DEF 14A of Arvinas, Inc.
Filed Apr 16, 2024 · FY20230001655759-24-000052
PROPOSAL NO. 1—ELECTION OF THREE CLASS III DIRECTORS
PROPOSAL NO. 1—ELECTION OF THREE CLASS III DIRECTORS Our board of directors currently consists of ten members. In accordance with the terms of our restated certificate of incorporation and our bylaws, our board of directors is divided into three classes (Class I, Class II and Class III), with members of each class serving staggered three-year terms. The members of the classes are currently divided as follows: •the Class I directors are Linda Bain, John Houston, Ph.D., and Laurie Smaldone Alsup, M.D., and their term expires at the annual meeting of stockholders to be held in 2025; •the Class II directors are Sunil Agarwal, M.D., Leslie V. Norwalk, Esq., and John Young., to be held in 2026; and •the Class III directors are Wendy Dixon, Ph.D., Edward Kennedy, Jr., Everett Cunningham, and Briggs Morrison, M.D., and their term expires at the Annual Meeting. Upon the expiration of the term of a class of directors, directors in that class will be eligible to be elected for a new three-year term at the annual meeting of stockholders in the year in which their term expires. Our restated certificate of incorporation and our bylaws provide that the authorized number of directors may be changed only by resolution of our board of directors. Our restated certificate of incorporation and bylaws also provide that our directors may be removed only for cause by the affirmative vote of the holders of at least 75% of the votes that all our stockholders would be entitled to cast in an annual election of directors, and that any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled only by vote of a majority of our directors then in office. Our board of directors, based on the recommendation of the nominating and corporate governance committee of our board of directors, has nominated three current Class III members, Edward Kennedy, Jr., Everett Cunningham, and Briggs Morrison, M.D., for election as Class III directors at the Annual Meeting. Wendy Dixon, Ph.D.,will not be standing for re-election as a Class III director at the Annual Meeting. Following the Annual Meeting subject to approval of this proposal, our board of directors will consist of nine members. Each of the nominees has indicated a willingness to serve as director, if elected. We have no reason to believe that any of our nominees will be unable to serve. However, if a nominee becomes unable or unwilling to serve, the proxies may be voted for substitute nominees selected by our board of directors, or our board of directors may reduce the number of directors to be elected at the Annual Meeting Our corporate governance guidelines provide that nominees should represent a diverse array of personal and professional characteristics, including gender, racial or ethnic identity, sexual identity, international experience and/or expertise in a particular discipline or field. Our priority in selection of board members is identification of members who will further the interests of our stockholders through their established records of professional accomplishment, the ability to contribute positively to the collaborative culture among our board members, knowledge of our business, understanding of the competitive landscape in which we operate and adherence to high ethical standards. Certain individual qualifications and skills of our directors that contribute to our board of directors’ effectiveness as a whole are described in the following paragraphs.
Nominees for Election as Class III Directors
Nominees for Election as Class III Directors Biographical information, including principal occupation and business experience during the last five years, for our nominees for election as Class III directors at our Annual Meeting is set forth below.
Nominees for Election as Class III Directors
| | Age | | Everett Cunningham has served as a member of our board of directors since December 2022. Mr. Cunningham has served as Chief Commercial Officer of Exact Sciences Corp., a company providing cancer screening and diagnostic tests, since October 2021. He has over 30 years of progressive responsibility in pharmaceuticals and medical services. Prior to joining Exact Sciences, from July 2019 to September 2021, Mr. Cunningham served as President and Chief Executive Officer for the U.S. and Canadian regions of GE HealthCare Technologies Inc., a global medical technology company, or GE. Before joining GE, from October 2012 to June 2019, Mr. Cunningham served as the Senior Vice President, Commercial, at Quest Diagnostics Incorporated, a clinical laboratory company, where he was responsible for global commercial sales, marketing, and commercial operations. Mr. Cunningham also previously served in numerous senior leadership roles at Pfizer, Inc., or Pfizer, including Regional President, Established Products for Asia Pacific, Senior Director of Worldwide Learning and Development, Senior Director of Business Operations, Vice President Sales for U.S. Pharmaceuticals, and Vice President of Global Corporate Human Resources. Mr. Cunningham has served on the board of Visby Medical since 2022. He earned his bachelor’s degree in economics from Northwestern University. We believe that Mr. Cunningham is qualified to serve on our board of directors due to his extensive experience in the pharmaceutical and medical services industries. | 57 | | Edward Kennedy, Jr. has served as a member of our board of directors since July 2018. A health care regulatory attorney for over 25 years, Mr. Kennedy is currently Partner and Member of the Health Care and Life Sciences practice of Epstein Becker & Green, P.C., a national law firm, where he counsels healthcare companies on the legal, reimbursement, coding and coverage issues facing providers, payers and the life sciences industry, since January 2014. Previously, Mr. Kennedy served as the Co-Founder and President of Marwood Group, a healthcare focused strategic advisory and financial services firm, from January 2001 to December 2013. A childhood cancer survivor and amputee, Mr. Kennedy has been a lifelong patient advocate and disability rights activist, and serves on the board of the American Association of People with Disabilities. He also served as a State Senator in the Connecticut General Assembly from January 2015 to January 2019. Mr. Kennedy currently serves on the board of directors of the publicly-traded company, InnovAge Holding Corp. Mr. Kennedy holds a J.D. from the University of Connecticut School of Law, an M.E.S. from the Yale School of Forestry and Environmental Studies and a B.A. from Wesleyan University. We believe Mr. Kennedy is qualified to serve on our board due to his extensive legal and regulatory experience, his roles as a policymaker and legislator, and his service on the boards of many innovative healthcare companies. | 62 | | Briggs Morrison, M.D., has served as a member of our board of directors since June 2018 and lead independent director since June 2023. Prior to joining our board of directors, Dr. Morrison was a member of our Scientific Advisory Board from August 2016 to June 2018. Dr. Morrison has served as Chief Executive Officer of Crossbow Therapeutics, Inc., a biotechnology company, since April 2023. Dr. Morrison previously served as President, Head of Research and Development of Syndax Pharmaceuticals Inc., a publicly-traded biopharmaceutical company, from February 2022 to April 2023 and previously served as Chief Executive Officer of Syndax Pharmaceuticals Inc. Dr. Morrison has also served as Executive Partner at MPM Capital, Inc. since June 2015. Previously, Dr. Morrison was the Chief Medical Officer and Head of Global Medicines Development at AstraZeneca plc, a biopharmaceutical company, from January 2012 to June 2015. Dr. Morrison currently serves on the board of directors of the publicly-traded companies, Carisma Therapeutics, Inc., Repare Therapeutics Inc., Syndax Pharmaceuticals Inc., and Werewolf Therapeutics Inc. and previously served on the board of directors of the publicly-traded companies Codiak Biosciences, Inc., NextCure, Inc., and Oncorus, Inc. Dr. Morrison holds an M.D. from the University of Connecticut Medical School and a B.S. in biology from Georgetown University. He completed residency training in Internal Medicine at the Massachusetts General Hospital and a fellowship in Medical Oncology at the Dana-Farber Cancer Institute. We believe Dr. Morrison is qualified to serve on our board due to his extensive executive leadership experience, his medical background and training, and his service on the boards of other public and private biopharmaceutical and biotechnology companies. | 65 |
Nominees for Election as Class III Directors
The board of directors recommends voting “FOR” the election of Edward Kennedy, Jr., Everett Cunningham, and Briggs Morrison, M.D., as Class III directors, for a three-year term ending at the annual meeting of stockholders to be held in 2027. Any properly submitted proxy will be voted in favor of the nominees unless a contrary specification is made in the proxy. The nominees have consented to serve as directors if elected. However, if any nominee is unable to serve or for good cause will not serve as a director, the persons named in the proxy intend to vote in their discretion for one or more substitutes who will be designated by our board of directors, or our board of directors may reduce the number of directors to be elected at the Annual Meeting.
Directors Continuing in Office
Directors Continuing in Office Biographical information, including principal occupation and business experience during the last five years, for our directors continuing in office after the Annual Meeting is set forth below.
Class I Directors (Term Expires at 2025 Annual Meeting)
Class I Directors (Term Expires at 2025 Annual Meeting)
Class I Directors (Term Expires at 2025 Annual Meeting)
| | Age | | Linda Bain has served as a member of our board of directors since June 2020. Ms. Bain has served as Chief Operating Officer and Chief Financial Officer for Mariana Oncology, Inc., a radiopharmaceutical company, since May 2023. Ms. Bain served as Chief Financial Officer of Codiak BioSciences, Inc., a biopharmaceutical company, from December 2015 to April 2023, where she led a successful initial public offering, or IPO, and follow-on financings. Previously, Ms. Bain served as Chief Financial Officer of Avalanche Biotechnologies, Inc., a gene therapy company, from April 2014 to November 2015, where she led a successful IPO and follow-on financing. Additionally, she served as Vice President of Finance, Business Operations at bluebird bio, Inc., a gene therapy biotechnology company, from October 2011 to March 2014, and as the Principal Accounting Officer from June 2013 to March 2014 where she led a successful IPO. Prior to bluebird bio, Ms. Bain held senior roles at Genzyme Corporation, a biotechnology company, and was Vice President of Finance, Global Manufacturing and Operations, and Vice President of Finance, Genzyme Genetics. Earlier in her career she held senior roles at Fidelity Investments, AstraZeneca plc, and Deloitte & Touche LLP. Ms. Bain currently serves on the board of directors of the publicly traded company Autolus Therapeutics plc. Ms. Bain is a Certified Public Accountant and earned a Bachelor of Science in Accounting and Business Administration and an Honors degree in Accounting and Business Administration from the University of the Free State, Bloemfontein, South Africa. We believe Ms. Bain is qualified to serve on our board due to her extensive executive leadership experience, knowledge of the life sciences industry, and her work with other public and private biopharmaceutical and biotechnology companies. | 53 | | John Houston, Ph.D., has served as a member of our board of directors and as our President and Chief Executive Officer since September 2017, our chairperson since June 2023, and President of Research and Development since February 2017. Dr. Houston served as our Chief Scientific Officer from January 2017 to April 2019 and has functioned as our principal executive officer since February 2017. Prior to joining Arvinas, Dr. Houston served in positions of increasing responsibility at The Bristol-Myers Squibb Company, a biopharmaceutical company, most recently as Senior Vice President, Head of Specialty Discovery from September 2015 to August 2016, and as Senior Vice President of Disease Sciences, Biologics and Applied Biotechnology from August 2008 to September 2015. Dr. Houston currently serves on the board of directors of the publicly-traded company NextCure, Inc. Dr. Houston holds a Ph.D. in microbial biochemistry from Heriot-Watt University, Edinburgh and a B.Sc. in medical microbiology from the University of Glasgow. We believe Dr. Houston is qualified to serve on our board due to his scientific and historical experience with us gained from serving as our President and Chief Executive Officer, combined with his previous scientific training and qualifications and the skills and experience he has developed during his extensive career in the life sciences industry. | 64 | | Laurie Smaldone Alsup, M.D., has served as a member of our board of directors since November 2019. Dr. Smaldone Alsup has served as Senior Vice President, Regulatory Science and Practical Lead of SSI Strategy Holdings LLC, a consulting firm that supports the needs of the medical affairs, pharmacovigilance, and clinical development functions within life science companies, or SSI Strategy, since January 2024. Dr. Smaldone Alsup served as Chief Scientific Officer and Chief Medical Officer for NDA Group, a regulatory and drug development consulting firm, from March 2016, when NDA Group merged with PharmApprove, LLC, to January 2024, when NDA group merged with SSI Strategy. Dr. Smaldone Alsup served as President and Chief Scientific Officer of PharmApprove, LLC, a regulatory communications consultancy firm and division of Taft and Partner, from August 2011 to March 2016. In addition, she served as Chief Executive Officer of Phytomedics, Inc., an early stage company focused on arthritis and inflammation, from 2008 to 2011. Prior to that, Dr. Smaldone Alsup spent over 20 years at Bristol Myers Squibb, a biopharmaceutical company, in roles of increasing responsibility in clinical development, regulatory strategy, and corporate risk management including Senior Vice President, Global Regulatory Science. Dr. Smaldone Alsup currently serves on the board of directors of the publicly-traded companies Blackberry Ltd., and Theravance Biopharma, Inc. and previously served as a member of the board of directors of the publicly-traded companies Kalobios Pharmaceuticals, Inc., Kinnate Biopharma Inc. and Pardes Biosciences Inc. (which was acquired by MediPacific, Inc.). Dr. Smaldone Alsup holds an M.D. from the Yale School of Medicine and a B.A. in biology from Fordham College. We believe Dr. Smaldone Alsup is qualified to serve on our board due to her extensive regulatory and clinical experience in the life sciences industry, senior management experience in several companies in our industry and demonstrated leadership in her field. | 70 |
Class II Directors (Term Expires at 2026 Annual Meeting)
Class II Directors (Term Expires at 2026 Annual Meeting)
Class II Directors (Term Expires at 2026 Annual Meeting)
| | Age | | Sunil Agarwal, M.D., has served as a member of our board of directors since June 2023. Dr. Agarwal most recently served as Executive Vice President, Head of Development and Chief Medical Officer at Sana Biotechnology, Inc., a company focused on creating and delivering engineered cells as medicines for patients, or Sana, from August 2018 until early 2024, after participating in a transition in which he helped to onboard two senior leaders to Sana’s research and development organization. From April 2017 to August 2018, Dr. Agarwal served as President of Research and Development at Juno Therapeutics Inc., a biopharmaceutical company. Previously, Dr. Agarwal was a Partner at Sofinnova, a biotech-focused investment firm. He also served as a former Executive Vice President and Chief Medical Officer at Ultragenyx Pharmaceutical, a biopharmaceutical company, where he managed the company’s clinical development and operations, regulatory affairs, biometrics, pharmacovigilance, medical affairs, pharmacology, and toxicology functions. Additionally, Dr. Agarwal previously served in various leadership roles at Genentech Inc., or Genentech, a biotechnology company, for more than a decade, including Senior Vice President and Global Head of Clinical Development for ophthalmology, metabolism, neurosciences, immunology, and infectious diseases. He led the approval of multiple therapies at Genentech including RITUXAN®, ACTEMRA®, LUCENTIS® and XOLAIR®. Earlier in his career, Dr. Agarwal served at MedImmune LLC and Guilford Pharmaceuticals Inc., or Guilford, both pharmaceutical companies, where he served in both development and medical affairs and led the formation of Guilford’s Medical Affairs Organization. Dr. Agarwal currently serves as a member of the board of directors of the publicly-traded company, Astria Therapeutics, Inc., and previously served as a member of the board of directors of the publicly-traded companies MyoKardia, Inc. (which was acquired by The Bristol-Myers Squibb Company) and Calithera Biosciences, Inc. Dr Agarwal completed his residency at Children’s National Medical Center (CNMC), Washington, D.C., and practiced in the CNMC Pediatric Emergency Department. He obtained his B.S. in neurobiology from Cornell University and earned his M.D. from Tufts University School of Medicine. We believe that Dr. Agarwal is qualified to serve on our board of directors due to his extensive research and development experience. | 54 | | Leslie V. Norwalk Esq., has served as a member of our board of directors since July 2019. Ms. Norwalk has served as strategic counsel to Epstein Becker & Green, P.C., a law firm with a focus on healthcare and life science, since August 2007, and two healthcare consulting agencies, EBG Advisors, Inc. and National Health Advisors, since September 2007. Additionally, since 2008, Ms. Norwalk has served as an advisor to several private equity firms. From 2006 to 2007, she was the acting administrator of the Centers for Medicare & Medicaid Services, where she managed the operations of federal health care programs, including Medicare and Medicaid. From 2002 to 2005, she was the agency's deputy administrator. Prior to that, Ms. Norwalk practiced law with Epstein Becker & Green, P.C., from 1996 to 2001. Ms. Norwalk also previously served in the George H.W. Bush Administration in the White House Office of Presidential Personnel and the Office of the US Trade Representative. Ms. Norwalk currently serves on the boards of directors of the publicly-traded companies ModivCare, Inc., Neurocrine Biosciences, Inc. and Globus, Inc. and previously served on the board of directors of the publicly-traded companies Centene Corporation, Endologix, Inc., Magellan Health, Inc., Nuvasive, Inc. (acquired by Globus, Inc.), Press Ganey Holdings, Inc., and Volcano Corp. Ms. Norwalk holds a J.D. from the George Mason University School of Law and a B.A. from Wellesley College. We believe Ms. Norwalk is qualified to serve on our board due to her knowledge of, and experience with, the healthcare industry and government regulations. | 58 | | John Young has served as a member of our board of directors since August 2022. Mr. Young joined our board of directors with nearly 35 years of experience with Pfizer, Inc. Prior to his retirement from Pfizer, Mr. Young served as Group Senior Advisor to the Pfizer Chief Executive Officer, from January to June 2022, and from January 2019 to December 2021 served as Group President and Chief Business Officer at Pfizer. Mr. Young also served as Group President of Pfizer Innovative Health from January 2018 to January 2019, Group President of Pfizer Essential Health from January 2014 to January 2018 and President & General Manager, Primary Care Business Unit, from June 2012 to January 2014. Additionally, Mr. Young currently serves on the boards of directors of the publicly-traded companies, Johnson Controls International and Novartis AG. Mr. Young previously served on the board of directors of the publicly-traded company, Haleon PLC. Previously, Mr. Young served as a board member for the European Federation of Pharmaceutical Industries Associations, The Biotechnology Innovation Organization, and the National Committee on United States-China Relations. Mr. Young received a B.Sc. in Biological Science from Glasgow University and an MBA from Strathclyde Graduate Business School. We believe Mr. Young is qualified to serve on our board of directors due to his deep experience and leadership in the pharmaceutical industry. | 59 |
Former Members of our Board of Directors Who Served in 2023 and Directors Not Standing for Re-Election at the Annual Meeting
Former Members of our Board of Directors Who Served in 2023 and Directors Not Standing for Re-Election at the Annual Meeting Timothy Shannon, M.D. served as the Chairperson and a member of our board of directors from July 2013 to June 2023. Dr. Shannon did not stand for re-election at the 2023 annual meeting of stockholders. Wendy Dixon., a member of our board of directors since June 2020, will not be standing for re-election at the Annual Meeting. There are no family relationships between or among any of our directors or executive officers. The principal occupation and employment during the past five years of each of our directors was carried on, in each case except as specifically identified above, with a corporation or organization that is not a parent, subsidiary or other affiliate of us. There is no arrangement or understanding between any of our directors and any other person or persons pursuant to which he or she is to be selected as a director. There are no material legal proceedings to which any of our directors is a party adverse to us or any of our subsidiaries or in which any such person has a material interest adverse to us or any of our subsidiaries. Codiak BioSciences, Inc., where Ms. Bain previously served as Chief Financial Officer, filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in March 2023.
EXECUTIVE AND DIRECTOR COMPENSATION
EXECUTIVE AND DIRECTOR COMPENSATION
Compensation Design
Compensation Design Compensation Philosophy and Objectives The goal of our executive compensation policies and programs is to pay for performance. Within this overarching principle, there are a number of key objectives that our policies and programs are designed to achieve: •Attract and retain individuals with superior ability, technical, and managerial experience; •Align the executives’ interests with those of our stockholders through long-term incentives linked to specific performance; and •Provide market competitive compensation to attract and retain highly qualified individuals who are capable of making significant contributions to the long-term success of the company. Alignment with Company Strategy Our executive compensation policies and programs reinforce our pay-for-performance philosophy. While fixed compensation, such as base salary and benefits, are primarily designed to be competitive in the biopharmaceutical marketplace for employees, a substantial portion of our named executive officers’ compensation is linked to achieving scientific, business, organizational and operational goals. We provide a significant portion of our executive compensation in the form of long-term incentives (stock options and RSUs) that vest over time. These equity awards are a key aspect of our pay-for-performance philosophy and serve to align the interests of our named executive officers with our stockholders, as they are tied to future increases in the value of our stock. Further, we believe that equity awards with a time-based vesting feature promote retention because this feature incentivizes our named executive officers to remain in our employment during the vesting period. The annual cash bonuses paid to our named executive officers are based entirely on corporate performance goals established by the board of directors. Our executives make strategic decisions that influence the company, and we believe it is appropriate to reward performance against corporate performance goals in that case, in line with our pay-for-performance philosophy. The total target compensation (base salary, target annual cash bonuses and equity incentive awards) for our Chief Executive Officer and our other named executive officers in 2023 was primarily performance-based, as shown in the charts below: The compensation committee uses a comparative framework to assess the named executive officers’ total compensation mix, but does not have a pre-established policy for allocating total compensation. Rather, based on blended peer group and broader market data, market competitiveness, expected future contribution, experience, impact and individual performance, and internal parity relative to similar positions within the company, the compensation committee subjectively determines the appropriate level and mix of total compensation, keeping in mind our pay-for-performance compensation philosophy. We believe that this approach results in compensation that: •is at an appropriate level to attract and retain individuals with superior ability, technical, and managerial experience; •provides the appropriate incentives to our executives to make significant contributions to the long-term success of the company, while avoiding incentives for inappropriate risk-taking; and •is fair and competitive without being excessive. Elements of Executive Compensation The primary elements of our executive compensation in program in 2023 were:
Compensation Design
| Element | Purpose | Key Features and Timing | | Base Salary (fixed cash) | Provide competitive, fixed compensation to attract and retain top executive talent | • Cash-based • Initial base salaries are set at the time of hire, and adjustments to base salaries are considered in conjunction with changes in job responsibilities or annually as part of our merit increase process | | Annual Cash Bonus (“at-risk” cash) | Performance-contingent compensation to motivate and reward individual for attaining rigorous corporate performance goals that relate to our key business objectives | • Cash-based • Based on corporate and individual performance • Generally measured and paid out on an annual basis, typically annually following the close of the previous fiscal year | | Long-term Incentives (“at-risk” equity) | Variable incentive compensation to promote performance, support retention, and create stockholder alignment | • Equity-based • Granted in time-based stock options and RSUs • Based on blended peer group and broader market data, market competitiveness, expected future contribution, experience, impact and individual performance, and internal parity relative to similar positions within the company • Generally granted at the time of hire, and annually following the close of the previous fiscal year |
2023 Compensation Decisions and Outcomes
2023 Compensation Decisions and Outcomes Role of our Compensation Committee and Executive Officers Our compensation committee, composed entirely of independent directors, is responsible for overseeing our compensation philosophy and operates under a written charter. Among other things, the role of our compensation committee is to seek to ensure that compensation decisions represent sound fiscal policy and enable us to attract and motivate qualified personnel, review and approve, or make recommendations to our board of directors with respect to, the compensation of our Chief Executive Officer and our other executive officers and recommend to the board of directors the compensation of the board of directors. In making its executive compensation determinations, our compensation committee and, if applicable, the full board of directors, considers recommendations from our Chief Executive Officer for our named executive officers (other than himself). In making his recommendations, our Chief Executive Officer has access to various third-party compensation surveys and compensation data provided by our compensation committee’s compensation consultant, as described below. While our Chief Executive Officer discusses his recommendations for the other named executive officers with our compensation committee, he does not participate in the deliberations concerning, or the determination of, his own compensation. From time to time, various other members of management and other employees as well as outside advisors or consultants may be invited by our compensation committee to make presentations, provide financial or other background information or advice or otherwise participate in compensation committee meetings. No named executive officer is present during voting or deliberations on his own compensation. Say-on-Pay Advisory Vote and Stockholder Engagement Each year, pursuant to Section 14(a) of the Exchange Act, we submit to our stockholders a proposal to vote, on an advisory, non-binding basis, to approve the compensation of our named executive officers disclosed in our proxy statement. We first held this vote at the 2021 annual meeting of stockholders. In addition, at our 2021 annual meeting of stockholders, our stockholders voted that we hold such a vote every year. In setting executive compensation, the compensation committee and the board of directors also consider the results of this “say-on-pay” vote. At the 2023 annual meeting of stockholders, this proposal received over 83% of the votes cast by stockholders, excluding broker non-votes and abstentions. While the say-on-pay vote is an advisory, non-binding, vote, we strongly value the opinions of our stockholders as expressed by the results of the say-on-pay vote and believe that stockholder approval of our named executive officer compensation demonstrates an alignment with our stockholders’ interests. Our compensation committee and board will continue to consider stockholder input and monitor our executive compensation program to ensure it aligns the interests of our named executive officers with the interests of our stockholders and adequately addresses any stockholder concerns that may be expressed in future votes. Consistent with the recommendation of our board and the preference of our stockholders as reflected in the non-binding advisory vote on the frequency of future “say-on-pay” votes conducted at our 2021 annual meeting of stockholders, our stockholders will have an opportunity annually to cast an advisory vote in connection with compensation for our named executive officers. Role of our Compensation Consultant As a part of reviewing, recommending and determining (as applicable) compensation for our named executive officers, the compensation committee has engaged Aon’s Human Capital Solutions Practice, a division of Aon plc (“Aon”), as an independent compensation consultant. Aon provides analysis and recommendations to the compensation committee regarding: •trends and emerging topics with respect to executive compensation; •peer group selection for executive compensation benchmarking; •compensation practices of our peer group; •compensation programs for executives, directors and all of our employees; and •stock utilization and related metrics. When requested, Aon consultants attend meetings of the compensation committee, including executive sessions in which executive compensation issues are discussed. Aon is engaged by the compensation committee and meets with management for purposes of gathering information for its analyses and recommendations. In determining to engage Aon, the compensation committee reviewed the independence of Aon taking into consideration relevant factors, including the absence of other services provided to the company by Aon, the amount of fees the company paid to Aon as a percentage of Aon’s total revenue, the policies and procedures of Aon that are designed to prevent conflicts of interest, any business or personal relationship of the individual compensation advisors employed by Aon with an executive officer of the company, any business or personal relationship the individual compensation advisors employed by Aon have with any member of the compensation committee, and any stock of the company owned by Aon or the individual compensation advisors employed by Aon. The compensation committee has determined, based on its analysis in light of all relevant factors, including the factors listed above, that the work of Aon and the individual compensation advisors employed by Aon as compensation consultants to the compensation committee has not created any conflicts of interest, and that Aon is independent pursuant to the independence standards set forth in The Nasdaq Global Select Market listing standards promulgated pursuant to Section 10C of the Exchange Act. Executive Compensation Process The compensation committee compares our executive compensation against a peer group to determine market trends and competitiveness. On an annual basis, the compensation committee reviews the companies in our peer group, as well as Aon’s recommendations regarding which companies should be included in the peer group. The compensation committee may also adjust the peer group to ensure it properly reflects the market in which we compete for executive talent. For purposes of compensation for 2023, the compensation committee retained Aon to evaluate our executive compensation program and recommend a course of action for 2023. In determining the 2023 base salaries, annual cash bonuses and long-term incentives for our named executive officers, our compensation committee relied on the following peer group, or the 2023 Peer Group:
2023 Compensation Decisions and Outcomes
* New to the 2023 Peer Group Aon focused on developing a peer group that: •comprised companies operating in the biopharmaceutical industries; •captured comparable companies in terms of market capitalization, revenue, employee size and stage of development; and •allowed for sufficient room for the company to grow. The 2023 Peer Group represents a group of pre-commercial, later stage, oncology or neurology-focused biopharmaceutical/biotechnology companies, with a median market capitalization of $3,110.7 million and a median of 346 employees. Dicerna Pharmaceuticals, Inc., Rubius Therapeutics, Inc., Turning Point Therapeutics, Inc. and Zymeworks, Inc. were each removed from our peer group as their market capitalization and/or stage of development, as applicable, fell outside our targeted range, or due to acquisition, as applicable. Based on the 2023 Peer Group, Aon prepared an assessment that included pay levels and compensation practices from public SEC filings. Aon supplemented the 2023 Peer Group proxy information with data from the Radford Global Compensation Survey, comprising 71 companies with a median headcount of 348 and a median market capitalization of $2.4 billion, which provides a broader market representation of companies and deeper position reporting. To arrive at competitive market compensation, market data collected from the 2023 Peer Group and the Radford Global Compensation Survey was blended equally to form a composite assessment. In analyzing and setting our executive compensation program for 2023, the board of directors and the compensation committee, as applicable, compared certain aspects of our named executive officers’ compensation to the compensation levels included in this composite assessment. Based on the results of the assessment, the board of directors and the compensation committee, as applicable, determined that compensation levels for our named executive officers in 2023 generally reflected market competitive ranges. Base Salaries The base salary for our Chief Executive Officer is determined annually by the board of directors, upon recommendation by the compensation committee. Base salaries for our named executive officers other than our Chief Executive Officer are recommended by our Chief Executive Officer to the compensation committee for approval. Each such determination is based on the scope of each officer’s responsibilities along with his respective experience and contributions to the company during the prior year. When reviewing base salaries, the board of directors and compensation committee, as applicable, takes factors into account such as blended peer group and broader market data, market competitiveness, expected future contribution, experience, impact and individual performance, and internal parity relative to similar positions within the company, but does not assign any specific weighting to any factor. The following table presents the base salaries for each of our named executive officers for the years 2022 and 2023, as approved by the board of directors and compensation committee, as applicable. The 2023 base salaries became effective on January 1, 2023.
2023 Compensation Decisions and Outcomes
Annual Cash Bonuses Our annual cash incentive program promotes and rewards our executive officers for the achievement of key business and strategic goals. Under this program, cash incentive awards are determined by multiplying each executive officer’s annualized base salary by a target annual bonus percentage and a corporate performance achievement factor established by our board of directors and compensation committee based on our performance as measured against our pre-established corporate goals. For the year ended December 31, 2023, the target annual bonus percentage was 60% for Dr. Houston and 45% for each of Mr. Cassidy, Dr. Peck and Dr. Taylor. Our board of directors and compensation committee, as applicable, set these targets at the beginning of the year and determined that annual cash bonus opportunities were competitive with the market based primarily on data provided by Aon. During and following the last quarter of each year, our senior management team evaluates our company performance. Based on this evaluation, our Chief Executive Officer recommends to our compensation committee any cash awards for executives (other than himself) under our annual cash incentive program. Our compensation committee then carefully reviews overall corporate performance. Our board of directors, upon the recommendation of our compensation committee, then further reviews our Chief Executive Officer’s compensation and evaluates our Chief Executive Officer’s contributions to our corporate performance. Our board of directors and compensation committee, as applicable, have the discretion to adjust the size of individual awards upward or downward based on company performance. At the beginning of 2023, the compensation committee and the board of directors established the corporate goals listed in the table below for the calendar year 2023, each overall goal having a designated weighting and relating to key development, strategic and business goals for the company. Our Chief Executive Officer and certain other members of senior management report to the compensation committee and the board of directors on our overall performance against these goals on a regular basis throughout the year. In addition, our compensation committee met with our Chief Executive Officer and certain other members of senior management as part of its annual compensation review and discussed our corporate performance in 2023 and a proposed corporate goal achievement score based on the Company’s actual performance as calculated against the previously-established corporate goals. The Chief Executive Officer then proposed recommendations for cash incentive awards for each of our executive officers other than the Chief Executive Officer. Our board of directors then further evaluated the cash incentive award for our Chief Executive Officer. Because our overall corporate goals allow for some amount of subjective and qualitative assessment, the compensation committee and the board of directors engaged in a number of discussions, including with certain members of senior management, as to the appropriate scoring of the Company’s performance against the goals previously-established corporate goals. The following table sets forth our 2023 corporate goals and the level of achievement against those goals as determined by the compensation committee and the board of directors.
2023 Compensation Decisions and Outcomes
As part of its evaluation of our corporate performance, our compensation committee and our board of directors noted various performance outcomes, including certain upside considerations supporting actual level of achievement over 100%, during 2023, including the factors listed below. Based on our overall performance during 2023 against these goals, our compensation committee and our board of directors determined that our overall corporate goals had been achieved at a level of 125%. However, as part of our overall commitment to our employees, we funded a special bonus pool of 5% from the overall bonus pool of 125%. As such, the bonuses awarded to all employees, including our named executive officers, for 2023 are based on a corporate goal achievement level of 120% and a portion of our employee population that contributed significantly to the company in 2023 received additional bonus amount. For the avoidance of doubt, for purposes of calculating annual bonuses for our named executive officers, bonuses were based on achievement of corporate goals at a level of 120%. 2023 Achievement Outcomes:
•Corporate
| Name | 2023 Annualized Salary ($) | 2023 Target Bonus (% of base salary) | 2023 Target Bonus ($) | Ratio (%) | 2023 Actual Bonus (1) ($) | | John Houston, Ph.D. | 657,697 | 60 | 394,618 | 120.0 | 473,600 | | Sean Cassidy | 460,617 | 45 | 207,278 | 120.0 | 248,800 | | Ronald Peck, M.D. | 473,443 | 45 | 213,049 | 120.0 | 255,700 | | Ian Taylor, Ph.D. | 466,856 | 45 | 210,085 | 120.0 | 252,200 |
•Corporate
(1) Based on past historical practice, annual bonuses actually awarded to each of Dr. Houston, Mr. Cassidy, Dr. Peck and Dr. Taylor were rounded up to the next hundred dollars from $473,542, $248,733, $255,659, $252,102, respectively, at the discretion of our compensation committee and board of directors, as applicable. Long-term Incentives Our equity awards program is designed to: •reward demonstrated leadership and performance; •align our executive officers’ interests with those of our stockholders; •retain our executive officers at least through the term of the awards; •maintain competitive levels of executive compensation; and •motivate our executive officers for outstanding future performance. The market for qualified and talented executives in the biopharmaceutical industry is highly competitive and we compete for talent with many companies that have greater resources than we do. Accordingly, we believe equity compensation is a crucial component of any competitive executive compensation package we offer. Historically, our equity awards have generally taken the form of stock options. In February 2023, our compensation committee determined that, in 2023 our annual equity incentive awards granted to our named executive officers would be in the form of stock options and RSUs, with two thirds of such award in the form of stock options and one third in the form of RSUs. We typically make equity award grants to each of our executive officers upon commencement of employment, annually in conjunction with our review of executive compensation, in connection with a promotion, or as a special incentive. All equity awards to our executive officers are approved by our compensation committee and, other than equity awards to new hires, are typically granted by our compensation committee in the first quarter of the year. The size of equity awards varies among our executive officers based on their positions and annual performance assessments. All stock options granted to our executive officers have exercise prices equal to the fair market value of our common stock on the date of grant, so that the recipient will not realize any value from his options unless our share price increases above the exercise price on the date of grant. Accordingly, this portion of our executive officers’ compensation is at risk and is directly aligned with stockholder value creation. In addition, equity grants to our executive officers typically vest over four years, which we believe provides an incentive to our executives to add value over the long-term and to remain with our company. Typically, the stock options we grant to our executives have a ten-year term and vest as to 25% of the shares on the first anniversary of their grant date and then in equal monthly installments thereafter until the fourth anniversary of such date, and RSU awards we grant to our executives vest as to 25% of the shares on the first anniversary of their grant and then in equal annual installments thereafter until the fourth anniversary of such date. Vesting of equity granted to employees ceases upon termination of employment and exercise rights typically cease three months following termination of employment, except in the case of death or disability, for grants made under our 2018 Plan. Prior to the exercise of an option, or settlement of an RSU, the stock option or RSU holder, as applicable, does not have any rights as a stockholder with respect to the shares subject to such option or RSU, as applicable, including voting rights or the right to receive dividends or dividend equivalents. The compensation committee may approve different award types in the future as part of the overall compensation strategy. Awards made in connection with a new, extended or expanded employment relationship may involve a different mix of equity awards, depending on the compensation committee’s assessment of the total compensation package being offered. In connection with the annual review of each executive officer’s individual performance and consistent with our compensation philosophy, based on a long-term incentive value in line with our 30-day stock price and Black Scholes percentage, in February 2023, our compensation committee approved annual equity incentive awards for our named executive officers. The number of stock options awarded and RSUs to each named executive officer was based on the 30-day average stock price of our common stock on the Nasdaq Global Select Market as of January 6, 2023, which was of $35.00, and Black Scholes percentage of 67.5% of face value. The exercise price for each of these stock options was $34.37, which was equal to the closing price of our common stock on the Nasdaq Global Select Market on the date of grant. The annual equity incentive awards granted to our named executive officers are set forth in the table below:
•Corporate
| Named Executive Officer | Stock Options (#) | RSUs (#) | | John Houston, Ph.D. | 186,250 | 61,975 | | Sean Cassidy | 57,450 | 19,125 | | Ronald Peck, M.D. | 57,450 | 19,125 | | Ian Taylor, Ph.D. | 57,450 | 19,125 |
2023 Summary Compensation Table
2023 Summary Compensation Table The following table sets forth information regarding compensation awarded to, earned by or paid to each of our named executive officers during the fiscal years ended December 31, 2023, 2022 and 2021 (unless otherwise specified).
2023 Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Stock Awards (1) ($) | Option Awards (1) ($) | Non-Equity Incentive Plan Compensation (2) ($) | All Other Compensation (3) ($) | Total ($) | | John Houston, Ph.D. | 2023 | 657,697 | 2,130,081 | 4,352,454 | 473,600 | 13,200 | 7,627,032 | | President and Chief | 2022 | 632,401 | — | 8,467,445 | 433,800 | 12,200 | 9,545,846 | | Executive Officer | 2021 | 584,051 | — | 11,532,263 | 473,100 | 11,600 | 12,601,014 | | Sean Cassidy | 2023 | 460,617 | 657,326 | 1,343,303 | 248,800 | 13,200 | 2,723,246 | | Former Chief Financial | 2022 | 442,901 | — | 2,829,043 | 227,900 | 12,200 | 3,512,044 | | Officer (4) | 2021 | 408,126 | — | 3,572,466 | 248,000 | 11,600 | 4,240,192 | | Ronald Peck, M.D. | 2023 | 473,443 | 657,326 | 1,343,303 | 255,700 | 13,200 | 2,742,972 | | Former Chief Medical | 2022 | 455,233 | — | 2,829,043 | 234,200 | 12,200 | 3,530,676 | | Officer (5) | 2021 | 435,630 | — | 3,572,466 | 264,700 | 11,600 | 4,284,396 | | Ian Taylor, Ph.D. | 2023 | 466,856 | 657,326 | 1,343,303 | 252,200 | 13,200 | 2,732,885 | | Chief Scientific Officer | 2022 | 448,900 | — | 2,829,043 | 230,900 | 12,200 | 3,521,043 | | | 2021 | 420,000 | — | 3,572,466 | 255,200 | 11,600 | 4,259,266 |
2023 Summary Compensation Table
(1)Reflects the aggregate grant date fair value of option awards and restricted stock units granted during the years in question calculated in accordance with the provisions of Financial Accounting Standards Board Accounting Standard Codification Topic 718, Compensation-Stock Compensation. See Note 9 to our audited consolidated financial statements appearing in our 2023 Annual Report for assumptions underlying the valuation of equity awards. All options were issued at exercise prices equal to the fair market value of our common stock on the date of grant. (2)The amounts reported in the “Non-Equity Incentive Plan Compensation” column represent awards to our named executive officers under our annual performance-based cash bonus program. See “—Annual Cash Bonuses” for a description of this program. Annual performance-based bonus compensation for 2023 was earned in 2023 and paid in 2024. Annual performance-based bonus compensation for 2022 was earned in 2022 and paid in 2023. Annual performance-based bonus compensation for 2021 was earned in 2021 and paid in 2022. (3)Reflects matching contributions paid under the terms of our 401(k) plan. (4)Sean Cassidy served as Chief Financial Officer until February 29, 2024. (5)Ronald Peck, M.D. served as Chief Medical Officer until March 18, 2024.
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table sets forth information regarding non-equity and equity awards granted to each of our named executive officers during the year ended December 31, 2023. All non-equity incentive plan awards were made pursuant to our annual cash incentive plan described in more detail above. We granted stock option and RSUs to our named executive officers in 2023 in recognition of performance in 2022. All stock options granted in 2023 consisted of options to purchase shares of our common stock with an exercise price equal to the fair market value of our common stock on the date of grant. All such equity awards were granted under our 2018 Plan, unless otherwise disclosed below. The vesting schedule of each option and RSU included in the following table is described in the footnotes to the Outstanding Equity Awards at Fiscal Year-End table.
Grants of Plan-Based Awards
| Name | Grant Date | Compensation Committee or Board of Directors Approval Date (1) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards Target (2) ($) | All Other Stock Awards: Number of Shares of Stock or Units (3) (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Share) | Grant Date Fair Value of Stock and Option Awards (4) ($) | | John Houston, Ph.D. | 2/22/2023 | 2/22/2023 | 394,618 | 61,975 | 186,250 | 34.37 | 6,482,534 | | Sean Cassidy | 2/22/2023 | 2/22/2023 | 207,278 | 19,125 | 57,450 | 34.37 | 2,000,629 | | Ronald Peck, M.D. | 2/22/2023 | 2/22/2023 | 213,049 | 19,125 | 57,450 | 34.37 | 2,000,629 | | Ian Taylor, Ph.D. | 2/22/2023 | 2/22/2023 | 210,085 | 19,125 | 57,450 | 34.37 | 2,000,629 |
Grants of Plan-Based Awards
(1)Our compensation committee approves the compensation of our non-Chief Executive Officer executive officers and our board of directors approves the compensation of our Chief Executive Officer. (2)These amounts relate to our annual cash incentive plan. The amounts shown in this column represent the 2024 target payout amount based on the target percentage applied to each named executive officer’s base salary as of December 31, 2023, assuming 100% corporate goal achievement. There were no threshold or maximum amounts. As described in more detail above, in 2023 each of our named executive officers, other than Dr. Houston, had an individual bonus target of 45% of his base salary, which was tied solely to the achievement of our corporate goals for 2023. Dr. Houston had an individual bonus target of 60% of his base salary, which was likewise tied solely to the achievement of our corporate goals for 2023. Actual amounts paid to each named executive officer under our annual cash incentive plan are included in the “Non-Equity Incentive Plan Compensation” column of the 2023 Summary Compensation Table above. (3)Represents a grant of RSUs to each named executive officer. All RSU awards vest as to 25% of the shares on the first anniversary of their grant date and then in equal annual installments thereafter until the fourth anniversary of such date. (4)Reflects the fair value of time-based stock option awards and RSUs on the date of grant calculated in accordance with ASC 718. For a discussion of the assumptions used in the valuation of the time-based stock option and RSU awards granted to our named executive officers in 2023, see footnote 1 to the 2023 Summary Compensation Table above.
Outstanding Equity Awards at 2023 Fiscal Year End
Outstanding Equity Awards at 2023 Fiscal Year End The following table sets forth information regarding outstanding equity awards held by our named executive officers as of December 31, 2023.
Outstanding Equity Awards at 2023 Fiscal Year End
| | Option Awards | | | | Stock Awards | | | Name | Number of Securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Option exercise price ($) | Option expiration date | Number of shares that have not vested (#) | Market value of shares that have not vested (1) ($) | | John Houston, Ph.D. | 267,432 | — | 16.00 | 9/25/2028 | | | | | 254,597 | — | 19.36 | 2/28/2029 | | | | | 225,208 | 9,792(2) | 47.38 | 2/26/2030 | | | | | 155,479 | 64,021(3) | 78.30 | 2/25/2031 | | | | | 91,895 | 108,605(4) | 64.19 | 2/22/2032 | | | | | | 186,250(5) | 34.37 | 2/21/2033 | | | | | | | | | 61,975(6) | 2,550,891 | | Sean Cassidy | 54,413 | — | 16.00 | 9/25/2028 | | | | | 87,752 | — | 19.36 | 2/28/2029 | | | | | 71,875 | 3,125(2) | 47.38 | 2/26/3030 | | | | | 48,166 | 19,834(3) | 78.30 | 2/25/2031 | | | | | 30,708 | 36,292(4) | 64.19 | 2/22/2032 | | | | | | 57,450(5) | 34.37 | 2/21/2033 | | | | | | | | | 19,125(6) | 787,185 | | Ronald Peck, M.D. | 46,559 | — | 26.58 | 7/28/2029 | | | | | 37,500 | 3,125(2) | 47.38 | 2/26/2030 | | | | | 48,166 | 19,834(3) | 78.30 | 2/25/2031 | | | | | 30,708 | 36,292(4) | 64.19 | 2/22/2032 | | | | | | 57,450(5) | 34.37 | 2/21/2033 | | | | | | | | | 19,125(6) | 787,185 | | Ian Taylor, Ph.D. | 20,836 | — | 16.00 | 9/25/2028 | | | | | 37,633 | — | 19.36 | 2/28/2029 | | | | | 71,875 | 3,125(2) | 47.38 | 2/26/2030 | | | | | 48,166 | 19,834(3) | 78.30 | 2/25/2031 | | | | | 30708 | 36292(4) | 64.19 | 2/22/2032 | | | | | | 57450(5) | 34.37 | 2/21/2033 | | | | | | | | | 19,125(6) | 787,185 |
Outstanding Equity Awards at 2023 Fiscal Year End
(1)Amounts shown are based on a price of $41.16 per share, which was the closing price of our common stock as reported on the Nasdaq Global Select Market on December 29, 2023, the last trading day of the year. (2)25% of the shares underlying this option vested on February 27, 2021 and the remainder vested in equal monthly increments until February 27, 2024. (3)25% of the shares underlying this option vested on February 26, 2022 and the remainder vest in equal monthly increments until February 26, 2025. (4)25% of the shares underlying this option vested on February 23, 2023 and the remainder vest in equal monthly increments until February 23, 2026. (5)25% of the shares underlying this option vested on February 22, 2024 and the remainder vest in equal monthly increments until February 22, 2027. (6)25% of the shares underlying this RSU vested on February 22, 2024 and the remainder vest in equal annual increments until February 22, 2027.
Option Exercises and Stock Vested Table
Option Exercises and Stock Vested Table The following table sets forth certain information regarding the exercise of options to purchase our common stock and the vesting of restricted stock and RSUs that were held by our named executive officers during the year ended December 31, 2023.
Option Exercises and Stock Vested Table
| | Stock Awards | | | Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting (1) ($) | | John Houston | 17,510 | 534,931 | | Sean Cassidy (2) | 4,791 | 146,365 | | Ronald Peck (3) | 4,010 | 89,904 | | Ian Taylor | 2,685 | 82,027 |
Option Exercises and Stock Vested Table
(1)The value realized when the stock awards vested represents the number of shares underlying the RSUs vested multiplied by market value of the shares on the vesting date. (2)Mr. Cassidy served as Chief Financial Officer until February 29, 2024. (3)Dr. Peck served as Chief Medical Officer until March 18, 2024.
Potential Payments upon Termination or Change in Control
Potential Payments upon Termination or Change in Control The employment agreements and the employment of each of our named executive officers may be (or could have been, in the case of Mr. Cassidy and Dr. Peck) terminated as follows: (1) upon the death or “disability” (as disability is defined in the applicable employment agreement) of such named executive officer; (2) at our election, with or without “cause” (as cause is defined in the applicable employment agreement); and (3) at such named executive officer’s election, with or without “good reason” (as good reason is defined in the applicable employment agreement). In the event of the termination of Dr. Houston’s employment by us without cause, or by him for good reason, prior to or more than twelve months following a “change in control” (as change in control is defined in his employment agreement), Dr. Houston is entitled to his base salary that has accrued and to which he is entitled as of the termination date and accrued but unused paid time off through and including the termination date and other accrued benefits, which we refer to collectively as, the accrued obligations. In addition, subject to his execution and nonrevocation of a release of claims in our favor and his continued compliance with his proprietary rights, non-disclosure, developments, non-competition and non-solicitation agreement and any similar agreement with us, he is entitled to (1) continued payment of his base salary, in accordance with our regular payroll procedures, for a period of 12 months and (2) provided he is eligible for and timely elects to continue receiving group medical insurance under COBRA and the payments would not result in the violation of nondiscrimination requirements of applicable law, payment by us of the portion of health coverage premiums we pay for similarly-situated, active employees who receive the same type of coverage, for a period of up to 12 months following his date of termination. In the event of the termination of Dr. Houston’s employment by us without cause, or by him for good reason within twelve months following a change in control, Dr. Houston is entitled to the accrued obligations. In addition, subject to his execution and nonrevocation of a release of claims in our favor and his continued compliance with his proprietary rights, non-disclosure, developments, non-competition and non-solicitation agreement and any similar agreement with us, Dr. Houston is entitled to (1) continued payment of his base salary, in accordance with our regular payroll procedures, for a period of 18 months, (2) provided he is eligible for and timely elects to continue receiving group medical insurance under COBRA and the payments would not result in the violation of nondiscrimination requirements of applicable law, payment by us of the portion of health coverage premiums we pay for similarly-situated, active employees who receive the same type of coverage, for a period of up to 18 months following his date of termination, (3) a lump sum payment equal to 150% of his target bonus for the year in which his employment is terminated or, if higher, his target bonus immediately prior to the change in control and (4) full vesting acceleration of his then-unvested equity awards, such that his equity awards become fully exercisable and non-forfeitable as of the termination date. If Dr. Houston’s employment is terminated for any other reason, including as a result of his death or disability, for cause, or voluntarily by Dr. Houston without good reason, our obligations under the employment agreement cease immediately, and Dr. Houston is only entitled to the accrued obligations. In the event of the termination of Dr. Taylor’s employment by us without cause, or by Dr. Taylor for good reason prior to, or more than twelve months following, a “change in control” (as change in control is defined in his employment agreement), Dr. Taylor is entitled to the accrued obligations. In addition, subject to his execution and nonrevocation of a release of claims in our favor and his continued compliance with his proprietary rights, non-disclosure, developments, non-competition and non-solicitation agreement and any similar agreement with us, Dr. Taylor is entitled to (1) continued payment of his base salary, in accordance with our regular payroll procedures, for a period of nine months and (2) provided he is eligible for and timely elects to continue receiving group medical insurance under COBRA and the payments would not result in the violation of nondiscrimination requirements of applicable law, payment by us of the portion of health coverage premiums we pay for similarly-situated, active employees who receive the same type of coverage, for a period of up to nine months following his date of termination. In the event of the termination of Dr. Taylor’s employment by us without cause, or by Dr. Taylor for good reason within twelve months following a change in control, Dr. Taylor is entitled to the accrued obligations. In addition, subject to his execution and nonrevocation of a release of claims in our favor and his continued compliance with his proprietary rights, non-disclosure, developments, non-competition and non-solicitation agreement and any similar agreement with us, Dr. Taylor is entitled to (1) continued payment of his base salary, in accordance with our regular payroll procedures, for a period of 12 months, (2) provided he is eligible for and timely elects to continue receiving group medical insurance under COBRA and the payments would not result in the violation of nondiscrimination requirements of applicable law, payment by us of the portion of health coverage premiums we pay for similarly-situated, active employees who receive the same type of coverage, for a period of up to 12 months following his date of termination, (3) a lump sum payment equal to 100% of his target bonus for the year in which his employment is terminated or, if higher, his target bonus immediately prior to the change in control and (4) full vesting acceleration of his then-unvested equity awards, such that his equity awards become fully exercisable and non-forfeitable as of the termination date. If Dr. Taylor’s employment is terminated for any other reason, including as a result of his death or disability, for cause, or voluntarily by him without good reason, our obligations under the employment agreement cease immediately, and he is only entitled to the accrued obligations. Mr. Cassidy and Dr. Peck departed from the Company in February 2024 and March 2024, respectively. Mr. Cassidy was entitled to the accrued obligations under this employment agreement. Subject to execution and nonrevocation of a release of claims in our favor and his continued compliance with his proprietary rights, non-disclosure, developments, non-competition and non-solicitation agreement, Dr. Peck is entitled to the severance benefits provided under his employment agreement in connection with a termination of his employment without cause or for good reason. These severance benefits include, subject to the terms of his employment agreement, (1) continued payment of his base salary for a period of nine months and (2) payment of the portion of health coverage premiums paid for similarly-situated, active employees who receive the same type of coverage, for a period of up to nine months.
Potential Payments Upon Termination or Change of Control
Potential Payments Upon Termination or Change of Control The following table presents our estimate of the amount of severance benefits to which each of our named executive officers would have been entitled if a termination occurred on December 31, 2023 under the circumstances set forth in the column headings.
Potential Payments Upon Termination or Change of Control
| Name | Executive Payments and Benefits upon Termination (1) | Termination by the Company without Cause or by Executive for Good Reason (No Change in Control) $ | Termination by the Company without Cause or by Executive for Good Reason (Change in Control) $ | | John Houston | Cash Severance (2) | 657,697 | 986,546 | | | Non-Equity Incentive Plan Compensation (3) | — | 591,927 | | | Equity (4) | | | | | Options | — | 1,264,638 | | | RSUs | — | 2,550,891 | | | Other Benefits (5) | 17,283 | 25,925 | | | Total | 674,980 | 5,419,927 | | Sean Cassidy (6) | Cash Severance (2) | 345,463 | 460,617 | | | Non-Equity Incentive Plan Compensation (3) | — | 207,278 | | | Equity (4) | | | | | Options | — | 390,086 | | | RSUs | — | 787,185 | | | Other Benefits (5) | 17,410 | 23,213 | | | Total | 362,873 | 1,868,379 | | Ronald Peck (7) | Cash Severance (2) | 355,082 | 473,443 | | | Non-Equity Incentive Plan Compensation (3) | — | 213,049 | | | Equity (4) | | | | | Options | — | 390,086 | | | RSUs | — | 787,185 | | | Other Benefits (5) | 17,410 | 23,213 | | | Total | 372,492 | 1,886,976 | | Ian Taylor | Cash Severance (2) | 350,142 | 466,856 | | | Non-Equity Incentive Plan Compensation (3) | — | 210,085 | | | Equity (4) | | | | | Options | — | 390,086 | | | RSUs | — | 787,185 | | | Other Benefits (5) | 17,410 | 23,213 | | | Total | 367,552 | 1,877,425 |
Potential Payments Upon Termination or Change of Control
(1)Represents amounts payable under the terms of the employment agreements with our executive officers. All amounts listed in the table are in addition to any amounts earned or accrued but unpaid as of the date of termination. (2)Represents 12 months of base salary continuation under no change in control and 18 months of base salary continuation under a change in control for Dr. Houston. Represents nine months of base salary continuation under no change in control and 12 months of base salary continuation under a change in control for Mr. Cassidy, Dr. Peck and Dr. Taylor. (3)Non-equity incentive plan compensation payment amount assumes no bonus amounts for 2023 have been paid to the executive as of December 31, 2023, and that all 2022 bonus amounts have been paid as of such date, in each case, as would be consistent with the company’s historical practice. Represents an amount equal to 150% of Dr. Houston’s annual target bonus for 2023. Represents an amount equal to 100% of the annual target bonus for 2023 for Mr. Cassidy, Dr. Peck and Dr. Taylor. (4)With respect to options, reflects the in-the-money value of the unvested portion of such named executive officer’s options. The value is calculated by multiplying the amount (if any) by which $41.16, the closing price of our common stock on The Nasdaq Global Select Market on December 29, 2023, exceeds the exercise price of the option by the number of shares subject to the accelerated portion of the option. With respect to RSUs and restricted stock, the value is calculated by multiplying the number of unvested RSUs and restricted stock with vesting provisions based solely on time by $41.16, the closing price of our common stock on The Nasdaq Global Select Market on December 30, 2023. (5)Represents 12 months and 18 months of reimbursement of a portion of Dr. Houston’s and dependents’ health and dental COBRA premiums to the same extent as if the executive remained employed for no change in control and change in control respectively. Represents nine months and 12 months of reimbursement of a portion of Mr. Cassidy’s, Dr. Peck’s and Dr. Taylor’s and dependents’ health and dental COBRA premiums to the same extent as if the executive remained employed for no change in control and change in control respectively. (6)Mr. Cassidy served as Chief Financial Officer until February 29, 2024. (7)Dr. Peck served as Chief Medical Officer until March 18, 2024.
Pay Ratio
Pay Ratio As required by the Dodd-Frank Act and SEC rules, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of John Houston, our President and Chief Executive Officer. For 2023, we estimate the pay ratio of the annual total compensation of our President and Chief Executive Officer ($7,627,032 as reported in the 2023 Summary Compensation Table above) to the annual total compensation of our median employee ($266,130) to be approximately 29 to 1. We believe this ratio represents a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. There have been no changes in our employee population or employee compensation arrangements that we believe would significantly impact the calculations of this pay ratio and require us to identify a new median employee. Last year’s reported median employee had anomalous compensation, therefore, consistent with SEC rules, for 2023, we chose to use a substitute employee that was identified near the median and who was viewed as more representative. In 2022, the median employee was identified by examining our total employee population at October 15, 2022 of approximately 400 full-time employees, excluding our President and Chief Executive Officer. We then used base salary, incentive compensation (including annual cash bonuses and long-term incentives) and other incentive payments, as applicable, to determine the annual total compensation of our median employee. We did not make any cost-of-living or other adjustments. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Pay Versus Performance Disclosure
Pay Versus Performance Disclosure In accordance with rules adopted by the U.S. Securities and Exchange Commission pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we provide the following disclosure regarding executive compensation for our principal executive officer, or PEO, and non-PEO named executive officers, or Non-PEO NEOs, and our performance for the fiscal years listed below. We did not use any financial performance measures to link Compensation Actually Paid to our performance in 2023. Therefore, this disclosure presents neither a Tabular List of most important financial performance measures nor a Company-Selected Measure. Further, The Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years shown. The Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years shown.
Pay Versus Performance Disclosure
| Year | Summary Compensation Table Total for John Houston, Ph.D.¹ ($) | Compensation Actually Paid to John Houston, Ph.D.¹˒²˒³ ($) | Average Summary Compensation Table Total for Non-PEO NEOs¹ ($) | Average Compensation Actually Paid to Non-PEO NEOs¹˒²˒³ ($) | Value of Initial Fixed $100 Investment based on:4 | | Net Income ($ Millions) | | | | | | | Total Shareholder Return ($) | Peer Group Total Shareholder Return ($) | | | 2023 | 7,627,032 | 5,982,932 | 2,733,034 | 2,167,245 | 100.17 | 118.87 | (367) | | 2022 | 9,545,846 | (6,680,330) | 3,521,254 | (1,686,145) | 83.26 | 113.65 | (283) | | 2021 | 12,601,014 | 9,298,565 | 4,261,285 | 3,296,740 | 199.90 | 126.45 | (191) | | 2020 | 8,019,781 | 26,459,622 | 2,892,630 | 8,267,864 | 206.69 | 126.42 | (119) |
Pay Versus Performance Disclosure
(1)John Houston, Ph.D. was our PEO for each year presented. The individuals comprising the Non-PEO NEOs for each year presented are listed below.
Pay Versus Performance Disclosure
| 2020 - 2023 | | Sean Cassidy | | Ronald Peck, M.D. | | Ian Taylor, Ph.D. |
Pay Versus Performance Disclosure
(2)The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by our named executive officers during the applicable years. These amounts reflect the Summary Compensation Table Total with certain adjustments made in accordance with Item 402(v) and as described in footnote 3 below. (3)Compensation Actually Paid reflects the exclusions and inclusions of certain amounts for the PEO and the Non-PEO NEOs as set forth below. Equity values are calculated in accordance with FASB ASC Topic 718. Amounts in the Exclusion of Option Awards column are the totals from the Option Awards column set forth in the Summary Compensation Table.
Pay Versus Performance Disclosure
| Year | Summary Compensation Table Total for PEO ($) | Exclusion of Equity Awards for PEO ($) | Inclusion of Equity Values for PEO ($) | Compensation Actually Paid to PEO ($) | | 2023 | 7,627,032 | (6,482,535) | 4,838,435 | 5,982,932 |
Pay Versus Performance Disclosure
| Year | Average Summary Compensation Table Total for Non-PEO NEOs ($) | Average Exclusion of Equity Awards for Non-PEO NEOs ($) | Average Inclusion of Equity Values for Non-PEO NEOs ($) | Average Compensation Actually Paid to Non-PEO NEOs ($) | | 2023 | 2,733,034 | (2,000,629) | 1,434,840 | 2,167,245 |
Pay Versus Performance Disclosure
The amounts in the Inclusion of Equity Values in the tables above are derived from the amounts set forth in the following tables:
Pay Versus Performance Disclosure
| Year | Year-End Fair Value of Equity Awards Granted During Year That Remained Outstanding and Unvested as of Last Day of Year for PEO ($) | Change in Fair Value from Last Day of Prior Year to Last Day of Year of Outstanding and Unvested Equity Awards Granted in any Prior Year for PEO ($) | Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for PEO ($) | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards Granted in any Prior Year that Vested During Year for PEO ($) | Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for PEO ($) | Total - Inclusion of Equity Values for PEO ($) | | 2023 | 5,482,420 | 521,962 | — | (1,165,947) | — | 4,838,435 |
Pay Versus Performance Disclosure
| Year | Average Year-End Fair Value of Equity Awards Granted During Year That Remained Outstanding and Unvested as of Last Day of Year for Non-PEO NEOs ($) | Average Change in Fair Value from Last Day of Prior Year to Last Day of Year of Outstanding and Unvested Equity Awards Granted in any Prior Year for Non-PEO NEOs ($) | Average Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for Non-PEO NEOs ($) | Average Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards Granted in any Prior Year that Vested During Year for Non-PEO NEOs ($) | Average Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Non-PEO NEOs ($) | Total - Average Inclusion of Equity Values for Non-PEO NEOs ($) | | 2023 | 1,691,434 | 170,296 | — | (426,890) | — | 1,434,840 |
Pay Versus Performance Disclosure
(4)The Peer Group TSR set forth in this table utilizes the Nasdaq Biotechnology Index, which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K included in our Annual Report for the year ended December 31, 2023. The comparison assumes $100 was invested for the period starting December 31, 2019, through the end of the listed year in the Company and in the Nasdaq Biotechnology Index, respectively. Historical stock performance is not necessarily indicative of future stock performance. Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Company Total Shareholder Return, or TSR The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average Compensation Actually Paid to our Non-PEO NEOs, and the Company’s cumulative TSR over the four most recently completed fiscal years and the Nasdaq Biotechnology Index TSR over the same period. Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Net Income The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average Compensation Actually Paid to our Non-PEO NEOs, and our net income during the four most recently completed fiscal years.
Director Compensation
Director Compensation We do not pay any compensation to our President and Chief Executive Officer in connection with his service on our board of directors. The compensation that we pay to our President and Chief Executive Officer is discussed earlier in this “Executive and Director Compensation” section. Under our director compensation program, we pay our non-employee directors a cash retainer for service on the board of directors and for service on each committee on which the director is a member. The chairperson of the board and of each committee receive higher retainers for such service. These fees are payable in arrears in four equal quarterly installments on the last day of each quarter, provided that the amount of such payment will be prorated for any portion of such quarter that the director is not serving on our board of directors. In June 2023, based on a review of our the cash and equity compensation paid to our board of directors versus directors of our peer companies, and with assistance of Aon, our compensation consultant, we amended our director compensation program to add fees for the lead independent director and approve fees for the science and technology committee, as follows:
Director Compensation
| | Non-Employee Member Annual Fee ($) | Non-Employee Chairperson Incremental Annual Fee ($) | Lead Independent Director ($) | | Board of Directors | 40,000 | 35,000 | 25,000 | | Audit Committee | 10,000 | 10,000 | — | | Compensation Committee | 7,500 | 7,500 | — | | Nominating and Corporate Governance Committee | 5,000 | 5,000 | — | | Science and Technology Committee | 7,500 | 7,500 | — |
Director Compensation
We also reimburse our non-employee directors for reasonable travel and other expenses incurred in connection with attending our board of director and committee meetings. In addition, under our director compensation program, as amended in June 2023, each non-employee director receives under the 2018 Plan, upon his or her initial election to our board of directors, equity having an aggregate grant date fair value of $750,000 as calculated by the company in accordance with ASC Topic 718, with two-thirds of the value of such award being issued as an option to purchase common stock, or the Initial Option Grant and one-third of the value of such award being issued in RSUs, or the Initial RSU Grant, subject to the maximum annual compensation limits set forth in the program and such other limits as may be set forth in the 2018 Plan. Subject to the non-employee director’s continued service as a director, (a) the Initial Option Grant will vest with respect to 1/36th of the shares of common stock subject thereto at the end of each successive one-month period following the grant date until the third anniversary of the grant date and (b) the Initial RSU Grant will vest annually over three years until the third anniversary of the grant date, and in the event of a change in control of the Company, the vesting schedule of the Initial Option Grant and the Initial RSU Grant will accelerate in full. The exercise price of the Initial Option Grant will be equal to the fair market value of the common stock on the date of grant, which shall be the closing trading price. Further, on the date of each of our annual meetings of stockholders, each non-employee director who has served on our board of directors for at least six months receives, under the 2018 Plan, equity having an aggregate grant date fair value of $375,000 as calculated by the company in accordance with ASC Topic 718, with two-thirds of the value of such award being issued as an option to purchase common stock, or the Annual Option Grant, and one-third of the value of such award being issued in RSUs, or the Annual RSU Grant, subject to the maximum annual compensation limits set forth in the program and such other limits as may be set forth in the 2018 Plan. Each of the Annual Option Grant and Annual RSU Grant will vest in full on the earlier of the first anniversary of the grant date or the first board of directors meeting held after the following annual meeting of stockholders, subject to the non-employee director’s continued service as a director. All options issued to our non-employee directors under our director compensation program are issued at exercise prices equal to the fair market value of our common stock on the date of grant. Prior to June 2023, each non-employee director received under the 2018 Plan, upon his or her initial election to our board of directors, an option to purchase approximately $750,000 of shares of our common stock based on the closing price of our common stock on the date of grant, subject to the maximum annual compensation limits set forth in the program and such other limits as may be set forth in the 2018 Plan. Each of these options vested in equal monthly installments at the end of each month following the date of grant through the third anniversary of the date of grant, subject to the non-employee director’s continued service as a director, employee, or consultant. Further, on the date of each of our annual meetings of stockholders, each non-employee director who has served on our board of directors for at least six months received, under the 2018 Plan, an option to purchase approximately $375,000 of shares of our common stock, based on the closing price of our common stock on the date of grant, subject to the maximum annual compensation limits set forth in the program and such other limits as may be set forth in the 2018 Plan. Each of these options vested in full on the one-year anniversary of the date of grant (or, if earlier, the date of our next annual meeting of stockholders following the date of grant), subject to the non-employee director’s continued service as a director. All options issued to our non-employee directors under our director compensation program were issued at exercise prices equal to the fair market value of our common stock on the date of grant. The following table sets forth information regarding compensation earned by our non-employee directors during the year ended December 31, 2023. There were no outstanding equity awards held by our non-employee directors as of December 31, 2023 other than as described in footnote 1 to the following table.
Director Compensation
| Name | Fees earned or paid in cash ($) | Stock awards (1) ($) | Option awards (1) ($) | Total ($) | | Timothy Shannon, M.D. (2) | 41,250 | 124,990 | 249,996 | 416,236 | | Sunil Agarwal, M.D. (3) | 32,500 | 249,980 | 502,261 | 784,741 | | Linda Bain | 60,000 | 124,990 | 249,996 | 434,986 | | Everett Cunningham | 50,000 | 124,990 | 249,996 | 424,986 | | Wendy Dixon, Ph.D. | 50,417 | 124,990 | 249,996 | 425,403 | | Edward Kennedy, Jr. | 47,708 | 124,990 | 249,996 | 422,694 | | Briggs Morrison, M.D. | 66,771 | 124,990 | 249,996 | 441,757 | | Leslie V. Norwalk, Esq. | 50,000 | 124,990 | 249,996 | 424,986 | | Laurie Smaldone Alsup, M.D. | 55,313 | 124,990 | 249,996 | 430,299 | | John Young | 47,500 | 124,990 | 249,996 | 422,486 |
Director Compensation
(1)Reflects the aggregate grant date fair value of restricted stock unit awards and option awards granted during the year in question calculated in accordance with the provisions of Financial Accounting Standards Board Accounting Standard Codification Topic 718, Compensation—Stock Compensation. See Note 9 to our audited consolidated financial statements appearing in our 2023 Annual Report for assumptions underlying the valuation of equity awards. The following non-employee directors held the following number of option awards as of December 31, 2023: Dr. Agrawal, 24,948;. Bain, 54,490; Mr. Cunningham, 42,882; Dr. Dixon, 54,490; Mr. Kennedy, 88,283; Dr. Morrison, 62,867; Ms. Norwalk, 68,336; Dr. Smaldone Alsup, 68,336; and Mr. Young, 37,359. (2)Dr. Shannon served as a director until June 15, 2023. (3)Dr. Agarwal joined our board of directors on June 15, 2023. PROPOSAL NO. 3—RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2024 Our stockholders are being asked to ratify the appointment by the audit committee of the board of directors of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2024. The audit committee is solely responsible for selecting our independent registered public accounting firm for the fiscal year ending December 31, 2024. Stockholder approval is not required to appoint Deloitte & Touche LLP as our independent registered public accounting firm. However, our board of directors believes that submitting the appointment of Deloitte & Touche LLP to the stockholders for ratification is good corporate governance. If the stockholders do not ratify this appointment, the audit committee will reconsider whether to retain Deloitte & Touche LLP. If the selection of Deloitte & Touche LLP is ratified, the audit committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time it decides that such a change would be in the best interest of our company and our stockholders. A representative of Deloitte & Touche LLP is expected to virtually attend the Annual Meeting and will have an opportunity to make a statement if he or she desires to do so and to respond to appropriate questions from our stockholders. We incurred the following fees from Deloitte & Touche LLP for the audit of the consolidated financial statements and for other services provided during the years ended December 31, 2023 and 2022.
Director Compensation
| | 2023 | 2022 | | Audit fees (1) | $971,250 | $869,000 | | Audit-related fees | — | — | | Tax fees (2) | — | 25,000 | | All other fees (3) | 1,895 | — | | Total fees | $973,145 | $894,000 |
Director Compensation
(1)Audit fees consist of fees billed for professional services by Deloitte & Touche LLP for audit and quarterly review of our consolidated financial statements and related services that are normally provided in connection with statutory and regulatory filings or engagements, including registration statements. (2)Tax fees consist of fees billed for professional services by Deloitte & Touche LLP for tax consultation. (3)All other fees consist of user access fees to Deloitte Accounting Research Tool. The aggregate fees included in the audit fees and tax fees are those fees billed for the fiscal year.