2016 Director Compensation Table
The following table sets forth the compensation awarded to, earned by, or paid to each person who served as a director during 2016, other than a
director who also served as a named executive officer.
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Name
|
|
Fees Earned or
Paid in Cash
($)(1)
|
|
Share Awards
($)(2)(3)(4)
|
|
All Other
Compensation
($)(5)
|
|
Total
($)
|
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(a)
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|
(b)
|
|
(c)
|
|
(g)
|
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(h)
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|
Eran Broshy
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|
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70,000
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|
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118,200
|
|
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76,928
|
|
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265,128
|
|
Henrietta H. Fore
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|
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70,000
|
|
|
118,200
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|
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89,660
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|
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277,860
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Robert V. Gunderson, Jr.
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|
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60,500
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|
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118,200
|
|
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73,394
|
|
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252,094
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Burton G. Malkiel, Ph.D.
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|
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89,000
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|
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118,200
|
|
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80,828
|
|
|
288,028
|
|
Dean J. Mitchell
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66,000
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|
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118,200
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|
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90,106
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274,306
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Susan Molineaux, Ph.D.
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62,500
|
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118,200
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|
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61,509
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242,209
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Donal O'Connor
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70,500
|
(6)
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118,200
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188,700
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Peter S. Ringrose, Ph.D.
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73,500
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118,200
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|
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74,950
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|
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266,650
|
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George M. Whitesides, Ph.D.
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|
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60,000
|
|
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118,200
|
|
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70,598
|
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248,798
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William D. Young
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104,500
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118,200
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84,590
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307,290
|
|
-
(1)
-
Includes
the annual retainer paid to each director, the annual retainers paid to the chairperson of each committee and to the lead independent director, as well as
fees for attendance at board of director and committee meetings.
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-
(2)
-
The
amounts in these columns represent the aggregate grant date fair value of share awards and option awards granted to the director during 2016 computed in
accordance with FASB ASC Topic 718. See Note 8 of the notes to our consolidated financial statements in our Annual Report on Form 10-K filed on March 1, 2017 for a discussion of
all assumptions made by us in determining the grant date fair value of our equity awards.
-
(3)
-
As
of December 31, 2016, certain of the above listed directors held outstanding, unvested RSUs under which the following number of our ordinary shares were
issuable: Mr. Broshy (6,000); Ms. Fore (6,000); Mr. Gunderson (6,000); Dr. Malkiel (6,000); Mr. Mitchell (6,000); Dr. Molineaux (6,000); Mr. O'Connor
(6,000); Dr. Ringrose (6,000); Dr. Whitesides (6,000); and Mr. Young (6,000). As of December 31, 2016, certain of the above-listed directors held outstanding RSUs under
which the following number of shares of Innoviva, Inc.'s ("Innoviva's") (known as Theravance, Inc. prior to January 7, 2016) common stock were issuable: Ms. Fore (7,585);
Mr. Gunderson (7,585); Dr. Malkiel (7,585); Dr. Ringrose (7,585); Dr. Whitesides (7,585); and Mr. Young (7,585). These RSUs are fully vested based on service to
Innoviva prior to our spin-off in June 2014 (the "Spin Off") from Innoviva, but have not yet settled in accordance with their terms.
-
(4)
-
As
of December 31, 2016, the above-listed directors held outstanding options to purchase the following number of our ordinary shares: Mr. Broshy
(24,000); Ms. Fore (24,000); Mr. Gunderson (24,000); Dr. Malkiel (24,000); Mr. Mitchell (24,000); Dr. Molineaux (12,000); Mr. O'Connor (12,000);
Dr. Ringrose (24,000); Dr. Whitesides (24,000); and Mr. Young (24,000). As of December 31, 2016, certain of the above-listed directors also held outstanding options to
purchase the following number of shares of Innoviva's common stock: Ms. Fore (34,132); Mr. Gunderson (56,889); Dr. Malkiel (75,854); Dr. Ringrose (22,755);
Dr. Whitesides (56,889); and Mr. Young (56,889). The Innoviva options held by our non-employee directors are fully vested, but, in connection with the Spin-Off, they were amended to
remain outstanding based on service on our board of directors.
-
(5)
-
Includes
actual amounts paid by us in 2016 and estimates of additional amounts to be paid to each director in connection with the Irish Tax Gross Up for compensation
earned by each director in 2016, assuming a 48% Irish income tax rate. The amounts have been converted from EUR at an exchange rate of 1.053.
-
(6)
-
Includes
$4,000 earned by Mr. O'Connor for service as a director of Theravance Biopharma Ireland Limited during 2016.
Shareholder Communications with the Board of Directors
Shareholders interested in communicating with the board of directors or a particular director should send correspondence to Theravance
Biopharma, Inc., c/o of its U.S. subsidiary, Theravance Biopharma US, Inc., at 901 Gateway Boulevard, South San Francisco, California 94080, Attn: Secretary. Each communication should
set forth (i) the name and address of the shareholder as it appears on our books and, if the shares are held by a nominee, the name and address of the beneficial owner of the shares, and
(ii) the number of ordinary shares that are owned of record by the record holder and beneficially by the beneficial owner. Pursuant to our ShareholderDirector Communications
Policy & Procedures, the Secretary has been instructed, in his discretion, to screen out communications from shareholders that are not related to the duties and responsibilities of the board of
directors. If deemed an appropriate communication, the Secretary will forward it, depending on the subject matter, to the chairperson of a committee of the board of directors or a particular director,
as appropriate.
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EXECUTIVE OFFICERS
The following table provides information concerning our executive officers as of March 20, 2017:
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Name
|
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Age
|
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Position(s)
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Rick E Winningham
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57
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Chief Executive Officer and Chairman of the Board
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Renee D. Gala
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44
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Senior Vice President and Chief Financial Officer, Treasurer
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Brett K. Haumann
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47
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Senior Vice President, Clinical Development and Chief Medical Officer
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Sharathchandra (Sharath) S. Hegde
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53
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Senior Vice President, Research
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Frank Pasqualone
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61
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Senior Vice President and Chief Commercial Operations Officer
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Kenneth R. Pitzer
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53
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Senior Vice President, Product Strategy and Commercial Planning
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Bradford J. Shafer
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57
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Executive Vice President, General Counsel and Secretary
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Philip D. Worboys
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47
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Senior Vice President, Translational Science
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Rick E Winningham.
See biographical information set forth above under "Proposal One: Election of DirectorsInformation Regarding
the
Nominees and Other Directors."
Renee D. Gala
joined Theravance Biopharma as Vice President, Finance and Treasurer in June 2014 in connection with our spin-off from
Innoviva, Inc. ("Innoviva") (known as Theravance, Inc. prior to January 7, 2016), became Senior Vice President, Finance in July 2014 and became Senior Vice President and Chief
Financial Officer in December 2014. Prior to the Spin-Off, Ms. Gala had been Vice President, Finance at Innoviva since January 2013. Ms. Gala joined Innoviva in June 2006, initially as
Director of Financial Planning and Analysis and then as Senior Director of Finance and Procurement in July 2008. From 2001 to 2006, Ms. Gala worked at Eli Lilly and Company, where she held
positions of increasing responsibility in global treasury, pharmaceutical sales, and corporate strategy/business development. Prior to joining Eli Lilly, she spent seven years in the energy industry
in the U.S. and internationally in positions focused on corporate finance, project finance, and mergers and acquisitions. She is a member of the board of directors of Corcept Therapeutics
Incorporated. Ms. Gala earned a B.S. in Mathematics from Vanderbilt University and an M.B.A. from Columbia Business School.
Brett K. Haumann, M.D., M.B.A.,
joined Theravance Biopharma in June 2014 in connection with our spin-off from Innoviva, after joining
Innoviva as Vice President, Clinical Development, in October 2013. He became Vice President, Clinical Development and Operations of Innoviva in March 2014 and became Senior Vice President, Clinical
Development at Theravance Biopharma in December 2014. Prior to joining Innoviva, Dr. Haumann served as Chief Medical Officer at and on the board of directors of Circassia Limited, a
biopharmaceutical company. Previously, Dr. Haumann held senior positions at GlaxoSmithKline, including Medicines Development Leader and Vice President Clinical Development. Dr. Haumann
has more than 15 years of experience in the discovery and development of pulmonary and allergy medicines. Dr. Haumann completed his M.D. at the University of Witwatersrand Medical
School, South Africa and holds an M.B.A. from Open University, United Kingdom.
Sharathchandra (Sharath) S. Hegde, Ph.D.
, joined Theravance Biopharma in June 2014 in connection with the spin-off from Innoviva and
became Senior Vice President, Research in March 2016. After joining Innoviva in September 1999, Dr. Hegde held various positions in the Pharmacology Department before being promoted to Vice
President, Pharmacology in June 2007 and later becoming Vice President, Discovery Biology of Theravance Biopharma in June 2015. Prior to joining Innoviva, Dr. Hegde spent 9 years at
Syntex Corporation, later acquired by Roche Holdings Ltd. as an Associate Director and, later, Director of Pharmacology. Dr. Hegde obtained his Ph.D. in Pharmacology from the University
of Houston and obtained his B.Pharm/M.Pharm degree in Pharmacy/Pharmacology from the University of Bombay.
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Frank Pasqualone
joined Theravance Biopharma as Senior Vice President, Operations in June 2014 in connection with our spin-off from
Innoviva. Prior to the Spin-Off, Mr. Pasqualone held the position of Senior Vice President, Operations at Innoviva since January 2014. From 2010 to 2012, he served as President of
Intercontinental Region: Latin America, Middle East and Africa and also as President of Southern Europe from 2009 to 2010, at Bristol-Myers Squibb (BMS). Over a 25-year period with BMS,
Mr. Pasqualone held senior management positions in the U.S. and globally. In the U.S., he was responsible for the Oncology/Virology business and led the marketing group in the Diabetes
business.
Since leaving Bristol-Myers Squibb and prior to joining Theravance, Mr. Pasqualone was self-employed as a part-time consultant. Mr. Pasqualone holds an M.B.A. from University of Dayton
and a B.S. in Marketing from Bowling Green State University in Ohio.
Kenneth R. Pitzer, D.V.M.
, has served as our Senior Vice President, Product Strategy and Commercial Planning since March 2016. Previously,
Dr. Pitzer was Vice President, Strategic and Commercial Planning since he joined Theravance Biopharma in October 2014 from Innoviva, where he held the position of Vice President, Strategic and
Commercial Planning since January 2008. Dr. Pitzer joined Innoviva in 2002 as Director, New Product Planning, and held various positions in the Commercial Development Department before being
promoted to Vice President, Strategic and Commercial Planning in January 2008. Prior to joining Innoviva Dr. Pitzer worked at Lederle Laboratories, a pharmaceutical manufacturing company, as
Marketing Manager from 1989 to 1995 and then at Cygnus, Inc., a biopharmaceutical company, from 1995 until 2002, ultimately serving as the Vice President of Product Management.
Dr. Pitzer earned a Doctor of Veterinary Medicine degree from The Ohio State University in 1987 and an M.B.A. from Carnegie-Mellon University in 1989.
Bradford J. Shafer
has served as our Executive Vice President, General Counsel since March 2016 and our Secretary since November 2014.
Previously, he was our Senior Vice President, General Counsel since September 2014. Prior to joining Theravance Biopharma, Mr. Shafer served as Senior Vice President, General Counsel and
Secretary at Innoviva, since August 1999. From 1996 to 1999 he served as General Counsel of Heartport, Inc., a medical device company. From 1993 to 1996, Mr. Shafer was a partner in the
Business and Technology Group at the law firm of Brobeck, Phleger & Harrison LLP. Mr. Shafer holds a J.D. from the University of California, Hastings College of the Law, where he
was Editor-in-Chief of The Hastings Constitutional Law Quarterly, and a B.A. from the University of the Pacific, where he graduated magna cum laude.
Philip D. Worboys, Ph.D.
, has served as our Senior Vice President, Translational Science since March 2016, where is he responsible for
leading the progression of drug candidates from the discovery stage into human clinical studies, including clinical pharmacology and biomarker development as well as project management. Previously,
Dr. Worboys was Vice President, Drug Metabolism and Pharmacokinetics (DMPK) since he joined Theravance Biopharma in October 2014 from Innoviva, where he held the position of Vice President,
DMPK since November 2008. Prior to joining Innoviva, he served as Senior Director, DMPK at Roche Bioscience, Inc. since 2005. Dr. Worboys was an Associate Director, DMPK at Pharmacia
Corporation from 2001 until its acquisition by Pfizer, Inc. and was Senior Director, DMPK at Pfizer, Inc. from 2003 to 2005. He spent the first part of his career in DMPK, at Merck
Sharp & Dohme in Harlow, United Kingdom, and worked in various capacities at Aventis, Unilever and GlaxoSmithKline prior to that. Dr. Worboys obtained his Ph.D. degree in Pharmaceutics
from Manchester University, United Kingdom. He holds a B.Sc. degree in Biochemistry from Imperial College of Science, Technology & Medicine at the University of London.
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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
This section discusses our executive compensation polices and decisions and the most important factors relevant to an analysis of these policies
and decisions. It provides qualitative information regarding the manner and context in which compensation is awarded to and earned by our named executive officers and offers perspective on the data
presented in the tables and narrative that follow.
Executive Summary
We are a biopharmaceutical company that was spun out of Innoviva, Inc. ("Innoviva") (known as Theravance, Inc. prior to
January 7, 2016) in June 2014. As a biopharmaceutical company, we operate in an extremely competitive, rapidly changing and heavily regulated industry. We believe that the skill, talent,
judgment and dedication of the executive officers and our other key employees are critical factors affecting our long-term shareholder value. Therefore, our goal is to maintain a compensation program
that will fairly compensate employees, attract and retain highly qualified employees, motivate the performance of employees towards and reward the achievement of key corporate goals, and align
employees' long-term interests with those of our shareholders.
Our
portfolio spans a number of therapeutic areas and includes products in every stage of development from investigation and discovery, through early-, mid- and late-stage clinical
trials, to commercialization
and sale. It is important our named executive officers understand the tactical and strategic elements of every program in our portfolio while the program progresses from research to development to
commercialization. The breadth and depth of our portfolio requires current knowledge of and facility with complex issues encompassing patient needs, the prescriber concerns and priorities,
institutional operational dynamics and the "payor" landscape. Our named executive officers must work in an integrated manner to maximize the value of each program, whether the program is wholly owned
by Theravance Biopharma or rights and responsibilities are shared with a partner, and enable our research organization to discover and develop impactful new therapies.
While
we have been operating as an independent company only since mid-2014, most of our management team has a long history both in the industry generally and specifically managing our
business as part of Innoviva. We believe their experience and track record in drug discovery, development and commercialization is a valuable asset.
2016 Performance Highlights.
2016 was a very successful year for Theravance Biopharma as we saw a significant increase in the
value of our ordinary
shares from $16.39 per share at market close on December 31, 2015 (the last trading day of 2015) to $31.88 at market close on December 30, 2016 (the last trading day of 2016), or a 95%
appreciation in our share price for 2016. Our one-year total shareholder return ("TSR") as of December 31, 2016 was the second highest in our peer group and was the sixth highest out of the 157
members of the Nasdaq Biotechnology Index as of December 31, 2016 with a measurable 2016 TSR. The Nasdaq Biotechnology Index Total Return performance for the same period was
21%.
In
addition, we reported positive Phase 1 clinical results for two potentially best-in-class programs: our intestinally restricted pan-Janus kinanse ("JAK") inhibitor program for
inflammatory intestinal diseases and our Neprilysin ("NEP") inhibitor program for cardiovascular and renal diseases and progressed candidates from pre-clinical development into early clinical
development in our JAK inhibitor program. We completed enrollment in each of our three studies in the Phase 3 program for revefenacin (TD-4208) in chronic obstructive pulmonary disease
("COPD"). Of these, we reported positive results from two replicate efficacy studies while the long term safety study remains ongoing. We progressed two other key programs in Phase 2 clinical
development: our highly selective 5-HT4 receptor agonist velusetrag (TD-5108) in gastroparesis, for which we received Fast Track designation
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from
the Food and Drug Administration ("FDA") for the treatment of symptoms associated with idiopathic and diabetic gastroparesis, and our norepinephrine and serotonin reuptake inhibitor ("NSRI")
TD-9855 in neurogenic orthostatic hypotension ("nOH"). We entered into a global license, development and commercialization agreement with Millennium Pharmaceuticals, Inc., a subsidiary of
Takeda Pharmaceutical Company Limited (together, "Takeda") for TD-8954, a selective 5-HT4 receptor
agonist for the treatment of enteral feeding intolerance and other gastrointestinal motility disorders. We also continued to execute our commercial strategy for VIBATIV including the progression of
the Telavancin Observational Use Registry ("TOUR
TM
"), a patient registry study designed to assess how VIBATIV is being used in real-world clinical settings, and a Phase 3
bacteremia study designed to expand the product's existing label. Finally, we strengthened our balance sheet through public offerings, the proceeds of which are intended for general corporate purposes
including the support of key programs and objectives.
Achievement of Corporate Goals.
At the beginning of 2016, we set out to achieve ten corporate goals (described below in the
"Annual Cash Incentive
Compensation" section), of which the compensation committee determined that we accomplished five out of ten goals for 2016 and partially achieved another three goals.
Adoption of Long-Term Retention and Performance Incentive Program.
For biopharmaceutical companies at our stage of development,
value-driving
performance requires years of successful achievement of objectives, with goals building toward regulatory approval and commercialization of our product candidates, whether on our own or with a
strategic partner. The drug discovery, development and regulatory process requires years of progress, with the later-stage development and regulatory achievements carrying the greatest value. For this
reason, as well as for incentive and retention purposes as described below, at the start of 2016 the compensation committee implemented a special long-term retention and performance incentive program
(further described in the "Equity Incentive Compensation" section below), which is comprised of two elements: (1) replenishment restricted share unit awards ("RSUs") twice the size of the
guideline replenishment award for the named executive officers, with extended, 5-year vesting, and an expectation that there will be substantially reduced replenishment awards in 2017 and 2018; and
(2) long-term performance-contingent restricted share awards ("RSAs") offering the named executive officers the opportunity to earn higher value over the 2016 - 2020 timeframe
depending on how many key operating goals and objectives are achieved during that five-year period (the "Five-Year Performance RSAs"). The Five-Year Performance RSAs are focused on
(1) rewarding achievements that we believe will create long-term value for shareholders, (2) long-term retention, and (3) alignment of executives with long-term shareholders.
Since the 2016 replenishment RSUs and the Five-Year Performance RSAs include part of the replenishment awards that would have been made in 2017 and that would be expected to be made in 2018, the value
of 2016 compensation may appear inflated. However, consistent with the long-term retention and performance incentive program, the replenishment equity awards granted to our named executive officers in
the first quarter of 2017 were significantly smaller than the 2016 replenishment equity awards and, absent significant changes in performance, role or market conditions, it is currently anticipated
that the same will be true for 2018.
Compensation Philosophy and Objectives
In order to attract, retain and incentivize our named executive officers, our compensation philosophy is to provide a competitive pay package
with significant upside potential and an emphasis on equity compensation over annual cash compensation. We also strive to design officer compensation to reward annual goal achievement and increased
shareholder value, while keeping focus on and greater potential financial reward for achievement of long-term, multi-year goals that we believe will create significant value for our shareholders. We
believe that successful execution against the goals we set is the best way to enhance long-term shareholder value. Accordingly, our annual cash incentives and the
32
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bulk
of our longer term incentives granted to named executive officers in 2016, such as the Five-Year Performance RSAs, are tied to our achievement of corporate operating and drug development goals.
The
difficulty of achieving our goals in the time frames specified, as well as the high level of drug development and leadership experience of the officer team, motivates our
compensation philosophy and the emphasis on longer-term compensation. Our annual and longer-term operating goals, which generally relate to the successful discovery, development, and regulatory
approval of our compounds, are aggressive. The business of discovering novel compounds and developing them as potential medicines is extremely risky, the current regulatory environment for new drug
approvals is highly uncertain and successful commercialization of approved medicines is increasingly challenging, including as a result of the increasing influence of third party payors. In addition,
the time frames within which our operating goals must be achieved in order to earn annual incentive compensation are relatively short. We often set more goals than we reasonably believe we can
accomplish in a given time frame in order to stretch the leadership team.
Compensation Committee
The compensation committee of our board of directors is comprised of four non-employee members of the board of directors. The compensation
committee's basic responsibility is to review the performance of our management in achieving corporate objectives and to ensure that the named executive officers as well as other members of senior
management are compensated effectively in a manner consistent with our compensation philosophy and competitive practice. In fulfilling this responsibility, the compensation committee reviews the
performance of each named executive officer at least once each year. The CEO, as the manager of the executive team, assesses the executives' contributions to the corporate goals and makes a
recommendation to the compensation committee with respect to any merit increase in salary, cash bonus and annual replenishment equity award for each member of the executive team, other than himself.
The compensation committee meets with the CEO to evaluate, discuss and modify or approve these recommendations. The compensation committee also conducts a similar evaluation of the CEO's contributions
when the CEO is not present, and determines any increase in salary, cash bonus and annual replenishment equity award for him.
The
compensation committee reviews all components of the named executive officers' compensation when we provide the compensation committee with compensation summaries for each executive
officer at the beginning of each year. The information in these summaries is used by the compensation committee to assist it in analyzing existing compensation and any proposed changes in compensation
for each named executive officer. The summaries include information regarding the accumulated value of equity ownership, how much is unvested, and the amount of potential value earnable under various
share price and performance goal achievement scenarios.
The
summaries help the compensation committee to track changes in an officer's total direct compensation from year to year and to remain aware of the compensation historically paid to
each named executive officer. The summaries reflect a variety of values for vested and unvested share awards assuming different share prices. They also provide insight into the aggregate values
accumulated from historical equity awards and the potential costs of severance that result from the current severance program. In addition to the information and analyses supplied to the compensation
committee as described above and in the peer group segment below, members of management support the compensation committee in its work from time to time and the compensation committee's independent
executive compensation consultant provides compensation analyses, in each case, at the compensation committee's request.
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Compensation Consultant
The compensation committee has the authority under its charter to engage the services of outside advisors, experts and others to assist the
compensation committee. In accordance with this authority and as described in the "Compensation Committee" section beginning on page 33, the compensation committee confers from time to time with its
independent executive compensation consultant, Frederic W. Cook & Co. ("FW Cook"). FW Cook is retained by and reports directly to the compensation committee and its role is
to assist and advise the compensation committee on matters related to compensation for executive officers, other key employees and non-employee directors. FW Cook does not work on projects for
management except as an agent of the compensation committee and with the advance knowledge and approval of the chairman of the compensation committee. The compensation committee has the sole authority
to retain and dismiss its outside compensation consultants.
Peer Group
We most recently revised our peer group in the second half of 2015, taking into account the advice of FW Cook. The objective was to find
companies at a similar stage of commercial development, preferably located in California near large urban centers, with a market capitalization below $2.5 billion. The compensation committee
intends to continue reviewing and revising the peer group periodically to ensure that it continues to reflect comparable companies. As of December 31, 2016, our market capitalization was the
third highest in the peer group.
|
|
|
Peer Group
|
Arena Pharmaceuticals
|
|
OncoMed Pharmaceuticals
|
Depomed
|
|
Orexigen Therapeutics
|
Dynavax Technologies
|
|
Portola Pharmaceuticals
|
Exelixis
|
|
PTC Therapeutics
|
FibroGen
|
|
Raptor Pharmaceutical
|
Five Prime Therapeutics
|
|
XenoPort
|
Intersect ENT
|
|
XOMA
|
MannKind
|
|
Zogenix
|
Nektar Therapeutics
|
|
|
We
operate in an intensely competitive labor market, in which talented employees typically have many alternatives and it is relatively easy to change jobs. Accordingly, when making
recommendations to our compensation committee and in making compensation decisions, our CEO and compensation committee review data about the compensation of similar officers at the peer group
companies, with a view that, to be competitive, compensation levels should generally be at least at median of the peer data. While we believe this data provides useful insight into the competitiveness
of our compensation packages, the compensation data provides only a reference point and we do not currently target any particular benchmark. Factors specific to our company and the individual named
executive officers primarily inform our compensation decisions. For example, we believe that our portfolio of research and development programs is generally broader than those of companies in our peer
group, which affects the skills and experiences needed by our executive officers and in turn affects our compensation decisions to attract and retain them.
Principal Elements of Compensation
Base Salaries
Base salaries are set to reflect compensation commensurate with the individual's current position and work experience. Our goal in this regard
is to attract and retain high caliber talent for the position
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and
to provide a base wage that is not subject to performance risk. Salary for the CEO and the other named executive officers is determined based on the underlying scope of their respective
responsibilities, their personal experience working at innovative drug discovery companies, including Innoviva (prior to the 2014 spin-off of Theravance Biopharma), and taking into account competitive
market compensation as a reference point. The compensation of each of our named executive officers was initially established in 2014 after the spin-off from Innoviva when we matched the salary each
had been earning at Innoviva. We review base salaries for the named executive officers annually, generally in the first quarter of each year. The CEO proposes salary adjustments to the compensation
committee (other than for himself) based on any changes in competitive market salaries, individual performance and/or changes in job duties and responsibilities. The compensation committee then
determines any salary adjustment applicable to each of the named executive officers.
Mr. Winningham
and Ms. Gala did not receive any increase in base salary in 2016 as we felt that their salaries were already appropriate and we preferred to focus on
performance-based long-term compensation alignment with shareholders through the Long-Term Retention and Performance Incentive Program described in the "Equity Incentive Compensation" section below.
In connection with their promotions in March 2016, the base salaries of each of Mr. Shafer and Drs. Hegde and Worboys were increased to $485,000, $400,000 and $400,000, respectively, to reflect
their increased responsibilities and bring their salaries into alignment with similarly situated officers.
Annual Cash Incentive Compensation
Our named executive officers are eligible for annual cash incentives under a Company-wide bonus program which is designed to reward the
achievement of key corporate goals established by our board of directors at the beginning of the year and which we believe should increase shareholder value over time.
Each
named executive officer has a target bonus stated in terms of a percentage of the officer's annual base salary for the year. For 2016, target bonus percentages were 50% of annual
base salary for the year for executive and senior vice presidents and 60% of annual base salary for the year for our CEO. For our named executive officers in 2015, no change was made in 2016 to their
respective target bonus percentages. However, in connection with their promotions in March 2016, each of Drs. Hegde's and Worboys' target bonus was increased to 50% of their annual base salary for the
year in order to align their target bonus with those of our other senior vice presidents.
The
goals applicable to the annual bonus program are established by our full board of directors at the beginning of the year as part of our annual business plan and communicated to
employees. Specific weightings are not assigned to the goals, in order to provide our compensation committee with flexibility to determine each goal's relative weight and importance on the basis of
actual results. At the end of the year, our compensation committee reviews the Company's performance against the goals and determines the overall level of achievement, which determines the size of the
Company's bonus pool for all employees, as well as individual bonus amounts for the named executive officers. In making these determinations, the compensation committee considers information presented
by the Company's Chief Executive Officer and its Vice President, Human Resources on Company-wide performance against goals and the individual contributions of the named executive officers toward
achievement of the goals.
The
goals comprising our cash bonus program for 2016 are listed in the table below (as well as the determination of our compensation committee on whether or not each goal was achieved)
and applied to the bonus program for all employees, including our named executive officers. If all the goals for 2016 were fully achieved, they would have resulted in funding of the Company-wide bonus
pool at 150% of target.
35
Table of Contents
|
|
|
|
|
2016 Corporate Goals
|
|
Achieved
|
|
1. Achieve key objectives related to VIBATIV commercialization
|
|
|
|
|
VIBATIV net sales of $25,000,000
|
|
|
|
|
Regulatory approval of supplemental new drug applications ("sNDAs") for VIBATIV concurrent bacteremia
|
|
|
|
|
Regulatory submission of sNDAs for supporting improved VIBATIV label
|
|
|
|
|
2. Report positive data from both revefenacin efficacy studies in COPD
|
|
|
X
|
|
3. Initiate revefenacin late-stage clinical studies aimed at product differentiation
|
|
|
X
|
(1)
|
4. Complete enrollment in the Velusetrag Phase 2b Diabetic and Idiopathic Gastroparesis Efficacy, Safety and
Tolerability ("DIGEST") Study
|
|
|
X
|
(1)
|
5. Report positive data from multiple early and mid-stage clinical programs
|
|
|
X
|
(1)
|
Phase 2a study in nOH with MARIN TD-9855
|
|
|
|
|
Phase 1 (single-ascending dose ("SAD")/multiple-ascending dose ("MAD")) program in Peripherally Restricted
Inhibitor of the Zinc Metalloprotease ("PRIZM")/NEPi
|
|
|
|
|
Phase 1b program with Luminal Novel Anti-Inflammatory Remedy ("LUNAR") TD-1473
|
|
|
|
|
6. Initiate 1-2 additional first time in human Phase 1 studies
|
|
|
X
|
|
7. Nominate 2-3 development candidates
|
|
|
|
|
8. Execute 2-3 corporate/business development transactions (based on business needs)
|
|
|
X
|
|
9. Achieve year-end cash balance of at least 2 years projected burn
|
|
|
X
|
|
10. Attract and retain an exceptional and passionate workforce
|
|
|
X
|
|
-
(1)
-
Goal
partially achieved, as described in further detail below.
As
the table above indicates, for purposes of the 2016 cash bonus program, our compensation committee determined that we accomplished five out of ten annual performance goals for 2016.
Our compensation committee also determined that we partially achieved another three performance goals. As a result, the compensation committee determined to fund the cash bonus pool at 110% of target.
The
following goals were achieved by the Company during 2016:
-
-
Goal 2: Positive results announced in two pivotal three-month Phase 3 efficacy studies for revefenacin in patients with COPD in Q4 2016.
The compensation committee also recognized the Company's significant success managing the overall Phase 3 clinical program for revefenacin, including the full enrollment of more than 1,000
patients in the 12-month safety study, which is on schedule to read out in mid-2017, and the achievement of the payment milestones from Mylan for accrual to the revefenacin studies, which enrolled
quite rapidly.
-
-
Goal 6: Progression of TD-1439, a neprilysin inhibitor, into Phase 1 randomized, double-blind, placebo-controlled, SAD and MAD studies
in healthy volunteers, and favorable results announced from the Phase 1 SAD study and the Phase 1 MAD study is expected to be complete in the first half of 2017.
-
-
Goal 8: Entry into a global license, development and commercialization agreement with Millennium Pharmaceuticals, Inc., a subsidiary of
Takeda Pharmaceutical Company Limited, for TD-8954, a selective 5-HT4 receptor agonist for the treatment of enteral feeding intolerance and other gastrointestinal motility disorders. In this regard,
the compensation committee noted the
36
Table of Contents
ability
of the scientific team to develop an intravenous form of TD-8954, which facilitated the completion of the business development transaction with Takeda, a partner whose strategic objectives are
aligned with ours. In addition, the compensation committee recognized the entry into a distribution agreement with a company for the regional distribution of VIBATIV in India.
-
-
Goal 9: Raised substantial capital during 2016 through equity and debt markets and collaborative partnership transactions. The Company's cash,
cash equivalents, and marketable securities totaled $592.7 million as of December 31, 2016, which we anticipate will fund at least two years of operating expenses.
-
-
Goal 10: The compensation committee considered the accomplishments and key metrics of the Company in its hiring, retention and employee
relations, and determined the Company achieved the 2016 workforce goal.
While
certain goals were not fully achieved by the Company during 2016, the Compensation Committee considered the following factors, including partial achievement and the progress made
towards achievement:
-
-
Goal 3: The Company's significant planning and preparation of a late-stage clinical study of revefenacin aimed at product differentiation,
which we are now conducting. In working with our partner Mylan, and as part of the commercial plan and the launch strategy for revefenacin, the Company will conduct a Phase 3b study with
revefenacin to assess the effects of revefenacin in COPD patients with low peak inspiratory flow rate (or PIFR).
-
-
Goal 4: The progress during 2016 and the ultimate achievement in early January 2017 of our enrollment target in our velusetrag phase 2b
DIGEST study, which study is currently expected to read out in mid-2017. As an additional achievement supporting velusetrag development, the compensation committee recognized the Fast Track
designation granted by the FDA to velusetrag, partnered with Alfa Wassermann, for the treatment of symptoms associated with idiopathic and diabetic gastroparesis.
-
-
Goal 5: In 2016, the Company progressed a number of early and mid-stage clinical programs, including: completing a Phase 1 randomized,
double-blind, placebo-controlled, SAD study in healthy volunteers of our most advanced NEP inhibitor compound, TD-0714; completing a Phase 1 randomized, double-blind, placebo-controlled, MAD
study in healthy volunteers of TD-0714 which demonstrated characteristics consistent with the compound's target product profile; and initiating a Phase 2a study of our investigational
norepinephrine and serotonin reuptake inhibitor TD-9855 assessing the potential use of TD-9855 in nOH (and, in early 2017, announcing that TD-9855 is showing encouraging early results in patients
following a single dose and the Company therefore plans to amend the protocol of the Phase 2a study to allow patients who respond to continue beyond a single dose).
With
respect to the two corporate goals for which the compensation committee determined no partial achievement should be recognized for the purposes of 2016 bonuses, the committee made
the following observations:
-
-
Goal 1: While we did not achieve all of our VIBATIV goals, the compensation committee recognized the progress made in increasing our U.S. net
product sales of VIBATIV by 100% from 2015 to 2016 and that approval in May 2016 by the U.S. Food and Drug Administration (FDA) of the Company's supplemental New Drug Application (sNDA) for
VIBATIV® (telavancin) to expand the product's label to include data describing the treatment of patients with concurrent Staphylococcus aureus (S. aureus) bacteremia in both of the
antibiotic's currently approved indications in the United States was a key objective related to VIBATIV commercialization.
37
Table of Contents
-
-
Goal 7: While we did not nominate 2-3 development candidates in 2016, the compensation committee recognized the important contributions of the
research and development organization, which nominated one new drug development candidate and progressed another to the point where it was formally nominated in early 2017, both candidates from our
programs designed to provide targeted drug delivery to tissues in the lung and gastrointestinal tract.
The
actual bonuses awarded to our named executive officers are shown in the table below and reflected in the Bonus and Non-Equity Incentive Compensation columns of the "Summary
Compensation Table" on page 46:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Cash
Bonus
($)
|
|
Percentage
of Target
|
|
Rick E Winningham
|
|
Chief Executive Officer
|
|
|
623,446
|
|
|
115
|
%
|
Renee D. Gala
|
|
SVP and Chief Financial Officer, Treasurer
|
|
|
246,977
|
|
|
115
|
%
|
Bradford J. Shafer
|
|
Executive Vice President, General Counsel and Secretary
|
|
|
278,875
|
|
|
115
|
%
|
Sharathchandra (Sharath) S. Hegde
|
|
Senior Vice President, Research
|
|
|
220,000
|
|
|
110
|
%
|
Philip D. Worboys
|
|
Senior Vice President, Translational Science
|
|
|
220,000
|
|
|
110
|
%
|
In
the cases of Messrs. Winningham and Shafer and Ms. Gala, our Compensation Committee exercised its discretion to increase their bonus amounts by 5% in recognition of
certain 2016 individual contributions, including their significant leadership roles in the planning, management, oversight and execution of the Company's fundraising activities.
Equity Incentive Compensation
We believe that successful research, development and commercialization of medicines requires excellent functional expertise. However, functional
expertise, alone, will not result in approved medicines, successful customer interactions or a successful company. The long-term equity incentives of the Company seek to support our strategy of
attracting people to the Company with excellence and expertise in functional areas (e.g. medicinal chemistry, different disciplines of biology, physical chemistry, process chemistry, clinical
science, clinical trial execution, strategic marketing, marketing science and financial planning). As importantly, our equity incentive plans seek to support an environment of extraordinary teamwork
as well as long-term retention of our employees in an intensely competitive environment.
The
types of equity compensation comprising the mix of officer compensation consist of: (i) options with time-based vesting, which require the market value of our ordinary shares
to increase before they are valuable; (ii) performance-contingent restricted share awards (or RSAs) or restricted share unit awards (or RSUs), the right to which is dependent upon successful
completion of corporate performance goals; and (iii) RSUs with time-based vesting. We do not use a targeted cash/equity split to set officer compensation. In 2016, we granted RSUs and RSAs to
our named executive officers (with both time-based and performance-based vesting), which we believed were more appropriate than stock options as RSUs and RSAs can provide reduced dilution compared to
stock options.
Generally,
in order to align the officer's interests with those of our shareholders, a significant option grant is made to a named executive officer at the first regularly scheduled
meeting of the compensation committee after the officer commences employment. Annual replenishment equity
38
Table of Contents
awards
generally are considered during the first quarter of each year, and additional equity awards may be made in connection with an officer earning a promotion or taking on additional duties or for
retention purposes in certain circumstances. Options have been used primarily as a hiring incentive, with annual replenishment awards provided in the form of RSUs. Replenishment equity awards are
granted annually based on recommendations to the compensation committee from the CEO and guidelines established in 2014 in connection with our spin-off from Innoviva. Replenishment equity awards
generally vest over a four-year period, although as described below, the replenishment RSUs awarded to our named executive officers in 2016 vest over a five-year period. The Company believes that the
resulting overlapping vesting schedule from awards made in prior years, together with the number of shares subject to each award, helps ensure a meaningful incentive to remain in the Company's employ
and to enhance shareholder value over time. Annual replenishment equity award grants to all employees generally are made during the first quarter of each year at a meeting of the compensation
committee following annual employee performance reviews.
In
2016, the Company's annual replenishment equity award grants were approached differently as part of a plan to promote long-term senior officer retention and create strong alignment
between our named executive officers and our shareholders. The compensation committee adopted a special long-term retention and performance incentive program (the "Long-Term Retention and Performance
Incentive Program"), which has two components. First, each named executive officer was granted a 2016 replenishment RSU that was larger than in prior years, reflecting a partial "front load" of a
portion of the annual replenishment award each officer could normally expect to receive over the 2016-2018 time period. Second, a portion of the 2017 and 2018 annual replenishment equity grants that
the named executive officers would normally be eligible to receive was eliminated and replaced with the Five-Year Performance RSAs described below which offer the opportunity to earn higher value over
the 2016-2020 timeframe depending on how successful the Company is at meeting its critical operating goals and objectives during that five-year period. The number of time-vested equity awards
eliminated in lieu of the Five-Year Performance RSAs are the "base shares" for participation in the program, and these awards may be forfeited if none of the goals are achieved by the end of 2020.
We
believe that the goals underlying these Five-Year Performance RSAs, which are discussed in further detail below, are strategically important for the Company and, if achieved in the
manner set forth in the Long-Term Retention and Performance Incentive Program, should increase shareholder value substantially. The Committee believes that the higher value that may be potentially
earned by the named executive officers under the long-term five-year performance-contingent component of the Long-Term Retention and Performance Incentive Program reflects superior performance that is
above the Company's targeted levels of achievement, which the compensation committee believes are already challenging to reach. In considering the structure and retention-effect of the Long-Term
Retention and Performance Incentive Program, the compensation committee considered the Company's predecessor's experience with similar long-term retention programs.
The
components of the Long-Term Retention and Performance Incentive Program are discussed in greater detail below; however, the intended front-load and performance award concept is
illustrated in
the following chart for our CEO, recognizing that the Five-Year Performance RSAs are subject to forfeiture if the relevant goals are not achieved by the end of 2020.
39
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
Awards
|
|
Replenishment
Award for
2017
|
|
Expected
Replenishment
Award for
2018(1)
|
|
Three-Year
Total
(2016 - 2018)
|
|
CEO Annual Grant Guideline
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4-Year Time-Based Equity Awards
|
|
|
140,000
|
|
|
140,000
|
|
|
140,000
|
|
|
420,000
|
|
Awards under Long-Term Retention and Incentive Program
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time-Based RSUs (2x Guideline)
|
|
|
280,000
|
|
|
28,000
|
|
|
28,000
|
|
|
|
|
Base RSAs for Five-Year Performance RSAs
|
|
+
|
84,000
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RSU/RSA Equivalents
|
|
|
364,000
|
|
|
28,000
|
|
|
28,000
|
|
|
420,000
|
|
-
(1)
-
Determined
at the time the 2016 awards were granted. Actual awards will take into account performance, role and market conditions.
-
(2)
-
Reflects
actual awards made in 2016 and the first quarter of 2017 and expected 2018 awards.
-
(3)
-
May
be forfeited if goals are not achieved and may be earned up to 5x the base shares based on achievement of different combinations of up to nine performance goals
over a 5-year performance period.
Under the Long-Term Retention and Performance Incentive Program, each named executive officer's guideline replenishment equity award for 2016,
2017 and 2018 was multiplied by three ("3-year award") to determine the number of shares that might normally be provided over the next three years. Each named executive officer was granted two-thirds
of his respective 3-year award as a replenishment RSU with extended time-based vesting that is longer than our historical vesting schedule for annual replenishment equity awards. Rather than vesting
over a four-year period, these RSUs vest over a five-year period with a one-year "cliff" for the first 20% of the RSUs. After the first anniversary of the grant date, these RSUs vest in equal
quarterly installments over the remaining four years.
Of
the remaining one-third of the 3-year award, 60% was eliminated by the officer in exchange for being eligible to participate in the long-term five-year performance-contingent
component of the Long-Term Retention and Performance Incentive Program described below. Twenty percent of the remaining one-third was granted to each named executive officer in 2017 and the other 20%
of the remaining one-third is expected to be granted to each named executive officer in 2018. These are the only equity grants currently expected to be made in 2017 and 2018 to our named executive
officers, however substantial changes in performance, role and market conditions may affect the actual awards granted to our named executive officers during this period.
The
replenishment RSU aspect of the Long-Term Retention and Performance Incentive Program was designed to provide the same number of RSU-equivalent shares as would have normally been
provided in 2016, 2017 and 2018 based on the executive officer's guideline annual replenishment equity award while promoting employee retention by providing more of the RSU-equivalent shares in 2016
and less in 2017 and 2018 (but with longer vesting on the larger initial grant). When viewed over the three-year period, the annual replenishment equity awards contemplated by the Long-Term Retention
and Performance Incentive Program do not provide more shares than the Company's current annual replenishment guidelines. The following table shows the time-based replenishment RSUs granted to the
named executive officers in 2016 under the Long-Term Retention and Performance Incentive Program, the reduced number of RSUs that were granted to each of them in the first quarter of 2017 and that we
expect will be granted to each of them in 2018, as well as the equity awards eliminated by each of them in exchange for participation in the five-year long-term performance-contingent component of the
Long-Term Retention and Performance Incentive Program (described further below). Provided there
40
Table of Contents
are
no changes in market conditions, performance or the roles of our named executive officers, we do not anticipate granting any other equity awards to them in 2017 or 2018, consistent with the
Long-Term Retention and Performance Incentive Program. The final two columns of the table reflect the total number of RSUs that the officers could normally have expected to receive over the 2016-2018
time period and the annual RSUs that they otherwise could have expected to receive under the Company's current annual replenishment equity award guidelines.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Title
|
|
2016
RSUs(a)(1)
|
|
2017
RSUs(b)
|
|
Expected
2018
RSUs(c)
|
|
Eliminated RSUs
("Base
Shares")(d)
|
|
Total RSU
Equivalent
2016 - 2018(e)(2)
|
|
Annual
Guideline
Equity
Award(f)
|
|
Rick E Winningham
Chief Executive Officer
|
|
|
280,000
|
|
|
28,000
|
|
|
28,000
|
|
|
84,000
|
|
|
420,000
|
|
|
140,000
|
|
Renee D. Gala
SVP and Chief Financial Officer, Treasurer
|
|
|
90,000
|
|
|
9,000
|
|
|
9,000
|
|
|
27,000
|
|
|
135,000
|
|
|
45,000
|
|
Bradford J. Shafer
Executive Vice President, General Counsel and Secretary
|
|
|
90,000
|
|
|
9,000
|
|
|
9,000
|
|
|
27,000
|
|
|
135,000
|
|
|
45,000
|
|
Sharathchandra (Sharath) S. Hegde
Senior Vice President, Research
|
|
|
90,000
|
|
|
9,000
|
|
|
9,000
|
|
|
27,000
|
|
|
135,000
|
|
|
45,000
|
|
Philip D. Worboys
Senior Vice President, Translational Science
|
|
|
90,000
|
|
|
9,000
|
|
|
9,000
|
|
|
27,000
|
|
|
135,000
|
|
|
45,000
|
|
-
(1)
-
For
Mr. Shafer and Drs. Hegde and Worboys, the amount in this column does not include RSUs granted to each such officer in 2016 in connection with their
promotion in March 2016.
-
(2)
-
The
"Total RSU Equivalent 2016 - 2018" for each officer in this column (e) reflects the sum of columns (a) through (d).
The Five-Year Performance RSAs granted to our named executive officers will give the officers the opportunity to earn up to a maximum of five
times the Base Shares indicated in the table above based on achievement of performance goals over the five-year timeframe from 2016-2020. Vesting of these performance-contingent RSAs is subject to the
achievement of performance milestones described below by December 31, 2020 and continued employment, both of which must be satisfied in order for the RSAs to vest. We selected this period of
time so that the performance milestones would be possible, though extremely challenging, to complete, and to provide incentive for long-term employee retention.
The
Five-Year Performance RSAs vest based on a point system that weights the importance and difficulty of the nine performance milestones that are expected to drive long-term shareholder
value if
41
Table of Contents
achieved
during the five year performance period. The following performance milestones apply to the Five-Year Performance RSAs, each of which carries the number of points indicated below.
|
|
|
|
|
|
|
|
|
Performance Milestone
|
|
Achievement
Points
|
|
#1
|
|
NDA Approval(1)
|
|
|
4
|
|
#2
|
|
Phase 3 Success(2)
|
|
|
4
|
|
#3
|
|
Phase 3 Success(2)
|
|
|
4
|
|
#4
|
|
$150 million in Recurring Annual Corporate Revenue(3)
|
|
|
4
|
|
#5
|
|
Proof of Concept in LUNAR program(4)
|
|
|
4
|
|
#6
|
|
First Proof of Concept (non-LUNAR program)(5)
|
|
|
2
|
|
#7
|
|
Second Proof of Concept (non-LUNAR program)(5)
|
|
|
1
|
|
#8
|
|
First Successful Completion of a BD Transaction(6)
|
|
|
4
|
|
#9
|
|
Second Successful Completion of a BD Transaction(6)
|
|
|
3
|
|
|
|
Possible Total:
|
|
|
30
|
|
|
|
|
|
|
|
|
-
(1)
-
"NDA
Approval" means the FDA's approval of a New Drug Application of a new pharmaceutical that is a Company Compound (a compound discovered or licensed by the
Company),
provided however
that (i) this would also include a Supplemental New Drug Application (sNDA) approved by the FDA for an already
approved NDA for any new indications (other than concurrent bacteremia for telavancin) and (ii) this would not apply to any compounds in which the Company has an economic interest in future
payments that may be made by Glaxo Group Limited (or one of its affiliates) pursuant to its agreements with Innoviva, Inc. relating to certain drug development programs.
-
(2)
-
"Phase 3
Success" means achievement of primary efficacy endpoints (and if a clinical long-term safety study is required, completion of this study as well)
with an adverse event profile that would not reasonably be expected to result in a refusal to file designation from a regulatory authority of a Company Compound.
-
(3)
-
"Recurring
Annual Corporate Revenue" means achieving annual corporate revenue generated by the Company and its subsidiaries of $150 million or greater in each
fiscal year for at least two (2) consecutive fiscal years. Recurring Annual Corporate Revenue
includes
net revenue from product sales,
royalty revenue, profit sharing with collaboration partners, the 85% economic interest from Theravance Respiratory Company, LLC, and R&D funding/reimbursement classified as revenue. Recurring
Annual Corporate Revenue
excludes
revenue from up-front payments received under licensing or collaboration agreements (including any premium on share
purchases) and milestone payments. For the avoidance of doubt, loss sharing with collaboration partners and any negative revenue are not included in the determination of Recurring Annual Corporate
Revenue. The amounts for all of the revenue components identified above to be included or excluded in the definition of Recurring Annual Corporate Revenue are the amounts determined under
US GAAP that are included in the determination of the income/loss before income taxes as reported in the Company's Form 10-K.
-
(4)
-
"Proof
of Concept (LUNAR program)" means completion of a Phase 2a study that shows efficacy and tolerability of a compound in the Company's LUNAR program such
that it would be reasonable to progress the compound to the next stage of development (e.g., 2b or a larger dose-ranging Phase 2 Study).
-
(5)
-
"Proof
of Concept (non-LUNAR program)" means completion of a Phase 2a study that shows efficacy and tolerability of a Company Compound (not including
compounds in the Company's LUNAR program) such that it would be reasonable to progress the Compound to the next stage of development (e.g., 2b or a larger dose-ranging Phase 2 Study).
-
(6)
-
"Successful
Completion of a BD Transaction" means the execution of a definitive agreement for the out-license of a Company-discovered compound which provides for
total upfront and potential milestone payments and/or purchases of the Company's equity securities at or above market prices of at least $250 million in aggregate.
42
Table of Contents
Vesting
of the awards will occur upon achievement of any combination of milestones adding up to 10, 15 and 20 points as follows:
-
-
Upon the achievement of any combination of milestones that add up to at least ten achievement points, performance-contingent RSAs equal to 1.25
times each officer's Base Shares will vest at the next regularly-scheduled quarterly vest date, provided that the officer is employed by the Company through such date. Due to the rigor of the
performance goals applicable to the Five Year Performance RSAs, we informally view this initial payout as the "target" payout under the awards.
-
-
Upon the achievement of any combination of milestones that add a further five achievement points (for a cumulative total of fifteen achievement
points), performance-contingent RSAs equal to 1.75 times each officer's Base Shares will be eligible for vesting and, after a twelve-month period, will vest on the next regularly-scheduled quarterly
vest date provided the officer remains an employee through such date.
-
-
Upon the achievement of any combination of milestones that add a further five or more achievement points (for a cumulative total of twenty or
more achievement points), performance-contingent RSAs equal to 2.0 times each officer's Base Shares will be eligible for vesting and, after a twelve-month period, will vest on the next
regularly-scheduled quarterly vest date provided the officer remains an employee through such date.
In
the event we undergo a change in control before the milestones applicable to any unvested performance-contingent RSAs have been satisfied, a portion of the RSAs will be forfeited if
the per share change in control transaction value is not at least $33.92, which is two times our closing share price on the date the awards were granted. Any remaining RSAs will vest in two equal
installments on each of the first and second anniversary of the change in control. The requirement for a specific per share change in control transaction value was included as a part of the program to
ensure that shareholders receive a high rate of return before converting the RSAs from performance-based awards to time-based awards. As described in the "Potential Payments Upon Termination or
Change-in-Control" section beginning on page 51, our named executive officers participate in our change in control severance plan, which generally provides for full vesting acceleration of unvested
equity awards in the event of an involuntary termination three months prior to or twenty four months after a change in control. Any Five-Year Performance RSAs for which the performance milestones have
been achieved as of the change in control, as well as the remaining RSAs not forfeited as described above, will be eligible for vesting acceleration under the change in control severance plan.
The
following table shows the Five-Year Performance RSAs granted to the named executive officers in 2016 under the Long-Term Retention and Performance Incentive Program:
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Name
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|
Base
Shares(a)
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Target Shares
(Earned with
10 Points)(b)
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Shares Earned
with
15 Points(c)(1)
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Shares Earned
with
20+ Points(d)(1)
|
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Maximum
Possible
RSAs(e)(2)
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Rick E Winningham
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84,000
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105,000
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147,000
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168,000
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420,000
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Renee D. Gala
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27,000
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33,750
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47,250
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54,000
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|
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135,000
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Bradford J. Shafer
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27,000
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|
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33,750
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|
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47,250
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54,000
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135,000
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Sharathchandra (Sharath) S. Hegde
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27,000
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33,750
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47,250
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54,000
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135,000
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Philip D. Worboys
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27,000
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33,750
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47,250
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54,000
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135,000
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-
(1)
-
Upon
achievement of this number of points, the shares associated with those points would not vest until twelve months after achievement of the points, and then only
if the officer remains employed at the Company through such date.
-
(2)
-
The
"Maximum Possible RSAs" for each officer in this column (e) reflects the sum of columns (b) through (d).
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In
accordance with SEC rules, the grant-date fair value of the Five-Year Performance RSAs is not shown in the "share awards" column of the Summary Compensation Table on page 46 because
at the time these awards were made, it was not probable that any of the performance milestones would be achieved. Instead, the grant date fair value of the Five-Year Performance RSAs, assuming maximum
achievement of the performance milestones, is shown in a footnote to the Summary Compensation Table. In order to earn the number of shares corresponding to the maximum grant date fair value, we must
achieve performance milestones worth at least 20 points by December 31, 2020. The compensation committee believes that if performance milestones adding up to 20 points are achieved by
December 31, 2020, the resulting vesting of the shares would reflect superior pay for superior performance.
In connection with their 2016 promotions, Mr. Shafer and Drs. Hegde and Worboys each received an additional grant of RSUs.
Mr. Shafer received an additional 25,000 RSUs and each of Drs. Hegde and Worboys received 15,000 RSUs. Twenty-five percent of the shares subject to the award vested on February 20, 2017
and the remaining shares vest quarterly thereafter over the course of the next three years, subject to the officer's continuous service through each vesting date.
Post-Termination Protection
We believe that the possibility of a change in control creates uncertainty for our officers regarding their continued employment by the Company
because such transactions frequently result in senior management changes. We provide change in control protections to our officers to alleviate concerns regarding the possible occurrence of such a
transaction, allowing them to focus their attention on the business of the Company. In addition, these protections encourage executives to remain with the Company during the threat or negotiation of a
change in control transaction, which preserves the value of the Company and the potential benefit to be received by our shareholders in the transaction. No new agreements with our named executive
officers covering potential payments upon termination or change in control were entered into during 2016, nor were there any amendments to such existing named executive officer agreements.
The
change in control severance benefits are structured under a Company plan instead of individual employment agreements. With this change in control severance plan, we sought uniformity
of results among the officers based on their positions at the Company. In addition, we believe that the events triggering payment, both the consummation of a change in control and an involuntary
termination, and then only when there is no misconduct by the officer, are fair hurdles for the ensuing income protection. A description of our change in control severance plan is in the "Potential
Payments Upon Termination or Change-in-Control" section on page 51. For officers who were eligible to participate in the Amended and Restated Change in Control Severance Plan of Innoviva
(
i.e.
, such named executive officer was an officer of Innoviva as of December 16, 2009), Theravance Biopharma provides gross-ups for excise taxes
potentially due upon a change in control. We feel that this is an appropriate and necessary benefit to offer to such former Innoviva employees in order to provide a level of benefits that is at least
equal to those they were eligible for prior to our spin-off in 2014.
We
do not have agreements providing severance in the event of involuntary terminations that do not occur in connection with a change in control with any of our officers except the Chief
Executive Officer. Pursuant to the offer letter we entered into with Mr. Winningham to become our Chief Executive Officer, if Mr. Winningham's service is terminated without cause, he
will receive a lump-sum
severance payment of 24 months of his current salary plus two times his current target bonus, which is the same severance protection he was entitled to at Innoviva.
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Perquisites
The Company does not provide a non-qualified deferred compensation program or a supplemental executive retirement plan. Generally the Company
does not provide perquisites or other personal benefits to named executive officers, and during 2016 we did not provide any perquisites to executive officers that were not provided to all employees.
Tax Deductibility of Pay
Section 162(m) of the Internal Revenue Code places a limit of $1,000,000 on the amount of compensation that Theravance Biopharma may
deduct in any one year with respect to each of its CEO and three other most highly paid executive officers, other than its CFO. There is an exception to the $1,000,000 limitation for
performance-based compensation, including stock options, meeting certain requirements. In 2016, our shareholders approved the Performance Incentive Plan pursuant to which we may grant cash and
equity-based awards in a manner intended to qualify for this exemption so that they will not be subject to the $1 million deduction limitation. To maintain flexibility in compensating executive
officers in a manner designed to promote varying corporate goals, the compensation committee has not adopted a policy requiring all compensation to be deductible. The compensation committee has and
may approve compensation or changes to plans, programs or awards that may cause the compensation or awards not to comply with Section 162(m) if it determines that such action is appropriate and
in our best interests.