UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-K/A
(Amendment No. 1)
(Mark One)
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20202021
or
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
001-33500
JAZZ PHARMACEUTICALS PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
Ireland | 98-1032470 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Fifth Floor, Waterloo Exchange
Waterloo Road, Dublin 4, Ireland D04 E5W7
011-353-1-634-7800
(Address, including zip code, and telephone number, including area code, of
registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Ordinary shares, nominal value $0.0001 per share | JAZZ | The Nasdaq Stock Market | ||
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
☒
No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
☐
No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
☒
No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒
No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2
of the Exchange Act.Large accelerated filer ☒ | Accelerated filer ☐ | |
Non-accelerated filer ☐ | Smaller reporting company ☐ | |
Emerging growth company ☐ | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Act). Yes ☐
No ☒
The aggregate market value of the voting and2020,2021, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $5,958,338,704$10,591,497,500 based upon the last sale price reported for the registrant’s ordinary shares on such date on The Nasdaq Global Select Market. The calculation of the aggregate market value of voting and1,454,4581,490,584 ordinary shares of the registrant held by executive officers, directors and shareholders that the registrant concluded were affiliates of the registrant on that date. Exclusion of such shares should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant or that such person is controlled by or under common control with the registrant.
non-voting
common equity held bynon-affiliates
of the registrant, as of June 30, non-voting
common equity excludes As of April 15, 2021,2022, a total of 56,891,72862,311,104 ordinary shares, nominal value $0.0001 per share, of the registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
EXPLANATORY NOTE
The registrant is filing this Amendment No. 1 to Annual Report on Form20202021 (Commission File Number20202021 Annual Report on FormFebruary 23, 2021.March 1, 2022. The principal purpose of this Amendment is to include in Part III the information that was to be incorporated by reference from the proxy statement for the registrant’s 20212022 Annual General Meeting of Shareholders, as well as to update certain of the information included on the cover page of the 20202021 Annual Report on Form20202021 Annual Report on Form
10-K/A,
or this Amendment (also referred to herein as this report), to amend the Annual Report on Form10-K
for the fiscal year ended December 31, 001-33500),
or the 10-K,
as filed by the registrant with the Securities and Exchange Commission, or the SEC, on 10-K
and in the list of exhibits included in Item 15 and the Exhibit Index of this report. This Amendment hereby amends the cover page, Part III, Items 10 through 14, and Part IV, Item 15 of the 10-K.
In addition, as required by Rule12b-15
under the Securities Exchange Act of 1934, as amended, or the Exchange Act, new certifications by the registrant’s principal executive officer and principal financial officer are filed as exhibits to this Amendment.No attempt has been made in this Amendment to modify or update the other disclosures presented in the 20202021 Annual Report on FormFebruary 23, 2021)March 1, 2022) or modify or update those disclosures that may be affected by subsequent events. Accordingly, this Amendment should be read in conjunction with the 20202021 Annual Report on Form
10-K.
This Amendment does not reflect events occurring after the filing of the original report (i.e., those events occurring after 10-K
and the registrant’s other filings with the SEC.In this report, unless otherwise indicated or the context otherwise requires, all references to “Jazz Pharmaceuticals,” “the registrant,” “the company,” “we,” “us,” and “our” refer to Jazz Pharmaceuticals plc and its consolidated subsidiaries. On January 18, 2012, the businesses of Jazz Pharmaceuticals, Inc. and Azur Pharma Public Limited Company, or Azur Pharma, were combined in a merger transaction, or the Azur Merger, in connection with which Azur Pharma was renamed Jazz Pharmaceuticals plc, and we became the parent company of and successor to Jazz Pharmaceuticals, Inc., with Jazz Pharmaceuticals, Inc. becoming our wholly owned subsidiary.
JAZZ PHARMACEUTICALS PLC
2021 ANNUAL REPORT ON FORM
10-K
Amendment No. 1
TABLE OF CONTENTS
Page | ||||||
| 2 | ||||||
Item 10. | 2 | |||||
Item 11. | ||||||
Item 12. | ||||||
Item 13. | ||||||
Item 14. | ||||||
Item 15. | ||||||
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “propose,” “intend,” “continue,” “potential,” “possible,” “foreseeable,” “likely,” “unforeseen” and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. We discuss many of these risks, uncertainties and other factors in greater detail under the heading “Risk Factors” in Part I, Item 1A of our 20202021 Annual Report on FormFebruary 23, 2021.March 1, 2022. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. You should read this report completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by our cautionary statements. Except as required by law, we assume no obligation to update our forward-looking statements publicly, or to update the reasons that actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
10-K,
as filed with the SEC on 1
PART III
Item 10. | Directors, Executive Officers and Corporate Governance |
DIRECTORS AND EXECUTIVE OFFICERS
Our Board of Directors
Our board of directors is divided into three classes, designated Class I, Class II and Class III. The term of the Class I directors will expire on the date of our 2021 annual general meeting of shareholders; the term of the Class II directors will expire on the date of our 2022 annual general meeting of shareholders; and the term of the Class III directors will expire on the date of our 2023 annual general meeting of shareholders; and the term of the Class I directors will expire on the date of our 2024 annual general meeting of shareholders. At each annual general meeting of shareholders, successors to the directors whose terms expire at that annual general meeting are put forward for election for a three-year term.
The following is a brief biography of each member of our board of directors, including their respective ages as of April 23, 2021,22, 2022, with each biography including information regarding the specific experience, qualifications, attributes or skills that led the nominating and corporate governance committee and our board of directors to determine that each member of our board of directors should serve as a director.
Class II Directors Continuing in Office Until the 2022 Annual General Meeting
Jennifer E. Cook
non-executive
director onC-suite,
global product development and commercialization expertise, with a focus on transformative growth.Patrick G. Enright
co-founded
Longitude Capital, a healthcare venture capital firm, where he has served as a Managing Director since 2006. Prior to Longitude Capital, Mr. Enright was a Managing Director of Pequot Ventures where heco-led
the life sciences investment practice. Mr. Enright also has significant life sciences operations experience including senior executive positions at Valentis, Boehringer Mannheim (acquired by Roche) and Sandoz (now known as Novartis). Mr. Enright currently serves on the boards of directors of Aptinyx Inc. and Vera Therapeutics, Inc. as well as several privately held healthcare companies and the National Venture Capital Association. Mr. Enright previously served on the boards of directors of over 20 companies, including Aimmune Therapeutics, Inc from 2013 until its acquisition by Nestlé in 2020 and Vaxcyte, Inc. from 2015 to 2020. Mr. Enright received a B.S. in Biological Sciences from Stanford University and an M.B.A. from the Wharton School of the University of Pennsylvania. Based on his experience as a venture capital investor focused on life sciences companies and his past work in the pharmaceutical industry, Mr. Enright brings to our board of directors over 30 years of operating experience and financial expertise in the life sciences industry.Seamus Mulligan
2
Norbert G. Riedel, Ph.D.
non-profit
organization, the Illinois Biotechnology Industry Organization, and is a member of the Austrian Academy of Sciences. Dr. Riedel is an Adjunct Professor at Boston University School of Medicine and an Adjunct Professor of Medicine at Northwestern University’s Feinberg School of Medicine. Dr. Riedel holds a Diploma in biochemistry and a Ph.D. in biochemistry from the University of Frankfurt. Dr. Riedel brings significant scientific, drug discovery and development, and commercial expertise to our board of directors with over 20 years of experience in the biotechnology and pharmaceutical industries.Class III Directors Continuing in Office Until the 2023 Annual General Meeting
Bruce C. Cozadd
,
co-founded
Jazz Pharmaceuticals, Inc. and has served as Chairman and Chief Executive Officer of Jazz Pharmaceuticals, Inc. since April 2009. From 2003 until 2009, he served as Jazz Pharmaceuticals, Inc.’s Executive Chairman and as a member of its board of directors. From 1991 until 2001, he held various positions with ALZA Corporation, a pharmaceutical company acquired by Johnson & Johnson, most recently as Executive Vice President and Chief Operating Officer, with responsibility for research and development, manufacturing and sales and marketing. Previously at ALZA Corporation, he held the roles of Chief Financial Officer and Vice President, Corporate Planning and Analysis. Mr. Cozadd serves on the board of Acelyrin, Inc., a clinical stage biotechnology company. Mr. Cozadd also serves on the board of Biotechnology Innovation Organization, a biotechnology trade association, where he serves on its Health Section Governing Board. He also serves on the boards of twonon-profit
organizations, The Nueva School and SFJAZZ. Mr. Cozadd previously served on the boards of directors of Cerus Corporation from 2001 to January 2018 and Threshold Pharmaceuticals, Inc. from 2005 to August 2017. He received a B.S. from Yale University and an M.B.A. from the Stanford Graduate School of Business. As aco-founder
and our Chief Executive Officer of over 10 years, he brings to our board a deep and comprehensive knowledge of our business, as well as shareholder-focused insight into effectively executing the company’s strategy and business plans to maximize shareholder value.Heather Ann McSharry
,
non-executive
director on the board of directors of International Airlines Group, S.A since 2020. From 2006 to 2009, Ms. McSharry was Managing Director Ireland of Reckitt Benckiser, a multinational health, home and hygiene consumer products company. From 1989 to 2006, she held various positions at Boots Healthcare, a leading global consumer healthcare company, most recently as Managing Director of Boots Healthcare Ireland Limited. Ms. McSharry served on the boards of directors of the Bank of Ireland from 2007 to 2011, the Industrial Development Agency in Ireland from 2010 to 2014, Uniphar plc from 2019 to 2020, Greencore Group plc from 2013 to 2021 and CRH plc from 2012 to 2021. Ms. McSharry holds a Bachelor of Commerce and a Master of Business Studies degree from University College Dublin. Ms. McSharry brings to our board of directors over 30 years of experience in multiple international industries, including healthcare, consumer goods and financial services, as well as expertise in crisis management, cybersecurity and privacy issues relevant to our business.Anne O
’
Riordan
3
Rick E Winningham
,
spin-off
from Innoviva, Inc. in June 2014. From October 2001 to August 2014, Mr. Winningham served as Chief Executive Officer of Innoviva, Inc., where he also served as Chairman of the Board of Directors from April 2010 to October 2014. From 1997 to 2001, he served as President of Bristol-Myers Squibb Oncology/Immunology/Oncology Therapeutics Network and, from 2000 to 2001, as President of Global Marketing. Mr. Winningham is a member of Biotechnology Industry Organization’s board of directors and serves on the Health Section Governing Board Standing Committee on Reimbursement. He previously served as a member of the board of directors of Retrotope, Inc., a private biotechnology company focused on cell degeneration, from February 2021 to January 2022 and OncoMed Pharmaceuticals, Inc. from June 2015 until the company’s merger with Mereo BioPharma Group plc in April 2019. He also served as a member of the board of directors of the California Healthcare Institute, or CHI, from November 2011 to March 2015 and served as its Chairman from January 2014 until CHI merged with Bay Area Bioscience Association to become the California Life Sciences Association, or CLSA, in March 2015. Mr. Winningham is on the board of directors of CLSA, and served as its Chairman from March 2015 until November 2015. Mr. Winningham holds an M.B.A. from Texas Christian University and a B.S. from Southern Illinois University. Mr. Winningham’s experience in senior management positions in the pharmaceutical industry provides significant industry knowledge and operational and management expertise to our board of directors.Class I Directors Continuing in Office Until the 20212024 Annual General Meeting
Peter Gray
non-profit
educational establishment. He served as Chairman of the board of directors of UDG Healthcare plc, an international provider of healthcare services, from February 2012 to September 2020. In September 2011, Mr. Gray retired from his position as Chief Executive Officer of ICON plc, a global provider of outsourced development services to the pharmaceutical, biotechnology and medical device industries, which he held since November 2002. At ICON plc, Mr. Gray previously served as Group Chief Operating Officer from June 2001 to November 2002 and Chief Financial Officer from June 1997 to June 2001. From November 1983 to November 1989, Mr. Gray served as senior financial officer at Elan Corporation plc, a pharmaceutical company. Mr. Gray holds a degree in law from Trinity College Dublin and qualified as a chartered accountant in 1981. Given his experience as Chief Executive Officer and Chief Financial Officer of ICON plc, Mr. Gray brings to our board of directors and audit committee over 30 years of experience in financial and operational management within the pharmaceutical industry.Kenneth W. O’Keefe
co-founded.
From November 2015 to January 2018, he was Chief Executive Officer, from January 2011 to November 2015, he was Managing Partner, and from 1997 to January 2011, he was Managing Director, of Beecken Petty O’Keefe & Company. He serves on the boards of several privately-held healthcare companies. He received a B.A. from Northwestern University and an M.B.A. from the University of Chicago. As a member of Beecken Petty O’Keefe & Company, Mr. O’Keefe brings to our board of Mark D. Smith, M.D.
non-executive
director on the boards of directors of two other publicly-held companies, Teladoc Health, Inc., a telemedicine and virtual healthcare company, and Phreesia, Inc., a healthcare software company. Dr. Smith also serves on the boards of directors of the Commonwealth Fund, a private health policy foundation, and the Institute for Health Care Improvement, an independent nonprofit organization. From 1996 to 2013, Dr. Smith was the founding President and Chief Executive Officer of the California HealthCare Foundation, an independent nonprofit philanthropy organization. From 1991 to 1996, he served as Executive Vice President at the Henry J. Kaiser Family Foundation. Dr. Smith received a B.A. from Harvard College, an M.D. from the University of North Carolina at Chapel Hill and an M.B.A. from The Wharton School at the University of Pennsylvania. Dr. Smith brings to our board of directors an impressive background that marries the worlds of active medical practice and business development. A practicing physician and professor, Dr. Smith also has experience working for a variety of health focused companies both public and private. Additionally, Dr. Smith allocates part of his time for nonprofit organizations and a health policy foundation.4
Catherine A. Sohn, Pharm.D.
Committee Membership
The following table provides membership information for 20202021 for each of the audit committee, the Compensation & Management Development Committee, or the compensation committee, and nominating and corporate governance committee of our board of directors:
| Name | Audit | Compensation | Nominating and Corporate Governance | |||
1 | l | |||||
Patrick G. Enright | l | l | ||||
Peter Gray | C | |||||
Heather Ann McSharry | l | C | ||||
Kenneth W. O’Keefe | l | |||||
Anne O’Riordan | l | |||||
Norbert G. Riedel, Ph.D. | C | |||||
2 | l | |||||
Catherine A. Sohn, Pharm.D. | l | l | ||||
Rick E Winningham | l | |||||
C = committee chairperson ●l= committee member
| 1 | Jennifer E. Cook was appointed as a member of our compensation committee in April 2021. |
| 2 | Mark D. Smith was appointed as a member of our nominating and corporate governance committee in April 2021. |
5
Our Executive Officers
The following table provides information regarding our executive officers as of April 23, 2021.22, 2022.
| Name | Age | Position | ||
Bruce C. Cozadd | Chairman and Chief Executive Officer | |||
Daniel N. Swisher, Jr. | President | |||
Renée Galá | Executive Vice President and Chief Financial Officer | |||
Robert Iannone, M.D., M.S.C.E | Executive Vice President, Global Head of Research and Development | |||
Kim Sablich | Executive Vice President and General Manager, North America | |||
Christopher Tovey | 56 | Executive Vice President and Chief Operating Officer and Managing Director, Europe and International | ||
Patricia Carr | 51 | Senior Vice President, Chief Accounting Officer | ||
Finbar Larkin, Ph.D. | Senior Vice President, Technical Operations | |||
Neena M. Patil | Chief Legal Officer and Senior Vice President, Legal and Corporate Affairs | |||
Samantha Pearce | Senior Vice President, Europe and International | |||
Bruce C. Cozadd
.
Our Board of Directors
Daniel N. Swisher, Jr.
was appointed our President as of January 2018 and also served as our Chief Operating Officer
Renée Galá
spin-out
from Innoviva, Inc. Ms. Galá joined Innoviva in 2006 and held various roles in the finance organization before leading the company’sspin-out
transaction. Prior to that, Ms. Galá served in various roles in global treasury, pharmaceutical sales and corporate strategy/business development at Eli Lilly and Company, from 2001 to 2006. Before joining Eli Lilly, Ms. Galá spent seven years in the energy industry in positions focused on corporate finance, project finance, and mergers and acquisitions. Ms. Galá serves on the board of directors of Gossamer Bio, Inc., a clinical-stage biopharmaceutical company, where she also chairs the audit Robert Iannone, M.D., M.S.C.E.
from December 2019
science-led
biopharmaceutical company. From 2004 to 2014, Dr. Iannone served in management roles at Merck Co., Inc., a global biopharmaceutical company, culminating in his role as Executive Director and Section Head of Oncology Clinical Development. From 2001 to 2004, he served as Assistant Professor of Pediatrics and from 2004 to 2012 as Adjunct Assistant Professor of Pediatrics at the University of Pennsylvania School of Medicine. Dr. Iannone has been serving on the board of directors of iTeos Therapeutics, Inc., a clinical- stage biopharmaceutical company, since May 2021, Jounce Therapeutics, Inc., a clinical-stage immunotherapy company, since January 2020 and on the Cancer Steering Committee of the Foundation for the National Institutes of Health since 2011. Dr. Iannone received a B.S. from The Catholic University of America, an M.D. from Yale University and an M.S.C.E. from University of Pennsylvania and completed his residency in Pediatrics and fellowship in Pediatric Hematology-Oncology at Johns Hopkins University.6
Kim Sablich
Christopher Tovey
Patricia Carr
Finbar Larkin, Ph.D.
.
Neena M. Patil
Samantha Pearce
CERTAIN CORPORATE GOVERNANCE MATTERS
Audit Committee
We have a standing audit committee that is currently composed of five directors (Mr. Gray, Mr. Enright, Ms. McSharry, Mr. O’Keefe and Ms. O’Riordan). Our board of directors has determined that each of Mr. Gray, Mr. Enright, Ms. McSharry, Mr. O’Keefe and Ms. O’Riordan meets the independence requirements of Rule
10A-3
of the Exchange Act and the listing standards of The Nasdaq Stock Market LLC, or Nasdaq, with respect to audit committee members. Our board of directors has also determined that each of Mr. Gray, Mr. Enright, Ms. McSharry and Mr. O’Keefe qualifies as an “audit committee financial expert” within the meaning of SEC regulations. In making this determination, our board of directors considered the overall knowledge, experience and familiarity of each with accounting matters, analyzing and evaluating financial statements, and, in the case of Mr. O’Keefe, managing private equity investments, and, in the case of Mr. Enright, managing venture capital investments. Mr. Gray serves as chairperson of the audit committee.Code of Conduct
Our code of conduct applies to all of our employees, directors and officers, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and those of our subsidiaries. The code of conduct is available on our website at www.jazzpharmaceuticals.com under the section entitled “About”“Our Purpose” under “Corporate Ethics.“Ethical Standards.” We intend to satisfy the disclosure requirements under Item 5.05 of Form
8-K
regarding any amendment to, or waiver from, a provision of our code of conduct by posting such information on our website at the website address and location specified above.Director Nominations
No material changes have been made to the procedures by which shareholders may recommend nominees to our board of directors.
Item 11. | Executive Compensation |
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following Compensation Discussion and Analysis describes the material elements of compensation for the following individuals who served as our principal executive officer, principal financial officer and three other most highly compensated executive officers as of December 31, 2020.2021. These individuals are our named executive officers, or NEOs, for 2020.2021.
Bruce C. Cozadd
Chairman and Chief Executive Officer (CEO)
Daniel N. Swisher, Jr.
President and Chief Operating Officer (COO)
Renée Galá
Executive Vice President and Chief Financial Officer (CFO)
Robert Iannone
Executive Vice President, Global Head of Research and Development and Chief Medical Officer (CMO)
Executive Vice President and General Manager, North AmericaChief Operating Officer and
Managing Director, Europe and International
TABLE OF CONTENTS
Compensation Discussion and Analysis | ||||
Executive Summary
Our Business
We are an innovativea global biopharmaceutical company whose purpose is to innovate to transform the lives of patients and their families. We are dedicated to developing and commercializing life-changing medicines that transform the lives of patientsfor people with serious diseases – diseases—often with limited or no therapeutic options. We have a diverse portfolio of marketed medicines and novel product candidates, infrom early- to late-stage development, across key therapeutic areas. Our focus is in neuroscience including sleep and movement disorders, and in oncology, including hematologic malignancies and solid tumors. We actively exploreoncology. Within these therapeutic areas, we strive to identify new options for patients including novel compounds,by actively exploring small molecules and biologics, and through innovative delivery technologies.technologies and cannabinoid science.
Our strategy for growth is rooted in executing commercial launches and ongoing commercialization initiatives; advancing robust research and development, or R&D, programs and delivering impactful clinical results; effectively deploying capital to strengthen the prospects of achieving our short- and long-term goals through strategic corporate development; and delivering strong financial performance. We focus on patient populations with high unmet needs. We identify and develop differentiated therapies for these patients that we expect will be long-lived assets and that we can support with an efficient commercialization model. In addition, we leverage our efficient, scalable operating model and integrated capabilities across our global infrastructure to effectively reach patients around the world.
Our strategy to create sustainable shareholder value is focused on:
Strong commercial execution to drive diversified revenue growth and address unmet medical needs of our patients across our product portfolio;portfolio, which focuses on neuroscience and oncology medicines;
Expanding and advancing our pipeline through internal and external patient-centric innovation to achieve a valuable product portfolio of durable, highly differentiated programs;
Continuing to build a flexible, efficient, and productive development engine for targeted therapeutic conditionsareas to identify and progress early-,
mid-
and late-stage assets;Identifying and acquiring novel product candidates and approved therapies to complement our existing pipeline and commercial portfolio;
Investing in an efficient, scalable operating model and differentiated capabilities to enable growth; and unlock
Unlocking further value through indication expansion and entry into global markets.
In 2020,2021, consistent with our strategy, we continued to focus on research and developmentR&D activities within our neuroscience and oncology therapeutic areas, such as our expansion into movement disorders and solid tumors, and exploring and investing in adjacent therapeutic areas that could further diversify our portfolio. In addition, in FebruaryMay 2021, we announced that we entered into a definitive transaction agreement withcompleted our acquisition of GW Pharmaceuticals plc, or GW, pursuantas consistent with our overall business and capital allocation strategy to which, subject to the satisfaction or waiver of the conditions set forth in the definitive agreement, we would acquire GW.
®
for the treatment of acute lymphoblastic leukemia, or ALL, or lymphoblastic lymphoma, or LBL, in pediatric and adult patients one month and older who have developed hypersensitivity to E. coli-derived asparaginase and Xywav®
for idiopathic hypersomnia, or IH, in 2021, we accomplished our goal to ®
, enhanced our R&D capabilities and talent, and added Financial | • | |||||
| • | 2021 GAAP 1 net loss of $329.7 million, or $5.52 per diluted share, compared to 2020 | |||||
| • | 2021 non-GAAP adjusted net income of $992.8 million2 , or $16.23 per diluted share, compared to $704.0 million, | |||||
Commercial | • | 3 , compared to 75% of ® in 2018 | ||||
| Neuroscience | ||||||
| • | ||||||
| • | ||||||
| • | ||||||
| • | ® net product sales were $463.6 million from the closing of 4 of | |||||
| Oncology | ||||||
| • | Zepzelca ® net product sales were $246.8 million in 2021, the first full calendar year on the market following launch in July 2020 | |||||
| • | Launched Rylaze in July 2021 for treatment of ALL or LBL in adult and pediatric patients; net product sales of | |||||
10
Research & Development | • | |||
| Neuroscience | ||||
| • | In | |||
| • | Late-stage clinical trials: Three ongoing Phase 3 clinical trials for nabiximols in multiple sclerosis (MS)-related spasticity and a Phase 3 trial of Epidiolex in Epilepsy with Myoclonic-Atonic Seizures, also known as Doose syndrome. | |||
| • | Meaningful progress across mid-stage pipeline: | |||
º In December 2021, JZP150 received Fast Track | ||||
º | ||||
º These are both patient populations that suffer significant impacts to their quality of life and for whom there are limited current treatment | ||||
| Oncology | ||||
| • | In | |||
| • | Initiated multiple clinical trials as part of our Zepzelca clinical development program: | |||
º We and collaborator Hoffman-La Roche Ltd initiated a Phase 3 trial to evaluate first-line use of Zepzelca in combination with Tecentriq® (atezolizumab), compared to Tecentriq alone, as maintenance therapy, in patients with extensive-stage small cell lung cancer after induction chemotherapy. | ||||
Corporate Development | • | In | ||
| 1 | U.S. generally accepted accounting principles (GAAP). |
| 2 | Non-GAAP adjusted net income is a non-GAAP financial measure that both excludes certain items from our GAAP reported net income and includes certain tax related adjustments. Commencing in 2020, following consultation with the staff of the Division of Corporation Finance of the U.S. Securities and Exchange Commission, we |
| 3 | Including the launches in 2020 and 2021 of Xywav (in narcolepsy and IH), Zepzelca, Sunosi ® , and Rylaze and the acquisition of Epidiolex and Sativex® . |
| 4 | On a proforma basis. |
Key Executive Compensation Program Changes for 2021
As described in more detail in this CD&A, the compensation committee made the following key changes to our executive compensation programs and policies in response to feedback from our shareholders:
| ● | Implemented a new |
| ● | Adopted a formal incentive compensation clawback policy that provides the committee discretion to |
| ● | ||||
11
Key Features of Our Executive Compensation Program
What We Do | What We Don’t Do | |
✔ Design executive compensation to align pay with performance✔ Balance short-term and long-term incentive compensation, with “at-risk” ✔ Align annual performance bonus plan for CEO with that of other executives andnon-sales employees, with 100% of CEO’s bonus based on such corporate performance goals as approved by the board of directors✔ Establish threshold and maximum levels of achievement for payouts under our annual performance bonus plan, including an overall cap on individual payout amounts✔ Maintain executive share ownership guidelines✔ Provide “double-trigger” change in control benefits✔ Prohibit hedging and pledging by executive officers and directors✔ Have 100% independent directors on the compensation committee✔ Hire independent compensation consultant who reports directly to the compensation committee✔ Meet regularly in executive session without management present✔ Starting in 2021, grant performance-based equity awards ✔ Maintain clawback policy | ✘ No excessive change in control or severance payments✘ No “single-trigger” cash or equity change in control benefits✘ No repricing of underwater stock options without prior shareholder approval✘ No excessive perquisites✘ No tax gross ups on severance or change in control benefits✘ No post-termination retirement or pension benefits that are not available to employees generally✘ No guaranteed bonuses or base salary increases | |
Pay-for-Performance
“at-risk”
compensation COVID-19
pandemic that adversely affected our business in The pie charts below show the various regularrecurring components of target total direct compensation for 20202021 for our CEO and other NEOs. These components include the following: (i) annual base salary rate for 2020;2021; (ii) annual target performance bonus opportunity for 2020;2021; and (iii) the grant date fairtarget value of equity awards granted in 2020. The pie charts exclude thenon-recurring2021.cash signing bonus Mses. Galá and Sablich each received in connection with their respective appointments in 2020; such bonuses are not considered part of theon-goingannual target total direct compensation opportunity.
12
Compensation Philosophy and Objectives
Our executive compensation program is designed with the following objectives and philosophy:
Attract, incentivize, reward and retain diverse, talented individuals with relevant experience in the life sciences industry through a competitive pay structure.
expectations.
Deliver balanced total compensation packages to accomplish our business objectives and mission.
program focuses on
target total direct compensation
Align pay with our performance.
pre-determined
levels of performance areachieved against annual corporate objectives approved by our board of directors at the beginning of the year. Likewise, our stock option awards will not provide realizable value and our restricted stock unit
pre-determined
levels of performance are achieved. 50% of each NEO’s target equity compensation is granted in the form of PSUs and 50% is in the form of time-based RSU awards. We also have executive share ownership guidelines to further support our ownership culture and align the interests of executive officers and shareholders.How We Determine Executive Compensation
Role of Our Compensation & Management Development Committee and Executive Officers
The compensation committee reviews and oversees our compensation policies, plans and programs and reviews and generally determines the compensation to be paid to the executive officers, including the NEOs. Either the compensation committee or the independent members of our board of directors, upon recommendation from the compensation committee, who receives input and advice from its independent compensation consultant, approve the compensation of our CEO. References in this Compensation Discussion and Analysis to our board of directors approving our CEO’s compensation are to the independent members of our board of directors.
In making other executive compensation determinations, the compensation committee considers recommendations from our CEO. In making his recommendations, our CEO receives input from our human resources department and from the individuals who manage or report directly to the other executive officers, and he reviews various sources of market compensation data provided by the independent compensation consultant to the compensation committee, as described below. While our CEO discusses his recommendations for the other executive officers with the compensation committee, he does not participate in the deliberations and recommendations to our board of directors concerning, or our board of directors’ determination of, his own compensation. Members of our human resources and legal departments also attend compensation committee meetings.
Below are the highlights of the annual cycle our compensation committee follows in reviewing and making decisions with respect to our executive compensation program.
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Role of the Independent Compensation Consultant
The compensation committee engages an independent compensation consultant each year to provide a competitive compensation assessment with respect to the executive officers to assist the compensation committee in making annual compensation decisions. Since 2010, Radford,Aon’s Human Capital Solutions practice, a business area withindivision of Aon plc, or Aon, has been engaged by the compensation committee. Aon supports the compensation committee each year to providein addressing the design of the peer company andgroup, provides industry compensation data, when requested, and to provideprovides the compensation committee with advice regarding executive officers’ compensation, including base salaries, performance-based bonuses and long-term equity compensation, and similar advice regardingRadfordAon to update the peer company and industry compensation data on an annual basis, address specific questions that arise as the committee fulfills their responsibilities as outlined in the compensation committee charter. The advisor provides support in addressing changes in trends and best practices for executive compensation, incentive and equity and/or other best practices that are requested by the compensation committee, in order to help inform the compensation committee’s decisions. RadfordAon reports directly to the compensation committee, which maintains the authority to direct Radford’sAon’s work and engagement. As requested, and under the purview of the compensation committee, RadfordAon may advise the human resources department on projects from time to time. RadfordAon interacts with management to gain access to company information that is required to perform services and to understand the culture and policies of the organization. RadfordAon attends compensation committee meetings, and the compensation committee and RadfordAon meet in executive session with no members of management present, as needed, to address various compensation matters, including deliberations regarding our CEO’s compensation.
non-employee
directors’ compensation. The compensation committee has also consulted with In assessing Radford’sAon’s independence from management in providing executive compensation services to the compensation committee, the compensation committee considered that RadfordAon is only engaged by, takes direction from, and reports to, the compensation committee for such services and, accordingly, only the compensation committee has the right to terminate or replace RadfordAon as its compensation consultant at any time. The compensation committee also analyzed whether the work of RadfordAon as a compensation consultant with respect to executive and director compensation raised any conflict of interest, taking into consideration the following factors:
✔ | the provision of other services to our company by | ✔ | any business or personal relationship of the individual compensation advisors with any compensation committee member; | |||||
✔ | the amount of fees we paid to | ✔ | ||||||
✔ | any business or personal relationship of | ✔ | any ordinary shares of our company owned by | |||||
The compensation committee has determined, based on its analysis of the above factors, that the work of RadfordAon and the individual compensation advisors employed by RadfordAon as compensation consultants to our company has not created any conflict of interest.
Competitive Assessment of Compensation – Peer Companies and Market Data
Because we aim to attract and retain the most highly qualified executive officers in an extremely competitive market, the compensation committee believes that it is important when making its compensation decisions to be informed as to the current practices of comparable public companies with which we compete for top talent. To this end, the compensation committee reviews market data for each executive officer’s position, compiled by RadfordAon as described below, including information relating to the mix and levels of compensation for executive officers in the life sciences industry, with a focus on target total direct compensation in line with the compensation committee’s holistic approach to executive compensation.
decision-making. Each year,
in the life sciences industry (specifically biotechnology and specialtyselect bio/pharma companies) with commercial products on the market;
with revenues of approximately$500$550 million to $6.0$6.6 billion in revenues);
one-fourth
(0.25x) to three times (3x) our then-projected revenue (resulting in a range of with market value of approximately(0.25x) to four times (4x) our market capitalization at the time (resulting in a range of between $1.9$1.5 billion to $29.8$24.3 billion in market capitalization); and
one-fourth (0.25x)
primarily located in the U.S. with a secondary focus on companies that are headquartered in Europe.
14
The peer group used for our 20202021 compensation decisions consisted of the 16 companies listed in the table below. At the time the compensation committee approved the peer group, we were at the 664630
th
percentile for trailing 12 months revenue and the th
percentile for market capitalization among the new peer group. The compensation committee considered this a reasonable balance and a good representation of companies that were of similar scope and complexity.| Alexion Pharmaceuticals, Inc. 1 | Exelixis, Inc. | Mallinckrodt plc 2 | Sarepta Therapeutics, Inc. | |||
| Alkermes plc | Horizon Therapeutics plc | Nektar Therapeutics | Seagen Inc. (formerly Seattle Genetics) | |||
| BioMarin Pharmaceutical Inc. | Incyte Corporation | Neurocrine Biosciences, Inc. | United Therapeutics Corporation | |||
| Endo International plc | Ionis Pharmaceuticals, Inc. | Regeneron Pharmaceuticals, Inc. | Vertex Pharmaceuticals Incorporated | |||
| 1 | Acquired by AstraZeneca plc in July 2021. |
| 2 | Declared bankruptcy in October 2020. |
2021 Market Data
committee’s determinations of executive compensation for
compensation and equity compensation, against the market data
company-to-company
Factors Used in Determining Executive Compensation
Our compensation committee sets the compensation of our executive officers at levels that the compensation committee determines to be competitive and appropriate for each NEO, using the compensation committee’s professional experience and judgment. The compensation committee’s pay decisions are not driven by a particular target level of compensation based on market data, and the compensation committee does not otherwise use a formulaic approach to setting executive pay. Instead, the compensation committee believes that executive pay decisions require consideration of multiple relevant factors, which may vary from year to year. The figure below reflects the factors the compensation committee considers in determining and approving the amount, form and mix of pay for our NEOs.
We hold aadvisory vote on executive compensation annually. Accordingly, at our 20202021 annual meeting, we provided shareholders with the opportunity to cast a2019.2020. Of the votes cast, approximately 88%90% were voted in favor of the proposal. We were pleased with these results and believe it reflects our continuous efforts to engage with shareholders and solicit their feedback on our executive compensation program.
say-on-pay
non-binding
vote on a proposal regarding the compensation of our named executive officers for the year ended December 31, 15
The compensation committee reviewed the final vote results for the proposal and, given the significant level of shareholder support and positive feedback received on recent program and governance changes, concluded that our executive compensation program continues to provide a competitivepackage that effectively incentivizes the NEOs and encourages long-term retention. Accordingly, theThe compensation committee and, with respect to our CEO’s compensation, our board of directors, determined not to make any significant changes to our 20202021 executive compensation policies or decisions as a result of the vote. Our compensation committee and, with respect to our CEO’s compensation, our board of directors will continue to consider the outcome of ourproposals and our shareholders’ views when making future compensation decisions for the NEOs.
pay-for-performance
say-on-pay
pre-established
financial and other strategic objectives as described in more detail on page 2021 Performance Bonus Program.Program
We also engage with our shareholders when they have topics of particular interest, which may include executive compensation related matters. Shareholder feedback is reported to our compensation committee (and our nominating and corporate governance committee, as applicable) throughout the year.
The following graphic describes our typical shareholder outreach and engagement cycle.
Key Components and Design of the Executive Compensation Program
Total Direct Compensation
Our compensation program focuses on target total direct compensation, which consists of base salary, target performance bonus opportunity (which, together with base salary, we refer to as target total cash compensation), and target long-term incentive awards (valued based on an approximation of grant date fair value).opportunity.
16
We also offer our executive officers severance benefits upon certain types of involuntary terminations in connection with a change in control. The table below captioned “” describes key features of each primary component of our executive compensation program and explains why we provide thea particular compensation component.
Components of Total Direct Compensation
The compensation committee takes a holistic approach to compensation and seeks to ensure that the aggregate level of pay, across all of the pay elements is meeting the company’s desired objectives for each executive officer. The compensation committee does not have any formal policies for allocating compensation among base salary, target performance bonus opportunity and long-term incentive awards. Instead, the compensation committee uses its experience and business judgment to establish a total compensation program for each NEO that is a mix of current, short-term and long-term incentive compensation, and cash and
non-cash
compensation, which it believes is appropriate to achieve the goals of our executive compensation program and our corporate goals.Because we believe it is important to our success to pursue both short- and long-term corporate objectives that drive sustainable shareholder value creation, to avoid excessive risk-taking, and to preserve our cash resources, the majority of the NEOs’ total direct compensation is comprised ofincentive awards,incentives, in the form of RSUs and PSUs, which align the executive officers’ incentives with the interests of our shareholders. This allocation betweenphilosophy.
“at-risk”
compensation, consisting of performance-based bonus opportunities and long-term “at-risk”
and fixed compensation is consistent with ourpay-for-performance
Components of Total Direct Compensation
Component | Key Features | Purpose | ||||||||||
Base Salary | ◆ Fixed level of cash compensation◆ No amount is contractually guaranteed◆ Amounts reviewed and determined annually, and are generally effective by March 1 each year | ◆ Provides fixed level of compensation that is competitive within our industry and reflective of the skills and experience required to be successful in fulfilling the role | ||||||||||
Performance Bonus Award | ◆ Cash compensation under the performance bonus plan, which is“at-risk” because it is dependent upon achievement ofpre-established ◆ Target ◆ Actual bonuses paid shortly after the end of each year, based on the extent corporate goals are attained as determined by the compensation committee, and for executive officers other than our CEO, their individual contributions toward such achievements◆ Actual bonuses capped at 300% of executive officer’s target award | ◆ Provides financial incentives to achieve key corporate objectives that are aligned with our business strategy◆ Rewards NEOs (other than our CEO) for extraordinary individual contributions to our corporate achievements | ||||||||||
Long-Term Incentive Compensation | ◆ ◆ RSUs generally vest over a4-year period subject to executive officer’s continued service◆ Awards reviewed and generally granted annually, early in the year, at time of hire or promotion | ◆ Fosters ownership culture◆ Links compensation to long-term success◆ ◆ RSUs assist with managing dilution for our shareholders, while reinforcing the importance of shareholder value creation over time◆ Executive share ownership guidelines to further support our ownership culture and align the interests of executive officers and shareholders | ||||||||||
Other Benefits
section below titled “
Description of Compensation Arrangements–401(k) Plan
pre-tax
funds to pay for qualified healthcare expenses and qualified childcare expenses not reimbursed by insurance. We do not currently offer pension or other retirement benefits in the United States; outside the U.S. we offer pension or other retirement benefits that are consistent with local regulations.17
Severance Benefits upon Change in Control
Additional Compensation Information
Change in Control Plan
Potential Payments upon Termination or Change in Control
Amended and
Restated Executive Change in Control and Severance Benefit Plan
The corporate objectives and relative weightings established by the board of directors for the 20202021 performance bonus program that were communicated to the NEOs in early 20202021 are described in the chart below. The revenue objective described below included strategically important, revenue-related stretch goals with the opportunity to earn up to an additional 17.5% bonus pool funding. Likewise, the adjusted net income objective included a stretch goal with the opportunity to earn up to an additional 2.5%15% bonus pool funding. For each of the five objectives, achievement can becould have been between 0% and 200% based on company performance, including the identified stretch objectives for revenue and adjusted net income. The payouts under the 2021 performance bonus program were capped at 300% of the NEO’s target award.
Following the end of the 2021 fiscal year, after adding togethersumming the resulting bonus pool funding percentages for the quantitative and qualitative objectives based on their relative weightings of 70%80% and 30%20%, respectively, and considering achievement of stretch goals, the compensation committee approved an overall bonus pool funding percentage of 127.3%108% of the target bonus pool for the 20202021 plan year, as further described below.
The compensation committee did not set specific objectives for individual executive officers. Each executive officer is responsible for contributing to the corporate objectives, individually and as part of the leadership team, with each objective deemed to be important in determining the level of the company’s performance during the year. In approving individual bonus awards, the compensation committee considers the individual contribution towards the company’s achievement of the corporate objectives by each executive officer (other than our CEO). The actual bonus payments approved for each of the NEOs for 20202021 are described below under “20202021 Compensation Decisions for Our Named Executive Officers.”
No COVID-related adjustments to the goals or to the assessment of their achievement were made in calculating the 2021 bonus pool.
Individual bonus awards are determined in accordance with the following methodology:
Quantitative Objectives
Each of the three main quantitative objectives for 2020,2021, or objectively measurable goals, had a total relative overall weighting of 70%80%, and is described in the table and accompanying footnotes below, including each objective’s weighting, actual results and performance multipliers, as well as the total bonus pool funding percentage resulting from the level of achievement of the quantitative objectives.
18
The compensation committee approved, at the start of the performance year, an algorithm with respect to each main quantitative objective (as well as the strategically important revenue-related stretch goals and the adjusted net income stretch goal discussed below)goals) for calculating the bonus pool funding attributable to the extent of achievement for each such objective. The revenue objective, with a weighting of 35%40%, was split into an oxybate net product sales objective weighted at 17.5%15%, a total revenue objective, excluding oxybate and anon-oxybaterevenueEpidiolex/Epidyolex net product sales, weighted at 15%, and an Epidiolex/Epidyolex net product sales objective weighted at 17.5%10%, as well as five related additional, or strategically important, stretch goals, each with its own individual weighting.weighted at 3%. The compensation committee set specific threshold and maximum levels of achievement for the revenue objective and the related stretch goals, which are described in the footnotes to the table below. The compensation committee also approved a stretch goal with its own individual weighting for the adjusted net income objective. For the quantitative product development objectives, the compensation committee established various objectively measurable target goals within these objectives but did not set a threshold performance level; rather, an overall achievement of between 0% and 200%, measured against the multiple targets as described in more detail below, was determined by the compensation committee and used to calculate the applicable bonus pool funding percentage attributable to the product development objectives.
Quantitative Objectives | Quantitative Objectives | Weighting | Actual Results | Multiplier | Bonus Pool Funding (3) | Quantitative Objectives | Weighting | Actual Results | Multiplier | Bonus Pool Funding (2) | ||||||||||||||||||
1. | Revenue Objective | Revenue Objective | ||||||||||||||||||||||||||
• Achieve total oxybate net product sales in 2020 of $1,729 million (1) | 17.5% | Above target: net product sales of $1,757 million | 108% | 18.9% | • Achieve total oxybate net product sales in 2021 of $1,767 million (1) | 15% | Above target: net product sales of $1,801 million | 110% | 16% | |||||||||||||||||||
• Achieve total revenue, excluding oxybate net product sales, in 2020 of $643 million (1) | 17.5% | Below target: total revenue excluding oxybate net product sales of $609 million(after giving effect to the adjustment identified in footnote (2)) | 73% (2) | 12.8% | • Achieve total revenue, excluding oxybate and Epidiolex/Epidyolex net product sales, in 2021 of $898 million (1) | 15% | Between threshold and target: total revenue, excluding oxybate and Epidiolex net product sales, of $829 million | 61% | 9% | |||||||||||||||||||
• Stretch goal (4) | 3.5% | Between threshold and maximum | 73% | 2.6% | • Achieve Epidiolex/Epidyolex net product sales in 2021 of $507 million (1) | 10% | Between threshold and target: net product sales of $464 million | 58% | 6% | |||||||||||||||||||
• Stretch goal (5) | 3.5% | Achieved | 100% | 3.5% | • Stretch goal (3) | 3% | Between threshold and maximum | 16% | 1% | |||||||||||||||||||
• Stretch goal (6) | 3.5% | Below threshold | 0% | 0% | • Stretch goal (4) | 3% | Achieved | 100% | 3% | |||||||||||||||||||
• Stretch goal ³ (7) | 3.5% | Above target | 100% | 3.5% | • Stretch goal (5) | 3% | Below threshold | 0% | 0% | |||||||||||||||||||
• Stretch goal (8) | 3.5% | Below threshold | 0% | 0% | • Stretch goal (6) | 3% | Below threshold | 0% | 0% | |||||||||||||||||||
• Stretch goal mid-year (100% for a launch before 1 July and 50% for a launch in July)(7) | 3% | Between threshold and maximum | 50% | 2% | ||||||||||||||||||||||||
| 2. | Adjusted Net Income Objective non-GAAP adjusted net income*in 2020 of $907 million(1) | 10% | Above target: non-GAAP adjusted net income* | 109% (9) | 10.9% | Product Development Objectives: (8) | 30% | Achieved at 101% level (8) | 101% | 30% | ||||||||||||||||||
• Stretch goal non-GAAP adjusted net income* in 2020 of $937 million | 2.5% | Below threshold | 0% | 0% | ||||||||||||||||||||||||
| 3. | Product Development Objectives (10) | 25% | Achieved at 130% level (10) | 130% | 32.5% | |||||||||||||||||||||||
| 3 | Adjusted Net Income Objective: non-GAAP adjusted net income* in 2021 of $859 million(1)(9) | 10% | Above target: non-GAAP adjusted net income* of $993 million | 177% (9) | 18% | |||||||||||||||||||||||
Total | 84.8% | Total | 84% | |||||||||||||||||||||||||
Note: |
| (1) | If the specified threshold annual performance level was met (90% of target for the pre-established scaled performance multiplier (ranging from 50% to 150% for the |
| (2) |
The percentages in this column represent, for each quantitative corporate objective, the weight of the quantitative objective multiplied by the performance multiplier that corresponds to the actual achievement of such quantitative objective. |
With respect to |
Xywav was launched in the U.S. for the treatment of IH in adults on November |
19
With respect to COVID-19 pandemic in 2020 and the |
With respect to COVID-19 pandemic on our ability to interact with and |
| (7) |
| (8) |
With respect to the product development objectives, the compensation committee determined that the actual achievement by the company was |
Performance Category | Target Goals and Results | |||
Top Priority | This performance category consisted of the following goals: (i) category except that we had only partially met the goal of completing U.S. and European regulatory submissions for Rylaze by fourth quarter of 2021, as the European regulatory submission was delayed for strategic reasons, and completing a clinical program designed to successfully submit a New Drug Application submission for nabiximols in multiple sclerosis by fourth quarter of 2021. The compensation committee noted that the approved label for Xywav in IH and orphan designation exceeded expectations, that the US approval of Rylaze in June was a monumental achievement for patients requiring close collaboration with the FDA and the Children’s Oncology Group , and that the delay in European submission for Rylaze was strategically made to increase the probability of a highly competitive product in that region. In aggregate, the compensation committee assessed the performance on Top Priority programs to be 115% of target.® (atezolizumab) in first-line extensive stage SCLC by |
High Priority | This performance category consisted of the following goals: (i) target. | |||||
All Other Development | This performance category consisted of the following goals: (i) enroll first patient in a Phase 1 study of JZP341 by the third quarter of 2021; (ii) complete go/no-go decision JZP324 by the first quarter of 2021; (iii) submit one high potential IND application in each of neuroscience, oncology and cannabinoid science by the fourth quarter of 2021; and (iv) complete Sunosi and Vyxeos target. | |||||
With respect to the product development objectives, |
In determining that the actual achievement by the company was |
| * | Non-GAAP adjusted net income is anon-GAAP financial measure that both excludes certain items from our GAAP reported net income and includes certaintax-related adjustments as reconciled under “Reconciliations ofNon-GAAP Financial Measures” below, except that solely for purposes of calculating the threshold performance achievement level and performance multiplier for non-GAAP adjusted net income included the additional adjustment as set forth in footnote (9) to this table. |
| (9) | With respect to the adjusted net income objective, the target achievement level for 2021 was set below the target achievement level and actual performance for 2020 due to the expected dilutive impact of the GW Acquisition. In this regard, the GW Acquisition was dilutive to both GAAP and non-GAAP adjusted net income for the year ended December 31, 2021. However, we expect that the GW Acquisition will be adjusted net income accretive in the first full year calendar year of combined operations and substantially accretive thereafter. |
Qualitative Objectives
The qualitative corporate objectives approved by the board of directors fell into two categories: (1) progress on corporate development activities related to closing the GW Acquisition and the successful integration of GW, with a relative weighting of 20%10%, and (2) a demonstrated commitment to and progress on certain organizational goals related to our transformation into an innovative and agile global company, with a relative weighting of 10%. Achievement of the qualitative objectives is inherently less objectively measurable than the quantitative objectives.
20
Corporate Development Objective
.
The objective relating to progress on corporate development activities consisted of
pre-payable
debt, progressed organizational designs, appropriately maintained retention and Organizational Objective
sub-goals.
Because thesub-goals
are not sub-goals,
were achieved, as a whole, during the year. The organizational corporate objectivesub-goals
were:expand and enhance social impact and corporate governance practices;
maintain culture of compliance and adheringadhere to our Code of Conduct, other policies and laws and regulations that apply to our business.Conduct.
In evaluating the organizational objective, the compensation committee determined that 2020 was an unprecedented year in navigating culture,our talent and employee engagement. It required agility, creativity,culture indicators demonstrate achievement in our organizational health and innovation to refocus priorities to both navigate new employee needs and challengesorganizational development progress. Key human capital metrics demonstrate favorability and/or alignment with external benchmarking trends, particularly in light of trends surrounding the pandemic, as well as those expected during an acquisition period. Our 2021 successes include defining our environmental, social and governance framework, enhancing our reporting and engaging in shared value and social impact work. We achieved key progression on organizational initiatives to support critical business requirements.strengthen our innovation, development and commercial excellence. We have made DEImaintained female and improved people of color representation at the leadership level consistent with our diversity, equity, inclusion and belonging, or DEIB, commitments to maintain or increase representation levels, embed a culture of inclusivity through continued education and learning goals, and ensure equity withinachieved our key talent processes. Overall, the company had a significant year of progress despite pandemic circumstances. This achievement was in large part fueled by the success of the continued ability to evolve and upgrade capabilities in critical areas and ensure a productive and engaged workforce.hiring goals. After taking into consideration both our accomplishments and challenges with respect to these125%115% and therefore, a 12.5%12% bonus pool funding percentage for the 20202021 organizational objective.
sub-goals
in light of the challenges of integrating a significant acquisition and an ongoing pandemic, the compensation committee determined that as a whole, our overall achievement resulted in a multiplier of General Approach
In making compensation decisions for 2020,2021, the compensation committee considered the factors discussed in “” above and the compensation committee’s specific compensation objectives for 2020.2021. Our compensation committee did20202021 pay decisions for each NEO are presented holistically in this section.
Factors Used in Determining
Executive Compensation
not use a formula or assign a particular weight to any one factor in determining each NEO’s target total direct compensation. Rather, our compensation committee’s determination of the target total direct compensation, mix of cash and equity and fixed and
“at-risk”
pay opportunities was a subjective, individualized decision for each NEO. The compensation committee reviewed and considered each element of pay in the context of the overall target total direct compensation for each NEO. When the compensation committee made changes to one element of pay, those changes were made in the context of the levels of the other elements of pay, and the resulting target total direct compensation for each NEO. As a result, the The compensation committee also had access to market data with respect to target total cash compensation and target equity award grants. However, as described above, the compensation committee believes that over-reliance on benchmarking can result in compensation that is unrelated to the value delivered by our executive officers because compensation benchmarking does not take into accountvariations among actual roles with similar titles or the specific performance of our executive officers.
company-by-company
Summary of 20202021 Compensation Decisions
Target Total Cash Compensation
effective in March
21
Target Equity Compensation and Impact on Target Total Direct Compensation
at the time the compensation committee (and the board of directors, with respect to Mr. Cozadd) made its decisions, after careful consideration, the compensation committee aimed to deliver equity awards to each executive officer
Starting in 2021, 50% of the potential value of each NEO’s equity awardaggregate annual long-term incentive compensation will be in the form of stock optionsPSUs that vest based on achievement of performance goals and 50% of the potential value in the form of RSUs, in each case based on an approximationtime-based RSUs. The compensation committee believes this mix strikes the right balance between the variable nature of grant date fair valuePSUs and using an approximately 2.5 to 1 ratiothe retentive nature of stock option grants to RSUs, in order to mitigate dilution and to reflect the increased value of receiving shares at full value without the payment of an exercise price.RSUs. The 50/50 value split was consistent with our historical practices for our executive officers. The actual share amounts underlying the PSUs and RSUs granted to each executive officer in 2021 were determined by applying the
company’s90-day 30-day averageaverage share price (as of December 31, 2019)(immediately preceding the grant date) to the grant date fair value of the award, which the compensation committee and, in the case of Mr. Cozadd, the board of directors, intended to deliver (dividing such value by the average share price, in the case of RSUs, and applying a Black-Scholes option pricing model calculation using theprice).The exercise price of each stock option is equal2021-2023 PSU Program grants, or the 2021 PSUs, were made to our closing share price on Nasdaq Global Select Market on the date of grant. The compensation committee understands that this process can result in the actual reported grant date value of an award being higher or lower than the intended value approved by the compensation committee, but has considered, in consultation with Radford, various approaches to granting equity awards,executives including each of which have advantages and disadvantages, and determined that the process described above, which has been used historically byNEOs at the compensation committee, is the most appropriate for the company at this time. The shares subject to the option awards vest over four years, with 25% vesting on theone-yearanniversaryclosing of the grant date and the remainder vestingGW Acquisition in equal monthly installments thereafter over the remaining 36 months.May 2021. The RSUs vest over four years in equal annual installments.On an annual basis, the compensation committee reviews market trends, including market peer use of performance-based vesting for equity awards, which are often favored by proxy advisory firms and certain institutional investors. For 2020, the compensation committee determined that equity awardsit was in the best interests of the company and its shareholders to delay the grant of the 2021 PSUs until the close of the transaction with GW announced in February 2021. Doing so allowed the compensation committee to select performance goals that reflect the combined company’s financial and strategic priorities across the new integrated leadership team, which will provide the leadership team with a unifying compensation strategy for the post-close organization. As a result, the performance will be measured for the period from May 6, 2021 – December 31, 2023.
A 30-day average share price, in the case of stock options). A90-dayaverage share price was used, rather than a single day share price, in order to provide a more stabilized share value less susceptible to possible swings in the market.
2021 – 2023 PSU Program.
As described in more detail below, the compensation committee selected performance goals that focus specifically on (i) growing and diversifying our commercial portfolio; and (ii) enhancing the value of our pipeline. The compensation committee believes that these metrics create a meaningful incentive and reward for successfully driving transformation and delivering long-term sustainable value to shareholders and life-changing medicines to patients.
Below is a summary of the performance metrics and associated weightings and targets applicable to the 2021 PSUs, as well as the TSR modifier.
Performance Goals | Weighting | Target | ||||
Commercial | Percentage of Revenue in 2022 from “New Product” Launches* | 30% | 45-50% | |||
Percentage of U.S. oxybate Patients on Xywav by December 31, 2023** | 25% | 60% | ||||
Epidiolex 2023 Revenue | 20% | *** | ||||
Pipeline | Pipeline Success Scorecard**** | 25% | 18 points | |||
| * | New product launches include Xywav (all indications), Zepzelca, Rylaze and Sunosi. |
| ** | Relative to total patients on Xywav, Xyrem and authorized generic versions of Xyrem. |
| *** | Target 2023 revenue information is not being disclosed at this time, as it represents confidential commercial and financial information, the disclosure of which would result in competitive harm to the company. The compensation committee believes that it has set performance goals at rigorous and challenging levels that will require significant effort and achievement by our executives to be attained, and that such goals have been established in light of our internal forecast as well as the macroeconomic and industry environments. After the end of the performance period, the targets and achievement relative to such targets will be disclosed. |
| **** | Points are awarded for successful investigational new drug applications, proof of concept studies, pivotal studies and product approvals occurring during the performance period. |
The four operational performance goals described above can individually, and in the aggregate, be achieved at 50% of target at threshold performance levels up to 160% of target for stretch performance.
Once the aggregate achievement percentage of the four performance goals is determined, that result is modified, from 75% to 125%, based on the performance of our stock price relative to peers, or what we refer to as a relative TSR modifier. The compensation committee believes that having a TSR modifier helps balance the importance of providing executives clearer line of sight to payout opportunities using financial/operational measures with the need to ensure that those payouts are aligned with shareholders’ experience during the performance period. The achievement percentage, as adjusted to reflect the TSR modifier, will determine the number of shares underlying the PSUs that will be earned, vest and be issued to each NEO.
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The 2021 PSUs are subject to potential vesting over time continuedacceleration upon the NEO’s termination in connection with a change in control, as well as upon death, disability or retirement, as described below under the heading, “”
Potential Payments upon Termination or Change in Control—Treatment of 2021 PSUs.
Percentile Rank vs. Comparator Group | Payout Modifier | |
≥ 75 th percentile | 125% | |
For every increase in percentile rank between 50 th and 75th percentiles | Increase by 1% | |
50 th percentile | 100% | |
For every decrease in percentile rank between 50 th and 25th percentiles | Decrease by 1% | |
≤ 25 th percentile | 75% | |
The compensation committee selected the constituents of the Russell 1000 pharmaceutical and biotechnology component companies as the comparator group for purposes of the relative TSR modifier for the following reasons:
the number of companies is large enough to be withstand any potential industry consolidation;
the most appropriate incentive structure forgroup includes 14 of 16 companies in our executive officers to reward performance over timecompensation peer group (see page 15); and achieve our retention objectives. Our time-based vesting schedules deliver retention incentives for
the company overrevenue, market cap and volatility of these companies is more aligned with the long-term and, unlike awardscompany’s profile.
Companies that vest based onpre-determinedoperational or market goals, doare not create incentives for inappropriate short-term risk-taking at the expense of realizing long-term value or the potential incentive for unethical conduct. In addition, we deliver a meaningful portion of compensation in the formRussell 1000 Index as of annual incentive compensation that is directly tied to, and incentivizes our executives to work towards, achievementthe end of our key corporate goals. The key purposes served by time-vesting options and RSUs for 2020 are discussed above in the chart captioned “performance period will be removed from final calculation.
| AbbVie Inc. | Bristol-Myers Squibb Company | Incyte Corporation | Pfizer Inc. | |||
| ACADIA Pharmaceuticals Inc. | Catalent, Inc. | Ionis Phamraceuticals, Inc. | Reata Pharmaceuticals, Inc. | |||
| Agios Pharmaceuticals, Inc. | Elanco Animal Health Incorporated. | Iovance Biotherapeutics, Inc. | Regeneron Pharmaceuticals, Inc. | |||
| Alkermes plc | Eli Lilly and Company | Johnson & Johnson | Sage Therapeutics, Inc. | |||
| Alnylam Pharmaceuticals, Inc. | Exact Sciences Corporation | Merck & Co., Inc. | Sarepta Therapeutics, Inc. | |||
| Amgen Inc. | Exelixis, Inc | Moderna, Inc. | Seagen Inc. | |||
| Biogen Inc. | Gilead Sciences, Inc | Nektar Therapeutics | United Therapeutics Corporation | |||
| BioMarin Pharmaceutical Inc | Global Blood Therapeutics, Inc. | Neurocrine Biosciences, Inc. | Vertex Pharmaceuticals Incorporated | |||
| bluebird bio, Inc. | Horizon Therapeutics plc | Perrigo Company plc | Zoetis Inc. | |||
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