UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant To Section 14(a) of the Securities Exchange Act of 1934

(Amendment No.      )

PROGENICS PHARMACEUTICALS, INC.

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

April 28, 2015

 

To Our Stockholders:

 

You are cordially invited to attend the Annual Meeting of Stockholders of Progenics Pharmaceuticals, Inc. to be held on Wednesday, June 10, 2015 at 10:00 A.M. local time at The Landmark at Eastview, Rockland Room, 777 Old Saw Mill River Road, Tarrytown, New York.

 

At this Meeting, you are being asked to consider and vote on (i) the election of Progenics' directors, (ii) the annual advisory vote on executive compensation, and (iii) ratifying your Board's selection of Ernst & Young LLP to serve as Progenics' independent registered public accounting firm for 2015.

 

Your Board encourages stockholders to participate in Progenics' affairs and invites you to attend the Meeting in person. It is always important that your shares be represented. Whether or not you decide to attend the Meeting, we urge you to vote. Even if you return a Proxy Card or vote via the Internet or by telephone, you may still attend the Meeting and vote in person.

Thank you for your participation.

Very truly yours,

PETER J. CROWLEY

Chairman of the Board of Directors

PROGENICS PHARMACEUTICALS, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To be held June 10, 2015

  

The Annual Meeting of Stockholders of Progenics Pharmaceuticals, Inc. will be held at The Landmark at Eastview, Rockland Room, 777 Old Saw Mill River Road, Tarrytown, New York, on Wednesday, June 10, 2015 at 10:00 A.M. local time, for the purpose of considering and voting upon the following matters, each as more fully described in the attached Proxy Statement:

Stockholders of record at the close of business on April 15, 2015 are entitled to receive notice of and vote at the Meeting. A list of stockholders entitled to vote at the Meeting is open to examination by any stockholder at our principal offices, 777 Old Saw Mill River Road, Tarrytown, New York 10591.

Whether or not you plan to attend the Meeting, please vote your shares promptly via the Internet or the toll-free telephone number as described in the enclosed materials. If you received a Proxy Card by mail, please sign, date and return it in the envelope provided. If you attend the Meeting and vote in person, your vote by Proxy will not be used. You may revoke your Proxy at any time prior to its exercise, regardless of the manner used to transmit your voting instructions.

 

Promptly communicating your voting instructions by any of these methods will help us in preparing for the Meeting. We greatly appreciate your cooperation and participation.

 

By order of the Board of Directors,

  

Angelo W. Lovallo, Jr.

Vice President, Finance and Treasurer

 

Tarrytown, New York

April 28, 2015

Table of Contents

PROGENICS PHARMACEUTICALS, INC.

777 Old Saw Mill River Road

Tarrytown, New York 10591

 

April 28, 2015

 

PROXY STATEMENT FOR 2015 ANNUAL MEETING OF STOCKHOLDERS

 

This Proxy Statement is furnished to holders of Progenics Pharmaceuticals, Inc. common stock, par value $.0013 per share, in connection with the solicitation of proxies, in the accompanying form, by our Board of Directors for use at the Annual Meeting of Stockholders to be held at The Landmark at Eastview, Rockland Room, 777 Old Saw Mill River Road, Tarrytown, New York on Wednesday, June 10, 2015, at 10:00 A.M. local time, and at any and all adjournments thereof.

 

Our proxy materials are most readily available to stockholders on the Internet. On the date of this Proxy Statement, we are

·	Mailing to stockholders a Notice of Internet Availability of Proxy Materials that contains instructions on how to access the proxy materials online and how to request a physical or email copy; and

·

Making available at www.proxyvote.com the Notice, Proxy Statement, Proxy Card, and a copy of our 2014 Annual Report to Stockholders, which includes our Annual Report on Form 10-K to the U.S. Securities and Exchange Commission. To view these documents, enter the 12-digit control number which appears on your Notice.

These proxy materials and our other SEC filings are available on the Internet at www.progenics.com, and on the SEC's EDGAR system, at www.sec.gov. You may also obtain without charge a copy of our Form 10-K by writing to Investor Relations at our address above.

Stockholders of record at the close of business on April 15, 2015 are entitled to vote at the Meeting and any adjournment thereof. At that date, there were outstanding 69,644,949 shares of Progenics common stock, our only class of voting securities outstanding. Each stockholder is entitled to one vote for each share of common stock registered in the holder's name on the record date. A majority of all shares of common stock outstanding constitutes a quorum and is required to be present in person or by proxy to conduct business at the Meeting.

You may revoke the authority granted by your proxy at any time prior to its use by filing with our Corporate Secretary a written revocation, submitting a new, proper proxy via the Internet or telephone after the date of the proxy to be revoked, or attending the Meeting and voting in person. The Company's officers or employees will solicit proxies chiefly through dissemination of proxy materials via the Internet and the mails, and we may also solicit proxies in person or by telephone or other electronic communication. We may also enlist the aid of brokerage houses or our transfer agent in soliciting proxies. We will bear all solicitation expenses, including costs of preparing, assembling and distributing the proxy materials.

 

Shares of common stock represented by unrevoked proxies will be voted in accordance with the choice or instructions specified on the proxy. The persons named in the proxy intend, unless otherwise specifically instructed in the proxy, to vote all proxies received by them (i) FOR electing the seven director nominees named in Proposal 1, (ii) FOR approving, on an advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement, and (iii) FOR ratifying the Board's selection of Ernst & Young LLP to serve as Progenics' independent registered public accounting firm for 2015.

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PROPOSAL 1:  ELECTION OF DIRECTORS

 

At the Meeting, seven directors are to be elected to serve until the next Annual Meeting of Stockholders and until their respective successors are elected and have qualified. Proxies given pursuant to this solicitation will be voted as specified in the proxies, and if no specification is made will be voted in favor of the seven nominees listed below. Should a nominee become unavailable to serve for any reason, the proxies will be voted for an alternative nominee to be determined by the persons named in the Proxy Card. The Board has no reason to believe that any nominee will be unavailable. Proxies cannot be voted for a greater number of persons than the number of nominees named.

Our By-Laws require that in order to be elected, a director nominee must receive a majority of the votes cast with respect to such nominee in uncontested elections (the number of shares voted "for" a director nominee must exceed the number of votes cast "against" that nominee). If a nominee who is currently serving as a director is not re-elected, Delaware law provides that the director continues to serve on the Board until his or her successor is elected and qualified or until earlier resignation or removal (known as the "holdover rule"). In light of the holdover rule and to give appropriate effect to the majority voting standard, each director named below standing for election has, in accordance with our By-Laws and Corporate Governance Guidelines, submitted a contingent resignation which becomes effective only if the director fails to receive a sufficient number of votes for re-election at an annual meeting and the Board accepts the resignation. If an incumbent director does not receive the required vote for re-election, our Nominating and Corporate Governance Committee would make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board would act on the Committee's recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date of certification of the election results.

 

Director Nominees

 

Our nominees for directors of the Company, all of whom are currently directors, are listed below together with information concerning (i) their principal occupations or employment, including other public-company directorships, during the past five years, and (ii) the particular experience, qualifications, attributes and/or skills of each nominee that led the Board, and the Nominating and Corporate Governance Committee and the Company's independent directors each to determine that he or she should serve as a director.

 

 

Mr. Crowley, 56, is an Operating Partner of MTS Health Partners, L.P., a New York based healthcare merchant bank, and an Operating Partner at JH Partners LLC, a private equity firm, in which capacities he has served since 2011 and 2008, respectively. Mr. Crowley retired in 2008 as Managing Director of the Healthcare Investment Banking group at Oppenheimer & Co. Inc. (formerly CIBC World Markets Inc.), which he headed since 1995, with responsibility for public and private financing and advisory services for biotechnology, pharmaceutical, medical device and healthcare services companies. Mr. Crowley serves on the boards of directors of Mount Sinai Hospital, the Foundation Fighting Blindness and Rye Country Day School. He is also a board member at Woodbury Health Products Inc., a catheter distribution company; Celerion, a contract research organization; Ouidad, Inc., a hair salon company; and NapaStyle, Inc., a specialty food and furnishings company. Mr. Crowley holds an M.B.A. in finance from Columbia University Graduate School of Business and a B.A. in economics from Harvard University.

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Mr. Crowley brings to the Board deep perspective into U.S. and international capital markets and strategic business trends. As a senior investment banker specializing in the healthcare industry, Mr. Crowley developed financial and analytic capabilities which are key inputs in the development of the Company's strategic direction, the setting of goals for its financial and operational plans, and the oversight of its financial reporting and audit functions. He has extensive knowledge of, and contacts with major participants in, the global biotechnology and pharmaceutical industries, as well as a wealth of experience evaluating the performance of businesses and products in the Company's industry and designing appropriate strategic and financial alternatives for them.

Dr. Maddon, 55, Progenics' Founder and Vice Chairman (since 2011), has served in various capacities since the Company's inception, including Chairman (from 1988 to 2003), Chief Executive Officer (from 1988 to 2011), President (from 1988 to 1997) and Chief Science Officer (from 1988 to 2012). Now a private investor and entrepreneur, he serves as a trustee of Columbia University and as a member of the Board of Advisors of its Medical Center. He also serves as a trustee of the Society for Science & the Public and NYSCI (New York Hall of Science), as well as a director of  the Fund for Public Health in New York, and the Sabin Vaccine Institute. Dr. Maddon serves as a director of Azevan Pharmaceuticals, Inc., a privately-held biotechnology company developing therapeutics to treat disorders of stress, mood, and behavior, as well as an advisor to several biotechnology and nutrition companies. Prior to founding Progenics, Dr. Maddon performed research at the Howard Hughes Medical Institute at Columbia University in the laboratory of Dr. Richard Axel from 1981 to 1988. Dr. Maddon holds a B.A. in biochemistry, an M.D., and a Ph.D. in biochemistry and molecular biophysics, all from Columbia University.

 

As a result of Dr. Maddon's long tenure as CEO and CSO, he has extensive knowledge of the Company and the biopharmaceutical industry and provides valuable business, leadership and management insights. Dr. Maddon's background reflects significant achievements in and knowledge of business, science and medicine, with a deep understanding of product development and the role of science in business. Through his service as a board member of other organizations, he also brings important insight on emerging technologies, products and markets, and how various areas of research and development, and the Company as a whole, compare against competing alternatives.

Mr. Baker, 60, Chief Executive Officer, joined the Company in 2005 as Senior Vice President & General Counsel and Secretary. In 2008, he was appointed Executive Vice President – Corporate, in 2009 became President and a director, and has been CEO since March 2011. From 2003 to 2005, Mr. Baker was Chief Business Officer, Secretary and a director of New York Trans Harbor LLC, a privately-held ferry operation in New York City. From 1997 to 2001, he was Executive Vice President, Chief Legal Officer and Secretary of Continental Grain Company, a privately-held international agri-business and financial concern. Prior thereto, he was a partner and Co-Chairman of the Capital Markets Group of the New York law firm, Dewey Ballantine LLP. Mr. Baker has an A.B. degree from Columbia College and a J.D. from the Columbia University School of Law.

Mr. Baker's qualifications for serving as a director of the Company include his 30 years of business and legal experience, a significant portion of which has been in the life sciences industry. Mr. Baker has been involved in the senior management of the organizations with which he worked before joining the Company, and has extensive experience managing public and private companies, including specific experience with respect to the financial, accounting, audit, human resources, intellectual property, legal, environmental, insurance, scientific and operational aspects of businesses in diverse industries. He has also served as a legal and business advisor to numerous boards of directors of public and private entities.

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Dr. Ferrante, 57, joined our Board in January 2014. In April 2014, she was appointed head of Research and Development and Chief Medical Officer of Tokai Pharmaceuticals, Inc., a publicly traded biopharmaceutical company developing treatments for prostate cancer and other hormonally driven diseases. From 2007 to July 2013, Dr. Ferrante held senior positions at Millennium Pharmaceuticals, Inc. and its parent company, Takeda Pharmaceutical Company Limited, most recently as Oncology Therapeutic Area Head and Cambridge USA Site Head from May 2013 to July 2013. From 1999 to 2007, she held positions of increasing responsibility at Pfizer Global Research & Development, culminating as Vice President, Oncology Department. She began her career in the pharmaceutical industry in 1995 as Associate Director of Clinical Oncology at Bristol-Myers Squibb Company. For more than a decade prior, she was at the New England Deaconess Hospital in Boston (Beth Israel Deaconess), where she completed her internship and residency in internal medicine followed by her fellowship in hematology and oncology. While at Beth Israel Deaconess, she served as Instructor, Clinical Instructor and Clinical Fellow in Medicine at the Harvard Medical School, and previously was a Bacteriologist for the City of Providence, Rhode Island Water Supply Board. Dr. Ferrante holds a B.S. in Chemistry and Biology from Providence College and an M.D. from Georgetown University; she has also been an author of a number of papers in the oncology field, is an active participant in academic and professional associations and symposia, and holds several patents.

Dr. Ferrante's more than two decades' experience working with major biotechnology and pharmaceutical companies and leading their efforts in oncology research and development and clinical activities, together with her prior experience as a practicing oncologist, gives her deep knowledge in Progenics' principal focus of operations, adding broad and significant insight into our developmental and clinical efforts for the perspective of our Board.

Mr. Kishbauch, 66, has held senior management positions in the life sciences industry for almost three decades, with extensive operational, strategic, product planning and promotion, sales, marketing and product launch experience. He joined our Board in September 2013 after retiring as President and Chief Executive Officer of Achillion Pharmaceuticals, Inc., in which capacities, as well as a director, he served since 2004. Before joining Achillion, Mr. Kishbauch founded in 1996 and served until 2004 as President and Chief Executive Officer of OraPharma, Inc., a publicly traded, commercial-stage pharmaceutical company focused on oral health care which was acquired by Johnson & Johnson in 2003. He previously held senior management positions with MedImmune, Inc. Mr. Kishbauch continues to serve on Achillion's board and currently serves on the board of TetraLogic Pharmaceuticals Corporation, a publicly traded biopharmaceutical company. He was a director of ARIAD Pharmaceuticals, Inc. from 2004 to 2008 and has held board positions with several other life sciences companies. He holds a M.B.A. from the Wharton School of the University of Pennsylvania and a B.A. in biology from Wesleyan University.

Mr. Kishbauch's extensive experience as an entrepreneur and manager, as well as a public company senior executive, has provided him a uniquely comprehensive knowledge of and perspective on our industry and adds significant value to our Board.

 

Dr. Scheinberg, 59, joined our Board in 1996 and has been associated with the Sloan-Kettering Institute for Cancer Research since 1986, where he is, since 2002, the Vincent Astor Chair and Member, Leukemia Service; Chairman, Molecular Pharmacology and Chemistry Program; and Chairman, Experimental Therapeutics Center. He also holds the positions of Professor of Medicine (since 2002) and of Pharmacology (since 1999) at the Weill-Cornell Medical College of Cornell University, and is a Founder and Director of the Tri-Institutional Therapeutics Discovery Institute, a non-profit drug development corporation formed by Sloan-Kettering, Cornell and The Rockefeller University since 2013. He received a B.A. from Cornell and an M.D. and a Ph.D. in pharmacology and experimental therapeutics from The Johns Hopkins University School of Medicine. Dr. Scheinberg is a director, member of the science and technology committee and chairman of the compensation committee of ContraFect Corporation, a publicly traded biotechnology company.

Dr. Scheinberg's expertise as a leading academic oncologist at Sloan-Kettering and Cornell is exceptionally valuable to the Board and its Science and Strategy Committee, which he chairs. He evaluates potential research directions and the design and monitoring of resulting programs. His broad knowledge of and contacts in the highest levels of medical research are important to the Company's efforts to advance its research and development initiatives.

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Ms. Williams' experience gives her special insight into the financial and operational issues that a company in the pharmaceutical industry faces. She brings expertise to the Company in the areas of financial analysis and reporting, internal auditing and controls, and risk management oversight. Her board and audit committee roles at other public companies give her a broad perspective in the areas of financial reporting, and audit and enterprise risk management (ERM). Her international training and experience with global corporations helps to guide the Company as its operations and activities have become more global.

 

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PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION

 Under the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act our stockholders are entitled to vote, on an advisory, nonbinding basis, on the compensation of the following individuals: Mark R. Baker, our Chief Executive Officer (CEO), Angelo W. Lovallo, Jr., our Principal Financial Officer (PFO), and Robert J. Israel, our Executive Vice President, Innovation, as well as Hagop Youssoufian, our former Executive Vice President, Research and Development, who terminated employment with us in September 2014. These individuals are referred to as Named Executive Officers (NEOs). Biographical, compensation and other information concerning the NEOs appears in Executive and Other Officers and Executive Compensation, below.

 As described in detail under Executive Compensation -- Compensation Discussion and Analysis, senior executive compensation at Progenics is designed to retain and incentivize high quality executives whose efforts are key to the Company's long-term success. Our NEOs are rewarded on the basis of individual and corporate performance measured against established corporate and strategic goals. The CD&A provides details about our executive compensation philosophy, objectives and processes as well as information about 2014 compensation of the NEOs.

 The Compensation Committee of your Board establishes and reviews NEO compensation to help ensure it achieves the desired goal of aligning executive compensation with our stockholders' interests and current market practices.

 In this proposal we ask stockholders to give advisory approval of the compensation of our Named Executive Officers. This vote is intended to address overall NEO compensation and the philosophy, policies and practices described in this Proxy Statement, rather than any specific item of compensation. We recommend that stockholders cast a non-binding advisory vote "FOR" the following resolution at the Annual Meeting:

"RESOLVED, that the compensation of the Company's Named Executive Officers, as disclosed in the Company's Proxy Statement for the 2015 Annual Meeting of Stockholders, particularly in the Compensation Discussion and Analysis and compensation tables, is hereby approved."

 The say-on-pay vote is advisory, and therefore not binding on Progenics, the Compensation Committee or the Board. Nevertheless, the Committee and the Board value the opinions of stockholders, whether expressed through this vote or otherwise, and, accordingly, intend to consider the results of this vote in making future determinations regarding executive compensation arrangements.

 The Company's current policy is to provide stockholders with an opportunity to approve the compensation of the NEOs each year at the annual meeting of stockholders. It is expected that the next such vote will occur at the 2016 annual meeting of stockholders.

VOTING

 

A majority of the votes cast at the Meeting in person or by proxy is necessary for approval of this advisory resolution. Since neither abstentions nor broker non-votes are considered to be "votes cast," they will not affect the outcome of the vote.

 

Your Board deems approval of this advisory resolution to be in the Company's and stockholders' best interests and recommends a vote FOR Proposal 2.

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		2014				2013
Audit Fees(1)		$	498,490			$	485,000
Tax Fees(2)			81,770				10,000
All Other Fees(3)			2,126				2,062

(1)	In connection with (i) the audit of our annual financial statements, including attestation services required under section 404 of the Sarbanes-Oxley Act of 2002 and reviews of quarterly interim financial statements ($384,490 for E&Y in 2014; $367,000 for E&Y and $7,500 for PwC in 2013), (ii) filing of replacement shelf registration statement with the SEC ($50,000 for E&Y in 2014), and (iii) the Company's 2014 and 2013 follow-on public offerings ($64,000 for E&Y in 2014; $83,000 for E&Y and $27,500 for PwC in 2013).
(2)	In connection with tax return preparation ($25,000 for 2014 and $10,000 for 2013) and Section 382 Analysis and consultations ($56,770 for 2014).
(3)	For proprietary internet-based services ($2,126 and $2,062 for E&Y in 2014 and 2013, respectively).

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Pre-Approval of Audit and Non-Audit Services by the Audit Committee

 

Audit and non-audit services performed for the Company by its independent registered public accounting firm must be pre-approved by the Audit Committee in order to assure that the provision of such services does not impair the accounting firm's independence. During the first quarter of each year, the Committee reviews a schedule prepared by the accounting firm of certain types of services to be provided for that year along with projected fees. The Committee reviews the schedule and provides general pre-approval of those types of services. The fee amounts are updated to the extent necessary at regularly scheduled meetings of the Committee. Any additional service proposed to be provided after the annual pre-approval process requires specific pre-approval by the Audit Committee. The Committee may delegate either general or specific pre-approval authority to its chair or any other member(s). The member(s) to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Committee at its next meeting. The Committee approved all services described above during 2014 and 2013.

 

VOTING

 

A majority of the votes cast at the Meeting in person or by proxy is necessary for ratification of the selection of E&Y as our independent registered public accounting firm. Since neither abstentions nor broker non-votes are considered to be "votes cast," they will not affect the outcome of the vote.

 

Your Board deems the ratification of the selection of Ernst & Young LLP to be in the Company's and stockholders' best interests and recommends a vote FOR Proposal 3.

 

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EXECUTIVE AND OTHER OFFICERS

 

Information concerning our executive and other officers is set forth below. There are no family relationships between any of our directors and executive officers. None of the organizations identified below with which an officer has previously been employed or associated is a parent, subsidiary or affiliate of the Company. Background information for Mr. Baker is provided under Proposal 1.

 

Dr. Israel, 58, Executive Vice President, Innovation, has been with Progenics since 1994. He previously held oncology positions at Sandoz Pharmaceuticals Corporation and Schering-Plough Corporation. Dr. Israel is a licensed physician and is board certified in internal medicine and medical oncology. He received a B.A. in physics from Rutgers University and an M.D. from the University of Pennsylvania, and completed an oncology fellowship at the Memorial Sloan-Kettering Cancer Center. Dr. Israel has been a consultant to the Solid Tumor Service at Sloan-Kettering.

Dr. Wong, 58, currently serves as Executive Vice President, Development. For three years prior to joining Progenics in 2007, Dr. Wong was Principal at Theritas Pharmaceutical Consultants. From 1989 to 2004, she held positions of increasing responsibility in preclinical development and pharmacology at Emisphere Technologies, Vivoquest, and Regeneron Pharmaceuticals. Dr. Wong has been a co-author on over 30 scientific articles for peer-reviewed journals. She received a B.Sc. in biology from the Mississippi University for Women, a Ph.D. in anatomy and neurobiology from the University of Maryland School of Medicine, and completed a postdoctoral fellowship in neurology at the Albert Einstein College of Medicine.

Dr. Ray, 62, Senior Vice President, Manufacturing, joined Progenics in 2001. Prior to joining Progenics, Dr. Ray served as Director of Bioprocess Development at Ortec International, and before that held positions of increasing responsibility at Hoffmann-La Roche in the areas of GMP Manufacturing and Process Development, ultimately as Research Leader, Biopharmaceuticals. Early in his career he developed process technology for biopharmaceutical manufacturing at Verax Corporation. Dr. Ray received an M.S. and Ph.D. in chemical and biochemical engineering from Rutgers University and a B.S. in chemical engineering from Jadavpur University, India.

Ms. Assumma, 61, joined Progenics in 2004 and currently serves as Vice President, Regulatory Affairs. She has over 30 years' experience in the pharmaceutical industry and regulatory affairs at companies including Dov Pharmaceuticals, Emisphere Technologies, Bayer and American Cyanamid. Ms. Assumma earned her M.S. in pharmacology from New York Medical College and a B.S. in biology from Fordham University. 

 

Mr. Lovallo, 50, was appointed Treasurer in 2011 and Vice President, Finance in 2013. Before joining Progenics in 2008 as Senior Director, Financial Reporting, he held Vice President, Financial Reporting positions at MBIA Inc. and AllianceBernstein. Earlier in his career, he was in accounting policy at Salomon Smith Barney and a senior manager at KPMG LLP. He received a B.B.A. in public accounting from Hofstra University and is a Certified Public Accountant.

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CORPORATE GOVERNANCE

 

The Board and its Committees

 

Leadership. Since 2004, the positions of Board Chair and Chief Executive of the Company have been held by different individuals.

Our Chair, Mr. Crowley, and Mr. Baker, Chief Executive Officer and a director, provide leadership to the Board of Directors by setting meeting agendas, preparing information and alternatives for presentation to the Board and leading discussions among and decision making by the Board. In this process, other members of the Board, including Committee chairs, interact freely with Messrs. Crowley and Baker and with other members generally in contributing to the Board's direction and priorities. Individual directors may and do become involved in matters outside the specific bounds of their Committee responsibilities as and when circumstances warrant and the Board deems appropriate.

The Board believes that this structure is appropriate because it results in a balanced leadership, combining an independent Chair with members of management involved in the day-to-day operation of the Company's business.

During 2014, the Board held eight meetings. It is the policy of the Board to hold an executive session of independent directors at each Board meeting. One Board member did not attend one meeting of the Board during 2014; all others attended all meetings.

Committees. The Board currently has four standing committees.  All of our directors attended all meetings of the committee(s) on which he or she served during the year 2014. Committee charters are available on our website, www.progenics.com.

 

The Audit Committee reviews our quarterly and annual financial statements and the reporting documents in which they are submitted to the SEC, consults with our independent auditors and examines and considers other matters relating to the audit of our financial statements and our financial condition and affairs generally, including the selection and retention of our independent auditors. It is responsible for oversight of the Company's internal auditor, who reports directly to it, oversees the work of management to identify, assess and monitor risk, and liaises with management and the Board in risk mitigation efforts. The Board has determined that Ms. Williams, Chair of the Committee, is an "audit committee financial expert" as such term is defined in in SEC rules. Dr. Ferrante and Mr. Kishbauch are also members of the Audit Committee. The Committee held nine meetings during 2014.

 

The Compensation Committee reviews and makes recommendations concerning salaries and incentive compensation for our employees and consultants, establishes and approves salaries and incentive compensation for our executive officers and other senior employees, administers our equity incentive plan and otherwise seeks to ensure that our compensation philosophy is consistent with the best interests of the Company, its stockholders and our employees, and is properly implemented. Mr. Crowley is Chair and Mr. Kishbauch is a member of this Committee. The Committee held five meetings during 2014.

 

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The Nominating and Corporate Governance Committee is responsible for developing and implementing policies and procedures intended to constitute and appropriately organize the Board to oversee the business and affairs of the Company and meet its fiduciary obligations to the Company and its stockholders on an ongoing basis. Among its specific duties, this Committee is tasked with (i) making recommendations to the Board about our corporate governance processes, (ii) assisting in identifying and recruiting candidates for the Board, (iii) administering the Nominations Policy, (iv) considering nominations to the Board received from stockholders, (v) making recommendations to the Board regarding the membership and chairs of the Board's committees, (vi) overseeing the annual evaluation of the effectiveness of the organization of the Board and of each of its committees, (vii) periodically reviewing and making recommendations to the full Board regarding the type and amount of Board compensation for non-employee directors, and (viii) being responsible for recommending to the Board on whether to accept or reject the resignation of any incumbent director who does not receive the required vote for re-election in an uncontested election under our majority-voting standard. The Committee also annually reports findings of fact to the Board that permit the Board to make affirmative determinations regarding each Board and committee member with respect to independence and expertise criteria established by the NASDAQ Marketplace and SEC rules and applicable law. Mr. Kishbauch is Chair and Ms. Williams is a member of this Committee. The Committee held two meetings during 2014.

The Science and Strategy Committee, is responsible for periodically examining the Company's direction of and investment in its science and technology initiatives, including its research and development efforts, assisting the Board in its review, evaluation and oversight of such initiatives and efforts, and advising the Board on scientific matters involving the Company's research and development, clinical and commercial programs, including internal projects, interaction with academic and other outside research organizations, and acquisition and development of technologies. It also monitors and advises on scientific matters relating to the Company's efforts to identify and in-license or acquire technologies complementary to or expanding on its strategic focus, and assists the Board in its review, evaluation and oversight of, and advises the Board on scientific matters involving, such efforts. Dr. Scheinberg is Chair of this Committee and Messrs. Baker and Crowley and Drs. Ferrante and Maddon are members. The Committee held eight meetings during 2014.

Oversight of Risk Management

Company management is responsible for assessing and managing Progenics' exposure to various risks. Responsibility for risk oversight by the Board of Directors lies with the entire Board. Responsibility for the administration of this risk oversight lies primarily with the Board's leadership.

As a research and development public company focused primarily on later-stage clinical product candidates, the Company's principal risks lie in the administration of its financial and operational controls and in the conduct of its research, development and clinical trial activities.

The Audit Committee, under the leadership of Chair Williams, has the role of monitoring risks associated with the Company's financial and operational controls, including reviewing the preparation and auditing of financial statements and the safeguarding of the Company's financial and other assets. Under the oversight of the Audit Committee, the Company's internal auditor, who reports to the Audit Committee, performs an ongoing enterprise-wide assessment, commenced in 2009, of the Company's risks, and provides reports on that assessment which are reviewed by the Audit Committee and the entire Board.

The Science and Strategy Committee reviews the Company's research and development activities. This Committee, under the leadership of Dr. Scheinberg, has the role of overseeing management's monitoring of risks associated with the Company's research, development and clinical trial activities.

As part of the Company's Enterprise Risk Management efforts, the Audit Committee provides to the Board updates summarizing the Committee's oversight of the Company's internal auditor's and senior management's ongoing application of ERM evaluative and quantification procedures to the Company's activities and changes in existing and new risk evaluations and targets resulting from the ERM process.  In 2014, the Audit Committee, in addition to its ongoing Company-wide ERM monitoring efforts, provided two reports to the Board, the primary focus of each being the Company's successful integration of the Molecular Insight acquisition including bolstering clinical research capabilities and our capital position enabling us to continue to fund our later-stage development programs. In addition, we addressed cyber risk by hiring a third-party firm to assess our information systems and cyber security programs.

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On April 1, 2015, Valeant Pharmaceuticals International, Inc. acquired Salix Pharmaceuticals, Ltd., and Salix became a wholly-owned subsidiary of Valeant (references hereinafter to "Valeant" refer to Salix and Valeant as a consolidated entity as a result of the acquisition). Since sales of the Company's commercial product, RELISTOR^®, are the responsibility of Valeant, risks to the Company with respect to such sales are monitored by the entire Board of Directors through oversight of the Company's contractual arrangements and collaborative relationship with Valeant. We closely monitored Valeant's management- and operations-related disclosures as well as its related communications pertaining to product inventory initiatives and resulting impact to its net product sales. In addition, we continue to monitor our Relistor franchise in light of the recently completed acquisition.

 

Director Independence and Other Qualifications

 

The Board has determined each of Messrs. Crowley and Kishbauch, Drs. Ferrante and Scheinberg and Ms. Williams to be an "independent director" as such term is defined in NASDAQ Marketplace rules.

The Board has also determined that each member of the Audit Committee and the Compensation Committee meets the independence standards applicable to those committees prescribed by the NASDAQ Marketplace rules, the SEC and the Internal Revenue Service.  In accordance with the applicable NASDAQ rule, the Company's director nominees each year, as well as new candidates for director, are recommended for the Board's selection by independent directors constituting a majority of the Board's independent directors in a vote in which only independent directors participate.

 

With the assistance of our legal counsel, the Nominating and Corporate Governance Committee reviews the applicable legal standards for Board member and Board committee independence and the criteria applied to determine "audit committee financial expert" status, as well as the answers to annual questionnaires completed by each of our directors. On the basis of this review, the Committee delivered a report to the full Board and the Board made its independence and "audit committee financial expert" determinations based upon the Committee's report and each member's review of the information made available to the Committee.

Stockholder Communications with the Board; Board Attendance at the Annual Meeting of Stockholders

 

Stockholders may communicate with the Board by writing to the Board care of the Corporate Secretary at our corporate headquarters.  In general, any stockholder communication about bona fide issues concerning Progenics will be forwarded by our Corporate Secretary to the Board or a Board committee, as appropriate.

 

It is our policy that the members of the Board attend annual meetings of our stockholders. All of the seven members of our Board at the time attended the 2014 Annual Meeting of Stockholders.

 

Code of Business Ethics and Conduct

 

We have a Code of Business Ethics and Conduct which is applicable to all of our directors, employees and consultants. The Code meets the criteria for a "code of ethics" under the SEC rules and "code of conduct" under the NASDAQ Marketplace rules. The Code is described in more detail under Other Matters - Certain Relationships and Related Transactions, below, and is available on our website at http://www.progenics.com/documents.cfm.

 

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Director Nominations Process

 

The Nominating and Corporate Governance Committee administers our Director Nominations Policy, which establishes criteria for Board member candidates and the process by which candidates for possible inclusion in our recommended slate of director nominees are selected. The Committee's charter, which includes the Nominations Policy, is available on our website at www.progenics.com.

 

 

 

 

 

 

 

 

 

 

 

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If a search firm is used, it may be asked to identify possible candidates who meet the minimum and desired qualifications expressed in the Nominations Policy; interview and screen candidates, and conduct appropriate background and reference checks; act as a liaison among the Board, the Committee and the candidate during the screening and evaluation process; and be available for consultation as needed by the Committee. The Committee has the authority under its Charter to approve such firms' fees and other retention terms.

 

Nomination of Directors by Stockholders. The Committee will also consider properly submitted stockholder nominations for candidates for membership on the Board. Any of our stockholders may recommend one or more eligible persons for election as a director at an annual meeting of stockholders if the stockholder provides the recommendation to our Corporate Secretary at our principal executive offices not less than 120 days prior to the anniversary of the date of the proxy statement released to stockholders in connection with the previous year's annual meeting. In the event that we set an annual meeting date that is not within 30 days before or after the date of the immediately preceding annual stockholders meeting, the stockholder's recommendation must be received no later than the close of business on the tenth day following the day on which notice of the date of the annual meeting was mailed or public disclosure of that date was made, whichever occurs first.

 

To be eligible for consideration, a candidate proposed by a stockholder must be independent of the stockholder providing the nomination in all respects, as determined by the Committee or by applicable law, qualify as an "independent director" under the NASDAQ Marketplace rules and meet the Minimum Criteria for Board Members set forth above.

 

Evaluation of Candidates. The Committee will consider all candidates identified through the processes described above, and will evaluate each of them, including incumbents, based on the same criteria.

 

If, based on the Committee's or other Board member(s)' initial evaluation, a candidate continues to be of interest, the Committee Chair or one or more other Board members will interview the candidate and communicate the interviewer(s)' evaluation to the other Committee member(s), the Chairman of the Board, the CEO, and the independent members of the Board. Later reviews will be conducted by other members of the Committee, the Board and senior management. Ultimately, background and reference checks will be conducted and the Committee will meet to finalize its list of recommended candidates for the Board's consideration.

 

Timing of the Identification and Evaluation Process. Our fiscal year is the calendar year. The Committee expects generally to meet one or more times prior to March 31 of each year to consider, among other things, candidates to be recommended to the Board and to the independent members of the Board for inclusion in our recommended slate of director nominees for the next annual meeting and our Proxy Statement. The Board usually meets each March and at that meeting vote on, among other things, the slate of director nominees to be submitted to and recommended for election by stockholders at the annual meeting, which is typically held in May or June.

 

All candidates, whether identified internally or by a nomination received from a stockholder, who after evaluation are recommended by the Committee and the independent members of the Board, and approved by the Board, will be included in our recommended slate of director nominees in our Proxy Statement.

 

Future Revisions to the Nominations Policy. The Nominations Policy is intended to provide a flexible set of guidelines for the effective functioning of our director nominations process. The Nominating and Corporate Governance Committee intends to review the Nominations Policy at least annually and anticipates that modifications may be necessary or desirable from time to time as our needs and circumstances evolve, and as applicable legal or listing standards change. The Committee may amend the Nominations Policy at any time, in which case the most current version will be available on our web site at www.progenics.com.

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Board Committee Reports

Audit Committee Report

 

The Audit Committee of the Board consists of three non-employee independent directors: Ms. Williams, Chair, Dr. Ferrante and Mr. Kishbauch. The Board and the Audit Committee believe that the Audit Committee's current member composition satisfies the NASDAQ Marketplace rule that governs audit committee composition, including the requirements that Audit Committee members satisfy the criteria for Audit Committee membership set forth in the federal Sarbanes-Oxley Act and SEC rules. The Audit Committee operates under a written Charter adopted by the Committee and approved by the Board as a whole.

 

As set forth in its Charter, the Audit Committee's role is one of oversight. Progenics management is responsible for preparing our financial statements and the independent registered public accounting firm is responsible for auditing those financial statements and expressing an opinion as to their conformity with accounting principles generally accepted in the United States.

 

The Audit Committee's primary function is to assist the Board in monitoring and overseeing the integrity of our financial statements, systems of internal control and the audit process. As mentioned in Oversight of Risk Management above, in 2014 the Audit Committee, in addition to its ongoing Company-wide ERM monitoring efforts, focused in particular on the Company's ERM analyses reflecting the integration of the Molecular Insight acquisition, bolstering clinical research capabilities and our capital position and addressing cyber security risk.

The Committee as part of its regular duties selects, subject to stockholder ratification, the independent registered public accounting firm for the Company. In last year's Proxy Statement, the Audit Committee reported that it had performed the necessary procedures to enable it to recommend to the Board the selection of E&Y as the Company's auditor for the year 2014, which selection was ratified by the Company's shareholders.  During 2014, the Audit Committee gave particular attention to the Company's preparation of interim and year-end financial statements and the valuation of its in-process research and development assets acquired as a result of the Company's 2013 acquisition of Molecular Insight. As part of its other regular duties, the Committee met regularly with management and E&Y, and reviewed and discussed the Company's audited financial statements. The Committee also discussed with members of E&Y each of the matters required to be discussed by auditing standards set by the Public Company Accounting Oversight Board, including Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the PCAOB in Rule 3200T. The Committee also received and reviewed the written disclosures and the letter from E&Y required by applicable requirements of the PCAOB regarding E&Y's communications with the Committee concerning independence, and discussed E&Y's independence with it. When considering E&Y's independence, the Committee considered whether their provision of services to the Company beyond those rendered in connection with their audit and review of the Company's financial statements was compatible with maintaining their independence, and discussed with them any relationships that may affect their objectivity and independence. The Committee also reviewed, among other things, the amount of fees paid to E&Y for audit and non-audit services in 2014 as presented under Fees Billed for Services Rendered by Current and Former Accounting Firms, above. Based on these discussions and considerations, the Committee was satisfied as to E&Y's independence.

 

The members of the Audit Committee are not professional accountants or auditors and, in performing their oversight role, have relied without independent verification on the information and representations provided to them by management and E&Y. Accordingly, the Committee's oversight does not provide an independent basis to certify that the audit of the Company's financial statements has been carried out in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with accounting principles generally accepted in the United States or that E&Y is in fact "independent."

 

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Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements referred to above be included in the Company's 2014 Annual Report on Form 10-K. The Committee has also determined, subject to stockholder ratification, to retain E&Y as the independent registered public accounting firm for the Company for 2015.

By the Audit Committee of the Board of Directors,

Nicole S. Williams, Chair

Karen J. Ferrante

Michael D. Kishbauch

Compensation Committee Report

 

The Compensation Committee has submitted the following report for inclusion in this Proxy Statement:

 

Our Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management. Based on our Committee's review of and the discussions with management with respect to the Compensation Discussion and Analysis, our Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in the Company's 2014 Annual Report on Form 10-K.

 

The foregoing report is provided by the following directors, who constitute the Committee:

By the Compensation Committee of the Board of Directors,

Peter J. Crowley, Chair

Michael D. Kishbauch

 

 

Compensation Committee Interlocks and Insider Participation. The Compensation Committee's members are independent directors.  As reported in Other Matters -- Certain Relationships and Related Transactions below, Progenics in 2012 entered into a financial advisory agreement with MTS Health Partners, L.P., of which Mr. Crowley is a Senior Managing Director and partner, on customary terms and conditions, whereby MTS received a monthly retainer of $10,000 during the term of the agreement and $300,000 for MTS' services in connection with the Company's January 2013 acquisition of Molecular Insight. The agreement was terminated in June 2013.  The directors who served on the Compensation Committee in 2014 did not have any additional affiliations or relationships with the Company which require disclosure under this heading. None of the Company's executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board or its Compensation Committee.

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EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Progenics is a biotechnology company engaged in drug development and commercialization, focusing on oncology. We compete with biopharmaceutical companies of all sizes to attract employees with the skills and expertise necessary to develop and commercialize drugs and achieve our objectives. Since the funds we can use for compensation are limited, we have worked to develop a compensation program that allows us to attract and retain talented individuals with the essential experience and skills we need at the executive level while being mindful of our limited resources. We have employed a philosophy which combines base salary with bonus compensation and long-term equity incentives, primarily in the form of stock options. We strive to conserve cash resources by setting base salaries and total cash compensation at what we deem an appropriate level in view of market compensation data in our industry and other factors as discussed below, while providing meaningful long-term equity opportunities for our executives.

This Compensation Discussion and Analysis (CD&A) outlines, among other things, our compensation philosophy, objectives and processes as they relate to our Named Executive Officers (NEOs) in 2014: Mark R. Baker, our CEO; Vice President and Treasurer, Angelo W. Lovallo, Jr. (PFO); Executive Vice President, Dr. Robert J. Israel, and former Executive Vice President, Dr. Hagop Youssoufian, whose employment with us terminated in September 2014.

 

Overview. Progenics made significant progress in achieving strategic objectives and program development in 2014. Our principal efforts were to (a) advance our oncology drug candidate programs, particularly to resume our phase 2b registrational trial under a special protocol assessment for Azedra^TM in the treatment of pheochromocytoma and paraganglioma and to complete testing of a second cohort of a phase 2 trial of our PSMA ADC product candidate for prostate cancer including identifying our clinical and commercial strategy; (b) advance our 1404 targeted imaging agent by identifying our clinical and commercial strategy; (c) advance our Relistor franchise in the United States and abroad; and (d) continue efforts to identify and pursue a number of opportunities to expand our oncology pipeline through in-licensing and acquisitions.

At the same time, we continued our focus on costs control and maintaining a sustainable cash burn rate, and bolstered our financial resources by completing a follow-on public offering of common stock in early 2014 and received a $40 million milestone from our Relistor partner Valeant, upon the U.S. Food and Drug Administration's expanded approval of subcutaneous injection for patients with chronic non-cancer pain.

We believe the compensation of our executives reflected the performance of the Company during 2014 and that our program generally strongly links executive compensation with Company performance. We have adopted a formal annual incentive plan based on established metrics and administered by the Compensation Committee to provide a framework to determine annual bonus payments to NEOs and other executives. As part of that process, we establish annual goals and objectives for the Company and for each NEO, and, as discussed below, determine bonuses based on how well the Company and the executive performed against these goals and objectives as determined by the Compensation Committee. We believe the annual bonus plan helps contribute to the growth of the Company and the creation of value for our stockholders.

A significant percentage of our NEOs' compensation is provided in the form of equity-based awards that we believe further align their interests with those of our stockholders. All of the options we granted to our NEOs in 2014 have an exercise price equal to the closing price of our common stock on the date of grant, and will therefore have value only if our stock price increases. The options vest over a multi-year period to provide an additional retention incentive for our executives.

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There were a number of changes to the peer group for 2014, with seven companies being added to the 2013 peer group and six companies being removed, in order to more closely align our peer group with us in terms of overall size, business model and stage of development.

 

The peer company compensation data provided by FWC is used by the Committee as a general reference point in its compensation review. The Committee does not set compensation levels at any specific level or percentile against this compensation data (i.e., the Committee does not "benchmark" the Company's executive compensation levels). The peer group data is only one point of information taken into account by the Committee in making compensation decisions: its executive compensation determinations are subjective and the result of the Committee's business judgment, which is informed by the experiences of its members as well as the input from, and peer group data provided by, its independent consultant.

In addition to Mr. Baker's recommendations regarding the other NEOs and its review of market data, the Committee considered various other factors in setting 2014 target compensation opportunities such as the individual's corporate roles and responsibilities, particular experience and expertise, performance and specific duties, the scope of his or her position and the department(s) or group(s) for which he or she had responsibility, the Company's overall corporate financial performance and the progress of our research and development programs and strategic initiatives during the year. The Compensation Committee does not assign any particular weighting to any factor and has discretion to consider whatever factors it may deem relevant to a particular decision. Except as otherwise noted in this Compensation Discussion and Analysis, decisions by the Compensation Committee are subjective and the result of the Compensation Committee's business judgment, which is informed by the experiences of the members of the Compensation Committee as well as analysis and input from, and comparable peer data provided by, the Compensation Committee's independent compensation consultants.

Elements of Compensation. We utilize a compensation structure that we believe is in line with that of other companies within the biotechnology industry which primarily includes base salary, annual bonus and long-term incentives. These elements are designed to reward (i) the level of effort and competence demonstrated in light of the executive's duties and responsibilities (base salary), (ii) decision-making that supports our annual product, development and financial goals (annual bonus), and (iii) a focus on building shareholder value over the long term in a sustainable manner by making decisions that will not sacrifice long-term prospects for a particular short-term achievement or goal (long-term incentives).

 

Base Salary. Levels of base salary for our executives in general take into account an individual's role and responsibilities, experience, expertise, individual performance and tenure. The amount is typically set around the median level for the executive's position relative to the peer data provided by the Committee's consultant.

The Compensation Committee approved the following base salary levels for the NEOs for 2014, in each case representing an increase of 3.75% over the executive's 2013 base salary: Mr. Baker $555,699; Mr. Lovallo $288,963; Dr. Israel $440,938; and Dr. Youssoufian $440,938. The Committee determined in its judgment that each of these 2014 salary levels was appropriate relative to the peer company data provided by FWC and in light of the executive's tenure in his position and the other factors noted above.

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Annual Bonus. Beginning in the fourth quarter of each year, the Compensation Committee works collaboratively with senior management to develop corporate goals and objectives tied to strategic plans for the coming year. For 2014, the Committee established five corporate strategic and research and development goals and one operational and financial goal, with the weightings noted below, for use in determining annual cash bonuses:

·	Complete the Azedra manufacturing process and finish preparations for resuming the Azedra clinical trial by year-end (20%).

·	Identify the commercial and clinical strategy for PSMA ADC following completion of the trial for the second cohort of chemotherapy-naïve patients (20%).

·	Advance our 1404 targeted imaging agent by identifying our clinical and commercial strategy following completion of phase 2 trial (20%).

·	Add an additional oncology compound to the Company's pipeline through in-licensing or acquisition (20%).

·	Advance the value of the Relistor franchise in the US, Europe and Japan (10%).

·	Successfully manage operating expenses within the 2014 approved budget (10%).

These corporate goals, along with individual goals for each NEO, were used to measure performance over the course of the year. Target bonus amounts were established for each executive based on a percentage of the executive's base salary and are generally set at levels the Committee believes to be competitive. For 2014, Mr. Baker's bonus target was 50% of base salary, and his bonus opportunity was based entirely on achievement of corporate goals. The target bonus amounts for the other NEOs were set by the Committee in its judgment taking into account Mr. Baker's recommendations. For Dr. Israel and Dr. Youssoufian, the target bonus amount was 35% of the executive's base salary, and the bonus opportunity was allocated 75% and 25% to the achievement of corporate and individual goals, respectively. For Mr. Lovallo the target bonus amount was 30% of the executive's base salary, and the bonus opportunity was allocated 67% and 33% to the achievement of corporate and individual goals. In each case, the NEO's bonus is capped at 150% of the target bonus amount.

The actual bonus amounts for the NEOs are determined by the Compensation Committee based on its assessment of achievement of the corporate goals identified above and of each individual NEO's performance during the year (taking into account the recommendations of Mr. Baker with respect to the individual performance of the NEOs other than himself). Bonuses are generally paid in the first quarter of the following year.

For 2014, the Committee approved a corporate achievement percentage of 100% of target based on the Company:

·	Meeting the Azedra goal.

·	Meeting the PSMA ADC goal.

·	Meeting the 1404 Targeting Imaging Agent goal.

·	Partial achievement of Pipeline Enhancement goal.

·	Exceeding the Relistor goal.

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·	Exceeding the operating expenses goal through the achievement of a lower actual cash burn compared to budget and bolstering our capital position as a result of a secondary offering and Relistor milestone.

For the individual NEOs, the Committee's determination of performance was as follows:

Mr. Baker. As noted above, Mr. Baker's bonus opportunity for 2014 was based entirely on the percentage achievement of the corporate goals and his target bonus of 50% of base salary: he was awarded a bonus of $277,850, equal to 50% of his 2014 annual salary and 100% of his target bonus.

Mr. Lovallo. Mr. Lovallo's contributions during 2014 included facilitating the valuation of acquired in-process research and development assets, managing financial components of corporate transactions, including in connection with securing additional equity capital, and supervising the Company's accounting, treasury and financial reporting functions as PFO. The Committee determined that Mr. Lovallo's individual performance for 2014 was above the target level. Based on the percentage achievement of his individual and the corporate goals, and his target bonus of 30% of base salary, Mr. Lovallo was awarded a bonus of $93,927, equal to 33% of his 2014 annual salary and 108% of his target bonus.

Dr. Israel. Dr. Israel's contributions during 2014 included his leadership of medical affairs. His individual goals included managing aspects attendant to developing our product candidates including achieving corporate goals for this past year related to Azedra, PSMA ADC and 1404, managing aspects in our relationships with Relistor collaboration partners, and efforts to identify in-license and acquisition candidates. The Committee determined that Dr. Israel's individual performance for 2014 was above the target level. Based on the percentage achievement of his individual and the corporate goals, and his target bonus of 35% of base salary, Dr. Israel was awarded a bonus of $163,974, equal to 37% of his 2014 annual salary and 106% of his target bonus.

As noted above, Dr. Youssoufian's employment with us terminated in September 2014, and accordingly, he was not eligible to receive a bonus for 2014.

 

Long-Term Incentives. Long-term incentives may include both stock options and restricted stock awards. For the past few years, including 2014, we granted stock options to the NEOs under our 2005 Stock Incentive Plan (the "2005 Plan"). The exercise prices of these options were set at the closing price of our common stock on the grant date so the options will only have value if our stock price increases after the grant date, further aligning the interests of our executives with those of our stockholders. The options vest generally in equal annual installments over three years from the date of grant subject to the executive's continued employment through the vesting date. The Compensation Committee believes that stock options provide appropriate incentives for executives both to increase value on a long-term basis for our stockholders and to continue in service with the Company.

When determining amounts of long -term incentive grants to our NEOs, the Compensation Committee compares (i) the value of the grant with the value of comparable grants made to executive officers in our peer group as discussed above; (ii) the number of shares granted by position as a percentage of total common shares outstanding, compared with the applicable percentages of comparable grants made to executives in our peer group; and (iii) the executive's overall equity incentive opportunity. The Committee believes these comparisons provide a meaningful context for assessing the competitive level of our equity grants and help ensure that we are not at a competitive disadvantage in terms of hiring or retaining key executive talent. As noted above, the Compensation Committee determines the levels of equity grants and other compensation in its judgment, uses the peer group information as background reference only and does not benchmark equity awards at any particular level relative to the peer group.

More information on the options granted to our NEOs during 2014 and awards outstanding from prior grants are presented in the Grants of Plan-Based Awards in 2014 and Outstanding Equity Awards at Fiscal Year-End tables, below.

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We generally grant annual equity awards near the beginning of the year (typically in March) to coincide with other compensation decisions. We may also grant awards to newly-hired employees or at other times during the year as deemed appropriate by the Compensation Committee.

 

Retirement, Welfare Benefits. We make available to our NEOs retirement and welfare benefits, consisting of partial matching contributions to 401(k) retirement plans and access to medical, dental and other welfare plans, all of which are available to all full-time employees. NEOs also receive reimbursement of premiums for enhanced life and disability insurance, totaling less than $10,000 per NEO, and we generally do not provide material perquisites to our NEOs. This philosophy is consistent with our view that company resources are generally best utilized in research, development and commercialization efforts. The total of these benefits in 2014 for each NEO is presented in the Summary Compensation Table, below.  

 

Severance Benefits; No Tax Gross-Ups. We do not have employment or other severance agreements with any of our NEOs, except for an agreement we entered into with Dr. Israel in 1994 that provides for severance of up to nine months' salary and benefits if his employment is terminated by us without cause. We do not provide any of our executives with reimbursements or "gross-up" payments for any taxes incurred pursuant to Section 280G of the Tax Code or otherwise.

In connection with his termination of employment with the Company, Dr. Youssoufian and the Company entered into a separation agreement in September 2014 that provided for him to receive severance benefits of six months' salary and payment by the Company of his COBRA premiums for that period and for Dr. Youssoufian to provide certain consulting services to the Company for three months after his termination. This agreement was negotiated with Dr. Youssoufian and determined to be advisable by the Compensation Committee in its judgment. The agreement also included a release of claims by Dr. Youssoufian.

Compensation and Risk. The Company does not believe, given the nature of our activities and the manner in which our employees are compensated, that risks arising from our compensation policies and practices relating to all of our employees are reasonably likely to have a material adverse effect on the Company. As described above, the Compensation Committee establishes multiple performance goals for the annual incentive plan and believes that this structure mitigates the risk associated with overemphasis on a particular performance metric. Further mitigating risk, annual incentives are capped at 150% of the target award amount regardless of how many goals are met or achieved. The Board of Directors carefully monitors the Company's activities, including those relevant to achievement of the goals specified in the annual incentive plan and believes that these awards have not adversely affected the Company or created significant incentives to take actions not in the best interests of stockholders.

Tax Considerations. The Tax Code limits deduction of compensation paid to certain of our NEOs to $1,000,000 unless the compensation is "performance-based." The 2005 Plan allows the Committee to grant awards that are intended to be exempt from the deduction limits imposed by section 162(m) of the Code if certain criteria are satisfied. There can be no assurance, however, that any compensation intended to qualify for deductibility awarded or paid by the Company will be fully deductible, and in any event we reserve discretion to design programs that we believe are consistent with our compensation goals and philosophy, even where the compensation paid may not be deductible.

 

2014 Shareholder Advisory Vote on Executive Compensation

The Company provides its stockholders with the opportunity to cast an annual advisory vote to approve its executive compensation program (referred to as a "say-on-pay proposal"). At our Annual Meeting held in June 2014, approximately 99.2% of the votes actually cast on the say-on-pay proposal were voted in favor of the proposal. The Compensation Committee believes these strong results affirm stockholders' support of the Company's approach to its executive compensation program. In general, the Compensation Committee did not change its approach in 2014 and believes the program in place, as in prior years, includes a number of features that further the goals of the Company's executive compensation program and reflect best practices in the market. The Compensation Committee will continue to consider the outcome of the Company's say-on-pay proposals when making future compensation decisions for the NEOs.

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