the founder and CEO of North Shore Health System, a large physician-hospital organization in Massachusetts. He serves on the boards of directors of Insulet Corporation (NASDAQ: PODD) (2012 to present), a medical devices company, and AMAG Pharmaceuticals, Inc. (NASDAQ: AMAG) (2014 to present), a specialty pharmaceutical company. Dr. Fallon was formerly the Chairman of the board of directors of NEHI (Network for Excellence in Health Innovation). In the past, he also served as a member the board of directors of Exact Sciences Corporation (NASDAQ: EXAS) (2016 to 2019), a molecular diagnostics company, as well as several not-for-profit boards, including: Alliance for Healthcare Improvement, Massachusetts Health Quality Partners, Massachusetts E-Health Collaborative and Neighborhood Health Plan. He also co-chaired, with the Massachusetts Secretary of Health and Human Services, the Massachusetts Patient Centered Medical Home Initiative. Dr. Fallon practiced internal medicine for more than 20 years, fulfilled his residency at Boston City Hospital, and is Board Certified in Internal Medicine. He received a B.A. from the College of the Holy Cross, an MBA from the University of South Florida and a Doctor of Medicine from Tufts University School of Medicine.
We believe that Dr. Fallon’s perspective and experience as an executive and board member in the life sciences industry, as well as his strong medical and scientific background, provide him with the qualifications and skills to serve as a director.
John Freund, M.D., Director. Dr. Freund has served as a member of our Board since February 2014. Dr. Freund founded Skyline Ventures (“Skyline”), a venture capital firm, in 1997 and has served as Managing Director at Skyline since its founding. Prior to joining Skyline, Dr. Freund served as Managing Director in the private equity group of Chancellor Capital Management, LLC. In 1995, Dr. Freund co-founded Intuitive Surgical, Inc. and served on its board of directors until 2000. From 1988 to 1994, Dr. Freund served in various positions at Acuson Corporation (“Acuson”), most recently as Executive Vice President. Prior to joining Acuson, Dr. Freund was a General Partner of Morgan Stanley Venture Partners from 1987 to 1988. From 1982 to 1988, Dr. Freund worked at Morgan Stanley & Co., where he co-founded the Healthcare Group in the Corporate Finance Department in 1983.
Dr. Freund currently serves on the board of directors of Tetraphase Pharmaceuticals, Inc. (NASDAQ: TTPH) (2012 to present), Sutro Biopharma, Inc. (NASDAQ: STRO) (2014 to present), and SI-Bone, Inc. (NASDAQ: SIBN) (2013 to present). Dr. Freund also serves on the board of directors of six U.S. registered investment funds managed by The Capital Group Companies. He previously served on the board of directors of several publicly traded companies, including, Proteon Therapeutics, Inc. (NASDAQ: PRTO) (2014 to 2020), XenoPort, Inc. (NASDAQ: XNPT) (1999 to 2016), where he was Chairman, Concert Pharmaceuticals, Inc. (NASDAQ: CNCE) (2014 to 2015), MAP Pharmaceuticals, Inc. (NASDAQ: MAPP) (2004 to 2011), and MAKO Surgical Corp. (NASDAQ: MAKO) (2008 to 2013). Dr. Freund is a member of the Advisory Board for the Harvard Business School Healthcare Initiative.
Dr. Freund graduated from Harvard College with a B.A. in History in 1975, received an M.D. from Harvard Medical School in 1980 and an M.B.A. from Harvard Business School in 1982.
We believe that Dr. Freund’s extensive finance and investment experience, his experience as an executive, and his service on the board of directors of numerous public and privately held companies in our industry provide him with the qualifications and skills to serve as a director.
David Hirsch, M.D., Ph.D., Director. Dr. Hirsch has served as a member of our Board since February 2012. Since 2007, Dr. Hirsch has served as a Founder and Managing Director at Longitude Capital Management Co., LLC (“Longitude”), a private investment firm, where he focuses on investments in biotechnology. From 2005 to 2006, Dr. Hirsch was Vice President of Pequot Capital Management (“Pequot”), where he worked in the life sciences practice. Prior to Pequot, Dr. Hirsch was an Engagement Manager in the pharmaceutical practice of McKinsey & Co. While at McKinsey & Co., he worked with many large pharmaceutical companies across a range of projects including clinical and commercial strategies, M&A evaluations, portfolio prioritization and managed care strategy.
Dr. Hirsch currently serves on the board of directors of Molecular Templates, Inc. (NASDAQ: MTEM) (2017 to present) and Tricida, Inc. (NASDAQ: TCDA) (2016 to present), as well as several private company boards, including Rapid Micro Biosystems, Inc., Poseida Therapeutics, Inflazome, and Velicept Therapeutics, Inc. He previously served on the board of directors of Civitas Therapeutics, Inc., Precision Therapeutics, Inc. and Zavante Therapeutics, Inc.
EXECUTIVE OFFICERS
The following are biographical summaries of our executive officers and their ages, except for Mr. Ciaffoni, whose biography is included under the heading “Proposal 1: Election of Directors” set forth above:
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Name
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Age
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Position(s)
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Joseph Ciaffoni
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49
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Director, President and Chief Executive Officer
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Paul Brannelly
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47
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Executive Vice President and Chief Financial Officer
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Scott Dreyer
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48
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Executive Vice President and Chief Commercial Officer
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Alison Fleming
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45
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Executive Vice President and Chief Technology Officer
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Shirley Kuhlmann
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36
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Executive Vice President and General Counsel
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Richard Malamut, M.D.
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60
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Executive Vice President and Chief Medical Officer
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Paul Brannelly, Executive Vice President and Chief Financial Officer. Mr. Brannelly has served as our Executive Vice President and Chief Financial Officer since February 2015. Prior to joining us, Mr. Brannelly served as Senior Vice President, Finance and Administration, and Treasurer of Karyopharm Therapeutics Inc., a biopharmaceutical company, from June 2013 to August 2014. From August 2014 to November 2014, Mr. Brannelly served as a consultant to Karyopharm. Prior to joining Karyopharm, Mr. Brannelly served as Vice President, Finance, Treasurer and Secretary at Verastem, Inc. from August 2010 to May 2013. From January 2010 to September 2011, Mr. Brannelly held the position of Chief Financial Officer at the Longwood Fund, a venture capital firm aimed at investing in, managing and building healthcare companies, where he set up the financial and operational infrastructure following the closing of its first fund and eventually served as Chief Financial Officer of its first two startup companies, Verastem and OvaScience, Inc. From November 2005 to September 2009, he served as Vice President, Finance at Sirtris Pharmaceuticals, Inc., a biopharmaceutical company which GlaxoSmithKline plc purchased for $720 million in 2008, where he managed the Form S-1 preparation and due diligence process for Sirtris’ initial public offering and managed the company’s transition to being a public company. Mr. Brannelly started his biopharmaceutical career at Dyax Corporation from September 1999 to May 2002, and subsequently moved on to positions of increasing responsibility at CombinatoRx Inc. from May 2002 to November 2005, including as Vice President, Finance and Treasurer, where he led the initial public offering process. Mr. Brannelly graduated from the University of Massachusetts at Amherst with a B.B.A. in Accounting in 1995.
Scott Dreyer, Executive Vice President and Chief Commercial Officer. Mr. Dreyer has served as our Executive Vice President and Chief Commercial Officer since July 2018, and joined us in January 2018 as Senior Vice President, Sales, Marketing and Training. Prior to his service with us, Mr. Dreyer served as the Senior Vice President, Sales, Marketing and Commercial Operations at The Medicines Company, a biopharmaceutical company, from September 2016 to December 2017; Vice President and Chief Marketing Officer – US at Biogen, a biotechnology company, from June 2014 to September 2016; and Vice President, Business Development at Publicis Touchpoint Solutions, a healthcare commercialization company, from September 2013 to June 2014. Mr. Dreyer began his career in the pharmaceutical industry at Merck & Co., where he held roles of increasing responsibility from 1994 to 2013, including Vice President of Hospital and Oncology Sales from 2011 to 2012, and Vice President of Primary Care Sales from 2012 until 2013. Mr. Dreyer holds a B.S. in Biology from Messiah College in 1994.
Alison Fleming, Ph.D., Executive Vice President and Chief Technology Officer. Dr. Fleming has served as our Executive Vice President and Chief Technology Officer since January 2017. Prior to being our Chief Technology Officer, Dr. Fleming led our development team as our Vice President, Product Development since October 2002. Prior to joining us, Dr. Fleming’s academic research focused on implantable drug delivery systems for cancer therapy. Dr. Fleming is an inventor on several U.S. patents and pending patent applications and has authored numerous scientific publications and poster presentations in the field of novel drug delivery systems. In 2001, Dr. Fleming was the recipient of the Jorge Heller Journal of Controlled Release Outstanding Paper Award. Dr. Fleming graduated from the University of Massachusetts, Amherst in 1997 with a B.S. in Chemical Engineering and received a Ph.D. in Chemical and Biomolecular Engineering from Cornell University in 2002.
Shirley Kuhlmann, Executive Vice President and General Counsel. Ms. Kuhlmann has served as our Executive Vice President and General Counsel since March 2018. Prior to joining us, Ms. Kuhlmann was a corporate and securities attorney at Pepper Hamilton LLP from September 2007 until March 2018. At Pepper Hamilton, where she was made a partner effective January 2017, Ms. Kuhlmann advised private and public companies on a range of commercial
and transactional matters, including financings, corporate governance and disclosure matters, and mergers and acquisitions and other business combination transactions. Ms. Kuhlmann holds a B.A. in Economics/Political Science from Columbia University in 2004 and a J.D. from Emory University School of Law in 2007.
Richard Malamut, M.D., Executive Vice President and Chief Medical Officer. Dr. Malamut has served as our Executive Vice President and Chief Medical Officer since April 2019. Prior to joining us, Dr. Malamut was Chief Medical Officer, Head of Research and Development and Senior Vice President for Braeburn Pharmaceuticals from June 2018 until March 2019. Prior to joining Braeburn, he was Chief Medical Officer at Avanir Pharmaceuticals from November 2016 until June 2018 and, from April 2013 until November 2016, he was Senior Vice President of Global Clinical Development at Teva Pharmaceuticals Industries Ltd where he was responsible for Pain, Neuropsychiatry, Oncology and New Therapeutic Entities. He also previously held roles of increasing responsibility focusing on early clinical development and translational medicine in neurology and analgesia at Bristol-Myers Squibb and AstraZeneca. Dr, Malamut earned his medical degree from Hahnemann University and completed both a residency in neurology and a fellowship in neuromuscular disease. He worked as a board-certified academic and clinical neurologist for 17 years and has more than 50 publications in the fields of pain medicine, neuromuscular disease, autonomic disease and neurodegenerative disease.
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) describes our compensation strategy, philosophy, policies and practices underlying our executive compensation programs for 2019. It also provides information regarding the manner and context in which compensation was earned by and awarded to our 2019 named executive officers listed below, whom we refer to collectively as “named executive officers” or “NEOs.”
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Joseph Ciaffoni, our President and Chief Executive Officer;
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Paul Brannelly, our Executive Vice President and Chief Financial Officer;
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Alison Fleming, Ph.D., our Executive Vice President and Chief Technology Officer;
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Shirley Kuhlmann, our Executive Vice President and General Counsel; and
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Richard Malamut, M.D., our Executive Vice President and Chief Medical Officer
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Executive Summary
2019 Performance Highlights
In 2019, we made significant strides towards becoming the leader in responsible pain management, delivered record revenue and achieved non-GAAP profitability for three consecutive quarters. Business highlights in 2019 included:
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Total Xtampza ER prescriptions grew to 466,378 in 2019, representing a 49% increase over 2018.
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Total net product revenues grew to $296.7 million in 2019, which included Xtampza ER net revenues of $105.0 million and Nucynta franchise net revenues of $191.7 million, compared to $280.4 million for the year ended December 31, 2018.
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20 new exclusive ER oxycodone formulary wins, covering more than 35 million lives for Xtampza ER, took effect January 1, 2020. With these wins, Collegium is the exclusive ER oxycodone for approximately 40% of Commercial and Part D covered lives.
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Operating expenses decreased for 2019 to $126.8 million, compared to $135.4 million in 2018.
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Net loss for 2019 improved to $22.7 million, or $0.68 per share (basic and diluted), compared to a net loss of $39.1 million, or $1.19 per share (basic and diluted) for 2018.
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Achieved non-GAAP adjusted income of $8.6 million in 2019, compared to a non-GAAP adjusted loss of $28.2 million for 2018.
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In 2019, we continued to work to align our executive compensation programs with shareholder interests as compensation earned under these programs was substantially linked to the achievement of our corporate performance goals. Although we made significant strides as an organization, we fell short on some of our 2019 corporate performance goals that we set at the beginning of the year under our incentive compensation plans. Accordingly, and consistent with our pay-for-performance philosophy, the payouts under these plans for 2019 were below target payout levels. A brief summary of our 2019 business, financial and executive compensation highlights are as follows:
Non-GAAP adjusted income (loss) from continuing operations is a measure not defined by accounting principles generally accepted in the U.S. (“GAAP”). See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for detailed information about our Non-GAAP adjusted income (loss) the years ended December 31, 2019 and 2018, a description of how our management uses Non-GAAP adjusted income (loss), and a reconciliation of non-GAAP adjusted income ( loss to its most directly comparable GAAP measure.
Overview of Our Executive Compensation Program
We have designed our executive compensation program to motivate our management team to create long-term value for our shareholders through the achievement of strategic business objectives, while effectively managing the risks and challenges inherent to a growing specialty pharmaceutical company. Specifically, our executive compensation program is designed to promote the achievement of key strategic objectives by linking executives’ short- and long-term cash and equity incentives to the achievement of measurable performance goals. Our corporate goals for 2019 were focused on commercial execution across our portfolio, as well as expanding and enhancing our manufacturing capabilities and building organizational strength and depth.
Our executive compensation programs are designed to be competitive with our peer group to enable us to attract, motivate, reward, and retain outstanding talent. Our compensation programs are based on the following key principles:
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Link a significant portion of executive pay with performance and the achievement of our annual and long-term strategic goals;
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Align our executives’ interests with those of our shareholders through equity compensation;
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Ensure our overall compensation is competitive in the industry and market in which we compete for executive talent; and
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Recognize corporate performance, individual contributions, teamwork and corporate performance.
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Compensation Governance Highlights
Say-on-Pay Voting
In 2019, we held our first say-on-pay and say-when-on-pay votes at our annual shareholder meeting. As previously reported, we received overwhelming support of our executive compensation program – with over 98% of votes cast supporting such program – as well as management’s recommendation to provide for an annual say-on-pay vote. We look forward to receiving feedback from our shareholders through the annual say-on-pay advisory vote and to incorporating the feedback we received as we evolve our executive compensation program.
Roles and Responsibilities of Participants in our Executive Compensation Process
Role of the Compensation Committee
Our compensation committee, which consists of three independent directors, has primary responsibility for overseeing and administering a compensation program for our named executive officers. In making executive compensation decisions, our compensation committee considers a variety of factors and data, most importantly our corporate performance and individual executives’ performance, and takes into account the totality of compensation that may be paid and compensation trends amongst the Company’s peer group. Our compensation committee retains the right to hire outside advisors as needed to assist it in reviewing and revising our executive compensation programs.
The responsibilities of the compensation committee are set forth in detail starting on page 17 of this Proxy Statement and in the Compensation Committee charter, which can be found on our website at www.collegiumpharma.com under the caption “Investors—Corporate Governance—Committee Charters.” In particular, the compensation committee annually reviews the base salaries, cash incentives and equity compensation of our named executive officers and periodically reviews other elements of our compensation program.
Role of the Independent Compensation Consultant
Our Compensation Committee believes that independent advice is critical in developing the Company’s executive compensation programs. W.T. Haigh is currently engaged as our compensation committee’s independent compensation consultant. W.T. Haigh does not provide any other services to the Company and reports directly to the Committee. Our compensation committee assesses W.T. Haigh’s independence annually and, in accordance with applicable SEC and Nasdaq rules, confirmed that W.T. Haigh’s work did not raise any conflicts of interest and that W.T. Haigh remains independent under applicable rules.
W.T. Haigh provides guidance on trends in executive and non-employee director compensation, the development of specific executive compensation programs and the composition of the Company’s compensation peer group. W.T. Haigh also engages in other matters as needed and as directed solely by our compensation committee. In 2019, W.T. Haigh used information from the 2018 Radford Global Life Sciences survey (the “Radford survey”) and comparable executive compensation information published in publicly available proxy statements for a peer group of companies of similar size and market capitalization in the biotechnology and pharmaceutical industries to develop a competitive analysis report.
During 2019, fees paid W.T. Haigh did not exceed $120,000 related to these services.
Role of the Chief Executive Officer
Each year our Chief Executive Officer provides an assessment of the performance of each executive officer, other than himself, during the prior year and makes recommendations to our compensation committee about the compensation of each executive. Our Chief Executive Officer’s recommendations are based on numerous factors including:
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Company, team and individual performance;
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Leadership competencies;
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External market competitiveness; and
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Internal pay comparisons.
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Our Chief Executive Officer also provides a self-assessment of his achievements for the prior year. Our compensation committee reviews and considers the Chief Executive Officer’s recommendations, as well as his self-
assessment, together with all of the other information presented, including the input and recommendations of W.T. Haigh, in determining the elements of compensation and target compensation levels for each named executive officer.
Executive Compensation Philosophy and Strategy
Our executive compensation programs are designed to reward the achievement of our short- and long-term strategic objectives and to drive the creation of long-term shareholder value by successfully executing our business strategy. We aim to achieve this by designing programs that are:
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Mission and Performance Focused. Our executive compensation programs provide our executives with incentives to achieve the near- and long-term objectives of our business. All of our executive incentive compensation programs are tied directly, and meaningfully, to Company performance. None of our corporate goals entail or anticipate growth in the opioid market, and each of our corporate goals that pertain to product sales is consistent with our goal of being the leader in responsible pain management.
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Competitive Within Our Industry. We strive to ensure the total value of our compensation package is fully competitive within our industry and is consistent with our performance. We benchmark our executive compensation programs against a peer group of pharmaceutical companies that are of similar size and complexity, and that are representative of the companies with which we compete for talent.
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Balanced for Short-Term and Long-Term Performance. We structure our executive compensation programs to emphasize the importance of achieving short-term goals while building and sustaining a foundation for long-term success. Striking the right balance between short-term and long-term incentives is a critical component of our risk management strategy, for which our Board has oversight responsibility and which is described in more detail on page 17.
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Shareholder Aligned. Every Collegium employee has a vested interest in our Company’s long-term success through participation in our equity compensation programs. To reinforce this alignment with our shareholders, we strongly encourage stock ownership through our equity-based compensation programs. For our named executive officers, who set and lead the future strategic direction of our Company, we ensure that a significant portion of their total compensation is delivered in the form of equity to maintain alignment between their interests and those of our shareholders. To further reinforce our shareholder alignment philosophy, our 2020 performance share unit program uses annual and three-year relative total shareholder return as its performance measure.
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Components of our Executive Compensation Program
Base Salary, Annual Cash Incentive, and Long-Term Equity Incentive
We strive to recognize the efforts involved in managing our business by compensating our named executive officers for the demands and risks associated with our business through three core elements that are designed to reward performance in a simple and straightforward manner:
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(2)
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Annual Cash Incentives; and
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(3)
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Long-Term Equity Incentives.
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Each component of our executive compensation program has different purposes and key characteristics; when combined, we believe that the components of our executive compensation program align with our executive
compensation philosophy and objectives described above to enable us to attract, motivate and retain a strong and capable leadership team.
In 2019, the long-term equity incentive component of our executive compensation program has been comprised of: stock options, with an exercise price equal to the closing price of our common stock on the date of grant; restricted stock units (“RSUs”); and performance share units (“PSUs”).
The stock option component of the long-term equity incentive aligns our named executive officers’ interests with those of our shareholders by rewarding them for appreciation in our stock price in excess of the exercise price of their stock options. The stock options awarded as part of our long-term equity incentives vest over a four-year period following the grant date, subject to continued employment with the Company. We believe that this vesting schedule is consistent with our focus on long-term, sustainable growth and plays an important retention role.
The RSU component of the long-term equity incentive further incentivizes our named executive officers to contribute to value creation, with the advantage that RSUs retain value in the face of stock price volatility common to growing pharmaceutical companies in the early stages of commercial operations. The RSUs, like the stock option component of the long-term equity incentive, have a four-year vesting period that reinforces our focus on long-term, sustainable growth and serves as a key retention tool.
Beginning in 2019, our compensation committee added a third equity instrument – PSUs – to the long-term equity incentive for our named executive officers. PSUs granted in 2019 vest following a three-year performance period, subject to the satisfaction of the annual or cumulative performance criteria and the executive’s continued employment
through the performance period. In 2020, we increased the mix of PSUs to further align our equity grants with our pay for performance philosophy. The chart below illustrates our changing mix of equity over time:
2019 Compensation Mix at Target
Our compensation mix is structured to ensure that a significant portion of the total compensation opportunity for our named executive officers is directly related to our performance and other factors that influence shareholder value. For 2019, the table below shows, for our named executive officers, the mix of fixed compensation, composed of base salary, compared to performance and stock price-variable compensation, comprised of target annual cash incentive and long-term equity incentives (equity is valued based on the value of such awards on the date approved by the compensation committee):
We also believe our executive compensation should be structured to appropriately balance cash compensation with equity-based compensation. For 2019, the table below shows, for each of our named executive officers, the mix of cash-based compensation, comprised of base salary and target annual cash incentive, compared to equity-based compensation, comprised of the long-term equity incentives (valued based on the grant date fair value of such awards).
Peer Group Determination
Market practices are one of the considerations taken into account by our compensation committee when determining executive compensation levels and compensation program design. In evaluating marketing practices, we do not target a specific market percentile, nor do we seek to duplicate any particular market practices. Rather, we review external market practices as a reference point to assist us in developing programs designed to attract, motivate, and retain a strong executive team.
Our compensation committee uses a peer group to provide context for its executive compensation decision-making. Each year, the compensation committee’s independent compensation consultant reviews the external market landscape and evaluates the composition of our peer group for appropriateness. Our compensation committee reviews the information provided from internal sources as well as the information provided by our independent compensation consultant to select our peer group based on comparable companies that approximate (1) our scope of business, including revenues, scope of commercial operations, and market capitalization, (2) our employee base, and (3) a comparable pool of talent for which we compete.
When determining the 2019 peer group, our compensation committee considered pharmaceutical companies that are of similar size to the Company in terms of market capitalization, revenues and commercial expansion, and number of employees.
The peer group for determining our 2019 compensation decisions consisted of the following companies:
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Acadia
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Dermira
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Lexicon Pharmaceuticals
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Acorda Therapeutics
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Eagle Pharmaceuticals
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Melinta
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Akebia
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Enanta Pharmaceuticals
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Pacira Pharmaceuticals
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AMAG Pharmaceuticals
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Flexion Therapeutics
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Retrophin
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Amicus Therapeutics
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Halozyme
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Spectrum Pharmaceuticals, Inc.
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Anika Therapeutics
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Heron Therapeutics
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Supernus Pharmaceuticals
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Corcept Therapeutics
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Insys
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Vanda Pharmaceuticals
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For each of the companies in our peer group, where available, we analyze the company’s Compensation Discussion and Analysis, Summary Compensation Table and other data publicly filed during the prior year to identify the executives at such companies whose positions are comparable to those held by our executive officers. We then compile and analyze the data for each comparable position. We also supplement the data for our peer group with published compensation surveys where appropriate. For 2019, consistent with past years, the compensation committee considered information from the Radford survey.
Process for Determining Executive Compensation
Our Practices
Our compensation committee reviews and establishes, annually, the pay levels of each element of total compensation for our named executive officers.
Compensation decisions are based primarily on the following:
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(1)
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Annual Performance Reviews—Our Chief Executive Officer conducts and presents an assessment of our corporate performance and the performance reviews of the other named executive officers to the compensation committee after the end of each fiscal year. In reviewing and determining the compensation of each named executive officer, the compensation committee also considers individual factors, such as: potential for future contributions to our growth, industry experience and retention concerns.
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(2)
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Peer and Industry Data—Our compensation committee considers peer and industry data provided by its independent compensation consultant, W.T. Haigh, as a reference in setting base salaries and target cash compensation, determining appropriate levels and mix of equity compensation and determining the type and portion of compensation tied to performance goals.
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(3)
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Chief Executive Officer Recommendations—The compensation committee seeks input from our Chief Executive Officer for setting the salary and target cash compensation levels for the other executive officers, and also for purposes of setting annual performance metrics and target incentive amounts for awards granted to the other executive officers.
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To achieve the objectives described above, our compensation committee evaluates our compensation program with the goal of setting compensation at levels that are based on each executive’s level of experience, performance and responsibility and that are competitive with those of other companies in our industry that compete with us for executive talent. The compensation committee seeks to ensure that our executive compensation program contains an appropriate amount of compensation for each of our executive officers that is “at risk” and subject to the achievement of critical business objectives.
Process for Establishing 2019 Compensation
Peer Group Selection
Our compensation committee begins its annual review cycle with an evaluation and, if appropriate, updating of our compensation peer group. For the 2019 cycle, this review resulted in an updated peer group that is identified on page 34, under the heading “Compensation Discussion & Analysis – Peer Group Determination.”
When determining the 2019 peer group, our compensation committee considered pharmaceutical companies that are of similar size to the Company in terms of market capitalization, revenues and commercial expansion, and number of employees. At the time our 2019 peer group was selected in October 2018, our market capitalization was at approximately the 25th percentile of the peer group, our revenue was at approximately the 55th percentile of the peer group and our number of employees was at approximately the 45th percentile of our peer group.
Process for Determining Components of Executive Compensation
Our compensation committee reviewed market practices and compensation information from our 2019 peer group, together with information from the Radford survey, in identifying and designing the components of our 2019 executive compensation program. In particular, our compensation committee evaluated how our named executive officers’ compensation elements compare to the 25th, 50th and 75th percentiles of the Radford survey and our peer companies’ comparably situated executives. Our compensation committee reviewed this information as reference points in its overall decision making and as indicative of the types and level of compensation necessary to attract, motivate and retain our executive officers. Our compensation committee set the actual amount of each element of compensation and the total compensation opportunity of each executive officer based in part on its review of peer group data and in part on the other factors discussed above and below.
Base Salary Determinations
In determining the base salaries of our then-serving named executive officers, our compensation committee reviewed the base salaries of comparable executive officers in our 2019 peer group and considered our named executive officers’ compensation mix, capabilities, performance and future expected contributions. Based on this review, the 2019 base salaries for our named executive officers positioned them, on average, slightly above the market median compared to persons with comparable jobs within our 2019 peer group. Changes in the 2019 base salaries for our named executive officers as compared to 2018 are discussed on page 37, under the caption “Base Salary.”
Annual Cash Incentive Determinations
Our executive compensation programs place a heavy emphasis on performance-based compensation, and a critical component of that is our annual cash incentive program, in which all of our employees, including our named executive officers, are eligible to participate. Awards made under our annual cash incentive are directly tied to the achievement of our corporate performance goals, which are aligned with the Company’s short- and long-term strategic plans, as well as, in some cases, individual performance goals.
In setting our corporate performance goals for the annual cash incentive plans, we strive to identify a range of metrics that address both the near-term performance of our business, and the actions needed to create and sustain a solid foundation for long-term growth. We believe that our 2019 corporate performance goals align directly with the creation of near- and long-term value for our shareholders. We strive to establish challenging targets within each metric that motivate our named executive officers to achieve and exceed our corporate performance goals, while carefully considering that goals should not encourage inappropriate risk-raking.
Our compensation committee is responsible for reviewing and approving our annual corporate goals, targets and levels of payout (e.g., threshold, target and maximum) for our executive compensation programs and for reviewing and determining actual performance results at the end of the applicable performance period. Our compensation committee reviews the annual cash incentive opportunities for our named executive officers each year to ensure such opportunities are competitive. Changes in the 2019 annual cash incentive opportunities for our named executive officers as compared to 2018 are discussed on page 37, under the caption “Annual Cash Incentives.”
Long-Term Equity Incentive Determinations
Long-term equity incentive awards granted to our named executive officers annually are designed to incentivize our executives to contribute to our Company’s long-term growth and success.
The size of each named executive officer’s long-term equity incentive award is based on the executive’s individual performance, potential future contributions and market competitiveness, as well as other factors. In determining long-term equity incentive awards, our compensation committee reviews the long-term equity incentive grant practices of our peer group as well as the 50th and 75th percentile ranges of long-term equity incentive awards of companies participating in the Radford survey. On average, annual long-term equity incentive grant values for our named executive officers serving at the beginning of 2019 position their overall compensation at or around the median values of our peer group in cases where there are comparable positions at the peer companies.
Long-term equity incentive grants are made following the completion of the internal performance reviews of our executive officers as well as our external market review of equity practices of our peer group, including the data from the Radford survey described above. In 2019, we introduced PSUs to the mix of equity instruments granted as part of our long-term equity incentives, as described in greater detail on page 38 under the caption “Long-Term Equity Incentives.” The 2019 long-term equity incentive grants issued to our named executive officers are also discussed on page 38.
2019 Executive Compensation of Our Named Executive Officers
2019 Corporate Goals
For purposes of determining 2019 Annual Cash Incentive, the following represents a summary of our corporate performance categories and goals, achievements with respect to each category, respective relative weightings assigned to each category and actual ratings determined based on performance during 2019.
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Corporate
Category
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2019
Goals
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2019
Performance
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Relative
Weighting
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2019
Achievement
Rating
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Commercial – Xtampza ER
|
|
Net Revenue target for Xtampza ER of $109.6M
|
|
Xtampza ER Net Revenue of $105.0M
|
|
40.0%
|
|
35.8%
|
Commercial – Other
|
|
Net Revenue target for Nucynta Franchise of $211.6M;
Adjusted Net Loss target of $(5.8M)
|
|
Nucynta franchise Net Revenue of $191.7M;
Adjusted Net Loss of $(6.2M)
|
|
10.0%
20.0%
|
|
5.3%
19.8%
|
Operations
|
|
Goals relating to:
Securing Xtampza ER commercial manufacturing and supply chain
Xtampza ER dedicated manufacturing facility readiness
R&D Efforts
|
|
Achieved:
Maintained commercial supply of Xtampza ER throughout 2019
Significant progress towards completion of dedicated facility; and
Completion of exploratory R&D testing
|
|
30.0%
|
|
25.0%
|
|
|
|
|
|
|
Overall Corporate Rating:
|
|
86.0%
|
No cash incentive is available with respect to any category of corporate goal that is not achieved at or in excess of 80% of the target approved by our compensation committee.
Our compensation committee evaluated our performance against our 2019 corporate goals in early 2020, established a percentage rating for each goal based on the extent to which the goal was achieved and then determined an overall corporate rating based on the cumulative weightings of the ratings for all the goals. The compensation committee reviewed its assessment of the Company’s achievement of 2019 corporate goals with our Board. The overall percentage rating as indicated above was 86%. The compensation committee determined in its sole discretion to set the overall percentage rating at 90% of target in recognition of the Company’s business development activities during 2019, which were not a formal 2019 performance objective.
Base Salary
In January 2019, our compensation committee reviewed the base salaries of our then-serving named executive officers and determined to increase those base salaries, after taking into account individual performance; the expansion of responsibilities and scope of duties; and the competitive market for talent, as well as data provided by its independent compensation consultant, W.T. Haigh, regarding the annual base salaries of similarly situated executives of companies in the Radford survey and our 2019 peer group. The table below sets forth such increases.
|
|
|
|
|
|
|
|
|
|
|
2018 Base
|
|
2019 Base
|
Named Executive Officer
|
|
Title
|
|
Salary ($ )
|
|
Salary ($ )
|
Joseph Ciaffoni
|
|
President and Chief Executive Officer
|
|
600,000
|
|
620,000
|
Paul Brannelly
|
|
Executive Vice President and Chief Financial Officer
|
|
390,000
|
|
415,000
|
Alison Fleming, Ph.D.
|
|
Executive Vice President and Chief Technology Officer
|
|
350,000
|
|
367,500
|
Shirley Kuhlmann
|
|
Executive Vice President and General Counsel
|
|
375,000
|
|
393,800
|
Richard Malamut, M.D. (1)
|
|
Executive Vice President and Chief Medical Officer
|
|
-
|
|
311,250
|
|
(1)
|
|
The 2019 base salary represents Dr. Malamut’s annualized salary, which went into effect upon his appointment as Executive Vice President and Chief Medical Officer on April 1, 2019.
|
Annual Cash Incentives
After a review of corporate and individual performance for 2019, the compensation committee approved a corporate performance rating of 90.0% of target, as described in greater detail on page 36, under the caption “2019 Corporate Goals.” This determination determined the size of the Company-wide annual cash incentive pool, as well as informing the annual cash incentive payouts for each of our named executive officers, whose 2019 annual cash incentive
payments were based on corporate and, and in the case of all of our named executive officers other than Mr. Ciaffoni, individual performance ratings.
Each named executive officer has a target annual cash incentive amount, which is expressed as a percentage of his or her salary. This target is set forth in each named executive officer’s employment agreement and evaluated by our compensation committee annually based upon a review of the peer and industry data provided by W.T. Haigh. In 2019, our compensation committee determined that annual cash incentive targets for the named executive officers should be adjusted, as shown below, to better align our executives with similarly situated executives at peer companies and to further align our named executive officers’ compensation with Company performance and the creation of shareholder value by increasing their performance-based compensation relative to their total compensation.
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2019
|
|
|
|
|
Annual Cash
|
|
Annual Cash
|
|
|
|
|
Incentive Target
|
|
Incentive Target
|
Named Executive Officer
|
|
Title
|
|
(% of Base Salary)
|
|
(% of Base Salary)
|
Joseph Ciaffoni
|
|
President and Chief Executive Officer
|
|
60%
|
|
70%
|
Paul Brannelly
|
|
Executive Vice President and Chief Financial Officer
|
|
50%
|
|
50%
|
Alison Fleming, Ph.D.
|
|
Executive Vice President and Chief Technology Officer
|
|
50%
|
|
50%
|
Shirley Kuhlmann
|
|
Executive Vice President and General Counsel
|
|
40%
|
|
50%
|
Richard Malamut, M.D.
|
|
Executive Vice President and Chief Medical Officer
|
|
-
|
|
50%
|
The actual amounts, paid to our named executive officers in February 2020, for performance in 2019, are set forth in the following table:
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|
|
|
|
|
|
|
|
|
|
Actual Annual
|
|
Actual Annual
|
|
|
|
|
Cash Incentive
|
|
Cash Incentive
|
Named Executive Officer
|
|
Title
|
|
(% of Base Salary)
|
|
($ )
|
Joseph Ciaffoni
|
|
President and Chief Executive Officer
|
|
63%
|
|
390,600
|
Paul Brannelly
|
|
Executive Vice President and Chief Financial Officer
|
|
52%
|
|
214,800
|
Alison Fleming, Ph.D.
|
|
Executive Vice President and Chief Technology Officer
|
|
45%
|
|
165,400
|
Shirley Kuhlmann
|
|
Executive Vice President and General Counsel
|
|
47%
|
|
186,100
|
Richard Malamut, M.D.
|
|
Executive Vice President and Chief Medical Officer
|
|
60%
|
|
186,800
|
Long-Term Equity Incentives
As part of the annual compensation review process, after reviewing the achievement of 2018 corporate goals for the prior fiscal year, as well as individual performance goals for our named executive officers, our compensation committee granted long-term equity awards in January 2019 to each of our then-serving named executive officers.
The 2019 long-term equity incentive awards for each named executive officer were comprised of a combination of stock options and RSUs. Our compensation committee sought to reward the executive team’s performance in 2018, incentivize continued performance in 2019 and align equity compensation with peer practices. To do so, the compensation committee, in consultation with W.T. Haigh, first determined the value of each named executive officer’s long-term equity incentive award by reference to these factors, and then allocated the total value of such award amongst three equity instruments – stock options, RSUs, and for the first time, PSUs – in a 1:2:1 ratio, and using a 50-day average stock price of $17.44 (for the period ending January 15, 2019) to derive the numbers of stock options, RSUs and PSUs comprising each award. The actual 2019 long-term equity incentive awards issued in 2019 were as set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
Named Executive Officer
|
|
Title
|
|
Stock Options
|
|
RSUs
|
|
PSUs
|
|
Equity Units
|
Joseph Ciaffoni
|
|
President and Chief Executive Officer
|
|
90,000
|
|
90,000
|
|
45,000
|
|
225,000
|
Paul Brannelly
|
|
Executive Vice President and Chief Financial Officer
|
|
32,000
|
|
32,000
|
|
16,000
|
|
80,000
|
Alison Fleming, Ph.D.
|
|
Executive Vice President and Chief Technology Officer
|
|
25,600
|
|
25,600
|
|
12,800
|
|
64,000
|
Shirley Kuhlmann
|
|
Executive Vice President and General Counsel
|
|
25,600
|
|
25,600
|
|
12,800
|
|
64,000
|
Richard Malamut, M.D.
|
|
Executive Vice President and Chief Medical Officer
|
|
-
|
|
-
|
|
-
|
|
-
|
The 2019 PSU award measures Xtampza Net Revenue performance on an annual and cumulative basis where each annual segment is weighted 20% and the cumulative three-year performance is weighted 40%. In February of 2020, the compensation committee reviewed the performance of the 2019 performance segment of the 2019 PSU award. 2019 Xtampza Net Revenue was $105.0 million which resulted in an earned award for the 2019 segment of 79.1% of target. The following table shows the number of shares earned for each of our named executive officers. Shares that are earned for each annual segment vest at the end of the three-year performance period based on continued employment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2019
|
|
|
|
|
Total
|
|
Segment
|
|
Segment
|
Named Executive Officer
|
|
Title
|
|
PSUs Granted
|
|
(20%)
|
|
Earned*
|
Joseph Ciaffoni
|
|
President and Chief Executive Officer
|
|
45,000
|
|
9,000
|
|
7,119
|
Paul Brannelly
|
|
Executive Vice President and Chief Financial Officer
|
|
16,000
|
|
3,200
|
|
2,531
|
Alison Fleming, Ph.D.
|
|
Executive Vice President and Chief Technology Officer
|
|
12,800
|
|
2,560
|
|
2,025
|
Shirley Kuhlmann
|
|
Executive Vice President and General Counsel
|
|
12,800
|
|
2,560
|
|
2,025
|
Richard Malamut, M.D.
|
|
Executive Vice President and Chief Medical Officer
|
|
-
|
|
-
|
|
-
|
* Number of shares rounded to nearest whole share.
Employment Agreements
The Company has entered into employment agreements with each of its named executive officers. These employment agreements outline the base salary, annual cash incentive, and long-term equity incentive components of our executive compensation program, as well as the impact of termination and change of control on the executive compensation programs in which our named executive officers participate
Compensation Risk Assessment
Our executive compensation program and policies are driven by our business environment and designed to enable us to achieve our mission and adhere to our values. The compensation committee and senior management continually evaluate the relationship between risk and reward as it relates to our executive compensation program. Our compensation committee has determined that the structure of our executive compensation programs does not put our patients, investors or the Company at any material risk.
Tax Deductibility of Compensation
In administering our executive compensation program, the Company takes into account the tax deductibility of the compensation, including as applicable, Section 162(m) of the Internal Revenue Code. Although our intent is to maximize the deductibility of compensation, under certain circumstances that are in the best interest of the Company and
our shareholders, the compensation committee may authorize compensation that is not deductible if it is determined to be appropriate.
Clawback Policy
We have adopted a Clawback Policy so that if the Company is required to prepare an accounting restatement due to our material non-compliance with any financial reporting requirements, then the compensation committee may require certain officers, including our named executive officers, to repay or forfeit any “erroneously awarded compensation.” “Erroneously awarded compensation” refers to the portion of cash and equity-based incentive compensation received by a covered officer during the three-year period preceding the publication of the restated financial statements that the compensation committee determines was in excess of the amount that such officer would have received had such incentive compensation been determined based on the financial results reported in the restated financial statements.
Anti-Hedging and Anti-Pledging Policy
Our insider trading policy prohibits employees, officers and directors from engaging in any hedging or monetization transactions or similar arrangements (including transactions involving zero-cost collars, prepaid variable forward sale contracts, equity swaps and exchange funds) that are designed to hedge or speculate on any change in the market value of our securities. It also explicitly prohibits employees, officers and directors from effecting short sales of our securities, which are inherently speculative in nature and contrary to the best interests of the Company and its shareholders. Our insider trading policy also prohibits employees, officers and directors from buying or selling puts or calls or other derivative securities on our securities and from pledging our securities as collateral for a loan or holding our securities in a margin account.
Stock Ownership Guidelines
In 2020 we adopted stock ownership guidelines to assist in focusing officers and non-employee directors on the long-term success of the Company and on shareholder value by requiring them to hold shares of Company common stock.
Our stock ownership guidelines apply to our Chief Executive Officer and each Executive Vice President (each a “Covered Officer”) and each non-employee director (each a “Covered Director”). The stock ownership guidelines require all Covered Officers other than our Chief Executive Officer, to hold shares of our common stock with a value equal to one times the amount of their then-current annual base salary. Our Chief Executive Officer is required to hold shares of our common stock with a value equal to three times the amount of their then-current annual base salary. Covered Directors are required to hold shares of our common stock with a value equal to three times the base cash retainer for board service (excluding committee and chair additional retainers). These ownership guidelines are calculated annually based on ownership as of January 1 of each year based on the applicable annual base salary in effect on such calculation date. The value of a share will be measured on such date based on the average closing price over the 30 calendar days preceding the date of calculation. Such calculated ownership levels will be reported to the Compensation Committee.
Covered Officers and Covered Directors are required to achieve the applicable level of ownership within five years of the later of the date the guidelines were adopted and the date the person first became subject to the guidelines. In the event that a Covered Officer or Covered Director does not meet the foregoing stock ownership guidelines, such individual may be required to hold 50%-100%, as determined by the compensation committee, of common stock issued following the exercise of options, the vesting of restricted stock units or the vesting of performance share units, after payment for applicable statutory withholding taxes or exercise price, until the required ownership level has been met.
Shares that count toward satisfaction of the guidelines include (i) shares owned outright by the individual or his or her immediate family members residing in the same household, including restricted shares and shares deliverable upon
settlement of vested and unvested restricted stock units and vested in-the-money options, excluding restricted stock units that remain subject to achievement of performance goals, such as performance share units; provided, however, the shares underlying performance share units for partial periods for which performance goals have been achieved but not yet vested are included and (ii) shares owned through savings plans, such as the our 401(k) plan, or acquired through the our employee stock purchase plan.
Our stock ownership guidelines may be waived, at the discretion of the compensation committee, if compliance would create undue hardship or prevent an individual from complying with a court order, as in the case of a divorce settlement. It is expected that these instances will be rare.
COMPENSATION COMMITTEE REPORT
The compensation committee our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K, which appears in this proxy statement, with our management. Based on this review and discussion, the compensation committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and our Annual Report on Form 10-K for the year ended December 31, 2019.
|
|
|
|
|
Compensation Committee:
|
|
David Hirsch, M.D., Ph.D., Chairman
|
|
Gino Santini
|
|
Theodore Schroeder
|
The foregoing report of the compensation committee does not constitute soliciting material and will not be deemed filed, incorporated by reference into or a part of any other filing by the Company (including any future filings) under the Exchange Act, except to the extent the Company specifically incorporates such report by reference therein.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows the annual compensation paid to or earned by our named executive officers, for the fiscal years ended December 31, 2019, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
All Other
|
|
|
Name and
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Total
|
Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($) (1)
|
|
($) (2)
|
|
($) (3)
|
|
($) (4)
|
|
($)
|
Joseph Ciaffoni
|
|
2019
|
|
618,461
|
|
-
|
|
2,146,500
|
|
859,738
|
|
390,600
|
|
17,329
|
|
4,032,628
|
President and Chief Executive Officer
|
|
2018
|
|
535,577
|
|
50,000
|
|
1,208,339
|
|
1,353,193
|
|
340,900
|
|
17,294
|
|
3,505,303
|
|
|
2017
|
|
264,807
|
|
-
|
|
692,683
|
|
1,362,009
|
|
147,900
|
|
15,556
|
|
2,482,955
|
Paul Brannelly
|
|
2019
|
|
413,077
|
|
-
|
|
763,200
|
|
305,685
|
|
214,800
|
|
17,012
|
|
1,713,774
|
Executive Vice President and Chief Financial Officer
|
|
2018
|
|
387,692
|
|
-
|
|
608,750
|
|
739,268
|
|
222,500
|
|
17,294
|
|
1,975,504
|
|
|
2017
|
|
358,183
|
|
-
|
|
248,138
|
|
323,426
|
|
149,100
|
|
17,559
|
|
1,096,406
|
Alison Fleming
|
|
2019
|
|
366,154
|
|
-
|
|
610,560
|
|
244,548
|
|
165,400
|
|
12,929
|
|
1,399,591
|
Executive Vice President and Chief Technology Officer
|
|
2018
|
|
346,154
|
|
-
|
|
608,750
|
|
739,268
|
|
199,700
|
|
15,294
|
|
1,909,166
|
|
|
2017
|
|
296,154
|
|
-
|
|
248,138
|
|
323,426
|
|
124,300
|
|
15,559
|
|
1,007,577
|
Shirley Kuhlmann
|
|
2019
|
|
392,354
|
|
-
|
|
610,560
|
|
244,548
|
|
186,100
|
|
15,807
|
|
1,449,369
|
Executive Vice President and General Counsel
|
|
2018
|
|
297,114
|
|
50,000
|
|
480,600
|
|
602,344
|
|
171,200
|
|
5,770
|
|
1,607,028
|
|
|
2017
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Richard Malamut, M.D.
|
|
2019
|
|
311,250
|
|
-
|
|
642,600
|
|
765,176
|
|
186,800
|
|
16,996
|
|
1,922,822
|
Executive Vice President and Chief Medical Officer
|
|
2018
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
2017
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(1)
|
|
The amounts reflect the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 15 to our financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
|
|
(2)
|
|
The amounts reflect the aggregate grant date fair value of option awards computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 15 to our financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
|
|
(3)
|
|
Amounts represent the annual cash incentive payments earned by our named executive officers, for the years ended December 31, 2019, 2018 and 2017, respectively, pursuant to the achievement of certain company and individual performance objectives for those years. Please see the descriptions of the annual cash incentives in the section below entitled “—Non-Equity Incentive Plan Compensation.”
|
|
(4)
|
|
This amount reflects our contributions to our 401(k) Plan and life/disability insurance.
|
Employment Agreements
We have employment and other service agreements with all of our named executive officers. The following is a summary of the material terms of each employment agreement.
Joseph Ciaffoni
On May 31, 2017, we entered into an employment agreement with Mr. Ciaffoni that was amended in connection with Mr. Ciaffoni’s appointment to President and Chief Executive Officer to set forth the terms of Mr. Ciaffoni’s compensation beginning July 1, 2018 (as amended, the “Ciaffoni Agreement”). The principal terms of the Ciaffoni Agreement, which govern Mr. Ciaffoni’s compensation beginning July 1, 2018, are as follows:
|
·
|
|
initial base salary of $600,000, subject to annual adjustments (adjusted to $620,000 for fiscal year 2019); and
|
|
·
|
|
annual cash incentive opportunity of 60% of then-current base salary (adjusted to 70% of base salary for fiscal year 2019) based upon the achievement of certain corporate and/or individual goals and payable pursuant to our Performance Bonus Plan.
|
Upon termination of Mr. Ciaffoni’s employment by us without cause or by Mr. Ciaffoni for good reason (each as defined in the Ciaffoni Agreement), Mr. Ciaffoni is eligible to receive: (i) twelve months of base salary following that termination; (ii) payment of any annual cash incentive otherwise payable (but for the cessation of his employment) with respect to a year ended prior to the cessation of his employment; (iii) a payment equal to his target annual cash incentive for the fiscal year in which his employment terminates paid in twelve (12) substantially equal installments; (iv) accelerated vesting of his unvested restricted stock units and stock options awarded in connection with his hiring equal to what would have vested had he remained employed for one additional year; and (v) waiver of the applicable premium otherwise payable for COBRA continuation coverage for him (and, to the extent covered immediately prior to the date of such cessation, his eligible dependents) for a period equal to twelve months.
Upon termination of Mr. Ciaffoni’s employment by us without cause or upon resignation by Mr. Ciaffoni for good reason, in each case, during the twelve month period following a change in control (as defined in our Amended and Restated 2014 Stock Incentive Plan) of our Company, Mr. Ciaffoni is eligible to receive the amount of any earned but unpaid cash incentive for the fiscal year prior to termination, a lump sum payment equal to 150% of his annual base salary and 150% of the target cash incentive otherwise payable in respect of the year in which termination occurs, waiver of the applicable premium otherwise payable for COBRA continuation coverage for him (and, to the extent covered immediately prior to the date of such cessation, his eligible dependents) for a period equal to eighteen months and all of his unvested restricted stock, stock options and other equity incentives awarded him by us will become immediately and automatically fully vested and exercisable (as applicable). Any severance benefits are subject to Mr. Ciaffoni’s execution of and non-revocation of a general release of claims.
Mr. Ciaffoni is entitled to participate in all of our employee benefit plans, subject to the terms and conditions applicable to such plans. Further, the Ciaffoni Agreement contains customary non-competition, non-solicitation and employee no-hire covenants that apply during employment and the 12-month period thereafter and a perpetual confidentiality covenant.
Paul Brannelly
On August 4, 2015, we entered into an employment agreement with Mr. Brannelly, our Executive Vice President and Chief Financial Officer (the “Brannelly Agreement”). The principal terms of the Brannelly Agreement are as follows:
|
·
|
|
initial base salary of $325,000 per year, subject to annual adjustments (adjusted to $360,000 for fiscal year 2017, $390,000 for fiscal year 2018, and $415,000 for fiscal year 2019); and
|
|
·
|
|
annual cash incentive opportunity of 35% of then-current base salary (adjusted to 40% of base salary for fiscal year 2017, and 50% of base salary for fiscal years 2018 and 2019) based upon the achievement of certain corporate and/or individual goals and payable pursuant to our Performance Bonus Plan
|
Upon termination of Mr. Brannelly’s employment by us without cause or by Mr. Brannelly for good reason (each as defined in the Brannelly Agreement) prior to a change in control of our company, Mr. Brannelly is eligible to receive
continuation of his base salary and continuation of his health insurance benefits at our expense for nine months, subject to his execution of and non-revocation of a general release of claims.
Upon termination of Mr. Brannelly’s employment by us without cause or by Mr. Brannelly for good reason within twelve months following a change in control of our Company, Mr. Brannelly is eligible to receive full vesting with respect to all unvested restricted stock, stock options and other equity incentives awarded to Mr. Brannelly and continuation of his base salary and health insurance benefits at our expense for twelve months, subject to his execution of and non-revocation of a general release of claims.
Mr. Brannelly is entitled to participate in all of our employee benefit plans, subject to the terms and conditions applicable to such plans. Further, the Brannelly Agreement contains customary non-solicitation covenants, which covenants remain in effect for nine months following any cessation of Mr. Brannelly’s employment with us.
Richard Malamut, M.D.
On April 1, 2019, we entered into an employment agreement with Dr. Malamut in connection with his appointment to serve as our Executive Vice President and Chief Medical Officer (the “Malamut Agreement”). The principal terms of the Malamut Agreement are as follows:
|
·
|
|
initial base salary of $415,000 per year, subject to annual adjustments; and
|
|
·
|
|
annual cash incentive opportunity of 50% of then-current base salary, based upon the achievement of certain corporate and/or individual goals and payable pursuant to our Performance Bonus Plan.
|
Upon termination of Dr. Malamut’s employment by us without cause or by Dr. Malamut for good reason (each as defined in the Malamut Agreement) prior to a change in control of our company, Dr. Malamut is eligible to receive (i) nine months of base salary following that termination; (ii) payment of any annual cash incentive otherwise payable (but for the cessation of his employment) with respect to a year ended prior to the cessation of his employment; and (iii) waiver of the applicable premium otherwise payable for health insurance benefits for him (and, to the extent covered immediately prior to the date of such cessation, his eligible dependents) for a period equal to nine months.
Upon termination of Dr. Malamut’s employment by us without cause or by Dr. Malamut for good reason within twelve months following a change in control of our company, Dr. Malamut is eligible to receive full vesting with respect to all unvested restricted stock, stock options and other equity incentives awarded to Dr. Malamut, twelve months of base salary following that termination, payment of any annual cash incentive otherwise payable (but for the cessation of his employment) with respect to a year ended prior to the cessation of his employment, and waiver of the applicable premium otherwise payable for health insurance benefits for him (and, to the extent covered immediately prior to the date of such cessation, his eligible dependents) for a period equal to twelve months.
Dr. Malamut is entitled to participate in all of our employee benefit plans, subject to the terms and conditions applicable to such plans. Further, the Malamut Agreement contains customary non-competition and non-solicitation covenants, which covenants remain in effect for nine months following any cessation of Dr. Malamut employment with us.
Alison Fleming, Ph.D.
On August 4, 2015, we entered into an employment agreement with Dr. Fleming, our Executive Vice President and Chief Technology Officer (the “Fleming Agreement”). The principal terms of the Fleming Agreement are as follows:
|
·
|
|
initial base salary of $225,000 per year, subject to annual adjustments (adjusted to $300,000 for fiscal year 2017, $350,000 for fiscal year 2018, and $367,500 for fiscal year 2019); and
|
|
·
|
|
target annual cash incentive opportunity of 25% of then-current base salary (adjusted to 40% of base salary for fiscal year 2017, and 50% of base salary for fiscal years 2018 and 2019).
|
Ms. Fleming is entitled to participate in all of our employee benefit plans, subject to the terms and conditions applicable to such plans.
Upon termination of Dr. Fleming’s employment by us without cause or by Dr. Fleming for good reason (each as defined in the Fleming Agreement) prior to a change in control of our company, Dr. Fleming is eligible to receive continuation of her base salary and continuation of her health insurance benefits at our expense for six months, subject to her execution of and non-revocation of a general release of claims.
Upon termination of Dr. Fleming’s employment by us without cause or by Dr. Fleming for good reason within twelve months following a change in control of our company, Dr. Fleming is eligible to receive full vesting with respect to all unvested restricted stock, stock options and other equity incentives awarded to Dr. Fleming and continuation of her base salary and health insurance benefits at our expense for nine months, subject to her execution of and non-revocation of a general release of claims.
Dr. Fleming is entitled to participate in all of our employee benefit plans, subject to the terms and conditions applicable to such plans. Further, the Fleming Agreement contains customary non-solicitation covenants, which covenants remain in effect for six months following any cessation of Dr. Fleming’s employment with us.
Shirley Kuhlmann
On March 16, 2018, we entered into an employment agreement with Shirley Kuhlmann, our Executive Vice President and General Counsel (the “Kuhlmann Agreement”). The principal terms of the Kuhlmann Agreement are as follows:
|
·
|
|
initial base salary of $375,000 per year, subject to annual adjustments (adjusted to $393,800 for fiscal year 2019); and
|
|
·
|
|
annual cash incentive opportunity of 40% of then-current base salary (adjusted to 50% for fiscal year 2019) based upon the achievement of certain corporate and/or individual goals and payable pursuant to our Performance Bonus Plan.
|
Upon termination of Ms. Kuhlmann’s employment by us without cause or by Ms. Kuhlmann for good reason (each as defined in the Kuhlmann Agreement) prior to a change in control of our company, Ms. Kuhlmann is eligible to receive continuation of her base salary and continuation of her health insurance benefits at our expense for nine months, subject to her execution of and non-revocation of a general release of claims.
Upon termination of Ms. Kuhlmann’s employment by us without cause or by Ms. Kuhlmann for good reason within twelve months following a change in control of our company, Ms. Kuhlmann is eligible to receive full vesting with respect to all unvested restricted stock, stock options and other equity incentives awarded to Ms. Kuhlmann and continuation of her base salary and health insurance benefits at our expense for twelve months, subject to her execution of and non-revocation of a general release of claims.
Ms. Kuhlmann is entitled to participate in all of our employee benefit plans, subject to the terms and conditions applicable to such plans. Further, the Kuhlmann Agreement contains customary non-solicitation covenants, which covenants remain in effect for nine months following any cessation of Ms. Kuhlmann’s employment with us.
Potential Payments upon Termination without Cause or Resignation for Good Reason
For each named executive officer, the following table sets forth quantitative estimates of the payments and benefits that would have become payable if such executive's employment had been terminated without cause or the executive resigned for good reason on December 31, 2019 other than in connection with a change of control. Amounts below
reflect potential payments pursuant to the employment agreements for such named executive officers as described above in the section titled “—Employment Agreements.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
|
|
|
|
|
|
Value of
|
|
|
|
|
Salary
|
|
Cash
|
|
Benefit
|
|
Value of
|
|
Stock
|
|
|
|
|
Continuation
|
|
Incentive
|
|
Continuation
|
|
RSU
|
|
Option
|
|
Total
|
Name and Principal Position
|
|
($)
|
|
($)
|
|
($)(1)
|
|
Vesting ($)(2)
|
|
($)(3)
|
|
($)
|
Joseph Ciaffoni
|
|
620,000
|
(4)
|
434,000
|
(5)
|
17,057
|
|
433,559
|
|
801,188
|
|
2,305,804
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Brannelly
|
|
311,250
|
(4)
|
-
|
|
9,007
|
|
-
|
|
-
|
|
320,257
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Malamut, M.D.
|
|
311,250
|
(4)
|
-
|
|
9,007
|
|
-
|
|
-
|
|
320,257
|
Executive Vice President and Chief Medical Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alison Fleming
|
|
183,750
|
(4)
|
-
|
|
10,672
|
|
-
|
|
-
|
|
194,422
|
Executive Vice President and Chief Technology Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shirley Kuhlmann
|
|
295,350
|
(4)
|
-
|
|
12,793
|
|
-
|
|
-
|
|
308,143
|
Executive Vice President and General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Estimated value of continued group health insurance for 12 months for Mr. Ciaffoni, 9 months for Mr. Brannelly, Dr. Malamut and Ms. Kuhlmann and 6 months for Dr. Fleming.
|
|
(2)
|
|
Amounts reflect value of the restricted stock unit shares that would become vested based on the closing price of our common stock of $20.58 on December 31, 2019.
|
|
(3)
|
|
Amounts reflect the intrinsic value of unvested stock options that would become vested based on the spread between the closing stock price of our common stock of $20.58 on December 31, 2019 and the exercise price applicable to such stock option.
|
|
(4)
|
|
Continuation of base salary following termination of employment paid in installments over a 12-month period for Mr. Ciaffoni, a 9-month period for Mr. Brannelly, Dr. Malamut and Ms. Kuhlmann and a 6-month period for Dr. Fleming.
|
|
(5)
|
|
Target cash incentive paid in 12 substantially equal installments for Mr. Ciaffoni.
|
Potential Payments Upon Termination or Change in Control
For each named executive officer, the following table sets forth quantitative estimates of the payments and benefits that would have become payable if such executive’s employment had been terminated without cause or the executive resigned for good reason on December 31, 2019, assuming that such termination occurs within twelve months following a change of control. Amounts below reflect potential payments pursuant to the employment agreements for such named executive officers as described above in the section titled “—Employment Agreements.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
|
|
|
|
|
|
Value of
|
|
|
|
|
Salary
|
|
Cash
|
|
Benefit
|
|
Value of
|
|
Stock
|
|
|
|
|
Continuation
|
|
Incentive
|
|
Continuation
|
|
RSU
|
|
Option
|
|
Total
|
Name and Principal Position
|
|
($)
|
|
($)
|
|
($)(1)
|
|
Vesting ($)(2)
|
|
($)(3)
|
|
($)
|
Joseph Ciaffoni
|
|
930,000
|
(4)
|
651,000
|
(5)
|
25,586
|
|
4,840,395
|
|
1,622,975
|
|
8,069,956
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Brannelly
|
|
415,000
|
(4)
|
-
|
|
12,009
|
|
1,697,109
|
|
206,414
|
|
2,330,532
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Malamut, M.D.
|
|
415,000
|
(4)
|
-
|
|
12,009
|
|
874,650
|
|
464,100
|
|
1,765,759
|
Executive Vice President and Chief Medical Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alison Fleming
|
|
275,625
|
(4)
|
-
|
|
16,008
|
|
1,449,614
|
|
176,462
|
|
1,917,709
|
Executive Vice President and Chief Technology Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shirley Kuhlmann
|
|
393,800
|
(4)
|
-
|
|
17,057
|
|
1,247,251
|
|
119,808
|
|
1,777,916
|
Executive Vice President and General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Estimated value of continued group health insurance for 18 months for Mr. Ciaffoni, 12 months for Mr. Brannelly, Dr. Malamut and Ms. Kuhlmann and 9 months for Dr. Fleming.
|
|
(2)
|
|
Amounts reflect value of the restricted stock unit shares that would become vested based on the closing price of our common stock of $20.58 on December 31, 2019.
|
|
(3)
|
|
Amounts reflect the intrinsic value of unvested stock options that would become vested based on the spread between the closing stock price of our common stock of $20.58 on December 31, 2019 and the exercise price applicable to such stock option.
|
|
(4)
|
|
Continuation of base salary following termination of employment paid in a lump sum payment equal to 150% of his annual base salary for Mr. Ciaffoni, continuation of base salary for a 12-month period for Mr. Brannelly, Dr. Malamut and Ms. Kuhlmann and a 9-month period for Dr. Fleming.
|
|
(5)
|
|
Target cash incentive paid in lump sum.
|
CEO Pay Ratio
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are required to disclose the median of the annual total compensation of our employees, the annual total compensation of our President and Chief Executive Officer, Joseph Ciaffoni, and the ratio of these two amounts.
We have determined the 2019 annual total compensation of our median compensated employee, excluding Mr. Ciaffoni, to be $159,794. The annual total compensation of our President and Chief Executive Officer as shown in the Summary Compensation Table above is $4,032,628. The ratio of the annual total compensation of our President and Chief Executive Officer to that of our median compensated employee was 25.2 to 1.
We identified the median employee by examining the 2019 target total compensation for all our employees, excluding our President and Chief Executive Officer, who were employed by us on December 17, 2019. We included all employees, whether employed on a full-time, or part-time, salaried or hourly basis. Target total compensation was based on annual base salary paid for 2019 plus target bonus opportunity plus the grant date value of equity awards made in 2019 and was consistently applied for all employees. After identifying the median employee, we calculated annual total compensation for such employee using the same methodology we use for our named executive officers as set forth in the 2019 Summary Compensation Table in this proxy statement.
The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules which allow companies to adopt a variety of methodologies. Therefore, the pay ratio reported by other companies may not be comparable to the pay ratio reported above.
Grants of Plan-Based Awards
The following table presents information concerning grants of equity awards to each of the named executive officers during 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
Grant Date
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
Stock Awards:
|
|
Option Awards:
|
|
Exercise or
|
|
Fair Value of
|
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
Number of Shares
|
|
Number of Securities
|
|
Base Price of
|
|
Stock and
|
|
|
|
|
|
|
Plan Awards (1)
|
|
|
|
|
|
of Stock or
|
|
Underlying
|
|
Option
|
|
Option
|
|
|
|
|
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
RSUs
|
|
Options
|
|
Awards
|
|
Awards
|
Name and Principal Position
|
|
Grant Date
|
|
Type
|
|
#
|
|
#
|
|
#
|
|
# (2)
|
|
# (2)
|
|
$/Sh (3)
|
|
$ (4)
|
Joseph Ciaffoni
|
|
1/25/2019
|
|
RSU/PSU
|
|
347,200
|
|
434,000
|
|
542,500
|
|
135,000
|
|
-
|
|
-
|
|
15.90
|
President and Chief Executive Officer
|
|
1/25/2019
|
|
Option
|
|
|
|
|
|
|
|
-
|
|
90,000
|
|
15.90
|
|
9.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Brannelly
|
|
1/25/2019
|
|
RSU/PSU
|
|
166,000
|
|
207,500
|
|
259,375
|
|
48,000
|
|
-
|
|
-
|
|
15.90
|
Executive Vice President and Chief Financial
|
|
1/25/2019
|
|
Option
|
|
|
|
|
|
|
|
-
|
|
32,000
|
|
15.90
|
|
9.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alison Fleming, Ph.D.
|
|
1/25/2019
|
|
RSU/PSU
|
|
147,000
|
|
183,750
|
|
229,688
|
|
38,400
|
|
-
|
|
-
|
|
15.90
|
Executive Vice President and Chief Technology Officer
|
|
1/25/2019
|
|
Option
|
|
|
|
|
|
|
|
-
|
|
25,600
|
|
15.90
|
|
9.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shirley Kuhlmann
|
|
1/25/2019
|
|
RSU/PSU
|
|
157,520
|
|
196,900
|
|
246,125
|
|
38,400
|
|
-
|
|
-
|
|
15.90
|
Executive Vice President and General Counsel
|
|
1/25/2019
|
|
Option
|
|
|
|
|
|
|
|
-
|
|
25,600
|
|
15.90
|
|
9.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Malamut, M.D.
|
|
4/1/2019
|
|
RSU/PSU
|
|
124,500
|
(5)
|
155,625
|
(5)
|
194,531
|
|
42,500
|
|
-
|
|
-
|
|
15.12
|
Executive Vice President and Chief Medical Officer
|
|
4/1/2019
|
|
Option
|
|
|
|
|
|
|
|
-
|
|
85,000
|
|
15.12
|
|
9.00
|
(1) Consists of potential cash payments under our annual cash incentive program for executives for 2019. Actual cash incentive payments determined in February 2020 for 2019 performance are set forth in the Summary Compensation Table above under the column entitled “Non-Equity Incentive Plan Compensation” for 2019. The “threshold” payouts reflect the annual cash incentive payment that would have been due had each of the corporate goals for 2019 been achieved at the minimum level, 80%, required for payout. The “target” payouts reflect the annual cash incentive payment that would have been due had each of the corporate goals for 2019 been achieved at the target level (100%). Finally, the “maximum” payouts reflect the annual cash incentive that would have been due had each of the corporate goals for 2019 been achieved at the maximum level applicable to that goal (which maximum levels range from 100-125%).
(2) Consists of stock awards for executives under our annual long-term equity incentive program for executives. For such stock awards, the grant date fair value, in accordance with FASB ASC Topic 718, is set forth in the Summary Compensation Table under the column “Stock Awards” for 2019.
(3) The exercise price of a share of our common stock on a particular date for purposes of granting stock options is determined as the closing price as reported on The NASDAQ Global Select Market on the date of grant.
(4) Amounts reported reflect the aggregate grant date fair value as calculated in accordance with ASC 718. These amounts do not represent the actual amounts paid or realized by the named executive officer during 2019. The assumptions we used in valuing equity awards are described in Note 15, “Stock-based Compensation,” to our audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
Outstanding Equity Awards at Fiscal Year-End
The following table provides information regarding equity awards held by each of our named executive officers that were outstanding as of December 31, 2019. All of our outstanding equity awards are governed by the Collegium Pharmaceutical, Inc. Amended and Restated 2014 Stock Incentive Plan. The market value of stock awards is based on the closing market price of our common stock of $20.58 per share on December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Market Value of
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Shares or Units
|
|
Shares or Units
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
Option
|
|
|
|
of Stock
|
|
of Stock
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Exercise
|
|
Option
|
|
That Have Not
|
|
That Have Not
|
|
|
Options (#)
|
|
Options (#)
|
|
Unearned
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
Name and Principal Position
|
|
(Exercisable)
|
|
(Unexercisable)
|
|
Options (#)
|
|
($)
|
|
Date
|
|
(#)
|
|
($ )
|
Joseph Ciaffoni
|
|
32,410
|
(1)
|
97,231
|
|
-
|
|
16.44
|
|
5/31/2027
|
|
31,600
|
(2)
|
650,328
|
President and Chief Executive Officer
|
|
21,875
|
(3)
|
28,125
|
|
-
|
|
24.35
|
|
1/25/2028
|
|
15,625
|
(4)
|
321,563
|
|
|
12,943
|
(5)
|
28,475
|
|
-
|
|
23.85
|
|
7/1/2028
|
|
18,855
|
(6)
|
388,036
|
|
|
-
|
(7)
|
90,000
|
|
-
|
|
15.90
|
|
1/25/2029
|
|
135,000
|
(8)
|
2,778,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Brannelly
|
|
29,607
|
(9)
|
-
|
|
-
|
|
11.46
|
|
3/19/2025
|
|
-
|
|
-
|
Executive Vice President and Chief Financial Officer
|
|
22,929
|
(10)
|
-
|
|
-
|
|
14.90
|
|
5/14/2025
|
|
-
|
|
-
|
|
|
28,861
|
(11)
|
614
|
|
-
|
|
32.30
|
|
1/20/2026
|
|
614
|
(12)
|
12,636
|
|
|
22,343
|
(13)
|
10,157
|
|
-
|
|
30.54
|
|
2/10/2027
|
|
6,094
|
(14)
|
125,415
|
|
|
21,875
|
(15)
|
28,125
|
|
-
|
|
24.35
|
|
1/25/2028
|
|
15,625
|
(16)
|
321,563
|
|
|
-
|
(17)
|
32,000
|
|
-
|
|
15.90
|
|
1/25/2029
|
|
48,000
|
(18)
|
987,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alison Fleming, Ph.D.
|
|
32,042
|
(19)
|
-
|
|
-
|
|
11.46
|
|
3/19/2025
|
|
-
|
|
-
|
Executive Vice President and Chief Technology Officer
|
|
10,000
|
(20)
|
-
|
|
-
|
|
15.60
|
|
5/18/2025
|
|
-
|
|
-
|
|
|
28,861
|
(21)
|
614
|
|
-
|
|
32.30
|
|
1/20/2026
|
|
614
|
(22)
|
12,636
|
|
|
22,343
|
(23)
|
10,157
|
|
-
|
|
30.54
|
|
2/10/2027
|
|
6,094
|
(24)
|
125,415
|
|
|
21,875
|
(25)
|
28,125
|
|
-
|
|
24.35
|
|
1/25/2028
|
|
15,625
|
(26)
|
321,563
|
|
|
-
|
(27)
|
25,600
|
|
-
|
|
15.90
|
|
1/25/2029
|
|
38,400
|
(28)
|
790,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shirley Kuhlmann
|
|
17,500
|
(29)
|
22,500
|
|
-
|
|
24.03
|
|
4/4/2028
|
|
12,500
|
(30)
|
257,250
|
Executive Vice President and General Counsel
|
|
-
|
(31)
|
25,600
|
|
-
|
|
15.90
|
|
1/25/2029
|
|
38,400
|
(32)
|
790,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Malamut, M.D.
|
|
-
|
(33)
|
85,000
|
|
-
|
|
15.12
|
|
4/1/2029
|
|
42,500
|
(34)
|
874,650
|
Executive Vice President and Chief Medical Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
A stock option to purchase 259,283 shares of our common stock was granted to Mr. Ciaffoni on May 31, 2017. As of December 31, 2019, 32,410 option shares were exercisable. The option vests and becomes exercisable over the four-year period following the grant date, with 25% of the option becoming vested and exercisable on May 31, 2018 and the remaining shares underlying the option vesting in quarterly installments over the remaining three years of the four-year period. Pursuant to Mr. Ciaffoni’s employment agreement, the option will immediately become fully vested and exercisable upon termination of Mr. Ciaffoni’s employment without cause or upon resignation by Mr. Ciaffoni for good reason within twelve months of the occurrence of a change of control.
|
|
(2)
Mr. Ciaffoni was awarded 84,268 restricted stock units on May 31, 2017. Twenty-five percent (25%) of the restricted stock units vested on May 31, 2018, and the balance of the restricted stock units vest in equal installments every six months (in each case, rounded up to the nearest whole share) over the remaining three years of the four-year period following the award date, subject to Mr. Ciaffoni’s continued service with us.
|
|
(3)
A stock option to purchase 50,000 shares of our common stock was granted to Mr. Ciaffoni on January 25, 2018. As of December 31, 2019, 21,875 option shares were exercisable. The option vests and becomes exercisable over the four-year period following the grant date, with 25% of the option becoming vested and exercisable on February 10, 2019 and the remaining shares underlying the option vesting in quarterly installments over the remaining three years of the four-year period, subject to Mr. Ciaffoni’s continued service with the Company.
|
|
(4)
Mr. Ciaffoni was awarded 25,000 restricted stock units on January 25, 2018. Twenty-five percent (25%) of the restricted stock units vested on February 10, 2019, and the balance of the restricted stock units vest in equal installments every six months (in each case, rounded up to the nearest whole share) over the remaining three years of the four-year period following the award date, subject to Mr. Ciaffoni’s continued service with the Company.
|
|
(5)
A stock option to purchase 41,418 shares of our common stock was granted to Mr. Ciaffoni on July 1, 2018. As of December 31, 2019, 12,943 option shares were exercisable. Twenty-five percent (25%) of the option vests and becomes exercisable on July 1, 2019, and the balance vests in equal quarterly installments (rounded up to the nearest whole share of common stock) over the following three-year period, subject to the reporting person's continued service with the Company.
|
|
(6)
Mr. Ciaffoni was awarded 25,140 restricted stock units on July 1, 2018. Twenty-five percent (25%) of the restricted stock units vested on July 1, 2019, and the balance of the restricted stock units vest in equal installments every six months (in each case, rounded up to the nearest whole share of common stock) over the following three-year period, subject to the Mr. Ciaffoni’s continued service with the Company.
|
|
(7)
A stock option to purchase 90,000 shares of our common stock was granted to Mr. Ciaffoni on January 25, 2019. As of December 31, 2019, none of the option shares were exercisable. Twenty-five percent (25%) of the option vests and becomes exercisable on January 25, 2020, and the balance vests in equal quarterly installments (rounded up to the nearest whole share of common stock) over the following three-year period, subject to the reporting person's continued service with the Company.
|
|
(8)
Mr. Ciaffoni was awarded 135,000 restricted stock units and performance share units on January 25, 2019. Twenty-five percent (25%) of the restricted stock units vest on January 25, 2020, and the balance of the restricted stock units vest in equal annual installments (rounded up to the nearest whole share of common stock) over the following three-year period, subject to the executive’s continued service with the Company. Performance share units granted in 2019 vest following a three-year performance period, subject to the satisfaction of the annual and cumulative performance criteria and the executive’s continued employment through the performance period.
|
|
(9)
A stock option to purchase 29,607 shares of our common stock was granted to Mr. Brannelly on March 19, 2015. As of December 31, 2019, 29,607 option shares were exercisable. The option vests and becomes exercisable monthly over the four-year period following the grant date. Pursuant to Mr. Brannelly’s employment agreement, the option will immediately become fully vested and exercisable upon termination of Mr. Brannelly’s employment without cause or upon resignation by Mr. Brannelly for good reason within twelve months of the occurrence of a change of control.
|
|
(10)
A stock option to purchase 22,929 shares of our common stock was granted to Mr. Brannelly on May 14, 2015. As of December 31, 2019, 22,929 option shares were exercisable. The option vests and becomes exercisable over the four-year period following the grant date, with 25% of the option having become vested and exercisable on May 14, 2016 and the remaining shares underlying the option vesting in monthly installments over the remaining three years of the four-year period. Pursuant to Mr. Brannelly’s employment agreement, the option will immediately become fully vested and exercisable upon termination of Mr. Brannelly’s employment without cause or upon resignation by Mr. Brannelly for good reason within twelve months of the occurrence of a change of control.
|
|
(11)
A stock option to purchase 29,475 shares of our common stock was granted to Mr. Brannelly on January 20, 2016. As of December 31, 2019, 28,861 of the option shares were exercisable. The option vests and becomes exercisable over the four-year period following the grant date, with 25% of the option having become vested and exercisable on January 20, 2017 and the remaining shares underlying the option vesting in monthly installments over the remaining three years of the four-year period. Pursuant to Mr. Brannelly’s employment agreement, the option will immediately become fully vested and exercisable upon termination of Mr. Brannelly’s employment without cause or upon resignation by Mr. Brannelly for good reason within twelve months of the occurrence of a change of control.
|
|
(12)
Mr. Brannelly was awarded 4,913 restricted stock units on January 20, 2016. Twenty-five percent (25%) of the restricted stock units vested on January 20, 2017, and the balance of the restricted stock units vest in equal installments every six months (in each case, rounded up to the nearest whole share) over the remaining three years of the four-year period following the award date, subject to Mr. Brannelly’s continued service with us.
|
|
(13)
A stock option to purchase 32,500 shares of our common stock was granted to Mr. Brannelly on February 10, 2017. As of December 31, 2019, 22,343 of the option shares were exercisable. The option vests and becomes exercisable over the four-year period following the grant date, with 25% of the option having become vested and exercisable on February 10, 2018 and the remaining shares underlying the option vesting in quarterly installments over the remaining three years of the four-year period. Pursuant to Mr. Brannelly’s employment agreement, the option will immediately become fully vested and exercisable upon termination of Mr. Brannelly’s employment without cause or upon resignation by Mr. Brannelly for good reason within twelve months of the occurrence of a change of control.
|
|
(14)
Mr. Brannelly was awarded 16,250 restricted stock units on February 10, 2017. Twenty-five percent (25%) of the restricted stock units vested on February 10, 2018, and the balance of the restricted stock units vest in equal installments every six months (in each case, rounded up to the nearest whole share) over the remaining three years of the four-year period following the award date, subject to Mr. Brannelly’s continued service with us.
|
|
(15)
A stock option to purchase 50,000 shares of our common stock was granted to Mr. Brannelly on January 25, 2018. As of December 31, 2019, 21,875 option shares were exercisable. The option vests and becomes exercisable over the four-year period following the grant date, with 25% of the option having become vested and exercisable on February 10, 2019 and the remaining shares underlying the option vesting in quarterly installments over the remaining three years of the four-year period, subject to Mr. Brannelly’s continued service with the Company.
|
|
(16)
Mr. Brannelly was awarded 25,000 restricted stock units on January 25, 2018. Twenty-five percent (25%) of the restricted stock units vested on February 10, 2019, and the balance of the restricted stock units vest in equal installments every six months (in each case, rounded up to the nearest whole share) over the remaining three years of the four-year period following the award date, subject to Mr. Brannelly’s continued service with the Company.
|
|
(17)
A stock option to purchase 32,000 shares of our common stock was granted to Mr. Brannelly on January 25, 2019. As of December 31, 2019, none of the option shares were exercisable. Twenty-five percent (25%) of the option vests and becomes exercisable on January 25, 2020, and the balance vests in equal quarterly installments (rounded up to the nearest whole share of common stock) over the following three-year period, subject to the reporting person's continued service with the Company.
|
|
(18)
Mr. Brannelly was awarded 48,000 restricted stock units and performance share units on January 25, 2019. Twenty-five percent (25%) of the restricted stock units vest on January 25, 2020, and the balance of the restricted stock units vest in equal annual installments (rounded up to the nearest whole share of common stock) over the following three-year period, subject to the executive’s continued service with the Company. Performance share units granted in
|
2019 vest following a three-year performance period, subject to the satisfaction of the annual and cumulative performance criteria and the executive’s continued employment through the performance period.
|
|
(19)
A stock option to purchase 60,378 shares of our common stock was granted to Ms. Fleming on March 19, 2015. As of December 31, 2019, 32,042 of the option shares were exercisable. The option vests and becomes exercisable in equal installments (rounded up to the nearest whole share) on a monthly basis over a four-year period commencing on March 19, 2015, subject to Ms. Fleming’s continued service with the Company.
|
|
(20)
A stock option to purchase 10,000 shares of our common stock was granted to Ms. Fleming on May 18, 2015. As of December 31, 2019, 10,000 of the option shares were exercisable. The option vests and becomes exercisable over a four-year period commencing on May 18, 2015. Twenty-five percent (25%) of the option vested and became exercisable on May 18, 2016, and the balance vests in equal monthly installments (rounded up to the nearest whole share) over the remaining three years of the four-year period, subject to Ms. Fleming’s continued service with the Company.
|
|
(21)
A stock option to purchase 29,475 shares of our common stock was granted to Ms. Fleming on January 20, 2016. As of December 31, 2019, 28,861 of the option shares were exercisable. The option vests and becomes exercisable over a four-year period commencing on January 20, 2016. Twenty-five percent (25%) of the option vests and becomes exercisable on January 20, 2017, and the balance vests in equal monthly installments (rounded up to the nearest whole share) over the remaining three years of the four-year period, subject to Ms. Fleming’s continued service with the Company.
|
|
(22)
Ms. Fleming was awarded 4,913 restricted stock units on January 20, 2016. Twenty-five percent (25%) of the restricted stock units vested on January 20, 2017, and the balance of the restricted stock units vest in equal installments every six months (in each case, rounded up to the nearest whole share) over the remaining three years of the four-year period following the award date, subject to Ms. Fleming’s continued service with us.
|
|
(23)
A stock option to purchase 32,500 shares of our common stock was granted to Ms. Fleming on February 10, 2017. As of December 31, 2019, 22,343 of the option shares were exercisable. The option vests and becomes exercisable over the four-year period following the grant date, with 25% of the option having become vested and exercisable on February 10, 2018 and the remaining shares underlying the option vesting in quarterly installments over the remaining three years of the four-year period.
|
|
(24)
Ms. Fleming was awarded 16,250 restricted stock units on February 10, 2017. Twenty-five percent (25%) of the restricted stock units vested on February 10, 2018, and the balance of the restricted stock units vest in equal installments every six months (in each case, rounded up to the nearest whole share) over the remaining three years of the four-year period following the award date, subject to Ms. Fleming’s continued service with us.
|
|
(25)
A stock option to purchase 50,000 shares of our common stock was granted to Ms. Fleming on January 25, 2018. As of December 31, 2019, 21,875 option shares were exercisable. The option vests and becomes exercisable over the four-year period following the grant date, with 25% of the option having become vested and exercisable on February 10, 2019 and the remaining shares underlying the option vesting in quarterly installments over the remaining three years of the four-year period, subject to Ms. Fleming’s continued service with the Company.
|
|
(26)
Ms. Fleming was awarded 25,000 restricted stock units on January 25, 2018. Twenty-five percent (25%) of the restricted stock units vested on February 10, 2019, and the balance of the restricted stock units vest in equal installments every six months (in each case, rounded up to the nearest whole share) over the remaining three years of the four-year period following the award date, subject to Ms. Fleming’s continued service with the Company.
|
|
(27)
A stock option to purchase 25,600 shares of our common stock was granted to Ms. Fleming on January 25, 2019. As of December 31, 2019, none of the option shares were exercisable. Twenty-five percent (25%) of the option vests and becomes exercisable on January 25, 2020, and the balance vests in equal quarterly installments (rounded up to the nearest whole share of common stock) over the following three-year period, subject to the reporting person's continued service with the Company.
|
|
(28)
Ms. Fleming was awarded 38,400 restricted stock units and performance share units on January 25, 2019. Twenty-five percent (25%) of the restricted stock units vest on January 25, 2020, and the balance of the restricted stock units vest in equal annual installments (rounded up to the nearest whole share of common stock) over the following three-year period, subject to the executive’s continued service with the Company. Performance share units granted in 2019 vest following a three-year performance period, subject to the satisfaction of the annual and cumulative performance criteria and the executive’s continued employment through the performance period.
|
|
(29)
A stock option to purchase 40,000 shares of our common stock was granted to Ms. Kuhlmann on April 4, 2018. As of December 31, 2019, 17,500 option shares were exercisable. Twenty-five percent (25%) of the option vests and becomes exercisable on March 16, 2019, and the balance vests in equal monthly installments (rounded up to the nearest whole share of common stock) over the following three-year period, subject to Ms. Kuhlmann’s continued service with the Company.
|
|
(30)
Ms. Kuhlmann was awarded 20,000 restricted stock units on April 4, 2018. Twenty-five percent (25%) of the restricted stock units vested on March 16, 2019, and the balance of the restricted stock units vest in equal installments every six months (in each case, rounded up to the nearest whole share of common stock) over the following three-year period, subject to Ms. Kuhlmann’s continued service with the Company.
|
|
(31)
A stock option to purchase 25,600 shares of our common stock was granted to Ms. Kuhlmann on January 25, 2019. As of December 31, 2019, none of the option shares were exercisable. Twenty-five percent (25%) of the option vests and becomes exercisable on January 25, 2020, and the balance vests in equal quarterly installments (rounded up to the nearest whole share of common stock) over the following three-year period, subject to the reporting person's continued service with the Company.
|
|
(32)
Ms. Kuhlmann was awarded 38,400 restricted stock units and performance share units on January 25, 2019. Twenty-five percent (25%) of the restricted stock units vest on January 25, 2020, and the balance of the restricted stock units vest in equal annual installments (rounded up to the nearest whole share of common stock) over the following three-year period, subject to the executive’s continued service with the Company. Performance share units granted in 2019 vest following a three-year performance period, subject to the satisfaction of the annual and cumulative performance criteria and the executive’s continued employment through the performance period.
|
|
(33)
A stock option to purchase 85,000 shares of our common stock was granted to Dr. Malamut on April 1, 2019. As of December 31, 2019, none of the option shares were exercisable. Twenty-five percent (25%) of the option vests and becomes exercisable on April 1, 2020, and the balance vests in equal monthly installments (rounded up to the nearest whole share of common stock) over the following three-year period, subject to the reporting person's continued service with the Company.
|
|
(34)
Dr. Malamut was awarded 42,500 restricted stock units on April 1, 2019. Twenty-five percent (25%) of the restricted stock units vest on April 1, 2020, and the balance of the restricted stock units vest in equal quarterly installments (rounded up to the nearest whole share) over the remaining three years of the four-year period following the award date, subject to Dr. Malamut’s continued service with the Company.
|
Option Exercises and Stock Vested
The following table sets forth certain information regarding option exercises and stock vested during the year ended December 31, 2019 with respect to each of our named executive officers:
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Number of Shares
Acquired on Exercise
|
Value Realized on
Exercise
|
|
Number of Shares
Acquired on Vesting
|
Value Realized on
Vesting
|
Name and Principal Position
|
|
(#)
|
($)
|
|
(#)
|
($)
|
Joseph Ciaffoni
|
|
64,821
|
683,930
|
|
36,727
|
558,226
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Brannelly
|
|
-
|
-
|
|
14,665
|
193,149
|
Executive Vice President and Chief Commercial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alison Fleming, Ph.D.
|
|
25,000
|
342,741
|
|
14,665
|
193,149
|
Executive Vice President and Chief Technology Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shirley Kuhlmann
|
|
-
|
-
|
|
7,500
|
116,000
|
Executive Vice President and General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Malamut, M.D.
|
|
-
|
|
|
-
|
-
|
Executive Vice President and Chief Medical Officer
|
|
|
|
|
|
|
Retirement Benefits
We maintain a 401(k) Plan for all employees who are 18 years of age or older. Employees can contribute up to 90% of their eligible pay, subject to maximum amounts allowed under law. We provide matching and profit-sharing contributions under the 401(k) Plan.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following includes a summary of transactions since January 1, 2019 to which we have been a party, in which the amount involved in the transaction exceeded $120,000, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described elsewhere in this proxy statement.
Employment Agreements
We have entered into employment agreements with certain of our named executive officers that provide for salary, cash incentives, and severance compensation. For more information regarding these employment agreements, see “Executive Compensation—Employment Agreements” and “Executive Compensation—Potential Payments Upon Termination or Change of Control.”
Equity Issued to Executive Officers and Directors
We have granted common stock and/or stock options to our named executive officers and non-employee directors, as more fully described in “Executive Compensation—Employment Agreements,” “Executive Compensation—Equity Awards During Fiscal Year ended December 31, 2019” and “Proposal 1: Election of Directors—Corporate Governance—Compensation of Non-Employee Directors.”
Indemnification Agreements with our Directors and Officers
We have entered into, and intend to continue to enter into, indemnification agreements with our directors and executive officers, in addition to the indemnification provided for in our articles of incorporation and bylaws. These agreements, among other things, require us to indemnify our directors and executive officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of our directors and/or executive officers or any other company or enterprise to which the person provides services at our request. We believe that these charter and bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
The limitation of liability and indemnification provisions in our articles of incorporation and bylaws may discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our shareholders. A shareholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
Policies and Procedures for Transactions with Related Persons
Our Board has adopted a related party transactions policy for us. Pursuant to the related party transactions policy, we will review all transactions with a dollar value in excess of $120,000 involving us in which any of our directors, director nominees, significant shareholders and executive officers and their immediate family members will be participants, to determine whether such person has a direct or indirect material interest in the transaction. All directors, director nominees and executive officers are required to promptly notify our Chief Financial Officer of any proposed transaction involving us in which such person has a direct or indirect material interest. Such proposed transaction will then be reviewed by the audit committee to determine whether the proposed transaction is a related party transaction under our policy. In reviewing any related party transaction, the audit committee determines whether or not to approve or ratify the transaction based on all relevant facts and circumstances, including the following:
|
·
|
|
the materiality and character of the related person’s interest in the transaction;
|
|
·
|
|
the commercial reasonableness of the terms of the transaction;
|
|
·
|
|
the benefit and perceived benefit, or lack thereof, to us;
|
|
·
|
|
the opportunity costs of alternate transactions; and
|
|
·
|
|
the actual or apparent conflict of interest of the related person.
|
In the event that any member of the audit committee is not a disinterested member with respect to the related person transaction under review, that member will be excluded from the review and approval or rejection of such related party transaction and another director may be designated to join the committee for purposes of such review. Whenever practicable, the reporting, review and approval will occur prior to entering into the transaction. If advance review and approval is not practicable, the audit committee will review and may, in its discretion, ratify the related party transaction. After any such review, the audit committee will approve or ratify the transaction only if it determines that the transaction is in, or not inconsistent with, the best interests of us and our shareholders. Our related party transaction policy is available on our website, www.collegiumpharma.com, under the “Investor Relations” section. The information contained in, or that can be accessed through, our website is not part of this proxy statement.
PROPOSAL 3: AMENDMENT AND RESTATEMENT OF THE ARTICLES OF INCORPORATION
TO DECLASSIFY THE BOARD OF DIRECTORS
The Board is submitting for approval by shareholders the following proposed amendment and restatement of our Articles of Incorporation to eliminate, over a period of three years, the classification of the Board, without affecting the unexpired terms of directors.
Our Articles of Incorporation currently provide that the Board shall be divided into three classes of directors, with each class elected every three years for a three-year term. Since our initial public offering, we have had a classified board structure. The Board has historically believed that this classified board structure promotes continuity and stability of strategy, ensures that a potential acquirer in a takeover situation negotiates with the Board, and facilitates the ability of the Board to focus on creating long-term shareholder value. The Board is aware that the current trend in corporate governance is leading away from classified boards in favor of electing all directors annually and also recognizes that a classified board structure may reduce directors’ accountability to shareholders because such a structure does not enable shareholders to express a view on each director’s performance by means of an annual vote. Moreover, many institutional investors believe that the election of directors is the primary means for shareholders to influence corporate governance policies and to increase accountability for implementing those policies.
After considering the advantages and disadvantages of declassification, including feedback from shareholders and views of commentators, the Board has determined that it is advisable and in the best interests of the Company and its shareholders to amend and restate the Articles of Incorporation to declassify the Board over the next three years. The Board believes that a declassified board structure should be phased-in so that directors serving immediately following the Annual Meeting can serve out the terms to which they have been elected. Approval by shareholders of this proposal would result in a fully declassified Board by the 2023 annual meeting of shareholders.
If the proposed amendment and restatement is adopted and becomes effective, directors in office immediately after the Annual Meeting would serve out their three-year terms, but directors elected by shareholders beginning at the 2021 annual meeting of shareholders would be elected to one-year terms. Beginning at the 2023 annual meeting of shareholders, all directors would be subject to annual election for one-year terms.
The pertinent section of the proposed amendment and restatement of our Articles of Incorporation as it would be amended and restated upon shareholder approval of this proposal to declassify the Board is attached as Appendix A to this Proxy Statement.
The Board has unanimously approved, adopted and declared advisable the amendment and restatement of our Articles of Incorporation to declassify our Board in phases as described above. The Board has also adopted resolutions recommending that the proposed amendment and restatement be submitted to shareholders and recommending that shareholders approve them.
The affirmative vote of a majority of all outstanding shares of the Company is required to approve this Proposal 3 to amend and restate the Articles of Incorporation to declassify the Board as described above. See information about the voting standard for this proposal on page 4.
If approved, this proposal would become effective, and the amendment and restatement of the Articles of Incorporation described in Appendix A to this Proxy Statement would be implemented, upon the filing of an amended and restated Articles of Incorporation containing the proposed amendment and restatement with the Secretary of State of Virginia, which the Company intends to do promptly after the required shareholder approval is obtained.
Recommendation of our Board
OUR BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF AMENDMENT AND RESTATEMENT OF THE ARTICLES OF INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS.
PROPOSAL 4: AMENDMENT AND RESTATEMENT OF THE ARTICLES OF INCORPORATION
TO ELIMINATE THE SUPERMAJORITY VOTING REQUIREMENT FOR AMENDMENTS TO THE BYLAWS
The Board is submitting for approval by shareholders the following proposed amendment and restatement of our Articles of Incorporation to eliminate the supermajority voting requirement for amendments to our Bylaws.
Our Articles of Incorporation currently requires a supermajority vote of at least two-thirds of all outstanding shares of the Company to adopt, amend or repeal provisions of the Bylaws. This proposed amendment would reduce the required shareholder approval for these actions to a simple majority of the voting power of the Company’s outstanding shares.
The pertinent section of the proposed amendment and restatement of our Articles of Incorporation as it would be amended and restated upon shareholder approval of this proposal to eliminate the supermajority voting requirement for amendments to our Bylaws is attached as Appendix B to this Proxy Statement.
Our Nominating and Corporate Governance Committee and the Board frequently review the Company’s governance structure and practices. Based on that review, which included consideration of current good governance practices and the advantages and disadvantages of the supermajority provision, the Board has unanimously approved and recommends that shareholders approve the amendment and restatement of the Articles of Incorporation to replace supermajority voting requirement for amendments to our Bylaws with a simple majority of outstanding shares requirement.
The affirmative vote of a majority of all outstanding shares of the Company is required to approve this Proposal 4 to amend and restate the Articles of Incorporation to replace supermajority voting requirement with a simple majority of outstanding shares requirement as described above. See information about the voting standard for this proposal on page 4.
If approved, this proposal would become effective, and the amendment and restatement of the Articles of Incorporation described in Appendix B to this Proxy Statement would be implemented, upon the filing of an amended and restated Articles of Incorporation containing the proposed amendment and restatement with the Secretary of State of Virginia, which the Company intends to do promptly after the required shareholder approval is obtained.
Recommendation of our Board
OUR BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF AMENDMENT AND RESTATEMENT OF THE ARTICLES OF INCORPORATION to eliminate the supermajority voting requirement for amendments to our Bylaws.
PROPOSAL 5: RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee has appointed Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020 and our Board has directed that management submit the appointment of the Company’s independent registered public accounting firm for ratification by the shareholders at the Annual Meeting. Representatives of Deloitte & Touche LLP are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they so desire, and be available to respond to appropriate questions. Deloitte & Touche LLP was appointed to serve as our independent registered public accounting firm for the fiscal year ended December 31, 2016 on April 11, 2016.
Shareholder ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm is not required by Virginia law, our articles of incorporation or our bylaws. However, our Board is submitting the audit committee’s appointment of Deloitte & Touche LLP to the shareholders for ratification as a matter of good corporate practice. If the shareholders fail to ratify the appointment, the audit committee will reconsider whether to retain that firm. Even if the appointment is ratified, the audit committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the audit committee determines that such a change would be in the best interests of the Company and its shareholders.
Independent Registered Public Accountants’ Fees
The following table sets forth the aggregate fees billed to us by Deloitte & Touche LLP, our independent registered public accounting firm, for the fiscal years ended December 31, 2018 and December 31, 2019, respectively, as described below:
|
|
|
|
|
|
|
Fee Category
|
|
2018
|
|
2019
|
Audit Fees
|
|
$
|
912,200
|
|
$
|
928,875
|
Audit-Related Fees
|
|
|
12,000
|
|
|
22,658
|
Tax Fees
|
|
|
—
|
|
|
125,000
|
All Other Fees
|
|
|
—
|
|
|
—
|
Total Fees
|
|
$
|
924,200
|
|
$
|
1,076,533
|
Audit Fees: Audit Fees consist of fees billed for professional services performed by Deloitte & Touche LLP for the audit of our annual consolidated financial statements and system of internal control over financial reporting; the reviews of interim consolidated financial statements; and consultations regarding accounting and financial reporting.
Audit-Related Fees: Audit Related Fees for 2018 and 2019 include fees billed by an independent registered public accounting firm for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. Such amounts include fees billed by Deloitte & Touche LLP for services provided in connection with the submission of our Registration Statements on Form S-3 and Form S-8.
Tax Fees: Tax Fees consist of fees billed for permissible professional services performed by Deloitte Tax LLP, an affiliate of Deloitte & Touche LLP, for tax planning and advice regarding the application of Section 382 of the Internal Revenue Code. There were no such fees incurred in 2018.
All Other Fees: There were no such fees incurred in 2018 or 2019.
The audit committee has considered the services listed above to be compatible with maintaining Deloitte & Touche LLP’s independence.
Pre-Approval Policies and Procedures
In accordance with the Sarbanes-Oxley Act of 2002, as amended, the audit committee’s policy is to pre-approve all audit and permitted non-audit services provided by our independent registered public accounting firm. The audit committee may, in accordance with applicable law, establish pre-approval policies and procedures for the engagement of the independent auditor or other registered public accounting firm to render services to the Company. The Chair of the audit committee and any other member of the audit committee to whom authority has been delegated by the audit committee has the authority in between meetings to pre-approve any audit or non-audit services, including fees, to be performed by the independent registered public accounting firm, provided that any such approvals are presented to the audit committee at its next scheduled meeting. In fiscal years 2018 and 2019, all of the services performed by our independent registered public accounting firm were pre-approved by the audit committee pursuant to our policy.
Recommendation of our Board
OUR BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of our capital stock outstanding as of the Record Date by:
|
·
|
|
each person, or group of affiliated persons, known by us to beneficially own more than 5% of our shares of common stock;
|
|
·
|
|
each of our directors and director nominees;
|
|
·
|
|
each of our named executive officers; and
|
|
·
|
|
all of our directors and executive officers as a group.
|
The percentage ownership information is based on 34,306,040 shares of common stock outstanding as of the Record Date. Information with respect to beneficial ownership has been furnished by each director, officer or beneficial owner of more than 5% of our common stock. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules attribute beneficial ownership of securities as of a particular date to persons who hold options or warrants to purchase shares of common stock and that are exercisable within 60 days of such date. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
Except as otherwise noted below, the address for each person or entity listed in the table is c/o Collegium Pharmaceutical, Inc., 100 Technology Center Drive, Suite 300, Stoughton, MA 02072.
|
|
|
|
|
|
|
Number of
|
|
Percentage
|
|
|
shares
|
|
of shares
|
|
|
beneficially
|
|
beneficially
|
Name and Address of Beneficial Owner
|
|
owned
|
|
owned
|
5% or greater shareholders:
|
|
|
|
|
Janus Henderson Group plc (1)
|
|
4,502,349
|
|
13.12%
|
BlackRock, Inc. (2)
|
|
2,565,927
|
|
7.48%
|
Eventide Asset Management, LLC (3)
|
|
2,427,976
|
|
7.08%
|
Camber Capital Management LP (4)
|
|
2,000,000
|
|
5.83%
|
Franklin Resources, Inc. (5)
|
|
1,770,152
|
|
5.16%
|
The Vanguard Group (6)
|
|
1,680,654
|
|
4.90%
|
Directors, Nominees and Named Executive Officers:
|
|
|
|
|
Joseph Ciaffoni (7)
|
|
159,860
|
|
*
|
Paul Brannelly (8)
|
|
253,128
|
|
*
|
Alison Fleming (9)
|
|
168,060
|
|
*
|
Shirley Kuhlmann (10)
|
|
41,042
|
|
*
|
Richard Malamut, M.D. (11)
|
|
33,646
|
|
*
|
Michael Heffernan, R.Ph. (12)
|
|
549,662
|
|
1.60%
|
Garen Bohlin (13)
|
|
78,418
|
|
*
|
John Fallon, M.D. (14)
|
|
57,796
|
|
*
|
John Freund, M.D. (15)
|
|
107,846
|
|
*
|
David Hirsch, M.D., Ph.D. (16)
|
|
26,531
|
|
*
|
Gwen Melincoff (17)
|
|
45,947
|
|
*
|
Gino Santini (18)
|
|
87,621
|
|
*
|
Theodore Schroeder (19)
|
|
64,433
|
|
*
|
All current executive officers and directors as a group (14 persons)(20)
|
|
1,730,174
|
|
5.04%
|
*Represents beneficial ownership of less than one percent (1%) of the outstanding shares of our common stock.
|
(1)
|
|
Based solely on an Amendment to Schedule 13G filed with the SEC on February 13, 2020, Janus Henderson Group plc, a Jersey public limited company located at 201 Bishopsgate EC2M 3AE, London, United Kingdom (“Janus Henderson”), reported aggregate beneficial ownership of 4,502,349 shares of our common stock as of December 31, 2019. Janus Henderson reported that it possessed shared voting and dispositive power of all of its shares and that it did not possess sole voting or dispositive power over any shares beneficially owned.
|
|
(2)
|
|
Based solely on an Amendment to Schedule 13G filed with the SEC on February 5, 2020, BlackRock, Inc., a Delaware corporation, located at 55 East 52nd Street, New York, NY 10055 (“BlackRock”), reported aggregate beneficial ownership of 2,565,927 shares of our common stock as of December 31, 2019. BlackRock reported that it possessed sole voting power of 2,506,740 shares and sole dispositive power of 2,565,927 shares. BlackRock also reported that it did not possess shared voting or dispositive power over any shares beneficially owned.
|
|
(3)
|
|
Based solely on an Amendment to Schedule 13G filed with the SEC on February 4, 2020, Eventide Asset Management, LLC, a Delaware limited liability company located at One International Place, 35th floor, Boston, MA 02110 (“Eventide”), reported aggregate beneficial ownership of 2,427,976 shares of our common stock as of December 31, 2019. Eventide reported that it possessed sole voting and dispositive power of all of its shares and that it did not possess shared voting or dispositive power over any shares beneficially owned.
|
|
(4)
|
|
Based solely on a Schedule 13G filed with the SEC on February 4, 2020, Camber Capital Management LP, a Delaware limited partnership located at 101 Huntington Avenue, Suite 2102, Boston, MA 02199 (“Camber”), reported aggregate beneficial ownership of 2,000,000 shares of our common stock as of February 11, 2020.
|
Camber reported that it possessed shared voting and dispositive power of all of its shares and that it did not possess sole voting or dispositive power over any shares beneficially owned.
|
|
(5)
|
|
Based solely on an Amendment to Schedule 13G filed with the SEC on February 4, 2020, Franklin Resources Inc., a Delaware corporation (“FRI”), located at One Franklin Parkway, San Mateo, CA 94403, reported aggregate beneficial ownership of 1,770,152 shares of our common stock by virtue of being the investment adviser, directly or indirectly, to investment management clients that directly or indirectly own such common shares. Charles B. Johnson and Rupert H. Johnson, Jr. each own in excess of 10% of the outstanding common stock of FRI and are the principal stockholders of FRI. FRI and Messrs. Johnson may be deemed to be, for purposes of Rule 13d-3 under the Act, the beneficial owners of securities held by persons and entities for whom or for which FRI subsidiaries provide investment management services.
|
|
(6)
|
|
Based solely on a Schedule 13G filed with the SEC on February 4, 2020, The Vanguard Group, Inc., a Pennsylvania corporation (“Vanguard”), located at 100 Vanguard Blvd., Malvern, PA 19355, reported aggregate beneficial ownership of 1,680,654 shares of our common stock. Vanguard reported that it possessed sole voting power of 66,353 shares and sole dispositive power of 1,603,050 shares. Vanguard also reported that it had shared voting power of 14,300 shares and shared dispositive power of 77,604 shares.
|
|
(7)
|
|
Includes 122,985 shares of our common stock subject to options exercisable and restricted stock units vesting within 60 days of the Record Date.
|
|
(8)
|
|
Includes 146,542 shares of our common stock subject to options exercisable and restricted stock units vesting within 60 days of the Record Date.
|
|
(9)
|
|
Includes 134,048 shares of our common stock subject to options exercisable and restricted stock units vesting within 60 days of the Record Date.
|
|
(10)
|
|
Includes 29,667 shares of our common stock subject to options exercisable and restricted stock units vesting within 60 days of the Record Date.
|
|
(11)
|
|
Includes 33,646 shares of our common stock subject to options exercisable and restricted stock units vesting within 60 days of the Record Date.
|
|
(12)
|
|
Includes 504,569 shares of our common stock subject to options exercisable and restricted stock units vesting within 60 days of the Record Date.
|
|
(13)
|
|
Includes 76,165 shares of our common stock subject to options exercisable and restricted stock units vesting within 60 days of the Record Date.
|
|
(14)
|
|
Includes 53,168 shares of our common stock subject to options exercisable and restricted stock units vesting within 60 days of the Record Date.
|
|
(15)
|
|
Includes 62,180 shares of our common stock subject to options exercisable and restricted stock units vesting within 60 days of the Record Date.
|
|
(16)
|
|
Includes 14,121 shares of our common stock subject to options exercisable and restricted stock units vesting within 60 days of the Record Date.
|
|
(17)
|
|
Includes 43,694 shares of our common stock subject to options exercisable and restricted stock units vesting within 60 days of the Record Date.
|
|
(18)
|
|
Includes 62,180 shares of our common stock subject to options exercisable and restricted stock units vesting within 60 days of the Record Date.
|
|
(19)
|
|
Includes 62,180 shares of our common stock subject to options exercisable and restricted stock units vesting within 60 days of the Record Date.
|
|
(20)
|
|
Includes 1,396,895 shares of common stock which the directors and current executive officers (i.e., Messrs. Ciaffoni, Brannelly and Dreyer, Drs. Fleming and Malamut, and Ms. Kuhlmann) (i) have the right to acquire upon the exercise of stock options that were exercisable as of the Record Date, or that will become exercisable within 60 days after that date; or (ii) will acquire upon vesting of restricted stock units within 60 days after the Record Date.
|
DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Exchange Act requires our directors and executive officers, and any persons who beneficially own more than 10% of our stock, to file with the SEC initial reports of ownership and reports of changes in ownership in our stock. Such persons are required by SEC regulations to furnish to us copies of all Section 16(a) forms they file. As a matter of practice, our administrative staff assists our directors and executive officers in preparing and filing such reports with the SEC. To our knowledge, based solely on our review of copies of the reports received by us, all such Section 16(a) filing requirements were met, except that a Form 4 for Mr. Heffernan to disclose awards of restricted stock units and options on April 25, 2019 was not filed on a timely basis due to an administrative delay; the Form 4 received a next-day filing date on April 30, 2019.
SECURITIES AUTHORIZED FOR
ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table contains information about our equity compensation plans as of December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities
|
|
|
Number of securities
|
|
|
Weighted-average
|
|
remaining available for
|
|
|
to be issued
|
|
|
exercise price of
|
|
future issuance under
|
|
|
upon exercise
|
|
|
outstanding
|
|
equity compensation
|
|
|
of outstanding
|
|
|
options,
|
|
plans
|
|
|
options,
|
|
|
warrants and
|
|
(excluding securities
|
|
|
warrants and rights
|
|
|
rights
|
|
reflected in column (a))
|
Plan category
|
|
(a)
|
|
|
(b)
|
|
(c)
|
Equity compensation plans approved by security holders:
|
|
|
|
|
|
|
|
—2014 Stock Incentive Plan
|
|
3,955,887
|
–
|
$
|
16.00
|
|
1,295,200
|
—2015 Employee Stock Purchase Plan
|
|
-
|
|
|
-
|
|
1,046,568
|
Equity compensation plans not approved by security holders
|
|
-
|
|
|
-
|
|
-
|
Total
|
|
3,955,887
|
|
$
|
16.00
|
|
2,341,768
|
The number of shares reserved for issuance under the 2014 Stock Incentive Plan automatically increases on January 1st each year, starting on January 1, 2016 and continuing through January 1, 2025, by an amount equal to four percent (4%) of the total number of shares of our capital stock outstanding on December 31st of the immediately preceding calendar year. Notwithstanding the foregoing, our Board may act prior to January 1st of a given year to provide that there will be no January 1st increase in the maximum number of shares that may be issued in respect of awards under the 2014 Stock Incentive Plan or that the increase in the maximum number of shares that may be issued in respect of awards for such year will be a lesser number of shares of common stock than would otherwise occur pursuant to the preceding sentence.
The number of shares reserved for issuance under the 2015 Employee Stock Purchase Plan automatically increases on January 1st each year, starting on January 1, 2016 and ending on December 31, 2025, by an amount equal to the least of (a) 400,000 shares, (b) one percent (1%) of the total number of shares of our common stock outstanding on January 1st of each year, and (c) a number determined by our Board.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 2020
ANNUAL MEETING OF SHAREHOLDERS
Proposals of shareholders intended to be presented at our 2021 annual meeting of shareholders must be received by us no later than December 10, 2020, which is 120 calendar days prior to the first anniversary of the date on which our proxy statement was released to shareholders in connection with the Annual Meeting, in order to be included in our proxy statement and form of proxy relating to the 2021 annual meeting of shareholders, unless the date of the 2021 annual meeting of shareholders is changed by more than 30 days from the anniversary of the Annual Meeting, in which case the deadline for such proposals will be a reasonable time before we begin to print and send our proxy materials. These proposals must comply with the requirements as to form and substance established by the SEC for such proposals in order to be included in the proxy statement.
In addition, our bylaws establish an advance notice procedure for nominations for election to our Board and other matters that shareholders wish to present for action at an annual meeting other than those to be included in our proxy statement. In general, notice must be received at our principal executive offices not less than 90 calendar days before nor more than 120 calendar days before the one-year anniversary of the previous year’s annual meeting of shareholders. Therefore, to be presented at our 2021 annual meeting of shareholders, such a proposal must be received by us no earlier than January 20, 2021 and no later than February 19, 2021. However, if the date of the annual meeting is more than 30 days earlier or more than 60 days later than such anniversary date, notice must be received no earlier than the close of business 120 calendar days prior to such annual meeting and no later than the close of business on the later of 90 days prior to such annual meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, then such notice must be received by the tenth day following the day on which public announcement of the date of such meeting was first made by us.
Any proposals we do not receive in accordance with the above standards will not be voted on at the 2021 annual meeting of shareholders. Shareholders are advised to review our bylaws which also specify requirements as to the form and content of a shareholder’s notice.
Any proposals, notices or information about proposed director candidates should be sent to:
Collegium Pharmaceutical, Inc.
|
100 Technology Center Drive, Suite 300
|
Stoughton, MA 02072
|
Attention: Corporate Secretary
DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS
The SEC has adopted rules known as “householding” that permit companies and intermediaries (such as brokers) to deliver one set of proxy materials to multiple shareholders residing at the same address. This process enables us to reduce our printing and distribution costs and reduce our environmental impact. Householding is available to both registered shareholders and beneficial owners of shares held in street name.
Registered Shareholders
If you are a registered shareholder and have consented to householding, then we will deliver or mail one Notice or set of our proxy materials, as applicable, for all registered shareholders residing at the same address. Your consent will continue unless you revoke it, which you may do at any time by providing notice to our Corporate Secretary by telephone at (781) 713‑3699 or by mail at 100 Technology Center Drive, Suite 300, Stoughton, MA 02072. In addition, the Company will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy of the annual report, proxy statement, or Notice to a shareholder at a shared address to which a single copy of the documents was delivered.
If you are a registered shareholder who has not consented to householding, then we will continue to deliver or mail Notices or copies of our proxy materials, as applicable, to each registered shareholder residing at the same address. You may elect to participate in householding and receive only one Notice or set of proxy materials, as applicable, for all registered shareholders residing at the same address by providing notice to the Company as described above.
Street Name Holders
Shareholders who hold their shares through a brokerage may elect to participate in householding, or revoke their consent to participate in householding, by contacting their respective brokers.
ANNUAL REPORT
This proxy statement is accompanied by our 2019 Annual Report to Shareholders, which includes our Annual Report on Form 10‑K for the fiscal year ended December 31, 2019. The 2019 Form 10‑K includes our audited financial statements. We have filed the 2019 Form 10‑K with the SEC, and it is available free of charge at the SEC’s website at http://www.sec.gov and on our website at www.collegiumpharma.com. In addition, upon written request to our Corporate Secretary at 100 Technology Center Drive, Stoughton, MA 02072, we will mail a paper copy of our 2019 Form 10‑K, including the financial statements and the financial statement schedules, to you free of charge.
OTHER MATTERS
We do not know of any business that will be presented for consideration or action by the shareholders at the Annual Meeting other than that described in this proxy statement. If, however, any other business is properly brought before the meeting, shares represented by proxies will be voted in accordance with the best judgment of the persons named in the proxies or their substitutes. All shareholders are urged to complete, sign and return the proxy card.
APPENDIX A
PROPOSED AMENDMENT AND RESTATEMENT OF THE COMPANY’S SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS
If Proposal 3 is approved by shareholders at the Annual Meeting, the following amendments to Article IV of the Articles of Incorporation will be approved.1
ARTICLE IV
The number of directors shall be fixed by or in accordance with the Bylaws. Commencing with the 2015 annual meeting of shareholders, the Board of Directors shall be divided into three classes, Class I, Class II and Class III, as nearly equal in number as possible. At the 2015 annual meeting of shareholders (or pursuant to written consent in lieu of such annual meeting), directors of the first class (Class I) shall be elected to hold office for a term expiring at the 2016 annual meeting of shareholders, directors of the second class (Class II) shall be elected to hold office for a term expiring at the 2017 annual meeting of shareholders and directors of the third class (Class III) shall be elected to hold office for a term expiring at the 2018 annual meeting of shareholders and, in each case, until such directors’ successors are duly elected and qualified. At each annual meeting of shareholders after 2015, the successors to the class of directors whose terms then shall expire shall be identified as being of the same class as the directors they succeed and elected to hold office for a term expiring at the third succeeding annual meeting of shareholders and until such directors’ successors are duly elected and qualified. When the number of directors is changed, any newly created directorships or any decrease in directorships shall be apportioned among the classes by the Board of Directors as to make all classes as nearly equal in number as possible. [As of the date of these Articles, the Board of Directors consists of three classes of directors (Class I, whose terms expire at the 2022 annual meeting of shareholders; Class II, whose terms expire at the 2023 annual meeting of shareholders; and Class III, whose terms expire at the 2021 annual meeting of shareholders). From and after the 2023 annual meeting of shareholders, but subject to the rights of holders of any class or series of Preferred Stock then outstanding, the Board of Directors shall consist of a single class of directors, whose terms shall not be staggered.
Subject to the rights of holders of any class or series of Preferred Stock then outstanding, the terms of the directors shall be as follows: (i) at the 2021 annual meeting of shareholders, the Class III directors and any other directors whose terms expire at the 2021 annual meeting of shareholders shall stand for election to hold office for a term expiring at the 2022 annual meeting of shareholders; (ii) at the 2022 annual meeting of shareholders, the Class I directors and any other directors whose terms expire at the 2022 annual meeting of shareholders shall stand for election to hold office for a term expiring at the 2023 annual meeting of shareholders; and (iii) at the 2023 annual meeting of shareholders, and at each annual meeting of shareholders thereafter, each director shall be elected for a term expiring at the first annual meeting of shareholders following the director’s election. Each director shall continue to hold office until the end of the term for which such director was elected and until the director’s successor shall have been elected and qualified or until the director’s prior death, resignation or removal. When the number of directors is changed, any newly created directorships or any decrease in directorships shall, until the 2023 annual meeting of shareholders, be apportioned among the classes by the Board of Directors as to make all classes as nearly equal in number as possible.]
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1The stricken through language represents existing language to be deleted, and language in brackets represents new language to be added. Multiple asterisks signify that text has been omitted, with no changes to the omitted text.
APPENDIX B
PROPOSED AMENDMENT AND RESTATEMENT OF THE COMPANY’S SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION TO ELIMINATE SUPERMAJORITY VOTING REQUIREMENTS FOR AMENDMENTS TO ITS AMENDED AND RESTATED BYLAWS
If Proposal 4 is approved by shareholders at the Annual Meeting, the following amendments to Article III of the Articles of Incorporation will be approved.2
ARTICLE III
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(A) Voting Powers
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2. Except as otherwise required by these Articles, the Act or the Board of Directors acting pursuant to subsection B of Section 13.1-707 (or any successor provision) of the Act:
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(iv) the vote required to constitute any voting group’s approval of an adoption, amendment or repeal of the Bylaws shall be more than two-thirds[a majority] of all votes entitled to be cast on the matter by such voting group.
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2The stricken through language represents existing language to be deleted, and language in brackets represents new language to be added. Multiple asterisks signify that text has been omitted, with no changes to the omitted text.
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MMMMMMMMMMMM MMMMMMMMMMMMMMM The Sample Company C123456789 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000004 ENDORSEMENT_LINE______________ SACKPACK_____________ MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 Your vote matters – here’s how to vote! You may vote online or by phone instead of mailing this card. Online GIof ntoo welwewct.reonnviicsivoontrienpgo, rts.com/COPI delete QR code and control # oΔr scan the≈ QR code — login details are located in the shaded bar below. Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at www.envisionreports.com/COPI Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + 1. Election of Joseph Ciaffoni, Michael Heffernan, R.Ph., and Gino Santini as Class II directors to hold office until the 2023 Annual Meeting. For Against Abstain For Against Abstain For Against Abstain 01 - Joseph Ciaffoni 02 - Michael Heffernan, R.Ph. 03 - Gino Santini For Against Abstain For Against Abstain 2. Approval of, on an advisory basis, the compensation of the Company’s named executive officers 3. Approval of a proposed amendment and restatement of the Company’s Second Amended and Restated Articles of Incorporation to declassify the Company’s Board of Directors 4. Approval of a proposed amendment and restatement of the Company’s Second Amended and Restated Articles of Incorporation to eliminate the supermajority voting requirement for amendments to the Company’s Amended and Restated Bylaws 5. Ratification of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020 Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. MMMMMMM C 1234567890 J N T 5 7 2 8 4 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 1 U P X 4 038BDC MMMMMMMMM B Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below A Proposals – The Board of Directors recommend a vote FOR all the nominees listed and FOR Proposals 2, 3, 4 and 5. Annual Meeting Proxy Card1234 5678 9012 345
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2020 Annual Meeting Admission Ticket 2020 Annual Meeting of Collegium Pharmaceutical, Inc. Shareholders May 20, 2020, 8:30 a.m. Eastern Time Virtually via live webcast www.meetingcenter.io/200054000 The 2020 Annual Meeting of Shareholders of Collegium Pharmaceutical, Inc. will be held on Wednesday, May 20, 2020, at 8:30 a.m. (Eastern Time), virtually via live webcast at www.meetingcenter.io/200054000. To access the virtual meeting, you must have the information that is printed in the shaded bar located on the reverse side of this form. The password for this meeting is — COPI2020. q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + Notice of 2020 Annual Meeting of Shareholders Virtually via live webcast www.meetingcenter.io/200054000 Proxy Solicited by Board of Directors for Annual Meeting — May 20, 2020 Joseph Ciaffoni and Paul Brannelly, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of Collegium Pharmaceutical, Inc. to be held on May 20, 2020 or at any postponement or adjournment thereof. Shares represented by this proxy will be voted by the shareholder. If no such directions are indicated, the Proxies will have authority to vote FOR all director nominees and FOR Proposals 2, 3, 4 and 5. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. (Items to be voted appear on reverse side) Change of Address — Please print new address below. Comments — Please print your comments below. + C Non-Voting Items Proxy — Collegium Pharmaceutical, Inc. Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/COPI
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