SECURITY OWNERSHIP OF CERTAIN BE
NEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 28, 2018, certain information with respect to the beneficial ownership of Common Stock by:
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•
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any person (including any group as that term is used in Section 13(d)(3) of the Exchange Act), known by us to be the beneficial owner of more than 5% of our voting securities;
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•
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each director and each nominee for director to the Company;
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|
•
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each of the executive officers named in the Summary Compensation Table appearing herein; and
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•
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all such executive officers, directors and nominees for director of the Company as a group.
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The number and percentage of shares beneficially owned are based on the aggregate of 54,008,113 shares of Common Stock outstanding as of February 16, 2018, adjusted as required by the rules promulgated by the SEC. We do not know of any arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change of control of the Company.
Name and Address of Beneficial Owner
|
|
Number of
Shares
|
|
|
Percent of
Common Stock
Outstanding
|
|
5% Stockholders:
|
|
|
|
|
|
|
|
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Entities affiliated with BlackRock, Inc.
(1)
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|
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7,239,394
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|
|
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13.4
|
%
|
55 East 52nd Street New York, NY 10055
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|
|
|
|
|
|
|
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Entities affiliated with BVF Partners L.P.
(1)
|
|
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5,721,888
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|
|
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10.6
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%
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1 Sansome Street, 30th Floor San Francisco, California 94104
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|
|
|
|
|
|
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Eastern Capital Limited.
(2)
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3,607,529
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|
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6.7
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%
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10 Market Street, #773 Grand Cayman KY1-9006, Cayman Islands
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|
|
|
|
|
|
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Entities affiliated with The Vanguard Group
(3)
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3,450,568
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|
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6.4
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%
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100 Vanguard Boulevard, Malvern, Pennsylvania 19355
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|
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|
|
|
|
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Entities affiliated with State Street Global Advisors
(3)
|
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2,715,972
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|
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5.0
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%
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1 Lincoln Street, Boston, Massachusetts 02111
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|
|
|
|
|
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Named Executive Officers:
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|
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|
|
|
|
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Robert I. Blum
(4)
|
|
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1,038,590
|
|
|
|
1.9
|
%
|
Ching Jaw
|
|
|
—
|
|
|
|
—
|
|
Fady I. Malik, M.D., Ph.D.
(5)
|
|
|
392,031
|
|
|
*
|
|
Bradley P. Morgan, Ph.D.
(6)
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|
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84,206
|
|
|
*
|
|
Andrew A. Wolff, M.D., F.A.C.C.
(7)
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|
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248,728
|
|
|
*
|
|
Non-Employee Directors:
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|
|
|
|
|
|
|
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Robert M. Califf, M.D.
(8)
|
|
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1,944
|
|
|
*
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|
Santo J. Costa
(8)
|
|
|
74,997
|
|
|
*
|
|
L. Patrick Gage, Ph.D.
(9)
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|
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208,216
|
|
|
*
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John T. Henderson, M.D., Ch.B.
(10)
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174,430
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|
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*
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Edward Kaye, M.D.
(8)
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54,150
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*
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B. Lynne Parshall, Esq.
(8)
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106,243
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*
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Sandford D. Smith
(8)
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117,565
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*
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Wendell Wierenga, Ph.D.
(8)
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113,788
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|
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*
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All directors and executive officers as a group (15 persons)
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2,893,421
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5.1
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%
|
*
Represents beneficial ownership of less than one percent (1%) of the outstanding shares of Common Stock.
(1)
|
Based on a Schedule 13G/A filed with the SEC on February 14, 2018.
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(2)
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B
ased on a Schedule 13G filed with the SEC on February 13, 2015.
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(3)
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Based on a Schedule 13G filed with the SEC on February 13, 2018.
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(4)
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Represents: (a) 65,680 shares of Common Stock held by Mr. Blum; (b) 2,083 shares of Common Stock held by the Brittany Blum 2003 Irrevocable Trust; (c) 2,083 shares of Common Stock held by the Bridget Blum 2003 Irrevocable Trust; and (d) 968,744 shares of Common Stock underlying options granted to Mr. Blum that are exercisable within 60 days of February 16, 2018. Mr. Blum disclaims beneficial ownership of the shares of Common Stock held by the trusts.
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(5)
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Represents: (a) 46,191 shares of Common Stock held by Dr. Malik; and (b) 345,840 shares of Common Stock underlying options granted to Dr. Malik that are exercisable within 60 days of February 16, 2018.
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(6)
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Represents: (a) 45,194 shares of Common Stock held by Dr. Morgan; and (b) 128,511 shares of Common Stock underlying options granted to Dr. Morgan that are exercisable within 60 days of February 16, 2018.
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(7)
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Represents: (a) 47,255 shares of Common Stock held by Dr. Wolff; and (b) 187,077 shares of Common Stock underlying options granted to Dr. Wolff that are exercisable within 60 days of February 28, 2018.
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9
(8)
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Consisting of shares exercisable within 60 days of February 16, 2018.
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(9)
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Represents (a) 31,850 shares of Common Stock held by Dr. Gage; (b) 1,850 shares held by Dr. Gage’s spouse; and (c) 176,376 shares of Common Stock underlying options granted to Dr. Gage that are exercisable within 60 days of February 16, 2018.
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(10)
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Represents (a) 250 shares of Common Stock held by Dr. Henderson; (b) 83 shares held by Dr. Henderson’s spouse; and (c) 174,097 shares of Common Stock underlying options granted to Dr. Henderson that are exercisable within 60 days of February 16, 2018. Dr. Henderson disclaims beneficial ownership of the shares of Common Stock held by his spouse.
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Except as otherwise noted above, the address of each person listed on the table is c/o Cytokinetics, Incorporated, 280 East Grand Avenue, South San Francisco, CA 94080.
10
BOARD OF D
IRECTORS
Our Board of Directors is composed of individuals whose knowledge, background, experience and judgment we believe to be valuable to us. The primary functions of our Board of Directors are to:
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•
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Review and approve our strategic direction and annual operating plan and monitor our performance;
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•
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Evaluate the President and Chief Executive Officer;
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•
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Review management performance and compensation;
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•
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Review management succession planning;
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•
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Advise and counsel management;
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•
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Monitor and manage potential conflicts of interests of management, board members and stockholders;
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•
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Oversee the integrity of financial information; and
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•
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Monitor the effectiveness of the governance practices under which the Board of Directors operates and make changes as needed.
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We do not have a formal diversity policy for selecting Board of Directors members. However, we believe it is important that the members of our Board of Directors collectively bring the experiences and skills appropriate to effectively carry out the Board of Directors’ responsibilities both as our business exists today and as we plan to develop an organization capable of successfully conducting late-stage clinical development and commercialization of our products. We therefore seek as members of our Board of Directors individuals with a variety of perspectives and the expertise and ability to provide advice and oversight in one or more of these areas: accounting controls, business strategy, risk management, strategic partnering, financial engineering, legal and regulatory compliance and compensation and retention practices.
The following table sets forth in alphabetical order the names of each member of our Board of Directors, their age, position, director class and committee membership at March 28, 2018.
Director
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Age
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Position/Class
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Audit
Committee
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Compensation
and Talent
Committee
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Nominating and
Governance
Committee
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Science and
Technology
Committee
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Robert I. Blum
|
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54
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CEO, Class II
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Robert M. Califf, M.D.
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66
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Class II
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✓
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Santo J. Costa
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72
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Class III
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Chair
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✓
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L. Patrick Gage, Ph.D.
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75
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Chair, Class I
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✓
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Chair
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✓
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John Henderson, M.D., Ch.B.
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|
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73
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|
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Class III
|
|
✓
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|
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✓
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✓
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Edward M. Kaye, M.D.
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|
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69
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|
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Class I
|
|
✓
|
|
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✓
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B. Lynne Parshall, Esq.
|
|
|
64
|
|
|
Class III
|
|
Chair
|
|
|
|
✓
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|
|
Sandford D. Smith
|
|
|
71
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|
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Class II
|
|
✓
|
|
✓
|
|
|
|
|
Wendell Wierenga, Ph.D.
|
|
|
70
|
|
|
Class I
|
|
|
|
✓
|
|
|
|
Chair
|
Director Skills, Experience and Background
Robert I. Blum
was appointed as our President and Chief Executive Officer and as a member of our Board of Directors in January 2007. Previous to that appointment, Mr. Blum served as our President from February 2006 to January 2007. He served as our Executive Vice President, Corporate Development and Commercial Operations and Chief Business Officer from September 2004 to February 2006. From January 2004 to September 2004, he served as our Executive Vice President, Corporate Development and Finance and Chief Financial Officer. From October 2001 to December 2003, he served as our Senior Vice President, Corporate Development and Finance and Chief Financial Officer. From July 1998 to September 2001, Mr. Blum was our Vice President, Business Development. Prior to joining us in July 1998, he was Director, Marketing at COR Therapeutics, Inc. since 1996. From 1991 to 1996, he was Director, Business Development at COR Therapeutics. Prior to that, Mr. Blum performed roles of increasing responsibility in sales, marketing and other pharmaceutical business functions at Marion Laboratories, Inc. and Syntex Corporation. Mr. Blum received B.A. degrees in Human Biology and Economics from Stanford University and an M.B.A. from Harvard Business School.
11
Mr. Blum brings to our Board of Directors a deep familiarity with our operations, strategy and vision, as well as a record of successful corporate management, strategic
partnering and financing.
Robert M. Califf, M.D.
has served as a member of our Board of Directors since February 2018. Dr. Califf is the Vice Chancellor for Health Data Science at Duke Health and Director of the Duke University Center for Health Data Science. He also serves as an advisor to the senior management team at Verily Life Sciences, a subsidiary of Alphabet, Inc. (parent company to Google) and was appointed an adjunct professor of medicine at Stanford University. Dr. Califf served as Commissioner of the United States Food and Drug Administration (FDA) between February 2016 and January 2017, and as Deputy Commissioner of the FDA’s Office of Medical Products and Tobacco from January 2015 until his appointment as FDA Commissioner. Prior to joining the FDA, Dr. Califf was Professor of Medicine and Vice Chancellor for Clinical and Translational Research at Duke University. He also served as Director of the Duke Translational Medicine Institute and founding Director of the Duke Clinical Research Institute. Dr. Califf is a member of the National Academy of Medicine (NAM) and has served on various committees for the NAM. He has also served on the Board of Scientific Counselors for the National Library of Medicine, as well as on advisory committees for the National Cancer Institute, the National Heart, Lung, and Blood Institute, the National Institute of Environmental Health Sciences and the Council of the National Institute on Aging. Dr. Califf held leadership positions and board appointments for biopharmaceutical companies including Portola Pharmaceuticals, Proventus and Nitrox, LLC. Dr. Califf received his medical degree from the Duke University School of Medicine in Durham, NC and completed his residency in internal medicine at the University of California, San Francisco and a fellowship in cardiology at Duke University.
Dr. Califf brings to our Board of Directors extensive experience in biopharmaceutical research and development, including relevant clinical and regulatory and expertise. He also has extensive experience as a public company board member and public policy.
Santo J. Costa
has served as a member of our Board of Directors since 2010. Since 2007, Mr. Costa has served as Of Counsel to the law firm of Smith, Anderson, Blount, Dorsett, Mitchell and Jernigan, L.L.P. of Raleigh, North Carolina, specializing in corporate law for healthcare companies. From 1994 to 2001, he held various positions at Quintiles Transnational Corporation, including as Vice Chairman, President and Chief Operating Officer. Prior to joining Quintiles, Mr. Costa spent 23 years in the pharmaceutical industry, most recently as General Counsel and Senior Vice President, Administration with Glaxo Inc. Prior to joining Glaxo, he served as U.S. Area Counsel with Merrell Dow Pharmaceuticals and as Food & Drug Counsel with Norwich Eaton Pharmaceuticals, Inc. Mr. Costa has served as Chairman of the Board of Alchemia Limited, a biopharmaceutical company, from March 2014 to June 2015. He served on the Board of Directors of Magor Corporation, formerly Biovest Corp. I, from March 2010 until March 2013. He served as Chairman of the Board of LaboPharm, Inc. from 2006 to 2011 and a director of OSI Pharmaceuticals from 2006 to 2010, as well as serving as a director at other private companies. Mr. Costa earned both a B.S. in Pharmacy and a J.D. from St. John’s University.
Mr. Costa brings to our Board of Directors broad operational leadership experience in the pharmaceutical and clinical services industries, including relevant legal, regulatory, governance and policy expertise. He also has extensive experience as a public company executive and board member in the pharmaceutical and biotechnology industries.
L. Patrick Gage, Ph.D.
has served as a member of our Board of Directors since 2009 and as Chairman of the Board of Directors since 2010. Dr. Gage serves as a consultant to the biopharmaceutical industry, including serving as an advisor to venture capital firms. From 1998 to 2002, Dr. Gage was President of Wyeth Research and subsequently also Senior Vice President, Science and Technology for American Home Products, parent company of Wyeth Research. From 1989 to 1998, he held roles of increasing responsibility at Genetics Institute, Inc., first as head of Research and Development, then as Chief Operating Officer and eventually as President. From 1971 to 1989, Dr. Gage held various positions in research management with Hoffmann-La Roche Inc., most recently serving as Vice President responsible for U.S. drug discovery. Dr. Gage has served as the Chairman of the Board of Directors of Tetraphase Pharmaceuticals since April 2013. Dr. Gage earned a bachelor’s degree in Physics from the Massachusetts Institute of Technology and a Ph.D. in Biophysics from the University of Chicago.
Dr. Gage brings to our Board of Directors extensive experience as a public company executive and board member in the pharmaceutical and biotechnology industries and in strategies for bringing breakthrough medicines to approval and commercialization.
12
John T. Henderson, M.D.
, Ch.B.
has serv
ed as a member of our Board of Directors since 2009. Since 2000, Dr. Henderson has served as a consultant to the pharmaceutical industry as president of Futurepharm LLC. Until his retirement in 2000, Dr. Henderson was with Pfizer Inc. for over 25 years, mo
st recently as a Vice President in the Pfizer Pharmaceuticals Group. Dr. Henderson previously held Vice Presidential level positions with Pfizer in Research and Development in Europe and later in Japan. He was also Vice President, Medical for Pfizer’s Euro
pe, U.S. and International Pharmaceuticals groups. Dr. Henderson has served on the Board of Directors of Myriad Genetics, Inc., a healthcare diagnostics company, since 2004, and has served as the Chairman of Myriad’s Board of Directors since 2005. He serve
d on the Board of Directors of Myrexis, Inc. (formerly Myriad Pharmaceuticals, Inc.) from June 2009 until January 2013. Dr. Henderson earned his bachelor of science and medical degrees from the University of Edinburgh and is a Fellow of the Royal College o
f Physicians (Ed.) and the Faculty of Pharmaceutical Medicine.
Dr. Henderson brings to our Board of Directors broad experience in matters relating to global pharmaceutical drug development in a wide range of therapeutic areas and stages of business development, and an extensive background as a public company executive, board member and consultant in the pharmaceutical industry.
Edward M. Kaye, M.D.,
has served as a member of our Board of Directors since May 2016. Dr. Kaye has served as the Chief Executive Officer of Stoke Therapeutics since 2017. Previously, he served as the Chief Executive Officer of Sarepta, as well as the Chief Medical Officer, from 2011 to 2017. Prior to joining Sarepta, Dr. Kaye was employed by Genzyme Corporation for ten years, holding various senior management positions, the most recent of which was Group Vice President of Clinical Development, in which he supervised clinical research in lysosomal storage disease programs and genetic neurological disorders. Previously, Dr. Kaye served as Chief of Biochemical Genetics at Children’s Hospital of Philadelphia and Associate Professor of Neurology and Pediatrics at the University Of Pennsylvania School Of Medicine. Dr. Kaye serves as a Neurological Consultant at the Children’s Hospital of Boston and is on the editorial boards of a number of medical journals. He is also a member of several scientific advisory boards, including United Leukodystrophy Foundation, Spinal Muscular Atrophy Foundation, CureCMD, CureDuchenne and Prize4Life. Dr. Kaye received his medical education and pediatric training at Loyola University Stritch School of Medicine and University Hospital, child neurology training at Boston City Hospital, Boston University, and completed his training as a neurochemical research fellow at Bedford VA Hospital, Boston University.
Dr. Kaye brings to our Board of Directors extensive clinical research and development experience, particularly his expertise in rare neuromuscular diseases that is highly relevant as we advance our clinical programs in ALS and SMA into late-stage development.
B. Lynne Parshall, Esq.
has served as a member of our Board of Directors since February 2013. Ms. Parshall currently serves on the Board of Directors and as the Senior Strategic Advisor of Ionis Pharmaceuticals, Inc. She has held various positions of increasing responsibilities at Ionis since 1991. Prior to joining Ionis, Ms. Parshall was a partner at the law firm of Cooley Godward LLP. From July 2005 to August 2009, Ms. Parshall also served as a member of the Board of Directors of Cardiodynamics International Corporation. Ms. Parshall has served as a member of the Board of Directors of Regulus Therapeutics Inc. since January 2009. She is a member of the Licensing Executives Society and a member of the American, California, and San Diego bar associations. Ms. Parshall holds a J.D. from Stanford Law School and a B.A. from Harvard University.
Ms. Parshall brings to our Board of Directors extensive operational and business development experience, particularly in the advancement and funding of potential products directed to specialty care and orphan drug designated indications.
Sandford D. Smith
has served as a member of our Board of Directors since March 2012.
Since December 2011, Mr. Smith has served as Founder and Chairman of Global Biolink Partners. From 1996 to 2011, Mr. Smith held various positions at Sanofi-Genzyme (formerly Genzyme Corporation), most recently leading the integration of Genzyme’s international business into Sanofi’s global organization. Prior to that, he served as Executive Vice President of Genzyme Corporation and President of Genzyme International. From 1986 to 1996, Mr. Smith was President, Chief Executive Officer, and a member of the Board of Directors of RepliGen Corporation. From 1977 to 1985, Mr. Smith held various positions at Bristol-Myers Squibb, most recently serving as Vice President of Business Development and Strategic Planning for the Pharmaceutical and Nutritional Division.
Mr. Smith has served on the Board of Directors of Akcea Therapeutics since March 2017, Neuralstem, Inc. since May 2014, and the Board of Directors of Arpicus Biosciences, Inc. since August 2014. He served on the Board of Directors of Novelion Therapeutics from November 2016 to March 2017, Aegerion Pharmaceuticals, Inc. from January 2012 to November
13
2016, and on the Board of Directors of NVenta Biopharmaceuticals Corporation from 2007 to 2009. Mr. Smith earned a B.S. from the University of Denver.
Mr. Smith brings to our Board of Directors broad experience in matters relating to the launch and commercialization of new drugs in a wide range of therapeutic areas, and in particular drugs targeting rare disease indications. He also has extensive experience as a public company executive and board member in the pharmaceutical and biotechnology industries.
Wendell Wierenga, Ph.D.
has served as a member of our Board of Directors since February 2011. From June 2011 to January 2014, Dr. Wierenga served as Executive Vice President, Research and Development, at Santarus, Inc., which was acquired by Salix Inc., which was subsequently acquired by Valeant Pharmaceuticals International, Inc. From 2006 to 2011, he served as Executive Vice President, Research and Development, at Ambit Biosciences Corporation. From 2003 to 2006, he served as Executive Vice President of Research and Development at Neurocrine Biosciences, Inc. From 2000 to 2003, Dr. Wierenga served as Chief Executive Officer of Syrrx, Inc. (now part of Takeda Pharmaceutical Company). From 1990 to 2000, he was Senior Vice President of Worldwide Pharmaceutical Sciences, Technologies and Development at Parke-Davis/Warner Lambert (now Pfizer, Inc.) Prior to that, Dr. Wierenga spent 16 years at Upjohn Pharmaceuticals in research and drug discovery roles, most recently as Executive Director of Discovery Research. Dr. Wierenga has served on the Board of Directors of XenoPort, Inc. from 2001 to August 2016, the Board of Directors of Ocera Therapeutics, Inc. since December 2013, the Board of Directors of Apricus Biosciences, Inc. and Concert Pharmaceuticals, Inc. since March 2014 and on the Board of Directors of Anacor Pharmaceuticals, Inc. from 2014 to July 2016. He also serves as the Chairman of the Board of Directors of a privately held pharmaceutical research and development company. Dr. Wierenga also served on the Board of Directors of Onyx Pharmaceuticals, Inc. from 1996 to 2013. Dr. Wierenga holds a B.A. from Hope College and a Ph.D. in Chemistry from Stanford University.
Dr. Wierenga brings to our Board of Directors over thirty years of experience in matters relating to pharmaceutical drug discovery and development in a wide range of therapeutic areas, and an extensive background as a public company executive and board member in the pharmaceutical and biotechnology industries.
B
oard Leadership Structure
Our Board of Directors does not have a policy on whether the same person should serve as both the Chief Executive Officer and Chairman of the Board or, if the roles are separate, whether the Chairman should be selected from the non-employee directors or should be an employee. The Board of Directors believes that it should have the flexibility to make these determinations in the way that it believes best provides appropriate leadership for us at a given time.
The Board believes that its current leadership structure, with Mr. Blum serving as Chief Executive Officer and Dr. Gage serving as Chairman, is appropriate for us at this time. Both leaders are actively engaged on significant matters affecting us, such as long-term strategy. The Chief Executive Officer has overall responsibility for all aspects of our operations, while the Chairman has a greater focus on governance, including oversight of the Board of Directors. We believe this balance of shared leadership between the two positions is a strength for us.
Board Role in Risk Oversight
The role of our Board of Directors is to oversee the President and Chief Executive Officer and other senior management in the competent, lawful and ethical operation of the Company, including management’s establishment and implementation of appropriate practices and policies with respect to areas of potentially significant risk to us. Management routinely reports to the Board of Directors regarding any potential areas of significant risk. These reports include discussions of current and new areas of potential operational, legal or financial risk and status reports on risk mitigation programs undertaken by us. The Board of Directors as a whole is responsible for such risk oversight, but administers certain of its risk oversight functions through its committees, such as the Audit Committee, the Compensation and Talent Committee and the Nominating and Governance Committee.
The Audit Committee is responsible for the oversight of our accounting and financial reporting processes, including our internal control systems. In addition, the Audit Committee oversees and reviews our financially related risk management practices, including our investment policy.
As part of the of the Compensation and Talent Committee’s risk oversight function, it considers whether our compensation policies and practices for our employees create risks that are reasonably likely to have a material
14
adverse effect on us. In conducting this evaluation, the Compensation and Talent Committee ha
s reviewed our current practices and procedures for awarding cash and equity compensation to employees through the annual performance review process, particularly as such practices and procedures apply to the establishment of the goals that are taken into
consideration in the payment of bonuses. The Compensation and Talent Committee has determined that these practices do not encourage inappropriate risk-taking. In particular, because we are a development-stage company with no commercial sales, the Compensat
ion and Talent Committee has concluded that our employees are not incentivized to take inappropriate risks to meet short-term goals. Further, the Compensation and Talent Committee believes that there is sufficient Board of Director oversight of our process
es for compensation determinations to avoid the establishment of incentives that are materially adverse to our interests. Accordingly, the Compensation and Talent Committee has determined that our compensation policies at this time do not create risks that
are reasonably likely to have a material adverse effect on the Company.
The Nominating and Governance Committee oversees the risks associated with our corporate governance and operating practices, including those relating to the composition of Board of Directors, the structure and function of Board committees, and meeting logistics and policies. The Nominating and Governance Committee regularly reviews issues and developments relating to corporate governance and formulates and recommends corporate governance standards to the Board of Directors.
Independence of Directors
Each of our directors is independent as defined under the Nasdaq listing standards, except for Robert I. Blum, our President and Chief Executive Officer, who is not independent by virtue of his employment with the Company.
There is no family relationship between any director and executive officer of the Company.
Board of Directors Meetings and Committees
Our Board of Directors held four meetings during the fiscal year ended December 31, 2017. Each of the directors serving during fiscal year 2017 attended at least 75% of the aggregate of all meetings of the Board of Directors and the committees of the Board of Directors upon which such director served during his or her tenure.
We do not have formal policies regarding attendance by members of the Board of Directors at our annual meetings of stockholders. Robert I. Blum, Santo Costa, L. Patrick Gage, Ed Kaye, John T. Henderson, Lynne Parshall, Sandford D. Smith and Wendell Wierenga attended the 2017 Annual Meeting of Stockholders.
The Board of Directors has a standing Audit Committee, a Compensation and Talent Committee, a Nominating and Governance Committee and a Science and Technology Committee and established written charters for each of these committee. All members of these committees are independent as currently defined by Nasdaq listing standards. Charters for these committees are on our website
cytokinetics.com.
The information found on our website is not part of this or any other report filed with or furnished to the SEC.
Audit Committee.
The Audit Committee consists of directors Ms. Parshall, Dr. Kaye (effective February 4, 2018), Dr. Henderson and Mr.
Smith. All members of the Audit Committee are independent (as independence is currently defined in Rules 5605(c)(2)(A)(i) and (ii) of the Nasdaq listing standards). The Board of Directors determined that Ms. Parshall is an “audit committee financial expert” as defined in the SEC rules, based on her experience as a Chief Operating Officer of a life science company and the other experience included in her biography above.
The Audit Committee reviews our critical accounting policies and practices, consults with and reviews the services provided by our independent registered public accounting firm and selects our independent registered public accounting firm.
The Audit Committee held eight meetings during fiscal year 2017.
Compensation and Talent Committee.
The Compensation and Talent Committee consists of directors Mr. Costa, Dr. Gage, Mr. Smith and Dr.
Wierenga. All members of the Compensation and Talent Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the Nasdaq listing standards) and Rule 5605(d)(2), as applied to compensation committee members.
The Compensation and Talent Committee reviews and approves the salaries and incentive compensation of our executive officers and administers our stock plans and employee benefit plans. The Compensation and Talent
15
Committee, in consultation with the third-party executive compensation consultant and discussion with management, forms its own recommendations for all executive compensation (base salary, bonus, equity and other benefits)
and director compensation. All new hire stock option and stock award grants to employees above the senior director level, including our executive officers, are approved by the Compensation and Talent Committee. In addition, the Compensation and Talent Com
mittee approves the annual stock option grants for all employees as part of the annual performance review process. The Compensation and Talent Committee may engage the services of third-party professional executive compensation consulting firms to assist i
n benchmarking data from competitive peer group companies.
The Compensation and Talent Committee has delegated to Robert I. Blum, as President and Chief Executive Officer, the authorization to approve new hire stock option grants, within pre-approved new hire grant guidelines, for new hires at or below the senior director level. Further discussion of the role and function of our Compensation and Talent Committee can be found in the section below entitled “Compensation Discussion and Analysis.”
The Compensation and Talent Committee held six meetings during fiscal year 2017.
Nominating and Governance Committee.
The Nominating and Governance Committee consists of directors Mr. Costa, Dr. Gage, Dr. Henderson, and Ms. Parshall. All members of the Nominating and Governance Committee are independent (as independence is currently defined in Rule 5605(a)(2) and 5605(d)(2) of the Nasdaq listing standards).
The Nominating and Governance Committee assists the Board of Directors in identifying qualified persons to serve as directors, evaluates all proposed director nominees, evaluates incumbent directors before recommending re-nomination, and recommends approved candidates to the Board of Directors for appointment or re-nomination to Company stockholders. The Nominating and Governance Committee also regularly reviews issues and developments relating to corporate governance and formulates and recommends corporate governance standards to the Board of Directors. If there is a change in a director’s employment, the Nominating and Governance Committee evaluates and makes a recommendation to the Board of Directors as to whether the potential termination of the director is appropriate.
The Nominating and Governance Committee has used and may use in the future search firms to assist in the identification and evaluation of qualified candidates to join the Board of Directors.
The Nominating and Governance Committee held four meetings during fiscal year 2017.
To date, the Nominating and Governance Committee has not established a policy for considering candidates for director nominated by our stockholders, and will consider director candidates nominated by stockholders on a case-by-case basis, as appropriate. Because those candidates will receive substantially the same consideration that candidates recommended by members of the Board of Directors receive, the Board of Directors believes that it is appropriate for us to not have a formal policy for considering such candidates at this time. Stockholders may nominate candidates for director in accordance with the advance notice and other procedures contained in our Bylaws.
Science and Technology Committee.
Our Board of Directors established the Science and Technology Committee in September 2014. The Science and Technology Committee consists of directors Dr. Califf (effective February 7, 2018), Dr. Gage, Dr. Henderson, Dr. Kaye and Dr. Wierenga.
The Science and Technology Committee provides guidance to management and the Board of Directors on emerging trends in healthcare, discovery research and clinical development, and reviews and advises management and the Board of Directors on the overall strategic direction and investment in our research, development and technology programs. The Science and Technology Committee regularly reviews research programs and progress against goals, assesses the capabilities of key scientific and medical personnel and the depth and breadth of the scientific resources available to us, as well as reviewing and advising on regulatory strategy.
The Science and Technology Committee held four meetings during fiscal year 2017.
16
Communicating with the Board of Directors.
We do not have a formal policy regarding stockholder communication with the Board of Directors. Our stockholders may communicate directly with the Board of Directors in writing, addressed to:
Board of Directors
c/o Corporate Secretary
Cytokinetics, Incorporated
280 East Grand Avenue
South San Francisco, California 94080
or by email to:
investor@cytokinetics.com
The Corporate Secretary will review each stockholder communication. The Corporate Secretary will forward to the entire Board of Directors (or to members of a Board of Directors’ committee, if the communication relates to a subject matter clearly within that committee’s area of responsibility) each communication that relates to our business or governance if the communication: (i) is not offensive, (ii) is legible in form and reasonably understandable in content, and (iii) is not merely related to a personal grievance against us or an individual or the purpose of which is to further a personal interest not shared by the other stockholders generally. Stockholders who would like their submissions directed to an individual member of the Board of Directors may so specify, and the communication will be forwarded, as appropriate.
17
EXECUTIVE
OFFICERS
The following table sets forth the names of our executive officers and their ages and positions with us as of March 28, 2018:
Name
|
|
Age
|
|
|
Position
|
Robert I. Blum
|
|
|
54
|
|
|
President and Chief Executive Officer
|
Ching Jaw
|
|
|
55
|
|
|
Senior Vice President, Chief Financial Officer
|
Fady I. Malik, M.D., Ph.D.
|
|
|
53
|
|
|
Executive Vice President, Research and Development
|
David W. Cragg
|
|
|
62
|
|
|
Senior Vice President, Human Resources
|
Executive Skills, Experience and Background
Robert I. Blum’s
biography is set forth under “Board of Directors” above.
Ching Jaw
has served as our Senior Vice President and Chief Financial Officer since June 2017.
He was Chief Financial Officer of North America Pharmaceuticals and as Chair of the North America Regional Finance Council at Sanofi, a pharmaceutical company, from 2015 to 2017. From 2012 to 2015, Ching was Chief Financial Officer for Ventana Medical Systems, a member of the Roche Group, a pharmaceutical company. Between 2001 and 2012, he held a wide variety of finance positions with Genentech Inc., now part of the Roche Group, including Chief Financial Officer of Roche in Taiwan and as Head of R&D Finance at Genentech. Mr. Jaw holds a Bachelor of Science degree in Naval Architecture from National Taiwan University, a Master of Science in Aerospace Engineering from the University of Michigan, and an M.B.A. in Finance and General Management from the University of Chicago Graduate School of Business.
David W. Cragg
has served as our Senior Vice President, Human Resources since July 2009. He served as our Vice President of Human Resources from February 2005 through June 2009. From October 2000 until January 2005, Mr. Cragg managed his own human resources consulting practice. From March 2000 until its acquisition in September 2000 by Yahoo!, Inc., he was Vice President, Human Resources for eGroups Inc., an Internet email management company. Prior to October 2000, Mr. Cragg was a Principal Human Resources Consultant at Genentech, Inc. Mr. Cragg received a B.A. in Industrial Psychology from the University of California, Santa Cruz.
Fady I. Malik, M.D., Ph.D.
, has served as our Executive Vice President of Research and Development since November 2015. Dr. Malik served as our Senior Vice President of Research and Development from August 2014 to November 2015. Dr. Malik served as our Senior Vice President of Research and Early Development from June 2012 to August 2014. He has been with Cytokinetics since our inception in 1998, serving in a variety of roles, including Vice President, Biology from March 2008 to June 2012, all focused towards building our cardiovascular and muscle programs. Since 2000, Dr. Malik has held an appointment in the Cardiology Division of the University of California, San Francisco, where he is currently a Clinical Professor and an Attending Interventional Cardiologist at the San Francisco Veterans Administration Medical Center. Dr. Malik received a B.S. from the University of California at Berkeley, a Ph.D. from the University of California at San Francisco and his M.D. from the University of California at San Francisco.
18
EXECUTIVE CO
MPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis explains our compensation philosophy, policies and practices for 2017 for the following individuals, who we refer to as our Named Executive Officers:
Name
|
|
Position
|
Robert I. Blum
|
|
President and Chief Executive Officer
|
Ching Jaw
|
|
Senior Vice President, Chief Financial Officer
|
Fady Malik, M.D., Ph.D.
|
|
Executive Vice President, Research and Development
|
Bradley P. Morgan, Ph.D.
|
|
Senior Vice President, Research and Non-Clinical Development
|
Andrew A. Wolff, M.D., F.A.C.C.
|
|
Senior Vice President, Chief Medical Officer
|
Sharon A. Barbari
|
|
Former Executive Vice President, Finance and Chief Financial Officer
|
Mr. Blum is our Principal Executive Officer, Mr. Jaw became our Principal Financial Officer when he joined us in June 2017 and Mr. Barbari was our Principal Financial Officer until her retirement in June 2017.
Overview of Compensation Program
We design our executive compensation program to provide a competitive compensation package that focuses on corporate and individual performance and long-term results, while maximizing retention.
The highlights of our 2017 executive compensation program include:
|
•
|
We provided merit salary increases in the range of 2% to 3% to members of our Named Executive Officers in 2017 (other than Mr. Jaw, who was newly hired in 2017) and granted merit salary increases to other employees in 2017 consistent with our past practices.
|
|
•
|
We provided an annual discretionary bonus designed to reward individuals for achieving corporate goals and, except for our President and Chief Executive Officer (our “CEO”), individual goals in their functional area.
|
|
•
|
Our Named Executive Officers were granted stock options and equity awards in recognition of their performance in 2016.
|
At our 2017 Annual Meeting of Stockholders, approximately 99% of the shares voted were cast in favor of our executive compensation for 2016 and a majority of shares voted were cast in favor of submitting fu
ture advisory votes on executive compensation to the stockholders
every
year
. The Compensation and Talent Committee of the Board of Directors (the “Committee”) believes that this vote affirms our stockholders’ support for our compensation practices. After considering the outcome of the advisory vote, the Committee made no significant changes to the executive compensation program for 2017. We expect to hold our advisory vote on executive compensation at the 2019 Annual Meeting.
Compensation Philosophy and Objectives
The Committee works to structure our executive compensation program to reward achievement of our business goals, align the executive officers’ interests with those of our stockholders and encourage our executives to build a sustainable biopharmaceutical company. The Committee seeks to ensure that we maintain our ability to attract and retain superior employees in key positions by providing our executives compensation that is competitive relative to the compensation paid to similarly situated executives in a defined group of peer companies and the broader marketplace from which we recruit and compete for talent. The Committee seeks to ensure that the total compensation paid to our executive officers is fair, reasonable, competitive and reflective of their performance and contributions toward corporate goals and objectives. To meet these objectives, we provide base salary, discretionary cash bonus, equity awards, broad-based employee benefits with limited prerequisites, and severance benefits upon a loss of position in connection with a change in control.
19
In determining the amount and form of these compensation elements, the Committee considers a number of factors, including:
|
•
|
compensation levels paid to similarly situated executives by our Peer Companies (as defined below), to attract and retain executives in a competitive market for talent;
|
|
•
|
corporate and individual performance, including performance in relation to our business plan, and execution of individual, team and company-wide strategic initiatives, to focus executives on achieving our business objectives;
|
|
•
|
the experiences and knowledge of our executives;
|
|
•
|
internal pay equity of the compensation paid to one executive officer as compared to another — that is, the compensation paid to each executive should reflect the importance of his or her role to the Company as compared to the roles of the other executives — to promote teamwork and contribute to retention, while recognizing that compensation opportunities should increase based on increased levels of responsibility among officers;
|
|
•
|
broader economic conditions, to ensure that our pay strategies account for how the larger economic environment impacts our business, such as the relatively high cost of living and competitive life science marketplace in the Bay Area; and
|
|
•
|
the potential dilutive effect of equity awards on our stockholders.
|
Role of the Committee
The Committee is generally responsible for reviewing, modifying, approving and otherwise overseeing the compensation policies and practices applicable to all of our employees, including the administration of our equity plans and employee benefit plans. As part of its responsibilities, the Committee establishes and implements compensation decisions for our Named Executive Officers and evaluates the success of those decisions in supporting our compensation philosophy for our Named Executive Officers. The Committee reports its decisions regarding executive compensation matters to the Board of Directors.
As part of its deliberations, in any given year, the Committee may review and consider materials such as Company financial reports, financial projections, operational data and stock performance data. The Committee also reviews information such as total compensation that may become payable in various hypothetical scenarios, executive stock ownership information, analyses of historical executive compensation levels and current company-wide compensation levels and benchmarking data provided by the independent compensation consultant. The Committee also seeks input from Radford Surveys + Consulting, an Aon Hewitt Company (“Radford”), the Committee’s independent compensation consultant and our CEO.
Role of the Independent Compensation Consultant
The Committee retained Radford as its independent compensation consultant for compensation decisions in 2017. The Committee assessed Radford’s independence and concluded that no conflict of interest exists that would prevent Radford from independently advising the Committee. The Committee intends to continue to assess the independence of any of our compensation advisors, consistent with applicable NASDAQ listing standards.
While we pay for Radford’s services, the Compensation Committee has the authority to engage and terminate Radford’s services. Radford has no authority to make compensation decisions on behalf of the Committee or the Company. Radford may attend Committee meetings either in person or via conference call as deemed appropriate by the Committee Chair. Our management provides historical data, reviews reports for accuracy and interacts directly with Radford. The Compensation Committee, at its discretion, may also communicate and meet separately with Radford.
For 2017, Radford provided the following services to the Committee:
|
•
|
reviewed and provided recommendations on the composition of our 2017 Peer Companies;
|
|
•
|
provided compensation data related to executives at our 2017 Peer Companies based on data from SEC filings and Radford’s Life Science Survey;
|
|
•
|
conducted a competitive review of the compensation of our Named Executive Officers, including advising on the design and structure of our equity incentive compensation program;
|
20
|
•
|
conducted a detailed assessment of our 2017 Peer Companies board of directors’ compensation practices and d
eveloped a summary report of findings and recommendations, including advising on the design and structure of our equity incentive compensation program; and
|
|
•
|
prepared an analysis of our share usage under our equity incentive plan in comparison to our 2017 Peer Companies based on data from SEC filings.
|
Radford did not provide any other executive compensation services to us in 2017. We separately engaged Radford to provide our management with survey data and advice regarding compensation and equity awards for our broader employee base. The fee for this engagement in 2017 was less than $20,000. The Committee determined that these services did not constitute a conflict of interest or prevent Radford from objectively performing its work for the Committee.
Role of Executive Officers in Compensation Decisions
For compensation decisions in 2017, our CEO aided the Committee by providing recommendations regarding the compensation of the Named Executive Officers other than himself. Each of those Named Executive Officer participated in an annual performance review with our CEO or their direct manager to provide input about his or her contributions to our goals and objectives for 2017. Our CEO participated in a review process, with respect to his own performance, with a representative from the Board of Directors and Committee member. The Committee assessed the recommendations of our CEO (and, with respect to our CEO, the recommendations of the Board of Directors’ representative) in the context of each Named Executive Officer’s performance. No Named Executive Officer participated directly in the Committee’s final determinations regarding the amount of any component of his or her 2017 compensation.
Our Human Resources, Finance and Legal departments work with our CEO to design and develop compensation programs for our Named Executive Officers, to recommend changes to existing compensation programs, to establish corporate and individual performance goals, to prepare peer data comparisons and other Committee briefing materials and ultimately to implement the Committee’s decisions. Our Senior Vice President, Human Resources and our CEO meet separately with Radford to convey information on proposals that management may make to the Committee, as well as to assist Radford in collecting information about us to perform its duties for the Committee.
Benchmarking
The Committee believes it is important when making its compensation-related decisions to be informed as to current compensation practices of comparable publicly held companies in the life sciences industry. the Committee engaged Radford to analyze the executive compensation practices of a number of comparable publicly held companies in the life sciences industry (the “Peer Companies). The Committee, in consultation with Radford, reviews and adjusts the list of Peer Companies annually to ensure that the list provides a current and useful comparison of companies for use as a means of comparing our executive compensation levels relative to the market. Companies are evaluated and adjusted as appropriate for inclusion in these analyses based on business characteristics similar to ours. Potential companies are selected based on criteria that include business model, stage of development, market capitalization, year of initial public offering, employee headcount, research and development expenditures, cash reserves and revenue.
In late 2016, The Committee approved the following Peer Companies for use in making compensation decisions in 2017:
• Acceleron Pharma
|
|
• ChemoCentryx
|
• Adamas Pharmaceuticals
|
|
• Concert Pharmaceuticals
|
• Aerie Pharmaceuticals
|
|
• Five Prime Therapeutics
|
• Amicus Therapeutics, Inc.
|
|
• Geron Corporation
|
• Anthera Pharmaceuticals, Inc.
|
|
• Insmed
|
• Ardelyx
|
|
• Omeros Corporation
|
• ArQule, Inc.
|
|
• OncoMed Pharmaceuticals, Inc.
|
• Array Biopharma, Inc.
|
|
• Regulus Therapeutics
|
• Atara Biotherapeutics
|
|
• Rigel Pharmaceuticals, Inc.
|
• BioCryst Pharmaceuticals
|
|
• Sangamo Biosciences, Inc.
|
21
At the time of the determination, these companies
each
had a market capitalization between $116 million and $1,453 million, had an employee head count between 17 and 185, and were generally at a comparable stage to us in the development of their lead drug
candidate. The Committee determined that the foregoing selection criteria were appropriate for selecting the Peer Companies for 2017 because at such time, we were a late-stage biopharmaceutical company with a market capitalization of approximately $363 mil
lion and 100 employees.
Radford prepared an analysis of the compensation practices of the Peer Companies as reported in their proxy statements, and offered additional analysis based on the compensation practices of a comparable group of life science companies (a subset of what is included in the broader Radford Life Science Survey).
The Committee reviewed the cash and equity components from these analyses in setting a total compensation package for each executive officer as well as reviewing each executive officer’s past and anticipated contributions to the Company, current compensation package, compensation market trends for competitive positions, retention risks and overall performance. The Committee believes that considering this benchmark information to be important in compensation-related decisions. Other factors, such as economic conditions, internal pay equity may play an important role with respect to the compensation offered to an executive in any given year.
The Committee aims to provide target total cash and long-term equity compensation at or around the median of the compensation paid to similarly situated executives employed by the Peer Companies for target level performance, with compensation above this level possible for exceptional performance. To achieve this positioning for target levels of compensation, the Committee generally sets the various compensation elements as follows:
|
•
|
base salaries between the 50th and 75th percentile for comparable positions;
|
|
•
|
target cash bonus compensation at a level such that, when combined with base salary, the target total cash compensation is at or around the median for comparable positions; and
|
|
•
|
target long-term equity compensation at a level such that, when combined with target total cash compensation, target total cash and equity compensation is at or around the median for comparable positions.
|
Compensation Components
Base Salary.
We provide base salary as the fixed source of compensation for our executive officers for the services they provide to us during the year and to balance the impact of having the bulk of the remainder of their compensation “at risk” in the form of discretionary annual cash bonuses and equity-based incentive compensation. The Committee recognizes the importance of base salaries as an element of compensation that helps to attract and retain talented executives.
Annual Bonus.
We structured our annual cash bonuses to provide incentives for our Named Executive Officers to achieve our annual corporate and individual performance objectives.
Target Bonuses.
Each Named Executive Officer’s annual target bonus is expressed as a percentage of his or her base salary and is set at a level that, upon 100% achievement of our corporate goals and the Named Executive Officer’s individual performance goals, falls at the median level for a similar executive position as compared to the Peer Company data. In determining the split of the target bonus as between corporate and individual performance, the Committee believes that the more senior a Named Executive Officer’s position and operational responsibilities, the greater the percentage of his or her bonus that should be weighted to our corporate rather than individual achievement. For example, our President and Chief Executive Officer’s bonus is based entirely on corporate achievement and not on individual achievement.
In the first quarter of each year, the Committee reviews and approves corporate goals presented by senior management. The Committee does weigh the goals but does not establish a specific performance formula. Rather, the Committee determines actual bonuses in a subjective fashion at the end of the year, taking into account the original goals and any other factors the Committee determines are material, in its discretion. The minimum bonus amount is zero, and the maximum is 120% of the target bonus amount. If the Committee determines that bonuses should not be awarded for corporate achievement for any reason, bonuses will not be paid even if the individual achievements were met. We believe this fully discretionary bonus structure allows the Committee to be responsive to the uncertainties and lack of predictability associated with being a biotechnology company dedicated to the discovery, development and commercialization of first-in-class therapeutics with novel mechanisms of action.
22
Equity Awards.
The Committee believes that providing a material portion of our executive of
ficers’ total compensation in equity awards aligns the interests of our executive officers with our stockholders, by linking the value of compensation to the value of our Common Stock. In determining the form and size of equity awards, the Committee consid
ers information provided by Radford as to whether the complete compensation packages provided to each
Named Executive Officer
, including prior equity awards, are sufficient to retain, motivate and adequately reward the executive for his or her contribution
s. In addition, in determining the size of equity awards, the Committee considers the anticipated value of the
Named Executive Officer
’s contributions going forward. We make new-hire and subsequent equity awards on pre-determined dates as follows:
|
•
|
Before an offer is made, the Committee approves the terms of new-hire equity awards above the senior director level. The Committee has authorized the CEO to approve new hire equity awards, within pre-approved guidelines, at or below the senior director level.
|
|
•
|
We generally grant subsequent equity awards to all eligible employees during the first quarter of each fiscal year.
|
We do not purposely accelerate or delay the public release of material information in consideration of a pending equity awards to allow the grantee to benefit from a more favorable stock price.
We encourage our executives to hold a significant equity interest in the Company, but we have not set specific ownership guidelines. We prohibit our executives, directors and other members of management from engaging in short sales, transactions in put or call options, hedging transactions or other inherently speculative transactions with respect to our stock.
Stock Options.
We grant stock options to our Named Executive Officers when they join us and annually, on a discretionary basis, as part of our performance review and rewards process. All options have an exercise price equal to the fair market value of our Common Stock on the date of grant, and generally vest monthly based on continued service over a four-year period (with a one-year cliff for new hire grants). As a result of our option grant structure, the options provide a return to the executive officer only if the executive officer remains a service provider to the Company, and then only if the market price of our Common Stock appreciates relative to the option exercise price over the period in which the option vests and beyond.
Restricted Stock Awards (RSUs):
In 2017, after reviewing practices of our peers and in conjunction with the recommendations of our compensation consultants, we granted a blend of stock options and RSUs to our Named Executive Officers. We believe this blended approach will enable us to retain a competitive position and enhances the retention of key talent.
In determining the size of equity awards to Named Executive Officers in a given year, the Committee may consider:
|
•
|
for each Named Executive Officer, the value of equity awards granted to executives in similar positions at our Peer Companies, targeting long-term equity compensation at a level such that, when combined with target total cash compensation, the officer’s target total compensation opportunity is at or around the median for comparable positions;
|
|
•
|
the equity budget for a given year for all of our employees, and the percentage of that budget allocated to be used for awards to our Named Executive Officers;
|
|
•
|
the retention and motivation value of equity awards that have been previously granted to each Named Executive Officer;
|
|
•
|
each Named Executive Officer’s total potential ownership as a percentage of our total outstanding shares; and
|
|
•
|
internal pay equity among our Named Executive Officers, to reflect the importance of each Named Executive Officer’s responsibilities to our success as compared to our other Named Executive Officers.
|
Broad-based employee benefits with limited prerequisites.
Our Named Executive Officers are eligible to participate in our employee benefit plans, including medical, dental, life insurance, employee stock purchase and 401(k) plans. These benefits are available on the same terms and conditions as to our other employees. Our Named Executive Officers do not receive any perquisites other than those provided to all employees.
Severance Benefits and Employment Agreements.
We have Executive Employment Agreements with each of our Named Executive Officers that provide for salary and benefit continuation, bonus payments and accelerated
23
vesting of equity awards upon the termination of their employment either by us without cause, or by the executive for good reason following a loss of position in connection with a change of control of the Company. The
terms of these agreements are described in the section below entitled “Potential Payments Upon Change of Control.”
The Committee believes these agreements are an essential element of our executive compensation program and assists the Committee in recruiting and retaining talented executives. The Committee also believes these benefits serve to minimize the distractions to the executive, reduce the risk that the executive will depart the Company before an acquisition is consummated, and allow the executive to focus on continuing normal business operations and the success of a potential business combination, rather than worrying about how business decisions that may be in our best interests and the interest of our stockholders will impact his or her own financial security. That is, these change of control arrangements help ensure stability among our executive ranks and will enable our executives to maintain a balanced perspective in making overall business decisions during periods of uncertainty. Further, these agreements are in line with customary practices at an executive level at the Peer Companies.
Corporate and Individual Achievement Assessment Impacting Compensation Components
Corporate Achievement.
Before the start of each calendar year, management prepares a set of corporate goals covering our expected operating and financial performance for the fiscal year. Our corporate goals are focused on corporate metrics and objectives that are intended to provide both near- and long-term stockholder value. The Committee then reviews and approves these corporate goals.
For 2017, the Committee approved corporate goals included:
|
•
|
Advancement of development candidates from Research into IND-enabling studies,
|
|
•
|
Completion of VITALITY-ALS and the reporting of top-line results,
|
|
•
|
Guiding collaboration with Amgen to include Japan in GALACTIC-HF, the Phase 3 trial of omecamtiv mecarbil in patients with congestive heart failure,
|
|
•
|
Guiding collaboration with Amgen to enable an additional Phase 3 trial for omecamtiv mecarbil,
|
|
•
|
Conduct of CY 5021, the Phase 2 clinical trial of reldesemtiv in patients with Spinal Muscle Atrophy,
|
|
•
|
Conduct of FORTITUDE-ALS, the Phase 2 clinical trial of reldesemtiv in patients with ALS,
|
|
•
|
Execution of regulatory and pre-commercial readiness plans for tirasemtiv
|
|
•
|
Development of a comprehensive compliance program,
|
|
•
|
Fundraising and corporate partnering related to our programs, and
|
|
•
|
Management of expenses to finish 2017 with adequate cash reserves to provide for company plans.
|
At the end of each year, the Committee determines the overall level of corporate achievement, including assessing our performance relative to these goals. The Committee does not use a rigid formula in determining the Company’s level of achievement, but instead considers:
|
•
|
the degree of success achieved for each corporate goal, comparing actual results against the pre-determined deliverables associated with each objective;
|
|
•
|
the difficulty of the goal;
|
|
•
|
whether significant unforeseen obstacles or favorable circumstances altered the expected difficulty of achieving the desired results;
|
|
•
|
other factors that may have made the stated goals more or less important to our success; and
|
|
•
|
other accomplishments by us during the year or other factors that, although not included as part of the formal goals, are nonetheless deemed important to our near- and long-term success.
|
The Committee does assign weightings to the goals by functional area, but uses its discretion and judgment to determine a percentage that it believes fairly represents our achievement level for the year.
Individual Goals.
Individual goals for each Named Executive Officer are derived from the corporate goals that relate to his or her functional area, except for our CEO, who has no individual goals apart from the corporate goals. Our CEO establishes the individual goals for 2017 with each other Named Executive Officer described below based on the relevant corporate goals and key functional area priorities for the year.
|
•
|
With Ms. Barbari’s planned retirement in 2017, her goals focused on ensuring a smooth transition of duties and responsibilities.
|
|
•
|
Dr. Malik’s goals included the advancement of programs in Research, completion and reporting of results from VITALITY-ALS, the conduct of our other clinical trials and the advancement of
|
24
|
|
omecamtiv mecarbil
in GALACTIC-HF as well as readying for the conduct of a second Phase 3
trial
w
ith
omecamtiv
mecarbil
to be conducted by Cytokinetics.
|
|
•
|
Dr. Morgan’s goals related to
collaborating with our commercial planning team to develop a CMC launch plan for tirasemtiv, leading Research towards candidate selection for our programs, overseeing non-clinical development and contributing to leadership across our collaborations.
|
|
•
|
Dr. Wolff’s goals related to analyses and interpretation of results from VITALITY-ALS protocol development for a new trial, leadership across our collaborations, working with commercial development to ready for a potential commercial launch of tirasemtiv and contributing to draft regulatory guidance.
|
Target bonus levels for 2017 performance for each of the Named Executive Officers, except for Ms. Barbari, who retired in June 2017, expressed as a percentage of base salary, and the relative weightings of individual goals and corporate goals, were as follows:
Named Executive Officer
|
|
Target Bonus
% of Salary
|
|
|
Individual
Goal
Weighting
|
|
|
Corporate
Goal
Weighting
|
|
Mr. Blum
|
|
60%
|
|
|
0%
|
|
|
100%
|
|
Mr. Jaw
|
|
40%
|
|
|
25%
|
|
|
75%
|
|
Dr. Malik
|
|
40%
|
|
|
25%
|
|
|
75%
|
|
Dr. Morgan
|
|
35%
|
|
|
25%
|
|
|
75%
|
|
Dr. Wolff
|
|
35%
|
|
|
25%
|
|
|
75%
|
|
The 2017 target bonus levels were at the median level for similar executive positions as compared to the Peer Company data for 2017.
2017 Compensation Decisions
In February 2017, based on progress in the advancement of our skeletal and cardiac muscle programs, the achievement of research program milestones, the expansion of a collaboration agreement, progress toward business development goals, other financing objectives and certain research goals, the Committee determined that the Company had an overall corporate achievement level of 95% for 2016. The Committee also determined the overall level of individual achievement for each Named Executive Officer, which includes, but is not limited to, an assessment of the individual’s performance relative to these goals.
The Committee does not use a rigid formula in determining each Named Executive Officer’s level of achievement, but considered:
|
•
|
the degree of success achieved against the specific deliverables associated with each objective;
|
|
•
|
the difficulty of the goal;
|
|
•
|
whether significant unforeseen obstacles or favorable circumstances altered the expected difficulty of achieving the desired results;
|
|
•
|
the overall performance of the functional areas for which the individual has responsibility;
|
|
•
|
the manner in which the individual contributes to our overall success, including areas outside of his or her responsibility;
|
|
•
|
the overall management of the individual’s staff;
|
|
•
|
other factors that may have made the stated goals more or less important to our success; and
|
|
•
|
other accomplishments by the executive officer during the year that, although not included as part of the formal goals, are nonetheless deemed important to our near- and long-term success.
|
The Committee does not assign weights in these assessments, but uses its discretion and judgment to determine a percentage that it believes fairly represents the individual’s achievement level for the year.
25
Mr. Blum’s individual achievement lev
el is based solely on the corporate achievement level. In February 2017, the Committee:
|
(i)
|
determined that the other Named Executive Officers had individual achievement levels for 2016 as follows: Ms. Barbari - 95%; Dr. Malik — 95%; Mr. Morgan — 95%; and Dr. Wolff — 87%; and
|
|
(ii)
|
increased base salaries, granted bonus amounts and grated equity awards for Named Executive Officers.
|
The Committee exercised some discretion in determining changes to compensation. All base salary changes were effective March 1, 2017. Equity awards were made pursuant to our 2004 Equity Incentive Plan. The following summarizes changes to individual compensation for our Named Executive Officers in 2017:
Robert I. Blum
Salary.
Increased base salary from $595,000 to $615,000.
Bonus.
Awarded a bonus of $350,000 for his performance in 2016.
Equity.
Granted options to purchase 205,000 shares of common stock and 60,000 RSUs.
Sharon A. Barbari
Salary.
Increased base salary from $412,798 to $425,182.
Bonus.
Awarded a bonus of $156,863 for her performance in 2016.
Fady Malik
Salary.
Increased base salary from $449,694 to $463,185.
Bonus.
Awarded a bonus of $170,884 for his performance in 2016.
Equity.
Granted options to purchase 50,000 shares of common stock and 30,000 RSUs.
Bradley Morgan
Salary.
Increased base salary from $332,227 to $342,194.
Bonus.
Awarded a bonus of $110,465 for his performance in 2016.
Equity.
Granted options to purchase 20,000 shares of common stock and 20,000 RSUs.
Andrew Wolff
Salary
.
Increase base salary from $395,760 to $403,675.
Bonus.
Awarded a bonus of $100,000 for his performance in 2016
Equity.
Granted options to purchase 15,000 shares of common stock and 15,000 RSUs.
2018 Compensation Decisions
In February 2018, the Committee made the following decisions with respect to the compensation of the Named Executive Officers.
Named Executive Officer
|
|
2018
Base Salary
|
|
|
Options
|
|
|
RSUs
|
|
|
Target Bonus
% of Salary
|
|
Mr. Blum
|
|
$
|
633,450
|
|
|
|
200,000
|
|
|
|
145,000
|
|
|
60%
|
|
Mr. Jaw
|
|
$
|
416,150
|
|
|
|
40,000
|
|
|
|
20,000
|
|
|
40%
|
|
Dr. Malik
|
|
$
|
477,081
|
|
|
|
75,000
|
|
|
|
65,000
|
|
|
40%
|
|
Dr. Morgan
|
|
$
|
352,460
|
|
|
|
20,000
|
|
|
|
20,000
|
|
|
35%
|
|
Dr. Wolff
|
|
$
|
403,675
|
|
|
|
15,000
|
|
|
|
15,000
|
|
|
35%
|
|
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally provides that publicly held companies may not deduct compensation paid to certain of their top executive officers to the extent such compensation exceeds $1 million per officer in any year. The exemption from the deduction limit under Section 162(m) for “performance-based compensation” has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our “covered employees” in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.
26
The Committee will continue to monitor the a
pplicability of Section 162(m) of the Code to its ongoing compensation arrangements. Because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, including the uncertain scope of
the transition relief under the legislation repealing the “performance-based compensation” exemption from the deduction limit, no assurance can be given that any compensation that may have been (or if granted under a binding written contract in place as o
f November 2, 2017 may be) intended to satisfy the requirements for exemption from Section 162(m), in fact will be exempt. In determining the form and amount of compensation for our named executive officers, the Committee may continue to consider all eleme
nts of the cost of such compensation, including the potential impact of Section 162(m). While the Committee considers the deductibility of awards as one factor in determining executive compensation, the Committee may also look at other factors in making it
s decisions, and retains the flexibility to award compensation that it determines to be consistent with the goals of our executive compensation program even if the awards are not deductible by us for tax purposes.
Accounting Considerations
In determining the size and type of equity awards, the Committee considers the potential impact of the accounting guidance for stock-based compensation. we do not set a specific budget for equity compensation based on the accounting cost.
Compensation Recovery Policy
One of the objectives of our compensation program for our Named Executive Officers is to make a substantial portion of compensation dependent on our overall financial performance. In order to ensure that our Named Executive Officers take full account of risks to us and our stockholders in their decision-making, and to reduce such risks wherever practicable, our Board adopted and delegated to the Committee a policy that allows us to seek repayment of incentive compensation that was erroneously paid, commonly referred to as a Clawback Policy. This policy provides that if the Board, or the Committee as applicable, determines that there has been a material misstatement of publicly issued financial results from those previously issued to the public due to a knowing violation of SEC rules and regulations of the or our policies, or the willful commission of an act of fraud, dishonesty, gross recklessness or gross negligence, our Board or Committee will review all incentive compensation made to our Named Executive Officers during the three-year period prior to the restatement on the basis of having met or exceeded specific performance targets. If such payments would have been lower had they been calculated based on such restated results, we will (to the extent permitted by governing law) seek to recoup the payments in excess of the amount that would have been paid based on the restated results.
In addition, if we are required as a result of misconduct to restate our financial results due to the material noncompliance with any financial reporting requirements under federal securities laws, our Chief Executive Officer and Chief Financial Officer may be legally required to reimburse us for any bonus or other incentive-based or equity-based compensation they received.