Definitive Proxy Statement
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY
STATEMENT
SCHEDULE 14A
INFORMATION
Proxy Statement Pursuant to
Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.
)
Filed by the Registrant
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Filed by a Party other than the
Registrant
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Check the appropriate
box:
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Preliminary Proxy
Statement
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Confidential, for
Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ
Definitive Proxy
Statement
¨
Definitive Additional
Materials
¨
Soliciting Material Pursuant to
§240.14a-12
IDENIX PHARMACEUTICALS,
INC.
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the
appropriate box):
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No fee
required
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Fee computed on table below per
Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title of each class of securities
to which transaction
applies:
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(2)
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Aggregate number of securities to
which transaction applies:
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(3)
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Per unit price or other underlying
value of transaction computed pursuant to Exchange Act Rule 0-11 (set
forth the amount on which the filing fee is calculated and state how it
was determined):
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(4)
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Proposed maximum aggregate value
of transaction:
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(5)
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Total fee
paid:
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Fee paid previously with
preliminary materials.
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Check box if any part of the fee
is offset as provided by Exchange Act Rule 0-11(a)(2) and identify
the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule
and the date of its filing.
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(1)
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Amount Previously
Paid:
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(2)
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Form, Schedule or Registration
Statement No.:
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Filing
Party:
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Date
Filed:
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Dear Idenix
Stockholder:
Please join us for the 2010 Annual
Meeting of Stockholders of Idenix Pharmaceuticals, Inc. The annual meeting will
be held on Thursday, June 3, 2010 at 9:00 a.m., at the offices of
WilmerHale, located at 60 State Street, Boston, Massachusetts
02109.
At this year’s annual meeting, we will
consider and act upon the following matters:
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1.
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To elect nine
directors;
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2.
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To ratify the appointment of our
independent registered public accounting
firm;
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3.
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To approve an amendment to our
2005 Stock Incentive Plan increasing the number of shares of common stock
authorized for issuance thereunder from 6,000,000 to 9,000,000 shares;
and
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4.
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To transact any other business
that may properly come before the
meeting.
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Additional information about the items
of business to be discussed at our annual meeting is given in the attached
Notice of Annual Meeting and Proxy Statement.
I urge you to carefully review the proxy
materials and to vote
FOR
the election of the director nominees,
FOR
ratification of the appointment of our
independent registered public accounting firm, and
FOR
the amendment to our 2005 Stock
Incentive Plan.
On behalf of the Idenix board of
directors, employees and management, I thank you for your support and
confidence. We look forward to seeing you at the annual
meeting.
Very truly yours,
JEAN-PIERRE
SOMMADOSSI
Chairman and Chief Executive
Officer
April 30,
2010
IDENIX PHARMACEUTICALS,
INC.
60 Hampshire Street
Cambridge, Massachusetts
02139
NOTICE OF 2010 ANNUAL MEETING OF
STOCKHOLDERS
By
Order of the Board of Directors,
John
F. Weidenbruch, Secretary
Cambridge,
Massachusetts
April 30,
2010
TABLE OF CONTENTS
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PROXIES AND VOTING
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1
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Householding of Annual Meeting
Materials
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4
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PROPOSAL 1 — ELECTION OF
DIRECTORS
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4
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DIRECTOR COMPENSATION
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9
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CORPORATE GOVERNANCE
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11
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Corporate Governance
Guidelines
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11
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Director Independence
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11
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Meetings of Independent
Directors
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11
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Director Attendance at Annual Meetings of
Stockholders
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11
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Board of Directors
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11
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Board Leadership Structure
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12
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Committees of Our Board of
Directors
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12
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Information About Our Nominating
Process
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13
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Director Qualification
Standards
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14
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Communicating with the Board of
Directors
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14
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Policy on Business Conduct and
Ethics
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15
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Oversight of Risk
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15
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
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15
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Beneficial Ownership Table
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15
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Executive Officers
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17
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COMPENSATION DISCUSSION AND
ANALYSIS
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18
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Executive Summary
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18
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Overview of Our Philosophy and Procedures for
Determining Executive Compensation
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18
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Review of Management’s Actual Performance Compared
to Pre-Determined Goals
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20
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2009 Corporate Objectives
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21
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Components of Our Executive Compensation
Program
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22
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Stock Option Grant
Practices
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25
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Stock Option Grants for Fiscal 2009 and Target
Grants for Fiscal 2010
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26
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Benefits
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26
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Severance and Change-in-Control
Payments
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27
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Tax Considerations
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28
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Summary
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28
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EXECUTIVE COMPENSATION
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29
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Compensation Summary
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29
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Grants of Plan-Based Awards
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30
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Outstanding Equity Awards at Fiscal
Year-End
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31
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Option Exercises and Stock
Vested
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32
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Potential Payments Upon Termination or Change in
Control
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33
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Compensation Committee Interlocks and Insider
Participation
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34
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Equity Compensation Plan
Information
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34
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COMPENSATION COMMITTEE
REPORT
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35
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AUDIT COMMITTEE
REPORT
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36
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CERTAIN RELATIONSHIPS AND RELATED PERSON
TRANSACTIONS
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37
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Policies and Procedures for Related Person
Transactions
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37
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Relationship with Novartis Pharma
AG
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38
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Employment Agreements
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41
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Registration Rights
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42
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PROPOSAL 2 — RATIFICATION OF SELECTION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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43
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Principal Accounting Fees and
Services
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43
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Pre-Approval Policies and
Procedures
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43
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PROPOSAL 3 – APPROVAL OF AMENDMENT TO 2005 STOCK
INCENTIVE PLAN
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44
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OTHER INFORMATION
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49
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Other Matters
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49
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Section 16(a) Beneficial Ownership Reporting
Compliance
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Stockholder Proposals for 2010 Annual
Meeting
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APPENDIX
A — 2005 Stock Incentive Plan and Amendment No. 1 and Amendment No.
2
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IDENIX
PHARMACEUTICALS, INC.
60
Hampshire Street
Cambridge,
Massachusetts 02139
Proxy
Statement for the 2010 Annual Meeting of Stockholders
To
Be Held on June 3, 2010
PROXIES
AND VOTING
This
proxy statement contains information about the 2010 annual meeting of
stockholders of Idenix Pharmaceuticals, Inc. We are holding the meeting on
Thursday, June 3, 2010 at 9:00 a.m. (eastern daylight time) at the
offices of WilmerHale, 60 State Street, Boston, Massachusetts
02109.
Directions
to the offices of WilmerHale,
60
State Street, Boston, Massachusetts 02109
are available at the WilmerHale
website at
http://www.wilmerhale.com/offices/offices/visitingus.aspx?officeid=1
.
In
this proxy statement, references to “Idenix”, “we”, “us” and “our” refer to
Idenix Pharmaceuticals, Inc.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR
THE 2010 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 3,
2010
This
proxy statement and the Annual Report on Form 10-K for the year ended
December 31, 2009 are available for viewing, printing and downloading at
http://www.idenix.com/InvestorRelations/2010proxy and
www.edocumentview.com/IDIX
.
Additionally,
you can find our Annual Report on Form 10-K for the year ended
December 31, 2009 through the Securities and Exchange Commission’s
electronic data system, called EDGAR, at www.sec.gov. You may obtain additional
printed copies of our Annual Report on Form 10-K, free of charge, by
sending a written request to: Idenix Pharmaceuticals, Inc., attention: Investor
Relations, 60 Hampshire Street, Cambridge, Massachusetts 02139. Exhibits will be
provided upon written request and payment of an appropriate processing
fee.
The
notice of annual meeting, this proxy statement and our annual report to
stockholders (which includes our annual report on Form 10-K for the year
ended December 31, 2009), are being mailed to stockholders on or about
April 30, 2010.
References
to our website are inactive textual references only and the contents of our
website should not be deemed to be incorporated by reference into this proxy
statement.
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Q.
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Who
can vote at the annual
meeting?
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A.
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To
be able to vote, you must have been a stockholder of record at the close
of business on April 9, 2010, the record date for our annual meeting.
On that date, 66,373,742 shares of common stock were issued and
outstanding and entitled to vote at the annual
meeting.
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If
you were a stockholder of record on that date, you are entitled to vote
all of the shares that you held on that date at the annual meeting, or any
postponements or adjournments of the annual
meeting.
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Q.
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What
are the voting rights of the holders of common
stock?
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A.
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Each
outstanding share of our common stock entitles the holder to one vote on
each proposal considered at the annual meeting. We have no other
securities authorized which would entitle a holder to vote at the
meeting.
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Q.
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What is a proxy
card?
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A.
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The proxy card enables you to
appoint Jean-Pierre Sommadossi, our chief executive officer, and John
Weidenbruch, our executive vice president and general counsel, as your
representatives at the annual meeting. By completing and returning the
proxy card, you are authorizing Dr. Sommadossi or
Mr. Weidenbruch to vote your shares at the meeting as you have
instructed on the proxy card. If you do not specify on the proxy card how
your shares should be voted, they will be voted as recommended by our
board of directors. By returning the proxy card to us, you can vote your
shares whether or not you attend the
meeting.
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Q.
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What am I voting
on?
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A.
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We are asking you to vote
on:
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•
the election of directors for a one-year
term;
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the ratification of
PricewaterhouseCoopers LLP as our independent registered public accounting firm
for the current fiscal year ending December 31, 2010;
and
•
an amendment to our 2005 Stock Incentive
Plan increasing the number of shares of common stock authorized for issuance
thereunder from 6,000,000 to 9,000,000.
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Q.
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How do I
vote?
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A.
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If you are a record holder,
meaning your shares are registered in your name, you may
vote:
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(1)
By
Mail:
Complete,
date and sign the enclosed proxy card and mail it in the enclosed postage paid
envelope. Your shares will be voted according to your instructions. If you do
not specify how your shares should be voted, they will be voted as recommended
by our board of directors.
(2)
In Person at the
Meeting:
If you
attend the meeting, you may deliver your completed proxy card in person or you
may vote by completing a ballot, which we will provide to you at the
meeting.
If your shares are held in “street
name,” meaning they are held for you by a broker, bank or other nominee, you may
vote:
(1)
By
Mail:
You will
receive instructions from your broker, bank or other nominee explaining how you
can vote your shares by mail. You should follow those
instructions.
(2)
In Person at the
Meeting:
Contact
the broker, bank or other nominee who holds your shares to obtain a proxy card
and bring it with you to the meeting.
You will
not be able to vote in person at the meeting unless you have obtained from the
broker, bank or other nominee a proxy issued in your name giving you the right
to vote your shares.
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Q.
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How may I change or revoke my
proxy?
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A.
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You may change or revoke your
proxy at any time before the meeting. To do so, you must do one of the
following:
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(1)
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Provide written notice to us in
time for receipt prior to the meeting that you wish to revoke your proxy.
Such notice should be sent to us c/o Secretary, Idenix
Pharmaceuticals, Inc., 60 Hampshire Street, Cambridge, Massachusetts
02139.
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(2)
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Sign a new proxy and submit it to
us c/o Secretary, Idenix Pharmaceuticals, Inc., 60 Hampshire Street,
Cambridge, Massachusetts 02139 in time for receipt prior to the meeting.
Only the most recently dated proxy will be
counted.
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(3)
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Attend the meeting, request that
your proxy be revoked and vote in person as instructed above. Attending
the meeting will not revoke your proxy unless you specifically request
such revocation.
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Q.
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Will my shares be voted if I do
not return my proxy?
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A.
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If your shares
are registered directly in your name
, your shares will not be voted if
you do not vote either by returning your proxy or voting in person by
ballot at the meeting.
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If your shares are held in “street
name,”
we encourage you to provide voting instructions to your broker,
bank or other nominee by giving your proxy to them. If you are the
beneficial owner of shares held in “street name” by a broker, the broker, as the
record holder of the shares, is required to vote those shares in accordance with
your instructions. If you do not give instructions to the broker, the
broker will be entitled to vote the shares with respect to “discretionary”
items, but will not be permitted to vote the shares with respect to
“non-discretionary” items (resulting in a “broker non-vote”). The
ratification of the selection of PricewaterhouseCoopers is a “discretionary”
item. The election of directors and the approval of the amendment to
our 2005 Stock Incentive Plan are “non-discretionary” items.
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Q.
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How many shares must be present to
hold the meeting?
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A.
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To establish a quorum, a majority
of our outstanding shares of common stock as of the record date must be
present in person or by proxy at the meeting. The presence of a quorum is
a prerequisite to holding and conducting business at the
meeting.
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Q.
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What vote is required to approve
each matter and how are votes
counted?
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A.
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Proposal 1 —
Election of Directors
. The nine nominees for
director who receive the highest number of votes FOR election will be
elected as directors. This is called a plurality. Abstentions are not
counted for purposes of electing directors. If your shares are held by
your broker in “street name” and you do not vote your shares, your broker
may not vote your unvoted shares on Proposal 1. You
may:
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• vote FOR all
nominees;
• WITHHOLD your vote from all
nominees; or
• vote FOR one or more nominees and
WITHHOLD your vote from one or more of the others. Votes that are withheld will
not be included in the vote tally for the election of directors and will not
affect the results of the vote.
Proposal 2 —
Ratification of Selection of Independent Registered Public Accounting
Firm.
The
affirmative vote of stockholders holding a majority of the votes cast on this
proposal is required to ratify PricewaterhouseCoopers LLP as our independent
registered public accounting firm for the year ending December 31, 2010. If
your shares are held by your broker in “street name” and you do not vote your
shares, your broker may vote your unvoted shares on
Proposal 2.
If you vote to abstain on this
Proposal 2, your shares will not be voted in favor of or against the
proposal and will also not be counted as votes cast or shares voting on the
proposal. As a result, voting to abstain will have no effect on the voting on
the proposal.
Although stockholder approval of our
Audit Committee’s selection of PricewaterhouseCoopers LLP as our independent
registered public accounting firm is not required, we believe that our
stockholders should have an opportunity to ratify this selection. If this
proposal is not approved at the annual meeting, our Audit Committee will
reconsider its selection of PricewaterhouseCoopers LLP.
Proposal
3 –
Approval
of Amendment to the 2005 Stock Incentive Plan.
The
affirmative vote of stockholders holding a majority of the votes cast on this
proposal is required to approve the amendment of the 2005 Stock Incentive
Plan.
If you vote to abstain on this
Proposal 3, your shares will not be voted in favor of or against the
proposal and will also not be counted as votes cast or shares voting on the
proposal. As a result, voting to abstain will have no effect on the voting on
the proposal. If your shares are held by your broker in “street name” and you do
not vote your shares, your broker may not vote your unvoted shares on
Proposal 3.
Proposal 4 —
Other Matters.
If any other matters are properly
presented at the meeting, the persons named in the accompanying proxy will have
the discretion to vote, or otherwise act for you, in accordance with their
judgment on the matter. As of the date of this proxy statement, we do not know
of any other matters to be presented at the annual meeting.
We believe that Novartis Pharma AG, a
direct and wholly owned subsidiary of Novartis AG, referred to herein
collectively with their respective subsidiaries and affiliates as Novartis,
intends to vote all of its shares FOR each proposal detailed above. On the
record date, Novartis was the holder of approximately 47% of our outstanding
common stock.
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Q.
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Where may I find the voting
results?
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A.
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We will announce preliminary
voting results at the meeting. We plan to report the final voting results
on a Current Report on Form 8-K within four business
days following the meeting.
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Q.
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Who is soliciting the proxy and
what are the costs of soliciting these
proxies?
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A.
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Our board of directors is
soliciting the proxy accompanying this proxy statement. We will bear the
cost of soliciting proxies. Our directors, officers and employees may
solicit proxies by telephone, e-mail, facsimile and in person, without
additional compensation. Upon request, we will also reimburse brokerage
houses and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses for distributing proxy
materials.
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Householding of Annual Meeting
Materials
Some brokers, banks and other nominee
record holders may be participating in the practice of “householding” proxy
statements and annual reports. This means that only one copy of our proxy
statement or annual report may have been sent to multiple stockholders in your
household. We will promptly deliver a separate copy of either document to you if
you call or write us at the following address or telephone number: 60 Hampshire
Street, Cambridge, Massachusetts 02139, Attention: Investor Relations;
617-995-9800. If you want to receive separate copies of the annual report and
proxy statement in the future, or if you are receiving multiple copies and would
like to receive only one copy for your household, you should contact your
broker, bank or other nominee record holder, or you may contact us at the above
address and telephone number.
PROPOSAL 1 — ELECTION OF
DIRECTORS
Our board of directors is elected each
year at the annual meeting of stockholders. There are nine nominees for the nine
currently authorized seats on our board of directors. Each director elected to
hold office will do so until the 2011 annual meeting of stockholders and until
her or his successor is elected and qualified, or until such director’s earlier
death, resignation or removal. In February 2009, Dr. Emmanuel Puginier, a
designee of Novartis, resigned from our board and was replaced by
Dr. Steven Projan, also a designee of Novartis. In June
2009, upon recommendation of the Nominating and Corporate Governance Committee
of our board, our board elected Anthony Rosenberg, a Novartis designee, as
a director. In connection with the election of Mr. Rosenberg, the number of
authorized seats on our board of directors was increased from eight to
nine.
On
January 11, 2010, Pamela Thomas-Graham resigned from our board;
Ms. Thomas-Graham had been a director of Idenix since 2005 and was recently
named Chief Talent, Branding and Communications Officer of Credit Suisse and a
member of the Executive Board of Credit Suisse. On March 30 2010,
upon recommendation of the Nominating and Corporate Governance Committee of our
board of directors, our board of directors elected Tamar D. Howson as a
director.
Each person nominated for election is
currently serving as a director of Idenix. The board of directors,
upon the recommendation of the Nominating and Corporate Governance Committee,
has nominated each of the listed nominees for election as a director. Steven
Projan, Ph.D., Robert E. Pelzer and Anthony Rosenberg have been nominated
as designees of Novartis, pursuant to the stockholders’ agreement and waiver and
consent described under the caption “Certain Relationships and Related Party
Transactions — Relationship with Novartis”. There are no family
relationships among any of our directors and our executive
officers.
Each nominee has agreed to serve if
elected, and we do not know any reason why any nominee would be unable to serve.
In the event that any nominee should be unavailable for election, proxies will
be voted for the election of a substitute nominee designated by the board of
directors or for election of only the remaining nominees.
Unless authority to do so is withheld,
shares represented by executed proxies will be voted for the election of the
nine nominees named below. Proxies cannot be voted for a greater number of
persons than the number of nominees standing for election. Since nine directors
are to be elected at the annual meeting, the nine nominees for director who
receive the highest number of votes for election will be elected as
directors.
Information with respect to the number
of shares of common stock beneficially owned by each director as of
April 1, 2010 appears under the heading “Security Ownership of Certain
Beneficial Owners and Management”. The name, age, years of service on our board
of directors, and principal occupation and business experience of each director
nominee is set forth below.
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Name and
Age
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Principal Occupation and Business
Experience
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Director
Since
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Jean-Pierre
Sommadossi, Ph.D.
(age 54)
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Dr. Sommadossi is the
principal founder of Idenix and has served as the chairman of our board of
directors since our inception and as our president and chief executive
officer since November 2000. During the period from November 1999 to
November 2000, Dr. Sommadossi served as our executive president and
chief scientific officer. Dr. Sommadossi served as a professor of
pharmacology, toxicology and clinical pharmacology and associate director
of both the Center for AIDS Research and the Liver Center, University of
Alabama at Birmingham School of Medicine from June 1992 to November 2000.
Dr. Sommadossi took a sabbatical and then unpaid leave from the
University of Alabama at Birmingham from November 1999 to November 2002.
From 1996 to 1999, Dr. Sommadossi served on the Research Agenda
Committee of the AIDS Clinical Trial Group. Dr. Sommadossi holds a
Pharm.D. and Ph.D. in Pharmacology from the University of Marseilles,
France.
Dr.
Sommadossi has overseen every aspect of our operations in his roles as
chairman, president and chief executive officer. We believe
that he has an unparalleled understanding of our business, our scientific
approach to research, and the markets in which we operate.
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1998
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Charles W.
Cramb
(age 63)
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Mr. Cramb has served as the vice
chairman, chief financial and strategic officer of The Avon Company, a
global beauty products company, since September 2007. Mr. Cramb joined The
Avon Company in November 2005 and previously served as executive vice
president, finance and technology and chief financial officer. Prior to
joining The Avon Company, Mr. Cramb served as the chief financial officer
at The Gillette Company, a worldwide consumer products company, from July
1997 to November 2005. From July 1995 to July 1997, Mr. Cramb served
as a corporate vice president and corporate controller of The Gillette
Company. He is also a member of the board of directors of Tenneco Inc. Mr.
Cramb holds a B.A. from Dartmouth College and an M.B.A. from the
University of Chicago.
Mr. Cramb’s extensive financial
leadership at his current and former companies adds vital expertise to our
board of directors and to our Audit Committee in the form of financial
understanding, business perspective and auditing
expertise. Mr. Cramb is diligent in keeping the board
abreast of current audit issues and collaborating with our independent
auditors and senior management team.
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2003
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Wayne T.
Hockmeyer,
Ph.D.
(age 65)
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Dr. Hockmeyer founded
MedImmune, Inc., a biotechnology company, in April 1988 and served until
October 2000 as the chief executive officer of MedImmune, Inc.
Dr. Hockmeyer continued to serve as chairman of the board of
directors of MedImmune, Inc. until June 2007. From 2002 to
2007, Dr. Hockmeyer served as president of MedImmune Ventures, Inc., a
wholly owned subsidiary of MedImmune, Inc. Dr. Hockmeyer also serves
as a director of Baxter International, Inc. and GenVec, Inc. and has
previously served as a director of Middlebrook Pharmaceutical Corporation.
Dr. Hockmeyer was recognized, in 1998, by the University of Florida
as a Distinguished Alumnus and in 2002 was awarded a Doctor of Science
honoris causa from Purdue University. Dr. Hockmeyer holds a B.S. from
Purdue University and a Ph.D. from the University of
Florida.
Dr. Hockmeyer’s significant
experience in establishing and maintaining strategic direction in the
biotechnology and pharmaceutical industries is a key asset of our board of
directors. He has tremendous insight into the drug development process and
the scientific, operational and regulatory aspects of clinical
trials.
|
2002
|
||
|
Thomas R.
Hodgson
(age 68)
|
Mr. Hodgson, who is retired,
served most recently, from September 1990 to January 1999, as president
and chief operating officer of Abbott Laboratories, a pharmaceutical
company. From 1983 to 1990, Mr. Hodgson served as the president of Abbott
International and from 1978 to 1983, Mr. Hodgson served as the president
of the Hospital Products Division of Abbott Laboratories. Mr. Hodgson is a
director of The Travelers Companies Inc. and has previously served as a
director of Intermune, Inc. Mr. Hodgson holds a B.S. from Purdue
University, an M.S. from the University of Michigan, an M.B.A. from
Harvard Business School and an honorary doctorate degree in engineering
awarded by Purdue University.
With his extensive experience at
the helm of a major health care company and his understanding of drug
development, Mr. Hodgson provides an invaluable resource to our board of
directors through his vital senior management experience and tested
business acumen.
|
2002
|
||
|
Robert E.
Pelzer
(age 56)
|
Mr. Pelzer has served since
September 2008 as president and chief executive officer of Novartis
Corporation, a part of the Novartis Group, a multinational group of
companies specializing in the research, development, manufacture, sale and
distribution of innovative healthcare products. Prior to that, from
March 2002 to August 2008, he served as general counsel of Novartis
Pharmaceuticals Division, a part of Novartis Group. Prior to his
appointment at Novartis in March 2002, Mr. Pelzer was general counsel at
DuPont Pharmaceuticals Company from 1998 to December 2001. Prior to that
time, Mr. Pelzer held various positions with The DuPont Company. Mr.
Pelzer holds degrees in Commerce and in Law from the University of
Alberta. He is admitted as barrister and solicitor in the Province of
Alberta, Canada, and as Solicitor in England and
Wales.
Mr. Pelzer serves on our board as
one of three representatives of our largest stockholder,
Novartis. Mr. Pelzer’s experience in the industry provides our
board with essential knowledge of the development and commercialization of
pharmaceuticals.
|
2003
|
|
Denise
Pollard-Knight,
Ph.D.
(age 50)
|
Dr. Pollard-Knight has served
since April 2004 as head of Nomura Phase4 Ventures, an affiliate of Nomura
International plc, a leading Japanese financial institution. From January
1999 to March 2004, Dr. Pollard-Knight served as head of Healthcare
Private Equity at Nomura International plc. Dr. Pollard-Knight previously
served as a director of Viacell. From January 1997 to January
1999, Dr. Pollard-Knight was a member of Rothschild Asset Management
Ltd., an investment management firm. Dr. Pollard-Knight holds a Ph.D.
and BSc (Hons) from the University of Birmingham in England.
Dr. Pollard-Knight completed postdoctorate work as a Fulbright
Scholar at the University of California, Berkeley.
Dr. Pollard-Knight brings strong
financial and investment skills and in-depth understanding of science to
our board of directors. Over her years on our board, these
skills have allowed Dr. Pollard-Knight to provide vital contributions to
our discussions regarding financing options, strategic collaborations and
strategic direction of Idenix. Given her financial skills, Dr.
Pollard-Knight also brings a high level of expertise to the Audit
Committee on which she serves.
|
2003
|
||
|
Steven
Projan, Ph.D.
(age 57)
|
Dr. Projan has served as a
director since February 2009. Dr. Projan has served since September
2008 as vice president, global head of infectious diseases for the
Novartis Institute for Biomedical Research, Inc., a part of the Novartis
Group. Prior to joining Novartis, from 1993 to August 2008,
Dr. Projan held several positions at Wyeth Pharmaceuticals, including
his most recent position as vice president of biological technologies.
Dr. Projan holds a Ph.D. in molecular genetics from Columbia
University.
Dr. Projan serves on our board as
one of three representatives of our largest stockholder,
Novartis. With his diverse industry experience, Dr. Projan
provides keen insight into the challenges and opportunities that exist in
the biopharmaceutical space.
|
2009
|
||
|
Anthony
Rosenberg
(age 56)
|
Mr. Rosenberg has served since
2005 as head of business development and licensing of Novartis Pharma AG,
a part of the Novartis Group. Prior to that Mr. Rosenberg was
global head of the transplant and immunology business unit at Novartis
from 2000 to 2005. Mr. Rosenberg initially joined Sandoz, a
predecessor to Novartis, in 1980. Mr. Rosenberg is a member of
the Pharma Executive Committee at Novartis Pharma AG. Mr.
Rosenberg holds a BSc from the University of Leicester and an M.Sc in
physiology from the University of London.
Mr. Rosenberg serves on our board
as one of three representatives of our largest stockholder,
Novartis. Through his experience at Novartis Pharma AG, Mr.
Rosenberg is uniquely qualified to provide our board with
industry-specific business development advice, further augmenting our
board’s depth of expertise in this area.
|
2009
|
|
Tamar D.
Howson
(age
61
)
|
Ms. Howson is currently a Partner
at JSB-Partners, a transaction advisory firm serving the life sciences
industry. Prior to joining JSB-Partners in 2010, Ms. Howson was
executive vice president of business development at Lexicon
Pharmaceuticals where she led the company’s partnering and licensing
efforts. From 2001 to 2007, Ms. Howson was senior vice president corporate
and business development at Bristol Myers Squibb, overseeing mergers and
acquisitions, licensing and research collaborations. During 2000 and 2001,
Ms. Howson served as a business development and strategy consultant to
various biotechnology companies in the United States and in Europe. Ms.
Howson was also a senior vice president and director of business
development at SmithKline Beecham from 1991 to 2000, where she also
managed SR One, SmithKline Beecham’s $100 million venture capital
fund.
Ms. Howson currently serves on the
board of directors of OXiGENE, Inc., a clinical-stage biopharmaceutical
company developing therapeutics to treat cancer and eye diseases, and
S*BIO Pte Ltd., which is focused on the discovery and clinical development
of novel, targeted small molecule drugs for the treatment of
cancer. She is also a member of the Scientific Advisory Board
of SAI Advantium Pharma Ltd., a drug discovery, development and
manufacturing company. She previously served as a director of
Ariad Pharmaceuticals, SkyePharma, NPS Pharmaceuticals and
Targacept. Ms. Howson holds an M.B.A from Columbia University,
an M.S. from City College of New York and a B.S. in Chemical Engineering
from the Technion in Israel.
Ms. Howson brings strong business
development, licensing and transactional guidance to our board of
directors from her varied experiences at pharmaceutical companies and with
venture capital. The board believes with her background, Ms.
Howson will provide important insights into licensing transactions,
financing options and strategic collaborations for
Idenix.
|
2010
|
The board of directors believes that
approval of the election of each nominee director named above is in our best
interests and in the best interests of our stockholders and therefore recommends
a vote “FOR” this proposal.
DIRECTOR
COMPENSATION
We compensate our non-employee
directors, other than directors who are employees of Novartis, with a
combination of cash and equity. Mr. Pelzer, Dr. Projan and Mr. Rosenberg,
our three directors who are also employees of Novartis, do not receive any
remuneration for their services as directors. We also do not provide additional
remuneration to Dr. Sommadossi, an officer of Idenix, for his service as a
director.
The following table describes our
compensation practices for non-employee directors, other than the directors
affiliated with Novartis, during the fiscal year ended December 31, 2009,
or fiscal 2009.
|
Meeting
Fees
|
Stock Options to
Purchase
|
|||||||||||||||||||
|
Cash
|
(Per
Meeting
|
Common
Stock(1)
|
||||||||||||||||||
|
Year
|
Retainer
|
Attended)
|
Initial
|
Annual
|
||||||||||||||||
|
Board
Member
|
2009
|
$
|
30,000
|
$
|
2,000
|
15,000
|
(2)
|
20,000
|
(3)
|
|||||||||||
|
Lead
Director
|
2009
|
10,000
|
—
|
—
|
—
|
|||||||||||||||
|
Nominating and Corporate
Governance Committee Chair
|
2009
|
5,000
|
1,000
|
—
|
—
|
|||||||||||||||
|
Audit Committee
Chair
|
2009
|
15,000
|
1,000
|
—
|
—
|
|||||||||||||||
|
Compensation Committee
Chair
|
2009
|
10,000
|
1,000
|
—
|
—
|
|||||||||||||||
|
Committee Members (other than
chair)
|
2009
|
—
|
1,000
|
—
|
—
|
|||||||||||||||
|
(1)
|
The exercise price of these stock
options is equal to the average of the open and close price of our common
stock as reported on the NASDAQ Global Market on the date of grant.
Subject to certain exceptions, each stock option terminates on the earlier
of ten years from the date of grant or 180 days after the optionee
ceases to serve as a
director.
|
|
(2)
|
Each non-employee director is
entitled to receive an award of stock options upon his or her election or
appointment to our board of directors. The initial stock option grant
vests in 24 equal monthly installments beginning one month from the date
of grant.
|
|
(3)
|
Each non-employee director is
entitled to receive at each year’s annual meeting after which he or she
continues to serve as a director, an additional stock option grant of
20,000 shares. The number of stock options to be awarded to new
non-employee directors who are appointed to our board of directors at
times other than immediately after the annual meeting of stockholders is
pro rated for the period of service between date of appointment and the
next annual meeting. The annual option grant vests in 12 equal monthly
installments beginning one month from the date of
grant.
|
In addition, members of our board of
directors, other than directors affiliated with Novartis, are reimbursed for
reasonable expenses incurred in connection with attendance at meetings of our
board of directors and its committees and related activities in accordance with
Idenix policy.
Director Compensation for Fiscal
2009
|
Fees Earned or
Paid
|
Stock Option
Awards
|
Total
|
||||||||||
|
Name
|
in
Cash ($)
|
($)(1)(2)
|
($)
|
|||||||||
|
Charles W.
Cramb(3)
|
$
|
78,000
|
$
|
42,340
|
$
|
120,340
|
||||||
|
Wayne T.
Hockmeyer(4)
|
65,000
|
42,340
|
107,340
|
|||||||||
|
Thomas R.
Hodgson(5)
|
70,000
|
42,340
|
112,340
|
|||||||||
|
Denise
Pollard-Knight(6)
|
60,000
|
42,340
|
102,340
|
|||||||||
|
Pamela
Thomas-Graham(7)
|
60,000
|
42,340
|
102,340
|
|||||||||
|
Robert
Pelzer(8)
|
—
|
—
|
—
|
|||||||||
|
Steven
Projan(9)
|
—
|
—
|
—
|
|||||||||
|
Anthony
Rosenberg(10)
|
—
|
—
|
—
|
|||||||||
|
Emmanuel Puginier
(11)
|
—
|
—
|
—
|
|||||||||
|
(1)
|
The
amounts in the Stock Option Awards column reflect the grant date fair
value of stock option awards granted during fiscal 2009 under our stock
incentive plans, in accordance with Financial Accounting Standards
Codification Topic 718, Compensation-Stock Compensation, or FASB ASC Topic
718. There can be no assurance that FASB ASC Topic 718 amounts will
reflect actual amounts realized. Refer to Note 10, “Equity Incentive
Plans and Share-Based Compensation”, in the Notes to Consolidated
Financial Statements included in the Annual Report on Form 10-K for
fiscal 2009 filed with the Securities and Exchange Commission, or SEC, on
March 9, 2010 for the relevant assumptions used to determine the
valuation of our option awards.
|
|
(2)
|
The
number of shares underlying stock options granted to our non-employee
directors in fiscal 2009 and the grant date fair value of such stock
options as determined in accordance with FASB ASC Topic 718
are:
|
|
Number of
Shares
|
Grant Date
Fair
|
|||||||||||
|
Underlying
Stock
|
Value of Stock
Option
|
|||||||||||
|
Director
|
Grant Date
|
Option Grants in
2009
|
Grants in 2009
($)
|
|||||||||
|
Mr. Cramb
|
6/2/2009
|
20,000 | 42,340 | |||||||||
|
Dr.
Hockmeyer
|
6/2/2009
|
20,000 | 42,340 | |||||||||
|
Mr. Hodgson
|
6/2/2009
|
20,000 | 42,340 | |||||||||
|
Dr.
Pollard-Knight
|
6/2/2009
|
20,000 | 42,340 | |||||||||
|
Ms.
Thomas-Graham
|
6/2/2009
|
20,000 | 42,340 | |||||||||
|
Mr. Pelzer
|
- | - | - | |||||||||
|
Dr. Projan
|
- | - | - | |||||||||
|
Mr.
Rosenberg
|
- | - | - | |||||||||
|
Dr.
Puginier
|
- | - | - | |||||||||
|
(3)
|
At
December 31, 2009, Mr. Cramb held stock options to purchase 140,000 shares
of our common stock.
|
|
(4)
|
At
December 31, 2009, Dr. Hockmeyer held stock options to purchase 100,000
shares of our common stock.
|
|
(5)
|
At
December 31, 2009, Mr. Hodgson held stock options to purchase 100,000
shares of our common stock.
|
|
(6)
|
At
December 31, 2009, Dr. Pollard-Knight held stock options to purchase
80,000 shares of our common stock.
|
|
(7)
|
At
December 31, 2009, Ms. Thomas-Graham held stock options to purchase
115,000 shares of our common stock. Ms. Thomas-Graham ceased
serving as a member of the board
on
January 11, 2010. Under our 2005 Stock Incentive Plan, Ms. Thomas-Graham
has 180 days from the date she ceased serving as a member of the board to
exercise her then vested options. None of Ms. Thomas-Graham’s options may
vest subsequent to January 11, 2010
.
|
|
(8)
|
Mr. Pelzer
was nominated by Novartis as one of its three designees to our board. Mr.
Pelzer does not receive compensation for serving on our board due to his
affiliation with Novartis.
|
|
(9)
|
Dr. Projan
joined our board of directors in February 2009. He was nominated by
Novartis as one of its three designees to our board. Dr. Projan does
not receive compensation for serving on our board due to his affiliation
with Novartis.
|
|
(10)
|
Mr. Rosenberg
joined our board of directors in June 2009. He was nominated by Novartis
as one of its three designees to our board. Mr. Rosenberg does not receive
compensation for serving on our board due to his affiliation with
Novartis.
|
|
(11)
|
Dr.
Puginier ceased serving as a member of the board in February 2009 upon
Novartis’ nomination of Dr. Projan. Dr. Puginier did not receive
compensation for serving on our board due to his affiliation with
Novartis.
|
CORPORATE GOVERNANCE
Our board of directors strongly believes
that good corporate governance policies and practices are important to ensure
that Idenix is managed for the overall long-term benefit of our stockholders. We
routinely review and update our corporate governance policies and practices that
we believe will promote a high level of performance from our board of directors,
officers and employees. This section describes key corporate governance
guidelines and practices that our board has adopted. Complete copies of our
Corporate Governance Guidelines, committee charters and Policy on Business
Conduct and Ethics are available on our website at www.idenix.com under the
caption “Investor Center — Our Leadership & Governance —
Board of Directors, Committee Composition and Charters”. Alternatively, you can
request a copy of any of these documents by writing to Secretary, Idenix
Pharmaceuticals, Inc., 60 Hampshire Street, Cambridge, Massachusetts
02139.
Corporate Governance
Guidelines
Our board has adopted Corporate
Governance Guidelines to assist the board in the exercise of its duties and
responsibilities and to serve the best interests of Idenix and our stockholders.
These guidelines provide a framework for the conduct of the board’s business and
includes guidelines for, among other things, determining director independence,
establishing criteria and qualifications of directors, conduct of meetings of
the board and meetings of independent directors, access by the directors to
management, independent consultants and professional advisors, and management
evaluation and succession.
Director
Independence
Relationship with
Novartis.
Under
the terms of the stockholders’ agreement, we have agreed to use our reasonable
best efforts to nominate for election as a director at least two designees of
Novartis for so long as Novartis and its affiliates own at least 35% of our
voting stock and at least one designee of Novartis for so long as Novartis and
its affiliates own at least 19.4% of our voting stock. In May 2009,
we and Novartis
entered into a waiver and consent in connection with our
filing of a registration statement to register shares of our common stock with
the SEC, pursuant to which we granted Novartis the right to designate an
additional director to serve on our board of directors, including the right, for
up to one year, to remove and replace such designee. The waiver and
consent is effective through December 31, 2010.
We have also agreed, for so long as one
or more Novartis designees serve on our board of directors, to permit
Novartis-designated directors to serve on our board committees unless such
committee service is prohibited by applicable law, rule or regulation, in which
case the Novartis designee is entitled to serve on our board committees as a
non-voting observer.
Board of
Directors.
Under
applicable NASDAQ rules, a director will only qualify as an “independent
director” if, in the opinion of our board of directors, that person does not
have a relationship that would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director. Our board of
directors has determined that none of the following five directors has a
relationship that would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director, and that each of these
directors is an “independent director” as defined in the NASDAQ rules:
Charles W. Cramb, Wayne T. Hockmeyer, Thomas R. Hodgson, Tamar D.
Howson and Denise Pollard-Knight.
Committees.
Our Audit Committee is
composed entirely of independent directors as required by applicable SEC and
NASDAQ rules, including Rule 10A-3 under the Securities Exchange Act of
1934, as amended, or the Exchange Act, with one Novartis-designated director,
Anthony Rosenberg,
who is
not independent, serving as a non-voting observer. Our Compensation Committee is
composed of independent directors with one Novartis-designated director, who is
not independent,
Robert Pelzer,
serving as a non-voting observer.
Our Nominating and Corporate Governance
Committee is composed of independent directors with one Novartis-designated
director, who is not independent,
Robert Pelzer,
serving as a non-voting
observer.
Meetings of Independent
Directors
Our Corporate Governance Guidelines
require that our independent directors regularly meet without management being
present. On an as needed basis, the independent directors meet in executive
session without management.
Director Attendance at Annual Meetings
of Stockholders
Our Corporate Governance Guidelines
provide that it is the responsibility of all of our directors to attend our
annual meetings of stockholders. All directors serving on our board as of the
2009 annual meeting of stockholders attended that meeting.
Board of Directors
Our board of directors has
responsibility for establishing broad corporate policies and reviewing our
overall performance. Among the primary responsibilities of our board of
directors is the oversight of the management of our company. Our directors
remain informed of our business and management’s activities by reviewing
documents provided to them before each meeting and by attending presentations
made by our chief executive officer and other members of management. At each
meeting of the board of directors, our directors are advised of actions taken by
each board committee. Directors have access to our books, records and reports
and independent advisors. Members of our management frequently interact with and
are at all times available to our directors.
Our board of directors met ten times
during fiscal 2009, three meetings of which were board meetings of our
independent directors only. During fiscal 2009, each director, other than
Dr. Puginier, attended at least 75% of the aggregate of the number of board
meetings and the number of meetings held by all committees on which he or she
then served.
Board Leadership
Structure
At the
current time, we do not separate the roles of chief executive officer and
chairman of the board. Jean-Pierre Sommadossi has served as the
chairman of our board of directors since
our inception and as our president and chief executive officer since November
2000.
Our board of directors has determined that having the same
individual hold both positions is in the best interests of Idenix and our
stockholders and is consistent with good corporate governance for the following
reasons:
|
|
·
|
Our
chief executive officer is more familiar with our business and strategy
than an independent, non-employee chairman would be and is thus better
positioned to focus our board’s agenda on the key issues facing our
company.
|
|
|
·
|
A
single chairman and chief executive officer provides strong and consistent
leadership for Idenix, without risking overlap or conflict of
roles.
|
|
|
·
|
Oversight
of our company is the responsibility of our board as a whole, and this
responsibility can be properly discharged without an independent
chairman.
|
|
|
·
|
Our
lead director provides similar benefits to those associated
with an independent chairman.
|
In part because of our decision not to
separate the two positions at this time, our
board of directors has
appointed Thomas R. Hodgson as lead director. Mr. Hodgson is an
independent director within the meaning of NASDAQ rules. His duties
as lead director include the following:
|
|
·
|
Chairing
meetings of the independent directors in executive
session.
|
|
|
·
|
Meeting
with any director who is not adequately performing his or her duties as a
member of our board or any
committee.
|
|
|
·
|
Facilitating
communications between other members of our board and our chairman and
chief executive officer.
|
|
|
·
|
Working
with our chairman and chief executive officer in the preparation of the
agenda for each board meeting and in determining the need for special
meetings of our board.
|
|
|
·
|
Reviewing
and, if appropriate, recommending action to be taken with respect to
written communications from stockholders submitted to our
board.
|
|
|
·
|
Consulting
with our chairman and chief executive officer on matters relating to
corporate governance and board
performance.
|
Our board
believes that our current leadership structure is appropriate because our lead
director is able to provide independent leadership and management oversight and
our long-term chairman and chief executive officer is able to focus on both
day-to-day business and strategy development.
Committees of Our Board of
Directors
Our board of directors has the following
three standing committees: Audit, Compensation and Nominating and Corporate
Governance. Each of these committees acts under the terms of a written charter
approved by our board of directors. Copies of the committees’ charters, as
currently in effect, are posted on our website at www.idenix.com under the
caption “Investor Center — Our Leadership & Governance —
Board of Directors, Committee Composition and Charters”.
|
|
•
|
The Audit Committee assists the
board of directors in its oversight of the integrity of our financial
statements, compliance with legal and regulatory requirements relating to
finance and financial reporting matters and understanding of our
accounting and financial reporting processes. The Audit Committee also
assists the board of directors in overseeing and monitoring our compliance
with the legal and regulatory requirements applicable to our business
operations. Our Audit Committee has the sole authority and responsibility
to select, evaluate, compensate and replace our independent registered
public accounting firm. Our board of directors has determined that Charles
W. Cramb, the chair of the Audit Committee, is a financial expert under
applicable SEC rules. The Audit Committee met 10 times in fiscal
2009.
|
|
|
•
|
The Compensation Committee assists
the board of directors with its overall responsibility relating to
compensation and management development, recommends for approval by the
board of directors the compensation of our chairman and chief executive
officer and our non-employee directors, establishes annually the
compensation of our other officers, effects the engagement of, and terms
of employment agreements and arrangement with, and the termination of all
our officers and administers our equity incentive plans. The Compensation
Committee met four times in fiscal 2009. The process and procedures
followed by our Compensation Committee in considering and determining
executive and director compensation are described below under the heading
“Compensation Discussion and
Analysis”.
|
|
|
|
|
|
•
|
The Nominating and Corporate
Governance Committee assists in developing and recommending to our board
of directors sound corporate governance principles and practices,
identifying and recommending qualified individuals to become members of
our board of directors and reviewing and making recommendations to our
board of directors with respect to management succession planning. The
Nominating and Corporate Governance Committee met two times and acted by
written consent once in fiscal
2009.
|
While each committee has its own charter
and designated responsibilities, the committees act on behalf of the entire
board of directors. The committees regularly report on their activities to the
entire board of directors, and all members of our board of directors are
entitled to receive copies of each committee’s agendas and
minutes.
None of the members of any committee of
our board of directors is or has been an officer of Idenix. Mr. Pelzer,
Dr. Projan and Mr. Rosenberg are employees of Novartis or its affiliates.
The current members of the committees of our board of directors are set forth in
the following table:
|
Nominating and
Corporate
|
||||
|
Audit
Committee(1)
|
Compensation
Committee(2)
|
Governance
Committee(1)(2)
|
||
|
Charles W. Cramb
(Chair)
|
Wayne T. Hockmeyer
(Chair)
|
Wayne T. Hockmeyer
(Chair)
|
||
|
Thomas
Hodgson
|
Charles W.
Cramb
|
Denise
Pollard-Knight
|
||
|
Denise
Pollard-Knight
|
|
(1)
|
Mr. Rosenberg is a non-voting
observer of the Audit Committee. Mr. Pelzer had served on the Audit
Committee as a non-voting observer until Mr. Rosenberg joined the Audit
Committee as an observer.
|
|
(2)
|
Mr. Pelzer is a non-voting
observer of the Compensation Committee and the Nominating and Corporate
Governance Committee.
|
Information About Our Nominating
Process
The Nominating and Corporate Governance
Committee is responsible for identifying and evaluating individuals to become
members of our board of directors, including the review of candidates
recommended by our stockholders, and recommending such qualified individuals to
our board of directors.
The process followed by the Nominating
and Corporate Governance Committee to identify, evaluate and review candidates
includes requests to members of our board of directors and others for
recommendations, meeting from time to time to evaluate biographical information
and background material relating to potential candidates, an assessment of such
candidates’ qualifications vis-à-vis our director qualification standards
described below, and interviews of selected candidates by members of the
Nominating and Corporate Governance Committee and the board of directors. In
addition, the Nominating and Corporate Governance Committee may retain the
services of an executive search firm to help identify and evaluate potential
director candidates.
Stockholders may recommend to the
Nominating and Corporate Governance Committee individuals for consideration as
potential director nominees by submitting on a timely basis the name and
background of the candidate to the Nominating and Corporate Governance
Committee, c/o Secretary, Idenix Pharmaceuticals, Inc., 60 Hampshire
Street, Cambridge, Massachusetts 02139. The Nominating and Corporate Governance
Committee will consider a recommendation if appropriate biographical information
and background material is provided. In addition to the biographical and
background information, the stockholder making such recommendation must include
a statement as to whether the stockholder or the group of stockholders making
the recommendation has beneficially owned more than 5% of our common stock for
at least a year as of the date such recommendation is made. Assuming that
appropriate biographical and background material is timely provided for
candidates recommended by stockholders, the Nominating and Corporate Governance
Committee will evaluate those candidates by following substantially the same
process, and applying substantially the same criteria, as for candidates
submitted by members of our board of directors or by other persons. If our board
of directors determines to nominate a stockholder recommended candidate, such
nominee’s name will be included in our proxy statement and our proxy card for
the stockholder meeting at which such nominee’s election is
recommended.
Our stockholders also have the right to
nominate director candidates themselves, without any prior review or
recommendation by the Nominating and Corporate Governance Committee or the board
of directors, by following the procedures set forth under “Stockholder Proposals
for the 2011 Annual Meeting.” Director candidates nominated in accordance with
the procedures set forth under the first paragraph of such section will be
included in our proxy materials but may not be included in our proxy card for
the next annual meeting.
At the annual meeting, stockholders will
be asked to consider the election of the nine director nominees described in
Proposal 1. Each of these nominees has been nominated for election by the
Nominating and Corporate Governance Committee.
Director Qualification
Standards
Directors should possess the highest
personal and professional ethics and integrity, understand and be aligned with
our core values, and be committed to representing the long-term interests of our
stockholders. Directors must also be inquisitive, objective and have practical
wisdom and mature judgment.
Our corporate governance guidelines
specify that the value of diversity on the board should be considered in the
director identification and nomination process. We endeavor to have a diverse
board of directors possessing strategic and policy-making experience and skills
in business, healthcare, drug development, strategic collaborations, science and
technology and the international arena. In considering whether to
recommend any candidate for inclusion in our board of director’s slate of
recommended director nominees, including candidates recommended by stockholders,
the Nominating and Corporate Governance Committee will apply the criteria set
forth in the charter of the Nominating and Corporate Governance Committee. These
criteria include the candidate’s integrity, business acumen, age, experience,
diligence, conflicts of interest and the ability to act in the interests of all
of our stockholders. The Nominating and Corporate Governance Committee does not
assign specific weights to particular criteria and no particular criterion is
necessarily applicable to all prospective nominees. Our board of directors
believes that the backgrounds and qualifications of our directors, considered as
a group, should provide diversity and a significant composite mix of experience,
knowledge and abilities that will allow our board of directors to fulfill its
responsibilities. Nominees are not discriminated against on the basis of race,
religion, national origin, sexual orientation, disability or any other basis
proscribed by law.
Directors must be willing to devote
sufficient time to carrying out their duties and responsibilities effectively,
and should be committed to serve on our board of directors for an extended
period of time. Our board of directors does not believe that arbitrary term
limits on directors’ service are appropriate since such term limits could result
in the loss of directors who have developed insights into Idenix and our
business and operations. Our board of directors annually engages in a
self-evaluation process and a review of the requisite skills and criteria
comprised by our board of directors and those to be sought in nominees for
directors.
We require any director who reaches the
age of 70 while serving as a director to retire from our board of directors
effective at the end of his or her then current term.
At the annual meeting, stockholders will
be asked for the first time to consider the election of Anthony Rosenberg and
Tamar D. Howson as directors. In June 2009, Novartis nominated Mr.
Rosenberg as one of its three designees to our board. Mr. Pelzer and Dr.
Projan are Novartis’ other designees to our board. Ms.
Howson was elected as a director in March 2010.
Communicating with the Board of
Directors
We have established an Integrity Hotline
for the confidential, anonymous submission by our directors, officers and
employees of concerns regarding violations or suspected violations of our Policy
on Business Conduct and Ethics, including matters relating to accounting and
auditing matters. In addition, the Audit Committee has established procedures
for the receipt, retention and treatment of communications received by us, our
board of directors and the Audit Committee regarding accounting, internal
controls or auditing matters.
Written
communications from our stockholders and employees may be sent to: Idenix
Pharmaceuticals, Inc., Audit Committee Chair, 60 Hampshire Street, Cambridge,
Massachusetts 02139.
Stockholders
who wish to send other communications to our board of directors should address
such communications to Board of Directors, c/o Secretary, Idenix
Pharmaceuticals, Inc., 60 Hampshire Street, Cambridge, Massachusetts
02139.
Our board
of directors will give attention to written communications that are submitted by
our stockholders and other interested parties. In general, communications
relating to corporate governance and corporate strategy are more likely to be
reviewed by our board than communications relating to ordinary business affairs,
personal grievances and matters as to which we receive repetitive or duplicative
communications. Absent unusual circumstances or as contemplated by committee
charters and subject to any required assistance or advice from our counsel, the
chair of the Nominating and Corporate Governance Committee is primarily
responsible for monitoring communications from our stockholders and other
interested parties and for providing copies or summaries to the other directors
as he or she considers appropriate.
Policy
on Business Conduct and Ethics
Our board
of directors is committed to legal and ethical conduct in fulfilling its
responsibilities. We expect all of our directors, officers and employees to act
ethically, legally and with integrity and in compliance with our Policy on
Business Conduct and Ethics as well as our other policies and standards of
conduct. Our Policy on Business Conduct and Ethics includes the code of ethics
that applies to our principal executive officer, principal financial officer,
principal accounting officer and persons performing similar functions. Our
Policy on Business Conduct and Ethics is posted on our website at www.idenix.com
under the caption “Investor Center — Our Leadership &
Governance — Idenix Policy on Business Conduct and Ethics” and we intend to
post on our website all disclosures that are required by law or NASDAQ listing
standards concerning any amendments to, or waivers from, any provision of our
policy. No waivers from any provision of our policy have been
granted.
Oversight
of Risk
We face a
number of risks in our business, including risks related to pre-clinical and
clinical research and development, regulatory reviews, approvals and oversight,
intellectual property filings, prosecution, maintenance and challenges, the
establishment and maintenance of strategic alliances, competition, the ability
to access additional funding for our business, as well as other risks. Our
management is responsible for the day-to-day management of the risks that we
face, while our board of directors, as a whole and through its committees, has
responsibility for the oversight of risk management. Our board and
its committees fulfill this duty by discussing with management the policies and
practices utilized by management in assessing and managing risks and providing
input on those policies and practices.
Our corporate governance guidelines
specify that our directors have an obligation to become and remain informed
about the risks and problems that affect the company’s business and prospects.
In general, our board oversees risk management activities relating to business
strategy, acquisitions, capital allocation, organizational structure and certain
operational risks. Our Audit Committee has the responsibility to review with
management the company’s (i) system of internal controls and policies relating
to the assessment of risk; (ii) policies with respect to risk assessment,
risk management, the company’s major financial and operational risk exposures,
and (iii) and the steps that management has taken to monitor and
control such exposures, including a review of the company’s insurance
program. The Audit Committee also has the responsibility to oversee
the company’s compliance programs and monitor its performance by periodically
reviewing significant compliance risk areas related to the company’s business
and the steps management has taken to monitor, control and report such
compliance risk exposures. Our Compensation Committee oversees risk management
activities relating to our compensation policies and practices. Finally, our
Nominating and Corporate Governance Committee oversees risk management
activities relating to board composition and management succession
planning. Each committee reports to the full board on a regular
basis, including reports with respect to the committee’s risk oversight
activities as appropriate. In addition, since risk issues often
overlap, committees from time to time request that that the full board discuss
particular risks.
Beneficial
Ownership Table
The
following table sets forth information regarding the beneficial ownership of our
common stock as of April 1, 2010 by:
|
|
•
|
each
person or group known by us to beneficially own more than 5% of our
outstanding common stock;
|
|
|
•
|
each
of our directors, including our chief executive
officer;
|
|
|
•
|
each
of the other executive officers named in the Summary Compensation Table
under the heading “Executive Compensation”
below; and
|
|
|
•
|
all
of our current executive officers and directors as a
group.
|
Unless
otherwise indicated, to our knowledge, each of the persons named in this table
has sole voting and investment power with respect to the shares indicated as
beneficially owned, subject to community property laws where
applicable.
|
Shares of
|
|||||||||||||
|
Shares of
|
Common Stock
|
Percentage of
|
|||||||||||
|
Common Stock
|
Issuable Under
|
Common Stock
|
|||||||||||
|
Name and Address of Beneficial Owner (1)
|
Beneficially Owned (2)
|
Stock Options (2)
|
Outstanding (3)
|
||||||||||
|
5%
Stockholders
|
|||||||||||||
|
Novartis
AG
|
31,322,836 | (4) | - | 47 | % | ||||||||
|
MPM
Capital L.P.
|
3,321,534 | (5) | - | 5.0 | % | ||||||||
|
Directors
|
|||||||||||||
|
Jean-Pierre
Sommadossi
|
2,219,754 | (6) | 987,506 | 4.8 | % | ||||||||
|
Charles
W. Cramb
|
7,200 | 138,333 | * | ||||||||||
|
Wayne
T. Hockmeyer
|
41,708 | 98,333 | * | ||||||||||
|
Thomas
R. Hodgson
|
92,324 | 98,333 | * | ||||||||||
|
Robert
E. Pelzer (7)
|
- | - | - | ||||||||||
|
Denise
Pollard-Knight
|
- | 78,333 | * | ||||||||||
|
Steven
Projan (8)
|
- | - | - | ||||||||||
|
Tamar
D. Howson
|
- | 5,208 | |||||||||||
|
Anthony
Rosenberg (9)
|
- | - | * | ||||||||||
|
Other
Executive Officers
|
|||||||||||||
|
Douglas
Mayers
|
30,000 | (10) | 174,586 | * | |||||||||
|
Ronald
Renaud, Jr.
|
15,000 | 286,252 | * | ||||||||||
|
David
Standring
|
67,375 | (11) | 164,688 | * | |||||||||
|
John
Weidenbruch
|
35,000 | 177,604 | * | ||||||||||
|
All
current directors and executive officers as a group (13
persons)
|
2,508,361 | 2,209,176 | 6.9 | % | |||||||||
*
Less than 1%
of the shares of total common stock outstanding as of April 1,
2010.
|
(1)
|
The
address of all of our executive officers and directors is in
c/o Idenix Pharmaceuticals, Inc., 60 Hampshire Street, Cambridge,
Massachusetts 02139. The address of Novartis AG is Lichtstrasse 35 CH-4002
Basel, Switzerland. The address of MPM Capital L.P. is 200 Clarendon
Street, Boston, Massachusetts
02116.
|
|
(2)
|
Beneficial
ownership is determined in accordance with the rules of the SEC and
includes voting or investment power with respect to shares of our common
stock. Shares of our common stock issuable under stock options that are
exercisable within 60 days after April 1, 2010 are deemed
outstanding and are included for computing the percentage ownership of the
person holding the options but are not deemed outstanding for computing
the percentage ownership of any other
person.
|
|
(3)
|
On
April 1, 2010, there were 66,373,742 shares of our common stock
outstanding.
|
|
(4)
|
Consists
of 31,322,836 shares held by Novartis Pharma AG, a direct, wholly
owned subsidiary of Novartis AG. This information is based solely on
information set forth in a Schedule 13D/A filed on November 2,
2005 jointly by Novartis AG and Novartis Pharma AG and subsequent
Forms 4 filed on April 4, 2006, June 8, 2006, May 30,
2008, September 3, 2008, November 25, 2008, February 23,
2009, May 29, 2009, August 24, 2009 and February 26,
2010.
|
|
(5)
|
Consists
of 2,949,488 shares held by BB BioVentures L.P., or BB BioVentures,
256,519 shares held by MPM Bioventures Parallel Fund L.P., or
Parallel Fund, 37,299 shares held by MPM Asset Management Investors
1998 LLC, or Investors Fund, and 78,228 shares held by MPM Asset
Management LLC, or AM LLC. BB BioVentures is under common control with
Parallel Fund, Investors Fund and AM LLC. This information is based solely
on information set forth in a Schedule 13G/A filed by such entities
on February 11, 2010.
|
|
(6)
|
Includes
161,185 shares held by the Jean-Pierre Sommadossi 1998 Irrevocable
Trust.
|
|
(7)
|
Mr. Pelzer
serves as president and chief executive officer of Novartis Corporation,
an affiliate of Novartis, and does not have sole or shared voting or
dispositive power over shares held by
Novartis.
|
|
(8)
|
Dr. Projan
serves as vice president, global head of infectious diseases for Novartis
Institute for Biomedical Research, Inc., an affiliate of Novartis, and
does not have sole or shared voting or dispositive power over shares held
by Novartis.
|
|
(9)
|
Mr. Rosenberg
serves as global head of business development and licensing of Novartis
and does not have sole or shared voting or dispositive power over shares
held by Novartis.
|
|
(10)
|
Includes of
30,000 shares held by Dr. Mayers’
spouse.
|
|
(11)
|
Includes
200 shares held by Dr. Standring’s
spouse.
|
The
following table sets forth information relating to the individuals who serve as
executive officers as of April 1, 2010:
|
Name
|
Age
|
Position
|
||
|
Jean-Pierre
Sommadossi, Ph.D.
|
54
|
President
and Chief Executive Officer and Chairman of the Board of
Directors
|
||
|
Paul
J. Fanning
|
52
|
Senior
Vice President, Human Resources
|
||
|
Douglas
Mayers, M.D.
|
56
|
Executive
Vice President and Chief Medical Officer
|
||
|
Ronald
C. Renaud, Jr.
|
41
|
Chief
Financial Officer and Treasurer
|
||
|
David
N. Standring, Ph.D.
|
59
|
Executive
Vice President, Biology
|
||
|
John
Weidenbruch
|
|
49
|
|
Executive
Vice President, General Counsel and
Secretary
|
Jean-Pierre
Sommadossi, Ph.D.
is the principal founder of Idenix and has served
as the chairman of our board of directors since our inception in 1998 and as our
president and chief executive officer since November 2000. During the
period from November 1999 to November 2000, Dr. Sommadossi served as our
executive president and chief scientific officer. Prior to taking a sabbatical
and then unpaid leave from November 1999 to November 2002, Dr. Sommadossi
served as a professor of pharmacology, toxicology and clinical pharmacology and
associate director of both the Center for AIDS Research and the Liver Center,
University of Alabama at Birmingham School of Medicine from June 1992 to
November 2000. From 1996 to 1999, Dr. Sommadossi served on the Research
Agenda Committee of the AIDS Clinical Trial Group. Dr. Sommadossi holds a
Pharm.D. and Ph.D. in Pharmacology from the University of Marseilles in
France.
Paul J.
Fanning
has served as our senior vice president, human resources since
December 2007 and as our vice president, human resources from March 2004 to
December 2007. Prior to joining Idenix, Mr. Fanning was employed by The
Foxboro Company and its affiliates from 1984 to 2004, most recently as vice
president, human resources at Invensys Process Systems from 2000 to 2004.
Mr. Fanning holds an M.B.A. from Babson College and a B.S. from the
University of Massachusetts.
Douglas
Mayers, M.D.
has served as our executive vice president and chief
medical officer since January 2007. Prior to joining Idenix, from May 2001
until January 2007, Dr. Mayers was with Boehringer Ingelheim
Pharmaceuticals, Inc., (Boehringer Ingelheim) where he served as vice president,
therapeutic area of virology and was responsible for the strategic coordination
of all HIV and hepatitis clinical trials in phases I through IV. Prior to
joining Boehringer Ingelheim, Dr. Mayers conducted clinical trials in HIV
research during his seventeen years in the United States Navy and his subsequent
three years as the head of infectious diseases with Henry Ford Hospital.
Dr. Mayers completed his M.D. at the University of
Pennsylvania.
Ronald C.
Renaud, Jr.
has served as our chief financial officer and treasurer
since June 2007. Prior to joining Idenix, Mr. Renaud served as senior vice
president, chief financial officer and treasurer of Keryx Biopharmaceuticals,
Inc. (Keryx) from February 2006 to May 2007. Prior to joining Keryx,
Mr. Renaud was a senior research analyst and global sector coordinator for
JP Morgan Securities from May 2004 until February 2006, where he was responsible
for the biotechnology equity research effort, covering all ranges of capitalized
biotechnology companies. From 2001 to May 2004, Mr. Renaud held managing
director posts at Charles Schwab & Co., SoundView Capital and Bear
Stearns & Co., Inc., where he covered companies in the biotechnology
and life sciences sectors. Mr. Renaud holds an M.B.A. from the Marshall
School of Business at the University of Southern California and a B.A. from St.
Anselm College.
David N.
Standring, Ph.D.
has served as our executive vice president, biology
since December 2007 and previously as senior vice president, biology from March
2006 to December 2007 and previously served as vice president, biology from
March 2002 to March 2006 and as our executive director of biology from September
2000 to March 2002. Prior to joining Idenix, from February 1998 to July 2000,
Dr. Standring served as research fellow and then as associate director,
virology department at Schering-Plough Research Institute, a division of
Schering Plough Corporation, a pharmaceutical company. From November 1994 to
January 1998, Dr. Standring served as group leader, hepatitis, virology
department at Bristol-Myers Squibb Research Institute. From 1984 to 1994,
Dr. Standring was on the faculty of the University of California at
San Francisco. Dr. Standring holds a B.A. from St. John’s College,
Oxford University and a Ph.D. in Bioorganic Chemistry from Harvard
University.
John
Weidenbruch
has served as our executive vice president and general
counsel since September 2006. Prior to joining Idenix, Mr. Weidenbruch
served as vice president and general counsel at Abraxis BioScience Inc.
(Abraxis) from October 2005 until September 2006. Prior to joining Abraxis,
Mr. Weidenbruch worked at Amgen Inc. from January 1995 until October 2005
where he held positions of increasing responsibility including senior director
of law operations and senior associate general counsel of global commercial
operations. Mr. Weidenbruch holds a B.A. from Loyola College in Baltimore,
Maryland and a J.D. from Georgetown University Law Center in
Washington, D.C.
Each of
our executive officers is elected or appointed by, and serves at the discretion
of, the board of directors. In addition, until such time as Novartis and its
affiliates own less than 40% of our voting stock, Novartis’ consent is required
for the selection and appointment of our chief financial officer. If in
Novartis’ reasonable judgment our chief financial officer is not satisfactorily
performing his duties, we are required to terminate the employment of our chief
financial officer. Each of our executive officers devotes his or her full time
to our affairs.
Executive
Summary
We have
designed our executive compensation plan to support our business goals and
promote the long term growth of the company. Specifically, our
compensation plan is designed to promote the achievement of key strategic and
financial performance measures by linking executives’ short- and long-term cash
and equity incentives to the achievement of measurable corporate and individual
performance goals.
Total
compensation of each executive officer varies with overall attainment of
corporate objectives, as well as the performance of individual goals and
objectives. The total compensation for each of our executive officers
is benchmarked against the total compensation of executive officers in
comparable positions at a peer group of companies of similar size and market
capitalization in the biotechnology sector, with a goal of compensating our
executives appropriately and competitively. A substantial portion of
total compensation for our executive officers is tied to key corporate
strategies and operational goals such as drug discovery initiatives, clinical
trial progress and other operational and financial measures.
We
provide a portion of our executive compensation in the form of stock options
that vest and become exercisable over time, which we believe helps to retain our
executives and to align their interests with those of our shareholders by
allowing our executives to participate in the longer term success of
Idenix. Our executive compensation program is structured to reflect
the performance of our company overall by linking pay both to individual
performance and to the achievement of pre-determined corporate objectives and
goals. We believe that executive compensation should help to attract, retain and
motivate those executives we depend on for our current and future
success.
Overview
of Our Philosophy and Procedures for Determining Executive
Compensation
The
Compensation Committee of our board of directors has primary responsibility to
assist the board in designing, implementing and maintaining compensation
programs for our executive officers, including the oversight of the
administration of our stock option plans. The responsibilities of the
Compensation Committee, which are set forth in detail in the Compensation
Committee charter and which can be found on our website at
www.idenix.com under the caption “Investor Center — Our
Leadership & Governance — Board of Directors, Committee
Composition and Charters”, include:
|
|
·
|
recommending
to the board of directors the compensation payable to non-employee
directors;
|
|
|
·
|
determining
the type and level of compensation for executive
officers;
|
|
|
·
|
recommending
to the board of directors the type and level of compensation for the chief
executive officer; and
|
|
|
·
|
oversight
of the administration of our stock option
plan.
|
The
Compensation Committee seeks to ensure that the executive compensation programs
contain an appropriate amount of compensation that is at risk and subject to the
achievement of critical business objectives.
To help
evaluate the appropriate levels of compensation with respect to each component
of our compensation program, the Compensation Committee annually reviews the
compensation level of our named executive officers and other key executives
against the compensation levels of comparable positions of a peer group of
companies. The Compensation Committee has the authority to retain
compensation consultants and other outside advisors to assist in the evaluation
of executive officer compensation. In recent years, including 2009, the
Compensation Committee retained Towers Watson (formerly known as Towers Perrin),
an independent executive compensation consulting firm, to provide assistance in
evaluating and developing our executive compensation program. Towers
Watson provides the Compensation Committee with relevant market data regarding
executive compensation. The Compensation Committee uses this market
data as a guide against which the Compensation Committee evaluates the
compensation of each of the executive officers, including the named executive
officers, in light of the executive’s scope of responsibility and expertise.
Towers Watson provides consulting activities on behalf of the Compensation
Committee and does not provide consulting or additional services for Idenix
management.
Towers
Watson generally provides the following:
|
|
·
|
compensation
survey data to the Compensation Committee for purposes of benchmarking or
comparing each compensation component within our executive compensation
program, namely base salary, cash incentive programs, equity programs and
benefits, to a group of other publicly traded companies engaged in the
discovery and development of drug products. The peer group is based on the
similarity of their revenue size and market
capitalization;
|
|
|
·
|
assistance
to interpret various sets of compensation
data;
|
|
|
·
|
its
own views on our compensation policies in general, compensation packages
for each of our executives and the competitiveness and effectiveness of
our executive officer compensation levels;
and
|
|
|
·
|
assistance
in the selection of our peer group
companies.
|
In
gathering competitive market compensation data, Towers Watson generally utilizes
two primary sources:
|
|
·
|
published
compensation surveys for biotechnology and pharmaceutical companies;
and
|
|
|
·
|
proxy
information of selected peer
organizations.
|
In fiscal
2009, Towers Watson utilized the Radford Global Life Sciences survey and
comparable executive compensation information published in publicly available
proxy statements from the peer group organizations set forth below to develop
the competitive benchmark analysis. In addition, Towers Watson
considered the overall economic environment and trends within the
biopharmaceutical industry when making their observations and
recommendations. A representative from Towers Watson presented its
findings and observations prior to the Compensation Committee making any
determination or recommendation regarding the compensation of the executive
officers.
In fiscal
2009, the Compensation Committee established total compensation targets for the
executive officers using the Radford survey and the proxy information of a peer
group comprised of 15 companies. The Compensation Committee reviews
and approves the list of peer companies each year. Our current peer
group consists of the following:
|
|
·
|
Adolor
Corporation,
|
|
|
·
|
Arena
Pharmaceuticals Inc.,
|
|
|
·
|
ARIAD
Pharmaceuticals Inc.,
|
|
|
·
|
Array
BioPharma Inc.,
|
|
|
·
|
Cytokinetics
Inc.,
|
|
|
·
|
Insight
Corporation,
|
|
|
·
|
Inspire
Pharmaceuticals Inc.,
|
|
|
·
|
InterMune
Inc.,
|
|
|
·
|
Lexicon
Pharmaceuticals Inc.,
|
|
|
·
|
Maxygen
Inc.,
|
|
|
·
|
Neurocrine
Biosciences Inc.,
|
|
|
·
|
Pharmasset
Inc.,
|
|
|
·
|
Rigel
Pharmaceuticals Inc.,
|
|
|
·
|
Theravance
Inc., and
|
|
|
·
|
ZymoGenetics
Inc.
|
The
Compensation Committee’s philosophy is to target our executive officers’
compensation at a competitive rate, generally between the 50
th
and the
75
th
percentiles for total annual compensation, using the Towers Watson benchmark
data to provide analysis and specific information with respect to the peer group
discussed above, as well as the Radford Global Life Sciences
survey. Benchmarking and aligning base salaries is critical to the
compensation program since other elements of our compensation are affected by
changes in base salary. For example, payments under our annual cash
performance incentive plan are targeted and paid out as a percentage of base
salary. Adjustments to the base salary in any year are made based on
comparisons to the survey data noted above and evaluation of the executive’s
level of responsibility and experience as well as company-wide
performance.
Our
executives are eligible to participate in our annual cash performance incentive
plan, which is an annual variable cash pay plan offered to all our
employees. The payouts for executives are paid when pre-determined
individual and corporate goals are met.
Our
executives are also eligible to participate in long-term incentives through
stock option grants, with the potential to benefit if shareholder value is
increased as a result of increases in our stock price.
In
addition to reviewing the compensation of the named executive officers against
the comparative data developed by Towers Watson, the Compensation Committee also
considers benchmarking data as well as recommendations from our chief executive
officer regarding compensation for all other personnel holding the position of
vice president or higher. With respect to our chief executive officer, the
Compensation Committee recommends his target cash performance incentive and
target equity amounts to our board for approval. The
Compensation Committee’s recommendation is based upon several factors, including
the benchmarking of our chief executive officer’s compensation against
comparative data prepared by Towers Watson and, as more fully discussed below,
achievement of corporate goals and objectives for the upcoming
year.
Lastly,
the Compensation Committee reviews a comprehensive analysis of all elements of
each named executive officer’s compensation, including any amounts payable under
severance or change-in-control arrangements under post-employment
scenarios. This review also analyzes how changes in any element of
compensation could impact other elements, particularly severance or
change-in-control benefits, if applicable to the executive. Such
analysis has become a key component in the Compensation Committee’s review of
executive compensation as the analysis allows the Compensation Committee to
consider an executive’s overall compensation rather than only one or two
specific components.
Review
of Management’s Actual Performance Compared to Pre-Determined Goals
In the
first quarter of each fiscal year, corporate and individual goals for the year
are drafted by the chief executive officer and the executive
officers. These goals are weighted by relative importance to Idenix’s
success. The corporate goals are presented to the Compensation
Committee, which actively engages in the process of setting and finalizing the
objectives for review and recommendation to the full board of
directors. The corporate goals are finalized and approved by the
board of directors. The extent to which corporate and
individual goals are achieved is used in determining annual cash incentive
payments and is considered in determining equity awards for our
executives.
Upon
completion of the fiscal year, the chief executive officer evaluates the
performance of each executive officer and assigns a proposed rating to such
officer based upon his or her achievement of the corporate and individual
goals. The chief executive officer presents a summary recommendation
to the Compensation Committee of the performance evaluations and ratings along
with compensation recommendations for the executive officers. The
Compensation Committee determines an overall corporate rating based on
performance against the corporate goals, as further described below, and decides
whether to approve or adjust the recommendations for individual executives made
by the chief executive officer. In determining the actual success of
the executive’s performance in any year, including fiscal 2009, the Compensation
Committee considers the difficulty of attaining the corporate and individual
objectives, whether there were any extenuating circumstances or factors that
needed to be considered, and whether the stated objectives were
met.
In
addition, the Compensation Committee meets in executive session to discuss and
review the compensation of the chief executive officer and his performance over
the past year compared to the previously approved goals for the corresponding
year and upon third party compensation benchmark data prepared by Towers
Watson. The Compensation Committee provides recommendations regarding
compensation for the chief executive officer to our board of directors. Our
board of directors reviews and approves any changes in our chief executive
officer’s compensation by the end of the first quarter of the fiscal
year.
No
executive officer, including our chief executive officer, recommends or
determines any element or component of his or her own pay package or total
compensation amount.
In the
first quarter of each fiscal year, the Compensation Committee evaluates the
company’s actual performance for the prior year against the predetermined
corporate objectives to establish an overall performance rating for the company
as a whole. This overall performance rating then determines the
amount of funding for the total cash incentive pool for all employees, as
discussed more fully below. The Compensation Committee uses a rating
scale of 1 to 3 to evaluate each corporate objective. A rating above
2 is given for exceeding the targeted objective, a rating of 2 indicates the
objective was achieved and a rating of below 2 indicates the objective was not
fully achieved. The Compensation Committee evaluates each
objective, establishes a rating for each and then determines an overall
corporate rating based on the weighting of the objectives and the extent to
which they were achieved. The determination of the corporate rating,
while based primarily on the numerical rating for each objective and the
relative weight assigned to each objective, also reflects a subjective analysis
by the Compensation Committee. A corporate rating of 2.0 typically
results in the funding of 100% of the aggregate target cash incentive bonus
pool. A corporate rating of 2.0 will equate to meeting the target
bonus at 100%, while a rating higher than 2.0 will typically equate to a payment
greater than the target amount, and a rating below 2.0 will typically equate to
a payment less than the target amount. The overall corporate rating
is then used to determine the individual cash incentive amounts for each
executive officer. Other than the Chief Executive Officer, a blending
of individual and corporate goal attainment will determine actual bonus payout.
The Chief Executive Officer’s bonus payout is based solely on the corporate
rating.
2009
Corporate Objectives
For 2009,
the following represents a summary of our five major corporate categories and
goals, achievements and respective relative weightings:
|
1.
|
IDX184:
a drug candidate for the treatment of hepatitis C virus, or HCV, which
accounted for 25% of our overall
corporate
goals
|
Goal:
Completing a three day
proof-of-concept clinical study of IDX184.
Achievement:
We successfully
completed the proof-of-concept clinical study of IDX184.
Goal:
Submitting a notice of
the results of proof-of-concept clinical study pursuant to our development and
commercialization agreement with Novartis under which Novartis has a right to
license IDX184 and other drug candidates from us.
Achievement:
Notice of the
results of proof-of-concept clinical study was submitted to Novartis pursuant to
our development and commercialization agreement with Novartis.
Goal:
Initiating a Phase IIa
14-day triple combination study of IDX184 with standard of care.
Achievement:
Triple
combination study of IDX184 was initiated in 4Q 2009
.
|
2.
|
IDX375:
an HCV non-nucleoside HCV polymerase program, which accounted for 20% of
our overall corporate goals
|
Goal:
Completing toxicology
and pharmacology studies in order to allow for an investigational new drug
application, or IND, with the United States Food & Drug Administration, or
FDA, or clinical trial application, or CTA, with the appropriate regulatory
agency outside the United States, to be filed with the appropriate regulatory
agency for IDX375
.
Achievement:
Toxicology and
pharmacology studies were completed allowing for CTA filing in 4Q
2009.
Goal:
Filing an IND, and/or
CTA, with the appropriate regulatory agency, for IDX375.
Achievement:
We filed in 4Q
2009 a CTA for IDX375, a non-nucleoside polymerase inhibitor for the treatment
of HCV.
Goal:
Completing single
ascending dose study of IDX375 in healthy volunteers.
Achievement:
Single ascending
dose study in healthy volunteers was completed for IDX375 choline
salt.
|
|
3.
|
IDX320:
a protease inhibitor program, which accounted for 20% of our overall
corporate goals
|
Goal:
Completing toxicology
and pharmacology studies in order to allow for an IND or CTA to be filed with
the appropriate regulatory agency for IDX320.
Achievement:
Completed IND
enabling toxicology and pharmacology studies for IDX320 in 4Q
2009.
Goal:
Filing an IND with the
FDA and/or CTA with the appropriate regulatory authority, for
IDX320.
Achievement:
We filed in Q4
2009 a CTA for IDX320.
|
|
4.
|
Discovery:
Our discovery program, pursuant to which we seek to identify and begin
early stage research and development of potential clinical candidates,
accounted for 20% of our overall corporate
goals
|
Goal:
Identifying a portfolio
of potential clinical candidates from our early stage development programs,
including nucleosides/nucleotides, polymerase inhibitors, protease inhibitors
and NS5A inhibitors.
Achievement:
A number of novel
compounds have been identified in different classes including NS5A inhibitors
and non-nucleoside polymerase inhibitors from a distinctly different active
binding site than IDX375. We continue to assess the possibility of further
development of these compounds through a process known as “lead
optimization.”
|
|
5.
|
General
Operations: accounted for 15% of our overall corporate
goals
|
Goal:
Objectives relating to
general operations of the company, including budget control, forecasting and
financial reporting.
Achievement:
All objectives
were achieved in the budget and financial reporting area.
Goal:
Raise sufficient funds
to enable the company to operate beyond 2010.
Achievement:
We raised $21
million and although less than anticipated, we managed our cash burn to enable
the company to operate beyond 2010.
Based on
the above, the Compensation Committee determined that Idenix had attained an
overall corporate rating of 2.14
Components
of Our Executive Compensation Program
The
primary elements of our executive compensation program are:
|
|
·
|
base
salary;
|
|
|
·
|
annual
cash performance incentive;
|
|
|
·
|
cash
signing bonus;
|
|
|
·
|
stock
option awards;
|
|
|
·
|
benefits
and
|
|
|
·
|
severance
and change-in-control payments.
|
We do not
have a formal process for allocating compensation between long-term and
short-term compensation or between cash and non-cash compensation, but, as
discussed above, we do analyze peer group data and related third party
information. The Compensation Committee, after reviewing information provided by
Towers Watson, determines subjectively what it believes to be the appropriate
level and mix of the various compensation components.
Base
Salary
Base
salary is used to recognize the experience, skills, knowledge and
responsibilities required of all our employees, including our
executives. When establishing base salaries for 2009, the
Compensation Committee considered the level of an individual’s responsibility
and experience, and reviewed both comparable positions in the market and the
market demand for such executive’s skill sets at the time of hire (as
applicable). Base salaries may be increased for merit reasons, based
on the executive’s success in meeting or exceeding individual performance
objectives as well as our combined success in meeting corporate goals, subject
to minimum salary requirements set forth in applicable employment
agreements. Salaries for individual executive officers are compared
to peer group companies based on the surveys and proxy statement information
described above. Base salaries may also be adjusted to maintain
market competitiveness, as compared to our peers.
In the
case of Jean-Pierre Sommadossi, our chief executive officer, Ronald Renaud, our
chief financial officer and treasurer, Douglas Mayers, our executive vice
president, clinical development, and chief medical officer, and John
Weidenbruch, our executive vice president and general counsel, the minimum base
salary is mandated by our written employment arrangements with those
executives. Merit increases generally take effect in February or
March of each year.
During
2009, the Compensation Committee determined that in consideration of market
conditions, none of our executive officers would receive an increase in base
salary. The annual base salaries remained at the same rate as
established in 2008, as set forth below.
For 2010,
our board of directors determined, following a recommendation by management,
that our chief executive officer’s base salary would again not be
increased. The Compensation Committee also determined, following a
recommendation by management, that the respective base salaries of our chief
financial officer, chief medical officer and executive vice president and
general counsel would not be increased from their current
levels. Management’s recommendation was based on the continued market
volatility and information provided by Towers Watson to the
Compensation Committee. The base salary of David Standring, our
executive vice president of biology, was increased from $260,000 to $270,000 in
recognition of the responsibilities he has assumed in the discovery
area.
|
Named Executive Officer
|
Title
|
2009 Salary
|
2010 Salary
|
|||||||
|
Jean-Pierre
Sommadossi
|
Chief
Executive Officer
|
$ | 580,000 | $ | 580,000 | |||||
|
Ronald
Renaud
|
Chief
Financial Officer and Treasurer
|
$ | 350,200 | $ | 350,200 | |||||
|
Douglas
Mayers
|
Executive
Vice President, Clinical
Development, and Chief Medical Officer
|
$ | 330,000 | $ | 330,000 | |||||
|
David
Stranding
|
Executive
Vice President, Biology
|
$ | 260,000 | $ | 270,000 | |||||
|
John
Weidenbruch
|
Executive
Vice President and General Counsel
|
$ | 324,450 | $ | 324,450 | |||||
Annual
Cash Performance Incentive
We have
an annual cash performance incentive plan for our executives, as discussed
above. The annual cash performance incentive is intended to
compensate for the direct contribution made by the executive to the achievement
of company strategic, operational and financial goals through individual effort
and achievement. Amounts payable under the annual cash performance
incentive plan are calculated as a percentage of the executive’s base
salary. A target annual incentive amount is established at the
beginning of each year. The plan allows for awards ranging from 0% to
200% of the cash target amount. The actual cash performance incentive
award is determined according to each named executive officer’s level of
achievement against the corporate and individual objectives for all executives
other than Dr. Sommadossi. Due to the expectations uniquely
associated with his position, Dr. Sommadossi’s cash incentive award is based
solely on the achievement of corporate goals and objectives. The
other named executive officers’ respective cash incentive awards were based in
part on the achievement of individual objectives as well as corporate
objectives.
As noted
above, the Compensation Committee set the overall corporate rating at 2.14 for
2009. According to the compensation bonus plan approved by the
Compensation Committee and the board of directors, the overall corporate rating
determines the total funding of the cash incentive pool available for all
employees, including the named executive officers. Each named
executive officer is given an overall rating, based upon the corporate
performance rating discussed above and his or her level of achievement against
his or her individual pre-determined objectives. Under the plan, a
corporate rating of 2.14 should typically result in the funding of 110% of the
aggregate target cash incentive pool. However, management recommended
to the Compensation Committee that in light of the company’s current financial
resources, the actual incentive funding payout be reduced to an aggregate of
100%. The committee, while recognizing the importance of management’s
recommendation, determined that the payouts should exceed target in several
instances, as further described below.
Based on
the Compensation Committee’s assessment of the overall corporate performance and
Dr. Sommadossi’s contributions toward this performance, it was determined that
Dr. Sommadossi would be awarded a cash performance incentive above his
target. Specifically, the Compensation Committee acknowledged
as a significant accomplishment Dr. Sommadossi’s leadership in advancing
multiple classes of HCV compounds from discovery through the IND stage and the
speed at which the company was able to reach these milestones.
Mr.
Renaud’s overall rating was weighted based on the achievement of the goals
associated with the general and financial operations of the company, development
of an HCV product valuation model and individual goals linked to infrastructure
improvements. Mr. Renaud received a cash performance incentive at
target based on these accomplishments as well as his strategic role in working
with our key business partners including both Novartis and GSK.
Dr.
Mayers’ overall rating was weighted based on the achievement of goals associated
with the clinical development of our compounds IDX184 and IDX375 and individual
goals in support of other programs. Dr. Mayers’ cash performance
incentive was slightly below his target because not all clinical development
goals pertaining to his department were fully realized within specified
timeframes during 2009.
Dr.
Standring’s overall rating was weighted based on the achievement of goals
associated with IDX184, IDX375, IDX320 and our discovery program, with an
individual goal associated with the transfer of a screening operation within
Idenix. Dr. Standring’s cash performance incentive was above target due to his
contributions to the corporate goals and the transition of the screening
operation with minimal disruption.
Mr.
Weidenbruch’s overall rating was weighted based on both the achievement of
corporate goals associated with general operations and his individual
goals. Mr. Weidenbruch’s cash performance incentive was above target
due to his efforts achieving corporate goals relating to general operations,
solidifying our position in the area of intellectual property and the completing
restructuring activities in Europe.
The
targeted cash performance incentive awards set in February 2009, along with
actual amounts paid in 2010 for performance in 2009, for our named executive
officers is set forth in the following table:
|
Named Executive
Officer
|
Title
|
2009 Targeted Cash
Performance
Incentive As a
Percentage of Base
Salary
|
Actual
Performance
Incentive As a
Percentage of
Base Salary
for
2009
|
Actual Cash
Performance
Incentive Paid for
2009
|
||||||||||
|
Jean-Pierre
Sommadossi
|
Chief
Executive Officer
|
60 | % | 69 | % |
$
400,000
|
||||||||
|
Ronald
Renaud
|
Chief
Financial Officer and Treasurer
|
50 | % | 50 | % |
$
175,000
|
||||||||
|
Douglas
Mayers
|
Executive
Vice President, Clinical Development, and Chief Medical
Officer
|
50 | % | 42 | % |
$
140,000
|
||||||||
|
David
Standring
|
Executive
Vice President, Biology
|
35 | % | 40 | % |
$
105,000
|
||||||||
|
John
Weidenbruch
|
Executive
Vice President and General Counsel
|
40 | % | 43 | % | $ 140,000 | ||||||||
The
incentive awards set forth in the table above were paid to the named executive
officers in late February 2010. Furthermore, in reviewing current
bonus targets for the named executive officers compared to our peer group, the
Compensation Committee determined that Dr. Standring’s bonus target should be
increased to 40% of base salary for the fiscal year ending December 31,
2010. The bonus targets for the other executive officers remain at
the same level for 2010.
Cash
Signing Bonuses
In certain circumstances, we provide
cash signing bonuses in order to attract highly qualified talent. Whether a
signing bonus is paid and the amount thereof, is determined on a case-by-case
basis based on the specific circumstances surrounding the hiring of a new
executive officer. We will consider paying signing bonuses to
compensate the executive for amounts forfeited when the executive leaves a
previous employer, or to create additional incentive for executives to join our
company in a position where there is high market demand.
Stock
Options
Our stock
option program is the primary vehicle for offering long-term incentives to our
executives, although the Compensation Committee has the authority to award other
forms of equity-based compensation under our stock incentive plan. We
believe that stock option grants provide our executives with a strong link to
our long-term performance and create an ownership culture and help align the
interests of our executives and shareholders. In addition, the
vesting feature of our stock option grants furthers our goal of executive
retention because this feature provides an incentive to our executives to remain
in our employ during the vesting period. The Compensation Committee
and the board closely oversee the annual “burn rate” or stock utilization rate
under our stock option program to ensure that it is appropriate in proportion to
the overall corporate stock option plan. We use the term “burn rate”
to mean, and burn rate is generally defined as, the total number of shares
subject to all equity awards granted during the fiscal year divided by the total
number of shares outstanding plus the shares available for grant under our stock
incentive plans at the end of the fiscal year. Our burn rate was 3.0%
from fiscal year 2007 through the end of fiscal 2009, which is within the
industry guidelines established by Risk Metrics, Inc., and is below the median
of our peer group.
The
annual target equity awards for named executive officers are set forth in such
officer’s respective employment agreement, each of which have been filed as
exhibits to our Annual Report on Form 10-K for the year ended December 31,
2009. The Compensation Committee reviews these targets, and if
necessary, makes any appropriate adjustments each year as part of the annual
review process. The executive officers are awarded stock options with
an exercise price equal to the fair market value of Idenix common stock on the
date of the grant. For executive officers other than our chief
executive officer, the Compensation Committee grants options that vest monthly
over a four-year period. The stock options awarded to our chief
executive officer typically vest over a five-year period with 25% of the award
vesting on the first anniversary of the date of the grant and the remaining 75%
vesting on a monthly basis over the next four years. Our chief
executive officer has a longer vesting schedule for greater retention impact of
the option grant.
Stock
Option Grant Practices
Stock
awards to our executives are typically granted annually in conjunction with the
review of their individual performance. This review takes place at
the regularly scheduled meeting of the Compensation Committee held during the
first quarter of the fiscal year. From time to time stock awards are made at
other times during the year. During this review, the chief executive
officer provides stock option award and target recommendations for the executive
officers to the Compensation Committee. The Compensation Committee
reviews the recommendations and is ultimately responsible for approval of all
option grants and target amounts to executive officers, other than to our chief
executive officer. Stock option grants and target amounts
regarding our chief executive officer are recommended by the Compensation
Committee for approval by our board of directors. In February 2009,
the board of directors approved a stock option grant of 200,000 shares at an
exercise price of $5.46 under our 1998 equity incentive plan to our chief
executive officer. After the stock option grant was approved, it was
determined that the stock options could no longer be awarded under the 1998 plan
and, accordingly this stock option award was not granted. In March
2010, our board of directors reapproved a stock option grant of 200,000 shares
at an exercise price of $5.46 under our 2005 equity incentive
plan. In an effort to address the vesting that would have occurred
between February 2009 and the reapproval of this stock option grant in March
2010, our board of directors modified the vesting period for the March 2010
grant so that the intended vesting schedule would not be affected by the
re-approval of the grant.
Determination
of Stock Option Exercise Prices
Stock
options are granted with an exercise price equal to the fair market value on the
grant date, calculated as the average of the open and close prices of our common
stock as reported on the NASDAQ Global Market on such date. Idenix
has not re-priced stock options or granted any options below fair market value
on the grant date.
Initial
New Hire Grant
Idenix
provides an initial stock option award to all employees with regular employment
status, which includes our executive officers. The amount of the
award is based upon similar grants to individuals holding comparable positions
in peer group companies, based on survey data. The amount of the
initial stock option award is also reviewed in light of the employee’s base
salary and other compensation to ensure that the employee’s total compensation
is in line with our overall compensation philosophy.
Annual
Stock Option Awards
Executive
officers are eligible for an annual stock option grant which is also a key part
of our overall compensation program. As with the Compensation
Committee’s determination of base salary and initial stock option awards, in
considering annual stock option awards for our executives, the committee
conducts a review of all components of the executive’s compensation to ensure
that an executive’s total compensation is consistent with our overall philosophy
and objectives. Among other factors analyzed in determining an annual
grant are the individual executive’s performance over the prior year, the
company’s performance over the prior year and comparable market
data.
Stock
Option Grants for Fiscal 2009 and Target Grants for Fiscal 2010
In
February 2010, the named executive officers received long-term incentive awards
as part of the annual review process for 2009 performance. No other
long-term incentive awards were granted to the named executive officers in
connection with their performance in 2009. These long-term awards
granted for fiscal 2009 were higher than target amounts for almost all of the
named executive officers principally because the Compensation Committee
considered an analysis prepared by Towers Watson that indicated that that the
equity targets for our named executive officers were well below targeted market
positions when compared to our peer group, as further discussed
below. The Compensation Committee recognized the need to retain and
incentivize our executive management team in light of current market conditions.
For our 2009 fiscal year long-term incentive compensation, the Compensation
Committee authorized a grant of stock options, which was made on February 10,
2010, to the named executive officers, including our chief executive officer.
Also on February 10, 2010, the board approved a stock option grant to our chief
executive officer based on a recommendation of the Compensation Committee. Set
forth in the table below are the stock option targets for fiscal 2009 for our
named executive officers and the actual number of options granted to such named
executive officers for fiscal 2009.
Our chief
executive officer, Dr. Sommadossi, was granted 100,000 stock options greater
than target for fiscal 2009 both in light of the analysis prepared by Towers
Watson and in recognition of the achievement of corporate goals.
Mr.
Renaud, our chief financial officer, was granted 20,000 stock options greater
than target for fiscal 2009 both in light of the analysis prepared by Towers
Watson and in recognition of the achievement of individual and corporate goals
for fiscal 2009.
For
fiscal 2009, our chief medical officer, Dr. Mayers, was granted an option award
equal to his target for stock option awards in consideration of his level of
achievement of individual and corporate goals for fiscal 2009 and to maintain
market competiveness.
Dr.
Standring, our executive vice president of biology, was granted 20,000 stock
options greater than target for fiscal 2009 in recognition of the achievement of
individual and corporate goals for 2009.
Mr.
Weidenbruch, our general counsel, was granted 20,000 stock options greater than
target for fiscal 2009 both in light of the analysis prepared by Towers Watson
and in recognition of the achievement of individual and corporate goals for
2009.
The
Compensation Committee (and the board, in the case of Dr. Sommadossi) determined
that in light of market data, for the year ending December 31, 2010, the
targeted shares underlying options be increased for the named executives set
forth in the table below.
|
Named Executive
Officer
|
Title
|
Targeted Shares
Underlying Stock
Options for fiscal
2009
|
Stock Options
Granted for
fiscal 2009
|
Targeted
Shares
Underlying
Stock Options
for fiscal 2010
|
||||||||||
|
Jean-Pierre
Sommadossi
|
Chief
Executive Officer
|
300,000 | 400,000 | 400,000 | ||||||||||
|
Ronald
Renaud
|
Chief
Financial Officer and Treasurer
|
80,000 | 100,000 | 110,000 | ||||||||||
|
Douglas
Mayers
|
Executive
Vice President, Clinical Development, and Chief Medical
Officer
|
40,000 | 40,000 | 60,000 | ||||||||||
|
David
Standring
|
Executive
Vice President, Biology
|
30,000 | 50,000 | 50,000 | ||||||||||
|
John
Weidenbruch
|
Executive
Vice President and General Counsel
|
80,000 | 100,000 | 90,000 | ||||||||||
Grants of
stock options are designed and administered so that they are not subject to the
limits on the company’s ability to take federal income tax deductions for
executive compensation over $1.0 million per year, imposed by Section 162(m) of
the Internal Revenue Code of 1986, as amended.
Benefits
We
maintain benefits that are provided to all employees, including health and
dental insurance, life and disability insurance and a 401(k) plan. All eligible
and participating employees receive a 401(k) match of twenty-five percent (25%)
on pre-tax contributions, up to the first six percent (6%) of eligible
compensation. Executive officers are eligible to participate in all of our
employee benefit plans, in each case on the same basis as other
employees.
We also
provide all employees, including executive officers with a flexible spending
account plan and paid time off benefits including, vacation, sick time and
holidays. In addition, we provide the chief executive officer
with company-paid life insurance, with a death benefit amount of $2.0 million
and company-paid disability with an aggregate benefit amount of $2.0 million,
either payable in a lump-sum or as an annuity. We also provide, from
time to time, payment or reimbursement of expenses in connection with the
relocation of our executive officers, including amounts required to gross up
these expenses for tax purposes.
The
Compensation Committee analyzed the total compensation package for each
executive to determine whether our current combination of compensation elements
provided to our executives contains what are considered to be an appropriate mix
of cash compensation, long term incentive and indirect
compensation. The Compensation Committee concluded that the total
compensation mix is appropriately structured at the present time with a
significant portion of the total compensation placed on the variable awards such
as the annual incentive bonus and the long term component in the form of stock
options while keeping a lower portion in the fixed area of
benefits. We believe that this mix emphasizes the performance aspect
of the compensation framework and is consistent with the interests of our
shareholders. We do not offer or provide any additional perquisites
to the chief executive officer or any other officer of the company.
Severance
and Change-in-Control Payments
We have
entered into employment agreements with each of our named executive officers
providing for, among other things, severance and change-in-control benefits as
described below. We have worked to design our severance and change-in-control
arrangements to be competitive, and we periodically review these
arrangements relative to
current market
trends. We review the total compensation arrangements for each of our
executives to determine whether the potential benefits that our
current severance and change-in-control arrangements provide are proportionate
to the value brought to Idenix by each of the executives, and we believe our
current severance and change-in-control benefits are appropriate.
We
believe that the severance plans for executives are consistent with our goal of
offering compensation packages that enable us to attract and retain talented
executives on terms consistent with the interests of our
shareholders. While we do not believe that the provision of a
severance plan is likely to be a determinative factor in an executive’s
decision to join Idenix, the absence of such a plan could present a distinct
competitive disadvantage in the market for talented executives.
Severance
Payments
In the
event that we terminate the employment of Drs. Mayers or Standring or Messrs.
Renaud or Weidenbruch for reasons other than cause (as defined in their
respective employment agreements), or if Dr. Mayers or Messrs. Renaud or
Weidenbruch terminates his respective employment for good reason (as defined in
his respective employment agreement), each executive is entitled to receive the
following:
|
|
·
|
a
lump sum payment equivalent to one times the executive officer’s base
salary at the time of termination and the greater of: (i) the current year
target cash performance incentive; or (ii) the cash performance incentive
earned in the year preceding the year in which the termination of
employment occurs;
|
|
|
·
|
immediate
vesting and exercisability of all outstanding equity awards;
and
|
|
|
·
|
benefits
continuation pursuant to the federal “COBRA” laws, and continued payment
by Idenix of premiums for the executive officer (and the executive
officer’s covered dependents) under the group health, dental, disability
and life insurance coverage at the active employee rates for a period of
12 months subsequent to the date of
termination.
|
In the
event our board of directors terminates Dr. Sommadossi’s employment for reasons
other than cause (as defined in his employment agreement), or he terminates his
employment for good reason (as described in his employment agreement), the chief
executive officer is entitled to receive the following:
|
|
·
|
a
lump sum payment equivalent to two times his base salary at the time of
termination;
|
|
|
·
|
two
times the greater of: (i) his current year target cash performance
incentive; or (ii) the cash performance incentive earned in the year
preceding the year in which the termination of employment
occurs;
|
|
|
·
|
immediate
vesting and exercisability of all outstanding equity
awards;
|
|
|
·
|
benefits
continuation pursuant to the federal “COBRA” laws, and continued payment
by Idenix of premiums for him (and his covered dependents) under the group
health, dental, and life insurance coverage at the active employee rates
for a period of 24 months subsequent to the date of termination;
and
|
|
|
·
|
pro-rated
annual target cash performance incentive amount and pro-rated target
equity grant.
|
In
addition, Dr. Sommadossi’s employment agreement provides for cash and noncash
benefits upon a termination of employment for death or disability.
Change-in-Control
Payments
We have
designed our change-in-control policies to provide income continuity after a
change-in-control that results in the executive being separated from the
company. Our policy in the case of change-in-control benefits has
been to structure these as “double trigger” benefits. In other words,
the change-in-control does not itself trigger benefits; rather, benefits are
paid only if the employment of the executive is terminated or the executive
terminates his or her employment for good reason during a specified period after
the change-in-control. We believe a “double trigger” benefit maximizes
shareholder value because it prevents an unintended windfall to executives in
the event of a friendly change-in-control, while still providing them
appropriate incentives to cooperate in negotiating any change-in-control in
which they believe they may lose their jobs. Under the terms of the
employment agreements with our named executive officers, if, within one year
following a change in control of Idenix, an executive
officer’s employment is terminated without cause or if such officer
terminates his or her employment for good reason, the officer is entitled to, in
addition to any severance payment, an additional lump-sum payment in an amount
equal to:
|
|
·
|
such
officer’s annual
base salary;
and
|
|
|
·
|
the
greater of such officer’s target cash performance incentive amount or the
cash incentive award earned in the year preceding the year in which the
termination occurs.
|
Dr.
Sommadossi is also entitled to receive gross up payments on any applicable
benefits he receives relating to change-in-control payments. This means that
Dr. Sommadossi will be compensated for excise taxes and associated
penalties imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the Code) by paying gross up amounts on any applicable benefits he
receives under his employment agreement. The agreements we have with our other
named executive officers provide that the amount of severance benefits payable
to such executive may be reduced by an amount such that the excise tax
provisions of sections 280G and 4999 of the Internal Revenue Code of 1986 would
not apply to such payments. The severance benefits payable will only
be so reduced if the net after tax amount that would be received by the
executive is greater than the net after-tax amount that would have been received
without such reduction.
Tax
Considerations
The
Internal Revenue Service, pursuant to Section 162(m) of the Code, generally
disallows a tax deduction for compensation in excess of $1.0 million paid to our
chief executive officer and to each other officer (other than our chief
executive officer and our chief financial officer) whose compensation is
required to be reported to our stockholders pursuant to the Exchange Act by
reason of being among the three most highly paid executive
officers. Certain compensation, including qualified performance-based
compensation, will not be subject to the deduction limit if certain requirements
are met. We periodically review the potential consequences of Section
162(m) and we generally intend to structure the performance-based portion of our
executive compensation, where feasible, to comply with exemptions in Section
162(m) so that the compensation remains tax deductible to
us. However, the Compensation Committee may, in its judgment,
authorize compensation payments that do not comply with exemptions in Section
162(m) when it believes that such payments are appropriate to attract and retain
executive talent.
Summary
The
Compensation Committee believes that our compensation programs are designed and
administered in a manner consistent with its compensation philosophy and
objectives. We continually monitor these programs in recognition of
the dynamic marketplace in which we compete for talent. We intend to
continue to emphasize pay-for-performance and equity-based incentive programs
that reward executives for actual results and that are consistent with
shareholder interests.
Narrative
Disclosure of our Compensation Policies and Practices as They Relate to Risk
Management
Our
Compensation Committee does not believe that any risks arising from our employee
compensation policies and practices are reasonably likely to have a material
adverse effect on our company. Our Compensation Committee believes
that any such risks are mitigated by:
|
·
|
The
multiple elements of our compensation packages, including base salary,
annual bonus programs and equity awards that vest over multiple years and
are intended to motivate employees to take a long-term view of our
business.
|
|
·
|
The
structure of our annual cash bonus program that is based on a number of
different performance measures (including goals related to our drug
candidates and related programs, our discovery program and objectives
relating to our general operations of the company, such as budget control,
forecasting and financial reporting) and, generally, on both
individual and corporate goals to avoid employees placing undue emphasis
on any particular performance metric at the expense of other aspects of
our business.
|
|
·
|
Individual
performance targets that we believe are somewhat aggressive yet reasonable
and should not require undue risk-taking to
achieve.
|
|
·
|
Goals
being set appropriately to avoid targets that, if not achieved, result in
a large percentage loss of
compensation;
|
|
·
|
Annual
cash performance incentive awards for all employees are capped at two
hundred percent (200%) of target amount;
and
|
|
·
|
Multi-year
vesting of our equity awards and our share ownership guidelines properly
account for the time horizon of
risk.
|
Compensation
Summary
The
following table contains information with respect to the compensation for fiscal
2009 of anyone serving as our principal executive officer and principal
financial officer during 2009 and our three most highly compensated executive
officers serving as executive officers at the end of the last completed fiscal
year. We refer to the executive officers identified in this table as our “named
executive officers”.
Summary
Compensation Table
|
Non-Equity
|
|||||||||||||||||||||||||||||
|
Incentive
|
|||||||||||||||||||||||||||||
|
Option
|
Plan
|
All Other
|
|||||||||||||||||||||||||||
|
Name and
|
Salary
|
Bonus
|
Awards
|
Compensation
|
Compensation
|
Total
|
|||||||||||||||||||||||
|
Principal Position
|
Year
|
($)(1)
|
($)
|
($)(2)
|
($)(3)
|
($)
|
($)
|
||||||||||||||||||||||
|
Jean-Pierre
Sommadossi,
|
2009
|
$ | 580,000 | - | $ | 647,780 | $ | 400,000 | $ | 30,987 | (4) | $ | 1,658,767 | ||||||||||||||||
|
President
and CEO
|
2008
|
575,000 | - | 1,019,375 | 400,000 | 29,569 | (4) | 2,023,944 | |||||||||||||||||||||
|
2007
|
544,792 | - | 1,302,180 | 250,000 | 29,564 | (4) | 2,126,536 | ||||||||||||||||||||||
|
Ronald
C. Renaud, Jr.,
|
2009
|
350,200 | - | 356,279 | 175,000 | 3,359 | (6) | 884,838 | |||||||||||||||||||||
|
Chief
Financial Officer
|
2008
|
348,500 | - | 233,000 | 200,000 | - | 781,500 | ||||||||||||||||||||||
|
and
Treasurer(5)
|
2007
|
172,615 | $ | 400,000 | (7) | 803,382 | 74,333 | - | 1,450,330 | ||||||||||||||||||||
|
Douglas
Mayers,
|
2009
|
290,687 | - | 129,556 | 140,000 | 3,675 | (9) | 563,918 | |||||||||||||||||||||
|
Executive
Vice President
|
2008
|
325,000 | - | 233,000 | 150,000 | 3,450 | (9) | 711,450 | |||||||||||||||||||||
|
and
Chief Medical Officer (8)
|
2007
|
284,231 | 300,000 | (10) | 534,752 | 112,500 | 102,438 | (11) | 1,333,921 | ||||||||||||||||||||
|
David
Standring,
|
2009
|
260,000 | - | 145,751 | 105,000 | 3,315 | (12) | 514,066 | |||||||||||||||||||||
|
Executive
Vice President,
|
2008
|
260,000 | - | 203,875 | 91,000 | 3,082 | (12) | 557,957 | |||||||||||||||||||||
|
Biology
|
2007
|
232,497 | 149,519 | 63,450 | 2,703 | (12) | 448,169 | ||||||||||||||||||||||
|
John
F. Weidenbruch,
|
2009
|
324,450 | - | 291,501 | 140,000 | 2964 | (13) | 758,915 | |||||||||||||||||||||
|
Executive
Vice President,
|
2008
|
322,875 | - | 174,750 | 130,000 | 2,388 | (13) | 630,013 | |||||||||||||||||||||
|
General
Counsel and
|
2007
|
311,875 | - | 98,330 | 82,688 | 79,532 | (14) | 572,425 | |||||||||||||||||||||
|
Secretary
|
|||||||||||||||||||||||||||||
|
(1)
|
Salary
increases generally occur in March and are not retroactive to January. For
this reason, the amount actually paid to the named executive officer is
lower than such person’s base salary for the
year.
|
|
(2)
|
The
amounts in the Option Awards column reflect the grant date fair value of
option awards granted during fiscal 2009 under our stock incentive plans,
in accordance with FASB ASC Topic 718. There can be no assurance that FASB
ASC Topic 718 amounts will reflect actual amounts realized. Refer to
Note 10, “Equity Incentive Plans and Share-Based Compensation”, in
the Notes to Consolidated Financial Statements included in the Annual
Report on Form 10-K for fiscal 2009 filed with the SEC on
March 9, 2010 for the relevant assumptions used to determine the
valuation of our option awards.
|
|
(3)
|
The
amounts shown in this column reflect cash bonus awards paid to our named
executive officers under our annual performance-based incentive bonus plan
for performance in the year
indicated.
|
|
(4)
|
Consists
of supplemental life insurance premiums paid by Idenix. Idenix paid for a
life insurance policy for Dr. Sommadossi and grossed up such amounts
as required pursuant to Dr. Sommadossi’s employment
agreement.
|
|
(5)
|
Mr. Renaud
became an executive officer of Idenix in June
2007.
|
|
(6)
|
Consists
of amounts paid as a company match to Mr. Renaud’s
401(k).
|
|
(7)
|
Consists
of a cash signing bonus in connection with the hiring of
Mr. Renaud.
|
|
(8)
|
Dr. Mayers
became an executive officer of Idenix in January
2007.
|
|
(9)
|
Consists
of amounts paid as a company match to Dr. Mayers’
401(k).
|
|
(10)
|
Consists
of a cash signing bonus in connection with the hiring of
Dr. Mayers.
|
|
(11)
|
Consists
of amounts paid for Dr. Mayers’ relocation to the Boston,
Massachusetts area including amounts required to gross up these expenses
for tax purposes.
|
|
(12)
|
Consists
of amounts paid as a company match to Dr. Standring’s
401(k).
|
|
(13)
|
Consists
of amounts paid as a company match to Mr. Weidenbruch’s
401(k).
|
|
(14)
|
Consists
of amounts paid for Mr. Weidenbruch’s relocation to the Boston,
Massachusetts area including amounts required to gross up these expenses
for tax purposes.
|
Grants
of Plan-Based Awards
The
following table shows information concerning each grant of an award made to a
named executive officer during fiscal 2009 under any plan, contract,
authorization or arrangement pursuant to which cash, securities, similar
instruments or other property may be received.
Grants
of Plan-Based Awards
|
All Other
|
||||||||||||||||||||||||||||||||||||||||||
|
Option
|
Grant Date
|
|||||||||||||||||||||||||||||||||||||||||
|
Awards:
|
Exercise
or
|
Closing
|
Fair Value
of
|
|||||||||||||||||||||||||||||||||||||||
|
Estimated Future Payouts Under
|
Estimated Future Payouts Under
|
Number of
|
Base
Price
|
Price of
|
Stock and
|
|||||||||||||||||||||||||||||||||||||
|
Non-Equity Incentive Plan Awards(1)
|
Equity Incentive Plan Awards(2)
|
Securities
|
of Option
|
Stock on
|
Option
|
|||||||||||||||||||||||||||||||||||||
|
Threshold
|
Target
|
Maximum
|
Threshold
|
Target
|
Maximum
|
Underlying
|
Awards
|
Grant
|
Awards
|
|||||||||||||||||||||||||||||||||
|
Name
|
Grant
Date
|
($)
|
($)
|
($)
|
(#)
|
(#)
|
(#)(3)
|
Options
(#)
|
($/Sh)
(4)
|
Date
($)
|
($)(5)
|
|||||||||||||||||||||||||||||||
|
Jean-Pierre
Sommadossi
|
2/13/2009
|
$ | - | $ | 348,000 | $ | 696,000 | |||||||||||||||||||||||||||||||||||
|
2/13/2009
|
- | 300,000 | - | |||||||||||||||||||||||||||||||||||||||
|
2/13/2009
|
200,000 | $ | 5.46 | $ | 5.39 | $ | 647,780 | |||||||||||||||||||||||||||||||||||
|
Ronald
C. Renaud, Jr.
|
2/13/2009
|
- | 175,100 | 350,200 | ||||||||||||||||||||||||||||||||||||||
|
2/13/2009
|
- | 80,000 | - | |||||||||||||||||||||||||||||||||||||||
|
2/13/2009
|
110,000 | $ | 5.46 | $ | 5.39 | 356,279 | ||||||||||||||||||||||||||||||||||||
|
Douglas
Mayers
|
2/13/2009
|
- | 165,000 | 330,000 | ||||||||||||||||||||||||||||||||||||||
|
2/13/2009
|
- | 40,000 | - | |||||||||||||||||||||||||||||||||||||||
|
2/13/2009
|
40,000 | $ | 5.46 | $ | 5.39 | 129,556 | ||||||||||||||||||||||||||||||||||||
|
David
Standring
|
2/13/2009
|
- | 91,000 | 182,000 | ||||||||||||||||||||||||||||||||||||||
|
2/13/2009
|
- | 30,000 | - | |||||||||||||||||||||||||||||||||||||||
|
2/13/2009
|
45,000 | $ | 5.46 | $ | 5.39 | 145,751 | ||||||||||||||||||||||||||||||||||||
|
John
Weidenbruch
|
2/13/2009
|
- | 113,558 | 227,116 | ||||||||||||||||||||||||||||||||||||||
|
2/13/2009
|
- | 80,000 | - | |||||||||||||||||||||||||||||||||||||||
|
2/13/2009
|
90,000 | $ | 5.46 | $ | 5.39 | 291,501 | ||||||||||||||||||||||||||||||||||||
|
(1)
|
Consists
of potential cash payments under our annual performance-based incentive
bonus plan for executives. Actual cash bonus amounts awarded in March 2010
for 2009 performance are set forth in the Summary Compensation Table above
under the column entitled “Non-Equity Incentive Plan Compensation” for
2009.
|
|
(2)
|
Consists
of potential stock option awards for executives under our annual
performance-based incentive bonus plan for executives. For such stock
option awards, the grant date fair value, in accordance with FASB ASC
Topic 718, is set forth in the Summary Compensation Table under the column
“Option Awards” for 2009.
|
|
(3)
|
No
set maximum exists for equity incentive plan awards. Actual equity
incentive plan awards are made at the discretion of our Compensation
Committee or, in the case of awards to our chief executive officer, at the
discretion of our board of directors based upon the Compensation
Committee’s recommendation.
|
|
(4)
|
The
exercise price of a share of our common stock on a particular date for
purposes of granting stock options is determined as the average of the
open and close prices as reported on the NASDAQ Global Market on such
date.
|
|
(5)
|
The
amounts in this column represent the grant date fair value of each equity
award as determined in accordance with FASB ASC Topic 718. These amounts
do not include the grant date fair value of equity awards calculated under
FASB ASC Topic 718 of stock option awards granted in February 2010 under
our 2009 annual performance-based incentive plan for
executives.
|
The
following table shows information regarding unexercised stock options held by
our named executive officers as of December 31, 2009.
Outstanding
Equity Awards at Fiscal Year-End
|
Option Awards
|
|||||||||||||
|
Number of
|
|||||||||||||
|
Number of
|
Securities
|
||||||||||||
|
Securities
|
Underlying
|
||||||||||||
|
Underlying
|
Unexercised
|
Option Exercise
|
|||||||||||
|
Unexercised Options
|
Options (#)
|
Price
|
Option Expiration
|
||||||||||
|
Name
|
(#)
Exercisable(1)
|
Unexercisable(1)
|
($)
|
Date
|
|||||||||
|
Jean-Pierre
Sommadossi
|
56,250 | — | $ | 8.50 |
11/19/2012
|
||||||||
| 100,000 | — | 12.05 |
2/1/2014
|
||||||||||
| 145,313 | 4,687 | 19.14 |
2/27/2015
|
||||||||||
| 117,188 | 32,812 | 21.11 |
3/6/2016
|
||||||||||
| 89,064 | 60,936 | 7.25 |
3/28/2017
|
||||||||||
| 100,000 | 50,000 | 7.24 |
5/31/2017
|
||||||||||
| 46,875 | 53,125 | 2.41 |
11/8/2017
|
||||||||||
| 147,659 | 202,341 | 5.18 |
2/21/2018
|
||||||||||
| — | 200,000 | 5.46 |
2/13/2019
|
||||||||||
|
Ronald
C. Renaud, Jr.
|
145,313 | 79,687 | 6.12 |
6/27/2017
|
|||||||||
| 21,667 | 18,333 | 2.41 |
11/8/2017
|
||||||||||
| 38,334 | 41,666 | 5.18 |
2/21/2018
|
||||||||||
| 25,209 | 84,791 | 5.46 |
2/13/2019
|
||||||||||
|
Douglas
Mayers
|
75,000 | 25,000 | 8.88 |
1/21/2017
|
|||||||||
| 21,667 | 18,333 | 2.41 |
11/8/2017
|
||||||||||
| 38,334 | 41,666 | 5.18 |
2/21/2018
|
||||||||||
| 9,167 | 30,833 | 5.46 |
2/13/2019
|
||||||||||
|
David
Standring
|
5,000 | — | 8.50 |
11/19/2012
|
|||||||||
| 20,000 | — | 12.05 |
2/1/2014
|
||||||||||
| 20,000 | — | 19.14 |
2/27/2015
|
||||||||||
| 19,166 | 834 | 21.11 |
3/6/2016
|
||||||||||
| 17,708 | 7,292 | 8.12 |
3/5/2017
|
||||||||||
| 16,250 | 13,750 | 2.41 |
11/8/2017
|
||||||||||
| 33,542 | 36,458 | 5.18 |
2/21/2018
|
||||||||||
| 10,313 | 34,687 | 5.46 |
2/13/2019
|
||||||||||
|
John
Weidenbruch
|
62,500 | 12,500 | 10.25 |
9/4/2016
|
|||||||||
| 7,084 | 2,916 | 8.12 |
3/5/2017
|
||||||||||
| 21,667 | 18,333 | 2.41 |
11/8/2017
|
||||||||||
| 28,750 | 31,250 | 5.18 |
2/21/2018
|
||||||||||
| 20,625 | 69,375 | 5.46 |
2/13/2019
|
||||||||||
|
(1)
|
Options
vest in 48 equal monthly installments beginning on the last day of the
month of the date of grant, except that options granted to
Dr. Sommadossi generally vest over a five-year period with 25% of the
shares vesting on the first anniversary of the date of grant and the
remaining 75% vesting in 48 equal monthly installments thereafter. Options
exercisable set forth herein, if exercised, would provide voting power
with respect to the shares of common stock underlying such
options.
|
The
following table sets forth certain information regarding the exercise of stock
options during 2009 for each of the named executive officers:
OPTION
EXERCISES DURING FISCAL 2009
|
Number of
Shares
Acquired Upon
Exercise (#)
|
Value Realized
Upon Exercise
($)(1)
|
|||||||
|
Jean-Pierre
Sommadossi
|
$ | — | ||||||
|
Ronald
C. Renaud, Jr.
|
$ | — | ||||||
|
Douglas
Mayers
|
$ | — | ||||||
|
David
Standring
|
15,000 | $ | 12,900 | |||||
|
John
Weidenbruch
|
$ | — | ||||||
|
(1)
|
Value
represents the difference between the closing price per share of our
common stock on each date of exercise and the exercise price per share,
multiplied by the number of shares acquired on
exercise.
|
Potential
Payments Upon Termination or Change in Control
Potential
payments made to our named executive officers in the instance of a termination
without cause or a termination for good reason or in the case of change in
control benefits upon a “double trigger” are discussed in greater detail under
“Compensation Discussion and Analysis” “— Severance and Change in Control
Benefits”.
The table
below sets forth the potential payments to our named executive officers assuming
a termination event or a change in control event occurred as of
December 31, 2009:
POTENTIAL
TERMINATION PAYMENTS
|
Acceleration of
|
||||||||||||||||
|
Vesting of
|
||||||||||||||||
|
Salary and
|
Equity
|
Other
|
||||||||||||||
|
Bonus(1)
|
Awards(2)
|
Payments(3)
|
Total
|
|||||||||||||
|
Jean-Pierre
Sommadossi
|
$
|
1,960,000
|
||||||||||||||