acad-def14a_20220607.htm

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant     Filed by a Party other than the Registrant

Check the appropriate box:

 

Preliminary Proxy Statement

 

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

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to § 240.14a-12

Acadia Pharmaceuticals Inc.

 

(Name of Registrant as Specified in Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

No fee required

Fee paid previously with preliminary materials

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

 


 

 

 

Acadia Pharmaceuticals Inc.

12830 El Camino Real, Suite 400

San Diego, California 92130

 

Notice of Annual Meeting of Stockholders

Dear Stockholder:

You are cordially invited to attend the 2022 Annual Meeting of Stockholders of Acadia Pharmaceuticals Inc., a Delaware corporation (“Acadia” or the “Company”). The meeting will be held on June 7, 2022 at 10:00 a.m. Pacific time. This year’s annual meeting will be a completely virtual meeting of stockholders. You can attend the annual meeting by visiting www.meetnow.global/MUXD6Z5, where you will be able to listen to the meeting live, submit questions and vote online. We are holding the annual meeting for the following purposes, as more fully described in the accompanying proxy statement:

 

1.

To elect three Class III directors named herein to hold office until the Company’s 2025 Annual Meeting of Stockholders.

 

2.

To approve an amendment to the Company’s 2010 Equity Incentive Plan, as amended, to, among other things, increase the aggregate number of shares of common stock authorized for issuance under the plan by 6,000,000 shares.

 

3.

To approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in this proxy statement.

 

4.

To ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022.

 

5.

To conduct any other business properly brought before the meeting.

These items of business are more fully described in the proxy statement accompanying this notice.

The record date for the annual meeting is April 22, 2022. Only stockholders of record at the close of business on that date may vote at the meeting or any adjournment or postponement thereof.

 

 

Important Notice Regarding the Availability of Proxy Materials

This Proxy Statement and the Company’s Annual Report to Stockholders are available at https://ir.acadia‑pharm.com.

 

By Order of the Board of Directors

Austin D. Kim

Executive Vice President, General Counsel
and Secretary

 

 

 

 


 

 

San Diego, California April 29, 2022

You are cordially invited to attend the meeting online. Whether or not you expect to attend the meeting, please complete, date, sign and return the enclosed proxy, or vote over the telephone or the internet as described in these materials, as promptly as possible in order to ensure your representation at the meeting. Even if you have voted by proxy, you may still vote if you attend the meeting online. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.

 

 

 


 

 

 

 

 

Table of Contents

 

 

 

 

Page

Proxy Statement

 

1

Questions and Answers hAbout these Proxy Materials and Voting

 

1

Proposal 1: Election of Directors

 

9

Proposal 2: Approval of an Amendment to the 2010 Equity Incentive Plan

 

28

Proposal 3: Advisory Vote on Executive Compensation

 

48

Proposal 4: Ratification of Selection of Independent Registered Public Accounting Firm

 

49

Security Ownership of Certain Beneficial Owners and Management

 

51

Executive Compensation — Compensation Discussion and Analysis

 

55

Director Compensation

 

79

Transactions with Related Persons

 

83

Householding of Proxy Materials

 

85

Other Matters

 

86

 

 

 

 


 

 

 

Acadia Pharmaceuticals Inc.

12830 El Camino Real, Suite 400

San Diego, California 92130

 

PROXY STATEMENT

FOR THE ANNUAL MEETING OF STOCKHOLDERS

To be held on June 7, 2022

Questions and Answers About these Proxy Materials and Voting

Why am I receiving these materials?

We have sent you these proxy materials because the Board of Directors (sometimes referred to as the “Board”) of Acadia is soliciting your proxy to vote at the 2022 Annual Meeting of Stockholders, including at any adjournments or postponements of the meeting. The annual meeting will be held virtually on June 7, 2022 at 10:00 a.m. Pacific time. You can attend the annual meeting by visiting www.meetnow.global/MUXD6Z5, where you will be able to listen to the meeting live, submit questions and vote online. However, you do not need to attend the meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card, or follow the instructions below to submit your proxy over the telephone or through the internet.

We intend to mail these proxy materials on or about May 2, 2022 to all stockholders of record entitled to vote at the annual meeting.

Why are we holding a virtual annual meeting?

This year, like the previous two years, we have implemented a virtual format for our annual meeting, which will be conducted via live audio webcast and online stockholder tools. We believe a virtual format helps to facilitate stockholder attendance and participation by enabling stockholders to participate fully, and equally, from any location around the world, at no cost (other than any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies). A virtual annual meeting makes it possible for more stockholders (regardless of size, resources or physical location) to have direct access to information more quickly, while saving the Company and our stockholders time and money. We also believe that the online tools we have selected will increase stockholder communication. For example, the virtual format allows stockholders to communicate with us in advance of, and during, the annual meeting so they can ask questions of the Board or management. During the annual meeting, we may answer questions submitted during the annual meeting and address those asked in advance, to the extent relevant to the business of the annual meeting, as time permits.

 

 

 

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What do I need to do to attend the annual meeting?

You will be able to attend the annual meeting online, submit your questions during the meeting and vote your shares electronically at the meeting by visiting www.meetnow.global/MUXD6Z5. To participate in the annual meeting, you will need the control number included on your proxy card. The annual meeting webcast will begin promptly at 10:00 a.m. Pacific time on June 7, 2022. We encourage you to access the meeting prior to the start time. Online check-in will begin at 9:45 a.m. Pacific time, and you should allow ample time for the check-in procedures

Who can vote at the annual meeting?

Only stockholders of record at the close of business on April 22, 2022, will be entitled to vote at the annual meeting. On the record date, there were 161,428,465 shares of common stock outstanding and entitled to vote. A list of our stockholders of record will be open for examination by any stockholder beginning ten days prior to the annual meeting at our headquarters located at 12830 El Camino Real, Suite 400, San Diego, California 92130. If you would like to view the list, please contact our Corporate Secretary to schedule an appointment by calling (858) 558-2871 or writing to him at the address above. In addition, the list will be available for inspection by stockholders on the virtual meeting website during the annual meeting.

STOCKHOLDER OF RECORD: SHARES REGISTERED IN YOUR NAME

If, on April 22, 2022, your shares were registered directly in your name with Acadia’s transfer agent, Computershare, Inc., then you are a stockholder of record. As a stockholder of record, you may vote online during the meeting or vote by proxy. Whether or not you plan to attend the meeting, we urge you to fill out and return the enclosed proxy card, or vote by proxy over the telephone or on the internet as instructed below, to ensure your vote is counted.

BENEFICIAL OWNER: SHARES REGISTERED IN THE NAME OF A BROKER OR BANK

If, on April 22, 2022, your shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials were forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You are also invited to attend the annual meeting. However, since you are not the stockholder of record, you may not vote your shares online during the meeting unless you request and obtain a valid proxy from your broker or other agent.

 

 

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What am I voting on?

There are four matters scheduled for a vote:

 

election of three Class III directors, Laura A. Brege, Stephen R. Davis and Elizabeth A. Garofalo, M.D., to hold office until our 2025 Annual Meeting of Stockholders;

 

approval of an amendment to our 2010 Equity Incentive Plan, as amended, to, among other things, increase the aggregate number of shares of common stock authorized for issuance under the plan by 6,000,000 shares;

 

advisory approval of the compensation of our named executive officers, as disclosed in this proxy statement in accordance with the rules adopted by the Securities and Exchange Commission (the “SEC”); and

 

ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022.

What if another matter is properly brought before the meeting?

The Board of Directors knows of no other matters that will be presented for consideration at the 2022 Annual Meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying form of proxy to vote on those matters in accordance with their best judgment.

How do I vote?

You may either vote “For” both the nominees to the Board of Directors or you may “Withhold” your vote for any nominee you specify. For each of the other matters to be voted on, you may vote “For” or “Against” or abstain from voting. The procedures for voting are as follows:

STOCKHOLDER OF RECORD: SHARES REGISTERED IN YOUR NAME

If, on April 22, 2022, you were a stockholder of record, you may vote online during the annual meeting, vote by proxy using the enclosed proxy card, vote by proxy over the telephone, or vote by proxy through the internet. Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is counted. You may still vote online during the annual meeting even if you have already voted by proxy.

 

To vote during the annual meeting, visit www.meetnow.global/MUXD6Z5, where stockholders may vote and submit questions during the meeting (have your  proxy card in hand when you visit the website).

 

To vote using the proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the annual meeting, we will vote your shares as you direct.

 

 

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To vote over the telephone, dial toll-free 1-800-652-8683 using a touch-tone phone and follow the recorded instructions. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 11:59 p.m. Eastern time on June 6, 2022 to be counted.

 

To vote through the internet, go to http://www.investorvote.com/ACAD to complete an electronic proxy card. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 11:59 p.m. Eastern time on June 6, 2022 to be counted.

BENEFICIAL OWNER: SHARES REGISTERED IN THE NAME OF A BROKER OR BANK

If, on April 22, 2022, your shares were held, not in your name, but rather in an account at a brokerage firm, bank or other similar organization, then you should have received a voting instruction form with these proxy materials from that organization rather than from Acadia. Simply complete and mail the voting instruction form to ensure that your vote is counted. Alternatively, you may vote by telephone or over the internet as instructed by your broker, bank or other agent. To vote online during the annual meeting, you must obtain a valid proxy from your broker, bank, or other agent. Follow the instructions from your broker, bank or other agent included with these proxy materials, or contact your broker, bank or other agent to request a proxy form.

 

We provide online proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your internet access, such as usage charges from internet access providers and telephone companies.

 

How many votes do I have?

On each matter to be voted upon, you have one vote for each share of common stock you owned as of the close of business on April 22, 2022.

What if I return a proxy card, or otherwise vote, but do not make specific choices?

If you return a signed and dated proxy card, or otherwise vote, without marking voting selections, your shares will be voted “For” the election of each of the three nominees for director, “For” the approval of the amendment to our 2010 Equity Incentive Plan, as amended, “For” the advisory approval of executive compensation, and “For” the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm, as applicable. If any other matter is properly brought before the meeting, one of the individuals named in the accompanying form of proxy will vote your shares using his or her best judgment.

 

 

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Who is paying for this proxy solicitation?

We will pay for the entire cost of soliciting proxies. In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.

What does it mean if I receive more than one set of proxy materials?

If you receive more than one set of proxy materials, your shares are registered in more than one name or in different accounts. Please follow the voting instructions on the proxy cards in the proxy materials to ensure that all of your shares are voted.

Can I change my vote after submitting my proxy?

Yes. You can revoke your proxy at any time before the final vote at the meeting. If you are the record holder of your shares, you may revoke your proxy in any one of the following ways:

 

You may submit a properly completed proxy card with a later date.

 

You may grant a subsequent proxy by telephone or through the internet.

 

You may send a timely written notice that you are revoking your proxy to Acadia’s Corporate Secretary at 12830 El Camino Real, Suite 400, San Diego, California 92130.

 

You may vote online during the annual meeting. Simply attending the meeting will not, by itself, revoke your proxy.

Your most current proxy card, or telephone or internet proxy, is the one that is counted.

If your shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker or bank.

When are stockholder proposals due for next year’s annual meeting?

To be considered for inclusion in next year’s proxy materials, your proposal must be submitted in writing by January 2, 2023, to Acadia’s Corporate Secretary at 12830 El Camino Real, Suite 400, San Diego, California 92130. If you wish to submit a proposal that is not to be included in next year’s proxy materials or nominate a director, your proposal generally must be submitted in writing to the same address no later than March 9, 2023 but no earlier than February 7, 2023. Please review our bylaws, which contain additional requirements regarding advance notice of stockholder proposals and nominations.

 

 

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How are votes counted?

Votes will be counted by the inspector of election appointed for the meeting, who will separately count, for the proposal to elect directors, votes “For”, “Withhold” and broker non-votes; and, with respect to other proposals, votes “For” and “Against”, abstentions and, if applicable, broker non-votes. Abstentions will be counted towards the vote total for each of Proposals 2, 3 and 4, and will have the same effect as “Against” votes. Broker non-votes will not be counted towards the vote total for any proposal.

What are “broker non-votes”?

Broker non-votes occur when a beneficial owner of shares held in “street name” does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed “non-routine.” Generally, if shares are held in street name, the beneficial owner of the shares is entitled to give voting instructions to the broker or nominee holding the shares. If the beneficial owner does not provide voting instructions, the broker or nominee can still vote the shares with respect to matters that are considered to be “routine”, but not with respect to “non-routine” matters. Under the rules and interpretations of the New York Stock Exchange, “non-routine” matters are matters that may substantially affect the rights or privileges of stockholders, such as mergers, stockholder proposals, elections of directors, advisory approval of executive compensation, or certain amendments to charter documents.

 

 

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How many votes are needed to approve each proposal?

The following table summarizes the minimum vote needed to approve each proposal and the effect of abstentions and broker non-votes.

 

Proposal
Number 

 

Proposal Description 

 

Vote Required for Approval 

 

Effect of
Abstentions 

 

Effect of Broker
Non-Votes 

1

 

Election of three Class III directors to hold office until our 2025 Annual Meeting of Stockholders

 

The three nominees receiving the most “For” votes

 

None

 

None

2

 

Approval of an amendment to our 2010 Equity Incentive Plan, as amended, to, among other things, increase the aggregate number of shares of common stock authorized for issuance under the plan by 6,000,000 shares

 

“For” votes from the holders of a majority of shares present at the meeting or represented by proxy and entitled to vote on the matter

 

Against

 

None

3

 

Advisory approval of the compensation of our named executive officers

 

“For” votes from the holders of a majority of shares present at the meeting or represented by proxy and entitled to vote on the matter

 

Against

 

None

4

 

Ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022

 

“For” votes from the holders of a majority of shares present at the meeting or represented by proxy and entitled to vote on the matter

 

Against

 

None

 

What is the quorum requirement?

A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding a majority of the outstanding shares entitled to vote are present at the meeting or represented by proxy. On the record date, there were 161,428,465 shares outstanding and entitled to vote. Thus, the holders of 80,714,233 shares must be present at the meeting or represented by proxy to have a quorum.

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote at the meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, the holders of a majority of shares present at the meeting or represented by proxy may adjourn the meeting to another date.

How can I find out the results of the voting at the annual meeting?

Preliminary voting results will be announced at the annual meeting. Final voting results will be reported in a Current Report on Form 8-K, which we plan to file within four business days after the date of the annual meeting. If final voting results are not available to us in time to file a Form 8-K within four business days

 

 

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after the date of the meeting, we intend to file a Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the final results.

What proxy materials are available on the internet?

This proxy statement and the Company’s annual report to stockholders is available at https://ir.acadiapharm.com.

 

 

 

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PROPOSAL 1:

ELECTION OF DIRECTORS

Acadia’s Board of Directors is divided into three classes. Each class consists of approximately one-third of the total number of directors, and each class has a three-year term. Vacancies on the Board may be filled only by persons elected by a majority of the remaining directors. A director elected by the Board to fill a vacancy in a class, including a vacancy created by an increase in the number of directors, shall serve for the remainder of the full term of that class and until the director’s successor is duly elected and qualified, or until such director’s earlier death, resignation or removal.

The Board of Directors presently has eight members. There are currently three directors in Class III, whose terms of office expire in 2022. The three nominees for Class III directors are Laura A. Brege, Stephen R. Davis and Elizabeth A. Garofalo, M.D.

Each of Ms. Brege, Mr. Davis and Dr. Garofalo is currently a director of the Company who was previously elected by the Company’s stockholders. If elected at the annual meeting, each of these nominees would serve until the 2025 Annual Meeting of Stockholders and until his or her successor has been duly elected and qualified, or, if sooner, until the director’s death, resignation or removal. The terms of the directors in Classes I and II expire at our 2023 and 2024 Annual Meetings of Stockholders, respectively. It is the Company’s policy to encourage directors and nominees for director to attend the annual meeting. All of our directors attended the 2021 Annual Meeting of Stockholders.

Directors are elected by a plurality of the votes of the holders of shares present at the meeting or represented by proxy and entitled to vote on the election of directors. The three nominees receiving the highest number of affirmative votes will be elected. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the three nominees named below. If any nominee becomes unavailable for election as a result of an unexpected occurrence, your shares that would have been voted for that nominee instead will be voted for the election of a substitute nominee proposed by the Board of Directors. Each person nominated for election has agreed to serve if elected. Our management has no reason to believe that any nominee will be unable to serve.

 

 

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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH NOMINEE

The following table sets forth information as of April 22, 2022 for our directors and executive officers:

 

Name 

 

Age

 

Position

Stephen R. Biggar, M.D., Ph.D.  

 

51

 

Chair of the Board and Director

Julian C. Baker  

 

55

 

Director

Laura A. Brege  

 

64

 

Director

James M. Daly  

 

60

 

Director

Edmund P. Harrigan, M.D.  

 

69

 

Director

Daniel B. Soland  

 

63

 

Director

Elizabeth A. Garofalo, M.D.

 

64

 

Director

Stephen R. Davis  

 

61

 

Director and Chief Executive Officer

Srdjan R. Stankovic, M.D., M.S.P.H.  

 

65

 

President

Austin D. Kim  

 

58

 

Executive Vice President, General Counsel and Secretary

Mark C. Schneyer

 

48

 

Executive Vice President, Chief Financial Officer

Brendan P. Teehan

 

53

 

Executive Vice President, Chief Operating Officer and Head of Commercial

 

The Nominating and Corporate Governance Committee (the “NCG Committee”) seeks to assemble a Board that, as a whole, possesses the appropriate balance of professional and industry knowledge, financial expertise and high-level management experience necessary to oversee and direct the Company’s business. The NCG and the Board also recognize the importance of diversity in board composition, including diversity of experience, gender and ethnicity. To that end, the NCG Committee has identified and evaluated nominees in the broader context of the Board’s overall composition, as well as the Company’s current needs and future needs, with the goal of having Board members who complement and strengthen the skills of each other through diversity and who also exhibit qualities that the NCG Committee views as critical to effective functioning of the Board, including sound judgment, collegiality, and integrity. The following is a brief biography of each nominee and a discussion of the specific experience, qualifications, attributes or skills of each nominee that led the NCG Committee to recommend that person to continue to serve on the Board.

Nominees for Election for a Three-Year Term Expiring at the 2025 Annual Meeting

Laura A. Brege has served as a director of our company since May 2008. Currently, Ms. Brege serves as a Senior Advisor to BridgeBio Pharma, Inc. From September 2015 to December 2017, Ms. Brege served as Managing Director of Cervantes Life Science Partners, LLC., a consulting firm providing integrated business solutions to life sciences companies. She has over 20 years of executive management experience in the pharmaceutical, biotechnology and venture capital industries. From September 2012 to July 2015, Ms. Brege served as President and Chief Executive Officer of Nodality, Inc., a life sciences company focused on innovative personalized medicine. Prior to joining Nodality, Ms.

 

 

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Brege held several senior-level positions at Onyx Pharmaceuticals, Inc., a biopharmaceutical and biotherapeutics company, from 2006 to 2012, including positions as Executive Vice President and Chief Operating Officer. While at Onyx, she led multiple functions, including commercialization, strategic planning, corporate development and medical, scientific and government affairs. Prior to Onyx, Ms. Brege was a general partner at Red Rock Capital Management, a venture capital firm specializing in early-stage financing for technology companies. Previously, Ms. Brege was Senior Vice President and Chief Financial Officer at COR Therapeutics, Inc., where she helped build the company from an early-stage research and development company through commercial launch of a successful cardiovascular product. Earlier in her career, Ms. Brege served as Chief Financial Officer at Flextronics, Inc. and Treasurer of The Cooper Companies. Ms. Brege currently serves on the boards of directors of Edgewise Therapeutics, Inc., HLS Therapeutics, Inc., Mirum Pharmaceuticals, Inc., Pacira BioSciences, Inc. and T-knife Therapeutics, Inc. During the past five years, Ms. Brege served on the boards of directors of Aratana Therapeutics, Dynavax Technologies Corporation and Portola Pharmaceuticals, Inc. The NCG Committee believes that Ms. Brege’s industry background, including her extensive experience as an officer of public companies in the biotechnology industry, position her to make an effective contribution to the Board and the Audit Committee. In addition, her past financial experience and current knowledge of financing trends are extremely valuable to the Board when considering financing strategies for the Company. Ms. Brege earned her undergraduate degree from Ohio University and has an M.B.A. from the University of Chicago.

Stephen R. Davis has served as our Chief Executive Officer and as a director of our company since September 2015. Mr. Davis joined us in July 2014 as our Executive Vice President, Chief Financial Officer and Chief Business Officer and served as our Interim Chief Executive Officer from March through August of 2015. Mr. Davis brings over 25 years of executive-level experience in the pharmaceutical industry. Prior to joining our company, he was Executive Vice President and Chief Operating Officer at Heron Therapeutics, Inc., which he joined in 2013, and Executive Vice President and Chief Operating Officer at Ardea Biosciences, Inc. from 2010 to 2013. Prior to joining Ardea, Mr. Davis served in numerous executive roles at Neurogen Corporation from 1994 to 2010, including Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer. Mr. Davis currently serves on the boards of directors of Bellicum Pharmaceuticals, Inc. and Heron Therapeutics, Inc. During the past five years, Mr. Davis served on the board of directors of Heron Therapeutics. Earlier in his career, Mr. Davis practiced as a certified public accountant with a major accounting firm and as a corporate and securities attorney with a Wall Street law firm. The NCG Committee believes that Mr. Davis’ deep experience as an executive officer enables him to bring critical company-specific and industrywide knowledge and leadership skills to the Board. Mr. Davis received his Bachelor of Science degree in accounting from Southern Nazarene University and a Juris Doctorate from Vanderbilt University.

Elizabeth A. Garofalo, M.D., has served as a director of our company since September 2020. Since 2016, Dr. Garofalo has served as the Principal for EAG Pharma Consulting LLC. Prior to that, Dr. Garofalo served in numerous leadership roles at Novartis International AG, including as Senior Vice President and Global Head of Clinical Development and member of the Novartis Global Development Leadership Team, Chair of the Novartis Portfolio Stewardship Board and Co-Head of the Novartis Neuroscience Franchise. Prior to that she was Vice President and Head of the Neuroscience Therapy Area at Astellas Pharma, Inc. Dr. Garofalo started her career at Parke-Davis/Pfizer where she had jobs of

 

 

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increasing responsibility including Ann Arbor Site Head of Neuroscience and Ann Arbor Site Head of Worldwide Regulatory Affairs. Dr. Garofalo currently serves as the chair of the board of directors of Exicure, Inc. and serves on the boards of Alector, Inc. and Xenon Pharmaceuticals Inc. She is also the chair of the board of the Institute for Advanced Clinical Trials in Children, a non-profit organization. The NCG Committee believes that Dr. Garofalo’s extensive industry experience, including her prior leadership positions in the biotechnology industry, position her to make effective contributions to the Board. Dr. Garofalo earned her M.D. from the Indiana University School of Medicine where she completed her pediatric residency. She completed fellowships in pediatric neurology and epilepsy at the University of Michigan Medical School.

The following is a brief biography, and a discussion of the specific experience, qualifications, attributes or skills of each director whose term will continue after the annual meeting.

Directors Continuing in Office Until the 2023 Annual Meeting

James M. Daly has served as a director of our company since January 2016. Mr. Daly served as Executive Vice President and Chief Commercial Officer at Incyte Corporation from October 2012 to June 2015. Prior to joining Incyte, Mr. Daly worked for Amgen, Inc. for 10 years, holding multiple leadership positions. In his last role, Mr. Daly served as Senior Vice President, North America Commercial Operations, Global Marketing and Commercial Development. Previously, he served as Vice President and General Manager of Amgen’s Oncology Business Unit. His teams at Amgen were responsible for the successful launch of many products, including Aranesp®, Neulasta®, Vectibix®, Nplate®, Xgeva® and Prolia®. Previously, Mr. Daly spent over 16 years with Glaxo Wellcome/GlaxoSmithKline (GSK) where he held roles of increasing responsibility, including Senior Vice President, General Manager, Respiratory and Anti-Infective Business Unit, and led the U.S. launch of Advair®. He currently serves on the boards of directors of argenx SE, Bellicum Pharmaceuticals, Halozyme Therapeutics and Madrigal Pharmaceuticals. During the past five years, Mr. Daly has served on the board of directors of Chimerix Inc. The NCG Committee believes that Mr. Daly’s deep experience as a pharmaceutical executive enables him to bring critical industry and commercial knowledge and leadership skills to the Board. Mr. Daly earned his B.S. in pharmacy and M.B.A. from the University at Buffalo, The State University of New York.

Edmund P. Harrigan, M.D., has served as a director of our company since November 2015. Dr. Harrigan served as Senior Vice President of Worldwide Safety and Regulatory for Pfizer Inc. from 2012 to 2015, where he led a 3,500-person team in 80 countries that was responsible for collecting, interpreting and reporting clinical safety data for more than 600 marketed products, and managed regulatory interactions with global health agencies. Dr. Harrigan’s previous executive leadership roles at Pfizer included serving as Senior Vice President, Head of Worldwide Business Development, Senior Vice President, Head of Worldwide Regulatory Affairs and Quality Assurance, and Vice President, Head of Neuroscience and Ophthalmology. Earlier in his career at Pfizer, Dr. Harrigan served as Vice President of Clinical Development, Therapeutic Area Head, CNS and Pain. Before entering the pharmaceutical industry in 1990, Dr. Harrigan was a practicing neurologist for seven years. He currently serves on the boards of directors of Incyte Corp. and PhaseBio Pharmaceuticals, Inc., as well as AlgoTherapeutix SAS, a private company based in Paris. During the past five years, Dr. Harrigan has served on the board of

 

 

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directors of Bellicum Pharmaceuticals and Karuna Therapeutics. The NCG Committee believes that Dr. Harrigan’s deep experience as a pharmaceutical executive enables him to bring critical industry and regulatory and development knowledge and leadership skills to the Board. Dr. Harrigan earned his B.A. degree in chemistry from St. Anselm College and holds an M.D. from the University of Massachusetts at Worcester.

Directors Continuing in Office Until the 2024 Annual Meeting

Julian C. Baker has served as a director of our company since December 2015. Mr. Baker is a Managing Member of Baker Brothers Investments, which Mr. Baker founded, together with his brother Felix Baker Ph.D., in 2000.Mr. Baker was a portfolio manager at Tisch Financial Management from 1994 to 1999. Previously, Mr. Baker was employed from 1988 to 1993 by the private equity investment arm of Credit Suisse First Boston Corporation Mr. Baker currently serves on the boards of directors of Incyte Corporation, Prelude Therapeutics, Inc., Everyone Medicines, Inc. and Alumis, Inc. During the past five years, Mr. Baker served on the boards of directors of Genomic Health, Inc. and Idera Pharmaceuticals, Inc. The NCG Committee believes that Mr. Baker’s extensive financial industry experience focused on life science corporations make him a valuable contributor to Board discussions. Mr. Baker holds an A.B. from Harvard University.

Stephen R. Biggar, M.D., Ph.D., has served as a director of our company since January 2013. Dr. Biggar is a Partner at Baker Bros. Advisors LP, a registered investment adviser focused on long-term investments in life-sciences companies. Dr. Biggar joined Baker Bros. Advisors LP in 2000. Dr. Biggar currently serves on the board of directors of Kiniksa Pharmaceuticals, Ltd. The NCG Committee believes that Dr. Biggar’s scientific background and financial industry experience make him a valuable contributor to Board discussions. Dr. Biggar received an M.D. and a Ph.D. in immunology from Stanford University and received a B.S. in genetics from the University of Rochester.

Daniel B. Soland  has served as a director of our company since March 2015. Mr. Soland is currently Senior Vice President and Chief Operating Officer of Idera Pharmaceuticals, Inc., and served as Chief Executive Officer of uniQure N.V., a human gene therapy company, from December 2015 until September 2016. Mr. Soland previously served as Senior Vice President and Chief Operating Officer of ViroPharma, Inc. starting in 2008 until it was acquired in 2014, and as Vice President and Chief Commercial Officer of ViroPharma from 2006 to 2008. During his tenure at ViroPharma, Mr. Soland managed the commercial, manufacturing and quality organizations, helped build the company’s commercial infrastructure in the United States, Europe, and Canada and led the launch of Cinryze®, one of the most successful ultra-orphan drugs in the United States. Mr. Soland served as President, Chiron Vaccines, of Chiron Corporation from 2005 to 2006 and led the growth of the vaccine business to over $1 billion in sales. From 2002 through 2005, Mr. Soland served as President and Chief Executive Officer of Epigenesis Pharmaceuticals. Earlier in his career, Mr. Soland worked for GlaxoSmithKline in increasing roles of responsibility from 1993 to 2002, including as Vice President and Director, Worldwide Marketing Operations, GSK Biologicals. He currently serves on the boards of directors of DBV Technologies S.A. and KalVista Pharmaceuticals, Inc. The NCG Committee believes that Mr. Soland’s extensive commercial experience brings valuable knowledge and expertise to the Board. Mr. Soland holds a B.S. in pharmacy from the University of Iowa.

 

 

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Executive Officers

Set forth below is biographical information for each of our executive officers other than Mr. Davis, whose biographical information is set forth above:

Srdjan R. Stankovic, M.D., M.S.P.H., has served as our President since November 2018. Dr. Stankovic previously served as our Executive Vice President, Head of Research and Development and has been with our company since November 2015. With a background in clinical and academic psychiatry, Dr. Stankovic brings over 20 years of executive level experience in drug development and clinical and medical affairs. Dr. Stankovic has built and led multidisciplinary teams for small molecules and biologics in therapeutic areas including neurology, psychiatry, oncology, cardiology and pain. He has led teams to achieve approvals of KEPPRA®, FENTORA®, TREANDA®, NUVIGIL® and ARISTADA™. Prior to joining our company, Dr. Stankovic served as Senior Vice President of Clinical Development and Medical Affairs at Alkermes plc. from 2013 to 2015. Prior to Alkermes, he held the position of Senior Vice President and Head of Global Clinical Development for Teva Pharmaceutical Industries Ltd. He was appointed to this role following Teva’s acquisition of Cephalon, Inc. where he served as Senior Vice President, Worldwide Clinical Research. Dr. Stankovic also served as Senior Vice President, Medical Affairs and Clinical Development CNS at Forest Laboratories, Inc. and held executive positions in research and development at Neurogen Corporation, Johnson and Johnson, and UCB. Dr. Stankovic is a member of the board of directors of Neurogene Inc., a privately held genetic medicine and gene therapy company. Dr. Stankovic received his M.D. from the University of Belgrade and holds a Master of Science in public health from the University of Alabama at Birmingham.

Austin D. Kim is our Executive Vice President, General Counsel and Secretary and has been with our company since July 2018. From 2006 until 2017, Mr. Kim held several senior legal positions at Teva Pharmaceutical Industries Ltd., a global specialty pharmaceutical company. At Teva, Mr. Kim was most recently Vice President and Deputy General Counsel, Corporate/M&A, handling corporate and securities law matters, acquisitions and corporate development, capital markets transactions and corporate governance matters. Before joining Teva, Mr. Kim was Deputy General Counsel at IVAX Corporation, a global generic pharmaceutical company, which was acquired by Teva in 2006. Earlier in his career, Mr. Kim was a senior lawyer at Transamerica Corporation, practiced law at Pillsbury, Madison & Sutro in San Francisco and clerked for Judge Vaughn Walker of the United States District Court, Northern District of California. Mr. Kim received his J.D. from Columbia University School of Law and his A.B. in English literature and economics from Stanford University.

Mark Schneyer has served as our Executive Vice President, Chief Financial Officer since December 2021. Mr. Schneyer joined the Company in May 2020 as Senior Vice President, Business Development and Chief Business Officer. In September 2021, he was appointed Interim Chief Financial Officer. Mr. Schneyer joined the Company from Pfizer Inc., where he was most recently Vice President, Business Development for the Upjohn division. Mr. Schneyer joined Pfizer’s Worldwide Business Development organization in 2011 and served in various business development positions of increasing responsibility, overseeing strategic transactions spanning licensing agreements, product acquisitions and divestitures, strategic collaborations and company acquisitions. Prior to serving at Pfizer, Mr. Schneyer was an investment banker at Lazard where he advised boards of directors and senior management teams in the

 

 

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healthcare sector. Mr. Schneyer earned a Bachelor of Science in Economics with a concentration in Finance from the Wharton School of the University of Pennsylvania.

Brendan P. Teehan has served as our Executive Vice President, Chief Operating Officer and Head of Commercial. since November 2021.  Mr. Teehan joined the Company in July 2018 as Vice President, Insights, Analytics and Commercial Operations. In March 2021, he was promoted to Senior Vice President, Chief Insights and Analytics Officer. Prior to joining the Company, Mr. Teehan served as Vice President, Provider Solutions at TESARO, Inc., a commercial-stage oncology company, from June 2016 to July 2018, and as Vice President, then Senior Vice President, Pharmacy Services at RainTree Oncology, an oral oncology services company, from April 2012 to April 2016. Mr. Teehan earned a Bachelor of Arts in government and international relations from the University of Notre Dame and an M.B.A. from Carnegie Mellon University, Tepper School of Business.

 

 

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INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Board Diversity

The Board Diversity Matrix, below, provides the diversity statistics for our Board of Directors.

 

 

Independence of the Board of Directors

As required under the Nasdaq Stock Market (“Nasdaq”) listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent”, as affirmatively determined by the board of directors. Our Board of Directors consults with the Company’s counsel to ensure that the Board’s determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent”, including those set forth in the applicable Nasdaq listing standards (including as independence is currently defined in Rule 5605(d)(2) of those listing standards).

Consistent with these considerations, after review of all identified relevant transactions or relationships between each director, or any of his or her family members, and the Company, its senior management and its independent registered public accounting firm, the Board has affirmatively determined that all of our current directors are independent directors within the meaning of the applicable Nasdaq listing standards except for Mr. Davis, our Chief Executive Officer.

 

 

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Our independent directors meet quarterly in regularly scheduled executive sessions at which only non-employee directors are present and which are presided over by the Chair of the Board.

Board Leadership Structure

Our Board of Directors has an independent Chair who has authority, among other things, to call and preside over meetings of our Board, including meetings of the independent directors, to set meeting agendas and to determine materials to be distributed to the Board. Accordingly, the Board Chair has substantial ability to shape the work of our Board. The Company believes that separation of the positions of Board Chair and Chief Executive Officer reinforces the independence of our Board in its oversight of the business and affairs of the Company. In addition, the Company believes that having an independent Board Chair creates an environment that is more conducive to objective evaluation and oversight of management’s performance, increasing management accountability and improving the ability of our Board to monitor whether management’s actions are in the best interests of the Company and its stockholders. As a result, the Company believes that having an independent Board Chair can enhance the effectiveness of our Board as a whole.

Role of the Board in Risk Oversight

One of the Board’s functions is risk oversight for the Company. The Board does not have a standing risk management committee, but rather administers this oversight function directly, as well as through various committees that address risks inherent in their respective areas of oversight. In particular, our Board is responsible for monitoring and assessing strategic risk exposure, including a determination of the nature and level of risk appropriate for the Company. The Board has received regular updates from the Chief Executive Officer on the evolving COVID-19 pandemic and its impact on the Company’s business. Our Compensation Committee is responsible for overseeing the Company’s executive compensation plans and arrangements and assessing whether any of our compensation policies or procedures has the potential to encourage excessive risk-taking. The Audit Committee oversees management of financial risks. The Audit Committee also monitors compliance with legal and regulatory requirements related to our finances. The NCG Committee manages risks associated with corporate governance, including the independence of the Board and potential conflicts of interest. Typically, the applicable Board committees discuss the applicable risk oversight at least annually at one of the regularly scheduled meetings for that committee with the relevant employees. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is regularly informed through committee reports and reports from management about such risks.

Meetings of the Board of Directors

The Board of Directors met 14 times during 2021. All directors attended at least 75% of the aggregate number of meetings of the Board and of the committees on which they served, held during the portion of the last fiscal year for which they were directors or committee members.

 

 

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Information Regarding Committees of the Board of Directors

The Board has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. The following table provides membership and meeting information for 2021:

 

Name

 

Audit Committee

 

Compensation

Committee

 

Nominating and
Corporate
Governance
Committee

Julian C. Baker

 

 

 

X

 

 

Stephen R. Biggar, M.D., Ph.D.

 

 

 

X*

 

X

Laura A. Brege

 

X*

 

 

 

X

James M. Daly

 

X

 

X

 

 

Daniel B. Soland

 

X

 

 

 

X*

Meetings in 2021

 

 

 

1 

 

*

Committee Chair

Below is a description of the Audit Committee, Compensation Committee and NCG Committee of the Board of Directors. The Board of Directors has determined that each member of such committees meets the applicable Nasdaq rules and regulations regarding “independence” and that each member is free of any relationship that would impair his or her individual exercise of independent judgment with regard to the Company.

Audit Committee

The Audit Committee of the Board of Directors is composed of three directors, each of whom is independent, and was established by the Board in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to oversee the Company’s corporate accounting and financial reporting processes and audits of its financial statements. The Audit Committee operates pursuant to a written charter that is available on our website at https://ir.acadia-pharm.com. The functions of the Audit Committee include, among other things:

 

reviewing and pre-approving the engagement of our independent registered public accounting firm to perform audit services and any permissible non-audit services,

 

reviewing our annual and quarterly results, financial statements and reports and discussing the statements and reports with our independent registered public accounting firm and management,

 

reviewing and discussing with our independent registered public accounting firm and management, as appropriate, significant issues that arise regarding accounting principles and financial statement presentation, and matters concerning the scope, adequacy and effectiveness of our internal control over financial reporting,

 

establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal auditing controls or auditing matters,

 

 

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establishing procedures for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters, and

 

reviewing and approving any transaction with a related person that must be disclosed by us.

The Board of Directors reviews the Nasdaq listing standards definition of independence for Audit Committee members on an annual basis and has determined that all members of the Audit Committee are independent (as independence is currently defined in the applicable Nasdaq listing standards). Our Board of Directors has determined that Ms. Brege qualifies as an “audit committee financial expert”, as defined in applicable SEC rules. The Board made a qualitative assessment of Ms. Brege’s level of knowledge and experience based on a number of factors, including her formal education, prior experience and business acumen.

Report of the Audit Committee of the Board of Directors

The material in this report is not “soliciting material”, is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

The primary purpose of the Audit Committee is to oversee our financial reporting processes on behalf of our Board of Directors. The Audit Committee’s functions are more fully described in its charter, which is available on our website at https://ir.acadia-pharm.com. Management has the primary responsibility for our financial statements and reporting processes, including our systems of internal controls.

The Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2021 with our management. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. The Audit Committee has also received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent accountants’ communications with the audit committee concerning independence and has discussed with the independent registered public accounting firm the accounting firm’s independence. Based on the foregoing, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The Audit Committee also has engaged Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022 and is seeking ratification of such selection by the stockholders.

 

 

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The foregoing report has been furnished by the Audit Committee.

Laura A. Brege, Committee Chair

James M. Daly

Daniel B. Soland

Compensation Committee

The Compensation Committee is composed of three directors, each of whom is independent. The Compensation Committee operates pursuant to a written charter that is available on our website at https://ir.acadia-pharm.com. The functions of the Compensation Committee include, among other things:

 

reviewing and recommending to our Board of Directors the compensation and other terms of employment of our executive officers and reviewing and suggesting corporate performance goals and

 

objectives relevant to such compensation, which shall support and reinforce our long-term strategic goals,

 

recommending to our Board of Directors the type and amount of compensation to be paid or awarded to non-employee directors for their service on our Board of Directors and its committees,

 

evaluating and recommending to our Board of Directors the equity incentive plans, compensation plans and similar programs advisable for us, as well as modification, administration or termination of existing plans and programs,

 

establishing policies with respect to equity compensation arrangements,

 

reviewing the terms of any employment agreements, severance arrangements, change-in-control protections and any other compensatory arrangements for our executive officers and approving any such agreements for all officers prior to approval by the Board of Directors, and

 

considering and responding to votes by the Company’s stockholders to approve executive compensation as required by Section 14A of the Exchange Act and determining the Company’s recommendations regarding the frequency of advisory votes on executive compensation.

Each year, the Compensation Committee reviews with management the Company’s Compensation Discussion and Analysis and considers whether to recommend that it be included in proxy statements and other filings.

The Compensation Committee meets several times each year. The agenda for each meeting is usually developed by the chair of the Compensation Committee, in consultation with management. The

 

 

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Compensation Committee meets regularly in executive session. However, from time to time, various members of management and other employees as well as outside advisors or consultants may be invited by the Compensation Committee to make presentations, provide financial or other background information or advice or otherwise participate in Compensation Committee meetings. The Chief Executive Officer does not participate in, and is not present during, any deliberations or determinations of the Compensation Committee regarding his compensation or his individual performance. The charter of the Compensation Committee grants the Compensation Committee full access to all books, records, facilities and personnel of the Company, as well as authority to obtain, at the expense of the Company, advice and assistance from internal and external legal, accounting or other advisors and consultants and other external resources that the Compensation Committee considers necessary or appropriate in the performance of its duties. The Compensation Committee has direct responsibility for the oversight of the work of any advisers engaged for the purpose of advising the Committee. In particular, the Compensation Committee has authority to retain compensation consultants to assist in its evaluation of executive and director compensation, including the authority to approve the consultant’s reasonable fees and other retention terms. Under the committee’s charter, the Compensation Committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to the Compensation Committee, other than in-house legal counsel and certain other types of advisers, only after taking into consideration six factors, prescribed by the SEC and Nasdaq, that bear upon the adviser’s independence; however, there is no requirement that any adviser be independent. For 2021, after taking into consideration the six factors prescribed by the SEC and Nasdaq, the Compensation Committee engaged Frederic W. Cook & Co., Inc. (“FW Cook”) as a compensation consultant to assist with Board and executive compensation. The Compensation Committee requested that FW Cook:

 

evaluate the efficacy of the Company’s existing executive compensation strategy and practices in supporting and reinforcing the Company’s long-term strategic goals; and

 

assist in refining the Company’s compensation strategy and in developing and implementing an executive compensation program to execute that strategy, including developing performance-based options designed focused on long-term incentives for executive officers.

As part of its engagement, FW Cook was requested by the Compensation Committee to review and update, as necessary, the comparator group of companies used for fiscal 2020 compensation discussions and to perform analyses of competitive performance and compensation levels for that group. At the request of the Compensation Committee, FW Cook also conducted interviews with certain members of the Compensation Committee and senior management to learn more about the Company’s business operations and strategy, key performance metrics and strategic goals, as well as the labor markets in which the Company competes. Following an active dialogue with FW Cook and our Chief Executive Officer, the Compensation Committee and/or the Board of Directors approved the recommendations discussed in the Compensation Discussion and Analysis section of this proxy statement.

Under its charter, the Compensation Committee may form, and delegate authority to, subcommittees, as appropriate. In addition, in 1998, the Board of Directors formed a Non-Officer Stock Option Committee to which it delegated authority to grant, without any further action required by the

 

 

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Compensation Committee, stock options to employees who are not executive officers of the Company. In July 2018, the Board of Directors delegated the authority to grant options under the 2010 Equity Incentive Plan, as amended, to Mr. Davis and Mr. Kim, acting together. The purpose of this delegation of authority is to enhance the flexibility of option administration within the Company and to facilitate the timely grant of options to non-management employees, particularly new employees, within specified limits approved by the Board of Directors. The authority of the Non-Officer Stock Option Committee is specified at least once every quarter, but, generally, it may not grant equity awards in excess of 100,000 shares to any one employee. Typically, as part of its oversight function, the Compensation Committee will review on a quarterly basis the list of grants made by the subcommittee.

The Compensation Committee meets to discuss and make recommendations to the Board of Directors regarding annual compensation adjustments, annual bonuses, annual equity awards, and new performance objectives. The Compensation Committee also considers matters related to individual compensation, such as compensation for new executive hires, as well as high-level strategic issues, such as the effectiveness of the Company’s compensation strategy, potential modifications to that strategy and new trends, plans or approaches to compensation, at various meetings throughout the year. Generally, the Compensation Committee’s process comprises two related elements: the determination of compensation levels and the establishment of performance objectives for the current year. For executives other than the Chief Executive Officer, the Compensation Committee solicits and considers evaluations and recommendations submitted to it by the Chief Executive Officer. In the case of the Chief Executive Officer, the evaluation of his performance is conducted by the Compensation Committee, which recommends to the Board of Directors any adjustments to his compensation as well as awards to be granted. For all executives, as part of its deliberations, the Compensation Committee may review and consider, as appropriate, materials such as financial reports and projections, operational data, executive stock ownership information, company stock performance data, analyses of historical executive compensation levels and current company-wide compensation levels, compensation surveys, and recommendations of compensation consultants, if applicable.

The specific determinations of the Compensation Committee with respect to executive compensation for 2021 are described in greater detail in the Compensation Discussion and Analysis section of this proxy statement.

Nominating and Corporate Governance Committee

The NCG Committee of the Board of Directors is composed of three independent directors and operates pursuant to a written charter that is available on our website at https://ir.acadia-pharm.com. The functions of the NCG Committee include, among other things:

 

interviewing, evaluating, nominating and recommending individuals for membership on our Board of Directors,

 

evaluating nominations by stockholders of candidates for election to our Board of Directors,

 

evaluating performance of our Board of Directors and applicable committees of the Board and determining whether continued service on the Board is appropriate,

 

 

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developing, reviewing and amending a set of corporate governance policies and principles, including our Code of Business Conduct and Ethics,

 

considering questions of possible conflicts of interest of officers and directors as such questions arise, and

 

overseeing and reviewing the processes and procedures we use to provide information to the Board of Directors and its committees.

Candidates for director nominees are reviewed in the context of the current composition of our Board of Directors, our operating requirements and the long-term interests of our stockholders. In conducting this assessment, the NCG Committee considers skills, diversity, age, and such other factors as it deems appropriate given our current needs and the current needs of the Board of Directors, to maintain a balance of knowledge, experience and capability. The NCG Committee does not have a formal policy regarding diversity, but does recognize the potential importance of diversity in board composition, including diversity of experience, gender and ethnicity, and believes that directors should represent a diversity of viewpoints. To these ends, the NCG Committee has identified and evaluated nominees in the broader context of the Board’s overall composition, as well as the Company’s current needs and future needs, with the goal of having Board members who complement and strengthen the skills of each other through diversity and who also exhibit qualities that the NCG Committee views as critical to effective functioning of the Board of Directors, including sound judgment, collegiality, and integrity. In the case of incumbent directors whose terms of office are set to expire, the NCG Committee reviews such directors’ experience, qualifications, attributes, overall service to us during their term, including the number of meetings attended, level of participation, quality of performance, and any other relevant considerations. In the case of new director candidates, the NCG Committee also determines whether the nominee would be independent under applicable Nasdaq listing standards, and SEC rules and regulations with the advice of counsel, if necessary. The NCG Committee uses its network of contacts to compile a list of potential candidates, but has also engaged, when it deemed appropriate, a professional search firm. The NCG Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of our Board of Directors. The NCG Committee meets to discuss and consider candidates’ qualifications and selects candidates for recommendation to the Board by majority vote.

The NCG Committee will consider director candidates recommended by stockholders. The NCG Committee does not intend to alter the manner in which it evaluates candidates, based on whether the candidate was recommended by a stockholder. Stockholders who wish to recommend individuals for consideration by the NCG Committee must do so by delivering a written recommendation to the NCG Committee at the following address: c/o Corporate Secretary, Acadia Pharmaceuticals Inc., 12830 El Camino Real, Suite 400, San Diego, California 92130. Each submission must set forth: the name and address of the stockholder on whose behalf the submission is made; the number of our shares that are owned beneficially by such stockholder as of the date of the submission; the full name of the proposed candidate; a description of the proposed candidate’s business experience for at least the previous five years; complete biographical information for the proposed candidate; and a description of the proposed candidate’s qualifications as a director. For the proposed candidate to be considered for nomination for

 

 

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the 2023 Annual Meeting of Stockholders, the written communication must be received no earlier than February 7, 2023 but no later than March 9, 2023.

 

Board Skills and Experience

Our Board comprises a diverse group of individuals, each of whom possesses various complementary skills and business experience. We believe that our Board collectively has an appropriate mix of skills to guide and assist Acadia in seeking to achieve our long-term goals.

 

 

Stockholder Communications with the Board of Directors

Our Board of Directors has adopted a formal process by which stockholders may communicate with the Board of Directors or any of its individual directors. Stockholders who wish to communicate with the Board of Directors may do so by sending written communications addressed to the Company’s General Counsel at 12830 El Camino Real, Suite 400, San Diego, California 92130. All communications will be compiled by the General Counsel and submitted to the Board or the individual directors on a periodic basis. These communications will be reviewed by the General Counsel, who will determine whether they should be presented to the Board. The purpose of this screening is to allow the Board of Directors to avoid having to consider irrelevant or inappropriate communications (such as advertisements, solicitations and hostile communications). All communications directed to the Audit Committee in accordance with the Company’s Open Door Policy for Reporting Complaints Regarding Accounting and Auditing Matters, discussed below, will be treated in accordance with that policy.

Corporate Social Responsibility

We partner beyond the science, so more possibilities shine through. While our primary passion is helping people fight biological diseases, our diverse team of employees is committed to doing so sustainably and ethically, while using our resources to give back.

 

 

 

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Product Safety and Quality

 

Our patients trust us to deliver products that are both safe and effective.

 

 

Policy: We have policies that uphold the standards provided by the FDA to ensure quality, safe medicines.

 

 

Management: We take a proactive approach to ensure quality by prioritizing regulatory compliance and performing routine compliance checks.

 

 

Drug Safety: We have a system of robust processes to review and evaluate the safety of our medicines, and we are committed to continuous improvement.

 

Access to Medicine and Support

 

Patients can’t benefit from what they don’t have access to. We support them by making sure they have access to resources through a safe, professional network.

 

 

Policy: We have policies that uphold the standards provided by the FDA to ensure quality, safe medicines.

 

 

Management: We take a proactive approach to ensure quality by prioritizing regulatory compliance and performing routine compliance checks.  

 

 

Drug Safety: We have a system of robust processes to review and evaluate the safety of our medicines, and we are committed to continuous improvement.

 

Giving Back

 

Through our commUNITY program, events like the Martin Luther King Jr. Day #dayofservice, Acadians let their generosity shine through by helping people experiencing homelessness, supporting the environment, sending Valentine’s Day cards to seniors in isolation, donating books to reading programs, picking up trash in a city park, and assembling lunches for a food pantry – a range of services as broad as Acadia’s commitment to our communities.

 

Environment

 

We minimize our carbon footprint in two key ways: our physical buildings and manufacturing process. Both of our office buildings limit their carbon footprint, and our San Diego building is Gold Level LEED certified. In our manufacturing process, our chemists are committed to “green chemistry,” increasing efficiencies, reducing materials, and minimizing waste. We continue to evolve our efforts, aiming for a long-term, sustainable future.

Diversity, Equity and Inclusion (DEI)

Acadia is committed to our Diversity, Equity, and Inclusion journey.  We believe our diverse perspectives drive innovation and support our mission of elevating life through science. We are dedicated to fostering a culture of curiosity and belonging: Curiosity at Acadia means we seek to understand more about ourselves, each other, and the work that we do. Belonging at Acadia means you can bring your whole self to work and also let your whole self shine through.

 

 

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Our commitment to diversity, equity, and inclusion is highlighted by:

 

 

the coordination of our efforts by a Senior Director, People & Performance, and Diversity, Equity and Inclusion;

 

 

a customized mandatory DEI training curriculum that includes both on-demand e-learnings and instructor-led trainings;

 

the Acadia Viewpoint employee engagement survey, which is conducted regularly, providing quantitative and qualitative data to support our DEI journey;

 

Acadia Employee Resource Groups, which have access to dedicated resources, professional speakers, and company-wide cultural engagement events;

 

 

Acadia’s supporting donor status for Catalyst, a global thought leader and partner in accelerating the progress of women at work, which provides access to tools and resources to all employees;

 

 

a cross-functional Diversity, Equity, and Inclusion Council and sub-committees, which work to integrate DEI principles throughout the company and our business;

 

an annual audit to assess personnel practices for discrimination, including hiring, promotion, performance appraisals and compensation.

 

Acadia recognizes that DEI efforts are most successful when they are integrated into everything we do.  Our DEI Council and its sub-committees focus on areas including: the employee life-cycle, external opportunities for DEI efforts, and corporate opportunities for DEI efforts.  Our Employee Resource Groups provide all employees opportunities to increase their personal engagement, improve their cultural competencies, celebrate their curiosity, and increase their sense of belonging in our Acadia family. We believe that our differences are our strengths - that creating an environment where everyone, from any background, can do our best work on behalf of the community we serve is the right thing to do.  We also believe our diverse perspectives drive innovation and support our mission of elevating life through science.

Professional Development

Removing the barriers to diverse talent is not just about removing barriers in the hiring process - it is also about making sure that Acadians all have access to the right tools in order to succeed once you join us. Our processes, policies, and procedures are paired with measures such as focused training to help support diversity, equity, and inclusion throughout the talent lifecycle.

We are committed to the ongoing growth and development of all employees at Acadia. A variety of development offerings are available at Acadia, including our tuition reimbursement program, live training programs for individuals and leaders, and on-demand tools and resources. We also recognize that professional development expands beyond formal learning and encourage employees to create an individual development plan which incorporates mentors, coaches, ongoing feedback and stretch assignments. We believe these development opportunities enhance necessary skills and knowledge for current positions, for potential future positions at Acadia, and they enhance our employees’ overall engagement.

 

 

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Code of Business Conduct and Ethics

As part of Acadia’s Comprehensive Compliance Program described below, we have adopted the Acadia Pharmaceuticals Inc. Code of Business Conduct and Ethics that applies to all officers, directors and employees. The Code of Business Conduct and Ethics is available on our website at https://ir.acadia-pharm.com. If we make any substantive amendments to this Code of Business Conduct and Ethics or grant any waiver from a provision of the Code of Business Conduct and Ethics to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website. Acadia requires all employees to comply with its Code of Business Conduct and Ethics and its U.S. Healthcare Compliance Manual.

Comprehensive Compliance Program

Acadia’s Comprehensive Compliance Program is aligned with (1) the United States Department of Health and Human Services, Office of Inspector General’s April 2003 “Compliance Program Guidance for Pharmaceutical Manufacturers” and (2) the Pharmaceutical Research and Manufacturers of America’s “Code on Interactions with Health Care Professionals.” Acadia’s Comprehensive Compliance Program has been designed to prevent and detect violations of company policy or law through a proactive and practical training and communication approach, an open-door policy to discuss and report any concerns and a comprehensive auditing and monitoring platform. In the event Acadia becomes aware of potential compliance concerns, it will, where appropriate, take steps to investigate the matter, pursue disciplinary action, and/or implement corrective measures to prevent future issues.

Hedging Policy

Our Amended and Restated Policy for Stock Trading by Officers, Directors and Certain Other Employees prohibits our officers, directors, and other employees that may be designated from time to time by our Chief Executive Officer, from engaging in short sales, transactions in put or call options, hedging transactions and other inherently speculative transactions with respect to our stock at any time. Our policy further prohibits such persons from engaging in transactions involving any loan, pledge or other transfer of beneficial ownership of the Company’s securities without obtaining advance clearance of the proposed transaction from our Chief Executive Officer or Chief Financial Officer.

Open Door Policy for Reporting Complaints Regarding Accounting and Auditing Matters

We have adopted an Open Door Policy for Reporting Complaints Regarding Accounting and Auditing Matters to facilitate the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, as well as the confidential, anonymous submission by our employees of concerns regarding these matters. The Open Door Policy is available on our website at https://ir.acadia-pharm.com.

 

 

 

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Proposal 2:

Approval of an Amendment to the 2010 Equity Incentive Plan

Overview

Our Board of Directors has amended the Acadia Pharmaceuticals Inc. 2010 Equity Incentive Plan (the “2010 Plan”), subject to stockholder approval, to among other things, increase the number of shares of common stock authorized for issuance under the 2010 Plan by 6,000,000 shares. We refer to the 2010 Plan, as so amended, as the “Amended 2010 Plan” throughout this proxy statement. References in this proposal to our Board of Directors include the Compensation Committee of the Board where applicable.

A description of the material terms of the Amended 2010 Plan are summarized below. The key difference between the terms of the 2010 Plan and the Amended 2010 Plan are that

 

the Amended 2010 Plan provides that an additional 6,000,000 shares may be issued pursuant to stock awards granted under the Amended 2010 Plan; and

 

the Amended 2010 Plan provides that the maximum number of shares that may be issued upon the exercise of incentive stock options is 34,000,000.

In this Proposal 2, our Board of Directors is requesting stockholder approval of the Amended 2010 Plan, including the increase to the number of shares of common stock authorized for issuance under the Amended 2010 Plan by 6,000,000 shares. As of December 31, 2021, approximately 9,600,000 shares were authorized for issuance under the 2010 Plan. If stockholder approval of this Proposal 2 is obtained, therefore, an aggregate of approximately 15,600,000 shares will be authorized for issuance under the Amended 2010 Plan, less the number of shares underlying equity awards that (1) have been granted since December 31, 2021 (after applying the share counting provisions described herein), and (2) are intended to be granted prior to the date of the 2022 Annual Meeting of Stockholders. Our Board of Directors believes that the Amended 2010 Plan is an integral part of our long-term compensation philosophy and the Amended 2010 Plan is necessary to continue providing the appropriate levels and types of equity compensation for our employees.

Equity Awards Are an Integral Component of Our Compensation Program

Equity awards have been historically and, we believe, will continue to be an integral component of our overall compensation program for our employees and directors. Approval of the Amended 2010 Plan will allow us to continue to grant stock options and other equity awards at levels we determine to be appropriate in order to attract new employees and directors, retain our existing employees and to provide incentives for such persons to exert maximum efforts for the Company’s success and ultimately increase stockholder value. The Amended 2010 Plan allows the Company to utilize a broad array of equity incentives with flexibility in designing such incentives, including traditional option grants, stock appreciation rights, restricted stock awards, restricted stock unit awards and performance stock awards.

 

 

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On December 31, 2021, stock awards covering an aggregate of 17,766,931 shares were outstanding under our 2004 Equity Incentive Plan (the “2004 Plan”) and the 2010 Plan, collectively. In addition, 9,590,133 shares remained available for future grant under the 2010 Plan as of such date.

The following table provides certain additional information regarding our equity incentive program as of December 31, 2021.

 

 

 

As of

December 31, 2021

 

Total number of shares of common stock subject to

   outstanding stock options

 

 

15,086,141

 

Weighted-average exercise price of outstanding

   stock options

 

$

31.58

 

Weighted-average remaining term of outstanding

   stock options

 

5.8 years

 

Total number of shares of common stock subject to

   outstanding full value awards

 

 

2,680,790

 

Total number of shares of common stock available for

   grant under the 2010 plan

 

 

9,590,133

 

Total number of shares of common stock available for

   grant under other equity incentive plans

 

 

 

Total number of shares of common stock outstanding

 

 

161,012,695

 

Per-share closing price of common stock as reported on

   Nasdaq Global Select Market

 

$

23.34

 

 

The Size of Our Share Reserve Increase Request Is Reasonable

If our request to increase the share reserve of the Amended 2010 Plan by 6,000,000 shares is approved, we will have approximately 15,600,000 shares authorized for issuance after the annual meeting. We believe that such number of shares will be sufficient to attract, retain and motivate employees for the next year. We anticipate seeking approval from our stockholders in 2024 of an additional increase to the share reserve under the Amended 2010 Plan. The size of our request is also reasonable in light of the equity granted to our employees and directors over the last three years.

We Manage Our Equity Incentive Award Use Carefully, and Dilution Is Reasonable

We continue to believe that equity awards such as stock options and other types of stock awards are a vital part of our overall compensation program. Our compensation philosophy reflects broad-based eligibility for equity incentive awards, and we grant awards to substantially all of our employees. However, we recognize that equity awards dilute existing stockholders, and, therefore, we must responsibly manage the growth of our equity compensation program. We are committed to effectively monitoring our equity compensation share reserve, including our “burn rate,” to ensure that we maximize stockholders’ value by granting the appropriate number of equity incentive awards necessary to attract, reward, and retain employees.

 

 

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The following table shows our historical dilution and burn rate percentages for fiscal years 2021, 2020 and 2019.

 

 

 

As of December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Full dilution(1)

 

 

14.52

%

 

 

15.08

%

 

 

16.75

%

Gross burn rate(2)

 

 

2.24

%

 

 

1.92

%

 

 

3.25

%

 

(1)

Full dilution is calculated as (shares available for grant + shares subject to outstanding equity incentive awards) ÷ (common stock outstanding + shares available for grant + shares subject to outstanding equity incentive awards).

(2)

Gross burn rate is calculated as (shares subject to options granted + shares subject to other equity incentive awards granted) ÷ weighted average common shares outstanding.

Burn Rate

The following table provides detailed information regarding the activity related to our equity incentive plans for fiscal years 2021, 2020 and 2019.

 

Fiscal Year

 

2021

 

 

2020

 

 

2019

 

Total number of shares of common stock subject to

   stock options granted

 

 

1,879,092

 

 

 

1,937,006

 

 

 

3,502,129

 

Total number of shares of common stock subject to

   full value awards granted

 

 

1,713,829

 

 

 

1,079,727

 

 

 

1,287,453

 

Weighted-average number of shares of common

   stock outstanding

 

 

160,493,000

 

 

 

157,331,000

 

 

 

147,199,000

 

Burn rate

 

 

2.24

%

 

 

1.92

%

 

 

3.25

%

 

The approval of the Amended 2010 Plan will allow us to continue to grant stock options and would allow us to grant other awards described below, at levels determined appropriate by our Board of Directors or its delegate. The Amended 2010 Plan will continue to provide us with flexibility in designing equity incentives in an environment where a number of companies have moved from traditional option grants to other stock-based awards, including stock appreciation rights, restricted stock awards, restricted stock unit awards, and performance stock awards. The Amended 2010 Plan allows us to utilize multiple types of equity incentives in order to secure and retain the services of our employees, consultants, and directors, and to provide long-term incentives that align the interests of our employees, consultants, and directors with the interests of our stockholders. We generally do not make awards to consultants and have no current plans to make any awards to consultants under the Amended 2010 Plan.

Important Aspects of Our Amended 2010 Plan Designed to Protect Our Stockholders’ Interests

The Amended 2010 Plan includes certain provisions that are designed to protect our stockholders’ interests and to reflect corporate governance best practices including:

 

Stockholder approval is required for additional shares. The Amended 2010 Plan does not contain an annual “evergreen” provision. Thus, stockholder approval is required each time

 

 

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we need to increase the share reserve allowing our stockholders the ability to have a say on our equity compensation programs.

 

Repricing is not allowed. The Amended 2010 Plan prohibits the repricing of outstanding equity awards and the cancelation of any outstanding equity awards that have an exercise price or strike price greater than the current fair market value of our common stock in exchange for cash or other stock awards under the Amended 2010 Plan.

 

Share counting provisions. The share reserve under the Amended 2010 Plan is reduced one share for each share of common stock issued pursuant to an option, stock appreciation right and or other stock award with an exercise price that is at least 100% of the fair market value of our common stock on the date of grant (an “Appreciation Award”) granted under the Amended 2010 Plan and 1.47 shares for each share of common stock issued pursuant to a stock award that is not an Appreciation Award (a “Full Value Award”) under the Amended 2010 Plan. This helps to ensure that management and our Board of Directors and Compensation Committee is using the share reserve effectively and with regard to the value of each type of equity award.

 

No liberal share counting or recycling.  Shares that are reacquired or withheld (or not issued) by us to satisfy the exercise or purchase price of a stock option or stock appreciation and shares that are reacquired or withheld (or not issued) by us to satisfy a tax withholding obligation in connection with a stock award will not become available again for issuance under the Amended 2010 Plan.

 

No liberal change in control definition. The change in control definition in the Amended 2010 Plan is not a “liberal” definition. A change in control transaction must actually occur in order for the change in control provisions in the Amended 2010 Plan to be triggered.

 

Minimum vesting requirements. Subject to limited exceptions as set forth in the Amended 2010 Plan and as further described below, stock awards granted under the plan generally must have a minimum one-year vesting requirement.

 

Submission of amendments to Amended 2010 Plan to stockholders. The Amended 2010 Plan requires stockholder approval for material amendments to the Amended 2010 Plan, including as noted above, any increase in the number of shares reserved for issuance under the Amended 2010 Plan.

 

No single trigger accelerated vesting upon change in control or excise tax gross-ups. The Amended 2010 Plan does not provide for any automatic mandatory vesting of awards upon a change in control or for excise tax gross-ups.

 

Flexibility in designing equity compensation scheme. The Amended 2010 Plan allows us to provide a broad array of equity incentives, including traditional option grants, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, and other stock awards. By providing this flexibility we can quickly and effectively

 

 

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react to trends in compensation practices and continue to offer competitive compensation arrangements to attract and retain the talent necessary for the success of our business.

 

Broad-based eligibility for equity awards. We grant equity awards to the vast majority of our employees. By doing so, we tie our employees’ interests with stockholder interests and motivate our employees to act as owners of the business.

 

Restrictions on dividends. The Amended 2010 Plan provides that (i) no dividends or dividend equivalents may be paid with respect to any shares of our common stock subject to an award before the date such shares have vested, (ii) any dividends or dividend equivalents that are credited with respect to any such shares will be subject to all of the terms and conditions applicable to such shares under the terms of the applicable award agreement (including any vesting conditions), (iii) any dividends or dividend equivalents that are credited with respect to any such shares will be forfeited to us on the date such shares are forfeited to or repurchased by us due to a failure to vest, and (iv) in no event shall dividends be paid or credited with respect to an Appreciation Award.

 

Recoupment. Awards granted under the Amended 2010 Plan (and cash-based incentive compensation granted outside of the plan) will be subject to recoupment in accordance with the Company’s compensation recovery policy, which was adopted by our Board in 2022 and is described in more detail later in the CD&A section of this proxy statement, and any such policy that we are required to adopt pursuant to the listing standards of any national securities exchange or association on which our securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law.

 

Restrictions on annual compensation. The Amended 2010 Plan contains a limit on the total annual compensation that may be paid or granted to any non-employee director for service as a director.

General 2010 Plan Information

Our 2010 Plan was adopted by the Board of Directors on March 12, 2010 and approved by our stockholders on June 11, 2010. The 2010 Plan was the successor to and continuation of the 2004 Plan. All outstanding stock awards granted under the 2004 Plan continue to be subject to the terms and conditions as set forth in the agreements evidencing such stock awards and the terms of the 2004 Plan; provided, however, that any shares subject to outstanding stock options granted under the 2004 Plan that expire or terminate for any reason prior to exercise become available for issuance pursuant to stock awards granted under the Amended 2010 Plan. Following June 11, 2010, the effective date of the 2010 Plan, no additional stock awards have been granted under the 2004 Plan. As of June 11, 2010, 802,809 shares remaining available for issuance as new stock awards under the 2004 Plan became available for issuance pursuant to stock awards granted under the 2010 Plan. In March 2013, our Board of Directors adopted, and in June 2013, our stockholders approved, an amendment to the 2010 Plan to increase the number of shares reserved for issuance under the 2010 Plan by 7,500,000 shares. In April 2015, our Board of Directors adopted, and in June 2015, our stockholders approved, an amendment to the 2010

 

 

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Plan to increase the number of shares reserved for issuance under the 2010 Plan by 5,000,000 shares. In April 2016, our Board of Directors adopted, and in June 2016, our stockholders approved, an amendment to the 2010 Plan to increase the number of shares reserved for issuance under the 2010 Plan by 3,000,000 shares. In April 2017, our Board of Directors adopted, and in June 2017, our stockholders approved, an amendment to the 2010 Plan to increase the number of shares reserved for issuance under the 2010 Plan by 5,500,000 shares. In April 2018, our Board of Directors adopted, and in June 2018, our stockholders approved, an amendment to the 2010 Plan to increase the number of shares reserved for issuance under the 2010 Plan by 6,700,000 shares. In April 2019, our Board of Directors adopted, and in June 2019, our stockholders approved, an amendment to the 2010 Plan to increase the number of shares reserved for issuance under the 2010 Plan by 8,300,000 shares.

In this Proposal 2, stockholders are requested to approve the Amended 2010 Plan. The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote on this matter at the annual meeting will be required to approve the adoption of the Amended 2010 Plan. Abstentions will be counted toward the tabulation of votes cast on Proposal 2 and will have the same effect as negative votes. Broker non-votes are counted toward a quorum but are not counted for any purpose in determining whether this matter has been approved.

THE BOARD OF DIRECTORS RECOMMENDS

A VOTE “FOR” PROPOSAL 2

Description of the Amended 2010 Plan

The material features of the Amended 2010 Plan are outlined below. This summary is qualified in its entirety by reference to the complete text of the Amended 2010 Plan. Stockholders are urged to read the actual text of the Amended 2010 Plan in its entirety, which is appended to this proxy statement as Appendix A and may be accessed from the SEC’s website at www.sec.gov.

Background

The terms of the Amended 2010 Plan provide for the grant of both nonstatutory stock options (“NSOs”) and incentive stock options (“ISOs”), restricted stock, restricted stock units, stock appreciation rights, other stock-related awards, and performance awards that may be settled in cash, stock, or other property.

Shares Available for Awards

If this Proposal 2 is approved, the total number of shares of our common stock reserved for issuance under the Amended 2010 Plan will consist of:

 

the number of shares that are subject to stock awards outstanding under the 2004 Plan and the 2010 Plan, as of December 31, 2021, that subsequently expire or terminate for any reason prior to exercise or settlement or are forfeited because of the failure to meet a contingency or condition required to vest vesting;

 

 

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the number of shares previously reserved for issuance under the 2010 Plan, of which 9,590,133 remained available for future grant as of December 31, 2021; plus

 

6,000,000 shares being added under this Proposal 2; less

 

the number of shares subject to awards granted after December 31, 2021 and prior to the Annual Meeting.

We call this aggregate number the “Share Reserve.” The number of shares available for issuance under the Amended 2010 Plan is reduced by (i) one share for each share of common stock issued pursuant to a Stock Appreciation Right, (ii) 1.47 shares for each share issued pursuant to a Full Value Award granted under the Amended 2010 Plan between June 6, 2018 and June 26, 2019, (iii) 1.42 shares for each share issue pursuant to a Full Value Award granted under the Amended 2010 Plan between Jun 26, 2019 and June 7, 2022 and (iii) 1.47 shares for each share issued pursuant to a Full Value Award granted under the Amended 2010 Plan on or after June 7, 2022. The Share Reserve under the Amended 2010 Plan may be exceeded so long as the number of shares of common stock actually issued upon the vesting or exercise of equity awards made under the Amended 2010 Plan does not exceed the Share Reserve.

As of December 31, 2021, there were 9,590,133 shares of common stock (plus any shares that might thereafter be returned to the plan as a result of cancellation or expiration of options) available for future grant under the 2010 Plan. In addition, as of such date, stock awards covering an aggregate of 17,766,931 shares, collectively, were outstanding under the 2004 Plan and the 2010 Plan, and no other awards were outstanding. The weighted average exercise price of all options outstanding as of December 31, 2021 was approximately $31.58 and the weighted average remaining term of such options was approximately 5.8 years. A total of 161,203,748 shares of our common stock were outstanding as of December 31, 2021.

If we issue common stock pursuant to a stock award and the common stock is later forfeited, then the forfeited shares will become available for issuance under the Amended 2010 Plan. To the extent that a Full Value Award again becomes available for issuance under the Amended 2010 Plan, then on and after June 7, 2022 the number of shares of common stock available for issuance under the Amended 2010 Plan will increase by 1.47 shares for each such Full Value Award.   Any shares tendered by a Participant, or withheld by the Company, to cover withholding taxes on any type of Stock Award (whether a Full Value Award or an Appreciation Award), to cover an exercise price for a Stock Option, or related to the net settlement of an SAR, will in all such cases no longer be available again for the grant of awards under the Plan, and in addition, shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of options will also not be available for the grant of awards under the Plan.

Eligibility

All of our approximately 550 employees and all of our non-employee directors are eligible to participate in the Amended 2010 Plan and may receive all types of awards; provided that incentive stock options may be granted under the Amended 2010 Plan only to our employees in the United States. Our

 

 

34


 

consultants are also eligible to participate in the Amended 2010 Plan, but we generally do not make awards to consultants and have no current plans to make any awards to consultants under the Amended 2010 Plan.

Limit on Non-Employee Director Compensation

Under the Amended 2010 Plan, the following limit on compensation will apply to non-employee directors. The aggregate value of all compensation granted or paid, as applicable, to any individual for service as a non-employee director with respect to any period commencing on the date of the Company’s annual meeting of stockholders for a particular year and ending on the day immediately prior to the date of the Company’s annual meeting of stockholders for the subsequent year, including awards granted and cash fees paid by the Company to such non-employee director, will not exceed (i) $1,500,000 in total value or (ii) in the event such non-employee director is first appointed or elected to the Board during such period, $2,000,000 in total value, in each case calculating the value of any awards based on the grant date fair value of such awards for financial reporting purposes.

Administration

The Amended 2010 Plan is administered by our Board of Directors, which may in turn delegate authority to administer the plan to a committee. Our Board of Directors has delegated administration of the Amended 2010 Plan to our Compensation Committee and an additional Non-Officer Stock Option Committee created by the Board that has separate but concurrent jurisdiction with the Compensation Committee to make certain discretionary equity awards under the Amended 2010 Plan to all eligible employees other than executive management. Subject to the terms of the Amended 2010 Plan, our Compensation Committee may determine the recipients, numbers, and types of stock awards to be granted, and terms and conditions of the stock awards, including the period of their exercisability and vesting. Subject to the terms of the Amended 2010 Plan and limitations on the size of individual and aggregate grants that are set quarterly by our Board of Directors, our Non-Officer Stock Option Committee may determine the recipients and numbers of stock options to be granted, provided that the terms and conditions of the option awards conform to pre-approved standards regarding the period of their exercisability and vesting. The fair market value applicable to a stock award and the exercise price of options granted under the Amended 2010 Plan is determined in accordance with the terms of the Amended 2010 Plan.

At the discretion of our Board of Directors, the Compensation Committee may consist solely of two or more “non-employee directors” within the meaning of Rule 16b-3 of the Exchange Act. Our Compensation Committee has the authority to delegate certain administrative powers to a subcommittee of one or more members. As used herein, except as explicitly stated otherwise, with respect to the Amended 2010 Plan, the “Board” refers to any committee the Board of Directors appoints (including the Compensation Committee and the Non-Officer Stock Option Committee) or, if applicable, any subcommittee, as well as to the Board of Directors itself.

 

 

35


 

Repricing

Under the Amended 2010 Plan, the Board does not have the authority to reprice any outstanding stock options or stock appreciation rights by reducing the exercise price of the stock award or cancelling any outstanding stock awards in exchange for cash or other stock awards under the plan without the approval of our stockholders (which approval must be obtained within 12 months prior to the repricing event).

Minimum Vesting Requirements

Under the Amended 2010 Plan, except as may be provided in connection with a corporate transaction or a change in control (and excluding for substitute awards, awards to non-employee directors that vest on the earlier of the one-year anniversary of the date of grant or the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting), no stock award granted on or after June 13, 2017 may vest until at least 12 months following the date of grant of such award, except that up to 5% of the share reserve of the Amended 2010 Plan may be subject to awards granted on or after June 13, 2017 that do not meet such vesting requirements provided that, for the avoidance of doubt, that the foregoing restriction does not apply to the Board’s discretion to provide for accelerated exercisability or vesting of any Award, including in cases of retirement, death, disability or a change in control, in the terms of the Award or otherwise.

Dividends and Dividend Equivalents

The Amended 2010 Plan provides that dividends or dividend equivalents may be paid or credited with respect to any shares of our common stock subject to an award, as determined by the Board and contained in the applicable award agreement; provided, however, that (i) no dividends or dividend equivalents may be paid with respect to any such shares before the date such shares have vested, (ii) any dividends or dividend equivalents that are credited with respect to any such shares will be subject to all of the terms and conditions applicable to such shares under the terms of the applicable award agreement (including any vesting conditions), and (iii) any dividends or dividend equivalents that are credited with respect to any such shares will be forfeited to us on the date such shares are forfeited to or repurchased by us due to a failure to vest.

Options

Options may be granted under the Amended 2010 Plan pursuant to stock option agreements. The Amended 2010 Plan permits the grant of options that qualify as incentive stock options, or ISOs, and nonstatutory stock options, or NSOs. Individual stock option agreements may be more restrictive as to any or all of the permissible terms described in this section.

The exercise price of NSOs may not be less than 100% of the fair market value of the common stock subject to the option on the date of grant. The exercise price of ISOs may not be less than 100% of the fair market value of the common stock subject to the option on the date of grant and, in some cases (see “Limitations” below), may not be less than 110% of such fair market value.

 

 

36


 

The term of stock options granted under the Amended 2010 Plan may not exceed ten years. Unless the terms of an optionholder’s stock option agreement provide for earlier or later termination, if an optionholder’s service relationship with us, or any affiliate of ours, ceases due to (i) disability, the optionholder may exercise any vested options for up to 12 months after the date the service relationship ends or (ii) death, the optionholder’s beneficiary, may exercise any vested options for up to 18 months after the date the service relationship ends. Except as explicitly provided otherwise in an optionholder’s award agreement, if an optionholder’s service relationship with us is terminated for “cause” as defined in the Amended 2010 Plan, all options terminate upon the service termination date, and the optionholder is prohibited from exercising any option from the time of such termination. If an optionholder’s service relationship with us ceases for any reason other than for cause or upon disability or death, the optionholder may exercise any vested options for up to three months after the date the service relationship ends, unless the terms of the stock option agreement provide for a longer or shorter period to exercise the option. For example, non-employee directors have three years from the end of their service on the Board to exercise options that have vested as of their service termination date. In no event may an option be exercised after its expiration date. Under the Amended 2010 Plan, the option term may be extended in the event that exercise of the option following termination of service is prohibited by applicable securities laws or if the sale of stock received upon exercise of an option would violate our insider trading policy. In no event, however, may any option be exercised beyond the expiration of its term.

Acceptable forms of consideration for the purchase of our common stock issued under the Amended 2010 Plan will be determined by our Board and may include cash, check, bank draft or money order made payable to us, common stock previously owned by the optionholder, payment through a broker assisted exercise or, for NSOs only, a net exercise feature, or other legal consideration approved by our Board.

Options granted under the Amended 2010 Plan may become exercisable in cumulative increments, or “vest”, as determined by our Board at the rate specified in the option agreement (subject to the limitations described in “Minimum Vesting Requirements” above). Shares covered by different options granted under the Amended 2010 Plan may be subject to different vesting schedules as our Board may determine. Vesting can be time-based or performance-based or can be a hybrid of performance- and time-based vesting. Our Board also has flexibility to provide for accelerated vesting of equity awards in certain events. Our Board and Compensation Committee intend to continue to grant stock options to our officers with accelerated vesting, subject to additional conditions, in the event of a change of control of the Company as defined in the Amended 2010 Plan.

Generally, an optionholder may not transfer a stock option other than by will or the laws of descent and distribution or a domestic relations order. However, an optionholder may designate a beneficiary who may exercise the option following the optionholder’s death.

Limitations

The aggregate fair market value, determined at the time of grant, of shares of our common stock with respect to ISOs that are exercisable for the first time by a participant during any calendar year under all of our stock plans may not exceed $100,000. The options or portions of options that exceed this limit

 

 

37


 

are treated as NSOs. No ISO may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any affiliate unless the following conditions are satisfied:

 

the option exercise price must be at least 110% of the fair market value of the stock subject to the option on the date of grant; and

 

the term of any ISO must not exceed five years from the date of grant.

The aggregate maximum number of shares of common stock that may be issued pursuant to the exercise of ISOs will be 34,000,000 under the Amended 2010 Plan.

Restricted Stock Awards

Restricted stock awards may be granted pursuant to restricted stock award agreements. A restricted stock award may be granted in consideration for cash, check, bank draft or money order payable to us, the recipient’s past or future services performed for us or an affiliate of ours, or any other form of legal consideration acceptable to the Board. Shares of our common stock acquired under a restricted stock award may be subject to forfeiture to us in accordance with a vesting schedule to be determined by our Board (subject to the limitations described in “Minimum Vesting Requirements” above). Rights to acquire shares of our common stock under a restricted stock award may be transferred only upon such terms and conditions as are set forth in the restricted stock award agreement.

Restricted Stock Unit Awards

Restricted stock unit awards may be granted pursuant to restricted stock unit award agreements. Payment of any purchase price may be made in any legal form acceptable to the Board. We will settle a payment due to a recipient of a restricted stock unit award by delivery of shares of our common stock, by cash, by a combination of cash and stock as deemed appropriate by our Board, or in any other form of consideration determined by our Board and set forth in the restricted stock unit award agreement. Dividend equivalents may be credited in respect of shares of our common stock covered by a restricted stock unit award. Restricted stock unit awards may be subject to vesting in accordance with a vesting schedule to be determined by our Board (subject to the limitations described in “Minimum Vesting Requirements” above). Except as otherwise provided in the applicable restricted stock unit award agreement, restricted stock units that have not vested will be forfeited upon the participant’s termination of continuous service for any reason.

Stock Appreciation Rights

Stock appreciation rights may be granted pursuant to a stock appreciation right agreement. Each stock appreciation right is denominated in common stock share equivalents. The strike price of each stock appreciation right will be determined by our Board but shall in no event be less than 100% of the fair market value of the stock subject to the stock appreciation right at the time of grant. Our Board may also impose restrictions or conditions upon the vesting of stock appreciation rights that it deems appropriate (subject to the limitations described in “Minimum Vesting Requirements” above). Stock appreciation rights may be paid in our common stock, in cash, in any combination of the two, or any other form of legal

 

 

38


 

consideration approved by our Board and contained in the stock appreciation right agreement. Stock appreciation rights shall be subject to the same conditions upon termination and restrictions on transfer as stock options under the Amended 2010 Plan.

Performance Stock Awards

The Amended 2010 Plan provides for the grant of performance stock awards. Performance awards may be granted, may vest, or may be exercised based upon the attainment during a certain period of time of certain performance goals (subject to the limitations described in “Minimum Vesting Requirements” above). The length of any performance period, the performance goals to be achieved during the performance period, and the measure of whether and to what degree such performance goals have been attained shall be determined by the Board.

Performance goals under the Amended 2010 Plan shall be determined by the Board or a committee of the Board, based on any one or more of the following performance criteria: (i) the attainment of certain target levels of, or a specified percentage increase in, revenues, earnings, income before taxes and extraordinary items, net income, operating income, earnings before income tax, earnings before interest, taxes, depreciation and amortization or a combination of any or all of the foregoing; (ii) the attainment of certain target levels of, or a percentage increase in, after-tax or pre-tax profits including, without limitation, that attributable to continuing and/or other operations; (iii) the attainment of certain target levels of, or a specified increase in, operational cash flow; (iv) the achievement of a certain level of, reduction of, or other specified objectives with regard to limiting the level of increase in, all or a portion of, the Company’s bank debt or other long-term or short-term public or private debt or other similar financial obligations of the Company, which may be calculated net of such cash balances and/or other offsets and adjustments as may be established by the Committee; (v) earnings per share or the attainment of a specified percentage increase in earnings per share or earnings per share from continuing operations; (vi) the attainment of certain target levels of, or a specified increase in return on capital employed or return on invested capital; (vii) the attainment of certain target levels of, or a percentage increase in, after-tax or pre-tax return on stockholders’ equity; (viii) the attainment of certain target levels of, or a specified increase in, economic value added targets based on a cash flow return on investment formula; (ix) the attainment of certain target levels in, or specified increases in, the fair market value of the shares of the Company’s common stock; (x) the growth in the value of an investment in the Company’s common stock; (xi) the attainment of a certain level of, reduction of, or other specified objectives with regard to limiting the level in or increase in, all or a portion of controllable expenses or costs or other expenses or costs; (xii) gross or net sales, revenue and growth of sales revenue (either before or after cost of goods, selling and general administrative expenses, research and development expenses and any other expenses or interest); (xiii) total stockholder return; (xiv) return on assets or net assets; (xv) return on sales; (xvi) operating profit or net operating profit; (xvii) operating margin; (xviii) gross or net profit margin; (xix) cost reductions or savings; (xx) productivity; (xxi) operating efficiency; (xxii) working capital; or (xxiii) market share; (xxiv) customer satisfaction; (xxv) workforce diversity;(xxvi) results of clinical trials; (xxvii) acceptance of a new drug application by a regulatory body; (xxviii) regulatory body approval for commercialization of a product; (xxix) regulatory body approval of additional indications or improved labeling for an already- approved product; (xxx) launch of a new drug; (xxxi) completion of out-licensing, in-licensing or disposition of product candidates or other acquisition or disposition projects; (xxxii)

 

 

39


 

successful completion of a financing; (xxxiii) maintenance and enhancement of investor base; and (xxxiv) other measures of performance selected by our Board. These performance criteria can be calculated under generally accepted accounting principles (“GAAP”) or can be calculated using non-GAAP results as predetermined when establishing the performance goals.

Other Stock Awards

Other forms of stock awards valued in whole or in part with reference to our common stock may be granted either alone or in addition to other stock awards under the Amended 2010 Plan. Our Board will have sole and complete authority to determine the persons to whom and the time or times at which such other stock awards will be granted, the number of shares of our common stock to be granted and all other conditions of such other stock awards. Other forms of stock awards may be subject to vesting in accordance with a vesting schedule to be determined by our Board (subject to the limitations described in “Minimum Vesting Requirements” above).

Changes to Capital Structure

In the event that there is a specified type of change in our capital structure not involving the receipt of consideration by us, such as a stock split or stock dividend, the class and number of shares reserved under the Amended 2010 Plan (including share limits) and the class and number of shares and exercise price or strike price, if applicable, of all outstanding stock awards will be appropriately adjusted.

Corporate Transactions

In the event of certain significant corporate transactions, our Board has the discretion to take one or more of the following actions with respect to outstanding stock awards under the Amended 2010 Plan:

 

arrange for assumption, continuation, or substitution of a stock award by a surviving or acquiring entity (or its parent company);

 

arrange for the assignment of any reacquisition or repurchase rights applicable to any shares of our common stock issued pursuant to a stock award to the surviving or acquiring corporation (or its parent company);

 

accelerate the vesting and exercisability of a stock award followed by the termination of the stock award;

 

arrange for the lapse of any reacquisition or repurchase rights applicable to any shares of our common stock issued pursuant to a stock award;

 

cancel or arrange for the cancellation of a stock award, to the extent not vested or not exercised prior to the effective date of the corporate transaction, in exchange for cash consideration, if any, as the Board, in its sole discretion, may consider appropriate; and

 

arrange for the surrender of a stock award in exchange for a payment equal to the excess of (a) the value of the property the holder of the stock award would have received upon the

 

 

40


 

 

exercise of the stock award, over (b) any exercise price payable by such holder in connection with such exercise.

The Board need not take the same action for each stock award.

For purposes of the Amended 2010 Plan, a corporate transaction will be deemed to occur in the event of the consummation of (i) a sale of all or substantially all of our consolidated assets, (ii) a sale of at least 50% of our outstanding securities, (iii) a merger or consolidation in which we are not the surviving corporation, or (iv) a merger or consolidation in which we are the surviving corporation but shares of our outstanding common stock are converted into other property by virtue of the transaction.

A stock award may be subject to additional acceleration of vesting and exercisability upon or after a change in control, as provided in the stock award agreement or in any other written agreement between us and the participant, but in the absence of such provision, no acceleration shall occur.

Compensation Recovery Policy

Awards granted under the Amended 2010 Plan (and cash-based incentive compensation granted outside of the plan) will be subject to recoupment in accordance with the Company’s compensation recovery policy, which was adopted by our Board in 2022 and is described in more detail later in the CD&A section of this proxy statement, and any such policy that we are required to adopt pursuant to the listing standards of any national securities exchange or association on which our securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law.  

Plan Amendments

Our Board will continue to have the authority to amend or terminate the Amended 2010 Plan. However, no amendment, including the one put forth in this Proposal 2, or termination of the plan will adversely affect any rights under awards already granted to a participant unless agreed to by the affected participant. We will obtain stockholder approval of any amendment to the Amended 2010 Plan as required by applicable law.

U.S. Federal Income Tax Consequences

The information set forth below is a summary only and does not purport to be complete. The information is based upon current federal income tax rules and therefore is subject to change when those rules change. Because the tax consequences to any recipient may depend on his or her particular situation, each recipient should consult the recipient’s tax adviser regarding the federal, state, local, and other tax consequences of the grant or exercise of an award or the disposition of stock acquired as a result of an award. The Amended 2010 Plan is not qualified under the provisions of Section 401(a) of the Code and is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974. Our ability to realize the benefit of any tax deductions described below depends on our generation of taxable income as well as the requirement of reasonableness, the provisions of Section 162(m) of the Code, and the satisfaction of our tax reporting obligations.

 

 

41


 

Nonstatutory Stock Options

Generally, there is no taxation upon the grant of an NSO where the option is granted with an exercise price equal to the fair market value of the underlying stock on the grant date. On exercise, an optionholder will recognize ordinary income equal to the excess, if any, of the fair market value on the date of exercise of the stock over the exercise price. If the optionholder is employed by us, that income will be subject to withholding tax. The optionholder’s tax basis in those shares will be equal to their fair market value on the date of exercise of the option, and the optionholder’s capital gain holding period for those shares will begin on that date.

Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the optionholder.

Incentive Stock Options

The Amended 2010 Plan provides for the grant of stock options that qualify as “incentive stock options”, as defined in Section 422 of the Code. Under the Code, an optionholder generally is not subject to ordinary income tax upon the grant or exercise of an ISO, subject to alternative minimum tax obligations upon exercise of an ISO. If the optionholder holds a share received on exercise of an ISO for more than two years from the date the stock option was granted and more than one year from the date the stock option was exercised, which is referred to as the required holding period, the difference, if any, between the amount realized on a sale or other taxable disposition of that share and the holder’s tax basis in that share will be long-term capital gain or loss.

If, however, an optionholder disposes of a share acquired on exercise of an ISO before the end of the required holding period, which is referred to as a disqualifying disposition, the optionholder generally will recognize ordinary income in the year of the disqualifying disposition equal to the excess, if any, of the fair market value of the share on the date the ISO was exercised over the exercise price. However, if the sales proceeds are less than the fair market value of the share on the date of exercise of the stock option, the amount of ordinary income recognized by the optionholder will not exceed the gain, if any, realized on the sale. If the amount realized on a disqualifying disposition exceeds the fair market value of the share on the date of exercise of the stock option, that excess will be short-term or long-term capital gain, depending on whether the holding period for the share exceeds one year.

For purposes of the alternative minimum tax, the amount by which the fair market value of a share of stock acquired on exercise of an ISO exceeds the exercise price of that stock option generally will be an adjustment included in the optionholder’s alternative minimum taxable income for the year in which the stock option is exercised. If, however, there is a disqualifying disposition of the share in the year in which the stock option is exercised, there will be no adjustment for alternative minimum tax purposes with respect to that share. In computing alternative minimum taxable income, the tax basis of a share acquired on exercise of an ISO is increased by the amount of the adjustment taken into account with respect to that share for alternative minimum tax purposes in the year the stock option is exercised.

 

 

42


 

We are not allowed an income tax deduction with respect to the grant or exercise of an ISO or the disposition of a share acquired on exercise of an ISO after the required holding period. If there is a disqualifying disposition of a share, however, we are allowed a deduction in an amount equal to the ordinary income includible in income by the optionholder, subject to Section 162(m) of the Code and provided that amount constitutes an ordinary and necessary business expense for us and is reasonable in amount, and either the employee includes that amount in income or we timely satisfy our reporting requirements with respect to that amount.

Restricted Stock Awards

Generally, the recipient of a restricted stock award will recognize ordinary compensation income at the time the stock is received equal to the excess, if any, of the fair market value of the stock received over any amount paid by the recipient in exchange for the stock. If, however, the stock is not vested when it is received (for example, if the employee is required to work for a period of time in order to have the right to sell the stock), the recipient generally will not recognize income until the stock becomes vested, at which time the recipient will recognize ordinary compensation income equal to the excess, if any, of the fair market value of the stock on the date it becomes vested over any amount paid by the recipient in exchange for the stock. A recipient may, however, file an election with the Internal Revenue Service, within 30 days of his or her receipt of the stock award, to recognize ordinary compensation income, as of the date the recipient receives the award, equal to the excess, if any, of the fair market value of the stock on the date the award is granted over any amount paid by the recipient in exchange for the stock.

The recipient’s tax basis for the determination of gain or loss upon the subsequent disposition of shares acquired from stock awards will be the amount paid for such shares plus any ordinary income recognized either when the stock is received or when the stock becomes vested.

Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of the stock award.

Stock Appreciation Rights

We may grant under the Amended 2010 Plan stock appreciation rights separate from any other award or in tandem with other awards under the Amended 2010 Plan.

Where the rights are granted with a strike price equal to the fair market value of the underlying stock on the grant date and where the recipient may only receive the appreciation inherent in the stock appreciation rights in shares of our common stock, the recipient will recognize ordinary compensation income equal to the fair market value of the stock received upon such exercise. If the recipient may receive the appreciation inherent in the stock appreciation rights in cash or other property and the stock appreciation right has been structured to conform to the requirements of Section 409A of the Code, then the cash will be taxable as ordinary compensation income to the recipient at the time that the cash is received.

 

 

43


 

Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code, and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of the stock appreciation right.

Restricted Stock Units

Generally, the recipient of a stock unit structured to conform to the requirements of Section 409A of the Code or an exception to Section 409A of the Code will recognize ordinary compensation income at the time the stock is delivered equal to the excess, if any, of the fair market value of the shares of our common stock received over any amount paid by the recipient in exchange for the shares of our common stock. To conform to the requirements of Section 409A of the Code, the shares of our common stock subject to a stock unit award may generally only be delivered upon one of the following events: a fixed calendar date (or dates), separation from service, death, disability, or a change in control. If delivery occurs on another date, unless the stock units otherwise comply with or qualify for an exception to the requirements of Section 409A of the Code, in addition to the tax treatment described above, the recipient will owe an additional 20% federal tax and interest on any taxes owed.

The recipient’s tax basis for the determination of gain or loss upon the subsequent disposition of shares acquired from stock units will be the amount paid for such shares plus any ordinary income recognized when the stock is delivered.

Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of the stock award.

Section 162 Limitations

Compensation of persons who are “covered employees” of the Company is subject to the tax deduction limits of Section 162(m) of the Code. The exemption from Section 162(m)’s deduction limit 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.

Interest of Certain Persons in the Amended 2010 Plan

Stockholders should understand that our directors, executive officers, and other employees may be considered as having an interest in the approval of the Amended 2010 Plan because they may, in the future, receive awards under it. If approved, the annual grants made to our non-employee directors in connection with our annual meeting, beginning with the 2022 Annual Meeting of Stockholders, would be issued under the Amended 2010 Plan. This would include options and restricted stock units covering $300,000 worth (based on the grant date “fair value” of such awards)for each non-employee director. The Board believes that it is important to our growth and long-term success to be able to continue to offer these incentives.

 

 

44


 

New Plan Benefits

No awards that may be made under the Amended 2010 Plan to any of the Named Executive Officers are currently determinable, as there are no guaranteed or contractually required awards. Future grants to the Named Executive Officers are subject to approval of our Board or the applicable committee. Awards covering up to $300,000 worth (based on the grant date “fair value” of such awards) may be made to each current non-employee directors, including one nominee for re-election at the Annual Meeting. As described in the preceding paragraph, this amount reflects the NSO grants to be made pursuant to our non-employee director compensation plan at the Annual Meeting as described under “Director Compensation” below.

 

 

45


 

Plan Benefits

The following table shows, for each of the named executive officers and the various groups indicated below, the total number of shares of our common stock subject to stock awards that have been granted (even if not currently outstanding) under the 2010 Plan since it became effective through December 31, 2021:

 

Name and Position

 

Number

of shares

(#)

 

Stephen R. Davis

Chief Executive Officer

 

 

3,568,258

 

Srdjan R. Stankovic, M.D., M.S.P.H.

President

 

 

1,701,820

 

Austin D. Kim

Executive Vice President, General Counsel, and Secretary

 

 

320,711

 

Mark Schneyer

Executive Vice President, Chief Financial Officer

 

 

164,099

 

Brendan P. Teehan

Executive Vice President, Chief Operating Officer, and Head of Commercial

 

 

193,621

 

Elena H. Ridloff(1)

Former Executive Vice President, Chief Financial Officer

 

 

362,421

 

All current executive officers as a group (5 persons)

 

 

5,948,509

 

All current non-employee directors as a group (7 persons)

 

 

964,781

 

All current employees, including all current non-executive officers, as a group (500 persons)

 

 

20,336,875

 

 

(1)

Ms. Ridloff resigned from the Company effective September 10, 2021.

 

 

46


 

Equity Compensation Plan Information

The following table provides certain information, as of December 31, 2021, with respect to all of our equity compensation plans in effect on that date:

 

 

 

Number of

securities to be

issued upon

exercise of

outstanding

options,

warrants and

rights

(a)

 

 

Weighted-

average

exercise

price of

outstanding

options,

warrants and

rights

(b)

 

 

Number of

securities

remaining

available for

issuance under

equity

compensation

plans

(excluding

securities

reflected in

column (a))

(c)

 

Equity compensation plans approved by stockholders(1)

 

 

17,901,436

 

 

$

30.11

 

 

 

12,265,754

 

Equity compensation plans not approved by stockholders(2)

 

 

 

 

$

 

 

 

 

Total

 

 

17,901,436

 

 

$

30.11

 

 

 

12,265,754

 

 

(1)

Includes our 2004 Plan, our 2010 Plan and our 2004 Employee Stock Purchase Plan (the “ESPP”). 2,810,145 shares under column (c) are attributable to our ESPP.

(2)

As of December 31, 2021, we did not have any equity compensation plans that were not approved by our stockholders.

 

 

 

 

47


 

 

PROPOSAL 3:

ADVISORY VOTE ON EXECUTIVE COMPENSATION

At our 2017 Annual Meeting of Stockholders, the stockholders indicated their preference that the Company solicit a non-binding advisory vote on the compensation of the named executive officers, commonly referred to as a “say-on-pay vote,” every year. Consistent with that preference, our Board of Directors is soliciting an advisory vote at the 2022 Annual Meeting of Stockholders and intends to do so each year until the stockholders indicate a different preference.

This vote is not intended to address any specific item of compensation, but rather the overall compensation of the Company’s named executive officers and the compensation philosophy, policies and practices described in this proxy statement. The compensation of the Company’s named executive officers subject to the vote is disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related narrative disclosure contained in this proxy statement. As discussed in those disclosures, the Company believes that its compensation policies and decisions are designed to align executive compensation with the Company’s business objectives and corporate performance, to be consistent with current market practices, and to enable the Company to attract and retain talented and experienced executives to lead the Company successfully in a competitive environment.

Accordingly, our Board of Directors is asking the stockholders to indicate their support for the compensation of the Company’s named executive officers as described in this proxy statement by casting a non-binding advisory vote “for” the following resolution:

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”

Because the vote is advisory, it is not binding on our Board of Directors or the Company. Nevertheless, the views expressed by stockholders, whether through this vote or otherwise, are important to management and the Board of Directors and, accordingly, the Board of Directors and the Compensation Committee intend to consider the results of this vote in making determinations in the future regarding executive compensation arrangements.

Approval of this proposal requires the vote of the holders of a majority of the shares present at the meeting or represented by proxy and entitled to vote on this matter. Abstentions and broker non-votes will be counted toward a quorum for Proposal 3, and abstentions will have the same effect as “Against” votes.

THE BOARD OF DIRECTORS RECOMMENDS

A VOTE “FOR” PROPOSAL 3

 

 

 

48


 

 

Proposal 4:

Ratification of Selection of Independent Registered Public Accounting Firm

The Audit Committee of our Board of Directors has engaged Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022 and is seeking ratification of such selection by our stockholders at the annual meeting. Ernst & Young LLP was selected by the Audit Committee as our independent registered public accounting firm in March 2015. Representatives of Ernst & Young LLP are expected to be present at the annual meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Neither our bylaws nor other governing documents or law require stockholder ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm. However, the Audit Committee is submitting the selection of Ernst & Young LLP to our stockholders for ratification as a matter of good corporate practice. If our stockholders fail to ratify the selection, the Audit Committee will reconsider whether to retain Ernst & Young LLP. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of Acadia and our stockholders.

To be approved, the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm must receive a “For” vote from the majority of shares present at the meeting or represented by proxy and entitled to vote on this matter. Abstentions will have the same effect as “Against” votes.

Principal Accountant Fees and Services

The following table provides information regarding the fees billed to us by Ernst & Young LLP for the fiscal years ended December 31, 2021 and 2020:

 

 

 

Fiscal Year Ended

December 31,

 

 

 

2021

 

 

2020

 

Audit fees(1)

 

$

1,012,800

 

 

$

1,038,000

 

Tax fees(2)

 

 

373,538

 

 

 

194,245

 

Total fees

 

$

1,386,338

 

 

$

1,162,255

 

 

 

(1)

Represents fees for services rendered for the audit and reviews of our financial statements, including fees related to auditing work for our compliance with Section 404 of the Sarbanes-Oxley Act. Audit fees also include fees for services associated with periodic reports and other documents filed with the SEC, such as fees related to our S-8 registration statement filed in 2020, including a consent and other documents issued in connection with such filing.

 

 

49


 

(2)

Represents fees for preparation of federal, state and foreign income taxes and related schedules and calculations.

Pre-Approval Policies and Procedures

The Audit Committee has pre-approval policies and procedures in place, pursuant to which services proposed to be performed by our independent registered public accounting firm are pre-approved by the Audit Committee. The policies generally provide for pre-approval of specified services in the defined categories of audit services, audit-related services, and tax services up to specified amounts. Pre-approval may also be given as part of the Audit Committee’s approval of the scope of the engagement of the independent registered public accounting firm or on an individual service-by-service basis. The pre-approval of non-audit services also has been delegated to the Chair of the Audit Committee, but each pre-approval decision is reported to the full Audit Committee at its next scheduled meeting. All of the fees listed under the caption “Tax fees” incurred in 2021 and 2020 were approved in accordance with our pre-approval policies and procedures.

THE BOARD OF DIRECTORS RECOMMENDS

A VOTE “FOR” PROPOSAL 4

 

 

 

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table provides information regarding the beneficial ownership of our common stock as of February 28, 2022, by: (i) each of our directors, (ii) each of our Named Executive Officers (as defined below), (iii) all of our current directors and executive officers as a group, and (iv) each person, or group of affiliated persons, known by us to beneficially own more than five percent of our common stock. The table is based upon information supplied by our officers, directors and principal stockholders and/or a review of Schedules 13D and 13G, if any, and other documents filed with the SEC. Unless otherwise indicated in the footnotes to the table and subject to community property laws where applicable, we believe that each of the stockholders named in the table has sole voting and investment power with respect to the shares indicated as beneficially owned.

Applicable percentages are based on 161,330,684 shares outstanding on February 28, 2022, adjusted as required by rules promulgated by the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options or warrants that are either immediately exercisable or exercisable on or before April 29, 2022, which is 60 days after February 28, 2022. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the

 

 

51


 

percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

 

Name of Beneficial Owner(1)

 

Number of

Shares

Beneficially

Owned

 

 

Percentage of

Shares

Beneficially

Owned

 

Baker Bros. Advisors LP(2)

 

 

42,260,317

 

 

 

26.2

%

FMR LLC(3)

 

 

13,841,350

 

 

 

8.6

%

T. Rowe Price Associate,  Inc. (4)

 

 

9,486,261

 

 

 

5.9

%

The Vanguard Group(5)

 

 

12,338,093

 

 

 

7.6

%

Blackrock Inc.(6)

 

 

10,766,079

 

 

 

6.7

%

Directors and Named Executive Officers

 

 

 

 

 

 

 

 

Stephen R. Davis(7)

 

 

2,020,389

 

 

 

1.3

%

Srdjan R. Stankovic, M.D., M.S.P.H.(8)

 

 

783,236

 

 

*

 

Austin D. Kim(9)

 

 

175,008

 

 

*

 

Mark C. Schneyer(10)

 

 

26,734

 

 

*

 

Elena H. Ridloff(11)

 

 

 

 

*

 

Brendan P. Teehan(12)

 

 

67,425

 

 

*

 

Stephen R. Biggar, M.D., Ph.D.(13)

 

 

42,260,317

 

 

 

26.2

%

Julian C. Baker(14)

 

 

42,260,317

 

 

 

26.2

%

Daniel B. Soland(15)

 

 

136,806

 

 

*

 

Laura A. Brege(16)

 

 

112,306

 

 

*

 

Edmund P. Harrigan, M.D.(17)

 

 

125,306

 

 

*

 

James M. Daly(18)

 

 

68,056

 

 

*

 

Elizabeth A. Garofalo, M.D.(19)

 

 

14,077

 

 

*

 

All current directors and executive officers as a group (12 persons)(20)

 

 

45,789,719

 

 

 

28.4

%

 

*

Less than one percent.

(1)

Except as otherwise noted below, the address for each person or entity listed in the table is c/o Acadia Pharmaceuticals Inc., 12830 El Camino Real, Suite 400, San Diego, California 92130. Unless otherwise indicated below, the persons and entities named in the table above have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable.

(2)

The shares of common stock reported to us as beneficially owned by Baker Bros. Advisors LP (“BBA”) includes 38,433,977 shares owned by Baker Brothers Life Sciences, L.P. (“BBLS”), 3,470,609 shares owned by 667, L.P., 40,443 shares owned by FBB3 LLC, 125,806 shares issuable to Dr. Biggar upon the exercise of stock options and 86,806 shares issuable to Mr. Baker upon the exercise of stock options. Pursuant to an agreement between Dr. Biggar and Baker Bros. Advisors LP, Dr. Biggar disclaims voting, dispositive power and pecuniary interest in stock options granted to him for services he performs as an employee of BBA. Mr. Baker has voting and investment power over the shares held by each of 667, BBLS and FBB3, as a principal of BBA-GP. Mr. Baker disclaims beneficial ownership of all shares held by 667, BBLS and FBB3, except to the extent of his indirect pecuniary interest therein. Does not include an aggregate of 489,269 shares issuable under warrants held by the Baker Brothers Funds, which are subject to a 19.99% ownership

 

 

52


 

limitation that restricts exercise. BBA is the management company and investment adviser to 667, BBLS and FBB3 and may be deemed to beneficially own all shares held by 667, BBLS, FBB3, Mr. Baker and Dr. Biggar. Baker Bros. Advisors (GP) LLC, or BBA-GP, is the sole general partner of BBA. Julian C. Baker and Felix J. Baker have voting and investment power over the shares held by each of 667, BBLS and FBB3, as principals of BBA-GP. Julian C. Baker, Felix J. Baker, BBA and BBA-GP disclaim beneficial ownership of all shares held by 667, BBLS and FBB3, except to the extent of their indirect pecuniary interest therein. The address for the Baker Brothers Funds is 860 Washington Street, 3rd Floor, New York, New York 10014. This information is based on the most recent Schedule 13D filed on behalf of Baker Bros. Advisors LP, subsequent filings, and our records relating to current outstanding stock options.

(3)

The address for FMR LLC is 245 Summer Street, Boston, Massachusetts 02210. This information is based on its most recently filed Schedule 13G.

(4)

The address for T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, MD 21202. This information is based on its most recently filed Schedule 13G.

(5)

The address for The Vanguard Group is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. This information is based on its most recently filed Schedule 13G.

(6)

The address for Blackrock Inc. is 55 East 52nd Street, New York, NY 10055. This information is based on its most recently filed Schedule 13G.

(7)

Includes 55,471 shares owned by Mr. Davis and 1, 964,918 shares issuable to Mr. Davis upon the exercise of stock options

(8)

Includes 48,437 shares owned by Dr. Stankovic and 734,799 shares issuable to Dr. Stankovic upon the exercise of stock options.

(9)

Includes 15,534 shares owned by Mr. Kim and 159,474 shares issuable to Mr. Kim upon the exercise of stock options.

(10)

Includes 2,102 shares owned by Mr. Schneyer and 24,632 shares issuable to Mr. Schneyer upon the exercise of stock options.

(11)

Ms. Ridloff resigned from the Company effective September 10, 2021.

 

 

53


 

(12)

Includes 3,428 shares owned by Mr. Teehan and 63,997 shares issuable to Mr. Teehan upon the exercise of stock options.

(13)

Includes 38,433,977 shares owned by BBLS, 3,470,609 shares owned by 667, L.P., 40,443 shares owned by FBB3 LLC, 125,806 shares issuable to Dr. Biggar upon the exercise of stock options, and 86,806 shares issuable to Mr. Baker upon the exercise of stock options. Dr. Biggar is an employee of BBA but disclaims beneficial ownership of any securities held by the Baker Brothers funds. Additionally, pursuant to an agreement between Dr. Biggar and BBA, Dr. Biggar disclaims beneficial ownership of any stock options granted to him for services he performs as an employee of BBA.

(14)

Includes 38,443,977 shares owned by BBLS, 3,470,609 shares owned by 667, L.P., 40,443 shares owned by FBB3 LLC, 125,806 shares issuable to Dr. Biggar upon the exercise of stock options, and 86,806 shares issuable to Mr. Baker upon the exercise of stock options. Mr. Baker has voting and investment power over the shares held by each of 667, BBLS and FBB3, as a principal of BBA-GP. Mr. Baker disclaims beneficial ownership of all shares held by 667, BBLS and FBB3, except to the extent of his indirect pecuniary interest therein.

(15)

Includes 136,806 shares issuable to Mr. Soland upon the exercise of stock options.

(16)

Includes 3,059 shares owned by Ms. Brege and 109,306 shares issuable to Ms. Brege upon the exercise of stock options.]

(17)

Includes 1,000 shares owned by Dr. Harrigan and 124,306 shares issuable to Dr. Harrigan upon the exercise of stock options.

(18)

Includes 68,056 shares issuable to Mr. Daly upon the exercise of stock options.

(19)

Includes 1,918 shares owned by Dr. Garofalo and 12,159 shares issuable to Dr. Garofalo upon the exercise of stock options.

(20)

Includes 3,598,906 shares issuable upon the exercise of stock options.

 

 

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Executive Compensation —

Compensation Discussion and Analysis

Executive Summary

The Compensation Committee of the Board of Directors, which consists entirely of independent directors, administers the Company’s executive compensation program. The role of the Compensation Committee is to oversee compensation and benefit plans and policies, to administer stock plans, and to review and recommend to the full Board of Directors for approval all compensation decisions relating to executive officers.

Executive Compensation Objectives and Philosophy

The Company’s executive compensation policies are designed to:

 

align executive compensation with business objectives and corporate performance;

 

attract and retain executive officers who contribute to the Company’s long-term success;

 

reward and motivate executive officers who contribute to operating and financial performance; and

 

link executive officer compensation and stockholder interests through the grant of long-term incentives.

The Compensation Committee believes that compensation programs should include short-term and long-term components, including cash and equity-based compensation, and should encourage and reward performance as measured against pre-established goals. The Compensation Committee evaluates both performance and compensation to make sure that compensation provided to executives of the Company remains competitive relative to compensation paid by companies of similar size and stage of development operating in the biotechnology and pharmaceutical industry, taking into account the Company’s relative performance and strategic goals. The Compensation Committee considers the total current and potential long-term compensation of each executive officers in establishing each element of compensation but views each element as related but distinct.

 

 

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The Compensation Committee’s philosophy is anchored by its strong pay-for-performance orientation and alignment with stockholder interests, based on the following beliefs.

 

“At-risk” compensation focuses executives on achievement of short- and long-term goals. The Company’s executive compensation program is primarily performance-based, for both short-term incentives (annual cash bonuses) and long-term incentives (equity awards). In 2021, a majority of the primary compensation (base salary, regular annual cash incentives and the grant date fair market value of equity awards, in each case as reflected in the 2021 Summary Compensation Table) of the Chief Executive Officer and of the other named executive officers on average was variable (approximately 92% and 84%, respectively), based on performance and/or stock price.

 

 

 

Short-term cash incentives should be based on objective, measurable goals to drive the achievement of strong annual performance. For 2021, under the annual cash incentive program, executives were eligible for target bonuses ranging from 40% to 80% of base salary. Under this program, if the threshold, or minimum, performance level of a particular goal is not achieved, there is no payout. If a particular goal is achieved at only a threshold performance level, 75% (50% in the case of sales goals) of the target bonus is payable, and if such goal is achieved at the outperform (highest) level, a maximum of 150% (200% in the case of sales goals) of the target bonus is payable, with an overall cash incentive payout cap of 150% of target. Consistent with our pay-for-performance philosophy, based on our results for 2021, annual cash incentives were paid out at 31% of target.

 

Performance stock units reward executives for the achievement of long-term objectives. Performance Stock Units (PSUs) represented 25% of senior management’s annual equity grant value. The PSUs become vested only upon the determination by the Compensation Committee that specific and difficult to attain commercial, clinical and regulatory long-term objectives have been achieved.

 

 

56


 

 

Stock options are inherently performance-based, as executives realize value only if there is stock price appreciation and such appreciation is maintained through the applicable vesting and exercise dates. Time-based stock options represented 50% of senior management’s annual grant value in 2021.

 

Restricted stock units are part of a balanced portfolio of equity awards. Consistent with stockholder feedback, time-based restricted stock units (RSUs) were retained as part of the equity program and represented 25% of senior management’s annual grant value.

Company Performance in 2021

2021 was a challenging year for the Company. The continuing headwinds of the on-going COVID-19 pandemic, including the surge of the Delta variant in the second half of the year, continued to limit in-person interactions with patients and medical practices, resulting in moderate growth in NUPLAZID net revenues of 10% over 2020. In addition, the Company received a complete response letter from the FDA in April 2021. Nonetheless, a number of R&D and business development objectives were achieved during the year, including:

 

Commencement of a number of pre-clinical studies relating to early-stage compounds;

 

Achievement of timely and positive top-line results in our Phase III Lavender study of trofinetide for the treatment of Rett syndrome;

 

Initiation of two Phase II studies in our pain program; and

 

Execution of a license and collaboration agreement with Stoke Therapeutics.

Despite the challenges of 2021, the Company remains well-positioned to execute on its broad development objectives, including expansion into potential new indications for pimavanserin, advancing trofinetide and investing in opportunities consistent with its long-term growth strategy to enhance its pipeline. The Company’s total shareholder return (TSR) was -56% and +44% for the one- and three-year periods ending December 31, 2021, which ranked at the 13th and 70th percentile of our peer group, respectively.

Say-on-Pay and Stockholder Engagement

As part of the Compensation Committee’s annual review of the executive compensation program, it considers the outcome of the annual advisory vote of stockholders. At the 2021 Annual Meeting, approximately 98% of the “say on pay” votes cast were in favor of the compensation of the Company’s named executive officers in 2020. The vote was favorable, as it has been every year since 2013 (the first time an advisory vote was held) and the approval percentage increased from approximately 95% in 2020. Despite the high approval rating the Compensation Committee continues to value stockholder feedback. In response to stockholder  feedback in 2018 and 2019, the Company made several programmatic changes that were well-received by stockholders and have remained a part of the ongoing program.

 

 

57


 

Considering the substantial stockholder support for the “say on pay” vote at the 2021 Annual Meeting, there were no significant changes made to the executive compensation program for 2021.

Positive Pay Practices

The Company’s executive compensation program reflects several positive pay governance practices, as follows:

 

What We Do

 

Grant compensation that is primarily at-risk and tied to performance

 

Subject short- and long-term incentive compensation to measurable and rigorous goals

 

Use an independent compensation consultant

 

Cap annual cash incentive payments at 150% of target and PSUs at 200% of target

 

Structure compensation to avoid excessive risk taking

 

Provide competitive compensation that is compared against an industry peer group

 

Have rigorous stock ownership guidelines

 

Have a “clawback” policy that covers cash and equity incentive awards

 

What We Don’t Do

 

Allow hedging of Company equity

 

Reprice stock options

 

Provide excessive perquisites

 

Provide supplemental executive retirement plans

 

Pay tax gross-ups on a change in control

 

Provide “single trigger” change in control payments

 

Provide excessive severance benefits

 

 

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DETERMINING EXECUTIVE COMPENSATION

Peer Group and Benchmarking

General. The Compensation Committee uses a peer group developed in coordination with an independent compensation consulting firm to assist it in understanding market factors, including the range of base salary, target annual incentive compensation, and equity grant levels offered for comparable roles at comparable companies. The Compensation Committee looks to the peer group of companies, as well as the broader market, as a baseline for executive compensation decisions. Generally, it does not target executive officer compensation at a specific level or percentage relative to compensation provided by the companies in the peer group or broader market. Instead, when determining compensation for executive officers, the Compensation Committee takes into account a broad array of factors, including the experience level of the individuals in their current positions, the overall financial and strategic performance of the Company during the year and the performance and contribution of each executive during the year relative to individual, pre-defined goals and objectives.

 

 

59


 

2021 Peer Group. In the Fall of 2020, the Compensation Committee engaged an independent compensation consulting firm, Frederic W. Cook & Co. (“FW Cook”), to assist it with the development of an updated peer group to reference for 2021 compensation . Several changes were made from the peer group used for 2020 pay decisions: Amicus Therapeutics, Biohaven Pharma, Blueprint Medicines, FibroGen, Global Blood Therapeutics, Sarepta Therapeutics and Ultragenyx Pharma were added, while The Medicines Company, Portola Pharma, Clovis Oncology, Ironwood Pharma, Pacira BioSciences, Puma Biotechnology, Supernus Pharma and Halozyme Therapeutics were removed. In establishing the peer group for 2021, the Compensation Committee considered potential peer companies’ stage of development and size (especially market capitalization) relative to Acadia.  The resulting peer group used for 2021 compensation decisions consisted of:

 

Alkermes

 

Intercept Pharmaceuticals

Alnylam Pharmaceuticals

 

Ionis Pharmaceuticals

Amicus Therapeutics

 

Jazz Pharmaceuticals

Biohaven Pharmaceuticals

 

Nektar Therapeutics

bluebird bio

 

Neurocrine Biosciences

Blueprint Medicines

 

Sage Therapeutics

Exact Sciences

 

Sarepta Therapeutics

Exelixis

 

Seattle Genetics (Seagen)

FibroGen

 

Ultragenyx

Global Blood Therapeutics

 

United Therapeutics

 

When the 2021 peer group was selected in the Fall of 2020, Acadia’s market capitalization of approximately $5.8 billion was at the 51st percentile of the peer group based on the last fiscal year average.

In the Fall of 2021, with the assistance of FW Cook, the Compensation Committee approved an updated peer group that will be used for 2022 compensation decisions.  The updated peer group reflects significant changes in the Company’s market capitalization from the time that the peer group was last approved in the fall of 2020.  The following changes were made to the peer group: Amarin, Apellis Pharmaceuticals, Heron Therapeutics, Insmed, Intra-Cellular Therapies, Ironwood Pharmaceuticals, Pacira BioSciences and PTC Therapeutics were added, and Alnylam Pharmaceuticals, Exact Sciences, Exelixis, Ionis Pharmaceuticals, Sarepta Therapeutics, Seagen, and United Therapeutics were removed.

 

Performance Evaluation

Historically, the Chief Executive Officer has evaluated the performance of the other executive officers on an annual basis and made recommendations to the Compensation Committee with respect to salary adjustments, bonuses and equity awards. For 2021, Mr. Davis provided guidance to the Compensation Committee on the Company’s achievement of corporate goals, based on his discussions with senior management. The Compensation Committee exercises its discretion in determining recommendations to the Board for salary adjustments and discretionary cash and equity awards for executive officers. Mr. Davis did not participate in, and was not present during, any deliberations or determinations of the Compensation Committee regarding his compensation or his performance.

 

 

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Elements of Executive Compensation

Compensation for executives consists of four principal components: base salary, potential annual incentive bonus, long-term incentives, and post-employment compensation. Changes to these components have been generally determined and made or paid, as appropriate, in the Winter of each year.

Base Salary. As a general matter, the base salary for each executive is initially established through arm’s-length negotiation at the time of hire, taking into account such officer’s qualifications, experience, prior salary (if available), and competitive market salary information for similar positions in the biotechnology industry. Base salaries of executives are reviewed annually and any adjustment is determined by an assessment of corporate performance, the performance of each executive officer against his or her individual job and functional area’s responsibilities including where appropriate, the impact of such performance on the Company’s business results, the financial position of the Company, competitive market conditions for executive compensation for similar positions, and cost-of-living considerations. For 2021, base salaries were increased as follows, with the percentage increase generally tracking the increase applied for non-executives:

 

Name

 

2020 Salary

 

 

2021 Salary

 

 

% Increase

 

 

Reason for Increase

Stephen R. Davis

 

$

771,612

 

 

$

797,075

 

 

3.3%

 

 

Standard merit

Srdjan R. Stankovic

 

$

719,588

 

 

$

743,334

 

 

3.3%

 

 

Standard merit

Austin D. Kim

 

$

451,082

 

 

$

474,000

 

 

5.1%

 

 

Standard merit + market-based increase

Elena H. Ridloff(1)

 

$

464,400

 

 

$

487,999

 

 

5.1%

 

 

Standard merit+ market-based increase

Mark C. Schneyer(2)

 

$

385,000

 

 

$

460,000

 

 

19.5%

 

 

Promotion

Brendan P. Teehan(3)

 

$

323,322

 

 

$

475,000

 

 

46.9%

 

 

Promotion

 

(1)

Ms. Ridloff resigned from the Company effective September 10, 2021.

(2)

Mr. Schneyer’s appointment was effective December 9, 2021. He previously served as the Company’s Senior Vice President, Business Development and Chief Business Officer.

(3)

Mr. Teehan’s appointment was effective November 1, 2021. He previously served as the Company’s Senior Vice President, Chief Insights and Analytics Officer.

 

Annual Incentive Bonuses. The Compensation Committee believes that performance-based cash bonuses play an important role in providing incentives to executives to achieve defined annual corporate goals. At the beginning of each year, the Compensation Committee reviews a detailed set of overall corporate performance goals for the current year prepared by management that are intended to apply to the executives’ annual incentive awards. If those goals are achieved in full, 75% of the executives’ annual target incentive awards would be earned. In early 2021, the Compensation Committee reserved the ability to approve an additional set of corporate performance goals at mid-year that would result, if achieved in full, in the remaining 25% of the executives’ annual target incentive awards being earned. The performance metrics against which executive officers are measured are pre-established, clearly communicated, measurable, and consistently applied. The Committee considers these metrics to be objectively measurable, rigorous and not susceptible to discretionary interpretation or application.

 

 

 

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The target annual incentive bonuses in 2021 were as follows in the table below. For 2021, Mr. Davis and Mr. Teehan’s target bonus percentages each increased by 10% in connection with a market-based increase (Mr. Davis) and a promotion-related increase (Mr. Teehan). Bonus target percentages were otherwise unchanged from 2020. Actual bonuses can range from 0 to 150% of the applicable target percentage based on the Compensation Committee’s quantifiable assessment of total corporate goal achievement to align delivered pay with actual performance.

 

Name

 

Base Salary

Paid for 2021

 

 

Target Bonus

(as % of

Base Salary)

 

 

Target Bonus

 

Stephen R. Davis

 

$

792,831

 

 

 

80

%

 

$

634,265

 

Srdjan R. Stankovic

 

$

739,377

 

 

 

65

%

 

$

480,595

 

Austin D. Kim

 

$

470,180

 

 

 

45

%

 

$

211,581

 

Elena H. Ridloff(1)

 

$

398,871

 

 

 

0

%

 

$

 

Mark C. Schneyer(2)

 

$

398,183

 

 

 

40

%

 

$

159,273

 

Brendan P. Teehan(3)

 

$

359,080

 

 

 

40

%

 

$

143,632

 

 

(1)

Ms. Ridloff resigned from the Company effective September 10, 2021.

(2)

Mr. Schneyer’s appointment was effective December 9, 2021.

(3)

Mr. Teehan’s appointment was effective November 1, 2021.

 

 

 

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Actual payout was determined by the Compensation Committee based on achievement of the pre-established goals, which have individual weightings and criteria for determination of payout above and below target levels.

 

The Committee applied the pre-established quantitative criteria to assessing 2021 annual incentives. Due in part to the continuing impact of COVID-19, particularly in the long-term care facilities that are a core part of our market, sales objectives were not met, and accordingly no points were earned in this performance category. Similarly, due to the unexpected complete response letter, the DRP approval goal was not met, and the Committee determined that no points should be earned in this performance category as well. Certain early-stage R&D objectives we met at a high level, both in terms of timing and level of achievement (including, importantly, the delivery of positive Phase III results in the Company’s Lavender trial of trofinetide for the treatment of Rett syndrome), and accordingly the Committee awarded points at an “outperform” level in this category. Finally, with regard to the corporate and business development category, the achievement of one transaction was deemed by the Committee to warrant partial points being earned. The total annual cash incentive percentage, therefore, was 31% of target for each executive. The resulting individual bonus percentages were as follows:

 

Name

 

2021 Annual

Bonus

Achieved (as

% of Target)

 

 

Actual Bonus for 2021

 

 

Actual Bonus

for 2021 (as %

of Base Salary)

 

Stephen R. Davis

 

31%

 

 

$

196,654

 

 

25%

 

Srdjan R. Stankovic

 

31%

 

 

$

149,008

 

 

20%

 

Austin D. Kim

 

31%

 

 

$

65,506

 

 

14%

 

Elena H. Ridloff(1)

 

31%

 

 

$

0

 

 

0%

 

Mark C. Schneyer

 

31%

 

 

$

52,337

 

 

12%

 

Brendan P. Teehan

 

31%

 

 

$

48,065

 

 

12%

 

 

(1)

Ms. Ridloff resigned from the Company effective September 10, 2021 and was not eligible for a bonus.

 

Long-Term Incentives. The grant date fair value of executives’ equity awards granted is based on the executive’s position, the executive’s performance in the prior year, the Company’s overall performance, and the executive’s potential for continued sustained contributions to the Company’s success. Based on market data provided by FW Cook, the Compensation Committee also considers the equity grant levels of the peer group. The Compensation Committee set the 2021 equity grant value near the 50th percentile of the peer group for the NEOs as a group.

 

In 2021, annual grants were made in February with the following equity mix: 50% time-based stock options; 25% PSUs; and 25% time-based RSUs. For details on awards granted in 2021, please see the Grants of Plan-Based Awards table included below.

 

Time-Based Stock Options (50% Weighting). Options are granted based on the belief that they naturally align executives with the creation of stockholder value and are the best long-term incentive vehicle to retain and promote the Company’s entrepreneurial culture. Time-based options vest 25% after one year and in equal monthly installments over the next three years and have a ten-year term.

 

 

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The Compensation Committee believes that stock options are inherently performance-based, incentivize employees to make decisions that ensure long-term success and are appropriate and advantageous for the following additional reasons:

 

 

Value is only realized if the stock price increases, thereby aligning the interests of executives with those of stockholders.

 

Stock options have greater downside risk than full-value awards, as they do not provide any value to the holder if the stock price declines below the exercise price (determined as of the date of grant).

 

The ten-year term of options gives executives the opportunity to realize value over a long period of time, which promotes long-term thinking and value creation.

 

Stock options are well understood and help attract and retain employees who contribute to the Company’s entrepreneurial culture.

 

PSUs (25% Weighting). PSUs provide for alignment with the Company’s long-term strategic goals. PSUs are earned only if the Company achieves rigorous long-term goals related to NUPLAZID revenue, pimavanserin development and other research and development objectives and business development goals focused on complementary indications benefiting from the Company’s demonstrated expertise in development and commercialization. For PSUs granted in 2021, the goals may be achieved between 2022 and 2027, with a decreasing number of points (or no points) earned for achievement in later years. Up to 43 possible points may be earned and achieving certain point thresholds results in PSUs being earned. The goals represent diversified business and development strategies, not all of which are expected to come to fruition. As such, we consider achievement of all goals to be highly unlikely and the achievement of the points required to earn target and maximum level payouts to represent very strong and truly outstanding performance, respectively. There is a minimum vesting period of two years on all earned awards.

PSU Earnout Schedule

 

Total Points

Earned

 

Awards Earned

(% Target)

 

<4

 

0%

 

4

 

50%

 

8

 

75%

 

12

 

100%

 

15

 

125%

 

18

 

150%

 

21

 

175%

 

≥24

 

200%

 

 

The PSU goals are pre-established, challenging, clearly communicated, measurable, and consistently applied. They focus on long-term performance, unlike our annual cash incentive program,

 

 

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which focuses on short-term performance. For example, only a portion of potential points in the category of NUPLAZID revenue achievement can be earned during 2022 (corresponding to a similarly limited portion of total potential points in the PSU earnout schedule). The remainder of revenue goals can be earned in 2022-2027. The categories of goals, performance periods and weightings are as follows:

 

Goal Category

 

Performance

Period*

 

Weighting

NUPLAZID revenue achievement

 

2022-2027

 

42% of available points

FDA approval of additional uses of pimavanserin

 

2022-2027

 

23% of available points

Development and approval of non-pimavanserin compound(s)

 

2022-2027

 

15% of available points

Trofinetide net revenue

 

2022-2027

 

10% of available points

 

*

A decreasing number of points, or zero points, would be earned for achievement in later years.

 

Under prior years’ performance equity programs, four, six and four points were earned against the schedules of performance options or PSUs granted in 2017, 2018 and 2019, respectively. These points were earned based on NUPLAZID revenue goals that were achieved in 2019 and 2020.

 

Time-Based Restricted Stock Units (25% Weighting). The Company believes that RSUs are a stable equity vehicle that has significant retentive value. The RSUs vest in four annual installments beginning on the first anniversary of the grant date.

 

Additional Policies and Benefits

 

Clawback Policy. In April 2022, the Board of Directors adopted a clawback policy that may be applied in the event of a material financial restatement. The clawback policy covers all of the named executive officers and includes cash and equity-based incentive compensation. Specifically, pursuant to the policy, if the Board determines that a “covered employee” (which generally covers current, and going forward will cover former, executive officers) engaged in misconduct (for example, an act of dishonesty, fraud or misrepresentation or a willful violation of a material Company policy or law, in any such case that caused the applicable financial restatement), the Company may require that such covered employee forfeit and/or reimburse to the Company all or such portion (if any) of the employee’s recoverable compensation, as determined in the discretion of the Board. Compensation that may be recoverable under the policy includes cash or equity-based compensation for which the grant, payment or vesting (or any portion thereof) is or was predicated upon the achievement of specified financial results that are impacted by the material financial restatement, and the amount of compensation that may be impacted by the clawback policy is the difference between the amount paid or granted, and the amount that should have been paid or granted, if calculated on the updated financials.

 

Equity Grant Policies. Executives’ stock options are granted with an exercise price based on the fair market value, which has been deemed to be the closing price on the date of grant. Stock option grants to executives currently are made pursuant to our 2010 Plan. We do not coordinate the grant of stock options to the timing of releases of material non-public information. New hire equity grants, which are made to all employees (including executives) at the time of hire, have historically consisted solely of time-based options, with the number of options determined by the level of the employee. New hire equity grants consist of both time-based options and RSUs, with a higher proportion of the overall grant value

 

 

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made up of options for senior vice presidents and above. In addition, new hire equity grants are made on a dollar value basis rather than as a fixed number of awards dependent upon level. For executive-level hires, the award value is established through arm’s-length negotiation at the time of hire, taking into account the executive’s qualifications, experience and competitive market information for similar positions in the biotechnology industry, as well as the current compensation approach of the Company.

 

Restrictions on Hedging or Pledging. Pursuant to the terms of the Company’s Amended and Restated Policy for Stock Trading by Officers, Directors and Certain Other Employees, executive officers are prohibited from engaging in short sales, transactions involving put or call options, hedging transactions and other inherently speculative transactions with respect to our stock at any time. In addition, pursuant to that policy, executive officers may not pledge or otherwise transfer any beneficially owned Company securities without prior notification and approval by the Chief Executive Officer or Chief Financial Officer.

 

Stock Ownership Guidelines. The Company maintains robust stock ownership guidelines, in part based upon the feedback of our shareholders. Executive officers’ stock ownership guidelines are based on the value of common stock owned as a multiple of base salary. The guidelines are reviewed annually and revised upward as appropriate to keep pace with competitive and good governance practices. The multiples are set based upon each officer's position, as set forth below:

 

Position

 

Stock Ownership Multiple of Salary

Chief Executive Officer

 

6x

President

 

4x

Other Executive Officers

 

2x

 

The program counts owned shares and in-the-money value of vested stock options towards the guideline. Ownership levels are expected to be achieved within five years of the guideline being applicable. As of December 31, 2021, all named executive officers were either in compliance with the guidelines or had additional time to achieve them.

Post-employment Compensation. The named executive officers are entitled to certain severance and change in control benefits, the terms of which are described below under “—Potential Payments upon Termination or Change of Control.” These severance and change in control benefits are an essential element of the overall executive compensation package and assist the Company in recruiting and retaining talented individuals and aligning the executive’s interests with the best interests of the stockholders.

 

Other Benefits. The Company provides certain additional benefits to executive officers that are also generally available to employees, including medical, dental, vision and life insurance coverage, 401(k) matching contributions, an employee stock purchase plan and, for new hires who are relocating, certain relocation benefits (including, among other things, certain moving expenses and reimbursement of certain costs incurred in connection with the sale of an existing home and purchase of a new home); however, the Compensation Committee in its discretion may revise, amend or add to these benefits.

 

 

 

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Compensation Committee Interlocks and Insider Participation

 

As indicated above, the Compensation Committee currently consists of Dr. Biggar and Messrs. Baker and Daly. No member of the Compensation Committee has ever been an officer or employee of the Company. None of the executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of director of any other entity that has one or more executive officers serving as a member of the Board of Directors or Compensation Committee.

 

Compensation Risk Assessment

 

Although a portion of the compensation provided to our executive officers and other employees is performance-based, the executive compensation program does not encourage excessive or unnecessary risk taking. This is primarily due to the fact that the compensation program is designed to encourage executive officers and other employees to remain focused on both short-term and long-term strategic goals within the context of a pay-for-performance compensation philosophy.

 

Compensation Committee Report

 

The material in this report is not “soliciting material,” is not deemed filed with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

 

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement. Based on this review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated into the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

 

The foregoing report has been furnished by the Compensation Committee.

 

Stephen R. Biggar, Committee Chair

Julian C. Baker

James M. Daly

 

 

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2021 Summary Compensation Table

The following table shows for the fiscal years ended December 31, 2021, 2020, and 2019, compensation awarded to or paid to, or earned by, the Company’s Chief Executive Officer, Chief Financial Officer, and its three other most highly compensated executive officers as of December 31, 2021 (the “Named Executive Officers”).

Summary Compensation Table

 

Name

 

Title

 

Year

 

Salary

($)

 

 

Bonus

($)

 

 

Stock

Awards

($)(1)

 

 

Option

Awards

($)(2)

 

 

Non-Equity

Incentive Plan

Compensation

($)(3)

 

 

All Other

Compensation ($)

 

 

Total ($)

 

Stephen R. Davis(4)

Chief Executive Officer

 

2021

 

 

792,831

 

 

 

 

 

 

4,355,433

 

 

 

4,403,433

 

 

 

196,654

 

 

 

44,937

 

 

 

9,793,289

 

 

 

 

 

2020

 

 

767,624

 

 

 

 

 

 

3,262,978

 

 

 

3,273,559

 

 

 

438,601

 

 

 

20,425

 

 

 

7,763,187

 

 

 

 

 

2019

 

 

743,705

 

 

 

 

 

 

3,140,000

 

 

 

3,127,738

 

 

 

597,485

 

 

 

22,318

 

 

 

7,631,245

 

Srdjan R. Stankovic(5)

President

 

2021

 

 

739,377

 

 

 

 

 

 

1,957,468

 

 

 

1,979,073

 

 

 

149,008

 

 

 

44,711

 

 

 

4,869,637

 

 

 

 

 

2020

 

 

715,869

 

 

 

 

 

 

1,864,547

 

 

 

1,870,608

 

 

 

379,813

 

 

 

25,577

 

 

 

4,856,415

 

 

 

 

 

2019

 

 

693,563