Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant
☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
| ☐ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only ( as permitted b y Rule14a-6(e)(2)) |
| ☒ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to §240.14a-12 |
Guardant Health, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
| ☒ | No fee required |
| ☐ | Fee paid previously with preliminary materials |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and0-11 |
Table of Contents
3100 Hanover Street
Palo Alto, California, 94304
April 27, 2023
Dear Guardant Stockholder:
We are pleased to invite you to attend the Guardant Health, Inc. 2023 Annual Meeting of Stockholders to be held on Wednesday, June 14, 2023, at 9:30 a.m. Pacific Time, virtually at www.virtualshareholdermeeting.com/GH2023.
The last year was a breakthrough for us at Guardant Health in many ways. We continued to expand our core Guardant360® franchise with another year of record sales. We gained Medicare reimbursement for our Guardant Reveal™ test addressing both minimal residual disease (MRD) detection and recurrence monitoring in colorectal cancer (CRC), and also expanded its use to include early-stage breast and lung cancers. Towards the end of the year, we reached a historic milestone with positive results from ECLIPSE, an over 20,000 patient registrational study evaluating the performance of our blood test for detecting CRC in average-risk adults.
In our Oncology business, nearly nine years after we launched the first comprehensive liquid biopsy, Guardant360 continued to experience rapid growth in clinical volumes and revenues as we reinforced our market-leading position. On the regulatory front, we received approval for Guardant360® CDx in Japan for tumor mutation profiling and several companion diagnostic indications, and in the United States as a companion diagnostic for ENHERTU® in non-small cell lung cancer. Guardant Reveal volume grew by more than 250% as clinicians responded positively to the availability of the first tissue-free liquid biopsy for MRD testing. In addition, our Guardant360 TissueNext™ assay for comprehensive genomic profiling gained Medicare reimbursement and grew rapidly during the year, broadening our offering to clinical customers.
Our screening program achieved a significant development goal with the successful readout of our ECLIPSE trial in CRC screening. Our Shield™ test demonstrated 83% sensitivity for CRC detection at 90% specificity. This was the highest level of performance ever demonstrated by a blood-based cancer screening test in a large scale prospective clinical study. CRC screening continues to be one of the largest unmet medical needs in healthcare, with over 49 million eligible Americans remaining unscreened and at higher risk of CRC-related death. Lack of adherence to screening recommendations due to barriers associated with available test methods has been a major issue, but with our Shield LDT test, we have shown 90% test adherence, more than double the rate of fecal immunochemical testing (FIT), which is currently the most used colorectal cancer screening test in the United States. With the completion of our FDA submission in March 2023, we are well positioned to bring the first high-performance and high-adherence blood-based test to market for CRC screening. We continue to investigate multi-cancer screening to detect early-stage cancers where there is a clinical benefit from early detection and treatment. Specifically, in January 2022, we initiated the SHIELD LUNG study, a prospective, observational, multi-center basket study designed to enroll individuals undergoing cancer screening across multiple cancer types.
Table of Contents
We also expanded our biopharma business, ending the year with over 150 partnerships to help bring the next generation of cancer therapeutics to patients sooner. In September 2022, we introduced GuardantINFINITY™, a “smart liquid biopsy” assay that provides researchers with novel genomic and epigenomic insights into the tumor microenvironment and patient immune responses from a simple blood draw. We also expanded our international presence further with the opening of our labs in Vall d’Hebron in Spain and The Royal Marsden in the United Kingdom.
These breakthrough technologies and advancements are enabling us to continue to fulfill our commitment to help patients at all stages of cancer live longer and healthier lives. We thank all of our stakeholders for their continued support and confidence in our efforts to transform cancer care.
We hope that you will join us at our 2023 Annual Meeting of Stockholders on June 14, 2023. Your continuing interest in Guardant Health is very much appreciated.
Sincerely,
Helmy Eltoukhy
Chairperson of the Board of Directors
and Co-Chief Executive Officer
AmirAli Talasaz
Co-Chief Executive Officer
Table of Contents
3100 Hanover Street
Palo Alto, California, 94304
NOTICE OF 2023 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 14, 2023
To the Stockholders of Guardant Health, Inc.:
NOTICE IS HEREBY GIVEN that the 2023 Annual Meeting of Stockholders (the “Annual Meeting”) of Guardant Health, Inc., a Delaware corporation, will be held on Wednesday, June 14, 2023, at 9:30 a.m. Pacific Time, virtually at www.virtualshareholdermeeting.com/GH2023.
The Annual Meeting will be held for the following purposes:
| 1. | To elect the three Class II director nominees to serve on the Board of Directors of Guardant Health, Inc. for a three-year term expiring at the 2026 annual meeting of stockholders or until their successors have been elected and qualified. The three nominees for election to the Board of Directors are Ian Clark, Meghan Joyce and Samir Kaul; |
| 2. | To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2023; |
| 3. | To approve, on a non-binding advisory basis, the compensation of our named executive officers, as described in the “Compensation Discussion and Analysis,” executive compensation tables and accompanying narrative disclosures in our proxy materials; and |
| 4. | To consider and take action upon such other matters as may properly come before the Annual Meeting or any adjournment or postponement thereof. |
These matters are more fully described in our proxy materials accompanying this Notice.
We know of no other matters to come before the Annual Meeting. Only stockholders who owned shares of common stock of Guardant Health, Inc. at the close of business on April 17, 2023 are entitled to notice of and to vote on matters brought for vote at the Annual Meeting or at any postponements or adjournments thereof.
You are cordially invited to attend the meeting conducted via live webcast, by registering at www.virtualshareholdermeeting.com/GH2023. You will not be able to attend the Annual Meeting in person. Whether or not you expect to attend, the Board of Directors respectfully requests that you vote your shares of common stock in the manner described in this proxy statement. You may revoke your proxy in the manner described in this proxy statement at any time before it has been voted at the meeting. Regardless of the number of shares of common stock you own, as a stockholder your role is very important, and the Board of Directors strongly encourages you to exercise your right to vote.
Table of Contents
By order of the Board of Directors of Guardant Health, Inc.,
John Saia
Chief Legal Officer and Corporate Secretary
Palo Alto, California
April 27, 2023
Table of Contents
TABLE OF CONTENTS
| Item | Page | |
Table of Contents
PROXY STATEMENT
INFORMATION CONCERNING VOTING AND SOLICITATION
General
Your proxy is solicited on behalf of the Board of Directors (the “Board”) of Guardant Health, Inc., a Delaware corporation (as used herein, “Guardant,” “Guardant Health,” “we,” “us” or “our”), for use at our 2023 annual meeting of stockholders (the “Annual Meeting”) to be held on Wednesday, June 14, 2023, at 9:30 a.m. Pacific Time, virtually at www.virtualshareholdermeeting.com/GH2023, or at any continuation, postponement or adjournment thereof, for the purposes discussed in this proxy statement and in the accompanying Notice of Annual Meeting and any other business properly brought before the Annual Meeting. Proxies are solicited to give all stockholders an opportunity to vote on matters properly presented at the Annual Meeting.
Virtual Annual Meeting. The Annual Meeting will be a virtual meeting of stockholders conducted via live audio webcast. You are invited to attend the Annual Meeting online. We believe that a virtual meeting provides expanded stockholder access and participation, as well as improved communications. You will be able to attend, vote and submit your questions online during the Annual Meeting. You will not be able to attend the Annual Meeting in person. Stockholders may attend the Annual Meeting online by logging onto www. virtualshareholdermeeting.com/GH2023 using the 16-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card, or on the voting instruction form provided by your broker, bank or other nominee.
Notice and Access Proxy Delivery. We have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice”) to most of our stockholders of record, and paper copies of the proxy materials to certain other stockholders of record. Brokers and other nominees who hold shares on behalf of beneficial owners will be sending their own similar Notice to such beneficial owners. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. You can find instructions on how to request a printed copy by mail or electronically on the Notice and on the website referred to in the Notice, including an option to request paper copies on an ongoing basis. On or about April 27, 2023, we intend to make this proxy statement available on the Internet and to commence mailing of the Notice to all stockholders entitled to vote at the Annual Meeting. We intend to mail this proxy statement, together with a proxy card, to those stockholders entitled to vote at the Annual Meeting who properly request paper copies of such materials, within three business days of such request.
Important Notice Regarding the Availability of Proxy Materials for the 2023 Annual Stockholder Meeting to be Held on June 14, 2023
Our proxy statement and 2022 Annual Report are available at www.proxyvote.com. This website address contains: the Notice of Annual Meeting, the proxy statement and proxy card sample, and the 2022 Annual Report. You will need your 16-digit control number that is included on your Notice, on your proxy card, or on the voting instruction form provided by your
1
Table of Contents
broker, bank or other nominee, to access these materials. You are encouraged to access and review all of the important information contained in the proxy materials before voting.
Who Can Vote, Outstanding Shares
Record holders of our common stock as of the close of business on April 17, 2023, the record date for the Annual Meeting (the “Record Date”), are entitled to notice of and to vote at the Annual Meeting on all matters to be voted upon. As of the Record Date, there were 102,764,757 shares of our common stock outstanding. On each matter presented to our stockholders for vote, the holders of common stock are entitled to one vote per share held as of the Record Date.
Voting of Shares
The method of voting by proxy differs (1) depending on whether you are viewing this proxy statement on the Internet or receiving a paper copy and (2) for shares held as a record holder and shares held in “street name.”
Record Holder. If you hold your shares of common stock as a record holder and you are viewing this proxy statement on the Internet, you may vote by submitting a proxy over the Internet by following the instructions on the website referred to in the Notice previously mailed to you. If you hold your shares of common stock as a record holder and you are reviewing a paper copy of this proxy statement, you may vote your shares by completing, dating and signing the proxy card that was included with the proxy statement and promptly returning it in the preaddressed, postage paid envelope provided to you, or by submitting a proxy over the Internet or by telephone by following the instructions on the proxy card.
Hold in Street Name. If you hold your shares of common stock in street name, which means your shares are held of record by a broker, bank or nominee, you will receive a Notice from your broker, bank or other nominee that includes instructions on how to vote your shares. Your broker, bank or nominee will allow you to deliver your voting instructions over the Internet and may also permit you to vote by telephone. In addition, you may request paper copies of the proxy statement and proxy card from your broker by following the instructions on the Notice provided by your broker.
General. The Internet and telephone voting facilities will close at 11:59 p.m. EDT on June 13, 2023. If you vote through the Internet, you should be aware that you may incur costs to access the Internet, such as usage charges from telephone companies or Internet service providers and that these costs must be borne by you. If you vote by Internet or telephone, then you need not return a written proxy card by mail.
Voting at the Virtual Annual Meeting. To attend and vote at the Annual Meeting you need to access the meeting via live audio webcast at www.virtualshareholdermeeting.com/GH2023 using the 16-digit control number included on your Notice, on your proxy card or on the voting instruction form. Attendance at the Annual Meeting will not, by itself, result in any vote or revocation of a prior vote. You must follow the instructions at www.virtualshareholdermeeting.com/GH2023 to vote your shares at the Annual Meeting.
2
Table of Contents
YOUR VOTE IS VERY IMPORTANT. You should submit your proxy even if you plan to attend the Annual Meeting online. If you properly give your proxy and submit it to us in time to vote, one of the individuals named as your proxy will vote your shares as you have directed.
All shares entitled to vote and represented by properly submitted proxies (including those submitted electronically, telephonically and in writing) received before the polls are closed at the Annual Meeting, and not revoked or superseded, will be voted at the Annual Meeting in accordance with the instructions indicated on those proxies. If no direction is indicated on a proxy, your shares will be voted as follows:
| ✓ | FOR the election of each of the three Class II nominees for director named in our proxy materials; |
| ✓ | FOR the ratification of the appointment of Deloitte & Touche LLP (“Deloitte”) as our independent registered public accounting firm for our fiscal year ending December 31, 2023; and |
| ✓ | FOR the approval, on a non-binding advisory basis, of the compensation of our named executive officers, as described in the “Compensation Discussion and Analysis,” executive compensation tables and accompanying narrative disclosures in our proxy materials. |
The proxy gives each of Helmy Eltoukhy, AmirAli Talasaz and John Saia discretionary authority to vote your shares in accordance with their best judgment with respect to all additional matters that might come before the Annual Meeting.
If you receive more than one proxy card or Notice, it means you hold shares that are registered in more than one account. To ensure that all of your shares are voted, sign and return each proxy card or, if you submit a proxy by telephone or the Internet, submit one proxy for each proxy card or Notice you receive.
Revocation of Proxy
If your shares are held of record, you may change or revoke your proxy at any time before your proxy is voted at the Annual Meeting by taking any of the following actions:
| • | timely delivering to our corporate secretary a signed written notice of revocation, bearing a date later than the date of the proxy, stating that the proxy is revoked; |
| • | signing and timely delivering a new paper proxy, relating to the same shares and bearing a later date than the original proxy; |
| • | submitting another proxy by telephone or over the Internet at or before 11:59 p.m. EDT on June 13, 2023 (your latest telephone or Internet voting instructions are followed); or |
| • | attending the Annual Meeting at www.virtualshareholdermeeting.com/GH2023 and timely voting your shares online, although attendance at the Annual Meeting will not, by itself, constitute a vote or revoke a proxy. |
3
Table of Contents
Written notices of revocation and other communications with respect to the revocation of proxies by record holders should be addressed to:
Guardant Health, Inc.
3100 Hanover Street
Palo Alto, California 94304
Attention: Corporate Secretary
If your shares are held in the name of a broker, bank, or other nominee, you may change or revoke your voting instructions by following the instructions of your broker, bank, or other nominee contained on the Notice.
Broker Non-Votes
Brokers, banks or other nominees who hold shares of common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions on how to vote on such matter from the beneficial owners. However, brokers are not allowed to exercise their voting discretion with respect to the election of directors or for the approval of matters that are considered “non-routine” without specific voting instructions from the beneficial owner. If you hold your shares in street name and do not provide voting instructions to your broker on how to vote on the election of directors or other “non-routine” proposals, your broker cannot exercise discretion to vote you shares and your shares will be considered to be “broker non-votes” and will not be voted on such matters. Accordingly, if your broker holds your common stock in “street name,” your broker will vote your shares on the election of directors and other “non-routine” proposals only if you provide instructions to your broker on how to vote your shares by following the procedures outlined in the voting instruction form sent to you by your broker. Only Proposal No. 2 (ratifying the appointment of our independent registered public accounting firm) is considered a routine matter on which your broker may vote without instruction from you as the beneficial owner. Proposal No. 1 (election of directors) and Proposal No. 3 (advisory vote to approve named executive officer compensation) are considered non-routine matters, and without your instruction, your broker cannot vote your shares for either of Proposal No. 1 or Proposal No. 3.
Quorum and Votes Required
The inspector of elections appointed for the Annual Meeting will tabulate votes cast by proxy, telephone and via Internet at www.proxyvote.com as of 11:59 p.m. EDT on June 13, 2023. The inspector of elections will also tabulate votes cast at www.virtualshareholdermeeting.com/GH2023 during the Annual Meeting and will determine whether a quorum is present. In order to constitute a quorum for the conduct of business at the Annual Meeting, the holders of a majority of the shares of common stock issued and outstanding and entitled to vote at the Annual Meeting must be present or represented by proxy at the Annual Meeting. On the Record Date, there were 102,764,757 shares of common stock entitled to vote at the Annual Meeting. Shares that abstain from voting on any proposal, or that are represented by broker non-votes, will be treated as shares that are present and entitled to vote at the Annual Meeting for purposes of determining whether a quorum is present.
4
Table of Contents
Proposal No. 1: Election of Directors. A plurality of the votes cast in the election of directors at the Annual Meeting is required for the election of directors. You may vote “FOR” or “WITHHOLD” your vote on any nominee. The three Class II director nominees receiving the highest number of “FOR” votes will be elected. Broker non-votes are considered votes not cast and thus will have no effect on the outcome of the election of directors.
Proposal No. 2: Ratification of Independent Registered Public Accounting Firm. The affirmative vote of the holders of a majority of the votes cast at the Annual Meeting is required for the ratification of the appointment of Deloitte as our independent registered public accounting firm. You may vote “FOR” or “AGAINST” or “ABSTAIN”. The number of votes “FOR” must exceed the number of votes “AGAINST” for the proposal to pass. Abstentions are considered to be votes not cast on this proposal and thus will have no effect. Brokers generally have discretionary authority to vote on the ratification of our independent registered public accounting firm, thus broker non-votes are not expected to result from the vote on Proposal No. 2. Any broker non-votes would be considered votes not cast and thus would have no effect.
Proposal No. 3: Advisory Vote to Approve Named Executive Officer Compensation. The affirmative vote of the holders of a majority of the votes cast at the Annual Meeting is required for determining approval on an advisory basis of the compensation of our named executive officers, as described in the “Compensation Discussion and Analysis,” executive compensation tables and accompanying narrative disclosures in our proxy materials. You may vote “FOR” or “AGAINST” or “ABSTAIN”. The number of votes “FOR” must exceed the number of votes “AGAINST” for the proposal to pass. Abstentions and broker non-votes are considered to be votes not cast on this proposal and thus will have no effect. This vote is advisory and not binding on us, our Board, or our Compensation Committee.
In their discretion, the proxy holders named in the proxy are authorized to vote on any other matters that may properly come before the Annual Meeting and at any continuation, postponement or adjournment thereof. The Board knows of no other items of business that will be presented for consideration at the Annual Meeting other than those described in this proxy statement. In addition, no stockholder proposal or nomination was received on a timely basis, so no such matters may be brought to a vote at the Annual Meeting.
Vote Recommendation
Our Board of Directors unanimously recommends that you vote:
| ✓ | FOR the election of each of the three Class II director nominees named in our proxy materials; |
| ✓ | FOR the ratification of the appointment of Deloitte as our independent registered public accounting firm for our fiscal year ending December 31, 2023; and |
| ✓ | FOR the approval, on a non-binding advisory basis, the compensation of our named executive officers, as described in the “Compensation Discussion and Analysis,” executive compensation tables and accompanying narrative disclosures in our proxy materials. |
5
Table of Contents
Details Regarding the Virtual Annual Meeting
Similar to last year, the Annual Meeting will again be held virtually this year via live interactive audio webcast on the Internet. You will be able to attend, vote and submit your questions during the Annual Meeting by logging onto www.virtualshareholdermeeting.com/GH2023. You will not be able to attend the Annual Meeting in person.
Access to the Annual Meeting
The live audio webcast of the Annual Meeting will begin promptly at 9:30 a.m. Pacific Time. Online access to the audit webcast will open approximately 15 minutes prior to the start of the Annual Meeting to allow time for our stockholders to log in and test their devices’ audio system. We encourage our stockholders to access the meeting in advance of the designated start time.
Log-In Instructions
Instructions on how to connect to the Annual Meeting, participate and demonstrate proof of stock ownership are posted at www.virtualshareholdermeeting.com/GH2023. To participate in the Annual Meeting, you will need to log-in using the 16-digit control number on your Notice, proxy card or voting instruction form.
Technical Assistance
Beginning 15 minutes prior to the start of and during the Annual Meeting, we will have a support team ready to assist stockholders with any technical difficulties they may have accessing or hearing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Virtual Shareholder Meeting log in page.
Submitting Questions at the Annual Meeting
Stockholders may submit questions and vote at www.virtualshareholdermeeting.com/GH2023 during the Annual Meeting. You will need to enter the 16-digit control number received with your Notice, proxy card or voting instruction form as proof of stock ownership in order to be able to submit questions and vote at our Annual Meeting. After the business portion of the Annual Meeting concludes and the meeting is adjourned, we will hold a Q&A session during which we intend to answer the questions submitted during the Annual Meeting that are pertinent to us and that are submitted in accordance with the Rules of Conduct for the Annual Meeting, as time permits. The Rules of Conduct will be posted on the virtual meeting web portal. Substantially similar questions will be answered only once. To promote fairness, efficient use our resources and to ensure all stockholder questions are able to be addressed, we will respond to no more than two questions from a single stockholder.
Solicitation of Proxies
Our Board is soliciting proxies for the Annual Meeting from our stockholders. We will bear the entire cost of soliciting proxies from our stockholders. In addition to the solicitation of proxies by delivery of the Notice or proxy statement by mail, we will request that brokers,
6
Table of Contents
banks and other nominees that hold shares of our common stock, which are beneficially owned by our stockholders, send Notices, proxies and proxy materials to those beneficial owners and secure those beneficial owners’ voting instructions. We will reimburse those record holders for their reasonable expenses. We do not intend to hire a proxy solicitor to assist in the solicitation of proxies. We may use several of our regular employees, who will not be specially compensated, to solicit proxies from our stockholders, either personally or by telephone, Internet, facsimile or special delivery letter.
Stockholder List
A list of stockholders eligible to vote at the Annual Meeting will be available for inspection, for any purpose germane to the Annual Meeting, at our corporate headquarters for a period of no less than ten days ending on the day prior to the Annual Meeting date. Please contact our Corporate Secretary at CorpSecretary@guardanthealth.com if you are interested in viewing the list. The list of stockholders will also be made available during the Annual Meeting at www.virtualshareholdermeeting.com/GH2023.
7
Table of Contents
CORPORATE GOVERNANCE
Corporate Governance Focus and Stockholder Outreach
Over the course of the last year, the Board has been actively engaged in a comprehensive review of its corporate governance practices and in taking steps to strengthen and enhance those practices in response to stockholder feedback. These steps have included increasing the size of the Board from seven to nine directors and increasing the gender diversity of the Board (which now includes three women directors). Most recently, the Board also made a number of meaningful enhancements to the Company’s corporate governance structure. In February 2022, our Board amended our Governance Committee Charter to enhance the Governance Committee’s oversight of corporate social responsibility, including ESG policies and practices and revised our Code of Conduct to increase the breadth and specificity of standards to be upheld by all directors, officers and employees of the Company, including adding and refining guidelines regarding conflicts of interest, business records, gifts and favors, antitrust practices, political contributions, environmental protection, and personal conduct and social media practices.
We recognize the value of a robust stockholder outreach program. We engage in regular, constructive dialogue with our stockholders on matters relevant to our business, including corporate governance, executive compensation, strategy, environmental, social and governance issues, and human capital management. During the third and fourth quarters of 2022 and the first quarter of 2023, we contacted our top 75 stockholders, representing more than 86% of the Company’s outstanding shares of common stock. We ultimately spoke with 21 stockholders representing approximately 57% of the Company’s outstanding shares of common stock. Please see “Compensation Discussion and Analysis – Stockholder Outreach” for more details regarding our outreach, stockholder feedback and responses by the Board and its committees.
Board Composition
The Board currently has nine members. Consistent with the Board’s commitment to Board refreshment, on June 30, 2022, Steve Krognes was appointed to the Board as a Class III director to serve for a term expiring at our 2024 annual meeting of stockholders. On February 21, 2023, Musa Tariq was appointed to the Board as a Class I director to serve for a term expiring at our 2025 annual meeting of stockholders.
8
Table of Contents
The following provides summary information about each continuing director and director nominee and reflects their committee assignments as of April 27, 2023.
| Name | Position | Age | Director Since | AC | CC | N&CG | ||||||||||
Helmy Eltoukhy | Chairperson & Co-Chief Executive Officer (“Co-CEO”) | 44 | 2013 | |||||||||||||
AmirAli Talasaz | Director & Co-CEO | 43 | 2013 | |||||||||||||
Ian Clark | Lead Independent Director | 62 | 2017 |
| ||||||||||||
Vijaya Gadde | Director | 48 | 2020 |
| ||||||||||||
Meghan Joyce | Director | 39 | 2021 |
|
| |||||||||||
Samir Kaul | Director | 49 | 2014 |
| ||||||||||||
Steve Krognes | Director | 54 | 2022 |
|
| |||||||||||
Myrtle Potter | Director | 64 | 2021 |
|
| |||||||||||
Musa Tariq | Director | 40 | 2023 |
| ||||||||||||
Chair 
Member
AC Audit Committee CC Compensation Committee N&CG Nominating & Corporate Governance Committee
The Board is divided into three classes (Class I, Class II and Class III) with staggered terms of three years each and holding office until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal. The term of one class expires at each annual meeting of stockholders.
Statistics for Nine Continuing Directors and Director Nominees (As of Our Annual Meeting)
 |  |  |
9
Table of Contents
Independence |
Gender Diversity |
Racial / Ethnic Diversity |
Tenure | |||
78%
| 33%
| 44%
| 4.8 years
| |||
| 7 of 9 directors are independent | 3 of 9 directors are female | 4 of 9 directors are members of traditionally underrepresented racial/ethnic groups, as defined by current U.S. census racial/ethnic categories | Average tenure of directors | |||
In accordance with Nasdaq Stock Market (“Nasdaq”) rules, the following Board Diversity Matrix sets forth the required diversity statistics for our existing directors:
Nasdaq Board Diversity Matrix (As of April 27, 2023)
| ||||
Total Number of Directors: | 9 | |||
| Female | Male | |||
Part I: Gender Identity | ||||
Directors | 3 | 6 | ||
Part II: Demographic Background | ||||
African American or Black | 1 | — | ||
Asian | 1 | 2 | ||
White | 1 | 3 | ||
Did Not Disclose Demographic Background | — | 1 | ||
Diversity of Skills and Expertise for Directors as of Our Annual Meeting
The skills matrix below identifies our continuing directors’ prominent experiences and qualifications by name. Each director brings his or her own unique background and range of expertise, knowledge and experience which provides an appropriate and diverse mix of qualifications necessary for our Board to effectively fulfill its oversight responsibilities. By its nature, the information contained in this summary is not intended to be exhaustive but aims to convey the general breadth of experience and qualifications that our directors bring to their work on our Board to oversee strategy, performance, culture and risk at the Company.
10
Table of Contents
Board Skills of Nine Continuing Directors
 |  |  |  |  |  |  |  |  | ||||||||||||
| Senior Executive Leadership | ● | ● | ● | ● | ● | ● | ● | ● | ● | ||||||||||
| Other Public Company Board Experience | ● | ● | ● | ● | ● | ||||||||||||||
| Corporate Strategy / M&A | ● | ● | ● | ● | ● | ● | ● | ● | |||||||||||
| Financial / Accounting or Audit Experience | ● | ● | ● | ● | ● | ● | |||||||||||||
| Healthcare Industry Experience | ● | ● | ● | ● | ● | ● | ● | ||||||||||||
| Sales / Marketing Experience | ● | ● | ● | ● | ● | ● | |||||||||||||
| Risk Management and Compliance | ● | ● | ● | ● | ● | ● | ● | ||||||||||||
| Sustainability and ESG | ● | ● | ● | ● | ● | ||||||||||||||
| Cybersecurity / Technology | ● | ● | ● | ● | ● | ● | ● | ||||||||||||
| Global / International Experience | ● | ● | ● | ● | ● | ● | ● | ||||||||||||
Our Nominating and Corporate Governance Committee (the “Governance Committee”) is responsible for determining Board membership qualifications and for selecting, evaluating and recommending to the Board nominees for annual election to the Board and to fill vacancies as they arise. When considering whether directors and nominees have the experience, qualifications, attributes or skills to enable the Board to satisfy its oversight responsibilities effectively in light of our business and structure, the Governance Committee and the Board evaluate each individual in the context of the Board as a whole, with the objective of assembling a team that can best perpetuate the success of the business and represent
11
Table of Contents
stockholder interests through the exercise of sound judgment using its diversity of experience, thought, backgrounds and cultures. Directors and nominees should have a high level of personal and professional integrity, strong ethics and values and the ability to make mature business judgments. The Governance Committee maintains Director Qualification Standards for selecting nominees and for considering stockholder recommended nominees, which are included in this proxy statement as Appendix A. In determining whether to recommend a director for re-election, the Governance Committee also considers the director’s past attendance at meetings and participation in and contributions to the Board’s activities. Our directors possess a range of diverse skills, backgrounds, experience and viewpoints that we believe are integral to an effective board of directors. Detailed information about each individual’s qualifications, experience, skills and expertise along with select professional and community contributions can be found above and in the section entitled “Proposal 1: Election of Directors” in this proxy statement. We believe that our directors provide an appropriate mix of experience, diversity and skills relevant to the size and nature of our business.
The Governance Committee is mindful of the policies regarding board service of certain investors and proxy advisory firms, which policies were developed due to concerns that “overboarded” directors face excessive time commitments and challenges in fulfilling their duties. Mr. Clark may be deemed “overboarded” under certain policies. In 2022, Mr. Clark reduced the number of boards he serves on from six to five. The Governance Committee reviewed and considered the contributions of Mr. Clark to the Board and noted his strong attendance, preparedness and engagement at Board and committee meetings, as well as his leadership as our Lead Independent Director. The Governance Committee also noted Mr. Clark’s valuable and extensive public company director experience and expertise.
The Governance Committee will consider stockholder recommendations of candidates on the same basis as it considers all other candidates. Stockholders may propose director nominees by adhering to the advance notice procedures described in the section entitled “Other Matters: Stockholder Proposals and Nominations” in this proxy statement and must include all information as required under our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) and Amended and Restated Bylaws (the “Bylaws”), and any other information that would be required to solicit a proxy under federal securities laws. We may request from the recommending stockholder or recommending stockholder group such other information as may reasonably be required to determine whether each person recommended by a stockholder or stockholder group as a nominee meets the minimum director qualifications established by our Board and is independent based on applicable laws and regulations. The Governance Committee may also establish procedures, from time to time, regarding submission of candidates by stockholders and others.
Director Independence
Our Governance Committee and our Board have undertaken a review of the Board’s composition, the composition of Board committees and the independence of each director. Based upon information concerning each director’s background, employment and affiliations, including family relationships, the Board has affirmatively determined that each of Ian Clark, Vijaya Gadde, Meghan Joyce, Samir Kaul, Steve Krognes, Myrtle Potter and Musa Tariq is independent, as defined under the applicable listing requirements and rules of Nasdaq and
12
Table of Contents
the Securities and Exchange Commission (the “SEC”), and that each of them and their respective family members have no material relationship with us, commercial or otherwise, that would interfere with the exercise of their independent judgment in carrying out the responsibilities of a director. Drs. Eltoukhy and Talasaz were determined to not be independent due to their service as our Co-CEOs. In making these determinations, the Board considered the current and prior relationships that each non-employee director has with us and all other facts and circumstances the Board deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.
Board Leadership Structure
Our Board has determined that at this time it is in the best interests of the Company and our stockholders to have Helmy Eltoukhy, our Co-CEO, serve as our Chairperson of the Board, coupled with a strong lead independent director, Ian Clark. Dr. Eltoukhy was appointed as Chairperson of the Board on August 5, 2021, succeeding AmirAli Talasaz in this role. We believe having one of our senior executives serve as Chairperson promotes responsibility and accountability, and that our Board benefits from having a Chairperson with his extensive understanding of our business and the unique challenges we face. The Board believes that this structure best facilitates consistent leadership direction and long-term strategic planning, while building a cohesive corporate culture that speaks with a single voice.
Our Board also recognizes the value and importance of a strong independent lead director with clearly delineated responsibilities. The independent directors have appointed Ian Clark to serve as our lead independent director. As set forth in our Corporate Governance Guidelines, Mr. Clark, as our independent lead director, has clearly delineated and comprehensive duties, including:
| • | presiding at all meetings of the Board at which the Chairperson is not present, including all executive sessions of the independent directors; |
| • | approving Board meeting schedules and agendas; |
| • | meeting in executive session without non-independent directors or management present on a regularly scheduled basis, but no less than twice per year; and |
| • | acting as the liaison between the independent directors and our Co-CEOs and Chairperson. |
Our Board will continue to evaluate its leadership structure in order to ensure it aligns with and supports the evolving needs and circumstances of Guardant and its stockholders.
Corporate Governance Guidelines
Our Board has adopted corporate governance guidelines covering, among other things, the duties and responsibilities of and independence standards applicable to our directors and Board committee structures and responsibilities. These guidelines are available on the “Corporate Governance” section of our website at https://investors.guardanthealth.com.
13
Table of Contents
Attendance by Members of the Board at Meetings
Our Board held six meetings and acted by written consent three times during the year ended December 31, 2022. During 2022, all of our then incumbent directors attended at least 75% of the combined total of (i) all Board meetings and (ii) all meetings of committees of the Board of which the incumbent director was a member. The membership of each standing committee in 2022 and the number of meetings held during 2022 are identified in the table below.
Director
|
Audit
|
Compensation
|
Governance
| |||||||
Helmy Eltoukhy
| ||||||||||
AmirAli Talasaz
| ||||||||||
Ian Clark
|
Chair
| |||||||||
Vijaya Gadde
|
Chair
| |||||||||
Meghan Joyce
|
✓
| ✓
| ||||||||
Samir Kaul
|
✓ | |||||||||
Steve Krognes
|
Chair
|
✓
| ||||||||
Myrtle Potter
|
✓
| ✓
| ||||||||
Number of meetings held during FY 2022
|
4
|
6
|
4
|
* Does not include action by written consent
Currently, we do not maintain a formal policy regarding director attendance at the Annual Meeting; however, it is expected that, absent compelling circumstances, each of our directors will attend our Annual Meeting. Each of our then-seven incumbent directors attended our 2022 Annual Meeting of Stockholders (the “2022 Annual Meeting”).
Executive Sessions
Our non-management directors meet regularly in executive sessions without management, to consider such matters as they deem appropriate. Our lead independent director, Mr. Clark, presides over all executive sessions.
Board Committees
We currently have three standing committees: Audit Committee, Compensation Committee and Governance Committee. From time to time, the Board may form a new committee or disband a current committee, depending on the circumstances. The charters of all three of our standing Board committees are available on our website under the “Corporate Governance – Governance Documents” section at https://investors.guardanthealth.com.
Audit Committee
Our Audit Committee currently consists of Steve Krognes, Meghan Joyce and Myrtle Potter, with Mr. Krognes serving as chair. Mr. Krognes joined the Audit Committee as the
14
Table of Contents
chair upon his appointment to the Board effective June 30, 2022. Mr. Kaul served as chair of the Audit Committee from the date of our 2022 Annual Meeting until June 30, 2022. Ian Clark served on the Audit Committee until our committee refreshment effective May 1, 2022. Our Board has determined that each of these directors is independent as defined by the applicable rules of the Nasdaq and the SEC, and that each member of the Audit Committee meets the financial literacy and experience requirements of the applicable SEC and Nasdaq rules. In addition, our Board has determined that each of Messrs. Krognes and Kaul, and Mss. Joyce and Potter is an “audit committee financial expert” as defined by the SEC. The Audit Committee met four times and did not act by written consent during the year ended December 31, 2022.
Our Audit Committee charter requires that the Audit Committee oversee our corporate accounting and financial reporting processes. The primary responsibilities and functions of our Audit Committee are, among other things, as follows:
| • | appointing, approving the compensation of, and assessing the independence of, our independent registered public accounting firm; |
| • | overseeing the work of our independent registered public accounting firm, including through the receipt and consideration of reports from such firm; |
| • | reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures; |
| • | monitoring our internal control over financial reporting and disclosure controls and procedures; |
| • | discussing our risk management policies and oversight of enterprise risk management process, which includes a consideration of climate and other ESG-related risks; |
| • | reviewing and approving or ratifying any related person transactions; and |
| • | preparing the audit committee report required by SEC rules. |
Compensation Committee
Our Compensation Committee currently consists of Vijaya Gadde, Samir Kaul and Myrtle Potter, with Ms. Gadde serving as chair. Ian Clark served on the Compensation Committee until our committee refreshment effective May 1, 2022. Our Board has determined that each of these directors is independent under Nasdaq rules and that each qualifies as a “non-employee director” under Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Compensation Committee met six times and did not act by written consent during the year ended December 31, 2022.
15
Table of Contents
The Compensation Committee’s responsibilities include, among other things:
| • | reviewing and approving, or recommending that our Board approve, the compensation of our Chief Executive Officer and our other executive officers; |
| • | reviewing and recommending to our Board the compensation of our directors; |
| • | selecting independent compensation consultants and advisers and assessing whether there are any conflicts of interest with any of the committees’ compensation advisers; and |
| • | reviewing and approving, or recommending that our Board approve, incentive compensation and equity plans. |
Since October 2019, the Compensation Committee has engaged Aon’s Human Capital Solutions Practice, a division of Aon plc (“Aon”), as independent compensation consultants to provide advice and guidance on the design of our executive compensation programs and practices. Aon attends Compensation Committee meetings when invited and meets with the Compensation Committee without management. Aon provides the Compensation Committee with third-party data and analysis as well as advice and expertise on competitive compensation practices and trends, executive compensation plans and program designs, and proposed executive and director compensation levels. Aon reports directly to the Compensation Committee and, as directed by the Compensation Committee, works with management and the chair of the Compensation Committee.
For 2022 compensation, Aon assisted the Compensation Committee with the following:
| • | updating the peer group of companies for our executive and director compensation analysis; |
| • | updating company-wide market-based compensation guidelines; |
| • | updating company-wide market-based equity compensation guidelines for new hires and annual grants; and |
| • | reviewing executive compensation market-based benchmarking data. |
Aon did not provide any additional services to the Company during 2022.
The Compensation Committee regularly reviews the services provided by its outside consultants, and it has assessed the independence of Aon consistent with SEC rules and Nasdaq listing standards. In doing so, the Compensation Committee considered each of the factors set forth by the SEC and Nasdaq with respect to a compensation consultant’s independence. The Compensation Committee also considered the nature and amount of work performed for the Compensation Committee and the fees paid for those services in relation to the firm’s total revenues. On the basis of its consideration of the foregoing and other relevant factors, the Compensation Committee has determined that Aon is independent, and that no conflicts of interest exist between the Company and Aon.
16
Table of Contents
Nominating and Corporate Governance Committee
Our Governance Committee currently consists of Ian Clark, Meghan Joyce, and Steve Krognes, with Mr. Clark serving as chair. Samir Kaul served on the Governance Committee until our committee refreshment effective May 1, 2022. Our Board has determined that each of these directors is independent under Nasdaq rules. The Governance Committee met four times and acted by written consent once during the year ended December 31, 2022.
In response in part to stockholder feedback, in February 2022, the Board reviewed and enhanced the oversight responsibilities of the Governance Committee. The Governance Committee’s responsibilities include, among other things:
| • | identifying individuals qualified to become Board members; |
| • | recommending to our Board the persons to be nominated for election as directors and to each of the Board’s committees; |
| • | reviewing and making recommendations to the Board with respect to management succession planning; |
| • | reviewing and making recommendations to the Board with respect to corporate social responsibility, including climate and other ESG matters; |
| • | reviewing and discussing with management our information technology initiatives, particularly those that relate to healthcare regulatory compliance; |
| • | overseeing management’s efforts to monitor our internal control over our Code of Conduct; |
| • | developing and recommending to the Board corporate governance principles; and |
| • | overseeing a periodic evaluation of the Board and management. |
Risk Oversight
The Audit Committee of the Board is primarily responsible for overseeing our risk management processes on behalf of the Board. The Audit Committee receives reports from management on at least a quarterly basis regarding our assessment of risks. In addition, the Audit Committee reports regularly to the Board, which also considers our risk profile, about material issues affecting the quality or integrity of our financial statements, compliance with legal or regulatory requirements, the performance or independence of the independent auditor, the performance of the Company’s internal audit function, and other matters that the Audit Committee deems appropriate. The Audit Committee and the Board focus on the most significant risks we face and our general risk management strategies. While the Board oversees our risk management, management is responsible for day-to-day risk management processes. Our Board expects management to consider risk and risk management in each business decision, to proactively develop and monitor risk management strategies and processes for day-to-day activities and to effectively implement risk management strategies adopted by the Audit Committee and the Board. We believe this division of responsibilities is
17
Table of Contents
the most effective approach for addressing the risks we face and that our Board’s leadership structure, which also emphasizes the independence of the Board in its oversight of its business and affairs, supports this approach. The standing committees of the Board retain primary responsibility for risk oversight in the following key areas:
Audit Committee |
Overseeing financial risk, capital risk, related party transactions, financial compliance risk and internal controls over financial reporting.
| |
Compensation Committee |
Overseeing our risks related to our compensation philosophy and practices and evaluating the balance between incentives and rewards.
| |
Governance Committee |
Evaluating director independence, the effectiveness of our Corporate Governance Guidelines and Code of Conduct, reviewing our ESG strategy and information technology initiatives, particularly those that relate to healthcare regulatory compliance, and overseeing management’s succession planning.
| |
Each of our committees periodically provide updates to the Board regarding risk management issues and management’s response.
Business Code of Conduct and Ethics
We have adopted a written Code of Conduct that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. In February 2022, our Board amended the Code of Conduct to increase the breadth and specificity of standards to be upheld by all directors, officers and employees of the Company, including adding and refining guidelines regarding conflicts of interest, business records, gifts and favors, antitrust practices, political contributions, environmental protection, and personal conduct and social media practices. We have posted a current copy of the code on our website, https://investors.guardanthealth.com. In addition, we intend to post on our website all disclosures that are required by law or the listing standards of Nasdaq concerning any amendments to, or waivers from, any provision of the code.
Environmental, Social and Governance
Guardant’s Values. Each day at Guardant starts and ends with putting the patient first. We are a team of diverse, passionate, and curious individuals, motivated to transform cancer care for patients at all stages of the disease. Guided by our core values, our commitment to advancing breakthrough science and giving patients the opportunity to live healthier lives are central to how we operate. Even as these values have evolved, we have never wavered from our commitment to putting the patient first.
18
Table of Contents
Our Core Values
Environmental, Social and Governance (ESG) Commitment. Our vision is to transform cancer care by creating impactful diagnostic tools that will be affordable and accessible to far more patients around the world. We are driven by an intense passion to dramatically change the course of cancer patients’ journeys. Our frustration with the data-starved status quo and our strong desire to improve human health shapes our unique culture. Our mission — to conquer cancer — is at the heart of our ESG commitment and fully integrated into our business strategy.
Guided by our core values, our commitment to advancing breakthrough science and giving patients the opportunity to live healthier lives are central to how we operate and are foundational to our approach to corporate responsibility. We believe that to serve patients well, it is important to also act responsibly in our relationships with our employees, our communities and the environment. Therefore, we are committed to: (1) providing meaningful work and development opportunities to our employees; (2) striving to recruit, hire and retain a talented and diverse team of people who align with our values and fostering a diverse, inclusive, and equitable workplace; (3) conducting our business with the highest professional and ethical standards and operating with integrity and mutual respect; (4) maintaining a well-developed environmental, health and safety program, which is reinforced through rigorous policies, education and engagement of our employees and internal and external periodic audits; (5) making it easy and affordable to complete our tests; and (6) investing in environmental sustainability and responsible supply chain operations.
In an effort to capture and communicate on our goals and recent accomplishments, we will release our inaugural ESG annual report (“ESG Report”) in May 2023. We look forward to enchancing and expanding on our ESG Report in the years to come.
19
Table of Contents
Grants and Giving. We sponsor and support numerous non-profits and patient advocacy groups and our employees donate their time. Our contributions help to support the work of non-profit organizations of all sizes, working in areas such as cancer research and patient support, community wellness and scientific education, and supporting the mission to accelerate access to innovation for cancer patients.
Safety and Wellness. We are committed to providing a safe and secure work environment and maintaining environmental, health and safety policies that seek to promote the health and safety of our employees and patients. We mandate continual training programs, and we have a robust employee wellness program that recognizes and supports the importance of personal health and work-life balance. We are committed to rewarding, supporting, and developing the employees who make it possible to deliver on our strategy. To that end, we offer a comprehensive total rewards package that includes market-competitive fixed and/or variable pay, broad-based equity grants and bonuses, access to medical, dental, vision and life insurance benefits, disability coverage, fertility subsidies, retirement savings plans, paid time off and family leave, caregiving support, fitness, cellphone and internet reimbursements, and mental health and other wellness benefits.
Governance. We evaluate input from our stockholders and consider their independent oversight of management and our long-term strategy. As part of our commitment to constructive engagement with investors, we evaluate and respond to the views voiced by our stockholders. Our dialogue has led to enhancements in our corporate governance, ESG, and executive compensation activities, which we believe are in the best interest of the Company and our stockholders. In February 2022, our Board amended our Governance Committee Charter to enhance the Governance Committee’s oversight of corporate social responsibility, including ESG policies and practices.
Communications with our Board
Any interested person, including any stockholder, may communicate with our Board by written mail addressed to Guardant Health, Inc. Board of Directors, c/o Corporate Secretary, 3100 Hanover Street, Palo Alto, California, 94304. We encourage stockholders to include proof of ownership of our stock in their communications. The corporate secretary will review the communications and forward them to the Board or the relevant committee of the Board, unless the communication is primarily commercial in nature, relates to an improper or irrelevant topic, or is unduly hostile, threatening, illegal or otherwise inappropriate.
20
Table of Contents
DIRECTOR COMPENSATION
Our Director Compensation Program is intended to fairly compensate our non-employee directors for the time and effort necessary to serve on our Board, in a manner that is competitive and serves the best interests of the Company and our stockholders.
Process for Determining Director Compensation. Decisions regarding the non-employee director compensation program are approved by our full Board based on recommendations by the Compensation Committee. The Compensation Committee reviews the total compensation of our non-employee directors and each element of our director compensation program each year, with this review usually scheduled before our annual stockholder meeting. The Compensation Committee consults with its independent compensation consultant periodically as to the competitive position of our director compensation program, both in terms of the compensation amount and with respect to the program’s design, against those of our peers (information about our peer group is on page 47).
The Board adopted its current equity-only compensation program, described below, effective as of June 12, 2020, the date of our 2020 annual stockholders’ meeting. The compensation for our Board members is aligned with long-term value creation because it consists solely of stock option and restricted stock unit awards that do not vest as to any of the underlying shares until one-year after the grant date. By using a program that is entirely based on stock awards, the Board has established that a compensation program that fully aligns their interests with those of our stockholders. Our directors do not receive cash compensation for their service as directors, but we pay their reasonable expenses incurred for attending meetings. The Compensation Committee did not recommend to the Board any adjustments to our director compensation program for 2022.
The following is a summary of our director compensation program that was adopted in June 2020 and remained in effect for 2022:
Initial Awards (each, an “Initial Award”)
| • | stock option award with an aggregate value of $362,500 (determined by dividing the value of the award by the per share Black-Scholes valuation as of the applicable grant date) and an exercise price equal to the fair market value of our common stock on the date of grant; and |
| • | restricted stock unit award with an aggregate value of $362,500 (determined by dividing the value by the fair market value of our common stock on the applicable grant date). |
Annual Awards (each, an “Annual Award”)
| • | stock option award with an aggregate value of $212,500 (determined by dividing the value of the award by the per share Black-Scholes valuation as of the applicable grant date) and an exercise price equal to the fair market value of our common stock on the date of grant; and |
21
Table of Contents
| • | restricted stock unit award with an aggregate value of $212,500 (determined by dividing the value by the fair market value of our common stock on the applicable grant date). |
Annual Lead Independent Director Award (each, a “LID Award”)
| • | restricted stock unit award with an aggregate value of $45,000 (determined by dividing the value by the fair market value of our common stock on the applicable grant date). |
The Initial Award is granted to each non-employee director who is initially elected or appointed to serve on the Board and each Initial Award vests and becomes exercisable (as applicable) as to 25% of the shares subject to such award on the first anniversary of the director’s election to the Board, and as to the remaining 75% of the shares subject to the Initial Award in substantially equal installments on each monthly anniversary of the director’s election to the Board thereafter, subject to continued service through the applicable vesting date.
The Annual Award is granted on the date of each annual stockholders’ meeting to non-employee directors who have served on the Board for at least six months prior to the date of such annual stockholders’ meeting. Each Annual Award vests and become exercisable (as applicable) in full on the earlier to occur of (i) the one-year anniversary of the applicable grant date and (ii) the date of the next annual meeting of the Company’s stockholders following the grant date, subject to continued service through the applicable vesting date.
The LID Award is granted on the date of each annual stockholders’ meeting to the non-employee director who has served on the Board for at least six months as of the date of such annual stockholders’ meeting and who will also serve as Lead Independent Director of the Board immediately following such meeting. Each LID Award will vest in full on the earlier to occur of (i) the one-year anniversary of the applicable grant date and (ii) the date of the next annual meeting of the Company’s stockholders following the grant date, subject to continued service through the applicable vesting date. Our Board decided that the additional LID Award is appropriate given the significant role and scope of the responsibilities of the Board’s Lead Independent Director, such as responsibilities related to leading meetings of independent directors, providing input on meeting agendas, advising our co-CEOs as to quantity, quality and timeliness of information and materials, providing feedback to our co-CEOs on the co-CEOs’ evaluation, and leading the Board evaluation process.
In addition, each Initial Award, Annual Award and LID Award will vest in full immediately prior to the director’s death, disability, termination without cause, or a change in control (as defined in the 2018 Incentive Award Plan (the “2018 Plan”)).
Any compensation payable to a director will comply with the director annual compensation limit set forth in our 2018 Plan (currently, an annual limit of $750,000 per director).
Director Compensation Table. The following table contains information concerning the compensation received by our non-employee directors during the year ended December 31, 2022. Directors who are also employees do not receive compensation for service on our
22
Table of Contents
Board (in addition to the compensation payable for their service as our employees). Drs. Eltoukhy and Talasaz are not included in the table below because they did not receive any additional compensation for their service on our Board. Drs. Eltoukhy’s and Talasaz’s 2022 compensation is presented in the Summary Compensation Table found on page 60.
On June 30, 2022, Steve Krognes was appointed to the Board as a Class III director to serve for a term expiring at our 2024 annual meeting of stockholders. Mr. Krognes received his Initial Award on August 9, 2022 in connection with his initial appointment to the Board.
2022 DIRECTOR COMPENSATION TABLE
Name
|
| Stock Awards (1)(3) ($)
|
|
| Option Awards (2)(3) ($)
|
|
| Total ($)
|
| |||
Ian Clark
|
| 257,529
|
|
| 212,643
|
|
| 470,172
|
| |||
Vijaya Gadde
|
| 212,501
|
|
| 212,643
|
|
| 425,144
|
| |||
Bahija Jallal(4)
| ||||||||||||
Meghan Joyce
|
| 212,501
|
|
| 212,643
|
|
| 425,144
|
| |||
Samir Kaul
|
| 212,501
|
|
| 212,643
|
|
| 425,144
|
| |||
Steven Krognes
|
| 362,549
|
|
| 362,597
|
|
| 725,146
|
| |||
Stanley Meresman(4)
| ||||||||||||
Myrtle Potter
|
| 212,501
|
|
| 212,643
|
|
| 425,144
|
|
| (1) | The amounts shown in the Stock Awards column reflects the aggregate grant date fair value of the restricted stock units (“RSUs”) awarded to our non-employee directors, computed in accordance with Topic 718, excluding the effect of estimated forfeitures. Amounts in this column reflect the market value of the RSUs using the closing price of a share of our common stock as reported on Nasdaq on the date of grant multiplied by the number of shares underlying each award, as follows: for Messrs. Clark, Gadde, and Kaul and Mses. Joyce and Potter using the closing price of $38.42 on June 15, 2022; for Mr. Krognes, using the closing price of $48.96 on August 9, 2022. |
| (2) | The amounts shown in the Option Awards column represent the aggregate grant date fair value of stock options computed in accordance with Topic 718. Valuations of options were determined using the Black-Scholes option pricing model. For information regarding assumptions, factors and methodologies used in our computations pursuant to Topic 718, see Note 12 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022. |
| (3) | The non-employee directors held the following outstanding RSUs and stock options as of December 31, 2022: |
Name
|
RSUs
|
Stock Options
| ||||||||
Ian Clark
|
| 6,703
|
|
| 15,571
|
| ||||
Vijaya Gadde
|
| 7,295
|
|
| 20,144
|
| ||||
Meghan Joyce
|
| 7,655
|
|
| 14,455
|
| ||||
Samir Kaul
|
| 5,531
|
|
| 19,335
|
| ||||
Steven Krognes
|
| 7,405
|
|
| 11,879
|
| ||||
Myrtle Potter
|
| 7,857
|
|
| 14,718
|
| ||||
| (4) | Ms. Jallal and Mr. Meresman did not receive any compensation in 2022 prior to departing from the Board and had no outstanding RSUs or stock options as of December 31, 2022. |
23
Table of Contents
PROPOSAL 1:
ELECTION OF DIRECTORS
Board Nominees
Pursuant to our Certificate of Incorporation and our Bylaws, the total number of directors constituting the Board is fixed from time to time by the Board. There are currently nine authorized directors and nine persons serving as directors.
The Board is divided into three classes (Class I, Class II and Class III) with staggered terms of three years each and holding office until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal. Each class contains as nearly as possible an equal number of directors. The term of one class expires at each annual meeting of stockholders; thus, directors typically stand for election after three years, unless they are filling an unexpired term. The current term of office of our Class II Directors expires at the Annual Meeting, while the term for our Class III Directors will expire at our 2024 annual meeting of stockholders and the term for our Class I Directors expires at our 2025 annual meeting of stockholders. On June 30, 2022, Steve Krognes was appointed to the Board as a Class III director to serve for a term expiring at our 2024 annual meeting of stockholders. On February 21, 2023, Musa Tariq was appointed to the Board as a Class I director, effective as of March 6, 2023, to serve for a term expiring at our 2025 annual meeting of stockholders.
Based upon the recommendation of our Governance Committee, the Board has nominated Ian Clark, Meghan Joyce and Samir Kaul, each a current Class II Director, for re-election at the Annual Meeting. Each director elected at the Annual Meeting will serve a three-year term expiring at the 2026 annual meeting of stockholders and until his or her successor is duly elected and qualified as a Class II Director, or until his or her earlier death, resignation or removal. At the Annual Meeting, proxies cannot be voted for a greater number of individuals than the three nominees named in this proxy statement.
The Board and the Governance Committee believe the skills, qualities, attributes and experience of our directors provide us with business acumen and a diverse range of perspectives to engage each other and management to effectively address our evolving needs and represent the best interests of our stockholders.
Vacancies on the Board, including any vacancy created by an increase in the size of the Board, may be filled only by a majority of the directors remaining in office, even though less than a quorum of the Board, or a sole remaining director. A director elected by the Board to fill a vacancy will serve until the next election of the class of directors for which such director was chosen and until such director’s successor is elected and qualified, or until such director’s earlier retirement, resignation, disqualification, removal or death.
If any nominee should become unavailable for election prior to the Annual Meeting, an event that currently is not anticipated by the Board, the proxies will be voted in favor of the election of a substitute nominee or nominees proposed by the Board or the number of directors may be reduced accordingly. Each nominee has agreed to serve if elected and the Board has no reason to believe that any nominee will be unable to serve.
24
Table of Contents
Information about Class II Director Nominees
Set forth below is biographical information for each nominee and a summary of the specific qualifications, attributes, skills and experiences which led the Board to conclude that each nominee should serve on the Board at this time.
Class II Director with Term Expiring at the 2023 Annual Meeting
Ian Clark
Former Chief Executive Officer of Genentech Inc.
Current Committee Assignments:
• Nominating and Corporate Governance Committee (Chair) | Mr. Clark has served as a member of our Board since January 2017 and is our lead independent director. Mr. Clark currently serves on the Board of Directors of AVROBIO, Inc., Corvus Pharmaceuticals, Inc., Olema Oncology and Takeda Pharmaceutical Company Limited.
Previously, Mr. Clark served on the Board of Directors of Agios Pharmaceuticals, Inc. from January 2017 to June 2022, Forty Seven Inc. from May 2018 to April 2020, Kite Pharma, Inc. from January 2017 to October 2017, Shire Pharmaceuticals, Inc. from February 2017 to January 2019, and TerraVia Holdings, Inc. from May 2011 to January 2018.
Mr. Clark most recently served as an Operating Partner at Blackstone Life Sciences, formerly Clarus Ventures, LLC, a venture capital firm, from September 2017 to September 2020. Prior to that, he served as Chief Executive Officer of Genentech Inc., a biotechnology company, from January 2010 to December 2016. Prior to that, he was the Executive Vice President and Chief Marketing Officer of the Roche Group from April 2009 to December 2009. Prior to his time at the Roche Group, Mr. Clark held several senior management positions at Genentech Inc. from January 2003 to March 2009, including Head of Global Product Strategy, Chief Marketing Officer, Senior Vice President, General Manager of BioOncology and Executive Vice President, Commercial Operations. Before joining Genentech Inc., Mr. Clark spent 23 years in the biopharmaceutical industry in senior roles at Novartis International AG, Ivax Pharmaceuticals, Inc. and Sanofi S.A. in the United Kingdom, France and Eastern Europe. He started his career at G.D. Searle, LLC, a subsidiary of Monsanto Corporation, holding positions in sales and marketing. Mr. Clark received a B.S. degree in Biology from Southhampton University.
We believe that Mr. Clark is qualified to serve as a member of our Board due to his vast experience in the biopharmaceutical industry, combined with his experience serving on the boards of directors of successful, high-growth public and private companies. | |
25
Table of Contents
Meghan Joyce
Independent Advisor
Current Committee Assignments:
• Audit Committee • Nominating and Corporate Governance Committee | Ms. Joyce has served as a member of our Board since August 2021. She currently serves as an independent advisor to select high growth organizations in the healthcare and consumer space, and co-founder and CEO or Duckbill Technnologies, Inc., a consumer tech startup, a role she has held since April 2022. Previously, from September 2019 to April 2022, Ms. Joyce served as Chief Operating Officer and Executive Vice President of Platform at Oscar Health, a high-growth health tech and health insurance company, where she led operations, technology, clinical, marketing, and new business lines.
Prior to joining Oscar Health, from 2013 to 2019, Ms. Joyce has held several leadership roles at Uber Technologies, most recently as Regional General Manager of the United States and Canada. Ms. Joyce has previously served as a Senior Policy Advisor at the United States Department of the Treasury, an investor at Bain Capital, and a consultant at Bain & Company.
Ms. Joyce currently serves as a member of the Board of Directors of The Boston Beer Company. She holds an M.B.A degree from Harvard Business School and an A.B. degree in History from Harvard College.
We believe that Ms. Joyce is qualified to serve as a member of our Board due to her extensive experience in business strategy, managing growth, financial modeling, implementation of new technologies, and management and retention of diverse employee groups. | |
Samir Kaul
General Partner at Khosla Ventures
Current Committee Assignments:
• Compensation Committee | Mr. Kaul has served as a member of our Board since April 2014. Mr. Kaul has been a General Partner at Khosla Ventures, a venture capital firm focusing on technology investing, since February 2006.
Mr. Kaul currently serves as a member of the Board of Directors of Khosla Ventures Acquisition Co., which is a special purpose acquisition company. Previously, Mr. Kaul served as a member of the Board of Directors of Vicarious Surgical Inc. from January 2018 to October 2022, Khosla Ventures Acquisition Co. II from March 2021 to November 2021 (merged with Nextdoor Holdings Inc.), Gevo, Inc. from March 2013 to May 2014 and Amyris, Inc. from May 2006 to May 2012. Prior to that, Mr. Kaul was a member of Flagship Pioneering Inc., a venture capital firm, from June 2002 to May 2006. Prior to that, Mr. Kaul worked at the Institute for Genomic Research. Mr. Kaul holds a B.S. degree in Biology from the University of Michigan, an M.S. degree in Biochemistry from the University of Maryland and an M.B.A. degree from Harvard Business School.
We believe that Mr. Kaul is qualified to serve as a member of our Board due to his wide-ranging experience in technology companies and insight in the management of startup companies and the building of companies from early stage to commercial scale. | |
26
Table of Contents
Information about Other Directors Not Standing for Election at this Meeting
Directors who will continue to serve after the Annual Meeting are listed below.
Class III Director with Term Expiring at the 2024 Annual Meeting
Helmy Eltoukhy
Co-Chief Executive Officer at Guardant Health, Inc. | Dr. Eltoukhy is our co-founder and has served as our CEO and a member of our Board since January 2013. On August 5, 2021, Dr. Eltoukhy was appointed as Chairperson of our Board and Co-CEO.
Prior to co-founding our company in 2013, Dr. Eltoukhy held various positions at Illumina, Inc. from August 2008 to December 2012, including Senior Director of Advanced Technology Research, where he developed novel chemistries, hardware and informatics for genetic analysis systems. In June 2007, he co-founded Avantome Inc. to commercialize semiconductor sequencing to help speed up the democratization of high throughput DNA sequencing and served as Chief Executive Officer until its acquisition by Illumina in August 2008. He joined the Stanford Genome Technology Center as a post-doctoral fellow in 2006 to work on low-cost DNA sequencing technologies. During his doctoral studies and at the Stanford Genome Technology Center, he developed the first semiconductor sequencing platform and first base-calling algorithm for next-generation sequencing under several National Human Genome Research Institute grants. He received his Ph.D., M.S. and B.S. degrees in electrical engineering from Stanford University.
We believe that Dr. Eltoukhy is qualified to serve as Chairperson of our Board due to his extensive knowledge of our company as co-founder and Co-CEO and his experience in the life sciences and biotechnology industries. | |
Steve Krognes
Former Chief Financial Officer of Denali Therapeutics Inc.
Current Committee Assignments:
• Audit Committee (Chair) • Nominating and Corporate Governance | Mr. Krognes has served as a member of our Board since June 2022. Mr. Krognes is a professional independent board member in the biotech and life sciences sector.
Before joining the Board, Mr. Krognes was the Chief Financial Officer at Denali Therapeutics Inc., a public biotechnology company, from October 2015 to April 2022. Mr. Krognes joined Denali from Genentech, Inc., a biotechnology company, where he served as Chief Financial Officer and a member of the Executive Committee from April 2009 to September 2015. Mr. Krognes also oversaw Genentech’s Site Services organization between 2011 and 2015, and Genentech’s IT organization between 2009 and 2011. He chaired the Genentech Access to Care Foundation between 2009 and 2015. From January 2004 to April 2009, Mr. Krognes served as Head of Mergers & Acquisitions and a member of the Finance Executive Committee at Roche Holding AG, a Swiss biotechnology company. From July 2002 to December 2003, Mr. Krognes served as Director of M&A at Danske Bank based in Norway.
Mr. Krognes currently serves as a member of the Board of Directors at Denali Therapeutics Inc., Gritstone bio, Inc. and argenx SE, and previously served on the Board at Corvus Pharmaceuticals, Inc. between January 2016 and March 2021 and RLS Global AB from January 2016 to January 2023. He received his M.B.A. from Harvard Business School and his B.S. in Economics from The Wharton School of the University of Pennsylvania.
We believe that Mr. Krognes is qualified to serve as a member of our Board due to his extensive experience in the biotechnology and life sciences industries. | |
27
Table of Contents
AmirAli Talasaz
Co-Chief Executive |
Dr. Talasaz is our co-founder and served as Chairperson of our Board, President and COO from January 2013 until August 2021. On August 5, 2021, the Company appointed Dr. Talasaz as Co-CEO of the Company. On the same day, Dr. Talasaz resigned his position as Chairperson of the Board and as President and Chief Operating Officer of the Company. Dr. Talasaz will retain his position as a member of our Board.
Prior to co-founding our company in 2013, Dr. Talasaz held various positions at Illumina, Inc., including Senior Director of Diagnostics Research from October 2011 to June 2012, where he led the efforts for emerging clinical applications of next-generation genomic analysis. During that time, he developed different genomic technologies suitable for clinical applications. In March 2008, he founded Auriphex Biosciences, Inc., which focused on purification and genetic analysis of circulating tumor cells for cancer management. The technology was acquired by lllumina, Inc. in 2009. During his academic years, he led the Technology Development group at the Stanford Genome Technology Center. He received his Ph.D. degree in electrical engineering, M.S. degree in electrical engineering and M.S. degree in management science and engineering from Stanford University.
We believe that Dr. Talasaz is qualified to serve as a member of our Board due to his extensive knowledge of our company as co-founder and Co-CEO and his knowledge of the life sciences and biotechnology industries. |
Class I Director with Term Expiring at the 2026 Annual Meeting
Vijaya Gadde
Former Chief Legal Officer of Twitter, Inc.
Current Committee Assignments:
• Compensation Committee (Chair) | Ms. Gadde has served as a member of our Board since June 2020. Ms. Gadde served as the Chief Legal Officer of Twitter, Inc., from February 2018 to October 2022, and Secretary from August 2013 to October 2022, leading its legal, public policy, and trust and safety teams globally before Twitter, Inc. became a private company. Ms. Gadde previously served as Twitter, Inc.’s General Counsel from 2013 to 2018, its head of communications from 2015 to 2016 and as its Director, Legal from 2011 to 2013.
Ms. Gadde currently serves on the Board of Trustees of NYU Law School and the Board of Directors of Planet Labs PBC, as well as Mercy Corps, a global humanitarian aid and development organization that partners with communities, corporations and governments. Ms. Gadde also co-founded #Angels, an investment collective focused on funding diverse and ambitious founders pursuing bold ideas.
Previously, from 2010 to 2011, Ms. Gadde served as Senior Director, Legal at Juniper Networks, Inc., a provider of network infrastructure products and services. From 2000 to 2010, Ms. Gadde was an attorney at Wilson Sonsini Goodrich & Rosati, P.C. Ms. Gadde earned a J.D. from New York University School of Law and a B.S. in industrial and labor relations from Cornell University.
We believe that Ms. Gadde is qualified to serve as a member of our Board due to her deep public company experience, in addition to her executive leadership experience and significant legal, public policy and regulatory expertise. | |
28
Table of Contents
Myrtle Potter
Chief Executive Officer of Sumitovant Biopharma, Inc.
Current Committee Assignments:
• Audit Committee • Compensation Committee
| Ms. Potter has served as a member of our Board since October 2021. Ms. Potter has served as the Chief Executive Officer of Sumitovant Biopharma, Inc., a subsidiary of Sumitovant Biopharma Ltd., since December 2019. Previously, from 2018 to 2019, Ms. Potter served as Vant Operating Chair at Roivant Sciences, Ltd., and as Chief Executive Officer of Myrtle Potter & Company, LLC from 2005 to 2018. From 2000 to 2004, Ms. Potter served as Chief Operating Officer at Genentech, Inc., and from 2004 to 2005, she served as the President, Commercial Operations and Executive Vice President of Genentech. Prior to joining Genentech, she held various positions, including President, U.S. Cardiovascular/Metabolics at Bristol-Myers Squibb, and a vice president at Merck & Co.
Ms. Potter currently serves on the Board of Directors of Liberty Mutual Holding Company, Inc. Ms. Potter previously served on the Board of Directors of Myovant Sciences, Ltd. from September 2018 to March 2023, Urovant Sciences Ltd. from July 2018 to March 2021, Axsome Therapeutics, Inc. from June 2017 to June 2020, Everyday Health, Inc. from September 2010 to December 2016, Immunovant, Inc. from June 2019 to February 2020, Axovant Gene Therapies, Ltd. from September 2018 to February 2020, Arbutus Biopharma, Inc. from October 2018 to February 2020, Insmed Incorporated from December 2014 to November 2018, and Rite Aid Corporation from November 2013 to September 2018. Ms. Potter holds a Bachelor of Arts Degree from The University of Chicago.
We believe that Ms. Potter is qualified to serve as a member of our Board due to her years of experience in the biotechnology industry, including extensive commercial and operational experience leading pharmaceutical companies in bringing new therapies to market and her extensive experience serving on boards of public companies. |
Musa Tariq
Chief Marketing Officer of GoFundMe
Current Committee Assignments:
• Nominating and Corporate Governance |
Mr. Tariq has served as a member of our Board since March 2023. Mr. Tariq currently serves as Chief Marketing Officer of GoFundMe, a crowdfunding platform. He joined GoFundMe in January 2021 to further build the GoFundMe brand and drive the company’s marketing and communications functions.
Prior to GoFundMe, Mr. Tariq was Global Head of Marketing for Airbnb Experiences, a division of Airbnb, Inc., a provider of an online marketplace for short-term homestays and experiences, from September 2018 to December 2020 where he drove brand awareness and adoption of that rapidly growing part of Airbnb’s business. Before Airbnb, he was Chief Brand Officer at Ford Motor Company from January 2017 to March 2018. Mr. Tariq has also held marketing leadership roles at Apple, Nike and Burberry.
Mr. Tariq has a B.S. in Geography and Economics from London School of Economics. A distinguished counselor to iconic and emerging global brands, Mr. Tariq currently serves as an advisor to MasterClass, The British Fashion Council, Felix Capital and several other starts ups.
We believe that Mr. Tariq is qualified to serve as a member of our Board due to his extensive marketing experience leading global consumer brands. |
29
Table of Contents
EXECUTIVE OFFICERS
The following are our executive officers as of the Record Date.
| Name | Age | Position | ||
Helmy Eltoukhy, Ph.D. | 44 | Chairperson and Co-Chief Executive Officer | ||
AmirAli Talasaz, Ph.D. | 43 | Co-Chief Executive Officer | ||
Michael Bell | 54 | Chief Financial Officer | ||
Craig Eagle, M.D. | 56 | Chief Medical Officer | ||
Christopher Freeman | 49 | Chief Commercial Officer | ||
Kumud Kalia | 57 | Chief Information Officer | ||
Amelia Merrill | 51 | Senior Vice President, People | ||
John Saia | 50 | Chief Legal Officer and Corporate Secretary | ||
The following sets for the biographical information of our Executive Officers. Biographical information pertaining to Helmy Eltoukhy, who is our Chairperson of the Board and our Co-CEO, and AmirAli Talasaz, who is a member of the Board and our Co-CEO, may be found in the section above entitled “Proposal 1: Election of Directors – Information about Other Directors Not Standing for Election at this Meeting – Class III Director with Term Expiring at the 2024 Annual Meeting”.
Michael Bell. Mr. Bell has served as our Chief Financial Officer since January 2021. He most recently served as the Chief Financial Officer of CareDx, Inc., a precision medicine company focused on transplantation, from April 2017 to December 2020. From January 2016 to March 2017, Mr. Bell served as the Chief Financial Officer of Metabiota, Inc., a company that develops and sells risk analytics products focused on infectious disease. From May 2012 to January 2016, he served as the Chief Financial Officer of Singulex, Inc., a clinical diagnostics company. Prior to that, Mr. Bell held leadership and executive positions within Novartis, including with Novartis Diagnostics, a global provider of blood screening solutions, where he served as Chief Financial Officer from 2011 to 2012, and Senior Director, Global Head of Finance from 2008 to 2011. Mr. Bell also previously worked for several years in public accounting with both Ernst & Young and Deloitte, UK. He holds a Bachelor of Science degree in Mathematics with Computing from the University of Leicester in the United Kingdom and is a Fellow of the Institute of Chartered Accountants in England & Wales.
Craig Eagle, M.D. Dr. Eagle has served as our Chief Medical Officer since April 2021. He most recently served as Vice President of Medical Affairs Oncology for Genentech, a company that uses human generic information to develop, manufacture and sell medicines for serious conditions, from 2019 to 2021, where he oversaw the medical programs across the oncology portfolio and developed innovative cancer trials and strategies in personalized health care. Prior to Genentech, Dr. Eagle has held several positions in the U.S. and internationally at Pfizer, from 2009 to 2019, including global head of the Oncology Medical and Outcomes Group. In this role, he oversaw the worldwide medical programs and development of numerous commercially successful drugs. Dr. Eagle currently serves on the Board of Directors for Generex Biotechnology and NuGenerex Immuno-Oncology. Dr. Eagle
30
Table of Contents
graduated from medical school at the University of New South Wales in Sydney, Australia and received his general internist training at Royal North Shore Hospital in Sydney. Dr. Eagle completed his specialist training in hemato-oncology and laboratory hematology at Royal Prince Alfred Hospital in Sydney and was granted Fellowship in the Royal Australasian College of Physicians (FRACP) and the Royal College of Pathologists Australasia (FRCPA).
Christopher Freeman. Mr. Freeman has served as our Chief Commercial Officer since June 2021. He most recently served as Vice President of the HIV Business Unit at Gilead Sciences, Inc., leading the $13 billion HIV treatment and prevention business, from January 2020 to June 2021. During the COVID-19 pandemic, Mr. Freeman led the Emergency Use Authorization for Veklury (remdesivir) to treat COVID-19. Mr. Freeman previously worked at Elan Pharmaceuticals from 2008 to 2011 where he was commercial lead for Elan’s Alzheimer’s pipeline products, and from 2001 to 2008, he worked at Genentech where he led marketing for their oncology product, Rituxan, and Xolair for patients suffering from asthma and severe allergies. Mr. Freeman is a member of the National Board of Directors for Dream Foundation, a national dream-granting organization for terminally ill adults and their families. Mr. Freeman served in the U.S. Army for five years, first enlisting as a Lieutenant and was promoted to Captain before being honorably discharged in 2001. Mr. Freeman graduated from the United States Military Academy at West Point.
Kumud Kalia. Mr. Kalia has served as our Chief Information Officer since January 2021. He most recently served as Chief Information and Technology Officer as well as other executive roles at Cylance, Inc., from March 2018 to June 2019, and previously served as Chief Information Officer at Akamai Technologies from October 2011 to February 2018. Prior to Akamai, Mr. Kalia worked at Direct Energy, an energy and services business operating in the U.S. and Canada, from March 2005 to January 2011, and where at the time of his departure he was the Chief Information Officer and Executive Vice President of Customer Operations. Earlier in his career, Mr. Kalia was Vice President and Chief Information Officer of the Business Markets Group of Qwest Communications International from 2002 to 2004 and served as Chief Information Officer for Dresdner Group in North America from 1998 to 2002. He has also performed in technology, operations and strategy roles at various investment banks. Mr. Kalia holds a Master’s degree in Information and Cyber Security from the University of California, Berkeley, an honors degree in Electronic Engineering from Bangor University, is a chartered engineer, and is a Fellow of both the Institution of Engineering and Technology and the British Computer Society.
Amelia Merrill. Ms. Merrill has served as our Senior Vice President, People, since August 2021, and prior to that as our Vice President, People, since May 2017. Prior to joining Guardant, she served as the Senior Vice President, People Strategy at Risk Management Solutions (RMS). She has also been an Advisory Board Member at Gild and RolePoint, and an Advisor for PeopleTech Partners and Wepow.
John Saia. Mr. Saia has served as our Chief Legal Officer and Corporate Secretary since April 2022, and prior to that as our Senior Vice President, General Counsel and Corporate Secretary since May 2020. He most recently served as Senior Vice President, General Counsel and Corporate Secretary of WageWorks, Inc., an administrator of consumer-directed benefits, from January 2019 until its acquisition by HealthEquity, Inc. in August 2019, and as General Counsel and Corporate Secretary for AcelRx Pharmaceuticals,
31
Table of Contents
Inc., a specialty pharmaceutical company, from April 2018 to January 2019. Mr. Saia led legal and compliance activities worldwide for both WageWorks and AcelRx. Prior to that, he spent more than a decade serving in numerous legal and compliance leadership roles at McKesson Corporation, ending his tenure in April 2018 as its Corporate Secretary and Associate General Counsel. In addition to holding positions at several highly respected law firms, Mr. Saia also held roles at the U.S. Securities and Exchange Commission and the U.S. Department of Justice. Mr. Saia graduated cum laude from Santa Clara University and holds a Juris Doctorate from The George Washington School of Law.
32
Table of Contents
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) discusses the principles and objectives underlying our policies and decisions with respect to the compensation of our named executive officers (“NEOs”) and other material factors relevant to an analysis of these policies and decisions regarding our 2022 executive compensation program. This CD&A is intended to be read in conjunction with the tables that immediately follow this section, which provide further compensation information for our 2022 NEOs:
| Name | Position | |
Helmy Eltoukhy | Chairman and Co-CEO | |
AmirAli Talasaz | Co-CEO | |
Michael Bell | Chief Financial Officer | |
Craig Eagle | Chief Medical Officer | |
Christopher Freeman | Chief Commercial Officer | |
John Saia | Chief Legal Officer and Corporate Secretary | |
Quick CD&A Reference Guide
Business and Compensation Overview | Section I | |
Compensation Philosophy and Objectives | Section II | |
Compensation Determination Process | Section III | |
Components of Our Compensation Program | Section IV | |
Additional Compensation Policies and Practices | Section V | |
I. BUSINESS AND COMPENSATION OVERVIEW
Company Overview
We are a leading precision oncology company focused on helping conquer cancer globally through the use of our proprietary tests, vast data sets and advanced analytics. We believe our tests can transform cancer care by unlocking insights that will help patients at all stages of the disease, including at its earliest stages, when it’s most treatable. For patients with advanced-stage cancer, we have commercially launched Guardant360 laboratory developed test, or LDT, and Guardant360 CDx, the first comprehensive liquid biopsy test approved by the U.S. Food and Drug Administration, or the FDA, to provide tumor mutation profiling with solid tumors and to be used as a companion diagnostic in connection with non-small cell lung cancer, or NSCLC, and breast cancer. We have also launched the Guardant360 TissueNext tissue test for advanced-stage cancer, the Guardant Reveal blood test to detect residual and recurring disease in early-stage cancer patients, and the
33
Table of Contents
Guardant360 Response blood test to predict patient response to immunotherapy or targeted therapy eight weeks earlier than current standard-of-care imaging.
We also collaborate with biopharmaceutical companies in clinical studies by providing the above-mentioned tests, as well as the GuardantOMNI blood test for advanced-stage cancer, and the GuardantINFINITY blood test, launched in September 2022, which is a next-generation smart liquid biopsy that provides new, multi-dimensional insights into the complexities of tumor molecular profiles and immune response to advance cancer research and therapy development. Using data collected from our tests, we have also developed our GuardantINFORM platform to help biopharmaceutical companies accelerate precision oncology drug development through the use of this in-silico research platform to unlock further insights into tumor evolution and treatment resistance across various biomarker-driven cancers.
In May 2022, we launched the Shield LDT test to address the needs of individuals eligible for colorectal cancer screening. From a simple blood draw, Shield uses a novel multimodal approach to detect colorectal cancer signals in the bloodstream, including DNA that is shed by tumors. In addition, in December 2022, we announced positive results from ECLIPSE, an over 20,000 patient registrational study evaluating the performance of our Shield blood test for detecting colorectal cancer in average-risk adults. We also expect to expand into lung and multi-cancer screening with our investigational, next-generation Shield assay.
We have implemented a set of values and core beliefs for the Company to drive cultural change and create an environment centered on patient care, collaboration, inclusion and innovation. For more information on our values, please see “Corporate Governance—Environmental, Social and Governance—Guardant’s Values”.
We believe our tests can expand the scope of precision oncology to earlier stages of the disease, improve patient outcomes and lower healthcare costs.
Stockholder Engagement
General. We recognize the value of a robust stockholder outreach program. We engage in regular, constructive dialogue with our stockholders on matters relevant to our business, including corporate governance, executive compensation, strategy, environmental, social and governance issues and human capital management. We believe that our approach to engaging openly with our stockholders drives increased corporate accountability, improves decision making, and ultimately creates long-term value.
34
Table of Contents
Our Stockholder Engagement Cycle
Robust Stockholder Engagement
Advisory Vote on Executive Compensation and Actions Taken in Response
At our 2022 Annual Meeting, we received approximately 61.2% support of the votes cast on our Say-on-Pay proposal. In addition to the outreach conducted in the weeks leading up to our 2022 Annual Meeting, following our review of the results of the shareholder advisory vote at the 2022 Annual Meeting, we again reached out to stockholders to solicit feedback on our investors’ concerns with the compensation of our NEOs. As part of this outreach program, during the third and fourth quarters of 2022 and the first quarter of 2023, we contacted our top 75 stockholders, representing more than 85% of the Company’s outstanding shares of common stock. We ultimately spoke with 21 stockholders representing approximately 57% of the Company’s outstanding shares of common stock, including at least five institutions that voted “against” our Say-on-Pay proposal last year. Seven of these stockholders, representing approximately 30% of the Company’s outstanding shares of common stock, declined and indicated a meeting with the Company was not necessary, while 14 of these stockholders, representing approximately 27% of the Company’s outstanding shares of common stock, engaged with us and provided substantive feedback.
The Chief Legal Officer, our Vice President of Investor Relations and other members of the corporate legal team participated in this effort on behalf of the Company. All feedback received was shared and discussed with the Compensation Committee, the Governance Committee and the full Board.
Response to Stockholder Feedback. Below is a summary of the principal feedback we received since our 2022 Annual Meeting and the changes made to our executive compensation program in response to this feedback, which we believe are beneficial to the creation of sustained long-term stockholder value.
35
Table of Contents
What We Heard
|
What We Did / How We Responded
| |
Increase the proportion of performance-based equity in the long-term incentive equity component of the executive compensation program; enhance CD&A disclosure regarding performance-based equity | In early 2023, the Compensation Committee began to incorporate performance stock units (“PSUs”) as part of the annual equity grants to our NEOs, other than our co-CEOs who are not eligible to receive equity incentive awards pursuant to the Waiver Letters (as defined below). Please see below for a description of the 2023 PSU grants.
The Compensation Committee intends, as appropriate and in line with the further development of the Company over time, to increase the proportion of long-term incentives allocated to performance-based vehicles so that overall compensation is more closely tied to performance-based metrics. | |
Adopt certain key risk mitigation devices relating to the executive compensation program to best protect stockholder interests | In 2022, the Company amended its stock ownership guidelines to include robust minimum levels of ownership.
In 2023, the Company will adopt a clawback policy that will comply with the new listing requirements issued by Nasdaq following recent SEC rulemaking under the Dodd-Frank Act. | |
Consider, in future performance equity awards, using rigorous performance hurdles including multiple metrics, both absolute and relative, and not using stock price only | As described further below, the 2023 PSUs include revenue and three-year Compound Annual Growth Rate, or CAGR, as performance goals, and as previously disclosed, the Compensation Committee intends for future performance equity grants to use performance metrics such as revenue targets, earnings per share targets, relative total shareholder return and research and development milestones. | |
36
Table of Contents
What We Heard
|
What We Did / How We Responded
| |
Communicate the Company’s Environment, Social and Governance (ESG) focus, direction and initiatives, and articulate the Board’s approach to oversight of ESG risks and opportunities | In the first half of 2023, the Company plans to issue its first ESG Report, detailing the Company’s strategy and action plan, developed with assistance from a consultant. There will be more details regarding the Company’s progress in the ESG Report.
The Board and management are actively engaged in ESG goal-setting and monitoring progress. Since 2021, we have had formal Board oversight of ESG matters, with our Governance Committee tasked with ESG oversight generally and the Compensation Committee responsible for human capital oversight.
In 2022, the Company adopted a 2022 annual bonus program which includes an ESG performance goal related to employee retention, as described further below. | |
The following provides additional details regarding how our Compensation Committee implemented the changes described in the table above:
| • | Performance-Based Equity Awards. Historically, we have granted long-term equity awards to our NEOs (other than our co-CEOs) in the form of time-based stock options and RSUs. Beginning with the executive long-term equity awards granted in 2023, a portion of such equity compensation will consist of PSUs that vest based upon the achievement of pre-determined financial goals, including revenue and three-year CAGR goals, over a three-year performance period ending December 31, 2025. |
| • | ESG Component in 2022 Annual Incentive Compensation Program. In 2022, our annual incentive compensation program included an ESG component related to employee retention, which accounted for 5% of each participating executive’s award opportunity. The 2022 annual incentive compensation program was based solely on the achievement of objective company performance criteria. The company performance goals were based on operational, financial and employee retention goals. |
| • | Stock Ownership Guidelines. In November 2022, our Board adopted amended stock ownership guidelines for our directors and executive officers. Stock ownership requirements for our co-CEOs are based on a multiple of the current median salary of chief executive officers in our 2022 executive compensation peer group, and the requirement for our other executive officers is 1x base salary. Executives will have until January 1, 2026 (or, if later, on the fifth anniversary of becoming subject to the guidelines) to become compliant. |
37
Table of Contents
Clawback Policy
Additionally, while our co-CEOs and Chief Financial Officer are subject to any recovery rights that are provided under applicable laws, including the Sarbanes-Oxley Act, and the standard terms of the 2018 Plan, we intend to adopt a compensation recovery policy as required under the Dodd-Frank Act. We are reviewing the final clawback rule adopted by the SEC that implements the applicable provisions of the Dodd-Frank Act and the Nasdaq’s related proposed listing standard, in each case relating to recoupment of incentive-based compensation. The Company will implement its clawback policy in accordance with the new listing standard when the new listing standard becomes final.
Co-CEO Compensation Decisions – Waiver Letters
Drs. Eltoukhy and Talasaz entered into waiver of compensation agreements (the “Waiver Letters”) with the Company in connection with the grant of PSUs in May 2020 that vest based on the achievement of robust stock price hurdles (the “Founders’ 2020 Performance Awards”). Pursuant to the Waiver Letters, each executive agreed to forego any annual bonuses or long-term or equity-based compensatory awards, and reduced their annual base salaries to $1, during the seven-year term of the Founders’ 2020 Performance Awards (the “Waiver Period”), which is scheduled to expire in May 2027, unless otherwise terminated earlier in accordance with the terms of the Waiver Letters. Accordingly, the total compensation received by each of Drs. Eltoukhy and Talasaz in fiscal year 2022 was $1, which represents each executive’s 2022 base salary.
Realized Pay Demonstrates Pay for Performance Alignment
A core component of our compensation philosophy is to incentivize our executive officers by creating a strong link between their individual performance, the Company’s operating and financial performance and the compensation they earn. To show the alignment of pay outcomes with performance, it is useful to illustrate the amounts realizable as of December 31, 2022 and 2021 relative to the reported amounts of NEO compensation set by the Compensation Committee for the year.
Realizable pay shows this relationship because it reflects the actual value of equity awards to be received by NEOs as of the fiscal year end, and fluctuates with performance and with increases or decreases in stock price. For this reason, contrasting reported pay with realizable pay provides a meaningful demonstration of the pay for performance alignment of our executive compensation program.
Drs. Eltoukhy and Talasaz entered into the Waiver Letters (as defined below) with the Company in connection with the grant of PSUs in May 2020 that vest based on the achievement of robust stock price hurdles. Pursuant to the Waiver Letters, each executive agreed to forego any annual bonuses or long-term or equity-based compensatory awards, and reduced their annual base salaries to $1, during the seven-year term of the PSUs.
38
Table of Contents
The following chart demonstrates, for each of the past two years, the relationship between the reported and realizable values of the NEOs’ aggregate annual equity grants.
The values shown as “Reported” reflect the reported amounts of stock and option awards as shown in the 2021 and 2022 Summary Compensation Tables. The equity grants include stock options, RSUs and PSUs.
The “Realizable” value shown for the equity grants represents the number of RSUs and PSUs multiplied by the stock price per share on the last trading day of 2021 or 2022, as applicable. The “Realizable” value shown for stock options is $0 because the exercise price of all options granted is greater than the year end stock price in both years. Because of the decrease in the share price that is a key component of the equity value, the realizable equity value represented substantially less than the reported value, demonstrating the direct link between performance and the potential pay outcome.
Compensation Objectives
The core elements of the Compensation Committee’s executive compensation philosophy are as follows:
| • | Attract, retain and motivate talented individuals who will drive the successful execution of Guardant Health’s strategic plan; |
| • | Link pay to performance and achievement of Guardant Health’s business objectives; |
| • | Align executive officers’ interests with those of Guardant Health and our stockholders, generally through the use of equity as a significant component of our executive compensation program; |
39
Table of Contents
| • | Provide market competitive compensation, the majority of which is of an “at risk” nature; and |
| • | Design programs that we believe are simple and transparent. |
2022 Select Business Highlights
We had a year of great progress in 2022, with solid growth in our financial results and strong advancement in our product development program. We achieved record revenues and volumes during the year, launched new offerings in minimal residual disease with multi cancer Reveal and expanded market access for our tests. We also launched our Smart Liquid Biopsy platform, which we believe will drive the next chapter of growth for our oncology business and enable significant R&D efficiency and operating leverage. With the approval of our first companion diagnostic in breast cancer and expanded payor coverage, we are poised for continued growth in the year ahead.
In May 2022, we launched the Shield LDT test to address the needs of individuals eligible for colorectal cancer screening. From a simple blood draw, Shield uses a novel multimodal approach to detect colorectal cancer signals in the bloodstream, including DNA that is shed by tumors. Our research and development results to date indicate that somatic signatures alone may be insufficient for detection of early-stage cancers with high sensitivity. For this reason, we have incorporated epigenomic signatures to enhance the performance of our Shield assay in these settings.
In December 2022, we announced positive results from our pivotal ECLIPSE study for colorectal cancer, an over 20,000 patient registrational study evaluating the performance of our Shield blood test for detecting colorectal cancer in average-risk adults. The test demonstrated 83% sensitivity in detecting individuals with colorectal cancer. Specificity was 90% in both individuals without advanced neoplasia and in those who had a negative colonoscopy result. These results exceed the performance criteria set forth by the Centers for Medicare and Medicaid Services, or CMS, for reimbursement. This test also demonstrated 13% sensitivity in detecting advanced adenomas. Based on these study results, in March 2023, we submitted to the FDA the final module of our premarket approval, or PMA, applicable for Shield, our blood test to screen for colorectal cancer. While we await FDA review, we are aggressively continuing our screening research and development efforts for lung and additional cancers.
We also expect to expand into lung and multi-cancer screening with our investigational, next-generation Shield assay. To clinically validate the performance of our next-generation Shield blood test in detecting lung cancer in high-risk individuals ages 50-80, in January 2022, we enrolled the first patient in a nearly 10,000-patient prospective, registrational study, which we refer to as the SHIELD LUNG study. The study is anticipated to run in approximately 100 centers in the United States and Europe.
We believe our product portfolio, once completed, will address the full continuum of cancer care and has utility in both the clinical and biopharmaceutical markets.
40
Table of Contents
Key highlights include the following:
Financial Results
| • | Revenue increased 20% to $449.5 million in 2022. Precision oncology revenue grew 29%, driven predominantly by an increase in clinical testing volume and biopharma sample volume, which grew 42% and 40%, respectively, over the prior year period. Development services and other revenue decreased by 17%, primarily due to the change in collaboration projects with biopharmaceutical customers for companion diagnostic development and regulatory approval services, and discontinuation of our Guardant-19 tests in August 2021, partially offset by revenues earned from licensing our technologies, and providing data services during the year ended December 31, 2022. |
| • | Gross profit, or total revenue less cost of precision oncology testing and cost of development services and other, was $293.2 million for 2022, an increase of $42.5 million from $250.7 million for the corresponding prior year period. |
| • | Gross margin, or gross profit divided by total revenue, was 65%, as compared to 67% for the corresponding prior year period. |
| • | Operating expenses were $837.6 million for 2022, as compared to $661.7 million for the corresponding prior year period, an increase of 27%. Non-GAAP operating expenses were $736.6 million for 2022, as compared to $506.8 million for the corresponding prior year period. |
Net loss attributable to common stockholders was $654.6 million for 2022, as compared to $405.7 million for the corresponding prior year period. Net loss per share attributable to common stockholders was $6.41 for 2022, as compared to $4.00 for the corresponding prior year period. Non-GAAP net loss was $435.4 million for 2022, as compared to $251.7 million for the corresponding prior year period. Non-GAAP net loss per share was $4.26 for 2022, as compared to $2.48 for the corresponding prior year period.
We define our non-GAAP measures as the applicable GAAP measure adjusted for the impacts of stock-based compensation and related employer payroll tax payments, changes in estimated fair value of noncontrolling interest liability, adjustments relating to redeemable noncontrolling interest, contingent consideration, acquisition related expenses, amortization of intangible assets, fair value adjustments on marketable equity securities, impairment of other assets, and other non-recurring items. See Appendix B for a reconciliation of non-GAAP information.
| • | Adjusted EBITDA loss was $403.4 million for 2022, as compared to a $231.5 million loss for 2021. Adjusted EBITDA is a non-GAAP measure that is defined as net loss attributable to common stockholders adjusted for interest income; interest expense; other income (expense), net; provision for income taxes; depreciation and amortization expense; stock-based compensation expense and related employer payroll tax payments; changes in estimated fair value of noncontrolling interest liability; adjustments relating to redeemable noncontrolling interest and contingent consideration; and, if applicable in a reporting period, acquisition-related expenses, and other non-recurring items. See Appendix B for a reconciliation of non-GAAP information. |
41
Table of Contents
Key Aspects of the 2022 Executive Compensation Program
Base Salaries. Drs. Eltoukhy and Talasaz received annual base salaries of $1 following the May 2020 grant of the Founders’ 2020 Performance Awards. The base salaries of the other NEOs were determined pursuant to arm’s length negotiations upon hire and are adjusted by the Compensation Committee as appropriate.
Annual Bonuses. 2022 annual bonuses for the NEOs other than Drs. Eltoukhy and Talasaz (who were not eligible to receive a 2022 annual bonus pursuant to the terms of the Waiver Letters) were determined based on our achievement against oncology product development milestones and screening research and development measures, representing a combined 60% of the target bonus opportunity (together, the “Operational Performance Component”), financial performance metrics, representing 35% of the target bonus opportunity (the “Financial Performance Component”), and a metric based on employee retention, representing 5% of the target bonus opportunity.
To establish these targets and goals, the Compensation Committee, with the input of the senior leadership team, and taking into account other corporate achievements and developments, set the targets at levels that it considered rigorous and challenging and that took into account the relevant risks and opportunities.
In the view of the Compensation Committee, for 2022, it was critically important to advance our oncology product program and our screening research and development program, and thus the Compensation Committee placed greater emphasis on the Operational Performance Component. Specifically, 30% of the target bonus opportunity related to oncology products and performance with respect to new product reimbursement, new product clinical volume, the launch of Guardant Reveal and the launch of upgraded Guardant360. Another 30% related to screening research and development performance, including the ECLIPSE study read out, data presentation regarding Guardant SHIELD and the launch of LDT.
The Financial Performance Component was comprised of:
(i) a revenue goal, which represented 25% of the target bonus opportunity, and
(ii) adjusted EBITDA and gross margin goals, each of which represent 5% of the target bonus opportunity.
The Compensation Committee set a rigorous revenue target substantially above the prior-year level, reflecting nearly 27% growth. In addition, there was rigor in the performance curve, as the 25% of target bonus opportunity attributed to revenue performance would be forfeited if we didn’t achieve at least 20% growth from the prior year. The targets for gross margin and adjusted EBITDA were also set at levels that the Compensation Committee viewed as challenging to achieve. The Compensation Committee incorporated these measures in the 2022 annual bonus program in order to focus executive officers on the critical strategic priorities of top line revenue growth and operating profitability.
The target for employee retention was also considered challenging, in light of the highly competitive market for talent in our industry in the San Francisco Bay area.
42
Table of Contents
Based on our 2022 oncology product development and research-based achievements and financial results, the Compensation Committee determined that overall achievement relative to the goals was 67% of target.
2022 Long-Term Incentives. 2022 equity grants for our NEOs other than Drs. Eltoukhy and Talasaz (who were not eligible to receive a 2022 equity grant pursuant to the terms of the Waiver Letters) consisted of stock options and restricted stock units, with the target value divided evenly between these awards. Long-term incentive equity awards are prospective in nature and intended to tie a substantial portion of an executive’s pay to creating long-term stockholder value. The Compensation Committee structures the long-term incentive opportunity to motivate executive officers to achieve multi-year strategic goals and deliver sustained long-term value to stockholders, and to reward them for doing so.
As part of the continuing evolution of the executive compensation program, in early 2023, the Compensation Committee began to incorporate performance-based equity when it granted PSUs to the NEOs, other than our co-CEOs. See below for a description of the 2023 PSUs.
II. COMPENSATION PHILOSOPHY AND OBJECTIVES
Compensation Philosophy
The Compensation Committee believes that a well-designed compensation program should align executive interests with the drivers of growth and stockholder returns, including by supporting the Company’s achievement of its primary business goals and the Company’s ability to attract and retain employees whose talents, expertise, leadership and contributions are expected to build and sustain growth in long-term stockholder value. As a result, we maintain a strong pay-for-performance orientation in our compensation program.
To achieve these objectives, the Compensation Committee regularly reviews our compensation policies and program design to ensure that they are aligned with the interests of our stockholders and our business goals, and that the total compensation paid to our executives is fair, reasonable and competitive for our size and stage of development. Specifically, the Compensation Committee targets base salaries, annual cash bonuses, and annual long-term equity incentive awards for our executive officers around the market median for our peer group, with variability in actual payments based on corporate and individual performance.
Compensation Objectives
Key objectives of our compensation programs include the following:
| • | Reward achievement of business objectives (pay for performance). We have clearly defined our Company’s overarching goal of being the leading provider of precision oncology products for cancer management across all stages of the disease and drive commercial adoption of our products. We have also developed a robust strategy to accomplish this overarching goal, including certain business objectives that are steps along the way. |
43
Table of Contents
The Compensation Committee has designed our executive compensation program to motivate our executive officers to achieve these business objectives by closely linking the value of the compensation they receive to our performance relative to these business objectives. |
| • | Align the interests of our executive officers and employees with those of our stockholders; foster an ownership culture. Equity-based compensation constitutes a significant portion of our executive officers’ overall compensation opportunity. The Compensation Committee uses equity, when appropriate, as the form for long-term incentive opportunities in order to incentivize and reward executive officers to (i) achieve multiyear strategic goals and (ii) deliver sustained long-term value to stockholders. |
The Compensation Committee believes using equity for the long-term incentives creates strong alignment between the interests of executive officers and the interests of our stockholders because it gives executive officers and stockholders a common interest in stock price performance. Granting equity also fosters an ownership culture among executive officers by making them stockholders with a personal stake in Guardant Health’s growth and success.
| • | Offer competitive compensation to attract and retain talent. The biopharmaceutical and technology industries are fiercely competitive, particularly in the San Francisco Bay Area and other areas where we operate, and we must compete for executive talent in these industries and areas. To manage our business and carry out our strategy, we seek high-caliber executive officers and managers who have diverse experience, expertise, capabilities and backgrounds. |
In recruiting our executive officers and determining competitive pay levels, the Compensation Committee references the amounts and compensation structures of executive officers in the companies in our compensation peer group and in industry surveys.
| • | Design straightforward compensation programs and plans and administer them transparently. In order for incentive compensation to serve its purpose of motivating participants to achieve results, the participants must have a clear understanding of the goals and targets by which they will be measured, and the rewards that they will receive for various levels of achievement of those goals, including the value of those rewards. |
The Compensation Committee strives to make the incentives in our executive compensation program straightforward and the programs transparent and understandable, so that our executive officers, as well as our stockholders, know what they are working toward, and what they will receive if they succeed. The Compensation Committee seeks to design programs that give participants a clear line of sight to the selected metrics and sufficient control over the performance toward the goals, to motivate them effectively for achieving our business objectives and to reward them appropriately, as a means of executing our strategy.
44
Table of Contents
Compensation Program Governance
The Compensation Committee assesses the effectiveness of our executive compensation program from time to time and reviews risk mitigation and governance matters, which includes maintaining the following best practices:
What We Do
| ||||
|
Pay for Performance |
The majority of total compensation opportunity for our named executive officers is variable and at-risk. | ||
|
Balance Short- and Long-Term Compensation |
The allocation of incentives among the annual incentive plan and the long-term incentive plan does not over-emphasize short-term performance at the expense of achieving long-term goals. | ||
|
Combination of Balanced Performance Metrics |
We use a diverse set of financial and milestone performance metrics in our annual incentive plan, and starting in 2023, our annual PSUs, to ensure that no single measure affects compensation disproportionately. | ||
|
Independent Compensation Consultant |
Our Compensation Committee has engaged an independent compensation consultant to provide information and advice for use in designing our executive compensation program. | ||
|
Peer Data |
We develop a peer group of companies based on industry, revenue, development stage and market capitalization to reference for compensation decisions. | ||
|
Cap Bonus Payouts; Fixed Equity Grants |
Our annual incentive plan has an upper limit on the amount of cash that may be earned. The maximum number of shares that might be earned is fixed in a grant. | ||
|
Double Trigger Change-in-Control Provisions |
If there is a change in control, outstanding time-based equity awards that are assumed by a buyer will vest only if there is both a change-in-control and an involuntary termination of employment (a “double trigger”). | ||
|
Robust Stock Ownership and Retention Guidelines |
Our executive officers and directors are required to maintain robust levels of stock ownership. We require, for those who have not met their minimum required ownership, that they hold (and not dispose of) a certain amount of shares of our common stock acquired through equity awards. | ||
|
Annual Say-on-Pay Vote |
We conduct an annual advisory say-on-pay vote on our NEO compensation. | ||
|
Stockholder Engagement |
We are committed to ongoing engagement with our stockholders regarding matters such as executive compensation, corporate governance and ESG. | ||
|
Annual Compensation Risk Assessment |
We conduct an annual compensation risk assessment to ensure that our compensation programs do not present any risks that are reasonably likely to have a material adverse effect on the Company. | ||
45
Table of Contents
What We Don’t Do
| ||||
|
No Guaranteed Employment Agreements |
We do not have employment agreements that guarantee employment for a specified term. Our executive officers are at-will employees. | ||
|
No Hedging or Pledging of Company Securities |
We prohibit employees and non-employee directors from engaging in hedging, pledging or short sale transactions in Company securities. | ||
|
No Excessive Perks |
We do not provide large perquisites to executive officers. | ||
|
No Excise Tax Gross-Ups |
We do not provide excise tax gross-ups. | ||
|
No Guaranteed Bonuses |
We do not guarantee our NEOs any minimum levels of payment under our annual incentive plan, which is entirely performance-based. | ||
III. COMPENSATION DETERMINATION PROCESS
Role of the Compensation Committee
The Compensation Committee establishes our compensation philosophy and objectives; determines the structure, components and other elements of the executive compensation program; and reviews and approves the compensation of the NEOs or recommends it for approval by the Board. The Compensation Committee structures the executive compensation program to accomplish its articulated compensation objectives in light of the compensation philosophy described above.
Toward the end of each year, the Compensation Committee reviews the elements of our executive compensation program to verify the alignment of the program with our business strategy and with the items that we believe drive the creation of stockholder value, and to determine whether any changes would be appropriate.
At the beginning of the new year, after the end of applicable annual performance periods, the Compensation Committee evaluates achievement relative to performance targets, and examines whether it would be appropriate to apply negative discretion to the initial earned amounts in order to take relevant factors into consideration, and determines corresponding payouts earned.
The Compensation Committee obtains input from executive officers regarding the annual operating plan, expected financial results, anticipated milestone results and related risks. Based on this information, the Compensation Committee establishes the performance-based metrics and targets for the annual incentive plan. For each metric, the Compensation Committee sets appropriate threshold and maximum levels of performance designed to motivate achievement without incentivizing excessive risk-taking. With the input of the co-CEOs, the Compensation Committee also establishes the compensation for all the other executive officers. The Compensation Committee sets the compensation for each of our NEOs and makes recommendations to the full Board generally at its meetings in the first quarter of each year.
46
Table of Contents
Role of the Independent Compensation Consultant
The Compensation Committee recognizes that there is value in procuring independent, objective expertise and counsel in connection with fulfilling its duties, and pursuant to its charter, the Compensation Committee has the authority to select and retain independent advisors and counsel to assist it with carrying out its duties and responsibilities. The Compensation Committee has exercised this authority to engage Aon as its independent compensation consultant, and has worked with Aon to develop a compensation peer group, provide a competitive market analysis of the base salary, annual cash incentive awards and long-term incentive compensation of our executive officers compared against the compensation peer group, report on share utilization, and review other market practices and trends.
While the Compensation Committee took into consideration the review and recommendations of Aon as well as the practices of our compensation peer group when making decisions about our executive compensation program, ultimately, the Compensation Committee made its own independent decisions in determining our executives’ compensation.
Compensation Peer Groups and Peer Selection Process
Relevant market and benchmark data provide a solid reference point for making decisions and very helpful context, even though, relative to other companies, there are differences and unique aspects of the Company. The Compensation Committee takes into consideration the structure and components of, and the amounts paid under, the executive compensation programs of other, comparable peer companies, as derived from public filings and other sources when making decisions about the structure and component mix of our executive compensation program.
The Compensation Committee, with the assistance of Aon, developed a peer group in 2021 for use in connection with decisions about 2022 executive compensation using the following criteria: sector (commercial biopharma and medical technology companies, with an emphasis on oncology and diagnostics where possible), revenue, and market capitalization. As of April 2021, the Company’s revenue was at the 9th percentile of the peer group revenue for fiscal year, and its market capitalization was at the 68th percentile of the peer group market capitalization.
Based on these criteria and considerations, the Compensation Committee approved a peer group for decisions relating to 2022 executive compensation that consisted of the following 16 companies:
10x Genomics, Inc. | Invitae Corporation | |
Adaptive Biotechnologies Corporation | Natera, Inc. | |
Alnylam Pharmaceuticals, Inc. | NeoGenomics, Inc. | |
BeiGene Ltd. | Neurocrine Biosciences, Inc. | |
Blueprint Medicines Corporation | Novocure Ltd. | |
EXACT Sciences Corporation | Penumbra, Inc. | |
Exelixis, Inc. | Repligen Corporation | |
Insulet Corporation | Sarepta Therapeutics, Inc. | |
47
Table of Contents
Based on the peer analysis performed by Aeon in 2021 for the purpose of selecting our 2022 peer group, Amarin Corp. plc, bluebird bio, inc., Genomic Health, Inc. and Moderna, inc. were removed, and 10x Genomics, Inc., Exelixis, Inc. and Invitae Corporation were added. In general, the removed peer companies no longer fit the selection criteria, as described above and further below, while the additions reflect companies with financial and industry characteristics more similar to our company.
In addition to the criteria above, the Compensation Committee also referenced general and specific industry surveys from other sources. The Compensation Committee determined that the appropriate market reference continues to be the 50th percentile. The market data are used as a reference point and to provide information on the range of competitive pay levels and current compensation practices in our industry.
We believe that the compensation practices of our peer group provided us with appropriate compensation reference points for evaluating and determining the compensation of our named executive officers during 2022. Consistent with best practices for corporate governance, the Compensation Committee will review our peer group annually. In mid-2022, the Compensation Committee engaged Aon to develop a new peer group that will be referenced in making decisions regarding executive compensation for 2023.
Role of the Co-Chief Executive Officers
The Compensation Committee works with our co-CEOs to set the target compensation of each of our other NEOs. As part of this process, the co-CEOs evaluate the performance of the other executive officers annually and make recommendations to the Compensation Committee in the first quarter of the year regarding the compensation of each other executive officer.
The input of the co-CEOs is particularly important. The Compensation Committee gives significant weight to their recommendations in light of their greater familiarity with the day-to-day performance of their direct reports and the importance of incentive compensation in driving the execution of managerial initiatives developed and led by the co-CEOs. Nevertheless, the Compensation Committee or the Board of Directors makes the ultimate determination regarding the compensation for the executive officers.
IV. COMPENSATION PROGRAM COMPONENTS
2022 Components in General
In order to achieve its executive compensation program objectives, the Compensation Committee utilizes the compensation components set forth in the chart below. The Compensation Committee regularly reviews each executive officer’s total compensation opportunity to ensure it is consistent with its compensation philosophy and objectives and that the component is serving a purpose in supporting the execution of our strategy.
48
Table of Contents
| Element | Description | Additional Detail | ||
Base Salary | Fixed cash compensation
Drs. Eltoukhy and Talasaz receive annual base salaries of $1 following the May 2020 grant of the Founders’ 2020 Performance Awards.
Base salaries for the other NEOs determined based on each executive officer’s role, individual skills, experience, performance, positioning relative to competitive market and internal equity. | Base salaries are intended to provide stable compensation to executive officers, allow us to attract and retain skilled executive talent and maintain a consistent leadership team. | ||
Short-Term Incentives: Annual Cash Incentive Opportunities | Variable cash compensation based on the level of achievement of certain annual performance objectives that are pre-determined.
Financial objectives, product development and research-based milestone objectives and an employee retention objective.
Performance against the revenue goal must be at least 85% of target to earn any credit toward a payout with respect to that goal.
Cash incentive opportunities are capped at a maximum of 200% of target, which are earned solely based on corporate performance.
Target cash award is no greater than 50% of the NEO’s base salary.
As previously noted, Drs. Eltoukhy and Talasaz were not eligible to participate in our 2022 annual incentive plan. | Annual cash incentive opportunities are designed to align our executive officers in pursuing our short-term goals; payout levels are generally determined based on actual financial results and the degree of achievement of performance milestones. | ||
Long-Term | Variable equity-based compensation.
Stock Options: Right to purchase shares at a price at least equal to the stock price on the grant date.
Restricted Stock Units (RSUs): Restricted stock units that vest based on continued service over a period of time.
As mentioned above, we incorporated PSUs as part of our 2023 long-term incentive program. | Equity-based compensation is designed to motivate and reward executive officers to achieve multi-year strategic goals and to deliver sustained long-term value to stockholders, as well as to attract and retain executive officers for the long term. | ||
49
Table of Contents
Base Salary
Base salaries provide fixed compensation to executive officers and help us to attract and retain the executive talent needed to lead the business and maintain a stable leadership team. Base salaries are individually determined according to each executive officer’s areas of responsibility, role and experience, and they vary among executive officers based on a variety of considerations, including skills, experience, achievements and the competitive market for the position.
For newly hired executive officers, the Compensation Committee establishes initial base salaries through arm’s-length negotiations at the time the executive officer is hired, considering the position and the executive’s experience, qualifications and the competitive market.
From time to time, the Compensation Committee considers and approves base salary adjustments for executive officers. The main considerations for a salary adjustment are similar to those used in initially determining base salaries, but may also include change in the competitive market, change of role or responsibilities, recognition for achievements or market trends. The Compensation Committee approved 2022 base salary increases for Messrs. Bell and Freeman and Dr. Eagle, each of which represented annual increases made in the normal course to align with the competitive market. The Compensation Committee approved a 2022 base salary increase for Mr. Saia in connection with his promotion to Chief Legal Officer.
The base salaries for each of our executive officers in effect at the end of 2022, and the adjustment from 2021, are as follows:
| NEO | 2022 Base Salary ($)(1) | Increase from 2021 | ||||
Helmy Eltoukhy | 1 (2) | — | ||||
AmirAli Talasaz | 1 (2) | — | ||||
Michael Bell | 472,000 | 4.9% | ||||
Craig Eagle | 489,000 | 2.9% | ||||
Christopher Freeman | 475,000 | 5.6% | ||||
John Saia | 485,000 | 16.9% | ||||
| (1) | Amounts shown are the annual base salary in effect at year end. |
| (2) | In connection with the Founders’ 2020 Performance Awards granted to Drs. Eltoukhy and Talasaz in May 2020, each of Drs. Eltoukhy and Talasaz formally agreed to accept a base salary of $1 per year until 2027. |
Annual Incentive Plan
The annual incentive plan for executive officers is a cash plan that rewards NEOs for the achievement of key short-term objectives. In particular, the plan offers incentives to the NEOs other than the co-CEOs to accomplish certain specified product development and research-based milestones and short-term financial results that the Compensation Committee views as key steps in the execution of our overall business strategy, with the intent ultimately of increasing stockholder value. In connection with the Founders’ 2020 Performance Awards granted to Drs. Eltoukhy and Talasaz in May 2020 and the long-term opportunity presented
50
Table of Contents
by such grants, each of Drs. Eltoukhy and Talasaz formally agreed to waive their right to receive an annual cash incentive opportunity until 2027.
In the Compensation Committee’s view, the most senior executive officers have the greatest responsibility for the performance of the Company, and consequently, the annual incentive plan for such executive officers utilizes only pre-established objective Company performance measures, with no individual discretionary component (other than with respect to the application of negative discretion to reduce earned amounts).
Performance Measures
The amount of the payout, if any, under the annual incentive plan is based on our achievement against (1) oncology product development milestones and screening research and development measures, representing a combined 60% of the target bonus opportunity (together, the “Operational Performance Component”), (2) financial performance metrics, representing 35% of the target bonus opportunity (the “Financial Performance Component”), and (3) a metric based on employee retention, representing 5% of the target bonus opportunity.
In the view of the Compensation Committee, for 2022, it was critically important to advance our oncology product program and our screening research and development program, and thus the Compensation Committee placed greater emphasis on the Operational Performance Component. Specifically:
| • | 30% of the target bonus opportunity related to oncology products and performance with respect to new product reimbursement, new product clinical volume, the launch of Guardant Reveal and the launch of upgraded Guardant360; and |
| • | 30% related to screening research and development performance, including the ECLIPSE study read out, data presentation regarding Guardant SHIELD and the launch of LDT. |
The financial measures selected by the Compensation Committee—Revenue, Gross Margin and Adjusted EBITDA—also remained very important, as they focus executive officers on the critical strategic priorities of top line revenue growth and operating profitability.
| • | Revenue (weighted 25%). Given the Company’s stage of development and market opportunity and window, the Compensation Committee emphasized revenue growth as a high priority. We derive revenue from the provision of precision oncology testing services provided to our ordering physicians and biopharmaceutical customers, as well as from biopharmaceutical research and development services provided to our biopharmaceutical customers. |
| • | Adjusted EBITDA (weighted 5%). The Compensation Committee continued using Adjusted EBITDA as a measure that reflected profitability without regard to how the Company is financed or taxed and adjusted for certain items beyond the control of management. A general description of how we calculate Adjusted EBITDA for purposes of our 2022 annual cash incentive plan is described above. |
| • | Gross Margin (weighted 5%). Gross margin is defined as total revenue less cost of precision oncology testing and costs of development and other services, divided by total revenue. |
51
Table of Contents
Finally, given the importance of retaining our human capital, and the highly competitive market for talent in the San Francisco Bay area, the Compensation Committee tied 5% of the target award to retention of our valued employees.
Target, Threshold and Maximum Performance Levels
The Compensation Committee set the performance metric targets at levels that it considered rigorous and challenging and that took into account the relevant risks and opportunities. More specifically, the Compensation Committee reviewed the relevant operational goals in light of the Company’s plans, as well as the financial objectives set as a result of the detailed budgeting process, and assessed various factors related to the achievability of these targets, including the risks associated with various macroeconomic factors, including macroeconomic factors, and the risks of achieving specific actions that underlie the targets and the implied performance relative to prior years.
Considering these factors, the Compensation Committee set the 2022 targets for the Operational Performance Components at levels or with timing in accordance with the Company’s strategic and operational plans. With respect to the Financial Performance Component, the Compensation Committee also set the 2022 target for revenue at a 26.6% growth rate over total revenue in 2021 and the target for 2022 gross margin at a 520 basis point decrease over the gross margin in 2021.
Having set the targets, the Compensation Committee also set the threshold and maximum performance levels for both the Operational Performance Component and the Financial Performance Component. For the 2022 milestone measures, the threshold level of performance generally involved achieving the goal later or in a lower amount, and maximum performance generally involved achieving it sooner or in a higher amount. For the 2022 financial measures, the Compensation Committee set the threshold at a high-performance level of approximately 95% of the target for revenue. The thresholds for gross margin and adjusted EBITDA loss were also set at high performance levels. The Compensation Committee set the maximum level for revenue at 105% of target, a level that presents a significant challenge requiring exceptionally strong performance. The Compensation Committee set maximum levels for the other two metrics that were also based on our 2022 operating plan, including the planned growth in revenue and expenses, and that required significant effort to achieve.
Payout Levels
The Compensation Committee defined payout levels representing the amount to be paid to NEOs based on the level of actual performance relative to the targets. If achievement is below the threshold level of performance, the Compensation Committee set the payout at 0% in order to motivate performance and underscore the importance of achieving, or closely approaching, the targets at this critical time in our development. If we achieve threshold performance on a metric, the payout is 50% of target; if we achieve 100% of target performance, the payout is 100% of target, and if we achieve maximum performance, the payout is 200% of target. For performance between the threshold and maximum for any metric, the payout amount is interpolated as a payout percentage between a threshold of 50% and a maximum of 200%.
52
Table of Contents
With respect to the Operational Performance Component, for the oncology products and performance, the launches of Guardant Reveal and Guardant360 were on target, while the new product reimbursement and new product clinical volume were between threshold and target. For the screening research and development performance, the ECLIPSE study read out and the LDT launch were on target, and the data presentation regarding Guardant SHIELD multi-cancer was above target.
With respect to the Financial Performance Component, as described above, total revenue increased to $449.5 million for the year ended December 31, 2022, a 20% increase from $373.7 million for the year ended December 31, 2021.
With respect to the employee retention metric, performance was nearly at target.
The following tables show (1) for each operational performance component and employee retention measure, the weighted payout, and (2) for each financial performance component, the achievements necessary to obtain payouts at the target level, the actual result for each performance component and the resulting achievement percentage, as well as the weighted payout:
| Operational Performance Component and Employee Retention Metric | Relative Weighting (%) | Weighted Payout% | ||
Oncology Product Milestones | 30% | 18% | ||
Screening Research and Development Objectives | 30% | 35% | ||
Employee Retention | 5% | 4% | ||
|
| |||
Subtotal | 65% | 57% | ||
Financial Performance Component | Relative (%) | Target ($) | Actual ($) | % Achievement | Weighted Payout % | |||||
| Revenue (in millions) | 25% | 473 | 449.5 | 0% | 0% | |||||
| Percentage of Target Performance | 100% | |||||||||
| Gross Margin % | 5% | 62 | 67 | 100% | 10% | |||||
| Adjusted EBITDA | 5% | (244.0) | (403.4) | 0% | 0% | |||||
| ||||||||||
| Subtotal | 35% | 100% | 10% | |||||||
| ||||||||||
| Total Operational Performance Component, Financial Performance Component and Employee Retention Metric Achievement Percentage | 67% | |||||||||
53
Table of Contents
Target Opportunities
The Compensation Committee determines the target cash incentive opportunity available to each NEO by taking the individual’s annual base salary in effect at year end and multiplying it by the individual’s target incentive percentage. Among other factors, the target incentive percentages are determined with reference to the peer group company percentages of salary and the proportion of total direct compensation represented by the annual incentive.
Payout Determination
The Compensation Committee verifies our achievement relative to the targets for the Operational Performance Component, Financial Performance Component and employee retention metric to determine the respective performance levels, and then translates those performance levels to a payout level based on linear interpolation between achievement levels. As noted above, for 2022, the payout level was 67%.
Having determined the total 2022 annual incentive plan payouts for each eligible NEO, the Compensation Committee then shared its conclusions with the Board for discussion.
NEO
| Base Salary ($)(1)
| Target Opportunity as a (%)
| Target Opportunity ($)
| Total Approved Payout ($)
| ||||||||||||
Helmy Eltoukhy | 1 | (2) | — | — | — | |||||||||||
AmirAli Talasaz | 1 | (2) | — | — | — | |||||||||||
Michael Bell | 472,000 | 50% | 236,000 | 154,958 | ||||||||||||
Craig Eagle | 489,000 | 50% | 244,500 | 157,262 | ||||||||||||
Christopher Freeman | 475,000 | 50% | 237,500 | 152,760 | ||||||||||||
John Saia | 485,000 | 50% (3) | 242,500 (3) | 148,177 | ||||||||||||
| (1) | Amounts shown are the annual base salary in effect at year end. |
| (2) | In connection with the Founders’ 2020 Performance Awards, each of Drs. Eltoukhy and Talasaz entered into Waiver Letters, pursuant to which they formally agreed to waive their opportunity to receive annual incentive opportunities or payouts under our annual incentive plan for seven years, including for 2022. |
| (3) | Mr. Saia’s annual incentive plan opportunity was 40% before his promotion to Chief Legal Officer in April 2022. |
Long-Term Incentives
The third and largest component of our executive compensation program is long-term equity incentives. The Compensation Committee has designed the long-term incentive opportunity for the NEOs to motivate and reward executive officers to achieve multi-year strategic goals and deliver sustained long-term value to stockholders, while at the same time monitoring the overall dilutive effect of equity granted.
The long-term incentives create a strong link between payouts and performance, and a strong alignment between the interests of executive officers and the interests of our
54
Table of Contents
stockholders. Long-term equity incentives also promote retention, because executive officers will only receive value if they remain employed by us over the required term, and they foster an ownership culture among our executive officers by making executive officers become stockholders, with a personal stake in the value they are incentivized to create.
Equity Vehicles
For 2022, long-term incentive grants took the form of 50% stock options and 50% RSU awards. The Compensation Committee structures the mix of equity vehicles and the relative weight assigned to each type to motivate stock price appreciation over the long term through stock options, which deliver value only if the stock price increases, and to ensure value delivery through the RSUs, reinforcing an ownership culture and commitment to us.
The target mix of long-term incentives approved by the Compensation Committee for the NEOs in 2022 as annual equity grants is shown below. The number of RSUs and stock options subject to each award is determined pursuant to the terms of our Equity Award Guidelines, which was last approved by the Compensation Committee in November 2022.
Equity Vehicle
| 2022 Allocation
| Vesting Period
| Rationale for Use
| |||
Stock Options | 50% | 4 years
Exercise price: closing price on grant date
10-year term | Prioritizes increasing stockholder value, thus aligning with stockholders
Promotes long-term focus | |||
RSUs | 50% | 4 years | Aligns with stockholders
Promotes retention
Provides value even during periods of stock price or market underperformance |
2022 Annual Equity Grants
Typically, in making determinations about long-term equity incentive grants to the NEOs, the Compensation Committee considers equity grant levels and the overall pay mix in peer group companies and the NEO’s role, skills and experience and the critical nature of the NEO’s contributions to the Company, among other things. The grants to the NEOs vary based on these factors. This portion of the NEOs’ total direct compensation is variable and directly aligned with stockholder interests.
The Compensation Committee made no equity grants to the co-CEOs in 2022 pursuant to the terms of the Waiver Letters.
55
Table of Contents
2022 Annual Equity Grants
| NEO | Target Value ($) | Stock Options (#) | RSUs (#) | |||||||||
Helmy Eltoukhy | — | — | — | |||||||||
AmirAli Talasaz | — | — | — | |||||||||
Michael Bell | 2,700,000 | 39,454 | 19,727 | |||||||||
Craig Eagle | 3,200,000 | 54,852 | 27,426 | |||||||||
Christopher Freeman | 3,600,000 | 61,708 | 30,854 | |||||||||
John Saia | 1,820,000 | 31,166 | 15,583 | |||||||||
2023 PSU Grants
In the first quarter of 2023, the Compensation Committee increased the performance nature of long-term incentives by granting performance stock units, or PSUs. The 2023 PSUs vest over a three-year performance period ending December 31, 2025 based on revenue and a three-year Compound Annual Growth Rate, or CAGR, each weighted 50%. The CAGR metric underscores the importance of consistent strong revenue growth over the 2023-25 performance period. The actual number of PSUs earned will be based on the Company’s performance relative to target. The addition of these PSUs reinforces the pay-for-performance nature of the long-term incentive grants and the executive compensation program overall.
The Compensation Committee views the use of these measures as critical because they tie executive officer compensation with key long-term priorities and align the interests of executive officers with those of Guardant and its shareholders. The performance-based metrics, in conjunction with the proportion of total compensation that was variable and at-risk, further enhance the link between pay and performance for the NEOs, as well as strengthened the alignment of the interests of the executive officers with those of our stockholders. The Compensation Committee intends, as appropriate and in line with the further development of the Company over time, to consider increasing the proportion of long-term incentives allocated to performance-based vehicles.
The Company maintains an ongoing commitment to good corporate governance principles and strong performance orientation in our compensation program by proactively reviewing our policies and program design. We continue to manage award amounts, with a goal of maintaining broad-based equity participation, delivering value that is aligned with our compensation philosophy and proactively managing our share usage as well as dilution during a period of rapid growth.
We expect to continue to evaluate our equity compensation strategy across the organization to manage our equity utilization during 2023 and beyond.
Promotion of John Saia to Chief Legal Officer
Effective April 3, 2022, the Board promoted John Saia to the position of Chief Legal Officer. In connection with Mr. Saia’s promotion, after considering the increase in scope to Mr. Saia’s role and responsibilities, as well as market data provided by our independent compensation consultant, internal equity, advice from our independent compensation consultant and other factors, the Compensation Committee made a one-time grant of 60,548
56
Table of Contents
stock options and 30,274 RSUs to Mr. Saia in August 2022, with a target dollar-denominated value for such award of $3,000,000. The equity awards granted to Mr. Saia in connection with his promotion vest over four years.
Other Elements of Compensation
401(k) Plan
We currently maintain a 401(k) retirement savings plan for our employees, including our NEOs, who satisfy certain eligibility requirements. The 401(k) plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Internal Revenue Code (the “Code”), and our NEOs are eligible to participate in the 401(k) plan on the same basis as our other employees. The Code allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k) plan. We believe that providing a vehicle for tax-deferred retirement savings though our 401(k) plan adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our NEOs, in accordance with our compensation policies. In 2022, we provided a discretionary contribution equal to 50% of the first 6% contributed by the employee.
Employee Benefits
All of our full-time employees, including our NEOs, are eligible to participate in our health and welfare plans, including:
| • | medical, dental and vision benefits; |
| • | short-term and long-term disability insurance; and |
| • | life and accidental death and dismemberment insurance. |
We also provide supplemental short-term disability coverage to our NEOs in addition to the short-term disability coverage provided to our full-time employees generally.
We believe the benefits and limited perquisite described above are necessary and appropriate to provide a competitive compensation package to our named executive officers.
Severance Arrangements
We maintain the Guardant Health, Inc. Executive Severance Plan (the “Severance Plan”). The Severance Plan provides for the payment of certain severance and other benefits to participants. The Severance Plan generally provides for severance amounts if the NEO’s employment is terminated by us without cause or by the NEO for good reason. For terminations not in connection with a change in control, severance amounts range from 50% to 100% of base salary. For terminations from three months prior to one year after a change in control, severance amounts range from 100% to 150% of the sum of base salary and target cash bonus. The Severance Plan also provides for reimbursement for health benefit continuation of up to 18 months. The payments and benefits provided under the Severance Plan are contingent upon the affected NEO’s execution and non-revocation of a general release of claims and compliance with specified restrictive covenants. See “Potential
57
Table of Contents
Payments upon a Termination or Change in Control,” which describes the payments to which the participating NEOs may be entitled under the Severance Plan.
In addition, in 2019, we entered into letter agreements with each of Drs. Eltoukhy and Talasaz that provide that if the executive experiences a “qualifying termination” of employment (as defined in the Severance Plan), other than in connection with a change in control, then each time-based vesting Company equity award held by the executive will vest and become exercisable as to the portion of the award that would have vested over the one-year period following the termination date (had the executive remained in continuous service during such period). This acceleration right is subject to the executive’s timely executive and non-revocation of a general release of claims.
V. ADDITIONAL COMPENSATION POLICIES AND PRACTICES
Stock Ownership Guidelines
To support our commitment to stockholder alignment and ensure non-employee members of our Board and our executive officers, including our NEOs, remain invested in our performance and the performance of our common stock, we adopted stock ownership guidelines effective January 2020, which were amended effective November 2022. Pursuant to the amended guidelines, we no longer include unexercised stock options in the definition of ownership for purposes of determining whether our NEOs have satisfied the stock ownership guidelines. We also increased the minimum ownership guidelines for our co-Chief Executive Officers to reflect a multiple of the current median salary of chief executive officers in our 2022 executive compensation peer group.
Our stock ownership guidelines require applicable individuals to hold a certain value of our common stock depending on their position with us, as follows:
| • | For our co-CEOs: $4,560,000 (equal to six times $629,000, which is the 50th percentile of CEO salaries in our peer group selected for decisions relating to 2022 executive compensation), |
| • | For each other executive officer: one times his or her annual base salary, and |
| • | For each non-employee member of our Board: $250,000 (equal to five times $50,000, which is the 50th percentile of annual cash retainers for non-employee directors in our peer group). |
Each individual subject to our stock ownership guidelines has until the later of January 1, 2026 or the fifth anniversary of his or her designation as being subject to the guidelines to comply with the stock ownership guidelines applicable to his or her position. Shares of common stock that count toward satisfaction of the ownership requirements include shares of common stock held directly or indirectly through certain trusts or entities, and outstanding RSUs that vest solely based on the passage of time. Shares underlying unexercised stock options and unearned performance-based stock awards do not count in determining compliance with the stock ownership guidelines.
Until a participant subject to our stock ownership guidelines meets the applicable minimum ownership guidelines, such participant is required to retain (and not dispose of or otherwise
58
Table of Contents
transfer) 20% of all “net settled shares” received from the vesting, delivery and/or exercise of equity awards granted under the Company’s equity incentive plans for one year subsequent to their vesting, delivery and/or exercise. For purposes of the stock ownership guidelines, “net settled shares” means those shares of common stock that remain after payment of the applicable exercise or purchase price and all applicable withholding taxes and transaction costs.
Anti-Hedging and Anti-Pledging Policies
We maintain an Insider Trading Compliance Policy that prohibits our officers, directors and employees from purchasing financial instruments (including prepaid variable forward contracts, equity swaps, and collars), or otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of our stock. It further prohibits pledging our stock as collateral to secure loans, margin purchases of our stock, short sales of our stock, and any transactions in puts, calls or other derivative securities involving our stock.
Accounting Policies for Stock-Based Compensation
We follow the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, or ASC Topic 718, for our stock-based compensation awards. ASC Topic 718 requires companies to calculate the grant date “fair value” of their stock-based awards using a variety of assumptions. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based awards in their income statements over the period that an employee is required to render service in exchange for the award. Grants of stock options and restricted stock units under our equity incentive award plans are accounted for under ASC Topic 718. Our Board or Committee will consider the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our equity incentive award plans and programs. As accounting standards change, the Compensation Committee may revise certain programs to appropriately align accounting expenses of equity awards with the overall executive compensation philosophy and objectives.
Report of the Compensation Committee on Executive Compensation
This Compensation Committee Report shall not be deemed to be incorporated by reference into any filing made by the Company under the Securities Act of 1933 or the Exchange Act, notwithstanding any general statement contained in any such filing incorporating this proxy statement by reference, except to the extent the Company incorporates such Report by specific reference.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with the management of the Company. Based on this review and these discussions, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K and the Company’s proxy statement.
The preceding report has been furnished by the following members of the Compensation Committee:
Vijaya Gadde, Chair
Samir Kaul
Myrtle Potter
59
Table of Contents
COMPENSATION TABLES
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards (2) ($) | Option Awards (3) | Non-Equity Incentive Plan Compensation (4) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||
| Helmy Eltoukhy (1) | 2022 | 1 | — | — | — | — | 11,631 | 11,632 | ||||||||||||||||||||||||
| Chairman and Co-Chief | 2021 | 1 | — | — | — | — | 13,664 | 13,665 | ||||||||||||||||||||||||
| Executive Officer | 2020 | 209,937 | — | 113,595,323 | — | — | 65,726 | 113,870,986 | ||||||||||||||||||||||||
| AmirAli Talasaz (1) | 2022 | 1 | — | — | — | — | 11,174 | 11,175 | ||||||||||||||||||||||||
| Co-Chief Executive Officer | 2021 | 1 | — | — | — | — | 13,270 | 13,271 | ||||||||||||||||||||||||
| 2020 | 209,937 | — | 113,595,323 | — | — | 79,780 | 113,885,040 | |||||||||||||||||||||||||
| Michael Bell | 2022 | 466,077 | — | 604,238 | 742,480 | 154,958 | 9,959 | 1,977,712 | ||||||||||||||||||||||||
| Chief Financial Officer | 2021 | 439,616 | 500,000 | 2,941,720 | 2,317,493 | 250,155 | 10,998 | 6,459,981 | ||||||||||||||||||||||||
| Craig Eagle | 2022 | 485,231 | 1,294,507 | 1,673,671 | 157,262 | 6,642 | 3,617,313 | |||||||||||||||||||||||||
| Chief Medical Officer | 2021 | 317,885 | 2,370,000 | 1,642,986 | 1,935,250 | 186,390 | 3,531 | 6,456,043 | ||||||||||||||||||||||||
| Christopher Freeman | 2022 | 468,269 | 1,456,309 | 1,882,865 | 152,760 | 9,364 | 3,969,567 | |||||||||||||||||||||||||
| Chief Commercial Officer | 2021 | 249,231 | 300,000 | 2,156,323 | 2,539,902 | 183,938 | 7,056 | 5,436,449 | ||||||||||||||||||||||||
| John Saia | 2022 | 466,154 | 2,385,451 | 3,006,043 | 148,177 | 12,853 | 6,018,678 | |||||||||||||||||||||||||
| Chief Legal Officer & | 2021 | 413,654 | 30,000 | 495,020 | 577,753 | 187,454 | 10,112 | 1,713,993 | ||||||||||||||||||||||||
| Corporate Secretary | 2020 | 304,346 | 30,000 | 1,362,000 | 1,234,607 | 196,800 | 9,359 | 3,137,112 | ||||||||||||||||||||||||
| (1) | In connection with the Founders’ 2020 Performance Awards granted to Drs. Eltoukhy and Talasaz in May 2020, pursuant to the Waiver Letters, each of Drs. Eltoukhy and Talasaz formally agreed to accept a base salary of $1 per year and waived their opportunity to receive annual incentive opportunities or payouts under our annual incentive plan, or to receive grants of equity incentive awards, for seven years. |
| (2) | The amounts shown in the Stock Awards column represent the aggregate grant date fair value of the RSUs granted to the named executive officers, in each case computed in accordance with Topic 718, excluding the effect of estimated forfeitures. For information regarding assumptions, factors and methodologies used in our computations pursuant to Topic 718, see Note 12 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022. |
| (3) | The amounts shown in the Option Awards column represent the aggregate grant date fair value of stock options computed in accordance with Topic 718. Valuations of options were determined using the Black-Scholes option pricing model. For information regarding assumptions, factors and methodologies used in our computations pursuant to Topic 718, see Note 12 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022. |
| (4) | The amounts shown in the Non-Equity Incentive Plan Compensation column are comprised of amounts paid in respect of our annual incentive plan, as determined by the Compensation Committee in accordance with the plan and the awards thereunder. Payments pursuant to the annual incentive plan are generally made early in the year following the year in which they are earned. As described in footnote 1, each of Drs. Eltoukhy and Talasaz waived their opportunity to receive annual incentive opportunities or payouts under our annual incentive plan. |
60
Table of Contents
2022 Grants of Plan Based Awards Table
Estimated Future Payouts | Estimated Future Payouts | All Other Stock Awards: Number of Shares of Stock or Units (3) (#) | All Other Option Number of | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value Of Stock and Option Awards (5) ($) | |||||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Approval Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||||||
| Helmy Eltoukhy (2) | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| AmirAli Talasaz (2) | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Michael Bell | — | 236,000 | 472,000 | |||||||||||||||||||||||||||||||||||||||||||||
| 05/09/2022 | 05/03/2022 | 37,454 | 30.63 | 742,4812 | ||||||||||||||||||||||||||||||||||||||||||||
| 05/09/2022 | 05/03/2022 | 19,727 | 604,238 | |||||||||||||||||||||||||||||||||||||||||||||
| Craig Eagle | — | 244,500 | 489,000 | |||||||||||||||||||||||||||||||||||||||||||||
| 11/07/2022 | 11/01/2022 | 54,852 | 47.20 | 1,673,672 | ||||||||||||||||||||||||||||||||||||||||||||
| 11/07/2022 | 11/01/2022 | 27,426 | 1,294,507 | |||||||||||||||||||||||||||||||||||||||||||||
| Christopher Freeman | — | 237,500 | 475,000 | |||||||||||||||||||||||||||||||||||||||||||||
| 11/07/2022 | 11/01/2022 | 61,708 | 47.20 | 1,882,865 | ||||||||||||||||||||||||||||||||||||||||||||
| 11/07/2022 | 11/01/2022 | 30,854 | 1,456,309 | |||||||||||||||||||||||||||||||||||||||||||||
| John Saia | — | 242,500 | 485,000 | |||||||||||||||||||||||||||||||||||||||||||||
| 08/08/2022 | 08/02/2022 | 60,548 | 54.50 | 2,055,090 | ||||||||||||||||||||||||||||||||||||||||||||
| 08/08/2022 | 08/02/2022 | 30,274 | 1,649,933 | |||||||||||||||||||||||||||||||||||||||||||||
| 11/07/2022 | 11/01/2022 | 31,166 | 47.20 | 950,953 | ||||||||||||||||||||||||||||||||||||||||||||
| 11/07/2022 | 11/01/2022 | 15,583 | 735,518 | |||||||||||||||||||||||||||||||||||||||||||||
| (1) | The amounts disclosed in these columns reflect the threshold, target and maximum annual cash incentive opportunities of our NEOs for 2022. The amounts of the annual cash incentive opportunities depend on the eligible annual base salary in effect at year end for each NEO. Below threshold performance on the financial metrics results in 0% payout. However, the Operational Performance Component metrics do not establish quantifiable threshold performance and thus payout for those metrics could be as little as 1%. See “Compensation Discussion and Analysis—Compensation Program Components—Annual Incentive Plan” for a detailed description of annual incentive plan awards, including the criteria for determining the amounts payable. Actual 2022 annual incentive plan results are reported in the “Summary Compensation Table” in the “Non-Equity Incentive Plan Compensation” column. The maximum award is 200% of target. Linear interpolation is used to determine the applicable payout amount between threshold and target and between target and maximum. |
| (2) | In connection with the Founders’ 2020 Performance Awards granted to Drs. Eltoukhy and Talasaz in May 2020, each of Drs. Eltoukhy and Talasaz formally waived their opportunity to receive annual incentive opportunities and payouts under our annual incentive plan for a seven-year period. |
| (3) | Amounts disclosed in this column reflect the number of RSUs granted to our NEOs in 2022. The RSUs generally vest over four years; one-fourth of the RSUs will vest on the first anniversary of the grant date, and 1/16th of the shares subject to the RSU vest on each quarterly anniversary thereafter, subject to the NEO’s continued service. RSUs granted to Mr. Bell in May 2022 vest over four years with one-fourth of these RSUs vesting on March 15, 2023, and 1/16th of the shares subject to the RSU vest on each quarterly anniversary thereafter, subject to continued service through the applicable vesting date. RSUs granted to Mr. Saia in August 2022 vest over four years with one-fourth of these RSUs vesting on April 15, 2023 and equal annual amounts on each anniversary during the three-year period thereafter, subject to continued service through the applicable vesting date. |
61
Table of Contents
| (4) | Amounts disclosed in this column reflect the number of stock options granted to our NEOs in 2022. The options vest one-fourth on the first anniversary of the grant date, and monthly thereafter at a rate of one forty-eighth (1/48) per month over the next three years, subject to continued service. Options granted to Mr. Bell in May 2022 vest over four years with one fourth of these options vesting on February 18, 2023, and monthly thereafter at a rate of one forty-eighth (1/48) per month, subject to continued service through the applicable vesting date. Options granted to Mr. Saia in August 2022 vest over four years with with one-fourth of these options vesting on April 3, 2023, and monthly thereafter at a rate of one forty-eighth (1/48) per month over the next three years, subject to continued service. |
| (5) | The amounts shown in for RSUs represent the aggregate grant date fair value of time-based RSUs, computed in accordance with Topic 718, excluding the effect of estimated forfeitures. Amounts in this column relating to RSUs reflect the market value of the RSUs using the closing price of a share of our common stock as reported on Nasdaq on the date of grant, multiplied by the number of shares underlying each award. The amounts shown in this column for stock options represent the aggregate grant date fair value of the stock options computed in accordance with Topic 718. Valuations of options were determined using the Black-Scholes option pricing model. For information regarding assumptions, factors and methodologies used in our computations pursuant to Topic 718, see Note 12 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022. |
62
Table of Contents
2022 Outstanding Equity at Fiscal Year End Table
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
| Number of Securities Underlying Unexercised Options | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units That Have Not Vested (3) (#) | Market Value of Shares or Units That Have Not Vested (4) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (5) (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (6) ($) | ||||||||||||||||||||||||||||||||||
Name | Award Type | Grant Date | Exercisable (1) (#) | Unexercisable (2) (#) | ||||||||||||||||||||||||||||||||||||
Helmy Eltoukhy | Options | 07/14/2017 | (7) | 711,612 | 4.18 | 07/14/2027 | ||||||||||||||||||||||||||||||||||
| PSUs | 05/26/2020 | (8) | 1,130,382 | 30,746,390 | ||||||||||||||||||||||||||||||||||||
AmirAli Talasaz | Options | 07/14/2017 | (7) | 567,659 | 4.18 | 07/14/2027 | ||||||||||||||||||||||||||||||||||
| PSUs | 05/26/2020 | (8) | 1,130,382 | 30,746,390 | ||||||||||||||||||||||||||||||||||||
Michael Bell | Options | 05/04/2021 | (9) | 12,682 | 13,785 | 148.19 | 05/04/2031 | |||||||||||||||||||||||||||||||||
| Options | 05/09/2022 | (9) | 39,454 | 30.63 | 05/09/2032 | |||||||||||||||||||||||||||||||||||
| RSUs | 05/04/2021 | (10) | 9,926 | 269,987 | ||||||||||||||||||||||||||||||||||||
| RSUs | 05/09/2022 | (10) | 19,727 | 536,574 | ||||||||||||||||||||||||||||||||||||
| PSUs | 05/04/2021 | (11) | 6,617 | 179,982 | ||||||||||||||||||||||||||||||||||||
Craig Eagle | Options | 08/03/2021 | (9) | 12,391 | 17,349 | 110.49 | 08/03/2031 | |||||||||||||||||||||||||||||||||
| Options | 11/07/2022 | (9) | 54,852 | 47.20 | 11/07/2032 | |||||||||||||||||||||||||||||||||||
| RSUs | 08/03/2021 | (10) | 11,153 | 303,362 | ||||||||||||||||||||||||||||||||||||
| RSUs | 11/07/2022 | (10) | 27,426 | 745,987 | ||||||||||||||||||||||||||||||||||||
Christopher Freeman | Options | 08/03/2021 | (9) | 14,636 | 24,396 | 110.49 | 08/03/2031 | |||||||||||||||||||||||||||||||||
| Options | 11/07/2022 | (9) | 61,708 | 47.20 | 11/07/2032 | |||||||||||||||||||||||||||||||||||
| RSUs | 08/03/2021 | (10) | 14,637 | 398,126 | ||||||||||||||||||||||||||||||||||||
| RSUs | 11/07/2022 | (10) | 30,854 | 839,229 | ||||||||||||||||||||||||||||||||||||
John Saia | Options | 07/22/2020 | (9) | 16,549 | 8,275 | 82.83 | 07/22/2030 | |||||||||||||||||||||||||||||||||
| Options | 11/02/2021 | (9) | 2,630 | 5,788 | 117.61 | 11/02/2031 | ||||||||||||||||||||||||||||||||||
| Options | 08/08/2022 | (9) | 60,548 | 54.50 | 08/08/2032 | |||||||||||||||||||||||||||||||||||
| Options | 11/07/2022 | (9) | 31,166 | 47.20 | 11/07/2032 | |||||||||||||||||||||||||||||||||||
| RSUs | 07/22/2020 | (10) | 6,206 | 168,803 | ||||||||||||||||||||||||||||||||||||
| RSUs | 09/11/2020 | (10) | 1,746 | 47,491 | ||||||||||||||||||||||||||||||||||||
| RSUs | 11/02/2021 | (12) | 2,894 | 78,717 | ||||||||||||||||||||||||||||||||||||
| RSUs | 08/08/2022 | (10) | 30,274 | 823,453 | ||||||||||||||||||||||||||||||||||||
| RSUs | 11/07/2022 | (10) | 15,583 | 423,858 | ||||||||||||||||||||||||||||||||||||
| (1) | Amounts disclosed in this column reflect the number of options granted to our NEOs that are subject to time based vesting and that had vested as of December 31, 2022. The options expire ten years from the date of grant. The options have an exercise price of no less than 100% of the fair market value of a share of our common stock on the date of grant. See “Potential Payments Upon Termination or Change in Control” for information on the treatment of options upon death, disability, termination or change in control. |
| (2) | Amounts disclosed in this column reflect the number of options granted to our NEOs that were subject to time-based vesting that had not vested as of December 31, 2022. |
| (3) | Amounts in this column reflect the number of unvested RSUs that were subject to time-based vesting and that had not vested as of December 31, 2022. |
| (4) | Amounts in this column reflect the market value of the RSUs using the closing price of a share of our common stock as reported on Nasdaq on December 30, 2022, the last trading day of the year, multiplied by the number of shares underlying each award. |
| (5) | Amounts in this column reflect the number of unvested PSUs that are subject to performance-based vesting conditions as of December 31, 2022. The Founders’ 2020 Performance Awards are shown based on maximum performance. |
63
Table of Contents
| (6) | Amounts in this column reflect the market value of the unvested PSUs using the closing price of a share of our common stock as reported on Nasdaq on December 30, 2022, the last trading day of the year, multiplied by the number of shares underlying each award. |
| (7) | 1/48th of the shares subject to the option will vest on each monthly anniversary of the vesting commencement date (April 23, 2017), subject to the NEO’s continued service. |
| (8) | The amounts shown for Drs. Eltoukhy and Talasaz represent the unvested portion of the Founders’ 2020 Performance Awards which are intended to compensate Drs. Eltoukhy and Talasaz over their seven-year maximum term and will become vested only if our stock price reaches (and maintains for a specified period) stock price hurdles of $150/share and $200/share during such seven-year period. |
| (9) | 1/4 of the shares subject to the option will vest (or, if applicable, vested) on the one-year anniversary of the grant date, and 1/48th of the shares subject to the option will vest on each monthly anniversary thereafter, subject to the NEO’s continued service. |
| (10) | 1/4th of the shares subject to the RSU agreement will vest on each anniversary of the grant date, subject to the NEO’s continued service. |
| (11) | The amounts shown for Mr. Bell reflect the number of PSUs that are subject to performance-based vesting conditions as of December 31, 2022, which will be distributed if specified financial and product development-related performance conditions are attained during the performance period of 4.5 years following his award date of May 4, 2021. The PSUs granted to Mr. Bell were not part of the annual equity grant cycle. The PSUs will vest upon the attainment of the performance conditions, and further subject to Mr. Bell’s continued employment with us for the six-month period immediately following the performance period. In accordance with the SEC rules, the number of PSUs shown represents the number of units that may be earned during the performance period based on threshold performance. |
| (12) | 1/4th of the shares subject to the RSU agreement vested on the first anniversary of the grant date and 1/16th vesting quarterly thereafter, subject to the NEO’s continued service. |
2022 Options Exercised and Stock Vested
| Option Awards | Stock Awards | |||||||||||||||
Name |
Number of Shares | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (1) (#) | Value Realized on Vesting (2) ($) | ||||||||||||
Helmy Eltoukhy | ||||||||||||||||
AmirAli Talasaz | ||||||||||||||||
Michael Bell | 3,308 | 256,635 | ||||||||||||||
Craig Eagle | 3,717 | 133,477 | ||||||||||||||
Christopher Freeman | 4,879 | 187,451 | ||||||||||||||
John Saia | 5,291 | 340,542 | ||||||||||||||
| (1) | The amounts shown in this column reflect the number of RSUs that vested during 2022. |
| (2) | The amounts shown in this column reflect the value realized upon vesting of the RSUs as calculated based on the price of a share of our common stock on the vesting date, multiplied by the number of shares underlying each award. |
Potential Payments Upon Termination or Change in Control
Upon a termination, or upon a change in control of Guardant Health, the Company maintains certain arrangements, guidelines, plans and programs pursuant to which our NEOs could be eligible to receive certain cash severance, equity vesting and other benefits.
64
Table of Contents
The amounts that the NEOs could receive are set forth below for the following types of termination of employment:
| • | Termination without cause or by executive for good reason not in connection with a change in control; |
| • | Termination without cause or by executive for good reason following a change in control; and |
| • | Death or disability. |
Executive Severance Plan
In September 2018, our Board adopted the Guardant Health, Inc. Executive Severance Plan (the “Severance Plan”). The Severance Plan provides for the payment of certain severance and other benefits to participants according to their participant tier in the event of a qualifying termination of employment with us. Drs. Eltoukhy and Talasaz are designated as “Tier 1” participants. Messrs. Bell, Saia and Freeman and Dr. Eagle are designated as “Tier 2” participants.
As discussed above, each of Drs. Eltoukhy and Talasaz have agreed by means of a written Waiver Letter filed with the SEC to effectively forego all base salary and annual incentive for a period of seven years. Consequently, while the terms of the Severance Plan do apply, the amount of base salary upon which they are based is nominal.
Severance Not in Connection with a Change in Control. Under the Severance Plan, in the event of a termination of a participant’s employment by us without “cause” or by the participant for “good reason,” in either case, more than three months prior to or more than one year after “a change in control” (as defined in the 2018 Plan), the participant will be eligible to receive the following benefits:
| • | “Tier 1” participants: |
| ○ | a lump-sum cash payment equal to 100% of the participant’s then-current annual base salary; and |
| ○ | company-paid COBRA premium payments for the participant and his or her covered dependents for up to 12 months. |
| • | “Tier 2” participants: |
| ○ | a lump-sum cash payment equal to 50% of the participant’s then-current annual base salary; and |
| ○ | company-paid COBRA premium payments for the participant and his or her covered dependents for up to 6 months. |
65
Table of Contents
Severance in Connection with a Change in Control. In the event of a termination by us of a participant’s employment without “cause” or by the participant for “good reason,” in either case, within the period beginning three months prior to a “change in control” (as defined in the 2018 Plan) and ending on the one-year anniversary of such change in control, the participant will be eligible to receive:
| • | “Tier 1” participants: |
| ○ | a lump sum cash payment equal to the sum of (a) 150% of the participant’s then-current annual base salary and (b) 100% of the participant’s target cash performance bonus, if any, for the year in which the qualifying termination occurs; |
| ○ | accelerated vesting of all equity awards which vest based solely on the participant’s continued service with us or the passage of time; and |
| ○ | company-paid COBRA premium payments for the participant and his or her covered dependents for up to 18 months. |
| • | “Tier 2” participants: |
| ○ | a lump sum cash payment equal to 100% of the sum of participant’s then-current annual base salary and target cash performance bonus, if any, for the year in which the qualifying termination occurs; |
| ○ | accelerated vesting of all equity awards which vest based solely on the participant’s continued service with us or the passage of time; and |
| ○ | company-paid COBRA premium payments for the participant and his or her covered dependents for up to 12 months. |
Any participant’s right to receive the severance payments and benefits described above is subject to his or her delivery and, as applicable, non-revocation of a general release of claims in our favor, and his or her continued compliance with any applicable restrictive covenants.
In addition, in the event that any payment under the Severance Plan, together with any other amounts paid to the participant by us, would subject such participant to an excise tax under Section 4999 of the Internal Revenue Code, such payments will be reduced to the extent that such reduction would produce a better net after-tax result for the participant.
For purposes of the Severance Plan, “cause” generally means the occurrence of any one or more of the following events (unless, to the extent capable of correction, the participant fully corrects the circumstances constituting cause within 15 days after written notice thereof): (i) the participant’s willful failure to substantially perform his or her duties (other than such failure resulting from the participant’s incapacity due to physical or mental illness or any such actual or anticipated failure after his or her issuance of a notice of termination for “good reason”), after a written demand for performance is delivered to the participant by our Compensation Committee; (ii) the participant’s commission of an act of fraud or material dishonesty resulting in reputational, economic or financial injury to us; (iii) the participant’s material misappropriation or embezzlement of our property or the property of any of our
66
Table of Contents
affiliates; (iv) the participant’s commission of (including entry of a guilty or no contest plea to) a felony (other than a traffic violation) or other crime involving moral turpitude, or the participant’s commission of unlawful harassment or discrimination; (v) the participant’s willful misconduct or gross negligence with respect to any material aspect of our business or a material breach by the participant of his or her fiduciary duty to us, which willful misconduct, gross negligence or material breach has a material and demonstrable adverse effect on us; or (vi) the participant’s material breach of his or her obligations to us under a written agreement with us.
For purposes of the Severance Plan, “good reason” generally means the occurrence of any one or more of the following without the participant’s prior written consent unless we fully correct the circumstances constituting good reason (provided such circumstances are capable of correction): (i) a material diminution in the participant’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities, excluding for this purpose any isolated, insubstantial or inadvertent actions not taken in bad faith and which are remedied by us promptly after receipt of notice thereof given by the participant; (ii) the material reduction by us of participant’s then-current annual base salary, other than as a result of a proportionate, across-the-board reduction of base compensation payable to similarly situated employees; or (iii) a material change in the geographic location at which the participant performs his or her principal duties for us to a new location that is more than 30 miles from the location at which the participant performs his or her principal duties for us as of the date on which he or she first becomes a participant in the Severance Plan. The participant will not be deemed to have resigned for “good reason” unless (1) he or she provides us with written notice setting forth in reasonable detail the facts and circumstances claimed by the participant to constitute “good reason” within 90 days after the date of the occurrence of any event that the participant knows or should reasonably have known to constitute “good reason,” (2) we fail to cure such acts or omissions within 30 days following its receipt of such notice, and (3) the effective date of the participant’s termination for “good reason” occurs no later than 60 days after the expiration of the 30-day cure period set forth above.
Eltoukhy and Talasaz Letter Agreements
In addition, in 2019 we entered into letter agreements with each of Drs. Eltoukhy and Talasaz that provide that if either executive experiences a qualifying termination of employment for purposes of the Severance Plan, other than in connection with a change in control, then each time-based vesting company equity award held by the executive will vest and become exercisable as to the portion of the award that would have vested over the one-year period following the termination date (had the executive remained in continuous service during such period). This acceleration right is subject to the executive’s timely execution and non-revocation of a general release of claims.
Drs. Eltoukhy and Talasaz did not hold any unvested time-based equity awards as of December 31, 2021.
67
Table of Contents
Termination Terms of Founders’ 2020 Performance Awards
Under the terms of the Founders’ 2020 Performance Awards, upon a termination of employment of Dr. Eltoukhy or Dr. Talasaz, the 2020 PSUs granted to such executive will be treated as follows, subject to the executive’s timely execution and non-revocation of a general release of claims:
| • | If the employment of Dr. Eltoukhy or Dr. Talasaz is terminated by the Company without cause or by Dr. Eltoukhy or Dr. Talasaz for good reason, then one-third of the total PSUs will vest. Any then-remaining unvested PSUs will remain outstanding for up to six months following the termination of employment and will vest to the extent that the Company achieves a stock price goal during such time period. |
| • | The PSUs will vest in full upon a termination of the Founder’s employment due to his death. |
| • | If the employment of Dr. Eltoukhy or Dr. Talasaz terminates due to his disability, then the PSUs will remain outstanding and eligible to vest through the later to occur of (x) the one-year anniversary the termination date and (y) the four-year anniversary of the grant date (but not beyond the Expiration Date). |
In the event of a change in control of the Company:
| • | If the price per share received by the Company’s common stockholders in a change in control exceeds the greater of (i) the fair market value of the Company’s stock on the grant date and (ii) the volume-weighted average stock price over the 180 days ending on the grant date, but is less than $120 per share, then one-third of the total PSUs will vest. |
| • | If the price per share received by the Company’s common stockholders in a change in control equals or exceeds $120 per share, then the PSUs will vest with respect to any stock price goal achieved by the deal price. In addition, if the deal price is between two stock price goals, then either 50% or 100% of the PSUs associated with the greater goal will vest (depending on whether the deal price is more or less than 50% between the two goals). |
| • | In addition, if any then-remaining unvested PSUs are assumed, they will continue to be eligible to vest following the transaction based on the achievement of stock price goals adjusted to reflect the transaction. |
68
Table of Contents
Summary of Potential Payments upon Termination or Change in Control
The following table summarizes the payments that would be made to our NEOs upon the occurrence of certain qualifying terminations of employment or a change in control, in any case, occurring on December 31, 2022. In accordance with SEC rules, the potential payments upon termination or change in control do not include certain distributions or benefits to which the NEO is already entitled, including the value of equity awards that have already vested and distributions from qualified retirement plans. Since many factors (e.g., the time of year when the event occurs, our stock price) could affect the nature and amount of benefits an NEO could potentially receive, any amounts paid or distributed upon a future termination may be different from those shown in the tables below.
| Name | Compensation Component | Change in Control | Involuntary Termination In Connection With a Change in Control | Termination without Cause or for Good Reason Termination | Death or Disability | |||||||||||||||||||||
Helmy Eltoukhy | ||||||||||||||||||||||||||
| Cash Severance | — | 2 | (1) | 1 | (2) | |||||||||||||||||||||
| Long Term Incentives | — | (3) | — | (4) | — | (5) | 30,746,930 | (6) | ||||||||||||||||||
| Benefits and Perquisites | — | 50,610 | (7) | 33,740 | (8) | |||||||||||||||||||||
| Executive Long Term Disability | — | — | (9) | |||||||||||||||||||||||
| Total | — | 50,612 | 33,741 | 30,746,930 | ||||||||||||||||||||||
AmirAli Talasaz | ||||||||||||||||||||||||||
| Cash Severance | — | 2 | (1) | 1 | (2) | |||||||||||||||||||||
| Long Term Incentives | — | (3) | — | (4) | — | (5) | 30,746,390 | (6) | ||||||||||||||||||
| Benefits and Perquisites | — | 50,610 | (7) | 33,740 | (8) | |||||||||||||||||||||
| Executive Long Term Disability | — | — | (9) | |||||||||||||||||||||||
| Total | — | 50,612 | 33,741 | 30,746,390 | ||||||||||||||||||||||
Michael Bell | ||||||||||||||||||||||||||
| Cash Severance | 708,000 | (1) | 236,000 | (2) | ||||||||||||||||||||||
| Long Term Incentives | 806,561 | (4) | ||||||||||||||||||||||||
| Benefits and Perquisites | 33,470 | (7) | 16,870 | (8) | ||||||||||||||||||||||
| Executive Long Term Disability | 1,264,000 | (9) | ||||||||||||||||||||||||
| Total | 1,548,301 | 252,870 | 1,264,000 | |||||||||||||||||||||||
Craig Eagle | ||||||||||||||||||||||||||
| Cash Severance | 733,500 | (1) | 244,500 | (2) | ||||||||||||||||||||||
| Long Term Incentives | 1,049,349 | (4) | ||||||||||||||||||||||||
| Benefits and Perquisites | 24,147 | (7) | 12,073 | (8) | ||||||||||||||||||||||
| Executive Long Term Disability | 1,072,000 | (9) | ||||||||||||||||||||||||
| Total | 1,806,996 | 256,573 | 1,072,000 | |||||||||||||||||||||||
Christopher Freeman | ||||||||||||||||||||||||||
| Cash Severance | 712,500 | (1) | 237,500 | (2) | ||||||||||||||||||||||
| Long Term Incentives | 1,237,355 | (4) | ||||||||||||||||||||||||
| Benefits and Perquisites | 32,468 | (7) | 16,234 | (8) | ||||||||||||||||||||||
| Executive Long Term Disability | 1,736,000 | (9) | ||||||||||||||||||||||||
| Total | 1,982,323 | 253,734 | 1,736,000 | |||||||||||||||||||||||
John Saia | ||||||||||||||||||||||||||
| Cash Severance | 727,500 | (1) | 242,500 | (2) | ||||||||||||||||||||||
| Long Term Incentives | 1,542,322 | (4) | ||||||||||||||||||||||||
| Benefits and Perquisites | ||||||||||||||||||||||||||
| Executive Long Term Disability | 1,608,000 | (9) | ||||||||||||||||||||||||
| Total | 2,269,822 | 242,500 | 1,608,000 | |||||||||||||||||||||||
| (1) | Under the Company’s Severance Plan, for each of Drs. Eltoukhy and Talasaz, the amount is equal to the sum of 150% of the base salary in effect immediately prior to |
69
Table of Contents
termination plus each executive’s target annual incentive bonus. For the other NEOs, the amount is equal to the sum of 100% of the base salary in effect immediately prior to termination plus each executive’s target annual incentive bonus. |
| (2) | Under the Company’s Severance Plan, for each of Drs. Eltoukhy and Talasaz, the amount is equal to 100% of the base salary in effect immediately prior to termination. For the other NEOs, the amount is equal to 50% of the base salary in effect immediately prior to termination. |
| (3) | Under the Founders’ 2020 Performance Awards, upon a change in control the PSUs are eligible to vest based on the price per share received by our common stockholders in connection with the change in control. Because the price of a share of our common stock as of December 30, 2022, the last trading day of the year, was $27.20, no portion of the awards would have vested on a change in control on that date. For Mr. Bell, upon a change in control his PSUs are eligible to vest if the underlying performance criteria for his award have been met as of the change in control date. Because those criteria were unmet as of December 31, 2022 no value has been included. |
| (4) | Under the Company’s Executive Severance Plan, all unvested stock options and RSUs, which vest based solely on the participant’s continued service with us or the passage of time, will vest. The amount shown for Messrs. Bell, Eagle, Freeman and Saia includes the value of all unvested stock options based on the positive difference (if any) between the exercise price and the price of a share of our common stock as of December 30, 2022, the last trading day of the year ($27.70), plus the market value of all unvested RSUs based on the price of a share of our common stock as of December 30, 2022. The amount shown for Mr. Bell does not include a value for unvested PSUs as the underlying performance criteria are unmet as of December 31, 2022. Under the Founders’ 2020 Performance Awards, upon a change in control the PSUs are eligible to vest based on the price per share received by our common stockholders in connection with the change in control. Because the price of a share of our common stock as of December 30, 2022, the last trading day of the year, was $27.20, no portion of the awards would have vested on a change in control and qualifying termination on that date. |
| (5) | Under the Founders’ 2020 Performance Awards, any then-remaining unvested PSUs will remain outstanding for up to six months following the termination of employment and will vest to the extent that the Company achieves a stock price goal during such time period. |
| (6) | Under the Founders’ 2020 Performance Awards for each of Drs. Eltoukhy and Talasaz, the amount reflects the vesting upon death of all remaining unvested PSUs. If the employment of Dr. Eltoukhy or Dr. Talasaz terminates due to disability, then the PSUs will remain outstanding and eligible to vest through the later to occur of (x) the one-year anniversary the termination date and (y) the four-year anniversary of the grant date (but not beyond the expiration date of the PSUs). |
| (7) | Under the Company’s Severance Plan, the amount is the Company’s reimbursement for the full amount of the COBRA premium payments for an 18-month period following termination for Dr. Eltoukhy and Dr. Talasaz, and for a 12-month period for the other NEOs. |
70
Table of Contents
| (8) | Under the Company’s Severance Plan, the amount is the Company’s reimbursement for the full amount of the COBRA premium payments for a 12-month period following termination for Dr. Eltoukhy and Dr. Talasaz, and for a 6-month period for the other NEOs. |
| (9) | The amounts reported represent the disability benefit payable to each NEO until age 67 in the event of termination of employment due to disability. Drs. Eltoukhy and Talasaz were not eligible for the executive long term disability benefit because in 2020, pursuant to the Waiver Letters, each of their annual base salary was reduced to $1 and therefore would not cover the benefit’s premium. |
CEO Pay Ratio
Under rules adopted pursuant to the Dodd-Frank Act, we are required to calculate and disclose the total compensation paid to our median paid employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to our Chief Executive Officer (the “CEO Pay Ratio”). The paragraphs that follow describe our methodology and the resulting CEO Pay Ratio.
Measurement Date
We identified the median employee using our employee population on October 1, 2022 (including all employees, whether employed on a full-time, part-time, seasonal or temporary basis).
Consistently Applied Compensation Measure
Under the relevant rules, we are required to identify the median employee by use of a “consistently applied compensation measure” (“CACM”). We chose a CACM that closely approximates the annual target total direct compensation of our employees. Specifically, we identified the median employee by aggregating, for each employee as of October 1, 2022: (1) annual base pay, (2) annual target cash incentive opportunity, and (3) the grant date fair value for equity awards granted in 2022. In identifying the median employee, we annualized the compensation values of individuals who joined our Company during 2022.
Methodology and Pay Ratio
After applying our CACM methodology, we identified the median employee. Once the median employee was identified, we calculated the median employee’s annual target total direct compensation in accordance with the requirements of the Summary Compensation Table.
Our median employee’s compensation in 2022, as calculated using Summary Compensation Table requirements, was $200,142. As disclosed in the Summary Compensation Table, the 2022 compensation was $11,174 for Dr. Eltoukhy and $11,631 for Dr. Talasaz. Therefore, using the highest-compensated of our co-CEOs, the CEO Pay Ratio for 2022 is approximately 0.1:1.
71
Table of Contents
This information is being provided for compliance purposes and is a reasonable estimate calculated in a manner consistent with the SEC rules, based on our internal records and the methodology described above. The SEC rules for identifying the median compensated employee allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. Accordingly, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. Neither the Compensation Committee nor management of the Company used the CEO Pay Ratio measure in making compensation decisions.
72
Table of Contents
Pay Versus Performance
In accordance with rules adopted by the Securities and Exchange Commission
pursuan
t to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we provide the following disclosure regarding executive compensation for our principal executive officers (“PEOs”) andNon-PEO
NEOs and Company performance for the fiscal years listed below. The Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years shown.Year | Summary Compensation Table Total for Helmy Eltoukhy (1) ($) | Summary Compensation Table Total for AmirAli Talasaz (1) ($) | Compensation Actually Paid to Helmy Eltoukhy (1) (2) (3) ($) | Compensation Actually Paid to AmirAli Talasaz (1) (2) (3) ($) | Average Summary Compensation Table Total for Non-PEO NEOs (1) ($) | Average Compensation Actually Paid to Non-PEO NEOs (1) (2) (3) ($) | Value of Initial Fixed $100 Investment based on: (4) | Net Income ($ Millions) | Revenue (5) ($ Millions) | |||||||||||
TSR ($) | Peer Group TSR ($) | |||||||||||||||||||
(a) | (b) | (b) | (c) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | ||||||||||
| 2022 | 11,632 | 11,175 | (68,726,853) | (68,727,310) | 3,895,818 | 538,306 | 39.25 | 113.65 | (654.6) | 449.5 | ||||||||||
| 2021 | 13,665 | 13,271 | (30,979,967) | (30,980,361) | 5,016,617 | 3,923,973 | 156.16 | 126.45 | (384.8) | 373.7 | ||||||||||
| 2020 | 113,870,986 | — | 196,429,143 | — | 29,791,305 | 51,705,986 | 201.22 | 126.42 | (246.3) | 286.7 | ||||||||||
| (1) | Helmy Eltoukhy and AmirAli Talasaz were our PEOs in 2021 and 2022. Helmy Eltoukhy was our PEO in 2020. The individuals comprising the Non-PEO NEOs for each year presented are listed below. |
2020 | 2021 | 2022 | ||
| AmirAli Talasaz | Michael Bell | Michael Bell | ||
| Derek Bertocci | Craig Eagle | Craig Eagle | ||
| Michael Wiley | Christopher Freeman | Christopher Freeman | ||
| John Saia | John Saia | John Saia | ||
| (2) | The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by the Company’s NEOs. These amounts reflect the Summary Compensation Table Total with certain adjustments as described in footnote 3 below. |
| (3) | Compensation Actually Paid reflects the exclusions and inclusions of certain amounts for the PEOs and the Non-PEO NEOs as set forth below. Equity values are calculated in accordance with FASB ASC Topic 718. Amounts in the Exclusion of Stock Awards and Option Awards column are the totals from the Stock Awards and Option Awards columns set forth in the Summary Compensation Table. |
Year | Summary Compensation Table Total for Helmy Eltoukhy ($) | Exclusion of Stock Awards and Option Awards for Helmy Eltoukhy ($) | Inclusion of Equity Values for Helmy Eltoukhy ($) | Compensation Actually Paid to Helmy Eltoukhy ($) | ||||
| 2022 | 11,632 | — | (68,738,485) | (68,726,853) | ||||
| 2021 | 13,665 | — | (30,993,632) | (30,979,967) | ||||
| 2020 | 113,870,986 | (113,595,323) | 196,153,480 | 196,429,143 | ||||
73
Year | Summary Compensation Table Total for AmirAli Talasaz ($) | Exclusion of Stock Awards and Option Awards for AmirAli Talasaz ($) | Inclusion of Equity Values for AmirAli Talasaz ($) | Compensation Actually Paid to AmirAli Talasaz ($) | ||||
| 2022 | 11,175 | — | (68,738,485) | (68,727,310) | ||||
| 2021 | 13,271 | (14,375,350) | (30,993,632) | (30,980,361) | ||||
Year | Average Summary Compensation Table Total for Non-PEO NEOs ($) | Average Exclusion of Stock Awards and Option Awards for Non-PEO NEOs($) | Average Inclusion of Equity Values for Non-PEO NEOs($) | Average Compensation Actually Paid to Non-PEO NEOs($) | ||||
| 2022 | 3,895,818 | (3,261,391) | (96,121) | 538,306 | ||||
| 2021 | 5,016,617 | (3,651,612) | 2,558,968 | 3,923,973 | ||||
| 2020 | 29,791,305 | (29,326,181) | 51,240,862 | 51,705,986 | ||||
The amounts in the Inclusion of Equity Values in the tables above are derived from the amounts set forth in the following tables:
Year | Year-End FairValue of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Helmy Eltoukhy ($) | Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Helmy Eltoukhy ($) | Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for Helmy Eltoukhy ($) | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Helmy Eltoukhy ($) | Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Helmy Eltoukhy ($) | Total - Inclusion of Equity Values for Helmy Eltoukhy ($) | ||||||
| 2022 | — | (68,738,485) | — | — | — | (68,738,485) | ||||||
| 2021 | — | (33,636,991) | — | 2,643,359 | — | (30,993,632) | ||||||
| 2020 | 186,645,071 | 5,021,606 | — | 4,486,803 | — | 196,153,480 | ||||||
Year | Year-End FairValue of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for AmirAli Talasaz ($) | Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for AmirAli Talasaz ($) | Vesting-Date Fair Value of Equity Awards Granted During Year that Vested During Year for AmirAli Talasaz ($) | Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for AmirAli Talasaz ($) | Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for AmirAli Talasaz ($) | Total - Inclusion of Equity Values for AmirAli Talasaz ($) | ||||||
| 2022 | — | (68,738,485) | — | — | — | (68,738,485) | ||||||
| 2021 | — | (33,636,991) | — | 2,643,359 | — | (30,993,632) |
74
Year | Average Year-End Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for Non-PEO NEOs ($) | Average Change in Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards for Non-PEO NEOs($) | Average Vesting- Date Fair Value of Equity Awards Granted During Year that Vested During Year for Non-PEO NEOs($) | Average Change in Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year for Non-PEO NEOs($) | Average Fair Value at Last Day of Prior Year of Equity Awards Forfeited During Year for Non-PEO NEOs ($) | Total - Average Inclusion of Equity Values for Non-PEO NEOs ($) | ||||||
| 2022 | 1,995,203 | (1,584,218) | — | (507,106) | — | (96,121) | ||||||
| 2021 | 2,728,176 | (197,657) | — | 28,449 | — | 2,558,968 | ||||||
| 2020 | 48,075,762 | 1,860,798 | — | 1,304,302 | — | 51,240,862 | ||||||
| (4) | The Peer Group TSR set forth in this table utilizes the NASDAQ Biotechnology Index which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K included in our Annual Report for the year ended December 31, 2022. The comparison assumes $100 was invested for the period starting December 31, 2019, through the end of the listed year in the Company and in the NASDAQ Biotech Index, respectively. Historical stock performance is not necessarily indicative of future stock performance. |
| (5) | We determined revenue to be the most important financial performance measure used to link Company performance to Compensation Actually Paid to our Non-PEO NEOs in 2022. The financial performance measure of revenue was not applicable to the determination of Compensation Actually Paid to either Dr. Eltoukhy or Dr. Talasaz in 2022 because, in connection with the Founders’ 2020 Performance Awards, each of Drs. Eltoukhy and Talasaz entered into Waiver Letters pursuant to which they formally agreed to waive their opportunity to receive annual incentive opportunities or payouts under our annual incentive plan for seven years, including for 2022. Revenue may not have been the most important financial performance measure for years 2021 and 2020 and we may determine a different financial performance measure to be the most important financial performance measure in future years. |
75
Description of Relationship Between PEO and
Non-PEO
NEO Compensation Actually Paid and Company Total Shareholder Return (“TSR”)The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our
Non-PEO
NEOs, and the Company’s cumulative TSR over the three most recently completed fiscal years.
76
Description of Relationship Between PEO and
Non-PEO
NEO Compensation Actually Paid and Net IncomeThe following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our
Non-PEO
NEOs, and our Net Income during the three most recently completed fiscal years.
77
Description of Relationship Between PEO and
Non-PEO
NEO Compensation Actually Paid and RevenueThe following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our
Non-PEO
NEOs, and our revenue during the three most recently completed fiscal years. As described in the Compensation Discussion and Analysis, revenue represented 25% of the target bonus opportunity for ourNon-PEO
NEOs in 2022, but no payout was made with respect to this metric for 2022. As detailed in footnote 5, above, revenue was not a financial performance metric applicable to the determination of Compensation Actually Paid to either Dr. Eltoukhy or Dr. Talasaz for 2022.
78
Description of Relationship Between Company TSR and Peer Group TSR
The following chart compares our cumulative TSR over the three most recently completed fiscal years to that of the NASDAQ Biotechnology Index over the same period.
Tabular List of Most Important Financial Performance Measures
In light of the impact of stock price on the Founders’ 2020 Performance Awards, stock price was the sole financial performance measure that the Company considers to have linked Compensation Actually Paid to our PEOs for 2022 to Company performance.
The following table presents the financial performance measures that the Company considers to have been the most important in linking Compensation Actually Paid to our
Non-PEO
NEOs for 2022 to Company performance. The measures in this table are not ranked.Revenue |
| Adjusted EBITDA |
Gross Margin |
Compensation Risk Assessment
To assess the risks arising from our compensation policies and practices, management reviewed our various compensation programs, and presented this risk assessment to the Compensation Committee. The risk assessment included a review of our compensation plans from various perspectives, as well as other aspects of our programs that mitigate risk, ultimately assessing whether the policies and practices could directly or indirectly encourage or mitigate risk-taking by executives or increase risk to the Company.
79
We believe that our current compensation policies and programs do not motivate or incent excessive risk taking. As described more fully below, we structure our pay to consist of both fixed and variable compensation, particularly in connection with ourcompensation philosophy. We believe this structure motivates our executives to produce superior short- and long-term results that are in the best interests of our Company and our stockholders in order to attain our ultimate objective of increasing stockholder value, and we have established, and our Compensation Committee endorses, several controls to address and mitigate compensation related risk. These include stock ownership guidelines for our senior executive officers and our directors, annual review of our gross burn rate, anti-hedging and anti-pledging policies, caps on incentive payouts, robust performance evaluations and a diverse set of financial and milestone performance metrics. As a result, we have concluded that our compensation policies and programs are not reasonably likely to have a material adverse effect on the Company.
pay-for-performance
80
Table of Contents
PROPOSAL 2:
RATIFICATION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Our Audit Committee has appointed Deloitte to serve as our independent registered public accounting firm for our fiscal year ending December 31, 2023. Ernst & Young LLP (“Ernst & Young”) served as our independent registered public accounting firm from 2015 through April 4, 2023.
On April 4, 2023, our Audit Committee, following a competitive request for proposal process, approved the engagement of Deloitte as our independent registered public accounting firm for our fiscal year ended December 31, 2023, and dismissed Ernst & Young as our independent registered public accounting firm, each effective immediately.
Ernst & Young’s audit reports on the Company’s consolidated financial statements as of and for each of the two most recently completed fiscal years, the fiscal years ended December 31, 2022 and 2021, did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 2022 and 2021, as well as the subsequent interim periods through April 4, 2023, there were (i) no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Ernst & Young on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Ernst & Young’s satisfaction, would have caused Ernst & Young to make reference thereto in their reports on the financial statements for such years, and (ii) no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K and the related instructions).
During the fiscal years ended December 31, 2022 and 2021, as well as the subsequent interim periods through April 4, 2023, neither we nor anyone acting on our behalf has consulted with Deloitte regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements or the effectiveness of internal control over financial reporting, and neither a written report nor oral advice was provided to us that Deloitte concluded was an important factor considered by us in reaching a decision as to any accounting, auditing, or financial reporting issue, (ii) any matter that was the subject of a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K, or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of Regulation S-K.
We provided Ernst & Young with a copy of the foregoing disclosure and requested that Ernst & Young furnish a letter addressed to the SEC stating whether it agrees with the above statements. A copy of Ernst & Young’s letter, dated April 10, 2023, was filed as Exhibit 16.1 to our Current Report on Form 10-K, filed with the SEC on April 10, 2023, and such letter stated that Ernst & Young had agreed with the statements concerning Ernst & Young contained therein.
At the Annual Meeting, our stockholders are being asked to ratify the appointment of Deloitte as our independent registered public accounting firm for our fiscal year ending
81
Table of Contents
December 31, 2023. Our Board is submitting the appointment of Deloitte to our stockholders because we value our stockholders’ views on our independent registered public accounting firm and as a matter of good corporate governance. Notwithstanding the appointment of Deloitte, and even if our stockholders ratify their appointment, our Audit Committee, in its discretion, may appoint another independent registered public accounting firm at any time during our fiscal year if our Audit Committee believes that such a change would be in the best interests of our Company and our stockholders. If our stockholders do not ratify the appointment of Deloitte, our Audit Committee will review the stockholder vote and appointment of Deloitte and will, in its discretion, determine whether to continue to retain Deloitte for 2023.
We expect that representatives of Deloitte and Ernst & Young will be present at the Annual Meeting to respond to appropriate questions, and they will each have the opportunity to make a statement if they desire.
82
Table of Contents
AUDIT MATTERS
Fees Paid to the Independent Registered Public Accounting Firm
The following table presents fees for professional audit services and other services rendered to us by Ernst & Young for the years ended December 31, 2022 and December 31, 2021, respectively.
| Year Ended December 31, | ||||||||
| Type of Fees | 2022 | 2021 | ||||||
Audit Fees | $ | 3,256,800 | $ | 2,729,891 | ||||
Audit Related Fees | — | — | ||||||
Tax Fees | 91,400 | 154,500 | ||||||
|
|
|
| |||||
Total Fees | $ | 3,348,200 | $ | 2,884,391 | ||||
|
|
|
| |||||
In the above table, in accordance with the definitions of the SEC, are the following fees:
| • | “Audit Fees” include billed and unbilled fees for the audit of our consolidated financial statements included in our annual report on Form 10-K, the review of the unaudited interim financial statements included in our quarterly report on Form 10-Q and other professional services related to various consultation matters; |
| • | “Audit Related Fees” include fees for assurance and related services that are reasonably related to the performance of the audit and the review of our financial statements and are not reported under “Audit Fees”; and |
| • | “Tax Fees” include fees related to preparation and filing of our U.S. federal and state tax returns, as well as audit support. For the years ended December 31, 2022 and 2021, no amounts were incurred by the Company for tax advice, planning or consulting services. |
Pre-Approval Policies and Procedures
The Audit Committee has approved all audit and non-audit services provided in 2022, prior to such service being provided by Ernst & Young. The Audit Committee’s policy is for the Audit Committee to approve all audit and non-audit services prior to such services being performed by the independent registered public accounting firm.
Audit Committee Report
The Audit Committee has reviewed and discussed the audited consolidated financial statements for the year ended December 31, 2022 with Guardant’s management and with Guardant’s independent registered public accounting firm, Ernst & Young.
83
Table of Contents
The Audit Committee has discussed with Ernst & Young those matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) and the SEC.
The Audit Committee has received and reviewed the written disclosures and the letter from Ernst & Young required by the PCAOB regarding Ernst & Young’s communications with the Audit Committee concerning independence and has discussed with Ernst & Young its independence from Guardant Health, Inc. and its management.
Based on the review and discussions referenced above, the Audit Committee recommended to our Board that the audited consolidated financial statements for the year ended December 31, 2022 be included in the Annual Report on Form 10-K for that year for filing with the SEC.
Respectfully submitted by the Audit Committee,
Steve Krognes, Chair
Meghan Joyce
Myrtle Potter
84
Table of Contents
PROPOSAL 3:
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
We are seeking an advisory, non-binding stockholder vote to approve the compensation of our NEOs as described in the “Compensation Discussion and Analysis,” executive compensation tables and accompanying narrative disclosures above on pages 33 through 80, referred to as the “say-on-pay vote”. In 2020, following an advisory vote of our stockholders on frequency of advisory votes on our named executive officer compensation, the Board determined to include an advisory vote on our named executive officer compensation in our proxy materials annually until the next required stockholder vote on frequency.
The Board believes that the information provided in the “Compensation Discussion and Analysis” and the executive compensation tables demonstrates that our executive compensation programs are designed appropriately, emphasize pay for performance and are working to ensure that management’s interests are aligned with our stockholders’ interests to support long-term value creation.
This vote is advisory, which means that this vote is not binding on us, our Board or our Compensation Committee. Although non-binding, our Board and our Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation programs.
85
Table of Contents
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Policies and Procedures for Review, Approval or Ratification of Transactions with Related Persons
Our Board has adopted a Related Person Transaction Policy and Procedures, setting forth the policies and procedures for the review and approval or ratification of related person transactions. This policy covers, with certain exceptions consistent with the exceptions set forth in Item 404 of Regulation S-K, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we (including any of our subsidiaries) are, were or will be a participant, where the amount involved exceeds $120,000 in any fiscal year and a related person has, had or will have a direct or indirect material interest.
Under the policy, management is responsible for implementing procedures to obtain information with respect to potential related person transactions, and then determining whether such transactions constitute related person transactions subject to the policy. Management then is required to present to the Audit Committee each proposed related person transaction. In reviewing and approving any such transactions, our Audit Committee is tasked to consider all relevant facts and circumstances, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction and the extent of the related person’s interest in the transaction. If advance Audit Committee approval of a related person transaction is not feasible, then the transaction may be preliminarily entered into by management upon prior approval by the Chairperson of the Audit Committee, subject to ratification of the transaction by the Audit Committee at the Audit Committee’s next regularly scheduled meeting. Management is responsible for updating the Audit Committee as to any material changes to any approved or ratified related person transaction and for providing a status report at least annually of all current related person transactions at a regularly scheduled meeting of the Audit Committee. No director may participate in approval of a related person transaction for which he or she is a related person.
The following are certain transactions, arrangements and relationships with our directors, executive officers and stockholders owning 5% or more of our outstanding common stock (a “Related Party Stockholder”). We believe that the terms of such agreements are as favorable as those we could have obtained from parties not related to us.
Indemnification Agreements
Our Bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the laws of the State of Delaware in effect from time to time, subject to certain exceptions contained in our bylaws. In addition, our Certificate of Incorporation provides that our directors will not be personally liable to us or our stockholders for any damages other than for breaches of fiduciary duty involving intentional misconduct, fraud or a knowing violation of law.
We have entered into indemnification agreements with each of our executive officers and directors. The indemnification agreements provide the executive officers and directors with contractual rights to indemnification, and expense advancement and reimbursement, to the fullest extent permitted under the laws of the State of Delaware in effect from time to time, subject to certain exceptions contained in those agreements.
86
Table of Contents
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the ownership of our common stock as of April 17, 2023 by: (i) each director (three of whom are the nominees for election to the Board); (ii) each of our named executive officers; (iii) all currently serving executive officers and directors as a group; and (iv) all those known by us to be beneficial owners of more than five percent of our common stock. Except as otherwise noted below, the address for persons listed in the tables is c/o Guardant Health, Inc., 3100 Hanover Street, Palo Alto, California, 94304.
Unless otherwise indicated in the footnotes to the table and subject to community property laws and the rights of spouses under revocable living trusts where applicable, we believe that each stockholder named in the table has sole voting and investment power with regard to the shares indicated as being beneficially owned. There were 102,764,757 shares of common stock outstanding on April 17, 2023.
| Name of Beneficial Owner | Total Shares Beneficially Owned** | Percentage of Shares Beneficially Owned** | ||||||
5% Stockholders: | ||||||||
The Vanguard Group, Inc. (1) | 9,040,240 | 8.8% | ||||||
FMR LLC (2) | 8,933,365 | 8.7% | ||||||
Capital International (3) | 7,879,355 | 7.7% | ||||||
Blackrock Inc. (4) | 5,495,293 | 5.3% | ||||||
Executive Officers and Directors: | ||||||||
Helmy Eltoukhy, Ph.D. (5) | 3,126,625 | 3.0% | ||||||
AmirAli Talasaz, Ph.D. (6) | 2,989,304 | 2.9% | ||||||
Michael Bell (7) | 36,831 | * | ||||||
Craig Eagle, M.D. (8) | 21,638 | * | ||||||
Christopher Freeman (9) | 27,585 | * | ||||||
John Saia (10) | 54,287 | * | ||||||
Ian Clark (11) | 24,472 | * | ||||||
Samir Kaul (12) | 35,682 | * | ||||||
Steve Krognes (13) | 0 | * | ||||||
Meghan Joyce (14) | 18,547 | * | ||||||
Vijaya Gadde (15) | 29,039 | * | ||||||
Myrtle Potter (16) | 18,341 | * | ||||||
Musa Tariq (17) | 0 | * | ||||||
All directors and executive officers as a group (15 persons) (18) | 6,504,314 | 6.2% | ||||||
| * | Represents beneficial ownership of less than one percent. |
87
Table of Contents
| ** | Includes shares which the individuals shown have the right to acquire upon exercise of stock options or the vesting of restricted stock units that are vested or vest within 60 days following April 17, 2023. Such shares are deemed to be outstanding in calculating the percentage ownership of such individual (and the group) but are not deemed to be outstanding as to any other person. |
| (1) | Based solely on information contained in a Schedule 13G/A filed with the SEC on February 9, 2023 by The Vanguard Group, reporting ownership as of December 30, 2022. The Vanguard Group reported shared voting power over 42,080 shares, sole dispositive power as to 8,903,278 shares, and shared dispositive power as to 136,962 shares. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. |
| (2) | Based solely on information contained in a Schedule 13G/A filed with the SEC on March 10, 2023 by FMR LLC, reporting ownership as of February 28, 2023. Abigail P. Johnson is a Director, the Chairman and the Chief Executive Officer of FMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. The address of FMR LLC is 245 Summer Street, Boston, Massachusetts 02210. |
| (3) | Based solely on information contained in a Schedule 13G filed with the SEC on February 13, 2023 by Capital International Investors, reporting ownership as of December 30, 2022. Capital International Investors reported sole voting power as to 7,879,355 shares and sole dispositive power as to 7,879,355 shares. The address of Capital Research Global Investors is 333 South Hope Street, 55th Fl, Los Angeles, California 90071. |
| (4) | Based solely on information contained in a Schedule 13G filed with the SEC on February 3, 2023, by Blackrock, Inc., reporting ownership as of December 31, 2022. Blackrock, Inc. reported sole voting power as to 5,261,753 of these shares and sole investment power with respect to 5,495,293 of these shares. The address of Blackrock, Inc. is 55 East 52nd Street, New York, New York 10055. |
| (5) | Includes 2,049,238 shares of common stock held by Helmy Eltoukhy and 711,612 shares of common stock that can be acquired upon the exercise of options that will be vested within 60 days of April 17, 2023. Also includes 365,775 shares held by Eltoukhy Investments, L.P., as to which Dr. Eltoukhy and his spouse have shared voting and dispositive power. |
| (6) | Includes 1,902,345 shares of common stock held by AmirAli Talasaz and 567,659 shares of common stock that can be acquired upon the exercise of options that will be vested within 60 days of April 17, 2023. Also includes 470,800 shares of common stock held by Talasaz Investments, L.P., 24,250 shares of common stock held by AmirAli Talasaz 2018 Children’s Remainder Trust, and 24,250 shares of common stock held by Maryam Eskandari 2018 Children’s Remainder Trust, as to which Dr. Talasaz and his spouse have shared voting and dispositive power. |
| (7) | Includes 7,279 shares of common stock held by Michael Bell and 28,319 shares of common stock that can be acquired upon the exercise of options, and 1,233 restricted stock units, that will be vested within 60 days of April 17, 2023. |
88
Table of Contents
| (8) | Includes 2,431 shares of common stock held by Craig Eagle and 15,489 shares of common stock that can be acquired upon the exercise of options, and 3,718 restricted stock units, that will be vested within 60 days of April 17, 2023. |
| (9) | Includes 3,191 shares of common stock held by Christopher Freeman and 19,515 shares of common stock that can be acquired upon the exercise of options, and 4,879 restricted stock units, that will be vested within 60 days of April 17, 2023. |
| (10) | Includes 13,031 shares of common stock held by John Saia and 40,993 shares of common stock that can be acquired upon the exercise of options, and 263 restricted stock units, that will be vested within 60 days of April 17, 2023. |
| (11) | Includes 2,198 shares of common stock held by Ian Clark and 15,571 shares of common stock that can be acquired upon the exercise of options, and 6,703 restricted stock units, that will be vested within 60 days of April 17, 2023. |
| (12) | Includes 5,873 shares of common stock held by Samir Kaul, 19,335 shares of common stock that can be acquired upon the exercise of options, and 5,531 restricted stock units, that will be vested within 60 days of April 17, 2023. Also includes 4,943 shares held by a trust for the benefit of Samir Kaul and his family. |
| (13) | Includes 0 shares of common stock held by Steve Krognes and 0 shares of common stock that can be acquired upon the exercise of options, and 0 restricted stock units, that will be vested within 60 days of April 17, 2023. |
| (14) | Includes 1,327 shares of common stock held by Meghan Joyce, and 11,557 shares of common stock that can be acquired upon the exercise of options, and 5,663 restricted stock units, that will be vested within 60 days of April 17, 2023. |
| (15) | Includes 5,145 shares of common stock held by Vijaya Gadde, and 18,167 shares of common stock that can be acquired upon the exercise of options, and 5,727 restricted stock units, that will be vested within 60 days of April 17, 2023. |
| (16) | Includes 1,231 shares of common stock held by Myrtle Potter, and 11,443 shares of common stock that can be acquired upon the exercise of options, and 5,667 restricted stock units, that will be vested within 60 days of April 17, 2023. |
| (17) | Includes 0 shares of common stock held by Musa Tariq, and 0 shares of common stock that can be acquired upon the exercise of options, and 0 restricted stock units, that will be vested within 60 days of April 17, 2023. |
| (18) | Includes an aggregate of 4,017,598 shares of common stock that are directly held and 1,556,446 shares of common stock that can be acquired upon the exercise of options, and 40,252 restricted stock units, that will be vested within 60 days of April 17, 2023. Also includes 890,018 shares held by trusts for the benefit of some of our executive officers and board members. |
89
Table of Contents
DELINQUENT SECTION 16(A) REPORTS
Section 16 of the Securities Exchange Act of 1934, as amended, requires our directors and Executive Officers (and any persons beneficially owning more than 10 percent of a class of our stock) to file reports of their stock ownership and changes in their ownership of our common stock with the SEC on Forms 3, 4, and 5, as appropriate. Based solely on our review of Company records, we believe that all required forms concerning beneficial ownership were filed on time by all directors and Executive Officers with respect to transactions during the fiscal year ended December 31, 2022, except for one Form 4 filing that was not timely filed with respect to each of the following: Mr. Bell’s May 9, 2022 option and RSU award; Dr. Eagle’s May 15, 2022 RSU vesting and related withholding of shares to pay taxes; Ms. Merrill’s August 1, 2022 RSU vesting and related withholding of shares to pay taxes; Ms. Merrill’s August 15, 2022 RSU vesting and related withholding of shares to pay taxes; Ms. Merrill’s September 1, 2022 RSU vesting and related withholding of shares to pay taxes; Ms. Joyce’s August 4, 2022 RSU vesting; Mr. Kalia’s September 1, 2022 RSU vesting and related withholding of shares to pay taxes; Mr. Saia’s September 1, 2022 RSU vesting and related withholding of shares to pay taxes; and Ms. Potter’s December 15, 2022 RSU vesting. In each case, the late Form 4 filing was due to an administrative error, and Guardant has taken administrative steps to prevent the reoccurrence of such errors going-forward.
90
Table of Contents
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth the equity awards outstanding as of December 31, 2022 regarding compensation plans under which our equity securities are authorized for issuance:
Plan Category
| Number of Securities
| Weighted-Average
| Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Shares Reflected in the First Column) | |||||||||
Equity compensation plans approved by security holders (1) | 9,692,939 (2) | $ | 34.34 (2) | 6,556,607 (3) | ||||||||
Equity compensation plan not approved by security holders | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | 9,692,939 | $ | 34.34 | 6,556,607 | ||||||||
|
|
|
|
|
| |||||||
| (1) | Consists of the Amended and Restated 2012 Plan (the “2012 Plan”), the 2018 Plan and the 2018 Employee Stock Purchase Plan (the “ESPP”). We are no longer permitted to grant awards under the 2012 Plan. |
| (2) | Represents 3,687,888 outstanding RSUs, 2,260,764 outstanding Founders’ 2020 Performance Awards, which are market-based RSUs, 341,713 outstanding performance-based RSUs granted at target, and 3,402,574 outstanding options and the weighted average exercise price of such outstanding options. Excludes shares subject to purchase under our ESPP offerings outstanding on December 31, 2022. |
| (3) | Includes 5,438,296 shares available for issuance under the 2018 Plan and 1,118,311 shares reserved for issuance under the ESPP as of December 31, 2022. Assumes that the outstanding performance based RSUs are earned at target. |
An aggregate of 3,658,602 shares of our common stock was initially available for issuance under awards granted pursuant to the 2018 Plan. In addition, the number of shares available for issuance under the 2018 Plan may be increased on January 1 of each calendar year beginning in 2019 and ending in 2028 by an amount equal to the least of (i) 3,689,000 shares, (ii) four percent of the shares of common stock outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year, assuming the conversion of any shares of preferred stock, but excluding shares issuable upon the exercise or payment of stock options, warrants or other equity securities with respect to which shares have not actually been issued, and (iii) such smaller number of shares as determined by our Board. Effective as of January 1, 2023, the number of shares available for issuance under the 2018 Plan was increased by 3,689,000 shares, which is not reflected in the table above.
A total of 922,250 shares of our common stock are initially reserved for issuance under our ESPP. In addition to the foregoing, on the first day of each calendar year beginning on January 1, 2019 and ending on and including January 1, 2028, the number of shares of our common stock available for issuance under the ESPP may be increased by the least of (i) 1,106,700 shares, (ii) 1% of the shares outstanding (on an as-converted basis) on the last day of the immediately preceding calendar year, assuming the conversion of any shares of preferred stock, but excluding shares issuable upon the exercise or payment of stock options,
91
Table of Contents
warrants or other equity securities with respect to which shares have not actually been issued, and (iii) such smaller number of shares as determined by our Board. Effective as of January 1, 2023, the number of shares available for issuance under the ESPP was increased by 1,026,194 shares, which is not reflected in the table above. The maximum number of shares subject to purchase under our ESPP offerings outstanding on December 31, 2022 is 1,118,311, the purchase covering these offerings will be on May 15, 2023 and November 15, 2023.
92
Table of Contents
OTHER MATTERS
Stockholder Proposals and Nominations
Stockholders who intend to have a proposal considered for inclusion in our proxy materials for presentation at our 2024 Annual Meeting of Stockholders pursuant to Rule 14a-8 under the Exchange Act must submit the proposal to our Corporate Secretary at our offices at 3100 Hanover Street, Palo Alto, California, 94304 no later than December 28, 2023.
Stockholders intending to present a proposal at the 2024 Annual Meeting of Stockholders, but not to include the proposal in our proxy statement, or to nominate a person for election as a director, must comply with the requirements set forth in our Bylaws. Our Bylaws require, among other things, that our Secretary receive written notice from the stockholder of record of their intent to present such proposal or nomination not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting. Therefore, we must receive notice of such a proposal or nomination for the 2024 Annual Meeting of Stockholders no earlier than the close of business on February 14, 2024 and no later than the close of business on March 16, 2024. The notice must contain the information required by the Bylaws, a copy of which is available upon request to our Secretary. In the event that the date of the 2024 Annual Meeting of Stockholders is more than 30 days before or more than 60 days after June 14, 2024, then our Secretary must receive such written notice not earlier than the close of business on the 120th day prior to the 2024 Annual Meeting and not later than the close of business on the 90th day prior to the 2024 Annual Meeting or, if later, the 10th day following the day on which public disclosure of the date of such annual meeting is first made by us. SEC rules permit management to vote proxies in its discretion in certain cases if the stockholder does not comply with this deadline and, in certain other cases notwithstanding the stockholder’s compliance with this deadline. In addition to satisfying the foregoing requirements under the company’s bylaws, to comply with the universal proxy rules (once they become effective), stockholders who intend to solicit proxies in support of director nominees other than the company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than April 15, 2024.
We reserve the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with these or other applicable requirements. We intend to file a Proxy Statement and WHITE proxy card with the SEC in connection with its solicitation of proxies for our 2024 Annual Stockholders’ Meeting. Stockholders may obtain our Proxy Statement (and any amendments and supplements thereto) and other documents as and when filed by the Company with the SEC without charge from the SEC’s website at: www.sec.gov.
Householding of Proxy Materials
The SEC has adopted rules that permit companies and intermediaries (such as banks and brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
93
Table of Contents
This year, a number of banks and brokers with account holders who are our stockholders will be householding our proxy materials. A single proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your bank or broker that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report, please notify your bank or broker, or contact us at 3100 Hanover Street, Palo Alto, California, 94304. Stockholders who currently receive multiple copies of the proxy statement at their address and would like to request householding of their communications should contact their bank or broker.
No Incorporation by Reference
To the extent that this proxy statement is incorporated by reference into any other filing by us under the Securities Act or the Exchange Act, the sections of this proxy statement entitled “Audit Committee Report” and “Compensation Committee Report” and Pay versus Performance, to the extent permitted by the rules of the SEC, will not be deemed incorporated, unless specifically provided otherwise in such filing. In addition, references to our website are not intended to function as a hyperlink and the information contained on our website is not intended to be part of this proxy statement. Information on our website, other than our proxy statement, Notice of Annual Meeting of Stockholders and form of proxy, is not part of the proxy soliciting material and is not incorporated herein by reference.
Forward-Looking Statements
Forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, the risks described in our Annual Report on Form 10-K for the year ended December 31, 2022 and available at www.sec.gov. The words “may,” “will,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “aim,” “seek,” “should,” “likely,” and similar expressions as they relate to us or our management are intended to identify these forward-looking statements. All statements by us regarding our expected financial position, revenues, cash flows and other operating results, business strategy and similar matters are forward-looking statements. Our expectations expressed or implied in these forward-looking statements may not turn out to be correct. Forward-looking statements should be evaluated together with the many uncertainties that affect our business, particularly those mentioned in the risk factors in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 and in our periodic reports on Form 10-Q and our current reports on Form 8-K. Additionally, we may provide information herein or in our other reporting, some of which may be forward-looking statements, that is not necessarily “material” under the federal securities laws for SEC reporting purposes, but that is informed by various ESG standards and frameworks (including standards for the measurement of underlying data), and the interests of various stakeholders. Much of this information is subject to assumptions, estimates or third-party information that is still evolving and subject to change. For example, our disclosures based on any standards may change due to revisions in framework requirements, availability of information, changes in our business or applicable government policies, or other factors, some of which may be beyond our control. Any forward-looking
94
Table of Contents
statement speaks only as of the date as of which such statement is made, and, except as required by law, we undertake no, and expressly disclaim any, obligation to update any forward-looking statement to reflect events or circumstances, including unanticipated events, after the date as of which such statement was made.
Other Matters
As of the date of this proxy statement, the Board knows of no business, other than that described in this proxy statement, that will be presented for consideration at the Annual Meeting. If any other business comes before the Annual Meeting or any adjournment or postponement thereof, proxy holders may vote their respective proxies at their discretion.
By Order of the Board of Directors of Guardant Health, Inc.,
John Saia
Chief Legal Officer and Corporate Secretary
Palo Alto, California,
April 27, 2023
95
Table of Contents
Appendix A
Director Qualification Standards and Additional Selection Criteria
Director Qualification Standards:
The Nominating and Corporate Governance Committee, in recommending director candidates for election to the Board, and the Board, in nominating director candidates, will consider candidates who have a high level of personal and professional integrity, strong ethics and values and the ability to make mature business judgments.
Additional Selection Criteria:
In evaluating director candidates, the Nominating and Corporate Governance Committee and the Board may also consider the following criteria as well as any other factor that they deem to be relevant:
| A. | the candidate’s experience in corporate management, such as serving as an officer or former officer of a publicly held company; |
| B. | the candidate’s experience as a board member of another publicly held company; |
| C. | the candidate’s professional and academic experience relevant to the Company’s industry; |
| D. | the strength of the candidate’s leadership skills; |
| E. | the candidate’s experience in finance and accounting and / or executive compensation practices; |
| F. | whether the candidate has the time required for preparation, participation and attendance at Board meetings and committee meetings, if applicable; and |
| G. | the candidate’s diversity of background and perspective, including, but not limited to, with respect to age, gender, race, place of residence and specialized experience, and in light of applicable diversity requirements (under applicable state law or otherwise). |
In addition, the Board will consider whether there are potential conflicts of interest with the candidate’s other personal and professional pursuits.
The Board should monitor the mix of specific experience, qualifications and skills of its directors in order to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure.
A-1
Table of Contents
Appendix B
Reconciliation of Non-GAAP Information
We believe that the exclusion of certain income and expenses in calculating these non-GAAP financial measures can provide a useful measure for investors when comparing our period-to-period core operating results, and when comparing those same results to that published by our peers. We exclude certain other items because we believe that these income (expenses) do not reflect expected future operating expenses. Additionally, certain items are inconsistent in amounts and frequency, making it difficult to perform a meaningful evaluation of our current or past operating performance. We use these non-GAAP financial measures to evaluate ongoing operations, for internal planning and forecasting purposes, and to manage our business.
These non-GAAP financial measures are not intended to be considered in isolation from, as substitute for, or as superior to, the corresponding financial measures prepared in accordance with GAAP. There are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation, and do not present the full measure of our recorded costs against its revenue. In addition, our definition of the non-GAAP financial measures may differ from non-GAAP measures used by other companies.
Reconciliation of Selected GAAP Measures to Non-GAAP Measures
(unaudited)
(in thousands, except per share data)
| Twelve Months Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
GAAP research and development expense | $ | 373,807 | $ | 263,221 | ||||
Stock-based compensation expense and related employer payroll tax payments | (26,928 | ) | (19,370 | ) | ||||
Contingent consideration | (5,229 | ) | — | |||||
|
|
|
| |||||
Non-GAAP research and development expense | $ | 341,650 | $ | 243,851 | ||||
GAAP sales and marketing expense | $ | 299,828 | $ | 191,881 | ||||
Amortization of intangible assets | (201 | ) | — | |||||
Stock-based compensation expense and related employer payroll tax payments | (25,666 | ) | (15,762 | ) | ||||
|
|
|
| |||||
Non-GAAP sales and marketing expense | $ | 273,961 | $ | 176,119 | ||||
|
|
|
| |||||
GAAP general and administrative expense | $ | 163,956 | $ | 206,640 | ||||
Amortization of intangible assets | (1,346 | ) | (1,347 | ) | ||||
Stock-based compensation expense and related employer payroll tax payments | (37,282 | ) | (116,105 | ) | ||||
Contingent consideration | (4,305 | ) | (2,380 | ) | ||||
|
|
|
| |||||
Non-GAAP general and administrative expense | $ | 121,023 | $ | 86,808 | ||||
|
|
|
| |||||
B-1
Table of Contents
| Twelve Months Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
GAAP loss from operations | $ | (544,378 | ) | $ | (411,001 | ) | ||
Amortization of intangible assets | 2,480 | 1,948 | ||||||
Stock-based compensation expense and related employer payroll tax payments | 95,451 | 154,860 | ||||||
Contingent consideration | 9,534 | 2,380 | ||||||
|
|
|
| |||||
Non-GAAP loss from operations | $ | (436,913 | ) | $ | (251,813 | ) | ||
|
|
|
| |||||
GAAP net loss | $ | (654,588 | ) | $ | (384,770 | ) | ||
Amortization of intangible assets | 2,480 | 1,948 | ||||||
Stock-based compensation expense and related employer payroll tax payments | 95,451 | 154,860 | ||||||
Contingent consideration | 9,534 | 2,380 | ||||||
Unrealized (gains) losses on marketable equity securities | 7,793 | — | ||||||
Impairment of other assets | 5,261 | — | ||||||
Fair value adjustments of noncontrolling interest liability | 99,785 | — | ||||||
Non-recurring other income | (1,100 | ) | (26,100 | ) | ||||
|
|
|
| |||||
Non-GAAP net loss | $ | (435,384 | ) | $ | (251,682 | ) | ||
|
|
|
| |||||
GAAP net loss attributable to Guardant Health, Inc. common stockholders | $ | (654,588 | ) | $ | (405,670 | ) | ||
Amortization of intangible assets | 2,480 | 1,948 | ||||||
Stock-based compensation expense and related employer payroll tax payments | 95,451 | 154,860 | ||||||
Contingent consideration | 9,534 | 2,380 | ||||||
Non-recurring other income | (1,100 | ) | (26,100 | ) | ||||
Unrealized (gains) losses on marketable equity securities | 7,793 | — | ||||||
Impairment of other assets | 5,261 | — | ||||||
Fair value adjustments of noncontrolling interest liability | 99,785 | — | ||||||
Adjustment of redeemable noncontrolling interest | — | 20,900 | ||||||
|
|
|
| |||||
Non-GAAP net loss attributable to Guardant Health, Inc. common stockholders | $ | (435,384 | ) | $ | (251,682 | ) | ||
|
|
|
| |||||
GAAP net loss per share attributable to Guardant Health, Inc., common stockholders, basic and diluted | $ | (6.41 | ) | $ | (4.00 | ) | ||
Non-GAAP net loss per share attributable to Guardant Health, Inc., common stockholders, basic and diluted | $ | (4.26 | ) | $ | (2.48 | ) | ||
Weighted-average shares used in computing GAAP and Non-GAAP net loss per share, basic and diluted | 102,178 | 101,314 | ||||||
B-2
Table of Contents
Reconciliation of GAAP Net Loss Attributable to Guardant Health, Inc.
Common Stockholders to Adjusted EBITDA
(unaudited)
(in thousands)
| Twelve Months Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
GAAP net loss attributable to Guardant Health, Inc. common stockholders | $ | (654,588 | ) | $ | (405,670 | ) | ||
Interest income | (6,069 | ) | (3,930 | ) | ||||
Interest expense | 2,577 | 2,577 | ||||||
Other (income) expense, net | 12,778 | (25,178 | ) | |||||
Provision for income taxes | 1,139 | 300 | ||||||
Depreciation and amortization | 35,962 | 22,271 | ||||||
Stock-based compensation expense and related employer payroll tax payments | 95,451 | 154,860 | ||||||
Contingent consideration | 9,534 | 2,380 | ||||||
Fair value adjustments of noncontrolling interest liability | 99,785 | — | ||||||
Adjustment of redeemable noncontrolling interest | — | 20,900 | ||||||
|
|
|
| |||||
Adjusted EBITDA | $ | (403,431 | ) | $ | (231,490 | ) | ||
|
|
|
| |||||
B-3
Table of Contents
SCAN TO VIEW MATERIALS & VOTE VOTE BY INTERNET—www.proxyvote.com or scan the QR Barcode above GUARDANT HEALTH, INC. Use the Internet to transmit your voting instructions and for electronic delivery of 3100 HANOVER STREET PALO ALTO, CA 94304 information. Vote by 11:59 P.M. Eastern Time on June 13, 2023. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/GH2023 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE—1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. Eastern Time on June 13, 2023. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. The Board of Directors recommends you vote FOR the following: 1. Election of Class II Directors Nominees For Withhold 1a. Ian Clark 0 0 1b. Meghan Joyce 0 0 1c. Samir Kaul 0 0 The Board of Directors recommends you vote FOR proposals 2 and 3. For Against Abstain 2. Ratification of the appointment of Deloitte & Touche LLP as Guardant Health, Inc.’s independent registered 0 0 0 public accounting firm for the year ending December 31, 2023. 3. Non-binding advisory vote to approve Guardant Health, Inc.’s named executive officer compensation. 0 0 0 NOTE: Such other business as may properly come before the meeting or any adjournment thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Table of Contents
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The 10K Wrap and Notice and Proxy Statement are available at www.proxyvote.com Guardant Health, Inc. Annual Meeting of Stockholders June 14, 2023 09:30 AM This proxy is solicited by the Board of Directors The stockholder hereby appoints Helmy Eltoukhy, AmirAli Talasaz and John Saia, or any of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares Common Stock of Guardant Health, Inc. that the stockholder is entitled to vote at the Annual Meeting of Stockholders to be held at 9:30 AM, Pacific Time on June 14, 2023, virtually at www.virtualshareholdermeeting.com/GH2023, or at any continuation, postponement adjournment thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will voted in accordance with the Board of Directors’ recommendations. Continued and to be signed on reverse side