SECURITIES AND EXCHANGE COMMISSION
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 ☐
Check the appropriate box:
| | | | | | | | | | | | | | | | | |
Filed by the Registrant | x | | Filed by a Party other than the Registrant | ¨ |
| | |
Check the appropriate box: |
| |
¨☐ | Preliminary Proxy Statement |
| ☐ | | | | |
¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| | | | | |
x☒ | Definitive Proxy Statement |
| | | | | |
¨☐ | Definitive Additional Materials |
| ☐ | | | | |
¨ | Soliciting Material Pursuant to §240.14a-12§240.14a-12 |
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
| | | | | | | | | | | | | | | | | |
Payment of Filing Fee (Check the appropriate box): |
| | |
x☒ | No fee required.required |
| | | | | |
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| | | | | |
| (1) | Title of each class of securities to which transaction applies: |
| | | | | |
| (2) | Aggregate number of securities to which transaction applies: |
| | | | | |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| | | | | |
| (4) | Proposed maximum aggregate value of transaction: |
| | | | | |
| (5) | Total fee paid: |
¨☐ | Fee paid previously with preliminary materials.materials |
| ☐ | | | | |
¨ | Check box if any part of the fee is offset as providedFee computed on table in exhibit required by Item 25(b) per Exchange Act Rule 0-11(a)(2) Rules14a-6(i)(1) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| | | | | |
| (1) | Amount Previously Paid: |
| | | | | |
| (2) | Form, Schedule or Registration Statement No.: |
| | | | | |
| (3) | Filing Party: |
| | | | | |
| (4) | Date Filed:0-11 |
505 Penobscot Dr.
Redwood City,
3100 Hanover Street
Palo Alto, California, 94063
25, 2024Dear Guardant Stockholder:
YouWe are cordially invitedpleased to invite you to attend the Guardant Health, Inc. 20212024 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Wednesday, June 16, 2021,12, 2024, at 9:30 a.m. Pacific Time.Time, virtually at www.virtualshareholdermeeting.com/GH2024.
2023 was an important year of strong execution across our business. We delivered more than 170,000 clinical tests and grew revenue 25% year over year. In lightTherapy Selection, we continued to improve our financial profile and achieved cash flow breakeven at the end of the public healthyear. In the fall, we hosted our inaugural investor day where we shared our long-term vision for Guardant and safety concerns relatedprovided five-year financial targets.
In Therapy Selection, nearly 10 years after we launched the first comprehensive liquid biopsy, Guardant360 continued its strong momentum and ended the year with record revenue and clinical volume, reinforcing our market-leading position. In the first half of the year, our commitment to coverage expansion for Guardant360 resulted in additional coverage policies with major commercial insurers, supporting steady ASP improvement through the COVID-19 pandemic, recommendationsback half of the year. We also made significant progress integrating our services into major electronic medical records (EMR) systems in the US and orders from federal, stateended the year with more than 475 accounts, exceeding our original target of 400. Internationally, we made important strides in Japan with the establishment of national reimbursement for Guardant360 CDx and local authorities, andsubsequent commercial launch. In the UK, our partnership with Royal Marsden is powering its lab to support the healthexpansion of complete genomic profiling and well-beingreceived an expression of interest by NHS England to launch liquid biopsy for non-small cell lung cell cancer. In Biopharma, we continued our strong expansion and ended the year with over 165 cumulative partnerships. We also launched Guardant360 for research use in China and exited the year with a healthy pipeline of partnerships.
In MRD, we continued to generate colorectal cancer (CRC) and breast cancer data for Reveal, bolstering its clinical validity profile. Reveal volume grew more than 90% year over year and, by end of year, we upgraded the assay to our Smart liquid biopsy platform, which enables even deeper clinical insights and a lower cost profile over time.
In Screening, we achieved a significant milestone with the submission of the final module of our Board of Directors, employeesPMA for ShieldTM to the U.S. Food and stockholders, the Annual Meeting will again be held virtually this year via live interactive audio webcast on the Internet. You will be able to attend, vote and submit your questions online during the Annual Meeting at
www.virtualshareholdermeeting.com/GH2021Drug Administration (FDA). You will not be able to attend the Annual Meeting in person.
At the Annual Meeting, the agenda includes the election of three Class III directors for three-year terms expiring at the 2024 annual meeting of stockholders, the ratificationCRC screening is one of the appointmentlargest unmet medical needs in healthcare. Even with available CRC screening modalities, 50 million eligible Americans remaining unscreened. Our Shield LDT test has shown dramatic improvement to screening adherence in a real world setting with an adherence rate of Ernst & Young LLP asgreater than 90%. Beyond CRC, our independent registered public accounting firmgoal has always been to have a blood test that can detect multiple cancers at early stages. Our second strategic indication is lung, the leading cause of cancer-related mortality, and we are making good progress enrolling for our fiscal year ending December 31, 2021,lung cancer screening study.
Our expanding technology suite along with commercial and the approval on an advisory basisregulatory execution are enabling us to continue to fulfill our commitment to help patients at all stages of the compensationcancer live longer and healthier lives. We thank all of our named executive officers. These matters are more fully describedstakeholders for their continued support and confidence in the accompanying Notice of 2021 Annual Meeting of Stockholders and proxy materials.
We are pleasedour efforts to take advantage of the U.S. Securities and Exchange Commission rules that allow us to furnish these proxy materials (including an electronic Proxy Card for the meeting) and our 2020 Annual Report on Form 10-K for the year ended December 31, 2020 to stockholders via the Internet. On or about April 29, 2021, we will mail to our stockholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our Proxy Statement and 2020 Annual Report and how to vote. We believe that posting these materials on the Internet enables us to provide stockholders with the information they need to vote more quickly, while lowering the cost and reducing the environmental impact of printing and delivering annual meeting materials. Please read our proxy materials and our 2020 Annual Report carefully before casting your vote.
Whether or not you plan to attend the Annual Meeting online, and regardless of the number of shares of Guardant Health, Inc. stock you own, it is important that your shares are represented and voted at the Annual Meeting. You may vote on the Internet or by telephone as instructed in the Notice of Internet Availability of Proxy Materials or, if you are receiving a paper copy of the proxy materials, you may complete, sign and date the enclosed proxy card and return it in the enclosed envelope as soon as possible. This action will not prevent you from voting your shares online at www.virtualshareholdermeeting.com/GH2021 on the day of the Annual Meeting if you subsequently choose to attend the Annual Meeting via audio webcast.
transform cancer care.We hope that you will join us at our 2024 Annual Meeting of Stockholders on June 16, 2021.12, 2024. Your continuing interest in Guardant Health is very much appreciated.
Helmy Eltoukhy
Chairperson of the Board of Directors
and Co-Chief Executive Officer
AmirAli Talasaz
Chairperson, President and Chief OperatingCo-Chief Executive Officer
505 Penobscot Dr.
Redwood City,
3100 Hanover Street
Palo Alto, California, 94063
94304NOTICE OF 20212024 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 16, 2021
12, 2024To the Stockholders of Guardant Health, Inc.:
NOTICE IS HEREBY GIVEN
that the 20212024 Annual Meeting of Stockholders (the “Annual Meeting”) of Guardant Health, Inc., a Delaware corporation, will be held on Wednesday, June 16, 2021,12, 2024, at 9:30 a.m. Pacific Time, virtually at www.virtualshareholdermeeting.com/GH2021GH2024.The Annual Meeting will be held for the following purposes:
1.To elect the three Class III director nominees to serve on the Board of Directors of Guardant Health, Inc. for a three-year term expiring at the 2024 annual meeting of stockholders or until their successors have been elected and qualified. The three nominees for election to the Board of Directors are Helmy Eltoukhy, AmirAli Talasaz and Bahija Jallal;
2.To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2021;
3.To approve, on a non-binding advisory basis, the compensation of our named executive officers, as described in the “Compensation Discussion and Analysis,” executive compensation tables and accompanying narrative disclosures in our proxy materials; and
4.To consider and take action upon such other matters as may properly come before the Annual Meeting or any adjournment or postponement thereof.
| 1. | To elect the three Class III director nominees to serve on the Board of Directors of Guardant Health, Inc. for a three-year term expiring at the 2027 annual meeting of stockholders or until their successors have been elected and qualified. The three nominees for election to the Board of Directors are Helmy Eltoukhy, Steve Krognes and AmirAli Talasaz; |
| 2. | To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2024; |
| 3. | To approve, on a non-binding advisory basis, the compensation of our named executive officers, as described in the “Compensation Discussion and Analysis,” executive compensation tables and accompanying narrative disclosures in our proxy materials; and |
| 4. | To consider and take action upon such other matters as may properly come before the Annual Meeting or any adjournment or postponement thereof. |
These matters are more fully described in our proxy materials accompanying this Notice.
We know of no other matters to come before the Annual Meeting. Only stockholders who owned shares of common stock of Guardant Health, Inc. at the close of business on April 19, 202115, 2024 are entitled to notice of and to vote on matters brought for vote at the Annual Meeting or at any postponements or adjournments thereof.
You are cordially invited to attend the meeting conducted via live webcast, by registering at
www.virtualshareholdermeeting.com/GH2021GH2024. You will not be able to attend the Annual Meeting in person. Whether or not you expect to attend, the Board of Directors respectfully requests that you vote your shares of common stock in the manner described in this proxy statement. You may revoke your proxy in the manner described in this proxy statement at any time before it has been voted at the meeting. Regardless of the number of shares of common stock you own, as a stockholder your role is very important, and the Board of Directors strongly encourages you to exercise your right to vote.
By order of the Board of Directors of Guardant Health, Inc.,
John Saia
Senior Vice President, General CounselChief Legal Officer and Corporate Secretary
Redwood City,Palo Alto, California
INFORMATION CONCERNING VOTING AND SOLICITATION
Your proxy is solicited on behalf of the Board of Directors (the “Board”) of Guardant Health, Inc., a Delaware corporation (as used herein, “Guardant," ”Guardant” “Guardant Health,"” “we,” “us” or “our”), for use at our 20212024 annual meeting of stockholders (the “Annual Meeting”) to be held on Wednesday, June 16, 2021,12, 2024, at 9:30 a.m. Pacific Time, virtually at
www.virtualshareholdermeeting.com/GH2021GH2024, or at any continuation, postponement or adjournment thereof, for the purposes discussed in this proxy statement and in the accompanying Notice of Annual Meeting and any other business properly brought before the Annual Meeting. Proxies are solicited to give all stockholders an opportunity to vote on matters properly presented at the Annual Meeting.
Virtual Annual Meeting
. The Annual Meeting will be a virtual meeting of stockholders using cutting-edge technology, conducted via live audio webcast. You are invited to attend the Annual Meeting online. We believe that a virtual meeting provides expanded stockholder access and participation, improved communications, as well as additional safeguards for health and safety related to the COVID-19 pandemic.improved communications. You will be able to attend, vote and submit your questions online during the Annual Meeting. You will not be able to attend the Annual Meeting in person. Stockholders may attend the Annual Meeting online by logging intoonto www.virtualshareholdermeeting.com/GH2021ww. virtualshareholdermeeting.com/GH2024 using the 16-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card, or on the voting instruction form provided by your broker, bank or other nominee.
Notice and Access Proxy Delivery
. We have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice”) to most of our stockholders of record, and paper copies of the proxy materials to certain other stockholders of record. Brokers and other nominees who hold shares on behalf of beneficial owners will be sending their own similar Notice to such beneficial owners. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. You can find instructions on how to request a printed copy by mail or electronically on the Notice and on the website referred to in the Notice, including an option to request paper copies on an ongoing basis. On or about April 29, 2021,25, 2024, we intend to make this proxy statement available on the Internet and to commence mailing of the Notice to all stockholders entitled to vote at the Annual Meeting. We intend to mail this proxy statement, together with a proxy card, to those stockholders entitled to vote at the Annual Meeting who properly request paper copies of such materials, within three business days of such request.Important Notice Regarding the Availability of Proxy Materials for the 20212024 Annual Stockholder Meeting to be Held on June 16, 2021
12, 2024Our proxy statement and 20202023 Annual Report are available at
www.proxyvote.com. This website address contains: the Notice of Annual Meeting, the proxy statement and proxy card sample, and the 2020 62023 Annual Report. You will need your 16-digit control number that is included on your Notice, on your proxy card, or on the voting instruction form provided by your1
Annual Report.broker, bank or other nominee, to access these materials. You are encouraged to access and review all of the important information contained in the proxy materials before voting.
Who Can Vote, Outstanding Shares
Record holders of our common stock as of the close of business on April 19, 2021,15, 2024, the record date for the Annual Meeting (the “Record Date”), are entitled to notice of and to vote at the Annual Meeting on all matters to be voted upon. As of the Record Date, there were 101,117,510121,885,230 shares of our common stock outstanding. On each matter presented to our stockholders for vote, the holders of common stock are entitled to one vote per share held as of the Record Date.
The method of voting by proxy differs (1) depending on whether you are viewing this proxy statement on the Internet or receiving a paper copy and (2) for shares held as a record holder and shares held in “street name.”
Record Holder
. If you hold your shares of common stock as a record holder and you are viewing this proxy statement on the Internet, you may vote by submitting a proxy over the Internet by following the instructions on the website referred to in the Notice previously mailed to you. If you hold your shares of common stock as a record holder and you are reviewing a paper copy of this proxy statement, you may vote your shares by completing, dating and signing the proxy card that was included with the proxy statement and promptly returning it in the preaddressed, postage paid envelope provided to you, or by submitting a proxy over the Internet or by telephone by following the instructions on the proxy card.
Hold in Street Name
. If you hold your shares of common stock in street name, which means your shares are held of record by a broker, bank or nominee, you will receive a Notice from your broker, bank or other nominee that includes instructions on how to vote your shares. Your broker, bank or nominee will allow you to deliver your voting instructions over the Internet and may also permit you to vote by telephone. In addition, you may request paper copies of the proxy statement and proxy card from your broker by following the instructions on the Notice provided by your broker.
General
. The Internet and telephone voting facilities will close at 11:59 p.m. EDT on June 15, 2021.11, 2024. If you vote through the Internet, you should be aware that you may incur costs to access the Internet, such as usage charges from telephone companies or Internet service providers and that these costs must be borne by you. If you vote by Internet or telephone, then you need not return a written proxy card by mail.
Voting at the Virtual Annual Meeting
. To attend and vote at the Annual Meeting you need to access the meeting via live audio webcast at www.virtualshareholdermeeting.com/GH2021GH2024 using the 16-digit control number included on your Notice, on your proxy card or on the voting instruction form. Attendance at the Annual Meeting will not, by itself, result in any vote or revocation of a prior vote. You must follow the instructions at www.virtualshareholdermeeting.
com/GH2021www.virtualshareholdermeeting.com/GH2024 to vote your shares at the Annual Meeting.
YOUR VOTE IS VERY IMPORTANT.IMPORTANT. You should submit your proxy even if you plan to attend the Annual Meeting online. If you properly give your proxy and submit it to us in time to vote, one of the individuals named as your proxy will vote your shares as you have directed.
All shares entitled to vote and represented by properly submitted proxies (including those submitted electronically, telephonically and in writing) received before the polls are closed at the Annual Meeting, and not revoked or superseded, will be voted at the Annual Meeting in accordance with the instructions indicated on those proxies. If no direction is indicated on a proxy, your shares will be voted as follows:
•FOR the election of each of the three Class III nominees for director named in our proxy materials;
•FOR the ratification of the appointment of Ernst & Young LLP (“Ernst & Young”) as our independent registered public accounting firm for our fiscal year ending December 31, 2021; and
•FOR the approval, on a non-binding advisory basis, of the compensation of our named executive officers, as described in the “Compensation Discussion and Analysis,” executive compensation tables and accompanying narrative disclosures in our proxy materials.
| ✓ | FOR the election of each of the three Class III nominees for director named in our proxy materials; |
| ✓ | FOR the ratification of the appointment of Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm for our fiscal year ending December 31, 2024; and |
| ✓ | FOR the approval, on a non-binding advisory basis, of the compensation of our named executive officers, as described in the “Compensation Discussion and Analysis,” executive compensation tables and accompanying narrative disclosures in our proxy materials. |
The proxy gives each of Helmy Eltoukhy, AmirAli Talasaz and John Saia discretionary authority to vote your shares in accordance with their best judgment with respect to all additional matters that might come before the Annual Meeting.
If you receive more than one proxy card or Notice, it means you hold shares that are registered in more than one account. To ensure that all of your shares are voted, sign and return each proxy card or, if you submit a proxy by telephone or the Internet, submit one proxy for each proxy card or Notice you receive.
If your shares are held of record, you may change or revoke your proxy at any time before your proxy is voted at the Annual Meeting by taking any of the following actions:
•timely delivering to our corporate secretary a signed written notice of revocation, bearing a date later than the date of the proxy, stating that the proxy is revoked;
•signing and timely delivering a new paper proxy, relating to the same shares and bearing a later date than the original proxy;
•submitting another proxy by telephone or over the Internet at or before 11:59 p.m. EDT on June 11, 2024 (your latest telephone or Internet voting instructions are followed); or
| • | | attending the Annual Meeting at www.virtualshareholdermeeting.com/GH2024 and timely voting your shares online, although attendance at the Annual Meeting will not, by itself, constitute a vote or revoke a proxy. |
3
•attending the Annual Meeting online and timely voting your shares at www.virtualshareholdermeeting.com/GH2021, although attendance at the Annual Meeting will not, by itself, revoke a proxy.
Written notices of revocation and other communications with respect to the revocation of proxies by record holders should be addressed to:
505 Penobscot Drive
Redwood City, CA 94063
3100 Hanover Street
Palo Alto, California 94304
Attention: Corporate Secretary
If your shares are held in the name of a broker, bank, trust, or other nominee, you may change or revoke your voting instructions by following the instructions of your broker, bank, trust, or other nominee contained on the Notice.
Brokers, banks or other nominees who hold shares of common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions on how to vote on such matter from the beneficial owners. However, brokers are not allowed to exercise their voting discretion with respect to the election of directors or for the approval of matters that are considered “non-routine”“non-routine” without specific voting instructions from the beneficial owner. If you hold your shares in street name and do not provide voting instructions to your broker or other nominee on how to vote on the election of directors or other “non-routine”“non-routine” proposals, your broker cannot exercise discretion to vote you shares and your shares will be considered to be “broker non-votes” and will not be voted on such matters. Accordingly, if your broker holds your common stock in “street name,” your broker will vote your shares on the election of directors and other “non-routine”“non-routine” proposals only if you provide instructions to your broker on how to vote your shares by following the procedures outlined in the voting instruction form sent to you by your broker. Only Proposal No. 2 (ratifying the appointment of our independent registered public accounting firm) is considered a routine matter on which your broker may vote without instruction from you as the beneficial owner. Proposal No. 1 (election of directors) and Proposal No. 3 (advisory vote to approve named executive officer compensation) are considered non-routine matters, and without your instruction, your broker cannot vote your shares for either of Proposal No. 1 or Proposal No. 3.
Quorum and Votes Required
The inspector of elections appointed for the Annual Meeting will tabulate votes cast by proxy, telephone and via Internet at
www.proxyvote.com as of 11:59 p.m. EDT on June 15, 2021 and at www.virtualshareholdermeeting.com/GH2021 on the day of and during the Annual Meeting.11, 2024. The inspector of elections will also tabulate votes cast at www.virtualshareholdermeeting.com/GH2024 during the Annual Meeting and will determine whether a quorum is present. In order to constitute a quorum for the conduct of business at the Annual Meeting, the holders of a majority of the shares of common stock issued and outstanding and entitled to vote at the Annual Meeting must be present or represented by proxy at the Annual Meeting. On the Record Date, there were 101,117,510121,885,230 shares of common stock entitled to vote at the Annual Meeting. Shares that abstain from voting on any proposal, or that are represented by broker non-votes, will be treated as shares that are present and entitled to vote at the Annual Meeting for purposes of determining whether a quorum is present.4
Proposal No. 1: Election of Directors. A plurality of the votes cast in the election of directors at the Annual Meeting is required for the election of directors. Accordingly, theNo cumulative voting is permitted. You may vote “FOR” or “WITHHOLD” your vote on any nominee. The three Class III director nominees receiving the highest number of “FOR” votes will be elected. If you abstain from voting on this proposal it will have no effect. In addition, broker Broker non-votes are
considered votes not cast and thus will have no effect on the outcome of the election of directors.
Proposal No. 2: Ratification of Independent Registered Public Accounting Firm
. The affirmative vote of the holders of a majority of the votes cast at the Annual Meeting is required for the ratification of the appointment of Ernst & YoungDeloitte as our independent registered public accounting firm. Thus, theYou may vote “FOR” or “AGAINST” or “ABSTAIN”. The number of votes “FOR” must exceed the number of votes “AGAINST.”“AGAINST” for the proposal to pass. Abstentions are considered to be votes not cast on this proposal and thus will have no effect. Brokers generally have discretionary authority to vote on the ratification of our independent registered public accounting firm, thus broker non-votes are not expected to result from the vote on Proposal No. 2. Any broker non-votes would be considered votes not cast and thus would have no effect.Proposal No. 3: Advisory Vote to Approve Named Executive Officer Compensation
. The affirmative vote of the holders of a majority of the votes cast at the Annual Meeting is required for determining approval on an advisory basis of the compensation of our named executive officers, as described in the “Compensation Discussion and Analysis,” executive compensation tables and accompanying narrative disclosures in our proxy materials. You may vote “FOR” or “AGAINST” or “ABSTAIN”. The number of votes “FOR” must exceed the number of votes “AGAINST” for the proposal to pass. Abstentions and broker non-votes are considered to be votes not cast on this proposal and thus will have no effect. This vote is advisory and not binding on us, our Board, or our Compensation Committee.In their discretion, the proxy holders named in the proxy are authorized to vote on any other matters that may properly come before the Annual Meeting and at any continuation, postponement or adjournment thereof. The Board knows of no other items of business that will be presented for consideration at the Annual Meeting other than those described in this proxy statement. In addition, no stockholder proposal or nomination was received on a timely basis, so no such matters may be brought to a vote at the Annual Meeting.
Our Board of Directors unanimously recommends that you vote:
| ✓ | FOR the election of each of the three Class III director nominees named in our proxy materials; |
| ✓ | FOR the ratification of the appointment of Deloitte as our independent registered public accounting firm for our fiscal year ending December 31, 2024; and |
| ✓ | FOR the approval, on a non-binding advisory basis, of the compensation of our named executive officers, as described in the “Compensation Discussion and Analysis,” executive compensation tables and accompanying narrative disclosures in our proxy materials. |
5
1.FOR the election of each of the three Class III director nominees named in our proxy materials;
2.FOR the ratification of the appointment of Ernst & Young as our independent registered public accounting firm for our fiscal year ending December 31, 2021; and
3.FOR the approval, on a non-binding advisory basis, the compensation of our named executive officers, as described in the “Compensation Discussion and Analysis,” executive compensation tables and accompanying narrative disclosures in our proxy materials.
Details Regarding the Virtual Annual Meeting
In light of the public health and safety concerns related to the COVID-19 pandemic, and to support the health and well-being of our Board of Directors, employees and stockholders, theThe Annual Meeting will again be held virtually this year via live interactive audio webcast on the Internet. You will be able to attend, vote and submit your questions during the Annual Meeting by logging onto
www.virtualshareholdermeeting.com/GH2021GH2024. You will not be able to attend the Annual Meeting in person.
Access to the Annual Meeting
The live audio webcast of the Annual Meeting will begin promptly at 9:30 a.m. Pacific Time. Online access to the audit webcast will open approximately 15 minutes prior to the start of the Annual Meeting to allow time for our stockholders to log in and test their devices’ audio system. We encourage our stockholders to access the meeting in advance of the designated start time.
Instructions on how to connect to the Annual Meeting, participate and demonstrate proof of stock ownership are posted on
at www.virtualshareholdermeeting.com/GH2021GH2024. To participate in the Annual Meeting, you will need to log-in using the 16-digit control number on your Notice, proxy card or voting instruction form.Beginning 15 minutes prior to the start of and during the Annual Meeting, we will have a support team ready to assist stockholders with any technical difficulties they may have accessing or hearing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, you shouldplease call ourthe technical support team at (800) 586-1548 (US Domestic Toll Free) or (303) 562-9288 (International).
number that will be posted on the Virtual Shareholder Meeting log in page.Submitting Questions at the Annual Meeting
Stockholders may submit questions and vote at www.virtualshareholdermeeting.com/GH2024during the Annual Meeting on w
ww.virtualshareholdermeeting.com/GH2021.Meeting. You will need to enter the 16-digit control number received with your Notice, proxy card or voting instruction form as proof of stock ownership in order to be able to submit questions and vote at our Annual Meeting. After the business portion of the Annual Meeting concludes and the meeting is adjourned, we will hold a Q&A session during which we intend to answer the questions submitted during the Annual Meeting that are pertinent to us and that are submitted in accordance with the Rules of Conduct for the Annual Meeting, as time permits. The Rules of Conduct will be posted on the virtual meeting web portal. Substantially similar questions will be answered only once. To promote fairness, efficient use of our resources and to ensure all stockholder questions are able to be addressed, we will respond to no more than two questions from a single stockholder.Our Board is soliciting proxies for the Annual Meeting from our stockholders. We will bear the entire cost of soliciting proxies from our stockholders. In addition to the solicitation of proxies by delivery of the Notice or proxy statement by mail, we will request that brokers,
6
banks and other nominees that hold shares of our common stock, which are beneficially owned by our stockholders, send Notices, proxies and proxy materials to those beneficial owners and secure those beneficial owners’ voting instructions. We will reimburse those record holders for their reasonable expenses. We do not intend to hire a proxy solicitor to assist in the solicitation of proxies. We may use several of our regular employees, who will not be specially compensated, to solicit proxies from our stockholders, either personally or by telephone, Internet, facsimile or special delivery letter.
A list of stockholders eligible to vote at the Annual Meeting will be available for inspection, for any purpose germane to the Annual Meeting, at our corporate headquarters for a period of no less than ten days ending on the day prior to the Annual Meeting.Meeting date. Please contact our Corporate Secretary at CorpSecretary@guardanthealth.com if you are interested in viewing the list. The list of stockholders will also be made available on
www.virtualshareholdermeeting.com/GH2021during the Annual Meeting.Meeting at www.virtualshareholdermeeting.com/GH2024.7
Forward-Looking Statements
This proxy statement contains “forward-looking statements” (as definedCORPORATE GOVERNANCE
Corporate Governance Focus and Stockholder Outreach
Over the course of the last few years, the Board has been actively engaged in a comprehensive review of its corporate governance practices and in taking steps to strengthen and enhance those practices in response to stockholder feedback. These steps have included increasing the Private Securities Litigation Reform Actsize of 1995). These statements are basedthe Board from seven to eight directors and increasing the diversity of the Board. Most recently, the Board made a number of meaningful enhancements to the Company’s corporate governance practices. In November 2023, for example, our Board approved and adopted our clawback policy and, we continued enhancing our Environmental, Social and Governance (ESG) efforts by publishing our inaugural ESG Report in May 2023.
We recognize the value of a robust stockholder outreach program. We engage in regular, constructive dialogue with our stockholders on our current expectations and involve risks and uncertainties, which may cause resultsmatters relevant to differ materially from those set forth in the statements. The forward-looking statements may include statements regarding actions to be taken by us. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Forward-looking statements should be evaluated together with the many uncertainties that affect our business, particularly those mentionedincluding corporate governance, executive compensation, strategy, environmental, social and governance issues, and human capital management. During the second quarter of 2023 we contacted our top 75 stockholders, representing more than 83% of the Company’s outstanding shares of common stock. We ultimately spoke with three investors owning 1.9% of outstanding shares with another eight investors owning 21% of outstanding shares stating they had no concerns that warranted a call with management. We also spoke with eight investors owning 39% of outstanding shares during the first quarter of 2024 in the risk factors in Item 1Aorder to receive input from some of our Annual Report on Form 10-K for the year ended December 31, 2020 and in our periodic reports on Form 10-Q and our current reports on Form 8-K.
CORPORATE GOVERNANCE
Corporate Governance Guidelines
Our Board has adopted corporate governance guidelines covering, among other things, the duties and responsibilities of and independence standards applicable to our directors and Board committee structures and responsibilities. These guidelines are availabletop stockholders on the “Corporate Governance” section of our website at https://investors.guardanthealth.com.
executive compensation program generally.Board Composition
The Board currently has eight members. The following provides summary information about each director. Our directors possess a rangedirector and reflects their committee assignments as of diverse skills, backgrounds, experience and viewpoints that we believe are integral to an effective board of directors. Detailed information about each individual’s qualifications, experience, skills and expertise along with select professional and community contributions can be found in the section entitled “Proposal 1 Election of Directors” in this proxy statement.
| | | | | | | | | | | | | | | | | | | | |
| Name | Position | Age | Director Since | AC | CC | N&CG |
| AmirAli Talasaz | Chairperson, President & COO | 41 | 2013 | | | |
| Ian Clark | Lead Independent Director | 60 | 2017 | n | l | |
| Helmy Eltoukhy | Director & CEO | 42 | 2013 | | | |
| Vijaya Gadde | Director | 46 | 2020 | | n | |
| Bahija Jallal | Director | 59 | 2019 | n | | n |
| Samir Kaul | Director | 47 | 2014 | | n | l |
| Stanley Meresman | Director | 74 | 2018 | l | | n |
lApril 25, 2024. | | | | | | | | | | | | | | | | |
| | | | | | | | |
| Name | | Position | | Age | | Director Since | | AC | | | | CC | | | | N&CG |
| | | | | | | | |
Helmy Eltoukhy | | Chairperson & Co-Chief Executive Officer (“Co-CEO”) | | 45 | | 2013 | | | | | | | | | | |
| | | | | | | | |
AmirAli Talasaz | | Director & Co-CEO | | 44 | | 2013 | | | | | | | | | | |
| | | | | | | | |
Ian Clark | | Lead Independent Director | | 63 | | 2017 | | | | | | | | | | 
|
| | | | | | | | |
Vijaya Gadde | | Director | | 49 | | 2020 | | | | | |
| | | | |
| | | | | | | | |
Meghan Joyce | | Director | | 40 | | 2021 | | 
| | | |
| | | | |
| | | | | | | | |
Steve Krognes | | Director | | 55 | | 2022 | |
| | | | | | | |
|
| | | | | | | | |
Myrtle Potter | | Director | | 65 | | 2021 | |
| | | |
| | | | |
| | | | | | | | |
Musa Tariq | | Director | | 41 | | 2023 | | | | | | | | | |
|
Chair
n MemberAC
Audit Committee CC Compensation CommitteeN&CG Nominating and& Corporate Governance Committee8
Pursuant to our Amended and Restated Bylaws (the "Bylaws"), the total number of directors constituting our Board shall be fixed by the Board from time to time. Our currently authorized number of directors is seven and we have seven Board members. On June 12, 2020, Vijaya Gadde was appointed to the Board as a Class I director to serve for a term expiring at our 2022 annual meeting of stockholders. The Board is divided into three classes (Class I, Class II and Class III) with staggered terms of three years each, andwith each director holding office until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal. The term of one class expires at each annual meeting of stockholders; thus, directors typically standstockholders.
Statistics for election after three years, unless they are filling an unexpired term.
13Directors (as of April 25, 2024) | | | | | | |
| | | | |
Independence | | Gender Diversity | | Racial / Ethnic Diversity | | Tenure |
| | | |
75% | | 38% | | 38% | | 3.5 years |
| | | |
6 of 8 directors are
independent | | 3 of 8 directors are
female | | 3 of 8 directors are
members of traditionally underrepresented racial/ethnic groups, as defined by current U.S. census racial/ethnic categories | | Average tenure of
directors |
In accordance with Nasdaq Stock Market (“Nasdaq”) rules, the following Board Diversity Matrix sets forth the required diversity statistics for our directors:
| | | | |
Nasdaq Board Diversity Matrix (As of April 25, 2024) |
| | |
Total Number of Directors: | | 8 | | |
| | |
| | | Female | | Male |
| | |
Part I: Gender Identity | | | | |
| | |
Directors | | 3 | | 5 |
| | |
Part II: Demographic Background | | | | |
| | |
African American or Black | | 1 | | — |
| | |
Asian | | 1 | | 1 |
| | |
White | | 1 | | 3 |
| | |
Did Not Disclose Demographic Background | | — | | 1 |
9
Director Statistics
| | | | | | | | | | | |
Independence
71%
5 of 7 directors are independent
| Gender Diversity
28%
2 of 7 directors are female
| Racial / Ethnic Diversity
42%
3 of 7 directors are diverse
| Tenure
5 years
Average tenure of directors
|
Diversity of Skills and Expertise for Directors as of Our Annual Meeting
The skills matrix below identifies our directors’ prominent experiences and qualifications by name. Each director brings his or her own unique background and range of expertise, knowledge and experience which provides an appropriate and diverse mix of qualifications necessary for our Board to effectively fulfill its oversight responsibilities. By its nature, the information contained in this summary is not intended to be exhaustive but aims to convey the general breadth of experience and qualifications that our directors bring to their work on our Board to oversee strategy, performance, culture and risk at the Company.
Board Skills of Directors
10
Our Nominating and Corporate Governance Committee (the “Governance Committee”) is responsible for determining Board membership qualifications and for selecting, evaluating and recommending to the Board nominees for annual election to the Board and to fill vacancies as they arise. When considering whether directors and nominees have the experience, qualifications, attributes or skills to enable the Board to satisfy its oversight responsibilities effectively in light of our business and structure, the Governance Committee and the Board evaluatesevaluate each individual in the context of the Board as a whole, with the objective of assembling a team that can best perpetuate the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience, thought, backgrounds and cultures. Directors and nominees should have a high level of personal and professional integrity, strong ethics and values and the ability to make mature business judgments. The Governance Committee maintains Director Qualification Standards for
selecting nominees and for considering stockholder recommended nominees, which are included in this proxy statement as Appendix A. In determining whether to recommend a director for re-election, the Governance Committee also considers the director’s past attendance at meetings and participation in and contributions to the Board’s activities. Our directors possess a range of diverse skills, backgrounds, experience and viewpoints that we believe are integral to an effective board of directors. Detailed information about each individual’s qualifications, experience, skills and expertise along with select professional and community contributions can be found above and in the section entitled “Proposal 1: Election of Directors” in this proxy statement. We believe that our directors provide an appropriate mix of experience, diversity and skills relevant to the size and nature of our business.
The Governance Committee is mindful of the overboarding policies regarding board service of certain institutional investors and proxy advisory firms, which policies were developed due to concerns that “overboarded” directors face excessive time commitments and challenges in fulfilling their duties. Messrs. MeresmanClark and ClarkKrognes may be deemed overboarded“overboarded” under certain policies. Neither of Messrs. Meresman orMr. Clark is not up for re-election this year. Nonetheless, the Governance Committee reviewed and considered the contributions of both Messrs. MeresmanClark and ClarkKrognes to the Board and noted their strong attendance, preparedness and engagement at Board and committee meetings. The Governance Committee also notedmeetings, and their valuable and extensive public company director experience and expertise (representing 2 of the 3 directors onexpertise. The Committee also noted Mr. Clark’s leadership as our Board who currently service as board members at other public companies). Further, the Governance Committee believes that Mr. Meresman is uniquely qualified to lead our Audit Committee, and note the active engagement of the other two members of our Audit Committee, who each serve on not more than one other audit committee.
Lead Independent Director.The Governance Committee will consider stockholder recommendations of candidates on the same basis as it considers all other candidates. Stockholders may propose director nominees by adhering to the advance notice procedures described in the section entitled “Other Matters-StockholderMatters: Stockholder Proposals and Nominations��Nominations” in this proxy statement and must include all information as required under our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) and Amended and Restated Bylaws (the “Bylaws”), and any other information that would be required to solicit a proxy under federal securities laws. We may request from the recommending stockholder or recommending stockholder group such other information as may reasonably be required to determine whether each person recommended by a stockholder or stockholder group as a nominee meets the minimum director qualifications established by our Board and is independent based on applicable laws and regulations. The Governance Committee may also establish procedures, from time to time, regarding submission of candidates by stockholders and others.
11
Our Governance Committee and our Board have undertaken a review of the Board’s composition, the composition of Board committees and the independence of each director. Based upon information concerning each director’s background, employment and affiliations, including family relationships, the Board has affirmatively determined that each of Ian Clark, Vijaya Gadde, Bahija Jallal, Samir KaulMeghan Joyce, Steve Krognes, Myrtle Potter and Stanley MeresmanMusa Tariq is independent, as defined under the applicable listing requirements and rules of the Nasdaq Global Select Market ("Nasdaq") and the Securities and Exchange Commission (the “SEC”), and that each of them and their respective family members have no material relationship with us, commercial or otherwise, that would interfere with the exercise of their independent judgment in carrying out the responsibilities of a director. Drs. EltoukhyThe Board also affirmatively determined that Samir Kaul, who served as a director during 2023 and Talasaz were determined to not bewho resigned as a director effective February 1, 2024, was independent, due to their service as our Chief Executive Officer (“CEO”),defined under the applicable listing requirements and as our Presidentrules of Nasdaq and Chief Operating Officer (“COO”), respectively.the SEC. In making these determinations, the Board
considered the current and prior relationships that each non-employee director has with us and all other facts and circumstances the Board deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.
Drs. Eltoukhy and Talasaz were determined to not be independent due to their service as our Co-CEOs.Board Leadership Structure
Our Board has determined that at this time it is in the best interests of the Company and our stockholders to have AmirAli Talasaz,Helmy Eltoukhy, our President and COO,Co-CEO, serve as our Chairperson of the Board, coupled with a strong lead independent director.director, Ian Clark. Dr. Eltoukhy was appointed as Chairperson of the Board on August 5, 2021, succeeding AmirAli Talasaz in this role. We believe having one of our founderssenior executives serve as Chairperson promotes responsibility and accountability, and that our Board benefits from having a Chairperson with his extensive understanding of our business and the unique challenges we face. The Board believes that this structure best facilitates consistent leadership direction and long-term strategic planning, while building a cohesive corporate culture that speaks with a single voice.
Our Board also recognizes the value and importance of a strong independent lead director with clearly delineated responsibilities. The independent directors have appointed Ian Clark to serve as our lead independent director.
As set forth in our Corporate Governance Guidelines, Mr. Clark, as our independent lead director, has clearly delineated and comprehensive duties, including:
•presiding at all meetings of the Board at which the Chairperson is not present, including all executive sessions of the independent directors;
•approving Board meeting schedules and agendas;
•meeting in executive session without non-Independent Directors or management present on a regularly scheduled basis, but no less than twice per year; and
•acting as the liaison between the independent directors and our Chief Executive Officer and Chairperson.
| • | | meeting in executive session without non-independent directors or management present on a regularly scheduled basis, but no less than twice per year; and |
| • | | acting as the liaison between the independent directors and our Co-CEOs and Chairperson. |
Our Board will continue to evaluate its leadership structure in order to ensure it aligns with and supports the evolving needs and circumstances of Guardant and its stockholders.
12
Corporate Governance Guidelines
Our Board has adopted corporate governance guidelines covering, among other things, the duties and responsibilities of and independence standards applicable to our directors and Board committee structures and responsibilities. These guidelines are available on the “Corporate Governance” section of our website at https://investors.guardanthealth.com.
Attendance by Members of the Board at Meetings
Our Board held nineseven meetings and acted by written consent fourthree times during the year ended December 31, 2020. During 2020, all2023. All of our then incumbent directors attended at least 75% of the combined total of (i) all Board meetings and (ii) all meetings of committees of the Board of which the incumbent director was a member.
The membership of each standing committee in 2023 and the number of meetings held during 2023 are identified in the table below. | | | | | | | | | | |
Director | | Audit | | | | Compensation | | | | Governance |
Helmy Eltoukhy | | | | | | | | | | |
AmirAli Talasaz | | | | | | | | | | |
Ian Clark | | | | | | | | | | Chair |
Vijaya Gadde | | | | | | Chair | | | | |
Meghan Joyce | | ✓ | | | | | | | | ✓ |
Samir Kaul(1) | | | | | | ✓ | | | | |
Steve Krognes | | Chair | | | | | | | | ✓ |
Myrtle Potter | | ✓ | | | | ✓ | | | | |
Musa Tariq(2) | | | | | | | | | | ✓ |
Number of meetings held during FY 2023* | | 5 | | | | 7 | | | | 4 |
| * | Does not include action by written consent |
| (1) | Mr. Kaul resigned as a member of the Board on February 1, 2024. |
| (2) | Mr. Tariq joined the Board effective March 6, 2023. |
Currently, we do not maintain a formal policy regarding director attendance at the Annual Meeting; however, it is expected that, absent compelling circumstances, each of our directors will attend our Annual Meeting. All of our then six directors attended our 20202023 Annual Meeting of Stockholders (the "2020“2023 Annual Meeting"Meeting”).
Our non-management directors meet regularly in executive sessions without management, to consider such matters as they deem appropriate. Our lead independent director, Mr. Clark, presides over all executive sessions.
sessions of Board of Directors meetings.Board Committees
We currently have three standing committees: an Audit Committee, a Compensation Committee and a Governance Committee. From time to time, the Board may form a new
13
committee or disband a current committee, depending on the circumstances. The charters of all three of our standing Board committees are available on our website under the “Corporate Governance-GovernanceGovernance – Governance Documents” section at https://investors.guardanthealth.com.
Our Audit Committee currently consists of Stanley Meresman, Ian ClarkSteve Krognes, Meghan Joyce and Bahija Jallal,Myrtle Potter, with Mr. MeresmanKrognes serving as chair. Our Board has determined that each of these directors is independent as defined by the applicable rules of the Nasdaq and the SEC, and that each member of the Audit Committee meets the financial literacy and experience requirements of the applicable SEC and Nasdaq rules. In addition, our Board has determined that each of Messrs. MeresmanMr. Krognes, and Clark,Mss. Joyce and Dr. Jallal,Potter is an “audit committee financial expert” as defined by the SEC. The Audit Committee met four times and acted by written consent once during the year ended December 31, 2020.
Our Audit Committee charter requires that the Audit Committee oversee our corporate accounting and financial reporting processes. The primary responsibilities and functions of our Audit Committee are, among other things, as follows:
•appointing, approving the compensation of, and reviewing and assessing the qualifications, performance, and independence of, our independent registered public accounting firm;
•overseeing the work of our independent registered public accounting firm, including through the receipt and consideration of reports from such firm;
•reviewing and discussing with management and the independent registered public accounting firm our annual audited and quarterly financial statements and related disclosures;
•reviewing and discussing with management and the independent registered public accounting firm significant issues regarding accounting principles and financial-statement presentation;
monitoring our internal control over financial reporting and disclosure controls and proceduresprocedures;
reviewing and business code of conduct and ethics;
•discussing our risk management policies;and assessment policies and oversight of enterprise risk management process, and overseeing management of the Company’s financial and regulatory risks;
•overseeing procedures for the receipt, retention, and treatment of any complaints regarding accounting, internal accounting controls or auditing matters, as well as for the confidential and anonymous submissions by our employees of concerns regarding questionable accounting or auditing matters;
reviewing and approving or ratifying any related person transactions; and
•preparing the audit committee report required by SEC rules.
14
Our Compensation Committee currently consists of Ian Clark, Vijaya Gadde, Meghan Joyce and Samir Kaul,Myrtle Potter, with Mr. ClarkMs. Gadde serving as chair. Ms. Gadde joinedJoyce replaced Samir Kaul as a member of the Compensation Committee upon her
appointment to the Board on June 12, 2020.in February 2024, following Mr. Kaul’s resignation from our Board. Our Board has determined that each of Messrs. Clark and Kaul, and Ms. Gadde,these directors is independent under Nasdaq rules and that each qualifies as a “non-employee“non-employee director” under Section 16Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Compensation Committee met five times and acted by written consent two times during the year ended December 31, 2020.
The Compensation Committee’s responsibilities include, among other things:
| • | | reviewing and approving, or recommending that our Board approve, the compensation of our Co-Chief Executive Officers and our other executive officers; |
•reviewing and approving, or recommending that our Board approve, the compensation of our Chief Executive Officer and our other executive officers;
•reviewing and recommending to our Board the compensation of our directors;
•selecting independent compensation consultants and advisers and assessing whether there are any conflicts of interest with any of the committees'committees’ compensation advisers; and
•reviewing and approving, or recommending that our Board approve, incentive compensation and equity plans.
plans;administering our incentive compensation and equity plans, including approving grants of cash- and equity-based awards under such plans;
reviewing and overseeing our strategies, initiatives and policies regarding human capital management; and
reviewing, approving and adopting our clawback policy.
Since early October 2019, the Compensation Committee has engaged Radford, which is part of the RewardsAon’s Human Capital Solutions practicePractice, a division of Aon plc (“Radford”Aon”), as independent compensation consultants to provide advice and guidance on the design of our executive compensation programs and practices. RadfordAon attends Compensation Committee meetings when invited and meets with the Compensation Committee without management. RadfordAon provides the Compensation Committee with third-party data and analysis as well as advice and expertise on competitive compensation practices and trends, executive compensation plans and program designs, and proposed executive and director compensation levels. RadfordAon reports directly to the Compensation Committee and, as directed by the Compensation Committee, works with management and the chair of the Compensation Committee.
For 2020 compensation, Radford2023, Aon assisted the Compensation Committee onas requested, including with the following:
•determiningupdating the updated peer group of companies for our executive and director compensation analysis;
•updating company-wide market-basedconducting detailed market analysis on executive and director compensation guidelines;
•updating company-wide market-based equity compensation guidelines for new hiresrelative to our peer group, and annual grants; andadvising on general industry pay practices;
15
•executive compensation market-based benchmarking.
In 2020,meeting regularly with our Compensation Committee engaged Semler Brossy Consulting Group, an independentto review each element of executive compensation consultant (“Semler Brossy”)for the executive officers (base salary, annual cash incentives and long-term incentives), to provide advice and consultation regarding our directorincluding the competitiveness of the executive compensation program to better align the program to peer compensation practices, and to review and provide advice regarding market competitiveness andagainst peer group practices regardingdata;
reviewing the Founders' 2020 Performance Awards granted toCompany’s equity grant strategy;
assisting with the Company’s consideration of the executive compensation risk assessment;
supporting the drafting of our CEOexecutive compensation disclosures for this proxy statement; and President/COO. Semler Brossy reported directly to
attending Compensation Committee meetings as requested, and communicating with the Chair of the Compensation Committee and, as directed by the Compensation Committee, worked with management and the chair of the Compensation Committee.between meetings.
The Compensation Committee regularly reviews the services provided by its outside consultants, and it has assessed the independence of Radford and Semler BrossyAon consistent with SEC rules and Nasdaq listing standards. In doing so, the Compensation Committee considered each of the factors set forth by the SEC and Nasdaq with respect to a compensation consultant’s independence. The Compensation Committee also considered the nature and amount of work performed for the Compensation Committee and the fees paid for those services in relation to the firm’s total revenues. On the basis of its consideration of the foregoing and other relevant factors, the Compensation Committee has determined that each of Radford and Semler BrossyAon is independent, and that no conflicts of interest exist between the Company and each of Radford and Semler Brossy.
Aon.Nominating and Corporate Governance Committee
Our Governance Committee currently consists of Samir Kaul, Stanley MeresmanIan Clark, Steve Krognes and Bahija Jallal,Musa Tariq, with Mr. KaulClark serving as chair. Meghan Joyce served as a member of the Governance Committee during 2023, and stepped down from the committee in February 2024 in connection with her transition onto the Compensation Committee. Our Board has determined that each of Messrs. Kaul and Meresman, and Dr. Jallal,these directors is independent under Nasdaq rules. The Governance Committee met three times and acted by written consent once during the year ended December 31, 2020.
The Governance Committee’s responsibilities include, among other things:
•identifying individuals qualified to become Board members;
•recommending to our Board the persons to be nominated for election as directors and to each of the Board’s committees;
| • | | reviewing and making recommendations to the Board with respect to management succession planning, and periodically reviewing the performance of our Co-Chief Executive Officers; |
•reviewing and making recommendations to the Board with respect to Board leadership structure;
reviewing and making recommendations to the Board with respect to corporate social responsibility, including climate and other ESG matters (with the Compensation Committee primarily responsible for human capital matters);
16
reviewing and discussing with management succession planning;our information technology initiatives, particularly those that relate to healthcare regulatory compliance, including education on cybersecurity and other relevant compliance risks;
•developingreviewing and reassessing our Code of Conduct, and overseeing management’s efforts to monitor compliance with our Code of Conduct;
reviewing and reassessing our Corporate Governance Guidelines, and recommending to the Board corporate governance principles;any proposed changes; and
•overseeing a periodic evaluationthe annual self-evaluation of the Board and management.
its committees.The Audit Committee of the Board is primarily responsible for overseeing our risk management processes on behalf of the Board. The Audit Committee receives reports from management on at least a quarterly basis regarding our assessment of risks. In addition, the Audit Committee reports regularly to the Board, which also considers our risk profile.profile, about material issues affecting the quality or integrity of our financial statements, compliance with legal or regulatory requirements, the performance or independence of the independent auditor, the performance of the Company’s internal audit function, and other matters that the Audit Committee deems appropriate. The Audit Committee and the Board focus on the most significant risks we face and our general risk management strategies. While the Board oversees our risk management, management is responsible for day-to-day risk management processes. Our Board expects management to consider risk and risk management in each business decision, to proactively develop and monitor risk management strategies and processes for day-to-day activities and to effectively implement risk management strategies adopted by the Audit Committee and the Board. We believe this division of responsibilities is the most effective approach for addressing the risks we face and that our Board’s leadership structure, which also emphasizes the independence of the Board in its oversight of its business and affairs, supports this approach. The standing committees of the Board retain primary responsibility for risk oversight in the following key areas:
•Audit Committee - Overseeing financial risk, capital risk, related party transactions, financial compliance risk and internal controls over financial reporting.
•Compensation Committee - Overseeing our risks related to our compensation philosophy and practices and evaluating the balance between incentives and rewards.
•Governance Committee - Evaluating director independence, the effectiveness of our Corporate Governance Guidelines and Business Code of Conduct and Ethics, and overseeing management’s succession planning.
| | |
| |
Audit Committee | | Overseeing financial risk, capital risk, related party transactions, financial compliance risk and internal controls over financial reporting. |
| |
Compensation Committee | | Overseeing our risks related to our compensation philosophy and practices and evaluating the balance between incentives and rewards. |
| |
Governance Committee | | Evaluating director independence, the effectiveness of our Corporate Governance Guidelines and Code of Conduct, reviewing our ESG strategy and information technology initiatives, particularly those that relate to healthcare regulatory compliance, and cybersecurity, and overseeing management’s succession planning. |
Each of our committees periodically provide updates to the Board regarding significant risk management issues and management’s response.
17
Compensation Risk Assessment
To assess the risks arising from our compensation policies and practices, management reviewed our various compensation programs, and presented this risk assessment to the Compensation Committee. The risk assessment included a review of our compensation plans from various perspectives, as well as other aspects of our programs that mitigate risk, ultimately assessing whether the policies and practices could directly or indirectly encourage or mitigate risk-taking by executives or increase risk to the Company.
We believe that our current compensation policies and programs do not motivate or incent excessive risk taking. As described more fully below, we structure our pay to consist of both fixed and variable compensation, particularly in connection with our pay-for-performance compensation philosophy. We believe this structure motivates our executives to produce superior short- and long-term results that are in the best interests of our Company and our stockholders in order to attain our ultimate objective of increasing stockholder value, and we have established, and our Compensation Committee endorses, several controls to address and mitigate compensation related risk. These include stock ownership guidelines for our senior executive officers and our directors, annual review of our gross burn rate, anti-hedging and anti-pledging policies, caps on incentive payouts, robust performance evaluations and a diverse set of financial and milestone performance metrics. As a result, we have concluded that our compensation policies and programs are not reasonably likely to have a material adverse effect on the Company.
Business Code of Conduct and Ethics
We have adopted a written Business Code of Conduct and Ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our Code of Conduct is designed to deter unlawful or unethical behavior, including with respect to actual or apparent conflicts of interest; to promote full, fair, accurate, timely and understandable disclosures; to promote compliance with applicable laws, rules and regulations; to prompt internal reporting of any violations and protection for persons reporting any such questionable behavior; to protect the Company’s business interests and assets in a manner that is protective of human health and safety and the environment; and to provide guidelines for our employees regarding political contributions, personal conduct and social media practices. We have posted a current copy of the code on our website, https://investors.guardanthealth.com.investors.guardanthealth.com. In addition, we intend to post on our website all disclosures that are required by law or the listing standards of Nasdaq concerning any amendments to, or waivers from, any provision of the code.
Stockholder Engagement
ThroughoutEnvironmental, Social and Governance (ESG)
Guardant’s Values. Each day at Guardant starts and ends with putting the last quarterpatient first. We are a team of 2020diverse, passionate, and into the first quarter of 2021, we conducted outreachcurious individuals, motivated to engage with stockholders on a wide variety of topics that are important to them. We report back to our Board on this engagement as well as specific issues to be addressed.
Our 2020 stockholder engagement initiatives included:
•Annual Stockholder Meeting: Our Chairpersontransform cancer care for patients at all stages of the Board answered questions from stockholders at the Company’s 2020 Annual Meeting.
•Investor Day: Senior executive officers presented on the Company’s strategy and financial performance atdisease. Guided by our Investor Day.
•Stockholder Outreach: We met with eight investors representing approximately 21% ofcore values, our outstanding shares and received feedback on financial performance, executive compensation programs, strategy, COVID-19 and environmental, social and governance matters.
Human Capital Management
Our people are critical to our success. We prioritize our people and provide rewarding careers for the intellectually curious and unabashedly determined. Our organization provides a safe, rewarding and respectful workplace where our people are provided with opportunities to pursue career paths based on their skills, performance and potential.
We adhere to our mission and values, which include a commitment to advancing breakthrough science and giving patients the opportunity to live healthier lives is central to how we operate. Even as these values have evolved, we have never wavered from our stakeholders, including our employees,commitment to operate with integrity and mutual respect. We also incorporate safety principles into every aspect of our business. We have a well-developed environmental, health and safety program, which is reinforced through rigorous policies, education and engagement of our employees and internal and external periodic audits.
21putting the patient first.Our Core Values
18
Our ESG Commitment. Our vision is to transform cancer care by creating impactful diagnostic tools that will be affordable and accessible to far more patients around the world. We are driven by an intense passion to dramatically change the course of cancer patients’ journeys. Our frustration with the data-starved status quo and our strong desire to improve human health shapes our unique culture. Ensuring a diverse and inclusive performance-driven cultureOur mission — to conquer cancer — is one ofat the key componentsheart of our ESG commitment and fully integrated into our business strategy.
Guided by our core values, our commitment to advancing breakthrough science and giving patients the opportunity to live healthier lives are central to how we operate and are foundational to our approach to corporate strategy,responsibility. We believe that to serve patients well, it is important to also act responsibly in our relationships with our employees, our communities and the environment. Therefore, we are committed to:
| | |
| | Providing meaningful work and development opportunities to our employees |
| | Striving to recruit, hire, and retain a talented and diverse team of people who align with our values and fostering a diverse, inclusive, and equitable workplace |
| | Conducting our business with the highest professional and ethical standards and operating with integrity and mutual respect |
| | Maintaining a well-developed environmental, health, and safety program, which is reinforced through rigorous policies, education, and engagement of our employees and internal and external periodic audits |
| | Making it easy and affordable to complete our tests |
| | Investing in environmental sustainability and responsible supply chain operations |
ESG Reporting and Engagement. In May 2023, we released our inaugural ESG report, which provides additional information related to our ESG commitments, initiatives, and recent achievements. Our ESG report is available for download on our website at http://investors.guardanthealth.com/corporate-governance/esg. We plan to provide periodic updates covering our ESG progress and data. Please note that nothing contained on or accessible through our website, including our ESG report or sections thereof, shall be deemed incorporated by reference into this proxy statement.
We engage with a variety of external groups, including our stockholders, our biopharma partners, and sustainability experts, to identify and understand ways to continually improve our ESG program. Based on feedback received from our engagements, we have conducted an initial accounting of our Scope 1 and 2 greenhouse gas emissions, and we are in the process of expanding that analysis as we strive to recruit, hire and retain a talented and diverse team of people who alignimprove our environmental management efforts. We are also evaluating potential ways to reduce our greenhouse gas emissions in line with the latest climate science. Additionally, we intend to more systematically engage our values. We believe in great leadership and lifetime learning,largest suppliers on ESG initiatives, and we invest in trainingplan to adopt a supplier code of conduct to outline our expectations related to responsible business conduct.
19
Grants and development opportunities in order to foster strong career paths for our employees.
Our compensationGiving. We sponsor and
benefits team strives to developsupport numerous non-profits and
implement policies and programs that support our business goals, maintain competitiveness, promote shared fiscal responsibility among the Companypatient advocacy groups and our employees
strategically align talent within our organizationdonate their time to a variety of causes. Our contributions help to support the work of non-profit organizations of all sizes, working in areas such as cancer research and
reward performance, while also managingpatient support, community wellness and scientific education, and supporting the
costsmission to accelerate access to innovation for cancer patients.Safety and Wellness. We are committed to providing a safe and secure work environment and maintaining environmental, health and safety policies that seek to promote the health and safety of such policies and programs. We provide our employees with competitiveand patients. We mandate continual training programs, and we have a robust employee wellness program that recognizes and supports the importance of personal health and work-life balance. We are committed to rewarding, supporting, and developing the employees who make it possible to deliver on our strategy. To that end, we offer a comprehensive total rewards package that includes market-competitive fixed and/or variable pay, competitive Companybroad-based equity programs,grants and bonuses, access to medical, dental, vision and life insurance benefits, disability coverage, a 401(k)fertility subsidies, retirement savings planplans, paid time off and numerous wellbeing benefits throughfamily leave, caregiving support, fitness, cellphone and internet reimbursements, and mental health and other wellness benefits.
Governance. We evaluate input from our Total Rewards program.
In order to ensure that we are meetingstockholders and consider their independent oversight of management and our human capital objectives, we frequently utilize employee engagement surveys to understand the effectivenesslong-term strategy. As part of our employee developmentcommitment to constructive engagement with investors, we evaluate and respond to the views voiced by our stockholders. Our dialogue has led to enhancements in our corporate governance, ESG, and executive compensation programsactivities, which we believe are in the best interest of the Company and where we can improve across the Company.
our stockholders.Communications with our Board
Any interested person, including any stockholder, may communicate with our Board by written mail addressed to Guardant Health, Inc. Board of Directors, c/o Corporate Secretary, 505 Penobscot Dr., Redwood City,3100 Hanover Street, Palo Alto, California, 94063.94304. We encourage stockholders to include proof of ownership of our stock in their communications. The corporate secretary will review the communications and forward them to the Board or the relevant committee of the Board, unless the communication is primarily commercial in nature, relates to an improper or irrelevant topic, or is unduly hostile, threatening, illegal or otherwise inappropriate.
Prohibition Against Pledging and Hedging
We maintain an Insider Trading Compliance Policy that prohibits our officers, directors and employees from purchasing financial instruments (including prepaid variable forward contracts, equity swaps, and collars), or otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of our stock. It further prohibits pledging our stock as collateral to secure loans, margin purchases of our stock, short sales of our stock, and any transactions in puts, calls or other derivative securities involving our stock.
Our Director Compensation Program is intended to fairly compensate our non-employee directors for the time and effort necessary to serve on our Board, in a manner that is competitive and serves the best interests of the Company and our stockholders.
PreviousProcess for Determining Director Compensation Program
. Prior toDecisions regarding the non-employee director compensation program are approved by our annual stockholders meeting in 2020, our Directorfull Board based on recommendations by the Compensation Program consisted of the following components:
Cash Compensation
•Annual Cash Retainer: $48,000
Additional Annual Retainers
•Lead Independent Director: $10,000
•Audit Committee Chair: $20,000
•Audit Committee Member (Non-Chair): $10,000
•Committee. The Compensation Committee Chair: $15,000
•Compensation Committee Member (Non-Chair): $7,500
•Governance Committee Chair: $10,000
•Governance Committee Member (Non-Chair): $5,000
The annual cash retainer is paid in quarterly installments in arrears. Annual cash retainers are not pro-rated for any partial calendar quarter of service.
Equity Compensation
•Initial Equity Grants to each non-employee director upon initial election or appointment to serve on our Board:
◦stock option award with an aggregate value (determined using a Black-Scholes option value based on a 30-day trading average stock price) of $215,000 and an exercise price equal toreviews the fair market valuetotal compensation of our common stock on the datenon-employee directors and each element of grant; and
◦restricted stock unit award with an aggregate value (determined based on a 30-day trading average stock price) of $215,000.
•Annual Equity Grants on the date of each annual stockholder meeting to each non-employee director who is serving on our Board as of (and who will continue to serve after) the date of such annual stockholder meeting:
◦stock option award with an aggregate value (determined using a Black-Scholes option value based on a 30-day trading average stock price) of $107,500 and an exercise price equal to the fair market value of our common stock on the date of grant; and
◦restricted stock unit award with an aggregate value (determined based on a 30-day trading average stock price) of $107,500.
The Annual Equity Grant is made to non-employee directors who have served on the Board for at least six months prior to the date of the applicable annual stockholder meeting.
Each Initial Equity Grant vests as to one-third of the shares subject to the award on each of the first three anniversaries of the date on which the director is appointed or elected to serve on our Board, subject to continued service. Each Annual Equity Grant vests in full on the earlier of the one-year anniversary of the applicable grant date and the date of the next annual stockholders’ meeting, subject to continued service. In addition, each Initial Equity Grant and Annual Equity Grant will vest in full immediately prior to the director’s death, disability, termination without cause, or a change in control (as defined in our 2018 Incentive Award Plan (the "2018 Plan")).
New Director Compensation Program. In the spring of 2020, our Compensation Committee engaged Semler Brossy to provide advice and consultation regarding our director compensation program each year, with this review usually scheduled before our annual stockholder meeting. The Compensation Committee consults with its independent compensation consultant periodically as to better align the competitive position of our director compensation program, both in terms of the compensation amount and with respect to peer compensation practices. Semler Brossy advised thatthe program’s design, against those of our program at the time was below market median and not competitive with our peer grouppeers (information regardingabout our peer group is on page 43)42).
BasedThe compensation for our Board members is aligned with long-term value creation because it consists solely of stock option and restricted stock unit awards that do not vest as to any of the underlying shares until one-year after the grant date. By using a program that is entirely based on this advice,stock awards, the Board in consultationhas established a compensation program that fully aligns their interests with Semler Brossy, adopted an updatedthose of our stockholders. Our directors do not receive cash compensation for their service as directors, but we pay their reasonable expenses incurred for attending meetings. The Compensation Committee did not recommend to the Board any adjustments to our director compensation program design that (i) eliminated the cash compensation component of the program, (ii) increased the value of annual equity awards granted under the program, (iii) provided for a separate annual equity award to be granted to our Board’s Lead Independent Director and (iv) revised certain terms of the equity awards that are granted upon a director’s initial appointment or election. This new program, which is further described below, became effective on the date of our annual stockholders’ meeting in 2020.
The Board believes that replacing a more traditional cash-and-equity compensation program with an equity-only compensation program is more competitive when compared to our peers; in addition, the total cost of the program, on an annual basis, approximates the total compensation cost of our peer groups’ director compensation programs. In addition, the initial equity awards granted to incoming directors under the updated program vest over four years, which is longer than our peer group (which use three years). In determining to incorporate an additional equity award to our Lead Independent Director, our Board took into account the significant role and scope of this director’s responsibilities, including leading meetings of independent directors and providing input on meeting agendas, advising our CEO as to quantity, quality and timeliness of information and materials, providing feedback to our CEO on the CEO’s evaluation and leading the Board evaluation process.
2023.The following is a summary of our updated director compensation program design, which became effective as ofthat was adopted in June 12, 2020 the date of our 2020 annual stockholders’ meeting:
and remained in effect for 2023:Initial Awards
(each, an “Initial Award”) •stock option award with an aggregate value of $362,500 (determined by dividing the value of the award by the per share Black-Scholes valuation as of the applicable grant date) and an exercise price equal to the fair market value of our common stock on the date of grant; and
•restricted stock unit award with an aggregate value of $362,500 (determined by dividing the value by the fair market value of our common stock on the applicable grant date).
Annual Awards
(each, an “Annual Award”)•stock option award with an aggregate value of $212,500 (determined by dividing the value of the award by the per share Black-Scholes valuation as of the applicable grant date) and an exercise price equal to the fair market value of our common stock on the date of grant; and
•restricted stock unit award with an aggregate value of $212,500 (determined by dividing the value by the fair market value of our common stock on the applicable grant date).
21
Annual Lead Independent Director Award
(each, a “LID Award”)•restricted stock unit award with an aggregate value of $45,000 (determined by dividing the value by the fair market value of our common stock on the applicable grant date).
The Initial Award is granted to each non-employee director who is initially elected or appointed to serve on the Board and each Initial Award vests and becomes exercisable (as applicable) as to 25% of the shares subject to such award on the first anniversary of the director’s election to the Board, and as to the remaining 75% of the shares subject to the Initial Award in substantially equal installments on each monthly anniversary of the director’s election to the Board thereafter, subject to continued service through the applicable vesting date.
The Annual Award is granted on the date of each annual stockholders’ meeting to non-employee directors who have served on the Board for at least six months prior to the date of such annual stockholders’ meeting. Each Annual Award vests and become exercisable (as applicable) in full on the earlier to occur of (i) the one-year anniversary of the applicable grant date and (ii) the date of the next annual meeting of the Company’s stockholders following the grant date, subject to continued service through the applicable vesting date.
The LID Award is granted on the date of each annual stockholders’ meeting to the non-employee director who has served on the Board for at least six months as of the date of such annual stockholders’ meeting and who will also serve as Lead Independent Director of the Board immediately following such meeting. Each LID Award will vest in full on the earlier to occur of (i) the one-year anniversary of the applicable grant date and (ii) the date of the next annual meeting of the Company’s stockholders following the grant date, subject to continued service through the applicable vesting date.
Our Board decided that the additional LID Award is appropriate given the significant role and scope of the responsibilities of the Board’s Lead Independent Director, such as responsibilities related to leading meetings of independent directors, providing input on meeting agendas, advising our Co-CEOs as to quantity, quality and timeliness of information and materials, providing feedback to our Co-CEOs on the Co-CEOs’ evaluation, and leading the Board evaluation process.In addition, each Initial Award, Annual Award and LID Award will vest in full immediately prior to the director’s death, disability, termination without cause, or a change in control (as defined in theour 2018 Plan)Incentive Award Plan (the “2018 Plan”)).
Any compensation payable to a director under this updated program will comply with the director annual compensation limit set forth in our 2018 Plan (currently, an annual limit of $750,000 per director).
Other Compensation Matters. Pursuant to terms of their letter agreements entered in connection with their commencement of We do not pay any additional compensation for committee service or attendance at Board service, each outstanding option granted to Mr.
Clark in 2017, and granted to Mr. Meresman in 2018, vests with respect to 1/48th of the shares on each monthly anniversary of the date their Board service commenced, and will vest in full immediately prior to a change in control (as defined in the 2018 Plan).
or committee meetings.Director Compensation Table
. The following table contains information concerning the compensation received by our non-employee directors during the year ended December 31, 2020.2023. Directors who are also employees do not receive compensation for service on our Board (in addition to the compensation payable for their service as our employees). On June 12, 2020, Vijaya Gadde was appointed to the Board as a Class I director to serve for a term expiring at our 2022 annual meeting of stockholders. Amounts shownDrs. Eltoukhy and Talasaz are not included in the “Fees Earned or Paidtable below because they did not receive any additional compensation for their service on our Board. Drs. Eltoukhy’s and Talasaz’s 2023 compensation is presented in Cash” column below reflect fees paid under our old director compensation program for service prior to our 2020 annual stockholders’ meeting. Annual Awards (including the annual LID Award) were grantedSummary Compensation Table found on June 12, 2020 to each non-employee director. Vijaya Gadde received her Initial Equity Grants on June 12, 2020 in connection with her initial appointment to the Board.page 61.22
20202023 DIRECTOR COMPENSATION TABLE
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Fees Earned or Paid in Cash (1) | | Stock Awards
(2)(4) | | Option Awards (3)(4) | | Total |
| Ian Clark | | $ | 41,500 | | | $ | 257,558 | | | $ | 212,592 | | | $ | 511,650 | |
| Vijaya Gadde | | — | | | 362,554 | | | 362,662 | | | 725,216 | |
| Bahija Jallal | | 31,500 | | | 212,537 | | | 212,592 | | | 456,629 | |
| Samir Kaul | | 32,750 | | | 212,537 | | | 212,592 | | | 457,879 | |
| Stanley Meresman | | 36,500 | | | 212,537 | | | 212,592 | | | 461,629 | |
| Dipchand Nishar(5) | | 27,750 | | | — | | | — | | | 27,750 | |
_______________
(1)Represents cash fees paid under our prior director compensation program.
(2) The amounts shown in the Stock Awards column reflects the aggregate grant date fair value of the restricted stock units ("RSUs") awarded to our directors, computed in accordance with Topic 718, excluding the effect of estimated forfeitures. Amounts in this column reflect the market value of the RSUs using the closing price of a share of our common stock as reported on Nasdaq on the date of grant of $77.09 on June 12, 2020, multiplied by the number of shares underlying each award.
(3) The amounts shown above in the Option Awards column represent the aggregate grant date fair value of share options computed in accordance with Topic 718. Valuations of options were determined using the Black-Scholes option pricing model. For information regarding assumptions, factors and methodologies used in our computations pursuant to Topic 718, see Note 14 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.
(4) The non-employee directors had the following outstanding RSUs and stock options as of December 31, 2020:
| | | | | | | | | | | | | | |
| | RSUs | | Stock Options |
| Ian Clark | | 3,341 | | | 15,165 | |
| Vijaya Gadde | | 4,703 | | | 7,904 | |
| Bahija Jallal | | 4,649 | | | 9,366 | |
| Samir Kaul | | 2,757 | | | 7,095 | |
| Stan Meresman | | 2,757 | | | 90,974 | |
| Dipchand Nishar | | — | | | — | |
(5) Mr. Nishar did not stand for re-election as a director of the Company at the 2020 Annual Meeting
26 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | |
| Fees
Earned or
Paid in
Cash
($) |
| |
| Stock
Awards (1)(3)
($) |
| |
| Option
Awards
(2)(3) ($) |
| |
| Non-Equity
Incentive
Plan
Compensation
($) |
| |
| Change in
Pension Value
and
Nonqualified
Deferred
Compensation
($) |
| |
| All Other
Compensation
($) |
| | | Total ($) | |
Ian Clark | | | — | | | | 257,522 | | | | 212,690 | | | | — | | | | — | | | | — | | | | 470,212 | |
Vijaya Gadde | | | — | | | | 212,524 | | | | 212,690 | | | | — | | | | — | | | | — | | | | 425,214 | |
Meghan Joyce | | | — | | | | 212,524 | | | | 212,690 | | | | — | | | | — | | | | — | | | | 425,214 | |
Samir Kaul(4) | | | — | | | | 212,524 | | | | 212,690 | | | | — | | | | — | | | | — | | | | 425,214 | |
Steven Krognes | | | — | | | | 212,524 | | | | 212,690 | | | | — | | | | — | | | | — | | | | 425,214 | |
Myrtle Potter | | | — | | | | 212,524 | | | | 212,690 | | | | — | | | | — | | | | — | | | | 425,214 | |
Musa Tariq(5) | | | — | | | | 362,518 | | | | 362,783 | | | | — | | | | — | | | | — | | | | 725,301 | |
| (1) | The amounts shown in the Stock Awards column reflects the aggregate grant date fair value of the restricted stock units (“RSUs”) awarded to our non-employee directors, computed in accordance with Topic 718, excluding the effect of estimated forfeitures. Amounts in this column reflect the market value of the RSUs using the closing price of a share of our common stock as reported on Nasdaq on the date of grant multiplied by the number of shares underlying each award, as follows: for Messrs. Clark, Kaul, and Krognes and Mses. Gadde, Joyce and Potter using the closing price of $38.01 on June 14, 2023; for Mr. Tariq, using the closing price of $30.23 on March 6, 2023. |
| (2) | The amounts shown in the Option Awards column represent the aggregate grant date fair value of stock options computed in accordance with Topic 718. Valuations of options were determined using the Black-Scholes option pricing model. For information regarding assumptions, factors and methodologies used in our computations pursuant to Topic 718, see Note 11 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023. |
| (3) | The non-employee directors held the following outstanding RSUs and stock options as of December 31, 2023: |
| | | | | | | | | | |
Name | | RSUs | | Stock Options |
Ian Clark | | | | 6,776 | | | | | 24,374 | |
Vijaya Gadde | | | | 6,180 | | | | | 28,947 | |
Meghan Joyce | | | | 6,920 | | | | | 23,258 | |
Samir Kaul(4) | | | | 5,592 | | | | | 28,138 | |
Steven Krognes | | | | 10,221 | | | | | 20,682 | |
Myrtle Potter | | | | 7,097 | | | | | 23,521 | |
Musa Tariq(5) | | | | 11,992 | | | | | 18,237 | |
| (4) | Mr. Kaul resigned as a member of the Board on February 1, 2024. |
| (5) | Mr. Tariq joined the Board effective March 6, 2023. |
23
Pursuant to our Certificate of Incorporation and our Bylaws, the total number of directors constituting the Board is fixed from time to time by the Board. There are currently seveneight authorized directors and seveneight persons serving as directors. On June 12, 2020, Vijaya Gadde was appointed to the Board as a Class I director to serve for a term expiring at our 2022 annual meeting of stockholders. With the addition of Ms. Gadde, two of our seven directors are women.
The Board is divided into three classes (Class I, Class II and Class III) with staggered terms of three years each, containingwith each director holding office until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal. Each class contains as nearly as possible an equal number of directors. The term of one class expires at each annual meeting of stockholders; thus, directors typically stand for election after three years, unless they are filling an unexpired term. The current term of office of our Class III Directors expires at the Annual Meeting, while the term for our Class I Directors will expireexpires at our 20222025 annual meeting of stockholders and the term for our Class II Directors expires at our 20232026 annual meeting of stockholders.
Based upon the recommendation of our Governance Committee, the Board has nominated each of Helmy Eltoukhy, Steve Krognes and AmirAli Talasaz, and Bahija Jallal, each a current Class III Director, for re-election at the Annual Meeting. Each director elected at the Annual Meeting will serve a three-year term expiring at the 20242027 annual meeting of stockholders and until his or her successor is duly elected and qualified as a Class III Director, or until his or her earlier death, resignation or removal. At the Annual Meeting, proxies cannot be voted for a greater number of individuals than the three nominees named in this proxy statement.
The Board and the Governance Committee believe the skills, qualities, attributes and experience of our directors provide us with business acumen and a diverse range of perspectives to engage each other and management to effectively address effectively our evolving needs and represent the best interests of our stockholders.
Vacancies on the Board, including any vacancy created by an increase in the size of the Board, may be filled only by a majority of the directors remaining in office, even though less than a quorum of the Board, or a sole remaining director. A director elected by the Board to fill a vacancy will serve until the next election of the class of directors for which such director was chosen and until such director’s successor is elected and qualified, or until such director’s earlier retirement, resignation, disqualification, removal or death.
If any nominee should become unavailable for election prior to the Annual Meeting, an event that currently is not anticipated by the Board, the proxies will be voted in favor of the election of a substitute nominee or nominees proposed by the Board or the number of directors may be reduced accordingly. Each nominee has agreed to serve if elected and the Board has no reason to believe that any nominee will be unable to serve.
24
Information about Class III Director Nominees
Set forth below is biographical information for each nominee and a summary of the specific qualifications, attributes, skills and experiences which led the Board to conclude that each nominee should serve on the Board at this time.
Class III Directors with Term Expiring at the 2024 Annual Meeting
| | |
| | | | | | | | | | | |
| Helmy Eltoukhy Ph.D. 
Co-Chief Executive Officer at Guardant Health, Inc. | | Dr. Eltoukhy is our co-founder and has served as our CEO and a member of our Board since January 2013. On August 5, 2021, Dr. Eltoukhy was appointed as Chairperson of our Board and Co-CEO.Prior to co-founding our company, in 2013, Dr. Eltoukhy held various positions at Illumina, Inc. from August 2008 to December 2012, including Senior Director of Advanced Technology Research, where he developed |
novel chemistries, hardware and informatics for genetic analysis systems. In June 2007, he co-founded Avantome Inc. to commercialize semiconductor sequencing to help speed up the democratization of high throughput DNA sequencing and served as Chief Executive Officer until its acquisition by Illumina in August 2008. He joined the Stanford Genome Technology Center as a post-doctoral fellow in 2006 to work on low-cost DNA sequencing technologies. During his doctoral studies and at the Stanford Genome Technology Center, he developed the first semiconductor sequencing platform and first base-calling algorithm for next-generation sequencing under several National Human Genome Research Institute grants. He received his Ph.D., M.S. and B.S. degrees in electrical engineering from Stanford University. We believe that Dr. Eltoukhy is qualified to serve as Chairperson of our Board due to his extensive knowledge of our company as co-founder and Co-CEO and his experience in the life sciences and biotechnology industries. |
| | |
| |
Steve Krognes 
Former Chief Financial Officer of Denali Therapeutics Inc. Current Committee Assignments: • Audit Committee (Chair) • Nominating and Corporate Governance Committee | | Mr. Krognes has served as a member of our Board since June 2022. Mr. Krognes is a professional independent board member in the biotech and life sciences sector. Before joining the Board, Mr. Krognes was the Chief Financial Officer at Denali Therapeutics Inc., a public biotechnology company, from October 2015 to April 2022. Mr. Krognes joined Denali from Genentech, Inc., a biotechnology company, where he served as Chief Financial Officer and a member of the Executive Committee from April 2009 to September 2015. Mr. Krognes also oversaw Genentech’s Site Services organization between 2011 and 2015, and Genentech’s IT organization between 2009 and 2011. He chaired the Genentech Access to Care Foundation between 2009 and 2015. From January 2004 to April 2009, Mr. Krognes served as Head of Mergers & Acquisitions and a member of the Finance Executive Committee at Roche Holding AG, a Swiss biotechnology company. From July 2002 to December 2003, Mr. Krognes served as Director of M&A at Danske Bank based in Norway. Mr. Krognes currently serves as a member of the Board of Directors at Denali Therapeutics Inc., Gritstone bio, Inc., argenx SE and ClavystBio, and previously served on the Board of Directors at Corvus Pharmaceuticals, Inc. between January 2016 and March 2021 and RLS Global AB from January 2016 to January 2023. He received his M.B.A. from Harvard Business School and his B.S. in Economics from The Wharton School of the University of Pennsylvania. We believe that Mr. Krognes is qualified to serve as a member of our Board due to his extensive knowledge of our company as co-founder and CEO and his experience in the biotechnology and life sciences and biotechnology industries. |
25
| | | | | | | | | | | | | | |
| AmirAli Talasaz Ph.D. 
Co-Chief Executive Officer at Guardant Health, Inc. | | Dr. Talasaz is our co-founder and has served as Chairperson of our Board, President and Chief Operating Officer (COO) from January 2013 until August 2021. On August 5, 2021, the Company appointed Dr. Talasaz as Co-CEO of the Company. On the same day, Dr. Talasaz resigned his position as Chairperson of the Board and as President and COO since January 2013. of the Company.Prior to co-founding our company, in 2013, Dr. Talasaz held various positions at Illumina, Inc., including Senior Director of Diagnostics Research from October 2011 to June 2012, where he led the efforts for |
emerging clinical applications of next-generation genomic analysis. During that time, he developed different genomic technologies suitable for clinical applications. In March 2008, he founded Auriphex Biosciences, Inc., which focused on purification and genetic analysis of circulating tumor cells for cancer management. The technology was acquired by lllumina, Inc. in 2009. During his academic years, he led the Technology Development group at the Stanford Genome Technology Center. He received his Ph.D. degree in electrical engineering, M.S. degree in electrical engineering and M.S. degree in management science and engineering from Stanford University.
We believe that Dr. Talasaz is qualified to serve as Chairperson of our Board due to his extensive knowledge of our company as co-founder and President and COO and his knowledge of the life sciences and biotechnology industries. |
| | | | | | | | | | | | | | |
| Bahija Jallal, Ph.D. Dr. Jallal has served as a member of our Board since April 2019. Dr. Jallal has served as the Chief Executive Officer of Immunocore Limited, a T cell receptor biotechnology company, since January 2019. Dr. Jallal has been a member of the boards of directors of Immunocore Limited since January 2019 and of Anthem, Inc. since February 2018, and also serves on the audit committee for Anthem.
|
Additionally, she is a member of the Board of Trustees of Johns Hopkins University and UMB Health Sciences Research Park Corporation and Past President of the Association for Women in Science.
Prior to that, Dr. Jallal served as Executive Vice President of AstraZeneca PLC, a pharmaceutical and biopharmaceutical company, from October 2013 to January 2019, and President of MedImmune, a subsidiary of AstraZeneca, from January 2013 to January 2019. She joined MedImmune in 2006 and held various research and development positions, including Senior Vice President, Research and Development, from 2010 to 2013. She received her Ph.D. degree in physiology and DEA degree in physiology and biology from the Université de Paris VI, and her AEA degree in plant physiology and M.S. degree in biology from the Université de Paris VII.
We believe that Dr. Jallal is qualified to serve as a member of our Board due to her extensive experience in the biopharmaceutical industry, in addition to her service as an executive at a number of companies.
|
Information about Other Directors Not Standing for Election at this Meeting
Directors who will continue to serve after the Annual Meeting are listed below.
Class I Directors with Terms Expiring at the 2022 Annual Meeting
| | | | | | | | | | | | | | |
| Stanley Meresman. Mr. Meresman has served as a member of our Board since May 2018. During the last ten years, Mr. Meresman has served on the boards of directors of various public and private companies, including service as chair of the audit committee for some of these companies. He currently serves on the board of directors and as chair of the audit committee of DoorDash, Inc., Snap, Inc., Cloudflare, Inc., and Medallia, Inc.
|
|
Previously, Mr. Meresman served as a member of the board of directors, including service as chair of the audit committee, of Palo Alto Networks, Inc. from September 2014 to December 2018, LinkedIn Corporation from October 2010 to December 2016, Zynga Inc. from June 2011 to June 2015, Meru Networks, Inc. from September 2010 to May 2013, and |
| | | | | | | | | | | | | | |
Riverbed Technology, Inc. from March 2005 to May 2012. From January 2004 to December 2004, Mr. Meresman was a Venture Partner with Technology Crossover Ventures, a private equity firm, and was General Partner and Chief Operating Officer of Technology Crossover Ventures from November 2001 to December 2003. During the four years before joining Technology Crossover Ventures, he was a private investor and board member and adviser to several technology companies. From May 1989 to May 1997, Mr. Meresman served as the Senior Vice President and Chief Financial Officer of Silicon Graphics, Inc. Mr. Meresman holds a B.S. degree in Industrial Engineering and Operations Research from the University of California, Berkeley and an M.B.A. degree from the Stanford Graduate School of Business.
We believe that Mr. Meresman is qualified to serve as a member of our Board due to his extensive financial expertise,knowledge of our company as co-founder and Co-CEO and his experience as public company chief financial officers, his experience on public company Audit Committees, as well as his yearsknowledge of strategicthe life sciences and management experience in the technology industry.
biotechnology industries. |
26
Information about Other Directors Not Standing for Election at this Meeting
Class I Directors with Term Expiring at the 2025 Annual Meeting
| | |
| | | | | | | | | | | |
Vijaya Gadde 
Former Chief Legal Officer of Twitter, Inc. Current Committee Assignments: • Compensation Committee (Chair) | Vijaya Gadde.
| Ms. Gadde has served as a member of our Board since June 2020. Ms. Gadde has served as the Chief Legal Officer of Twitter, Inc., a global platform for public self-expression and conversation in real time, sincefrom February 2018 to October 2022, and Secretary sincefrom August 2013 to October 2022, leading its legal, public policy, and trust and safety teams globally. Prior to her current role atglobally before Twitter, Inc., became a private company. Ms. Gadde previously served as itsTwitter, Inc.’s General Counsel from August |
2013 to February 2018, its head of communications from July 2015 to August 2016 and as its Director, Legal from July 2011 to August 2013. Ms. Gadde currently serves on the Board of Trustees of NYU Law School and the Board of Directors of Planet Labs PBC, as well as Mercy Corps, a global humanitarian aid and development organization whichthat partners with communities, corporations and governments. Ms. Gadde also co-founded #Angels, an investment collective focused on funding diverse and ambitious founders pursuing bold ideas. Previously, from October 2010 to July 2011, Ms. Gadde served as Senior Director, Legal at Juniper Networks, Inc., a provider of network infrastructure products and services. From October 2000 to April 2010, Ms. Gadde was an attorney at Wilson Sonsini Goodrich & Rosati, P.C. Ms. Gadde earned a J.D. from New York University School of Law and a B.S. in industrial and labor relations from Cornell University. We believe that Ms. Gadde is qualified to serve as a member of our Board due to her deep public company experience, in addition to her executive leadership experience and significant legal, public policy and regulatory expertise. |
27
| | |
Myrtle Potter 
Former President,
Chief Executive Officer and Chairperson of Sumitomo Pharma America, Inc. Current Committee Assignments: • Audit Committee • Compensation Committee | | Ms. Potter has served as a member of our Board since October 2021. Ms. Potter most recently served as President, Chief Executive Officer and Chairperson of the Board of Sumitomo Pharma America, Inc. from July 1, 2023 to April 1, 2024. Prior to this, Ms. Potter served as the Chief Executive Officer of Sumitovant Biopharma, Inc., a subsidiary of Sumitovant Biopharma Ltd., from December 2019 to July 2023, when Sumitomo Pharma America, Inc. announced its launch resulting from the combination of Sumitovant and its wholly owned U.S. subsidiaries and other U.S. Sumitomo Pharma wholly owned subsidiaries. Previously, from 2018 to 2019, Ms. Potter served as Vant Operating Chair at Roivant Sciences, Ltd., and as Chief Executive Officer of Myrtle Potter & Company, LLC from 2005 to 2018. From 2000 to 2004, Ms. Potter served as Chief Operating Officer at Genentech, Inc., and from 2004 to 2005, she served as the President, Commercial Operations and Executive Vice President of Genentech. Prior to joining Genentech, she held various positions, including President, U.S. Cardiovascular/Metabolics at Bristol-Myers Squibb, and a vice president at Merck & Co. Ms. Potter currently serves on the Board of Directors of Liberty Mutual Holding Company, Inc. Ms. Potter previously served on the Board of Directors of Myovant Sciences, Ltd. from September 2018 to March 2023, Urovant Sciences Ltd. from July 2018 to March 2021, Axsome Therapeutics, Inc. from June 2017 to June 2020, Everyday Health, Inc. from September 2010 to December 2016, Immunovant, Inc. from June 2019 to February 2020, Axovant Gene Therapies, Ltd. from September 2018 to February 2020, Arbutus Biopharma, Inc. from October 2018 to February 2020, Insmed Incorporated from December 2014 to November 2018, and Rite Aid Corporation from November 2013 to September 2018. Ms. Potter holds a Bachelor of Arts Degree from The University of Chicago. We believe that Ms. Potter is qualified to serve as a member of our Board due to her years of experience in the biotechnology industry, including extensive commercial and operational experience leading pharmaceutical companies in bringing new therapies to market and her extensive experience serving on boards of public companies. |
| | |
Musa Tariq 
Former Chief Marketing Officer of GoFundMe Current Committee Assignments: • Nominating and Corporate Governance Committee | | Mr. Tariq has served as a member of our Board since March 2023. Mr. Tariq most recently served as Chief Marketing Officer of GoFundMe, a crowdfunding platform, from January 2021 to June 2023. He joined GoFundMe to further build the GoFundMe brand and drive the company’s marketing and communications functions. Prior to GoFundMe, Mr. Tariq was Global Head of Marketing for Airbnb Experiences, a division of Airbnb, Inc., a provider of an online marketplace for short-term homestays and experiences, from September 2018 to December 2020 where he drove brand awareness and adoption of that rapidly growing part of Airbnb’s business. Before Airbnb, he was Chief Brand Officer at Ford Motor Company from January 2017 to March 2018. Mr. Tariq has also held marketing leadership roles at Apple, Nike and Burberry. Mr. Tariq has a B.S. in Geography and Economics from London School of Economics. A distinguished counselor to iconic and emerging global brands, Mr. Tariq currently serves as an advisor to MasterClass, The British Fashion Council, Felix Capital and several other start-ups. We believe that Mr. Tariq is qualified to serve as a member of our Board due to his extensive marketing experience leading global consumer brands. |
28
Class II DirectorDirectors with Term Expiring at the 20232026 Annual Meeting
| | |
| | | | | | | | | | | |
Ian Clark 
Former Chief Executive Officer of Genentech Inc. Current Committee Assignments: • Nominating and Corporate Governance Committee (Chair) | Ian Clark.
| Mr. Clark has served as a member of our Board since January 2017 and is our lead independent director. Mr. Clark currently serves onmost recently served as CEO, led the boards of directors of Agios Pharmaceuticals, Inc., AVROBIO, Inc., Corvus Pharmaceuticals, Inc., Olema OncologyExecutive Committee, and Takeda Pharmaceutical Company Limited. |
|
| | | | | | | | | | | | | | |
Previously, Mr. Clark served on the board of directors of Forty Seven Inc. from May 2018 to April 2020, including aswas a member of its audit committee, and on the boardBoard of directors of Shire Pharmaceuticals, Inc. from February 2017 to January 2019. He served on the board of directors and audit committee of Kite Pharma, Inc. from January 2017 to October 2017. He served as Chief Executive OfficerDirectors of Genentech Inc. , a biotechnology company, from January 2010 to December 2016. Prior to that,In total he wasserved for 14 years at Genentech of which 12 were on the Genentech Executive Committee, initially as Executive Vice President and Chief Marketing Officer of the Roche Group from April 2009 to December 2009. Prior to his time at the Roche Group, Mr. Clark held several senior management positions at Genentech Inc. from January 2003 to March 2009, including Head of Global Product Strategy, Chief Marketing Officer,Commercial Operations. Before that, he served as Senior Vice President and General Manager of BioOncology and Executive Vice President, Commercial Operations. Before joining Genentech Inc.,BioOncology. Prior to this, Mr. Clark spent 2320 years in the biopharmaceutical industry in senior rolespositions of increasing responsibility at Novartis, International AG,Sanofi, Ivax, Pharmaceuticals, Inc. and Sanofi S.A.Searle, working in the United Kingdom, FranceCanada, Eastern Europe and Eastern Europe.France.Mr. Clark currently serves on the Board of Directors of Takeda Pharmaceutical Company Limited, Olema Pharmaceuticals, Inc., Kyverna Therapeutics Inc, Corvus Pharmaceuticals, Inc., and AVROBIO, Inc. He started his careerpreviously served on the Board of Directors of Shire, Kite Pharma, Gyroscope, Forty Seven, Agios, TerraVia (formerly Solazyme), Dendreon, and Vernalis. Mr. Clark is an advisor to KKR and was previously an advisor at G.D. Searle, LLC,Lazard, Blackstone Life Sciences, and Perella Weinberg Partners. He served on the Board of the Biotechnology Industry Organization (BIO) and as a subsidiarymember of Monsanto Corporation, holding positions in salesthe 12th District Economic Advisory Council (EAC) of the Federal Reserve. He also served on the BioFulcrum Board of the Gladstone Institute and marketing.as Chair of the External Advisory Board to Southampton University’s Institute for Life Sciences. Mr. Clark received a B.S. degreeB.Sc. and an honorary doctorate in Biologybiological sciences from South Hampton University. Southampton UniversityWe believe that Mr. Clark is qualified to serve as a member of our Board due to his vast experience in the biopharmaceutical industry, combined with his experience serving on the boards of directors of multiplesuccessful, high-growth public and private companies. |
| | |
| | | | | | | | | | | |
Meghan Joyce 
Independent Advisor Current Committee Assignments: • Audit Committee • Compensation Committee | Samir Kaul. Mr. Kaul
| Ms. Joyce has served as a member of our Board since August 2021. She is co-founder and CEO of Duckbill Technologies, Inc., a consumer tech startup, a role she has held since April 2014. Mr. Kaul has been2022, and also serves as an independent director and advisor to select high growth organizations in the healthcare and consumer space. Previously, from September 2019 to April 2022, Ms. Joyce served as Chief Operating Officer and Executive Vice President of Platform at Oscar Health, a high-growth health tech and health insurance company, where she led operations, technology, clinical, marketing, and new business lines. Prior to joining Oscar Health, from 2013 to 2019, Ms. Joyce held several leadership roles at Uber Technologies, most recently as Regional General PartnerManager of the United States and Canada. Ms. Joyce previously served as a Senior Policy Advisor at Khosla Ventures,the United States Department of the Treasury, an investor at Bain Capital, and a venture capital firm focusing on technology investing, since February 2006 andconsultant at Bain & Company. Ms. Joyce currently serves on the boards of directors of several private companies. Previously, Mr. Kaul served as a member of the boardBoard of directorsDirectors of
|
Gevo, Inc. from March 2013 to May 2014 and Amyris, Inc. from May 2006 to May 2012. Prior to that, Mr. Kaul was a member of Flagship Pioneering Inc., a venture capital firm, from June 2002 to May 2006. Prior to that, Mr. Kaul worked at the Institute for Genomic Research. Mr. Kaul The Boston Beer Company. She holds a B.S. degree in Biology from the University of Michigan, an M.S. degree in Biochemistry from the University of Maryland and an M.B.A. degreeMBA from Harvard Business School.
School and an A.B. degree in History from Harvard College.We believe that Mr. KaulMs. Joyce is qualified to serve as a member of our Board due to his wide-rangingher extensive experience in technology companiesbusiness strategy, managing growth, financial modeling, implementation of new technologies, and insight in the management and retention of startup companies and the building of companies from early stage to commercial scale. diverse employee groups. |
The following are our executive officers as of the Record Date.
| | | | |
| | | | |
| | | | | | | | | | | | |
| Name | | Age | | Position |
| | |
Helmy Eltoukhy, Ph.D. | | 4245 | | Chairperson and Co-Chief Executive Officer |
| | |
AmirAli Talasaz, Ph.D. | | 44 | | Co-Chief Executive Officer |
| | |
Michael Bell | | 55 | | Chief Financial Officer |
| | |
Darya Chudova | | 50 | | Chief Technology Officer |
| | |
Craig Eagle, M.D. | | 57 | | Chief Medical Officer |
| | |
Christopher Freeman | | 50 | | Chief ExecutiveCommercial Officer |
| AmirAli Talasaz, Ph.D. | |
Kumud Kalia | | 4158 | | President and Chief OperatingInformation Officer |
| | |
Terilyn Juarez Monroe | | 57 | | Chief People Officer |
| Michael Bell | | 52 | Chief Financial Officer |
John Saia | | 4851 | | Senior Vice President, General CounselChief Legal Officer and Corporate Secretary |
Effective as of December 4, 2020, Derek Bertocci ceased service as our Chief Financial Officer, and was replaced by Michael Bell effective January 5, 2021. On May 6, 2020, Michael Wiley transitioned from being our Chief Legal Officer in order to assume a new non-executive officer role as Head of Corporate Affairs, and John Saia was hired as Senior Vice President, General Counsel and Corporate Secretary.
The following sets for the biographical information of our Executive Officers. Biographical information pertaining to Helmy Eltoukhy, who is a memberour Chairperson of ourthe Board and our CEO,Co-CEO, and AmirAli Talasaz, who is the Chairpersona member of ourthe Board and our President and COO,Co-CEO, may be found in the section above entitled “Proposal 1: Election of Directors – Information about Class III Director Nominees.”
Nominees”.Michael Bell.
Bell.Mr. Bell has served as our Chief Financial Officer since January 2021. He most recently served as the Chief Financial Officer of CareDx, Inc., a precision medicine company focused on transplantation, from April 2017 to December 2020. From January 2016 to March 2017, Mr. Bell served as the Chief Financial Officer of Metabiota, Inc., a company that develops and sells risk analytics products focused on infectious disease. From May 2012 to January 2016, he served as the Chief Financial Officer of Singulex, Inc., a clinical diagnostics company. Prior to that, Mr. Bell held leadership and executive positions within Novartis, including with Novartis Diagnostics, a global provider of blood screening solutions, where he served as Chief Financial Officer from 2011 to 2012, and Senior Director, Global Head of Finance from 2008 to 2011. Mr. Bell also previously worked for several years in public accounting with both Ernst & Young and Deloitte, UK. He holds a Bachelor of Science degree in Mathematics with Computing from the University of Leicester in the United Kingdom and is a Fellow of the Institute of Chartered Accountants in England & Wales.Darya Chudova. Dr. Chudova has served as our Chief Technology Officer since May 2023. She has been with Guardant Health since August 2015, most recently serving as Senior Vice President of Technology. In this role, she initially focused on leading technical development of Guardant360 LDT and CDx products improving the precision, robustness and accessibility of Guardant’s liquid biopsy tests. Most recently, she has led the development of Guardant’s ShieldTM technology for blood-based colorectal cancer screening, which is currently under review with the U.S. Food and Drug Administration. Prior to Guardant, Dr. Chudova successfully developed non-invasive prenatal testing at Illumina, Inc. from March 2013 to August 2015 and tools for clinical diagnostics and interpretation of genomic
30
expression and sequencing data in the context of molecular cytology at Veracyte, Inc. from 2008 to 2013. Dr. Chudova holds a Ph.D. in Computer Science from the University of California, Irvine.
Craig Eagle, M.D. Dr. Eagle has served as our Chief Medical Officer since April 2021. He most recently served as Vice President of Medical Affairs Oncology for Genentech, a company that uses human generic information to develop, manufacture and sell medicines for serious conditions, from 2019 to 2021, where he oversaw the medical programs across the oncology portfolio and developed innovative cancer trials and strategies in personalized health care. Prior to Genentech, Dr. Eagle has held several positions in the U.S. and internationally at Pfizer, from 2009 to 2019, including global head of the Oncology Medical and Outcomes Group. In this role, he oversaw the worldwide medical programs and development of numerous commercially successful drugs. Dr. Eagle currently serves on the Board of Directors for Generex Biotechnology and NuGenerex Immuno-Oncology. Dr. Eagle graduated from medical school at the University of New South Wales in Sydney, Australia and received his general internist training at Royal North Shore Hospital in Sydney. Dr. Eagle completed his specialist training in hemato-oncology and laboratory hematology at Royal Prince Alfred Hospital in Sydney and was granted Fellowship in the Royal Australasian College of Physicians (FRACP) and the Royal College of Pathologists Australasia (FRCPA).
Christopher Freeman. Mr. Freeman has served as our Chief Commercial Officer since June 2021. He most recently served as Vice President of the HIV Business Unit at Gilead Sciences, Inc., leading the $13 billion HIV treatment and prevention business, from January 2020 to June 2021. During the COVID-19 pandemic, Mr. Freeman led the Emergency Use Authorization for Veklury (remdesivir) to treat COVID-19. Mr. Freeman previously worked at Elan Pharmaceuticals from 2008 to 2011 where he was commercial lead for Elan’s Alzheimer’s pipeline products, and from 2001 to 2008, he worked at Genentech where he led marketing for their oncology product, Rituxan, and Xolair for patients suffering from asthma and severe allergies. Mr. Freeman is a member of the National Board of Directors for Dream Foundation, a national dream-granting organization for terminally ill adults and their families. Mr. Freeman served in the U.S. Army for five years, first enlisting as a Lieutenant and was promoted to Captain before being honorably discharged in 2001. Mr. Freeman graduated from the United States Military Academy at West Point.
Kumud Kalia. Mr. Kalia has served as our Chief Information Officer since January 2021. He most recently served as Chief Information and Technology Officer as well as other executive roles at Cylance, Inc., from March 2018 to June 2019, and previously served as Chief Information Officer at Akamai Technologies from October 2011 to February 2018. Prior to Akamai, Mr. Kalia worked at Direct Energy, an energy and services business operating in the U.S. and Canada, from March 2005 to January 2011, and where at the time of his departure he was the Chief Information Officer and Executive Vice President of Customer Operations. Earlier in his career, Mr. Kalia was Vice President and Chief Information Officer of the Business Markets Group of Qwest Communications International from 2002 to 2004 and served as Chief Information Officer for Dresdner Group in North America from 1998 to 2002. He has also served in technology, operations and strategy roles at various investment banks. Mr. Kalia holds a Master’s degree in Information and Cyber Security from the University of California, Berkeley, an honors degree in Electronic Engineering from Bangor University, is a chartered engineer, and is a Fellow of both the Institution of Engineering and Technology and the British Computer Society.
31
Terilyn Juarez Monroe. Ms. Monroe has served as our Chief People Officer since January 2024. She most recently served as Chief People Officer at Bonterra, a SaaS, PE backed company focused on accelerating social impact through technology, from November 2021 to September 2023, and previously served as Chief People Officer, SVP People & Places at Varian from October 2017 to April 2021. Prior to Varian, Ms. Monroe worked as Chief People & Culture Officer, SVP Human Resources at Acxiom from 2015 to 2017. She also was Chief Diversity Officer at Intuit, where she led the company’s diversity and inclusion efforts, from 2002 to 2015. Ms. Monroe serves on the board of directors for CASSY, a nonprofit organization focused on counseling and support services for youth and holds a bachelor’s degree in public relations from San Jose State University.
John Saia. Saia.Mr. Saia has served as our Chief Legal Officer and Corporate Secretary since April 2022, and prior to that as our Senior Vice President, General Counsel and Corporate Secretary since May 2020. Mr. SaiaHe most recently served as Senior Vice President, General Counsel and Corporate Secretary of WageWorks, Inc., an administrator of consumer-directed benefits, from January 2019 until its acquisition by HealthEquity, Inc. in August 2019, and as General Counsel and Corporate Secretary for AcelRx Pharmaceuticals, Inc., a specialty pharmaceutical company, from April 2018 to January 2019. Mr. Saia led legal and compliance activities worldwide for both WageWorks and AcelRx. Prior to that, he spent more than a decade serving in numerous legal and compliance leadership roles at McKesson Corporation, ending his tenure in April 2018 as its Corporate Secretary and Associate General Counsel. In addition to holding positions at several highly respected law firms, Mr. Saia also held
roles at the U.S. Securities and Exchange Commission and the U.S. Department of Justice. Mr. Saia graduated cum laude from Santa Clara University and holds a Juris Doctorate from The George Washington School of Law.
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) discusses the principlesphilosophy, objectives, process, components and objectives underlying our policies and decisions with respect to the compensationadditional aspects of our named executive officers (“NEOs”) and other material factors relevant to an analysis of these policies and decisions regarding our 20202023 executive compensation program. This CD&A is intended to be read in conjunction with the tables that immediately follow this section, which provide further compensation information for the following NEOs:
our 2023 named executive officers (“NEOs”): | | |
| | | | | | | | |
| Name | | Position |
| |
Helmy Eltoukhy | | Chief Executive Officer (“CEO”)Chairman and Co-CEO |
| |
AmirAli Talasaz | | President and Chief Operating Officer (“President/COO”)Co-CEO |
| John G. Saia (1) | Senior Vice President, General Counsel and Corporate Secretary |
Michael WileyBell | | Head of Corporate Affairs |
Derek Bertocci (2) | | Former Chief Financial Officer |
| |
Darya Chudova | | Chief Technology Officer |
| |
Craig Eagle | | Chief Medical Officer |
| |
Christopher Freeman | | Chief Commercial Officer |
| |
Ines Dahne-Steuber (1) | | Former Chief Operating Officer |
_______________
(1)Mr. Saia joined the Company on April 7, 2020.
(2)Mr. Bertocci stepped down as an executive officer on December 4, 2020 but remained an employee into 2021.
| (1) | Ms. Dahne-Steuber joined the Company on May 3, 2023, and separated from service effective December 1, 2023. |
Quick CD&A Reference Guide
| | |
| | | | | |
Business and Compensation Overview | | Section I |
| |
Compensation Philosophy and Objectives | | Section II |
| |
Compensation Determination Process | | Section III |
| |
Components of Our Compensation Program | | Section IV |
| |
Additional Compensation Policies and Practices | | Section V |
I.
BUSINESS AND COMPENSATION OVERVIEW
We are a leading precision oncology company focused on helping conquer cancer globallyguarding wellness and giving every person more time free from cancer. We are transforming patient care by providing critical insights into what drives disease through the use of our proprietary blood-basedadvanced blood and tissue tests vast data sets and advanced analytics. We believe that the key to conquering cancer is unprecedented access to its molecular information throughout all stages of the disease, which we intend to enable by a routine blood draw, or liquid biopsy.
real-world data. Our
Guardant Health Oncology Platform is designed to leverage our capabilities in technology, clinical development, regulatory and reimbursement to drive commercial adoption, accelerate drug development,tests help improve
patient clinical outcomes
and lower healthcare costs. In pursuit of our goal to manage cancer across all stages of
care, including screening to find cancer early, monitoring for recurrence in early-stage cancer, and helping doctors select the
disease,best treatment for patients with advanced cancer. For patients with advanced-stage cancer, we have
commercially launched
our Guardant360
laboratory developed test, or LDT, and Guardant360 CDx,
the first comprehensive liquid biopsy test approved by33
the U.S. Food and GuardantOMNI liquid biopsy-based testsDrug Administration, or the FDA, to provide tumor mutation profiling with solid tumors and to be used as a companion diagnostic in connection with non-small cell lung cancer, or NSCLC, and breast cancer. We have also launched the Guardant360 TissueNext tissue test for advanced stageadvanced-stage cancer, and in February 2021, launched our Guardant Reveal liquid biopsy-basedblood test forto detect residual and recurring disease in early-stage colorectal, breast and lung cancer patients, and Guardant360 Response blood test to first addresspredict patient response to immunotherapy or targeted therapy eight weeks earlier than current standard-of-care imaging.
We also collaborate with biopharmaceutical companies in clinical studies by providing the need in Stage II-III colorectal cancer.
We are developingabove-mentioned tests, as well as the GuardantOMNI blood test for advanced-stage cancer, and the GuardantINFINITY blood test, a next-generation smart liquid biopsy that provides new, multi-dimensional insights into the complexities of tumor molecular profiles and immune response to advance cancer research and therapy development. Using data collected from our Guardant360 tissue program which aims to address challenges with tissue genotyping products currently available in the market and are also developing tests, from our LUNAR program which aims to address the needs of early-stage cancer patients with neoadjuvant and adjuvant treatment selection, cancer survivors with surveillance, and asymptomatic individuals eligible for cancer screening and individuals at a higher risk for developing cancer with early detection. Wewe have also developed our GuardantINFORM platform to furtherhelp biopharmaceutical companies accelerate precision oncology drug development by biopharmaceutical companies by offering them an through the use of this in-silico research platform to unlock further insights into tumor evolution and treatment resistance across various biomarker-driven cancers.
Our GuardantOMNIFor early cancer detection, in May 2022, we launched the Shield LDT test has been designatedto address the needs of individuals eligible for colorectal cancer screening. From a simple blood draw, Shield uses a novel multimodal approach to detect colorectal cancer signals in the bloodstream, including DNA that is shed by tumors. In December 2022, we announced that the FDA asECLIPSE study, a breakthrough device for use as a companion diagnostic in connection with certain specified therapeutic productsregistrational study evaluating the performance of our biopharmaceutical customers.
Shield blood test for detecting colorectal cancer in average-risk adults, met co-primary endpoints. In addition, in March 2023, we submitted a premarket approval application, or PMA, for our Shield blood test to the FDA. The FDA’s Molecular and Clinical Genetics Panel of the Medical Devices Advisory Committee intends to review the PMA. We also expect to expand into lung and multi-cancer screening with our investigational, next-generation Shield assay.We have implemented a set of values and core beliefs for the Company to drive cultural change and create an environment centered on patient care, collaboration, inclusion and innovation. For more information on our values, please see “Corporate Governance—Environmental, Social and Governance—Guardant’s Values”.
We believe our tests can expand the scope of precision oncology to earlier stages of the disease, improve patient outcomes and lower healthcare costs.
Stockholder Engagement and Say-on-Pay Vote
As we are no longer considered an “emerging growth company” as defined underWe recognize the Jumpstart Our Business Startups Actvalue of 2012, we will be holdinga robust stockholder outreach program. We engage in regular, constructive dialogue with our first non-binding stockholder advisory votestockholders on the compensation of our named executive officers (a “Say-on-Pay” vote) at the Annual Meeting. Throughout the last quarter of 2020 and into the first quarter of 2021, we reached outmatters relevant to our top 20business, including corporate governance, executive compensation, strategy, environmental, social and governance issues and human capital management. We believe that our approach to engaging openly with our stockholders representing over 54%drives increased corporate accountability, improves decision making, and ultimately creates long-term value.
34
At our 2023 Annual Meeting, we received the support of approximately 86.5% of the total shares outstanding, to discuss various matters, includingvotes cast on our executive compensation program. We are committed to engagingSay-on-Pay proposal. The Compensation Committee was pleased with stockholders to ensure that we understand stockholder feedback about our executive compensation programs and other key matters of interest to them, and we pay careful attention to any feedback we receive from them. We intend to continue our stockholder outreach following the filing of this proxy statement with the SEC, to seek support for our annual meeting proposals and to solicit additional feedback regarding compensation and governance matters of importance to our stockholders.
these results. The CommitteeBoard and the Board of DirectorsCompensation Committee will carefully consider the outcomeresults of future stockholder advisory votes, includingany Say-on-Pay vote in the vote which will take place at the Annual Meeting, in addition to other relevant stockholder feedback that may be received throughout the year, when we make compensation decisions for the named executive officers. For additional information about the Say-on-Pay vote, please review the proposal set forth earlier in this Proxy Statement.
future.Compensation Objectives
The core elements of the Compensation Committee’s executive compensation philosophy are as follows:
•Attract, retain and motivate talented individuals who will drive the successful execution of Guardant Health’s strategic plan;
•Link pay to performance and achievement of Guardant Health’s business objectives;
•Align executive officers’ interests with those of Guardant Health and our stockholders, generally through the use of equity as a significant component;
component of our executive compensation program;•Provide market competitive compensation, that is athe majority of anwhich is “at risk” nature;; and
•Design programs that we believe are simple and transparent.
20202023 Select Business Highlights
We had another exceptionallya strong year in 2020, notwithstanding the impact of COVID-19, with outstanding growth in our2023, driven by excellent execution to deliver strong clinical volumes.
Key financial results and strong progress in our product development program. Key highlights include the following:
Financial Results
•Total revenueRevenue increased 34%25% to $286.7$563.9 million in 2020,2023, driven predominantly by a 31%an increase in precision oncology testing revenue, primarily as a result of higher clinical testing volume and increased revenue per test,biopharma sample volume, which grew 39% and a 49% increase in development services and other revenue, primarily due to new collaboration agreements entered in 2020 as well as progression of existing collaboration projects from biopharmaceutical customers for companion diagnostic development and regulatory approval services completed during 2020.
15%, respectively, over the prior year period.•Gross profit, increased 35% to $194.2 million in 2020, compared to $143.7 million in 2019.
•Gross margin was 68% in 2020, compared to 67% in 2019.
•GAAP operating loss was $255.0 million, compared to $82.4 million in 2019. Non-GAAP adjusted operating loss was $110.9 million, which is calculated as GAAP operating loss less stock-based compensation expense of $144.1 million, compared to $65.4 million in 2019, which is calculated as GAAP operating loss less stock-based compensation expense of $17 million.
•Net loss attributable to common stockholders was $253.8 million in 2020, compared to $75.7 million in 2019.
•Net loss per share attributable to common stockholders, basic and diluted, was $2.60 in 2020, compared to $0.84 in 2019.
•We successfully completed an underwritten public offering of common stock through which we received net proceeds of $354.6 million after deducting underwriting discounts and commissions and offering expenses payable by us, and an underwritten public offering of $1.15 billion in convertible senior notes, and ended the year with $2.0 billion in cash, cash equivalents and marketable securities.
Gross profit is calculated asor total revenue less costscost of precision oncology testing and costscost of development services and other, services. was $336.9 million for 2023, an increase of $43.7 million from $293.2 million for the corresponding prior year period.
35
Gross margin, is calculated asor gross profit divided by total revenue.revenue, was 60%, as compared to 65% for the corresponding prior year period.
Products and Development Programs
| • | | Operating expenses (research and development expense, sales and marketing expense and general and administrative expense) were $818.2 million for 2023, as compared to $837.6 million for the corresponding prior year period, a decrease of 2.3%. Other operating expenses were $83.4 million for 2023, related to a non-recurring legal accrual. No such other operating expense was recorded for the corresponding prior year period. Non-GAAP operating expenses were $729.2 million for 2023, as compared to $736.6 million for the corresponding prior year period. |
| • | | Net loss was $479.4 million for 2023, as compared to $654.6 million for the corresponding prior year period. Net loss per share was $4.28 for 2023, as compared to $6.41 for the corresponding prior year period. Non-GAAP net loss was $352.3 million for 2023, as compared to $435.4 million for the corresponding prior year period. Non-GAAP net loss per share was $3.15 for 2023, as compared to $4.26 for the corresponding prior year period. |
We have launcheddefine our Guardant360, Guardant360 CDx, GuardantOMNI and Guardant Reveal tests, we have presented data from a new patient cohort that demonstrated that our LUNAR-2 liquid assay achieved 90% sensitivity and 94% specificity in detecting early-stage colorectal cancer, and we are developing additional tests under our Guardant360 tissue and LUNAR programs.
•Precision oncology reported 63,254 tests to clinical customers and 15,983 tests to biopharmaceutical customers, representing an increasenon-GAAP measures as the applicable GAAP measure adjusted for the impacts of 27% and a decrease of 23%, respectively.
•We announced two strategic collaborations to develop the Guardant360 assay as a companion diagnostic for Janssen Biotech’s amivantamab in non-small-cell lung carcinoma, and expanding to a new indication, for Radius Health’s elacestrant in breast cancer.
•We obtained FDA approval for our Guardant360 CDx for tumor mutation profiling, also known as comprehensive genomic profiling, in patients with any solid malignant tumor.
General Impact of COVID-19
We continue to closely monitor and respond, where possible, to the ongoing COVID-19 pandemic. As the global situation continues to change rapidly, ensuring the well-being of our employees remains one of our top priorities. A number of our employees are temporarily working remotely and those on site must follow our social distance guidelines. We developed our own proprietary COVID-19 test and make that test available to all of our employees and contractors and their dependents at no cost, and we leverage that testing as a condition for access to our offices. In addition, we have developed special cashstock-based compensation and
incentive programs to manyrelated employer payroll tax payments, contingent consideration, amortization of
our essential employees,intangible assets, fair value adjustments on marketable equity securities, impairment of non-marketable equity securities and other related assets, fair value adjustments of noncontrolling interest liability, and other non-recurring items. See Appendix B for a reconciliation of non-GAAP information. | • | | Adjusted EBITDA loss was $344.2 million for 2023, as compared to a $403.4 million loss for 2022. Adjusted EBITDA is a non-GAAP measure that is defined as net loss adjusted for interest income; interest expense; other income (expense), net; provision for (benefit from) income taxes; depreciation and amortization expense; stock-based compensation expense and related employer payroll tax payments; contingent consideration; fair value adjustments of noncontrolling interest liability; and other non-recurring items. See Appendix B for a reconciliation of non-GAAP information. |
Net cash used in recognition of their outstanding service during the COVID-19 pandemic, and we extended COVID-19 protection pay for employees who were quarantined, sick or needed to provide care for their families.
Due to the unprecedented economic disruption caused by COVID-19, we have experienced significant reduction in access to our customers, including restrictions on our ability to market and distribute our tests and to collect samples, as well as supply constraints. Our partners, vendors and customers have similarly had their operations altered or temporarily suspended. Additionally, we have experienced unpredictable reductionsoperating activities was negative $325.0 million, versus negative $309.5 million in the demandprior year. Free cash flow for our tests2023 was negative $345.5 million, as healthcare customers divert medical resourcescompared to negative $386.9 million for the corresponding prior year period. Free cash flow is defined as net cash used in operating activities in the period less purchase of property and priorities towardequipment in the treatment of the virus. Consequently, the COVID-19 pandemic has resulted in increased costs or delays to production and development of our products, and our future revenue and results of operations may be adversely affected until testing, treatments and vaccines substantially eliminate the impact of the COVID-19 pandemic.period.
Key Aspects of the 20202023 Executive Compensation Program
Base Salaries
. The 2020 base salaries of the NEOs were unchanged, except with respect to Drs. Eltoukhy and Talasaz who reduced theirreceived annual base salaries toof $1 infollowing the May 2020 in connection with the Founders’ 2020 Performance Awards. For more information regardinggrant of the Founders’ 2020 Performance Awards see “Components(as defined herein). The base salaries of Our Compensation Program—Long-Term Incentives—Founders’ 2020 Performance Grants” below.our other continuing NEOs increased by amounts ranging from 2.2% to 4.0% based upon consideration of market salary ranges and on job performance.Annual Bonuses
. 20202023 annual bonuses for the NEOs other than Drs. ElthoukhyEltoukhy and Talasaz (who were not eligible to receive a 20202023 annual bonus)bonus pursuant to the terms of the36
Waiver Letters) were determined based on our achievement against oncology product development milestones and screening research and development measures, representing a combined 55% of the achievement of bothtarget bonus opportunity (together, the “Operational Performance Component”), and financial performance metrics, representing 65%45% of the target bonus opportunity (the “Financial Performance Component”),. The Waiver Letters are no longer in effect. See “Components of Our Compensation Program—2024 Compensation of Drs. Eltoukhy and product development- and research-based milestone measures, representing 35% of the target bonus opportunity (the “Operational
Performance Component”). Talasaz.”To establish these targets and goals, the Compensation Committee, (the “Committee”), with the input of the senior leadership team, evaluated our corporate performance for the prior year as compared to the corporate goals, and taking into account other corporate achievements and developments, the Committee set the targets at levels that it considered rigorous and challenging and that took into account the relevant risks and opportunities.
In the view of the Compensation Committee, for 2023, it was critically important to advance our oncology product program and our screening research and development program, and thus the Compensation Committee placed greater emphasis on the Operational Performance Component. Specifically, 30% of the target bonus opportunity related to oncology products and performance with respect to new product launches, product reimbursement in one foreign jurisdiction and the development of data for use of tests for additional indications. Another 25% related to the submittal of a premarket approval for a product and enrollment in ECLIPSE and another study.
The Financial Performance Component was comprised of:
(i) a revenue goal which represented 50%(represented 30% of the target bonus opportunity,opportunity),
(ii) Adjusted EBITDA (10%), and
(ii) adjusted operating income (loss) and(iii) gross margin goals which represented 10% and 5%, respectively, of the target bonus opportunity.
(5%).The Compensation Committee set a rigorous revenue target substantially above the prior-year level, reflecting 36%21% growth. In addition, there was rigor in the performance curve, as the 50%30% of target bonus opportunity attributed to revenue performance would be forfeited if we didn’tdid not achieve at least 16%18% growth from the prior year. The targets for gross margin and adjusted operating income (loss)Adjusted EBITDA were also set at levels that the Compensation Committee viewed as challenging to achieve. In an effort to use a reflection of operating income unaffected by certain unique items beyond the control of management, the Committee utilized operating income (loss) excluding the non-operating, non-cash effect of stock-based compensation expense. The Compensation Committee incorporated these measures in the 2023 annual bonus program in order to focus executive officers on the critical strategic priorities of top line revenue growth and operating profitability.
The Operational Performance Component targets were also demanding, and included a regulatory objective, FDA approval of the Guardant360 In Vitro Diagnostics Premarket Approval Application, representing 15% of the target bonus opportunity, and research and development pipeline and commercialization objectives, including LUNAR trial enrollment, representing 20% of the target bonus opportunity.
As described above,below, total revenue increased 34%25% to $286.7$563.9 million based on strong growthdriven predominantly by an increase in both precision oncologyclinical testing revenuevolume and development services and other revenue,biopharma sample volume; gross margin increased to 68%,was on target at 60%; and adjusted operating loss wideneddecreased to $110.9$(344) million. We announcedalso launched an upgraded version of our Reveal test, secured product reimbursement in Japan and developed additional data to drive both utilization and reimbursement. Finally, we submitted our Shield screening test for premarket approval and enrolled patients in two strategic collaborations and obtained FDA approval of Guardant360 CDx for tumor mutation profiling.studies. Based on theseour financial results, andtogether with the product development and research-based achievements, the Compensation Committee determined that overall achievement relative to theour financial and operational goals was 124.8%135% of target.
20202023 Long-Term Incentives
. In addition2023, the Compensation Committee, with the assistance of its independent compensation consultant, took the first step toward growing the37
performance nature of long-term incentive equity grants by introducing grants of PSUs. As disclosed previously and discussed below, at this key moment for liquid biopsy in screening for early detection, recurrence and treatment selection, the Compensation Committee viewed incentivizing top line revenue growth as the most important goal. The PSUs use three-year revenue compound annual growth rate (CAGR) and one-year revenue growth with an additional two-year vesting period. The other elements of the 2023 long-term incentives consisted of stock options and time-based RSUs, both annual grants and a supplemental grant in 2023. Long-term incentive equity awards are prospective in nature and intended to tie a substantial portion of an executive’s pay to creating long-term stockholder value. The Compensation Committee structures the Founders’ 2020 Performance Awards, whichlong-term incentive opportunity to motivate executive officers to achieve multi-year strategic goals and deliver sustained long-term value to stockholders, and to reward them for doing so.
For the 2023 PSUs based on one-year revenue growth, as described above, the Company generated revenue of $563.9 million in 2023, representing growth of 25%. Based on this performance, the NEOs earned a total of 200% of the target number of PSUs that were based on that metric. While the performance measure has been achieved, the PSUs are not considered “earned” and shares will not be delivered unless and until the NEO remains in service for the three-year period (except in certain circumstances as described below under the heading entitled “Potential Payments Upon Termination or Change in 2020 the Committee approved the grant of RSUs to Messrs. Saia and Wiley. These RSUs vest ratably over four years. Mr. Bertocci did not receive a grant.
Founders’ 2020 Performance AwardsControl”). Our Committee, after a comprehensive and lengthy process, developed and granted performance-based long-term restricted stock unit awards, or PSUs, to our CEO and President/COO, Drs. Eltoukhy and Talasaz. In conjunction with the grant, they have each signed Waiver Letters in which they have agreed to forego any base salary, annual bonuses or time-based long-term incentives for seven years. Each PSU award covers 1,695,574 PSUs, and vests based on the achievement of stock price hurdles of $120, $150 and $200, representing increases of 55%, 94% and 158% growth from the base price used by the
Committee at the time the grant was awarded. See “Long-Term Incentives—Founders’ 2020 Performance Awards” below.
Introduction of PSUs in 2020. As the Company has evolved and grown, the Committee believes that the form of long-term incentives awarded to our employees should also evolve to include performance-based equity. This evolution began with the Founders’ 2020 Performance Awards and in 2020, the Company introduced PSUs with a financial performance metric related to revenue and an operational milestone metric related to a LUNAR-2 launch to certain non-NEO employees. The Committee believes these metrics incentivize top line growth to fuel further growth, and the pursuit of a key strategic goal of expanding the applicability of our technology and methodology to a broader market.
Adoption of Stock Ownership Policy. To support our commitment to stockholder alignment and ensure non-employee members of our Board and our executive officers, including our NEOs, remain invested in our performance and the performance of our common stock, we adopted a stock ownership policy on November 5, 2020 that became effective as of January 1, 2021. Under this policy, our executive officers and directors are required to maintain certain levels of stock ownership (for our CEO, equal to six times the 50th percentile base salary of CEOs of our peer group). Furthermore, we require for those who have not met their minimum required ownership to hold (and not dispose) certain shares of our common stock acquired through equity awards. For more information regarding our stock ownership policy, see “Additional Compensation Policies and Practices—Stock Ownership Policy” below.
II. COMPENSATION PHILOSOPHY AND OBJECTIVES
The Compensation Committee believes that a well-designed compensation program should align executive interests with the drivers of growth and stockholder returns, including by supporting the Company’s achievement of its primary business goals and the Company’s ability to attract and retain employees whose talents, expertise, leadership, and contributions are expected to build and sustain growth in long-term stockholder value. As a result, we maintain a strong pay-for-performance orientation in our compensation program.
To achieve these objectives, the Compensation Committee regularly reviews our compensation policies and program design overall to ensure that they are aligned with the interests of our stockholders and our business goals, and that the total compensation paid to our employees and directorsexecutives is fair, reasonable, and competitive for our size and stage of development. Specifically, the Compensation Committee targets base salaries, annual cash bonuses, and annual long-term equity incentive awards for our executive officers around the market median for our peer group, with variability in actual payments based on corporate and individual performance.
Key objectives of our compensation programs include the following:
•Reward achievement of business objectives (pay for performance). We have clearly defined our Company’s overarching goal of being the leading provider of precision oncology products for cancer management across all stages of the disease. We have
39 | • | | Reward achievement of business objectives (pay for performance). We have clearly defined our Company’s overarching goal of being the leading provider of precision oncology products for cancer management across all stages of the disease |
38
also developed a robust strategy to accomplish this overarching goal, including certain business objectives that are steps along the way.
| and driving commercial adoption of our products. We have also developed a robust strategy to accomplish this overarching goal, including certain business objectives that are steps along the way. |
The Compensation Committee has designed our executive compensation program to motivate our executive officers to achieve these business objectives by closely linking the value of the compensation they receive to our performance relative to these business objectives and, in the case of Drs. Eltoukhy and Talasaz, the creation of substantial stockholder value.
•Align the interests of our executive officers and employees with those of our stockholders; Foster an ownership culture. Equity-based compensation constitutes a significant portion of our executive officers’ overall compensation. objectives. | • | | Align the interests of our executive officers and employees with those of our stockholders; foster an ownership culture. Equity-based compensation constitutes a significant portion of our executive officers’ overall compensation opportunity. The Compensation Committee uses equity, when appropriate, as the form for long-term incentive opportunities in order to incentivize and reward executive officers to (i) achieve multiyear strategic goals and (ii) deliver sustained long-term value to stockholders. |
The Committee uses equity, when appropriate, as the form for long-term incentive opportunities in order to incentivize and reward executive officers to (i) achieve multiyear strategic goals and (ii) deliver sustained long-term value to stockholders.
TheCompensation Committee believes using equity for the long-term incentives creates strong alignment between the interests of executive officers and the interests of our stockholders because it gives executive officers and stockholders a common interest in stock price performance. Granting equity also fosters an ownership culture among executive officers by making them stockholders with a personal stake in Guardant Health’s growth and success.
•Offer competitive compensation to attract and retain talent. The biopharmaceutical and technology industries are fiercely competitive, particularly in the California Bay Area and other areas where we operate, and we must compete for executive talent in these industries and areas. To manage our business and carry out our strategy, we seek high-caliber executive officers and managers who have diverse experience, expertise, capabilities and backgrounds.
| • | | Offer competitive compensation to attract and retain talent. The biopharmaceutical and technology industries are fiercely competitive, particularly in the San Francisco Bay Area and other areas where we operate, and we must compete for executive talent in these industries and areas. To manage our business and carry out our strategy, we seek high-caliber executive officers and managers who have diverse experience, expertise, capabilities and backgrounds. |
In recruiting our executive officers and determining competitive pay levels, the Compensation Committee references the amounts and compensation structures of executive officers in the companies in our compensation peer group and in industry surveys.
•Design straightforward compensation programs and plans and administer them transparently. In order for incentive compensation to serve its purpose of motivating participants to achieve results, the participants must have a clear understanding of the goals and targets by which they will be measured, and the rewards that they will receive for various levels of achievement of those goals, including the value of those rewards.
| • | | Design straightforward compensation programs and plans and administer them transparently. In order for incentive compensation to serve its purpose of motivating participants to achieve results, the participants must have a clear understanding of the goals and targets by which they will be measured, and the rewards that they will receive for various levels of achievement of those goals, including the value of those rewards. |
The Compensation Committee strives to make the incentives in our executive compensation program straightforward and the programs transparent and understandable, so that our executive officers, as well as our stockholders, know what they are working toward and what they will receive if they succeed. The Compensation Committee seeks to design programs that give participants a clear line of sight to the selected metrics and sufficient control over the performance toward the goals, to motivate them effectively for achieving our business objectives and to reward them appropriately, as a means of executing our strategy.
For a description of the objectives and rationale for the Founders’ 2020 Performance Awards granted to Drs. Eltoukhy and Talasaz, please see “Components of Our Compensation Program—Long-Term Incentives—Founders’ 2020 Performance Grants” below.
Compensation Program Governance
The Compensation Committee assesses the effectiveness of our executive compensation program from time to time and reviews risk mitigation and governance matters, which includes maintaining the following best practices:
| | | | | | | | | | | | | | |
What We Do |
| þ | |
| | Pay for Performance | | The majority of total compensation opportunity for our named executive compensationofficers is variable and at-risk. |
þ
| | Balance Short- and Long-Term Compensation | | The allocation of incentives among the annual incentive plan and the long-term incentive plan does not over-emphasize short-term performance at the expense of achieving long-term goals. |
þ
| | Combination of Balanced Performance Metrics | | We use a diverse set of financial and milestone performance metrics in our annual incentive plan to ensure that no single measure affects compensation disproportionately.plan. |
þ
| | Independent Compensation Consultant | | Our Compensation Committee has engaged an independent compensation consultant to provide information and advice for use in Committee decision-making.designing our executive compensation program. |
þ
| | Peer Data | | We develop a peer group of companies based on industry, revenue, development stage and market capitalization to reference for compensation decisions. |
þ
| | Cap Bonus Payouts; Fixed Equity Grants | | Our annual incentive plan has an upper limit on the amount of cash that may be earned. We grant a fixedThe maximum number of options, RSUs and PSUs.PSUs that might be earned is fixed in a grant. |
þ
| | Double Trigger Change-in-Control Provisions | | If there is a change in control, outstanding time-based equity awards that are assumed by a buyer will vest only if there is both a change-in-control and an involuntary termination of employment (a “double trigger”). A change-in-control alone will not trigger vesting. |
þ
| | Newly Adopted Robust Stock Ownership and Retention Guidelines | | Our executive officers and directors are required to maintain certainrobust levels of stock ownership (for our CEO, equal to 6x the 50th percentile base salary of CEOs of our peer group).ownership. We require, for those who have not met their minimum required ownership, tothat they hold (and not dispose)dispose of) a certain amount of shares of our common stock acquired through equity awards. |
| | Annual Say-on-Pay Vote | | We conduct an annual advisory say-on-pay vote on our NEO compensation. |
| | Stockholder Engagement | | We are committed to ongoing engagement with our stockholders regarding matters such as executive compensation, corporate governance and ESG. |
| | Annual Compensation Risk Assessment | | We conduct an annual compensation risk assessment to ensure that our compensation programs do not present any risks that are reasonably likely to have a material adverse effect on the Company. |
| | Clawback Policy | | We maintain a clawback policy designed to recoup incentive compensation paid to executive officers based on erroneously prepared financial statements. |
40
| | | | |
What We Don’t Do |
ý
| | No Guaranteed Employment Agreements | | We do not have employment agreements that guarantee employment for a specified term. Our executive officers are at-will employees with no employment contracts. employees. |
ý
| | No Hedging or Pledging of Company Securities | | We prohibit employees and non-employee directors from engaging in hedging, pledging or short sale transactions in Company securities. |
ý
| | No Excessive Perks | | We do not provide large perquisites to executive officers. |
ý
| | No Excise Tax Gross-Ups | | We do not provide excise tax gross-ups. |
ý
| | No Stock Options Below Fair Market ValueGuaranteed Bonuses | | We do not grant stock options below fair market value.guarantee our NEOs any minimum levels of payment under our annual incentive plan, which is entirely performance-based. |
III. COMPENSATION DETERMINATION PROCESS
Role of the Compensation Committee
The Compensation Committee establishes our compensation philosophy and objectives,objectives; determines the structure, components, and other elements of the executive compensation program; and
reviews and approves the compensation of the NEOs or recommends it for approval by the Board. The Compensation Committee structures the executive compensation program to accomplish its articulated compensation objectives in light of the compensation philosophy described above.
The Committee obtains input from executive officers regarding the annual operating plan, expected financial results, and related risks. Based on this information, the Committee establishes the performance-based metrics and targets for the annual incentive plan. For each metric, the Committee sets appropriate threshold and maximum levels of performance designed to motivate achievement without incentivizing excessive risk-taking.
Toward the end of each year, the Compensation Committee reviews the elements of our executive compensation program to verify the alignment of the program with our business strategy and with the items that we believe drive the creation of stockholder value, and to determine whether any changes would be appropriate.
At the beginning of the new year, after the end of applicable annual or long-term performance periods, the Compensation Committee evaluates achievement relative to performance targets, and examines whether it would be appropriate to apply negative discretion to the initial outcomesearned amounts in order to take relevant factors into consideration, and determines corresponding payouts earned.
The Compensation Committee obtains input from executive officers regarding the annual operating plan, expected financial results, anticipated milestone results and related risks. Based on this information, the Compensation Committee establishes the performance-based metrics and targets for the cash-based annual incentive plan and for the performance share units granted under our equity incentive plan. For each metric, the Compensation Committee sets appropriate threshold and maximum levels of performance designed to motivate achievement without incentivizing excessive risk-taking. With the input of the CEO andCo-CEOs, the President/COO, theCompensation Committee also establishes the compensation for all the other executive officers. The Compensation Committee sets the compensation for each of our NEOs and makes recommendations to the full Board generally at its meetings in the first quarter of each year.
41
Role of the Independent Compensation Consultant
The Compensation Committee recognizes that there is value in procuring independent, objective expertise and counsel in connection with fulfilling its duties, and pursuant to its charter, the Compensation Committee has the authority to select and retain independent advisors and counsel to assist it with carrying out its duties and responsibilities. The Compensation Committee has exercised this authority to engage RadfordAon as anits independent compensation consultant, and the Company has provided appropriate funding to the Committee to do so. The Committee has worked with RadfordAon to develop a compensation peer group, provide a competitive market analysis of the base salary, annual cash incentive awards and long-term incentive compensation of our executive officers compared against the compensation peer group, report on share utilization, and review of other market practices and trends.
The Committee engaged a separate independent compensation consultant, Semler Brossy, in connection withWhile the Founders’ 2020 Performance Awards to the CEO and President/COO, as well as in reassessing our director compensation program. Semler Brossy reported directly to the Committee, and the Committee had the sole authority to retain, terminate and obtain the advice of Semler Brossy in connection with the Founders’ 2020 Performance Awards and the director compensation program at the Company’s expense.
While theCompensation Committee took into consideration the respective review and recommendations of Radford and Semler BrossyAon as well as the practices of our compensation peer group when making decisions about our executive compensation
program, ultimately, the Compensation Committee made its own independent decisions in determining our executives’ compensation.
Compensation Peer Groups and Peer Selection Process
Relevant market and benchmark data provide a solid reference point for making decisions and very helpful context, even though, relative to other companies, there are differences and unique aspects of the Company. The Compensation Committee takes into consideration the structure and components of, and the amounts paid under, the executive compensation programs of other, comparable peer companies, as derived from public filings and other sources when making decisions about the structure and component mix of our executive compensation program.
The Compensation Committee, with the assistance of Compensia, its prior independent compensation consultant,Aon, developed a peer group in 20192022 for use in connection with decisions about 2023 executive compensation using the following criteria: sector (diagnostics, other biotechnology)(commercial biopharma and medical technology companies, with an emphasis on oncology and diagnostics where possible), revenue, market capitalization, profitability, stage of development (pre-commercial, commercial) and employee head count. As of May 2020, the Company’s revenue was at the 28th percentile of the peer group revenue, and its market capitalization was at the 48th percentile of the peer group market capitalization.
Based on these criteria and considerations, ourthe Compensation Committee in July 2022 approved a peer group selected for decisions relating to 20202023 executive compensation that consisted of the following 16 companies:
| | |
| |
10x Genomics, Inc. | | Natera, Inc. |
| |
ACADIA Pharmaceuticals Inc. | | Neurocrine Biosciences, Inc. |
| |
Adaptive Biotechnologies Corporation | | Novocure Ltd. |
| |
Blueprint Medicines Corporation | | Penumbra, Inc. |
| |
EXACT Sciences Corporation | | Repligen Corporation |
| |
Exelixis, Inc. | | Sarepta Therapeutics, Inc. |
| |
Invitae Corporation | | Ultragenyx Pharmaceutical Inc. |
| |
iRythym Technologies, Inc. | | Veracyte, Inc. |
42
Based on the peer analysis performed by Aon in 2022, Alnylam Pharmaceuticals Inc., Beigene Ltd., Insulet Corporation and NeoGeomics Inc. were removed, and ACADIA Pharmaceuticals, iRhythm Technologies, Ultragenyx Pharmaceutical and Veracyte, Inc. were added. In general, the removed peer companies no longer fit the selection criteria, as described above and further below, while the additions reflect companies with financial and industry characteristics more similar to our company. Subsequently, in August 2023, the Compensation Committee engaged Aon to develop a new peer group that would be referenced in making subsequent decisions regarding executive compensation. The August 2023 peer group used the same framework as the July 2022 peer group, and used Guardant’s then-current revenue and market capitalization. Invitae Corporation was removed, and Myriad Genetics, Inc. and NeoGenomics, Inc. were added. Based on these criteria and considerations, the Compensation Committee approved by the Committee,a revised peer group relating to executive compensation decisions subsequent to August 2023 that consisted of the following 17 companies:
| | |
| | | | | | | | |
Alnylam10x Genomics, Inc. | | NeoGenomics, Inc. |
| |
ACADIA Pharmaceuticals Inc. | EXACT Sciences Corp. | Neurocrine Biosciences, Inc. |
| Amarin Corp. plc |
Adaptive Biotechnologies Corporation | Genomic Health, Inc. | Novocure Ltd. |
| Array BioPharma, Inc. |
Blueprint Medicines Corporation | Insulet Corp. | Penumbra, Inc. |
| BeiGene Ltd. |
EXACT Sciences Corporation | Moderna, Inc. | SAGE Therapeutics, Inc.Repligen Corporation |
| bluebird bio, inc. |
Exelixis, Inc. | Natera, Inc. | Sarepta Therapeutics, Inc. |
| Blueprint Medicines Corp. |
iRythym Technologies, Inc. | NeoGenomics, | Ultragenyx Pharmaceutical Inc. |
| |
Myriad Genetics, Inc. | | Veracyte, Inc. |
| |
Natera, Inc. | | |
In addition to the criteria above, the Compensation Committee also referenced general and specific industry surveys from other sources. The Committee determined that the appropriate market reference continues to be the 50th percentile. The market data are used as a reference point and to provide information on the range of competitive pay levels and current compensation practices in our industry.
We believe that the compensation practices of our peer group provided us with appropriate compensation reference points for evaluating and determining the compensation of our named executive officersNEOs during 2020.2023. Consistent with best practices for corporate governance, the Compensation Committee will review our peer group annually. In mid-2020, the Committee engaged Radford to develop a new peer group for decisions regarding executive compensation for 2021.
Role of the ChiefCo-Chief Executive Officer and the President/Chief Operating Officer
OfficersThe Compensation Committee works with our CEO and our President/COOCo-CEOs to set the target compensation of each of our other NEOs. As part of this process, these two executive officersthe Co-CEOs evaluate the performance of the other executive officers annually and make recommendations to the Compensation Committee in the first quarter of the year regarding the compensation of each other executive officer.
The input of these two executive officersthe Co-CEOs is particularly important. The Compensation Committee gives significant weight to thetheir recommendations of these two executive officers in light of their greater familiarity with the
43
day-to-day performance of their direct reports and the importance of incentive compensation in driving the execution of managerial initiatives developed and led by the CEO andCo-CEOs. Nevertheless, the President/COO. Nevertheless, theCompensation Committee or the Board of Directors makes the ultimate determination regarding the compensation for the executive officers.
IV. COMPENSATION PROGRAM COMPONENTS
20202023 Components in General
In order to achieve its executive compensation program objectives, the Compensation Committee utilizes the compensation components set forth in the chart below. The Compensation Committee verifies through its regularregularly reviews that each executive officer’s total compensation opportunity to ensure it is consistent with its compensation philosophy and objectives and that the component is serving a purpose in supporting the execution of our strategy.
| | | | |
| | | | | | | | | | | | | | |
| Element | | Description | | Additional Detail |
| | |
Base Salary | | Fixed cash compensation
Determinedcompensation.Drs. Eltoukhy and Talasaz receive annual base salaries of $1 following the May 2020 grant of the Founders’ 2020 Performance Awards. Base salaries for the other NEOs determined based on each executive officer’s role, individual skills, experience, performance, positioning relative to competitive market and internal equity. | | Base salaries are intended to provide stable compensation to executive officers, allow us to attract and retain skilled executive talent and maintain a consistent stable leadership team. |
| | |
Short-Term Incentives: Annual Cash Incentive Opportunities | | Variable cash compensation based on the level of achievement of certain annual performance objectives that are pre-determined.
Financial objectives, and product development and research-based milestone objectives
objectives. Performance against the revenue goal must be at least 85%98% of target in order to earn any credit toward a payout with respect to that goal.
Cash incentivesincentive opportunities are capped at a maximum of 200% of base salary.
target, which are earned solely based on corporate performance. Target cash award as a percentageis no greater than 50% of the NEO’s base salary is capped at 50%. salary.As previously noted, Drs. Eltoukhy and Talasaz were not eligible to participate in our 2023 annual incentive plan. | | Annual cash incentive opportunities are designed to align our executive officers in pursuing our short-term goals; payout levels are generally determined based on actual financial results and the degree of achievement of performanceproduct development and research milestones. |
44
| | | | |
| | |
| Element | | Description | | Additional Detail |
| | |
Long-Term Incentives: Equity-Based Compensation | | Variable equity-based compensation. Stock Options: Right to purchase shares at a price at least equal to the stock price on the grant date.
Restricted Stock Units (RSUs): Restricted stock units that are time-based.
vest based on continued service over a period of time.Performance Stock Units (PSUs): Restricted stock units that are performance-based (2021). PSUs vest over a three-year period, with the amount vesting based on corporate performance. | | Equity-based compensation is designed to motivate and reward executive officers to achieve multi-year strategic goals and to deliver sustained long-term value to stockholders, as well as to attract and retain executive officers for the long term. |
2020 Target Pay Mix
While the core concepts of the Committee’s executive compensation philosophy are to link pay to performance and to align incentive compensation with strategic objectives and executive officers’ interests with those of stockholders through the use of equity as a significant component, the 2020 pay mix was atypical.
As discussed below under “Long-Term Incentives—Founders’ 2020 Performance Awards,” the Committee granted the Founders’ 2020 Performance Awards to the CEO and the President/COO. In connection with these grants, the CEO and the President/COO waived their rights to base salary, annual incentive opportunity and time-based equity, beginning mid-way through the year. As such, the pay mix for these two is not reflective of the Committee’s general philosophy and approach to pay mix.
For our other NEOs, as described above, the Committee made grants of RSUs only to Messrs. Saia and Wiley. As such, while the intended typical target pay mix NEOs includes a meaningful majority of annual target total compensation being variable, at-risk pay, including equity, in 2020, this was not the case. The Committee considers compensation to be “at risk” if it is subject to operating performance or if its value depends on stock price appreciation.
Each compensation element is discussed in more detail below and set forth in more detail in the 2020 Summary Compensation Table and 2020 Grants of Plan-Based Awards table below.
Base salaries provide fixed compensation to executive officers and help us to attract and retain the executive talent needed to lead the business and maintain a stable leadership team. Base salaries are individually determined according to each executive officer’s areas of responsibility, role, and experience, and they vary among executive officers based on a variety of considerations, including skills, experience, achievements and the competitive market for the position.
| | | | | | | | | | | | | | | | | |
| NEO | | 2019 Base Salary ($)(1) | | 2020 Base Salary ($)(1) | |
| Helmy Eltoukhy | | $ | 500,000 | | | $ | 1 | | (2) |
| AmirAli Talasaz | | 500,000 | | | 1 | | (2) |
| John G. Saia (3) | | NA | | 410,000 | | |
| Michael Wiley | | 395,000 | | | 395,000 | | |
| Derek Bertocci (4) | | 390,000 | | | 390,000 | | |
_______________
(1)Amounts shown areFor newly hired executive officers, the Compensation Committee establishes initial base salaries through arm’s-length negotiations at the time the executive officer is hired, considering the position and the executive’s experience, qualifications, and the competitive market.
Drs. Eltoukhy and Talasaz entered into waiver of compensation agreements (the “Waiver Letters”) with the Company in connection with the grant of PSUs in May 2020 that vest based on the achievement of robust stock price hurdles (the “Founders’ 2020 Performance Awards”). Pursuant to the Waiver Letters, each executive agreed to forego any annual bonuses or long-term or equity-based compensatory awards, and reduced their annual base salary in effect at year end.
(2)In connection withsalaries to $1, during the seven-year term of the Founders’ 2020 Performance Awards granted(the “Waiver Period”), which is scheduled to Drs. Eltoukhy and Talasazexpire in May 2020,2027, unless otherwise terminated earlier in accordance with the terms of the Waiver Letters. Accordingly, the total direct compensation received by each of Drs. Eltoukhy and Talasaz formally agreed to accept ain fiscal year 2023 was $1, which represents each executive’s 2023 base salary of $1 per year. For 2020, Drs. Eltoukhy and Talasaz received their base salaries at a rate of $500,000 per year through May 31, 2020.
(3)Mr. Saia joined the Company on April 7, 2020.
(4)Mr. Bertocci resigned as an executive officer of the Company on December 4, 2020 but remained an employee into 2021.
Adjustments to Base Salary.
salary.From time to time, the Compensation Committee might considerconsiders and approveapproves base salary adjustments for executive officers. The main considerations for a salary adjustment are similar to those used in initially determining base salaries, but may also include change in the competitive market, change of role or responsibilities, recognition for achievements or market trends. The Compensation Committee approved 2023 base salary increases for Messrs. Bell and Freeman, and Dr. Eagle, each of which represented annual increases made in the normal course to align with the competitive market, and approved a base salary increase for Dr. Chudova in conjunction with the change of her responsibilities as a result of her promotion in May 2023.
45
For newly-hiredThe base salaries for each of our executive officers the Committee establishes initial base salaries through arm’s-length negotiationsin effect at the time the executive officer is hired, considering the position,end of 2023, and the executive’s experience, qualifications and prior compensation.
adjustment from 2022, are as follows: | | | | | | |
| | | |
| NEO | | 2023 Base Salary ($)(1) | | | Increase from 2022 |
| | |
Helmy Eltoukhy | | | 1 (2) | | | — |
| | |
AmirAli Talasaz | | | 1 (2) | | | — |
| | |
Michael Bell | | | 485,000 | | | 2.7% |
| | |
Craig Eagle | | | 500,000 | | | 2.2% |
| | |
Christopher Freeman | | | 495,000 | | | 4.0% |
| | |
Darya Chudova (3) | | | 445,000 | | | N/A |
| | |
Ines Dahne-Steuber | | | 490,000 | | | N/A |
| (1) | Amounts shown are the annual base salary in effect at year end or, in the case of Ms. Dahne-Steuber, her base salary prior to her separation. |
| (2) | In connection with the Founders’ 2020 Performance Awards granted to Drs. Eltoukhy and Talasaz in May 2020, each of Drs. Eltoukhy and Talasaz formally agreed to accept a base salary of $1 per year until 2027. |
| (3) | The Compensation Committee promoted Dr. Chudova to the position of Chief Technology Officer in May 2023. The Compensation Committee increased her base salary to $445,000 in conjunction with her new promotion, from $400,000 previously at the start of the year. |
Annual Incentive Plan
The annual cash incentive plan for executive officers is a cash plan that rewards NEOs for the achievement of key short-term objectives. In particular, the plan offers incentives to the NEOs other than the CEO and the President/COOCo-CEOs to accomplish certain short-term financial results and specified product development and research-based milestones and short-term financial results that the Compensation Committee views as key steps in the execution of our overall business strategy, with the intent ultimately of increasing stockholder value.
In connection with the Founders’ 2020 Performance Awards granted to Drs. Eltoukhy and Talasaz in May 2020 and the long-term opportunity presented by such grants, each of Drs. Eltoukhy and Talasaz formally agreed to waive their right to receive an annual cash incentive opportunity until 2027.In the Compensation Committee’s view, the most senior executive officers have the greatest responsibility for the performance of the Company, and consequently, the annual incentive plan for such executive officers utilizes only pre-established objective Company performance measures, with no individual discretionary component (other than with respect to the application of negative discretion)discretion to reduce earned amounts).
The amount of the payout, if any, under the annual incentive plan is based on our achievement against three financial metrics and two categories of(1) oncology product development milestones and research-based milestone metrics.screening research and development measures, representing a combined 55% of the target bonus opportunity (together, the “Operational Performance Component”), and (2) financial performance metrics, representing 45% of the target bonus opportunity (the “Financial Performance Component”).
46
In the view of the Compensation Committee, for 2023, it was critically important to advance our oncology product program and our screening research and development program, and thus the Compensation Committee placed significant emphasis on the Operational Performance Component. Specifically:
30% of the target bonus opportunity related to oncology products and performance with respect to new product launches, product reimbursement in one foreign jurisdiction and the development of data for use of tests for additional indications.
25% related to the submittal of a premarket approval for a product and enrollment in ECLIPSE and another study.
The financial measures selected by the Compensation Committee—Revenue, Gross Margin and Adjusted Operating Income (Loss)—EBITDA—also remained very important, as they focus executive officers on the critical strategic priorities of top line revenue growth and operating profitability.
•Revenue (weighted 50%). Given the Company’s stage of development and market opportunity and window, the Committee emphasized revenue growth as the highest priority. We derive revenue from the provision of precision oncology testing services provided to our ordering physicians and biopharmaceutical customers, as well as from biopharmaceutical research and development services provided to our biopharmaceutical customers.
•Adjusted Operating Income (Loss) (weighted 10%). Operating income (loss) is revenue less costs and expenses. In an effort to use a reflection of operating income unaffected by certain unique items beyond the control of management, the Committee considered operating income (loss) excluding the non-operating, non-cash effect of stock-based compensation expense.
•Gross Margin (weighted 5%). Gross margin is defined as total revenue less cost of precision oncology testing and costs of development and other services, divided by total revenue.
The milestone metrics related to 1) key regulatory steps for one of our tests and 2) key process steps for one of our other focus areas:
•GUARDANT360 In Vitro Diagnostics Premarket Approval Application (weighted 15%). The Committee chose to prioritize seeking FDA approval for the use of this test as a companion diagnostic in late stage situations.
•LUNAR Progress (weighted 20%). In connection our LUNAR (early stage) programs, the Committee incorporated certain steps in the process as goals.
| • | | Revenue (weighted 30%). Given the Company’s stage of development and market opportunity and window, the Compensation Committee emphasized revenue growth as a high priority. We derive revenue from the provision of precision oncology testing services provided to our ordering physicians and biopharmaceutical customers, as well as from biopharmaceutical research and development services provided to our biopharmaceutical customers. |
| • | | Adjusted EBITDA (weighted 10%). The Compensation Committee continued using Adjusted EBITDA as a measure that reflected profitability without regard to how the Company is financed or taxed and adjusted for certain items beyond the control of management. A general description of how we calculate Adjusted EBITDA for purposes of our 2023 annual cash incentive plan is described above. See Appendix B for a reconciliation of non-GAAP information. |
| • | | Gross Margin (weighted 5%). Gross margin is defined as total revenue less cost of precision oncology testing and costs of development and other services, divided by total revenue. |
Target, Threshold and Maximum Performance Levels
The Compensation Committee set the performance metric targets at levels that it considered rigorous and challenging and that took into account the relevant risks and opportunities. More specifically, the Compensation Committee reviewed the relevant operational goals in light of the Company’s plans, as well as the financial objectives set as a result of the detailed budgeting process, and assessed various factors related to the achievability of these budget targets, including the risks associated with various macroeconomic factors, and the risks of achieving specific actions that underlie the targets and the implied performance relative to prior years.
Considering these factors, the Compensation Committee set the 20202023 targets for the Operational Performance Components at levels or with timing in accordance with the Company’s strategic and operational plans. With respect to the Financial Performance Component, the Compensation Committee set the 2023 target for revenue at a 36%20.1% growth
47
rate over the total revenue in 2019,2022, the target for 2020 gross marginAdjusted EBITDA loss at a 110 basis point increase13.1% improvement over the gross margin in 2019,2022 actual, and the target for adjusted operating loss2023 gross margin was established at a 54% increase500 basis point decrease over the adjusted operating lossactual gross margin in 2019 (excluding2022. The target for gross margin was reduced as a result of a number of factors, including due to the impact from stock-based compensation expense).
change in mix between clinical and biopharma revenue.Having set the targets, the Compensation Committee also set the threshold and maximum performance levels.levels for both the Operational Performance Component and the Financial Performance Component. For 2020, the 2023 milestone measures, the threshold level of performance generally involved achieving the goal later or in a lower amount, and maximum performance generally involved achieving it sooner or in a higher amount. For the 2023 financial measures, the Compensation Committee set the threshold at a high-performance level of approximately 85%98% of the target for revenue. The thresholds for gross margin and adjusted operatingAdjusted EBITDA loss were also set at high performance levels, although they do not lend themselves to a comparable relative analysis.levels. The Compensation Committee set the maximum level for revenue at 118%104% of target, a level that presents a significant challenge requiring exceptionally strong performance. The Compensation Committee set maximum levels for the other two metrics as well that were also based on our 20202023 operating plan, including the planned growth in revenue and expenses, and that required significant effort to achieve.
The Compensation Committee defined payout levels representing the amount to be paid to NEOs based on the level of actual performance relative to the targets. If achievement is below the threshold level of performance, the Compensation Committee set the payout at 0% in order to motivate performance and underscore the importance of achieving, or closely approaching, the targets at this critical time in our development. If we achieve threshold performance on a metric, the payout is 50% of target; if we achieve 100% of target performance, the payout is 100% of target,target; and if we achieve maximum performance, the payout is 200% of target.
47 For performance between the threshold and maximum for any metric, the payout amount is interpolated as a payout percentage between a threshold of 50% and a maximum of 200%.With respect to the Operational Performance Component, for the oncology products and performance, of the two upgraded product launches, one was achieved on time and on target and the other was not. The reimbursement for Guardant360 in Japan was accomplished on time. The development of clinical validity data for additional indications for two of our tests was accomplished, which was above target. For the screening research and development performance, the submittal of the Premarket Application was achieved on time and on target, and the enrollment in ECLIPSE and one other study were both accomplished on target.
With respect to the Financial Performance Component, as described above, total revenue increased to $563.9 million for the year ended December 31, 2023, a 25% increase from $449.5 million for the year ended December 31, 2022.
The following tables show (1) for each operational performance component, the weighted payout, and (2) for each financial performance component, the achievements necessary to obtain payouts at the target level, the actual result for each performance component and the resulting achievement percentage, as well as the weighted payout:
48
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Performance Metric | | Relative Weighting
(%) | | Below Threshold ($/%) | | Threshold
($/%) | | Target
($/%) | | Maximum
($/%) | | Actual Result
($)/%) | | % Achievement | | Weighted
Payout % |
Revenue (in millions) | | 50% | | <247.5 | | 247.5 | | 291.2 | | 343.0 | | 286.7 | | 98.5% | | 44.9% |
| Percentage of Target Performance | | | | Less than 85% | | 85% | | 100% | | 118% | | | | | | |
| Gross Margin % | | 5% | | <62.4 | | 62.4 | | 64.2 | | 65.7 | | 67.7 | | 200% | | 10% |
| Non-GAAP Operating Income (Loss)(excluding stock-based compensation expense) | | 10% | | >(140.2) | | (140.2) | | (155.7) | | (168.8) | | (143.0) | | 199% | | 19.9% |
| Financial Metric Payout Percentage | | | | 0% | | 50% | | 100% | | 200% | | | | | | 74.8 |
| | | | | | | | | | | | | | | | | | | | |
| Milestone Metric | | Relative Weighting (%) | | Actual Achievement (as a % of Target) | | Weighted Payout % |
| Regulatory Objectives | | | | | | |
| FDA Approval of Guardant 360 In Vitro Diagnostic Premarket Approval Application | | 15% | | 100% | | 15% |
| R&D Pipeline Objectives | | | | | | |
| Enrollment of patients in a trial of the LUNAR ECLIPSE assay | | 20% | | 175% | | 35% |
| Milestone Metric Payout Percentage | | 50% |
| Total Financial Metric and Milestone Metric Payout Percentage | | 124.8% |
| | | | | | |
| | | | |
| Operational Performance Component | | | | Relative Weighting (%) | | Weighted Payout% |
| | | |
Oncology Product Milestones | | | | 30% | | 20% |
| | | |
Launch new products | | 20% | | | | |
| | | |
Secure reimbursement in Japan | | 5% | | | | |
| | | |
Develop data for additional Reveal/Response indications | | 5% | | | | |
| | | |
Screening Research and Development Objectives | | | | 25% | | 30% |
| | | |
Submit Premarket Application | | 20% | | | | |
| | | |
Enroll patients in ECLIPSE and SHIELD-LUNG | | 5% | | | | |
| | | |
Subtotal | | | | 55% | | 50% |
| | | | | | | | | | |
| | | | | | |
Financial Performance Component | | Relative
Weighting (%) | | Target ($) | | Actual
Result ($) | | % Achievement | | Weighted Payout % |
| | | | | |
| Revenue (in millions) | | 30% | | 540 | | 563.9 | | 200% | | 60% |
| | | | | |
| Percentage of Target Performance | | | | 100% | | | | | | |
| | | | | |
| Gross Margin % | | 5% | | 60 | | 60 | | 100% | | 5% |
| | | | | |
| Adjusted EBITDA | | 10% | | (350.0) | | (344)(1) | | 200% | | 20% |
| | | | | | | | | | |
| | | | | |
| Subtotal | | 45% | | 100% | | | | | | 85% |
| | | | | | | | | | |
| | | | | |
| Total Operational Performance Component, Financial Performance Component and Employee Retention Metric Achievement Percentage | | | | | | | | | | 135% |
| (1) | For purposes of the annual incentive plan, the final result excludes the amount of incentive compensation expense in excess of the target level of $10 million. |
Target Opportunities
The Compensation Committee determines the target cash incentive opportunity available to each NEO by taking the individual’s annual base salary in effect at year end and multiplying it by the individual’s target incentive percentage. Among other factors, the target incentive percentages are determined with reference to the peer group company percentages of salary and the proportion of total direct compensation represented by the annual incentive.
| | | | | | | | |
NEO | | 2020 Target Annual Incentive Plan Opportunity
as a % of Base Salary |
Helmy Eltoukhy | | — (1) |
AmirAli Talasaz | | — (1) |
John Saia | | 40% |
Michael Wiley | | 50% |
Derek Bertocci | | 40% |
_______________
(1)In connection with For 2023, the Founders’ 2020 Performance Awards granted to Drs. Eltoukhy and Talasaz in May 2020,target opportunity percentage for each of Drs. Eltoukhy and Talasaz formally agreed to waive their opportunity to receive annual incentive opportunities or payouts under our annual incentive plan for seven years, including for 2020.
the NEOs was 50%.Payout Determination
The Compensation Committee verifies our achievement relative to the targets for the financialOperational Performance Component and milestone metricsFinancial Performance Component to determine the respective performance levels, and then translates those performance levels to a payout level based on linear interpolation between achievement levels. As noted above, for 2023, the payout curve. For 2020, thecalculated payout level was 124.8%, based on the achievement of revenue being slightly below target, achievement of gross margin and adjusted operating loss coming in at the maximum level driven by a solid increase in precision oncology testing revenue and development services and other revenue, as well as meeting one regulatory objective at target and one LUNAR pipeline objective at the maximum level. The Committee agreed to fund the 2020 bonus pool at 124.8% and agreed with management’s recommendation to modify slightly downwards the payouts to all employees entitled to a bonus, including all executive officers, in order to reallocate the differential to other high-performing employees and non-bonus eligible employees.
135%.Having determined the total 20202023 annual incentive plan payouts for each eligible NEO, the Compensation Committee then presented the determination of annual incentive plan payout amounts toshared its conclusions with the Board for its review and approval.discussion.
49
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NEO | | Base Salary ($)(1) | | Target Opportunity (%) | | Target Opportunity ($) | | Approved Payout Percentage % | | Total Approved Payout ($) |
| Helmy Eltoukhy | | $ | 1 | | | — | | | $ | — | | | — | | | $ | — | |
| AmirAli Talasaz | | 1 | | | — | | | — | | | — | | | — | |
| John Saia | | 410,000 | | | 40% | | 164,000 | | | 120% | | 196,800 | |
| Michael Wiley | | 395,000 | | | 50% | | 197,500 | | | 115% | | 227,520 | |
| Derek Bertocci (2) | | 390,000 | | | 40% | | 156,000 | | | — | | | — | |
_______________
(1)Amounts shown are the annual base salary in effect at year end.
(2)Due to his retirement, Mr. Bertocci was not eligible for a payout under the annual incentive plan.
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
NEO | | Base Salary ($)(1) | | | Target Opportunity as a
Percentage of
Base Salary (%) | | | Target Opportunity ($) | | | Achievement% | | | Total Approved Payout ($) | |
Helmy Eltoukhy | | | 1 | (2) | | | — | | | | — | | | | — | | | | — | |
AmirAli Talasaz | | | 1 | (2) | | | — | | | | — | | | | — | | | | — | |
Michael Bell | | | 485,000 | | | | 50% | | | | 242,500 | | | | 135 | % | | | 327,375 | |
Craig Eagle | | | 500,000 | | | | 50% | | | | 250,000 | | | | 135 | % | | | 337,500 | |
Christopher Freeman | | | 495,000 | | | | 50% | | | | 247,500 | | | | 135 | % | | | 327,443 | |
Darya Chudova | | | 445,000 | | | | 50% (3) | | | | 206,875 (3) | | | | 135 | % | | | 279,281 | |
| (1) | Amounts shown are the annual base salary in effect at year end. Ms. Dahne-Steuber was not employed at year-end and therefore was ineligible for an annual incentive payout under the terms of the program. |
| (2) | In connection with the Founders’ 2020 Performance Awards, each of Drs. Eltoukhy and Talasaz entered into Waiver Letters, pursuant to which they formally agreed to waive their opportunity to receive annual incentive opportunities or payouts under our annual incentive plan for seven years, including for 2023. |
| (3) | Dr. Chudova’s annual incentive plan opportunity was increased to 50% upon her promotion to Chief Technology Officer in May 2023 from 40%. Her payout in 2023 was a pro-rata blend of the two rates. |
Long-Term Incentives
The third and largest main component of theour executive compensation program is long-term equity incentives. The Compensation Committee has designed the long-term incentive opportunity for the NEOs other than the CEO and the President/COO to motivate and reward executive officers to achieve multiyearmulti-year strategic goals and deliver sustained long-term value to stockholders.
stockholders, while at the same time monitoring the overall dilutive effect of equity granted.The long-term incentives create a strong link between payouts and performance, and a strong alignment between the interests of executive officers and the interests of our stockholders. Long-term equity incentives also promote retention, because executive officers will only receive value if they remain employed by us over the required term, and they foster an ownership culture among our executive officers by making executive officers become stockholders, with a personal stake in the value they are incentivized to create.
In 2019,2023, long-term incentive grants took the form of two different vehicles: stock options, RSUs and RSU awards.PSUs. The Compensation Committee structuredstructures the mix of equity vehicles and the relative weight assigned to each type toto: motivate growth through achievement of performance goals through PSUs with operational metrics; motivate stock price appreciation over the long term through stock options, which deliver value only if the stock price increases,increases; and to ensure some amount of
value delivery through the RSUs, which
are complementary because they have upside potential but deliver
some value even
if theduring period of stock market or stock price
or the market generally does not go up, while alsounderperformance, reinforcing an ownership culture and commitment to us.
50
We completed our initial public offering | | | | |
Equity Vehicle | | Vesting Period | | Rationale for Use |
PSUs | | 3 years | | Aligns payout with prioritizing revenue performance and growth, key indicators of success of our strategy Promotes retention through performance achievement and vesting requirements |
Stock Options | | 3 years Exercise price: closing price on grant date 10-year term | | Prioritizes increasing stockholder value, thus aligning with stockholders Promotes long-term focus |
RSUs | | 3 years | | Aligns with stockholders Promotes retention Provides value even during periods of stock price or market underperformance |
2023 Annual Equity Grants
Typically, in October 2018, and 2019 and 2020 were our initial years as a public company. Our use of these vehicles in 2019 and, to a more limited degree, in 2020 is consistent with other newly-public companies and others in our industry, and the Committee envisions that, over time, as the Company evolves and grows, the executive compensation program and the form of themaking determinations about long-term incentives will also evolve.
2020 Equity Grants
Our Committee, after a comprehensive and lengthy process, developed and granted performance-based long-term PSUs to our CEO and President/COO, Drs. Eltoukhy and Talasaz. Each received a grant of 1,695,574 PSUs with stock price vesting hurdles of $120, $150 and $200, representing increases of 55%, 94% and 158% from the base price used by the Committee. See “Long-Term Incentives—Founders’ 2020 Performance Awards” below.
The Committee also made regular annualequity incentive grants to the NEOs, the Compensation Committee considers: equity grant levels and the overall pay mix in peer group companies; the NEO’s role, skills and experience and the critical nature of the NEO’s contributions to the Company; and the importance of maintaining a consistent leadership team, among other NEOs, in the form of RSUs to Messrs. Saia and Wiley.things. The RSUs vest ratably over four years. Due to his impending retirement, Mr. Bertocci did not receive a grant.
The Committee intends to make grants of long-term incentive awards annually and might also grant long-term incentive awards when an individual is promoted to a senior executive position to recognize the increase in the scope of his or her role and responsibilities. From time to time, the Committee might make special awards to recognize major accomplishments, or selective awards in situations involving a leadership transition. The Committee might also make grants to newly-hired executive officers.
Introductionthe NEOs vary based on these factors. This portion of
PSUsthe NEOs’ total direct compensation is variable and directly aligned with stockholder interests.The Compensation Committee made no equity grants to the Co-CEOs in 2020
The Company maintains an ongoing commitment2023 pursuant to
good corporate governance principles and strong performance orientation in our compensation program by proactively reviewing our policies and program design. In 2020, this included an evaluationthe terms of
our incentive compensation programs. With respect to our long-term equity incentive program, we adjusted the
mix of equity for our annual awards, new hire awards, and awards in connection with promotions to include inaugural grants of performance-based PSUs for certain non-NEO employees in 2020, and weWaiver Letters.We continue to manage award amounts, with a goal of maintaining broad-based equity participation, delivering value that is aligned with our compensation philosophy and proactively managing our share usage as well as dilution during a period of rapid growth.
In 2020,2023 PSU Grants
As disclosed previously, in the first quarter of 2023, the Compensation Committee increased the performance nature of long-term incentives by granting performance stock units, or PSUs. At this key moment for liquid biopsy in screening for early detection, recurrence and treatment selection, the Compensation Committee believed that at this time, the Company introducedhas a unique opportunity in the market and only a brief window to take maximum advantage of it. The Compensation Committee thus viewed incentivizing top line revenue growth (after also having selected it as one of the measures in the annual cash incentive) as the most important goal because it focuses executive officers on the Company’s most critical strategic priorities of growing the business and seizing market share, and aligns the incentives for the NEOs with these goals. The 2023 PSUs vest over a three-year performance period ending in 2025 based on 1) a one-year revenue growth metric for 2023 and 2) a three-year revenue Compound Annual Growth Rate, or CAGR, each weighted 50%. The CAGR metric underscores the importance of consistent strong revenue growth over
51
the 2023-25 performance period. The actual number of PSUs earned will be based on the Company’s performance relative to target. The addition of these PSUs reinforces the pay-for-performance nature of the long-term incentive grants and the executive compensation program overall.
The Compensation Committee views the use of these measures as critical because they tie executive officer compensation with key long-term priorities and align the interests of executive officers with those of Guardant and its stockholders. The performance-based metrics, in conjunction with the proportion of total compensation that was variable and at-risk, further enhanced the link between pay and performance for the NEOs, as well as strengthened the alignment of the interests of the executive officers with those of our stockholders. The Compensation Committee intends, as appropriate and in line with the further development of the Company over time, to consider increasing the proportion of long-term incentives allocated to performance-based vehicles.
The Compensation Committee awarded PSUs to the NEOs in 2023 as follows:
| | | | | | | | |
| | | |
| NEO (1) | | Target Value ($) | | | PSUs (#) | |
Michael Bell | | | 540,000 | | | | 10,519 | |
Craig Eagle | | | 704,000 | | | | 13,713 | |
Christopher Freeman | | | 792,000 | | | | 15,427 | |
Darya Chudova | | | 550,000 | | | | 10,714 | |
| (1) | Drs. Eltoukhy and Talasaz and Ms. Dahne-Steuber did not receive 2023 PSU awards. |
At the time of grant, the Compensation Committee established the specific performance measures and associated payout levels, and evaluated the rigor of the performance goals and the alignment of those goals with the Company’s objectives. For the half of the total 2023-2025 PSU target value that is determined based on a one-year absolute revenue growth metric for 2023, the Compensation Committee established performance levels and potential payouts as follows:
| | | | | | | | |
Less than 15%
Revenue Growth
(Threshold) | | Greater than or equal
to 18% and less than
20% Revenue Growth | | Greater than or equal
to 20% and less than
22% Revenue Growth
(Target) | | Greater than or equal
to 22% and less than
25% Revenue Growth | | Greater than or equal
to 25% Revenue
Growth (Maximum) |
| | | | |
| No Payout | | 50% Payout | | 100% Payout | | 150% Payout | | 200% Payout |
The Company’s 2023 revenue growth was 25%, resulting in a 200% payout for one-half of the 2023 PSUs awarded to each NEO, as shown above. While the performance measure has been achieved, the PSUs are not considered “earned” and shares will not be delivered unless and until the NEO remains in service for the three-year period (except in certain circumstances as described below under the heading entitled “Potential Payments Upon Termination or Change in Control”) and the performance is approved by the Compensation Committee.
The other half of the 2023 PSUs is based on three-year Revenue CAGR. Before the conclusion of the three-year performance period, we do not publicly disclose our specific performance measure targets and the corresponding minimums and maximums because of
52
the potential for competitive harm from such disclosure. These measures are competitively sensitive and would reveal information about our view of our anticipated trajectory, which is not otherwise public. The Compensation Committee believes that they have set performance goals at rigorous and challenging levels so as to require significant effort and achievement by our executive officers to be attained, and that such goals have been established in light of our internal forecast as well as the macroeconomic and industry environments. After the end of the performance period, the targets and achievement relative to such targets will be disclosed.
2023 Option and RSU Grants
The Compensation Committee structured a mix of equity vehicles and the relative weight assigned to each type to motivate performance against long-term targets and stock price appreciation over the long term and to encourage ownership and retention while aligning executive officers’ interests with those of our stockholders. The Compensation Committee sought to motivate stock price appreciation over the long term through stock options because they deliver value only if the stock price increases, and the RSUs are complementary to the PSUs and options because they have upside potential but deliver some value even during periods of market or stock price underperformance, providing a retention incentive and reinforcing an ownership culture and commitment to the Company.
In the fourth quarter of 2023, the Compensation Committee granted stock options and RSUs to the NEOs, with the awards vesting over a four-year period, as reflected in the table below.
| | | | | | | | | | | | |
| | | | |
| NEO (1) | | Target Value for Options and RSUs ($) (2) | | | Stock Options (#) | | | RSUs (#) | |
Michael Bell | | | 1,750,000 | | | | 37,326 | | | | 24,884 | |
Craig Eagle | | | 1,400,000 | | | | 29,861 | | | | 19,907 | |
Christopher Freeman | | | 1,400,000 | | | | 29,861 | | | | 19,907 | |
Darya Chudova | | | 1,400,000 | | | | 29,861 | | | | 19,907 | |
| (1) | Pursuant to the Waiver Letters, Drs. Eltoukhy and Talasaz did not receive any equity grants in 2023. Ms. Dahne-Steuber did not receive a grant of options and RSUs in the fourth quarter of 2023 as she had resigned from employment by the date of grant. |
| (2) | The target value is converted to a number of RSUs by taking the average closing stock price of the Company’s common stock for each trading day for the fiscal quarter before the Compensation Committee’s grant. The number of options awarded is based on a Black-Scholes option pricing model. |
Supplemental Grants
The Compensation Committee views supplemental grants as an important way to meet the Company’s needs for a specific purpose or during a specific period.
For several years, there has been fierce competition in the life sciences industry for executive officers and employees with the skills and experience to lead our team on our pioneering mission of helping patients at all stages of cancer live longer and healthier lives through the power of blood tests and the data they unlock—from informing better treatment in patients with advanced cancer, to new ways of monitoring recurrence in cancer survivors, and
53
screening to find cancer at its earliest and most treatable stage in the general population. There is also tough competition for qualified sales and operations leaders who are veterans of the biotechnology industry. This is especially true in the San Francisco Bay Area, where there is an ongoing “war for talent”. Various factors, including inflation and the post-COVID employment market, have made the situation even more intense. In addition, as a pioneer in our market, our employees, including our executive officers, are desirable as candidates for employment with other organizations, and they receive substantial ongoing interest from other companies. Attracting and retaining executive talent of the caliber of our leaders, and maintaining a stable, consistent team, is both extremely challenging and vitally important. Our ability to execute our strategy, our future success and the promotion and protection of the interest of our stockholders depend to a great extent on our continuing ability to retain highly qualified and skilled employees.
Against this backdrop, the Compensation Committee determined that it was in the best interest of the Company and our stockholders to make certain supplemental grants to our NEOs. In June 2023, the Compensation Committee made the following grants in the form of stock options, which the Compensation Committee views as related to performance because they provide no value to recipients unless the recipients help create stockholder value, and RSUs that vest over a three-year term:
| | | | | | | | | | | | |
| | | | |
| NEO (1) | | Target Value for Options and RSUs ($) (2) | | | Stock Options (#) | | | RSUs (#) | |
Michael Bell | | | 1,600,000 | | | | 36,519 | | | | 24,346 | |
Craig Eagle | | | 1,100,000 | | | | 25,107 | | | | 16,738 | |
Christopher Freeman | | | 1,100,000 | | | | 25,107 | | | | 16,738 | |
| (1) | Pursuant to the Waiver Letters, Drs. Eltoukhy and Talasaz did not receive any equity grants in 2023. Neither Dr. Chudova nor Ms. Dahne-Steuber received a supplemental grant. |
| (2) | The target value is converted to a number of RSUs by taking the average closing stock price of the Company’s common stock for each trading day for the fiscal quarter before the Compensation Committee’s grant. The number of options awarded is based on a Black-Scholes option pricing model. |
Leadership Transitions
On May 8, 2023, the Company promoted Darya Chudova to the position of Chief Technology Officer. The Company adjusted her base salary for this new position to $445,000, set a new target annual cash incentive opportunity to 50% (which percentage was blended with her prior target opportunity to determine her total 2023 opportunity) and made a grant of options and RSUs with a financial performance metric relatedtarget value of $2,000,000 that vest over four years.
Effective May 2, 2023, the Board appointed Ines Dahne-Steuber to revenuethe position of Chief Operations Officer. In connection with her appointment, Ms. Dahne-Steuber was entitled to receive (i) an annual base salary of $490,000; (ii) a target bonus equal to 50% of her annual base salary; (iii) RSUs valued at approximately $2,000,000; and an operational milestone metric related(iv) a stock option to purchase approximately $2,000,000 of the Company’s common stock. Additionally, Ms. Dahne-Steuber received a LUNAR-2 launch. The Committee believes these metrics incentivize top line growthsigning bonus of $50,000 and a relocation allowance of up to fuel further growth, and$50,000, both of which were subject to clawback (on a prorated basis) in the pursuit of a key strategic goal of expandingevent
Ms. Dahne-Steuber voluntarily terminated employment with the applicability of our technology and methodologyCompany prior to a broader market.
We expect to continue to evaluate our equity compensation strategy across the organization to manage our equity utilization during 2021 and beyond.
Founders’ 2020 Performance Awards
Executive Summary
Founders’ 2020 Performance Awards Overview
To align12 months of service. Ms. Dahne-Steuber agreed to certain restrictive covenants, including confidentiality, invention assignment, and a customer and one-year employee non-solicitation. In November 2023, the incentivesCompany and Ms. Dahne-Steuber negotiated the terms of her involuntary termination, effective as of November 10, 2023. Ms. Dahne-Steuber remained employed through December 1, 2023. Under these terms, in exchange for a release of claims, Ms. Steuber was entitled to receive an amount equal to six months of base salary and six months of COBRA premiums for continued health coverage, and was entitled to retain the remaining prorated portion of her signing bonus and relocation allowance. All RSUs and stock options received upon appointment were forfeited.
2024 Compensation of Drs. Eltoukhy and Talasaz with our long-term, large-scale strategic objectives
In 2021, 2022 and 2023, the compensation of making significant headway against cancer, and to secure their continued leadership, expertise and energy, and considering the interests of our stockholders and stakeholders, in May 2020, our Board granted awards to each of Drs. Eltoukhy and Talasaz as follows:
•consisted of a base salary of $1, no annual cash incentive opportunity and no long-term incentive equity opportunity, pursuant to waivers they had granted. The Board, aided by its Compensation Committee, had adopted these arrangements in the first half of 2020, in conjunction with the grant to each of the Co-CEOs of 1,695,574 performance share units, or PSUs which are 100% performance-basedwith stock price hurdles of $120, $150, and at-risk$200 (the “Founders’ 2020 Performance Awards”).
•The Company achieved the first stock price hurdle in 2021 and one-third of the PSUs vest only if certain rigorousvested, but the stock price has not achieved the other two stock price hurdles are reached duringhave not been achieved, and the seven-year termstock closed at $20.63 on March 28, 2024, approximately 86% below the $150/share hurdle.Over the last year, the Board became increasingly concerned that the Founders’ 2020 Performance Awards were no longer effective at accomplishing the goals for which they were originally designed, and thus were no longer in the best interests of the awards.
•Based onCompany and its stockholders. Specifically, given the stock price used bydecrease in market values of high growth biotechnology companies generally over the Board to determine the number of PSUs granted, the price must increase by 55%, 94%last two years, and 158% in order for the three tranches of the award to be earned, respectively, corresponding to stockholder value creation of $4.0 billion, $6.9 billion and $11.6 billion, respectively.
•To underscore the “all in” nature of the performance award, each of Drs. Eltoukhy and Talasaz have agreed by means of a written Waiver Letter filed with the SEC to effectively forego all base salary and annual incentive for a period of seven years. Drs. Eltoukhy and Talasaz must remain our employeesCompany in order for any tranche of the award to vest.
Background
In 2011, the team of Dr. Helmy Eltoukhy, our Chief Executive Officer, and Dr. AmirAli Talasaz, our President and Chief Operating Officer (collectively, our “Founders”), founded Guardant Health as a start up with the belief that the key to conquering cancer is unprecedented access to its molecular information throughout all stages of the disease.
The Company enables this access by a routine blood draw, or liquid biopsy blood test, with our Guardant360 and GuardantOMNI tests for advanced stage cancer. GuardantOMNI has been used by our biopharmaceutical customers as a comprehensive genomic profiling tool to help accelerate clinical development programs in both immuno-oncology and targeted therapy.
Performance
Within seven years of our founding, we became a leading precision oncology company. As it is practiced today, precision oncology is primarily focused on matching cancer patients to personalized treatments based on the underlying molecular profile of their existing tumors. In October 2018, we went public, with an IPO valuation of approximately $1.59 billion.
As described above, our 2020 total revenue was $286.7 million, driven by precision oncology testing revenue, primarily as a result of higher testing volume and increased revenue per test, and by development services and other revenue, primarily from new projects.
Approximately 10 years after Drs. Eltoukhy and Talasaz founded our company, as of April 19, 2021, our equity market capitalization was approximately $15.4 billion, a 968% increase since our IPO. Under the leadership of Drs. Eltoukhy and Talasaz, Guardant Health has created approximately $13.8 billion in value for our stockholders since our IPO.
Cumulative Total Stockholder Return
Strategic Opportunity
Having developed Guardant360 and GuardantOMNI for advanced stage cancer (each were designated by the FDA as a breakthrough device for use as a companion diagnostic in connection with certain specified therapeutic products of our biopharmaceutical customers), we are now moving aggressively to the next phase of our growth and development: solutions for early detection and the detection of recurrence and residual disease (our LUNAR and LUNAR-2 efforts, respectively), and the market opportunity presented by such tests.
Our LUNAR assay is intended to address identification of those who are likely to benefit from adjuvant treatment, detection of minimal residual disease in the blood of cancer patients after surgery, and surveillance of patients who have completed curative cancer treatment to potentially detect recurrence at an earlier stage. This assay was launched in 2018 for research use and in late 2019 for investigational use. We are developing our LUNAR-2 assay to address early cancer detection in screening eligible asymptomatic individuals and higher risk individuals.
Key 2020 Compensation Decisions Relating to the Founders
The Committee consideredparticular, the Founders’ success2020 Performance Awards no longer offered meaningful financial or retentive value. From the Board’s perspective, the misalignment raised increasing concerns about the Founders’ 2020 Performance Awards’ ability to datemotivate the Co-CEOs at this critical time in envisioning and executing the development of novel technology and bringingthe market for precision oncology. The Compensation Committee also viewed it as vital to market,align the corresponding significant stockholder value creation and strong relative performance.
At this critical moment on our path, our Board of Directors sought to incentivize Drs. Eltoukhy and Talasaz to continue driving long-term stockholder value creation and providing strong leadershipperformance goals for the Company. The Founders had not received equity grants sinceCo-CEOs with the Summerperformance goals of 2017 and their cash compensationall other executive officers, so that the full leadership team was below market. The Board engagedaligned in a thorough and comprehensive process over approximately 11 months to develop an appropriate incentive.
Set forth below is an outlinepursuit of the
termssame short-and long-term objectives.In addition, the Board took into account the feedback that it had received after the grant of the Founders’ 2020 Performance Awards grantedthat future performance-based equity awards to each of Drs. Eltoukhy and Talasaz.
| | | | | |
Item | Description |
Date of Grant | May 26, 2020 |
Performance Awards | 1,695,574 Shares |
Equity Type | Performance-based Restricted Stock Units (“PSUs”) |
Base Price | $89.04 (180-day volume-weighted average price on date of grant) |
Performance Goals | 30-Day Sustained Number of PSUs
Price Per Share Goal that Vest
$120 565,192
$150 565,191
$200 565,191
|
Performance Period Term | 7 years |
Post-Vesting Holding Period | 1 year, for vesting within 3 years of grant; the later of 6 months from vesting date or 4 years from grant, for vesting between years 3 and 4; and 6 months from vesting date, for vesting after 4 years. |
Employment Requirement for Continued Vesting | Vesting contingent on continued employment through the applicable vesting date. |
Termination of Employment | Forfeiture of unvested Awards except for termination without “cause” or for “good reason,” or due to death or disability.
1.Without “cause” or for “good reason”: 1/3 will vest on termination and the remaining unvested PSUs remain outstanding for 6 months (and eligible to vest upon achievement of stock price goals during that period).
2.Disability: unvested PSUs remain outstanding and eligible to vest until the later of 1 year after termination or 4 years from the grant date (but not beyond the seven-year performance period).
3.Death: unvested PSUs vest in full.
|
Change in Control | If the price received by the Company’s stockholders is equal to or greater than $120 per share, then the PSUs will vest with respect to any stock price goal achieved by the transaction price, with the number of PSUs vesting dependent upon where the transaction price falls, and if the price received by the Company’s stockholders is less than $120 but greater than the base price ($89.04), then one-third of the PSUs will vest. To the extent any unvested PSUs are assumed, they will be eligible to vest following the transaction based on the achievement of stock price goals adjusted to reflect the transaction. |
Clawback | Subject to any clawback or recoupment policy adopted or maintained by the Company to the extent required in order to comply with applicable law. |
BoardTalasaz should be granted annually and contain a variety of Directors’ Rationale
performance metrics. The Board
also considered more recent directional stockholder feedback about different compensation structures, such as the inclusion of
Directors engagedthe typical components of base salary, annual cash incentive and long-term equity incentive that are set based on reference to competitive market levels.As part of its regular review, and in a deliberate and robust process to designlight of the Board’s view that the Founders’ 2020 Performance Awards were no longer effective, the Compensation Committee considered a number of alternatives, and its rationalesought advice solely for grantingthis purpose from a separate independent compensation consultant, Meridian Compensation Partners LLC (“Meridian”). The Compensation Committee referenced the compensation of CEOs at companies in the peer group, as well as obtaining directional input from some of the Company’s top
55
stockholders. At the conclusion of a comprehensive process that began in mid-2023, including obtaining advice from Meridian, and in view of the program’s important role in motivating the Co-CEOs and keeping a stable, consistent leadership team, the Compensation Committee determined, and the independent members of the Board approved, a change to the compensation arrangements with Drs. Eltoukhy and Talasaz, effective as of January 1, 2024. In order to motivate the achievement of strategic, financial and value creation goals, on March 18, 2024, the Board established the following 2024 compensation for Drs. Eltoukhy and Talasaz:
| 1) | with respect to base salary, the Co-CEOs requested equity in lieu of cash, given their confidence in the Company’s fundamentals and future business outlook, and the Compensation Committee viewed doing so as appropriate because it further aligned the Co-CEOs’ and stockholders’ interests. The Co-CEOs were granted RSUs with a grant date value of $800,000, which vest quarterly over a one-year period. This quantum was set based on reference to base salary levels of comparable positions at the peer group companies. The Compensation Committee anticipates that Drs. Eltoukhy and Talasaz will be eligible for similar annual equity awards each year, provided to them in lieu of cash base salary, the value of which will be reviewed annually by the Compensation Committee, as is customary for all executive officers; |
| 2) | with respect to an annual cash bonus opportunity, the Co-CEOs requested equity in lieu of cash, given their confidence in the Company’s fundamentals and future business outlook, the Compensation Committee granted PSUs with a target value equal to 100% of the target base salary amount ($800,000 in 2024), with the opportunity to earn 0% to 200% of the target number of PSUs. This quantum was set based on reference to annual cash bonus incentive levels of comparable positions at the peer group companies. The PSUs cliff vest after one year based upon performance relative to the identical annual incentive performance metrics as applicable in the annual cash incentive for all other executive officers. The Compensation Committee anticipates that Drs. Eltoukhy and Talasaz will be eligible for similar annual equity awards each year, provided to them in lieu of their annual cash bonus, the target value of which will be reviewed annually by the Compensation Committee, as is customary for all executive officers; and |
| 3) | the Compensation Committee granted annual long term incentive equity grants in the form of 50% PSUs, with a target value of $5 million, and 50% RSUs, with a grant date fair value of $5 million. The quantum for these awards was set based on reference to long-term incentive equity grant levels of CEOs from the peer companies. The PSUs are based on Revenue CAGR, with a relative total stockholder return (TSR) modifier and a negative TSR cap. The RSUs vest one-third on the first anniversary of the vesting commencement date, and quarterly thereafter for the remaining two years. The PSUs have the same performance metrics and as those granted to other executive officers, and the PSUs and RSUs have the same vesting and other terms as those granted to other executive officers. The Compensation Committee anticipates that Drs. Eltoukhy and Talasaz will be eligible for similar annual equity awards each year, the target value of which will be reviewed annually by the Compensation Committee, as is customary for all executive officers. |
56
In conjunction with the adoption of these new compensation arrangements, the Co-CEOs’ unvested Founders’ 2020 Performance Awards was based on the following:
•Rigorous Stock Price Hurdles Align Awards with Achievement of Large-Scale Strategic and Operational Objectives, Which Drive Significant Stockholder Value Creation. Reaching the stock price hurdleswere cancelled, and the Founders’ receipt of value from the Founders’ 2020 Performance Awards are inextricably tiedshares underlying such PSUs returned to the successful executionpool of our strategy to increase awareness of liquid biopsy, expand clinical utility and reimbursement, strengthen relationships with customers and expand our product portfolio, and to the creation of significant stockholder value well beyond average long-term stock market growth.
•Board Conducted Lengthy Process and Gave Extensive Consideration to All Design Aspects, with Stockholder Viewpoint in Mind. Our Board and Committee conducted a thorough and lengthy 11-month process and engaged in robust deliberations and iterations about all aspects of the Founders’ 2020 Performance Awards prior to setting the final terms, including stockholder and stakeholder views. The Committee favored the chosen design after considering dilution, stockholder alignment, achievement of milestone goals driving the stock price, market benchmarking, implied CAGRs, the appropriate time period for performance, cost and the effect on the available share pool.
•Award Magnitude Determined Relative to External Benchmarks, Internal Considerations and Committee’s View. The Committee exhaustively considered the size of the Founders’ 2020 Performance Awards. It took into account comparable-type grants, internal considerations, unique aspects of the Company’s situation, its own developed perspective and the more prominent role of co-Founder Dr. Talasaz than a typical second-ranking executive. Ultimately, the Committee recognized that since 2017, the Founders received no equity and below market median cash compensation, and so the Committee referenced the comparable top market quartile in determining a target annual value with respect to each year in the seven-year term, resulting in the aggregate target value of the award.
•Award Design and Protective Stockholder Attributes. The Founders’ 2020 Performance Awards provide value to the Founders only if they drive the creation of substantial value for all stockholders that is sustained for 30 days, they must retain the shares for six to twelve months,future equity grants, and shares earnedtheir Waiver Letters are subject to any clawback policy adopted by the Board.
As of the date of this filing, the first stock price hurdle has been achieved and sustained for 30 days and certified by the Committee and the Board. The other price per share goals have not been achieved. Consequently, the first tranche under the Founders’ 2020 Performance Awards, corresponding to 565,192 PSUs for each executive, has vested.
no longer in effect.Other Elements of Compensation
We currently maintain a 401(k) retirement savings plan for our employees, including our NEOs, who satisfy certain eligibility requirements. The 401(k) plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Internal Revenue Code (the “Code”), and our NEOs are eligible to participate in the 401(k) plan on the same basis as our other employees. The Code allows eligible employees to defer a portion of their compensation, within prescribed
limits, on a pre-tax basis through contributions to the 401(k) plan. We believe that providing a vehicle for tax-deferred retirement savings though our 401(k) plan adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our NEOs, in accordance with our compensation policies. In 2020,2023, we provided a discretionarymatching contribution equal to 50% of the first 6% contributed by the employee.
All of our full-time employees, including our NEOs, are eligible to participate in our health and welfare plans, including:
•medical, dental and vision benefits;
•short-term and long-term disability insurance; and
•life and accidental death and dismemberment insurance.
We also provide supplemental short-term disability coverage to our NEOs in addition to the short-term disability coverage provided to our full-time employees generally.
We offer a sabbatical program to honor our active, regular employees upon completion of five or ten years of continuous service, under which employees are eligible for up to 20 consecutive business days off as a paid sabbatical. In addition, employees who take the sabbatical receive up to $25,000 as a travel award to be used during the sabbatical, with the Company paying for the taxes that the employee would incur from using the award. The purpose of the sabbatical program is to honor employees for their service to the Company by giving them time to innovate and pursue their interests outside of work, and travel, in the hope that it renews their commitment to working for the Company in the long-term. In 2023, Dr. Talasaz was eligible for, and elected to take, the sabbatical award.
We believe the benefits and limited perquisite described above are necessary and appropriate to provide a competitive compensation package to our named executive officers.
In September 2018, our Board adoptedWe maintain the Guardant Health, Inc. Executive Severance Plan (the "Severance Plan"“Severance Plan”). The Severance Plan provides for the payment of certain severance and other benefits to participants. The Severance Plan generally provides for severance amounts if the NEO’s
57
employment is terminated by us without cause or by the NEO for good reason. For terminations not in connection with a change in control, severance amounts range from 50% to 100% of base salary. For terminations from three months prior to one year after a change in control, severance amounts range from 100% to 150% of the sum of base salary and target cash bonus. The Severance Plan also provides for reimbursement for health benefit continuation of up to 18 months. The payments and benefits provided under the Severance Plan are contingent upon the affected NEO’s execution and non-revocation of a general release of claims and compliance with specified restrictive covenants. See “Potential Payments upon a Termination or Change in Control,” which describes the payments to which the participating NEOs may be entitled under the Severance Plan.
In addition, in 2019, we entered into letter agreements with each of Drs. Eltoukhy and Talasaz that provide that if eitherthe executive experiences a “qualifying termination” of employment (as defined in the Severance Plan), other than in connection with a change in control, then each time-based vesting Company equity award held by the executive will vest and become exercisable as to the portion of the award that would have vested over the one-year period following the termination date (had the executive remained in continuous service during such period). This acceleration right is subject to the executive’s timely executiveexecution and non-revocation of a general release of claims.
V. ADDITIONAL COMPENSATION POLICIES AND PRACTICES
GuidelinesTo support our commitment to stockholder alignment and ensure non-employee members of our Board and our executive officers, including our NEOs, remain invested in our performance and the performance of our common stock, we adopted a stock ownership policy onguidelines, which were last amended effective November 5, 2020 that became effective January 1, 2021. 2022.
Our stock ownership policy requiresguidelines require applicable individuals to hold a certain value of our common stock depending on their position with us. The required stock holdings areus, as follows:
| • | | For our Co-CEOs: $4,800,000 (equal to six times $800,000, which is the 50th percentile of CEO salaries in our peer group selected for decisions relating to 2023 executive compensation), |
•For our Chief Executive Officer and our President and Chief Operating Officer: $3,774,000 (equal to six times $629,000, which is the 50th percentile of CEO salaries in our peer group selected for decisions relating to 2020 executive compensation),
•For each other executive officer: one times his or her annual base salary, and
•For each non-employee member of our Board: $250,000 (equal to five times $50,000, which is the 50th percentile of annual cash retainers for non-employee directors in our peer group).
| • | | For each non-employee member of our Board: $250,000 (equal to five times $50,000, which is the 50th percentile of annual cash retainers for non-employee directors in our peer group). |
Each individual subject to our stock ownership policyguidelines has until the later of January 1, 2026 or the fifth anniversary of his or her designation as being subject to the policyguidelines to comply with the stock ownership requirementsguidelines applicable to his or her position. Shares of common stock that count toward satisfaction of the minimum ownership requirementrequirements include shares of common stock held directly or indirectly through certain trusts or entities, and shares underlying vested, but unexercised, options to purchase shares of common stockoutstanding RSUs that vest solely based on the spread between exercise pricepassage of time. Shares underlying unexercised stock options and unearned performance-based stock awards do not count in determining compliance with the averagestock ownership guidelines. As of December 31, 2023, all NEOs were in compliance with the month-end price of our common stock over the prior 12 months.ownership guidelines.
58
Until a participant ofsubject to our stock ownership policyguidelines meets the applicable minimum ownership requirement,guidelines, such participant is required to retain (and not dispose of or otherwise transfer) 20% of all “net settled shares” received from the vesting, delivery and/or exercise of equity awards granted under the Company’s equity incentive plans for one year subsequent to their vesting, delivery and/or exercise. For purposes of thisthe stock ownership policy,guidelines, “net settled shares” means those shares of common stock that remain after payment of the applicable exercise or purchase price and all applicable withholding taxes and transaction costs.
Anti-Hedging and Anti-Pledging Policies
Our insider trading compliance policyWe maintain an Insider Trading Compliance Policy that prohibits our officers, directors and executivesemployees from (i)purchasing financial instruments (including prepaid variable forward contracts, equity swaps, and collars), or otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, any formsdecrease in the market value of hedgingour stock. It further prohibits pledging our stock as collateral to secure loans, margin purchases of our stock, short sales of our stock, and any transactions in puts, calls or short-selling transactionsother derivative securities involving our securities, (ii) pledging or marginingstock.
Tax and Accounting Considerations
When appropriate, our securities, or (iii) any other transaction that would directly or indirectly reduceCompensation Committee takes into consideration the risk of holding Company securities, however acquired.
Tax Considerations: Section 162(m)
When reviewing compensation matters, the Committee considers the anticipatedaccounting and tax
consequences to us (and, when relevant, to our executive officers)treatment of the
various payments undercompensation and benefit arrangements for our
compensation programs. Section 162(m)Named Executive Officers. These considerations are in addition to those described above that were material to the pay decisions for the most recent fiscal year.Clawback Policy
In accordance with the applicable provisions of the Code generally disallowsDodd-Frank Wall Street Reform and Consumer Protection Act and the related Nasdaq listing standard, the Company adopted a tax deduction for any publicly held corporation for individualclawback policy in 2023 designed to recoup erroneously awarded incentive compensation of more than $1.0 million in any taxable year to certain executive officers. The Committee, after considering the potential impact of the
application of Section 162(m) of the Code, may provide compensationpaid to executive officers
that may not be tax deductible if it believes that providing that compensation is in the
best interestsevent of an accounting restatement (the “Dodd-Frank Clawback Policy”). Under the Dodd-Frank Clawback Policy, if a restatement of the
CompanyCompany’s financial statements is required, all incentive-based compensation tied to a financial reporting measure that was “received” (within the meaning of the rules) by subject executive officers in the three prior completed fiscal years will be recalculated based on the updated financial statements, to the extent applicable. Incentive compensation deemed to have been erroneously awarded due to the erroneous financials shall be subject to recoupment. Pursuant to the terms of the Dodd-Frank Clawback Policy, the Compensation Committee maintains discretion to determine the appropriate means of recoupment.Our Co-CEOs and its stockholders.
Chief Financial Officer are subject to any recovery rights that are provided under applicable laws, including the Sarbanes-Oxley Act, and the standard terms of the 2018 Plan.Accounting Policies for Stock-Based Compensation
We follow the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, or ASC Topic 718, for our stock-based compensation awards. ASC
59
Topic 718 requires companies to calculate the grant date “fair value” of their stock-based awards using a variety of assumptions. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based awards in their income statements over the period that an employee is required to render service in exchange for the award. Grants of performance stock units, stock options and restricted stock units under our equity incentive award plans are accounted for under ASC Topic 718. Our Board or Committee will regularly consider the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our equity incentive award plans and programs. As accounting standards change, the Compensation Committee may revise certain programs to appropriately align accounting expenses of equity awards with the overall executive compensation philosophy and objectives. In connection with the thorough process relating to the Founders’ 2020 Performance Awards and equity grants made to other NEOs in 2020, the Committee took into account the accounting for such awards.
Report of the Compensation Committee on Executive Compensation
This Compensation Committee Report shall not be deemed to be incorporated by reference into any filing made by the Company under the Securities Act of 1933 or the Exchange Act, notwithstanding any general statement contained in any such filing incorporating this proxy statement by reference, except to the extent the Company incorporates such Report by specific reference.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with the management of the Company. Based on this review and these discussions, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K and the Company’s proxy statement.
The preceding report has been furnished by the following members of the Compensation Committee:
Ian Clark, Chair
Samir Kaul
58 ChairMeghan Joyce
Myrtle Potter
60
2020 Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Stock Awards ($) (2)(3) | | Option Awards ($) (4) | | Non-Equity Incentive Plan Compensation ($) (5) | | All Other Compensation ($) (6) | | Total ($) |
| Helmy Eltoukhy (1) | | 2020 | | $ | 209,937 | | | $ | — | | | $ | 113,595,323 | | | $ | — | | | $ | — | | | $ | 65,726 | | | $ | 113,870,986 | |
| Chief Executive Officer | | 2019 | | 500,000 | | | — | | | — | | | — | | | 412,500 | | | 2,406 | | | 914,906 | |
| 2018 | | 480,000 | | | — | | | — | | | — | | | 336,000 | | | 2,405 | | | 818,405 | |
| Derek Bertocci | | 2020 | | 376,390 | | | — | | | — | | | — | | | — | | | 13,510 | | | 389,900 | |
| Chief Financial Officer | | 2019 | | 378,313 | | | — | | | 543,958 | | | 971,591 | | | 226,512 | | | 9,234 | | | 2,129,608 | |
| AmirAli Talasaz (1) | | 2020 | | 209,937 | | | — | | | 113,595,323 | | | — | | | — | | | 79,780 | | | 113,885,040 | |
| President and Chief Operation Officer | | 2019 | | 500,000 | | | — | | | — | | | — | | | 412,500 | | | 2,406 | | | 914,906 | |
| 2018 | | 480,000 | | | — | | | — | | | — | | | 336,000 | | | 2,405 | | | 818,405 | |
| John Saia | | 2020 | | 304,346 | | | 30,000 | | | 1,362,000 | | | 1,234,607 | | | 196,800 | | | 9,359 | | | 3,137,112 | |
| Senior Vice President, General Counsel & Corporate Secretary | | | | | | | | | | | | | | | | |
| Michael Wiley | | 2020 | | 395,000 | | | — | | | 1,112,792 | | | — | | | 227,520 | | | 17,856 | | | 1,753,168 | |
| Head of Corporate Affairs | | 2019 | | 392,250 | | | — | | | 543,958 | | | 971,591 | | | 306,323 | | | 1,945 | | | 2,216,067 | |
| 2018 | | 384,000 | | | — | | | — | | | — | | | 269,000 | | | 1,461 | | | 654,461 | |
_______________
(1)In connection with the Founders’ 2020 Performance Awards granted to Drs. Eltoukhy and Talasaz in May 2020, for seven years, each of Drs. Eltoukhy and Talasaz formally agreed to accept a base salary of $1 per year, and waived their opportunity to receive annual incentive opportunities or payouts under our annual incentive plan. For 2020, Drs. Eltoukhy and Talasaz received their base salaries at a rate of $500,000 per year through May 31, 2020.
(2)The amounts shown in the Stock Awards column, other than for Drs. Eltoukhy and Talasaz, represent the aggregate grant date fair value of market condition PSUs and time-based RSUs, computed in accordance with FASB Accounting Standards Codification Topic 718 (“Topic 718”), excluding the effect of estimated forfeitures. Amounts in this column relating to RSUs reflect the market value of the RSUs using the closing price of a share of our common stock as reported on Nasdaq on the date of grant, multiplied by the number of shares underlying each award. For information regarding assumptions, factors and methodologies used in our computations pursuant to Topic 718, see Note 14 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.
(3)The amounts shown for Drs. Eltoukhy and Talasaz represent the Founders’ 2020 Performance Awards, which are market-based RSUs intended to compensate Drs. Eltoukhy and Talasaz over their seven-year term and will become vested only if our stock price reaches sustained stock price hurdles of $120/share, $150/share and $200/share during such seven-year period. A tranche of the total number of PSUs will become vested each time one of the stock price hurdles is attained and maintained for 30 days, subject to continued service to us. In addition, any shares received in connection with the vesting of PSUs will be subject to a post-vesting holding period. If any PSUs have not vested by the end of the term of the award, they will be forfeited and Drs. Eltoukhy and Talasaz will not realize the value of such PSUs. As of the date of this filing, one stock price hurdle has been achieved and consequently, 565,192 shares have vested under the Founders’ 2020 Performance Awards. See “Executive Compensation—Compensation Discussion and Analysis—Founders’ 2020 Performance Awards” above. The amounts for the Founders’ 2020 Performance Awards are based on the probable outcome of the market-condition goals, determined using a Monte Carlo simulation model. For information regarding assumptions, factors and methodologies used in our computations pursuant to Topic 718, see Note 14 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.
59 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| Name and Principal Position | | Year | | | Salary
(1)
($) | | | Bonus
(2) ($) | | | Stock Awards (1,3) ($) | | | Option Awards (1,4)
($) | | | Non-Equity Incentive Plan Compensation (1,5)
($) | | | All Other Compensation
(6) ($) | | | Total ($) | |
| Helmy Eltoukhy (1) | | | 2023 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 11,590 | | | | 11,591 | |
| Chairman and Co-Chief | | | 2022 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 11,631 | | | | 11,632 | |
| Executive Officer | | | 2021 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 13,664 | | | | 13,665 | |
| AmirAli Talasaz (1) | | | 2023 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 26,414 | | | | 26,415 | |
| Co-Chief Executive Officer | | | 2022 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 11,174 | | | | 11,175 | |
| | | 2021 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 13,270 | | | | 13,271 | |
| Michael Bell | | | 2023 | | | | 482,000 | | | | — | | | | 1,851,413 | | | | 1,453,305 | | | | 327,375 | | | | 9,900 | | | | 4,123,993 | |
| Chief Financial Officer | | | 2022 | | | | 466,077 | | | | — | | | | 604,238 | | | | 742,480 | | | | 154,958 | | | | 9,959 | | | | 1,977,712 | |
| | | 2021 | | | | 439,616 | | | | 500,000 | | | | 2,941,720 | | | | 2,317,493 | | | | 250,155 | | | | 10,998 | | | | 6,459,981 | |
| Darya Chudova | | | 2023 | | | | 424,462 | | | | — | | | | 2,222,397 | | | | 1,817,482 | | | | 279,281 | | | | 11,919 | | | | 4,755,541 | |
| Chief Technology Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Craig Eagle | | | 2023 | | | | 497,462 | | | | — | | | | 1,565,107 | | | | 1,075,387 | | | | 337,500 | | | | 9,900 | | | | 3,485,356 | |
| Chief Medical Officer | | | 2022 | | | | 485,231 | | | | — | | | | 1,294,507 | | | | 1,673,671 | | | | 157,262 | | | | 6,642 | | | | 3,617,313 | |
| | | 2021 | | | | 317,885 | | | | 2,370,000 | | | | 1,642,986 | | | | 1,935,250 | | | | 186,390 | | | | 3,531 | | | | 6,456,043 | |
| Christopher Freeman | | | 2023 | | | | 490,385 | | | | — | | | | 1,621,395 | | | | 1,075,387 | | | | 327,443 | | | | 8,442 | | | | 3,523,052 | |
| Chief Commercial Officer | | | 2022 | | | | 468,269 | | | | — | | | | 1,456,309 | | | | 1,882,865 | | | | 152,760 | | | | 9,364 | | | | 3,969,567 | |
| | | 2021 | | | | 249,231 | | | | 300,000 | | | | 2,156,323 | | | | 2,539,902 | | | | 183,938 | | | | 7,056 | | | | 5,436,449 | |
| Ines Dahne-Steuber (2) | | | 2023 | | | | 307,101 | | | | 50,000 | | | | 2,611,538 | | | | 2,550,722 | | | | — | | | | 317,355 | | | | 5,836,716 | |
| Former Chief Operating Officer (a) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | Ms. Dahne-Steuber’s employment with the Company ended on December 1, 2023. |
| (1) | In connection with the Founders’ 2020 Performance Awards granted to Drs. Eltoukhy and Talasaz in May 2020, pursuant to the Waiver Letters, each of Drs. Eltoukhy and Talasaz formally agreed to accept a base salary of $1 per year and waived their opportunity to receive annual incentive opportunities or payouts under our annual incentive plan, or to receive grants of equity incentive awards, for seven years. |
| (2) | The amount shown in the Bonus column for Ms. Dahne-Steuber is a sign on bonus paid as part of her new hire compensation. The amounts shown in the Stock Awards and Option Awards columns were forfeited upon Ms. Dahne-Steuber’s separation from service. |
| (3) | The amounts shown in the Stock Awards column represent the aggregate grant date fair value of time-based RSUs and performance-condition PSUs, computed in accordance with FASB Accounting Standards Codification Topic 718 (“Topic 718”), excluding the effect of estimated forfeitures. Amounts in this column relating to RSUs reflect the market value of the RSUs using the closing price of a shares of our common stock on the date of grant, multiplied by the number of shares underlying each award. The amounts included in this column for the PSU awards are calculated based upon achievement of performance at the “target” level, which is the probable outcome of the performance metrics associated with each award of PSUs. If performance were to be achieved at “maximum” level, the grant date fair value of the 2023 PSU awards as of the respective grant dates would have been as follows: Michael Bell, $690,888; Darya Chudova, $703,696; Craig Eagle, $900,670; Christopher Freeman, $1,013,245. For information regarding assumptions, factors and methodologies used in our |
61
| computations pursuant to Topic 718, see Note 11 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023. |
| (4) | The amounts shown in the Option Awards column represent the aggregate grant date fair value of stock options computed in accordance with Topic 718. Valuations of options were determined using the Black-Scholes option pricing model. For information regarding assumptions, factors and methodologies used in our computations pursuant to Topic 718, see Note 11 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023. |
| (5) | The amounts shown in the Non-Equity Incentive Plan Compensation column are comprised of amounts paid in respect of our annual incentive plan, as determined by the Compensation Committee in accordance with the plan and the awards thereunder. Payments pursuant to the annual incentive plan are generally made early in the year following the year in which they are earned. As described in footnote 1, each of Drs. Eltoukhy and Talasaz waived their opportunity to receive annual incentive opportunities or payouts under our annual incentive plan. |
| (6) | For Dr. Talasaz, the amount shown includes $18,996 for (a) tax reimbursements related to the waived health insurance premiums and (b) tax reimbursements all participants are eligible to receive related to the travel expenditures under the Company-wide Sabbatical and Travel Award Program. For Ms. Dahne-Steuber, the amount shown includes relocation reimbursements of $26,911 and payments totaling $282,111 under her separation agreement. (See below under “Potential Payments Upon Termination or Change in Control”). |
62
(4)The amounts shown in the Option Awards column represent the aggregate grant date fair value of stock options computed in accordance with Topic 718. Valuations of options were determined using the Black-Scholes option pricing model. For information regarding assumptions, factors and methodologies used in our computations pursuant to Topic 718, see Note 14 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.
(5)The amounts shown in the Non-Equity Incentive Plan Compensation column are comprised of amounts paid in respect of our annual incentive plan, as determined by the Compensation Committee in accordance with the plan and the awards thereunder. Payments pursuant to the annual incentive plan are generally made early in the year following the year in which they are earned.
(6)The amounts shown in the All Other Compensation column include premiums paid by the Company for supplemental disability coverage paid for all NEOs. In addition, for Drs. Eltoukhy and Talasaz, the amounts include Company payment of health insurance premiums and related taxes imposed during the portion of the year that each waived his salary, and includes $57,692 for Dr. Eltoukhy and $54,000 for Dr. Talasaz for payment of accrued vacation. Finally, for all NEOs except Dr. Eltoukhy, the amounts also include Company matching contributions to the tax-qualified 401(k) retirement plan
20202023 Grants of Plan Based Awards Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards (1)(2) | | Estimated Future Payouts
Under Equity Incentive
Plan Awards (3) | | All Other Stock Awards: Number of Shares of Stock or Units (4) | | All Other Option Awards: Number of Securities Underlying Options (5) | | Exercise or Base Price of Option Awards | | Grant Date Fair Value of Stock and Option Awards (6) |
| Name | | Grant Date | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | | | | |
| | ($) | | ($) | | ($) | | (#) | | (#) | | (#) | | (#) | | (#) | | ($/Share) | | ($) |
| Helmy Eltoukhy | | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | | | |
| 5/26/2020 | | | | | | | | 565,192 | | | 1,695,574 | | | 1,695,574 | | | | | | | | | 113,595,323 | |
| Derek Bertocci | | | | — | | | 156,000 | | | 312,000 | | | | | | | | | | | | | | | |
| AmirAli Talasaz | | | | — | | | — | | | — | | | | | | | | | | | | | | | |
| 5/26/2020 | | | | | | | | 565,192 | | | 1,695,574 | | | 1,695,574 | | | | | | | | | 113,595,323 | |
| John Saia | | | | — | | | 164,000 | | | 328,000 | | | | | | | | | | | | | | | |
| | 7/22/2020 | | | | | | | | | | | | | | 12,412 | | | | | | | 1,028,086 | |
| | 7/22/2020 | | | | | | | | | | | | | | | | 24,824 | | | 82.83 | | | 1,234,607 | |
| | 9/11/2020 | | | | | | | | | | | | | | 3,491 | | | | | | | 333,914 | |
| Michael Wiley | | | | — | | | 197,500 | | | 395,000 | | | | | | | | | | | | | | | |
| | 9/11/2020 | | | | | | | | | | | | | | 11,634 | | | | | | | 1,112,792 | |
Annual Incentive Plan
(1) The annual incentive plan makes a cash payout based on performance. The amounts disclosed in these columns reflect the threshold, target and maximum annual cash incentive opportunities of our NEOs for 2020. The amounts of the annual cash incentive opportunities depend on the eligible annual base salary in effect at year end for each NEO. Below threshold performance on the financial metrics results in 0% payout. However, the milestone metrics do not establish threshold performance and thus payout for those metrics could be as little as 1%. See “Compensation Discussion and Analysis—Compensation Program Components—Annual Incentive Plan” for a detailed description of annual incentive plan awards, including the criteria for determining the amounts payable. Actual 2020 annual incentive plan results are reported in the “Summary Compensation Table” in the “Non-Equity Incentive Plan Compensation” column. The maximum award is 200% of target. Linear interpolation is used to determine the applicable payout amount between threshold and target and between target and maximum.
60 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards (1)(2) | | | Estimated Future Payouts
Under Equity Incentive
Plan Awards (3) | | | All Other
Stock
Awards:
Number of
Shares
of Stock
or Units (4)
(#) | | | All Other Option
Awards: Number of
Securities
Underlying
Options (5)
(#) | | | Exercise or Base Price of Option Awards ($/Sh) | | | Grant Date
Fair Value
Of Stock
and Option
Awards (6)
($) | |
| Name | | Grant Date | | | Approval Date | | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | |
| Helmy Eltoukhy (2) | | | | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| AmirAli Talasaz (2) | | | | | | | | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Michael Bell | | | | | | | | | | | — | | | | 242,500 | | | | 485,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | 6/7/2023 | | | | 3/15/2023 | | | | — | | | | — | | | | — | | | | 5,260 | | | | 10,519 | | | | 21,038 | | | | — | | | | — | | | | — | | | | 345,444 | |
| | | 6/9/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 24,346 | | | | — | | | | — | | | | 800,010 | |
| | | 6/9/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 36,519 | | | | 32.86 | | | | 775,689 | |
| | | 12/13/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 37,326 | | | | 28.37 | | | | 677,616 | |
| | | 12/13/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 24,884 | | | | — | | | | — | | | | 705,959 | |
| Darya Chudova | | | | | | | | | | | — | | | | 201,667 | | | | 403,334 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | |
| | | 6/7/2023 | | | | 3/15/2023 | | | | — | | | | — | | | | — | | | | 5,357 | | | | 10,714 | | | | 21,428 | | | | — | | | | — | | | | — | | | | 351,848 | |
| | | 8/7/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 34,821 | | | | — | | | | — | | | | 1,305,788 | |
| | | 8/7/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 52,232 | | | | 37.50 | | | | 1,275,385 | |
| | | 12/13/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 29,861 | | | | 28.37 | | | | 542,097 | |
| | | 12/13/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 19,907 | | | | — | | | | — | | | | 564,762 | |
| Craig Eagle | | | | | | | | | | | — | | | | 250,000 | | | | 500,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | 6/7/2023 | | | | 3/15/2023 | | | | — | | | | — | | | | — | | | | 6,857 | | | | 13,713 | | | | 27,426 | | | | — | | | | — | | | | — | | | | 450,335 | |
| | | 6/9/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 16,738 | | | | — | | | | — | | | | 550,011 | |
| | | 6/9/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 25,107 | | | | 32.86 | | | | 533,290 | |
| | | 12/13/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 29,861 | | | | 28.37 | | | | 542,097 | |
| | | 12/13/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 19,907 | | | | — | | | | — | | | | 564,762 | |
| Christopher Freeman | | | | | | | | | | | — | | | | 247,500 | | | | 495,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | 6/7/2023 | | | | 3/15/2023 | | | | — | | | | — | | | | — | | | | 7,714 | | | | 15,427 | | | | 30,854 | | | | — | | | | — | | | | — | | | | 506,623 | |
| | | 6/9/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 16,738 | | | | — | | | | — | | | | 550,011 | |
| | | 6/9/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 25,107 | | | | 32.86 | | | | 533,290 | |
| | | 12/13/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 29,861 | | | | 28.37 | | | | 542,097 | |
| | | 12/13/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 19,907 | | | | — | | | | — | | | | 564,762 | |
| Ines Dahne-Steuber | | | | | | | | | | | — | | | | 183,750 | | | | 367,500 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | 8/7/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 104,462 | | | | 37.50 | | | | 2,550,722 | |
| | | 8/7/2023 | | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 69,641 | | | | — | | | | — | | | | 2,611,538 | |
| (1) | The amounts disclosed in these columns reflect the threshold, target and maximum annual cash incentive opportunities of our NEOs for 2023. The amounts of the annual cash incentive opportunities depend on the eligible annual base salary in effect at year end for each NEO. Below threshold performance on the financial metrics results in 0% payout. However, the Operational Performance Component metrics do not establish quantifiable threshold performance and thus payout for those metrics could be as little as 1%. See “Compensation Discussion and Analysis—Compensation Program Components—Annual Incentive Plan” for a detailed description of annual incentive plan awards, including the criteria for determining the amounts payable. Actual 2023 annual incentive plan results are reported in the “Summary Compensation Table” in the “Non-Equity Incentive Plan Compensation” column. The maximum award is 200% of target. Linear interpolation is used to determine the applicable payout amount between threshold and target and between target and maximum. |
| (2) | In connection with the Founders’ 2020 Performance Awards granted to Drs. Eltoukhy and Talasaz in May 2020, each of Drs. Eltoukhy and Talasaz formally waived their opportunity to receive annual incentive opportunities and payouts under our annual incentive plan. |
63
| (3) | Amounts disclosed in these columns reflect the potential threshold, target and maximum number of PSUs that may be earned in respect of the PSUs awarded in 2023 to each NEO. Actual amounts earned are based on the level of achievement relative to two financial goals. Results will be certified by the Compensation Committee in the first quarter of 2026. For more information on the 2023 PSUs, including the applicable performance metrics, please see “Compensation Discussion and Analysis-IV. Compensation Program Components-Long Term Incentives-2023 PSU Grants”. Valuations of PSUs disclosed in this table were determined based on the fair market value of a shares on the grant date. |
| (4) | Amounts disclosed in this column reflect the number of RSUs granted to our NEOs in 2023. The RSUs generally vest over three years; one-third of the RSUs will vest on the first anniversary of the grant date, and 1/12th of the shares subject to the RSU vest on each quarterly anniversary thereafter, subject to the NEO’s continued service. RSUs granted to Dr. Chudova on August 7, 2023, vest 25% on May 15, 2024 and 25% of each subsequent May 15th, subject to her continued service. Ms. Dahne-Steuber’s RSUs were granted with the same vesting schedule as Dr. Chudova’s RSUs, but were forfeited upon her separation from the Company in 2023. |
| (5) | Amounts disclosed in this column reflect the number of stock options granted to our NEOs in 2023. The options generally vest one-third on the first anniversary of the grant date, and monthly thereafter at a rate of one thirty-sixth (1/36) per month over the next two years, subject to continued service. Stock options granted to Dr. Chudova on August 7, 2023, vest 25% on May 15th, 2024 and monthly thereafter at a rate of one forty-eighth (1/48) per month over the next three years, subject to continued service. Ms. Dahne-Steuber’s stock options were granted with the same vesting schedule as Dr. Chudova’s stock options, but were forfeited upon her separation from the Company in 2023. |
| (6) | The amounts shown in this column for RSUs and PSUs represent the aggregate grant date fair value of time-based RSUs, and performance-based PSUs, computed in accordance with Topic 718, excluding the effect of estimated forfeitures. Amounts in this column relating to RSUs and PSUs reflect the market value of the RSUs and PSUs using the closing price of a share of our common stock as reported on Nasdaq on the date of grant, multiplied by the number of shares underlying each award. The amounts shown in this column for stock options represent the aggregate grant date fair value of the stock options computed in accordance with Topic 718. Valuations of options were determined using the Black-Scholes option pricing model. For information regarding assumptions, factors and methodologies used in our computations pursuant to Topic 718, see Note 11 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023. |
64
Founders Annual Incentive Opportunities
(2) In connection with the Founders’ 2020 Performance Awards granted to Drs. Eltoukhy and Talasaz in May 2020 for a maximum term of seven years, each of Drs. Eltoukhy and Talasaz formally waived their opportunity to receive annual incentive opportunities and payouts under our annual incentive plan.
Founders’ 2020 Performance Awards
(3) The amounts shown for Drs. Eltoukhy and Talasaz represent the Founders’ 2020 Performance Awards performance-based PSUs which are intended to compensate Drs. Eltoukhy and Talasaz over their seven-year maximum term and will become vested only if our stock price reaches stock price hurdles of $120/share, $150/share and $200/share during such seven-year period. A tranche of the total number of PSUs will become vested only if one of the stock price hurdles is attained and maintained for 30 days, subject to continued service to us. This award was designed to be an incentive for future performance that might take many years to be achieved. Further, the stock price hurdles were selected because they were believed to be difficult to achieve. If any PSUs have not vested by the end of the term of the award, they will be forfeited and Drs. Eltoukhy and Talasaz will not realize the value of such PSUs. See “Executive Compensation—Compensation Discussion and Analysis—Founders’ 2020 Performance Awards” above.
Restricted Stock Units
(4)Amounts disclosed in this column reflect the number of RSUs granted to our NEOs in 2020. The RSUs granted as part of the annual equity grant vest over four years; one-fourth of the RSUs will vest on each anniversary of the grant date, subject to continued service. Valuations of RSUs were determined based on the fair market value of a share of our common stock on the grant date.
Stock Options
(5) Amounts disclosed in this column reflect the number of stock options granted to our NEOs in 2020. The options vest one-fourth on the first anniversary of the grant date, and monthly thereafter at a rate of one forty-eighth (1/48) per month over the next three years, subject to continued service. The grant date fair values were calculated using the Black-Scholes value of each option on the grant date.
Grant Date Fair Value
(6) The amounts for the Founders’ 2020 Performance Awards are based on the probable outcome of the market-condition goals, determined using a Monte Carlo simulation model. The amounts shown in for RSUs represent the aggregate grant date fair value of market condition PSUs and time-based RSUs, computed in accordance with FASB Accounting Standards Codification Topic 718 (“Topic 718”), excluding the effect of estimated forfeitures. Amounts in this column relating to RSUs reflect the market value of the RSUs using the closing price of a share of our common stock as reported on Nasdaq on the date of grant, multiplied by the number of shares underlying each award. The amounts shown in this column for stock options represent the aggregate grant date fair value of the stock options computed in accordance with Topic 718. Valuations of options were determined using the Black-Scholes option pricing model. For information regarding assumptions, factors and methodologies used in our computations pursuant to Topic 718, see Note 14 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.
20202023 Outstanding Equity at Fiscal Year End Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Option Awards | | Stock Awards |
| | | | | | | Number of Securities Underlying Unexercised Options | | Option Exercise Price | | Option Expiration Date | | Number of Shares or Units That Have Not Vested (3) | | Market Value of Shares or Units That Have Not Vested (4) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (5) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (6) |
| Name | | Award Type | | Grant Date | | | Exercisable (1) | | Unexercisable (2) | | | | | | |
| | | | (#) | | (#) | | ($) | | | (#) | | ($) | | (#) | | ($) |
| Helmy Eltoukhy | | Options | | 7/14/2017 | (7) | | 635,611 | | | 99,924 | | | $ | 4.18 | | | 7/13/2022 | | | | | | | | |
| PSUs | | 5/26/2020 | (8) | | | | | | | | | | | | | | 1,695,574 | | | 218,525,577 | |
| Derek Bertocci | | Options | | 8/22/2018 | (9) | | 3,074 | | | 15,371 | | | 8.80 | | | 8/21/2028 | | | | | | | | |
| | | 8/1/2019 | (9) | | 5,813 | | | 11,629 | | | 94.47 | | | 8/1/2029 | | | | | | | | |
| RSUs | | 8/1/2019 | (10) | | | | | | | | | | 4,319 | | | 556,633 | | | | | |
| AmirAli Talasaz | | Options | | 7/14/2017 | (7) | | 491,658 | | | 99,924 | | | 4.18 | | | 7/13/2022 | | | | | | | | |
| PSUs | | 5/26/2020 | (8) | | | | | | | | | | | | | | 1,695,574 | | | 218,525,577 | |
| John Saia | | Options | | 7/22/2020 | (11) | | — | | | 24,824 | | | 82.83 | | | 7/21/2030 | | | | | | | | |
| RSUs | | 7/22/2020 | (10) | | | | | | | | | | 12,412 | | | 1,599,659 | | | | | |
| | | 9/11/2020 | (10) | | | | | | | | | | 3,491 | | | 449,920 | | | | | |
| Michael Wiley | | Options | | 7/14/2017 | (7) | | 20,167 | | | 12,297 | | | 4.18 | | | 7/13/2027 | | | | | | | | |
| | | 8/1/2019 | (9) | | 5,813 | | | 11,629 | | | 94.47 | | | 8/1/2029 | | | | | | | | |
| RSUs | | 8/1/2019 | (10) | | | | | | | | | | 4,319 | | | 556,633 | | | | | |
| | | 9/11/2020 | (10) | | | | | | | | | | 11,634 | | | 1,499,390 | | | | | |
_______________
(1)Amounts in this column reflect the number of options granted that were subject to time-based vesting and that had vested as of December 31, 2020. The options expire ten years from the date of grant, except for the grants to Drs. Eltoukhy and Talasaz, which expire five years from the date of grant. The options have an exercise price of no less than 100% of the fair market value of a share of our common stock on the date of grant. See "Potential Payments Upon Termination or Change in Control" for information about the treatment of options upon retirement, death, disability, termination or change in control.
(2)Amounts in this column reflect the number of options granted that were subject to time-based vesting and that had not vested as of December 31, 2020.
(3)Amounts in this column reflect the number of unvested RSUs granted that were subject to time-based vesting and that had not vested as of December 31, 2020. See “Potential Payments Upon Termination or Change in Control” for information about the treatment of RSUs upon retirement, death, disability, termination or change in control.
(4)Amounts in this column reflect the market value of the RSUs using the closing price of a share of our common stock as reported on Nasdaq on December 31, 2020, the last trading day of the year, multiplied by the number of shares underlying each award.
(5)Amounts in this column reflect the number of unvested PSUs that are subject to performance-based vesting conditions as of December 31, 2020. See "Potential Payments Upon Termination or Change in Control" for information about the treatment of PSUs upon retirement, death, disability or change in control.
(6)Amounts in this column reflect the market value of the PSUs using the closing price of a share of our common stock as reported on Nasdaq on December 31, 2020, the last trading day of the year, multiplied by the number of shares underlying each award.
62 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| | | | | | | | | | Option Awards | | Stock Awards | |
| | | | | | | | | | Number of
Securities
Underlying
Unexercised
Options | | | Option
Exercise
Price
($) | | | Option
Expiration
Date | | Number of
Shares or
Units
That
Have Not
Vested (3)
(#) | | | Market
Value of
Shares or
Units
That
Have Not
Vested (4)
($) | | | Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested (5)
(#) | | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested (6)
($) | |
Name | | Award
Type | | Grant Date | | | | | Exercisable
(1) (#) | | | Unexercisable
(2) (#) | |
Helmy Eltoukhy | | Options | | | 7/14/2017 | | | | | | 711,612 | | | | — | | | | 4.18 | | | 7/14/2027 | | | — | | | | — | | | | — | | | | — | |
| | PSUs | | | 5/26/2020 | | | (7) | | | — | | | | — | | | | — | | | — | | | — | | | | — | | | | 1,130,382 | | | | 30,576,833 | |
AmirAli Talasaz | | Options | | | 7/14/2017 | | | | | | 567,659 | | | | — | | | | 4.18 | | | 7/14/2027 | | | — | | | | — | | | | — | | | | — | |
| | PSUs | | | 5/26/2020 | | | (7) | | | — | | | | — | | | | — | | | — | | | — | | | | — | | | | 1,130,382 | | | | 30,576,833 | |
Michael Bell | | Options | | | 5/4/2021 | | | (8) | | | 19,298 | | | | 7,169 | | | | 148.19 | | | 5/4/2031 | | | — | | | | — | | | | — | | | | — | |
| | Options | | | 5/9/2022 | | | (8) | | | 18,082 | | | | 21,372 | | | | 30.63 | | | 5/9/2032 | | | — | | | | — | | | | — | | | | — | |
| | Options | | | 6/9/2023 | | | (9) | | | — | | | | 36,519 | | | | 32.86 | | | 6/9/2033 | | | — | | | | — | | | | — | | | | — | |
| | Options | | | 12/13/2023 | | | (9) | | | — | | | | 37,326 | | | | 28.37 | | | 12/13/2033 | | | — | | | | — | | | | — | | | | — | |
| | RSUs | | | 5/4/2021 | | | (10) | | | — | | | | — | | | | — | | | — | | | 6,617 | | | | 178,990 | | | | — | | | | — | |
| | RSUs | | | 5/9/2022 | | | (11) | | | — | | | | — | | | | — | | | — | | | 11,097 | | | | 300,174 | | | | — | | | | — | |
| | RSUs | | | 6/9/2023 | | | (12) | | | — | | | | — | | | | — | | | — | | | 24,346 | | | | 658,559 | | | | — | | | | — | |
| | RSUs | | | 12/13/2023 | | | (12) | | | — | | | | — | | | | — | | | — | | | 24,884 | | | | 673,112 | | | | — | | | | — | |
| | PSUs | | | 5/4/2021 | | | (13) | | | — | | | | — | | | | — | | | — | | | — | | | | — | | | | 6,617 | | | | 178,990 | |
| | PSUs | | | 6/7/2023 | | | (14) | | | — | | | | — | | | | — | | | — | | | 10,520 | | | | 284,566 | | | | 5,259 | | | | 142,256 | |
Darya Chudova | | Options | | | 3/30/2018 | | | | | | 4,328 | | | | — | | | | 4.6625 | | | 3/30/2028 | | | — | | | | — | | | | — | | | | — | |
| | Options | | | 8/22/2018 | | | | | | 8,982 | | | | — | | | | 8.80 | | | 8/22/2028 | | | — | | | | — | | | | — | | | | — | |
| | Options | | | 8/1/2019 | | | | | | 17,442 | | | | — | | | | 94.47 | | | 8/1/2029 | | | — | | | | — | | | | — | | | | — | |
| | Options | | | 11/2/2021 | | | (8) | | | 5,681 | | | | 4,419 | | | | 117.61 | | | 11/2/2031 | | | — | | | | — | | | | — | | | | — | |
| | Options | | | 11/7/2022 | | | (8) | | | 12,499 | | | | 30,355 | | | | 47.20 | | | 11/7/2032 | | | — | | | | — | | | | — | | | | — | |
| | Options | | | 8/7/2023 | | | (8) | | | — | | | | 52,232 | | | | 37.50 | | | 8/7/2033 | | | — | | | | — | | | | — | | | | — | |
| | Options | | | 12/13/2023 | | | (9) | | | — | | | | 29,861 | | | | 28.37 | | | 12/13/2033 | | | — | | | | — | | | | — | | | | — | |
| | RSUs | | | 9/11/2020 | | | (10) | | | — | | | | — | | | | — | | | — | | | 2,909 | | | | 78,688 | | | | — | | | | — | |
| | RSUs | | | 11/4/2020 | | | (15) | | | — | | | | — | | | | — | | | — | | | 9,756 | | | | 263,900 | | | | — | | | | — | |
| | RSUs | | | 11/2/2021 | | | (11) | | | — | | | | — | | | | — | | | — | | | 2,210 | | | | 59,781 | | | | — | | | | — | |
| | RSUs | | | 11/7/2022 | | | (11) | | | — | | | | — | | | | — | | | — | | | 16,071 | | | | 434,721 | | | | — | | | | — | |
| | RSUs | | | 8/7/2023 | | | (10) | | | — | | | | — | | | | — | | | — | | | 34,821 | | | | 941,908 | | | | — | | | | — | |
| | RSUs | | | 12/13/2023 | | | (12) | | | — | | | | — | | | | — | | | — | | | 19,907 | | | | 538,484 | | | | — | | | | — | |
| | PSUs | | | 11/4/2020 | | | (13) | | | — | | | | — | | | | — | | | — | | | — | | | | — | | | | 21,863 | | | | 591,394 | |
| | PSUs | | | 6/7/2023 | | | (14) | | | — | | | | — | | | | — | | | — | | | 10,714 | | | | 289,814 | | | | 5,357 | | | | 144,907 | |
Craig Eagle | | Options | | | 8/3/2021 | | | (8) | | | 19,826 | | | | 9,914 | | | | 110.49 | | | 8/3/2031 | | | — | | | | — | | | | — | | | | — | |
| | Options | | | 11/7/2022 | | | (8) | | | 15,998 | | | | 38,854 | | | | 47.20 | | | 11/7/2032 | | | — | | | | — | | | | — | | | | — | |
| | Options | | | 6/9/2023 | | | (9) | | | — | | | | 25,107 | | | | 32.86 | | | 6/9/2033 | | | — | | | | — | | | | — | | | | — | |
| | Options | | | 12/13/2023 | | | (9) | | | — | | | | 29,861 | | | | 28.37 | | | 12/13/2023 | | | — | | | | — | | | | — | | | | — | |
| | RSUs | | | 8/3/2021 | | | (10) | | | — | | | | — | | | | — | | | — | | | 7,435 | | | | 201,117 | | | | — | | | | — | |
| | RSUs | | | 11/7/2022 | | | (11) | | | — | | | | — | | | | — | | | — | | | 20,570 | | | | 556,419 | | | | — | | | | — | |
| | RSUs | | | 6/9/2023 | | | (12) | | | — | | | | — | | | | — | | | — | | | 16,738 | | | | 452,763 | | | | — | | | | — | |
| | RSUs | | | 12/13/2023 | | | (12) | | | — | | | | — | | | | — | | | — | | | 19,907 | | | | 538,484 | | | | — | | | | — | |
| | PSUs | | | 6/7/2023 | | | (14) | | | — | | | | — | | | | — | | | — | | | 13,714 | | | | 370,964 | | | | 6,856 | | | | 185,455 | |
Christopher Freeman | | Options | | | 8/3/2021 | | | (8) | | | 24,394 | | | | 14,638 | | | | 110.49 | | | 8/3/2031 | | | — | | | | — | | | | — | | | | — | |
| | Options | | | 11/7/2022 | | | (8) | | | 17,998 | | | | 43,710 | | | | 47.20 | | | 11/7/2032 | | | — | | | | — | | | | — | | | | — | |
| | Options | | | 6/9/2023 | | | (9) | | | — | | | | 25,107 | | | | 32.86 | | | 6/9/2033 | | | — | | | | — | | | | — | | | | — | |
| | Options | | | 12/13/2023 | | | (9) | | | — | | | | 29,861 | | | | 28.37 | | | 12/13/2033 | | | — | | | | — | | | | — | | | | — | |
| | RSUs | | | 8/3/2021 | | | (10) | | | — | | | | — | | | | — | | | — | | | 9,758 | | | | 263,954 | | | | — | | | | — | |
| | RSUs | | | 11/7/2022 | | | (11) | | | — | | | | — | | | | — | | | — | | | 23,141 | | | | 625,964 | | | | — | | | | — | |
| | RSUs | | | 6/9/2023 | | | (12) | | | — | | | | — | | | | — | | | — | | | 16,738 | | | | 452,763 | | | | — | | | | — | |
| | RSUs | | | 12/13/2023 | | | (12) | | | — | | | | — | | | | — | | | — | | | 19,907 | | | | 538,484 | | | | — | | | | — | |
| | PSUs | | | 6/7/2023 | | | (14) | | | — | | | | — | | | | — | | | — | | | 15,428 | | | | 417,327 | | | | 7,713 | | | | 208,637 | |
| (1) | Amounts disclosed in this column reflect the number of options granted to our NEOs that are subject to time-based vesting and that had vested as of December 31, 2023. The options expire |
65
| ten years from the date of grant. The options have an exercise price of no less than 100% of the fair market value of a share of our common stock on the date of grant. See “Potential Payments Upon Termination or Change in Control” for information on the treatment of options upon death, disability, termination or change in control. |
| (2) | Amounts disclosed in this column reflect the number of options granted to our NEOs that were subject to time-based vesting that had not vested as of December 31, 2023. |
| (3) | Amounts in this column reflect the number of unvested RSUs and earned but unvested PSUs that were subject to time-based vesting and that had not vested as of December 31, 2023. See “Potential Payments Upon Termination or Change in Control” for information about the treatment of RSUs and PSUs upon death, disability, or change in control. |
| (4) | Amounts in this column reflect the market value of the RSUs and earned PSUs using the closing price of a share of our common stock as reported on Nasdaq on December 29, 2023, the last trading day of the year, multiplied by the number of shares underlying each award. |
| (5) | Amounts in this column reflect the number of unvested PSUs that are subject to performance-based vesting conditions as of December 31, 2023. See “Potential Payments Upon Termination or Change in Control” for information about the treatment of PSUs upon death, disability or change in control. |
| (6) | Amounts in this column reflect the market value of the unvested PSUs using the closing price of a share of our common stock as reported on Nasdaq on December 29, 2023, the last trading day of the year, multiplied by the number of shares underlying each award. |
| (7) | The amounts shown for Drs. Eltoukhy and Talasaz represent the unvested portion of the Founders’ 2020 Performance Awards which are intended to compensate Drs. Eltoukhy and Talasaz over their seven-year maximum term and will become vested only if our stock price reaches stock price hurdles of $150/share and $200/share during such seven-year period. See “Compensation Discussion and Analysis — IV. Components of Our Compensation Program — Leadership Transition” above for a description of the 2024 compensation arrangements of Drs. Eltoukhy and Talasaz, pursuant to which the remaining PSUs were cancelled in March 2024. See “Potential Payments Upon Termination or Change in Control” for information about the treatment of PSUs upon death, disability or change in control. |
| (8) | 1/4 of the shares subject to the option will vest (or, if applicable, vested) on the one-year anniversary of the vesting commencement date, and 1/48th of the shares subject to the option will vest on each monthly anniversary thereafter, subject to the NEO’s continued service. |
| (9) | 1/3 of the shares subject to the option will vest (or, if applicable, vested) on the one-year anniversary of the grant date, and 1/36th of the shares subject to the option will vest on each monthly anniversary thereafter, subject to the NEO’s continued service. |
| (10) | 1/4th of the shares subject to the RSU agreement will vest on each anniversary of the vesting commencement date, subject to the NEO’s continued service. |
| (11) | 1/4 of the shares subject to the RSU agreement will vest (or, if applicable, vested) on the one-year anniversary of the vesting commencement date, and 1/16th of the shares subject to the RSU award will vest quarterly thereafter, subject to the NEO’s continued service. |
| (12) | 1/3 of the shares subject to the RSU agreement will vest (of, if applicable, vested) on the one-year anniversary of the vesting commencement date, and 1/12 of the shares subject to the RSU award will vest quarterly thereafter, subject to the NEO’s continue service. |
| (13) | The amounts shown reflect the number of PSUs that are subject to performance-based vesting conditions as of December 31, 2023, which will be distributed if specified financial and product development-related performance conditions are attained during the performance period (ending November 2024) and further subject to the NEO’s continued employment with us for the six-month period immediately following the performance period. See “Potential Payments Upon Termination or Change in Control” for information about the treatment of PSUs upon death, disability or change in control. |
66
(7)1/48th of the shares subject to the option will vest on each monthly anniversary of the vesting commencement date, which was April 23, 2017, subject to the NEO’s continued service.
(8)The amounts shown for Drs. Eltoukhy and Talasaz represent the unvested portion of the Founders’ 2020 Performance Awards which are intended to compensate Drs. Eltoukhy and Talasaz over their seven-year maximum term and will become vested only if our stock price reaches stock price hurdles of $120/share, $150/share and $200/share during such seven-year period. Please see “Founders’ 2020 Performance Awards” above for information about these awards.
(9)1/48th of the shares subject to the option will vest on each monthly anniversary of the vesting commencement date (the date of grant), subject to the NEO’s continued service.
(10)1/4th of the shares subject to the RSU agreement will vest on each anniversary of the vesting commencement date (the date of grant), subject to the NEO’s continued service.
(11)1/4 of the shares subject to the option vested on April 15, 2021 and 1/48th of the shares subject to the option will vest on each monthly anniversary thereafter, subject to the executive’s continued service.
2020 | (14) | The amounts shown in the “Number of Shares or Units That Have Not Vested” represent PSUs earned at the completion of the 2023 performance period that will vest on or before March 15, 2026, subject to the NEO’s continued employment with us to December 31, 2025. The numbers shown as Equity Incentive Plan Awards reflect the number of PSUs that remain subject to performance-based vesting conditions as of December 31, 2023, which will be distributed if specified performance conditions are attained during the performance period (ending December 31, 2025) and will vest on March 15, 2026, subject to the NEO’s continued employment with us to the end of the performance period. See “Potential Payments Upon Termination or Change in Control” for information about the treatment of PSUs upon death, disability or change in control. |
2023 Options Exercised and Stock Vested
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
| | Number of Shares Acquired on Exercise (1) | | Value Realized on Exercise (2) | | Number of Shares Acquired on Vesting (3) | | Value of Realized on Vesting (4) |
| Name | | (#) | | ($) | | (#) | | ($) |
| Helmy Eltoukhy | | 148,923 | | | $ | 15,140,844 | | | | | |
| Derek Bertocci | | 38,428 | | | 2,820,872 | | | 1,439 | | | 122,574 | |
| AmirAli Talasaz | | 293,174 | | | 24,463,968 | | | | | |
| John Saia | | | | | | | | |
| Michael Wiley | | 18,169 | | | 1,654,009 | | | 1,439 | | | 122,574 | |
_______________
(1)The amounts shown in this column represent the number of shares acquired on the exercise of options during 2020.
(2)The amounts shown in this column represent the number of shares acquired on exercise multiplied by the difference between the closing price of a share of our common stock on the date of exercise and the option exercise price.
(3)The amounts shown in this column represent the number of RSUs that vested during 2020.
(4)The amounts shown in this column reflect the value realized upon vesting of the RSUs as calculated based on the price of a share of our common stock on the vesting date, multiplied by the number of shares underlying each award.
| | | | | | | | | | | | | | | | |
| | | Option Awards | | | Stock Awards | |
Name | | Number of Shares
Acquired on Exercise
(#) | | | Value Realized
on Exercise
($) | | | Number of Shares
Acquired on Vesting
(1) (#) | | | Value Realized
on Vesting (2)
($) | |
Helmy Eltoukhy | | | — | | | | — | | | | — | | | | — | |
AmirAli Talasaz | | | — | | | | — | | | | — | | | | — | |
Michael Bell | | | — | | | | — | | | | 11,939 | | | | 350,595 | |
Darya Chudova | | | — | | | | — | | | | 10,966 | | | | 350,047 | |
Craig Eagle | | | — | | | | — | | | | 10,574 | | | | 306,907 | |
Christopher Freeman | | | — | | | | — | | | | 12,592 | | | | 413,332 | |
Ines Dahne-Steuber | | | — | | | | — | | | | — | | | | — | |
| (1) | The amounts shown in this column represent the number of RSUs that vested for each named executive officer during 2023. |
| (2) | The amounts shown in this column reflect the value realized upon vesting of the RSUs for each named executive officer, as calculated based on the price of a share of our common stock on the vesting date, multiplied by the number of shares underlying each award. |
Potential Payments Upon Termination or Change in Control
Upon a termination, or upon a change in control of Guardant Health, the Company maintains certain arrangements, guidelines, plans and programs pursuant to which our NEOs could be eligible to receive certain cash severance, equity vesting and other benefits.
The amounts that the NEOs could receive are set forth below for the following types of termination of employment:
•Termination without cause or by executive for good reason not in connection with a change in control;
•Termination without cause or by executive for good reason following a change in control; and
In September 2018, our Board adopted the Guardant Health, Inc. Executive Severance Plan (the "Severance Plan"“Severance Plan”). The Severance Plan provides for the payment of certain
67
severance and other benefits to participants according to their participant tier in the event of a qualifying termination of employment with us. EachDrs. Eltoukhy and Talasaz are designated as “Tier 1” participants. Messrs. Bell, and Freeman and Drs. Chudova and Eagle are designated as “Tier 2” participants.
As discussed above, each of Drs. Eltoukhy and Talasaz have agreed by means of a written Waiver Letter filed with the SEC to effectively forego all base salary and Mr. Wileyannual incentive for a period of seven years. Consequently, while the terms of the Severance Plan do apply, the amount of base salary upon which they are based is designated as a “Tier 1” participant. Messrs. Saia and Bertocci are designated as “Tier 2” participants.
nominal.Severance Not in Connection with a Change in Control
. Under the Severance Plan, in the event of a termination of a participant’s employment by us without “cause” or by the participant for “good reason,” in either case, more than three months prior to or more than one year after “a change in control” (as defined in the 2018 Plan), the participant will be eligible to receive the following benefits: | ○ | | a lump-sum cash payment equal to 100% of the participant’s then-current annual base salary; and |
| ○ | | company-paid COBRA premium payments for the participant and his or her covered dependents for up to 12 months. |
◦a lump-sum cash payment equal to 100% of the participant’s then-current annual base salary; and
◦company-paid COBRA premium payments for the participant and his or her covered dependents for up to 12 months.
◦a lump-sum cash payment equal to 50% of the participant’s then-current annual base salary; and
◦company-paid COBRA premium payments for the participant and his or her covered dependents for up to 6 months.
As discussed under “Founders’ 2020 Performance Awards” above, each of Drs. Eltoukhy and Talasaz have agreed by means of a written Waiver Letter filed with the SEC to effectively forego all base salary and annual incentive for a period of seven years. Consequently, while the terms of the Severance Plan do apply, the amount of base salary upon which they are based is nominal.
| ○ | | a lump-sum cash payment equal to 50% of the participant’s then-current annual base salary; and |
| ○ | | company-paid COBRA premium payments for the participant and his or her covered dependents for up to 6 months. |
Severance in Connection with a Change in Control
. In the event of a termination by us of a participant’s employment without “cause” or by the participant for “good reason,” in either case, within the period beginning three months prior to a “change in control” (as defined in the 2018 Plan) and ending on the one-year anniversary of such change in control, the participant will be eligible to receive: | ○ | | a lump sum cash payment equal to the sum of (a) 150% of the participant’s then-current annual base salary and (b) 100% of the participant’s target cash performance bonus, if any, for the year in which the qualifying termination occurs; |
| ○ | | accelerated vesting of all equity awards which vest based solely on the participant’s continued service with us or the passage of time; and |
| ○ | | company-paid COBRA premium payments for the participant and his or her covered dependents for up to 18 months. |
◦a lump sum cash payment equal to the sum of (a) 150% of the participant’s then-current annual base salary and (b) 100% of the participant’s target cash performance bonus, if any, for the year in which the qualifying termination occurs;
◦accelerated vesting of all equity awards which vest based solely on the participant’s continued service with us or the passage of time; and
◦company-paid COBRA premium payments for the participant and his or her covered dependents for up to 18 months.
| ○ | | a lump sum cash payment equal to 100% of the sum of participant’s then-current annual base salary and target cash performance bonus, if any, for the year in which the qualifying termination occurs; |
68
◦a lump sum cash payment equal to 100% of the sum of participant’s then-current annual base salary and target cash performance bonus, if any, for the year in which the qualifying termination occurs;
◦accelerated vesting of all equity awards which vest based solely on the participant’s continued service with us or the passage of time; and
◦company-paid COBRA premium payments for the participant and his or her covered dependents for up to 12 months.
| ○ | | accelerated vesting of all equity awards which vest based solely on the participant’s continued service with us or the passage of time; and |
| ○ | | company-paid COBRA premium payments for the participant and his or her covered dependents for up to 12 months. |
Any participant’s right to receive the severance payments and benefits described above is subject to his or her delivery and, as applicable, non-revocation of a general release of claims in our favor, and his or her continued compliance with any applicable restrictive covenants.
In addition, in the event that any payment under the Severance Plan, together with any other amounts paid to the participant by us, would subject such participant to an excise tax under Section 4999 of the Internal Revenue Code, such payments will be reduced to the extent that such reduction would produce a better net after-tax result for the participant.
For purposes of the Severance Plan, “cause” generally means the occurrence of any one or more of the following events (unless, to the extent capable of correction, the participant fully corrects the circumstances constituting cause within 15 days after written notice thereof): (i) the participant’s willful failure to substantially perform his or her duties (other than such failure resulting from the participant’s incapacity due to physical or mental illness or any such actual or anticipated failure after his or her issuance of a notice of termination for “good reason”), after a written demand for performance is delivered to the participant by our Compensation Committee; (ii) the participant’s commission of an act of fraud or material dishonesty resulting in reputational, economic or financial injury to us; (iii) the participant’s material misappropriation or embezzlement of our property or the property of any of our affiliates; (iv) the participant’s commission of (including entry of a guilty or no contest plea to) a felony (other than a traffic violation) or other crime involving moral turpitude, or the participant’s commission of unlawful harassment or discrimination; (v) the participant’s willful misconduct or gross negligence with respect to any material aspect of our business or a material breach by the participant of his or her fiduciary duty to us, which willful misconduct, gross negligence or material breach has a material and demonstrable adverse effect on us; or (vi) the participant’s material breach of his or her obligations to us under a written agreement with us.
For purposes of the Severance Plan, “good reason” generally means the occurrence of any one or more of the following without the participant’s prior written consent unless we fully correct the circumstances constituting good reason (provided such circumstances are capable of correction): (i) a material diminution in the participant’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities, excluding for this purpose any isolated, insubstantial or inadvertent actions not taken in bad faith and which are remedied by us promptly after receipt of notice thereof given by the participant; (ii) the material reduction by us of participant’s then-current annual base salary, other than as a result of a proportionate, across-the-board reduction of base compensation payable to similarly situated employees; or (iii) a material change in the geographic location at which the participant performs his or her principal duties for us to a new location that is more than 30 miles from the location at which the participant performs his or her principal duties for us as of the date on which he or she first becomes a participant in the Severance Plan. The participant will not be deemed to have resigned for “good reason” unless (1) he or she provides us with
69
written notice setting forth in reasonable detail the facts and circumstances claimed
by the participant to constitute “good reason” within 90 days after the date of the occurrence of any event that the participant knows or should reasonably have known to constitute “good reason,” (2) we fail to cure such acts or omissions within 30 days following its receipt of such notice, and (3) the effective date of the participant’s termination for “good reason” occurs no later than 60 days after the expiration of the 30-day cure period set forth above.
ElthoukhyEltoukhy and Talasaz Letter Agreements
In addition, in 2019 we entered into letter agreements with each of Drs. Eltoukhy and Talasaz that provide that if either executive experiences a qualifying termination of employment for purposes of the Severance Plan, other than in connection with a change in control, then each time-based vesting company equity award held by the executive will vest and become exercisable as to the portion of the award that would have vested over the one-year period following the termination date (had the executive remained in continuous service during such period). This acceleration right is subject to the executive’s timely execution and non-revocation of a general release of claims.
Drs. Eltoukhy and Talasaz did not hold any unvested time-based equity awards as of December 31, 2023.
Termination Terms of Founders’ 2020 Performance Awards
Under the terms of the Founders’ 2020 Performance Awards, upon a termination of employment of Dr. Eltoukhy or Dr. Talasaz, the 2020 PSUs granted to such executive will bewould have been treated as follows, subject to the executive’s timely execution and non-revocation of a general release of claims:
| • | | If the employment of Dr. Eltoukhy or Dr. Talasaz is terminated by the Company without cause or by Dr. Eltoukhy or Dr. Talasaz for good reason, then one-third of the total PSUs would have vested. Any then-remaining unvested PSUs would have remained outstanding for up to six months following the termination of employment and would have vested to the extent that the Company achieves a stock price goal during such time period. |
•If the employment of Dr. Eltoukhy or Dr. Talasaz is terminated by the Company without cause or by Dr. Eltoukhy or Dr. Talasaz for good reason, then one-third of the total PSUs will vest. Any then-remaining unvested PSUs will remain outstanding for up to six months following the termination of employment and will vest to the extent that the Company achieves a stock price goal during such time period.
•The PSUs will vestwould have vested in full upon a termination of the Founder’s employment due to his death.
•If the employment of Dr. Eltoukhy or Dr. Talasaz terminates due to his disability, then the PSUs will remain outstanding and eligible to vest through the later to occur of (x) the one-year anniversary the termination date and (y) the four-year anniversary of the grant date (but not beyond the Expiration Date).
| • | | If the employment of Dr. Eltoukhy or Dr. Talasaz terminated due to his disability, then the PSUs would have remained outstanding and eligible to vest through the later to occur of (x) the one-year anniversary the termination date and (y) the four-year anniversary of the grant date (but not beyond the Expiration Date). |
In the event of a change in control of the Company:
| • | | If the price per share received by the Company’s common stockholders in a change in control had exceeded the greater of (i) the fair market value of the Company’s stock on the grant date and (ii) the volume-weighted average stock price over the 180 days ending on the grant date, but is less than $120 per share, then one-third of the total PSUs would have vested. |
•If the price per share received by the Company’s common stockholders in a change in control exceeds the greater of (i) the fair market value of the Company’s stock on the grant date and (ii) the volume-weighted average stock price over the 180 days ending on the grant date, but is less than $120 per share, then one-third of the total PSUs will vest.
•If the price per share received by the Company’s common stockholders in a change in control equalshad equalled or exceedsexceeded $120 per share, then the PSUs will vest with respect to any stock price goal achieved by the deal price. In addition, if the deal price is between two stock price goals, then either 50% or 100% of the PSUs associated with the greater goal will vest (depending on whether the deal price is more or less than 50% between the two goals).would have vested
70
• | with respect to any stock price goal achieved by the deal price. In addition, if the deal price would have been between two stock price goals, then either 50% or 100% of the PSUs associated with the greater goal would have vested (depending on whether the deal price is more or less than 50% between the two goals). |
In addition, if any then-remaining unvested PSUs arewere assumed, they will continuewould have continued to be eligible to vest following the transaction based on the achievement of stock price goals adjusted to reflect the transaction.
66Change in Control Terms of 2023 PSU Awards
For PSU awards granted in 2023, the portion of the award subject to a performance period in which a change in control occurs will be considered earned based on the greater of (a) the target level of performance or (b) the actual performance through the date of the change in control. Any earned PSUs under the award agreement (after giving effect of this provision) will remain outstanding and subject to the continued-service vesting conditions of the award (unless a qualifying termination under the Executive Severance Plan occurs). Any unearned PSUs as of the date of the change in control will be forfeited.
Dahne-Steuber Separation
As previously discussed above in the CD&A, in conjunction with her separation Ms. Dahne-Steuber received amounts equal to six-months of base salary ($245,000), up to six-months of COBRA premiums ($5,765) for continued health coverage and was entitled to retain the remaining prorated portion of her signing bonus and relocation allowance ($32,046). The total amount of these items is $282,811.
71
Summary of Potential Payments upon Termination or Change in Control
The following table summarizes the payments that would be made to our NEOs upon the occurrence of certain qualifying terminations of employment or a change in control, in any case, occurring on December 31, 2020.2023. In accordance with SEC rules, the potential payments upon termination or change in control do not include certain distributions or benefits to which the NEO is already entitled, including the value of equity awards that have already vested and distributions from qualified retirement plans. Since many factors (e.g., the time of year when the event occurs, our stock price and the executive’s age)price) could affect the nature and amount of benefits an NEO could potentially receive, any amounts paid or distributed upon a future termination may be different from those shown in the tables below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Compensation Component | | Change in Control | | | Involuntary Termination in Connection with a Change in Control | | | Termination without Cause of for Good Reason Termination | | | Death or Disability | |
| Helmy Eltoukhy | | Cash Severance | | $ | — | | | | $ | 2 | | (1) | | $ | 1 | | (2) | | $ | — | | |
| | Long Term Incentives | | 109,262,853 | | (3) | | | 121,723,376 | | (4) | | 85,302,468 | | (5) | | 218,525,577 | | (6) |
| | Benefits and Perquisites | | — | | | | 46,692 | | (7) | | 31,128 | | (8) | | — | | |
| | Executive Long Term Disability | | — | | | | — | | | | — | | | | — | | (9) |
| | Total | | 109,262,853 | | | | 121,770,070 | | | | 85,333,597 | | | | 218,525,577 | | |
| Derek Bertocci | | Cash Severance | | | | | 546,000 | | (10) | | 195,000 | | (11) | | — | | |
| | Long Term Incentives | | | | | 2,802,537 | | (4) | | — | | | | — | | |
| | Benefits and Perquisites | | | | | 17,088 | | (8) | | 8,544 | | (12) | | — | | |
| | Executive Long Term Disability | | | | | — | | | | — | | | | 16,000 | | (9) |
| | Total | | | | | 3,365,625 | | | | 203,544 | | | | 16,000 | | |
| AmirAli Talasaz | | Cash Severance | | — | | | | 2 | | (1) | | 1 | | (2) | | — | | |
| | Long Term Incentives | | 109,262,853 | | (3) | | | 121,723,376 | | (4) | | 85,302,468 | | (5) | | 218,525,577 | | (6) |
| | Benefits and Perquisites | | — | | | | 46,692 | | (7) | | 31,128 | | (8) | | — | | |
| | Executive Long Term Disability | | — | | | | — | | | | — | | | | — | | (9) |
| | Total | | 109,262,853 | | | | 121,770,070 | | | | 85,333,597 | | | | 218,525,577 | | |
| John Saia | | Cash Severance | | | | | 630,000 | | (10) | | 225,000 | | (11) | | — | | |
| | Long Term Incentives | | | | | 3,192,724 | | (4) | | — | | | | — | | |
| | Benefits and Perquisites | | | | | — | | | | — | | | | — | | |
| | Executive Long Term Disability | | | | | — | | | | — | | | | 1,800,000 | | (9) |
| | Total | | | | | 3,822,724 | | | | 225,000 | | | | 1,800,000 | | |
| Michael Wiley | | Cash Severance | | | | | 790,000 | | (1) | | 395,000 | | (2) | | — | | |
| | Long Term Incentives | | | | | 3,989,613 | | (4) | | — | | | | — | | |
| | Benefits and Perquisites | | | | | 36,198 | | (7) | | 24,132 | | (8) | | — | | |
| | Executive Long Term Disability | | | | | — | | | | — | | | | 2,064,000 | | (9) |
| | Total | | | | | 4,815,811 | | | | 419,132 | | | | 2,064,000 | | |
_______________
(1)Under the Company’s Severance Plan, amount is equal to the sum of 150% of the base salary in effect immediately prior to termination plus target annual incentive.
(2)Under the Company’s Severance Plan, amount is equal to 100% of the base salary in effect immediately prior to termination.
(3)Under the Founders’ 2020 Performance Awards, amount reflects 100% of the amount that vests upon attainment of the first stock price hurdle and 50% of the amount that vests upon attainment of the second stock price hurdle.
(4)Under the Company’s Severance Plan, all unvested stock options and RSUs, which vest based solely on the participant’s continued service with us or the passage of time, will vest. The amount shown is
67 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
| Name | | Compensation Component | | Change in
Control ($) | | Involuntary
Termination
In Connection
With
a Change in
Control ($) | | Termination
without Cause
or for Good
Reason
Termination
($) | | Death or
Disability ($) |
Helmy Eltoukhy | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Cash Severance | | | | | | | | | 2 | | | (1) | | | 1 | | | (2) | | | — | | | |
| | Long Term Incentives | | | | | | (3) | | | — | | | (4) | | | — | | | (5) | | | 30,576,833 | | | (6) |
| | COBRA Premium Reimbursement | | | | | | | | | 51,623 | | | (7) | | | 34,415 | | | (8) | | | — | | | |
| | Total | | | | | | | | | 51,625 | | | | | | 34,416 | | | | | | 30,576,833 | | | |
AmirAli Talasaz | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Cash Severance | | | | | | | | | 2 | | | (1) | | | 1 | | | (2) | | | — | | | |
| | Long Term Incentives | | | | | | (3) | | | — | | | (4) | | | — | | | (5) | | | 30,576,833 | | | (6) |
| | COBRA Premium Reimbursement | | | | | | | | | 51,623 | | | (7) | | | 34,415 | | | (8) | | | — | | | |
| | Total | | | | | | | | | 51,625 | | | | | | 34,416 | | | | | | 30,576,833 | | | |
Michael Bell | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Cash Severance | | | | | | | | | 727,500 | | | (1) | | | 242,500 | | | (2) | | | — | | | |
| | Long Term Incentives | | | | | | (3) | | | 2,237,657 | | | (4) | | | — | | | | | | — | | | |
| | COBRA Premium Reimbursement | | | | | | | | | 34,415 | | | (7) | | | 17,208 | | | (8) | | | — | | | |
| | Total | | | | | | | | | 2,999,572 | | | | | | 259,708 | | | | | | — | | | |
Darya Chudova | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Cash Severance | | | | | | | | | 667,500 | | | (1) | | | 222,500 | | | (2) | | | — | | | |
| | Long Term Incentives | | | | | | (3) | | | 2,752,202 | | | (4) | | | — | | | | | | — | | | |
| | COBRA Premium Reimbursement | | | | | | | | | 20,160 | | | (7) | | | 10,080 | | | (8) | | | — | | | |
| | Total | | | | | | | | | 3,439,862 | | | | | | 232,580 | | | | | | — | | | |
Craig Eagle | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Cash Severance | | | | | | | | | 750,000 | | | (1) | | | 250,000 | | | (2) | | | — | | | |
| | Long Term Incentives | | | | | | (3) | | | 2,305,201 | | | (4) | | | — | | | | | | — | | | |
| | COBRA Premium Reimbursement | | | | | | | | | 24,630 | | | (7) | | | 12,315 | | | (8) | | | — | | | |
| | Total | | | | | | | | | 3,079,831 | | | | | | 262,315 | | | | | | — | | | |
Christopher Freeman | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Cash Severance | | | | | | | | | 742,500 | | | (1) | | | 247,500 | | | (2) | | | — | | | |
| | Long Term Incentives | | | | | | | | | 2,507,129 | | | (4) | | | — | | | | | | — | | | |
| | COBRA Premium Reimbursement | | | | | | | | | 33,118 | | | (7) | | | 16,559 | | | (8) | | | — | | | |
| | Total | | | | | | | | | 3,282,747 | | | | | | 264,059 | | | | | | — | | | |
| (1) | Under the Company’s Severance Plan, for each of Drs. Eltoukhy and Talasaz, the amount is equal to the sum of 150% of the base salary in effect immediately prior to termination plus each executive’s target annual incentive bonus. For the other NEOs, the amount is equal to the sum of 100% of the base salary in effect immediately prior to termination plus each executive’s target annual incentive bonus. |
72
| (2) | Under the Company’s Severance Plan, for each of Drs. Eltoukhy and Talasaz, the amount is equal to 100% of the base salary in effect immediately prior to termination. For the other NEOs, the amount is equal to 50% of the base salary in effect immediately prior to termination. |
| (3) | Under the Founders’ 2020 Performance Awards, upon a change in control the PSUs are eligible to vest based on the price per share received by our common stockholders in connection with the change in control. Because the price of a share of our common stock as of December 29, 2023, the last trading day of the year, was $27.05, no portion of the awards would have vested on a change in control on that date. For Mr. Bell, and Dr. Chudova, upon a change in control PSUs awarded in 2021 and 2020 respectively are eligible to vest if the underlying performance criteria for the award has been met as of the change in control date. Because those criteria were unmet as of December 31, 2023, no value has been included. |
| (4) | Under the Company’s Executive Severance Plan, all unvested stock options and RSUs, and earned PSUs which vest based solely on the participant’s continued service with us or the passage of time will vest. The amount shown for Messrs. Bell, Freeman and Drs. Chudova and Eagle includes the value of all unvested stock options based on the positive difference (if any) between the exercise price and the price of a share of our common stock as of December 29, 2023, the last trading day of the year ($27.05), plus the market value of all unvested RSUs based on the price of a share of our common stock as of December 29, 2023. For Mr. Bell and Dr. Chudova, upon a change in control the PSUs awarded in 2021 and 2020 respectively are eligible to vest if the underlying performance criteria for the award has been met as of the change in control date. Because those criteria were unmet as of December 31, 2023 no value has been included. Under the Founders’ 2020 Performance Awards, upon a change in control the PSUs are eligible to vest based on the price per share received by our common stockholders in connection with the change in control. Because the price of a share of our common stock as of December 29, 2023, the last trading day of the year, was $27.05, no portion of the awards would have vested on a change in control and qualifying termination on that date. For Messrs. Bell and Freeman and Drs. Chudova and Eagle, the amounts include the value of the PSUs awarded in 2023, both the 2023 portion that was already earned at the maximum level of performance and the remaining portion, which is assumed to be earned at the target level of performance. |
| (5) | Under the Founders’ 2020 Performance Awards, any then-remaining unvested PSUs will remain outstanding for up to six months following the termination of employment and will vest to the extent that the Company achieves a stock price goal during such time period. |
| (6) | Under the Founders’ 2020 Performance Awards for each of Drs. Eltoukhy and Talasaz, the amount reflects the vesting upon death of all remaining unvested PSUs. If the employment of Dr. Eltoukhy or Dr. Talasaz terminates due to disability, then the PSUs will remain outstanding and eligible to vest through the later to occur of (x) the one-year anniversary the termination date and (y) the four-year anniversary of the grant date (but not beyond the expiration date of the PSUs). See “Compensation Discussion and Analysis — IV. Components of Our Compensation Program — Leadership Transition” above for a description of the 2024 compensation arrangements of Drs. Eltoukhy and Talasaz, pursuant to which the remaining PSUs were cancelled in March 2024. |
| (7) | Under the Company’s Severance Plan, the amount is the Company’s reimbursement for the full amount of the COBRA premium payments for an 18-month period following termination for Dr. Eltoukhy and Dr. Talasaz, and for a 12-month period for the other NEOs. |
| (8) | Under the Company’s Severance Plan, the amount is the Company’s reimbursement for the full amount of the COBRA premium payments for a 12-month period following termination for Dr. Eltoukhy and Dr. Talasaz, and for a 6-month period for the other NEOs. |
73
the value of all unvested stock options based on the difference between the exercise price and the price of a share of our common stock as of December 31, 2020 ($128.88) plus the market value of all unvested RSUs based on the price of a share of our common stock as of December 31, 2020. For Drs. Eltoukhy and Talasaz, amount reflects 100% of the amount that vests upon attainment of the first stock price hurdle and 50% of the amount that vests upon attainment of the second stock price hurdle.
(5)Under the Eltoukhy and Talasaz letter agreements, each time-based equity award will vest and become exercisable as to the portion of the award that would have vested over the one-year period following the termination date. Under the Founders’ 2020 Performance Awards, one-third of the total PSUs will vest. Any then-remaining unvested PSUs will remain outstanding for up to six months following the termination of employment and will vest to the extent that the Company achieves a stock price goal during such time period.
(6)Under the Founders’ 2020 Performance Awards, amount reflects the vesting of all three stock price hurdles of all unvested PSUs. If the employment of Dr. Eltoukhy or Dr. Talasaz terminates due to disability, then the PSUs will remain outstanding and eligible to vest through the later to occur of (x) the one-year anniversary the termination date and (y) the four-year anniversary of the grant date (but not beyond the expiration date of the PSUs).
(7)Under the Company’s Severance Plan, amount is the Company's reimbursement for the full amount of the COBRA premium payments for an 18-month period following termination.
(8)Under the Company’s Severance Plan, amount is the Company's reimbursement for the full amount of the COBRA premium payments for a 12-month period following termination.
(9)The amounts reported represent the disability benefit payable to each NEO until age 67 in the event of termination of employment due to disability. Drs. Eltoukhy and Talasaz were not eligible for the executive long term disability benefit because their 2020 annual base salary was reduced to $1 and therefore would not cover the benefit’s premium.
(10)Under the Company’s Severance Plan, amount is equal to 100% of the base salary in effect immediately prior to termination plus target annual incentive.
(11)Under the Company’s Severance Plan, amount is equal to 50% of the base salary in effect immediately prior to termination.
(12)Under the Company’s Severance Plan, amount is the Company's reimbursement for the full amount of the COBRA premium payments for a 6-month period following termination.
Under rules adopted pursuant to the Dodd-Frank Act, we are required to calculate and disclose the total compensation paid to our median paid employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to our Chief Executive Officer (the "CEO“CEO Pay Ratio"Ratio”). The paragraphs that follow describe our methodology and the resulting CEO Pay Ratio.
We identified the median employee using our employee population on October 1, 20202023 (including all employees, whether employed on a full-time, part-time, seasonal or temporary basis).
Consistently Applied Compensation Measure
Under the relevant rules, we are required to identify the median employee by use of a "consistently“consistently applied compensation measure" ("CACM"measure” (“CACM”). We chose a CACM that closely approximates the annual target total direct compensation of our employees. Specifically, we identified the median employee by aggregating, for each employee as of October 1, 2020:2023: (1) annual base pay, (2) annual target cash incentive opportunity, and (3) the grant date fair value for
equity awards granted in 2020.2023. In identifying the median employee, we annualized the compensation values of individuals who joined our Company during 2020.
2023, other than temporary or seasonal employees.Methodology and Pay Ratio
After applying our CACM methodology, we identified the median employee. Once the median employee was identified, we calculated the median employee'semployee’s annual target total direct compensation in accordance with the requirements of the Summary Compensation Table.
Our median employee’s compensation in 2020,2023, as calculated using Summary Compensation Table requirements, was $185,112. Our Chief Executive Officer's compensation in 2020 as reported$169,585. As disclosed in the Summary Compensation Table, the 2023 compensation was $113,870,986.$11,591 for Dr. Eltoukhy and $26,415 for Dr. Talasaz. Therefore, using the highest-compensated of ourCo-CEOs, the CEO Pay Ratio for 20202023 is approximately 615:0.2:1.
This information is being provided for compliance purposes and is a reasonable estimate calculated in a manner consistent with the SEC rules, based on our internal records and the methodology described above. The SEC rules for identifying the median compensated employee allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. Accordingly, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. Neither the Compensation Committee nor management of the Company used the CEO Pay Ratio measure in making compensation decisions.
74
In accordance with rules adopted by the Securities and Exchange Commission pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we provide the following disclosure regarding executive compensation for our principal executive officers (“PEOs”) andNon-PEO
NEOs and Company performance for the fiscal years listed below.Alternate Pay Ratio Given
| | | | | | | | | | | | | | | | | | | | |
| | Summary
Compensation
Table Total for
Helmy
Eltoukhy (1)
($) | | Summary
Compensation
Table Total for
AmirAli
Talasaz (1)
($) | | Compensation
Actually Paid to
Helmy Eltoukhy
(1) (2) (3)
($) | | Compensation
Actually Paid
to AmirAli
Talasaz
(1) (2) (3)
($) | | Average Summary Compensation Table Total for Non-PEO NEOs (1) ($) | | Average Compensation Actually Paid to Non-PEO NEOs (1) (2) (3) ($) | | Value of Initial
Fixed $100
Investment
based on: (4) | | | | |
| | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| 2023 | | 11,591 | | 26,415 | | (4,228,364) | | (4,213,540) | | 4,344,931 | | 2,870,807 | | 42.23 | | 118.87 | | (479.4) | | 563.9 |
| | | | | | | | | | |
| 2022 | | 11,632 | | 11,175 | | (68,726,853) | | (68,727,310) | | 3,895,818 | | 538,306 | | 39.25 | | 113.65 | | (654.6) | | 449.5 |
| | | | | | | | | | |
| 2021 | | 13,665 | | 13,271 | | (30,979,967) | | (30,980,361) | | 5,016,617 | | 3,923,973 | | 156.16 | | 126.45 | | (384.8) | | 373.7 |
| | | | | | | | | | |
| 2020 | | 113,870,986 | | — | | 196,429,143 | | — | | 29,791,305 | | 51,705,986 | | 201.22 | | 126.42 | | (246.3) | | 286.7 |
| (1) | Helmy Eltoukhy and AmirAli Talasaz were our PEOs in 2021, 2022 and 2023. Helmy Eltoukhy was our PEO in 2020. The individuals comprising theNon-PEO NEOs for each year presented are listed below. |
| | | | | | |
| | | | | | |
| | | |
| AmirAli Talasaz | | Michael Bell | | Michael Bell | | Michael Bell |
| | | |
| Derek Bertocci | | Craig Eagle | | Craig Eagle | | Craig Eagle |
| | | |
| Michael Wiley | | Christopher Freeman | | Christopher Freeman | | Christopher Freeman |
| | | |
| John Saia | | John Saia | | John Saia | | Darya Chudova |
| | | |
| | | | | | Ines Dahne-Steuber |
| (2) | The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of RegulationS-K and do not reflect compensation actually earned, realized, or received by the Company’s NEOs. These amounts reflect the Summary Compensation Table Total with certain adjustments as described in footnote 3 below. |
| (3) | Compensation Actually Paid reflects the exclusions and inclusions of certain amounts for the PEOs and theNon-PEO NEOs as set forth below. Equity values are calculated in accordance with FASB ASC Topic 718. Amounts in the Exclusion of Stock Awards and Option Awards column are the totals from the Stock Awards and Option Awards columns set forth in the Summary Compensation Table. |
| | | | | | | | | | | | |
| | Summary
Compensation
Table Total for
Helmy
Eltoukhy
($) | | Exclusion of
Change in
Pension Value
for Helmy
Eltoukhy | | Stock
Awards
and Option
Awards for
Helmy
Eltoukhy
($) | | Inclusion of
Pension
Service
Cost for
Helmy
Eltoukhy | | Inclusion
of Equity
Values for
Helmy
Eltoukhy
($) | | Compensation
Actually
Paid to Helmy
Eltoukhy
($) |
| | | | | | |
| 2023 | | 11,591 | | — | | — | | — | | (4,239,955) | | (4,228,364) |
75
| | | | | | | | | | | | |
| | Summary
Compensation
Table Total
for AmirAli
Talasaz
($) | | Exclusion of
Change in
Pension Value
for AmirAli
Talasaz | | Exclusion of
Stock
Awards and Option
Awards for
AmirAli
Talasaz
($) | | Inclusion of
Pension
Service
Cost for
AmirAli
Talasaz | | Inclusion of
Equity
Values for
AmirAli
Talasaz
($) | | Compensation
Actually
Paid to AmirAli |
| | | | | | |
| 2023 | | 26,415 | | — | | — | | — | | (4,239,955) | | (4,213,540) |
| | | | | | | | | | | | |
| | Summary Compensation Table Total for Non-PEO NEOs ($) | | Average Exclusion of Change in Pension Value for Non-PEO NEOs | | Exclusion of Stock Awards and Option Awards for Non-PEO NEOs ($) | | Average Inclusion of Pension Service Cost for Non-PEO NEOs | | Average Inclusion of Equity Values for Non-PEO NEOs | | Average Compensation Actually Paid to Non-PEO NEOs |
| | | | | | |
| 2023 | | 4,344,931 | | — | | (3,568,826) | | — | | 2,094,702 | | 2,870,807 |
The amounts in the Inclusion of Equity Values in the tables above are derived from the amounts set forth in the following tables:
| | | | | | | | | | | | | | |
| | Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Helmy Eltoukhy ($) | | Change in Fair
Value from Last
Day of Prior
Year to Last
Day of Year of
Unvested
Equity Awards
for Helmy
Eltoukhy
($) | | Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for Helmy Eltoukhy ($) | | Change in Fair
Value from
Last Day of
Prior Year to
Vesting Date
of Unvested
Equity
Awards
that Vested
During Year
for Helmy
Eltoukhy
($) | | Fair Value at
Last Day of
Prior Year
of Equity
Awards
Forfeited
During
Year
for Helmy
Eltoukhy
($) | | Value of
Dividends or
Other
Earnings
Paid on
Equity
Awards Not
Otherwise
Included for
Helmy
Eltoukhy | | Total -
Inclusion of
Equity Values
for Helmy
Eltoukhy
($) |
| | | | | | | |
| 2023 | | — | | (4,239,955) | | — | | — | | — | | — | | (4,239,955) |
| | | | | | | | | | | | | | |
| | Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for AmirAli Talasaz ($) | | Change in Fair
Value from
Last Day of
Prior Year to
Last Day of
Year of
Unvested
Equity
Awards
for AmirAli
Talasaz
($) | | Vesting-
Date Fair
Value of Equity
Awards Granted
During Year
that Vested
During Year for
AmirAli
Talasaz
($) | | Change in Fair
Value from
Last Day of
Prior Year to
Vesting Date
of Unvested
Equity
Awards
that Vested
During Year
for AmirAli
Talasaz
($) | | Fair Value at
Last Day of
Prior Year
of Equity
Awards
Forfeited
During Year
for AmirAli
Talasaz
($) | | Value of
Dividends
or Other
Earnings
Paid on
Equity
Awards
Not
Otherwise
Included
for AmirAli
Talasaz | | Total -
Inclusion of
Equity Values
for AmirAli
Talasaz
($) |
| | | | | | | |
| 2023 | | — | | (4,239,955) | | — | | — | | — | | — | | (4,239,955) |
76
| | | | | | | | | | | | | | |
| | Average Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Non-PEO NEOs ($) | | in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Non-PEO NEOs ($) | | Vesting- Date Fair Value of Equity Awards Granted During Year that Vested During Year for Non-PEO NEOs ($) | | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Non-PEO NEOs ($) | | Average Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Non-PEO NEOs ($) | | Average Value of Dividends or Other Earnings Paid on Equity Awards Not Otherwise Included for Non-PEO NEOs | | Total - Average Inclusion of Equity Values for Non-PEO NEOs ($) |
| | | | | | | |
| 2023 | | 1,964,078 | | (127,536) | | 272,534 | | (14,374) | | — | | — | | 2,094,702 |
| (4) | The Peer Group TSR set forth in this table utilizes the NASDAQ Biotechnology Index which we also utilize in the stock performance graph required by Item 201(e) of RegulationS-K included in our Annual Report for the year ended December 31, 2023. The comparison assumes $100 was invested for the period starting December 31, 2019, through the end of the listed year in the Company and in the NASDAQ Biotech Index, respectively. Historical stock performance is not necessarily indicative of future stock performance. |
| (5) | We determined revenue to be the most important financial performance measure used to link Company performance to Compensation Actually Paid to ourNon-PEO NEOs in 2023. The financial performance measure of revenue was not applicable to the determination of Compensation Actually Paid to either Dr. Eltoukhy or Dr. Talasaz in 2023 because, in connection with the Founders’ 2020 Performance Awards, each of Drs. Eltoukhy and Talasaz entered into Waiver Letters pursuant to which they formally agreed to waive their opportunity to receive annual incentive opportunities or payouts under our annual incentive plan for seven years, including for 2023. Revenue may not have been the most important financial performance measure for years, and we may determine a different financial performance measure to be the most important financial performance measure in future years. |
77
Relationship Between PEO andNon-PEO
NEO Compensation Actually Paid and Company and Peer Group TSR The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to ourNon-PEO
NEOs, and the Company’s cumulative TSR over the four most recently completed fiscal years, and the NASDAQ Biotechnology Index TSR over the same period. 78
Relationship Between PEO andNon-PEO
NEO Compensation Actually Paid and Net Income The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to ourNon-PEO
NEOs, and our Net Income during the four most recently completed fiscal years. 79
Relationship Between PEO andNon-PEO
NEO Compensation Actually Paid and Adjusted Operating Income The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to ourNon-PEO
NEOs, and our revenue during the four most recently completed fiscal years. Tabular List of Most Important Financial Performance Measures
In light of the impact of stock price on the Founders’ 2020 Performance Awards, stock price was the sole financial performance measure that the Company considers to have linked Compensation Actually Paid to our PEOs for 2023 to Company performance.
The following table presents the financial performance measures that the Company considers to have been the most important in linking Compensation Actually Paid to ourNon-PEO
NEOs for 2023 to Company performance. The measures in this table are not ranked. |
|
Revenue |
|
| Adjusted EBITDA |
|
Gross Margin |
Compensation Risk Assessment
To provide additional perspective forassess the risks arising from our compensation policies and practices, management reviewed our various compensation programs, and presented this pay ratio, we calculated an alternate ratio by dividingrisk assessment to the valueCompensation Committee. The risk assessment included a review of our CEO’s Founders’ 2020 Performance Awards by seven, to give effect to the intention that the Founders’ 2020 Performance Awards made to our CEO is intended to be an award for that period of time. The result of this calculation is an alternate pay ratio of approximately 89:1.compensation plans
from various perspectives, as well as other aspects of our programs that mitigate risk, ultimately assessing whether the policies and practices could directly or indirectly encourage or mitigate risk-taking by executives or increase risk to the Company.
We believe that our current compensation policies and programs do not motivate or incent excessive risk taking. As described more fully above, we structure our pay to consist of both fixed and variable compensation, particularly in connection with ourcompensation philosophy. We believe this structure motivates our executives to produce superior short- and long-term results that are in the best interests of our Company and our stockholders in order to attain our ultimate objective of increasing stockholder value, and we have established, and our Compensation Committee endorses, several controls to address and mitigate compensation related risk. These include stock ownership guidelines for our senior executive officers and our directors, annual review of our gross burn rate, anti-hedging and anti-pledging policies, caps on incentive payouts, robust performance evaluations and a diverse set of financial and milestone performance metrics. As a result, we have concluded that our compensation policies and programs are not reasonably likely to have a material adverse effect on the Company. 81
2:RATIFICATION OF INDEPENDENT REGISTERED
Our Audit Committee has appointed Ernst & YoungDeloitte to serve as our independent registered public accounting firm for our fiscal year ending December 31, 2021. Ernst & Young2024. Deloitte has served as our independent registered public accounting firm since 2015.
April 2023.As previously disclosed, on April 4, 2023, our Audit Committee, following a competitive request for proposal process, approved the engagement of Deloitte as our independent registered public accounting firm for our fiscal year ended December 31, 2023, and dismissed Ernst & Young LLP (“Ernst & Young“) as our independent registered public accounting firm, each effective immediately.
Ernst & Young’s audit reports on the Company’s consolidated financial statements as of and for each of the two most recently completed fiscal years, the fiscal years ended December 31, 2022 and 2021, did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 2022 and 2021, as well as the subsequent interim periods through April 4, 2023, there were (i) no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Ernst & Young on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Ernst & Young’s satisfaction, would have caused Ernst & Young to make reference thereto in their reports on the financial statements for such years, and (ii) no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K and the related instructions).
During the fiscal years ended December 31, 2022 and 2021, as well as the subsequent interim periods through April 4, 2023, neither we nor anyone acting on our behalf has consulted with Deloitte regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements or the effectiveness of internal control over financial reporting, and neither a written report nor oral advice was provided to us that Deloitte concluded was an important factor considered by us in reaching a decision as to any accounting, auditing, or financial reporting issue, (ii) any matter that was the subject of a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K, or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of Regulation S-K.
We provided Ernst & Young with a copy of the foregoing disclosure and requested that Ernst & Young furnish a letter addressed to the SEC stating whether it agrees with the above statements. A copy of Ernst & Young’s letter, dated April 10, 2023, was filed as Exhibit 16.1 to our Current Report on Form 10-K, filed with the SEC on April 10, 2023, and such letter stated that Ernst & Young had agreed with the statements concerning Ernst & Young contained therein.
At the Annual Meeting, our stockholders are being asked to ratify the appointment of Ernst & YoungDeloitte as our independent registered public accounting firm for our fiscal year ending
82
December 31, 2021.2024. Our Board is submitting the appointment of Ernst & YoungDeloitte to our stockholders because we value our stockholders'stockholders’ views on our independent registered public accounting firm and as a matter of good corporate governance. Notwithstanding the appointment of Ernst & Young,Deloitte, and even if our stockholders ratify their appointment, our Audit Committee, in its discretion, may appoint another independent registered public accounting firm at any time during our fiscal year if our Audit Committee believes that such a change would be in the best interests of our Company and our stockholders. If our stockholders do not ratify the appointment of Ernst & Young,Deloitte, our Audit Committee may reconsider the appointment or may continue to retain Ernst & YoungDeloitte for 2021. 2024.
Representatives of Ernst & YoungDeloitte will be present at the Annual Meeting, and they will have an opportunity to make a statement and will be available to respond to appropriate questions from our stockholders.
70
83
Fees Paid to the Independent Registered Public Accounting Firm
The following table presents fees for professional audit services and other services rendered to us by Deloitte and Ernst & Young LLP for the years ended December 31, 20202023, and December 31, 2019,2022, respectively.
| | | | | | | | | | | | | | |
| | Year Ended December 31, |
| Type of Fees | | 2020 | | 2019 |
| | | | |
| Audit Fees | | $ | 3,450,502 | | | $ | 2,646,000 | |
| Audit Related Fees | | — | | | 2,000 | |
| Tax Fees | | — | | | — | |
| Total Fees | | $ | 3,450,502 | | | $ | 2,648,000 | |
The Audit Committee appointed Deloitte as the Company’s independent registered public accountant beginning in April 2023. | | | | | | | | |
| |
| | | Year Ended December 31, | |
| | |
| Type of Fees | | 2023 | | | 2022 | |
| | |
Audit Fees | | $ | 1,900,069 | | | $ | 3,256,800 | |
| | |
Audit Related Fees | | | — | | | | — | |
| | |
Tax Fees | | $ | — | | | $ | 91,400 | |
| | | | | | | | |
| | |
Total Fees | | $ | 1,900,069 | | | $ | 3,348,200 | |
| | | | | | | | |
In the above table, in accordance with the definitions of the SEC, are the following fees:
| • | | “Audit Fees” include billed and unbilled fees for the audit of our consolidated financial statements included in our annual report on Form 10-K, the review of the unaudited interim financial statements included in our quarterly report on Form 10-Q and other professional services related to various consultation matters; |
•“Audit Fees” include billed and unbilled fees for the audit of our consolidated financial statements included in our annual report on Form 10-K, the review of the unaudited interim financial statements included in our quarterly report on Form 10-Q and other professional services related to various consultation matters;
•“Audit Related Fees” include fees for assurance and related services that are reasonably related to the performance of the audit and the review of our financial statements and are not reported under “Audit Fees”; and
•"“Tax Fees” include fees related to preparation and filing of our U.S. federal and state tax returns, as well as audit support. For the years ended December 31, 20202023, and 2019,2022, no amounts were incurred by the Company for tax advice, planning or consulting services.
Pre-Approval Policies and Procedures
The Audit Committee has approved all audit and non-audit services provided in 2020,2023, prior to such service being provided by Ernst & Young.the independent registered public accountant. The Audit Committee’s policy is for the Audit Committee to approve all audit and non-audit services prior to such services being performed by the independent registered public accounting firm.
The Audit Committee has reviewed and discussed the audited consolidated financial statements for the year ended December 31, 20202023 with Guardant's management of Guardant and with Guardant’s independent registered public accounting firm, Ernst & Young.Deloitte.
84
The Audit Committee has discussed with Ernst & YoungDeloitte those matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) and the SEC.
The Audit Committee has received and reviewed the written disclosures and the letter from Ernst & YoungDeloitte required by the PCAOB regarding Ernst & Young’sDeloitte’s communications with the
Audit Committee concerning independence, and has discussed with Ernst & YoungDeloitte its independence from Guardant Health, Inc. and its management.
Based on the review and discussions referenced above, the Audit Committee recommended to our Board that the audited consolidated financial statements for the year ended December 31, 20202023 be included in the Annual Report on Form 10-K for that year for filing with the SEC.
Respectfully submitted by the Audit Committee,
Stanley Meresman,Steve Krognes, Chair
Ian Clark
Bahija Jallal
72Meghan Joyce
Myrtle Potter
85
3:ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER
COMPENSATION
We are seeking an advisory, non-binding stockholder vote to approve the compensation of our NEOs as described in the “Compensation Discussion and Analysis,” executive compensation tables and accompanying narrative disclosures above on pages 3433 through 69,60, referred to as the “say-on-pay“say-on-pay vote”. In 2020, following an advisory vote of our stockholders on frequency of advisory votes on our named executive officer compensation, the Board determined to include an advisory vote on our named executive officer compensation in our proxy materials annually until the next required stockholder vote on frequency.
The Board believes that the information provided in the “Compensation Discussion and Analysis” and the executive compensation tables demonstrates that our executive compensation programs are designed appropriately, emphasize pay for performance and are working to ensure that management’s interests are aligned with our stockholders’ interests to support long-term value creation.
This vote is advisory, which means that this vote is not binding on us, our Board or our Compensation Committee. Although non-binding, our Board and our Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation programs.
73
86
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Policies and Procedures for Review, Approval or Ratification of Transactions with Related Persons
Our Board has adopted a Related Person Transaction Policy and Procedures, setting forth the policies and procedures for the review and approval or ratification of related person transactions. This policy covers, with certain exceptions consistent with the exceptions set forth in Item 404 of Regulation S-K, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we (including any of our subsidiaries) are, were or will be a participant, where the amount involved exceeds $120,000 in any fiscal year and a related person has, had or will have a direct or indirect material interest.
Under the policy, management is responsible for implementing procedures to obtain information with respect to potential related person transactions, and then determining whether such transactions constitute related person transactions subject to the policy. Management then is required to present to the Audit Committee each proposed related person transaction. In reviewing and approving any such transactions, our Audit Committee is tasked to consider all relevant facts and circumstances, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arm'sarm’s length transaction and the extent of the related person'sperson’s interest in the transaction. If advance Audit Committee approval of a related person transaction is not feasible, then the transaction may be preliminarily entered into by management upon prior approval by the Chairperson of the Audit Committee, subject to ratification of the transaction by the Audit Committee at the Audit Committee'sCommittee’s next regularly scheduled meeting. Management is responsible for updating the Audit Committee as to any material changes to any approved or ratified related person transaction and for providing a status report at least annually of all current related person transactions at a regularly scheduled meeting of the Audit Committee. No director may participate in approval of a related person transaction for which he or she is a related person. Unless noted otherwise, all of the transactions, agreements or relationships described in this section occurred prior to the adoption of this policy.
The following are certainThere were no related person transactions, arrangements andor relationships with our directors, executive officers andor stockholders owning 5% or more of our outstanding common stock (a “Related Party Stockholder”). We believe that during the terms of such agreements are as favorable as those we could have obtained from parties not related to us.
Joint Venture with SoftBank
In May 2018, we formed a joint venture, Guardant Health AMEA, Inc. (the “Joint Venture”), with an entity affiliated with SoftBank Vision Fund (AIV M1) L.P. (“SoftBank”), relating to the sale, marketing and distribution of our tests in all areas in the “JV Territory” which is defined as all areas in the worldwide outside of North America, Central America, South America, the United Kingdom, all other member states of the European Union as of May 2017, Iceland, Norway, Switzerland and Turkey. In a given country, depending on the market opportunity in a country, the Joint Venture may create direct operations, sell through a distribution model or license to a third party. Direct operations would entail full operations, including a laboratory, sales and marketing and regulatory, among other functions. Under the distribution model, our tests would be marketed and sold by the Joint Venture or a third-party distributor in relevant countries within the JV Territory, and the tests would be performed by or on behalf of us or our affiliates outside
of such countries on samples obtained by the Joint Venture or third-party distributor in such countries. Under the license model, the Joint Venture, or an entity designated by the Joint Venture, would be licensed to market and sell the tests in relevant countries within the JV Territory, and the Joint Venture, or an entity designated by the Joint Venture, would perform the tests on samples obtained in such countries. Following a determination by the board of directors of the Joint Venture on the appropriate model for an individual country, we will enter into agreements with the Joint Venture with respect to the individual country based on the license or distribution model. We expect to rely on the Joint Venture to accelerate commercialization of our products in Asia, the Middle East and Africa, with our initial focus being on Japan. The Joint Venture generated total revenue of $14.4 million for thefiscal year ended December 31, 2020, the majority of which was from direct sales.
SoftBank Vision Fund (AIV M1) L.P. indirectly beneficially owns more than 5% of our capital stock.
Formation, Capitalization and Financing of Joint Venture
In May 2018, an entity affiliated with SoftBank purchased 50% of the original issued shares of the Joint Venture in exchange for $41.0 million in cash. In May 2018, we also purchased 50% of the original issued shares of the Joint Venture in exchange for $9.0 million in cash and our entry into various ancillary agreements necessary to provide the Joint Venture with the rights needed to operate its business. As a result of these transactions, we and SoftBank each currently own 50% of the outstanding capital stock of the Joint Venture. All stockholders of the Joint Venture have a pro rata right to any dividends or other distributions from the Joint Venture, in proportion to the holder’s percentage ownership in the Joint Venture.
Under the terms of the joint venture agreement, neither we nor SoftBank or its affiliates is obligated to make any further capital contribution, in cash or otherwise, to the Joint Venture. In the event the Joint Venture requires any additional funding for its operations, the Joint Venture may seek debt financing from third parties, or may seek additional financing from its major shareholders, which will be on a pro rata basis among major shareholders unless such shareholders agree otherwise. For purposes of the joint venture agreement, “major shareholder” refers to us, so long as we hold at least 50% of the shares in the Joint Venture issued to us in May 2018, to SoftBank, so long as it and its affiliates hold at least 50% of the shares in the Joint Venture issued to it in May 2018, and to any other shareholder holding at least 30% of the outstanding shares of the Joint Venture.
Governance and Related Party Transactions
The board of directors of the Joint Venture is responsible for the supervision and management of the Joint Venture. Under the terms of the joint venture agreement, the board of directors of the Joint Venture is required to consist of four directors, with two being appointed by us and two being appointed by SoftBank. Each director is entitled to one vote, and each resolution of the board requires majority approval, including by at least one of our appointed directors and one of SoftBank’s appointed directors. The Board’s chair position is required to be held in alternate years by a SoftBank appointee and one of our appointees. Both we and SoftBank may remove our own appointed directors by giving written notice to the other party.
Notwithstanding the foregoing, any decision on behalf of the Joint Venture relating to, among other things, action by the Joint Venture relating to the entry into, termination,
amendment or waiver of any provision of an agreement between the Joint Venture and either us or SoftBank is required to be made by the disinterested party’s director appointees.
Put-Call Arrangement
The joint venture agreement includes a put-call arrangement with respect to the shares of the Joint Venture held by SoftBank and its affiliates. Under certain specified circumstances and on terms specified in the joint venture agreement as described below, SoftBank will have the right to cause us to purchase all such shares of the Joint Venture (the “put right”), and we will have a similar right to purchase all such shares (the “call right”) as described below.
Triggers of Rights
Material Change in Business - If our business model were to materially change such that the sale, marketing and distribution of our tests in the territory covered by the joint venture agreement was no longer economical, SoftBank would have the right to cause us to purchase, or we would have the right to purchase, all of the shares of the Joint Venture held by SoftBank and its affiliates. In this instance, we would be required to repurchase the shares at an aggregate purchase price of $41.0 million, the original purchase price paid by SoftBank to the Joint Venture for the shares.
Deadlock Trigger - Additionally, both we and SoftBank may exercise our respective rights in the event of certain disagreements relating to the Joint Venture, other than one relating to the Joint Venture’s business plan or to factual matters that may be capable of expert determination (a “Deadlock Trigger”). In the event of a material disagreement relating to the joint venture or its business that may seriously affect the ability of the joint venture to perform its obligations under the joint venture agreement or may otherwise seriously impair the ability of the Joint Venture to conduct its business in an effective matter, the matter is to be referred to ours and SoftBank’s respective chairs or chief executives. Following discussions between those individuals, if either party provides written notice to the other of an intention to seek formal resolution of the disagreement within 90 days, and the disagreement has not been resolved within those 90 days, then SoftBank will have a right to exercise its put right and we will have a right to exercise our call right.
Other Triggers - Both we and SoftBank were entitled to exercise our respective rights following the effective time of our initial public offering (the “IPO Trigger”), and we may also exercise our respective rights following a change in control of our company (the “Change in Control Trigger”) or the seventh anniversary of the formation of the Joint Venture (the “Time-Based Trigger”), or each subsequent anniversary of each of the foregoing events. In order to exercise its right, a party must provide the other party with written notice within 30 days of the IPO Trigger, the Change in Control Trigger or the Time-Based Trigger, as applicable.
Each party may also exercise its right following a material breach of the joint venture agreement by the other party that goes unremedied within 20 business days.
Purchase Procedure and Limitations
In the event either we or SoftBank properly exercise our respective rights, we are required to purchase the shares of the Joint Venture on a date determined by us and no more than 30 business days after the determination of the aggregate purchase price to be paid for the shares.
We may pay the purchase price for the shares of the Joint Venture in cash, in shares of our capital stock (which may be a non-voting security with senior preferences to all other classes of our equity or, if our common stock is publicly traded on a national exchange, our common stock), or in a combination of cash and our capital stock. In the event SoftBank exercises its put right, we will choose the form of consideration. In the event we exercise our call right, SoftBank will choose the form of consideration. To the extent we pay any portion of the purchase price in cash, we may elect to deliver that portion in the form of a promissory note, secured by a first lien stock pledge in the shares of the Joint Venture we are purchasing and payable within 18 months following the closing date of our purchase of the shares. The terms of the note, including interest rate, will be at prevailing market terms for our third-party borrowings. To the extent we pay any portion of the purchase price in our stock and our stock is publicly traded, SoftBank and its affiliates are required under the joint venture agreement to execute and deliver to us an irrevocable proxy appointing us as the attorney-in-fact and proxy, to vote the shares as we, in our sole discretion, deem proper with respect to such shares.
If, in the event SoftBank exercises its put right, the fair value of the Joint Venture is determined to be greater than 40% of the fair value of our company, then we will only be required to purchase the number of shares of the Joint Venture held by SoftBank and its affiliates having an aggregate value equal to the product of 40% and the pro rata portion of the outstanding shares of the Joint Venture held by SoftBank and its affiliates. If SoftBank and its affiliates continue to hold shares of the Joint Venture on account of this limitation, SoftBank will not be permitted to request that the fair values of the Joint Venture and our company be re-determined for three months.
If, after either we or SoftBank properly exercises our respective rights, we fail to purchase all of the shares of the Joint Venture held by SoftBank and its affiliates, other than in connection with the 40% limitation described in the preceding paragraph, we are required to pay SoftBank interest on the applicable purchase price. The interest will be payable monthly, in cash, at a rate of 15% per annum, and will accrue from the date the purchase of the shares should have occurred until the date we actually purchase the shares.
Determination of Fair Value
In the event either we or SoftBank properly exercises our right respective rights on account of an event other than as described above under “-Triggers of rights-Material change in business,” the purchase price per share of the Joint Venture will be:
•if the shares of the Joint Venture are publicly traded and listed on a national exchange, equal to the average closing price of the shares for the 20 trading days ending on the business day immediately preceding the date of the put notice, provided that, in the event we exercise our call right, the fair value of the Joint Venture will be deemed to be no less than an amount that yields a 20% internal rate of return on each tranche of capital invested by SoftBank and its affiliates in the Joint Venture, taking into account all proceeds received by SoftBank and its affiliates arising from their shares through such date;
•if the shares of the Joint Venture are not publicly traded and listed on a national exchange, determined by a third-party valuation firm, and on the assumption that the sale is on an arm’s-length basis on the date of the put or call notice, as applicable, provided that, in the event we exercise our call right, the fair value of the Joint Venture will be deemed to be no less than an amount that yields a 20% internal rate
of return on each tranche of capital invested by SoftBank and its affiliates in the Joint Venture, taking into account all proceeds received by SoftBank and its affiliates arising from their shares through such date; or
•if the fair value is being determined in connection with a Deadlock Trigger being determined in connection with a potential change of control of the Joint Venture, in accordance with the preceding bullets, but will in no event be less than the consideration proposed to be paid in connection with such potential change of control of the Joint Venture.
In the event either we or SoftBank properly exercises our respective rights, the fair value of a share of our capital stock will be:
•while our common stock is publicly traded and listed on a national exchange, equal to the average closing price of our common stock for the 20 trading days ending on the business day immediately preceding the date of the put notice;
•if our common stock is not publicly traded and listed on a national exchange, determined by a third-party valuation firm, and on the assumption that the sale is on an arm’s-length basis on the date of the put notice; or
•if the fair value of our company is being determined in connection with a put or call notice, as applicable, delivered within 30 days following a Change in Control Trigger, the fair value of a share of our capital stock will be equal to the consideration per share paid or payable by the purchaser in such change of control.
Termination
The joint venture agreement will terminate upon any of the following three events: (i) if one party (including any transferees of that party) ceases to hold any shares of the Joint Venture, (ii) if a resolution is passed by the shareholders or creditors, or an order is made by a court or other competent body or person instituting a process that will lead to the Joint Venture being wound up and its assets being distributed among the Joint Venture’s creditors, shareholders or other contributors or (iii) upon written notice of insolvency (as described in the joint venture agreement) of either us or SoftBank.
Investor Rights Agreement
We are party to an amended and restated investor rights agreement (the “Investor Rights Agreement”), with certain of our stockholders who purchased shares of our convertible preferred stock prior to our IPO, which then converted to shares of our common stock in connection with our IPO. The Investor Rights Agreement grants rights to certain holders, including certain registration rights with respect to the registrable securities held by them, and also imposes certain affirmative obligations on us, including with respect to the furnishing of financial statements and information to the holders. The current stockholders include certain of our directors. Previous parties to the Investors Rights Agreement included certain holders of 5% of our capital stock and entities affiliated with certain of our directors, and certain executive officers.
Holders of approximately 0.2 million shares of our common stock are currently entitled to such registration rights pursuant to the Investor Rights Agreement. These registration rights will expire on the earlier of the date that is three years after the completion of the IPO (October 9,
2021) or, with respect to each stockholder following the completion of the IPO, at such time as such stockholder can sell all of its registrable securities pursuant to Rule 144(b)(1)(i) of the Securities Act of 1933, as amended (the “Securities Act”) or holds one percent or less of our outstanding common stock and all of such stockholder’s registrable securities can be sold in any three month period without registration pursuant to Rule 144 of the Securities Act. The registration of shares of our common stock pursuant to the exercise of these registration rights would enable the holders thereof to sell such shares without restriction under the Securities Act when the applicable registration statement is declared effective. Under the Investor Rights Agreement, we will pay all expenses relating to such registrations, including the reasonable fees and disbursements of one counsel for the participating holders, and the holders will pay all underwriting discounts and commissions relating to the sale of their shares. The Investor Rights Agreement also includes customary indemnification and procedural terms.
Demand Registration Rights
Certain holders of a majority of the registrable securities then outstanding may, on not more than two occasions, request that we prepare, file and maintain a registration statement to register at least a majority of their registrable securities then outstanding, or a lesser percentage of their registrable securities if the anticipated aggregate offering price, net of underwriting discounts and commissions, would exceed $7.5 million. As we are eligible to use a registration statement on Form S-3, certain holders of not less than 25% of the registrable securities then outstanding may request that we prepare, file and maintain a registration statement on Form S-3 covering the sale of their registrable securities, but only if the anticipated offering price, net of underwriting discounts and commissions, would exceed $1 million.
Piggyback Registration Rights
In the event that we propose to register any of our securities under the Securities Act, either for our own account or for the account of other security holders, the holders of registrable securities are entitled to certain “piggyback” registration rights allowing them to include their registrable securities in such registration, subject to certain customary marketing and other limitations. As a result, whenever we propose to file a registration statement under the Securities Act other than with respect to a demand registration or a registration statement on Form S-4 or S-8, these holders will be entitled to notice of the registration and will have the right to include their registrable securities in the registration subject to certain limitations.
2023.Indemnification Agreements
Our Bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the laws of the State of Delaware in effect from time to time, subject to certain exceptions contained in our bylaws. In addition, our Certificate of Incorporation provideprovides that our directors will not be personally liable to us or our stockholders for any damages other than for breaches of fiduciary duty involving intentional misconduct, fraud or a knowing violation of law.
We have entered into indemnification agreements with each of our executive officers and directors. The indemnification agreements provide the executive officers and directors with contractual rights to indemnification, and expense advancement and reimbursement, to the fullest extent permitted under the laws of the State of Delaware in effect from time to time, subject to certain exceptions contained in those agreements.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the ownership of our common stock as of April 19, 202115, 2024 by: (i) each director (three of whom are the nominees for election to the Board); (ii) each of our named executive officers; (iii) all currently serving executive officers and directors as a group; and (iv) all those known by us to be beneficial owners of more than five percent of our common stock. Except as otherwise noted below, the address for persons listed in the tables is c/o Guardant Health, Inc., 505 Penobscot Dr., Redwood City,3100 Hanover Street, Palo Alto, California, 94063.
94304.Unless otherwise indicated in the footnotes to the table and subject to community property laws and the rights of spouses under revocable living trusts where applicable, we believe that each stockholder named in the table has sole voting and investment power with regard to the shares indicated as being beneficially owned. There were 101,117,510121,885,230 shares of common stock outstanding on April 19, 2021.
| | | | | | | | | | | | | | |
| Name of Beneficial Owner | | Total Shares Beneficially Owned** | | Percentage of Shares Beneficially Owned** |
| 5% Stockholders: | | | | |
| The Vanguard Group (1) | | 7,621,237 | | | 7.5 | % |
| Entities affiliated with SoftBank Group (2) | | 7,037,960 | | | 7.0 | % |
| BlackRock, Inc. (3) | | 5,323,941 | | | 5.3 | % |
| Directors and Named Executive Officers: | | | | |
| Helmy Eltoukhy, Ph.D. (4) | | 3,009,577 | | | 3.0 | % |
| AmirAli Talasaz, Ph.D. (5) | | 2,787,804 | | | 2.8 | % |
| Derek Bertocci (6) | | 1,641 | | | * |
| Michael Wiley (7) | | 29,430 | | | * |
| John Saia (8) | | 9,266 | | | * |
| Ian Clark (9) | | 12,814 | | | * |
| Bahija Jallal, Ph.D. (10) | | 12,505 | | | * |
| Samir Kaul (11) | | 31,097 | | | * |
| Stanley Meresman (12) | | 21,022 | | | * |
| Vijaya Gadde (13) | | 3,151 | | | * |
| All directors and executive officers as a group (9 persons) (14) | | 5,887,236 | | | 5.8 | % |
_______________
* 15, 2024. | | | | | | | | |
| | | |
| Name of Beneficial Owner | | Total Shares
Beneficially Owned** | | | Percentage of
Shares Beneficially
Owned** | |
5% Stockholders: | | | | | | | | |
The Vanguard Group, Inc. (1) | | | 11,130,601 | | | | 9.8% | |
Blackrock Inc. (2) | | | 10,831,716 | | | | 8.9% | |
Deep Track Capital, LP, Deep Track Biotechnology Master Fund, Ltd., and Kavid Kroin (3) | | | 7,000,000 | | | | 5.8% | |
Baillie Gifford & Co (4) | | | 6,178,812 | | | | 5.2% | |
Executive Officers and Directors: | | | | | | | | |
Helmy Eltoukhy, Ph.D. (5) | | | 3,133,577 | | | | 2.6% | |
AmirAli Talasaz, Ph.D. (6) | | | 2,996,256 | | | | 2.5% | |
Michael Bell (7) | | | 68,751 | | | | * | |
Darya Chudova (8) | | | 108,394 | | | | * | |
Craig Eagle, M.D. (9) | | | 69,232 | | | | * | |
Christopher Freeman (10) | | | 79,240 | | | | * | |
Inest Dahne Steuber (11) | | | 1,233 | | | | * | |
Ian Clark (12) | | | 40,051 | | | | * | |
Steve Krognes (13) | | | 23,634 | | | | * | |
Meghan Joyce (14) | | | 32,010 | | | | * | |
Vijaya Gadde (15) | | | 46,587 | | | | * | |
Myrtle Potter (16) | | | 34,776 | | | | * | |
Musa Tariq (17) | | | 6,801 | | | | * | |
All directors and executive officers as a group (15 persons) (18) | | | 6,831,965 | | | | 5.5% | |
| * | Represents beneficial ownership of less than one percent. |
| ** | Includes shares which the individuals shown have the right to acquire upon exercise of stock options or the vesting of restricted stock units that are vested or vest within 60 days following April 15, 2024. Such shares are deemed to be outstanding in calculating the percentage ownership of such individual (and the group) but are not deemed to be outstanding as to any other person. |
88
| (1) | Based solely on information contained in a Schedule 13G/A filed with the SEC on February 13, 2024 by The Vanguard Group, reporting ownership as of December 30, 2023. The Vanguard Group reported shared voting power over 206,317 shares, sole dispositive power as to 10,801,617 shares, and shared dispositive power as to 328,984 shares. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. |
| (2) | Based solely on information contained in a Schedule 13G/A filed with the SEC on January 25 2024, by Blackrock, Inc., reporting ownership as of December 31, 2023. Blackrock, Inc. reported sole voting power as to 10,578,036 shares, and sole dispositive power as to 10,831,716 shares. The address of Blackrock, Inc. is 50 East Hudson Yards, New York, New York 10001. |
| (3) | Based solely on information contained in Schedule 13G filed with the SEC on April 12, 2024, by Deep Track Capital, LP, Deep Track Biotechnology Master Fund, Ltd, and David Kroin, reporting ownership as of April 2, 2024. Deep Track Capital, LP, Deep Track Biotechnology Master Fund, Ltd, and David Kroin reported shared voting power as to 7,000,000 shares, shared dispositive power as to 7,000,000 shares. The addresses are the following, Deep Track Capital, LP, 200 Greenwich Avenue, 3rd Floor, Greenwich, CT 06830, Deep Track Biotechnology Master Fund, Ltd., c/o Walkers Corporate Limited, 190 Elgin Avenue, George Town, KY1-9001, Cayman Islands, and David Kroin, c/o Deep Track Capital, LP, 200 Greenwich Avenue, 3rd Floor, Greenwich, CT 06830. |
| (4) | Based solely on information contained in Schedule 13G filed with the SEC on January 30, 2024, by Baillie Gifford & Co, reporting ownership as of December 31, 2023. Baillie Gifford & Co reported sole voting power as to 6,133,067 shares, sole dispositive power as to 6,178,812 shares. The address of Baillie Gifford & Co is Calton Square, 1 Greenside Row, Edinburgh EH1 3AN, Scotland, UK. |
| (5) | Includes 2,092,961 shares of common stock held by Helmy Eltoukhy and 711,612 shares of common stock that can be acquired upon the exercise of options that will be vested within 60 days of April 15, 2024. Also includes 164,288 shares held by Children’s Remainder Trust A, and 164,716 shares held by Children’s Remainder Trust B, as to which Dr. Eltoukhy and his spouse have shared voting and dispositive power. |
| (6) | Includes 1,909,297 shares of common stock held by AmirAli Talasaz and 567,659 shares of common stock that can be acquired upon the exercise of options that will be vested within 60 days of April 15, 2024. Also includes 470,800 shares of common stock held by Talasaz Investments, L.P., 24,250 shares of common stock held by AmirAli Talasaz 2018 Children’s Remainder Trust, and 24,250 shares of common stock held by Maryam Eskandari 2018 Children’s Remainder Trust, as to which Dr. Talasaz and his spouse have shared voting and dispositive power. |
| (7) | Includes 12,453 shares of common stock held by Michael Bell and 56,298 shares of common stock that can be acquired upon the exercise of options, and 0 restricted stock units, that will be vested within 60 days of April 15, 2024. |
| (8) | Includes 36,304 shares of common stock held by Darya Chudova and 63,070 shares of common stock that can be acquired upon the exercise of options, and 9,020 restricted stock units, that will be vested within 60 days of April 15, 2024. |
| (9) | Includes 11,452 shares of common stock held by Craig Eagle and 54,063 shares of common stock that can be acquired upon the exercise of options, and 3,717 restricted stock units, that will be vested within 60 days of April 15, 2024. |
| (10) | Includes 15,971 shares of common stock held by Christopher Freeman and 63,269 shares of common stock that can be acquired upon the exercise of options, and 0 restricted stock units, that will be vested within 60 days of April 15, 2024. |
89
| (11) | Includes 1,233 shares of common stock held by Ines Dahne-Steuber and no shares of common stock that can be acquired upon the exercise of options, or restricted stock units, that will be vested within 60 days of April 15, 2024. |
| (12) | Includes 8,901 shares of common stock held by Ian Clark and 24,374 shares of common stock that can be acquired upon the exercise of options, and 6,776 restricted stock units, that will be vested within 60 days of April 15, 2024. |
| (13) | Includes 3,239 shares of common stock held by Steve Krognes and 14,494 shares of common stock that can be acquired upon the exercise of options, and 5,901 restricted stock units, that will be vested within 60 days of April 15, 2024. |
| (14) | Includes 4,588 shares of common stock held by Meghan Joyce, and 21,697 shares of common stock that can be acquired upon the exercise of options, and 5,725 restricted stock units, that will be vested within 60 days of April 15, 2024. |
| (15) | Includes 11,851 shares of common stock held by Vijaya Gadde, and 28,947 shares of common stock that can be acquired upon the exercise of options, and 5,789 restricted stock units, that will be vested within 60 days of April 15, 2024. |
| (16) | Includes 7,582 shares of common stock held by Myrtle Potter, and 21,533 shares of common stock that can be acquired upon the exercise of options, and 5,661 restricted stock units, that will be vested within 60 days of April 15, 2024. |
| (17) | Includes 1,232 shares of common stock held by Musa Tariq, and 5,319 shares of common stock that can be acquired upon the exercise of options, and 250 restricted stock units, that will be vested within 60 days of April 15, 2024 |
| (18) | Includes an aggregate of 4,155,611 shares of common stock that are directly held and 1,784,237 shares of common stock that can be acquired upon the exercise of options, and 43,813 restricted stock units, that will be vested within 60 days of April 15, 2024. Also includes 848,304 shares held by trusts for the benefit of some of our executive officers and board members. |
90
DELINQUENT SECTION 16(A) REPORTS
Section 16 of the Securities Exchange Act of 1934, as amended, requires our directors and Executive Officers (and any persons beneficially owning more than 10 percent of a class of our stock) to file reports of their stock ownership and changes in their ownership of less than one percent.
** Includes shares which the individuals shown have the right to acquire upon exercise ofour common stock options or the vesting of restricted stock units that are vested or vest within 60 days following April 19, 2021. Such shares are deemed to be outstanding in calculating the percentage ownership of such individual (and the group), but are not deemed to be outstanding as to any other person.
(1) Based solely on information contained in a Schedule 13G filed with the SEC on February 10, 2021 by The Vanguard Group, reporting ownershipForms 3, 4, and 5, as of December 31, 2020. Vanguard reported sole voting power as to 0 shares, shared voting power over 62,414 shares, sole dispositive power as to 7,494,908 shares, and shared dispositive power as to 126,329 shares. The address of Vanguard is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.
(2)appropriate. Based solely on information contained in a Schedule 13D/Aour review of Company records, we believe that all required forms concerning beneficial ownership were filed with the SEC on October 13, 2020,time by all directors and consists of 7,037,960 shares held of record by SVF Bluebird (Cayman) Limited, and SVF Bluebird (Cayman) Limited, SVF Enterprise (Cayman) Limited, SVF Endurance (Cayman), SoftBank Vision Fund (AIV M1) L.P. and SB Investment Advisers (UK) Limited each report shared voting and dispositive power over these shares.
SVF Bluebird (Cayman) Limited is a subsidiary of SVF Enterprise (Cayman) Limited, which is a subsidiary of SVF Endurance (Cayman) Limited, which is a wholly owned subsidiary of SoftBank Vision Fund (AIV M1) L.P. SB Investment Advisers (UK) Limited has been appointed as alternative investment fund manager (“AIFM”), of SoftBank Vision Fund (AIV M1) L.P., and is exclusively responsible for managing SoftBank Vision Fund (AIV M1) L.P. in accordance with the Alternative Investment Fund Managers Directive and is authorized and regulated by the UK Financial Conduct Authority accordingly. As AIFM of SoftBank Vision Fund (AIV M1) L.P., SB Investment Advisers (UK) Limited is exclusively responsible for making all decisions related to the acquisition, structuring, financing and disposal of SoftBank Vision Fund (AIV M1) L.P.’s Investments. The registered address for SB Investment Advisers (UK) Limited is 69 Grosvenor St., Mayfair, London W1K 3JP.
The amounts reflected above do not include any shares of our capital stock that SoftBank may acquire pursuant to put and call rights in our joint venture agreement with SoftBank as described in “Relationships and Related Party Transactions-Joint venture with SoftBank.” To the extent SoftBank elects to receive, or we elect to issue, shares of our common stock as any portion of the consideration, SoftBank will be required to execute and deliver to us an irrevocable proxy appointing us as the attorney-in-fact and granting us a proxy to vote as we deem properExecutive Officers with respect to such shares.
(3)Based solely on information contained in a Schedule 13Gtransactions during the fiscal year ended December 31, 2023, except for two Form 4 filings that were not timely filed with respect to the SEC on February 5, 2021 by BlackRock, Inc., reporting ownership asfollowing: Dr. Chudova’s June 1, 2023 RSU vesting and related withholding of December 31, 2020. BlackRock reported sole voting power asshares to 5,065,003pay taxes; and Dr. Chudova’s August 1, 2023 RSU vesting and related withholding of shares and sole dispositive power as to 5,323,941 shares. The address of BlackRock is 55 East 52nd Street, New York, New York 10055.
(4)Includes (i) 1,908,267 shares of common stock held by Helmy Eltoukhy, (ii) 735,535 shares of common stock that can be acquired uponpay taxes. In each case, the exercise of options that will be vested within 60 days of April 19, 2021. Also includes 365,775 shares held by Eltoukhy Investments, L.P., aslate Form 4 filing was due to which Dr. Eltoukhy and his spouse have shared voting and dispositive power.
(5)Includes (i) 1,725,422 shares of common stock held by AmirAli Talasaz, (ii) 591,582 shares of common stock that can be acquired upon the exercise of options that will be vested within 60 days of April 19, 2021. Also includes 470,800 shares of common stock held by Talasaz Investments, L.P., as to which Dr. Talasaz and his spouse have shared voting and dispositive power.
(6)Includes 1,641 shares of common stock held by Derek Bertocci.
(7)Includes 933 shares of common stock held by Michael Wiley and 28,497 shares of common stock that can be acquired upon the exercise of options that will be vested within 60 days of April 19, 2021.
(8) Includes 2,026 shares of common stock held by John Saia and 7,240 shares of common stock that can be acquired upon the exercise of options that will be vested within 60 days of April 19, 2021.
(9)Includes 1,302 shares of common stock held by Ian Clark and 8,171 shares of common stock that can be acquired upon the exercise of options, and 3,341 restricted stock units, that will be vested within 60 days of April 19, 2021.
(10)Includes 1,891 shares of common stock held by Bahija Jallal and 7,857 shares of common stock that can be acquired upon the exercise of options, and 2,757 restricted stock units, that will be vested within 60 days of April 19, 2021.
(11) Includes (i) 1,302 shares of common stock held by Samir Kaul, (ii) 7,095 shares of common stock that can be acquired upon the exercise of options, and 2,757 restricted stock units, that will be
81an administrative error.91
vested within 60 days of April 19, 2021. Also includes 19,943 shares held by a trust for the benefit of Samir Kaul and his family.
(12) Includes 1,302 shares of common stock held by Stanley Meresman and 16,963 shares of common stock that can be acquired upon the exercise of options, and 2,757 restricted stock units, that will be vested within 60 days of April 19, 2021.
(13)Includes 1,976 shares of common stock that can be acquired by Vijaya Gadde upon the exercise of options, and 1,175 restricted stock units, that will be vested within 60 days of April 19, 2021.
(14) Includes an aggregate of 3,641,512 shares of common stock that are directly held and 1,376,419 shares of common stock that can be acquired upon the exercise of options, and 12,787 restricted stock units, that will be vested within 60 days of April 19, 2021. Also includes 856,518 shares held by trusts for the benefit of some of our executive officers and board members.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth the equity awards outstanding as of December 31, 20202023 regarding compensation plans under which our equity securities are authorized for issuance:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Plan Category | | Number of Shares to be Issued Upon Exercise of Outstanding Options & Vesting of RSUs
| | | Weighted-Average Exercise Price of Outstanding Options
| | | Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Shares Reflected in the First Column) | |
| Equity compensation plans approved by security holders (1) | | 7,988,906 | | (2) | | $ | 15.80 | | (2) | | 3,355,714 | | (3) |
| Equity compensation plan not approved by security holders | | — | | | | — | | | | — | | |
| Total | | 7,988,906 | | | | $ | 15.80 | | | | 3,355,714 | | |
_______________
(1)Consists of the Amended and Restated 2012 Plan (the “2012 Plan”), the 2018 Plan and the 2018 Employee Stock Purchase Plan (the “ESPP”). We are no longer permitted to grant awards under the 2012 Plan.
(2) Represents 1,118,655 outstanding RSUs, 3,391,148 outstanding Founders’ 2020 Performance Awards, which are market-based RSUs, 377,922 outstanding performance-based RSUs, and 3,101,181 outstanding options and the weighted average exercise price of such outstanding options. Excludes shares subject to purchase under our ESPP offerings outstanding on December 31, 2020.
(3) Includes 1,819,223 shares available for issuance under the 2018 Plan and 1,536,491 shares reserved for issuance under the ESPP as of December 31, 2020.
| | | | | | | | | | | | |
| | | | |
Plan Category | | Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants & Rights | | | Weighted-Average
Exercise Price of
Outstanding
Options | | | Number of Shares
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding Shares
Reflected in the First
Column) | |
Equity compensation plans approved by security holders (1) | | | 11,031,167 (2) | | | $ | 31.76 (2) | | | | 8,732,503 (3) | |
Equity compensation plan not approved by security holders (4) | | | 50,012 (5) | | | $ | 0.00 (5) | | | | 4,949,259 (5) | |
| | | | | | | | | | | | |
Total | | | 11,081,179 | | | $ | 31.76 | | | | 13,681,762 | |
| | | | | | | | | | | | |
| (1) | Consists of the Amended and Restated 2012 Plan (the “2012 Plan”), the 2018 Plan and the 2018 Employee Stock Purchase Plan (the “ESPP”). We are no longer permitted to grant awards under the 2012 Plan. |
| (2) | Represents 4,296,773 outstanding RSUs, 2,260,764 outstanding and unvested Founders’ 2020 Performance Awards, which are market-based PSUs, 460,724 outstanding performance-based RSUs granted at target, and 4,012,906 outstanding options and the weighted average exercise price of such outstanding options. Excludes shares subject to purchase under our ESPP offerings outstanding as of December 31, 2023. The unvested Founders’ 2020 Performance Awards were cancelled in March 2024, and the shares underlying such PSUs returned to the pool of available shares for future equity grants, which is not reflected in the table above. |
| (3) | Includes 7,052,868 shares available for issuance under the 2018 Plan and 1,679,635 shares reserved for issuance under the ESPP as of December 31, 2023. Assumes that the outstanding performance based RSUs are earned at target. |
| (4) | In August 2023, the Company’s Board of Directors adopted the 2023 Employment Inducement Incentive Award Plan or the (“2023 Plan”), under which the Company may exclusively grant awards to its new employees as an inducement material to the employee’s entry into employment with the Company. The 2023 Plan was approved by the Company’s Board of Directors without stockholder approval in accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules. |
| (5) | Represents 50,012 outstanding RSUs, no options were granted during 2023. There are 4,949,259 shares available for issuance under the 2023 Plan as of December 31, 2023. |
An aggregate of 3,658,602 shares of our common stock was initially available for issuance under awards granted pursuant to the 2018 Plan. In addition, the number of shares available for issuance under the 2018 Plan may be increased on January 1 of each calendar year beginning in 2019 and ending in 2028 by an amount equal to the least of (i) 3,689,000 shares, (ii) four percent of the shares of common stock outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year, assuming the conversion of any shares of preferred stock, but excluding shares issuable upon the exercise or payment of stock options, warrants or other equity securities with respect to which shares have not actually been issued, and (iii) such smaller number of shares as determined by our Board. Effective as of January 1, 2021,2024, the number of shares available for issuance under the 2018 Plan was increased by 3,689,000 shares, which is not reflected in the table above.
92
A total of 922,250 shares of our common stock are initially reserved for issuance under our ESPP. In addition to the foregoing, on the first day of each calendar year beginning on January 1, 2019 and ending on and including January 1, 2028, the number of shares of our common stock available for issuance under the PlanESPP may be increased by the least of (i) 1,106,700 shares, (ii) 1% of the shares outstanding (on an as-converted basis) on the last day of the immediately preceding calendar year, assuming the conversion of any shares of preferred stock, but excluding shares issuable upon the exercise or payment of stock options, warrants or other equity securities with respect to which shares have not actually been issued, and (iii) such smaller number of shares as determined by our Board. For 2021,Effective as of January 1, 2024, the Board waived the automatic annual increase to thenumber of shares available for issuance under our ESPP.the ESPP was increased by 1,106,700 shares, which is not reflected in the table above. The maximum number of shares subject to purchase under our ESPP offerings outstanding on December 31, 20202023 is 1,536,491, the1,679,635. The purchase periods covering these offerings will be onin 2024 are November 15, 2023 through May 14, 2024 and May 15, 2021 and2024 through November 15, 2021.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our executive officers, directors and persons who own more than ten percent of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater than ten-percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such forms furnished to us and the written representations from certain of the reporting persons that no other reports were required during the fiscal year ended December 31, 2020, all executive officers, directors and greater than ten-percent beneficial owners complied with the reporting requirements of Section 16(a), except that due to administrative oversights, one late Form 4 was filed for Ian Clark to report the sale of 538 shares of our common stock, and one late Form 4 was filed for John Saia to report the receipt of 3,491 shares of our common stock from an equity award under the 2018 Plan.
Stockholder Proposals and Nominations
Stockholders who intend to have a proposal considered for inclusion in our proxy materials for presentation at our 20222025 Annual Meeting of Stockholders pursuant to Rule 14a-8 under the Exchange Act must submit the proposal to our Corporate Secretary at our offices at 505 Penobscot Dr., Redwood City,3100 Hanover Street, Palo Alto, California, 94063 not94304 no later than December 29, 2021.
26, 2024.Stockholders intending to present a proposal at the 20222025 Annual Meeting of Stockholders, but not to include the proposal in our proxy statement, or to nominate a person for election as a director, must comply with the requirements set forth in our Bylaws. Our Bylaws require, among other things, that our Secretary receive written notice from the stockholder of record of their intent to present such proposal or nomination not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting. Therefore, we must receive notice of such a proposal or nomination for the 20222025 Annual Meeting of Stockholders no earlier than the close of business on February 16, 202211, 2025, and no later than the close of business on March 18, 2022.14, 2025. The notice must contain the information required by the Bylaws, a copy of which is available upon request to our Secretary. In the event that the date of the 20222025 Annual Meeting of Stockholders is more than 30 days before or more than 60 days after June 16, 2022,12, 2025, then our Secretary must receive such written notice not earlier than the close of business on the 120th day prior to the 20222025 Annual Meeting and not later than the close of business on the 90th day prior to the 20222025 Annual Meeting or, if later, the 10th day following the day on which public disclosure of the date of such annual meeting is first made by us. SEC rules permit management to vote proxies in its discretion in certain cases if the stockholder does not comply with this deadline and, in certain other cases notwithstanding the stockholder'sstockholder’s compliance with this deadline.
In addition to satisfying the foregoing requirements under the company’s bylaws, to comply with the universal proxy rules (once they become effective), stockholders who intend to solicit proxies in support of director nominees other than the company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than April 13, 2025.We reserve the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with these or other applicable requirements.
We intend to file a Proxy Statement and WHITE proxy card with the SEC in connection with its solicitation of proxies for our 2025 Annual Stockholders’ Meeting. Stockholders may obtain our Proxy Statement (and any amendments and supplements thereto) and other documents as and when filed by the Company with the SEC without charge from the SEC’s website at: www.sec.gov.Householding of Proxy Materials
The SEC has adopted rules that permit companies and intermediaries (such as banks and brokers) to satisfy the delivery requirements for proxy statements and annual reports with
respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
94
This year, a number of banks and brokers with account holders who are our stockholders will be householding our proxy materials. A single proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your bank or broker that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report, please notify your bank or broker.broker, or contact us at 3100 Hanover Street, Palo Alto, California, 94304. Stockholders who currently receive multiple copies of the proxy statement at their address and would like to request householding of their communications should contact their bank or broker.
No Incorporation by Reference
To the extent that this proxy statement is incorporated by reference into any other filing by us under the Securities Act or the Exchange Act, the sections of this proxy statement entitled “Audit Committee Report” and “Compensation Committee Report” and Pay versus Performance, to the extent permitted by the rules of the SEC, will not be deemed incorporated, unless specifically provided otherwise in such filing. In addition, references to our website are not intended to function as a hyperlink and the information contained on our website is not intended to be part of this proxy statement. Information on our website, other than our proxy statement, Notice of Annual Meeting of Stockholders and form of proxy, is not part of the proxy soliciting material and is not incorporated herein by reference.
Forward-Looking Statements
Forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, the risks described in our Annual Report on Form 10-K for the year ended December 31, 2023, and available at www.sec.gov. The words “may,” “will,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “aim,” “seek,” “should,” “likely,” and similar expressions as they relate to us or our management are intended to identify these forward-looking statements. All statements by us regarding our expected financial position, revenues, cash flows and other operating results, business strategy and similar matters are forward-looking statements. Our expectations expressed or implied in these forward-looking statements may not turn out to be correct. Forward-looking statements should be evaluated together with the many uncertainties that affect our business, particularly those mentioned in the risk factors in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 and in our periodic reports on Form 10-Q and our current reports on Form 8-K. Additionally, we may provide information herein or in our other reporting, some of which may be forward-looking statements, that is not necessarily “material” under the federal securities laws for SEC reporting purposes, but that is informed by various ESG standards and frameworks (including standards for the measurement of underlying data), and the interests of various stakeholders. Much of this information is subject to assumptions, estimates or third-party information that is still evolving and subject to change. For example, our disclosures based on any standards may change due to revisions in framework requirements, availability of information, changes in our business or applicable government policies, or other factors, some of which may be beyond our control. Any forward-looking
95
statement speaks only as of the date as of which such statement is made, and, except as required by law, we undertake no, and expressly disclaim any, obligation to update any forward-looking statement to reflect events or circumstances, including unanticipated events, after the date as of which such statement was made.
Other Matters
As of the date of this proxy statement, the Board knows of no business, other than that described in this proxy statement, that will be presented for consideration at the Annual Meeting. If any other business comes before the Annual Meeting or any adjournment or postponement thereof, proxy holders may vote their respective proxies at their discretion.
By Order of the Board of Directors of Guardant Health, Inc.,
John Saia
Senior Vice President, General CounselChief Legal Officer and Corporate Secretary
Redwood City,Palo Alto, California,
Director Qualification Standards and Additional Selection Criteria
Director Qualification Standards
:The Nominating and Corporate Governance Committee, in recommending director candidates for election to the Board, and the Board, in nominating director candidates, will consider candidates who have a high level of personal and professional integrity, strong ethics and values and the ability to make mature business judgments.
Additional Selection Criteria
:In evaluating director candidates, the Nominating and Corporate Governance Committee and the Board may also consider the following criteria as well as any other factor that they deem to be relevant:
A.the candidate’s experience in corporate management, such as serving as an officer or former officer of a publicly held company;
B.the candidate’s experience as a board member of another publicly held company;
C.the candidate’s professional and academic experience relevant to the Company’s industry;
D.the strength of the candidate’s leadership skills;
E.the candidate’s experience in finance and accounting and / or executive compensation practices;
F.whether the candidate has the time required for preparation, participation and attendance at Board meetings and committee meetings, if applicable; and
G.the candidate’s geographic background, gender, age, ethnicity and other diversity characteristics.
| A. | the candidate’s experience in corporate management, such as serving as an officer or former officer of a publicly held company; |
| B. | the candidate’s experience as a board member of another publicly held company; |
| C. | the candidate’s professional and academic experience relevant to the Company’s industry; |
| D. | the strength of the candidate’s leadership skills; |
| E. | the candidate’s experience in finance and accounting and / or executive compensation practices; |
| F. | whether the candidate has the time required for preparation, participation and attendance at Board meetings and committee meetings, if applicable; and |
| G. | the candidate’s diversity of background and perspective, including, but not limited to, with respect to age, gender, race, place of residence and specialized experience, and in light of applicable diversity requirements (under applicable state law or otherwise). |
In addition, the Board will consider whether there are potential conflicts of interest with the candidate’s other personal and professional pursuits.
The Board should monitor the mix of specific experience, qualifications and skills of its directors in order to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure.
A-1
Appendix B
Reconciliation of Non-GAAP Information
We believe that the exclusion of certain income and expenses in calculating these non-GAAP financial measures can provide a useful measure for investors when comparing our period-to-period core operating results, and when comparing those same results to that published by our peers. We exclude certain other items because we believe that these income (expenses) do not reflect expected future operating expenses. Additionally, certain items are inconsistent in amounts and frequency, making it difficult to perform a meaningful evaluation of our current or past operating performance. We use these non-GAAP financial measures to evaluate ongoing operations, for internal planning and forecasting purposes, and to manage our business.
These non-GAAP financial measures are not intended to be considered in isolation from, as substitute for, or as superior to, the corresponding financial measures prepared in accordance with GAAP. There are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation, and do not present the full measure of our recorded costs against its revenue. In addition, our definition of the non-GAAP financial measures may differ from non-GAAP measures used by other companies.
Reconciliation of Selected GAAP Measures to Non-GAAP Measures
(unaudited)
(in thousands, except per share data)
| | | | | | | | |
| | |
| | | Twelve Months Ended
December 31, | |
| | | 2023 | | | 2022 | |
GAAP cost of precision oncology testing | | $ | 205,528 | | | $ | 148,199 | |
Amortization of intangible assets | | | (599 | ) | | | (933 | ) |
Stock-based compensation expense and related employer payroll tax payments | | | (4,727 | ) | | | (5,575 | ) |
| | | | | | | | |
Non-GAAP cost of precision oncology testing | | $ | 200,202 | | | $ | 141,691 | |
| | | | | | | | |
| | |
GAAP cost of development services and other | | $ | 21,524 | | | $ | 8,126 | |
Amortization of intangible assets | | | (804 | ) | | | — | |
Stock-based compensation expense and related employer payroll tax payments | | | (1,857 | ) | | | — | |
| | | | | | | | |
Non-GAAP cost of development services and other | | $ | 18,863 | | | $ | 8,126 | |
| | | | | | | | |
| | |
GAAP gross profit | | $ | 336,896 | | | $ | 293,213 | |
Amortization of intangible assets | | | 1,403 | | | | 933 | |
Stock-based compensation expense and related employer payroll tax payments | | | 6,584 | | | | 5,575 | |
Non-GAAP gross profit | | $ | 344,883 | | | $ | 299,721 | |
B-1
| | | | | | | | |
| | |
| | | Twelve Months Ended
December 31, | |
| | | 2023 | | | 2022 | |
GAAP cost of screening | | $ | 13,476 | | | $ | 2,017 | |
Amortization of intangible assets | | | (804 | ) | | | — | |
Stock-based compensation expense and related employer payroll tax payments | | | (1,857 | ) | | | — | |
| | | | | | | | |
Non-GAAP cost of screening | | $ | 10,815 | | | $ | 2,017 | |
| | | | | | | | |
Non-GAAP gross profit excluding cost of screening | | $ | 355,698 | | | $ | 301,738 | |
| | | | | | | | |
| | |
GAAP research and development expense | | $ | 367,194 | | | $ | 373,807 | |
Stock-based compensation expense and related employer payroll tax payments | | | (35,286 | ) | | | (26,928 | ) |
Contingent consideration | | | (2,082 | ) | | | (5,229 | ) |
| | | | | | | | |
Non-GAAP research and development expense | | $ | 329,826 | | | $ | 341,650 | |
| | | | | | | | |
| | |
GAAP sales and marketing expense | | $ | 295,227 | | | $ | 299,828 | |
Amortization of intangible assets | | | — | | | | (201 | ) |
Stock-based compensation expense and related employer payroll tax payments | | | (25,095 | ) | | | (25,666 | ) |
| | | | | | | | |
Non-GAAP sales and marketing expense | | $ | 270,132 | | | $ | 273,961 | |
| | | | | | | | |
| | |
GAAP general and administrative expense | | $ | 155,800 | | | $ | 163,956 | |
Amortization of intangible assets | | | (1,345 | ) | | | (1,346 | ) |
Stock-based compensation expense and related employer payroll tax payments | | | (25,098 | ) | | | (37,282 | ) |
Contingent consideration | | | (110 | ) | | | (4,305 | ) |
| | | | | | | | |
Non-GAAP general and administrative expense | | $ | 129,247 | | | $ | 121,023 | |
| | | | | | | | |
| | |
GAAP other operating expense | | $ | 83,400 | | | | — | |
Non-recurring other operating expense | | | (83,400 | ) | | | — | |
| | | | | | | | |
Non-GAAP other operating expense | | | — | | | | — | |
| | | | | | | | |
| | |
GAAP loss from operations | | $ | (564,725 | ) | | $ | (544,378 | ) |
Amortization of intangible assets | | | 2,748 | | | | 2,480 | |
Stock-based compensation expense and related employer payroll tax payments | | | 92,063 | | | | 95,451 | |
Contingent consideration | | | 2,192 | | | | 9,534 | |
Non-recurring other operating expense | | | 83,400 | | | | — | |
| | | | | | | | |
Non-GAAP loss from operations | | $ | (384,322 | ) | | $ | (436,913 | ) |
| | | | | | | | |
B-2
| | | | | | | | |
| | |
| | | Twelve Months Ended
December 31, | |
| | | 2023 | | | 2022 | |
GAAP net loss | | $ | (479,449 | ) | | $ | (654,588 | ) |
Amortization of intangible assets | | | 2,748 | | | | 2,480 | |
Stock-based compensation expense and related employer payroll tax payments | | | 92,063 | | | | 95,451 | |
Contingent consideration | | | 2,192 | | | | 9,534 | |
Non-recurring other operating expense | | | 83,400 | | | | — | |
Unrealized losses (gains) on marketable equity securities | | | (79,710 | ) | | | 7,793 | |
Impairment of non-marketable equity securities and other related assets | | | 29,054 | | | | 5,261 | |
Fair value adjustments of noncontrolling interest liability | | | — | | | | 99,785 | |
Non-recurring other income | | | (2,631 | ) | | | (1,100 | ) |
| | | | | | | | |
Non-GAAP net loss | | $ | (352,333 | ) | | $ | (435,384 | ) |
| | | | | | | | |
| | |
GAAP net loss per share, basic and diluted | | $ | (4.28 | ) | | $ | (6.41 | ) |
Non-GAAP net loss per share, basic and diluted | | $ | (3.15 | ) | | $ | (4.26 | ) |
Weighted-average shares used in computing GAAP and Non-GAAP net loss per share, basic and diluted | | | 111,988 | | | | 102,178 | |
B-3
Guardant Health, Inc.
Reconciliation of GAAP Net Loss to Adjusted EBITDA
(unaudited)
(in thousands)
| | | | | | | | |
| | | Twelve Months Ended
December 31, | |
| | | 2023 | | | 2022 | |
GAAP net loss | | $ | (479,449 | ) | | $ | (654,588 | ) |
Interest income | | | (35,365 | ) | | | (6,069 | ) |
Interest expense | | | 2,578 | | | | 2,577 | |
Other expense (income), net | | | (53,174 | ) | | | 12,778 | |
(Benefit from) provision for income taxes | | | 685 | | | | 1,139 | |
Depreciation and amortization | | | 42,881 | | | | 35,962 | |
Stock-based compensation expense and related employer payroll tax payments | | | 92,063 | | | | 95,451 | |
Contingent consideration | | | 2,192 | | | | 9,534 | |
Non-recurring other operating expense | | | 83,400 | | | | — | |
Fair value adjustments of noncontrolling interest liability | | | — | | | | 99,785 | |
| | | | | | | | |
Adjusted EBITDA | | $ | (344,189 | ) | | $ | (403,431 | ) |
| | | | | | | | |
Reconciliation of Free Cash Flow to Net Cash Used in Operating Activities
(unaudited)
(in thousands)
| | | | | | | | |
| | | Twelve Months Ended
December 31, | |
| | | 2023 | | | 2022 | |
Net cash used in operating activities | | $ | (324,975 | ) | | $ | (309,463 | ) |
Purchase of property and equipment | | | (20,486 | ) | | | (77,461 | ) |
| | | | | | | | |
Free cash flow | | $ | (345,461 | ) | | $ | (386,924 | ) |
| | | | | | | | |
B-4
GUARDANT HEALTH, INC.
3100 HANOVER STREET
PALO ALTO, CA 94304
86
VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. Eastern Time on June 11, 2024. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go to www.virtualshareholdermeeting.com/GH2024
You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. Eastern Time on June 11, 2024. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
| | | | | | | | |
| The Board of Directors recommends you vote FOR the following: | | | | | | |
| 1. | | Election of Class III Directors | | | | | | |
| | | | |
| | Nominees | | For | | | | Withhold |
| | | | |
| 1a. | | Helmy Eltoukhy | | ☐ | | | | ☐ |
| | | | |
| 1b. | | Steve Krognes | | ☐ | | | | ☐ |
| | | | |
| 1c. | | AmirAli Talasaz | | ☐ | | | | ☐ |
| | | |
| The Board of Directors recommends you vote FOR proposals 2 and 3. | | For | | Against | | Abstain |
| | | | |
| 2. | | Ratification of the appointment of Deloitte & Touche LLP as Guardant Health, Inc.'s independent registered public accounting firm for the year ending December 31, 2024. | | ☐ | | ☐ | | ☐ |
| | | | |
| 3. | | Non-binding advisory vote to approve Guardant Health, Inc.'s named executive officer compensation. | | ☐ | | ☐ | | ☐ |
| | | |
| NOTE: Such other business as may properly come before the meeting or any adjournment thereof. | | ☐ | | ☐ | | ☐ |
| | | | | | | | | | |
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. |
| | | | | | | | | | |
| Signature [PLEASE SIGN WITHIN BOX] | | Date | | | | Signature (Joint Owners) | | Date | | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The 10K Wrap and Notice & Proxy Statement are available at www.proxyvote.com
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
Guardant Health, Inc.
Annual Meeting of Stockholders
June 12, 2024 09:30 AM
This proxy is solicited by the Board of Directors
The stockholder hereby appoints Helmy Eltoukhy, AmirAli Talasaz and John Saia, or any of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of Guardant Health, Inc. that the stockholder is entitled to vote at the Annual Meeting of Stockholders to be held at 9:30 AM, Pacific Time on June 12, 2024, virtually at www.virtualshareholdermeeting.com/GH2024, or at any continuation, postponement or adjournment thereof.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations.
Continued and to be signed on reverse side
SAMPLE
SAMPLE
