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
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
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| ☒ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material Pursuant to | |
BIOGEN INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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| NOTICE OF |
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20172019 Annual Meeting of
Stockholders and Proxy Statement
Wednesday, June 7, 201719, 2019
9:00 a.m., Eastern Daylight Time
To be held at our offices located at 225 Binney Street,
Cambridge, Massachusetts 02142 and
Onlineonline atwww.virtualshareholdermeeting.com/BIIB2017BIIB2019
Letter from our Chairman
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April 26, 201730, 2019
To ourMy Fellow Stockholders:
On behalf of the Board of Directors, I want to thank you for your investment in Biogen and for the confidence you put in this Board to oversee your interests in our company.
Our view is that neurological diseases are deeply connected and because the pathways of these diseases are interrelated, so are the potential approaches for treating them. While we made progress in a number of our core and emerging growth areas in 2018, we also know it is the nature of drug development that many studies fail before one succeeds. In March 2019, together with our collaboration partner Eisai Co. Ltd., we decided to discontinue the global Phase 3 aducanumab studies ENGAGE and EMERGE based on analysis performed by an independent data monitoring committee that concluded that aducanumab was unlikely to meet the pre-determined efficacy targets. While a decision to discontinue a program is always disappointing, most importantly for patients who need effective treatments, we remain focused on the learnings and priorities that we take away from every clinical study.
Our philosophy of Caring Deeply. Working Fearlessly. Changing Lives.™ informs our policies and business practices. We work to have an impact beyond our medicines as we strive to improve patient health outcomes, solve social and environmental challenges, cultivate a workplace that enables our employees to thrive, support local communities and inspire future generations of scientists.
2018 marked our 40th anniversary, a remarkable milestone honoring our legacy as one of the oldest independent biotechnology companies. Looking back, we have always been pioneers, having the courage to take new approaches to help people who suffer from devastating diseases. Thanks to our fearless mindset and groundbreaking research, thousands of patients today have access to life-changing treatments.
Our Board takes its role in protecting the interest of our fellow stockholders and overseeing our long-term business strategy very seriously. We believe that good corporate governance and high ethical standards are key to our success. We are accountable to you, our fellow stockholders, and remain committed to investing time with you to increase transparency and better understand your perspectives. During 2018 independent members of our Board met with several stockholders to discuss a variety of topics, including business strategy, capital allocation, corporate governance, executive compensation, sustainability and corporate social responsibility initiatives.
Our Board believes ensuring diverse perspectives, including a mix of skills, experience and backgrounds, are key to representing the interests of stockholders effectively. This year we have nominated three new candidates to stand for election as directors at our 2019 annual meeting of stockholders.
We are proud of our accomplishments in 2018, including:
Generating record revenues of $13.5 billion for the year, demonstrating resilience in our multiple sclerosis business, continuing one of the most impressive launches in the history of the biopharmaceutical industry with SPINRAZA, the first approved treatment for spinal muscular atrophy, and continuing to make significant progress in our biosimilars business, including the October 2018 launch of IMRALDI, an adalimumab biosimilar referencing HUMIRA, in Europe.
The addition of six clinical programs to our pipeline.
Being awarded the 2018 International Prix Galien as Best Biotechnology Product for SPINRAZA, our seventh Prix Galien for SPINRAZA, following country recognitions in the U.S., Germany, Italy, Belgium-Luxembourg, the Netherlands and the U.K.
Our perfect score of 100% on the Human Rights Campaign’s Corporate Equality Index (a national benchmarking tool on corporate policies and practices pertinent to LGBTQ employees) for the fifth consecutive year.
Our continued commitment to operational carbon neutrality highlighted through the use of 100% renewable electricity globally.
Being named the Biotechnology Industry Leader on the Dow Jones Sustainability World Index and being recognized as a corporate sustainability leader with Gold Class and Industry Mover Sustainability Awards from RobecoSAM.
The dedication and commitment of the over 3,200 employees who volunteered from 28 countries during our annual Care Deeply Day.
The engagement of 50,000+ students inhands-on learning to inspire their passion for science since the inception of Biogen’s Community Labs.
On behalf of the Board, I am pleased to invite you to attend our 20172019 annual meeting of stockholders, which will be held onlineat our offices located at 225 Binney Street, Cambridge, Massachusetts 02142 on Wednesday, June 7, 2017,19, 2019, beginning at 9:00 a.m., Eastern Daylight Time. You mayFor those who cannot attend in person, we are offering a virtual stockholder meeting in which you can view the meeting, virtually via the Internetsubmit questions and vote online atwww.virtualshareholdermeeting.com/BIIB2017BIIB2019, where you will be able to vote electronically and submit questions.. You will need the16-digit control number included with these proxy materials to attend the annual meeting.meeting virtually via the Internet.Stockholders who attend the annual meeting virtually via the Internet will have the opportunity to participate fully in the meeting on an equal basis with those who attend in person.
The following notice of our annual meeting of stockholders contains details of the business to be conducted at the meeting. Only stockholders of record at the close of business on April 10, 201722, 2019, will be entitled to notice of, and to vote at, the annual meeting.
On behalf of the Board of Directors, I thank you for your continued support and investment in Biogen.
Very truly yours,
STELIOS PAPADOPOULOS, Ph.D.
Chairman of the Board
On behalf of the Board of Directors of Biogen Inc.
Notice of
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Date: | Wednesday, June |
Time: | 9:00 a.m. |
Place: |
225 Binney Street
Cambridge, Massachusetts 02142
Record Date: | April |
Items of Business: | 1. | To elect the |
| 2. | To ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
| 3. | To hold an advisory vote on executive compensation. |
| 4. |
| To transact such other business as may be properly brought before the annual meeting and any adjournments or postponements. |
Virtual Meeting: | To participate in the annual meeting virtually via the Internet, please visitwww.virtualshareholdermeeting.com/ |
Voting: | Your vote is extremely important regardless of the number of shares you own. Whether or not you expect to attend the annual meeting, |
Important Notice Regarding the Availability of Proxy Materials for Annual Meeting of Stockholders
To Be Held on June 7, 2017:19, 2019:
The Notice of 20172019 Annual Meeting of Stockholders, Proxy Statement and 20162018 Annual Report on Form10-K are
are available at the following website:www.proxyvote.com.
By Order of Our Board of Directors,
SUSAN H. ALEXANDER,
Secretary
225 Binney Street
Cambridge, Massachusetts 02142
April 26, 201730, 2019
This noticeNotice and proxy statementProxy Statement are first being sent to stockholders on or about April 26, 2017. 30, 2019.
Our 2018 Annual Report on Form10-K is being sent with this noticeNotice and proxy statement.Proxy Statement.
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| Proxy Statement Summary | Proxy Statement Summary | iii | Proxy Statement Summary | iii | ||||||||||||
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Director Qualifications, Standards, and Diversity
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| Audit Committee Matters | Proposal 2 – Ratification of the Selection of Our Independent Registered Public Accounting Firm | 24 | Audit Committee Matters | Proposal 2 – Ratification of the Selection of Our Independent Registered Public Accounting Firm | 27 | ||||||||||
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Proxy Statement Table of Contents(continued) |
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| Other Management Proposals | Proposal 4 – Advisory Vote on the Frequency of the Advisory Vote on Executive Compensation | 55 | |||||
Proposal 5 – Approval of the Biogen Inc. 2017 Omnibus Equity Plan
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Manner and Cost of Proxy Solicitation
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| Appendix A — GAAP to Non-GAAP Reconciliation | A-1 | |||||||
| Appendix B — Biogen Inc. 2017 Omnibus Equity Plan | B-1 | |||||||
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Manner and Cost of Proxy Solicitation
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| Appendix A — GAAP toNon-GAAP Reconciliation | A-1 | |||||||
| -ii- | |
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This summary highlights important information you will find in this Proxy Statement. As it is only a summary, please review the complete Proxy Statement before you vote.
Annual Meeting Information
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| DATE: | Wednesday, June | |
| TIME: | 9:00 a.m. | |
| LOCATION: |
Cambridge, Massachusetts 02142 | |
RECORD DATE:
| April
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Voting Matters and Vote Recommendation
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| Voting Matter | Board Recommendation | Page Number for more detail | ||
| Item 1—Election of Directors | FOR each nominee | |||
| Item 2—Ratification of the Selection of our Independent Registered Public Accounting Firm | FOR | |||
| Item 3—Advisory Vote on Executive Compensation | FOR | |||
How to Vote
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| -iii- | |
Proxy Statement Summary (continued) |
Highlights of 2018 Company Performance | ||||
We are focused on discovering, developing and delivering worldwide innovative therapies for people living with serious neurological and neurodegenerative diseases as well as related therapeutic adjacencies. Our core growth areas include multiple sclerosis (MS) and neuroimmunology, Alzheimer’s disease and dementia, movement disorders, including Parkinson’s disease, and neuromuscular disorders, including spinal muscular atrophy (SMA) and amyotrophic lateral sclerosis (ALS). We are also focused on discovering, developing and delivering worldwide innovative therapies in our emerging growth areas of acute neurology, neurocognitive disorders, pain and ophthalmology. In addition, we are employing innovative technologies to discover potential treatments for rare and genetic disorders, including new ways of treating diseases through gene therapy in our core and emerging growth areas. We also commercialize biosimilars of advanced biologics. For additional information, please see our 2018 Annual Report on Form10-K.
2018 Operating Performance Highlights
Full year total revenues of $13.5 billion, a 10% increase versus the prior year.
We continued the successful launch of SPINRAZA, the first approved treatment for SMA. As of December 31, 2018, there were over 6,600 patients on therapy across the post-marketing setting, the Expanded Access Program and clinical trials.
In October 2018 we and Samsung Bioepis Co., Ltd. (Samsung Bioepis), our joint venture with Samsung BioLogics Co., Ltd. (Samsung BioLogics), launched IMRALDI, an adalimumab biosimilar referencing HUMIRA, in Europe.
We completed six business development transactions and increased our ownership percentage in Samsung Bioepis from approximately 5% to approximately 49.9%.
| • | We added six clinical programs to our pipeline in 2018, including BIIB078(IONIS-C9Rx) for C9ORF72-associated ALS, BIIB110 (ActRIIA/B ligand trap) for muscle enhancement in diseases such as SMA, an option to acquireTMS-007 for acute ischemic stroke, BIIB104 (AMPA receptor potentiator) for cognitive impairment associated with schizophrenia (CIAS), BIIB074 (vixotrigine) for small fiber neuropathy and BIIB095 for neuropathic pain. |
In December 2018 Alkermes Pharma Ireland Limited, a subsidiary of Alkermes plc (Alkermes), submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) for the review of BIIB098 (diroximel fumarate).
We were awarded the 2018 International Prix Galien as Best Biotechnology Product for SPINRAZA. The prestigious honor marks the seventh Prix Galien for SPINRAZA, following country recognitions in the U.S., Germany, Italy, Belgium-Luxembourg, the Netherlands and the U.K.
Throughout 2018 we repurchased approximately 14.8 million shares of our common stock at a total cost of approximately $4.4 billion.
| -iv- | |
Proxy Statement Summary (continued)
Our Values | ||||
Biogen Elements
Much like the periodic table of elements documents the building blocks of the universe around us, theBiogen Elements give shape to our company’s culture and are embedded into all our people processes, including performance management, goal setting and development programs and activities. The Biogen Elements drive the behaviors, actions and decisions required to achieve our strategy and promote a unified approach to our individual jobs – strengthening our mission, informing our leadership, expanding our impact and fueling our growth.
As we remain focused on discovering, developing and delivering worldwide innovative therapies, we remaincustomer focused. We keep patients, payers and physicians front and center in our daily work and collaborate to solve critical scientific and business challenges. In doing so, we foster aninclusivecommunity, both internally and externally. We work in partnership to break down siloes and encourage diverse perspectives and backgrounds at all levels.
Apioneeringspirit permeates our work. We challenge the status quo and experiment to create new possibilities. We are not afraid to take calculated risks and learn from failure. We are resilient andagile, adapting in response to internal changes and external disruptors, and developing solutions quickly to take advantage of emerging opportunities.
As pioneers and leaders, we hold ourselvesaccountable for our work and results. We honor our commitments and we never compromise our integrity. We sustain anethicalenvironment of trust, honesty and transparency while ensuring appropriate confidentiality.
Environmental Sustainability
We are committed to solving environmental challenges. We work to improve our operational impact on the environment and have adopted strong sustainability policies. We aspire to be a catalyst for positive change by addressing environmental impacts resulting from our business, including carbon and water, and by increasing the environmental and social performance of our supply chain.
As part of this commitment, we utilize a science-based approach to reduce our environmental footprint, demonstrated by our Science Based Targets Initiative-approved 2030 absolute greenhouse gas reduction target of 35%. Our practice of using science to inform our targets when possible is part of our broader commitment to context-based sustainability. We embrace green chemistry as an opportunity to improve sustainability in our operations, and we work to find new and better ways to minimize waste and maintain zero waste to landfill in our manufacturing facilities.
Our 2018 accomplishments include:
Named the Biotechnology Industry Leader on the Dow Jones Sustainability World Index.
Recognized as a corporate sustainability leader with Gold Class and Industry Mover Sustainability Awards from RobecoSAM.
Continued commitment to operational carbon neutrality highlighted through the use of 100% renewable electricity globally.
Committed to reduce carbon emissions by a targeted amount approved by the Science Based Target Initiative, to align ourselves with the global goal of limiting global temperature rise to under two degrees Celsius.
Earned Carbon Disclosure Project (CDP) scores of A,A- and B in the areas of Supplier Engagement, Climate Change and Water, respectively.
Diversity and Inclusion
We believe that diversity in all forms is a key to our success. Different perspectives make us stronger as a business. Our diversity and inclusion strategy touches every facet of our business, focusing on three key components: expanding workforce diversity, improving health outcomes for underserved global patient populations and developing a sustainable, diverse supplier base.
We are honored to be recognized as a company of choice. In 2018 Biogen was ranked #51 on theForbes list of World’s Best Employers, as well as one of the Best Employers for Women (at #38). We scored 100% on the 2018 Disability Equality Index, which measures our policies and practices related to disability inclusion. Additionally, for the fifth consecutive year, we were recognized as a Best Place to Work for LGBTQ Equality by the Human Rights Campaign, scoring 100% on their Corporate Equality Index.
| -v- | |
Proxy Statement Summary (continued)
Corporate Governance Matters
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We striveare committed to maintain effectivethe highest standards of ethics, business integrity and corporate governance, practices towhich we believe will ensure that our company is managed for the long-term benefit of our stockholders. ToOur governance practices are designed to establish and preserve accountability of our Board of Directors and management, provide a structure that end, we continually reviewallows our Board to set objectives and refine our corporate governance policies, procedures,monitor performance, ensure the efficient use and practices. Seeaccountability of resources and enhance stockholder value. Please see Part 2 – “Corporate Governance at Biogen” for more information.
Corporate Governance Highlights
| Board and Board Committees | ||||
| Number of Independent Director Nominees/Total Number of Director Nominees | ||||
| Number of Female Director Nominees/Total Number of Director Nominees | 3/ | |||
| Number of Director Nominees of International Origin/Total Number of Director Nominees | 3/14 | |||
| Average Age of Directors Standing for Election (as of April | ||||
| All Board Committees Consist of Independent Directors | Yes | |||
| Risk Oversight by Full Board and Committees | Yes | |||
| Separate Risk Committee | Yes | |||
| Active Board Oversight of Enterprise Risk Management | Yes | |||
| Separate Independent Chairman and CEO | Yes | |||
| Regular Executive Sessions of Independent Directors | Yes | |||
| Annual Anonymous Board and Committee Self-Evaluations | Yes | |||
| Annual Independent Director Evaluation of CEO | Yes | |||
| Mandatory Retirement Age for Directors (75 years old) | Yes | |||
| Director Education and Orientation | Yes | |||
| Annual Equity Grant to Directors | Yes | |||
| Director | Yes | |||
| Stockholder Rights, Accountability and Other Governance Practices | ||||
| Annual Election of All Directors | Yes | |||
| Majority Voting for Directors and Resignation Policy | Yes | |||
| One-Share,One-Vote Policy | Yes | |||
| Proxy Access Bylaw (3% ownership, 3 years, nominees for up to 25% of our Board) | Yes | |||
| Annual Advisory Stockholder Vote on Executive Compensation | Yes | |||
| Stockholder Ability to Call Special Meetings (25% Threshold) | Yes | |||
| Stockholder Ability to Act by Written Consent | Yes | |||
| Anti-Overboarding Policy Limiting the Number of Other Public Company Boards on which our Directors May Serve (four forNon-Employee Directors and one for the CEO) | Yes | |||
| Stock Ownership Guidelines for Directors and Executives | Yes | |||
| Prohibition from Hedging and Pledging Securities or Otherwise Engaging in Derivative Transactions | Yes | |||
| Compensation Recovery in Equity and Annual Bonus Plans | Yes | |||
| Comprehensive Code of Conduct and Corporate Governance Princples | Yes | |||
| Related Person Transaction Policy and Conflicts of Interest and Outside Activities Policy with Oversight by the Corporate Governance Committee | Yes | |||
| Stock Ownership Guidelines for Directors and Executives | Yes | |||
| Active Board Engagement in Succession Planning of Executive Officers | Yes | |||
| Absence of a Stockholder Rights Plan (referred to as “Poison Pill”) | Yes | |||
| Strong Commitment to Environmental and Sustainability Matters | Yes | |||
| Board Oversight and Expanded Disclosure on Website Related to Corporate Political Contributions and Expenditures | Yes | |||
Director - Stockholder Engagement Initiative
We value the views of our stockholders and other stakeholders, and we solicit input throughout the year on topics such asyear. During 2018 independent members of our Board of Directors met with several stockholders to discuss a variety of issues, including business strategy, capital allocation, corporate governance, executive compensation, sustainability and corporate social responsibility initiatives. During fiscal 2016, independent members of our Board of Directors conducted outreach to stockholders to discuss a variety of issues, including business, corporate governance, and compensation related matters.
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Proxy Statement Summary (continued) |
Our Director Nominees
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Proposal 1 — Election of Directors
You are being asked to vote on the election of the following eleven14 nominees for director. All Directorsdirectors are elected annually by the affirmative vote of a majority of votes cast. Detailed information about each Director’sdirector’s background, skill sets and areas of expertise can be found beginning on page 10.11.
| Committee Memberships* | Other Public Boards | |||||||||||||||||
| Name, Occupation, and Experience | Age* | Independent | AC | CC | CGC | FC | RC | STC | ||||||||||
Alexander J. Denner, Ph.D. Founding Partner, Sarissa Capital | 47 | Yes |  |  | 2 | |||||||||||||
Caroline D. Dorsa Retired Executive Vice President and Chief Financial Officer, Public Service Enterprise Group Incorporated | 57 | Yes |  | | 3 | |||||||||||||
Nancy L. Leaming Retired Chief Executive Officer and President, Tufts Health Plan | 69 | Yes | | | — | |||||||||||||
Richard C. Mulligan, Ph.D. Portfolio Manager, Icahn Capital LP and Mallinckrodt Professor of Genetics, Emeritus, Harvard Medical School | 62 | Yes | | | — | |||||||||||||
Robert W. Pangia Partner, Ivy Capital Partners, LLC | 65 | Yes | | | — | |||||||||||||
Stelios Papadopoulos, Ph.D. Chairman, Biogen Inc., and Chairman, Exelixis, Inc. and Regulus Therapeutics Inc. | 68 | Yes | | | | 3 | ||||||||||||
Brian S. Posner President, Point Rider Group and Private Investor | 55 | Yes | | | | 3 | ||||||||||||
Eric K. Rowinsky, M.D. President and Executive Chairman of RGenix, Inc. | 60 | Yes | | | | 2 | ||||||||||||
The Honorable Lynn Schenk Attorney, Former Chief of Staff to the Governor of California and Former U.S. Congresswoman | 72 | Yes | | | 1 | |||||||||||||
Stephen A. Sherwin, M.D. Clinical Professor of Medicine, University of California, San Francisco and Advisor to Life Sciences Companies | 68 | Yes | | | | 3 | ||||||||||||
Michel Vounatsos Chief Executive Officer, Biogen Inc. | 55 | No | — | |||||||||||||||
| Committee Memberships* | Other Public Boards | |||||||||||||||||
| Name, Occupation and Experience | Age* | Independent | AC | C&MDC | CGC | FC | RC | STC | ||||||||||
John R. Chiminski* Chair of the Board, President and Chief Executive Officer, Catalent, Inc. | 55 | Yes | 1 | |||||||||||||||
Alexander J. Denner, Ph.D. Founding Partner and Chief Investment Officer, Sarissa Capital Management LP | 49 | Yes | 
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Caroline D. Dorsa Retired Executive Vice President and Chief Financial Officer, Public Service Enterprise Group Incorporated | 59 | Yes | 
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William A. Hawkins* Senior Advisor, EW Healthcare Partners | 65 | Yes | 1 | |||||||||||||||
Nancy L. Leaming Retired Chief Executive Officer and President, Tufts Health Plan | 71 | Yes |
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Jesus B. Mantas* Managing Partner and General Manager, IBM Global Services | 50 | Yes | — | |||||||||||||||
Richard C. Mulligan, Ph.D. Mallinckrodt Professor of Genetics, Emeritus, Harvard Medical School and Executive Vice Chairman, Sana Biotechnology | 64 | Yes |
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Robert W. Pangia Retired Chief Executive Officer, Ivy Sports Medicine, LLC | 67 | Yes |
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Stelios Papadopoulos, Ph.D. Chairman, Biogen Inc., Chairman, Exelixis, Inc. and Chairman, Regulus Therapeutics Inc. | 70 | Yes |
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Brian S. Posner Private Investor and Founder and Managing Partner, Point Rider Group LLC | 57 | Yes |
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Eric K. Rowinsky, M.D. President and Executive Chairman, RGenix, Inc. | 62 | Yes |
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The Honorable Lynn Schenk, J.D. Attorney, Former Chief of Staff to the Governor of California and Former U.S. Congresswoman | 74 | Yes |
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Stephen A. Sherwin, M.D. Clinical Professor of Medicine, University of California, San Francisco and Advisor to Life Sciences Companies | 70 | Yes |
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| 3 | ||||||||||||
Michel Vounatsos Chief Executive Officer, Biogen Inc. | 57 | No | — | |||||||||||||||
* Age and Committee memberships are as of April 13, 2017.22, 2019. Messrs. Chiminski, Hawkins and Mantas are each new director nominees standing for election to our Board of Directors at the Annual Meeting.
| AC: Audit Committee | CGC: Corporate Governance Committee | RC: Risk Committee | ||
| FC: Finance Committee | STC: Science and Technology Committee |
| Chair: | Member: | Financial Expert: |
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Proxy Statement Summary (continued) |
Our Auditors
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Proposal 2 – Ratification of Independent Registered Public Accounting Firm
You are being asked to vote to ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2017.2019. Detailed information about this proposal can be found beginning on page 24.27.
Executive Compensation Matters
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Proposal 3 – Advisory Vote on Executive Compensation
Our Board of Directors recommends that stockholders vote to approve, on an advisory basis, the compensation paid to the Company’s named executive officers (NEOs) as described in this Proxy Statement (the“say-on-pay” vote). Detailed information about the compensation paid to our NEOs can be found beginning on page 27.30.
Our compensation program embodiesprograms embody apay-for-performance philosophy that supports our business strategy and aligns executive interests with those of our stockholders. Highlights of our compensation programprograms for 20162018 and our compensation best practices follow.
| Pay-for-Performance | ||
Short- and long-term incentive compensation rewards financial, strategic and operational performance and the accomplishment ofpre-establishedgoals that are set to support our long-range plans. | ||
Approximately 91% of the target compensation | ||
Approximately 84% of the target compensation | ||
| Other Compensation Best Practices | ||
We provide competitive total pay opportunities after consideration of many factors, including comparative data from a carefully selected peer group. | ||
An independent compensation consultant assists | ||
Our compensation programs do not encourage unnecessary and excessive risk taking, and risk assessments are conducted annually. | ||
Payments under our annual bonus plan are performance-based and capped. | ||
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Long-term incentive awards are generally performance-based and subject to multi-year vesting and designed to reward long-term performance. | ||
Stock option awards are granted at fair market value; | ||
We maintain robust | ||
Compensation may be recouped/clawed back under our equity and annual bonus plans. | ||
A double-trigger is required for accelerated equity vesting upon change in | ||
In June 2009 we adopted a policy to eliminate excise tax gross ups for newly-hired executives. | ||
We do not offer additional special perquisites to our executive officers that are not offered to our broad employee base or senior management populations. | ||
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Proxy Statement Summary (continued) |
Note about Forward-Looking Statements | ||||
This Proxy Statement contains forward-looking statements, including statements relating to: our strategy and plans; potential of our commercial business and pipeline programs; capital allocation and investment strategy; clinical trials and data readouts and presentations; and the anticipated benefits and potential of investments, collaborations and business development activities. These forward-looking statements may be accompanied by such words as “aim,” “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “possible,” “will,” “would” and other words and terms of similar meaning. You should not place undue reliance on these statements or the scientific data presented.
These statements involve risks and uncertainties that could cause actual results to differ materially from those reflected in such statements, including the risks and uncertainties that are described in the Risk Factors section of our most recent annual or quarterly report and in other reports we have filed with the Securities and Exchange Commission (SEC). These statements are based on our current beliefs and expectations and speak only as of the date of this Proxy Statement. We do not undertake any obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by law.
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Proposal 4 – Advisory Vote on the FrequencyPLEGRIDY®, SPINRAZA®, TECFIDERA® and ZINBRYTA® are registered trademarks of the Advisory Vote on Executive Compensation
Proposal 3 above requests that you cast an advisory vote for the compensation paid to the Company’s NEOs as describedBiogen. IMRALDI™ is a trademark of Biogen. HUMIRA® and other trademarks referenced in this Proxy Statement (the“say-on-pay” vote). In this Proposal 4, as required pursuant to Section 14Aare the property of the Securities Exchange Act, you are being asked to cast anon-binding, advisory vote on how frequently we should havesay-on-pay votes in the future. You can vote to holdsay-on-pay votes every one, two, or three years, or you can abstain from voting. Our Board of Directors believes thatsay-on-pay votes should be held annually to give stockholders the opportunity to provide regular input on our executive compensation programs and increase our Board’s accountability for its compensation decisions and therefore recommends that stockholders vote for the one year option. Detailed information about this proposal can be found on page 55.
Proposal 5 – Approval of the Biogen Inc. 2017 Omnibus Equity Plan
You are being asked to approve the Biogen Inc. 2017 Omnibus Equity Plan. Our Board of Directors, upon the recommendation of our Compensation and Management Development Committee, approved the Biogen Inc. 2017 Omnibus Equity Plan, subject to stockholder approval. The Biogen Inc. 2017 Omnibus Equity Plan will not become effective unless and until it is approved by our stockholders.
The Biogen Inc. 2017 Omnibus Equity Plan will allow our Compensation and Management Development Committee to make grants of stock options, stock appreciation rights, restricted stock units, restricted stock awards, and other awards (including performance-based awards) to employees. Our Board believes that equity awards have been, and will continue to be, a critical part of our total compensation program and allow us to attract and retain the key talent needed to effectively compete in our industry, incentivize superior results and long-term value creation, and align the interests of our employees with those of our stockholders. As discussed in our Compensation Discussion and Analysis, equity compensation is a key element of total compensation at Biogen, and the Biogen Inc. 2017 Omnibus Equity Plan will allow us to continue to grant this key element of compensation and to attract and retain key employees and motivate superior results with long-term incentive awards. Detailed information about this proposal can be found beginning on page 55.their respective owners.
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Biogen Inc.
225 Binney Street
Cambridge, Massachusetts 02142
The Board of Directors of Biogen Inc. is soliciting your proxy to vote at our 20172019 annual meeting of stockholders (Annual Meeting) to be held at 9:00 a.m., Eastern Daylight Time on Wednesday, June 7, 201719, 2019, for the purposes summarized in the accompanying Notice of 20172019 Annual Meeting of Stockholders. Our 20162018 Annual Report on FormForm 10-K is also available with this Proxy Statement.
References in this Proxy Statement to “Biogen” or the “Company,” “we”,“we,” “us”, and “our” refer to Biogen Inc.
What is the purpose of the Annual Meeting? | At the Annual Meeting, stockholders will vote upon the matters that are summarized in the formal meeting notice. This Proxy Statement contains important information for you to consider when deciding how to vote on the matters before the
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Can I attend the Annual Meeting? | We will be hosting the Annual Meeting at our offices at 225 Binney Street, Cambridge, Massachusetts 02142. For those who cannot attend in person, we are offering a virtual stockholder meeting in which you can view the meeting, submit questions and vote online atwww.virtualshareholdermeeting.com/BIIB2019. You will need the16-digit control number included with these proxy materials to attend the Annual Meeting virtually via the Internet.
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What do I need in order to be able to participate in the Annual Meeting | You will need the16-digit control number included on your Notice of Internet Availability of Proxy Materials or your proxy card or voting instruction form in order to be able to vote your shares or submit questions via the Internet during the Annual Meeting. If you do not have your16-digit control number and attend the meeting online, you will be able to listen to the meeting only — you will not be able to vote or submit questions during the meeting.
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Who can vote? | Each share of our common stock that you own as of the close of business on the record date of April
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| 1 | General Information About the Meeting (continued) |
What am I voting on at the Annual Meeting? | Stockholders will be asked to vote on the following items at the Annual Meeting:
• The election to our Board of Directors of the
• The ratification of the selection of PricewaterhouseCoopers LLP (PwC) as our independent registered public accounting firm for the fiscal year ending December 31,
• The advisory vote on executive compensation (Proposal 3); and
• The transaction of such other business as may be properly brought before the meeting and any adjournments or postponements.
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What is the recommendation of our Board of Directors on each of the matters scheduled to be voted on at the Annual Meeting? | Our Board of Directors recommends that you vote:
• “FOR” each of the director nominees (Proposal 1);
• “FOR” the ratification of the selection of PwC as our independent registered public accounting firm for the fiscal year ending December 31,
• On an advisory basis, “FOR” the approval of our executive compensation (Proposal 3)
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How do proxies work? | Our Board of Directors is asking for your proxy authorizing the individuals named as proxies to vote your shares at the Annual Meeting in the manner you direct. You may abstain from voting on any matter. If you submit your proxy without specifying your voting instructions, we will vote your shares on the matters scheduled to be voted on at the Annual Meeting in accordance with our Board of Directors’ recommendations described above. As to any other matter that may properly come before the
Shares represented by valid proxies received in time for the Annual Meeting and not revoked before the Annual Meeting will be voted at the Annual Meeting. You can revoke your proxy and change your vote in the manner described below (under the heading “Can I revoke or change my vote after I submit my proxy?”). If your shares are held through a bank, broker or other nominee, please follow the instructions that you were provided by your bank, broker or other nominee.
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| 1 | General Information About the Meeting (continued) |
How do I vote and what are the voting deadlines? | Stockholders of Record. If you are a stockholder of record, there are several ways for you to vote your shares.
You may also vote during the Annual Meeting via the Internet by going towww.virtualshareholdermeeting.com/
If you vote via the Internet or by telephone before the Annual Meeting, your electronic vote authorizes the named proxies in the same manner as if you signed, dated and returned your proxy card.If you vote via the Internet or by telephone before the Annual Meeting, do not return your proxy card.
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Beneficial Owners.If your shares are held in a brokerage account in your broker’s name, then you are the beneficial owner of shares held in “street |
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| 1 | General Information About the Meeting (continued) |
Can I revoke or change my vote after I submit my proxy? | Stockholders of Record. If you are a stockholder of record, you may revoke or change your vote at any time before the final vote at the Annual Meeting by:
• signing and returning a new proxy card with a later date, to be received no later than June
• submitting a later-dated vote by telephone or via the Internet — only your latest
• attending the Annual Meeting in person and voting in person or participating in the Annual Meeting virtually via the Internet and voting again; or
• delivering a written revocation to our Secretary at Biogen Inc., 225 Binney Street, Cambridge, Massachusetts 02142, to be received no later than June
Only your latest vote, in whatever form, will be counted.
Beneficial Owners. If you are a beneficial owner of your shares, you must contact the bank, broker or other nominee holding your shares and follow their instructions for revoking or changing your vote.
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Will my shares be counted if I do not vote? | Stockholders of Record. If you are the stockholder of record and you do not vote before the Annual Meeting by proxy card, telephone or via the Internet, or during the Annual Meeting either in person or virtually via the Internet, your shares will not be voted at the Annual Meeting.
Beneficial Owners. If you are the beneficial owner of shares, your bank, broker or other nominee, as the record holder of the shares, is required to vote those shares in accordance with your instructions. If no voting instructions are provided, these record holders can vote your shares only on discretionary, or routine, matters and not onnon-discretionary, ornon-routine, matters. Uninstructed shares whose votes cannot be counted onnon-routine matters result in what are commonly referred to as “brokernon-votes.”
The proposal to ratify the selection of our independent registered public accounting firm is a routine matter and the other proposals arenon-routine matters. If you do not give your broker voting instructions, your broker (1) will be entitled to vote your shares on the proposal to ratify the selection of our independent registered public accounting firm and (2) will not be entitled to vote your shares on the other proposals. We urge you to provide instructions to your bank, broker or other nominee so that your votes may be counted on all of these important matters.
You should vote your shares by telephone or by Internet according to the instructions provided by your bank, broker or other nominee or by signing, dating and returning a printed voting instruction form to your bank, broker or other nominee to ensure that your shares are voted on your behalf.
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How many shares must be present to hold the Annual Meeting? | A majority of our issued and outstanding shares of common stock as of the Record Date must be present at the Annual Meeting to hold the Annual Meeting and conduct business. This is called a quorum. Shares voted in the manner described above (under the heading “How do I vote and what are the voting deadlines?”) will be counted as present at the Annual Meeting. Shares that are present and entitled to vote on one or more of the matters to be voted upon are counted as present for establishing a quorum. If a quorum is not present, we expect that the Annual Meeting will be adjourned until we obtain a quorum.
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| 1 | General Information About the Meeting (continued) |
What vote is required to approve each proposal and how are votes counted? | • Proposal 1: Election of Directors: Directors are elected by a majority vote of the votes cast in uncontested elections — that is, a director will be elected if more votes are cast for that director’s election than against that director — and by a plurality of votes cast in contested elections — that is, the directors receiving the highest number of “For” votes will be elected. Abstentions and brokernon-votes, if any, are not counted for purposes of electing directors and will have no effect on the results of this vote.
• Proposal 2: Ratification of
• Proposal 3: Advisory Vote on Executive Compensation:Because this proposal asks for anon-binding, advisory vote, there is no “required vote” that would constitute approval. We value the opinions expressed by our stockholders in this advisory vote, and
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Are there other matters to be voted on at the Annual Meeting? | We do not know of any other matters that may come before the Annual Meeting. If any other matters are properly presented at the Annual Meeting, your proxy authorizes the individuals named as proxies to vote, or otherwise act, in accordance with their best judgment.
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| Why did I receive aone-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials? | We have elected to provide access to our proxy materials on the Internet, consistent with the rules of the
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| 1 | General Information About the Meeting (continued) |
What does it mean if I receive more than one notice regarding the Internet availability of proxy materials or more than one set of printed proxy materials? | If you hold your shares in more than one account, you may receive a separate Notice of Internet Availability of Proxy Materials or a separate set of printed proxy materials, including a separate proxy card or voting instruction form, for each account. To ensure that all of your shares are voted, please vote by telephone or by Internet or sign, date and return a proxy card or voting instruction form for each account.
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Where do I find the voting results of the Annual Meeting? | We will publish the voting results of the Annual Meeting in a Current Report on Form8-K filed with the SEC within four business days after the end of the Annual Meeting. You may request a copy of this Form8-K by contacting Investor Relations, Biogen Inc., 225 Binney Street, Cambridge, Massachusetts 02142, (781)
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Who should I call if I have any questions? | If you have any questions or require any assistance with voting your shares, please contact the bank, broker or other nominee holding your shares, or our Investor Relations department at (781)
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Corporate Governance Practices
We striveare committed to maintain effectivethe highest standards of ethics, business integrity and corporate governance, practices towhich we believe will ensure that our company is managed for the long-term benefit of our stockholders. We reviewOur governance practices are designed to establish and preserve accountability of our corporate governance principlesBoard of Directors and practices onmanagement, provide a regular basis.structure that allows our Board to set objectives and monitor performance, ensure the efficient use and accountability of resources and enhance stockholder value. A description of our corporate governance highlights is set forth in the “Proxy Statement Summary” above.
We believe that our Board’sBoard of Directors’ primary functions are to appoint, evaluate and hold accountable management, as well as assuringoversee key strategic, operational and compliance risks and ensure optimal capital allocation and strategic decisions such that long-term shareholderstockholder value is maximized.
We believe part of effective corporate governance includes active engagement with our stockholders. We value the views of our stockholders and other stakeholders, and we communicate with them regularly and solicit input on a number of topics such as business strategy, capital allocation, corporate governance, executive compensation, sustainability and corporate social responsibility initiatives.
| • | Director |
| • | Corporate Responsibility. Our passion for developing medicines that make a meaningful difference in patients’ lives is reflected in our commitment to our global impact: citizenship, environmental sustainability, diversity and inclusion and other key initiatives. Our |
ship and sustainability commitments and performance have been recognized over the years, including the most recent acknowledgements noted in the executive summary section under |
Board of Directors.Directors
All of our directors and nominees for director, other than Mr.Michel Vounatsos, our Chief Executive Officer, satisfy the independence requirements of The NASDAQNasdaq Stock Market (NASDAQ)(Nasdaq). In determining that Stelios Papadopoulos, the Chairman of our Board of Directors, is independent, our Board of Directors considered that Dr. Papadopoulos is a director or advisor to certain companies with which we collaborate.
Committees.Committees
Leadership Structure.Structure
We currently separate the roles of Chairman of the Board of Directors and Chief Executive Officer. Dr.Stelios Papadopoulos, an independent director, is the Chairman of our Board. Among other responsibilities, our Chairman:
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| 2 | Corporate Governance at Biogen (continued) |
We believe that having an independent Chairman promotes a greater role for the independent directors in the oversight of the Company, including oversight of material risks facing the Company, encourages active participation by the independent directors in the work of our Board of Directors, enhances our Board of Directors’ role of representing stockholders’ interests and improves our Board of Directors’ ability to supervise and evaluate our Chief Executive Officer and other executive officers. Further, separation of the Chairman and CEO roles allows our CEO to focus on operating and managing Biogen while leveraging our independent Chairman’s experience and perspectives.
Our Corporate Governance Committee is responsible for identifying individuals qualified to become members of our Board of Directors and reviewing candidates recommended by stockholders. Stockholders may recommend nominees for consideration by our Corporate Governance Committee by submitting the names and supporting information to our Secretary, Biogen Inc., 225 Binney Street, Cambridge, Massachusetts 02142. Any such recommendation should include at a minimum the name(s) and address(es) of the stockholder(s) making the recommendation and appropriate biographical information for the proposed nominee(s). Candidates who are recommended by stockholders will be considered in the same manner as candidates from other sources. For all potential candidates, our Corporate Governance Committee will consider all factors it deems relevant, including at a minimum those listed below in the subsection titledentitled “Director Qualifications, Standards and Diversity.” Director nominations are recommended by our Corporate Governance Committee to our Board of Directors and must be approved by a majority of independent directors.
In addition, our Fourth Amended and Restated Bylaws (Bylaws) contain provisions that address the process by which a stockholder may nominate an individual to stand for election to our Board of Directors at an annual meeting of stockholders.
| • | Stockholder Nominations Not for Inclusion in Company’s Proxy Statement. Our Bylaws permit stockholders to nominate directors for consideration at an annual |
ing. To nominate a director for consideration at an annual meeting, a nominating stockholder must provide the information required by our Bylaws and give timely notice of the nomination to our Secretary in accordance with our Bylaws, and each nominee must meet the qualifications required by our Bylaws. To nominate a director for consideration at next year’s annual meeting, stockholders must provide the notice required by our Bylaws |
| • | Stockholder Nominations Under Proxy Access Bylaw. In addition, our Bylaws provide that under certain circumstances, a stockholder or group of stockholders may include director candidates that they have nominated in our annual meeting proxy statement. These proxy access provisions of our Bylaws provide, among other things, that a stockholder or group of up to 20 stockholders seeking to include director candidates in our annual meeting proxy statement must own 3% or more of our outstanding common stock continuously for at least the previous |
The number of stockholder-nominated candidates appearing in any annual meeting proxy statement can equal up to 25% of the number of directors then serving on our Board.Board of Directors. If 25% is not a whole number, the maximum number of stockholder-nominated candidates would be the closest whole number below 25%, subject to a minimum of one. A nominee will be counted in determining whether the 25% maximum has been reached if the nominee was included in the proxy materials as a Board-nominated candidate, if we have received notice that such nominee has been nominated by a stockholder pursuant to our Bylaws, the nominee was submitted under the proxy access procedures and later withdrawn the nominee was included in the proxy materials as a Board-nominated candidate, or the nominee was nominated in any of the Company’sour three preceding annual meetings and is being recommended by our Board of Directors for reelection.
The nominating stockholder or group of stockholders also must deliver the information required by our Bylaws,
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| 2 | Corporate Governance at Biogen (continued) |
and each nominee must meet the qualifications required by our Bylaws.
Requests to include stockholder-nominated candidates in our proxy materials for next year’s annual meeting must be received by our Secretary no earlier than 150 daysDecember 2, 2019, and no later than 120January 1, 2020. However, if the 2020 annual meeting of stockholders is called for more than 30 days beforeearlier or later than the anniversary of the Annual Meeting, requests to include stockholder-nominated candidates in our proxy materials for the 2020 annual meeting of stockholders must be received not later than (1) the 10th day after public announcement of the date thatof the 2020 annual meeting of stockholders or (2) the 60th day prior to the date we issuedfile our proxy statement forin connection with the previous year’s2020 annual meeting of stockholders.
Annual Elections and Majority Voting
Our directors are elected annually to serve until the next annual meeting of stockholders and until their successors are duly elected and qualified. Our directors must be elected by a majority of votes cast in uncontested elections (meaning any election for which the number of directors nominated does not exceed the number of directors to be elected at such meeting), and by a plurality of votes cast in contested elections (meaning any election for which the number of directors nominated exceeds the number of directors to be elected at such meeting, regardless of whether such nominees were proposed by the Company or by stockholders). In addition, following their appointment or election by stock-
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holdersstockholders to our Board of Directors, directors must submit an irrevocable resignation that will be effective upon (1) the failure to receive the required number of votes for reelection at the next annual meeting of stockholders at which they face reelection and (2) acceptance of such resignation by our Board of Directors. If an incumbent director fails to receive the number of votes required for reelection, our Board of Directors (excluding the director in question) will, within 90 days after certification of the election results, decide whether to accept the director’s resignation taking into account such factors as it deems relevant. Such factors may include the stated reasons why stockholders voted against such director’s reelection, the qualifications of the director and whether accepting the resignation would cause us to fail to meet any applicable listing standards or would violate state law. Our Board of Directors will promptly disclose its decision in a filing with the SEC.
Director Qualifications, Standards and Diversity
| • | Board Composition. Our Board of Directors is committed to ensuring that it is well-equipped to oversee the Company’s business and effectively represent the interests of stockholders. Our Board of Directors regularly reviews its composition to ensure it includes directors with the experience, skills and diversity necessary for effective, independent Board oversight. Towards this end, our Board of Directors initiated a process to add new directors with capabilities that would be beneficial to the Company and stockholders. As a result of this process, we have nominated three new director candidates to stand for election at the Annual Meeting. Our Board of Directors will continue to seek to add new directors to our Board, focusing on skills, experience and diversity. |
| • | General Qualifications and Standards. Our Corporate Governance Principles provide that directors should possess the highest personal and professional ethics and integrity, understand and be aligned with our core values and be committed to representing the long-term interests of our stockholders. Our directors must also be inquisitive and objective and have practical wisdom and mature judgment. |
| • | Diversity. In accordance with our Corporate Governance Principles, we endeavor to have a Board of Directors that collectively represents diversity of thought and diverse experience at strategic and policy-making levels in business, government, education, healthcare, science and technology and the international arena, and collectively has knowledge and expertise in the functional areas of accounting and finance, risk management and compliance, strategic and business planning, corporate governance, human resources, marketing and commercial and research and development. Consistent with our Corporate Governance |
Principles, in selecting nominees to our Board of Directors, our Corporate Governance Committee considers the diversity of skills and experience that a potential nominee possesses and the extent to which such diversity would enhance the perspective, background, knowledge and experience of our Board of Directors as a whole. Our Board of Directors considers personal diversity, including gender, national origin, ethnic and racial diversity, as an additional benefit to our Board of |
| • | Director Term and Resignation. Our Board of Directors does not believe that arbitrary term limits on directors’ service are appropriate, nor does it believe that directors should expect to bere-nominated. Our Corporate Governance Principles provide that directors should offer |
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| 2 | Corporate Governance at Biogen (continued) |
their resignation in the event of any significant change in personal circumstances, including a significant change in principal job responsibilities or any circumstances that may adversely affect their ability to effectively carry out their duties and responsibilities or in the case of a significant conflict of interest that cannot otherwise be resolved. Our directors are also expected to offer their resignation to our Board of Directors effective at the annual meeting of stockholders in the year of their 75th birthday. |
| • | Board and Committee Evaluations. Regular evaluations are an important determinant for continued tenure, and, to that end, our Board of Directors and its committees perform a self-evaluation on an annual |
ing effectively, and to provide our Board with an opportunity to reflect upon and improve processes and effectiveness. Our Corporate Governance Committee oversees the evaluations and reports the results to our |
| • | Director Orientation and Continuing Education. We provide orientation for new directors and provide directors with materials or briefing sessions on subjects that we believe will assist them in discharging their duties. We also make director education program information available to directors on a regular basis and encourage directors to attend director education programs and reimburse the costs of attending such programs. |
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Proposal 1 – Election of Directors
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Our Board of Directors currently consists ofWe are asking our stockholders to elect the following directors, all servingone-year terms extending until the Annual Meeting and until their successors are duly elected and qualified:
Other than Mr. Vounatsos, all directors are standing for reelection14 director nominees listed below to serve aone-year term extending until the 20182020 annual meeting of stockholders and until their successors are duly elected and qualified, unless they resign or are removed. Mr. Vounatsos was appointed to our Board of Directors in January 2017 and is standing for election to serve aone-year term extending until the 2018 annual meeting of stockholders and until his successor is duly elected and qualified, unless he resigns or is removed. removed:
| John R. Chiminski | Jesus B. Mantas | Eric K. Rowinsky | ||
| Alexander J. Denner | Richard C. Mulligan | Lynn Schenk | ||
| Caroline D. Dorsa | Robert W. Pangia | Stephen A. Sherwin | ||
| William A. Hawkins | Stelios Papadopoulos | Michel Vounatsos | ||
| Nancy L. Leaming | Brian S. Posner |
Our Board of Directors has nominated these eleven directors14 individuals based on its carefully considered judgment that the experience, qualifications, attributes and skills of our nominees qualify them to serve on our Board of Directors. As described in detail below, our nominees have considerable professional and business expertise. We know of no reason why any nominee would be unable to accept nomination or election.
If any nominee is unable to serve on our Board of Directors, the shares represented by your proxy will be voted for the election of such other person as may be nominated by our Board of Directors. In addition, in compliance with all applicable state and federal laws and regulations, we will file an amended proxy statement and proxy card that, as applicable, (1) identifies the alternate nominee(s), (2) discloses that such nominees have consented to being named in the revised proxy statement and to serve if elected and (3) includes the disclosure required by Item 7 of Schedule 14A with respect to such nominees. All nominees have consented to be named in this Proxy Statement and to serve if elected.
Director Skills and Qualifications
The Corporate Governance Committee believes that the 14 director nominees collectively have the skills, experience, diversity and character to execute the Board’s responsibilities. The following is a summary of those qualifications:
Attributes, Experience and Skills |
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General Management Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||||||
Financial Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||||||||
Audit Committee Financial Expertise | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||||||||||||
Mergers & Acquisitions Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||||||||||||
Scientific Research Experience | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||||||||||||||||||||
Drug Development Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||||||||||||||||
International Business Experience | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||||||||||||||||||||
Public Policy Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||||||||||||||
Operations Experience | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | |||||||||||||||||||||||||||||||||||||||||||||
Other Public Company Board Service | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||||||||
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Our Nominees for Director
(Information is as of April 13, 2017) 22, 2019)
John R. Chiminski | ||||
| Director Since: New Nominee Age: 55 Biogen Board Committees: – New Nominee | |||
Experience
Mr. Chiminski has served as the Chief Executive Officer of Catalent, Inc., a global provider of advanced delivery technologies and development solutions for drugs, biologics, and consumer and animal health products, since March 2009, as a director since February 2009 and as Chair of the Board since October 2016. Prior to that, Mr. Chiminski spent more than 20 years at GE Healthcare in engineering, operations and senior leadership roles. From 2007 to 2009 Mr. Chiminski was President and Chief Executive Officer of GE Medical Diagnostics, a global business with sales of $1.9 billion. From 2005 to 2007 he served as Vice President and General Manager of GE Healthcare’s Global Magnetic Resonance Business and from 2001 to 2005 as Vice President and General Manager of Global Healthcare Services. Earlier at GE, he held a series of cross-functional leadership positions in both manufacturing and engineering, including a GE Medical Systems assignment in France. Mr. Chiminski holds a B.S. from Michigan State University and an M.S. from Purdue University, both in electrical engineering, as well as a Master’s Degree in Management from the Kellogg School of Management at Northwestern University.
Qualifications
Mr. Chiminski has significant experience in advising and managing companies in various segments of the healthcare industry and overseeing the day-to-day business operations of a healthcare company. He also possesses broad healthcare industry knowledge.
Other Current Public Company Boards
– Catalent, Inc. (Chair)
Former Public Company Directorships Held in the Past Five Years
– None
Alexander J. Denner, Ph.D.
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| Director Since: 2009 Age: 49 Biogen Board Committees: – Corporate Governance (Chair) – Finance | |||
Experience
Dr. Denner, 47, has served as one of our directors since 2009. Dr. Denner is a founding partner and Chief Investment Officer of Sarissa Capital Management LP.LP, a registered investment advisor, which he founded in 2012. Sarissa Capital focuses on improving the strategies of companies to better provide shareholderenhance stockholder value. From 2006 to 2011 Dr. Denner served as a Senior Managing Director at Icahn Capital.Capital L.P. Prior to that, he served as a portfolio manager at Viking Global Investors, a private investment fund, and Morgan Stanley Investment Management.Management, a global asset management firm. Dr. Denner also serves as a director of The Medicines Company, a biopharmaceutical company, where he is Chairman of the Board.
Qualifications
Dr. Denner has significant experience overseeing the operations and research and development of healthcare companies and evaluating corporate governance matters. He also has extensive experience as an investor, particularly with respect to healthcare companies, and possesses broad healthcare industry knowledge.
– Corporate Governance (Chair)
– Finance
– The Medicines Company (Chair)
– Bioverativ Inc.
– Amylin Ariad Pharmaceuticals, Inc. (Chair)
– Ariad Pharmaceuticals,Bioverativ Inc. (Chair)
– Vivus, Inc.
– Enzon Pharmaceuticals, Inc.
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| 3 | Board of Directors (continued) |
Caroline D. Dorsa
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| Director Since: 2010 Age: 59 Biogen Board Committees: – Audit (Chair) – Risk | |
Experience
Ms. Dorsa, 57, has served as one of our directors since 2010. Ms. Dorsa served as the Executive Vice President and Chief Financial Officer of Public Service Enterprise Group Incorporated, a diversified energy company, from April 2009 until her retirement in October 2015, and served on its Board of Directors from February 2003 to April 2009. From February 2008 to April 2009 she served as Senior Vice President, Global Human Health, Strategy and Integration at Merck & Co., Inc., a pharmaceutical company. From November 2007 to January 2008 Ms. Dorsa served as Senior Vice President and Chief Financial Officer of Gilead Sciences, Inc., a life sciences company. From February 2007 to November 2007 she served as Senior Vice President and Chief Financial Officer of Avaya, Inc., a telecommunications company. From 1987 to January 2007 Ms. Dorsa held various financial and operational positions at Merck & Co., Inc., including Vice President and Treasurer, Executive Director of U.S. Customer Marketing and Executive Director of U.S. Pricing and Strategic Planning. Ms. Dorsa also serves as a director of Illumina, Inc., a life sciences company, and Intellia Therapeutics, Inc., a biotechnology company, and as a Trustee of the Goldman Sachs ETF Trust, the Goldman Sachs MLP and Energy Renaissance Fund and the Goldman Sachs MLP Income Opportunities Fund, investment funds within the Goldman Sachs Asset Management fund complex.
Qualifications
Ms. Dorsa has significant financial and accounting expertise and a deep knowledge of the pharmaceutical industry. Her strategic perspective on the industry is particularly valuable to our Board of Directors as it oversees our growth initiatives and reviews both internal development projects and external opportunities.
– Audit (Chair)
– Risk
– Illumina, Inc.
– Intellia Therapeutics, Inc.
– Goldman Sachs Investment Funds
– None
William A. Hawkins | ||||
| Director Since: New Nominee Age: 65 Biogen Board Committees: – New Nominee | |||
Experience
Mr. Hawkins serves as a Senior Advisor to EW Healthcare Partners, a life sciences private equity firm. Mr. Hawkins is the former Chairman and CEO of Medtronic, Inc., a global leader in medical technology. He was at Medtronic from 2002 until 2011. After retiring from Medtronic he served as President and Chief Executive Officer of Immucor, a private equity backed global leader in transfusion and transplant medicine from October 2011 to July 2015. From 1998 to 2001 Mr. Hawkins served as President and Chief Executive Officer of Novoste Corporation, an interventional cardiology company. Prior to that, Mr. Hawkins served in a variety of senior roles at American Home Products, a consumer, pharma and medical device company, Johnson & Johnson, a healthcare company, Guidant Corporation, a medical products company, and Eli Lilly and Company, a global pharmaceutical company. Mr. Hawkins also serves as a director of Avanos Medical, Inc., a medical technology company, as Chairman of Bioventus, LLC and Chairman of 4 Tech and as a director of Trice Medical, Inc., AsKBio; Virtue labs, Cerius, Keratin Biosciences and Baebies, Inc., all of which are medical products companies. Mr. Hawkins is Vice Chair of the Duke University Board of Trustees and is Chair of the Duke University Health System. Mr. Hawkins was elected as a member of the AIMBE College of Fellows and the National Academy of Engineering. He has a dual degree in Electrical and Biomedical Engineering from Duke University and a M.B.A. from the University of Virginia’ s Darden School of Business.
Qualifications
Mr. Hawkins has significant leadership experience as a chief executive officer, significant knowledge of, and experience in, the healthcare industry and significant international experience. He also has extensive governance and public company board experience.
Other Current Public Company Boards
– Avanos Medical, Inc.
Former Public Company Directorships Held in the Past Five Years
– Thoratec Corporation
| 13 | | |
| 3 | Board of Directors (continued) |
Nancy L. Leaming
| ||||
| Director Since: 2008 Age: 71 Biogen Board Committees: – Audit – Risk | |||
Experience
Ms. Leaming, 69, has served as one of our directors since 2008. Ms. Leaming has been an independent consultant since 2005. From 2003 to 2005 she served as the Chief Executive Officer and President of Tufts Health Plan, a provider of healthcare insurance. From 1986 to 2003 Ms. Leaming served in several executive positions at Tufts Health Plan, including President, Chief Operating Officer and Chief Financial Officer.
Qualifications
Ms. Leaming has well-developed leadership skills and financial acumen and provides insights into the healthcare reimbursement and payor market, where she served for 20 years in senior operational, financial and managerial roles.
– Audit
– Risk
– None
– Edgewater Technology, Inc.
– Hologic, Inc.
Jesus B. Mantas
| ||||
| Director Since: New Nominee Age: 50 Biogen Board Committees: – New Nominee | |||
Experience
Mr. Mantas serves as Managing Partner and General Manager responsible for worldwide strategy, offerings, digital platforms and innovation for IBM Global Services, a $17 billion unit of IBM. From January 2011 to October 2014 Mr. Mantas served as a Managing Partner and General Manager, IBM Global Business Services in Latin America after he held multiple leadership positions as Vice President in North America. Prior to that, Mr. Mantas was a Partner at PricewaterhouseCoopers Consulting and an officer in the Air Force of Spain. He also serves in the World Economic Forum Global Artificial Intelligence Council.
Qualifications
Mr. Mantas has significant global operating and business leadership experience, including Europe, North America and Latin America. He has demonstrated leadership translating strategy into execution, applying technology to improve business performance and brings over 25 years of experience in information technology, data science and artificial intelligence.
Other Current Public Company Boards
– None
Former Public Company Directorships Held in the Past Five Years
– None
| |
| 3 | Board of Directors (continued) |
Richard C. Mulligan, Ph.D.
| ||||
| Director Since: 2009 Age: 64 Biogen Board Committees: – Science and Technology (Chair) – Compensation and Management Development | |||
Experience
Dr. Mulligan 62, has served as one of our directors since 2009. He is currently a Portfolio Manager at Icahn Capital LP and, since 2013, the Mallinckrodt Professor of Genetics, Emeritus, at Harvard Medical School, after serving as the Mallinckrodt Professor of Genetics and Director of the Harvard Gene Therapy Initiative since 1996.from 1996 to 2013. He also currently serves as Executive Vice Chairman of the Board of Sana Biotechnology, a private biotechnology company. From March 2017 to October 2018 Dr. Mulligan served as a Portfolio Manager at Icahn Capital LP. Prior to that, heDr. Mulligan was a founding partner of Sarissa Capital Management LP, a registered investment advisor, from 2013 to 2016. Prior to Harvard, Dr. Mulligan was a Professor of Molecular Biology at the Massachusetts Institute of Technology, a member of the Whitehead Institute for Biomedical Research and the Chief Scientific Officer of Somatix Therapy Corporation, a drug discovery and development company that he founded. Dr. Mulligan was a founding partner of Sarissa Capital Management LP, an investment firm, from 2013 to 2016. Dr. Mulligan was named a MacArthur Foundation Fellow in 1981.
Qualifications
Dr. Mulligan has scientific expertise in the areas of molecular biology, genetics, gene therapy and biotechnology, as well as extensive experience within the healthcare industry, including overseeing the operations and research and development of healthcare companies.
– Science and Technology (Chair)
– Compensation and Management Development
– None
– Cellectis SA
– Enzon Pharmaceuticals, Inc.None
Robert W. Pangia
| ||||
| Director Since: 1997 Age: 67 Biogen Board Committees: – Compensation and Management Development (Chair) – Finance | |||
Experience
Mr. Pangia 65, served as a director of the Company from 1997 to 2003 during the period the Company was operated as IDEC Pharmaceuticals, and has served as a director since 2003 following IDEC’s merger with Biogen, Inc. Mr. Pangia has been a partner in Ivy Capital Partners, LLC, the general partner of Ivy Healthcare Capital, L.P., a private equity fund specializing in healthcare investments, since 2003. From 2011 to 2016 he was also the Chief Executive Officer of Ivy Sports Medicine, LLC, a medical device company. From October 2007 to October 2009 he also served as the Chief Executive Officer of Highlands Acquisition Corp., a special purpose acquisition company. From 1996 to 2003 Mr. Pangia was self-employed as an investment banker. From 1987 to 1996 he held various senior management positions at PaineWebber, a financial services company, including Executive Vice President and Director of Investment Banking for PaineWebber Incorporated of New York, a member of the Board of Directors of PaineWebber, Inc., Chairman of PaineWebber Properties, Inc., and a member of several of PaineWebber’s executive and operating committees.
Qualifications
Mr. Pangia has significant financial acumen and breadth of expertise within the healthcare industry.
– Compensation and Management Development (Chair)
– Finance
– None
–None
| |
| 3 | Board of Directors (continued) |
Stelios Papadopoulos, Ph.D.
| ||||
| Director Since: 2008 Independent Chairman Since: 2014Age: 70 Biogen Board Committees: – Audit – Finance – Science & Technology | |||
Experience
Dr. Papadopoulos 68, has served as one of our directors since 2008 and as our independent Chairman since June 2014. Dr. Papadopoulos also serves as the Chairman of Regulus Therapeutics Inc., a biopharmaceutical company, and Exelixis, Inc., a drug discovery and development company that heco-founded in 1994.1994, and Regulus Therapeutics Inc., a biopharmaceutical company. Previously, he was an investment banker with Cowen & Co., LLC, a financial services company, focusing on the biotechnology and pharmaceutical sectors, from 2000 until his retirement as Vice Chairman in August 2006. Prior to joining Cowen & Co., Dr. Papadopoulos served for 13 years as an investment banker at PaineWebber, Inc., a financial services company, where he was most recently Chairman of PaineWebber Development Corp., a PaineWebber subsidiary focusing on biotechnology.
Qualifications
Having founded multiple life sciences companies and worked as an investment banker focused on the life sciences industry, Dr. Papadopoulos brings to our Board of Directors a firsthandfirst-hand understanding of the demands of establishing, growing and running life sciences businesses.
– Audit
– Finance
– Science and Technology
– BG Medicine, Inc.
– Exelixis, Inc. (Chair)
– Regulus Therapeutics Inc. (Chair)
– NoneBG Medicine, Inc.
Brian S. Posner
| ||||
| Director Since: 2008 Age: 57 Biogen Board Committees: – Finance (Chair) – Audit – Corporate Governance | |||
Experience
Mr. Posner, 55, has served as one of our directors since 2008. Mr. Posner has been a private investor since March 2008 and is the Presidentfounder and Managing Partner of Point Rider Group LLC, a boutique consulting and advisory services firm serving predominantly thethat provides customized solutions to senior executives and boards of financial, services industry,bio-pharmaceutical and other services-related companies, as well as institutionalstrategic investors seeking tothat make, direct and control investments in that industry.those sectors. From 2005 to March 2008 Mr. Posner served as the President, Chief Executive Officer andco-Chief Investment Officer of ClearBridge Advisors LLC, an asset management company and a wholly-owned subsidiary of Legg Mason. Prior to that, Mr. Posnerco-founded Hygrove Partners LLC, a private investment fund, in 2000 and served as its Managing Partner for five years. He served as a portfolio manager and an analyst at Fidelity Investments, a financial services company, from 1987 to 1996 and, from 1997 to 1999, at Warburg Pincus Asset Management/Credit Suisse Asset Management where he also served asco-Chief Investment Officer and Director of Research. Mr. Posner also serves as a director of AQR Funds, an investment fund, and Arch Capital Group Ltd., a specialty insurance and reinsurance provider.
Qualifications
Given his substantialWith more than 30 years of experience as a senior corporate executive, leading institutional investment managerprofessional and advisor,director on public company andnot-for-profit boards, Mr. Posner brings significant management and financial expertise, a professional investor’s perspective and significant management and financial expertise that are valuableextensive experience in areas of corporate governance to our Board of Directors as it oversees our strategy for enhancing stockholder value.
– Finance (Chair)Directors.
– Audit
– Corporate Governance
– Arch Capital Group Ltd.
– AQR Funds
–Bioverativ Inc. (Chair) Arch Capital Group Ltd.
– BG Medicine, Inc.
– River Park FundsBioverativ Inc. (Chair)
| |
| 3 | Board of Directors (continued) |
Eric K. Rowinsky, M.D.
| ||||
| Director Since: 2010 Age: 62 Biogen Board Committees: – Compensation and Management Development – Corporate Governance – Science and Technology | |||
Experience
Dr. Rowinsky 60, has served as one of our directors since 2010. He has served as President of RGenix, Inc., a privately-held life sciences company, since November 2015 and as its Executive Chairman since December 2015.2016. Since June 2016 Dr. Rowinsky has also been the Chief Scientific Officer of Clearpath Development Co., which rapidly advances development stage therapeutic assets topre-defined humanproof-of-concept milestones. From January 2012 to November 2015 Dr. Rowinsky was the Head of Research and Development and Chief Medical Officer of Stemline Therapeutics, Inc., a biotechnology company focusing on the discovery and development of therapeutics targeting cancer stem cells. Dr. Rowinsky is an Adjunct Professor of Medicine at New York University and has been an independent consultant since January 2010. Prior to that, he was the Chief MedicalExecutive Officer of Primrose Therapeutics, Inc., astart-up biotechnology company focusing on the development of therapeutics for polycystic kidney disease, from August 2010 until its acquisition in September 2011. From 2005 to December 2009 he served as the Chief Medical Officer and Executive Vice President of ImClone Systems Incorporated, a life sciences company. From 1996 to 2004 Dr. Rowinsky held several positions at the Cancer Therapy & Research Center’s Institute for Drug Development, including Director of the Institute and Director of Clinical Research. During that time, he held the SBC Endowed Chair for Early Drug Development and Clinical Professor of Medicine at the University of Texas Health Science Center
at San Antonio. From 1988 to 1996 Dr. Rowinsky was an Associate Professor of Oncology at the Johns Hopkins School of Medicine and on the staff of the Johns Hopkins Hospital. Dr. Rowinsky also serves as a director of Biophytis, a biotechnology company, and Fortress Biotech Inc. and Verastem, Inc., both biopharmaceutical companies.
Qualifications
Dr. Rowinsky has extensive research and drug development experience oncology expertise, and broad scientific and medical knowledge.
– Compensation and Management Development
– Corporate Governance
– Science and Technology
– Biophytis
– Fortress Biotech Inc.
– Navidea Biopharmaceuticals,Verastem, Inc.
– BIND Therapeutics, Inc.
– Navidea Biopharmaceuticals, Inc.
| |
| 3 | Board of Directors (continued) |
Lynn Schenk, J.D.
| ||||
| Director Since: 1995 Age: 74 Biogen Board Committees: – Risk (Chair) – Compensation and Management Development | |||
Experience
Ms. Schenk 72, served as a director of the Company from 1995 to 2003 during the period the Company was operated as IDEC Pharmaceuticals, and has served as a director since 2003 following IDEC’s merger with Biogen, Inc. Ms. Schenk is an attorney and consultant in private practice with extensive public policy and business experience. She is also a member of the Board of Overseers of the Scripps Research Institute, a director of the California High Speed Rail Authority Board and a trustee of the University of California San Diego Foundation. From 1999 to 2003 she served as Chief of Staff to the Governor of California, during which time she led the effort to create the Institutes for Science and Innovation at the University of California. She headed the State’s Executive Branch risk management team post 9/11 and during the California energy crisis. From 1993 to 1995 Ms. Schenk was a Member of the United States House of Representatives, representing San Diego, California and served on the House Energy & Commerce Committee with a special emphasis on biotechnology. From 1980 to 1983 she was the California Secretary of Business, Transportation and Housing, during which time she formed the California Commission on Industrial Innovation. Ms. Schenk is a member of the Board of Directors of Sempra Energy, an energy services and development company, and serves on the CompensationCorporate Governance Committee, the Executive Committee and is the Chair of the Environmental Health, Safety and Technology CommitteeCommittee. Ms. Schenk is also a
National Association of which she isCorporate Directors (NACD) Board Leadership Fellow, a member of the Chair.NACD Advisory Council on Risk Oversight and a Fellow of the UCLA Luskin School of Public Affairs. In 2017 Ms. Schenk was selected as an NACD Directorship 100 honoree.
Qualifications
Ms. Schenk’s strong public policy, government, legal and private sector experience provides vital insights to our Board of Directors about significant issues affecting the highly regulated life sciences industry. She brings public sector operations and management expertise to our Board of Directors. She has demonstrated her commitment to boardroom excellence by completing the National Association of Corporate Directors’ (NACD)NACD’s comprehensive program of study for corporate directors. She completed the NACD Cyber Risk Certificate course and earned the CERT Certificate in Cybersecurity Oversight, issued by the CERT Division of the Software Engineering Institute at Carnegie Mellon University. She supplements her skill sets through ongoing engagement with the director community and access to leading practices.
– Risk (Chair)
– Compensation and Management Development
– Sempra Energy
– None
| |
| 3 | Board of Directors (continued) |
Stephen A. Sherwin, M.D.
| ||||
| Director Since: 2010 Age: 70 Biogen Board Committees: – Finance – Risk – Science and Technology | |||
Experience
Dr. Sherwin, 68, has served as one of our directors since 2010. Dr. Sherwin currently divides his time between advisory work in the life sciences industry and patient care and teaching in his specialty of medical oncology. He is a Clinical Professor of Medicine at the University of California, San Francisco and a volunteer Attending Physician in Hematology-Oncology at the Zuckerberg San Francisco General Hospital. Dr. Sherwin also currently serves as a venture partner with Third Rock Ventures, LLC. Dr. SherwinHe previously served as the Chairman of Ceregene, Inc., a life sciences company that heco-founded, from 2001 until its acquisition by Sangamo Biosciences, Inc. in 2013. He was also aco-founder and chairman of Abgenix, Inc., an antibody company which was acquired by Amgen Inc. in 2006. From 1990 to October 2009 he served as the Chief Executive Officer of Cell Genesys, Inc., a life sciences company, and was its Chairman from 1994 until the company’s merger with BioSante Pharmaceuticals, Inc. (now ANI Pharmaceuticals, Inc.) in October 2009. Prior to that, he held various positions at Genentech, Inc., a life sciences company, most recently as Vice President, Clinical Research. In addition, Dr. Sherwin is a memberpreviously served on the board of directors of the BoardsBiotechnology Industry Organization from 2001 to 2014 and as its chairman from 2009 to 2011. Dr. Sherwin currently serves as a director of Directors ofAduro Biotech, Inc., Neon Therapeutics Inc. and Neurocrine Biosciences, Inc., Rigel Pharmaceuticals, Inc., and Aduro Biotech, Inc., all of which are clinical-stage life sciences companies. During the past five years, Dr. Sherwin also served as a director of BioSante Pharmaceuticals until its merger with ANI Pharmaceuticals, Inc. in September 2013, Vical Inc., and Verastem Inc.
Qualifications
Dr. Sherwin has extensive knowledge of the life sciences industry and brings more than 30 years of experience in senior leadership positions at large and small publicly traded life sciences companies to our Board of Directors.
– Finance
– Risk
– Science and Technology
– Aduro Biotech, Inc.
– Neon Therapeutics, Inc.
–Neurocrine Biosciences, Inc.
– Rigel Pharmaceuticals, Inc.*
* On February 22, 2017, Dr. Sherwin notified Rigel Pharmaceuticals, Inc. of his decision to not stand forre-election and to resign from the Board of Directors of Rigel Pharmaceuticals, Inc., effective May 11, 2017.
– BiosanteRigel Pharmaceuticals, Inc.
– Verastem, Inc.
– Vical, Inc.
– Verastem, Inc.
| |
Michel Vounatsos
| ||||
| Director Since: 2017 Age: 57 Biogen Board Committees: – None | |||
Experience
Mr. Vounatsos 55, has served as our Chief Executive Officer and one of our directors since January 2017. Prior to that, from April 2016 to December 2016,until his appointment as our Chief Executive Officer, he served as our Executive Vice President, Chief Commercial Officer. Prior to joining Biogen, Mr. Vounatsos spent 20 years at Merck & Co., Inc., a pharmaceutical company, where he most recently served as President, Primary Care, Customer Business Line.Line and Merck Customer Centricity. In this role, he led Merck’s global primary care business unit, a role which encompassed Merck’s cardiology-metabolic, general medicine, women’s health and biosimilars groups and developed and instituted a strategic framework for enhancing the company’s relationships with key constituents, including the most significant providers, payers and retailers and the world’s largest governments. Mr. Vounatsos previously held leadership positions across Europe and in China for Merck. Prior to that, Mr. Vounatsos held management positions at Ciba-Geigy.Ciba-Geigy, a pharmaceutical company. Mr. Vounatsos currently serves on the advisory board of Tsinghua University School of Pharmaceutical Sciences and as a member of the MIT Presidential CEO Advisory Board. Mr. Vounatsos received his C.S.C.T. certificate in Medicine from the Universite Victor Segalen, Bordeaux II, France, and his M.B.A. from the HEC School of Management in Paris.
Qualifications
Mr. Vounatsos has significant knowledge and experience with respect to the biotechnology, healthcare and pharmaceutical industries, a comprehensive global leadership background resulting from service as an executive in the pharmaceutical industry and studied medicine and business as part of his educational background.
Other Current Public Company Boards
– None
– None
– None
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTEFORTHE ELECTION OF EACH
DIRECTOR NOMINEE NAMED ABOVE.
| |
| 3 | Board of Directors (continued) |
Our Board of Directors met 1712 times in 2016.2018. Our Board of Directors also has six standing committees. The principal functions of each committee, the committee composition in 2016,2018 and number of meetings held in 20162018 are described in the table below. The Chair of each committee periodically reports to our Board of Directors on committee deliberations and decisions. Each committee’s charter is posted on our website,www.biogen.com, under the “Corporate Governance” subsection of the “Investors” section of the website. Also posted there are our Corporate Governance Principles, which, together with our committee charters, comprise our governance framework.
Committee | Function | 2018 Members | Meetings in | |||||
Audit | Assists our Board of Directors in its oversight of: • the integrity of our financial statements; • our accounting and financial reporting processes; • the independence, qualifications and performance of our independent registered public accounting firm; • our global tax compliance and tax audit processes; and • our internal audit and corporate compliance functions.
Our Audit Committee has the sole authority and direct responsibility for the appointment, compensation, retention, evaluation and oversight of the work of our independent registered public accounting firm. | Caroline D. Dorsa† (Chair) Nancy L. Stelios Papadopoulos Brian S. Posner† | 9 | |||||
Compensation and Management Development | Assists our Board of Directors with oversight of executive compensation and management development, including: • recommending to our Board of Directors the compensation for our Chief Executive Officer and approving the compensation for our other executive officers; • administration of our short- and long-term incentive plans; • reviewing executive and senior management development • recommending to our Board of Directors the compensation of ournon-employee directors. | Robert W. Pangia (Chair)
Richard C. Mulligan Eric K. Rowinsky Lynn Schenk | 9 | |||||
Corporate Governance | Assists our Board of Directors in assuring sound corporate governance practices and identifying qualified nominees to our Board of Directors and its committees. | Alexander J. Denner (Chair) Brian S. Posner Eric K. Rowinsky
| 11 | |||||
Finance | Assists our Board of Directors with oversight of our financial strategy, policies and practices. | Brian S. Posner (Chair) Alexander J. Denner Robert W. Pangia Stelios Papadopoulos Stephen A. Sherwin | 8 | |||||
Risk | Assists our Board of Directors with oversight of management’s exercise of its responsibility to assess and manage risks associated with our business and operations.
For more information on our Board oversight of risks, please see “Board Risk Oversight” below. | Lynn Schenk (Chair)
Caroline D. Dorsa Nancy L. Leaming Stephen A. Sherwin | 5 | |||||
Science and Technology | Assists our Board of Directors with oversight of our key strategic decisions involving research and development matters and our intellectual property portfolio. | Richard C. Mulligan (Chair) Stelios Papadopoulos Eric K. Rowinsky Stephen A. Sherwin | 8 | |||||
| † | Determined by our Board of Directors to be an audit committee financial expert. |
| • |
|
| Attendance at Board and Committee Meetings. No director attended fewer than 75% of the total number of meetings of our Board of Directors and the committees on which he or she served during |
| |
| • | Executive |
| • | Attendance at Stockholder |
| 20 | | |
| 3 | Board of Directors (continued) |
This section describes our compensation program for ournon-employee directors and shows the compensation paid to or earned by ournon-employee directors during 2016. George A. Scangos, Ph.D., our former Chief Executive Officer and a former member of our Board of Directors, received no compensation for his service on our Board during 2016.2018. Mr. Vounatsos, our current Chief Executive Officer, receives no compensation for his service on our Board of Directors.
Retainers, Meeting Fees and Expenses
The following table presents the annual retainers and meeting fees for allnon-employee members of our Board of Directors in effect in 2016:2018, which were unchanged from 2017:
| Retainers | Meeting Fees | Meeting Fees | ||||||||||||||||||
Annual Board Retainer | $ | 65,000 | Board of Directors Meetings (per meeting day): |
$
|
65,000
|
|
Board of Directors Meetings (per meeting day):
| |||||||||||||
Annual Retainers (in addition to Annual Board Retainer):
| In-person attendance
| $ | 2,500 |
In-person attendance
|
$
|
2,500
|
| |||||||||||||
Telephonic attendance | $ | 1,500 |
Telephonic attendance
|
$
|
1,500
|
| ||||||||||||||
Independent Chairman of the Board | $ | 50,000 | Committee Meetings (per meeting) | $ | 1,500 |
$
|
75,000
|
|
Committee Meetings (per meeting attended by each such committee member in person or telephonically)
|
$
|
1,500
|
| ||||||||
Audit Committee Chair | $ | 25,000 | Attendance at Annual Science and Technology Committee Portfolio Review (per day) |
$ |
1,500 |
|
$
|
25,000
|
|
Attendance at Annual Science and Technology Committee Portfolio Review (per day)
|
$
|
1,500
|
| |||||||
Compensation and Management | $ | 20,000 |
$
|
20,000
|
| |||||||||||||||
Corporate Governance Committee Chair | $ | 15,000 |
$
|
15,000
|
| |||||||||||||||
Finance Committee Chair | $ | 15,000 |
$
|
15,000
|
| |||||||||||||||
Risk Committee Chair | $ | 15,000 |
$
|
15,000
|
| |||||||||||||||
Science and Technology Committee Chair | $ | 15,000 |
$
|
15,000
|
| |||||||||||||||
Audit Committee Member (other than Chair) | $ | 5,000 | $
| 5,000
|
| |||||||||||||||
Ournon-employee directors are also eligible to be paid a fee of $1,000 for each full day of service to the Company other than in connection with meetings of our Board of Directors or one of its committees.
Ournon-employee directors may defer all or part of their cash compensation under our Voluntary Board of Directors Savings Plan, which is similar to our Supplemental Savings Plan described in the narrative preceding the 2016“2018Non-Qualified Deferred Compensation TableTable” in Part 5 – Executive Compensation Matters of this Proxy Statement, but without any Company matching contributions. If anon-employee directors choosedirector chooses to defer compensation under our Voluntary Board of Directors Savings Plan, theirhis or her notional accountsaccount under the plan will periodically be credited with amounts of deemed investment earnings as if theirthe deferred compensation was actually invested in the
notional investment(s) selected by the director or in a default investment if the director does not make a selection. These notional investment options include the mutual funds available under our 401(k) plan as well as a fixed rate option which earns a rate of return determined each year by the Company’s retirement committee. For 2018non-employee
director contributionsdeferrals notionally invested in the fixed rate option, in 2016, this rate of return was set at 5.50%5%. ContributionsDeferrals notionally invested in the fixed rate option continue to be credited with the rate of return that was in effect during the year of contribution.deferral.
Non-employee directors are also reimbursed for actual expenses incurred in attending meetings of our Board of Directors and any of its committees, as well as service to our Board of Directors or any of its committees that is unrelated to such meetings.
| |
Awards Under OurNon-Employee Directors Equity Plan
Ournon-employee directors receive awards under our 2006Non-Employee Directors Equity Plan (theNon-Employee Directors Equity Plan). TheNon-Employee Directors Equity Plan was initially approved by our stockholders at our 2006 Annual Meetingannual meeting of Stockholders.stockholders. In 2015 our stockholders approved an amendment to extend the term of the plan until June 10, 2025.
| 21 | | |
| 3 | Board of Directors (continued) |
General Provisions of theNon-Employee Directors Equity Plan
Non-employee directors receive an annual grantsaward under theNon-Employee Directors Equity Plan effective on the date of each annual meeting of stockholders (or a pro rata grantaward upon election other than at an annual meeting of stockholders). Under theNon-Employee Directors Equity Plan, a maximum of 17,500 shares of our common stock (or 30,000 shares for the independent Chairman of the Board) may be granted to anon-employee director pursuant to such annual grantsawards each calendar year. Annual grantsawards vest on theone-year anniversary of the date of grant or over a longer period determined in the discretion of our Compensation Committee.Board of Directors.
GrantsAwards tonon-employee directors are recommended by our CompensationC&MD Committee and approved by our Board of Directors, with the independent Chairman recused from discussion and voting upon his own awards.
Awards granted under theNon-Employee Directors Equity Plan are subject to accelerated vesting upon termination of a director’s service by reason of death, disability or retirement and upon a change in control (as such terms are defined in the plan)Non-Employee Directors Equity Plan). In addition,non-employee director awards will become fully vested upon an involuntary termination of a director’s service within two years following certain mergers or other corporate transactions, as defineddescribed in the plan.Non-Employee Directors Equity Plan.
GrantsAwards During 20162018
In June 2016,2018 our CompensationC&MD Committee recommended, and our Board of Directors approved, annual grants tonon-employee directorsawards with a grant date fair value of approximately $270,000 for eachnon-employee director and an additional annual award with a grant date fair value of approximately $135,000$175,000 for the independent Chairman. These amounts were consistent with those approved in 2015 andannual awards were below the limits set forth in the
Non-Employee Directors Equity Plan described above.above and were consistent with the awards made in 2017. The June 20162018 annual grantsawards were awardedmade in the form of restricted stock units (RSUs) vesting in full on the first anniversary of the grant date, generally subject to the director’s continued service.
Periodically we review our compensation program for ournon-employee directors in relation to those of the peer
group used for executive compensation purposes (as described below in our Compensation Discussion and Analysis) to assess its competitiveness and appropriateness. While the grant date fair values of the equity awards granted in 20162018 were above the median of our peer group, the annual cash retainer for ournon-employeedirectors was at or below the 25th percentile of that same peer group. Overall, the total compensation levels were market competitive. Our CompensationC&MD Committee and our Board of Directors believe that a somewhat heavier reliance onweighting towards equity awards than thatthe weighting of equity awards of our peer group companies is appropriate because it will further alignaligns the interests of ournon-employee directors with those of our stockholders.
Ournon-employee directors must usepre-established trading plans to sell shares of our common stock.stock from their personal accounts. Trading plans may only be entered into during an open trading window and when the director is not in possession of materialnon-public information about the Company. We require a waiting period following the establishment of a trading plan before any trades may be executed. Our policy is designed to provide safeguards that will allowwhile allowing ournon-employee directors to have an opportunity to realize the value intended by the Company in granting equity-based awards.
Non-Employee Director ShareStock Ownership Guidelines
We maintain the following sharestock ownership guidelines for ournon-employee directors:
Position |
| |
Independent Chairman | Number of shares equal in value to 5x the total annual cash retainer for (i) the independent Chairman position and (ii) othernon-employeeBoard members | |
Non-Employee Directors (excluding Chairman) | Number of shares equal in value to 5x the annual cash retainer fornon-employee Board members | |
| (1) | Eachnon-employee director has five years from the date of initial election or appointment to meet the |
| |
| 3 | Board of Directors (continued) |
20162018 Director Compensation
Name (a) | Fees (b) | Stock (c) | Change in Pension (d) | All Other (e) | Total (f) |
Fees Earned or Paid in Cash(1) (b) | Stock Awards(2) (c) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings(3) (d) | All Other Compensation(4) (e) | Total (f) | ||||||||||||||||||||||
Alexander J. Denner | $ | 173,500 | $ | 269,420 | — | — | $ | 442,920 |
$
|
139,000
|
|
$
|
269,447
|
|
—
|
$5,000
|
$
|
413,447
|
| |||||||||||||
Caroline D. Dorsa | $ | 170,000 | $ | 269,420 | — | — | $ | 439,420 |
$
|
143,000
|
|
$
|
269,447
|
|
—
|
—
|
$
|
412,447
|
| |||||||||||||
Nancy L. Leaming | $ | 127,500 | $ | 269,420 | — | — | $ | 396,920 |
$
|
120,500
|
|
$
|
269,447
|
|
—
|
$10,280
|
$
|
400,227
|
| |||||||||||||
Richard C. Mulligan | $ | 176,500 | $ | 269,420 | — | — | $ | 445,920 |
$
|
138,500
|
|
$
|
269,447
|
|
—
|
—
|
$
|
407,947
|
| |||||||||||||
Robert W. Pangia | $ | 153,000 | $ | 269,420 | $57,011 | — | $ | 479,431 |
$
|
140,500
|
|
$
|
269,447
|
|
$72,763
|
—
|
$
|
482,710
|
| |||||||||||||
Stelios Papadopoulos | $ | 213,500 | $ | 404,130 | — | $10,000 | $ | 627,630 |
$
|
144,500
|
|
$
|
443,976
|
|
—
|
$25,000
|
$
|
613,476
|
| |||||||||||||
Brian S. Posner | $ | 186,000 | $ | 269,420 | — | $25,000 | $ | 480,420 |
$
|
158,000
|
|
$
|
269,447
|
|
—
|
$25,000
|
$
|
452,447
|
| |||||||||||||
Eric K. Rowinsky | $ | 151,000 | $ | 269,420 | — | — | $ | 420,420 |
$
|
138,500
|
|
$
|
269,447
|
|
—
|
—
|
$
|
407,947
|
| |||||||||||||
Lynn Schenk | $ | 160,000 | $ | 269,420 | — | $25,000 | $ | 454,420 |
$
|
134,000
|
|
$
|
269,447
|
|
—
|
$25,000
|
$
|
428,447
|
| |||||||||||||
Stephen A. Sherwin | $ | 133,000 | $ | 269,420 | — | $25,000 | $ | 427,420 |
$ |
124,500 |
|
$ |
269,447 |
|
— |
$25,000 |
$ |
418,947 |
| |||||||||||||
Notes to the 20162018 Director Compensation Table
| (1) | Includes $1,500 of fees received by each director in 2018 for fees earned in 2017 and $3,000 of fees earned by each of Dr. Denner, Mr. Posner and Dr. Rowinsky in 2018 but which were paid in 2019. |
| (2) | The amounts in column (c) represent the grant date fair value of |
The amounts in column (d) represent earnings |
The amounts in column (e) represent the amount of matching contributions made in |
| |
| 3 | Board of Directors (continued) |
Director Equity Outstanding at 20162018 FiscalYear-End
The following table summarizes the equity awards that were outstanding as of December 31, 20162018, for each of thenon-employee directors serving during 2016.2018.
Option Awards(1)
|
Stock Awards(2)
| |||||||||||||||
| Option Awards(1) | Stock Awards(2) | |||||||||||||||
| Name | Number of Securities Underlying Unexercised Options | Number of Shares or Units of Stock That Have Not Vested |
Number of
|
Number of Shares or Units of Stock That Have Not Vested
| ||||||||||||
Alexander J. Denner | — | 1,060 |
—
|
880
| ||||||||||||
Caroline D. Dorsa | — | 1,060 |
—
|
880
| ||||||||||||
Nancy L. Leaming | — | 1,060 |
—
|
880
| ||||||||||||
Richard C. Mulligan | — | 1,060 |
—
|
880
| ||||||||||||
Robert W. Pangia | 17,125 | 1,060 |
6,114
|
880
| ||||||||||||
Stelios Papadopoulos | — | 1,590 |
—
|
1,450
| ||||||||||||
Brian S. Posner | — | 1,060 |
—
|
880
| ||||||||||||
Eric K. Rowinsky | — | 1,060 |
—
|
880
| ||||||||||||
Lynn Schenk | — | 1,060 |
—
|
880
| ||||||||||||
Stephen A. Sherwin | 12,000 | 1,060 |
12,278 |
880 | ||||||||||||
Notes to the Director Equity Outstanding at 20162018 FiscalYear-End Table
| (1) | All stock |
| (2) | Represents the number of RSUs |
Our Board of Directors believes that a fundamental part of risk management is understanding the risks that we face, monitoring these risks and adopting appropriate control and mitigation of these risks. As stated in our Corporate Governance Guidelines,Principles, our Board of Directors and its committees are responsible for “reviewing the Company’s significant risk exposures and steps taken by management to monitor and mitigate such exposure.” We also have a separate Risk Committee of our Board of Directors that assists our Board in its oversight of management’s exercise of its responsibility to assess and manage risk associated with the Company’s business and operations.
Our Board of Directors oversees the management of material risks facing the Company. Biogen is committed to fostering a company culture of risk-adjusted decision-making without constraining reasonable risk-taking and innovation, and ourinnovation. Our Board of Directors and its committee overseescommittees oversee our efforts to foster this culture.
Our Board of Directors regularly receives information about our material strategic, operational, financial and compliance risks and management’s response to, and mitigation of, such risks. In addition, our risk management systems, including our risk assessment processes, internal controlscontrol over financial reporting, compliance programs and internal and external auditing procedures, are designed to inform management and our Board of Directors about our material risks. As part of its risk oversight function, our Board of Directors and its committees review this framework, its operation and our strategies for generating long-term value for our stockholders to ensure that such strategies will not motivate management to take excessive risks.
Our Board of Directors also reviews enterprise risks and discusses them with our management, including issues relevant to our business, reputation and strategy, including intellectual property risk, pipeline and business development, pricing and patient access, legal and regulatory matters and manufacturing. In addition, our Board of Directors and its committees oversee elements of our culture. Management updates our C&MD Committee on our compensation practices and progress against strategies and objectives in the areas of management and leadership development and diversity as well as steps taken to address matters such as inappropriate workplace behavior, including harassment and retaliation. In addition, our Audit Committee is responsible for the oversight of our compliance program.
| 24 | | |
| 3 | Board of Directors (continued) |
In determining the allocation of risk oversight responsibilities, our Board of Directors and its committees generally oversee material risks within their identified areas of concern. Our Board of Directors and each committeeof its committees meet regularly with management to ensure that management is exercising its responsibility to identify relevant risks and is adequately assessing, monitoring and taking appropriate action to mitigate risk. WhenIn the event a committee receives a report from members of management on areas of material risk to the Company, the Chair of the relevant committee reports on the discussion to the full Board of Directors duringat the next Board of Directors meeting. This enables our Board of Directors and its committees to coordinate their oversight of risk and identify risk interrelationships.
| |
Our independent Chairman of the Board promotes effective communication and consideration of matters presenting significant risks to the Company through his role in developing our Board’sBoard of Directors’ meeting agendas, advising committee chairs, chairing meetings of the independent directors and facilitating communications between independent directors and our Chief Executive Officer.
A summary of the key areas of risk oversight responsibility of our Board of Directors and each of its committees is set forth below:
Board or Committee | Area of Risk Oversight | |||
Board | • Corporate and commercial strategy and execution, pricing and reimbursement, competition and other material | |||
Audit | • Financial, accounting, disclosure, corporate compliance, distributors, insurance, anti-bribery and anti-corruption matters and other risks reviewed in its oversight of the internal audit and corporate compliance | |||
Compensation and Management Development | • Workforce • | |||
Corporate Governance | • Corporate governance and board succession, director independence, potential conflicts of interest and related party transactions involving directors and executive | |||
Finance | • Financial, capital and credit | |||
Risk | • • • • Information technology, cybersecurity, environmental, health and sustainability and other material risks not allocated to our Board of Directors or another • Material government and other | |||
Science and Technology | • Research and development activities, clinical development and drug safety and intellectual | |||
The Compensation Discussion and Analysis (CD&A) section of this Proxy Statement describes our compensation policies, programs and practices for our named executive officers. Our goal-setting, performance assessment and compensation decision-making processes described in the CD&A generally apply to all employees. We offer a limited number of short-term cash incentive plans, with employees eligible for either our annual bonus plan or a sales incentive compensation plan; noplan. No employee is eligible to participate in more than one cash incentive plan at any time. Our annual bonus plan is consistently maintained for all participants globally, with the same Company performance goals, payout levels (as a percentage of target) and administrative provisions regardless of the participant’s job level, location or function in the Company. We also have a long-term incentive program that provides different forms of awards depending upon an employee’s level but is otherwise consistent throughout the Company.
| 25 | | |
| 3 | Board of Directors (continued) |
In the CD&A, we describe the risk-mitigation controls for our compensation programs, including the role of our Compensationprograms. These controls include C&MD Committee to review and approveapproval of the design, goals and payouts under our annual bonus plan and long-term incentive program and to each executive officer’s compensation.compensation (or, in the case of our Chief Executive Officer’s compensation, a recommendation of that compensation to our Board of Directors for its approval). In addition, we have reviewedreview the processes, controls and design of our sales incentive compensation plans.
The C&MD Committee, working with the independent compensation consultant, also conducts an annual assessment of potential risks related to our compensation policies, programs and practices. Among other factors, this risk assessment considers the form of compensation (i.e., award type, fixed versus variable and short-term versus long-term), pay alignment, performance measures and goals, payout maximums, vesting periods and C&MD Committee oversight and independence. This assessment is focused on (1) having an appropriate balance in our program structure to mitigate compensation-related risk with cash versus stock, short-term versus long-term measurement and financial versusnon-financial goals; and (2) policies and practices to mitigate compensation-related risk including recoupment of compensation, stock ownership guidelines, equity administration rules and insider-trading and hedging prohibitions.
Based on our assessment, we believe that, through a combination of risk-mitigating features and incentives guided by relevant market practices and Company-wide goals, our compensation policies, programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
| |
| 4 |
Proposal 2 – Ratification of the Selection of Our Independent Registered Public Accounting Firm
| ||||
Our Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit our consolidated financial statements. Our Audit Committee has selected PricewaterhouseCoopers LLP (PwC)PwC as our independent registered public accounting firm for the fiscal year ending December 31, 2017.2019. PwC has served as our independent registered public accounting firm since 2003.
In order to assure continuing auditor independence, our Audit Committee periodically considers whether there should be a rotation of the independent registered public accounting firm. Further, in conjunction with the rotation of the auditing firm’s lead engagement partner required by applicable SEC rules, our Audit Committee and its Chair has in the past been, and in the future will be, directly involved in the selection of PwC’s new lead engagement partner.
Our Audit Committee believes at this time that the continued retention of PwC to serve as our independent registered public accounting firm is in the best interest of Biogen and its stockholders.
Although stockholder approval of our Audit Committee’s selection of PwC is not required, our Board of Directors believes that it is a matter of good corporate practice to solicit stockholder ratification of this selection. If our stockholders do not ratify the selection of PwC as our independent registered public accounting firm, our Audit Committee will reconsider its selection. Even if the selection is ratified, our Audit Committee always has the ability to change the engagement of PwC if it considers that a change is in Biogen’s best interest. Representatives of PwC will participate in the Annual Meeting, have the opportunity to make a statement if they so desire and be available to respond to appropriate questions.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTEFOR THE RATIFICATION OF
THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2017.2019.
| |
| 4 | Audit Committee Matters (continued) |
The Audit Committee’s role is to act on behalf of our Board of Directors in the oversight of Biogen’s financial reporting, internal control and audit functions. The roles and responsibilities of the Audit Committee are set forth in the written charter adopted by our Board of Directors, which is posted on our website,www.biogen.com, under the “Governance”“Corporate Governance” subsection of the “About Us”“Investors” section of the site.website. Management has primary responsibility for the financial statements and the reporting process, including the systems of internal controls.control.
In fulfilling its oversight responsibilities, the Audit Committee, among other things:
In reliance on these reviews and discussions, the Audit Committee recommended to our Board of Directors that the audited consolidated financial statements be included in Biogen’s Annual Report on Form10-K for the fiscal year ended December 31, 20162018, for filing with the SEC.
The Audit Committee of our Board of Directors:
Caroline D. Dorsa (Chair)
Nancy L. Leaming
Stelios Papadopoulos
Brian S. Posner
| |
| 4 | Audit Committee Matters (continued) |
The following table shows fees for professional audit services billed to us by PwC for the audit of our annual consolidated financial statements for the years ended December 31, 20162018, and December 31, 2015,2017, and fees billed to us by PwC for other services provided during 20162018 and 2015:2017:
| Fees | 2016 | 2015 | ||||||||||||||
Fees (amounts in thousands) | 2018 | 2017 | ||||||||||||||
Audit fees | $ | 4,359,989 | $ | 4,717,996 | $ | 5,177.6 | $ | 5,036.3 | ||||||||
Audit-related fees | 2,661,994 | 406,442 | 302.0 | 281.2 | ||||||||||||
Tax fees* | 365,638 | 542,125 | 609.0 | 381.0 | ||||||||||||
All other fees | 7,110 | 13,547 | 322.1 | 7.1 | ||||||||||||
Total | $ | 7,394,731 | $ | 5,680,110 | $ | 6,410.7 | $ | 5,705.6 | ||||||||
| * | Includes tax compliance fees of |
Audit feesare fees for the audit of our 20162018 and 20152017 consolidated financial statements included in our Annual Reports on Form10-K, reviews of our condensed consolidated financial statements included in our Quarterly Reports on FormForm 10-Q, review of the consolidated financial
statements incorporated by reference into our outstanding registration statements and statutory audit fees in overseas jurisdictions.
Audit-related fees are fees that principally relate to assurance and related services that are also performed by our independent registered public accounting firm. More specifically, these services include audits of employee benefit plan information, accounting consultations, due diligence and audits in connection with business development activity, internal control reviews and attest services related to financial reporting that are not required by statute or regulation. The increase in fees in 2016 over 2015 was primarily due to audit-related services provided in relation to thespin-off of Bioverativ Inc. (Bioverativ), a wholly-owned subsidiary of the Company, as an independent publicly traded company on February 1, 2017.
Tax feesare fees for tax compliance and planning services. The increase in fees incurred in 2018 is driven by incremental support for international tax matters.
All other feesin 2018 include license$0.3 million related to consultation services with respect to supply chain optimization strategies for the development of new products and services. All other fees in 2018 and 2017 also includelicense fees for aweb-based accounting research tool, which totaled $7,110 and $7,470 in 2016 and 2015, respectively. All other fees in 2015 also include $6,077 of fees incurred for services provided in assessing the technical structure and format of reports submitted to government authorities to ensure compliance with applicable regulations.tool.
Policy onPre-Approval of Audit andNon-Audit Services
Our Audit Committee has the sole authority to approve the scope of the audit and any audit-related services as well as all audit fees and terms. Our Audit Committee mustpre-approve any audit andnon-audit services provided by our independent registered public accounting firm. Our Audit Committee will not approve the engagement of the independent registered public accounting firm to perform any services that the independent registered public accounting firm would be prohibited from providing under applicable securities laws, NASDAQNasdaq requirements or Public Company Accounting Oversight Board rules. In assessing whether to approve the use of our independent registered public accounting firm to provide permittednon-audit services, our Audit Committee tries to minimize relationships that could appear to impair the objectivity of our independent registered public accounting firm. Our Audit Committee will approve permittednon-audit services by our independent registered public accounting firm only when it will be more effective or economical to have such services provided by our independent registered public accounting firm than by another firm.
Our Audit Committee annually reviews andpre-approves the audit, audit-related, tax and other permissiblenon-audit services that can be provided by the independent registered public accounting firm. After the annual review, any proposed services exceedingpre-set levels or amounts, or additional services not previously approved requires separatepre-approval by our Audit Committee or the Chair of our Audit Committee. Anypre-approval decision made by the Chair of our Audit Committee is reported to our Audit Committee at the next regularly scheduled Audit Committee meeting. Our Chief AccountingFinancial Officer and our Chief FinancialAccounting Officer can approve up to an additional $50,000 in the aggregate per calendar year for categories of services that our Audit Committee (or the Chair through its delegated authority) haspre-approved.
All of the services provided by PwC during 20162018 and 20152017 werepre-approved in accordance with this policy, except for $6,077 of fees incurred in 2015 for technical compliance services described under the caption “All other fees”, which were subsequently ratified by our Audit Committee.policy.
| |
| 5 |
Proposal 3 – Advisory Vote on Executive Compensation
| ||||
Our Compensation Discussion and Analysis, which appears below, describes our executive compensation programs and the compensation decisions that our CompensationC&MD Committee and our Board of Directors made with respect to the 20162018 compensation of our named executive officers (listed in the Summary Compensation Table).officers. As required pursuant to Section 14A of the Securities Exchange Act, our Board of Directors is asking that stockholders cast anon-binding, advisory vote FOR the following resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
Our Board of Directors is asking that our stockholders support this proposal. Although the vote you are being asked to cast isnon-binding, we value the views of our stockholders, and our CompensationC&MD Committee and our Board of Directors will consider the outcome of the vote when making future compensation decisions for our named executive officers.
As we describe in our Compensation Discussion and Analysis, our executive compensation programs embody apay-for-performance philosophy that supports our business strategy and aligns the interests of our executives with those of our stockholders. In particular, our compensation programs reward financial, strategic and operational performance and the goals set for each performance categoryunder our plans support our short- and long-range plans. In addition, to discourage excessive risk taking, we maintain policies for sharestock ownership and our equity and annual bonus incentive plans have provisions providing for the recoupment of compensation, wecompensation. We also cap payments under our annual bonus plan and we generally require multi-year vesting ofperiods for long-term incentive awards.
We will hold anon-binding, advisory vote of our stockholders on the compensation of our named executive officers every year until the next required stockholder vote on the frequency of such advisory vote. The next stockholder vote on the frequency of such advisory vote is expected to be held at the 2023 annual meeting of stockholders.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE APPROVAL OF THE RESOLUTION SET FORTH ABOVE.
| |
| 5 | Executive Compensation Matters (continued) |
COMPENSATION DISCUSSION AND ANALYSIS
|
This Compensation Discussion and Analysis (CD&A) describes our compensation strategy, philosophy, policies and practices underlying our executive compensation programs for 2016.2018. It also provides information regarding the manner and context in which compensation was earned by and awarded to our 20162018 named executive officers listed below, whom we refer to collectively as “named executive officers” or “NEOs”.“NEOs.”
 |
| |||||||||||
 |
Executive Vice President, Chief | |||||||||||
 | Jeffrey D. Capello Executive Vice President | |||||||||||
| ||||||||||||
 |
Pharmaceutical Operations | |||||||||||
 | Michael Ehlers, M.D., Ph.D. Executive Vice President, Research and Development |
|
2018 Highlights
2016 Highlights
In 2016, we experienced solid performance acrossWe had a productive and successful 2018. We generated record revenues of $13.5 billion for the year, demonstrated resilience in our portfolio of multiple sclerosis and hemophilia therapies and received marketing approval of SPINRAZA. We also strengthened our research and development and leadership teams,MS business, continued a strong global launch for SPINRAZA, the first approved treatment for SMA, and made significant progress in buildingour biosimilars business.
We added six clinical programs across our strategic core and advancing our pipeline.emerging growth areas and had a strong year for business development.
We provided value to our stockholders through the return of approximately $1.0$4.4 billion in capital through share repurchases and we continued our leading efforts in environmental, sustainability and diversity matters.
Our executive compensation programs for 20162018 were similar to past years, remainingaligned with stockholder interests as compensation earned under these programs was closely-linked to the achievement of our corporate performance goals and aligned with stockholder interests.goals.
We achieved or exceeded the vast majority of ourthe corporate performance goals that we set inat the beginning of the year under our incentive compensation plans and, accordingly, the payouts under these plans for 20162018 were moderately above target payout amounts.levels.
| 31 | | |
| 5 | Executive Compensation Matters (continued) |
A brief summary of our 20162018 business, financial and executive compensation highlights follow:
are as follows:
Financial Performance
We had moderateThe following chart provides a summary of our financial growth in 2016 whenperformance for 2018 compared to our performance in 2015.2017:
A reconciliation of our GAAP tonon-GAAPNon-GAAP financial measures is provided in Appendix A to this Proxy Statement.
Total Stockholder Return
Ourone-, three- and five-year total stockholder return (TSR)* compared to our peer group and the Standard & Poor’s 500 (S&P 500) is set forth below.
| * | TSR is a measure of performance over time that combines changes in share price and dividends paid to show the total return to the stockholder expressed as an annualized percentage. |
Product and Pipeline Developments
The following provides a summary of our product and pipeline developments for 2018:
Product Developments
In March 2018 we and AbbVie Inc. announced the voluntary worldwide withdrawal of ZINBRYTA for relapsing MS (RMS).
In October 2018 we and Samsung Bioepis launched IMRALDI, an adalimumab biosimilar referencing HUMIRA, in Europe.
Applications for Marketing and Agency Actions
In October 2018 the FDA granted BIIB092, ananti-tau mAb, fast track designation for progressive supranuclear palsy (PSP).
In December 2018 Alkermes submitted a NDA to the FDA for the review of BIIB098 (diroximel fumarate). Alkermes is seeking approval of diroximel fumarate under the 505(b)(2) regulatory pathway. If approved, we intend to market diroximel fumarate under the brand name VUMERITY. This name has been conditionally accepted by the FDA and will be confirmed upon approval.
| |
| 5 | Executive Compensation Matters (continued) |
Clinical Trials
ProductMS and Pipeline DevelopmentsNeuroimmunology
Approvals
In September 2018 we completed enrollment of the U.S. FoodPhase 2b AFFINITY study evaluating opicinumab, anti-LINGO, as anadd-on therapy in MS patients who are adequately controlled on their anti-inflammatory disease-modifying therapy (DMT), versus the DMT alone.
In November 2018 we initiated the Phase 3b NOVA study evaluating the efficacy and Drug Administration (FDA)safety of extended interval dosing (every six weeks) for the treatment of spinal muscular atrophy (SMA)natalizumab compared to standard interval dosing in pediatricpatients with RMS and adult patients in the U.S.,enrolled the first approved treatment for this disease.patient in December 2018.
In December 2018 we dosed the treatmentfirst patient in a bioequivalence study to test whether exposure levels of relapsing forms of multiple sclerosis (MS) in the U.S. by the FDA and in the European Union (EU) by the European Medicines Agency (EMA).
Applications for Marketing and Agency Actions
Biologics license applications, new drug applications, and/or marketing authorization applications for product candidates were accepted by the FDA or the EMA:
Data Readouts
Leadership TeamNeuromuscular Disorders
At the core of what we do are our people and our leaders. As a result, our goal is to findtop-tier talent with the skills necessary to imagine and lead us into the future. We advanced this goal in 2016 with the addition of three key members to our leadership team.
| • | In September 2018 we enrolled the |
| Phase 1 study evaluating BIIB078 |
| • |
|
Alzheimer’s Disease and Dementia
In May 2018 we initiated a Phase 2 study of BIIB092 for Alzheimer’s disease.
In June 2018 we and our collaboration partner Eisai Co., Ltd. (Eisai) announced that elenbecestat, the oral BACE (beta amyloid cleaving enzyme) inhibitor, demonstrated an acceptable safety and tolerability profile in the Phase 2 study, and the results demonstrated a statistically significant difference in amyloid-beta levels in the brain measured byamyloid-PET (positron emission tomography). A numerical slowing of decline in functional clinical scales of a potentially clinically important difference was also observed, although this effect was not statistically significant.
In December 2017 we and our collaboration partner Eisai announced that the Phase 2 study of BAN2401, a monoclonal antibody that targets amyloid beta aggregates, an Eisai product candidate for the treatment of Alzheimer’s disease, did not meet the criteria for success based on a Bayesian analysis at 12 months as the primary endpoint in an856-patient Phase 2 clinical study, an endpoint that was designed to enable a potentially more rapid entry into Phase 3 development. In July 2018, based upon the final analysis of the data at 18 months, we and Eisai announced that the topline results from the Phase 2 study demonstrated a statistically significant slowing in clinical decline and reduction of amyloid beta accumulated in the brain. The study achieved statistical significance on key predefined endpoints evaluating efficacy at 18 months on slowing progression in Alzheimer’s Disease Composite Score (ADCOMS) and on reduction of amyloid accumulated in the brain as measured usingamyloid-PET.
In July 2018 we completed enrollment of ENGAGE and EMERGE, the Phase 3 studies of aducanumab. In March 2019 we and our collaboration partner Eisai announced that we were discontinuing the EMERGE and ENGAGE Phase 3 studies.
Movement Disorders
In January 2018 we dosed the first patient in the Phase 2 SPARK study of BIIB054,a-synuclein antibody, in Parkinson’s disease.
In September 2018 we completed enrollment of the Phase 2 PASSPORT study of BIIB092 for PSP.
Acute Neurology
In March 2018 we dosed the first patient in the Phase 2 OPUS study of natalizumab in drug-resistant focal epilepsy.
In September 2018 we enrolled the first patient in the Phase 3 CHARM study of BIIB093, glibenclamide IV, in large hemispheric infarction, a severe form of ischemic stroke.
| |
| 5 | Executive Compensation Matters (continued) |
Neurocognitive Disorders
|
In December 2018 we dosed the first patient in our Phase 2b study of BIIB104 (AMPA) in CIAS.
Pain
In March 2018 we initiated a Phase 1 study of BIIB095, a Nav 1.7 inhibitor for neuropathic pain.
In May 2018 we initiated a Phase 2 study of vixotrigine (BIIB074) in small fiber neuropathy.
Other
In September 2018 we dosed the first patient in the Phase 2b study of BG00011(STX-100) in idiopathic pulmonary fibrosis, a chronic irreversible and ultimately fatal disease characterized by a progressive decline in lung function.
Discontinued Programs
In February 2018 we announced that the Phase 2b dose-ranging ACTION study investigating natalizumab in individuals with acute ischemic stroke (AIS) did not meet its primary endpoint. Based on these results, we discontinued development of natalizumab in AIS. The results of the Phase 2b ACTION study do not impact the benefit-risk profile of natalizumab in approved indications, including MS.
In October 2018 we announced that we completed the Phase 2b study of vixotrigine (BIIB074) for the treatment of painful lumbosacral radiculopathy (PLSR). The study did not meet its primary or secondary efficacy endpoints and we discontinued development of vixotrigine for the treatment of PLSR. The safety data were consistent with the safety profile reported in previous studies.
HemophiliaSpin-offBusiness Development
In January 2018 we acquired BIIB100 from Karyopharm Therapeutics Inc. BIIB100 is a Phase 1 ready investigational oral compound for the treatment of certain neurological and neurodegenerative diseases, primarily in May 2016ALS. BIIB100 is a novel therapeutic candidate that works by inhibiting a protein known as XP01, with the goal of reducing inflammation and neurotoxicity, along with increasing neuroprotective responses.
In April 2018 we acquired BIIB104 from Pfizer Inc. BIIB104 is afirst-in-class, Phase 2b ready AMPA receptor potentiator for CIAS, representing our intentionfirst program in neurocognitive disorders. AMPA receptors mediate fast excitatory synaptic transmission in the central nervous system, a process which can be disrupted in a number of neurological and psychiatric diseases, including schizophrenia.
In June 2018 we closed a10-year exclusive agreement with Ionis to spin offdevelop novel ASO drug candidates for a broad range of neurological diseases (the 2018 Ionis Agreement). We have the option to license therapies arising out of the 2018 Ionis Agreement and will be responsible for the development and potential commercialization of such therapies.
In June 2018 we entered into an exclusive option agreement with TMS Co., Ltd. granting us the option to acquireTMS-007, a plasminogen activator with a novel mechanism of action associated with breaking down blood clots, which is in Phase 2 development in Japan, and backup compounds for the treatment of stroke.
In June 2018 we exercised our hemophilia business, Bioverativ,option under our joint venture agreement with Samsung BioLogics to increase our ownership percentage in Samsung Bioepis from approximately 5% to approximately 49.9%. The share purchase transaction was completed in November 2018.
In July 2018 we acquired BIIB110 (Phase 1a) andALG-802 (preclinical) from AliveGen Inc. BIIB110 andALG-802 represent novel ways of targeting the myostatin pathway. We initially plan to study BIIB110 in multiple neuromuscular indications, including SMA and ALS.
In December 2018 we exercised our option with Ionis and obtained a worldwide, exclusive, royalty-bearing license to develop and commercialize BIIB067, an investigational treatment for ALS with SOD1 mutations.
In December 2018 we entered into a collaborative research and license agreement with C4 Therapeutics (C4T) to investigate the use of C4T’s novel protein degradation platform to discover and develop potential new treatments for neurological diseases, such as an independent, publicly traded companyAlzheimer’s disease and completedParkinson’s disease. We will be responsible for thespin-off on February 1, 2017. development and potential commercialization of any therapies resulting from this collaboration.
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| 5 | Executive Compensation Matters (continued) |
Capital AllocationShare Repurchase Activity
In August 2018 our Board of Directors authorized a $5.0program to repurchase up to $3.5 billion of our common stock repurchase program and(2018 Share Repurchase Program). Our 2018 Share Repurchase Program does not have an expiration date. All share repurchases under our 2018 Share Repurchase Program will be retired.
We returned approximately $1.0$4.4 billion to stockholders in 2016.
Other Notable Achievements in the Workplace and Community
Awarded the 2018 International Prix Galien as Best Biotechnology Product for SPINRAZA. The prestigious honor marks the seventh Prix Galien for SPINRAZA, following country recognitions in the U.S., Germany, Italy, Belgium-Luxembourg, the Netherlands and the U.K. The International Prix Galien is given every two years by Prix Galien International Committee members in recognition of excellence in scientific innovation to improve human health.
Named the Biotechnology Industry Leader on the Dow Jones Sustainability World Index.
Recognized as a corporate sustainability leader with Gold Class and Industry Mover Sustainability Awards from RobecoSAM.
Continued commitment to operational carbon neutrality across our value chain since 2014.highlighted through the use of 100% renewable electricity globally.
Committed to reduce carbon emissions by a targeted amount approved by the Science Based Target Initiative, to align ourselves with the global operations from renewable sources, earning Biogen a Green Power Leadership Award fromgoal of limiting global temperature rise to under two degrees Celsius.
Earned CDP scores of A,A- and B in the Environmental Protection Agency.areas of Supplier Engagement, Climate Change and Water, respectively.
Earned a perfect score of 100% on the Human Rights Campaign’s Corporate Equality Index (a national benchmarking tool on corporate policies and practices pertinent to LGBTQ employees) for the fourthfifth consecutive year.
Continued commitment to diversity and inclusion. As of December 31, 2018, 44% of Director-level positions and above were held by women.
Over 3,0003,200 employees volunteered from 2728 countries in theduring our annual Care Deeply Day.
Engaged 29,000+50,000+ students inhands-on learning to inspire their passion for science since the inception of Biogen’s Community Labs.
Total Shareholder Return
20162018 Executive Compensation Programs andPay-for-Performance Alignment
We believe our executive compensation programs are effectively designed and have worked well to implement apay-for-performance culture that is aligned with the interests of our stockholders. In 2016,2018 our executive compensation programs consisted of base salary, short- and long-term incentives and other benefits.
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91% of our CEO’s and 84% of our other NEOs’ 20162018 target compensation was performance-based andat-risk.
| * | Reflects |
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| 5 | Executive Compensation Matters (continued) |
100% of our NEOs’ 2018 annual long-term incentive (LTI) grants were performance-based andat-risk.
 | • 60% earned based on achievement of three-year adjustedNon-GAAP diluted earnings per share (EPS) and • 40% earned based on achievement of adjustedNon-GAAP free cash flows and revenues over threeone-year performance periods • PSUs were introduced in 2018. For more information on our PSUs, please see “Long-Term Incentives – 2018 PSUs” below. • Earned based on stock price performance over one, two and three year |
Our 20162018 performance-based compensation payouts align with our commitment to strong performance.
In 2016, overall2018 we achievedexceeded the vast majority of the corporate performance goals that we set inat the beginning of the year for our incentive compensation plans. As a result, the payouts, as a percentage of target, for our 20162018 annual bonus plan 2016 granted cash-settledand the portions of our PSUs and MSUs that were eligible to be earned based on 2018 performance units, and 2016 granted market stock units were above target payout levels,amounts, as described in further detail below.
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20162018 Advisory Vote on Executive Compensation
| At our 2018 annual meeting of stockholders, we continued to receive strong support for our executive compensation programs with approximately 95% of the votes cast for approval of our annual“say-on-pay” proposal. Our C&MD Committee viewed this as positive support for our executive compensation programs and their alignment with long-term stockholder value creation and determined that the Company’s executive compensation programs have been effective in implementing the Company’s stated compensation philosophy and objectives. |
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Our C&MD Committee is committed to continually reviewing our executive compensation programs on a proactive basis to ensure the ongoing alignment of such programs with the interests of our stockholders. | ||
| In 2018 our C&MD Committee reviewed the external landscape, the results from our“say-on-pay” proposal at last year’s annual meeting of stockholders and the Company’s performance against the current compensation programs. Our C&MD Committee was satisfied that our existing compensation programs further ourpay-for-performance philosophy, but made certain enhancements to the design of our LTI program in 2018 to strengthen its focus on long-term performance and alignment with our stockholders’ interests. | ||
Specifically, under our 2016 Annual Meeting2018 LTI program, grants of Stockholders,PSUs replaced grants of cash-settled performance units (CSPUs), which we continuedhad granted in previous years. The key changes are as follows:
PSU awards are subject to receive supportthree-year cliff vesting as compared to annual ratable vesting over three years (1/3 per year) for our executive compensation programs with approximately 97%CSPU awards;
60% of PSU awards are earned over a three-year performance period based on the achievement of three-year cumulative performance goals for stock-settled PSU awards and 40% of PSU awards are earned over three annual performance periods based on the achievement of three sets of annual performance goals for cash-settled PSU awards as compared to 100% of CSPUs awards earned based upon one annual performance period for CSPU awards; and
60% of the votes castPSU awards will be settled in stock and 40% of the PSU awards will be settled in cash as compared to 100% cash settlement for approval of our annual“say-on-pay” proposal. Our Compensation Committee viewed this as very positive support for our executive compensation programs and their alignment with long-term stockholder value creation and noted that the Company’s executive compensation programs have been effective in implementing the Company’s stated compensation philosophy and objectives.CSPU awards.
Our Compensation Committee is committed to continually reviewing our executive compensation programs on a proactive basis to ensure the ongoing alignment of such programs with the interests of our stockholders.
In 2016, we reviewed the external landscape, the results from our“say-on-pay” proposal at last year’s Annual Meeting of Stockholders, and the results of our current compensation programs. Our Compensation Committee was satisfied that our existing compensation programs further ourpay-for-performance outcomes, and, accordingly, did not recommend any significant changes to our executive compensation programs for 2016.
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| 5 | Executive Compensation Matters (continued) |
For additional information on our PSU awards, please see “Long-Term Incentives – 2018 PSUs” below.
Role of our CompensationC&MD Committee
Our CompensationC&MD Committee, which is composed of four independent directors, oversees and administers our executive compensation programs. In making executive compensation decisions, our CompensationC&MD Committee considersreviews a variety of factors and data, most importantly our performance and individual executives’ performance, and takes into accountconsiders the totality of compensation that may be paid. In addition, our CompensationC&MD Committee administers our annual bonus plan and our 2008 Omnibus Equity Plan,equity plans, reviews business achievements relevant to payouts under our compensation levels,plans, makes recommendations to our Board of Directors with respect to compensation policies and practices as well as the compensation of our CEO and seeks to ensure that total compensation paid to our executive officers is fair, competitive and aligned with stockholder interests. Our CompensationC&MD Committee retains the right to hire outside advisors as needed to assist it in reviewing and revising our executive compensation programs.
The duties and responsibilities of our CompensationC&MD Committee are described on page 1820 and can be found in our CompensationC&MD Committee’s written charter adopted by our Board of Directors, which can be found on our website,www.biogen.com, under the “Governance”“Corporate Governance” subsection of the “About Us”“Investors” section of the site.website.
Role of the Independent Compensation Consultant
Our CompensationC&MD Committee believes that independent advice is important in developing Biogen’sand overseeing our executive compensation programs. Frederic W. Cook & Co., Inc. (FW Cook) is currently engagedserved as our CompensationC&MD Committee’s independent compensation consultant.consultant until June 2018 and advised our C&MD Committee regarding compensation decisions in 2018. FW Cook did not provide any other services to Biogen. Pearl Meyer & Partners LLC (Pearl Meyer) has served as our C&MD Committee’s independent compensation consultant since June 2018 and has advised our C&MD Committee regarding compensation decisions since that time. Pearl Meyer does not provide any other services to Biogen.Biogen and engages in other matters as needed and as directed solely by our C&MD Committee. References in this CD&A to our independent compensation consultant refer to FW Cook for the period during which it was engaged and to Pearl Meyer thereafter.
Reporting directly to our CompensationC&MD Committee, FW Cookour independent compensation consultant provides guidance on trends in CEO, executive andnon-employee director compensation, the development of specific executive compensation programs and the composition of the Company’s compensation peer group. Additionally, FW Cookour independent compensation consultant prepares a report on CEO pay that compares each element of compensation to that of CEOs in comparable positions at companies in our peer group. Using this and other similar information, our CompensationC&MD Committee recommends, and our Board of Directors approves, the elements and target levels of our CEO’s compensation. FW Cook also engages in other matters as needed and as directed solely by our Compensation Committee.
During 2016,2018 the Company paid FW Cook approximately $246,252and Pearl Meyer $123,275 and $47,666, respectively, in consulting fees directly related to these serv-
ices.services. Our CompensationC&MD Committee assessesassessed FW Cook’s independence annually and, in accordance with applicable SEC and NASDAQNasdaq rules, confirmed in December 20162017 that FW Cook’s work did not raise any conflicts of interest and that FW Cook remained independent under applicable rules. Our C&MD Committee assessed Pearl Meyer’s independence in connection with its engagement in June 2018 and, in accordance with applicable SEC and Nasdaq rules, confirmed in December 2018 that Pearl Meyer’s work did not raise any conflicts of interest and that Pearl Meyer remains independent under applicable rules.
Role of our CEO
Each year our CEO provides an assessment of the performance of each executive officer, other than himself, during the prior year and recommends to our CompensationC&MD Committee the compensation to be paid or awarded to each executive. Our CEO’s recommendations are based on numerous factors, including:
To understand the external market competitiveness of the compensation for our executive officers, our CEO and our CompensationC&MD Committee review a report analyzing publicly-available information and surveys prepared by our internal
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| 5 | Executive Compensation Matters (continued) |
compensation group and reviewed by FW Cook.our independent compensation consultant. The report compares the compensation of each executive officer, other than our CEO, relative to data for comparable positions at companies in our peer group, by compensation element (see(please see “External Market Competitiveness and Peer Group” below for further details). Our CompensationC&MD Committee considers all of the information presented, discusses the recommendations with our CEO and with FW Cook,our independent compensation consultant and applies its judgment to determine the elements of compensation and target compensation levels for each executive officer other than the CEO.
Our CEO also provides a self-assessment of his achievements for the prior year. Our CompensationC&MD Committee reviews and considers this in analyzing the CEO’s performance, and in recommending for approval by our Board of Directors, the compensation of our CEO. Our CEO does not participate in any deliberations regarding his own compensation.
Executive Compensation Philosophy and Objectives
Our executive compensation programs are designed to drive the creation of long-term stockholder value by delivering performance-based compensation that is competitive with our peer group in order to attract and retain extraordinary leaders who can perform at high levels and suc-
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ceedsucceed in a demanding business environment. We aim to achieve this by designing programs that are:
| • | Mission Focused and Business Driven. Our executive compensation programs support the relentless pursuit of delivering meaningful and innovative therapies to patients by providing our executives with incentives to achieve the near- and long-term objectives of our business. Substantially all of our executive incentive compensation programs are tied directly, and meaningfully, to Company performance. Our objective is to emphasize the importance of achieving short-term goals while building and sustaining a foundation for long-term success. |
| • | Competitively Advantageous. We benchmark our executive compensation programs against a peer group of biotechnology and pharmaceutical companies that we believe are representative of the companies we primarily compete with for talent, balanced with factors such as business scope and size, including |
enable us to recruit, retain and motivate our leadership team to achieve their best for Biogen and our stockholders. |
| • | Performance Differentiated. We believe strongly inpay-for-performance and endeavor to significantly differentiate rewards by delivering the highest rewards to our best performers and |
| • | Ownership Aligned. At Biogen, we believe every employee contributes to the success of the Company and, as such, every employee has a vested interest in the Company’s success. To reinforce this alignment with our stockholders, we strongly encourage stock ownership through our equity-based compensation programs. For members of our executive team, including our NEOs, who set and lead the future strategic direction of our Company, we ensure that a significant portion of their total pay opportunities are equity-based to maintain alignment between the interests of our executive officers and our stockholders. |
| • | Flexible. We are committed to providing flexible benefits designed to allow our diverse global workforce to have reward opportunities that meet their varied needs so that they are inspired to perform their very best on behalf of patients and stockholders each day. |
External Market Competitiveness and Peer Group
MarketWe consider market practices are one of our considerationsand trends when determining executive compensation levels and compensation program
designs at Biogen. We do not target a specific market percentile or simply replicate the market practice. Instead, we review external market practices as a reference point to assist us in providing programs designed to attract, retain and inspire extraordinary talent. Our CompensationC&MD Committee also uses a peer group to provide context for its executive compensation decision-making. Each year our independent compensation consultant reviews the external market landscape and evaluates the composition of our peer group for appropriateness.
Our CompensationC&MD Committee reviews the information provided from internal sources as well as the information provided by our independent compensation consultant to select our peer group based on comparable companies that approximate (1) our scope of business, including revenuerevenues and market capitalization, (2) our global geographical reach, (3) our research-based business with multiple marketed products and (4) a comparable pool of talent for which we compete.
The peer group for determining our February 20162018 compensation decisions primarily consisted of biotechnology and pharmaceutical
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| 5 | Executive Compensation Matters (continued) |
companies, as we compete with companies in both of these sectors for executive talent.
| Biotechnology Peers |
Alexion Pharmaceuticals, Inc. Amgen Inc. Celgene Corporation Gilead Sciences Inc. Vertex Pharmaceuticals International, Inc.
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| Pharmaceutical Peers |
AbbVie Inc. Allergan plc Bristol-Myers Squibb Company Eli Lilly and Company Merck & Co, Inc. Mylan N.V. Bausch Health Companies (f/k/a Valeant Pharmaceuticals |
For each of the companies in our peer group, where available, we analyze the company’s Compensation Discussion and Analysis and other data publicly filed during the prior year to identify the executives at such companies whose positions are comparable to those held by our executive officers. We then compile and analyze the data for each comparable position. Our competitive analysis includes the structure and design of the compensation programs as well as the targeted value of the compensation under these programs.
For our NEOsexecutive officers other than our CEO, we may supplement the data forfrom our peer group with published compensation surveys where appropriate. For 2016,2018, consistent with past
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years, we used theWillisTowersWatson U.S. CDB Pharmaceutical and Health Sciences Executive Compensation Database survey (which we refer to as the Willis Towers Watson survey). We chose thisthe Willis Towers Watson survey because of the number of companies in our peer group that participate in it, the number of positions reported by the survey that continue to be comparable to our executive positions and the high standards under which we understand the survey is conducted (including data collection and analysis methodologies). All of the companies in our peer group are represented in a special cross-section of the Willis Towers Watson survey focused on our peer group, other than Bausch Health Companies (formally known as Valeant Pharmaceuticals Incorporated whoIncorporated), which did not participate in the survey.
Our CompensationC&MD Committee determines the elements of compensation we provide to our executive officers. The elements of
our executive compensation programs and their objectives are as follows:
| Element | Objective(s) | |||||
Base Salary | • | Provides a fixed level of compensation that is competitive with the external market and reflects each executive’s contributions, experience, responsibilities and potential to contribute to our future success.
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Annual Bonus Plan | • | Aligns short-term compensation with the annual goals of the Company.
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| • | Motivates and rewards the achievement of annual Company and individual performance goals that support short- and long-term value creation.
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Long-term Incentives | • | Aligns executives’ interests with the long-term interests of our stockholders by linking the value of awards to increases in our stock price.
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| • | Motivates and rewards the achievement of stock price growth andpre-established
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| • | Promotes executive retention and stock ownership and focuses executives on enhancing long-term stockholder value.
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Benefits | • | Promotes health and wellness.
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| • | Provides financial protection in the event of disability or death.
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| • | Providestax-beneficial ways for executives to save towards their retirement and encourages savings through competitive matches to executives’ retirement savings.
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Our CompensationC&MD Committee determines the general mix of the elements of our executive compensation programs. It does not target a specific mix of value for the compensation elements within these programs in either the program design or pay decisions. Rather, our CompensationC&MD Committee reviews the pay mix of compensation elements to ensure an appropriate level of performance-based compensation is apportioned to the short-term and even more to the long-term to ensure alignment with our business goals and performance.
Additionally, our CompensationC&MD Committee believes the greater the leadership responsibilities, the greater the potential impact an individual will have on Biogen’s future strategic direction. Therefore, for our executive officers, including our NEOs, additional emphasis is placed on performance-based compensation, with a particular emphasis on long-term incentives.LTI.
The 2016 pay2018 compensation mix for Dr. ScangosMr. Vounatsos and our other NEOs was highly performance-based andat-risk; 91% of 20162018 compensation was performance-based for Dr. ScangosMr. Vounatsos and 84% of 20162018 compensation was
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| 5 | Executive Compensation Matters (continued) |
performance-based for our other full-year active NEOs, serving at the end of 2016, assuming target level achievement of applicable corporate performance goals and with long-term incentiveLTI awards measured at planned approximatetarget grant date values.
values, and excluding theone-time transition awards of RSUs granted to Dr. Ehlers, Ms. Alexander and Dr. McKenzie, as described in further detail below.
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Performance Goals and Target Setting Process
Early each year, our CompensationC&MD Committee reviews and establishes the pay levels of each element of total compensation for our executive officers. Total compensation is comprised of base salary, annual bonus and long-termLTI awards.
As part of this process, our C&MD Committee reviews the mix of compensation elements to ensure our performance-based compensation is apportioned appropriately and aligns with our business goals and performance. Our C&MD Committee also ensures that the performance metrics and goals are aligned with the annual business plan approved by our Board of Directors so there is full alignment of executive incentive awards. goals with the goals that have been established for the year. Executive officers are also evaluated based on qualitative factors, such as individual, strategic and leadership achievements. The use of both quantitative and qualitative metrics, as well as the weighting of such metrics, effectively mitigates the impact of a single risk, such as dependence on drug pricing, pipeline performance or market share, on overall compensation.
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| 5 | Executive Compensation Matters (continued) |
A summary of the process our CompensationC&MD Committee follows in setting compensation is described below:
|
• Our |
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• Reviews and discusses the performance of our
• Reviews and discusses the Company, team and individual performance of each executive officer, other than our CEO, as assessed by our CEO.
• Reviews and discusses our CEO’s recommended compensation levels for each executive officer, other than himself, in the context of such executive officer’s contributions to the Company and the other factors described above.
• Approves the final compensation for each
• Reviews CEO compensation and recommends to our Board of Directors for approval the compensation of our CEO, including base salary, annual bonus and | |||
• Our C&MD Committee and our CEO discuss potential goals for the upcoming year that are tied to the short- and longer-term strategic goals of the Company as well as individual goals for our executive officers. • The annual business plan for the year is approved by our Board of Directors. As part of the approval process, our Board considers many factors relevant to our business, reputation and strategy, including pipeline and business development, pricing and patient access, market expectations and intellectual property risk. • Our C&MD Committee ensures that the performance goals and targets under our compensation plans are aligned with the approved annual business plan. • Payout levels for each performance goal are established by management and approved by our C&MD Committee. • The performance goals are then applied to the compensation opportunities for our executive officers, including NEOs, so that there is full alignment of executive incentive • Our C&MD Committee also reviews base salaries, bonus and LTI planning ranges, plan designs, benefits and peer group data. |
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| 5 | Executive Compensation Matters (continued) |
2016 and 2017 Hiring- and Transition-Related Compensation Decisions
Arrangements with Mr. Vounatsos and Dr. Ehlers
In April 2016, we hired Mr. Vounatsos as our Executive Vice President, Chief Commercial Officer and, in May 2016, we hired Dr. Ehlers as our Executive Vice President, Research and Development. Mr. Vounatsos was appointed as our Chief Executive Officer effective in January 2017.
In determining annual and long-term compensation for Mr. Vounatsos and Dr. Ehlers, our Compensation Committee followed the same compensation philosophy and objectives described in this CD&A and also took into consideration the value of compensation that Mr. Vounatsos and Dr. Ehlers would have been eligible to earn had they remained employed by their prior employers. After considering the compensation opportunities that Mr. Vounatsos and Dr. Ehlers would be required to forfeit in order to join us, and in order to incentivize them to do so, our Compensation Committee granted Mr. Vounatsos aone-time cashsign-on bonus of $1,500,000, a long-term incentive award of Cash-Settled Performance Units (CSPUs) with a grant date fair value of $1,550,454, and a long-term incentive award of Market Stock Units (MSUs) with a grant date fair value of $1,600,745 and granted Dr. Ehlers aone-time cashsign-on bonus of $1,170,177, a long-term incentive award of CSPUs with a grant date fair value of $1,250,535, a long-term incentive award of MSUs with a grant date fair value of $1,289,903, and a long-term incentive award of RSUs with a grant date fair value of $870,212. These amounts represent a portion of the compensation that Mr. Vounatsos and Dr. Ehlers would have been eligible to receive had they remained employed with their prior employer as well as, for Dr. Ehlers, compensation that was recouped by Dr. Ehlers’ former employer in connection with his departure.
Mr. Vounatsos’one-time cashsign-on bonus is subject to recoupment by the Company as follows: 100% of his cashsign-on bonus is subject to recoupment if Mr. Vounatsos voluntarily resigns within the first two years of his employment; 50% of his cashsign-on bonus is subject to recoupment if Mr. Vounatsos voluntarily resigns within the third year of his employment; and 25% of his cashsign-on bonus is subject to recoupment if Mr. Vounatsos voluntarily resigns within the fourth year of his employment. Dr. Ehlers’one-time cash sign on bonus is subject to recoupment by the Company as follows: $300,000 of his cashsign-on bonus is subject to recoupment if Dr. Ehlers voluntarily
resigns within the first year of his employment and $150,000 of his cashsign-on bonus is subject to recoupment if Dr. Ehlers voluntarily resigns within the second year of his employment. The terms of the CSPUs and MSUs awards granted to Mr. Vounatsos and Dr. Ehlers are described below in the section entitled “Long-Term Incentives (LTI).” The RSUs granted to Dr. Ehlers vest ratably over three years, subject to Dr. Ehlers’ continued employment. The payments that Dr. Ehlers will be eligible to receive in connection with certain terminations of employment are described in further detail under the heading “Potential Payments Upon Termination or Change in Control” below.
In connection with Mr. Vounatsos’ appointment as Chief Executive Officer in January 2017, in December 2016 our Compensation Committee approved, as part of the employment agreement he entered into with us, an increase in his annual base salary to $1.1 million and a target bonus of 125% of his base salary under our annual bonus plan. In addition, on February 15, 2017, he received a long-term incentive award of CSPUs with a grant date fair value of $4,999,754 and a long-term incentive award of MSUs with a grant date fair value of $4,999,754. The payments that Mr. Vounatsos will be eligible to receive in connection with certain terminations of employment are described in further detail under the heading “Potential Payments Upon Termination or Change in Control” below. Our Compensation Committee approved these terms after reviewing peer group data provided by FW Cook.
Arrangement with Mr. Cox
Prior to Mr. Vounatsos’ hiring, Mr. Cox served as our interim Executive Vice President, Global Therapeutic Operations, while concurrently serving as our Executive Vice President, Pharmaceutical Operations and Technology. In recognition of the substantial additional responsibilities that Mr. Cox assumed, and his exceptional contributions to the Company, our Compensation Committee granted Mr. Cox aone-time special recognition award consisting of time-based RSUs having a grant date fair value of $2.2 million. These RSUs vest in three equal annual installments beginning on the first anniversary of the date of grant. In connection with the Bioverativspin-off, these RSUs were converted into RSUs for Bioverativ common stock and will continue to vest in accordance with the terms of his original grant. Our Compensation Committee believes thisone-time special recognition award was appropriate in light of Mr. Cox’s exceptional contributions to the Company
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and the additional responsibilities he assumed throughout the year, and that the value of the award was commensurate with such contributions and responsibilities.
Dr. Scangos’ Arrangements
On January 6, 2017, Dr. Scangos ceased to be our Chief Executive Officer (which was considered a termination without cause under his employment agreement) and the Company paid him the severance benefits payable under his employment agreement, consisting of a lump sum cash payment in the amount $7.2 million (two times his annual base salary and target annual bonus), provided him with up to nine months of executive-level outplacement services at our cost, and continuation of certain subsidized medical and dental benefits until the earlier of (1) January 8, 2019, (2) the date on which he becomes eligible to receive substantially comparable benefits through another employer, or (3) the date he is eligible for Medicare. In addition, pursuant to the terms of his employment agreement, all of his outstanding MSUs, CPSUs and stock options will continue to vest as if he had remained employed by the Company for the duration of the respective award’s vesting period and all awards that require exercise by him will remain exercisable until the earlier of January 7, 2020 or their expiration date.
In 2016, in determining Dr. Scangos’ base salary, ourOur Board of Directors reviewed the base salaries of comparable chief executive officers in our peer group and considered Dr. Scangos’ payMr. Vounatsos’ compensation mix, capabilities, performance and future expected contributions. Based on its review, Dr. Scangos’Mr. Vounatsos’ base salary was held constant as compared to 2015,set at $1,300,000, which positioned him at or aroundbelow the market median when compared to the chief executive officers of our peer group.
Our CompensationC&MD Committee undertook a similar review when approving the base salaries for Messrs. Clancy and Cox,our other NEOs, which positioned them, on average, slightly below the market median compared to persons with comparable jobs within our peer group.
The annual base salary of each of our NEOs in 20162018, compared to 20152017, was as follows:
Name
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2015 Salary
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2016 Salary
|
% Increase(1)
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G. Scangos | $ | 1,500,000 | $ | 1,500,000 | — | |||||||
M. Vounatsos(2) | n/a | $ | 750,000 | n/a | ||||||||
P. Clancy | $ | 722,933 | $ | 860,470 | 18.5% | |||||||
J. Cox | $ | 656,121 | $ | 702,049 | 7% | |||||||
M. Ehlers(2) | n/a | $ | 775,000 | n/a | ||||||||
| Name | 2018 Salary | 2017 Salary | % Increase(1) | |||||||||
M. Vounatsos | $ | 1,300,000 | $ | 1,100,000 | 18.2% | |||||||
J. Capello(2) | $ | 750,000 | $ | 750,000 | n/a | |||||||
M. Ehlers | $ | 834,094 | $ | 794,375 | 5.0% | |||||||
S. Alexander | $ | 749,177 | $ | 723,842 | 3.5% | |||||||
P. McKenzie | $ | 633,938 | $ | 603,750 | 5.0% | |||||||
| (1) | Percentage increase reflects the annual merit increase and, in the case of Mr. |
| (2) | Mr. |
20162018 Performance-Based Plans and Goal Setting
Our executive compensation programs place a heavy emphasis on performance-based rewards.compensation.
We maintain a short-term incentive plan, known as our annual bonus plan, as well as a long-term incentivean LTI plan.
Awards to our NEOs under our annual bonus plan arehave been made under our 2008 Performance-Based Management Incentive Plan, and awards under our long-term incentiveLTI plan are granted under our 20082017 Omnibus Equity Plan.
Awards made under our annual bonus plan are directly tied to the achievement of our corporate performance goals, which are aligned with the Company’s short- and long-term strategic plans. Our long-term incentivesplans, as well as individual performance goals.
Awards made under our LTI plan are directly tied to the performance of the price of our common stock, which alignaligns our executives’ long-term interests with the interests of our stockholders. SomeA portion of our long-term incentivesLTI awards are also tied to the Company’s financial performance, as described below.below under “Long-Term Incentives – 2018 PSUs.”
In setting our annual goals under our short- and long-term incentive plans, in addition to our internal forecasts, we consider analysts’ projections for our performance and the performance of companies in our peer group, as well as broad economic and industry trends. We strive to establish challenging targets that result in payouts at or above target levels only when Company performance warrants it. Our CompensationC&MD Committee is responsible for reviewing and approving our annual goals, targets and levels of payout (e.g., threshold, target and maximum) for our executive incentive compensation plans and for reviewing and determining actual performance results at the end of the applicable performance period.
In setting and approving the corporate performance goals for our executive officers and for the Company under both the short- and long-term incentive plans, our CompensationC&MD Committee also considers the alignment of such goals to our business plan, the degree of difficulty of attainment and the potential for the goals to encourage inappropriate risk-taking. Our CompensationC&MD Committee has determined that the structures of our executive compensation programs do not put our patients, investors or the Company at any material risk.
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Annual Bonus Plan
Our annual bonus plan is a cash incentive plan that rewards near-term financial, strategic and operational performance. Our CompensationC&MD Committee reviews ourthe annual target bonus opportunities for each executive officer by job levelposition each year to ensure they aresuch opportunities remain competitive.
Based on the results of an annual competitive market review, the target annual bonus opportunities for Dr. Scangos and Messrs. Clancy and Cox were below the median target amounts provided by companies in our peer group to persons with comparable jobs, due to our compensation programs placing a greater emphasis on long-term incentives. No significant changes were made in 20162018 to the target annual bonus opportunities, as a percentage ofyear-end annual base salary, for Dr. Scangosany of our NEOs other than Mr. Vounatsos, whose target annual bonus opportunity was market adjusted and Messrs. Clancy and Cox.increased from 125% of base salary in 2017 to 140% of base salary in 2018. In accordance with our policy, target annual bonus opportunities for Mr. Vounatsos and Dr. Ehlersall of our other NEOs in 20162018 were determined based on their positions as Executive Vice Presidents.
The target annual bonus opportunity as a percent ofyear-end base salary for each of our NEOs in 2016 was as follows:
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The target annual bonus opportunity as a percentage ofyear-end annual base salary each of our NEOs in 2018 compared to 2017 was as follows:
| Name | 2018 Target | 2017 Target | ||||||
M. Vounatsos | 140% | 125% | ||||||
J. Capello | 70% | 70% | ||||||
M. Ehlers | 70% | 70% | ||||||
S. Alexander | 70% | 70% | ||||||
P. McKenzie | 70% | 70% | ||||||
20162018 Annual Bonus Plan Design
Awards for our NEOs under our 20162018 annual bonus plan were based solely on the achievement of Company goals. Consistent with recent years, each NEO’sperformance goals and individual performance goals.
At the beginning of 2018, our C&MD Committee set multiple Company performance goals were identical to the Company goals, which we believe further reinforces the importance of working to achieve the Company’s goals as an integrated leadership team.
Our 2016for our 2018 annual bonus plan and provided for a payout multiplier, which we refer to as the Company Multiplier, ranging from 0% to 150%, for each Company goal based on the determination of the level of achievement of each goal and application of the weighting previously assigned to each goal, which determined the Company performance multiplierMultiplier applied to the bonus calculation. Because our 2016 annual bonus plan design provided that individual goals would be identical to Company goals, the individual performance multiplier applied to the bonus calculation is the same as the Company performance multiplier.
The Company performance multiplier and, correspondingly, the individual performance multiplier,Multiplier ranged from 0% to 150% as follows:
Performance Multipliers | Below Threshold | Threshold | Target | Max | Below Threshold | Threshold | Target | Max | ||||||||
Company | 0% | 50% | 100% | 150% | 0% | 50% | 100% | 150% | ||||||||
Individual | 0% | 50% | 100% | 150% | ||||||||||||
In addition, our 2018 annual bonus plan payouts were also based on an assessment of each NEO’s individual performance, taking into account his or her achievement of individual performance goals. Evaluating individual performance allows our C&MD Committee the discretion to increase or decrease each NEO’s bonus amount based on the NEO’s performance by applying an individual performance multiplier, ranging from 0% to 150%, which we refer to as the Individual Multiplier.
We determined the individual annual bonus payments for 20162018 using the following calculation:
Our 20162018 annual bonus plan provided that if the Company performance multiplierMultiplier was less than 50%, there would be no payout.payout, regardless of individual performance, further strengthening ourpay-for-performance philosophy. Further, because the individual performance multiplier was the same as
Individual Multiplier and the Company performance multiplier for 2016,Multiplier each have a maximum of 150%, the combined multiplier result for each NEO could not exceed 225%.
20162018 Company Performance Goals and Results
Company performance goals were established at the start of 20162018 with assigned weightings that reflected the Company’s focus on the following priorities:attaining both financial and strategic goals (pipeline performance, MS leadership, continued SMA launch excellence and enhancing our strategic alliances).
The goals and weightings we selected reflect the importance of linking reward opportunities to both near-term results and our progress in achieving longer-term goals.
The strategic goals we selected in 20162018 were designed to measure the achievement of our annual strategic priorities relating to our commercial opportunities and pipeline progress. Our financial performance goals were based on the Company’s annual operating plan and long-range plan approved by our Board of Directors and with reference to analyst consensus for Biogen revenuerevenues andnon-GAAPNon-GAAP earnings per share (EPS)diluted EPS based on the most current analyst reports at the time we set our targets.
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The following table presents our financial targets relative to analysts’ consensus for 2016:2018:
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2016
(1) Please see “2018 Annual Bonus Plan Company TargetPerformance Targets and Results Table” below for more details.
(2) Wall Street figures reflect estimates made in January 2018 for the Biogen fiscal year ending December 31, 2018.
(3) ReflectsNon-GAAP diluted EPS.
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| 5 | Executive Compensation Matters (continued) |
2018 Annual Bonus Plan Company Performance Targets and Results Table
Set forth below is a summary of the Company performance goals and weightings that our CompensationC&MD Committee established for our 20162018 annual bonus plan and the degree to which we attained these Company performance goals. As described below, the Company Multiplier for the 2018 Annual Bonus Plan was 131%, reflecting the strong performance multiplier was 110%. Because the individual performance multiplier was the same as the Company performance multiplier for 2016, the combined annual bonus multiplier for each NEO was 121%.relative to ourpre-established goals.
| Performance Range | ||||||||||||||||||||||||||||||||||||||||||||||||
| Performance Range | ||||||||||||||||||||||||||||||||||||||||||||||||
Company Goals
| Weight
| Threshold
| Target
| Max
| Results
| Payout
| Weight
| Threshold
| Target
| Max
| Results
| Company Multiplier
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FINANCIAL PERFORMANCE | ||||||||||||||||||||||||||||||||||||||||||||||||
EPS | 25 | % | $ | 17.62 | $ | 19.06 | $ | 20.50 | $ | 20.16 | (1) | 134.1 | % | |||||||||||||||||||||||||||||||||||
Revenue | 25 | % | $ | 10,760M | $ | 11,385M | (1) | $ | 12,010M | $ | 11,481M | (1) | 104.5 | % | ||||||||||||||||||||||||||||||||||
Revenues | 20 | % | $ | 12,310M | $ | 12,780M | $ | 13,250M | $ | 13,363M | (1) | 150.0 | % | |||||||||||||||||||||||||||||||||||
Non-GAAP diluted EPS | 20 | % | $ | 23.47 | $ | 24.74 | $ | 26.01 | $ | 26.89 | (1) | 150.0 | % | |||||||||||||||||||||||||||||||||||
MARKET PERFORMANCE | ||||||||||||||||||||||||||||||||||||||||||||||||
Achieve Global MS Market Share | 15 | % | | Specific market goals are not disclosed for competitive reasons |
| | Below Goal (2) | 70.0 | % | 15 | % | | Specific market goals are not disclosed for competitive reasons |
| | Below Goal(2) |
| 91.8 | % | |||||||||||||||||||||||||||||
Increase Global Hemophilia Units | 5 | % | | Specific market goals are not disclosed for competitive reasons |
| | Above Goal (2) | 150.0 | % | |||||||||||||||||||||||||||||||||||||||
MS Leader in Customer Trust and Value Survey | 10 | % | | Specific market goals are not disclosed for competitive reasons |
| | Above Goal(2) |
| 125.0 | % | ||||||||||||||||||||||||||||||||||||||
Achieve Global SMA Market Share | 10 | % | | Specific market goals are not disclosed for competitive reasons |
| | Above Goal(2) |
| 134.9 | % | ||||||||||||||||||||||||||||||||||||||
PIPELINE DEVELOPMENT | ||||||||||||||||||||||||||||||||||||||||||||||||
Build and Advance Total Pipeline | 20 | % | | Specific pipeline goals are not disclosed for competitive reasons | | | Above Goal (3) | 105.0 | % | 10 | % | | Specific pipeline goals are not disclosed for competitive reasons |
| | Above Goal(3) |
| 110.0 | % | |||||||||||||||||||||||||||||
Achieve Aducanumab Phase 3 Enrollment | 10 | % | | Specific enrollment goals are | | | Above Goal (4) | | 110.5 | % | 5 | % | | Specific enrollment goals are not disclosed for competitive reasons |
| | Above Goal(4) |
| 105.0 | % | ||||||||||||||||||||||||||||
Weighted Company Performance Multiplier |
| 110.0 | %* | |||||||||||||||||||||||||||||||||||||||||||||
COLLABORATION | ||||||||||||||||||||||||||||||||||||||||||||||||
Improve and Expand Key Strategic Alliances | 10 | % | | Specific strategic alliance goals are not disclosed for competitive reasons | | | Above Goal(5) |
| 150.0 | % | ||||||||||||||||||||||||||||||||||||||
Company Multiplier | Company Multiplier |
| 131.0 | %* | ||||||||||||||||||||||||||||||||||||||||||||
| * | Numbers may not recalculate due to rounding. |
Notes to 20162018 Annual Bonus Plan Company Performance Targets and Results Table
| (1) | These financial measures were based on our publicly reported revenues of |
| (2) | Achievement of market goals for MS was below goal and |
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| (3) | The Company continued to expand andre-shape its pipeline ofpre-clinical and clinical stage programs through the advancement of internal programs, |
| (4) | Aducanumab Phase 3 clinical trial patient enrollment was above goal. Specific details are not disclosed for competitive reasons. |
| (5) | Key strategic alliance and acquisition activities were above goal. Specific details are not disclosed for competitive reasons. |
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| 5 | Executive Compensation Matters (continued) |
2018 Individual Performance Goals and Results
The Individual Multiplier reflects each named executive officer’s overall individual performance rating as part of our performance assessment process. Unlike our formulaic calculation of corporate performance against Company performance goals in determining the Company Multiplier, each named executive officer’s Individual Multiplier is based on a subjective evaluation of his or her overall performance and consideration of the achievement of individual goals established at the beginning of the year. Goals may be both quantitative and qualitative. For 2018 Mr. Vounatsos recommended to our C&MD Committee an Individual Multiplier for each named executive officer other than himself based on his assessment of their individual contributions for the full year. Our C&MD Committee considered all of the information presented, discussed our CEO’s recommendations with him and its independent compensation consultant and applied its judgment to determine the Individual Multiplier for each named executive officer. Our Board of Directors determined Mr. Vounatsos’ Individual Multiplier based on its assessment of his performance.
In its evaluation, our C&MD Committee assigned Individual Multipliers to our named executive officers of between 115% and 140% based on the following accomplishments during 2018:
Michel Vounatsos
Jeffrey D. Capello
Michael Ehlers
Susan H. Alexander
Paul F. McKenzie
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| 5 | Executive Compensation Matters (continued) |
In addition, our C&MD Committee reviews on a qualitative basis each named executive officer’s other contributions to the Company and our business, leadership competencies and relative performance among our named executive officers.
2018 Annual Bonus Plan Awards
Our CompensationC&MD Committee determined that the final bonus awards under our 20162018 annual bonus plan were as follows:
| Name | Year-end Salary (A) x | Target Bonus % (B) x | Overall (C) = | Bonus (D) | ||||||||||||
G. Scangos | $ | 1,500,000 | 140 | % | 121 | % | $ | 2,541,000 | ||||||||
M. Vounatsos(1) | $ | 750,000 | 70 | % | 121 | % | $ | 447,799 | ||||||||
P. Clancy | $ | 860,470 | 70 | % | 121 | % | $ | 728,818 | ||||||||
J. Cox(2) | $ | 702,049 | 70 | % | 121 | % | $ | 594,636 | ||||||||
M. Ehlers(1) | $ | 775,000 | 70 | % | 121 | % | $ | 425,062 | ||||||||
Notes to the 2016 Annual Bonus Plan Awards Table
| Name | Year-end Salary (A) x | Target Bonus% (B) x | Company Multiplier (C) x | Individual Multiplier (D) = | Bonus Award (E) | |||||||||||||||
M. Vounatsos | $ | 1,300,000 | 140 | % | 131 | % | 140 | % | $ | 3,337,880 | ||||||||||
J. Capello | $ | 750,000 | 70 | % | 131 | % | 115 | % | $ | 790,913 | ||||||||||
M. Ehlers | $ | 834,094 | 70 | % | 131 | % | 120 | % | $ | 917,837 | ||||||||||
S. Alexander | $ | 749,177 | 70 | % | 131 | % | 125 | % | $ | 858,744 | ||||||||||
P. McKenzie | $ | 633,938 | 70 | % | 131 | % | 135 | % | $ | 784,784 | ||||||||||
| Terms | Performance Stock Units (PSUs) | Market Share Units (MSUs) | ||||
Proportion of Annual Target Value | 50% | 50% | ||||
| Settlement | 60% stock settled | 40% cash settled | 100% stock settled | |||
| Performance Period(s) | 3 years (2018-2020) | 1 year (each of 2018, 2019, 2020) | 1 year, 2 years, 3 years (from grant date) | |||
Metrics and Weighting | AdjustedNon-GAAP diluted EPS: 30%
Pipeline Milestone Performance: 30% | Adjusted Free Cash Flow: 28%
Revenues: 12% | Stock Price: 100% | |||
Threshold / Maximum Payout (% of Target Award) | 50% / 200% | 50% / 200% | 50% / 200% | |||
| Vesting | 3-year Cliff Vesting | 3-year Cliff Vesting | Annual Ratable Vesting over 3 years (1/3 per year) | |||
All annual LTI awards granted to our executives are performance-based and are designed to reward long-term Company performance.
Our executive annual LTI program consists primarilyfor 2018 consisted of CSPUsPSUs and MSUs, with the annual LTI total target grant value of awards being split evenly between PSUs and MSUs. The CSPUsPSUs we grantawarded to executive officers are performance-based RSUs that may beare settled, as applicable, in cash or, at the discretion of our Compensation Committee,and shares of our common stock. The MSUs we awarded to executive officers are performance-based RSUs that are settled in shares of our common stock. The performance conditions applicable to CSPUsthese PSUs and MSUs are described in further detail below. As used in this Proxy Statement, references to RSUs include CSPUs and MSUs. The
Our annual LTI awards are equally weighted between CSPUs and MSUs, based on grant date values.
We also generally grant time-based RSUs in lieu of CSPUs at the time an executive is hired if employment commences after June 30th, as the performance period for CSPUs would be substantially in progress as of such time, and from time to time we grant time-based RSUs in connection with new hires or to recognize extraordinary contributions to the Company, as we did for Dr. Ehlers and Mr. Cox in 2016.
Our LTI planning range is reviewed each year. Our LTItarget grant values are differentiated based on an executive’s individual performance, potential future contributions and
market competitiveness, as well as other factors. In determining the annual LTI planning range,target grant value, our CompensationC&MD Committee reviews our LTI planning ranges against target LTI awards of our peer group and also reviews the overall total compensation of our executive officers against our peer group due to ourgroup. In general, we have a heavier weighting in executive paycompensation mix towards LTI awards. No changes to our LTI planning range were made in 2016 as the current range positions us competitively against our peer group and allows for individual LTI award differentiation. On average, annual LTI target grant values for our NEOs (excluding NEOs who joined in 2016 after the annual awards were granted) position their overalltotal compensation at or around the median values of our peer group in cases where there are comparable positions at the peer companies.
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| 5 | Executive Compensation Matters (continued) |
We have an established annual LTI grant practice where LTI grants are made following the completion of our internal performance reviews of our executive officers as well as our external market review of equity practices of our peer group, including the data from the Willis Towers Watson survey described above. Since 2004 we have made our annual LTI grants in February of each year following our annual earnings release. Other
We generally grant time-based RSUs in lieu of PSUs at the time an executive is hired if employment commences after June 30th. These grants such as those made in connection with a new hire, are generally granted on the first trading day of the month following the date of hire. From time to time, we also grant time-based RSUs to recognize extraordinary contributions to the Company or for transition or retention purposes.
In 2016,2018 the planned and approvedannual LTI target grant date values for our NEOs were as follows:
| Name | Annual LTI
| |||||||
| ||||||||
M. Vounatsos | $11,500,000 | |||||||
J. Capello(1) | n/a | |||||||
| ||||||||
| $ 3,750,000 | |||||||
| ||||||||
P. McKenzie(2) | $ 3,000,000 | |||||||
Notes to the 20162018 Annual Long-Term IncentivesLTI Awards Table
| (1) | In lieu of a 2018 annual LTI award, Mr. Capello received a new hire grant in January 2018, which consisted of PSUs and MSUs with an aggregate grant date target value of $3.0 million. The initial determination of these awards took into account the Company’s peer group data. |
| (2) | In addition to the annual LTI |
The actual value that will be realized from the CSPUsPSU awards depends on the degree of achievement of performance goals, with 60% of the PSUs (based on the grant date target value) settled in shares of our 2016 revenue, adjusted free cash flow,common stock based upon achievement of cumulative three-year financial and pipeline metrics and the30-day average closing stock price on each remaining 40% of the dates they vest.
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PSUs settled in cash based upon the achievement of two annual financial metrics that are determined at the beginning of each relevant year. The actual value that will be realized from the MSUsMSU awards depends on our30-day average common stock price growth between the grant date and each of the dates theysuch awards vest. Our common stock price is influenced by the Company’s performance as well as external market factors.
2016 CSPUs2018 PSUs
CSPUsPSUs comprised 50% of our executives’ target LTI for 2018. PSUs are performance-based RSUs that have three-year cliff vesting in furtherance of the Company’s long-termpay-for-performance philosophy and to encourage employee retention. PSUs align executive compensation to Company goals through performance against a combination of financial and pipeline milestone performance metrics. The actual value (if any) of PSUs will not be realized by the NEOs until the three-year period ends and then only if the applicable performance goals are subject toachieved.
For our 2018 PSU awards, 60% of the PSUs (based on the grant date target value) will be settled in shares of our common stock based on achievement of financial and pipeline performance goals over aone-year three-year performance period and three-year service-based vesting. Our 2016 CSPU awards are eligible to vest upon(the 2018 Stock-Settled PSUs). The remaining 40% of the PSUs will be settled in cash based on the achievement of an equal weightingthree sets of revenueone-year financial goals (the 2018 Cash-Settled PSUs) and adjusted free cash flow results when comparedcontinued employment through the vesting date. Our 2018 PSU awards are scheduled topre-established goals set vest in February 2021.
For our 2018 PSU awards, the number of PSUs earned at the startend of the three-year performance period will be determined as follows:
In designing our 2018 PSU LTI program, our C&MD Committee acknowledged the need to balance driving long-term performance and investing for the future with achieving key milestones along the way. Cash payments are primarily aligned with and reward more recent performance, while equity awards encourage our executives to continue to deliver results over a longer period of time and also serve as a retention tool. Accordingly, our C&MD Committee determined that moving compensation for our executive officers further away from cash and towards equity awards with longer-term goals would further align their interests with those of Biogen’s stockholders in creating long-term stockholder value.
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| 5 | Executive Compensation Matters (continued) |
2018 PSU Awards Table
Set forth below is a summary of the performance periodmetrics and weightings that our C&MD Committee established for our 2018 PSU awards and the degree to which we achieved the performance goals for the 2018 tranche of the 2018 Cash-Settled PSUs. Based on the results outlined in the table below, the multiplier for the 2018 tranche of the 2018 Cash-Settled PSUs was 192%.
| Percentage of PSU Award | Percentage of PSU Target | Performance Metrics | Performance Metrics Weight | Performance Period | Target Performance | Actual Performance | ||||||||||
Stock- Settled: 60% | 60% / 30% | Adjusted Non-GAAP diluted EPS Pipeline Milestone Performance | 30% 30% | 2018-2020 2018-2020 | Specific goals are not disclosed for competitive reasons | |||||||||||
Cash- Settled: 40% | 40% / 20% | Adjusted Free Cash Flows Revenues | 28% 12% | 2018 2019 2020 2018 2019 2020 | $ 2.9B Target set at beginning of 2019 Target set at beginning of 2020 $ 12.8B Target set at beginning of 2019 Target set at beginning of 2020 | $ 4.0B(1) TBD TBD $ 13.4B(2) TBD | ||||||||||
Notes to the 2018 PSU Awards Table
| (1) | This financial measure was based on ourNon-GAAP free cash flows, as adjusted to add back $256 million to reflect the cash impact of additional research and development expense recognized in 2018 resulting from the 2018 Ionis Agreement, $16 million to neutralize the unfavorable cash impact of the worldwide withdrawal of ZINBRYTA and $33 million related to higher than originally contemplated stock repurchases in 2018, partially offset by the subtraction of $235 million to reflect tax payments made in connection with tax reform, as these charges were not originally contemplated at the time these performance goals were determined. |
| (2) | This financial measure was based on our publicly reported revenues of $13.5 billion, as adjusted to neutralize the effects of foreign exchange rate fluctuations. |
The 2018 Stock-Settled PSUs metrics were approved by our Compensation Committee.C&MD Committee with equal weighting assigned to each metric. The two metrics selected were the achievement of a cumulative three-year adjustedNon-GAAP diluted EPS and pipeline milestone performance, in each case, for the three-year period of 2018 through 2020.
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The 2018 Cash-Settled PSUs financial metrics are adjusted free cash flow measure, similar to past years,flows and revenues. At the beginning of each year during the performance period for our 2018 PSU awards,
our C&MD Committee will approve the targets for each of these financial metrics for such year. Our C&MD Committee decided that because of the nature of our Compensationbusiness, in which operating metrics can potentially be impacted positively or negatively by events outside of the control of executives, the design of the PSU program would be based, in part, on the use of threeone-year financial goals.
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| 5 | Executive Compensation Matters (continued) |
In order to further motivate our executives to workdrive the organization toward the achievement of these goals, we provide for a maximum payout (200%). CSPUs are subject to service-based vesting, withone-thirdof CSPUs vesting on each200% for our 2018 PSU awards. Participants may ultimately earn between 0% and 200% of the first three anniversariestarget number of PSUs granted based on the grant date,degree of actual performance goal achievement, generally subject to continued service with the Company.
2016 Cash-Settled Performance Units Company Target and Results Table2018 MSUs
The final CSPU performance multiplier was determined by our Compensation Committee and applied to the target units granted to determine the actual units earned and eligible to vest. The following chart shows thepre-established corporate performance goals and the actual results that determined the final CSPU Multiplier for 2016:
| Company Goals (1) | Weight % | Target Performance Range | Payout | |||||||||||
| Threshold | Target | Max | Results | |||||||||||
Revenue | 50% | $10,760M | $11,385M | $12,343M | $11,481M | 104.5% | ||||||||
Adjusted Free Cash Flow | 50% | $3,341M | $3,656M | $4,139M | $3,906M | 136.5% | ||||||||
Weighted CSPU Performance Multiplier | 120.0%* | |||||||||||||
Notes to 2016 Cash-Settled Performance Units Company Targets and Results Table
(1) See Notes to 2016 Annual Bonus Plan Company Targets and Results Table above for definitions and adjustments related to revenue goals and results. Adjusted free cash flow was decreased to reflect the delay in Swiss large scale manufacturing capital spending.
The 2016 CSPUs are also subject to stock price performance, in that the value actually received in respect of CSPUs is dependent on the performanceMSUs comprised 50% of our common stock, and service-based vesting over three years from the grant date, in furtherance of the Company’s long-termpay-for-performance philosophy and to encourage employee retention. Once vested, the CSPUs are generally converted into and settled in cash, based on the30-day average closing price of our common stock prior to and including the date on which they vest, except that, with respect to grants to the executive officers, our Compensation Committee may settle such grants in shares of our common stock or in cash at its discretion.
CSPU Illustration:
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2016 MSUs
executives’ target LTI for 2018. MSUs are performance-based RSUs that are earned based on the growth of our common stock price performance from the date of grant to each of the three annual vesting dates. On each vesting date, the performance multiplier is derived based on the stock price growth measured from the grant date to each of the three annualsuch vesting datesdate using the average closing stock price for the 30 calendar days prior tofollowing and including the grant date and each30 calendar days prior to and including such vesting date. The performance multiplierdate for MSUs granted prior to 2014 continues to be calculated using a60-day average closingin 2018.
Participants may ultimately earn between 0% and 200% of the target number of MSUs awarded based on actual stock price and vesting occurs over four annual installments.
performance. The maximum payout percentage of MSUs granted in 20162018 is 200% of the target grant, consistent with the 2016 CSPUs.those granted in 2017 (200%). Once the performance multiplier is determined, it is applied to the target number of unitsMSUs granted to each executive and can increase or decrease the overall number of MSUs earned based on stock price performance. For grants made prior to 2014, the maximum payout continues to be 150%.
Below Threshold | Threshold | Target | Max | |||||||||||||
Stock Price Growth | < -50% | -50% | | 0% (no change) |
| +100% | ||||||||||
Performance Multiplier | 0% | �� | 50% | 100% | 200% | |||||||||||
MSU Illustration:Illustration
The three-year service vesting period ties executive compensation even more directly to our common stock price performance, as both the MSUs earned and the value actually received in respect of MSUs isare dependent on the performance of our common stock.stock over the vesting period. On each vesting date, the earned MSUs are settled in shares of our common stock.
The following table shows the vesting date, performance period and performance multiplier applied for MSUs vesting in 20162018 and 2017:2019:
| Grant Date | Vesting Date | Performance Period | Performance Multiplier | |||||||||||
2/ | 2/ | 1 year | ||||||||||||
2/ | 2/ | 2 years | ||||||||||||
| 2/ | 1 year | |||||||||||||
2/ | 2/ | 3 years | ||||||||||||
| 2/ | 2 years | |||||||||||||
2018One-Time Transition Awards
As part of our 2018 LTI program change and transition plan, our C&MD Committee decided to grantone-time transition awards in the form of time-based RSUs in February 2018 to certain executive officers, excluding Messrs. Vounatsos and Capello, which vest over atwo-year period, with 33% vesting on the first anniversary of the grant date and 67% vesting on the second anniversary of the grant date. These awards were intended to help mitigate the impact on executives’ compensation and cash flow disruption due to the program changes, including the change to the three-year cliff vesting schedule applied to the PSU awards discussed above compared to the annual installment vesting over three years that applied to the CSPUs that we previously granted.
In 2018 theone-time transition awards of RSUs for our NEOs were as follows:
| |||||||||||||||
Grant Date Value | |||||||||||||||
| |||||||||||||||
J. Capello | n/a | ||||||||||||||
M. Ehlers | $ 1,500,000 | ||||||||||||||
S. Alexander | |||||||||||||||
P. McKenzie | $ 1,200,000 | ||||||||||||||
We maintain a Supplemental Savings Plan (SSP), which is anon-qualified deferred compensation plan covering our executive officers and other managementeligible employees in the U.S. We offer the SSP as part of the retirement savings component of our benefits program. We designed the SSP to be competitive with thenon-qualified deferred compensation plans offered by companies in our peer group.group at that time. Details of the SSP are presented indiscussed under the narrative preceding the “2016heading “2018Non-Qualified Deferred Compensation Table”Compensation” below.
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| 5 | Executive Compensation Matters (continued) |
In addition to eligibility for the benefit programs generally provided to all employees, such as our employee stock purchase plan, 401(k) plan and medical, dental, vision, life and disability insurance, we provide certain supplemental benefits to our executives. These benefits include:
Life Insurance
Lynn Schenk
All of our U.S. executives, including our NEOs, receive Company-paid term life insurance equal to three times their annual base salary, up to a maximum benefit of $1.5 million. Employees who are not executives receive Company-paid term life insurance equal to two times their annual base salary. The additional value of Company-provided life insurance for our executive officers reflects competitive practices and is consistent with our philosophy to provide appropriate levels of financial security for our employees based on their positions within the Company. The cost of Company-paid life insurance in excess of a $50,000 insurance level is taxable income to U.S. employees and is not grossed up by the Company.
| |
Executive Physicals, Tax Preparation, Financial and Estate Planning
Our executive officers, other than our CEO, are eligible for reimbursement of expenses incurred for tax preparation and financial and estate planning services, as well as the purchase of tax preparation and financial planning software, subject to annual expense limits of $7,500 for executive vice presidents. Such reimbursements are taxable income to our executives and are not grossed up.
All of our executive officers, including our CEO, are eligible for reimbursement for the cost of their executive physicals, subject to the annual expense limit noted directly above (which for our CEO is $7,500). This benefit provides our executives with additional flexibility to proactively manage their health and wellness.
Relocation Expenses
Under our Executive Relocation Policy, we will provide relocation benefits when executives first join us. In 2016, we provided Mr. Vounatsos with relocation benefits of $147,958, which includes a taxgross-up of $71,372.
Post-Termination Compensation and Benefits
We provide severance benefits to all of our executive officers if they are terminated without cause or in certain other instances following a corporate transaction or a corporate change in control. The terms of these arrangements and the amounts payable under them are described below for each NEO in the subsection titled “Potential Payments Upon Termination or Change in Control.” We provide these benefits because we believe that severance protection is necessary to help our executives maintain their focus on the best interests of the Company when providing advice to the Company and making strategic decisions about a potential corporate transaction or change in control, and encourages effective leadership in the closing and integration of significant transactions affecting the Company.
We maintain share ownership guidelines for our executive officers to strengthen and reinforce the link our compensation programs create between our executives and our stockholders. A summary of our share ownership guidelines is set forth below.
| ||
| ||
|
Executive officers have five years from their initial appointment to meet the requirement. In the event the requirement is not met within that time, 100% of vested shares received in respect of LTI awards are required to be held until the requirement is satisfied. Only shares owned outright or otherwise earned are credited toward the share ownership requirement. Shares underlying unvested RSUs are not included in the calculation. All of our executive officers currently meet the share ownership requirement or are still within the five-year period to meet such requirement.
We may recover compensation from our employees, including our executive officers, who engage in detrimental or competitive activity. Detrimental activity includes any action or failure to act that constitutes financial malfeasance that is materially injurious to the Company, violates our Code of Business Conduct (Values in Action), results in a restatement of our earnings or financial results, or results in a violation or breach of law or contract. Competitive activity includes any action or failure to act that violatesnon-disclosure,non-competition, and/ornon-solicitation agreements. Our 2008 Performance-Based Management Incentive Plan allows for the forfeiture and/or repayment of cash-based awards, and our 2008 Omnibus Equity Plan allows for the cancellation of LTI grants in these circumstances. In addition, cashsign-on bonuses to our NEOs may be forfeited if they voluntarily resign from the Company within apre-determined period of time.
Insider Trading, Hedging, and Pledging Policy Prohibitions
We maintain a Global Insider Trading Policy that prohibits our employees and directors from, among other things, engaging in hedging or derivative transactions with respect to the Company’s equity securities, purchasing Company stock on margin, pledging Company securities as collateral for a loan, or engaging in short sales of the Company’s securities.
Tax-Deductibility of Compensation
Section 162(m) of the Internal Revenue Code (Section 162(m)) limits the amount a company may deduct for compensation paid to its chief executive officer and any of its other three named executive officers (excluding its chief financial officer) to $1.0 million. This limitation does not, however, apply to compensation meeting the definition of qualifying performance-based compensation.
| |
Management regularly reviews the provisionsCorporate
Governance
Assists our Board of our plansDirectors in assuring sound corporate governance practices and programs, monitors legal developments, and works with our Compensation Committee and its consultant to review and consider Section 162(m) tax deductibility of compensation payments. Our Compensation Committee, however, believes that a compensation program that attracts, retains, and rewards executive talent and achievement is necessary for our success and, therefore, is in the best interests of the Company and our stockholders and that, in establishing the cash and equity incentive compensation program for the Company’s executive officers, the potential deductibility of the compensation payable under that program should only be one of a number of relevant factors taken into consideration. Consequently, our Compensation Committee may pay or provide, and has paid or provided, compensation in excess of $1.0 million that is not exempt from the deduction limitations under Section 162(m).
Amounts of base salary above $1.0 million are not deductible by the Company. Our annual bonus plan payouts in 2017 for our 2016 plan year and our 2016 LTI grants of CSPUs and MSUs are intended to fall within the exception for qualifying performance-based compensation (and therefore to betax-deductible compensation) under Section 162(m).
The rules and regulations promulgated under Section 162(m) are complex and subject to change from time to time, sometimes with retroactive effect. There can be no guarantee that amounts potentially subject to the Section 162(m) limitations will be treated by the Internal Revenue Service asidentifying qualified performance-based compensation under Section 162(m) and/or deductible by the Company.
The Compensation Committee furnishes the following report:
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with Biogen management. Based on this review and discussion, the Compensation Committee recommendednominees to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.its committees.
Submitted by,
Robert W. PangiaAlexander J. Denner (Chair)
Richard C. Mulligan
Brian S. Posner
Eric K. Rowinsky
11
Finance
Assists our Board of Directors with oversight of our financial strategy, policies and practices.
Brian S. Posner (Chair)
Alexander J. Denner
Robert W. Pangia
Stelios Papadopoulos
Stephen A. Sherwin
8
Risk
Assists our Board of Directors with oversight of management’s exercise of its responsibility to assess and manage risks associated with our business and operations.
For more information on our Board oversight of risks, please see “Board Risk Oversight” below.
Lynn Schenk (Chair)
Caroline D. Dorsa
Nancy L. Leaming
Stephen A. Sherwin
5
Science and
Technology
Assists our Board of Directors with oversight of our key strategic decisions involving research and development matters and our intellectual property portfolio.
Richard C. Mulligan (Chair)
Stelios Papadopoulos
Eric K. Rowinsky
Stephen A. Sherwin
8
| † | Determined by our Board of Directors to be an audit committee financial expert. |
| • | Attendance at Board and Committee Meetings. No director attended fewer than 75% of the total number of meetings of our Board of Directors and the committees on which he or she served during 2018. |
| • | Executive Sessions. Under our Corporate Governance Principles, the independent directors of our full Board of Directors are required to meet without management present at least four times each year and may also meet without management present at such other times as determined by our Chairman or if requested by at least two other directors. In 2018 the independent directors of our full Board of Directors met without management present four times. Each committee of our Board of Directors also had numerous executive sessions throughout the year. |
| • | Attendance at Stockholder Meeting. We expect all of our directors and director nominees to attend our annual meetings of stockholders. All of our directors attended our 2018 annual meeting of stockholders. |
| 20 | | |
| 3 | Board of Directors (continued) |
This section describes our compensation program for ournon-employee directors and shows the compensation paid to or earned by ournon-employee directors during 2018. Mr. Vounatsos, our Chief Executive Officer, receives no compensation for his service on our Board of Directors.
Retainers, Meeting Fees and Expenses
The following table presents the annual retainers and meeting fees for allnon-employee members of our Board of Directors in effect in 2018, which were unchanged from 2017:
| Retainers | Meeting Fees | |||||||||
Annual Board Retainer
|
$
|
65,000
|
|
Board of Directors Meetings (per meeting day):
| ||||||
Annual Retainers (in addition to Annual Board Retainer):
|
In-person attendance
|
$
|
2,500
|
| ||||||
Telephonic attendance
|
$
|
1,500
|
| |||||||
Independent Chairman of the Board
|
$
|
75,000
|
|
Committee Meetings (per meeting attended by each such committee member in person or telephonically)
|
$
|
1,500
|
| |||
Audit Committee Chair
|
$
|
25,000
|
|
Attendance at Annual Science and Technology Committee Portfolio Review (per day)
|
$
|
1,500
|
| |||
Compensation and Management
|
$
|
20,000
|
| |||||||
Corporate Governance Committee Chair
|
$
|
15,000
|
| |||||||
Finance Committee Chair
|
$
|
15,000
|
| |||||||
Risk Committee Chair
|
$
|
15,000
|
| |||||||
Science and Technology Committee Chair
|
$
|
15,000
|
| |||||||
Audit Committee Member (other than Chair)
| $
| 5,000
|
| |||||||
Ournon-employee directors are also eligible to be paid a fee of $1,000 for each full day of service to the Company other than in connection with meetings of our Board of Directors or one of its committees.
Ournon-employee directors may defer all or part of their cash compensation under our Voluntary Board of Directors Savings Plan, which is similar to our Supplemental Savings Plan described in the narrative preceding the “2018Non-Qualified Deferred Compensation Table” in Part 5 – Executive Compensation Matters of this Proxy Statement, but without any Company matching contributions. If anon-employee director chooses to defer compensation under our Voluntary Board of Directors Savings Plan, his or her notional account under the plan will periodically be credited with amounts of deemed investment earnings as if the deferred compensation was actually invested in the notional investment(s) selected by the director or in a default investment if the director does not make a selection. These notional investment options include the mutual funds available under our 401(k) plan as well as a fixed rate option which earns a rate of return determined each year by the Company’s retirement committee. For 2018non-employee
director deferrals notionally invested in the fixed rate option, this rate of return was set at 5%. Deferrals notionally invested in the fixed rate option continue to be credited with the rate of return that was in effect during the year of deferral.
Non-employee directors are also reimbursed for actual expenses incurred in attending meetings of our Board of Directors and any of its committees, as well as service to our Board of Directors or any of its committees that is unrelated to such meetings.
Awards Under OurNon-Employee Directors Equity Plan
Ournon-employee directors receive awards under our 2006Non-Employee Directors Equity Plan (theNon-Employee Directors Equity Plan). TheNon-Employee Directors Equity Plan was initially approved by our stockholders at our 2006 annual meeting of stockholders. In 2015 our stockholders approved an amendment to extend the term of the plan until June 10, 2025.
| 21 | | |
| 3 | Board of Directors (continued) |
General Provisions of theNon-Employee Directors Equity Plan
Non-employee directors receive an annual award under theNon-Employee Directors Equity Plan effective on the date of each annual meeting of stockholders (or a pro rata award upon election other than at an annual meeting of stockholders). Under theNon-Employee Directors Equity Plan, a maximum of 17,500 shares of our common stock (or 30,000 shares for the independent Chairman of the Board) may be granted to anon-employee director pursuant to such annual awards each calendar year. Annual awards vest on theone-year anniversary of the date of grant or over a longer period determined in the discretion of Board of Directors.
Awards tonon-employee directors are recommended by our C&MD Committee and approved by our Board of Directors, with the independent Chairman recused from discussion and voting upon his own awards.
Awards granted under theNon-Employee Directors Equity Plan are subject to accelerated vesting upon termination of a director’s service by reason of death, disability or retirement and upon a change in control (as such terms are defined in theNon-Employee Directors Equity Plan). In addition,non-employee director awards will become fully vested upon an involuntary termination of a director’s service within two years following certain mergers or other corporate transactions, as described in theNon-Employee Directors Equity Plan.
Awards During 2018
In June 2018 our C&MD Committee recommended, and our Board of Directors approved, annual awards with a grant date fair value of approximately $270,000 for eachnon-employee director and an additional annual award with a grant date fair value of approximately $175,000 for the independent Chairman. These annual awards were below the limits set forth in theNon-Employee Directors Equity Plan described above and were consistent with the awards made in 2017. The June 2018 annual awards were made in the form of restricted stock units (RSUs) vesting in full on the first anniversary of the grant date, generally subject to the director’s continued service.
Periodically we review our compensation program for ournon-employee directors in relation to those of the peer
group used for executive compensation purposes (as described below in our Compensation Discussion and Analysis) to assess its competitiveness and appropriateness. While the grant date fair values of the equity awards granted in 2018 were above the median of our peer group, the annual retainer for ournon-employee directors was below the 25th percentile of that same peer group. Overall, the total compensation levels were market competitive. Our C&MD Committee and our Board of Directors believe that a somewhat heavier weighting towards equity awards than the weighting of equity awards of our peer group companies is appropriate because it further aligns the interests of ournon-employee directors with those of our stockholders.
Ournon-employee directors must usepre-established trading plans to sell shares of our common stock from their personal accounts. Trading plans may only be entered into during an open trading window and when the director is not in possession of materialnon-public information about the Company. We require a waiting period following the establishment of a trading plan before any trades may be executed. Our policy is designed to provide safeguards while allowing ournon-employee directors to have an opportunity to realize the value intended by the Company in granting equity-based awards.
Non-Employee Director Stock Ownership Guidelines
We maintain the following stock ownership guidelines for ournon-employee directors:
Position | Stock Ownership Requirement(1) | |
Independent Chairman | Number of shares equal in value to 5x the total annual cash retainer for (i) the independent Chairman position and (ii) othernon-employee Board members | |
Non-Employee Directors (excluding Chairman) | Number of shares equal in value to 5x the annual cash retainer fornon-employee Board members | |
| (1) | Eachnon-employee director has five years from the date of initial election or appointment to meet the stock ownership requirement. All of our currentnon-employee directors meet the stock ownership requirement. |
| 22 | | |
| 3 | Board of Directors (continued) |
Name (a) |
Fees Earned or Paid in Cash(1) (b) | Stock Awards(2) (c) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings(3) (d) | All Other Compensation(4) (e) | Total (f) | |||||||||||
Alexander J. Denner
|
$
|
139,000
|
|
$
|
269,447
|
|
—
|
$5,000
|
$
|
413,447
|
| |||||
Caroline D. Dorsa
|
$
|
143,000
|
|
$
|
269,447
|
|
—
|
—
|
$
|
412,447
|
| |||||
Nancy L. Leaming
|
$
|
120,500
|
|
$
|
269,447
|
|
—
|
$10,280
|
$
|
400,227
|
| |||||
Richard C. Mulligan
|
$
|
138,500
|
|
$
|
269,447
|
|
—
|
—
|
$
|
407,947
|
| |||||
Robert W. Pangia
|
$
|
140,500
|
|
$
|
269,447
|
|
$72,763
|
—
|
$
|
482,710
|
| |||||
Stelios Papadopoulos
|
$
|
144,500
|
|
$
|
443,976
|
|
—
|
$25,000
|
$
|
613,476
|
| |||||
Brian S. Posner
|
$
|
158,000
|
|
$
|
269,447
|
|
—
|
$25,000
|
$
|
452,447
|
| |||||
Eric K. Rowinsky
|
$
|
138,500
|
|
$
|
269,447
|
|
—
|
—
|
$
|
407,947
|
| |||||
Lynn Schenk
|
$
|
134,000
|
|
$
|
269,447
|
|
—
|
$25,000
|
$
|
428,447
|
| |||||
Stephen A. Sherwin |
$ |
124,500 |
|
$ |
269,447 |
|
— |
$25,000 |
$ |
418,947 |
| |||||
Notes to the 2018 Director Compensation Table
| (1) | Includes $1,500 of fees received by each director in 2018 for fees earned in 2017 and $3,000 of fees earned by each of Dr. Denner, Mr. Posner and Dr. Rowinsky in 2018 but which were paid in 2019. |
| (2) | The amounts in column (c) represent the grant date fair value of RSU awards made in 2018 tonon-employee directors under theNon-Employee Directors Equity Plan, as described in the narrative preceding this table. These RSUs are scheduled to vest in full and be settled in shares on the first anniversary of the grant date, generally subject to continued service. Grant date fair values were computed in accordance with Accounting Standards Codification (ASC) 718 and determined by multiplying the number of RSUs awarded by the fair market value of the Company’s common stock on the relevant grant date. |
| (3) | The amounts in column (d) represent earnings under the Voluntary Board of Directors Savings Plan that are in excess of 120% of the average applicable federal long-term rate. The federal long-term rate for 2018 applied in this calculation is 3.06%, which was the federal long-term rate effective in January 2018 when the Fixed Rate Option (FRO) under this plan was established for 2018. Only Mr. Pangia has deferred compensation notionally invested in the FRO. |
| (4) | The amounts in column (e) represent the amount of matching contributions made in 2018 by the Biogen Foundation on behalf of the director pursuant to the terms of a matching gift program offered by the Biogen Foundation to all U.S. employees andnon-employee directors of Biogen. Under the matching gift program, the Biogen Foundation matches gifts to eligible U.S.-basednon-profit organizations, in accordance with the Biogen Foundation’s guidelines, up to an annual maximum per donor amount of $25,000 per calendar year and up to a program total of $1.5 million per calendar year. The matching contributions made by the Biogen Foundation are not taxable income to the director, and the director may not take any tax deductions for such matching contributions. |
| 23 | | |
| 3 | Board of Directors (continued) |
Director Equity Outstanding at 2018 FiscalYear-End
The following table summarizes the equity awards that were outstanding as of December 31, 2018, for each of thenon-employee directors serving during 2018.
Option Awards(1)
|
Stock Awards(2)
| |||||||
Name
|
Number of
|
Number of Shares or Units of Stock That Have Not Vested
| ||||||
Alexander J. Denner
|
—
|
880
| ||||||
Caroline D. Dorsa
|
—
|
880
| ||||||
Nancy L. Leaming
|
—
|
880
| ||||||
Richard C. Mulligan
|
—
|
880
| ||||||
Robert W. Pangia
|
6,114
|
880
| ||||||
Stelios Papadopoulos
|
—
|
1,450
| ||||||
Brian S. Posner
|
—
|
880
| ||||||
Eric K. Rowinsky
|
—
|
880
| ||||||
Lynn Schenk
|
—
|
880
| ||||||
Stephen A. Sherwin |
12,278 |
880 | ||||||
Notes to the Director Equity Outstanding at 2018 FiscalYear-End Table
| (1) | All stock option awards were granted to ournon-employee directors with aten-year term and vested in full on the first anniversary of the grant date. All outstanding stock options granted tonon-employee directors were fully vested and exercisable as of December 31, 2018. |
| (2) | Represents the number of RSUs awarded tonon-employee directors in 2018 under theNon-Employee Directors Equity Plan, as described in the narrative preceding the “2018 Director Compensation” table above. These RSU awards are scheduled to vest in full and be settled in shares on the first anniversary of the grant date, generally subject to continued service. |
Our Board of Directors believes that a fundamental part of risk management is understanding the risks that we face, monitoring these risks and adopting appropriate control and mitigation of these risks. As stated in our Corporate Governance Principles, our Board of Directors and its committees are responsible for “reviewing the Company’s significant risk exposures and steps taken by management to monitor and mitigate such exposure.” We also have a separate Risk Committee of our Board of Directors that assists our Board in its oversight of management’s exercise of its responsibility to assess and manage risk associated with the Company’s business and operations.
Our Board of Directors oversees the management of material risks facing the Company. Biogen is committed to fostering a company culture of risk-adjusted decision-making without constraining reasonable risk-taking and innovation. Our Board of Directors and its committees oversee our efforts to foster this culture. Our Board of Directors regularly receives information about our material strategic, operational, financial and compliance risks and management’s response to, and mitigation of, such risks. In addition, our risk management systems, including our risk assessment processes, internal control over financial reporting, compliance programs and internal and external auditing procedures, are designed to inform management and our Board of Directors about our material risks. As part of its risk oversight function, our Board of Directors and its committees review this framework, its operation and our strategies for generating long-term value for our stockholders to ensure that such strategies will not motivate management to take excessive risks.
Our Board of Directors also reviews enterprise risks and discusses them with our management, including issues relevant to our business, reputation and strategy, including intellectual property risk, pipeline and business development, pricing and patient access, legal and regulatory matters and manufacturing. In addition, our Board of Directors and its committees oversee elements of our culture. Management updates our C&MD Committee on our compensation practices and progress against strategies and objectives in the areas of management and leadership development and diversity as well as steps taken to address matters such as inappropriate workplace behavior, including harassment and retaliation. In addition, our Audit Committee is responsible for the oversight of our compliance program.
| 24 | | |
| 3 | Board of Directors (continued) |
In determining the allocation of risk oversight responsibilities, our Board of Directors and its committees generally oversee material risks within their identified areas of concern. Our Board of Directors and each of its committees meet regularly with management to ensure that management is exercising its responsibility to identify relevant risks and is adequately assessing, monitoring and taking appropriate action to mitigate risk. In the event a committee receives a report from members of management on areas of material risk to the Company, the Chair of the relevant committee reports on the discussion to the full Board of Directors at the next Board of Directors meeting. This enables our Board of Directors and its committees to coordinate their oversight of risk and identify risk interrelationships.
Our independent Chairman of the Board promotes effective communication and consideration of matters presenting significant risks to the Company through his role in developing our Board of Directors’ meeting agendas, advising committee chairs, chairing meetings of the independent directors and facilitating communications between independent directors and our Chief Executive Officer.
A summary of the key areas of risk oversight responsibility of our Board of Directors and each of its committees is set forth below:
Board or Committee | Area of Risk Oversight | |||
Board | • Corporate and commercial strategy and execution, pricing and reimbursement, competition and other material risks | |||
Audit | • Financial, accounting, disclosure, corporate compliance, distributors, insurance, anti-bribery and anti-corruption matters and other risks reviewed in its oversight of the internal audit and corporate compliance functions | |||
Compensation and Management Development | • Workforce matters, including harassment • Compensation policies and practices, including whether such policies and practices balance risk-taking and rewards in an appropriate manner as discussed further below | |||
Corporate Governance | • Corporate governance and board succession, director independence, potential conflicts of interest and related party transactions involving directors and executive officers | |||
Finance | • Financial, capital and credit risks | |||
Risk | • Risk governance framework and infrastructure designed to identify, assess, manage and monitor the Company’s material risks • Risk management policies, guidelines and practices implemented by Company management • Allocation of risk oversight responsibilities to our Board of Directors and its committees • Information technology, cybersecurity, environmental, health and sustainability and other material risks not allocated to our Board of Directors or another committee • Material government and other investigations and litigation | |||
Science and Technology | • Research and development activities, clinical development and drug safety and intellectual property | |||
The Compensation Discussion and Analysis (CD&A) section of this Proxy Statement describes our compensation policies, programs and practices for our named executive officers. Our goal-setting, performance assessment and compensation decision-making processes described in the CD&A generally apply to all employees. We offer a limited number of short-term cash incentive plans, with employees eligible for either our annual bonus plan or a sales incentive compensation plan. No employee is eligible to participate in more than one cash incentive plan at any time. Our annual bonus plan is consistently maintained for all participants globally, with the same Company performance goals, payout levels (as a percentage of target) and administrative provisions regardless of the participant’s job level, location or function in the Company. We also have a long-term incentive program that provides different forms of awards depending upon an employee’s level but is otherwise consistent throughout the Company.
| 25 | | |
| 3 | Board of Directors (continued) |
In the CD&A, we describe the risk-mitigation controls for our compensation programs. These controls include C&MD Committee review and approval of the design, goals and payouts under our annual bonus plan and long-term incentive program and each executive officer’s compensation (or, in the case of our Chief Executive Officer’s compensation, a recommendation of that compensation to our Board of Directors for its approval). In addition, we review the processes, controls and design of our sales incentive compensation plans.
The C&MD Committee, working with the independent compensation consultant, also conducts an annual assessment of potential risks related to our compensation policies, programs and practices. Among other factors, this risk assessment considers the form of compensation (i.e., award type, fixed versus variable and short-term versus long-term), pay alignment, performance measures and goals, payout maximums, vesting periods and C&MD Committee oversight and independence. This assessment is focused on (1) having an appropriate balance in our program structure to mitigate compensation-related risk with cash versus stock, short-term versus long-term measurement and financial versusnon-financial goals; and (2) policies and practices to mitigate compensation-related risk including recoupment of compensation, stock ownership guidelines, equity administration rules and insider-trading and hedging prohibitions.
Based on our assessment, we believe that, through a combination of risk-mitigating features and incentives guided by relevant market practices and Company-wide goals, our compensation policies, programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
| 26 | | |
| 4 |
Proposal 2 – Ratification of the Selection of Our Independent Registered Public Accounting Firm | ||||
Our Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit our consolidated financial statements. Our Audit Committee has selected PwC as our independent registered public accounting firm for the fiscal year ending December 31, 2019. PwC has served as our independent registered public accounting firm since 2003.
In order to assure continuing auditor independence, our Audit Committee periodically considers whether there should be a rotation of the independent registered public accounting firm. Further, in conjunction with the rotation of the auditing firm’s lead engagement partner required by applicable SEC rules, our Audit Committee and its Chair has in the past been, and in the future will be, directly involved in the selection of PwC’s new lead engagement partner.
Our Audit Committee believes at this time that the continued retention of PwC to serve as our independent registered public accounting firm is in the best interest of Biogen and its stockholders.
Although stockholder approval of our Audit Committee’s selection of PwC is not required, our Board of Directors believes that it is a matter of good corporate practice to solicit stockholder ratification of this selection. If our stockholders do not ratify the selection of PwC as our independent registered public accounting firm, our Audit Committee will reconsider its selection. Even if the selection is ratified, our Audit Committee always has the ability to change the engagement of PwC if it considers that a change is in Biogen’s best interest. Representatives of PwC will participate in the Annual Meeting, have the opportunity to make a statement if they so desire and be available to respond to appropriate questions.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTEFOR THE RATIFICATION OF
THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019.
| 27 | | |
| 4 | Audit Committee Matters (continued) |
The Audit Committee’s role is to act on behalf of our Board of Directors in the oversight of Biogen’s financial reporting, internal control and audit functions. The roles and responsibilities of the Audit Committee are set forth in the written charter adopted by our Board of Directors, which is posted on our website,www.biogen.com, under the “Corporate Governance” subsection of the “Investors” section of the website. Management has primary responsibility for the financial statements and the reporting process, including the systems of internal control.
In fulfilling its oversight responsibilities, the Audit Committee, among other things:
In reliance on these reviews and discussions, the Audit Committee recommended to our Board of Directors that the audited consolidated financial statements be included in Biogen’s Annual Report on Form10-K for the fiscal year ended December 31, 2018, for filing with the SEC.
The Audit Committee of our Board of Directors:
Caroline D. Dorsa (Chair)
Nancy L. Leaming
Stelios Papadopoulos
Brian S. Posner
| 28 | | |
| 4 | Audit Committee Matters (continued) |
The following table shows fees for professional audit services billed to us by PwC for the audit of our annual consolidated financial statements for the years ended December 31, 2018, and December 31, 2017, and fees billed to us by PwC for other services provided during 2018 and 2017:
Fees (amounts in thousands) | 2018 | 2017 | ||||||
Audit fees | $ | 5,177.6 | $ | 5,036.3 | ||||
Audit-related fees | 302.0 | 281.2 | ||||||
Tax fees* | 609.0 | 381.0 | ||||||
All other fees | 322.1 | 7.1 | ||||||
Total | $ | 6,410.7 | $ | 5,705.6 | ||||
| * | Includes tax compliance fees of approximately $0.1 million in 2018 and 2017. |
Audit feesare fees for the audit of our 2018 and 2017 consolidated financial statements included in our Annual Reports on Form10-K, reviews of our condensed consolidated financial statements included in our Quarterly Reports on Form10-Q, review of the consolidated financial
statements incorporated by reference into our outstanding registration statements and statutory audit fees in overseas jurisdictions.
Audit-related fees are fees that principally relate to assurance and related services that are also performed by our independent registered public accounting firm. More specifically, these services include audits of employee benefit plan information, accounting consultations, due diligence and audits in connection with business development activity, internal control reviews and attest services related to financial reporting that are not required by statute or regulation.
Tax feesare fees for tax compliance and planning services. The increase in fees incurred in 2018 is driven by incremental support for international tax matters.
All other feesin 2018 include $0.3 million related to consultation services with respect to supply chain optimization strategies for the development of new products and services. All other fees in 2018 and 2017 also includelicense fees for aweb-based accounting research tool.
Policy onPre-Approval of Audit andNon-Audit Services
Our Audit Committee has the sole authority to approve the scope of the audit and any audit-related services as well as all audit fees and terms. Our Audit Committee mustpre-approve any audit andnon-audit services provided by our independent registered public accounting firm. Our Audit Committee will not approve the engagement of the independent registered public accounting firm to perform any services that the independent registered public accounting firm would be prohibited from providing under applicable securities laws, Nasdaq requirements or Public Company Accounting Oversight Board rules. In assessing whether to approve the use of our independent registered public accounting firm to provide permittednon-audit services, our Audit Committee tries to minimize relationships that could appear to impair the objectivity of our independent registered public accounting firm. Our Audit Committee will approve permittednon-audit services by our independent registered public accounting firm only when it will be more effective or economical to have such services provided by our independent registered public accounting firm than by another firm.
Our Audit Committee annually reviews andpre-approves the audit, audit-related, tax and other permissiblenon-audit services that can be provided by the independent registered public accounting firm. After the annual review, any proposed services exceedingpre-set levels or amounts, or additional services not previously approved requires separatepre-approval by our Audit Committee or the Chair of our Audit Committee. Anypre-approval decision made by the Chair of our Audit Committee is reported to our Audit Committee at the next regularly scheduled Audit Committee meeting. Our Chief Financial Officer and our Chief Accounting Officer can approve up to an additional $50,000 in the aggregate per calendar year for categories of services that our Audit Committee (or the Chair through its delegated authority) haspre-approved.
All of the services provided by PwC during 2018 and 2017 werepre-approved in accordance with this policy.
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Our Compensation Discussion and Analysis, which appears below, describes our executive compensation programs and the compensation decisions that our C&MD Committee and our Board of Directors made with respect to the 2018 compensation of our named executive officers. As required pursuant to Section 14A of the Exchange Act, our Board of Directors is asking that stockholders cast anon-binding, advisory vote FOR the following resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
Our Board of Directors is asking that our stockholders support this proposal. Although the vote you are being asked to cast isnon-binding, we value the views of our stockholders, and our C&MD Committee and our Board of Directors will consider the outcome of the vote when making future compensation decisions for our named executive officers.
As we describe in our Compensation Discussion and Analysis, our executive compensation programs embody apay-for-performance philosophy that supports our business strategy and aligns the interests of our executives with those of our stockholders. In particular, our compensation programs reward financial, strategic and operational performance and the goals set under our plans support our short- and long-range plans. In addition, to discourage excessive risk taking, we maintain policies for stock ownership and our equity and annual bonus incentive plans have provisions providing for the recoupment of compensation. We also cap payments under our annual bonus plan and we generally require multi-year vesting periods for long-term incentive awards.
We will hold anon-binding, advisory vote of our stockholders on the compensation of our named executive officers every year until the next required stockholder vote on the frequency of such advisory vote. The next stockholder vote on the frequency of such advisory vote is expected to be held at the 2023 annual meeting of stockholders.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE APPROVAL OF THE RESOLUTION SET FORTH ABOVE.
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| 5 | Executive Compensation Matters (continued) |
This Compensation Discussion and Analysis (CD&A) describes our compensation strategy, philosophy, policies and practices underlying our executive compensation programs for 2018. It also provides information regarding the manner and context in which compensation was earned by and awarded to our 2018 named executive officers listed below, whom we refer to collectively as “named executive officers” or “NEOs.”
| Michel Vounatsos Chief Executive Officer | | Susan H. Alexander Executive Vice President, Chief Legal Officer and Secretary | |||||||||
| Jeffrey D. Capello Executive Vice President and Chief Financial Officer | | Paul F. McKenzie, Ph.D. Executive Vice President, Pharmaceutical Operations & Technology | |||||||||
| Michael Ehlers, M.D., Ph.D. Executive Vice President, Research and Development |
2018 Highlights
We had a productive and successful 2018. We generated record revenues of $13.5 billion for the year, demonstrated resilience in our MS business, continued a strong global launch for SPINRAZA, the first approved treatment for SMA, and made significant progress in our biosimilars business.
We added six clinical programs across our strategic core and emerging growth areas and had a strong year for business development.
We provided value to our stockholders through the return of approximately $4.4 billion in capital through share repurchases and we continued our leading efforts in environmental, sustainability and diversity matters.
Our executive compensation programs for 2018 were aligned with stockholder interests as compensation earned under these programs was closely-linked to the achievement of our corporate performance goals.
We achieved or exceeded the vast majority of the corporate performance goals that we set at the beginning of the year under our incentive compensation plans and, accordingly, the payouts under these plans for 2018 were above target payout levels.
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A brief summary of our 2018 business, financial and executive compensation highlights are as follows:
Financial Performance
The following chart provides a summary of our financial performance for 2018 compared to 2017:
A reconciliation of our GAAP toNon-GAAP financial measures is provided in Appendix A to this Proxy Statement.
Total Stockholder Return
Ourone-, three- and five-year total stockholder return (TSR)* compared to our peer group and the Standard & Poor’s 500 (S&P 500) is set forth below.
| * | TSR is a measure of performance over time that combines changes in share price and dividends paid to show the total return to the stockholder expressed as an annualized percentage. |
Product and Pipeline Developments
The following provides a summary of our product and pipeline developments for 2018:
Product Developments
In March 2018 we and AbbVie Inc. announced the voluntary worldwide withdrawal of ZINBRYTA for relapsing MS (RMS).
In October 2018 we and Samsung Bioepis launched IMRALDI, an adalimumab biosimilar referencing HUMIRA, in Europe.
Applications for Marketing and Agency Actions
In October 2018 the FDA granted BIIB092, ananti-tau mAb, fast track designation for progressive supranuclear palsy (PSP).
In December 2018 Alkermes submitted a NDA to the FDA for the review of BIIB098 (diroximel fumarate). Alkermes is seeking approval of diroximel fumarate under the 505(b)(2) regulatory pathway. If approved, we intend to market diroximel fumarate under the brand name VUMERITY. This name has been conditionally accepted by the FDA and will be confirmed upon approval.
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| 5 | Executive Compensation Matters (continued) |
Clinical Trials
MS and Neuroimmunology
In September 2018 we completed enrollment of the Phase 2b AFFINITY study evaluating opicinumab, anti-LINGO, as anadd-on therapy in MS patients who are adequately controlled on their anti-inflammatory disease-modifying therapy (DMT), versus the DMT alone.
In November 2018 we initiated the Phase 3b NOVA study evaluating the efficacy and safety of extended interval dosing (every six weeks) for natalizumab compared to standard interval dosing in patients with RMS and enrolled the first patient in December 2018.
In December 2018 we dosed the first patient in a bioequivalence study to test whether exposure levels of PLEGRIDY are maintained with intramuscular administration.
Neuromuscular Disorders
| • | In September 2018 we enrolled the first patient in the Phase 1 study evaluating BIIB078(IONIS-C9Rx), an antisense oligonucleotide (ASO) drug candidate, in adults with C9ORF72-associated ALS. |
| • | In December 2018 we and our collaboration partner Ionis Pharmaceuticals, Inc. (Ionis) announced results from a positive interim analysis of the ongoing Phase 1 study of BIIB067 (IONIS-SOD1Rx), an investigational treatment for ALS with superoxide dismutase 1 (SOD1) mutations. The interim analysis showed that, over a three-month period, BIIB067 resulted in a statistically significant lowering of SOD1 protein levels in the cerebrospinal fluid and a numerical trend towards slowing of clinical decline as measured by the ALS Functional Rating Scale Revised, both compared to placebo. |
Alzheimer’s Disease and Dementia
In May 2018 we initiated a Phase 2 study of BIIB092 for Alzheimer’s disease.
In June 2018 we and our collaboration partner Eisai Co., Ltd. (Eisai) announced that elenbecestat, the oral BACE (beta amyloid cleaving enzyme) inhibitor, demonstrated an acceptable safety and tolerability profile in the Phase 2 study, and the results demonstrated a statistically significant difference in amyloid-beta levels in the brain measured byamyloid-PET (positron emission tomography). A numerical slowing of decline in functional clinical scales of a potentially clinically important difference was also observed, although this effect was not statistically significant.
In December 2017 we and our collaboration partner Eisai announced that the Phase 2 study of BAN2401, a monoclonal antibody that targets amyloid beta aggregates, an Eisai product candidate for the treatment of Alzheimer’s disease, did not meet the criteria for success based on a Bayesian analysis at 12 months as the primary endpoint in an856-patient Phase 2 clinical study, an endpoint that was designed to enable a potentially more rapid entry into Phase 3 development. In July 2018, based upon the final analysis of the data at 18 months, we and Eisai announced that the topline results from the Phase 2 study demonstrated a statistically significant slowing in clinical decline and reduction of amyloid beta accumulated in the brain. The study achieved statistical significance on key predefined endpoints evaluating efficacy at 18 months on slowing progression in Alzheimer’s Disease Composite Score (ADCOMS) and on reduction of amyloid accumulated in the brain as measured usingamyloid-PET.
In July 2018 we completed enrollment of ENGAGE and EMERGE, the Phase 3 studies of aducanumab. In March 2019 we and our collaboration partner Eisai announced that we were discontinuing the EMERGE and ENGAGE Phase 3 studies.
Movement Disorders
In January 2018 we dosed the first patient in the Phase 2 SPARK study of BIIB054,a-synuclein antibody, in Parkinson’s disease.
In September 2018 we completed enrollment of the Phase 2 PASSPORT study of BIIB092 for PSP.
Acute Neurology
In March 2018 we dosed the first patient in the Phase 2 OPUS study of natalizumab in drug-resistant focal epilepsy.
In September 2018 we enrolled the first patient in the Phase 3 CHARM study of BIIB093, glibenclamide IV, in large hemispheric infarction, a severe form of ischemic stroke.
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| 5 | Executive Compensation Matters (continued) |
Neurocognitive Disorders
In December 2018 we dosed the first patient in our Phase 2b study of BIIB104 (AMPA) in CIAS.
Pain
In March 2018 we initiated a Phase 1 study of BIIB095, a Nav 1.7 inhibitor for neuropathic pain.
In May 2018 we initiated a Phase 2 study of vixotrigine (BIIB074) in small fiber neuropathy.
Other
In September 2018 we dosed the first patient in the Phase 2b study of BG00011(STX-100) in idiopathic pulmonary fibrosis, a chronic irreversible and ultimately fatal disease characterized by a progressive decline in lung function.
Discontinued Programs
In February 2018 we announced that the Phase 2b dose-ranging ACTION study investigating natalizumab in individuals with acute ischemic stroke (AIS) did not meet its primary endpoint. Based on these results, we discontinued development of natalizumab in AIS. The results of the Phase 2b ACTION study do not impact the benefit-risk profile of natalizumab in approved indications, including MS.
In October 2018 we announced that we completed the Phase 2b study of vixotrigine (BIIB074) for the treatment of painful lumbosacral radiculopathy (PLSR). The study did not meet its primary or secondary efficacy endpoints and we discontinued development of vixotrigine for the treatment of PLSR. The safety data were consistent with the safety profile reported in previous studies.
Business Development
In January 2018 we acquired BIIB100 from Karyopharm Therapeutics Inc. BIIB100 is a Phase 1 ready investigational oral compound for the treatment of certain neurological and neurodegenerative diseases, primarily in ALS. BIIB100 is a novel therapeutic candidate that works by inhibiting a protein known as XP01, with the goal of reducing inflammation and neurotoxicity, along with increasing neuroprotective responses.
In April 2018 we acquired BIIB104 from Pfizer Inc. BIIB104 is afirst-in-class, Phase 2b ready AMPA receptor potentiator for CIAS, representing our first program in neurocognitive disorders. AMPA receptors mediate fast excitatory synaptic transmission in the central nervous system, a process which can be disrupted in a number of neurological and psychiatric diseases, including schizophrenia.
In June 2018 we closed a10-year exclusive agreement with Ionis to develop novel ASO drug candidates for a broad range of neurological diseases (the 2018 Ionis Agreement). We have the option to license therapies arising out of the 2018 Ionis Agreement and will be responsible for the development and potential commercialization of such therapies.
In June 2018 we entered into an exclusive option agreement with TMS Co., Ltd. granting us the option to acquireTMS-007, a plasminogen activator with a novel mechanism of action associated with breaking down blood clots, which is in Phase 2 development in Japan, and backup compounds for the treatment of stroke.
In June 2018 we exercised our option under our joint venture agreement with Samsung BioLogics to increase our ownership percentage in Samsung Bioepis from approximately 5% to approximately 49.9%. The share purchase transaction was completed in November 2018.
In July 2018 we acquired BIIB110 (Phase 1a) andALG-802 (preclinical) from AliveGen Inc. BIIB110 andALG-802 represent novel ways of targeting the myostatin pathway. We initially plan to study BIIB110 in multiple neuromuscular indications, including SMA and ALS.
In December 2018 we exercised our option with Ionis and obtained a worldwide, exclusive, royalty-bearing license to develop and commercialize BIIB067, an investigational treatment for ALS with SOD1 mutations.
In December 2018 we entered into a collaborative research and license agreement with C4 Therapeutics (C4T) to investigate the use of C4T’s novel protein degradation platform to discover and develop potential new treatments for neurological diseases, such as Alzheimer’s disease and Parkinson’s disease. We will be responsible for the development and potential commercialization of any therapies resulting from this collaboration.
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| 5 | Executive Compensation Matters (continued) |
Share Repurchase Activity
In August 2018 our Board of Directors authorized a program to repurchase up to $3.5 billion of our common stock (2018 Share Repurchase Program). Our 2018 Share Repurchase Program does not have an expiration date. All share repurchases under our 2018 Share Repurchase Program will be retired.
We returned approximately $4.4 billion to stockholders in 2018 through share repurchases under our 2018 Share Repurchase Program and our 2016 Share Repurchase Program, which was a program authorized by our Board of Directors in July 2016 to repurchase up to $5.0 billion of our common stock and which was completed as of June 30, 2018.
Other Notable Achievements in the Workplace and Community
Awarded the 2018 International Prix Galien as Best Biotechnology Product for SPINRAZA. The prestigious honor marks the seventh Prix Galien for SPINRAZA, following country recognitions in the U.S., Germany, Italy, Belgium-Luxembourg, the Netherlands and the U.K. The International Prix Galien is given every two years by Prix Galien International Committee members in recognition of excellence in scientific innovation to improve human health.
Named the Biotechnology Industry Leader on the Dow Jones Sustainability World Index.
Recognized as a corporate sustainability leader with Gold Class and Industry Mover Sustainability Awards from RobecoSAM.
Continued commitment to operational carbon neutrality highlighted through the use of 100% renewable electricity globally.
Committed to reduce carbon emissions by a targeted amount approved by the Science Based Target Initiative, to align ourselves with the global goal of limiting global temperature rise to under two degrees Celsius.
Earned CDP scores of A,A- and B in the areas of Supplier Engagement, Climate Change and Water, respectively.
Earned a perfect score of 100% on the Human Rights Campaign’s Corporate Equality Index (a national benchmarking tool on corporate policies and practices pertinent to LGBTQ employees) for the fifth consecutive year.
Continued commitment to diversity and inclusion. As of December 31, 2018, 44% of Director-level positions and above were held by women.
Over 3,200 employees volunteered from 28 countries during our annual Care Deeply Day.
Engaged 50,000+ students inhands-on learning to inspire their passion for science since the inception of Biogen’s Community Labs.
2018 Executive Compensation Programs andPay-for-Performance Alignment
We believe our executive compensation programs are effectively designed and have worked well to implement apay-for-performance culture that is aligned with the interests of our stockholders. In 2018 our executive compensation programs consisted of base salary, short- and long-term incentives and other benefits.
91% of our CEO’s and 84% of our other NEOs’ 2018 target compensation was performance-based andat-risk.
| * | Reflects annual salary, target bonus and target grant value of the 2018 annual long-term incentive awards. The NEO compensation mix excludes theone-time transition awards of RSUs granted to Dr. Ehlers, Ms. Alexander and Dr. McKenzie, as described in further detail below. |
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100% of our NEOs’ 2018 annual long-term incentive (LTI) grants were performance-based andat-risk.
| • 60% earned based on achievement of three-year adjustedNon-GAAP diluted earnings per share (EPS) and pipeline milestone performance goals • 40% earned based on achievement of adjustedNon-GAAP free cash flows and revenues over threeone-year performance periods • PSUs were introduced in 2018. For more information on our PSUs, please see “Long-Term Incentives – 2018 PSUs” below. • Earned based on stock price performance over one, two and three year periods |
Our 2018 performance-based compensation payouts align with our commitment to strong performance.
In 2018 we exceeded the vast majority of the corporate performance goals that we set at the beginning of the year for our incentive compensation plans. As a result, the payouts, as a percentage of target, for our 2018 annual bonus plan and the portions of our PSUs and MSUs that were eligible to be earned based on 2018 performance were above target payout amounts, as described in further detail below.
2018 Advisory Vote on Executive Compensation
| At our 2018 annual meeting of stockholders, we continued to receive strong support for our executive compensation programs with approximately 95% of the votes cast for approval of our annual“say-on-pay” proposal. Our C&MD Committee viewed this as positive support for our executive compensation programs and their alignment with long-term stockholder value creation and determined that the Company’s executive compensation programs have been effective in implementing the Company’s stated compensation philosophy and objectives. |
| |
Our C&MD Committee is committed to continually reviewing our executive compensation programs on a proactive basis to ensure the ongoing alignment of such programs with the interests of our stockholders. | ||
| In 2018 our C&MD Committee reviewed the external landscape, the results from our“say-on-pay” proposal at last year’s annual meeting of stockholders and the Company’s performance against the current compensation programs. Our C&MD Committee was satisfied that our existing compensation programs further ourpay-for-performance philosophy, but made certain enhancements to the design of our LTI program in 2018 to strengthen its focus on long-term performance and alignment with our stockholders’ interests. | ||
Specifically, under our 2018 LTI program, grants of PSUs replaced grants of cash-settled performance units (CSPUs), which we had granted in previous years. The key changes are as follows:
PSU awards are subject to three-year cliff vesting as compared to annual ratable vesting over three years (1/3 per year) for CSPU awards;
60% of PSU awards are earned over a three-year performance period based on the achievement of three-year cumulative performance goals for stock-settled PSU awards and 40% of PSU awards are earned over three annual performance periods based on the achievement of three sets of annual performance goals for cash-settled PSU awards as compared to 100% of CSPUs awards earned based upon one annual performance period for CSPU awards; and
60% of the PSU awards will be settled in stock and 40% of the PSU awards will be settled in cash as compared to 100% cash settlement for CSPU awards.
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For additional information on our PSU awards, please see “Long-Term Incentives – 2018 PSUs” below.
Role of our C&MD Committee
Our C&MD Committee, which is composed of four independent directors, oversees and administers our executive compensation programs. In making executive compensation decisions, our C&MD Committee reviews a variety of factors and data, most importantly our performance and individual executives’ performance, and considers the totality of compensation that may be paid. In addition, our C&MD Committee administers our annual bonus plan and our equity plans, reviews business achievements relevant to payouts under our compensation plans, makes recommendations to our Board of Directors with respect to compensation policies and practices as well as the compensation of our CEO and seeks to ensure that total compensation paid to our executive officers is fair, competitive and aligned with stockholder interests. Our C&MD Committee retains the right to hire outside advisors as needed to assist it in reviewing and revising our executive compensation programs.
The duties and responsibilities of our C&MD Committee are described on page 20 and can be found in our C&MD Committee’s written charter adopted by our Board of Directors, which can be found on our website,www.biogen.com, under the “Corporate Governance” subsection of the “Investors” section of the website.
Role of the Independent Compensation Consultant
Our C&MD Committee believes that independent advice is important in developing and overseeing our executive compensation programs. Frederic W. Cook & Co., Inc. (FW Cook) served as our C&MD Committee’s independent compensation consultant until June 2018 and advised our C&MD Committee regarding compensation decisions in 2018. FW Cook did not provide any other services to Biogen. Pearl Meyer & Partners LLC (Pearl Meyer) has served as our C&MD Committee’s independent compensation consultant since June 2018 and has advised our C&MD Committee regarding compensation decisions since that time. Pearl Meyer does not provide any other services to Biogen and engages in other matters as needed and as directed solely by our C&MD Committee. References in this CD&A to our independent compensation consultant refer to FW Cook for the period during which it was engaged and to Pearl Meyer thereafter.
Reporting directly to our C&MD Committee, our independent compensation consultant provides guidance on trends in CEO, executive andnon-employee director compensation, the development of specific executive compensation programs and the composition of the Company’s compensation peer group. Additionally, our independent compensation consultant prepares a report on CEO pay that compares each element of compensation to that of CEOs in comparable positions at companies in our peer group. Using this and other similar information, our C&MD Committee recommends, and our Board of Directors approves, the elements and target levels of our CEO’s compensation.
During 2018 the Company paid FW Cook and Pearl Meyer $123,275 and $47,666, respectively, in consulting fees directly related to these services. Our C&MD Committee assessed FW Cook’s independence annually and, in accordance with applicable SEC and Nasdaq rules, confirmed in December 2017 that FW Cook’s work did not raise any conflicts of interest and that FW Cook remained independent under applicable rules. Our C&MD Committee assessed Pearl Meyer’s independence in connection with its engagement in June 2018 and, in accordance with applicable SEC and Nasdaq rules, confirmed in December 2018 that Pearl Meyer’s work did not raise any conflicts of interest and that Pearl Meyer remains independent under applicable rules.
Role of our CEO
Each year our CEO provides an assessment of the performance of each executive officer, other than himself, during the prior year and recommends to our C&MD Committee the compensation to be paid or awarded to each executive. Our CEO’s recommendations are based on numerous factors, including:
To understand the external market competitiveness of the compensation for our executive officers, our CEO and our C&MD Committee review a report analyzing publicly-available information and surveys prepared by our internal
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compensation group and reviewed by our independent compensation consultant. The report compares the compensation of each executive officer, other than our CEO, to data for comparable positions at companies in our peer group, by compensation element (please see “External Market Competitiveness and Peer Group” below for further details). Our C&MD Committee considers all of the information presented, discusses the recommendations with our CEO and with our independent compensation consultant and applies its judgment to determine the elements of compensation and target compensation levels for each executive officer other than the CEO.
Our CEO also provides a self-assessment of his achievements for the prior year. Our C&MD Committee reviews and considers this in analyzing the CEO’s performance, and in recommending for approval by our Board of Directors, the compensation of our CEO. Our CEO does not participate in any deliberations regarding his own compensation.
Executive Compensation Philosophy and Objectives
Our executive compensation programs are designed to drive the creation of long-term stockholder value by delivering performance-based compensation that is competitive with our peer group in order to attract and retain extraordinary leaders who can perform at high levels and succeed in a demanding business environment. We aim to achieve this by designing programs that are:
| • | Mission Focused and Business Driven. Our executive compensation programs support the relentless pursuit of delivering meaningful and innovative therapies to patients by providing our executives with incentives to achieve the near- and long-term objectives of our business. Substantially all of our executive incentive compensation programs are tied directly, and meaningfully, to Company performance. Our objective is to emphasize the importance of achieving short-term goals while building and sustaining a foundation for long-term success. |
| • | Competitively Advantageous. We benchmark our executive compensation programs against a peer group of biotechnology and pharmaceutical companies that we believe are representative of the companies we primarily compete with for talent, balanced with factors such as business scope and size, including revenues and market capitalization, business focus and geographic scope of operations. Peer group practices are among the many factors we take into account in developing compensation programs that we believe are most effective, and which |
enable us to recruit, retain and motivate our leadership team to achieve their best for Biogen and our stockholders. |
| • | Performance Differentiated. We believe strongly inpay-for-performance and endeavor to significantly differentiate rewards by delivering the highest rewards to our best performers and lesser rewards to those who do not meet our performance expectations. |
| • | Ownership Aligned. At Biogen, we believe every employee contributes to the success of the Company and, as such, every employee has a vested interest in the Company’s success. To reinforce this alignment with our stockholders, we strongly encourage stock ownership through our equity-based compensation programs. For members of our executive team, including our NEOs, who set and lead the future strategic direction of our Company, we ensure that a significant portion of their total pay opportunities are equity-based to maintain alignment between the interests of our executive officers and our stockholders. |
| • | Flexible. We are committed to providing flexible benefits designed to allow our diverse global workforce to have reward opportunities that meet their varied needs so that they are inspired to perform their very best on behalf of patients and stockholders each day. |
External Market Competitiveness and Peer Group
We consider market practices and trends when determining executive compensation levels and compensation program designs at Biogen. We do not target a specific market percentile or simply replicate the market practice. Instead, we review external market practices as a reference point to assist us in providing programs designed to attract, retain and inspire extraordinary talent. Our C&MD Committee also uses a peer group to provide context for its executive compensation decision-making. Each year our independent compensation consultant reviews the external market landscape and evaluates the composition of our peer group for appropriateness.
Our C&MD Committee reviews the information provided from internal sources as well as the information provided by our independent compensation consultant to select our peer group based on comparable companies that approximate (1) our scope of business, including revenues and market capitalization, (2) our global geographical reach, (3) our research-based business with multiple marketed products and (4) a comparable pool of talent for which we compete.
The peer group for determining our 2018 compensation decisions consisted of biotechnology and pharmaceutical
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companies, as we compete with companies in both of these sectors for executive talent.
| Biotechnology Peers |
Alexion Pharmaceuticals, Inc. Amgen Inc. Celgene Corporation Gilead Sciences Inc. Vertex Pharmaceuticals International, Inc. |
| Pharmaceutical Peers |
AbbVie Inc. Allergan plc Bristol-Myers Squibb Company Eli Lilly and Company Merck & Co, Inc. Mylan N.V. Bausch Health Companies (f/k/a Valeant Pharmaceuticals Incorporated) |
For each of the companies in our peer group, where available, we analyze the company’s Compensation Discussion and Analysis and other data publicly filed during the prior year to identify the executives at such companies whose positions are comparable to those held by our executive officers. We then compile and analyze the data for each comparable position. Our competitive analysis includes the structure and design of the compensation programs as well as the targeted value of the compensation under these programs.
For our executive officers other than our CEO, we may supplement the data from our peer group with published compensation surveys where appropriate. For 2018, consistent with past years, we used theWillisTowersWatson U.S. CDB Pharmaceutical and Health Sciences Executive Compensation Database survey (which we refer to as the Willis Towers Watson survey). We chose the Willis Towers Watson survey because of the number of companies in our peer group that participate in it, the number of positions reported by the survey that continue to be comparable to our executive positions and the high standards under which we understand the survey is conducted (including data collection and analysis methodologies). All of the companies in our peer group are represented in a special cross-section of the Willis Towers Watson survey focused on our peer group, other than Bausch Health Companies (formally known as Valeant Pharmaceuticals Incorporated), which did not participate in the survey.
Our C&MD Committee determines the elements of compensation we provide to our executive officers. The elements of
our executive compensation programs and their objectives are as follows:
| Element | Objective(s) | |||||
Base Salary | • | Provides a fixed level of compensation that is competitive with the external market and reflects each executive’s contributions, experience, responsibilities and potential to contribute to our future success. | ||||
Annual Bonus Plan | • | Aligns short-term compensation with the annual goals of the Company. | ||||
| • | Motivates and rewards the achievement of annual Company and individual performance goals that support short- and long-term value creation. | |||||
Long-term Incentives | • | Aligns executives’ interests with the long-term interests of our stockholders by linking the value of awards to increases in our stock price. | ||||
| • | Motivates and rewards the achievement of stock price growth andpre-established corporate performance goals, including those with a longer-term focus. | |||||
| • | Promotes executive retention and stock ownership and focuses executives on enhancing long-term stockholder value. | |||||
Benefits | • | Promotes health and wellness. | ||||
| • | Provides financial protection in the event of disability or death. | |||||
| • | Providestax-beneficial ways for executives to save towards their retirement and encourages savings through competitive matches to executives’ retirement savings. | |||||
Our C&MD Committee determines the general mix of the elements of our executive compensation programs. It does not target a specific mix of value for the compensation elements within these programs in either the program design or pay decisions. Rather, our C&MD Committee reviews the mix of compensation elements to ensure an appropriate level of performance-based compensation is apportioned to the short-term and even more to the long-term to ensure alignment with our business goals and performance.
Additionally, our C&MD Committee believes the greater the leadership responsibilities, the greater the potential impact an individual will have on Biogen’s future strategic direction. Therefore, for our executive officers, including our NEOs, additional emphasis is placed on performance-based compensation, with a particular emphasis on LTI.
The 2018 compensation mix for Mr. Vounatsos and our other NEOs was highly performance-based andat-risk; 91% of 2018 compensation was performance-based for Mr. Vounatsos and 84% of 2018 compensation was
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performance-based for our other NEOs, assuming target level achievement of applicable corporate performance goals and with LTI awards measured at target grant date
values, and excluding theone-time transition awards of RSUs granted to Dr. Ehlers, Ms. Alexander and Dr. McKenzie, as described in further detail below.
Performance Goals and Target Setting Process
Early each year, our C&MD Committee reviews and establishes the pay levels of each element of total compensation for our executive officers. Total compensation is comprised of base salary, annual bonus and LTI awards.
As part of this process, our C&MD Committee reviews the mix of compensation elements to ensure our performance-based compensation is apportioned appropriately and aligns with our business goals and performance. Our C&MD Committee also ensures that the performance metrics and goals are aligned with the annual business plan approved by our Board of Directors so there is full alignment of executive incentive goals with the goals that have been established for the year. Executive officers are also evaluated based on qualitative factors, such as individual, strategic and leadership achievements. The use of both quantitative and qualitative metrics, as well as the weighting of such metrics, effectively mitigates the impact of a single risk, such as dependence on drug pricing, pipeline performance or market share, on overall compensation.
| 40 | | |
| 5 | Executive Compensation Matters (continued) |
A summary of the process our C&MD Committee follows in setting compensation is described below:
|
• Our C&MD Committee closely monitors progress against the performance goals throughout the year and engages in dialogue with management on such progress. |
• Reviews and discusses the performance of our executive officers against their respective performance goals. • Reviews and discusses the Company, team and individual performance of each executive officer, other than our CEO, as assessed by our CEO. • Reviews and discusses our CEO’s recommended compensation levels for each executive officer, other than himself, in the context of such executive officer’s contributions to the Company and the other factors described above. • Approves the final compensation for each executive officer other than our CEO, including base salary, annual bonus and LTI awards. • Reviews CEO compensation and recommends to our Board of Directors for approval the compensation of our CEO, including base salary, annual bonus and LTI awards. | ||
• Our C&MD Committee and our CEO discuss potential goals for the upcoming year that are tied to the short- and longer-term strategic goals of the Company as well as individual goals for our executive officers. • The annual business plan for the year is approved by our Board of Directors. As part of the approval process, our Board considers many factors relevant to our business, reputation and strategy, including pipeline and business development, pricing and patient access, market expectations and intellectual property risk. • Our C&MD Committee ensures that the performance goals and targets under our compensation plans are aligned with the approved annual business plan. • Payout levels for each performance goal are established by management and approved by our C&MD Committee. • The performance goals are then applied to the compensation opportunities for our executive officers, including NEOs, so that there is full alignment of executive incentive goals with the goals that have been established for the year. • Our C&MD Committee also reviews base salaries, bonus and LTI planning ranges, plan designs, benefits and peer group data. |
| 41 | | |
| 5 | Executive Compensation Matters (continued) |
Our Board of Directors reviewed the base salaries of chief executive officers in our peer group and considered Mr. Vounatsos’ compensation mix, capabilities, performance and future expected contributions. Mr. Vounatsos’ base salary was set at $1,300,000, which positioned him below the market median when compared to the chief executive officers of our peer group.
Our C&MD Committee undertook a similar review when approving the base salaries for our other NEOs, which positioned them, on average, slightly below the market median compared to persons with comparable jobs within our peer group.
The annual base salary of each of our NEOs in 2018, compared to 2017, was as follows:
| Name | 2018 Salary | 2017 Salary | % Increase(1) | |||||||||
M. Vounatsos | $ | 1,300,000 | $ | 1,100,000 | 18.2% | |||||||
J. Capello(2) | $ | 750,000 | $ | 750,000 | n/a | |||||||
M. Ehlers | $ | 834,094 | $ | 794,375 | 5.0% | |||||||
S. Alexander | $ | 749,177 | $ | 723,842 | 3.5% | |||||||
P. McKenzie | $ | 633,938 | $ | 603,750 | 5.0% | |||||||
| (1) | Percentage increase reflects the annual merit increase and, in the case of Mr. Vounatsos, also includes a market adjustment. |
| (2) | Mr. Capello was hired in November 2017. The initial determination of his base salary took into account the Company’s peer group data. |
2018 Performance-Based Plans and Goal Setting
Our executive compensation programs place a heavy emphasis on performance-based compensation.
We maintain a short-term incentive plan, known as our annual bonus plan, as well as an LTI plan.
Awards to our NEOs under our annual bonus plan have been made under our 2008 Performance-Based Management Incentive Plan, and awards under our LTI plan are granted under our 2017 Omnibus Equity Plan.
Awards made under our annual bonus plan are directly tied to the achievement of our corporate performance goals, which are aligned with the Company’s short- and long-term strategic plans, as well as individual performance goals.
Awards made under our LTI plan are directly tied to the performance of the price of our common stock, which aligns our executives’ long-term interests with the interests of our stockholders. A portion of our LTI awards are also tied to the Company’s financial performance, as described below under “Long-Term Incentives – 2018 PSUs.”
In setting our annual goals under our short- and long-term incentive plans, in addition to our internal forecasts, we consider analysts’ projections for our performance and the performance of companies in our peer group, as well as broad economic and industry trends. We strive to establish challenging targets that result in payouts at or above target levels only when Company performance warrants it. Our C&MD Committee is responsible for reviewing and approving our annual goals, targets and levels of payout (e.g., threshold, target and maximum) for our executive incentive compensation plans and for reviewing and determining actual performance results at the end of the applicable performance period.
In setting and approving the corporate performance goals for our executive officers and for the Company under both the short- and long-term incentive plans, our C&MD Committee also considers the alignment of such goals to our business plan, the degree of difficulty of attainment and the potential for the goals to encourage inappropriate risk-taking. Our C&MD Committee has determined that the structures of our executive compensation programs do not put our patients, investors or the Company at any material risk.
Annual Bonus Plan
Our annual bonus plan is a cash incentive plan that rewards near-term financial, strategic and operational performance. Our C&MD Committee reviews the annual target bonus opportunities for each executive officer by position each year to ensure such opportunities remain competitive.
No significant changes were made in 2018 to the target annual bonus opportunities, as a percentage ofyear-end annual base salary, for any of our NEOs other than Mr. Vounatsos, whose target annual bonus opportunity was market adjusted and increased from 125% of base salary in 2017 to 140% of base salary in 2018. In accordance with our policy, target annual bonus opportunities for all of our other NEOs in 2018 were determined based on their positions as Executive Vice Presidents.
| 42 | | |
| 5 | Executive Compensation Matters (continued) |
The target annual bonus opportunity as a percentage ofyear-end annual base salary each of our NEOs in 2018 compared to 2017 was as follows:
| Name | 2018 Target | 2017 Target | ||||||
M. Vounatsos | 140% | 125% | ||||||
J. Capello | 70% | 70% | ||||||
M. Ehlers | 70% | 70% | ||||||
S. Alexander | 70% | 70% | ||||||
P. McKenzie | 70% | 70% | ||||||
2018 Annual Bonus Plan Design
Awards for our NEOs under our 2018 annual bonus plan were based on the achievement of Company performance goals and individual performance goals.
At the beginning of 2018, our C&MD Committee set multiple Company performance goals for our 2018 annual bonus plan and provided for a payout multiplier, which we refer to as the Company Multiplier, ranging from 0% to 150%, for each Company goal based on the determination of the level of achievement of each goal and application of the weighting assigned to each goal, which determined the Company Multiplier applied to the bonus calculation.
The Company Multiplier ranged from 0% to 150% as follows:
Performance Multipliers | Below Threshold | Threshold | Target | Max | ||||
Company | 0% | 50% | 100% | 150% | ||||
In addition, our 2018 annual bonus plan payouts were also based on an assessment of each NEO’s individual performance, taking into account his or her achievement of individual performance goals. Evaluating individual performance allows our C&MD Committee the discretion to increase or decrease each NEO’s bonus amount based on the NEO’s performance by applying an individual performance multiplier, ranging from 0% to 150%, which we refer to as the Individual Multiplier.
We determined the individual annual bonus payments for 2018 using the following calculation:
Our 2018 annual bonus plan provided that if the Company Multiplier was less than 50%, there would be no payout, regardless of individual performance, further strengthening ourpay-for-performance philosophy. Further, because the
Individual Multiplier and the Company Multiplier each have a maximum of 150%, the combined multiplier result for each NEO could not exceed 225%.
2018 Company Performance Goals and Results
Company performance goals were established at the start of 2018 with assigned weightings that reflected the Company’s focus on attaining both financial and strategic goals (pipeline performance, MS leadership, continued SMA launch excellence and enhancing our strategic alliances).
The goals and weightings we selected reflect the importance of linking reward opportunities to both near-term results and our progress in achieving longer-term goals.
The strategic goals we selected in 2018 were designed to measure the achievement of our annual strategic priorities relating to our commercial opportunities and pipeline progress. Our financial performance goals were based on the Company’s annual operating plan and long-range plan approved by our Board of Directors and with reference to analyst consensus for Biogen revenues andNon-GAAP diluted EPS based on the most current analyst reports at the time we set our targets.
The following table presents our financial targets relative to analysts’ consensus for 2018:
(1) Please see “2018 Annual Bonus Plan Company Performance Targets and Results Table” below for more details.
(2) Wall Street figures reflect estimates made in January 2018 for the Biogen fiscal year ending December 31, 2018.
(3) ReflectsNon-GAAP diluted EPS.
| 43 | | |
| 5 | Executive Compensation Matters (continued) |
2018 Annual Bonus Plan Company Performance Targets and Results Table
Set forth below is a summary of the Company performance goals and weightings that our C&MD Committee established for our 2018 annual bonus plan and the degree to which we attained these Company performance goals. As described below, the Company Multiplier for the 2018 Annual Bonus Plan was 131%, reflecting the strong performance relative to ourpre-established goals.
| Performance Range | ||||||||||||||||||||||||
Company Goals
| Weight
| Threshold
| Target
| Max
| Results
| Company Multiplier
| ||||||||||||||||||
FINANCIAL PERFORMANCE | ||||||||||||||||||||||||
Revenues | 20 | % | $ | 12,310M | $ | 12,780M | $ | 13,250M | $ | 13,363M | (1) | 150.0 | % | |||||||||||
Non-GAAP diluted EPS | 20 | % | $ | 23.47 | $ | 24.74 | $ | 26.01 | $ | 26.89 | (1) | 150.0 | % | |||||||||||
MARKET PERFORMANCE | ||||||||||||||||||||||||
Achieve Global MS Market Share | 15 | % | | Specific market goals are not disclosed for competitive reasons |
| | Below Goal(2) |
| 91.8 | % | ||||||||||||||
MS Leader in Customer Trust and Value Survey | 10 | % | | Specific market goals are not disclosed for competitive reasons |
| | Above Goal(2) |
| 125.0 | % | ||||||||||||||
Achieve Global SMA Market Share | 10 | % | | Specific market goals are not disclosed for competitive reasons |
| | Above Goal(2) |
| 134.9 | % | ||||||||||||||
PIPELINE DEVELOPMENT | ||||||||||||||||||||||||
Build and Advance Total Pipeline | 10 | % | | Specific pipeline goals are not disclosed for competitive reasons |
| | Above Goal(3) |
| 110.0 | % | ||||||||||||||
Achieve Aducanumab Phase 3 Enrollment | 5 | % | | Specific enrollment goals are not disclosed for competitive reasons |
| | Above Goal(4) |
| 105.0 | % | ||||||||||||||
COLLABORATION | ||||||||||||||||||||||||
Improve and Expand Key Strategic Alliances | 10 | % | | Specific strategic alliance goals are not disclosed for competitive reasons | | | Above Goal(5) |
| 150.0 | % | ||||||||||||||
Company Multiplier |
| 131.0 | %* | |||||||||||||||||||||
| * | Numbers may not recalculate due to rounding. |
Notes to 2018 Annual Bonus Plan Company Performance Targets and Results Table
| (1) | These financial measures were based on our publicly reported revenues of $13,453 million and our publicly announcedNon-GAAP diluted EPS of $26.20, as adjusted as follows: for purposes of our 2018 annual bonus plan, revenues andNon-GAAP diluted EPS were adjusted to neutralize the effects of foreign exchange rate fluctuations.Non-GAAP diluted EPS was further adjusted to add back $1.21 to reflect the impact of additional research and development expense recognized in 2018 resulting from the 2018 Ionis Agreement and $0.07 to neutralize the unfavorable impact of the worldwide withdrawal of ZINBRYTA, partially offset by the subtraction of $0.59 related to higher than originally contemplated stock repurchases in 2018, as these charges were not originally contemplated at the time the Company performance goals were determined. |
| (2) | Achievement of market goals for MS was below goal and achievement of MS leader and market goals for SMA were above goals. Specific details are not disclosed for competitive reasons. |
| (3) | The Company continued to expand andre-shape its pipeline ofpre-clinical and clinical stage programs through the advancement of internal programs, external business development activities and exceeding expectations with respect to the level of confidence in and momentum of its clinical stage portfolio. Specific details are not disclosed for competitive reasons. |
| (4) | Aducanumab Phase 3 clinical trial patient enrollment was above goal. Specific details are not disclosed for competitive reasons. |
| (5) | Key strategic alliance and acquisition activities were above goal. Specific details are not disclosed for competitive reasons. |
| 44 | | |
| 5 | Executive Compensation Matters (continued) |
2018 Individual Performance Goals and Results
The Individual Multiplier reflects each named executive officer’s overall individual performance rating as part of our performance assessment process. Unlike our formulaic calculation of corporate performance against Company performance goals in determining the Company Multiplier, each named executive officer’s Individual Multiplier is based on a subjective evaluation of his or her overall performance and consideration of the achievement of individual goals established at the beginning of the year. Goals may be both quantitative and qualitative. For 2018 Mr. Vounatsos recommended to our C&MD Committee an Individual Multiplier for each named executive officer other than himself based on his assessment of their individual contributions for the full year. Our C&MD Committee considered all of the information presented, discussed our CEO’s recommendations with him and its independent compensation consultant and applied its judgment to determine the Individual Multiplier for each named executive officer. Our Board of Directors determined Mr. Vounatsos’ Individual Multiplier based on its assessment of his performance.
In its evaluation, our C&MD Committee assigned Individual Multipliers to our named executive officers of between 115% and 140% based on the following accomplishments during 2018:
Michel Vounatsos
Jeffrey D. Capello
Michael Ehlers
Susan H. Alexander
Paul F. McKenzie
| 45 | | |
| 5 | Executive Compensation Matters (continued) |
In addition, our C&MD Committee reviews on a qualitative basis each named executive officer’s other contributions to the Company and our business, leadership competencies and relative performance among our named executive officers.
2018 Annual Bonus Plan Awards
Our C&MD Committee determined that the final bonus awards under our 2018 annual bonus plan were as follows:
| Name | Year-end Salary (A) x | Target Bonus% (B) x | Company Multiplier (C) x | Individual Multiplier (D) = | Bonus Award (E) | |||||||||||||||
M. Vounatsos | $ | 1,300,000 | 140 | % | 131 | % | 140 | % | $ | 3,337,880 | ||||||||||
J. Capello | $ | 750,000 | 70 | % | 131 | % | 115 | % | $ | 790,913 | ||||||||||
M. Ehlers | $ | 834,094 | 70 | % | 131 | % | 120 | % | $ | 917,837 | ||||||||||
S. Alexander | $ | 749,177 | 70 | % | 131 | % | 125 | % | $ | 858,744 | ||||||||||
P. McKenzie | $ | 633,938 | 70 | % | 131 | % | 135 | % | $ | 784,784 | ||||||||||
| Terms | Performance Stock Units (PSUs) | Market Share Units (MSUs) | ||||
Proportion of Annual Target Value | 50% | 50% | ||||
| Settlement | 60% stock settled | 40% cash settled | 100% stock settled | |||
| Performance Period(s) | 3 years (2018-2020) | 1 year (each of 2018, 2019, 2020) | 1 year, 2 years, 3 years (from grant date) | |||
Metrics and Weighting | AdjustedNon-GAAP diluted EPS: 30%
Pipeline Milestone Performance: 30% | Adjusted Free Cash Flow: 28%
Revenues: 12% | Stock Price: 100% | |||
Threshold / Maximum Payout (% of Target Award) | 50% / 200% | 50% / 200% | 50% / 200% | |||
| Vesting | 3-year Cliff Vesting | 3-year Cliff Vesting | Annual Ratable Vesting over 3 years (1/3 per year) | |||
All annual LTI awards granted to our executives are performance-based and designed to reward long-term Company performance.
Our executive annual LTI program for 2018 consisted of PSUs and MSUs, with the annual LTI total target grant value of awards being split evenly between PSUs and MSUs. The PSUs we awarded to executive officers are performance-based RSUs that are settled, as applicable, in cash and shares of our common stock. The MSUs we awarded to executive officers are performance-based RSUs that are settled in shares of our common stock. The performance conditions applicable to these PSUs and MSUs are described in further detail below.
Our annual LTI target grant values are differentiated based on an executive’s individual performance, potential future contributions and market competitiveness, as well as other factors. In determining the annual LTI target grant value, our C&MD Committee reviews LTI awards of our peer group and also reviews the total compensation of our executive officers against our peer group. In general, we have a heavier weighting in executive compensation mix towards LTI awards. On average, annual LTI target grant values for our NEOs position their total compensation at or around the median values of our peer group in cases where there are comparable positions at the peer companies.
| 46 | | |
| 5 | Executive Compensation Matters (continued) |
We have an established annual LTI grant practice where LTI grants are made following the completion of our internal performance reviews of our executive officers as well as our external market review of equity practices of our peer group, including the data from the Willis Towers Watson survey described above. Since 2004 we have made our annual LTI grants in February of each year following our annual earnings release.
We generally grant time-based RSUs in lieu of PSUs at the time an executive is hired if employment commences after June 30th. These grants are generally granted on the first trading day of the month following the date of hire. From time to time, we also grant time-based RSUs to recognize extraordinary contributions to the Company or for transition or retention purposes.
In 2018 the annual LTI target grant values for our NEOs were as follows:
| Name | Annual LTI Grant Value | |||
M. Vounatsos | $11,500,000 | |||
J. Capello(1) | n/a | |||
M. Ehlers(2) | $ 3,750,000 | |||
S. Alexander(2) | $ 3,200,000 | |||
P. McKenzie(2) | $ 3,000,000 | |||
Notes to the 2018 Annual LTI Awards Table
| (1) | In lieu of a 2018 annual LTI award, Mr. Capello received a new hire grant in January 2018, which consisted of PSUs and MSUs with an aggregate grant date target value of $3.0 million. The initial determination of these awards took into account the Company’s peer group data. |
| (2) | In addition to the annual LTI award, Dr. Ehlers, Ms. Alexander and Dr. McKenzie each received aone-time transition award of RSUs, as described in further detail below. |
The actual value that will be realized from PSU awards depends on the degree of achievement of performance goals, with 60% of the PSUs (based on the grant date target value) settled in shares of our common stock based upon achievement of cumulative three-year financial and pipeline metrics and the remaining 40% of the PSUs settled in cash based upon the achievement of two annual financial metrics that are determined at the beginning of each relevant year. The actual value that will be realized from MSU awards depends on our30-day average common stock price growth between the grant date and each of the dates such awards vest. Our common stock price is influenced by the Company’s performance as well as external market factors.
2018 PSUs
PSUs comprised 50% of our executives’ target LTI for 2018. PSUs are performance-based RSUs that have three-year cliff vesting in furtherance of the Company’s long-termpay-for-performance philosophy and to encourage employee retention. PSUs align executive compensation to Company goals through performance against a combination of financial and pipeline milestone performance metrics. The actual value (if any) of PSUs will not be realized by the NEOs until the three-year period ends and then only if the applicable performance goals are achieved.
For our 2018 PSU awards, 60% of the PSUs (based on the grant date target value) will be settled in shares of our common stock based on achievement of financial and pipeline performance goals over a three-year performance period (the 2018 Stock-Settled PSUs). The remaining 40% of the PSUs will be settled in cash based on the achievement of three sets ofone-year financial goals (the 2018 Cash-Settled PSUs) and continued employment through the vesting date. Our 2018 PSU awards are scheduled to vest in February 2021.
For our 2018 PSU awards, the number of PSUs earned at the end of the three-year performance period will be determined as follows:
In designing our 2018 PSU LTI program, our C&MD Committee acknowledged the need to balance driving long-term performance and investing for the future with achieving key milestones along the way. Cash payments are primarily aligned with and reward more recent performance, while equity awards encourage our executives to continue to deliver results over a longer period of time and also serve as a retention tool. Accordingly, our C&MD Committee determined that moving compensation for our executive officers further away from cash and towards equity awards with longer-term goals would further align their interests with those of Biogen’s stockholders in creating long-term stockholder value.
| 47 | | |
| 5 | Executive Compensation Matters (continued) |
2018 PSU Awards Table
Set forth below is a summary of the performance metrics and weightings that our C&MD Committee established for our 2018 PSU awards and the degree to which we achieved the performance goals for the 2018 tranche of the 2018 Cash-Settled PSUs. Based on the results outlined in the table below, the multiplier for the 2018 tranche of the 2018 Cash-Settled PSUs was 192%.
| Percentage of PSU Award | Percentage of PSU Target | Performance Metrics | Performance Metrics Weight | Performance Period | Target Performance | Actual Performance | ||||||||||
Stock- Settled: 60% | 60% / 30% | Adjusted Non-GAAP diluted EPS Pipeline Milestone Performance | 30% 30% | 2018-2020 2018-2020 | Specific goals are not disclosed for competitive reasons | |||||||||||
Cash- Settled: 40% | 40% / 20% | Adjusted Free Cash Flows Revenues | 28% 12% | 2018 2019 2020 2018 2019 2020 | $ 2.9B Target set at beginning of 2019 Target set at beginning of 2020 $ 12.8B Target set at beginning of 2019 Target set at beginning of 2020 | $ 4.0B(1) TBD TBD $ 13.4B(2) TBD | ||||||||||
Notes to the 2018 PSU Awards Table
| (1) | This financial measure was based on ourNon-GAAP free cash flows, as adjusted to add back $256 million to reflect the cash impact of additional research and development expense recognized in 2018 resulting from the 2018 Ionis Agreement, $16 million to neutralize the unfavorable cash impact of the worldwide withdrawal of ZINBRYTA and $33 million related to higher than originally contemplated stock repurchases in 2018, partially offset by the subtraction of $235 million to reflect tax payments made in connection with tax reform, as these charges were not originally contemplated at the time these performance goals were determined. |
| (2) | This financial measure was based on our publicly reported revenues of $13.5 billion, as adjusted to neutralize the effects of foreign exchange rate fluctuations. |
The 2018 Stock-Settled PSUs metrics were approved by our C&MD Committee with equal weighting assigned to each metric. The two metrics selected were the achievement of a cumulative three-year adjustedNon-GAAP diluted EPS and pipeline milestone performance, in each case, for the three-year period of 2018 through 2020.
The 2018 Cash-Settled PSUs financial metrics are adjusted free cash flows and revenues. At the beginning of each year during the performance period for our 2018 PSU awards,
our C&MD Committee will approve the targets for each of these financial metrics for such year. Our C&MD Committee decided that because of the nature of our business, in which operating metrics can potentially be impacted positively or negatively by events outside of the control of executives, the design of the PSU program would be based, in part, on the use of threeone-year financial goals.
| 48 | | |
| 5 | Executive Compensation Matters (continued) |
In order to further motivate our executives to drive the organization toward the achievement of these goals, we provide for a maximum payout of 200% for our 2018 PSU awards. Participants may ultimately earn between 0% and 200% of the target number of PSUs granted based on the degree of actual performance goal achievement, generally subject to continued service with the Company.
2018 MSUs
MSUs comprised 50% of our executives’ target LTI for 2018. MSUs are performance-based RSUs that are earned based on our common stock price performance from the date of grant to each of the three annual vesting dates. On each vesting date, the performance multiplier is derived based on the stock price growth measured from the grant date to such vesting date using the average closing stock price for the 30 calendar days following and including the grant date and 30 calendar days prior to and including such vesting date for MSUs granted in 2018.
Participants may ultimately earn between 0% and 200% of the target number of MSUs awarded based on actual stock performance. The maximum payout percentage of MSUs granted in 2018 is consistent with those granted in 2017 (200%). Once the performance multiplier is determined, it is applied to the target number of MSUs granted to each executive and can increase or decrease the overall number of MSUs earned based on stock price performance.
MSU Illustration
The three-year service vesting period ties executive compensation directly to our common stock price performance, as both the MSUs earned and the value actually received in respect of MSUs are dependent on the performance of our common stock over the vesting period. On each vesting date, the earned MSUs are settled in shares of our common stock.
The following table shows the vesting date, performance period and performance multiplier applied for MSUs vesting in 2018 and 2019:
| Grant Date | Vesting Date | Performance Period | Performance Multiplier | |||||||
2/2018 | 2/2019 | 1 year | 114% | |||||||
2/2017 | 2/2019 | 2 years | 124% | |||||||
| 2/2018 | 1 year | 126% | ||||||||
2/2016 | 2/2019 | 3 years | 134% | |||||||
| 2/2018 | 2 years | 132% | ||||||||
2018One-Time Transition Awards
As part of our 2018 LTI program change and transition plan, our C&MD Committee decided to grantone-time transition awards in the form of time-based RSUs in February 2018 to certain executive officers, excluding Messrs. Vounatsos and Capello, which vest over atwo-year period, with 33% vesting on the first anniversary of the grant date and 67% vesting on the second anniversary of the grant date. These awards were intended to help mitigate the impact on executives’ compensation and cash flow disruption due to the program changes, including the change to the three-year cliff vesting schedule applied to the PSU awards discussed above compared to the annual installment vesting over three years that applied to the CSPUs that we previously granted.
In 2018 theone-time transition awards of RSUs for our NEOs were as follows:
| Name | Grant Date Value | |
M. Vounatsos | n/a | |
J. Capello | n/a | |
M. Ehlers | $ 1,500,000 | |
S. Alexander | $ 1,280,000 | |
P. McKenzie | $ 1,200,000 | |
We maintain a Supplemental Savings Plan (SSP), which is anon-qualified deferred compensation plan covering our executive officers and other eligible employees in the U.S. We offer the SSP as part of the retirement savings component of our benefits program. We designed the SSP to be competitive with thenon-qualified deferred compensation plans offered by companies in our peer group at that time. Details of the SSP are discussed under the heading “2018Non-Qualified Deferred Compensation” below.
| 49 | | |
| 5 | Executive Compensation Matters (continued) |
In addition to eligibility for the benefit programs generally provided to all employees, such as our employee stock purchase plan, 401(k) plan and medical, dental, vision, life and disability insurance, we provide certain supplemental benefits to our executives. These benefits include:
Lynn Schenk
9
Corporate
Governance
Assists our Board of Directors in assuring sound corporate governance practices and identifying qualified nominees to our Board of Directors and its committees.
Alexander J. Denner (Chair)
Brian S. Posner
Eric K. Rowinsky
11
Finance
Assists our Board of Directors with oversight of our financial strategy, policies and practices.
Brian S. Posner (Chair)
Alexander J. Denner
Robert W. Pangia
Stelios Papadopoulos
Stephen A. Sherwin
8
Risk
Assists our Board of Directors with oversight of management’s exercise of its responsibility to assess and manage risks associated with our business and operations.
For more information on our Board oversight of risks, please see “Board Risk Oversight” below.
Lynn Schenk (Chair)
Caroline D. Dorsa
Nancy L. Leaming
Stephen A. Sherwin
5
Science and
Technology
Assists our Board of Directors with oversight of our key strategic decisions involving research and development matters and our intellectual property portfolio.
Richard C. Mulligan (Chair)
Stelios Papadopoulos
Eric K. Rowinsky
Stephen A. Sherwin
8
| † | Determined by our Board of Directors to be an audit committee financial expert. |
| • | Attendance at Board and Committee Meetings. No director attended fewer than 75% of the total number of meetings of our Board of Directors and the committees on which he or she served during 2018. |
| • | Executive Sessions. Under our Corporate Governance Principles, the independent directors of our full Board of Directors are required to meet without management present at least four times each year and may also meet without management present at such other times as determined by our Chairman or if requested by at least two other directors. In 2018 the independent directors of our full Board of Directors met without management present four times. Each committee of our Board of Directors also had numerous executive sessions throughout the year. |
| • | Attendance at Stockholder Meeting. We expect all of our directors and director nominees to attend our annual meetings of stockholders. All of our directors attended our 2018 annual meeting of stockholders. |
| 20 | | |
| 3 | Board of Directors (continued) |
This section describes our compensation program for ournon-employee directors and shows the compensation paid to or earned by ournon-employee directors during 2018. Mr. Vounatsos, our Chief Executive Officer, receives no compensation for his service on our Board of Directors.
Retainers, Meeting Fees and Expenses
The following table presents the annual retainers and meeting fees for allnon-employee members of our Board of Directors in effect in 2018, which were unchanged from 2017:
| Retainers | Meeting Fees | |||||||||
Annual Board Retainer
|
$
|
65,000
|
|
Board of Directors Meetings (per meeting day):
| ||||||
Annual Retainers (in addition to Annual Board Retainer):
|
In-person attendance
|
$
|
2,500
|
| ||||||
Telephonic attendance
|
$
|
1,500
|
| |||||||
Independent Chairman of the Board
|
$
|
75,000
|
|
Committee Meetings (per meeting attended by each such committee member in person or telephonically)
|
$
|
1,500
|
| |||
Audit Committee Chair
|
$
|
25,000
|
|
Attendance at Annual Science and Technology Committee Portfolio Review (per day)
|
$
|
1,500
|
| |||
Compensation and Management
|
$
|
20,000
|
| |||||||
Corporate Governance Committee Chair
|
$
|
15,000
|
| |||||||
Finance Committee Chair
|
$
|
15,000
|
| |||||||
Risk Committee Chair
|
$
|
15,000
|
| |||||||
Science and Technology Committee Chair
|
$
|
15,000
|
| |||||||
Audit Committee Member (other than Chair)
| $
| 5,000
|
| |||||||
Ournon-employee directors are also eligible to be paid a fee of $1,000 for each full day of service to the Company other than in connection with meetings of our Board of Directors or one of its committees.
Ournon-employee directors may defer all or part of their cash compensation under our Voluntary Board of Directors Savings Plan, which is similar to our Supplemental Savings Plan described in the narrative preceding the “2018Non-Qualified Deferred Compensation Table” in Part 5 – Executive Compensation Matters of this Proxy Statement, but without any Company matching contributions. If anon-employee director chooses to defer compensation under our Voluntary Board of Directors Savings Plan, his or her notional account under the plan will periodically be credited with amounts of deemed investment earnings as if the deferred compensation was actually invested in the notional investment(s) selected by the director or in a default investment if the director does not make a selection. These notional investment options include the mutual funds available under our 401(k) plan as well as a fixed rate option which earns a rate of return determined each year by the Company’s retirement committee. For 2018non-employee
director deferrals notionally invested in the fixed rate option, this rate of return was set at 5%. Deferrals notionally invested in the fixed rate option continue to be credited with the rate of return that was in effect during the year of deferral.
Non-employee directors are also reimbursed for actual expenses incurred in attending meetings of our Board of Directors and any of its committees, as well as service to our Board of Directors or any of its committees that is unrelated to such meetings.
Awards Under OurNon-Employee Directors Equity Plan
Ournon-employee directors receive awards under our 2006Non-Employee Directors Equity Plan (theNon-Employee Directors Equity Plan). TheNon-Employee Directors Equity Plan was initially approved by our stockholders at our 2006 annual meeting of stockholders. In 2015 our stockholders approved an amendment to extend the term of the plan until June 10, 2025.
| 21 | | |
| 3 | Board of Directors (continued) |
General Provisions of theNon-Employee Directors Equity Plan
Non-employee directors receive an annual award under theNon-Employee Directors Equity Plan effective on the date of each annual meeting of stockholders (or a pro rata award upon election other than at an annual meeting of stockholders). Under theNon-Employee Directors Equity Plan, a maximum of 17,500 shares of our common stock (or 30,000 shares for the independent Chairman of the Board) may be granted to anon-employee director pursuant to such annual awards each calendar year. Annual awards vest on theone-year anniversary of the date of grant or over a longer period determined in the discretion of Board of Directors.
Awards tonon-employee directors are recommended by our C&MD Committee and approved by our Board of Directors, with the independent Chairman recused from discussion and voting upon his own awards.
Awards granted under theNon-Employee Directors Equity Plan are subject to accelerated vesting upon termination of a director’s service by reason of death, disability or retirement and upon a change in control (as such terms are defined in theNon-Employee Directors Equity Plan). In addition,non-employee director awards will become fully vested upon an involuntary termination of a director’s service within two years following certain mergers or other corporate transactions, as described in theNon-Employee Directors Equity Plan.
Awards During 2018
In June 2018 our C&MD Committee recommended, and our Board of Directors approved, annual awards with a grant date fair value of approximately $270,000 for eachnon-employee director and an additional annual award with a grant date fair value of approximately $175,000 for the independent Chairman. These annual awards were below the limits set forth in theNon-Employee Directors Equity Plan described above and were consistent with the awards made in 2017. The June 2018 annual awards were made in the form of restricted stock units (RSUs) vesting in full on the first anniversary of the grant date, generally subject to the director’s continued service.
Periodically we review our compensation program for ournon-employee directors in relation to those of the peer
group used for executive compensation purposes (as described below in our Compensation Discussion and Analysis) to assess its competitiveness and appropriateness. While the grant date fair values of the equity awards granted in 2018 were above the median of our peer group, the annual retainer for ournon-employee directors was below the 25th percentile of that same peer group. Overall, the total compensation levels were market competitive. Our C&MD Committee and our Board of Directors believe that a somewhat heavier weighting towards equity awards than the weighting of equity awards of our peer group companies is appropriate because it further aligns the interests of ournon-employee directors with those of our stockholders.
Ournon-employee directors must usepre-established trading plans to sell shares of our common stock from their personal accounts. Trading plans may only be entered into during an open trading window and when the director is not in possession of materialnon-public information about the Company. We require a waiting period following the establishment of a trading plan before any trades may be executed. Our policy is designed to provide safeguards while allowing ournon-employee directors to have an opportunity to realize the value intended by the Company in granting equity-based awards.
Non-Employee Director Stock Ownership Guidelines
We maintain the following stock ownership guidelines for ournon-employee directors:
Position | Stock Ownership Requirement(1) | |
Independent Chairman | Number of shares equal in value to 5x the total annual cash retainer for (i) the independent Chairman position and (ii) othernon-employee Board members | |
Non-Employee Directors (excluding Chairman) | Number of shares equal in value to 5x the annual cash retainer fornon-employee Board members | |
| (1) | Eachnon-employee director has five years from the date of initial election or appointment to meet the stock ownership requirement. All of our currentnon-employee directors meet the stock ownership requirement. |
| 22 | | |
| 3 | Board of Directors (continued) |
Name (a) |
Fees Earned or Paid in Cash(1) (b) | Stock Awards(2) (c) |
Change in Pension Value and Nonqualified Deferred Compensation Earnings(3) (d) | All Other Compensation(4) (e) | Total (f) | |||||||||||
Alexander J. Denner
|
$
|
139,000
|
|
$
|
269,447
|
|
—
|
$5,000
|
$
|
413,447
|
| |||||
Caroline D. Dorsa
|
$
|
143,000
|
|
$
|
269,447
|
|
—
|
—
|
$
|
412,447
|
| |||||
Nancy L. Leaming
|
$
|
120,500
|
|
$
|
269,447
|
|
—
|
$10,280
|
$
|
400,227
|
| |||||
Richard C. Mulligan
|
$
|
138,500
|
|
$
|
269,447
|
|
—
|
—
|
$
|
407,947
|
| |||||
Robert W. Pangia
|
$
|
140,500
|
|
$
|
269,447
|
|
$72,763
|
—
|
$
|
482,710
|
| |||||
Stelios Papadopoulos
|
$
|
144,500
|
|
$
|
443,976
|
|
—
|
$25,000
|
$
|
613,476
|
| |||||
Brian S. Posner
|
$
|
158,000
|
|
$
|
269,447
|
|
—
|
$25,000
|
$
|
452,447
|
| |||||
Eric K. Rowinsky
|
$
|
138,500
|
|
$
|
269,447
|
|
—
|
—
|
$
|
407,947
|
| |||||
Lynn Schenk
|
$
|
134,000
|
|
$
|
269,447
|
|
—
|
$25,000
|
$
|
428,447
|
| |||||
Stephen A. Sherwin |
$ |
124,500 |
|
$ |
269,447 |
|
— |
$25,000 |
$ |
418,947 |
| |||||
Notes to the 2018 Director Compensation Table
| (1) | Includes $1,500 of fees received by each director in 2018 for fees earned in 2017 and $3,000 of fees earned by each of Dr. Denner, Mr. Posner and Dr. Rowinsky in 2018 but which were paid in 2019. |
| (2) | The amounts in column (c) represent the grant date fair value of RSU awards made in 2018 tonon-employee directors under theNon-Employee Directors Equity Plan, as described in the narrative preceding this table. These RSUs are scheduled to vest in full and be settled in shares on the first anniversary of the grant date, generally subject to continued service. Grant date fair values were computed in accordance with Accounting Standards Codification (ASC) 718 and determined by multiplying the number of RSUs awarded by the fair market value of the Company’s common stock on the relevant grant date. |
| (3) | The amounts in column (d) represent earnings under the Voluntary Board of Directors Savings Plan that are in excess of 120% of the average applicable federal long-term rate. The federal long-term rate for 2018 applied in this calculation is 3.06%, which was the federal long-term rate effective in January 2018 when the Fixed Rate Option (FRO) under this plan was established for 2018. Only Mr. Pangia has deferred compensation notionally invested in the FRO. |
| (4) | The amounts in column (e) represent the amount of matching contributions made in 2018 by the Biogen Foundation on behalf of the director pursuant to the terms of a matching gift program offered by the Biogen Foundation to all U.S. employees andnon-employee directors of Biogen. Under the matching gift program, the Biogen Foundation matches gifts to eligible U.S.-basednon-profit organizations, in accordance with the Biogen Foundation’s guidelines, up to an annual maximum per donor amount of $25,000 per calendar year and up to a program total of $1.5 million per calendar year. The matching contributions made by the Biogen Foundation are not taxable income to the director, and the director may not take any tax deductions for such matching contributions. |
| 23 | | |
| 3 | Board of Directors (continued) |
Director Equity Outstanding at 2018 FiscalYear-End
The following table summarizes the equity awards that were outstanding as of December 31, 2018, for each of thenon-employee directors serving during 2018.
Option Awards(1)
|
Stock Awards(2)
| |||||||
Name
|
Number of
|
Number of Shares or Units of Stock That Have Not Vested
| ||||||
Alexander J. Denner
|
—
|
880
| ||||||
Caroline D. Dorsa
|
—
|
880
| ||||||
Nancy L. Leaming
|
—
|
880
| ||||||
Richard C. Mulligan
|
—
|
880
| ||||||
Robert W. Pangia
|
6,114
|
880
| ||||||
Stelios Papadopoulos
|
—
|
1,450
| ||||||
Brian S. Posner
|
—
|
880
| ||||||
Eric K. Rowinsky
|
—
|
880
| ||||||
Lynn Schenk
|
—
|
880
| ||||||
Stephen A. Sherwin |
12,278 |
880 | ||||||
Notes to the Director Equity Outstanding at 2018 FiscalYear-End Table
| (1) | All stock option awards were granted to ournon-employee directors with aten-year term and vested in full on the first anniversary of the grant date. All outstanding stock options granted tonon-employee directors were fully vested and exercisable as of December 31, 2018. |
| (2) | Represents the number of RSUs awarded tonon-employee directors in 2018 under theNon-Employee Directors Equity Plan, as described in the narrative preceding the “2018 Director Compensation” table above. These RSU awards are scheduled to vest in full and be settled in shares on the first anniversary of the grant date, generally subject to continued service. |
Our Board of Directors believes that a fundamental part of risk management is understanding the risks that we face, monitoring these risks and adopting appropriate control and mitigation of these risks. As stated in our Corporate Governance Principles, our Board of Directors and its committees are responsible for “reviewing the Company’s significant risk exposures and steps taken by management to monitor and mitigate such exposure.” We also have a separate Risk Committee of our Board of Directors that assists our Board in its oversight of management’s exercise of its responsibility to assess and manage risk associated with the Company’s business and operations.
Our Board of Directors oversees the management of material risks facing the Company. Biogen is committed to fostering a company culture of risk-adjusted decision-making without constraining reasonable risk-taking and innovation. Our Board of Directors and its committees oversee our efforts to foster this culture. Our Board of Directors regularly receives information about our material strategic, operational, financial and compliance risks and management’s response to, and mitigation of, such risks. In addition, our risk management systems, including our risk assessment processes, internal control over financial reporting, compliance programs and internal and external auditing procedures, are designed to inform management and our Board of Directors about our material risks. As part of its risk oversight function, our Board of Directors and its committees review this framework, its operation and our strategies for generating long-term value for our stockholders to ensure that such strategies will not motivate management to take excessive risks.
Our Board of Directors also reviews enterprise risks and discusses them with our management, including issues relevant to our business, reputation and strategy, including intellectual property risk, pipeline and business development, pricing and patient access, legal and regulatory matters and manufacturing. In addition, our Board of Directors and its committees oversee elements of our culture. Management updates our C&MD Committee on our compensation practices and progress against strategies and objectives in the areas of management and leadership development and diversity as well as steps taken to address matters such as inappropriate workplace behavior, including harassment and retaliation. In addition, our Audit Committee is responsible for the oversight of our compliance program.
| 24 | | |
| 3 | Board of Directors (continued) |
In determining the allocation of risk oversight responsibilities, our Board of Directors and its committees generally oversee material risks within their identified areas of concern. Our Board of Directors and each of its committees meet regularly with management to ensure that management is exercising its responsibility to identify relevant risks and is adequately assessing, monitoring and taking appropriate action to mitigate risk. In the event a committee receives a report from members of management on areas of material risk to the Company, the Chair of the relevant committee reports on the discussion to the full Board of Directors at the next Board of Directors meeting. This enables our Board of Directors and its committees to coordinate their oversight of risk and identify risk interrelationships.
Our independent Chairman of the Board promotes effective communication and consideration of matters presenting significant risks to the Company through his role in developing our Board of Directors’ meeting agendas, advising committee chairs, chairing meetings of the independent directors and facilitating communications between independent directors and our Chief Executive Officer.
A summary of the key areas of risk oversight responsibility of our Board of Directors and each of its committees is set forth below:
Board or Committee | Area of Risk Oversight | |||
Board | • Corporate and commercial strategy and execution, pricing and reimbursement, competition and other material risks | |||
Audit | • Financial, accounting, disclosure, corporate compliance, distributors, insurance, anti-bribery and anti-corruption matters and other risks reviewed in its oversight of the internal audit and corporate compliance functions | |||
Compensation and Management Development | • Workforce matters, including harassment • Compensation policies and practices, including whether such policies and practices balance risk-taking and rewards in an appropriate manner as discussed further below | |||
Corporate Governance | • Corporate governance and board succession, director independence, potential conflicts of interest and related party transactions involving directors and executive officers | |||
Finance | • Financial, capital and credit risks | |||
Risk | • Risk governance framework and infrastructure designed to identify, assess, manage and monitor the Company’s material risks • Risk management policies, guidelines and practices implemented by Company management • Allocation of risk oversight responsibilities to our Board of Directors and its committees • Information technology, cybersecurity, environmental, health and sustainability and other material risks not allocated to our Board of Directors or another committee • Material government and other investigations and litigation | |||
Science and Technology | • Research and development activities, clinical development and drug safety and intellectual property | |||
The Compensation Discussion and Analysis (CD&A) section of this Proxy Statement describes our compensation policies, programs and practices for our named executive officers. Our goal-setting, performance assessment and compensation decision-making processes described in the CD&A generally apply to all employees. We offer a limited number of short-term cash incentive plans, with employees eligible for either our annual bonus plan or a sales incentive compensation plan. No employee is eligible to participate in more than one cash incentive plan at any time. Our annual bonus plan is consistently maintained for all participants globally, with the same Company performance goals, payout levels (as a percentage of target) and administrative provisions regardless of the participant’s job level, location or function in the Company. We also have a long-term incentive program that provides different forms of awards depending upon an employee’s level but is otherwise consistent throughout the Company.
| 25 | | |
| 3 | Board of Directors (continued) |
In the CD&A, we describe the risk-mitigation controls for our compensation programs. These controls include C&MD Committee review and approval of the design, goals and payouts under our annual bonus plan and long-term incentive program and each executive officer’s compensation (or, in the case of our Chief Executive Officer’s compensation, a recommendation of that compensation to our Board of Directors for its approval). In addition, we review the processes, controls and design of our sales incentive compensation plans.
The C&MD Committee, working with the independent compensation consultant, also conducts an annual assessment of potential risks related to our compensation policies, programs and practices. Among other factors, this risk assessment considers the form of compensation (i.e., award type, fixed versus variable and short-term versus long-term), pay alignment, performance measures and goals, payout maximums, vesting periods and C&MD Committee oversight and independence. This assessment is focused on (1) having an appropriate balance in our program structure to mitigate compensation-related risk with cash versus stock, short-term versus long-term measurement and financial versusnon-financial goals; and (2) policies and practices to mitigate compensation-related risk including recoupment of compensation, stock ownership guidelines, equity administration rules and insider-trading and hedging prohibitions.
Based on our assessment, we believe that, through a combination of risk-mitigating features and incentives guided by relevant market practices and Company-wide goals, our compensation policies, programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
| 26 | | |
| 4 |
Proposal 2 – Ratification of the Selection of Our Independent Registered Public Accounting Firm | ||||
Our Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit our consolidated financial statements. Our Audit Committee has selected PwC as our independent registered public accounting firm for the fiscal year ending December 31, 2019. PwC has served as our independent registered public accounting firm since 2003.
In order to assure continuing auditor independence, our Audit Committee periodically considers whether there should be a rotation of the independent registered public accounting firm. Further, in conjunction with the rotation of the auditing firm’s lead engagement partner required by applicable SEC rules, our Audit Committee and its Chair has in the past been, and in the future will be, directly involved in the selection of PwC’s new lead engagement partner.
Our Audit Committee believes at this time that the continued retention of PwC to serve as our independent registered public accounting firm is in the best interest of Biogen and its stockholders.
Although stockholder approval of our Audit Committee’s selection of PwC is not required, our Board of Directors believes that it is a matter of good corporate practice to solicit stockholder ratification of this selection. If our stockholders do not ratify the selection of PwC as our independent registered public accounting firm, our Audit Committee will reconsider its selection. Even if the selection is ratified, our Audit Committee always has the ability to change the engagement of PwC if it considers that a change is in Biogen’s best interest. Representatives of PwC will participate in the Annual Meeting, have the opportunity to make a statement if they so desire and be available to respond to appropriate questions.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTEFOR THE RATIFICATION OF
THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019.
| 27 | | | ||
| 4 | | |
Audit Committee Matters (continued) |
The Audit Committee’s role is to act on behalf of our Board of Directors in the oversight of Biogen’s financial reporting, internal control and audit functions. The roles and responsibilities of the Audit Committee are set forth in the written charter adopted by our Board of Directors, which is posted on our website,www.biogen.com, under the “Corporate Governance” subsection of the “Investors” section of the website. Management has primary responsibility for the financial statements and the reporting process, including the systems of internal control.
In fulfilling its oversight responsibilities, the Audit Committee, among other things:
In reliance on these reviews and discussions, the Audit Committee recommended to our Board of Directors that the audited consolidated financial statements be included in Biogen’s Annual Report on Form10-K for the fiscal year ended December 31, 2018, for filing with the SEC.
The Audit Committee of our Board of Directors:
Caroline D. Dorsa (Chair)
Nancy L. Leaming
Stelios Papadopoulos
Brian S. Posner
| 28 | | |
| 4 | Audit Committee Matters (continued) |
The following table shows fees for professional audit services billed to us by PwC for the audit of our annual consolidated financial statements for the years ended December 31, 2018, and December 31, 2017, and fees billed to us by PwC for other services provided during 2018 and 2017:
Fees (amounts in thousands) | 2018 | 2017 | ||||||
Audit fees | $ | 5,177.6 | $ | 5,036.3 | ||||
Audit-related fees | 302.0 | 281.2 | ||||||
Tax fees* | 609.0 | 381.0 | ||||||
All other fees | 322.1 | 7.1 | ||||||
Total | $ | 6,410.7 | $ | 5,705.6 | ||||
| * | Includes tax compliance fees of approximately $0.1 million in 2018 and 2017. |
Audit feesare fees for the audit of our 2018 and 2017 consolidated financial statements included in our Annual Reports on Form10-K, reviews of our condensed consolidated financial statements included in our Quarterly Reports on Form10-Q, review of the consolidated financial
statements incorporated by reference into our outstanding registration statements and statutory audit fees in overseas jurisdictions.
Audit-related fees are fees that principally relate to assurance and related services that are also performed by our independent registered public accounting firm. More specifically, these services include audits of employee benefit plan information, accounting consultations, due diligence and audits in connection with business development activity, internal control reviews and attest services related to financial reporting that are not required by statute or regulation.
Tax feesare fees for tax compliance and planning services. The increase in fees incurred in 2018 is driven by incremental support for international tax matters.
All other feesin 2018 include $0.3 million related to consultation services with respect to supply chain optimization strategies for the development of new products and services. All other fees in 2018 and 2017 also includelicense fees for aweb-based accounting research tool.
Policy onPre-Approval of Audit andNon-Audit Services
Our Audit Committee has the sole authority to approve the scope of the audit and any audit-related services as well as all audit fees and terms. Our Audit Committee mustpre-approve any audit andnon-audit services provided by our independent registered public accounting firm. Our Audit Committee will not approve the engagement of the independent registered public accounting firm to perform any services that the independent registered public accounting firm would be prohibited from providing under applicable securities laws, Nasdaq requirements or Public Company Accounting Oversight Board rules. In assessing whether to approve the use of our independent registered public accounting firm to provide permittednon-audit services, our Audit Committee tries to minimize relationships that could appear to impair the objectivity of our independent registered public accounting firm. Our Audit Committee will approve permittednon-audit services by our independent registered public accounting firm only when it will be more effective or economical to have such services provided by our independent registered public accounting firm than by another firm.
Our Audit Committee annually reviews andpre-approves the audit, audit-related, tax and other permissiblenon-audit services that can be provided by the independent registered public accounting firm. After the annual review, any proposed services exceedingpre-set levels or amounts, or additional services not previously approved requires separatepre-approval by our Audit Committee or the Chair of our Audit Committee. Anypre-approval decision made by the Chair of our Audit Committee is reported to our Audit Committee at the next regularly scheduled Audit Committee meeting. Our Chief Financial Officer and our Chief Accounting Officer can approve up to an additional $50,000 in the aggregate per calendar year for categories of services that our Audit Committee (or the Chair through its delegated authority) haspre-approved.
All of the services provided by PwC during 2018 and 2017 werepre-approved in accordance with this policy.
| 29 | | |
| 5 |
Our Compensation Discussion and Analysis, which appears below, describes our executive compensation programs and the compensation decisions that our C&MD Committee and our Board of Directors made with respect to the 2018 compensation of our named executive officers. As required pursuant to Section 14A of the Exchange Act, our Board of Directors is asking that stockholders cast anon-binding, advisory vote FOR the following resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
Our Board of Directors is asking that our stockholders support this proposal. Although the vote you are being asked to cast isnon-binding, we value the views of our stockholders, and our C&MD Committee and our Board of Directors will consider the outcome of the vote when making future compensation decisions for our named executive officers.
As we describe in our Compensation Discussion and Analysis, our executive compensation programs embody apay-for-performance philosophy that supports our business strategy and aligns the interests of our executives with those of our stockholders. In particular, our compensation programs reward financial, strategic and operational performance and the goals set under our plans support our short- and long-range plans. In addition, to discourage excessive risk taking, we maintain policies for stock ownership and our equity and annual bonus incentive plans have provisions providing for the recoupment of compensation. We also cap payments under our annual bonus plan and we generally require multi-year vesting periods for long-term incentive awards. We will hold anon-binding, advisory vote of our stockholders on the compensation of our named executive officers every year until the next required stockholder vote on the frequency of such advisory vote. The next stockholder vote on the frequency of such advisory vote is expected to be held at the 2023 annual meeting of stockholders. OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE RESOLUTION SET FORTH ABOVE.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
This Compensation Discussion and Analysis (CD&A) describes our compensation strategy, philosophy, policies and practices underlying our executive compensation programs for 2018. It also provides information regarding the manner and context in which compensation was earned by and awarded to our 2018 named executive officers listed below, whom we refer to collectively as “named executive officers” or “NEOs.”
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) |
Estimated Future Payouts | All Other Stock Awards: Number of Shares or Units (#) (i) | Grant Date Fair Value of Stock Awards(2) (j) | |||||||||||||||||||||||||||||||||||||||
Name (a) | Grant Date (b) | Notes | Threshold (c) | Target (d) | Maximum (e) | Threshold (f) | Target (g) | Maximum (h) | ||||||||||||||||||||||||||||||||||
George A. Scangos | 02/22/2016 | (3) | — | — | — | 10,115 | 20,230 | 40,460 | — | $ | 6,607,796 | |||||||||||||||||||||||||||||||
| 02/22/2016 | (4) | — | — | — | 12,038 | 24,075 | 48,150 | — | $ | 6,399,857 | ||||||||||||||||||||||||||||||||
| 02/22/2016 | (5) | $ | 525,000 | $ | 2,100,000 | $ | 4,725,000 | — | — | — | — | — | ||||||||||||||||||||||||||||||
Michel P. Vounatsos | 05/02/2016 | (3) | — | — | — | 2,380 | 4,760 | 9,520 | — | $ | 1,600,745 | |||||||||||||||||||||||||||||||
| 05/02/2016 | (4) | — | — | — | 2,833 | 5,665 | 11,330 | — | $ | 1,550,454 | ||||||||||||||||||||||||||||||||
| 05/02/2016 | (5) | $ | 92,521 | $ | 370,082 | $ | 832,685 | — | — | — | — | — | ||||||||||||||||||||||||||||||
Paul J. Clancy | 02/22/2016 | (3) | — | — | — | 2,765 | 5,530 | 11,060 | — | $ | 1,806,282 | |||||||||||||||||||||||||||||||
| 02/22/2016 | (4) | — | — | — | 3,293 | 6,585 | 13,170 | — | $ | 1,750,491 | ||||||||||||||||||||||||||||||||
| 02/22/2016 | (5) | $ | 150,582 | $ | 602,329 | $ | 1,355,240 | — | — | — | — | — | ||||||||||||||||||||||||||||||
John G. Cox | 02/22/2016 | (3) | — | — | — | 2,963 | 5,925 | 11,850 | — | $ | 1,935,336 | |||||||||||||||||||||||||||||||
| 02/22/2016 | (4) | — | — | — | 3,528 | 7,055 | 14,110 | — | $ | 1,875,431 | ||||||||||||||||||||||||||||||||
| 02/22/2016 | (5) | $ | 122,859 | $ | 491,434 | $ | 1,105,727 | — | — | — | — | — | ||||||||||||||||||||||||||||||
| 04/01/2016 | (6) | — | — | — | — | — | — | 8,444 | $ | 2,200,000 | ||||||||||||||||||||||||||||||||
Michael D. Ehlers | 06/01/2016 | (3) | — | — | — | 1,830 | 3,660 | 7,320 | — | $ | 1,289,903 | |||||||||||||||||||||||||||||||
| 06/01/2016 | (4) | — | — | — | 2,180 | 4,360 | 8,720 | — | $ | 1,250,535 | ||||||||||||||||||||||||||||||||
| 06/01/2016 | (5) | $ | 87,823 | $ | 351,291 | $ | 790,405 | — | — | — | — | — | ||||||||||||||||||||||||||||||
| 06/01/2016 | (6) | — | — | — | — | — | — | 3,034 | $ | 870,212 | ||||||||||||||||||||||||||||||||
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Chief Executive Officer
2018 Highlights We had a productive and successful 2018. We generated record revenues of $13.5 billion for the year, demonstrated resilience in our MS business, continued a strong global launch for SPINRAZA, the first approved treatment for SMA, and made significant progress in our biosimilars business. We added six clinical programs across our strategic core and emerging growth areas and had a strong year for business development. We provided value to our stockholders through the return of approximately $4.4 billion in capital through share repurchases and we continued our leading efforts in environmental, sustainability and diversity matters. Our executive compensation programs for 2018 were aligned with stockholder interests as compensation earned under these programs was closely-linked to the achievement of our corporate performance goals. We achieved or exceeded the vast majority of the corporate performance goals that we set at the beginning of the year under our incentive compensation plans and, accordingly, the payouts under these plans for 2018 were above target payout levels.
A brief summary of our 2018 business, financial and executive compensation highlights are as follows: Financial Performance The following chart provides a summary of our financial performance for 2018 compared to 2017:
A reconciliation of our GAAP toNon-GAAP financial measures is provided in Appendix A to this Proxy Statement. Total Stockholder Return Ourone-, three- and five-year total stockholder return (TSR)* compared to our peer group and the Standard & Poor’s 500 (S&P 500) is set forth below.
Product and Pipeline Developments The following provides a summary of our product and pipeline developments for 2018: Product Developments In March 2018 we and AbbVie Inc. announced the voluntary worldwide withdrawal of ZINBRYTA for relapsing MS (RMS). In October 2018 we and Samsung Bioepis launched IMRALDI, an adalimumab biosimilar referencing HUMIRA, in Europe. Applications for Marketing and Agency Actions In October 2018 the FDA granted BIIB092, ananti-tau mAb, fast track designation for progressive supranuclear palsy (PSP). In December 2018 Alkermes submitted a NDA to the FDA for the review of BIIB098 (diroximel fumarate). Alkermes is seeking approval of diroximel fumarate under the 505(b)(2) regulatory pathway. If approved, we intend to market diroximel fumarate under the brand name VUMERITY. This name has been conditionally accepted by the FDA and will be confirmed upon approval.
Clinical Trials MS and Neuroimmunology In September 2018 we completed enrollment of the Phase 2b AFFINITY study evaluating opicinumab, anti-LINGO, as anadd-on therapy in MS patients who are adequately controlled on their anti-inflammatory disease-modifying therapy (DMT), versus the DMT alone. In November 2018 we initiated the Phase 3b NOVA study evaluating the efficacy and safety of extended interval dosing (every six weeks) for natalizumab compared to standard interval dosing in patients with RMS and enrolled the first patient in December 2018. In December 2018 we dosed the first patient in a bioequivalence study to test whether exposure levels of PLEGRIDY are maintained with intramuscular administration. Neuromuscular Disorders
Alzheimer’s Disease and Dementia In May 2018 we initiated a Phase 2 study of BIIB092 for Alzheimer’s disease. In June 2018 we and our collaboration partner Eisai Co., Ltd. (Eisai) announced that elenbecestat, the oral BACE (beta amyloid cleaving enzyme) inhibitor, demonstrated an acceptable safety and tolerability profile in the Phase 2 study, and the results demonstrated a statistically significant difference in amyloid-beta levels in the brain measured byamyloid-PET (positron emission tomography). A numerical slowing of decline in functional clinical scales of a potentially clinically important difference was also observed, although this effect was not statistically significant. In December 2017 we and our collaboration partner Eisai announced that the Phase 2 study of BAN2401, a monoclonal antibody that targets amyloid beta aggregates, an Eisai product candidate for the treatment of Alzheimer’s disease, did not meet the criteria for success based on a Bayesian analysis at 12 months as the primary endpoint in an856-patient Phase 2 clinical study, an endpoint that was designed to enable a potentially more rapid entry into Phase 3 development. In July 2018, based upon the final analysis of the data at 18 months, we and Eisai announced that the topline results from the Phase 2 study demonstrated a statistically significant slowing in clinical decline and reduction of amyloid beta accumulated in the brain. The study achieved statistical significance on key predefined endpoints evaluating efficacy at 18 months on slowing progression in Alzheimer’s Disease Composite Score (ADCOMS) and on reduction of amyloid accumulated in the brain as measured usingamyloid-PET. In July 2018 we completed enrollment of ENGAGE and EMERGE, the Phase 3 studies of aducanumab. In March 2019 we and our collaboration partner Eisai announced that we were discontinuing the EMERGE and ENGAGE Phase 3 studies. Movement Disorders In January 2018 we dosed the first patient in the Phase 2 SPARK study of BIIB054,a-synuclein antibody, in Parkinson’s disease. In September 2018 we completed enrollment of the Phase 2 PASSPORT study of BIIB092 for PSP. Acute Neurology In March 2018 we dosed the first patient in the Phase 2 OPUS study of natalizumab in drug-resistant focal epilepsy. In September 2018 we enrolled the first patient in the Phase 3 CHARM study of BIIB093, glibenclamide IV, in large hemispheric infarction, a severe form of ischemic stroke.
Neurocognitive Disorders In December 2018 we dosed the first patient in our Phase 2b study of BIIB104 (AMPA) in CIAS. Pain In March 2018 we initiated a Phase 1 study of BIIB095, a Nav 1.7 inhibitor for neuropathic pain. In May 2018 we initiated a Phase 2 study of vixotrigine (BIIB074) in small fiber neuropathy. Other In September 2018 we dosed the first patient in the Phase 2b study of BG00011(STX-100) in idiopathic pulmonary fibrosis, a chronic irreversible and ultimately fatal disease characterized by a progressive decline in lung function. Discontinued Programs In February 2018 we announced that the Phase 2b dose-ranging ACTION study investigating natalizumab in individuals with acute ischemic stroke (AIS) did not meet its primary endpoint. Based on these results, we discontinued development of natalizumab in AIS. The results of the Phase 2b ACTION study do not impact the benefit-risk profile of natalizumab in approved indications, including MS. In October 2018 we announced that we completed the Phase 2b study of vixotrigine (BIIB074) for the treatment of painful lumbosacral radiculopathy (PLSR). The study did not meet its primary or secondary efficacy endpoints and we discontinued development of vixotrigine for the treatment of PLSR. The safety data were consistent with the safety profile reported in previous studies. Business Development In January 2018 we acquired BIIB100 from Karyopharm Therapeutics Inc. BIIB100 is a Phase 1 ready investigational oral compound for the treatment of certain neurological and neurodegenerative diseases, primarily in ALS. BIIB100 is a novel therapeutic candidate that works by inhibiting a protein known as XP01, with the goal of reducing inflammation and neurotoxicity, along with increasing neuroprotective responses. In April 2018 we acquired BIIB104 from Pfizer Inc. BIIB104 is afirst-in-class, Phase 2b ready AMPA receptor potentiator for CIAS, representing our first program in neurocognitive disorders. AMPA receptors mediate fast excitatory synaptic transmission in the central nervous system, a process which can be disrupted in a number of neurological and psychiatric diseases, including schizophrenia. In June 2018 we closed a10-year exclusive agreement with Ionis to develop novel ASO drug candidates for a broad range of neurological diseases (the 2018 Ionis Agreement). We have the option to license therapies arising out of the 2018 Ionis Agreement and will be responsible for the development and potential commercialization of such therapies. In June 2018 we entered into an exclusive option agreement with TMS Co., Ltd. granting us the option to acquireTMS-007, a plasminogen activator with a novel mechanism of action associated with breaking down blood clots, which is in Phase 2 development in Japan, and backup compounds for the treatment of stroke. In June 2018 we exercised our option under our joint venture agreement with Samsung BioLogics to increase our ownership percentage in Samsung Bioepis from approximately 5% to approximately 49.9%. The share purchase transaction was completed in November 2018. In July 2018 we acquired BIIB110 (Phase 1a) andALG-802 (preclinical) from AliveGen Inc. BIIB110 andALG-802 represent novel ways of targeting the myostatin pathway. We initially plan to study BIIB110 in multiple neuromuscular indications, including SMA and ALS. In December 2018 we exercised our option with Ionis and obtained a worldwide, exclusive, royalty-bearing license to develop and commercialize BIIB067, an investigational treatment for ALS with SOD1 mutations. In December 2018 we entered into a collaborative research and license agreement with C4 Therapeutics (C4T) to investigate the use of C4T’s novel protein degradation platform to discover and develop potential new treatments for neurological diseases, such as Alzheimer’s disease and Parkinson’s disease. We will be responsible for the development and potential commercialization of any therapies resulting from this collaboration.
Share Repurchase Activity In August 2018 our Board of Directors authorized a program to repurchase up to $3.5 billion of our common stock (2018 Share Repurchase Program). Our 2018 Share Repurchase Program does not have an expiration date. All share repurchases under our 2018 Share Repurchase Program will be retired. We returned approximately $4.4 billion to stockholders in 2018 through share repurchases under our 2018 Share Repurchase Program and our 2016 Share Repurchase Program, which was a program authorized by our Board of Directors in July 2016 to repurchase up to $5.0 billion of our common stock and which was completed as of June 30, 2018. Other Notable Achievements in the Workplace and Community Awarded the 2018 International Prix Galien as Best Biotechnology Product for SPINRAZA. The prestigious honor marks the seventh Prix Galien for SPINRAZA, following country recognitions in the U.S., Germany, Italy, Belgium-Luxembourg, the Netherlands and the U.K. The International Prix Galien is given every two years by Prix Galien International Committee members in recognition of excellence in scientific innovation to improve human health. Named the Biotechnology Industry Leader on the Dow Jones Sustainability World Index. Recognized as a corporate sustainability leader with Gold Class and Industry Mover Sustainability Awards from RobecoSAM. Continued commitment to operational carbon neutrality highlighted through the use of 100% renewable electricity globally. Committed to reduce carbon emissions by a targeted amount approved by the Science Based Target Initiative, to align ourselves with the global goal of limiting global temperature rise to under two degrees Celsius. Earned CDP scores of A,A- and B in the areas of Supplier Engagement, Climate Change and Water, respectively. Earned a perfect score of 100% on the Human Rights Campaign’s Corporate Equality Index (a national benchmarking tool on corporate policies and practices pertinent to LGBTQ employees) for the fifth consecutive year. Continued commitment to diversity and inclusion. As of December 31, 2018, 44% of Director-level positions and above were held by women. Over 3,200 employees volunteered from 28 countries during our annual Care Deeply Day. Engaged 50,000+ students inhands-on learning to inspire their passion for science since the inception of Biogen’s Community Labs. 2018 Executive Compensation Programs andPay-for-Performance Alignment We believe our executive compensation programs are effectively designed and have worked well to implement apay-for-performance culture that is aligned with the interests of our stockholders. In 2018 our executive compensation programs consisted of base salary, short- and long-term incentives and other benefits. 91% of our CEO’s and 84% of our other NEOs’ 2018 target compensation was performance-based andat-risk.
100% of our NEOs’ 2018 annual long-term incentive (LTI) grants were performance-based andat-risk.
Our 2018 performance-based compensation payouts align with our commitment to strong performance. In 2018 we exceeded the vast majority of the corporate performance goals that we set at the beginning of the year for our incentive compensation plans. As a result, the payouts, as a percentage of target, for our 2018 annual bonus plan and the portions of our PSUs and MSUs that were eligible to be earned based on 2018 performance were above target payout amounts, as described in further detail below. 2018 Advisory Vote on Executive Compensation
Specifically, under our 2018 LTI program, grants of PSUs replaced grants of cash-settled performance units (CSPUs), which we had granted in previous years. The key changes are as follows:
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Target Setting
Monitoring & Tracking
Results & Awards:
