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June , 2016April 27, 2018
To Our Stockholders:
We are pleased to invite you to attend the 20162018 Annual Meeting of Stockholders of Intercept Pharmaceuticals, Inc., which will be held on Tuesday, July 19, 2016,Wednesday, June 20, 2018 at 9:00 a.m. Eastern Time,(local time), at Intercept’s corporate headquarters,the offices of Skadden, Arps, Slate, Meagher & Flom LLP, located at 450 West 15th Street, Suite 505,Four Times Square, New York, NY 10011.New York 10036.
Details regarding the meeting, the business to be conducted at the meeting and information about Intercept that you should consider when you vote your shares are described in this proxy statement.
The boardBoard of directorsDirectors recommends the approval of each of Proposals 1,1A through 1J, 2 3 and 43 as set forth in the proxy statement.
We hope you will be able to attend the annual meeting.Annual Meeting. Whether or not you plan to attend the annual meeting or not,in person, it is important that you cast your vote either in person or by proxy.shares be represented and voted at the meeting. You may be able to vote over the internetInternet as well as by mail. After you have finished reading the proxy statement, we urge you to vote in accordance with the instructions set forth in this proxy statement.therein. We encourage you to vote by proxy so that your shares will be represented and voted at the meeting,Annual Meeting, whether or not you can attend.
Thank you for your continued support of Intercept. We look forward to seeing you at the annual meeting.Annual Meeting.
Sincerely,
Mark Pruzanski, M.D.
President and Chief Executive Officer
June , 2016
TIME:Dear Stockholder:
You are cordially invited to attend the 2018 Annual Meeting of Stockholders (the “Annual Meeting”) of Intercept Pharmaceuticals, Inc., a Delaware corporation (the “Company”). The Annual Meeting will be held on Wednesday, June 20, 2018 at 9:00 a. m. Eastern Time
DATE: Tuesday, July 19, 2016
PLACE: Intercept’s Corporate Headquarters, 450 West 15th Street, Suite 505,a.m. (local time), at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, located at Four Times Square, New York, NY 10011New York 10036.
PURPOSES:The purposes of the Annual Meeting are:
1. | To elect, |
1A. Paolo Fundarò; | 1B. Mark Pruzanski, M.D.; | 1C. Srinivas Akkaraju, M.D., Ph.D.; | ||
1D. Luca Benatti, Ph.D.; | 1E. Daniel Bradbury; | 1F. Keith Gottesdiener, M.D.; | ||
1G. Nancy Miller-Rich; | 1H. Gino Santini; | 1I. Glenn Sblendorio; and | ||
1J. Daniel Welch. |
2. |
To approve, on a non-binding, advisory basis, the compensation of |
To ratify the appointment of KPMG LLP as |
To transact such other business |
WHO MAY VOTE:The foregoing items of business are more fully described in the proxy statement accompanying this Notice of Annual Meeting of Stockholders.
You may vote if you were the record holder of Intercept common stock at theThe close of business on MayApril 23, 2016. A list of2018 is the record date for determining stockholders of record will be availableentitled to vote at the annual meeting and, duringAnnual Meeting. Only holders of the ten days prior to the annual meeting, at our principal executive offices located at 450 West 15th Street, Suite 505, New York, NY 10011.
All stockholdersCompany’s Common Stock, par value $0.001 per share (the “shares”), as of record on the record date are cordially invitedentitled to attendnotice of, and to vote at, the annual meeting.Annual Meeting or any adjournments thereof.
By Order of the Board of Directors
/s/Ryan T. Sullivan
Ryan T. Sullivan
General Counsel and Secretary
New York, New York
April 27, 2018
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on June 20, 2018. The Company’s Proxy Statement for the Annual Meeting and Annual Report on Form 10-K for the year ended December 31, 2017 are available atwww.interceptpharma.com/proxy.html.
Whether or not you plan to attend the annual meeting or not, we urge you to vote and submit your proxy via the internet or by mailAnnual Meeting in order to ensureperson, it is important that your shares arebe represented and voted at the annual meeting.Annual Meeting.You Holders of record may changesubmit a proxy via the Internet or revoke yourby completing, signing and dating the enclosed proxy at any time beforecard and returning it as promptly as possible in the enclosed envelope. Holders of record must vote in accordance with the instructions listed on the proxy card. Beneficial holders whose shares are held in the name of a bank, broker or other nominee must vote in accordance with the voting instructions provided to them by their bank, broker or other nominee. Such holders may be eligible to submit a proxy electronically.
The Company’s proxy statement is voted at the meeting.
BY ORDER OF THE BOARD OF DIRECTORSBryan YoonCorporate Secretarydated April 27, 2018, and is first being mailed to stockholders on or about April 27, 2018.
i
iii
ThisThese proxy statement, alongmaterials are provided in connection with the accompanying noticesolicitation of 2016 annual meetingproxies by the Board of stockholders, contains information about the 2016 annual meeting of stockholdersDirectors (the “Board”) of Intercept Pharmaceuticals, Inc., including any adjournments or postponements (the “Company”) for the Company’s 2018 Annual Meeting of the annual meeting. We are holding the annual meetingStockholders (the “Annual Meeting”) to be held on Wednesday, June 20, 2018 at 9:00 a.m. (local time), Eastern Time, on Tuesday, July 19, 2016, at our corporate headquartersthe offices of Skadden, Arps, Slate, Meagher & Flom LLP, located at 450 West 15th Street, Suite 505,Four Times Square, New York, NY 10011.New York 10036.
InUnless otherwise noted or the context otherwise requires, references in this proxy statement weto “we,” “us” or “our” refer to Intercept Pharmaceuticals, Inc. as “Intercept,” “the Company,” “we”
This proxy statement relates tocontains information about the solicitation of proxiesAnnual Meeting and was prepared by our boardmanagement for the Board. This proxy statement and the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (the “Annual Report”) are first being mailed to stockholders on or around April 27, 2018. This proxy statement and the Annual Report are available atwww.interceptpharma.com/proxy.html.
The specific proposals to be considered and acted upon at the annual meeting.
On or about June , 2016, we began sending this proxy statement,Annual Meeting are summarized in the attachedaccompanying Notice of Annual Meeting of Stockholders andStockholders. Each proposal is described in more detail in this proxy statement.
The close of business on April 23, 2018 is the enclosed proxy card to allrecord date for determining stockholders entitled to vote at the annual meeting.Annual Meeting. Only holders of the Company’s Common Stock, par value $0.001 per share (the “shares”), as of the record date are entitled to notice of, and to vote at, the Annual Meeting or any adjournments thereof. Each such holder is entitled to one (1) vote for each share that such holder held as of the record date.
Although not partOn April 23, 2018, there were 29,582,955 of thisthe Company’s shares outstanding.
If on the record date, your shares were registered directly in your name with our transfer agent, VStock Transfer, LLC, then you may vote your shares in one of the following ways:
If on the record date, your shares were held in street name through a bank, broker or other nominee, then you must vote in accordance with the amendmentvoting instructions provided to our annual reportyou by your bank, broker or other nominee. If your shares are held in street name, you still may be eligible to submit a proxy electronically. Beneficial holders whose shares are held in street name and who plan to vote at the Annual Meeting must obtain a legal proxy, executed in their favor by or on Form 10-K/A.behalf of their bank, broker or other nominee, to be able to vote at the Annual Meeting, and should contact such bank, broker or other nominee for instructions on how to obtain a legal proxy.
ThisThere are three matters scheduled to be voted on at the Annual Meeting:
1. | To elect, by separate resolutions, the following ten nominees to serve on the Board of Directors until the 2019 Annual Meeting of Stockholders or until their respective successors are duly elected and qualified: |
a) | Paolo Fundarò (Proposal No. 1A); |
b) | Mark Pruzanski, M.D. (Proposal No. 1B); |
c) | Srinivas Akkaraju, M.D., Ph.D. (Proposal No. 1C); |
d) | Luca Benatti, Ph.D. (Proposal No. 1D); |
e) | Daniel Bradbury (Proposal No. 1E); |
f) | Keith Gottesdiener, M.D. (Proposal No. 1F); |
g) | Nancy Miller-Rich (Proposal No. 1G); |
h) | Gino Santini (Proposal No. 1H); |
i) | Glenn Sblendorio (Proposal No. 1I); and |
j) | Daniel Welch (Proposal No. 1J); |
2. | To approve, on a non-binding, advisory basis, the compensation of the Company’s named executive officers (Proposal No. 2); and |
3. | To ratify the appointment of KPMG LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2018 (Proposal No. 3). |
As of the date of this proxy statement, the Company’s management knows of no other matter that will be presented for consideration at the Annual Meeting other than those matters discussed in this proxy statement. If any other matters properly come before the Annual Meeting and our 2015 annual report on Form 10-K, togethercall for a vote of stockholders, proxies properly submitted prior to the Annual Meeting will be voted in accordance with the amendment to our 2015 annual report on Form 10-K/A, are available for viewing, printing and downloading athttp://www.interceptpharma.com/proxy.html. On this website, record holders can also elect to receive future distributionsjudgment of ourthe proxy statements and annual reports to stockholders by electronic delivery.holders.
Additionally, you can find a copy of our annual report on Form 10-K, which includes our financial statements, forHow does the
fiscal year ended December 31, 2015, along with the amendment to our annual report on Form 10-K/A,Board recommend that I vote on the website of the Securities and Exchange Commission, or the SEC, atwww.sec.gov, or in the “Financial Information” section of the “Investors” section of our website atwww.interceptpharma.com. You may also obtain a printed copy of our annual report on Form 10-K, including our financial statements, along with the amendment to our annual report on Form 10-K/A, free of charge, from us by sending a written request to: Intercept Pharmaceuticals, Inc., 450 West 15th Street, Suite 505, New York, NY 10011, Attn: Corporate Secretary. Exhibits will be provided upon written request and payment of an appropriate processing fee.proposals?
The Board recommends that you vote your shares as follows:
1. | FOR the election, by separate resolutions, of each of the following ten nominees to serve on the Board of Directors until the 2019 Annual Meeting of Stockholders or until their respective successors are duly elected and qualified: |
a) | Paolo Fundarò (Proposal No. 1A); |
b) | Mark Pruzanski, M.D. (Proposal No. 1B); |
c) | Srinivas Akkaraju, M.D., Ph.D. (Proposal No. 1C); |
d) | Luca Benatti, Ph.D. (Proposal No. 1D); |
e) | Daniel Bradbury (Proposal No. 1E); |
f) | Keith Gottesdiener, M.D. (Proposal No. 1F); |
g) | Nancy Miller-Rich (Proposal No. 1G); |
h) | Gino Santini (Proposal No. 1H); |
i) | Glenn Sblendorio (Proposal No. 1I); and |
j) | Daniel Welch (Proposal No. 1J); |
2. | FOR the approval, on a non-binding, advisory basis, of the compensation of the Company’s named executive officers (Proposal No. 2); and |
3. | FOR the ratification of the appointment of KPMG LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2018 (Proposal No. 3). |
For Proposal Nos. 1A, 1B, 1C, 1D, 1E, 1F, 1G, 1H, 1I and 1J you may vote FOR or WITHHOLD your vote. For Proposal Nos. 2 and 3, you may vote FOR or AGAINST or ABSTAIN.
Attendance at the Annual Meeting is limited to our stockholders as of the record date. If you plan to attend the Annual Meeting in person, you will need to register in advance and present a valid government-issued photo identification (e.g., driver’s license or passport) to be admitted. Holders of record can register for the Annual Meeting by checking the appropriate box on their proxy card. Beneficial holders whose shares are held in “street name” through a bank, broker or other nominee will need to bring a letter from their bank, broker or other nominee that confirms that such holder is the Company Soliciting My Proxy?
The boardbeneficial owner of directorssuch shares as of Intercept is soliciting your proxythe record date. Beneficial holders whose shares are held in street name and who plan to vote at the 2016 annual meetingAnnual Meeting must also obtain a legal proxy, executed in their favor by or on behalf of stockholderstheir bank, broker or other nominee, to be held at our corporate headquarters, located at 450 West 15th Street, Suite 505, New York, NY 10011, on Tuesday, July 19, 2016, at 9:00 a.m. Eastern Time and any adjournments of the meeting, which we refer to as the annual meeting. The proxy statement along with the accompanying Notice of Annual Meeting of Stockholders summarizes the purposes of the meeting and the information you need to knowable to vote at the annual meeting.Annual Meeting, and should contact such bank, broker or other nominee for instructions on how to obtain a legal proxy. Holders of record will be verified against an official list. We reserve the right to deny admittance to anyone who cannot adequately show proof of share ownership as of the record date.
WeIt is important that your shares be represented and voted at the Annual Meeting and, whether or not you plan to attend the Annual Meeting in person, we encourage you to submit a proxy over the Internet or by completing and returning the proxy card. You do not need to attend the Annual Meeting in order to vote.
1. | Approval of Proposal Nos. 1A, 1B, 1C, 1D, 1E, 1F, 1G, 1H, 1I and 1J each requires a plurality of the votes cast in person or by proxy at the Annual Meeting. |
2. | Approval of Proposal No. 2 requires the affirmative vote of a majority of the shares cast affirmatively or negatively in person or by proxy at the Annual Meeting. |
3. | Approval of Proposal No. 3 requires the affirmative vote of a majority of the shares cast affirmatively or negatively in person or by proxy at the Annual Meeting. |
Abstentions may be specified for Proposal Nos. 2 and 3 and have made available to youno effect on the internet orresults of the relevant vote. Broker non-votes have sent you this proxy statement,no effect on the Noticeresults of the relevant vote.
A “quorum” must be present for the Annual Meeting to be held. A quorum will be present if the holders of Stockholders, the proxy card and a copy of our annual report on Form 10-K for the fiscal year ended December 31, 2015, along with a copymajority of the amendment to our annual report on Form 10-K/A, because you owned sharesvoting power of Intercept common stock on the record date. The Company intends to commence distributionall of the proxy materials to stockholders on or about June , 2016.
Only stockholders who owned our common stock at the close of business on May 23, 2016 areshares entitled to vote at the annual meeting. On this record date, there were 24,600,161Annual Meeting are present in person or represented by proxy at the Annual Meeting. Shares present in person or represented by proxy at the Annual Meeting, including broker non-votes and shares of our common stock outstanding and entitled to vote. Our common stock is our only class of voting stock.
Each share of our common stock that you own entitles youabstain or do not vote with respect to one vote.
Whether you plan to attendor more of the annual meeting or not, we urge you to vote by proxy. All shares represented by valid proxies that we receive through this solicitation, and that are not revoked,matters presented for stockholder approval, will be voted in accordance with your instructions oncounted for purposes of determining whether a quorum is present. If there is no quorum, the proxy card or as instructed viaAnnual Meeting may be adjourned, from time to time, by the internet. If you properly submit a proxy without giving specific voting instructions, yourchairman of the Annual Meeting.
If your shares are registered directly in your name throughwith our stock transfer agent, VStock Transfer, LLC, or if you have stock certificates registered in your name, you may vote by any of the following methods:
If your shares are held in “street name” (held in the name of a bank, broker or other holder of record), you will receive instructions from the holder of record. You must follow the instructions of the holder of record in order for your shares to be voted. Internet voting also will be offered to stockholders owning shares through certain banks and brokers. If your shares are not registered in your own name and you plan to vote your shares in person at the annual meeting, you should contact your broker or agent to obtain a legal proxy or broker’s proxy card and bring it to the annual meeting in order to vote.
The board of directors recommends that you vote as follows:
If any other matter is presented at the annual meeting, your proxy provides that your shares will be voted by the proxy holder listed in the proxy in accordance with his or her best judgment.
If you give us your proxy, you may change or revoke it at any time before the annual meeting. You may change or revoke your proxy in any one of the following ways:
Your most current vote, whether by internet or proxy card is the one that will be counted.
You may receive more than one proxy card if you hold shares of our common stock in more than one account, which may be in registered form or held in street name. Please vote in the manner described above under “How Do I Vote?” for each account to ensure that all of your shares are voted.
If your shares are registered in your name or if you have stock certificates, they will not be counted if you do not vote as described above under “How Dodo I Vote?vote?”
Generally, broker non-votes occur whenIf your shares are held by a broker in “street name” for a beneficial owner are notstreet name, your shares may be voted with respect to a particular proposal because (1) the broker has not received voting instructions from the beneficial owner and (2) the broker lacks discretionary voting power to vote those shares. Under applicable stock exchange rules,even if you do not give instructions to your brokerage firm subject to theseprovide the bank, broker or other nominee through which the shares are held with voting instructions. These entities have the authority, under applicable regulatory rules, it will still be able to vote your shares with respect to certain “discretionary” items, but will not be allowed to vote your shares with respect to certain “non-discretionary” items. A broker is entitled to vote shares held for a beneficial owner on “routine” matters, such as the adoption of an amendment to the certificate of incorporation to increase the number of authorized shares of common stock (Proposal 2) and the ratification of the appointment of independent auditors (Proposal 4), withoutwhich their customers do not provide voting instructions from the beneficial owner of those shares. On the other hand, a broker may not be entitled to vote shares held for a beneficial owner on certain non-routine items, such as the election of directors, absent instructions from the beneficial owner of such shares. Broker non-votes count for purposes of determining whether a quorum exists but do not count as entitled to vote with respect to individual proposals.“routine” matters.
TheProposal No. 3 is considered a “routine” matter for which these entities may vote unvoted shares. Proposal Nos. 1A, 1B, 1C, 1D, 1E, 1F, 1G, 1H, 1I, 1J and 2 are not considered “routine” matters for which these entities may vote unvoted shares.
Accordingly, if you hold your shares in street name, the bank, broker or other nominee through which the shares are held is not permitted to vote your shares with respect to the election of directors (Proposal 1) andor the approval, on a non-binding, advisory vote onbasis, of the compensation of the Company’s named executive compensation, or “say-on-pay” vote (Proposal 3), are both “non-discretionary” items, meaning thatofficers if you have not provided instructions. This is called a “broker non-vote.” We strongly encourage you to submit your proxy and exercise your right to vote as a stockholder.
If you return a signed and dated proxy card or otherwise submit a proxy without voting on how to vote with respect to any of these proposals, your brokerage firm will not vote with respect to thata proposal, and your shares will be countedvoted on such proposal in the manner set forth below:
1. | FOR the election, by separate resolutions, of each of the following ten nominees to serve on the Board of Directors until the 2019 Annual Meeting of Stockholders or until their respective successors are duly elected and qualified: |
a) | Paolo Fundarò (Proposal No. 1A); |
b) | Mark Pruzanski, M.D. (Proposal No. 1B); |
c) | Srinivas Akkaraju, M.D., Ph.D. (Proposal No. 1C); |
d) | Luca Benatti, Ph.D. (Proposal No. 1D); |
e) | Daniel Bradbury (Proposal No. 1E); |
f) | Keith Gottesdiener, M.D. (Proposal No. 1F); |
g) | Nancy Miller-Rich (Proposal No. 1G); |
h) | Gino Santini (Proposal No. 1H); |
i) | Glenn Sblendorio (Proposal No. 1I); and |
j) | Daniel Welch (Proposal No. 1J); |
2. | FOR the approval, on a non-binding, advisory basis, of the compensation of the Company’s named executive officers (Proposal No. 2); |
3. | FOR the ratification of the appointment of KPMG LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2018 (Proposal No. 3); and |
4. | In the manner that the proxy holders deem appropriate for any other proposal to be considered at the Annual Meeting. |
If you are a holder of record, you may revoke your proxy before it is voted at the Annual Meeting by:
If youryou are a beneficial holder whose shares are held in street name, and you do not providemay submit new voting instructions toby contacting the bank, broker or other nominee that holdsthrough which you hold your shares as described above, the bank, broker or other nominee that holds your shares has the authority to vote your unvoted shares only on the ratification of the appointment of our independent registered public accounting firm (Proposal 3) without receiving instructions from you, because this is considered a “discretionary” item.shares. You may
For any proposals requiring the affirmative vote of those shares present and entitled to vote, broker non-votes will not affect the outcome of the vote. Because the approval of Proposal 2 requires the affirmative vote of a majority of all outstanding shares, broker non-votes have the same effect as a vote “AGAINST” that proposal.
Therefore, we encourage you to provide voting instructions to your bank, broker or other designee. This ensures your shares will be voted at the annual meeting and in the manner you desire.
also vote in person at the Annual Meeting if you obtain a legal proxy, executed in your favor by or on behalf of your bank, broker or other nominee, as described elsewhere in this proxy statement.
This proxy is solicited on behalf of the Board. The Company will pay the cost of distributing this proxy statement and related materials. Upon request, the Company will reimburse banks, brokers and other nominees for reasonable expenses they incur in forwarding proxy materials to beneficial owners of the Company’s shares. The Company has retained Innisfree M&A Incorporated to assist in the solicitation of proxies for a fee of approximately $17,500, plus out-of-pocket expenses. Certain of the Company’s directors, officers and employees may participate in the solicitation of proxies, including electronically or by mail or telephone, without additional compensation.
If you receive more than one set of proxy materials, your shares may be registered in more than one name or in different accounts. Please submit proxies for all of your shares.
We have adopted a procedure called “householding” under which only one Annual Report and one proxy statement will be mailed to multiple stockholders sharing an address unless the Company receives contrary instructions from one or more of the stockholders sharing an address. If your household has received only one Annual Report and one proxy statement and you wish to receive separate copies of these documents, please follow the instructions set forth under “Householding” starting on page 57.
We will keep all the proxies, ballots and voting tabulations private. We only let our Inspector of Election, VStock Transfer, LLC, examine these documents. Management will not know how you voted on a specific proposal unless it is necessary to meet legal requirements. We will, however, forward to management any written comments you provide on the proxy card or through other means.
The preliminary voting results will be announced at the annual meeting, and we will publish preliminary, or final results if available,Meeting in a Current Report on Form 8-K within four business days of the annual meeting. If final results are unavailable at the time we file the Form 8-K, then we will file an amended report on Form 8-K to disclose the final voting results within four business days after the final voting results are known.
We will pay all of the costs of soliciting these proxies. Our directors and employees may solicit proxies in person or by telephone, fax or email. We will pay these employees and directors no additional compensation for these services. We will ask banks, brokers and other institutions, nominees and fiduciaries to forward these proxy materials to their principals and to obtain authority to execute proxies. We will then reimburse them for their expenses.
The presence, in person or by proxy, of the holders of a majority of the voting power of all outstanding shares of our common stock entitled to vote at the annual meeting is necessary to constitute a quorum at the annual meeting. Votes of stockholders of record who are present at the annual meeting in person or by proxy, abstentions, and broker non-votes are counted for purposes of determining whether a quorum exists.
The annual meeting will be held at 9:00 a.m. Eastern Time on Tuesday, July 19, 2016 at our corporate headquarters, located at 450 West 15th Street, Suite 505, New York, NY 10011. You need not attend the annual meeting in order to vote.
SEC rules concerning the delivery of annual disclosure documents allow us or your broker to send a single set of our proxy materials to any household at which two or more of our stockholders reside, if we or your broker believe that the stockholders are members of the same family. This practice, referred to as “householding,” benefits both you and us. It reduces the volume of duplicate information received at your household and helps to reduce our expenses. The rule applies to our annual reports, proxy statements and information statements. Once you receive notice from your broker or from us that communications to your address will be “householded,” the practice will continue until you are otherwise notified or until you revoke your consent to the practice. Stockholders who participate in householding will continue to have access to and utilize separate proxy voting instructions.
If your household received a single set of proxy materials this year, but you would prefer to receive your own copy, please contact our transfer agent, VStock Transfer, LLC, by calling their toll free number, 1-855-9VSTOCK.
If you do not wish to participate in “householding” and would like to receive your own set of Intercept’s proxy materials in future years, follow the instructions described below. Conversely, if you share an address with another Intercept stockholder and together both of you would like to receive only a single set of proxy materials, follow these instructions:
Most stockholders can elect to view or receive copies of future proxy materials over the internet instead of receiving paper copies in the mail.
You can choose this option and save us the cost of producing and mailing these documents by going tohttp://www.interceptpharma.com/proxy.html and following the instructions relating to the electronic delivery of proxy materials.Meeting.
This proxy statement contains forward-looking statements, including, but not limited to, statements regarding the progress, timing and results of our clinical trials, including our clinical trials for the treatment of nonalcoholic steatohepatitis (“NASH”), the safety and efficacy of our approved product, Ocaliva (obeticholic acid or “OCA”), the potential approval of OCA in indications other than primary biliary cholangitis (“PBC”), the timing and potential commercial success of OCA and any other product candidates we may develop and our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth.
These statements constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates, and we undertake no obligation to update any forward-looking statement except as required by law. These forward-looking statements are based on estimates and assumptions by our management that, although believed to be reasonable, are inherently uncertain and subject to a number of risks. The following table sets forth certain information regardingrepresent some, but not necessarily all, of the beneficial ownershipfactors that could cause actual results to differ materially from historical results or those anticipated or predicted by our forward-looking statements: our ability to successfully commercialize Ocaliva for PBC; our ability to maintain our regulatory approval of Ocaliva for PBC in the United States, Europe, Canada, Israel and other jurisdictions in which we have or may receive marketing authorization; the initiation, timing, cost, conduct, progress and results of our common stock as of May 23, 2016, by:
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Shares of common stockproduct candidates, including OCA for NASH; conditions that may be acquiredimposed by an individual or group within 60 days of May 23, 2016, pursuant to derivative securities,regulatory authorities on our marketing approvals for our products and product candidates, such as options, warrants the need for clinical outcomes data (and not just results based on achievement of a surrogate endpoint), and any related restrictions, limitations and/or restricted stock units, are deemed towarnings contained in the label of any of our products or product candidates; any potential side effects associated with Ocaliva for PBC or our product candidates that could delay or prevent approval, require that an approved product be outstanding fortaken off the purposemarket, require the inclusion of computingsafety warnings or precautions or otherwise limit the percentage ownershipsale of such individualproduct or group, butproduct candidate; our ability to maintain our relationships with, and the performance of, third-party vendors upon whom we are not deemedsubstantially dependent, including contract research organizations for our clinical trials and our third-party suppliers and manufacturers; our ability to identify, develop and commercialize our products and product candidates; our ability to obtain and maintain intellectual property protection for our products and product candidates; our ability to successfully commercialize our product candidates, if approved; the size and growth of the markets for our products and product candidates and our ability to serve those markets; the degree of market acceptance of Ocaliva for PBC and, if approved, our product candidates, which may be outstandingaffected by the ability of patients and healthcare providers to obtain coverage or reimbursement from payors for our products and the purposeextent to which such coverage or reimbursement is provided; our ability to establish and maintain an effective sales and marketing infrastructure directly or through collaborations with third parties; competition from existing drugs or new drugs that become available; costs and outcomes relating to any securities, intellectual property, employment, product liability or other litigation; our collaborators’ election to pursue research, development and commercialization activities; our ability to attract and maintain collaborators with development, regulatory and commercialization expertise; our need for and ability to obtain additional financing; our estimates regarding expenses, revenues and capital requirements and the accuracy thereof; our use of computingcash and short-term investments; our ability to acquire, license and invest in businesses, technologies, product candidates and products; our ability to attract and retain key personnel to manage our business effectively; our ability to manage the percentage ownershipgrowth of anyour operations, infrastructure, personnel, systems and controls; our ability to obtain and maintain adequate insurance coverage; and the other person shownrisks and uncertainties identified in our periodic filings filed with the table. Percentage of ownership is based on an aggregate of 24,600,161 shares of common stock outstanding as of May 23, 2016.
Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole votingU.S. Securities and investment power with respect to all shares of common stock shown to be beneficially owned by them, based on information provided to us by such stockholders. Unless otherwise indicated, the address for each director, director nominee and executive officer is: c/o Intercept Pharmaceuticals, Inc.Exchange Commission (the “SEC”), 450 West 15th Street, Suite 505, New York, NY 10011.including our Annual Report.
Beneficial Owner | Number of Shares of Common Stock Beneficially Owned | Percentage of Common Stock Beneficially Owned | ||||||
Directors, Director Nominees and Executive Officers | ||||||||
Mark Pruzanski, M.D.(1) | 844,383 | 3.4 | % | |||||
David Shapiro, M.D.(2) | 87,647 | * | ||||||
Barbara Duncan(3) | 97,471 | * | ||||||
Rachel McMinn, Ph.D.(4) | 22,930 | * | ||||||
Lisa Bright(5) | 30,910 | * | ||||||
Srinivas Akkaraju, M.D., Ph.D.(6) | 18,546 | * | ||||||
Luca Benatti, Ph.D.(7) | 4,059 | * | ||||||
Paolo Fundaro(8) | 19,625 | * | ||||||
Gino Santini(9) | 2,467 | * | ||||||
Glenn Sblendorio(10) | 3,219 | * | ||||||
Jonathan Silverstein(11) | 1,136,910 | 4.6 | % | |||||
Klaus Veitinger, M.D., Ph.D.(12) | 12,793 | * | ||||||
Daniel Welch(13) | 2,467 | * | ||||||
All current executive officers, directors and director nominees as a group (13 persons)(14) | 2,283,427 | 9.2 | % | |||||
Daniel Bradbury | — | — | ||||||
Keith Gottesdiener, M.D. | — | — | ||||||
Five Percent Stockholders | ||||||||
Genextra S.p.A.(15) | 6,454,953 | 26.2 | % | |||||
FMR LLC(16) | 3,649,728 | 14.8 | % | |||||
Carmignac Gestion(17) | 1,319,887 | 5.4 | % | |||||
Capital World Investors(18) | 1,567,537 | 6.4 | % | |||||
Ameriprise Financial, Inc.(19) | 2,863,068 | 11.6 | % |
The Board currently consists of Directors
Eachten directors, each of ourwhom is standing for election at the Annual Meeting. Our directors are elected annually to serve one-year terms.
The following table sets forth the names, ages, tenures and hold office until their successors are duly elected and qualified or until the earlier of their death, resignation or removal. Our board of directors currently consists of nine members, all of whom were elected as directors at our 2015 Annual Meeting of Stockholders. Jonathan Silverstein and Klaus Veitinger will not stand for re-election to our board of directors. The board of directors, upon the recommendation of the nominating and governance committee has nominated Daniel Bradbury and Keith Gottesdiener, M.D. to be newly elected as a members of our board at the 2016 Annual Meeting of Stockholders.
Our restated certificate of incorporation and our restated bylaws provide that the authorized number of directors may be changed only by resolution of the board of directors. Our restated bylaws also provide that our directors may be removed with or without cause by the affirmative vote of the holders of a majority of the votes that all our stockholders would be entitled to cast in an annual election of directors, and our restated certificate of incorporation and amended and restated bylaws provide that any vacancy on our board of directors, including a vacancy resulting from an increase in the size of our board, may be filled only by vote of a majoritymemberships of our directors then in office.
Eachas of the nominees listed below has been nominated by the board, upon the recommendation of the nominating and governance committee, for election or re-election as a director until the Annual Meeting of Stockholders to be held in 2017 and until their respective successors are elected, or until their earlier death, resignation or removal. Each of the nominees, other than Daniel Bradbury and Keith Gottesdiener, presently serves on the board.
Set forth below are the names of the persons nominated as directors, their ages, their offices in the Company, if any, their principal occupations or employment for at least the past five years, the length of their tenure as directors and the names of other public companies in which such persons hold or have held directorships during the past five years. Additionally, information about the specific experience, qualifications, attributes or skills that led to our board of directors’ conclusion at the time of filing of this proxy statement that each person listed below should serve as a director is set forth below:April 27, 2018.
Director | Age | Director Since | ||||||
Paolo Fundarò(1) | 44 | 2006 | ||||||
Mark Pruzanski, M.D. | 50 | 2002 | ||||||
Srinivas Akkaraju, M.D., Ph.D.(2)(3) | 50 | 2012 | ||||||
Luca Benatti, Ph.D.(3)(4) | 57 | 2014 | ||||||
Daniel Bradbury(4)(5) | 57 | 2016 | ||||||
Keith Gottesdiener, M.D.(3) | 64 | 2016 | ||||||
Nancy Miller-Rich | 59 | 2018 | ||||||
Gino Santini(2)(5)(6) | 61 | 2015 | ||||||
Glenn Sblendorio(5) | 62 | 2014 | ||||||
Daniel Welch(2)(4) | 60 | 2015 |
(1) |
(2) | Member of |
(3) | Member of |
(4) | Member of |
(5) | Member of the Audit Committee. |
(6) | Lead Independent Director. |
The Board has nominated Paolo Fundarò, Mark Pruzanski, M.D., Srinivas Akkaraju, M.D., Ph.D., Luca Benatti, Ph.D., Daniel Bradbury, Keith Gottesdiener, M.D., Nancy Miller-Rich, Gino Santini, Glenn Sblendorio and Daniel Welch for election as directors at the Annual Meeting. The election of each of the nominees recommended for election as directors requires a plurality of the votes cast in person or by proxy at the Annual Meeting. If elected, each of Messrs. Fundarò, Bradbury, Santini, Sblendorio and Welch, Drs. Pruzanski, Akkaraju, Benatti and Gottesdiener and Ms. Miller-Rich will serve on the Board until the 2019 Annual Meeting of Stockholders or until his or her respective successor is duly elected and qualified. If any of Messrs. Fundarò, Bradbury, Santini, Sblendorio or Welch, Drs. Pruzanski, Akkaraju, Benatti or Gottesdiener or Ms. Miller-Rich should become unable to accept election, the persons named as proxies may vote for a substitute nominee selected by the Board or the named proxies. Each of Messrs. Fundarò, Bradbury, Santini, Sblendorio and Welch, Drs. Pruzanski, Akkaraju, Benatti and Gottesdiener and Ms. Miller-Rich has agreed to serve if elected, and the Company’s management has no reason to believe that any nominee will be unable to serve.
The name, principal occupation and other information concerning the nominees recommended for election as directors at the Annual Meeting, including the specific experience, qualifications, attributes and skills that led the Board to determine that the nominees should serve as directors, are set forth below. There are no family relationships between or among any of our directors or executive officers. For more information regarding the independence of our directors, please see “Board of Directors and Governance—Independence.”
Paolo FundaroFundarò has served as a member of our board of directorsBoard since 2006 and has acted as our chairmanChairman since October 2015. Mr. FundaroFundarò has been Genextra’s chief financial officerChief Financial Officer of Genextra S.p.A., an investment firm focused on the life sciences industry, since its inception in 2004. Mr. Fundarò also has served as Managing Director of certain of Genextra’s portfolio companies, including Congenia S.r.l. since 2004 and Dac S.r.l. from 2004 until
December 2016. Before joining Genextra, Mr. FundaroFundarò was directorDirector of financeFinance and strategic planningStrategic Planning for the Fastweb Group from 2000 to 2004. Previously, heEarlier in his career, Mr. Fundarò worked for investment banks including Salomon Smith Barney (now Citigroup) and Donaldson, Lufkin & Jenrette (now Credit Suisse). Mr. Fundaro hasFundarò serves on the board of directors of a number of private companies. Mr. Fundarò received a degree in Business Management from Bocconi University in Milan, Italy.
We believe that Mr. Fundaro possesses specific attributes that qualify him to serve as a member of our board of directors, including hisFundarò’s significant experience in corporate finance and strategic planning, as well as his experienceexpertise in building, investing in and growing companies in diverse industries, including the biopharmaceutical industry.industry, contributed to the Board’s conclusion that Mr. Fundarò should be nominated to serve an additional term as a director of the Company.
Mark Pruzanski, M.D. is a co-founderone of our companyco-founders and has served as our chief executive officerPresident and president,Chief Executive Officer, and has beenas a member of our board of directors,Board, since our inception in 2002. HeDr. Pruzanski has over 1520 years of experience in life sciences company management, venture capital and strategic consulting. Prior to co-founding the Company, Dr. Pruzanski was previously a venture partner at Apple Tree Partners, an early stage life sciences venture capital firm that he co-founded, in 1999. Prior to that, he wasand an entrepreneur-in-residence at Oak Investment Partners.Partners, a venture capital firm. Dr. Pruzanski is a co-author of a number of scientific publications and is named as an inventor on several of our patents. Dr. Pruzanski currently serves on the boards of the Emerging Companies Section of the Biotechnology Innovation Organization (BIO), a biotechnology-focused trade association, and the Foundation for Defense of Democracies, a non-profit policy institute focusing on foreign policy and national security. Dr. Pruzanski received his M.D. from McMaster University in Ontario,Hamilton, Canada, a M.A. degree in International Affairs from the Johns Hopkins University School of Advanced International Studies in Bologna, Italy and Washington, D.C., and a bachelor’s degree from McGill University in Montreal, Quebec. He currently also serves on the boardsCanada.
Dr. Pruzanski’s comprehensive knowledge of the Emerging Company Section of the Biotechnology Industry Association (BIO) and the Foundation for the Defense of Democracies, a think tank in Washington, D.C. Dr. Pruzanski is a co-author of a number of scientific publicationsits approved product, development pipeline, management team, strategy and an inventor of several patents relating to our product candidates and scientific discoveries.
We believe that Dr. Pruzanski’s perspective and the experience he bringspartners, as our chief executive officer and president andwell as one of our company’s founders, together with his historic knowledge of our company and our product candidates, operational expertise and continuity to our board of directors, and his experience in managing, advising and investing in companies within the life sciences industry, qualify himcompanies, contributed to the Board’s conclusion that Dr. Pruzanski should be nominated to serve an additional term as a memberdirector of our board of directors.the Company.
Srinivas Akkaraju, M.D., Ph.D. has served as a member of our board of directorsBoard since October 2012. Since February 2016,March 2017, Dr. Akkaraju has been the Managing General Partner of Samsara BioCapital, a senior advisor to Sofinnova Ventures.venture capital firm that he co-founded. From April 2013 to February 2016,March 2017, Dr. Akkaraju served aswas a general partnerGeneral Partner and then a Senior Advisor of Sofinnova Ventures.Ventures, a venture capital firm focused on the life sciences industry. From January 2009 until April 2013, Dr. Akkaraju was a managing directorManaging Director of New Leaf Venture Partners, L.L.C.an investment firm focused on the healthcare technology sector. From 2006 to 2008, Dr. Akkaraju served as a managing director atManaging Director of Panorama Capital, LLC, a private equityventure capital firm founded bythat he co-founded along with other members of the former venture capital investment team of J.P. Morgan Partners, LLC, a private equity division of JPMorgan Chase & Co. Prior to co-founding Panorama Capital, heDr. Akkaraju was with J.P. Morgan Partners, which he joined in 2001 and of which he became a partner in 2005. From 1998 to 2001, he wasDr. Akkaraju worked in business and corporate development at Genentech, Inc. (a wholly owned(now a member of the Roche Group), a biotechnology company, most recentlycompany. Dr. Akkaraju has been a director of Seattle Genetics, Inc. since 2003, Versartis Inc. since July 2013, aTyr Pharma, Inc. since March 2015 (but will not be standing for re-election as senior manager.a director of aTyr Pharma, Inc. when his current term expires in May 2018) and Syros Pharmaceuticals, Inc. since June 2017. Dr. Akkaraju also serves on the board of directors of a number of private companies. During the prior five years, Dr. Akkaraju previously served as a director of ZS Pharma, Inc. Dr. Akkaraju received his M.D. and a Ph.D. in Immunology from Stanford University. He received his undergraduate degrees in Biochemistry and Computer Science from Rice University.
Dr. Akkaraju’s extensive experience in venture capital, in-depth knowledge of life sciences companies and financial expertise, as well as his scientific background and experience as a member of the board of directors of other public companies, contributed to the Board’s conclusion that Dr. Akkaraju serves and has served on the boards of directors and board committees of numerous public and private companies. Dr. Akkaraju servesshould be nominated to serve an additional term as a director of Seattle Genetics, Inc., Versartis Inc. and aTyr Pharma, Inc. Previously, Dr. Akkaraju served as a director on the boards of Barrier Therapeutics, Inc., Eyetech Pharmaceuticals, Inc., Synageva Biopharma Corp. and ZS Pharma, Inc., all publicly traded biotechnology companies, and Amarin Corporation plc, a foreign publicly traded biotechnology company.
We believe that Dr. Akkaraju’s scientific background, coupled with experience in private equity and venture capital investing, qualify him to serve as a member of our board of directors.Company.
Luca Benatti, Ph.D. has served as a member of our board of directorsBoard since July 2014. Dr. Benatti has over 25 years of experience in the biopharmaceutical industrypharmaceutical and biotechnology industries. Since June 2012, Dr. Benatti has been servingserved as the chief executive officerChief Executive Officer and a director of EryDel S.p.A., a drug delivery company focused on rare diseases, since June 2012.diseases. From 19991998 until May 2012, Dr. Benatti was the founder and chief executive officerChief Executive Officer of Newron Pharmaceuticals
S.p.A., a publicly traded biopharmaceutical company listed on the Swiss Exchange.that Dr. Benatti co-founded. Under his guidance,Dr. Benatti’s leadership, Newron developed a pipeline of potential therapies, with its most advanced compound, Xadago, recently approved in Europe and under regulatory review in the United States for the treatment of Parkinson’s disease. He also was instrumentaldisease in finalizing multimillion licensing deals with Merck Serono, Meiji Seikavarious jurisdictions, and Zambon Pharma S.p.A., and in the acquisition of Hunter Fleming, a U.K.-based biotechnology company.undertook significant business development activities. From 1985 to 1998, heDr. Benatti held various R&Dresearch and development positions at Farmitalia, Pharmacia and Pharmacia & Upjohn.Upjohn and its predecessor companies. Dr. Benatti has authored several scientific publications and holds a number of patents. Dr. Benatti currently serves as a director of Newron Pharmaceuticals S.p.A. Dr. Benatti also serves as chairman of Italian Angels for Biotech and as a member of the board of Assobiotec, the Italian association for the development of biotechnology. Dr. Benatti graduated from and performed his post-doctoral training at the Milano Genetics Institute. He serves as director on the board of Newron (SIX: NWRN), as chairman of the scientific advisory board of Zambon, as chairman of the Italian
Angels for Biotech association, as a member of the board of Assobiotec, the Italian Biotech Association, and member of the jury of the European Biotechnica Award. He has authored several scientific publications and holds a number of patents.
We believe that Dr. Benatti’s scientific background, together with his significant experience in drug development, financing,the pharmaceutical and biotechnology industries, business development, financial and regulatory matters at other biopharmaceutical companies, qualify himstrategic leadership expertise and thorough understanding of pharmaceutical drug discovery and development contributed to the Board’s conclusion that Dr. Benatti should be nominated to serve on our boardan additional term as a director of directors.the Company.
Daniel Bradbury has been nominated for election toserved as a member of our board of directors at our 2016 annual meeting.Board since July 2016. Mr. Bradbury has over 30 years of experience leading global, fast-growing life sciences companies. Since 2012,May 2017, Mr. Bradbury has served as Chairman and Chief Executive Officer of Equillium, Inc., a private biopharmaceutical company that Mr. Bradbury co-founded. In addition, Mr. Bradbury has been a managing memberManaging Member of BioBrit, LLC, a life sciences consulting and investment firm.firm, since 2012. Previously, Mr. Bradbury served as the presidentheld several senior positions at Amylin Pharmaceuticals, Inc., a biopharmaceutical company focused on diabetes and chief executive officermetabolic disorders, including President and Chief Executive Officer from March 2007 until its acquisition by Bristol-Myers Squibb Company in August 2012, President and Chief Operating Officer from 2006 to 2007, Chief Operating Officer from 2003 to 2006, Executive Vice President from 2000 to 2003 and Senior Vice President, Corporate Development from 1998 to 2000. Mr. Bradbury also served as a director of Amylin Pharmaceuticals, a biopharmaceutical company based in San Diego, California, focused on metabolic diseases, from March 2007 until it was acquired by the Bristol-Myers Squibb Company inJune 2006 to August 2012. Prior to being named president and chief executive officer, Mr. Bradbury held positions of increasing responsibility atjoining Amylin sincein 1994, including president (2006 – 2007), chief operating officer (2003 – 2006) and executive vice president (2000 – 2003). Before joining Amylin, Mr. Bradbury worked in marketingat SmithKline Beecham Pharmaceuticals and sales rolesits predecessor companies for ten years at SmithKline Beecham Pharmaceuticals.in various sales and marketing positions. Mr. Bradbury currentlyhas been a director of Geron Corporation since September 2012 and Corcept Therapeutics Incorporated since October 2012. Mr. Bradbury also serves on the board of directors of a number of private companies. During the prior five years, Mr. Bradbury previously served as a director of Corcept Therapeutics, Inc., Geron Corporation and Illumina, Inc., all of which are NASDAQ-listed biopharmaceutical companies, and Biocon Limited, a biopharmaceutical company tradedBioMed Realty Trust, Inc. In addition, Mr. Bradbury serves on the National Stock ExchangeKeck Graduate Institute’s Board of India. He is an advisory board member of Investor Growth Capital, and is a member of the advisory committee of BioMed Ventures. Mr. Bradbury also serves onTrustees, the University of California San Diego’s Rady School of Management’sManagement Dean’s Advisory Council and the Keck Graduate Institute’s Board of Trustees.BioMed Ventures Advisory Committee. Mr. Bradbury received a Bachelor of Pharmacy from Nottingham University and a Diploma in Management Studies from Harrow and Ealing Colleges of Higher Education in the United Kingdom.
We believeMr. Bradbury’s extensive experience in the biopharmaceutical industry, demonstrated leadership and operational skills and significant research, development and commercialization expertise, as well as his experience as a member of the board of directors of other public companies, contributed to the Board’s conclusion that Mr. Bradbury’s significant experience in leading biopharmaceutical companies that have brought innovative therapies to market and his deep understanding of strategic and operational understanding of rapidly growing, global life science companies qualifies himBradbury should be nominated to serve on our boardan additional term as a director of directors.the Company.
Keith Gottesdiener, M.D. has been nominated for election toserved as a member of our board of directors at our 2016 annual meeting.Board since July 2016. Since October 2011, Dr. Keith Gottesdiener has been the chief executive officerChief Executive Officer and a member of the board of directors at Rhythm Holding Co., LLC since October 2011, a holding company with two subsidiaries, Rhythm Pharmaceuticals and Motus Therapeutics. Dr. Gottesdiener has also served as the chief executive officer and a board memberdirector of Rhythm Pharmaceuticals, and Motus Therapeutics since October 2011. HeInc., a biopharmaceutical company. Dr. Gottesdiener joined Rhythm after 16 years at Merck Research Laboratories. Dr. Gottesdiener joined Merck early clinical development in 1995, helping to transition compounds from the bench to the bedside and through to proof of concept. HeLaboratories, where he held positions of increasing responsibility, eventuallyincluding serving as a leader of Merck’s late clinical development organization from 2006 to 2011 and leading Merck’s early clinical development across all therapeutic areas from 2001 through early 2006. From 2006 to 2011, he was a leader of Merck’s late clinical development organization, first overseeingIn such roles, Dr. Gottesdiener oversaw the development of Merck’s infectious diseases and vaccine products through pivotal trials, registration, and life cycle management, including GardasilTM (HPV Vaccine), RotateqTM (rotavirus vaccine), ZostavaxTM (zoster vaccine) and IsentressTM (HIV integrase inhibitor), among others. In 2008, Dr. Gottesdiener was appointed Late Stage Therapeutic Group Leader, and in that role led Merck’s late-stage clinical development efforts (from Phase 2 through patent expiry) across all therapeutic areas. After Merck’s merger with Schering PloughSchering-Plough Corporation in 2009, he continued as Co-Head of Late Development. From 2009 through 2011, he served as Merck’s Vice President, Clinical Sciences and Therapeutic Area Group Leader.
Dr. Gottesdiener received his B.A. from Harvard College and his M.D. from the University of Pennsylvania. He completed his residency and fellowship at the Brigham and Women’s Hospital-Beth Israel Medical Center-Dana Farber Cancer Institute Children’s Hospital programs. After his fellowship, Dr. Gottesdiener did postdoctoral research in the
laboratory of Dr. Jack Strominger at Dana Farber Cancer Institute working on the molecular immunology of the T-cell receptor. In 1986, he joined the faculty as an assistant professor at Columbia University, started an independent research laboratory with NIH RO-1 funding, focusing on gene transcription, and was Associate Clinical Professor of Medicine at the time he left to join Merck in 1995.
We believeDr. Gottesdiener’s extensive experience as a senior executive in the pharmaceutical industry, drug development and regulatory affairs expertise and research work for both medical and academic institutions, as well as his experience as a member of the board of directors of other public companies, contributed to the Board’s conclusion that Dr. Gottesdiener’s scientific background and significant experience in leading the development of numerous therapies to market, together with his leadership experience at global biopharmaceutical companies, qualify himGottesdiener should be nominated to serve on our boardan additional term as a director of directors.the Company.
Gino SantiniNancy Miller-Rich has served as a member of our Board since April 2018. Ms. Miller-Rich has 35 years of experience in the healthcare industry, with significant expertise in business development and commercial strategy. Since September 2017, Ms. Miller-Rich has served as a consultant to the pharmaceutical industry. Previously, Ms. Miller-Rich served in a number of leadership roles at Merck & Co., Inc. and, prior to the merger of the two companies, at Schering-Plough Corporation, including most recently as Senior Vice President, Global Human Health Business Development & Licensing, Strategy and Commercial Support from November 2013 to September 2017 and as Group Vice President, Consumer Care Global New Ventures and Strategic Commercial Development from January 2007 to November 2013. Prior to joining Schering-Plough in 1990, Ms. Miller-Rich served in a variety of commercial and marketing roles at Sandoz Pharmaceuticals and Sterling Drug, Inc. She is currently a director of UDG Healthcare plc, as well as a board member of directorsa number of not-for-profit entities. She received her B.S. in Business Administration, Marketing from Ithaca College in Ithaca, New York.
Ms. Miller-Rich’s significant experience in the healthcare industry, as well as her business development and commercial strategy expertise, contributed to the Board’s conclusion that Ms. Miller-Rich should be nominated to serve an additional term as a director of the Company.
Gino Santini has served as our Lead Independent Director since February 2018 and as a member of our Board since November 2015. From 1983 to December 2010, Mr. Santini held a variety of commercial, operational and operationalleadership roles of increasing responsibility at Eli Lilly and Company, a public global pharmaceutical company, serving most recently from April 2007 to December 2010 asincluding Senior Vice President, Corporate Strategy and Business Development where he led corporate strategy and long-range planning, mergers and acquisitions, new product licensing and the expansion of Lilly Ventures in the United States and China. During his tenure at Eli Lilly, Mr. Santini held various leadership positions of increasing responsibility, including manager of various international regions andfrom 2007 to 2010, Senior Vice President of Corporate Strategy and Policy from 2004 to 2007.2007, President of U.S. Operations from 1999 to 2004 and President of the Women’s Health Franchise from 1997 to 1999. Mr. Santini serves on the boardshas been a director of directors of the following public biopharmaceutical companies: AMAG Pharmaceuticals, Inc., since 2012; CollegiumFebruary 2012, Allena Pharmaceuticals, Inc., since 2012;February 2012, Horizon Pharma plc (and its predecessor company), since 2012;March 2012 and Vitae Pharmaceuticals,Collegium Pharmaceutical, Inc., since 2014. Mr. Santini was previously a director of Sorin, S.p.A., a global public medical device company, until its acquisition in October 2015.July 2012. Mr. Santini also serves as a director for a number of private biopharmaceutical companies such as Intarcia Therapeutics, Inc., Allena Pharmaceuticals, Inc. and Artax Biopharma Inc. Mr. Santini is a past chairman of the board of the National Pharmaceutical Council and of Noble of Indiana, a non-profit agency serving individuals with developmental disabilities. He also served on the board of directors for United Way andof a number of private companies. During the executive committee and the boardprior five years, Mr. Santini previously served as a director of directors of the Indianapolis Chamber of Commerce. HeVitae Pharmaceuticals, Inc. Mr. Santini holds an undergraduate degree in mechanical engineering from the University of Bologna and an M.B.A. from the Simon School of Business, University of Rochester.
We believe that Mr. Santini’s extensive experience in a variety ofthe pharmaceutical industry, demonstrated leadership and operational skills and leadership roles at Eli Lilly, including hissignificant domestic and international commercial, corporate strategy, business development and transactiontransactional experience, qualify him to serveas well as his experience as a member of ourthe board of directors.directors of other public companies, contributed to the Board’s conclusion that Mr. Santini should be nominated to serve an additional term as a director of the Company.
Glenn Sblendorio has served as a member of our board of directorsBoard since February 2014. In April 2016, Mr. Sblendorio joinedhas over 30 years of experience in the pharmaceutical and biotechnology industries. Mr. Sblendorio has been Chief Executive Officer, President and a director of Ophthotech Corporation since July 2017, January 2017 and May 2017, respectively. Mr. Sblendorio also previously served at Ophthotech Corporation as its executive vice president, chief operating officerExecutive Vice President and chief financial officer.Chief Operating Officer from April 2016 to January 2017, Chief Financial Officer and Treasurer from April 2016 until April 2017 and a director from July 2013 through March 2016. Prior to joining Ophthotech Corporation, Mr. Sblendorio served as the presidentPresident and chief financial officerChief Financial Officer of The Medicines Company from February 2012 throughMarch 2006 until December 2015. From March 2006 to February 2012, he served as chief financial officer and executive vice president of The Medicines Company. From November 2005 until he joined The Medicines Company, Mr. Sblendorio served as a consultant to a company in the pharmaceutical industry. Previously, Mr. Sblendorio was executive vice presidentExecutive Vice President and chief financial officerChief Financial Officer of Eyetech Pharmaceuticals, Inc. from February 2002 until it was acquired by OSI Pharmaceuticals, Inc. in November 2005. From July 2000 to February 2002, Mr. Sblendorio also held the positionserved as Senior Vice President of chief executive officer and managing director of MPM Capital Advisors. His other pharmaceutical experience also includes 12 yearsBusiness Development at Hoffmann-LaRoche, Inc., a pharmaceutical company, in a variety of senior financial positions, including vice president, finance of Roche Molecular Systems and head of finance-controller for Amgen/Roche Europe.The Medicines Company. Mr. Sblendorio currently serveshas been a director of
Amicus Therapeutics, Inc. since June 2006. During the prior five years, Mr. Sblendorio previously served as a director of Amicus Therapeutics, Inc., a public biopharmaceutical company. Mr. Sblendorio was previously a board member of Ophthotech Corporation though March 2016 and The Medicines Company through December 2015.Company. Mr. Sblendorio received hisa B.B.A. from Pace University and hisan M.B.A. from Fairleigh Dickinson University and is a graduate of the Harvard Business School, Advanced Management Program.University.
We believe that Mr. Sblendorio’s extensive experience in the pharmaceutical and biotechnology industries, leadership skills, operational and strategic expertise and financial expertise,knowledge, which enables him to serve as a financial expert on our Audit Committee, as well as his experience as a member of the leadershipboard of numerous life sciencesdirectors of other public companies, together with his experience as chief financial officer and board member with numerous companies, qualify himcontributed to the Board’s conclusion that Mr. Sblendorio should be nominated to serve an additional term as a memberdirector of our board of directors. In addition, Mr. Sblendorio brings expertise to our company in the areas of business operations and strategy, financial analysis and reporting, internal auditing and controls and risk management oversight.Company.
Daniel Welch has served as a member of our board of directorsBoard since November 2015. From January 2015 to February 2018, Mr. Welch has beenserved as an Executive Partner atof Sofinnova Ventures, since 2015.a venture capital firm. From September 2003 until Octoberits acquisition by Roche Holdings in September 2014, Mr. Welch was the Chairman,served as Chief Executive Officer and President of InterMune, Inc., which was listed on the Nasdaq Stock Market until the acquisition of the company by Roche. During his tenure, InterMune secured registration of Esbriet, the first medicine approved for idiopathic pulmonary fibrosis in Europe and the
United States.a biotechnology company. Mr. Welch built thealso served as Chairman of InterMune development and commercial teams that delivered the successful approval and launches of Esbriet in Europe and the United States.from May 2008 to September 2014. From August 2002 to January 2003, Mr. Welch served as Chairman and Chief Executive Officer of Triangle Pharmaceuticals, Inc., a pharmaceutical company whichthat was acquired by Gilead Sciences. From October 2000 to June 2002, heMr. Welch served as presidentPresident of the pharmaceutical division ofBiopharmaceuticals at Elan Corporation, PLC (later acquired by Perrigo Company plc).Corporation. From September 1987 to August 2000, Mr. Welch served in various senior management roles at Sanofi-Synthelabo, (nownow Sanofi, S.A.) and its predecessor companies, Sanofi and Sterling Winthrop. During his time at Sanofi, he led the worldwide launches of Plavix®, Eloxatin® and Avapro® asincluding Vice President of Worldwide Marketing and served as Chief Operating Officer of the U.S. business. From November 1980 to September 1987, Mr. Welch was with American Critical Care, a division of American Hospital Supply. He currently serves on the boardMr. Welch has been a director of directors of Avexis,Seattle Genetics, Inc., (where he serves as the chairman of the board), since June 2007, Ultragenyx Pharmaceutical Inc. since April 2015 and AveXis, Inc. since January 2016. During the prior five years, Mr. Welch previously served as a director of InterMune, Inc., (where he serves as the chairman of the board)Corium International, Inc. and Seattle Genetics,Hyperion Therapeutics, Inc. Mr. Welch holds a B.S. from the University of Miami and an M.B.A. from the University of North Carolina.
We believe that Mr. Welch’s knowledge andextensive experience in leading companies from clinical stage drug development through to large-scale commercialization,the biotechnology industry, leadership skills and commercial, operational and strategic expertise, as well as his track record of building operations and international businesses, qualify him to serveexperience as a member of our board of directors.
There are no family relationships between or among any of our directors, executive officers or director nominees. The principal occupation and employment during the past five years of each of our directors and nominees was carried on, in each case except as specifically identified above, with a corporation or organization that is not a parent, subsidiary or other affiliate of us. There is no arrangement or understanding between any of our directors or nominees and any other person or persons pursuant to which he or she is to be selected as a director or nominee.
There are no legal proceedings to which any of our directors is a party adverse to us or any of our subsidiaries or in which any such person has a material interest adverse to us or any of our subsidiaries.
No material changes have been made to the procedures by which stockholders may recommend nominees to our board of directors.
Our board of directors has reviewed the materiality of any relationship that each of our directors and the director nominees has with Intercept, either directly or indirectly. Based upon this review, our board has determined that Mr. Bradbury and Dr. Gottesdiener, our director nominees, and all of our directors other than Dr. Pruzanski, our chief executive officer and president, are “independent directors” as defined by NASDAQ. Our board of directors also determined that Messrs. Welch and Silverstein and Dr. Benatti, who comprise our nominating and governance committee, all satisfy the independence standards for such committees established by the SEC and the NASDAQ Marketplace Rules, as applicable. With respect to our audit committee, our board of directors has determined that Messrs. Sblendorio, Santini and Silverstein satisfy the independence standards for such committee established by Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, the SEC and the NASDAQ Marketplace Rules, as applicable. With respect to our compensation committee, our board of directors has determined that Messrs. Santini and Welch and Drs. Akkaraju and Veitinger satisfy the independence standards for such committee established by Rule 10C-1 under the Exchange Act, the SEC and the NASDAQ Marketplace Rules, as applicable.
In making such determinations, the board of directors consideredof other public companies, contributed to the relationshipsBoard’s conclusion that each such non-employeeMr. Welch should be nominated to serve an additional term as a director or director nominee has with our company and all other facts and circumstancesof the board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stockCompany.
The election, by each non-employee director. In considering the independence of our directors and director nominees, our board of directors considered the associationseparate resolutions, of each such non-employee directorof the following ten nominees to serve on the Board of Directors until the 2019 Annual Meeting of Stockholders or until their respective successors are duly elected and director nominee has with usqualified requires a plurality of the votes cast in person or by proxy at the Annual Meeting: Paolo Fundarò (Proposal No. 1A); Mark Pruzanski, M.D. (Proposal No. 1B); Srinivas Akkaraju, M.D., Ph.D. (Proposal No. 1C); Luca Benatti, Ph.D. (Proposal No. 1D); Daniel Bradbury (Proposal No. 1E); Keith Gottesdiener, M.D. (Proposal No. 1F); Nancy Miller-Rich (Proposal No. 1G); Gino Santini (Proposal No. 1H); Glenn Sblendorio (Proposal No. 1I); and all other facts and circumstances our board of directors deemed relevant in determining independence.Daniel Welch (Proposal No. 1J).
We have adopted a performance-based compensation philosophy that is intended to attract, retain, reward and incentivize our executive officers to achieve our near-term corporate goals, as well as our long-term strategic objectives. In particular, our philosophy is designed to achieve the following objectives:
We urge our stockholders to read the “Compensation Discussion and Analysis” section of this proxy statement, which describes our executive compensation philosophy and how we implemented it through our 2017 compensation program for our principal executive officer, our principal financial officer and our three other most highly compensated executive officers serving at the end of 2017 (the “named executive officers”).
Pursuant to Section 14A of the Board of Directors and Meetings
Meeting Attendance. DuringExchange Act, our stockholders are entitled to vote to approve, on a non-binding, advisory basis, the fiscal year ended 2015 there were nine meetingscompensation of our board of directors, and the various committees of the board metnamed executive officers as disclosed in this proxy statement. This non-binding, advisory vote is commonly referred to as a total of 16 times. No director attended fewer than 75% of the total number of meetings of the board and of committees of the board on which he or she served during fiscal 2015. The board has adopted a policy under which each member of the board is strongly encouraged but not required to attend each annual meeting of our stockholders either in person or via teleconference. Six of our directors, including five of our independent directors, attended“say-on-pay” vote.
At our 2015 Annual Meeting of Stockholders, eitherwe asked our stockholders to indicate if we should hold a “say-on-pay” vote every year, every two years or every three years. Our stockholders indicated a strong preference for holding such a vote every year and, after taking this result into consideration, our Board determined to hold such a vote every year. Accordingly, we are submitting the following resolution for stockholder approval at the Annual Meeting:
“RESOLVED, that the stockholders of Intercept Pharmaceuticals, Inc. approve, on a non-binding, advisory basis, the compensation of the Company’s named executive officers as disclosed in the proxy statement for the 2018 Annual Meeting of Stockholders, including the Compensation Discussion and Analysis and the compensation tables and other narrative compensation disclosures.”
This vote is not intended to address any specific item of compensation, but rather the overall compensation of the Company’s named executive officers and the philosophy, programs and practices described in this proxy statement. As this is a non-binding, advisory vote, the result will not be binding on the Company, our Board or our Compensation Committee, although our Compensation Committee will consider the outcome of the vote when evaluating the Company’s compensation philosophy, programs and practices.
The approval, on a non-binding, advisory basis, of the compensation of the Company’s named executive officers (Proposal No. 2) requires the affirmative vote of a majority of the shares cast affirmatively or negatively in person or by teleconference, including our chairman of the boardproxy at the time, Mr. Silverstein.
Our board of directors intends to make new committee designations after our directors commence their new terms in office upon the completion of our annual meeting of stockholders.
Audit Committee. Our audit committee met six times during fiscal 2015. This committee currently has three members: Messrs. Sblendorio (Chairman), Santini and Silverstein. Our board of directors determined that Mr. Sblendorio is an audit committee financial expert, as defined by the rules of the SEC, and satisfies the financial sophistication requirements of applicable NASDAQ rules. Our board of directors has determined that each of Messrs. Sblendorio, Silverstein and Santini is an independent director under the NASDAQ Marketplace Rules and Rule 10A-3 of the Exchange Act.
Mr. Silverstein, who will not stand for re-election, will also cease to be a member of our audit committee after our 2016 Annual Meeting of Stockholders. Our board of directors intends to designate a third member to our audit committee upon the completion of our annual meeting.Meeting.
Our audit committee’s role and responsibilities are set forth in the audit committee’s written charter and include the authority to retain and terminate the services of our independent registered public accounting firm. In addition, the audit committee reviews our annual and quarterly financial statements, considers matters relating to accounting policy and internal controls and reviews the scope of annual audits.
Our audit committee is authorized to:
Please also see the report of the audit committee set forth elsewhere in this proxy statement.
Compensation Committee. Our compensation committee met five times during fiscal 2015. This committee currently has four members: Messrs. Santini (Chairman) and Welch and Drs. Akkaraju and Veitinger. All members of the compensation committee qualify as independent under the definition promulgated by The NASDAQ Stock Market and Rule 10C-1 of the Exchange Act.
Dr. Vettinger, who will not stand for re-election, will also cease to be a member of our compensation committee after our 2016 Annual Meeting of Stockholders.
OurThe Audit Committee is responsible for the appointment, compensation, committee’s roleretention and responsibilities are set forth inoversight of the compensation committee’s written charter and include:
KPMG LLP has audited the Company’s financial statements since 2008. Representatives of KPMG LLP will be present at the Annual Meeting, with the objectiveopportunity to attractmake a statement should they choose to do so, and retain superior talent, to reward individual performance and to achieve our financial goals;
While stockholder ratification is not required by the Company’s Restated Bylaws or otherwise, the Board is submitting the appointment of KPMG LLP to the stockholders for ratification as a matter of good corporate governance practices. If the Company’s stockholders fail to ratify the appointment, the Audit Committee may, but is not required to, reconsider whether to retain KPMG LLP. Even if the appointment is ratified, the Audit Committee, in our annual meeting proxy statement.
In respectits discretion, may direct the appointment of the determination of the compensation of our president and chief executive officer, the compensation committee conducts its decision making process without the president and chief executive officer present.
Our compensation committee makes all compensation decisions regarding our executive officers, after which it makes a recommendation to our full board of directors. Our board of directors then approves the compensation for our executive officers.
During the first calendar quarter of each year, we evaluate each executive’s performance for the prior year. In connection with each annual review cycle, Dr. Pruzanski, our president and chief executive officer, meets with our executive officers to discuss our accomplishmentsdifferent independent registered public accounting firm at any time during the year andif it determines that such a change would be in the individual’s performance and contributions over the prior year. Based on these discussions, Dr. Pruzanski, with respect to each executive other than himself, prepares an evaluationbest interest of the executive’s performance. Dr. Pruzanski also prepares his own self-assessmentCompany and its stockholders.
Ratification of the appointment of KPMG LLP as well asthe independent registered public accounting firm of the Company for the year ending December 31, 2018 (Proposal No. 3) requires the affirmative vote of a detailed reviewmajority of company performance against stated corporate goals. This process leads to a recommendationthe shares cast affirmatively or negatively in person or by Dr. Pruzanski to the compensation committee with respect to each executive officer, including himself, as to:
These recommendations are reviewed and taken into account by the compensation committee. The compensation committee makes a recommendation regarding executive compensation to the full board of directors, which then approves the compensation of our executive officers.
In designing our executive compensation program, our compensation committee considers publicly available compensation data for U.S. companies in the biopharmaceutical industry to help guide its executive compensation decisionsproxy at the time of hiring and for subsequent adjustments in compensation. Our compensation committee also retained the services of Radford, an independent compensation consultant and a division of Aon Hewitt, which is a subsidiary of Aon plc, to provide it with additional comparative data on executive compensation practices in our industry and to advise it on our executive compensation program generally. For 2015, Radford provided advice and data to the compensation committee on executive and director compensation matters, including the selection of our peer group, comparative market pay levels, equity dilution and annual share utilization practices, incentive plan design and emerging market trends. Pearl Meyer & Partners, or PM&P, an independent compensation consultant, also advised the compensation committee in its evaluation and determination of the cash salary and bonus targets for 2015. Although the compensation committee considers the advice and recommendations of the compensation consultants about our executive compensation program, the compensation committee ultimately makes its own decisions about these matters.Annual Meeting.
The compensation committeeBoard is currently comprised of ten directors. Our directors are elected annually to serve one-year terms.
The Board meets regularly reviewsto review significant developments affecting the services provided by its outside consultantsCompany and performs an annual assessmentto act on matters requiring the independenceapproval of its compensation consultants to determine whether the compensation consultant is independent.Board. The compensation committee conducted a specific review of its relationship withBoard held nine board meetings during the year ended December 31, 2017. During the year ended December 31, 2017, each of Radford and PM&Pour incumbent directors attended at least 75%, in 2015, and determined that each such advisor is independent in providing Intercept with executive and director compensation consulting services and that each such advisor’s work for the compensation committee did not raise any conflictsaggregate, of interest, consistent with SEC rules and NASDAQ listing standards.
Our compensation committee will also review and discuss annually with management our “Compensation Discussion and Analysis” disclosure to(i) the extent such disclosure is required by SEC rules.
A copymeetings of the compensation committee’s written charter is publicly available inBoard held during the “Investors” sectionperiod that such director served and (ii) the meetings held by the committees of the Board on which such director served during the period that such director served.
The Company maintains a corporate governance page on its website that includes key information about its Global Code of Business Conduct and charters for each of the Audit Committee, the Compensation Committee, the Nominating and Governance Committee and the Research and Development Committee of the Board. The corporate governance page can be found on our website atwww.interceptpharma.com. in the Investors & Media section under “Corporate Governance.”
Nominating and Governance Committee. Our nominating and governance committee met five times during fiscal 2015. This committee currentlyMr. Fundarò has three members: Daniel Welch (Chairman), Mr. Silversteinserved as our Chairman since October 2015 and Dr. Benatti. All members of the nominatingPruzanski has served as our President and governance committee qualify as independent under the definition promulgated by The NASDAQ Stock Market.
Mr. Silverstein, who will not stand for re-election, will also cease to be a member of our nominatingChief Executive Officer, and governance committee after our 2016 Annual Meeting of Stockholders. Our board of directors intends to designate a third member to our nominating and governance committee upon the completion of our annual meeting.
The nominating and governance committee’s role and responsibilities are set forth in the nominating and governance committee’s written charter and include:
Our nominating and governance committee recommended to the board of directors that Mr. Bradbury and Dr. Gottesdiener join the board and upon such endorsement, the board recommended that Mr. Bradbury and Dr. Gottesdiener be nominated as directors at our 2016 Annual Stockholder Meeting.
If a stockholder wishes to nominate a candidate for director who is not to be included in our proxy statement, it must follow the procedures described in our restated by-laws and in “Stockholder Proposals and Nominations for Director” at the end of this proxy statement.
Under our current corporate governance policies, the nominating and governance committee may consider candidates recommended by stockholders as well as from other sources such as other directors or officers, third party search firms or other appropriate sources. The process followed by our nominating and governance committee to identify and evaluate director candidates includes requests to board members and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the committee and our board. For all potential candidates, the nominating and governance committee may consider all factors it deems relevant, such as a candidate’s personal integrity and sound judgment, business and professional skills and experience, independence, knowledge of the industry in which we operate, possible conflicts of interest, diversity, the extent to which the candidate would fill a present need on the board, and concern for the long-term interests of the stockholders. In general, persons recommended by stockholders will be considered on the same basis as candidates from other sources. If a stockholder wishes to propose a candidate for consideration as a nominee by the nominating and governance committee under our corporate governance policies, it should submit such recommendation in writing c/o Corporate Secretary, Intercept Pharmaceuticals, Inc., 450 West 15th Street, Suite 505, New York, NY 10011.
A copy of the nominating and governance committee’s written charter is publicly available in the “Investors” section of our website atwww.interceptpharma.com.
Research and Development Committee. Our research and development committee met once during fiscal 2015. This committee currently has three members: Dr. Luca Benatti (Chairman) and Drs. Akkaraju and Veitinger. This committee assists the board of directors in its oversight of our strategic direction and investment in research and development, technology and manufacturing activities. The research and development committee is also responsible for identifying and discussing significant emerging trends and issues in science and technology and considering their potential impact on our company.
Dr. Veitinger, who will not stand for re-election, will also cease to be a member of our research and development committee after our 2016 Annual Meeting of Stockholders. Our board of directors intends to designate a third member to our research and development committee upon the completion of our annual meeting of stockholders.
A copy of the research and development committee’s written charter is publicly available in the “Investors” section of our website atwww.interceptpharma.com.
Our nominating and governance committee is responsible for reviewing with the board of directors, on an annual basis, the appropriate characteristics, skills and experience required for the board of directors as a whole and its individual members. In evaluating the suitability of individual candidates (both new candidates and current members), the nominating and corporate governance committee, in recommending candidates for election, and the board of directors, in approving (and, in the case of vacancies, appointing) such candidates, will take into account many factors, including the following:
No member of our compensation committee during fiscal 2015 has at any time been an officer or employee of ours. None of our executive officers serves as a member of another entity’s board of directors or compensation committee, or other committee serving an equivalent function that has one or more executive officers servingthe Board, since our inception in 2002. In February 2018, we appointed Mr. Santini to serve as a member of our board of directors or compensation committee.
The positions of chairman of the board and chief executive officer are presently separated at our company. Board’s Lead Independent Director.
We believe that separating these positionsthe roles of Chairman and Chief Executive Officer recognizes the time, effort and energy that our Chief Executive Officer is required to devote to his position and allows our chief executive officerhim to focus on our day-to-day business, while allowing our chairman of the boardChairman to lead the board of directorsBoard in its fundamental role of providing advice to, and independent oversight of, management. Our board of directorsThe Board also recognizes the time, effort and energy that the chief executive officer is required to devote to his position in the current business environment, as well as the commitment required to serve as our chairman,Chairman, particularly as the board of directors’Board’s oversight responsibilities continue to grow. Our boardgrow, and as a result, we believe that the appointment of directorsMr. Santini as our Lead Independent Director will contribute to the overall effectiveness of the Board. We also believe that Mr. Santini’s appointment enhances the governance structure of the Board by reinforcing the independence of the Board in its oversight of the business and affairs of the Company. However, no single leadership model is right for all companies and at all times, and the Board may review its leadership structure in the future.
The Board has delegated certain responsibilities to the committees of the Board. The Board has created four standing committees: an Audit Committee, a Compensation Committee, a Nominating and Governance Committee and a Research and Development Committee. In addition, special committees of the Board may be created from time to time to oversee special projects, financings and other matters. Each committee is chaired by an independent director who reports to the full Board on the activities and findings of his or her respective committee. The Board believes that this structure ensures a greater roledelegation of responsibilities facilitates efficient decision-making and communication among the directors and management.
The Board has responsibility for the independent directors in the oversight of our companyrisk management, while the Company’s management has the day-to-day responsibility for the identification and active participationcontrol of risk at the independent directorsCompany. The Board, either as a whole or through its committees, regularly discusses with management the Company’s major risk exposures, their potential impact on the Company and the appropriate steps that should be taken in setting agendasorder to monitor and establishing prioritiescontrol such exposures. The committees assist the Board in fulfilling its risk oversight responsibilities within their respective areas of responsibility. For example, pursuant to its written charter, the Audit Committee oversees the Company’s processes and procedures forwith respect to financial and enterprise risk, including overseeing the Company’s enterprise risk management program. The Compensation Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising
work of our board of directors. Our board of directors believes its administration of its risk oversight function has not affected its leadership structure.
While our restated by-lawsfrom the Company’s compensation policies and corporate governance guidelines do not require that our chairmanprograms. The Nominating and chief executive officer positions be separate, our board of directors believes that having separate positions isGovernance Committee focuses on the appropriate leadership structure for us at this time and demonstrates our commitment to good corporate governance.
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including risks relating to the regulatory approval and commercialization of pharmaceutical products, product candidate development, technological and competitive uncertainty, dependence on collaborative partners and other third parties, uncertainty regarding patents and proprietary rights, comprehensive government regulations and dependence on key personnel, as more fully discussed under Item 1.A. “Risk Factors” in our annual report on Form 10-K as may be periodically updated in our filings under the Exchange Act. Management is responsible for the day-to-day management of risks we face, while our boardassociated with the organization, membership and structure of directors, as a wholethe Board and through its committees, has responsibility for the oversightcorporate governance structure of risk management. In its risk oversight role, our board of directors has the responsibility to satisfy itself thatCompany. The Research and Development Committee reviews risks associated with the risk management processes designedCompany’s research and implemented by management are adequate and functioning as designed.
Our board of directors is actively involved in oversight of risks that could affect us. This oversight is conducted primarily through the auditdevelopment programs. Each committee of our board of directors, but the full board of directors has retained responsibility for general oversight of risks. Our board of directors satisfies this responsibility through fullBoard meets and reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within our company as our board of directors believes that full and open communication between management and the board of directors is essential for effective risk management and oversight.
Generally,The Board is currently comprised of ten directors. The Board uses the standards of independence established by the SEC and Nasdaq in determining whether its members are independent. The Board has affirmatively determined that each of the Company’s current directors (other than Dr. Pruzanski) is independent under the director independence criteria established by Nasdaq. Dr. Pruzanski is not an independent director by virtue of his employment with the Company.
In addition, the Board has determined that each member of the Audit Committee, Compensation Committee and Nominating and Governance Committee meets any additional “independence” criteria established by Nasdaq or the SEC required for service on such committees.
The Board generally holds executive sessions of the independent directors following each regularly scheduled in-person meeting of the Board. Executive sessions do not include any employee directors of the Company.
The Board has adopted a policy strongly encouraging members of the Board to attend the Company’s Annual Meetings of Stockholders. Six of the nine directors comprising the Board at the time were in attendance at the Company’s 2017 Annual Meeting of Stockholders held on June 27, 2017.
The Board has adopted a process by which stockholders who have questions or concerns should contact our Investor Relations department at 646-747-1000. However, any stockholdersmay communicate with the Board. Stockholders who wish to address questions regarding our business directlycommunicate with the board of directors, or any individual director, should direct his or her questions in writingBoard may do so by sending written communications to the chairman of the board or any individual director ATTN: SECURITY HOLDER COMMUNICATION, Board of Directors, following address:
Intercept Pharmaceuticals, Inc. at 450 West 15
c/o Company Secretary
10 Hudson Yards, 37th Street, Suite 505, Floor
New York, NY 1001110001
Any such communication must state the number of shares owned by the stockholder making the communication. In any such communication, an interested person may also designate a particular director, or via e-mail at secretary@interceptpharma.com. Communicationsa committee of the Board, such as the Audit Committee, to which such communication should be directed. Our legal department will be distributedforward all correspondence to the board,Board or the particularly designated audience, except for spam, junk mail, mass mailings, job inquiries, surveys, business solicitations or advertisements or patently offensive or otherwise inappropriate or frivolous material. Our legal department may forward certain correspondence, such as product-related inquiries, elsewhere within the Company for review and possible response.
We have adopted a Global Code of Business Conduct as our “code of ethics” as defined by regulations promulgated under the Securities Act and the Exchange Act, which applies to any individual directorour directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or directors as appropriate, dependingcontroller, or persons performing similar functions. The Global Code of Business Conduct is available on the facts and circumstances outlinedour website atwww.interceptpharma.com in the communications. Items that are unrelatedInvestors & Media section under “Corporate Governance.” We intend to satisfy the duties and responsibilitiesdisclosure requirement under Item 5.05 of Form 8-K regarding any future amendment to, or waiver from, a provision of the board may be excluded,Global Code of Business Conduct that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions by posting such as:
In addition, any material that is unduly hostile, threatening, or illegalinformation on our website atwww.interceptpharma.com in nature may be excluded, provided that any communication that is filtered out will be made available to any outside director upon request.the Investors & Media section under “Corporate Governance.”
The Company restricts its officers and employees from (i) engaging in any transactions involving options, straddles, collars or other similar risk reduction or hedging devices, (ii) using the Company’s securities to secure a margin or other loan, (iii) effecting “short sales” of the Company’s securities and (iv) trading in the Company’s securities on a short-term basis.
Pursuant to its written charter, the Audit Committee is responsible for reviewing and approving, prior to the Company’s entry into any such transaction, all transactions in which the Company is or will be a participant and in which any executive officer, director, beneficial owner of more than 5% of the Company’s securities or immediate family member of any of the foregoing persons, or any other person whom the Board determines may be considered to be a related person under Item 404 of Regulation S-K, has or is expected to have a direct or indirect material interest. For the above purposes, “immediate family member” means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, and any person (other than a tenant or employee) sharing the household with the executive officer, director or 5% beneficial owner.
In reviewing and approving such transactions, the Audit Committee shall obtain, or shall direct management to obtain on its behalf, all information that the Audit Committee believes to be relevant and important to a review of the transaction prior to its approval. Following receipt of the necessary information, a discussion shall be held of the relevant factors if deemed to be necessary by the Audit Committee prior to approval. If a discussion is not deemed to be necessary, approval may be given by written consent of the committee. This approval authority may also be delegated to the chairperson of the Audit Committee in some circumstances. No related person transaction shall be entered into prior to the completion of these procedures.
The Audit Committee or its chairperson, as the case may be, shall approve only those related person transactions that are determined to be in, or not inconsistent with, the best interests of the Company and its stockholders, taking into account all available facts and circumstances as the Audit Committee or the chairperson determines in good faith to be necessary in accordance with principles of Delaware law generally applicable to directors of a Delaware corporation. These facts and circumstances will typically include, but not be limited to, the commercial reasonableness of the terms, the benefit and perceived benefit, or lack thereof, to the Company, opportunity costs of alternate transactions, the materiality and character of the related person’s direct or indirect interest and the actual or apparent conflict of interest of the related person. No member of the Audit Committee shall participate in any review, consideration or approval of any related person transaction with respect to which the member or any of his or her immediate family members has an interest.
The Board has created four standing committees: an Audit Committee, a Compensation Committee, a Nominating and Governance Committee and a Research and Development Committee. In addition, special committees of the Board may be created from time to time to oversee special projects, financings and other matters.
The Board has established an Audit Committee currently consisting of Messrs. Sblendorio, Bradbury and Santini. Mr. Sblendorio, who the Board has determined is an “audit committee financial expert” (as that term is defined in Item 407(d)(5) of Regulation S-K), serves as the chairman of the Audit Committee. Each member of the Audit Committee is independent under Rule 10A-3 of the Exchange Act and the applicable rules of Nasdaq.
The Audit Committee’s primary purpose is to act on behalf of the Board in fulfilling the Board’s oversight responsibilities with respect to the Company’s corporate accounting and financial reporting practices, systems of internal control over financial reporting and audits of financial statements, as well as the quality and integrity of the Company’s financial statements, reports and internal controls, the qualifications, independence and performance of the Company’s independent registered public accounting firm, the performance of the Company’s internal audit function and the Company’s processes for monitoring compliance with legal and regulatory requirements and the Company’s Global Code of Business Conduct. The Audit Committee’s report begins on page 54.
The Audit Committee operates under a written charter adopted by the Board, a current copy of which is available on the Company’s website atwww.interceptpharma.com in the Investors & Media section under “Corporate Governance.” The Audit Committee met five times during the year ended December 31, 2017.
The Board has established a Compensation Committee currently consisting of Messrs. Santini and Welch and Dr. Akkaraju, all of whom are independent under applicable Nasdaq rules, “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act and “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code (the “Code”). Mr. Santini serves as the chairperson of the Compensation Committee. The Compensation Committee’s primary purpose is to act on behalf of the Board in fulfilling the Board’s responsibilities to oversee the Company’s compensation programs, policies and practices, to review and determine the compensation to be paid to the Company’s executive officers, to review, discuss with management and approve the Company’s “Compensation Discussion and Analysis” disclosures and to review and approve the committee’s report included in the Company’s annual proxy statement in accordance with applicable rules and regulations of the SEC in effect from time to time.
The Compensation Committee’s report is set forth on page 40. For a discussion of the role of management and the use of compensation consultants in determining executive compensation, see “Executive Compensation—Compensation Discussion and Analysis.”
The Compensation Committee operates under a written charter adopted by the Board, a current copy of which is available on Company’s website atwww.interceptpharma.com in the Investors & Media section under “Corporate Governance.” Under its charter, the Compensation Committee may form and delegate its authority to subcommittees of the committee when it deems it appropriate and in the best interests of the Company. The Compensation Committee met six times during the year ended December 31, 2017.
The Board has established a Nominating and Governance Committee currently consisting of Messrs. Welch and Bradbury and Dr. Benatti, all of whom are independent under applicable Nasdaq rules. Mr. Welch serves as the chairperson of the Nominating and Governance Committee. The key responsibilities of the Nominating and Governance Committee are to: (i) oversee all aspects of the Company’s corporate governance functions on behalf of the Board; (ii) make recommendations to the Board regarding corporate governance issues; (iii) identify, review and evaluate candidates to serve as directors and review and evaluate incumbent directors; (iv) serve as a focal point for communication between such candidates, non-committee directors and the Company’s management; (v) recommend to the Board for selection candidates to the Board to serve as nominees for director at Annual Meetings of Stockholders; and (vi) make other recommendations to the Board regarding affairs relating to the directors. When the Board determines to seek a new member, whether to fill a vacancy or otherwise, the Nominating and Governance Committee may utilize third-party search firms and will consider recommendations from directors, management and others, including the Company’s stockholders.
The Nominating and Governance Committee has adopted a policy regarding the qualifications of directors, which sets forth threshold requirements for individuals nominated to serve as directors of the Company. In general, the Nominating and Governance Committee looks for new members possessing relevant expertise to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, having demonstrated excellence in his or her field, having the ability to exercise sound business judgment, having the commitment to promote and enhance the long-term value of the Company for its
stockholders and possessing the highest personal and professional standards of integrity and ethical values. The Nominating and Governance Committee does not have a formal policy with respect to diversity; however, pursuant to its policy regarding the qualifications of directors, the Nominating and Governance Committee considers issues of diversity among its members in identifying and considering nominees for director, and will strive where appropriate to achieve a diverse balance of backgrounds, perspectives, experience, age, gender, ethnicity and country of citizenship on the Board and its committees. Candidates for director nominees are reviewed in the context of the foregoing standards and considerations, as well as the contributions that the candidate can be expected to make to the collective functioning of the Board based upon the totality of his or her credentials, experience and expertise, the composition of the Board at the time and other relevant circumstances, including the operating requirements of the Company and the long-term interests of stockholders. With respect to the nomination of continuing directors for re-election, the individual’s past performance as a director is also considered. The Nominating and Governance Committee periodically reviews the composition of the Board, including whether the directors, both individually and collectively, can and do provide the experience, qualifications, attributes and skills appropriate for the Company.
The Nominating and Governance Committee has adopted policies with respect to the consideration of candidates recommended by stockholders for nomination for election to the Board and the procedures for stockholders to follow in submitting such recommendations. The Nominating and Governance Committee will consider bona fide candidates recommended by stockholders in accordance with such policies. Any such recommendation must be submitted in writing to the Nominating and Governance Committee, care of Intercept Pharmaceuticals, Inc., 10 Hudson Yards, 37th Floor, New York, NY 10001, Attention: Company Secretary, within the time frames set forth in such policies and contain the information and undertakings required by such policies. Nominees for director who are recommended by stockholders to the Nominating and Governance Committee will be evaluated in the same manner as any other nominee for director. Nominations by stockholders may also be made in the manner set forth under “Stockholders’ Proposals.”
The Nominating and Governance Committee operates under a written charter adopted by the Board, which includes the Nominating and Governance Committee’s policies regarding the qualifications of directors, the consideration of candidates recommended by stockholders for nomination for election to the Board and the procedures for stockholders to follow in submitting such recommendations. A current copy of such charter is available on Company’s website atwww.interceptpharma.com in the Investors & Media section under “Corporate Governance.” The Nominating and Governance Committee met twice during the year ended December 31, 2017.
The Board has established a Research and Development Committee currently consisting of Drs. Benatti, Akkaraju and Gottesdiener, all of whom are independent under applicable Nasdaq rules. Dr. Benatti serves as the chairperson of the Research and Development Committee. The primary purposes of the Research and Development Committee are to assist the Board in its oversight of the Company’s strategic direction and investment in research and development, technology and manufacturing activities and to identify and discuss significant emerging trends and issues in science and technology and consider their potential impact on the Company.
The Research and Development Committee operates under a written charter adopted by the Board, a copy of which is available on Company’s website atwww.interceptpharma.com in the Investors & Media section under “Corporate Governance.” The Research and Development Committee met once during the year ended December 31, 2017.
During 2017, Messrs. Santini and Welch and Dr. Akkaraju comprised the Compensation Committee. No member of the Compensation Committee is or has formerly been an officer or employee of the Company. In 2017, none of our executive officers served on the board of directors or compensation committee of another entity that had one or more of its executive officers serving on the Board or the Compensation Committee of the Company. Please refer to “Related Person Transactions” for information concerning certain transactions with Samsara BioCapital, L.P. Dr. Akkaraju is a managing member of Samsara BioCapital GP, LLC, the general partner of Samsara BioCapital, L.P.
On an annual basis, the Compensation Committee conducts an evaluation of the design and competitiveness of the Company’s non-employee director compensation program in light of market trends, best practices and competitive market data for the Company’s compensation peer group. In 2017, the Compensation Committee also retained the services of Radford, an independent compensation consultant and subdivision of Aon plc, to provide it with additional comparative data on director compensation practices in the Company’s industry and to advise it on the Company’s non-employee director compensation program generally. In April 2017, based on the input and analysis provided by Radford, our Compensation Committee and Board determined the Company’s 2017 non-employee director compensation program with reference to the 50th percentile of the competitive market based on our compensation peer group. As a result, (i) all annual cash retainers were maintained at their 2016 levels, except for the annual cash retainer for the Chairman of the Board, which was increased from $75,000 to $80,000, (ii) the aggregate amount of the Annual Grant (as defined below) was reduced from $406,832 to $337,203 and (iii) the aggregate amount of any New Director Grant (as defined below) was reduced from $813,665 to $693,461. Only directors who are “independent” in accordance with applicable Nasdaq rules (the “Independent Directors”) receive compensation for their service as directors. Each of the Company’s current directors, other than Dr. Pruzanski, qualifies as an Independent Director.
Effective April 2017, the annual cash retainers for the Independent Directors were set as follows (payable quarterly in equal installments):
Membership | Chairperson | Other Members | ||||||
Board of Directors. | $ | 80,000 | $ | 50,000 | ||||
Audit Committee | $ | 20,000 | $ | 10,000 | ||||
Compensation Committee | $ | 15,000 | $ | 7,500 | ||||
Nominating and Governance Committee | $ | 10,000 | $ | 5,000 | ||||
Research and Development Committee | $ | 10,000 | $ | 5,000 |
Effective April 2017, (i) each Independent Director who had served on the Board for six months or longer as of the date of the Company’s Annual Meeting of Stockholders was eligible to receive an annual equity grant (each, an “Annual Grant”) comprised of $163,616 of stock options and $173,587 of restricted stock and (ii) each new Independent Director appointed or elected to the Board was eligible to receive an equity grant (each, a “New Director Grant”) comprised of $369,823 of stock options and $323,638 of restricted stock.
Subject to the Independent Director’s continued service on the Board, the stock option and restricted stock awards granted in connection with (i) each Annual Grant vest in full on the earlier of (A) the one-year anniversary of the date of grant and (B) the day immediately preceding the date of the next Annual Meeting of Stockholders and (ii) each New Director Grant vest in a series of three equal annual installments, with 1/3 of the shares subject to the award vesting on each anniversary of the date that the Independent Director was first elected or appointed to the Board (or, if earlier in any given year, the day immediately preceding the date of the Annual Meeting of Stockholders in such year). In addition, all unvested Annual Grants and New Director Grants shall immediately vest in connection with a change of control of the Company. The exercise price for stock options granted in connection with each Annual Grant and New Director Grant is the per-share closing price of the Company’s common stock on the Nasdaq Global Select Market on the date of grant.
The Company also reimburses reasonable out-of-pocket expenses incurred in connection with attendance at Board meetings.
The following table sets forth, certainfor the fiscal year ended December 31, 2017, the total compensation paid to the Independent Directors serving on the Board during 2017.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(9) | Option Awards ($)(9) | Total ($) | ||||||||||||
Paolo Fundarò | 78,750 | (1) | 173,620 | 141,698 | 394,068 | |||||||||||
Srinivas Akkaraju, M.D., Ph.D. | 62,500 | (2) | 173,620 | 141,698 | 377,818 | |||||||||||
Luca Benatti, Ph.D. | 65,000 | (3) | 173,620 | 141,698 | 380,318 | |||||||||||
Daniel Bradbury | 65,000 | (4) | 173,620 | 141,698 | 380,318 | |||||||||||
Keith Gottesdiener, M.D. | 55,000 | (5) | 173,620 | 141,698 | 370,318 | |||||||||||
Gino Santini | 75,000 | (6) | 173,620 | 141,698 | 390,318 | |||||||||||
Glenn Sblendorio | 70,000 | (7) | 173,620 | 141,698 | 385,318 | |||||||||||
Daniel Welch | 67,500 | (8) | 173,620 | 141,698 | 382,818 |
(1) | Represents an annual cash retainer for Mr. Fundarò’s service as Chairman of the Board. The amount of such retainer increased from $75,000 to $80,000 effective April 2017. |
(2) | Represents an annual cash retainer for Dr. Akkaraju’s service as a director, as a member of the Compensation Committee and as a member of the Research and Development Committee. |
(3) | Represents an annual cash retainer for Dr. Benatti’s service as a director, as Chairperson of the Research and Development Committee and as a member of the Nominating and Governance Committee. |
(4) | Represents an annual cash retainer for Mr. Bradbury’s service as a director, as a member of the Nominating and Governance Committee and as a member of the Audit Committee. |
(5) | Represents an annual cash retainer for Dr. Gottesdiener’s service as a director and as a member of the Research and Development Committee. |
(6) | Represents an annual cash retainer for Mr. Santini’s service as a director, as Chairperson of the Compensation Committee and as a member of the Audit Committee. |
(7) | Represents an annual cash retainer for Mr. Sblendorio’s service as a director and as Chairperson of the Audit Committee. |
(8) | Represents an annual cash retainer for Mr. Welch’s service as a director, as a member of the Compensation Committee and as Chairperson of the Nominating and Governance Committee. |
(9) | Amounts shown represent the aggregate grant date fair value, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”), in respect of restricted stock and stock option awards. These amounts do not reflect compensation actually received by the Independent Directors. Assumptions used in the calculation of these amounts are included in “Note 14” to the Notes to Consolidated Financial Statements for the year ended December 31, 2017, included in our Annual Report. Each Independent Director received 1,423 shares of restricted stock and 2,036 stock options in 2017. As of December 31, 2017, the aggregate number of outstanding shares of restricted stock and stock options (including unvested restricted stock and stock option awards) held by each Independent Director serving on the Board during 2017 was as follows: 1,423 shares of restricted stock and 14,388 stock options for Mr. Fundarò; 1,423 shares of restricted stock and 10,138 stock options for Dr. Akkaraju; 1,423 shares of restricted stock and 5,935 stock options for Dr. Benatti; 3,028 shares of restricted stock and 5,232 stock options for Mr. Bradbury; 3,028 shares of restricted stock and 5,232 stock options for Dr. Gottesdiener; 1,856 shares of restricted stock and 7,134 stock options for Mr. Santini; 1,423 shares of restricted stock and 5,935 stock options for Mr. Sblendorio; and 1,856 shares of restricted stock and 7,134 for Mr. Welch. |
The Company has adopted minimum stock ownership guidelines for the Board, which require, within a five-year period, the Independent Directors to hold Company equity equal to at least 3x their annual cash retainer. Until the ownership guidelines are satisfied, the Independent Directors are required to maintain a minimum retention ratio of at least 50% of their annual equity awards, net of shares sold or withheld solely to pay applicable exercise fees and/or withholding taxes. Any Independent Directors failing to meet the guidelines within the allotted compliance period will be required to maintain a minimum retention ratio of 100% of net shares after the applicable exercise fees and/or withholding taxes.
The following table and accompanying footnotes show information as of April 23, 2018 regarding ourthe beneficial ownership of the Company’s shares by:
For purposes of the table below, we deem shares subject to options that are exercisable or exercisable within sixty days of April 23, 2018 to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person, but we do not also directors.treat them as outstanding for the purpose of computing the percentage ownership of any other person. Except as otherwise noted, the persons or entities in this table have sole voting and investing power with respect to all of the shares beneficially owned by them. On April 23, 2018, there were 29,582,955 shares outstanding. Unless otherwise specified, the address of each director and executive officer is c/o Intercept Pharmaceuticals, Inc., 10 Hudson Yards, 37th Floor, New York, NY 10001.
Name and Address | Shares Beneficially Owned(5) | |||||||
Number of Shares | Percentage of Common Stock | |||||||
5% Stockholders: | ||||||||
Genextra S.p.A.(1) | 6,845,578 | 23.1 | % | |||||
FMR LLC(2) | 3,765,311 | 12.7 | % | |||||
JPMorgan Chase & Co.(3) | 2,007,198 | 6.8 | % | |||||
Directors and Executive Officers: | ||||||||
Paolo Fundarò | 25,886 | * | ||||||
Mark Pruzanski, M.D. | 847,355 | 2.8 | % | |||||
Srinivas Akkaraju, M.D., Ph.D.(4) | 259,182 | * | ||||||
Luca Benatti, Ph.D. | 10,504 | * | ||||||
Daniel Bradbury | 15,809 | * | ||||||
Keith Gottesdiener, M.D. | 9,168 | * | ||||||
Nancy Miller-Rich | — | * | ||||||
Gino Santini | 11,061 | * | ||||||
Glenn Sblendorio | 9,664 | * | ||||||
Daniel Welch | 10,242 | * | ||||||
Jerome Durso | 21,250 | * | ||||||
David Ford | 9,250 | * | ||||||
Sandip Kapadia | 32,948 | * | ||||||
David Shapiro, M.D. | 97,887 | * | ||||||
All directors and executive officers as group (18 persons) | 1,484,404 | 4.9 | % |
* | Less than 1%. |
(1) | In a Schedule 13G filed with the SEC on April 12, 2018 by Genextra S.p.A. (“Genextra”) and Francesco Micheli, Genextra and Mr. Micheli each reported shared voting power and shared dispositive power over 6,845,578 shares. Mr. Micheli is an Executive Director and Chairman of the Board of Genextra and, in such capacity, Mr. Micheli exercises voting control over the shares owned by Genextra. Mr. Micheli disclaims beneficial ownership with respect to any such shares, except to the extent of his pecuniary interest therein, if any. Genextra’s address is Via Privata Giovannino De Grassi, 11, 20123 Milan, Italy. Genextra has informed the Company that it has pledged the shares held by it prior to the Concurrent Private Placement (as defined under “Related Person Transactions—Public Offering and Concurrent Private Placement”) to an affiliate of Credit Suisse Securities (USA) LLC as collateral in connection with a margin loan. |
(2) | Based solely on information contained in a Schedule 13G filed with the SEC on February 13, 2018 by FMR LLC (“FMR”). In the FMR Schedule 13G, FMR reported sole voting power over 198,547 shares and sole dispositive power over 3,765,311 shares. FMR’s address is 245 Summer Street, Boston, MA 02210. |
(3) | Based solely on information contained in a Schedule 13G filed with the SEC on January 10, 2018 by JPMorgan Chase & Co. (“JPM”). In the JPM Schedule 13G, JPM reported sole voting power over 1,844,738 shares and sole dispositive power over 2,007,198 shares. JPM’s address is 270 Park Avenue, New York, NY 10017. |
(4) | Includes 234,375 shares held by Samsara BioCapital, L.P. Dr. Akkaraju is a managing member of Samsara BioCapital GP, LLC, the general partner of Samsara BioCapital, L.P. Dr. Akkaraju disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. |
(5) | Includes the following shares issuable upon the exercise of options that are exercisable or exercisable within sixty days of April 23, 2018: for Mr. Fundarò, 14,388 shares; for Dr. Pruzanski, 270,791 shares; for Dr. Akkaraju, 10,138 shares; for Dr. Benatti, 5,935 shares; for Mr. Bradbury, 4,167 shares; for Dr. Gottesdiener, 4,167 shares; for Mr. Santini, 7,134 shares; for Mr. Sblendorio, 5,935 shares; for Mr. Welch, 7,134 shares; for Mr. Durso, 6,250 shares; for Mr. Ford, 3,250 shares; for Mr. Kapadia, 12,733 shares; for Dr. Shapiro, 53,674 shares; and for all directors and executive officers as a group, 448,604 shares. |
The executive officers of Intercept Pharmaceuticals, Inc. as of April 27, 2018, their positions and their ages are as listed below.
Name | Age | |||||||
Mark Pruzanski, M.D. | 50 | President and Chief Executive Officer | ||||||
Jerome Durso | 50 | Chief Operating Officer | ||||||
Lisa Bright | 50 | President, International | ||||||
David Ford | 49 | Chief | ||||||
48 | Chief Financial Officer and Treasurer | |||||||
49 | President, U.S. Commercial & Strategic Marketing | |||||||
David Shapiro, M.D. | 63 | Chief Medical Officer | ||||||
Ryan Sullivan | 42 | General Counsel and | ||||||
Christian Weyer, M.D., M.A.S. | 49 | EVP, Research & Development |
Mark Pruzanski, M.D. is one of our co-founders and has served as our President and Chief Executive Officer, and as a member of our Board, since our inception in 2002. Dr. Pruzanski has over 20 years of experience in life sciences company management, venture capital and strategic consulting. Prior to co-founding the Company, Dr. Pruzanski was a venture partner at Apple Tree Partners, an early stage life sciences venture capital firm that he co-founded, and an entrepreneur-in-residence at Oak Investment Partners, a venture capital firm. Dr. Pruzanski is a co-author of a number of scientific publications and is named as an inventor on several of our patents. Dr. Pruzanski currently serves on the boards of the Emerging Companies Section of the Biotechnology Innovation Organization (BIO), a biotechnology-focused trade association, and the Foundation for Defense of Democracies, a non-profit policy institute focusing on foreign policy and national security. Dr. Pruzanski received his M.D. from McMaster University in Hamilton, Canada, a M.A. degree in International Affairs from the Johns Hopkins University School of Advanced International Studies in Bologna, Italy and Washington, D.C., and a bachelor’s degree from McGill University in Montreal, Canada.
Jerome Durso has served as our Chief Operating Officer since February 2017. Mr. Durso has 25 years of experience in building and leading commercial and business operations at life sciences companies both in the United States and abroad. Prior to joining the Company, Mr. Durso served as a consultant to the biopharmaceutical industry from September 2015 to February 2017. Mr. Durso has spent the majority of his career at Sanofi, a global pharmaceutical company, where he most recently served as Senior Vice President, Chief Commercial Officer of the Global Diabetes Division from June 2011 to April 2015. From 2010 to 2011, Mr. Durso was Senior Vice President, Chief Commercial Officer of Sanofi’s U.S. pharmaceuticals business. Prior to that, he served in a number of commercial leadership roles of increasing responsibility in business unit and brand management, marketing and sales since he first joined Sanofi in 1993. Mr. Durso earned his bachelor’s degree in marketing from the University of Notre Dame.
Lisa Bright has served as our chief commercial and corporate affairs officerPresident, International since February 2015. SheJuly 2016. Ms. Bright has over 25 years of experience in the biopharmaceutical industry. Ms. Bright joined Interceptthe Company in November 2014 as senior vice presidentSenior Vice President and headHead of Europe.Europe and then served as Chief Commercial and Corporate Affairs Officer from February 2015 to July 2016. Prior to joining Intercept,the Company, Ms. Bright worked at Gilead Sciences Ltd. starting in 2008, where she held positions of increasing responsibility, including: general managerGeneral Manager United Kingdom & Ireland; vice president,Vice President, Northern Europe; vice president, headVice President, Head of Sovaldi launch planningLaunch Planning for Europe, Asia, Middle East and Australasia; and vice president, government affairsVice President, Government Affairs Europe, Middle East and Australasia. Prior to holding these positions, Ms. Bright held a range of senior positions at GlaxoSmithKline plc, including vice presidentVice President and managing directorManaging Director of New Zealand and vice presidentVice President — salesSales for the United Kingdom. Ms. Bright has been a director of Ascendis Pharma A/S since April 2017. Ms. Bright has a B.Sc. in pharmacology from University College London.
Barbara DuncanDavid Fordhas served as our Chief Human Resources Officer since May 2017. He brings over 25 years of experience in a variety of human resources roles across the United States, Europe, Latin America and New Zealand. Prior to joining the Company, Mr. Ford spent nearly 15 years at Sanofi, where he most recently served as Vice President Human Resources for the Sanofi Genzyme global business unit from January 2016 to May 2017. Prior to that role, from November 2011 through December 2015, Mr. Ford served as Vice President Human Resources for the Sanofi North American businesses. Mr. Ford joined the pharmaceutical industry in 2002 as the HR Director — United Kingdom and Republic of Ireland for Sanofi-Synthelabo. Mr. Ford holds a master’s degree in business administration from INSEAD, Fontainebleau (France).
Sandip Kapadiahas served as our Chief Financial Officer and Treasurer since July 2016. Mr. Kapadia has over 20 years of experience in building and leading finance and administration teams at life sciences companies both in the United States and abroad. Mr. Kapadia joined the Company from Sandoz, Inc., a division of Novartis AG, where he served as Vice President and Chief Financial Officer — North America from July 2014 to June 2016. From March 2012 to June 2014, Mr. Kapadia was Vice President and Chief Financial Officer of Novartis Pharmaceuticals UK Limited. Mr. Kapadia also served as Vice President and Chief Financial Officer of Novartis Pharmaceuticals B.V. located in the Netherlands from 2009 to 2012. Prior to that, he served as Head of Finance — Oncology Business Unit for both Novartis Pharmaceuticals A.G. and Novartis Pharmaceuticals Corporation. Mr. Kapadia earned his bachelor’s degree in business administration and accounting from Montclair State University, an M.B.A from Rutgers Graduate School of Management and is a certified public accountant.
Richard Kim has served as our chief financial officerPresident, U.S. Commercial & Strategic Marketing since May 2009 andFebruary 2018, having previously served as our treasurerSenior Vice President, Commercial U.S. since 2010. SheJuly 2015. He has over 1520 years of commercial, marketing and managerial experience in the life sciences industry. From 2001 through April 2009, Ms. Duncan served as chief financial officerbiopharmaceutical industry in the United States and then chief executive officer at DOV Pharmaceutical, Inc., or DOV, a biopharmaceutical company focused on central nervous system disorders, which was sold to Euthymics Bioscience, Inc. in 2010.abroad. Prior to joining DOV, Ms. Duncanthe Company, Mr. Kim worked at Bristol-Myers Squibb starting in 2004, where he most recently served as General Manager, Hepatitis C Worldwide Commercialization. Prior to that, Mr. Kim held a vice presidentnumber of Lehman Brothers Inc. in its corporate finance division from August 1998roles of increasing responsibility at Bristol-Myers Squibb, including Vice President, SPRYCEL Brand Lead, Oncology Global Marketing; Vice President, U.S. In-Line Oncology and Global Marketing for Necitumumab; and Vice President, East Area Sales, Cardiovascular and Metabolics. Prior to August 2001, where she provided financial advisory services primarily to companiesholding these positions, Mr. Kim held a range of senior positions in the life sciencesUnited States, Canada and general industrial industries. From September 1994 to August 1998, Ms. DuncanAustralia at Schering-Plough, which was an associate and director at SBC Warburg Dillon Read,acquired by Merck & Co., Inc. in its corporate finance group, where she focused primarily on structuring mergers, divestitures and financings for companies in the life sciences and general industrial sectors. She also worked for PepsiCo, Inc. from 1989 to 1992 in its international audit division, and was a certified public accountant in the audit division of Deloitte & Touche LLP from 1986 to 1989. Ms. Duncan received her B.S. from Louisiana State University in 1985 and her M.B.A. from the Wharton School, University of Pennsylvania, in 1994. She previously served as a director of DOV and currently serves on the board of directors of Edgemont Pharmaceuticals, LLC, a privately held, specialty pharmaceutical company with a primary focus in the field of neuroscience, Jounce Therapeutics, Inc., a privately held cancer immunotherapy company, Medgenics, Inc., a public, clinical stage biopharmaceutical company focused on rare diseases, and Adaptimmune Therapeutics plc, a public, clinical stage biopharmaceutical company focused cancer immunotherapy products based on its T-cell platform.
Rachel McMinn, Ph.D. has served as our chief business and strategy officer since March 2015. Dr. McMinn joined Intercept as chief strategy officer in 2014. Since 2009 until joining Intercept, she was a managing director at Bank of America Merrill Lynch, working as the lead research analyst covering the biotechnology industry. Previously, Dr. McMinn worked at Cowen and Company as a lead biotechnology analyst and started her career as a biotechnology analyst at Piper Jaffray & Co. She graduatedmagna cum laude with a Bachelor of ArtsMr. Kim earned his bachelor’s degree in chemistry from Cornell University, earned a Ph.D. in molecular and cellular biology and chemistry from The Scripps Research Institute, and was awarded a post-doctoral Miller fellowship at the University of California, at Berkeley.Alberta.
David Shapiro, M.D. has served as our chief medical officerChief Medical Officer since November 2017, having previously served as our Chief Medical Officer and executive vice president, developmentExecutive Vice President, Development since 2008. HeDr. Shapiro has over 25 years of clinical development experience in the pharmaceutical industry. Dr. Shapiro founded a consulting company, Integrated Quality Resources, that focused on development stage biopharmaceutical companies and was active in this role from 2005 to 2008. From 2000 to 2005, Dr. Shapiro was executive vice president, medical affairsExecutive Vice President, Medical Affairs and chief medical officerChief Medical Officer of Idun Pharmaceuticals, Inc., prior to its acquisition by Pfizer.Pfizer Inc. From 1995 to 1998, he was presidentPresident of the Scripps Medical Research Center at Scripps Clinic. He also served as vice president, clinical researchVice President, Clinical Research at Gensia and as directorDirector and group leader,
hypertension clinical researchGroup Leader, Hypertension Clinical Research at Merck Research Laboratories from 1985 to 1990. Dr. Shapiro has authored more than 20 peer-reviewed publications and organized and chaired several conferences aimed at improving product development. HeDr. Shapiro served for two terms on the Executive Committee of the Board of the American Academy of Pharmaceutical Physicians. Dr. Shapiro has been a director of Arcturus Therapeutics Ltd. since November 2017. Dr. Shapiro received his medical degree from Dundee University & Medical School, and undertook his postgraduate medical training in the university affiliated hospitals in Oxford, United Kingdom and the University of Vermont. Dr. Shapiro served on the board of directors of Altair Therapeutics and served for two terms on the Executive Committee of the Board of the American Academy of Pharmaceutical Physicians. He is an elected Fellow of both the Royal College of Physicians of London and the Faculty of Pharmaceutical Physicians of the United Kingdom.
There are no family relationships between or among any ofTABLE OF CONTENTS
Ryan Sullivan has served as our executive officers. The principal occupationGeneral Counsel and employment duringSecretary since February 2018. Prior to joining the past five years of each of our executive officersCompany, Mr. Sullivan worked at Anacor Pharmaceuticals, Inc., which was carried on, in each case exceptacquired by Pfizer Inc. At Anacor, Mr. Sullivan served as specifically identified above, with a corporation or organization that is not a parent, subsidiary or other affiliate of us. There is no arrangement or understanding between any of our executive officersExecutive Vice President, General Counsel and any other person or persons pursuant to which he was or is to be selectedSecretary from February 2016 until June 2016 and as Senior Vice President, General Counsel and Secretary from April 2014 until February 2016. Before joining Anacor, Mr. Sullivan worked as an attorney in the legal group of Warner Chilcott plc prior to its acquisition by Actavis plc (now Allergan plc). During his tenure at Warner Chilcott from July 2007 until December 2013, Mr. Sullivan served in a number of positions of increasing responsibility, including most recently as General Counsel and Secretary. Before joining Warner Chilcott, Mr. Sullivan practiced in the New York corporate law group of Cahill Gordon & Reindel LLP. Mr. Sullivan earned his bachelor’s of science degree from Cornell University and his juris doctor degree from Cornell Law School.
Christian Weyer, M.D., M.A.S. has served as our EVP, Research & Development since November of 2017. Dr. Weyer’s career in metabolic drug development spans more than 20 years, involving clinical studies and regulatory submissions at all stages of product development and across the continuum of diabetes, obesity and NAFLD/NASH. Prior to joining the Company, Dr. Weyer was President and Chief Development Officer at ProSciento, Inc., a leading clinical R&D service provider focused on diabetes, NAFLD/NASH and obesity, from December 2015 to November 2017. Dr. Weyer has served as a senior executive officer.
There are no legal proceedingsin several companies, including as President, Chief Executive Officer and a director of Fate Therapeutics, Inc. from October 2012 to which anyNovember 2015, where he steered the company’s transition into a publicly-traded cellular therapeutics company, and as Senior Vice President of our executive officers isR&D at Amylin Pharmaceuticals, Inc., where he contributed to the development and approval of several first-in-class medicines for diabetes and lipodystrophy. Before joining Amylin, Dr. Weyer worked at the National Institutes of Health, NIDDK, conducting clinical research on the pathogenesis of obesity and type 2 diabetes. Dr. Weyer received his M.D. and clinical training at the Department of Metabolic Disorders, World Health Organization Collaborating Center for Diabetes Treatment and Prevention, at the University of Düsseldorf, Germany and holds a party adverse to us or anypostdoctoral master’s degree in advanced clinical research from the University of our subsidiaries or in which any such person has a material interest adverse to us or any of our subsidiaries.California, San Diego.
This section discusses the principles underlying our policiesCompensation Discussion and decisions with respect to the compensation ofAnalysis describes our executive officerscompensation philosophy and thehow we implemented it through our 2017 compensation program for our principal executive officer, our principal financial officer and our three other most important factors relevant to an analysis of these policies and decisions. This section also describes the material elements of compensation awarded to, earned by or paid to each of our namedhighly compensated executive officers for 2015. In addition, this section provides qualitative information regardingserving at the manner and context in which compensation is awarded to and earned by our executive officers and is intended to place in perspective the data presented in the tables and narrative that follow. Ourend of 2017 (the “named executive officers” for the year ended December 31, 2015 were as follows:):
Name | Title | |||
Mark Pruzanski, M.D. | President and Chief Executive Officer | |||
Sandip Kapadia | Chief Financial Officer | |||
Jerome Durso(1) | Chief Operating Officer | |||
David Ford(2) | Chief Human Resources Officer | |||
David Shapiro, M.D.(3) | Chief Medical Officer |
(1) | Mr. Durso joined the Company in February 2017. |
(2) | Mr. Ford joined the Company in May 2017. |
(3) | Dr. Shapiro served as Chief Medical Officer and Executive Vice President, Development | |
until his roles were bifurcated in November 2017, after which time he continued as Chief | ||
2017 was a productive year for us. We achieved a number of significant commercial and product development milestones and continued to refine and strengthen our executive compensation programs and corporate governance practices. Highlights are described below.
In 2015, we successfully achieved multiple important corporate and product development milestones that we believe contributed to enhancing stockholder value. Success in achieving these milestones enabled us to continue to develop obeticholic acid, or OCA, for both primary biliary cirrhosis, recently renamed primary biliary cholangitis, or PBC, and nonalcoholic steatohepatitis, or NASH, and, subject to obtaining required regulatory approvals, prepare for the planned commercial launch of OCA for PBC. In particular:
Advanced NASH Development Program. We continued our ongoing Phase 3 clinical trial in non-cirrhotic nonalcoholic steatohepatitis (“NASH”) patients with liver fibrosis, known as the |
Other Product Development Achievements. In addition to PBC and NASH, we continued to invest in research of OCA for additional patient populations with other liver diseases. For example, in July 2017, we announced top-line results of our Phase 2 AESOP trial in primary sclerosing cholangitis (“PSC”), which evaluated the effects of 24 weeks of treatment with varying doses of OCA compared to placebo. This trial achieved its primary endpoint, which we believe establishes a proof-of-concept of OCA in |
Our CEO
Dr. Mark Pruzanskico-founded our Company and has served as our CEO since our inception in 2002. Dr. Pruzanski has been critical in driving many of our achievements over the past 15 years.
Market-Based CEO Compensation. For 2017, we determined total CEO compensation (including annual equity awards) with reference to the |
Break-Down of 2017 CEO Compensation
Significant Performance Elements. In 2017, we incorporated significant performance elements into Dr. Pruzanski’s annual and long-term incentive compensation arrangements. Approximately 89% of Dr. Pruzanski’s 2017 total direct compensation consisted of variable compensation elements dependent on our achievement of corporate performance goals and objectives and our stock price performance. |
TSR-Based Performance Share Units. In 2018, we introduced performance share unit awards (“TSR PSUs”) that vest, if at all, based on the |
What We Do
Independent Chairman, Lead Independent Director and Majority Independent Board. Paolo Fundarò serves as our Board’s Chairman, and all of the members of our |
Independent Compensation Consultant. Our Compensation Committee uses an independent executive compensation consulting firm that reports directly to the committee. |
Annual Compensation Review and Analysis. Our Compensation Committee conducts an annual assessment of executive compensation to ensure that we provide competitive compensation packages to attract, retain, reward and incentivize our executive management team to achieve success for us and our stockholders. |
Multiple Performance Elements. In accordance with our performance-based compensation philosophy, our executive compensation program incorporates multiple performance elements, including target-based cash incentive bonuses payable upon the achievement of corporate and individual goals and objectives, and long-term equity incentive compensation, a substantial portion of which consists of stock options and, commencing with our 2018 annual equity grants, TSR PSUs. |
Market Benchmarking and Use of Reference Peer Group. Our Compensation Committee, with the |
Stock Ownership Requirements. We have adopted minimum stock ownership guidelines for our Board, CEO and other executive officers, including our named executive officers, which require, within specified periods of time, our non-employee directors to hold Company equity equal to at least 3x their annual cash retainer and our CEO and other executive officers to hold Company equity equal to at least 3x and 1x, respectively, their annual base salary. |
Clawback Policy. In early 2018, we adopted a clawback policy that permits the Company to recover, from any current or former executive officer, including any named executive officer, whose fraud or intentional misconduct contributes to the circumstances requiring the Company to prepare an accounting restatement due to material non-compliance of the Company with any financial reporting requirement under U.S. federal securities laws, up to 100% of any incentive-based compensation received by such officer from the Company during the one-year period preceding the date on which the Company is required to prepare such accounting restatement. |
Compensation Risk Assessment. In 2018, we strengthened our annual compensation risk assessment review process. |
What We Don’t Do
✗ | No excise tax gross-ups. We have not provided excise tax gross-ups to any of our named executive officers. |
✗ | No “single-trigger” change-in-control protections. The change-in-control protections for our named executive officers are limited to “double-trigger” arrangements, which do not provide for automatic payment upon the occurrence of a |
✗ | Limited perquisites. Our named executive officers generally receive the same benefits as are available to all of our salaried employees, with limited recurring exceptions primarily consisting of fully-paid health insurance premiums. |
✗ | No automatic or guaranteed annual salary increases. We do not provide for any formulaic or guaranteed base salary increases for our named executive officers. |
✗ | No guaranteed bonuses. We do not provide guaranteed bonuses to our named executive officers. |
✗ | No hedging or pledging of Company stock. Our named executive officers and other employees are restricted from engaging in speculative trading activities, including hedging or pledging their company securities as collateral. |
Annual “Say-on-Pay”. We have determined to hold an advisory vote on the |
Communication with Stockholders. We believe that stockholder engagement is important and we regularly communicate with our largest stockholders. As we mature as a company, we will continue to expand our stockholder engagement efforts. We welcome feedback with respect to our executive compensation practices from all of our stockholders. |
Focus on Stockholder Value. Our Compensation Committee members, who are themselves stockholders, approved the compensation for our CEO and other named executive officers with the |
The primary objective of our executiveWe have adopted a performance-based compensation policyphilosophy that is intended to attract, retain, reward and motivateincentivize our executive officers to achieve our near-term corporate goals, as well as our long-term strategic objectives. In particular, our philosophy is designed to achieve the key executives necessary for our short-term and long-term success. We seek to tie short-term and long-term compensation to employee performance, includingfollowing objectives:
Our Compensation Committee is responsible for the evaluation and oversight of our executive compensation program, policies and practices. Accordingly, our Compensation Committee reviews and approves all compensation provided to our named executive officers, including adjustments to base salaries, annual target-based cash incentive bonuses, equity incentive awards, severance arrangements and benefit programs. Our Compensation Committee consists of three members of our Board, each of whom has extensive experience in our industry and is an independent director under applicable Nasdaq and SEC rules. Our Compensation Committee uses its judgment and experience to develop and approve executive compensation decisions, including our Chief Executive Officer’s compensation package. In doing so, our Compensation Committee meets with an independent compensation consultant in executive session without our Chief Executive Officer or any other member of management present. Our Compensation Committee also periodically evaluates the need for revisions to our executive compensation program to ensure our program is competitive with the companies with which we compete for executive talent.
A small number of executive officers, including our Chief Executive Officer, participate in general sessions of our Compensation Committee. Management does not participate in executive sessions of our Compensation Committee. At the request of our Compensation Committee, our Chief Executive Officer provides input and recommendations to the committee approveson salary adjustments, annual target-based cash incentive bonus amounts and appropriate equity incentive compensation levels in relation to our executive officers other than himself. In formulating these recommendations, our Chief Executive Officer may consider data obtained from third-party sources, including data provided by compensation consultants other than the independent compensation consultant retained by our Compensation Committee.
In designing our executive compensation program, our Compensation Committee considers publicly available compensation data for other companies in the biopharmaceutical industry to help guide its executive compensation decisions at the time of hiring and for subsequent adjustments in compensation. In 2017, our Compensation Committee also retained the services of Radford, an independent compensation consultant and subdivision of Aon plc, to provide it with additional comparative data on executive compensation practices in our industry and to advise it on our executive compensation program generally. For 2017, Radford provided advice and data to our Compensation Committee on executive and director compensation matters, including the selection of our compensation peer group, comparative market pay levels, equity dilution and annual share utilization practices, incentive plan design and emerging market trends. Although our Compensation Committee considers the advice and recommendations of its compensation consultant about our executive compensation program, the committee ultimately makes its own decisions about these matters. Our Compensation Committee determined that the work of Radford did not raise any conflicts of interest in 2017. In making this assessment, our Compensation Committee considered the independence factors enumerated in Rule 10C-1(b) under the Exchange Act and the applicable Nasdaq rules.
Our Compensation Committee references a peer group of publicly traded companies in the biopharmaceutical industry for purposes of gathering data to compare with our existing executive compensation levels and practices and as context for future compensation decisions. Our Compensation Committee, with the assistance of its independent compensation consultant, periodically reviews and updates the compensation peer group, as appropriate, to include companies that the Compensation Committee believes are competitors for executive talent and are similar to us based on certaina number of criteria, including stage of development, revenue, market capitalization and number of employees. Our Compensation Committee may consider peer group and other industry compensation philosophies,data and the recommendations of its independent compensation consultant when making decisions related to executive compensation. Our Compensation Committee also considers peer companies identified by proxy advisory firms in the prior year’s proxy cycle. Changes in the composition of our compensation peer group from 2016 to 2017 were largely the result of,
among other things, the replacement of companies that had been acquired or that our Compensation Committee, with the assistance of its independent compensation consultant, no longer considered comparable to us in light of the criteria outlined above. The companies included in our compensation peer group for 2017 were as follows:
ACADIA Pharmaceuticals Inc. | Ionis Pharmaceuticals, Inc. | Seattle Genetics Inc. | ||
Alkermes plc | Ironwood Pharmaceuticals, Inc. | Tesaro, Inc. | ||
Alnylam Pharmaceuticals, Inc. | Neurocrine Biosciences, Inc. | The Medicines Company | ||
bluebird bio, Inc. | Ophthotech Corporation | Ultragenyx Pharmaceutical Inc. | ||
Exelixis, Inc. | Puma Biotechnology, Inc. | United Therapeutics Corporation | ||
Incyte Corporation |
At the beginning of 2017, based on the input and analysis provided by Radford and the recommendation of our Chief Executive Officer (except with respect to his own compensation), our Compensation Committee determined that 2017 target total direct compensation for our Chief Executive Officer and other named executive officers employed by the Company would be determined with reference to the 50th percentile of compensation for executives holding similar positions at the companies in our compensation peer group. In determining each named executive officer’s equity incentive award, our Compensation Committee examined peer group compensation data provided by Radford and other related compensation data. When hiring our new Chief Operating Officer and new Chief Human Resources Officer during 2017, our Compensation Committee continued to use this approach, although it supplemented annual compensation with one-time “sign-on” equity awards as necessary and appropriate to achieve the Company’s recruitment and retention objectives and to closely align the interests of the new named executive officer with those of our stockholders.
On an annual basis, our Compensation Committee meets to review the performance of our Chief Executive Officer and our other named executive officers. At these meetings, our Compensation Committee typically invites our Chief Executive Officer to participate in the discussion (excluding discussions pertaining to his own compensation) in order to seek our Chief Executive Officer’s input and recommendations with respect to each named executive officer (other than himself) as to:
Our Compensation Committee takes into consideration these recommendations and other relevant performance and competitive market factors when it makes its determination on executive compensation matters. Our Compensation Committee also meets to review and decide compensation matters periodically throughout the year.
We have determined to hold an advisory vote on the compensation of our named executive officers (a “say-on-pay” vote) every year. Each year, our Compensation Committee considers the outcome of the prior year’s say-on-pay vote when making decisions relating to the compensation of our named executive officers and our executive compensation programs and policies. At our 2017 Annual Meeting of Stockholders, our stockholders demonstrated strong support of our named executive compensation programs, with our 2017 advisory say-on-pay proposal being approved by over 99% of the votes cast on the proposal. Our Compensation Committee took this result into consideration when designing the structure of our 2018 annual compensation program, including the following:performance-based elements thereof, such as the TSR PSUs granted to our executive officers in early 2018. Our Compensation Committee will continue to take into account future stockholder advisory votes to approve executive compensation and other relevant market developments affecting executive officer compensation in order to determine whether any subsequent changes to our programs and policies are warranted to reflect stockholder concerns or to address market developments.
We strive to incorporate best practices in our executive compensation program, including by adopting from time to time additional compensation policies and practices that discourage excessive or unnecessary risk-taking. For example, in early 2018, we adopted a clawback policy that permits the Company to recover, from any current or former executive officer, including any named executive officer, whose fraud or intentional misconduct contributes to the circumstances requiring the Company to prepare an accounting restatement due to material non-compliance of the Company with any financial reporting requirement under U.S. federal securities laws, up to 100% of any incentive-based compensation received by such officer from the Company during the one-year period preceding the date on which the Company is required to prepare such accounting restatement. We also strengthened our annual compensation risk assessment review process in 2018.
We have adopted minimum stock ownership guidelines for our Board, Chief Executive Officer and other executive officers, including our named executive officers, which require, within a five-year period, our non-employee directors to hold Company equity equal to at least 3x their annual cash retainer and our Chief Executive Officer and other executive officers to hold Company equity equal to at least 3x and 1x, respectively, their annual base salary. Until the ownership guidelines are satisfied, our non-employee directors and executive officers are required to maintain a minimum retention ratio of at least 50% of their annual equity awards, net of shares sold or withheld solely to pay applicable exercise fees and/or withholding taxes. Any non-employee director or executive officer failing to meet the guidelines within the allotted compliance period will be required to maintain a minimum retention ratio of 100% of net shares after the applicable exercise fees and/or withholding taxes.
We have not provided excise tax gross-ups to any of our named executive officers and change-in-control protections for our named executive officers are limited to “double-trigger” arrangements, which do not provide for automatic payment upon the occurrence of a change in control. Instead, such arrangements require both a change in control and a qualifying termination of employment to occur. Our named executive officers generally receive the same benefits as are available to all of our salaried employees, with limited recurring exceptions primarily consisting of fully-paid health insurance premiums. We do not provide for any formulaic or guaranteed base salary increases for our named executive officers and we do not provide guaranteed bonuses to our named executive officers. In addition, our employees, including our named executive officers, are restricted from engaging in speculative trading activities, including hedging or pledging their company securities as collateral.
The primary elements of our executive compensation program are:
The compensation committeeOur Compensation Committee believes that a significant amount of executive compensation should be in the form of “at risk” incentives and that the pay mix should be strongly weighted toward equity incentive awards in order to provide alignment with long-term shareholderstockholder value. However, we do not have a formal or informal policy for a pre-set allocation between long-term and short-term compensation, between cash and non-cash compensation or among different forms of non-cash compensation. Instead, our compensation committee,Compensation Committee, after reviewing information provided by ourits independent compensation consultant and other relevant data, determines what it believes to be the appropriate level and mix of the various compensation components. We generally strive to provide our named executive officers with a balance of short-term and long-term incentives to encourage consistently strong performance. Ultimately, the objective in allocating between long-term and currently paid compensation is to ensure adequate base compensation to attract and retain personnel, while providing incentives to maximize long-term value for Interceptthe Company and our its
stockholders. Therefore, we provide base salaries that meet competitive salary norms and recognize individual performance on an annual basis. We provide an opportunity to earn annual target-based cash incentive bonuses to incentivize and reward superior short-term performance. To further focus our executivesnamed executive officers on longer-term performance and the creation of stockholder value, we rely upon equity-based awards that vest over a meaningful period of time. In addition, we provide our executives with benefits that are generally available to our salaried employees.time and the value of which is dependent on stock price performance.
We use base salaries to recognize the experience, skills, knowledge and responsibilities of our employees, including our named executive officers. Base salaries for ournewly-hired named executive officers typically are established through an arm’s-length negotiation at the time the executiveindividual is hired, taking into account factors such as the position for which the executiveindividual is being considered, and the executive’sindividual’s qualifications, prior experience and prior salary.base salary (to the extent available) and competitive market demand. None of our named executive officers is currently party to an employment agreement that provides for automatic or scheduled increases in base salary. However, on an annual basis, our compensation committeeCompensation Committee reviews and evaluates, with input from our chief executive officer,Chief Executive Officer (other than with respect to his own base salary), the need for adjustment of the base salaries of our executivesnamed executive officers based on changes and expected changes in the scope of an executive’stheir responsibilities. The compensation committeeOur Compensation Committee also considers promotions, the individual contributions made by and performance of the named executive officer during the prior fiscal year, the executive’sindividual’s performance over a period of years, overall economic and labor market conditions, the relative ease or difficulty of replacing the executiveindividual with a well-qualified person, our overall growth and development as a company, general salary trends in our industry and among our compensation peer group and where the executive’sindividual’s salary falls in the salary range presented by that data. For more information regarding our compensation peer group, see “Our“—Our Executive Compensation Process — Process—Market Benchmarking and Peer Group.”Group” above. In making decisions regarding salary increases, weour Compensation Committee may also draw upon the experience of members of our board of directorsBoard with other companies. We do not provide for any formulaic base salary increases for our named executive officers.
For 2015, the compensation committee recommended2017, our Compensation Committee determined annual base salaries for each of our named executive officers (other than newly-hired named executive officers) based on their overall individual performance in 2014,2016, their increased level of experience and to ensure that their salaries remained competitive with those of similarly-situated executives in our compensation peer group. The annual base salaries for Mr. Durso and Mr. Ford were negotiated in the context of competitive recruitment processes and were determined by our Compensation Committee, which considered the factors described in the preceding paragraph, as well as compensation peer group data and other input provided by Radford and the recommendation of our Chief Executive Officer. For 2015,2017 and, as applicable, 2016, the annual base salarysalaries for each of our named executive officers was increased from his or her 2014 annual base salarywere as follows:
Executive | 2014 Salary | 2015 Salary | % Increase | |||||||||
Dr. Mark Pruzanski | $ | 550,000 | $ | 600,000 | 9.09 | % | ||||||
Dr. David Shapiro | $ | 420,000 | $ | 460,000 | 9.52 | % | ||||||
Barbara Duncan | $ | 385,000 | $ | 415,000 | 7.79 | % | ||||||
Dr. Rachel McMinn | $ | 355,000 | $ | 390,000 | 9.86 | % | ||||||
Lisa Bright | — | $ | 396,000 | — | ||||||||
Daniel Regan | $ | 360,000 | $ | 360,000 | — |
Named Executive Officer | 2017 Salary | 2016 Salary | Change from 2016 | |||||||||
Mark Pruzanski, M.D. | $ | 675,000 | $ | 620,000 | 8.87% | |||||||
Sandip Kapadia | $ | 425,000 | $ | 400,000 | 6.25% | |||||||
Jerome Durso(1) | $ | 520,000 | — | New hire | ||||||||
David Ford(2) | $ | 380,000 | — | New hire | ||||||||
David Shapiro, M.D. | $ | 489,300 | $ | 475,000 | 3.01% |
(1) | Mr. Durso joined the Company in February 2017. Mr. Durso’s prorated salary for 2017 was $441,333. |
(2) | Mr. Ford joined the Company in May 2017. Mr. Ford’s prorated salary for 2017 was $246,269. |
The change to the annual base salary of each named executive officer, as applicable, was effective as of January 1, 2015. Mr. Regan left the service of our company in March 2015. His prorated salary for 2015 was $80,539 through his last day of employment. In 2015, Mr. Regan also received other compensation in connection with his separation in accordance with the terms of his employment agreement. Mr. Regan’s employment agreement is described in “— Other Named Executive Officers” under the discussion of “Employment Agreements.” Ms. Bright’s 2014 salary and percentage increase are not listed in the table above because she did not become an executive officer until February 2015.
2017. Please refer to “—Compensation Decisions Relating to Fiscal Year 2016”2018” below for a listing of the annual base salaries of each of our named executive officers for 2016.2018.
As part of our pay-for-performanceperformance-based compensation philosophy, our annual target-based cash incentive bonus program is designed to reward our named executive officers for the achievement of specified, measurable annual corporate objectives. At the beginning of each year, the cash incentive bonus opportunity for each
named executive officer is established as a target percentage of his or hersuch officer’s base salary. The actual annual cash incentive bonus amounts payable to our named executive officers are determined after year end based on the compensation committee’sour Compensation Committee’s evaluation of performance against the corporate objectives and, in the case of our named executive officers other than Dr. Pruzanski,our Chief Executive Officer, the achievement of individual performance levels. Individual performance of the named executive officers other(other than Dr. Pruzanskiour Chief Executive Officer) is determined by the compensation committeeour Compensation Committee after considering the overall performance of the individual executiveofficer and taking into account the recommendations of the chief executive officer. The overall assessment by our compensation committee isChief Executive Officer.
Our Compensation Committee believes that a cash incentive bonus program based on the evaluation of objective metrics,multiple corporate objectives and individual performance (with respect to our named executive officers other than our Chief Executive Officer) is best-suited for a biopharmaceutical company at our stage of development due to the uncertainties inherent in the development, regulatory approval and commercialization of new drug treatments. Our Compensation Committee also considers the practices of our compensation peer group and overall industry practices as part of its review of our cash incentive bonus program. In order to better align cash incentive bonus payouts with performance, our Compensation Committee may take additional significant corporate achievements into account for the current year’s cash incentive bonus calculation that were not contemplated at the time the current year corporate objectives were determined. Our Compensation Committee also has the authority to shift corporate objectives to subsequent fiscal years and to eliminate them for the current year’s cash incentive bonus calculation if it determines that underachievement of a goal was primarily caused by circumstances that were beyond the named executive officer’s control or if it determines that the business priorities for the year had shifted. Each of our Compensation Committee and Board has authority, in its sole discretion, to review and approve management’s evaluation of how we performed against our corporate objectives and the recommended cash incentive bonus payout levels. This authority includes the ability to rate the accomplishment of particular objectives at below, equal to or greater than 100% of target based on the Company’s performance.
The target annual cash incentive bonus for each named executive officer is set by our Compensation Committee as a percentage of such officer’s base salary. The target percentages approved by our Compensation Committee are typically based on an evaluation of compensation peer group data, as the successful achievementwell as consideration of the applicable goallevel of qualification and experience of each named executive officer as well as internal pay comparisons. Based on this evaluation, our Compensation Committee determined to maintain the weightings ascribed to such goal, which is then adjusted to reflect other factors that may be pertinent to the performance of the company and the individual2017 annual cash incentive bonus target percentages for our named executive officer.officers at their 2016 levels.
TheOur annual corporate objectives includehave historically included the achievement of specific clinical, regulatory, commercial and precommercial, operational and/or financial milestones, with a focus on regulatory achievements, commercial and precommercial preparedness, the advancement of our product candidates in clinical development, the pursuit of various internal initiatives and ensuring adequate funding for our growth. As we continue to transition from a development-stage company to a commercial-stage company, we have begun to introduce precommercial and commercial-related milestones into our annual corporate objectives, with added focus on precommercial and commercial preparedness, commercial sales metrics and regulatory achievements. The corporate objectives are proposed by senior management each year and reviewed and approved by our compensation committeeCompensation Committee and board of directorsBoard in the beginning of our fiscal year, with such modifications as the compensation committeeour Compensation Committee and board of directorsBoard deem appropriate. TheIn connection with such approval, our Compensation Committee and Board conduct a rigorous review designed to ensure that such objectives reflect the corporate performance measures that we believe are most important to the success of our company and will drive stockholder value. In addition, the corporate objectives are designedset at challenging levels so as to require significantour named executive officers to expend substantial effort and operational success on the part ofcommitment leveraging their individual and collective skills and competencies to attain such goals and objectives.
For 2017, our executives and Intercept, but also to be achievable with hard work and dedication.
Our compensation committee believes that a bonus program based on the evaluation of multipleannual corporate objectives are summarized below:
objectives were determined. Our compensation committee also has the authority to shift
Each of our compensation committee and our board of directors has authority, in its sole discretion, to review and approve management’s evaluation of how our company performed against its corporate objectives and the recommended bonus payout levels. This authority includes the ability to rate the accomplishment of particular objectives at greater than 100% of target based on exceptional company performance. In any year, our executives can achieve up to 125% of target after factoring all potential performance achievements deemed by our compensation committee and our board of directors as exceeding applicable objectives and goals.
The target annual cash bonus for each executive officer is set by the compensation committee as a percentage of each executive officer’s base salary. The target percentages approved by our compensation committee were based on an evaluation of peer group data, as well as consideration of the level of qualification and experience of each executive at Intercept as well as internal pay comparisons.
For 2015, our annual corporate objectives were as follows:
In January 2016,February 2018, our compensation committeeCompensation Committee considered theour performance of our company in light of the above goals, together with other information available to it, and determined that we achieved our 20152017 corporate objectives at a level of 100%85%.
Our compensation committee did not set any specific individual performance targets for the payment ofChief Executive Officer’s cash bonuses to our named executive officers in 2015. Instead, the compensation committee reviewed our company performance against our 2015 corporate objectives and also evaluated the individual performance of each named executive officer. Dr. Pruzanski’sincentive bonus is determined solely based on the achievement of corporate goals, whereas the cash incentive bonus for our other named executive officers is based on both our corporate goals and individual performance.
The 2015 Our Compensation Committee’s assessment of the individual performance of our named executive officers (other than our Chief Executive Officer) may result in such officers receiving cash incentive bonuses that are higher or lower than the amounts that they would otherwise receive if such bonuses were based on the achievement of corporate goals alone. For 2017, our Compensation Committee reviewed our performance against our 2017 corporate objectives and determined the individual performance of the named executive officers (other than our Chief Executive Officer) after evaluating their individual performance levels in consultation with the Chief Executive Officer. For 2017, the target and actual cash incentive bonuses for each of our named executive officer were:officers were as follows:
Executive | Target Bonus as % of Base Salary | Actual Bonus as % of Target | ||||||
Mark Pruzanski, M.D. | 70 | % | 100 | % | ||||
David Shapiro, M.D. | 40 | % | 100 | % | ||||
Barbara Duncan | 40 | % | 100 | % | ||||
Rachel McMinn, Ph.D. | 40 | % | 100 | % | ||||
Lisa Bright | 40 | % | 100 | % | ||||
Daniel Regan* | — | — |
Named Executive Officer | Target Bonus (as % of Base Salary) | Actual Bonus (as % of Target) | ||||||
Mark Pruzanski, M.D. | 70 | % | 85 | % | ||||
Sandip Kapadia | 50 | % | 89 | % | ||||
Jerome Durso | 50 | % | 100 | % | ||||
David Ford | 50 | % | 89 | % | ||||
David Shapiro, M.D. | 50 | % | 70 | % |
Please refer to “—Compensation Decisions Relating to Fiscal Year 2018” below for a listing of the target annual cash incentive bonuses for each of our named executive officers for 2018.
Our equity awardincentive program is the primary vehicle used for offeringproviding long-term incentives to our executives.executive officers, including our named executive officers. We believe that equity awards provide our executivesnamed executive officers with a strong link to our long-term performance, create an ownership culture and help to align the long-term interests of our executivessuch officers and our stockholders. In addition, we believe that equity awards with a time-basedtime- or performance-based vesting feature promote executive retention because this feature incentivizesthese features incentivize our named executive officers to remain in our employment during the vesting period.
To date, we have used equity awards both to compensate our named executive officers in the form of new hire grants at theirthe commencement of their employment and to provide ongoing long-term incentives to our named executivesuch officers as our business has developed. We also generally plan to continue to grant equity awards on at least an annual basis to all of our named executive officers. Typically, stock optionsoption and shares of restricted stock (or restricted stock unit) awards granted to our named executive officers vest over a period of four years, subject to continued employment. Subject to the terms of each executive officer’s employment agreement as described below, vesting ceases upon termination of employment, and stock option exercise rights cease shortly after termination of employment. The exercise price for any InterceptCompany stock option is set at no less than the fair market value of our common stock on the date of grant, as determined by reference to the closing market price of our common stock on the date of grant.such date.
In determining the size of the annual equity awards granted to our named executive officers, our compensation committeeCompensation Committee considers recommendations developed by ourits independent compensation consultant, including information regarding comparative stock ownership of, and equity awards received by, the executives in our compensation peer group and our industry. In addition, our compensation committeeCompensation Committee considers each executive’snamed executive officer’s individual performance and the extent to which such executiveofficer has vested in previous equity awards, as well as our overall corporate performance and the potential for enhancing the long-term creation of value for our stockholders.
EquityAnnual equity awards to our named executive officers are typically granted annuallyeach year in conjunction with the review of their individual performance and Intercept’sour overall corporate performance for the previous year. This review typically occurs at meetings of the compensation committeeour Compensation Committee held during the first quarter of each year, though the equity awards in 2015 were granted in October 2015. year.
This allows the compensation committeeour Compensation Committee to receive audited financial statements ofreview various metrics related to our performance in the previous year before making award determinations.
In makingdetermining the annual equity awards for 2015,to be granted to our compensation committeenamed executive officers in 2017, our Compensation Committee considered, among other things, the value of the annual equity awards received by executives in our compensation peer group and our industry the value of the annual equity awards as a percentage of company value and the size of the annual equity awards as a percentage of our company’s outstanding stock, dilution to existing stockholders and the retention value in the outstanding equity program based on the value of outstanding unvested awards, all of which were considered in light of individual and companycorporate performance for the previous year, 2014. Based on the recommendation of our chief executive officer, and in consideration of our company’s performance and the market performance of our common stock, our compensation committee determined that it would be appropriate to grant equity awards targeting the 50th percentile range of our peer group and industry, in contrast to a target between the 50th and 75th percentile used for grants made in 2014.2016. To promote our
pay-for-performance performance-based compensation philosophy, individual equity awards were positioned higher or lower within the compensation peer group range based on the individual performance of each named executive officer.
We believe that a mix of compensation components incentivizes consistently strong performance. In 2015, the compensation committee2017, our Compensation Committee granted equity incentives into our named executive officers a mix of equity incentive awards, including stock optionsoption and restricted stock.stock awards. Our approach reflects what we believe is an appropriate equity mix,allocation, providing executivesour named executive officers with exposure to downside stock-price risk through stock options, while addressing the historically high volatility of our common stock through the restricted stock award component. This approach also helps manage overall dilution levels and the remaining equity pool available under our 2012 Equity Incentive Plan or (“2012 Plan,Plan”) in light of our significant recent growth and continuedfuture potential expansion in company-wideof company headcount. We expect these two typesIn 2018, we retained the use of equity incentives to bestock option and restricted stock (or restricted stock unit) awards and introduced as part of our annual equity award program performance share unit awards that vest, if at all, based on our TSR relative to that of our TSR Peer Group over a 3-year period, subject to continued employment. Approximately half of the compensation mix ongrant date fair value of Dr. Pruzanski’s 2018 annual equity award was comprised of such TSR PSUs and the remaining half was comprised of stock options. Our other named executive officers received an equal proportion of the grant date fair value of their 2018 annual basis.equity awards in the form of such TSR PSUs, stock options and restricted stock units. Please refer to “—Compensation Decisions Relating to Fiscal Year 2018” below for a listing of grants made to each of our named executive officers in connection with our 2018 annual equity award program.
In October 2015,February 2017, as part of our annual grant process, our compensation committeeCompensation Committee approved the grant of certain time-based options to purchase shares of our common stock option and shares of restricted stock awards to our named executive officers. Each of the time-basedThe stock option awards and shares of restricted stock vestedgranted in connection with respect toour 2017 annual grant have (i) a four-year vesting period, with 25% of the shares on January 1, 2016, and vest with respectsubject to the remainingaward vesting in an initial annual installment following the relevant vesting commencement date and 1/48th of the shares in approximately equal monthly installments forsubject to the stock optionsaward vesting each month thereafter, subject to continued employment and quarterly installments for the restricted stock through January 1, 2019. The time-based stock option awards have(ii) an exercise price of $161.16$107.18 per share, the last reported sale price of our common stock on the NASDAQNasdaq Global Select Market on the date of grant. The restricted stock awards granted in connection with our 2017 annual grant have a four-year vesting period, with 25% of the shares subject to the award vesting in an initial annual installment following the relevant vesting commencement date and 1/16th of the shares subject to the award vesting each quarter thereafter, subject to continued employment. The grants made to each of our named executive officers in connection with our 2017 annual equity award program are set forth in the following table. Please refer to “—Components of Our Executive Compensation Program—Equity Incentive Awards—New Hire Equity Awards” below for a listing of grants made to Mr. Durso and Mr. Ford in 2017.
Name | Time-Based Awards (# of Shares) | |||||||
Options | Restricted Stock | |||||||
Mark Pruzanski, M.D. | 32,550 | 15,100 | ||||||
David Shapiro, M.D. | 13,100 | 5,150 | ||||||
Barbara Duncan | 10,600 | 4,050 | ||||||
Rachel McMinn, Ph.D. | 10,600 | 4,050 | ||||||
Lisa Bright | 13,450 | 5,200 |
Named Executive Officer | Stock Options | Shares of Restricted Stock | ||||||
Mark Pruzanski, M.D. | 40,000 | 23,200 | ||||||
Sandip Kapadia | 11,600 | 7,000 | ||||||
David Shapiro, M.D. | 10,000 | 6,000 |
We grant a new hire equity award in connection with the commencement of an executive’sa named executive officer’s employment as appropriate and necessary to recruit talent, consistent with industry practice. The size of each new hire award is established through an arm’s-length negotiation at the time the named executive officer is hired, taking into account factors such as the position for which the executiveindividual is being considered, and the executive’sindividual’s qualifications and prior experience, and compensation including forfeitedany equity awards as well as external factors such asthat the individual will forfeit by leaving his or her former employer and competitive market demand. Typically, the time-based stock optionsoption and restricted stock we grant(or restricted stock unit) awards granted to our newly-hired named executive officers vest over a period of four years. years, subject to continued employment.
In each case,connection with the competitive recruitment and hiring of our new Chief Operating Officer, Mr. Durso, and our new Chief Human Resources Officer, Mr. Ford, who commenced employment with the Company in February 2017 and May 2017, respectively, our Compensation Committee granted Mr. Durso and Mr. Ford stock option and restricted stock awards. The grants of such long-term equity incentive awards were instrumental to the recruitment of Mr. Durso and Mr. Ford and were determined by our Compensation Committee, which considered the factors described in the preceding paragraph, as well as compensation peer group data and other input provided by Radford and the recommendation of our Chief Executive Officer. In addition, such grants were designed to closely align the interests of Mr. Durso and Mr. Ford with those of our stockholders and satisfy our retention objectives.
The following table sets forth the new hire equity awards that were granted to Mr. Durso and Mr. Ford. The stock option awards granted to Mr. Durso and Mr. Ford have (i) a four-year vesting period, with 25% of the shares subject to the termsaward vesting in an initial annual installment following the relevant vesting commencement date and 1/48th of the shares subject to the award vesting each executive officer’s employment agreement as described below, vesting ceases upon termination ofmonth thereafter, subject to continued employment and (ii) an exercise price of $115.93 per share (in the case of Mr. Durso) and $114.90 per share (in the case of Mr. Ford), which was the last reported sale price of our common stock option exercise rights cease shortly after terminationon the Nasdaq Global Select Market on the relevant date of grant. The restricted stock awards granted to Mr. Durso and Mr. Ford have a four-year vesting period, with 25% of the shares subject to the award vesting in an initial annual installment following the relevant vesting commencement date and 1/16th of the shares subject to the award vesting each quarter thereafter, subject to continued employment.
Named Executive Officer | Stock Options | Shares of Restricted Stock | ||||||
Jerome Durso | 20,000 | 15,000 | ||||||
David Ford | 12,000 | 6,000 |
We believe that establishing competitive benefit packages for our employees is an important factor in attracting and retaining highly qualified personnel. We maintain broad-based benefits that are provided to all employees, including medical, dental, vision, group life insurance and long- and short-term disability insurance. For our U.S.-based executives,employees, we also provide a 401(k) plan. Under our 401(k) plan, we are permitted to make discretionary contributions and matching contributions, subject to established limits and a vesting schedule. Since 2015, we have matched an employee’s contributions to the 401(k) plan up to the first five percent of the employee’s salary.salary, subject to such limits. We provide pension, insurance and other benefits to executivesemployees located outside the United States in line with those provided to similar executivesemployees in their respective countries. All of our executivesOur named executive officers generally receive the same benefits as are eligibleavailable to participate in all of our employee benefit plans available in their respective countries, in each case on the same basis as other employees. The compensation committeesalaried employees, with limited recurring exceptions primarily consisting of fully-paid health insurance premiums. Our Compensation Committee in its discretion may revise, amend or add to thea named executive officer’s benefits and perquisites if it deems it advisable.
In For example, in particular circumstances, we may agree to reimburse ana named executive officer for certain expenses, such as commuting or travel expenses, as an additional incentive to join Interceptus in a position where there is high market demand. Whether such expenses are covered and the amount of the reimbursement is determined on a case-by-case basis under the specific hiring circumstances. In 2015, we reimbursed Ms. Bright for her2017, Mr. Kapadia received an aggregate commuting costs, which reimbursement is capped at a maximumallowance of £1,080 per month (approximately $1,579), plus gross ups on the applicable tax amounts. Ms. Bright$2,165 and Dr. Shapiro also received aan aggregate car allowance in 2015.of $12,000. Mr. Kapadia ceased receiving such commuting allowance following the second quarter of 2017. See “—Summary Compensation Table.”Table” below.
Pursuant to employment agreements or arrangements that we have entered into with our named executive officers, our executivesuch officers are entitled to specified benefits in the event of the termination of their employment under specified circumstances, including termination followingin connection with a change in control of Intercept. Please refer to “— Narrative Disclosure to Summary Compensation Table” for a more detailed discussion of these benefits. We have provided estimates of the value of the severance payments and other benefits that would have been made or provided to executive officers under various termination circumstances under the caption “— Potential Payments Upon Termination or Change in Control” below.
Company. We believe that providing thesesuch benefits is consistent with industry practices and helps us to compete for executive talent. After reviewingtalent, as well as to retain and motivate our named executive officers and minimize management distraction created by uncertain job security, particularly in the practicesevent of companies representeda potential transaction that would be beneficial to our peer group, we believe that our severance and change in control benefits are generally in line with severance packages offered to executives of the companies in our peer group.stockholders.
We have structured our change in control benefits as “double trigger” benefits. In other words, the change in control does not itself trigger benefits. Rather, benefits are paid only if the employment of the named executive officer is terminated during a specified period afterunder certain circumstances in connection with the change in control. We believe that a “double trigger” benefit is protective of stockholder value because itvalue. It prevents an unintended windfallwindfalls to named executive officers in the event of a friendly change in control absent a qualifying termination, while still providing them appropriate incentivesincentivizing named executive officers to cooperate in negotiating anypursue change in control transactions determined by our Board to be in which they believe they may lose their jobs.the best interest of our stockholders.
Please refer to “—Employment Arrangements with Our Compensation Process
Our compensation committee oversees our policies governingvalue of the compensation of our executive officers. In this role, the compensation committee reviewsseverance payments and approves and recommends for approval to our full board of directors (other than our chief executive officer) all compensation decisions relatingother benefits that would have been made or provided to our named executive officers. Our compensation committee consistsofficers under various termination circumstances under the caption “—Potential Payments and Benefits Upon Termination of four members of our board of directors, each of whom has extensive experienceEmployment or Change in our industry and is an independent director under applicable NASDAQ and SEC rules. The compensation committee uses its judgment and experience to develop and make executive compensation recommendations to our full board of directors for approval, including its recommendation regarding our chief executive officer’s compensation package. In doing so, the compensation committee meets with our independent compensation consultant, in executive session, without our chief executive officer or any other member of management present. The board of directors has full discretion to approve or modify the recommendations of the compensation committee. The compensation committee periodically evaluates the need for revisions to our executive compensation program to ensure our program is competitive with the companies with which we compete for executive talent.Control” below.
A small number of executives, including our chief executive officer, our senior vice president of human resources and our senior vice president of legal affairs, participate in general sessions of our compensation committee. Management does not participate in executive sessions of our compensation committee. At the request of the compensation committee, our chief executive officer provides input and recommendations to the compensation committee on salary adjustments, annual target-based cash bonus amounts and appropriate equity incentive compensation levels. In formulating these recommendations, our chief executive officer may consider data obtained from third-party sources, including data provided by a compensation consultant other than the compensation consultant retained by the compensation committee. Any data provided by separate compensation consultants used by management is either not customized specifically for Intercept or is
customized based on parameters that are not developed by such compensation consultant and about which such compensation consultant does not provide advice.
In designing our executive compensation program, our compensation committee considers publicly available compensation data for U.S. companies in the biopharmaceutical industry to help guide its executive compensation decisions at the time of hiring and for subsequent adjustments in compensation. Our compensation committee also retained the services of Radford, an independent compensation consultant and a division of Aon Hewitt, which is a subsidiary of Aon plc, to provide it with additional comparative data on executive compensation practices in our industry and to advise it on our executive compensation program generally. For 2015, Radford provided advice and data to the compensation committee on executive and director compensation matters, including the selection of our peer group, comparative market pay levels, equity dilution and annual share utilization practices, incentive plan design and emerging market trends. Pearl Meyer & Partners, or PM&P, an independent compensation consultant, also advised the compensation committee in its evaluation and determination of the cash salary and bonus targets for 2015. Although the compensation committee considers the advice and recommendations of the compensation consultants about our executive compensation program, the compensation committee ultimately makes its own decisions about these matters.
The compensation committee regularly reviews the services provided by its outside consultants and performs an annual assessment on the independence of its compensation consultants to determine whether the compensation consultant is independent. The compensation committee conducted a specific review of its relationship with each of Radford and PM&P in 2015, and determined that each such advisor is independent in providing Intercept with executive and director compensation consulting services and that each such advisor’s work for the compensation committee did not raise any conflicts of interest, consistent with SEC rules and NASDAQ listing standards.
Our compensation committee references a peer group of publicly traded companies in the biopharmaceutical industry for purposes of gathering data to compare with our existing executive compensation levels and practices and as context for future compensation decisions. The compensation committee periodically reviews and updates the compensation peer group, as appropriate, to include companies that the compensation committee believes are competitors for executive talent and that are similar to us in stage of development, market capitalization and number of employees. The compensation committee may consider peer group and other industry compensation data and the recommendations of our compensation consultant when making decisions related to executive compensation, ultimately giving consideration to the competitiveness of our compensation program, internal perceptions of equity and individual performance. The compensation committee also considered peer companies identified by proxy advisory firms in the prior year’s proxy cycle.
The companies included in our peer group for 2015 were: ACADIA Pharmaceuticals Inc., Achillion Pharmaceuticals, Inc., Alnylam Pharmaceuticals, Inc., Clovis Oncology, Inc., Ironwood Pharmaceuticals, Inc., Merrimack Pharmaceuticals, Inc., NPS Pharmaceuticals, Inc., Ophthotech Corporation, Pharmacyclics, Inc., PTC Therapeutics, Inc., Puma Biotechnology, Inc., Receptos, Inc., Relypsa, Inc., Seattle Genetics Inc., Synageva BioPharma Corp. and Tesaro, Inc.
At the end of each calendar year, the compensation committee considers each executive’s performance for the completed year. This process includes the review of recommendations by our chief executive officer to the compensation committee with respect to each executive officer (other than himself) as to:
The compensation committee takes into consideration these recommendations and other relevant performance and competitive market factors when it makes its determination on executive compensation matters.
In February 2016, in order to provide each of our named executive officers with base salaries that are competitive with our publicly traded peer companies,2018, the annual base salaries of our named executive officers were increasedset by our Compensation Committee as follows, effective January 1, 2016: for Dr. Pruzanski, to $620,000; for Dr. Shapiro, to $475,000; for Ms. Duncan, to $430,000; for Ms. Bright to $430,000 and for Dr. McMinn, to $420,000. 2018:
Named Executive Officer | 2018 Salary | 2017 Salary | Change from 2017 | |||||||||
Mark Pruzanski, M.D. | $ | 702,000 | $ | 675,000 | 4.00 | % | ||||||
Sandip Kapadia | $ | 442,000 | $ | 425,000 | 4.00 | % | ||||||
Jerome Durso | $ | 540,800 | $ | 520,000 | 4.00 | % | ||||||
David Ford | $ | 392,000 | $ | 380,000 | 3.16 | % | ||||||
David Shapiro, M.D. | $ | 489,300 | $ | 489,300 | — |
In addition, in February 2016,2018, our board of directorsCompensation Committee determined to maintain the 2018 annual cash incentive bonus target percentages for our named executive officers at their 2017 levels, and approved cash incentive bonus targets for our named executive officers for 20162018 as follows: for Dr. Pruzanski, 70%; for Dr. Shapiro, 50%; for Ms. Duncan, 50%; for Ms. Bright, 50%; and for Ms. McMinn, 50%.
Named Executive Officer | Target Bonus (as % of Base Salary) | |||
Mark Pruzanski, M.D. | 70 | % | ||
Sandip Kapadia | 50 | % | ||
Jerome Durso | 50 | % | ||
David Ford | 50 | % | ||
David Shapiro, M.D. | 50 | % |
In February 2016, upon2018, our Compensation Committee approved the recommendation of the compensation committee of the board of directors,following equity grants were made to our named executive officers as follows: for Dr. Pruzanski,officers:
Named Executive Officer | TSR PSUs | Stock Options | Restricted Stock Units | |||||||||
Mark Pruzanski, M.D. | 23,400 | 45,500 | — | |||||||||
Sandip Kapadia | 5,400 | 10,500 | 6,900 | |||||||||
Jerome Durso | 10,600 | 20,700 | 13,600 | |||||||||
David Ford | 3,400 | 6,600 | 4,300 | |||||||||
David Shapiro, M.D. | 2,300 | 4,400 | 2,900 |
The stock optionsoption awards granted in connection with our 2018 annual grant have (i) a four-year vesting period, with 25% of the shares subject to purchase 30,500the award vesting in an initial annual installment following the relevant vesting commencement date and 1/48th of the shares of common stocksubject to the award vesting each month thereafter, subject to continued employment and 23,300 shares of restricted stock; for Dr. Shapiro, stock options to purchase 10,200 shares of common stock and 7,800 shares of restricted stock; for Ms. Duncan, stock options to purchase 8,100 shares of common stock and 6,200 shares of restricted stock; for Ms. Bright, stock options to purchase 10,200 shares of common stock and 7,800 shares of restricted stock; and for Dr. McMinn, stock options to purchase 8,800 shares of common stock and 6,700 shares of restricted stock. The(ii) an exercise price for the options awarded to our executive officers is $95.74of $58.74 per share, the last reported sale price of our common stock on the NASDAQNasdaq Global Select Market on the date of the grant.
The compensation committeerestricted stock unit awards granted in connection with our 2018 annual grant have a four-year vesting period, with 25% of the board of directors of Intercept Pharmaceuticals, Inc. has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with Intercept’s management. Based on such review and discussions, the compensation committee recommendedshares subject to the board of directors thataward vesting in an initial annual installment following the Compensation Discussionrelevant vesting commencement date and Analysis be included in this proxy statement.
By the compensation committee1/16th of the boardshares subject to the award vesting each quarter thereafter, subject to continued employment. The TSR PSUs granted in connection with our 2018 annual grant vest, if at all, based on our TSR relative to that of directorsour TSR Peer Group over a 3-year period, subject to continued employment. The percentage of Intercept Pharmaceuticals, Inc.such TSR PSUs that may vest following such period ranges from 0% to 150% as follows:
Relative TSR | ||||
Below 25th Percentile | 0 | % | ||
25th Percentile | 50 | % | ||
50th Percentile | 100 | % | ||
75th Percentile and Above | 150 | % |
The following table sets forth information regarding compensation awarded to, earned by or paid to our named executive officers during the years ended December 31, 2015, 2014 and 2013.
Name and Principal Position | Year | Salary ($) | Bonus(1) ($) | Stock Awards(2) ($) | Option Awards(3)(4) ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||
Mark Pruzanski, M.D. Chief Executive Officer and President | 2015 | 600,000 | 420,000 | 2,308,606 | 2,867,210 | — | 4,627 | (5) | 6,200,443 | |||||||||||||||||||||||
2014 | 537,500 | 327,250 | 1,249,981 | 1,108,935 | — | 4,444 | (5) | 3,228,110 | ||||||||||||||||||||||||
2013 | 459,000 | 475,000 | (6) | 245,630 | 2,073,500 | — | 4,200 | (5) | 3,257,330 | |||||||||||||||||||||||
David Shapiro, M.D. Chief Medical Officer and Executive Vice President, Development | 2015 | 460,000 | 184,000 | 787,371 | 1,153,900 | — | 29,877 | (7) | 2,615,148 | |||||||||||||||||||||||
2014 | 409,250 | 165,900 | 400,079 | 354,945 | — | 15,052 | (7) | 1,345,226 | ||||||||||||||||||||||||
2013 | 377,000 | 249,500 | (10) | 95,700 | 717,750 | — | 14,874 | (7) | 1,454,824 | |||||||||||||||||||||||
Barbara Duncan Chief Financial Officer and Treasurer | 2015 | 415,000 | 166,000 | 619,196 | 933,680 | — | 21,168 | (8) | 2,155,044 | |||||||||||||||||||||||
2014 | 372,500 | 148,125 | 400,079 | 354,945 | — | 8,527 | (8) | 1,284,176 | ||||||||||||||||||||||||
2013 | 331,000 | 225,875 | (11) | 95,700 | 717,750 | — | 8,013 | (8) | 1,378,338 | |||||||||||||||||||||||
Rachel McMinn, Ph.D. Chief Strategy and Business Officer | 2015 | 390,000 | 156,000 | (12) | 619,196 | 933,713 | — | 16,508 | (9) | 2,115,417 | ||||||||||||||||||||||
2014 | 236,667 | 130,169 | (12) | 1,300,263 | (13) | 1,166,901 | — | 2,560 | (9) | 2,836,560 | ||||||||||||||||||||||
Lisa Bright(14) Chief Commercial and Corporate Affairs Officer | 2015 | 396,000 | (14) | 158,400 | 795,016 | 1,184,830 | — | 140,421 | (15) | 2,674,667 | ||||||||||||||||||||||
Daniel Regan(16) Former Chief Commercial Officer | 2015 | 350,538 | (17) | — | — | — | — | 41,962 | (18) | 392,500 | ||||||||||||||||||||||
2014 | 372,500 | 129,600 | 375,074 | 332,701 | — | 21,720 | (19) | 1,231,595 | ||||||||||||||||||||||||
2013 | 277,083 | 167,708 | (20) | — | 3,980,227 | — | 36,147 | (19) | 4,461,165 |
Mark Pruzanski, M.D. Dr. Pruzanski’s employment agreement provides for an initial term of one year with automatic renewal each year thereafter unless terminated by either us or Dr. Pruzanski. Dr. Pruzanski’s base salary, effective as of January 1, 2016, was set at $620,000 per year, subject to annual review and increase (but not decrease), as determined by our board of directors or the compensation committee. Dr. Pruzanski is also eligible to receive an annual bonus payment of up to 70% of his annual base salary, based on achievement of certain performance milestones identified by our board of directors in consultation with Dr. Pruzanski. During 2015 and 2014, Dr. Pruzanski’s base salaries were $600,000 and $550,000, respectively. Dr. Pruzanski’s 2015 salary was effective on January 1, 2015 and his 2014 salary was effective on April 1, 2014.
Dr. Pruzanski is also eligible to participate in our group benefits programs, including but not limited to medical, disability and life insurance, vacation and retirement plans, and a 401(k) plan sponsored by us. We initiated a 401(k) matching program for all of our employees in the United States, including our named executive officers, in 2015. We have agreed to pay 100% of the health insurance premiums of Dr. Pruzanski and his spouse and other dependents and an annual life insurance premium of $10,000. During 2015, 2014 and 2013, although we paid the premium for Dr. Pruzanski’s participation in our group life insurance policy, which is available generally to all employees, we did not purchase or pay premiums for any individual life insurance policy for Dr. Pruzanski. We are also required to purchase short-term and long-term disability policies insuring at least 60% of Dr. Pruzanski’s base salary.
If Dr. Pruzanski terminates his employment with us or we terminate his employment for any reason, in addition to payment of accrued compensation and benefits, Dr. Pruzanski will be entitled to an amount equal to his target bonus for the prior year, if unpaid, and the prorated portion of his target bonus for the year in which his termination occurs. In the event that Dr. Pruzanski does not renew his employment atour relative TSR falls between the end of the employment term, is terminated for cause, is terminated due to death or disability, or he terminates his employment without good reason, Dr. Pruzanski will not be entitled to any severance benefits except as otherwise described below or otherwise required by law.
In the event we do not renew Dr. Pruzanski’s employment at the end of the employment term, Dr. Pruzanski is terminated by us without cause, as defined in the employment agreement, or he resigns with good reason, as defined in the employment agreement, Dr. Pruzanski25th and 75th percentiles will be entitled to receive (i) 12 monthsbased on linear interpolation. In addition, if our relative TSR meets or exceeds the 50th percentile, but our absolute TSR over such period is negative, the percentage of his base salary payable according to our company’s payroll, (ii) a lump sum payment equal to the mean bonus earned by him during the prior three years (such payment shall be in lieu of the prorated bonus payment for the year in which the termination occurs described above) and (iii) continuation of participation in our group health and/or dental plan and the payment of his premiums for 12 months from the date of termination (or the cost of COBRA coverage for such period) for Dr. Pruzanski, his spouse and any dependents covered under our group health and/or dental plan prior to termination.
If Dr. Pruzanski is terminated due to disability, he is entitled to (i) 12 months of base salary payable according to our company’s payroll, so long as he is not eligible to participate in a company-sponsored short-term and long-term disability plansTSR PSUs that provide for benefits of at least 60% of base salary, and (ii) continued participation in our group health and/or dental plan and the payment of his premiums for 12 months following the date of termination (or the cost of COBRA coverage for such period) for Dr. Pruzanski, his spouse and any dependents covered under our group health and/or dental plan prior to termination.
If we do not renew Dr. Pruzanski’s employment at the end of the employment term, Dr. Pruzanski is terminated by us without cause, he resigns with good reason or Dr. Pruzanski is terminated due to his death or disability, all of Dr. Pruzanski’s stock options and equity awards will vest upon the effectiveness of a release of claims in our favor and his stock options will be exercisable for up to three years from the effective date of termination unless the stock plan pursuant to which the option is granted requires earlier termination. In the event that Dr. Pruzanski does not renew his employmentcapped at the end of the employment term, Dr. Pruzanski is terminated for cause or he terminates his employment without good reason, all of his unvested equity awards100%.
vested stock options will be exercisable for up to three years from the effective date of termination unless the stock plan pursuant to which the option is granted requires earlier termination.
In the event of the termination of Dr. Pruzanski’s employment in anticipation of, and/or within three months before or 12 months following, a change in control, as defined in the employment agreement, (i) by us because we do not renew Dr. Pruzanski’s employment at the end of the employment term, (ii) by us for any reason other than for cause or (iii) by Dr. Pruzanski for good reason, Dr. Pruzanski will be entitled to receive (a) an amount equal to 24 months’ of his then-current monthly base salary payable as a single lump sum, (b) a lump sum payment equal to two times the mean bonus earned during the prior three years (such payment shall be in lieu of the prorated bonus payment for the year in which the termination occurs described above) and (c) continuation of participation in our group health and/or dental plan and the payment of his premiums for up to 24 (but not less than 18) months from the date of termination (or the cost of COBRA coverage for such period) for Dr. Pruzanski, his spouse and any dependents covered under our group health and/or dental plan prior to termination.
Receipt of the severance benefits described above is conditioned upon Dr. Pruzanski entering into a release of claims with us and the release becoming effective and irrevocable within 60 days after termination. Dr. Pruzanski has acknowledged and agreed that the timing of payments may be modified by us to comply with Section 409A of the Internal Revenue Code of 1986, as amended, or the Code.
To the extent that we are required to implement a clawback policy for the incentive compensation paid to Dr. Pruzanski based on erroneous data contained in an accounting statement pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Dr. Pruzanski’s employment agreement contemplates that the terms of such policy will be incorporated into his employment agreement, provided that such policy applies to the other executive officers of our company.
Under Dr. Pruzanski’s employment agreement, “cause” for termination shall be deemed to exist upon (a) a good faith finding by a majority of the members of the board (excluding Dr. Pruzanski) that (i) Dr. Pruzanski has engaged in material dishonesty, willful misconduct or gross negligence, or (ii) Dr. Pruzanski has materially breached the employment agreement, and has failed to cure such conduct or breach within 30 days after his receipt of written notice from us, or (b) Dr. Pruzanski’s conviction or entry of nolo contendere to any crime involving moral turpitude, fraud or embezzlement, or any felony. Under Dr. Pruzanski’s employment agreement, “good reason” is defined as a material change in duties, position, responsibilities or reporting requirements, relocation of Dr. Pruzanski’s place of employment by more than 50 miles from his principal residence or place of employment prior to such change or our material breach of the employment agreement.
The base salary of our named executive officers other than Dr. Pruzanski whom we refer to as the non-CEO named executive officers, is subject to annual review and increase (but not decrease), as determined by our board of directors and the compensation committee. Each of our non-CEO named executive officers is also eligible to receive an annual bonus based on a target percentage set by our board of directors and the compensation committee in consultation with our chief executive officer. During 2015 and 2014, Dr. Shapiro’s base salaries were $460,000 and $420,000, respectively. Dr. Shapiro’s 2015 salary was effective on January 1, 2015 and his 2014 salary was effective on April 1, 2014. During 2015 and 2014, Ms. Duncan’s base salaries were $415,000 and $385,000, respectively. Ms. Duncan’s 2015 salary was effective on January 1, 2015 and her 2014 salary was effective on April 1, 2014.
The following table sets forth the base salary and bonus target percentages for 2016 for each of our non-CEO named executive officers, other than Mr. Regan who ceased to be employed with us in March 2015:
Name | 2016 Base Salary | 2016 Bonus Target | ||||||
David Shapiro, M.D. | $ | 475,000 | 50 | % | ||||
Barbara Duncan | $ | 430,000 | 50 | % | ||||
Lisa Bright | $ | 430,000 | 50 | % | ||||
Rachel McMinn, Ph.D. | $ | 420,000 | 50 | % |
We maintain broad-based benefits that are provided to all employees, including our executive officers, such as medical, dental, group life insurance and long- and short-term disability insurance. For our U.S.-based employees, including our U.S.-based executives, we also provide a 401(k) plan. Under our 401(k) plan, we are permitted to make discretionary contributions and matching contributions, subject to established limits and a vesting schedule. Starting in 2015, we generally match an employee’s contributions to the 401(k) plan up to the first five percent of the employee’s salary. We provide pension, insurance and other benefits to employees and executives located outside the United States in line with those provided in their respective countries to personnel of similar level and experience. All of our executives are eligible to participate in all of our employee benefit plans available in their respective countries, in each case on the same basis as other employees. We have agreed to pay 100% of the health insurance premiums of our named executive officers and their respective spouses and other dependents. For Dr. Shapiro, we provide a monthly car allowance of $1,000. For Ms. Bright, we provide a monthly car allowance of £1,180 (approximately $1,725) and we reimburse her £1,080 (approximately $1,579) per month for commuting costs plus gross ups on the applicable tax amounts for commuting. The compensation committee in its discretion may revise, amend or add to the named executive officer’s benefits and perquisites if it deems it advisable.
The employment agreements of Dr. Shapiro and Dr. McMinn provide for an initial term of one year with automatic renewal each year thereafter unless terminated by either us or them. In the event we do not renew Dr. Shapiro’s or Dr. McMinn’s employment at the end of his or her employment term, such named executive officer is terminated by us without cause, as defined in the employment agreement, or he or she resigns with good reason, as defined in the employment agreement, such named executive officer will be entitled to receive (i) 12 months of his or her base salary (paid in a single lump sum in the case of Dr. Shapiro and in accordance with regular payroll for Dr. McMinn) and (ii) continuation of participation in our group health and/or dental plan and the payment of his or her premiums for 12 months (or the cost of COBRA coverage for such period) for such named executive officer and his or her dependents covered under our group health and/or dental plan prior to termination. In the event that Dr. Shapiro or Dr. McMinn does not renew his or her employment at the end of the employment term, is terminated for cause, is terminated due to death or disability, or terminates his or her employment without good reason, such named executive officer will not be entitled to severance payments unless mutually agreed upon in writing.
If we do not renew the employment of Dr. Shapiro or Dr. McMinn at the end of their respective employment terms, such named executive officer is terminated by us without cause or he or she resigns with good reason, all of such named executive officer’s equity awards and stock options that would have vested within one year of the termination date will vest upon effectiveness of a release of claims in our favor and all vested stock options will be exercisable for up to one year from the effective date of termination unless the stock plan pursuant to which the option is granted requires earlier termination.
In the event of the termination of Dr. Shapiro’s or Dr. McMinn’s employment, in anticipation of, and/or within 12 months following, a change in control (i) by us because we do not renew such named executive officer’s employment at the end of the employment term, (ii) by us without cause or (iii) by such named executive officer for good reason, such named executive officer will be entitled to receive (a) an amount equal to 12 months of his or her then-current monthly base salary payable as a single lump sum and (b) continuation of participation in our group health and/or dental plan and the payment of his or her premiums for 12 months (or the cost of COBRA coverage for such period) for such named executive officer, his or her spouse and any dependents covered under our group health and/or dental plan prior to termination. In such instances of termination, all of such named executive officer’s unvested equity awards and stock options will, upon effectiveness of a release of claims in our favor, become fully vested and all of his or her vested stock options will be exercisable for a period of one year following the effective date of termination unless the stock plan pursuant to which the option is granted requires earlier termination.
In the event that either Dr. Shapiro or Dr. McMinn is terminated for cause or such named executive officer terminates his or her employment without good reason, all unvested equity awards and stock options granted will immediately be forfeited and all vested options will be exercisable for up to 90 days following termination unless the stock plan pursuant to which the option is granted requires earlier termination.
Receipt of the severance benefits described above is conditioned upon the Dr. Shapiro or Dr. McMinn, as the case may be, entering into a release of claims with us and the release becoming effective and irrevocable within 60 days after termination. Each of Dr. Shapiro or Dr. McMinn has acknowledged and agreed that the timing of payments may be modified by us to comply with Section 409A of the Code.
To the extent that we are required to implement a clawback policy for the incentive compensation paid to executive officers based on erroneous data contained in an accounting statement pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, each of Dr. Shapiro and Dr. McMinn’s employment agreements contemplate that the terms of such policy will be incorporated into his or her employment agreement, provided that such policy applies to the other executive officers of our company.
Under the employment agreements of Dr. Shapiro and Dr. McMinn, “cause” for termination shall be deemed to exist upon (a) a good faith finding by us that (i) the named executive officer has engaged in material dishonesty, willful misconduct or gross negligence, (ii) the named executive officer has materially breached the employment agreement, or (iii) the named executive officer has breached or threatened to breach his or her invention, non-disclosure and non-solicitation agreement, and has failed to cure such conduct or breach within 30 days after his or her receipt of written notice from us, or (b) the named executive officer’s conviction or entry of nolo contendere to any crime involving moral turpitude, fraud or embezzlement, or any felony. Under the employment agreements, “good reason” is defined as a material change in duties, position, responsibilities or reporting requirements, a relocation of the named executive officer’s place of employment by more than 50 miles from his or her principal residence or place of employment immediately prior to such change or our material breach of the employment agreement.
Ms. Bright’s employment agreement, which was effective in November 2014, will continue until it is either terminated by Ms. Bright by giving us six months’ written notice, or terminated by us by giving Ms. Bright six months’ written notice. In the event that Ms. Bright is terminated for equity cause, is terminated due to death or disability, or terminates her employment without equity good reason, she will not be entitled to severance payments unless mutually agreed upon in writing.
If Ms. Bright terminates her employment for equity good reason or if she is terminated by us without equity cause, all unvested stock options and other equity awards that would have otherwise vested within one year of Ms. Bright’s termination, shall vest on the date that a settlement agreement between us and Ms. Bright becomes effective, and Ms. Bright shall have until the earlier of the expiration date of the option or one year from her date of termination to exercise all vested options unless the stock plan pursuant to which the option is granted requires earlier termination. In the event that Ms. Bright is terminated for equity cause or she terminates her employment without equity good reason, or if she is terminated by reason of disability, all unvested equity awards and stock options will immediately be forfeited.
In the event of the termination of Ms. Bright’s employment in anticipation of, and/or within 12 months following, a change in control, provided Ms. Bright executes a settlement agreement and the settlement agreement becomes effective and irrevocable within sixty days of termination, all of Ms. Bright’s unvested equity awards and stock options will immediately become fully vested and all of her vested stock options will be exercisable for a period of one year following the effective date of termination, unless the provisions contained in our equity incentive plan require earlier termination in connection with a liquidation or sale of our company.
Under Ms. Bright’s employment agreement, “equity cause” for termination shall be deemed to exist upon (a) a good faith finding by us that (i) Ms. Bright has engaged in material dishonesty, willful misconduct or gross negligence, (ii) Ms. Bright has breached or threatened to breach an agreement between herself and us related to intellectual property, non-disclosure or non-solicitation of our employees or customers, (iii) Ms. Bright has materially breached the employment agreement and failed to cure such breach within thirty (30) days after receipt of written notice of such breach of written notice from us, or (iv) Ms. Bright’s conviction or entry of nolo contendere to any crime involving fraud, bribery, embezzlement or any other criminal offense. Under the employment agreement, “equity good reason” is defined as a material change in duties, position, responsibilities or reporting requirements, a relocation of Ms. Bright’s place of employment
by more than 50 miles from his or her principal residence or place of employment immediately prior to such change or our material breach of the employment agreement.
The terms of Ms. Duncan’s employment agreement are substantially similar to those of the employment agreements of Dr. Shapiro and Dr. McMinn described above. In January 2016, as previously disclosed, Ms. Duncan announced her planned departure from her role as our chief financial officer and treasurer. In accordance with such planned departure, in February 2016, we entered into a transition agreement and release with Ms. Duncan. Pursuant to the terms of the transition agreement, Ms. Duncan will continue to serve as our chief financial officer until June 30, 2016 or such earlier date determined by our chief executive officer and mutually agreed upon by Ms. Duncan. We refer to the date of her separation as the separation date and the period of her employment as the employment period. The parties may also agree to delay the separation date if no successor chief financial officer is in the office by June 30, 2016. During the employment period, Ms. Duncan will continue to receive her annual base salary and participate in our benefit plans and programs. Ms. Duncan is also eligible for a pro-rated bonus for 2016 equal to 40% of her pro-rated 2016 salary. Additionally, from the separation date through July 1, 2017 or a date that is one year following the separation date beyond June 30, 3016, which one year period we refer to as the consulting period, Ms. Duncan has agreed to provide consulting services to us on an as-requested basis. Compensation for the consulting period will be paid to Ms. Duncan at a rate of $500 per hour (to a maximum of $40,000 per month even if working in excess of 80 hours in such month) upon presentation of invoices in a form reasonably acceptable to us. We plan to enter into a separate consulting agreement with Ms. Duncan on or before the separation date.
In consideration of Ms. Duncan’s release of any claims against us, Ms. Duncan will be entitled to the following severance and other benefits following the end of her employment period: (i) annual base salary paid monthly for 12 months, which payments will be delayed six months in compliance with Section 409A of the Internal Revenue Code; (ii) a lump sum payment of 40% of such base salary; and (iii) reimbursement for the employer portion of the premiums for COBRA coverage for Ms. Duncan and her dependents under our company’s subsidized health benefits for a period of 12 months following the separation date or earlier if Ms. Duncan ceases to be eligible for COBRA, or chooses not to elect such coverage. Ms. Duncan will also be entitled to the following in relation to her equity awards: (a) continued vesting of options until the end of her consulting period, or initial vesting date, and accelerated vesting for all unvested time-based options that were scheduled, by their terms, to vest on or before one year following the end of her consulting period, or the extended vesting date; (b) all unvested performance based options shall be extended through the initial vesting date but will only become vested to the extent that performance targets are satisfied during that time; and (c) restricted stock and restricted stock units will continue to vest through the initial vesting date, and all unvested restricted stock and restricted stock units that were scheduled, by their terms, to vest on or before the extended vesting date, will be accelerated; and (d) if there is a change in control as defined in the respective award agreements, before the end of her consulting period such that the change in control is effective within three months following the conclusion of her consulting period, any unvested options, shares of restricted stock and restricted stock units will be accelerated.
Mr. Regan left the service of our company in March 2015. Pursuant to the terms of Mr. Regan’s employment agreement, he received (i) an aggregate cash payment of $360,000 corresponding to his salary for 12 months in accordance with our regular payroll, (ii) reimbursement of $9,000 for his apartment rent, (iii) the premiums for the health and dental insurance for himself and his spouse and dependents, and (iv) the acceleration of 32,500 shares underlying the options granted in 2013, 430 shares underlying the time-vesting options granted in 2014 and 352 shares underlying the restricted stock awards granted in 2014.
Dr. Pruzanski is a party to a non-competition and non-solicitation agreement with us, which prevents him from competing with us or soliciting our employees or independent contractors during his employment and for a one-year period thereafter. In addition, each of our named executive officers has also entered into an agreement that contains provisions relating to confidential information, non-solicitation and assignment of inventions. Among other things, these provisions obligate each named executive officer to refrain from
disclosing any of our proprietary information received during the course of employment and soliciting our employees and to assign to us any inventions conceived or developed during the course of employment.
The following table sets forth information regarding grants of plan-based awards to our named executive officers during 2015. All equity awards in 2015 were issued under our 2012 Plan.
Name | Grant Date | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/share)(1) | Grant Date Fair Value of Stock and Option Awards(2) | |||||||||||||||
Mark Pruzanski | 10/01/2015 | 15,100 | — | $ | 2,255,185 | |||||||||||||||
10/01/2015 | 32,550 | $ | 161.16 | $ | 2,841,753 | |||||||||||||||
David Shapiro | 10/01/2015 | 5,150 | — | — | $ | 769,153 | ||||||||||||||
10/01/2015 | 13,100 | $ | 161.16 | $ | 1,143,686 | |||||||||||||||
Barbara Duncan | 10/01/2015 | 4,050 | — | $ | 604,868 | |||||||||||||||
10/01/2015 | 10,600 | $ | 161.16 | $ | 925,424 | |||||||||||||||
Rachel McMinn | 10/01/2015 | 4,050 | — | — | $ | 604,868 | ||||||||||||||
10/01/2015 | 10,600 | $ | 161.16 | $ | 925,424 | |||||||||||||||
Lisa Bright | 10/01/2015 | 5,200 | — | — | $ | 776,620 | ||||||||||||||
10/01/2015 | 13,450 | $ | 161.16 | $ | 1,174,242 |
The following table shows information regarding exercises of options to purchase our common stock and vesting of stock awards held by each of our named executive officer during the year ended December 31, 2015.
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||
Mark Pruzanski | 6,561 | — | 23,452 | 4,825,666 | ||||||||||||
David Shapiro | 22,014 | — | 7,898 | 1,625,911 | ||||||||||||
Barbara Duncan | — | — | 6,600 | 1,356,326 | ||||||||||||
Rachel McMinn | — | — | 1,846 | 439,999 | ||||||||||||
Lisa Bright | — | — | 2,097 | 385,051 | ||||||||||||
Daniel Regan | 5,306 | — | 705 | 156,624 |
The following table shows grants of restricted stock units or awards, stock options and grants of unvested stock awards outstanding on the last day of the fiscal year ended December 31, 2015 to each of our named executive officers.
Option Awards | Stock Awards | |||||||||||||||||||||||
Number of Securities Underlying Unexercised Options | Option Exercise Price ($/share) | Option Expiration Date | Number of Stock Units That Have Not Vested (#)(1) | Market Value of Stock Units That Have Not Vested ($)(2) | ||||||||||||||||||||
Name | Exercisable | Un-exercisable | ||||||||||||||||||||||
(a) | (b) | (c) | (e) | (f) | (g) | (h) | ||||||||||||||||||
Mark Pruzanski | 12,500 | — | 9.83 | 7/18/2016 | ||||||||||||||||||||
8,411 | — | 9.83 | 9/18/2018 | |||||||||||||||||||||
116,628 | — | 8.67 | 8/16/2020 | |||||||||||||||||||||
34,404 | — | 8.67 | 10/13/2021 | |||||||||||||||||||||
46,158 | 1,082 | (3) | 21.50 | 11/16/2022 | ||||||||||||||||||||
47,396 | 13,845 | (4) | 31.90 | 5/7/2023 | ||||||||||||||||||||
2,747 | 2,654 | (7) | 266.01 | 4/11/2024 | ||||||||||||||||||||
— | 22,931 | (11) | 266.01 | 4/11/2024 | ||||||||||||||||||||
— | 32,550 | (12) | 161.16 | 10/01/2025 | ||||||||||||||||||||
— | — | — | — | 4,868 | (5) | 727,036 | ||||||||||||||||||
— | — | — | — | 2,406 | (6) | 359,336 | ||||||||||||||||||
— | — | — | — | 2,643 | (8) | 394,732 | ||||||||||||||||||
— | — | — | — | 15,100 | (13) | 2,255,185 | ||||||||||||||||||
David Shapiro | 2,235 | — | 8.67 | 10/13/2021 | ||||||||||||||||||||
9,475 | 361 | (3) | 21.50 | 11/16/2022 | ||||||||||||||||||||
16,187 | 6,094 | (4) | 31.90 | 5/7/2023 | ||||||||||||||||||||
879 | 956 | (7) | 266.01 | 4/11/2024 | ||||||||||||||||||||
— | 8,255 | (11) | 266.01 | 4/11/2024 | ||||||||||||||||||||
— | 13,100 | (12) | 161.16 | 10/01/2025 | ||||||||||||||||||||
— | — | — | — | 1,623 | (5) | 242,395 | ||||||||||||||||||
— | — | — | — | 937 | (6) | 139,941 | ||||||||||||||||||
— | — | — | — | 846 | (8) | 126,350 | ||||||||||||||||||
— | — | — | — | 5,100 | (13) | 769,153 | ||||||||||||||||||
Barbara Duncan | 19,520 | — | 9.82 | 5/18/2019 | ||||||||||||||||||||
6,940 | — | 8.67 | 8/16/2020 | |||||||||||||||||||||
13,413 | — | 8.67 | 10/13/2021 | |||||||||||||||||||||
8,077 | 288 | (3) | 21.50 | 11/16/2022 | ||||||||||||||||||||
8,781 | 6,094 | (4) | 31.90 | 5/7/2023 | ||||||||||||||||||||
879 | 956 | (7) | 266.01 | 4/11/2024 | ||||||||||||||||||||
— | 6,650 | (11) | 266.01 | 4/11/2024 | �� | |||||||||||||||||||
— | 10,600 | (12) | 161.16 | 10/01/2025 | ||||||||||||||||||||
— | — | — | — | 1,298 | (5) | 193,856 | ||||||||||||||||||
— | — | — | — | 937 | (6) | 139,941 | ||||||||||||||||||
— | — | — | — | 846 | (8) | 126,350 | ||||||||||||||||||
— | — | — | — | 4,050 | (13) | 604,868 |
Option Awards | Stock Awards | |||||||||||||||||||||||
Number of Securities Underlying Unexercised Options | Option Exercise Price ($/share) | Option Expiration Date | Number of Stock Units That Have Not Vested (#)(1) | Market Value of Stock Units That Have Not Vested ($)(2) | ||||||||||||||||||||
Name | Exercisable | Un-exercisable | ||||||||||||||||||||||
(a) | (b) | (c) | (e) | (f) | (g) | (h) | ||||||||||||||||||
Rachel McMinn | 2,502 | 3,502 | (9) | 264.12 | 4/30/2024 | |||||||||||||||||||
— | 6,467 | (11) | 264.12 | 4/30/2024 | ||||||||||||||||||||
— | 10,600 | (12) | 161.16 | 10/01/2025 | ||||||||||||||||||||
— | — | — | — | 3,077 | (10) | 459,550 | ||||||||||||||||||
— | — | — | — | 4,050 | (13) | 604,868 | ||||||||||||||||||
Lisa Bright | 2,771 | 7,461 | (14) | 155.00 | 11/24/2024 | |||||||||||||||||||
— | 10,839 | (11) | 155.00 | 11/24/2024 | ||||||||||||||||||||
— | 13,450 | (12) | 161.16 | 10/01/2025 | ||||||||||||||||||||
— | — | — | — | 6,290 | (15) | 939,412 | ||||||||||||||||||
— | — | — | — | 5,200 | (13) | 776,620 | ||||||||||||||||||
Daniel Regan | 37,969 | — | 37.69 | 5/7/2023 | ||||||||||||||||||||
932 | — | 266.01 | 4/11/2025 |
The following tables set forth information regarding potential payments that each named executive officer who was serving as an executive officer as of December 31, 2015 would have received if the named executive officer’s employment had terminated as of December 31, 2015 under the circumstances set forth below. See “Narrative Disclosure to Summary Compensation Table” for a narrative description of the compensation to which any of our named executive officers would be entitled to upon termination.
The value of stock options with accelerated vesting represents the value of unvested stock options, calculated by multiplying the number of shares subject to the accelerated portion of the option by the amount (if any) by which $149.35, the closing market price of our common stock on December 31, 2015, exceeds the exercise price of such option. The value of RSUs and restricted stock grants is calculated by multiplying the number of shares subject to acceleration by $149.35, the closing price of our common stock on December 31, 2015.
Name | Cash Payment | Value of Equity Accelerated | Other Benefits | |||||||||
Mark Pruzanski | 1,104,617 | 5,942,213 | 4,627 | |||||||||
David Shapiro | 531,583 | 1,453,859 | 4,627 | |||||||||
Barbara Duncan | 450,083 | 1,324,150 | 7,918 | |||||||||
Rachel McMinn | 413,190 | 448,498 | 3,258 | |||||||||
Lisa Bright | 201,718 | 652,958 | — |
Name | Cash Payment | Value of Equity Accelerated | Other Benefits | |||||||||
Mark Pruzanski | 697,200 | 5,942,213 | 4,627 | |||||||||
David Shapiro | 71,583 | — | — | |||||||||
Barbara Duncan | 35,083 | — | — | |||||||||
Rachel McMinn | 23,190 | — | — | |||||||||
Lisa Bright | 201,718 | — | — |
Name | Cash Payment | Value of Equity Accelerated | Other Benefits | |||||||||
Mark Pruzanski | 97,200 | 5,942,213 | — | |||||||||
David Shapiro | 71,583 | — | — | |||||||||
Barbara Duncan | 35,083 | — | — | |||||||||
Rachel McMinn | 23,190 | — | — | |||||||||
Lisa Bright | 3,718 | — | — |
Name | Cash Payment | Value of Equity Accelerated | Other Benefits | |||||||||
Mark Pruzanski | 2,112,034 | 5,942,213 | 9,254 | |||||||||
David Shapiro | 531,583 | 2,039,733 | 4,627 | |||||||||
Barbara Duncan | 450,083 | 1,762,492 | 7,918 | |||||||||
Rachel McMinn | 413,190 | 1,064,417 | 3,258 | |||||||||
Lisa Bright | 201,718 | 1,716,032 | — |
The following table sets forth the compensation we paid to our non-employee directors during 2015.
Name(1) | Fees Earned or Paid in Cash(2) | Stock Awards(3)(4) | Option Awards(3)(5) | Total | ||||||||||||
Srinivas Akkaraju, M.D., Ph.D.(6)(8) | $ | 52,473 | $ | 116,525 | $ | 172,347 | $ | 341,345 | ||||||||
Luca Benatti, Ph.D.(6)(8) | 47,240 | 116,525 | 172,347 | 336,112 | ||||||||||||
Paolo Fundaro(6)(8) | 53,140 | 116,525 | 172,347 | 342,012 | ||||||||||||
Sanj K. Patel(8) | 40,531 | — | — | 40,531 | ||||||||||||
Gino Santini(7)(8) | 5,555 | 227,599 | 349,360 | 582,514 | ||||||||||||
Glenn Sblendorio(6)(8) | 48,193 | 116,525 | 172,347 | 337,065 | ||||||||||||
Jonathan T. Silverstein(6)(8) | 66,749 | 116,525 | 172,347 | 355,621 | ||||||||||||
Klaus Veitinger, M.D.(6)(8) | 47,860 | 116,525 | 172,347 | 336,732 | ||||||||||||
Daniel Welch(7)(8) | 5,118 | 227,599 | 349,360 | 582,077 | ||||||||||||
Nicole S. Williams(8) | 49,538 | — | — | 49,538 |
Name | Stock Options | Restricted Stock | ||||||
Srinivas Akkaraju, M.D., Ph.D. | 8,004 | 650 | ||||||
Luca Benatti | 2,301 | 951 | ||||||
Paolo Fundaro | 10,754 | 650 | ||||||
Sanj K. Patel | 184 | — | ||||||
Gino Santini | 3,500 | 1,300 | ||||||
Glenn Sblendorio | 2,301 | 951 | ||||||
Jonathan Silverstein | 15,327 | 650 | ||||||
Klaus Veitinger, M.D., Ph.D. | 9,977 | 650 | ||||||
Daniel Welch | 3,500 | 1,300 | ||||||
Nicole Williams | 20,070 | — |
All directors are eligible to receive reimbursement for reasonable out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors, and our non-employee directors are also eligible to receive reimbursement, upon approval of the board of directors or a committee thereof, for reasonable out-of-pocket expenses incurred in connection with attendance at various conferences or meetings with our management.
In February 2016, our board of directors adopted a revised non-employee director compensation policy. Pursuant to the revised policy, our non-employee directors will receive the following cash compensation for service on our board of directors and our board committees effective as of the date of adoption:
Board of Directors or Committee of Board of Directors | Annual Retainer Amount for Chair | Annual Retainer Amount for Other Members | ||||||
Board of Directors | $ | 75,000 | $ | 50,000 | ||||
Audit Committee | $ | 20,000 | $ | 10,000 | ||||
Compensation Committee | $ | 15,000 | $ | 7,500 | ||||
Nominating and Governance Committee | $ | 10,000 | $ | 5,000 | ||||
R&D Committee | $ | 10,000 | $ | 5,000 |
In addition, our non-employee directors who have served on our board of directors for at least six months prior to an annual meeting of stockholders will receive options to purchase common stock and shares of restricted stock based on the following valuations:
Stock Options | Restricted Stock | |||||||
$232,045 | $174,787 |
The equity grants will vest on the one-year anniversary of the date of grant, subject to the non-employee director’s continued service on our board of directors;provided, however, that if the next subsequent annual meeting of stockholders is held prior to the one year anniversary date from the grant, the equity grants shall vest as of the close of business on the day immediately preceding such annual meeting date, subject to the non-employee director’s continued service on our board. The grants will vest in full immediately prior to a change in control of our company.
Newly appointed non-employee directors will be granted a non-qualified stock option under the 2012 Plan to purchase shares of our common stock equivalent to $464,090 in value and shares of restricted stock equivalent to $349,575 in value. The grant will be made automatically and without any action on the part of our board of directors on the first annual meeting of stockholders immediately following the appointment of the new non-employee director;provided, however, that if the new non-employee director is initially elected at an annual meeting, the date of grant will be the annual meeting date upon which the non-employee director was initially elected to our board of directors. The equity grants will vest annually over three years on the anniversary of the date the non-employee director was first elected or appointed to our board of directors, subject to the non-employee director’s continued service on our board of directors;provided, however, if the next subsequent annual meeting date (starting from the annual meeting date in the year after the initial equity grants are made) is held prior to the anniversary date in that year, the annual vesting for such year will occur on the day immediately preceding the date of the annual meeting in such year, subject to the non-employee director’s continued service on our board of directors. The grants will vest in full immediately prior to a change in control of our company.
The following table provides certain aggregate information with respect to all of the Company’s equity compensation plans in effect as of December 31, 2015.
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the Second Column) | |||||||||
Equity compensation plans approved by security holders | 1,541,164 | (1) | $ | 108.49 | 1,223,693 | (2) | ||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 1,541,164 | 108.49 | 1,223,693 |
Until Mr. Patel’s departure from our board of directors in November 2015 after our annual meeting, our compensation committee was composed of Drs. Akkaraju and Veitinger and Messrs. Fundaro and Patel. Since December 2015, our compensation committee has been composed of Drs. Akkaraju and Veitinger and Messrs. Santini and Welch. No member of our compensation committee during fiscal 2015 has at any time been an officer or employee of ours. None of our executive officers serves as a member of another entity’s board of directors or compensation committee, or other committee serving an equivalent function that has one or more executive officers serving as a member of our board of directors or compensation committee.
Our compensation committee has reviewed and evaluated the philosophy and standards on which our compensation plans have been developed and implemented across our company. It is our belief that our compensation programs do not encourage inappropriate actions or risk taking by our executive officers. We do not believe that any risks arising from our employee compensation policies and practices are reasonably likely to have a material adverse effect on our company. In addition, we do not believe that the mix and design of the components of our executive compensation program encourage management to assume excessive risks.
Section 162(m) of the Internal Revenue Code generally restricts deductibility for federal income tax purposes of annual individual compensation in excess of $1 million paid to eachcertain executive officers. Prior to the enactment of the chief executive officerTax Cuts and Jobs Act of 2017 (the “TCJA”), Section 162(m) provided an exemption from this limitation for “qualified performance-based compensation.” The TCJA repealed the three other most highly compensated executive officers (other than“qualified performance-based compensation” exemption, effective for taxable years beginning after December 31, 2017, but provides transition relief for certain contractual arrangements in place as of November 2, 2017 and not modified thereafter. We account for stock-based compensation, including annual and new hire equity awards, in accordance with the chief financial officer) if certain conditions are not satisfied. Qualified “performance-based compensation” is not subject to the deduction limitation if specified requirements are met. The compensation committeeof ASC 718.
Our Compensation Committee is informed about the tax deductibility and accounting treatment of compensation when making its compensation determinations. The compensation committee’sOur Compensation Committee’s general policy is to develop and maintain compensation programs that effectively attract, motivate and retain exceptional executives in a highly competitive environment, which may include payments that might not be deductible if the compensation committeeour Compensation Committee believes they are in the best interests of our companythe Company and ourits stockholders.
The information contained in this report shall not be deemed to be “soliciting material,” “filed” with the SEC or incorporated by reference into any filing under the Securities Act or the Exchange Act, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.
The Compensation Committee of the Board of Directors of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with the Company’s management. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
By the Compensation Committee of the Board of Directors of Intercept Pharmaceuticals, Inc.,
Gino Santini,Chairperson
Srinivas Akkaraju, M.D., Ph.D.
Daniel Welch
TABLE OF AUDIT COMMITTEECONTENTS
The audit committeefollowing table summarizes the compensation that was earned by our named executive officers for the year ended December 31, 2017 and, as applicable, the years ended December 31, 2016 and 2015.
Name and Principal Position | Year(1) | Salary ($)(2) | Bonus ($)(3) | Stock Awards ($)(4) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | All Other Compensation ($)(6) | Total ($) | ||||||||||||||||||||||||
Mark Pruzanski, M.D. President and Chief Executive Officer | 2017 | 675,000 | — | 2,486,576 | 2,583,556 | 401,625 | 7,930 | �� | 6,154,687 | |||||||||||||||||||||||
2016 | 620,000 | — | 2,196,957 | 1,608,449 | 347,000 | 4,627 | 4,777,033 | |||||||||||||||||||||||||
2015 | 600,000 | — | 2,433,516 | 2,967,359 | 420,000 | 4,627 | 6,425,502 | |||||||||||||||||||||||||
Sandip Kapadia Chief Financial Officer | 2017 | 425,000 | — | 750,260 | 749,231 | 188,594 | 23,930 | 2,137,016 | ||||||||||||||||||||||||
2016 | 200,000 | 75,000 | 2,195,400 | 1,559,019 | 183,000 | 7,057 | 4,219,476 | |||||||||||||||||||||||||
Jerome Durso Chief Operating Officer | 2017 | 441,333 | — | 1,738,950 | 1,395,217 | 260,000 | 26,765 | 3,862,266 | ||||||||||||||||||||||||
David Ford Chief Human Resources Officer | 2017 | 246,269 | — | 689,400 | 788,343 | 168,625 | 20,010 | 1,912,647 | ||||||||||||||||||||||||
David Shapiro, M.D. Chief Medical Officer | 2017 | 489,300 | — | 643,080 | 645,889 | 171,255 | 30,330 | 1,979,854 | ||||||||||||||||||||||||
2016 | 475,000 | — | 735,462 | 537,908 | 190,000 | 29,877 | 1,968,247 | |||||||||||||||||||||||||
2015 | 460,000 | — | 829,974 | 1,194,237 | 184,000 | 29,877 | 2,698,088 |
(1) | Mr. Kapadia, Mr. Durso and Mr. Ford joined the Company in July 2016, February 2017 and May 2017, respectively. Dr. Shapiro served as Chief Medical Officer and Executive Vice President, Development until his roles were bifurcated in November 2017, after which time he continued as Chief Medical Officer. |
(2) | Reflects (i) prorated 2016 salary for Mr. Kapadia, who was hired during 2016 and (ii) prorated 2017 salaries for Mr. Durso and Mr. Ford, each of whom were hired during 2017. |
(3) | Reflects for Mr. Kapadia in 2016, a sign-on cash bonus in the amount of $75,000 paid in connection with the commencement of his employment in July 2016. |
(4) | Amounts shown represent the aggregate grant date fair value for the fiscal years presented, computed in accordance with ASC 718, in respect of restricted stock and option awards, as applicable. Assumptions used in the calculation of these amounts are included in “Note 14” to the Notes to Consolidated Financial Statements for the year ended December 31, 2017, included in our Annual Report. Amounts shown do not reflect the compensation actually received by the named executive officers. For Mr. Kapadia in 2016 and Mr. Durso and Mr. Ford in 2017, such amounts reflect such individuals’ new-hire equity awards. |
(5) | Amounts shown reflect target-based cash incentive bonuses earned with respect to the fiscal years presented based on our Compensation Committee’s evaluation of the relevant named executive officer’s performance against corporate objectives and, in the case of named executive officers other than our Chief Executive Officer, individual performance levels. See “—Compensation Discussion and Analysis—Components of Our Executive Compensation Program—Annual Target-Based Cash Incentive Bonuses” above for a discussion of the target and actual cash incentive bonuses for each of the named executive officers with respect to 2017. |
(6) | The following table sets forth the component amounts presented in the “All Other Compensation” column above for the year ended December 31, 2017: |
Name | Contributions Under 401(k) Plan ($)(i) | Health Insurance ($)(ii) | Commuting/ Car Allowance ($)(iii) | Counsel Fees ($)(iv) | ||||||||||||
Mark Pruzanski, M.D. | — | 7,930 | — | — | ||||||||||||
Sandip Kapadia | 13,500 | 8,265 | 2,165 | — | ||||||||||||
Jerome Durso | 13,500 | 8,265 | — | 5,000 | ||||||||||||
David Ford | 9,500 | 5,510 | — | 5,000 | ||||||||||||
David Shapiro, M.D. | 13,500 | 4,830 | 12,000 | — |
(i) | Represents the annual contribution of the Company under the terms of its 401(k) Plan. |
(ii) | Represents the amount paid by the Company for health insurance premiums above the amounts generally paid for the coverage of its employees. |
(iii) | Represents an aggregate commuting allowance of $2,165 paid to Mr. Kapadia and a car allowance of $1,000 per month paid to Dr. Shapiro. Mr. Kapadia ceased receiving such commuting allowance following the second quarter of 2017. |
(iv) | Represents the amount paid by the Company in respect of attorney’s fees incurred by Mr. Durso and Mr. Ford in connection with the review and negotiation of their employment agreements. |
The following table sets forth information concerning the named executive officers’ 2017 annual cash incentive bonus award opportunities and 2017 grants of restricted stock and stock options under our 2012 Plan. All stock options granted to our named executive officers are incentive stock options, to the extent permissible under the Code.
Name | Grant Date | Estimated Future Payout Under Non-Equity Incentive Plan Awards Target ($)(4) | All Other Stock Awards: Number of Shares of Stock (#)(5) | All Other Option Awards: Number of Securities Underlying Options (#)(6) | Exercise or Base Price of Option Awards ($/Sh)(7) | Grant Date Fair Value of Stock and Option Awards ($)(8) | ||||||||||||||||||
Mark Pruzanski, M.D. | — | 472,500 | — | — | — | — | ||||||||||||||||||
02/01/17 | (1) | — | 23,200 | — | — | 2,486,576 | ||||||||||||||||||
02/01/17 | (1) | — | — | 40,000 | 107.18 | 2,583,556 | ||||||||||||||||||
Sandip Kapadia | — | 212,500 | — | — | — | — | ||||||||||||||||||
02/01/17 | (1) | — | 7,000 | — | — | 750,260 | ||||||||||||||||||
02/01/17 | (1) | — | — | 11,600 | 107.18 | 749,231 | ||||||||||||||||||
Jerome Durso | — | 260,000 | — | — | — | — | ||||||||||||||||||
02/23/17 | (2) | — | 15,000 | — | — | 1,738,950 | ||||||||||||||||||
02/23/17 | (2) | — | — | 20,000 | 115.93 | 1,395,217 | ||||||||||||||||||
David Ford | — | 190,000 | — | — | — | — | ||||||||||||||||||
05/08/17 | (3) | — | 6,000 | — | — | 689,400 | ||||||||||||||||||
05/08/17 | (3) | — | — | 12,000 | 114.90 | 788,343 | ||||||||||||||||||
David Shapiro, M.D. | — | 244,650 | — | — | — | — | ||||||||||||||||||
02/01/17 | (1) | — | 6,000 | — | — | 643,080 | ||||||||||||||||||
02/01/17 | (1) | — | — | 10,000 | 107.18 | 645,889 |
(1) | Represents annual equity grants made to Dr. Pruzanski, Mr. Kapadia and Dr. Shapiro in 2017, as more fully described under “—Compensation Discussion and Analysis—Components of Our Executive Compensation Program—Equity Incentive Awards—Annual Equity Awards” above. Such awards have a vesting commencement date of January 1, 2017. |
(2) | Represents grants made to Mr. Durso in connection with his appointment as Chief Operating Officer of the Company in February 2017, as more fully described under “—Compensation Discussion and Analysis—Components of Our Executive Compensation Program—Equity Incentive Awards—New Hire Equity Awards” above. Such awards have a vesting commencement date of February 23, 2017. |
(3) | Represents grants made to Mr. Ford in connection with his appointment as Chief Human Resources Officer of the Company in May 2017, as more fully described under “—Compensation Discussion and Analysis—Components of Our Executive Compensation Program—Equity Incentive Awards—New Hire Equity Awards” above. Such awards have a vesting commencement date of May 8, 2017. |
(4) | Represents the potential 2017 cash incentive bonus payouts assuming target achievement of corporate goals and, as applicable, individual performance, based upon the named executive officer’s cash incentive bonus target and base salary in effect on December 31, 2017. No minimum threshold amount or maximum amount beyond the target amount was established. See the column entitled “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table for the cash incentive bonuses earned by the named executive officers in 2017 and paid in 2018. |
(5) | Represents grants of restricted stock made to the named executive officers in 2017. Such awards have a four-year vesting period, with 25% of the shares subject to the award vesting in an initial annual installment following the relevant vesting commencement date and 1/16th of the shares subject to the award vesting each quarter thereafter, subject to continued employment. |
(6) | Represents grants of stock options made to the named executive officers in 2017. Such awards have a four-year vesting period, with 25% of the shares subject to the award vesting in an initial annual |
installment following the relevant vesting commencement date and 1/48th of the shares subject to the award vesting each month thereafter, subject to continued employment. |
(7) | Represents the closing market price of the shares on the date of the grant. |
(8) | Amounts shown represent the aggregate grant date fair value, computed in accordance with ASC 718, in respect of restricted stock and option awards, as applicable, granted in 2017. Assumptions used in the calculation of these amounts are included in “Note 14” to the Notes to Consolidated Financial Statements for the year ended December 31, 2017, included in our Annual Report. |
The following table sets forth information concerning unexercised stock options and unvested restricted stock for each of the boardnamed executive officers outstanding as of directorsDecember 31, 2017. The closing market price of the shares on December 31, 2017 was $58.42.
Option Awards | Stock Awards | |||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable(10) | Option Exercise Price ($) | Option Expiration Date | Number of Units of Stock That Have Not Vested (#)(14) | Market Value of Units of Stock That Have Not Vested ($) | ||||||||||||||||||
Mark Pruzanski, M.D. | 50,039 | (1) | — | 8.6667 | 08/16/20 | 294 | (15) | 17,175 | ||||||||||||||||
34,404 | (2) | — | 8.6667 | 10/13/21 | 4,719 | (16) | 275,684 | |||||||||||||||||
46,158 | (3) | — | 21.50 | 11/16/22 | 13,106 | (17) | 765,653 | |||||||||||||||||
62,595 | (4) | — | 31.90 | 05/07/23 | 23,200 | (18) | 1,355,344 | |||||||||||||||||
5,614 | (5) | 119 | (5) | 266.01 | 04/11/24 | |||||||||||||||||||
11,465 | (6) | 11,466 | (6) | 266.01 | 04/11/24 | — | — | |||||||||||||||||
23,734 | (7) | 8,816 | (7) | 161.16 | 10/01/25 | — | — | |||||||||||||||||
14,615 | (8) | 15,885 | (8) | 94.29 | 02/11/26 | — | — | |||||||||||||||||
— | 40,000 | (11) | 107.18 | 02/01/27 | — | — | ||||||||||||||||||
Sandip Kapadia | 6,375 | (9) | 11,625 | (9) | 146.36 | 07/01/26 | 10,312 | (19) | 602,427 | |||||||||||||||
— | 11,600 | (11) | 107.18 | 02/01/27 | 7,000 | (18) | 408,940 | |||||||||||||||||
Jerome Durso | — | 20,000 | (12) | 115.93 | 02/23/27 | 15,000 | (20) | 876,300 | ||||||||||||||||
David Ford | — | 12,000 | (13) | 114.90 | 05/08/27 | 6,000 | (21) | 350,520 | ||||||||||||||||
David Shapiro, M.D. | 5,786 | (3) | — | 21.50 | 11/16/22 | 94 | (15) | 5,491 | ||||||||||||||||
21,031 | (4) | — | 31.90 | 05/07/23 | 1,609 | (16) | 93,998 | |||||||||||||||||
1,797 | (5) | 38 | (5) | 266.01 | 04/11/24 | |||||||||||||||||||
4,127 | (6) | 4,128 | (6) | 266.01 | 04/11/24 | 4,387 | (17) | 256,289 | ||||||||||||||||
9,552 | (7) | 3,548 | (7) | 161.16 | 10/01/25 | 6,000 | (18) | 350,520 | ||||||||||||||||
4,888 | (8) | 5,312 | (8) | 94.29 | 02/11/26 | — | — | |||||||||||||||||
— | 10,000 | (11) | 107.18 | 02/01/27 | — | — |
(1) | These options were granted on August 16, 2010. |
(2) | These options were granted on October 13, 2011. |
(3) | These options were granted on November 16, 2012. |
(4) | These options were granted on May 7, 2013. |
(5) | These options were granted on April 11, 2014, with a vesting commencement date of January 1, 2014. |
(6) | These options were granted on April 11, 2014, with a vesting commencement date of January 1, 2014. Such options vest upon the achievement of certain regulatory milestones related to OCA. |
(7) | These options were granted on October 1, 2015, with a vesting commencement date of January 1, 2015. |
(8) | These options were granted on February 11, 2016, with a vesting commencement date of January 1, 2016. |
(9) | These options were granted on July 1, 2016, with a vesting commencement date of July 1, 2016. |
(10) | Unless otherwise noted, unexercisable stock option awards are subject to a four-year vesting period, with 25% of the shares subject to the award vesting in an initial annual installment following the relevant vesting commencement date and 1/48th of the shares subject to the award vesting each month thereafter, subject to continued employment. |
(11) | These options were granted on February 1, 2017, with a vesting commencement date of January 1, 2017. |
(12) | These options were granted on February 23, 2017, with a vesting commencement date of February 23, 2017. |
(13) | These options were granted on May 8, 2017, with a vesting commencement date of May 8, 2017. |
(14) | Unvested restricted stock awards have a four-year vesting period, with 25% of the shares subject to the award vesting in an initial annual installment following the relevant vesting commencement date and 1/16th of the shares subject to the award vesting each quarter thereafter, subject to continued employment. |
(15) | This restricted stock was granted on April 11, 2014, with a vesting commencement date of January 1, 2014. |
(16) | This restricted stock was granted on October 1, 2015, with a vesting commencement date of January 1, 2015. |
(17) | This restricted stock was granted on February 11, 2016, with a vesting commencement date of January 1, 2016. |
(18) | This restricted stock was granted on February 1, 2017, with a vesting commencement date of January 1, 2017. |
(19) | This restricted stock was granted on July 1, 2016, with a vesting commencement date of July 1, 2016. |
(20) | This restricted stock was granted on February 23, 2017, with a vesting commencement date of February 23, 2017. |
(21) | This restricted stock was granted on May 8, 2017, with a vesting commencement date of May 8, 2017. |
The following table sets forth the number of shares and value realized by the named executive officers during 2017 on the exercise of stock options and the vesting of restricted stock (or restricted stock units).
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | ||||||||||||
Mark Pruzanski, M.D. | 40,000 | 4,885,196 | 15,624 | 1,606,766 | ||||||||||||
Sandip Kapadia | — | — | 4,688 | 508,454 | ||||||||||||
Jerome Durso | — | — | — | — | ||||||||||||
David Ford | — | — | — | — | ||||||||||||
David Shapiro, M.D. | 4,835 | 490,555 | 5,264 | 541,420 |
(1) | The value realized on the exercise of options was calculated by multiplying the number of options exercised on the applicable exercise date by the difference between the closing market price of the shares on such date and the exercise price of the options. |
(2) | The value realized on the vesting of restricted stock (or restricted stock units) was calculated by multiplying the number of shares vesting on the applicable vesting date by the closing market price of the shares on such date. |
The following table provides information as of December 31, 2017 with respect to shares that may be issued under our equity compensation plans.
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance | |||||||||
Equity Compensation Plans Approved by Security Holders(1) | 2,301,458 | (2) | $ | 114.70 | (3) | 1,885,651 | (4) | |||||
Equity Compensation Plans Not Approved by Security Holders | — | — | — |
(1) | All of our equity compensation plans have been approved by security holders. Our equity compensation plans are described in “Note 14” to the Notes to Consolidated Financial Statements for the year ended December 31, 2017, included in our Annual Report. |
(2) | Consists of 1,659,682 shares issuable upon the exercise of stock options, 426,323 shares of restricted stock and 66,428 shares issuable upon the vesting of restricted stock units outstanding under the 2012 Plan and 149,025 shares issuable upon the exercise of stock options outstanding under our 2003 Stock Incentive Plan (the “2003 Plan”). |
(3) | Does not take into account outstanding shares of restricted stock or restricted stock units, which do not require the payment of any exercise price in connection with the vesting thereof. |
(4) | As of December 31, 2017, there were 1,885,651 shares available for future grants under the 2012 Plan. No shares are available for future grants under the 2003 Plan. Shares underlying awards outstanding under the 2003 Plan that expire or are forfeited or cancelled become available for issuance under the 2012 Plan. The number of shares available for future grants under the 2012 Plan automatically increases on January 1st of each year until (and including) January 1, 2022 by an amount equal to the lesser of (i) 1,211,533 shares, (ii) 4% of the total number of shares outstanding on such date and (iii) an amount determined by our Board or Compensation Committee. Accordingly, on January 1, 2018, the number of shares available for future grants increased by 1,010,693 shares. |
The Company, with the assistance of an independent compensation consultant, Radford, has furnishedreviewed Company compensation policies and practices and determined that those policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. In conducting this review, we considered various features of our compensation policies and practices that discourage excessive or unnecessary risk-taking, including, but not limited to, the following:
We have entered into individual agreements with our named executive officers. In addition, the agreements governing equity awards granted to our employees, including our named executive officers, contain provisions relating to the treatment of such awards in the event of certain terminations. The material terms of these agreements are summarized below. See “—Termination-Related Provisions—Definitions” below for the meanings of certain terms used in this section.
The employment agreements with each of our named executive officers provide for (i) an annual base salary, which is subject to annual review and increase (but not decrease), as determined by our Board or Compensation Committee, (ii) eligibility for an annual target-based cash incentive bonus equal to a percentage of such officer’s base salary and (iii) eligibility to participate in the Company’s benefit plans and arrangements, including fully-paid health insurance premiums, in each case, as described in greater detail under “—Compensation Discussion and Analysis—Components of Our Executive Compensation Program” above. The employment agreements with each of our named executive officers have initial terms of one year with automatic renewal each year thereafter unless either party elects not to renew or earlier terminates the agreement.
Upon any termination of employment, each named executive officer is entitled to receive accrued but unpaid salary (including payment of accrued but unused vacation days), such officer’s vested equity awards and any other accrued benefits under the Company’s benefit plans or such officer’s employment agreement. In addition, Dr. Pruzanski will be entitled to receive an amount equal to his cash incentive bonus for the year preceding the year in which termination occurs, to the extent unpaid, and a prorated cash incentive bonus for the year in which termination occurs, payable in a lump sum. All unvested equity awards held by the named executive officer would be forfeited and such officer would have, in the case of (i) Dr. Pruzanski, three years and (ii) the named executive officers other than Dr. Pruzanski, 90 days (or, in each case, the remaining term of the options if shorter) following termination to exercise any vested options.
In the event that the Company elects not to renew the employment agreement of a named executive officer, such officer is terminated by the Company without cause or such officer resigns with good reason, such officer will be entitled to receive (i) cash severance in an amount equal to 12 months of such officer’s base salary in effect at the time of termination, payable over 12 months (or, in the case of Dr. Shapiro, in a lump sum), (ii) continued health benefits for up to 12 months following termination and (iii) the same benefits as described under “Termination for Any Reason” above, except that, in the case of (A) Dr. Pruzanski, all unvested equity awards held by Dr. Pruzanski will vest, Dr. Pruzanski will have three years (or the remaining term of the options if shorter) following termination to exercise any vested options and, in lieu of the prorated cash incentive bonus for the year in which termination occurs, Dr. Pruzanski will be entitled to an amount equal to the mean bonus earned by him during the prior three years, payable in a lump sum, and (B) the named executive officers other than Dr. Pruzanski, the number of unvested equity awards held by such officer that would otherwise have vested during the period from the date of termination to the first anniversary thereof will vest, such officer will have one year (or the remaining term of the options if shorter) following termination to exercise any vested options and all remaining unvested equity awards held by such officer would be forfeited.
In the event that the Company elects not to renew the employment agreement of a named executive officer, such officer is terminated by the Company without cause or such officer resigns with good reason, in each case, in anticipation of, within three months before (in the case of Dr. Pruzanski) or within 12 months following a change in control, such officer will be entitled to receive the same benefits as described under “Termination Without Cause or Resignation for Good Reason” above, except that, in the case of
(i) Dr. Pruzanski, the cash severance will be in an amount equal to 24 months of Dr. Pruzanski’s base salary in effect at the time of termination and payable in a lump sum, the health benefits will continue for up to 24 months following termination and, in lieu of the mean bonus earned by him during the prior three years, Dr. Pruzanski will be entitled to an amount equal to two times the mean bonus earned by him during the prior three years and (ii) the named executive officers other than Dr. Pruzanski, the cash severance amount will be payable in a lump sum, all unvested equity awards held by such officer will vest and such officer will have one year (or the remaining term of the options if shorter) following termination to exercise any vested options.
In the event of termination by reason of a named executive officer’s death or disability, such officer will be entitled to receive the same benefits as described under “Termination for Any Reason” above, except that, in the case of (i) Dr. Pruzanski, all unvested equity awards held by Dr. Pruzanski will vest, Dr. Pruzanski (or his estate or legal representative, as applicable) will have three years (or the remaining term of the options if shorter) following termination to exercise any vested options and, in the case of a termination due to disability, Dr. Pruzanski will be entitled to (A) continued health benefits for up to 12 months following termination and (B) solely to the extent that Dr. Pruzanski is not eligible to participate in Company-sponsored short- and long-term disability plans that provide for benefits of at least 60% of base salary, cash severance in an amount equal to 12 months of his base salary in effect at the time of termination, payable over 12 months, and (ii) the named executive officers other than Dr. Pruzanski, a prorated portion (based on the number of days accrued in the current vesting period prior to the date of termination) of the unvested options held by such officer that would otherwise have vested on the next vesting date will vest and such officer (or such officer’s estate or legal representative, as applicable) will have one year (or the remaining term of the options if shorter) following termination to exercise any vested options and all remaining unvested equity awards held by such officer would be forfeited.
Eligibility for the severance payments and benefits described above is conditioned upon the execution by the named executive officer (or such officer’s legal representative, as applicable) and effectiveness, within a specified period of time following termination, of a general release of claims in favor of the Company.
If any amounts owed to a named executive officer as a result of a termination in connection with a change in control of the Company would be subject to the excise tax imposed by Section 4999 of the Code, then such amounts will be payable either (i) in full or (ii) solely to the extent that the after-tax value of such amounts to such officer would be greater as a result of such reduction, as to such reduced amount that would maximize the after-tax value of such amounts to such officer.
In addition, the timing of payments may be modified by us to comply with Section 409A of the Code.
Under the employment agreements with our named executive officers:
purchasing equity securities of the Company pursuant to a financing or a series of financings approved by our Board) becomes the beneficial owner, directly or indirectly, of securities representing 25% or more of the total number of votes that may be cast for the election of the directors of the Company; and |
Each of our named executive officers has entered into an agreement with us with respect to proprietary information and inventions. Among other things, these agreements obligate each named executive officer to refrain from disclosing any of our proprietary information received during the course of employment or soliciting our employees and to assign to us any inventions conceived or developed during the course of employment.
As described under “—Employment Arrangements with Our Named Executive Officers” above, we have entered into individual agreements with our named executive officers providing for severance payments and benefits in the event of certain terminations of employment, including in connection with a change of control. In addition, the agreements governing equity awards granted to our employees, including our named executive officers, contain provisions relating to the treatment of such awards in the event of certain terminations. The following table sets forth estimates of the payments and benefits each named executive officer would have been entitled to receive from the Company upon a termination of employment under the circumstances described in the table effective December 31, 2017. In the case of Dr. Pruzanski, such payments and benefits are inclusive or in lieu of a cash payment in the amount of $472,500 that he would have been entitled to upon a termination of employment for any reason effective December 31, 2017.
In accordance with SEC rules, the potential payments were determined under the terms of the Company’s contracts, agreements, plans and arrangements as in effect on December 31, 2017. The tables do not include any previously vested equity awards or accrued benefits. Because the payments to be made to a named executive officer depend on several factors, the actual amounts to be paid out upon a triggering event can only be determined at the time of the triggering event.
Name | Termination Due to Death ($)(4) | Termination Due to Disability ($)(5) | Termination Without Cause or Resignation for Good Reason ($)(6) | Termination Without Cause or Resignation for Good Reason In Connection with a Change of Control ($)(7) | ||||||||||||||||
Mark Pruzanski, M.D. | ||||||||||||||||||||
Cash Payments | (1) | 472,500 | 1,147,500 | 1,039,750 | 2,079,500 | |||||||||||||||
Value of Accelerated Vesting | (2) | 2,413,856 | 2,413,856 | 2,413,856 | 2,413,856 | |||||||||||||||
Health Insurance Benefits | (3) | — | 29,342 | 29,342 | 58,684 | |||||||||||||||
Total | 2,886,356 | 3,590,698 | 3,482,948 | 4,552,040 | ||||||||||||||||
Sandip Kapadia | ||||||||||||||||||||
Cash Payments | (1) | — | — | 425,000 | 425,000 | |||||||||||||||
Value of Accelerated Vesting | (2) | — | — | 398,015 | 1,011,367 | |||||||||||||||
Health Insurance Benefits | (3) | — | — | 30,199 | 30,199 | |||||||||||||||
Total | — | — | 853,214 | 1,466,566 | ||||||||||||||||
Jerome Durso | ||||||||||||||||||||
Cash Payments | (1) | — | — | 520,000 | 520,000 | |||||||||||||||
Value of Accelerated Vesting | (2) | — | — | 383,410 | 876,300 | |||||||||||||||
Health Insurance Benefits | (3) | — | — | 30,199 | 30,199 | |||||||||||||||
Total | — | — | 933,609 | 1,426,499 | ||||||||||||||||
David Ford | ||||||||||||||||||||
Cash Payments | (1) | — | — | 380,000 | 380,000 | |||||||||||||||
Value of Accelerated Vesting | (2) | — | — | 131,445 | 350,520 | |||||||||||||||
Health Insurance Benefits | (3) | — | — | 30,199 | 30,199 | |||||||||||||||
Total | — | — | 541,644 | 760,719 | ||||||||||||||||
David Shapiro, M.D. | ||||||||||||||||||||
Cash Payments | (1) | — | — | 489,300 | 489,300 | |||||||||||||||
Value of Accelerated Vesting | (2) | — | — | 347,950 | 706,298 | |||||||||||||||
Health Insurance Benefits | (3) | — | — | 20,502 | 20,502 | |||||||||||||||
Total | — | — | 857,752 | 1,216,100 |
(1) | Includes cash severance payments calculated based on base salary in effect on December 31, 2017. |
(2) | The value realized upon the accelerated vesting of (i) stock options is calculated by multiplying the number of options subject to accelerated vesting by the difference between the closing market price of the shares on December 31, 2017 and the weighted-average exercise price of such options and (ii) restricted stock is calculated by |
multiplying the number of shares of restricted stock subject to accelerated vesting by the closing market price of the shares on December 31, 2017. The closing market price of the shares on December 31, 2017 was $58.42. |
(3) | Represents the estimated cost to the Company of continuing health insurance benefits for the named executive officers. |
(4) | See “—Employment Arrangements with Our Named Executive Officers—Termination-Related Provisions—Termination in the Event of Death or Disability” above for a description of the circumstances that would trigger the payment of amounts set forth in this column. |
(5) | See “—Employment Arrangements with Our Named Executive Officers—Termination-Related Provisions—Termination in the Event of Death or Disability” above for a description of the circumstances that would trigger the payment of amounts set forth in this column. Assumes that Dr. Pruzanski is not eligible to participate in Company-sponsored short- and long-term disability plans that provide for benefits of at least 60% of base salary. |
(6) | See “—Employment Arrangements with Our Named Executive Officers—Termination-Related Provisions—Termination Without Cause or Resignation for Good Reason” above for a description of the circumstances that would trigger the payment of amounts set forth in this column. |
(7) | See “—Employment Arrangements with Our Named Executive Officers—Termination-Related Provisions—Termination Without Cause or Resignation for Good Reason in Connection with a Change in Control” above for a description of the circumstances that would trigger the payment of amounts set forth in this column. |
In accordance with the requirements of Section 953(b) of the Dodd-Frank Act and Item 402(u) of Regulation S-K (collectively, the “Pay Ratio Rule”), we are providing the following report:estimated information for 2017:
SEC rules for identifying the “median employee” and calculating annual total compensation allow companies to apply various methodologies and make various assumptions and, as result, the pay ratio reported by us may not be comparable to the pay ratio reported by other companies.
To identify the median of the annual total compensation of all of our employees (other than our Chief Executive Officer), we first identified our total domestic and foreign employee population. We selected December 31, 2017 as the date upon which we would identify our “median employee”. We determined that, as of December 31, 2017, we had 507 employees. We did not make any adjustments to our employee population.
To identify our “median employee” from our total employee population, we compared each employee’s aggregate 2017 base salary (annualized in the case of newly hired employees), cash incentive target and equity award grant date fair value, in each case, converted into U.S. dollars as necessary. We identified our median employee using this compensation measure, which was consistently applied to all our employees included in the calculation.
In April 2018, we issued and sold (i) 2,695,313 shares in a registered public offering, at a price to the public of $64.00 per share (the “Public Offering”) and (ii) 1,562,500 shares (the “Private Placement Shares”) in a private placement exempt from the registration requirements of the Securities Act, at a purchase price per share equivalent to the price to the public set in the Public Offering and pursuant to a securities purchase agreement (the “Securities Purchase Agreement”) that we entered into with Genextra, Samsara BioCapital, L.P. and certain other purchasers named therein (the “Concurrent Private Placement”).
Drs. Pruzanski and Gottesdiener and Mr. Bradbury purchased 7,812 shares, 1,171 shares and 7,812 shares, respectively, in the Public Offering and Genextra and Samsara BioCapital, L.P. purchased 390,625 shares and 234,375 shares, respectively, in the Concurrent Private Placement. Genextra is our largest existing stockholder. Mr. Fundarò is the Chief Financial Officer of Genextra and Dr. Akkaraju is a managing member of Samsara BioCapital GP, LLC, the general partner of Samsara BioCapital, L.P.
Pursuant to the Securities Purchase Agreement, we granted to the purchasers in the Concurrent Private Placement (the “Private Placement Purchasers”) certain registration rights requiring us, upon request delivered by one or more of the Private Placement Purchasers (and/or certain affiliate transferees thereof) on or after June 5, 2018 and subject to certain terms and conditions, to register the resale by such Private Placement Purchasers (and/or such affiliates) of the Private Placement Shares held by them.
Our Restated Certificate of Incorporation and Restated Bylaws provide that we will indemnify our directors and officers, and may indemnify our employees and other agents, to the fullest extent permitted by law. Under our Restated Certificate of Incorporation and/or Restated Bylaws, we are also empowered to purchase insurance on behalf of our directors, officers, employees and other agents and to enter into indemnification agreements with our directors, officers, employees and other agents. We have entered into indemnification agreements with directors and officers, which provide for indemnification for all reasonable expenses and liabilities incurred in connection with any action or proceeding brought against them in connection with their services. We believe that these arrangements are necessary to attract and retain qualified directors and officers and to allow them to exercise their judgment in the best interest of the Company and its stockholders. We have also obtained director and officer liability insurance as a risk management measure.
The information contained in this report shall not be deemed to be “soliciting material,” “filed” with the SEC or incorporated by reference into any filing under the Securities Act or the Exchange Act, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.
The audit committee assistsAudit Committee’s primary purpose is to act on behalf of the boardBoard in overseeingfulfilling the Board’s oversight responsibilities with respect to the Company’s corporate accounting and monitoringfinancial reporting practices, systems of internal control over financial reporting and audits of financial statements, as well as the quality and integrity of ourthe Company’s financial reporting process,statements, reports and internal controls, the qualifications, independence and performance of the Company’s independent registered public accounting firm, the performance of the Company’s internal audit function and the Company’s processes for monitoring compliance with legal and regulatory requirements and the qualityCompany’s Global Code of internal and external audit processes. This committee’s role and responsibilities are set forth in ourBusiness Conduct. The Audit Committee operates under a written charter adopted by the board,Board, a current copy of which is available inon the “Investors” section of ourCompany’s website atwww.interceptpharma.com. This committee reviews in the Investors & Media section under “Corporate Governance.”
The Audit Committee has:
• | discussed with the Company’s independent registered public accounting firm, KPMG LLP, the matters required to be discussed by Auditing Standard No. 1301,Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board (“PCAOB”); and |
Based on the foregoing review and discussions, the Audit Committee has recommended to the boardBoard that the audited financial statements be included in the Company’s Annual Report on Form 10-K for approval. the year ended December 31, 2017.
The audit committeeAudit Committee is responsible for overseeing our overall financial reporting process, and for the appointment, compensation, retention and oversight of the work of KPMG LLP. In fulfilling its responsibilities for the financial statements for fiscal year 2015, the audit committee took the following actions:
By the Audit Committee of the Public Company Accounting Oversight Board regardingof Directors of Intercept Pharmaceuticals, Inc.,
Glenn Sblendorio,Chairperson
Daniel Bradbury
Gino Santini
The Audit Committee has appointed KPMG LLP communicationsas the Company’s independent registered public accounting firm for the year ending December 31, 2018. KPMG LLP has audited the Company’s financial statements since 2008.
The following table sets forth the aggregate fees billed to the Company for the years ended December 31, 2017 and 2016 by KPMG LLP.
Year Ended December 31, | ||||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
Audit Fees | $ | 1,415 | $ | 1,061 | ||||
Audit-Related Fees | — | — | ||||||
Tax Fees | $ | 127 | $ | 128 | ||||
All Other Fees | — | — | ||||||
Total Fees | $ | 1,542 | $ | 1,189 |
Audit fees include fees associated with the annual integrated audit committee and the audit committee further discussed with KPMG LLP their independence.
The audit committee also considered the status of pending litigation, taxation matters and other areas of oversight relating to the financial reporting and audit process that the committee determined appropriate.
Based on the audit committee’s review of the auditedour financial statements and discussionsinternal control over financial reporting, reviews of our interim financial information, the issuance of consents in connection with management and KPMG LLP, the audit committee recommended to the board that the audited financial statements be included in our annual report on Form 10-K for the fiscal year ended December 31, 2015 for filingfilings with the SEC.
In 2015, the audit committee reviewedSEC, statutory audits and KPMG LLP’s work relating toin connection with our annualfinancing activities. Tax fees include fees associated with tax compliance services, preparation of federal and quarterly financial statements, alongstate income tax returns, preparation of sales tax returns and certain other tax consulting services.
We did not incur any audit-related fees or other fees in 2017 and 2016. All fees described above were approved by the Audit Committee.
The Audit Committee has determined that the provision of services rendered above is compatible with maintaining KPMG LLP’s work relatingindependence.
The Audit Committee has adopted a policy and procedures for the pre-approval of audit and non-audit services rendered by the Company’s independent registered public accounting firm, KPMG LLP. On an annual basis, management submits to our public offerings completed in 2015. Based on KPMG LLP’s performance, the audit committee recommends that our stockholders ratify the appointment of KPMG LLP as our auditors for fiscal 2016.
Members of the Audit CommitteeGlenn Sblendorio, ChairpersonJonathan SilversteinGino Santini for pre-approval specified services expected to be rendered by the Company’s independent registered public accounting firm in the defined categories of audit, audit-related, tax and other services up to specified amounts. Prior to engagement, the Audit Committee pre-approves these services by category of service. In the event that circumstances arise where it may become necessary to engage the Company’s independent registered public accounting firm for additional services not contemplated in the original pre-approval, pre-approval may also be given on an individual, case-by-case basis before the Company’s independent registered public accounting firm is engaged to provide such services. The Audit Committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the full Audit Committee at its next scheduled meeting.
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
To ourthe Company’s knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required,the Company, during the fiscal year 2015,ended December 31, 2017, all reports which were required to be filed pursuant to Section 16(a) offiling requirements applicable to the Exchange ActCompany’s officers, directors and greater than ten percent beneficial owners were filed oncomplied with, except that (i) a timely basis, except for the following Forms 4 which were inadvertently filed late: Form 4 of Srinivas Akkaraju filed on May 22, 2015 reporting the exercise of stock options and the sale of shares of common stock on May 19, 2015; Forms 4 of Luciano Adorini, Barbara Duncan, Mark Pruzanski and David Shapiro filed on July 7, 2015 reporting the vesting of restricted stock unitsheld by Lisa Bright on August 1, 2017 and the issuance of shares of common stockDecember 18, 2017 was filed late on July 1, 2015 with respect thereto; andJanuary 26, 2018, (ii) a Form 4 of Rachel McMinn filed on July 17, 2015 reporting the mandatory sale of shares of common stock to cover the withholding tax amounts upon the vestinggrants of restricted stock awardsand stock options to Christian Weyer on November 27, 2017 was filed late on December 11, 2017 and (iii) a Form 4 reporting the vesting and subsequent partial sale of restricted stock held by Lisa Bright on May 1, 2015.2, 2017 was filed late on May 10, 2017.
In additionRule 14a-8 under the Exchange Act addresses when a company must include a stockholder’s proposal in its proxy statement and identify the proposal in its form of proxy card when the company holds an annual or special meeting of stockholders. Under Rule 14a-8, in order for your proposals to be considered for inclusion in the proxy statement and proxy card relating to the director and executive officer compensation arrangements discussed above in “Executive and Director Compensation,” since January 1, 2015, we have engaged in the following transactions in which the amount involved exceeded $120,000 and in which any director, executive officer or holder2019 Annual Meeting of moreStockholders (the “2019 Annual Meeting”), your proposals must be sent to Intercept Pharmaceuticals, Inc., 10 Hudson Yards, 37th Floor, New York, NY 10001, Attention: Company Secretary, not less than 5% of our voting securities, whom we refer to as our principal stockholders, or affiliates or immediate family members of our directors, executive officers and principal stockholders, had or will have a material interest. We believe that all of these transactions were on terms as favorable as could have been obtained from unrelated third parties.
Some of our directors are affiliated with our principal stockholders as indicated in the table below:
We have entered into indemnification agreements with each of our directors and officers. The indemnification agreements and our restated certificate of incorporation and restated by-laws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.
Pursuant to the written charter of our audit committee, the audit committee is responsible for reviewing and approving, prior to our entry into any such transaction, all transactions in which we are a participant and in which any parties related to us, including our executive officers, our directors, beneficial owners of more than 5% of our securities, immediate family members of the foregoing persons and any other persons whom our board of directors determines may be considered related parties under Item 404 of Regulation S-K, has or will have a direct or indirect material interest.
In reviewing and approving such transactions, the audit committee shall obtain, or shall direct our management to obtain on its behalf, all information that the committee believes to be relevant and important to a review of the transaction prior to its approval. Following receipt of the necessary information, a discussion shall be held of the relevant factors if deemed to be necessary by the committee prior to approval. If a discussion is not deemed to be necessary, approval may be given by written consent of the committee. This approval authority may also be delegated to the chair of the audit committee in some circumstances. No related party transaction shall be entered into120 days prior to the completionanniversary of these procedures.
The audit committee or its chair, as the case may be, shall approve only those related party transactions that are determineddate on which the Company’s proxy statement was released to stockholders in connection with the 2018 Annual Meeting of Stockholders (the “2018 Annual Meeting”). Therefore, the deadline is expected to be December 28, 2018 for the 2019 Annual Meeting. However, if the date of the 2019 Annual Meeting changes by more than 30 days from the anniversary of the 2018 Annual Meeting, the deadline is a reasonable time before we begin to print and mail our proxy materials. We will notify you of any change in this deadline in a quarterly report on Form 10-Q or in another communication to you. Stockholder proposals must also be otherwise eligible for inclusion.
If you desire to bring a matter before an Annual Meeting of Stockholders outside the process of Rule 14a-8, you may do so by following the procedures set forth in the Company’s Restated Bylaws. To be timely, written notice must be delivered to Intercept Pharmaceuticals, Inc., 10 Hudson Yards, 37th Floor, New York, NY 10001, Attention: Company Secretary not inconsistent with,less than 90 days nor more than 120 days prior to the best interestsfirst anniversary of us and our stockholders, taking into account all available facts and circumstances as the committee2018 Annual Meeting; provided, however, that in the event that the date of the 2019 Annual Meeting is more than 30 days before or the chair determines in good faithmore than 30 days after such anniversary date, then such notice to be necessary in accordance with principles of Delaware law generally applicable to directors of a Delaware corporation. These facts and circumstances will typically include, but nottimely must be limiteddelivered to the benefitsCompany Secretary not more than 120 days prior to the 2019 Annual Meeting and not less than the later of (i) 90 days prior to such annual meeting or (ii) 10 days following the date of the transaction to us;first public announcement of the impact onscheduled date of the 2019 Annual Meeting. As a director’s independenceresult, in the event the related party2019 Annual Meeting is a director, an
immediate family member of a director or an entity in which a director is a partner, stockholder or executive officer;not held more than 30 days before nor more than 30 days after the availability of other sources for comparable products or services; the termsfirst anniversary of the transaction;2018 Annual Meeting, notice of nominations or other business submitted pursuant to the Company’s Restated Bylaws must be received no later than the close of business on March 22, 2019 and no earlier than February 20, 2019. Any such notice to the terms of comparable transactions that would be available to unrelated third parties or to employees generally. No memberCompany Secretary must include all of the audit committee shall participateinformation specified in any review, consideration or approval of any related party transaction with respect to which the member or any of his or her immediate family members has an interest.Company’s Restated Bylaws.
Upon recommendationThe cost of solicitation will be borne by the Company, and in addition to directly soliciting stockholders by mail, the Company may request brokers, dealers, banks, trustees or other nominees to solicit their customers who have shares of the nominating and governance committee,Company registered in the board of directors has nominated Srinivas Akkaraju, M.D., Ph.D., Luca Benatti, Ph.D., Daniel Bradbury, Paolo Fundaro, Keith Gottesdiener, M.D., Mark Pruzanski, M.D., Gino Santini, Glenn Sblendorio and Daniel Welch for election at the annual meeting. If they are elected, they will serve on our board of directors until the 2017 annual meeting of stockholders and until their respective successors have been elected and qualified, or until their earlier death, resignation or removal.
Unless authority to vote for any of these nominees is withheld, the shares represented by the enclosed proxy will be voted FOR the election as directorsname of the nominee and, if so, will reimburse such brokers, dealers, banks, trustees or other nominees listed above. If any nominee should be unable or unwilling to serve on our board of directors, the shares representedfor their reasonable out-of-pocket costs. Solicitation by the enclosed proxy will be voted for the election of such other person as the board of directors may recommend in that nominee’s place. We have no reason to believe that any nominee will be unable or unwilling to serve as a director.
A pluralityofficers and employees of the shares voted FOR each nominee at the meeting is required to elect each nominee as a director.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF SRINIVAS AKKARAJU, M.D., PH.D., LUCA BENATTI, PH.D., DANIEL BRADBURY, PAOLO FUNDARO, KEITH GOTTESDIENER, M.D., MARK PRUZANSKI, M.D., GINO SANTINI, GLENN SBLENDORIO, AND DANIEL WELCH AS DIRECTORS, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
Our board of directors has unanimously determined that it is in the best interests of Intercept and its stockholders to amend our Restated Certificate of Incorporation, as amended (the “Charter”), to increase the number of authorized shares of our common stock from 35,000,000 shares to 45,000,000 shares, which will result in an increase of the total number of authorized shares of our capital stock from 40,000,000 shares to 50,000,000 shares.
Currently, our Charter authorizes an aggregate of 40,000,000 shares of capital stock, consisting of 35,000,000 shares of authorized common stock and 5,000,000 shares of authorized preferred stock. No shares of preferred stock are issued and outstanding and we are not proposing to increase the number of authorized preferred stock. As of May 23, 2016, we had 24,600,161 shares of common stock issued and outstanding and 1,913,481 shares subject to outstanding stock options and restricted stock units. As of May 23, 2016, we had 661,251 shares of common stock reserved for future issuance under our 2012 Equity Incentive Plan, or 2012 Plan. Accordingly, approximately 77.6% of our authorized shares of common stock has been issued or reserved for issuance.
No other changes to the Charter have been approved or are being proposed by our board of directors. To effectuate the increase of the number of authorized shares of our common stock, Article FOURTH, Paragraph A of the Charter is proposed to be amended as set forth below in its entirety:
“The total number of shares of all classes of stock which the Corporation shall have the authority to issue is 50,000,000 shares, consisting of 45,000,000 shares of common stock, par value $0.001 per share (the “Common Stock”), and 5,000,000 shares of preferred stock, par value $0.001 per share (the “Preferred Stock”).
The number of authorized shares of Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any Preferred Stock designation.”
A copy of the amendment to the Charter proposed by us is attached to this Proxy Statement as Appendix A. For a description of our common stock, please see our Registration Statement on Form 8-A dated as filed with the SEC on September 27, 2012.
Given the small number of authorized shares currently available under our Certificate of Incorporation, we believe that an increase in the number of authorized shares of our common stock is critical to ensure that a sufficient number of shares is available for future issuances if and when our board of directors deems it to be in our and our stockholders’ best interests. While we have no current plans to issue any shares that will be authorized if the increase is approved, we may use any of the increased shares at the time and in the manner approved by our board of directors, which may include raising capital through equity financing, executing potential strategic transactions or establishing collaborative relationships, acquiring businesses or assets, issuing equity awards to employees or stock dividends to stockholders, effecting stock splits, or engaging in other general corporate transactions. Historically we have relied significantly on equity financing to fund our business operations and plan to do so in the future. Therefore, the increase of our authorized shares will provide us with the ability and flexibility to access equity capital when needed and available. We believe that if we do not obtain stockholder approval to increase the number of authorized shares of our common stock, our planned operations will be materially and adversely impacted.
If the proposed amendment is approved and adopted, the additional authorized shares of common stock may be issued from time to time by actions of our board of directors without further stockholder approval, except as required by law, regulatory authorities or NASDAQ corporate governance listing rules. The increase in authorized shares of common stock will not alter our current number of issued shares of common stock. The relative rights and limitations of the shares of common stock will remain unchanged under this amendment. The additional shares of common stock to be authorized by stockholder approval under this Proposal No. 2 would have the rights identical to the currently outstanding shares of our common stock. Our stockholders will not realize any dilution in their percentage of ownership of us or their voting rights as a result of the increase. However, issuances of additional shares of common stock in the future may, among other things, dilute the earnings per share of the our common stock and the equity and voting rights of those holding our common stock at the time the additional shares are issued. Under our Charter, stockholders do not have preemptive rights to purchase additional securities that may be issued by us. This means that current stockholders do not have a prior right to purchase any new issuances of shares in order to maintain their proportionate ownership interests in Intercept.
The additional shares of common stock that would become available for issuanceCompany may also be usedmade of some stockholders in person or by mail, email or telephone following the original solicitation. The Company has retained Innisfree M&A Incorporated to opposeassist in the solicitation of proxies for a hostile takeover attempt or to delay or prevent changes in controlfee of the company. For example, without further stockholder approval,approximately $17,500, plus out-of-pocket expenses.
Our Annual Report, including our board of directors could strategically sell shares of common stock in a private transaction to purchasers who would oppose a takeover or favor the current board of directors. However, this proposal to increase authorized shares is prompted by business andaudited financial considerations and not by the threat of any hostile takeover attempt, and we are not aware of any such attempts directed at us.
The affirmative vote of a majority of the shares of our common stock outstanding and entitled to vote at the annual meeting is required to approve the amendment to our Charter to effect the proposed increase in our authorized common stock. The amendment to the Charter will be effective immediately upon acceptance of filing by the Secretary of State of Delaware following stockholder approval of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF THE AMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF OUR COMMON STOCK FROM 35,000,000 SHARES TO 45,000,000 SHARES, AND PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR THEREOF, UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
We are providing our stockholders the opportunity to vote to approve, on an advisory, non-binding basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the SEC’s rules. This proposal, which is commonly referred to as “say-on-pay,” is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which added Section 14A to the Exchange Act. Section 14A of the Exchange Act also requires that stockholders have the opportunity to cast a non-binding, advisory vote with respect to whether future executive compensation advisory votes will be held every one, two or three years, which is commonly referred to as “say-on-frequency”. The stockholders voted “every year” at our 2015 annual meeting of stockholders, which was ratified by our board of directors. As such, the next required advisory (non-binding) vote regarding say on pay frequency will be at our 2021 annual meeting of stockholders.
Our executive compensation programs are designed to attract, motivate and retain our executive officers, who are critical to our success. Under these programs, our named executive officers are rewardedstatements for the achievement of our short-term and longer-term financial and strategic goals and for driving corporate financial performance and stability. The programs contain elements of cash and equity-based compensation and are designed to align the interests of our executives with those of our stockholders.
The “Executive Officer and Director Compensation” section of this proxy statement, including “Compensation Discussion and Analysis,” describes in detail our executive compensation programs and the decisions made by the compensation committee and our board of directors with respect to the year ended December 31, 2015. As2017, is being mailed to you along with this proxy statement. In order to reduce printing and postage costs, only one Annual Report and one proxy statement will be mailed to multiple stockholders sharing an address unless the Company receives contrary instructions from one or more of the stockholders sharing an address. If your household has received only one Annual Report and one proxy statement and you wish to receive separate copies of these documents, we describewill deliver promptly a separate copy of such documents to any requesting stockholder who contacts our transfer agent, VStock Transfer, LLC, by telephone at 1-855-9VSTOCK or in writing to VStock Transfer, LLC, 18 Lafayette Place, Woodmere, NY 11598. If your household is receiving multiple copies of the Company’s annual reports or proxy statements and you wish to request delivery of a single copy, you may send a written request to our transfer agent at VStock Transfer, LLC, 18 Lafayette Place, Woodmere, NY 11598.
Management does not know of any other matters to be brought before the Annual Meeting except those set forth in the Compensation Discussion and Analysis section, our executive compensation program embodiesnotice thereof. If other business is properly presented for consideration at the Annual Meeting, it is intended that the proxies will be voted by the persons named therein in accordance with their judgment on such matters.
We will mail without charge, upon written request, a pay-for-performance philosophy that supports our business strategy and aligns the interestscopy of our executives with our stockholders. Our board believes this link between compensation and the achievement of our short- and long-term business goals has helped drive our performance over time. At the same time, we believe our program does not encourage excessive risk-taking by management.
Our board is asking stockholders to approve a non-binding advisory voteAnnual Report on the following resolution:
RESOLVED, that the compensation paid to the named executive officers of Intercept Pharmaceuticals, Inc., as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and any related material disclosed in this proxy statement, is hereby approved.
As an advisory vote, this proposal is not binding. The outcome of this advisory vote does not overrule any decision by us or our board of directors (or any committee thereof), create or imply any change to the fiduciary duties of us or our board of directors (or any committee thereof), or create or imply any additional fiduciary duties for us or our board of directors (or any committee thereof). However, our compensation committee and our board of directors value the opinions expressed by our stockholders in their vote on this proposal and will consider the outcome of the vote when making future compensation decisions for named executive officers.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
The audit committee of our board of directors has appointed KPMG LLP, as our independent registered public accounting firm, to audit our financial statements for the fiscal year ending December 31, 2016. Although stockholder approval of the appointment of KPMG LLP is not required by law or NASDAQ rules, our audit committee believes that it is advisable and has decided to give our stockholders the opportunity to ratify this appointment. KPMG LLP audited our financial statementsForm 10-K for the fiscal year ended December 31, 2015, and has served as our auditors since 2008. We expect that representatives of KPMG LLP will be present at2017, including the annual meeting, will be able to make a statement if they so desire, and will be available to respond to appropriate questions.
The following table presents fees for professional audit services rendered by KPMG LLP for the audit of our annualconsolidated financial statements, for the years ended December 31, 2015schedules and December 31, 2014,list of exhibits, and fees billed for other services rendered by KPMG LLP during those periods.any particular exhibit specifically requested. Requests should be sent to: Intercept Pharmaceuticals, Inc., 10 Hudson Yards, 37th Floor, New York, NY 10001, Attention: Company Secretary.
/s/ RYAN T. SULLIVAN
Ryan T. Sullivan
General Counsel and Secretary
(in thousands) | 2015 | 2014 | ||||||
Audit fees | $ | 688 | $ | 394 | ||||
Audit related fees | — | — | ||||||
Tax fees | 25 | 48 | ||||||
All other fees | 141 | — | ||||||
Total | $ | 854 | $ | 442 |
Audit fees include fees associated with the annual audit, review of our quarterly reports on Form 10-Q, consents related to filings with the SEC and KPMG LLP’s work in connection with our financing activities. Tax fees include tax compliance, preparation of state and federal income tax returns, and preparation of sales tax returns.
The audit committee has determined that the provision of services rendered above is compatible with maintaining KPMG LLP’s independence. All audit related, tax and other services are required to be pre-approved by the audit committee.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of Independent Public Accountant
Consistent with SEC policies regarding auditor independence, the audit committee has responsibility for appointing, setting compensation and overseeing the work of our independent registered public accounting firm. In recognition of this responsibility, the audit committee has established a policy to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm.
Prior to engagement of an independent registered public accounting firm for the following year’s audit, management submits an aggregate of services expected to be rendered during that year for each of four categories of services to the audit committee for approval.
1.Audit services include audit work performed in the preparation of financial statements, as well as work that generally only an independent registered public accounting firm can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.
2.Audit-Related services are for assurance and related services that are traditionally performed by an independent registered public accounting firm, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.
3.Tax services include all services performed by an independent registered public accounting firm’s tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice.New York, New York
April 27, 2018
4.Other Fees are those associated with services not captured in the other categories. We generally do not request such services from our independent registered public accounting firm.
Prior to engagement, the audit committee pre-approves these services by category of service. The fees are budgeted and the audit committee requires our independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage our independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the audit committee requires specific pre-approval before engaging our independent registered public accounting firm.
The audit committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the audit committee at its meetings.
In the event the stockholders do not ratify the appointment of KPMG LLP as our independent registered public accounting firm, the audit committee will reconsider its appointment.
The affirmative vote of a majority of the shares cast affirmatively or negatively at the annual meeting is required to ratify the appointment of the independent registered public accounting firm.
The audit committee regularly evaluates the performance of KPMG LLP. In 2015, our audit committee reviewed KPMG LLP’s work relating to our annual and quarterly financial statements, along with KPMG LLP’s work relating to our public offerings completed in 2015. Based on KPMG LLP’s performance relating to our annual and quarterly financial review and their performance relating to our financing activities in 2015, our audit committee recommends that our stockholders ratify the appointment of KPMG LLP as our auditors for fiscal 2016.
We expect a representative of KPMG LLP to attend the Annual Meeting either in person or via teleconference. The representative will have an opportunity to make a statement if he or she desires and also will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF SUCH RATIFICATION UNLESS A STOCKHOLDER INDICATES OTHERWISE ON THE PROXY.
We have adopted a global code of business conduct that applies to all of our employees, including our chief executive officer and chief financial and accounting officer. The text of the global code of business conduct is posted in the “Investors” section of our website atwww.interceptpharma.com. Disclosure regarding any amendments to, or waivers from, provisions of our global code of business conduct that apply to our directors, principal executive officer and principal financial officer will be included in a Current Report on Form 8-K within four business days following the date of such amendment or waiver, unless posting on our website or the issuance of a press release of such amendments or waivers is then permitted by the rules of The NASDAQ Stock Market.
The board of directors knows of no other business which will be presented to the annual meeting. If any other business is properly brought before the annual meeting, proxies will be voted in accordance with the judgment of the persons named therein.
To be considered for inclusion in the proxy statement relating to our 2017 annual meeting of stockholders, we must receive stockholder proposals (other than for director nominations) no later than, 2017. To be considered for presentation at the 2017 annual meeting, although not included in the proxy statement, proposals (including director nominations that are not requested to be included in our proxy statement) must be received no earlier than March 21, 2017 and no later than April 20, 2017; provided, however, that if the 2017 annual meeting date is more than 30 days before or 30 days after the anniversary of the 2016 annual meeting date, notice must be delivered by the stockholder not earlier than the close of business on the 120th day prior to the 2017 annual meeting and not later than the close of business on the later of (i) the 90th day prior to the 2017 annual meeting and (ii) the close of business on the tenth day following the day on which public announcement of the date of the 2017 annual meeting is first made by us. Proposals that are not received in a timely manner will not be voted on at the 2017 annual meeting. If a proposal is received on time, the proxies that management solicits for the meeting may still exercise discretionary voting authority on the proposal under circumstances consistent with the proxy rules of the SEC. All stockholder proposals should be marked for the attention of Corporate Secretary, Intercept Pharmaceuticals, Inc., 450 West 15th Street, Suite 505, New York, NY 10011.
New York, NYJune , 2016
(Pursuant to Section 242 of theGeneral Corporation Law of the State of Delaware)
Intercept Pharmaceuticals, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Intercept Pharmaceuticals, Inc. (the “Corporation”). The Certificate of Incorporation of the Corporation was filed with the Secretary of the State of Delaware on September 4, 2002 under the name TSM Pharmaceuticals, Inc. The Certificate of Incorporation of the Corporation filed on September 4, 2002 was amended on October 11, 2002 to change the name of the Corporation to Intercept Pharmaceuticals, Inc. A Restated Certificate of Incorporation was last filed on October 16, 2012. An Amendment to the Restated Certificate of Incorporation was filed on July 17, 2014.
2. This Certificate of Amendment to Restated Certificate of Incorporation of the Corporation, as amended, was duly adopted by the Board of Directors of the Corporation pursuant to a resolution setting forth the proposed amendment of the Restated Certificate of Incorporation, as amended, and declaring said amendment to be advisable.
3. Article FOURTH, Paragraph A. of the Restated Certificate of Incorporation, as amended, is hereby deleted in its entirety and replaced with the following:
A.Designation and Number of Shares.
The total number of shares of all classes of stock which the Corporation shall have the authority to issue is 50,000,000 shares, consisting of 45,000,000 shares of common stock, par value $0.001 per share (the “Common Stock”), and 5,000,000 shares of preferred stock, par value $0.001 per share (the “Preferred Stock”).
The number of authorized shares of Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any Preferred Stock designation.
4. The aforesaid amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to Restated Certificate of Incorporation, as amended, to be signed by its duly authorized President and Chief Executive Officer this day of , 2016.
INTERCEPT PHARMACEUTICALS, INC.
INTERCEPT PHARMACEUTICALS, INC.
Annual Meeting of Stockholders
JULY 19, 2016
The undersigned, revoking all prior proxies, hereby appoints Mark Pruzanski and Bryan Yoon, or either of them, with full power of substitution, as proxy to represent and vote all shares of Common Stock, par value $0.001 per share, of Intercept Pharmaceuticals, Inc. (the “Company”), which the undersigned will be entitled to vote if personally present at the Annual Meeting of the Stockholders of the Company to be held on July 19, 2016, at 9:00 a.m. ET at the Company’s corporate headquarters, located at 450 W. 15th Street, Suite 505, New York, NY 10011, upon matters set forth in the Notice of 2016 Annual Meeting of Stockholders and Proxy Statement dated June , 2016, a copy of which has been received by the undersigned. Each share of Common Stock is entitled to one vote. The proxies are further authorized to vote, in their discretion, upon such other business as may properly come before the meeting.
This proxy, when properly executed, will be voted as directed. If no direction is made, the proxy shall be votedFORthe election of the listed nominees as directors,FOR the amendment to the Company’s restated certificate of incorporation,FOR the holding of a non-binding, advisory vote on executive compensation, andFOR the ratification of the appointment of KPMG LLP as the Company’s independent auditors for the fiscal year ending December 31, 2016 and, in the case of other matters that legally come before the meeting, as said proxy(s) may deem advisable.
Please check here if you plan to attend the Annual Meeting of Stockholders on July 19, 2016 at 9:00 a.m. (ET).o
VOTE ON INTERNETGo tohttp://www.interceptpharma.com/proxy.html andlog-on using the below control number.
CONTROL #
VOTE BY MAILMark, sign and date your proxy card and return itin the envelope we have provided.
VOTE IN PERSONIf you would like to vote in person, please attend theAnnual Meeting to be held on July 19, 2016 at9:00 a.m. ET.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE INDIVIDUAL NOMINEES STRIKE A LINE THROUGH THE NOMINEES’ NAMES BELOW:
Note: This proxy must be signed exactly as the name appears hereon. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by a duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by an authorized person.