This peer group reflects the following changes to the peer group for the compensation decisions made by the compensation committee in 2020: (a) the removal of the following companies: (i) INSYS Therapeutics (which filed bankruptcy), (ii) Myriad Genetics (which has higher revenue and a poor business match), (iii) MannKind Corporation (which had low sales and many one-time events), and (iv) The Medicines Company (which had no revenues due to generic competition), and (b) the addition of Supernus Pharmaceuticals, Inc., AMAG Pharmaceuticals, Inc., FibroGen Inc., Collegium Pharmaceuticals, Inc., ANI Pharmaceuticals, Inc., and Alnylam Pharmaceuticals, Inc.
In March 2020, Dr. Zhang presented to the compensation committee a proposal with respect to the compensation of our executive officers for 2020.
Dr. Zhang’s proposal considered market compensation data in a survey provided by WTW. Based on how the Company compared to the companies in its peer group with respect to (i) revenue, (ii) earnings before interest, taxes, depreciation, and amortization, (iii) operating income, (iv) net income and, (v) total shareholder return for the previous one, three, and five years, (vi) market capitalization, (vii) number of employees; (viii) whether the company manufactures a majority of its products sold; and (ix) the number of units manufactured and sold by the company, the proposal initially considered the compensation provided to similarly situated executives of our peer group companies at the 50th percentile, but was modified based on the following factors: certain members of the peer group differed from the Company in that (i) many peer group members had no products or had most of their products manufactured by other companies and/or (ii) many peer group members are not manufacturers. In particular, only one peer group member manufactured more units than the Company, which manufactured all of its units. This contrasts with the Company’s position as a fully integrated specialty pharmaceutical company that is engaged in research and development, animal study, clinical research, manufacturing, marketing, distribution, active pharmaceutical ingredient production, component production, complex combination drug product manufacturing.
Accordingly, in the cases of Dr. Zhang, Mr. Peters, Dr. Luo, and Mr. Shandell, the proposal adjusted the compensation data for these named executive officers by multiplying the relevant amounts by the following factors, in order to account for these named executive officers’ expertise and responsibilities with respect to manufacturing, operations, quality, and clinical research: (i) 125% for Dr. Zhang, (ii) 105% for Mr. Peters, (iii) 125% for Dr. Luo, and (iv) 105% for Mr. Shandell.
In the case of Mr. Zhou and Mr. Liawatidewi, because many of our peer group members were not manufacturers and the job titles of the top five most highly compensated employees at many of our peer companies did not match to their titles, only three members of the peer group had similarly situated executives. As a result, Dr. Zhang’s proposal adjusted the compensation data for Mr. Zhou and Mr. Liawatidewi by averaging (i) the median base salaries for similarly situated executives at these three peer group companies with (ii) the average base salary of similarly situated executives from companies in various industries (based on market data provided by WTW).
In the discussion below, references to “adjusted market data” refer to the relevant compensation data from the WTW survey, as adjusted in Dr. Zhang’s proposal in the manner described above.
Components of Our Executive Compensation Program
The following sections provide a description of each component of our 2020 executive compensation program, discuss the rationale for each such component, and explain how the compensation committee determined the amounts of compensation and awards.