No fee required.
2020
stockholders and employees, the Annual Meeting will be held virtually. You will be able to attend the Annual Meeting, ask questions and vote your shares by visiting www.virtualshareholdermeeting.com/ICPT2020. Please note that to participate you will need the 16-digit control number included in your proxy materials or on your proxy card.
We hope you will be able to attend the annual meeting.
Annual Meeting.
June , 2016
TIME: 9:00 a. m. Eastern Time
DATE: Tuesday, July 19, 2016
PLACE: Intercept’s Corporate Headquarters, 450 West 15th Street, Suite 505, New York, NY 10011
PURPOSES:
WHO
TO BE HELD ON MAY VOTE:
28, 2020
| 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. | | | |
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All stockholders10001.
BY ORDER OF THE BOARD OF DIRECTORSBryan YoonCorporate Secretary
i
This proxy statement, along with the accompanying notice of 2016 annual meeting of stockholders, contains information about the 2016 annual meeting of stockholders of Intercept Pharmaceuticals, Inc., including any adjournments or postponementsaffirmative vote of the annual meeting. We are holding the annual meeting 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.
In this proxy statement, we refer to Intercept Pharmaceuticals, Inc. as “Intercept,” “the Company,” “we” and “us.”
This proxy statement relates to the solicitationholders of proxies by our boarda majority of directors for use at the annual meeting.
On or about June , 2016, we began sending this proxy statement, the attached Notice of Annual Meeting of Stockholders and the enclosed proxy card to all stockholders entitled to vote at the annual meeting.
Although not part of this proxy statement, we are also sending, along with this proxy statement, our 2015 annual report on Form 10-K, which includes our financial statements for the fiscal year ended December 31, 2015, along with the amendment to our annual report on Form 10-K/A.
This proxy statement and our 2015 annual report on Form 10-K, together 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 distributions of our proxy statements and annual reports to stockholders by electronic delivery.
Additionally, you can find a copy of our annual report on Form 10-K, which includes our financial statements, for the fiscal year ended December 31, 2015, along with the amendment to our annual report on Form 10-K/A, 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.
The board of directors of Intercept is soliciting your proxy to vote at the 2016 annual meeting of stockholders 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 know to vote at the annual meeting.
We have made available to you on the internet or have sent you this proxy statement, the Notice of Annual Meeting 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 copy of the amendment to our annual report on Form 10-K/A, because you owned shares of Intercept common stock on the record date. The Company intends to commence distribution 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 are entitled to vote at the annual meeting. On this record date, there were 24,600,161 shares of our common stock outstanding and entitled to vote at the Annual Meeting.
Each sharepower of our common stockall of the shares entitled to vote at the Annual Meeting are present or represented by proxy at the Annual Meeting. Shares present or represented by proxy at the Annual Meeting, including broker non-votes and shares 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 held in “street name” (held instreet name, your shares may be voted even if you do not provide the name of a bank, broker or other holder of record),nominee through which the shares are held with voting instructions. These entities have the authority, under applicable regulatory rules, to vote shares for which their customers do not provide voting instructions on certain “routine” matters. Proposal No. 4 is considered a “routine” matter for which these entities may vote unvoted shares.
The board2021 Annual Meeting 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 Do I Vote?”
Generally, broker non-votes occur when shares held by a broker in “street name” for a beneficial owner are not 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, if you do not give instructions to your brokerage firm subject to these 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) andFOR the ratification of the appointment of independent auditors (Proposal 4), without 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, suchKPMG LLP as the electionindependent registered public accounting firm of directors, absent instructions from the beneficial owner of such shares. Broker non-votes countCompany for purposes of determining whether a quorum exists but do not count as entitled to vote with respect to individual proposals.
The election
For any proposals requiring the affirmative vote of those shares present and entitled to vote, broker non-votes will not affect the outcomeone or more of the vote. Becausestockholders 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 approvalinstructions set forth under “Householding.”
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.
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 after the Annual Meeting.
We will payrisks. The following represent some, but not necessarily all, of the factors that could cause actual results to differ materially from historical results or those anticipated or predicted by our forward-looking statements: the impact of COVID-19, including any impact on our net sales, non-GAAP adjusted operating expenses or financial position, related quarantines and government actions, delays relating to our regulatory applications, disruptions relating to our ongoing clinical trials or involving our contract research organizations, study sites or other clinical partners, disruptions relating to our supply chain or involving our third-party manufacturers, distributors or other distribution partners, facility closures or other restrictions, and the extent and duration thereof; 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, Australia and other jurisdictions in which we have or may receive marketing authorization; the initiation, timing, cost, conduct, progress and results of our research and development activities, preclinical studies and clinical trials, including any issues, delays or failures in identifying patients, enrolling patients, treating patients, retaining patients, meeting specific endpoints in the jurisdictions in which we intend to seek approval or completing and timely reporting the results of our NASH or PBC clinical trials; our ability to timely and cost-effectively file for and obtain regulatory approval of our product candidates, including the regulatory approval of our New Drug Application for liver fibrosis due to NASH; any advisory committee recommendation that our product candidates, including OCA for liver fibrosis due to NASH, should not be approved or approved only under certain conditions; any determination that the regulatory applications and subsequent information we submit for our product candidates, including OCA for liver fibrosis due to NASH, do not contain adequate clinical or other data or meet applicable regulatory requirements for approval; conditions that may be imposed by regulatory authorities on our marketing approvals for our products and product candidates, including OCA for liver fibrosis due to NASH, such as the need for clinical outcomes data (and not just results based on achievement of a surrogate endpoint), any risk mitigation programs such as a REMS, and any related restrictions, limitations and/or warnings contained in the label of any of our products or product candidates; any potential side effects associated with Ocaliva for PBC, OCA for liver fibrosis due to NASH or our other product candidates that could delay or prevent approval, require that an approved product be taken off the market, require the inclusion of safety warnings or precautions or otherwise limit the sale of such product or product candidate; our ability to establish and maintain relationships with, and the performance of, third-party manufacturers, contract research organizations and other vendors upon whom we are substantially dependent for, among other things, the manufacture and supply of our products, including Ocaliva for PBC and, if approved, OCA for liver fibrosis due to NASH, and our clinical trial activities; our ability to identify, develop and successfully commercialize our products and product candidates, including our ability to timely and successfully launch OCA for liver fibrosis due to NASH, if approved; our ability to obtain and maintain intellectual property
Director | | | Age | | | Director Since | | ||||||
Paolo Fundarò(1) | | | | | 46 | | | | | | 2006 | | |
Mark Pruzanski, M.D. | | | | | 52 | | | | | | 2002 | | |
Srinivas Akkaraju, M.D., Ph.D.(2) | | | | | 52 | | | | | | 2012 | | |
Luca Benatti, Ph.D.(2)(3) | | | | | 59 | | | | | | 2014 | | |
Daniel Bradbury(3)(4) | | | | | 59 | | | | | | 2016 | | |
Keith Gottesdiener, M.D.(2) | | | | | 66 | | | | | | 2016 | | |
Nancy Miller-Rich(5) | | | | | 61 | | | | | | 2018 | | |
Gino Santini(4)(5)(6) | | | | | 63 | | | | | | 2015 | | |
Glenn Sblendorio(4) | | | | | 64 | | | | | | 2014 | | |
Daniel Welch(3)(5) | | | | | 62 | | | | | | 2015 | | |
Meeting. The presence,election of each of the nominees recommended for election as directors requires a plurality of the votes cast 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.
Meeting. 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.
The following table sets forth certain information regarding the beneficial ownership of our common stock as of May 23, 2016, by:
Beneficial ownership is determined in accordance with Ms. Miller-Rich will serve on the rules of the SEC and includes voting or investment power with respect to the securities. Shares of common stock that may be acquired by an individual or group within 60 days of May 23, 2016, pursuant to derivative securities, such as options, warrants or restricted stock units, are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in 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 voting 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., 450 West 15th Street, Suite 505, New York, NY 10011.
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 | % |
Each of our directors are elected annually 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 majority of our directors then in office.
Each 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 the2021 Annual Meeting of Stockholders to be held in 2017 and until their respective successors are elected, or until their earlier death, resignationhis or removal.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.
Set forth below are the names of the persons nominatedrecommended for election as directors their ages, their offices inat 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 aboutAnnual Meeting, including the specific experience, qualifications, attributes orand skills that led the Board to our board of directors’ conclusion atdetermine that the time of filing of this proxy statement that each person listed belownominees should serve as a director isdirectors, are set forth below:
Paolo FundaroFundarò has served as our Chairman since October 2015 and as a member of our board of directorsBoard since 2006 and has acted as our chairman since October 2015.2006. Mr. FundaroFundarò has been Genextra’s chief financial officerthe Chief Executive Officer of Genextra S.p.A., an investment firm focused on the life sciences industry, since July 2019 and previously served as the Chief Financial Officer of Genextra
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 determination that Mr. Fundarò should be nominated to serve an additional term as a director of the Company.
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 determination that Dr. Pruzanski should be nominated to serve an additional term as a memberdirector of our board of directors.
the 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.
Angels for Biotech association,Daniel Bradbury has served 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, business development and regulatory matters at other biopharmaceutical companies, qualify him to serve on our board of directors.
Daniel Bradbury has been nominated for election to our board of directors at our 2016 annual meeting.Board since July 2016. Mr. Bradbury has over 3035 years of experience leading global, fast-growing life sciences companies. Since 2012,Mr. Bradbury has served as Executive Chairman of Equillium, Inc., a biopharmaceutical company that Mr. Bradbury co-founded, since January 2020 and served as Chairman of Equillium, Inc. from March 2018 through December 2019. Mr. Bradbury also previously served as Chief Executive Officer of Equillium, Inc., from June 2018 through December 2019 and as President of Equillium, Inc. from March 2017 until June 2018. 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 Castle Biosciences, Inc. since September 2012 and serves on the board of directors of a number of private companies and philanthropic organizations. During the prior five years, Mr. Bradbury previously served as a director of Geron Corporation, Corcept Therapeutics Incorporated, Illumina, Inc., Geron Corporation and Illumina,BioMed Realty Trust, Inc., all of which are NASDAQ-listed biopharmaceutical companies, and Biocon Limited, a biopharmaceutical company traded 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,Trustees and is a member of the advisory committee of BioMed Ventures. Mr. Bradbury also serves on 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.Council. 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 believe
the Company.
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 public company experience, contributed to the Board’s determination 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.
Gino Santinithe Company.
We believe that
the Company.
We believe that University.
Company.
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 currentlyMr. Welch has been a director of Seattle Genetics, Inc. since June 2007 and Ultragenyx Pharmaceutical Inc. since April 2015. During the prior five years, Mr. Welch previously served as a director of AveXis, Inc. and Hyperion Therapeutics, Inc. Mr. Welch also serves on the board of directors of Avexis, Inc., (where he serves as the chairmana number of the board), Ultragenyx Pharmaceutical Inc., (where he serves as the chairman of the board) and Seattle Genetics, Inc.private companies. 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
There are no family relationships between or among any of our directors, executive officers or director nominees. the Company.
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 recommendfollowing ten 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 considered the relationships that each such non-employee director or director nominee has with our company and all other facts and circumstances the board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. In considering the independence of our directors and director nominees, our board of directors considered the association of each such non-employee director and director nominee has with us and all other facts and circumstances our board of directors deemed relevant in determining independence.
Meeting Attendance. Duringuntil the fiscal year ended 2015 there were nine meetings of our board of directors, and the various committees of the board met 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 our 20152021 Annual Meeting of Stockholders eitheror until their respective successors are duly elected and qualified requires a plurality of the votes cast 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.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 (Chairman), Santini(Proposal No. 1I); 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.
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.
A copy of the audit committee’s written charter is publicly available in the “Investors” section of our website atwww.interceptpharma.com.
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.
Our compensation committee’s role and responsibilities are set forth in the compensation committee’s written charter and include:
In respect 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 accomplishments during the year and 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 evaluation of the executive’s performance. Dr. Pruzanski also prepares his own self-assessment as well as a detailed review of company performance against stated corporate goals. This process leads to a recommendation 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 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 will also review and discuss annually with management our “Compensation Discussion and Analysis” disclosure to the extent such disclosure is required by SEC rules.
A copy of the compensation committee’s written charter is publicly available in the “Investors” section of our website atwww.interceptpharma.com.
Nominating and Governance Committee. Our nominating and governance committee met five times during fiscal 2015. This committee currently has three members: Daniel Welch (Chairman), Mr. Silverstein and Dr. Benatti. All members of the nominating 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 nominating 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 serving 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. We believe that separating these positions allows our chief executive officer to focus on our day-to-day business, while allowing our chairman of the board to lead the board of directors in its fundamental role of providing advice to, and independent oversight of, management. Our board of directors 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, particularly as the board of directors’ oversight responsibilities continue to grow. Our board of directors also believes that this structure ensures a greater role for the independent directors in the oversight of our company and active participation of the independent directors in setting agendas and establishing priorities and procedures for the
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-laws and corporate governance guidelines do not require that our chairman and chief executive officer positions be separate, our board of directors believes that having separate positions is 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 board of directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, our board of directors has the responsibility to satisfy itself that the risk management processes designed 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 audit 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 full 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, stockholders who have questions or concerns should contact our Investor Relations department at 646-747-1000. However, any stockholders who wish to address questions regarding our business directly with the board of directors, or any individual director, should direct his or her questions in writing to the chairman of the board or any individual director ATTN: SECURITY HOLDER COMMUNICATION, Board of Directors Intercept Pharmaceuticals, Inc. at 450 West 15th Street, Suite 505, New York, NY 10011 or via e-mail at secretary@interceptpharma.com. Communications willis requesting stockholder approval of an amendment to our Restated Certificate of Incorporation to increase the authorized number of our shares of common stock, par value $0.001 per share, from 45,000,000 to 90,000,000.
In addition, any material that is unduly hostile, threatening, or illegal in nature may be excluded, provided that any communication that is filtered out will be made available to any outside director upon request.
The following table sets forth certain information regarding our executive officers who are not also directors.
Lisa Bright has served as our chief commercial and corporate affairs officer since February 2015. She has over 25 years of experience in the biopharmaceutical industry. Ms. Bright joined Intercept in November 2014 as senior vice president and head of Europe. Prior to joining Intercept, Ms. Bright worked at Gilead Sciences Ltd. starting in 2008, where she held positions of increasing responsibility, including: general manager United Kingdom & Ireland; vice president, Northern Europe; vice president, head of Sovaldi launch planning for Europe, Asia, Middle East and Australasia; and vice 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 president and managing director of New Zealand and vice president — sales for the United Kingdom. Ms. Bright has a B.Sc. in pharmacology from University College London.
Barbara Duncan has served as our chief financial officer since May 2009 and as our treasurer since 2010. She has over 15 years of experience in the life sciences industry. From 2001 through April 2009, Ms. Duncan served as chief financial officer 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. Prior to joining DOV, Ms. Duncan served as a vice president of Lehman Brothers Inc. in its corporate finance division from August 1998 to August 2001, where she provided financial advisory services primarily to companies in the life sciences and general industrial industries. From September 1994 to August 1998, Ms. Duncan was an associate and director at SBC Warburg Dillon Read, 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 Arts 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.
David Shapiro, M.D. has served as our chief medical officer and executive vice president, development since 2008. He 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 affairs and chief medical officer of Idun Pharmaceuticals, Inc., prior to its acquisition by Pfizer. From 1995 to 1998, he was president of the Scripps Medical Research Center at Scripps Clinic. He also served as vice president, clinical research at Gensia and as director and group 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. He 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 of our executive officers. The principal occupation and employment during the past five years of each of our executive officers 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 executive officers and any other person or persons pursuant to which he was or is to be selected as an executive officer.
There are no legal proceedings to which any of our executive officers 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.
This section discusses the principles underlying our policies and decisions with respect to the compensation of our executive officers and the 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 named executive officers for 2015. In addition, this section provides qualitative information regarding 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. Our “named executive officers” for the year ended December 31, 2015 were as follows:
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:
The primary objective of our executive compensation policy is to attract, retain and motivate 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, including the achievement of measurable corporate objectives, and to align executives’ incentives with stockholder value. The compensation committee approves compensation based on certain compensation philosophies, including the following:
The primary elements of our executive compensation program are:
The 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 shareholder 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, after reviewing information provided by our 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 Intercept and our 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 bonuses to incentivize and reward superior short-term performance. To further focus our executives 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.
We use base salaries to recognize the experience, skills, knowledge and responsibilities of our employees, including our executive officers. Base salaries for our named executive officers typically are established through an arm’s-length negotiation at the time the executive is hired, taking into account the position for which the executive is being considered and the executive’s qualifications, prior experience and prior salary. None of our 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 committee reviews and evaluates, with input from our chief executive officer, the need for adjustment of the base salaries of our executives based on changes and expected changes in the scope of an executive’s responsibilities. The compensation committee also considers promotions, the individual contributions made by and performance of the executive during the prior fiscal year, the executive’s performance over a period of years, overall economic and labor market conditions, the relative ease or difficulty of replacing the executive with a well-qualified person, our overall growth and development as a company, general salary trends in our industry and among our peer group and where the executive’s salary falls in the salary range presented by that data. For more information regarding our peer group, see “Our Compensation Process — Market Benchmarking and Peer Group.” In making decisions regarding salary increases, we may also draw upon the experience of members of our board of directors with other companies. We do not provide for any formulaic base salary increases for our named executive officers.
For 2015, the compensation committee recommended annual base salaries for each of our named executive officers based on their overall individual performance in 2014, their increased level of experience and to ensure that their salaries remained competitive with those of similarly-situated executives in our peer group. For 2015, the annual base salary for each of our named executive officers was increased from his or her 2014 annual base salary 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 | — |
The change to the base salary of each named executive officer 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.
Please refer to “— Compensation Decisions Relating to Fiscal Year 2016” for a listing of the annual base salaries of each of our named executive officers for 2016.
As part of our pay-for-performance philosophy, our annual target-based cash bonus program is designed to reward our named executive officers for the achievement of specified annual corporate objectives. At the beginning of each year, the bonus opportunity for each executive officer is established as a target percentage of his or her base salary. The actual annual cash bonus amounts payable to our executive officers are determined after year end based on the compensation committee’s evaluation of performance against the corporate objectives and, in the case of our named executive officers other than Dr. Pruzanski, individual performance levels. Individual performance of the executive officers other than Dr. Pruzanski is determined by the compensation committee after considering the overall performance of the individual executive and taking into account the recommendations of the chief executive officer. The overall assessment by our compensation committee is based on the evaluation of objective metrics, such as the successful achievement of the applicable goal and 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 individual executive officer.
The annual corporate objectives include 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. The corporate objectives are proposed by senior management each year and reviewed and approved by our compensation committee and board of directors in the beginning of our fiscal year, with such modifications as the compensation committee and board of directors deem appropriate. The corporate objectives are designed to require significant effort and operational success on the part of 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 multiple corporate objectives and individual performance is best-suited for a biopharmaceutical company at our stage of development due to the uncertainties inherent in development, regulatory approval and commercialization of new drug treatments. Our compensation committee also considers the practices of our peer group and overall industry practices as part of its review of our bonus program. In order to better align bonus payouts with performance, the compensation committee may take additional significant corporate achievements into account for the current year’s 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 bonus calculation if it determines that underachievement of a goal was primarily caused by circumstances that were beyond the executive’s control or if it determines that the business priorities for the year had shifted.
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, our compensation committee considered the performance of our company in light of the above goals, together with other information available to it, and determined that we achieved our 2015 corporate objectives at a level of 100%.
Our compensation committee did not set any specific individual performance targets for the payment of 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’s bonus is determined solely based on the achievement of corporate goals, whereas the bonus for our other named executive officers is based on both our corporate goals and individual performance.
The 2015 target and actual bonuses for each named executive officer were:
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* | — | — |
Our equity award program is the primary vehicle for offering long-term incentives to our executives. We believe that equity awards provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the long-term interests of our executives and our stockholders. In addition, we believe that equity awards with a time-based or performance-based vesting feature promote executive retention because this feature incentivizes our executive officers to remain in our employment during the vesting period.
To date, we have used equity awards both to compensate our executive officers in the form of new hire grants at their commencement of employment, and to provide ongoing long-term incentives to our named executive officers as our business has developed. We also generally plan to grant equity awards on at least an annual basis to all of our executive officers. Typically, stock options and shares of restricted stock granted to our 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 Intercept 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.
In determining the size of the annual equity awards granted to our named executive officers, our compensation committee considers recommendations developed by our compensation consultant, including information regarding comparative stock ownership of, and equity awards received by, the executives in our peer group and our industry. In addition, our compensation committee considers each executive’s individual performance, the extent to which such executive has vested previous equity awards, as well as our overall corporate performance and the potential for enhancing the long-term creation of value for our stockholders.
Equity awards to our named executive officers are typically granted annually in conjunction with the review of their individual performance and Intercept’s overall performance for the previous year. This review typically occurs at meetings of the compensation committee held during the first quarter of each year, though the equity awards in 2015 were granted in October 2015. This allows the compensation committee to receive audited financial statements of the previous year before making award determinations.
In making annual equity awards for 2015, our compensation committee considered, among other things, the value of the annual equity awards received by executives in our 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 company 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. To promote our
pay-for-performance philosophy, individual equity awards were positioned higher or lower within the 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 committee granted equity incentives in a mix of stock options and restricted stock. Our approach reflects what we believe is an appropriate equity mix, providing executives 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, in light of our significant recent growth and continued expansion in company-wide headcount. We expect these two types of equity incentives to be part of the compensation mix on an annual basis.
In October 2015, as part of our annual grant process, our compensation committee approved the grant of certain time-based options to purchase shares of our common stock and shares of restricted stock to our named executive officers. Eachoutstanding, such as dilution of the time-based stock option awards and shares of restricted stock vested with respect to 25% of the shares on January 1, 2016, and vest with respect to the remaining shares in approximately equal monthly installments for the stock options and quarterly installments for the restricted stock through January 1, 2019. The time-based stock option awards have an exercise price of $161.16 per share operating results and the last reported sale pricevoting rights of current holders of our common stock onstock. If the NASDAQ Global Select Market onamendment is approved, it will become effective upon the datefiling of grant.
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 |
We grantan amendment to our Restated Certificate of Incorporation (in the form of a new hire equity award in connectionCertificate of Amendment to our Restated Certificate of Incorporation) with the commencementSecretary of an executive’s employment as appropriate and necessary to recruit talent, consistent with industry practice. The size of each new hire award is established through arm’s-length negotiation at the time the executive is hired, taking into account the position for which the executive is being considered and the executive’s qualifications, prior experience and compensation including forfeited equity awards, as well as external factors such as competitive market demand. Typically, the time-based stock options and restricted stock we grant to our newly-hired executive officers vest over a period of four years. In each case, 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.
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, group life insurance and long- and short-term disability insurance. For 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. Since 2015, we have matched an employee’s contributions to the 401(k) plan up to the first five percentState of the employee’s salary. We provide pension, insurance and other benefits to executives located outside the United States in line with those provided to similar executives in their respective countries. AllState of our executives are eligible to participate in allDelaware.
In particular circumstances,April 6, 2020, we may agree to reimburse an executive officer for certain expenses, such as commuting or travel expenses, as an additional incentive to join Intercept 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 her commuting costs, which reimbursement is capped at a maximum of £1,080 per month (approximately $1,579), plus gross ups on the applicable tax amounts. Ms. Bright and Dr. Shapiro also received a car allowance in 2015. See “— Summary Compensation Table.”
Pursuant to employment agreements or arrangements we have entered into with our executive officers, our executive officers are entitled to specified benefits in the event of the termination of their employment under specified circumstances, including termination following 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.
We believe that providing these benefits helps us compete for executive talent. After reviewing the practices of companies represented 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.
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 executive officer is terminated during a specified period after the change in control. We believe that a “double trigger” benefit is protective of stockholder value because it prevents an unintended windfall to executive officers in the event of a friendly change in control, while still providing them appropriate incentives to cooperate in negotiating any change in control in which they believe they may lose their jobs.
Our compensation committee oversees our policies governing the compensation of our executive officers. In this role, the compensation committee reviews and approves and recommends for approval to our full board of directors (other than our chief executive officer) all compensation decisions relating to our named executive officers. Our compensation committee consists of four members of our board of directors, each of whom has extensive experience 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.
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, the annual base salaries of our named executive officers were increased 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. In addition, in February 2016, our board of directors approved bonus targets for our named executive officers for 2016 as follows: for Dr. Pruzanski, 70%; for Dr. Shapiro, 50%; for Ms. Duncan, 50%; for Ms. Bright, 50%; and for Ms. McMinn, 50%.
In February 2016, upon the recommendation of the compensation committee of the board of directors, equity grants were made to our named executive officers as follows: for Dr. Pruzanski, stock options to purchase 30,500had 32,943,079 shares of common stock outstanding and 23,300 sharesour Board of restricted stock; for Dr. Shapiro, stock options to purchase 10,200Directors had reserved 3,388,031 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 exercise price for the options awarded to our executive officers is $95.74 per share, the last reported sale price of our common stock on the NASDAQ Global Select Market on the date of the grant.
The compensation committee of the board of directors of Intercept Pharmaceuticals, Inc. has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with Intercept’s management. Based on such review and discussions, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement.
By the compensation committee of the board of directors of Intercept Pharmaceuticals, Inc.
The following table sets forth information regarding compensation awarded to, earned by or paid to our named executive officers during the years ended December 31, 2015, 2014 and 2013.
Name and Principal Position | Year | Salary ($) | 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 at 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. Pruzanski will be entitled to receive (i) 12 months 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 plans 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 vestissuance 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 employment 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 awards and stock options will immediately be forfeited upon the effective date of such termination and all of his
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 each of the chief executive officer and the three other most highly compensated executive officers (other than 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 committee is informed about the tax deductibility and accounting treatment of compensation when making its compensation determinations. The 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 committee believes they are in the best interests of our company and our stockholders.
The audit committee of the board of directors has furnished the following report:
The audit committee assists the board in overseeing and monitoring the integrity of our financial reporting process, compliance with legal and regulatory requirements and the quality of internal and external audit processes. This committee’s role and responsibilities are set forth in our charter adopted by the board, which is available in the “Investors” section of our website atwww.interceptpharma.com. This committee reviews and reassesses our charter annually and recommends any changes to the board for approval. The audit 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:
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 audited financial statements and discussions 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 filing with the SEC.
In 2015, the 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, 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
To our knowledge, based solely on a review of the reports furnished to us and written representations that no other reports were required, during the fiscal year 2015, all reports which were required to be filed pursuant to Section 16(a) of the Exchange Act were filed on 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 salevesting of other equity awards outstanding under our equity plans. In addition, the Board of Directors had reserved up to 5,823,784 shares of common stock on May 19, 2015; Forms 4for issuance upon conversion of Luciano Adorini, Barbara Duncan, Mark Pruzanskiour 3.25% Convertible Senior Notes due 2023 and David Shapiro filed on July 7, 2015 reporting the vestingour 2.00% Convertible Senior Notes due 2026. As a result, as of restricted stock units and the issuance ofApril 6, 2020, we had only 2,845,106 shares of common stock on July 1, 2015 with respect thereto; and Form 4available for issuance for other purposes. If the proposed amendment to our Restated Certificate of Rachel McMinn filed on July 17, 2015 reportingIncorporation to increase the mandatory saleauthorized number of our shares of common stock to cover the withholding tax amounts upon the vestingis not approved, we may not have sufficient shares of restrictedcommon stock awards on May 1, 2015.
In addition 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 holder of more 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 responsibleissuance 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 ifpurposes 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 into prior to the completion of these procedures.
The audit committee or its chair, as the case may be, shall approve only those related party transactions that are determined to be in, or not inconsistent with, the best interests of us and our stockholders, taking into account all available facts and circumstances as the committee or the chair 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 benefits of the transaction to us; the impact on a director’s independence in the event the related party is a director, an
immediate family member of a director or an entity in which a director is a partner, stockholder or executive officer; the availability of other sources for comparable products or services; the terms of the transaction; and the terms of comparable transactions that would be available to unrelated third parties or to employees generally. No member of the audit committee shall participate 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.
Upon recommendation of the nominating and governance committee, 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 directors of the nominees listed above. If any nominee should be unable or unwilling to serve on our board of directors, the shares represented 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 plurality 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 Interceptthe Company by our Board of Directors.
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 24,600,161additional shares of common stock issued and outstanding and 1,913,481 shares subjectultimately could be used 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,oppose a hostile takeover attempt or 2012 Plan. Accordingly, approximately 77.6% of our authorized shares of common stock has been issuedto delay or reserved for issuance.
No otherprevent changes to the Charter have been approvedin control or are being proposed by our board of directors. To effectuate the increasemanagement of the number of authorized shares of our common stock,Company.
entirety as follows:
A copy of the
Given the small number of authorized shares currently available under ourCompany’s Restated 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 authorized 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 time45,000,000 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 of90,000,000 (Proposal No. 2) requires 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 issuance may also be used to oppose a hostile takeover attempt or to delay or prevent changes in control of the company. For example, without further stockholder approval, 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 and 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 the holders 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.
Annual Meeting.
OFFICERS
Our executive compensation programs are designed to attract, motivate and retain our executive officers, who are critical to our success. Under these programs, ourCompany’s named executive officers are rewardedas disclosed in the proxy statement for the achievement2020 Annual Meeting 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. As we describe in the Compensation Discussion and Analysis section, our executive compensation program embodies a pay-for-performance philosophy that supports our business strategy and aligns the interests 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 vote 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,Stockholders, including the Compensation Discussion and Analysis and the compensation tables and other narrative compensation disclosures.”
As ana non-binding, advisory vote, this proposal isthe result will not binding. The outcome of this advisory vote does not overrule any decision by usbe binding on the Company, our Board or our board of directors (or any committee thereof), create or imply any change to the fiduciary duties of us orCompensation Committee, although 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 andCompensation Committee will consider the outcome of the vote when making futureevaluating the Company’s compensation decisionsphilosophy, programs and practices.
OURofficers (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.
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 | | |
Name | | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($)(10) | | | Option Awards ($)(10) | | | Total ($) | | ||||||||||||
Paolo Fundarò | | | | | 80,000(1) | | | | | | 129,133 | | | | | | 132,223 | | | | | | 341,356 | | |
Srinivas Akkaraju, M.D., Ph.D. | | | | | 55,000(2) | | | | | | 129,133 | | | | | | 132,223 | | | | | | 316,356 | | |
Luca Benatti, Ph.D. | | | | | 65,000(3) | | | | | | 129,133 | | | | | | 132,223 | | | | | | 326,356 | | |
Daniel Bradbury | | | | | 65,000(4) | | | | | | 129,133 | | | | | | 132,223 | | | | | | 326,356 | | |
Keith Gottesdiener, M.D. | | | | | 55,000(5) | | | | | | 129,133 | | | | | | 132,223 | | | | | | 316,356 | | |
Nancy Miller-Rich | | | | | 57,500(6) | | | | | | 129,133 | | | | | | 132,223 | | | | | | 318,856 | | |
Gino Santini | | | | | 75,000(7) | | | | | | 129,133 | | | | | | 132,223 | | | | | | 336,356 | | |
Glenn Sblendorio | | | | | 70,000(8) | | | | | | 129,133 | | | | | | 132,223 | | | | | | 331,356 | | |
Daniel Welch | | | | | 67,500(9) | | | | | | 129,133 | | | | | | 132,223 | | | | | | 328,856 | | |
| | | Shares Beneficially Owned(9) | | |||||||||
Name and Address | | | Number of Shares | | | Percentage of Common Stock | | ||||||
5% Stockholders: | | | | | | | | | | | | | |
Genextra S.p.A.(1) | | | | | 6,095,578 | | | | | | 18.5% | | |
FMR LLC(2) | | | | | 4,919,116 | | | | | | 14.9 % | | |
BlackRock, Inc.(3) | | | | | 2,314,468 | | | | | | 7.0 % | | |
The Vanguard Group(4) | | | | | 2,296,438 | | | | | | 7.0 % | | |
Directors and Executive Officers: | | | | | | | | | | | | | |
Paolo Fundarò(5) | | | | | 6,129,142 | | | | | | 18.6% | | |
Mark Pruzanski, M.D.(6) | | | | | 787,855 | | | | | | 2.4% | | |
Srinivas Akkaraju, M.D., Ph.D.(7) | | | | | 438,344 | | | | | | 1.3% | | |
Luca Benatti, Ph.D. | | | | | 21,553 | | | | | | * | | |
Daniel Bradbury(8) | | | | | 26,723 | | | | | | * | | |
Keith Gottesdiener, M.D. | | | | | 20,082 | | | | | | * | | |
Nancy Miller-Rich | | | | | 14,809 | | | | | | * | | |
Gino Santini | | | | | 20,910 | | | | | | * | | |
Glenn Sblendorio | | | | | 19,513 | | | | | | * | | |
Daniel Welch | | | | | 20,091 | | | | | | * | | |
Jerome Durso. | | | | | 50,857 | | | | | | * | | |
Sandip Kapadia | | | | | 54,264 | | | | | | * | | |
Richard Kim | | | | | 32,751 | | | | | | * | | |
Ryan Sullivan | | | | | 30,456 | | | | | | * | | |
All directors and executive officers as group (19 persons) | | | | | 7,812,414 | | | | | | 23.7% | | |
Name | | | Age | | | Position | |
Mark Pruzanski, M.D. | | | 52 | | | President and Chief Executive Officer | |
Jerome Durso | | | 52 | | | Chief Operating Officer | |
Lisa Bright | | | 52 | | | President, International | |
Jason Campagna, M.D., Ph.D. | | | 50 | | | Chief Medical Officer | |
Gail Cawkwell, M.D., Ph.D. | | | 58 | | | SVP, Medical Affairs, Safety & Pharmacovigilance | |
David Ford | | | 51 | | | Chief Human Resources Officer | |
Sandip Kapadia | | | 50 | | | Chief Financial Officer and Treasurer | |
Richard Kim | | | 51 | | | President, U.S. Commercial & Strategic Marketing | |
Ryan Sullivan | | | 44 | | | General Counsel and Secretary | |
Christian Weyer, M.D., M.A.S. | | | 51 | | | EVP, Research & Development | |
Name | | | Title | |
Mark Pruzanski, M.D. | | | President and Chief Executive Officer (“CEO”) | |
Sandip Kapadia | | | Chief Financial Officer and Treasurer | |
Jerome Durso | | | Chief Operating Officer | |
Ryan Sullivan | | | General Counsel and Secretary | |
Richard Kim | | | President, U.S. Commercial & Strategic Marketing | |
| | 2019 STOCK PRICE PERFORMANCE AND RELATED AWARDS | | | ||||
| | | | | ✓ Solid Stock Price Appreciation. Our stock price increased by 23% over the course of 2019. ✓ TSR-Based Performance Stock Unit Awards. In 2019, we again granted as part of our annual equity award program for our executive officers performance stock unit awards (“TSR PSUs”) that vest, if at all, based on the Total Shareholder Return (“TSR”) of our common stock relative to that of the companies comprising the S&P Biotechnology Select Industry Index (“TSR Peer Group”) over a 3-year period, subject to a vesting cap equal to 100% of target in the event that our relative TSR exceeds target but our absolute TSR is negative. | | |
| | KEY BUSINESS ACHIEVEMENTS | | | ||||||||||||
| | ✓ | | | | Achieved Positive Topline Results in Pivotal Phase 3 REGENERATE trial. In February 2019, we announced positive topline results from the planned 18-month interim analysis of our pivotal Phase 3 clinical trial of obeticholic acid (“OCA”) in patients with liver fibrosis due to NASH, known as the REGENERATE trial. In the primary efficacy analysis, once-daily OCA 25 mg met the primary endpoint agreed with the U.S. Food and Drug Administration (“FDA”) of fibrosis improvement by at least one state with no worsening of NASH at the planned 18-month interim analysis and adverse events were generally mild to moderate in severity and the most common were consistent with the known profile of OCA. In November 2019, the results of the 18-month interim analysis from the REGENERATE trial were published in The Lancet. | | | ||||||||
| | ✓ | | | | Submitted First NDA to the FDA and First MAA to the EMA in Liver Fibrosis due to NASH. In September 2019, we submitted the first New Drug Application (“NDA”) to the FDA seeking accelerated approval of OCA in liver fibrosis due to NASH. In November 2019, the FDA accepted our NDA for filing and granted priority review. In December 2019, we submitted the first Marketing Authorization Application (“MAA”) to the European Medicines Agency (“EMA”) seeking conditional approval of OCA for liver fibrosis due to NASH, which was validated by the EMA in January 2020 thereby confirming that our MAA was sufficiently complete to begin the formal review. | | | ||||||||
| | ✓ | | | | Achieved Significant Worldwide Ocaliva Net Sales. We recognized $249.6 million in net sales of Ocaliva® (obeticholic acid) in 2019, as compared to $177.8 million in 2018. Ocaliva net sales in 2019 were comprised of U.S. net sales of $187.5 million and ex-U.S. net sales of $62.1 million, as compared to U.S. net sales of $140.8 million and ex-U.S. net sales of $37.0 million in 2018. | | | ||||||||
| | ✓ | | | | Executed $470 million Financing Significantly Strengthening our Financial Position. In May 2019, we issued and sold $230.0 million aggregate principal amount of 2.00% Convertible Senior Notes due 2026 and received net proceeds of approximately $223.4 million therefrom. In addition, we issued and sold 2,760,000 shares of common stock for $83.50 per share in a registered public offering and 119,760 shares of common stock for $83.50 per share in a concurrent private placement and received net proceeds of approximately $227.3 million. | | | ||||||||
| | ✓ | | | | Advanced Leading NASH Development Program and Pipeline. In 2019, we continued to advance our leading NASH development program, including our Phase 3 trial in NASH patients with compensated cirrhosis, known as REVERSE, which is now fully enrolled with over 900 patients randomized. In addition, we began evaluating in a Phase 2 study the efficacy, safety and tolerability of bezafibrate, a pan-peroxisome proliferator-activated receptor (“PPAR”) agonist, in combination with OCA in patients with PBC following our acquisition of the U.S. rights to bezafibrate from Aralez Pharmaceuticals Canada Inc. | | |
| | CEO COMPENSATION HIGHLIGHTS | | | ||||||||||||
| | Our CEO | | | | Break-Down of 2019 CEO Compensation | | | ||||||||
| | Dr. Mark Pruzanski co-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 course of our history, including those described above. | | | | | | |||||||||
| | ✓ | | | | Market-Based CEO Compensation. For 2019, we determined total CEO compensation (including annual equity awards) with reference to the 50th percentile of the competitive market based on our compensation peer group. In 2020, we continued this approach and again determined total CEO compensation (including annual equity awards) with reference to this percentile. | | | ||||||||
| | ✓ | | | | Significant Performance Elements. We incorporated significant performance elements, including TSR PSUs, into our CEO’s annual and long-term incentive compensation arrangements for 2019. Approximately 87% of our CEO’s 2019 total compensation consisted of variable compensation elements dependent on our achievement of corporate performance goals and our stock price performance. | | | ||||||||
| | ✓ | | | | TSR PSU Grants. As part of our annual equity award program, we grant our executive officers TSR PSUs. In each of 2019 and 2020, the proportion of our CEO’s annual equity grant attributable to TSR PSUs was approximately 60% of the total grant date fair value. | | | ||||||||
| | ✓ | | | | Executive Leadership. Our CEO leads a highly-experienced executive team that spearheaded our business successes described above. | | | ||||||||
| | STOCKHOLDER OUTREACH | | | ||||||||||||
| | Overview. We are committed to establishing and maintaining an open and transparent dialogue with our stockholders with respect to executive compensation and important governance matters. Each year, we engage with our stockholders to request feedback regarding our executive compensation program and other governance matters of importance to our stockholders. Stockholder feedback is then reported to our Compensation Committee, Nominating and Governance Committee and the full Board for consideration. | | | ||||||||||||
| | Stockholder Advisory Vote on Executive Compensation. Each year, our stockholders are provided the opportunity to cast an advisory vote on the compensation of our named executive officers (a “say-on-pay” vote), and 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 program. Our 2019 advisory say-on-pay proposal was approved by approximately 98% of the votes cast on the proposal. Though we were encouraged by this feedback, we plan to continue to work to understand our stockholders’ perspective concerning our executive compensation program and remain committed to our stockholder engagement activities. In 2019, we reached out to stockholders representing over 70% of our outstanding shares, including each of our largest stockholders. Participants at our meetings with such stockholders included members of our executive management team and the Chairperson of our Compensation Committee and Lead Independent Director. | | | ||||||||||||
| | Stockholder Feedback. We believe that our outreach was well received, and many of the stockholders we contacted in 2019 informed us that they were generally pleased with our approach to executive compensation and did not feel the need to meet to discuss such matters in detail. Generally, the stockholders that we did meet with have a long-term outlook and understand that we regularly review | | |
| | and refine our compensation programs as we continue to transition from a development-stage company to a more mature commercial-stage company in a competitive and dynamic industry. In these interactions, among other matters, we discussed our performance-based compensation philosophy, including our practice of granting TSR PSUs to our executive officers. We consistently heard from these stockholders that they appreciated our efforts to engage with them on our compensation philosophy and practices, and they encouraged us to continue our outreach on a regular basis. | | | ||||||||||||
| | Commitment to Future Outreach. We believe that stockholder engagement is important and our Compensation Committee will continue to consider stockholder feedback, future say-on-pay votes and relevant market developments in order to determine whether any subsequent changes to our executive compensation program are warranted. We expect to continue our outreach efforts with respect to executive compensation and important governance matters in future years in order to ensure that we collect stockholder feedback for the consideration of our Compensation Committee, Nominating and Governance Committee and the full Board. | | | ||||||||||||
| | COMPENSATION AND GOVERNANCE BEST PRACTICES | | | ||||||||||||
| | What We Do | | | ||||||||||||
| | ✓ | | | | Independent Chairman and All Board Members other than our CEO are Independent. Paolo Fundarò serves as our Board’s Chairman, and all of the members of our Board (except Dr. Pruzanski) are independent directors. | | | ||||||||
| | ✓ | | | | Additional Independent Board Leadership and Diversity. Gino Santini serves as our Board’s Lead Independent Director, which we believe enhances our Board governance structure and contributes to the overall effectiveness of our Board. In addition, in April 2018, we appointed Nancy Miller-Rich as an independent director to our Board, which increased the gender diversity of our Board. We continue to strive where appropriate to achieve a diverse balance of backgrounds, perspectives, experiences, ages, genders and ethnicities on our Board and its committees. | | | ||||||||
| | ✓ | | | | Independent Compensation Committee. Our Compensation Committee, which is composed entirely of independent directors, provides independent oversight of our compensation programs. | | | ||||||||
| | ✓ | | | | 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 goals and individual performance, and long-term equity incentive compensation, a substantial portion of which consists of stock options and TSR PSUs. | | | ||||||||
| | ✓ | | | | Market Benchmarking and Use of Reference Peer Group. Our Compensation Committee, with the assistance of its independent compensation consultant, annually analyzes similar life science companies to identify a relevant group of peer companies for purposes of ensuring the reasonableness and competitiveness of our executive compensation program. | | | ||||||||
| | ✓ | | | | 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 with a value equal to at least 3x their annual cash retainer and our CEO and other executive officers to hold Company equity with a value equal to at least 3x and 1x, respectively, their annual base salary. | | |
| | ✓ | | | | Clawback Policy. We have 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. | | | ||||||||
| | ✓ | | | | Corporate Governance Guidelines. In 2019, we adopted corporate governance guidelines reflecting our Board’s commitment to building long-term stockholder value with an emphasis on corporate governance. The Nominating and Governance Committee periodically reviews the adequacy and effectiveness of our corporate governance guidelines and recommends any proposed changes to the Board for approval. | | | ||||||||
| | What We Don’t Do | | | ||||||||||||
| | ✘ | | | | No excise tax gross-ups. We have not provided or committed to provide excise tax gross-ups to any of our named executive officers. | | | ||||||||
| | ✘ | | | | No change in control “windfalls”. The change in control protections for our named executive officers are limited to “double-trigger” arrangements, which require both a change in control and a qualifying termination of employment, or in the case of TSR PSUs, vesting, if at all, based on our TSR performance relative to that of our TSR Peer Group through the month preceding the month in which the change in control occurs. | | | ||||||||
| | ✘ | | | | 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 or annual equity grants. We do not provide guaranteed bonuses or annual equity grants to our named executive officers. In addition, our Compensation Committee determined to maintain the 2019 annual cash incentive bonus target percentages for our named executive officers at their 2018 levels. | | | ||||||||
| | ✘ | | | | 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. | | |
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Named Executive Officer | | | 2019 Salary | | | 2018 Salary | | | Change from 2018 | |
Dr. Mark Pruzanski | | | $734,292 | | | $702,000 | | | 4.6% | |
Sandip Kapadia | | | $464,100 | | | $442,000 | | | 5.0% | |
Jerome Durso | | | $573,250 | | | $540,800 | | | 6.0% | |
Ryan Sullivan | | | $445,520 | | | $424,300 | | | 5.0% | |
Richard Kim | | | $442,900 | | | $430,000 | | | 3.0% | |
2019 Corporate Goal Summary | | | Relative Weighting | | | Assessed Achievement | |
NASH Program | | | 60% | | | 59% | |
Includes specified activities and milestones related to: | | | | ||||
• the delivery of topline results from the planned 18-month interim analysis of our pivotal Phase 3 clinical trial of OCA in patients with liver fibrosis due to NASH, known as the REGENERATE trial, and the timing thereof • the acceptance of our NDA in NASH in the United States and the timing thereof • the timely completion of launch preparation and organization ramp-up activities to support a launch of OCA in liver fibrosis due to NASH in the United States, if approved, including the establishment of marketing and medical plans and the creation and appropriate staffing of the launch organization | | | | ||||
PBC Commercial Program | | | 30% | | | 41% | |
Includes specified commercial milestones such as: | | | | ||||
• the achievement of $230 million in worldwide annual net sales of Ocaliva • the achievement of commercial contribution targets in PBC | | | | ||||
Pipeline and New Products | | | 10% | | | 9% | |
Includes specified activities and milestones related to: | | | | | | | |
• the initiation of a Phase 2 study of OCA/bezafibrate combination in PBC • the development and implementation of a pipeline expansion strategy | | | | | | ||
Total | | | 100% | | | 109% | |
| | | 2019 Cash Incentive Bonus | | |||||||||||||||||||||||||||
Named Executive Officer | | | Target (as % of Base Salary) | | | Corporate Goal Achievement Level | | | Individual Goal Achievement Level | | | Aggregate Achievement (as % of Base Salary) | | | Payment | | |||||||||||||||
Dr. Mark Pruzanski | | | | | 70% | | | | | | 109% | | | | | | — | | | | | | 76% | | | | | $ | 560,265 | | |
Sandip Kapadia | | | | | 50% | | | | | | 109% | | | | | | 100% | | | | | | 55% | | | | | $ | 252,935 | | |
Jerome Durso | | | | | 50% | | | | | | 109% | | | | | | 115% | | | | | | 63% | | | | | $ | 359,284 | | |
Ryan Sullivan | | | | | 50% | | | | | | 109% | | | | | | 110% | | | | | | 60% | | | | | $ | 267,089 | | |
Richard Kim | | | | | 50% | | | | | | 109% | | | | | | 110% | | | | | | 60% | | | | | $ | 265,519 | | |
Relative TSR | | | Vesting Percentage | |
Below 25th Percentile | | | 0% | |
25th Percentile | | | 50% | |
50th Percentile | | | 100% | |
75th Percentile and Above | | | 150% | |
Named Executive Officer | | | TSR PSUs | | | Stock Options | | | Restricted Stock Units | | |||||||||
Dr. Mark Pruzanski | | | | | 23,300 | | | | | | 13,700 | | | | | | 8,500 | | |
Sandip Kapadia | | | | | 3,600 | | | | | | 7,200 | | | | | | 4,500 | | |
Jerome Durso | | | | | 7,500 | | | | | | 15,200 | | | | | | 9,400 | | |
Ryan Sullivan | | | | | 5,300 | | | | | | 10,700 | | | | | | 6,600 | | |
Richard Kim | | | | | 3,200 | | | | | | 6,400 | | | | | | 4,000 | | |
Named Executive Officer | | | 2020 Salary | | | 2019 Salary | | | Change from 2020 | |
Dr. Mark Pruzanski | | | $759,992 | | | $734,292 | | | 3.50% | |
Sandip Kapadia | | | $478,023 | | | $464,100 | | | 3.00% | |
Jerome Durso | | | $601,913 | | | $573,250 | | | 5.00% | |
Ryan Sullivan | | | $461,113 | | | $445,520 | | | 3.50% | |
Richard Kim | | | $457,294 | | | $442,900 | | | 3.25% | |
Named Executive Officer | | | Target Cash Incentive Bonus (as % of Base Salary) | | |||
Dr. Mark Pruzanski | | | | | 70% | | |
Sandip Kapadia | | | | | 50% | | |
Jerome Durso | | | | | 50% | | |
Ryan Sullivan | | | | | 50% | | |
Richard Kim | | | | | 50% | | |
Named Executive Officer | | | TSR PSUs | | | Stock Options | | | Restricted Stock Units | | |||||||||
Dr. Mark Pruzanski | | | | | 25,800 | | | | | | 17,700 | | | | | | 10,800 | | |
Sandip Kapadia | | | | | 4,500 | | | | | | 9,200 | | | | | | 5,600 | | |
Jerome Durso | | | | | 8,500 | | | | | | 17,400 | | | | | | 10,600 | | |
Ryan Sullivan | | | | | 4,500 | | | | | | 9,200 | | | | | | 5,600 | | |
Richard Kim | | | | | 4,300 | | | | | | 8,800 | | | | | | 5,400 | | |
Relative TSR | | | Vesting Percentage | |
Below 25th Percentile | | | 0% | |
25th Percentile | | | 50% | |
50th Percentile | | | 100% | |
75th Percentile and Above | | | 150% | |
Name and Principal Position | | | Year(1) | | | Salary ($)(2) | | | Bonus ($)(3) | | | Stock Awards ($)(4) | | | Option Awards ($)(4) | | | Non-Equity Incentive Plan Compensation ($)(5) | | | All Other Compensation ($)(6) | | | Total ($) | | ||||||||||||||||||||||||
Dr. Mark Pruzanski President and Chief Executive Officer | | | | | 2019 | | | | | | 734,292 | | | | | | — | | | | | | 4,197,742 | | | | | | 1,116,118 | | | | | | 560,265 | | | | | | 7,368 | | | | | | 6,615,785 | | |
| | | 2018 | | | | | | 702,000 | | | | | | — | | | | | | 1,667,718 | | | | | | 1,705,358 | | | | | | 442,260 | | | | | | 8,623 | | | | | | 4,525,960 | | | ||
| | | 2017 | | | | | | 675,000 | | | | | | — | | | | | | 2,486,576 | | | | | | 2,583,556 | | | | | | 401,625 | | | | | | 7,930 | | | | | | 6,154,687 | | | ||
Sandip Kapadia Chief Financial Officer and Treasurer | | | | | 2019 | | | | | | 464,100 | | | | | | — | | | | | | 1,001,664 | | | | | | 586,573 | | | | | | 252,935 | | | | | | 21,368 | | | | | | 2,326,640 | | |
| | | 2018 | | | | | | 442,000 | | | | | | — | | | | | | 790,164 | | | | | | 393,544 | | | | | | 228,735 | | | | | | 22,403 | | | | | | 1,876,846 | | | ||
| | | 2017 | | | | | | 425,000 | | | | | | — | | | | | | 750,260 | | | | | | 749,231 | | | | | | 188,594 | | | | | | 23,930 | | | | | | 2,137,016 | | | ||
Jerome Durso Chief Operating Officer | | | | | 2019 | | | | | | 573,250 | | | | | | — | | | | | | 2,089,570 | | | | | | 1,238,321 | | | | | | 359,284 | | | | | | 21,368 | | | | | | 4,281,793 | | |
| | | 2018 | | | | | | 540,800 | | | | | | — | | | | | | 1,554,326 | | | | | | 775,844 | | | | | | 292,032 | | | | | | 22,403 | | | | | | 3,185,406 | | | ||
| | | | | 2017 | | | | | | 441,333 | | | | | | — | | | | | | 1,738,950 | | | | | | 1,395,217 | | | | | | 260,000 | | | | | | 26,765 | | | | | | 3,862,266 | | |
Ryan Sullivan General Counsel and Secretary | | | | | 2019 | | | | | | 445,520 | | | | | | — | | | | | | 1,471,902 | | | | | | 871,713 | | | | | | 267,089 | | | | | | 21,368 | | | | | | 3,077,592 | | |
| | | 2018 | | | | | | 376,158 | | | | | | — | | | | | | 1,239,112 | | | | | | 1,190,351 | | | | | | 229,122 | | | | | | 173,437 | | | | | | 3,208,180 | | | ||
Richard Kim President, U.S. Commercial & Strategic Marketing | | | | | 2019 | | | | | | 442,900 | | | | | | 202,800 | | | | | | 890,368 | | | | | | 521,398 | | | | | | 265,519 | | | | | | 76,343 | | | | | | 2,399,328 | | |
Name | | | Contributions Under 401(k) Plan ($)(i) | | | Health Insurance ($)(ii) | | | Miscellaneous ($)(iii) | | |||||||||
Dr. Mark Pruzanski | | | | | — | | | | | | 7,368 | | | | | | — | | |
Sandip Kapadia | | | | | 14,000 | | | | | | 7,368 | | | | | | — | | |
Jerome Durso | | | | | 14,000 | | | | | | 7,368 | | | | | | — | | |
Ryan Sullivan | | | | | 14,000 | | | | | | 7,368 | | | | | | — | | |
Richard Kim | | | | | 14,000 | | | | | | 7,368 | | | | | | 54,975 | | |
Name | | | Grant Date | | | Estimated Future Payout Under Non-Equity Incentive Plan Awards Target ($)(2) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(3) | | | 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) | | |||||||||||||||||||||||||||||||||
| Threshold (#)(4) | | | Target (#) | | | Maximum (#) | | |||||||||||||||||||||||||||||||||||||||||||||||
Dr. Mark Pruzanski | | | | | — | | | | | | 514,004 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | 01/16/19(1) | | | | | | — | | | | | | 11,650 | | | | | | 23,300 | | | | | | 34,950 | | | | | | — | | | | | | — | | | | | | — | | | | | | 3,255,942 | | | ||
| | | 01/16/19(1) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 8,500 | | | | | | 13,700 | | | | | | 110.80 | | | | | | 941,800 | | | ||
| | | 01/16/19(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,116,118 | | | ||
Sandip Kapadia | | | | | — | | | | | | 232,050 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | 01/16/19(1) | | | | | | — | | | | | | 1,800 | | | | | | 3,600 | | | | | | 5,400 | | | | | | — | | | | | | — | | | | | | — | | | | | | 503,064 | | | ||
| | | 01/16/19(1) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 4,500 | | | | | | — | | | | | | — | | | | | | 498,600 | | | ||
| | | 01/16/19(1) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 7,200 | | | | | | 110.80 | | | | | | 586,573 | | | ||
Jerome Durso | | | | | — | | | | | | 286,625 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | 01/16/19(1) | | | | | | — | | | | | | 3,750 | | | | | | 7,500 | | | | | | 11,250 | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,048,050 | | | ||
| | | 01/16/19(1) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 9,400 | | | | | | — | | | | | | — | | | | | | 1,041,520 | | | ||
| | | 01/16/19(1) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 15,200 | | | | | | 110.80 | | | | | | 1,238,321 | | | ||
Ryan Sullivan | | | | | — | | | | | | 222,760 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | 01/16/19(1) | | | | | | — | | | | | | 2,650 | | | | | | 5,300 | | | | | | 7,950 | | | | | | | | | | | | — | | | | | | — | | | | | | 740,622 | | | ||
| | | 01/16/19(1) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 6,600 | | | | | | 10,700 | | | | | | 110.80 | | | | | | 731,280 | | | ||
| | | 01/16/19(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 871,713 | | | ||
Richard Kim | | | | | — | | | | | | 221,450 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | 01/16/19(1) | | | | | | — | | | | | | 1,600 | | | | | | 3,200 | | | | | | 4,800 | | | | | | | | | | | | — | | | | | | — | | | | | | 447,168 | | | ||
| | | 01/16/19(1) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 4,000 | | | | | | | | | | | | | | | | | | 443,200 | | | ||
| | | 01/16/19(1) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 6,400 | | | | | | 110.80 | | | | | | 521,398 | | |
| | | Option Awards | | | | Stock Awards | | ||||||||||||||||||||||||||||||||||||||||||
Name | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable(13) | | | Option Exercise Price ($) | | | Option Expiration Date | | | | Number of Shares or Units of Stock That Have Not Vested (#)(14) | | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(22) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | ||||||||||||||||||||||||
Dr. Mark Pruzanski | | | | | 30,084(1) | | | | | | — | | | | | | 21.50 | | | | | | 11/16/22 | | | | | | | 1,456(15) | | | | | | 180,428 | | | | | | 35,100(23) | | | | | | 4,349,592 | | |
| | | 62,595(2) | | | | | | — | | | | | | 31.90 | | | | | | 05/07/23 | | | | | | | 7,250(16) | | | | | | 898,420 | | | | | | 34,950(24) | | | | | | 4,331,004 | | | ||
| | | 5,733(3) | | | | | | — | | | | | | 266.01 | | | | | | 04/11/24 | | | | | | | 6,375(17) | | | | | | 789,990 | | | | | | — | | | | | | — | | | ||
| | | — | | | | | | 5,733(3) | | | | | | 266.01 | | | | | | 04/11/24 | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | ||
| | | 32,550(4) | | | | | | — | | | | | | 161.16 | | | | | | 10/01/25 | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | ||
| | | 29,865(5) | | | | | | 635(5) | | | | | | 94.29 | | | | | | 02/11/26 | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | ||
| | | 29,167(6) | | | | | | 10,833(6) | | | | | | 107.18 | | | | | | 02/01/27 | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | ||
| | | 21,801(7) | | | | | | 23,699(7) | | | | | | 58.74 | | | | | | 02/05/28 | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | ||
| | | 3,425(8) | | | | | | 10,275(8) | | | | | | 110.80 | | | | | | 01/16/29 | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | ||
Sandip Kapadia | | | | | 15,375(9) | | | | | | 2,625(9) | | | | | | 146.36 | | | | | | 07/01/26 | | | | | | | 2,812(18) | | | | | | 348,463 | | | | | | 8,100(23) | | | | | | 1,003,752 | | |
| | | 8,458(6) | | | | | | 3,142(6) | | | | | | 107.18 | | | | | | 02/01/27 | | | | | | | 2,187(16) | | | | | | 271,013 | | | | | | 5,400(24) | | | | | | 669,168 | | | ||
| | | 5,030(7) | | | | | | 5,470(7) | | | | | | 58.74 | | | | | | 02/05/28 | | | | | | | 3,882(19) | | | | | | 481,057 | | | | | | — | | | | | | — | | | ||
| | | 1,800(8) | | | | | | 5,400(8) | | | | | | 10.80 | | | | | | 01/16/29 | | | | | | | 3,375(17) | | | | | | 418,230 | | | | | | — | | | | | | — | | | ||
Jerome Durso | | | | | 14,167(10) | | | | | | 5,833(10) | | | | | | 115.93 | | | | | | 02/23/27 | | | | | | | 4,687(20) | | | | | | 580,813 | | | | | | 15,900(23) | | | | | | 1,970,328 | | |
| | | 9,918(7) | | | | | | 10,782(7) | | | | | | 58.74 | | | | | | 02/05/28 | | | | | | | 7,650(19) | | | | | | 947,988 | | | | | | 11,250(24) | | | | | | 1,394,100 | | | ||
| | | 3,800(8) | | | | | | 11,400(8) | | | | | | 110.80 | | | | | | 01/16/29 | | | | | | | 7,050(17) | | | | | | 873,636 | | | | | | — | | | | | | — | | | ||
Ryan Sullivan | | | | | 7,353(11) | | | | | | 19,122(11) | | | | | | 53.41 | | | | | | 02/13/28 | | | | | | | 13,050(21) | | | | | | 1,617,156 | | | | | | 7,950(24) | | | | | | 985,164 | | |
| | | 2,675(8) | | | | | | 8,025(8) | | | | | | 110.80 | | | | | | 01/16/29 | | | | | | | 4,950(17) | | | | | | 613,404 | | | | | | — | | | | | | — | | | ||
Richard Kim | | | | | 4,395(12) | | | | | | — | | | | | | 277.61 | | | | | | 07/18/25 | | | | | | | 127(15) | | | | | | 15,738 | | | | | | 6,750(23) | | | | | | 836,460 | | |
| | | 4,015(5) | | | | | | 85(5) | | | | | | 94.29 | | | | | | 02/11/26 | | | | | | | 1,469(16) | | | | | | 182,038 | | | | | | 4,800(24) | | | | | | 594,816 | | | ||
| | | 5,363(6) | | | | | | 2,437(6) | | | | | | 107.18 | | | | | | 02/01/27 | | | | | | | 3,263(19) | | | | | | 404,350 | | | | | | — | | | | | | — | | | ||
| | | 4,216(7) | | | | | | 4,584(7) | | | | | | 58.74 | | | | | | 02/05/28 | | | | | | | 3,000(17) | | | | | | 371,760 | | | | | | — | | | | | | — | | | ||
| | | 1,600(8) | | | | | | 4,800(8) | | | | | | 110.80 | | | | | | 01/16/29 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 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) | | ||||||||||||
Dr. Mark Pruzanski | | | | | 50,517 | | | | | | 4,420,527 | | | | | | 14,694 | | | | | | 1,396,956 | | |
Sandip Kapadia | | | | | — | | | | | | — | | | | | | 9,643 | | | | | | 915,168 | | |
Jerome Durso | | | | | — | | | | | | — | | | | | | 12,050 | | | | | | 1,160,076 | | |
Ryan Sullivan | | | | | 8,825 | | | | | | 278,782 | | | | | | 11,800 | | | | | | 1,183,334 | | |
Richard Kim | | | | | — | | | | | | — | | | | | | 5,896 | | | | | | 575,258 | | |
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) | | | | | 2,690,460(2) | | | | | $ | 99.87(3) | | | | | | 2,784,100(4) | | |
Equity Compensation Plans Not Approved by Security Holders | | | | | — | | | | | | — | | | | | | — | | |
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) | |
Dr. Mark Pruzanski | | | | | | | | | | | | | | | | |
| | | Cash Payments(1) | | | 514,004 | | | 1,248,296 | | | 1,131,254 | | | 2,262,507 | |
| | | Value of Accelerated Vesting(2) | | | 12.429,102 | | | 12,429,102 | | | 12,429,102 | | | 12,429,102 | |
| | | Health Insurance Benefits(3) | | | — | | | 34,283 | | | 34,283 | | | 34,283 | |
| | | Total | | | 12,943,106 | | | 13,711,681 | | | 13,594,639 | | | 14,725,892 | |
Sandip Kapadia | | | | | | | | | | | | | | | | |
| | | Cash Payments(1) | | | — | | | — | | | 464,100 | | | 464,100 | |
| | | Value of Accelerated Vesting(2) | | | 594,816 | | | 594,816 | | | 1,161,755 | | | 3,671,663 | |
| | | Health Insurance Benefits(3) | | | — | | | — | | | 34,283 | | | 34,283 | |
| | | Total | | | 594,816 | | | 594,816 | | | 1,660,138 | | | 4,170,046 | |
Jerome Durso | | | | | | | | | | | | | | | | |
| | | Cash Payments(1) | | | — | | | — | | | 573,250 | | | 573,250 | |
| | | Value of Accelerated Vesting(2) | | | 1,185,501 | | | 1,185,501 | | | 1,604,353 | | | 6,665,809 | |
| | | Health Insurance Benefits(3) | | | — | | | — | | | 34,283 | | | 34,283 | |
| | | Total | | | 1,185,501 | | | 1,185,501 | | | 2,211,886 | | | 7,273,342 | |
Ryan Sullivan | | | | | | | | | | | | | | | | |
| | | Cash Payments(1) | | | — | | | — | | | 445,520 | | | 445,520 | |
| | | Value of Accelerated Vesting(2) | | | 218,925 | | | 218,925 | | | 1,580,551 | | | 4,669,304 | |
| | | Health Insurance Benefits(3) | | | — | | | — | | | 34,283 | | | 34,283 | |
| | | Total | | | 218,925 | | | 218,925 | | | 2,060,354 | | | 5,149,107 | |
Richard Kim | | | | | | | | | | | | | | | | |
| | | Cash Payments(1) | | | — | | | — | | | 442,900 | | | 442,900 | |
| | | Value of Accelerated Vesting(2) | | | 503,941 | | | 503,941 | | | — | | | 2,810,238 | |
| | | Health Insurance Benefits(3) | | | — | | | — | | | 34,283 | | | 34,283 | |
| | | Total | | | 503,941 | | | 503,941 | | | 477,183 | | | 3,287,421 | |
KPMG LLP
| | | Year Ended December 31, | | |||||||||
| | | 2019 | | | 2018 | | ||||||
| | | (in thousands) | | |||||||||
Audit Fees | | | | $ | 1,777 | | | | | $ | 1,491 | | |
Audit-Related Fees | | | | | — | | | | | | — | | |
Tax Fees | | | | | 146 | | | | | | 94 | | |
All Other Fees | | | | | 2 | | | | | | 2 | | |
Total Fees | | | | $ | 1,925 | | | | | $ | 1,587 | | |
(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 integrated audit review of our quarterly reports on Form 10-Q,financial statements and internal control over financial reporting, reviews of our interim financial information, the issuance of consents related toin connection with filings with the SEC, statutory audits and KPMG LLP’s work in connection with our financing activities.activities, including the issuance of comfort letters. Tax fees include fees associated with tax compliance services, preparation of statefederal and federalstate income tax returns, and preparation of sales tax returns.
returns and certain other tax consulting services. All other fees in 2019 consist of fees related to a subscription to KPMG LLP’s Accounting Research Online tool.
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 anCompany’s independent registered public accounting firm, for the following year’s audit,KPMG LLP. On an annual basis, management submits an aggregate ofto the Audit Committee for pre-approval specified services expected to be rendered during that year for each of four categories of services toby 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 anCompany’s 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 areasdefined categories of audit, audit-related, tax compliance, tax planning, and tax advice.
4.Other Fees are those associated withother services not captured in the other categories. We generally do not request such services from our independent registered public accounting firm.
up to specified amounts. Prior to engagement, the audit committeeAudit Committee pre-approves these services by category of service. The fees are budgeted andIn 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,event that circumstances may arise whenwhere it may become necessary to engage ourthe Company’s independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances,pre-approval, pre-approval may also be given on an individual, case-by-case basis before the audit committee requires specific pre-approval before engaging ourCompany’s independent registered public accounting firm.
firm is engaged to provide such services. The audit committeeAudit 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 audit committeefull 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
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 and proxy card relating to the 2021 Annual Meeting of Stockholders (the “2021 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 120 days prior to the anniversary of the date on which the Company’s proxy statement was released to stockholders in connection with the 2020 Annual Meeting of Stockholders (the “2019 Annual Meeting”). Therefore, the deadline is expected to be December 30, 2020 for the 2021 Annual Meeting. However, if the date of the 2021 Annual Meeting changes by more than 30 days from the anniversary of the 2020 Annual Meeting, the deadline is a reasonable time before we begin to print and mail our 2017 annual meetingproxy materials. We will notify you of stockholders, weany change in this deadline in a quarterly report on Form 10-Q or in another communication to you. Stockholder proposals must receive stockholder proposals (other thanalso be otherwise eligible for director nominations) no later than, 2017.inclusion.
10001, Attention: Company Secretary.
(Pursuant
Intercept Pharmaceuticals, Inc., a corporation organized and existing underCompany’s named executive officers; and4. FOR the lawsratification of the Stateappointment of Delaware, hereby certifiesKPMG LLP as follows:
1. The nametheindependent registered public accounting firm of the corporation is Intercept Pharmaceuticals, Inc. (the “Corporation”). The CertificateCompanyfor the year ending December 31, 2020.NOTE: Such other business as may properly come before the meeting orany adjournment thereof.1g. Nancy Miller-Rich1i. Glenn Sblendorio1j. Daniel Welch1e. Daniel Bradbury1f. Keith Gottesdiener, M.D.1h. Gino Santini1. FOR the election, by separate resolutions, of Incorporationeach of the Corporation was filed with the Secretary of the State of Delawarefollowingten nominees to serve 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 until the 2021Annual Meeting of Stockholders or until their respective successorsare duly elected and qualified:For Against Abstain! !! !! !! !! !! !! ! !! ! !! ! !! !INTERCEPT PHARMACEUTICALS, INC.The Board recommends that you vote these shares as follows:INTERCEPT PHARMACEUTICALS, INC.10 HUDSON YARDS 37TH FLOORNEW YORK, NY 10001! !! !For Withhold! !Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator,or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders mustsign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.VOTE BY INTERNETBefore The Meeting - Go to www.proxyvote.comUse the Corporation pursuantInternet to a resolution setting forthtransmit your voting instructions and for electronic deliveryof information up until 11:59 p.m. Eastern Time the proposed amendment ofday before the Restated Certificate of Incorporation, as amended,cut-off dateor meeting date. Have your proxy card in hand when you access the web siteand follow the instructions to obtain your records and declaring said amendment to be advisable.
3. Article FOURTH, Paragraph A. ofcreate an electronicvoting instruction form.During The Meeting - Go to www.virtualshareholdermeeting.com/ICPT2020You may attend the Restated Certificate of Incorporation, as amended,meeting via the Internet and vote during the meeting. Havethe information that is hereby deletedprinted 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)box marked by the affirmative vote ofarrow available andfollow the holders of a majority ofinstructions.VOTE BY MAILMark, sign and date your proxy card and return it in the voting power of all of the then-outstanding shares of capital stock of the Corporation entitledpostage-paidenvelope we have provided or return it 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
TheDIRECTORSThe undersigned, revoking all prior proxies, hereby appoints Mark Pruzanski, M.D., Sandip Kapadia and Bryan Yoon,Ryan T. Sullivan, or eitherany of them, with fullthe power of substitution, as proxy to represent and vote allthe shares of Common Stock, par value $0.001 per share, of Intercept Pharmaceuticals, Inc. (the “Company”),the undersigned, with all the powers which the undersigned will be entitled to vote if personally presentwould possess, at the Annual Meeting of the Stockholders of the CompanyIntercept Pharmaceuticals, Inc. to be held on July 19, 2016, May 28, 2020,at 9:10:00 a.m. ET(EDT) by visiting www.virtualshareholdermeeting.com/ICPT2020 or 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.
Thisany postponement or adjournment thereof.This proxy, when properly executed, will be voted as directed. If no direction is made, the proxy shall be votedFORthe election of the nominees listed nomineesin Proposals 1a through 1j as directors,FOR the approval of an amendment to the Company’s restated certificateRestated Certificate of incorporation,FORIncorporation to increase the holdingnumber of authorized shares of common stock from 45,000,000 to 90,000,000, FOR the approval, on a non-binding, advisory vote onbasis, of the compensation of the Company’s named executive compensation,officers, andFOR the ratification of the appointment of KPMG LLP as the Company’s independent auditorsregistered public accounting firm of the Company for the fiscal year ending December 31, 2016 and, in2020. In their discretion, the case ofProxies are authorized to vote upon such other matters that legallybusiness as may properly 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.