The following
Compensation Discussion & Analysis (CD&A) describes the background, objectives and structure of our 2015 executive compensation programs. This CD&A is intended to be read in conjunction with the tables following the
Compensation Committee Report, which provide further historical compensation information for our named executive officers (NEOs):
Our
long-term success has been made possible in large measure by our ability to attract, retain and motivate talented and experienced individuals across all areas of our business, including our senior executives. In 2015, our NEOs were:
ARIAD is a global oncology company focused on transforming the lives of cancer patients with breakthrough medicines. Our mission is to
discover, develop and commercialize small-molecule drugs to treat cancer in patients with the greatest unmet medical needaggressive cancers for which current therapies are inadequate. We are focused on value-driving investments in
commercialization, research and development and new business development initiatives that we expect will lead to sustained profitability and increased shareholder value.
We currently are commercializing or developing the following three products and product candidates:
ARIAD has made significant progress in our business since the start of 2015:
At our 2015 Annual Meeting of Shareholders, approximately 56% of votes cast by our shareholders supported our say-on-pay proposal. This result was lower than
we anticipated. As a result, we prioritized our shareholder engagement program. Following the 2015 meeting, we reached out to the majority of our top 20 shareholders and offered to discuss our executive compensation practices in detail. Our outreach
efforts led to constructive conversations with the majority of our top 10 shareholders and almost 60% of our top 20 shareholders. These conversations allowed us to gain insight and outside perspective on our executive compensation program.
We also met with two leading proxy advisory firms to gather their perspectives.
Overall, the feedback we received from shareholders regarding our compensation program was overwhelmingly positive, particularly with respect to the design of
our new CEOs compensation package. However, our shareholders did express some areas of concern. The following chart summarizes our responses to the key areas of concern expressed by our shareholders.
Our NEO compensation is based on clear, measurable goals related to Company and individual performance. The Compensation Committee sets performance objectives
that are designed to be challenging but achievable. Annual performance awards and long-term equity incentive compensation levels are determined based on pre-determined, measurable corporate objectives and individual performance reviews. The
Companys performance shares, which comprise a higher percentage of long-term compensation relative to our peers, possess a second layer of objective metrics that must be achieved before realization.
At the beginning of each year, our Compensation Committee evaluates managements progress towards each corporate objective for the prior year. Specific
corporate objectives for 2015 are set forth in detail below in Part IV under the heading Executive Compensation Determinations Evaluation of Company Performance Against Corporate Objectives. NEOs are further evaluated based on
detailed self and peer evaluations, as well as the CEOs review and evaluation of all of these assessments and overall evaluation of performance for each officer for the year. Performance ratings of each NEO are based on both achievement of
these corporate objectives and these evaluations of individual performance, which our Compensation Committee uses to determine our executives annual performance awards, long-term equity incentive grants and base salary increases.
In addition, we have made the following important changes to our compensation program since the beginning of 2015:
Paris Panayiotopoulos was appointed CEO and President of the Company effective January 1, 2016. Mr. Panayiotopoulos employment agreement
provides for a three-year term with the following compensation approved by the Compensation Committee, in consultation with its independent compensation consultant, Radford:
Manmeet S. Soni was appointed Executive Vice President, CFO and Treasurer of the Company effective
March 21, 2016. Mr. Sonis employment agreement provides for a three-year term with the following compensation approved by the Compensation Committee, in consultation with its independent compensation consultant, Radford:
The Compensation Committee determined these terms were appropriate and fair given the experience and value
Mr. Panayiotopoulos and Mr. Soni bring to the Company. Additionally, the Compensation Committee determined the one-time payments disclosed above were necessary and appropriate measures to attract Mr. Panayiotopoulos and Mr. Soni,
and to reimburse them in part for their expenses related to joining the Company and pending near-term payments at their previous employers. Lastly, the Compensation Committee believes the equity components help to align their interests with those
shareholders.
Our compensation plan for our CEO and other NEOs, which we
refer to as our Other NEOs, incorporates three primary sources: base salary, annual performance awards and long-term equity incentives. In 2015, executive pay packages continued to emphasize our pay-for-performance philosophy through a heavy
reliance on annual performance awards and long-term equity incentives which are variable and highly performance-based.
Our pay mixes for 2015 are affected by two items worth noting. The first is for our CEO, Dr. Harvey Berger, who
received only RSUs in 2015 pursuant to the terms of his Retirement Agreement. The second is the time-based stock option grant made to one NEO, Thomas J. DesRosier, Esq. in 2015 in connection with the commencement of his employment. Removing his
option grant would effectively make the balance between RSUs and performance shares for our Other NEOs to be 50/50 in 2015.
Our Compensation Committee
considers this mix of compensation elements to be critical in driving our pay-for-performance philosophy. As displayed in the graphics above, the vast majority of our executives compensation packages are delivered in either annual
performance awards or long-term incentive compensation with value contingent on the achievement of specific performance targets, appreciation of our stock value, or both.
Our Compensation Committee is strongly committed to alignment of senior executive compensation with value creation for our shareholders:
There has been significant volatility in our stock price over the past five years. It increased by 140% and 57% in 2011 and 2012, respectively. 2013 was a
particularly volatile year, with a sharp stock price decline of almost 90% after the temporary suspension of marketing and distribution of Iclusig in the United States in the fall of 2013, followed by an increase of more than 150% from its price
nadir by the end 2013. In 2014 and 2015, our stock has held steady with minimal variation. In aggregate, over the five years ended December 31, 2015, our annualized TSR was 23%.
The following chart compares our cumulative TSR over the last five years with both the total reported grant date fair value compensation of our CEO (disclosed
pay the Summary Compensation Table from this filing* and our prior filings) and realizable CEO pay, which reflects cash plus the value of equity grants measured at year end:
STRONG COMPENSATION GOVERNANCE AND PRACTICES
The following are characteristics of our compensation program that demonstrate its strong governance principles:
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Best Practices We Employ
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Practices We Avoid
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ü
Pay is closely linked to performance through a mix of annual and long-term awards utilizing various individual and corporate objectives
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X
No single-trigger
change in control provisions following the retirement of Dr. Berger
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ü
Structure significant proportion of executive compensation from long-term equity incentive plan
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X
No tax gross-ups
following the retirement of Dr. Berger
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ü
Include relative TSR metric in performance-based equity.
A minority of our current peers include a similar metric
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X
No
hedging or pledging of shares
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ü
Thoughtful structure our peer group, selecting other similarly sized biotech firms and conducting annual Compensation Committee review
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ü
Utilize
robust stock ownership guidelines
CEO: 6x base salary
Other Executive Officers: 1x base salary
Directors: 5x annual cash compensation
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17
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ü
Incentive compensation clawback policy
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ü
Our Compensation Committee is comprised entirely of independent directors
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ü
Utilize an independent compensation consultant
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ü
Engage directly
with shareholders on executive compensation and governance issues
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II.
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Components of Executive Compensation
|
Our compensation plan for our NEOs
incorporates three primary sources: base salary, annual performance awards and long-term equity incentives. We emphasize variable, long-term, performance-based compensation for our most senior executives, in line with their level of responsibility
for and impact on our results.
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Type
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|
Element
|
|
Performance
Period
|
|
Objective
|
|
Performance measured and/or
rewarded for 2015 and 2016
|
|
|
|
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|
Fixed
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|
Base Salary
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Annual
|
|
Fixed pay, to recognize an individuals role and responsibilities
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|
Reviewed annually and set based on market competitiveness, individual performance and internal equity considerations
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Performance -based
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Annual Bonus
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|
Annual
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|
Variable pay component, to reward achievement of annual financial, operating and individual pre-set goals
|
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Corporate
Objectives
Individual Performance Metrics
See Annual Performance Award Compensation below
.
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Performance -based
|
|
Performance Shares
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|
Long-Term
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|
Supports the achievement of the Companys three-year financial and strategic objectives
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Research and Development Goals (2015 only)
Commercial Goals (2015 only)
Relative TSR
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Performance -based
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Restricted Stock Units
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Long-Term
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Supports retention and the creation of long-term sustained shareholder value
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Reviewed against market practice and the equity pool to ensure competitive delivery aligned with long-term share ownership
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Performance -based
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Stock options
(2016)
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Long-Term
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|
Supports a focus on increasing share price over the long-term
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|
Long-term stock price appreciation
|
BASE SALARY
Base salary is intended to provide a fair and competitive base level of compensation that reflects job function, organizational level, experience and tenure
and sustained performance over time. On an annual basis, our executives are eligible for a salary increase. The amount of this increase, if any, is determined by our Compensation Committee, and recommended to our Board for approval in the case of
our CEO. Any target salary increase is based on:
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●
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|
analysis of market compensation data;
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●
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demonstrated levels of core job competency and effective leadership;
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●
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|
performance in achieving key corporate and individual objectives established at the beginning of the previous year;
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●
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|
internal pay equity; and
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●
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|
the recommendation of the Committees independent compensation consultant
|
18
The executives performance rating leads to the application of a performance multiplier, which, in
conjunction with peer information, directly influences the actual salary adjustment. Adjustments to base salary levels typically are made in the first quarter of each year and are paid retroactively to January 1
st
of that year.
In 2015, the NEOs received an average base salary adjustment of 2.3%. As previously
mentioned, due to several factors including Company performance, shareholder feedback, and market analysis, the Compensation Committee decided to freeze base salaries and give no merit increases to the NEOs for 2016.
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Name
|
|
2014 Base
|
|
|
2015 Base
|
|
|
% Adjustment
|
|
|
|
|
|
Harvey J.
Berger, M.D.
(1)
|
|
$
|
751,000
|
|
|
$
|
751,000
|
|
|
|
0.00
|
%
|
|
|
|
|
Timothy
P. Clackson, Ph.D.
|
|
$
|
493,000
|
|
|
$
|
513,000
|
|
|
|
4.10
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%
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|
|
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|
Edward M.
Fitzgerald
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|
$
|
466,000
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|
|
$
|
475,000
|
|
|
|
1.90
|
%
|
|
|
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Thomas J.
DesRosier, Esq.
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|
|
N/A
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|
$
|
485,000
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|
|
|
N/A
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|
|
|
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|
Martin J.
Duvall
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|
$
|
455,000
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|
|
$
|
470,000
|
|
|
|
3.30
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%
|
|
|
|
|
Average
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|
|
|
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2.30
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%
|
|
(1)
|
After the annual salary increases were approved in March 2015, Dr. Berger received a salary increase to $773,500 (3% increase), per the terms of his Retirement Agreement which is not reflected in the table.
|
VARIABLE AND PERFORMANCE-BASED COMPENSATION
We believe that one of the most important motivators for our executives is the opportunity to earn compensation greater than the established targets by
exceeding applicable performance requirements. We accomplish this through a system of performance multipliers that reward exceptional performance at substantially higher levels than performance that merely meets requirements of the
position.
Under our performance multiplier approach, the level of performance of each executive, in conjunction with the level of achievement of our
corporate goals, directly influences such executives base salary, annual performance award and long-term equity incentive award relative to target awards. Our Compensation Committee established in 2013 the following performance multiplier
scale, for purposes of our NEOs compensation. In 2015, our average NEO performance rating was 3.6, generally resulting in below target (100%) awards.
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Performance
|
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Annual
Performance
Award Factor
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|
Long-term Equity
Incentive
Factor
|
|
|
|
Outstanding
(5.0)
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|
200%
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160%
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|
|
|
(4.5)
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150%
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130%
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|
|
|
Exceeds
Requirements (4.0)
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100%
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100%
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|
(3.5)
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75%
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85%
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Meets
Requirements (3.0)
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50%
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50%
|
|
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Below Meets
Requirements (< 3.0)
|
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0%
|
|
0%
|
19
ANNUAL PERFORMANCE AWARD COMPENSATION
Annual performance awards are intended to reward our executive officers for achievement of corporate, individual and key leadership and management objectives
on an annual basis. Our Compensation Committee annually establishes target annual performance awards for different tiers of executives, which are expressed as a percentage of base salary. These target awards are then adjusted for each executive
through the application of a performance multiplier based on the individual executives performance rating for the year.
Annual performance awards
to our NEOs for 2015 performance were paid in cash and were established in accordance with the annual performance targets for all our executives. Targeted annual awards for 2015 and 2016 were as follows:
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Name
|
|
2015 Target Annual
Awards
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|
2016 Target Annual
Awards
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|
|
|
|
(as a %
of base salary)
|
Harvey J. Berger, M.D.
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85%
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|
Timothy P. Clackson, Ph.D.
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50%
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|
50%
|
Edward M. Fitzgerald
|
|
50%
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|
|
Martin J. Duvall
|
|
50%
|
|
50%
|
Thomas J. DesRosier, Esq.
|
|
50%
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|
50%
|
Paris Panayiotopoulos
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|
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|
70%
|
Manmeet S. Soni
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50%
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2015 Results
In early
2016 our CEO and Other NEOs were awarded annual performance awards in connection with meeting their 2015 performance objectives described above, as well as an evaluation of their individual performance. Annual performance awards are set at an annual
target percentage of salary.
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|
Name
|
|
2015 Target
Annual Awards
(as a % of Base Salary)
|
|
Performance
Factor
|
|
Actual
Target
Percentage
|
|
Actual Award
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|
|
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|
Harvey J. Berger, M.D.
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85%
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|
3.5
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|
75%
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|
$493,106
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Timothy P. Clackson, Ph.D.
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50%
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|
3.5
|
|
75%
|
|
$192,000
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Edward M. Fitzgerald
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|
50%
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|
3.5
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|
75%
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$178,000
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Martin J. Duvall
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50%
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3.5
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75%
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|
$176,000
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Thomas J. DesRosier, Esq.
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50%
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|
4.0
|
|
100%
|
|
$223,000
|
LONG-TERM EQUITY INCENTIVE COMPENSATION
Long-term equity incentive awards are intended to reward our executive officers for achievement of corporate, individual and key leadership and management
objectives. In addition, such awards are intended to align the interests of all of our executive officers with those of our shareholders, promote progress toward achieving our long-term strategy and assist in long-term retention of our executive
officers. As such, long-term equity incentive awards for our executive officers are made in the form of performance shares, restricted stock units and/or stock options.
Performance shares are earned on the achievement of one or more key corporate objectives or metrics and, once achieved, are subject in certain cases to
further time-based vesting to promote retention. Our restricted stock units generally vest annually over three years, and our stock options generally vest over four years.
20
Based on 2014 performance assessments, our Compensation Committee awarded the following equity grants to our
executives in April 2015:
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|
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|
|
|
Name
|
|
Performance Shares at
Target (#)
|
|
Restricted Stock Units
(#)
|
|
|
|
Harvey J.
Berger, M.D.
|
|
|
|
345,000
|
|
|
|
Timothy
P. Clackson, Ph.D.
|
|
75,100
|
|
70,200
|
|
|
|
Edward M.
Fitzgerald
|
|
75,100
|
|
54,000
|
|
|
|
Martin J.
Duvall
|
|
75,100
|
|
54,000
|
|
|
|
Thomas
J. DesRosier, Esq.(1)
|
|
|
|
|
|
(1)
|
Mr. DesRosier joined the Company in January 2015 and, per his employment agreement, received a stock option to purchase 130,000 shares and 110,000 RSUs.
|
In April 2015, Dr. Berger entered into a Retirement Agreement with the Company pursuant to which Dr. Berger was granted restricted stock units with
respect to 345,000 shares of common stock, which vested upon his retirement on December 31, 2015. For more details regarding Dr. Bergers Retirement Agreement, see the subsection of this filing captioned Narrative to Summary
Compensation Table and Grants of Plan-Based Awards in 2015 Table Dr. Bergers Retirement Agreement.
2015 Performance Shares
For the performance shares granted in early 2015, the number of shares earned ranged from 0% to 160% of the target amount, with the actual number of
shares earned and the vesting schedule varying depending on the degree of achievement of the various goals. Based upon the Companys strategic imperatives for 2015, our Compensation Committee determined that the most appropriate performance
share structure would continue to balance the underlying pillars of the business commercial and R&D. In addition, our Compensation Committee determined to further align executive pay directly with shareholder returns through the
introduction of a relative TSR metric. For 2015, our Compensation Committee continued to utilize an equity model that targets approximately 50% of long-term equity incentives in the form of performance shares.
The R&D goal focused on the achievement of 50% enrollment in the OPTIC-2L randomized second line trial of Iclusig vs. nilotinib, as a means to further
potential market opportunity for Iclusig, to be achieved no later than June 30, 2018.
The Commercial goal was based on fiscal year 2015 Iclusig
revenue, as a means to emphasize the importance of executing on Iclusig product sales to lay the foundation for future commercial success. The target (100%) payout for the award was directly aligned with the Companys initial 2015
financial guidance of $130 to $140 million of net product revenues. Threshold performance for the award was $115 million (earning 50% of target payout) with stretch performance defined as revenue in excess of $140 million (earning 160% of target
payout). Despite lower revenue guidance in December 2015 and final 2015 Iclusig revenue at less than the threshold target, the Compensation Committee did not adjust revenue targets for these performance shares. As such, and as certified by the
Compensation Committee in February 2016, the revenue target was not achieved and none of these shares were earned.
The relative TSR goal is designed to
ensure that executives have direct alignment with ARIADs stock price performance, in comparison to the broader industrys stock performance. ARIADs stock price performance will be measured against component companies in the NASDAQ
Biotechnology Index, which is the life sciences index most highly correlated with ARIAD, and a frequent index used for this type of program structure. The payouts of this objective are described in more detail below.
The objectives of the 2015 performance shares are set forth below:
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|
|
Metric
|
|
Weighting
|
|
Performance
Period End Date
|
|
Vesting
|
|
|
|
|
R&D Goal: Clinical Trial Enrollment
|
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40%
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|
6/30/2018
|
|
50-100% at achievement; any
remainder at first anniversary
|
|
|
|
|
Commercial Goal: 2015 Global Product
Revenue
|
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40%
|
|
12/31/2015
|
|
34% at achievement; 33% at first
and second anniversary
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|
|
|
|
Relative TSR for 2015-2017
|
|
20%
|
|
12/31/2017
|
|
100% at achievement
|
21
Payouts for the relative TSR metric against the components of the NASDAQ Biotechnology Index are set forth below:
|
|
|
TSR Percentile
Achievement
|
|
Payout
(% of Target)
|
|
|
75th
|
|
160%
|
|
|
62nd
|
|
130%
|
|
|
50th
|
|
100%
|
|
|
38th
|
|
85%
|
|
|
25th
|
|
50%
|
|
|
< 25th
|
|
0%
|
History of Performance Shares at ARIAD
Performance-based equity has been a mainstay in the ARIAD executive officer compensation program since 2011. Given the various growth stages our Company has
gone through over the past five years, our performance metrics have evolved accordingly. As indicated in the chart below, the Compensation Committee has thoughtfully and appropriately changed the performance measures over time to motivate executives
to pursue strategic and financial objectives:
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|
|
|
|
|
|
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|
|
|
|
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
|
|
FDA approval of Iclusig and European Medicines Agency (EMA) approval of Iclusig
|
|
R&D Goal: Clinical
Trial Enrollment
|
|
● R&D Goal: Clinical
Trial Enrollment
● Commercial Goal: Two-Year Cumulative Revenue
|
|
● R&D Goal: Clinical
Trial Enrollment
● Commercial Goal: One-Year Revenue
● Three-Year Relative
TSR
|
|
● Three Year
Relative
TSR
|
The following is a summary of these performance share grants and their corresponding performance objectives and status of
achievement:
|
|
|
|
|
|
|
|
Year
|
|
Performance Objective
|
|
Status of
Achievement
|
|
|
|
2011
|
|
● Approval of Iclusig by FDA
by December 31, 2016
|
|
● Achieved at 100% of target in 2012
|
|
|
|
2012
|
|
● Approval of Iclusig by
European Medicines Agency (EMA) by December 31, 2016
|
|
● Achieved at 160% of target in 2013
|
|
|
|
2013
|
|
● Full patient enrollment in
a new pivotal registration trial for a new indication of an ARIAD product by December 31, 2016
|
|
● Achieved at 100% of target in 2015 upon full enrollment of the Phase 3 ALTA trial for
brigatinib
|
|
|
|
2014
|
|
● 50% enrollment in the OPTIC trial by September 30, 2017
|
|
● Pending
(at 0% to 130% of target, subject to timing of achievement)
|
|
|
|
|
|
● Two-year cumulative product
revenue target for 2014 and 2015
|
|
● Achieved at 100% of target in 2016
|
|
|
|
2015
|
|
● 50% enrollment in the OPTIC-2L trial by June 30,2018
|
|
● Pending
(at 0% to 160% of target, subject to timing of achievement)
|
|
|
|
|
|
● One-year product revenue target for 2015
|
|
● Not
achieved
|
|
|
|
|
|
● Three-year relative TSR
for 2015- 2017
|
|
● Pending (at 0% to 160% of target, subject to percentile achievement)
|
|
|
|
2016
|
|
● Three-year relative TSR
for 2016-2018
|
|
● Pending (at 0% to 160% of target, subject to percentile achievement)
|
22
2013 Performance Shares
Based on the Companys strategic objectives in 2013, our Compensation Committee believed it was important to balance the continued advancement of
promising development candidates with ongoing drug discovery. To that end, our Compensation Committee established a performance share program based on the achievement of full patient enrollment in a pivotal registration trial for a new indication of
any ARIAD product, excluding the Phase 3 EPIC trial for Iclusig (which was already underway), no later than December 31, 2016.
The characteristics
of the 2013 performance shares are set forth below. At the time of grant, these awards could have paid out between 0% to 160% of the target amount based on pre-determined performance thresholds. This performance goal was certified as having been
achieved in September 2015, upon full enrollment of the Phase 3 ALTA trial for brigatinib, resulting in the shares being earned at the 100% level.
|
|
|
|
|
|
|
Metric
|
|
Weighting
|
|
Performance
Period End Date
|
|
Vesting
|
R&D Goal: Clinical Trial Enrollment
|
|
100%
|
|
12/31/16
|
|
50-100% at achievement;
any
remainder at first anniversary
|
2014 Performance Shares
Consistent with ARIADs strategic goals for 2014, our Compensation Committee introduced a commercially oriented metric to emphasize the importance of
commercial execution, while being directly responsive to follow-up actions stemming from FDA discussions. The commercial objective consisted of a two-year cumulative revenue goal from Iclusig sales for fiscal years 2014 and 2015, which was
structured in this manner due to a high degree of uncertainty with respect to the proximity to product re-launch, potential market reaction stemming from FDA action taken in 2013 and reimbursement and revenue recognition timing.
The target (100%) payout for the award was directly linked to two-year cumulative 2014 and 2015 net product revenues of between $155 and less than $175
million of net product revenues. Threshold performance for the award was $125 million (earning 50% of target payout), with stretch performance defined as revenue in excess of $205 million (earning 160% of target payout). Based on actual net product
revenue performance of $55.7 million in 2014 and $112.5 million in 2015 (cumulatively $168.2 million), and as certified by the Compensation Committee in February 2016, the revenue target was achieved at the target (100%) level.
Based on the continued importance of R&D progress to both ARIAD and its shareholders, our Compensation Committee also incorporated an R&D metric in
its 2014 performance shares: enrollment of 50% of patients in our OPTIC dose-ranging trial, which is an FDA required clinical trial of Iclusig as part of post-marketing requirements, to be completed no later than September 30, 2017.
The characteristics of the 2014 performance shares are set forth below. Each metric may pay out between 0% to 160% of the target amount based on
pre-determined performance thresholds. Because the R&D milestone had not been achieved by March 31, 2016, the 160% payout is no longer achievable.
|
|
|
|
|
|
|
Metric
|
|
Weighting
|
|
Performance
Period End Date
|
|
Vesting
|
R&D Goal:
Clinical Trial Enrollment
|
|
50%
|
|
09/30/17
|
|
50% at achievement;
50% at first anniversary
|
Commercial Goal:
Two-Year
Cumulative Global Revenue
|
|
50%
|
|
12/31/15
|
|
50% at achievement;
50% at first anniversary
|
BENEFITS AND PERQUISITES
ARIAD provides executive perquisites in line with our peers, which are offered to help attract and retain our executive officers. In addition to general
benefits offered to all other salaried employees, we provide our executive officers with supplemental long-term disability insurance and long-term care insurance, tax return preparation services and an auto allowance in accordance with their
employment agreements. These were the only perquisites we provided to our executive officers during 2015. Perquisites represent less than 1% of each NEOs total compensation as set forth in the Summary Compensation Table in this filing.
III.
|
Benchmarking for Executive Compensation Components
|
EXECUTIVE PERFORMANCE REVIEWS
Our Compensation Committee annually reviews the performance of our CEO and reviews and recommends his compensation for approval by the Board. The Compensation
Committee also annually reviews the assessment of performance of our other executive
23
officers conducted by our CEO and reviews and approves their compensation in consultation with our CEO. While our Compensation Committee has ultimate authority and responsibility for approving
all executive officer compensation, other than our CEOs compensation, which the Board approves, our CEO plays an active role in such decisions, except with respect to his own compensation where he participates in neither the deliberations nor
the decision.
Corporate Objectives
At the beginning of each year, the executive leadership team of the Company establishes annual corporate objectives, which are reviewed and discussed with the
Compensation Committee and the Board and form the basis for our annual operating plan. The status of our corporate objectives, as well as our performance relative to our operating plan, are reviewed and discussed with the Board regularly during the
year. Based on the annual corporate objectives and the associated operating plan, each officer is responsible for developing plans and managing key initiatives and activities designed to achieve our objectives.
Performance Reviews of our CEO
The Compensation Committee undertakes a comprehensive review of our CEOs overall performance based on its evaluation of the Companys performance
against its corporate objectives, the CEOs individual contributions to achievement of key objectives, his strategic leadership of the Company and his demonstration of the Companys vision and corporate values, including a commitment to
building shareholder value. Based on this comprehensive review, the Compensation Committee assigns a performance rating. Performance ratings can range from unsatisfactory to meets requirements to exceeds
requirements to outstanding. The performance rating is then used to determine the performance multiplier applicable to our CEO, which forms the basis for any increases in salary, and for any annual performance awards and long-term
equity incentive awards. The Compensation Committee makes these determinations in executive session and then makes recommendations to the Board for subsequent approval.
Performance Reviews of our Other NEOs
Generally, at the end of each year, each of our executive officers is evaluated based on:
|
●
|
|
A detailed self-assessment of performance relative to the established corporate and individual objectives, as well as to key leadership and management measures described below
|
|
●
|
|
A confidential evaluation by several peers, subordinates and in some instances, external colleagues, selected by our CEO
|
|
●
|
|
CEO review and evaluation of all of these assessments and overall evaluation of performance for each executive officer for the year
|
|
¡
|
|
Our CEOs evaluation takes into account judgment regarding the Companys overall progress, each executive officers contribution to the achievement of corporate objectives, his or her achievement of
individual objectives and his or her performance in relation to leadership and management measures
|
The level of corporate performance is
also used by our CEO to guide his recommendations to the Compensation Committee regarding each executive officers performance rating. As part of this process, the Compensation Committee, with input from our CEO, reviews the overall performance
of the Company relative to the key corporate objectives established at the beginning of the year. The corporate performance assessment, along with the assessments made by our CEO regarding the individual officers, forms the basis for the decisions
regarding the individuals performance rating. Performance is rated using the same performance scale as for our CEO.
Additional Factors
In addition to an evaluation of the level of achievement of our corporate and certain individual objectives, each executive officer is evaluated as to key
leadership and management measures, including:
|
●
|
|
Contribution to the management team and development and application of leadership skills reflective and supportive of our corporate values, vision and mission
|
|
●
|
|
Ability to attract, hire, manage, retain and motivate talent in support of the achievement of our objectives
|
|
●
|
|
Management of his or her functions and responsibilities within established financial budgets and forecasts
|
|
●
|
|
Management of regulatory compliance requirements related to his or her responsibilities
|
24
PEER GROUP SELECTION
The Company draws on a pool of executive talent that is highly sought after by similarly situated biotechnology companies, as well as larger pharmaceutical
and biotechnology companies from which we frequently recruit, both within and outside our geographic area. We believe that the compensation practices of our peer group provide useful information to help us compete in this arena.
Each year, the Compensation Committee works closely with its independent compensation consultant, Radford, and with our management to review and update a
comparator group of companies considered to be our peer group to ensure its continued relevance as ARIAD evolves as a company. The Compensation Committee also reviews broader life science industry data to further inform its decisions. With
Radfords assistance, our Compensation Committee uses two primary market frames of reference (which we collectively refer to as the market) against which to compare the Companys executive compensation practices, as follows:
|
●
|
|
Select Peer Group A select group of national biotechnology companies at a similar stage of development as the Company, with similar headcount, market capitalization, short- and long-term growth objectives and
similar therapeutic targets.
|
|
●
|
|
Radford Global Life Sciences Survey A size-appropriate cut of a national survey of executive compensation levels and practices that covers approximately 60 executive positions in over 600 multinational life
sciences organizations.
|
Our Compensation Committee reviews composite market data synthesized by Radford from these two groups showing
levels of cash, equity and total compensation for all comparable officers relative to the elements of compensation paid to our officers.
In October 2014,
our Compensation Committee met with Radford to discuss whether the selection criteria should be revised for 2015 and which companies should be added and dropped as peer companies. The Compensation Committee used the following selection criteria:
|
●
|
|
public companies in the biopharmaceutical industry with at least one commercial product
|
|
●
|
|
annual revenues generally less than $500 million
|
|
●
|
|
market capitalization of $550 million to $3.5 billion (1/3 to 3 times ARIADs value at the time of our review)
|
|
●
|
|
headcount of 100 to 1,200 (1/3 to 3 times that of ARIAD at the time of our review)
|
Our 2015 peer group
consisted of the following 19 companies (bolded companies were added to the peer group from 2014)*. This was the peer group used for our compensation decisions made in 2015 with respect to 2015 long-term equity incentive grants and salary increases.
|
|
|
|
|
|
|
|
Acorda Therapeutics, Inc.
|
|
ImmunoGen, Inc.
|
|
Pacira Pharmaceuticals, Inc.
|
|
|
|
Aegerion Pharmaceuticals, Inc.
|
|
INSYS Therapeutics, Inc.
|
|
Questcor Pharmaceuticals, Inc.
|
|
|
|
Arena Pharmaceuticals, Inc.
|
|
Ironwood Pharmaceuticals, Inc.
|
|
Seattle Genetics,
Inc.
|
|
|
|
Auxilium Pharmaceuticals, Inc.
|
|
Ionis Pharmaceuticals, Inc. (formerly Isis)
|
|
Spectrum Pharmaceuticals, Inc.
|
|
|
|
Avanir Pharmaceuticals, Inc.
|
|
Momenta Pharmaceuticals, Inc.
|
|
The Medicines Company
|
|
|
|
Dyax Corp.
|
|
Nektar Therapeutics
|
|
|
|
|
|
Halozyme Therapeutics, Inc.
|
|
NPS Pharmaceuticals, Inc.
|
|
|
*
|
The following companies were removed from the peer group: Exelixis, Medivation, Santarus, Theravance, ViroPharma, and VIVUS.
|
25
The following table shows how we compare to the companies in our 2015 peer group, based on median values at the
time of the review:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Headcount
|
|
|
|
Market Cap
|
|
|
|
Revenue
|
|
|
|
|
|
19 Named Peers
|
|
|
308
|
|
|
|
$1.3B
|
|
|
|
$141M
|
|
|
|
|
|
ARIAD
|
|
|
307
|
|
|
|
$1.1B
|
|
|
|
$49M
|
|
|
|
|
|
ARIAD percentile rank
|
|
|
50th
|
|
|
|
29th
|
|
|
|
13th
|
|
In September 2015, our Compensation Committee met with Radford to discuss whether the selection criteria should be revised for
2016 and which companies should be added and dropped as peer companies. The Compensation Committee used the following selection criteria:
|
●
|
|
public companies in the biopharmaceutical industry with at least one commercial product
|
|
●
|
|
annual revenues generally less than $750 million
|
|
●
|
|
market capitalization of $570 million to $5.2 billion (1/3 to 3 times ARIADs value at the time of our review)
|
|
●
|
|
headcount of 125 to 1,200 (1/3 to 3 times that of ARIAD at the time of our review)
|
Our 2016 peer group
consists of the following 19 companies (bolded companies were added to the peer group from 2015)*. This was the peer group used for our compensation decisions made in 2016 with respect to 2016 long-term equity incentive grants (as there were no
salary increases for our executive officers).
|
|
|
|
|
|
|
|
Acorda Therapeutics, Inc.
|
|
ImmunoGen, Inc.
|
|
Raptor Pharmaceuticals,
Inc.
|
|
|
|
Aegerion Pharmaceuticals, Inc.
|
|
INSYS Therapeutics, Inc.
|
|
Repligen Corporation
|
|
|
|
AMAG Pharmaceuticals, Inc.
|
|
Ironwood Pharmaceuticals, Inc.
|
|
Seattle Genetics, Inc.
|
|
|
|
Arena Pharmaceuticals, Inc.
|
|
Ionis Pharmaceuticals, Inc. (formerly Isis)
|
|
Tesaro Inc.
|
|
|
|
Dyax Corp.
|
|
Momenta Pharmaceuticals, Inc.
|
|
The Medicines Company
|
|
|
|
Exelixis, Inc.
|
|
Nektar Therapeutics
|
|
|
|
|
|
Halozyme Therapeutics, Inc.
|
|
Pacira Pharmaceuticals, Inc.
|
|
|
*
|
The following companies were removed from the peer group: Auxilium, Avanir, NPS, Questcor, and Spectrum.
|
The
following table shows how we compare to the companies in our 2016 peer group, based on median values at the time of review:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Headcount
|
|
|
|
Market Cap
|
|
|
|
Revenue
|
|
|
|
|
|
19 Named Peers
|
|
|
307
|
|
|
|
$1.6B
|
|
|
|
$91M
|
|
|
|
|
|
ARIAD
|
|
|
379
|
|
|
|
$1.7B
|
|
|
|
$118M
|
|
|
|
|
|
ARIAD percentile rank
|
|
|
61
st
|
|
|
|
52
nd
|
|
|
|
51
st
|
|
26
BENCHMARKING TO THE MARKET
Our Compensation Committee annually establishes a benchmark for our executive compensation packages relative to other companies in our market. This benchmark
is expressed as a percentile of the market. For 2015, the Compensation Committee provided a range, targeted at the 50th to 75th percentile of the market, with an expectation of above-median performance for above-median compensation. The
range allows for flexibility, rather than fixating on one singular point. The Compensation Committee recognizes the very competitive market for executive talent in our industry, and the importance of attracting and retaining strong talent as our
business continues to evolve. This positioning on compensation is intended to keep ARIAD competitive while strongly incentivizing performance and appropriately controlling executive compensation cost.
The compensation benchmark is not intended to set a ceiling or a floor on any executives compensation. Instead, the actual value received by an
executive in a given year may fluctuate above or below this level. The target long-term equity incentive awards for each officer are based on recommendations by Radford, taking into consideration the value of equity-based awards and total
compensation of executives of peer companies in addition to an assessment of Company performance and application of the philosophy framework in the current year grant cycle.
IV.
|
Executive Compensation Determinations
|
EVALUATION
OF COMPANY PERFORMANCE AGAINST CORPORATE OBJECTIVES
Since the beginning of 2015, the Company has achieved or made substantial progress on its
major corporate objectives. The Companys principal corporate objectives and achievement against them, which were considered in determining 2015 annual incentive payments and 2016 long-term equity incentive grants and salary increases, are set
forth below:
|
|
|
|
|
2015 Performance Objective
|
|
Significant Achievements Against Objective
|
Achieve global product sales and
corporate financial targets
|
|
● Generated Iclusig net product revenue of $112.5 million, doubling prior year
revenue
● Launched sales of Iclusig in Italy, Australia and Israel and entered
into distribution agreements to expand global sales into Canada and Turkey
● Secured non-dilutive funding through a royalty financing agreement with PDL,
under which we received $50 million upon signing and will receive an additional $50 million in July 2016, with an option to draw down up to an additional $100 million through that date
● While we were not able to recognize revenue from sales of Iclusig in France by
the end of 2015, as originally anticipated, we expect to recognize the revenue in 2016 upon completion of pricing and reimbursement negotiations
|
27
|
|
|
Expand the market for Iclusig by further improving its benefit/risk profile and developing new or expanded indications
|
|
● Initiated the dose-ranging OPTIC trial, which is designed to provide important
data regarding the efficacy and safety of Iclusig at doses lower than the currently approved dose, and is expected to inform the optimal use of Iclusig in patients with refractory, chronic-phase CML
● Initiated the second-line OPTIC-2L trial, a randomized Phase 3 trial of Iclusig
vs. nilotinib in second-line patients with chronic phase CML, which, if approved for this indication, would significantly expand the patient population eligible to receive Iclusig
● Led the preparation of the new drug application for Iclusig in Japan in patients
with resistant and intolerant CML and Ph+ ALL, which was submitted by Otsuka in early 2016
|
Further develop and maximize the value of brigatinib
|
|
● Completed full patient enrollment in the Phase 3 ALTA trial
● Continued interactions with the FDA and preparations for an NDA submission for
brigatinib, which is expected in the third quarter of 2016
● Finalized
preparations and the protocol for the launch of a new Phase 3 trial of brigatinib in first-line patients, which we announced in April 2016
|
Broaden our portfolio of products and product candidates
|
|
● Conducted pre-clinical studies in support of and filed an IND application for
AP32788, our most recent, internally-discovered drug candidate that we are developing for the treatment of patients with NSCLC with specific mutations in the EGFR or HER2 kinases
● Continued to provide assistance to Medinol in support of its registrational
clinical trials of ridaforolimus-eluting stents
● Substantially upgraded our
technology and informatics infrastructure to position the company for future, multi-program drug discovery capabilities
|
For 2014, the Company successfully achieved all of its major corporate objectives. The Companys principal corporate
objectives for 2014 and achievement against them, which were considered in determining 2015 long-term equity incentive grants and salary increases, are set forth below:
|
|
|
|
|
2014 Performance Objective
|
|
Significant Achievements Against Objective
|
Manage Iclusig
commercial growth
|
|
Generated Iclusig net product revenue of $55.7 million; on track to meet Iclusig
two-year revenue goals
Rebuilt and re-trained our U.S. commercial and medical
affairs teams and successfully re-launched Iclusig in January 2014
Secured Iclusig
commercial partners/distributors for Japan, Central and Eastern Europe (CEE), Australia and Israel and progressed clinical and regulatory development activities in Japan, Australia and Canada
Advanced pricing and reimbursement negotiations across Europe with successful coverage
decisions in several countries
|
Expand Iclusig market
opportunities
|
|
Timely executed on U.S. and European Union (EU) post-marketing
requirements
Received positive outcome from European Pharmacovigilance Risk
Assessment Committee (PRAC) review of Iclusig with no changes to previously approved indications
Presented proof-of-concept clinical trial data of Iclusig in adult patients with
refractory metastatic and/or unresectable gastrointestinal stromal tumors (GIST); initiated or re-opened multiple investigator sponsor trials in various cancers, including RET driven NSCLC
|
Advance clinical development
of brigatinib (AP26113)
|
|
Initiated pivotal ALTA trial of brigatinib in patients with locally advanced
or metastatic NSCLC who were previously treated with crizotinib
Received FDA
Breakthrough Therapy designation for brigatinib
|
28
|
|
|
Build and progress
pipeline candidates
|
|
Nominated AP32788, a novel TKI targeting NSCLC, for clinical development
Provided regulatory and manufacturing assistance to Medinol in support of two
registrational clinical trials initiated by Medinol in 2014 related to its development of ridaforolimus-eluting stents
|
Disciplined management
of global operations
|
|
Managed results of operations consistent with our operating plan and budget
Relocated European headquarters on time and within budget
Executed Iclusig partnership strategy in Japan/Asia, Australia, CEE and Israel
Developed brigatinib partnering strategy
Strengthened our balance sheet via a $200 million convertible debt issuance and
non-dilutive funding from two license transactions.
|
Implement programs, processes
and systems
|
|
Successfully implemented or upgraded key systems and processes to support re-launch of
Iclusig in the U.S. and expansion in Europe
|
2015 INDIVIDUAL PERFORMANCE EVALUATIONS
As described above, in early 2016 our Compensation Committee made decisions regarding 2015 annual performance awards and, in the case of our Other NEOs, 2016
salary increases and 2016 grants of long-term equity incentive awards, in each case based on 2015 performance. The Compensation Committee, and the Board in the case of our CEO, determined the performance rating of each executive officer based on his
or her contribution to the achievement of our key corporate objectives for 2015, as well as each officers performance in relation to individual goals and leadership and management measures. Based on these criteria, the following compensation
determinations were made:
Dr. Bergers Performance Assessment
Our CEOs salary increase and long-term equity incentive awards in 2015 were granted in connection with the entry into his Retirement Agreement. Under
the Retirement Agreement, Dr. Berger was also eligible to receive an annual cash bonus award for his performance in 2015, which he was awarded based predominantly on the Companys achievement of the above-described key corporate
accomplishments for 2015. These achievements included doubling Iclusig net product sales from the prior year, launching two new clinical trials of Iclusig, successfully completing enrollment in our brigatinib pivotal clinical trial and advancing our
next internally-discovered oncology drug candidate into clinical development. Based on the above, Dr. Bergers performance was rated at 3.5 out of 5.0 on our performance scale, or between meeting and exceeding requirements.
Dr. Clacksons Performance Assessment
Dr. Clackson, as President of Research and Development and Chief Scientific Officer, continued to have broad responsibilities for the management of our
business, including leading our discovery research, preclinical development, clinical development, medical affairs, manufacturing and program and alliance management. Based on his contributions to the achievement of our corporate objectives for
2015, including launching two new clinical trials of Iclusig, successfully completing enrollment in our brigatinib pivotal clinical trial and advancing our next internally-discovered oncology drug candidate into clinical development, as well as his
performance in relation to individual objectives and leadership and management standards, Dr. Clacksons performance was rated at 3.5 out of 5.0 on our performance scale, or between meeting and exceeding requirements.
Mr. Fitzgeralds Performance Assessment
Mr. Fitzgerald, as Executive Vice President and Chief Financial Officer, continued to have broad responsibilities for many aspects of our operations and
business. These included managing all financial aspects of our business, leading the planning and implementation of key systems necessary to support the needs of our business, managing significant initiatives that provided additional funding for our
programs and effectively managing our spending in support of our key corporate objectives. Based on his contributions to the achievement of our corporate objectives for 2015, including contributing to our receipt of non-dilutive funding through a
royalty financing agreement with PDL, successfully managing the finances of the business such that results of operations were in line with our final budget, as well as his performance in relation to individual objectives and leadership and
management standards, Mr. Fitzgeralds performance was rated at 3.5 out of 5.0 on our performance scale, or between meeting and exceeding requirements.
29
Mr. Duvalls Performance Assessment
Mr. Duvall, as Executive Vice President and Chief Commercial Officer, continued to have responsibilities for the management of our commercial business on
a global basis. Based on his contributions to the achievement of our corporate objectives for 2015, including doubling net product sales of Iclusig compared to the prior year, launching sales of Iclusig in Italy, Australia and Israel and entering
into distribution agreements to expand global sales into Canada and Turkey, as well as his performance in relation to individual objectives and leadership and management standards, Mr. Duvalls performance was rated at 3.5 out of 5.0 on
our performance scale, or between meeting and exceeding requirements.
Mr. DesRosiers Performance Assessment
Mr. DesRosier joined the company as our Executive Vice President, Chief Legal and Administrative Officer and Secretary in January
2015, with responsibility for management of all of our legal, human resources, information technology and other administrative functions. Based on his contributions to the achievement of our corporate objectives for 2015, including supporting the
business in doubling Iclusig net product sales from the prior year, launching two new clinical trials of Iclusig, and working closely with the Board on Dr. Bergers Retirement Agreement, the search for a new CEO and the employment
agreements for our new CEO and new CFO, Mr. DesRosiers performance was rated at 4.0 out of 5.0 on our performance scale, or exceeding requirements.
LOOKING FORWARD: 2016 BASE SALARIES, ANNUAL BONUSES, AND LONG-TERM EQUITY INCENTIVE AWARDS
The above corporate and individual performance assessments for 2015 played a substantial part in determining salary, bonus targets, and equity awards for
2016. The Compensation Committee considers a range of factors, including the executives level of experience, scope of position, individual performance and Company constraints.
2016 Base Salaries
As previously discussed, due to several factors including company performance, shareholder feedback, and market analysis, the Compensation Committee decided
to freeze base salaries and give no merit increases to the NEOs for 2016.
2016 Annual Target Bonuses for Annual Performance
Awards
For 2016, annual target bonuses, as a percentage of base salary, remained equal to 2015 targets for all incumbent executives. For
Paris Panayiotopoulos and Manmeet S. Soni, our new CEO and CFO, respectively, their 2016 annual target bonuses were set as part of their employment agreements at the time of hiring. The actual payout of the 2016 annual performance awards may be
above or below target based on the achievement of progress towards our corporate objectives, which are based on 2016 global net product revenues for Iclusig, filing for regulatory approval and launch preparedness for brigatinib, and enrollment
targets in our ALTA, OPTIC and OPTIC-2L trials, as well as individual goals.
The targets for our NEOs are as follows:
|
|
|
Name
|
|
2016 Target Annual
Awards
(as a % of base
salary)
|
|
|
Paris
Panayiotopoulos
|
|
70%
|
|
|
Timothy P.
Clackson, Ph.D.
|
|
50%
|
|
|
Martin J.
Duvall
|
|
50%
|
|
|
Thomas J.
DesRosier
|
|
50%
|
|
|
Manmeet S.
Soni
|
|
50%
|
2016 Equity Awards
For 2016, the Compensation Committee, with the guidance of Radford analysis as well as the input of shareholders, determined to amend the mix of long-term
equity awards through the re-introduction of stock options. The new long-term incentive mix utilized for 2016 grants was:
|
●
|
|
Restricted stock units (30%)
|
|
●
|
|
Performance shares (20%)
|
30
Based on the corporate and individual performance ratings discussed above, in March 2016, the Compensation
Committee approved the following long-term equity incentive awards for our NEOs, each as shown in the table below.
|
|
|
|
|
|
|
Name
|
|
Performance Shares
at Target
(#)
|
|
Restricted Stock
Units
1
(#)
|
|
Stock
Options
1
(#)
|
|
|
|
|
Timothy P. Clackson, Ph.D.
|
|
29,700
|
|
26,180
|
|
87,125
|
|
|
|
|
Edward M.
Fitzgerald
2
|
|
29,700
|
|
26,180
|
|
87,125
|
|
|
|
|
Martin J. Duvall
|
|
29,700
|
|
26,180
|
|
87,125
|
|
|
|
|
Thomas J.
DesRosier, Esq.
|
|
29,700
|
|
30,180
|
|
102,500
|
1
Restricted stock units vest in equal annual installments over three
years and stock options vest in equal annual installments over four years.
2
Pursuant to his
employment agreement, upon Mr. Fitzgeralds resignation in March 2016, any time-based awards that would have vested during the remainder of 2016 were accelerated to his last day of employment. Since none of the awards in the above table
would have vested in 2016, all were terminated.
For Paris Panayiotopoulos, our new CEO, his employment agreement included inducement grants awarded in
connection with his commencement of employment in January 2016 of 1,500,000 stock options vesting over four years and 200,000 service-based RSUs vesting over 18 months. He will be eligible to receive long-term equity incentive awards commencing in
fiscal year 2017. For Manmeet S. Soni, our new CFO, his employment agreement included inducement grants awarded in connection with his commencement of employment in March 2016 of 550,000 stock options vesting over four years and 150,000 performance
shares that will be earned based on the relative total shareholder return of the Companys stock price compared to component companies in the NASDAQ Biotechnology Index over a three year period ending December 31, 2018.
In early 2016, the Compensation Committee awarded new performance share grants, wherein these awards would solely focus on relative TSR as measured over a
three-year period compared to component companies of the NASDAQ Biotechnology Index, which is the life sciences index most highly correlated with ARIAD, and a frequent index used for this type of program structure. As with the 2015 program design,
ARIAD TSR performance will be measured in comparison to component companies of the NASDAQ Biotechnology Index.
The payout schedule will be as follows:
|
|
|
TSR Percentile
Achievement
|
|
Payout
(% of Target)
|
75th
|
|
160%
|
62nd
|
|
130%
|
50th
|
|
100%
|
38th
|
|
85%
|
25th
|
|
50%
|
< 25th
|
|
0%
|
STOCK OWNERSHIP GUIDELINES
We have adopted stock ownership guidelines for our executives and non-employee directors. The guideline for our CEO is ownership of our common
stock with a value of at least six times his base salary, and for other executive officers is at least one times their respective base salary. The guideline for non-employee directors is five times their annual cash compensation.
31
RECOUPMENT POLICY
We adopted an Incentive Compensation Recoupment Policy effective as of January 1, 2015. The recoupment (or clawback) policy provides the
Compensation Committee with broad discretion to recoup certain incentive awards made to the Companys executive officers in instances of material violations of law or a written Company policy by an executive officer, or by a subordinate
employee if the executive failed to supervise the subordinate, if the misconduct caused significant financial harm to the Company.
This clawback policy
goes beyond current and expected regulatory requirements and is based on principles that were jointly developed by six major pharmaceutical companies and 13 institutional investors as a best practice corporate governance strategy that seek to
strengthen board risk oversight and preserve long-term shareholder value.
The policy can be found on the Investors section of our website at
http://investor.ariad.com under the heading Corporate Governance. See the section of this filing captioned Corporate Governance Compensation Practices and Policies Relating to Risk Management for more details.
HEDGING TRANSACTIONS, PLEDGES OF STOCK AND INSIDER TRADING POLICY
Our policies expressly prohibit our employees and directors from:
|
|
|
Engaging in hedging transactions such as buying or selling puts and calls on ARIAD stock
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|
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|
Purchasing ARIAD stock on margin and pledging our stock as collateral
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Purchasing or selling ARIAD securities while in possession of material, non-public information or otherwise using such information for their personal benefit
|
We encourage our executives and directors to enter into trading plans that are intended to comply with the requirements of Rule 10b5-1 promulgated under the
Exchange Act when they desire to prudently diversify their asset portfolios and exercise their stock options before their scheduled expiration dates, as well as to satisfy tax obligations upon vesting of RSUs and performance shares.
EMPLOYMENT AGREEMENTS AND POTENTIAL SEVERANCE AND CHANGE OF CONTROL
We have entered into employment agreements with our NEOs. Each of these agreements provides for certain payments and other benefits if the executives
employment terminates under certain circumstances other than for cause, including in connection with a change in control. See the subsection Narrative to Summary Compensation Table and Grants of Plan-Based Awards in
2015 table below for a description of the agreement terms impacting current compensation and Potential Payments upon Termination or Change in Control below for a description of applicable severance and change in control benefits.
The Compensation Committee believes that change in control and severance arrangements are important parts of the overall compensation program for our
NEOs. Change in control provisions help to secure the continued employment and dedication of our executive officers, to reduce any concern that they might have regarding their own continued employment prior to or following a change in control, and
to promote a continuity of management during a corporate transaction. Severance arrangements are used primarily to attract, retain and motivate individuals with the requisite experience and ability to drive our success. Severance arrangements also
serve, in part, as consideration to secure commitments from our executive officers not to compete with us after termination of their employment.
Effective April 2010, our Compensation Committee adopted a policy that restricts our Company from entering into any future agreement that provides an
executive officer with a severance payment following a change in control of our Company, except in the case of a termination event (i.e., a double-trigger). With the retirement of Dr. Berger, all employment agreements with current
executive offices now include these double-trigger provisions.
In addition, the policy also restricts our Company from entering into any
future agreement that provides an executive officer with the right to receive excise tax gross-ups following a change in control, except in certain unusual circumstances. Effective April 2013, our Compensation Committee revised this policy
eliminating the exception to allow for an excise tax gross-up in certain unusual circumstances. We have not entered into any agreements with any of our current executive officers that provide for an excise tax gross-up.
32
Further, the Compensation Committee has worked with its independent compensation consultant, Radford, to
determine market competitive practices for executive officer employment agreements and severance terms based on our peer group and broader market practice. This data was, in part, used to shape the severance terms to ensure an appropriate level of
protection to the executive and Company with an eye towards governance best practices. There was also a conscious effort to conform the broader employment terms across all agreements going forward. This was demonstrated in the employment agreements
with our most recent executive hires, Mr. DesRosier, Mr. Panayiotopoulos and Mr. Soni, by providing no excise tax gross-up, no single trigger acceleration of unvested equity and ensuring that the underlying terms are consistent with
the terms of our other executive officers.
In April 2015, ARIAD entered into a Retirement Agreement with Dr. Berger, which called for certain
compensation terms, as summarized below:
|
●
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|
2015 Compensation Arrangements:
|
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¡
|
|
Annual base in the amount of $773,500, representing a 3% increase from 2014 and in-line with broader Company merit increases
|
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¡
|
|
Eligible to participate in the Companys 2015 annual bonus program, with a target bonus for 2015 equal to 85% of salary, as described earlier in the CD&A
|
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¡
|
|
345,000 RSUs under the Companys 2014 Long-Term Incentive Plan. The Compensation Committee chose to award the long-term incentive awards in this structure to deliver competitive annual long-term incentive value as
compared to our peers and in recognition of the impending CEO successor within the nine month period which created practical challenges in granting an award with performance metrics
|
|
●
|
|
Severance Following the Retirement Date:
|
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¡
|
|
On January 4, 2016, the Company paid a lump-sum cash payment equal to $4,235,550, representing the product of three times the sum of (A) Annual Base Salary plus (B) 2014 annual bonus
|
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¡
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|
Time-based equity awards that were outstanding and unvested as of the Retirement Date, including earned performance shares, vested immediately to facilitate the transition from CEO to Special Advisor
|
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¡
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|
Dr. Berger became entitled to vest in any performance shares (other than the performance shares based on achievement of 2015 revenue) based on the greater of target-level performance and the actual achieved performance
level as of the Retirement Date as determined by the Compensation Committee.
|
TAX DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code) limits the deduction a public company is permitted
for compensation paid to the chief executive officer and to the three most highly compensated executive officers (other than the chief financial officer). Generally, amounts paid in excess of $1,000,000 to a covered executive cannot be deducted,
unless the compensation is paid pursuant to a plan that is performance related, non-discretionary and has been approved by shareholders. Our 2014 Long-Term Equity Incentive Plan permits the issuance of performance-based stock awards that would be
compliant with Section 162(m). In 2014, 2015 and 2016, the performance shares we granted under our 2014 Long-Term Equity Incentive Plan were intended to comply with Section 162(m). We have not adopted a policy that all executive
compensation be fully deductible. The Company may award compensation that is not fully deductible under the Internal Revenue Code when we view such compensation as consistent with our compensation policies and in the best interests of the Company
and our shareholders. The awards made to our new CEO, Mr. Panayiotopoulos were not deductible and a portion of Dr. Bergers 2014 performance award lost its deductibility in connection with the vesting of such award under his Retirement
Agreement.
VI.
|
Compensation Committee Report
|
The Compensation Committee of the Board has
reviewed and discussed with members of management the CD&A section included in this Form 10-K/A, as required by Item 402(b) of Regulation S-K. Based on this review and discussion, the Compensation Committee recommended to the Board that the
CD&A be included in this Form 10-K/A.
Members of the Compensation Committee
Norbert G. Riedel, Ph.D., Chair
Athanase Lavidas, Ph.D.
Anna Protopapas
33
Summary Compensation Table
The following table sets forth the compensation paid to or accrued on behalf of our CEO, our Chief Financial Officer and our three other most highly
compensated executive officers, whom we refer to collectively as our NEOs, during the fiscal years ended December 31, 2013, 2014 and 2015.
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Name and Principal
Position
|
|
Year
|
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|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
(1)
($)
|
|
|
Option
Awards
(1)
($)
|
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|
All Other
Compensation
(2)
($)
|
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|
Total
($)
|
|
Harvey J. Berger, M.D.
(3)
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2015
|
|
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|
773,500
|
|
|
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493,106
|
|
|
|
3,060,150
|
|
|
|
-
|
|
|
|
5,745,971
|
|
|
|
10,072,727
|
|
Chairman, CEO and President
|
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|
2014
|
|
|
|
751,000
|
|
|
|
638,350
|
|
|
|
3,695,000
|
|
|
|
-
|
|
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|
42,560
|
|
|
|
5,126,910
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|
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|
2013
|
|
|
|
749,754
|
|
|
|
-
|
|
|
|
4,240,670
|
|
|
|
2,831,090
|
|
|
|
35,473
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|
|
|
7,856,987
|
|
|
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|
|
|
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|
Edward M. Fitzgerald
(4)
|
|
|
2015
|
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|
475,000
|
|
|
|
178,000
|
|
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|
1,191,593
|
|
|
|
-
|
|
|
|
30,246
|
|
|
|
1,874,839
|
|
Executive Vice President, Chief
|
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2014
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|
|
|
466,000
|
|
|
|
210,000
|
|
|
|
1,219,350
|
|
|
|
-
|
|
|
|
30,096
|
|
|
|
1,925,447
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|
Financial Officer and Treasurer
|
|
|
2013
|
|
|
|
465,354
|
|
|
|
-
|
|
|
|
1,410,075
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|
|
|
851,949
|
|
|
|
30,306
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|
|
|
2,757,683
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|
|
|
|
|
|
|
|
|
Timothy P. Clackson, Ph.D.
|
|
|
2015
|
|
|
|
513,000
|
|
|
|
192,000
|
|
|
|
1,341,119
|
|
|
|
-
|
|
|
|
32,455
|
|
|
|
2,078,574
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|
President of Research and
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|
|
2014
|
|
|
|
493,000
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|
|
|
365,000
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|
|
|
1,219,350
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|
|
|
147,655
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|
|
|
32,075
|
|
|
|
2,257,080
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|
Development and Chief
|
|
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2013
|
|
|
|
492,423
|
|
|
|
-
|
|
|
|
1,410,075
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|
|
|
851,949
|
|
|
|
31,979
|
|
|
|
2,786,426
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|
Scientific Officer
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
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|
|
|
|
|
|
Thomas J. DesRosier, Esq.
(5)
|
|
|
2015
|
|
|
|
447,692
|
|
|
|
298,000
|
|
|
|
807,400
|
|
|
|
729,092
|
|
|
|
27,018
|
|
|
|
2,309,202
|
|
Executive Vice President, Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Legal and Administrative Officer and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
Martin J. Duvall
|
|
|
2015
|
|
|
|
470,000
|
|
|
|
176,000
|
|
|
|
1,191,593
|
|
|
|
-
|
|
|
|
34,683
|
|
|
|
1,872,276
|
|
Executive Vice President and
|
|
|
2014
|
|
|
|
453,385
|
|
|
|
230,000
|
|
|
|
1,219,350
|
|
|
|
-
|
|
|
|
34,303
|
|
|
|
1,937,038
|
|
Chief Commercial Officer
|
|
|
2013
|
|
|
|
427,262
|
|
|
|
-
|
|
|
|
919,160
|
|
|
|
748,558
|
|
|
|
23,457
|
|
|
|
2,118,437
|
|
(1)
|
The amounts included under Stock Awards and Option Awards represent the aggregate grant date fair value for restricted stock unit, performance share and/or option awards granted during the year,
computed in accordance with FASB ASC Topic 718. The assumptions used in the calculation of the grant date fair value for awards granted in 2015 are set forth in note 11 to our audited consolidated financial statements titled Stock
Compensation included in the Original Filing. The grant date fair value of performance shares awarded in 2015, assuming the maximum potential value is achieved, was $1,109,077 for each of Mr. Fitzgerald, Dr. Clackson and
Mr. Duvall. The grant date fair value of performance shares awarded in 2014 and 2013, for which the maximum potential values were previously reported, were as follows: in 2014, $1,766,210 for Dr. Berger; and $569,030 for each of
Mr. Fitzgerald, Dr. Clackson and Mr. Duvall; and in 2013, $1,984,550 for Dr. Berger; $731,150 for Mr. Fitzgerald and Dr. Clackson; and $417,800 for Mr. Duvall.
|
(2)
|
Amounts included under All Other Compensation for 2015 consist of: (i) $4,928 in life insurance premiums paid by us for the benefit of Dr. Berger; (ii) matching contributions to our 401(k)
defined contribution retirement savings plan ($7,950 for each of Dr. Berger, Mr. Fitzgerald, Dr. Clackson, and Mr. Duvall and $6,831 for Mr. DesRosier); (iii) the cost of supplemental long-term disability insurance
($10,398 for Dr. Berger, $4,228 for Mr. Fitzgerald, $2,909 for Dr. Clackson, $3,453 for Mr. Duvall and $1,667 for Mr. Des Rosier); (iv) the cost of long-term care insurance ($6,021 for Dr. Berger, $6,069 for
Mr. Fitzgerald, $4,766 for Dr. Clackson, $6,450 for Mr. Duvall and $2,580 for Mr. DesRosier); (v) an annual auto allowance ($12,000 for each of Dr. Berger, Mr. Fitzgerald, Dr. Clackson, and Mr. Duvall and
$10,615 for Mr. DesRosier); and (vi) tax preparation services ($4,830 for Dr. Clackson, $4,830 for Mr. Duvall and $5,325 for Mr. DesRosier). In addition, the amounts included for Dr. Berger under All Other
Compensation for 2015 include payments to Dr. Berger pursuant to the terms of his Retirement Agreement, consisting of (i) severance in a lump sum payment of $4,235,550; (ii) payment of $580,125 in satisfaction of accrued
benefits under our sabbatical policy that was terminated in 2008, payable six months after separation of service; (iii) reimbursement of $470,289 in legal expenses incurred in connection with his Retirement Agreement and the proxy contest with
Sarissa during 2015; and (iv) a special payment of $418,710 to satisfy the taxes payable on the reimbursement of legal fees, as provided in the Retirement Agreement.
|
(3)
|
Retired as of Chairman, Chief Executive Officer and President on December 31, 2015.
|
(4)
|
Resigned as our Executive Vice President, Chief Financial Officer and Treasurer on March 21, 2016.
|
(5)
|
Joined as our Executive Vice President, Chief Legal and Administrative Officer and Secretary on January 20, 2015 and resigned effective as of April 30, 2016. Mr. DesRosiers 2015 salary reflects his
partial year of service, and his bonus includes a $75,000 signing bonus paid in connection with his commencement of employment.
|
34
Grants of Plan-Based Awards in 2015
The following table shows information regarding grants of equity awards that were made during the year ended December 31, 2015 to each of our NEOs. All
awards were made under our 2014 Long-Term Incentive Plan. There were no grants of non-equity incentive plan awards to our NEOs during 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
Date
|
|
|
Estimated Future Payouts Under
Equity Incentive Plan Awards:
(1)
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
|
|
|
Exercise or
Base Price
of Option
Awards
($/sh)
|
|
|
Grant Date Fair
Value of Stock
and Option
Awards
(1)
($)
|
|
|
|
Threshold(#)
|
|
|
Target(#)
|
|
|
Maximum
(#)
|
|
|
|
|
|
Harvey J. Berger
|
|
|
04/28/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
345,000
(2)
|
|
|
|
|
|
|
|
|
|
|
|
3,060,150
|
|
|
|
|
|
|
|
|
|
|
Edward M. Fitzgerald
|
|
|
04/29/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,000
(3)
|
|
|
|
|
|
|
|
|
|
|
|
498,420
|
|
|
|
|
04/29/2015
(4)
|
|
|
|
15,000
|
|
|
|
30,000
|
|
|
|
48,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
276,900
|
|
|
|
|
04/29/2015
(5)
|
|
|
|
15,000
|
|
|
|
30,000
|
|
|
|
48,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
276,900
|
|
|
|
|
04/29/2015
(6)
|
|
|
|
7,550
|
|
|
|
15,100
|
|
|
|
24,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139,373
|
|
|
|
|
|
|
|
|
|
|
Timothy P. Clackson
|
|
|
04/29/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,200
(3)
|
|
|
|
|
|
|
|
|
|
|
|
647,946
|
|
|
|
|
04/29/2015
(4)
|
|
|
|
15,000
|
|
|
|
30,000
|
|
|
|
48,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
276,900
|
|
|
|
|
04/29/2015
(5)
|
|
|
|
15,000
|
|
|
|
30,000
|
|
|
|
48,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
276,900
|
|
|
|
|
04/29/2015
(6)
|
|
|
|
7,550
|
|
|
|
15,100
|
|
|
|
24,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139,373
|
|
|
|
|
|
|
|
|
|
|
Thomas J. DesRosier
|
|
|
02/18/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,000
(7)
|
|
|
|
$7.34
|
|
|
|
729,092
|
|
|
|
|
02/18/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110,000
(8
)
|
|
|
|
|
|
|
|
|
|
|
|
807,400
|
|
|
|
|
|
|
|
|
|
|
Martin J. Duvall
|
|
|
04/29/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,000
(3)
|
|
|
|
|
|
|
|
|
|
|
|
498,420
|
|
|
|
|
04/29/2015
(4
)
|
|
|
|
15,000
|
|
|
|
30,000
|
|
|
|
48,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
276,900
|
|
|
|
|
04/29/2015
(5)
|
|
|
|
15,000
|
|
|
|
30,000
|
|
|
|
48,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
276,900
|
|
|
|
|
04/29/2015
(6)
|
|
|
|
7,550
|
|
|
|
15,100
|
|
|
|
24,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139,373
|
|
(1)
|
The grant date fair values of the awards have been determined in accordance with FASB ASC Topic 718. The assumptions used in the calculation of the grant date fair values of these awards are set forth in Note 11 to our
audited financial statements titled Stock Compensation included in the Original Filing.
|
(2)
|
This restricted stock unit award vested on December 31, 2015 pursuant to the terms of Dr. Bergers Executive Employment Agreement and Retirement Agreement described in the narrative after this table.
|
(3)
|
These awards are in the form of restricted stock units that vest as to 33
1
⁄
3
% of the awards on each of April 29, 2016, 2017
and 2018, provided that the executive is then employed with us and subject to acceleration of vesting in accordance with the terms of the recipients executive employment agreement.
|
(4)
|
These awards are performance shares which will be earned based on the achievement and timing of the achievement of a one-year cumulative revenue target relating to Iclusig for fiscal year 2015. The earned shares shall
vest 34% on certification by the Compensation Committee of achievement of this performance goal and an additional 33% on each of the first and second year anniversary thereof, provided that the executive is then employed with us, and subject to
acceleration of vesting in accordance with the terms of the recipients executive employment agreement. In February, 2016, the Compensation Committee determined that this performance goal was not achieved and, as a result, none of the
associated performance shares were earned.
|
(5)
|
These awards are performance shares which will be earned based on the achievement and timing of the achievement of enrolling 50% of the patients in a randomized second line clinical trial that will evaluate Iclusig vs.
nilotinib (or another second-generation BCR-ABL inhibitor), which is our OPTIC-2L trial, not later than the earlier of (x) 27 months following enrollment of the first patient in such trial or (y) June 30, 2018. The earned shares shall
vest 50% upon the certification by the Compensation Committee of the achievement of this performance goal and 50% on the one year anniversary thereof, or 100% upon the certification by the Compensation Committee if the number of shares is earned at
the threshold amount, in each case provided that the executive is then employed with us, and subject to acceleration of vesting in accordance with the terms of the recipients executive employment agreement.
|
35
(6)
|
These awards are performance shares which will be earned based on the total shareholder return percentile achievement for the three-year period beginning January 1, 2015 and ending December 31, 2017 of ARIAD
as compared to component companies of the NASDAQ Biotechnology Index, with the target award earned if the total shareholder return percentile return is between the 50
th
and 62
nd
percentiles. The earned shares shall vest 100% upon certification by the Compensation Committee of the achievement of this performance goal, provided that the executive is then employed with us, and
subject to acceleration of vesting in accordance with the terms of the recipients executive employment agreement.
|
(7)
|
This stock option was granted to Mr. DesRosier in connection with the commencement of his employment, and vests in four equal annual installments from the date of grant, subject to acceleration of vesting in
accordance with the terms of his executive employment agreement.
|
(8)
|
These restricted stock units were granted to Mr. DesRosier in connection with the commencement of his employment, and vest in two equal annual installments from the date of grant, subject to acceleration of vesting
in accordance with the terms of his executive employment agreement.
|
Narrative to Summary Compensation Table and Grants of Plan-Based
Awards in 2015 Table
Employment Agreements
Employment agreements with our NEOs provide for base salary as may be adjusted annually, annual bonus opportunities, participation in our benefit plans, the
opportunity to receive equity awards and post-termination benefits and obligations.
Dr. Bergers Amended and Restated Employment Agreement was
in effect from April 2010 through December 31, 2015, when he retired from ARIAD pursuant to the terms of his Retirement Agreement described below.
In April 2014, the terms of employment of Mr. Fitzgerald, Dr. Clackson and Mr. Duvall were extended to December 31, 2016, and in January
2015 we entered into an executive employment agreement with Mr. DesRosier providing for a term of employment through December 31, 2017. These employment agreements provide for automatic renewal for successive one-year terms absent 90
days notice to the contrary by either party. Each employment agreement specifies a minimum level of base salary for the executive, but gives our Compensation Committee authority to increase the executives base salary from time to time.
In addition, under the terms of his employment agreement, Mr. DesRosier received a $75,000 signing bonus that was paid in two installments during 2015 and is repayable in the event that he terminates his employment within the first two years,
subject to specified exceptions.
Dr. Bergers employment agreement provided that we would pay him a discretionary cash bonus based on a target
of not less than 50% of his then current salary, with the actual amount determined by our Board. The employment agreements for our Other NEOs provide for discretionary bonuses based on a target of not less than 30% of their then current salaries for
Mr. Fitzgerald, Dr. Clackson and Mr. Duvall and 50% for Mr. DesRosier, payable in the form of stock options, stock awards, restricted stock units, performance share awards, deferred compensation or cash, as determined by our
Board. The annual targets are reviewed and established each year by the Compensation Committee. The target awards for 2015 are set forth in the CD&A in Item 11 of this Form 10-K/A under the heading Executive Compensation
Determinations.
The employment agreements also provide that each executive is entitled to, among other things, participate in any incentive, stock
award or bonus plan, pension, group insurance and fringe benefits on the same basis as executives at a comparable level; group health, disability and life insurance; paid vacation; an auto allowance of $1,000 per month; standard tax preparation and
planning services; reimbursement of business expenses; indemnification and directors and officers insurance coverage; and for executives who had received credit under our sabbatical policy prior to its termination in 2008, a lump sum
payment upon retirement in good standing from the Company after the age of 60 equal to three months of their base salary for each sabbatical that was fully earned under the policy (amounting to nine months salary for Dr. Berger and three
months salary for each of Dr. Clackson and Mr. Fitzgerald), payable six months after separation from service. In addition, Dr. Bergers employment agreement provided him with medical malpractice insurance with coverage
reasonably satisfactory to Dr. Berger and legal costs to enforce the employment agreement on an as-incurred basis subject to repayment if we prevail.
The employment agreements with our NEOs also provide for severance payments upon termination of employment by us without cause, termination by the executive
for material breach of the agreement by us, non-renewal (for Dr. Berger only) or termination in connection with a change in control. Following the expiration of Dr. Bergers agreement, none of the employment agreements with our
executive officers provide for a tax gross-up under Sections 280G and 4999 of the Code. See Potential Payments upon Termination or Change in Control for a description of these provisions in the employment agreements.
36
Dr. Bergers Retirement Agreement
On April 28, 2015, the Company entered into a retirement letter agreement with Dr. Berger (the Retirement Agreement), pursuant to which
Dr. Berger agreed to retire as Chief Executive Officer and President of the Company and retire as a member and as Chairman of the Companys Board, both of which became effective on December 31, 2015. Pursuant to the Retirement
Agreement, Dr. Bergers annual base salary was adjusted to $773,500, retroactive to January 1, 2015; he received a grant of 345,000 restricted stock units that vested in full upon his retirement in lieu of any other equity
compensation for 2014 or 2015 performance; he remained eligible to receive a bonus for 2015, at a target of 85% of his annual base salary (which was received in March 2016 at 75% of the target); and he participated in the Companys employee
benefit plans while he remained employed by the Company prior to his retirement. In addition, he received reimbursement of $470,289 in legal expenses incurred in connection with his Retirement Agreement and the proxy contest with Sarissa during
2015, together with a special payment of $418,710 to satisfy the taxes payable on the reimbursement of legal fees, as provided in the Retirement Agreement. These payments and benefits were made in lieu of any amounts provided under
Dr. Bergers employment agreement described above.
Upon his retirement, Dr. Berger received the severance benefits described in his
employment agreement with the Company that he would have been entitled to receive had his employment been terminated by the Company without cause or by him for good reason, which consisted of (i) severance in a lump sum payment of $4,235,550,
representing three times the aggregate of his 2015 annual base salary and the bonus amount paid to him in 2015 for 2014 performance; and (ii) a lump sum payment of $580,125, equivalent to nine months salary, payable six months after
separation of service and representing benefits that had accrued to him under our sabbatical policy at the time it was terminated in 2008. In addition, upon Dr. Bergers retirement on December 31, 2015, all unvested options
outstanding became exercisable, all time-based restricted stock units accelerated, any earned performance shares that were then unvested became vested and he became entitled to vest in any performance shares (other than the performance shares based
on achievement of 2015 revenue) based on the greater of target-level performance and the actual achieved performance level as of the Retirement Date as determined by the Compensation Committee.
Pursuant to the terms of the Retirement Agreement, following his retirement, Dr. Berger agreed to serve as a special advisor to the Board and to our
current Chief Executive Officer until the date of the Companys 2016 Annual Meeting or earlier under certain circumstances. Dr. Berger continues to receive his annual base salary and participate in the Companys employee benefit plans
and his unearned performance shares remain outstanding while he is employed as a special advisor. In addition to other customary restrictive covenants, the Retirement Agreement prohibits Dr. Berger from competing with the Company or soliciting
or hiring its employees during the period he remains employed as a special advisor and during the one-year period thereafter. The foregoing is not a complete description of the terms of the Retirement Agreement. For a further description of the
terms of the Retirement Agreement, including a copy thereof, please see our Current Report on Form 8-K that we filed with the SEC on April 29, 2015.
Performance Awards
The Compensation Committee
awards performance shares to NEOs that pay out only if specific strategic targets are met, and based on the timing in meeting those goals.
In 2012, we
awarded performance shares to all of our NEOs providing that 50% to 160% of the target award would be earned on obtaining regulatory approval from the EMA to market Iclusig in the EU, provided such approval was obtained by the end of 2016. The
objective was achieved in July 2013, which triggered payment at 160% of target. In accordance with the terms of the grant, 50% of the award vested in July 2013, 25% vested in July 2014 and the remaining 25% vested in July 2015.
In 2013, we awarded performance shares to all of our NEOs providing that 50% to 160% of the target award would be earned on full patient enrollment in a
pivotal registration trial for a new indication of any ARIAD product, excluding the Phase 3 EPIC trial for Iclusig, provided that such enrollment is completed before the end of 2016. This objective was achieved in September 2015, upon full patient
enrollment in the Companys ALTA trial of brigatinib, which triggered payment at 100% of target. In accordance with the terms of the grant, 50% of the performance shares earned vested in September 2015 and the remaining 50% will vest in
September 2016, provided that the executive is then employed with us.
In 2014, we awarded performance shares to all of our NEOs based on two separate
milestones: R&D and revenue. The awards provided that 50% to 160% of the target award will be earned based on the separate achievement of each performance goal. The performance shares based on the R&D goal will be earned when we enroll 50%
of the patients in the clinical trial of Iclusig required as part of the FDAs post-marketing requirements, which is our OPTIC dose-ranging trial, provided that this goal is met by September 30, 2017. This performance milestone has not yet
been achieved and, as a result, the R&D performance shares may only be earned in an amount between 50% and 130% of target. If earned, this award will vest 50% on the certification by the Compensation Committee of achievement of the performance
goal and 50% on the one year anniversary thereof. If the R&D milestone is not achieved by September 30, 2017, then these performance shares will terminate and have no value. The performance shares based on the revenue goal were eligible to
be earned based on a two-year cumulative revenue target for Iclusig for fiscal years 2014 and 2015. This performance milestone was achieved, triggering payment at 100% of target. In accordance with the terms of the grant, 50% of the award vested in
on March 1, 2016 and the remaining 50% will vest on March 1, 2017, provided that the executive is then employed with us.
37
In April 2015, we awarded performance shares to our Other NEOs based on three separate milestones: R&D,
revenue and relative TSR. The awards provide that 50% to 160% of the target award will be earned based on the separate achievement of each performance goal. The performance shares based on the R&D goal will be earned when we enroll 50% of the
patients in a randomized second line clinical trial that will evaluate Iclusig vs. nilotinib (or another second-generation BCR-ABL inhibitor), which is our OPTIC-2L trial, provided this goal is met by June 30, 2018. The performance shares based
on the revenue goal were eligible to be earned if we achieved a revenue target for Iclusig for fiscal year 2015. This performance milestone based on revenue was not achieved and, as a result, none of the associated performance shares were earned.
The performance shares based on relative TSR will be earned if we achieve a target TSR for the three year period beginning January 1, 2015 and ending December 31, 2017 as compared to component companies of the NASDAQ Biotechnology Index.
If earned, the R&D performance shares will vest over one year or on the date of the certification of the achievement by the Compensation Committee, depending upon when the enrollment is achieved. If earned, the relative TSR performance shares
will vest in full on the date of the certification of the achievement of the percentage by the Compensation Committee during the first quarter of 2018. If the R&D milestone is not achieved by June 30, 2018 and the TSR target is not achieved
at the end of 2017, these performance shares will terminate and have no value. Dr. Berger did not receive any performance share awards. For a description of the RSUs awarded to Dr. Berger in April 2015, see the subsection of Item 11
of this Form 10-K/A under the heading Narrative to Summary Compensation Table and Grants of Plan-Based Awards in 2015 Table Dr. Bergers Retirement Agreement.
In March 2016, we awarded performance shares to our Other NEOs based on a relative TSR milestone. The award provides that 50% to 160% of the target award will
be earned if we achieve a target TSR for the three year period beginning January 1, 2016 and ending December 31, 2018 as compared to component companies of the NASDAQ Biotechnology Index. If earned, the performance shares will vest in full
on the date of the certification of the achievement of the percentage by the Compensation Committee during the first quarter of 2019. If the TSR target is not achieved at the end of 2018, these performance shares will terminate and have no value.
Outstanding Equity Awards at December 31, 2015
The following table lists the outstanding equity awards at December 31, 2015 for each of our NEOs.
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Option Awards
|
|
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Stock Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options:
Exercisable
(1)
(#)
|
|
|
Number of
Securities
Underlying
Unexercised
Options:
Unexercisable
(1)
(#)
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock
That
Have
Not
Vested
(2)
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
|
|
|
Equity
Incentive Plan
Awards:
Market or
Payout Values
of Unearned
Shares, Units
or Other
Rights that
Have Not
Vested
(2)
($)
|
|
|
|
|
|
|
|
|
|
|
Harvey J. Berger
|
|
|
240,000
|
|
|
|
|
|
4.64
|
|
|
|
03/06/17
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
(3)
|
|
|
|
|
|
4.49
|
|
|
|
04/16/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
220,000
|
|
|
|
|
|
7.82
|
|
|
|
04/01/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
213,000
|
|
|
|
|
|
15.05
|
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|
|
03/20/22
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|
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|
|
|
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|
|
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|
|
|
|
|
|
216,000
|
|
|
|
|
|
20.89
|
|
|
|
03/19/23
|
|
|
|
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|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
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119,500
(4)
|
|
|
|
746,875
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119,500
(5)
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|
|
|
746,875
|
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|
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|
|
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|
Edward M. Fitzgerald
|
|
|
100,000
|
|
|
|
|
|
4.49
|
|
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|
04/16/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
3.25
|
|
|
|
06/24/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,000
|
|
|
|
|
|
7.82
|
|
|
|
04/01/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
(3)
|
|
|
|
|
|
14.50
|
|
|
|
01/17/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,000
|
|
|
|
|
|
15.05
|
|
|
|
03/20/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,333
|
|
|
21,667
(6)
|
|
|
20.89
|
|
|
|
03/19/23
|
|
|
|
|
|
|
|
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|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
10,833
(7)
|
|
|
|
67,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,666
(8)
|
|
|
|
366,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,000
(9)
|
|
|
|
337,500
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
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17,500
(10)
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109,375
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38,500
(4)
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|
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|
240,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
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|
38,500
(5)
|
|
|
|
240,625
|
|
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|
|
|
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|
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|
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|
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|
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|
|
30,000
(11)
|
|
|
|
187,500
|
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|
|
|
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|
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|
|
|
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|
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30,000
(12)
|
|
|
|
187,500
|
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|
|
|
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|
|
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|
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|
|
|
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|
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|
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15,100
(13)
|
|
|
|
94,375
|
|
38
|
|
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|
|
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|
|
|
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|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options:
Exercisable
(1)
(#)
|
|
|
Number
of
Securities
Underlying
Unexercised
Options:
Unexercisable
(1)
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock
That
Have
Not
Vested
(2)
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
|
|
|
Equity
Incentive Plan
Awards:
Market or
Payout Values
of Unearned
Shares, Units
or Other
Rights that
Have Not
Vested
(2)
($)
|
|
|
|
|
|
|
|
|
|
|
Timothy P. Clackson
|
|
|
31,422
|
|
|
|
|
|
|
|
4.49
|
|
|
|
04/16/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
3.25
|
|
|
|
06/24/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,369
|
|
|
|
|
|
|
|
7.82
|
|
|
|
04/01/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,000
|
|
|
|
|
|
|
|
15.05
|
|
|
|
03/20/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,333
|
|
|
|
21,667
(6)
|
|
|
|
20.89
|
|
|
|
03/19/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
(3)
|
|
|
|
|
|
|
|
7.69
|
|
|
|
03/11/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,833
(7)
|
|
|
|
67,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,666
(8)
|
|
|
|
366,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,200
(9)
|
|
|
|
438,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,500
(10)
|
|
|
|
109,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,500
(4)
|
|
|
|
240,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,500
(5)
|
|
|
|
240,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
(11)
|
|
|
|
187,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
(12)
|
|
|
|
187,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,100
(13)
|
|
|
|
94,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options:
Exercisable
(1)
(#)
|
|
|
Number
of
Securities
Underlying
Unexercised
Options:
Unexercisable
(1)
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock
That
Have
Not
Vested
(2)
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
|
|
|
Equity
Incentive Plan
Awards:
Market or
Payout Values
of Unearned
Shares, Units
or Other
Rights that
Have Not
Vested
(2)
($)
|
|
Thomas J. DesRosier
|
|
|
|
|
|
|
130,000
(14)
|
|
|
|
7.34
|
|
|
|
02/18/25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110,000
(15)
|
|
|
|
687,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin J. Duvall
|
|
|
100,000
|
|
|
|
|
|
|
|
10.28
|
|
|
|
09/19/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
15.05
|
|
|
|
03/20/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,000
|
|
|
|
16,000
(6)
|
|
|
|
20.89
|
|
|
|
03/19/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,500
|
|
|
|
17,500
(16)
|
|
|
|
4.29
|
|
|
|
12/09/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
(7)
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,666
(8)
|
|
|
|
366,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,000
(9)
|
|
|
|
337,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
(10)
|
|
|
|
62,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,500
(4)
|
|
|
|
240,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,500
(5)
|
|
|
|
240,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
(11)
|
|
|
|
187,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
(12)
|
|
|
|
187,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,100
(13)
|
|
|
|
94,375
|
|
39
(1)
|
Options have ten-year terms. Unless otherwise indicated, the options reported in this table vest 25% per year over the four-year period following the date of grant, provided that the option holder is still an
employee of ARIAD, and subject to acceleration of vesting as provided in the executives employment agreement.
|
(2)
|
The market value of the stock awards is determined by multiplying the number of shares by $6.25, the closing price of our common stock on the NASDAQ Global Select Market on December 31, 2015, the last business day
of our most recently completed fiscal year.
|
(3)
|
These options were granted pursuant to our program to grant options to employees and directors upon reaching 10, 15 or 20 years of service with ARIAD. These options are fully vested upon grant and have a term of 10
years.
|
(4)
|
These performance shares vest only if we enroll 50% of the patients in the clinical trial of Iclusig required as part of the FDAs post-marketing requirements, which is our OPTIC dose-ranging trial, by
September 30, 2017. These amounts represent target awards, with the final number of shares to be issued being dependent upon when, prior to October 1, 2017, the clinical trial performance milestone is achieved.
|
(5)
|
These performance shares vest only if we achieve at least the lower end of the revenue target for fiscal years 2014 and 2015. These amounts represent awards at 100% of target, with the final number of shares to be
issued being dependent upon the amount of revenue achieved within the target range. In February 2016, our Compensation Committee certified that these awards had been achieved at 100% of target, resulting in 50% of the shares vesting on March 1,
2016 and the remaining shares vesting on March 1, 2017, provided that the recipient is still employed with us.
|
(6)
|
These options vested on March 19, 2016.
|
(7)
|
These restricted stock units vested on March 19, 2016.
|
(8)
|
One-half of these restricted stock units vested on January 31, 2016 and the remainder will vest on January 31, 2017.
|
(9)
|
These restricted stock units will vest 33
1
/
3
% on April 29, 2016, 2017 and 2018.
|
(10)
|
The performance metric for these performance shares (full patient enrollment in a pivotal registration trial for a new indication of any ARIAD product, excluding the Phase 3 EPIC trial for Iclusig) was achieved in
September 2015, upon completion of enrollment in our ALTA trial for brigatinib, resulting in the awards being earned at 100% of target. Of the earned shares, 50% vested at that time and the remaining 50% of the shares will vest on September 24,
2016.
|
(11)
|
These performance shares vest only if we achieve at least the lower end of the revenue target for fiscal year 2015. These amounts represent awards at 100% of target, with the final number of shares to be issued being
dependent upon the amount of revenue achieved within the target range. In February 2016, our Compensation Committee certified that the revenue target had not been achieved, resulting in none of these awards being earned.
|
(12)
|
These performance shares vest only if we enroll 50% of the patients in a randomized second line clinical trial that will evaluate Iclusig vs. nilotinib (or another second-generation BCR-ABL inhibitor), which is our
OPTIC-2L trial, provided this goal is met by not later than the earlier of (x) 27 months following enrollment of the first patient in such trial or (y) June 30, 2018. These amounts represent target awards, with the final number of
shares to be issued being dependent upon when, prior to June 30, 2018, the clinical trial performance milestone is achieved.
|
(13)
|
These performance shares vest only if we achieve a target TSR for the three year period beginning January 1, 2015 and ending December 31, 2017, as compared to component companies of the NASDAQ Biotechnology
Index, provided that the TSR target is at least the 25% percentile. These amounts represent target awards, with the final number of shares to be issued being dependent upon the percentile achievement of the TSR target.
|
(14)
|
These stock options vested as to 25% of the shares on February 18, 2016 and will vest as to 25% of the shares on each of February 18, 2017, 2018 and 2019.
|
(15)
|
These restricted stock units vested as to 50% of the shares on February 18, 2016 and will vest as to the remaining shares on February 18, 2017.
|
(16)
|
These stock options vest as to 50% of the shares on December 8, 2016 and 2017.
|
40
Option Exercises and Stock Vested in 2015
The following table contains information regarding option exercises and stock awards that vested during the year ended December 31, 2015 held by our NEOs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Shares
Acquired on
Exercise
(#)
|
|
|
Value Realized on
Exercise
(1)
($)
|
|
|
Shares
Acquired on
Vesting
(#)
|
|
|
Value Realized on
Vesting
($)
|
|
Harvey J. Berger
|
|
|
26,454
|
|
|
|
16,137
|
|
|
|
|
|
|
|
|
|
|
|
|
123,546
|
|
|
|
75,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,000
(2)
|
|
|
|
295,290
|
|
|
|
|
|
|
|
|
|
|
|
|
36,800
(3)
|
|
|
|
307,280
|
|
|
|
|
|
|
|
|
|
|
|
|
72,000
(4)
|
|
|
|
547,920
|
|
|
|
|
|
|
|
|
|
|
|
|
95,000
(5)
|
|
|
|
631,275
|
|
|
|
|
|
|
|
|
|
|
|
|
261,000
(6)
|
|
|
|
1,648,650
|
|
|
|
|
|
|
|
|
|
|
|
|
345,000
(7)
|
|
|
|
2,156,250
|
|
|
|
|
|
|
Edward M. Fitzgerald
|
|
|
22,387
|
|
|
|
27,760
|
|
|
|
|
|
|
|
|
|
|
|
|
37,613
|
|
|
|
46,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,333
(2)
|
|
|
|
72,372
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000
(3)
|
|
|
|
116,900
|
|
|
|
|
|
|
|
|
|
|
|
|
10,833
(8)
|
|
|
|
97,172
|
|
|
|
|
|
|
|
|
|
|
|
|
17,500
(9)
|
|
|
|
123,200
|
|
|
|
|
|
|
|
|
|
|
|
|
29,334
(10)
|
|
|
|
189,204
|
|
|
|
|
|
|
Timothy P. Clackson
|
|
|
20,657
|
|
|
|
29,746
|
|
|
|
|
|
|
|
|
|
|
|
|
24,036
|
|
|
|
84,366
|
|
|
|
|
|
|
|
|
|
|
|
|
24,999
|
|
|
|
134,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,333
(2)
|
|
|
|
115,797
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000
(3)
|
|
|
|
116,900
|
|
|
|
|
|
|
|
|
|
|
|
|
10,833
(8)
|
|
|
|
97,172
|
|
|
|
|
|
|
|
|
|
|
|
|
17,500
(9)
|
|
|
|
123,200
|
|
|
|
|
|
|
|
|
|
|
|
|
29,334
(10)
|
|
|
|
189,204
|
|
|
|
|
|
|
Thomas J. DesRosier
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
Martin J. Duvall
|
|
|
|
|
|
|
|
|
|
|
1,667
(2)
|
|
|
|
14,478
|
|
|
|
|
|
|
|
|
|
|
|
|
2,800
(3)
|
|
|
|
23,380
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
(8)
|
|
|
|
71,760
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
(9)
|
|
|
|
70,400
|
|
|
|
|
|
|
|
|
|
|
|
|
29,334
(10)
|
|
|
|
189,204
|
|
(1)
|
Value represents the market value of a share of our common stock at the time of exercise minus the exercise price per share of the option, multiplied by the number of shares acquired upon exercise.
|
(2)
|
This represents the vesting of restricted stock units granted on March 20, 2012. The value realized is calculated by multiplying the number of shares that vested times $8.69, the closing price of our common stock
on March 20, 2015.
|
(3)
|
This represents the vesting of performance shares granted on March 20, 2012 which were earned in July 2013 and became 25% vested on July 15, 2015. The value realized is calculated by multiplying the number of
shares that vested times $8.35, the closing price of our common stock on July 15, 2015.
|
(4)
|
This represents the vesting of restricted stock units granted on March 19, 2013, of which 36,000 shares vested on March 19, 2015 and the balance was accelerated to vest on December 31, 2015 upon
Dr. Bergers retirement in accordance with the terms of his Executive Employment Agreement and his Retirement Agreement. The value realized is calculated by multiplying the number of shares that vested on each date by the closing price of
our common stock on such date, which was $8.97 on March 19, 2015 and $6.25 on December 31, 2015.
|
41
(5)
|
This represents the vesting of performance shares granted on March 19, 2013 which were earned in September 2015, of which 47,500 shares vested on September 24, 2015 and the balance was accelerated to vest on
December 31, 2015 upon Dr. Bergers retirement in accordance with the terms of his Executive Employment Agreement and his Retirement Agreement. The value realized is calculated by multiplying the number of shares that vested on each
date by the closing price of our common stock on such date, which was $7.04 on September 24, 2015 and $6.25 on December 31, 2015.
|
(6)
|
This represents the vesting of restricted stock units granted on January 31, 2014, of which 87,000 shares vested on January 31, 2015 and the balance was accelerated to vest on December 31, 2015 upon
Dr. Bergers retirement in accordance with the terms of his Executive Employment Agreement and his Retirement Agreement. The value realized is calculated by multiplying the number of shares that vested on each date by the closing price of
our common stock on such date, which was $6.45 on January 30, 2015 and $6.25 on December 31, 2015.
|
(7)
|
This represents the vesting of restricted stock units granted on April 28, 2015, all of which vested on December 31, 2015 upon Dr. Bergers retirement in accordance with the terms of his Executive
Employment Agreement and his Retirement Agreement. The value realized is calculated by multiplying the number of shares that vested times $6.25, the closing price of our common stock on December 31, 2015.
|
(8)
|
This represents the vesting of restricted stock units granted on March 19, 2013. The value realized is calculated by multiplying the number of shares that vested times $8.97, the closing price of our common stock
on March 19, 2015.
|
(9)
|
This represents the vesting of performance shares granted on March 19, 2013 which were earned in September 2015. The value realized is calculated by multiplying the number of shares that vested times $7.04, the
closing price of our common stock on September 24, 2015.
|
(10)
|
This represents the vesting of restricted stock units granted on January 31, 2014. The value realized is calculated by multiplying the number of shares that vested times $6.45, the closing price of our common stock
on January 30, 2015.
|
Pension Benefits
We do not have any qualified or non-qualified defined benefit plans.
Non-Qualified Deferred Compensation
We no longer have
any nonqualified deferred compensation plans applicable to our NEOs.
Potential Payments upon Termination or Change in Control
Chief Executive Officer
The following table sets
out the payments received by Dr. Berger, under the terms of his employment agreement and his Retirement Agreement, upon his retirement as our President and Chief Executive Officer on December 31, 2015.
|
|
|
|
|
Severance benefits:
|
|
|
|
Lump sum payment
(1)
|
|
$
|
4,235,550
|
|
Healthcare benefits
(2)
|
|
|
34,741
|
|
Accrued sabbatical benefits
(3)
|
|
|
580,125
|
|
|
|
Acceleration of equity awards:
|
|
|
|
|
Market value of equity vesting on
termination
(4)
|
|
|
1,609,375
|
|
|
|
|
|
|
Total Payments
|
|
$
|
6,459,791
|
|
(1)
|
Represents the sum of three times Dr. Bergers 2015 annual salary and three times the bonus amount paid to him in 2015 for 2014 performance.
|
(2)
|
Represents the value of continued medical coverage in all group health plans for the maximum COBRA continuation period.
|
(3)
|
Represents benefits that had accrued to Dr. Berger under our sabbatical policy at the time it was terminated in 2008, equivalent to nine months salary, payable six months after separation of service.
|
(4)
|
The acceleration of equity awards in the table above includes the value of unvested performance shares granted in 2013, the vesting of which was time-based, as the performance objective had been achieved prior to Dr.
Bergers retirement. The table does not include the value of performance shares granted in 2014 based on a two-year revenue milestone, for which the performance objectives were certified as having been achieved in February 2016 at the target
performance level and pursuant to which the vesting of 50% of this award was accelerated. The table also does not include the value of unvested performance shares granted in 2014 based on enrollment of 50% of patients in our OPTIC dose-ranging trial
for which the performance has not yet been earned, but which we are accelerating the entire award to vest 100% at target. These two awards represent an additional acceleration amount of $1,120,313 based on the closing price of our common stock on
December 31, 2015, which was $6.25. The values of equity awards included in the table above and in this footnote is calculated by multiplying (x) the number of shares accelerated by (y) the closing price of our common stock on December 31, 2015,
which was $6.25.
|
42
Other NEOs
The following is a description of the potential payments upon termination or change in control with respect to our Other NEOs:
E
MPLOYMENT
T
ERMINATION
W
ITHOUT
C
AUSE
If we terminate the employment of our Other NEOs without cause, we are obligated to continue payment of the executives then current salary for a period
of twelve months following the effective date of termination; accelerate vesting of all stock, stock options, stock awards and similar equity awards granted to the executive that would have otherwise vested during the remaining term of that
executives contract, subject to the normal post termination exercise period; and continue payment of all benefits covered under COBRA for up to one year.
Cause for purposes of our Other NEOs employment agreements consists of any of the following:
|
|
|
The officers failure to perform any of his material duties.
|
|
|
|
The conviction of the officer of any felony.
|
|
|
|
Commission of any crime related to the officers employment with the Company.
|
|
|
|
Violation of any law or regulation related to our business.
|
|
|
|
Conduct that could result in unfavorable publicity for us in a material way.
|
|
|
|
Unprofessional conduct inconsistent with the officers position with the Company.
|
|
|
|
Failure to comply with our written policies.
|
|
|
|
Breach of the terms of the employment agreement.
|
The executive officer has a right to cure any conduct that
constitutes cause, if curable, within 30 days after receiving written notice.
For purposes of determining payments upon termination, a termination of the
employment agreement by an Other NEO due to an uncured breach by us of the employment agreement is treated as a termination of the executives employment without cause.
N
ON
-R
ENEWAL
If we do not renew
the employment agreement of our Other NEOs, no severance benefit is payable. In addition, any unvested stock awards, stock options, restricted stock or restricted stock units, or performance shares shall be forfeited to the Company.
E
MPLOYMENT
T
ERMINATION
WITH
C
AUSE
Any unvested stock awards, stock options, restricted stock or restricted stock units, or performance shares shall be forfeited to the Company in the event the
employment is terminated by the Company for Cause.
C
HANGE
IN
C
ONTROL
In the event of a consummation of a Change in Control, as defined below, if within one year following such occurrence the Company terminates the
executive officers employment without cause or the executive officer resigns for good reason, we are obligated to accelerate the vesting of all stock options, stock grants and similar equity rights granted to the officer and provide for
continued exercisability of all awards through their original terms with all rights. We are also obligated to continue to pay the Other NEOs their then current salary for a period of 24 months from the effective date of termination. Good reason
means the involuntary relocation of more than 25 miles, the material breach of the employment agreement by the Company, or the material diminution of the officers responsibilities, which situation remains uncured within a specified timeframe
after notice.
Under the employment agreements for the Other NEOs, there is a Change in Control if any of the following occurs:
|
|
|
Any person makes a tender or exchange offer for our common stock pursuant to which such person acquires 50% or more of our issued and outstanding common stock.
|
43
|
|
|
A merger or consolidation of ARIAD, other than a merger or consolidation of ARIAD in which our voting securities prior to the transaction continue to represent more than 50% of the total voting power of the surviving
corporation, or the sale or disposition of all or substantially all of our assets.
|
|
|
|
Any person acquires more than 50% of our issued and outstanding voting securities.
|
The following tables set
out the estimated potential payments upon termination or a change in control for our Other NEOs, based on the assumptions following the table and assuming such event occurred on December 31, 2015. The total of continued payments in the case of
termination by ARIAD without cause in the tables below reflect the remaining terms of the employment agreements with each of these executives. The footnotes to all of the tables follow the last table.
Mr. Fitzgerald
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments and benefits
|
|
Voluntary
Termination or
Termination
for Cause
($)
|
|
|
Death or Disability
($)
|
|
|
Termination by
ARIAD Without
Cause or by the
Executive
for
ARIADs
Material
Breach
($)
|
|
|
Termination by
ARIAD without
Cause or by the
Executive for Good
Reason within
One
Year after a Change
in
Control
($)
|
|
Severance benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of continued payments
|
|
|
|
|
|
|
|
|
|
|
475,000
|
|
|
|
950,000
|
|
Healthcare benefits
|
|
|
|
|
|
|
23,161
|
|
|
|
23,161
|
|
|
|
34,741
|
|
Acceleration of equity awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value of equity vesting on
termination
(1)
|
|
|
|
|
|
|
260,568
|
|
|
|
472,913
|
|
|
|
2,120,619
|
|
|
|
|
|
|
Total Payment
|
|
|
|
|
|
|
283,728
|
|
|
|
971,073
|
|
|
|
3,105,360
|
|
Dr. Clackson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments and benefits
|
|
Voluntary
Termination or
Termination
for Cause
($)
|
|
|
Death or Disability
($)
|
|
|
Termination by
ARIAD Without
Cause or by the
Executive
for
ARIADs
Material
Breach
($)
|
|
|
Termination by
ARIAD without
Cause or by the
Executive for Good
Reason within
One
Year after a Change
in
Control
($)
|
|
Severance benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of continued payments
|
|
|
|
|
|
|
|
|
|
|
513,000
|
|
|
|
1,026,000
|
|
Healthcare benefits
|
|
|
|
|
|
|
23,533
|
|
|
|
23,533
|
|
|
|
35,299
|
|
Acceleration of equity awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value of equity vesting on
termination
(1)
|
|
|
|
|
|
|
271,844
|
|
|
|
506,663
|
|
|
|
2,221,869
|
|
|
|
|
|
|
Total Payment
|
|
|
|
|
|
|
295,377
|
|
|
|
1,043,195
|
|
|
|
3,283,168
|
|
Mr. DesRosier
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments and benefits
|
|
Voluntary
Termination or
Termination
for Cause
($)
|
|
|
Death or Disability
($)
|
|
|
Termination by
ARIAD Without
Cause or by the
Executive
for
ARIADs
Material
Breach
($)
|
|
|
Termination by
ARIAD without
Cause or by the
Executive for Good
Reason within
One
Year after a Change
in
Control
($)
|
|
Severance benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of continued payments
|
|
|
|
|
|
|
|
|
|
|
485,000
|
|
|
|
970,000
|
|
Healthcare benefits
|
|
|
|
|
|
|
23,161
|
|
|
|
23,161
|
|
|
|
34,741
|
|
Acceleration of equity awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value of equity vesting on
termination
(1)
|
|
|
|
|
|
|
595,458
|
|
|
|
687,500
|
|
|
|
687,500
|
|
|
|
|
|
|
Total Payment
|
|
|
|
|
|
|
618,618
|
|
|
|
1,195,661
|
|
|
|
1,692,241
|
|
44
Mr. Duvall
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments and benefits
|
|
Voluntary
Termination or
Termination
for Cause
($)
|
|
|
Death or Disability
($)
|
|
|
Termination by
ARIAD Without
Cause or by the
Executive
for
ARIADs
Material
Breach
($)
|
|
|
Termination by
ARIAD without
Cause or by the
Executive for Good
Reason within
One
Year after a Change
in
Control
($)
|
|
Severance benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of continued payments
|
|
|
|
|
|
|
|
|
|
|
470,000
|
|
|
|
940,000
|
|
Healthcare benefits
|
|
|
|
|
|
|
23,161
|
|
|
|
23,161
|
|
|
|
34,741
|
|
Acceleration of equity awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value of equity vesting on
termination
(1)
|
|
|
|
|
|
|
209,876
|
|
|
|
425,481
|
|
|
|
2,083,213
|
|
|
|
|
|
|
Total Payment
|
|
|
|
|
|
|
233,036
|
|
|
|
918,642
|
|
|
|
3,057,953
|
|
(1)
|
Amounts in the tables above do not include the value associated with vested stock options. Information about all stock options and other unvested equity awards held by the Other NEOs as of December 31, 2015 is
included in the Outstanding Equity Awards at December 31, 2015 table.
|
In the case of termination by the Company without
Cause or by the officer for the Companys material breach, then the unvested portions of all time-based awards, including performance shares previously earned, that would have vested during the remaining term of the officers employment
agreement accelerate upon the effective date of such termination. In the case of termination by the Company without Cause or by the officer for good reason within one year of a Change in Control, all outstanding unvested equity awards immediately
vest and remain exercisable according to their terms, including performance shares granted in 2014 and 2015, even if the performance objective had not been achieved as of the Change in Control. The 2014 performance shares will immediately vest in
full upon termination in connection with a Change in Control at the maximum level, which is 160%, and the 2015 performance shares will immediately vest in full upon termination in connection with a Change in Control at the greater of the target
level, which is 100%, or the actual level achieved, which can be up to 160% of the target level. The values of equity awards included in the tables above is calculated by multiplying (x) the number of shares accelerated by (y) the closing
price of our common stock on December 31, 2015, which was $6.25.
The amounts in the above tables do not include the value of the lump sum payments
payable upon termination in good standing to Dr. Clackson ($128,250) and Mr. Fitzgerald ($118,750) for amounts previously earned under our now terminated sabbatical policy, as described in the Narrative to Summary Compensation Table
and Grants of Plan-Based Awards Table in 2015 above. The amounts in the above tables also do not reflect any reduction in payments related to the modified economic cutback provisions in the executive officers employment agreements that
may apply on or after a change-in-control.
Assumptions Regarding Post Termination Payment Tables
Except as otherwise specifically noted above, the tables presented on the preceding pages were prepared as though each NEOs employment was terminated on
December 31, 2015, using the closing price of our common stock on that date ($6.25). We are required by the SEC to use these assumptions. With those assumptions taken as a given, we believe that the remaining assumptions listed above, which are
necessary to produce these estimates and reflect solely our interpretation of our contractual obligations, are reasonable in the aggregate. However, the executives employment was not terminated on December 31, 2015 (other than with
respect to Dr. Berger) and a change in control did not occur on that date. There can be no assurance that a termination of employment, a change in control or both would produce the same or similar results as those described if either or both of
them occur on any other date or at any other price of our common stock, or if any assumption is not correct in fact.
45
Post-Termination Payments to Chief Financial Officer after December 31, 2015
The following table sets out the payments to be made to Mr. Fitzgerald under the terms of his employment agreement following his resignation as our
Executive Vice President, Chief Financial Officer and Treasurer on March 21, 2016, and from the Company on April 8, 2016.
|
|
|
|
|
Severance benefits:
|
|
|
|
|
Total of continued payments
(1)
|
|
|
$ 475,000
|
|
Healthcare and other benefits
(2)
|
|
|
32,055
|
|
Accrued sabbatical benefits
(3)
|
|
|
118,750
|
|
|
|
Acceleration of equity awards:
|
|
|
|
|
Market value of equity vesting on
termination
(4)
|
|
|
234,300
|
|
|
|
|
|
|
|
|
Total Payments
|
|
|
$ 860,105
|
|
(1)
|
Represents twelve months of his current base salary.
|
(2)
|
Represents the value of continued coverage in group health, long-term care and long-term disability plans for twelve months.
|
(3)
|
Represents benefits that had accrued to Mr. Fitzgerald under our sabbatical policy at the time it was terminated in 2008, equivalent to three months salary, payable six months after separation of service.
|
(4)
|
All time-based equity awards that were outstanding and unvested as of April 8, 2016 and that would have vested during the remainder of 2016 were accelerated as of such date. The acceleration of equity awards in the
table above includes the value of 18,000 unvested restricted stock units that would have vested on April 29, 2016 and the value of 17,500 unvested performance shares granted in 2013, the vesting of which was time-based and would have vested on
September 24, 2016, as the performance objective had been achieved. The values of equity awards included in the table above is calculated by multiplying (x) the number of shares accelerated by (y) the closing price of our common stock
on April 8, 2016, which was $6.60.
|
Director Compensation
Annual compensation for our non-employee directors is as follows:
|
|
|
A one-time grant upon initial appointment or election to the Board of 75,000 stock options, which vest over three years in equal amounts on the first, second and third anniversaries of the grant date.
|
|
|
|
Annual cash compensation of $70,000, paid in equal quarterly amounts on or about the last day of each calendar quarter. In lieu of cash, a director may elect to receive the equivalent value in restricted shares of our
common stock on January 31, subject to a lapsing repurchase right as to 25% of the shares on March 31, June 30, September 30 and December 31 of the year of the award. The number of shares to be issued will be
determined based on the volume weighted average price of our common stock for the month of December of the prior year. Any such election to be paid in shares in lieu of cash must be made by January 15 of each calendar year.
|
|
|
|
An annual equity grant of 25,000 stock options and 12,500 restricted stock units which vests as to 25% of the shares on March 31, June 30, September 30 and December 31 of the year of the
award.
|
The exercise price of each stock option award is the closing price of our common stock as quoted on the NASDAQ Global Select Market
on the grant date. These awards have terms of 10 years, subject to earlier termination. The annual cash component is prorated for any director who joins the Board during the year beginning on the first day of the fiscal quarter in which he or she
was initially appointed or elected and the individual may elect to be paid in shares in lieu of cash. If a director dies, resigns or is removed during any quarter, he or she shall be entitled to a cash payment (or shares in lieu thereof) on a
pro-rated basis through his or her last day of service.
All future grants are made under our 2014 Long-Term Incentive Plan or will be made under a future
equity plan approved by our shareholders.
Dr. Berger received no additional compensation for serving on our Board. No other director is an employee
of the Company.
46
2015 Director Compensation Table
The following table provides information concerning the compensation of our non-employee directors during 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned
or Paid in
Cash
($)
|
|
|
Stock
Awards
(1)(2)
($)
|
|
|
Option
Awards
(2)
($)
|
|
|
Total
($)
|
|
Alexander J. Denner, Ph.D.
|
|
|
|
|
|
|
162,054
|
|
|
|
122,633
|
|
|
|
354,686
|
|
Jay R. LaMarche
|
|
|
70,000
|
|
|
|
89,375
|
|
|
|
122,633
|
|
|
|
282,008
|
|
Athanase Lavidas, Ph.D.
|
|
|
70,000
|
|
|
|
89,375
|
|
|
|
122,633
|
|
|
|
282,008
|
|
Anna Protopapas
(3)
|
|
|
52,500
|
|
|
|
|
|
|
|
481,335
|
|
|
|
533,835
|
|
Massimo Radaelli, Ph.D.
|
|
|
70,000
|
|
|
|
89,375
|
|
|
|
122,633
|
|
|
|
282,008
|
|
Norbert G. Riedel, Ph.D.
|
|
|
70,000
|
|
|
|
89,375
|
|
|
|
122,633
|
|
|
|
282,008
|
|
Sarah J. Schlesinger, M.D.
|
|
|
70,000
|
|
|
|
89,375
|
|
|
|
122,633
|
|
|
|
282,008
|
|
Wayne Wilson
|
|
|
70,000
|
|
|
|
89,375
|
|
|
|
122,633
|
|
|
|
282,008
|
|
(1)
|
Dr. Denner elected to receive restricted stock in lieu of cash fees of $70,000.
|
(2)
|
The amounts included under Stock Awards and Option Awards represent the aggregate grant date fair value for stock awards and option awards granted during the year, computed in accordance with
FASB ASC Topic 718. The assumptions used in the calculation of the grant date fair value of the restricted stock unit awards and option awards are set forth in note 11 to our audited consolidated financial statements, entitled Stock
Compensation, included in the Original Filing. As of December 31, 2015, each non-employee director had the following aggregate number of stock options outstanding: Mr. Denner 100,000; Mr. LaMarche 120,000;
Dr. Lavidas 70,000; Ms. Protopapas 75,000; Dr. Radaelli 102,319; Dr. Riedel 75,000; Dr. Schlesinger 90,000; and Mr. Wilson 75,000.
|
(3)
|
Ms. Protopapas was appointed to the Board effective as of April 28, 2015. Upon her initial appointment to the Board, Ms. Protopapas was granted stock options to purchase 75,000 shares of common stock.
Ms. Protopapas annual cash compensation was pro-rated due to her partial service during 2015.
|
Director Stock Ownership
Guidelines
In 2012, we adopted stock ownership guidelines, to be phased in over five years, for our non-employee directors. In December 2014, we
strengthened the guidelines so that our non-employee directors are required to own Company common stock worth at least five times his or her annual cash compensation. Newly elected directors have five years from when they are first elected or
appointed to the Board to comply with these guidelines. As of December 31, 2015, all of our then serving non-employee directors with the exception of Sarah Schlesinger and Ms. Protopapas, who recently joined the Board, are in early
compliance with our stock ownership guidelines. The guidelines are designed to align the interests of our non-employee directors with those of our shareholders by ensuring that our non-employee directors have a meaningful financial stake in our
long-term success. In developing these guidelines, we reviewed the market practices of our then current peer group companies to determine a meaningful level of ownership to align our directors and shareholders.
Compensation Practices and Policies Relating to Risk Management
The Compensation Committee has assessed the Companys compensation policies, practices and awards, including the use of performance shares, and has
concluded that our compensation policies, practices and awards do not create risks that are reasonably likely to have a material adverse effect on the Company.
Our management assessed the Companys compensation and benefits programs to determine if the programs provisions and operations create undesired or
unintentional risk of a material nature, and reported its assessment to the Compensation Committee. We do not have any programs where a participant may be able to directly affect variability or timing of payout. Rather, our compensation programs
include a combination of fixed base salaries, cash bonuses, long-term incentive awards, including performance-based compensation and employee retirement plans that are generally uniform in design and operation throughout the Company and with all
levels of employees.
In 2012, we implemented a minimum stock ownership guideline for our CEO equal to six times his base salary, to be phased in over
five years, as well as minimum stock ownership guidelines for the non-employee members of our Board of Directors. Dr. Berger met this guideline during 2015. Our new CEO does not yet meet the guideline, as he just joined us in 2016. In 2014, we
increased the stock ownership guideline applicable to our non-employee directors to five times their annual cash compensation, up from three times. As with the original CEO requirement, the policy is phased in over five years. Our non-employee
directors already meet this
47
guideline, with the exception of Dr. Schlesinger and Ms. Protopapas, who both recently joined the Board. In February 2016, we implemented a minimum stock ownership guideline for our
other executive officers equal to one times their base salary, to be phased in over five years. All of our Other NEOs already meet this guideline, with the exception of Mr. DesRosier, who joined us in 2015. We believe the adoption of such
guidelines further aligns the interests of our CEO, our other executive officers and our Board of Directors with those of our shareholders.
We adopted an
Incentive Compensation Recoupment Policy effective as of January 1, 2015. This recoupment (or clawback) policy goes beyond current regulatory requirements, and is based on principles that were jointly developed by six major
pharmaceutical companies and 13 institutional investors as a best practice corporate governance strategy that seeks to strengthen board risk oversight and preserve long-term shareholder value. It provides the Compensation Committee with broad
discretion to recoup certain incentive awards made to the Companys executive officers in instances of material violations of law or a written Company policy by such executive officer, or by a subordinate employee, if the executive failed to
supervise the subordinate, where the misconduct caused significant financial harm to the Company. Public disclosure of recoupment decisions will be made in compliance with the rules and regulations of the Securities and Exchange Commission and other
applicable laws. Where the Company deems it appropriate, it may provide disclosure beyond that required by law. The policy can be found on the Investors section of our website at
http://investor.ariad.com
under the heading Corporate
Governance.
Based on the foregoing, we believe that our compensation policies, practices and awards do not create risks that are likely to have a
material adverse effect on the Company as a whole. We also believe that our incentive compensation arrangements provide incentives that do not encourage risk-taking beyond the organizations ability to effectively identify and manage
significant risks, are compatible with our effective internal controls and our risk management practices, and are supported by the oversight and administration of the Compensation Committee with regard to executive compensation programs.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 2015, Drs. Lavidas and Riedel and Ms. Protopapas served as members of our Compensation Committee. In 2015,
none of our executive officers served on the board of directors or compensation committee of any entity that had one or more executive officers serving as a member of our Board or Compensation Committee. There are no family relationships between or
among the members of our Board or executive officers.
48