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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K/A

(Amendment No. 1)

 

 

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 001-36172

 

ARIAD Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware   22-3106987

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

26 Landsdowne Street, Cambridge, Massachusetts 02139-4234

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (617) 494-0400

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Name of each exchange on which registered
Common Stock, $.001 par value   The NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   x     No   ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes   ¨     No   x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨   (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x

The aggregate market value of the registrant’s common stock held by nonaffiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate), computed by reference to the price at which the common stock was last sold, as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $1.1 billion.

As of March 31, 2016, the registrant had 191, 032,380 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None

 

 


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Explanatory Note

This Amendment No. 1 on Form 10-K/A (this “Form 10-K/A”) amends the Annual Report on Form 10-K of ARIAD Pharmaceuticals, Inc. (the “Company,” “we,” “our,” “us” or “ARIAD”) for the fiscal year ended December 31, 2015, as originally filed with the Securities and Exchange Commission (the “SEC”) on February 29, 2016 (the “Original Filing”). This Form 10-K/A amends the Original Filing to include the information required by Part III of the Original Filing because the Company has not and will not file a definitive proxy statement within 120 days after the end of its 2015 fiscal year. In addition, this Form 10-K/A amends Item 15 of Part IV of the Original Filing to update the Exhibit List and to include new certifications by our principal executive officer and principal financial officer under Section 302 of the Sarbanes-Oxley Act of 2002, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Except for the foregoing, we have not modified or updated disclosures presented in the Original Filing in this Form 10-K/A. Accordingly, this Form 10-K/A does not modify or update the disclosures in the Original Filing to reflect subsequent events, results or developments or facts that have become known to us after the date of the Original Filing. Information not affected by this amendment remains unchanged and reflects the disclosures made at the time the Original Filing was filed. Therefore, this Form 10-K/A should be read in conjunction with any documents incorporated by reference therein and our filings made with the SEC subsequent to the Original Filing.

Forward-Looking Statements

This Form 10-K/A contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on management’s expectations and are subject to certain factors, risks and uncertainties that may cause actual results, outcome of events, timing and performance to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements should be evaluated together with the many uncertainties that affect our business, particularly those mentioned in the section entitled “Certain Factors That May Affect Future Results of Operations” and in the Risk Factors in Item 1A of our Original Filing and in our periodic reports on Form 10-Q and Form 8-K. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements attributable to us or to any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

Unless the content requires otherwise, references to “ARIAD,” “Company,” “we,” “our,” and “us,” in this Form 10-K/A refer to ARIAD Pharmaceuticals, Inc. and our subsidiaries.

 

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TABLE OF CONTENTS

 

Explanatory Note   1
Forward-Looking Statements   1
PART III  

Item 10: Directors, Executive Officers and Corporate Governance

 

3

Item 11: Executive Compensation

 

12

Item  12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

49

Item  13: Certain Relationships and Related Transactions, and Director Independence

 

51

Item 14: Principal Accounting Fees and Services

 

52

PART IV  

Item 15: Exhibits, Financial Statement Schedules

 

53

Signature Page   54

 

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PART III

 

ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Board of Directors

Our Board of Directors (the “Board”) currently consists of nine members classified into three classes. Listed below are our nine directors by class. At each annual meeting of shareholders, the term for one class of directors expires, and directors are elected for a full term of three years to succeed the directors of such class.

 

Class    Name    Position with ARIAD    Age*      Director
Since
 

1

   Alexander J. Denner, Ph.D.    Chairman of the Board      46         2014   
   Athanase Lavidas, Ph.D.    Director      68         2003   
     Massimo Radaelli, Ph.D.    Director      58         2008   

2

   Jay R. LaMarche    Director      69         1992   
   Anna Protopapas    Director      51         2015   
     Norbert G. Riedel, Ph.D.    Director      58         2011   

3

   Paris Panayiotopoulos    Chief Executive Officer and President      42         2016   
   Sarah J. Schlesinger, M.D.    Director      56         2013   
     Wayne Wilson    Director      67         2008   

 

* Ages are provided as of April 20, 2016

Certain biographical information is set forth below for our directors. Additionally, information about the specific experience, qualifications, attributes or skills that led to our Board of Directors’ conclusion that each person listed below should serve as a director is also set forth below.

Class 1 Directors (Term to Expire in 2016)

Alexander J. Denner, Ph.D. has been a member of our Board since February 2014 and the Chairman of the Board since January 2016. He is the Chief Investment Officer of Sarissa Capital Management LP, a registered investment advisor, which he founded in 2012. Sarissa Capital focuses on improving the strategies of companies to better provide shareholder value. From 2006 to 2011, Dr. Denner served as a Senior Managing Director of Icahn Capital, an entity through which Carl C. Icahn conducts his investment activities. Prior to that, he served as a portfolio manager at Viking Global Investors, a private investment fund, and Morgan Stanley Investment Management, a global asset management firm. Dr. Denner has also served as a director of Biogen Inc. since June 2009 and as a director of The Medicines Company since February 2016, both biopharmaceutical companies. Previously, Dr. Denner also served as a director of the following biopharmaceutical companies: Amylin Pharmaceuticals, Inc., Enzon Pharmaceuticals, VIVUS, Inc., and ImClone Systems Incorporated, where he also served as Chairman of the Executive Committee.

Dr. Denner was appointed to the Board pursuant to the terms of a nomination and settlement agreement entered into in February 2014, as described in more detail below under the caption “Agreements with Dr. Denner and Sarissa.”

Dr. Denner is a member of our Board’s Nominating and Corporate Governance Committee. Dr. Denner brings to the Board a strong background overseeing the operations and research and development of biopharmaceutical companies and evaluating corporate governance matters. He also has extensive experience as an investor, particularly with respect to healthcare companies and has broad healthcare-industry knowledge.

Dr. Denner received his S.B. degree from the Massachusetts Institute of Technology and his M.S., M.Phil. and Ph.D. degrees from Yale University.

Athanase Lavidas, Ph.D. has been a member of our Board since September 2003 and served as our Lead Director from November 2008 until January 2014. He has been the Chairman and Chief Executive Officer of the Lavipharm Group, a pharmaceutical, cosmetics and consumer health-products company headquartered in Greece, since 1976. Dr. Lavidas is also Chairman of the Greece-U.S. Business Council and Chairman of SEV Business Council for International Activities, the international arm of the Hellenic Federation of Industries and Enterprises (SEV).

Dr. Lavidas is Chair of our Board’s Nominating and Corporate Governance Committee and a member of our Board’s Compensation Committee. Dr. Lavidas brings to the Board over 30 years of international pharmaceutical industry experience in strategic development and operational management. Dr. Lavidas has expertise in the research, development and commercialization of innovative pharmaceutical and cosmetic products, as well as global pharmaceutical and biotechnology collaborations.

 

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Dr. Lavidas received his S.B. and M.S. in chemistry from the University of Munich, his M.B.A. from the Institut Superieur de Marketing et de Management in Paris and his Ph.D. degree in pharmaceutical chemistry from the University of Athens.

Massimo Radaelli, Ph.D. has been a member of our Board since October 2008. He is the President and Chief Executive Officer of Noventia Pharma, a specialty pharmaceutical company focused on orphan drugs for the treatment of rare diseases, in particular for the central nervous system and respiratory system. Before joining Noventia in May 2009, Dr. Radaelli was President and Chief Executive Officer of Dompé International SA, the international pharmaceutical company of the Dompé Group. He joined Dompé in 1996 as director of corporate business development. Dr. Radaelli is also Executive Chairman of Bioakos Pharma Laboratories, a specialty pharmaceuticals company concentrated in the fields of gynecology, dermatology, ear, nose and throat and pediatrics and a director of Arriani International, SA, the international subsidiary of Arriani Pharmaceuticals, a pharmaceutical company in southeastern Europe. Since January 2014, Dr. Radaelli has served as a director of NovaBay Pharmaceuticals, Inc., a clinical-stage biopharmaceutical company. He also serves as a director of Innotex SA, a privately held specialty pharmaceuticals and cosmetics business, and IDRI, a non-profit organization focused on neglected diseases. Dr. Radaelli is a member of the Italian Society of Pharmacology and has been awarded the highest ranking honor of the Italian Republic by the President and Prime Minister of Italy for merit acquired in the fields of science and biopharma and for his commitment to patients with rare diseases and unmet medical needs.

Dr. Radaelli is a member of our Board’s Audit Committee and Science and Medicine Committee. He brings over 25 years of international industry experience to the Board, including senior leadership positions with major European pharmaceutical companies. Dr. Radaelli also brings to the Board significant strategic and operational industry experience in the specialty pharma and oncology sector, including expertise in pharmaceutical business development, strategic alliance management, and product development and commercialization with a strong track record of success particularly in emerging markets.

Dr. Radaelli received a University Degree in pharmaceutical sciences and a Ph.D. in clinical pharmacology from the University of Milan and an Executive Master of Business from Bocconi University of Milan.

Class 2 Directors (Term to Expire in 2017)

Jay R. LaMarche has been a member of our Board since January 1992. He is a retired financial executive who served us in executive leadership positions including Chief Financial Officer and Treasurer from January 1992 to November 2000. Mr. LaMarche was our Executive Vice President from March 1997 to November 2000 and Senior Vice President, Finance from January 1992 to February 1997. Before joining ARIAD, he was Chief Financial Officer and a director of ChemDesign Corporation, a fine chemicals manufacturer. Previously, Mr. LaMarche was an audit partner with Deloitte Haskins & Sells, a public accounting firm. Mr. LaMarche also served as an officer in the United States Navy.

Mr. LaMarche is a member of our Board’s Audit Committee and Nominating and Corporate Governance Committee. Mr. LaMarche brings to our Board more than 40 years of financial and senior operating experience. He has extensive knowledge of our operations, as well as expertise in financial and accounting issues, particularly as they relate to the pharmaceutical and biotechnology industry. Mr. LaMarche’s management experience and financial background serve him well in providing guidance concerning our operations and business strategy.

Mr. LaMarche received his B.B.A. degree in public accountancy from the University of Notre Dame.

Anna Protopapas has been a member of our Board since April 2015. She has been the President and Chief Executive Officer of Mersana Therapeutics, Inc. (“Mersana”), a biotechnology company focused on engineering novel antibody-drug conjugates, since March 2015. From October 2010 to October 2014, she served as a member of the Executive Committee of Takeda Pharmaceutical Company Limited, a global pharmaceutical company, and held various senior management positions, including serving as President of Millennium Pharmaceuticals, a wholly owned subsidiary of Takeda focused in oncology, where she was responsible for leading Takeda’s oncology business, and Executive Vice President of Global Business Development, where she was responsible for global acquisitions, partnering, licensing and venture investing. From October 1997 to October 2010, Ms. Protopapas served in various positions at Millennium Pharmaceuticals, including as the Senior Vice President of Strategy and Business Development and a member of the Executive Committee, where she led the company’s business development initiatives. Ms. Protopapas has been a member of the board of directors of Mersana since March 2015 and was a member of the board of directors of Ensemble Therapeutics, a company focused on engineering novel therapeutics, from 2006 to 2013.

Ms. Protopapas was appointed to the Board pursuant to the terms of an agreement entered into in April 2015, as described in more detail below under the caption “Agreements with Dr. Denner and Sarissa.”

 

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Ms. Protopapas is a member of our Board’s Compensation Committee. Ms. Protopapas brings significant industry experience to the Board, including extensive transactional and senior management experience in the oncology industry.

Ms. Protopapas received a B.S. in engineering from Princeton University, an M.S. in chemical engineering practice from Massachusetts Institute of Technology and a MBA from Stanford Graduate School of Business.

Norbert G. Riedel, Ph.D. has been a member of our Board since April 2011. He has served as the President and Chief Executive Officer and a director of Aptinyx Inc., a biopharmaceutical company discovering and developing innovative therapies for challenging disorders of the brain and nervous system, since August 2015. From January 2014 to August 2015, Dr. Riedel served as the President and Chief Executive Officer of Naurex Inc., the predecessor company acquired by Allergan and from which Aptinyx and its technology were spun out. Prior to that time, he was Corporate Vice President and Chief Science and Innovation Officer of Baxter International Inc., a diversified healthcare company from March 2001 until January 2013. From 1998 to 2001, Dr. Riedel served as President and General Manager of the recombinant therapeutic proteins business unit and Vice President of Research and Development at Baxter’s bioscience business. Prior to joining Baxter, from 1996 to 1998, he was head of worldwide biotechnology and worldwide core research functions at Hoechst-Marion Roussel, now Sanofi, a global pharmaceutical company. Previously, he held a series of scientific management positions at Hoechst-Marion Roussel and Hoechst AG. Dr. Riedel is a member of the board of directors of Jazz Pharmaceuticals, Zytoprotec GmbH, and the Illinois Biotechnology Industry Organization. He also serves on the Advisory Board of Northwestern University’s Innovation and New Ventures Office. From 1999 to 2010, Dr. Riedel was a member of the board of directors of Oscient Pharmaceuticals Corporation, a biopharmaceutical company, and its predecessor company, Genome Therapeutics Corporation, a genomics company. Dr. Riedel was a member of the Supervisory Board of MediGene AG, a biotechnology company from 2003 to 2013. Dr. Riedel was a postdoctoral fellow at Harvard University from 1984 to 1987 and an Assistant Professor and Associate Professor of medicine and biochemistry at Boston University School of Medicine from 1987 to 1991. Dr. Riedel was also a was a visiting professor at Massachusetts Institute of Technology in 1992, and in 2009, Dr. Riedel was elected as member of the Austrian Academy of Sciences. Dr. Riedel is currently an adjunct professor at Boston University School of Medicine, and an adjunct professor of Medicine at Northwestern University’s Feinberg School of Medicine.

Dr. Riedel is the Chair of our Board’s Compensation Committee and a member of the Science and Medicine Committee. Given his experience as a senior executive in the healthcare field, Dr. Riedel brings to the Board invaluable scientific and commercial expertise, as well as a keen understanding of the biotechnology industry, drug discovery and development and pharmaceutical management.

Dr. Riedel received his Diploma in biochemistry from the University of Frankfurt in 1981 and his Ph.D. in biochemistry from the University of Frankfurt in 1983.

Class 3 Directors (Term to Expire in 2018)

Paris Panayiotopoulos has served as our President and Chief Executive Officer since January 2016. Mr. Panayiotopoulos joined ARIAD from EMD Serono, Inc., a subsidiary of pharmaceutical company Merck KGaA, Darmstadt, Germany, where he served as President from 2013 through 2015. Prior to being appointed President of EMD Serono, Mr. Panayiotopoulos held positions of increasing responsibility within Merck KGaA, serving as President of Merck Serono, Tokyo, Japan, from 2012 through 2013; Global Chief of Staff for the CEO in Geneva, Switzerland, from 2011 through 2012; Head of Western Europe for the fertility and endocrinology franchises, in 2011; Global Director of the neurology franchise, from 2007 through 2011; and Global Strategy and Business Intelligence Director from 2004 through 2007. Prior to joining Merck KGaA, Mr. Panayiotopoulos was at Eli Lilly & Co. from 1999 to 2004.

Mr. Panayiotopoulos brings significant industry and leadership experience to the Board, including a strong track record of global and turnaround success, both strategically and operationally.

Mr. Panayiotopoulos received his combined BSc degree in Chemistry and Management Studies from University College London, and his MSc degree in Marketing and Product Management from Cranfield Business School in the United Kingdom.

Sarah J. Schlesinger, M.D. has been a member of our Board since July 2013. She has spent more than 20 years working in the field of cellular immunity, including as clinical director of the laboratory led by the late Ralph M. Steinman, M.D., 2011 Nobel Laureate in Physiology or Medicine. She is currently Senior Attending Physician and Associate Professor of Clinical Investigation at the Laboratory of Molecular Immunology at The Rockefeller University. Before joining The Rockefeller University in 2003, Dr. Schlesinger was a scientist at the International AIDS Vaccine Initiative in New York City from 2002 to 2003. From 1996 to 2002, Dr. Schlesinger was a Research Physician/Pathologist at the Division of Retrovirology at Walter Reed Army Institute of Research, having previously served, from 1994 to 2002, as Staff Pathologist at the Armed Force Institute of Pathology in Washington, DC. Dr. Schlesinger trained in Surgery at the Albert Einstein College of Medicine and began her career in pathology at Georgetown

 

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University in Washington, DC, and hospitals in New York including Buffalo General, Hospital New York and the Manhattan Eye, Ear and Throat Hospital. Dr. Schlesinger leads clinical trials and also chairs the research education and training committee of the Center for Clinical and Translational Science at The Rockefeller University Hospital. She is co-director of Rockefeller’s Clinical Scholars program, the Certificate in Clinical and Translational Sciences program and is the vice-chair of the hospital’s Institutional Review Board. Widely published in her field, Dr. Schlesinger has been recognized with numerous awards for her research and teaching. She also belongs to a number of prominent medical societies including the United States and Canadian Academy of Pathology, the American Association for the Advancement of Science and the College of American Pathologists.

Dr. Schlesinger’s experience leading clinical trials and dealing with the FDA in regulatory matters, coupled with her research expertise, have proven invaluable in her role as Chair of our Board’s Science and Medicine Committee. Her knowledge and expertise will play a vital role as we move forward with plans for broadened clinical development of its products and product candidates.

Dr. Schlesinger received her A.B. degree from Wellesley College in Wellesley, MA, and her M.D. from Rush Medical College in Chicago. She obtained further medical training in Pathology at The New York Hospital – Cornell Medical Center where she was chief resident.

Wayne Wilson has been a member of our Board since October 2008 and served as our Lead Director from January 2014 until January 2016. He has over 30 years of business, financial and accounting experience. He has been an independent business advisor since 2002. From 1995 to 2002, he served in various roles, including as President, Chief Operating Officer and Chief Financial Officer at PC Connection, Inc., a Fortune 1000 direct marketer of information technology products and services. From 1986 to 1995, Mr. Wilson was a partner in the assurance and advisory services practice of Deloitte & Touche LLP, a public accounting firm. Mr. Wilson is also a member of the boards of directors of FairPoint Communications, Inc., a telecommunications company, and Edgewater Technology, Inc., a technology management consulting firm. He retired as director of Hologic, Inc. in March 2016 and previously served as a director of Cytyc Corporation, both medical diagnostics and device companies.

Mr. Wilson is Chair of our Board’s Audit Committee and a member of our Board’s Nominating and Corporate Governance Committee. Mr. Wilson brings substantial general business and financial expertise to the Board, as well as the Audit Committee. Mr. Wilson’s background and extensive experience in financial accounting and reporting make him well-equipped to evaluate financial results and to oversee the financial reporting process of a publicly traded corporation, making him highly qualified to be the chair of the Board’s Audit Committee. In addition to his tenure on our Board, he has substantial healthcare industry experience, having served on the boards of two medical technology companies, including Hologic, Inc.

Mr. Wilson received an A.B. degree in political science from Duke University and an M.B.A. from the University of North Carolina at Chapel Hill.

Review of Board Membership and Structure

As previously reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, we are currently conducting a company-wide, strategic review of our operations aimed at increasing shareholder value. As part of this review, the Board has unanimously authorized Messrs. Denner and Paris Panayiotopoulos to evaluate the size, composition and organization of the Board, including whether to reconstitute the membership of the Board and/or to eliminate the classified board structure. In order to facilitate such evaluation and a potential reconstitution and/or declassification of the Board, we announced on March 11, 2016 that each of our directors had tendered his or her conditional resignation from the Board (each, a “Conditional Resignation”).

Each Conditional Resignation provides that if any director is not selected to serve on the reconstituted Board, such director will resign from the Board effective as of the 2016 Annual Meeting. Further, with respect to any Class 3 director with a term expiring at the Company’s 2018 annual meeting of shareholders, each Conditional Resignation provides further that if the Board approves an amendment to the Company’s certificate of incorporation to effect a declassification of the Board, which amendment is approved by the Company’s shareholders at the 2016 Annual Meeting, such director will resign from the Board effective as of the date immediately prior to the 2017 annual meeting of shareholders.

Agreements with Dr. Denner and Sarissa

On February 20, 2014, we entered into a nomination and settlement agreement (the “Existing Settlement Agreement”) with Dr. Denner and Sarissa Capital Management LP and certain of its affiliated funds and entities (collectively, “Sarissa”). Pursuant to this agreement, the Board increased the size of the Board from eight to nine members and appointed Dr. Denner to the Board as a Class 1

 

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director to serve until the 2016 annual meeting of shareholders (the “2016 Annual Meeting”). Dr. Denner was also appointed as a member of the Nominating and Corporate Governance Committee of the Board. We also agreed to appoint an additional director, referred to as the Additional Designee, selected by the Board and approved by Dr. Denner, as a Class 2 director with a term expiring at the 2017 annual meeting of shareholders (the “2017 Annual Meeting”). We have not yet appointed this additional director.

The agreement provides that, for so long as Dr. Denner is a member of the Board, we will give prior notice to Sarissa before the advance notice deadline in our bylaws if Dr. Denner or the Additional Designee (when appointed) will not be nominated for election at any future annual meeting of shareholders when their current terms expire. Following the appointment of the Additional Designee and for so long as Dr. Denner is a member of the Board, we have agreed not to increase the size of the Board above 10 members. Pursuant to the agreement, Dr. Denner will resign from the Board and any committee thereof if Sarissa no longer beneficially owns at least 6 million shares of our common stock.

In conjunction with the Existing Settlement Agreement, we and Sarissa also entered into a Confidentiality Agreement governing the provision of confidential information, obtained by Dr. Denner during his service on the Board, to Sarissa.

The foregoing is not a complete description of the terms of the Existing Settlement Agreement and the Confidentiality Agreement. For a further description of the terms of the agreements, including copies thereof, please see our Current Report on Form 8-K that we filed with the SEC on February 21, 2014.

In February 2015, Sarissa notified the Company of its intent to nominate a slate of three alternative directors in opposition to the nominees recommended by the Company’s Board of Directors for election at the Company’s 2015 annual meeting of shareholders (the “2015 Annual Meeting”).

On April 28, 2015, we entered into an agreement (the “New Settlement Agreement”) with Sarissa. Pursuant to this agreement, the Company and Sarissa agreed to settle the proxy contest pertaining to the election of directors to the Board at the 2015 Annual Meeting. In addition, Dr. Berger decided to retire as Chairman, Chief Executive Officer and President of the Company, upon the appointment of his permanent successor or December 31, 2015, whichever is earlier.

In addition, pursuant to the New Settlement Agreement, the Company agreed to promptly commence a search for a new Chief Executive Officer and formed a new committee of the Board chaired by Dr. Denner (the “CEO Search Committee”), was responsible for running the process for the selection of the new Chief Executive Officer. The other members of the CEO Search Committee were Dr. Riedel, Dr. Schlesinger and Mr. Wilson. On December 18, 2015, we announced the appointment of Mr. Panayiotopoulos as our new Chief Executive Officer, effective as of January 1, 2016.

Pursuant to the New Settlement Agreement, effective as of April 28, 2015, the Board appointed Ms. Protopapas as a Class 2 director, with a term expiring at the 2017 Annual Meeting, by filling an existing vacancy in such class. The New Settlement Agreement provides that, for so long as each of Dr. Denner and Ms. Protopapas is a member of the Board, we will give prior notice to Sarissa before the advance notice deadline in our bylaws if Ms. Protopapas will not be nominated for election at any future annual meeting of shareholders when her current term expires. Pursuant to the New Settlement Agreement, Ms. Protopapas will resign from the Board and any committee thereof if Sarissa no longer beneficially owns at least 6 million shares of our common stock.

On March 17, 2016, we and Sarissa agreed to amend the New Settlement Agreement to terminate the standstill covenant contained therein, and Sarissa agreed that it will not nominate directors or submit proposals for other business at the 2016 Annual Meeting.

The foregoing is not a complete description of the terms of the New Settlement Agreement. For a further description of the terms of the New Settlement Agreement, as amended, including a copy thereof, please see our Current Reports on Form 8-K that we filed with the SEC on April 29, 2015 and March 18, 2016.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and officers, and persons who own more than 10% of our common stock, to file reports of securities ownership and changes in that ownership with the SEC. Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely upon a review of the copies of the forms furnished to us and written representations that no other forms were required, we believe that all Section 16(a) filing requirements were timely met during the fiscal year ended December 31, 2015, except that a Form 4 report covering the issuance of shares of common stock and a stock option to each of our outside directors (Denner, LaMarche, Lavidas, Radaelli, Riedel, Schlesinger, Wilson) on January 31, 2015 under our director compensation policy was filed late by each such director.

 

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Corporate Code of Conduct and Ethics

Our Corporate Code of Conduct and Ethics applies to all of our employees and directors. Any changes in or waivers from our Corporate Code of Conduct and Ethics will be included in a Current Report on Form 8-K within four business days following the date of the change or waiver, unless website posting of the amendments or waivers is then permitted by the rules of The NASDAQ Stock Market LLC (“NASDAQ”). Our Corporate Code of Conduct and Ethics is publicly available on the Investors section of our website at http://investor.ariad.com under the heading “Corporate Governance” and is also available upon request, without charge, by contacting us at (617) 503-7028 or through an e-mail request to Investor.Relations@ariad.com.

Corporate Governance Guidelines

Our Corporate Governance Guidelines, which were developed and are overseen by the Nominating and Corporate Governance Committee, establish basic principles of corporate governance by which the Board operates. These guidelines address selection, composition and independence of the Board, director compensation, majority voting in uncontested director elections and director resignation in the event of a failure to receive the required vote, evaluation of the performance of the Board and its committees, the structure and operations of the committees of the Board, the establishment and implementation of corporate governance guidelines, principles and practices, leadership development and succession planning.

Under our Corporate Governance Guidelines, if the Chief Executive Officer is also Chairman of the Board, the Board shall appoint one of the independent directors to serve in the role of lead director. His or her role is to support the independent directors in meeting their responsibilities as independent directors. As such, he or she is responsible for oversight of those processes of the Board that independent directors are required to perform. In addition, he or she presides at meetings of the non-management directors. In January 2016. Mr. Wilson stepped down as our Lead Director upon the appointment of Dr. Denner to serve as the Chairman of the Board.

The Nominating and Corporate Governance Committee is responsible for the establishment, implementation and oversight of our Corporate Governance Guidelines, Conflict of Interest Policy for Board of Directors and other corporate governance guidelines, policies and practices. Our Corporate Governance Guidelines and Conflict of Interest Policy are publicly available on the Investors section of our website at http://investor.ariad.com under the heading “Corporate Governance.”

Procedures by which Stockholders may Nominate Directors

There have been no changes to the procedures by which stockholders may recommend nominees to our Board of Directors.

Majority Voting in Director Elections

In April 2014, we amended our Amended and Restated Bylaws to provide that our directors must be elected by a majority of votes cast in uncontested elections and by a plurality of votes cast in contested elections.

In connection with the April 2014 change, we adopted a director resignation policy as part of our Corporate Governance Guidelines. Under this policy, the Board will only nominate directors for election or re-election who have submitted an irrevocable letter of resignation that will be effective upon (1) their failure to receive the required number of votes for reelection at the next annual meeting of shareholders at which they face re-election and (2) acceptance of such resignation by the Board. If an incumbent director fails to receive the number of votes required for re-election, the Nominating and Corporate Governance Committee will act on an expedited basis to determine whether to accept the director’s resignation and will submit its recommendation for prompt consideration to the Board, who, with the director in question abstaining, will decide whether to accept the director’s resignation, taking into account such factors as it deems relevant. Such factors may include the stated reasons why shareholders voted against such director’s reelection, the qualifications of the director and whether accepting the resignation would cause us to fail to meet any applicable listing standards or would violate state law.

Board Committees

The Board currently has four standing committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Science and Medicine Committee. Each committee meets periodically throughout the year, reports its actions and recommendations to the Board, receives reports from senior management, annually evaluates its performance and has the authority to retain outside advisors in its discretion. The primary responsibilities of each committee are summarized below and set forth in more detail in each committee’s written charter, which can be found on the Investors section of our website at http://investor.ariad.com under the heading “Corporate Governance.”

The information under the heading “Director Independence and Committee Qualifications” in Item 13 of this Form 10-K/A is incorporated herein by reference.

 

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Committee Responsibility Summary

Audit Committee

 

   

•    Oversees management’s maintenance of the reliability and integrity of our accounting policies and financial reporting and disclosure practices.

 

•    Oversees management’s establishment and maintenance of processes to ensure that we have an adequate system of internal control.

 

•    Oversees management’s establishment and maintenance of processes to ensure our compliance with legal and regulatory requirements that may impact our financial reporting and disclosure obligations.

 

•    Reviews our independent registered public accounting firm’s qualifications and independence.

 

•    Appoints, compensates and oversees the work of our independent registered public accounting firm.

 

•    Pre-approves all audit and non-audit services performed by our independent registered public accounting firm.

 

•    Reviews, in consultation with our management and independent registered public accounting firm, the scope and results of reviews of our quarterly financial statements, audits of our annual financial statements and audits of our system of internal control over financial reporting.

 

•    Performs other duties, including reviewing, evaluating and approving related person or similar transactions or relationships and recommending approval of such transactions to the disinterested and independent members of the Board, if necessary.

 

•    Oversees our compliance with applicable laws, regulations and corporate policies, including our Code of Conduct and Ethics.

 

NUMBER OF MEETINGS

HELD IN 2015: 10

 

CURRENT COMMITTEE MEMBERS:

 

Wayne Wilson, Chair

Jay R. LaMarche

Massimo Radaelli, Ph.D.

   
   
   
   
   
   
   
   

Compensation Committee

 

   

•    Assesses the performance of and approves, or recommends for approval by the Board, the compensation of our executive officers.

 

•    Analyzes our officer and director compensation plans, policies and programs.

 

•    Administers our stock-based compensation and executive compensation plans.

 

•    Reviews and approves all proposed compensation disclosures, including the Compensation Discussion and Analysis (“CD&A”), for inclusion in our proxy statement or Form 10-K/A and reviews all recommendations by shareholders of the compensation of our named executive officers (the “NEOs”) and the frequency of voting by shareholders on the compensation of our NEOs.

 

NUMBER OF MEETINGS

HELD IN 2015: 7

 

CURRENT COMMITTEE MEMBERS:

 

Norbert G. Riedel, Ph.D., Chair

Athanase Lavidas, Ph.D.

Anna Protopapas

   
   
   

 

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Nominating and Corporate Governance Committee

 

   

•    Identifies and evaluates individuals to become directors.

 

•    Makes recommendations to the Board concerning the size, structure and composition of the Board and its committees.

 

•    Monitors the process to assess the Board’s effectiveness.

 

•    Reviews and assesses the adequacy of our corporate governance, including our Corporate Governance Guidelines and our Board Conflict of Interest Policy.

 

•    Oversees matters relating to the independence (including potential conflicts of interest), education, operation and effectiveness of the Board and its committees.

 

NUMBER OF MEETINGS

HELD IN 2015: 5

 

CURRENT COMMITTEE MEMBERS:

 

Athanase Lavidas, Ph.D., Chair

Jay R. LaMarche

Wayne Wilson

Alexander J. Denner, Ph.D.

   
   
   
   

Science and Medicine Committee

 

   

•    Consults with and advises management on the strategy, focus and direction of our research and development, clinical programs and initiatives, as well as competitive and other factors that may affect those programs and initiatives.

 

•    Identifies and discusses significant emerging science and technology trends and issues and their potential impact on our research and development and clinical programs, plans or policies.

 

•    Leads periodic updates and discussions with the Board on our progress in achieving our strategic research, development and clinical goals and objectives.

 

•    Consults with and advises management, as appropriate, on our internal and external investments in science and technology and for any material external investments in research and development that require approval by the Board, and assists the Board in evaluating such opportunities.

 

NUMBER OF MEETINGS

HELD IN 2015: 0

 

CURRENT COMMITTEE MEMBERS:

 

Sarah J. Schlesinger, M.D., Chair

Norbert G. Riedel, Ph.D.

Massimo Radaelli, Ph.D.

   
   
   

Executive Officers

The following table sets forth certain information regarding our executive officers, including their ages, as of April 20, 2016.

 

Name

   Age     

Position

Paris Panayiotopoulos

     42       Chief Executive Officer and President

Timothy P. Clackson, Ph.D.

     51       President of Research and Development and Chief Scientific Officer

Manmeet S. Soni

     38       Executive Vice President, Chief Financial Officer and Treasurer

Martin J. Duvall

     54       Executive Vice President and Chief Commercial Officer

Thomas J. DesRosier, J.D. (1) .

     61       Executive Vice President, Chief Legal and Administrative Officer and Secretary

Daniel M. Bollag, Ph.D

     55       Senior Vice President, Regulatory Affairs and Quality

Maria E. Cantor

     48       Senior Vice President, Corporate Affairs

Hugh M. Cole

     51       Senior Vice President, Chief Business Officer

Frank G. Haluska, M.D., Ph.D. (2)

     57       Senior Vice President, Clinical Research and Development and Chief Medical Officer

 

(1)   Mr. DesRosier resigned from ARIAD effective as of April 30, 2016.
(2)   Dr. Haluska resigned from ARIAD effective as of May 6, 2016.

 

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For biographical information pertaining to Mr. Panayiotopoulos, who is a director and executive officer of ARIAD, see Item 10 of this Form 10-K/A under the heading “Class 3 Directors (Term to Expire in 2018).”

Timothy P. Clackson, Ph.D. has served as our President of Research and Development and Chief Scientific Officer since June 2010. Previously, he served as our Senior Vice President and Chief Scientific Officer from September 2003 to June 2010.

Manmeet S. Soni has served as our Executive Vice President, Chief Financial Officer and Treasurer since March 2016. Previously, he served as chief financial officer of Pharmacyclics, Inc., a biopharmaceutical company, where he was responsible for all finance, procurement, information technology and human resources functions, and played a vital role in Pharmacyclics’ acquisition by AbbVie, Inc. in May 2015. He first joined Pharmacyclics in September 2012 as corporate controller and executive director of finance, and was promoted to vice president, corporate controller in February 2013; senior vice president, finance in August 2013; and executive vice president, finance in November 2013, prior to being appointed as chief financial officer and treasurer in February 2014. Previously, Mr. Soni worked at ZELTIQ Aesthetics Inc., a publicly held medical technology company, from January 2012 to September 2012, where he served as controller, senior director of finance, and was responsible for accounting, SEC and treasury functions. Prior to ZELTIQ, Mr. Soni worked at PricewaterhouseCoopers in San Jose, CA from June 2007 to January 2012 in the Life Science and Venture Capital Group, providing audit and assurance services to various public and privately held companies in the pharmaceutical, biotechnology, software and semiconductor space. Prior to that, he worked at PricewaterhouseCoopers, India providing audit and assurance services.

Martin J. Duvall has served as our Executive Vice President, Chief Commercial Officer since December 2013, having served as our Senior Vice President, Commercial Operations since September 2011. Previously, from 2010 to 2011, he served as Senior Vice President and General Manager of the global oncology franchise at Merck & Co., Inc., a global healthcare company. From 2009 to 2010, Mr. Duvall led global marketing and commercial operations at Abraxis Bioscience, Inc., an immunochemistry products manufacturing company. From 2004 to 2009, Mr. Duvall held roles leading commercial operations, commercial development and oncology strategy for MGI Pharma, Inc., a biopharmaceutical company, and its acquirer, Eisai Pharmaceuticals, a global pharmaceutical company.

Thomas J. DesRosier, J.D. has served as our Executive Vice President, Chief Legal and Administrative Officer and Secretary since January 2015. Previously, he served as Executive Vice President, Chief Legal and Administrative Officer and Secretary of Cubist Pharmaceuticals, Inc., a biopharmaceutical company, from 2014 to 2015 and as Senior Vice President, Chief Legal Officer and Secretary from 2013 to 2014. Before that, Mr. DesRosier served as Senior Vice President, General Counsel North America of Sanofi, a global biopharmaceutical company, from 2011 to 2013. From 1999 to 2011, Mr. DesRosier held several increasing leadership roles within the legal group of Genzyme Corporation, a biotechnology company, culminating in his role as Senior Vice President, Chief Legal Officer.

Daniel M. Bollag, Ph.D. has served as our Senior Vice President, Regulatory Affairs and Quality since January 2009. He previously was Vice President, Regulatory Affairs for Genzyme Corporation from 2006 to 2008.

Maria E. Cantor has served as our Senior Vice President, Corporate Affairs since January 2012. Previously, she served as our Vice President, Corporate Communications and Investor Relations since July 2008. Ms. Cantor held several positions of increasing responsibility at Genzyme Corporation from 2001 to 2008, most recently serving as Senior Director, Corporate Communications.

Hugh M. Cole has served as our Senior Vice President and Chief Business Officer since March 2014. Previously, from 2007 to 2014, Mr. Cole held management positions at Shire Pharmaceuticals, a biopharmaceutical company, most recently as Senior Vice President, Strategic Planning and Program Management and, previously, as a global franchise head, and before that, as Vice President, Business Development. Previously he held senior positions in business and corporate development at Oscient Pharmaceuticals (formerly, Genome Therapeutics), a pharmaceutical company, and at Millennium Pharmaceuticals, a biopharmaceutical company, and its affiliates.

Frank G. Haluska, M.D., Ph.D. has served as our Senior Vice President, Clinical Research and Development and Chief Medical Officer since January 2012, having held the position of Vice President and Chief Medical Officer since June 2010. Previously, he served as our Vice President, Clinical Affairs from May 2009 to June 2010, Vice President, Clinical Research from July 2008 to May 2009, and Senior Medical Director from October 2007 to July 2008.

 

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ITEM 11:          EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The following Compensation Discussion & Analysis (“CD&A”) describes the background, objectives and structure of our 2015 executive compensation programs. This CD&A is intended to be read in conjunction with the tables following the Compensation Committee Report, which provide further historical compensation information for our named executive officers (“NEOs”):

Our long-term success has been made possible in large measure by our ability to attract, retain and motivate talented and experienced individuals across all areas of our business, including our senior executives. In 2015, our NEOs were:

 

    

Name

  

Position

  

Harvey J. Berger, M.D. (1)

   Chairman of the Board, Chief Executive Officer and President
  

Timothy P. Clackson, Ph.D.

   President of Research and Development and Chief Scientific Officer
  

Edward M. Fitzgerald (2)

   Executive Vice President, Chief Financial Officer and Treasurer
  

Martin J. Duvall

   Executive Vice President and Chief Commercial Officer
  

Thomas J. DesRosier, Esq. (3)

   Executive Vice President, Chief Legal and Administrative Officer and Secretary

(1) Mr. Berger retired from all positions at ARIAD as of December 31, 2015. Mr. Berger was succeeded by Paris Panayiotopolous as Chief Executive Officer and President commencing January 1, 2016.

(2) Mr. Fitzgerald resigned as Executive Vice President, Chief Financial Officer and Treasurer as of March 21, 2016, and from ARIAD as of April 8, 2016. Manmeet S. Soni has served as our Executive Vice President, Chief Financial Officer and Treasurer since March 21, 2016.

(3) Mr. DesRosier joined ARIAD on January 26, 2015, and resigned from ARIAD effective as of April 30, 2016.

Quick CD&A Reference Guide

 

   

  Executive Summary

 

  

Section I  

 

  Components of Executive Compensation

 

  

Section II  

 

  Compensation Competitive Analysis

 

  

Section III  

 

  Executive Compensation Determinations

 

  

Section IV  

 

  Additional Compensation Practices and Policies

 

  

Section V  

 

  Compensation Committee Report

 

  

Section VI  

 

 

I. Executive Summary

BUSINESS OVERVIEW

ARIAD is a global oncology company focused on transforming the lives of cancer patients with breakthrough medicines. Our mission is to discover, develop and commercialize small-molecule drugs to treat cancer in patients with the greatest unmet medical need—aggressive cancers for which current therapies are inadequate. We are focused on value-driving investments in commercialization, research and development and new business development initiatives that we expect will lead to sustained profitability and increased shareholder value.

We currently are commercializing or developing the following three products and product candidates:

 

    Iclusig ® (ponatinib) is our first approved cancer medicine, which we are commercializing in the United States, Europe and other areas for the treatment of certain patients with rare forms of leukemia

 

    Brigatinib (AP26113) is our next most advanced drug candidate, which we are developing for the treatment of certain patients with a form of non-small cell lung cancer, or NSCLC

 

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    AP32788 is our most recent, internally discovered drug candidate, which we are developing for the treatment of patients with NSCLC with specific mutations in the EGFR or HER2 kinases

COMPANY PERFORMANCE HIGHLIGHTS

ARIAD has made significant progress in our business since the start of 2015:

 

    We continued to expand commercial sales of our first approved cancer medicine, Iclusig, by doubling net product revenue to $112.5 million from the prior year. We also launched sales of Iclusig in Italy, Australia and Israel and entered into distribution agreements to expand global sales into Canada and Turkey

 

    We secured non-dilutive funding through a royalty financing agreement with PDL BioPharma, Inc., or PDL

 

  ¡     Pursuant to the agreement, we received an upfront payment of $50 million and will receive an additional $50 million in July 2016, with an option to draw down up to an additional $100 million through that date

 

  ¡     In exchange for these payments, we agreed to pay PDL a mid-single digit royalty on future sales of Iclusig until PDL receives a fixed internal rate of return

 

  ¡     The non-dilutive funding from the PDL agreement allows us to accelerate the initiation of our front-line trial of brigatinib, which we announced in March 2016, and support initiatives to prepare for the launch of brigatinib in the United States and to continue to invest in our efforts to increase sales of Iclusig

 

    We continued to advance our research and development pipeline.

 

  ¡     With our partner Otsuka, we filed for regulatory approval of Iclusig in Japan in early 2016

 

  ¡     We achieved full patient enrollment in our ALTA pivotal Phase 3 trial of brigatinib in ALK+ NSCLC, and, assuming favorable results, plan to file for regulatory approval in the United States in the third quarter of 2016, which could lead to potential approval and launch in early 2017

 

  ¡     We initiated two key clinical trials of Iclusig — the dose-ranging OPTIC trial, which is designed to provide important data regarding the efficacy and safety of Iclusig at doses lower than the currently approved dose; and the second-line OPTIC-2L trial, which, if approved for this indication, would significantly expand the patient population eligible to receive Iclusig

 

  ¡     We submitted an investigational new drug application, or IND, to the FDA for AP32788, our most recently internally discovered oncology drug candidate, which we are developing for the treatment of patients with NSCLC with specific mutations in the EGFR or HER2 kinases

SHAREHOLDER OUTREACH

At our 2015 Annual Meeting of Shareholders, approximately 56% of votes cast by our shareholders supported our say-on-pay proposal. This result was lower than we anticipated. As a result, we prioritized our shareholder engagement program. Following the 2015 meeting, we reached out to the majority of our top 20 shareholders and offered to discuss our executive compensation practices in detail. Our outreach efforts led to constructive conversations with the majority of our top 10 shareholders and almost 60% of our top 20 shareholders. These conversations allowed us to gain insight and outside perspective on our executive compensation program.

We also met with two leading proxy advisory firms to gather their perspectives.

Overall, the feedback we received from shareholders regarding our compensation program was overwhelmingly positive, particularly with respect to the design of our new CEO’s compensation package. However, our shareholders did express some areas of concern. The following chart summarizes our responses to the key areas of concern expressed by our shareholders.

 

   
What We Heard

 

  

What We Did

 

Compensation geared toward that of a bigger company – Our shareholders expressed concerns that our pay levels were reflective of a larger company and not our current size

   Determined to give no merit increases in base salary for our executive officers for 2016, delivered 2016 long-term incentive equity awards at the 50 th percentile of our 2016 peers, and negotiated an appropriately-sized pay package for our new CEO and CFO

 

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Use of awards tied to appreciation in stock value – Our shareholders expressed a preference towards stock options and market-based awards

  

Re-introduced stock options and increased the relative TSR performance share component for our 2016 long-term incentive equity program.

 

Insufficient Disclosure of Performance Awards – More transparent disclosure would allow shareholders to more fully evaluate the performance-based awards

  

Enhanced disclosure in this year’s CD&A regarding the performance metrics and goals used to grant and evaluate long-term incentive equity awards

 

Alignment of Program with the Interests of Long-Term Shareholders – Our shareholders expressed it was important that our program be aligned with long-term shareholder interests

   Expanded our shareholder ownership guidelines to apply to all of our executive officers

KEY COMPENSATION DECISIONS AND OUTCOMES SINCE 2015

Our NEO compensation is based on clear, measurable goals related to Company and individual performance. The Compensation Committee sets performance objectives that are designed to be challenging but achievable. Annual performance awards and long-term equity incentive compensation levels are determined based on pre-determined, measurable corporate objectives and individual performance reviews. The Company’s performance shares, which comprise a higher percentage of long-term compensation relative to our peers, possess a second layer of objective metrics that must be achieved before realization.

At the beginning of each year, our Compensation Committee evaluates management’s progress towards each corporate objective for the prior year. Specific corporate objectives for 2015 are set forth in detail below in Part IV under the heading “Executive Compensation Determinations – Evaluation of Company Performance Against Corporate Objectives.” NEOs are further evaluated based on detailed self and peer evaluations, as well as the CEO’s review and evaluation of all of these assessments and overall evaluation of performance for each officer for the year. Performance ratings of each NEO are based on both achievement of these corporate objectives and these evaluations of individual performance, which our Compensation Committee uses to determine our executives’ annual performance awards, long-term equity incentive grants and base salary increases.

In addition, we have made the following important changes to our compensation program since the beginning of 2015:

 

    Added relative TSR as a performance metric to our performance share grants
    Decided to freeze 2016 base salaries for executive officers at 2015 levels
    Added stock options to the long-term incentive vehicle mix and increased the relative TSR performance share component after discussions with several prominent shareholders
    Awarded 2016 long-term incentive performance share awards for executive officers at the 50 th percentile of our 2016 peer group
    Strengthened and broadened stock ownership guidelines to now include all executive officers
    Enhanced our CD&A disclosure to be more comprehensive and transparent, particularly with regard to performance targets and associated payouts
    In April 2015, entered into a Retirement Agreement with Dr. Berger. Following Dr. Berger’s retirement, none of our executive employment agreements have:
  ¡     280g excise tax gross-ups
  ¡     single-trigger change-in-control provisions
    In late 2015 entered into an employment agreement with Mr. Panayiotopoulos, our new CEO, which positions his pay appropriately to market levels while incorporating best practice features such as double-trigger change-in-control provisions and no excise tax gross-ups
  ¡     In connection with the receipt of his inducement equity awards, Mr. Panayiotopoulos agreed to purchase from the Company during the first 12 months of his employment, $500,000 worth of shares of the Company’s common stock, at a price per share equal to the closing price of the Company’s common stock on the applicable purchase date
    In early 2016 ARIAD entered into an employment agreement with Manmeet S. Soni, our new CFO, positioned competitively with the market. In line with the rest of the executive team, Mr. Soni’s agreement contains best practice features such as double-trigger change-in-control provisions and no excise tax gross-ups

Employment Agreements with CEO and CFO

Paris Panayiotopoulos was appointed CEO and President of the Company effective January 1, 2016. Mr. Panayiotopoulos’ employment agreement provides for a three-year term with the following compensation approved by the Compensation Committee, in consultation with its independent compensation consultant, Radford:

 

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    An annual base salary of $650,000;

 

    An annual target bonus of 70% of his annual base salary;

 

    A one-time make-whole payment of $500,000 in order to reimburse Mr. Panayiotopoulos for benefits he is forgoing from his former employer subject to clawback in the event Mr. Panayiotopoulos terminates his employment without good reason or the Company terminates his employment for cause within the first year of employment;

 

    A one-time payment of $50,000 as a reimbursement for expenses incurred in connection with the commencement of his employment;

 

    An inducement grant of 1,500,000 stock options vesting over four years and 200,000 service-based restricted stock units (“RSUs”) vesting over 18 months; and

 

    Commencing in fiscal year 2017, Mr. Panayiotopoulos will be eligible to participate in the Company’s long-term incentive compensation plans on terms and conditions no less favorable than the Company’s other senior executive officers.

Manmeet S. Soni was appointed Executive Vice President, CFO and Treasurer of the Company effective March 21, 2016. Mr. Soni’s employment agreement provides for a three-year term with the following compensation approved by the Compensation Committee, in consultation with its independent compensation consultant, Radford:

 

    An annual base salary of $475,000;

 

    An annual target bonus of 50% of his annual base salary;

 

    A one-time relocation bonus of $100,000 subject to clawback in the event that Mr. Soni terminates his employment within the first two years of employment other than on account of an uncured material breach of the Employment Agreement by the Company or at any time upon a for cause termination; and

 

    An inducement grant of 550,000 stock options vesting over four years and 150,000 performance shares with the same relative TSR performance criteria and vesting as the 2016 performance shares granted to our other executive officers.

The Compensation Committee determined these terms were appropriate and fair given the experience and value Mr. Panayiotopoulos and Mr. Soni bring to the Company. Additionally, the Compensation Committee determined the one-time payments disclosed above were necessary and appropriate measures to attract Mr. Panayiotopoulos and Mr. Soni, and to reimburse them in part for their expenses related to joining the Company and pending near-term payments at their previous employers. Lastly, the Compensation Committee believes the equity components help to align their interests with those shareholders.

EXECUTIVE COMPENSATION PHILOSOPHY

Our compensation philosophy has three fundamental objectives:

 

    We endeavor to attract and retain the best available executive talent to lead our Company, recognizing that we do so in a highly competitive environment.

 

    We seek to motivate our executives to perform by placing a substantial portion of our executives’ compensation at-risk such that it may not be realized if Company and individual goals are not achieved. This includes long-term equity in the form of performance shares, restricted stock units, and the re-introduction of stock options to the mix. We consider this “pay-for-performance” philosophy to be central to our success to date and expect this to continue into the future.

 

    We strive to align the interests of our executive officers with those of our shareholders. We do this not only by paying for performance aimed at enhancing shareholder value, but also by structuring a substantial portion of our executives’ compensation as long-term equity compensation. While we believe use of equity in long-term compensation promotes alignment with the interests of shareholders, we also carefully manage potential dilution from employee equity plans and encourage an appropriate level of executive officer equity stock holdings via stock ownership guidelines.

ALIGNMENT OF COMPENSATION COMPONENTS WITH COMPANY PERFORMANCE

Our compensation plan for our CEO and other NEOs, which we refer to as our Other NEOs, incorporates three primary sources: base salary, annual performance awards and long-term equity incentives. In 2015, executive pay packages continued to emphasize our pay-for-performance philosophy through a heavy reliance on annual performance awards and long-term equity incentives which are variable and highly performance-based.

 

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LOGO

Our pay mixes for 2015 are affected by two items worth noting. The first is for our CEO, Dr. Harvey Berger, who received only RSUs in 2015 pursuant to the terms of his Retirement Agreement. The second is the time-based stock option grant made to one NEO, Thomas J. DesRosier, Esq. in 2015 in connection with the commencement of his employment. Removing his option grant would effectively make the balance between RSUs and performance shares for our Other NEOs to be 50/50 in 2015.

Our Compensation Committee considers this mix of compensation elements to be critical in driving our “pay-for-performance” philosophy. As displayed in the graphics above, the vast majority of our executives’ compensation packages are delivered in either annual performance awards or long-term incentive compensation with value contingent on the achievement of specific performance targets, appreciation of our stock value, or both.

Structural Alignment of Pay with Performance

Our Compensation Committee is strongly committed to alignment of senior executive compensation with value creation for our shareholders:

 

    Executive compensation is linked firmly to the financial and operational performance of our business. As shown in the above pie graphs, in 2015 our CEO and Other NEO pay was heavily weighted toward variable pay, with approximately 82% of CEO pay and 76% of Other NEO pay at-risk such that it may not be realized if Company and individual goals are not achieved. As was the case in the prior year, in 2015 equity awards included a material element of performance shares.

 

    In 2015, we added a relative TSR performance goal as an additional metric to the performance shares granted to our Other NEOs, which is a minority practice among our peer group.

 

    To further align executive and shareholder interests, we have broadened our stock ownership guidelines, which requires our CEO to hold common stock with a value of at least six times his base salary and Other NEOs to hold common stock with a value of at least one times his/her base salary. In addition, our new CEO, Mr. Panayiotopoulos agreed in connection with his employment to purchase from the Company during his first 12 months of his employment $500,000 worth of shares of the Company’s common stock, at a price per share equal to the closing price of the Company’s common stock on the applicable purchase date.

 

    We focus executive attention on the financial and strategic objectives of our Company that we believe will produce long-term, sustainable shareholder value. To do so, we measure performance over the short and long-term, and utilized the following mix of performance measures and vehicles:

 

Component

 

  

Vehicle

 

  

Performance Metrics in 2015 and 2016

 

Base Salary

 

  

Cash

 

  

n/a

 

Annual Performance Awards    Cash   

●       Corporate Objectives

●       Individual Performance

 

Long-Term Equity Awards    Performance Shares   

●       Research and Development Goals (2015 only)

●       Commercial Goals (2015 only)

●       Relative TSR

  

 

Restricted Stock Units

  

 

n/a

  

 

Stock Options (2016 only)

 

  

 

n/a

 

 

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Realizable Pay Demonstrates Alignment

There has been significant volatility in our stock price over the past five years. It increased by 140% and 57% in 2011 and 2012, respectively. 2013 was a particularly volatile year, with a sharp stock price decline of almost 90% after the temporary suspension of marketing and distribution of Iclusig in the United States in the fall of 2013, followed by an increase of more than 150% from its price nadir by the end 2013. In 2014 and 2015, our stock has held steady with minimal variation. In aggregate, over the five years ended December 31, 2015, our annualized TSR was 23%.

The following chart compares our cumulative TSR over the last five years with both the total reported grant date fair value compensation of our CEO (disclosed pay the Summary Compensation Table from this filing* and our prior filings) and “realizable” CEO pay, which reflects cash plus the value of equity grants measured at year end:

 

LOGO

 

  * CEO compensation in 2015 does not include severance and other payments provided to Dr. Berger pursuant to his Retirement Agreement

STRONG COMPENSATION GOVERNANCE AND PRACTICES

The following are characteristics of our compensation program that demonstrate its strong governance principles:

 

Best Practices We Employ    Practices We Avoid

ü     Pay is closely linked to performance through a mix of annual and long-term awards utilizing various individual and corporate objectives

 

  

X     No single-trigger change in control provisions following the retirement of Dr. Berger

 

ü     Structure significant proportion of executive compensation from long-term equity incentive plan

 

  

X       No tax gross-ups following the retirement of Dr. Berger

 

ü     Include relative TSR metric in performance-based equity.
A minority of our current peers include a similar metric

 

  

X       No hedging or pledging of shares

 

ü     Thoughtful structure our peer group, selecting other similarly sized biotech firms and conducting annual Compensation Committee review

 

  

ü     Utilize robust stock ownership guidelines
CEO: 6x base salary
Other Executive Officers: 1x base salary
Directors: 5x annual cash compensation

    

 

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ü     Incentive compensation “clawback” policy

 

  

ü     Our Compensation Committee is comprised entirely of independent directors

 

  

ü     Utilize an independent compensation consultant

 

  

ü     Engage directly with shareholders on executive compensation and governance issues

 

    

 

II. Components of Executive Compensation

Our compensation plan for our NEOs incorporates three primary sources: base salary, annual performance awards and long-term equity incentives. We emphasize variable, long-term, performance-based compensation for our most senior executives, in line with their level of responsibility for and impact on our results.

 

         

Type

 

  

Element

 

  

Performance

Period

 

  

Objective

 

  

Performance measured and/or
rewarded for 2015 and 2016

 

Fixed    Base Salary    Annual    Fixed pay, to recognize an individual’s role and responsibilities   

Reviewed annually and set based on market competitiveness, individual performance and internal equity considerations

 

         
Performance -based    Annual Bonus    Annual    Variable pay component, to reward achievement of annual financial, operating and individual pre-set goals   

–       Corporate Objectives

–       Individual Performance Metrics

See “Annual Performance Award Compensation” below .

 

Performance -based    Performance Shares    Long-Term    Supports the achievement of the Company’s three-year financial and strategic objectives   

–       Research and Development Goals (2015 only)

–       Commercial Goals (2015 only)

–       Relative TSR

 

Performance -based    Restricted Stock Units    Long-Term    Supports retention and the creation of long-term sustained shareholder value   

Reviewed against market practice and the equity pool to ensure competitive delivery aligned with long-term share ownership

 

Performance -based

 

  

Stock options

(2016)

 

   Long-Term   

Supports a focus on increasing share price over the long-term

 

   Long-term stock price appreciation

BASE SALARY

Base salary is intended to provide a fair and competitive base level of compensation that reflects job function, organizational level, experience and tenure and sustained performance over time. On an annual basis, our executives are eligible for a salary increase. The amount of this increase, if any, is determined by our Compensation Committee, and recommended to our Board for approval in the case of our CEO. Any target salary increase is based on:

 

    analysis of market compensation data;

 

    demonstrated levels of core job competency and effective leadership;

 

    performance in achieving key corporate and individual objectives established at the beginning of the previous year;

 

    internal pay equity; and

 

    the recommendation of the Committee’s independent compensation consultant

 

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The executive’s performance rating leads to the application of a performance multiplier, which, in conjunction with peer information, directly influences the actual salary adjustment. Adjustments to base salary levels typically are made in the first quarter of each year and are paid retroactively to January 1 st of that year.

In 2015, the NEOs received an average base salary adjustment of 2.3%. As previously mentioned, due to several factors including Company performance, shareholder feedback, and market analysis, the Compensation Committee decided to freeze base salaries and give no merit increases to the NEOs for 2016.

 

       

Name

 

  

2014 Base

 

    

2015 Base

 

    

% Adjustment

 

 
   

Harvey J. Berger, M.D. (1)

 

   $

 

751,000

 

  

 

   $

 

751,000

 

  

 

    

 

0.00

 

 

   

Timothy P. Clackson, Ph.D.

 

   $

 

493,000

 

  

 

   $

 

513,000

 

  

 

    

 

4.10

 

 

   

Edward M. Fitzgerald

 

   $

 

466,000

 

  

 

   $

 

475,000

 

  

 

    

 

1.90

 

 

   

Thomas J. DesRosier, Esq.

 

    

 

N/A

 

  

 

   $

 

485,000

 

  

 

    

 

N/A

 

  

 

   

Martin J. Duvall

 

   $

 

455,000

 

  

 

   $

 

470,000

 

  

 

    

 

3.30

 

 

   

Average

 

                      

 

2.30

 

 

 

  (1) After the annual salary increases were approved in March 2015, Dr. Berger received a salary increase to $773,500 (3% increase), per the terms of his Retirement Agreement which is not reflected in the table.

VARIABLE AND PERFORMANCE-BASED COMPENSATION

We believe that one of the most important motivators for our executives is the opportunity to earn compensation greater than the established targets by exceeding applicable performance requirements. We accomplish this through a system of “performance multipliers” that reward exceptional performance at substantially higher levels than performance that merely meets requirements of the position.

Under our performance multiplier approach, the level of performance of each executive, in conjunction with the level of achievement of our corporate goals, directly influences such executive’s base salary, annual performance award and long-term equity incentive award relative to target awards. Our Compensation Committee established in 2013 the following performance multiplier scale, for purposes of our NEO’s compensation. In 2015, our average NEO performance rating was 3.6, generally resulting in below target (100%) awards.

 

     

Performance

   Annual

Performance

Award Factor

 

   Long-term Equity         

Incentive Factor        

   

Outstanding (5.0)

 

   200%

 

   160%  

 

   

(4.5)

 

   150%

 

   130%  

 

   

Exceeds Requirements (4.0)

 

   100%

 

   100% 

 

   

(3.5)

 

   75%

 

   85%

 

   

Meets Requirements (3.0)

 

   50%

 

   50%

 

   

Below Meets Requirements (< 3.0)

 

   0%

 

     0%

 

 

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ANNUAL PERFORMANCE AWARD COMPENSATION

Annual performance awards are intended to reward our executive officers for achievement of corporate, individual and key leadership and management objectives on an annual basis. Our Compensation Committee annually establishes target annual performance awards for different tiers of executives, which are expressed as a percentage of base salary. These target awards are then adjusted for each executive through the application of a performance multiplier based on the individual executive’s performance rating for the year.

Annual performance awards to our NEOs for 2015 performance were paid in cash and were established in accordance with the annual performance targets for all our executives. Targeted annual awards for 2015 and 2016 were as follows:

 

Name    2015 Target Annual
Awards
   2016 Target Annual        
Awards        
   
     

(as a % of base salary)

 

Harvey J. Berger, M.D.

 

   85%

 

   —        

 

Timothy P. Clackson, Ph.D.

 

   50%

 

   50%        

 

Edward M. Fitzgerald

 

   50%

 

   —        

 

Martin J. Duvall

 

   50%

 

   50%        

 

Thomas J. DesRosier, Esq.

 

   50%

 

   50%        

 

Paris Panayiotopoulos

 

  

 

   70%        

 

Manmeet S. Soni

 

  

 

   50%        

 

2015 Results

In early 2016 our CEO and Other NEOs were awarded annual performance awards in connection with meeting their 2015 performance objectives described above, as well as an evaluation of their individual performance. Annual performance awards are set at an annual target percentage of salary.

 

Name   

2015 Target

Annual Awards

(as a % of Base Salary)

 

Performance

Factor

  

Actual

Target

      Percentage      

  Actual Award      

 

 

 

  

 

Harvey J. Berger, M.D.

 

       85%

 

      3.5

 

   75%

 

  $493,106    

 

Timothy P. Clackson, Ph.D.

 

       50%

 

      3.5

 

   75%

 

  $192,000    

 

Edward M. Fitzgerald

 

       50%

 

      3.5

 

   75%

 

  $178,000    

 

Martin J. Duvall

 

       50%

 

      3.5

 

   75%

 

  $176,000    

 

Thomas J. DesRosier, Esq.

 

       50%

 

      4.0

 

   100%

 

  $223,000    

 

LONG-TERM EQUITY INCENTIVE COMPENSATION

Long-term equity incentive awards are intended to reward our executive officers for achievement of corporate, individual and key leadership and management objectives. In addition, such awards are intended to align the interests of all of our executive officers with those of our shareholders, promote progress toward achieving our long-term strategy and assist in long-term retention of our executive officers. As such, long-term equity incentive awards for our executive officers are made in the form of performance shares, restricted stock units and/or stock options.

Performance shares are earned on the achievement of one or more key corporate objectives or metrics and, once achieved, are subject in certain cases to further time-based vesting to promote retention. Our restricted stock units generally vest annually over three years, and our stock options generally vest over four years.

 

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Based on 2014 performance assessments, our Compensation Committee awarded the following equity grants to our executives in April 2015:

 

     
Name    Performance Shares at
Target (#)
   Restricted Stock Units
(#)
   

Harvey J. Berger, M.D.

 

  

 

   345,000

 

   

Timothy P. Clackson, Ph.D.

 

   75,100

 

   70,200

 

   

Edward M. Fitzgerald

 

   75,100

 

   54,000

 

   

Martin J. Duvall

 

   75,100

 

   54,000

 

   

Thomas J. DesRosier, Esq.(1)

 

  

 

  

 

 

  (1) Mr. DesRosier joined the Company in January 2015 and, per his employment agreement, received a stock option to purchase 130,000 shares and 110,000 RSUs.

In April 2015, Dr. Berger entered into a Retirement Agreement with the Company pursuant to which Dr. Berger was granted restricted stock units with respect to 345,000 shares of common stock, which vested upon his retirement on December 31, 2015. For more details regarding Dr. Berger’s Retirement Agreement, see the subsection of this filing captioned “Narrative to Summary Compensation Table and Grants of Plan-Based Awards in 2015 Table – Dr. Berger’s Retirement Agreement.”

2015 Performance Shares

For the performance shares granted in early 2015, the number of shares earned ranged from 0% to 160% of the target amount, with the actual number of shares earned and the vesting schedule varying depending on the degree of achievement of the various goals. Based upon the Company’s strategic imperatives for 2015, our Compensation Committee determined that the most appropriate performance share structure would continue to balance the underlying pillars of the business – commercial and R&D. In addition, our Compensation Committee determined to further align executive pay directly with shareholder returns through the introduction of a relative TSR metric. For 2015, our Compensation Committee continued to utilize an equity model that targets approximately 50% of long-term equity incentives in the form of performance shares.

The R&D goal focused on the achievement of 50% enrollment in the OPTIC-2L randomized second line trial of Iclusig vs. nilotinib, as a means to further potential market opportunity for Iclusig, to be achieved no later than June 30, 2018.

The Commercial goal was based on fiscal year 2015 Iclusig revenue, as a means to emphasize the importance of executing on Iclusig product sales to lay the foundation for future commercial success. The target (100%) payout for the award was directly aligned with the Company’s initial 2015 financial guidance of $130 to $140 million of net product revenues. Threshold performance for the award was $115 million (earning 50% of target payout) with stretch performance defined as revenue in excess of $140 million (earning 160% of target payout). Despite lower revenue guidance in December 2015 and final 2015 Iclusig revenue at less than the threshold target, the Compensation Committee did not adjust revenue targets for these performance shares. As such, and as certified by the Compensation Committee in February 2016, the revenue target was not achieved and none of these shares were earned.

The relative TSR goal is designed to ensure that executives have direct alignment with ARIAD’s stock price performance, in comparison to the broader industry’s stock performance. ARIAD’s stock price performance will be measured against component companies in the NASDAQ Biotechnology Index, which is the life sciences index most highly correlated with ARIAD, and a frequent index used for this type of program structure. The payouts of this objective are described in more detail below.

The objectives of the 2015 performance shares are set forth below:

 

       
Metric    Weighting   

Performance

Period End Date

   Vesting

R&D Goal: Clinical Trial Enrollment

   40%    6/30/2018   

50-100% at achievement; any
remainder at first anniversary

 

Commercial Goal: 2015 Global Product

Revenue

   40%    12/31/2015   

34% at achievement; 33% at first
and second anniversary

 

Relative TSR for 2015-2017

 

   20%

 

   12/31/2017

 

  

100% at achievement

 

 

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Payouts for the relative TSR metric against the components of the NASDAQ Biotechnology Index are set forth below:

 

TSR Percentile

Achievement

 

  

Payout

(% of Target)

 

   

75th

   160%
   

62nd

   130%
   

50th

   100%
   

38th

   85%
   

25th

   50%
   

< 25th

   0%

History of Performance Shares at ARIAD

Performance-based equity has been a mainstay in the ARIAD executive officer compensation program since 2011. Given the various growth stages our Company has gone through over the past five years, our performance metrics have evolved accordingly. As indicated in the chart below, the Compensation Committee has thoughtfully and appropriately changed the performance measures over time to motivate executives to pursue strategic and financial objectives:

 

           

2011

 

 

2012

 

 

2013

 

 

2014

 

 

2015

 

 

2016

 

         
FDA approval of Iclusig and European Medicines Agency (“EMA”) approval of Iclusig  

R&D Goal: Clinical    

Trial Enrollment    

 

●    R&D Goal: Clinical Trial Enrollment

 

●    Commercial Goal: Two-Year Cumulative Revenue

 

●    R&D Goal: Clinical Trial Enrollment

 

●    Commercial Goal: One-Year Revenue

 

●    Three-Year Relative
TSR

 

 

●    Three Year
  Relative
  TSR

The following is a summary of these performance share grants and their corresponding performance objectives and status of achievement:

 

     

    Year    

 

  

Performance Objective

 

  

Status of Achievement

 

   
    2011     

●    Approval of Iclusig by FDA by December 31, 2016

 

  

●    Achieved at 100% of target in 2012

   
    2012     

●    Approval of Iclusig by European Medicines Agency (“EMA”) by December 31, 2016

 

  

●    Achieved at 160% of target in 2013

   
    2013     

●    Full patient enrollment in a new pivotal registration trial for a new indication of an ARIAD product by December 31, 2016

 

  

●    Achieved at 100% of target in 2015 upon full enrollment of the Phase 3 ALTA trial for brigatinib

   
    2014     

●    50% enrollment in the OPTIC trial by September 30, 2017

  

●    Pending (at 0% to 130% of target, subject to timing of achievement)

   
    

●    Two-year cumulative product revenue target for 2014 and 2015

 

  

●    Achieved at 100% of target in 2016

   
    2015     

●    50% enrollment in the OPTIC-2L trial by June 30,2018

  

●    Pending (at 0% to 160% of target, subject to timing of achievement)

 

   
    

●    One-year product revenue target for 2015

  

●    Not achieved

 

   
    

●    Three-year relative TSR for 2015- 2017

  

●    Pending (at 0% to 160% of target, subject to percentile achievement)

 

   
    2016     

●    Three-year relative TSR for 2016-2018

  

●    Pending (at 0% to 160% of target, subject to percentile achievement)

 

 

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2013 Performance Shares

Based on the Company’s strategic objectives in 2013, our Compensation Committee believed it was important to balance the continued advancement of promising development candidates with ongoing drug discovery. To that end, our Compensation Committee established a performance share program based on the achievement of full patient enrollment in a pivotal registration trial for a new indication of any ARIAD product, excluding the Phase 3 EPIC trial for Iclusig (which was already underway), no later than December 31, 2016.

The characteristics of the 2013 performance shares are set forth below. At the time of grant, these awards could have paid out between 0% to 160% of the target amount based on pre-determined performance thresholds. This performance goal was certified as having been achieved in September 2015, upon full enrollment of the Phase 3 ALTA trial for brigatinib, resulting in the shares being earned at the 100% level.

 

Metric

   Weighting       Performance  

  Period End Date  

   Vesting

R&D Goal: Clinical Trial Enrollment

   100%   12/31/16    50-100% at achievement;
any  remainder at first anniversary

2014 Performance Shares

Consistent with ARIAD’s strategic goals for 2014, our Compensation Committee introduced a commercially oriented metric to emphasize the importance of commercial execution, while being directly responsive to follow-up actions stemming from FDA discussions. The commercial objective consisted of a two-year cumulative revenue goal from Iclusig sales for fiscal years 2014 and 2015, which was structured in this manner due to a high degree of uncertainty with respect to the proximity to product re-launch, potential market reaction stemming from FDA action taken in 2013 and reimbursement and revenue recognition timing.

The target (100%) payout for the award was directly linked to two-year cumulative 2014 and 2015 net product revenues of between $155 and less than $175 million of net product revenues. Threshold performance for the award was $125 million (earning 50% of target payout), with stretch performance defined as revenue in excess of $205 million (earning 160% of target payout). Based on actual net product revenue performance of $55.7 million in 2014 and $112.5 million in 2015 (cumulatively $168.2 million), and as certified by the Compensation Committee in February 2016, the revenue target was achieved at the target (100%) level.

Based on the continued importance of R&D progress to both ARIAD and its shareholders, our Compensation Committee also incorporated an R&D metric in its 2014 performance shares: enrollment of 50% of patients in our OPTIC dose-ranging trial, which is an FDA required clinical trial of Iclusig as part of post-marketing requirements, to be completed no later than September 30, 2017.

The characteristics of the 2014 performance shares are set forth below. Each metric may pay out between 0% to 160% of the target amount based on pre-determined performance thresholds. Because the R&D milestone had not been achieved by March 31, 2016, the 160% payout is no longer achievable.

 

Metric

   Weighting       Performance  

  Period End Date  

   Vesting

R&D Goal: Clinical Trial Enrollment

   50%     09/30/17      50% at achievement;
50% at first anniversary

Commercial Goal: Two-Year

Cumulative Global Revenue

   50%     12/31/15      50% at achievement;
50% at first anniversary

BENEFITS AND PERQUISITES

ARIAD provides executive perquisites in line with our peers, which are offered to help attract and retain our executive officers. In addition to general benefits offered to all other salaried employees, we provide our executive officers with supplemental long-term disability insurance and long-term care insurance, tax return preparation services and an auto allowance in accordance with their employment agreements. These were the only perquisites we provided to our executive officers during 2015. Perquisites represent less than 1% of each NEO’s total compensation as set forth in the Summary Compensation Table in this filing.

 

III. Benchmarking for Executive Compensation Components

EXECUTIVE PERFORMANCE REVIEWS

Our Compensation Committee annually reviews the performance of our CEO and reviews and recommends his compensation for approval by the Board. The Compensation Committee also annually reviews the assessment of performance of our other executive

 

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officers conducted by our CEO and reviews and approves their compensation in consultation with our CEO. While our Compensation Committee has ultimate authority and responsibility for approving all executive officer compensation, other than our CEO’s compensation, which the Board approves, our CEO plays an active role in such decisions, except with respect to his own compensation where he participates in neither the deliberations nor the decision.

Corporate Objectives

At the beginning of each year, the executive leadership team of the Company establishes annual corporate objectives, which are reviewed and discussed with the Compensation Committee and the Board and form the basis for our annual operating plan. The status of our corporate objectives, as well as our performance relative to our operating plan, are reviewed and discussed with the Board regularly during the year. Based on the annual corporate objectives and the associated operating plan, each officer is responsible for developing plans and managing key initiatives and activities designed to achieve our objectives.

Performance Reviews of our CEO

The Compensation Committee undertakes a comprehensive review of our CEO’s overall performance based on its evaluation of the Company’s performance against its corporate objectives, the CEO’s individual contributions to achievement of key objectives, his strategic leadership of the Company and his demonstration of the Company’s vision and corporate values, including a commitment to building shareholder value. Based on this comprehensive review, the Compensation Committee assigns a performance rating. Performance ratings can range from “unsatisfactory” to “meets requirements” to “exceeds requirements” to “outstanding.” The performance rating is then used to determine the performance multiplier applicable to our CEO, which forms the basis for any increases in salary, and for any annual performance awards and long-term equity incentive awards. The Compensation Committee makes these determinations in executive session and then makes recommendations to the Board for subsequent approval.

Performance Reviews of our Other NEOs

Generally, at the end of each year, each of our executive officers is evaluated based on:

 

    A detailed self-assessment of performance relative to the established corporate and individual objectives, as well as to key leadership and management measures described below

 

    A confidential evaluation by several peers, subordinates and in some instances, external colleagues, selected by our CEO

 

    CEO review and evaluation of all of these assessments and overall evaluation of performance for each executive officer for the year

 

  ¡     Our CEO’s evaluation takes into account judgment regarding the Company’s overall progress, each executive officer’s contribution to the achievement of corporate objectives, his or her achievement of individual objectives and his or her performance in relation to leadership and management measures

The level of corporate performance is also used by our CEO to guide his recommendations to the Compensation Committee regarding each executive officer’s performance rating. As part of this process, the Compensation Committee, with input from our CEO, reviews the overall performance of the Company relative to the key corporate objectives established at the beginning of the year. The corporate performance assessment, along with the assessments made by our CEO regarding the individual officers, forms the basis for the decisions regarding the individual’s performance rating. Performance is rated using the same performance scale as for our CEO.

Additional Factors

In addition to an evaluation of the level of achievement of our corporate and certain individual objectives, each executive officer is evaluated as to key leadership and management measures, including:

 

    Contribution to the management team and development and application of leadership skills reflective and supportive of our corporate values, vision and mission

 

    Ability to attract, hire, manage, retain and motivate talent in support of the achievement of our objectives

 

    Management of his or her functions and responsibilities within established financial budgets and forecasts

 

    Management of regulatory compliance requirements related to his or her responsibilities

 

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PEER GROUP SELECTION

The Company draws on a pool of executive talent that is highly sought after by similarly situated biotechnology companies, as well as larger pharmaceutical and biotechnology companies from which we frequently recruit, both within and outside our geographic area. We believe that the compensation practices of our peer group provide useful information to help us compete in this arena.

Each year, the Compensation Committee works closely with its independent compensation consultant, Radford, and with our management to review and update a comparator group of companies considered to be our peer group to ensure its continued relevance as ARIAD evolves as a company. The Compensation Committee also reviews broader life science industry data to further inform its decisions. With Radford’s assistance, our Compensation Committee uses two primary market frames of reference (which we collectively refer to as the “market”) against which to compare the Company’s executive compensation practices, as follows:

 

    Select Peer Group – A select group of national biotechnology companies at a similar stage of development as the Company, with similar headcount, market capitalization, short- and long-term growth objectives and similar therapeutic targets.

 

    Radford Global Life Sciences Survey – A size-appropriate cut of a national survey of executive compensation levels and practices that covers approximately 60 executive positions in over 600 multinational life sciences organizations.

Our Compensation Committee reviews composite market data synthesized by Radford from these two groups showing levels of cash, equity and total compensation for all comparable officers relative to the elements of compensation paid to our officers.

In October 2014, our Compensation Committee met with Radford to discuss whether the selection criteria should be revised for 2015 and which companies should be added and dropped as peer companies. The Compensation Committee used the following selection criteria:

 

    public companies in the biopharmaceutical industry with at least one commercial product

 

    annual revenues generally less than $500 million

 

    market capitalization of $550 million to $3.5 billion (1/3 to 3 times ARIAD’s value at the time of our review)

 

    headcount of 100 to 1,200 (1/3 to 3 times that of ARIAD at the time of our review)

Our 2015 peer group consisted of the following 19 companies (bolded companies were added to the peer group from 2014)*. This was the peer group used for our compensation decisions made in 2015 with respect to 2015 long-term equity incentive grants and salary increases.

 

     

Acorda Therapeutics, Inc.

 

 

ImmunoGen, Inc.

 

 

Pacira Pharmaceuticals, Inc.

 

     

Aegerion Pharmaceuticals, Inc.

 

 

INSYS Therapeutics, Inc.

 

 

Questcor Pharmaceuticals, Inc.

 

     

Arena Pharmaceuticals, Inc.

 

 

Ironwood Pharmaceuticals, Inc.

 

 

Seattle Genetics, Inc.

 

     

Auxilium Pharmaceuticals, Inc.

 

 

Ionis Pharmaceuticals, Inc. (formerly Isis)

 

 

Spectrum Pharmaceuticals, Inc.

 

     

Avanir Pharmaceuticals, Inc.

 

 

Momenta Pharmaceuticals, Inc.

 

 

The Medicines Company

 

     

Dyax Corp.

 

 

Nektar Therapeutics

 

   
     

Halozyme Therapeutics, Inc.

 

 

NPS Pharmaceuticals, Inc.

 

   

 

* The following companies were removed from the peer group: Exelixis, Medivation, Santarus, Theravance, ViroPharma, and VIVUS.

 

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Table of Contents

The following table shows how we compare to the companies in our 2015 peer group, based on median values at the time of the review:

 

       
      

 

Headcount

 

  

 

    

 

Market Cap

 

  

 

    

 

Revenue 

 

  

 

       

19 Named Peers

    

 

308     

 

  

 

    

 

$1.3B    

 

  

 

    

 

$141M

 

  

 

       

ARIAD

    

 

307     

 

  

 

    

 

$1.1B    

 

  

 

    

 

$49M 

 

  

 

       

ARIAD percentile rank

    

 

50th    

 

  

 

    

 

  29th     

 

  

 

    

 

  13th  

 

  

 

In September 2015, our Compensation Committee met with Radford to discuss whether the selection criteria should be revised for 2016 and which companies should be added and dropped as peer companies. The Compensation Committee used the following selection criteria:

 

    public companies in the biopharmaceutical industry with at least one commercial product

 

    annual revenues generally less than $750 million

 

    market capitalization of $570 million to $5.2 billion (1/3 to 3 times ARIAD’s value at the time of our review)

 

    headcount of 125 to 1,200 (1/3 to 3 times that of ARIAD at the time of our review)

Our 2016 peer group consists of the following 19 companies (bolded companies were added to the peer group from 2015)*. This was the peer group used for our compensation decisions made in 2016 with respect to 2016 long-term equity incentive grants (as there were no salary increases for our executive officers).

 

     

Acorda Therapeutics, Inc.

 

 

ImmunoGen, Inc.

 

 

Raptor Pharmaceuticals, Inc.

 

     

Aegerion Pharmaceuticals, Inc.

 

 

INSYS Therapeutics, Inc.

 

 

Repligen Corporation

 

     

AMAG Pharmaceuticals, Inc.

 

 

Ironwood Pharmaceuticals, Inc.

 

 

Seattle Genetics, Inc.

 

     

Arena Pharmaceuticals, Inc.

 

 

Ionis Pharmaceuticals, Inc. (formerly Isis)

 

 

Tesaro Inc.

 

     

Dyax Corp.

 

 

Momenta Pharmaceuticals, Inc.

 

 

The Medicines Company

 

     

Exelixis, Inc.

 

 

Nektar Therapeutics

 

   
     

Halozyme Therapeutics, Inc.

 

 

Pacira Pharmaceuticals, Inc.

 

   

 

* The following companies were removed from the peer group: Auxilium, Avanir, NPS, Questcor, and Spectrum.

The following table shows how we compare to the companies in our 2016 peer group, based on median values at the time of review:

 

       
      

 

Headcount

 

  

 

    

 

Market Cap

 

  

 

    

 

Revenue 

 

  

 

       

19 Named Peers

 

    

 

307     

 

  

 

    

 

$1.6B    

 

  

 

    

 

$91M

 

  

 

       

ARIAD

 

    

 

379     

 

  

 

    

 

$1.7B    

 

  

 

    

 

$118M 

 

  

 

       

ARIAD percentile rank

 

    

 

61 st     

 

  

 

    

 

  52 nd      

 

  

 

    

 

  51 st   

 

  

 

 

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BENCHMARKING TO THE MARKET

Our Compensation Committee annually establishes a benchmark for our executive compensation packages relative to other companies in our market. This benchmark is expressed as a “percentile of the market.” For 2015, the Compensation Committee provided a range, targeted at the 50th to 75th percentile of the market, with an expectation of above-median performance for above-median compensation. The range allows for flexibility, rather than fixating on one singular point. The Compensation Committee recognizes the very competitive market for executive talent in our industry, and the importance of attracting and retaining strong talent as our business continues to evolve. This positioning on compensation is intended to keep ARIAD competitive while strongly incentivizing performance and appropriately controlling executive compensation cost.

The compensation benchmark is not intended to set a ceiling or a floor on any executive’s compensation. Instead, the actual value received by an executive in a given year may fluctuate above or below this level. The target long-term equity incentive awards for each officer are based on recommendations by Radford, taking into consideration the value of equity-based awards and total compensation of executives of peer companies in addition to an assessment of Company performance and application of the philosophy framework in the current year grant cycle.

 

IV. Executive Compensation Determinations

EVALUATION OF COMPANY PERFORMANCE AGAINST CORPORATE OBJECTIVES

Since the beginning of 2015, the Company has achieved or made substantial progress on its major corporate objectives. The Company’s principal corporate objectives and achievement against them, which were considered in determining 2015 annual incentive payments and 2016 long-term equity incentive grants and salary increases, are set forth below:

 

   
2015 Performance Objective    Significant Achievements Against Objective

Achieve global product sales and

corporate financial targets

  

 

●     Generated Iclusig net product revenue of $112.5 million, doubling prior year revenue

●     Launched sales of Iclusig in Italy, Australia and Israel and entered into distribution agreements to expand global sales into Canada and Turkey

●     Secured non-dilutive funding through a royalty financing agreement with PDL, under which we received $50 million upon signing and will receive an additional $50 million in July 2016, with an option to draw down up to an additional $100 million through that date

●     While we were not able to recognize revenue from sales of Iclusig in France by the end of 2015, as originally anticipated, we expect to recognize the revenue in 2016 upon completion of pricing and reimbursement negotiations

 

 

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Expand the market for Iclusig by further improving its benefit/risk profile and developing new or expanded indications   

 

●     Initiated the dose-ranging OPTIC trial, which is designed to provide important data regarding the efficacy and safety of Iclusig at doses lower than the currently approved dose, and is expected to inform the optimal use of Iclusig in patients with refractory, chronic-phase CML

●     Initiated the second-line OPTIC-2L trial, a randomized Phase 3 trial of Iclusig vs. nilotinib in second-line patients with chronic phase CML, which, if approved for this indication, would significantly expand the patient population eligible to receive Iclusig

●     Led the preparation of the new drug application for Iclusig in Japan in patients with resistant and intolerant CML and Ph+ ALL, which was submitted by Otsuka in early 2016

 

Further develop and maximize the value of brigatinib   

 

●     Completed full patient enrollment in the Phase 3 ALTA trial

●     Continued interactions with the FDA and preparations for an NDA submission for brigatinib, which is expected in the third quarter of 2016

●     Finalized preparations and the protocol for the launch of a new Phase 3 trial of brigatinib in first-line patients, which we announced in April 2016

 

Broaden our portfolio of products and product candidates   

 

●     Conducted pre-clinical studies in support of and filed an IND application for AP32788, our most recent, internally-discovered drug candidate that we are developing for the treatment of patients with NSCLC with specific mutations in the EGFR or HER2 kinases

●     Continued to provide assistance to Medinol in support of its registrational clinical trials of ridaforolimus-eluting stents

●     Substantially upgraded our technology and informatics infrastructure to position the company for future, multi-program drug discovery capabilities

 

For 2014, the Company successfully achieved all of its major corporate objectives. The Company’s principal corporate objectives for 2014 and achievement against them, which were considered in determining 2015 long-term equity incentive grants and salary increases, are set forth below:

 

   
2014 Performance Objective    Significant Achievements Against Objective

Manage Iclusig

commercial growth

  

•    Generated Iclusig net product revenue of $55.7 million; on track to meet Iclusig two-year revenue goals

•    Rebuilt and re-trained our U.S. commercial and medical affairs teams and successfully re-launched Iclusig in January 2014

•    Secured Iclusig commercial partners/distributors for Japan, Central and Eastern Europe (“CEE”), Australia and Israel and progressed clinical and regulatory development activities in Japan, Australia and Canada

•    Advanced pricing and reimbursement negotiations across Europe with successful coverage decisions in several countries

Expand Iclusig market

opportunities

  

•    Timely executed on U.S. and European Union (“EU”) post-marketing requirements

•    Received positive outcome from European Pharmacovigilance Risk Assessment Committee (“PRAC”) review of Iclusig with no changes to previously approved indications

•    Presented proof-of-concept clinical trial data of Iclusig in adult patients with refractory metastatic and/or unresectable gastrointestinal stromal tumors (“GIST”); initiated or re-opened multiple investigator sponsor trials in various cancers, including RET driven NSCLC

Advance clinical development

of brigatinib (AP26113)

  

•    Initiated pivotal ‘ALTA’ trial of brigatinib in patients with locally advanced or metastatic NSCLC who were previously treated with crizotinib

•    Received FDA Breakthrough Therapy designation for brigatinib

 

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Build and progress

pipeline candidates

  

•    Nominated AP32788, a novel TKI targeting NSCLC, for clinical development

•    Provided regulatory and manufacturing assistance to Medinol in support of two registrational clinical trials initiated by Medinol in 2014 related to its development of ridaforolimus-eluting stents

Disciplined management

of global operations

  

•    Managed results of operations consistent with our operating plan and budget

•    Relocated European headquarters on time and within budget

•    Executed Iclusig partnership strategy in Japan/Asia, Australia, CEE and Israel

•    Developed brigatinib partnering strategy

•    Strengthened our balance sheet via a $200 million convertible debt issuance and non-dilutive funding from two license transactions.

Implement programs, processes

and systems

  

•    Successfully implemented or upgraded key systems and processes to support re-launch of Iclusig in the U.S. and expansion in Europe

2015 INDIVIDUAL PERFORMANCE EVALUATIONS

As described above, in early 2016 our Compensation Committee made decisions regarding 2015 annual performance awards and, in the case of our Other NEOs, 2016 salary increases and 2016 grants of long-term equity incentive awards, in each case based on 2015 performance. The Compensation Committee, and the Board in the case of our CEO, determined the performance rating of each executive officer based on his or her contribution to the achievement of our key corporate objectives for 2015, as well as each officer’s performance in relation to individual goals and leadership and management measures. Based on these criteria, the following compensation determinations were made:

Dr. Berger’s Performance Assessment

Our CEO’s salary increase and long-term equity incentive awards in 2015 were granted in connection with the entry into his Retirement Agreement. Under the Retirement Agreement, Dr. Berger was also eligible to receive an annual cash bonus award for his performance in 2015, which he was awarded based predominantly on the Company’s achievement of the above-described key corporate accomplishments for 2015. These achievements included doubling Iclusig net product sales from the prior year, launching two new clinical trials of Iclusig, successfully completing enrollment in our brigatinib pivotal clinical trial and advancing our next internally-discovered oncology drug candidate into clinical development. Based on the above, Dr. Berger’s performance was rated at 3.5 out of 5.0 on our performance scale, or between meeting and exceeding requirements.

Dr. Clackson’s Performance Assessment

Dr. Clackson, as President of Research and Development and Chief Scientific Officer, continued to have broad responsibilities for the management of our business, including leading our discovery research, preclinical development, clinical development, medical affairs, manufacturing and program and alliance management. Based on his contributions to the achievement of our corporate objectives for 2015, including launching two new clinical trials of Iclusig, successfully completing enrollment in our brigatinib pivotal clinical trial and advancing our next internally-discovered oncology drug candidate into clinical development, as well as his performance in relation to individual objectives and leadership and management standards, Dr. Clackson’s performance was rated at 3.5 out of 5.0 on our performance scale, or between meeting and exceeding requirements.

Mr. Fitzgerald’s Performance Assessment

Mr. Fitzgerald, as Executive Vice President and Chief Financial Officer, continued to have broad responsibilities for many aspects of our operations and business. These included managing all financial aspects of our business, leading the planning and implementation of key systems necessary to support the needs of our business, managing significant initiatives that provided additional funding for our programs and effectively managing our spending in support of our key corporate objectives. Based on his contributions to the achievement of our corporate objectives for 2015, including contributing to our receipt of non-dilutive funding through a royalty financing agreement with PDL, successfully managing the finances of the business such that results of operations were in line with our final budget, as well as his performance in relation to individual objectives and leadership and management standards, Mr. Fitzgerald’s performance was rated at 3.5 out of 5.0 on our performance scale, or between meeting and exceeding requirements.

 

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Mr. Duvall’s Performance Assessment

Mr. Duvall, as Executive Vice President and Chief Commercial Officer, continued to have responsibilities for the management of our commercial business on a global basis. Based on his contributions to the achievement of our corporate objectives for 2015, including doubling net product sales of Iclusig compared to the prior year, launching sales of Iclusig in Italy, Australia and Israel and entering into distribution agreements to expand global sales into Canada and Turkey, as well as his performance in relation to individual objectives and leadership and management standards, Mr. Duvall’s performance was rated at 3.5 out of 5.0 on our performance scale, or between meeting and exceeding requirements.

Mr. DesRosier’s Performance Assessment

Mr. DesRosier joined the company as our Executive Vice President, Chief Legal and Administrative Officer and Secretary in January 2015, with responsibility for management of all of our legal, human resources, information technology and other administrative functions. Based on his contributions to the achievement of our corporate objectives for 2015, including supporting the business in doubling Iclusig net product sales from the prior year, launching two new clinical trials of Iclusig, and working closely with the Board on Dr. Berger’s Retirement Agreement, the search for a new CEO and the employment agreements for our new CEO and new CFO, Mr. DesRosier’s performance was rated at 4.0 out of 5.0 on our performance scale, or exceeding requirements.

LOOKING FORWARD: 2016 BASE SALARIES, ANNUAL BONUSES, AND LONG-TERM EQUITY INCENTIVE AWARDS

The above corporate and individual performance assessments for 2015 played a substantial part in determining salary, bonus targets, and equity awards for 2016. The Compensation Committee considers a range of factors, including the executive’s level of experience, scope of position, individual performance and Company constraints.

2016 Base Salaries

As previously discussed, due to several factors including company performance, shareholder feedback, and market analysis, the Compensation Committee decided to freeze base salaries and give no merit increases to the NEOs for 2016.

2016 Annual Target Bonuses for Annual Performance Awards

For 2016, annual target bonuses, as a percentage of base salary, remained equal to 2015 targets for all incumbent executives. For Paris Panayiotopoulos and Manmeet S. Soni, our new CEO and CFO, respectively, their 2016 annual target bonuses were set as part of their employment agreements at the time of hiring. The actual payout of the 2016 annual performance awards may be above or below target based on the achievement of progress towards our corporate objectives, which are based on 2016 global net product revenues for Iclusig, filing for regulatory approval and launch preparedness for brigatinib, and enrollment targets in our ALTA, OPTIC and OPTIC-2L trials, as well as individual goals.

The targets for our NEOs are as follows:

 

Name

  

2016 Target Annual
Awards

 

(as a % of base salary)

   

Paris Panayiotopoulos

 

  

70%

 

   

Timothy P. Clackson, Ph.D.

 

  

50%

 

   

Martin J. Duvall

 

  

50%

 

   

Thomas J. DesRosier

 

  

50%

 

   

Manmeet S. Soni

 

  

50%

 

2016 Equity Awards

For 2016, the Compensation Committee, with the guidance of Radford analysis as well as the input of shareholders, determined to amend the mix of long-term equity awards through the re-introduction of stock options. The new long-term incentive mix utilized for 2016 grants was:

 

    Stock options (50%)
    Restricted stock units (30%)
    Performance shares (20%)

 

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Based on the corporate and individual performance ratings discussed above, in March 2016, the Compensation Committee approved the following long-term equity incentive awards for our NEOs, each as shown in the table below.

 

Name

   Performance Shares
at Target
(#)
  Restricted Stock  Units 1
(#)
  Stock  Options 1
(#)
       

Timothy P. Clackson, Ph.D.

 

   29,700

 

  26,180

 

  87,125

 

       

Edward M. Fitzgerald 2

 

   29,700

 

  26,180

 

  87,125

 

       

Martin J. Duvall

 

   29,700

 

  26,180

 

  87,125

 

       

Thomas J. DesRosier, Esq.

 

   29,700

 

  30,180

 

  102,500

 

1 Restricted stock units vest in equal annual installments over three years and stock options vest in equal annual installments over four years.

2 Pursuant to his employment agreement, upon Mr. Fitzgerald’s resignation in March 2016, any time-based awards that would have vested during the remainder of 2016 were accelerated to his last day of employment. Since none of the awards in the above table would have vested in 2016, all were terminated.

For Paris Panayiotopoulos, our new CEO, his employment agreement included inducement grants awarded in connection with his commencement of employment in January 2016 of 1,500,000 stock options vesting over four years and 200,000 service-based RSUs vesting over 18 months. He will be eligible to receive long-term equity incentive awards commencing in fiscal year 2017. For Manmeet S. Soni, our new CFO, his employment agreement included inducement grants awarded in connection with his commencement of employment in March 2016 of 550,000 stock options vesting over four years and 150,000 performance shares that will be earned based on the relative total shareholder return of the Company’s stock price compared to component companies in the NASDAQ Biotechnology Index over a three year period ending December 31, 2018.

In early 2016, the Compensation Committee awarded new performance share grants, wherein these awards would solely focus on relative TSR as measured over a three-year period compared to component companies of the NASDAQ Biotechnology Index, which is the life sciences index most highly correlated with ARIAD, and a frequent index used for this type of program structure. As with the 2015 program design, ARIAD TSR performance will be measured in comparison to component companies of the NASDAQ Biotechnology Index.

The payout schedule will be as follows:

 

TSR Percentile
Achievement

   Payout
(% of Target)

75th

   160%

62nd

   130%

50th

   100%

38th

   85%

25th

   50%

< 25th

   0%

 

V. Other Considerations

STOCK OWNERSHIP GUIDELINES

We have adopted stock ownership guidelines for our executives and non-employee directors. The guideline for our CEO is ownership of our common stock with a value of at least six times his base salary, and for other executive officers is at least one times their respective base salary. The guideline for non-employee directors is five times their annual cash compensation.

 

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RECOUPMENT POLICY

We adopted an Incentive Compensation Recoupment Policy effective as of January 1, 2015. The recoupment (or “clawback”) policy provides the Compensation Committee with broad discretion to recoup certain incentive awards made to the Company’s executive officers in instances of material violations of law or a written Company policy by an executive officer, or by a subordinate employee if the executive failed to supervise the subordinate, if the misconduct caused significant financial harm to the Company.

This clawback policy goes beyond current and expected regulatory requirements and is based on principles that were jointly developed by six major pharmaceutical companies and 13 institutional investors as a best practice corporate governance strategy that seek to strengthen board risk oversight and preserve long-term shareholder value.

The policy can be found on the Investors section of our website at http://investor.ariad.com under the heading “Corporate Governance.” See the section of this filing captioned “Corporate Governance – Compensation Practices and Policies Relating to Risk Management” for more details.

HEDGING TRANSACTIONS, PLEDGES OF STOCK AND INSIDER TRADING POLICY

Our policies expressly prohibit our employees and directors from:

 

    Engaging in hedging transactions such as buying or selling puts and calls on ARIAD stock

 

    Purchasing ARIAD stock on margin and pledging our stock as collateral

 

    Purchasing or selling ARIAD securities while in possession of material, non-public information or otherwise using such information for their personal benefit

We encourage our executives and directors to enter into trading plans that are intended to comply with the requirements of Rule 10b5-1 promulgated under the Exchange Act when they desire to prudently diversify their asset portfolios and exercise their stock options before their scheduled expiration dates, as well as to satisfy tax obligations upon vesting of RSUs and performance shares.

EMPLOYMENT AGREEMENTS AND POTENTIAL SEVERANCE AND CHANGE OF CONTROL

We have entered into employment agreements with our NEOs. Each of these agreements provides for certain payments and other benefits if the executive’s employment terminates under certain circumstances other than for “cause,” including in connection with a “change in control.” See the subsection “Narrative to Summary Compensation Table and Grants of Plan-Based Awards in 2015” table below for a description of the agreement terms impacting current compensation and “Potential Payments upon Termination or Change in Control” below for a description of applicable severance and change in control benefits.

The Compensation Committee believes that change in control and severance arrangements are important parts of the overall compensation program for our NEOs. Change in control provisions help to secure the continued employment and dedication of our executive officers, to reduce any concern that they might have regarding their own continued employment prior to or following a change in control, and to promote a continuity of management during a corporate transaction. Severance arrangements are used primarily to attract, retain and motivate individuals with the requisite experience and ability to drive our success. Severance arrangements also serve, in part, as consideration to secure commitments from our executive officers not to compete with us after termination of their employment.

Effective April 2010, our Compensation Committee adopted a policy that restricts our Company from entering into any future agreement that provides an executive officer with a severance payment following a change in control of our Company, except in the case of a termination event (i.e., a “double-trigger”). With the retirement of Dr. Berger, all employment agreements with current executive offices now include these “double-trigger” provisions.

In addition, the policy also restricts our Company from entering into any future agreement that provides an executive officer with the right to receive excise tax gross-ups following a change in control, except in certain unusual circumstances. Effective April 2013, our Compensation Committee revised this policy eliminating the exception to allow for an excise tax gross-up in certain unusual circumstances. We have not entered into any agreements with any of our current executive officers that provide for an excise tax gross-up.

 

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Further, the Compensation Committee has worked with its independent compensation consultant, Radford, to determine market competitive practices for executive officer employment agreements and severance terms based on our peer group and broader market practice. This data was, in part, used to shape the severance terms to ensure an appropriate level of protection to the executive and Company with an eye towards governance best practices. There was also a conscious effort to conform the broader employment terms across all agreements going forward. This was demonstrated in the employment agreements with our most recent executive hires, Mr. DesRosier, Mr. Panayiotopoulos and Mr. Soni, by providing no excise tax gross-up, no single trigger acceleration of unvested equity and ensuring that the underlying terms are consistent with the terms of our other executive officers.

In April 2015, ARIAD entered into a Retirement Agreement with Dr. Berger, which called for certain compensation terms, as summarized below:

 

    2015 Compensation Arrangements:

 

  ¡     Annual base in the amount of $773,500, representing a 3% increase from 2014 and in-line with broader Company merit increases
  ¡     Eligible to participate in the Company’s 2015 annual bonus program, with a target bonus for 2015 equal to 85% of salary, as described earlier in the CD&A
  ¡     345,000 RSUs under the Company’s 2014 Long-Term Incentive Plan. The Compensation Committee chose to award the long-term incentive awards in this structure to deliver competitive annual long-term incentive value as compared to our peers – and in recognition of the impending CEO successor within the nine month period – which created practical challenges in granting an award with performance metrics

 

    Severance Following the Retirement Date:

 

  ¡     On January 4, 2016, the Company paid a lump-sum cash payment equal to $4,235,550, representing the product of three times the sum of (A) Annual Base Salary plus (B) 2014 annual bonus
  ¡     Time-based equity awards that were outstanding and unvested as of the Retirement Date, including earned performance shares, vested immediately to facilitate the transition from CEO to Special Advisor
  ¡     Dr. Berger became entitled to vest in any performance shares (other than the performance shares based on achievement of 2015 revenue) based on the greater of target-level performance and the actual achieved performance level as of the Retirement Date as determined by the Compensation Committee.

TAX DEDUCTIBILITY OF COMPENSATION

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) limits the deduction a public company is permitted for compensation paid to the chief executive officer and to the three most highly compensated executive officers (other than the chief financial officer). Generally, amounts paid in excess of $1,000,000 to a covered executive cannot be deducted, unless the compensation is paid pursuant to a plan that is performance related, non-discretionary and has been approved by shareholders. Our 2014 Long-Term Equity Incentive Plan permits the issuance of performance-based stock awards that would be compliant with Section 162(m). In 2014, 2015 and 2016, the performance shares we granted under our 2014 Long-Term Equity Incentive Plan were intended to comply with Section 162(m). We have not adopted a policy that all executive compensation be fully deductible. The Company may award compensation that is not fully deductible under the Internal Revenue Code when we view such compensation as consistent with our compensation policies and in the best interests of the Company and our shareholders. The awards made to our new CEO, Mr. Panayiotopoulos were not deductible and a portion of Dr. Berger’s 2014 performance award lost its deductibility in connection with the vesting of such award under his Retirement Agreement.

 

VI. Compensation Committee Report

The Compensation Committee of the Board has reviewed and discussed with members of management the CD&A section included in this Form 10-K/A, as required by Item 402(b) of Regulation S-K. Based on this review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in this Form 10-K/A.

Members of the Compensation Committee

Norbert G. Riedel, Ph.D., Chair

Athanase Lavidas, Ph.D.

Anna Protopapas

 

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Summary Compensation Table

The following table sets forth the compensation paid to or accrued on behalf of our CEO, our Chief Financial Officer and our three other most highly compensated executive officers, whom we refer to collectively as our NEOs, during the fiscal years ended December 31, 2013, 2014 and 2015.

 

Name and Principal Position                    

   Year      Salary
($)
     Bonus
($)
     Stock
Awards (1)

($)
     Option
Awards (1)
($)
     All Other
Compensation (2)

($)
     Total
($)
 

Harvey J. Berger, M.D. (3)

     2015         773,500         493,106         3,060,150         -         5,745,971         10,072,727   

Chairman, CEO and President

     2014         751,000         638,350         3,695,000         -         42,560         5,126,910   
     2013         749,754         -         4,240,670         2,831,090         35,473         7,856,987   

Edward M. Fitzgerald (4)

     2015         475,000         178,000         1,191,593         -         30,246         1,874,839   

Executive Vice President, Chief

     2014         466,000         210,000         1,219,350         -         30,096         1,925,447   

Financial Officer and Treasurer

     2013         465,354         -         1,410,075         851,949         30,306         2,757,683   

Timothy P. Clackson, Ph.D.

     2015         513,000         192,000         1,341,119         -         32,455         2,078,574   

President of Research and

     2014         493,000         365,000         1,219,350         147,655         32,075         2,257,080   

Development and Chief

     2013         492,423         -         1,410,075         851,949         31,979         2,786,426   

Scientific Officer

                    

Thomas J. DesRosier, Esq. (5)

     2015         447,692         298,000         807,400         729,092         27,018         2,309,202   

Executive Vice President, Chief

                    

Legal and Administrative Officer and Secretary

                    

Martin J. Duvall

     2015         470,000         176,000         1,191,593         -         34,683         1,872,276   

Executive Vice President and

     2014         453,385         230,000         1,219,350         -         34,303         1,937,038   

Chief Commercial Officer

     2013         427,262         -         919,160         748,558         23,457         2,118,437   

 

(1) The amounts included under “Stock Awards” and “Option Awards” represent the aggregate grant date fair value for restricted stock unit, performance share and/or option awards granted during the year, computed in accordance with FASB ASC Topic 718. The assumptions used in the calculation of the grant date fair value for awards granted in 2015 are set forth in note 11 to our audited consolidated financial statements titled “Stock Compensation” included in the Original Filing. The grant date fair value of performance shares awarded in 2015, assuming the maximum potential value is achieved, was $1,109,077 for each of Mr. Fitzgerald, Dr. Clackson and Mr. Duvall. The grant date fair value of performance shares awarded in 2014 and 2013, for which the maximum potential values were previously reported, were as follows: in 2014, $1,766,210 for Dr. Berger; and $569,030 for each of Mr. Fitzgerald, Dr. Clackson and Mr. Duvall; and in 2013, $1,984,550 for Dr. Berger; $731,150 for Mr. Fitzgerald and Dr. Clackson; and $417,800 for Mr. Duvall.
(2) Amounts included under “All Other Compensation” for 2015 consist of: (i) $4,928 in life insurance premiums paid by us for the benefit of Dr. Berger; (ii) matching contributions to our 401(k) defined contribution retirement savings plan ($7,950 for each of Dr. Berger, Mr. Fitzgerald, Dr. Clackson, and Mr. Duvall and $6,831 for Mr. DesRosier); (iii) the cost of supplemental long-term disability insurance ($10,398 for Dr. Berger, $4,228 for Mr. Fitzgerald, $2,909 for Dr. Clackson, $3,453 for Mr. Duvall and $1,667 for Mr. Des Rosier); (iv) the cost of long-term care insurance ($6,021 for Dr. Berger, $6,069 for Mr. Fitzgerald, $4,766 for Dr. Clackson, $6,450 for Mr. Duvall and $2,580 for Mr. DesRosier); (v) an annual auto allowance ($12,000 for each of Dr. Berger, Mr. Fitzgerald, Dr. Clackson, and Mr. Duvall and $10,615 for Mr. DesRosier); and (vi) tax preparation services ($4,830 for Dr. Clackson, $4,830 for Mr. Duvall and $5,325 for Mr. DesRosier). In addition, the amounts included for Dr. Berger under “All Other Compensation” for 2015 include payments to Dr. Berger pursuant to the terms of his Retirement Agreement, consisting of (i) severance in a lump sum payment of $4,235,550; (ii) payment of $580,125 in satisfaction of accrued benefits under our sabbatical policy that was terminated in 2008, payable six months after separation of service; (iii) reimbursement of $470,289 in legal expenses incurred in connection with his Retirement Agreement and the proxy contest with Sarissa during 2015; and (iv) a special payment of $418,710 to satisfy the taxes payable on the reimbursement of legal fees, as provided in the Retirement Agreement.
(3) Retired as of Chairman, Chief Executive Officer and President on December 31, 2015.
(4) Resigned as our Executive Vice President, Chief Financial Officer and Treasurer on March 21, 2016.
(5) Joined as our Executive Vice President, Chief Legal and Administrative Officer and Secretary on January 20, 2015 and resigned effective as of April 30, 2016. Mr. DesRosier’s 2015 salary reflects his partial year of service, and his bonus includes a $75,000 signing bonus paid in connection with his commencement of employment.

 

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Grants of Plan-Based Awards in 2015

The following table shows information regarding grants of equity awards that were made during the year ended December 31, 2015 to each of our NEOs. All awards were made under our 2014 Long-Term Incentive Plan. There were no grants of non-equity incentive plan awards to our NEOs during 2015.

 

     Grant
Date
     Estimated Future Payouts Under
Equity Incentive Plan Awards: (1)
     All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
     All Other
Option

Awards:
Number of
Securities
Underlying
Options
(#)
     Exercise or
Base Price
of Option
Awards
($/sh)
     Grant Date Fair
Value of Stock
and Option
Awards (1)
($)
 
      Threshold(#)      Target(#)      Maximum
(#)
             

Harvey J. Berger

     04/28/2015                  345,000 (2)               3,060,150   

Edward M. Fitzgerald

     04/29/2015                  54,000 (3)               498,420   
     04/29/2015   (4)         15,000         30,000         48,000                  276,900   
     04/29/2015 (5)         15,000         30,000         48,000                  276,900   
     04/29/2015 (6)         7,550         15,100         24,160                  139,373   

Timothy P. Clackson

     04/29/2015                  70,200 (3)               647,946   
     04/29/2015 (4)         15,000         30,000         48,000                  276,900   
     04/29/2015 (5)         15,000         30,000         48,000                  276,900   
     04/29/2015 (6)         7,550         15,100         24,160                  139,373   

Thomas J. DesRosier

     02/18/2015                     130,000 (7)         $7.34         729,092   
     02/18/2015                  110,000 (8 )               807,400   

Martin J. Duvall

     04/29/2015                  54,000 (3)               498,420   
     04/29/2015 (4 )         15,000         30,000         48,000                  276,900   
     04/29/2015 (5)         15,000         30,000         48,000                  276,900   
     04/29/2015 (6)         7,550         15,100         24,160                  139,373   

 

 

(1) The grant date fair values of the awards have been determined in accordance with FASB ASC Topic 718. The assumptions used in the calculation of the grant date fair values of these awards are set forth in Note 11 to our audited financial statements titled “Stock Compensation” included in the Original Filing.
(2) This restricted stock unit award vested on December 31, 2015 pursuant to the terms of Dr. Berger’s Executive Employment Agreement and Retirement Agreement described in the narrative after this table.
(3) These awards are in the form of restricted stock units that vest as to 33  1 3 % of the awards on each of April 29, 2016, 2017 and 2018, provided that the executive is then employed with us and subject to acceleration of vesting in accordance with the terms of the recipient’s executive employment agreement.
(4) These awards are performance shares which will be earned based on the achievement and timing of the achievement of a one-year cumulative revenue target relating to Iclusig for fiscal year 2015. The earned shares shall vest 34% on certification by the Compensation Committee of achievement of this performance goal and an additional 33% on each of the first and second year anniversary thereof, provided that the executive is then employed with us, and subject to acceleration of vesting in accordance with the terms of the recipient’s executive employment agreement. In February, 2016, the Compensation Committee determined that this performance goal was not achieved and, as a result, none of the associated performance shares were earned.
(5) These awards are performance shares which will be earned based on the achievement and timing of the achievement of enrolling 50% of the patients in a randomized second line clinical trial that will evaluate Iclusig vs. nilotinib (or another second-generation BCR-ABL inhibitor), which is our OPTIC-2L trial, not later than the earlier of (x) 27 months following enrollment of the first patient in such trial or (y) June 30, 2018. The earned shares shall vest 50% upon the certification by the Compensation Committee of the achievement of this performance goal and 50% on the one year anniversary thereof, or 100% upon the certification by the Compensation Committee if the number of shares is earned at the threshold amount, in each case provided that the executive is then employed with us, and subject to acceleration of vesting in accordance with the terms of the recipient’s executive employment agreement.

 

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(6) These awards are performance shares which will be earned based on the total shareholder return percentile achievement for the three-year period beginning January 1, 2015 and ending December 31, 2017 of ARIAD as compared to component companies of the NASDAQ Biotechnology Index, with the target award earned if the total shareholder return percentile return is between the 50 th and 62 nd percentiles. The earned shares shall vest 100% upon certification by the Compensation Committee of the achievement of this performance goal, provided that the executive is then employed with us, and subject to acceleration of vesting in accordance with the terms of the recipient’s executive employment agreement.
(7) This stock option was granted to Mr. DesRosier in connection with the commencement of his employment, and vests in four equal annual installments from the date of grant, subject to acceleration of vesting in accordance with the terms of his executive employment agreement.
(8) These restricted stock units were granted to Mr. DesRosier in connection with the commencement of his employment, and vest in two equal annual installments from the date of grant, subject to acceleration of vesting in accordance with the terms of his executive employment agreement.

Narrative to Summary Compensation Table and Grants of Plan-Based Awards in 2015 Table

Employment Agreements

Employment agreements with our NEOs provide for base salary as may be adjusted annually, annual bonus opportunities, participation in our benefit plans, the opportunity to receive equity awards and post-termination benefits and obligations.

Dr. Berger’s Amended and Restated Employment Agreement was in effect from April 2010 through December 31, 2015, when he retired from ARIAD pursuant to the terms of his Retirement Agreement described below.

In April 2014, the terms of employment of Mr. Fitzgerald, Dr. Clackson and Mr. Duvall were extended to December 31, 2016, and in January 2015 we entered into an executive employment agreement with Mr. DesRosier providing for a term of employment through December 31, 2017. These employment agreements provide for automatic renewal for successive one-year terms absent 90 days’ notice to the contrary by either party. Each employment agreement specifies a minimum level of base salary for the executive, but gives our Compensation Committee authority to increase the executive’s base salary from time to time. In addition, under the terms of his employment agreement, Mr. DesRosier received a $75,000 signing bonus that was paid in two installments during 2015 and is repayable in the event that he terminates his employment within the first two years, subject to specified exceptions.

Dr. Berger’s employment agreement provided that we would pay him a discretionary cash bonus based on a target of not less than 50% of his then current salary, with the actual amount determined by our Board. The employment agreements for our Other NEOs provide for discretionary bonuses based on a target of not less than 30% of their then current salaries for Mr. Fitzgerald, Dr. Clackson and Mr. Duvall and 50% for Mr. DesRosier, payable in the form of stock options, stock awards, restricted stock units, performance share awards, deferred compensation or cash, as determined by our Board. The annual targets are reviewed and established each year by the Compensation Committee. The target awards for 2015 are set forth in the CD&A in Item 11 of this Form 10-K/A under the heading “Executive Compensation Determinations.”

The employment agreements also provide that each executive is entitled to, among other things, participate in any incentive, stock award or bonus plan, pension, group insurance and fringe benefits on the same basis as executives at a comparable level; group health, disability and life insurance; paid vacation; an auto allowance of $1,000 per month; standard tax preparation and planning services; reimbursement of business expenses; indemnification and directors’ and officers’ insurance coverage; and for executives who had received credit under our sabbatical policy prior to its termination in 2008, a lump sum payment upon retirement in good standing from the Company after the age of 60 equal to three months of their base salary for each sabbatical that was fully earned under the policy (amounting to nine months’ salary for Dr. Berger and three months’ salary for each of Dr. Clackson and Mr. Fitzgerald), payable six months after separation from service. In addition, Dr. Berger’s employment agreement provided him with medical malpractice insurance with coverage reasonably satisfactory to Dr. Berger and legal costs to enforce the employment agreement on an as-incurred basis subject to repayment if we prevail.

The employment agreements with our NEOs also provide for severance payments upon termination of employment by us without cause, termination by the executive for material breach of the agreement by us, non-renewal (for Dr. Berger only) or termination in connection with a change in control. Following the expiration of Dr. Berger’s agreement, none of the employment agreements with our executive officers provide for a tax gross-up under Sections 280G and 4999 of the Code. See “Potential Payments upon Termination or Change in Control” for a description of these provisions in the employment agreements.

 

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Dr. Berger’s Retirement Agreement

On April 28, 2015, the Company entered into a retirement letter agreement with Dr. Berger (the “Retirement Agreement”), pursuant to which Dr. Berger agreed to retire as Chief Executive Officer and President of the Company and retire as a member and as Chairman of the Company’s Board, both of which became effective on December 31, 2015. Pursuant to the Retirement Agreement, Dr. Berger’s annual base salary was adjusted to $773,500, retroactive to January 1, 2015; he received a grant of 345,000 restricted stock units that vested in full upon his retirement in lieu of any other equity compensation for 2014 or 2015 performance; he remained eligible to receive a bonus for 2015, at a target of 85% of his annual base salary (which was received in March 2016 at 75% of the target); and he participated in the Company’s employee benefit plans while he remained employed by the Company prior to his retirement. In addition, he received reimbursement of $470,289 in legal expenses incurred in connection with his Retirement Agreement and the proxy contest with Sarissa during 2015, together with a special payment of $418,710 to satisfy the taxes payable on the reimbursement of legal fees, as provided in the Retirement Agreement. These payments and benefits were made in lieu of any amounts provided under Dr. Berger’s employment agreement described above.

Upon his retirement, Dr. Berger received the severance benefits described in his employment agreement with the Company that he would have been entitled to receive had his employment been terminated by the Company without cause or by him for good reason, which consisted of (i) severance in a lump sum payment of $4,235,550, representing three times the aggregate of his 2015 annual base salary and the bonus amount paid to him in 2015 for 2014 performance; and (ii) a lump sum payment of $580,125, equivalent to nine months’ salary, payable six months after separation of service and representing benefits that had accrued to him under our sabbatical policy at the time it was terminated in 2008. In addition, upon Dr. Berger’s retirement on December 31, 2015, all unvested options outstanding became exercisable, all time-based restricted stock units accelerated, any earned performance shares that were then unvested became vested and he became entitled to vest in any performance shares (other than the performance shares based on achievement of 2015 revenue) based on the greater of target-level performance and the actual achieved performance level as of the Retirement Date as determined by the Compensation Committee.

Pursuant to the terms of the Retirement Agreement, following his retirement, Dr. Berger agreed to serve as a special advisor to the Board and to our current Chief Executive Officer until the date of the Company’s 2016 Annual Meeting or earlier under certain circumstances. Dr. Berger continues to receive his annual base salary and participate in the Company’s employee benefit plans and his unearned performance shares remain outstanding while he is employed as a special advisor. In addition to other customary restrictive covenants, the Retirement Agreement prohibits Dr. Berger from competing with the Company or soliciting or hiring its employees during the period he remains employed as a special advisor and during the one-year period thereafter. The foregoing is not a complete description of the terms of the Retirement Agreement. For a further description of the terms of the Retirement Agreement, including a copy thereof, please see our Current Report on Form 8-K that we filed with the SEC on April 29, 2015.

Performance Awards

The Compensation Committee awards performance shares to NEOs that pay out only if specific strategic targets are met, and based on the timing in meeting those goals.

In 2012, we awarded performance shares to all of our NEOs providing that 50% to 160% of the target award would be earned on obtaining regulatory approval from the EMA to market Iclusig in the EU, provided such approval was obtained by the end of 2016. The objective was achieved in July 2013, which triggered payment at 160% of target. In accordance with the terms of the grant, 50% of the award vested in July 2013, 25% vested in July 2014 and the remaining 25% vested in July 2015.

In 2013, we awarded performance shares to all of our NEOs providing that 50% to 160% of the target award would be earned on full patient enrollment in a pivotal registration trial for a new indication of any ARIAD product, excluding the Phase 3 EPIC trial for Iclusig, provided that such enrollment is completed before the end of 2016. This objective was achieved in September 2015, upon full patient enrollment in the Company’s ALTA trial of brigatinib, which triggered payment at 100% of target. In accordance with the terms of the grant, 50% of the performance shares earned vested in September 2015 and the remaining 50% will vest in September 2016, provided that the executive is then employed with us.

In 2014, we awarded performance shares to all of our NEOs based on two separate milestones: R&D and revenue. The awards provided that 50% to 160% of the target award will be earned based on the separate achievement of each performance goal. The performance shares based on the R&D goal will be earned when we enroll 50% of the patients in the clinical trial of Iclusig required as part of the FDA’s post-marketing requirements, which is our OPTIC dose-ranging trial, provided that this goal is met by September 30, 2017. This performance milestone has not yet been achieved and, as a result, the R&D performance shares may only be earned in an amount between 50% and 130% of target. If earned, this award will vest 50% on the certification by the Compensation Committee of achievement of the performance goal and 50% on the one year anniversary thereof. If the R&D milestone is not achieved by September 30, 2017, then these performance shares will terminate and have no value. The performance shares based on the revenue goal were eligible to be earned based on a two-year cumulative revenue target for Iclusig for fiscal years 2014 and 2015. This performance milestone was achieved, triggering payment at 100% of target. In accordance with the terms of the grant, 50% of the award vested in on March 1, 2016 and the remaining 50% will vest on March 1, 2017, provided that the executive is then employed with us.

 

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In April 2015, we awarded performance shares to our Other NEOs based on three separate milestones: R&D, revenue and relative TSR. The awards provide that 50% to 160% of the target award will be earned based on the separate achievement of each performance goal. The performance shares based on the R&D goal will be earned when we enroll 50% of the patients in a randomized second line clinical trial that will evaluate Iclusig vs. nilotinib (or another second-generation BCR-ABL inhibitor), which is our OPTIC-2L trial, provided this goal is met by June 30, 2018. The performance shares based on the revenue goal were eligible to be earned if we achieved a revenue target for Iclusig for fiscal year 2015. This performance milestone based on revenue was not achieved and, as a result, none of the associated performance shares were earned. The performance shares based on relative TSR will be earned if we achieve a target TSR for the three year period beginning January 1, 2015 and ending December 31, 2017 as compared to component companies of the NASDAQ Biotechnology Index. If earned, the R&D performance shares will vest over one year or on the date of the certification of the achievement by the Compensation Committee, depending upon when the enrollment is achieved. If earned, the relative TSR performance shares will vest in full on the date of the certification of the achievement of the percentage by the Compensation Committee during the first quarter of 2018. If the R&D milestone is not achieved by June 30, 2018 and the TSR target is not achieved at the end of 2017, these performance shares will terminate and have no value. Dr. Berger did not receive any performance share awards. For a description of the RSUs awarded to Dr. Berger in April 2015, see the subsection of Item 11 of this Form 10-K/A under the heading “Narrative to Summary Compensation Table and Grants of Plan-Based Awards in 2015 Table – Dr. Berger’s Retirement Agreement.”

In March 2016, we awarded performance shares to our Other NEOs based on a relative TSR milestone. The award provides that 50% to 160% of the target award will be earned if we achieve a target TSR for the three year period beginning January 1, 2016 and ending December 31, 2018 as compared to component companies of the NASDAQ Biotechnology Index. If earned, the performance shares will vest in full on the date of the certification of the achievement of the percentage by the Compensation Committee during the first quarter of 2019. If the TSR target is not achieved at the end of 2018, these performance shares will terminate and have no value.

Outstanding Equity Awards at December 31, 2015

The following table lists the outstanding equity awards at December 31, 2015 for each of our NEOs.

 

     Option Awards      Stock Awards  

Name

   Number of
Securities
Underlying
Unexercised
Options:
Exercisable  (1)
(#)
     Number of
Securities
Underlying
Unexercised
Options:
Unexercisable (1)
(#)
   Option
Exercise
Price
($)
     Option
Expiration
Date
     Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
     Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested (2)
($)
     Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
     Equity
Incentive Plan
Awards:
Market or
Payout Values
of Unearned
Shares, Units
or Other
Rights that
Have Not
Vested (2)
($)
 

Harvey J. Berger

     240,000            4.64         03/06/17               
     25,000  (3)            4.49         04/16/17               
     220,000            7.82         04/01/21               
     213,000            15.05         03/20/22               
     216,000            20.89         03/19/23               
                       119,500  (4)         746,875   
                       119,500  (5)         746,875   

Edward M. Fitzgerald

     100,000            4.49         04/16/17               
       40,000            3.25         06/24/20               
       68,000            7.82         04/01/21               
       20,000 (3)            14.50         01/17/22               
       51,000            15.05         03/20/22               
       43,333       21,667  (6)      20.89         03/19/23               
                 10,833  (7)         67,706         
                 58,666  (8)         366,663         
                 54,000  (9)         337,500         
                 17,500  (10)         109,375         
                       38,500  (4)         240,625   
                       38,500  (5)         240,625   
                       30,000  (11)         187,500   
                       30,000  (12)         187,500   
                       15,100  (13)         94,375   

 

 

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     Option Awards      Stock Awards  

Name

   Number of
Securities
Underlying
Unexercised
Options:
Exercisable (1)
(#)
     Number of
Securities
Underlying
Unexercised
Options:
Unexercisable (1)
(#)
     Option
Exercise
Price
($)
     Option
Expiration
Date
     Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
     Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested (2)
($)
     Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
     Equity
Incentive Plan
Awards:
Market or
Payout Values
of Unearned
Shares, Units
or Other
Rights that
Have Not
Vested (2)
($)
 

Timothy P. Clackson

     31,422            4.49         04/16/17               
     30,000            3.25         06/24/20               
     59,369            7.82         04/01/21               
     82,000            15.05         03/20/22               
     43,333         21,667  (6)         20.89         03/19/23               
     25,000  (3)            7.69         03/11/24               
                 10,833  (7)         67,706         
                 58,666  (8)         366,663         
                 70,200  (9)         438,750         
                 17,500  (10)         109,375         
                       38,500  (4)         240,625   
                       38,500  (5)         240,625   
                       30,000  (11)         187,500   
                       30,000  (12)         187,500   
                       15,100  (13)         94,375   

 

     Option Awards      Stock Awards  

Name

   Number of
Securities
Underlying
Unexercised
Options:
Exercisable  (1)
(#)
     Number of
Securities
Underlying
Unexercised
Options:
Unexercisable  (1)
(#)
     Option
Exercise
Price
($)
     Option
Expiration
Date
     Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
     Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested (2)
($)
     Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
     Equity
Incentive Plan
Awards:
Market or
Payout Values
of Unearned
Shares, Units
or Other
Rights that
Have Not
Vested (2)
($)
 

Thomas J. DesRosier

        130,000 (14)         7.34         02/18/25               
                 110,000 (15)         687,500         

Martin J. Duvall

     100,000            10.28         09/19/21               
     10,000            15.05         03/20/22               
     32,000         16,000  (6)         20.89         03/19/23               
     17,500         17,500  (16)         4.29         12/09/23               
                 8,000  (7)         50,000         
                 58,666  (8)         366,663         
                 54,000  (9)         337,500         
                 10,000  (10)         62,500         
                       38,500  (4)         240,625   
                       38,500  (5)         240,625   
                       30,000  (11)         187,500   
                       30,000  (12)         187,500   
                       15,100  (13)         94,375   

 

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(1) Options have ten-year terms. Unless otherwise indicated, the options reported in this table vest 25% per year over the four-year period following the date of grant, provided that the option holder is still an employee of ARIAD, and subject to acceleration of vesting as provided in the executive’s employment agreement.
(2) The market value of the stock awards is determined by multiplying the number of shares by $6.25, the closing price of our common stock on the NASDAQ Global Select Market on December 31, 2015, the last business day of our most recently completed fiscal year.
(3) These options were granted pursuant to our program to grant options to employees and directors upon reaching 10, 15 or 20 years of service with ARIAD. These options are fully vested upon grant and have a term of 10 years.
(4) These performance shares vest only if we enroll 50% of the patients in the clinical trial of Iclusig required as part of the FDA’s post-marketing requirements, which is our OPTIC dose-ranging trial, by September 30, 2017. These amounts represent target awards, with the final number of shares to be issued being dependent upon when, prior to October 1, 2017, the clinical trial performance milestone is achieved.
(5) These performance shares vest only if we achieve at least the lower end of the revenue target for fiscal years 2014 and 2015. These amounts represent awards at 100% of target, with the final number of shares to be issued being dependent upon the amount of revenue achieved within the target range. In February 2016, our Compensation Committee certified that these awards had been achieved at 100% of target, resulting in 50% of the shares vesting on March 1, 2016 and the remaining shares vesting on March 1, 2017, provided that the recipient is still employed with us.
(6) These options vested on March 19, 2016.
(7) These restricted stock units vested on March 19, 2016.
(8) One-half of these restricted stock units vested on January 31, 2016 and the remainder will vest on January 31, 2017.
(9) These restricted stock units will vest 33  1 / 3 % on April 29, 2016, 2017 and 2018.
(10) The performance metric for these performance shares (full patient enrollment in a pivotal registration trial for a new indication of any ARIAD product, excluding the Phase 3 EPIC trial for Iclusig) was achieved in September 2015, upon completion of enrollment in our ALTA trial for brigatinib, resulting in the awards being earned at 100% of target. Of the earned shares, 50% vested at that time and the remaining 50% of the shares will vest on September 24, 2016.
(11) These performance shares vest only if we achieve at least the lower end of the revenue target for fiscal year 2015. These amounts represent awards at 100% of target, with the final number of shares to be issued being dependent upon the amount of revenue achieved within the target range. In February 2016, our Compensation Committee certified that the revenue target had not been achieved, resulting in none of these awards being earned.
(12) These performance shares vest only if we enroll 50% of the patients in a randomized second line clinical trial that will evaluate Iclusig vs. nilotinib (or another second-generation BCR-ABL inhibitor), which is our OPTIC-2L trial, provided this goal is met by not later than the earlier of (x) 27 months following enrollment of the first patient in such trial or (y) June 30, 2018. These amounts represent target awards, with the final number of shares to be issued being dependent upon when, prior to June 30, 2018, the clinical trial performance milestone is achieved.
(13) These performance shares vest only if we achieve a target TSR for the three year period beginning January 1, 2015 and ending December 31, 2017, as compared to component companies of the NASDAQ Biotechnology Index, provided that the TSR target is at least the 25% percentile. These amounts represent target awards, with the final number of shares to be issued being dependent upon the percentile achievement of the TSR target.
(14) These stock options vested as to 25% of the shares on February 18, 2016 and will vest as to 25% of the shares on each of February 18, 2017, 2018 and 2019.
(15) These restricted stock units vested as to 50% of the shares on February 18, 2016 and will vest as to the remaining shares on February 18, 2017.
(16) These stock options vest as to 50% of the shares on December 8, 2016 and 2017.

 

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Option Exercises and Stock Vested in 2015

The following table contains information regarding option exercises and stock awards that vested during the year ended December 31, 2015 held by our NEOs.

 

     Option Awards      Stock Awards  
           Shares      
      Acquired on       
      Exercise      
      (#)      
           Value Realized on    
      Exercise (1)     

      ($)    
           Shares      
      Acquired on       
      Vesting      
      (#)      
           Value Realized on      
       Vesting      
      ($)      
 

Harvey J. Berger

     26,454          16,137          —             —      
     123,546          75,363          —             —      
           34,000 (2)           295,290     
           36,800 (3)           307,280     
           72,000 (4)           547,920     
           95,000 (5)           631,275     
           261,000 (6)           1,648,650     
           345,000 (7)           2,156,250     

Edward M. Fitzgerald

     22,387          27,760          —             —      
     37,613          46,640          —             —      
           8,333 (2)           72,372     
           14,000 (3)           116,900     
           10,833 (8)           97,172     
           17,500 (9)           123,200     
           29,334 (10)           189,204     

Timothy P. Clackson

     20,657          29,746          —             —      
     24,036          84,366          —             —      
     24,999          134,495          —             —      
           13,333 (2)           115,797     
           14,000 (3)           116,900     
           10,833 (8)           97,172     
           17,500 (9)           123,200     
           29,334 (10)           189,204     

Thomas J. DesRosier

     --         --         --              --       

Martin J. Duvall

           1,667 (2)           14,478     
           2,800 (3)           23,380     
           8,000 (8)           71,760     
           10,000 (9)           70,400     
           29,334 (10)           189,204     

 

(1) Value represents the market value of a share of our common stock at the time of exercise minus the exercise price per share of the option, multiplied by the number of shares acquired upon exercise.
(2) This represents the vesting of restricted stock units granted on March 20, 2012. The value realized is calculated by multiplying the number of shares that vested times $8.69, the closing price of our common stock on March 20, 2015.
(3) This represents the vesting of performance shares granted on March 20, 2012 which were earned in July 2013 and became 25% vested on July 15, 2015. The value realized is calculated by multiplying the number of shares that vested times $8.35, the closing price of our common stock on July 15, 2015.
(4) This represents the vesting of restricted stock units granted on March 19, 2013, of which 36,000 shares vested on March 19, 2015 and the balance was accelerated to vest on December 31, 2015 upon Dr. Berger’s retirement in accordance with the terms of his Executive Employment Agreement and his Retirement Agreement. The value realized is calculated by multiplying the number of shares that vested on each date by the closing price of our common stock on such date, which was $8.97 on March 19, 2015 and $6.25 on December 31, 2015.

 

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(5) This represents the vesting of performance shares granted on March 19, 2013 which were earned in September 2015, of which 47,500 shares vested on September 24, 2015 and the balance was accelerated to vest on December 31, 2015 upon Dr. Berger’s retirement in accordance with the terms of his Executive Employment Agreement and his Retirement Agreement. The value realized is calculated by multiplying the number of shares that vested on each date by the closing price of our common stock on such date, which was $7.04 on September 24, 2015 and $6.25 on December 31, 2015.
(6) This represents the vesting of restricted stock units granted on January 31, 2014, of which 87,000 shares vested on January 31, 2015 and the balance was accelerated to vest on December 31, 2015 upon Dr. Berger’s retirement in accordance with the terms of his Executive Employment Agreement and his Retirement Agreement. The value realized is calculated by multiplying the number of shares that vested on each date by the closing price of our common stock on such date, which was $6.45 on January 30, 2015 and $6.25 on December 31, 2015.
(7) This represents the vesting of restricted stock units granted on April 28, 2015, all of which vested on December 31, 2015 upon Dr. Berger’s retirement in accordance with the terms of his Executive Employment Agreement and his Retirement Agreement. The value realized is calculated by multiplying the number of shares that vested times $6.25, the closing price of our common stock on December 31, 2015.
(8) This represents the vesting of restricted stock units granted on March 19, 2013. The value realized is calculated by multiplying the number of shares that vested times $8.97, the closing price of our common stock on March 19, 2015.
(9) This represents the vesting of performance shares granted on March 19, 2013 which were earned in September 2015. The value realized is calculated by multiplying the number of shares that vested times $7.04, the closing price of our common stock on September 24, 2015.
(10) This represents the vesting of restricted stock units granted on January 31, 2014. The value realized is calculated by multiplying the number of shares that vested times $6.45, the closing price of our common stock on January 30, 2015.

Pension Benefits

We do not have any qualified or non-qualified defined benefit plans.

Non-Qualified Deferred Compensation

We no longer have any nonqualified deferred compensation plans applicable to our NEOs.

Potential Payments upon Termination or Change in Control

Chief Executive Officer

The following table sets out the payments received by Dr. Berger, under the terms of his employment agreement and his Retirement Agreement, upon his retirement as our President and Chief Executive Officer on December 31, 2015.

 

Severance benefits:       

Lump sum payment (1)

   $ 4,235,550   

Healthcare benefits (2)

     34,741   

Accrued sabbatical benefits (3)

     580,125   

Acceleration of equity awards:

  

Market value of equity vesting on termination (4)

 

    

 

1,609,375

 

  

 

  

 

 

 

Total Payments

   $ 6,459,791   

 

(1) Represents the sum of three times Dr. Berger’s 2015 annual salary and three times the bonus amount paid to him in 2015 for 2014 performance.
(2) Represents the value of continued medical coverage in all group health plans for the maximum COBRA continuation period.
(3) Represents benefits that had accrued to Dr. Berger under our sabbatical policy at the time it was terminated in 2008, equivalent to nine months’ salary, payable six months after separation of service.
(4) The acceleration of equity awards in the table above includes the value of unvested performance shares granted in 2013, the vesting of which was time-based, as the performance objective had been achieved prior to Dr. Berger’s retirement. The table does not include the value of performance shares granted in 2014 based on a two-year revenue milestone, for which the performance objectives were certified as having been achieved in February 2016 at the target performance level and pursuant to which the vesting of 50% of this award was accelerated. The table also does not include the value of unvested performance shares granted in 2014 based on enrollment of 50% of patients in our OPTIC dose-ranging trial for which the performance has not yet been earned, but which we are accelerating the entire award to vest 100% at target. These two awards represent an additional acceleration amount of $1,120,313 based on the closing price of our common stock on December 31, 2015, which was $6.25. The values of equity awards included in the table above and in this footnote is calculated by multiplying (x) the number of shares accelerated by (y) the closing price of our common stock on December 31, 2015, which was $6.25.

 

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Other NEOs

The following is a description of the potential payments upon termination or change in control with respect to our Other NEOs:

E MPLOYMENT T ERMINATION W ITHOUT C AUSE

If we terminate the employment of our Other NEOs without cause, we are obligated to continue payment of the executive’s then current salary for a period of twelve months following the effective date of termination; accelerate vesting of all stock, stock options, stock awards and similar equity awards granted to the executive that would have otherwise vested during the remaining term of that executive’s contract, subject to the normal post termination exercise period; and continue payment of all benefits covered under COBRA for up to one year.

“Cause” for purposes of our Other NEOs’ employment agreements consists of any of the following:

 

    The officer’s failure to perform any of his material duties.

 

    The conviction of the officer of any felony.

 

    Commission of any crime related to the officer’s employment with the Company.

 

    Violation of any law or regulation related to our business.

 

    Conduct that could result in unfavorable publicity for us in a material way.

 

    Unprofessional conduct inconsistent with the officer’s position with the Company.

 

    Failure to comply with our written policies.

 

    Breach of the terms of the employment agreement.

The executive officer has a right to cure any conduct that constitutes cause, if curable, within 30 days after receiving written notice.

For purposes of determining payments upon termination, a termination of the employment agreement by an Other NEO due to an uncured breach by us of the employment agreement is treated as a termination of the executive’s employment without cause.

N ON -R ENEWAL

If we do not renew the employment agreement of our Other NEOs, no severance benefit is payable. In addition, any unvested stock awards, stock options, restricted stock or restricted stock units, or performance shares shall be forfeited to the Company.

E MPLOYMENT T ERMINATION WITH C AUSE

Any unvested stock awards, stock options, restricted stock or restricted stock units, or performance shares shall be forfeited to the Company in the event the employment is terminated by the Company for Cause.

C HANGE IN C ONTROL

In the event of a consummation of a “Change in Control”, as defined below, if within one year following such occurrence the Company terminates the executive officer’s employment without cause or the executive officer resigns for good reason, we are obligated to accelerate the vesting of all stock options, stock grants and similar equity rights granted to the officer and provide for continued exercisability of all awards through their original terms with all rights. We are also obligated to continue to pay the Other NEOs their then current salary for a period of 24 months from the effective date of termination. Good reason means the involuntary relocation of more than 25 miles, the material breach of the employment agreement by the Company, or the material diminution of the officer’s responsibilities, which situation remains uncured within a specified timeframe after notice.

Under the employment agreements for the Other NEOs, there is a Change in Control if any of the following occurs:

 

    Any person makes a tender or exchange offer for our common stock pursuant to which such person acquires 50% or more of our issued and outstanding common stock.

 

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    A merger or consolidation of ARIAD, other than a merger or consolidation of ARIAD in which our voting securities prior to the transaction continue to represent more than 50% of the total voting power of the surviving corporation, or the sale or disposition of all or substantially all of our assets.

 

    Any person acquires more than 50% of our issued and outstanding voting securities.

The following tables set out the estimated potential payments upon termination or a change in control for our Other NEOs, based on the assumptions following the table and assuming such event occurred on December 31, 2015. The total of continued payments in the case of termination by ARIAD without cause in the tables below reflect the remaining terms of the employment agreements with each of these executives. The footnotes to all of the tables follow the last table.

Mr. Fitzgerald

 

Payments and benefits

       Voluntary    
    Termination or    
    Termination    
    for Cause    
    ($)    
         Death or Disability    
    ($)    
         Termination by    
    ARIAD Without    
    Cause or by the    
    Executive for    
    ARIAD’s    
    Material    
    Breach     
    ($)    
         Termination by    
    ARIAD without    
    Cause or by the    
    Executive for Good    
    Reason within One    
    Year after a Change    
    in Control    
    ($)    
 

Severance benefits:

           

Total of continued payments

     —          —          475,000         950,000   

Healthcare benefits

     —          23,161         23,161         34,741   

Acceleration of equity awards:

           

Market value of equity vesting on termination (1)

     —          260,568         472,913         2,120,619   
  

 

 

 

Total Payment

     —          283,728         971,073         3,105,360   

Dr. Clackson

 

Payments and benefits

       Voluntary    
    Termination or    
    Termination    
    for Cause    
    ($)    
         Death or Disability    
    ($)    
         Termination by    
    ARIAD Without    
    Cause or by the    
    Executive for    
    ARIAD’s    
    Material    
    Breach     
    ($)    
         Termination by    
    ARIAD without    
    Cause or by the    
    Executive for Good    
    Reason within One    
    Year after a Change    
    in Control    
    ($)    
 

Severance benefits:

           

Total of continued payments

     —          —          513,000         1,026,000   

Healthcare benefits

     —          23,533         23,533         35,299   

Acceleration of equity awards:

           

Market value of equity vesting on termination (1)

     —          271,844         506,663         2,221,869   
  

 

 

 

Total Payment

     —          295,377         1,043,195         3,283,168   

Mr. DesRosier

 

Payments and benefits

       Voluntary    
    Termination or    
    Termination    
    for Cause    
    ($)    
         Death or Disability    
    ($)    
         Termination by    
    ARIAD Without    
    Cause or by the    
    Executive for    
    ARIAD’s    
    Material    
    Breach     
    ($)    
         Termination by    
    ARIAD without    
    Cause or by the    
    Executive for Good    
    Reason within One    
    Year after a Change    
    in Control    
    ($)    
 

Severance benefits:

           

Total of continued payments

     —          —          485,000         970,000   

Healthcare benefits

     —          23,161         23,161         34,741   

Acceleration of equity awards:

           

Market value of equity vesting on termination (1)

     —          595,458         687,500         687,500   
  

 

 

 

Total Payment

     —          618,618         1,195,661         1,692,241   

 

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Mr. Duvall

 

Payments and benefits

       Voluntary    
    Termination or    
    Termination    
    for Cause    
    ($)    
         Death or Disability    
    ($)    
         Termination by    
    ARIAD Without    
    Cause or by the    
    Executive for    
    ARIAD’s    
    Material    
    Breach     
    ($)    
         Termination by    
    ARIAD without    
    Cause or by the    
    Executive for Good    
    Reason within One    
    Year after a Change    
    in Control    
    ($)    
 

Severance benefits:

           

Total of continued payments

     —            —            470,000         940,000   

Healthcare benefits

     —            23,161         23,161         34,741   

Acceleration of equity awards:

           

Market value of equity vesting on termination (1)

     —            209,876         425,481         2,083,213   
  

 

 

 

Total Payment

     —            233,036         918,642         3,057,953   

 

(1) Amounts in the tables above do not include the value associated with vested stock options. Information about all stock options and other unvested equity awards held by the Other NEOs as of December 31, 2015 is included in the “Outstanding Equity Awards at December 31, 2015” table.

In the case of termination by the Company without Cause or by the officer for the Company’s material breach, then the unvested portions of all time-based awards, including performance shares previously earned, that would have vested during the remaining term of the officer’s employment agreement accelerate upon the effective date of such termination. In the case of termination by the Company without Cause or by the officer for good reason within one year of a Change in Control, all outstanding unvested equity awards immediately vest and remain exercisable according to their terms, including performance shares granted in 2014 and 2015, even if the performance objective had not been achieved as of the Change in Control. The 2014 performance shares will immediately vest in full upon termination in connection with a Change in Control at the maximum level, which is 160%, and the 2015 performance shares will immediately vest in full upon termination in connection with a Change in Control at the greater of the target level, which is 100%, or the actual level achieved, which can be up to 160% of the target level. The values of equity awards included in the tables above is calculated by multiplying (x) the number of shares accelerated by (y) the closing price of our common stock on December 31, 2015, which was $6.25.

The amounts in the above tables do not include the value of the lump sum payments payable upon termination in good standing to Dr. Clackson ($128,250) and Mr. Fitzgerald ($118,750) for amounts previously earned under our now terminated sabbatical policy, as described in the “Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table in 2015” above. The amounts in the above tables also do not reflect any reduction in payments related to the modified economic cutback provisions in the executive officers’ employment agreements that may apply on or after a change-in-control.

Assumptions Regarding Post Termination Payment Tables

Except as otherwise specifically noted above, the tables presented on the preceding pages were prepared as though each NEOs’ employment was terminated on December 31, 2015, using the closing price of our common stock on that date ($6.25). We are required by the SEC to use these assumptions. With those assumptions taken as a given, we believe that the remaining assumptions listed above, which are necessary to produce these estimates and reflect solely our interpretation of our contractual obligations, are reasonable in the aggregate. However, the executives’ employment was not terminated on December 31, 2015 (other than with respect to Dr. Berger) and a change in control did not occur on that date. There can be no assurance that a termination of employment, a change in control or both would produce the same or similar results as those described if either or both of them occur on any other date or at any other price of our common stock, or if any assumption is not correct in fact.

 

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Post-Termination Payments to Chief Financial Officer after December 31, 2015

The following table sets out the payments to be made to Mr. Fitzgerald under the terms of his employment agreement following his resignation as our Executive Vice President, Chief Financial Officer and Treasurer on March 21, 2016, and from the Company on April 8, 2016.

 

Severance benefits:

  

Total of continued payments (1)

     $    475,000   

Healthcare and other benefits (2)

     32,055   

Accrued sabbatical benefits (3)

     118,750   

Acceleration of equity awards:

  

Market value of equity vesting on termination (4)

             234,300   
  

 

 

 

Total Payments

     $    860,105   

 

(1) Represents twelve months of his current base salary.
(2) Represents the value of continued coverage in group health, long-term care and long-term disability plans for twelve months.
(3) Represents benefits that had accrued to Mr. Fitzgerald under our sabbatical policy at the time it was terminated in 2008, equivalent to three months’ salary, payable six months after separation of service.
(4) All time-based equity awards that were outstanding and unvested as of April 8, 2016 and that would have vested during the remainder of 2016 were accelerated as of such date. The acceleration of equity awards in the table above includes the value of 18,000 unvested restricted stock units that would have vested on April 29, 2016 and the value of 17,500 unvested performance shares granted in 2013, the vesting of which was time-based and would have vested on September 24, 2016, as the performance objective had been achieved. The values of equity awards included in the table above is calculated by multiplying (x) the number of shares accelerated by (y) the closing price of our common stock on April 8, 2016, which was $6.60.

Director Compensation

Annual compensation for our non-employee directors is as follows:

 

    A one-time grant upon initial appointment or election to the Board of 75,000 stock options, which vest over three years in equal amounts on the first, second and third anniversaries of the grant date.

 

    Annual cash compensation of $70,000, paid in equal quarterly amounts on or about the last day of each calendar quarter. In lieu of cash, a director may elect to receive the equivalent value in restricted shares of our common stock on January 31, subject to a lapsing repurchase right as to 25% of the shares on March 31, June 30, September 30 and December 31 of the year of the award. The number of shares to be issued will be determined based on the volume weighted average price of our common stock for the month of December of the prior year. Any such election to be paid in shares in lieu of cash must be made by January 15 of each calendar year.

 

    An annual equity grant of 25,000 stock options and 12,500 restricted stock units which vests as to 25% of the shares on March 31, June 30, September 30 and December 31 of the year of the award.

The exercise price of each stock option award is the closing price of our common stock as quoted on the NASDAQ Global Select Market on the grant date. These awards have terms of 10 years, subject to earlier termination. The annual cash component is prorated for any director who joins the Board during the year beginning on the first day of the fiscal quarter in which he or she was initially appointed or elected and the individual may elect to be paid in shares in lieu of cash. If a director dies, resigns or is removed during any quarter, he or she shall be entitled to a cash payment (or shares in lieu thereof) on a pro-rated basis through his or her last day of service.

All future grants are made under our 2014 Long-Term Incentive Plan or will be made under a future equity plan approved by our shareholders.

Dr. Berger received no additional compensation for serving on our Board. No other director is an employee of the Company.

 

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2015 Director Compensation Table

The following table provides information concerning the compensation of our non-employee directors during 2015.

 

Name

       Fees Earned    
or Paid in
Cash
($)
     Stock
    Awards (1)(2)     
($)
     Option
    Awards (2)     
($)
         Total    
($)
 

Alexander J. Denner, Ph.D.

     —          162,054         122,633         354,686   

Jay R. LaMarche

     70,000         89,375         122,633         282,008   

Athanase Lavidas, Ph.D.

     70,000         89,375         122,633         282,008   

Anna Protopapas (3)

     52,500         —          481,335         533,835   

Massimo Radaelli, Ph.D.

     70,000         89,375         122,633         282,008   

Norbert G. Riedel, Ph.D.

     70,000         89,375         122,633         282,008   

Sarah J. Schlesinger, M.D.

     70,000         89,375         122,633         282,008   

Wayne Wilson

     70,000         89,375         122,633         282,008   

 

(1) Dr. Denner elected to receive restricted stock in lieu of cash fees of $70,000.
(2) The amounts included under “Stock Awards” and “Option Awards” represent the aggregate grant date fair value for stock awards and option awards granted during the year, computed in accordance with FASB ASC Topic 718. The assumptions used in the calculation of the grant date fair value of the restricted stock unit awards and option awards are set forth in note 11 to our audited consolidated financial statements, entitled “Stock Compensation,” included in the Original Filing. As of December 31, 2015, each non-employee director had the following aggregate number of stock options outstanding: Mr. Denner – 100,000; Mr. LaMarche – 120,000; Dr. Lavidas – 70,000; Ms. Protopapas – 75,000; Dr. Radaelli – 102,319; Dr. Riedel – 75,000; Dr. Schlesinger – 90,000; and Mr. Wilson – 75,000.
(3) Ms. Protopapas was appointed to the Board effective as of April 28, 2015. Upon her initial appointment to the Board, Ms. Protopapas was granted stock options to purchase 75,000 shares of common stock. Ms. Protopapas’ annual cash compensation was pro-rated due to her partial service during 2015.

Director Stock Ownership Guidelines

In 2012, we adopted stock ownership guidelines, to be phased in over five years, for our non-employee directors. In December 2014, we strengthened the guidelines so that our non-employee directors are required to own Company common stock worth at least five times his or her annual cash compensation. Newly elected directors have five years from when they are first elected or appointed to the Board to comply with these guidelines. As of December 31, 2015, all of our then serving non-employee directors with the exception of Sarah Schlesinger and Ms. Protopapas, who recently joined the Board, are in early compliance with our stock ownership guidelines. The guidelines are designed to align the interests of our non-employee directors with those of our shareholders by ensuring that our non-employee directors have a meaningful financial stake in our long-term success. In developing these guidelines, we reviewed the market practices of our then current peer group companies to determine a meaningful level of ownership to align our directors and shareholders.

Compensation Practices and Policies Relating to Risk Management

The Compensation Committee has assessed the Company’s compensation policies, practices and awards, including the use of performance shares, and has concluded that our compensation policies, practices and awards do not create risks that are reasonably likely to have a material adverse effect on the Company.

Our management assessed the Company’s compensation and benefits programs to determine if the programs’ provisions and operations create undesired or unintentional risk of a material nature, and reported its assessment to the Compensation Committee. We do not have any programs where a participant may be able to directly affect variability or timing of payout. Rather, our compensation programs include a combination of fixed base salaries, cash bonuses, long-term incentive awards, including performance-based compensation and employee retirement plans that are generally uniform in design and operation throughout the Company and with all levels of employees.

In 2012, we implemented a minimum stock ownership guideline for our CEO equal to six times his base salary, to be phased in over five years, as well as minimum stock ownership guidelines for the non-employee members of our Board of Directors. Dr. Berger met this guideline during 2015. Our new CEO does not yet meet the guideline, as he just joined us in 2016. In 2014, we increased the stock ownership guideline applicable to our non-employee directors to five times their annual cash compensation, up from three times. As with the original CEO requirement, the policy is phased in over five years. Our non-employee directors already meet this

 

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guideline, with the exception of Dr. Schlesinger and Ms. Protopapas, who both recently joined the Board. In February 2016, we implemented a minimum stock ownership guideline for our other executive officers equal to one times their base salary, to be phased in over five years. All of our Other NEOs already meet this guideline, with the exception of Mr. DesRosier, who joined us in 2015. We believe the adoption of such guidelines further aligns the interests of our CEO, our other executive officers and our Board of Directors with those of our shareholders.

We adopted an Incentive Compensation Recoupment Policy effective as of January 1, 2015. This recoupment (or “clawback”) policy goes beyond current regulatory requirements, and is based on principles that were jointly developed by six major pharmaceutical companies and 13 institutional investors as a best practice corporate governance strategy that seeks to strengthen board risk oversight and preserve long-term shareholder value. It provides the Compensation Committee with broad discretion to recoup certain incentive awards made to the Company’s executive officers in instances of material violations of law or a written Company policy by such executive officer, or by a subordinate employee, if the executive failed to supervise the subordinate, where the misconduct caused significant financial harm to the Company. Public disclosure of recoupment decisions will be made in compliance with the rules and regulations of the Securities and Exchange Commission and other applicable laws. Where the Company deems it appropriate, it may provide disclosure beyond that required by law. The policy can be found on the Investors section of our website at http://investor.ariad.com under the heading “Corporate Governance.”

Based on the foregoing, we believe that our compensation policies, practices and awards do not create risks that are likely to have a material adverse effect on the Company as a whole. We also believe that our incentive compensation arrangements provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage significant risks, are compatible with our effective internal controls and our risk management practices, and are supported by the oversight and administration of the Compensation Committee with regard to executive compensation programs.

Compensation Committee Interlocks and Insider Participation

During the fiscal year ended December 31, 2015, Drs. Lavidas and Riedel and Ms. Protopapas served as members of our Compensation Committee. In 2015, none of our executive officers served on the board of directors or compensation committee of any entity that had one or more executive officers serving as a member of our Board or Compensation Committee. There are no family relationships between or among the members of our Board or executive officers.

 

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ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of March 31, 2016, certain information with respect to (i) each person (including any “group” as defined in Section 13(d)(3) of the Exchange Act) known to us to own beneficially more than 5% of our common stock, (ii) each of our directors and director nominees, (iii) each of our NEOs and (iv) all of our current directors and executive officers as a group. In accordance with the rules promulgated by the SEC, such ownership includes shares currently owned, as well as shares that the named person has the right to acquire within 60 days of March 31, 2016, including, but not limited to, shares that the named person has the right to acquire through the exercise of any option and restricted stock units that will be vested as of that date. Except as otherwise indicated, the shareholders listed in the table have sole voting and investment powers with respect to the common stock shown as beneficially owned. Percentage ownership is based on 191,032,380 shares of common stock outstanding as of March 31, 2016.

 

Name and Address**

   Number and Nature of
      Shares Beneficially Owned      
               Percent of Class            

Putnam Investments, LLC.

     16,140,401 (1)         8.45%   

One Post Office Square

     

Boston, MA 02109

     

BlackRock, Inc.

     13,382,977 (2)         7.01%   

55 East 52 nd Street

     

New York, NY 10022

     

Sarissa Capital Management LP

     12,850,000 (3)         6.73%   

660 Steamboat Road, 3 rd Floor

     

Greenwich, CT 06830

     

The Vanguard Group, Inc.

     12,145,786 (4)         6.36%   

100 Vanguard Blvd.

     

Malvern, PA 19355

     

Harvey J. Berger, M.D.

     5,285,103 (5)         2.75%   

Edward M. Fitzgerald

     718,495 (6)         *   

Timothy P. Clackson, Ph.D.

     634,663 (7)         *   

Thomas J. DesRosier

     69,130 (8)         *   

Martin J. Duvall

     288,610 (9)         *   

Alexander J. Denner, Ph.D.

     12,966,415 (3)         6.78%   

Jay R. LaMarche

     685,151 (10)         *   

Athanase Lavidas, Ph.D.

     195,381 (11)         *   

Paris Panayiotopoulos

     61,099      

Anna Protopapas

     55,152 (12)         *   

Massimo Radaelli, Ph.D.

     214,069 (13)         *   

Norbert G. Riedel, Ph.D.

     203,109 (14)         *   

Sarah Schlesinger

     136,017 (15)         *   

Wayne Wilson

     206,750 (16)         *   

All current directors and executive officers as a group (17 persons)

     16,766,432 (18)         8.69%   

 

* Indicates less than 1% of the outstanding shares of common stock.
** Addresses are given for beneficial owners of more than 5% of the outstanding common stock only.
(1) This information is based solely on information contained in a Schedule 13G/A filed with the SEC on February 16, 2016 by Putnam Investments LLC. The shares are held by various subsidiaries of Putnam Investments LLC that have voting and dispositive power over the shares, as detailed in the filing.
(2) This information is based solely on information contained in a Schedule 13G/A filed with the SEC on January 25, 2016 by BlackRock, Inc. The shares are held by various subsidiaries of BlackRock, Inc. that have voting and dispositive power over the shares, as detailed in the filing. (3) The information regarding Sarissa Capital Management LP is based solely on information contained in a Schedule 13D/A filed with the SEC on August 20, 2014 by Sarissa Capital Management LP. The information regarding Dr. Denner is based on the information contained in the August 20, 2014 Schedule 13D/A and also includes shares that Dr. Denner beneficially owns as a result of receiving awards for serving on our Board, including 81,250 shares issuable upon the exercise of stock options. The shares reported in the Schedule 13D/A are held by various affiliates of Sarissa Capital Management LP, including Dr. Denner, that have voting and dispositive power over the shares, as detailed in the filing. By virtue of his position as the Chief Investment Officer of Sarissa Capital and as the managing member of Sarissa Capital’s general partner and as controlling the ultimate general partner of each of the Sarissa Funds, Dr. Denner may be deemed to have the shared power to vote or direct the vote of (and the shared power to dispose or direct the disposition of) the 12,850,000 shares held by Sarissa Funds.

 

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(4) This information is based solely on information contained in a Schedule 13G/A filed with the SEC on February 10, 2016 by The Vanguard Group, Inc. The shares are held by various subsidiaries of The Vanguard Group, Inc. that have voting and dispositive power over the shares, as detailed in the filing.
(5) Includes 914,000 shares issuable upon exercise of stock options. Includes 1,864,286 shares owned by Ocean Capital Partners, LLC, an investment entity owned by Dr. Berger and his immediate family and for which Dr. Berger has the right to vote and dispose of the shares; and 740,050 shares owned by Dr. Berger’s spouse and daughters. Dr. Berger disclaims beneficial ownership of the shares held by his spouse and daughters.
(6) Includes 397,500 shares issuable upon exercise of stock options and vesting of restricted stock units.
(7) Includes 316,191 shares issuable upon exercise of stock options and vesting of restricted stock units.
(8) Includes 32,500 shares issuable upon exercise of stock options.
(9) Includes 193,500 shares issuable upon exercise of stock options and vesting of restricted stock units.
(10) Includes 126,250 shares issuable upon exercise of stock options and 6,696 shares held by Mr. LaMarche’s spouse.
(11) Includes 76,250 shares issuable upon exercise of stock options.
(12) Includes 31,250 shares issuable upon exercise of stock options.
(13) Includes 108,569 shares issuable upon exercise of stock options.
(14) Includes 81,250 shares issuable upon exercise of stock options.
(15) Includes 82,917 shares issuable upon exercise of stock options.
(16) Includes 81,250 shares issuable upon exercise of stock options.
(17) See notes 7 through 16 above. Also includes 439,903 shares of common stock and 610,983 shares issuable upon the exercise of stock options and vesting of restricted stock units held by executive officers not listed in the table above.

Equity Compensation Plan Information

The following table provides certain aggregate information with respect to all of our equity compensation plans in effect as of December 31, 2015.

 

Plan Category

   Number of
Securities to be
Issued Upon

Exercise of
Outstanding
Options, Warrants
and Rights
    Weighted Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
     Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (excluding
securities reflected
in first column)
 

Equity compensation plans approved by stockholders

     15,132,403        10.00         10,259,932   

Equity compensation plans not approved by stockholders

     N/A        N/A         N/A   

Total

     15,132,403 (1)          10,259,932 (2)  

 

(1) Consists of options to purchase 72,100 shares of common stock granted under our 2001 Stock Plan, as amended; options to purchase 8,298,234 shares of common stock, 884,874 restricted stock units and performance shares for up to a maximum of 1,311,100 shares of common stock granted under our 2006 Long-Term Incentive Plan, as amended; and options to purchase 1,862,635 shares of common stock, 1,722,338 restricted stock units and performance shares for up to a maximum of 981,080 shares of our common stock granted under our 2014 Long-Term Incentive Plan.
(2) Consists of 9,632,924 shares available for issuance under our 2014 Long-Term Incentive Plan and 627,008 shares available for issuance under our 1997 Employee Stock Purchase Plan, as amended.

 

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ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Related Person Transactions Approval Policy

All related person transactions are reviewed and approved in advance by our Audit Committee or other independent body of our Board. In general, a related person transaction is defined as any transaction (other than setting compensation) in which we or any subsidiary or affiliate is a participant and in which any of the following persons has or will have a direct or indirect material interest: our executive officers, our Board members and nominees, beneficial holders of more than 5% of our securities, immediate family members of any of the foregoing persons and any other persons who the Board determines may be considered to be related persons as defined by the rules and regulations of the SEC.

Our Audit Committee or its chair or other independent body of our Board, as the case may be, will approve only those related person transactions that are determined to be in, or not inconsistent with, the best interests of ARIAD and our shareholders, taking into account all available facts and circumstances as it determines in good faith to be necessary. These facts and circumstances will typically include, but not be limited to, the benefits of the transaction to us and our shareholders, the impact on a director’s independence in the event the related person is a director or nominee, an immediate family member of a director or nominee, or an entity in which a director or nominee is a partner, shareholder, or executive officer, the availability of other sources for comparable products or services, the terms of the transaction and the terms of comparable transactions that would be available to unrelated third parties or to employees generally. No member of our Audit Committee or our Board will participate in any review, consideration or approval of any related person transaction with respect to which the member or any of his or her immediate family members or other business affiliates is the related person.

In reviewing and approving such transactions, our Audit Committee or other independent body of our Board will obtain, or will direct management to obtain on its behalf, all information that it believes to be relevant and important to its review of the transaction prior to approval. Following receipt and review of the necessary information, a discussion will be held of the relevant factors deemed to be necessary prior to approval. If a discussion is not deemed to be necessary, approval may be given by unanimous written consent of our Audit Committee or other independent body of our Board. This approval authority may also be delegated to the chair of our Audit Committee in some circumstances. No related person transaction shall be entered into prior to completing these procedures.

Our policies as described above are included in the Audit Committee Charter as approved by our Audit Committee and our Board. As required under SEC rules, transactions that involve an amount in excess of $120,000, in which we are a participant and a related person is determined to have a direct or indirect material interest, are disclosed in our annual report on Form 10-K and/or proxy statement.

Transactions with Related Persons

We have no related person transactions to report.

Indemnification

We indemnify our directors and our executive officers to the fullest extent permitted by law so that they will be free from undue concern about personal liability in connection with their service to the Company. This is required under our Amended and Restated Bylaws, and we have also entered into agreements with those individuals contractually obligating us to provide this indemnification to them.

Director Independence and Committee Qualifications

The Board has determined that each of our directors, except Mr. Panayiotopoulos, is an “independent director” as defined by NASDAQ rules. The Board has also determined that each member of the Compensation Committee, the Audit Committee and the Nominating and Corporate Governance Committee meets the independence requirements applicable to each such committee member prescribed by NASDAQ and the SEC. The Board has further determined that Mr. LaMarche and Mr. Wilson are “audit committee financial experts” as defined in the rules of the SEC.

The Nominating and Corporate Governance Committee annually reviews the independence of all directors and reports its findings to the Board. The Nominating and Corporate Governance Committee has reviewed each director’s status by applying the standards for director independence and the criteria to determine “audit committee financial expert” status and by evaluating self-evaluation questionnaires and other information supplied by each director or otherwise independently obtained. On the basis of this review, the Nominating and Corporate Governance Committee delivered a report to our Board upon which our Board made its determinations of each director’s status.

 

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In making these determinations, the Nominating and Corporate Governance Committee considered that in the ordinary course of business, relationships and transactions may occur between the Company and its subsidiaries and entities with which some of our directors are or have been affiliated. In addition, each year the Committee evaluates, based on questionnaires completed by the directors, whether the directors have any conflicts of interest with the Company under our Conflict of Interest Policy, a copy of which is publicly available on the Investors section of our website at http://investor.ariad.com under the heading “Corporate Governance.”

 

ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES

The Audit Committee of our Board of Directors has appointed Deloitte & Touche LLP (“Deloitte”) to be our independent registered public accounting firm for the year ending December 31, 2016. Our Board of Directors has ratified this appointment. Deloitte has served as our independent registered public accounting firm since 1991. Deloitte has advised us that it does not have any direct or indirect financial interest in ARIAD.

Before it selected Deloitte as our independent registered public accounting firm, our Audit Committee carefully considered the qualifications of Deloitte, including the firm’s performance in prior years, the competence of personnel assigned to our engagement and its reputation for integrity, quality and competence in the fields of accounting and auditing. Our Audit Committee also considered whether Deloitte’s provision of non-audit services to ARIAD is compatible with that firm’s independence.

Audit and Non-Audit Fees

For the fiscal years ending December 31, 2015 and 2014, we incurred the following fees for the services of Deloitte and its member firms:

 

     2015      2014       
  

 

 

Audit Fees

   $         1,747,395       $         1,838,270      

Audit-Related Fees

     —          —       

Tax Fees

     472,399         362,642      

All Other Fees

     3,370         2,600      

Total

   $ 2,223,164       $ 2,203,512      

Audit Fees

Audit Fees include fees for the audit of our annual financial statements, the reviews of our quarterly financial statements included in reports on Form 10-Q and the audit of our system of internal control over financial reporting and fees related to statutory audit requirements of our subsidiaries, as well as fees for work that generally only our independent registered public accounting firm can provide including reviews of registration statements that include the firm’s consent and the provision of comfort letters in connection with securities offerings.

Audit-Related Fees

Audit-Related Fees include fees for services that are reasonably related to the audit or reviews of our consolidated financial statements and are not reported under Audit Fees above. These services include consultation on financial accounting and reporting matters.

Tax Fees

Tax Fees include fees for preparation of tax returns as well as general tax planning and advice.

All Other Fees

All Other Fees include fees associated with services not captured in the three preceding categories, which includes access to and usage of Deloitte’s accounting research database.

Our Audit Committee determined that the non-audit services rendered by Deloitte were compatible with maintaining its independence and pre-approved all of the services pursuant to our pre-approval policy described below.

 

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Policy on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of Independent Auditors

Consistent with SEC policies regarding auditor independence, our Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. In recognition of this responsibility, our Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm.

Prior to engagement of an independent registered public accounting firm for the next year’s audit and also on a quarterly basis, management submits a report to our Audit Committee for their approval, outlining the services planned or anticipated to be rendered by the independent registered public accounting firm and the estimated fees for such services. The services are outlined according to the four categories of services defined above, Audit, Audit-Related, Tax and All Other. Actual fees incurred relative to estimated fees are reported to our Audit Committee each quarter.

Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted and the Audit Committee requires our independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage our independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging our independent registered public accounting firm.

To ensure prompt consideration of unexpected services, our Audit Committee has delegated authority to the Chair of our Audit Committee to pre-approve services to be rendered. Any such actions taken by the Chair must be reported to our Audit Committee at its next scheduled meeting.

PART IV

 

I TEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The financial statements and financial statement schedules listed in the exhibit index of the Original Filing and the exhibits listed in the exhibit index of this Form 10-K/A are filed with, or incorporated by reference in, this Form 10-K/A.

 

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SI GNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this Amendment No. 1 to Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cambridge, Commonwealth of Massachusetts on the 29 th day of April, 2016.

 

ARIAD PHARMACEUTICALS, INC.
By:   /s/ Manmeet S. Soni
Name:   Manmeet S. Soni
Title:   Executive Vice President, Chief Financial Officer and Treasurer

 

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ARIAD Pharmaceuticals, Inc.

Form 10-K/A for the Year Ended December 31, 2015

Exhibit List

 

Exhibit

Number        

       

Exhibit Description

  

Filed

with

this

Report

  

Incorporated by

Reference

herein from

Form or

Schedule

  

Filing

Date

  

SEC File/

Reg.

Number

3.1       Restated Certificate of Incorporation of ARIAD Pharmaceuticals, Inc.      

8-K

(Exhibit 3.4)

   01/13/16    001-36172
3.2       ARIAD Pharmaceuticals, Inc. Amended and Restated Bylaws      

8-K

(Exhibit 3.1)

   05/01/14    001-36172
4.1       Specimen common stock certificate of ARIAD Pharmaceuticals, Inc.    X         
4.2    .1    Section 382 Rights Agreement, dated October 31, 2013, between ARIAD Pharmaceuticals, Inc. and Computershare Trust Company, N.A., as Rights Agent      

8-K

(Exhibit 4.1)

   11/01/13    000-21696
   .2    Amendment to Section 382 Rights Agreement, dated June 24, 2014, between ARIAD Pharmaceuticals, Inc. and Computershare Trust Company, N.A., as Rights Agent      

8-K

(Exhibit 4.1)

   06/24/14    001-36172
   .3    Second Amendment to Section 382 Rights Agreement, dated as of January 8, 2014, between ARIAD Pharmaceuticals, Inc. and Computershare Trust Company, N.A., as Rights Agent      

8-K

(Exhibit 4.1)

   01/13/16    001-36172
4.3       Indenture, dated June 17, 2014 by and between ARIAD Pharmaceuticals, Inc. and Wells Fargo Bank, National Association, as trustee      

8-K

(Exhibit 4.1)

   06/17/14    001-36172
4.4       Form of 3.625 percent Convertible Senior Note due 2019 (included in Exhibit 4.3)      

8-K

(Exhibit 4.1)

   06/17/14    001-36172
4.5       Convertible Note Hedge Confirmation, dated June 12, 2014, by and between ARIAD Pharmaceuticals, Inc. and JP Morgan Chase Bank, National Association      

8-K

(Exhibit 10.2)

   06/17/14    001-36172
4.6       Warrant Confirmation, dated June 12, 2014, by and between ARIAD Pharmaceuticals, Inc. and JP Morgan Chase Bank, National Association      

8-K

(Exhibit 10.3)

   06/17/14    001-36172

Lease Agreements

10.1    .1    Lease Agreement, dated January 8, 1992, between ARIAD Pharmaceuticals, Inc. and Forest City Cambridge, Inc.      

10-Q

(Exhibit 10.1)

   04/30/93    000-21696
   .2    Eighth Amendment to Lease dated October 30, 2006      

10-K

(Exhibit 10.57)

   03/14/07    000-21696
   .3    Ninth Amendment to Lease dated May 20, 2011, between ARIAD Corporation and UP 26 Landsdowne LLC      

10-Q

(Exhibit 10.1)

   08/09/11    000-21696
   .4    Assignment and Assumption dated December 31, 2011, by and between ARIAD Corporation and ARIAD Pharmaceuticals, Inc. (for lease at 26 Landsdowne Street)      

10-K

(Exhibit 10.1.4)

   02/29/12    000-21696
10.2    .1    Lease Agreement, dated January 4, 2013 between ARIAD Pharmaceuticals, Inc. and ARE-MA REGION NO. 48, LLC (for lease at 75 Binney Street and 125 Binney Street)*      

10-K

(Exhibit 10.2)

   03/01/13    000-21696
   .2    First Amendment to Lease, dated September 16, 2013, between ARIAD Pharmaceuticals, Inc. and ARE-MA REGION NO. 48, LLC (for lease at 75 Binney Street and 125 Binney Street)*       10-Q
(Exhibit 10.1)
   11/12/13    001-36172

 

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Table of Contents

Exhibit

Number        

       

Exhibit Description

  

Filed

with

this

Report

  

Incorporated by

Reference

herein from

Form or

Schedule

  

Filing

Date

  

SEC File/

Reg.

Number

   .3    Second Amendment to Lease, dated March 24, 2015, between ARIAD Pharmaceuticals, Inc. and ARE-MA REGION NO. 48, LLC (for lease at 75 Binney Street and 125 Binney Street)*       10-Q
(Exhibit 10.5)
   05/08/15    001-36172
10.3       Sublease, effective as of August 20, 2015, between ARIAD Pharmaceuticals, Inc. and International Business Machines Corporation (for a portion of the lease at 75 Binney Street and 125 Binney Street)*       10-Q
(Exhibit 10.1)
   11/06/15    001-36172

Collaboration, License and Commercial Agreements

10.4       Amended and Restated Agreement, dated as of December 12, 1997, between The Board of Trustees of The Leland Stanford Junior University and ARIAD Gene Therapeutics, Inc.*      

10-K

(Exhibit 10.14)

   03/10/98    000-21696
10.5       License Agreement, effective January 26, 2005, by and between ARIAD Pharmaceuticals, Inc. and Medinol Ltd.*      

10-Q

(Exhibit 10.2)

   05/08/15    001-36172
10.6       Supply Agreement, entered into as of January 26, 2005, by and between ARIAD Pharmaceuticals, Inc. and Medinol Ltd.*      

10-Q

(Exhibit 10.2)

   05/10/05    000-21696
10.7       Master Services Agreement, effective as of January 21, 2014, between ARIAD Pharmaceuticals, Inc. and Biologics, Inc. *      

10-K

(Exhibit 10.12)

   03/03/14    001-36172
10.8       Collaboration Agreement, effective December 22, 2014, by and between ARIAD Pharmaceuticals, Inc. and Otsuka Pharmaceutical Co., Ltd. *      

10-K

(Exhibit 10.8)

   03/02/15    001-36172
10.9    .1    Amended and Restated License Agreement, dated March 7, 2011, by and between ARIAD Pharmaceuticals, Inc. and Bellicum Pharmaceuticals, Inc.*      

10-K

(Exhibit 10.9.1)

   03/02/15    001-36172
   .2    Omnibus Amendment Agreement, dated October 3, 2014, by and between ARIAD Pharmaceuticals, Inc. and Bellicum Pharmaceuticals, Inc.*      

10-K

(Exhibit 10.9.2)

   03/02/15    001-36172
10.10       Revenue Interest Assignment Agreement, entered into as of July 28, 2015, between ARIAD Pharmaceuticals, Inc. and PDL BioPharma, Inc.*       10-Q
(Exhibit 10.2)
   11/06/15    001-36172
10.11       Security Agreement, entered into as of July 28, 2015, between ARIAD Pharmaceuticals, Inc. and PDL BioPharma, Inc.*       10-Q
(Exhibit 10.3)
   11/06/15    001-36172

Agreements with Executive Officers and Directors

10.12       Executive Employment Agreement, dated December 16, 2015, between ARIAD Pharmaceuticals, Inc. and Paris Panayiotopoulos+      

8-K

(Exhibit 10.1)

   12/18/15    001-36172
10.13       Amended and Restated Executive Employment Agreement, dated April 30, 2010, between ARIAD Pharmaceuticals, Inc. and Harvey J. Berger, M.D.+      

8-K

(Exhibit 10.1)

   05/03/10    000-21696
10.14       Retirement Letter Agreement, dated April 28, 2015, by and between ARIAD Pharmaceuticals, Inc. and Harvey J. Berger, M.D.+      

8-K

(Exhibit 10.2)

   04/29/15    001-36172

 

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Table of Contents

Exhibit

Number        

       

Exhibit Description

  

Filed

with

this

Report

  

Incorporated by

Reference

herein from

Form or

Schedule

  

Filing

Date

  

SEC File/

Reg.

Number

10.15       Executive Employment Agreement, dated March 9, 2016, between ARIAD Pharmaceuticals, Inc. and Manmeet S. Soni+    X         
10.16       Amended and Restated Executive Employment Agreement, dated May 15, 2010, between ARIAD Pharmaceuticals, Inc. and Daniel M. Bollag, Ph.D.+      

10-Q

(Exhibit 10.5)

   08/09/10    000-21696
10.17    .1    Amended and Restated Executive Employment Agreement, dated May 1, 2010, between ARIAD Pharmaceuticals, Inc. and Maria Cantor+      

10-Q

(Exhibit 10.1)

   05/09/12    000-21696
   .2    First Amendment to Amended and Restated Executive Employment Agreement, dated January 25, 2012, between ARIAD Pharmaceuticals, Inc. and Maria Cantor+      

10-Q

(Exhibit 10.2)

   05/09/12    000-21696
10.18       Amended and Restated Executive Employment Agreement, dated May 15, 2010, between ARIAD Pharmaceuticals, Inc. and Timothy P. Clackson, Ph.D.+      

10-Q

(Exhibit 10.6)

   08/09/10    000-21696
10.19       Executive Employment Agreement, dated February 28, 2014, between ARIAD Pharmaceuticals, Inc., and Hugh M. Cole+      

10-Q

(Exhibit 10.4)

   05/09/14    001-36172
10.20       Executive Employment Agreement, dated January 20, 2015, between ARIAD Pharmaceuticals, Inc., and Thomas J. DesRosier, Esq.+      

10-K

(Exhibit 10.16)

   03/02/15    001-36172
10.21       Executive Employment Agreement, dated September 3, 2011, between ARIAD Pharmaceuticals, Inc. and Martin J. Duvall+      

10-Q

(Exhibit 10.1)

   11/07/11    000-21696
10.22       Amended and Restated Executive Employment Agreement, dated May 15, 2010, between ARIAD Pharmaceuticals, Inc. and Edward M. Fitzgerald+      

10-Q

(Exhibit 10.8)

   08/09/10    000-21696
10.23    .1    Amended and Restated Executive Employment Agreement, dated May 1, 2010, between ARIAD Pharmaceuticals, Inc. and Frank G. Haluska, M.D., Ph.D.+      

10-Q

(Exhibit 10.9)

   08/09/10    000-21696
   .2    First Amendment to Amended and Restated Executive Employment Agreement, dated January 25, 2012 between ARIAD Pharmaceuticals, Inc. and Frank G. Haluska, M.D., Ph.D.+      

10-Q

(Exhibit 10.3)

   05/09/12    000-21696
10.24       Amendments to Executive Employment Agreements, dated April 28, 2014, for David L. Berstein, Esq., Daniel M. Bollag, Ph.D., Maria E. Cantor, Timothy P. Clackson, Ph.D., Martin J. Duvall, Edward M. Fitzgerald, and Frank G. Haluska, M.D., Ph.D. (solely to extend term)+      

8-K

(Exhibit 10.1)

   05/01/14    001-36172
10.25       Nomination and Standstill Agreement, dated February 20, 2014, by and between ARIAD Pharmaceuticals, Inc., Dr. Alexander J. Denner, Sarissa Capital Management LP, Sarissa Capital Domestic Fund LP, Sarissa Capital Offshore Master Fund LP, Sarissa Capital Fund GP LP and Sarissa Capital Offshore Fund GP LLC+      

8-K

(Exhibit 99.1)

   02/21/14    001-36172
10.26       Confidentiality Agreement, dated February 20, 2014, by and between ARIAD Pharmaceuticals, Inc., Dr. Alexander J. Denner, Sarissa Capital Management LP, Sarissa Capital Domestic Fund LP, Sarissa Capital Offshore Master Fund LP, Sarissa Capital Fund GP LP and Sarissa Capital Offshore Fund GP LLC+      

8-K

(Exhibit 99.2)

   02/21/14    001-36172

 

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Table of Contents

Exhibit

Number        

       

Exhibit Description

  

Filed

with

this

Report

  

Incorporated by

Reference

herein from

Form or

Schedule

  

Filing

Date

  

SEC File/

Reg.

Number

10.27    .1    Agreement, dated April 28, 2015, by and between ARIAD Pharmaceuticals, Inc., Sarissa Capital Management LP, Sarissa Capital Domestic Fund LP, Sarissa Capital Offshore Master Fund LP, Sarissa Capital Fund GP LP and Sarissa Capital Offshore Fund GP LLC+      

8-K

(Exhibit 10.1)

   04/29/15    001-36172
   .2    Amendment to Agreement, dated March 17, 2016, by and between ARIAD Pharmaceuticals, Inc., Sarissa Capital Management LP, Sarissa Capital Domestic Fund LP, Sarissa Capital Offshore Master Fund LP, Sarissa Capital Fund GP LP and Sarissa Capital Offshore Fund GP LLC+      

8-K

(Exhibit 10.1)

   03/18/16    001-36172
10.28       Form of Indemnity Agreement between ARIAD Pharmaceuticals, Inc. and its directors and officers+      

10-K

(Exhibit 10.33)

   03/16/09    000-21696

Equity and Other Compensation Plans

10.29       Director Compensation Arrangements+      

10-K

(Exhibit 10.25)

   03/03/14    001-36172
10.30       ARIAD Pharmaceuticals, Inc. 2001 Stock Plan, as amended and restated+      

10-Q

(Exhibit 10.3)

   11/09/05    000-21696
10.31    .1    ARIAD Pharmaceuticals, Inc. 2006 Long-Term Incentive Plan, as amended+      

Def 14A

(Appendix A)

   04/30/12    000-21696
   .2    Form of Stock Option Certificate under the ARIAD Pharmaceuticals, Inc. 2006 Long-Term Incentive Plan+      

10-K

(Exhibit 10.30.2)

   02/29/12    000-21696
   .3    Form of Stock Grant Certificate under the ARIAD Pharmaceuticals, Inc. 2006 Long-Term Incentive Plan+      

10-K

(Exhibit 10.30.3)

   02/29/12    000-21696
   .4    Form of Restricted Stock Unit Certificate under the ARIAD Pharmaceuticals, Inc. 2006 Long-Term Incentive Plan+      

10-K

(Exhibit 10.30.4)

   02/29/12    000-21696
   .5    Form of Restricted Stock Grant Certificate under the ARIAD Pharmaceuticals, Inc. 2006 Long-Term Incentive Plan+      

10-K

(Exhibit 10.30.5)

   02/29/12    000-21696
   .6    Form of 2012 Performance Share Certificate under the ARIAD Pharmaceuticals, Inc. 2006 Long-Term Incentive Plan+      

10-Q

(Exhibit 10.5)

   05/09/12    000-21696
10.32    .1    ARIAD Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan      

Def 14A

(Appendix B)

   05/09/14    001-36172
   .2    Form of Option Agreement under the ARIAD Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan+      

10-Q

(Exhibit 10.1)

   11/07/14    001-36172
   .3    Form of Restricted Stock Unit Agreement under the ARIAD Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan      

10-Q

(Exhibit 10.2)

   11/07/14    001-36172
   .4    Form of Restricted Stock Agreement under the ARIAD Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan      

10-Q

(Exhibit 10.3)

   11/07/14    001-36172
   .5    Form of Performance Share Agreement under the ARIAD Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan      

10-Q

(Exhibit 10.4)

   11/07/14    001-36172
10.33       Form of Restricted Stock Unit Agreement, between ARIAD Pharmaceuticals, Inc. and Paris Panayiotopoulos (inducement grant)+      

8-K

(Exhibit 10.2)

   12/18/15    001-36172
10.34       Stock Option Agreement, between ARIAD Pharmaceuticals, Inc. and Paris Panayiotopoulos (inducement grant)+      

S-8

(Exhibit 99.1)

   03/18/16    333-210286

 

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Table of Contents

Exhibit

Number        

       

Exhibit Description

  

Filed

with

this

Report

  

Incorporated by

Reference

herein from

Form or

Schedule

  

Filing

Date

  

SEC File/

Reg.

Number

10.35       Form of Stock Option Agreement, between ARIAD Pharmaceuticals, Inc. and Manmeet S. Soni (inducement grant)+      

S-8

(Exhibit 99.2)

   03/18/16    333-210286
10.36       Form of 2016 Performance Share Agreement, between ARIAD Pharmaceuticals, Inc. and Manmeet S. Soni (inducement grant)+      

S-8

(Exhibit 99.3)

   03/18/16    333-210286
21.1       Subsidiaries of ARIAD Pharmaceuticals, Inc.      

10-K

(Exhibit 21.1)

   02/29/16    001-36172
23.1       Consent of Deloitte & Touche LLP      

10-K

(Exhibit 23.1)

   02/29/16    001-36172
31.1       Certification of the Chief Executive Officer    X         
31.2       Certification of the Chief Financial Officer   

X

        
32.1       Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002      

10-K

(Exhibit 32.1)

   02/29/16    001-36172
101       The following materials from ARIAD Pharmaceuticals, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Loss, (iii) Consolidated Statements of Stockholders’ Equity (Deficit), (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements      

10-K

(Exhibit 101)

   02/29/16    001-36172

 

(+) Management contract or compensatory plan or arrangement.
(*) Confidential treatment has been granted by the Securities and Exchange Commission as to certain portions.

 

59

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