DEF 14A of Anika Therapeutics, Inc.
Filed Jun 11, 2024 · FY20230001193125-24-159219
2023 Executive Total Compensation Mix
2023 Executive Total Compensation Mix The charts below show the annual total direct compensation (actual base salary, grant date fair value of equity incentive compensation granted in 2023, and actual cash bonuses received for the 2023 fiscal year) for our Chief Executive Officer and our other current named executive officers, or NEOs, for 2023. Approximately 83% of our CEO’s and approximately 69% of our other NEOs’ actual 2023 compensation* was variable and at risk, tied to our stock price performance or achievement of rigorous performance objectives that are important to the creation of long-term stockholder value.
2023 Executive Total Compensation Mix
| * Ms. Nunes was promoted to Senior Vice President, Chief Operations Officer in June 2023 and her compensation data is excluded. |
2023 Executive Total Compensation Mix
| Compensation Element | Description | Objectives | | Base salary | • Fixed cash compensation | • Provide appropriate level of fixed compensation based on role, responsibility, performance and competitive market practices | | Cash bonuses | • Annual cash award based on the performance of our company and the individual • Overall cash bonus capped at 150% of the target payout | • Reward the achievement of financial results, organizational development, business and technical development, individual goals and contributions to building long-term stockholder value | | Equity-based grants | • Grants of equity awards, including restricted stock unit awards and stock options, under our equity plan | • Align interests of our executive officers with those of our stockholders in terms of long-term value generation | | | • Includes performance-based and time-vesting equity awards | • Provide executive officers with opportunity to be compensated based on meaningful and continued stock price appreciation over time | | | | • Encourage employee retention through long-term value creation |
2023 Executive Total Compensation Mix
Additional detailed information regarding our compensation philosophy and process and the compensation awarded to our named executive officers in 2023 is included in the Compensation Discussion and Analysis beginning on page 46, the Executive and Director Compensation Tables beginning on page 63, and other related disclosures throughout this Proxy Statement.
2023 Executive Total Compensation Mix
| Board Recommendation: | The Board of Directors recommends a vote “FOR” the approval of NEO compensation for the 2023 fiscal year as set forth in this Proxy Statement. | | Vote Required for Approval: | Affirmative vote of the holders of a majority of the shares of common stock that are voting on the matter. Abstentions and broker non-votes will not be treated as votes cast and will have no impact on the proposal. This vote is not binding on us, but will be given due consideration by the Compensation Committee and the Board. |
2023 Executive Total Compensation Mix
| Proposal 1: Election of Directors |
2023 Executive Total Compensation Mix
Our company is managed under the oversight of the Board of Directors, which is led by an independent chair. The directors utilize their deep experience in business and science, including biotech, pharmaceuticals, and medical devices, as well as their diverse backgrounds to provide management with guidance and oversight in delivering innovative products to meet the needs of clinicians and the patients that they treat, and in executing on our strategy for long-term value creation. The Board sets high standards for management and employees tied to our core values of principled and ethical behavior, and the Board applies those same standards to itself, undertaking regular and rigorous reviews of each committee’s and each director’s performance, both collectively and individually. This is evidenced in our ongoing approach to Board refreshment, having added six of our current nine continuing directors in the past four years. The current mix of longer serving and recently added directors provides an appropriate balance of perspectives as the Board holds management accountable for delivering long-term value and keeping the interests of our stockholders and stakeholders, including clinicians and their patients, employees and business partners, at the center of our priorities. The Board is currently comprised of ten directors and is divided into three classes: Class I, Class II and Class III. Each class of directors serves for a three-year term, with one class of directors being elected by our stockholders at each annual meeting. Sheryl L. Conley, William R. Jellison, Stephen O. Richard and Jeffery S. Thompson serve as Class I Directors, with terms of office expiring at the Annual Meeting. Cheryl R. Blanchard, Ph.D., Joseph H. Capper and Glenn R. Larsen, Ph.D. serve as Class II Directors, with terms of office expiring at the 2025 Annual Meeting. Gary P. Fischetti, John B. Henneman, III and Susan L. N. Vogt serve as Class III Directors, with terms of office expiring at the 2026 Annual Meeting. Ms. Conley, Mr. Jellison and Mr. Richard are the Board’s nominees for election as Class I Directors at the Annual Meeting. Each Class I Director will be elected to hold office until the 2027 Annual Meeting and until a successor is duly elected and qualified. Unless otherwise instructed, the persons named in the accompanying proxy will vote, as permitted by our bylaws, to elect Ms. Conley, Mr. Jellison and Mr. Richard as Class I Directors. The Board has no reason to believe that Ms. Conley, Mr. Jellison or Mr. Richard will be unable or unwilling to serve if elected. William R. Jellison was appointed to our Board in May 2024 in connection with the Cooperation Agreement, or the Cooperation Agreement, with Caligan Partners LP, Caligan Partners Master Fund LP and David Johnson, or collectively with each of their respective affiliates and associates, the Investor Group, dated May 28, 2024. Mr. Jellison filled a newly-created Class I vacancy and he stands for election this year. As part of the Cooperation Agreement, the Investor Group agreed, among other things, (i) to customary standstill provisions until the date that is thirty calendar days prior to the notice deadline under the company’s bylaws for stockholders to submit stockholder nominations for election to the Board at the company’s 2025 annual meeting of stockholders, (ii) to vote its shares in favor of the Board’s slate of directors at the Annual Meeting, and (iii) the Company reimbursed the Investor Group for such reasonable, documented out-of-pocket fees and expenses (including legal expenses) incurred in connection with the subject matter of the Cooperation Agreement, up to $600,000 in the aggregate. There are no other arrangements or understandings between any nominee and any other person pursuant to which the nominee was selected. At the Annual Meeting, the election of a director requires the affirmative vote of a majority of the shares of common stock that are voting in the election of directors, meaning that, to be elected, the shares voted “FOR” a nominee must exceed the number of shares voted “AGAINST” that nominee. Abstentions and broker non-votes will not be treated as votes cast and will have no impact on the proposal. Under our Majority Voting in Uncontested Director Elections Policy, if a director receives a greater number of votes “AGAINST” than “FOR” election, the director must promptly offer the director’s resignation for consideration by the Governance and Nominating Committee. Please see the section captioned “Majority Voting in Uncontested Director Elections Policy” for more details on this policy and its impact on the election of director nominees.
Board Recommendation
Board Recommendation THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF SHERYL L. CONLEY, WILLIAM R. JELLISON AND STEPHEN O. RICHARD, THE DIRECTOR NOMINEES.
Information Regarding Directors
Information Regarding Directors The following table sets forth the name of our current directors and includes the nominees for re-election as directors at the Annual Meeting, together with their ages (as of the record date) and the years in which they became a director.
Information Regarding Directors
| Director Name | Age | Director Since | Term Expires | | Class I Directors | | | | | Sheryl L. Conley | 63 | 2021 | 2024 | | William R. Jellison | 66 | 2024 | 2024 | | Stephen O. Richard | 61 | 2020 | 2024 | | Class II Directors | | | | | Cheryl R. Blanchard, Ph.D. | 59 | 2018 | 2025 | | Joseph H. Capper | 61 | 2024 | 2025 | | Glenn R. Larsen, Ph.D. | 70 | 2015 | 2025 | | Class III Directors | | | | | Gary P. Fischetti | 63 | 2023 | 2026 | | John B. Henneman, III | 62 | 2020 | 2026 | | Susan L. N. Vogt | 70 | 2018 | 2026 |
Information Regarding Directors
| Cheryl R. Blanchard, Ph.D. | | | | Anika Board Service: • Director since August 2018 | | PRESIDENT and CHIEF EXECUTIVE OFFICER | Age: 59 |
Education
Education
Education
| • | Ph.D. and M.S. in Materials Science and Engineering from the University of Texas-Austin |
Education
| • | B.S. in Ceramic Engineering from Alfred University |
Education
| • | Medical Devices/Pharmaceutical Experience, Commercialization/ Marketing Expertise, M&A/Business Development Expertise, Manufacturing Experience, R&D/Innovation Experience, Regulatory Expertise, and International/Global Business Experience – acquired over her career in positions of leadership at multiple companies in the life science industry, where she gained extensive experience in business development, developing and commercializing products, including building from scratch a high-growth $100 million-plus regenerative medicine business while at Zimmer, and regenerative medicine and drug delivery products while at multiple companies in the life science industry |
Education
| • | Public Company Governance/Corporate Responsibility Expertise – obtained through her experience serving on boards of directors, including publicly held medical technology and biopharmaceutical companies |
Education
| • | Dr. Blanchard also brings Human Capital Management Expertise to the Board |
Education
| Joseph H. Capper | | | | Anika Board Service: • Director since May 2024 • Committees: • Capital Allocation | | INDEPENDENT | Age: 61 |
Relevant Skills
Relevant Skills
Relevant Skills
| • | Medical Devices/Pharmaceutical Experience, R&D/Innovation Expertise, Commercialization/Marketing Expertise, M&A/Business Development Expertise, Financial Oversight/Accounting Expertise, Regulatory Expertise, and International/Global Business Experience – gained during his nearly 30 years in the medical device and healthcare industries, including his significant executive leadership experience, global brand management, marketing, sales and product development, operations |
Relevant Skills
| • | Public Company Governance/Corporate Responsibility Expertise – obtained through his significant experience serving on boards of directors, including the board of publicly held companies |
Relevant Skills
| Sheryl L. Conley | | | | Anika Board Service: • Director since October 2021 • Committees: • Audit • Compensation | | INDEPENDENT | Age: 63 |
Relevant Skills
Relevant Skills
Relevant Skills
| • | Medical Devices/Pharmaceutical Experience, Commercialization/Marketing Expertise, M&A/Business Development Expertise, R&D/Innovation Expertise, Financial Oversight/Accounting Expertise, Regulatory Expertise, and International/Global Business Experience – gained during more than 35 years in the orthopedic medical device and healthcare industries, including her significant executive leadership experience running full profit-and-loss business segments, global brand management, marketing, sales, product development, operations, and in global medical device development and commercialization |
Relevant Skills
| • | Manufacturing Expertise – developed while at Zimmer, where she held roles with responsibility for oversight of business divisions that included manufacturing segments |
Relevant Skills
| • | Public Company Governance/Corporate Responsibility Expertise – obtained through her corporate section 16 officer roles at Zimmer, an NYSE public company, in addition to her experience serving on boards of directors, including boards of publicly held medical technology companies, gaining experience serving as a board chair and a chair of a nominating and governance committee |
Relevant Skills
| • | Ms. Conley also brings Human Capital Management Expertise to the Board through her multiple and globally expansive executive leadership roles |
Relevant Skills
| Gary P. Fischetti | | | | Anika Board Service: • Director since April 2023 • Committees: • Capital Allocation • Compensation | | INDEPENDENT | Age: 63 |
Professional Experience
Professional Experience
Professional Experience
| • | Spent 35 years at Johnson & Johnson, a multinational corporation that develops medical devices, pharmaceuticals, and consumer packaged goods, in positions of increasing responsibility, including Company Group Chairman – North American Medical Devices from May 2015 to January 2018, Company Group Chairman – DePuy Synthes North America from January 2014 to June 2015, Company Group Chairman – DePuy Orthopaedic from February 2011 to May 2015, and Worldwide President of DePuy Spine from 2005 to 2011 |
Other Public Company Board Service
Other Public Company Board Service
Other Public Company Board Service
| • | Conformis (NASDAQ: CFMS), a medical technology company focused on advancing orthopedic patient care and creating a world without joint pain, from May 2022 through completion of the acquisition by Restor3d in September 2023 |
Education
Education
Education
| • | M.B.A. from Rutgers University |
Education
| • | B.S.B.A. in Finance from Villanova University |
Relevant Skills
Relevant Skills
Relevant Skills
| • | Medical Devices/Pharmaceutical Experience, Commercialization/Marketing Expertise, M&A/Business Development Expertise, R&D/Innovation Expertise, Financial Oversight/Accounting Expertise, Regulatory Expertise, and International/Global Business Experience – acquired during his 35 years at Johnson & Johnson serving in executive leadership positions for multiple medical device businesses and divisions of the company, with both domestic and worldwide responsibilities, overseeing all aspects of strategic planning, product and business development, and commercial operations, with full P&L responsibility, as well as oversight of sales and marketing initiatives |
Relevant Skills
| • | Public Company Governance/Corporate Responsibility Expertise – obtained through his experience serving on boards of directors, including the board of publicly held medical technology company, Conformis |
Relevant Skills
| John B. Henneman, III | | | | Anika Board Service: • Director since September 2020 • Chair of the Board • Committees: • Compensation (Chair) • Capital Allocation • Governance and Nominating | | INDEPENDENT | Age: 62 |
Relevant Skills
Relevant Skills
Relevant Skills
| • | Medical Devices/Pharmaceutical Experience and M&A/Business Development Expertise – developed during his more than 25 years of senior management experience in the medical technology and biotechnology industries, including at Integra, where he led or executed more than 40 acquisitions and alliances and raised more than $1 billion in debt and equity financing |
Relevant Skills
| • | Financial Oversight/Accounting Expertise – acquired while serving as Executive Vice President and Chief Financial Officer of NewLink Genetics and as Chief Financial Officer of Integra, positions in which he was responsible for overseeing all the financial aspects of the company’s operations |
Relevant Skills
| • | Human Capital Management Expertise and Regulatory Expertise – gained in his role as General Counsel at Integra and his multiple roles as CFO, especially at Integra, where while serving in that role, he had the additional responsibility, at various times, for the company’s regulatory affairs and human resources functions |
Relevant Skills
| • | Public Company Governance/Corporate Responsibility Expertise – obtained through his significant experience serving on boards of directors, including boards of publicly held life science companies |
Relevant Skills
| • | Mr. Henneman also brings International/Global Business Experience to the Board |
Relevant Skills
| William R. Jellison | | | | Anika Board Service: • Director since May 2024 • Committees: • Capital Allocation | | INDEPENDENT | Age: 66 |
Relevant Skills
Relevant Skills
Relevant Skills
| • | Medical Devices/Pharmaceutical Experience, R&D/Innovation Expertise, Commercialization/Marketing Expertise, M&A/Business Development Expertise, Financial Oversight/Accounting Expertise, Regulatory Expertise, and International/Global Business Experience – acquired as a veteran MedTech executive and corporate finance expert, with over 25 years in the medical device and healthcare industries, including his significant executive leadership experience, global brand management, marketing, sales and product development, operations |
Relevant Skills
| • | Public Company Governance/Corporate Responsibility Expertise – obtained through his experience serving on boards of directors |
Relevant Skills
| Glenn R. Larsen, Ph.D. | | | | Anika Board Service: • Director since February 2015 • Committees: • Compensation • Governance and Nominating | | INDEPENDENT | Age: 70 |
Relevant Skills
Relevant Skills
Relevant Skills
| • | Medical Devices/Pharmaceutical Experience, R&D/Innovation Expertise, M&A/Business Development Expertise, Regulatory Expertise, and International/Global Business Experience – acquired during his extensive background in management, product development and business development at multiple companies in the life science industry as well as significant experience in innovative research and product development and commercial development, including leading groups that advanced 15 drugs to clinical development, resulting in 5 commercial approvals |
Relevant Skills
| • | Public Company Governance/Corporate Responsibility – obtained through his service on the Company’s board |
Relevant Skills
| • | Dr. Larsen also brings Manufacturing, Financial Oversight/Accounting and Human Capital Management Expertise to the Board |
Relevant Skills
| Stephen O. Richard | | | | Anika Board Service: • Director since September 2020 • Committees: • Audit (Chair) (Financial Expert) • Capital Allocation (Chair) | | INDEPENDENT | Age: 61 |
Professional Experience
Professional Experience
Professional Experience
| • | Senior Vice President, Chief Risk Officer from May 2019 to present, and Chief Audit Executive from 2016 to present, of Becton, Dickinson and Company, an $18 billion, global medical technology company |
Professional Experience
| • | Various executive positions in the areas of finance, operations and business development of the National Basketball Association from 1998 to 2016, including Senior Vice President, Business Development and Global Operations of NBA Properties, Inc. from 2013 to 2016, Chief Financial Officer of NBA China from 2010 to 2013, and Interim Chief Executive Officer of NBA China from 2010 to 2011 |
Professional Experience
| • | Earlier in his career, Mr. Richard served as, among other positions, Regional Audit Director, U.S. Consumer Businesses at Citigroup Inc., District Manager, Financial Planning and Analysis at AT&T Corporation, and Senior Manager at Deloitte & Touche LLP |
Education
Education
Education
| • | M.B.A. in Finance from Columbia Business School |
Education
| • | B.S. in Accounting from Northeastern University |
Relevant Skills
Relevant Skills
Relevant Skills
| • | Medical Devices/Pharmaceutical Experience and Commercialization/Marketing Expertise – acquired through his senior management roles at Becton, Dickinson and Company and the National Basketball Association |
Relevant Skills
| • | Public Company Governance/Corporate Responsibility Expertise and M&A/Business Development Expertise – gained as Chief Risk Officer of Becton, Dickinson and Company and Senior Vice President, Business Development and Global Operations of NBA Properties; NACD Directorship Certified, having completed examination and continuing recertification requirements through the National Association of Corporate Directors (NACD) |
Relevant Skills
| • | Financial Oversight/Accounting Expertise and International/Global Business Experience – first gained through his education and further developed during his experience serving as Chief Risk Officer and Chief Audit Executive of Becton, Dickinson, Chief Financial Officer and interim Chief Executive Officer of NBA China, and Regional Audit Director, U.S. Consumer Businesses at Citigroup, as well as all prior professional positions and as the Chairman of the Committee on Governance, Risk and Compliance of Financial Executives International, an association of financial executives serving public and private companies |
Relevant Skills
| • | Mr. Richard also brings Human Capital Management Expertise to the Board |
Relevant Skills
| • | Mr. Richard is a Certified Public Accountant with an active license in the State of New Jersey |
Relevant Skills
| Susan L. N. Vogt | | | | Anika Board Service: • Director since October 2018 • Committees: • Audit (Financial Expert) • Governance and Nominating (Chair) | | INDEPENDENT | Age: 70 |
Board Committees
| ☑ | Annually reviewing and recommending to the Board of Directors compensation for non-employee directors |
Executive Summary
| • | Significant Ratio of Incentives are Long-Term Focused to Foster Alignment with Our Stockholders – 2023 equity awards granted to the CEO and other NEOs, except Ms. Nunes who became a named executive officer mid-year, were evenly split between performance-based stock options in the form of premium-priced stock options with an exercise price set at 110% of fair market value on the grant date, and time-vesting restricted stock units. The Compensation Committee believes the structure of the long-term incentives balances retention, the motivation of long-term value creation and the alignment of executive interests with those of our stockholders. |
Executive Summary
| • | Annual Bonuses for 2023 Performance Paid Out Below Target Reflecting Commitment to Pay for Performance – In approving the payout under the 2023 annual bonus program, the Compensation Committee considered financial performance results achieved in 2023, as described above, including revenue growth, strong balance sheet management, adjusted EBITDA growth, our strategic investments in the development and rollout of a growing product portfolio, process and system improvements, and delivering on our commitment to improved employee engagement and culture throughout the organization. As part of its assessment, the Compensation Committee also considered that target performance was not achieved under one Customer and Product metric and one People and Culture metric. On balance, the Compensation Committee approved a corporate bonus payout of 94.5% of target for our NEOs, which it viewed to be aligned with financial and operational results achieved in 2023. Based on the individual performance results, final bonus payouts were 95.6% of target for each of Messrs. Colleran and Levitz, 93.1% of target for Ms. Nunes, and there were no adjustments for Dr. Blanchard. |
Compensation Philosophy
Compensation Philosophy The Compensation Committee oversees our overall compensation program and approves our compensation policies. The overriding goal of our compensation program is to drive long-term high performance and increase stockholder value through our pay programs and corporate culture. As a result, the Compensation Committee incorporates performance into many aspects of our compensation program, including pay levels, incentive payouts, and pay opportunities. Corporate and individual goals are set through our yearly budgeting and strategic planning processes and these goals are ultimately reviewed and approved by the Board of Directors prior to, or at the beginning of, each year. The Compensation Committee, utilizing the structure of our compensation program and, as appropriate, its discretion, implements our executive compensation program to reward our NEOs when their performance meets or exceeds established goals. A significant portion of each NEO’s incentive compensation is weighted towards the management team’s achievement against targeted goals (rather than individual performance), so that if we meet or exceed our goals, the team earns compensation at or above target levels. Conversely, if the team fails to meet the minimum thresholds, they will not be awarded the targeted components of the performance-based compensation. As a general matter, the Compensation Committee uses compensation data from the annual compensation study of competitive peer companies to inform its decisions about overall compensation opportunities and specific compensation elements. Additionally, the Compensation Committee uses multiple reference points when establishing targeted compensation levels, and it does not benchmark specific elements or total compensation to a specific level or percentile relative to peer companies or the broader market. Rather than rely on a specific formula-based model, the Compensation Committee applies judgment and discretion in establishing targeted pay levels, considering not only competitive market data, but also factors such as company, business, and individual performance, scope of responsibility, critical needs and skill sets, leadership potential, and succession planning. The Compensation Committee believes that retaining this discretion gives the Compensation Committee the ability to more accurately reflect factors and individual contributions that cannot be absolutely quantified. The Compensation Committee also considers our primary physical location near Boston, Massachusetts, the high level of competition for highly qualified life sciences employees in that geographic area, and the need to remain competitive with the compensation offered by other life sciences companies to ensure the successful recruitment and retention of top performing executives and employees, all of which have become more challenging in recent years. We have designed our compensation program to:
Compensation Philosophy
| • | Align each NEO’s compensation with the interests of long-term stockholders by tying a significant portion of total compensation opportunity to the value of our stock; |
What We Do
| ☑ | Align a significant portion of NEO compensation with stockholders’ interests through long-term incentives, including historical grants of performance-based awards with exclusively multi-year performance metrics and grants in 2023 of performance-based awards in the form of premium-priced stock options with a 3-year vesting period |
What We Do
| ☑ | Structure our equity grants to the NEOs to be evenly divided between time-vesting and performance-based awards (excepting the equity grants made to Ms. Nunes in March 2023, prior to her appointment as an NEO, which grants were divided 67% time-vesting and 33% performance-based awards) |
What We Do
| ☑ | Balance short-term and long-term incentives |
What We Do
| ☑ | Include minimum vesting requirements for equity awards in our equity incentive plan, subject to certain exceptions |
What We Do
| ☑ | Incorporate double-trigger vesting upon a change in control for all equity awards to NEOs |
What We Do
| ☑ | Cap annual cash bonus payouts at 1.5x target |
What We Do
| ☑ | Utilize an independent compensation consultant annually to assist our assessment of our compensation program |
What We Don’t Do
| ☒ | No guaranteed short-term or long-term incentive awards |
What We Don’t Do
| ☒ | No repricing of stock options or SARs without stockholder approval |
What We Don’t Do
| ☒ | No granting of stock options or SARs with an exercise price less than fair market value on the grant date |
What We Don’t Do
Key Performance Factors In setting the compensation for our NEOs, the Compensation Committee relies primarily on our overall financial performance and an assessment of each individual’s performance and contribution to the achievement of our goals. The Compensation Committee seeks to align the metrics it uses in evaluating our executive compensation with the metrics that we use to evaluate our performance more generally, including those metrics that we publicly disclose. In 2021, to reflect best market practice and preferences of our stockholders, the Compensation Committee began to use premium-priced stock options as a performance-based equity award to further align individual performance with our goals for growth and stockholder value appreciation. This practice was continued in 2023. The Compensation Committee balances corporate goals and objectives, including certain financial metrics, product development, share price performance and individual performance, including, but not limited to, completion of strategic projects/transactions and new product releases, in making decisions on annual cash bonus payments. Additionally, the Compensation Committee considers the recommendations of the Chief Executive Officer in its review with regard to other NEO performance (other than the Chief Executive Officer) and resulting compensation decisions. In 2023, following the determination of the corporate bonus payout at 94.5% of target, to foster alignment with our stockholders, the Compensation Committee determined to apply certain individual performance adjustments to the bonus payouts for the NEOs, resulting in a total bonus payout of 94.5% of target for Dr. Blanchard, 95.6% of target for each of Messrs. Colleran and Levitz, and 93.1% of target for Ms. Nunes. The Committee recognized the commitment and leadership that the NEOs demonstrated throughout the year maintaining a healthy balance sheet with a focus on revenue and adjusted EBITDA, managing our strategic investments in the development and rollout of a growing product portfolio, driving process and system improvements, and delivering on our commitment to improve employee engagement and culture throughout the organization. The Role of Compensation Consultant In addition to corporate and individual performance metrics, the Compensation Committee weighs other quantitative factors, such as general compensation trends, in making compensation decisions. In this regard, the Compensation Committee periodically reviews surveys of executive compensation and information concerning compensation in general and at similarly situated companies. For the 2023 compensation cycle, the Compensation Committee elected to engage a new compensation consultant, Willis Towers Watson, or WTW, in 2022 to provide executive compensation consulting services to the Compensation Committee, to assist the Compensation Committee in selecting an appropriate peer group for compensation comparisons, and to perform an executive compensation review. The Compensation Committee assessed the independence of WTW under the applicable SEC and NASDAQ Listing Rules and concluded that the continued engagement of WTW did not raise any conflicts of interest and did not adversely affect WTW’s independence. In completing its analysis for 2023, the Compensation Committee reviewed competitive data compiled by WTW from a peer group comprised of 17 companies in related businesses at similar stages of development and of similar size in terms of market capitalization and employee population (see Determination of the Compensation Peer Group below). The Compensation Committee also reviewed market data from the 2022 Radford Global Life Sciences Survey, or the Radford Survey, covering public biopharmaceutical and medical device companies. The Compensation Committee uses competitive compensation data from these peer company and industry reviews to inform its decisions about overall compensation opportunities and specific compensation elements. Additionally, the Compensation Committee uses multiple reference points when establishing targeted compensation levels. While the Compensation Committee considers benchmarking data and may factor certain benchmarking data elements into its compensation decisions, it does not generally seek to benchmark specific compensation elements or total compensation to a specific level or percentile relative to the peer companies or the broader United States market. Rather than rely on a specific formula-based model, the Compensation Committee applies its judgment in establishing targeted pay levels, considering not only competitive market data, but also factors such as company, business, and individual performance, scope of responsibility, critical needs and skill sets, leadership potential, and succession planning. The Compensation Committee believes this approach gives the committee the ability to more accurately reflect factors and individual contributions that cannot be absolutely quantified. The Compensation Committee also considers our primary locations near Boston, Massachusetts, the high level of competition for highly qualified life sciences employees in that area, and the need to remain competitive with the compensation offered by other life sciences companies to ensure the successful recruitment and retention of top performing executives and employees. Determination of the Compensation Peer Group With our compensation consultant’s assistance, the Compensation Committee reviews and adjusts our peer group annually to ensure that the industry data we review is relevant to our current and near-term future activities and goals. We believe that the adjustments we made to our 2023 peer group are appropriate to better reflect changes in our Company over time, based on our history of strong financial performance, growing product pipeline, commercial strategies, and our Global Industrial Classification System, or GICS, Code as a Biotechnology company. Given this dynamic, the Compensation Committee determined it was appropriate to blend biotechnology companies with medical device companies in a ratio of approximately 2/3 to 1/3, as we did for 2022. The Compensation Committee adopted the following peer group in November 2022 for use in 2023 compensation decisions:
What We Don’t Do
| Peer Group Companies | | | Biotechnology Companies | Medical Device Companies | | Avid Bioservices, Inc. | Artivion, Inc. | | Collegium Pharmaceutical, Inc. | Atrion Corporation | | Heron Therapeutics, Inc. | AxoGen, Inc. | | Karyopharm Therapeutics, Inc. | Bioventus Inc. | | MacroGenics, Inc. | Orthofix, Inc. | | MiMedx Group, Inc. | SurModics, Inc. | | Organogenesis Holdings Inc. | | | Rigel Pharmaceuticals, Inc. | | | Travere Therapeutics, Inc. | | | Vanda Pharmaceuticals, Inc. | | | Vericel Corporation | |
2023 Compensation Decisions
| • | Discretionary annual cash bonus; and |
2023 Compensation Decisions
| • | Equity-based long-term incentive awards, generally in the form of performance-based stock options and time-based restricted stock units. |
2023 Annualized Base Salary
Annual Cash Bonus The second principal component of our compensation policy for executive officers consists of cash bonuses, which are generally paid to our NEOs to motivate attainment of our near-term goals that are consistent with our long-term strategic plan. Each NEO has a target annual bonus amount established by the Compensation Committee at the beginning of each year that is expressed as a percentage of the NEO’s base salary. In 2023, with the exception of the target for Anne M. Nunes, which changed from 35% to 45% in connection with her June 2023 promotion, these targets were unchanged from the prior year’s targets for individuals in similar positions. The Compensation Committee establishes the target bonus amounts consistent with the compensation philosophy described above, including consideration of market practices, and to provide, in its view, an appropriate balance between fixed (salary) and variable (bonus) cash compensation. The 2023 target bonus amounts for the NEOs were as follows:
2023 Annual Cash Bonus Targets
2023 Annual Cash Bonus Targets
2023 Annual Cash Bonus Targets
| Name | % of Salary | | Amount at Target | | Cheryl R. Blanchard, Ph.D. | 85 | | $617,100 | | Michael L. Levitz | 45 | | $223,200 | | David B. Colleran | 45 | | $211,455 | | Anne M. Nunes | 45 | %(1) | $171,000(2) |
2023 Annual Cash Bonus Targets
| (1) Represents target annual bonus percentage for Ms. Nunes in her role of Senior Vice President, Chief Operations Officer. |
2023 Annual Cash Bonus Targets
| (2) Represents a blended target bonus amount in connection with the promotion of Ms. Nunes in June 2023 to Senior Vice President, Chief Operations Officer. |
2023 Annual Cash Bonus Targets
Actual bonus amounts awarded are not formulaic and depend on the Compensation Committee’s assessment of both our business and individual NEO performance after the completion of each year. The Compensation Committee considers factors such as our financial performance, our overall operational performance, and our contribution to increasing stockholder value to determine an appropriate level of baseline cash bonus compensation for our NEOs. Once the Compensation Committee has established this baseline, it considers the applicable individual performance with respect to individual goals and contribution to overall Company performance to adjust each individual NEO’s cash bonus award. 2023 Annual Cash Bonus Payouts After the completion of the 2023 fiscal year, the Compensation Committee, with the assistance of our Chief Executive Officer, reviewed the performance of the Company, as well as the individual performance of each executive officer (other than the CEO’s own performance). The accomplishments set forth in the Executive Summary section titled “Our Fiscal Year 2023 Business Performance” and below were considered in this review. In 2023, we delivered strong financial results and achieved significant strategic and operational goals as set forth in the section captioned “Our Fiscal Year 2023 Business Performance” above, including among other achievements, the following:
2023 Annual Cash Bonus Targets
| (i) delivered increased revenue for fiscal 2023 of 7% to $166.7 million, including delivering record annual revenues of $102 million in OA Pain Management on global growth of our Monovisc single injection viscosupplement, and continued double-digit international growth of our Cingal next generation non-opioid single injection pain product; |
2023 Annual Cash Bonus Targets
| (ii) completed the launch of the PEEK version of the X-Twist Fixation System, followed by the launch of the X-Twist Biocomposite Fixation System in Q1 2024, and entered into full market release of our new RevoMotion Reverse Shoulder Arthroplasty System; |
2023 Annual Cash Bonus Targets
| (iii) | conducted a Type C meeting with the FDA with ongoing interactions between the Company and the FDA regarding proposed non-clinical next steps toward Cingal U.S. regulatory approval, and took steps to pursue potential commercial partnerships for Cingal in the U.S. and select Asian markets; |
2023 Annual Cash Bonus Targets
| (iv) initiated the limited market release of the Integrity Implant System; and |
2023 Annual Cash Bonus Targets
| (v) fully enrolled the Phase III clinical trial for Hyalofast with a planned modular premarket approval submission with break-through device designation commencing in 2024. |
2023 Annual Cash Bonus Targets
We entered 2024 with a healthy balance sheet having launched meaningful new products, achieved record annual revenue in OA pain management, made considerable progress in addressing the new MDR regulatory requirements in Europe and continued to dedicate our efforts toward driving value creation. On balance, the Compensation Committee determined that while we outperformed on our financial goals and we continued to make strong overall business progress transforming our organization, especially in light of the ongoing impact of macroeconomic volatility and inflationary pressures, and continued disruption of our distributor and supply chain networks during 2023, we did not achieve expected performance levels on certain smaller components of our Customer and Product goals and People and Culture goals. As such, the Compensation Committee determined an initial corporate bonus payout of 94.5% of target appropriately reflected results achieved by the management team in 2023. Final bonus payouts for our NEOs were subject to adjustment based on individual performance achievement against individual goals, which included a range of financial, commercial, regulatory, and employee engagement objectives tailored to each executive’s responsibilities, as well as contributions to overall Company performance. Overall, our NEOs had strong performance during the year and significantly contributed to our business and financial performance results with demonstrated commitment and leadership navigating the macroeconomic uncertainties and accelerating our progress, and the Compensation Committee determined to apply certain incremental additional positive adjustments for the payout for certain individual performances. The bonus targets based on annualized salary and final actual bonus amounts paid are presented in the table below.
2023 Cash Bonus Decisions
2023 Cash Bonus Decisions
2023 Cash Bonus Decisions
| Name | Bonus Target | % Achieved | Bonus Paid | | Cheryl R. Blanchard, Ph.D. | $617,100 | 94.5% | $583,160 | | Michael L. Levitz | $223,200 | 95.6% | $213,368 | | David B. Colleran | $211,455 | 95.6% | $202,183 | | Anne M. Nunes | $171,000 | 93.1% | $159,183 |
2023 Cash Bonus Decisions
Long-Term Equity Incentive Program The third principal component of our compensation policy for executive officers consists of grants under our equity incentive plan, which are generally provided to our NEOs to align their goals and objectives with the interests of our stockholders, to motivate attainment of our long-term strategic vision, and for retention purposes. Under our equity incentive plan, NEOs may be granted stock options or other forms of equity awards, including restricted stock awards and units, performance-based equity awards, and stock appreciation rights. Equity awards typically are approved at regularly scheduled Compensation Committee meetings, generally during the first quarter of each year given the meeting’s proximity to the beginning of the performance period for performance-based awards, and generally granted effective on the third full business day following our announcement of financial and business results for the completed prior fiscal year. The amount and form of equity-based grants each year are determined by the Compensation Committee using the compensation philosophy described above, including the Compensation Committee’s informed judgment, and taking into account our performance, competitive market practices, past and expected individual performance achievements, past and expected contributions to overall Company performance, and the need to attract and retain talented executives in an extremely competitive environment who can drive and implement our transformation, growth and operational excellence strategies. For the last several years, the Compensation Committee has increasingly used performance-based equity awards to align the interests of our NEOs with those of our stockholders. In 2023, our Chief Executive Officer was granted equity awards, the value of which was split approximately evenly between performance-based stock options in the form of premium priced stock options priced at 110% of fair market value on the grant date and time-vesting restricted stock units. Other NEOs, with the exception of Ms. Nunes who was not an executive officer at the time of grant, received a similar split in value as the CEO between time-vesting restricted stock units and performance based time-vesting stock options in the form of the same premium-priced stock options. The value of equity awards granted to Ms. Nunes in 2023 was split approximately 2/3 in time-based vesting restricted stock units and 1/3 in performance based time-vesting stock options in the form of the same premium-priced stock options. The restricted stock units and the premium-priced stock options vest in three equal annual installments beginning one year from the grant date. We believe premium-priced stock options granted with an exercise price of 110% of the fair market value of our common stock on the grant date inherently drive individual and Company performance, while strongly aligning executive interests with stockholder interests by generating stockholder value through increased stock performance over time. For 2023, the Compensation Committee awarded the following balanced mix of time-vesting restricted stock units and premium-priced stock options:
2023 Cash Bonus Decisions
| Name(1) | Time-Vesting RSUs ($ Value)(1) | Premium-Priced Stock Options ($ Value)(1) | | Cheryl R. Blanchard, Ph.D. | $1,829,963 | $1,830,037 | | Michael L. Levitz | $537,500 | $537,500 | | David B. Colleran | $500,000 | $500,000 | | Anne M. Nunes(2) | $301,500 | $148,500 |
2023 Cash Bonus Decisions
| (1) The Committee typically makes value-based annual equity awards to our NEOs in which 50% of the total award value is granted as RSUs and 50% of the total award is granted as performance-based awards in the form of premium-priced stock options. The Committee approved the awards on February 15, 2023, and the awards were granted with an effective date of March 9, 2023. The Company applies a 20-day trailing average stock price to the grant date fair value of the awards to determine the number of shares granted as RSUs and premium-priced stock options on the grant date. As a result, the actual grant date fair value reported in the Summary Compensation Table below is different from the value of the award reported in this table. |
2023 Cash Bonus Decisions
| (2) At the time of this award, Ms. Nunes was still in her role as Vice President, Operations. The mix of time-vesting RSUs and premium-priced stock options granted to Ms. Nunes in 2023 is reflective of the standard mix granted to Vice Presidents at the time of the award. We anticipate aligning the mix of future equity award grants to Ms. Nunes in her current role as Senior Vice President, Chief Operations Officer with the mix of equity awards granted to other NEOs. |
Other Compensation Matters
Other Compensation Matters Employment and Executive Retention Agreements Effective at December 31, 2023 Prior to 2023, we had entered into an employment agreement with Cheryl R. Blanchard (as described below under “Dr. Blanchard’s Employment Agreement”) and executive retention agreements with each of the other NEOs. While the NEOs remain employed at-will, these agreements are intended to provide market-level severance compensation to be competitive with our peer group of comparable companies and to promote retention. We believe that these agreements are fair to the executives and to our stockholders because they provide relatively modest severance in exchange for the restrictive covenants that help protect our Company. These restrictive covenants include standard non-competition, non-solicitation, non-disparagement, and confidentiality restrictions. The agreements are discussed in connection with the “Potential Payments Upon Termination or Change in Control” table below. Each agreement provides for severance benefits that may be triggered by an involuntary termination of employment by us without “cause” or by the executive for “good reason” (as defined in each agreement), or a qualifying termination. The level of severance benefits depends on whether the involuntary termination occurs during or outside of a change in control protected period that runs from three months before until 12 months after a change in control (as defined in each agreement). In addition, the agreements provide for full vesting of outstanding equity awards upon a qualifying termination occurring during the period from three months before until 12 months after a change in control for awards granted after January 29, 2019. Equity awards granted prior to January 29, 2019 will continue to vest in full upon the occurrence of a change in control in accordance with the award terms. Except as described in this paragraph and for certain equity grants made to Dr. Blanchard upon her appointment as our President and Chief Executive Officer, none of the equity grants made to our NEOs provide for accelerated vesting upon termination of their employment by us without “cause” or by the executive for “good reason.” If “golden parachute” excise taxes would be triggered by payments due in connection with termination during a change in control protected period, the agreements provide for a cut-back in the payments to avoid the excise tax, if the cut-back would result in a greater after-tax benefit to the executive. The following summarizes the cash and health benefits (i.e., Company payment of premiums under our health plans) severance provided to the NEOs as of December 31, 2023:
Other Compensation Matters
| Trigger | Type of Severance | CEO | CFO | EVP, GC | SVP, COO | | Termination without cause or with good reason, not in connection with a change in control | Cash severance Health benefits | 18 months’ salary 18 months at active employee rates | 12 months’ salary 12 months at active employee rates | 12 months’ salary 12 months at active employee rates | 6 months’ salary 6 months at active employee rates | | Termination without cause or with good reason, within 3 months before or 12 months after a change in control | Cash severance | 2x the sum of 12 months’ salary plus target bonus | 1.5x the sum of 12 months’ salary plus target bonus | 12 months’ salary plus target bonus | 9 months’ salary plus target bonus | | | Health benefits | 18 months at active employee rates | 18 months at active employee rates | 12 months at active employee rates | 9 months at active employee rates |
Other Compensation Matters
The Compensation Committee, which is comprised entirely of independent directors, is responsible for establishing and implementing our executive compensation philosophy and for ensuring that the total compensation paid to our NEOs and other executives is fair, competitive and motivates high performance. The Compensation Committee is solely responsible for compensation decisions regarding our Chief Executive Officer. When making compensation recommendations for NEOs other than the Chief Executive Officer, the Compensation Committee requests and considers the advice and counsel of the Chief Executive Officer, given her direct day-to-day working relationship with those executives. Taking this feedback into consideration, the Compensation Committee will engage in discussions and make final determinations related to compensation paid to the NEOs. Risk Considerations in Our Compensation Programs The Compensation Committee believes that risks arising from our policies and practices for compensating employees are not reasonably likely to have a material adverse effect on our Company. Deferred Compensation Plan We provide our U.S. based NEOs, as well as other key employees, with an opportunity to defer settlement of restricted stock unit awards granted to them in 2020 and thereafter. Participants may elect to defer up to 100% of their restricted stock unit awards. We implemented this program, and continue to maintain it, to remain competitive with market practices. No deferral elections have been made by NEOs. Compensation Recovery Policy Historically, all awards, amounts or benefits received or outstanding under the equity incentive plan by the NEOs have been subject to clawback, cancellation, recoupment, rescission, payback, reduction or other similar action in accordance with the terms of any clawback or similar policy or any applicable law related to such actions, as may be in effect from time to time. In accordance with the SEC’s adoption of the final “clawback rule,” effective January 27, 2023, requiring public companies to develop and implement a policy to recover excess incentive-based compensation from executive officers if amounts were based on material misstatements in financial reports, the Board adopted a Compensation Recovery Policy, effective November 27, 2023. The Compensation Recovery Policy covers our current and former executive officers, including all of our NEOs. Under the Compensation Recovery Policy, in the event that we are required to prepare a restatement of our previously issued financial statements due to our material noncompliance with any financial reporting requirement under securities laws, we are required to recover (subject to certain limited exceptions described in the Compensation Recovery Policy and permitted under the final clawback rules) any cash and/or equity incentive-based compensation received by any current or former executive officer after the effective date of the Compensation Recovery Policy and in the three years prior to the date we are required to restate our financial statements that is in excess of the amount that would have been received based on the restated financial statements. Prohibition on Hedging, Pledging, and Short Sales Our Insider Trading Policy prohibits the NEOs from hedging or pledging our stock. Stock Retention Guidelines Our stock retention guidelines generally require each NEO to beneficially own certain amounts of our common stock. Generally, these guidelines require the Chief Executive Officer to beneficially own, at a minimum, the number of shares (or vested share equivalents) of common stock having a market value equal to three times the amount of his or her base salary. They require any other NEO to beneficially own, at a minimum, the number of shares (or vested share equivalents) of common stock having a market value equal to the amount of his or her base salary. Any individual initially designated as an executive officer has five years to achieve compliance. Each NEO is currently in compliance or within the five-year grace period. See the section captioned “Director and Executive Officer Stock Retention Guidelines” below for additional information.
Executive and Director Compensation
Executive and Director Compensation
Summary Compensation Table
Summary Compensation Table The following table summarizes the compensation information with respect to our NEOs for the years ended December 31, 2023, 2022 and 2021, respectively.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(3) | All Other Compensation ($)(4) | Total ($) | | Cheryl R. Blanchard, Ph.D. | 2023 | 726,000 | 583,160 | 1,614,708 | 1,509,736 | 26,196 | 4,459,800 | | President and Chief | 2022 | 695,100 | 590,835 | 2,306,779 | 2,323,562 | 24,446 | 5,940,722 | | Executive Officer | 2021 | 668,400 | 568,140 | 1,470,806 | 1,471,831 | 23,431 | 4,202,608 | | Michael L. Levitz | 2023 | 496,000 | 213,380 | 474,262 | 443,420 | 24,756 | 1,651,818 | | EVP, Chief Financial Officer | 2022 | 474,600 | 213,570 | 682,065 | 433,721 | 22,430 | 1,826,386 | | and Treasurer | 2021 | 456,400 | 205,362 | 452,710 | 453,004 | 21,380 | 1,588,856 | | David B. Colleran | 2023 | 469,900 | 202,194 | 441,189 | 412,475 | 24,756 | 1,550,514 | | EVP, General Counsel | 2022 | 449,700 | 202,365 | 588,033 | 399,061 | 12,476 | 1,651,635 | | and Secretary | 2021 | 432,400 | 194,597 | 375,598 | 375,853 | 22,064 | 1,400,513 | | Anne M. Nunes | 2023 | 440,000 | 158,859 | 266,032 | 122,498 | 26,196 | 1,013,585 | | SVP, Chief Operations Officer | | | | | | | |
Summary Compensation Table
| (1) Unless otherwise stated, the amounts in this column represent the annual base salary approved for the executive by the Board of Directors. The base salary for Ms. Nunes represents her annual base salary upon her promotion to Senior Vice President, Chief Operations Officer on June 14, 2023. Prior to her promotion in June 2023, the annual base salary for Ms. Nunes was $401,200. |
Summary Compensation Table
| (2) The amounts in this column represent discretionary cash bonuses earned in the indicated year, but paid in the following year. The bonus for Ms. Nunes is prorated based upon her promotion in June 2023. See the section in the Compensation Discussion and Analysis titled “Annual Cash Bonus” for additional details regarding the cash bonuses earned for 2023. |
Summary Compensation Table
| (3) The amounts in this column reflect the grant date fair value computed with respect to the stock and option awards issued during the indicated year calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC 718ASC Topic 718. See the information appearing in Note 14 to our consolidated financial statements included as part of our Annual Report on Form 10-K for the year ended December 31, 2023 for certain assumptions made in the valuation of stock and option awards. See the section in the Compensation Discussion and Analysis titled “Equity-Based Grants” for additional details regarding the stock and option awards issued in 2023. |
Summary Compensation Table
| (4) Unless otherwise noted, these amounts constitute matching contributions to our Employee Savings and Retirement Plan (401(k) Plan) and group term life insurance premiums. Matching contributions to the 401(k) Plan in the indicated year were $23,100 to each of Dr. Blanchard, Messrs. Levitz and Colleran, and Ms. Nunes. |
Grants of Plan-Based Awards in 2023
Grants of Plan-Based Awards in 2023 The following table sets forth each grant of equity awards under the equity incentive plan made to the NEOs during the year ended December 31, 2023. All such equity awards vest over a three-year period commencing on the first anniversary of the grant date.
Grants of Plan-Based Awards in 2023
| Name | Grant Date | Approval Date | All other stock awards: Number of shares of stock or units (#) | All other option awards: Number of securities underlying options (#) | Exercise or base price of option awards ($/Sh) (1) | Grant date fair value of stock and option awards ($)(2)(3) | | Cheryl R. Blanchard, Ph.D. | March 9, 2023 | February 15, 2023 | 60,004 | | | 1,614,708 | | | March 9, 2023 | February 15, 2023 | | 130,998 | $29.60 | 1,509,736 | | Michael L. Levitz | March 9, 2023 | February 15, 2023 | 17,624 | | | 474,262 | | | March 9, 2023 | February 15, 2023 | | 38,475 | $29.60 | 443,420 | | David B. Colleran | March 9, 2023 | February 15, 2023 | 16,395 | | | 441,189 | | | March 9, 2023 | February 15, 2023 | | 35,790 | $29.60 | 412,475 | | Anne M. Nunes (4) | March 9, 2023 | February 15, 2023 | 9,886 | | | 266,032 | | | March 9, 2023 | February 15, 2023 | | 10,629 | $29.60 | 122,498 |
Grants of Plan-Based Awards in 2023
| (1) The option awards granted to our NEOs in 2023 are premium-priced stock options with an exercise price or base price of each option award equal 110% of the grant date closing stock price, as reported on the NASDAQ stock exchange. |
Grants of Plan-Based Awards in 2023
| (2) This column represents the full grant date fair value of stock options and restricted stock unit awards under ASC 718 granted to each of the NEOs in the fiscal year ended December 31, 2023. Generally, the full grant date fair value is the amount that we will expense in our financial statements over the award’s vesting period. For time-vesting restricted stock units, fair value was calculated using the closing price of our common stock on the grant date. For stock options, the fair value was calculated using the Black-Scholes value on the grant date. See the information appearing in Note 14 to our consolidated financial statements included as part of our Annual Report on Form 10-K for the year ended December 31, 2023 for certain assumptions made in the valuation of these awards. |
Grants of Plan-Based Awards in 2023
| (3) Except as otherwise noted, the Company typically makes value-based annual equity awards to our NEOs in which 50% of the total award value is granted as RSUs and 50% of the total award is granted as performance-based awards in the form of premium-priced stock options. The Company applies a 20-day trailing average stock price to the grant date fair value of the awards to determine the number of shares granted as RSUs and premium-priced stock options on the grant date. Depending on the actual grant date fair value versus the 20-day trailing average as applied to the grant date fair value, the actual value of the award as noted in Footnote 2 above may result in the grant date fair value of the performance-based award being more or less than 50%. |
Grants of Plan-Based Awards in 2023
| (4) Represents annual awards granted to Ms. Nunes prior to her promotion to Senior Vice President, Chief Operations Officer on June 14, 2023. At the time of these awards, Ms. Nunes was still in her role as Vice President, Operations. The mix of time-vesting RSUs and premium-priced stock options granted to Ms. Nunes in 2023 is reflective of the standard mix granted to Vice Presidents at the time of the award. We anticipate aligning the mix of future equity award grants to Ms. Nunes in her current role as Senior Vice President, Chief Operations Officer with the mix of equity awards granted to other NEOs. Ms. Nunes did not receive additional equity in 2023 in connection with her promotion. |
Outstanding Equity Awards at December 31, 2023
Outstanding Equity Awards at December 31, 2023 The following table provides information on the holdings of outstanding stock options and unvested stock awards held by the current NEOs as of December 31, 2023.
Outstanding Equity Awards at December 31, 2023
| | | Option Awards | | | | | Stock Awards | | | Name | Grant Date | Number of securities underlying unexercised options (#) exercisable(1) | Number of securities underlying unexercised options (#) unexercisable(1) | 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 (#)(1) | Market value of shares or units of stock that have not vested ($)(2) | | Cheryl R. Blanchard, Ph.D. | April 26, 2020 | 101,644 | | | 33.40 | 4/26/2030 | 24,575 | 556,870 | | | April 26, 2020 | 139,168(3) | | | 33.40 | 4/26/2030 | | | | | March 9, 2021 | 72,265 | 36,133 | | 37.40(4) | 3/9/2031 | 14,420 | 326,757 | | | March 11, 2022 | 69,607 | 139,214 | | 28.14(4) | 3/11/2032 | 60,119 | 1,362,297 | | | March 9, 2023 | | 130,998 | | 29.60(4) | 3/9/2033 | 60,004 | 1,359,691 | | Michael L. Levitz | August 10, 2020 | 57,145 | | | 34.55 | 8/10/2030 | | | | | March 9, 2021 | 22,242 | 11,121 | | 37.40(4) | 3/9/2031 | 4,438 | 100,565 | | | March 11, 2022 | 12,993 | 25,986 | | 28.14(4) | 3/11/2032 | 17,776 | 402,804 | | | March 9, 2023 | | 38,475 | | 29.60(4) | 3/9/2033 | 17,624 | 399,360 | | David B. Colleran | March 4, 2020 | 35,000 | | | 43.06 | 3/4/2030 | | | | | March 9, 2021 | 18,454 | 9,227 | | 37.40(4) | 3/9/2031 | 3,682 | 83,434 | | | March 11, 2022 | 11,955 | 23,909 | | 28.14(4) | 3/11/2032 | 15,325 | 347,265 | | | March 9, 2023 | | 35,790 | | 29.60(4) | 3/9/2033 | 16,395 | 371,511 | | Anne M. Nunes | October 1, 2021 | 5,760 | 2,880 | | 43.27 | 10/1/2031 | 2,491 | 56,446 | | | October 1, 2021 | 6,150 | 3,075 | | 47.60(4) | 10/1/2031 | | | | | March 11, 2022 | 2,921 | 5,842 | | 28.14(4) | 3/11/2032 | 5,122 | 116,065 | | | March 9, 2023 | | 10,629 | | 29.60(4) | 3/9/2033 | 9,886 | 224,017 |
Outstanding Equity Awards at December 31, 2023
| (1) Vesting of equity awards commences on the first anniversary of the grant date and continues on each subsequent grant date anniversary until the equity award is fully vested, except as otherwise noted below. Except as otherwise noted, equity awards are subject to a three-year vesting period, in each case subject to the holder’s continued employment with us. The expiration date of each option award is ten years after its grant date. |
Outstanding Equity Awards at December 31, 2023
| (2) Based on the closing price of our common stock on the NASDAQ stock exchange on December 29, 2023 of $22.66 per share. |
Outstanding Equity Awards at December 31, 2023
| (3) This amount includes 139,168 performance-based stock options granted in 2020, which vested on December 31, 2022. The performance measurement date and vest date for this award was December 31, 2022. The Compensation Committee reviewed our Total Shareholder Return (as defined in the grant agreement) against the Comparison Group (as defined in the grant agreement), and determined and specified, at the Compensation Committee’s sole discretion, that 133% of the shares granted at Target had been earned by Dr. Blanchard. See the sections in the Compensation Discussion and Analysis titled “Dr. Blanchard’s Employment Agreement” for additional details regarding the option award. |
Outstanding Equity Awards at December 31, 2023
| (4) Represents an exercise price of 110% of the grant date closing stock price, as reported on the NASDAQ stock exchange. |
2023 Option Exercises and Stock Vested
2023 Option Exercises and Stock Vested The following table provides information regarding options exercised and stock awards vested for the NEOs during the year ended December 31, 2023.
2023 Option Exercises and Stock Vested
| | Option Awards | | Stock Awards | | | Name | Number of shares acquired on exercise (#) | Value realized on exercise ($) | Number of shares acquired on vesting (#) | Value realized on vesting ($) | | Cheryl R. Blanchard, Ph.D. | — | — | 69,054 | 1,819,887 | | Michael L. Levitz | — | — | 17,186 | 423,131 | | David B. Colleran | — | — | 13,846 | 378,089 | | Anne M. Nunes | — | — | 5,052 | 113,249 |
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control Our President and Chief Executive Officer, our Chief Financial Officer, and our other NEOs have certain termination or change in control benefits described in the Compensation Discussion and Analysis sections captioned “Other Compensation Matters – Employment and Executive Retention Agreements Effective at December 31, 2023” and “Other Compensation Matters – Dr. Blanchard’s Employment Agreement.” The following table provides estimates of the potential payments and other post-termination benefits these individuals would receive assuming a change in control occurred and/or their employment was terminated as of December 31, 2023:
Potential Payments Upon Termination or Change in Control
| Name | | Termination without cause or for good reason | Termination upon change in control without cause or for good reason (1) | Change in control without termination or death or disability (1) | | Cheryl R. Blanchard, Ph.D. | Salary Continuation | $1,089,000 | $1,452,000 | $— | | | Additional Cash Payment | $— | $1,234,200 | $— | | | Equity Awards Vesting | $— | $3,048,744 | $— | | | Health Care Benefits | $32,636 | $32,636 | $— | | | | $1,121,636 | $5,767,580 | $— | | Michael L. Levitz | Salary Continuation | $496,000 | $744,000 | $— | | | Additional Cash Payment | $— | $502,200 | $— | | | Equity Awards Vesting | $— | $902,729 | $— | | | Health Care Benefits | $21,757 | $32,636 | $— | | | | $517,757 | $2,181,565 | $— | | David B. Colleran | Salary Continuation | $469,900 | $469,900 | $— | | | Additional Cash Payment | $— | $211,455 | $— | | | Equity Awards Vesting | $— | $802,209 | $— | | | Health Care Benefits | $21,757 | $21,757 | $— | | | | $491,657 | $1,505,321 | $— | | Anne M. Nunes | Salary Continuation | $220,000 | $330,000 | $— | | | Additional Cash Payment | $— | $148,500 | $— | | | Equity Awards Vesting | $— | $396,527 | $— | | | Health Care Benefits | $10,879 | $16,318 | $— | | | | $230,879 | $891,345 | $— |
Potential Payments Upon Termination or Change in Control
| (1) Termination for the purposes of this column is limited to termination without cause or termination for good reason within a period three months prior to or twelve months after a change in control. The indicated values for the accelerated vesting of stock options reflect the number of equity award shares that would vest on an accelerated basis, multiplied by the excess, if any, of the $22.66 closing price for our common stock as reported by NASDAQ on December 29, 2023, over the applicable exercise price for each option. This calculation assumes equity awards with an exercise price higher than the closing price of our common stock on December 29, 2023 will not be exercised. |
Pay Versus Performance Disclosure
Pay Versus Performance Disclosure As required by the Dodd-Frank Act and Item 402(v) of Regulation S - K, the Pay versus Performance disclosure that follows provides information about the relationship between Compensation Actually Paid, or CAP, to our Principal Executive Officer, or PEO, and Non-PEO NEOs and certain financial performance measures of the Company. See the Compensation Discussion and Analysis within this Proxy Statement for further information concerning the Company’s variable pay-for-performance philosophy and how the Company aligns executive compensation with Company performance.
Pay Versus Performance Disclosure
| | | | | | | | Value of initial fixed $100 Investment based on: | | | | | | Year | Summary Compensation Table Total for PEO (Blanchard) | Summary Compensation Table Total for Other PEO (Darling) | Compensation Actually Paid to PEO (Blanchard) | Compensation Actually Paid to Other PEO (Darling) | Average Summary Compensation Table Total for non-PEO NEOs | Average Compensation Actually Paid to non-PEO NEOs | Total Shareholder Return | Peer Total Shareholder Return | Net Income ($mm) | | Revenue ($mm) | | | (a) | (b) | (a) | (b) | (c) | (c) | (d) | (d) | | (e) | (e) | | 2023 | $4,459,800 | N/A | $1,870,227 | N/A | $1,405,306 | $877,307 | $44 | $115 | ($ | 83) | $167 | | 2022 | $5,940,722 | N/A | $3,599,763 | N/A | $1,739,011 | $1,406,419 | $57 | $111 | ($ | 15) | $156 | | 2021 | $4,202,608 | N/A | $1,818,313 | N/A | $1,234,846 | $1,051,797 | $69 | $125 | | 4 | $148 | | 2020 | $10,029,434 | $288,753 | $10,513,388 | ($7,088,313) | $1,411,154 | $772,039 | $87 | $126 | ($ | 24) | $130 |
Pay Versus Performance Disclosure
| (a) Dr. Blanchard served as interim CEO for part of 2020 and was appointed President and CEO in April 2020. |
Pay Versus Performance Disclosure
| (b) Mr. Darling , CEO at the beginning of 2020, passed away unexpectedly in January 2020. All of Mr. Darling’s unvested equity was forfeited upon his death. |
Pay Versus Performance Disclosure
| (c) NEOs in 2023 include Messrs. Levitz and Colleran and Ms. Nunes. NEOs in 2022 include Messrs. Levitz and Col le ran, NEOs in 2021 include Messrs. Levitz, Colleran, Thomas Finnerty and James Loerop. Mr. Loerop, the Company’s EVP, Business Development and Strategic Planning, resigned in January 2022. Mr. Finnerty, the Company’s EVP, Human Resources, retired in March 2022. NEOs in 2020 include Messrs. Levitz, Colleran, Finnerty, Loerop and Sylvia Cheung. Ms. Cheung, the Company’s CFO, resigned in August 2020. Mr. Colleran joined the Company as EVP, General Counsel and Secretary in March 2020, and Mr. Levitz joined the Company as EVP, CFO and Treasurer in August 2020. Ms. Nunes joined the Company in September 2021 and was named SVP & Chief Operations Officer in June 2023. |
Pay Versus Performance Disclosure
| (d) Shareholder return based on $100 investment at beginning of 2020; Peer shareholder return based on NASDAQ Biotechnology Index. |
Pay Versus Performance Disclosure
| (e) Net Income and Revenue as reported in company 10-K. |
Pay Versus Performance Disclosure
The following table sets forth a reconciliation from the summary compensation table (SCT) to compensation actually paid (CAP) to our PEO and to our average non-PEO NEO each year.
Pay Versus Performance Disclosure
| | PEO (Blanchard) | | | | | | | | PEO (Darling) | Average NEO | | | | | | | | | | 2023 | | 2022 | | 2021 | | 2020 | | 2020 | 2023 | | 2022 | | 2021 | | 2020 | | | SCT Total Compensation | | 4,459,800 | | 5,940,722 | | 4,202,608 | | 10,029,434 | $288,753 | | 1,405,306 | | 1,739,011 | | 1,234,846 | | 1,411,154 | | SUBTRACT Grant Fair Value of Equity Awards Made During Current Year (a) | ($ | 3,124,444) | ($ | 4,630,341) | ($ | 2,942,637) | ($ | 8,994,889) | $0 | ($ | 719,959) | ($ | 1,051,440) | ($ | 658,333) | ($ | 962,952) | | ADD Year End Fair Value of Equity Awards Made During Current Year (b) | | 2,457,454 | | 5,294,178 | | 3,254,974 | | 9,337,528 | $0 | | 568,766 | | 1,205,238 | | 728,209 | | 668,806 |
Pay Versus Performance Disclosure
| | PEO (Blanchard) | | | | | | | PEO (Darling) | | Average NEO | | | | | | | | | | 2023 | | 2022 | | 2021 | | 2020 | 2020 | | 2023 | | 2022 | | 2021 | | 2020 | | | ADD Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards (c) | ($ | 1,421,814) | ($ | 1,016,462) | ($ | 2,470,476) | $0 | | 0 | ($ | 252,244) | ($ | 274,828) | ($ | 189,171) | ($ | 64,142) | | ADD Change in Fair Value of Equity Awards Granted in Prior Years that Vested in Current Year (d) | ($ | 500,768) | ($ | 1,988,334) | ($ | 226,155) | $0 | ($ | 18,351) | ($ | 124,563) | ($ | 211,562) | ($ | 63,754) | ($ | 83,186) | | ADD Fair Value at Vesting of Equity Awards Made During Year That Also Vested During Year (e) | | 0 | | 0 | | 0 | $141,315 | | 0 | | 0 | | 0 | | 0 | | 0 | | SUBTRACT Fair Value at the End of the Prior Year of Equity Awards that Were Forfeited During Year (f) | | 0 | | 0 | | 0 | $0 | ($ | 7,358,716) | | 0 | | 0 | | 0 | ($ | 197,641) | | Total Adjustments Related to Equity Awards | ($ | 2,589,573) | ($ | 2,340,959) | ($ | 2,384,295) | $483,954 | ($ | 7,377,066) | ($ | 527,999) | ($ | 332,592) | ($ | 183,048) | ($ | 639,115) | | Compensation Actually Paid Total | | 1,870,227 | | 3,599,763 | | 1,818,313 | $10,513,388 | ($ | 7,088,313) | | 877,307 | | 1,406,419 | | 1,051,797 | | 772,039 |
Pay Versus Performance Disclosure
| (a) Represents the grant date fair value of equity-based awards made during the fiscal year. |
Pay Versus Performance Disclosure
| (b) Represents the year-end fair value of equity awards that were made during the fiscal year. |
Pay Versus Performance Disclosure
| (c) Represents the change in fair value during the fiscal year of equity-based awards granted in prior fiscal years that were still unvested as of year-end. |
Pay Versus Performance Disclosure
| (d) Represents the change in fair value since prior year-end of equity-based awards granted in prior fiscal years that vested during the current fiscal year. |
Pay Versus Performance Disclosure
| (e) Represents the fair value on the vesting date of equity-based awards that vested in the same year as granted. In 2020, Dr. Blanchard received a grant of RSUs for her service as interim Chief Executive Officer between February and April 2020, which RSUs fully vested upon her permanent appointment as President and CEO in April 2020. |
Pay Versus Performance Disclosure
| (f) Represents the prior year-end fair value of equity awards that were forfeited during the year. Mr. Darling passed away unexpectedly in early 2020, and unvested equity awards were forfeited upon his death. Ms. Cheung resigned in August 2020 and all unvested equity awards were forfeited upon her resignation. |
Pay Versus Performance Disclosure
The table below summarizes the option fair values and related assumptions used to calculate NEO CAP for fiscal year 2023.
Pay Versus Performance Disclosure
| Valuation Purpose for PVP | ANIK Stock Price | ANIK Option Exercise Price | Expected Term (years) | Stock Price Volatility | Risk-free Rate | Dividend Yield | Option Fair Value | | Year-end 2022 | $29.60 | $28.14 - $47.60 | 2.29 –4.81 | 49.40% | 4.01% - 4.35% | 0% | $7.37 - $12.57 | | 2023 Vesting | $18.58 -$31.59 | $28.14 - $47.60 | 2.37 –5.01 | 53.9% - 55.5% | 3.81% -4.70% | 0% | $3.84 - $10.30 | | Year-end 2023 | $22.66 | $28.14 - $47.60 | 3.31 –4.66 | 48.20% | 3.87% -3.98% | 0% | $5.08 - $8.38 |
Pay Versus Performance Disclosure
The following table sets forth what we consider to be the most important financial performan ce measures in how CAP was linked to Company performance during 2023.
COMPARISON OF COMPENSATION ACTUALLY PAID TO PERFORMANCE
COMPARISON OF COMPENSATION ACTUALLY PAID TO PERFORMANCE Because Mr. Darling only served as CEO for one month during 2020, the graphs below only reflects Dr. Blanchard as President and CEO for the 2020-2023 period. The chart below shows CAP for each year along with investment values based on total shareholder return for both the Company and the NASDAQ Biotechnology Index. The chart below shows CAP for each year along with Company net income for each year. The chart below shows C AP for each year along with Company revenues for each year.
CEO Pay Ratio
CEO Pay Ratio As required by applicable SEC rules, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Dr. Blanchard, our year-end Chief Executive Officer, or CEO. For 2023, our last completed fiscal year:
CEO Pay Ratio
| • | The median of the annual total compensation of all our employees (other than our CEO) was $109,550; and |
CEO Pay Ratio
| • | The annual total compensation of our CEO, for the purposes of this disclosure, was $4,459,800. |
CEO Pay Ratio
Based on this information, for 2023 the ratio of the annual total compensation of Dr. Blanchard, our year-end Chief Executive Officer, to the median of the annual total compensation of all our employees was 41 to 1. We took the following steps to identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee and our CEO.
CEO Pay Ratio
| 1. | We determined that, as of December 31, 2023, our employee population consisted of 354 individuals. This population consisted of our full-time employees employed with us as of the determination date, excluding our CEO. We then excluded one individual in each of two countries (South Africa and Sweden), resulting in a remaining employee population of 352 individuals. |
CEO Pay Ratio
| 2. | To identify the “median employee” from our employee population, we aggregated for each applicable employee, other than our CEO, (a) annual base salary (or hourly rate multiplied by estimated work schedule, for hourly employees), (b) the bonus amount earned for 2023, which was paid out in early 2024, and (c) the grant date fair value of equity granted in 2023. |
CEO Pay Ratio
| 3. | Once aggregated, we conducted statistical sampling and gathered additional Summary Compensation Table pay elements for a narrow group of employees who were paid within a narrow range around our median consistently applied compensation measure. From this group, we selected an employee who was reasonably representative of the median of our global employee population. |
CEO Pay Ratio
| 4 | For the annual total compensation of our median employee, we identified and calculated the elements of that employee’s compensation for 2023 in accordance with the requirements of Item 402(c)(2)(x), resulting in annual total compensation of $109,550. |
CEO Pay Ratio
The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our internal records and the methodology described above. The SEC rules for identifying the median-compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. Therefore, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Director Compensation
Director Compensation The Board previously adopted a Director Compensation Policy and the Compensation Committee undertakes an annual review of the Director Compensation Policy with input from the Company’s compensation consultant with regard to general compensation trends for director compensation. Each non-employee director receives cash retainers and is eligible for an initial or annual equity award grant, as applicable, with a value and vesting provisions as stated in the Director Compensation Policy. In 2023, the Board revised the Director Compensation Policy with respect to grants beginning in 2024 to (1) reduce the annual equity grant made to each non-employee director from $175,000 to $150,000, and (2) eliminate a standalone initial grant of equity of $350,000 that the Company had historically granted when a new non-employee director joined the Board in favor of a pro-rated portion of the standard annual equity award in the event that the non-employee director joined the Board at a time other than at the Company’s Annual Meeting. Cash Compensation For 2023, each of our non-employee directors was entitled to annual retainers per the following schedule, with such amounts to be prorated based on the actual number of days served if a director’s service to us commenced after January 1, 2023 or ended prior to the end of 2023:
Director Compensation
| Compensation Element | 2023 Cash Compensation | | Board of Directors | | | Board Chair Retainer | $87,500 | | Other Directors Retainer | $50,000 | | Audit Committee | | | Committee Chair Retainer | $20,000 | | Other Committee Members Retainer | $10,000 | | Capital Allocation Committee | | | Committee Chair Retainer | $10,000 | | Other Committee Members Retainer | $5,000 | | Compensation Committee | | | Committee Chair Retainer | $15,000 | | Other Committee Members Retainer | $7,500 | | Governance and Nominating Committee | | | Committee Chair Retainer | $10,000 | | Other Committee Members Retainer | $5,000 |
Director Compensation
Equity Compensation For 2023, the Board of Directors approved a grant of 6,500 restricted stock units to each non-employee director, valued at $174,980 under the Plan, based on the fair market value of our common stock on June 14, 2023, the date of grant for our then-current directors. These restricted stock units granted to each then-current non-employee director in 2023 vest in one installment on the earlier of the date that is immediately prior to the 2024 Annual Meeting or one year from the date of grant. Total Compensation The following table summarizes the compensation earned by non-employee directors in 2023.
Director Compensation
| Name | Fees earned in cash ($) | Stock awards ($) (1) (2) | Total ($) | | Sheryl L. Conley | 67,500 | 174,980 | 242,480 | | Gary P. Fischetti | 46,027(3) | 524,975(4) | 571,002 | | John B. Henneman, III | 74,832 | 174,980 | 249,812 | | Glenn R. Larsen, Ph.D. | 62,500 | 174,980 | 237,480 | | Stephen O. Richard | 74,000 | 174,980 | 248,980 | | Jeffery S. Thompson | 92,502 | 174,980 | 267,482 | | Susan L. N. Vogt | 74,000 | 174,980 | 248,980 |
Director Compensation
| (1) Except as otherwise noted, an amount of 6,500 restricted stock units were awarded to each director on June 14, 2023, based on the closing price of $26.92 per share, which vest on the earlier of the 2024 Annual Meeting or the one year anniversary of the grant date. The amounts in this column reflect the grant date fair value computed with respect to the restricted stock units, made during 2023 in accordance with ASC Topic 718. See the information appearing in Note 14 to our consolidated financial statements included as part of our Annual Report on Form 10-K for the year ended December 31, 2023 for certain assumptions made in the valuation of these restricted stock unit awards. |
Director Compensation
| (2) The aggregate number of shares outstanding underlying stock awards for each director as of December 31, 2023 were: 9,226 for Ms. Conley, 6,500 for each of Dr. Larsen, Messrs. Henneman, Richard and Thompson, and Ms. Vogt, and 19,358 for Mr. Fischetti. No director held outstanding option awards as of December 31, 2023. |
Director Compensation
| (3) Mr. Fischetti’s fees are prorated based on his appointment to the Board on April 13, 2023. |
Director Compensation
| (4) Includes 12,858 restricted stock units awarded to Mr. Fischetti upon his appointment to the Board on April 13, 2023, based on the grant date closing price of $27.22, which vest in three equal annual installments beginning on the first anniversary of the date of grant, and 6,500 restricted stock units awarded per director on June 14, 2023, based on the closing price of $26.92 per share, which vest on the earlier of the 2024 Annual Meeting or the one year anniversary of the grant date. |