aveo-def14a_20200610.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

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

Check the appropriate box:

Preliminary Proxy Statement

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

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

AVEO PHARMACEUTICALS, INC.

(Name of Registrant as Specified in its Charter)

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

Payment of Filing Fee (Check the appropriate box):

No fee required.

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

 

(1)

Title of each class of securities to which transaction applies:

 

(2)

Aggregate number of securities to which transaction applies:

 

(3)

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

 

(4)

Proposed maximum aggregate value of transaction:

 

(5)

Total fee paid:

Fee paid previously with preliminary materials.

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

 

(1)

Amount previously paid:

 

(2)

Form, Schedule or Registration Statement No.:

 

(3)

Filing Party:

 

(4)

Date Filed:

 

 


 

NOTICE OF 2020 ANNUAL MEETING OF STOCKHOLDERS

To Be Held on June 10, 2020

To our Stockholders:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of AVEO Pharmaceuticals, Inc. will be held on Wednesday, June 10, 2020 at 10:00 a.m., Eastern Time, at Donnelley Financial Solutions, 20 Custom House St., 7th Floor, Boston, MA 02110. We intend to hold our annual meeting in person; however, we are actively monitoring the COVID-19 pandemic and are sensitive to the public health and travel concerns our shareholders, employees and directors may have and the restrictions or protocols that federal, state, and local governments may impose on in-person meetings. In the event it is not possible or advisable to hold our annual meeting in person, we will issue a press release, which we will also file with the Securities and Exchange Commission on a Form 8-K, announcing alternative arrangements for the meeting, which may include holding the meeting solely by means of remote communication, as promptly as practicable.  Please also monitor our ann ual meeting website at www.proxydocs.com/AVEO for updated information. If you are planning to attend our meeting, please check the website in the days leading up to the meeting date. As always, we encourage you to vote your shares prior to the annual meeting regardless of whether you intend to attend in person.

At the meeting, stockholders will consider and vote on the following matters:

1.

To elect six directors, each to serve for a one-year term expiring at the 2021 annual meeting of stockholders;

2.

To approve an advisory vote on executive compensation;

3.

To approve an amendment to the AVEO Pharmaceuticals, Inc. 2019 Equity Incentive Plan to increase the number of shares available for issuance under the plan and to make certain other changes; and

4.

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2020.

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

Instead of mailing a printed copy of our proxy materials to all of our stockholders, we provide access to these materials via the Internet. This reduces the amount of paper necessary to produce these materials as well as the costs associated with mailing these materials to all stockholders. Accordingly, on or about April 30, 2020, we will begin mailing a Notice of Internet Availability of Proxy Materials, or Notice, to all stockholders of record on our books at the close of business on April 15, 2020, the record date for determining our stockholders entitled to notice of, and to vote at, the annual meeting, and will post our proxy materials on the website referenced in the Notice. As more fully described in the Notice, stockholders may choose to access our proxy materials on the website referred to in the Notice or may request to receive a printed set of our proxy materials. In addition, the Notice and website provide information regarding how you may request to receive proxy materials in printed form by mail, or electronically by email, on an ongoing basis.


Stockholders of record at the close of business on April 15 , 2020 are entitled to notice of, and to vote at, the annual meeting or any adjournment thereof. Your vote is important regardless of the number of shares you own. If you are a stockholder of record, you may submit your proxy to cause your shares to be present an d voted at the meeting in one of these three ways:

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

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

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

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

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

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

 

By Order of the Board of Directors,

Michael P. Bailey

President and Chief Executive Officer

Boston, Massachusetts

April 28, 2020

 

 


 

TABLE OF CONTENTS

 

PROXY STATEMENT

 

1

IMPORTANT INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

 

2

HOUSEHOLDING OF ANNUAL MEETING MATERIALS

 

6

PRESENTATION OF OUR COMMON STOCK

 

6

OWNERSHIP OF OUR COMMON STOCK

 

7

PROPOSAL 1—ELECTION OF DIRECTORS

 

9

CORPORATE GOVERNANCE

 

12

General

 

12

Board Determination of Independence

 

12

Role of the Board

 

13

The Board’s Role in Risk Oversight

 

13

Board of Directors Meetings and Attendance

 

14

Director Attendance at Annual Meeting of Stockholders

 

14

Board Committees

 

14

Director Nomination Process

 

15

Communicating with the Independent Directors

 

16

Executive Officer and Director Compensation Processes

 

17

Report of the Audit Committee

 

17

Principal Accountant Fees and Services

 

18

Audit Committee Pre-Approval Policies and Procedures

 

18

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

 

19

Policies and Procedures for Related Person Transactions

 

19

Related Person Transactions

 

20

EXECUTIVE AND DIRECTOR COMPENSATION

 

21

Compensation Discussion and Analysis

 

21

Summary Compensation Table for the Years Ended December 31, 2019 and 2018

 

33

Grants of Plan-Based Awards for the Year Ended December 31, 2019

 

34

Outstanding Equity Awards at December 31, 2019

 

35

Option Exercises

 

36

Pay Ratio of Chief Executive Officer to Median Employee

 

36

Employment Agreements and Severance Arrangements

 

36

Potential Payments and Benefits Upon Termination and a Change in Control

 

39

Equity Compensation Plan Information

 

40

Compensation Committee Report

 

40

Compensation Committee Interlocks and Insider Participation

 

41

Director Compensation

 

41

PROPOSAL 2—ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

43

PROPOSAL 3— AMENDMENT TO THE 2019 EQUITY INCENTIVE PLAN

 

44

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

 

44

Highlights of the 2019 Equity Incentive Plan, as Proposed to be Amended

 

45

Information Regarding Overhang and Dilution

 

46

Description of the 2019 Equity Incentive Plan, as Proposed to be Amended

 

46

Federal Income Tax Consequences

 

54

i


 

 

PROPOSAL 4—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

56

OTHER MATTERS

 

56

STOCKHOLDER PROPOSALS

 

56

APPENDIX A

 

A-1

 

 

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AVEO PHARMACEUTICALS, INC.

30 WINTER STREET

BOSTON, MASSACHUSETTS 02108

PROXY STATEMENT

for the 2020 Annual Meeting of Stockholders to be held on June 10, 2020

This Proxy Statement and the accompanying proxy card are being furnished in connection with the solicitation of proxies by the board of directors of AVEO Pharmaceuticals, Inc. for use at the Annual Meeting of Stockholders to be held on Wednesday, June 10, 2020 at 10:00 a.m., Eastern Time, at Donnelley Financial Solutions, 20 Custom House St., 7th Floor, Boston, MA 02110, and at any adjournment thereof. Except where the context otherwise requires, references to “we,” “us,” “our,” “our company”, the “Company” and similar terms refer to AVEO Pharmaceuticals, Inc. and its consolidated subsidiaries.

In the event it is not possible or advisable to hold our annual meeting in person, we will announce alternative arrangeme nts for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication on the above date and time. Please monitor our annual meeting website at www.proxydocs.com/AVEO for updated information.

All properly submitted proxies will be voted in accordance with the instructions contained in those proxies. If no instructions are specified, the proxies will be voted in accordance with the recommendation of our board of directors with respect to each of the matters set forth in the accompanying Notice of 2020 Annual Meeting of Stockholders. You may revoke your proxy at any time before it is exercised at the meeting by submitting a later dated proxy or by giving our Secretary written notice to that effect.

On or about April 30, 2020, we are mailing to our stockholders of record as of April 15, 2020 a Notice of Internet Availability of Proxy Materials, including this Proxy Statement and our 2019 Annual Report to Stockholders on Form 10-K, instead of paper copies of these documents. The Notice contains instructions on how to access those documents over the Internet. The Notice also contains instructions on how you may receive a paper copy of our proxy materials, including this Proxy Statement, our 2019 Annual Report to Stockholders on Form 10-K and a form of proxy card or voting instruction card.

Important Notice Regarding the Availability of Proxy Materials for

the Annual Meeting of Stockholders to be held on June 10, 2020:

This Proxy Statement and our 2019 Annual Report to Stockholders on Form 10-K

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

A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed with the U.S. Securities and Exchange Commission, or the SEC, except for exhibits, will be furnished without charge to any stockholder upon written request to AVEO Pharmaceuticals, Inc., 30 Winter Street, Boston, Massachusetts 02108, Attention: Corporate Secretary. Copies of exhibits, if any, are also available upon written request to the preceding address and upon the payment of an appropriate processing fee.  This Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 are also available on the SEC’s website at www.sec.gov .

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IMPORTANT INFORMATION ABOUT T HE ANNUAL MEETING AND VOTING

Q. Why did I receive these proxy materials?

A. We are providing these proxy materials to you, as a stockholder of record of AVEO Pharmaceuticals, Inc., in connection with the solicitation by our board of directors of proxies to be voted at our 2020 annual meeting of stockholders to be held at Donnelley Financial Solutions, 20 Custom House St., 7th Floor, Boston, MA 02110 on Wednesday, June 10, 2020 at 10:00 a.m., Eastern Time. As a stockholder of record of AVEO Pharmaceuticals, Inc. as of April 15, 2020, you are invited to attend our annual meeting and are entitled and requested to vote on the proposals described in th is proxy statement. In the event it is not possible or advisable to hold our annual meeting in person, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication on the above date and time. Please monitor our annual meeting website at www.proxydocs.com/AVEO for updated information.

Q. What is the purpose of the annual meeting?

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

1. To elect six directors, each to serve for a one-year term expiring at our 2021 annual meeting of stockholders and until his or her successor is duly elected and qualified;

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

3. To approve an amendment to the AVEO Pharmaceuticals, Inc. 2019 Equity Incentive Plan, which we refer to as the 2019 Equity Incentive Plan, to increase the number of shares available for issuance under the plan and to make certain other changes; and

4. To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2020.

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

Q. Who can vote at the annual meeting?

A. To be entitled to vote, you must have been a stockholder of record at the close of business on April 15, 2020, the record date for determining our stockholders entitled to vote at our annual meeting. There were 16,080,616 shares of our common stock outstanding and entitled to vote at the annual meeting as of the record date.

Q. How many votes do I have?

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

Q. How do I vote?

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

(1) Submit a Proxy Over the Internet: Go to the website of our tabulator at www.proxypush.com/AVEO . Use the vote control number printed on the Notice (or your proxy card) to access your account and submit a proxy to vote your shares. You must specify how you want your shares voted.  If you do not specify how you want your shares voted, your Internet proxy will not be completed, and you will receive an error message. Your shares will be voted according to your instructions.

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(2) Submit a Proxy b y Telephone: Call 1- 866 - 230 - 6355 , toll free from the United States, Canada and Puerto Rico, and follow the recorded instructions. You will need to have the Notice (or your proxy card) in hand when you call. You must specify how you want your shares voted and confirm your proxy t o vote your shares as instructed at the end of the call , or your telephonic proxy cannot be completed. Your shares will be voted according to your instructions.

(3) Submit a Proxy by Mail: If you received a printed copy of the proxy materials, complete and sign your enclosed proxy card and mail it in the enclosed postage prepaid envelope to Mediant Communications, P.O. Box 8016, Cary, NC 27512-9903. Mediant Communications must receive the proxy card not later than June 9, 2020, the day before the annual meeting, for your mailed proxy to be valid and your shares to be voted at the annual meeting. Your shares will be voted according to your instructions. If you return your proxy card but do not specify how you want your shares voted on any particular matter, they will be voted in accordance with the recommendations of our board of directors.

Vote in Person at the Annual Meeting: If you attend the annual meeting, you may submit your proxy in one of the three ways listed above; you may deliver your completed proxy card in person at the meeting; or you may vote by completing a ballot that we will provide to you at the meeting.

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

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

Q. Can I change my vote?

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

(1) Submit a new proxy over the Internet or by telephone as instructed above. Only your latest Internet or telephone proxy will be voted at the annual meeting.

(2) Sign a new proxy and submit it by mail to Mediant Communications, P.O. Box 8016, Cary, NC 27512-9903. Mediant Communications must receive the proxy card no later than June 9, 2020. Only your latest dated proxy will be voted at the annual meeting.

(3) Attend the annual meeting and vote in person as instructed above. Attending the annual meeting alone, without submitting a new proxy, will not revoke any previously submitted proxy.

(4) Give our Corporate S ecretary written notice before the meeting or prior to the taking of the vote at the meeting that you want to revoke your previously submitted proxy.   

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

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

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

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

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

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

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

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

A. Proposal 1—Election of Directors

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

vote FOR all nominees;

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

WITHHOLD your vote from all nominees.

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

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Proposal 2—Advisory Vote on Executive Compensati on

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

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

Proposal 3—Approval of an Amendment to the 2019 Equity Incentive Plan

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

Proposal 4—Ratification of Appointment of Independent Registered Public Accounting Firm

To approve Proposal 4, stockholders holding a majority of the votes cast on the matter and voting FOR or AGAINST the proposal must vote FOR the proposal. Proposal 4 is considered a discretionary matter . Therefore, if your shares are held by your bank, brokerage firm or other nominee in “street name” and you do not provide voting instructions with respect to your shares, your bank, brokerage firm or other nominee may vote your shares on Proposal 4. If you ABSTAIN from voting on Proposal 4, your shares will not be voted FOR or AGAINST the proposal and also will not be counted as votes cast or shares voting on the proposal. As a result, votes to ABSTAIN will have no effect on the outcome of Proposal 4.

Although stockholder approval of our audit committee’s appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2020 is not required, we believe that it is advisable to give stockholders an opportunity to ratify this appointment. If this proposal is not approved at the annual meeting, our audit committee will reconsider its appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2020.

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

A. Our board of directors recommends that you vote:

FOR the election of each of the six nominees to serve on our board of directors, each to serve for a one-year term expiring at our 2021 annual meeting of stockholders and until his or her successor is duly elected and qualified;

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

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FOR the approval of an amendment to the 2019 Equity Incentive Plan; and

FOR the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2020.

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

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

Q. Where can I find the voting results?

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

Q. What are the costs of soliciting these proxies?

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

HOUSEHOLDING OF ANNUAL MEETING MATERIALS

Some banks, brokerage firms and other nominee record holders may be participating in the practice of “householding” proxy statements, annual reports to stockholders, and notices of Internet availability of proxy materials. This means that only one copy of such materials may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of any such document to you upon written or oral request to AVEO Pharmaceuticals, Inc., 30 Winter Street, Boston, Massachusetts 02108, Attention: Corporate Secretary, telephone: (857) 400-0101. If you want to receive separate copies of the proxy statement, annual report to stockholders, or notices of Internet availability of proxy materials in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, brokerage firm or other nominee record holder, or you may contact us at the above address and phone number.

PRESENTATION OF OUR COMMON STOCK

On February 19, 2020, we effected a 1-for-10 reverse stock split of our common stock. All references to shares of common stock and per share amounts in this proxy statement give effect to the reverse stock split unless otherwise indicated.

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OWNERSHIP OF OUR COMMON STOCK

Unless otherwise provided below, the following table sets forth information regarding beneficial ownership of our common stock as of April 15, 2020 by:

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

each of our current directors and director nominees;

our executive officers that are named in the “ Summary Compensation Table for the Years Ended December 31, 2019 and 2018” included elsewhere in this proxy statement; and

all of our directors and executive officers as a group.

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

The column entitled “Percentage of Shares Beneficially Owned” is based on a total of 16,080,616 shares of our common stock outstanding as of April 15, 2020. Except as otherwise set forth below, the address of each beneficial owner is c/o AVEO Pharmaceuticals, Inc., 30 Winter Street, Boston, Massachusetts 02108.

 

Name and Address of Beneficial Owner

 

Number of

Shares

Beneficially

Owned

 

 

Common

Stock

Underlying

Warrants

Exercisable

Within 60

Days

 

 

Common

Stock

Underlying

Options

Exercisable

Within 60

Days

 

 

Total

Securities

Beneficially

Owned

 

 

Percentage

of Shares

Beneficially

Owned

 

Holders of more than 5% of our voting securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Entities affiliated with New Enterprise Associates (1)

 

 

2,524,387

 

 

 

1,471,052

 

 

 

 

 

 

3,995,439

 

 

 

22.8

%

Directors and Named Executive Officers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kenneth M. Bate

 

 

375

 

 

 

 

 

 

32,952

 

 

 

33,327

 

 

*

 

Anthony B. Evnin

 

 

41,852

 

(2)

 

12,953

 

 

 

32,952

 

(3)

 

87,758

 

 

*

 

Robert C. Young

 

 

1,896

 

(4)

 

 

 

 

33,277

 

 

 

35,173

 

 

*

 

Gregory T. Mayes

 

 

 

 

 

 

 

 

4,162

 

 

 

4,162

 

 

*

 

Scarlett Spring

 

 

 

 

 

 

 

 

1,664

 

 

 

1,664

 

 

 

 

 

Michael Bailey

 

 

31,885

 

 

 

5,181

 

 

 

371,460

 

 

 

408,526

 

 

 

2.5

%

Michael Needle

 

 

5,181

 

 

 

5,181

 

 

 

115,186

 

 

 

125,549

 

 

*

 

Karuna Rubin

 

 

 

 

 

 

 

 

63,058

 

 

 

63,058

 

 

*

 

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

 

 

81,189

 

 

 

23,316

 

 

 

654,711

 

 

 

759,216

 

 

 

4.5

%

 

*

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

(1)

The shares are directly held by Growth Equity Opportunities Fund IV, LLC, or GEO IV; and indirectly held by New Enterprise Associates 15, L.P., or NEA 15, the sole member of GEO IV; NEA Partners 15, L.P., or NEA Partners 15, the sole general partner of NEA 15; NEA 15 GP, LLC, or NEA 15 GP, the sole general partner of NEA Partners 15, and the individual managers of NEA 15 GP (NEA 15, NEA Partners 15, NEA 15 GP and the individual managers of NEA 15 GP being collectively referred to as the Indirect Reporting Persons). The individual managers of NEA 15 GP are Peter J. Barris, Forest Baskett, Anthony A. Florence, Jr., Mohamad Makhzoumi, Josh Makower, David M. Mott, Scott D. Sandell and Peter W. Sonsini. Each of the Indirect

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Reporting Persons disclaims beneficial ownership of the shares held by GEO IV other than those shares which such person owns of record, and except to the extent of its or his pecuniary interest therein. The address of GEO IV is New Enterprise Associates, 1954 Greenspring Drive, Suite 600, Timon ium, MD 21093.

(2)

Consists of (a) 10 shares of common stock held by Venrock Entrepreneurs Fund Management III, LLC, or VEFM III and (b) 41,841 shares of common stock held directly by Dr. Anthony Evnin.  Dr. Evnin is a partner of VR Management, LLC, an affiliate of VEFM III. Dr. Evnin expressly disclaims beneficial ownership over all shares held by or on behalf of VEFM III, except to the extent of his indirect pecuniary interest therein. The address of VEFM III is c/o Venrock, 3340 Hillview Avenue, Palo Alto, CA 94304.

(3)

Includes 3,500 shares of common stock issuable upon exercise of options held by Dr. Evnin on behalf and for the sole benefit of VR Management, LLC.

(4)

Consists of (a) 1,795 shares of common stock held by Dr. Young, and (b) 100 shares of common stock held by Dr. Young’s wife.

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PROPOSAL 1—ELECTI ON OF DIRECTORS

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

If they are elected, each of the nominees will hold office until our annual meeting of stockholders in 2021 and until his or her successor is duly elected and qualified. Each of the nominees has indicated his or her willingness to serve, if elected; however, if any nominee should be unable to serve, the shares of common stock represented by proxies may be voted for a substitute nominee designated by our board of directors.

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

Below are the names, ages and certain other information regarding the business experience, qualifications, attributes and skills of each of the nominees for director. Information with respect to the number of shares of common stock beneficially owned by each of these individuals, directly or indirectly, as of April 15, 2020 appears above under the heading “Ownership of Our Common Stock.”

Michael P. Bailey , age 54, has served as our President and Chief Executive Officer and as a director since January 6, 2015. Mr. Bailey joined our company in September 2010 as our Chief Commercial Officer and was named our Chief Business Officer in June 2013. Prior to joining our company, Mr. Bailey served as senior vice president, business development and chief commercial officer at Synta Pharmaceuticals Corp., a biopharmaceutical company focused on research, development and commercialization of oncology medicines, from August 2008 to September 2010. From 1999 to 2008, Mr. Bailey worked at ImClone Systems Incorporated, a biopharmaceutical company focused on the development and commercialization of treatments for cancer patients. During his nine-year tenure at ImClone, he was responsible for commercial aspects of the planning and launch of ERBITUX ® (cetuximab) across multiple oncology indications, as well as new product planning for the ImClone development portfolio, which included CYRAMZA ® (ramucirumab) and PORTRAZZA ® (necitumumab). In addition, Mr. Bailey was a member of the strategic leadership committees for ImClone and its North American and worldwide partnerships and led its commercial organization, most recently as senior vice president of commercial operations. Prior to his role at ImClone, Mr. Bailey managed the cardiovascular development portfolio at Genentech, Inc., a biotechnology company, from 1997 to 1999. Mr. Bailey started his career in the pharmaceutical industry as part of Smith-Kline Beecham’s executive marketing development program, where he held a variety of commercial roles from 1992 to 1997, including sales, strategic planning, and product management. Mr. Bailey received a B.S. in psychology from St. Lawrence University and an M.B.A. in international marketing from the Mendoza College of Business at the University of Notre Dame. We believe Mr. Bailey’s qualifications to serve on our board of directors include his service as our chief executive officer, his executive leadership roles at global pharmaceutical companies and his significant experience in cancer research and development and corporate strategy.

Kenneth M. Bate , age 69, has served as a director since December 2007. He is currently an independent consultant. Mr. Bate currently serves on the boards of Catabasis Pharmaceuticals, Inc., Genocea Biosciences, Inc., Epizyme, Inc. and Madrigal Pharmaceuticals, Inc., each a public biopharmaceutical company. During the last five years, Mr. Bate also served as chairman of the board of Cubist Pharmaceuticals, Inc. and as a director of BioMarin Pharmaceutical Inc. and Vanda Pharmaceuticals Inc., each a public biopharmaceutical company. Previously, Mr. Bate was the president and chief executive officer of Archemix Corp., a private biopharmaceutical company, a position he held from April 2009 through December 2011. From 2006 to April 2009, he served in various positions at NitroMed, Inc., a public pharmaceutical company, most recently as president and chief executive officer. From 2002 to 2005, Mr. Bate served as head of commercial operations and chief financial officer at Millennium Pharmaceuticals, Inc., a biopharmaceutical company. Prior to joining Millennium Pharmaceuticals, Mr. Bate co-founded JSB Partners, LLC, a banking and advisory services firm for biopharmaceutical and life sciences companies. From 1990 to 1996, Mr. Bate was employed with Biogen, Inc., a public biotechnology company, first as its chief financial officer and then as head of the commercial organization responsible for launching its multiple sclerosis business. He holds a B.A. in Chemistry from Williams College and an M.B.A. from The Wharton School of the University of Pennsylvania. We believe Mr. Bate’s qualifications to serve on our board of directors include his operating, finance, commercial, transactional and senior management experience in the industry, such as his

9


 

experience as chief executive officer of Archemix and NitroMed, as head of commercial operations and chief financial officer at Millennium Pharmaceuticals, and as chief financial officer and vice president of sales and marketing at Biogen, as well as his experience serving on the board of directors of other public life sciences companies, such as Cubist Pharmaceuticals , BioMarin Pharmaceutical and Vanda Pharmaceuticals .

Anthony B. Evnin, Ph.D. , age 79, has served as a director since March 2002. He has been a Partner at Venrock, a venture capital firm, where he focuses largely on life sciences investments and, in particular, biotechnology investments, since 1975. Dr. Evnin currently serves on the boards of Infinity Pharmaceuticals, Inc., a public biopharmaceutical company, and Cantel Medical Corp., a public medical equipment company. He also serves on the boards of Redpin Therapeutics, Inc. and Bridge Medicines LLC, both private biopharmaceutical companies. During the last five years, Dr. Evnin served as a director of Constellation Pharmaceuticals, Inc. and Juno Therapeutics, Inc, both public biopharmaceutical companies. Dr. Evnin’s previous experience was as a manager of business development at Story Chemical Corporation and a research scientist at Union Carbide Corporation. Dr. Evnin is a trustee emeritus of The Rockefeller University and of Princeton University, a trustee of The Jackson Laboratory, a member of the Boards of Overseers and Managers of Memorial Sloan Kettering Cancer Center, a director of the New York Genome Center, and a member of the board of directors of the Albert and Mary Lasker Foundation. Dr. Evnin holds a Ph.D. in Chemistry from the Massachusetts Institute of Technology and an A.B. from Princeton University. We believe Dr. Evnin’s qualifications to sit on our board of directors include his substantial experience as an investor in, and director of, numerous biopharmaceutical companies, including Infinity Pharmaceuticals and Constellation Pharmaceuticals and his experience as a board member of world renowned hospitals and research universities such as Memorial Sloan Kettering Cancer Center and The Rockefeller University.

Gregory T. Mayes , age 51, has served as a director since February 2019. Mr. Mayes is the president and chief executive officer of Engage Therapeutics, Inc., a privately held specialty biopharmaceutical company, which he founded in January 2017. From January 2018 to April 2019, Mr. Mayes served on the board of OncoSec Medical Incorporated, a public biopharmaceutical company. From 2013 to 2016, Mr. Mayes served as executive vice president and chief operating officer of Advaxis, Inc., a public biotechnology company focused on the development of immune-oncology therapies. Mr. Mayes also served on the board of Advaxis, Inc. from March 2016 to April 2017. Prior to joining Advaxis, Inc., Mr. Mayes served as executive vice president of Dendreon Corporation, a public biotechnology company. From 2010 to 2012, Mr. Mayes was the president and general counsel of Unigene Laboratories, Inc. where he primarily led out-licensing efforts for its oral peptide drug delivery platform. He also served on the board of Unigene Laboratories, Inc. from 2012 to 2013. Prior to these roles, Mr. Mayes served as general counsel and chief compliance officer at ImClone Systems Corporation, a wholly owned subsidiary of Eli Lilly & Company, and as senior counsel at AstraZeneca Pharmaceuticals, LP., and practiced law at Morgan, Lewis & Bockius LLP. He holds a B.S. in advertising and political science from Syracuse University and a J.D. from the Temple University School of Law. We believe Mr. Mayes’ qualifications to serve on our board of directors include his substantial experience as an executive and director of multiple biopharmaceutical and other life sciences companies.

Scarlett Spring , age 56, has served as a director since November 2019. Ms. Spring is the co-founder and chief executive officer of TapRoot Interventions & Solutions, Inc., a privately held software company, which she co-founded in March 2019. From August 2010 to December 2018, Ms. Spring served as president and chief commercial officer for VisionGate, Inc., a privately held biopharmaceutical company. Prior to these roles, Ms. Spring served at Merck & Co., Inc., a public pharmaceutical company, and AstraZeneca Pharmaceuticals, LP, a subsidiary of AstraZeneca plc, a public biopharmaceutical company, in national sales and commercial leadership roles. Ms. Spring also previously served as executive vice president and chief operating officer of the Greater Phoenix Economic Council from 2008 to 2010. She currently serves as a member of the board of directors of Republic Bank of Arizona, the Arizona Bioscience Board and Risk Capital Committee of the Flinn Foundation, and the Arizona Sports and Tourism Authority. She holds a B.A. in Marketing from the University of Texas at Austin and an M.B.A. from Pepperdine University. We believe Ms. Spring’s qualifications to serve on our board of directors include her extensive experience in leadership of national sales and commercial divisions of global biopharmaceutical companies, as well as her extensive experience as a director and executive in healthcare and other highly regulated organizations, such as at the Republic Bank of Arizona.

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Robert C. Young, M.D. , age 80 , has served as a director since July 2009. Dr. Young is president of RCY Medicine, a con sulting company focused on cancer center productivity, health care quality and health policy , which he founded in July 2009. From 2007 to 2009, Dr. Young served as chancellor of Fox Chase Cancer Center , and from 1989 to 2007, as its president and chief exe cutive officer. Dr. Young is a past president of the American Society of Clinical Oncology (ASCO), the American Cancer Society and the International Gynecologic Cancer Society , a past chairman of the board of scientific advisors of the National Cancer Inst itute and a past chairman of the National Comprehensive Cancer Network. Dr. Young serves on the boards of Friends of Cancer Research and NCCN Foundation, each non-profit organizations. Dr. Young is also a member of the scientific advisory boards of the Kan sas Cancer Center and the Oklahoma Cancer Center. Dr. Young has also serve d as chairman of the editorial board of Oncology Times. Dr. Young served on the board of directors of West Pharmaceutical Services, Inc., a public pharmaceutical technology company, from July 2002 to May 2012, and on the board of directors of Human Genome Sciences, Inc., a biopharmaceutical company, from November 2005 to July 2012. Dr. Young holds a B.Sc. in zoology from The Ohio State University and an M.D. from Cornell University Me dical College and is board certified in Internal Medicine, Hematology and Medical Oncology. We believe that Dr. Young’s qualifications to serve on our board of directors include his extensive leadership in cancer research as head of the Fox Chase Cancer Ce nter , as chairman of the board of scientific advisors of the National Cancer Institute and at the National Cancer Policy Board at the Institute of Medicine ; his service as a director of public life sciences companies West Pharmaceutical Services and Human Genome Sciences and his accomplished background as a board-certified physician.

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

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CORPORATE G OVERNANCE

General

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

Board Determination of Independence

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

Our board of directors annually reviews the composition of our board of directors and its committees and the independence of each director. In 2020, based upon information provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors determined that none of Mr. Bate, Dr. Evnin, Mr. Mayes, Ms. Spring or Dr. Young, representing five of our six directors, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is an “independent director” as that term is defined under Rule 5605(a)(2) of the Nasdaq Listing Rules. Our board of directors also determined that Mr. Bate, Dr. Evnin, Ms. Spring and Dr. Young, who comprise our audit committee, Mr. Bate, Dr. Evnin and Mr. Mayes, who comprise our compensation committee, and Mr. Mayes, Ms. Spring and Dr. Young, who comprise our nominating and governance committee, satisfy the independence standards for such committees established by the SEC and the Nasdaq Listing Rules, as applicable. Our board of directors had previously determined that John H. Johnson, who served on the board and on the compensation and nominating and corporate governance committees until his resignation in February 2019, was also independent. In making such determinations, the board of directors considered the relationships that each such non-employee director has with our company and other facts and circumstances the board of directors deemed relevant in determining independence, including the beneficial ownership of our capital stock by each non-employee director.

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Role of t he Board

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

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

chairing any meeting of the independent directors in executive session;

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

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

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

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

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

The Board’s Role in Risk Oversight

We face a number of risks in our business, including risks related to: clinical research and development; regulatory reviews, approvals and oversight; intellectual property filings, prosecution, maintenance and challenges; the establishment and maintenance of strategic alliances; manufacturing; pricing and competition; the ability to access additional funding for our business; stockholder litigation; and other risks, including those described under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019. Our management is responsible for the day-to-day management of the risks that we face, while our board of directors, as a whole and through its committees, has responsibility for the oversight of risk management.

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

13


 

Board of Directors Mee tings and Attendance

Our board met 18 times during 2019 either in person or by teleconference. During 2019, each of our directors then in office attended at least 75% of the aggregate number of board meetings and meetings of the committees on which he or she then served.

Director Attendance at Annual Meeting of Stockholders

Our corporate governance guidelines provide that directors are responsible for attending annual meetings. Each of our then-current directors attended the 2019 annual meeting of stockholders.

Board Committees

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

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

Audit Committee

The members of our audit committee are Kenneth Bate (chair), Anthony Evnin, Scarlett Spring and Robert Young. Our board of directors has determined that Mr. Bate is an “audit committee financial expert” as defined in applicable SEC rules. Ms. Spring joined the committee in February 2020. Our audit committee’s responsibilities include:

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

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

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

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

overseeing our internal audit function, if any;

discussing our risk management policies;

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

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

reviewing and approving or ratifying any related person transactions; and

preparing the audit committee report required by SEC rules.

Our audit committee met seven times during 2019.

Compensation Committee

The members of our compensation committee are Anthony Evnin (chair), Kenneth Bate and Gregory Mayes. Our compensation committee’s responsibilities include:

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

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

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

14


 

overseeing an evaluation of our senior executives;

overseeing and administering our cash and equity incentive plans;

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

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

preparing the annual compensation committee report required by SEC rules.

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

Our compensation committee met four times during 2019.

Nominating and Governance Committee

The members of our nominating and governance committee are Robert Young (chair), Gregory Mayes and Scarlett Spring. Ms. Spring joined the committee in February 2020. Our nominating and governance committee’s responsibilities include:

identifying individuals qualified to serve as members of our board;

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

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

developing and recommending to our board corporate governance guidelines;

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

overseeing an annual evaluation of our board.

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

Our nominating and governance committee met four times during 2019.

Director Nomination Process

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

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

Scarlett Spring was originally proposed to the nominating and governance committee by the chief executive officer, and was appointed by our board as a director in November 2019. At the annual meeting, stockholders will be asked to consider the election of Ms. Spring, who has been nominated for election as a director by stockholders for the first time.  

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Criteria and Diversity

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

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

Stockholder Nominations

Stockholders may recommend individuals to our nominating and governance committee for consideration as potential director candidates by submitting names of the proposed candidates, together with appropriate biographical information and background materials and, if the stockholder is not a stockholder of record, a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of our common stock for at least a year as of the date such recommendation is made, to the nominating and governance committee, c/o Karuna Rubin, Secretary, AVEO Pharmaceuticals, Inc., 30 Winter Street, Boston, Massachusetts 02108. Assuming that appropriate biographical and background material has been provided on a timely basis, the committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others. Stockholders also have the right under our bylaws to nominate director candidates directly, without any action or recommendation on the part of the committee or the board, by following the procedures set forth in our bylaws and described below under the heading “Stockholder Proposals.”

Communicating with the Independent Directors

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

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

Stockholders who wish to send communications on any topic to our board should address such communications to the Board of Directors, c/o Karuna Rubin, Secretary, AVEO Pharmaceuticals, Inc., 30 Winter Street, Boston, Massachusetts 02108.

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Executive Officer and Direc tor Compensation Processes

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

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

Our board of directors has delegated to our chief executive officer, in his capacity as a director and as the sole member of an option committee of the board, authority to make equity awards under our 2019 Equity Incentive Plan to employees that are not executive officers and consultants, at exercise prices equal to the closing price of our common stock on the date of grant and subject to vesting provisions and other conditions specified by our board and the compensation committee.

Our compensation committee has the authority to retain compensation consultants and other outside advisors to assist in the evaluation of executive officer compensation. During the year ended December 31, 2019, our compensation committee retained an independent compensation consultant, Radford, an Aon Hewitt company, which we refer to as Radford, to assist the compensation committee in developing our executive compensation programs for 2019 and 2020.

Report of the Audit Committee

Our audit committee has reviewed our audited financial statements for the year ended December 31, 2019 and discussed them with our management and our independent registered public accounting firm, Ernst &Young LLP.

Our audit committee has also received from, and discussed with, Ernst &Young LLP various communications that Ernst &Young LLP is required to provide to our audit committee, including the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board, or the PCAOB, and the SEC.

In addition, Ernst & Young LLP provided our audit committee with the written disclosures and the letter required by the applicable requirements of the PCAOB and the SEC, and the audit committee has discussed with Ernst &Young LLP their independence.

Based on the review and discussions referred to above, our audit committee recommended to our board of directors that our financial statements audited by Ernst & Young LLP be included in our Annual Report on Form 10-K for the year ended December 31, 2019.

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

Kenneth Bate, Chair

Anthony Evnin

Scarlett Spring

Robert Young

17


 

Principal Accountant Fees and Services

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

 

Fee Category

 

2019

 

 

2018

 

Audit Fees (1)

 

$

746,000

 

 

$

782,000

 

Audit-Related Fees

 

 

 

 

 

 

Tax Fees (2)

 

$

31,000

 

 

$

23,000

 

All Other Fees

 

 

 

 

 

 

Total Fees

 

$

777,000

 

 

$

805,000

 

 

(1)

“Audit Fees” in each of 2019 and 2018 include fees for the integrated audit of our annual financial statements and the effectiveness of our internal control over financial reporting, the review of the interim financial statements included in our quarterly reports on Form 10-Q, and fees in connection with our public securities offerings, including registration statements, comfort letters and consents.

(2)

“Tax Fees” in each of 2019 and 2018 include fees for tax advice and tax services primarily related to: (i) miscellaneous federal and state tax consulting, (ii) international tax consulting and (iii) tax compliance with domestic and foreign tax returns.

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

Audit Committee Pre-Approval Policies and Procedures

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

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

18


 

CERTAIN RELATIONSHIPS AND R ELATED PERSON TRANSACTIONS

Policies and Procedures for Related Person Transactions

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

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

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

the related person’s interest in the transaction;

the approximate dollar value of the transaction;

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

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

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

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

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

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

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

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

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

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

19


 

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

Related Person Transactions

On August 21, 2018, we completed a public offering of 250,000 shares of our common stock at the public offering price of $22.60 per share, with total gross proceeds to us of $5,650,000. Polar Capital, LLP and an entity affiliated with New Enterprise Associates participated in the public offering. Each of (i) Polar Capital, LLP and (ii) entities affiliated with New Enterprise Associates (collectively) beneficially held more than 5% of our voting securities at such time. Polar Capital, LLP purchased 132,743 shares at a total cost of $3.0 million, and an affiliate of New Enterprise Associates purchased 66,371 shares at a total cost of $1.5 million. In accordance with our related person transaction policy, the participation of these existing stockholders in the underwritten public offering was approved by the audit committee in connection with the offering.

On April 8, 2019, we completed a public offering of 2,173,913 shares of our common stock and warrants to purchase an aggregate of 2,500,000 shares of our common stock, including warrants to purchase an aggregate of 326,086 shares of our common stock sold pursuant to the underwriter’s partial exercise of its overallotment option, at the public offering price of $11.40 per share and $0.10 per warrant, with total gross proceeds to us of $25,032,609. An entity affiliated with New Enterprise Associates participated in this public offering by purchasing 434,782 shares of common stock and warrants to purchase an aggregate of 434,782 shares of common stock at a total cost of approximately $5.0 million. At such time, entities affiliated with New Enterprise Associates (collectively) beneficially held more than 5% of our voting securities. In accordance with our related person transaction policy, the participation of this existing stockholder in the underwritten public offering was approved by the audit committee in connection with the offering.

 

20


 

EXECUTIVE AND DIRE CTOR COMPENSATION

Compensation Discussion and Analysis

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

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

rewarding our executive officers for consistently strong execution; and

establishing a clear connection between rewards and performance.

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

On February 19, 2020, we effected a 1-for-10 reverse stock split of our common stock. All references to shares of common stock and per share amounts in this proxy statement give effect to the reverse stock split unless otherwise indicated.

Executive Summary

We are a biopharmaceutical company developing and seeking to commercialize our pipeline of product candidates designed to provide a better life for patients with cancer.  Our strategy is to focus our efforts and resources toward development and commercialization of our product candidates in North America while leveraging partnerships to support development and commercialization in other geographies.  Our pipeline of product candidates under development includes our lead candidate tivozanib , which is approved in the European Union, the United Kingdom, Norway, New Zealand and Iceland for the treatment of adult patients with advanced renal cell carcinoma, or RCC, and is in development for other indications; ficlatuzumab, a hepatocyte growth factor inhibitory antibody, as a potential treatment for various cancer types; AV-203, an anti-ErbB3 monoclonal antibody, as a potential oncology treatment; AV-380, a humanized IgG1 inhibitory monoclonal antibody targeting growth differentiation factor 15, a divergent member of the TGF-ß family, for the potential treatment of cancer cachexia; and AV-353, which targets the Notch 3 pathway.

We are working to develop and commercialize tivozanib in North America as a treatment for relapsed or refractory metastatic RCC. We are conducting a phase 3 randomized, controlled, multi-center, open-label trial, or the TIVO-3 trial, which compares tivozanib to an approved therapy, sorafenib (Nexavar ® ), in 350 subjects as a third- and fourth-line treatment for RCC. We have sublicensed tivozanib, marketed under the brand name FOTIVDA®, in Europe and other territories outside of North America. Through our partner, EUSA Pharma (UK) Limited, or EUSA, tivozanib is approved in the European Union as well as the United Kingdom, Norway, Iceland and New Zealand, for the first-line treatment of adult patients with RCC and for adult patients who are vascular endothelial growth factor receptor and mTOR pathway inhibitor-naïve following disease progression after one prior treatment with cytokine therapy for RCC.  We also have clinical collaborations to study tivozanib in combination with immune checkpoint inhibitors in RCC and in hepatocellular carcinoma, or HCC.  In September 2019, we presented final results of a phase 2 clinical trial of tivozanib in combination with Opdivo ® (nivolumab), a PD-1 inhibitor, in the first-line and the second-line treatment of RCC , which we refer to as the TiNivo trial. In September 2019, we also opened enrollment in an open-label, multi-center, randomized phase 1b/2 clinical trial of tivozanib in combination with IMFINZI (durvalumab), a PD-L1 inhibitor, as a first-line treatment for patients with advanced, unresectable HCC who have not received prior systemic therapy, which we refer to as the DEDUCTIVE trial, leveraging early monotherapy results in HCC.

When making compensation decisions, the compensation committee considers the progress of the clinical and regulatory development of our product candidates and the need to retain key executives. The compensation committee has focused on retaining and incentivizing our key employees in ways that we believe are both meaningful to the employees, as well as aligned with the interests of our stockholders, including providing our executive officers with annual cash incentive bonuses and equity awards that are dependent on individual and corporate performance, as further described below. In setting compensation for 2020, the compensation committee

21


 

has cont inued to focus on ensuring that executive compensation is in line with our peers in order to retain our management team and motivate them to continue to advance our pipeline.

At our 2019 annual meeting, we conducted an advisory vote on executive compensation. Approximately 74% of the votes cast were voted “FOR” approval of our executive compensation program as described and disclosed in the Compensation Discussion and Analysis section, compensation tables and narrative discussion in our 2019 proxy statement. The compensation committee considered the results of this advisory vote, together with the other factors and data discussed in this proxy statement, in determining executive compensation decisions and policies, and believes the result affirms stockholders’ support of our company’s approach to and structure of executive compensation. The compensation committee will continue to consider the outcome of our company’s say-on-pay votes when making future compensation decisions for our named executive officers.

Our Compensation Program Emphasizes Performance

We believe that the compensation of our named executive officers for 2019 was well-aligned with our executive compensation objectives and with our performance for the following reasons:

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

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

We aim to attract and retain exceptional executives in an extremely competitive market. In making its recommendation and decisions, the compensation committee reviewed market and peer data, which includes competitive information relating to the mix and levels of compensation for executives in the life science industry. The compensation committee also considered the need to retain key executives and reward those executives who continued to perform at a high level through 2019.

Overview of our Executive Compensation

The following section discusses the principles underlying our policies and decisions with respect to the compensation of our executive officers that are named in the “Summary Compensation Table for the Years Ended December 31, 2019 and 2018”, whom we refer to as our “named executive officers”, and the most important factors relevant to an analysis of these policies and decisions.

Under applicable SEC rules, our named executive officers for 2019 were:

Michael Bailey, our president and chief executive officer;

Michael Needle, our chief medical officer; and

Karuna Rubin, our senior vice president and general counsel.

22


 

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

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

Objectives of our Executive Compensation Program

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

attract and retain talented and experienced executives;

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

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

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

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

Basis for Compensation Policies and Decisions

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

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

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

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

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

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

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

recommendations from our independent compensation consultant.

23


 

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

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

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

the contributions and performance of each named executive officer.

In making certain compensation decisions during 2019 and for 2020, the compensation committee also considered the extended timeline of our TIVO-3 trial, the need to retain key executives and our stock price.

Our compensation committee retained an independent compensation consultant, Radford, to assist the compensation committee in developing our executive compensation for 2019 and 2020.

To assist in determining executive compensation in 2019, Radford and the compensation committee reviewed a peer group, which we refer to as the 2019 peer group, of publicly traded companies in the life sciences industry at a stage of development, market capitalization, geography and size comparable to ours, which companies the compensation committee believed were generally comparable to our company and against which the compensation committee believed we competed for executive talent. In addition to the publicly available information with respect to our 2019 peer group companies. In addition, Radford gathered competitive market data from the 2018 Radford Global Life Sciences Survey of public biopharmaceutical companies with less than 100 employees and a market value between $100 million and $900 million, which we refer to as the 2018 Radford Global Life Sciences Survey. The survey included data from companies in the life sciences industry which the compensation committee believes are generally comparable to our company and against which the compensation committee believes we compete for executive talent.

To assist in determining executive compensation in 2020, Radford and the compensation committee reviewed a peer group, which we refer to as the 2020 peer group, of publicly traded companies in the life sciences industry at a stage of development, market capitalization, geography and size comparable to ours, which companies the compensation committee believed were generally comparable to our company and against which the compensation committee believed we competed for executive talent. The compensation committee, in consultation with members of the Radford team, included the following companies in the 2020 peer group:

 

AcelRx Pharmaceuticals

Idera Pharmaceuticals

Stemline Therapeutics

Aldeyra Therapeutics

MEI Pharma

Syndax Pharmaceuticals

BioCryst Pharmaceuticals

Paratek Pharmaceuticals

Syros Pharmaceuticals

Calithera Biosciences

Progenics Pharmaceuticals

TG Therapeutics

Catalyst Pharmaceuticals

resTORbio

Verastem

Chiasma

Rigel Pharmaceuticals

 

Geron

Sesen Bio

 

 

In addition to the publicly available information with respect to our 2020 peer group companies, Radford gathered competitive market data from the 2019 Radford Global Life Sciences Survey of public biopharmaceutical companies with less than 100 employees and a market value between $100 million and $600 million, which we refer to as the 2019 Radford Global Life Sciences Survey, for our analysis of executive compensation in 2020.

Our compensation committee has concluded that our executive compensation program is effectively designed in light of our objectives and continues to be aligned with the interests of our stockholders and, therefore, determined not to make significant changes to the structure of our executive compensation program in 2020.

In setting compensation for 2020, the compensation committee focused on ensuring that compensation was in line with our peers in order to retain and motivate our management team.

24


 

The Chief Executive Officer’s Role in the Compensation Proces s

The compensation committee has historically used, in addition to its own judgment and experience and the resources and tools described above, the recommendations of our chief executive officer as to the performance of each executive and as to the amount and type of compensation for such executive. Mr. Bailey, our chief executive officer, did not participate in the determination of his own compensation for 2019 or 2020.

Risk Considerations in our Compensation Program

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

Executive Compensation Components

Our executive compensation program is primarily comprised of:

base salary;

annual cash incentive compensation; and

equity compensation.

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

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

Base Salary. Base salary is used to recognize the experience, skills, knowledge and responsibilities required of all our employees, including our named executive officers. Generally, we believe that executive base salaries should be targeted near the median of the range of salaries for executives in similar positions at comparable companies. When establishing base salaries for 2019 and 2020, our board of directors, upon the recommendation of our compensation committee, considered the overall economic environment, the company’s cash position, the degree to which our company achieved its business goals and objectives, the need to attract, motivate and retain key executives, and each individual’s performance. In addition, with respect to the base salaries of our named executive officers in 2019 and 2020, other than Mr. Bailey, our compensation committee considered the recommendations of Mr. Bailey in determining appropriate base salary levels.  

25


 

201 9 Base Salaries

In February 2019, our board of directors, on the recommendation of the compensation committee, established the base salaries of our named executive officers for 2019, as set forth in the table below.  Mr. Bailey and Dr. Needle volunteered to forego the salary increase recommended by Radford in order to help preserve cash for our company given the extended timeline of the TIVO-3 trial . For Ms. Rubin, the increase was made to be competitive with the 50 th percentile of comparable companies in the 2019 peer group and the 2018 Radford Global Life Sciences Survey, as recommended by Radford. The 2019 base salaries for our named executive officers were as follows:

 

Name

 

2019 Annual

Base Salary ($)

 

 

Percentage

Increase in

Base Salary

From 2018

Base Salary (%)

 

Michael Bailey (1)

 

$

527,621

 

 

—%

 

Michael Needle (1)

 

$

436,578

 

 

—%

 

Karuna Rubin

 

$

345,251

 

 

 

15.0

%

 

(1)

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

2020 Base Salaries

In February 2020, our board of directors, on the recommendation of the compensation committee, established the base salaries of our named executive officers for 2020, as set forth in the table below. Radford recommended salary increases for 2020 for each of our named executive officers that were derived from the 50 th percentile of comparable companies in the 2020 peer group and the 2019 Radford Global Life Sciences Survey. Our compensation committee made its recommendation to the board based on Radford’s recommendations, with adjustments based on the achievements of the named executive officers in 2019. The 2020 base salaries for our named executive officers are as follows:

 

Name

 

2020 Annual

Base Salary ($)

 

 

Percentage

Increase in

Base Salary

From 2019

Base Salary (%)

 

Michael Bailey

 

$

564,554

 

 

 

7.0

%

Michael Needle

 

$

451,858

 

 

 

3.5

%

Karuna Rubin

 

$

374,597

 

 

 

8.5

%

 

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

2019 Cash Incentive Program

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

Name

 

2019 Target

Annual

Cash

Incentive

Award($)

 

 

Cash

Incentive

Award Paid

for 2019

($) (1)

 

 

Cash

Incentive

Award as a

Percentage of

Target Cash

Incentive

Award (%)

 

Michael Bailey

 

$

290,192

 

 

$

258,270

 

 

 

89

%

Michael Needle

 

$

174,631

 

 

$

148,786

 

 

 

85

%

Karuna Rubin

 

$

138,100

 

 

$

127,328

 

 

 

92

%

 

 

(1)

The annual cash incentive awards for the year ended December 31, 2019 were paid in February 2020.

 

27


 

On February 5 , 20 20 , upon the recommendation of the compensation committee, the board determined to award the achievement of the corporate goals under the annual cash incentive program for the year ending December 31, 2019 at 89 % of their aggregate target level.  The goals as achi eved in 201 9 are set forth below:

 

2019 Corporate Goals

 

Target Score (%)

 

 

Actual Score (%)

 

 

Financial

 

 

 

 

 

 

 

 

 

Secure funds that enable a cash runway to extend into 2021

 

 

25

%

 

 

27.5

%

(1)

Tivozanib

 

 

 

 

 

 

 

 

 

Execute the TIVO-3 trial to enable an FDA submission in fourth quarter of 2019

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Expand clinical collaborations for IO combinations

 

 

50

%

 

 

32.5

%

(2)

Pipeline

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

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

 

 

20

%

 

 

25

%

(3)

Corporate

 

 

 

 

 

 

 

 

 

Maintain and motivate organizational infrastructure to achieve goals

 

 

5

%

 

 

4

%

(4)

Total

 

 

100

%

89%

 

 

TIVO-3 Kicker

 

 

 

 

 

 

 

 

 

Positive TIVO-3 OS data

 

1.5X

 

 

N/A

 

(5)

 

(1)

Financial: Our board of directors determined that we exceeded the requirement for achieving this corporate goal. In 2019, we secured funding that extended our cash runway from the third quarter of 2019 into the second quarter of 2021, which was more than one quarter longer than required to achieve the corporate goal.  Our cash runway was achieved through a combination of nondilutive business development transactions, including the upfront payment received from Kyowa Kirin Co., Ltd. (formerly Kirin Brewery Co., Ltd.), or KKC, pursuant to the August 2019 amendment to our license agreement with KKC, or the KKC Agreement, the royalty and reimbursement milestone payments received from EUSA, and capital market offerings, including a public offering of our common stock and warrants in April 2019 and sales of common stock under our at-the-market facility .

(2)

Tivozanib Development: Our board of directors determined that we partially achieved this corporate goal. In August 2019, we performed a second prespecified interim overall survival, or OS, analysis for the TIVO-3 trial resulting in an OS hazard ratio of 0.99 (p=0.95) . We met with the U.S. Food and Drug Administration, or FDA, to discuss the potential submission of a new drug application, or NDA, for tivozanib with the updated OS data, and the FDA recommended that we not submit an NDA at that time. Following the FDA’s recommendation, we made the strategic decision not to submit an NDA for tivozanib in 2019, opting to wait until the first quarter of 2020, closer to the second quarter 2020 final analysis of OS data.  Our board of directors took into account the improvement in the OS hazard ratio and the progress we made towards filing an NDA in determining that we partially achieved the portion of the corporate goal related to the TIVO-3 trial.  In addition, our board of directors determined that we partially achieved the portion of the corporate goal related to our DEDUCTIVE trial. We completed study start-up activities and opened enrollment in the phase 1b portion of the DEDUCTIVE trial in September 2019, but had not completed the phase 1b portion of the trial by year end.  In addition, our board of directors determined that we partially achieved the portion of the corporate goal related to expanded clinical collaborations for IO combinations due to our continuing work toward additional clinical collaborations, pending, in part, the outcome of the TIVO-3 final OS analysis.    

28


 

(3)

Pipeline: Our board of directors determined that we exceeded the requirement for achieving this corporate goal. In 2019, w e initiated preclinical toxicology studies of AV-380 to support a potential investigational new drug application with the FDA in the second half of 2020 and our board of directors determined that we fully achieved this portion of the corporate goal. In add ition, we entered into an amendment to the KKC Agreement in August 2019 pursuant to which KKC repurchased the non-oncology rights to tivozanib in our territory, excluding the rights we have sublicensed to EUSA. Pursuant to the amendment, KKC made a non-ref undable upfront payment to us of $25.0 million and waived a one-time milestone payment of $18.0 million otherwise payable by us upon our obtaining marketing approval for tivozanib in the U.S. KKC is also required to make certain milestone payments and roya lty payments to us on net sales of tivozanib in non-oncology indications in our territory. Our board of directors determined that we exceeded the requirement for achieving this portion of the corporate goal.

(4)

Corporate: Our board of directors considered the retention of a majority of our employees and the recruitment efforts in 2019 to fill key leadership roles and determined that this corporate goal was partially achieved.

(5)

Positive TIVO-3 OS Kicker: O ur board of directors decided to defer the TIVO-3 kicker to 2020 as the final OS analysis is expected to be reported in June 2020.  

For 2019, the individual goals for each of our named executive officers (other than our chief executive officer) accounted for 20% of his or her performance incentive. The annual cash incentive payment for our chief executive officer is based solely on the achievement of our overall corporate goals described above. The individual goals for our other named executive officers are primarily related to the corporate goals for which they are most responsible and, to a lesser extent, individual development goals or department specific goals, subject to discretionary adjustments that our compensation committee deems appropriate. Our chief executive officer makes recommendations to the compensation committee as to the degree to which those named executive officers have satisfied their individual goals.

For 2019, Dr. Needle’s goals related to leading the clinical group; acting as our clinical representative in interactions with investigators, key opinion leaders, cooperative groups and partners to advance the development of our product candidates; executing the TIVO-3 data analyses in preparation for a potential NDA submission to the FDA; and leading the phase 1 portion of the DEDUCTIVE trial.

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

 

2020 Cash Incentive Program

In February 2020, the compensation committee established a target cash incentive payment for each of our named executive officers based on a percentage of their 2020 annual base salary as set forth below. These target cash incentive payments were based on target cash incentives comparable to similar executives in the 2019 Radford Global Life Sciences Survey.  To arrive at the competitive market data, Radford blended this broad life sciences survey data with peer survey data from the 2020 peer group set at levels that approximated the 50 th percentile of target executive cash incentive compensation at those companies.

 

Name

 

2020 Annual

Base Salary

($)

 

 

Target

Percentage

of 2020

Annual

Base Salary

(%)

 

 

2020 Target

Annual

Cash

Incentive

Award

($)

 

Michael Bailey

 

$

564,554

 

 

 

55

%

 

$

310,505

 

Michael Needle

 

$

451,858

 

 

 

40

%

 

$

180,743

 

Karuna Rubin

 

$

374,597

 

 

 

40

%

 

$

149,839

 

 

29


 

In February 20 20 , our board of directors, upon the recommendation of our compensation committee, established the following corporate goals under the annual cash incentive program for the year ending December 31, 20 20 , as set forth below:

 

2020 Corporate Goals

 

Percentage of Annual

Cash Incentive

Award

Attributable to

Corporate Goals

 

Financial

 

 

 

 

Secure funds consistent with corporate objectives (clinical, regulatory and commercial) that provide a cash runway into 2022

 

 

15

%

Tivozanib

 

 

 

 

File NDA and successfully respond to FDA information requests, gain a positive opinion from the Oncologic Drugs Advisory Committee of the FDA, secure commercial drug supply and prepare for commercialization

 

 

 

 

Initiate randomized IO combination study in RCC

 

 

 

 

Complete enrollment for Phase 2 portion of DEDUCTIVE trial in HCC

 

 

60

%

Pipeline

 

 

 

 

Submit AV-380 IND

 

 

 

 

Advance ficlatuzumab study to enable phase 3 decision

 

 

 

 

Complete a business development transaction to advance or monetize pipeline asset(s)

 

 

20

%

Corporate

 

 

 

 

Maintain and motivate organizational infrastructure to achieve corporate goals

 

 

5

%

Total

 

 

100

%

TIVO-3 Kicker

 

 

 

 

Positive TIVO-3 OS data

 

1.5X

 

 

Our chief executive officer’s annual cash incentive award is based solely on the achievement of these corporate goals. The annual cash incentive awards for our other named executive officers are based on a combination of achievement of the corporate goals set forth above (80% of award) and individual goals that are also set annually (20% of award).

For 2020, Dr. Needle’s goals relate to leading the clinical group; acting as our clinical representative in interactions with investigators, key opinion leaders, cooperative groups and partners to advance the development of our product candidates; leading the NDA submission to the FDA; and leading our clinical trials.

For 2020, Ms. Rubin’s goals relate to leading the legal group; assuring compliance with securities and governance matters; managing litigation, intellectual property, contracts and other legal matters; and overseeing risk management compliance.

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

30


 

We grant equity incentive awards to our employees, including our named executive officers, in connection with the commencement of their employment and, generally, on an annual basis, as part of our overall compensation progra m. Historically, all grants of equity awards to our named executive officers have been made by our board of directors at regularly scheduled meetings during the year upon the recommendation of our compensation committee. The exercise or purchase price of e ach stock option is equal to the fair market value of our common stock on the date of grant, which is generally the date of the board meeting approving such grant, the date of hire or such other date as the board may specify consistent with applicable law.   In addition to the factors set forth above, we also consider the number of shares subject to, and exercise prices of, our executive officers’ vested and unvested outstanding awards , as well as the vesting schedule of our executive officers’ unvested awar ds and the amount and percentage of total equity on a diluted basis held by our executive officers .

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

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

2019 Equity Compensation Awards

In February 2019, as part of the annual performance evaluations of our named executive officers, our board of directors, upon the recommendation of our compensation committee, granted to our named executive officers options to purchase shares of our common stock as set forth in the table below, contingent on the approval of the 2019 Equity Incentive Plan by our stockholders at the 2019 annual meeting. Our compensation committee made its recommendations based on its analysis, with input from our consultant, Radford, of the executive officer equity compensation practices of the 2019 peer group companies and the 2018 Radford Global Life Sciences Survey.  The committee generally recommended awards that approximated the 50 th percentile of executive equity incentive compensation at those companies, with adjustments that considered performance, retention, and total compensation for each executive officer. The stock option awards to such named executive officers were granted with a term of 10 years and an exercise price of $6.20 per share, which was the closing price of our common stock on the date of grant. The options vest in equal monthly installments over four years, subject to the officer’s continued employment with our company.

 

Name

 

Total Number

of Shares of

Common Stock

Underlying

Time-Based

Options Granted

in 2019

 

Michael Bailey

 

 

120,000

 

Michael Needle

 

 

20,000

 

Karuna Rubin

 

 

45,065

 

 

31


 

2 020 Equity Compensation Awards

In February 2020, as part of the annual individual performance evaluations of our named executive officers, our board of directors, upon the recommendation of our compensation committee, granted to our named executive officers options to purchase shares of our common stock as set forth in the table below. Our compensation committee, with input from our consultant, Radford, analyzed the executive officer equity compensation practices of the 2020 peer group companies and the 2019 Radford Global Life Sciences Survey. The committee generally recommended awards that approximated the 50 th percentile of executive equity incentive compensation at those companies, with adjustments that considered performance, retention and total compensation for each executive officer. The compensation committee considered the extended timeline of the tivozanib program and determined to use equity rather than cash retention in order to preserve the company’s cash and to continue to align executive and stockholder incentives.  The stock option awards to such named executive officers were granted with a term of 10 years and an exercise price of $5.60 per share, which was the closing price of our common stock on the date of grant. The options vest in equal monthly installments over four years, subject to the officer’s continued employment with our company.

 

Name

 

Total Number

of Shares of

Common Stock

Underlying

Time-Based

Options Granted

in 2020

 

Michael Bailey

 

 

121,025

 

Michael Needle

 

 

30,000

 

Karuna Rubin

 

 

42,500

 

 

Other Benefits

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

Severance and Change in Control Benefits

Each of our named executive officers are entitled to receive severance benefits in connection with a termination of their employment, unless such termination is for cause.  If we undergo a change in control, our named executive officers are entitled to severance payments and immediate vesting of all equity awards if we terminate their employment without cause, or if they leave their employment with us for good reason (as such terms are defined in the Key Employee Change in Control Severance Benefit Plan), within 18 months of such change in control event. Our change in control benefits have been structured as “double trigger” benefits. This means that the change in control does not itself trigger benefits; rather, benefits are paid only if the employment of the executive is terminated during the specified period after the change in control. We believe a “double trigger” benefit maximizes stockholder value because it prevents an unintended windfall to executives in the event of a friendly change in control, while still providing executives with appropriate incentives to cooperate in negotiating any change in control in which they believe they may lose their jobs but which may be beneficial to stockholders.

32


 

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

Please refer to “Employment Agreements and Severance Arrangements” for a more detailed discussion of these benefits. We have also provided more information about these benefits, along with estimates of their value under various circumstances, under “—Potential Payments and Benefits Upon Termination and a Change in Control” below.

Tax and Accounting Considerations

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

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

Summary Compensation Table for the Years Ended December 31, 2019 and 2018

The following table sets forth information for the years ended December 31, 2019 and 2018 regarding compensation awarded to, earned by or paid to our named executive officers.

 

Name and Principal Position

 

Year

 

Salary ($)

 

 

Option

Awards ($) (1)

 

 

 

Non-Equity

Incentive Plan

Compensation ($) (2)

 

 

All Other

Compensation ($) (3)

 

 

Total ($)

 

Michael Bailey,

 

2019

 

$

527,621

 

 

$

735,240

 

 

 

$

258,270

 

 

$

68,513

 

 

$

1,589,644

 

Chief Executive Officer

 

2018

 

$

527,621

 

 

$

2,340,394

 

 

 

$

174,115

 

 

$

68,432

 

 

$

3,110,562

 

Michael Needle,

 

2019

 

$

436,578

 

 

$

122,540

 

 

 

$

148,786

 

 

$

12,275

 

 

$

720,179

 

Chief Medical Officer

 

2018

 

$

436,578

 

 

$

549,455

 

 

 

$

106,525

 

 

$

10,112

 

 

$

1,102,670

 

Karuna Rubin,

 

2019

 

$

345,251

 

 

$

276,113

 

 

 

$

127,328

 

 

$

787

 

 

$

749,479

 

Senior Vice President and General Counsel

 

2018

 

$

300,217

 

 

$

639,131

 

 

 

$

62,145

 

 

$

650

 

 

$

1,002,143

 

 

(1)

The amounts reported in the “Option Awards” column represent the grant date fair value of the stock options granted during 2019 and 2018, as computed in accordance with FASB ASC Topic 718, using a Black-Scholes valuation model . A key assumption in the Black-Scholes valuation model is the exercise price, which represents the closing stock price of our common stock on the date of grant. The options granted to our named executive officers in 2019 were subject to stockholder approval of the 2019 Equity Incentive Plan at the annual meeting of stockholders held on June 12, 2019. We began recognizing expense for these awards on June 12, 2019 because the grant date criteria under ASC 718 had been met. The closing stock price of our common stock on June 12, 2019 was $7.60 per share. The closing stock price of our common stock on February 1, 2018 was $30.80 per share. Our assumptions with respect to the valuation of option awards are set forth in note 8 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. Note that the amounts reported in this column reflect the accounting cost for these stock options and do not correspond to the actual economic value that may be received by the named executive officers from the stock options.

33


 

( 2 )

Our compensation committee determined to pay Mr. Bailey, Dr. Needle and Ms. Rubin annual cash incentive awards equal to 89%, 85%, and 92%, respectively, of such executive officer’s target award for performance in 2019. Our compensation committee determined to pay Mr. Bailey, Dr. Needle and Ms. Rubin annual cash incentive awards equal to 60 %, 61 % and 69 % , resp ectively, of such executive officer’s target award for performance in 2018.

( 3 )

Amounts in this column represent the sum of (i) any matching contributions made by us under our tax-qualified 401(k) Retirement Plan, (ii) any life insurance premiums paid on behalf of the executive officer, and (iii) a housing and commuting allowance for Mr. Bailey of $60,000 in each of 2019 and 2018 .

Grants of Plan-Based Awards for the Year Ended December 31, 2019

The following table sets forth information for the year ended December 31, 2019 regarding grants of plan-based awards made during 2019 to our named executive officers.

 

 

 

 

 

Estimated

Future   Payouts

Under Non-

Equity Incentive

Plan Awards

 

 

Estimated

Future Payouts

Under Equity

Incentive Plan Awards

 

All   Other

Option Awards:

Number of

Securities

Underlying

 

 

 

Exercise

or Base

Price of

Stock and

Option

 

 

Grant Date

Fair Value

of Stock

and Option

 

 

Name

 

Grant

Date

 

Target

($) (1)

 

 

 

Target

(#)

 

 

Options

(#) (2)

 

 

 

Awards

($/sh)

 

 

Awards

($) (3)

 

 

Michael Bailey

 

2/6/2019

 

$

290,192

 

 

 

 

 

 

120,000

 

 

 

$

6.20

 

 

$

735,240

 

 

Michael Needle

 

2/6/2019

 

$

174,631

 

 

 

 

 

 

20,000

 

 

 

$

6.20

 

 

$

122,540

 

 

Karuna Rubin

 

2/6/2019

 

$

138,100

 

 

 

 

 

 

45,065

 

 

 

$

6.20

 

 

$

276,113

 

 

 

(1)

Represents the target payout levels under the annual cash incentive program. Target payouts for Mr. Bailey, Dr. Needle and Ms. Rubin represented 55%, 40% and 40% of base salary in 2019, respectively. The actual payout with respect to each named executive officer is shown above in the Summary Compensation Table for the Years Ended December 31, 2019 and 2018 in the column titled “Non-Equity Incentive Plan Compensation.” The annual cash incentive program did not have threshold payout levels, as the determination of the level of achievement of corporate and individual goals was subjective and subject to the discretion of our board of directors. Payouts under the annual cash incentive program were not subject to any maximum limit. Additional information regarding the design of the annual cash incentive program, including a description of the corporate goals and individual performance applicable to 2019 awards, is described above in “—Executive Compensation Components.”

(2)

For the vesting schedules of these awards, please see the footnotes to “Outstanding Equity Awards at December 31, 2019” table below. Some of these awards are subject to acceleration upon termination of employment as further described in the “—Employment Agreements and Severance Arrangements” section below.

(3)

Amounts represent the grant date fair value, computed in accordance with FASB ASC Topic 718, using a Black-Scholes valuation model. A key assumption in the Black-Scholes valuation model is the exercise price, which represents the closing stock price of our common stock on the date of grant. The options granted to our named executive officers in 2019 were subject to stockholder approval of the 2019 Equity Incentive Plan at the annual meeting of stockholders held on June 12, 2019. We began recognizing expense for these awards on June 12, 2019 because the grant date criteria under ASC 718 had been met. The closing stock price of our common stock on June 12, 2019 was $7.60 per share. Our assumptions with respect to the valuation of option awards are set forth in note 8 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.

34


 

Outstanding Equity Award s at December 31, 201 9

The following table sets forth information regarding outstanding equity awards held as of December 31, 2019 by our named executive officers.

 

Option Awards (1)

Name

 

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable

 

 

Number of

Securities

Underlying

Unexercised

Options

(#)

Unexercisable

 

 

Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)

 

Option

Exercise

Price ($)

 

 

 

Option

Expiration

Date

Michael Bailey

 

 

25,000

 

 

 

95,000

 

 

 

 

$

6.20

 

(2)

 

2/6/2029

 

 

 

45,833

 

 

 

54,167

 

 

 

 

$

30.80

 

(3)

 

2/1/2028

 

 

 

18,867

 

 

 

 

 

 

 

$

6.00

 

 

 

2/8/2027

 

 

 

40,021

 

 

 

16,479

 

 

 

 

$

6.00

 

(4)

 

2/8/2027

 

 

 

45,042

 

 

 

958

 

 

 

 

$

10.80

 

(5)

 

1/7/2026

 

 

 

90,000

 

 

 

 

 

 

 

$

8.40

 

 

 

1/6/2025

 

 

 

16,750

 

 

 

 

 

 

 

$

15.70

 

 

 

6/19/2024

 

 

 

7,500

 

 

 

 

 

 

 

$

17.70

 

 

 

1/29/2024

 

 

 

12,000

 

 

 

 

 

 

 

$

25.10

 

 

 

6/26/2023

 

 

 

3,250

 

 

 

 

 

 

 

$

77.20

 

 

 

1/24/2023

 

 

 

3,100

 

 

 

 

 

 

 

$

131.80

 

 

 

1/31/2022

 

 

 

500

 

 

 

 

 

 

 

$

141.60

 

 

 

2/15/2021

 

 

 

18,000

 

 

 

 

 

 

 

$

142.60

 

 

 

10/5/2020

Michael Needle

 

 

4,167

 

 

 

15,833

 

 

 

 

$

6.20

 

(2)

 

2/6/2029

 

 

 

10,313

 

 

 

12,188

 

 

 

 

$

30.80

 

(3)

 

2/1/2028

 

 

 

7,000

 

 

 

 

 

 

 

$

6.00

 

 

 

2/8/2027

 

 

 

14,875

 

 

 

6,125