DEF 14A of Neurocrine Biosciences Inc
Filed Apr 10, 2024 · FY20230000914475-24-000106
OUR BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS The Company’s bylaws, as amended and restated, provide that the Board of Directors is comprised of ten directors. The Company’s Certificate of Incorporation provides that the Board of Directors is divided into three classes. There are currently four directors in Class I (William H. Rastetter, Ph.D., George J. Morrow, Leslie V. Norwalk, and Christine A. Poon), three directors in Class II (Richard F. Pops, Shalini Sharp, and Stephen A. Sherwin, M.D.), and three directors in Class III (Kevin C. Gorman, Ph.D., Gary A. Lyons, and Johanna Mercier). With the exception of Kevin C. Gorman, Ph.D., who is the Chief Executive Officer of the Company, all current members of the Board of Directors meet the definition of “independent director” under the Nasdaq Stock Market qualification standards. The directors in Class I hold office until the 2024 Annual Meeting of Stockholders, the directors in Class II hold office until the 2025 Annual Meeting of Stockholders, and the directors in Class III hold office until the 2026 Annual Meeting of Stockholders (or, in each case, until their earlier resignation, removal from office, or death). After each such election, the directors in each such case will then serve in succeeding terms of three years and until a successor is duly elected and qualified. Officers of the Company serve at the discretion of the Board of Directors. There are no family relationships among the Company’s directors and executive officers. The term of office for directors William H. Rastetter, Ph.D., George J. Morrow, Leslie V. Norwalk, and Christine A. Poon will expire at the 2024 Annual Meeting of Stockholders.
Director Biographies of Class I Directors Nominated for Reelection at the 2024 Annual Meeting of Stockholders
Director Biographies of Class I Directors Nominated for Reelection at the 2024 Annual Meeting of Stockholders William H. Rastetter, Ph.D. has served on the Board of Directors since February 2010 and as Chairman of the Board of Directors since May 2011. Currently, he serves as the Chairman of the Board of Directors for Fate Therapeutics, a publicly traded company focused on cellular therapies, as well as for Daré Bioscience, Inc. (previously known as Cerulean Pharma Inc.), a publicly traded company focused on women’s healthcare. Dr. Rastetter also serves on the Board of Directors for Regulus Therapeutics Inc., a publicly traded company focused on RNA-based therapeutics, and on the Board of Directors of Iambic, Inc., a private company using artificial intelligence and laboratory automation to design and develop medicinal chemicals initially for oncology indications. Dr. Rastetter previously served on the board of Grail, Inc., a private company developing deep sequencing approaches for disease diagnosis, with an initial focus on the early diagnosis of cancer. Dr. Rastetter serves as an advisor to Illumina Ventures, and is the Chairman of San Diego Squared, a nonprofit focused on STEM awareness and education for students in underserved communities. Dr. Rastetter was a partner in the venture capital firm, Venrock, from 2006 through early 2013 and was Executive Chairman of Biogen Idec, Inc. from 2003 to 2005. Earlier, he served as Chairman and Chief Executive Officer of IDEC Pharmaceuticals Corporation until its merger with Biogen Inc. in 2003; he joined IDEC Corporation as its Chief Executive Officer at the company’s founding in 1986. From 1984 to 1986, Dr. Rastetter was Director of Corporate Ventures at Genentech, where from 1982 to 1984 he held scientific positions. He held a series of faculty positions including Associate Professor at the Massachusetts Institute of Technology (“MIT”) from 1975 to 1982. Dr. Rastetter has an S.B. degree in Chemistry from MIT and received M.A. and doctorate degrees in Chemistry from Harvard University. The continued service of Dr. Rastetter on the Company’s Board of Directors is based on Dr. Rastetter’s scientific and technical expertise combined with his business experience in leading rapidly growing companies in the life sciences industry. The Company’s continued growth is dependent on scientific and technical advances, and the Board of Directors believes that Dr. Rastetter offers both strategic and technical insight into the risks and opportunities associated with our business. In addition, Dr. Rastetter’s board and executive leadership experience at other life sciences companies provides valuable strategic and governance insight to the Board of Directors as a whole. George J. Morrow has served on the Board of Directors since October 2015. Mr. Morrow served as Executive Vice President, Global Commercial Operations at Amgen Inc., a global biotechnology company, from 2003 until his retirement in 2011. He joined Amgen in 2001 as Executive Vice President, Worldwide Sales and Marketing. His responsibilities included oversight of all commercial functions for Amgen’s broad spectrum of products in more than 50 countries worldwide, and the introduction of multiple new products into global markets. From 1992 to 2001, Mr. Morrow held executive management and commercial positions within several subsidiaries of Glaxo Wellcome, including Group Vice President for Commercial Operations (U.S.), Managing Director (U.K.), and most recently as President and Chief Executive Officer of Glaxo Wellcome, Inc. (U.S.). Mr. Morrow currently serves on the Board of Directors of Align Technology, Inc., a publicly traded global medical device company. He has previously served on the boards of Vical, Inc., Otonomy, Inc., Glaxo Wellcome, Inc., Human Genome Sciences, Inc., Safeway, Inc., National Commerce Bank, the John Hopkins School of Public Health, and the Duke University Fuqua School of Business. Mr. Morrow holds a B.S. in Chemistry from Southampton College, Long Island University, an M.S. in Biochemistry from Bryn Mawr College and an M.B.A. from Duke University. The continued service of Mr. Morrow on the Company’s Board of Directors is based on his extensive commercialization experience at Amgen, his broad executive experience at GlaxoSmithKline Inc., and his years of experience in corporate governance as a board member of several publicly traded companies. Mr. Morrow’s board experience, leadership experience and commercialization expertise prove valuable strategic insights to the Board of Directors. Leslie V. Norwalk has served on the Board of Directors since September 2019. Since 2007, Ms. Norwalk has served as Strategic Counsel to healthcare companies at Epstein Becker Green, EBG Advisors, and National Health Advisors. Ms. Norwalk advises several private equity firms on healthcare matters. She serves as a director of Globus Medical, Inc., Modivcare Inc., and Arvinas, Inc., all publicly traded companies, as well as several privately held healthcare companies. Ms. Norwalk previously served on the Board of Directors of Centene, Endologix, Magellan Health, NuVasive, Inc., prior to its acquisition by Globus Medical, and Press Ganey. Ms. Norwalk began her career in the public sector in The White House Office of Presidential Personnel under the first Bush administration, following which, she practiced law at the Washington, D.C. office of Epstein Becker Green, P.C. From 2001 to 2007, she served in several roles at the Centers for Medicare & Medicaid Services (CMS) under the George W. Bush administration, including serving as Deputy Administrator, and Counselor and Policy Advisor, before assuming the role of Acting Administrator. Ms. Norwalk holds a J.D. from the George Mason University School of Law and a B.A. in Economics and International Relations from Wellesley College. The continued service of Ms. Norwalk to the Company’s Board of Directors is based on her deep knowledge of, and experience with, the healthcare industry and government regulations, as well as corporate governance and risk management. Such knowledge and experience provides valuable guidance and insight to the Board of Directors. Christine A. Poon has served on the Board of Directors since July 2023. Ms. Poon is the former Executive-in-Residence in the Department of Management and Human Resources at the Max M. Fisher College of Business at The Ohio State University, where she served as Dean and the John W. Berry, Sr. Chair in Business from 2009 to 2014. She served as Vice Chairman and Member of the Board of Directors of Johnson & Johnson from 2005 until her retirement in March 2009. Ms. Poon joined Johnson & Johnson in 2000 as Company Group Chair in the Pharmaceuticals Group. She became a member of Johnson & Johnson’s Executive Committee and Worldwide Chair, Pharmaceuticals Group, in 2001, and served as Worldwide Chair, Medicines and Nutritionals, from 2003 to 2005. Prior to joining Johnson & Johnson, she spent 15 years at Bristol-Myers Squibb in various management positions. Ms. Poon was also a Vice Chair of the Supervisory Board of Royal Philips Electronics and a member of the Board of Directors of Decibel Therapeutics, Inc. She currently serves on the Board of Directors of Prudential Financial, Inc., Regeneron Pharmaceuticals, Inc., where she currently serves as the lead independent director, and The Sherwin-Williams Company. Ms. Poon was named Woman of the Year by the Healthcare Businesswomen’s Association in 2004 and named Business Leader of the Future by CNBC/Wall Street Journal in 2005. The continued service of Ms. Poon on the Company’s Board of Directors is based on her expertise in U.S. and international business operations, including extensive experience in capital allocation, and her strategic and operational knowledge of the pharmaceutical industry.
Director Biographies of Class II and Class III Directors not Nominated for Reelection at the 2024 Annual Meeting of Stockholders
Director Biographies of Class II and Class III Directors not Nominated for Reelection at the 2024 Annual Meeting of Stockholders Kevin C. Gorman, Ph.D. has been employed with the Company since 1993. He was appointed President and Chief Executive Officer in January 2008 after having served as Executive Vice President and Chief Operating Officer since September 2006 and prior to that, as Executive Vice President and Chief Business Officer and Senior Vice President of Business Development. He currently serves as Chief Executive Officer and has served on the Board of Directors since January 2008. Dr. Gorman currently serves as a director of Xencor, Inc. a publicly traded clinical-stage biopharmaceutical company. Additionally, he serves on the Board of Directors of the Biotechnology Innovation Organization (BIO) and the Pharmaceutical Research and Manufacturers of America (PhRMA). From 1990 until 1993, Dr. Gorman was a principal of Avalon Medical Partners, L.P. where he was responsible for the early stage founding of the company and several other biotechnology companies such as Onyx Pharmaceuticals, Inc., Metra Biosystems, Inc., Idun Pharmaceuticals, Inc. and ARIAD Pharmaceuticals, Inc. Dr. Gorman received his Ph.D. in immunology and M.B.A. in Finance from the University of California, Los Angeles and did further post-doctoral training at The Rockefeller University. The continued service of Dr. Gorman on the Company’s Board of Directors is based on the fact that as Chief Executive Officer of the Company, Dr. Gorman has extensive knowledge of our commercial products and our product candidates, our employees and the industry in which we operate. Dr. Gorman has also demonstrated exceptional leadership skills, sound business judgment and a strong commitment to the Company. Gary A. Lyons has served on the Board of Directors since joining Neurocrine Biosciences in February 1993. Mr. Lyons served as the President and Chief Executive Officer of the Company from February 1993 through January 2008. Prior to joining the Company, Mr. Lyons held a number of senior management positions at Genentech, Inc., including Vice President of Business Development and Vice President of Sales. Mr. Lyons is currently the Chairman of the Board of Directors of Travere Therapeutics, a publicly traded ultra-orphan disease commercial-stage company, and serves as a director of Rigel Pharmaceuticals, Inc., a publicly traded biotechnology company focused on developing drugs for the treatment of inflammatory/autoimmune and metabolic diseases. Mr. Lyons previously served on the Board of Directors of Fresh Tracks Therapeutics, Inc. (formerly Brickell Biotech, Inc.), Eledon Pharmaceuticals, Inc. (formerly Novus Therapeutics), and Facet Biotech Corporation. Mr. Lyons holds a B.S. in Marine Biology from the University of New Hampshire and an M.B.A. from Northwestern University’s J.L. Kellogg Graduate School of Management. The continued service of Mr. Lyons on the Company’s Board of Directors is based on Mr. Lyons’ extensive business development and corporate governance experience and, as the Company’s former Chief Executive Officer, his in-depth understanding of the Company’s strategic plans, business operations, management and culture. With this history with the Company and management, Mr. Lyons brings a unique perspective and point of view to the Company’s Board of Directors. Johanna Mercier has served on the Board of Directors since April 2021. Ms. Mercier is the Chief Commercial Officer of Gilead Sciences, with responsibility for the global commercialization of Gilead’s medicines across virology, liver and oncology franchises. Ms. Mercier is actively engaged with the policy and advocacy community to ensure affordability and access to the company’s medicines in both the developed and resource-limited countries. She is a staunch advocate for diversity and inclusion and is the executive sponsor for the Women@Gilead employee resource group. Ms. Mercier joined Gilead in 2019 after 25 years at Bristol Myers Squibb, where she served in a number of executive leadership positions, gaining broad experience across geographies and in all aspects of the commercial business. Ms. Mercier holds a B.S. in Biology from the University of Montreal and an M.B.A. from Concordia University. She currently serves on the Board of Directors of Arcus Biosciences, Inc., a publicly traded company, and the University of Southern California’s Leonard D. Schaeffer Center for Health Policy and Economics. Ms. Mercier is also a member of World 50. The continued service of Ms. Mercier on the Company’s Board of Directors is based on Ms. Mercier’s extensive commercialization experience at both Gilead Sciences and Bristol Myers Squibb, as well as her executive leadership experience across geographies and in all aspects of the commercial business. Richard F. Pops has served on the Board of Directors since April 1998. Mr. Pops is the Chairman and Chief Executive Officer of Alkermes Public Limited Company. He joined Alkermes as Chief Executive Officer in February 1991. Under his leadership, Alkermes has grown from a privately held research-based company with 25 employees to an international, publicly traded pharmaceutical company with more than 2,000 employees. In addition to Alkermes, he currently serves on the Board of Directors of the Biotechnology Innovation Organization (BIO) and the Pharmaceutical Research and Manufacturers of America (PhRMA). Previously, Mr. Pops served on the Board of Directors of Epizyme, Inc., a biotechnology company focused on epigenetics, and Acceleron Pharma, Inc., a biopharmaceutical company. He holds a B.A. in Economics from Stanford University. The continued service of Mr. Pops to the Company’s Board of Directors is based on his leadership experience and track record for growing companies, his strength in business strategy and his financial acumen and capital markets experience. In addition, Mr. Pops is recognized for his service to the biopharmaceutical industry as a member of the Boards of the Biotechnology Innovation Organization and the Pharmaceutical Research and Manufacturers of America. His breadth and range of industry experience from operations and strategy is a significant contribution to the Board of Directors. Shalini Sharp has served on the Board of Directors since February 2020. She also serves on the Board of Directors of Organon & Co., a publicly traded healthcare company focused on improving the health of women throughout their lives. Previously, Ms. Sharp served on the Board of Directors of Mirati Therapeutics, prior to its acquisition by Bristol-Myers Squibb Company, Sutro Biopharma, Inc., Panacea Acquisition Corp., prior to its merger with Nuvation Bio, Precision BioSciences, Inc., TB Alliance, Array Biopharma, prior to its acquisition by Pfizer, and Agenus Inc. Ms. Sharp has held the positions of Chief Financial Officer and Executive Vice President at Ultragenyx, a biopharmaceutical company committed to bringing to patients novel products for the treatment of serious rare and ultra-rare genetic diseases, and Chief Financial Officer at Agenus Inc., a clinical-stage immuno-oncology company focused on the discovery and development of therapies that engage the body’s immune system to fight cancer. Ms. Sharp previously served in strategic planning and as Chief of Staff to the Chairman of the Board of Directors of Elan Pharmaceuticals, and as a management consultant at McKinsey & Company as well as an investment banker at Goldman Sachs. She holds a B.A. and an M.B.A. from Harvard University. The continued service of Ms. Sharp to the Company’s Board of Directors is based on her extensive experience as a Chief Financial Officer of a public company, her financial acumen, and her management and leadership skills.
Director Biographies of Class II and Class III Directors not Nominated for Reelection at the 2024 Annual Meeting of Stockholders
Stephen A. Sherwin, M.D. has served on the Board of Directors since April 1999. Dr. Sherwin currently divides his time between advisory work in the life sciences industry and patient care and teaching in his specialty of medical oncology. He is a Clinical Professor of Medicine at the University of California, San Francisco, and a volunteer Attending Physician in Hematology-Oncology at the Zuckerberg San Francisco General Hospital. Dr. Sherwin currently serves on the Board of Directors of Biogen Inc., a publicly traded company. He is an Advisory Partner with Third Rock Ventures and a member of the Scientific Steering Committee of the Parker Institute for Cancer Immunotherapy. Previously, Dr. Sherwin was Chairman and Chief Executive Officer of Cell Genesys, a cancer immunotherapy company, from 1990 until the company’s merger in 2009 with BioSante Pharmaceuticals (now ANI Pharmaceuticals). He was also a Co-founder and Chairman of Abgenix, an antibody company which was acquired by Amgen in 2006, and co-founder and Chairman of Ceregene, a gene therapy company which was acquired by Sangamo Biosciences in 2013. From 1983 to 1990, Dr. Sherwin held various positions in clinical research at Genentech, most recently that of Vice President. Prior to 1983, he was on the staff of the National Cancer Institute. In addition, Dr. Sherwin previously served on the Board of Directors of Aduro Biotech, BioPlus Acquisition Corporation, Neon Therapeutics, and Rigel Pharmaceuticals, Inc., as well as the Biotechnology Innovation Organization (BIO) from 2001 to 2014 and as its Chairman from 2009 to 2011, and was a member of the President’s Council of Advisors in Science and Technology (PCAST) Working Group on Drug Development from 2011 to 2013. Dr. Sherwin holds a B.A. in biology, summa cum laude, from Yale University and an M.D. from Harvard Medical School, is board-certified in internal medicine and medical oncology, and is a Fellow of the American College of Physicians. The continued service of Dr. Sherwin for election to the Company’s Board of Directors is based on his experience and credentials in the biotechnology industry as the former Chief Executive Officer of Cell Genesys, Inc., the former Chairman and co-founder of Abgenix, Inc., the Chairman and co-founder of Ceregene, Inc., and his positions at Genentech, Inc. and the National Cancer Institute. Dr. Sherwin is also currently Chairman Emeritus of the Biotechnology Innovation Organization (BIO). In addition to his biotechnology credentials, Dr. Sherwin’s medical expertise in internal medicine and medical oncology provides a unique contribution to the Board of Directors.
Information About Board Committees
Information About Board Committees The table below provides membership information for each of the committees of the Board during 2023. In February 2024, our Board approved revisions to the membership of our committees (see page 22 for our Board's current committee membership).
Identification and Evaluation of Nominees for Director
Identification and Evaluation of Nominees for Director The Nominating / Corporate Governance Committee identifies nominees for director by first evaluating the current members of the Board of Directors willing to continue in service. Current members with qualifications and skills that are consistent with the Nominating / Corporate Governance Committee’s criteria for service and who are willing to continue are considered for re-nomination, balancing the value of continuity of service by existing members of the Board of Directors with that of obtaining members who would offer a new perspective. If any member of the Board of Directors does not wish to continue in service, or if the Board of Directors decides not to re-nominate a member for re-election, the Nominating / Corporate Governance Committee identifies the desired skills and experience of a new nominee in light of the criteria above. The Nominating / Corporate Governance Committee generally polls the Board of Directors and members of management for their recommendations and may also seek input from third-party search firms. The Nominating / Corporate Governance Committee may also seek input from industry experts or analysts. The Nominating / Corporate Governance Committee reviews the qualifications, experience and background of the candidates. Final candidates are then interviewed by the Company’s independent directors and executive management. In making its determinations, the Nominating / Corporate Governance Committee evaluates each individual in the context of the Company’s Board of Directors as a whole, with the objective of assembling a group that can best perpetuate the success of the Company and represent stockholder interests through the exercise of sound judgment. After review and deliberation of all feedback and data, the Nominating / Corporate Governance Committee makes its recommendation to the Board of Directors. We have not received director candidate recommendations from the Company’s stockholders and do not have a formal policy regarding consideration of such recommendations. However, any recommendations received from stockholders will be evaluated in the same manner that potential nominees suggested by members of our Board of Directors, management or other parties are evaluated. Accordingly, our Board of Directors believes a formal policy regarding consideration of such recommendations is unnecessary.
PROPOSAL ONE: ELECTION OF DIRECTORS
PROPOSAL ONE: ELECTION OF DIRECTORS The Company’s bylaws, as amended, provide that the Board of Directors is comprised of ten directors. The Company’s Certificate of Incorporation provides that the Board of Directors is divided into three classes. There are currently four directors in Class I (William H. Rastetter, Ph.D., George J. Morrow, Leslie V. Norwalk, and Christine A. Poon), three directors in Class II (Richard F. Pops, Shalini Sharp, and Stephen A. Sherwin, M.D.), and three directors in Class III (Kevin C. Gorman, Ph.D., Gary A. Lyons, and Johanna Mercier). With the exception of Kevin C. Gorman, Ph.D., who is the Chief Executive Officer of Neurocrine Biosciences, all current members of the Board of Directors meet the definition of “independent director” under the Nasdaq Stock Market qualification standards. Additionally, our Corporate Governance Guidelines contain a director resignation policy, which provides that any director nominee who receives a greater number of votes “withheld” than votes “for” such election shall tender his or her resignation to the Board of Directors. The Nominating / Corporate Governance Committee will consider all of the relevant facts and circumstances and recommend to the Board of Directors whether to accept or reject the resignation. The Board of Directors will act on the Nominating / Corporate Governance Committee's recommendation within 90 days of the annual meeting. Following the Board’s decision on the Nominating / Corporate Governance Committee’s recommendation, the Company will publicly disclose the Board’s decision whether to accept the resignation as tendered in a Form 8-K filed with the Securities and Exchange Commission (the "SEC"). The directors in Class I hold office until the 2024 Annual Meeting of Stockholders, the directors in Class II hold office until the 2025 Annual Meeting of Stockholders and the directors in Class III hold office until the 2026 Annual Meeting of Stockholders (or, in each case, until their earlier resignation, removal from office, or death). After each such election, the elected directors will then serve in succeeding terms of three years and until a successor is duly elected and qualified. Officers of the Company serve at the discretion of the Board of Directors. There are no family relationships among the Company’s directors and executive officers. The term of office for directors William H. Rastetter, Ph.D., George J. Morrow, Leslie V. Norwalk, and Christine A. Poon will expire at the 2024 Annual Meeting of Stockholders.
Nominees for Election at the Annual Meeting
Nominees for Election at the Annual Meeting All of the nominees (William H. Rastetter, Ph.D., George J. Morrow, Leslie V. Norwalk, and Christine A. Poon) are currently Class I directors of the Company. Information about the nominees is set forth below as of the date of this Proxy Statement:
Nominees for Election at the Annual Meeting
| Name of Director | Age | Position in the Company | Director Since | | William H. Rastetter, Ph.D. (1) | 75 | Chairman of the Board | 2010 | | George J. Morrow (2)(3) | 72 | Director | 2015 | | Leslie V. Norwalk (3) | 58 | Director | 2019 | | Christine A. Poon (3)(4) | 71 | Director | 2023 |
Directors Continuing in Office
Directors Continuing in Office The Class II and III directors will remain in office after the 2024 Annual Meeting of Stockholders. The names and certain other current information about the directors whose terms of office continue after the Annual Meeting are set forth below:
Directors Continuing in Office
| Name of Director | Age | Position in the Company | Director Since | | Kevin C. Gorman, Ph.D. | 66 | Chief Executive Officer and Director | 2008 | | Gary A. Lyons (1) | 73 | Director | 1993 | | Johanna Mercier (3) | 54 | Director | 2021 | | Richard F. Pops (1)(2) | 62 | Director | 1998 | | Shalini Sharp (2)(4) | 49 | Director | 2020 | | Stephen A. Sherwin, M.D. (1)(4) | 75 | Director | 1999 |
Directors Continuing in Office
(1) Member of the Science and Medical Technology Committee. (2) Member of the Compensation Committee. (3) Member of the Nominating / Corporate Governance Committee. (4) Member of the Audit Committee. The nominees receiving the affirmative vote of a plurality of the shares represented in person or by proxy at the 2024 Annual Meeting of Stockholders and entitled to vote on the election of directors will be elected to the Board of Directors. If a nominee receives a greater number of votes “withheld” than votes “for” such election, the nominee shall tender his or her resignation to the Board of Directors in accordance with our director resignation policy. The Nominating / Corporate Governance Committee will consider all of the relevant factors and recommend to the Board of Directors whether to accept or reject the resignation. The Board of Directors will act on the Nominating / Corporate Governance Committee's recommendation within 90 days of the annual meeting. Following the Board’s decision on the Nominating / Corporate Governance Committee’s recommendation, the Company will publicly disclose the Board’s decision whether to accept the resignation as tendered in a Form 8-K filed with the SEC. Votes withheld from any director are counted for purposes of determining the presence or absence of a quorum, but have no other legal effect under Delaware law. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the Company’s Class I nominees named above. If any of the Company’s nominees is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who is designated by the present Board of Directors to fill the vacancy. It is not expected that any of the Company’s nominees will be unable or will decline to serve as a director. The Board of Directors unanimously recommends that stockholders vote “FOR” the Class I nominees named above.
Limit on Non-Employee Director Compensation
Limit on Non-Employee Director Compensation The aggregate value of all compensation granted or paid by us to any individual for service as a non-employee director with respect to any period commencing on the date of the annual stockholders meeting for a particular year and ending on the date of the annual stockholders meeting for the next subsequent year (such period, the “annual period”), including awards granted under the Amended 2020 Plan and cash fees paid to such non-employee director, will not exceed $1,250,000 in total value. In addition, the aggregate value of any equity award(s) granted by us to any individual for service as a non-employee director upon or in connection with his or her initial election or appointment to the Board of Directors will not exceed $2,000,000 in total value (such that the aggregate compensation granted or paid by us to any individual for service as a non-employee director with respect to an annual period in which such individual is first appointed or elected to the Board of Directors will not exceed $3,250,000 in total value). For purposes of these limitations, the value of any equity awards is calculated based on the grant date fair value of such awards for financial reporting purposes.
2023 Compensation Program Highlights
2023 Compensation Program Highlights Consistent with our goal of attracting, motivating and retaining a high-caliber executive team, our executive officer compensation program is designed to pay for performance. A summary of key compensation decisions and compensation related outcomes aligned with this philosophy are highlighted below for 2023. •Pay for Performance / At-Risk Pay - Our executive compensation program is designed so that a significant portion of pay is variable or “at risk” and the realized value of compensation is linked with Company performance and value delivered to stockholders. For 2023, the percentage of pay that is “at risk” for our CEO and NEOs is approximately 80% and 73%, respectively, helping us align pay with performance (refer to "Pay for Performance / At-Risk Pay" below). • Base Salary Adjustments - Salary increases for 2023 were generally due to Company performance in 2022 and maintaining competitive market positioning relative to market data. Merit based increases for NEOs ranging from 4.5% – 11.0% were approved for 2023. •Annual Cash Incentives - Our annual cash award opportunity is based on corporate performance compared to pre-established corporate goals and the individual performance of each executive officer. Corporate goals are selected to directly align with our specific strategic goals that we believe will create long-term stockholder value. For 2023, we achieved our corporate goals at an overall level of 110% and we paid an annual cash incentive award to our CEO at 110% of target and to our other NEOs at 110% - 121% of target. •Long-Term Equity Awards: Equity Mix - A significant portion of our CEO’s and other NEO’s compensation is delivered in the form of long-term equity awards comprised of a mix of stock options, performance-based restricted stock units ("PRSUs") and restricted stock units ("RSUs"). For our CEO, the aggregate grant date fair value of long-term equity awards granted in 2023 consisted of approximately 50% stock options, 35% PRSUs and 15% RSUs. For NEOs other than our CEO, the aggregate grant date fair value of long-term equity awards granted in 2023 consisted of approximately 55-65% stock options, 15-25% PRSUs and 15-20% RSUs. •PRSU Payouts Linked to Performance - The performance conditions for PRSUs granted to our NEOs in 2021 with a performance period ending in March 2023 were not achieved and no portion of these PRSUs vested. The Compensation Committee did not take any actions to mitigate the negative impact on payouts for these awards consistent with our pay for performance philosophy.
Pay for Performance / At-Risk Pay
Pay for Performance / At-Risk Pay Our executive officer compensation program is designed to reward achievement of the specific strategic goals that we believe will advance our business strategy and create long-term value for our stockholders. Consistent with our goal of attracting, motivating and retaining a high-caliber executive team, our executive officer compensation program is designed to pay for performance. We utilize compensation elements that meaningfully align our NEOs’ interests with those of our stockholders to create long-term value. As such, a significant portion of our Chief Executive Officer’s and other executive officers’ compensation is “at-risk,” performance-based compensation, in the form of long-term equity awards that have performance-based vesting criteria or have value directly dependent on the Company’s stock price (or in the case of stock options, only if the Company's stock price increases), and annual cash incentives that are only earned if we achieve pre-established corporate goals. With respect to long-term equity awards, the Committee annually considers the appropriate mix of equity awards. The Committee believes that combining performance-based vesting equity awards with time-based vesting equity awards appropriately promotes a focus on delivering sustainable long-term value to our stockholders, while also supporting the long-term retention of our executive officers. The graphics below illustrate the primary elements of our Chief Executive Officer’s compensation mix for 2023 and the aggregate compensation mix for 2023 for the other NEOs as a group. The percentages in the chart below reflect the actual base salary earned, cash incentives paid, and the grant date fair value of equity awards granted, in each case as reported in our 2023 Summary Compensation Table.
Our Compensation Practices
| | WHAT WE DO | | WHAT WE DON'T DO | | ✓ Heavily weight our executive officer compensation toward “at risk,” performance-based compensation ✓ Balance short-term and long-term incentive compensation ✓ Use multi-year vesting for all executive officer equity awards ✓ Grant performance-based equity awards annually in the form of PRSUs ✓ Have an incentive compensation recoupment or clawback policy ✓ Structure our executive officer compensation program to minimize inappropriate risk-taking and encourage appropriate risk-taking ✓ Cap annual cash incentives at a maximum payout amount ✓ Select peer companies that we compete with for executive officer talent, have a similar business and are of similar size as us, and review their pay practices ✓ Utilize an independent compensation consulting firm to facilitate pay assessments and review best practices ✓ Have meaningful equity ownership guidelines for executive officers and the Board of Directors ✓ Hold annual say-on-pay advisory vote | | × Provide guaranteed bonuses or base salary increases × Allow for the repricing of stock options without stockholder approval × Pay dividends or dividend equivalents on unearned shares × Permit hedging or other forms of speculative transactions by employees or directors × Permit pledging by employees or directors × Provide single-trigger change in control benefits × Include gross-ups in executive employment agreements or change-in-control arrangements (excluding the Chief Executive Officer's employment agreement, which was last amended in 2007) × Provide excessive perquisites to our executive officers × Provide retirement or pension benefits to our executive officers that are not available to employees generally | |
Role of the Compensation Committee
Role of the Compensation Committee As discussed in greater detail below, the Committee takes into consideration a peer group, survey data and advice from an independent compensation consultant when setting the compensation philosophy and compensation structure for the Company. The Committee’s complete roles and responsibilities are set forth in a written charter, which was adopted by the Board of Directors and is available at http://www.neurocrine.com/investors/corporate-governance/. Some of the significant roles and responsibilities of the Committee include reviewing, revising, and approving: •the compensation philosophy of the Company; •the corporate goals and objectives relating to the compensation of the Company’s employees, including executive officers, and evaluating the performance of the Company, and its executive officers, in light of these corporate goals and objectives; •compensation for all executive officers, including perquisite benefits, if any; •all promotions to executive officer positions and the hiring of all new executive officers, including employment agreements; •recommendations to the full Board of Directors regarding all director compensation by taking into consideration peer group data and advice from an independent compensation consultant; •guidelines for salaries, merit salary increases, cash incentive payments, stock-based grants and performance-based stock grants for all non-executive officer employees of the Company; •equity and incentive plans, including amendments or modifications to such equity and incentive plans; •equity ownership guidelines for executive officers and directors; •the Compensation Discussion and Analysis for inclusion in any of the Company's annual reports on Form 10-K, registration statements, proxy statements or information statements; and •the Committee report on executive compensation to be included in the Company's annual proxy statement in accordance with applicable SEC rules and regulations. In addition, the Committee also has the following oversight responsibilities: •overseeing the development, implementation and effectiveness of the Company’s policies and strategies with respect to human capital and talent management, including diversity and inclusion initiatives; •administering the Company’s equity and incentive plans and employee benefit plans; •overseeing the implementation of clawback policies allowing the Company to recoup certain compensation paid to employees; •reviewing and taking into consideration stockholder feedback regarding compensation matters, including our annual say-on-pay vote; •retaining independent compensation consultants and advisors when appropriate to advise the Committee on compensation policies and plans; and •complying with requirements established by the SEC, assessing the risks arising from the Company’s compensation policies and taking any actions required as a result thereof.
Compensation Philosophy
Our compensation philosophy for executive officers provides that cash compensation should be structured such that at least one-third of each executive officer’s target total cash compensation, consisting of base salary and target cash incentives, is at risk and dependent upon the Company’s achievement of specific corporate goals that drive stockholder value. Starting in 2020, 50% of our Chief Executive Officer’s target total cash compensation is at risk under our annual cash incentive plan. Long-term equity compensation for executive officers is generally a combination of performance-based and time-based vesting equity awards, and it is designed to motivate executive officers to increase long-term stockholder value and to reward and retain key employees.
Overall Compensation Determination Process
Overall Compensation Determination Process The implementation of the compensation philosophy is carried out under the supervision of the Committee. The Committee uses the services of an independent compensation consultant who is retained by, and reports directly to, the Committee. Management, under guidelines and procedures approved by the Committee, determines the compensation of our non-executive officer employees. In the early part of each year, the Committee deliberates and makes decisions regarding the base salary, target cash incentives and long-term equity award components of compensation to be awarded to our executive officers, including our Chief Executive Officer, for the new fiscal year, as well as performance-based compensation payouts for the prior fiscal year. In setting compensation for our other NEOs, the Committee solicits the input of our Chief Executive Officer, who recommends to the Committee the base salary, target cash incentives and long-term equity award components of compensation to be awarded to our NEOs for the new fiscal year, as well as performance-based compensation payouts for the prior fiscal year. The Committee remains solely responsible for making the final decisions on compensation for all of our NEOs. Our NEOs, including our Chief Executive Officer, are not present during discussions of their respective compensation packages nor do they participate in approving any portion of their own or other NEO compensation packages. The Committee considers a variety of factors, as described below, which may vary from year to year, to set the compensation of our NEOs at levels that the Committee considers to be competitive and appropriate for each NEO, using the Committee’s professional experience and judgment: ✓ Company performance ✓ Market data from the independent compensation consultant ✓ Individual performance ✓ Retention risk ✓ Independent compensation consultant recommendations ✓ Chief Executive Officer’s recommendations (other than for himself), based on direct knowledge of NEO performance and his extensive industry experience ✓ Internal pay equity among individuals and positions ✓ Criticality and scope of job function ✓ Total targeted and historical compensation ✓ Any other factors the Committee determines appropriate In addition, during the first quarter of the year, Company-wide performance goals for the then current year are finalized by the Committee and the Board of Directors, and progress toward these goals is reviewed at meetings throughout the year. Later in the year, the Committee reviews the Company’s compensation philosophy, policies and procedures. Committee meetings in the fourth quarter of the year generally focus on Company goal achievement, selection of the peer group for the following year and executive officer performance.
Compensation Consultant
Compensation Consultant The Committee uses the services of an independent compensation consultant who is retained by, and reports directly to, the Committee to provide the Committee with an additional external perspective with respect to its evaluation of relevant market and industry practices. In the summer of 2022, the Committee engaged the services of Frederic W. Cook & Co., Inc. (“FW Cook”) as its independent compensation consultant to assist the Committee with evaluating our executive and director compensation programs and to make recommendations for our 2023 compensation programs, including updating the Committee on new developments in areas that fall within the Committee's oversight. FW Cook serves solely at the pleasure of the Committee and their fees are approved by the Committee. FW Cook conducted analyses and provided advice on, among other things, the appropriate peer group, executive officer compensation and compensation trends in the life sciences industry. In weighing its recommendations for executive officer compensation for 2023, the Committee directed FW Cook to advise the Committee on both best practices and peer practices when designing and modifying our executive officer compensation program in order to achieve our objectives. As part of its duties, FW Cook provided the Committee with the following services with respect to 2023 compensation decisions: •carried out a comprehensive review of our peer group for use in making 2023 executive officer compensation decisions; •provided compensation data for the peer group and relevant executive officer pay survey data and an analysis of the compensation of the Company’s executive officers as compared to this market data; •provided a competitive assessment of, and comparison to, incentive design and executive officer pay program structure based on peer group data; •conducted a comprehensive pay for performance assessment; •provided recommendations regarding the annual cash incentive and long-term equity incentive program design for 2023; •assisted the Committee with the design of 2023 pay programs consistent with the Company’s business strategy and pay philosophy; •provided background information and data for 2023 adjustments to the Company’s executive officer compensation program consistent with good governance practices and the Company’s objectives; and •prepared an analysis of the Board of Directors’ 2023 compensation program. The Committee annually assesses whether the work of its compensation consultant has raised any conflict of interest, taking into consideration the following factors: (i) the provision of other services, if any, to the Company by the compensation consultant; (ii) the amount of fees the Company paid to the compensation consultant as a percentage of the firm’s total revenue; (iii) the compensation consultant’s policies and procedures that are designed to prevent conflicts of interest; (iv) any business or personal relationship of the compensation consultant or the individual compensation advisors employed by the firm with an executive officer of the Company; (v) any business or personal relationship of the individual compensation advisors with any member of the Committee; and (vi) any stock of the Company owned by the compensation consultant or the individual compensation advisors employed by the firm. The Committee has determined, based on its analysis of the above factors, that there was no conflict of interest with respect to FW Cook providing services to the Committee.
Competitive Assessment of Compensation—Peer Group and Market Data
Competitive Assessment of Compensation—Peer Group and Market Data 2023 Peer Group. In September 2022, when developing a proposed list of our peer group companies to be used in connection with making compensation decisions for 2023, FW Cook selected primarily recently commercial biopharmaceutical companies or late-stage high valuation pre-commercial companies with revenues generally between $200 million and $2.5 billion, market capitalization generally between $2.6 billion and $26.4 billion and employee headcount generally under 3,000, which FW Cook recommended as a reasonable range in relation to our then-current revenue, market capitalization and headcount. Based on these criteria, FW Cook recommended, and our Committee approved, the following peer group for 2023:
Competitive Assessment of Compensation—Peer Group and Market Data
| ACADIA Pharmaceuticals, Inc. | Alkermes plc | Alnylam Pharmaceuticals, Inc. | | BeiGene, Ltd. | Biohaven Ltd. | BioMarin Pharmaceuticals, Inc. | | Exelixis, Inc. | Horizon Therapeutics plc | Incyte Corporation | | Ionis Pharmaceuticals, Inc. | Jazz Pharmaceuticals plc | Mirati Therapeutics, Inc. | | Sarepta Therapeutics, Inc. | Seagen Inc. | Ultragenyx Pharmaceutical Inc | | United Therapeutics Corporation | | |
Competitive Assessment of Compensation—Peer Group and Market Data
The 2023 peer group reflects the following changes from our 2022 peer group: (i) the removal of Alexion Pharmaceuticals, Inc., due to its acquisition by AstraZeneca, and (ii) the removal of Nektar Therapeutics, as its market cap and revenue fell below the targeted range. At the time of approval of our 2023 peer group, our Company was approximately in the 55th percentile of the peer group for market capitalization and for revenue. 2023 Market Data. In late 2022, FW Cook completed an assessment of executive officer compensation based on the 2023 peer group to inform the Committee’s determinations of executive officer compensation for 2023. The data for this assessment was compiled from multiple sources, including: (i) the 2023 peer group companies’ publicly disclosed information, or public peer data; and (ii) survey data from the Radford Global Compensation Database for peer companies and biotechnology and pharmaceutical companies that had annual revenue between $500 million and $3.0 billion. The components of this data were based on the availability of sufficient comparative data for an executive officer’s position. The public peer data and survey data, collectively referred to in this Proxy Statement together as market data, were reviewed by the Committee, with the assistance of FW Cook, and used as one reference point, in addition to other factors, in setting our executive officers’ compensation for 2023. Use of 2023 Market Data. The Committee generally reviews target total direct compensation, comprising both target cash compensation and equity compensation, against the market data described above primarily to ensure that our executive officer compensation program as a whole is positioned competitively to attract and retain the highest caliber executive officers and that the total direct compensation opportunity for the executive officer group is aligned with our corporate objectives and strategic needs. The Committee does not have a specific target compensation level for the NEOs; rather, the Committee reviews a range of market data reference points with respect to target total direct compensation, target total cash compensation (including both base salary and the target annual cash incentive) and equity compensation (valued based on an approximation of grant date fair value). In making compensation determinations, the Committee considers the market data, along with the other factors described above under “Overall Compensation Determination Process.”
Components of Executive Compensation
Components of Executive Compensation The Committee considers each executive officer’s performance, contributions to Company goals, responsibilities, experience, qualifications, and where in the competitive range the executive officer’s compensation compares to the Company’s peer group when determining the appropriate compensation for each executive officer. The Committee considers each component of compensation independently and each component in the context of each executive officer’s total compensation. Compensation for our NEOs currently consists of three key elements that are designed to reward performance in a simple and straightforward manner: base salaries, annual performance-based cash incentives and long-term equity awards, which generally include restricted stock units ("RSUs"), and stock options, which both vest based on continued service over time, and PRSUs, which vest upon achievement of key corporate goals that we believe will create stockholder value. The table below summarizes the purpose and key characteristics of each Compensation Element, with those associated with at-risk pay shown in pink font.
Components of Executive Compensation
| Compensation Element | Purpose of This Element | Key Characteristics | | Base Salary | Designed to compensate competitively at levels necessary to attract and retain qualified executive officers in the life sciences industry; generally based on the scope of each executive officer’s responsibilities, as well as his/her qualifications, breadth of experience, performance record and depth of applicable functional expertise; established and adjusted to be appropriate as compared to the applicable market data, enabling the Company to attract, motivate, reward and retain highly skilled executive officers; gives executive officers a degree of certainty in light of having a majority of their compensation at risk. | Fixed cash compensation where year-to-year adjustments to each executive officer’s base salary are based upon sustained superior performance, changes in the general level of base salaries of persons in comparable positions within our industry, and any average merit salary increase for such year for all employees of the Company established by the Committee, as well as other factors the Committee judges to be pertinent during an assessment period. In making base salary decisions, the Committee exercises its judgment to determine the appropriate weight to be given to each of these factors. Although adjustments may also be made during the year for special circumstances, no mid-year adjustments have been made in the past five years. | | Annual Cash Incentives | Motivates executive officers to achieve our short-term strategic plan and milestones that are designed to drive long-term growth and performance while providing flexibility to respond to opportunities and changing market conditions. | Annual cash award opportunity based on corporate performance compared to pre-established corporate goals with pre-established target and maximum payout opportunities for each executive officer. The cash incentive program, including corporate goals and target payouts, are reviewed and approved by the Committee annually and may include individual performance targets for each executive officer. The corporate goals are prepared in an interactive process between management and the Committee based on the Company’s business plan and budget for the year. Cash incentive payments are linked to the attainment of overall corporate goals and the individual performance of each executive officer, or other factors the Committee determines appropriate. | | Long-Term Equity Incentives (RSUs) | Motivates executive officers to achieve our business objectives by tying compensation to the performance of our common stock over the long term; creates an ownership culture; motivates our executive officers to remain with the Company by mitigating swings in incentive values during periods when market volatility impacts our stock price; directly motivates an executive officer to maximize long-term stockholder value and serve as an effective tool for incentivizing and retaining those executive officers who are most responsible for influencing stockholder value. | RSUs generally vest on an annual basis, ratably over four years subject to executive officer’s continued service; the ultimate value realized varies with our common stock price. | | Long-Term Equity Incentives (Stock Options) | Motivates executive officers to achieve our business objectives by tying incentives to the appreciation of our common stock over the long-term and creates an ownership culture. | Stock options with an exercise price equal to the fair market value on the date of grant generally vest monthly over four years subject to executive officer’s continued service; the ultimate realizable value, if any, depends on the appreciation of our common stock price from the date of grant. The Committee views stock options as performance-based compensation, as stock options provide a return to our executive officers only if the market price of our common shares appreciates over the stock option term. | | Long-Term Equity Incentives (PRSUs) | Creates a strong link to the Company’s long-term performance, creates an ownership culture and closely aligns the interests of our executive officers with those of our stockholders because the value that the grants deliver is directly dependent on attainment of performance metrics and our stock price. | PRSUs only vest upon achievement of objectively measurable performance metrics tied to our business strategy that focus executive officers on achieving these long-term Company performance metrics and increasing stockholder value. |
Components of Executive Compensation
| Other Compensation | Provides benefits that promote employee health and welfare, which assists in attracting and retaining our executive officers; certain additional benefits reflect market standards and are reasonable and necessary to attract and/or retain each of our executive officers and allow the executive officers to realize the full benefit of the other elements of compensation we provide. | Executive officers are eligible to participate in the Company’s employee benefit plans on the same terms as all other full-time employees. These plans include medical, dental and life insurance and eligibility to participate in the Company’s employee stock purchase plan. Additional benefits include disability insurance premiums, an annual physical examination and financial planning services. The terms of the Company’s 401(k) Savings Plan (the “401(k) Plan”) provide for executive officer and broad-based employee participation on the same general terms. Under the 401(k) Plan, all Company employees are eligible to receive basic matching contributions from the Company that vest annually over three years from date of hire. | | Severance and Change in Control Benefits | Serves our retention objectives by helping our executive officers maintain continued focus and dedication to their responsibilities to maximize stockholder value, including in the event of a transaction that could result in a change in control of the Company. | Provides protection in the event of a termination of employment under specified circumstances, including following a change in control of the Company as described below under “Potential Payments Upon Termination or Change-in-Control.” Compensation components for executive officers in the event of a termination by the Company without cause or termination by the executive officer due to constructive termination within six months after the consummation of a change in control include payments for annual base salary, a cash compensation payment, cash compensation for the value of all outstanding stock awards, limited Company-paid health insurance benefits, and any accrued vacation and any accrued benefits under any plans of the Company in which the executive officer is a participant. Eligibility for these benefits requires a signed release agreement by the executive officer. Pursuant to his employment agreement, which was last amended in 2007, our Chief Executive Officer is entitled to tax gross-ups in the event of certain levels of payments he may receive upon a change in control. We have not entered into any new change in control gross-ups for executive officers since 2007, nor does the Company intend to enter into any new agreements containing such gross-ups. Accordingly, Dr. Gorman is the only NEO entitled to such tax gross-ups. |
2023 Annual Cash Incentives
2023 Annual Cash Incentives In February 2023, the Committee approved the 2023 target bonus opportunities as a percentage of base salary for the NEOs as set forth in the table below. After considering market data for each NEO’s position, no changes were made to the target bonus opportunities of our NEOs.
2023 Annual Cash Incentives
| Executive Officer | 2023 Target Bonus (% of Base Salary) | | Chief Executive Officer | 100% | | All Other Executive Officers | 50% |
2023 Annual Cash Incentives
In March 2023, the Committee approved the corporate goals for our 2023 annual cash incentive plan. The most significant and impactful goals and achievements are summarized in the table below. Our corporate goals are directly aligned with our specific strategic goals that we believe will create long-term stockholder value, including achieving a net revenue target from sales of INGREZZA, ensuring commercial readiness for the launch of INGREZZA for the treatment of chorea associated with Huntington's disease, scaling pre-launch commercial infrastructure for crinecerfont to treat CAH, advancing and expanding our clinical pipeline, and achieving certain other corporate and financial goals. The Committee did not assign specific relative weightings to the corporate goals for 2023 in order to enable a holistic assessment of complementary goals that collectively reflect achievement of our 2023 performance objectives and build the foundation for long-term success. The maximum bonus payout for each NEO was capped at 150% of their target bonus opportunity. During meetings conducted throughout the year and culminating in February 2024, the Committee engaged in a robust dialogue with management, the Board Chair and other Board members (including at Board meetings), and its independent compensation consultant to evaluate the accomplishments and performance of the Company relative to the 2023 corporate goals. The Committee discussed the relative importance of each of these goals and ultimately determined that the following goals were the most impactful to the creation of long-term stockholder value: (i) the INGREZZA net sales goal; (ii) the advancement of our clinical pipeline, including positive top-line results in two phase 3 studies of crinecerfont in adults and pediatrics for the treatment of CAH; and (iii) a positive resolution of all patent litigation brought by us against the companies that filed ANDAs seeking approval to market generic versions of INGREZZA. The Committee further determined that the Company achieved the high-end of the range for INGREZZA net sales goal, over achieved the most critical goals associated with the advancement of the Company's clinical pipeline, overachieved with respect to the resolution of all patent litigation brought by us against the companies seeking approval to market generic versions of INGREZZA, and partially achieved other important goals. After these discussions, the Committee determined our 2023 corporate goal achievement at 110%.
2023 Annual Cash Incentives
| Business Area / Initiative | Target | Achievements / Relevant Developments | Overall Achievement | | Commercial Activities | Achieve INGREZZA net sales in 2023 between $1.70B and $1.84B | Achieved INGREZZA net sales of $1.84B | Achieved High End of Range | | | Prepare for launch of INGREZZA for chorea associated with Huntington's disease | Completed launch-ready activities | Achieved | | | Stage-appropriate crinecerfont launch readiness | Completed foundational activities and build-out of initial commercial team | Achieved | | Advance and Expand Clinical Pipeline | sNDA Approval: Obtain FDA approval of sNDA for valbenazine for treatment of chorea associated with Huntington disease | Obtained FDA approval in August 2023 | Achieved | | | Phase 2 and Phase 3 Clinical Pipeline: | | Over Achieved in Part* | | | •Report topline data in two Phase 3 studies in CAH (adults and pediatrics) | •Reported positive top-line data from the Phase 3 clinical studies of crinecerfont in adults and pediatrics with CAH | | | | •Achieve enrollment targets in all studies | •Met enrollment targets in most studies | | | | •Report top-line data on two Phase 2 studies | •Reported top-line data on one Phase 2 study | | | | Phase 1 Studies: Complete IND/CTA submission for 4 new chemical entities | IND/CTA submissions completed for five new chemical entities. | Over Achieved | | | Development: Identify 3 new development candidates, including one biologic | Identified two new development candidates | Achieved in Part | | Financial/Operational | •Meet annual budget for non-GAAP operating expense by year-end | •Met annual budget for non-GAAP operating expense by year-end | Achieved in Part | | | •Retire convertible notes due May 2024 | •Company made strategic decision in 2023 not to retire the convertible notes. As of December 31, 2023, $170.4 million aggregate principal amount of the convertible notes remained outstanding | | | General Business and People | •Maintain or improve sustainability ratings | •Improved overall sustainability ratings over prior year | Achieved | | | •Continue to maintain company culture of integrity, ethics and compliance | •Enhanced compliance training and related communication | | | Legal | Manage litigation matters to a positive outcome | Successfully resolved all patent litigation brought by us against the companies seeking approval to market generic versions of INGREZZA | Over Achieved | | Overall Achievement: | | | 110% |
2023 Annual Cash Incentives
* Although the enrollment goals associated with the Phase 2 and Phase 3 Clinical Pipeline were partially achieved, the Committee considered the reporting of top-line data in two Phase 3 studies in CAH to be the most impactful to the Company and the long-term benefit of stockholders and this specific goal was deemed to be “Over Achieved”. Notwithstanding the Committee’s determination of our 2023 corporate goal achievement at 110%, the Committee had discretion to eliminate any NEO’s bonus or to reduce or increase the amount of any NEO’s bonus payout amount. However, our CEO's bonus payment cannot be increased above the corporate goal achievement level for the Company. In February 2024, the Committee determined whether to exercise its discretion to increase or decrease the bonus payout amount for each NEO after considering their individual performance contributing to achievement of our corporate goals. Following such review, Dr. Roberts was awarded an increased bonus payout amount in recognition of her success in advancing and expanding our clinical development programs, including the generation of positive top-line data from the Phase 3 clinical studies of crinecerfont in adults and pediatrics with CAH. After making these determinations, the Committee approved the bonus payout amounts set forth in the table below.
2023 Annual Cash Incentives
| | 2023 Target Bonus | | 2023 Actual Bonus Paid | | | Named Executive Officer | % of Base Salary | $ | % of Target Bonus | $ | | Kevin C. Gorman, Ph.D. | 100% | $946,000 | 110% | $1,040,600 | | Matthew C. Abernethy | 50% | $323,030 | 110% | $355,335 | | Kyle W. Gano, Ph.D. | 50% | $301,456 | 110% | $331,602 | | Jude Onyia, Ph.D. | 50% | $319,125 | 110% | $351,038 | | Eiry W. Roberts, M.D. | 50% | $330,174 | 121% | $399,511 |
2023 Long-Term Equity Awards
2023 Long-Term Equity Awards 2023 Equity Award Mix. In 2023, the Committee granted long-term equity awards to our NEOs in the form of stock options, RSUs and PRSUs after determining that these three types of equity awards continued to provide the appropriate balance of long-term and performance-based incentives for our executive officers. The Committee generally maintained the overall value of the equity awards provided to the NEOs, with the exception of Dr. Gorman, and continued to place emphasis on performance-based incentives that align our NEOs’ financial interests with those of our stockholders. For Dr. Gorman, the Committee altered the mix of equity awards in 2023 to slightly decrease the amount of RSUs and PRSUs and increase the amount of stock options to further tie incentive compensation to the appreciation of our common stock and long-term stockholder value creation. For Dr. Gorman, the Committee allocated approximately 50% of the aggregate value of Dr. Gorman's long-term equity awards in the form of stock options, 35% of such value in the form of PRSUs and approximately 15% of such value in the form of RSUs. The 35% allocation of Dr. Gorman’s long-term equity awards to PRSUs is consistent with other companies in the Company’s peer group. For the NEOs, other than Dr. Gorman, the Committee decided to generally allocate approximately 55-65% of the aggregate value of each NEO’s long-term equity awards in the form of stock options, 15-25% of such value in the form of PRSUs and 15-20% of such value in the form of RSUs, primarily based on each NEO’s expected impact on the achievement of the performance metrics underlying the PRSUs. Size of 2023 Equity Awards. In determining the size of the total equity compensation opportunity in 2023, the Committee: •aimed to have the aggregate target award value result in target total direct compensation at a level that is competitive in the marketplaces in which we compete; •focused a larger portion of total direct compensation in the form of long-term performance equity awards which only vest upon achievement of the specific, objective criteria described below, which if achieved, the Committee believes will drive long-term differentiated value relative to our peers and maximize long-term stockholder value; and •considered the recommendations of Dr. Gorman for the other NEOs. The following table summarizes the annual 2023 long-term equity awards for the NEOs:
2023 Long-Term Equity Awards
| | Stock Options | | RSUs | | PRSUs | | | | Named Executive Officer | $* | # of Shares | $* | # of Shares | $* | # of Shares (Target) | Total ($*) | | Kevin C. Gorman, Ph.D. | $6,678,750 | 133,656 | $2,226,250 | 21,506 | $4,795,000 | 50,979 | $13,700,000 | | Matthew C. Abernethy | $3,187,500 | 63,789 | $1,062,500 | 10,264 | $750,000 | 7,974 | $5,000,000 | | Kyle W. Gano, Ph.D. | $3,187,500 | 63,789 | $1,062,500 | 10,264 | $750,000 | 7,974 | $5,000,000 | | Jude Onyia, Ph.D. | $3,375,000 | 67,541 | $1,125,000 | 10,868 | $1,500,000 | 15,948 | $6,000,000 | | Eiry W. Roberts, M.D. | $2,625,000 | 52,532 | $875,000 | 8,453 | $1,250,000 | 13,290 | $4,750,000 |
2023 Long-Term Equity Awards
* Represents the target grant date fair value of the awards approved by the Compensation. The Committee approved the PRSU award values in February 2023, but the PRSUs were granted in May 2023 following Committee approval of performance metrics and vesting requirements for these awards. See the Summary Compensation Table and the Grants of Plan-Based Awards Table included in this Proxy Statement for the actual grant date fair value of such awards. 2023 Equity Award Vesting Criteria. The Committee determined that the 2023 equity grants vest as follows: (i) the stock options vest in equal monthly installments over a four-year period; (ii) the RSUs vest in equal annual installments over a four-year period; and (iii) the PRSUs vest on the date, or dates, that the Committee determines achievement of two underlying performance metrics, each of which must occur by the end of a three-year performance period ending on December 31, 2025. The metrics underlying the PRSUs target certain regulatory milestones and the advancement of certain clinical programs, including advancing our late-stage clinical pipeline, that we believe will drive stockholder value within the three-year performance period ending on December 31, 2025. The actual number of earned units subject to the PRSUs will be determined based on the level of achievement of such metrics, with minimum, target, upside, and maximum levels specified in the Grants of Plan-Based Awards During the Fiscal Year Ended December 31, 2023 table. The Committee set the specific performance targets underlying each performance metric at challenging levels that the Committee determined would require substantial effort to be achieved. We believe disclosing the specific performance targets while the performance period is ongoing could cause competitive harm, as providing this information could provide competitors with insights in our strategy and clinical development programs that would be harmful to us. However, we will disclose the specific performance targets in 2026 following the Committee’s determination of performance and certification.
Prior Year PRSUs Performance
| Achievement Level | Performance Condition | Payout Level (as a % of target) | | Minimum | Positive Phase 3 data in both adult and adolescent studies of crinecerfont for the treatment of CAH. | CEO & Chief Medical Officer: 75% Other NEOs: 67% | | Target | Positive Phase 3 data in both adult and adolescent studies of crinecerfont for the treatment of CAH and submission of an NDA to the FDA for either the adolescent or adult indication. | CEO & Chief Medical Officer: 100% Other NEOs: 100% | | Max | Positive Phase 3 data in both adult and adolescent studies of crinecerfont for the treatment of CAH and submission of two NDAs to the FDA, one for each of the adolescent and adult indications. | CEO & Chief Medical Officer: 125% Other NEOs: 133% |
Prior Year PRSUs Performance
| INGREZZA HD Metric Achievement Level | Performance Condition for INGREZZA HD Metric | Payout Level (as a % of target with respect to the INGREZZA HD Metric) | | Target | Company receives FDA approval of INGREZZA for the treatment of adults with chorea associated with Huntington's disease | 100% | | Max | Company receives FDA approval of INGREZZA for the treatment of adults with chorea associated with Huntington's disease and such approval does not require a black box warning | 175% |
Equity Trading Policies and Procedures
Equity Trading Policies and Procedures The Company has policies and procedures in place that prohibit direct or indirect participation by employees and directors of the Company in transactions involving trading activities in Company common stock which by their aggressive or speculative nature may give rise to an appearance of impropriety. Such prohibited activities would include the purchase of put or call options, or the writing of such options as well as short sales, hedging transactions such as “cashless” collars, forward sales, equity swaps and other related arrangement which may indirectly involve short-sale and any other transactions designed for profit from short-term movement in the Company’s stock price. In addition, no officer, director or employee of the Company may margin, or make any offer to margin, any Company common stock, including without limitation, borrowing against such stock, at any time. Under the policies, a contribution of the Company’s securities to an exchange fund not designed to hedge any decrease in the market value of Neurocrine's equity securities is not considered a form of hedging; however, such contribution by an employee or director remains subject to the other provisions of the Company’s insider trading policy, including provisions regarding quarterly trading blackout periods and pre-clearance requirements. To the Company’s knowledge, there were no transactions involving hedging, pledging or margining Company common stock during 2023, nor were there any such transactions as of the Record Date. The Company also requires directors and executive officers to complete all equity related open-market purchase and sale transactions via a 10b5-1 plan. The 10b5-1 plans typically cover, among other transactions, direct sales and purchases of Company stock, as well as same-day-sales related to option exercises and sales of stock for tax payments upon the vesting of RSUs. All 10b5-1 plans are required to have a waiting period from the election date to the date of the first transaction. Additionally, Company policy restricts the executive officers from amending a 10b5-1 trading plan.
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Name and Principal Position (1) | Year | Salary ($) (2) | Bonus ($) (2) | Option Awards ($) (3) | Stock Awards ($) (4) | All Other Compensation ($) (5) | Total ($) | | Kevin C. Gorman, Ph.D. | 2021 | $825,000 | $701,250 | $6,093,752 | $6,406,366 | $55,044 | $14,081,412 | | Chief Executive Officer | 2022 | $860,000 | $989,000 | $4,875,106 | $5,125,079 | $53,342 | $11,902,527 | | | 2023 | $946,000 | $1,040,600 | $6,678,790 | $7,021,386 | $64,036 | $15,750,812 | | Matthew C. Abernethy | 2021 | $588,800 | $264,960 | $2,625,019 | $2,375,068 | $53,003 | $5,906,850 | | Chief Financial Officer | 2022 | $618,240 | $373,262 | $2,310,061 | $1,570,128 | $52,632 | $4,924,323 | | | 2023 | $646,061 | $355,335 | $3,187,536 | $1,812,563 | $56,387 | $6,057,882 | | Kyle W. Gano, Ph.D. | 2021 | $517,000 | $271,425 | $2,625,018 | $2,375,067 | $22,814 | $5,811,324 | | Chief Business Development and Strategy Officer | 2022 | $550,605 | $332,428 | $2,775,053 | $1,725,086 | $38,485 | $5,421,657 | | | 2023 | $602,912 | $331,602 | $3,187,536 | $1,812,563 | $55,602 | $5,990,215 | | Jude Onyia, Ph.D. | 2021 | $52,340 | $26,170 | $4,500,035 | $3,000,136 | $2,949 | $7,581,630 | | Chief Scientific Officer | 2022 | $575,000 | $330,625 | $225,008 | $1,275,146 | $55,520 | $2,461,299 | | | 2023 | $638,250 | $351,038 | $3,375,024 | $2,625,124 | $233,780 | $7,223,216 | | Eiry W. Roberts, M.D. | 2021 | $604,700 | $272,115 | $2,625,019 | $2,875,113 | $48,649 | $6,425,596 | | Chief Medical Officer | 2022 | $631,912 | $345,182 | $2,625,057 | $2,075,144 | $57,986 | $5,735,281 | | | 2023 | $660,348 | $399,511 | $2,625,024 | $2,125,112 | $63,852 | $5,873,847 |
Summary Compensation Table
(1)The titles and capacities set forth in the table above are as of December 31, 2023. (2)Salary and bonus figures represent amounts earned during each respective fiscal year, regardless of whether part or all of such amounts were paid in subsequent fiscal year(s). Bonuses are awarded pursuant to a bonus program. (3)The amounts shown are the full grant date fair value in accordance with Accounting Standards Codification 718-10, Compensation—Stock Compensation (ASC 718). The assumptions used to calculate the grant date fair value of option awards are set forth under Note 9 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 9, 2024. The grant date fair values of option awards for 2021, 2022 and 2023 (other than Dr. Onyia's 2021 new hire award) are based on per share Black-Scholes values of $53.52, $34.81 and $49.97, respectively. The grant date fair value of Dr. Onyia's new hire option award granted in 2021 is based on per share Black-Scholes value of $37.45. (4)Stock awards consist of RSUs and PRSUs and may be subject to deferred delivery arrangements. The amounts shown are the full grant date fair value in accordance with Accounting Standards Codification 718-10, Compensation—Stock Compensation (ASC 718). The assumptions used to calculate the grant date fair value of stock awards are set forth under Note 9 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 9, 2024. The fair values of RSUs and PRSUs granted in 2021, 2022 and RSUs granted in 2023 are based on the Company’s closing market price per share on the grant date, which was $117.63 for all 2021 grants, $79.02 for all 2022 grants and $103.52 for all 2023 RSU grants (other than Dr. Onyia's 2021 new hire grant, for which the Company's closing market price per share on the grant date was $84.74). The fair values of PRSUs granted in 2023 are based on the Company's closing market price per share on the grant date, which was $94.06 for 2023 PRSU grants. The PRSU values included in the table above are based on the target number of shares subject to the PRSU awards. If the highest level of performance metrics are achieved, the PRSU values based on the maximum number of shares issuable to each NEO for 2023 are as follows: Dr. Gorman – $9,590,075, Mr. Abernethy – $1,499,975, Dr. Gano – $1,499,975, Dr. Onyia – $2,999,950, and Dr. Roberts – $2,500,021. (5)Includes all other compensation as described in the table below.
Grants of Plan-Based Awards During 2023
Grants of Plan-Based Awards During 2023 The following table sets forth certain information regarding plan based awards granted by the Company during 2023 to the NEOs below:
Grants of Plan-Based Awards During 2023
| | | | Estimated Future Payouts Under PRSU Awards (1) | | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | All Other Option Awards: Number of Securities Underlying Options (#)(2) | Exercise Price of Option Awards ($/Sh)(2) | Grant Date Fair Value (3) | | Name | Approval Date | Grant Date | Minimum(#) | Target (#) | Upside (#) | Maximum (#) | | | | | | Kevin C. Gorman, Ph.D. | 2/1/2023 | 2/13/2023 | | | | | 21,506 | | — | $2,226,301 | | | 5/19/2023 | 5/19/2023 (1) | 28,038 | 50,979 | 76,468 | 101,957 | | | — | $4,795,085 | | | 2/1/2023 | 2/13/2023 | | | | | | 133,656 | $103.52 | $6,678,790 | | Matthew C. Abernethy | 2/1/2023 | 2/13/2023 | | | | | 10,264 | | — | $1,062,529 | | | 5/19/2023 | 5/19/2023 (1) | 4,385 | 7,974 | 11,960 | 15,947 | | | — | $750,034 | | | 2/1/2023 | 2/13/2023 | | | | | | 63,789 | $103.52 | $3,187,536 | | Kyle W. Gano, Ph.D. | 2/1/2023 | 2/13/2023 | | | | | 10,264 | | — | $1,062,529 | | | 5/19/2023 | 5/19/2023 (1) | 4,385 | 7,974 | 11,960 | 15,947 | | | — | $750,034 | | | 2/1/2023 | 2/13/2023 | | | | | | 63,789 | $103.52 | $3,187,536 | | Jude Onyia, Ph.D. | 2/1/2023 | 2/13/2023 | | | | | 10,868 | | — | $1,125,055 | | | 5/19/2023 | 5/19/2023 (1) | 8,771 | 15,948 | 23,920 | 31,894 | | | — | $1,500,069 | | | 2/1/2023 | 2/13/2023 | | | | | | 67,541 | $103.52 | $3,375,024 | | Eiry W. Roberts, M.D. | 2/1/2023 | 2/13/2023 | | | | | 8,453 | | — | $875,055 | | | 5/19/2023 | 5/19/2023 (1) | 7,309 | 13,290 | 19,934 | 26,579 | | | — | $1,250,057 | | | 2/1/2023 | 2/13/2023 | | | | | | 52,532 | $103.52 | $2,625,024 |
Grants of Plan-Based Awards During 2023
(1)Represents the number of shares that may be earned under the PRSUs granted to NEOs in 2023 under the Company’s Amended 2020 Plan. The PRSUs will vest on the date, or dates, that the Committee determines achievement of two underlying performance metrics, each of which must occur before December 31, 2025. Such metrics relate to the advancement of certain regulatory milestones and clinical programs which we believe will drive stockholder value within the 36-month performance period commencing on January 1, 2023 and ending on December 31, 2025. The actual number of units subject to the PRSUs will be determined based on the level of achievement of such metrics, with minimum, target, upside and maximum levels specified. (2)Option awards granted have an exercise price equal to the closing market price of the Company’s common stock on the date of grant. All option awards are time-based awards, which vest monthly, on a pro-rata basis, over four years and have an option term of ten years. RSUs vest annually, on a pro-rata basis, over a four-year period. (3)Reflects the grant date per share Black-Scholes value of $49.97 for option awards and the grant date per share value of $103.52 for RSUs, each granted on February 13, 2023, and $94.06 for PRSUs which were granted on May 19, 2023, all of which were calculated in accordance with ASC 718.
Outstanding Equity Awards Table
Outstanding Equity Awards Table
Outstanding Equity Awards Table
| | Option Awards | | | | | | Stock Awards | | | | | Name | Award Grant and Commencement of Vesting Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) (3) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Kevin C. Gorman, Ph.D. | 1/16/2014 | 167,858 | — | — | $19.59 | 1/16/2024(2) | — | — | — | — | | | 2/3/2015 | 146,105 | — | — | $32.99 | 2/3/2025(2) | — | — | — | — | | | 2/5/2016 | 109,100 | — | — | $35.99 | 2/5/2026(2) | — | — | — | — | | | 2/6/2017 | 207,400 | — | — | $43.24 | 2/6/2027(2) | — | — | — | — | | | 2/5/2018 | 104,200 | — | — | $81.49 | 2/5/2028(2) | — | — | — | — | | | 2/7/2019 | 133,345 | — | — | $81.05 | 2/7/2029(2) | — | — | — | — | | | 2/6/2020 | 139,627 | 6,071 | — | $102.90 | 2/6/2030(2) | 5,771 | $760,387 | — | — | | | 2/8/2021 | 80,653 | 33,210 | — | $117.63 | 2/8/2031(2) | 8,635 | $1,137,748 | — | — | | | 1/31/2022 | 67,107 | 72,942 | — | $79.02 | 1/31/2032(2) | 15,424 | $2,032,266 | 26,576(4) | $3,501,654 | | | 2/13/2023 | 27,845 | 105,811 | — | $103.52 | 2/13/2033(2) | 21,506 | $2,833,631 | — | $0 | | | 5/19/2023 | — | — | — | — | | — | — | 50,979(5) | $6,716,993 | | Matthew C. Abernethy | 12/1/2017 | 45,000 | — | — | $73.60 | 12/1/2027(1) | — | — | — | — | | | 2/7/2019 | 83,341 | — | — | $81.05 | 2/7/2029(2) | — | — | — | — | | | 2/6/2020 | 58,791 | 2,556 | — | $102.90 | 2/6/2030(2) | 2,430 | $320,177 | — | — | | | 2/8/2021 | 34,743 | 14,306 | — | $117.63 | 2/8/2031(2) | 3,720 | $490,147 | — | — | | | 1/31/2022 | 31,798 | 34,564 | — | $79.02 | 1/31/2032(2) | 7,309 | $963,034 | 6,075(4) | $800,442 | | | 2/13/2023 | 13,289 | 50,500 | — | $103.52 | 2/13/2033(2) | 10,264 | $1,352,385 | — | — | | | 5/19/2023 | — | — | — | — | | — | — | 7,974(5) | $1,050,654 | | Kyle W. Gano, Ph.D. | 1/16/2014 | 75,000 | — | — | $19.59 | 1/16/2024(2) | — | — | — | — | | | 2/3/2015 | 65,000 | — | — | $32.99 | 2/3/2025(2) | — | — | — | — | | | 2/5/2016 | 36,400 | — | — | $35.99 | 2/5/2026(2) | — | — | — | — | | | 2/6/2017 | 60,000 | — | — | $43.24 | 2/6/2027(2) | — | — | — | — | | | 2/5/2018 | 30,400 | — | — | $81.49 | 2/5/2028(2) | — | — | — | — | | | 2/7/2019 | 66,673 | — | — | $81.05 | 2/7/2029(2) | — | — | — | — | | | 2/6/2020 | 73,488 | 3,195 | — | $102.90 | 2/6/2030(2) | 3,037 | $400,155 | — | — | | | 2/8/2021 | 34,743 | 14,306 | — | $117.63 | 2/8/2031(2) | 3,720 | $490,147 | — | — | | | 1/31/2022 | 38,199 | 41,521 | — | $79.02 | 1/31/2032(2) | 8,780 | $1,156,853 | 6,075(4) | $800,442 | | | 2/13/2023 | 13,289 | 50,500 | — | $103.52 | 2/13/2033(2) | 10,264 | $1,352,385 | — | — | | | 5/19/2023 | — | — | — | — | | — | — | 7,974(5) | $1,050,654 | | Jude Onyia, Ph.D. | 44529 | 62,588 | 57,581 | — | $84.74 | 11/29/2031(1) | 8,852 | $1,166,340 | — | — | | | 1/31/2022 | 3,097 | 3,367 | — | $79.02 | 1/31/2032(2) | 713 | $93,945 | 9,112(4) | $1,200,597 | | | 2/13/2023 | 14,071 | 53,470 | — | $103.52 | 2/13/2033(2) | 10,868 | $1,431,968 | — | — | | | 5/19/2023 | — | — | — | — | | — | — | 15,948(5) | $2,101,308 | | Eiry W. Roberts, M.D | 1/8/2018 | 5,140 | — | — | $77.81 | 1/8/2028(1) | — | — | — | — | | | 2/7/2019 | 40,673 | — | — | $81.05 | 2/7/2029(2) | — | — | — | — | | | 2/6/2020 | 51,441 | 2,237 | — | $102.90 | 2/6/2030(2) | 2,126 | $280,122 | — | — | | | 2/8/2021 | 34,743 | 14,306 | — | $117.63 | 2/8/2031(2) | 3,720 | $490,147 | — | — | | | 1/31/2022 | 21,994 | 39,277 | — | $79.02 | 1/31/2032(2) | 8,306 | $1,094,399 | 9,112(4) | $1,200,597 | | | 2/13/2023 | 10,944 | 41,588 | — | $103.52 | 2/13/2033(2) | 8,453 | $1,113,767 | — | — | | | 5/19/2023 | — | — | — | — | | — | — | 13,290(5) | $1,751,090 |
Outstanding Equity Awards Table
(1)Vests monthly over four years, subject to an initial one-year “cliff.” (2)Vests monthly over four years. (3)Vests annually over four years. (4)Consists of PRSUs. Represents the target number of shares that may be earned under the PRSUs granted to NEOs in 2022 under the Company’s 2020 Plan. The PRSUs will vest on the date, or dates, that the Committee determines achievement of two underlying performance metrics, each of which must occur by December 31, 2024. Such metrics relate to the advancement of certain clinical programs which we believe will drive stockholder value within the 36-month performance period commencing on January 1, 2022 and ending on December 31, 2024. The actual number of units subject to the PRSUs will be determined based on the level of achievement of such metrics, with minimum, target and maximum levels specified. (5)Consists of PRSUs. Represents the target number of shares that may be earned under the PRSUs granted to NEOs in 2023 under the Company’s 2020 Plan. The PRSUs will vest on the date, or dates, that the Committee determines achievement of two underlying performance metrics, each of which must occur by December 31, 2025. Such metrics relate to regulatory milestones and the advancement of certain clinical programs which we believe will drive stockholder value within the 36-month performance period commencing on January 1, 2023 and ending on December 31, 2025. The actual number of units subject to the PRSUs will be determined based on the level of achievement of such metrics, with minimum, target and maximum levels specified. Option Exercises and Stock Vested During the Year. The following table sets forth the options exercised and stock awards that vested during 2023 along with their respective values at December 31, 2023 for the NEOs:
Option Exercises and Stock Vested Table
Option Exercises and Stock Vested Table
Option Exercises and Stock Vested Table
| | Option Awards (1) | | Stock Awards (2) | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) (3) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (4) | | Kevin C. Gorman, Ph.D. | — | — | 77,989 | $8,222,913 | | Matthew C. Abernethy | — | — | 38,930 | $4,081,420 | | Kyle W. Gano, Ph.D. | — | — | 39,256 | $4,119,477 | | Jude Onyia, Ph.D. | — | — | 19,293 | $2,075,033 | | Eiry W. Roberts, M.D. | 100,000 | 4,151,021 | 40,212 | $4,225,625 |
Option Exercises and Stock Vested Table
(1) Information relates to stock option exercises during 2023. (2) Information relates to RSUs and PRSUs that vested during 2023. (3) Calculated by multiplying the number of shares acquired upon exercise of stock options by the difference between the exercise price and the market price of the Company’s common stock at the time of exercise. (4) Calculated by multiplying the number of shares acquired upon vesting of RSUs and PRSUs by the average price of shares sold for purposes of satisfying federal and state income tax liabilities. Potential Payments Upon Termination or Change-in-Control. The following tables set forth the potential severance benefits payable to the NEOs in the event of a termination prior to or following a change in control, assuming such event occurred on December 31, 2023:
Potential Payment Upon Termination Table*
Potential Payment Upon Termination Table*
Potential Payment Upon Termination Table*
| Name | Salary (1) | Bonus (2) | Accrued Compensation (3) | Stock Awards (4) | Medical (5) | Total | | Kevin C. Gorman, Ph.D. | $1,182,500 | $1,182,500 | $136,443 | $8,801,736 | $55,305 | $11,358,484 | | Matthew C. Abernethy | $646,061 | $323,031 | $93,183 | $2,796,723 | $34,992 | $3,893,990 | | Kyle W. Gano, Ph.D. | $602,912 | $301,456 | $86,958 | $3,135,805 | $33,156 | $4,160,287 | | Jude Onyia, Ph.D. | $638,250 | $319,125 | $76,713 | $2,947,024 | $37,380 | $4,018,492 | | Eiry W. Roberts, M.D. | $660,348 | $330,174 | $79,395 | $2,771,321 | $42,456 | $3,883,694 |
Potential Payment Upon Termination Table*
* Reflects a termination without cause or due to a constructive termination, or deemed termination, prior to a change in control. (1)Based on salary as of December 31, 2023. (2)Based on bonus targets established by the Board of Directors for 2023. (3)Accrued compensation is comprised of vacation pay earned and unpaid as of December 31, 2023. (4)The amounts in this column represent the intrinsic value of ‘in-the money’ unvested options and RSUs as of December 31, 2023 that would vest in accordance with the executive officers’ employment agreements. Values were derived using the closing price of the Company’s common stock on December 29, 2023 of $131.76. (5)Medical is comprised primarily of health insurance premiums for the period specified in each executive officer’s employment contract.
Potential Payment Upon Change-in-Control Table*
| Name | Salary (1) | Bonus (2) | Accrued Compensation (3) | Stock Awards (4) | Medical (5) | Total (6) | | Kevin C. Gorman, Ph.D. | $1,892,000 | $1,892,000 | $136,443 | $24,462,209 | $88,488 | $28,471,140 | | Matthew C. Abernethy | $969,092 | $484,546 | $93,183 | $8,501,775 | $52,488 | $10,101,084 | | Kyle W. Gano, Ph.D. | $904,368 | $452,184 | $86,958 | $9,160,926 | $49,734 | $10,654,170 | | Jude Onyia, Ph.D. | $957,375 | $478,688 | $76,713 | $10,389,185 | $56,070 | $11,958,031 | | Eiry W. Roberts, M.D. | $990,522 | $495,261 | $79,395 | $9,442,741 | $63,684 | $11,071,603 |
Potential Payment Upon Termination by Disability Table*
Potential Payment Upon Termination by Disability Table*
Potential Payment Upon Termination by Disability Table*
| Name | Salary (1) | Bonus (2) | Accrued Compensation (3) | Stock Awards (4) | Medical (5) | Total | | Kevin C. Gorman, Ph.D. | $1,182,500 | $1,182,500 | $136,443 | $8,801,736 | $55,305 | $11,358,484 | | Matthew C. Abernethy | $646,061 | $323,031 | $93,183 | $2,796,723 | $34,992 | $3,893,990 | | Kyle W. Gano, Ph.D. | $602,912 | $301,456 | $86,958 | $3,135,805 | $33,156 | $4,160,287 | | Jude Onyia, Ph.D. | $638,250 | $319,125 | $76,713 | $2,947,024 | $37,380 | $4,018,492 | | Eiry W. Roberts, M.D. | $660,348 | $330,174 | $79,395 | $2,771,321 | $42,456 | $3,883,694 |
Potential Payment Upon Termination by Disability Table*
* Reflects a termination due to disability. (1)Based on salary as of December 31, 2023. (2)Based on bonus targets established by the Board of Directors for 2023. (3)Accrued compensation is comprised of vacation pay earned and unpaid as of December 31, 2023. (4)The amounts in this column represent the intrinsic value of ‘in-the money’ unvested options and RSUs as of December 31, 2023 that would vest in accordance with the executive officers’ employment agreements. Values were derived using the closing price of the Company’s common stock on December 29, 2023 of $131.76. (5)Medical is comprised primarily of health insurance premiums for the period specified in each executive officer’s employment contract.
Potential Payment Upon Termination by Death Table*
Potential Payment Upon Termination by Death Table*
Potential Payment Upon Termination by Death Table*
| Name | Bonus (1) | Accrued Compensation (2) | Stock Awards (3) | Total | | Kevin C. Gorman, Ph.D. | $946,000 | $136,443 | $8,801,736 | $9,884,179 | | Matthew C. Abernethy | $323,031 | $93,183 | $2,796,723 | $3,212,937 | | Kyle W. Gano, Ph.D. | $301,456 | $86,958 | $3,135,805 | $3,524,219 | | Jude Onyia, Ph.D. | $319,125 | $76,713 | $2,947,024 | $3,342,862 | | Eiry W. Roberts, M.D. | $330,174 | $79,395 | $2,771,321 | $3,180,890 |
Potential Payment Upon Termination by Death Table*
* Reflects a termination due to death. (1)Based on bonus targets established by the Board of Directors for 2023. (3)The amounts in this column represent the intrinsic value of ‘in-the money’ unvested options and RSUs as of December 31, 2023 that would vest in accordance with the executive officers’ employment agreements. Values were derived using the closing price of the Company’s common stock on December 29, 2023 of $131.76. The following is a description of the arrangements under which the NEOs may be entitled to potential payments upon a termination without cause or resignation due to a constructive termination (including following a change-in-control) or upon disability or death. Resignation due to constructive termination may include an executive’s resignation following one or more of the following material adverse changes in the nature of such executive’s employment, as specified in the agreement, which is not cured following notification: • a significant reduction in the executive or the executive supervisor’s duties or responsibilities, • a material reduction in base salary, • material relocation, or • material breach of the executive’s employment agreement. Dr. Gorman is entitled to 1.25 times the amount of his annual base salary and target annual bonus to be paid equally over 15 months, an acceleration of unvested shares that would have vested over the 15 continuous months after the date of termination, and payment of COBRA benefits to continue then-current coverage for a period of 15 months following termination in the event that the Company terminates his employment without cause, or he resigns due to a constructive termination. In the event of such termination within six months after the consummation of a change in control, Dr. Gorman is entitled to 2 times the amount of his annual base salary and annual target bonus to be paid in one lump sum, a cash amount equal to the value of all unvested stock awards and all vested and outstanding stock awards, and payment of COBRA benefits to continue then-current coverage for a period of 24 months following termination. In addition, the Company has agreed to reimburse Dr. Gorman for the increase in federal and state income taxes payable by him by reason of the benefits provided in connection with such a termination in connection with a change in control if the total payment exceeds 2.99 times his base amount by more than 15%. In the event of termination due to disability, Dr. Gorman is entitled to 15 months of base salary paid semi-monthly over 15 months, a lump sum amount equal to his target annual bonus multiplied by a fraction the numerator of which is the number of full months of employment by Dr. Gorman in the fiscal year and the denominator of which is 12, an acceleration of unvested shares that would have vested over the 15 continuous months after the date of termination, and payment of COBRA benefits to continue then-current coverage for a period of 15 months following termination. In the event of a termination due to Dr. Gorman’s death, his beneficiaries or estate, would be entitled to an acceleration of unvested shares that would have vested over the 15 continuous months after the date of termination, a lump sum amount equal to his target annual bonus multiplied by a fraction the numerator of which is the number of full months of employment by Dr. Gorman in the fiscal year and the denominator of which is 12 and any accrued and unpaid compensation on the date of termination. Mr. Abernethy is entitled to 1.0 times the amount of his annual base salary and target annual bonus to be paid equally over 12 months, an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination, and payment of COBRA benefits to continue then-current coverage for a period of 12 months following termination in the event that the Company terminates his employment without cause, or he resigns due to a constructive termination. In the event of such termination within six months after the consummation of a change in control, Mr. Abernethy is entitled to 1.5 times the amount of his annual base salary and annual target bonus to be paid in one lump sum, a cash amount equal to the value of all unvested stock awards and all vested and outstanding stock awards, and payment of COBRA benefits to continue then-current coverage for a period of 18 months following termination; provided, however, in the event such payment to Mr. Abernethy after a change in control is subject to a “best-after-tax” provision. The best-after-tax provision provides that if the change in control payment due to Mr. Abernethy would be subject to the excise tax provisions of Section 280G of the Internal Revenue Code, the Company may reduce the change in control payments to Mr. Abernethy if, after all applicable taxes, the final payments would be larger than if the change in control payments were not reduced and therefor subject to an excise tax. In the event of termination due to disability, Mr. Abernethy is entitled to 12 months of base salary paid semi-monthly over 12 months, a lump sum amount equal to his target annual bonus multiplied by a fraction the numerator of which is the number of full months of employment by Mr. Abernethy in the fiscal year and the denominator of which is 12, an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination, and payment of COBRA benefits to continue then-current coverage for a period of 12 months following termination. In the event of a termination due to Mr. Abernethy’s death, his beneficiaries or estate, would be entitled to an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination, a lump sum amount equal to his target annual bonus multiplied by a fraction the numerator of which is the number of full months of employment by Mr. Abernethy in the fiscal year and the denominator of which is 12 and any accrued and unpaid compensation on the date of termination.
Potential Payment Upon Termination by Death Table*
Dr. Gano is entitled to 1.0 times the amount of his annual base salary and target annual bonus to be paid equally over 12 months, an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination, and payment of COBRA benefits to continue then-current coverage for a period of 12 months following termination in the event that the Company terminates his employment without cause, or he resigns due to a constructive termination. In the event of such termination within six months after the consummation of a change in control, Dr. Gano is entitled to 1.5 times the amount of his annual base salary and annual target bonus to be paid in one lump sum, a cash amount equal to the value of all unvested stock awards and all vested and outstanding stock awards, and payment of COBRA benefits to continue then-current coverage for a period of 18 months following termination; provided, however, in the event such payment to Dr. Gano after a change in control is subject to a “best-after-tax” provision. The best-after-tax provision provides that if the change in control payment due to Dr. Gano would be subject to the excise tax provisions of Section 280G of the Internal Revenue Code, the Company may reduce the change in control payments to Dr. Gano if, after all applicable taxes, the final payments would be larger than if the change in control payments were not reduced and therefor subject to an excise tax. In the event of termination due to disability, Dr. Gano is entitled to 12 months of base salary paid semi-monthly over 12 months, a lump sum amount equal to his target annual bonus multiplied by a fraction the numerator of which is the number of full months of employment by Dr. Gano in the fiscal year and the denominator of which is 12, an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination, and payment of COBRA benefits to continue then-current coverage for a period of 12 months following termination. In the event of a termination due to Dr. Gano’s death, his beneficiaries or estate, would be entitled to an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination, a lump sum amount equal to his target annual bonus multiplied by a fraction the numerator of which is the number of full months of employment by Dr. Gano in the fiscal year and the denominator of which is 12 and any accrued and unpaid compensation on the date of termination. Dr. Onyia is entitled to 1.0 times the amount of his annual base salary and target annual bonus to be paid equally over 12 months, an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination, and payment of COBRA benefits to continue then-current coverage for a period of 12 months following termination in the event that the Company terminates his employment without cause, or he resigns due to a constructive termination. In the event of such termination within six months after the consummation of a change in control, Dr. Onyia is entitled to 1.5 times the amount of his annual base salary and annual target bonus to be paid in one lump sum, a cash amount equal to the value of all unvested stock awards and all vested and outstanding stock awards, and payment of COBRA benefits to continue then-current coverage for a period of 18 months following termination; provided, however, in the event such payment to Dr. Onyia after a change in control is subject to a “best-after-tax” provision. The best-after-tax provision provides that if the change in control payment due to Dr. Onyia would be subject to the excise tax provisions of Section 280G of the Internal Revenue Code, the Company may reduce the change in control payments to Dr. Onyia if, after all applicable taxes, the final payments would be larger than if the change in control payments were not reduced and therefor subject to an excise tax. In the event of termination due to disability, Dr. Onyia is entitled to 12 months of base salary paid semi-monthly over 12 months, a lump sum amount equal to his target annual bonus multiplied by a fraction the numerator of which is the number of full months of employment by Dr. Onyia in the fiscal year and the denominator of which is 12, an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination, and payment of COBRA benefits to continue then-current coverage for a period of 12 months following termination. In the event of a termination due to Dr. Onyia’s death, his beneficiaries or estate, would be entitled to an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination, a lump sum amount equal to his target annual bonus multiplied by a fraction the numerator of which is the number of full months of employment by Dr. Onyia in the fiscal year and the denominator of which is 12 and any accrued and unpaid compensation on the date of termination. Dr. Roberts is entitled to 1.0 times the amount of her annual base salary and target annual bonus to be paid equally over 12 months, an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination, and payment of COBRA benefits to continue then-current coverage for a period of 12 months following termination in the event that the Company terminates her employment without cause, or she resigns due to a constructive termination. In the event of such termination within six months after the consummation of a change in control, Dr. Roberts is entitled to 1.5 times the amount of her annual base salary and annual target bonus to be paid in one lump sum, a cash amount equal to the value of all unvested stock awards and all vested and outstanding stock awards, and payment of COBRA benefits to continue then-current coverage for a period of 18 months following termination; provided, however, in the event such payment to Dr. Roberts after a change in control is subject to a “best-after-tax” provision. The best-after-tax provision provides that if the change in control payment due to Dr. Roberts would be subject to the excise tax provisions of Section 280G of the Internal Revenue Code, the Company may reduce the change in control payments to Dr. Roberts if, after all applicable taxes, the final payments would be larger than if the change in control payments were not reduced and therefor subject to an excise tax. In the event of termination due to disability, Dr. Roberts is entitled to 12 months of base salary paid semi-monthly over 12 months, a lump sum amount equal to her target annual bonus multiplied by a fraction the numerator of which is the number of full months of employment by Dr. Roberts in the fiscal year and the denominator of which is 12, an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination, and payment of COBRA benefits to continue then-current coverage for a period of 12 months following termination. In the event of a termination due to Dr. Roberts’s death, her beneficiaries or estate, would be entitled to an acceleration of unvested shares that would have vested over the 12 continuous months after the date of termination, a lump sum amount equal to her target annual bonus multiplied by a fraction the numerator of which is the number of full months of employment by Dr. Roberts in the fiscal year and the denominator of which is 12 and any accrued and unpaid compensation on the date of termination.
CEO PAY RATIO
CEO PAY RATIO Under SEC rules, we are required to calculate and disclose the annual total compensation of our median employee, as well as the ratio of the annual total compensation of our median employee as compared to the annual total compensation of our CEO, Kevin C. Gorman, Ph.D. (the “CEO Pay Ratio”). To identify our median employee, we used the following methodology: •To determine our total population of employees, we included all full-time and part-time employees as of December 31, 2023. •To identify our median employee from our employee population, we calculated the aggregate amount of each employee’s 2023 base salary (using a reasonable estimate of the hours worked and overtime actually paid during 2023 for hourly employees and actual salary paid for our remaining employees) and bonuses attributable to 2023 performance and the grant date fair value of equity awards granted in fiscal 2023 using the same methodology we use for estimating the value of the equity awards granted to our named executive officers and reported in our Summary Compensation Table. •In making this determination, we annualized the base salary and target bonus compensation of employees who were employed by us for less than the entire fiscal year. After identifying our median employee, we then calculated compensation for such median employee using the same methodology used to calculate compensation for our NEOs as reported in the 2023 Summary Compensation Table. For 2023, the median of the annual total compensation of our employees (other than our CEO) was $269,081 and the annual total compensation of our CEO, as reported in the Summary Compensation Table included in this Proxy Statement, was $15,750,812. Based on this information, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was approximately 58 to 1. The CEO Pay Ratio above represents our reasonable estimate calculated in a manner consistent with SEC rules and applicable guidance. SEC rules and guidance provide significant flexibility in how companies identify the median employee, and each company may use a different methodology and make different assumptions particular to that company. As a result, and as explained by the SEC when it adopted these rules, in considering the pay ratio disclosure, stockholders should keep in mind that the rule was not designed to facilitate comparisons of pay ratios among different companies, even companies within the same industry, but rather to allow stockholders to better understand and assess each particular company’s compensation practices and pay ratio disclosures. Neither the Compensation Committee nor our management used our CEO Pay Ratio measure in making compensation decisions. In addition to the information above, in order to reflect our employee compensation practices, we have also calculated the annual base salary of our median employee while taking only annual base salary into account, as well as the ratio of the base salary of our CEO as compared to the annual base salary of such median employee. In calculating the annual base salary of our median employee, we used the applicable methodology listed above. For fiscal 2023, the median of the annual base salary of our employees (other than our CEO) was $161,926, and the annual base salary of our CEO, as reported in the Summary Compensation Table included in this Proxy Statement, was $946,000. Based on this information, the ratio of the annual base salary of our CEO to the median of the annual base salary of all employees (other than the CEO) was approximately 6 to 1. Neither the Compensation Committee nor our management used this ratio to make compensation decisions.
ITEM 402(v) PAY VERSUS PERFORMANCE
ITEM 402(v) PAY VERSUS PERFORMANCE The disclosure included in this section is prescribed by SEC rules and does not necessarily align with how the Company or the Compensation Committee view the link between the Company’s performance and NEO pay and the Compensation Committee does not utilize CAP (as defined below) as the basis for making compensation decisions. For additional information about our pay-for-performance philosophy and how we align executive compensation with Company performance, refer to the Compensation Discussion and Analysis.
Required Tabular Disclosure of Pay Versus Performance
Required Tabular Disclosure of Pay Versus Performance The following table reports the compensation of our Principal Executive Officer ("PEO") or CEO and the average compensation of the other non-PEO named executive officers ("Non-PEO NEOs") as reported in the Summary Compensation Table for the past four fiscal years, as well as Compensation Actually Paid ("CAP") as calculated under new SEC Pay-Versus-Performance ("PVP") disclosure requirements and certain performance measures required by the rules. The disclosure covers our four most-recent fiscal years, which will expand incrementally over the next year to a rolling five years.
Required Tabular Disclosure of Pay Versus Performance
| | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Year | Summary Compensation Table Total for PEO ($)(1) | Compensation Actually Paid to PEO ($)(2) | Average Summary Compensation Table Total for Non-PEO NEOs ($)(3) | Average Compensation Actually Paid to Non-PEO NEOs ($)(4) | Total Shareholder Return ($)(5) | Peer Group Total Shareholder Return ($)(5) | GAAP Net Income (millions) ($)(6) | Net Product Sales (millions) ($)(7) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | 2023 | $15,750,812 | $12,335,515 | $6,286,290 | $5,262,182 | $122.58 | $118.87 | $249.7 | $1,860.6 | | 2022 | $11,902,527 | $21,886,517 | $5,200,614 | $11,398,982 | $111.46 | $111.66 | $154.5 | $1,440.9 | | 2021 | $14,081,412 | $4,496,176 | $6,429,791 | $3,012,565 | $79.48 | $125.33 | $89.6 | $1,090.1 | | 2020 | $13,880,632 | $8,176,596 | $6,522,476 | $4,030,852 | $89.45 | $126.13 | $407.3 | $994.1 |
Required Tabular Disclosure of Pay Versus Performance
(1)The dollar amounts reported in column (b) are the amounts of total compensation reported for Kevin C. Gorman, Ph.D. (PEO) for each corresponding year in the “Total” column of the Summary Compensation Table. (2)The dollar amounts reported in column (c) represent the amount of CAP for Dr. Gorman, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Dr. Gorman during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Dr. Gorman’s total reported compensation for 2023 to determine the CAP:
Required Tabular Disclosure of Pay Versus Performance
| | 2023 | | Total Compensation for Covered Fiscal Year ("FY") from Summary Compensation Table | $15,750,812 | | Deduct: Amounts Reported in "Stock Awards" & "Option Awards" Columns | 13,700,176 | | Add: Year End Fair Value of Equity Awards Granted During the Covered FY that Remain Outstanding and Unvested as of Last Day of the Covered FY | 9,092,870 | | Add: Change in Fair Value from the end of the Prior FY to the end of the Covered FY | (101,013) | | Add: Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Covered FY | 1,334,539 | | Add: Change in Fair Value as of the Vesting Date of Equity Awards Granted in Prior FY that Vested in the Covered FY | (41,517) | | Add: Fair Value at the End of the Prior FY of Equity Awards that Failed to Meet Vesting Conditions in the Covered FY | — | | Add: Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation | — | | Compensation Actually Paid (as defined by SEC rule) | $12,335,515 |
Required Tabular Disclosure of Pay Versus Performance
(3)The dollar amounts reported in column (d) represent the average of the amounts reported for the Company’s Non-PEO NEOs as a group in the “Total” column of the Summary Compensation Table in each applicable year. The names of each of the Non-PEO NEOs included for purposes of calculating the average amounts in each applicable year are as follows: (i) for 2023, Matthew C. Abernethy, Kyle W. Gano, Ph.D., Jude Onyia, Ph.D., and Eiry W. Roberts, M.D.; (ii) for 2022, Matthew C. Abernethy, Kyle W. Gano, Ph.D., Darin M. Lippoldt, and Eiry W. Roberts, M.D.; (iii) for 2021, Matthew C. Abernethy, Eric Benevich, Jude Onyia, Ph.D., and Eiry W. Roberts, M.D.; (iv) for 2020, Matthew C. Abernethy, Eric Benevich, Kyle W. Gano, Ph.D., and Eiry W. Roberts, M.D. (4)The dollar amounts reported in column (e) represent the average amount of CAP to the Non-PEO NEOs, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the NEOs as a group (excluding Dr. Gorman) during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total reported compensation for the Non-PEO NEOs for each year to determine the CAP, using the same methodology described above in Note 2:
Required Tabular Disclosure of Pay Versus Performance
| | 2023 | | Total Compensation for Covered FY from Summary Compensation Table | $6,286,290 | | Deduct: Amounts Reported in "Stock Awards" & "Option Awards" Columns | 5,187,621 | | Add: Year End Fair Value of Equity Awards Granted During the Covered FY that Remain Outstanding and Unvested as of Last Day of the Covered FY | 4,212,074 | | Add: Change in Fair Value from the end of the Prior FY to the end of the Covered FY | (68,838) | | Add: Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Covered FY | 618,180 | | Add: Change in Fair Value as of the Vesting Date of Equity Awards Granted in Prior FY that Vested in the Covered FY | (597,903) | | Add: Fair Value at the End of the Prior FY of Equity Awards that Failed to Meet Vesting Conditions in the Covered FY | — | | Add: Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation | — | | Compensation Actually Paid (as defined by SEC rule) | $5,262,182 |
Required Tabular Disclosure of Pay Versus Performance
(5)The dollar amounts reflect the cumulative Total Shareholder Return (TSR) of our common stock (column (f)) and the Peer Group (column (g)) for the measurement periods beginning on December 31, 2019 and ending on December 31 of each of 2023, 2022, 2021 and 2020, respectively, calculated in accordance with Item 201(e) of Regulation S-K. “Peer Group” represents the NASDAQ Biotechnology Index, which the Company has identified as its peer group for purposes of Item 402(v) and which is used by the Company for purposes of compliance with Item 201(e) of Regulation S-K. (6)The dollar amounts reported in column (h) represent net income reflected in the Company’s audited financial statements for the applicable fiscal year. (7)As required by Item 402(v) of Regulation S-K, we have determined that Net Product Sales is the Company-Selected Measure. Dollar amounts reported for INGREZZA net product sales, which represent nearly all of the Company's total net product sales, are reflected in the Company's audited financial statements for the applicable fiscal year. The assumptions used in calculating the fair value of the equity awards did not differ in any material respect from the assumptions used to calculate the grant date fair value of the awards as reported in the Summary Compensation Table, except that the fair value calculations of (i) the options granted on or between February 7, 2019 and February 13, 2023 used an estimated term between 1.37 years and 7.04 years in FY 2023, as compared to an estimated term of 6.0 to 6.5 years used to calculate the grant date fair value of such awards, and (ii) the PRSUs assumed payout multipliers at current expectations, which range from 0% to 158% across different grant years and metrics, in each case as compared to the grant date fair value calculations which assumed a payout at target.
Required Disclosure of the Relationship Between Compensation Actually Paid and Financial Performance Measures
Required Disclosure of the Relationship Between Compensation Actually Paid and Financial Performance Measures As required by Item 402(v) of Regulation S-K, we are providing the following graphs to illustrate the relationship between the pay and performance figures that are included in the pay versus performance tabular disclosure above. In addition, the first graph below further illustrates the relationship between Company total shareholder return and that of the Peer Group. As noted above, CAP for purposes of the tabular disclosure and the following graphs were calculated in accordance with SEC rules and do not fully represent the actual final amount of compensation earned by or actually paid to our NEOs during the applicable fiscal years. All information provided above under the “Item 402(v) Pay Versus Performance” heading will not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent the Company specifically incorporates such information by reference.
DIRECTORS COMPENSATION SUMMARY
DIRECTORS COMPENSATION SUMMARY
Non-Employee Director Compensation Philosophy
Non-Employee Director Compensation Philosophy Our non-employee director compensation philosophy is based on the following guiding principles: • Aligning the long-term interests of stockholders and directors; and • Compensating directors appropriately and adequately for their time, effort and experience. The elements of director compensation consist of annual cash retainers and equity awards, as well as customary and usual expense reimbursement in attending Board or committee meetings. In an effort to align the long-term interests of our stockholders and non-employee directors, the mix of cash and equity compensation has historically been, and is currently, weighted more heavily to equity. The Board and the Company’s stockholders have approved certain annual limits on compensation to be paid to the Company’s non-employee directors. Our 2020 Plan provides that the aggregate value of all compensation granted or paid by us to any individual for service as a non-employee director with respect to any period commencing on the date of the annual stockholders meeting for a particular year and ending on the date of the annual stockholders meeting for the next subsequent year (such period, the “annual period”), including awards granted under our 2020 Plan and cash fees paid to such non-employee director, will not exceed $1,250,000 in total value. In addition, the aggregate value of any equity award(s) granted by us to any individual for service as a non-employee director upon or in connection with his or her initial election or appointment to the Board of Directors will not exceed $2,000,000 in total value (such that the aggregate compensation granted or paid by us to any individual for service as a non-employee director with respect to an annual period in which such individual is first appointed or elected to the Board of Directors will not exceed $3,250,000 in total value). For purposes of these limitations, the value of any equity awards is calculated based on the grant date fair value of such awards for financial reporting purposes. The Amended 2020 Plan proposed for approval in Proposal Three of this Proxy Statement contains the same annual limits on non-employee director compensation as the 2020 Plan. Our Compensation Committee regularly assesses, on at least an annual basis, our non-employee director compensation program in consultation with its independent compensation consultant, who provides analysis and input on recent developments, prevailing market practices, and recommends any changes to the program to our Board, who ultimately approves non-employee director compensation. The fiscal 2023 compensation for the Company’s non-employee directors was recommended by the Compensation Committee to the Board following the review of a report from FW Cook, its independent compensation consultant, which contained an analysis of prevailing market practices regarding levels and types of non-employee director compensation, including the non-employee director compensation practices of our peer group, which is described in the “Compensation Discussion and Analysis” section of this Proxy Statement, and a comparative assessment of our non-employee director compensation to such peers and market practices. In fiscal 2023, the Compensation Committee also received a presentation from FW Cook about recent developments and best practices related to non-employee directors to inform its analysis of, and recommendations regarding, non-employee director compensation. In formulating its recommendations to the Board for fiscal 2023, the Compensation Committee did not engage in benchmarking or targeting compensation to a specific level of the peer group data provided by FW Cook, but rather used the peer data as a reference point in making non-employee director compensation recommendations. For 2023, the Compensation Committee determined that each non-employee director may elect to receive the full value of his or her annual award in the form of (i) restricted stock units, (ii) nonstatutory stock options, or (iii) 50% restricted stock units and 50% nonstatutory stock options. It is the Compensation Committee’s view that offering both stock options and restricted stock units provides a total compensation package that enables us to retain and attract highly skilled and qualified non-employee directors. Ultimately, the Board set fiscal 2023 non-employee director compensation in the forms and amounts it determined to be appropriate using its professional experience and judgment, after careful review of the FW Cook analysis and the Compensation Committee’s recommendations. Our director compensation for fiscal 2023 is described below.
Non-Employee Director Compensation for 2023
Non-Employee Director Compensation for 2023 For fiscal 2023, directors who are not employees of the Company earned a $60,000 annual cash retainer. The Company provided the Chair of the Board, William H. Rastetter, an additional $35,000, making his total annual cash retainer $95,000. In addition to the cash compensation set forth above, the Chair of the Audit Committee earned an additional $25,000 annual cash retainer, the Chair of the Compensation Committee earned an additional $20,000 annual cash retainer, and the Chair of the Nominating / Corporate Governance Committee earned an additional $15,000 annual cash retainer. Each other director who was a member of the Audit Committee, the Compensation Committee, the Nominating / Corporate Governance Committee earned an additional annual cash retainer of $12,000, $12,000, and $7,500, respectively, for each Committee on which she or he served. Non-employee directors are also reimbursed for expenses incurred in connection with performing their duties as directors of the Company. For fiscal 2023, on the date of the 2023 Annual Meeting of Stockholders, each continuing non-employee director received an annual equity award with an approximate grant date value of $400,000. Each non-employee director had the ability to elect to receive the full value of his or her annual award in the form of (i) restricted stock units, (ii) nonstatutory stock options, or (iii) 50% restricted stock units and 50% nonstatutory stock options. The restricted stock units granted to non-employee directors vest in full on the one-year anniversary of the date of grant. The options granted to non-employee directors have exercise prices equal to the closing price of the Company’s common stock on the date of the grant, are subject to a ten-year term, and vest in full on the one-year anniversary of the date of grant. Additionally, newly-appointed members of our Board of Directors received an initial equity award with an approximate grant value of $800,000 on their date of appointment. This initial equity award is comprised 100% of nonstatutory stock options, vests monthly over three years, and has a ten-year term. The following table sets forth the compensation earned for the fiscal year ended December 31, 2023 by the directors of the Company named below:
Director Compensation Table
Director Compensation Table
Director Compensation Table
| Name | Fees Earned or Paid in Cash (1) | Option Awards (2) | Stock Awards (3) | Total | | Kevin C. Gorman, Ph.D. (4) | — | — | — | — | | William H. Rastetter, Ph.D. (5) | $95,000 | $400,039 | — | $495,039 | | Gary A. Lyons (6) | $60,000 | $200,043 | $200,067 | $460,110 | | Johanna Mercier (7) | $67,500 | $200,043 | $200,067 | $467,610 | | George J. Morrow (8) | $79,500 | — | $400,039 | $479,539 | | Leslie V. Norwalk (9) | $75,000 | $200,043 | $200,067 | $475,110 | | Christine A. Poon (10) | $13,370 | $800,083 | — | $813,453 | | Richard F. Pops (11) | $92,000 | — | $400,039 | $492,039 | | Shalini Sharp (12) | $97,000 | $200,043 | $200,067 | $497,110 | | Stephen A. Sherwin, M.D. (13) | $79,500 | — | $400,039 | $479,539 |
Director Compensation Table
(1)Amounts in this column reflect compensation earned in 2023. (2)The amounts shown represent the full grant date fair value of option awards granted in 2023 as determined pursuant to ASC 718. The assumptions used to calculate the value of such awards are set forth under Note 9 of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. All option awards were granted on the date of our 2023 annual meeting of stockholders; the grant date fair values of all option awards are based on a per share Black-Scholes value of $46.63 (other than Ms. Poon's initial equity award of nonstaturory stock options, which was granted on July 11, 2023 and for which the Black-Scholes value was $48.86). (3)The amounts shown represent the full grant date fair value of RSU awards granted in 2023 as determined pursuant to ASC 718. (4)During 2023, Dr. Gorman was an employee of the Company, and as such, did not receive any compensation for service on the Board of Directors. As of December 31, 2023, Dr. Gorman had outstanding options to purchase 1,401,274 shares of common stock, and 128,891 outstanding RSUs and PRSUs. (5)As of December 31, 2023, Dr. Rastetter had outstanding options to purchase 147,154 shares of common stock. (6)As of December 31, 2023, Mr. Lyons had outstanding options to purchase 106,365 shares of common stock and 2,100 outstanding RSUs. (7)As of December 31, 2023, Ms. Mercier had outstanding options to purchase 40,027 shares of common stock and 2,100 outstanding RSUs. (8)As of December 31, 2023, Mr. Morrow had outstanding options to purchase 117,075 shares of common stock and 4,199 outstanding RSUs. (9)As of December 31, 2023, Ms. Norwalk had outstanding options to purchase 43,865 shares of common stock and 2,100 outstanding RSUs. (10)As of December 31, 2023, Ms. Poon had outstanding options to purchase 16,375 shares of common stock. (11)As of December 31, 2023, Mr. Pops had outstanding options to purchase 117,075 shares of common stock and 4,199 outstanding RSUs. (12)As of December 31, 2023, Ms. Sharp had outstanding options to purchase 37,847 shares of common stock and 2,100 outstanding RSUs. (13)As of December 31, 2023, Dr. Sherwin had outstanding options to purchase 102,075 shares of common stock and 4,199 outstanding RSUs.
Non-Employee Director Compensation for 2024
Non-Employee Director Compensation for 2024 In 2024, on the recommendation of the Compensation Committee and based on a review of our peer group companies and analysis performed by FW Cook, the Board increased the annual retainer for the Chair of the Nominating / Corporate Governance Committee by $3,000 to a total of $18,000 annually and the annual retainer for other members of the Nominating / Corporate Governance Committee by $1,500 to a total of $9,000 annually. Additionally, in connection with the formation of the Science and Medical Technology Committee in January 2024, the Board approved annual retainers for the Chair and non-chair members of $20,000 and $10,000, respectively. The Board maintained all equity compensation and all other annual cash retainers for non-employee directors at the 2023 levels.