UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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☐ | Soliciting Material under §240.14a-12 |
INCYTE CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Dear Fellow Stockholders,
This past year was one of significant progress as we seek to build Incyte into a diversified, fast-growing and global biopharmaceutical company.
Before highlighting our achievements in 2018, an important, although disappointing, event was the result of ECHO-301, our Phase 3 trial together with Merck evaluating epacadostat in combination with pembrolizumab, Mercks PD-1 antagonist, for the first-line treatment of patients with advanced or metastatic melanoma. The expectations internally and within the medical community were high, and we were disappointed that the combination did not show a benefit in progression-free survival (PFS) over pembrolizumab monotherapy. We continue to learn as much as we can from the results, but this event reinforced our belief in the importance of having a robust portfolio of development projects. Id like to now move on to our 2018 achievements.
Sales of Jakafi® (ruxolitinib) continue to grow in both approved indications, myelofibrosis (MF)1 and polycythemia vera (PV)1. The stories of the patients we treat inspire us to do better, and we are committed to maintaining our leadership position in the treatment of patients with myeloproliferative neoplasms (MPNs). To that end, we are pursuing strategies that may improve patient outcomes in three ways: improved formulations of ruxolitinib, investigating ruxolitinib-based combination therapies, and discovering new targets beyond JAK inhibition.
With the ongoing U.S. Food and Drug Administration (FDA) review of ruxolitinib in steroid-refractory acute graft versus host disease (GVHD) and NDA submissions expected in the near-term for pemigatinib in patients with cholangiocarcinoma and itacitinib in treatment-naïve GVHD, we are confident in our potential to drive top-line growth in the years to come.
Our discovery and development teams have created multiple opportunities for growth. In the coming year, we plan to focus on six key late-stage product candidates outlined below that, together, we believe may drive significant revenue growth in the near future.
We also have two late-stage product candidates, baricitinib and capmatinib, which are out-licensed globally to Eli Lilly and Novartis, respectively. In June, we, along with Eli Lilly, announced the FDA approval of Olumiant® (baricitinib) for the treatment of certain patients with rheumatoid arthritis (RA)5. Lilly is also developing baricitinib in multiple other autoimmune disorders and recently announced that the first two Phase 3 trials of baricitinib in atopic dermatitis achieved their primary endpoints. Lilly expects the last three of the five Phase 3 trials needed to seek approval in patients with moderate to severe atopic dermatitis to readout later in 2019. Data from capmatinib were presented in non-small cell lung cancer patients with MET exon 14 skipping mutations at the European Society for Medical Oncology 2018 Congress (ESMO), and Novartis has stated that it plans to submit an NDA in this indication this year.
Its also important to note that should these goals come to fruition as we expect, five Incyte-invented molecules will have received FDA approval. We believe this remarkable achievement would be an excellent illustration of the quality of the work of our world class biologists and chemists.
On the financial front, total revenues reached $1.9B in 2018, an increase of over 20% versus 2017. Iclusig® (ponatinib)6 continues to grow, and royalties from Jakavi® (ruxolitinib)7 and Olumiant® (baricitinib) are contributing more to our top-line growth with each passing year. GAAP Net Income grew to $110M for 2018 as compared to a GAAP Net Loss of $313M in 2017.
We also had the opportunity to strengthen our executive management team with three new members in the last twelve months. First, we welcomed Maria Pasquale, J.D. as our General Counsel in April 2018. Ms. Pasquale has nearly 20 years of legal and compliance experience in the biopharmaceutical industry and most recently held the position of Global Chief Compliance Officer at Celgene Corporation. In December 2018, we were excited to welcome Dr. Dashyant Dhanak to the team as our Chief Scientific Officer. Dr. Dhanak joined us from Janssen Research & Development, where he most recently served as Global Head, Discovery Sciences. In February 2019, we welcomed Christiana Stamoulis as our new Chief Financial Officer. Ms. Stamoulis has over 20 years of experience in the biopharmaceutical industry, 15 of which was in investment banking and management consulting, and thereafter in executive positions at Vertex Pharmaceuticals and most recently serving as the President and CFO of Unum Therapeutics. We believe the collective experience of our new leadership team members will be a great asset for Incyte as we embark on our next stage of growth.
In October, we were proud to be recognized as the number two top employer in the biopharma industry by Science magazine. We believe that the collective experience and passion of our over 1,300 talented colleagues is foundational to our success, and as our organization continues to grow, we are committed to maintaining a culture that is driven by a passion for innovative science and where patients are at the forefront of everything we do.
Together, we strive to make a meaningful difference in the lives of those with cancer and other serious diseases, and in doing so, we aim to create long-term and sustainable value for you, our stockholders.
We thank you for your continued support and look forward to keeping you updated on our progress.
Sincerely,
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Hervé Hoppenot Chairman of the Board of Directors | ||
1. | Jakafi (ruxolitinib) is approved in intermediate or high-risk myelofibrosis (MF), including primary myelofibrosis, post-polycythemia vera myelofibrosis and post-essential thrombocythemia myelofibrosis, and in patients with polycythemia vera (PV) who have had an inadequate response to or are intolerant of hydroxyurea. |
2. | Development of ruxolitinib in GVHD in collaboration with Novartis. |
3. | Inflammation and Autoimmunity. |
4. | All epidemiology data is for U.S., Europe and Japan except where noted for U.S. only; all incidence data for unresectable or metastatic disease, except prevalence for ruxolitinib cream. |
5. | Olumiant (baricitinib) is approved for the treatment of mild to moderate rheumatoid arthritis in patients with inadequate response to standard-of-care therapies. |
6. | Iclusig® is marketed by ARIAD Pharmaceuticals, Inc in the U.S. and by Incyte in the European Union and select countries. In the European Union, Iclusig is indicated for adult patients with CP-, AP-, or BP-CML who are resistant to dasatinib or nilotinib; who are intolerant to dasatinib or nilotinib and for whom subsequent treatment with imatinib is not clinically appropriate; or who have the T315I mutation, and adult patients with Ph+ ALL who are resistant to dasatinib; who are intolerant to dasatinib and for whom subsequent treatment with imatinib is not clinically appropriate; or who have the T315I mutation. |
7. | Ex-U.S. rights to ruxolitinib license to Novartis; commercialized by Novartis as Jakavi. |
Company History of Success
Current Portfolio of Projects
Incyte Corporation
1801 Augustine Cut-Off
Wilmington, Delaware 19803
Notice of Annual Meeting of Stockholders
Friday, April 26, 2019
1:00 PM Eastern Daylight Time
1815 Augustine Cut-Off, Wilmington, Delaware 19803
To the Stockholders of Incyte Corporation:
The Annual Meeting of Stockholders of Incyte Corporation, a Delaware corporation (the Company), will be held at the Companys offices located at 1815 Augustine Cut-Off, Wilmington, Delaware 19803, on Friday, April 26, 2019, at 1:00 PM Eastern Daylight Time, for the following purposes:
Purposes:
1. | To elect eight directors to serve until the 2020 Annual Meeting of Stockholders and thereafter until their successors are duly elected and qualified; |
2. | To approve, on a non-binding, advisory basis, the compensation of the Companys named executive officers; |
3. | To approve amendments to the Companys Amended and Restated 2010 Stock Incentive Plan; |
4. | To ratify the appointment of Ernst & Young LLP as the Companys independent registered public accounting firm for 2019; |
5. | To vote on a stockholder proposal, if properly presented, described in more detail in the proxy statement; and |
6. | To transact such other business as may properly come before the Annual Meeting of Stockholders and any postponement or adjournment of the Annual Meeting. |
Record Date: |
March 12, 2019Stockholders of record as of the close of business on March 12, 2019 are entitled to notice of and to vote at the Annual Meeting and any postponement or adjournment thereof. |
It is important that your shares be represented at this meeting. Even if you plan to attend the meeting, we hope that you will vote as soon as possible. Voting now will ensure your representation at the Annual Meeting regardless of whether you attend in person. You may vote over the internet, by telephone or by mailing the enclosed proxy card or voting instruction form. Please review the instructions on page 3 of the attached Proxy Statement and your proxy card or voting instruction form regarding each of these voting options.
By Order of the Board of Directors |
Maria E. Pasquale |
Secretary |
March 21, 2019
Proxy Statement 2019 | i |
Meeting Information
Time and Date: | 1:00 PM EDT, April 26, 2019 | |||
Place: | 1815 Augustine Cut-Off | |||
Wilmington, DE 19803 | ||||
Record Date: | March 12, 2019 | |||
Admission: | Please follow the instructions | |||
contained in this Proxy | ||||
Statement | ||||
Mail Date: | This Proxy Statement and the | |||
accompanying form of proxy | ||||
are being mailed to | ||||
stockholders on or about | ||||
March 25, 2019 |
Voting Matters
PROPOSAL | BOARDS VOTING RECOMMENDATION | |||
1 |
Election of Directors | FOR Each Nominee | ||
2 |
Advisory Vote to Approve Executive Compensation | FOR
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3 |
Amend the Amended and Restated 2010 Stock Incentive Plan |
FOR | ||
4 |
Ratification of Independent Registered Public Accounting Firm |
FOR | ||
5
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Stockholder Proposal
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AGAINST
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Proxy Statement 2019 | 1 |
Proxy Statement Summary |
Will there be any other items of business on the agenda?
We do not expect any other items of business because the deadline for stockholder proposals and nominations has already passed. Nonetheless, in case there is an unforeseen need, the accompanying proxy gives discretionary authority to the persons named on the proxy with respect to any other matters that might be brought before the meeting. Those persons intend to vote that proxy in accordance with their best judgment.
Who is entitled to vote?
Stockholders of record at the close of business on March 12, 2019, the Record Date, may vote at the Annual Meeting. Each stockholder is entitled to one vote for each share of our common stock held by such stockholder as of the Record Date.
How many shares must be present to hold the Annual Meeting?
The presence, in person or by proxy, of the holders of a majority of our outstanding common stock on the Record Date constitutes a quorum, which is required to hold and conduct business at the Annual Meeting. As of the close of business on the Record Date, there were 214,264,527 shares of our common stock outstanding. If you are a record holder and you submit your proxy, regardless of whether you abstain from voting on one or more matters, your shares will be counted as present at the Annual Meeting for purposes of determining a quorum. If your shares are held in street name, your shares are counted as present for purposes of determining a quorum if your broker, bank or other nominee submits a proxy covering your shares. Your broker, bank or other nominee is entitled to submit a proxy covering your shares as to certain routine matters, even if you have not instructed your broker, bank or other nominee on how to vote on those matters. Please see How are votes counted? below. If a quorum is not present, we expect that the Annual Meeting will be adjourned until we obtain a quorum.
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
Stockholder of Record. If your shares are registered directly in your name with our transfer agent, Computershare, you are considered, with respect to those shares, the stockholder of record. This Proxy Statement, our Annual Report and the proxy card have been sent directly to you by Incyte.
Beneficial Owner. If your shares are held in a stock brokerage account or by a broker, bank or other nominee, you are considered the beneficial owner of shares held in street name. This Proxy Statement and our Annual Report have been forwarded to you by your broker, bank or other nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your shares by using the voting instruction form provided by your broker, bank or other nominee.
2 | Proxy Statement 2019 |
Proxy Statement Summary |
How do I vote?
You may vote using any of the following methods:
By Mail
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By Telephone
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By Internet
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In Person at the Annual Meeting
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Mail Follow the instructions in your proxy materials. | Telephone Stockholders of record may call toll-free 1-800-652VOTE (8683) | By Internet Stockholders of record may vote online at www.envisionreports.com/INCY | In Person at the Annual Meeting You may obtain directions to the Annual Meeting by contacting our Companys Investor Relations Department at (302) 498-6700. | |||||||||
Most stockholders who hold shares beneficially in street name may provide voting instructions to their brokers, banks or other nominees by telephone by calling the number specified on the voting instruction form provided by their brokers, banks or other nominees. The telephone voting facilities will close at 11:59pm, Eastern Daylight Time, the day before the meeting date. | Most stockholders who hold shares beneficially in street name may provide voting instructions to their brokers, banks or other nominees by accessing the website specified on the voting instruction form provided by their brokers, banks or other nominees. The internet voting facilities will close at 11:59pm, Eastern Daylight Time, the day before the meeting date. | Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy or voting instructions or vote by telephone or the internet so that your vote will be counted if you later decide not to attend the meeting |
Can I change my vote or revoke my proxy?
You may change your vote or revoke your proxy at any time prior to the vote at the Annual Meeting. If you submitted your proxy by mail, you must file with the Secretary of our Company a written notice of revocation or deliver, prior to the vote at the Annual Meeting, a valid, later dated proxy. If you submitted your proxy by telephone or the internet, you may change your vote or revoke your proxy with a later telephone or internet proxy, as the case may be. Attendance at the Annual Meeting will not have the effect of revoking a proxy unless you give written notice of revocation to the Secretary before the proxy is exercised or you vote by written ballot at the Annual Meeting. For shares you hold beneficially in street name, you may change your vote or revoke your proxy by submitting new voting instructions to or informing your broker, bank or other nominee in accordance that entitys procedures for changing or revoking your voting instructions.
How are votes counted?
In the election of directors, you may vote FOR, AGAINST or ABSTAIN for each nominee. For each of Proposals 2, 3, 4 and 5, you may vote FOR, AGAINST or ABSTAIN.
If you provide specific instructions, your shares will be voted as you instruct. If you sign your proxy card or voting instruction form with no further instructions, your shares will be voted in accordance with the recommendations of the Board (FOR all of the nominees to the Board of Directors, FOR the approval of the compensation of our named executive officers, FOR the approval of the amendments to our Amended and Restated 2010 Stock Incentive Plan, FOR the ratification of the independent registered public accounting firm, AGAINST the stockholder proposal, if properly presented, and in the discretion of the proxy holders on any other matters that may properly come before the meeting).
If you hold shares beneficially in street name and do not provide your broker, bank or other nominee with voting instructions, your shares may constitute broker non-votes. Generally, broker non-votes occur on a matter when a broker, bank or other nominee is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. If you hold shares beneficially in
Proxy Statement 2019 | 3 |
Proxy Statement Summary |
street name and do not vote your shares, your broker, bank or other nominee can vote your shares at its discretion only on Proposal 4, the ratification of the independent registered public accounting firm. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal. Thus, broker non-votes will not affect the outcome of any matter being voted on at the Annual Meeting, other than Proposal 4, assuming that a quorum is obtained.
What vote is required to approve each item?
We have a majority voting standard for the election of directors in an uncontested election, which is generally defined as an election in which the number of nominees does not exceed the number of directors to be elected at the meeting. Cumulative voting is not permitted, which means that each stockholder may vote no more than the number of shares he or she owns for a single director candidate. Under our majority voting standard, in uncontested elections of directors, such as this election, each director must be elected by the affirmative vote of a majority of the votes cast by the shares present in person or represented by proxy. A majority of the votes cast means that the number of votes cast FOR a director nominee exceeds the number of votes cast AGAINST the nominee. If a director nominee is an incumbent director and does not receive a majority of the votes cast in an uncontested election, that director will continue to serve on the Board as a holdover director, but will be subject to our director resignation policy. Additional information concerning our director resignation policy is set forth under the heading Corporate GovernanceMajority Voting Policy.
The table below describes the proposals to be considered at the Annual Meeting and the vote required for each proposal:
Proposal | Vote Required | Effect of Abstentions(1) |
Broker Discretionary | |||||
1 | Election of Directors | A nominee for director will be elected if the votes cast FOR such nominee exceed the votes cast AGAINST such nominee. | No effect
Not considered votes cast on this proposal |
No
Brokers without voting instructions will not be able to vote on this proposal | ||||
2 | Advisory Vote to Approve Executive Compensation | Non-binding, advisory proposal. We will consider the matter approved if it receives the affirmative vote of a majority of the shares of common stock present at the Annual Meeting in person or by proxy and entitled to vote. | Counted as vote
Same effect as votes against |
No
Brokers without voting instructions will not be able to vote on this proposal | ||||
3 | Approval of Amendments to the Amended and Restated 2010 Stock Incentive Plan | The affirmative FOR vote of a majority of the shares present at the Annual Meeting in person or by proxy and entitled to vote. | Counted as vote
Same effect as votes against |
No
Brokers without voting instructions will not be able to vote on this proposal | ||||
4 | Ratification of the Appointment of Ernst & Young LLP | The affirmative FOR vote of a majority of the shares present at the Annual Meeting in person or by proxy and entitled to vote. | Counted as vote
Same effect as votes against |
Yes
Brokers without voting instructions will have discretionary authority to vote | ||||
5 | Stockholder Proposal | Non-binding, advisory proposal. We will consider the matter approved if it receives the affirmative vote of a majority of the shares of common stock present at the Annual Meeting in person or by proxy and entitled to vote. | Counted as vote
Same effect as votes against |
No
Brokers without voting instructions will not be able to vote on this proposal |
(1) | As noted above, abstentions will be counted as present for purposes of establishing a quorum at the Annual Meeting. |
(2) | Only relevant if you are the beneficial owner of shares held in street name. If you are a stockholder of record and you do not cast your vote, no votes will be cast on your behalf on any of the items of business at the Annual Meeting. |
4 | Proxy Statement 2019 |
Proxy Statement Summary |
If any other matter is properly brought before the Annual Meeting, such matter also will be determined by the affirmative vote of a majority of the shares of common stock present at the Annual Meeting in person or by proxy and entitled to vote at the Annual Meeting.
What is householding and how does it affect me?
We have adopted a process for mailing our Annual Report and this Proxy Statement called householding, which has been approved by the Securities and Exchange Commission. Householding means that stockholders who share the same last name and address will receive only one copy of our Annual Report and this Proxy Statement, unless we receive contrary instructions from any stockholder at that address. We will continue to mail a proxy card to each stockholder of record.
If you prefer to receive multiple copies of our Annual Report and this Proxy Statement at the same address, additional copies will be provided to you upon request. If you are a stockholder of record, you may contact us by writing to Investor Relations Department, Incyte Corporation, 1801 Augustine Cut-Off, Wilmington, Delaware 19803 or by calling (302) 498-6700 and asking for Investor Relations. Eligible stockholders of record receiving multiple copies of our Annual Report and this Proxy Statement can request householding by contacting us in the same manner. We have undertaken householding to reduce printing costs and postage fees, and we encourage you to participate.
If you are a beneficial owner, you may request additional copies of our Annual Report and this Proxy Statement or you may request householding by notifying your broker, bank or other nominee.
How are proxies solicited?
Our employees, officers and directors may solicit proxies. We will pay the cost of printing and mailing proxy materials, and will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation material to the owners of our common stock. In addition, we have engaged D.F. King & Co., Inc. to assist us in soliciting proxies for a fee of $12,500, plus out-of-pocket expenses.
Proxy Statement 2019 | 5 |
Throughout the year, we maintain an ongoing stockholder outreach program to garner feedback as well as to answer any questions stockholders may have both during and outside of proxy season. Our goal is to ensure that our corporate governance practices, our compensation program and our stockholder communications align with best practices.
Each year, we proactively reach out to our stockholders to determine how our corporate governance, compensation practices and stockholder communications might improve. In 2018 and 2017, we contacted stockholders representing over 80% and 60% of our shares outstanding, respectively. Our CEO, our Lead Independent Director and the rest of our Board along with the rest of our executive management regularly discuss the learnings from these thorough and informative conversations. As a result of this ongoing stockholder engagement over the last four years, we have implemented several significant enhancements in our corporate governance and compensation policies and in our stockholder communication practices, including most recently in 2019. We believe these changes help us to further align the Companys interests with the best interests of our stockholders.
What We Heard | What We Did | |||||
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2018 Say-on-pay stockholder discussions made clear that ad hoc retention equity grants to CEO were out of favor
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Compensation Committee eliminated special option grants to CEO in 2019
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Compensation to Board of Directors should be better aligned with best practices
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Restructured director compensation to eliminate fixed share grants and instead use target dollar value equity awards
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Need for enhanced disclosure about our Corporate Responsibility efforts
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New disclosure detailing our commitment to patients, employees, the community and the environment
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Not enough performance-based compensation for executive officers
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Commencing in July 2018, executive officers receive 25% of target equity award value in the form of performance shares tied to pre-specified performance goals
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Plurality-plus voting for directors in uncontested elections not preferred
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Our Bylaws now require majority voting for directors in uncontested elections
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No clawback policy for executives
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Adopted a 3 year cash clawback for executives
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No minimum vesting period for employee equity awards
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Implemented a minimum vesting period of 12 months generally for employees
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Need for further diversification of expertise on Board and executive team
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Increased gender diversity on our Board and our executive team
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6 | Proxy Statement 2019 |
Stockholder Engagement |
What We Heard | What We Did | |||||
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Insufficient rationale on why CEO also serves as the Chairman of the Board
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Provided more insight into the Boards rationale behind our current leadership structure, as well as enhanced detail on the function of our Lead Independent Director
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Limited detail on corporate goals
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Provided a more detailed retrospective analysis of our 2017 and 2018 corporate goals, and also general prospective overview of current year goals
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No official stock ownership guidelines for Board and executives
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Implemented robust stock ownership guidelines for our Board, our CEO and all other executive officers
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Excise tax gross-ups are not in line with best practices
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Eliminated excise tax gross-ups
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Insider trading policy unclear to stockholders
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Enhanced disclosure to make clear that robust anti-hedging and anti-speculation policies are in place |
We continually seek to engage with stockholders throughout the year, and we invite you to reach out with any comments or questions at any time. Please see the Investor section of our website for the appropriate contact information.
Proxy Statement 2019 | 7 |
Election of Directors
The Board proposes the election of eight directors of our Company to serve until the next annual meeting of stockholders, or thereafter until their successors are duly elected and qualified. If any nominee is unable or declines to serve as director at the time of the Annual Meeting, an event that we do not currently anticipate, proxies will be voted for any nominee designated by the Board to fill the vacancy.
Committee Membership | ||||||||||||||||||
Name and Primary Occupation | Director Since |
Age | Independent | Compensation | Audit | Nominating and Corporate Governance |
Finance | |||||||||||
Hervé HoppenotChairman of the Board |
2014 | 59 | ● | |||||||||||||||
President and Chief Executive Officer |
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Incyte Corporation |
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Julian C. BakerLead Independent Director |
2001 | 52 | ● | ● | ● | |||||||||||||
Managing Partner |
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Baker Brothers Investments |
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Jean-Jacques Bienaimé |
2015 | 65 | ● | ● | ||||||||||||||
Chief Executive Officer |
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BioMarin Pharmaceutical Inc. |
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Paul A. Brooke |
2001 | 73 | ● | ● | ||||||||||||||
Former Founder and Managing Partner venBio, LLC |
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Paul J. Clancy |
2015 | 57 | ● | |||||||||||||||
Executive Vice President and Chief Financial Officer |
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Alexion Pharmaceuticals, Inc. |
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Wendy L. Dixon, Ph.D. |
2010 | 63 | ● | ● | ● | |||||||||||||
Former Chief Marketing Officer and |
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President, Global Marketing |
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Bristol-Myers Squibb Company |
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Jacqualyn A. Fouse, Ph.D. |
2017 | 57 | ● | |||||||||||||||
Chief Executive Officer |
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Agios Pharmaceuticals, Inc. |
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Paul A. Friedman, M.D. |
2001 | 76 | ● | |||||||||||||||
Chief Executive Officer |
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Madrigal Pharmaceuticals, Inc. |
Committee Chair | Financial Expert | ● Member |
8 | Proxy Statement 2019 |
Proposal 1 Election of Directors |
Director Nominees
Names of the nominees and certain biographical information about them are set forth below:
Hervé Hoppenot | ||||
Age 59
Director since 2014
Chairman of the Board
Committees
Finance |
BACKGROUND | |||
Mr. Hoppenot joined Incyte as President and Chief Executive Officer and a Director in January 2014, and was appointed Chairman of the Board in May 2015. Mr. Hoppenot served as the President of Novartis Oncology, Novartis Pharmaceuticals Corporation, the U.S. subsidiary of Novartis AG, a pharmaceutical company, from January 2010 to January 2014. Prior to that, Mr. Hoppenot served in other executive positions at Novartis Pharmaceuticals Corporation, serving from September 2006 to January 2010 as Executive Vice President, Chief Commercial Officer of Novartis Oncology and Head of Global Product Strategy & Scientific Development of Novartis Pharmaceuticals Corporation and from 2003 to September 2006 as Senior Vice President, Head of Global Marketing of Novartis Oncology. Prior to joining Novartis, Mr. Hoppenot served in various increasingly senior roles at Aventis S.A. (formerly Rhône Poulenc S.A.), a pharmaceutical company, including as Vice President Oncology US of Aventis Pharmaceuticals, Inc. from 2000 to 2003 and Vice President US Oncology Operations of Rhone Poulenc Rorer Pharmaceuticals, Inc. from 1998 to 2000. | ||||
QUALIFICATIONS | ||||
The Board has concluded that Hervé Hoppenot should serve on the Board because he has significant leadership and senior management experience from his various executive positions in the healthcare industry, including as the President of Novartis Oncology, Novartis Pharmaceuticals Corporation. His past experiences and his current role as our CEO give him strong knowledge of our strategy, markets, competitors, financials and operations. | ||||
OTHER PUBLIC COMPANY BOARDS | ||||
Current | Past 5 Years | |||
Cellectis S.A. | None |
Julian C. Baker | ||||
Age 52
Director since 2001
Lead Independent Director
Committees
Compensation Finance Nominating & Corporate Governance (Chair) |
BACKGROUND | |||
Mr. Baker is a Managing Partner of Baker Brothers Investments, which he and his brother, Felix Baker, Ph.D., founded in 2000. Baker Brothers Investments is an investment advisor focused on long term investments in life sciences companies. Mr. Bakers career as a fund manager began in 1994 when he co-founded a biotechnology investing partnership with the Tisch family. Previously, Mr. Baker was employed from 1988 to 1993 by the private equity investment arm of Credit Suisse First Boston Corporation. | ||||
QUALIFICATIONS | ||||
The Board has concluded that Julian C. Baker should serve on the Board because he is an experienced investor in many life sciences companies. He brings to the Board significant strategic and financial expertise and extensive knowledge of the life sciences and biopharmaceuticals industries as a result of his investments in and service as a director of other publicly and privately held life sciences companies. | ||||
OTHER PUBLIC COMPANY BOARDS | ||||
Current | Past 5 Years | |||
Acadia Pharmaceuticals, Inc. | Idera Pharmaceuticals, Inc. (2014-2018) | |||
Genomic Health, Inc. |
Proxy Statement 2019 | 9 |
Proposal 1 Election of Directors |
Jean-Jacques Bienaimé |
||||
Age 65
Director since 2015
Independent Director
Committees
Compensation |
BACKGROUND | |||
Mr. Bienaimé has served as Chief Executive Officer and a member of the board of directors of BioMarin Pharmaceutical Inc., a biopharmaceutical company, since May 2005. Mr. Bienaimé has also served as Chairman of BioMarin since June 2015. From November 2002 to April 2005, Mr. Bienaimé served as Chairman, Chief Executive Officer and President of Genencor, a biotechnology company focused on industrial bioproducts and targeted cancer biotherapeutics. Prior to joining Genencor, Mr. Bienaimé was Chairman, President and Chief Executive Officer of SangStat Medical Corporation, an immunology focused biotechnology company that was later acquired by Genzyme Corporation. He became President of SangStat in 1998 and Chief Executive Officer in 1999. Prior to joining SangStat, Mr. Bienaimé held various management positions from 1992 to 1998 with Rhône Poulenc Rorer Pharmaceuticals (now known as Sanofi Aventis), including Senior Vice President of Corporate Marketing and Business Development, and Vice President and General Manager of the advanced therapeutic and oncology division. Mr. Bienaimé is a director of the Biotechnology Innovation Organization and the Pharmaceutical Research and Manufacturers of America® (PhRMA). | ||||
QUALIFICATIONS | ||||
The Board has concluded that Jean-Jacques Bienaimé should serve on the Board because he has significant leadership experience in the management of biotechnology organizations, business development, and sales and marketing of both biotechnology and pharmaceutical products. He also brings significant experience as a director of other publicly held life sciences companies. | ||||
OTHER PUBLIC COMPANY BOARDS | ||||
Current | Past 5 Years | |||
BioMarin Pharmaceutical Inc. | InterMune, Inc. (2012-2014)
Portola Pharmaceuticals, Inc. (2010-2014)
Vital Therapies, Inc. (20132018) |
Paul A. Brooke | ||||
Age 73
Director since 2001
Independent Director
Committees
Audit Compensation (Chair) Finance (Chair) Nominating & Corporate Governance |
BACKGROUND | |||
Mr. Brooke was a founder and managing partner of venBio, LLC, a pharmaceutical investment company, from which he retired at the end of 2016. Mr. Brooke was Chairman of the Board of Directors of Alsius Corporation, a medical device company, from June 2007 through its sale in May 2009, and was the Chairman and Chief Executive Officer of a predecessor company from April 2005 to June 2007. Mr. Brooke has been the Managing Member of PMSV Holdings, LLC, a private investment firm, since 1993. He also served as a Senior Advisor to Morgan Stanley & Co. Incorporated from April 2000 to December 2009, and was a Venture Partner at MPM Capital, a venture capital firm specializing in the healthcare industry, from 1997 through 2006. From April 1999 through May 2000, Mr. Brooke served as a Managing Director at Tiger Management LLC. He was a Managing Director and the Global Head of Healthcare Research and Strategy at Morgan Stanley & Co. from 1983 to April 1999. Mr. Brooke is also a director of several privately held companies. | ||||
QUALIFICATIONS | ||||
The Board has concluded that Paul A. Brooke should serve on the Board because he has leadership experience and insight into the operations, challenges and complex issues facing healthcare companies gained from his experience as head of healthcare research at a major investment bank and as an investor. He also has extensive financial and capital markets experience, which is critical to his role as Chair of the Finance Committee, and significant experience as a director of other publicly and privately held life sciences and healthcare companies. | ||||
OTHER PUBLIC COMPANY BOARDS | ||||
Current | Past 5 Years | |||
Manning & Napier Fund, Inc. | ViroPharma Incorporated (2001-2014) |
10 | Proxy Statement 2019 |
Proposal 1 Election of Directors |
Paul J. Clancy | ||||
Age 57
Director since 2015
Independent Director
Committees
Audit (Chair) |
BACKGROUND | |||
Mr. Clancy has more than 30 years of experience in financial management and strategic business planning, and has served as the Executive Vice President and Chief Financial Officer of Alexion Pharmaceuticals, Inc., a biopharmaceutical company, since July 2017. Prior to joining Alexion, Mr. Clancy served as Executive Vice President, Finance and Chief Financial Officer of Biogen Inc. (formerly known as Biogen Idec Inc.), a biopharmaceutical company, from August 2007 until June 2017. He also served as Senior Vice President of Finance of Biogen, with responsibilities for leading the treasury, tax, investor relations and business planning groups. Prior to the 2003 merger of Biogen, Inc. and IDEC Pharmaceuticals Corporation to form Biogen, Mr. Clancy was the Vice President of Portfolio Management of Biogen. He joined Biogen in 2001 as Vice President of U.S. Marketing. Before Biogen, Mr. Clancy spent 13 years at PepsiCo Inc., a food and beverage company, serving in a variety of financial and general management positions, including Vice President and General Manager of their Great West Business Unit. | ||||
QUALIFICATIONS | ||||
The Board has concluded that Paul J. Clancy should serve on the Board because he has significant financial and executive leadership experience at large multi-national biopharmaceutical companies. Mr. Clancy also has experience as a director of a publicly held biotechnology company, and his breadth and depth of financial experience position him well to serve on the Audit Committee of the Board. | ||||
OTHER PUBLIC COMPANY BOARDS | ||||
Current | Past 5 Years | |||
Agios Pharmaceuticals, Inc. | None |
Wendy L. Dixon, Ph.D. |
||||
Age 63
Director since 2010
Independent Director
Committees
Audit Nominating & Corporate Governance |
BACKGROUND | |||
Dr. Dixon served as Chief Marketing Officer and President, Global Marketing for Bristol Myers Squibb Company from December 2001 until May 2009 and served on the Chief Executive Officers Executive Committee. From 1996 to 2001 she was Senior Vice President, MarketingUSHH at Merck & Co., Inc., and prior to that she held executive management positions at West Pharmaceuticals, Osteotech, Inc. and Centocor, Inc. and various positions at SmithKline & French Pharmaceuticals in marketing, regulatory affairs, project management and as a biochemist. | ||||
QUALIFICATIONS | ||||
The Board has concluded that Wendy L. Dixon should serve on the Board because she has significant leadership experience in the pharmaceutical and biotechnology industry, including experience in drug development and regulatory affairs. Dr. Dixon has extensive experience in building successful marketing and sales teams and launching multiple pharmaceutical products across a broad range of therapeutic areas. Dr. Dixon also has significant experience serving as a director of other publicly held life sciences companies, including as a member of certain audit committees. | ||||
OTHER PUBLIC COMPANY BOARDS | ||||
Current | Past 5 Years | |||
Alkermes plc | Furiex Pharmaceuticals, Inc. (2010-2014) | |||
bluebird bio, Inc. | Orexigen Therapeutics, Inc. (2010-2016) | |||
Sesen Bio, Inc. | ||||
Voyager Therapeutics, Inc. |
Proxy Statement 2019 | 11 |
Proposal 1 Election of Directors |
Jacqualyn A. Fouse, Ph.D. |
||||
Age 57
Director since 2017
Independent Director
Committees None |
BACKGROUND | |||
Dr. Fouse has served as Chief Executive Officer of Agios Pharmaceuticals, Inc., a biopharmaceutical company, since February 2019. Prior to Agios, she served as Executive Chair of Dermavant Sciences, a biopharmaceutical company from July 2017 to September 2018. From September 2010 until June 2017, Dr. Fouse served in various capacities at Celgene Corporation, a biopharmaceutical company, serving as Strategic Advisor to the Management Executive Committee from April 2017 to June 2017, President and Chief Operating Officer from March 2016 to March 2017, President, Hematology and Oncology from August 2014 to February 2016, Executive Vice President and Chief Financial Officer from February 2012 to July 2014, and Senior Vice President and Chief Financial Officer from September 2010 to February 2012. Prior to joining Celgene, Dr. Fouse served as Chief Financial Officer of Bunge Limited, a global agribusiness and food company, from July 2007 to September 2010. Prior to joining Bunge, Dr. Fouse served as Senior Vice President, Chief Financial Officer and Corporate Strategy at Alcon Laboratories, Inc. since 2006, and as its Senior Vice President and Chief Financial Officer since 2002. Prior to her time with Alcon she held a variety of senior leadership roles with international companies. | ||||
QUALIFICATIONS | ||||
The Board has concluded that Jacqualyn A. Fouse should serve on the Board because she has significant corporate finance, financial reporting and accounting expertise as a result of her executive roles at Agios and previously at Dermavant Sciences and Celgene, as well as her prior positions with other companies. Additionally, Dr. Fouse is able to provide diverse and valuable corporate governance, management, operational and strategic expertise to the Board through her experience as an executive officer and a public company board member. | ||||
OTHER PUBLIC COMPANY BOARDS | ||||
Current | Past 5 Years | |||
Agios Pharmaceuticals, Inc. | Perrigo Company (2012-2016) | |||
Dicks Sporting Goods, Inc. | Celgene Corporation (2016-2017) |
12 | Proxy Statement 2019 |
Proposal 1 Election of Directors |
Paul A. Friedman, M.D. |
||||
Age 76
Director since 2001
Independent Director
Committees None |
BACKGROUND | |||
Dr. Friedman has served as Chief Executive Officer and Chairman of the Board of Directors of Madrigal Pharmaceuticals, Inc., a biopharmaceutical company, since July 2016. Dr. Friedman served as our Chief Executive Officer from November 2001 to January 2014 and was our President from May 2004 to January 2014. From 1998 until October 2001, Dr. Friedman served as President of DuPont Pharmaceuticals Research Laboratories, a wholly owned subsidiary of DuPont Pharmaceuticals Company (formerly The DuPont Merck Pharmaceutical Company), from 1994 to 1998 he served as President of Research and Development of The DuPont Merck Pharmaceutical Company, and from 1991 to 1994 he served as Senior Vice President at Merck Research Laboratories. Prior to his work at Merck and DuPont, Dr. Friedman was an Associate Professor of Medicine and Pharmacology at Harvard Medical School. Dr. Friedman is a Diplomate of the American Board of Internal Medicine and a Member of the American Society of Clinical Investigation. Dr. Friedman is a director of two privately held companies. | ||||
QUALIFICATIONS | ||||
The Board has concluded that Paul A. Friedman should serve on the Board because he has extensive expertise in our business and in the drug development and discovery industry. His past experiences, including as our former CEO, give him strong knowledge of our strategy, markets, competitors, financials and operations. He also has experience as a director of publicly held life sciences and healthcare companies. | ||||
OTHER PUBLIC COMPANY BOARDS | ||||
Current | Past 5 Years | |||
Alexion Pharmaceuticals, Inc. | Auxilium Pharmaceuticals, Inc. (2010-2015) | |||
Madrigal Pharmaceuticals, Inc. | Cerulean Pharma Inc. (2014-2017) | |||
Durata Therapeutics, Inc. (2013-2014) | ||||
Verastem, Inc. (2014-2017) |
|
The Board recommends a vote FOR election as director of each of the nominees set forth above. |
Proxy Statement 2019 | 13 |
The Board has appointed an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. The Board has determined that each director who serves on these committees is independent, as that term is defined by applicable listing standards of The Nasdaq Stock Market and Securities and Exchange Commission rules. The Board has approved a charter for each of these committees, a current copy of each committees charter can be found on our website at http://www.incyte.com under the Corporate Governance heading in the For Investors portion of our website. The Board has also appointed a Finance Committee and a Non-Management Stock Option Committee.
Audit Committee | COMMITTEE MEMBERS | |
The Audit Committees responsibilities include: | Paul J. Clancy (Chair)
Paul A. Brooke
Wendy L. Dixon
Met 8 times in 2018 | |
Ø assisting the Board in fulfilling its oversight responsibilities relating to the Companys financial statements, systems of internal control over financial reporting, auditing, accounting and financial reporting processes, and compliance with legal and regulatory requirements; | ||
Ø appointing, compensating, evaluating and, when appropriate, replacing our independent registered public accounting firm; | ||
Ø reviewing and pre-approving audit and permissible non-audit services; | ||
Ø reviewing the scope of the annual audit; |
||
Ø monitoring the independent registered public accounting firms relationship with the Company; |
||
Ø meeting with the independent registered public accounting firm and management to discuss and review our financial statements, internal control over financial reporting, and auditing, accounting and financial reporting processes; |
||
Ø reviewing the results of managements efforts to monitor compliance with the Companys programs and policies designed to promote adherence to applicable laws and regulations; and |
||
Ø overseeing the management of risks associated with financial and accounting systems, accounting policies, public reporting, investment strategies and cybersecurity, including the periodic review of managements efforts to identify and mitigate such risks. |
||
The Board has determined that Mr. Clancy and Mr. Brooke are each qualified as an Audit Committee Financial Expert under the definition outlined by the Securities and Exchange Commission; |
||
No members of our Audit Committee sit on more than three public company audit committees, including ours.
|
14 | Proxy Statement 2019 |
Board Committees |
Compensation Committee
|
COMMITTEE MEMBERS
| |
The Compensation Committees responsibilities include: |
Paul A. Brooke (Chair)
Julian C. Baker
Jean-Jacques Bienaimé
Met 8 times in 2018 | |
Ø assisting the Board in meeting its responsibilities with regard to oversight and determination of executive compensation; | ||
Ø reviewing and making recommendations with respect to major compensation plans, policies and programs of the Company; | ||
Ø developing and monitoring compensation arrangements for our executive officers; | ||
Ø determining compensation for our CEO and other executive officers; |
||
Ø determining stock-based compensation awards for our executive officers; |
||
Ø administering performance-based compensation plans such as our Amended and Restated 2010 Stock Incentive Plan (the 2010 Stock Incentive Plan); |
||
Ø reviewing and recommending directors compensation to the full Board; and |
||
Ø possessing sole authority to select, retain, terminate and approve the fees and other retention terms of consultants as it deems appropriate to perform its duties.
|
||
Nominating and Corporate Governance Committee | COMMITTEE MEMBERS | |
The Nominating and Corporate Governance Committees responsibilities include: |
Julian C. Baker (Chair)
Paul A. Brooke
Wendy L. Dixon
Met 1 time in 2018 | |
Ø identifying qualified individuals to become members of the Board; | ||
Ø determining the composition of the Board and its committees; | ||
Ø monitoring a process to assess Board effectiveness; | ||
Ø recommending nominees to fill vacancies on the Board; | ||
Ø reviewing and making recommendations to the Board with respect to candidates for director proposed by stockholders; |
||
Ø reviewing the composition, functioning and effectiveness of the Board and its committees; |
||
Ø developing and recommending to the Board codes of conduct applicable to officers, directors and employees and charters for the various committees of the Board; and |
||
Ø reviewing and making recommendations to the Board regarding the succession plan relating to our CEO and other executive officers.
|
||
Finance Committee | COMMITTEE MEMBERS | |
The Finance Committees responsibilities include: |
Paul A. Brooke (Chair)
Julian C. Baker
Hervé Hoppenot
Did Not Meet in 2018 | |
Ø assisting the Board in its oversight of the Companys strategic financing matters; | ||
Ø reviewing and recommending matters related to the capital structure of the Company; and | ||
Ø exercising the powers of the Board that may be lawfully delegated to the Finance Committee in connection with the authorization, issuance and sale of debt or equity securities of the Company. |
Proxy Statement 2019 | 15 |
What We Do | ||||||
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Majority voting for directors in uncontested elections
|
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Audit Committee receives semiannual updates by our Chief Compliance Officer
| |||
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Strong and active Lead Independent Director, representing our largest stockholder
|
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Maintain robust Code of Business Conduct and Ethics, Senior Financial Officers Code of Ethics and Board of Directors Code of Conduct and Ethics
| |||
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Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee comprised solely of independent directors
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Pre-clearance by our General Counsel required for trading in our stock by any director or executive officer
| |||
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Audit Committee regularly meets in executive session with Ernst & Young, our independent registered public accounting firm, as well as our internal controls team without members of executive management present
|
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Board members have complete access to management and employees in their discretion
| |||
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An independent compensation consultant is engaged by and reports directly to our Compensation Committee
|
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Board and the committees may seek advice from outside advisors
| |||
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Annual election of directors
|
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Review corporate strategic plan at least annually
| |||
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High Board and committee attendance
|
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Review and approve Company budget annually
| |||
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Limits on outside Board and audit committee service
|
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Robust commitment to corporate, environmental and social responsibility
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What We Dont Do | ||||||
|
No staggered or classified Board
|
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No hedging or speculative trading in our stock by directors, executives or other employees
| |||
|
No plurality voting in uncontested Board elections
|
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Board members may not be overboarded
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16 | Proxy Statement 2019 |
Corporate Governance |
Corporate Responsibility
At Incyte, in addition to our commitment to innovation and the rigorous pursuit of research and development excellence, we are also committed to enhancing the communities in which we operate, improving the treatment and experience of patients, supporting our colleagues and operating our business in a way that protects the environment. For more information, please see Our Commitment in the Our Company portion of our website at http://www.incyte.com; however, the information on our website is not part of this proxy statement.
|
PATIENTS
At Incyte, we believe in the power of research to advance scientific innovation and improve patient health and outcomes. Every day we |
|
EMPLOYEES
Incyte is committed to promoting a collaborative, safe and innovative work environment at which everyone can contribute to their fullest potential. | |||||
are driven to discover and deliver medicines that will positively impact the lives of patients with cancer and other serious diseases.
We support our patients through commitments in four key areas:
Patient Safety Scientific Excellence Access to Medicine Patient Education and Awareness |
We appreciate, celebrate, and thrive on one anothers differences and strengths. A strong safety culture is a fundamental part of how we work. Our philosophy is that everyone at Incyte has a responsibility to create and maintain a safe and healthy workplace with a goal to reduce risk and prevent injuries.
Recognized as the number two employer in the biopharma industry by Science magazine. Specifically recognized by team members for its innovation, work culture and respect for employees. | |||||||
|
COMMUNITY
Incyte is committed to being an active participant in improving the communities where we live and work. |
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ENVIRONMENT
At Incyte, we seek to operate in a way that reduces our environmental impact. This includes programs for data collection and | |||||
Incyte Involved is comprised of three initiatives focused on philanthropy as well as employee and community engagement.
The Incyte Charitable Giving Foundation Includes the Incyte Cancer Care Assistance Fund for Delaware, which provides emergency financial assistance for cancer patients, their caregivers, and family members living in Delaware.
The Community Service Program Incyte colleagues donated over 1,200 hours to working with organizations, including the Food Bank of Delaware and the Salvation Army in 2018.
The Matching Gifts Program In 2018, Incyte matched more than $120,000 donated by our colleagues. |
analysis in order to measure and reduce hazardous air emissions, greenhouse gases and water use. In 2019, Incyte launched Greencyte, which is a cross-functional and global team dedicated to seeking ways to minimize our impact on the environment.
United States: All hazardous waste is recycled, reused, fuel-blended or disposed of at an EPA approved facility. Incytes Environmental, Health and Safety team works to identify waste minimization and pollution prevention.
Ex-U.S.: Construction of two sites in Switzerland follow strict Swiss regulations regarding environmental protection and energy consumption. Solar panels are being used on both buildings. |
Majority Voting Policy
Our Bylaws include a majority voting standard for the election of directors. In order to receive a majority of the votes cast, the number of shares voted FOR must exceed the number of votes AGAINST; abstentions and broker non-votes do not count as votes cast. Our Bylaws provide that, in an uncontested election, director nominees must receive a majority of the votes cast to be elected to
Proxy Statement 2019 | 17 |
Corporate Governance |
the Board. Our Corporate Governance Guidelines state that if a nominee for director in an uncontested election does not receive a majority of the votes cast, the director should submit a resignation for consideration by the Board. The Nominating and Corporate Governance Committee will evaluate and make a recommendation to the Board with respect to the proffered resignation. The Board must take action on the recommendation within 90 days following certification of the stockholder vote. The director whose resignation is under consideration cannot participate in any decision regarding his or her resignation. The Nominating and Corporate Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a directors resignation.
Board Leadership Structure and Role in Risk Oversight
Our current leadership structure and governing documents permit the roles of Chairman and CEO to be filled by the same or different individuals. Where the Chairman and CEO roles are filled by the same individual, our Corporate Governance Guidelines require the independent directors on our Board to appoint a Lead Independent Director. The Board has currently determined that it is in the best interests of our stockholders to have Hervé Hoppenot, our President and CEO, serve as Chairman, coupled with an active Lead Independent Director. As such, Mr. Hoppenot holds the position of Chairman, President and CEO, and Julian C. Baker serves as our Lead Independent Director. Mr. Baker is a managing member of the general partner of our largest stockholdernamely, Baker Bros. Advisors LP and affiliated entitieswho collectively holds 16.1% of our common stock as of March 12, 2019. The Board retains the authority to modify this structure as it deems appropriate.
Focus on Independence. The Board maintains a strong commitment to ensuring Board independence so that it is able to maintain effective oversight of management. The Boards commitment to independence includes:
✓ | Annual appointment of a strong Lead Independent Director, who also represents our largest stockholder, thereby ensuring strong representation of stockholder interests |
✓ | Robust duties of the Lead Independent Director: |
| presiding at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors |
| serving as liaison between the Chairman and the independent directors |
| approving information sent to the Board |
| approving meeting agendas for the Board |
| approving meeting schedules to assure that there is sufficient time for discussion of all agenda items |
| authority to call meetings of the independent directors |
| being available for consultation with stockholders, when appropriate. |
✓ | Review, at least annually, of the Companys strategic plan and the following years capital and operating budgets |
✓ | Annual election of all directors, ensuring accountability to stockholders |
✓ | Regular executive sessions of the independent, non-management directorswithout Mr. Hoppenotto review Company performance, management effectiveness, proposed programs and transactions and the Board meeting agenda item |
18 | Proxy Statement 2019 |
Corporate Governance |
✓ | Requirement that only independent directors serve on the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee |
✓ | Requirement that a majority of the Board be comprised of independent directors, with 87.5% of the current Board being independent |
✓ | Corporate Governance Guidelines providing that the Board may have access to Company management and employees and its own advisors, at the Boards discretion. |
Benefits of Combined Leadership Structure. The Board believes that the Company and our stockholders have been best served by having Mr. Hoppenot in the role of Chairman and CEO for the following reasons:
| Mr. Hoppenot is most familiar with our business and the unique challenges we face. As such, Mr. Hoppenot is the director best suited to identify strategic opportunities and focus the activities of the Board. Mr. Hoppenots day-to-day insight into our challenges facilitates a timely deliberation by the Board of important matters. |
| Mr. Hoppenot has and will continue to identify agenda items and lead effective discussions on the important matters affecting us. Mr. Hoppenots knowledge and extensive experience regarding our operations and the highly-regulated industries and markets in which we compete position him to identify and prioritize matters for Board review and deliberation. |
| As Chairman and CEO, Mr. Hoppenot serves as an important bridge between the Board and management and provides critical leadership for carrying out our strategic initiatives and confronting our challenges. The Board believes that Mr. Hoppenot brings a unique, stockholder-focused insight to assist the Company to most effectively execute its strategy and business plans to maximize stockholder value. |
| The strength and effectiveness of the communications between Mr. Hoppenot as our Chairman and Mr. Baker as our Lead Independent Director result in effective Board oversight of the issues, plans and prospects of our Company. |
| This leadership structure provides the Board with more complete and timely information about the Company, a unified structure and consistent leadership direction internally and externally and provides a collaborative and collegial environment for Board decision-making. |
Flexibility of the Leadership Structure. The Board is committed to high standards of corporate governance. The Board values its flexibility to select, from time to time, a leadership structure that is most able to serve the Companys and stockholders best interests based on the qualifications of individuals available and circumstances existing at the time. As such, the Board periodically evaluates whether combining or separating the roles of Chairman and CEO is in the best interests of the Company and our stockholders. The Board believes that a policy limiting its flexibility to choose, consistent with its fiduciary duties, a leadership structure that will enable the Company to most effectively execute its strategy and business plans to maximize stockholder value would be detrimental to the Company and our stockholders.
Boards Role in Risk Oversight. Our Board is responsible for overseeing the overall risk management process at the Company directly and through its committees. The responsibility for managing risk rests with executive management while the committees of the Board and the Board as a whole participate in the oversight process. The Boards risk oversight process builds upon managements
Proxy Statement 2019 | 19 |
Corporate Governance |
risk assessment and mitigation processes, which include reviews of long term strategic and operational planning, executive development and evaluation, regulatory and legal compliance, and financial reporting and internal controls. The Board considers strategic and operational risks and opportunities and regularly receives reports from executive management regarding specific aspects of risk management. The Audit Committee receives periodic reports from executive management with respect to, and reviews such risks associated with, our financial and accounting systems, accounting policies, investment strategies, regulatory compliance and our information systems and technology, including cybersecurity risks and readiness. The Audit Committee also meets regularly with our Chief Compliance Officer, our internal controls team and our independent registered public accounting firm in executive session without the presence of other members of management. The Compensation Committee evaluates our compensation policies and practices to help ensure that these policies and practices do not incentivize employees to take unnecessary or excessive risks that are reasonably likely to have a material adverse effect on our Company and provide appropriate incentives for meeting both short-term and long-term objectives and increasing stockholder value over time. The Nominating and Corporate Governance Committee reviews our risks associated with governance matters and non-compensation related human resources matters.
Director Independence
In 2018, our Board determined that each individual who served as a member of the Board in 2018, except for Mr. Hoppenot, was an independent director within the meaning of Rule 5605 of The Nasdaq Stock Market.
Mr. Hoppenot is not considered independent as he is currently employed as our CEO. For Mr. Bienaimé, Mr. Baker, Mr. Brooke, Mr. Clancy, Dr. Dixon, Dr. Fouse and Dr. Friedman, the Board considered their relationship and transactions with our Company as directors and security holders of our Company.
All of the nominees are current members of the Board.
Director Nominations
The Board nominates directors for election at each annual meeting of stockholders and elects new directors to fill vacancies when they arise. The Board has as an objective, set forth in our Corporate Governance Guidelines, that its membership be composed of experienced and dedicated individuals with diversity of backgrounds, perspectives and skills. The Nominating and Corporate Governance Committee has the responsibility to identify, evaluate, recruit and recommend qualified candidates to the Board for nomination or election.
The Nominating and Corporate Governance Committee will select candidates for director based on their character, judgment, diversity of experience, business acumen, and ability to act on behalf of all stockholders. The Nominating and Corporate Governance Committee believes that nominees for director should have experience, such as experience in management, accounting, finance, drug discovery and development, or marketing, or industry and technology knowledge, that may be useful to the Company and the Board; high personal and professional ethics and the willingness and ability to devote sufficient time to effectively carry out his or her duties as a director. Although the Company has no formal diversity policy for board members, the Board and the Nominating and Corporate Governance Committee consider diversity of backgrounds and experiences and other forms of diversity when selecting nominees.
20 | Proxy Statement 2019 |
Corporate Governance |
The Nominating and Corporate Governance Committee believes it appropriate for at least one, and, preferably, multiple, members of the Board to meet the criteria for an audit committee financial expert as defined by Securities and Exchange Commission rules, and our Corporate Governance Guidelines require that a majority of the members of the Board meet the definition of independent director under the rules of The Nasdaq Stock Market. The Nominating and Corporate Governance Committee believes it appropriate for certain key members of our management currently, our CEO to participate as members of the Board.
Prior to each annual meeting of stockholders, the Nominating and Corporate Governance Committee identifies nominees first by evaluating the current directors whose term will expire at the annual meeting and who are willing to continue in service. These candidates are evaluated based on the criteria described above, including as demonstrated by the candidates prior service as a director, and the needs of the Board with respect to the particular talents and experience of its directors. In the event that a director does not wish to continue in service, the Nominating and Corporate Governance Committee determines not to re-nominate the director, or if a vacancy is created on the Board as a result of a resignation, an increase in the size of the Board or other event, then the Committee will consider various candidates for Board membership, including those suggested by the Committee members, by other Board members, by any search firm engaged by the Committee and by stockholders. The Committee may only recommend, and the Board may only nominate, candidates for director who agree to tender, promptly following their election or re-election as a director, irrevocable resignations that would be effective if the director fails to receive a sufficient number of votes for re-election at the next annual meeting of stockholders at which he or she faces re-election and if the Board accepts the resignation. The Committee recommended all of the nominees for election included in this Proxy Statement. All of the nominees are current members of the Board.
A stockholder who wishes to suggest a prospective nominee for the Board should notify the Secretary of the Company or any member of the Nominating and Corporate Governance Committee in writing with any supporting material the stockholder considers appropriate. In addition, our Bylaws contain provisions that address the process by which a stockholder may nominate an individual to stand for election to the Board at our annual meeting of stockholders. In order to nominate a candidate for director, a stockholder must give timely notice in writing to the Secretary of the Company and otherwise comply with the provisions of our Bylaws. To be timely, our Bylaws provide that our Secretary must have received the stockholders notice not less than 90 days nor more than 120 days prior to the first anniversary of the preceding years annual meeting of stockholders. However, in the event that no annual meeting was held in the preceding year or the annual meeting is called for a date that is more than 30 days before or more than 60 days after the first anniversary date of the preceding years annual meeting of stockholders, notice by the stockholder to be timely must be so received by the Secretary of the Company not later than the close of business on the later of (1) the 90th day prior to the date of the meeting and (2) the 10th day following the first public announcement or disclosure of the meeting date. Information required by the Bylaws to be in the notice include the name and contact information for the candidate and the person making the nomination and other information about the nominee that must be disclosed in proxy solicitations under Section 14 of the Securities Exchange Act of 1934 and the related rules and regulations under that Section.
Proxy Statement 2019 | 21 |
Corporate Governance |
Stockholder nominations must be made in accordance with the procedures outlined in, and include the information required by, our Bylaws and must be addressed to:
Secretary
Incyte Corporation
1801 Augustine Cut-Off
Wilmington, DE 19803
You can obtain a copy of the full text of the Bylaw provision by writing to the Companys Secretary at the above address.
Board Meetings
The Board held five meetings during 2018. All directors attended all meetings held by the Board and of the committees on which such director served during his or her tenure in 2018.
The independent directors meet in executive sessions at regularly scheduled meetings of the Board without the participation of our CEO or other members of management. There were four regularly scheduled meetings of the Board in 2018.
In 2018, we did not, and for 2019, we do not, have a policy that requires the attendance of directors at the Annual Meeting.
Corporate Governance Guidelines
The Board is committed to sound and effective corporate governance practices. Accordingly, the Board has adopted Corporate Governance Guidelines, which are intended to describe the governance principles and procedures by which the Board functions. The guidelines are subject to periodic review and update by the Nominating and Corporate Governance Committee and the Board, and were most recently amended in November 2017. These Guidelines can be found on our website at http://www.incyte.com under the Corporate Governance heading in the For Investors portion of our website.
The Corporate Governance Guidelines provide, among other things, that:
| a majority of the directors must be independent; |
| if the Chairman of the Board is not an independent director, the independent directors will appoint a Lead Independent Director, whose duties would include presiding at all meetings of the Board at which the Chairman is not present, presiding at executive sessions of the independent directors, serving as liaison between the Chairman and the independent directors, approving information sent to the board, approving meeting agendas for the Board, approving meeting schedules to assure that there is sufficient discussion time for all agenda items, and being available for consultation with stockholders (when appropriate); |
| directors should offer to resign from the Board if they experience a change in their principal occupation; |
| directors should submit their resignations from the Board if they do not receive the votes of a majority of the votes cast in an uncontested election; |
| directors should advise the chair of the Nominating and Corporate Governance Committee before accepting an invitation to serve on more than four other public company boards (or, if a director is a chief executive officer of a public company, more than two other public company boards); |
22 | Proxy Statement 2019 |
Corporate Governance |
| the Audit, Compensation, and Nominating and Corporate Governance Committees must consist solely of independent directors; |
| the Board and its committees may seek advice from outside advisors as appropriate; |
| the independent directors regularly meet in executive sessions without the presence of the non-independent directors or members of our management; and |
| the Nominating and Corporate Governance Committee periodically reviews the composition, functioning and effectiveness of the Board and its committees, and oversees the self-assessment of the Board and its committees. |
Communications with the Board
If you wish to communicate with the Board, you may send your communication in writing to:
Secretary
Incyte Corporation
1801 Augustine Cut-Off
Wilmington, DE 19803
You must include your name and address in the written communication and indicate whether you are a stockholder of the Company.
The Secretary will review any communications received from a stockholder and all material communications from stockholders will be forwarded to the appropriate director or directors or Committee of the Board based on the subject matter.
Certain Relationships and Related Transactions
Our policy is that all employees, officers and directors must avoid any activity that is or has the appearance of conflicting with the interests of the Company. This policy is included in our Code of Business Conduct, Ethics and Board Code of Conduct and Ethics. We conduct a review of all related party transactions for potential conflict of interest situations on an ongoing basis and all such transactions must be approved by the Audit Committee or another independent body of the Board.
Proxy Statement 2019 | 23 |
Our director compensation program is designed to enable continued attraction and retention of highly qualified non-employee directors by ensuring that our director compensation is in line with compensation offered by our peer companies that compete with us for director talent. The program is designed to address the time, effort, expertise, and accountability required of active board membership. Directors who are employees of the Company do not receive any fees for their service on the Board or any committee. Mr. Hoppenot is the Companys only employee director. The Compensation Committee, with the assistance of its independent compensation consultant, periodically reviews the compensation for our non-employee directors in relation to the peer group used for compensation purposes (as described below under Compensation Discussion and Analysis).
In the course of our stockholder engagement during 2018, it became clear that it was time to re-evaluate our director compensation practices. Existing director compensation practices included an equity grant of a fixed number of options. A consensus was forming among several of our stockholders that the equity component of director compensation should, instead, aim to deliver a fixed value. The goal of fixed-value equity compensation is to ensure that overall compensation amounts are generally consistent over time, thus avoiding the up-and-down values that occur when equity compensation grants are fixed to a particular number of stock options. Accordingly, based on the Compensation Committees most recent review in September 2018, the Compensation Committee recommended, and, in March 2019, the Board of Directors approved the changes in non-employee director compensation described below, noting the continued heavy weighting of compensation toward equity and stock options. These changes will take effect upon the approval of amendments to our Amended and Restated 2010 Stock Incentive Plan (the 2010 Stock Incentive Plan), as described below under Proposal 3.
Cash Compensation
Effective as of the date of stockholder approval of Proposal 3, the amendments to the 2010 Stock Incentive Plan, each non-employee director, other than the Lead Independent Director, will receive a $60,000 annual retainer, payable quarterly, and prorated for such portion of the year that the director serves on the Board. The Lead Independent Director will receive a $90,000 annual retainer. The chair of the Audit Committee will receive an additional $25,000 annual retainer, and each other member of the Audit Committee will receive an additional $12,000 annual retainer. The chair of the Compensation Committee will receive an additional $25,000 annual retainer, and each other member of the Compensation Committee will receive an additional $10,000 annual retainer. The chair of the Nominating and Corporate Governance Committee will receive an additional $16,000 annual retainer, and each other member of the Nominating and Corporate Governance Committee will receive an additional $8,000 annual retainer. The chair of the Finance Committee receives an additional $15,000 annual retainer, and each other member of the Finance Committee receives an additional $8,000 annual retainer. All retainers will be prorated for such portion of the year that the director serves on the Board.
Non-employee directors have the option to elect to receive their retainers and committee fees in the form of restricted stock that vests immediately when the associated quarterly retainer amount is paid. All directors are reimbursed for their travel and out-of-pocket expenses in accordance with our travel policy for each in-person Board or committee meeting that they attend.
24 | Proxy Statement 2019 |
Compensation of Directors |
Equity Compensation
In addition to cash compensation for services as a member of the Board, non-employee directors also receive equity awards. If our stockholders approve Proposal 3, the 2010 Stock Incentive Plan will be amended to provide that following the conclusion of the Annual Meeting and each future annual meeting of our stockholders, each non-employee director who continues to serve as a member of the Board will receive awards with a grant date value of $500,000, of which 75% would be in the form of stock options and 25% would be in the form of restricted stock unit (RSU) awards, determined in the same manner as with awards to our executive officers, as described below under Compensation Discussion and Analysis. The exercise price of the options will be equal to the fair market value on the date of grant, and the options will have a term of ten years. Each of these options and RSUs will vest in full on the first anniversary of the date of the grant or, if earlier, the date of the next annual meeting of stockholders or upon a change in control. The initial stock option grants described in the next paragraph will be eliminated.
Prior to the date of stockholder approval of Proposal 3, each new non-employee director appointed to the Board will receive an initial stock option to purchase 25,000 shares of our common stock at an exercise price equal to the fair market value of our common stock on the date of grant. The initial stock option vests and becomes exercisable as to 25% of those shares on the first anniversary of the date of the grant, and the remaining shares vest and become exercisable monthly over the following three years. In addition, on the date of each annual meeting of stockholders, each non-employee director who continues to serve as a member of the Board will receive an option to purchase 15,000 shares of our common stock at an exercise price equal to the fair market value of our common stock on the date of grant. Each of these annually granted options will vest in full on the first anniversary of the date of the grant or, if earlier, the date of the next annual meeting of stockholders or upon a change in control.
Under the 2010 Stock Incentive Plan, when a new non-employee director is appointed to the Board at a time other than at an annual meeting, the director receives a pro rata portion of the automatic annual grants. On May 1, 2018, the date of our 2018 Annual Meeting of Stockholders, each then continuing non-employee director received his or her annual grant of an option to purchase 15,000 shares of our common stock at an exercise price equal to the fair market value of our common stock on the date of grant.
Proxy Statement 2019 | 25 |
Compensation of Directors |
The table below shows the compensation paid to each non-employee director for his or her service in 2018:
2018 Director Compensation Table
Name | Fees Earned ($) |
Stock Awards ($)(1) |
Option Awards ($)(2)(3) |
Total ($) |
||||||||||||
Julian C. Baker |
| 76,000 | 427,371 | 503,371 | ||||||||||||
Jean-Jacques Bienaimé |
| 58,000 | 427,371 | 485,371 | ||||||||||||
Paul A. Brooke |
| 95,000 | 427,371 | 522,371 | ||||||||||||
Paul J. Clancy |
70,000 | | 427,371 | 497,371 | ||||||||||||
Wendy L. Dixon |
| 65,000 | 427,371 | 492,371 | ||||||||||||
Jacqualyn A. Fouse |
| 50,000 | 427,371 | 477,371 | ||||||||||||
Paul A. Friedman |
50,000 | | 427,371 | 477,371 |
(1) | Value of restricted stock awards issued at the election of the director in lieu of some of his or her annual retainer and committee fees. |
(2) | Amounts listed in this column represent the aggregate grant date fair value of option awards granted in 2018 determined in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (ASC 718) for financial reporting purposes. See Note 13 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of our assumptions in determining the ASC 718 values of our stock awards. |
(3) | The following table provides the number of shares of common stock subject to outstanding options held at December 31, 2018 for each director. The number of shares shown for Dr. Friedman includes 107,500 shares underlying options received while he served as our CEO. |
Name | Number of Shares Underlying Unexercised Options |
|||
Julian C. Baker | 175,000 | |||
Jean-Jacques Bienaimé | 90,000 | |||
Paul A. Brooke | 155,000 | |||
Paul J. Clancy | 90,000 | |||
Wendy L. Dixon | 188,334 | |||
Jacqualyn A. Fouse | 48,750 | |||
Paul A. Friedman | 182,500 |
26 | Proxy Statement 2019 |
Compensation Discussion and Analysis
What We Do | ||||||
We pay for performance | We have adopted a compensation clawback policy
| |||||
25% of executives target equity award value is in the form of performance shares
|
Our Compensation Committee uses an independent compensation consultant, Compensia
| |||||
We consider peer groups in establishing executive compensation
|
We have robust anti-hedging and anti-speculation policies in place
| |||||
We have implemented robust stock ownership guidelines for our CEO, executive officers and our directors
|
We conduct an annual say-on-pay vote
| |||||
We have double-trigger equity vesting in the event of a change-in-control
|
Our Compensation Committee is comprised of all independent directors
| |||||
Equity awards have a minimum vesting period of 12 months.
|
We engage proactively with our stockholders throughout the year
|
What We Dont Do | ||||||
We do not reprice stock options without stockholder approval
|
We do not provide golden parachute excise tax gross-ups
| |||||
We do not provide single-trigger equity vesting in the event of a change-in-control
|
We do not provide executive perquisites beyond financial and tax planning
|
Compensation Program Strategy and Objectives
The Compensation Committee of our Board believes that the compensation of our executive officers should:
| Pay for performance; |
| Encourage both creation of stockholder value and achievement of strategic corporate objectives; |
| Integrate compensation with our annual and long-term corporate objectives and strategy, and focus executive behavior on the fulfillment of both of those objectives; |
| Provide a competitive total compensation package that enables us to attract and retain, on a long-term basis, qualified personnel; and |
| Provide fair compensation consistent with internal compensation programs. |
Proxy Statement 2019 | 27 |
Executive Compensation |
Our executive officers compensation currently includes three primary components: base salary, cash bonus, and equity-based incentive awards. Equity-based incentive awards can be made up of restricted stock units, performance shares or stock options. Salary is a fixed amount and does not vary with our performance. All other components of our executives compensation are closely tied to our Companys performance either through the amounts (if any) of each component actually received or the value of each component over time, or both and each contributes toward our goal of delivering long-term stockholder value. Each of the equity-based components including the performance shares that only become earned upon achievement of pre-determined goals are also subject to time-based vesting, which the Compensation Committee believes incentivizes executive retention. The performance-based components and time-based components of our equity compensation program are designed to encourage both an appropriate level of risk-taking and a focus on sound long-term decision-making, thus aligning executive interests with the long-term best interests of our Company and our stockholders. The chart below sets out each of these components.
Fixed Compensation Performance-Based Compensation Short Term Cash Compensation Program Long Term Equity Compensation Program Partially At-Risk Wholly At-Risk Salary Incentive Compensation Program Restricted Stock Units1 Performance Shares Stock Options2 Form and Key Features Provides base compensation that is predictable and competitive with our peer group Reflects the scope and complexity of executives' roles and responsibilities Reviewed and approved annually by the Compensation Committee Annual cash bonus opportunity Percentage of base salary awarded is determined by level of achievement of commercial, R&D and strategic goals Goals approved at the start of each year by the Compensation Committee Achievement percentage determined at the end of each year by the Compensation Committee 25% of target equity value Value is tied to the stock price Vests over four years 25% of target equity value Goals approved at the start of each year by the Compensation Committee Performance goals align with stockholder interests Only earned if we meet pre-determined performance goals If achieved, value is directly tied to the stock priceVests over four years50% of target equity value Value is directly tied to the stock price Vests over four years Purpose Rewards current contributions to the CompanyAttracts and retains high-level talentProvides opportunity for near-term cash bonus based on the achievement of short-term strategic corporate objectives, which are intended to drive long-term growthSets the stage for potential continued growthProvides opportunity for compensation when stock price is volatileProvides long-term retention of key talentEncourages long-term decision making Aligns management objectives with stockholder interest Provides incentive to achieve key objectives intended to maximize stockholder valueProvides long-term retention of key talentEncourages long-term decision making Aligns management objectives with stockholder interestProvides incentives for strategic risk-taking to maximize value, which correlates to our longer-term R&D plans, and aligns with longer-term stockholder valueProvides long-term retention of key talentEncourages long-term decision makingAligns management objectives with stockholder interest Equity Ownership Guidelines for Executives Help Ensure Continued Alignment with Stockholder Interests Year After Year
1. | Restricted Stock Units were not used as part of the 2018 equity compensation program, but comprise 25% of target equity compensation for 2019. For a further description of the evolution of the equity compensation program from 2018 through 2019, see -Recent Evaluation of Our Equity Grant Practices, starting on page 33. |
2. | Stock options comprised 75% of target equity compensation for 2018, and now comprise 50% for 2019. For a further description of the evolution of the equity compensation program from 2018 through 2019, see -Recent Evaluation of Our Equity Grant Practices, starting on page 33. |
As the design of our executive compensation program shows, the Compensation Committee believes that executive compensation should be designed to pay for performance. Our Company has been very successful in recent years, and executive compensation has reflected that performance. While 2018 was also successful in many respects, we did miss a very important development goal
28 | Proxy Statement 2019 |
Executive Compensation |
when our ECHO-301 trial failed, resulting in a lower cash bonus of 81% of target as well as decreased value of equity holdings. In addition, in the case of performance shares which were tied to pre-determined, internal, stretch revenue targets, the shares earned amounted to only 83% of target shares. The charts below illustrate how our CEOs compensation is closely tied to our Companys performance goals over the last three years and how the percentage of our CEOs compensation that is tied to performance compares with those of our peer group of companies. The chart below illustrates this evolution with respect to our CEOs compensation, demonstrating that our CEOs total compensation tracks our achievement of Board-approved corporate goals:
CEO Total Compensation is Linked to Performance
Total CEO Compensation
Incentive Compensation Program Achievement |
Performance Share Achievement |
Proxy Statement 2019 | 29 |
Executive Compensation |
CEO At-Risk Compensation is In-Line with 2019 Peer Group
Implementing Our Objectives Role of Compensation Committee and Our Chief Executive Officer
The Compensation Committee approves, administers and interprets our executive compensation and benefits policies, including our 2010 Stock Incentive Plan. The Compensation Committee evaluates the performance of our CEO and determines his compensation in light of the goals and objectives of our compensation program. Our CEO and the Compensation Committee together assess the performance of our other executive officers and determine their compensation, based on initial recommendations from our CEO.
Role of the Independent Compensation Consultant
Under its charter, the Compensation Committee has the sole authority to retain any independent compensation consultant or other advisor as the Committee may deem appropriate. Pursuant to this authority, the Compensation Committee has engaged Compensia, a national compensation consulting firm, for support on matters related to the compensation of our executive officers. Compensia does not provide any other services to our Company.
Compensia was retained by the Compensation Committee to prepare compensation analyses for our executive officers and the non-employee members of our Board of Directors. Specifically, Compensia was directed to provide a competitive market analysis of the base salary, annual cash incentive awards, and long-term incentive equity compensation of our executive officers compared against our compensation peer groups and to review other market practices and trends. This market analysis was reviewed with the Compensation Committee in connection with its January 2018 compensation decisions, and was used to guide decisions regarding base salary adjustments and target annual cash and equity incentive award opportunities. Updated data prepared by Compensia were used to inform the July 2018 equity award decisions made by the Compensation Committee.
30 | Proxy Statement 2019 |
Executive Compensation |
Market Reference Data
While the Compensation Committee reviews market benchmarks, it does not necessarily target a specific percentile within our peer group but rather utilizes market reference data to evaluate the competitiveness of our executive officers compensation and to determine whether the total compensation paid to each of our named executive officers was reasonable in the aggregate.
In connection with its analysis for purposes of 2018 compensation decisions, the Compensation Committee reviewed information prepared by Compensia comparing the compensation for our executive officers with data from SEC filings and the Radford Life Sciences Survey for a peer group comprised of 16 publicly-traded biopharmaceutical companies. Where peer data was unavailable, Compensia used survey data from the Mercer SIRS Survey. We collectively refer to this data as the competitive compensation data.
The peer group for 2018 compensation decisions, referred to as the 2018 peer group, was chosen based on the following characteristics: major labor and capital market competitors, broadly similar size in revenue, market capitalization and headcount, and similar product and business models.
In September 2018, the peer group was changed because one company, Bioverativ, had been acquired and another company, Tesaro, no longer met our revenue and market capitalization criteria. Two new companies that did meet our criteria, Jazz Pharmaceuticals and Neurocrine Biosciences, were added to our peer group to replace the dropped companies. This updated peer group was used for 2019 compensation decisions and is referred to as the 2019 peer group.
The following table sets forth our peer group criteria and a comprehensive list of the peer group companies used for 2018 and 2019 compensation decisions:
How We Establish Our Peer Group
Proxy Statement 2019 | 31 |
Executive Compensation |
Using recent data as of December 31, 2018, the following tables illustrate Incytes twelve trailing months of revenue performance relative to the 2019 peer group and also illustrate our relative headcount and revenue-to-employee ratio compared to the 2019 peer group. We believe this data helps underscore the efficiency of our operations.
2018 Revenue vs. Peers
Revenue to Employee Ratio vs. Peers
32 | Proxy Statement 2019 |
Executive Compensation |
Recent Evaluation of Our Equity Grant Practices
In July 2016, the Compensation Committee, after consulting with Compensia with respect to peer group practices, revised our equity grant guidelines. In 2016 and 2017, 75% of the value of an executive officers annual equity-based incentive awards were in the form of stock options while the remaining 25% were in the form of restricted stock units (RSUs).
In response to stockholder feedback, in 2018, the Compensation Committee changed the RSU portion to performance share awards, which combine the time-based vesting aspects of RSUs with a performance-based vesting requirement, resulting in 75% of the value being in the form of stock options and 25% in performance share awards.
In 2019, the Compensation Committee noted Compensias observation that our mix for executives of 75% stock options and 25% performance shares put our executives equity-based compensation more at-risk than our peer group and the broader market norm and that, on average, our peers deliver approximately 25% of executive equity compensation value in the form of time-based vesting RSUs, with approximately 50% being delivered in the form of stock options and approximately 25% being delivered in the form of performance-based shares or options. The Committee also noted that, due to our stock price decline and limited use of RSUs, realizable compensation for our executives for 2016 through 2018 fell well below target compensation values. Accordingly, to enhance executive retention and bring our executive equity compensation practices in line with our peers, the Committee determined that, for 2019, our executives will receive 50% of their grant date target value in the form of stock options, 25% in the form of performance shares, and 25% in the form of RSUs.
While the equity awards are actually granted in July of each year, the Compensation Committee determines the overall equity grant target value for our executive officers in the early portion of the year, in conjunction with the determination of base salary adjustments and the establishment of the annual incentive compensation plan described in greater detail below. Based on those target values, the share numbers of our annual stock option grants are determined in the middle of each calendar year, with one-half of the grants made at that time and one-half made at the beginning of the following calendar year, with a view toward countering some of the effects of the volatile trading price of our common stock. Our annual stock option grants have a ten-year term with four-year service-based vesting with one-quarter vesting after one year and the remainder vesting in 36 equal monthly installments. Our annual executive performance share and RSU awards are made in the middle of each calendar year. The performance share awards vest, assuming performance goals are achieved at specified levels, in equal annual installments over four years and are described further below. The RSU awards vest in equal installments on each of the first four anniversaries of the grant date.
The Compensation Committee also has the discretion to make outstanding merit stock option awards, which have a ten-year term and vest in a single installment after four years. Those awards, if granted, can be made to executives other than our CEO as well as other key employees throughout our Company and are typically made in connection with salary adjustments at the beginning of each year as the awards are intended to relate to prior year performance and to incentivize and retain the recipients. Our CEO championed the creation of the outstanding merit grant program to recognize important contributions both within a function and the Company as a whole - by leaders throughout our organization. Previously, our CEO received these grants too, but, starting in 2019, in response to stockholder feedback, the Compensation Committee eliminated awards of outstanding merit grants to our CEO.
Proxy Statement 2019 | 33 |
Executive Compensation |
In addition, as described below, in June 2018, the Compensation Committee made retention plan awards to certain key R&D and salesforce employees, including the grant of performance share awards to certain executive officers (not including our CEO).
The exercise price of each stock option awarded under our 2010 Stock Incentive Plan is the closing price of our common stock on the date of grant, which for our annual stock option grants are the dates of the regularly scheduled Compensation Committee meetings or actions without meetings, which are taken following decisions at meetings, in the middle of the year at which equity awards for senior executives are formally determined and at the beginning of the year at which salary adjustments and cash bonuses under our incentive compensation plan are determined. These meetings are scheduled in advance, and we do not coordinate the timing of equity award grants with the release of financial results or other material announcements by our Company. Under our 2010 Stock Incentive Plan, we may not reprice or replace options at lower exercise prices without stockholder approval.
Compensation Practices and Policies
Equity Ownership Guidelines. Effective January 1, 2016, our Board adopted robust equity ownership guidelines for members of senior management, including our executive officers, and members of the Board. Under these guidelines, the covered individuals are expected to meet the following equity ownership requirements:
Equity Ownership Requirements | ||
CEO |
6x Annual Base Salary | |
All Other Executive Officers |
3x Annual Base Salary | |
Non-Employee Members of the Board |
6x Annual Cash Retainer |
All directors and executive officers have either met their respective equity ownership targets or are within the five-year period for achieving compliance.
Covered individuals as of January 1, 2016 must satisfy these guidelines by December 31, 2020, and individuals who subsequently become subject to the guidelines will have five years to reach their ownership requirements. Shares held directly, shares held indirectly, such as by a trust or a 401(k) plan, unvested restricted shares and RSUs, and shares underlying vested stock options are included in determining an individuals equity ownership. Unvested stock options and unearned performance shares are not counted toward meeting these guidelines.
Compensation Recovery Policy. In late 2017, in response to our 2017 stockholder engagement campaign (described more fully under Stockholder Engagement on page 6), our Compensation Committee adopted a compensation recovery (clawback) policy which provides that, in the event that, on account of fraud or other intentional misconduct, we are required to prepare an accounting restatement, we may recover from any executive officer any incentive compensation erroneously paid or awarded in excess of what would have been paid under the accounting restatement. This policy applies prospectively to certain incentive compensation paid or awarded after January 1, 2018, its effective date, and covers the three-year period preceding the date on which we are required to prepare the accounting restatement. The incentive compensation to which it applies is cash bonuses or other cash awards to the extent those bonuses or awards are earned based on the attainment of a financial reporting measure presented in our financial statements or derived from our accounting
34 | Proxy Statement 2019 |
Executive Compensation |
records. In addition, we are subject to the provisions of Section 304 of the Sarbanes-Oxley Act of 2002, which provides that if we are required as a result of misconduct to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws, our CEO and Chief Financial Officer may be legally required to reimburse us for any bonus or other incentive-based or equity-based compensation they receive. To the extent our policy is inconsistent with any final regulations adopted by the SEC to implement the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we intend to revise our policy to comply with those regulations.
Limitations on Hedging and Pledging. Under our insider trading policy, our employees, including our executive officers, and Board members are prohibited from trading in our securities on a short-term basis, purchasing our securities on margin, making short sales in our securities, buying or selling put or call options on our stock, pledging our securities as collateral for a loan, and engaging in other hedging or monetization transactions such as prepaid variable forwards, equity swaps, collars and exchange funds, that permit a holder to continue to own our securities but, without the full risks and rewards of ownership.
Effects of Stockholder Advisory Vote on Executive Compensation, Stockholder Engagement
Approximately 72% of the votes cast in the stockholder advisory say on pay vote on executive compensation in 2018 approved our executive compensation described in last years proxy statement. Throughout the 2018 proxy season, we engaged directly or indirectly through our proxy solicitor, D. F. King & Co., with investors across the vast majority of our stockholder base, representing over 80% of our outstanding shares at that time, including our top ten stockholders. The Compensation Committee considered the result of the stockholder advisory vote as generally strong support for its overall compensation policies, practices and philosophy for our executive officers while also clearly understanding the perspective from several of our stockholders that some change was needed. Accordingly, as a result of this valuable stockholder feedback, the Compensation Committee eliminated the practice of granting special option grants (now called outstanding merit option grants) to our CEO on an ad hoc basis.
While say-on-pay votes are a key indicator of stockholder feedback, we are committed to keeping an open dialogue with our stockholders, including our institutional investors, throughout the year, not just during proxy season. We regularly and frequently engage with our stockholders to discuss business topics, seek feedback on our performance and address other matters of importance to our stockholders, such as executive compensation and corporate governance. Even though our 2017 say-on-pay vote resulted in nearly unanimous approval of our compensation practices, our 2017 stockholder engagement campaign (described more fully under Stockholder Engagement on page 6) made clear that a persistent stockholder concern was that our executive compensation program did not include any performance-based shares tied to financial metrics. As a result, and as described elsewhere in this proxy statement, the Compensation Committee included performance shares tied to pre-specified performance goals (which were revenue-based for 2018) starting with the equity grant cycle in July 2018. These performance share awards comprised 25% of each executive officers target equity award value for 2018 and 2019.
The Compensation Committee intends to continue to regularly review, assess and, when appropriate, adjust our compensation practices based on feedback from our stockholders or other determinations informed by best practices and trends.
Proxy Statement 2019 | 35 |
Executive Compensation |
Tax Deductibility of Compensation
Section 162(m) of the Internal Revenue Code places a limit of $1,000,000 on the amount of compensation that we may deduct in any one year with respect to our CEO and each of the next three most highly compensated executive officers (excluding the chief financial officer for taxable years prior to 2018). Section 162(m) historically permitted deductions in excess of $1,000,000 for performance-based compensation, which included stock options meeting certain requirements, but the exception for performance-based compensation has been repealed effective for taxable years beginning after December 31, 2017.
Stock options that we granted in 2017 and prior years should still qualify for full deductibility under a transition rule for amounts payable pursuant to written binding contracts in effect on November 2, 2017. To maintain flexibility in compensating our executive officers, the Compensation Committee has not adopted a policy requiring all executive compensation to be deductible.
Key Elements of Executive Compensation
Our executive officers compensation currently includes three primary components: base salary, cash bonus, and long-term equity-based incentive awards. Of these components, only base salary is not tied directly and meaningfully to our Companys performance because base salary is intended to attract and retain key talent by providing a stable source of income. In addition, we provide our executive officers a variety of benefits that are available generally to all salaried employees. Each of these components is described in more detail below.
Base Salary
Base salaries are designed to attract and retain qualified personnel by providing a consistent cash flow throughout the year as compensation for acceptable levels of performance of day-to-day responsibilities. Base salaries for our executive officers are established based on the scope of their responsibilities, their performance, and their prior relevant background, training and experience, taking into account competitive market compensation paid by the companies represented in the compensation data we review for similar positions and the overall market demand for those executive officers at the time of hire. The Compensation Committee reviews salaries on an annual basis. At such time, the Compensation Committee may change each executive officers salary based on the individuals contributions and responsibilities over the prior twelve months and any change in competitive market pay levels.
In January 2018, the Compensation Committee set the 2018 base salaries for our executive officers. The Committee considered our Companys performance in 2017, including our commercial operations, clinical trial progress of our other drug candidates, job performance, internal pay alignment and equity, marketplace competitiveness and the 2018 peer group data in determining the base salaries for 2018.
In January 2019, the Compensation Committee set the 2019 base salaries for our executive officers. The Committee considered our Companys performance in 2018, including our commercial operations, clinical trial progress of our other drug candidates, job performance, internal pay alignment and equity, marketplace competitiveness and the 2019 peer group data in determining the base
36 | Proxy Statement 2019 |
Executive Compensation |
salaries for 2019. The following table sets forth the salary history of our named executive officers listed in the Summary Compensation Table and for Christiana Stamoulis, our new Chief Financial Officer.
Name | 2016 Base Salary |
2017 Increase |
2017 Base Salary |
2018 Increase |
2018 Base Salary |
2019 Increase |
2019 Base Salary |
|||||||||||||||||||||
Hervé Hoppenot |
$ | 940,000 | 3.0 | % | $ | 968,200 | 3.0 | % | $ | 997,246 | 5.0 | % | $ | 1,047,108 | ||||||||||||||
Christiana Stamoulis (1) |
| | | | | | $ | 560,000 | ||||||||||||||||||||
David Gryska (2) |
$ | 553,805 | 3.0 | % | $ | 570,419 | 3.0 | % | $ | 587,532 | | | ||||||||||||||||
Reid Huber (3) |
$ | 480,000 | 3.0 | % | $ | 494,400 | 3.0 | % | $ | 509,232 | | | ||||||||||||||||
Steven Stein |
$ | 442,900 | 7.3 | % | $ | 475,000 | 10.5 | % | $ | 525,000 | 5.0 | % | $ | 551,250 | ||||||||||||||
Wenqing Yao |
$ | 430,000 | 4.7 | % | $ | 450,000 | 3.0 | % | $ | 463,500 | 5.0 | % | $ | 486,675 | ||||||||||||||
Maria Pasquale (4) |
| | | | $ | 500,000 | 3.0 | % | $ | 515,000 |
(1) | Ms. Stamoulis joined us as our Executive Vice President and Chief Financial Officer effective February 2019. |
(2) | Mr. Gryska resigned as Executive Vice President and Chief Financial Officer effective December 2018. |
(3) | Dr. Huber resigned as Executive Vice President and Chief Scientific Officer effective November 2018. |
(4) | Ms. Pasquale was appointed Executive Vice President and General Counsel effective April 2018. |
For each of 2018 and 2019, 3.0% was the average base salary increase for all of our non-executive employees.
Annual Incentive Compensation Plan
Each year, we have established an incentive compensation plan that provides for cash incentive awards for all of our eligible employees. The plans have been designed to pay for performance by aligning incentive awards for each participant with an evaluation of our achievement of corporate objectives. These corporate objectives are approved by the independent members of our Board based on the recommendations of the Compensation Committee, as well as, in the case of individuals other than our CEO, the achievement of individual business objectives for a particular year. Eligibility to participate in the plans and actual award amounts are not guaranteed and are determined, in the case of our executive officers, at the discretion of the Compensation Committee. After the completion of each year, the Compensation Committee reviews with our CEO the level of achievement of the corporate objectives under the plan and determines the size of the overall bonus pool to be used for awards. The Compensation Committee, with input from our CEO with respect to our other executive officers, may use discretion in determining for each executive officer his or her bonus amount.
Incentive awards for our executive officers were approved by the Compensation Committee and paid in 2019 pursuant to our 2018 incentive compensation plan. Each of our executive officers who was with us for all of 2018, other than our CEO, had a funding target under the plan of 50% of his or her annual base salary for 2018, with the potential for actual awards under the plan to either exceed or be less than the funding target depending upon corporate performance, as well as the executive officers achievement of certain individual goals that are predetermined by our CEO. Our CEO had a funding target under the plan of 100% of his annual base salary for 2018, with the potential for actual awards under the plan to either exceed or be less than such funding target depending upon corporate performance. Target incentive award amounts for each participant were based on the participants potential impact on our operating and financial results and on market competitive pay practices. Individual performance goals were also established for eligible employees other than our CEO, and evaluations were based upon whether the employee met, exceeded or did not meet each established goal. The Committee believes that it is appropriate to align a higher percentage of our executive officers total cash compensation with the achievement of our Board-approved corporate objectives because those objectives are determined with a view toward progressing our Companys business and
Proxy Statement 2019 | 37 |
Executive Compensation |
maximizing stockholder value. Linking a significant percentage of executive officer cash incentive awards to achievement of Committee-approved corporate objectives puts a substantial portion of our CEOs and executive officers cash compensation at risk, and is another way the Committee has designed executive compensation to pay for performance.
While executive officers other than our CEO have individual performance objectives that are evaluated by our CEO, the outcome of those objectives did not affect awards under our 2018 incentive compensation plan to those officers, and the award amounts were based solely on achievement of the corporate performance objectives.
Annual Incentive Compensation Plan
2018 Corporate Performance Objectives
Corporate performance objectives for 2018 were based on achievement of drug discovery objectives, drug development objectives, commercial objectives, finance objectives, and technical operations objectives.
Threshold, target and outperform achievement levels are defined for each corporate objective and, depending on the achievement of those performance levels, a payout ranging from 0% to 150% may be made for each objective. The ECHO-301 component of our drug development objectives was only achievable at the outperform level and related to achieving data sufficient for a regulatory submission. Bonus objectives included an extra 5% for drug discovery, an extra 25% for drug development, and an extra 5% for business development. Collectively, the bonus opportunities enabled the payout of up to an additional 35 percentage points for extraordinary achievements beyond core objectives.
38 | Proxy Statement 2019 |
Executive Compensation |
At the time the corporate performance objectives for 2018 were set, the Committee and management believed that achievement of the target levels of performance for the non-ECHO-301 objectives would be difficult and challenging, but achievable with significant effort and skill, favorable preclinical study and clinical trial results and continued strong commercial performance. As noted above, achievement of the ECHO-301 component of our drug development objectives were dependent on clinical trial results.
In January 2019, the Compensation Committee evaluated the achievement of the 2018 corporate performance objectives and determined that incentive awards under our 2018 incentive compensation plan should be based upon achievement of 81% of the target level of corporate performance objectives. While the Committee noted that the business development bonus opportunity relating to the establishment of a strategic relationship that provides near-term sales revenues was not met, the Committee determined that our establishment of our strategic collaboration in China with Innovent warranted the award of two percentage points. The various objective categories, target payouts and actual payouts, are listed in the table below.
Objectives | Target % | Payout % | ||||||||
Drug Discovery |
15 | 22.5 | ||||||||
Achieved IND filings for INCAGN2385, INCAGN2390, and INCB86550 | ||||||||||
Achieved pre-clinical objectives relating to certain programs | ||||||||||
Bonus Achieved | | 5 | ||||||||
Achieved four objectives, including filing an IND for INCB86550 | ||||||||||
Drug Development |
60 | 30 | ||||||||
JAK Programs | 5 | 5 | ||||||||
Submitted sNDA for ruxolitinib in steroid-refractory acute GVHD | ||||||||||
Completed enrollment targets for pre-specified trials, including GRAVITAS-301 | ||||||||||
Immune Therapies Large Molecule | 5 | 7.5 | ||||||||
Achieved five of six objectives, including initiating three monotherapy clinical trials with registrational intent for INCMGA0012 | ||||||||||
Immune Therapies Small Molecule | 5 | 5 | ||||||||
Achieved three of five objectives, including opening enrollment for the first clinical trial of INCB86550 | ||||||||||
Epacadostat | 35 | | ||||||||
|
Did not achieve sufficient pivotal data from ECHO-301 to trigger a decision to submit to regulatory authorities | |||||||||
Did not complete enrollment in other pivotal epacadostat trials | ||||||||||
Targeted Therapies | 5 | | ||||||||
Only achieved four of eleven objectives, including opening enrollment for the Phase III study of pemigatinib in first-line cholangiocarcinoma | ||||||||||
Bonus Achieved | | 5 | ||||||||
Reported preliminary data for pemigatinib in second-line FGFR2 translocated cholangiocarcinoma which, if confirmed in the full cohort, would support an NDA submission | ||||||||||
Inflammation/Autoimmunity | 5 | 7.5 | ||||||||
Achieved four out of five objectives, including the initiation of the Phase III trial of ruxolitinib cream in atopic dermatitis as well as trials with INCB54707 and parsaclisib in pre-specified indications | ||||||||||
Commercial |
25 | 21 | ||||||||
Achieved pre-specified level of revenue for Jakafi and Iclusig | ||||||||||
Business Development Bonus Achieved | | 2 | ||||||||
Achieved out-licensing collaboration that provides potential for royalties by 2021 |
Proxy Statement 2019 | 39 |
Executive Compensation |
The table below sets forth the incentive awards under our 2018 incentive compensation plan for our named executive officers:
Name |
Year-End (A) x |
Target Bonus % (B) x |
Overall Multiplier (C) = |
Bonus (D) |
||||||||||||
Hervé Hoppenot |
$ | 997,246 | 100 | % | 81.0 | % | $ | 807,769 | ||||||||
David W. Gryska (1) |
$ | 587,532 | 50 | % | 81.0 | % | $ | 237,551 | ||||||||
Reid M. Huber (2) |
| | | | ||||||||||||
Steven H. Stein |
$ | 525,000 | 50 | % | 81.0 | % | $ | 212,625 | ||||||||
Wenqing Yao |
$ | 463,500 | 50 | % | 81.0 | % | $ | 187,718 | ||||||||
Maria E. Pasquale (3) |
$ | 500,000 | | | $ | 250,000 |
(1) | Mr. Gryska resigned as Executive Vice President and Chief Financial Officer effective December 2018. |
(2) | Dr. Huber resigned as Executive Vice President and Chief Scientific Officer effective November 2018. |
(3) | Ms. Pasquale was appointed Executive Vice President and General Counsel effective April 2018. Her bonus award for 2018 was contractually agreed, independent of our corporate achievement factor. |
Our incentive compensation program is designed to incentivize employees, including our executive officers, in every area of our Company, which we believe helps lead to significant achievement across all areas. Our Compensation Committee believes that measuring and rewarding achievements from all functions including functions such as discovery, development, technical operations and business development, whose efforts take a much longer time to make an impact on our top-line revenue or on our stock price helps ensure that we are properly incentivizing the collective efforts that lead not only to successful current commercial performance but also critically set the stage for potential continued growth and potential long-term sustained success in the years ahead. Our Compensation Committee also believes that linking incentive compensation to corporate goals aligns employees incentives with strategic imperatives, thus paying for performance.
The chart below illustrates the achievement levels under our incentive compensation program over the last three years, and illustrates how the annual incentive compensation plan serves to execute on the Compensation Committees goal of paying for performance:
Incentive Compensation Plan Achievement 2016-2018
40 | Proxy Statement 2019 |
Executive Compensation |
Annual Incentive Compensation Plan
2019 Corporate Performance Objectives
In January 2019, our Board, based on the recommendations of the Compensation Committee, approved corporate objectives for our 2019 incentive compensation plan. Under this plan, the funding targets for our executive officers remain the same as for 2018. Corporate performance objectives for 2019 are based on achievement of drug discovery objectives, drug development objectives and commercial objectives.
Threshold, target and outperform achievement levels are defined for each corporate objective and, depending on the achievement of those performance levels, a payout ranging from 0% to 150% may be made for each objective. Bonus objectives include an extra 5% for Drug Discovery, an extra 20% for Drug Development, and an extra 10% for Business Development. Collectively, the bonus opportunities enable the payout of up to an additional 35 percentage points for extraordinary achievements beyond core objectives.
The Committee and management believe that achievement of the target levels of performance will be difficult and challenging, but achievable with significant effort and skill, favorable preclinical study and clinical trial results and continued strong commercial performance.
Equity-Based Incentive Awards
The Compensation Committee administers equity-based incentive awards, such as stock option grants, RSUs and performance shares that are made to our executive officers under our 2010 Stock Incentive Plan. The Compensation Committee believes that by providing those persons who have substantial responsibility for our management and growth with an opportunity to increase their ownership of our stock, the best interests of our stockholders and executive officers will be closely aligned. Therefore, executive officers are eligible to receive equity-based incentive awards when the Compensation Committee performs its annual review, although these awards may be granted at other times in recognition of exceptional achievements. As is the case when the amounts of base salary and initial equity awards are determined, the Compensation Committee conducts a review of all components
Proxy Statement 2019 | 41 |
Executive Compensation |
of an executive officers compensation when determining annual equity awards to ensure that the executives total compensation conforms to our overall philosophy and objectives.
Under our 2010 Stock Incentive Plan, we may grant restricted shares, performance shares, RSUs or stock appreciation rights.
In 2018, our executive officers received stock options and performance shares and, for 2019, our executive officers will receive stock options, performance shares, and RSUs. The value of all of these awards are inherently performance-based.
| Stock options are performance based because they pay nothing to our executive officers unless stockholders benefit by stock price appreciation. In addition, with a ten-year life and a four-year vesting period, stock options are in sync with the time required for discovery, development and commercialization of new medicines. Our Compensation Committee believes that stock options help align executives interests with the long-term interests of our Company and our stockholders. Stock options reinforce our belief that future potential growth of Incyte will be generated by innovation, our discovery and development pipeline, demand for our products and our commercial execution. |
| Performance shares do not become earned unless pre-determined performance goals are met. |
| RSU awards grow or decline in value based on stock price, also linking executive officers compensation to the value delivered to stockholders. |
In addition to the performance-based aspects of stock options, performance shares and RSUs, the four-year vesting periods of all of these awards also serves a critical retention function. Time-based vesting helps ensure the long-term retention of highly valuable executive officers, in whom we have invested considerable time and money, and the intellectual capital they create as well as continuity of their respective teams. The performance-based components and time-based components of our equity compensation program are designed to encourage both an appropriate level of risk-taking and a focus on sound long-term decision making, thus aligning executive interests with the long-term best interests of our Company and our stockholders.
For our 2018 annual equity grants, stock options comprised 75% of an executive officers target equity compensation and performance shares comprised 25%. As described above under Equity Grant Practices, for 2019 the Compensation Committee has determined that our executive officers annual equity award mix should be 50% stock options, 25% performance shares and 25% RSUs to bring our practices in line with our peer group and the broader market norm and to provide greater retentive value from our equity awards.
Performance shares granted in July 2018 had revenue triggers that were determined by the Compensation Committee in February 2018. Depending on revenue actually achieved, the payout on these performance shares could have varied from 0% to 150% of target. These performance shares comprise 25% of an executive officers target equity compensation awarded in connection with our annual equity grants. The Compensation Committee believes that these performance shares align our executive officers interest even more closely with the financial performance of our Company and the eventual value delivered to stockholders. For 2018, the revenue target for the performance shares that would have yielded a 100% payout was an aspirational, internal, stretch target. The Compensation Committee believes such stretch revenue targets help incentivize executives to achieve maximum performance and are a key element of the pay-for-performance strategy. While we achieved record revenue in 2018, we nevertheless did not achieve the internal, stretch target. Accordingly, in February 2019, the Compensation Committee determined that the performance shares earned were only 83% of the target payout.
42 | Proxy Statement 2019 |
Executive Compensation |
Performance Share Achievement 2018
Target Value of 2018 Equity Grants
For the 2018 annual equity grants, our CEO received awards with a grant date target value of $7,000,000 and each of our executive vice presidents received awards with a grant date target value of $1,800,000, in each case, unchanged from the values awarded in July 2017.
While, for our CEO, the Compensation Committee did not target a particular peer group percentile in setting the 2018 equity award values, in July 2018 when the Compensation Committee was actually granting these awards, it noted that then current peer group data indicated that the value of peer group long-term incentive awards had increased. Accordingly, the Compensation Committee noted that our CEOs 2018 equity awards would result in target total direct compensation (target total cash compensation plus long-term incentive value of equity awards) approximating only the 30th percentile of our peer group. The Compensation Committee further noted that, for calendar year 2018, when including the outstanding merit stock option grant made to our CEO in January 2018 that was intended to relate to 2017 performance, our CEOs target total direct compensation would approximate the peer group 40th percentile.
Similarly, for executive officers other than our CEO, the Compensation Committee noted in July 2018 that, because the value of peer group long-term incentive awards had increased since January 2018 when our equity target values were established, target award values likely no longer approximated the peer group 60th percentile.
Nevertheless, despite these target equity award values being lower relative to our then current peer group than initially designed to be, the Compensation Committee decided - in keeping with its pay-for-performance philosophy - that no changes would be made at that time.
For a discussion of updates to the equity grant target values undertaken by the Compensation Committee in 2019, see Target Value of 2019 Equity Grants on page 45.
Outstanding Merit Grants
In January 2018, certain of our named executive officers received outstanding merit option grants intended to incentivize and retain those individuals. Our CEO received a grant with a grant date target
Proxy Statement 2019 | 43 |
Executive Compensation |
value of $1,200,000 and certain other named executive officers - Drs. Huber, Stein and Yao - received grants with a grant date target value of $1,000,000. These outstanding merit option grants are subject to four-year cliff vesting. As noted above under Compensation Practices and PoliciesEffects of Stockholder Advisory Vote on Executive Compensation, the Compensation Committee has now eliminated the practice of awarding outstanding merit option grants (formerly named special option grants) to our CEO and no such grant was made in 2019.
2018 Retention Plans
With the failure of our ECHO-301 program in April 2018 and the significant stock price decline which accompanied it, the Compensation Committee believed it was vital to act to preserve the two key engines of growth within Incyte namely, the salesforce which generates the revenue to fund our day-to-day operations and the R&D effort which aims to produce the compounds that will potentially lead to future growth. Accordingly, in June 2018, the Compensation Committee adopted retention plans utilizing performance share awards for certain groups of employees of our Company, namely key R&D employees and our salesforce. The R&D retention plan participants included three of our named executive officers, Drs. Huber, Stein and Yao, who each received performance share awards potentially representing 50,000 shares of common stock, which would be earned based on a specific number of investigational new drug (IND) filings made by our Company during a specified time frame and, if earned, would vest on the third anniversary of the initial grant date.
Full Value Share Issuance Limits
While the Compensation Committee, in its discretion, may elect to make grants of restricted shares, performance shares, RSUs or stock appreciation rights if it deems it advisable, the 2010 Stock Incentive Plan contains a limit on the total amount of shares that may be issued other than upon the exercise of stock options or stock appreciation rights or pursuant to sales of restricted shares at purchase prices at least equal to the fair market value of the shares sold. That limit is currently 3,500,000 shares and is proposed to be eliminated in connection with the amendments to the 2010 Stock Incentive Plan described under Proposal 3.
Termination Based Compensation Under Employment Agreements and Offer Letters
Our executive officers are parties to employment agreements and offer letters, as described below under Employment Contracts, Termination of Employment and Change-in-Control Arrangements.
These employment agreements and offer letters provide for severance payments and acceleration of vesting of equity-based awards upon termination of employment under the circumstances described below under Employment Contracts, Termination of Employment and Change-in-Control Arrangements. In general, the employment agreements provide for severance benefits if an officers employment is terminated within 24 months following a change in control. These agreements are designed both to attract executives, as we compete for talented employees in a marketplace where such protections are routinely offered, and to retain executives and provide continuity of management in the event of an actual or threatened change in control.
Other Compensation
All of our full-time employees, including our executive officers, may participate in our health programs, such as medical, dental and vision care coverage, and our 401(k) and life and disability insurance programs. These benefits are designed to provide our executive officers and eligible employees a competitive total compensation package that enables us to attract and retain qualified
44 | Proxy Statement 2019 |
Executive Compensation |
personnel. Under our employment agreement with our CEO, we paid the premiums with respect to a six-year insurance policy that becomes payable to the CEO or his estate upon his disability or death, although at his suggestion we recently amended his employment agreement to eliminate our obligation to pay the last years premium on that insurance policy, as described below under Employment Contracts, Termination of Employment and Change-in-Control Arrangements.
Target Value of 2019 Equity Grants
In February 2019, the Compensation Committee established grant date target values for the 2019 annual equity grants for our CEO and other executive officers. In determining to establish a grant date target value of $12,900,000 for our CEO, the Committee noted that the 2019 peer group data presented to the Committee in November 2018 indicated that our CEOs target total direct compensation (target total cash compensation plus long-term incentive value) for 2018 approximated the peer 25th percentile despite his target total cash compensation (base salary plus target bonus) approximating the peer 50th percentile. The Committee noted our Companys overall performance in 2018 despite the ECHO-301 disappointment and the CEOs strong leadership following that development as our Company continued to increase product revenues and continued to advance product candidates through our clinical pipeline, with a number of late-stage candidates that can accelerate near-term growth. Our CEOs 2019 equity grant date target value approximates the 2019 peer group 68th percentile for long-term incentive value and places him at approximately the peer 67th percentile for target total direct compensation. The Committee established grant date target values of $2,200,000 for each of our other executive officers who is eligible to receive annual equity grants in 2019, intended generally to approximate the peer 60th percentile for long-term incentive value. Ms. Stamoulis joined us in February 2019, received initial equity awards with an aggregate grant date target value of $3,300,000 on joining us, and will not receive a 2019 annual equity award but instead will be entitled to receive, on the first anniversary of the commencement of her employment and in July 2020, equity awards with an aggregate grant date target value of $1,300,000 and $2,200,000, respectively.
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Hoppenot, our CEO. The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.
For 2018, our last completed fiscal year:
| the median of the annual total compensation of all employees of our Company (other than our CEO), was $228,006; and |
| the annual total compensation of our CEO, as reported in the Summary Compensation Table presented elsewhere in this Proxy Statement, was $9,314,189. |
Based on this information, for 2018 the ratio of the annual total compensation of Mr. Hoppenot, our CEO, to the median of the annual total compensation of all employees was 41 to 1.
|
Proxy Statement 2019 | 45 |
Executive Compensation |
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of the median employee, the methodology and the material assumptions, adjustments, and estimates that we used were as follows:
| We determined that, as of December 31, 2018, our employee population consisted of 1,367 employees, with 1,106 based in the United States and 261 based in Europe and Japan. |
| We selected December 31, 2018, which is within the last three months of 2018, as the date upon which we would identify the median employee. |
| For all employees, we examined total compensation, which included: base salary, incentive compensation plan payments for non-sales employees, sales incentive compensation plan payments for sales employees, equity awards consisting of stock options and restricted stock units, and other compensation such as 401(k) matching contributions and Company-paid life insurance premiums. |
| We included all employees, whether employed on a full-time or part-time basis, and we annualized the compensation of all permanent employees who were not employed by us for all of 2018. |
| We did not make any cost-of-living adjustments in identifying the median employee. |
| For employees outside the United States, we converted their compensation to U.S. dollars using the average exchange rate for 2018. |
This report shall not deemed to be soliciting material or filed with the Securities and Exchange Commission or be deemed incorporated by reference into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates it by reference into a document filed under such Acts.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth in this Proxy Statement with our management. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the Companys Annual Report on Form 10-K for the year ended December 31, 2018.
Compensation Committee
Paul A. Brooke (Chair)
Julian C. Baker
Jean-Jacques Bienaimé
Named Executive Officers
The Summary Compensation Table, Grants of Plan-Based Awards Table and the tables that follow provide compensation information for our named executive officers, including Hervé Hoppenot, our President and CEO, David W. Gryska, our Executive Vice President and Chief Financial Officer until December 31, 2018, and Reid M. Huber, Steven H. Stein, Wenqing Yao and Maria E. Pasquale.
46 | Proxy Statement 2019 |
Executive Compensation |
Our named executive officers total compensation for 2018 as determined under the rules of the Securities and Exchange Commission, or SEC, is set forth in the following table under the caption Total.
SUMMARY COMPENSATION TABLE
Name and Principal Position | Year | Salary ($) |
Bonus ($) |
Stock ($)(1) |
Option ($)(1) |
Non-Equity ($)(2) |
All Other ($)(3) |
Total ($) | ||||||||||||||||||||||||
Hervé Hoppenot |
2018 | 995,575 | | 1,733,822 | 5,564,508 | 807,769 | 212,515 | 9,314,189 | ||||||||||||||||||||||||
President and Chief |
2017 | 966,505 | | 1,755,563 | 11,677,844 | 1,476,505 | 210,614 | 16,087,031 | ||||||||||||||||||||||||
Executive Officer |
2016 | 937,738 | | 2,810,905 | 6,720,183 | 1,129,880 | 208,407 | 11,807,113 | ||||||||||||||||||||||||
David W. Gryska |
2018 | 586,547 | | 445,824 | 1,123,701 | 237,551 | 38,875 | 2,432,498 | ||||||||||||||||||||||||
Executive Vice President and |
2017 | 569,421 | | 451,372 | 1,588,433 | 434,945 | 35,519 | 3,079,690 | ||||||||||||||||||||||||
Chief Financial Officer (4) |
2016 | 552,792 | | 715,609 | 1,649,443 | 332,837 | 17,485 | 3,268,166 | ||||||||||||||||||||||||
Steven H. Stein |
2018 | 522,123 | | 3,733,824 | 2,119,070 | 212,625 | 23,874 | 6,611,516 | ||||||||||||||||||||||||
Executive Vice President and |
2017 | 473,070 | 100,000 | (6) | 451,372 | 2,688,504 | 362,188 | 24,121 | 4,099,255 | |||||||||||||||||||||||
Chief Medical Officer (5) |
2016 | 442,089 | | 715,609 | 1,649,441 | 266,183 | 16,338 | 3,089,660 | ||||||||||||||||||||||||
Reid M. Huber |
2018 | 465,129 | | 3,733,824 | 2,119,070 | | 34,578 | 6,352,601 | ||||||||||||||||||||||||
Executive Vice President and |
2017 | 493,534 | | 451,372 | 2,688,504 | 376,980 | 40,680 | 4,051,070 | ||||||||||||||||||||||||
Chief Scientific Officer (7) |
2016 | 474,973 | | 715,609 | 2,549,416 | 288,480 | 34,866 | 4,063,344 | ||||||||||||||||||||||||
Wenqing Yao |
2018 | 462,723 | | 3,733,824 | 2,119,070 | 187,718 | 36,716 | 6,540,051 | ||||||||||||||||||||||||
Executive Vice President, |
2017 | 448,798 | | 451,372 | 2,688,504 | 343,125 | 41,374 | 3,973,173 | ||||||||||||||||||||||||
Head of Discovery Chemistry |
2016 | 426,858 | | 715,609 | 2,124,411 | 258,430 | 34,299 | 3,559,607 | ||||||||||||||||||||||||
Maria E. Pasquale |
2018 | 365,753 | 250,000 | (9) | 833,278 | 1,830,477 | 250,000 | 93,960 | 3,623,468 | |||||||||||||||||||||||
Executive Vice President |
||||||||||||||||||||||||||||||||
and General Counsel (8) |
(1) | Amounts shown do not reflect compensation actually received by the named executive officer. Instead, the amounts reported above in the Stock Awards and Option Awards columns represent the aggregate grant date fair value of stock awards and options awards granted in the respective fiscal years, as determined in accordance with ASC 718. The reported amounts for 2018 include the grant date fair value of awards of performance shares, restricted stock units (RSUs) and option awards. Additional information with respect to 2018 performance share, RSU and option awards is set forth in the 2018 Grants of Plan Based Awards table below. |
(2) | Amounts listed in this column represent bonuses paid under the annual incentive compensation plan for each of the respective years. These amounts are not reported in a separately identified Bonus column because the awards are tied to corporate performance objectives. |
Proxy Statement 2019 | 47 |
Executive Compensation |
(3) | Amounts listed in this column for each year represent payments made for group term life insurance and matching contributions under our 401(k) plan and also the following payments: |
Name | Year | Life Insurance Premiums ($)(1) |
Financial Planning ($)(2) |
Statutory Fee for ($) |
Relocation Fees ($)(3) |
|||||||||||||||
Hervé Hoppenot |
2018 | 160,207 | 27,649 (12,649) | 4,400 | | |||||||||||||||
2017 | 160,207 | 26,131 (12,631) | 4,400 | | ||||||||||||||||
2016 | 160,207 | 24,118 (11,118) | 4,400 | | ||||||||||||||||
David Gryska |
2018 | | 18,132 (6,270) | | | |||||||||||||||
2017 | | 15,211 (7,937) | | | ||||||||||||||||
2016 | | | | | ||||||||||||||||
Reid Huber |
2018 | | 17,617 (5,617) | | | |||||||||||||||
2017 | | 23,683 (11,683) | | | ||||||||||||||||
2016 | | 23,794 (11,794) | | | ||||||||||||||||
Steven Stein |
2018 | | 1,674 (479) | 4,400 | | |||||||||||||||
2017 | | 2,358 (1,098) | 4,400 | | ||||||||||||||||
2016 | | | 4,400 | | ||||||||||||||||
Wenqing Yao |
2018 | | 18,390 (5,640) | | | |||||||||||||||
2017 | | 23,123 (11,123) | | | ||||||||||||||||
2016 | | 18,090 (6,090) | | | ||||||||||||||||
Maria Pasquale |
2018 | | 588 (176) | | 92,464 (28,639) |
(1) | Payment of life insurance premiums for Mr. Hoppenot is designed to compensate him for certain components of equity awards from his previous employer that he forfeited when joining Incyte. Our obligation to make these payments expired in 2019. For a more detailed explanation, please see Employment Contracts, Termination of Employment and Change-in-Control ArrangementsPresident and CEOLife Insurance and Disability Insurance Coverage below. |
(2) | Amounts in this column are inclusive of tax gross-up payments. The amount of the specific tax gross-ups are detailed in the parentheses next to the total amount. |
(3) | Amounts in this column are inclusive of tax gross-up payments. The amount of the specific tax gross-ups are detailed in the parentheses next to the total amount. |
(4) | Mr. Gryska resigned as Executive Vice President and Chief Financial Officer effective December 2018. |
(5) | Dr. Stein was appointed Executive Vice President, Chief Medical Officer effective May 2016. |
(6) | This amount represents a portion of Dr. Steins signing bonus in connection with the commencement of his employment and intended to compensate Dr. Stein for compensation forfeited by leaving his previous employer; payment of this portion was deferred until the second anniversary of the date of his employment. |
(7) | Dr. Huber resigned as Executive Vice President and Chief Scientific Officer effective November 2018. |
(8) | Ms. Pasquale was appointed Executive Vice President and General Counsel effective April 2018. |
(9) | This amount represents Ms. Pasquales signing bonus in connection with the commencement of her employment. |
48 | Proxy Statement 2019 |
Executive Compensation |
2018 Grants of Plan-Based Awards
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)(2) |
|
|
Estimated Future Payouts Equity Incentive Plan Awards Shares (3) |
|
|
All Other Stock Awards: Number of Shares of Stocks or Units (#) (4) |
|
|
All Other Option Awards: Number of Securities Underlying Options (#) |
|
|
Exercise or Base Price of Option Awards ($/Sh) |
|
|
Grant Date Fair Value of Stock and Option Awards ($)(5) |
| |||||||||||||||||||||||||||||||
Name | Grant Date |
Threshold ($) |
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#) |
Maximum (#) |
|||||||||||||||||||||||||||||||||||||||||
Hervé Hoppenot |
747,935 | 997,246 | 1,495,869 | |||||||||||||||||||||||||||||||||||||||||||||
01/23/2018 | 47,168 (6) | 94.63 | 1,766,502 | |||||||||||||||||||||||||||||||||||||||||||||
01/24/2018 | 25,401 (7) | 95.34 | 1,194,472 | |||||||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 88,557 (8) | 68.62 | 2,603,534 | |||||||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 12,633 | 25,267 | 37,900 | 68.62 | 1,733,822 | |||||||||||||||||||||||||||||||||||||||||||
David W. Gryska (9) |
220,325 | 293,766 | 440,649 | |||||||||||||||||||||||||||||||||||||||||||||
01/23/2018 | 12,128 (6) | 94.63 | 454,212 | |||||||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 22,772 (8) | 68.62 | 669,489 | |||||||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 3,248 | 6,497 | 9,745 | 68.62 | 445,824 | |||||||||||||||||||||||||||||||||||||||||||
Steven H. Stein |
196,875 | 262,500 | 393,750 | |||||||||||||||||||||||||||||||||||||||||||||
01/23/2018 | 12,128 (6) | 94.63 | 454,212 | |||||||||||||||||||||||||||||||||||||||||||||
01/24/2018 | 21,167 (7) | 95.34 | 995,370 | |||||||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 22,772 (8) | 68.62 | 669,489 | |||||||||||||||||||||||||||||||||||||||||||||
06/28/2018 | 50,000 | 65.76 | 3,288,000 | |||||||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 3,248 | 6,497 | 9,745 | 68.62 | 445,824 | |||||||||||||||||||||||||||||||||||||||||||
Reid Huber (10) |
190,962 | 254,616 | 381,924 | |||||||||||||||||||||||||||||||||||||||||||||
01/23/2018 | 12,128 (6) | 94.63 | 454,212 | |||||||||||||||||||||||||||||||||||||||||||||
01/24/2018 | 21,167 (7) | 95.34 | 995,370 | |||||||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 22,772 (8) | 68.62 | 669,489 | |||||||||||||||||||||||||||||||||||||||||||||
06/28/2018 | 50,000 | 65.76 | 3,288,000 | |||||||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 3,248 | 6,497 | 9,745 | 68.62 | 445,824 | |||||||||||||||||||||||||||||||||||||||||||
Wenqing Yao |
173,813 | 231,750 | 347,625 | |||||||||||||||||||||||||||||||||||||||||||||
01/23/2018 | 12,128 (6) | 94.63 | 454,212 | |||||||||||||||||||||||||||||||||||||||||||||
01/24/2018 | 21,167 (7) | 95.34 | 995,370 | |||||||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 22,772 (8) | 68.62 | 669,489 | |||||||||||||||||||||||||||||||||||||||||||||
06/28/2018 | 50,000 | 65.76 | 3,288,000 | |||||||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 3,248 | 6,497 | 9,745 | 68.62 | 445,824 | |||||||||||||||||||||||||||||||||||||||||||
Maria E. Pasquale (11) |
187,500 | 250,000 | 375,000 | |||||||||||||||||||||||||||||||||||||||||||||
04/09/2018 | 41,193 (8) | 65.36 | 1,160,988 | |||||||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 22,772 (8) | 68.62 | 669,489 | |||||||||||||||||||||||||||||||||||||||||||||
04/09/2018 | 5,928 | 65.36 | 387,454 | |||||||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 3,248 | 6,497 | 9,745 | 68.62 | 445,824 |
(1) | The target amounts shown reflect our annual incentive plan awards originally provided under the 2018 incentive compensation plan and represent the pre-established target awards as a percentage of base salary for the 2018 fiscal year, with the potential for actual awards under the plan to either exceed or be less than such funding target depending upon corporate performance. Actual award amounts are not guaranteed and are determined at the discretion of the Compensation Committee, which may consider an individuals performance during the period. For additional information, please refer to the section titled Executive CompensationCompensation Discussion and AnalysisKey Elements of Executive CompensationAnnual Incentive Compensation Plan. Actual 2018 incentive compensation plan payouts are reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. |
(2) | The threshold amounts shown illustrate the smallest payout that can be made under the 2018 incentive compensation plan if all of the pre-established performance objectives are achieved at the minimum achievement level. The target amounts shown are the payouts that can be made if all of the pre-established performance objectives have been achieved at the target achievement level and, as noted in footnote (1), correlate to the pre-established target awards as a percentage of base salary. The maximum amounts shown are the greatest payout that can be made if all of the pre-established maximum performance objectives are achieved or exceeded at the outperform achievement levels and all potential bonus points under the 2018 incentive compensation plan were earned. Actual awards may be more or less than these amounts and, as |
Proxy Statement 2019 | 49 |
Executive Compensation |
noted in footnote (1), are at the discretion of the Compensation Committee. For additional information, please refer to the section titled Executive CompensationCompensation Discussion and AnalysisKey Elements of Executive CompensationAnnual Incentive Compensation Plan. |
(3) | Awards under these columns represent performance shares. For the awards made on June 28, 2018, the performance shares become earned only if a specified number of investigational new drug (IND) filings are made during a specified time frame and, if earned, would vest on the third anniversary of the initial grant date. For the awards made on July 2, 2018, the actual number of number of shares of common stock into which each performance share award may convert will be calculated by multiplying the target number of performance shares allocated to that award by performance percentage multipliers ranging from 0% to 150% based on the actual level at which the applicable revenue-based performance goal is achieved, as certified by the Compensation Committee. The performance period was the year ended December 31, 2018 and achievement of maximum, target and threshold levels will result in percentage multipliers of 150%, 100% and 50%, respectively, with achievement below the threshold level resulting in a percentage multiplier of 0%. In February 2019, the Compensation Committee of the Board of Directors determined that the performance shares were earned at the 83% level, resulting in 20,571 shares being earned by Mr. Hoppenot and 5,389 shares earned by the other executive officers who received performance shares, and the earned shares will vest in equal installments on each of the first four anniversaries of the grant date of July 2, 2018. For additional information, please refer to the section titled Executive CompensationCompensation Discussion and AnalysisKey Elements of Executive CompensationEquity Based Incentive Awards. |
(4) | Represents RSUs that will vest in equal installments on each of the first four anniversaries of the grant date. Vesting of the RSUs is subject to acceleration under the circumstances described under Employment Contracts, Termination of Employment and Change-in-Control Arrangements below. The RSUs were granted in connection with the commencement of Ms. Pasquales employment. |
(5) | Represents the aggregate fair value of stock and option awards computed as of the grant date of each performance share, RSU or option award in accordance with ASC 718, rather than amounts paid to or realized by the named individual. There can be no assurance that options will be exercised (in which case no value will be realized by the individual), that the value on exercise of options will approximate the compensation expense we recognized, or that the price of our common stock when RSUs vest and if and when performance shares vest will equal or exceed the price of our common stock on the date of the applicable RSU or performance share award. The grant date fair values of performance shares were calculated by multiplying the closing price of our common stock on the grant date by the target number of shares payable if the performance targets for those shares are achieved at the target level of 100%. |
(6) | Options become exercisable as to one-fourth of the shares on July 5, 2018, with the remaining shares vesting ratably each month thereafter over the following three years, and have a term of ten years, subject to earlier termination in certain events relating to termination of employment. Vesting of the options is subject to acceleration under the circumstances described under Employment Contracts, Termination of Employment and Change-in-Control Arrangements below. |
(7) | Options become exercisable as to all of the shares on the fourth anniversary of the grant date, and have a term of ten years, subject to earlier termination in certain events relating to termination of employment. Vesting of the options is subject to acceleration under the circumstances described under Employment Contracts, Termination of Employment and Change-in-Control Arrangements below. |
(8) | Options become exercisable as to one-fourth of the shares on the first anniversary of the grant date, with the remaining shares vesting ratably each month thereafter over the following three years, and have a term of ten years, subject to earlier termination in certain events relating to termination of employment. Vesting of the options is subject to acceleration under the circumstances described under Employment Contracts, Termination of Employment and Change-in-Control Arrangements below. |
(9) | Mr. Gryska resigned as Executive Vice President and Chief Financial Officer effective December 2018. |
(10) | Dr. Huber resigned as Executive Vice President and Chief Scientific Officer effective November 2018. |
(11) | Ms. Pasquale was appointed Executive Vice President and General Counsel effective April 2018. |
Salary
The annual salaries of the named executive officers are reflected under the Salary column of the Summary Compensation Table. The Compensation Committee reviews salaries on an annual basis, and may change each executive officers salary based on the individuals contributions and responsibilities over the prior twelve months and any change in comparable company pay levels. In
50 | Proxy Statement 2019 |
Executive Compensation |
January 2018, the Compensation Committee set the 2018 base salaries for our executive officers. Salary compensation is discussed in greater detail under the heading Executive CompensationCompensation Discussion and Analysis.
Incentive Compensation
All named executive officers who continued to be employed by us at the time of the January 2019 Compensation Committee determination with respect to achievement under our discretionary 2018 incentive compensation plan received a bonus for the 2018 fiscal year under that plan, although the bonus for Ms. Pasquale was the negotiated amount determined in connection with the commencement of her employment in April 2018. This bonus is reflected under the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table because the bonus is tied to the corporate performance of the Company. The plan established cash incentive awards for all of our eligible employees for 2018, and was designed to align incentive awards for each participants individual performance with our corporate goals. Incentive awards for our executive officers were approved by the Compensation Committee in January 2019 and paid in February 2019 pursuant to this plan. Our executive officers each had a funding target under the plan, with the potential for actual awards under the plan to either exceed or be less than such funding target depending upon corporate performance, as well as each executive officers individual performance. The range of the 2018 awards at the time of establishment of the plan is set forth under the Estimated Future Payouts Under Non-Equity Incentive Plan Awards column to the Grants of Plan-Based Awards Table. Actual incentive award amounts paid to named executive officers for 2018 pursuant to this plan were based on the achievement of corporate goals that were predetermined by the Compensation Committee, as described in greater detail under the heading Executive CompensationCompensation Discussion and Analysis, and is disclosed in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.
In January 2018, all named executive officers who were then employed by us received grants of options to purchase common stock in connection with our annual equity award cycle and certain named executive officers also received outstanding merit option grants, and in July 2018, in connection with our annual equity award cycle, all named executive officers received grants of options to purchase common stock and performance shares. As described in greater detail under the heading Executive CompensationCompensation Discussion and Analysis, the outstanding merit option grants were intended to incentivize and retain the recipients of those grants and the performance shares were tied to a corporate-based performance goal. The numbers and grant date fair values of these awards under ASC 718 are set forth in the Grants of Plan-Based Awards Table. The exercise price for options awarded in 2018 was the fair market value of our common stock on the grant date. The options awarded in January 2018 under our equity grant guidelines will generally vest and become exercisable as to one-fourth of the shares on the first anniversary of the July 2017 grant date, with the remaining shares vesting ratably each month thereafter over the following three years. The options awarded in July 2018 will generally vest and become exercisable as to one-fourth of the shares on the first anniversary of the grant date, with the remaining shares vesting ratably each month thereafter over the following three years. The outstanding merit option grants awarded in January 2018 will vest and become exercisable as to all of the shares on the fourth anniversary of the grant date. The options awarded in January 2018 and in July 2018, and outstanding merit option grants, have a term of ten years from the grant date. The performance shares, if earned, will vest in equal installments on each of the first four anniversaries of the grant date.
In April 2018, Ms. Pasquale received options and RSUs in connection with her employment with us; the options will vest and become exercisable as to one-fourth of the shares on the first anniversary
Proxy Statement 2019 | 51 |
Executive Compensation |
of the grant date, with the remaining shares vesting ratably each month thereafter over the following three years, and the RSUs will vest in equal installments on each of the first four anniversaries of the grant date.
In June 2018, certain of our named executive officers were participants in our R&D retention plan and received performance share awards that are described in greater detail under the heading Executive CompensationCompensation Discussion and Analysis.
The amounts, if any, actually realized by the named executive officers for the 2018 awards will vary depending on the vesting of the award and the price of our common stock in relation to the exercise price at the time of exercise. Detail regarding the number of exercisable and unexercisable options held by each named executive officer at year-end is set forth in the Outstanding Equity Awards at Fiscal Year-End Table.
Compensation Risk Assessment
The Compensation Committee, in consultation with the Companys executive management, reviewed the Companys compensation policies and practices for its employees and concluded that risks arising from those policies and practices are not reasonably likely to have a material adverse effect on the Company.
Employment Contracts, Termination of Employment and Change-in-Control Arrangements
In April 2014, the Compensation Committee and Management Stock Option Committee approved amendments to outstanding employee stock option and RSU agreements and to the forms of agreements for future employee stock option and RSU agreement to provide that, in the event of a change in control of the Company, (i) if the successor corporation does not assume or substitute comparable awards for all outstanding employee options and RSUs, then as of the date of completion of the change in control transaction, the vesting of such options and RSUs shall be accelerated in full, and (ii) if outstanding options and RSUs are assumed or replaced by comparable awards by the successor corporation and within one year after the change in control, an equity awardees service as an employee is terminated without cause or due to constructive termination, then the vesting of such persons assumed or substituted options and RSUs shall be accelerated in full. The value of such acceleration in full for each Named Executive Officer, assuming such termination or event was effective as of December 31, 2018, is set forth in the table below under the heading Potential Payments Upon Termination in Connection with a Change in Control.
President and CEO
In connection with his appointment as President and CEO in January 2014, Mr. Hoppenot and the Company entered into an offer of employment letter and an employment agreement.
Pursuant to the offer letter, Mr. Hoppenot was entitled to an initial base salary of $800,000 and participated in the Companys annual incentive compensation plan with a funding target for a cash bonus under such plan of 100% of his annual base salary and a minimum bonus for 2014 of $800,000. Mr. Hoppenots base salary is reviewed annually by the Compensation Committee. Future bonuses under the incentive compensation plan will be determined by the Compensation Committee in its discretion based on the achievement of performance goals to be determined annually by the Board or, as applicable, the Committee. Pursuant to the offer letter, Mr. Hoppenot also received a signing bonus of $2,200,000, one quarter of which was paid upon commencement of employment and the remainder of which was paid in equal installments on the first day of each of the second, third and fourth calendar
52 | Proxy Statement 2019 |
Executive Compensation |
quarters of 2014. Except as otherwise provided in his employment agreement, Mr. Hoppenot must have remained employed by the Company through the first calendar day of each such quarter in order to receive the respective quarterly portion of the signing bonus.
Mr. Hoppenot received an initial award in January 2014 of options to purchase 124,148 shares of common stock and 17,428 performance shares under the Companys 2010 Stock Incentive Plan with an aggregate value as of the grant date equal to $4,500,000, determined under generally accepted accounting principles consistent with the valuation of the Companys equity incentives. Mr. Hoppenot will be eligible to receive future annual equity awards as determined by the Compensation Committee, and all such equity awards, including the initial award, will be subject to vesting or attainment of performance criteria, as applicable, at the same levels as apply to awards of the same type granted to the Companys other senior executives for the same fiscal year. Mr. Hoppenot also received in January 2014 a one-time grant of 400,000 RSUs, designed to make him whole for equity he forfeited at his previous employer and also to further incentivize retention over a six-year period. Each RSU represents the right to acquire one share of the Companys common stock. Vesting of the RSUs will be subject to Mr. Hoppenots continued employment on the applicable vesting dates, with one-sixth of the RSUs vesting at the end of each of the calendar years 2014 through 2019, subject to earlier acceleration of vesting upon the occurrence of certain events in accordance with the terms of his employment agreement.
Termination Without Good Reason Prior to a Change in Control. If Mr. Hoppenot voluntarily terminates his employment with the Company other than for good reason and other than in the 24-month period following a change in control (the Change in Control Employment Period), the Company will pay Mr. Hoppenot, to the extent not already paid, his annual base salary through the date of termination, any deferred compensation and any accrued vacation pay.
Termination Without Good Reason in Connection with a Change in Control. If Mr. Hoppenot terminates his employment with the Company without good reason during the Change in Control Employment Period, the Company will pay Mr. Hoppenot, to the extent not already paid, his annual base salary through the date of termination, any deferred compensation, any accrued vacation pay, and an amount equal to a pro rata portion of his target bonus calculated according to the number of days he worked through the date of termination in the current fiscal year.
Termination Without Cause or for Good Reason Not in Connection with a Change in Control. If, at any time other than during the Change in Control Employment Period, Mr. Hoppenots employment is terminated by the Company without cause or by Mr. Hoppenot for good reason, the Company will pay Mr. Hoppenot, to the extent not already paid, his annual base salary through the date of termination, his signing bonus, any deferred compensation, any accrued vacation pay, and an amount equal to a pro rata portion of his target bonus calculated according to the number of days he worked through the date of termination in the current fiscal year. In addition, the Company will pay him an amount equal to the sum of 1.5 times his annual base salary and the greater of his current target bonus or his bonus amount for the preceding fiscal year. The agreement also provides that Mr. Hoppenots stock options and RSUs (other than his one-time grant of 400,000 RSUs) will vest as to the amount that would have vested had he continued to work for the Company for an additional 18 months. All options would continue to be exercisable for 180 days following the date of termination. In addition, the agreement provides that the 400,000 RSUs granted in connection with joining the Company will vest as to 100% of the amount that would have vested had he continued to work for the Company for an additional 12 months and vest as to 50% of the amount that would have vested had he continued to work for the Company for an additional 12 months subsequent to the initial 12 months after the date of termination. The agreement also provides for the payment of COBRA premiums by the
Proxy Statement 2019 | 53 |
Executive Compensation |
Company, or the cash equivalent thereof, for Mr. Hoppenot and his family for up to 12 months, outplacement services for up 12 months, as well as payment with respect to any other accrued amounts under other of the Companys benefits arrangements.
Termination in Connection with a Change in Control Without Cause or for Good Reason. If during the Change in Control Employment Period Mr. Hoppenots employment is terminated by the Company without cause or by Mr. Hoppenot for good reason, the Company will pay Mr. Hoppenot, to the extent not already paid, his annual base salary through the date of termination, his signing bonus, any deferred compensation, any accrued vacation pay, and an amount equal to a pro rata portion of his target bonus calculated according to the number of days he worked through the date of termination in the current fiscal year. In addition, the Company will pay him an amount equal to three times the sum of his current annual base salary and the greater of his current target bonus or his bonus amount for the preceding fiscal year. The agreement also provides that in the event of such a termination, all of Mr. Hoppenots unvested RSUs and unvested stock options will vest in full, and all stock options will remain exercisable for 12 months following his termination. In addition, all performance shares will vest in full and be settled assuming the target level of performance has been achieved. The agreement also provides for the continuation of benefits for Mr. Hoppenot and his family for up to 36 months, outplacement services for up 12 months, as well as payment with respect to any other accrued amounts under other of the Companys benefits arrangements.
Life Insurance and Disability Insurance Coverage. When Mr. Hoppenot became our CEO in January 2014, after being recruited by our Board, he forfeited certain equity based awards with his previous employer that had provided for an acceleration of vesting of a majority of the awards in the event of his death or permanent disability. Our one-time grant of 400,000 RSUs to Mr. Hoppenot, described above, does not contain a similar provision. To provide Mr. Hoppenot with similar economic value commensurate with the equity based awards he had forfeited in order to join us, we agreed in Mr. Hoppenots employment agreement to pay the premiums for an insurance policy that will remain in place for the six-year period that commenced on the first day of his employment that will pay $15 million to Mr. Hoppenot upon termination of his employment for disability or his estate on his death. The six-year period for the life and disability insurance is the same vesting period for the 400,000 RSUs. Mr. Hoppenots initial employment agreement also required us to gross-up each premium amount so that the total payment made by us was sufficient to cover the premiums and all federal, state and local income taxes incurred by Mr. Hoppenot. In April 2015, we amended Mr. Hoppenots employment agreement so that we would no longer be required to gross-up each premium amount to cover taxes incurred by Mr. Hoppenot. In 2019, at Mr. Hoppenots suggestion, we amended Mr. Hoppenots employment agreement so that we would no longer be required to pay the premiums for the life and disability insurance coverage for 2019, the last year of vesting of Mr. Hoppenots initial RSU grant.
Other Covenants. Under the agreement, Mr. Hoppenot is subject to non-solicitation/non-hiring and non-disparagement covenants that extend two years from termination of employment. Upon certain breaches of those covenants after termination of employment, Mr. Hoppenot must forfeit all of his unvested stock options, stock appreciation rights, restricted stock units, performance shares, and the gain or income realized from the exercise, vesting or settlement of the same within 24 months prior to the breach.
Agreements with Other Named Executive Officers
In November 2003, our Board approved a form of employment agreement for Executive Vice Presidents and certain other senior employees. The form of employment agreement for the Executive Vice Presidents and certain other senior employees was amended in December 2008 to comply with
54 | Proxy Statement 2019 |
Executive Compensation |
Section 409A of the Internal Revenue Code of 1986, as amended. In April 2012, the employment agreements with our Executive Vice Presidents and certain other senior employees were amended to increase the amount payable upon an involuntary termination of the executives employment within 24 months following a change in control. The Company entered into an employment agreement with Reid M. Huber in May 2011, Steven H. Stein in March 2015 and Wenqing Yao in November 2003 while each served as one of our senior employees. The Company entered into an employment agreements with David W. Gryska in October 2014 upon his employment as Executive Vice President and Chief Financial Officer and with Maria E. Pasquale in April 2018 upon her employment as Executive Vice President and General Counsel.
The employment agreements with our Executive Vice Presidents provide that in the event of an involuntary termination of the executives employment within 24 months following a change in control (which includes actual termination without cause and constructive termination by way of the assignment of duties substantially and materially inconsistent with the executives position or other diminishment in position, requiring the executive to be based at any location outside more than 35 miles from the office or location where he or she was based prior to a change in control, a reduction in salary, bonus or adverse change in benefits, or a breach by the Company of the terms of the executives employment arrangement), we will pay the executive an amount equal to two times the sum of the executives current annual base salary and the greater of (1) the executives current target bonus or (2) the executives bonus amount for the preceding fiscal year. A change in control generally includes a significant change in the composition of the Board, the acquisition by any person or entity of greater than 50% of the combined voting power of the Companys outstanding securities, the approval of a liquidation or dissolution of the Company, or the sale or disposition of all or substantially all of the Companys assets or similar transaction. We will also pay the executive a pro rata portion of the executives target bonus calculated according to the number of days the executive worked through the termination date in the current fiscal year. The cash payment would be paid in a lump sum payment following the executives termination. The agreement also provides that in the event of such a termination, all of the executives unvested stock options will vest in full, and all stock options will be exercisable for 12 months following the executives termination. In addition, the agreement provides for the reimbursement of COBRA premiums by the Company for the executive and eligible dependents for up to 12 months, reimbursement (or payment) by the Company for the cost of continued life and disability insurance for the executive for 12 months at the same levels in effect on the termination date, as well as payment with respect to any other accrued amounts under other of the Companys benefits arrangements.
Potential Payments Upon Termination Without a Change in Control
The following table describes the potential payments and benefits triggered by a termination of employment of a named executive officer by the Company without cause, or by the executive for good reason, in each case prior to a change in control and assuming the employment of the named executive officer was terminated on December 31, 2018.
Termination | Cash Payment ($) |
Medical/ Insurance Benefits ($) |
Acceleration of Equity Awards ($)(1) |
Other ($)(2) |
Total ($) |
|||||||||||||||
Hervé Hoppenot |
||||||||||||||||||||
Termination without cause |
4,707,873 | 30,502 | 6,624,425 | 236,025 | 11,598,825 |
(1) | Represents the amount by which the $63.59 closing price of our common stock on December 31, 2018 exceeded the exercise price for equity awards for which vesting would have accelerated as a result of termination of employment. |
Proxy Statement 2019 | 55 |
Executive Compensation |
(2) | Includes accrued amounts under other of the Companys benefits arrangements, including accrued vacation and other vested benefits the named executive officer is entitled to receive that are generally available to all salaried employees. |
Potential Payments Upon Termination in Connection with a Change in Control
The following table describes the potential payments and benefits triggered by a termination of employment of a named executive officer in connection with a change in control, by the Company without cause or by the executive for good reason, in each case assuming the employment of the named executive officer was terminated on December 31, 2018.
Termination | Cash Payment ($) |
Medical/ Insurance Benefits ($) |
Acceleration of Equity Awards ($)(1) |
Other ($)(2) | Total ($) | |||||||||||||||
Hervé Hoppenot |
||||||||||||||||||||
Termination without cause or for good reason(3) |
8,418,499 | 100,930 | 7,849,359 | 236,025 | 16,604,813 | |||||||||||||||
Steven H. Stein |
||||||||||||||||||||
Termination without cause or for good reason(3) |
2,036,876 | 6,838 | 4,103,018 | 40,385 | 6,187,117 | |||||||||||||||
Wenqing Yao |
||||||||||||||||||||
Termination without cause or for good reason(3) |
1,845,000 | 32,447 | 4,103,018 | 53,481 | 6,033,946 | |||||||||||||||
Maria E. Pasquale |
||||||||||||||||||||
Termination without cause or for good reason(3) |
1,750,000 | 33,734 | 790,106 | | 2,573,840 |
(1) | Represents the amount by which the $63.59 closing price of our common stock on December 31, 2018 exceeded the exercise price for stock options for which vesting would have accelerated as a result of termination of employment and $63.59 multiplied by the number of RSUs for which vesting would have accelerated as a result of termination of employment. |
(2) | Includes accrued amounts under other of the Companys benefits arrangements, including accrued vacation and other vested benefits the named executive officer is entitled to receive that are generally available to all salaried employees. |
(3) | Includes constructive termination following a change in control. See the section entitled Employment Contracts, Termination of Employment and Change-in-Control ArrangementsAgreements with Other Named Executive Officers above. |
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2018 Outstanding Equity Awards at Fiscal Year-End
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Un-Exercisable |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested ($)(2) |
Equity Awards: |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
|||||||||||||||||||||||||||||||||||
Hervé Hoppenot |
01/13/2014 | 66,666 | (3) | 4,239,291 | ||||||||||||||||||||||||||||||||||||||||
01/21/2014 | 124,148 | | 64.55 | 01/20/2021 | ||||||||||||||||||||||||||||||||||||||||
01/08/2015 | 89,771 | | 73.21 | 01/07/2022 | ||||||||||||||||||||||||||||||||||||||||
**01/07/2016 | | 20,195 | 95.76 | 01/06/2023 | ||||||||||||||||||||||||||||||||||||||||
01/07/2016 | 73,050 | 2,088 | 95.76 | 01/06/2023 | ||||||||||||||||||||||||||||||||||||||||
01/07/2016 | 10,442 | (4) | 664,007 | |||||||||||||||||||||||||||||||||||||||||
*07/15/2016 | 44,856 | 29,389 | 83.83 | 07/14/2026 | ||||||||||||||||||||||||||||||||||||||||
07/15/2016 | 10,802 | (5) | 686,899 | |||||||||||||||||||||||||||||||||||||||||
***01/17/2017 | 44,856 | 29,389 | 113.64 | 01/16/2027 | ||||||||||||||||||||||||||||||||||||||||
**01/17/2017 | | 94,325 | 113.64 | 01/16/2027 | ||||||||||||||||||||||||||||||||||||||||
07/05/2017 | 10,260 | (5) | 652,433 | |||||||||||||||||||||||||||||||||||||||||
*07/05/2017 | 16,705 | 30,463 | 128.34 | 07/04/2027 | ||||||||||||||||||||||||||||||||||||||||
***01/23/2018 | 16,705 | 30,463 | 94.63 | 01/22/2028 | ||||||||||||||||||||||||||||||||||||||||
**01/24/2018 | | 25,401 | 95.34 | 01/23/2028 | ||||||||||||||||||||||||||||||||||||||||
*07/02/2018 | | 88,557 | 68.62 | 07/01/2028 | ||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 25,267 | (6) | 1,606,729 | (7) | ||||||||||||||||||||||||||||||||||||||||
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410,091 | 350,270 | 98,171 | 6,242,630 | 25,267 | 1,606,729 | |||||||||||||||||||||||||||||||||||||||
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David W. Gryska(8) |
10/31/2014 | 12,459 | | 67.06 | 03/31/2019 | |||||||||||||||||||||||||||||||||||||||
01/08/2015 | 4,190 | | 73.21 | 03/31/2019 | ||||||||||||||||||||||||||||||||||||||||
01/07/2016 | 18,262 | | 95.76 | 03/31/2019 | ||||||||||||||||||||||||||||||||||||||||
*07/15/2016 | 4,773 | | 83.83 | 03/31/2019 | ||||||||||||||||||||||||||||||||||||||||
***01/17/2017 | 11,533 | | 113.64 | 03/31/2019 | ||||||||||||||||||||||||||||||||||||||||
*07/05/2017 | 4,295 | | 128.34 | 03/31/2019 | ||||||||||||||||||||||||||||||||||||||||
***01/23/2018 | 4,295 | | 94.63 | 03/31/2019 | ||||||||||||||||||||||||||||||||||||||||
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59,807 | | |||||||||||||||||||||||||||||||||||||||||||
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Steven H. Stein |
03/02/2015 | 10,876 | | 88.68 | 03/01/2022 | |||||||||||||||||||||||||||||||||||||||
01/07/2016 | 8,348 | 522 | 95.76 | 01/06/2023 | ||||||||||||||||||||||||||||||||||||||||
**01/07/2016 | | 4,039 | 95.76 | 01/06/2023 | ||||||||||||||||||||||||||||||||||||||||
01/07/2016 | 2,610 | (4) | 165,970 | |||||||||||||||||||||||||||||||||||||||||
*07/15/2016 | 6,364 | 7,558 | 83.83 | 07/14/2026 | ||||||||||||||||||||||||||||||||||||||||
07/15/2016 | 2,778 | (5) | 176,653 | |||||||||||||||||||||||||||||||||||||||||
***01/17/2017 | 11,533 | 7,558 | 113.64 | 01/16/2027 | ||||||||||||||||||||||||||||||||||||||||
**01/17/2017 | | 18,865 | 113.64 | 01/16/2027 | ||||||||||||||||||||||||||||||||||||||||
07/05/2017 | 2,638 | (5) | 167,750 | |||||||||||||||||||||||||||||||||||||||||
*07/05/2017 | 4,295 | 7,833 | 128.34 | 07/04/2027 | ||||||||||||||||||||||||||||||||||||||||
***01/23/2018 | 4,295 | 7,833 | 94.63 | 01/22/2028 | ||||||||||||||||||||||||||||||||||||||||
**01/24/2018 | | 21,167 | 95.34 | 01/23/2028 | ||||||||||||||||||||||||||||||||||||||||
06/28/2018 | 50,000 | (9) | 3,179,500 | (10) | ||||||||||||||||||||||||||||||||||||||||
*07/02/2018 | | 22,772 | 68.62 | 07/01/2028 | ||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 6,497 | (6) | 413,144 | (7) | ||||||||||||||||||||||||||||||||||||||||
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45,711 | 98,147 | 8,026 | 510,373 | 56,497 | 3,592,644 | |||||||||||||||||||||||||||||||||||||||
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Proxy Statement 2019 | 57 |
Executive Compensation |
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Un-Exercisable |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested ($)(2) |
Equity Awards: |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
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Reid M. |
01/21/2014 | 22,070 | | 64.55 | 11/30/2019 | |||||||||||||||||||||||||||||||||||||||
Huber(11) |
01/08/2015 | 21,545 | | 73.21 | 11/30/2019 | |||||||||||||||||||||||||||||||||||||||
01/07/2016 | 17,740 | | 95.76 | 11/30/2019 | ||||||||||||||||||||||||||||||||||||||||
*07/15/2016 | 11,136 | | 83.83 | 11/30/2019 | ||||||||||||||||||||||||||||||||||||||||
***01/17/2017 | 11,136 | | 113.64 | 11/30/2019 | ||||||||||||||||||||||||||||||||||||||||
*07/05/2017 | 4,042 | | 128.34 | 11/30/2019 | ||||||||||||||||||||||||||||||||||||||||
***01/23/2018 | 4,042 | | 94.63 | 11/30/2019 | ||||||||||||||||||||||||||||||||||||||||
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91,711 | | |||||||||||||||||||||||||||||||||||||||||||
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Wenqing Yao |
01/19/2012 | 25,354 | | 17.79 | 01/18/2019 | |||||||||||||||||||||||||||||||||||||||
02/09/2013 | 62,542 | | 18.32 | 02/08/2020 | ||||||||||||||||||||||||||||||||||||||||
01/21/2014 | 16,553 | | 64.55 | 01/20/2021 | ||||||||||||||||||||||||||||||||||||||||
01/08/2015 | 21,545 | | 73.21 | 01/07/2022 | ||||||||||||||||||||||||||||||||||||||||
**01/08/2015 | | 20,000 | 73.21 | 01/07/2022 | ||||||||||||||||||||||||||||||||||||||||
01/07/2016 | 2,610 | (4) | 165,970 | |||||||||||||||||||||||||||||||||||||||||
**01/07/2016 | | 13,631 | 95.76 | 01/06/2023 | ||||||||||||||||||||||||||||||||||||||||
01/07/2016 | 18,262 | 522 | 95.76 | 01/06/2023 | ||||||||||||||||||||||||||||||||||||||||
*07/15/2016 | 11,533 | 7,558 | 83.83 | 07/14/2026 | ||||||||||||||||||||||||||||||||||||||||
07/15/2016 | 2,778 | (5) | 176,653 | |||||||||||||||||||||||||||||||||||||||||
***01/17/2017 | 11,533 | 7,558 | 113.64 | 01/16/2027 | ||||||||||||||||||||||||||||||||||||||||
**01/17/2017 | | 18,865 | 113.64 | 01/16/2027 | ||||||||||||||||||||||||||||||||||||||||
07/05/2017 | 2,638 | (5) | 167,750 | |||||||||||||||||||||||||||||||||||||||||
*07/05/2017 | 4,295 | 7,833 | 128.34 | 07/04/2027 | ||||||||||||||||||||||||||||||||||||||||
***01/23/2018 | 4,295 | 7,833 | 94.63 | 01/22/2028 | ||||||||||||||||||||||||||||||||||||||||
**01/24/2018 | | 21,167 | 95.34 | 01/23/2028 | ||||||||||||||||||||||||||||||||||||||||
06/28/2018 | 50,000 | (9) | 3,179,500 | (10) | ||||||||||||||||||||||||||||||||||||||||
*07/02/2018 | | 22,772 | 68.62 | 07/01/2028 | ||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 6,497 | (6) | 413,144 | (7) | ||||||||||||||||||||||||||||||||||||||||
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175,912 | 127,739 | 8,026 | 510,373 | 56,497 | 3,592,644 | |||||||||||||||||||||||||||||||||||||||
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Maria E. Pasquale(12) |
*04/09/2018 | | 41,193 | 65.36 | 04/09/2028 | |||||||||||||||||||||||||||||||||||||||
04/09/2018 | 5,928 | (6) | 376,962 | |||||||||||||||||||||||||||||||||||||||||
*07/02/2018 | | 22,772 | 68.62 | 07/01/2028 | ||||||||||||||||||||||||||||||||||||||||
07/02/2018 | 6,497 | (6) | 413,144 | (7) | ||||||||||||||||||||||||||||||||||||||||
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| 63,965 | 5,928 | 376,962 | 6,497 | 413,144 |
(1) | All options listed in this table, other than those marked with an asterisk (*), a double asterisk (**) or a triple asterisk (***), become exercisable as to one-third of the shares on the first anniversary of the date of grant, with the remaining shares vesting ratably on a monthly basis thereafter over the following two years, and have a term of seven years, subject to earlier termination in certain events relating to termination of employment. Options marked with an asterisk become exercisable as to one-fourth of the shares on the first anniversary of the date of grant, with the remaining shares vesting ratably on a monthly basis thereafter over the following three years, and have a term of ten years, subject to earlier termination in certain events relating to termination of employment. Options marked with a double asterisk become exercisable as to all of the shares on the fourth anniversary of the date of grant, and have a term of ten years, subject to earlier termination in certain events relating to termination of employment. Options marked with a triple asterisk become exercisable as to one-fourth of the shares on the first anniversary of the grant date in July of the preceding year with the remaining shares vesting ratably on a monthly basis thereafter over the following three years, and have a term of ten years, subject to earlier termination in certain events relating to termination of employment. Vesting of all options listed in this table is subject to acceleration under the circumstances described under Employment Contracts, Termination of Employment and Change-in-Control Arrangements. |
58 | Proxy Statement 2019 |
Executive Compensation |
(2) | The market value of unvested RSUs is calculated by multiplying the number of unvested RSUs held by the applicable named executive officer by $63.59, the closing price of our common stock on December 31, 2018. |
(3) | In connection with the commencement of his employment as our CEO in January 2014, Mr. Hoppenot was awarded a one-time grant of 400,000 RSUs, with one-sixth vesting at the end of each of the calendar years 2014 through 2019 subject to Mr. Hoppenots continued employment and subject to acceleration of vesting upon certain events in accordance with the terms of his employment agreement, as described under Employment Contracts, Termination of Employment and Change-in-Control Arrangements. |
(4) | RSUs that vest in full on the third anniversary of the grant date, subject to the holders continued service through such date. Vesting of the RSUs is subject to acceleration under the circumstances described under Employment Contracts, Termination of Employment and Change-in-Control Arrangements. |
(5) | RSUs that vest in equal installments on each of the first four anniversaries of the grant date, subject to the holders continued service through such dates. Vesting of the RSUs is subject to acceleration under the circumstances described under Employment Contracts, Termination of Employment and Change-in-Control Arrangements. |
(6) | Represents the target number of shares of common stock underlying performance shares that can be earned based upon the achievement of revenue based performance criteria. The actual number of number of shares of common stock into which each performance share award may convert will be calculated by multiplying the target number of performance shares allocated to that award by performance percentage multipliers ranging from 0% to 150% based on the actual level at which the applicable revenue-based performance goal is achieved, as certified by the Compensation Committee. The earned performance shares will vest in equal installments on each of the first four anniversaries of the grant date of July 2, 2018. |
(7) | The market value of unearned and unvested performance shares assumes achievement of the performance goals at the target level of 100% and is calculated by multiplying the number of unearned and unvested target shares held by the applicable named executive officer by $63.59, the closing price of our common stock on December 31, 2018. |
(8) | Mr. Gryska resigned as Executive Vice President and Chief Financial Officer effective December 2018. |
(9) | Represents shares of common stock underlying performance shares that become earned only if a specified number of investigational new drug (IND) filings are made during a specified time frame. If earned, the shares would vest on the third anniversary of the initial grant date. |
(10) | The market value of unearned and unvested performance shares is calculated by multiplying the number of unearned and unvested target shares held by the applicable named executive officer by $63.59, the closing price of our common stock on December 31, 2018. |
(11) | Dr. Huber resigned as Executive Vice President and Chief Scientific Officer effective November 2018. |
(12) | Ms. Pasquale was appointed Executive Vice President and General Counsel effective April 2018. |
Proxy Statement 2019 | 59 |
Executive Compensation |
2018 Option Exercises and Stock Vested Table
Option Awards | Stock Awards | ||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise ($)(1) |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($)(2) | |||||||||||||||||||||
Hervé Hoppenot |
| $ | | 88,079 | (3) | $ | 7,431,197 | ||||||||||||||||||
David W. Gryska(4) |
6,760 | $ | 101,696 | 5,290 | (5) | $ | 417,495 | ||||||||||||||||||
Steven H. Stein |
| $ | | 8,751 | (6) | $ | 719,005 | ||||||||||||||||||
Reid M. Huber(7) |
| $ | | 5,290 | (8) | $ | 417,495 | ||||||||||||||||||
Wenqing Yao |
| $ | | 5,290 | (9) | $ | 417,495 | ||||||||||||||||||
Maria E. Pasquale(10) |
| $ | | | $ | |
(1) | Value realized is based on the fair market value of our common stock on the date of exercise minus the exercise price and does not necessarily reflect proceeds actually received by the individual. |
(2) | Value realized is based on the fair market value of our common stock on the vesting date and does not necessarily reflect proceeds actually received by the individual. |
(3) | Represents 88,079 shares received upon vesting of RSUs, of which 41,205 shares were automatically withheld to cover tax withholding obligations. |
(4) | Mr. Gryska resigned as Executive Vice President and Chief Financial Officer effective December 2018. |
(5) | Represents 5,290 shares received upon vesting of RSUs, of which 1,805 shares were automatically withheld to cover tax withholding obligations. |
(6) | Represents 8,751 shares received upon vesting of RSUs, of which 2,920 shares were automatically withheld to cover tax withholding obligations. |
(7) | Dr. Huber resigned as Executive Vice President and Chief Scientific Officer effective November 2018. |
(8) | Represents 5,290 shares received upon vesting of RSUs, of which 1,796 shares were automatically withheld to cover tax withholding obligations. |
(9) | Represents 5,290 shares received upon vesting of RSUs, of which 1,729 shares were automatically withheld to cover tax withholding obligations. |
(10) | Ms. Pasquale was appointed Executive Vice President and General Counsel effective April 2018. |
60 | Proxy Statement 2019 |
Equity Compensation Plan Information
The following table gives information about our common stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans as of December 31, 2018, including the 1993 Directors Stock Option Plan, the 1997 Employee Stock Purchase Plan and the 2010 Stock Incentive Plan.
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted-average exercise price of outstanding options, warrants and rights ($) |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||||||||||||||||
Plan Category | (a) | (b) | (c) | ||||||||||||||||||||||
Equity compensation plans approved by security holders |
14,481,691 | (1) | $ | 74.39 | (2) | 7,563,654 | (3) | ||||||||||||||||||
Equity compensation plans not approved by security holders |
133,333 | (4) | | | |||||||||||||||||||||
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Total |
14,615,024 | $ | 74.39 | 7,563,654 | |||||||||||||||||||||
(1) | Includes 1,597,893 and 598,639 shares subject to RSUs and performance shares outstanding as of December 31, 2018 that were issued under the 2010 Stock Incentive Plan. The number of shares subject to such performance shares represents the maximum number of shares issuable pursuant to such performance shares as of such date. |
(2) | RSUs and performance shares, which do not have an exercise price, are excluded in the calculation of weighted-average exercise price. |
(3) | Includes 693,521 shares available for issuance under the 1997 Employee Stock Purchase Plan and 6,870,133 shares available for issuance under the 2010 Stock Incentive Plan. No shares remain available for future issuance under the 1993 Directors Stock Option Plan. |
(4) | Represents shares subject to RSUs granted outside of the 2010 Stock Incentive Plan to Hervé Hoppenot, as described under Employment Contracts, Termination of Employment and Change in Control ArrangementsPresident and CEO. |
Proxy Statement 2019 | 61 |
Report of the Audit Committee of the Board
The Audit Committee of the Board is composed of three directors, each of whom qualifies as independent under the current listing requirements of The Nasdaq Stock Market. The current members of the Audit Committee are Paul J. Clancy, Paul A. Brooke and Wendy L. Dixon. The Audit Committee acts pursuant to a written charter that has been adopted by the Board. The charter is reviewed annually for changes, as appropriate.
In performing its functions, the Audit Committee acts in an oversight capacity and necessarily relies on the work and assurances of the Companys management, which has the primary responsibility for financial statements and reports, and of the independent registered public accounting firm, who, in their report, express an opinion on the conformity of the Companys annual financial statements with accounting principles generally accepted in the United States and the effectiveness of the Companys internal control over financial reporting. It is not the duty of the Audit Committee to plan or conduct audits, to determine that the Companys financial statements are complete and accurate and are in accordance with generally accepted accounting principles, or to assess or determine the effectiveness of the Companys internal control over financial reporting.
Within this framework, the Audit Committee has reviewed and discussed with management the Companys audited financial statements as of and for the year ended December 31, 2018 and the Companys internal control over financial reporting. The Audit Committee has also discussed with the independent registered public accounting firm, Ernst & Young LLP, the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, issued by the Public Company Accounting Oversight Board. In addition, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firms communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the independent registered public accounting firms independence.
Based upon these reviews and discussions, the Audit Committee recommended to the Board that the audited financial statements be included in the Companys Annual Report on Form 10-K for the year ended December 31, 2018.
Audit Committee
Paul J. Clancy (Chair)
Paul A. Brooke
Wendy L. Dixon
62 | Proxy Statement 2019 |
Advisory Vote to Approve Executive Compensation
This Proposal 2, commonly known as a say-on-pay proposal, provides our stockholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission.
As described in detail under the heading Executive CompensationCompensation Discussion and Analysis, our executive compensation programs are designed to attract and retain our named executive officers, who are critical to our success. Under these programs, our named executive officers are rewarded for the achievement of annual and long-term corporate objectives, and the creation of increased stockholder value. Please read the Compensation Discussion and Analysis for additional details about our executive compensation programs, including information about the 2018 compensation of our named executive officers.
Each year since 2011, we sought, and received, approval for our executive compensation program. In addition, in 2011, and again in 2017, we sought, and received, approval to hold a say-on-pay vote each year. Accordingly, we are again asking our stockholders to indicate their support for our named executive officer compensation as described in this Proxy Statement. This Proposal 2 gives our stockholders the opportunity to express their views on our named executive officers compensation. This vote is advisory, which means that the vote on executive compensation is not binding on the Company, our Board or the Compensation Committee of the Board. This vote is not intended to address any specific item of compensation, but rather the vote relates to the compensation of our named executive officers, as described in this Proxy Statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission. Accordingly, we again will ask our stockholders to vote for the following resolution at the annual meeting:
RESOLVED, that the Companys stockholders approve, on a non-binding, advisory basis, the compensation of the named executive officers, as disclosed in the Companys Proxy Statement for the 2019 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure.
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The Board recommends a vote FOR the Approval of Executive Compensation. |
Proxy Statement 2019 | 63 |
Proposal to Amend the Amended and Restated 2010
Stock Incentive Plan
In March 2019, the Board approved amendments to the Amended and Restated 2010 Stock Incentive Plan (referred to in this proposal description as the 2010 Plan), subject to the approval of our stockholders at the Annual Meeting, to increase the number of shares available for issuance and make certain additional changes. Incyte has continued to grow at a significant rate. As our revenue and our discovery and development pipeline have substantially increased over the last several years, so too has our number of employees. Our 2016 expansion into Europe and our 2017 expansion into Japan has also contributed to our increasing employee headcount. Even though our employee headcount has risen substantially in the last several years, including in 2018, we have carefully managed the 2010 Plan to ensure that stockholders are subject to minimal dilution and that there is as little overhang as possible on our common stock. In fact, as the chart below shows, since the 2018 amendment to the 2010 Plan that added 6,000,000 shares, our overhang percentage remains low, at 9.1%, and our 3-year average burn rate is 2.26% (assuming that each full value award equates to 2.0 shares and each stock option award equates to 1.0 share), all while our employee headcount has grown by 98% over the past three years.
3-Year average burn rate for peer group 50th percentile is 2.8%
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64 | Proxy Statement 2019 |
Proposal 3 Proposal to Amend the Amended and Restated 2010 Stock Incentive Plan |
Further detail of our year-end overhang percentage is set forth in the table below:
Overhang Detail
2015 | 2016 | 2017 | 2018 | |||||||||||||
Overhang: |
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Options and awards available for grant |
4,681,150 | 7,473,290 | 4,678,903 | 7,023,328 | ||||||||||||
Options and awards outstanding |
11,617,846 | 12,751,142 | 12,385,213 | 14,328,496 | ||||||||||||
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Total overhang |
16,298,996 | 20,224,432 | 17,064,116 | 21,351,824 | ||||||||||||
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