40,000, payable on a quarterly basis. The chair
of the audit committee received an additional annual retainer of
$12,500, the chair of the compensation committee received an
additional annual retainer of $12,500 and the chair of the
corporate governance committee received an additional annual
retainer of $7,500. Members of the foregoing committees, other than
the non-employee Chairman, received an additional retainer of
one-half the retainer payable to the committee chair. For the
fiscal year ending June 30, 2019, Dr. Prendergast serves as
Chairman of the board and will receive an annual retainer of
$87,500, payable quarterly. Other non-employee directors will
receive an annual base retainer of $40,000, payable on a quarterly
basis. The chair of the audit committee will receive an additional
annual retainer of $15,000, the chair of the compensation committee
will receive an additional annual retainer of $15,000 and the chair
of the corporate governance committee will receive an additional
annual retainer of $10,000. Members of the foregoing committees,
other than the non-employee Chairman, receive an additional
retainer of one-half the retainer payable to the applicable
committee chair.
Non-Employee Directors’ Expenses.
Non-employee directors are reimbursed for expenses incurred in
performing their duties as directors, including attending all
meetings of the board and any committees on which they
serve.
Employee Directors.
Employee directors
are not separately compensated for services as directors, but are
reimbursed for expenses incurred in performing their duties as
directors, including attending all meetings of the board and any
committees on which they serve.
[END OF ITEM ONE]
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
14
ITEM TWO: RATIFICATION OF APPOINTMENT OF KPMG LLP
AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
recommend voting FOR the ratification of the appointment of KPMG
LLP (“KPMG”) as our independent registered public
accounting firm for the fiscal year ending June 30, 2019. KPMG
served as our independent registered public accounting firm for the
fiscal year ended June 30, 2018. We expect that a representative of
KPMG will attend the annual meeting. The representative will have
an opportunity to make a statement, if he or she desires, and will
be available to respond to appropriate questions from
stockholders.
Audit Fees
. For the fiscal year ended
June 30, 2018, fees for professional services rendered by KPMG for
the audit of our annual consolidated financial statements, the
audit of internal control over financial reporting as of June 30,
2018, review of our consolidated financial statements in our Forms
10-Q, services provided in connection with regulatory filings and
comfort letters were $526,000. For the fiscal year ended June 30,
2017, fees for professional services rendered for the audit of our
annual consolidated financial statements, review of our
consolidated financial statements in our Forms 10-Q and services
provided in connection with regulatory filings were
$382,600.
Audit-Related Fees
. For the fiscal
years ended June 30, 2018 and 2017, KPMG did not perform or bill us
for any audit-related services.
Tax Fees
. For the fiscal year ended
June 30, 2018, KPMG billed us a total of $380,354 for professional
services rendered for tax compliance and consulting services. For
the fiscal year ended June 30, 2017, KPMG billed us a total of
$208,651 for professional services rendered for tax compliance and
IRC Section 382 services.
All Other Fees
. KPMG did not perform or
bill us for any services other than those described above for the
fiscal years ended June 30, 2018 and 2017.
Policy on Audit Committee Pre-Approval of
Audit and Permissible Non-Audit Services of Independent
Auditors
. Consistent with SEC policies regarding auditor
independence, the audit committee has responsibility for
appointing, setting compensation for and overseeing the work of the
independent registered public accounting firm. In recognition of
this responsibility, the audit committee has established a policy
to pre-approve all audit and permissible non-audit services
provided by the independent registered public accounting
firm.
Before
engaging the independent registered public accounting firm for the
next year’s audit, management will submit to the audit
committee for approval an estimate of fees for services expected to
be rendered during that year in each of four
categories:
1.
Audit services, including work that generally only our independent
registered public accounting firm can reasonably be expected to
provide, such as services provided in connection with regulatory
filings, statutory audits and attest services and consultation
regarding financial accounting and/or reporting
standards;
2.
Audit-related services, including assurance and related services
that are traditionally performed by the independent registered
public accounting firm, including due diligence related to mergers
and acquisitions, employee benefit plan audits and special
procedures required to meet certain regulatory
requirements;
15
3. Tax
services, including services performed by our independent
registered public accounting firm’s tax personnel except
those services specifically related to the audit of the
consolidated financial statements, including fees in the areas of
tax compliance, tax planning and tax advice; and
4. All
other services not described in the preceding categories. We
generally do not request other services from our independent
registered public accounting firm.
The
audit committee pre-approves fees for each category of service. The
fees are budgeted, and the audit committee requires the independent
registered public accounting firm and management to report actual
fees versus the budget periodically throughout the year by category
of service. During the year, circumstances may arise when it may
become necessary to engage the independent registered public
accounting firm for additional services not contemplated in the
original pre-approval. In those instances, the audit committee
requires specific pre-approval before engaging the independent
registered public accounting firm.
The
audit committee may delegate pre-approval authority to one or more
of its members. The member to whom such authority is delegated must
report, for informational purposes only, any pre-approval decisions
to the audit committee at its next scheduled meeting.
Although
stockholder approval of KPMG LLP’s appointment as our
independent registered public accounting firm is not required by
law or binding on the board or the audit committee, the board and
the audit committee believe that stockholders should have an
opportunity to express their views. In the event the stockholders
do not ratify the appointment of KPMG LLP as our independent
registered public accounting firm, the audit committee will
reconsider its appointment.
REPORT OF THE AUDIT COMMITTEE
The
audit committee of the board of directors, which consists entirely
of directors who meet the independence and experience requirements
of the NYSE American, has furnished the following
report:
The
audit committee assists the board in overseeing and monitoring the
integrity of its financial reporting process, compliance with legal
and regulatory requirements and the quality of internal and
external audit processes. This committee reviews and reassesses our
charter annually and recommends any changes to the board for
approval. The audit committee is responsible for overseeing our
overall financial reporting process, and for the appointment,
compensation, retention, and oversight of the work of KPMG
LLP.
The
audit committee has reviewed and discussed the audited consolidated
financial statements for the fiscal year ended June 30, 2018 with
Palatin’s management and has discussed with KPMG LLP the
matters required to be discussed under Public Company Accounting
Oversight Board standards. In addition, the audit committee has
received from KPMG LLP the written disclosures and a letter from
KPMG LLP regarding its independence as required by applicable
requirements of the Public Company Accounting Oversight Board
regarding KPMG LLP communications with the audit committee, and the
audit committee further discussed with KPMG LLP its independence.
The audit committee also considered the status of pending
litigation, taxation matters and other areas of oversight relating
to the financial reporting and audit process, among other factors,
that the committee determined appropriate.
16
Based
on these reviews and discussions, we recommended to the board of
directors that the audited consolidated financial statements be
included in Palatin’s annual report on Form 10-K for the
fiscal year ended June 30, 2018.
The Audit Committee
Robert
K. deVeer, Jr., Chairman
Alan W.
Dunton, M.D.
J.
Stanley Hull
Angela
Rossetti
RECOMMENDATION OF THE BOARD
The board recommends a vote FOR the ratification of the appointment
of KPMG LLP as our independent registered public accounting firm
for the fiscal year ending June 30, 2019.
[END OF ITEM TWO]
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17
ITEM THREE: ADVISORY APPROVAL ON THE FREQUENCY OF HOLDING FUTURE
ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
(“SAY-ON-FREQUENCY”)
In
addition to holding a say-on-pay advisory vote on executive
compensation (see Item Four below), we are seeking an advisory,
non-binding vote regarding the frequency of future advisory
say-on-pay votes as required by Section 14A of the Securities
Exchange Act of 1934, as amended, known as a
“say-on-frequency” advisory vote. Stockholders will be
able to vote that we hold the say-on-pay advisory vote at a
frequency of every year, every two years, or every three
years.
The
board recommends that the say-on-pay advisory vote should occur
annually. Although the effects of any changes in compensation
policies or amounts may not be entirely apparent within the space
of one year, we undergo the process of evaluating our policies and
setting actual compensation every year, and we value the input of
stockholders into that process. We can always ask the stockholders
to change the frequency in the future if it becomes apparent that
an annual vote is unduly burdensome or not meaningful, or for
reasons that have yet to become evident, is not in accordance with
best corporate governance practices.
The
frequency (one year, two years or three years) that receives the
highest number of votes cast by the stockholders will be deemed the
frequency for the advisory say-on-pay vote preferred by the
stockholders. Because your vote is advisory, the results will not
be binding upon the board. Although not binding, the board values
the opinions of our stockholders and will review and consider the
outcome of the vote, along with other relevant factors, in
evaluating the frequency of future advisory votes on executive
compensation.
RECOMMENDATION OF THE BOARD
The board recommends that stockholders vote for the option of ONE
YEAR as your preference for the frequency of holding future
advisory votes on the compensation of our named executive
officers.
[END OF ITEM THREE]
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
ITEM FOUR: ADVISORY APPROVAL OF THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS
As
required by Section 14A of the Securities Exchange Act of 1934, as
amended, we are seeking an advisory, non-binding stockholder vote
with respect to the compensation of our named executive officers
listed in the Summary Compensation Table in the “Executive
Compensation” section of this proxy statement (sometimes
referred to as the “NEOs”) for the fiscal year ended
June 30, 2018 (“fiscal 2018”), as disclosed in this
proxy statement pursuant to Item 402 of Regulation S-K. This vote
is not intended to address any specific item of compensation, but
rather the overall compensation of our NEOs and the philosophy,
policies and practices described in this proxy statement. This vote
is commonly known as a “say-on-pay” advisory
vote.
The
board of directors, consistent with the advisory vote of the
stockholders at the 2013 annual meeting, has adopted an annual
frequency for a say-on-pay advisory vote. A proposal on the
frequency of the say-on-pay advisory vote is described in Item
Three above.
Our
executive compensation program is based on pay for performance. Our
NEOs are compensated based on advancing our product candidates,
developing partnerships with pharmaceutical companies that add
value to our product candidates, and seeking financing to support
our development programs. We believe that our NEO compensation
program aligns incentive compensation with the long-term interests
of our stockholders. The board encourages you to review the
Executive Compensation section of this proxy statement, including
the Compensation Discussion and Analysis, beginning on page 24 of
this proxy statement, for additional details of our executive
compensation program.
This
past year we sought feedback from our largest 25 institutional
investors. Discussions with investors who responded to our outreach
efforts (and others with whom we had discussions) touched on
several themes, including stockholders’ desires that a
meaningful portion of long-term incentives be allocated to
performance-based equity based on achieving longer-term performance
goals closely linked to our business strategy. The changes to our
executive compensation that were implemented in fiscal 2018
included a performance-based component.
We
believe that NEO compensation for the fiscal year ended June 30,
2018 was effective in retaining and motivating our NEOs to work
toward our annual and long-term goals, and well within the range of
normal practices for companies of our size and in our industry. See
“Compensation Discussion and Analysis” under the
Executive Compensation section below. Our NEOs are compensated in
accordance with three-year employment agreements that are designed
to motivate our NEOs to achieve both annual and long-term
financial, operational and strategic objectives. See
“Employment Agreements” under the Executive
Compensation section below Accordingly, we ask for our stockholders
to indicate their support for the compensation paid to our NEOs by
voting FOR the following non-binding resolution at the
meeting:
RESOLVED, that the
stockholders approve the compensation of the named executive
officers for the fiscal year ended June 30, 2018 listed in the
Summary Compensation Table in the Executive Compensation section of
the proxy statement, as disclosed pursuant to Item 402 of
Regulation S-K, including the compensation tables and narrative
discussion.
19
Approval of this
proposal requires that votes cast in favor of the proposal exceed
the votes cast against the proposal. Because your vote is advisory,
the result will not be binding on the board or the compensation
committee. Nonetheless, the board and the compensation committee
value the opinions of our stockholders and will consider the
outcome of the vote, along with other relevant factors, when making
future compensation decisions for NEOs.
RECOMMENDATION OF THE BOARD
The board recommends a vote FOR the approval of the compensation of
the NEOs, as stated in the above non-binding
resolution.
[END OF ITEM FOUR]
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
20
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following compensation discussion and analysis contains
statements regarding future individual and corporate performance
targets and goals. These targets and goals are disclosed and
discussed in the context of Palatin’s compensation programs
and should not be understood to be statements of management’s
expectations or guidance.
This
Compensation Discussion and Analysis describes the compensation
program for our NEOs. During fiscal 2018 our NEOs
were:
●
Carl Spana, Ph.D.,
our President and Chief Executive Officer (our “CEO”);
and
●
Stephen T. Wills,
our Chief Financial Officer and Chief Operating Officer (our
“CFO/COO”).
The
material elements of our executive compensation program during
fiscal 2018 are also described in this Compensation Discussion and
Analysis, as well as an overview of our executive compensation
philosophy and our related policies and practices.
Our Company
We are
a specialized biopharmaceutical company developing first-in-class
medicines based on molecules that modulate the activity of the
melanocortin and natriuretic peptide receptor systems. Our product
candidates are targeted, receptor-specific therapeutics for the
treatment of diseases with significant unmet medical need and
commercial potential. Our most advanced product candidate is
Vyleesi™, the trade name for bremelanotide, a peptide
melanocortin receptor 4 (MC4r) agonist, for the treatment of
premenopausal women with acquired, generalized hypoactive sexual
desire disorder (“HSDD”), which is a type of female
sexual disorder (“FSD”), defined as low desire with
associated distress or interpersonal difficulty.
Vyleesi.
Vyleesi is a subcutaneous
injectable product for the treatment of HSDD in premenopausal
women. Vyleesi is a synthetic peptide analog of the naturally
occurring hormone alpha-MSH (melanocyte-stimulating hormone). In
March 2018, our exclusive North American licensee for Vyleesi, AMAG
Pharmaceuticals, Inc. (“AMAG”), submitted a New Drug
Application (“NDA”) to the U.S. Food and Drug
Administration (“FDA”) for Vyleesi for the treatment of
HSDD in premenopausal women, which was accepted for filing and
review by the FDA. In November 2018, AMAG announced that the FDA
requested additional data assessing 24-hour ambulatory blood
pressure with short term daily use of Vyleesi, which study has been
completed. The Prescription Drug User Fee Act (“PDUFA”)
date for completion of FDA review of the Vyleesi NDA was extended
by three months to June 23, 2019. We have also licensed rights to
Vyleesi for the People’s Republic of China, Taiwan, Hong Kong
S.A.R. and Macau S.A.R. (collectively, the “Chinese
Territories”) and the Republic of Korea
(“Korea”).
Phase 3
studies with Vyleesi for HSDD in premenopausal women met the
pre-specified co-primary efficacy endpoints of improvement in
desire and decrease in distress associated with low sexual desire
as measured using validated patient-reported outcome instruments.
The most frequent adverse events were nausea, flushing, injection
site reactions and headache, which were generally mild-to-moderate
in intensity and were transient.
21
We
retain worldwide rights for Vyleesi for HSDD and all other
indications outside North America, Korea and the Chinese
Territories. We are actively seeking potential partners for
marketing and commercialization rights for Vyleesi for HSDD outside
the licensed territories. However, we may not be able to enter into
suitable agreements with potential partners on acceptable terms, if
at all.
Melanocortin Receptor Systems.
There are
five melanocortin receptors, MC1r through MC5r. Modulation of these
receptors, through use of receptor-specific agonists, which
activate receptor function, or receptor-specific antagonists, which
block receptor function, can have significant pharmacological
effects. Our new product development activities primarily focus on
MC1r agonists, with potential to treat inflammatory and autoimmune
diseases such as dry eye disease, also known as
keratoconjunctivitis sicca, uveitis, diabetic retinopathy and
inflammatory bowel disease. We believe that MC1r agonists,
including the MC1r agonist peptides we are developing, have broad
anti-inflammatory effects and appear to utilize mechanisms engaged
by the endogenous melanocortin system in regulation of the immune
system and resolution of inflammatory responses. We are also
developing peptides that are active at more than one melanocortin
receptor, and MC4r agonists, with potential utility in certain
obesity and metabolic-related disorders, including rare disease and
orphan indications.
●
PL-8177, a
selective MC1r agonist peptide, is our lead clinical development
candidate for inflammatory bowel diseases, with potential
applicability for a number of other diseases. We filed an
Investigational New Drug (“IND”) application on PL-8177
in late 2017 and have completed subcutaneous dosing of human
subjects in a Phase 1 single and multiple ascending dose clinical
safety study. A microdose study utilizing an oral formulation of
PL-8177 in human subjects was completed in the fourth quarter of
calendar year 2018.
●
PL-9643, a
pan-melanocortin receptor peptide agonist, is a preclinical
development candidate for treating ocular inflammation. We are
conducting IND-enabling preclinical activities with PL-9643, and if
results are favorable, anticipate filing an IND and initiating
clinical trials for treatment of dry eye disease in the second half
of calendar year 2019.
●
We have initiated
preclinical programs with MC4r peptides and orally-active small
molecules for treatment of rare genetic metabolic and obesity
disorders, and if results are favorable, anticipate selecting a
lead clinical development candidate and completing IND-enabling
activities in calendar year 2019.
Natriuretic Peptide Receptor Systems.
The natriuretic peptide receptor (“NPR”) system has
numerous cardiovascular functions, and therapeutic agents
modulating this system may be useful in treatment of cardiovascular
diseases, including reducing cardiac hypertrophy and fibrosis,
heart failure, acute asthma, other pulmonary diseases and
hypertension. While the therapeutic potential of modulating this
system is well appreciated, development of therapeutic agents has
been difficult due, in part, to the short biological half-life of
native peptide agonists. We have designed and are developing
potential NPR candidate drugs that are selective for one or more
different natriuretic peptide receptors, including natriuretic
peptide receptor-A (“NPR-A”), natriuretic peptide
receptor B (“NPR-B”), and natriuretic peptide receptor
C (“NPR-C”).
22
●
PL-3994 is an NPR-A
agonist we developed, which has completed Phase 1 clinical safety
studies. It has potential utility in treatment of a number of
cardiovascular diseases, including genetic and orphan diseases
resulting from a deficiency of endogenous active NPR-A. We have
ongoing academic collaborations with several institutions with
PL-3994.
●
PL-5028, a dual
NPR-A and NPR-C agonist we developed, is in preclinical development
for cardiovascular diseases, including reducing cardiac hypertrophy
and fibrosis. We have ongoing academic collaborations with several
institutions related to PL-5028 and seek to enter into a
development partnership by the end of calendar year
2019.
The
following chart illustrates the status of our drug development
programs.
Financial Highlights
●
Revenue
– Generated revenue of
$67.1 million for fiscal 2018, compared to revenue of $44.7 million
for fiscal 2017.
●
Net Income
– Reported net income
of $24.7 million for fiscal 2018, compared to a net loss of $(13.3)
million for fiscal 2017.
●
Net Loss Per Share
– Recorded net
income per share (basic and diluted) of $0.12 for fiscal 2018,
compared to a net loss per share (basic and diluted) of $0.07 in
fiscal 2017.
●
Cash at end of fiscal 2018
– Cash
and cash equivalents were $38.0 million at June 30, 2018, compared
to cash and cash equivalents and investments of $40.5 million and
accounts receivable of $15.1 million at June 30, 2017.
23
Executive Compensation Highlights
Advisory Vote to Approve Named Executive
Officer Compensation.
At our last annual meeting of
stockholders in June 2018, we conducted a non-binding stockholder
advisory vote to approve the compensation of our NEOs (commonly
known as a “Say-on-Pay” vote). Our stockholders did not
approve the Say-on-Pay proposal, with only approximately 48% of the
votes cast in favor of the proposal. Based on the vote and
subsequent feedback from our stockholders, we have substantially
expanded our disclosure in this proxy compared to prior years and
have adopted significant new policies consistent with good
corporate governance.
At our
last annual meeting, our say-on-pay proposal was supported by
approximately 48% of the votes cast for or against advisory
approval. In response, the compensation committee and board have
implemented the following policies and practices:
●
Stockholder Engagement.
We attend investor conferences in
the biotechnology and pharmaceutical industries and meet with our
institutional and other investors at those conferences. We also
reached out to our top twenty-five largest institutional
stockholders (which represented 20% of the outstanding stock of
Palatin), and held teleconference meetings, led by our Chief
Financial Officer, with stockholders seeking to engage with us.
Some stockholders expressed concerns with certain elements of our
executive compensation program, which are addressed below. We
intend to continue engaging with our stockholders on a regular
basis.
|
What We Heard
|
|
Our Response
|
|
We
would like more disclosure, and more accessible disclosure, on
compensation practices.
|
|
We have
revised our proxy disclosure this year and include more disclosure
on what we have done and how our compensation process works. We
have expanded disclosure on the work of our independent
compensation advisor.
|
|
We
would like increased disclosure on metrics used for bonuses and
incentive compensation.
|
|
We have
increased our disclosure. Annual bonuses are tied to specific
performance metrics for the fiscal year, such as advancing clinical
and regulatory of our product candidates, entering into licensing
and related agreements, and our financial condition.
|
|
We
would like at least half of long-term incentives to be
performance-based
|
|
We
incorporated performance-based elements into our long-term
incentive program for 2018 and intend to structure the 2020
long-term incentive program so that half of the awards will be
subject to the achievement of pre-established performance
goals.
|
|
A
formal policy on stock ownership by NEOs and board members should
be adopted.
|
|
We have
adopted a stock ownership policy that requires our NEOs, as well as
our board members, to maintain a minimum ownership level of our
common stock. All current NEOs and board members meet the target
ownership levels of shares with a value equal to at least five
times the annual base salary of NEOs and at least two times the
annual retainer for board members. In addition, both time-based and
performance-based restricted stock unit awards contain deferred
delivery provisions providing for delivery of the common stock
after the grantee’s separation from service or a defined
changed in control. Our stock ownership policy is on our website at
www.palatin.com/about/corporate-governance/.
|
|
A
formal “clawback” policy should be
adopted.
|
|
We have
adopted a clawback policy allowing Palatin to recover related
compensation should the board determine that compensation paid to
NEOs resulted from material noncompliance with financial reporting
requirements under federal securities law. Our clawback policy is
on our website at
www.palatin.com/about/corporate-governance/.
|
●
Retain an Independent Compensation Advisor.
The compensation
committee engaged Korn Ferry Hay Group (“Hay Group”), a
nationally-recognized global human resources consulting firm, as
its independent compensation advisor in the fall of 2017. Hay Group
principally provided analysis, advice and recommendations on named
executive officer and non-employee director compensation. The
compensation committee intends to conduct an independent
compensation advisor review at least every other fiscal year, with
the next review by our independent compensation advisor scheduled
for awards to be made in June 2019 for the fiscal year ending June
30, 2020.
●
Compensation at Risk.
Our executive compensation program is
designed so that a significant portion of compensation is “at
risk” based on our performance, as well as short-term cash
and long-term equity incentives to align the interests of our
executive officers and stockholders. Long-term equity incentives
will be no less than base salaries, with at least half of long-term
equity incentives being performance-based.
●
Use a Pay-for-Performance Philosophy.
The compensation
committee employs a mixture of compensation elements designed to
balance short-term goals with longer-term performance. Our
executive compensation program includes these principal
elements:
o
Base salary, which
targets the comparable position median salary for our peer
group;
o
An annual incentive
compensation opportunity, with a target bonus payout of 50% of base
salary, depending on performance, and a maximum of 100% of base
salary; and,
o
A long-term
incentive program consisting of stock option and restricted stock
unit awards. In fiscal 2018, approximately 35% of all long-term
incentive shares were performance-based equity awards. Moving
forward, our target is to have at least half of long-term equity
incentives be performance-based.
24
The
compensation committee and board also reviewed our existing
compensation practices, and intend to continue the following
policies and practices:
●
Maintain an Independent Compensation Committee.
The
compensation committee consists entirely of independent
directors.
●
Annual Executive Compensation Review.
The compensation
committee conducts an annual review and approval of our
compensation strategy, utilizing an independent compensation
advisor at least every other year. This review, including a peer
group review, is intended to ensure that our compensation programs
appropriately reward corporate growth without encouraging excessive
or inappropriate risk-taking.
●
“Double Trigger” Feature for Acceleration of CE0 and
CFO/COO Equity Awards.
Under employment agreements with our
NEOs, outstanding equity awards granted to our NEOs provide that,
upon a change in control of Palatin, the vesting of such awards
will accelerate only in the event of a subsequent involuntary
termination of employment (a “double-trigger”
provision).
●
No Stock Option Re-pricing.
Our 2011 Stock Incentive Plan
does not permit options to purchase shares of our common stock to
be repriced to a lower exercise or strike price without the
approval of our stockholders.
●
No Dividends or Dividend Equivalents Payable on Unvested or
Undelivered Equity Awards.
Under our restricted share unit
agreements, we do not pay dividends or dividend equivalents on
unvested RSU awards or vested RSU awards subject to delayed
delivery.
●
No Executive Retirement Plans.
We do not offer pension
arrangements or retirement plans or arrangements to our executive
officers that are different from or in addition to those offered to
our other employees.
●
No Special Welfare or Health Benefits.
Our executive
officers participate in broad-based Company-sponsored health and
welfare benefit programs on the same basis as our other full-time,
salaried employees.
Independent Compensation Advisor –
Competitive Positioning.
A competitive assessment of both
our NEOs and our non-employee directors was conducted in the fall
of 2017, and the next assessment will be completed in June 2019
prior to setting salaries, equity award and bonus targets and
objectives for the fiscal year starting July 1, 2019. For the fall
2017 evaluation, the compensation committee engaged Hay Group to
assess total compensation and compensation elements for both NEOs
and directors, including a comparison against a compensation peer
group consisting of the following companies:
|
AcelRx
Pharmaceuticals
|
Flexion
Therapeutics
|
|
Achaogen
|
GTX
|
|
Anchillion
Pharmaceuticals
|
Ironwood
Pharmaceuticals
|
|
Ardelyx
|
Proteon
Therapeutics
|
|
Argos
Therapeutics
|
Seres
Therapeutics
|
|
Assembly
biosciences
|
Soligenix
|
|
Athersys
|
Sucampo
Pharmaceuticals
|
|
Cempra
|
Synergy
Pharmaceutical
|
|
Concert
Pharmaceuticals
|
Tetraphase
Pharmaceuticals
|
|
CytRx
|
Vitality
BioPharm
|
25
The
peer group was designed to reflect the industry and sector in which
Palatin competes, as well as companies comparable to Palatin in
terms of company life cycle, phase of development of potential
products, market capitalization and talent market. From a market
capitalization perspective, Palatin was aligned with the peer group
median of the 20 selected peer companies.
EXECUTIVE OFFICERS
Executive officers
are appointed by the board and serve at the discretion of the
board. Each officer holds his position until his successor is
appointed and qualified. The current executive officers hold office
under employment agreements.
|
Name
|
Age
|
Position with Palatin
|
|
Carl
Spana, Ph.D.
|
56
|
Chief
Executive Officer, President and Director
|
|
Stephen
T. Wills, MST, CPA
|
62
|
Chief
Financial Officer, Chief Operating Officer, Executive Vice
President, Secretary and Treasurer
|
Additional
information about Dr. Spana is included above under the heading
“Item One: Election of Directors.”
STEPHEN
T. WILLS, CPA, MST, currently serves as the Chief Financial Officer
(since 1997), Chief Operating Officer (since 2011), Treasurer and
Secretary of Palatin. Since March 2017, Mr. Wills has served as a
director, and since October 2017 as non-executive chairman, of
MediWound Ltd., a publicly-traded biopharmaceutical company
providing products for severe burns, chronic and other hard-to-heal
wounds. Mr. Wills served as executive chairman and interim
principal executive officer of Derma Sciences, Inc.
(“Derma”), a publicly-held company providing advanced
wound care products, from December 2015 until February 2017 when
Derma was acquired by Integra LifeSciences Holding Corporation. Mr.
Wills also served as the lead director of Derma until December 2015
and as Derma’s chief financial officer from 1997 to 2000. Mr.
Wills is chairman of the board of trustees of The Hun School of
Princeton, New Jersey, a college preparatory day and boarding
school. From 1991 to 2000 he was the president and chief operating
officer of Golomb, Wills & Company, P.C., a public accounting
firm. Mr. Wills, a certified public accountant, received his B.S.
in accounting from West Chester University, and an M.S. in taxation
from Temple University.
26
Fiscal 2018 Summary Compensation Table
The
following table summarizes the compensation earned by or paid to
our principal executive officer and our principal financial
officer, who constitute all of our executive officers, for fiscal
2018 and fiscal 2017. We have no defined benefit or actuarial
pension plan, and no deferred compensation plan.
|
Name and Principal Position
|
Fiscal
Year
|
Salary
($)
|
Stock
awards (1) ($)
|
Option
awards (1) ($)
|
Nonequity incentive plan compensation (2) ($)
|
All
other
compensation
(3) ($)
|
Total
($)
|
|
Carl Spana, Ph.D.,
Chief Executive Officer and President
|
2018
|
490,700
|
1,418,500
|
1,029,882
|
263,000
|
13,857
|
3,215,939
|
|
Carl Spana, Ph.D.,
Chief Executive Officer and President
|
2017
|
476,400
|
368,050
|
367,368
|
458,000
|
13,250
|
1,683,068
|
|
Stephen T. Wills,
MST, CPA, Chief Financial Officer, Chief Operating Officer and
Executive Vice President
|
2018
|
448,300
|
1,189,125
|
869,371
|
240,000
|
13,827
|
2,760,623
|
|
Stephen T. Wills,
MST, CPA, Chief Financial Officer, Chief Operating Officer and
Executive Vice President
|
2017
|
435,200
|
338,330
|
336,570
|
438,000
|
13,250
|
1,561,350
|
(1)
Amounts in these
columns represent the aggregate grant date fair value for stock
awards and option awards computed using either the Black-Scholes
model or a multifactor Monte Carlo simulation. The aggregate grant
date fair value of the performance-based stock options and
performance-based restricted stock units granted in fiscal 2018,
assuming that the highest level of performance would be achieved,
is as follows: for Dr. Spana: $313,938 for performance-based stock
options and $531,250 for performance-based restricted stock units;
and for Mr. Wills: $234,985 for performance-based stock options and
$382,500 for performance-based restricted stock units. For a
description of the assumptions we used to calculate these amounts,
see Note 14 to the consolidated financial statements included in
our Annual Report.
(2)
Annual incentive
amounts.
(3)
Consists of
matching contributions to 401(k) plan.
27
Base Salary
The
salary for each named executive officer is based, among other
factors, upon job responsibilities, level of experience, individual
performance, comparisons to the salaries of executives in similar
positions obtained from market surveys, and internal comparisons.
The compensation committee considers changes in the base salaries
of our named executive officers annually. In fiscal 2018, the
compensation committee approved merit increases of 3.0% for each
named executive officer, which was consistent with our overall
merit pool for employees.
Annual Incentive Program
We
provide annual incentive opportunities to our named executive
officers to promote the achievement of annual performance
objectives. Each year, the compensation committee establishes the
target annual incentive opportunity for each named executive
officer, which is based on a percentage of his base salary. For
fiscal 2018, the target annual incentive opportunity for each named
executive officer equaled 50% of his annual base salary, which
remained unchanged from fiscal 2017.
Total
payouts under the 2018 annual incentive program were based
primarily on our achievement of key management objectives. The
performance levels are established so that target attainment is not
assured. Instead, our executives are required to demonstrate
significant effort, dedication, and achievement to attain payment
for performance at target or above. The following table briefly
describes each category of management objectives, the relative
weighting of each objective, and the related achievement
level:
|
Management
Objectives
Related to:
|
Weight
|
Achievement Level
|
Discretionary Adjustment*
|
Total Weighted Achievement
|
|
FSD (Bremelanotide)
Program
|
70
%
|
100
%
|
15
%
|
85
%
|
|
Anti-Inflammatory
Program
|
10
%
|
50
%
|
0
%
|
5
%
|
|
Natriuretic Peptide
Program
|
10
%
|
50
%
|
0
%
|
5
%
|
|
Corporate
|
10
%
|
100
%
|
2
%
|
12
%
|
|
Total
Payout
|
107
%
|
|||
*Discretionary
adjustments were primarily related to the successful filing of the
bremelanotide NDA and subsequent acceptance by FDA, which resulted
in receipt of a $20 million milestone payment, and secondarily for
expanded analyst coverage and facilitating investors converting
prefunded warrants to common stock.
Based
on performance relative to the management objectives, each named
executive officer received a payout under the 2018 annual incentive
program equal to 107% of his target annual incentive opportunity,
or $263,000 for Dr. Spana and $240,000 for Mr. Wills (subject to
rounding conventions).
28
Long-Term Incentive Program
The
total direct compensation levels for our named executive officers
are heavily weighted to long-term incentive opportunities. This
structure is intended to align executives’ interests with
those of our stockholders, enhance our retention incentives and
focus our executives on delivering sustainable performance over the
longer-term.
The
design of this program has evolved over the past several years to
reflect core performance metrics and an incentive structure the
compensation committee believes is necessary to drive our long-term
success and that reflects feedback received from investors during
our stockholder engagement process.
Each
year, the compensation committee establishes the target long-term
incentive opportunity for each named executive officer, which is
based on a percentage of his base salary. For fiscal 2018, the
target long-term incentive opportunity for each named executive
officer equaled 145% of base salary for Dr. Spana and 135% of base
salary for Mr. Wills.
On June
20, 2017 we granted 595,000 restricted stock units to Dr. Spana and
545,000 restricted stock units to Mr. Wills, which vest as to
50% on each anniversary of the grant date. We also granted 938,000
stock options to Dr. Spana and 859,000 stock options to Mr.
Wills, which vest as to 25% on each anniversary of the grant date.
These options have an exercise price of $0.37, the fair market
value of the common stock on the date of grant, and they expire on
June 20, 2027.
In the
fall of 2017, the compensation committee retained the Hay Group, a
nationally-recognized global human resources consulting firm, as
its independent compensation advisor. Hay Group principally
provided analysis, advice and recommendations regarding named
executive officer and non-employee director compensation. Hay Group
developed a peer group of similarly-situated public companies which
was used as the basis for competitive market analysis both for
beneficial ownership and target total cash compensation. It was
determined that beneficial ownership levels, on a fully diluted
basis, for the named executive officers was below the peer group
twenty-fifth percentile, and significantly below the peer group
median. It was determined by the compensation committee to make a
special grant to the named executive officers to position each
executive around peer group median levels, and to promote
performance and retention.
As a
result, on December 12, 2017, we granted 625,000 time-based
restricted stock units to Dr. Spana and 575,000 time-based
restricted stock units to Mr. Wills, each of which vest as to 25%
of the number of shares granted on each anniversary of the grant
date. We also granted 625,000 performance-based stock units to Dr.
Spana and 467,500 performance-based stock units to Mr. Wills. The
performance-based stock units vest, if at all, during a performance
period ending December 31, 2020, as follows:
●
100% of the granted
stock units upon achievement of a closing price for Palatin common
stock equal to or greater than $1.50 per share for 20 consecutive
trading days,
●
30% of the granted
stock units if the FDA accepts for filing an NDA for Vyleesi for
HSDD,
29
●
50% of the granted
stock units upon approval by the FDA of an NDA for Vyleesi for
HSDD, or
●
20% of the granted
stock units upon entry into one or more licensing agreements for
the commercialization of Vyleesi in selected
countries.
We also
granted 625,000 performance-based stock options to Dr. Spana and
467,500 performance-based stock options to Mr. Wills, each having
an exercise price of $0.85, the fair market value of the common
stock on the date of grant. The performance-based stock options
vest, if at all, during a performance period ending December 31,
2020, upon the same performance criteria as for the
performance-based stock units.
Thirty
percent of the performance-based stock units and the
performance-based stock options vested on June 26, 2018, upon
ratification by the Board of the compensation committee’s
determination that the FDA had accepted for filing an NDA for
Vyleesi for HSDD.
The
following table shows the allocation of performance and time-based
awards on a share basis for fiscal 2018 and fiscal 2017. Awards
included restricted stock unit awards and stock option
awards.
|
Name and Principal Position
|
Fiscal
Year
|
Time-based stock awards (RSUs) (1)
|
Performance-based stock awards (RSUs) (1)
|
Time-based option
awards (1)
|
Performance-based option awards (1)
|
|
Carl Spana, Ph.D.,
Chief Executive Officer and President
|
2018
|
981,000
|
625,000
|
1,158,000
|
625,000
|
|
Carl Spana, Ph.D.,
Chief Executive Officer and President
|
2017
|
885,000
|
-
|
1,370,000
|
-
|
|
Stephen T. Wills,
MST, CPA, Chief Financial Officer, Chief Operating Officer and
Executive Vice President
|
2018
|
878,000
|
467,500
|
1,029,000
|
467,500
|
|
Stephen T. Wills,
MST, CPA, Chief Financial Officer, Chief Operating Officer and
Executive Vice President
|
2017
|
813,000
|
-
|
1,255,000
|
-
|
(1)
Amounts in these
columns represent the aggregate maximum number of shares obtainable
based on awards in the relevant fiscal year, and assuming all
awards ultimately vest.
On June
26, 2018, as part of our 2019 long-term incentive program, we
granted 356,000 restricted stock units to Dr. Spana and 303,000
restricted stock units to Mr. Wills, which vest as to 50% of the
number of shares granted on each anniversary of the grant date. We
also granted 533,000 stock options to Dr. Spana and 454,000 stock
options to Mr. Wills, which vest as to 25% of the number of shares
granted on each anniversary of the grant date. These options have
an exercise price of $1.00, the fair market value of the common
stock on the date of grant, and they expire on June 26,
2028.
30
Employment Agreements
Effective July 1,
2016, we entered into employment agreements with Dr. Spana and Mr.
Wills, which continue through June 30, 2019 unless terminated
earlier. Under these agreements, which replaced substantially
similar agreements that expired on June 30, 2016, Dr. Spana is
serving as Chief Executive Officer and President at a base salary
of $476,400 per year and Mr. Wills is serving as Chief Financial
Officer and Chief Operating Officer at a base salary of $435,200
per year. Each agreement also provides for:
●
annual
discretionary bonus compensation, in an amount to be decided by the
compensation committee and approved by the board, based on
achievement of yearly performance objectives; and
●
participation in
all benefit programs that we establish, to the extent the
executive’s position, tenure, salary, age, health and other
qualifications make him eligible to participate.
Each
agreement allows us or the executive to terminate the agreement
upon written notice, and contains other provisions for termination
by us for “cause,” or by the employee for “good
reason” or due to a “change in control” (as these
terms are defined in the employment agreements and set forth
below). Early termination may, in some circumstances, result in
severance pay at the salary then in effect, plus continuation of
medical and dental benefits then in effect for a period of two
years (Dr. Spana) or 18 months (Mr. Wills). In addition, the
agreements provide that options and restricted stock units granted
to these officers accelerate upon termination of employment except
for voluntary resignation by the officer or termination for cause.
In the event of retirement, termination by the officer for good
reason, or termination by us other than for “cause”,
options may be exercised until the earlier of twenty-four months
following termination or expiration of the option term.
Arrangements with our named executive officers in connection with a
termination following a change in control are described below. Each
agreement includes non-competition, non-solicitation and
confidentiality covenants.
The
annual incentive bonus for the named executive officers is
determined based on corporate performance and individual
achievements and performance, as warranted. The target bonus payout
for both fiscal 2018 and fiscal 2017 was 50% of base salary. In
determining the annual incentive bonus opportunity for executives,
the executive’s annual base salary is multiplied by the
target bonus percentage. The resulting amount is then multiplied by
the corporate performance percentage approved by the compensation
committee, which is dependent on the achievement of corporate
performance goals, and also potentially adjusted upwards or
downwards for individual executives based on their individual
contribution toward the corporate results during the relevant year.
For fiscal 2018, the compensation committee determined that our
named executive officers achieved 107% of their target objectives,
consisting primarily of progress relating to the Vyleesi program,
including filing an NDA and acceptance of the NDA by FDA, and
entering into license agreements for Vyleesi for China and Korea
and secondarily to advances in MC1r anti-inflammatory programs and
other corporate items, and our financial condition. In February
2017 the compensation committee awarded a special, one-time cash
bonus of $220,000 to each of the named executive officers based on
positive data for Vyleesi in the Phase 3 clinical trials and
entering into a North American licensing agreement with AMAG. In
June 2017, the compensation committee determined that our named
executive officers achieved 100% of their target objectives, after
giving consideration to the February 2017 award, based on results
of the Vyleesi program, and secondarily to advances in melanocortin
receptor programs, including anti-inflammatory programs, and NPR
programs.
31
Outstanding Equity Awards at 2018 Fiscal Year-End
The
following table summarizes all of the outstanding equity-based
awards granted to our named executive officers as of June 30, 2018,
the end of our fiscal year.
|
|
|
Option awards (1)
|
Stock awards (2)
|
|||||||
|
Name
|
Option or
stock
award
grant
date
|
Number of
securities
underlying
unexercised
options
(#)
exercisable
|
Number of
securities
underlying
unexercised
options
(#)
unexercisable
|
Equity incentive plan award: number of securities underlying
unexercised unearned options (#)
|
Option
exercise
price
($)
|
Option
expiration
date
|
Number of shares or units of stock that have not
vested
(#)
|
Market value of shares or units of stock that have not
vested
($) (3)
|
Equity incentive plan awards: number of unearned shares, unit or
other rights that have not vested (#)
|
Equity incentive plan awards: market or payout value of unearned
shares, units or other rights that have not vested ($)
|
|
Carl
Spana
|
07/01/08
|
25,000
|
-
|
|
1.80
|
07/01/18
|
|
|
|
|
|
|
07/01/09
|
25,000
|
-
|
|
2.80
|
07/01/19
|
|
|
|
|
|
|
06/22/11
|
300,000
|
-
|
|
1.00
|
06/22/21
|
|
|
|
|
|
|
07/17/12
|
150,000
|
-
|
|
0.72
|
07/17/22
|
|
|
|
|
|
|
06/27/13
|
275,000
|
-
|
|
0.62
|
06/27/23
|
|
|
|
|
|
|
06/25/14
|
175,000
|
-
|
|
1.02
|
06/25/24
|
|
|
|
|
|
|
06/11/15
|
225,000
|
75,000
|
|
1.08
|
06/11/25
|
|
|
|
|
|
|
09/07/16
|
199,500
|
232,500
|
|
0.68
|
09/07/26
|
|
|
|
|
|
|
06/20/17
|
234,500
|
703,500
|
|
0.37
|
06/20/27
|
|
|
|
|
|
|
12/12/17
|
-
|
625,000
|
|
0.85
|
12/12/27
|
|
|
|
|
|
|
12/12/17
|
187,500
|
|
437,500
|
0.85
|
12/12/27
|
|
|
|
|
|
|
6/26/18
|
-
|
533,000
|
|
1.00
|
6/26/28
|
|
|
|
|
|
|
12/08/15
|
|
|
|
|
|
81,250
|
78,813
|
|
|
|
|
09/07/16
|
|
|
|
|
|
107,500
|
104,275
|
|
|
|
|
06/20/17
|
|
|
|
|
|
297,500
|
288,575
|
|
|
|
|
12/12/17
|
|
|
|
|
|
625,000
|
606,250
|
437,500
|
424,375
|
|
|
6/26/18
|
|
|
|
|
|
356,000
|
345,320
|
|
|
|
|
Total
Stock Awards
|
|
|
|
1,467,250
|
$
1,423,233
|
437,500
|
$
424,375
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
StephenT.
Wills
|
07/01/08
|
20,000
|
-
|
|
1.80
|
07/01/18
|
|
|
|
|
|
|
07/01/09
|
20,000
|
-
|
|
2.80
|
07/01/19
|
|
|
|
|
|
|
06/22/11
|
250,000
|
-
|
|
1.00
|
06/22/21
|
|
|
|
|
|
|
07/17/12
|
135,000
|
-
|
|
0.72
|
07/17/22
|
|
|
|
|
|
|
06/27/13
|
250,000
|
-
|
|
0.62
|
06/27/23
|
|
|
|
|
|
|
06/25/14
|
150,000
|
-
|
|
1.02
|
06/25/24
|
|
|
|
|
|
|
06/11/15
|
202,500
|
67,500
|
|
1.08
|
06/11/25
|
|
|
|
|
|
|
09/07/16
|
182,250
|
213,750
|
|
0.68
|
09/07/26
|
|
|
|
|
|
|
06/20/17
|
214,750
|
644,250
|
|
0.37
|
06/20/27
|
|
|
|
|
|
|
12/12/17
|
-
|
575,000
|
|
0.85
|
12/12/27
|
|
|
|
|
|
|
12/12/17
|
135,000
|
|
332,500
|
0.85
|
12/12/27
|
|
|
|
|
|
|
6/26/18
|
-
|
454,000
|
|
1.00
|
6/26/28
|
|
|
|
|
|
|
12/08/15
|
|
|
|
|
|
75,000
|
72,750
|
|
|
|
|
09/07/16
|
|
|
|
|
|
100,000
|
97,000
|
|
|
|
|
06/20/17
|
|
|
|
|
|
272,500
|
264,325
|
|
|
|
|
12/12/17
|
|
|
|
|
|
575,000
|
557,750
|
332,500
|
322,525
|
|
|
6/26/18
|
|
|
|
|
|
303,000
|
293,910
|
|
|
|
|
Total
Stock Awards
|
|
|
|
1,325,500
|
$
1,285,735
|
332,500
|
$
322,525
|
||
(1)
Stock option
vesting schedules: all options granted on or before June 10, 2015
have fully vested. Options granted after June 10, 2015 vest over
four years with 1/4 of the shares vesting per year starting on the
first anniversary of the grant date, provided that the named
executive officer remains an employee. See “Termination and
Change-In-Control Arrangements” below, except for
performance-based options granted on December 12, 2017, which vest
according to the terms of the grant described above.
(2)
Time-based stock
award vesting schedule: stock awards consist of restricted stock
units granted December 8, 2015, as to 325,000 shares for Dr. Spana
and 300,000 shares for Mr. Wills, which vest in equal amounts over
a four year period, provided that the named executive officer
remains an employee; restricted stock units granted on September 7,
2016, as to 290,000 shares for Dr. Spana and 268,000 shares for
Mr. Wills, which have fully vested as of September 7, 2018;
restricted stock units granted on June 20, 2017, as to 595,000
shares for Dr. Spana and 545,000 shares for Mr. Wills, which vest
in equal amounts over a two year period, provided that the named
executive officer remains an employee; restricted stock units
granted on December 12, 2017, as to 625,000 shares for Dr. Spana
and 575,000 shares for Mr. Wills, which vest in equal amounts over
a four year period, provided that the named executive officer
remains an employee; and restricted stock units granted on June 26,
2018, as to 356,000 shares for Dr. Spana and 303,000 shares for Mr.
Wills, which vest in equal amounts over a two year period, provided
that the named executive officer remains an employee. Both
time-based and performance-based restricted stock unit awards
contain deferred delivery provisions providing for delivery of the
common stock after the grantee’s separation from service or a
defined change in control. See “Stock Options and Restricted
Stock Unit Awards” above and “Termination and
Change-In-Control Arrangements” below.
(3)
Calculated by
multiplying the number of restricted stock units by $0.97, the
closing market price of our common stock on June 29, 2018, the last
trading day of our most recently completed fiscal
year.
32
Termination and Change-In-Control Arrangements
The
employment agreements, stock option agreements and restricted stock
unit agreements with Dr. Spana and Mr. Wills contain the following
provisions concerning severance compensation and the vesting of
stock options and restricted stock units upon termination of
employment or upon a change in control. The executive’s
entitlement to severance, payment of health benefits and
accelerated vesting of options is contingent on the executive
executing a general release of claims against us.
Termination Without Severance Compensation
. Regardless of
whether there has been a change in control, if we terminate
employment for cause or the executive terminates employment without
good reason (as those terms are defined in the employment agreement
and set forth below), then the executive will receive only his
accrued salary and vacation benefits through the date of
termination. He may also elect to receive medical and dental
benefits pursuant to COBRA for up to two years (Dr. Spana) or 18
months (Mr. Wills), but must remit the cost of coverage to us.
Under the terms of our outstanding options and restricted stock
units, all unvested options and restricted stock units would
terminate immediately, and vested options would be exercisable for
three months after termination.
Severance Compensation After Death or Disability.
In the
event of the executive’s death or disability, we will provide
lump sum severance pay equal to 24 months (for Dr. Spana) or 18
months (for Mr. Wills) of base pay, as well as the opportunity for
COBRA benefits as described above under “Termination Without
Severance Compensation.”
Severance Compensation Without a Change in Control
. If we
terminate or fail to extend the employment agreement without cause,
or the executive terminates employment with good reason, then the
executive will receive as severance pay his salary then in effect,
paid in a lump sum, plus medical and dental benefits at our
expense, for a period of two years (Dr. Spana) or 18 months (Mr.
Wills) after the termination date. In addition, upon such event all
unvested options would immediately vest and be exercisable for two
years after the termination date or, if earlier, the expiration of
the option term, and all unvested restricted stock units would
accelerate and become fully vested.
Severance Compensation After a Change in Control
. If, within
one year after a change in control, we terminate employment or the
executive terminates employment with good reason, then the
executive will receive as severance pay 200% (Dr. Spana) or 150%
(Mr. Wills) of his salary then in effect, paid in a lump sum, plus
medical and dental benefits at our expense, for a period of two
years (Dr. Spana) or 18 months (Mr. Wills) after the termination
date. We would also reimburse the executive for up to $25,000 in
fees and expenses during the six months following termination, for
locating employment. We would also reimburse the executive for any
excise tax he might incur on “excess parachute
payments” (as defined in Section 280G(b) of the Internal
Revenue Code). All unvested options would immediately vest and be
exercisable for two years after the termination date or, if
earlier, the expiration of the option term. All unvested restricted
stock units would vest upon a change in control, without regard to
whether the executive’s employment is
terminated.
Option and Restricted Stock Unit Vesting Upon a Change in
Control
. Options and restricted stock units granted under
the 2011 Stock Incentive Plan vest upon a change in control. If any
options granted under the 2005 Stock Plan are to be terminated in
connection with a change in control, those options will vest in
full immediately before the change in control.
33
Definitions
. Under the employment agreements, a
“change in control,” “cause” and
“good reason” are defined as follows:
A
“change in control” occurs when:
(a)
any person or
entity acquires more than 50% of the voting power of our
outstanding securities;
(b)
the individuals
who, during any twelve-month period, constitute our board of
directors cease to constitute at least a majority of the board of
directors;
(c)
the consummation of
a merger or consolidation; or
(d)
we sell
substantially all our assets.
The
term “cause” means:
(a)
the occurrence of
(i) the executive’s material breach of, or habitual neglect
or failure to perform the material duties which he is required to
perform under, the terms of his employment agreement; (ii) the
executive’s material failure to follow the reasonable
directives or policies established by or at the direction of our
board of directors; or (iii) the executive’s engaging in
conduct that is materially detrimental to our interests such that
we sustain a material loss or injury as a result thereof, provided
that the breach or failure of performance is not cured, to the
extent cure is possible, within ten days of the delivery to the
executive of written notice thereof;
(b)
the willful breach
by the executive of his obligations to us with respect to
confidentiality, invention and non-disclosure, non-competition or
non-solicitation; or
(c)
the conviction of
the executive of, or the entry of a pleading of guilty or nolo
contendere by the executive to, any crime involving moral turpitude
or any felony.
The
term “good reason” means the occurrence of any of the
following, with our failure to cure such circumstances within 30
days of the delivery to us of written notice by the executive of
such circumstances:
(a)
any material
adverse change in the executive’s duties, authority or
responsibilities, which causes the executive’s position with
us to become of significantly less responsibility, or assignment of
duties and responsibilities inconsistent with the executive’s
position;
(b)
a material
reduction in the executive’s salary;
(c)
our failure to
continue in effect any material compensation or benefit plan in
which the executive participates, unless an equitable arrangement
has been made with respect to such plan, or our failure to continue
the executive’s participation therein (or in a substitute or
alternative plan) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the level of the
executive’s participation relative to other
participants;
(d)
our failure to
continue to provide the executive with benefits substantially
similar to those enjoyed by the executive under any of our health
and welfare insurance, retirement and other fringe-benefit plans,
the taking of any action by us which would directly or indirectly
materially reduce any of such benefits, or our failure to provide
the executive with the number of paid vacation days to which he is
entitled; or
(e)
the relocation of
the executive to a location which is a material distance from
Cranbury, New Jersey.
34
STOCK OWNERSHIP INFORMATION
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
The
rules of the SEC require us to disclose failures to file or late
filings of reports of stock ownership and changes in stock
ownership required to be filed by our directors, officers and
holders of more than 10% of our common stock. To the best of our
knowledge, all of the filings for our directors, officers and
holders of more than 10% of our common stock were made on a timely
basis in fiscal 2018.
BENEFICIAL OWNERSHIP OF MANAGEMENT AND OTHERS
The
tables below show the beneficial stock ownership and voting power,
as of May 3, 2019, of:
●
each director, each
nominee for director, each of the named executive officers, and all
current directors and officers as a group; and
●
all persons who, to
our knowledge, beneficially own more than five percent of our
common stock or Series A preferred stock.
“Beneficial
ownership” here means direct or indirect voting or
dispositive power over outstanding stock and stock that a person
has the right to acquire now or within 60 days after May 3, 2019.
See the footnotes for more detailed explanations of the holdings.
Except as noted, to our knowledge, the persons named in the tables
beneficially own and have sole voting and dispositive power over
all shares listed.
The
common stock has one vote per share and the Series A preferred
stock has approximately 15 votes per share of Series A preferred
stock. Voting power is calculated on the basis of the aggregate of
common stock and Series A preferred stock outstanding as of May 3,
2019, on which date 203,062,848 shares of common stock and 4,030
shares of Series A preferred stock, convertible into 61,335 shares
of common stock, were outstanding.
Under
our Insider Trading and Securities Law Compliance Policy directors
and officers may not engage in hedging, monetization or pledging
transactions of our securities. None of the shares of our
management and directors shown on the table below are
pledged.
The
address for all members of our management and directors is c/o
Palatin Technologies, Inc., 4B Cedar Brook Drive, Cranbury, NJ
08512. Addresses of other beneficial owners are in the applicable
table.
35
MANAGEMENT:
|
Class
|
Name of beneficial owner
|
Amount and nature of beneficial ownership
|
Percent of class
|
Percent of total voting power
|
|
Common
|
Carl Spana,
Ph.D.
|
5,266,352
(1)
|
2.5
%
|
*
|
|
Common
|
Stephen T.
Wills
|
4,737,989
(2)
|
2.3
%
|
*
|
|
Common
|
John K.A.
Prendergast, Ph.D.
|
963,017
(3)
|
*
|
*
|
|
Common
|
Robert K. deVeer,
Jr.
|
540,060
(4)
|
*
|
*
|
|
Common
|
J. Stanley
Hull
|
511,000
(5)
|
*
|
*
|
|
Common
|
Alan W. Dunton,
M.D.
|
464,352
(6)
|
*
|
*
|
|
Common
|
Angela
Rossetti
|
389,000
(7)
|
*
|
*
|
|
Common
|
Arlene M.
Morris
|
331,000
(8)
|
*
|
*
|
|
Common
|
Anthony M. Manning,
Ph.D.
|
93,000
(9)
|
*
|
*
|
|
|
|
|
|
|
|
|
All current
directors and executive officers as a group (nine
persons)
|
13,295,770
(10)
|
6.2
%
|
1.2
%
|
*Less
than one percent.
(1)
Includes 2,448,000
shares of common stock underlying outstanding options and 2,056,750
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(2)
Includes 2,150,250
shares of common stock underlying outstanding options and 1,843,250
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(3)
Includes 532,250
shares of common stock underlying outstanding options and 176,000
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(4)
Includes 293,500
shares of common stock underlying outstanding options and 88,000
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(5)
Includes 290,000
shares of common stock underlying outstanding options and 88,000
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(6)
Includes 242,000
shares of common stock underlying outstanding options and 78,000
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(7)
Includes 194,500
shares of common stock underlying outstanding options and 68,000
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(8)
Consists of 149,500
shares of common stock underlying outstanding options and 58,000
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(9)
Consists of 46,500
shares of common stock underlying outstanding options and 33,000
shares of common stock underlying restricted stock units, all of
which shares of common stock underlying restricted stock units have
vested but not been delivered under deferred delivery provisions
providing for delivery after the grantee’s separation from
service or a defined change in control, but does not include shares
of common stock underlying outstanding options or restricted stock
unit awards that have not vested and will not vest within 60
days.
(10)
Includes 10,835,500
shares of common stock underlying outstanding options and
restricted stock units.
36
MORE THAN 5% BENEFICIAL OWNERS:
|
Class
|
Name
and address of beneficial owner
|
Amount and nature of beneficial ownership (1)
|
Percent
of class
|
Percent of total voting
power
|
|
Common
|
BlackRock,
Inc.
55 East 52nd
Street
New York, NY
10055
|
12,428,014
(2)
|
6.1
%
|
5.9
%
|
|
Series
A
Preferred
|
Steven N.
Ostrovsky
43 Nikki
Ct.
Morganville, NJ
07751
|
500
|
12.4
%
|
*
|
|
Series
A
Preferred
|
Thomas L. Cassidy
IRA Rollover
38 Canaan
Close
New Canaan, CT
06840
|
500
|
12.4
%
|
*
|
|
Series
A
Preferred
|
Jonathan E.
Rothschild
300 Mercer St.,
#28F
New York, NY
10003
|
500
|
12.4
%
|
*
|
|
Series
A
Preferred
|
Arthur J.
Nagle
19 Garden
Avenue
Bronxville, NY
10708
|
250
|
6.2
%
|
*
|
|
Series
A
Preferred
|
Thomas P. and Mary
E. Heiser, JTWROS
10 Ridge
Road
Hopkinton, MA
01748
|
250
|
6.2
%
|
*
|
|
Series
A
Preferred
|
Carl F.
Schwartz
31 West 87th
St.
New York, NY
10016
|
250
|
6.2
%
|
*
|
|
Series
A
Preferred
|
Michael J.
Wrubel
3650 N. 36 Avenue,
#39
Hollywood, FL
33021
|
250
|
6.2
%
|
*
|
|
Series
A
Preferred
|
Myron M.
Teitelbaum, M.D.
175 Burton
Lane
Lawrence, NY
11559
|
250
|
6.2
%
|
*
|
|
Series
A
Preferred
|
Laura Gold
Galleries Ltd. Profit Sharing Trust Park South Gallery at Carnegie
Hall
154 West 57th
Street, Suite 114
New York, NY
10019
|
250
|
6.2
%
|
*
|
|
Series
A
Preferred
|
Laura
Gold
180 W. 58th
Street
New York, NY
10019
|
250
|
6.2
%
|
*
|
|
Series
A
Preferred
|
Nadji T.
Richmond
20 E. Wedgewood
Glen
The Woodlands, TX
77381
|
230
|
5.7
%
|
*
|
*Less
than one percent.
(1)
Unless otherwise indicated by footnote, all share amounts represent
outstanding shares of the class indicated, and all beneficial
owners listed have, to our knowledge, sole voting and dispositive
power over the shares listed.
(2)
Based on a report filed on Schedule 13G (the “BlackRock
13G”) on February 8, 2019 by BlackRock, Inc. According to the
BlackRock 13G, BlackRock, Inc. has sole voting power with respect
to 12,044,305 of the Palatin common shares it beneficially owns and
has sole dispositive power with respect to all the Palatin common
shares it beneficially owns.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As a
condition of employment, we require all employees to disclose in
writing actual or potential conflicts of interest, including
related party transactions. Our code of corporate conduct and
ethics, which applies to employees, officers and directors,
requires that the audit committee review and approve related party
transactions. Our code of corporate conduct and ethics is available
at our website, www.palatin.com. Since July 1, 2012, there
have been no transactions or proposed transactions in which we were
or are to be a participant, in which any related person had or will
have a direct or indirect material interest.
OTHER ITEMS OF BUSINESS
We are
not aware of any matters, other than the items of business
discussed in this proxy statement, which may come before the
meeting. If other items of business properly come before the
meeting, the proxy holders will vote shares in accordance with
their judgment.
37
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Stockholders may
submit proposals on matters appropriate for stockholder action at
annual meetings in accordance with regulations adopted by the SEC.
To be considered for inclusion in the proxy statement and form of
proxy relating to the next annual meeting of stockholders, such
proposals must be received no later than January 10, 2020. To be
considered for presentation at the 2019 annual meeting, although
not included in the proxy statement, proposals must be received no
later than March 25, 2020. Proposals that are not received in a
timely manner will not be voted on at the 2019 annual meeting. If a
proposal is received on time, the proxies that management solicits
for the meeting may still exercise discretionary voting authority
on the proposal under circumstances consistent with the proxy rules
of the SEC. All stockholder proposals should be marked for the
attention of the Secretary at our executive offices, 4B Cedar Brook
Drive, Cranbury, NJ 08512.
Your
cooperation in giving these matters your immediate attention and
voting by Internet or telephone or by returning your proxy card is
greatly appreciated.
|
|
By
order of the board of directors,
|
|
|
|
|
|
|
|
|
Stephen T. Wills
,
Secretary
|
|
|
May 6,
2019
|
38
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