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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND MANAGEMENT
The following table shows, based on information we have, the beneficial ownership of our common stock as of April 14, 2023, by:
•all persons who are beneficial owners of 5% or more of our outstanding common stock;
•each of our current directors;
•each of our named executive officers (as defined below in “Compensation Discussion and Analysis – Summary Compensation Table”); and
•all of our executive officers and directors as a group.
Unless otherwise indicated, each of the stockholders has sole voting and investment power with respect to the shares beneficially owned, subject to community property laws, where applicable. Percentage of ownership is based on approximately 17,175,550 shares of common stock outstanding on April 14, 2023. Shares of common stock underlying options include options which are currently exercisable or will become exercisable within 60 days after April 14, 2023, are deemed outstanding for computing the percentage of the person or group holding such options, but are not deemed outstanding for computing the percentage of any other person or group. The address for individuals for whom an address is not otherwise indicated is 3911 Sorrento Valley Blvd, Suite 110, San Diego, CA 92121.
| | | | | | | | | | | |
| Beneficial Owner | Number of Shares Beneficially Owned | | Percent of
Class Owned |
BlackRock, Inc.(1) 55 East 52nd Street New York, NY 10055 | 2,789,479 | | | 16.2% |
The Vanguard Group(2) 100 Vanguard Blvd. Malvern, PA 19355 | 1,843,115 | | | 10.7% |
Janus Henderson Group plc(3) 201 Bishopsgate EC2M 3AE United Kingdom | 1,255,273 | | | 7.3% |
| | | |
| | | |
| Directors and Executive Officers | | | |
Todd C. Davis(4)(16) | 86,024 | | | * |
Matthew Korenberg(5)(16) | 182,804 | | | 1.1% |
Tavo Espinoza(6)(16) | 36,364 | | | * |
Andrew Reardon(7)(16) | 17,258 | | | * |
John L. Higgins(8)(16) | 1,019,212 | | | 5.7% |
Matthew W. Foehr(9) | 162,187 | | | * |
Charles S. Berkman(10) | 23,825 | | | * |
Jason M. Aryeh(11) | 155,664 | | | * |
Nancy R. Gray, Ph.D.(12) | 27,620 | | | * |
John W. Kozarich, Ph.D.(13) | 71,590 | | | * |
John L. LaMattina, Ph.D.(14) | 55,779 | | | * |
Jason Haas(16) | — | | | * |
Stephen L. Sabba, M.D.(15) | 55,442 | | | * |
Directors and executive officers as a group (13 people)(16) | 1,893,769 | | | 10.4% |
| | | | | |
| * | Less than one percent. |
| |
(1) | Represents shares of common stock owned by funds affiliated with BlackRock, Inc. at December 31, 2022, as indicated in the entity’s Schedule 13G/A filed with the SEC on January 26, 2023. |
| (2) | Represents shares of common stock beneficially owned by The Vanguard Group at December 31, 2022 as indicated in the entity’s Schedule 13G/A filed with the SEC on February 9, 2023. |
(3) | Represents shares of common stock owned by funds affiliated with Janus Henderson Group plc at December 31, 2022, as indicated in the entity’s Schedule 13G/A filed with the SEC on February 10, 2023. |
| |
| (4) | Consists of (i) 51,786 shares of common stock, (ii) 1,723 shares of common stock issuable to Mr. Davis upon settlement of outstanding restricted stock units which will vest within 60 days of April 14, 2023, and (iii) 32,515 shares of common stock Mr. Davis has the right to acquire pursuant to outstanding options which are exercisable within 60 days of April 14, 2023. |
| (5) | Consists of (i) 52,676 shares of common stock, and (ii) 130,128 shares of common stock Mr. Korenberg has the right to acquire pursuant to outstanding options which are exercisable within 60 days of April 14, 2023. |
| (6) | Consists of (i) 2,433 shares of common stock, and (ii) 33,931 shares of common stock Mr. Espinoza has the right to acquire pursuant to outstanding options which are exercisable within 60 days of April 14, 2023. |
| (7) | Consists of (i) 2,059 shares of common stock, and (ii) 15,199 shares of common stock Mr. Reardon has the right to acquire pursuant to outstanding options which are exercisable within 60 days of April 14, 2023. |
| (8) | Consists of (i) 417,695 shares of common stock, and (ii) 601,517 shares of common stock Mr. Higgins has the right to acquire pursuant to outstanding options which are exercisable within 60 days of April 14, 2023. |
| (9) | Consists of 162,187 shares of common stock. |
| (10) | Consists of 23,825 shares of common stock. |
| (11) | Consists of (i) 69,668 shares of common stock held directly, (ii) 51,594 shares of common stock held by certain funds (collectively, the “Funds”) managed by JALAA Equities, LP (“JALAA”), (iii) 5,025 shares of common stock held by Mr. Aryeh in a self-directed investment retirement account, and (iv) 1,723 shares of common stock issuable to Mr. Aryeh upon settlement of outstanding restricted stock units which will vest within 60 days of April 14, 2023, and (v) 27,654 shares Mr. Aryeh has the right to acquire pursuant to outstanding options which are exercisable within 60 days of April 14, 2023. In his role as a general partner of JALAA, Mr. Aryeh may be deemed to beneficially own the shares managed by the Funds. Mr. Aryeh disclaims beneficial ownership of the shares held by the Funds except to the extent of his pecuniary interest therein. |
| (12) | Consists of (i) 4,706 shares of common stock, (ii) 1,723 shares of common stock issuable to Dr. Gray upon settlement of outstanding restricted stock units which will vest within 60 days of April 14, 2023, and (iii) 21,191 shares of common stock Dr. Gray has the right to acquire pursuant to outstanding options which are exercisable within 60 days of April 14, 2023. |
| (13) | Consists of (i) 42,213 shares of common stock, (ii) 1,723 shares of common stock issuable to Dr. Kozarich upon settlement of outstanding restricted stock units which will vest within 60 days of April 14, 2023, and (iii) 27,654 shares of common stock Dr. Kozarich has the right to acquire pursuant to outstanding options which are exercisable within 60 days of April 14, 2023. |
| (14) | Consists of (i) 26,402 shares of common stock, (ii) 1,723 shares of common stock issuable to Dr. LaMattina upon settlement of outstanding restricted stock units which will vest within 60 days after April 14, 2023, and (iii) 27,654 shares of common stock Dr. LaMattina has the right to acquire pursuant to outstanding options which are exercisable within 60 days of April 14, 2023. |
| (15) | Consists of (i) 26,065 shares of common stock, (ii) 1,723 shares of common stock issuable to Dr. Sabba upon settlement of outstanding restricted stock units which will vest within 60 days of April 14, 2023, and (iii) 27,654 shares of common stock Dr. Sabba has the right to acquire pursuant to outstanding options which are exercisable within 60 days of April 14, 2023. |
| (16) | The number and percentage of shares beneficially owned excludes the number of shares which are subject to restricted stock units and held by the applicable individual that are not scheduled to vest within 60 days of April 14, 2023. |
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) describes our compensation philosophy and programs, the compensation decisions the Human Capital Management and Compensation Committee made under those programs, and the factors considered in making those decisions. This CD&A focuses on the compensation of our named executive officers (“NEOs”) for 2022:
| | | | | |
| Name | Title |
Todd C. Davis (1) | Chief Executive Officer |
Matthew Korenberg (2) | President and Chief Operating Officer |
Tavo Espinoza (3) | Chief Financial Officer |
Andrew Reardon (4) | Chief Legal Officer and Secretary |
John L. Higgins (5) | Former Chief Executive Officer |
Matthew W. Foehr (6) | Former President and Chief Operating Officer |
Charles S. Berkman (7) | Former Senior Vice President, General Counsel and Secretary |
(1) Mr. Davis has served as a member of the Board since March 2007 and assumed the role of Chief Executive Officer on December 5, 2022.
(2) Mr. Korenberg was appointed President and Chief Operating Officer in connection with the completion of the OmniAb spin-off, effective November 1, 2022. Prior to that he was Executive Vice President, Finance and Chief Financial Officer.
(3) Mr. Espinoza was appointed Chief Financial Officer in connection with the completion of the OmniAb spin-off, effective November 1, 2022.
(4) Mr. Reardon joined the Company in August 2022 and was appointed Chief Legal Officer and Secretary in connection with the completion of the OmniAb spin-off, effective November 1, 2022.
(5) Mr. Higgins retired from his role as Chief Executive Officer effective December 5, 2022 and resigned as a member of the Board effective December 31, 2022.
(6) Mr. Foehr resigned from his role as President and Chief Operating Officer in connection with the completion of the OmniAb spin-off, effective November 1, 2022.
(7) Mr. Berkman resigned from his role as Senior Vice President, General Counsel and Secretary in connection with the completion of the OmniAb spin-off, effective November 1, 2022.
Except as noted below with respect to certain pre-Distribution equity awards granted to our named executive officers, the share numbers and exercise prices reflected in this “Executive Compensation and Other Information” section with respect to outstanding stock options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) granted to our named executive officers have been adjusted to reflect the adjustment of such awards pursuant to the Distribution and spin-off of OmniAb. See “Treatment of Outstanding Equity Awards at the Time of the Distribution” below for a description of the adjustment of outstanding equity awards held by our named executive officers in connection with the Distribution and spin-off of OmniAb.
2022 BUSINESS HIGHLIGHTS
2022 was a transformative year for Ligand, both operationally and financially. Following Ligand’s spin-off of OmniAb, we are positioned to achieve significant revenue growth with anticipated important clinical and regulatory events from our partners, along with the continued expansion of our portfolio through a focus on life sciences royalty opportunities. Our fiscal year 2022 accomplishments, guided by our named executive officers, illustrate the success of our executive compensation program, and included, among other things, the following:
•Royalty Revenue Increased by approximately 50% Over 2021: Royalty revenue for 2022 increased by approximately 50% as compared to 2021. Royalty revenue is comprised of many products and we currently have seven major royalty revenue contributors: Evomela®, Kyprolis®, Nexterone®, Pneumosil®, Rylaze®, Teriparatide, and VaxneuvanceTM. Our growth in royalty revenue reflects strong sales for these products with increasing contributions from the three programs backed by our Pelican Expression Technology, which is Rylaze from Jazz Pharmaceuticals, Pneumosil from the Serum Institute of India and Teriparatide from Alvogen. Our core business
model at Ligand is built around technology licensing and sharing in the success of our partners through royalties. We are now at the point where we anticipate significant top line growth by existing and new royalty streams that should fuel superior bottom line results and cash flow, as we manage a lean operating structure.
•Completed the Spin-Off of OmniAb: On November 1, 2022, we successfully completed the spin-off of our OmniAb antibody discovery business, followed by a business combination of OmniAb with Avista Public Acquisition Corp. II, resulting in OmniAb becoming an independent publicly traded company. Following the spin-off of OmniAb, we believe we are well positioned to achieve significant revenue growth coupled with a lean cost structure. The spin-off resulted in substantial changes in our management further discussed below.
•Major Operational Accomplishments: We rationalized our Captisol supply chain to satisfy or eliminate obligations to third-party providers and improved cost sales on new material. We completed office and lab expansion and consolidation projects in connection with the OmniAb spin-off.
| | | | | |
OVERVIEW OF 2022 COMPENSATION PROGRAMS AND DECISIONS In line with our executive compensation program’s emphasis on pay for performance, compensation awarded to our named executive officers for 2022 reflected our financial results and overall compensation philosophy. |
| Base Salary Adjustments: | During 2022, our named executive officers received 4.5% increases to their base salaries, and for Mr. Korenberg, an additional 3.8% increase in connection with his promotion. |
| Pay-for-Performance Annual Bonuses: | Our annual bonus program rewards our named executive officers based on company achievement of pre-established financial and strategic objectives that differ from those used for purposes of our long-term incentives, as described below. For 2022, our Company focused on key corporate objectives in the following areas: financial performance, strategic and corporate initiatives, completion of the OmniAb spin-off, M&A activity, business development and operations goals. The annual program is formulaic using pre-set goals. No goals, other than the completion of the OmniAb spin-off, overlap with the goals for the PSUs granted to our named executive officers during 2022. The program moving forward does not utilize overlapping metrics. Based on corporate performance in these areas during 2022, our Human Capital Management and Compensation Committee determined that our named executive officers who were eligible for a 2022 annual bonus should be paid annual bonuses at 90% of targeted levels. |
| | | | | |
| Equity Emphasis on Performance-Based Equity Awards | Our Human Capital Management and Compensation Committee continued its practice of ensuring that a substantial portion of our named executive officers’ total compensation is awarded in the form of long-term equity incentive awards. During 2022, our named executive officers received annual awards, certain new hire and promotional awards in connection with our executive transitions in connection with the consummation of the OmniAb spin-off, and additional stock options granted following the completion of the OmniAb spin-off in consideration of the impact of the adjustments pursuant to the Distribution and Business Combination on the equity awards held by our named executive officers. Annual awards are granted in accordance with the weightings described below. New hire awards and promotional awards may be granted solely in the form of one or more equity vehicles or may have different weightings •Stock Options – 40% of Total Target Equity Value (for Annual Awards): 40% of each named executive officer’s annual long-term equity incentive award was granted in the form of stock options, which we consider to be performance-based awards as they provide value to our executives only if our stock price increases. These stock options are subject to our standard four year vesting schedule. •Performance-Based Restricted Stock Units (“PSUs”) – 33% of Total Target Equity Value (for Annual Awards): i.33% of each named executive officer’s annual long-term equity incentive award was granted in the form of PSUs. The PSUs granted in 2022 were tied to two corporate goals with equal weightings ii.For 2022, relative total stockholder return (“TSR”) and the timing of the completion of the OmniAb spin-off were the two performance metrics for our PSUs. iii.The Human Capital Management and Compensation Committee selected the foregoing performance measures because they represent two key performance metrics tied to our near-term and long-term business objectives and, with respect to the relative TSR objectives, are appropriately measured over the related period of time, as opposed to the metrics used for our annual incentives, thereby creating the clearest link between executive actions, corporate results and our continued long-term success. •Time-Based Restricted Stock Units (“RSUs”) – 27% of Total Target Equity Value for Annual Awards: The remainder of the annual long-term equity incentive awards granted to our named executive officers was granted in the form of RSUs that are subject to our standard three year vesting schedule. |
RESPONSE TO 2022 SAY-ON-PAY VOTE
In June 2022, we held a stockholder advisory vote on the compensation of our named executive officers, commonly referred to as a say-on-pay vote. Our stockholders overwhelmingly approved the compensation of our named executive officers, with approximately 93% of stockholder votes cast in favor of our 2022 say-on-pay resolution (excluding abstentions and broker non-votes). As we evaluate our compensation practices and talent needs throughout 2022 and in setting 2023 compensation, we were mindful of the strong support our stockholders expressed for our compensation philosophy.
AT-RISK COMPENSATION
The charts below show that the significant majority of target total direct compensation for our named executive officers is variable (or “at-risk”) – 93% for our Chief Executive Officer for 2022 and 87% for our other named executive officers for 2022. The calculation is based on total target direct compensation for the applicable year, calculated as the sum of the annual base salaries and target annual bonuses for such year, and the value of the long-term equity incentive awards granted in such year, assuming “target” performance. “At-risk” pay is tied to the achievement of corporate and individual performance objectives or stock price performance. The chart below for our Chief Executive Officer reflects the target total direct compensation for Mr. Higgins for 2022. We expect the target total direct compensation for Mr. Davis for 2023 to be similarly focused on variable or “at-risk” compensation.
LIGAND’S EXECUTIVE COMPENSATION BEST PRACTICES
We regularly review and refine our executive compensation program to ensure that it continues to reflect practices and policies that are aligned with our pay-for-performance philosophy. The following practices and policies we believe are in line with current best practices for aligning executive and stockholder interests and sound corporate governance practices:
| | | | | | | | |
| What We Do | | |
| Pay for Performance | a | A substantial portion of our executives’ total direct compensation is performance-based or “at risk.” |
| Balanced Mix of Pay Components | a | Target compensation is not overly weighted toward annual cash compensation and balances cash and long-term equity awards to align with our short- and long-term goals. |
| Annual Say-on-Pay Vote | a | We seek an annual non-binding advisory vote from our stockholders to approve our executive compensation programs. |
| Independent Compensation Consultant | a | The Human Capital Management and Compensation Committee retains an independent compensation consultant. |
| Annual Peer Group Analysis | a | The Human Capital Management and Compensation Committee reviews external market data when making compensation decisions and annually reviews our peer group with its independent compensation consultant. |
| Annual Compensation Risk Assessment | a | Each year we perform an assessment of any risks that could result from our compensation plans and programs. |
| Double-Trigger Change in Control Benefits | a | We require a double-trigger (or both a change in control and termination of an executive’s employment) before vesting of equity awards is accelerated. |
| Limited Perquisites | a | We provide our named executive officers with perquisites on a limited basis. |
| What We Do Not Do | | |
| No Employment Agreements | r | We do not provide our executive officers with employment agreements. |
| No Tax Gross-Ups | r | We do not provide tax gross ups to our executives for “excess parachute payments.” |
| No Stock Option Repricing | r | We prohibit option repricing without stockholder approval. |
TOTAL STOCKHOLDER RETURN PERFORMANCE
The graph below shows the ten-year cumulative total stockholder return assuming the investment of $100 and is based on the returns of the component companies weighted monthly according to their market capitalizations. The graph compares total stockholder returns of our common stock, of all companies traded on the Nasdaq Stock market, as represented by the Nasdaq Composite® Index, and of the NASDAQ Biotechnology Index, as prepared by The Nasdaq Stock Market Inc.
Because of the importance of tying executive compensation outcomes to long-term stockholder value creation, relative total stockholder return as compared to the NASDAQ Biotechnology Index was selected by our Human Capital Management and Compensation Committee as one of the two performance objectives for purposes of the PSUs granted to our named executive officers in 2022.
The stockholder return shown on the graph below is not necessarily indicative of future performance and we will not make or endorse any predictions to future stockholder returns.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Human Capital Management and Compensation Committee has designed our executive compensation program with the following key principles in mind:
| | | | | |
| Attract and Retain the Right Individuals | Our compensation program is designed to attract, motivate and retain individuals of superior ability and managerial talent critical to its long-term success. |
| Pay for Performance | The majority of our named executive officers’ total compensation ties compensation directly to the achievement of corporate objectives, increases in our stock price or both. We emphasize pay for performance in order to create incentives to achieve key strategic and corporate performance objectives, align executive compensation with our business strategy and the creation of long-term stockholder value. |
| Align Executive Pay with Corporate Objectives and Stockholder Interests | Our compensation program aligns executive compensation with our corporate strategies, business objectives and long-term stockholder interests by rewarding successful execution of our business plan and tying a significant portion of total compensation opportunities to performance-based compensation. As a result, our compensation program enhances the executives’ incentive to increase our stock price and maximize stockholder value. |
| Market Competitive Pay | The Human Capital Management and Compensation Committee uses competitive compensation data from the annual total compensation study of peer companies to inform its decisions about overall compensation opportunities and specific compensation elements, including base salary. |
PRINCIPAL ELEMENTS OF PAY AND PAY POSITIONING
Our executive compensation program generally consists of four principal components: base salary, annual performance bonus, long-term equity incentives and other benefits.
The Human Capital Management and Compensation Committee has, however, adopted a compensation philosophy that places a greater emphasis on long-term equity incentive compensation for our named executive officers than cash compensation. In addition, the mix of compensation paid to our named executive officers is intended to ensure that total compensation reflects our overall success or failure, including our long-term stock performance, and to motivate executive officers to meet appropriate performance measures.
In determining each element of compensation for any given year, our Human Capital Management and Compensation Committee considers and determines each element individually and then reviews the resulting total compensation and determines whether it is reasonable and competitive. We do not have a pre-established policy or target for the allocation between either cash and non-cash or short-term and long-term incentive compensation.
As a result of the weighting of the short-term cash and long-term equity components of total compensation, the total target annual compensation for our named executive officers approximates the 50th percentile of the peer group.
| | | | | | | | | | | | | | |
| | Description and Purpose | | Pay Positioning Philosophy |
| Base Salary | | Competitive fixed cash compensation used to attract and retain talented executives. | | We generally provide our named executive officers with a base salary that falls below the median for similar positions at our peer group. |
| Annual Performance Bonus Award | | Cash incentives designed to reward executive officers for successful corporate performance against board approved annual bonus objectives. | | Target total cash compensation generally below the median of executive officers performing similar job functions at companies in our peer group to ensure a greater emphasis is placed on long-term incentives while ensuring total compensation is competitive with market. |
| Long-Term Equity Incentive Awards | | Stock options and RSU awards subject to time-based and performance-based vesting designed to align each executive officer’s incentives with stockholder value creation. | | We emphasize long-term equity incentive compensation within our named executive officers' total target compensation opportunity. While we do not set target equity compensation at a specific level relative to our peer group, annual target equity opportunities may exceed the median of executive officers performing similar job functions at companies in our peer group if the Human Capital Management and Compensation Committee believes that is appropriate based on other compensation components, retention and incentive needs and individual executive officer performance. The annual target equity opportunities for our named executive officers for 2022 generally fell between the 50th to 75th percentile for similar positions at our peer group after the Human Capital Management and Compensation Committee's review of the foregoing factors. |
| Benefits & Other Compensation Programs | | Healthcare and insurance coverage, deferred compensation arrangements, 401(k) matching program, employee stock purchase plan offering and other fringe benefits. | | Benefits and other compensation programs designed to further incentivize our executive officers and provide competitive compensation. |
However, we strongly believe in retaining the best talent among our senior executive management team and while we believe that comparisons to market data are a useful tool, we do not believe that it is appropriate to establish executive compensation levels based solely on a comparison to data from these companies. Therefore, the Human Capital Management and Compensation Committee may approve total compensation packages for senior executive management that vary from the
foregoing positioning based on several factors, including overall experiences, accumulated years of service with us, level of responsibilities and/or performance ratings. Our 2022 total compensation for our named executive officers was generally consistent with the foregoing compensation philosophy.
The compensation levels of our named executive officers reflect to a significant degree their varying roles and responsibilities. Our Chief Executive Officer, has the greatest level of responsibility among our named executive officers and, therefore, receives the highest level of pay. This is also consistent with the practices of the companies in our peer group and the summary compensation data included in the summaries of comparable companies reviewed by our Human Capital Management and Compensation Committee.
COMPENSATION DETERMINATION PROCESS
Role of the Human Capital Management and Compensation Committee
The Human Capital Management and Compensation Committee has the primary authority to determine our compensation philosophy and to establish compensation for our executive officers. In determining each level of compensation and the total package, the Human Capital Management and Compensation Committee reviewed a variety of sources to determine and set compensation.
In the fourth quarter of each year or the first quarter of the following year, the Human Capital Management and Compensation Committee reviews the performance of each of our named executive officers during the year under review. Generally at this time, the Human Capital Management and Compensation Committee also reviews our performance relative to the corporate performance objectives set by the Board for the previous year and makes the final bonus payment determinations based on our overall corporate performance and, with respect to the named executive officers other than our Chief Executive Officer, the Human Capital Management and Compensation Committee’s evaluation of each named executive officer’s performance for the year under review. In connection with this review, the Human Capital Management and Compensation Committee also reviews and adjusts, as appropriate, annual base salaries for our named executive officers and grants, as appropriate, additional equity awards to our named executive officers and certain other eligible employees.
During the fourth quarter of each year our Human Capital Management and Compensation Committee also reviews the corporate performance objectives for purposes of our performance bonus programs for the following year, but such objectives historically have been recommended to the full Board for approval.
Role of Our Executive Officers
The Chief Executive Officer aids the Human Capital Management and Compensation Committee by providing annual recommendations regarding the compensation of all executive officers, other than himself. Each named executive officer and senior executive management team member, in turn, participates in an annual performance review with the Chief Executive Officer to provide input about his contributions to our success for the period being assessed. The performance of our Chief Executive Officer and senior executive management team as a group is reviewed annually by the Human Capital Management and Compensation Committee.
Role of Compensation Consultant
In 2022, the Human Capital Management and Compensation Committee retained Aon’s Human Capital Solutions practice, a division of Aon plc (“Aon”), a national executive compensation consulting firm, as its independent compensation consultant. During 2022, Aon provided the following services to the Human Capital Management and Compensation Committee:
•Assisted in the formulation of the peer group used to determine executive compensation during 2022.
•Advised regarding the determination of the key elements of the executive compensation program.
•Advised regarding the market competitiveness of the director compensation program.
Aon reports to and is accountable to the Human Capital Management and Compensation Committee, and may not conduct any other work for us without the authorization of the Human Capital Management and Compensation Committee. Aon did not provide any services to us in 2022 beyond its engagement as an advisor to the Human Capital Management and Compensation Committee on executive and director compensation matters. After review and consultation with Aon, the Human Capital Management and Compensation Committee has determined that Aon is independent and there is no conflict of interest resulting from retaining Aon currently or during the year ended December 31, 2022. In reaching these conclusions, the Human Capital Management and Compensation Committee considered the factors set forth in Exchange Act Rule 10C-1 and Nasdaq listing standards.
Role of Comparable Company Information
In November 2021, the Human Capital Management and Compensation Committee worked with Aon to confirm a peer group of companies in the United States for which compensation information can be provided to the Human Capital Management and Compensation Committee.
The peer group was not selected on the basis of executive compensation levels and reflects companies that are our peers in terms of our then current business model and stage of development, including the number of programs maintained by us and the importance of licensing to our business model.
The selected companies in our peer group are companies that fall within a reasonable range of comparison factors and/or that we may compete with for executive talent. In addition to the criteria related to finding companies with similar business models and at a similar stage of development as Ligand, the other criteria used in the identification and selection of the peer group included:
| | |
| Peer Group Selection Criteria |
•U.S. based, publicly-traded, commercial biopharma companies |
•Revenues ranging from $100 million to $700 million. Ligand’s trailing 12-month revenues as of October 2021 (approximately $252 million), when the peer group was selected, approximated the 49th percentile of the selected peers. |
•Market values between $0.75 billion and $6.0 billion (based on trading values in October 2021 when the peer group was selected). Ligand’s market capitalization in October 2021 (approximately $2.3 billion), when the peer group was selected, approximated the 51st percentile of the selected peers. |
•Products in comparable stages of development to our products. We also focused on companies with multiple product candidates, as opposed to single product companies. |
Based on the criteria identified above, the Human Capital Management and Compensation Committee elected to remove Intercept Pharmaceuticals, Repligen, and Theravance Biopharma from the 2022 peer group since their trailing 12-month revenues and/or market capitalizations were positioned outside of the peer group selection criteria. The Human Capital Management and Compensation Committee added Berkeley Lights, Codexis, Schrödinger, and Twist Bioscience as new peers due to their alignment with the peer group selection criteria. The peer group companies for 2022 compensation was comprised of the following companies:
| | | | | | | | |
| Agios Pharmaceuticals | Heron Therapeutics | REGENXBIO |
| Berkeley Lights | Innoviva | Schrodinger |
| Codexis | Ironwood Pharmaceuticals | Supernus Pharmaceuticals |
| Coherus BioSciences | Nektar Therapeutics | Twist Bioscience |
| Corcept Therapeutics | Pacira BioSciences | Ultragenyx Pharmaceuticals |
| Halozyme Therapeutics | PTC Therapeutics | Xencor |
The peer group compensation data is limited to publicly available information and therefore does not provide precise comparisons by position as offered by more comprehensive survey data. The pool of senior executive talent from which we draw and against which we compare ourselves extends beyond the limited community of our immediate peer group and includes a wide range of other organizations outside of our traditional competitors, which range is represented by such surveys. As a result, the Human Capital Management and Compensation Committee uses peer group data to analyze the overall competitiveness of our compensation with our direct publicly traded peers in the United States and our general compensation philosophy, and to determine equity award levels for the named executive officers, but also relies on industry survey data in determining actual executive compensation. For 2022, Aon also provided the Human Capital Management and Compensation Committee with data compiled from a custom cut of companies in the Aon Global Life Sciences Survey, consisting of comparable U.S. public biotechnology companies with revenues ranging from $100 million to $700 million and market capitalization between $0.75 billion and $6.0 billion as of the date the survey data was compiled. This survey data is used to provide pooled compensation data for positions closely akin to those held by each named executive officer. For purposes of this compensation discussion and analysis, references to our “peer group” include both the peer group of companies listed above and the survey data reviewed by our Human Capital Management and Compensation Committee.
With respect to the foregoing survey data, the identities of the individual companies included in the surveys were not provided to the Human Capital Management and Compensation Committee, and the Human Capital Management and Compensation Committee did not refer to individual compensation information for such companies. Instead, the Human Capital Management and Compensation Committee only referred to the statistical summaries of the compensation information for the companies included in such surveys.
ELEMENTS OF COMPENSATION
Base Compensation
Annual base salary increases are based upon the performance of the executive officers, internal pay equity considerations and peer practices, as assessed by the Chief Executive Officer (for executives other than himself) and approved by the Human Capital Management and Compensation Committee. The Human Capital Management and Compensation Committee assesses these factors with respect to the Chief Executive Officer.
For 2022, Mr. Higgins, Mr. Foehr and Mr. Berkman each received a 4.5% increase in base salary compared to 2021, and Mr. Korenberg received a total 8.3% increase in base salary compared to 2021 (an initial 4.5% increase and an additional 3.8% increase effective in December 2022 in connection with his promotion). These increases were determined to be appropriate by our Human Capital Management and Compensation Committee to ensure that the base salaries of our named executive officers continued to be generally consistent with our pay positioning philosophy, as described above. Base salaries paid to our named executive officers for 2022 were as follows:
| | | | | | | | |
| Name | 2022 Base Salary | % Base Salary
Increase (Over 2021) |
Todd C. Davis(1) | $ | 650,000 | | — | |
Matthew Korenberg(2) | 540,000 | 8.3 | % |
Tavo Espinoza(2) | 400,000 | | — | |
Andrew Reardon(3) | 415,000 | — | |
John L. Higgins(1) | 730,455 | | 4.5 | % |
Matthew W. Foehr(4) | 543,609 | | 4.5 | % |
Charles S. Berkman(4) | 476,834 | | 4.5 | % |
(1) On December 5, 2022, John L. Higgins retired as Chief Executive Officer of the Company, and Todd C. Davis was appointed Chief Executive Officer, each effective as of December 5, 2022.
(2) On November 1, 2022, in connection with the completion of the OmniAb spin-off, Matthew Korenberg was appointed as Ligand’s President and Chief Operating Officer, who until then served as Ligand’s Executive Vice President, Finance and Chief Financial Officer. Tavo Espinoza was appointed as Ligand’s Chief Financial Officer, replacing Mr. Korenberg in his roles as principal financial officer and principal accounting officer.
(3) Andrew Reardon was hired by the Company in August 2022 and was appointed Chief Legal Officer and Secretary on November 1, 2022, in connection with the completion of the OmniAb spin-off.
(4) On November 1, 2022, in connection with the completion of the OmniAb spin-off, Matthew W. Foehr and Charles S. Berkman resigned as Ligand’s President and Chief Operating Officer and Senior Vice President, General Counsel and Secretary, respectively.
Annual Performance-Based Cash Compensation
It is the Human Capital Management and Compensation Committee’s objective to have a substantial portion of each named executive officer’s compensation contingent upon company performance. Our annual performance-based bonus program provides for cash bonus payments tied to achievement of key annual corporate performance objectives established by the Board for such purpose. Our annual performance-based bonus program is intended to complement our long-term equity program, which more directly aligns realized executive compensation with longer-term share price and corporate objectives.
Target Annual Bonus Opportunities
The target incentive opportunities for our named executive officers for 2022 are set forth in the table below. Each executive’s annual bonus is tied 100% to corporate performance. Mr. Davis was not eligible for a 2022 annual bonus, however his target bonus for 2023 is 60% of his annual base salary.
| | | | | |
| Name | 2022 Target Bonus (as a % of Base Salary) |
| Todd C. Davis | — | |
| Matthew Korenberg | 50% |
| Tavo Espinoza | 40% |
| Andrew Reardon | 40% |
| John L. Higgins | 75% |
| Matthew W. Foehr | 50% |
| Charles S. Berkman | 45% |
2022 Corporate Performance Objectives and Achievements
At the beginning of each year, the Board sets corporate objectives for the year in a number of areas after considering management input and our overall strategic objectives. Following the conclusion of each year, the Human Capital Management and Compensation Committee assesses the level of achievement relative to these corporate objectives. This achievement level is then applied to each named executive officer’s target bonus to determine that year’s total annual bonus. The Human Capital Management and Compensation Committee retains the discretion to reduce the final bonus payout to a named executive officer based on other factors deemed relevant to assessing the company’s performance in comparison to its peers and the industry.
In January 2022, the Human Capital Management and Compensation Committee and the Board approved the performance objectives for the 2022 annual bonus program. The metrics were established after careful consideration of key short-term corporate goals.
| | | | | | | | |
| Objective | Actual | Performance Achievement |
Financial •Revenue of $95 million (excluding OmniAb) •Adjusted EBITDA(1) of $35 million (excluding OmniAb) |
•Revenue of $108.2 million (excluding OmniAb) – 114% of target goal •Adjusted EBITDA of $45.8 million (excluding OmniAb) – 131% of target goal |
122% |
Strategic and Corporate •Complete spin-off and public listing of OmniAb/OABI •Expand and diversify board of directors for both Ligand and OmniAb •Finalize strategy to capitalize Ligand •Evaluate and thoroughly diligence three potential product/asset or company M&A targets |
•OmniAb spin-off completed on November 1, 2022 •Added one new board member to Ligand's board of directors and one new female board member to OmniAb's board of directors. •Ligand capitalization now sufficient to execute Ligand's strategy following capital raised for OmniAb in spin-off •150+ opportunities screened with 7+ reaching significant diligence |
100% |
Licensing •Complete at least three new major commercial licensing deals from the Pelican or Captisol technology platforms •Complete at least five OmniAb technology license agreements |
•Executed seven licensing agreements across Captisol and Pelican technology platforms •Executed 12 OmniAb technology license agreements •No major commercial license deals completed
|
90% |
Operations •Rationalize Captisol supply chain •Support Alvogen through potential Therapeutic Equivalence (TE) approval and cost reduction programs •Complete OmniAb office/lab expansion and consolidation projects |
•Captisol supply chain rationalized •Alvogen TE dialogue with FDA ongoing; cost reduction efforts in process •OmniAb office/lab expansion and consolidation projects completed |
100% |
(1) Adjusted EBITDA for annual bonus plan purposes is a non-GAAP measure and is generally calculated as our earnings before interest, taxes, depreciation, amortization and other non-cash related expenses. Adjusted EBITDA for 2022 annual bonus plan purposes also excluded the OmniAb business.
In evaluating management’s performance against our 2022 corporate objectives in January 2023, our Human Capital Management and Compensation Committee assessed performance relative to the predefined goals to be in line with the targeted levels of performance anticipated by the Board when such objectives were first established. In addition, our Human Capital Management and Compensation Committee considered our business achievements in 2022 as discussed above under “2022 Business Highlights.” With the performance against the pre-established goals, our Human Capital Management and Compensation Committee determined to payout annual bonuses to the executives at 90% of target.
2022 Annual Bonus Determinations
| | | | | | | | | | | | | | |
| Name | Base Salary | Target Bonus (as % of base salary) | Corporate Performance Achievement % | Total 2022 Annual Bonus(1) |
| | | | |
| Matthew Korenberg | 540,000 | 50% | 90% | $234,229 |
| Tavo Espinoza | 400,000 | 40% | 90% | 119,715 |
| Andrew Reardon | 415,000 | 40% | 90% | 62,250 |
(1) Annual bonus amounts were calculated based on the actual salary earned during 2022 for the executives. Mr. Reardon’s annual bonus for the year ended December 31, 2022 was prorated to reflect his partial year of employment. Mr. Davis, who commenced employment as our Chief Executive Officer on December 5, 2022, was not eligible for a 2022 annual bonus.
On November 1, 2022, in connection with the completion of the OmniAb spin-off, Matthew W. Foehr and Charles S. Berkman resigned as Ligand’s President and Chief Operating Officer and Senior Vice President, General Counsel and Secretary, respectively. As a result, they were not eligible for an annual bonus payment from Ligand for 2022.
On December 5, 2022, John L. Higgins retired as Chief Executive Officer, and he was not eligible for a 2022 annual bonus.
Long-Term Performance-Based Equity Incentive Program
Our long-term performance-based compensation is designed to link the ultimate level of an executive officer’s compensation to our stock price performance and long-term stockholder interests while creating an incentive for sustained growth. Except for Mr. Reardon’s initial grants, which are granted under our 2022 Inducement Plan, all equity awards for our executive officers are granted under our 2002 Plan.
Equity Vehicles
We provide equity compensation to our named executive officers through grants of stock options, PSUs and RSUs. For 2022 annual award purposes, these equity vehicles were weighted at 40%, 33% and 27%, respectively. New hire awards and promotional awards may be granted solely in the form of one or more equity vehicles or may have different weightings.
•Time-based stock options granted to our named executive officers generally have a four-year vesting schedule designed to provide an incentive for continued employment. Options have a ten-year term and an exercise price equal to 100% of the fair market value of the underlying stock on the date of grant. Accordingly, options will provide a return to the executive officer only if the market price of the shares appreciates over the option term.
•Time-based restricted stock units generally vest in equal installments over three years.
•Performance stock units are a significant component of our annual long-term equity incentive awards for our named executive officer that vest based on key corporate and financial objectives over multi-year performance periods. At the time of grant, our Human Capital Management and Compensation Committee conducts a review of the performance measures and associated payout levels, the rigor of the performance goals and their alignment with performance. Our PSUs are structured with two staggered performance periods to provide our Human Capital Management and Compensation Committee the ability to design performance objectives that are tailored to specifically drive long-term stockholder value creation over varying time horizons. This staggered performance period design results in PSUs from two awards vesting each year and facilitates more diversity in performance objectives.
The Human Capital Management and Compensation Committee views granting equity awards as both a valuable retention device and a means to effectively align the interests of our named executive officers with our long-term objectives and stockholder interests. In line with the retention benefits of our equity awards, the Human Capital Management and Compensation Committee therefore also reviews the status of vesting and number of vested versus unvested awards at the time of grant. Guidelines for the number of equity awards granted to each executive officer are determined using a procedure approved by the Human Capital Management and Compensation Committee based upon several factors, including the
executive officer’s level of responsibility, salary grade, performance and the value of the equity awards at the time of grant. We emphasize long-term equity incentive compensation within our named executive officers' total target compensation opportunity. While we do not set target equity compensation at a specific level relative to our peer group, annual target equity opportunities may exceed the median of executive officers performing similar job functions at companies in our peer group if the Human Capital Management and Compensation Committee believes that is appropriate based on its review of the foregoing factors and each executive's other compensation and individual executive officer performance.
2022 Annual Awards
In June 2022, our Human Capital Management and Compensation Committee approved annual long-term incentive awards to our named executive officers as described in the table below.
| | | | | | | | | | | | | | | | | | | | |
| Name | Total Stock Option Target Value (40%) | Number of Stock Options Granted(1) | Total RSU Target Value (27%) | Number of RSUs Granted(2) | Total PSU Target Value (33%) | Number of PSUs Granted (at Target)(2) |
| Matthew Korenberg | $ | 1,200,000 | | 30,189 | | $ | 810,000 | | 8,062 | | $ | 990,000 | | 9,853 | |
| Tavo Espinoza | 541,190 | | 13,615 | | 270,569 | | 2,693 | | 401,908 | | 4,000 | |
| John L. Higgins | 3,040,000 | | 76,478 | | 2,052,000 | | 20,423 | | 2,508,000 | | 24,962 | |
| Matthew W. Foehr | 1,360,000 | | 34,214 | | 918,000 | | 9,137 | | 1,122,000 | | 11,167 | |
| Charles S. Berkman | 800,000 | | 20,126 | | 540,000 | | 5,375 | | 660,000 | | 6,569 | |
(1) The actual number of options awarded was calculated using the Black-Scholes option pricing model (utilizing the same assumptions that we utilize in the preparation of our financial statements).
(2) The actual number of RSUs and PSUs awarded is calculated by dividing (a) the target grant value of the RSU award, by (b) the average closing price per share of our common stock on the Nasdaq Global Market (or such other established stock exchange or national quotation system on which the stock is quoted) for the 30-calendar day period through and including May 5, 2022.
The table above only includes the annual grants made to named executive officers. The table above excludes the new hire grants made to Todd C. Davis and Andrew Reardon, the promotion grants made to Matthew Korenberg and Tavo Espinoza and the grants made to Todd C. Davis, Matthew Korenberg, Tavo Espinoza and John L. Higgins in connection with the OmniAb spin-off.
The annual time-based stock options and RSUs granted to our named executive officers and reflected in the table above vest in accordance with the standard vesting schedules described above.
The PSUs granted by our Human Capital Management and Compensation Committee in 2022 (the “2022 PSUs”) were divided into two equally weighted components: one subject to certain combined TSR goals of Ligand and OmniAb (“Combined TSR”) and one subject the completion of the OmniAb spin-off during the period from July 2022 and ending at the earlier of the spin-off date or March 23, 2023. Our Human Capital Management and Compensation Committee selected these performance measures in order to drive the key behaviors that reinforce and align pay with stockholder returns.
Threshold, target and maximum performance levels for both components of the 2022 PSUs were established, as described below. The Human Capital Management and Compensation Committee selected the foregoing performance measures because they represent the key financial and operational performance metrics for which the executives are responsible as well as align with stockholders’ interests, thereby creating the clearest link between executive actions, corporate results and our continued long-term success.
Combined TSR Component. The performance-based vesting requirement for the 2022 PSUs tied to combined TSR is based on the percentile level of combined Ligand and OmniAb TSR for a period of approximately two years following the close of the Merger relative to the members of the NASDAQ Biotechnology Index. The NASDAQ Biotechnology Index was selected for comparison because it enables our Human Capital Management and Compensation Committee to assess our performance against an objective peer group.
| | | | | |
| COMBINED TSR PERCENTILE VS. NASDAQ BIOTECHNOLOGY INDEX | % OF TARGET PAID |
95th percentile | 200% |
55th percentile | 100% |
30th percentile | 50% |
< 30th percentile | 0% |
Performance between achievement levels will be determined by linear interpolation. To receive the earned shares, an executive officer must generally remain employed with us through the last day of the applicable performance period.
OmniAb Spin-Off Component. The second performance-based vesting component for the 2022 PSUs is tied to the completion of the OmniAb spin-off during the period from July 2022 and ending at the earlier of the spin-off date or March 23, 2023. The portion of the 2022 PSUs tied to the OmniAb spin-off was scheduled to vest as follows:
| | | | | |
| OMNIAB SPIN-OFF CLOSING DATE | % OF TARGET PAID |
Q3 2022 | 125% |
Q4 2022 | 100% |
Q1 2023 | 75% |
after Q1 2023 | 0% |
The OmniAb spin-off was completed on November 1, 2022, resulting in the vesting of this portion of the PSUs at 100%. The actual number of units that vested with respect to the PSUs tied to the completion of the OmniAb spin-off were as follows: Mr. Korenberg, 8,456 shares, Mr. Espinoza, 3,432 shares, Mr. Reardon, 3,432 shares, and Mr. Higgins, 21,421 shares.
New Hire and Promotion Awards
Effective August 2022, the Human Capital Management and Compensation Committee granted 42,500 stock options, 5,000 RSUs and 4,000 PSUs (at “target”) to Mr. Reardon under the Company’s 2022 Inducement Plan in connection with his hiring and appointment as Chief Legal Officer, which equity awards vest in accordance with the standard vesting schedule described above, or in the case of Mr. Reardon’s PSUs, in accordance with the vesting schedule applicable to the 2022 PSUs granted to our other named executive officers as described above.
In December 2022, the Human Capital Management and Compensation Committee approved the grant of 132,000 stock options to Mr. Davis under the Company’s 2002 Plan in connection with his appointment as Chief Executive Officer, which stock options vest in accordance with the standard vesting schedule described above.
Additionally, in December 2022, the Human Capital Management and Compensation Committee approved grants of equity awards to Messrs. Korenberg and Espinoza in connection with each executive’s promotion to President and Chief Operating Officer and Chief Financial Officer, respectively. Messrs. Korenberg and Espinoza were granted 30,000 and 20,000 stock options, respectively, and 14,000 and 11,000 RSUs, respectively, in each case, under the Company’s 2002 Plan. The stock options and RSUs vest in accordance with the standard vesting schedules described above.
December 2022 Make-Whole Awards
As discussed below under the heading “Treatment of Outstanding Equity Awards at the Time of the OmniAb Spin-Off,” our executives and directors who held outstanding Ligand awards granted prior to March 2, 2022 were split at the time of the Distribution into two equity awards—a Ligand equity award and a New OmniAb equity award. The adjusted Ligand equity awards and New OmniAb equity awards generally are subject to the same terms and conditions, including the same vesting and share payment timing provisions, as applied to the applicable Ligand equity awards immediately prior to the Distribution. The adjustment of such awards was prescribed by the A&R Employee Matters Agreement (as defined below) and was intended to result in the same intrinsic value of those awards prior to and following the adjustment. However, the formula in the A&R Employee Matters Agreement did not accomplish this intent due to a variety of factors, including the fixed value of OmniAb at the agreed upon merger value consistent with other deSPAC transactions. As a result of those adjustments, significant value was lost by employees, directors and other service providers holding Ligand equity awards granted prior to March 2, 2022.
Following the completion of the OmniAb spin-off, after identifying the disproportionate effect on these Ligand equity award holders of the adjustments as a result of the OmniAb spin-off and the Business Combination and considering the extraordinary circumstances that led to such outcome, the Human Capital Management and Compensation Committee consulted with Aon, its independent compensation consultant, to design a make-whole grant program for affected Ligand employees, directors and service providers that would help to mitigate the lost retentive and incentive value in Ligand's equity award program as a result of such adjustments.
Following extensive discussions with Aon, in December 2022, and determining that the lost value as a result of the adjustment of outstanding Ligand equity awards as a result of the OmniAb spin-off and Business Combination presented extraordinary circumstances, the Human Capital Management and Compensation Committee recommended that the full Board approve, and the Board approved, the following grants of stock options under the Company's 2022 Plan to Messrs. Davis, Korenberg, Espinoza and Higgins, as compensation for their services as executives:
| | | | | |
| Name | Number of Stock Options Granted |
| Todd C. Davis | 2,081 | |
| Matthew Korenberg | 25,967 | |
| Tavo Espinoza | 6,620 | |
| John L. Higgins | 92,932 | |
The stock options vest in accordance with the standard vesting schedules described above, except that the options granted to Mr. Higgins were fully vested on the date of grant.
Treatment of 2020 and 2021 Performance-Based Restricted Stock Units in OmniAb Spin-Off
Our Human Capital Management and Compensation Committee amended the outstanding Ligand PSUs granted prior to the Equity Cutoff Date to convert those PSUs into time-based RSUs immediately prior to the Distribution based on its assessment of Ligand’s achievement relative to the applicable performance objectives as of such dates.
The PSUs granted by our Human Capital Management and Compensation Committee in 2020 (the “2020 PSUs”) were eligible to vest based on the following two equally-weighted objectives:
•The vesting of the first component of the 2020 PSUs was tied to Ligand’s adjusted EPS growth for the two year performance period commencing January 1, 2020 and ending December 31, 2021.
•The vesting of the second component of the 2020 PSUs is tied to Ligand’s TSR during the performance period commencing January 1, 2020 and ending December 31, 2022, relative to the members of the NASDAQ Biotechnology Index.
In January 2022, our Human Capital Management and Compensation Committee certified Ligand’s achievement relative to the adjusted EPS growth objective for purposes of the 2020 PSUs following the end of the applicable two-year performance period. In October 2022, in anticipation of the OmniAb spin-off, the Human Capital Management and Compensation Committee determined that the portion of the 2020 PSUs tied to Ligand’s TSR had not been achieved and assigned a 0% achievement level, resulting in the forfeiture of these awards.
The 2021 PSUs granted to our named executive officers were eligible to vest based on the following two equally weighted components (and a possible performance multiplier of 150% for the relative TSR component and 200% for the OmniAb program initiative component):
•The vesting of the first component of the 2021 PSUs was tied to the percentile level of Ligand’s TSR for the three-year performance period from January 1, 2021 through December 31, 2023, relative to the members of the NASDAQ Biotechnology Index.
•The vesting of the second component of the 2021 PSUs was tied to OmniAb program initiation performance conditions during the two-year performance period from January 1, 2021 through December 31, 2022.
In October 2022, in anticipation of the OmniAb spin-off, the Human Capital Management and Compensation Committee certified that the anticipated achievement of the 2021 PSUs relative to the number of partnered OmniAb antibody programs initiated during the two-year performance period from January 1, 2021 through December 31, 2022 was at the maximum level shown in the table below, and therefore approved the vesting of the PSUs granted at 150% at such time. With respect to the portion of the 2021 PSUs tied to Ligand’s TSR, performance was determined to be 168%.
| | | | | |
| NUMBER OF PARTNERED OMNIAB ANTIBODY PROGRAMS INITIATED | % OF TARGET PAID |
>=35 | 150% |
25 | 100% |
15 | 50% |
<15 | 0% |
The actual number of units that vested and were issued with respect to the 2021 PSUs were as follows: Mr. Higgins, 11,557; Mr. Foehr, 6,045 shares; Mr. Korenberg, 9,084 shares; and Mr. Berkman, 3,201 shares. The 2021 PSUs, after giving effect to these achievement levels, were converted into time-based Ligand RSUs and vested on December 31, 2022 (with respect to the portion tied to OmniAb program initiation) and will vest on December 31, 2023 (with respect to the portion formerly tied to Ligand’s TSR), subject to continued employment through each applicable vesting date.
See “Treatment of Outstanding Equity Awards at the Time of the Distribution” below for a description of the treatment of the 2021 PSUs tied to our TSR during the two-year performance period from January 1, 2021 through December 31, 2023 in connection with the Distribution and spin-off of OmniAb.
As a result of such determination, the portion of the 2020 PSUs tied to Ligand’s TSR were assigned a 0%
Treatment of Outstanding Equity Awards at the Time of the OmniAb Spin-Off
Pursuant to the Amended and Restated Employee Matters Agreement, dated as of August 18, 2022 (the “A&R Employee Matters Agreement”), among our company, OmniAb, New OmniAb and Merger Sub, at the time of the Distribution, each outstanding Ligand stock option, RSU award and PSU award held by Ligand and service providers who previously provided service to OmniAb (“OmniAb service providers”) as of the time of the Distribution and granted prior to March 2, 2022 (the “Equity Cutoff Date”) was split at the time of the Distribution into two equity awards—a Ligand equity award and an OmniAb equity award. The adjusted Ligand equity awards and OmniAb equity awards generally are subject to the same terms and conditions, including the same vesting and share payment timing provisions, as applied to the applicable Ligand equity awards immediately prior to the Distribution.
Each outstanding Ligand stock option, RSU award and PSU award that was granted on or after the Equity Cutoff Date to an individual who was a current or former Ligand service provider as of the time of the Distribution generally was adjusted solely into a Ligand equity award at the time of the Distribution. The adjusted Ligand equity awards generally are subject to the same terms and conditions, including the same vesting and share payment timing provisions, as applied to the applicable Ligand equity awards immediately prior to the Distribution. Each of the named executive officers other than Messrs. Foehr and Berkman were treated as Ligand service providers for this purpose.
As described above, each outstanding Ligand stock option, RSU award and PSU award that was granted after the Equity Cutoff Date to an individual who was an OmniAb service provider as of the time of the Distribution generally was adjusted solely into an OmniAb equity award at the time of the Distribution. The adjusted OmniAb equity awards generally are subject to the same terms and conditions, including the same vesting and share payment timing provisions, as applied to the applicable Ligand equity awards immediately prior to the Distribution. Messrs. Foehr and Berkman were treated as OmniAb service providers for this purpose.
At the effective time of the Merger, all OmniAb options, OmniAb RSU awards and OmniAb PSU awards, in each case, that were outstanding as of immediately prior to the effective time were converted into awards relating to shares of New OmniAb common stock, respectively, in each case, with substantially the same terms and conditions as were applicable to the OmniAb equity award immediately prior to the closing of the Business Combination (other than terms that have been rendered inoperative by the Distribution and Business Combination), including with respect to vesting and termination-related provisions, as adjusted by the Base Exchange Ratio (as defined in the Merger Agreement). In addition, at the effective time of the Merger, each holder of a New OmniAb equity award was issued a number of “earnout shares” equal to the product of the
number of shares of New OmniAb common stock subject to the New OmniAb equity award multiplied by the “earnout exchange ratio” (“OmniAb Earnout Shares”), with 50% of such OmniAb Earnout Shares vesting upon achievement of a post-transaction volume-weighted average price (“VWAP”) of $12.50 per share of New OmniAb’s common stock for any 20 trading days over a consecutive 30 trading-day period, and the remainder vesting upon achievement of a post-transaction VWAP of $15.00 per share of New OmniAb’s common stock for any 20 trading days over a consecutive 30 trading-day period, in each case provided such vesting occurs during the five-year period following the consummation of the Business Combination.
Following the foregoing adjustments, in the case of Ligand equity awards that were converted into both adjusted Ligand equity awards and OmniAb equity awards (or, following the closing of the Business Combination, New OmniAb equity awards), continued employment with or service to Ligand or its affiliates is treated as employment or other continued service with New OmniAb and its affiliates with respect to New OmniAb equity awards held by Ligand service providers, and continued employment with or other service to New OmniAb and its affiliates is treated as employment or other continued service with Ligand and its affiliates with respect to Ligand equity awards held by OmniAb service providers.
Notwithstanding the foregoing, with respect to any unvested New OmniAb equity award or unvested Ligand equity award granted or adjusted, as applicable, in connection with the Distribution and Business Combination, if the original Ligand equity award was subject to accelerated vesting provisions in connection with a termination of service with Ligand and/or a “change in control” (as defined in the applicable award agreements or equity plan) of Ligand, then the New OmniAb equity award or Ligand equity award, as applicable, is subject to the same acceleration provisions in connection with the holder’s termination of service with his or her post-spin employer, as applicable, and/or change in control of such entity. In addition, any unvested New OmniAb equity award granted to a Ligand service provider in connection with the Distribution and Business Combination will vest in full upon a change in control of New OmniAb, and any unvested Ligand equity award held by an OmniAb service provider that was adjusted in connection with the Distribution and Business Combination will vest in full upon a change in control of Ligand. Additionally, if our Board or the New OmniAb board of directors, as applicable, determines to accelerate in full the vesting of all of such entity’s equity awards that are held by its current and former service providers, then such board of directors shall also accelerate in full the vesting of all of its equity awards that are held by current and former service providers of the other entities, as applicable.
The adjusted Ligand equity awards held by our named executive officers as of December 31, 2022 are reflected in the Outstanding Equity Awards at Fiscal Year End Table below.
OTHER ELEMENTS OF COMPENSATION AND PERQUISITES
We also provide our named executive officers and other employees the following benefits and perquisites.
Health and Welfare Benefits
We provide to each named executive officer, the named executive officer’s spouse and children such health, dental and vision insurance coverage as we may from time to time make available to its other executives of the same level of employment. We pay a portion of the premiums for this insurance for all employees.
We provide each named executive officer such disability and/or life insurance as we may from time to time make available to our other employees of the same level of employment. We pay the premiums for this life insurance coverage for the named executive officers.
Defined Contribution Plan
We and our designated affiliates offer the Section 401(k) Savings/Retirement Plan (the “401(k) Plan”), a tax-qualified retirement plan, to their eligible employees. The 401(k) Plan permits eligible employees to defer from 1% to 90% of their annual eligible compensation, subject to certain limitations imposed by the Internal Revenue Code. The employees’ elective deferrals are immediately vested and non-forfeitable in the 401(k) Plan. We also make matching contributions to the 401(k) Plan. In 2022, the match was equal to $0.50 per each $1.00 contributed by an employee up to an annual maximum of $6,000 per year.
Employee Stock Purchase Plan
Our 2002 Employee Stock Purchase Plan, as amended, which is intended to qualify under Section 423 of the Internal Revenue Code, permit participants to purchase Company stock on favorable terms. Plan participants are granted a purchase right to acquire shares of common stock at a price that is 85% of the stock price on either the first day of the six month offering period or the stock price on the last day of the six month offering period, whichever is lower. The purchase dates occur on the last business days of December and June of each year. To pay for the shares, each participant may authorize periodic payroll deductions from 1% to 10% of his or her cash compensation, subject to certain limitations imposed by the Internal Revenue Code. All payroll deductions collected from the participant in an offering period are automatically applied to the purchase of common stock on that offering period’s purchase date provided the participant remains an eligible employee and has not withdrawn from the employee stock purchase plan prior to that date.
Limited Perquisites and Other Benefits
We make available certain other perquisites or fringe benefits to executive officers and other employees, such as tuition reimbursement, professional society dues and food and recreational fees incidental to official company functions, including board meetings. The aggregate of these other benefits was less than $11,000 for each executive officer in the last fiscal year.
CLAWBACK POLICY
While our Chief Executive Officer and Chief Financial Officer are subject to any recovery rights that are provided under applicable laws, including the Sarbanes-Oxley Act, we have not yet adopted a compensation recovery policy as required under the Dodd-Frank Act. We are reviewing the final clawback rule adopted by the SEC that implements the applicable provisions of the Dodd-Frank Act and the NASDAQ’s related proposed listing standard, in each case relating to recoupment of incentive-based compensation. The Company will implement its clawback policy in accordance with the new listing standard when the new listing standard becomes final.
SEVERANCE AND CHANGE IN CONTROL ARRANGEMENTS
We believe that reasonable severance benefits for our named executive officers are important because it may be difficult for our executive officers to find comparable employment within a short period of time following an involuntary termination of employment. We also believe that it is important to protect our named executive officers in the event of a change in control transaction involving us. In addition, it is our belief that the interests of stockholders will be best served if the interests of our senior management are aligned with them, and providing change in control severance benefits should eliminate, or at least reduce, the reluctance of senior management to pursue potential change in control transactions that may be in the best interests of stockholders. Accordingly, the severance arrangements we have entered into with each of our executive officers provide for severance benefits in specified circumstances, as well as benefits in connection with an involuntary termination following a change in control.
Severance Agreement with Todd C. Davis
We entered into a severance agreement with Mr. Davis in connection with his appointment as our Chief Executive Officer. In the event Mr. Davis’ employment is terminated by us without cause or he resigns for good reason prior to a change in control of the Company or more than 24 months following a change in control of the Company, he will be eligible to receive a severance benefit equal to:
•eighteen months of his base salary at the rate in effect at the time of involuntary termination; plus
•eighteen multiplied by the monthly premium he would be required to pay for continued health coverage for himself and his eligible dependents.
In the event Mr. Davis’ employment is terminated by us without cause or he resigns for good reason within 24 months following a change in control of our company, he will be eligible to receive a severance benefit equal to:
•two times the annual rate of base salary in effect at the time of involuntary termination; plus
•two times the greater of: (a) the maximum target bonus for the fiscal year in which the termination occurs; or (b) the maximum target bonus for the fiscal year in which the change in control occurs, if different; plus
•twenty-four multiplied by the monthly premium the executive would be required to pay for continued health coverage for himself and his eligible dependents.
The foregoing severance amounts will be payable in a lump sum following Mr. Davis’ termination of employment, subject to his execution of a general release of claims acceptable to us.
The severance agreement also provides that in the event Mr. Davis’ employment is terminated by us without cause or he resigns for good reason, all of Mr. Davis’ outstanding stock awards will vest in the event of such involuntary termination (provided that the acceleration of performance-based awards will be governed by the applicable award agreements). In addition, the post-termination exercise period of Mr. Davis’ stock options will be extended from three months to the date that is 24 months following the date of termination (but in no event beyond the original expiration date of such options), subject to his agreement to certain restrictions on the transfer of shares of the Company’s common stock held by him.
For purposes of the severance agreement, an involuntary termination is either a termination of Mr. Davis’ employment by us without cause or his resignation for good reason. “Cause” is generally defined as Mr. Davis’ conviction of, or plea of “guilty” or “no contest” to, a felony under the laws of the United States or any state thereof, his willful and material breach of any obligation or duty under the employment agreement, any confidentiality and proprietary rights agreement or any written employment or other written policies that have previously been furnished to him, which breach is not cured within 30 days after written notice thereof is received by him, if such breach is capable of cure, Mr. Davis’ gross negligence or willful misconduct, including without limitation, fraud, dishonesty or embezzlement, in the performance of his duties, or his continuing failure or refusal to perform his assigned duties or to comply with reasonable directives of the Board that are consistent with his job duties (which directives are not in conflict with applicable law), which failure is not cured within 30 days after written notice thereof is received by him.
For purposes of the Mr. Davis severance agreement, “good reason” is generally defined as a material diminution in the officer’s authority, duties or responsibilities, a material diminution in the officer’s base compensation, a material change in the geographic location at which the officer must perform his duties, or any other action or inaction that constitutes a material breach by us or any successor or affiliate of its obligations to the officer under the employment agreement. An officer must provide written notice to us of the occurrence of any of the foregoing events or conditions without his written consent within 90 days of the occurrence of such event. We will have a period of 30 days to cure such event or condition after receipt of written notice of such event from the officer. Any voluntary termination of an officer’s employment for “good reason” must occur no later than the date that is six months following the initial occurrence of one of the foregoing events or conditions.
For purposes of Mr. Davis’ severance agreement, a “change in control” has generally the same definition as given to such term under our 2002 Plan, as described below.
Change in Control Arrangements
We have a change in control severance agreement with each of the named executive officers (other than Mr. Davis). In the event a named executive officer’s employment is terminated by us without cause or he or she resigns for good reason within 24 months following a change in control of our company, he or she will be eligible to receive a severance benefit equal to:
•one times the annual rate of base salary in effect for such officer at the time of involuntary termination; plus
•one times the greater of: (a) the maximum target bonus for the fiscal year in which the termination occurs; or (b) the maximum target bonus for the fiscal year in which the change in control occurs, if different; plus
•twelve multiplied by the monthly premium the executive would be required to pay for continued health coverage for himself or herself and his or her eligible dependents.
The foregoing severance amounts will be payable in a lump sum following the officer’s termination of employment, subject to the officer’s execution of a general release of claims acceptable to us.
The change in control severance agreements also provide that all of a named executive officer’s outstanding stock awards will vest in the event of such a termination. In addition, the post-termination exercise period of a named executive officer’s stock options will be extended from three months to the date that is nine months following the date of termination (but in no event beyond the original expiration date of such options). For purposes of the change in control severance agreements, an involuntary termination is either a termination of a named executive officer’s employment by us without cause or his resignation for good reason. “Cause” and “good reason” have the same definitions as given to such terms under Mr. Davis’ separation agreement described above.
For purposes of the change in control severance agreements, a “change in control” has generally the same definition as given to such term under our 2002 Plan, as described below.
Severance Plan
We maintain the Ligand Pharmaceuticals Incorporated Severance Plan to provide severance payments to our employees and the employees of our subsidiaries upon an involuntary termination of employment without cause. Each of the named executive officers (other than Mr. Davis) is eligible to participate in the severance plan, provided that he or she is not subject to disciplinary action or a formal performance improvement plan at the time of termination. However, if, as a result of his or her involuntary termination by us without “cause,” a named executive officer would be eligible to receive severance under any individual change in control severance agreement, employment agreement or other arrangement providing severance benefits, as approved by the Board or a committee thereof, such named executive officer will not be eligible for benefits under the severance plan.
Under the terms of the severance plan, a named executive officer will be eligible to receive (1) a lump sum payment in cash for his fully earned but unpaid base salary and accrued but unused vacation through the date of termination, (2) an amount equal to his base salary for the severance period, which period will be equal to (a) two months plus (b) one week for each year of service as of the date of termination and (c) continued health coverage at the same cost as was in effect for the named executive officer at the date of termination throughout such severance period, provided that such named executive officer elects continued coverage under COBRA. The foregoing cash severance benefit will be payable in a lump sum following the officer’s termination of employment, subject to the officer’s execution of a general release of claims acceptable to us.
For purposes of the severance plan, “cause” is generally defined as an officer’s conviction of (or entry of a plea of no contest to) any felony or any other criminal act, an officer’s commission of any act of fraud or embezzlement, an officer’s unauthorized use or disclosure of our confidential or proprietary information or trade secrets, or an officer’s commission of any material violation of our policies, or an officer’s commission of any other intentional misconduct which adversely affects our business or affairs in a material manner.
Change in Control Acceleration of Equity Awards
Equity awards granted under the 2002 Plan to the named executive officers may be subject to accelerated vesting in the event of a “change in control.”
Equity award agreements under the 2002 Plan, which cover each of the named executive officers, provide that such equity awards will automatically vest in the event of a “change in control” where the option is not assumed or replaced by a successor.
Under the 2002 Plan, a “change in control” is generally defined as:
•a merger, consolidation or reorganization of our company in which 50% or more of our voting securities change ownership;
•the sale, transfer or other disposition of all or substantially all of our assets in complete liquidation or dissolution of our company; or
•a change in control of our company effected through a successful tender offer for more than 50% of our outstanding common stock or through a change in the majority of the Board as a result of one or more contested elections for board membership.
In addition, the PSUs granted to the named executive officers in 2022 contain additional vesting provisions that will apply in the event of a change in control. In the event of a change in control prior to December 31, 2023, the number of PSUs in which a named executive will be eligible to vest under each PSU will be set at the “target” number of units, which “target” PSUs will continue to be eligible to vest based solely on the participant’s continued employment or service, with 50% of such “target” PSUs vesting on December 31, 2023 and 50% of such “target” PSUs vesting on December 31, 2024. In the event of a change in control after December 31, 2023 but prior to December 31, 2024, the remaining number of PSUs in which a participant will be eligible to vest under each PSU will be set at 50% of the “target” number of PSUs, which “target” PSUs will continue to be eligible to vest based solely on the participant’s continued employment or service through December 31, 2024.
RISK ASSESSMENT OF COMPENSATION POLICIES AND PROGRAMS
In January 2022, management and Aon assessed our compensation policies and programs for all employees for purposes of determining the relationship of such policies and programs and the enterprise risks faced by us and presented its assessment to our Human Capital Management and Compensation Committee. Based on these assessments, management recommended, and the Human Capital Management and Compensation Committee concluded, that none of our compensation policies or programs create risks that are reasonably likely to have a material adverse effect on us. In connection with their review, management and the Human Capital Management and Compensation Committee noted certain key attributes of our compensation policies and programs that help to reduce the likelihood of excessive risk taking, including:
•The program design provides a balanced mix of cash and equity compensation, fixed and variable compensation and annual and long-term incentives.
•Corporate performance objectives are designed to be consistent with our overall business plan and strategy, as approved by the Board.
•The determination of executive incentive awards is based on a review of a variety of indicators of performance, reducing the risk associated with any single indicator of performance.
•Our equity awards generally vest over multi-year periods.
•The Human Capital Management and Compensation Committee has the right to exercise negative discretion over executive annual incentive plan payments.
POLICIES REGARDING TAX DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code restricts the ability of publicly held companies to take a federal income tax deduction for compensation paid to “covered employees” to the extent that compensation exceeds $1.0 million per covered employee in any fiscal year. While we consider the tax deductibility of each element of executive compensation as a factor in our overall compensation program, the Human Capital Management and Compensation Committee retains the discretion to approve compensation that may not qualify for the compensation deduction if, in light of all applicable circumstances, it would be in our best interest for such compensation to be paid without regard to whether it may be tax deductible.
HUMAN CAPITAL MANAGEMENT AND COMPENSATION
COMMITTEE REPORT
The Human Capital Management and Compensation Committee of the board of directors has submitted the following report for inclusion in this proxy statement:
The Human Capital Management and Compensation Committee reviewed this Compensation Discussion and Analysis and discussed its contents with the company’s management. Based on the review and discussions, the Human Capital Management and Compensation Committee has recommended to the board of directors that this Compensation Discussion and Analysis be included in this proxy statement and our annual report for the year ended December 31, 2022.
This report of the Human Capital Management and Compensation Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
The foregoing report has been furnished by the Human Capital Management and Compensation Committee.
Jason Haas, Chair
Jason M. Aryeh
John L. LaMattina, Ph.D.
COMPENSATION TABLES
SUMMARY COMPENSATION TABLE
The following table provides information regarding the compensation earned by our named executive officers during the fiscal years ended December 31, 2022, 2021 and 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | | Year | | Salary | | Stock Awards(1) | | Option Awards(1) | | Non-Equity Incentive Plan Compensation(2) | | All Other Compensation(3) | | Total |
| | | | | | | | | | | | | | |
Todd C. Davis (4) | | 2022 | | $ | 49,243 | | | $ | 79,607 | | | $ | 5,001,298 | | | $ | — | | | $ | 65,021 | | | $ | 5,195,169 | |
| Chief Executive Officer | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Matthew Korenberg | | 2022 | | 519,858 | | | 2,691,809 | | | 3,089,749 | | | 234,229 | | | 6,900 | | | 6,542,545 | |
| President and Chief Operating Officer | | 2021 | | 497,297 | | | 4,890,114 | | | 1,082,118 | | | 248,649 | | | 7,300 | | | 6,725,479 | |
| 2020 | | 482,833 | | | 1,150,224 | | | 1,206,821 | | | 265,558 | | | 5,700 | | | 3,111,136 | |
| | | | | | | | | | | | | | |
| Tavo Espinoza | | 2022 | | 330,097 | | | 1,385,048 | | 1,295,068 | 1,430,012 | | | 119,715 | | | 7,380 | | | 3,272,252 | |
| Chief Financial Officer | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Andrew Reardon | | 2022 | | 172,917 | | | 1,023,470 | | | 1,746,108 | | | 62,250 | | | 2,909 | | | 3,007,654 | |
| Chief Legal Officer and Secretary | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| John L. Higgins | | 2022(5) | | 675,264 | | | 4,562,984 | | | 5,178,758 | | | — | | | 6,347,984 | | | 16,764,990 | |
| Former Chief Executive Officer | | 2021 | | 696,583 | | | 6,016,298 | | | 2,344,512 | | | 522,438 | | | 7,380 | | | 9,587,211 | |
| 2020 | | 668,333 | | | 2,277,460 | | | 2,389,544 | | | 501,250 | | | 6,180 | | | 5,842,767 | |
| | | | | | | | | | | | | | |
| Matthew W. Foehr | | 2022(6) | | 451,057 | | | 2,041,319 | | | 1,400,037 | | | — | | | 115,353(7) | | 4,007,766 | |
| Former President and Chief Operating Officer | | 2021 | | 518,933 | | | 3,146,844 | | | 1,226,357 | | | 259,467 | | | 130,603(8) | | 5,282,204 | |
| 2020 | | 503,750 | | | 1,242,269 | | | 1,303,366 | | | 277,063 | | | 158,001(9) | | 3,484,449 | |
| | | | | | | | | | | | | | |
| Charles S. Berkman | | 2022(10) | | 396,920 | | | 1,200,811 | | | 823,556 | | | — | | | 12,150 | | | 2,433,437 | |
Former Senior Vice President, General Counsel and Secretary | | 2021 | | 451,682 | | | 1,665,811 | | | 649,308 | | | 203,257 | | | 10,890 | | | 2,980,948 | |
| 2020 | | 441,917 | | | 644,168 | | | 675,820 | | | 176,767 | | | 6,180 | | | 1,944,852 | |
(1) Reflects the grant date fair value for stock and option awards granted in 2020, 2021 and 2022, calculated in accordance with FASB ASC Topic 718, Compensation - Stock Compensation, (“Topic 718”). The assumptions used to calculate the value of stock and option awards are set forth under Note 9 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023. For Mr. Davis, also includes the grant date fair value for stock and option awards granted to him in 2022 for his service as a member of the Board prior to his appointment as our Chief Executive Officer effective December 5, 2022 in the amount of $79,607 and $251,449, respectively. With respect to the PSU awards included in the Summary Compensation Table, these amounts include the grant date fair value of such PSUs granted to each of the named executive officers based on the estimated probable outcome of the performance based objectives applicable to such awards on the grant date.
With respect to the PSUs granted in 2020, the number of PSUs that are eligible to vest will be determined based on the measurement of two equally weighted metrics, the compound annual growth rate for our adjusted EPS over a two-year performance period and our relative TSR ranked on a percentile basis against the NASDAQ Biotechnology Index over a three-year performance period measured from January 1, 2020. The grant date fair value of the PSUs granted during 2020 included in this column that are tied to the compound annual growth rate for our adjusted EPS was calculated based on the probable achievement of the performance goals as determined at the date of grant, which was determined to be the target level of performance. The grant date fair value of the PSUs that are tied to relative TSR was calculated using the Monte Carlo simulation which utilizes the stock volatility, dividend yield and market correlation of the Company and the NASDAQ Biotechnology Index. For the PSUs granted during 2020, such inputs consisted of: (a) an expected term that was based on the actual 2.81 year term of the award; (b) a risk-free interest rate of 0.4% derived from the yield on U.S. government bonds of appropriate term from the U.S. Department of Treasury; (c) a dividend yield of 0.0% based on historic and future dividend yield estimates; (d) stock price volatility of 39.75% based on an analysis of the historical stock price volatility of Ligand and each company in the NASDAQ Biotechnology Index over the three years prior to the date of grant to conform to the term of the awards; and (e) initial TSR performance of -11.48% based on actual historical TSR performance for Ligand and each company in the NASDAQ Biotechnology Index. Based on this methodology, the valuation of the PSUs tied to relative TSR performance granted during 2020 was 52.81% of the closing price of our common stock on the date of grant. The highest level of performance that may be achieved for the PSUs is 200% of the target. The full grant date fair value of the PSUs awarded to our named executive officers during fiscal year 2020, assuming maximum achievement of the applicable performance objectives is as follows: Mr. Higgins $1,924,273, Mr. Foehr $1,049,603, Mr. Korenberg $971,834 and Mr. Berkman $544,291.
With respect to the PSUs granted in 2021, the number of PSUs that are eligible to vest will be determined based on the measurement of two equally weighted metrics, the initiation of partnered OmniAb antibody programs over a two-year performance period measured from January 1, 2021 and Ligand’s relative TSR ranked on a percentile basis against the NASDAQ Biotechnology Index over a three-year performance period measured from January 1, 2021. The grant date fair value of the PSUs granted during 2021 included in this column that are tied to the initiation of partnered OmniAb antibody programs was calculated based on the probable achievement of the performance goals as determined at the date of grant, which was determined to be the target level of performance. The grant date fair value of the PSUs that are tied to relative TSR was calculated using the Monte Carlo simulation which utilizes the stock volatility, dividend yield and market correlation of the Company and the NASDAQ Biotechnology Index. For the PSUs granted during 2021, such inputs consisted of: (a) an expected term that was based on the actual 2.9 year term of the award; (b) a risk-free interest rate of 0.18% derived from the yield on U.S. government bonds of appropriate term from the U.S. Department of Treasury; (c) a dividend yield of 0.0% based on historic and future dividend yield estimates; (d) stock price volatility of 52.56% based on an analysis of the historical stock price volatility of Ligand and each company in the NASDAQ Biotechnology Index over the three years prior to the date of grant to conform to the term of the awards; and (e) initial TSR performance of 84.38% based on actual historical TSR performance for Ligand and each company in the NASDAQ Biotechnology Index. Based on this methodology, the valuation of the PSUs tied to relative TSR performance granted during 2020 was 176.27% of the closing price of Ligand common stock on the date of grant. The highest level of performance that may be achieved for the PSUs is 200% of the target. The full grant date fair value of the PSUs awarded to our named executive officers during fiscal year 2021, assuming maximum achievement of the applicable performance objectives, is as follows: Mr. Higgins $4,462,197, Mr. Foehr $2,333,894, Mr. Korenberg $3,507,211 and Mr. Berkman $1,235,551.
With respect to the PSUs granted by Ligand in 2022, the number of PSUs that were eligible to vest were determined based on the measurement of two equally weighted metrics, the completion of the OmniAb spin-off during the period from July 2022 and ending at the earlier of the spin-off date or March 23, 2023, and the achievement of certain combined TSR goals of Ligand and OmniAb relative to the NASDAQ Biotechnology Index during a period of approximately two years following the close of the OmniAb spin-off. The grant date fair value of the PSUs granted during 2022 included in this column that are tied to the calendar quarter during which the completion of the OmniAb spin-off occurred was calculated based on the probable achievement of the performance goals as determined at the date of grant, which was determined to be the target level of performance. The grant date fair value of the PSUs that are tied to relative TSR was calculated using the Monte Carlo simulation which utilizes the stock volatility, dividend yield and market correlation of Ligand, OmniAb and the NASDAQ Biotechnology Index. For the PSUs granted during 2022, such inputs consisted of: (a) an expected term that was based on the actual 2.5 year term of the award; (b) a risk-free interest rate of 2.8% derived from the yield on U.S. government bonds of appropriate term from the U.S. Department of Treasury; (c) a dividend yield of 0.0% based on historic and future dividend yield estimates; (d) stock price volatility of 59.71% based on an analysis of the historical stock price volatility of Ligand and each company in the NASDAQ Biotechnology Index over the 2.5 years prior to the date of grant to conform to the term of the awards; and (e) initial TSR performance of 100% based on actual historical TSR performance for Ligand and each company in the NASDAQ Biotechnology Index. Based on this methodology, the valuation of the PSUs tied to relative TSR performance granted during 2022 was 147.15% of the closing price of Ligand Common Stock on the date of grant. The highest level of performance that may be achieved for the spin-off PSU grant and combined TSR PSU grant is 125% and 200% of the target, respectively. The full grant date fair value of the PSUs awarded to our named executive officers during fiscal year 2022, assuming maximum achievement of the applicable performance objectives, is $3,241,409 for Mr. Higgins, $1,450,066 for Mr. Foehr, $1,279,438 for Mr. Korenberg, $852,999 for Mr. Berkman, $519,415 for Mr. Espinoza and $546,065 for Mr. Reardon. The PSU grant tied to the completion of the OmniAb spin-off was vested at 100% of target upon completion of the Distribution during the fourth quarter of 2022.
Certain of these awards were adjusted at the time of the Distribution and spin-off of OmniAb. For more information about the adjustment of the equity awards in connection with the Distribution and spin-off of OmniAb, see “Treatment of Outstanding Equity Awards at the Time of the Distribution” above.
(2) Represents performance bonus awards under the management bonus plan earned in 2020, 2021, and 2022 but paid in the subsequent year.
(3) Represents life insurance premiums paid by us for each year represented in the table and for 401(k) matching funds paid by us for certain named executive officers, as follows: $2,572 for Andrew Reardon, and $6,000 for the remaining named executive officers (other than Mr. Davis) in 2022; $6,000 for each named executive officer in 2021; and $4,800 for each named executive officer in 2020). In addition, the amount for John L. Higgins in 2022 includes the incremental stock-based compensation expense under Topic 718 in the amount of $5,099,852 resulting from the accelerated vesting of his outstanding equity awards in connection with his separation from the company, $85,288 for his accrued paid time off balance paid upon his resignation, and $1,095,683 in severance payments and $61,161 in continued health benefit coverage pursuant to his separation agreement with the Company. For Mr. Davis, includes the cash retainers paid to Mr. Davis received for his service on the Board prior to his appointment as our Chief Executive Officer effective as of December 5, 2022 in the amount of $65,021. Mr. Davis did not receive any 401(k) matching funds during 2022.
The assumptions used to calculate the incremental stock-based compensation expense under Topic 718 with respect to Mr. Higgins’ equity award acceleration are set forth under Note 9 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023.
(4) For Mr. Davis, his salary represents the pro-rated base salary paid in 2022 in the amount of $49,243.
(5) Effective December 5, 2022, John L. Higgins retired as Chief Executive Officer of the Company, and Todd C. Davis was appointed Chief Executive Officer. Mr. Higgins remained a member of the Board until December 31, 2022.
(6) Mr. Foehr resigned from his role as President and Chief Operating Officer in connection with the OmniAb spin-off, effective November 1, 2022.
(7) Pursuant to the management rights letter between Viking Therapeutics, Inc. (Viking) and Ligand dated May 21, 2014, Ligand nominated Mr. Foehr to serve as a member of Viking’s board of directors. During 2022, in connection with Mr. Foehr’s service as a director of Viking, Mr. Foehr received (1) $38,000 in cash payments and (2) $70,203 in option awards (representing the aggregate grant date fair value of the option awards as reported by Viking, computed in accordance with authoritative accounting guidance). Additionally, for 2022, Mr. Foehr received life insurance premiums paid by Ligand of $1,150 and $6,000 in 401(k) matching funds paid by Ligand in 2022.
(8) During 2021, in connection with Mr. Foehr’s service as a director of Viking, Mr. Foehr received (1) $38,000 in cash payments and (2) $85,603 in option awards (representing the aggregate grant date fair value of the option awards as reported by Viking, computed in accordance with authoritative accounting guidance). Additionally, Mr. Foehr received life insurance premiums paid by Ligand for 2021 of $900, taxable fringe benefits of $100, and $6,000 in 401(k) matching funds paid by Ligand in 2021.
(9) During 2020, in connection with Mr. Foehr’s service as a director of Viking, Mr. Foehr received (1) $38,000 in cash payments and (2) $114,001 in option awards (representing the aggregate grant date fair value of the option awards as reported by Viking, computed in accordance with authoritative accounting guidance). Additionally, Mr. Foehr received life insurance premiums paid by us for 2020 of $900, taxable fringe benefits of $300, and $4,800 in 401(k) matching funds paid by Ligand in 2020.
(10) Mr. Berkman resigned from his role as Senior Vice President, General Counsel and Secretary in connection with the OmniAb spin-off effective November 1, 2022.
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2022
The following table summarizes plan-based awards granted to our named executive officers during the last fiscal year.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | Grant Date | Date of Board Action approving Award | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | All Other Option Awards: Number of Securities Underlying Options (#)(4) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(5) | |
| Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |
| Todd C. Davis | | | | | | | | | | | | | | | | | | | | | | | |
| 6/10/22 | 6/10/22 (6) | — | | | — | | | — | | | — | | | — | | | — | | | 1,004 | | | — | | | — | | | 79,607 | | | |
| 6/10/22 | 6/10/22 (6) | — | | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,340 | | | | 79.20 | | | 180,646 | | | |
| 12/5/22 | 12/5/22 | — | | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | 132,000 | | | | 69.70 | | | 4,749,848 | | | |
| 12/22/22 | 12/22/22 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,081 | | | 67.03 | | 70,803 | | | |
| Matthew Korenberg | | | | | | | | | | | | | | | | | | | | | | | |
| 12/13/22 | 12/13/22 | | | 270,000 | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | |
| 7/5/22 | 7/5/22 | — | | — | | — | | — | | 9,853 | | | 16,011 | | | — | | | — | | | — | | 1,161,893 | | | |
| 6/10/22 | 4/8/22 | — | | — | | — | | | — | | — | | | — | | | 8,062 | | | — | | | — | | 639,236 | | | |
| 12/13/22 | 12/13/22 | — | | | — | | | — | | | | — | | | | — | | | | — | | | | 14,000 | | | | — | | | | — | | | | 890,680 | | | |
| 5/5/22 | 4/8/22 | — | | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,189 | | | | 90.68 | | | 1233634 | | |
| 12/13/22 | 12/13/22 | — | | | — | | — | | | — | | | — | | | — | | | — | | | 30,000 | | | 63.62 | | 972,624 | | | |
| 12/22/22 | 12/22/22 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 25,967 | | | | 67.03 | | | 883,491 | | | |
| Tavo Espinoza | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 12/13/22 | 12/13/22 | — | | | 160,000 | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | |
| 7/5/22 | 7/5/22 | — | | | — | | | — | | | — | | | 4,000 | | | 6,500 | | | — | | | — | | | — | | | 471,700 | | |
| 6/10/22 | 4/8/22 | — | | | — | | | — | | | — | | | — | | | — | | | 2,693 | | | — | | | — | | | 213,528 | | |
| 12/13/22 | 12/13/22 | — | | | — | | | — | | | — | | | — | | | — | | | 11,000 | | | — | | | — | | | 699,820 | | |
| 5/5/22 | 4/8/22 | — | | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | 13,615 | | | | 90.68 | | | 556,359 | | | |
| 12/13/22 | 12/13/22 | — | | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | 20,000 | | | | 63.62 | | | 648,416 | | | |
| 12/22/22 | 12/22/22 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 6,620 | | | 67.03 | | 225,236 | | |
| Andrew Reardon | | | | | | | | | | | | | | | | | | | | | | | |
| 10/21/22 | 10/21/22 | | | 166,000 | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | |
| 8/10/22 | 7/5/22 | — | | | — | | | — | | | — | | | 4,000 | | | 6,500 | | | — | | | — | | | — | | | 493,020 | | | |
| 8/10/22 | 4/8/22 | — | | | — | | | — | | | — | | | — | | | — | | | 5,000 | | | — | | | — | | | 530,450 | | | |
| 8/1/22 | 4/8/22 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 42,500 | | | 89.70 | | | 1,746,108 | | | |
John L. Higgins | | | | | | | | | | | | | | | | | | | | | | |
| 1/26/22 | 1/26/22 | | | 547,841 | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | |
| 7/5/22 | 7/5/22 | — | | | — | | | — | | | | — | | | | 24,962 | | | | 40,562 | | | | — | | | | — | | | | — | | | | 2,943,644 | | |
| 6/10/22 | 4/8/22 | — | | | — | | | — | | | | — | | | | — | | | | — | | | | 20,423 | | | | — | | | | — | | | | 1,619,340 | | | |
| 5/5/22 | 4/8/22 | — | | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | | 76,478 | | | | 90.69 | | | 3,125,174 | | | |
| 12/22/22 | 12/22/22 | — | | | — | | | — | | | | — | | | | — | | | | — | | | | — | | | 92,932 | | | 67.03 | | 2,053,583 | | | |
Matthew W. Foehr | | | | | | | | | | | | | | | | | | | | | | |
| 1/26/22 | 1/26/22 | | | 271,805 | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | |
| 7/5/22 | 7/5/22 | — | | — | | — | | — | | 11,167 | | | 18,144 | | | — | | | — | | | — | | 1,316,868 | | |
| 6/10/22 | 4/8/22 | — | | — | | — | | — | | — | | | — | | | 9,137 | | | — | | | — | | 724,473 | | |
| 5/5/22 | 4/8/22 | — | | — | | — | | — | | — | | | — | | | — | | | 34,214 | | | 90.68 | | 1,398,111 | | |
| Charles S. Berkman | | | | | | | | | | | | | | | | | | | | | | |
| 1/26/22 | 1/26/22 | | | 214,575 | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | |
| 7/5/22 | 7/5/22 | — | | — | | — | | — | | 6,569 | | | 10,675 | | | — | | | — | | | — | | 774,649 | | |
| 6/10/22 | 4/8/22 | — | | — | | — | | — | | — | | | — | | | 5,375 | | | — | | | — | | 426,184 | | |
| 5/5/22 | 4/8/22 | — | | — | | — | | — | | — | | | — | | | — | | | 20,126 | | | 90.68 | | 822,423 | | |
(1) Represents the target cash bonus awards granted under our annual performance bonus program. Actual bonus amounts paid are reflected in the Summary Compensation Table above.
(2) The PSUs were eligible to vest based on objectives related to the completion of the Business Combination, and the achievement of certain combined TSR goals of Ligand and OmniAb relative to the NASDAQ Biotechnology Index during a period of approximately two years following the close of the Business Combination, with each such objective equally weighted. Threshold performance levels, below which no vesting will be awarded, were also established for each performance objective. The portion of the PSUs tied to completion of the Business Combination vested at target levels upon completion of the Business Combination. For a description of the change in control provisions applicable to the foregoing equity awards, see “Treatment of Outstanding Equity Awards at the Time of the Distribution” and “Severance and Change in Control Arrangements” above. For a description of the accelerated vesting of Mr. Higgins’ equity awards in connection with his retirement, see “Higgins Separation Agreement” above.
(3) Other than the RSU awards granted in December 2022 to Mr. Higgins and as described below in footnote (6), the RSU awards granted to the named executive officers vest in equal installments over a three year period on each of February 15, 2023, 2024 and 2025. The RSU awards granted in December 2022 to Mr. Higgins were vested on the date of grant. For a description of the change in control provisions applicable to the foregoing equity awards, see “Treatment of Outstanding Equity Awards at the Time of the Distribution” and “Severance and Change in Control Arrangements” above. For a description of the accelerated vesting of Mr. Higgins’ equity awards in connection with his retirement, see “Higgins Separation Agreement” above.
(4) Other than the RSU awards granted in December 2022 to Mr. Higgins and as described below in footnote (6), each option grant to the named executive officers vests 12.5% six months from the grant date and the remainder in 42 equal monthly installments. The option awards granted in December 2022 to Mr. Higgins were vested on the date of grant. For a description of the change in control provisions applicable to the foregoing equity awards, see “Treatment of Outstanding Equity Awards at the Time of the Distribution” and “Severance and Change in Control Arrangements” above. For a description of the accelerated vesting of Mr. Higgins’ equity awards in connection with his retirement, see “Higgins Separation Agreement” above.
(5) Represents the fair value of the stock option or stock award at the time of grant as determined in accordance with the provisions of FASB ASC Topic 718. The assumptions used to calculate the value of stock and option awards are set forth under Note 9 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023. With respect to awards, the vesting of which is performance-based, the grant date fair value is based on the estimated probable outcome of the performance objectives applicable to such awards on the grant date. The grant date fair value of the PSUs that are tied to relative TSR was calculated using the Monte Carlo simulation which utilizes the stock volatility, dividend yield and market correlation of the Company and the NASDAQ Biotechnology Index. See additional disclosure in footnote (1) under the “Summary Compensation Table” above.
(6) Represents stock options and RSUs automatically granted on June 10, 2022 to Mr. Davis for his service on the Board pursuant to the terms of our non-employee director compensation policy. These awards will vest on June 9, 2023.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table provides information on all stock and option awards held by our named executive officers as of December 31, 2022. All outstanding equity awards are in shares of our common stock. The share numbers and exercise prices of the equity awards reflected in the table below have been adjusted to reflect the adjustment of such awards pursuant to the Distribution and spin-off of OmniAb. See “Treatment of Outstanding Equity Awards at the Time of the Distribution” above for a description of the adjustment of outstanding Ligand equity awards in connection with the Distribution and spin-off of OmniAb.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards | | Stock Awards |
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | Option Expiration Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#)(2) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | | Equity Incentive Plan Awards: Number of Unearned Shares, Unit or Other Rights That Have Not Vested (#) | | Equity incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | |
| Todd C. Davis | 3,556 | | | — | | | — | | | 66.19 | | | 6/5/2029 | | — | | | — | | | — | | | — | | |
| 2,156 | | | — | | | — | | | 68.51 | | | 6/10/2030 | | — | | | — | | | — | | | — | | |
| 2,855 | | | — | | | — | | | 67.24 | | | 6/4/2031 | | — | | | — | | | — | | | — | | |
| — | | | 7,448 | | | — | | | 46.20 | | | 6/9/2032 | | — | | | — | | | — | | | — | | |
| — | | | 132,000 | | | — | | | 69.70 | | | 12/4/2032 | | — | | | — | | | — | | | — | | |
| — | | | 2,081 | | | — | | | 67.03 | | | 12/21/2032 | | — | | | — | | | — | | | — | | |
| | | | | | | | | | | 1,723(4) | | 115,096 | | | | | | |
| Matthew Korenberg | 21,840 | | | — | | | — | | | 60.94 | | | 8/5/2025 | | — | | | — | | | — | | | — | | |
| 6,048 | | | — | | | — | | | 49.99 | | | 2/10/2026 | | — | | | — | | | — | | | — | | |
| 13,301 | | | — | | | — | | | 58.49 | | | 2/24/2027 | | — | | | — | | | — | | | — | | |
| 14,021 | | | — | | | — | | | 92.65 | | | 3/1/2028 | | — | | | — | | | — | | | — | | |
| 24,530 | | | 1,065 | | | — | | | 68.74 | | | 2/10/2029 | | — | | | — | | | — | | | — | | |
| 19,029 | | | 7,834 | | | — | | | 55.75 | | | 2/12/2030 | | — | | | — | | | — | | | — | | |
| 4,643 | | | 5,482 | | | — | | | 103.42 | | | 2/3/2031 | | — | | | — | | | — | | | — | | |
| 10,797 | | | 41,016 | | | — | | | 52.84 | | | 5/4/2032 | | — | | | — | | | — | | | — | | |
| — | | | 30,000 | | | — | | | 63.62 | | | 12/12/2032 | | — | | | — | | | — | | | — | | |
| — | | | 25,967 | | | — | | | 67.03 | | | 12/21/2032 | | — | | | — | | | — | | | — | | |
| — | | | — | | | — | | | — | | | — | | | 47,505 (5) | | 3,173,334 | | | — | | | — | | |
| — | | | — | | | — | | | — | | | — | | | — | | | — | | | 8,454(6) | | 564,727 | | |
| Tavo Espinoza | 1,883 | | | | | — | | | 80.72 | | | 8/1/2026 | | — | | | — | | | — | | | — | | |
| 1,932 | | | | | — | | | 58.49 | | | 2/24/2027 | | — | | | — | | | — | | | — | | |
| 3,057 | | | | | — | | | 92.65 | | | 3/1/2028 | | — | | | — | | | — | | | — | | |
| 2,511 | | | 109 | | | — | | | 70.04 | | | 1/31/2029 | | — | | | — | | | — | | | — | | |
| 3,348 | | | 145 | | | — | | | 68.74 | | | 2/10/2030 | | — | | | — | | | — | | | — | | |
| 2,245 | | | 1,423 | | | — | | | 55.75 | | | 2/12/2030 | | — | | | — | | | — | | | — | | |
| 4,260 | | | 3,602 | | | — | | | 57.22 | | | 10/1/2030 | | — | | | — | | | — | | | — | | |
| 2,003 | | | 2,364 | | | — | | | 103.42 | | | 2/3/2031 | | — | | | — | | | — | | | — | | |
| 4,871 | | | 18,496 | | | — | | | 52.84 | | | 5/4/2032 | | — | | | — | | | — | | | — | | |
| — | | | 20,000 | | | — | | | 63.62 | | | 12/12/2032 | | — | | | — | | | — | | | — | | |
| — | | | 6,620 | | | — | | | 67.03 | | | 12/21/2032 | | — | | | — | | | — | | | — | | |
| — | | | — | | | — | | | — | | | — | | | 18,121(7) | | 1,210,483 | | | — | | | — | | |
| — | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,432(6) | | 229,258 | | |
| Andrew Reardon | — | | | 72,944 | | | — | | | 52.27 | | | 7/31/2032 | | | | | | | | | |
| — | | | — | | | — | | | — | | | 0 | | 8,581(8) | | 573,211 | | | — | | | — | | |
| — | | | — | | | — | | | — | | | 0 | | — | | | — | | | 3,432(6) | | 229,258 | | |
| John L. Higgins | 20,335 | | | | | | | 12.78 | | | 2/15/2023 | | | | | | | | | |
| 12,522 | | | | | | | 18.65 | | | 6/3/2023 | | | | | | | | | |
| 81,795 | | | | | | | 43.36 | | | 2/12/2024 | | | | | | | | | |
| 47,544 | | | | | | | 32.78 | | | 12/5/2024 | | | | | | | | | |
| 47,374 | | | | | | | 49.99 | | | 12/5/2024 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 38,130 | | | | | | | 58.49 | | | 12/5/2024 | | | | | | | | | |
| 36,161 | | | | | | | 92.65 | | | 12/5/2024 | | | | | | | | | |
| 92,932 | | | | | | | 67.03 | | | 12/5/2024 | | | | | | | | | |
| | | 51,191 | | | | | 68.74 | | | 12/5/2024 | | | | | | | | | |
| | | 53,191 | | | | | 55.75 | | | 12/5/2024 | | | | | | | | | |
| | | 21,938 | | | | | 103.42 | | | 12/5/2024 | | | | | | | | | |
| | | 131,261 | | | | | 52.84 | | | 12/5/2024 | | | | | | | | | |
| | | | | | | | | | | 60,920(9) | | 4,069,456 | | | | | | |
| | | | | | | | | | | | | | | 21,421(6) | | 1,430,923 | | |
| Matthew W. Foehr | 55,222 | | | | | | | 43.36 | | | 2/12/2014 | | | | | | | | | |
| 35,258 | | | | | | | 32.78 | | | 2/10/2015 | | | | | | | | | |
| 22,660 | | | | | | | 49.99 | | | 2/11/2016 | | | | | | | | | |
| 21,271 | | | | | | | 58.49 | | | 2/24/2017 | | | | | | | | | |
| 17,711 | | | | | | | 92.65 | | | 3/2/2018 | | | | | | | | | |
| 29,861 | | | 1,242 | | | | | 68.74 | | | 2/11/2019 | | | | | | | | | |
| 29,012 | | | 8,459 | | | | | 55.75 | | | 2/13/2020 | | | | | | | | | |
| 11,475 | | | 6,213 | | | | | 103.42 | | | 2/3/2021 | | | | | | | | | |
| | | | | | | | | | | 13,631(10) | | 910,551 | | | | | | |
| Charles S. Berkman | 1,701 | | | | | | | 32.78 | | | 2/9/2025 | | | | | | | | | |
| 3,627 | | | | | | | 49.99 | | | 2/10/2026 | | | | | | | | | |
| 5,966 | | | | | | | 58.49 | | | 2/24/2027 | | | | | | | | | |
| 8,117 | | | | | | | 92.65 | | | 3/1/2028 | | | | | | | | | |
| 12,265 | | | 532 | | | | | 68.74 | | | 2/10/2029 | | | | | | | | | |
| 10,658 | | | 4,385 | | | | | 55.75 | | | 2/12/2030 | | | | | | | | | |
| 2,786 | | | 3,290 | | | | | 103.42 | | | 2/3/2031 | | | | | | | | | |
| | | | | | | | | | | 7,188(11) | | 480,158 | | | | | | |
(1) Each option grant to the named executive officers has a ten year term from the date of grant. Except as described below, each option vests 12.5% after six months from grant and the remainder in 42 equal monthly installments. The option grants to Mr. Davis prior to December 2022 were granted to him in his capacity as a non-employee director and vested on the earlier of (A) the date of the next annual meeting of our stockholders following the grant date or (B) on the first anniversary of the date of grant. For a description of the change in control provisions applicable to the stock option awards, see “Treatment of Outstanding Equity Awards at the Time of the Distribution” and “Severance and Change in Control Arrangements” above.
(2) Except as described below, the RSU awards granted to the named executive officers vest over a three year period in equal installments on February 15 of the first three calendar years following the year in which the date of grant occurs. For a description of the change in control provisions applicable to the stock awards, see “Treatment of Outstanding Equity Awards at the Time of the Distribution” and “Severance and Change in Control Arrangements” above.
(3) Computed by multiplying the closing market price of our common stock on December 30, 2022, the last trading day of 2022, of $66.80, by the number of shares of common stock subject to such award.
(4) Represents RSUs held by Mr. Davis and granted to him on June 10, 2022 in his capacity as a non-employee director, which RSUs will vest on June 9, 2023.
(5) This balance represents the remaining unvested RSUs from the following RSU grants to Mr. Korenberg: 2,282 unvested RSUs granted February 13, 2020, 17,386 unvested RSUs granted on February 3, 2021, 13,837 unvested RSUs granted on June 10, 2022, and 14,000 unvested RSUs granted on December 13, 2022. For a description of the change in control provisions applicable to the stock awards, see “Treatment of Outstanding Equity Awards at the Time of the Distribution” and “Severance and Change in Control Arrangements” above.
(6) Represents the remaining portion of the “target” number of PSUs granted to the named executive officer in 2022. This portion of PSUs granted in 2022 will vest based on the achievement of certain combined TSR goals of Ligand and OmniAb relative to the NASDAQ Biotechnology Index during a period of approximately two years following the OmniAb spin-off (and a possible performance multiplier of 200% for “maximum” performance). Threshold performance levels, below which no vesting will be awarded, were also established for each performance objective.
The “target” number of PSUs granted to the named executive officers in 2022 that remain eligible to vest based on the relative TSR objective are reported in the column titled “Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested” above as follows: Mr. Korenberg 8,454 shares, Mr. Espinoza 3,432 shares, Mr. Reardon 3,432 shares, and Mr. Higgins 21,421 shares.
For a description of the change in control provisions applicable to the foregoing equity awards, see “Treatment of Outstanding Equity Awards at the Time of the Distribution” and “Severance and Change in Control Arrangements” above.
(7) This balance represents the remaining unvested RSUs from the following RSU grants to Mr. Espinoza: 333 unvested RSUs granted February 13, 2020, 1,000 unvested RSUs granted on October 1, 2020, 1,166 unvested RSUs granted on February 3, 2021, 4,622 unvested RSUs granted on June 10, 2022, and 11,000 unvested RSUs granted on December 13, 2022. For a description of the change in control
provisions applicable to the stock awards, see “Treatment of Outstanding Equity Awards at the Time of the Distribution” and “Severance and Change in Control Arrangements” above.
(8) This balance represents the unvested RSUs from the August 10, 2022 grant to Mr. Reardon. For a description of the change in control provisions applicable to the stock awards, see “Treatment of Outstanding Equity Awards at the Time of the Distribution” and “Severance and Change in Control Arrangements” above.
(9) This balance represents the remaining unvested RSUs from the following RSU grants to Mr. Higgins: 4,519 unvested RSUs granted on February 13, 2020, 21,349 unvested RSUs granted on February 3, 2021 and 35,052 unvested RSUs granted on June 10, 2022. For a description of the change in control provisions applicable to the stock awards, see “Treatment of Outstanding Equity Awards at the Time of the Distribution” and “Severance and Change in Control Arrangements” above. For a description of the accelerated vesting of Mr. Higgins’ equity awards in connection with his retirement, see “Higgins Separation Agreement” above.
(10) This balance represents the remaining unvested RSUs from the following RSU grants to Mr. Foehr: 2,465 unvested RSUs granted on February 13, 2020 and 11,166 unvested RSUs granted on February 3, 2021. For a description of the change in control provisions applicable to the stock awards, see “Treatment of Outstanding Equity Awards at the Time of the Distribution” and “Severance and Change in Control Arrangements” above.
(11) This balance represents the remaining unvested RSUs from the following RSU grants to Mr. Berkman: 1,278 unvested RSUs granted on February 13, 2020 and 5,910 unvested RSUs granted on February 3, 2021. For a description of the change in control provisions applicable to the stock awards, see “Treatment of Outstanding Equity Awards at the Time of the Distribution” and “Severance and Change in Control Arrangements” above.
OPTION EXERCISES AND STOCK VESTED DURING FISCAL YEAR 2022
The following table provides information on stock option exercises and stock vesting in fiscal 2022 by our named executive officers.
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| Option Awards | | Stock Awards |
| Name | No. of Shares Acquired on Exercise (#) | | Value Realized Upon Exercise ($)(1) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($)(2) |
| Todd C. Davis | — | | | | — | | | | 630 | | | | 53,500 | | |
| Matthew Korenberg | — | | | | — | | | | 37,215 | | | | 3,535,515 | | |
| Tavo Espinoza | — | | | — | | | | 5,799 | | | | 505,145 | | |
| Andrew Reardon | — | | | — | | | | 3,432 | | | | 250,193 | | |
| John L. Higgins | 38,000 | | | | 2,719,420 | | | | 69,136 | | | | 6,568,066 | | |
| Matthew W. Foehr | — | | | | — | | | | 26,199 | | | | 2,763,370 | | |
| Charles S. Berkman | — | | | | — | | | | 12,947 | | | | 1,355,210 | | |
(1) The value realized upon exercise of stock options reflects the price at which shares acquired upon exercise of the stock options were sold or valued for income tax purposes, net of the exercise price for acquiring the shares.
(2) Computed by multiplying the closing market price of our common stock on the vesting date by the number of RSUs or PSUs subject to such award vesting on the applicable vesting date.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The following table summarizes potential change in control and severance payments to each named executive officer as of December 31, 2022. The three right-hand columns describe the payments that would apply in three different potential scenarios—a termination without cause prior to a change in control or more than 24 months following a change in control; a change in control without a termination of employment; or a termination of employment as a result of the named executive officer’s resignation for good reason or termination of employment by us other than for cause, in each case within 24 months following a change in control. The table assumes that the termination or change in control occurred on December 31, 2022. For purposes of estimating the value of accelerated equity awards to be received in the event of a termination of employment or change in control, we have assumed a price per share of our common stock of $66.80, which represents the closing market price of our common stock as reported on the Nasdaq Global Market on December 30, 2022, the last trading day of 2022. All cash severance benefits will be paid in a lump sum. Messrs. Foehr and Berkman are not included in the table below as their employment with us terminated in connection with the OmniAb spin-off and neither executive received compensation or
benefits in connection with such departure that would be required to be disclosed in this table. The separation arrangements with Mr. Higgins are described below the table.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Benefit | | Termination Without Cause; No Change of Control ($) | | Change of Control; No Termination ($)(1) | | Termination Without Cause or Resignation for Good Reason within 24 Months Following a Change of Control ($)(2) |
| Todd C. Davis | | Salary | | $ | 975,000 | | | | $ | — | | | | $ | 1,300,000 | | |
| | Bonus | | — | | | | — | | | | 780,000 | | |
| | Option acceleration | | 153,429 | | | | 153,429 | | | | 153,429 | | |
| | Stock Award acceleration | | 115,096 | | | | 115,096 | | | | 115,096 | | |
| | Benefits continuation | | 58,329 | | | | | | | 77,772 | | |
| | Total value: | | 1,301,854 | | | | 268,525 | | | | 2,426,297 | | |
| Matthew Korenberg | | Salary | | 166,966 | | | | — | | | | 520,933 | | |
| | Bonus | | — | | | | — | | | | 260,467 | | |
| | Option acceleration | | — | | | | 754,549 | | | | 754,549 | | |
| | Stock Award acceleration | | — | | | | 3,738,061 | | | | 3,738,061 | | |
| | Benefits continuation | | 12,962 | | | | — | | | | 38,886 | | |
| | Total value: | | 179,928 | | | | 4,492,610 | | | | 5,312,896 | | |
| Tavo Espinoza | | Salary | | 98,907 | | | | — | | | | 98,907 | | |
| | Bonus | | — | | | | — | | | | — | | |
| | Option acceleration | | — | | | | 372,035 | | | | 372,035 | | |
| | Stock Award acceleration | | — | | | | 1,439,740 | | | | 1,439,740 | | |
| | Benefits continuation | | 12,962 | | | | — | | | | 12,962 | | |
| | Total value: | | 111,869 | | | | 1,811,775 | | | | 1,923,644 | | |
| Andrew Reardon | | Salary | | 69,167 | | | | — | | | | 69,167 | | |
| | Bonus | | — | | | | — | | | | — | | |
| | Option acceleration | | — | | | | 1,059,876 | | | | 1,059,876 | | |
| | Stock Award acceleration | | — | | | | 802,468 | | | | 802,468 | | |
| | Benefits continuation | | 6,481 | | | | — | | | | 6,481 | | |
| | Total value: | | 75,648 | | | | 1,862,344 | | | | 1,937,992 | | |
(1) The 2002 Plan provides that options or RSUs will vest in the event of a change in control and the options or RSUs are not assumed or replaced by a successor. This disclosure assumes that the successor does not assume or replace the options or RSUs. For purposes of calculating the values in the table above, PSUs are included at “target” performance levels.
(2) The severance agreement with Mr. Davis and the severance agreement with Mr. Davis and the change in control severance agreements with each of our other named executive officers provide that all of a named executive officer’s outstanding stock awards will vest in the event of an involuntary termination following a change in control. In addition, the severance agreement with Mr. Davis provides that all of his outstanding stock awards the vesting of which is time-based will vest upon an involuntary termination at any time, and any performance-based awards will be governed by the terms of the applicable award agreements. The agreements governing our PSUs provide for accelerated vesting of such PSUs upon an involuntary termination following a change in control, as described above under “Treatment of Outstanding Equity Awards at the Time of the Distribution” and “Severance and Change in Control Arrangements.” For purposes of calculating the values in the table above, PSUs are included at “target” performance levels.
Higgins Separation Agreement
In connection with Mr. Higgins’ retirement as Chief Executive Officer effective December 5, 2022, the Company and Mr. Higgins entered into a separation agreement (the “Higgins Agreement”). Pursuant to the Higgins Agreement, Mr. Higgins will be entitled to receive base salary continuation payments for a period of 18 months (totaling $1,095,683), continued health benefits at the Company’s expense for up to 18 months (with an aggregate value of $61,161), full vesting of all of his outstanding equity awards (with his PSUs vesting at “target” levels) and an extension of the post-employment exercise period of his vested stock options to the second anniversary of his last day of employment (but in no event beyond the original expiration date of such options), subject to his agreement to certain restrictions on the transfer of shares of the Company’s common stock held by him. The vesting of Mr. Higgins’ equity awards resulted in the following number of equity awards vesting on January 3, 2023 with the corresponding values based on the closing market price of our common stock as reported
on the Nasdaq Global Market on December 30, 2022, the last trading day of 2022: 257,581 stock options, with an aggregate value of $2,420,164; 60,920 RSUs with an aggregate value of $4,069,456; and 21,421 PSUs (at “target” levels) with an aggregate value of $1,430,923.
PAY RATIO DISCLOSURE
As required by Section 953(b) of the Dodd-Frank Act and Item 402(u) of Regulation S-K, we are providing the following information regarding the relationship of the annual total compensation of our median compensated employee to the total annualized compensation of Todd C. Davis, our Chief Executive Officer:
•Total annualized compensation of our Chief Executive Officer, Mr. Davis, in 2022 was $5,795,926, as further described below. The total compensation for the median employee, other than our Chief Executive Officer, was $295,590. The total compensation for the median employee was calculated according to the requirements of the Summary Compensation Table.
•The ratio of our Chief Executive Officer’s annualized compensation (as determined below) to the compensation of the median employee for 2022 was 20 to 1.
While Mr. Davis did not serve as our Chief Executive Officer for the entire year, SEC rules allow us to use the annual total compensation of Mr. Davis, who was serving as our Chief Executive Officer as of December 31, 2022, to calculate our pay ratio. For purposes of determining our Chief Executive Officer pay ratio, we determined Mr. Davis’ annual total compensation for 2022 was $5,795,926, which, as required by SEC rules, includes his total compensation as required in the Summary Compensation Table, with the exception that his base salary for 2022 at the rate in effect following his appointment as Chief Executive Officer is annualized for this purpose.
The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our internal records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. Therefore, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
We had 76 active employees as of December 31, 2022, which is the date that we used to identify our median employee. To identify the median of the annual total compensation of our employees as of such date, we compared the sum of each employee’s base salary, 2022 bonus, the grant date fair value of equity awards granted during 2022 (determined in accordance with Topic 718) and 401(k) matching contribution for 2022. This compensation measure was consistently applied to all of our employees included in this calculation.
PAY VERSUS PERFORMANCE DISCLOSURE
As required by Section 953(a) of the Dodd-Frank Act and Item 402(v) of Regulation S-K, the following table sets forth information concerning the compensation of our NEOs for each of the fiscal years ended December 31, 2020, 2021 and 2022, and our financial performance for each such fiscal year:
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| | | | | | | Value of Initial Fixed $100 Investment Based on: | | |
| Year | Summary Compensation Table Total for PEO John L. Higgins
($) | Summary Compensation Table Total for PEO Todd C. Davis
($) | Compensation Actually Paid for PEO John L. Higgins ($)(1) | Compensation Actually Paid to PEO Todd C. Davis ($)(2) | Average Summary Compensation Table Total for Non-PEO NEOs
($) | Average Compensation Actually Paid to Non-PEO NEOs ($)(3)(4) | Total Shareholder Return
($) | Peer Group Total Shareholder Return ($)(5) | Net Income
(Loss)
($ thousands) | Revenue
($ thousands) |
| 2022 | 16,764,990 | | 5,195,169 | | 12,243,958 | | 4,977,510 | | 3,852,731 | | 2,922,612 | | 92.32 | | 113.65 | | (33,361) | | 196,245 | |
| 2021 | 9,587,211 | | — | | 15,958,534 | | — | | 4,996,210 | | 7,722,154 | | 148.11 | | 126.45 | | 57,138 | | 241,544 | |
| 2020 | 5,842,767 | | — | | 6,788,815 | | — | | 2,846,812 | | 3,246,826 | | 95.36 | | 126.42 | | (2,985) | | 163,562 | |
(1) Compensation actually paid to our former Principal Executive Officer (“PEO”), John L. Higgins for each relevant fiscal year is presented in the following table:
| | | | | | | | | | | | | | |
| Year | Summary Compensation Table Total for John L. Higgins ($) | Exclusion of Stock Awards and Option Awards for John L. Higgins ($) | Inclusion of Equity Values for John L. Higgins ($) | Compensation Actually Paid to John L. Higgins ($) |
| 2022 | 16,764,990 | | (9,741,742) | | 5,220,710 | | 12,243,958 | |
| 2021 | 9,587,211 | | (8,360,810) | | 14,732,133 | | 15,958,534 | |
| 2020 | 5,842,767 | | (4,667,004) | | 5,613,052 | | 6,788,815 | |
(2) Compensation actually paid to our current PEO, Todd C. Davis for 2022 is presented in the following table:
| | | | | | | | | | | | | | |
| Year | Summary Compensation Table Total for Todd C. Davis ($) | Exclusion of Stock Awards and Option Awards for Todd C. Davis ($) | Inclusion of Equity Values for Todd C. Davis ($) | Compensation Actually Paid to Todd C. Davis ($) |
| 2022 | 5,195,169 | | (5,080,905) | | 4,863,246 | | 4,977,510 | |
(3) Average compensation actually paid to our non-PEO NEOs for each relevant fiscal year is presented in the following table:
| | | | | | | | | | | | | | |
| Year | Average Summary Compensation Table Total for Non-PEO NEOs | Average Exclusion of Stock Awards and Option Awards for Non-PEO NEOs | Average Inclusion of Equity Values for Non-PEO NEOs | Average Compensation Actually Paid to Non-PEO NEOs |
| 2022 | 3,852,731 | | (3,366,384) | | 2,436,265 | | 2,922,612 | |
| 2021 | 4,996,210 | | (4,220,184) | | 6,946,128 | | 7,722,154 | |
| 2020 | 2,846,812 | | (2,074,223) | | 2,474,237 | | 3,246,826 | |
(4) Amounts represent compensation actually paid to our PEO and the average compensation actually paid to our remaining NEOs for the relevant fiscal year, as determined under SEC rules (and described below), which includes the individuals indicated in the table below for each fiscal year:
| | | | | | | | |
| Year | PEO | Non-PEO NEOs |
| 2022 | John L. Higgins, Todd C. Davis | Matthew Korenberg, Tavo Espinoza, Andrew Reardon, Matthew W. Foehr, and Charles S. Berkman |
| 2021 | John L. Higgins | Matthew Korenberg, Matthew W. Foehr, and Charles S. Berkman |
| 2020 | John L. Higgins | Matthew Korenberg, Matthew W. Foehr, and Charles S. Berkman |
(5) For the relevant fiscal year, the Peer Group TSR is from the NASDAQ Biotechnology Index, which we also utilize in the stock performance graph required by Item 201(e) of Regulation S-K included in our Annual Report for the year ended December 31, 2022. The calculation of the TSR assumes an initial investment of $100 on January 1, 2020 through December 31 of the applicable year in the table above, assuming all dividends are reinvested.
The amounts reported in the “Compensation Actually Paid to PEO” and “Average Compensation Actually Paid to Non-PEO NEOs” columns do not reflect the actual compensation paid to or realized by the individuals serving as our Chief Executive Officer or our non-PEO NEOs during each applicable year. The calculation of compensation actually paid for purposes of this table includes point-in-time fair values of stock awards and these values will
fluctuate based on our stock price, various accounting valuation assumptions and projected performance related to our performance awards. See the Summary Compensation Table for certain other compensation paid to the individuals serving as our Chief Executive Officer and our non-PEO NEOs for each applicable fiscal year and the Option Exercises and Stock Vested During 2022 table for the value realized by each of them upon the exercise of stock options and/or vesting of stock awards during 2022.
Compensation actually paid to our NEOs represents the “Total” compensation reported in the Summary Compensation Table for the applicable fiscal year, as adjusted as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Adjustments(1) |
| Year | Year-End ASC 718 Fair Value of Equity Awards Granted During Year That Remained Unvested as of Last Day of Year for ($) | Change in ASC 718 Fair Value from Last Day of Prior Year to Last Day of Year of Unvested Equity Awards ($) | Vesting-Date ASC 718 Fair Value of Equity Awards Granted During Year that Vested During Year ($) | Change in ASC 718 Fair Value from Last Day of Prior Year to Vesting Date of Unvested Equity Awards that Vested During Year ($) | ASC 718 Fair Value at Last Day of Prior Year of Equity Awards Forfeited During ($) | Total - Inclusion of Equity Value ($) |
| Todd C. Davis | 2022 | 5,055,927 | | — | | — | | (192,681) | | — | | 4,863,246 | |
| John L. Higgins | 2022 | — | | (6,621,513) | | 16,896,532 | | (4,111,108) | | (943,201) | | 5,220,710 | |
| 2021 | 6,506,295 | | 5,230,428 | | 223,475 | | 2,771,935 | | — | | 14,732,133 | |
| 2020 | 4,657,103 | | 334,654 | | 604,582 | | 16,713 | | — | | 5,613,052 | |
| Non-PEO NEOs | 2022 | 3,368,797 | | (1,668,590) | | 1,487,576 | | (499,989) | | (251,529) | | 2,436,265 | |
| 2021 | 3,354,183 | | 2,320,671 | | 93,981 | | 1,177,293 | | — | | 6,946,128 | |
| 2020 | 2,071,606 | | 127,864 | | 268,699 | | 6,068 | | — | | 2,474,237 | |
(1) Fair value or change in fair value, as applicable, of equity awards in the “Compensation Actually Paid” columns was determined by reference to (i) for solely service-vesting RSU awards, the closing price per share on the applicable year-end dates or, in the case of vesting dates, the closing price per share on the applicable vesting dates; (ii) for stock options, a Black-Scholes value as of the applicable year-end or vesting dates, determined based on the same methodology as used to determine grant date fair value but using the closing stock price on the applicable revaluation date as the current market price and with an expected life set equal to the remaining life of the award in the case of underwater stock options and, in the case of in the money options, an expected life equal to the original ratio of expected life relative to the ten year contractual life times the remaining life as of the applicable revaluation date, and in all cases based on volatility and risk free rates determined as of the revaluation date based on the expected life period and based on an expected dividend yield based on our dividend yield methodology used for valuing stock options generally; and (iii) for PSUs, calculated by a Monte Carlo simulation model as of the applicable revaluation dates, which utilizes multiple input variables, including expected volatility of our stock price and other assumptions appropriate for determining fair value, to estimate the probability of satisfying the performance objective established for the award, including the expected volatility of our stock price relative to the applicable comparative index and a risk-free interest rate. For additional information about the assumptions used to value our stock and option awards, please see Note 9 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023, and our Annual Report on Form 10-K for prior years.
Relationship Between Financial Performance Measures
The graphs below compare the compensation actually paid to our PEOs and the average of the compensation actually paid to our remaining NEOs, with (i) our cumulative TSR, (ii) our Peer Group TSR, (iii) our net income (loss), and (iv) our revenue, in each case, for the fiscal years ended December 31, 2020, 2021 and 2022. TSR amounts reported in the graph assume an initial fixed investment of $100 on December 31, 2019 through December 31 of the applicable year in the graph, assuming all dividends were reinvested.
Pay Versus Performance Tabular List
We believe the following performance measures represent the most important financial performance measures used by us to link compensation actually paid to our NEOs for the fiscal year ended December 31, 2022:
•Revenue
•Adjusted EBITDA
•Total Shareholder Return
The measures in the above list are not ranked. For additional details regarding how we link pay to financial performance measures, please see the section titled “Elements of Compensation—Annual Performance-Based Cash Compensation” and “Elements of Compensation—Long-Term Performance-Based Equity Incentive Program” in our Compensation Discussion and Analysis above.