Proxy Statement - Notice of Shareholders Meeting (preliminary) (pre 14a)

Date : 04/19/2019 @ 10:12PM
Source : Edgar (US Regulatory)
Stock : AVEO Pharmaceuticals Inc (AVEO)
Quote : 1.05  0.0 (0.00%) @ 1:00AM

Proxy Statement - Notice of Shareholders Meeting (preliminary) (pre 14a)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

Filed by the Registrant                               Filed by a party other than the Registrant  

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

AVEO PHARMACEUTICALS, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

(2)

Aggregate number of securities to which transaction applies:

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

(4)

Proposed maximum aggregate value of transaction:

 

(5)

Total fee paid:

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount previously paid:

 

(2)

Form, Schedule or Registration Statement No.:

 

(3)

Filing party:

 

(4)

Date Filed:

 

 

 


NOTICE OF 2019 ANNUAL MEETING OF STOCKHOLDERS

To Be Held on June 12, 2019

To our Stockholders:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of AVEO Pharmaceuticals, Inc. will be held on Wednesday, June 12, 2019 at 10:00 a.m., Eastern Daylight Time, at Donnelley Financial Solutions, 20 Custom House St., 7th Floor, Boston, MA 02110. At the meeting, stockholders will consider and vote on the following matters:

1.

To elect five directors, each to serve for a one-year term expiring at the 2020 annual meeting of stockholders;

2.

To approve an advisory vote on executive compensation;

3.

To approve the AVEO Pharmaceuticals, Inc. 2019 Equity Incentive Plan;

4.

To approve an amendment to our Restated Certificate of Incorporation to increase the number of authorized shares of our common stock from 250,000,000 to 500,000,000;

5.

To approve an amendment to our Restated Certificate of Incorporation to effect a reverse stock split of our common stock, by a ratio of not less than 1-for-5 and not more than 1-for-15, and a proportionate reduction in the number of authorized shares of common stock, such ratio and the implementation and timing of the reverse stock split to be determined in the discretion of our board of directors; and

6.

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2019.

 

Stockholders will also act on any other business that may properly come before the annual meeting or any adjournment thereof.

Instead of mailing a printed copy of our proxy materials to all of our stockholders, we provide access to these materials via the Internet. This reduces the amount of paper necessary to produce these materials as well as the costs associated with mailing these materials to all stockholders. Accordingly, on or about [—], 2019, we will begin mailing a Notice of Internet Availability of Proxy Materials, or Notice, to all stockholders of record on our books at the close of business on April 15, 2019, the record date for determining our stockholders entitled to notice of, and to vote at, the annual meeting, and will post our proxy materials on the website referenced in the Notice. As more fully described in the Notice, stockholders may choose to access our proxy materials on the website referred to in the Notice or may request to receive a printed set of our proxy materials. In addition, the Notice and website provide information regarding how you may request to receive proxy materials in printed form by mail, or electronically by email, on an ongoing basis.


Stockholders of record at the close of business on April 15 , 201 9 are entitled to notice of, and to vote at, the annual meeting or any adjournment thereof. Your vote is important regardless of the number of shares you own. If you are a stockholder of record, you may submit your proxy to cause your shares to be present and voted at the meeting in one of these three ways:

Submit a Proxy Over the Internet , by going to the website of our tabulator at www.proxypush.com/AVEO (have your Notice or proxy card in hand when you access the website);

Submit a Proxy by Telephone , by calling the toll-free number 1-866-230-6355 (have your Notice or proxy card in hand when you call); or

Submit a Proxy by Mail , if you received (or requested and received) a printed copy of the proxy materials, by returning the enclosed proxy card (signed and dated) in the envelope provided. If you submitted a proxy by Internet or telephone, you are not required to mail your proxy.

You may also vote in person by attending the annual meeting and delivering your completed proxy card in person or by completing a ballot at the meeting.

If your shares are held in “street name,” that is, held for your account by a bank, brokerage firm or other nominee, you will receive instructions from the holder of record that you must follow for your shares to be voted.

We encourage all stockholders to attend the annual meeting in person. You may obtain directions to the location of the annual meeting on our website at www.aveooncology.com. Stockholders who attend the meeting may vote their stock in person, even if they previously submitted their proxies. Whether or not you plan to attend the annual meeting in person, we hope you will take the time to submit a proxy and cause your shares to be present and voted at the annual meeting.

 

By Order of the Board of Directors,

Michael P. Bailey

President and Chief Executive Officer

Cambridge, Massachusetts

[—], 2019

 

 


 

TABLE OF CONTENTS

 

PROXY STATEMENT

 

1

IMPORTANT INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

 

2

HOUSEHOLDING OF ANNUAL MEETING MATERIALS

 

7

OWNERSHIP OF OUR COMMON STOCK

 

8

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

9

PROPOSAL 1—ELECTION OF DIRECTORS

 

10

CORPORATE GOVERNANCE

 

12

General

 

12

Board Determination of Independence

 

12

Role of the Board

 

13

The Board’s Role in Risk Oversight

 

13

Board of Directors Meetings and Attendance

 

14

Director Attendance at Annual Meeting of Stockholders

 

14

Board Committees

 

14

Director Nomination Process

 

15

Communicating with the Independent Directors

 

16

Executive Officer and Director Compensation Processes

 

17

Report of the Audit Committee

 

17

Principal Accountant Fees and Services

 

18

Audit Committee Pre-Approval Policies and Procedures

 

18

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

 

19

Policies and Procedures for Related Person Transactions

 

19

Related Person Transactions

 

20

EXECUTIVE AND DIRECTOR COMPENSATION

 

21

Compensation Discussion and Analysis

 

21

Summary Compensation Table for the Years Ended December 31, 2018, 2017 and 2016

 

36

Grants of Plan-Based Awards for the Year Ended December 31, 2018

 

37

Outstanding Equity Awards at December 31, 2018

 

38

Option Exercises

 

39

Pay Ratio of Chief Executive Officer to Median Employee

 

39

Employment Agreements and Severance Arrangements

 

40

Potential Payments and Benefits Upon Termination and a Change in Control

 

43

Equity Compensation Plan Information

 

44

Compensation Committee Report

 

45

Compensation Committee Interlocks and Insider Participation

 

45

Director Compensation

 

45

PROPOSAL 2—ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

47

PROPOSAL 3— APPROVAL OF 2019 EQUITY INCENTIVE PLAN

 

48

Why We Are Requesting Stockholder Approval of the 2019 Equity Incentive Plan

 

48

Highlights of the 2019 Equity Incentive Plan

 

49

Information Regarding Overhang and Dilution

 

50

Description of the 2019 Equity Incentive Plan

 

51

Amendment or Termination

 

58

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PROPOSAL 4—APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF OUR COMMON STOCK

 

61

Purpose

 

61

Possible Effects of the Amendment

 

62

PROPOSAL 5—APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF OUR COMMON STOCK BY A RATIO OF NOT LESS THAN 1-FOR-5 AND NOT MORE THAN 1-FOR-15, SUCH RATIO AND THE IMPLEMENTATION AND TIMING OF THE REVERSE STOCK SPLIT TO BE DETERMINED IN THE DISCRETION OF OUR BOARD OF DIRECTORS

 

63

Background and Reasons for the Reverse Stock Split

 

64

Procedure for Implementing the Reverse Stock Split

 

64

Effect of the Reverse Stock Split on Holders of Outstanding Common Stock

 

65

Authorized Shares of Common Stock

 

65

Beneficial Holders of Common Stock

 

65

Registered “Book-Entry” Holders of Common Stock

 

66

Exchange of Stock Certificates

 

66

Fractional Shares

 

67

Effect of the Reverse Stock Split on Employee Plans, Options, Restricted Stock Awards and Warrants

 

67

Accounting Matters

 

67

Material U.S. Federal Income Tax Consequences of the Reverse Stock Split

 

68

PROPOSAL 6—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

70

OTHER MATTERS

 

70

STOCKHOLDER PROPOSALS

 

70

APPENDIX A

 

A-1

APPENDIX B

 

B-1

APPENDIX C

 

C-1

 

 

 

ii


 

AVEO PHARMACEUTICALS, INC.

ONE BROADWAY, 14TH FLOOR

CAMBRIDGE, MASSACHUSETTS 02142

 

PROXY STATEMENT

for the 2019 Annual Meeting of Stockholders to be held on June 12, 2019

This Proxy Statement and the accompanying proxy card are being furnished in connection with the solicitation of proxies by the board of directors of AVEO Pharmaceuticals, Inc. for use at the Annual Meeting of Stockholders to be held on Wednesday, June 12, 2019 at 10:00 a.m., Eastern Daylight Time, at Donnelley Financial Solutions, 20 Custom House St., 7th Floor, Boston, MA 02110, and at any adjournment thereof. Except where the context otherwise requires, references to “we,” “us,” “our,” “our company”, the “Company” and similar terms refer to AVEO Pharmaceuticals, Inc. and its consolidated subsidiaries.

All properly submitted proxies will be voted in accordance with the instructions contained in those proxies. If no instructions are specified, the proxies will be voted in accordance with the recommendation of our board of directors with respect to each of the matters set forth in the accompanying Notice of 2019 Annual Meeting of Stockholders. You may revoke your proxy at any time before it is exercised at the meeting by submitting a later dated proxy or by giving our Secretary written notice to that effect.

On or about [—], 2019, we are mailing to our stockholders of record as of April 15, 2019 a Notice of Internet Availability of Proxy Materials instead of a paper copy of this Proxy Statement and our 2018 Annual Report to Stockholders on Form 10-K. The Notice contains instructions on how to access those documents over the Internet. The Notice also contains instructions on how you may receive a paper copy of our proxy materials, including this Proxy Statement, our 2018 Annual Report to Stockholders on Form 10-K and a form of proxy card or voting instruction card.

Important Notice Regarding the Availability of Proxy Materials for

the Annual Meeting of Stockholders to be held on June 12, 2019:

This Proxy Statement and our 2018 Annual Report to Stockholders on Form 10-K

are available for viewing, printing and downloading at www.proxydocs.com/AVEO .

A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the Securities and Exchange Commission, or the SEC, except for exhibits, will be furnished without charge to any stockholder upon written request to AVEO Pharmaceuticals, Inc., One Broadway, 14th Floor, Cambridge, Massachusetts 02142, Attention: Corporate Secretary. Copies of exhibits, if any, are also available upon written request to the preceding address and upon the payment of an appropriate processing fee.  This Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 are also available on the SEC’s website at www.sec.gov .

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IMPORTANT INFORMATION ABOUT T HE ANNUAL MEETING AND VOTING

Q. Why did I receive these proxy materials?

A. We are providing these proxy materials to you, as a stockholder of record of AVEO Pharmaceuticals, Inc., in connection with the solicitat ion by our board of directors of proxies to be voted at our 2019 annual meeting of stockholders to be held at Donnelley Financial Solutions, 20 Custom House St., 7th Floor, Boston, MA 02110 on Wednesday, June 12, 2019 at 10:00 a.m., Eastern Daylight Time. As a stockholder of record of AVEO Pharmaceuticals, Inc., you are invited to attend our annual meeting and are entitled and requested to vote on the proposals described in this proxy statement.

Q. What is the purpose of the annual meeting?

A. At the annu al meeting, stockholders will consider and vote on the following matters:

1. To elect five directors, each to serve for a one-year term expiring at our 2020 annual meeting of stockholders and until his successor is duly elected and qualified;

2. To approve a non-binding advisory vote on executive compensation;

3. To approve the AVEO Pharmaceuticals, Inc. 2019 Equity Incentive Plan, which we refer to as the 2019 Equity Incentive Plan;

4. To approve an amendment to our Restated Certificate of Incorporation to increase the number of authorized shares of our common stock from 250,000,000 to 500,000,000;

5. To approve an amendment to our Restated Certificate of Incorporation to effect a reverse stock split of our common stock, by a ratio of not less than 1-for-5 and not more than 1-for-15 , and a proportionate reduction in the number of authorized shares of common stock , such ratio and the implementation and timing of the reverse stock split to be determined in the discretion of our board of directors; and

6. To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2019.

Stockholders will also act on any other business that may properly come before the meeting, or any adjournment thereof.

Q. Who can vote at the annual meeting?

A. To be entitled to vote, you must have been a stockholder of record at the close of business on April 15, 2019, the record date for determining our stockholders entitled to vote at our annual meeting. There were 160,739,471 shares of our common stock outstanding and entitled to vote at the annual meeting as of the record date.

Q. How many votes do I have?

A. Each share of our common stock that you own as of the record date will entitle you to one vote on each matter considered at the annual meeting.

2


 

Q. How do I vote?

A. Submit a Proxy : If you are the “record holder” of your shares, meaning that you own your shares in your own name and not through a bank, brokerage firm or other nominee, you may submit a proxy to cause your shares to be present and voted at the annual meeting:

(1) Submit a Proxy Over the Internet: Go to the website of our tabulator at www.proxypush.com/AVEO . Use the vote control number printed on the Notice (or your proxy card) to access your account and submit a proxy to vote your shares. You must specify how you want your shares voted or your Internet proxy cannot be completed and you will receive an error message. You must submit your Internet proxy before 11:59 p.m., Eastern Daylight Time, on June 11, 2019, the day before the annual meeting, for your Internet proxy to be valid and your shares to be voted at the annual meeting. Your shares will be voted according to your instructions.

(2) Submit a Proxy by Telephone: Call 1-866-230-6355, toll free from the United States, Canada and Puerto Rico, and follow the recorded instructions. You will need to have the Notice (or your proxy card) in hand when you call. You must specify how you want your shares voted and confirm your proxy to vote your shares as instructed at the end of the call or your telephonic proxy cannot be completed. You must submit your telephonic proxy before 11:59 p.m., Eastern Daylight Time, on June 11, 2019, the day before the annual meeting, for your telephonic proxy to be valid and your shares to be voted at the annual meeting. Your shares will be voted according to your instructions.

(3) Submit a Proxy by Mail: If you received a printed copy of the proxy materials, complete and sign your enclosed proxy card and mail it in the enclosed postage prepaid envelope to Mediant Communications, P.O. Box 8016, Cary, NC 27512-9903. Mediant Communications must receive the proxy card not later than June 11, 2019, the day before the annual meeting, for your mailed proxy to be valid and your shares to be voted at the annual meeting. Your shares will be voted according to your instructions. If you return your proxy card but do not specify how you want your shares voted on any particular matter, they will be voted in accordance with the recommendations of our board of directors.

Vote in Person at the Meeting: If you attend the annual meeting, you may deliver your completed proxy card in person or you may vote by completing a ballot, which we will provide to you at the meeting.

If your shares are held in “street name,” meaning they are held for your account by a bank, brokerage firm or other nominee, you are deemed to be the beneficial owner of your shares.  The intermediary that actually holds the shares for you is considered the record holder for the purposes of voting at the meeting.  As the beneficial owner, you have the right to instruct that intermediary as to how to vote the shares held in your account by following the instructions contained on the voting instruction card provided to you by that organization; such intermediary is required to vote the shares it holds on your behalf according to your instructions. The proxy materials, as well as voting and revocation instructions, should have been forwarded to you by the intermediary that holds your shares. To cause your shares to be voted at the annual meeting, you will need to follow the instructions that such intermediary provides you. Many intermediaries solicit voting instructions over the Internet or by telephone.  

If your shares are held in “street name,” you may also vote your shares in person at the meeting.  To attend the meeting, you must bring an account statement or letter from your bank, brokerage firm or other nominee showing that you are the beneficial owner of the shares as of the record date. To vote your shares held in street name at the meeting, you will also need to obtain a legal proxy from the holder of record.

3


 

Q. Can I change my vote?

A. If your shares are registered directly in your name, you may revoke your proxy at any time before the annual meeting. You may also revoke any previously submitted proxy by attending the annual meeting and voting in person at the annual meeting. To do so, you must do one of the following:

(1) Submit a new proxy over the Internet or by telephone as instructed above. Only your l atest Internet or telephone proxy will be voted at the annual meeting. You may not revoke your previously submitted proxy over the Internet or by telephone after 11:59 p.m., Eastern Daylight Time, on June 11, 2019.

(2) Sign a new proxy and submit it by ma il to Mediant Communications, P.O. Box 8016, Cary, NC 27512-9903. Mediant Communications must receive the proxy card no later than June 11, 2019. Only your latest dated proxy will be voted at the annual meeting.

(3) Attend the annual meeting and vote in p erson as instructed above. Attending the annual meeting alone will not revoke any previously submitted proxy.

(4) Give our corporate secretary written notice before or at the meeting that you want to revoke your previously submitted proxy.

If your shares are held in “street name,” you may submit new voting instructions by contacting your bank, brokerage firm or other nominee. You may also vote in person at the annual meeting, which will have the effect of revoking any previously submitted voting instructions, if you obtain a legal proxy from the record holder of your shares as described in the answer to the question “How do I vote?” above.

Q. Will my shares be voted if I do not return my proxy?

A. If your shares are registered directly in your name , your shares will not be voted if you do not submit a proxy over the Internet, by telephone or by mail or vote by ballot at the annual meeting.

If your shares are held in “street name,” your bank, brokerage firm or other nominee may under certain circumstances vote your shares if you do not return your voting instructions. Banks, brokerage firms or other nominees can vote customers’ shares for which they have not received voting instructions on discretionary matters, but your bank, brokerage firm or other nominee will not be allowed to vote your shares with respect to certain non-discretionary items. If you do not return voting instructions to your bank, brokerage firm or other nominee to vote your shares, your bank, brokerage firm or other nominee may, on discretionary matters, either vote your shares or leave your shares unvoted.

Your bank, brokerage firm or other nominee cannot vote your shares on any matter that is considered non-discretionary. Proposal 1, the election of directors; Proposal 2, a non-binding advisory vote on executive compensation; and Proposal 3, the approval of the 2019 Equity Incentive Plan, are considered non-discretionary matters. If you do not instruct your bank, brokerage firm or other nominee how to vote with respect to these matters, your bank, brokerage firm or other nominee may not vote with respect to these proposals and those votes will be counted as “broker non-votes.” “Broker non-votes” are shares that are held in “street name” by a bank, brokerage firm or other nominee that indicates on its proxy that it does not have or did not exercise discretionary authority to vote on a particular matter. Proposal 4, the approval of an amendment to our Restated Certificate of Incorporation to increase the number of authorized shares of our common stock; Proposal 5, the approval of an amendment to our Restated Certificate of Incorporation to effect a reverse stock split and proportionate reduction the number of authorized shares of common stock; and Proposal 6, the ratification of the appointment of our independent registered public accounting firm, are considered discretionary matters, and your bank, brokerage firm or other nominee will be able to vote on these matters even if it does not receive instructions from you, so long as it holds your shares in its name. We encourage you to provide voting instructions to your bank, brokerage firm or other nominee. This ensures that your shares will be voted at the annual meeting according to your instructions. You should receive directions from your bank, brokerage firm or other nominee about how to submit your voting instructions to them.

4


 

Q. How many shares must be represented to hold the annual meeting?

A. Our Second Amended and Restated Bylaws requires stockholders holding a majority of our sha res issued and outstanding as of the record date and entitled to vote at the meeting to be present in person or represented by proxy to hold the annual meeting. This is called a quorum. For purposes of determining whether a quorum exists, we count as present any shares for which a proxy has been submitted over the Internet, by telephone, by completing and submitting a proxy by mail or that are represented in person at the meeting. Further, for purposes of establishing a quorum, we will count as present shares that a stockholder holds even if the stockholder votes (or submits a proxy with instructions to vote) to abstain or only votes (or submits a proxy with instructions to vote) on one of the proposals. In addition, we will count as present shares held in “street name” by banks, brokerage firms or other nominees who indicate on their proxies that they do not have authority to vote those shares on Proposals 1, 2 and 3. If a quorum is not present, we expect to adjourn the annual meeting until we obtain a quorum.

Q. What vote is required to approve each matter and how are votes counted?

A. Proposal 1—Election of Directors

The five nominees for director to receive the highest number of votes FOR election will be elected as directors. This is called a plurality. Proposal 1 is not considered a discretionary matter . Therefore, if your shares are held by your bank, brokerage firm or other nominee in “street name” and you do not provide voting instructions with respect to your shares, your bank, brokerage firm or other nominee cannot vote your shares on Proposal 1. Shares held in “street name” by banks, brokerage firms or other nominees who indicate on their proxies that they do not have authority to vote the shares on Proposal 1 will not be counted as votes FOR or WITHHELD from any nominee. As a result, such “broker non-votes” will have no effect on the voting on Proposal 1. You may:

vote FOR all nominees;

vote FOR a particular nominee or nominees and WITHHOLD your vote from the other nominees; or

WITHHOLD your vote from all nominees.

Votes that are withheld will not be included in the vote tally for the election of directors and will not affect the results of the vote.

Proposal 2—Advisory Vote on Executive Compensation

Our board of directors is holding a non-binding advisory vote regarding the compensation of our named executive officers, as described in the “Executive and Director Compensation” section of this proxy statement, including the executive compensation tables and accompanying narrative disclosures therein. To approve Proposal 2, stockholders holding a majority of the votes cast on the matter and voting FOR or AGAINST the proposal must vote FOR the proposal. Proposal 2 is considered a non-discretionary matter . Therefore, if your shares are held by your bank, brokerage firm or other nominee in “street name” and you do not provide voting instructions with respect to your shares, your bank, brokerage firm or other nominee cannot vote your shares on Proposal 2. Shares held in “street name” by banks, brokerage firms or other nominees who indicate on their proxies that they do not have authority to vote the shares on Proposal 2 will not be counted as votes FOR or AGAINST the proposal and will also not be counted as votes cast or shares voting on the proposal. If you ABSTAIN from voting on Proposal 2, your shares will not be voted FOR or AGAINST the proposal and will also not be counted as votes cast or shares voting on the proposal. As a result, “broker non-votes” and votes to ABSTAIN will have no effect on the outcome of Proposal 2.

The proposal is advisory and non-binding in nature, but our compensation committee and board of directors will take into account the outcome of the vote when considering future executive compensation arrangements.

5


 

Proposal 3—Approval of the 2019 Equity Incentive Plan

To approve Proposal 3, stockholders holding a majority of the votes cast on the matter and voting FOR or AGAINST the proposal must vote FOR the proposal. Proposal 3 is considered a non-discretionary matter. Therefore, if your shares are held by your bank, brokerage firm or other nominee in “street name” and you do not provide voting instructions with respect to your shares, your bank, brokerage firm or other nominee cannot vote your shares on Proposal 3. Shares held in “street name” by banks, brokerage firms or other nominees who indicate on their proxies that they do not have authority to vote the shares on Proposal 3 will not be counted as votes FOR or AGAINST the proposal and will also not be counted as votes cast or shares voting on the proposal. If you ABSTAIN from voting on Proposal 3, your shares will not be voted FOR or AGAINST the proposal and will also not be counted as votes cast or shares voting on the proposal. As a result, “broker non-votes” and votes to ABSTAIN will have no effect on the outcome of Proposal 3.

Proposal 4—Approval of an Amendment to our Restated Certificate of Incorporation to Increase the Number of Authorized Shares of our Common Stock from 250,000,000 to 500,000,000

To approve Proposal 4, stockholders holding a majority of the outstanding shares of our common stock entitled to vote thereon must vote FOR the proposal. Proposal 4 is considered a discretionary matter. Therefore, if your shares are held by your bank, brokerage firm or other nominee in “street name” and you do not provide voting instructions with respect to your shares, your bank, brokerage firm or other nominee may vote your shares on Proposal 4. If you ABSTAIN from voting on Proposal 4, your shares will not be voted FOR or AGAINST the proposal. Because this Proposal 4 requires an affirmative vote of the outstanding shares entitled to vote thereon, votes to ABSTAIN will effectively be counted as votes AGAINST the proposal.

Proposal 5—Approval of an Amendment to our Restated Certificate of Incorporation to Effect a Reverse Stock Split of our Common Stock, by a Ratio of Not Less Than 1-for-5 and Not More Than 1-for-15, and a Proportionate Reduction in the Number of Authorized Shares of Common Stock, Such Ratio and the Implementation and Timing of the Reverse Stock Split to be Determined in the Discretion of our Board of Directors

To approve Proposal 5, stockholders holding a majority of the outstanding shares of our common stock entitled to vote thereon must vote FOR the proposal. Proposal 5 is considered a discretionary matter. Therefore, if your shares are held by your bank, brokerage firm or other nominee in “street name” and you do not provide voting instructions with respect to your shares, your bank, brokerage firm or other nominee may vote your shares on Proposal 5. If you ABSTAIN from voting on Proposal 5, your shares will not be voted FOR or AGAINST the proposal. Because this Proposal 5 requires an affirmative vote of the outstanding shares entitled to vote thereon, votes to ABSTAIN will effectively be counted as votes AGAINST the proposal.

Proposal 6—Ratification of Appointment of Independent Registered Public Accounting Firm

To approve Proposal 6, stockholders holding a majority of the votes cast on the matter and voting FOR or AGAINST the proposal must vote FOR the proposal. Proposal 6 is considered a discretionary matter . Therefore, if your shares are held by your bank, brokerage firm or other nominee in “street name” and you do not provide voting instructions with respect to your shares, your bank, brokerage firm or other nominee may vote your shares on Proposal 6. If you ABSTAIN from voting on Proposal 6, your shares will not be voted FOR or AGAINST the proposal and will also not be counted as votes cast or shares voting on the proposal. As a result, votes to ABSTAIN will have no effect on the outcome of Proposal 6.

Although stockholder approval of our audit committee’s appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2019 is not required, we believe that it is advisable to give stockholders an opportunity to ratify this appointment. If this proposal is not approved at the annual meeting, our audit committee will reconsider its appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2019.

6


 

Q. How does the board of directors recommend that I vote on the proposals?

A. Our board of directors recommends that you vote:

FOR the election of each of the five nominees to serve on our board of directors, each to serve for a one-year term expiring at our 2020 annual meeting of stockholders and until his successor is duly elected and qualified;

FOR the approval of the non-binding advisory vote on the compensation of our named executive officers;

FOR the approval of the 2019 Equity Incentive Plan;

FOR the approval of an amendment to our Restated Certificate of Incorporation to increase the number of authorized shares of our common stock from 250,000,000 to 500,000,000;

FOR the approval of an amendment to our Restated Certificate of Incorporation to effect a reverse stock split of our common stock, by a ratio of not less than 1-for-5 and not more than 1-for-15, and a proportionate reduction in the number of authorized shares of common stock, such ratio and the implementation and timing of the reverse stock split to be determined in the discretion of our board of directors; and

FOR the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2019.

Q. Are there other matters to be voted on at the annual meeting?

A. We do not know of any other matters that may come before the annual meeting. If any other matters are properly presented at the annual meeting, the persons named in the accompanying proxy intend to vote, or otherwise act, in accordance with their judgment on the matter.

Q. Where can I find the voting results?

A. We plan to report the voting results in a Current Report on Form 8-K filed with the SEC within four business days following the date of our annual meeting.

Q. What are the costs of soliciting these proxies?

A. We will bear the cost of soliciting proxies. We have retained Morrow Sodali LLC to assist us in solicitation of proxies for an aggregate fee of approximately $7,500, plus reasonable out-of-pocket expenses. In addition to solicitation by mail, our directors, officers and employees may solicit proxies by telephone, e-mail, facsimile and in person without additional compensation. We may reimburse banks, brokerage firms or other nominees holding stock in their names, or in the names of their nominees, for their expenses in sending proxies and proxy material to beneficial owners.

 

HOUSEHOLDING OF ANNUAL MEETING MATERIALS

Some banks, brokerage firms and other nominee record holders may be participating in the practice of “householding” proxy statements, annual reports to stockholders, and notices of Internet availability of proxy materials. This means that only one copy of such materials may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of any such document to you upon written or oral request to AVEO Pharmaceuticals, Inc., One Broadway, 14 th Floor, Cambridge, Massachusetts 02142, Attention: Corporate Secretary, telephone: (617) 588-1960. If you want to receive separate copies of the proxy statement, annual report to stockholders, or notices of Internet availability of proxy materials in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, brokerage firm or other nominee record holder, or you may contact us at the above address and phone number.

7


 

OWNERSHIP OF OUR COMMON STOCK

Unless otherwise provided below, the following table sets forth information regarding beneficial ownership of our common stock as of April 8, 2019 by:

each person, or group of affiliated persons, known to us to be the beneficial owner of 5% or more of the outstanding shares of our common stock;

each of our current directors and director nominees;

our principal executive officer, our principal financial officer and our other executive officers named in the Summary Compensation table included elsewhere in this proxy statement, whom we collectively refer to as our named executive officers; and

all of our directors and executive officers as a group.

The number of shares of common stock beneficially owned by each person or entity is determined in accordance with the applicable rules of the SEC and includes voting or investment power with respect to shares of our common stock. The information is not necessarily indicative of beneficial ownership for any other purpose. Unless otherwise indicated in the table or in the footnotes to the table below, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares of common stock, except to the extent authority is shared by spouses under community property laws. The inclusion herein of any shares as beneficially owned does not constitute an admission of beneficial ownership.

The column entitled “Percentage of Shares Beneficially Owned” is based on a total of 160,739,471 shares of our common stock outstanding as of April 8, 2019. Except as otherwise set forth below, the address of each beneficial owner is c/o AVEO Pharmaceuticals, Inc., One Broadway, 14 th Floor, Cambridge, Massachusetts 02142.

 

Name and Address of Beneficial Owner

 

Number of

Shares

Beneficially

Owned

 

 

Common

Stock

Underlying

Warrants

Exercisable

Within 60

Days

 

 

Common

Stock

Underlying

Options

Exercisable

Within 60

Days

 

 

Total

Securities

Beneficially

Owned

 

 

Percentage

of Shares

Beneficially

Owned

 

Holders of more than 5% of our voting securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Entities affiliated with New Enterprise Associates (1)

 

 

25,243,865

 

 

 

14,710,521

 

 

 

 

 

 

39,954,386

 

 

 

22.8

%

Entities affiliated with Heights Capital Management, Inc. (2)

 

 

7,826,087

 

 

 

7,826,087

 

 

 

 

 

 

15,652,174

 

 

 

9.3

%

Directors and Named Executive Officers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kenneth M. Bate

 

 

3,750

 

 

 

 

 

 

299,533

 

 

 

303,283

 

 

*

 

Anthony B. Evnin

 

 

418,523

 

(3)

 

129,533

 

 

 

299,533

 

(4)

 

847,589

 

 

*

 

Robert C. Young

 

 

18,958

 

(5)

 

 

 

 

289,783

 

 

 

308,741

 

 

*

 

Gregory T. Mayes (6)

 

 

 

 

 

 

 

 

8,324

 

 

 

8,324

 

 

*

 

Michael Bailey

 

 

168,848

 

 

 

51,813

 

 

 

2,755,498

 

 

 

2,976,159

 

 

 

1.8

%

Matthew D. Dallas

 

 

 

 

 

 

 

 

333,332

 

 

 

333,332

 

 

*

 

Michael Needle

 

 

51,813

 

 

 

51,813

 

 

 

924,666

 

 

 

1,028,292

 

 

*

 

Nikhil Mehta

 

 

 

 

 

 

 

 

212,499

 

 

 

212,499

 

 

*

 

Karuna Rubin

 

 

 

 

 

 

 

 

319,893

 

 

 

319,893

 

 

*

 

All current executive officers and directors as a group (9 persons)

 

 

661,892

 

 

 

233,159

 

 

 

5,443,061

 

 

 

6,338,112

 

 

 

3.8

%

 

*

Represents beneficial ownership of less than one percent of our outstanding common stock.

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(1)

The shares are directly held by Growth Equity Opportunities Fund IV, LLC, or GEO IV; and indirectly held by New Enterprise Associates 15, L.P., or NEA 15, the sole member of GEO IV; NEA Partners 15, L.P., or NEA Partners 15, the sole general partner of NEA 15; NEA 15 GP, LLC, or NEA 15 GP, the sole general partner of NEA Partners 15, and the individual managers of NEA 15 GP (NEA 15, NEA Partners 15, NEA 15 GP and the individual managers of NEA 15 GP being collectively referred to as the Indirect Reporting P ersons). The individual managers of NEA 15 GP are Peter J. Barris, Forest Baskett, Anthony A. Florence, Jr., Mohamad Makhzoumi , Josh Makower, David M. Mott, Scott D. Sandell and Peter W. Sonsini . Each of the Indirect Reporting Persons disclaims beneficial ownership of the shares held by GEO IV other than those shares which such person owns of record, and except to the extent of its or his pecuniary interest therein . The address of GEO IV is New Enterprise Associates, 1954 Greenspring Drive, Suite 600, Timon ium, MD 21093.

( 2 )

The shares are directly held by CVI Investments, Inc. and indirectly held by Heights Capital Management, Inc. The address of CVI Investments, Inc. is Heights Capital Management, Inc., 101 California Street, Suite 3250, San Francisco, CA 94111.

( 3 )

Consists of (a) 109 shares of common stock held by Venrock Entrepreneurs Fund Management III, LLC, or VEFM III and (b) 418,414 shares of common stock held directly by Dr. Anthony Evnin.  Dr. Evnin is a partner of VR Management, LLC, an affiliate of VEFM III. Dr. Evnin expressly disclaims beneficial ownership over all shares held by or on behalf of VEFM III, except to the extent of his indirect pecuniary interest therein. The address of VEFM III is c/o Venrock Associates, 530 Fifth Avenue, 22 nd Floor, New York, New York 10036.

( 4 )

Includes 35,000 shares of common stock issuable upon exercise of options held by Dr. Evnin on behalf and for the sole benefit of VR Management, LLC.

( 5 )

Consists of (a) 17,958 shares of common stock held by Dr. Young, and (b) 1,000 shares of common stock held by Dr. Young’s wife.

( 6 )

Mr. Mayes was appointed to our board of directors effective February 27, 2019.

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, requires our directors, executive officers and the holders of more than 10% of our common stock to file with the SEC initial reports of ownership of our common stock and other equity securities on a Form 3 and reports of changes in such ownership on a Form 4 or Form 5. Executive officers, directors and 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of our records and written representations by the persons required to file these reports, we believe that, during the year ended December 31, 2018, our executive officers, directors and 10% stockholders complied with all Section 16(a) filing requirements applicable to them.

9


 

PROPOSAL 1—ELECTI ON OF DIRECTORS

Our board is currently comprised of five members, and our board has set the size of our board at five pursuant to our certificate of incorporation and bylaws. The persons named in the accompanying proxy will vote to elect Messrs. Bailey, Bate and Mayes and Drs. Evnin and Young as directors unless you indicate otherwise on your proxy. Each of the nominees is currently a member of our board of directors.

If they are elected, each of the nominees will hold office until our annual meeting of stockholders in 2020 and until his successor is duly elected and qualified. Each of the nominees has indicated his willingness to serve, if elected; however, if any nominee should be unable to serve, the shares of common stock represented by proxies may be voted for a substitute nominee designated by our board of directors.

There are no family relationships between or among any of our officers or directors.

Below are the names, ages and certain other information regarding the business experience, qualifications, attributes and skills of each of the nominees for director. Information with respect to the number of shares of common stock beneficially owned by each of these individuals, directly or indirectly, as of April 8, 2019 appears above under the heading “Ownership of Our Common Stock.”

Michael P. Bailey , age 53, has served as our President and Chief Executive Officer and as a director since January 6, 2015. Mr. Bailey joined our company in September 2010 as our Chief Commercial Officer and was named our Chief Business Officer in June 2013. Prior to joining our company, Mr. Bailey served as senior vice president, business development and chief commercial officer at Synta Pharmaceuticals Corp., a biopharmaceutical company focused on research, development and commercialization of oncology medicines, from August 2008 to September 2010. From 1999 to 2008, Mr. Bailey worked at ImClone Systems Incorporated, a biopharmaceutical company focused on the development and commercialization of treatments for cancer patients. During his nine-year tenure at ImClone, he was responsible for commercial aspects of the planning and launch of ERBITUX ® (cetuximab) across multiple oncology indications, as well as new product planning for the ImClone development portfolio, which included CYRAMZA ® (ramucirumab) and PORTRAZZA ® (necitumumab). In addition, Mr. Bailey was a member of the strategic leadership committees for ImClone and its North American and worldwide partnerships and led its commercial organization, most recently as senior vice president of commercial operations. Prior to his role at ImClone, Mr. Bailey managed the cardiovascular development portfolio at Genentech, Inc., a biotechnology company, from 1997 to 1999. Mr. Bailey started his career in the pharmaceutical industry as part of Smith-Kline Beecham’s executive marketing development program, where he held a variety of commercial roles from 1992 to 1997, including sales, strategic planning, and product management. Mr. Bailey received a B.S. in psychology from St. Lawrence University and an M.B.A. in international marketing from the Mendoza College of Business at the University of Notre Dame. We believe Mr. Bailey’s qualifications to serve on our board of directors include his service as our chief executive officer and his significant experience in research and development for cancer and corporate strategy development, including his executive leadership roles at global pharmaceutical companies.

Kenneth M. Bate , age 68, has served as a director since December 2007. He is currently an independent consultant. Mr. Bate currently serves on the boards of Catabasis Pharmaceuticals, Inc., Genocea Biosciences, Inc., Epizyme, Inc. and Madrigal Pharmaceuticals, Inc., each a public biopharmaceutical company. During the last five years, Mr. Bate also served as chairman of the board of Cubist Pharmaceuticals, Inc. and as a director of BioMarin Pharmaceutical Inc. and Vanda Pharmaceuticals Inc., each a public biopharmaceutical company. Previously, Mr. Bate was the president and chief executive officer of Archemix Corp., a private biopharmaceutical company, a position he held from April 2009 through December 2011. From 2006 to April 2009, he served in various positions at NitroMed, Inc., a public pharmaceutical company, most recently as president and chief executive officer. From 2002 to 2005, Mr. Bate served as head of commercial operations and chief financial officer at Millennium Pharmaceuticals, Inc., a biopharmaceutical company. Prior to joining Millennium Pharmaceuticals, Mr. Bate co-founded JSB Partners, LLC, a banking and advisory services firm for biopharmaceutical and life sciences companies. From 1990 to 1996, Mr. Bate was employed with Biogen, Inc., a public biotechnology company, first as its chief financial officer and then as head of the commercial organization responsible for launching its multiple sclerosis business. He holds a B.A. in Chemistry from Williams College and an M.B.A. from The Wharton School of the University of Pennsylvania. We believe Mr. Bate’s qualifications to serve on our board of directors include

10


 

his operating, finance, commercial, transactional and senior management experience in the industry, such as his experience as chief executive officer of Archem ix and NitroMed, as head of commercial operations and chief financial officer at Millennium Pharmaceuticals, and as chief financial officer and vice president of sales and marketing at Biogen, as well as his experience serving on the board of directors of other public companies in the life sciences industry, such as Cubist Pharmaceuticals , BioMarin Pharmaceutical and Vanda Pharmaceuticals .

Anthony B. Evnin, Ph.D. , age 78, has served as a director since March 2002. He has been a Partner at Venrock, a venture capital firm, where he focuses largely on life sciences investments and, in particular, biotechnology investments, since 1975. Dr. Evnin currently serves on the boards of Infinity Pharmaceuticals, Inc. and Constellation Pharmaceuticals, Inc., both public biopharmaceutical companies, as well as Cantel Medical Corp., a public medical equipment company. He also serves on the boards of Redpin Therapeutics, Inc. and Bridge Medicines LLC, both private biopharmaceutical companies. During the last five years, Dr. Evnin served as a director of Juno Therapeutics, Inc., a public biopharmaceutical company. He has also served as a director of Acceleron Pharma, Inc., Celladon Corporation, CymaBay Therapeutics, Inc., Icagen, Inc. and Pharmos Corporation, each public biopharmaceutical companies, Altea Therapeutics Corporation, a private biopharmaceutical company, and Boston-Power, Inc., a private lithium-ion battery company. Dr. Evnin’s previous experience was as a manager of business development at Story Chemical Corporation and a research scientist at Union Carbide Corporation. Dr. Evnin is a trustee emeritus of The Rockefeller University and of The Jackson Laboratory, trustee emeritus of Princeton University, a member of the Boards of Overseers and Managers of Memorial Sloan-Kettering Cancer Center, a director of the New York Genome Center, and a member of the board of directors of the Albert and Mary Lasker Foundation. Dr. Evnin holds a Ph.D. in Chemistry from the Massachusetts Institute of Technology and an A.B. from Princeton University. We believe Dr. Evnin’s qualifications to sit on our board of directors include his substantial experience as an investor in, and director of, biopharmaceutical companies, including Infinity Pharmaceuticals and Constellation Pharmaceuticals, as well as his expertise in corporate strategy at a public biopharmaceutical company.

Gregory T. Mayes , age 50, has served as a director since February 2019. Mr. Mayes is the president and chief executive officer of Engage Therapeutics, Inc., a privately held specialty biopharmaceutical company, which he founded in January 2017. Mr. Mayes currently serves on the board of OncoSec Medical Incorporated, a public biopharmaceutical company. From 2013 to 2016, Mr. Mayes served as executive vice president and chief operating officer of Advaxis, Inc., a public biotechnology company focused on the development of immune-oncology therapies. Mr. Mayes also served on the board of Advaxis, Inc. from March 2016 to April 2017. Prior to joining Advaxis, Inc., Mr. Mayes served as executive vice president of Dendreon Corporation, a public biotechnology company. From 2010 to 2012, Mr. Mayes was the president and general counsel of Unigene Laboratories, Inc. where he primarily led out-licensing efforts for its oral peptide drug delivery platform. He also served on the board of Unigene Laboratories, Inc. from 2012 to 2013. Prior to these roles, Mr. Mayes served as general counsel and chief compliance officer at ImClone Systems Corporation, a wholly owned subsidiary of Eli Lilly & Company, and as senior counsel at AstraZeneca Pharmaceuticals, LP., and practiced law at Morgan, Lewis & Bockius LLP. He holds a B.S. in advertising and political science from Syracuse University and a J.D. from the Temple University School of Law. We believe Mr. Mayes’s qualifications to serve on our board of directors include his substantial experience as an executive and director of multiple biopharmaceutical and other life sciences companies.

Robert C. Young, M.D. , age 79, has served as a director since July 2009. Dr. Young is president of RCY Medicine, a consulting company focused on cancer center productivity, health care quality and health policy which he founded in July 2009. From 2007 to 2009, Dr. Young served as chancellor of Fox Chase Cancer Center and as president and chief executive officer from 1989 to 2007. Dr. Young is a past president of the American Society of Clinical Oncology (ASCO), the American Cancer Society and the International Gynecologic Cancer Society, a past chairman of the board of scientific advisors of the National Cancer Institute and a past chairman of the National Comprehensive Cancer Network. Dr. Young served as chairman of the editorial board of Oncology Times. Dr. Young served on the board of directors of West Pharmaceutical Services, Inc., a public pharmaceutical technology company, from July 2002 to May 2012, and on the board of directors of Human Genome Sciences, Inc., a biopharmaceutical company, from November 2005 to July 2012. During the last five years, Dr. Young has served as a member of the scientific advisory boards of the Kansas Cancer Center, the Oklahoma Cancer Center, the Indiana Cancer Center and the Ohio State Cancer Center. Dr. Young holds a B.Sc. in zoology from The Ohio State University and an M.D. from Cornell University Medical College and is board certified in Internal Medicine, Hematology and Medical Oncology. We believe that Dr. Young’s qualifications to serve on our board of directors include his substantial experience in cancer research as head of the Fox Chase Cancer Center and as chairman of the board of scientific advisors of the National Cancer Institute as well as his prior role with the National Cancer Policy Board at the Institute of Medicine, his service as a member of the board of directors at public life sciences companies West Pharmaceutical Services and Human Genome Sciences, as well as his accomplished background as a board-certified physician.

Our board of directors recommends a vote “FOR” the election of each of the director nominees.

11


 

CORPORATE G OVERNANCE

General

We believe that good corporate governance is important to ensure that our company is managed for the long-term benefit of our stockholders. This section describes key corporate governance practices that we have adopted. We have adopted a code of business conduct and ethics, which applies to all of our officers, directors and employees, as well as charters for our audit committee, our compensation committee and our nominating and governance committee, and corporate governance guidelines. We have posted copies of our code of business conduct and ethics and corporate governance guidelines, as well as each of our committee charters, on the Corporate Governance page of the Investors section of our website, www.aveooncology.com , which you can access free of charge. We intend to disclose on our website any amendments to, or waivers from, our code of business conduct and ethics that are required to be disclosed by law or Nasdaq listing standards.

Board Determination of Independence

The Nasdaq Listing Rules requires a majority of a listed company’s board of directors to be comprised of independent directors within one year of listing. In addition, Nasdaq Listing Rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent directors and, in the case of all members of the audit committee, satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and, in the case of all members of the compensation committee, satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act. Under Rule 5605(a)(2), a director will only qualify as an “independent director” if, in the opinion of our board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries. In addition, in affirmatively determining the independence of any director who will serve on a company’s compensation committee, Rule 10C-1 under the Exchange Act requires that a company’s board of directors consider all factors specifically relevant to determining whether a director has a relationship to such company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (1) the source of compensation of the director, including any consulting, advisory or other compensatory fee paid by such company to the director; and (2) whether the director is affiliated with the company or any of its subsidiaries or affiliates.

Our board of directors annually reviews the composition of our board of directors and its committees and the independence of each director. In 2019, based upon information provided by each director concerning his background, employment and affiliations, including family relationships, our board of directors determined that none of Mr. Bate, Dr. Evnin, Dr. Young, or Mr. Mayes, representing four of our five directors, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is an “independent director” as that term is defined under Rule 5605(a)(2) of the Nasdaq Listing Rules. Our board of directors also determined that Mr. Bate and Drs. Evnin and Young, who comprise our audit committee, Dr. Evnin, Mr. Bate and Mr. Mayes, who comprise our compensation committee, and Drs. Evnin and Young and Mr. Mayes, who comprise our nominating and governance committee, satisfy the independence standards for such committees established by the SEC and the Nasdaq Listing Rules, as applicable. Our board of directors had previously determined that Dr. Young and Mr. Bate were independent while serving as members of the compensation committee and nominating and governance committee, respectively, from May 2017 to February 2018, and that John H. Johnson, who served on the board and on the compensation and nominating and corporate governance committees until his resignation in February 2019, was also independent. In making such determinations, the board of directors considered the relationships that each such non-employee director has with our company and other facts and circumstances the board of directors deemed relevant in determining independence, including the beneficial ownership of our capital stock by each non-employee director.

12


 

Role of t he Board

Our board of directors is responsible for establishing broad corporate policies and reviewing our overall performance. The primary responsibility of our board is to oversee the management of our company and, in doing so, serve the best interests of our company and our stockholders. Our board selects, evaluates and provides for the succession of executive officers and, pursuant to recommendations by our nominating and governance committee and subject to stockholder election, selects directors. It reviews and approves corporate objectives and strategies, and evaluates significant policies and proposed major commitments of corporate resources. Our board also participates in decisions that have a potential major economic impact on our company. Management keeps our directors informed of company activity through regular communication, including written reports and presentations at board of directors and committee meetings.

Our board of directors has designated Mr. Bate, an independent director within the meaning of Nasdaq Listing Rules (see “Board Determination of Independence” above), to serve as our lead outside director of the board of directors. As lead outside director, Mr. Bate performs many of the same functions and duties as a chairman of the board. Pursuant to our Corporate Governance Guidelines, Mr. Bate’s duties as lead outside director include the following:

chairing any meeting of the independent directors in executive session;

meeting with any director who is not adequately performing his or her duties as a member of the board or any committee;

facilitating communications between other members of the board and chief executive officer;

coordinating the agenda for each board meeting and determining the need for special meetings of the board; and

consulting with the chief executive officer on matters relating to corporate governance and board performance.

We do not currently have a designated chairman and do not have a policy as to whether the same person should serve as both the chief executive officer and the chairman of the board. However, we believe that the board should have the flexibility to make these determinations at any given time in a way that provides the most appropriate leadership for our company. Our board of directors has concluded that our current leadership structure is appropriate at this time. However, the board will continue to periodically review our leadership structure and may make such changes in the future as it deems appropriate.

The Board’s Role in Risk Oversight

We face a number of risks in our business, including risks related to: clinical research and development; regulatory reviews, approvals and oversight; intellectual property filings, prosecution, maintenance and challenges; the establishment and maintenance of strategic alliances; manufacturing; pricing and competition; the ability to access additional funding for our business; stockholder litigation; and other risks, including those described under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018. Our management is responsible for the day-to-day management of the risks that we face, while our board of directors, as a whole and through its committees, has responsibility for the oversight of risk management.

Our board administers its risk oversight function directly and through its three committees. Our lead outside director meets regularly with our chief executive officer and other executive officers to discuss strategy and risks facing our company. Members of our executive management team attend at least quarterly board meetings and are available to address any questions or concerns raised by the board on risk management and other related matters. Each quarter, the board of directors receives presentations from members of senior management on strategic matters involving our business. In addition, the audit committee periodically discusses with management our risk exposures in the areas of financial reporting, internal controls and compliance with legal and financial regulatory requirements, their potential impact on our company and the steps we take to manage them. The compensation committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. The nominating and governance committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks associated with board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance.

13


 

Board of Directors Mee tings and Attendance

Our board met thirteen times during 2018 either in person or by teleconference. During 2018, each of our directors then in office attended at least 75% of the aggregate number of board meetings and meetings of the committees on which he then served.

Director Attendance at Annual Meeting of Stockholders

Our corporate governance guidelines provide that directors are responsible for attending annual meetings. Each of our then-current directors attended the 2018 annual meeting of stockholders.

Board Committees

Our board of directors has established standing audit, compensation, and nominating and governance committees, each of which operates under a written charter that has been approved by our board and are available on our website, www.aveooncology.com . Each such committee reviews its respective charter at least annually. The members of each committee are appointed by our board, upon recommendation of our nominating and governance committee.

Our board has determined that all of the members of each of these three standing committees satisfy the independence standards for such committees established by the SEC and the Nasdaq Listing Rules.

Audit Committee

The members of our audit committee are Kenneth Bate, Anthony Evnin and Robert Young. Mr. Bate chairs the audit committee. Our board of directors has determined that Mr. Bate is an “audit committee financial expert” as defined in applicable SEC rules. Our audit committee’s responsibilities include:

appointing, approving the compensation of, and assessing the independence of the independent registered public accounting firm;

overseeing the work of the independent registered public accounting firm, including through the receipt and consideration of reports from such firm;

reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures;

monitoring our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics;

overseeing our internal audit function, if any;

discussing our risk management policies;

establishing policies regarding hiring employees from the independent registered public accounting firm and procedures for the receipt and retention of accounting-related complaints and concerns;

meeting independently with our internal auditing staff, if any, independent registered public accounting firm and management;

reviewing and approving or ratifying any related person transactions; and

preparing the audit committee report required by SEC rules.

Our audit committee met six times during 2018.

14


 

Compensation Committee

The members of our compensation committee are Kenneth Bate, Anthony Evnin, and Gregory Mayes. Dr. Evnin chairs the compensation committee. Previously, Dr. Young served on the compensation committee from May 2017 to February 2018 and Mr. Johnson served on the committee from February 2018 until his resignation from the board, subsequent to which Mr. Mayes joined the committee in February 2019. Our compensation committee’s responsibilities include:

annually reviewing and approving corporate goals and objectives relevant to our chief executive officer and our other executive officers’ compensation;

reviewing and making recommendations to our board with respect to the compensation of our chief executive officer;

reviewing and approving, or making recommendations to our board with respect to, the compensation of our other executive officers;

overseeing an evaluation of our senior executives;

overseeing and administering our cash and equity incentive plans;

reviewing and making recommendations to our board with respect to director compensation;

reviewing and discussing annually with management our “Compensation Discussion and Analysis” disclosure required by SEC rules; and

preparing the annual compensation committee report required by SEC rules.

 

The processes and procedures followed by our compensation committee in considering and determining executive compensation are described below under the heading “Executive and Director Compensation Processes.”

Our compensation committee met three times during 2018.

Nominating and Governance Committee

The members of our nominating and governance committee are Anthony Evnin, Gregory Mayes and Robert Young. Dr. Young chairs the nominating and governance committee. Previously, Mr. Bate served on the committee from May 2017 to February 2018 and Mr. Johnson served on the committee from February 2018 until his resignation from the board, subsequent to which Mr. Mayes joined the committee in February 2019. Our nominating and governance committee’s responsibilities include:

identifying individuals qualified to serve as members of our board;

recommending to our board the persons to be nominated for election as directors and to each of our board’s committees;

reviewing and making recommendations to our board with respect to management succession planning;

developing and recommending to our board corporate governance guidelines;

developing and recommending to our board continuing educational programs regarding corporate governance and other pertinent topics; and

overseeing an annual evaluation of our board.

The processes and procedures followed by our nominating and governance committee in identifying and evaluating director candidates are described below under the heading “Director Nomination Process.”

Our nominating and governance committee met two times during 2018.

Director Nomination Process

Our nominating and governance committee is responsible for identifying individuals qualified to serve as directors, consistent with criteria approved by our board, and recommending the persons to be nominated for election as directors, except where we are legally required by contract, law or otherwise to provide third parties with the right to nominate.

15


 

The process followed by our nominating and governance committee to identify and evaluate director candidates includes requests to board members and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the committee and our board.

At the annual meeting, stockholders will be asked to consider the election of Gregory Mayes, who has been nominated for election as a director by stockholders for the first time.  During 2019, Mr. Mayes was appointed by our board as a new director. Mr. Mayes was originally proposed to the nominating and governance committee by the chief executive officer and our board of directors determined to include him among the nominees.

Criteria and Diversity

In considering whether to recommend any particular candidate for inclusion in our board’s slate of recommended director nominees, our nominating and governance committee apply criteria that include the candidate’s integrity, business acumen, knowledge of our business and industry, experience, absence of conflicts of interest and ability to act in the interests of all stockholders. Our nominating and governance committee also considers the board’s current composition in evaluating any candidate, such as diversity of gender, race and national origin, education, professional experience and differences in viewpoints and skills. Our corporate governance guidelines specify that the value of diversity on the board should be considered by the nominating and governance committee in the director identification and nomination process. The committee does not assign specific weights to particular criteria; however, our board and nominating and governance committee believe that it is essential that the board members represent diverse viewpoints, and we are actively seeking to identify board candidates that will contribute to the diversity of the board. We believe that the backgrounds and qualifications of our directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow our board to promote our strategic objectives and fulfill its responsibilities to our stockholders.

The director biographies appearing above under “Proposal 1—Election of Directors” indicate each nominee’s experience, qualifications, attributes and skills that led our board to conclude that each director should serve as a member of our board. Our board believes that the nominees have all had substantial achievement in their professional and personal pursuits, and possess the background, talents and experience that our board desires and that will contribute to the best interests of our company and to long-term stockholder value.

Stockholder Nominations

Stockholders may recommend individuals to our nominating and governance committee for consideration as potential director candidates by submitting names of the proposed candidates, together with appropriate biographical information and background materials and, if the stockholder is not a stockholder of record, a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of our common stock for at least a year as of the date such recommendation is made, to the nominating and governance committee, c/o Karuna Rubin, Secretary, AVEO Pharmaceuticals, Inc., One Broadway, 14 th Floor, Cambridge, Massachusetts 02142. Assuming that appropriate biographical and background material has been provided on a timely basis, the committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others. Stockholders also have the right under our bylaws to nominate director candidates directly, without any action or recommendation on the part of the committee or the board, by following the procedures set forth in our bylaws and described below under the heading “Stockholder Proposals.”

Communicating with the Independent Directors

Our board of directors will give appropriate attention to written communications that are submitted by stockholders, and will respond if and as appropriate. The lead outside director, subject to advice and assistance from our company’s internal legal counsel, is primarily responsible for monitoring communications from stockholders and for providing copies or summaries to the other directors as he considers appropriate.

16


 

Communications are forwarded to all directors if they relate to important substantive matters and include suggestions or comments that the lead outside director c onsiders to be important for the directors to know. In general, communications relating to governance and long-term corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs and personal grievances.

Stockholders who wish to send communications on any topic to our board should address such communications to the board of directors, c/o Karuna Rubin, Secretary, AVEO Pharmaceuticals, Inc., One Broadway, 14 th Floor, Cambridge, Massachusetts 02142.

Executiv e Officer and Director Compensation Processes

Our compensation committee has implemented an annual performance review program for our executives, under which annual performance goals are determined and set forth in writing at the beginning of each calendar year for our company as a whole and for each of our executive officers. Annual corporate goals are proposed by management and approved by our board at the beginning of each calendar year for the upcoming year. These corporate goals target the achievement of specific clinical, regulatory, corporate development and financial milestones. Annual individual goals focus on contributions that facilitate the achievement of the corporate goals and are set during the first quarter of each calendar year. Individual goals are proposed by management and approved by our compensation committee and board of directors. Annual salary increases, annual bonuses, and annual stock options granted to our executives are tied to the achievement of these corporate and individual performance goals.

During the first calendar quarter of each year, we evaluate individual and corporate performance against the written goals for the recently completed year. This process leads to recommendations by our chief executive officer for corporate and individual goal achievement, annual salary increases, annual equity awards and bonuses, if any, for executive officers other than himself, which are then reviewed and approved by our compensation committee and our board of directors. Any awards under our annual cash incentive program to our chief executive officer are based solely on the achievement of our overall corporate goals, as determined by our compensation committee or the board of directors.

Our board of directors has delegated to our chief executive officer in his capacity as a director, as a committee of the board, the authority to make equity awards under our Second Amended and Restated 2010 Incentive Stock Plan to our employees and consultants (other than to any executive officer or any other individual our board of directors or compensation committee may specify from time to time), at exercise prices equal to the closing price of our common stock on the date of grant and subject to vesting provisions and other conditions specified by our board and the compensation committee.

Our compensation committee has the authority to retain compensation consultants and other outside advisors to assist in the evaluation of executive officer compensation. During the year ended December 31, 2018, our compensation committee retained an independent compensation consultant, Radford, an Aon Hewitt company, or Radford, to assist the compensation committee in developing our executive compensation programs for 2018 and 2019.

Report of the Audit Committee

Our audit committee has reviewed our audited financial statements for the year ended December 31, 2018 and discussed them with our management and our independent registered public accounting firm, Ernst &Young LLP.

Our audit committee has also received from, and discussed with, Ernst &Young LLP various communications that Ernst &Young LLP is required to provide to our audit committee, including the matters required to be discussed by generally accepted auditing standards (including Public Company Accounting Oversight Board Auditing Standard No. 1301, Communications with Audit Committees ).

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In addition, Ernst & Young LLP provided our audit committee with the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the audit committee concerning independence, and the audit committee has discussed with Ernst &Young LLP their independence.

Based on the review and discussions referred to above, our audit committee recommended to our board of directors that our financial statements audited by Ernst & Young LLP be included in our Annual Report on Form 10-K for the year ended December 31, 2018.

By the audit committee of the board of directors of AVEO Pharmaceuticals, Inc.

Kenneth Bate, Chair

Anthony Evnin

Robert Young

Principal Accountant Fees and Services

The following table summarizes the fees of Ernst & Young LLP, our independent registered public accounting firm, billed to us for each of the last two years.

 

Fee Category

 

2018

 

 

2017

 

Audit Fees (1)

 

$

782,000

 

 

$

788,000

 

Audit-Related Fees

 

 

 

 

 

 

Tax Fees (2)

 

$

23,000

 

 

$

23,000

 

All Other Fees

 

 

 

 

 

 

Total Fees

 

$

805,000

 

 

$

811,000

 

 

(1)

“Audit Fees” in each of 2018 and 2017 include fees for the integrated audit of our annual financial statements and the effectiveness of our internal control over financial reporting, the review of the interim financial statements included in our quarterly reports on Form 10-Q, and fees in connection with our public securities offerings, including registration statements, comfort letters and consents.

(2)

“Tax Fees” in each of 2018 and 2017 include fees for tax advice and tax services primarily related to: (i) miscellaneous federal and state tax consulting, (ii) international tax consulting and (iii) tax compliance with domestic and foreign tax returns.

All such accountant services and fees were pre-approved by our audit committee in accordance with the “Audit Committee Pre-Approval Policies and Procedures” described below.

Audit Committee Pre-Approval Policies and Procedures

Our audit committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm. This policy generally provides that we will not engage our independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by our audit committee.

From time to time, our audit committee may pre-approve specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next twelve months. Any such pre-approval is detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar amount.

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CERTAIN RELATIONSHIPS AND R ELATED PERSON TRANSACTIONS

Policies and Procedures for Related Person Transactions

Our board of directors has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which we are a participant, the amount involved exceeds $120,000 and one of our executive officers, directors, director nominees or 5% stockholders (or their respective immediate family members), each of whom we refer to as a “related person,” has a direct or indirect material interest.

If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to our corporate counsel. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by the audit committee of our board of directors. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chairman of the audit committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.

A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the audit committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the committee will review and consider:

the related person’s interest in the related person transaction;

the approximate dollar value of the amount involved in the related person transaction;

the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;

whether the transaction was undertaken in the ordinary course of our business;

whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unaffiliated third party;

the purpose of, and the potential benefits to us of, the transaction; and

any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

The audit committee may approve or ratify the transaction only if the committee determines that, under all of the circumstances, the transaction is in or is not inconsistent with the best interests of our company. The audit committee may impose any conditions on the related person transaction that it deems appropriate.

In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, our board of directors has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:

interests arising solely from the related person’s position as a director or an executive officer of another entity (whether or not the person is also a director of such entity), that is a participant in the transaction, where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, and (c) the amount involved in the transaction equals less than the greater of $200,000 or 5% of the annual consolidated gross revenues of the entity receiving payment under the transaction; or

transactions that involve compensation (a) to an executive officer if the compensation has been approved, or recommended to our board of directors for approval, by our compensation committee or a group of independent directors of our company performing a similar function, or (b) to a director for services as a director of our company if such compensation will be reported pursuant to applicable securities laws; or

a transaction that is specifically contemplated by provisions of our charter or bylaws.

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The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the compensation committee in the manner specified in its charter.

Related Person Transactions

On August 21, 2018, we completed a public offering of 2,500,000 shares of our common stock at the public offering price of $2.26 per share, with total gross proceeds to us of $5,650,000. Polar Capital, LLP and an entity affiliated with New Enterprise Associates participated in the public offering. Each of (i) Polar Capital, LLP and (ii) entities affiliated with New Enterprise Associates (collectively) beneficially held more than 5% of our voting securities at such time. Polar Capital, LLP purchased 1,327,433 shares at a total cost of $3.0 million, and an affiliate of New Enterprise Associates purchased 663,717 shares at a total cost of $1.5 million. In accordance with our related person transaction policy, the participation of these existing stockholders in the underwritten public offering was approved by the audit committee in connection with the offering.

 

On April 8, 2019, we completed a public offering of 21,739,131 shares of our common stock and warrants to purchase an aggregate of 25,000,000 shares of our common stock, including warrants to purchase an aggregate of 3,260,869 shares of our common stock sold pursuant to the underwriter’s partial exercise of its overallotment option, at the public offering price of $1.14 per share and $0.01 per warrant, with total gross proceeds to us of $25,032,609. An entity affiliated with New Enterprise Associates participated in this public offering by purchasing 4,347,827 shares of common stock and warrants to purchase an aggregate of 4,347,827 shares of common stock at a total cost of approximately $5.0 million. At such time, entities affiliated with New Enterprise Associates (collectively) beneficially held more than 5% of our voting securities. In accordance with our related person transaction policy, the participation of this existing stockholder in the underwritten public offering was approved by the audit committee in connection with the offering.

 

20


 

EXECUTIVE AND DIRE CTOR COMPENSATION

Compensation Discussion and Analysis

Our approach to executive compensation is guided by the following principles:

holding our executive officers accountable for results over the long term and maintaining integrity in all of the business dealings of our executive officers;

rewarding our executive officers for consistently strong execution; and

establishing a clear connection between rewards and performance.

These principles underlie our compensation program and, indeed, our entire culture. We seek to achieve financial strength by, among other things, linking compensation to performance goals, by using equity as a key component of compensation, and by continually reviewing and monitoring our compensation program.

Executive Summary

We are a biopharmaceutical company seeking to advance targeted medicines for oncology and other unmet medical needs. We are conducting a phase 3 randomized, controlled, multi-center, open-label trial, or the TIVO-3 trial, which compares tivozanib to an approved therapy, sorafenib (Nexavar ® ), in 350 subjects as a third- and fourth-line treatment for RCC, in order to develop and commercialize our lead candidate tivozanib in North America as a treatment for advanced or metastatic renal cell carcinoma, or RCC. We are also leveraging several collaborations in the development of tivozanib and our other product candidates.  We have sublicensed tivozanib, marketed under the brand name FOTIVDA®, to EUSA Pharma (UK) Limited, or EUSA, for oncological indications in Europe and other territories outside of North America. Through EUSA, tivozanib is approved in the European Union, as well as Norway and Iceland, for the first-line treatment of adult patients with RCC and for adult patients who are vascular endothelial growth factor receptor and mTOR pathway inhibitor-naïve following disease progression after one prior treatment with cytokine therapy for RCC.  We also have clinical collaborations to study tivozanib in combination with immune checkpoint inhibitors in RCC and in hepatocellular carcinoma, or HCC.  We are conducting a phase 2 clinical trial of tivozanib in combination with Opdivo ® (nivolumab), a PD-1 inhibitor, in the first-line and the second-line treatment of RCC , which we refer to as the TiNivo trial. Leveraging early monotherapy results in HCC, we have a clinical collaboration with a wholly-owned subsidiary of AstraZeneca PLC, or AstraZeneca, to study tivozanib in combination with IMFINZI ® (durvalumab), a PD-L1 inhibitor, for the treatment of advanced, unresectable HCC. In addition, a new formulation of tivozanib is in pre-clinical development for the treatment of age-related macular degeneration. Ficlatuzumab, a hepatocyte growth factor inhibitory antibody, is currently being tested in several investigator-sponsored studies jointly funded by us and Biodesix, Inc., or Biodesix, for the potential treatment of squamous cell carcinoma of the head and neck, or HNSCC, acute myeloid leukemia, or AML, and pancreatic cancer.  CANbridge Life Sciences Ltd., or CANbridge, our partner for AV-203, an anti-ErbB3 monoclonal antibody, is planning to initiate clinical studies in China in 2019 in esophageal squamous cell carcinoma and has committed to funding the development of AV-203 through proof-of-concept.  We have recently regained the rights to AV-380, a humanized IgG1 inhibitory monoclonal antibody targeting growth differentiation factor 15, a divergent member of the TGF-ß family, for the potential treatment of cancer cachexia, and are working to initiate preclinical toxicology studies in 2019 to support the potential filing of an investigational new drug application, or IND, with the U.S. Food and Drug Administration, or the FDA. We are evaluating options for the development of our preclinical AV-353 platform which targets the Notch 3 pathway.

When making compensation decisions, the compensation committee considers the progress of the clinical and regulatory development of our product candidates and the need to retain key executives. The compensation committee has focused on retaining and incentivizing our key employees in ways that we believe are both meaningful to the employees, as well as aligned with the interests of our stockholders, including providing our executive officers with annual cash incentive bonuses and equity awards that are dependent on individual and corporate performance, as further described below. In setting compensation for 2019, the compensation committee has continued to focus on ensuring that executive compensation is in line with our peers in order to retain our management team and motivate them to continue to advance our pipeline.

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At our 2018 annual meeting, we conducted an advisory vote on executive compensation. Approximately 98 % of the votes cast were voted “FOR” approval of our executive compensat ion program as described and disclosed in the Compensation Discussion and Analysis section, compensation tables and narrative discussion in our 2018 proxy statement. The compensation committee considered the results of this advisory vote, together with the other factors and data discussed in this proxy statement, in determining executive compensation decisions and policies, and believes the result affirms stockholders’ support of our company ’s approach to and structure of executive compensation. The compens ation committee will continue to consider the outcome of our company ’s say-on-pay votes when making future compensation decisions for our named executive officers.

Our Compensation Program Emphasizes Performance

We believe that the compensation of our named executive officers for 2018 was well-aligned with our executive compensation objectives and with our performance for the following reasons:

We provide cash bonuses that are 100% dependent upon our company’s and individual’s performance goals. The cash bonus portion of our named executive officer’s compensation is not guaranteed and is totally at risk. We ensure that the performance goals underlying the cash bonuses are aggressive, aligned with stockholders’ interest and results driven. Therefore, if our company or an individual does not perform at a level of excellence, the cash bonus can be, and has been on occasion, zero.

We deliver a significant portion of our named executive officer target total direct compensation in the form of long-term incentive equity awards. Over the past several years, a significant portion of the total target value of the three primary elements of named executive officer compensation—base salaries, annual cash incentive awards and equity awards—was delivered in the form of long-term equity awards. The amounts disclosed in the executive compensation tables in this proxy statement generally reflect the grant-date fair value of stock option awards, but the actual economic value of stock option awards depends directly on the performance of our stock price over the period during which the awards vest and the period during which stock options may be exercised. Therefore, if stockholder value decreases over time, so does the value of the stock compensation. Our executive officers will only realize value when our stock price, and consequently stockholder value, increases.

We aim to attract and retain exceptional executives in an extremely competitive market. In making its recommendation and decisions, the compensation committee reviewed market and peer data, which includes competitive information relating to the mix and levels of compensation for executives in the life science industry. The compensation committee also considered the need to retain key executives and reward those executives who continued to perform at a high level through 2018.

Overview of our Executive Compensation

The following section discusses the principles underlying our policies and decisions with respect to the compensation of our executive officers that are named in the “Summary Compensation Table for the Years Ended December 31, 2018, 2017, and 2016”, whom we refer to as our “named executive officers”, and the most important factors relevant to an analysis of these policies and decisions.

Under applicable SEC rules, our named executive officers for 2018 were:

Michael Bailey, our president and chief executive officer;

Matthew Dallas, our chief financial officer;

Michael Needle, our chief medical officer;

Nikhil Mehta, our senior vice president of regulatory and quality assurance; and

Karuna Rubin, our senior vice president and general counsel.

22


 

Our compensation committee is responsible for establishing and administering our policies governing the compensation for our named executive o fficers, including salaries, annual cash incentive s and equity incentive compensation. Our compensation committee consists of three non-employee independent directors of our board, all of whom have extensive experience in our industry. Our compensation com mittee considers the recommendations of our chief executive officer when determining the appropriate mix of compensation for each of our executive officers, including our named executive officers. Our chief executive officer, however, does not participate in the determination of his own compensation. Although our compensation committee is empowered to approve the salaries, annual cash incentive s and equity incentive compensation of certain of our named executive officers, (i) the members of our board of dir ectors approve the salary, annual cash incentive and equity incentive compensation of our chief executive officer, based on the recommendation of the compensation committee, and (ii) the compensation committee typically requests that the members of our boa rd of directors approve the salaries, annual cash incentive s and equity incentive compensation of all of our other named executive officers based on the compensation committee’s recommendation.

We believe that the compensation of our named executive officers should be designed to focus executive behavior on the achievement of short-term corporate goals as well as long-term business objectives and strategies. We place significant emphasis on pay-for-performance compensation, which rewards our executives when we achieve certain specific regulatory, clinical, corporate development and financial milestones, thereby creating stockholder value. We use a combination of base salary, annual cash incentive compensation, a long-term equity incentive compensation and a broad-based benefits program to create a competitive compensation package for our executive officers.

Objectives of our Executive Compensation Program

Our compensation committee has designed our overall executive compensation program to achieve the following objectives:

attract and retain talented and experienced executives;

motivate and reward executives whose knowledge, skills and performance are critical to our success;

provide a competitive compensation package that aligns the interests of our named executive officers and stockholders by including a significant variable component which is weighted heavily toward performance-based rewards;

ensure fairness among executive officers by recognizing the contributions each executive makes to our success; and

foster a shared commitment among executives by aligning their individual goals with our corporate goals and the creation of stockholder value.

Basis for Compensation Policies and Decisions

We use a mix of short-term compensation, consisting of base salaries and annual cash incentive awards, and long-term compensation, consisting of equity incentive compensation, to provide a total compensation structure that is designed to achieve our objectives.

In arriving at the amount and types of initial compensation for each of our named executive officers, we consider the following factors:

the individual’s particular background and circumstances, including prior relevant work experience and compensation paid prior to joining us and the uniqueness of the individual’s skills within the industry;

the individual’s role with us and the compensation paid to similar persons in the companies represented in the compensation data that we review (as further discussed below);

the demand for people with the individual’s specific expertise and experience at the time of hire;

performance goals and other expectations for the individual’s position;

comparison to other executives within our company having similar levels of expertise and experience; and

recommendations from our independent compensation consultant.

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We reassess annually the compensation of our named executive officers and determine whether any adjustments should be made. In determining whether to adjust the compensation of any of our named executive officers, we generally take into account the following factors:

formal market data regarding base salary, cash incentives and equity compensation from a leading life science compensation survey of comparable biopharmaceutical and biotechnology companies;

the roles and responsibilities of our executives, including any increases or decreases in responsibilities; and

the contributions and performance of each named executive officer.

In making certain compensation decisions during 2018 and for 2019, the compensation committee also considered the extended timeline of our TIVO-3 trial, the need to retain key executives and our stock price.

Our compensation committee retained an independent compensation consultant, Radford, to assist the compensation committee in developing our overall executive compensation for 2018 and 2019.

To assist in determining executive compensation in 2018, Radford and the compensation committee reviewed competitive market data from the 2017 Radford Global Life Sciences Survey of public biopharmaceutical companies with less than 100 employees and a market value between $140 million and $1.3 billion, which we refer to as the 2017 Radford Global Life Sciences Survey. The survey included data from companies in the life sciences industry which the compensation committee believes are generally comparable to our company and against which the compensation committee believes we compete for executive talent.

To assist in determining executive compensation in 2019, Radford and the compensation committee reviewed a peer group, which we refer to as the 2019 peer group, of publicly traded companies in the life sciences industry at a stage of development, market capitalization, geography and size comparable to ours, which companies the compensation committee believed were generally comparable to our company and against which the compensation committee believed we competed for executive talent. The compensation committee, in consultation with members of the Radford team, included the following companies in the 2019 peer group:

 

AcelRx Pharmaceuticals

Idera Pharmaceuticals

Stemline Therapeutics

Aldeyra Therapeutics

Karyopharm Therapeutics

Syndax Pharmaceuticals

BioCryst Pharmaceuticals

Kura Oncology

Syros Pharmaceuticals

Calithera Biosciences

Paratek Pharmaceuticals

TG Therapeutics

Catalyst Pharmaceuticals

Progenics Pharmaceuticals

Verastem

Deciphera Pharmaceuticals

Rigel Pharmaceuticals

ZIOPHARM Oncology

 

In addition to the publicly available information with respect to our 2019 peer group companies, Radford gathered competitive market data from the 2018 Radford Global Life Sciences Survey of public biopharmaceutical companies with less than 100 employees and a market value between $100 million and $900 million, which we refer to as the 2018 Radford Global Life Sciences Survey, for our analysis of executive compensation in 2019.

Our compensation committee has concluded that our executive compensation program is effectively designed in light of our objectives and continues to be aligned with the interests of our stockholders and therefore determined not to make significant changes to the structure of our executive compensation program in 2019.

In setting compensation for 2019, the compensation committee focused on ensuring that compensation was in line with our peers in order to retain and motivate our management team.

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The Chief Executive Officer’s Role in the Compensatio n Process

The compensation committee has historically used, in addition to its own judgment and experience, and the resources and tools described above, the recommendations of our chief executive officer as to the performance of each executive and as to the amount and type of compensation for such executive. Mr. Bailey, our chief executive officer, did not participate in the determination of his own compensation for 2018 or 2019.

Risk Considerations in our Compensation Program

Our compensation committee has discussed the concept of risk as it relates to our executive compensation program, and our compensation committee does not believe our executive compensation program encourages excessive or inappropriate risk taking. As described more fully below in “Executive Compensation Components,” we structure our pay to consist of both fixed and variable compensation to motivate our executives to produce superior short- and long-term results that are in our best interests and the best interests of our stockholders and that have the greatest potential to increase stockholder value. We have reviewed our compensation policies and programs with our compensation and audit committees and have concluded that any risks arising from our compensation policies and programs are not reasonably likely to have a material adverse effect on our company or business.

Executive Compensation Components

Our executive compensation program is primarily comprised of:

base salary;

annual cash incentive compensation; and

equity compensation.

Our compensation committee has not adopted a formal policy for allocating between long-term and short-term compensation, between cash and non-cash compensation or among the different forms of non-cash compensation. Instead, the compensation committee, after reviewing information provided by our compensation consultant, determines what it believes to be the appropriate and competitive level and mix of the various compensation components.

We generally strive to provide our named executive officers with a balance of short-term and long-term incentives to encourage consistently strong performance. While we believe that the annual cash incentive component of our compensation package encourages our executives to focus on our short-term performance, generally over a one-year period, we rely upon equity-based awards to encourage focus on our longer-term performance. In addition, we provide our executives with benefits that are available to all of our salaried employees, including medical, dental, group life and accidental death, dismemberment and long-term and short-term disability insurance, and matching contributions in our 401(k) plan.

Base Salary. Base salary is used to recognize the experience, skills, knowledge and responsibilities required of all our employees, including our named executive officers. Generally, we believe that executive base salaries should be targeted near the median of the range of salaries for executives in similar positions at comparable companies. When establishing base salaries for 2018 and 2019, our board of directors, upon the recommendation of our compensation committee, considered the overall economic environment, the degree to which our company achieved its business goals and objectives, the need to attract, motivate and retain key executives, and each individual’s performance. In addition, with respect to the base salaries of our named executive officers in 2018 and 2019, other than Mr. Bailey, our compensation committee considered the recommendations of Mr. Bailey in determining appropriate base salary levels.

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2018 Base Salaries

In February 2018, our board of directors, on the recommendation of the compensation committee, decided to increase the base salary of each of our named executive officers for 2018 as set forth in the table below. Our compensation committee made its recommendation based on the continued progress of our company and substantial achievements of the executive officers in 2017, as well as its analysis, with input from Radford, of executive officer pay from the 2017 Radford Global Life Sciences Survey. Given the continued strong performance of the executive team in 2017, salary increases for 2018 were made to keep pace with the 50th percentile of comparable companies in the 2017 Radford Global Life Sciences Survey, as recommended by Radford, in order to keep our company competitive with its peers in executive compensation. The 2018 base salaries for our named executive officers are as follows:

 

Name

 

2018 Annual

Base Salary ($)

 

 

Percentage

Increase in

Base Salary

From 2017

Base Salary (%)

 

Michael Bailey

 

$

527,621

 

 

 

10.0

%

Matthew Dallas

 

$

352,000

 

 

 

10.0

%

Michael Needle

 

$

436,578

 

 

 

3.5

%

Nikhil Mehta (1)

 

$

419,999

 

 

N/A

 

Karuna Rubin (2)

 

$

300,217

 

 

 

21.3

%

 

(1)

Dr. Mehta joined our company as senior vice president of regulatory and quality assurance, effective November 20, 2017, and was not eligible for a salary increase until 2019.

(2)

In February 2018, Ms. Rubin was promoted to senior vice president and general counsel and, accordingly, received a salary adjustment in connection with the promotion.

2019 Base Salaries

In February 2019, our board of directors, on the recommendation of the compensation committee, established the base salaries of our named executive officers for 2019, as set forth in the table below. Radford recommended salary increases for 2019 for each of our named executive officers in order to keep our company competitive with its peers in executive compensation. However, Mr. Bailey, Mr. Dallas and Dr. Needle volunteered to forego a 2019 salary increase in order to help preserve cash for our company given the extended timeline of the TIVO-3 trial OS analysis. Our compensation committee made its recommendation taking this into consideration as well as the achievements of the executive officers in 2018, and its analysis, with input from Radford, of executive officer pay for the 2019 peer group companies described above and the 2018 Radford Global Life Sciences Survey. For our named executive officers that received salary increases for 2019, these increases were made to keep pace with the 50th percentile of comparable companies in the 2019 peer group and the 2018 Radford Global Life Sciences Survey, as recommended by Radford. The 2019 base salaries for our named executive officers are as follows:

 

Name

 

2019 Annual

Base Salary ($)

 

 

Percentage

Increase in

Base Salary

From 2018

Base Salary (%)

 

Michael Bailey (1)

 

$

527,621

 

 

 

%

Matthew Dallas (1)

 

$

352,000

 

 

 

%

Michael Needle (1)

 

$

436,578

 

 

 

%

Nikhil Mehta

 

$

434,699

 

 

 

3.5

%

Karuna Rubin

 

$

345,251

 

 

 

15.0

%

 

(1)

Mr. Bailey, Mr. Dallas and Dr. Needle volunteered to forego any increases to their base salaries for 2019.

 

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Annual Cash Incentive Program. We have designed our annual cash incentive program to reward our named executive officers who continue to provide service to our company upon the achievement of specified annual corporate and, for our named executive officers other than our chief executive officer, individual goals which are approved in advance by our compensation committee and board of directors. Our annual cash incentive program emphasizes pay-for-performance and is intended to closely align executive compen sation with achievement of specified operating results as the cash incentive amount is calculated on the basis of the percentage of individual or corporate goals achieved, respectively. The compensation committee communicates the cash incentive award crite ria to such executive officers at the beginning of each fiscal year. The performance goals established by the compensation committee are based on the business strategy of our company and the objective of building stockholder value. There are three steps fo r determining whether, and the extent to which, an annual cash incentive award is payable to such executive officer. First, at the beginning of the fiscal year, the compensation committee determines the target annual cash incentive award for such executive officer based on a percentage of the officer’s annual base salary for that year. Second, at the beginning of the fiscal year, the compensation committee establishes the specific performance goals that must be met in order for the officer to receive the aw ard and the related weighting of each goal. Third, shortly after the end of the fiscal year, the compensation committee determines the extent to which these performance goals were met and the amount of the award. The board of directors consider s , and if th ey deem appropriate, approve s , the recommendation of the compensation committee with respect to each of these steps. Our compensation committee has the authority to make discretionary adjustments to our annual cash incentive program, including the ability to make additional awards based on our named executive officers’ performance and to modify the corporate and individual performance targets and the level of awards that our named executive officers receive in conjunction with their performance against the targets.

2018 Cash Incentive Program

In February 2018, the compensation committee established a target cash incentive payment for each of our named executive officers based on a percentage of their 2018 annual base salary. These target cash incentive payments were based on target cash incentives comparable to the 50th percentile of similar executives in the 2017 Radford Global Life Sciences Survey. For 2018, the target cash incentive payments and the cash incentive amounts paid for our named executive officers, taking into account the achievement of corporate goals and individual goals discussed below, were as follows:

 

Name

 

2018 Target

Annual

Cash

Incentive

Award($)

 

 

Cash

Incentive

Award Paid

for 2018

($) (1)

 

 

Cash

Incentive

Award as a

Percentage of

Target Cash

Incentive

Award (%)

 

Michael Bailey

 

$

290,192

 

 

$

174,115

 

 

 

60

%

Matthew Dallas

 

$

140,800

 

 

$

97,152

 

 

 

69

%

Michael Needle

 

$

174,631

 

 

$

106,525

 

 

 

61

%

Nikhil Mehta

 

$

168,000

 

 

$

114,240

 

 

 

68

%

Karuna Rubin

 

$

90,065

 

 

$

62,145

 

 

 

69

%

 

(1)

The annual cash incentive awards for the year ended December 31, 2018 were paid in February 2019.

 

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In addition, our board established corporate goals under the annual cash incentive program for the year ending December 31, 2018 .   On February 6, 2019 , the board determined to award the achievement of the corporate goals at 60 % of their aggregate target level.  The goals as achieved in 2018 are set forth below:

 

2018 Corporate Goals

 

Target Score (%)

 

 

Actual Score (%)

 

 

Financial

 

 

 

 

 

 

 

 

 

Raise funds through partnership and/or financing to secure funding into 2020

 

 

25

%

 

 

20

%

(1)

Tivozanib (TIVO-3 Success)

 

 

 

 

 

 

 

 

 

Submit NDA by the end of the year

 

 

 

 

 

 

 

 

 

Positive TiNivo study that enables initiation of new value-creating immunotherapy combination study (RCC or HCC)

 

 

55

%

 

 

20

%

(2)

Pipeline

 

 

 

 

 

 

 

 

 

Meet end-of-year enrollment goals for ficlatuzumab HNSCC study

 

 

5

%

 

 

5

%

(3)

Business Development / Alliance Management

 

 

 

 

 

 

 

 

 

Successful monetization of AV-353

 

 

 

 

 

 

 

 

 

Achieve AV-203 development milestone

 

 

10

%

 

 

10

%

(4)

Corporate

 

 

 

 

 

 

 

 

 

Secure new facilities (as appropriate)

 

 

5

%

 

 

5

%

(5)

Total

 

 

100

%

 

 

60

%

 

TIVO-3 Kicker

 

 

 

 

 

 

 

 

 

Positive TIVO-3 data (PFS statistically significant and positive OS trend)

 

1.5X

 

 

N/A

 

(6)

 

(1)

Financial Runway: In 2018, we secured funding that extended our cash runway from the first quarter of 2019 into the third quarter of 2019, which was one quarter shorter than required to fully achieve the corporate goal.  Our cash runway was extended through completion of a public offering of our common stock in August 2018, extension of the interest-only period under our term loan with Hercules Capital, sales of common stock under our at-the-market facility and securing of milestone payments and royalties under agreements with our partners, EUSA and CANbridge.

(2)

Tivozanib Development: The topline data readout for the TIVO-3 trial was pushed back from the first quarter of 2018 to November 2018 following the slower than forecasted occurrence of progression-free survival, or PFS, events, which rendered a new drug application, or NDA, filing with the FDA, during 2018 impracticable.  Furthermore, while in November 2018 we announced that the TIVO-3 trial had met its primary endpoint of PFS, data for the secondary endpoint of overall survival, or OS, was not mature as of the time of the final PFS analysis. In January 2019, the FDA recommended that we not submit an NDA for tivozanib at this time as the preliminary OS results from the TIVO-3 trial did not allay its OS concerns from our previously completed phase 3 trial for tivozanib in the first line treatment of RCC. Following discussion with the FDA, we have extended the timeline for the TIVO-3 trial OS analysis and plan to conduct another interim OS analysis in August 2019.  While we anticipate reporting the results of this analysis in the fourth quarter of 2019, and plan to provide an update regarding the potential submission of an NDA for tivozanib to the FDA, we did not achieve this portion of the corporate goal in 2018. Our board of directors determined that we fully achieved the portion of the corporate goal related to our immunotherapy combination studies. In February 2018, we presented positive preliminary results from the TiNivo trial at the 2018 ASCO Genitourinary Cancers Symposium, and in October 2018, we presented positive updated interim results from all 25 patients treated at full dose in the TiNivo trial at the ESMO 2018 Congress. In addition, in 2018, we reported promising early results in a phase 1b/2 monotherapy study of tivozanib in first-line HCC. In December 2018, we entered into a clinical collaboration with AstraZeneca to evaluate the safety and efficacy of AstraZeneca’s IMFINZI (durvalumab) in combination with tivozanib as a first-line treatment for patients with advanced, unresectable HCC in a phase 1/2 study in which AstraZeneca will contribute the clinical supply of IMFINZI and cover half of the costs of the study.

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(3)

Pipeline - Ficlatuzumab Development: We and our partner, Biodesix, Inc., are currently funding investigator-sponsored trials of ficlatuzumab in HNSCC, AML, and pancreatic cancer.  In 2018, patient enrollment and new site initiation in a randomized, phase 2, multicenter, investigator-initiated confirmatory trial of ficlatuzumab in HNSCC continued, b ut did not meet its 2018 patient enrollment target.  However, in 2018, the enrollment expectation in the phase 1/2 clinical trial of ficlatuzumab in pancreatic cancer was exceeded . Accordingly, our board of directors determined that that the development of ficlatuzumab was progressing at least as much as targeted and determined to award full achievement of this corporate goal.  

(4)

Business Development/Alliance Management: In August 2018, the China National Drug Administration approved CANbridge’s IND application for AV-203, triggering a $2 million milestone payment to us in satisfaction of the AV-203 portion of this corporate goal. We have continued to evaluate options for the development of our preclinical AV-353 platform, but have not monetized that program to date.  However, in 2018, we regained worldwide rights to the AV-380 program from Novartis International Pharmaceutical Ltd., or Novartis, and have worked with Novartis to transition the program in a manner that facilitates our initiation of preclinical toxicology studies in 2019.  In addition, in December 2018, we entered into an agreement with Novartis regarding the transition of the AV-380 program that provided for us to receive goods and payments from Novartis totaling approximately $6 million, comprised of a $2.3 million cash payment, as well as the transfer to us of the AV-380 drug supply, valued at approximately $4 million, at no charge. Our board of directors determined that the business development/alliance management corporate goal was fully achieved by these developments in, and payments under, the AV-203 and AV-380 programs.

(5)

Facilities: We have maintained a lean staffing structure that has contributed to our ability to be conservative and flexible in our use of capital for our office space.  For the past three years, we have leased our principal office facility, which consists of approximately 3,000 square feet of office space, under a month-to-month lease, in order to minimize exit costs should a shift in the size of our company warrant an increase or decrease in space.  In 2018, we relocated to a new space within our existing building, without any change in cost or other terms of the lease.  Our board of directors accordingly determined that this corporate goal was met.

(6)

TIVO-3 Data: As discussed in (2) above, although the TIVO-3 trial met its primary endpoint, demonstrating a statistically significant improvement in PFS, the trial did not show a positive OS trend at the time of the topline data readout in November 2018.  While this OS analysis was preliminary, and OS data collection will continue in 2019 , our board of directors determined that the conditions for the TIVO-3 kicker were not met in 2018.

For 2018, the individual goals for each of our named executive officers (other than our chief executive officer) accounted for 20% of his or her performance incentive. The annual cash incentive payment for our chief executive officer is based solely on the achievement of our overall corporate goals described above. The individual goals for our other named executive officers are primarily related to the corporate goals for which they are most responsible and, to a lesser extent, individual development goals or department specific goals, subject to discretionary adjustments that our compensation committee deems appropriate. Our chief executive officer makes recommendations to the compensation committee as to the degree to which those named executive officers have satisfied their individual goals.

For 2018, Mr. Dallas’s goals related to leading the financial, IT and facilities groups; assuring corporate financial compliance and reporting; managing our financial resources; achieving financing goals; and optimizing investor relations.

For 2018, Dr. Needle’s goals related to leading the clinical group; acting as our clinical representative in interactions with investigators, key opinion leaders, cooperative groups and partners to advance tivozanib development; completion of our TIVO-3 phase 3 study and TiNivo phase 1/2 PD-1 combination study; and advancing development of ficlatuzumab.

For 2018, Dr. Mehta’s goals related to leading the regulatory, quality and CMC groups; leading the submission of an NDA application to the FDA for tivozanib in the event of positive TIVO-3 data; and ensuring a tivozanib commercial supply.

For 2018, Ms. Rubin’s goals related to leading the legal group; assuring compliance with securities and governance matters; managing intellectual property, contracts and other corporate legal matters; and overseeing risk management compliance.

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2019 Cash Incentive Program

In February 2019, the compensation committee established a target cash incentive payment for each of our named executive officers based on a percentage of their 2019 annual base salary as set forth below. These target cash incentive payments were based on target cash incentives comparable to similar executives in the 2018 Radford Global Life Sciences Survey.  To arrive at the competitive market data, Radford blended this broad life sciences survey data with peer survey data from the 2019 peer group set at levels that approximated the 50th percentile of target executive cash incentive compensation at those companies.

 

Name

 

2019 Annual

Base Salary

($)

 

 

Target

Percentage

of 2019

Annual

Base Salary

(%)

 

 

2019 Target

Annual

Cash

Incentive

Award

($)

 

Michael Bailey

 

$

527,621

 

 

 

55

%

 

$

290,192

 

Matthew Dallas

 

$

352,000

 

 

 

40

%

 

$

140,800

 

Michael Needle

 

$

436,578

 

 

 

40

%

 

$

174,631

 

Nikhil Mehta

 

$

434,699

 

 

 

40

%

 

$

173,880

 

Karuna Rubin

 

$

345,251

 

 

 

40

%

 

$

138,100

 

 

In February 2019, our board of directors, upon the recommendation of our compensation committee, established the following corporate goals under the annual cash incentive program for the year ending December 31, 2019, as set forth below:

 

2019 Corporate Goals

 

Percentage of Annual

Cash Incentive

Award

Attributable to

Corporate Goals

 

Financial

 

 

 

 

Secure funds that enable a cash runway into 2021

 

 

25

%

Tivozanib

 

 

 

 

Execute TIVO-3 to enable an FDA submission in 4Q2019

 

 

 

 

Successfully complete Phase 1 (IO) combo study in HCC that enables Phase 2

 

 

 

 

Expand clinical collaborations for IO combinations

 

 

50

%

Pipeline

 

 

 

 

Initiate animal tox study for AV-380 to enable IND or partner program

 

 

 

 

Complete BD transaction to advance or monetize pipeline asset(s) inclusive of tivozanib ocular formulation, ficlatuzumab and AV-203

 

 

20

%

Corporate

 

 

 

 

Maintain and motivate organizational infrastructure to achieve goals

 

 

5

%

Total

 

 

100

%

 

 

The corporate goals will account for 80% of the annual cash incentive opportunity for our executive officers (other than our chief executive officer). The annual cash incentive payment for our chief executive officer will be based solely on the achievement of our overall corporate goals described above. In addition to the overall corporate goals described above, the performance of each executive officer will be measured against the achievement of certain individual goals. For 2019, the individual goals for each of our named executive officers (other than our chief executive officer) will account for 20% of such executive officer’s annual cash incentive opportunity.

30


 

For 201 9 , Mr. Dallas’s goals relate to leading the financial, IT and facilities groups; assuring corporate financial compliance and reporting; managing our financial resources; achieving financing goals ; and optimizing investor relations.

For 2019, Dr. Needle’s goals relate to leading the clinical group; acting as our clinical representative in interactions with investigators, key opinion leaders, cooperative groups and partners to advance the development of our product candidates; executing the TIVO-3 data analyses in preparation for a potential NDA submission to the FDA; and leading the phase 1 portion of the combination study of tivozanib and AstraZeneca’s IMFINZI (durvalumab) in HCC.

For 2019, Dr. Mehta’s goals relate to leading the regulatory, quality and CMC groups; leading the preparation of an NDA submission for tivozanib; supporting regulatory activities in connection with our tivozanib combination studies; leading preclinical toxicology studies to enable the filing of an IND with the FDA for AV-380; and ensuring sufficient drug supply of our product candidates.

For 2019, Ms. Rubin’s goals relate to leading the legal group; assuring compliance with securities and governance matters; managing intellectual property, contracts and other corporate legal matters; and overseeing risk management compliance.

Equity Compensation .  We use stock options, including performance-based options, as well as other equity-based compensation to attract, retain, motivate and reward our named executive officers. Through our equity-based grants, we seek to align the interests of our named executive officers with our stockholders, reward and motivate both short-term and long-term executive performance and provide an incentive for retention. Our decisions regarding the amount and type of equity incentive compensation and the allocation of equity and relative weighting of these awards within total executive compensation have been based on market practices of similarly-situated companies.

We grant equity incentive awards to our employees, including our named executive officers, in connection with the commencement of their employment and, generally, on an annual basis, as part of our overall compensation program. Historically, all grants of equity awards to our named executive officers have been made by our board of directors at regularly scheduled meetings during the year upon the recommendation of our compensation committee. The exercise or purchase price of each award is equal to the fair market value of the award on the date of grant, which is the date of the board meeting approving such grant or such other date as the board may specify at its discretion. The following factors are considered in determining the amount of equity incentive awards, if any, to be granted to our named executive officers:

the number of shares subject to, and exercise prices (when applicable) of, outstanding awards, both exercisable, or vested, and unexercisable, or unvested, held by our executives;

the vesting schedule of the unvested awards held by our executives; and

the amount and percentage of total equity on a diluted basis held by our executives.

Vesting of options and restricted stock granted to our named executive officers fully accelerates if such officer is terminated without “cause” within 18 months following a change in control of us – see “Severance and Change in Control Benefits” below. Vesting and exercise rights, if applicable, cease shortly after termination of employment except in the case of death or disability. Prior to the exercise of an option, the holder has no rights as a stockholder with respect to the shares subject to such option, including voting rights or the right to receive dividends or dividend equivalent payments.

Our insider trading policy, which applies to all of our employees and directors, prohibits (i) pledging of our securities, including purchasing our securities on margin, margin accounts and pledges as collateral for a loan and (ii) hedging of our securities, including shorts sales of our securities and purchases or sales of puts, calls and other derivative securities. We do not have any equity ownership guidelines for our executive officers.

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2018 Equity Compensation Awards

Time-Based Option Grants

In February 2018, as part of the annual individual performance evaluations of our named executive officers, our board of directors, upon the recommendation of our compensation committee, granted to our named executive officers options to purchase shares of our common stock as set forth in the table below. The stock option awards to such named executive officers were granted with a term of 10 years and an exercise price of $3.08 per share, which was the closing price of our common stock on the date of grant. The options vest in equal monthly installments over four years, subject to the officer’s continued employment with our company. Our compensation committee made its recommendation based on its analysis, with input from our consultant, Radford, of the executive officer equity compensation practices in the 2017 Radford Global Life Sciences Survey and recommended awards that approximated the 50th percentile of executive equity incentive compensation at those companies.

 

Name

 

Total Number

of Shares of

Common Stock

Underlying

Time-Based

Options Granted

in 2018

 

Michael Bailey

 

 

1,000,000

 

Matthew Dallas (1)

 

 

250,000

 

Michael Needle

 

 

225,000

 

Nikhil Mehta (1)

 

 

75,000

 

Karuna Rubin

 

 

280,000

 

 

(1)

For Mr. Dallas and Dr. Mehta, each of whom joined our company during 2017, a portion of the total number of options granted in February 2018 was granted in the form of time-based options, as described above, and a portion was granted in the form of performance-based options, as described below.

2018 Performance-Based Option Grants

In February 2018, in order to incentivize Mr. Dallas and Dr. Mehta to achieve a milestone for filing an NDA with the FDA for tivozanib, our board of directors, upon the recommendation of our compensation committee, granted to Mr. Dallas and Dr. Mehta performance-based options, or the 2018 performance-based options, to purchase shares of our common stock tied to the achievement of the regulatory milestone set forth below. The 2018 performance-based options granted to Mr. Dallas and Dr. Mehta were granted with a term of 10 years and an exercise price of $3.08 per share, which was the closing price of our common stock on the date of grant.

The 2018 performance-based options were to commence vesting upon our achievement of the following milestone:

Regulatory Milestone – if, at the determination of the compensation committee in its sole discretion, we have filed an NDA with the FDA for tivozanib (i) no more than sixth months after topline data of the TIVO-3 phase 3 clinical trial has become available and (ii) no later than February 7, 2019, one-half of the total number of shares underlying the performance option shall vest on February 8, 2019 and the second half will vest on February 8, 2020.

In November 2018, our board of directors, upon the recommendation of our compensation committee, approved amendments to the above definition of “Regulatory Milestone” to (a) amend the deadline to file an NDA for tivozanib to account for the delay in receiving topline data from the TIVO-3 trial due to the slower than expected rate of progression free survival events, (b) shorten the time period in which to file the NDA from six months to five months from the receipt of topline data and (c) add an additional requirement that the NDA be accepted for filing by the FDA within three months following its submission by our company. The amendments were approved in order to continue to incentivize Mr. Dallas and Dr. Mehta so our company could file a well-prepared NDA in a timely matter in light of the timing of receiving the TIVO-3 trial’s topline data on November 5, 2018.  As amended, the definition of “Regulatory Milestone” is as follows :    

32


 

Regulatory Milestone – i f, at the determination of the c ompensation c ommittee in its sole discretion, (i) we have filed a n NDA with the FDA for tivozanib no more than five months after November 5, 2018, which is the date the topline data of the TIVO phase 3 clinical trial became available and (ii) the FDA accepts the NDA for filing no later than three months after we have filed i t , and in no event later than July 30, 2019, one-half of the total number of shares underlying the performance option shall vest on the date the FDA accepts the NDA for filing and the second half will vest on February 8, 2020.

However, as we did not file an NDA for tivozanib with the FDA by April 5, 2019, this regulatory milestone was not met and the 2018 performance-based options irrevocably expired as of such date.

 

Name

 

Total Number

of Shares of

Common Stock

Underlying 2018

Performance

-Based Options

(1)(2)

 

Matthew Dallas

 

 

100,000

 

Nikhil Mehta

 

 

175,000

 

 

(1)

For Mr. Dallas and Dr. Mehta, who each joined our company during 2017, a portion of the total number of options granted in February 2018 was granted in the form of time-based options and a portion was granted in the form of performance-based options, each as described above.

(2)

These options irrevocably expired as of April 5, 2019 as the relevant milestone was not met as described above.

Amendment of the 2017 Performance-Based Option Grants

In February 2017, our board of directors, upon the recommendation of our compensation committee, granted performance-based options, or the 2017 performance-based options, to all of our executive and non-executive employees, including Mr. Bailey, Dr. Needle and Ms. Rubin, to incentivize them to achieve three performance milestones relating to our clinical trials for tivozanib. Upon our compensation committee’s determination that two of the three milestones were met in 2017, one-third of the total number of shares underlying each of the 2017 performance-based options vested on February 8, 2018 and one-third vested on February 8, 2019, subject to the option grantee’s continued service to our company as of the applicable vesting date . The conditions for the remaining performance milestone were the same as the initial “Regulatory Milestone” applicable to the 2018 performance-based options as described above.

In November 2018, our board of directors, upon the recommendation of our compensation committee, approved the same amendments to the definition of “Regulatory Milestone” for the 2017 performance-based options as the 2018 performance-based options such that accordingly, if (i) we file an NDA with the FDA for tivozanib no more than five months after November 5, 2018 and (ii) the FDA accepts the NDA for filing no later than three months after we have filed it, and in no event later than July 30, 2019, the remaining one-third of the total number of shares underlying the 2017 performance-based options would vest on the date the FDA accepts the NDA for tivozanib. However, as we did not file an NDA for tivozanib with the FDA by April 5, 2019, this regulatory milestone was not met and the remaining one-third of the 2017 performance-based options irrevocably expired as of such date.

33


 

2019 Equity Compensation Awards

Time-Based Option Grants

In February 2019, as part of the annual individual performance evaluations of our named executive officers, our board of directors, upon the recommendation of our compensation committee, granted to our named executive officers options to purchase shares of our common stock as set forth in the table below, contingent on the approval of the 2019 Equity Incentive Plan by our stockholders. As we did not have enough shares under the Second Amended and Restated 2010 Incentive Stock Plan to make these stock option grants, which we refer to as the Contingent Option Awards, and we believe it is appropriate to continue to provide equity as part of an executive’s compensation and to grant such awards to executives on the same cycle as in past years, we granted these awards contingent on the approval of the 2019 Equity Incentive Plan. The Contingent Option Awards to such named executive officers were granted with a term of 10 years and an exercise price of $0.62 per share, which was the closing price of our common stock on the date of grant. The Contingent Option Awards vest in equal monthly installments over four years, subject to the officer’s continued employment with our company; provided, that the Contingent Option Awards will automatically terminate and be forfeited if our stockholders do not approve the 2019 Equity Incentive Plan within 12 months of the grant date of the options, and further provided that the options will not be exercisable, and no common stock will be issuable thereunder, before the approval of the 2019 Equity Incentive Plan by our stockholders. Our compensation committee made its recommendation based on its analysis, with input from our consultant, Radford, of the executive officer equity compensation practices of the 2019 peer group companies and the 2018 Radford Global Life Sciences Survey and recommended awards that approximated the 50th percentile of executive equity incentive compensation at those companies.

 

Name

 

Total   Number

of Shares of

Common Stock

Underlying

Time-Based

Contingent Option

Awards Granted

in 2019 (1)

 

Michael Bailey

 

 

1,200,000

 

Matthew Dallas

 

 

450,750

 

Michael Needle

 

 

200,000

 

Nikhil Mehta

 

 

450,000

 

Karuna Rubin

 

 

450,650

 

 

(1)

The Contingent Option Awards will automatically terminate and be forfeited if our stockholders do not approve the 2019 Equity Incentive Plan within 12 months after the grant date. Each Contingent Option Award will not be exercisable and no common stock will be issued thereunder before the approval of the 2019 Equity Incentive Plan by our stockholders.

 

Other Benefits

We believe that establishing competitive benefit packages for our employees is an important factor in attracting and retaining highly qualified personnel. Named executive officers are eligible to participate in all of our employee benefit plans, such as medical, dental, group life and accidental death and dismemberment insurance and our 401(k) plan, in each case on the same basis as other employees. Under our 401(k) plan, we match 50% on every dollar contributed by an employee up to a maximum of 5% of the employee’s salary. The match vests at 25% per year over four years. In addition, we have provided housing and commuting allowances to certain of our named executive officers in connection with relocation. Consistent with our compensation philosophy, we intend to maintain our current benefits for our named executive officers. Our compensation committee may, in its discretion, revise, amend or add to the benefits and perquisites made available to our named executive officers if it deems it advisable to do so.

34


 

Severance and Change in Control Benefits

Our named executive officers who continue to provide service to our company are entitled to receive severance benefits in connection with a termination of their employment not in connection with a change in control. Additionally, pursuant to our Key Employee Change in Control Severance Benefit Plan, certain of our key employees, including our named executive officers who continue to provide service to our company, are entitled to severance payments if we terminate their employment without cause or if they leave their employment with us for good reason (as such terms are defined in the Key Employee Change in Control Severance Benefit Plan) within 18 months of a change in control of us. Further, if we terminate a named executive officer’s employment without cause or such named executive officer leaves his or her employment with us for good reason within 18 months of a change in control of us, all options held by such named executive officer will become immediately exercisable in full and all restricted stock held by such named executive officer will vest in full. Please refer to “Employment Agreements and Severance Arrangements” for a more detailed discussion of these benefits. We have also provided more information about these benefits, along with estimates of their value under various circumstances, under “—Potential Payments and Benefits Upon Termination and a Change in Control” below.

We believe providing these benefits helps us compete for executive talent. After reviewing the practices of comparable companies, we believe that our severance and change in control benefits are generally in line with severance packages offered to executives by such companies.

Our practice in the case of change in control benefits has been to structure these as “double trigger” benefits. This means that the change in control does not itself trigger benefits; rather, benefits are paid only if the employment of the executive is terminated during a specified period after the change in control. We believe a “double trigger” benefit maximizes stockholder value because it prevents an unintended windfall to executives in the event of a friendly change in control, while still providing executives with appropriate incentives to cooperate in negotiating any change in control in which they believe they may lose their jobs but which may be beneficial to stockholders.

Tax and Accounting Considerations

Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, generally disallows a tax deduction for compensation in excess of $1.0 million paid in any taxable year to a company’s chief executive officer, chief financial officer, and other officers whose compensation is required to be reported to the company’s stockholders pursuant to the Exchange Act by reason of being among its three highest compensated officers. For taxable years beginning on or before December 31, 2017, certain compensation, including compensation paid to our chief financial officer and qualified performance-based compensation, was not subject to the deduction limitations. Pursuant to the Tax Cuts and Jobs Act, signed into law on December 22, 2017, or Tax Act, subject to certain transition rules, for taxable years beginning after December 31, 2017, the deduction limitations under Section 162(m) are expanded to apply to compensation in excess of $1 million paid in any taxable year to our chief financial officer, and the performance-based compensation exception to the deduction limitations under Section 162(m) is no longer available. As a result, for taxable years beginning after December 31, 2017, all compensation in excess of $1 million paid to the specified executives will not be deductible, unless grandfathered under transition guidance. The compensation committee has and will continue to review on a periodic basis the effect of Section 162(m) and may use its judgment to authorize compensation payments that may be in excess of the limit when it believes such payments are appropriate, after taking into consideration changing business conditions and the performance of our employees.

We account for equity compensation paid to our employees in accordance with Accounting Standards Codification, or ASC, 718, which requires us to measure and recognize compensation expense in our financial statements for all share-based payments based upon an estimate of their fair value over the service period of the award. We record cash compensation as an expense at the time the obligation is incurred.

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Summary Compensation Table for the Years Ended December 31, 2018 , 2017 and 2016

The following table sets forth information for the years ended December 31, 2018, 2017 and 2016 regarding compensation awarded to, earned by or paid to our named executive officers.

 

Name and Principal Position

 

Year

 

Salary ($)

 

 

Option

Awards ($) (1)

 

 

 

Non-Equity

Incentive Plan

Compensation ($) (2)

 

 

All Other

Compensation ($) (3)

 

 

Total ($)

 

Michael Bailey,

 

2018

 

$

527,621

 

 

$

2,340,394

 

(4)

 

$

174,115

 

 

$

68,432

 

 

$

3,110,562

 

Chief Executive Officer

 

2017

 

$

479,655

 

 

$

451,076

 

 

 

$

369,334

 

 

$

68,593

 

 

$

1,368,658

 

 

 

2016

 

$

444,125

 

 

$

329,774

 

 

 

$

188,753

 

 

$

68,433

 

 

$

1,031,085

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Matthew Dallas,

 

2018

 

$

352,000

 

 

$

879,330

 

(4)

 

$

97,152

 

 

$

7,278

 

 

$

1,335,760

 

Chief Financial Officer (5)

 

2017

 

$

155,017

 

 

$

773,750

 

 

 

$

103,564

 

 

$

413

 

 

$

1,032,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael Needle,

 

2018

 

$

436,578

 

 

$

549,455

 

(4)

 

$

106,525

 

 

$

10,112

 

 

$

1,102,670

 

Chief Medical Officer

 

2017

 

$

421,814

 

 

$

123,827

 

 

 

$

222,718

 

 

$

45,112

 

 

$

813,471

 

 

 

2016

 

$

407,550

 

 

$

131,910

 

 

 

$

141,827

 

 

$

70,112

 

 

$

751,399

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nikhil Mehta

 

2018

 

$

419,999

 

 

$

747,200

 

(4)

 

$

114,240

 

 

$

12,044

 

 

$

1,293,483

 

Sr. Vice President,

 

2017

 

$

36,873

 

 

$

1,088,500

 

 

 

$

25,518

 

 

$

803

 

 

$

1,151,694

 

Regulatory and Quality Assurance (6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Karuna Rubin

 

2018

 

$

300,217

 

 

$

639,131

 

(4)

 

$

62,145

 

 

$

650

 

 

$

1,002,143

 

Senior Vice President and General Counsel (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

The amounts reported in the “Option awards” column represents the grant date fair value of the stock options granted during 2018, 2017 and 2016 and, as applicable, incremental fair value associated with the amendment of the 2017 performance-based options and 2018 performance-based options as further detailed in footnote (4) below, as computed in accordance with FASB ASC Topic 718, using a Black-Scholes valuation model. A key assumption in the Black-Scholes valuation model is the exercise price, which represents the closing stock price of our common stock on the date of grant. The closing stock prices of our common stock on February 1, 2018 and November 8, 2018, the respective dates of grant for option awards made in 2018, were $3.08 and $2.00 per share, respectively. See note 8 of “Notes to Consolidated Financial Statements” in our Annual Report on Form 10-K filed with the SEC on March 14, 2019 for a discussion of assumptions made by our company in determining the grant date fair value of our option awards. Note that the amounts reported in this column reflect the accounting cost for these stock options and do not correspond to the actual economic value that may be received by the named executive officers from the stock options.

( 2 )

Our compensation committee determined to pay Mr. Bailey, Mr. Dallas, Dr. Needle, Dr. Mehta and Ms. Rubin annual cash incentive awards equal to 60%, 69%, 61%, 68% and 69%, respectively, of such executive officer’s target award for performance in 2018. Our compensation committee determined to pay Mr. Bailey, Mr. Dallas, Dr. Needle and Dr. Mehta annual cash incentive awards equal to 140%, 138%, 132% and 132%, respectively, of such executive officer’s target award for performance in 2017. Our compensation committee determined to pay Mr. Bailey and Dr. Needle annual cash incentive awards equal to 85% and 87%, respectively, of such executive officer’s target award for performance in 2016.

( 3 )

Amounts in this column represent the sum of (i) any matching contributions made by us under our tax-qualified 401(k) Retirement Plan, (ii) any life insurance premiums paid on behalf of the executive officer, and (iii) housing and commuting allowances for Mr. Bailey, in the amount of $60,000 in each of 2016, 2017 and 2018 and for Dr. Needle, in the amounts of $60,000 in 2016 and $35,000 in 2017.

( 4 )

Amounts include $156,594, $115,000, $58,100, $201,250 and $27,667 for each of Mr. Bailey, Mr. Dallas, Dr. Needle, Dr. Mehta and Ms. Rubin, respectively, in incremental fair value associated with the amendment of the 2017 performance-based options and the 2018 performance-based options, each as described in “—Amendment of the 2017 Performance-Based Option Grants” and “—2018 Performance-Based Option Grants” above.

( 5 )

Mr. Dallas was appointed chief financial officer, effective June 1, 2017, and received a pro-rated amount of his annual salary and his annual cash incentive award for his service during 2017.

( 6 )

Dr. Mehta was appointed senior vice president of regulatory and quality assurance, effective November 20, 2017, and received a pro-rated amount of his annual salary and his annual cash incentive award for his service during 2017.

(7)

In February 2018, Ms. Rubin was promoted to senior vice president and general counsel.

36


 

Grants of Plan-Based Awards for t he Year Ended December 31, 2018

The following table sets forth information for the year ended December 31, 2018 regarding grants of plan-based awards made during 2018 to our named executive officers.

 

 

 

 

 

Estimated

Future   Payouts

Under Non-

Equity Incentive

Plan Awards

 

 

Estimated

Future Payouts

Under Equity

Incentive Awards

 

All   Other

Option Awards:

Number of

Securities