DEF 14A of Puma Biotechnology, Inc.
Filed Apr 26, 2024 · FY20230001437749-24-013309
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
Board Structure
Board Structure Under our fourth amended and restated bylaws (“Bylaws”), the number of directors shall be fixed from time to time by resolutions of the directors. Our Board has fixed the size of the Board at eight members, and we have eight current members of the Board. In evaluating the suitability of individual Board candidates and members, the Nominating and Corporate Governance Committee and Board consider many factors including experience, wisdom, integrity, skills (such as understanding of finance and marketing), educational and professional background, diversity of gender, race, geography, ethnicity, culture, background and perspective, and willingness to devote adequate time to Board duties. The Board has actively sought and appointed qualified female candidates and other diverse directors. For more information concerning the director recruitment and nominating process, please see “Nominating and Corporate Governance Committee” below.
Directors and Board Nominees
Directors and Board Nominees Based upon the recommendation of our Nominating and Corporate Governance Committee, our Board has nominated Alan H. Auerbach, Alessandra Cesano, Allison Dorval, Michael P. Miller, Jay M. Moyes, Adrian M. Senderowicz, Brian Stuglik, and Troy E. Wilson for re-election as directors to the Board. If elected, each director will serve a one-year term expiring at the close of our next annual meeting in 2025, and until such director’s successor is elected and qualified, or until such director’s earlier resignation or removal. Each of Messrs. Auerbach, Miller, Moyes, and Stuglik, Ms. Dorval, and Drs. Cesano, Senderowicz and Wilson currently serve on our Board, and each has agreed to serve if re-elected. If any nominee should become unavailable for election prior to the annual meeting (an event that currently is not anticipated by the Board), the proxies will be voted in favor of the election of a substitute nominee or nominees proposed by the Board or, alternatively, the authorized number of directors may be reduced accordingly by the Board. Set forth below is certain information with respect to the nominees as of the record date. Proxies cannot be voted for a greater number of nominees than the eight nominees set forth below.
Directors and Board Nominees
| Name | Age | Director Since | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | Research and Development Committee | | Alan H. Auerbach | 54 | 2011 | | | | | | Alessandra Cesano, M.D., Ph.D. | 63 | 2022 | | | | M | | Allison Dorval | 48 | 2021 | M | | | | | Michael P. Miller | 67 | 2018 | | M | M | | | Jay M. Moyes* | 70 | 2012 | C | M | | | | Adrian M. Senderowicz, M.D. | 60 | 2015 | | | M | C | | Brian Stuglik, R.Ph. | 64 | 2020 | | C | | M | | Troy E. Wilson, Ph.D., J.D. | 55 | 2013 | M | | C | M |
Directors and Board Nominees
| * Lead Independent Director |
Directors and Board Nominees
| “C” | Current Chair |
Directors and Board Nominees
| “M” | Current Member |
Directors and Board Nominees
| The average tenure of our Board is 7.1 years, comprised of two directors with less than three years of experience, two directors with 3-8 years of experience, and three directors with 9-13 years of experience. |
Directors and Board Nominees
Our directors possess a range of diverse skills, backgrounds, experience and viewpoints that we believe are integral to an effective board of directors. The experience matrix below identifies certain of our directors’ experiences, strengths and qualifications by person.
Directors and Board Nominees
| | Auerbach | Cesano | Dorval | Miller | Moyes | Senderowicz | Stuglik | Wilson | | Senior Executive Leadership | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | | Other Public Company Board | ✔ | ✔ | ✔ | ✔ | ✔ | | ✔ | ✔ | | Pharmaceutical/Biotechnology | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | ✔ | | Financial/Accounting or Audit | ✔ | | ✔ | | ✔ | ✔ | ✔ | ✔ | | Commercialization/Sales/Marketing | ✔ | | | ✔ | | ✔ | ✔ | | | Research and Product Development | ✔ | ✔ | | | | ✔ | ✔ | ✔ | | Regulatory or Risk Management | ✔ | ✔ | | | | ✔ | | | | Advanced Education in Science | ✔ | ✔ | | | | ✔ | | ✔ |
Directors and Board Nominees
In compliance with NASDAQ’s Board Diversity Rule, the table below provides certain highlights of the composition of our Board members and nominees. These rules require all Nasdaq listed companies to have, or explain why they do not have, at least two diverse directors, including one who self-identifies as female and one who self-identifies as either an under-represented minority or LGBTQ+. Accordingly, we are in compliance with Nasdaq’s Board diversity requirements.
Directors and Board Nominees
| Board Diversity Matrix (As of April 22, 2024) | | | | Total Number of Directors | 8 | | | | Female | Male | | Part I: Gender Identity | | | | | 2 | 6 | | Part II: Demographic Background | | | | Hispanic or Latinx | — | 1 | | White (not of Hispanic or Latinx origin) | 2 | 5 | | LGBTQ+ | 1 | |
Director Biographical Information
Director Biographical Information The following biographical information is furnished with respect to our current directors who are nominees for re-election at the annual meeting. Alan H. Auerbach. Mr. Auerbach has served as Chairman of our Board and as our President, Chief Executive Officer and Secretary since the Company’s inception in September 2010. Prior to founding the Company, Mr. Auerbach founded Cougar Biotechnology, Inc. (“Cougar”), a biotechnology company, in May 2003 and served as Chief Executive Officer, President and a member of its board of directors until July 2009, when Cougar was acquired by Johnson & Johnson. From July 2009 until January 2010, Mr. Auerbach served as Co-Chairman of the Integration Steering Committee at Cougar (as part of Johnson & Johnson) that provided leadership and oversight for the development and global commercialization of Cougar’s lead drug candidate, abiraterone acetate, for the treatment of advanced prostate cancer. Prior to founding Cougar, from June 1998 to April 2003, Mr. Auerbach was Vice President, Senior Research Analyst at Wells Fargo Securities, where he was responsible for research coverage of small- and middle-capitalization biotechnology companies, with a focus on companies in the field of oncology. Mr. Auerbach served as a director of Radius Health, Inc., a public pharmaceutical company focused on acquiring and developing new therapeutics for the treatment of osteoporosis and other women’s health conditions, from May 2011 to December 2017 and its predecessor entity from October 2010 to May 2011. Mr. Auerbach received a B.S. in Biomedical Engineering from Boston University and an M.S. in Biomedical Engineering from the University of Southern California. Mr. Auerbach was nominated to serve as a director because of his position as our President and Chief Executive Officer and his significant experience as an executive and research analyst in the biotechnology industry. Our employment agreement with Mr. Auerbach dated January 19, 2012 provides that Mr. Auerbach will be nominated for election to our Board if the term of his directorship expires during the term of the employment agreement. The original term of his employment agreement was through September 1, 2014, but is subject to successive automatic one-year renewal terms. Alessandra Cesano, M.D., Ph.D. has been a director since July 2022. Dr. Cesano has been the Chief Medical Officer of ESSA Pharma Inc., a pharmaceutical company developing therapies for the treatment of prostate cancer, since July 2019 and Executive Vice President since 2023. Dr. Cesano has also served as a member of the board of directors of Summit Therapeutics Inc., a public biopharmaceutical oncology company, since November 2022, and a member of the board of directors of Zymeworks, a public, clinical-stage biotechnology company, since February 2024. From July 2015 until June 2019, Dr. Cesano was the Chief Medical Officer of NanoString Inc., a biotechnology company that develops translational research tools, where she focused on the development of translational and diagnostic multi-plexed assays for the characterization and measurement of mechanisms of immune response/resistance. Prior to NanoString, Dr. Cesano was Chief Medical Officer at Cleave Biosciences, Inc., a biopharmaceutical company focusing on protein therapies for the treatment of cancer and neurodegenerative diseases, and before that she served as Chief Medical Officer and Chief Operations Officer at Nodality, Inc., where she built and led the Research & Development group, while providing the overall clinical vision for the organization. Between 1998 and 2008, Dr. Cesano held various management positions at Amgen Inc., Biogen Inc. (formerly Biogen Idec) and SmithKline Beecham Pharmaceuticals, where she helped to advance various oncology drugs through late stage development and FDA approvals. Early in her professional career, she spent 12 years conducting research in tumor immunology, including nine years at the Wistar Institute, an NCI Basic Cancer Center connected with the University of Pennsylvania. Dr. Cesano also holds membership in several professional and scientific societies including ASCO, ESMO, ASH, EHA, AACR and the Society of Immunotherapy of Cancer (“SITC”). In the latter, she has served as co-chair in the SITC Industry Committee and of the SITC Biomarker Working Group, and she currently serves as Associate Editor for the Biomarker section of the Journal for ImmunoTherapy of Cancer, co-chair of the Regulatory Committee, and as the elected At-Large Director of the SITC for the 2020-2023 term. Over her career, she has been an author on over 130 publications. Dr. Cesano received an M.D. summa cum laude, a Board Certification in Oncology and a Ph.D. in Tumor Immunology from the University of Turin. Dr. Cesano was selected as a director because of her extensive background in biotechnology research and development and her experience in the life sciences industry. Allison Dorval. Ms. Dorval has been a director since July 2021. Also in July 2021, Ms. Dorval was appointed to serve on the board of directors of Aerovate Therapeutics, Inc., a public biopharmaceutical company, and has served as the Chief Financial Officer for Verve Therapeutics, Inc. (“Verve”), a public biotechnology company since November 2021. From November 2018 to November 2021, Ms. Dorval served as the Chief Financial Officer of Voyager Therapeutics, Inc. (“Voyager”), a public clinical stage gene therapy company, and as Voyager’s principal financial officer and principal accounting officer. Ms. Dorval joined Voyager as its Vice President of Finance from June 2017 to November 2018. Ms. Dorval is a certified public accountant. Prior to joining Voyager, Ms. Dorval served as Vice President and Controller of Juniper Pharmaceuticals, Inc., a biopharmaceutical company, from August 2016 to June 2017, and as a consultant at Danforth Advisors, a life sciences consultancy focusing on accounting and financial matters, from September 2015 to August 2016. In connection with her role at Danforth, Ms. Dorval served as interim Chief Financial Officer of medical device companies 480 Biomedical, Inc. and Arsenal Medical, Inc. from December 2015 to August 2016. Prior to her time at Danforth, Ms. Dorval served in several roles at Insulet Corporation, a medical device company, from August 2008 to July 2015, including as Chief Financial Officer from November 2014 to May 2015 and as Vice President and Controller from August 2008 to November 2014. Earlier in her career, Ms. Dorval served in various financial and accounting capacities at iBasis, Inc., a telecommunications company; Digitas Inc., an advertising company; and PricewaterhouseCoopers LLP. Ms. Dorval received a B.S. in Business Administration, with a concentration in Accounting, from the University of Vermont and has completed a graduate-level certificate program in Taxation at Bentley University’s McCallum Graduate School of Business. Ms. Dorval was first identified to the Company through an outside search firm, and was subsequently interviewed by Mr. Auerbach and presented to the Nominating and Governance Committee for consideration to be nominated as a director. Ms. Dorval was nominated to serve as a director because of her strong financial background and significant experience in the biopharmaceutical industry.
Director Biographical Information
Michael P. Miller. Mr. Miller has been a director since February 2018. Since 2022, Mr. Miller has served as an advisor to Rigel Pharmaceuticals, a public biotechnology company, Concarlo Therapeutics, a private biotechnology company, and Heathyr, a private diagnostic company. Since January 2022, Mr. Miller has also served on the board of directors for BioXcel, a public biotechnology company. Mr. Miller served as the Executive Vice President U.S. Commercial of Jazz Pharmaceuticals plc, a public biopharmaceutical company from April 2014 until his retirement in September 2020. From April 2010 to January 2014, Mr. Miller was Senior Vice President and Chief Commercial Officer of Vivus, Inc., a public biopharmaceutical company. From 2006 to 2010, Mr. Miller served as Vice President, leading the HER Family Oncology Franchise, of Genentech, Inc., a biotechnology company and wholly owned subsidiary of Roche Holding Ltd. From 2003 to 2005, Mr. Miller served as the Senior Vice President, Chief Commercial Officer of Connetics Corporation, a specialty pharmaceutical company acquired by Stiefel Laboratories, Inc. Previously, from 1997 to 2001, Mr. Miller served as Vice President of the Urology Business Unit of ALZA Corporation, a pharmaceutical company acquired by Johnson & Johnson. Prior to 1997, Mr. Miller served 13 years in various sales and marketing positions at Syntex Corporation, a pharmaceutical company acquired by Roche Holding Ltd. Mr. Miller received a B.S. in Business Administration and Finance from the University of San Francisco and an M.B.A. in Information and Computer Systems from San Francisco State University. Mr. Miller was nominated to serve as a director because of his significant commercialization experience and background in the life sciences industry. Jay M. Moyes. Mr. Moyes has been a director since April 2012. Mr. Moyes has been a member of the board of directors of Biocardia, Inc., a public cardiovascular regenerative medicine company, since January 2011. Mr. Moyes served as the Chief Financial Officer of Sera Prognostics, Inc., a public commercial-stage biotechnology company focused on improving maternal and neonatal health through innovative biomarker approaches, from March 2020 to June 2023. Mr. Moyes previously served as a member of the board of directors of Achieve Life Sciences, Inc., a public specialty pharmaceutical company, from August 2017 to May 2023; Predictive Technology Group, Inc., a public molecular diagnostics and regenerative medicine company, from February 2019 to December 2019; Osiris Therapeutics, Inc., a public bio-surgery company, from May 2006 until December 2017; and Amedica Corporation, a public orthopedic implant company, from November 2012 to August 2014. He served as Chief Financial Officer of Amedica from October 2013 to August 2014. From May 2008 through July 2009, Mr. Moyes served as Chief Financial Officer of XDx (now CareDx), Inc., a privately held molecular diagnostics company. Prior to that, Mr. Moyes served as Chief Financial Officer of Myriad Genetics, Inc., a public healthcare diagnostics company, from June 1996 until November 2007, and as its Vice President of Finance from July 1993 until July 2005. From 1991 to 1993, Mr. Moyes served as Vice President of Finance and Chief Financial Officer of Genmark, Inc., a privately held genetics company. Mr. Moyes held various positions with the accounting firm of KPMG LLP from 1979 through 1991, most recently as a Senior Manager. He holds an M.B.A. from the University of Utah, a B.A. in economics from Weber State University, and is formerly a Certified Public Accountant. Mr. Moyes also served as a member of the Board of Trustees of the Utah Life Science Association from 1999 through 2006. Mr. Moyes was nominated to serve as a director because his extensive background in finance and accounting and his experience in the context of the life sciences industry enable him to make significant contributions to the Board. Adrian M. Senderowicz. Dr. Senderowicz has been a director since August 2015. Dr. Senderowicz has been Senior Advisor of Constellation Pharmaceuticals, Inc., a public clinical-stage biopharmaceutical company focusing on the development of novel tumor-targeted and immuno-oncology therapies, since June 2020 and served as its Senior Vice President and Chief Medical Officer from July 2017 until June 2020. Dr. Senderowicz served as Senior Vice President and Chief Medical Officer of Cerulean Pharma Inc., a public clinical-stage company developing nano-particle conjugates, from September 2015 until June 2017. Dr. Senderowicz served as the Chief Medical Officer and Senior Vice President, Clinical Development and Regulatory Affairs from August 2014 to February 2015, and Clinical and Regulatory Strategy Officer from February 2015 to March 2015 of Ignyta, Inc., a public precision oncology biotechnology company. Prior to joining Ignyta, Dr. Senderowicz was Vice President, Global Regulatory Oncology at Sanofi, a global pharmaceutical company based in France, a position he held from September 2013 to August 2014. Prior to Sanofi, Dr. Senderowicz was Chief Medical Officer and Vice President, Medical Development at Tokai Pharmaceuticals, Inc. from August 2012 to March 2013. From August 2008 to March 2012, Dr. Senderowicz held positions of increasing responsibility, including Senior Medical Director, Oncology Clinical Development, at AstraZeneca, a global biopharmaceutical company. Before his tenure at AstraZeneca, Dr. Senderowicz spent almost four years in a variety of leadership positions at the U.S. Food and Drug Administration Division of Oncology Drug Products in the Center for Drug Evaluation and Research. Prior to his work with the U.S. Food and Drug Administration (“FDA”), Dr. Senderowicz held a variety of clinical and research positions, including Coordinator of the Prostate Cancer Drug Development Clinic and Investigator and Chief, Molecular Therapeutics Unit, with the National Cancer Institute/National Institutes of Health. Dr. Senderowicz holds both an M.D. and an Instructor of Pharmacology degree from the School of Medicine at the Universidad de Buenos Aires in Argentina. Dr. Senderowicz was nominated to serve as a director because of his extensive clinical and regulatory background and his significant experience in the life sciences industry. Brian Stuglik. Mr. Stuglik has been a director since July 2020. Mr. Stuglik has been a member of the board of directors of Verastem, Inc., a public biopharmaceutical company, since September 2017, where he served as Chief Executive Officer from July 2019 to July 2023. Mr. Stuglik also serves as a member of the board of directors of Oncopeptides AB, a public biotechnology company based in Sweden, since May 2018. Since January 2016, Mr. Stuglik has served as consultant and founder of Proventus Health Solutions, a consulting company for pharmaceutical and biotechnology companies, focusing on U.S. and international pharmaceutical development, product strategy, and commercialization. Prior to founding Proventus Health Solutions, Mr. Stuglik served as Vice President and Chief Marketing Officer for the oncology division of Eli Lilly and Company, a global pharmaceutical company, from 2009 to December 2015. Mr. Stuglik received a B.S. in Pharmacy from Purdue University and holds memberships in the American Society of Clinical Oncology, the American Association of Cancer Research, and the International Association for the Study of Lung Cancer. Mr. Stuglik was nominated to serve as a director because of his significant experience and background in the life sciences industry and, in particular, product strategy and commercialization of pharmaceutical therapies.
Director Biographical Information
Troy E. Wilson. Dr. Wilson has been a director since October 2013. Dr. Wilson has been President and Chief Executive Officer and Chairman of the board of directors of Kura Oncology, Inc., a public clinical-stage biopharmaceutical company that discovers and develops personalized therapeutics for the treatment of solid tumors and blood cancers, since August 2014. Dr. Wilson also serves as a member of the board of directors of Avidity Biosciences, a public biotechnology company, since November 2012. He served as President and Chief Executive Officer of Avidity Biosciences, Inc., a public biopharmaceutical company, from November 2012 to February 2019 and as President and Chief Executive Officer of Wellspring Biosciences, Inc., a private biopharmaceutical company, and its parent company Araxes Pharma LLC, a private biopharmaceutical company, from July 2012 to March 2019. Dr. Wilson served as President and Chief Executive Officer and a member of the board of directors of Intellikine, Inc., a private biopharmaceutical company, from April 2007 to January 2012 and from August 2007 to January 2012, respectively. He holds a J.D. from New York University and graduated with a Ph.D. in bioorganic chemistry and a B.A. in biophysics from the University of California, Berkeley. Dr. Wilson was nominated to serve as a director because of his executive leadership experience, his background in finance and accounting and his extensive experience in the life sciences industry. Except as indicated herein with respect to Mr. Auerbach, no arrangements or understandings exist between any director or person nominated for election as a director and any other person pursuant to whom such person is to be selected as a director or nominee for election as a director.
Compensation of Directors
Compensation of Directors Our Board has approved a compensation program for our non-employee directors (the “Director Compensation Program”), which governed their compensation for 2023. The Director Compensation Program is intended to fairly compensate our directors for the time and effort necessary to serve on the Board. Every other year the Compensation Committee engages Compensia to perform an assessment of the Director Compensation Program relative to its then peer group of companies. In early 2023, Compensia provided their assessment to Company management and the Board and no changes were made to our Director Compensation Program following this review. We expect Compensia to provide an assessment of the program in early 2025, at which time we will evaluate whether any changes should be made to our Director Compensation Program going forward.
Director Compensation Program
Director Compensation Program Under the Director Compensation Program, each non-employee director receives an annual cash retainer for service on the Board, and for service on each committee of which the non-employee director is a member, paid in four equal installments at the beginning of each calendar quarter. All cash fees are payable on a pro-rated basis for non-employee directors who are initially elected or appointed in the middle of a calendar quarter. The fees paid to non-employee directors for service on the Board under the Director Compensation Program are as follows:
Director Compensation Program
| Cash Compensation | | | Board Annual Retainer | $50,000 | | Committee Chair Annual Retainer | | | Audit | $20,000 | | Compensation | $15,000 | | Nominating and Corporate Governance | $10,000 | | Research and Development | $15,000 | | Committee Member (Non-Chair) Annual Retainer | | | Audit | $10,000 | | Compensation | $7,500 | | Nominating and Corporate Governance | $5,000 | | Research and Development | $7,500 |
Director Compensation Program
In addition, under the Director Compensation Program, each of our non-employee directors receives an annual RSU award with a value of $300,000 (determined using the trailing 30-calendar day average stock price through and including the grant date) (the “Annual RSU Award”), up to a maximum of 27,000 shares. The 27,000 share limit has resulted in less than $300,000 of equity award value being granted for the past 2 years. The Annual RSU Award is granted automatically on the date of the annual stockholders’ meeting and vests in full on the earlier of the one-year anniversary of the grant date and the date of the annual meeting following the date of grant, subject to the non-employee director’s continued service through the applicable vesting date. Upon initial appointment or election to the Board, under the Director Compensation Program, each new non-employee director receives a stock option to purchase a number of shares of common stock under the 2011 Plan with a value of $700,000 (determined using a Black-Scholes option value based on a trailing 30-calendar day average stock price), up to a maximum of 100,000 shares. The stock options which vest and become exercisable with respect to one-third of the shares on the first anniversary of the grant date, and with respect to an additional 1/36th of the shares on each monthly anniversary thereafter, subject to the non-employee director’s continued service through the applicable vesting date (the “Initial Option Award”). Each Initial Option Award has an exercise price per share of common stock equal to the fair market value on the date of grant. Pursuant to the terms of our 2011 Plan, any compensation payable to our non-employee directors is limited such that the maximum aggregate value of cash compensation and equity-based awards granted to any non-employee director during any calendar year is $1,000,000. The following table sets forth information regarding the compensation earned by our non-employee directors for the year ended December 31, 2023. Mr. Auerbach, who served as our President and Chief Executive Officer during the year ended December 31, 2023, and continues to serve in that capacity, does not receive additional compensation for his service as a director, and therefore is not included in the Director Compensation table below. All compensation paid to Mr. Auerbach is reported in the Summary Compensation Table included under “Executive Compensation.”
Director Compensation Table
Director Compensation Table
Director Compensation Table
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Total ($) | | Alessandra Cesano M.D., Ph.D. | 57,500 | 94,770 | 152,270 | | Allison Dorval | 60,000 | 94,770 | 154,770 | | Michael P. Miller | 68,125 | 94,770 | 162,895 | | Jay M. Moyes | 77,500 | 94,770 | 172,270 | | Adrian M. Senderowicz, M.D. | 70,000 | 94,770 | 164,770 | | Brian Stuglik, R.Ph. | 66,875 | 94,770 | 161,645 | | Troy E. Wilson, Ph.D., J.D. | 77,500 | 94,770 | 172,270 |
Director Compensation Table
| (1) Represents the grant date fair value of 27,000 RSUs granted on June 13, 2023 determined in accordance with Accounting Standards Codification 718, Compensation-Stock Compensation (“ASC 718”). For a discussion of valuation assumptions for RSU awards, see Note 10 to our 2023 Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 and filed on February 29, 2024. The RSUs granted in 2023 had a value that was less than the annual $300,000 grant value as a result of the 27,000 shares cap on the number of shares that could be subject to the award. As of December 31, 2023, each of our non-employee directors, held 27,000 unvested RSUs. As of December 31, 2023, our non-employee directors held the following outstanding vested and unvested stock options: Dr. Cesano – 100,000; Ms. Dorval – 108,721; Mr. Miller – 17,626; Mr. Moyes – 57,604; Dr. Senderowicz – 77,604; Dr. Stuglik – 93,953; Dr. Wilson – 47,604. |
2023 Compensation Highlights
| • | Achievement of 2023 Corporate Performance Goals – Below Target Payout Despite Improved Revenue and Net Income. Our compensation philosophy is designed to align the interests of our executive officers with those of our stockholders by providing pay that is directly linked to the achievement of performance goals established to foster the creation of sustainable long-term stockholder value and year-over-year improvement. As such, the portion of our 2023 short-term incentive compensation program for our Named Executive Officers, which was based on previously established goals related to total revenue (excluding license revenue), cashflow, alisertib clinical trial and alisertib product development, were deemed achieved at 49.0%, 73.2%, 50% and 150% of target for that goal, respectively, which resulted in an overall 71.5% attainment of the corporate performance portion of the annual short-term incentive compensation award opportunity, after weighting, as described further below. The revenue goal was weighted 40%, the net income goal was weighted 30%, and each of the two alisertib goals were weighted 15% each. The revenue and net income threshold goals were set at last year’s actual performance, with at-threshold performance resulting in 0% earned for that goal and linear interpolation to performance at target, which yields 100% payout, and maximum performance, which yields 200% payout, for that goal. Mr. Auerbach’s short-term incentive compensation is based 100% on our corporate performance and thus he was awarded 2023 short-term incentive compensation of 71.5% of target opportunity. For the other Named Executive Officers (other than Mr. Auerbach), after taking into account the Compensation Committee’s assessment of each executive’s individual performance and the performance of the operations for which the executive is responsible, the 2023 short-term incentive compensation awarded to Messrs. Nougues, Hunt and Ludwig and Dr. Wong was 88.25%, 88.25%, 68.25% and 83.25%, respectively, of each executive’s target bonus opportunity, based on individual performance assessed at 105%, 105%, 65%, and 95% of target, respectively. |
2023 Compensation Highlights
| • | Increased 2023 Equity Award Values Based on Company Performance and Market Median. The long-term equity values granted for 2023 reflect the Compensation Committee’s general approach in determining annual equity grant value, wherein the median long-term equity value granted at our peer group for the similar position is modified by the Company’s actual performance under the corporate goals for our just completed prior year’s annual short-term incentive compensation program. Thus, in 2023, the primary factors that impacted the value of long-term equity-based incentive awards granted was our 158.4% performance against corporate goals for 2022 under our annual short-term incentive compensation program and the 50th percentile of the long-term equity values of our 2023 peer group. In approving these increases, the Compensation Committee also reviewed and considered 2023 peer group benchmarking data that reflected the prior year’s equity grant values for our NEOs being significantly below market median, the recommendations of our CEO for an adjustment in grant value for the other NEOs, individual performance by each of the NEOs, and the limitation imposed by the shares available for grant under our 2011 Plan. These additional considerations resulted in 2023 equity grant values for each executive at 149% of peer group median for their position. Under this formula, the total value of the 2023 long-term equity-based incentive award for Mr. Auerbach increased from approximately $790,000 in 2022 to approximately $1.6 million in 2023, which methodology aligns with our pay for performance philosophy. |
2023 Shareholder Engagement
2023 Shareholder Engagement We value the opinions of our stockholders on our executive compensation programs. In evaluating the design of our executive compensation, the Compensation Committee considers stockholder input, which we solicit annually through direct outreach with our large investors and through our annual advisory say-on-pay vote. In 2023, we gathered feedback from our stockholders on topics including our compensation program, board composition, board expertise and diversity and over-boarding. Chief Executive Officer Realized Compensation The graph below illustrates the Summary Compensation Table reported values for Mr. Auerbach’s total compensation for 2022 and 2023 in the Summary Compensation Table and his total direct compensation realized for each year. We believe this graph shows that Mr. Auerbach’s total direct compensation realized is less than the Summary Compensation Table-reported values for 2022 and 2023, and that the compensation reported in the Summary Compensation Table overstates Mr. Auerbach’s compensation. (1) For purposes of this graph, realized value includes Mr. Auerbach’s salary and short-term incentive compensation for the applicable year, as well as benefits and other perquisites, the value of any RSUs that vested, and any stock options exercised in the applicable year. At December 31, 2022 and 2023, all of the outstanding options held by our executive officers were underwater with exercise prices in excess of the closing stock price of our common stock on December 30, 2022 and December 29, 2023 (the last trading days of the applicable calendar year) of $4.23 and $4.33 per share, respectively, except for the option grants to our executives on March 3, 2022 at an exercise price of $2.33 per share.
Compensation Principles and Objectives
| • | Align officer and stockholder interests by providing a portion of total compensation opportunities for senior management in the form of equity awards and short-term incentive compensation awarded based on the Compensation Committee’s review of Company and individual performance; |
Strong Governance and Compensation Practices
| | What We Do | | What We Do Not Do | | ✓ | Multi-Year Vesting. The equity awards granted to our executive officers generally vest over multi-year periods, which we believe is consistent with current market practice, our retention objectives and our pay for performance philosophy. | ✕ | No Guaranteed Compensation. We do not guarantee cash incentives, equity compensation or salary increases for executive officers. | | ✓ | Stock Ownership Guidelines. We maintain executive stock ownership guidelines that cover our executive officers. | ✕ | No “Single-Trigger” Compensation. We have no single-trigger cash severance, equity acceleration or other benefits in connection with a change in control; instead, payments require a termination of employment in connection with the change in control. | | ✓ | Clawback Policy. In 2023, we updated our clawback policy to recoup erroneously-paid cash and equity compensation from our executive officers in the event of a financial restatement. | ✕ | Hedging and Pledging Prohibited. We prohibit our executive officers and the non-employee members of our Board from hedging or pledging our securities. | | ✓ | Long-Term Incentive Awards. The majority of our executive officers' compensation is granted in the form of long-term equity awards, which we believe aligns their interests with those of our stockholders. | ✕ | No Repricing without Stockholder Approval. Our equity plan prohibits repricing of out-of-the-money stock options to a lower exercise price without approval of our stockholders. | | ✓ | Limited Perquisites. We provide only limited perquisites or other personal benefits to our executive officers, such as Company-paid long-term disability insurance and annual physicals. | | | | ✓ | Independent Compensation Committee. The Compensation Committee is comprised solely of independent directors. | | | | ✓ | Independent Compensation Advisor. The Compensation Committee engages an independent compensation consultant to provide independent analysis, advice and guidance on executive compensation. | | |
Determination of Compensation
| • | Annual short-term incentive compensation awards: awards to recognize and reward achievement of short-term corporate and individual performance. |
Determination of Compensation
| • | Long-term equity incentive awards: equity compensation to provide an incentive to our Named Executive Officers to focus on long-term performance and to manage us from the perspective of an owner with an equity stake in the business. |
Determination of Compensation
| • | Severance and change in control benefits: remuneration available to certain Named Executive Officers in the event of a qualifying termination of employment. |
Determination of Compensation
To aid the Compensation Committee in making its determination, our Chief Executive Officer provides recommendations annually to the Compensation Committee regarding the compensation of all other executive officers (other than himself) based on the overall corporate achievements during the period being assessed and his knowledge of the individual contributions to our success by each of the Named Executive Officers. The overall performance of our Named Executive Officers as a team is reviewed annually by the Compensation Committee. We set base salary and annual short-term incentive compensation structures and any grants of stock options or RSUs based on the Compensation Committee members’ collective understanding of compensation practices in the biotechnology and pharmaceutical industry and such members’ experiences as seasoned executives, consultants, board and compensation committee members, or investors in similar biotechnology and specialty pharmaceutical industry companies. In November 2022, the Compensation Committee reviewed and revised the composition of our peer group, employing an assessment of our peer group prepared by, and after consideration of the advice of, Compensia, for use as a reference when setting our 2023 executive compensation levels, resulting in establishing the following 16 peer group companies (the “2023 peer group”):
Determination of Compensation
| (1) Peer company was added for 2023. |
Determination of Compensation
The market data used for Compensia’s comparative analysis was drawn from publicly available sources and also from the Radford Global Life Science Survey. The 2023 peer group was developed with primary consideration given to companies with lower market capitalization than the 2022 peer group, and companies more similar to ours with respect to development phase revenue, market capitalization and employee headcount. Based on the peer analysis performed by Compensia in November 2022 for the purpose of selecting our 2023 peer group, 12 companies were added to the 2023 peer group (as noted above) and the following 15 companies were removed: Adamas Pharmaceuticals; ADMA Biologics; Aerie Pharmaceuticals; BioDelivery Sciences International; Catalyst Pharmaceuticals; Clovis Oncology; Coherus BioSciences; Collegium Pharmaceutical; Flexion Therapeutics; Intercept Pharmaceuticals; La Jolla Pharmaceutical Company; Omeros; Radius Health; Theravance Biopharma; Travere Therapeutics; and Vanda Pharmaceuticals. In general, the removed peer companies no longer fit the selection criteria, while the additions reflect companies with financial and industry characteristics more similar to our company. In assessing our peer group, Compensia prepared for the Compensation Committee a peer group using the following criteria:
Determination of Compensation
| • | Peer companies with revenues ranging from $0 to $297 million (with Puma revenues at $207 million or the 83rd percentile), market capitalization ranging from $27 million to $399 million (with Puma market capitalization at $106 million or the 33rd percentile); and |
Determination of Compensation
| • | Peer companies headquartered in the United States and other similar characteristics such as revenue, market cap, one-year and three-year total shareholder return and employee headcount. |
Determination of Compensation
We believe these characteristics are relevant because their similarity captures the similarity in the labor market for executives. In November 2023, the Compensation Committee reviewed and revised the composition of our peer group, employing an assessment of our peer group prepared by, and after consideration of the advice of, Compensia, for use as a reference when setting our 2024 executive compensation levels, resulting in the following 16 peer group companies (the “2024 peer group”):
Determination of Compensation
| (1) Peer company was added in 2024. | | (2) Acquired by Alfasigma in November 2023. |
Determination of Compensation
The market data used for Compensia’s comparative analysis was drawn from publicly available sources for the companies in the 2023 peer group and also from the Radford Global Life Science Survey. The 2024 peer group was developed with primary consideration given to companies with similar market capitalization as well as removing any pre-commercial companies from the 2024 peer group. Based on the peer analysis performed by Compensia in 2023 for the purpose of selecting our 2024 peer group, 9 companies were added as noted above and the following 7 companies were removed: AcelRx Pharmaceuticals, Inc.; AEIM ImmunoTech Inc.; Citius Pharmaceuticals, Inc.; Fortress Biotech, Inc.; MacroGenics, Inc.; Paratek Pharmaceuticals, Inc.; and Trevena, Inc. In general, the removed peer companies no longer fit the selection criteria while the additions reflect companies with financial and industry characteristics more similar to our company. In assessing our peer group, Compensia prepared for the Compensation Committee a peer group using the following criteria:
Determination of Compensation
| • | Peer companies with revenues ranging from $75 million to $690 million (with Puma revenues at $230 million or the 97th percentile), market capitalization ranging from $40 million to $590 million (with Puma market capitalization at $146 million or the 57th percentile); and |
Determination of Compensation
| • | Peer companies headquartered in the United States and other similar characteristics such as revenue, market cap, one-year and three year total shareholder return and employee headcount. |
Elements of Executive Compensation
The actual base salaries paid to all of our Named Executive Officers during 2023 are set forth in the “Summary Compensation Table” below. Short-term Incentive Compensation Our short-term incentive compensation program is intended to provide incentives to drive company-wide performance. Each of our Named Executive Officers is eligible to receive a cash incentive award targeted as a percentage of the executive’s base salary. For 2023, as in prior years, Messrs. Auerbach, Nougues, Ludwig, Hunt, and Dr. Wong were eligible to receive a cash incentive award targeted at 65%, 40%, 40%, 40%, and 40%, respectively, of their annual base salary in effect at the end of 2023. The Company’s 2023 annual short-term incentive compensation program was based in part on the achievement of corporate performance objectives, which represented 100% of the award opportunity for Mr. Auerbach, and for the other Named Executive Officers, corporate performance objectives represented 50% of the award opportunity and individual performance represented the remaining 50% of the award opportunity. Short-term incentive award opportunities relating to corporate performance objectives (the “Corporate Performance Portion”) were based on the achievement of four performance criteria: (1) total revenue, less license revenue, (2) cashflow, (3) alisertib clinical trial development and (4) alisertib product development. Award opportunities for each metric were established at threshold, target and maximum levels of performance, and achievement at threshold (and below) pays out at 0%, achievement at target pays out at 100%, and achievement at or above maximum performance pays out at 200%, of each executive’s target award opportunity. With respect to the revenue and cashflow metrics, straight-line interpolation was used to calculate payouts associated with actual results falling between threshold and target goals (0-100%), and target and maximum goals (100-200%). Each of the corporate performance objectives are explained in detail as follows:
Elements of Executive Compensation
| FINANCIAL PERFORMANCE METRIC | WEIGHTING | THRESHOLD 0% Payout | TARGET 100% Payout | MAXIMUM 200% Payout | | ACTUAL | ATTAINMENT FACTOR -% OF TARGET PAYOUT (AFTER WEIGHTING) | | Total revenue, less license revenue Sum of (a) total product revenue, net and (b) royalty revenue. The goals were rigorous with threshold goal approximately equal to 2022 actual performance. | 40% | $228.0 million | $243.6 million | $259.1 million | | $235.6 million | 49% Attainment 19.6% Payout | | Cashflow Change from 12/31/22 to 12/31/23 in total cash and cash equivalents, marketable securities, and restricted cash, less (i) significant one-time cash outflows related to lawsuit settlements or asset acquisitions and (ii) capital raises. | 30% | $26.1 million | $38.1 million | $50.1 million | | $34.9 million | 73.2% Attainment 22% Payout | | CLINICAL PERFORMANCE METRIC | WEIGHTING | THRESHOLD 50% Payout | TARGET 100% Payout | PRE-MAXIMUM 150% Payout | MAXIMUM 200% Payout | ACTUAL | ATTAINMENT FACTOR -% OF TARGET PAYOUT (AFTER WEIGHTING) | | Alisertib Clinical Trial Development Total number of alisertib trial site openings and trial patients during 2023. | 15% | Trial Sites: 2 Trial Patients: 0 | Trial Sites: 0 Trial Patients: 1 | Trial Sites: 5 Trial Patients: 3 | Trial Sites: 5 Trial Patients: 5 | Trial Sites: 4 Trial Patients: 0 | 50% Attainment 7.5% Payout | | Alisertib Product Development Drug re-supply and analytical samples testing and release. | 15% | Re-supply incomplete, expiry extension obtained. | Re-supply and testing complete. | Re-supply released by December 31, 2023 | Re-supply released by November 30, 2024 | Completed December 2023 | 150% Attainment 22.5% Payout |
Elements of Executive Compensation
When the Compensation Committee established the goals for 2023 in early 2023, they believed the goals were rigorous given that any payout under the financial metrics required achieving at a minimum actual performance for 2022, and target performance was informed by the Board-established budget for 2023. Under the plan design, performance between threshold and target is interpolated between 0 and 100%. Based on each of the previously defined corporate performance criteria cited above, the final achievement of target opportunity for revenue, cashflow, alisertib clinical trial development and alisertib product development was 49.0%, 73.2%, 50% and 150%, respectively, prior to weightings, which resulted in an overall 71.5% payout of target opportunity after weighting under the Corporate Performance Portion of the annual short-term incentive compensation award opportunity. For our Named Executive Officers, other than Mr. Auerbach, the 2023 short-term incentive compensation program also contained a discretionary element based on the Compensation Committee’s assessment of the executive’s individual performance (the “Individual Performance Portion”), weighted 50%, with the Corporate Performance portion weighted 50%. In assessing our executives’ performance in 2023 at fiscal year-end, the Compensation Committee considered their efforts with respect to the commercial performance of NERLYNX both within and outside of the United States, as well as clinical, financial, and working capital achievements. Among those achievements are: initial development of alisertib, effective management of operating expenses, and a significant improvement of our net income in 2023. Additionally, the Company was cashflow positive for 2023. Based on our Compensation Committee’s consideration of each executive’s individual performance for 2023, with feedback from our Chief Executive Officer, Messrs. Nougues and Hunt each received 105%, Dr. Wong received 95%, and Mr. Ludwig received 65% of the discretionary portion of their 2023 short-term incentive compensation opportunity given the contributions each person made in the achievement of the Company’s overall results described above. Each executive’s blended performance for 2023 was as follows: Messrs. Nougues and Hunt each received 88.25%, Dr. Wong received 83.25%, and Mr. Ludwig received 68.25% of each executive’s applicable target bonus opportunity. The following table sets forth the short-term incentive compensation awards paid to each Named Executive Officer for 2023.
Elements of Executive Compensation
| Name | 2023 Bonus ($) | Actual Award Paid % of Target Award ($) | | Alan H. Auerbach | 407,991 | 71.50% | | Maximo F. Nougues | 181,979 | 88.25% | | Alvin Wong, Pharm.D. | 174,545 | 83.25% | | Jeff J. Ludwig | 162,863 | 68.25% | | Douglas Hunt, B.Sc (Hons) | 151,093 | 88.25% |
Elements of Executive Compensation
Long-Term Equity Awards The goal of our long-term, equity-based incentive awards is to align the interests of our Named Executive Officers with the interests of our stockholders. Because vesting is based on continued service, our equity-based awards also encourage the retention of our Named Executive Officers during the award vesting period. In determining the size of the long-term equity incentives to be awarded to our Named Executive Officers, we take into account a number of factors, such as corporate performance, peer group practices as provided by Compensia, relative job scope, the value of existing stockholdings in the Company and long-term incentive awards, and individual performance history. To reward and retain our Named Executive Officers in a manner that aligns their interests with stockholders’ interests, we have historically used stock options as the primary incentive vehicle for long-term compensation. Because employees realize value from stock options only if our stock price increases relative to the stock option’s exercise price, we believe stock options provide meaningful incentives to achieve increases in the value of our stock over time. Additionally, since 2016, we have granted our executives RSUs in addition to stock option grants, as they serve as an important retention tool. We historically have used equity awards to compensate our Named Executive Officers, both in the form of initial grants in connection with the commencement of employment and additional annual grants. The Compensation Committee retains discretion to make equity awards to employees at any time, including in connection with the promotion of an employee, to reward an employee, for retention purposes or in other circumstances recommended by management. The Compensation Committee, when determining the 2023 aggregate dollar-denominated values of equity awards for our Named Executive Officers, aligned the targeted aggregate dollar-denominated values with the 50th percentile of the long-term equity incentive values of our 2023 peer group, as modified by the Company’s achievement of the following 2022 fiscal year corporate objectives: revenue, cashflow, and closure of summit sites under our 2022 short-term incentive compensation program, which the Compensation Committee determined had been attained at 158.4%. In approving these increases, the Compensation Committee also reviewed and considered 2023 peer group benchmarking data that reflected the prior year’s equity grant values for our NEOs being significantly below market median, the recommendations of our CEO for an adjustment in grant value for the other NEOs, individual performance by each of the NEOs, and the limitation imposed by the shares available for grant under our 2011 Plan. These additional considerations resulted in 2023 equity grant values for each executive at 149% of peer group median for their position. Additionally, due to stock price volatility and the limit on the number of shares available in the 2011 Plan, the Compensation Committee estimated the grant date fair values of the 2023 equity awards based on the applicable accounting rules and an assumed closing share price on the day of grant (February 10, 2023) of $4.39 per share and a Black-Scholes value per share of $3.29 and, based on this calculation, approved the number of stock options and RSUs to be granted to our Named Executive Officers in 2023. The 2023 equity awards were granted in the form of stock options and RSUs, with each representing approximately 50% of the aggregate value of the award.
Elements of Executive Compensation
As with the 2022 equity awards, the equity awards granted in February 2023 vest over a two-year period, in six month increments, as follows (subject to continued service, or for Mr. Auerbach, continued employment, through the applicable vesting date): one-fourth (1/4th) of the RSUs on each of July 1, 2023, January 1, 2024, July 1, 2024 and January 1, 2025. The Compensation Committee believes that the shorter vesting period in six-month increments over two years, instead of annual increments over four years, continues to appropriately encourage continued service or employment, as applicable, with the Company while allowing our executives to realize compensation in line with the value they have created for our stockholders. During 2023, we made the following annual stock option grants to our Named Executive Officers, representing approximately 50% of the aggregate equity award value:
Elements of Executive Compensation
| | 2023 RSUs | | Name | (# of Units) | | Alan H. Auerbach | 186,403 | | Maximo F. Nougues | 58,601 | | Alvin Wong, Pharm.D. | 58,601 | | Jeff J. Ludwig | 66,972 | | Douglas Hunt, B.Sc (Hons) | 48,136 |
Elements of Executive Compensation
For 2024, consistent with the Compensation Committee’s 2023 grant methodology, long-term equity award values for our Chief Executive Officer were granted based primarily on 2023 median peer group equity grant values for CEOs, multiplied by 71.5%, which was the Company’s attainment against target under the 2023 annual short-term incentive program. There was a significant increase in median peer group CEO equity grant values for 2023. As a result of this methodology, 2024 long-term equity grant values for our Chief Executive Officer were slightly higher than 2023 equity grant values. The Compensation Committee used the same methodology to inform the 2024 grant values for the other Named Executive Officers, with revisions to these amounts made to reflect the Compensation Committee’s assessment of the Named Executive Officers’ individual performance during fiscal 2023, with Messrs. Nougues and Hunt receiving higher values and Messrs. Wong and Ludwig receiving lower values, than derived from the methodology. 2021 Auerbach Warrant In accordance with SEC rules, Mr. Auerbach’s compensation as reported in the Summary Compensation Table of our proxy statement includes the grant date fair values of equity awards granted in the applicable year, as well as, for 2021, the incremental fair value of $13.7 million related to an amendment to extend the term of Mr. Auerbach’s warrant (the “Auerbach Warrant”), which was approved by stockholders at the 2021 annual meeting (the “Warrant Amendment”). However, the actual delivered or realized value of these awards may differ substantially from the Summary Compensation Table reported values, as the exercise price of the warrant is $16.00 per share. In addition, due to the incremental fair value reported in 2021 with respect to the Warrant Amendment, Mr. Auerbach’s 2021 is significantly higher than his regular annual compensation reflected for 2022 and 2023. The Auerbach Warrant was issued on October 4, 2011 by Puma Biotechnology, Inc., a privately-held Delaware corporation just prior to it being acquired by the Company in October 2011 (the “Merger”). The Company assumed the Auerbach Warrant in the Merger, and it became exercisable in full upon the closing of the Company’s public offering of our common stock on October 24, 2012 (the “2012 Public Offering”). At that time, the number of shares subject to the Auerbach Warrant was set at 2,116,250 shares, based on the number of shares sufficient to maintain beneficial ownership of 20% of our outstanding shares of common stock as of the closing of our 2012 Public Offering, and the exercise price was set at the 2012 Public Offering price per share of $16.00. The Auerbach Warrant originally was granted in recognition of Mr. Auerbach’s many contributions to the Company with the objectives of allowing him the ability to maintain beneficial ownership of at least 20% of our outstanding common stock, encouraging full investment of his time and energy to further our best interests, and providing incentives for stock appreciation. If the Warrant Amendment had not been approved, then the Auerbach Warrant would have expired pursuant to its original terms, and would have been forfeited by Mr. Auerbach in full. When approving the Warrant Amendment in April 2021, the Board considered the importance for Mr. Auerbach to have the right to maintain a significant ownership interest in the Company to best align his interests with that of our stockholders and long-term value creation. The Board also believed that the Auerbach Warrant provides a valuable incentive to increase our stock price. Although the Board does not view the Auerbach Warrant as part of Mr. Auerbach’s standard compensation program for 2021, SEC rules require the Company to disclose the incremental fair value associated with the Warrant Amendment, as determined under applicable accounting standards. In accordance with ASC 718, the extension of the term of the Auerbach Warrant resulted in a generally non-cash, stock-based compensation expense of $13.7 million, as reported under the “Option Awards” column for the 2021 fiscal year of the Summary Compensation Table. Mr. Auerbach’s 2021 equity compensation excluding the amount attributed to the Auerbach Warrant was $3.6 million, which represented a small increase from his equity compensation of $3.15 million in 2020. Severance and Change in Control Arrangements Mr. Auerbach’s employment agreement and Messrs. Nougues’ and Ludwig’s employment letters provide that the executive is eligible to receive severance payments and benefits upon a qualifying involuntary termination of employment, including in connection with a change in control of our Company (as opposed to solely upon a “single-trigger” change in control). We believe that these protections serve to encourage continued attention and dedication to duties without distraction arising from the possibility of a change in control, and provide the business with a smooth transition in the event of such a termination of employment in connection with a transaction. These severance and change in control arrangements are designed to retain certain of our executives in these key positions as we compete for talented executives in the marketplace where such protections are commonly offered. For a detailed description of the severance provisions contained in Mr. Auerbach’s employment agreement and Messrs. Nougues’ and Ludwig’s employment letters, see “Potential Payments Upon Termination or Change in Control” below. Other Elements of Compensation and Perquisites We provide our executive officers, including our Named Executive Officers, with long-term disability and long-term care insurance, and we reimburse for physical exams. All of our full-time employees in the United States, including our Named Executive Officers, are eligible to participate in our 401(k) plan. Pursuant to our 401(k) plan, employees may elect to reduce their current compensation by up to the statutorily prescribed annual limit, which was $22,500 in 2023, or $30,000 for employees age 50 and older, and to have the amount of this reduction contributed to our 401(k) plan. In addition, all of our full-time employees, including our Named Executive Officers, are eligible to participate in our health and welfare plans.
Clawback Policy
Clawback Policy We believe in maintaining best practices for our executive compensation program, and as part of that our Board in 2023 adopted a compensation recovery policy that requires the recovery of certain erroneously paid incentive compensation received by our Section 16 officers on or after October 2, 2023, in the event the Company is required to prepare a financial restatement, as defined, as required by new SEC rules and NASDAQ listing standards implemented pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and which can be recovered from time-vesting or performance-vesting equity compensation (in addition to other forms of incentive compensation).
Summary Compensation Table
Summary Compensation Table The following table sets forth information regarding the compensation earned by our Named Executive Officers for the years ended December 31, 2023, 2022 and 2021.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) (1) | Stock Awards ($) (2) | Option Awards ($) (3) | Non-Equity Incentive Plan Compensation ($) (4) | All Other Compensation ($) (5) | Total ($) | | Alan H. Auerbach | 2023 | 877,871 | — | 818,309 | 821,842 | 407,991 | 18,735 | 2,944,748 | | President and Chief Executive Officer | 2022 | 852,302 | — | 393,360 | 394,837 | 877,530 | 14,732 | 2,532,761 | | | 2021 | 827,478 | — | 1,802,411 | 15,540,659 | 268,930 | 14,132 | 18,453,610(6) | | Maximo F. Nougues | 2023 | 515,521 | 108,259 | 257,258 | 258,366 | 73,720 | 18,702 | 1,231,826 | | Chief Financial Officer | 2022 | 495,693 | 114,009 | 144,870 | 145,417 | 157,036 | 14,732 | 1,071,757 | | | 2021 | 472,089 | 94,418 | 668,252 | 668,160 | 47,209 | 14,132 | 1,964,260 | | Alvin Wong, Pharm.D. | 2023 | 524,160 | 99,590 | 257,258 | 258,366 | 74,955 | 15,535 | 1,229,864 | | Chief Scientific Officer | 2022 | 504,000 | 115,920 | 104,575 | 104,970 | 159,667 | 30,104 | 1,019,237 | | | 2021 | 459,364 | 96,000 | 84,692 | 651,954 | 48,000 | 22,424 | 1,362,434 | | Jeff J. Ludwig | 2023 | 596,568 | 77,554 | 294,007 | 295,277 | 85,309 | 33,134 | 1,381,848 | | Chief Commercial Officer | 2022 | 573,623 | 131,933 | 91,145 | 91,486 | 181,724 | 29,572 | 1,099,483 | | | 2021 | 562,375 | 89,980 | 433,549 | 433,485 | 56,238 | 26,416 | 1,602,043 | | Douglas Hunt, B.Sc (Hons) | 2023 | 428,026 | 89,885 | 211,317 | 212,231 | 61,208 | 18,886 | 1,021,553 | | Chief Regulatory Affairs, Medical Affairs, | 2022 | 398,164 | 91,578 | 52,768 | 52,966 | 126,138 | 16,767 | 738,381 | | Pharmacovigilance, and Law Officer | 2021 | 379,204 | 75,841 | 237,479 | 237,443 | 37,920 | 16,075 | 983,962 |
Summary Compensation Table
| (1) Reflects the discretionary short-term incentive compensation paid to the Named Executive Officers based on individual achievement during the applicable fiscal year. | | (2) Represents the grant date fair values of RSUs granted during the applicable year determined in accordance with ASC 718. For a discussion of valuation assumptions for the stock awards made to executive officers, see Note 10 to our 2023 Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024. There can be no assurance that this value will be realized upon any vesting, or that the awards will vest (if an award does not vest, no value will be realized by the individual). | | (3) Represents the grant date fair values of stock options granted during the applicable year determined in accordance with ASC 718. For a discussion of valuation assumptions for the stock option grants, see Note 10 to our 2023 Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024. There can be no assurance that awards will vest or will be exercised (if they are not exercised, no value will be realized by the individual), or that the value upon exercise will approximate the aggregate grant date fair value determined under ASC 718. With respect to Mr. Auerbach, in accordance with the requirements of ASC 718 and SEC rules, the reported amount for 2021 also includes $13,738,509 in incremental fair value related to the amendment to extend the term of the Auerbach Warrant which was approved by our stockholders at the 2021 annual meeting. Excluding the incremental fair value attributed to the Auerbach Warrant extension, Mr. Auerbach’s 2021 annual Stock Awards compensation was $1,802,150. | | (4) Reflects annual short-term incentive compensation payments for the applicable year earned under the Corporate Performance Portion of our short-term incentive compensation program. | | (5) For Messrs. Auerbach, Nougues, Ludwig, and Hunt and Dr. Wong, represents long-term disability and long-term care insurance premiums paid by us in the amounts of $1,735, $1,735, $2,540, $1,886, and $1,735, respectively, for 2023. For Messrs. Auerbach, Nougues, Ludwig, and Hunt and Dr. Wong, represents matching contributions to our 401(k) plan made by us in 2023 the amount of $13,200 for each of the Named Executive Officers. For Messrs. Auerbach, Nougues, Ludwig, and Hunt and Dr. Wong, represents allowances for work-from-home expenses paid by us in the in the amounts of $600 each, for 2023. For Messrs. Auerbach, Ludwig, and Hunt and Dr. Wong, represents annual physicals paid by us in the amounts of $3,200 each, and for Mr. Nougues, $3,167, for 2023. For Mr. Ludwig, represents a company-paid sales incentive trip in the amount of $16,794, including a $5,807 related tax gross-up for such trip. | | (6) The total compensation reported for Mr. Auerbach in 2021 includes $13,738,509 in incremental fair value related to the amendment to extend the term of the Auerbach Warrant, which was approved by our stockholders at the 2021 annual meeting. See footnote 3. Excluding the amount attributed to the Auerbach Warrant, Mr. Auerbach’s total compensation in 2021 equaled $4,715,101. |
Grants of Plan-Based Awards in 2023
Grants of Plan-Based Awards in 2023 The following table sets forth information regarding grants of plan-based awards made to our Named Executive Officers during the year ended December 31, 2023.
Grants of Plan-Based Awards in 2023
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | Stock Awards: Number of | Option Awards: Number of Shares | Exercise or Base Price of Option | Grant Date Fair Value of Stock | | Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Shares or Units (#) (2) | Underlying Options (#) (3) | Awards Per Share ($) | and Option Awards ($)(4) | | Alan H. Auerbach | 2/10/2023 | — | — | — | — | 258,924 | 4.39 | 821,842 | | | 2/10/2023 | — | — | — | 186,403 | — | — | 818,309 | | | | — | — | — | — | — | — | — | | | | (1) | 570,616 | 1,141,232 | — | — | — | — | | Maximo F. Nougues | 2/10/2023 | — | — | — | — | 81,399 | 4.39 | 258,366 | | | 2/10/2023 | — | — | — | 58,601 | — | — | 257,258 | | | | (1) | 103,104 | 206,208 | — | — | — | — | | Alvin Wong, Pharm.D. | 2/10/2023 | — | — | — | — | 81,399 | 4.39 | 258,366 | | | 2/10/2023 | — | — | — | 58,601 | — | — | 257,258 | | | | (1) | 104,832 | 209,664 | — | — | — | — | | Jeff J. Ludwig | 2/10/2023 | — | — | — | — | 93,028 | 4.39 | 295,277 | | | 2/10/2023 | — | — | — | 66,972 | — | — | 294,007 | | | | (1) | 119,314 | 238,627 | — | — | — | — | | Douglas Hunt, B.Sc (Hons) | 2/10/2023 | — | — | — | — | 66,864 | 4.39 | 212,231 | | | 2/10/2023 | — | — | — | 48,136 | — | — | 211,317 | | | | (1) | 85,605 | 171,210 | — | — | — | — |
Grants of Plan-Based Awards in 2023
| (1) The amounts in these columns represent the range of potential payouts under the Corporate Performance Portion of our 2023 annual short-term incentive compensation program based on achievement of pre-established goals. For Mr. Auerbach, 100% of his entire target short-term incentive compensation opportunity was based on the Corporate Performance Portion of our short-term incentive compensation program. For our other Named Executive Officers, 50% of each executive’s entire target short-term incentive compensation opportunity was based on the Corporate Performance Portion of our short-term incentive compensation program, and 50% is based on Compensation Committee discretion based on individual performance and thus is not reflected in this table. Achievement at or below threshold results in no payout, with straight line interpolation between threshold and target (0-100%) and between target and threshold (100-200%). | | (2) Amounts reflect the number of RSUs granted in 2023 with one-fourth (1/4) of the RSUs vesting on each of July 1, 2023, January 1, 2024, July 1, 2024 and January 1, 2025, subject to continued service, or for Mr. Auerbach, continued employment, through the applicable vesting date. | | (3) Amounts reflect the number of stock options granted in 2023 with one-fourth (1/4) of the shares underlying the option vesting on each of July 1, 2023, January 1, 2024, July 1, 2024 and January 1, 2025, subject to continued service, or for Mr. Auerbach, continued employment, through the applicable vesting date. | | (4) Represents the grant date fair values of equity awards granted during 2023 determined in accordance with ASC 718. For a discussion of valuation assumptions for the equity awards, see Note 10 to our 2023 Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024. |
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Outstanding Equity Awards at Fiscal Year End
Outstanding Equity Awards at Fiscal Year End The following table sets forth summary information regarding the outstanding equity awards held by our Named Executive Officers at December 31, 2023. Except as indicated below, stock awards and options were granted pursuant to our 2011 Plan.
Outstanding Equity Awards at Fiscal Year End
| | Option Awards | | | | Stock Awards | | | Name | Number of Securities Underlying Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Unvested Shares or Units of Stock that Have Not Vested ($) (1) | | Alan H. Auerbach | 2,116,250(2) | — | 16.00 | 10/4/2026 | — | — | | | 150,000 | — | 195.33 | 12/12/2024 | — | — | | | 150,000 | — | 76.54 | 10/4/2025 | — | — | | | 66,667 | — | 35.61 | 5/22/2026 | — | — | | | 70,000 | — | 37.35 | 2/16/2027 | — | — | | | 56,940 | — | 60.85 | 2/11/2028 | — | — | | | 62,634 | — | 27.76 | 2/6/2029 | — | — | | | 161,649 | — | 12.34 | 2/11/2030 | — | — | | | 175,800 | 35,144(3) | 12.02 | 2/17/2031 | 24,982(4) | 108,172 | | | 180,882 | 60,294(5) | 2.33 | 3/3/2032 | 42,206(6) | 182,752 | | | 64,731 | 194,193(7) | 4.39 | 2/10/2033 | 139,803(8) | 605,347 | | Maximo F. Nougues | 90,000 | — | 23.37 | 11/11/2028 | — | — | | | 15,567 | — | 12.34 | 2/11/2030 | — | — | | | 65,179 | 13,030(3) | 12.02 | 2/17/2031 | 9,263(4) | 40,109 | | | 66,618 | 22,206(5) | 2.33 | 3/3/2032 | 15,544(6) | 67,306 | | | 20,349 | 61,050(7) | 4.39 | 2/10/2033 | 43,951(8) | 190,308 | | Alvin Wong, Pharm.D. | 10,500 | — | 112.80 | 3/14/2024 | — | — | | | 10,500 | — | 217.38 | 3/23/2025 | — | — | | | 7,035 | — | 73.57 | 11/30/2025 | — | — | | | 10,500 | — | 39.50 | 12/1/2026 | — | — | | | 75,000 | 15,000(9) | 10.21 | 6/17/2031 | — | — | | | 48,088 | 16,030(5) | 2.33 | 3/3/2032 | 11,221(6) | 48,587 | | | 20,349 | 61,050(7) | 4.39 | 2/10/2033 | 43,951(8) | 190,308 | | Jeff J. Ludwig | 320,000 | — | 7.82 | 3/20/2030 | — | — | | | 42,286 | 8,454(3) | 12.02 | 2/17/2031 | 6,010(4) | 26,023 | | | 41,911 | 13,971(5) | 2.33 | 3/3/2032 | 9,780(6) | 42,347 | | | 23,257 | 69,771(7) | 4.39 | 2/10/2033 | 50,229(8) | 217,492 | | Douglas Hunt, B.Sc (Hons) | 90,000 | — | 90.85 | 1/16/2028 | — | — | | | 15,400 | — | 27.76 | 2/6/2029 | — | — | | | 54,842 | — | 12.34 | 2/11/2030 | — | — | | | 23,162 | 4,631(3) | 12.02 | 2/17/2031 | 3,292(4) | 14,254 | | | 24,264 | 8,089(5) | 2.33 | 3/3/2032 | 5,662(6) | 24,516 | | | 16,716 | 50,148(7) | 4.39 | 2/10/2033 | 36,102(8) | 156,322 |
Outstanding Equity Awards at Fiscal Year End
| (1) Market value is determined based on the closing price of our common stock on December 29, 2023 (the last trading day of the calendar year) of $4.33 per share. | | (2) Mr. Auerbach holds a warrant that was issued in 2011 and is exercisable until October 2026 for 2,116,250 shares of our common stock at $16 per share. | | (3) One-third of the granted option vested on the first anniversary of the vesting commencement date of January 1, 2021, one-sixth vested on July 1, 2022, January 1, 2023, and July 1, 2023, with this last unvested increment vesting on January 1, 2024, subject to continued service, or for Mr. Auerbach, continued employment, through the applicable vesting date. In addition, for Messrs. Auerbach, Nougues, and Ludwig the option may accelerate and vest under certain circumstances described more fully under “Potential Payments Upon a Termination or Change in Control” below. | | (4) One-third of the granted RSU award vested on the first anniversary of the vesting commencement date of January 1, 2021, one-sixth vested on July 1, 2022, January 1, 2023, and July 1, 2023, with this last unvested increment vesting on January 1, 2024, subject to continued service, or for Mr. Auerbach, continued employment, through the applicable vesting date. In addition, for Messrs. Auerbach, Nougues, and Ludwig the RSUs may accelerate and vest under certain circumstances described more fully under “Potential Payments Upon a Termination or Change in Control” below. | | (5) One-fourth of the granted option vested on July 1, 2022, January 1, 2023, and July 1, 2023, with this last unvested increment vesting on January 1, 2024, subject to continued service, or for Mr. Auerbach, continued employment, through the applicable vesting date. In addition, for Messrs. Auerbach, Nougues, and Ludwig this option may accelerate and vest under certain circumstances described more fully under “Potential Payments Upon a Termination or Change in Control” below. | | (6) One-fourth of the granted RSU award vested on July 1, 2022, January 1, 2023, July 1, 2023, with this last unvested increment vesting on January 1, 2024, subject to continued service, or for Mr. Auerbach, continued employment, through the applicable vesting date. In addition, for Messrs. Auerbach, Nougues, and Ludwig the RSUs may accelerate and vest under certain circumstances described more fully under “Potential Payments Upon a Termination or Change in Control” below. | | (7) One-fourth of the granted option vested on July 1, 2023, and these remaining unvested options will vest in one-fourth increments on each of January 1, 2024, July 1, 2024 and January 1, 2025, subject to continued service, or for Mr. Auerbach, continued employment, through the applicable vesting date. In addition, for Messrs. Auerbach, Nougues, and Ludwig this option may accelerate and vest under certain circumstances described more fully under “Potential Payments Upon a Termination or Change in Control” below. | | (8) One-fourth of the granted RSU award vested on July 1, 2023, and these remaining unvested RSUs will vest in one-fourth increments on each of January 1, 2024, July 1, 2024, and January 1, 2025, subject to continued service, or for Mr. Auerbach, continued employment, through the applicable vesting date. In addition, for Messrs. Auerbach, Nougues, and Ludwig the RSUs may accelerate and vest under certain circumstances described more fully under “Potential Payments Upon a Termination or Change in Control” below. | | (9) One-third of the granted option vested on the first anniversary of the vesting commencement date of June 15, 2021, and one thirty-sixth vested in monthly increments from July 2022 through December 2023, with these remaining unvested options vesting in one thirty-sixth monthly increments through June 15, 2024, subject to continued employment through each applicable vesting date. |
Options Exercised and Stock Vested
Options Exercised and Stock Vested The following table shows the number of shares of common stock acquired by each Named Executive Officer during 2023 upon the vesting of RSUs during 2023. None of our Named Executive Officers exercised stock options during 2023.
Options Exercised and Stock Vested
| | Stock Awards | | | | Number of | Value | | | Shares | Realized on | | | Acquired on | Vesting | | Name | Vesting (#) | ($) (1) | | Alan H. Auerbach | 184,550 | 700,984 | | Maximo F. Nougues | 64,706 | 246,084 | | Alvin Wong, Pharm.D. | 39,275 | 146,637 | | Jeff J. Ludwig | 48,327 | 181,649 | | Douglas Hunt, B.Sc (Hons) | 31,148 | 117,063 |
Options Exercised and Stock Vested
| (1) Represents the amounts realized based on the closing stock price of our common stock on the vesting date. |
Pension Benefits and Nonqualified Deferred Compensation
Pension Benefits and Nonqualified Deferred Compensation During the fiscal year ended December 31, 2023, we did not have any plans in place for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax qualified deferred contribution plans and nonqualified deferred contribution plans. We do maintain a 401(k) plan for our employees, including our NEOs.
Potential Payments Upon a Termination or Change in Control
Potential Payments Upon a Termination or Change in Control Alan H. Auerbach. On January 19, 2012, we entered into an employment agreement with Alan H. Auerbach, our President and Chief Executive Officer. Pursuant to the employment agreement, in the event Mr. Auerbach’s employment is terminated by us without “cause” or by Mr. Auerbach for “good reason” 60 days prior to, or 18 months following, a “change in control” (each as defined in the employment agreement and described below), he will be entitled to receive, in addition to any accrued but unpaid compensation and benefits:
Potential Payments Upon a Termination or Change in Control
| • | A lump sum payment equal to two times the sum of his base salary and the maximum amount payable under our annual short-term incentive compensation program to which he would be eligible to receive for the year in which the termination occurs; |
Potential Payments Upon a Termination or Change in Control
| • | all unvested equity-based incentive awards will immediately vest in connection with such termination of employment on the later of the change in control and the termination date, and will remain exercisable (as applicable) for a period of up to 12 months from the date of the termination; and |
Potential Payments Upon a Termination or Change in Control
| • | up to 18 months continuation of healthcare benefits to him and his dependents. |
Potential Payments Upon a Termination or Change in Control
In the event a change in control occurs and an excise tax is imposed as a result of any compensatory payments made to Mr. Auerbach in connection with such change in control, we will either (i) reduce the payments made to Mr. Auerbach such that the excise tax will not be imposed or (ii) if such reduction would not result in a greater net after-tax benefit to Mr. Auerbach than receiving the full amount of such payments, pay the entire (unreduced) payments and also pay or reimburse Mr. Auerbach an amount equal to any such excise tax plus any taxes resulting from such payments. In the event Mr. Auerbach’s employment is terminated without “cause” or by Mr. Auerbach for “good reason,” in each case outside of the change in control context described above, then Mr. Auerbach will be entitled to receive, in addition to any accrued but unpaid compensation and benefits:
Potential Payments Upon a Termination or Change in Control
| • | An amount equal to the sum of his base salary and the maximum amount under our annual short-term cash incentive compensation program to which he would be eligible to receive for the year in which the termination occurs, payable over a period of one year following such termination in substantially equal installments; and |
Potential Payments Upon a Termination or Change in Control
| • | up to 18 months continuation of healthcare benefits to him and his dependents. |
Potential Payments Upon a Termination or Change in Control
All severance benefits are contingent upon Mr. Auerbach’s execution and non-revocation of a general release of claims in favor of us. Under the terms of Mr. Auerbach’s employment agreement:
Potential Payments Upon a Termination or Change in Control
| • | “Cause” is generally defined as (i) the willful failure, disregard or refusal by the executive to perform his duties; (ii) any willful, intentional or grossly negligent act by the executive that injures in a material way our business or reputation; (iii) willful misconduct by the executive in respect of his duties or obligations; (iv) the executive’s commission of any felony or a misdemeanor involving moral turpitude (including entry of a nolo contendere plea to any such charge); (v) the determination by us, after a reasonable and good-faith investigation following a written allegation by another employee of us that the executive engaged in some form of harassment prohibited by law, unless the executive’s actions were specifically directed by the board; (vi) any misappropriation or embezzlement of our property; (vii) breach by the executive of his obligations with respect to confidentiality, non-solicitation and non-disparagement or of any of his representations or warranties under the employment agreement; and (viii) material breach by the executive of any other provision of the employment agreement which is not cured within a specified timeframe. |
Potential Payments Upon a Termination or Change in Control
| • | “Good reason” is generally defined as: (i) a material diminution in the executive’s base salary, excluding any reduction applicable equally to all of our executive officers following a material decline in our earnings, public image, or performance; (ii) a material diminution in the executive’s authority, duties or responsibilities; (iii) a change in the geographic location at which the executive must perform services to a location that is greater than 25 miles from our principal place of business as of the date of the employment agreement; (iv) a direction to the executive to take any action that violates any applicable legal or regulatory requirement; or (v) any other action or inaction that constitutes a material breach by us of our obligations under the employment agreement. |
Potential Payments Upon a Termination or Change in Control
| • | A “change in control” is generally defined as: (i) the consummation of a transaction where any persons become the beneficial owners of Company securities representing more than 50% of the total combined voting power of our securities after such acquisition; (ii) a change in the composition of the board such that during any period of two consecutive years, individuals who originally formed our board, together with certain new directors, at the beginning of such period cease for any reason to constitute a majority of the board; (iii) us merging, consolidating, reorganizing or combining with another corporation or entity or a sale or other disposition of all or substantially all of our assets or an acquisition of assets or stock of another entity, in each case, where our stockholders prior to the transaction own less than 50% of the outstanding voting securities of the surviving corporation or entity; or (iv) our stockholders approving a liquidation or dissolution of us. |
Potential Payments Upon a Termination or Change in Control
Maximo F. Nougues and Jeff J. Ludwig. On November 5, 2018, we entered into an employment letter agreement with Maximo F. Nougues, our Chief Financial Officer, and on March 16, 2020, we entered into an employment letter agreement with Jeff J. Ludwig, our Chief Commercial Officer. Pursuant to the employment letter agreements, in the event the executive’s employment is terminated by us without “cause” or by the executive for “good reason” (each as defined in the applicable employment letter and described below) he will be entitled to receive, in addition to any accrued but unpaid compensation and benefits:
Potential Payments Upon a Termination or Change in Control
| • | 12 months base salary, and for Mr. Ludwig, target amount payable under our annual short-term incentive compensation program, to be paid in substantially equal installments in accordance with the Company’s standard payroll policies; |
Potential Payments Upon a Termination or Change in Control
| • | up to 12 months continuation of healthcare benefits to him and his dependents; and |
Potential Payments Upon a Termination or Change in Control
| • | if the termination occurs on or within the 18 months following a “change in control” (as defined in the employment letter and described below), all unvested equity-based incentive awards will immediately vest on the termination date. |
Potential Payments Upon a Termination or Change in Control
All severance benefits are contingent upon the executive’s execution and non-revocation of a general release of claims in favor of us. Under the terms of each executive’s employment letter:
Potential Payments Upon a Termination or Change in Control
| • | “Cause” is generally defined as (i) the unauthorized use or disclosure of confidential information or trade secrets of the Company or any other material breach of a written agreement between the executive and the Company, including without limitation a material breach of any employment or confidentiality agreement; (ii) the executive’s indictment for, or the entry of a plea of guilty or nolo contendere by the executive to, a felony under the laws of the United States or any state thereof or other foreign jurisdiction or any crime involving dishonesty or moral turpitude; (iii) the executive’s gross negligence or willful misconduct or the executive’s willful or repeated failure or refusal to substantially perform assigned duties; (iv) any act of fraud, embezzlement, material misappropriation or dishonesty committed by the executive against the Company; or (v) any acts, omissions or statements by an executive which the Company reasonably determines to be materially detrimental or damaging to the reputation, operations, prospects or business relations of the Company. |
Potential Payments Upon a Termination or Change in Control
| • | “Good reason” is generally defined as (i) a material diminution in the executive’s base salary, excluding any reduction applicable equally to all of our executive officers following a material decline in our earnings, public image, or performance; (ii) a material diminution in the executive’s authority, duties or responsibilities; and (iii) a change in the geographic location at which the executive must perform services to a location that is greater than 25 miles from our principal place of business as of the date of the employment letter. |
Potential Payments Upon a Termination or Change in Control
| • | A “change in control” is generally defined as: (i) the consummation of a transaction where any persons become the beneficial owners of Company securities representing more than 50% of the total combined voting power of our securities after such acquisition; (ii) a change in the composition of the board such that during any period of two consecutive years, individuals who originally formed our board, together with certain new directors, at the beginning of such period cease for any reason to constitute a majority of the board; (iii) us merging, consolidating, reorganizing or combining with another corporation or entity or a sale or other disposition of all or substantially all of our assets or an acquisition of assets or stock of another entity, in each case, where our stockholders prior to the transaction own less than 50% of the outstanding voting securities of the surviving corporation or entity; or (iv) our stockholders approving a liquidation or dissolution of us. |
Potential Payments Upon a Termination or Change in Control
Terms of Equity Awards. Under the terms of the 2011 Plan, if, in the event of a change in control (as defined above), the successor corporation does not assume or substitute the then outstanding equity awards, such equity awards will immediately vest or become exercisable and be deemed exercised immediately prior to the change in control, as applicable.
Summary of Potential Payments
Summary of Potential Payments The following table summarizes the payments that would have been made to Messrs. Auerbach, Ludwig and Nougues upon the occurrence of a qualifying termination of employment (whether or not in connection with a change in control), assuming that the executive’s termination of employment with our Company occurred on December 31, 2023. Amounts shown do not include (i) accrued but unpaid salary through the date of termination, and (ii) other benefits earned or accrued by the executive during employment that are available to all salaried employees, such as accrued vacation. In addition, the following table does not include our other Named Executive Officers because they would not be entitled to any payments and/or benefits pursuant to any plan or agreement upon a termination and/or change in control occurring on December 31, 2023. The following table also assumes that a successor corporation would assume or provide substitute equity awards in a change in control.
Summary of Potential Payments
| Name | Termination Without Cause or With Good Reason (Not in Connection with Change in Control) ($) | Termination Without Cause or With Good Reason (In Connection with Change in Control) ($) | | Alan H. Auerbach | | | | Cash Severance (1) | 2,019,103 | 4,038,207 | | Continued Health Benefits | 18,998 | 18,998 | | Acceleration of Equity Awards | — | 1,016,859(2) | | 280G Excise Tax Gross-Up | — | —(3) | | Total | 2,038,101 | 5,074,064 | | Maximo F. Nougues | | | | Cash Severance | 515,521 | 515,521 | | Continued Health Benefits | 39,453 | 39,453 | | Acceleration of Equity Awards | — | 342,134(2) | | Total | 554,974 | 897,108 | | Jeff J. Ludwig | | | | Cash Severance (1) | 835,195 | 835,195 | | Continued Health Benefits | 39,453 | 39,453 | | Acceleration of Equity Awards | — | 313,804(2) | | Total | 874,648 | 1,188,452 |
Summary of Potential Payments
| (1) In accordance with the terms of their respective agreements, Mr. Auerbach’s and Mr. Ludwig’s cash severance includes the maximum award amount for Mr. Auerbach, and target award amount for Mr. Ludwig, payable under our short-term incentive compensation program for the year of termination. |
Summary of Potential Payments
| (2) Represents the sum of the values attributable to the accelerated vesting of the unvested portion of all outstanding stock options and RSUs held by the executive officers as of December 31, 2023. The value of the accelerated equity awards was calculated based on the closing price of our common stock on December 29, 2023 (the last trading day of the year) of $4.33 per share. |
Summary of Potential Payments
| (3) No gross-up for excise taxes would be payable to Mr. Auerbach, or adjustments to his severance amounts, under his employment agreement if he had been terminated in connection with a change in control on December 31, 2023. |
Pay Ratio Disclosure
Pay Ratio Disclosure As required by Section 953(b) of the Dodd-Frank Act, and Item 402(u) of Regulation S-K, we are providing the following information regarding the ratio of the annual total compensation of the individual identified as our median paid employee to the annual total compensation of Alan H. Auerbach, our President and Chief Executive Officer (our “CEO”). We consider the pay ratio specified below to be a reasonable estimate, calculated in a manner that is intended to be consistent with the requirements of Item 402(u) of Regulation S-K. For 2023, our last completed fiscal year:
Pay Ratio Disclosure
| • | The annual total compensation of the employee who was identified as our median compensated employee (other than our CEO) was $258,589; and |
Pay Ratio Disclosure
| • | The annual total compensation of our CEO, as reported in the Summary Compensation Table above, was $2,944,748. |
Pay Ratio Disclosure
Based on this information, for 2023 the ratio of CEO annual total compensation to that of the median identified employee is 11:1. This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below. Methodology for Determining Our Median Employee The Company used our employee population data as of December 31, 2021 as the reference date for identifying our median employee. To identify the median employee from our employee population, we calculated each employee’s 2021 base salary, actual amount paid under our short-term incentive compensation program and commission earned in 2021 and grant-date fair value of equity awards granted in 2021. In identifying the median employee, we annualized the compensation of all full-time employees who were new hires in 2021 or were on a leave of absence in a portion of 2021. As there have been no changes that would materially impact our pay ratio analysis, as permitted by SEC rules, we are using the same individual identified in 2021 for our 2023 pay ratio analysis. Annual Total Compensation With respect to the annual total compensation of the employee who represents our median compensated employee, we calculated such employee’s compensation for 2023 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K. We used the amount reported in the “Total” column of our 2023 Summary Compensation Table included in this Proxy Statement for the annual total compensation of our CEO.
Pay-Versus-Performance Table
| Year | Summary Compensation Table Total for PEO(1) | Compensation Actually Paid to PEO(2) | Average Summary Compensation Table Total for Non-PEO Named Executive Officers(3) | Average Compensation Actually Paid to Non-PEO Named Executive Officers(4) | Value of Initial Fixed $100 Investment Based On (5): | | Net Income | Company- Selected Measure (Total Revenue, Less License Revenue)(7) | | | | | | | Total Stockholder Return | Peer Group Total Stockholder Return(6) | | | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | 2023 | $2,944,748 | $2,802,956 | $1,216,273 | $1,176,749 | $49 | $119 | $21,591,000 | $235,637,000 | | 2022 | $2,532,761 | $3,249,847 | $982,214 | $1,174,336 | $48 | $114 | $2,000 | $228,031,000 | | 2021 | $18,453,610 | $14,666,241 | $1,478,175 | $462,002 | $35 | $126 | ($29,126,000) | $201,405,000 | | 2020 | $4,413,827 | $3,972,462 | $1,928,504 | $1,948,890 | $117 | $126 | ($59,995,000) | $202,410,000 |
Background
| 1. | Pursuant to our Director Compensation Program, each non-employee director serving on our board at this annual meeting will be awarded a restricted stock unit award with a value of $300,000 (determined using the trailing 30-calendar day average stock price through and including the grant date), capped at 27,000 shares. |