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.  )

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Pharmion Corporation

(Name of Registrant as Specified In Its Charter)

 

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PHARMION CORPORATION
2525 28th Street, Suite 200
Boulder, Colorado 80301

 

April 27, 2007

 

Dear Stockholder,

 

It is my pleasure to invite you to attend the 2007 Annual Meeting of Stockholders of Pharmion Corporation. We will hold the meeting on Wednesday, June 6, 2007 at 8:30 a.m. at the Hotel Boulderado, at 2115 13^th Street, Boulder, Colorado 80302. The accompanying Notice of Annual Meeting and Proxy Statement describe the business to be conducted, details regarding admission to the meeting and information about the Company that you should consider as you vote your shares.

 

Your vote is important. When you have read the Proxy Statement, please promptly vote your shares by marking, signing, dating and returning the proxy card in the enclosed prepaid envelope or following the enclosed voting instructions. You may also vote your shares on the Internet or by telephone. Whether or not you plan to attend the Annual Meeting, we encourage you to vote as soon as possible to ensure your representation at the meeting.

 

Thank you for your ongoing support and continued interest in Pharmion Corporation.

 

Sincerely,

 

PATRICK J. MAHAFFY

President and Chief Executive Officer

2007 ANNUAL MEETING OF STOCKHOLDERS

 

NOTICE OF ANNUAL MEETING AND PROXY STATEMENT

 

TABLE OF CONTENTS

 

PHARMION CORPORATION
2525 28th Street, Suite 200
Boulder, Colorado 80301
(720) 564-9100

 

 

By Order of the Board of Directors

 

STEVEN DUPONT

Vice President, General Counsel and Secretary

 

April 27, 2007

at Boulder, Colorado

 

This notice of annual meeting, proxy statement and form of proxy are being distributed on or about May 4, 2007

PHARMION CORPORATION
2525 28th Street, Suite 200
Boulder, Colorado 80301

 

PROXY STATEMENT
FOR THE 2007 ANNUAL MEETING OF STOCKHOLDERS

 

April 27, 2007

 

 

The Board of Directors (the “Board”) of Pharmion Corporation, a Delaware corporation (sometimes referred to as “Pharmion,” the “Company,” “we,” “us,” and “our”) is soliciting your proxy to vote at Pharmion’s Annual Meeting of Stockholders, which will take place on Wednesday, June 6, 2007. You are receiving this proxy statement and the enclosed proxy card or voting instructions in preparation of the annual meeting.

 

As a stockholder, you are invited to attend the annual meeting and are entitled and requested to vote on the items of business to be conducted at the annual meeting described in this proxy statement. However, you do not need to attend the meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card, follow your broker or nominee’s voting instructions, or you may also be able to submit your proxy over the telephone or on the Internet.

 

 

The information in this proxy statement relates to the proposals to be voted on at the annual meeting, the voting process, Pharmion’s Board and Board committees, the compensation of directors and certain current and former executive officers for the 2006 fiscal year, and other required information.

 

We are also enclosing a copy of our 2006 Annual Report on Form 10-K, which includes our financial statements for the fiscal year ended December 31, 2006.

 

 

The items of business scheduled to be voted on at the annual meeting are:

 

 

We will also consider any other business that properly comes before the annual meeting. See Question 18 “What happens if additional matters are presented at the annual meeting?”

 

 

Our Board recommends that you vote your shares “FOR” each of the nominees for Class I Director according to Proposal 1, and “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the 2007 fiscal year according to Proposal 2.

 

 

We are making this solicitation and will pay the entire cost of preparing and distributing these proxy materials and soliciting proxies. In addition to these mailed proxy materials, our directors and employees may also solicit proxies or votes in person, by telephone or by other means of communication. Directors and employees will not be

paid any additional compensation for soliciting proxies. We will also reimburse brokerage firms, banks and other nominees for their costs in forwarding proxy materials to our beneficial owners.

 

 

Record Holders.  Record holders of our common stock at the close of business on April 16, 2007 (the “Record Date”) may vote at the annual meeting. On April 16, 2007, we had 32,158,122 outstanding shares of common stock, which were held by approximately 2,460 record holders.

 

Stockholder of Record.  If your shares are registered directly, in your name, with our transfer agent, American Stock Transfer & Trust Company, you are considered the stockholder of record with respect to those shares and these proxy materials are being sent to you by Pharmion. As the stockholder of record, you have the right to grant your voting proxy directly to Pharmion or to vote in person at the annual meeting.

 

Beneficial Owner.  If your shares are held in a stock brokerage account or by a bank, trustee or other nominee, you are considered the beneficial owner of shares held in street name. These proxy materials are being forwarded to you by your broker, trustee or nominee, who is considered the record holder with respect to those shares. As the beneficial owner, you have the right to direct your broker or nominee how to vote, and you are also invited to attend the annual meeting. However, since you are not the record holder, you may not vote these shares in person at the meeting unless you follow your broker’s procedures for obtaining a “legal proxy” from the broker, trustee or nominee, giving you the right to vote the shares at the meeting. Your broker or nominee has enclosed a voting instruction card for you to use.

 

You are urged to vote by proxy regardless of whether or not you attend the annual meeting.

 

 

Each share of our common stock that you own on the Record Date entitles you to one vote. Shares held in your name as the stockholder of record may be voted by proxy or in person at the annual meeting. Shares held beneficially in street name may be voted by following your voting instructions or, in person at the annual meeting, only if you obtain a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the annual meeting, we recommend you also submit your proxy or voting instructions as described below so that your vote will be counted if you later decide not to attend the meeting.

 

 

Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the annual meeting. If you are a stockholder of record, you may vote by completing the enclosed proxy card and promptly returning it in the envelope provided. If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker, trustee or nominee. You may also be able to submit your proxy over the telephone or on the Internet. Please refer to the voting instruction card provided by your broker, trustee or nominee. If you properly fill in your proxy card and send it to us in time, or properly submit your voting instructions, your proxy holder, Patrick J. Mahaffy or Erle T. Mast, will vote your shares as recommended by our Board.

 

 

If you plan to attend the annual meeting and vote in person, we will give you a ballot when you arrive. However, if your shares are held in a stock brokerage account or by a bank or other nominee, you must bring an account statement or letter from the nominee indicating that you were the beneficial owner of the shares on April 16, 2007, the Record Date for voting, together with a “legal proxy” from the broker, trustee or other nominee.

 

 

You can change your vote or revoke your proxy at any time before the final vote at the annual meeting. If you are the stockholder of record, you may do this by:

 

 

If you hold shares through a broker, trustee or nominee, you must contact your financial institution, broker or nominee for information on how to revoke your proxy or change your vote. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically so request.

 

 

Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within Pharmion or to third parties, except: (1) as necessary to meet applicable legal requirements, (2) to allow for the tabulation of votes and certification of the vote, and (3) to facilitate a successful proxy solicitation. Occasionally, stockholders provide written comments on their proxy card, which are then forwarded to Pharmion management.

 

 

 

If you sign your proxy card or voting instruction card without giving specific instructions, your shares will be voted in accordance with the recommendations of the Board (“FOR” all of Pharmion’s Director nominees to the Board, “FOR” ratification of Pharmion’s independent registered public accounting firm, and in the discretion of either of proxy holder, Patrick J. Mahaffy or Erle T. Mast, on any other matters that may properly come before the meeting.

 

 

In the election of Directors, the three persons receiving the highest number of “FOR” votes at the annual meeting will be elected. Proposal 2 requires the affirmative “FOR” vote of a majority of those shares present in person or represented by proxy and entitled to vote on this proposal at the annual meeting.

 

 

Votes will be counted by the inspector of election appointed for the meeting, who will separately count “FOR” and “WITHHOLD” and, with respect to proposals other than the election of directors, “AGAINST” votes, abstentions and broker non-votes. Abstentions will be counted towards the vote total for each proposal, and will have the same effect as “AGAINST” votes. Broker non-votes have no effect and will not be counted towards the vote total for any proposal.

 

If your shares are held by your broker, trustee or nominee, you will need to obtain a proxy form from the institution that holds your shares and follow the instructions included on that form regarding how to instruct your broker to vote your shares. If you do not give instructions to your broker, your broker can vote your shares with respect to “discretionary” items, but not with respect to “non-discretionary” items. Discretionary items are proposals considered routine on which your broker may vote shares held in street name in the absence of your voting instructions. On non-discretionary items for which you do not give your broker instructions, the shares will be treated as broker non-votes.

 

 

If you are a stockholder of record, your vote by proxy must be received before the polls close at the annual meeting. If you hold shares beneficially in street name with a broker, trustee or nominee, please follow the voting instructions provided by your broker, trustee or nominee.

 

 

You are entitled to attend the annual meeting only if you were a Pharmion stockholder as of the close of business on April 16, 2007 or you hold a valid proxy for the annual meeting. Your name will be verified against the list of stockholders of record on the record date prior to your being admitted to the annual meeting. If you are not a stockholder of record but hold shares through a broker, trustee or nominee (i.e., in street name), you should provide proof of beneficial ownership on the record date, such as your most recent account statement prior to April 16, 2007, a copy of the voting instruction card provided by your broker, trustee or nominee, or other similar evidence of ownership. If you do not provide photo identification or comply with the other procedures outlined above, you will not be admitted to the annual meeting.

 

The meeting will begin promptly at 8:30 a.m., local time, on Wednesday, June 6, 2007. Check-in will begin at 8:00 a.m., local time, and you should allow ample time for the check-in procedures.

 

 

A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if at least a majority of the outstanding shares of Pharmion common stock are represented by stockholders entitled to vote and present in person or represented by proxy. Both abstentions and broker non-votes described previously in Question 14 are counted for the purpose of determining the presence of a quorum. If there is no quorum, a majority of the votes present at the meeting may adjourn the meeting to another date.

 

 

Other than the two items of business described in this proxy statement, we are not aware of any other business to be acted upon at the annual meeting. If you grant a proxy, the persons named as proxy holders, Patrick J. Mahaffy and Erle T. Mast, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If for any reason any of our nominees is not available as a candidate for Director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board.

 

 

You may submit proposals for consideration at future stockholder meetings. For a stockholder proposal to be considered for inclusion in Pharmion’s proxy statement for the annual meeting next year, the Corporate Secretary must receive the written proposal at our principal executive offices no earlier than February 7, 2008 and no later than March 8, 2008. Such proposals also must comply with Securities and Exchange Commission (“SEC”) regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:

 

Corporate Secretary

Pharmion Corporation

2525 28^th Street, Suite 200

Boulder, Colorado 80301

Fax: (720) 564-9191

 

A stockholder may send a proposed director candidate’s name and qualifications to the Board at any time. Generally, such proposed candidates are considered at the Board meeting prior to the annual meeting.

 

To nominate an individual for election at an annual stockholder meeting, the stockholder must give timely notice to the Corporate Secretary in accordance with the bylaws of Pharmion, which, for the 2008 annual stockholder meeting, require that the notice be received by the Corporate Secretary between the close of business on February 7, 2008 and March 8, 2008, unless the annual meeting is moved by more than 30 days before the anniversary date of the 2007 annual meeting, in which case the deadline will be not earlier than the close of business on the tenth (10^th) day following the earlier of the day on which notice of the date of the meeting was mailed or the day public announcement of the meeting date was made.

 

 

You may contact the Corporate Secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates.

 

 

Please contact Pharmion’s transfer agent at the phone number or address listed below with questions concerning stock certificates, transfer of ownership or other matters pertaining to your stock account.

 

American Stock Transfer & Trust Company

59 Maiden Lane

Plaza Level

New York, NY 10038

(800) 937-5449

(718) 921-8124

 

 

In December 2000, the SEC adopted a rule concerning the delivery of annual disclosure documents. The rule allows us or your broker to send a single set of our annual report and proxy materials to any household at which two or more of our shareholders reside, if we or your broker believe that the shareholders are members of the same family. This practice, referred to as “householding,” benefits both you and us. It reduces the volume of duplicate information received at your household and helps to reduce our expenses. The rule applies to our annual reports, proxy statements 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 shareholder will continue to receive a separate proxy card or voting instruction card.

 

If your household received a single set of disclosure documents this year, but you would prefer to receive a set for each stockholder or if you share a household with another stockholder and you received multiple sets of disclosure documents and would like to only receive one set, please follow these instructions:

 

 

 

As of July 1, 2007, applicable for our annual disclosure documents in 2008, SEC rules permit us to send you a notice indicating that our proxy materials are available on the Internet and also how you can request a mailed copy. There is a box to check on the proxy card, or you can indicate your request by following your broker or nominee’s voting instructions, if you want to receive our future proxy materials by mail at no cost to you. Even if you do not check the box, you will still have the right to request a free set of proxy materials upon receipt of a notice.

 

Pharmion is committed to maintaining the highest standards of business conduct and corporate governance, which we believe are essential to running our business in an efficient and effective manner, serving our stockholders well and maintaining Pharmion’s integrity as a global pharmaceutical company. Pharmion has adopted a code of business conduct and ethics for its Board members, officers and employees, known as the Corporate Code of Conduct and Ethics. Pharmion also has adopted Corporate Governance Guidelines to be followed by our Board which, in conjunction with our certificate of incorporation, bylaws and Board committee charters, form the framework for governance. Pharmion’s Corporate Code of Conduct and Ethics and our Corporate Governance Guidelines are available on our web site at www.pharmion.com in the “Investor Relations, Corporate Governance” section. Disclosure regarding any amendments to, or waivers from, provisions of the Corporate Code of Conduct and Ethics that apply to our directors, principal executive or financial officers will be included in a Current Report on Form 8-K within four business days following the date of any amendment or waiver, unless Pharmion has posted such amendments or waivers on its web site.

 

Copies of the Corporate Code of Conduct and Ethics and the Corporate Governance Guidelines are available to stockholders without charge, upon written request, from:

 

Pharmion Corporation

Attention: Investor Relations

2525 28^th Street

Boulder, CO 80301

 

Our bylaws provide that our business is to be managed under the direction of our Board. Under our certificate of incorporation, our Board is divided into three classes of directors for purposes of election. One class of directors is elected at each annual meeting of stockholders to serve for a three-year term. Our Board currently consists of eight (8) members, classified into the three (3) classes as follows: (1) Brian G. Atwood, M. James Barrett and Edward J. McKinley constitute Class I with a term ending at the 2007 annual meeting; (2) Patrick J. Mahaffy, James Blair and Cam L. Garner constitute Class II with a term ending at the 2008 annual meeting; and (3) Dr. Thorlef Spickschen and Dr. John C. Reed constitute Class III with a term ending at the 2009 annual meeting.

 

On April 3, 2007, our Board nominated Brian G. Atwood, M. James Barrett and Edward J. McKinley for reelection as directors at our 2007 annual meeting of stockholders for a term of three years, to serve until the 2010 annual meeting of stockholders and until their respective successors have been elected and qualified.

 

Pharmion’s Corporate Governance Guidelines provide that a majority of the Board will consist of independent directors. The Board has determined that each nominee director standing for reelection, Brian G. Atwood, M. James Barrett and Edward J. McKinley, and each member of each Board committee has no material relationship with Pharmion and is independent within the meaning of the Board’s independence standards, which reflect the criteria

for independence of The NASDAQ Stock Market (“NASDAQ”) and the Securities and Exchange Commission (the “SEC”) rules. The current Board is composed of the following seven independent directors.

 

Brian G. Atwood
James Blair
M. James Barrett
Cam L. Garner
Edward J. McKinley
John C. Reed
Thorlef Spickschen

 

Mr. Mahaffy is not independent under the Board’s independence standards because of his employment as our President and Chief Executive Officer.

 

Set forth below are the names of the persons nominated as directors and directors whose terms do not expire this year, their ages as of April 27, 2007, their offices in the Company, if any, background information about their principal occupations or employment, the length of their tenure as directors and the names of other public companies in which such persons hold directorships.

 

 

M. James Barrett, Ph.D., has served as the Chairman of our board of directors since September 2003. Since September 2001, Dr. Barrett has served as a general partner of New Enterprise Associates, a venture capital firm that focuses on the healthcare and information technology industries. From 1997 to 2001, Dr. Barrett served as Chairman and Chief Executive Officer of Sensors for Medicine and Science, Inc., which he founded in 1997. He continues to serve as the chairman of its board of directors. Dr. Barrett also serves on the board of directors of MedImmune, Inc., Iomai Corporation, Targacept, Inc., YM Biosciences, Inc. and Inhibitex, Inc., and on the boards of several privately-held healthcare companies.

 

Brian G. Atwood has served as a member of our board of directors since January 2000. Since 1999, Mr. Atwood has served as a Managing Director of Versant Venture Management LLC, a venture capital firm focusing on healthcare that he co-founded. Prior to founding Versant Venture, Mr. Atwood served as a general partner of Brentwood Associates, a venture capital firm. Mr. Atwood also serves on the board of directors of Cadence Pharmaceuticals, Inc., and on the boards of several privately-held pharmaceutical and biotechnology companies.

 

James Blair, Ph.D., has served as a member of our board of directors since January 2000. Since 1985, Dr. Blair has served as a partner of Domain Associates, L.L.C., a venture capital management company focused on life sciences. Dr. Blair currently serves on the board of directors of the Prostate Cancer Foundation, a philanthropic organization. Dr. Blair is presently an advisor to the Department of Molecular Biology at Princeton University and an advisor to the Department of Bioengineering at the University of Pennsylvania. Additionally, Dr. Blair currently serves on the board of directors of Cadence Pharmaceuticals, Inc., Novacea, Inc., NuVasive, Inc., and Volcano Corporation, and on the boards of several privately-held healthcare companies

 

Cam L. Garner has served as a member of our board of directors since May 2001. Mr. Garner is a co-founder and currently serves as Chairman and CEO of Verus Pharmaceuticals, Inc., a specialty pharmaceutical company. Mr. Garner served as the chairman of Xcel Pharmaceuticals, Inc., a specialty pharmaceutical company that he co-

founded, from 2001 until its acquisition by Valeant Pharmaceuticals International in March 2005. From 1989 to November 2000, Mr. Garner was Chief Executive Officer of Dura Pharmaceuticals, Inc. and its Chairman from 1995 to 2000. Mr. Garner was also the co-founder and Chairman of DJ Pharma from 1998 to 2000. Mr. Garner serves on the board of directors of Favrille, Inc. and Somaxon Pharmaceuticals, Inc. and as Chairman of the Board of Cadence Pharmaceuticals, Inc. Mr. Garner also serves on the boards of several privately-held pharmaceutical and biotechnology companies.

 

Patrick J. Mahaffy is a founder of Pharmion and has served as our President and Chief Executive Officer and a member of our board of directors since our inception. From 1992 through 1998, Mr. Mahaffy was President and Chief Executive Officer of NeXagen, Inc. and its successor, NeXstar Pharmaceuticals, Inc., a biopharmaceutical company. Prior to that, Mr. Mahaffy was a Vice President at E.M. Warburg Pincus and Co. Mr. Mahaffy currently serves on the board of Ruxton Pharmaceuticals, Inc., a privately-held biopharmaceutical company.

 

Edward J. McKinley has served as a member of our board of directors since October 2004. Mr. McKinley is a private investor. Until his retirement in 2003, he was a partner at E.M. Warburg, Pincus and Co., holding various roles including managing the firm’s private equity activity in Europe and serving on the firm’s Management Committee. From 2003 to 2004, he served as a Senior Advisor to Warburg Pincus. Prior to joining Warburg Pincus, he was a consultant with McKinsey and Company. Mr. McKinley also serves on the board of directors of several private companies.

 

John C. Reed has served as a member of our board of directors since June 2005. Dr. Reed has been the President and Chief Executive Officer of The Burnham Institute, an independent, nonprofit, public benefit organization dedicated to basic biomedical research, since January 2002. Dr. Reed has been with The Burnham Institute for the past thirteen years, serving as the Deputy Director of the Cancer Center beginning in 1994, as Scientific Director of the Institute beginning in 1995 and as Cancer Center Director in 2002. Additionally, he holds adjunct professorships at the University of California San Diego and San Diego State University. Dr. Reed also serves as an advisor and consultant to numerous biotechnology and pharmaceutical companies. He currently serves on the board of directors of Isis Pharmaceuticals, Inc. and Stratagene, Inc. He is also a member of the Board of Trustees of The Burnham Institute.

 

Thorlef Spickschen has served as a member of our board of directors since December 2001. From 1994 to 2001, Dr. Spickschen was chairman and CEO of BASF Pharma/Knoll AG. Prior to joining Knoll AG, he held executive positions at Boehringer Mannheim GmbH, where he was responsible for sales and marketing and was Chairman of its Executive Board from 1990, and at Eli Lilly & Co. Dr. Spickschen currently serves on the board of Cytos Biotechnology AG, which is publicly-traded in Switzerland, and as Chairman of the Supervisory Board of BIOTEST AG, which is publicly-traded in Germany, and on the boards of several privately-held companies and non-profit organizations in Europe.

 

As of the date of this proxy statement, our Board has three committees, Audit, Compensation and Nominating and Corporate Governance. Each of the committees operates under a written charter adopted by the Board. All of the committee charters are available on Pharmion’s web site at www.pharmion.com in the “Investor Relations, Corporate Governance” section. During the year ended December 31, 2006, there were ten meetings of our Board, and the various committees of the Board met a total of ten times. No director attended fewer than 75% of the total number of meetings of the Board and of committees of the Board on which he or she served during 2006. Currently, the Board does not have a formal policy regarding director attendance at our annual meetings of stockholders. However, it is expected that absent compelling circumstances, each of our directors will be in attendance. All of the members of our Board, with the exception of Dr. Reed, were able to attend our 2006 Annual Meeting of Stockholders.

 

Audit Committee.  Our Audit Committee currently has three members, Messrs. McKinley (Chairman) and Atwood and Dr. Spickschen. Our Audit Committee evaluates the independent auditors qualifications, independence and performance; determines the engagement of the registered public accounting firm to be retained as independent auditors; approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services; monitors the rotation of partners of the independent registered public accounting

firm on our engagement team as required by law; confers with management and the independent registered public accounting firm regarding the effectiveness of financial reporting controls in effect; reviews our financial statements; reviews our critical accounting policies and estimates; and discusses with management and the independent registered public accounting firm the results of the annual audit and the review of our quarterly financial statements. All members of the Audit Committee satisfy the current independence standards promulgated by the SEC and by NASDAQ as such standards apply specifically to members of Audit Committees. Our Board has determined that Mr. McKinley is an “audit committee financial expert,” as the SEC has defined that term in Item 401 of Regulation S-K. Please also see the Report of the Audit Committee set forth elsewhere in this proxy statement. Our Audit Committee charter, in addition to being available at our web site, is attached to this proxy statement as Appendix A. The Audit Committee held seven meetings during 2006.

 

Compensation Committee.  Our Compensation Committee currently has three members, Drs. Blair (Chairman), Barrett and Spickschen. The duties and responsibilities of our Compensation Committee are set forth in detail below in the section entitled, “Compensation Discussion and Analysis.” All members of the Compensation Committee qualify as independent under the definition promulgated by NASDAQ. Please also see the report of the Compensation Committee set forth elsewhere in this proxy statement. The committee held two meetings during 2006.

 

Nominating and Corporate Governance Committee.  Our Nominating and Corporate Governance Committee currently has three members, Drs. Barrett (Chairman), Atwood and Blair each of whom is a non-management member of our Board. The Nominating and Corporate Governance Committee oversees and assists our Board in reviewing and recommending nominees for election as directors, assessing the performance of the Board, directing guidelines for the composition of our Board members and reviewing and administering our corporate governance guidelines. All members of the Nominating and Corporate Governance Committee qualify as independent under the definition promulgated by NASDAQ. The committee held one meeting during 2006.

 

New candidates for membership on the Board are reviewed in the context of the current composition of the Board, the operating requirements of the Company and the long-term interests of our stockholders. The committee may consider candidates recommended by stockholders as well as from other sources such as other directors or officers, third party search firms or other appropriate sources. For all potential candidates, the committee may consider all factors it deems relevant, such as a candidate’s 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. In the case of incumbent members of the Board whose terms of office are set to expire, the Nominating and Corporate Governance Committee reviews such directors’ overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair the independence of that director. In the case of new director candidates, the committee also determines whether the nominee is independent, which determination is based upon applicable NASDAQ rules, applicable SEC rules and regulations and the advice of counsel, if necessary.

 

In general, persons recommended by stockholders will be considered on the same basis as candidates from other sources. If a stockholder wishes to nominate a candidate to be considered for election as a director at the 2008 Annual Meeting of Stockholders using the procedures set forth in our bylaws, it must follow the procedures described in Questions 19 and 20, under “stockholder proposals, director nominations and related bylaw provisions.” If a stockholder wishes to propose a candidate for consideration as a nominee by the Nominating and Corporate Governance Committee, it should submit any pertinent information regarding the candidate to the Nominating Committee by mail at 2525 28th Street, Suite 200, Boulder, CO 80301 (c/o Pharmion Corporation).

 

To be considered for inclusion in the proxy statement relating to our Annual Meeting of Stockholders to be held in 2008, stockholder proposals must be received not earlier than February 7, 2008 and not later than March 8, 2008, unless the annual meeting is moved by more than 30 days before the anniversary date of the 2007 annual meeting, in which case the deadline will be not earlier than the close of business on the tenth (10th) day following the earlier of the day on which notice of the date of the meeting was mailed or the day public announcement of the meeting date was made.

 

As noted above, during the fiscal year ended December 31, 2006, our Compensation Committee was composed of Drs. Blair (Chairman), Barrett and Spickschen. No member of the Compensation Committee has ever been an employee or officer of Pharmion.

 

Erle T. Mast, our Executive Vice President and Chief Financial Officer, serves on the board of directors of Verus Pharmaceuticals, Inc., a privately-held pediatric-focused specialty pharmaceutical company. Cam L. Garner, a member of our Board of directors, currently serves as Chairman and CEO of Verus and James Blair, a member of our Board and Compensation Committee, currently serves as a member of the board of directors of Verus. Patrick J. Mahaffy, our President and Chief Executive Officer, serves as Chairman of the board of directors of Ruxton Pharmaceuticals, Inc. a privately-held biopharmaceutical company. M. James Barrett, a member of our Board and Compensation Committee, is also a member of the board of directors of Ruxton Pharmaceuticals, Inc. None of our executive officers serve as a member of the board of directors or compensation committee of any entity that has one or more executive officers who serve on our Compensation Committee.

 

Generally, stockholders who have questions or concerns should contact our Investor Relations Department at (720) 564-9150. However, any shareholder who wishes to address questions regarding our business directly with our Board, any Board committee or any individual director should direct his or her questions or other communications in writing to:

 

Corporate Secretary

Pharmion Corporation

2525 28^th Street

Boulder, CO 80301

 

As of June 8, 2006, non-employee directors received an annual fee of $25,000, payable in equal quarterly installments, plus a fee of $3,000 for each meeting of the Board attended. An additional annual fee of $20,000 is paid to each member of the Audit Committee and an additional annual fee of $10,000 is paid to the members of each of the Compensation Committee and the Nominating and Corporate Governance Committee. Mr. Mahaffy, our President and Chief Executive Officer, does not receive any separate compensation for his Board activities. Members of the Board are reimbursed for all reasonable expenses incurred in connection with their attendance at Board or committee meetings.

 

Under our 2001 Non-Employee Director Stock Option Plan, as amended and restated, each new non-employee director will receive upon joining our Board an option to purchase 25,000 shares of our common stock, which option vests ratably on each of the first four anniversaries of the date of grant. Additionally, each non-employee director will receive an automatic, annual option grant to purchase 7,500 shares of our common stock on the date of each annual meeting of stockholders, which option vests in full on the first anniversary of the date of grant. All options granted under the 2001 Non-Employee Director Stock Option Plan have a ten-year term and an exercise price equal to the fair market value of our common stock on the grant date.

 

 

 

 

		Grant Date
Grant Date		Fair Value
6/1/2005		$	43,775
6/8/2006			55,247

 

 

		Grant Date
Grant Date		Fair Value
10/14/2004		$	600,082
6/1/2005			43,775
6/8/2006			55,247

 

 

		Grant Date
Grant Date		Fair Value
6/1/2005		$	218,875
6/8/2006			55,247

 

The following table sets forth certain information regarding each executive officer as of April 27, 2007, who is not also a director. We have employment agreements with each executive officer, which have been previously filed with the SEC.

 

 

Erle T. Mast has served as our Chief Financial Officer since July 2002 and as Executive Vice President since February 2006. From 1997 through 2002, Mr. Mast worked for Dura Pharmaceuticals and its successor, Elan Corporation. From 2000 to 2002, he served as Chief Financial Officer for the Global Biopharmaceuticals business for Elan. From 1997 to 2000, Mr. Mast served as Vice President of Finance for Dura. Prior to that, Mr. Mast was a partner with Deloitte & Touche, LLP.

 

Gillian C. Ivers-Read has served as our Vice President, Clinical Development and Regulatory Affairs since April 2002, as Executive Vice President, Clinical Development, Regulatory Affairs and Medical since February 2006 and as our Executive Vice President, Development Operations since August 2006. Between 1996 and 2001, Ms. Ivers-Read held various regulatory positions with Hoechst Marion Roussel and its successor Aventis Pharmaceuticals, Inc., where she most recently held the position of Vice President, Global Regulatory Affairs. From 1994 to 1996, Ms. Ivers-Read was Vice President, Development and Regulatory Affairs for Argus Pharmaceuticals and from 1984 to 1994 she served as a regulatory affairs director for Marion Merrell Dow.

 

Michael D. Cosgrave has served as our Vice President, International Commercial Operations since November 2000, as Executive Vice President, Global Commercial Operations since July 2005, and as our Executive Vice President and Chief Commercial Officer since August 2006. From 1991 to November 2000, Mr. Cosgrave served in various business development and sales and marketing positions for NeXagen, Inc. and its successor, NeXstar Pharmaceuticals, Inc., where he most recently held the position of Vice President, Sales and Marketing with responsibility for markets in the Middle East, Asia, Africa, Australia and Greece. From 1980 to 1991, Mr. Cosgrave worked for Johnson and Johnson UK Ltd. with business development and general manager responsibilities in various international countries.

 

Steven N. Dupont has served as our Vice President, General Counsel and Secretary since January 2005. From 2001 through 2004, Mr. Dupont was a partner at Cooley Godward LLP, a Silicon Valley-based law firm and outside counsel to the Company. From 1995 until his promotion to partner at the firm in January 2001, Mr. Dupont was a business associate at Cooley Godward. Prior to 1995, Mr. Dupont was an associate at Jenner & Block, a Chicago-based law firm.

 

Andrew R. Allen has served as our Executive Vice President and Chief Medical Officer since August 2006. From October 2004 to 2006, Dr. Allen served as Vice President of BioPharma Development and head of the Oncology Therapeutic Unit for Chiron Corporation. From 2002 to October 2004, Dr. Allen served as global head of development for Abbott Laboratories’ oncology franchise. From 1999 to June 2002, Dr. Allen was an engagement manager for McKinsey & Company, leading internal and client teams in the development and execution of business strategies for biotechnology and pharmaceutical companies.

 

The following table shows the beneficial ownership of our common stock as of April 6, 2007 for (a) the executive officers named in the “Summary Compensation Table” of this proxy statement (the “Named Executive Officers”), (b) each of our directors, (c) all of our current directors and Named Executive Officers as a group and (d) each stockholder known by us to own beneficially more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules of the SEC and means voting or investment power with respect to the securities. We deem shares of common stock that may be acquired by an individual or group within 60 days of April 6, 2007 pursuant to the exercise of options to be outstanding for the purpose of computing the percentage ownership of such individual or group, but such shares are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them based on information provided to us by these stockholders. Percentage of ownership is based on 32,155,021 shares of our common stock outstanding on April 6, 2007. Unless otherwise indicated, the address for each of the stockholders in the table below is c/o Pharmion Corporation, 2525 28th Street, Boulder, Colorado 80301.

 

 

 

 

 

Our records reflect that all reports which were required to be filed pursuant to Section 16(a) of the Exchange Act were filed on a timely basis.

 

For the election of Class I Directors, the three nominees receiving the highest number of votes will be elected. Abstentions and broker non-votes (as described in Question No. 14) will have no effect on the voting outcome with respect to the election of directors. We will vote your shares as you specify on your proxy card. If you sign, date and return the proxy card but do not specify how you want your shares voted, we will vote them for the election of the nominees listed below. If you do not wish to have your shares voted for the nominees, you may so indicate in the space provided in the proxy card. If unforeseen circumstances (such as death or disability) make it necessary for the Board to substitute another person for any of the nominees, we will vote your shares for such other person. If we do not name substitute nominees, the size of the Board will be reduced. The Board knows of no reason why the nominees would not be available to serve at the time of the annual meeting.

 

The Board has nominated Brian G. Atwood, M. James Barrett and Edward J. McKinley for reelection as directors at our 2007 annual meeting of stockholders for a term of three years to serve until the 2010 annual meeting of stockholders, and until their respective successors have been elected and qualified. The Class II directors (Patrick J. Mahaffy, James Blair and Cam L. Garner) and the Class III directors (Dr. Thorlef Spickschen and Dr. John C. Reed) will serve until the annual meetings of stockholders to be held in 2008 and 2009, respectively, and until their respective successors have been elected and qualified.

 

The following is a brief listing of the age, term as a director of our Board, principal occupation, business experience and other directorships of the nominees for election as Class I Directors.

 

Nominees for Directors in Class I

 

(The term of these nominee Directors would expire at the annual meeting of stockholders in 2010)

 

Brian G. Atwood, age 54, has served as a member of our board of directors since January 2000. Since 1999, Mr. Atwood has served as a Managing Director of Versant Venture Management LLC, a venture capital firm focusing on healthcare that he co-founded. Prior to founding Versant Venture, Mr. Atwood served as a general partner of Brentwood Associates, a venture capital firm. Mr. Atwood also serves on the board of directors of Cadence Pharmaceuticals, Inc., and on the boards of several privately-held pharmaceutical and biotechnology companies.

 

M. James Barrett, Ph.D., age 64, has served as the Chairman of our board of directors since September 2003. Since September 2001, Dr. Barrett has served as a general partner of New Enterprise Associates, a venture capital firm that focuses on the healthcare and information technology industries. From 1997 to 2001, Dr. Barrett served as Chairman and Chief Executive Officer of Sensors for Medicine and Science, Inc., which he founded in 1997. He continues to serve as the chairman of its board of directors. Dr. Barrett also serves on the board of directors of MedImmune, Inc., Iomai Corporation, Targacept, Inc., YM Biosciences, Inc. and Inhibitex, Inc., and on the boards of several privately-held healthcare companies.

 

Edward J. McKinley, age 55, has served as a member of our board of directors since October 2004. Mr. McKinley is a private investor. Until his retirement in 2003, he was a partner at E.M. Warburg, Pincus and Co. During Mr. McKinley’s 20 years with Warburg Pincus, he performed various roles including managing the firm’s private equity activity in Europe and serving on the firm’s Management Committee. From 2003 to 2004, he served as a Senior Advisor to Warburg Pincus. Prior to joining Warburg Pincus, he was a consultant with McKinsey and Company. Mr. McKinley also serves on the boards of directors of several private companies.

 

The Board of Directors recommends a vote “FOR” the above nominees for Director.

 

 

 

At the recommendation of the Audit Committee, the Board has appointed the firm of Ernst & Young LLP (“Ernst & Young”), as independent registered public accounting firm to audit the financial statements of Pharmion for the fiscal year ended December 31, 2007. The affirmative vote of a majority of the total number of votes present in person or by proxy and entitled to be cast will ratify the appointment of Ernst & Young as the independent registered public accounting firm to audit the financial statements of Pharmion for the fiscal year ending December 31, 2007.

 

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

 

Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. It is understood that even if the selection of Ernst & Young as the independent registered public accounting firm is ratified, the Board and the Audit Committee, at their discretion, may direct the appointment of a new independent registered public accounting firm at any time during the year if the Board and Audit Committee believe that such change would be in the best interests of the Company and its stockholders. If the stockholders do not ratify the Board’s selection of Ernst & Young as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2007, the Board will consider the matter at its next meeting.

 

The Board of Directors recommends a vote “FOR” Proposal 2.

 

 

 

This discussion and analysis of the compensation programs for our Named Executive Officers for 2006 should be read together with the compensation tables and related disclosures which follow. In addition to a description of compensation actions taken in respect of the 2006 fiscal year, this discussion contains forward looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. In consideration of the flexibility necessary for furthering the objectives of our compensation policies set forth below, actual compensation programs that we adopt in subsequent years may differ materially from our current programs.

 

Role of Our Compensation Committee

 

The Compensation Committee is appointed by our Board and consists of directors who are “outside directors” for purposes of Section 162(m) of the Internal Revenue Code and “independent” for purposes of NASDAQ Marketplace Rule 4350(c)(3). Our Compensation Committee is comprised of Drs. James Blair, M. James Barrett and Thorlef Spickschen, and is chaired by Dr. Blair. The Committee’s membership has remained constant since 2003.

 

Our Compensation Committee is responsible for formulating, reviewing and evaluating our compensation programs for directors, executives and key employees, and all compensation programs involving the use of Pharmion common stock, to ensure consistency with our compensation philosophy and corporate governance guidelines. Our Compensation Committee is responsible for establishing the executive compensation packages offered to our Chief Executive Officer and other Named Executive Officers, and for making recommendations to our Board concerning the adoption of equity-based compensation and benefit plans and compensation arrangements with our non-employee directors.

 

Further, our Compensation Committee is charged with producing its annual report on Named Executive Officer compensation for inclusion in Pharmion’s proxy statement for our annual meeting of stockholders, including the review and approval of this Compensation Discussion and Analysis. The Committee serves other functions set forth in its committee charter, posted on our company web site at www.pharmion.com in the “Investor Relations, Corporate Governance” section.

 

Our Compensation Committee has taken the following steps to ensure that our Named Executive Officer compensation programs are consistent with both our compensation philosophy and our corporate governance guidelines:

 

 

 

The Committee does not delegate any of its functions or responsibilities to others in setting compensation for our Named Executive Officers.

 

Role of Management in Determining Executive Compensation

 

The Compensation Committee chair and the full Committee engage in regular discussions with management, including our Chief Executive Officer and our Vice President of Human Resources, as part of its evaluation and deliberation processes. In connection with these discussions, the Committee regularly communicates its expectations concerning the information required to fulfill its obligations under the Committee’s charter. Management regularly provides the Committee with information concerning compensation practices of competitive companies to supplement information provided by the independent compensation consultant, corporate and individual goals, the Company’s organizational development plans and expectations and concerns of employees, including senior management.

 

Communication between the Committee and senior management is critical in helping the Committee understand the implications of compensation decisions. Our Chief Executive Officer, Vice President of Human Resources and other key personnel within management, including our Chief Financial Officer, also play an essential role in providing the full transparency of facts and figures that support the Committee’s compensation decisions. Summary reports and charts drafted by senior management and the independent compensation consultant help identify any potential issues with our compensation program design and ensure that the Committee’s compensation decisions take into consideration employee concerns and the specific needs of the Company.

 

Executive Compensation

 

Overview

 

Our executive compensation and benefits program for our Named Executive Officers provides the means through which the Company and its subsidiaries attract and retain superior talent critical to our long-term success and reward performance. This program seeks to fulfill three primary objectives:

 

 

At the beginning of each year, our Named Executive Officers engage in a collaborative process with the Board to develop our corporate strategy and establish quantifiable and achievable business goals for the year. Our Board then approves a set of corporate objectives that the Board deems important to both the short-term and long-term success of our Company. Annual corporate objectives typically include product sales revenue goals, regulatory and product development milestones and corporate development milestones. The annual corporate goals assist the Compensation Committee in its retrospective review of corporate and individual performance as part of the analyses it undertakes to determine the ultimate composition of our Named Executive Officers’ total compensation package, including bonus and equity award amounts, as well as other component levels. The corporate goals for 2006 are described in the section below entitled, “Compensation Actions Taken in Respect of 2006 Service.”

 

Additionally, each Named Executive Officer, other than our Chief Executive Officer, defines his or her annual personal objectives that are consistent with and further the achievement of the corporate goals set by the Board, and that further define compatible objectives for the functional areas of our business for which he or she shares responsibility. These personal and functional area objectives established by our Named Executive Officers are reviewed and approved by Mr. Mahaffy, our Chief Executive Officer.

 

In the Compensation Committee’s retrospective annual review of performance for each Named Executive Officer, the Committee considers, with assistance from Mr. Mahaffy, each Named Executive Officer’s level of achievement versus his or her personal and functional area objectives. The annual incentive bonuses for these Named Executive Officers, as is finally determined by the Committee, has been weighted 75% on the collective achievement of corporate goals, and 25% toward each Named Executive Officer’s achievement of his or her personal and functional area objectives. Mr. Mahaffy’s annual incentive bonus is tied solely to our collective achievement of the corporate goals.

 

Components of our Compensation Program

 

Our performance-driven executive compensation and benefit program for our Named Executive Officers consists of five components: base salary, incentive bonuses, long-term discretionary equity incentives, benefits and severance compensation/termination protection. In allocating between salary and discretionary incentives (including discretionary annual bonuses and stock option and restricted stock grants), our Compensation Committee attempts to strike an appropriate balance between providing a liquid, fixed form of compensation that is both fair and competitive and compensation that rewards the achievement of specific strategic and personal goals. Only one of our Named Executive Officers, Mr. Cosgrave, our Chief Commercial Officer, receives a sixth component: perquisites, which are listed by description and amount in the Summary Compensation Table included below. Perquisites received by Mr. Cosgrave directly relate to his non-US-based and global leadership status with, and required duties for, the Company.

 

Cash Compensation

 

We utilize base salary and annual discretionary incentive bonuses to motivate and reward our Named Executive Officers for the achievement of individual, functional business area and corporate goals. For 2006, approximately 57% of our Chief Executive Officer’s total compensation was delivered in cash form. The level of cash compensation paid to our other Named Executive Officers ranged from approximately 61% to 76% of total compensation.

 

Base Salary.  Base salaries are set competitively relative to companies within our “peer group” (see the discussion on “Benchmarking and Target Pay Positioning” below.) In a review of our peer group, the Compensation Committee seeks to compare our compensation arrangements with those of executives who have comparable levels of responsibility and expected levels of contribution to those of our Named Executive Officers.

 

In setting or adjusting base salaries of our Named Executive Officers, the Committee also takes into account the level of competition among biotech/pharmaceutical companies, in general, to attract talented personnel, and it reviews the experience, market data (indicating what the industry is paying for comparable positions and talent levels) and skills necessary to attract the level of competence needed for our Named Executive Officer positions. Compensia, Inc.’s analyses provided to the Committee include a review of our compensation components and an analysis of the allocation between short-term and long-term and cash and non-cash components, and aid the Compensation Committee in determining an appropriate base salary in relation to the other components of compensation in our executive compensation program.

 

The Compensation Committee reviews base salary levels for our Named Executive Officers on an annual basis taking into consideration individual performance measured against the achievement of the prior year’s established corporate and individual goals. Base salary adjustments, if any, are generally effective March 1^st.

 

Annual Incentive Bonuses.  The Compensation Committee establishes annual cash bonus targets as a percentage of base salary for our Chief Executive Officer and the other Named Executive Officers of the Company based upon its reviews of peer group data and the analyses prepared by its independent compensation consultant.

The bonus targets currently established are: 50% of the annual base salary of our Chief Executive Officer, 40% of the annual base salary of our Executive Vice Presidents and 35% of annual salary of our other executive officers.

 

We believe our cash bonus program provides a powerful incentive for our Named Executive Officers to pursue objectives that are consistent with the strategic objectives of the Company as determined by our Board. At the beginning of each year, the Committee evaluates the Company’s performance against the established corporate objectives for the previous year. The Committee then determines the amount of each Named Executive Officer’s bonus, if any, based on the established bonus targets (see the discussion on “Benchmarking and Target Pay Positioning” below) and from a subjective assessment by the Committee of the Named Executive Officer’s progress toward achieving the prior year’s established corporate and individual goals. Incentive bonuses are generally paid in mid-March with respect to performance and service during the prior fiscal year.

 

Long-term Incentive Compensation

 

Long-term equity incentive compensation, in the form of stock options and restricted stock units, encourages our Named Executive Officers to take appropriate risks with the Company’s capital to generate returns for our stockholders while sharing some of the downside risk of such decision-making. The size of the awards is designed to reward past performance, encourage retention and create an incentive to meet long-term objectives. The regulatory approval process for our developing product portfolio can take a significant amount of time, as can the research and development of a product prior to regulatory submission and the post-approval commercialization of that product. We believe this long-term compensation component is an effective retention tool that helps our Company achieve consistent progress toward the development of products and continuity of leadership. Each Named Executive Officer’s leadership roles require different experience, skills and talents for each of our functional areas. Awards are set at the levels calculated to be competitive within our peer group, as well as within a broader group of biotechnology and pharmaceutical companies with whom we compete for executive talent.

 

In determining the size of each equity award to a Named Executive Officer, the Compensation Committee takes into account the number of shares previously granted to the officer, the Company’s performance and the performance of the individual executive against the established corporate and individual goals, and the interaction of the compensation components in the structure of our executive compensation program.

 

Equity awards are typically approved by the Compensation Committee for grant to our Named Executive Officers upon the commencement of employment. In addition, historically, at its December meeting, the Compensation Committee considers incentive equity grants for each Named Executive Officer. The Committee reviews recommendations from management and its independent compensation consultant, and makes an independent determination of the equity awards with respect to each Named Executive Officer based on the criteria described above. It is our Company’s practice not to make equity grant awards to our Named Executive Officers or to any employees prior to or in coordination with the release of any material non-public information.

 

Stock option awards to our Named Executive Officers vest over a period of four years from the date of the grant, with twenty-five percent of the award vesting one year following the grant date, followed by prorated (1/48) monthly vesting over the following three years. Stock options have a seven year term. The per share exercise price for the annual grants awarded prior to December 6, 2006, was set at the per-share closing price of the Company’s common stock listed on the most recent NASDAQ exchange trading day prior to the date of the grant. For grants awarded on and after December 6, 2006, due to the Compensation Committee’s modification in the manner in which fair market value is determined under our stock option plan, the per-share exercise price for stock option grants is set at the per share closing price of the Company’s common stock listed on the NASDAQ exchange on the date of the grant.

 

Restricted stock unit awards to our Named Executive Officers generally vest over a period of four years from the date of the award, with twenty-five percent of the units granted vesting one year following the grant date, followed by the prorated quarterly vesting over the remaining three-year period.

 

Benefits

 

We provide benefits to our U.S.-based Named Executive Officers, Messrs. Mahaffy, Mast and Dupont and Ms. Ivers-Read on the same basis as such benefits are provided to all U.S. employees.

 

These benefits are consistent with those offered by other U.S.-based companies and specifically with those companies with which we compete for employees. We reserve the right to alter, amend and/or terminate benefits at our sole discretion.

 

Under terms of his employment agreement, Mr. Cosgrave, our Executive Vice President and Chief Commercial Officer based in our Thailand subsidiary, receives private medical insurance coverage, long-term disability and life insurance coverage, and a Company contribution of ten percent of his monthly base salary to Mr. Cosgrave’s chosen personal pension scheme. Additionally, amounts paid to Mr. Cosgrave from our Thailand subsidiary are, by agreement, grossed-up for Thai tax purposes. We believe the benefits provided to Mr. Cosgrave are competitive with other non-U.S.-based executives providing similar global leadership to U.S. companies in similar international locations.

 

Severance Compensation and Termination Protection

 

We have entered into employment agreements with our Named Executive Officers, including our Chief Executive Officer. The employment agreements provide for severance payments and other benefits if the executive officer’s employment is terminated without cause or if the executive officer terminates his or her employment for good reason (a “Qualifying Termination”). In addition, upon a Qualifying Termination within two years after a change in control, all outstanding stock options and other equity awards granted by us to the executive officer accelerate and become immediately exercisable. These employment agreements also specify that our Named Executive Officers are eligible to receive gross-up payments for any amounts they receive in connection with a change in control that would be subject to excise taxes under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as any additional federal, state, local and excise tax on such gross-up payments. The terms “cause,” “just cause,” “good reason,” “termination,” “change of [or in] control” and “severance” are defined in the employment agreements. Each referenced agreement has been furnished previously with our SEC filings.

 

Each employment agreement with our Named Executive Officers prohibits the executive officer from engaging in any business, entering into any employment or performing any services that compete with our business for one year following termination of his or her employment. In addition, each executive officer continues to be bound by the obligations of confidentiality contained in a Confidential Information and Invention Assignment Agreement the executive officer must enter into as a condition of his or her employment. In order to qualify for severance benefits, the executive officer must execute a general release of all claims he or she has against the Company.

 

We believe that our severance agreements with our Named Executive Officers are an important component of our overall compensation program because they create incentives for our executive officers to act in the best interests of our stockholders, regardless of any concerns they may have about their continued employment as a result of a change of control or acquisition of our company. Furthermore, severance arrangements similar to those we provide are typical in our industry and we believe they are necessary for us to recruit and retain talented executives.

 

Effective April 28, 2006, as disclosed in our 2006 Proxy Statement, we entered into an Employment Separation and General Release Agreement with Dr. Hemberger, our former Executive Vice President and Chief Operating Officer. The separation agreement terminated and superseded Dr. Hemberger’s prior employment agreement with the Company. Pursuant to the separation agreement, Dr. Hemberger signed a general release in favor of the Company and became entitled to receive: (a) continuation of her base salary of $400,000 for a period of 24 months following April 1, 2006 (the “Separation Date”), the date of her official retirement from the Company and its Board, (b) payment of premiums for Dr. Hemberger’s group health insurance COBRA continuation coverage for up to eighteen months from the Separation Date, and (c) payment of fees associated with Dr. Hemberger’s participation in a six-month outplacement assistance program.

 

Additional information regarding severance benefits that could be provided to our Named Executive Officers under our employment agreements is described in the section entitled “Executive Employment Agreements” below and the amounts to which each officer would be eligible had a termination event occurred as of December 31, 2006, are set forth in the tally sheet entitled “2006 Potential Payments upon Termination or Change in Control Table” below.

 

Benchmarking and Target Pay Positioning

 

Historically, our market for experienced senior management has been, and remains, highly competitive, and the Company competes in the pool of talent with both large and established companies for top executive-level talent. We draw upon a market that is national and international in scope. Our ability to compete is also based on past achievements of corporate objectives, our vision of future successes, our culture and company values, the cohesiveness and productivity of our teams and the excellence of our leadership and management personnel.

 

For its benchmarking, the Compensation Committee considers the analyses of Compensia, Inc., which cover the competitive market and review the companies within comparable geographic areas and the biotechnology and pharmaceutical industries against which the Committee believes Pharmion competes for talent and for stockholder investment (the “peer group”). These analyses compare each component of each Named Executive Officer position against corresponding executive positions within this peer group, based on a comparative framework with the following parameters:

 

 

Based upon this analysis, the companies currently constituting our peer group are:

 

• Alpharma Inc. • Cubis Pharmaceuticals, Inc. • ICOS Corporation • Integra Lifesciences Holdings Corporation • InterMune, Inc. • K-V Pharmaceutical Company • Ligand Pharmaceuticals, Inc. • Martek Biosciences Corporation • Medicis Pharmaceutical Corporation • MGI Pharma, Inc. • Nabi Biopharmaceuticals		• Neurocrine Biosciences, Inc. • Perrigo Company • QLT Inc. (USA) • Sciele Pharma, Inc. • Techne Corporation • The Medicines Company • United Therapeutics Corporation • Valeant Pharmaceuticals International • Vertex Pharmaceuticals Incorporated • Zymogenetics, Inc.

 

The independent compensation consultant’s report to the Compensation Committee further includes a review in light of peer group practices of the allocation between the various compensation components. From these analyses, the Compensation Committee has set the following as its targeted market guidelines for our Named Executive Officer compensation components, correlating links between pay and performance and employee retention with stockholder value:

 

 

The Compensation Committee’s independent compensation consultant also reviews and reports on various compensation surveys, such as Employers’ Group and the Radford Biotechnology Executive Compensation Report by Aon Consulting, and takes into consideration findings from such reviews, as appropriate, in the analyses prepared for the Committee. The interaction and balance between our executive compensation program components are subject to annual review for possible adjustment by our Compensation Committee, as it deems appropriate.

 

Compensation Actions Taken in Respect of 2006 Service

 

In February 2006, our Compensation Committee set our Named Executive Officer annual base salaries effective as of March 1, 2006, and awarded annual incentive bonuses for 2005, based on its review of the compensation analysis provided by Compensia Inc., and on performance measured against the corporate goals established by the Board in the first quarter of 2005 and the individual officer’s established goals for 2005. Further, the Committee recommended the corporate goals for 2006 which were approved by the Board at its February meeting.

 

The 2005 annual incentive bonuses were included in 2005 executive compensation reported in our filing of the Proxy Statement for the 2006 Annual Meeting of Stockholders. The Named Executive Officer annual base salaries, which were effective March 1, 2006, were set as follows: Mr. Mahaffy ($485,000); Mr. Mast ($330,000); Ms. Ivers-Read ($330,000); Mr. Cosgrave ($404,169); Mr. Dupont ($290,000) and Ms. Hemberger, a former Named Executive Officer ($400,000).

 

At its meeting in December 2006, the Compensation Committee reviewed 2006 achievements toward our 2006 corporate goals established by the Board. The Committee also considered our Chief Executive Officer’s recommendations for equity awards to each of the other Named Executive Officers and, following its independent review of 2006 corporate and individual performance, granted a mix of stock options and restricted stock unit awards to each of our Named Executive Officers for 2006 results measured against the corporate and the executive officer’s personal and functional area goals. The appropriate mix of stock option to restricted stock unit awards was determined by the Committee for each Named Executive Officer to be approximately ninety percent options to ten percent restricted stock units.

 

The corporate goals set by our Board for 2006 were based on the following categories: (i) achievement of sales targets; (ii) goals relating to regulatory milestones for the Company’s products, particularly in Europe; (iii) clinical development objectives; (iv) business development goals relating to new product acquisition; (v) development of a comprehensive corporate strategic plan; and (vi) filling key management positions.

 

In early 2007, the Compensation Committee again engaged Compensia, Inc., as its independent compensation consultant, to conduct and provide comparative analyses of the Company’s peer group and to report to the Committee its findings relative to the competitiveness of the levels and structure of compensation provided to our Named Executive Officers during 2006, and to make recommendations to the Committee regarding 2007 Named Executive Officer compensation.

 

Based on its analysis, the outside consultant reported to the Compensation Committee that generally the levels of the Company’s executive compensation provided during 2006 were, on average, at the 50th percentile for total cash compensation levels, with total direct compensation slightly above the 60th percentile for most of our Named Executive Officers’ positions.

 

At its February 2007 meeting, the Compensation Committee considered the Company’s progress towards 2006 corporate goals, the analysis and recommendations of Compensia, Inc. and each individual executive’s current base salary level, total compensation and progress toward individual and departmental goals. The Compensation Committee determined the Company had substantially met all of its corporate goals for 2006 and had exceeded achievement of a number of the goals:

 

 

 

Meeting with our Chief Executive Officer, the Committee further reviewed the 2006 achievement of set goals and performance by each of the other Named Executive Officers. Based on these findings in executive session, the Compensation Committee set the 2006 annual incentive bonus for each Named Executive Officer at 110% of each Named Executive Officer’s 2006 bonus target. The 2006 bonus awards for each Named Executive Officer are set forth in the Summary Compensation Table.

 

In addition, based on achievement of the 2006 corporate goals and Compensia Inc.’s analysis of peer group practices, at its February 2007 meeting, the Compensation Committee approved an additional Company match for all participants in the Pharmion Corporation 401(k) Profit Sharing Plan that was previously approved by the Plan’s administrative committee and subsequently approved by our Board. As a result, it was determined that for the Plan Year 2006 only, the Company would match an amount equal to one dollar for each dollar contributed by participating employees, including our Named Executive Officers, on the first five percent of their regular earnings, subject to any limitations imposed by the IRS.

 

Compensation Actions Taken in Respect of Future Service

 

The Compensation Committee, in executive session, then reviewed and analyzed overall compensation levels for each Named Executive Officer and the appropriateness of its targeted competitive compensation levels for those executives. Based on its findings, the Committee determined that the base salaries for Messrs. Mahaffy, Cosgrave and Dupont were below the intended level and required appropriate increases, with a 4% increase being deemed appropriate for base salary increases for the remaining Named Executive Officers. Base salary increases were set to be effective as of March 1, 2007, as follows: Patrick J. Mahaffy ($570,000), Erle T. Mast ($350,000), Gillian Ivers-Read ($350,000), Michael Cosgrave ($445,000, converted to and paid in British Pounds Sterling) and Steven N. Dupont ($315,000).

 

Also at its February 2007 meeting, the Compensation Committee determined to leave the Named Executive Officers’ individual 2007 target percentages for annual incentive bonuses at the same levels set for 2006, with discretion retained by the Committee to review and determine deviations in such targets as are appropriate based on overall 2007 corporate and individual performance.

 

Tax and Accounting Considerations

 

The collective aim of the Company, the Compensation Committee and the Board with respect to our compensation strategy for our Named Executive Officers and other employees is to be cost and tax-effective. Therefore, our policy is to preserve corporate tax deductions, while maintaining the flexibility to approve compensation arrangements that the Compensation Committee and the Board deem to be in the best interests of the Company and its stockholders, but that may not always qualify for full tax deductibility.

 

Section 162(m) of the Code, generally disallows a tax deduction to public companies for certain compensation in excess of $1 million paid to the company’s chief executive officer and the four other most highly compensated executive officers. Based on current levels of compensation, no current Named Executive Officer is expected to receive compensation for 2006 or 2007 services that would be non-deductible under Section 162(m). Accordingly, the Compensation Committee has not considered any revisions to its policies and programs in response to this provision of law.

 

Executive Employment Agreements

 

The employment agreements the Company has entered into with each of its Named Executive Officers fit into our overall compensation strategy described above.

 

Employment Agreement with Mr. Mahaffy.  On February 23, 2004, we entered into an employment agreement with Patrick J. Mahaffy, our President and Chief Executive Officer, which provides for an annual base salary that is subject to an annual increase at the discretion of our Board, and the payment of bonuses upon the achievement of corporate goals as determined by our Board. The agreement may be terminated either by the Company for just cause or without just cause upon 30 days notice or by Mr. Mahaffy either for good reason (so long as he provides written

notice to us within 90 days of receiving notice from us of the occurrence of an event or act constituting good reason) or without good reason upon 30 days advance written notice. If we terminate Mr. Mahaffy’s employment without just cause or he resigns for good reason, Mr. Mahaffy, upon releasing all claims that he may have against us, is entitled to receive severance pay equal to twenty-four months of his base salary and payment of premiums for group health, vision and dental insurance COBRA continuation coverage, equal to coverage on the day before the date of termination, for eighteen months. If we terminate Mr. Mahaffy’s employment without just cause or he resigns for good reason occurring on or within twenty-four months after a “change of control,” Mr. Mahaffy, upon releasing all claims that he may have against us and in addition to compensation provided due to such events not involving a change of control, is further entitled to the accelerated vesting and exercisability of all stock options and other equity-based awards on the date of termination, with stock options remaining exercisable for one-year from the date of termination. The agreement also provides that for one year following termination of Mr. Mahaffy’s employment, Mr. Mahaffy may not engage in any business, enter into any employment or perform any services that compete with our business.

 

Employment Agreements with Mr. Cosgrave.  On January 5, 2001, we entered into an employment agreement with Michael Cosgrave, our Executive Vice President and Chief Commercial Officer. The employment agreement provides for an annual base salary, which is subject to annual increase at the discretion of our Board, a rental allowance for housing of $2,000 USD equivalent per month and the use of a vehicle for business and private purposes. Mr. Cosgrave is entitled to participate in our private medical insurance plan in force from time to time and to participate in our long-term disability and life insurance plans. We are also obligated to make monthly contributions to a pension benefit scheme of Mr. Cosgrave’s choice at a rate of 10% of Mr. Cosgrave’s annual base salary. Further, compensation amounts paid by us to Mr. Cosgrave through our Thailand subsidiary, where Mr. Cosgrave is based in Bangkok, are grossed-up for Thai tax purposes. The agreement may be terminated generally by either us or Mr. Cosgrave upon three months’ advance written notice. In addition, on November 29, 2001, we entered into a non-competition and severance agreement with Mr. Cosgrave. The agreement provides that for one year following termination of Mr. Cosgrave’s employment, Mr. Cosgrave may not engage in any business, enter into any employment or perform any services that compete with our business. In addition, if we terminate Mr. Cosgrave’s employment without just cause or if he resigns for good reason following written notice to us, Mr. Cosgrave is entitled to receive severance compensation equal to twelve months’ base salary.

 

Employment Agreements with Mr. Mast, Ms. Ivers-Read and Mr. Dupont.  On March 1, 2004, we entered into amended and restated employment agreements with Erle Mast, our Executive Vice President and Chief Financial Officer, and Gillian Ivers-Read, our Executive Vice President of Development Operations. In addition, on March 11, 2005, we entered into an employment agreement with Steven Dupont, our Vice President, General Counsel and Corporate Secretary. Each agreement provides for an annual base salary, subject to annual increase at the discretion of our Board, and the payment of bonuses upon the achievement of corporate goals as determined by our Board. Each employment agreement provides that the executive’s employment with Pharmion is at-will and may be altered or terminated by either the Company or the executive at any time, with or without cause. However, if we terminate the executive’s employment without just cause or he or she resigns for good reason (so long as the executive provides written notice to us within 90 days of receiving notice from us of the occurrence of an event or act constituting good reason), the executive, upon releasing all claims that he or she may have against us, is entitled to receive severance pay equal to twelve months of his or her base salary and payment of premiums for group health, vision and dental insurance COBRA continuation coverage, equal to coverage on the day before the date of termination, for twelve months. If the executive’s employment is terminated without just cause or he or she resigns for good reason on or within twenty-four months after a “change of control,” in addition to compensation provided due to such events not involving a change of control, the executive is further entitled to the accelerated vesting and exercisability of all stock options and other equity-based awards on the date of termination, with stock options remaining exercisable for the period allowed under the plan document. Each agreement also provides that for one year following termination of the executive’s employment, that executive may not engage in any business, enter into any employment or perform any services that compete with our business.

 

Evolution of our Compensation Programs

 

Our director and Named Executive Officer compensation programs are necessarily tied to our evolving corporate strategies and stages of development and growth. Accordingly, the specific direction, emphasis on and components of our director and executive compensation and benefit programs are anticipated to evolve in parallel. Our Compensation Discussion and Analysis will, in the future, reflect these evolutionary changes.

 

The Compensation Committee of the Company’s Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

THE COMPENSATION COMMITTEE

 

James Blair, Ph.D., Committee

Chair M. James Barrett, Ph.D.

Dr. Thorlef Spickschen

 

The following tables contain information with respect to Pharmion’s Chief Executive Officer, Chief Financial Officer, three other most highly paid executive officers and an individual who retired during 2006 but would have been a Named Executive Officer during 2006 had retirement not occurred. Please see the section entitled, “Compensation Discussion and Analysis” for additional information regarding the Company’s compensation philosophy and practices and our Compensation Committee’s determinations concerning 2006 compensation to our Named Executive Officers.