Preliminary Proxy Statement
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.    )

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Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to Section 240.14a-12

JAZZ PHARMACEUTICALS PUBLIC LIMITED COMPANY

 

 

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Table of Contents

PRELIMINARY COPY – SUBJECT TO COMPLETION

 

LOGO

 

NOTICE OF 2021 ANNUAL GENERAL MEETING

OF SHAREHOLDERS

TO BE HELD ON JULY 29, 2021

 

Dear Shareholder:

 

The 2021 annual general meeting of shareholders (the “annual meeting”) of Jazz Pharmaceuticals plc, a public limited company formed under the laws of Ireland (the “company”), will be held on Thursday, July 29, 2021, at 3:00 p.m. local time at our corporate headquarters located at Fifth Floor, Waterloo Exchange, Waterloo Road, Dublin 4, Ireland, for the following purposes:

 

1.   To elect by separate resolutions each of the four nominees for director named in the accompanying proxy statement (the “proxy statement”) to hold office until the 2024 annual meeting of shareholders (Proposal 1).

 

2.   To ratify, on a non-binding advisory basis, the appointment of KPMG, Dublin, or KPMG, as the independent auditors of the company for the fiscal year ending December 31, 2021 and to authorize, in a binding vote, the board of directors, acting through the audit committee, to determine the independent auditors’ remuneration (Proposal 2).

 

3.   To approve, on a non-binding advisory basis, the compensation of the company’s named executive officers, or NEOs, as disclosed in the accompanying proxy statement (Proposal 3).

 

4.   To renew the board of directors’ existing authority under Irish law to allot and issue ordinary shares (Proposal 4).

 

5.   To renew the board of directors’ existing authority under Irish law to allot and issue ordinary shares for cash without first offering those ordinary shares to existing shareholders pursuant to the statutory pre-emption right that would otherwise apply (Proposal 5).

 

6.   To approve any motion to adjourn the annual meeting, or any adjournments thereof, to another time and place to solicit additional proxies if there are insufficient votes at the time of the annual meeting to approve Proposal 5 (Proposal 6).

 

To conduct any other business properly brought before the annual meeting.

 

Proposals 1, 2, 3, 4 and 6 are ordinary resolutions, requiring the affirmative vote of a majority of the votes cast (in person or by proxy) at the annual meeting. Proposal 5 is a special resolution, requiring the approval of not less than 75% of the votes cast (in person or by proxy) at the annual meeting.

 

In addition to the above proposals, the annual meeting will also receive and consider the company’s Irish statutory financial statements for the fiscal year ended December 31, 2020 and the reports of the directors and auditors thereon. There is no requirement under Irish law that the Irish statutory financial statements be approved by the shareholders, and no such approval will be sought at the annual meeting. Under the company’s Memorandum and Articles of Association (our “articles”), and the Irish Companies Act 2014 (the “2014 Act”), Proposals 1 and 2 are deemed to be ordinary business, and Proposals 3, 4, 5 and 6 are deemed to be special business.

 

The record date for the annual meeting is June 2, 2021. Only shareholders of record at the close of business on that date may vote at the annual meeting or any adjournment or postponement thereof.

 

A shareholder entitled to attend and vote at the annual meeting is entitled to appoint one or more proxies to attend, speak and vote instead of him or her at the annual meeting, using the proxy card provided (or the form of proxy contained in section 184 of the 2014 Act) or using an electronic proxy card by telephone or via the internet in the manner described in this proxy statement. A proxy need not be a shareholder of record.

    

 

Whether or not you expect to attend the meeting, please vote as soon as possible. You may vote your shares:

 

 
     LOGO   

Over the Telephone

1-800-690-6903

 
    

 

LOGO

  

 

Via the Internet

www.proxyvote.com

 
    

 

LOGO

  

 

By Mail

Complete, sign and return proxy card

 
    

 

LOGO

  

 

In Person

Attend Annual Meeting

 
    

 

If you received a proxy card or voting instruction card by mail, you may submit your proxy card or voting instruction card mailing your proxy card or voting instruction card in the envelope provided. Proxy cards must be received by July 28, 2021. Electronic proxy cards submitted via the internet or by telephone must be received by 11:59 p.m., U.S. Eastern Time, on July 28, 2021. It may not be possible to count proxy cards received after the relevant time towards voting. Proxy cards received will be forwarded to the company’s registered office electronically before commencement of the annual meeting to comply with Irish law. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please note, however, that if the record holder of your ordinary shares is a broker, bank or other agent, and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.

 

 
         

 

Important Notice Regarding the Availability of Proxy Materials for the annual meeting of shareholders to be held on July 29, 2021,

at 3:00 p.m. local time at our corporate headquarters located at Fifth Floor, Waterloo Exchange, Waterloo Road, Dublin 4, Ireland.

The proxy statement, our letter to shareholders and our 2020 Annual Report on Form 10-K are available at

https://materials.proxyvote.com/G50871.

By order of the board of directors,

Aislinn Doody, Company Secretary

Dublin, Ireland

June     , 2021


Table of Contents

Potential Impacts of the COVID-19 Pandemic on the Annual General Meeting

In light of the ongoing COVID-19 pandemic, the company would like to emphasize that we consider the health of our shareholders, employees and other attendees a top priority. We are monitoring guidance issued by appropriate governmental health agencies, including the Irish Health Service Executive, or the HSE, the Irish government, the U.S. Center for Disease Control and Prevention and the World Health Organization, collectively, the Health Authorities, and we have implemented, and will continue to implement the measures advised by the relevant Health Authorities to minimize the spread of COVID-19. Information on such measures and on COVID-19 generally is available on the HSE’s website at https://www.hse.ie/eng/services/news/newsfeatures/covid19-updates/.

The annual meeting will be held in accordance with HSE and relevant Health Authority guidance.

Should we determine that alternative arrangements are necessitated due to public health recommendations regarding containment of COVID-19, which may include a change in date or time of the meeting, a change in venue or format of the meeting we will announce our decision by press release and/or filing with the Securities Exchange Commission as additional soliciting materials and also post information on the investor relations page of the company’s website found at https://investor.jazzpharma.com/news. We encourage shareholders to keep up-to-date with, and follow the guidance from the Government of Ireland and the Department of Health (of Ireland) (as appropriate), as circumstances may change at short notice. Due to this uncertainty, shareholders are strongly encouraged to vote their shares by proxy in advance at the annual meeting.

 


Table of Contents

TABLE OF CONTENTS

 

PROXY OVERVIEW     1  
Business Overview     1  
Information About our Board of Directors     3  
Shareholder and Other Stakeholder Engagement     5  
ESG Highlights     7  
Summary of Shareholder Voting Matters and Board Recommendations     13  
GENERAL     18  
CORPORATE GOVERNANCE AND BOARD MATTERS     19  
Overview     19  
Independence of the Board of Directors     19  
Board Leadership Structure and Risk Oversight     19  
Meetings of the Board of Directors     21  
Director Commitments     21  
Classified Board Structure     21  
Information About Board Committees     21  
Audit Committee     22  
Report of the Audit Committee of the Board of Directors     24  
Compensation Committee     24  
Compensation Committee Processes and Procedures     25  
Compensation Committee Interlocks and Insider Participation     26  
Compensation Consultant Fees     26  
Compensation Committee Report     27  
Nominating and Corporate Governance Committee     27  
Corporate Governance Strengths     29  
Other Corporate Governance Matters     29  
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT     31  
EXECUTIVE OFFICERS     33  
EXECUTIVE COMPENSATION     36  
Compensation Discussion and Analysis     36  
Summary of Compensation     65  
Grants of Plan-Based Awards     66  
Description of Compensation Arrangements     67  
Outstanding Equity Awards at Fiscal Year-End     71  
Option Exercises and Stock Vested     73  
Potential Payments upon Termination or Change in Control     73  
Pay Ratio Disclosure     77  
DIRECTOR COMPENSATION     78  
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS     83  
PROPOSAL 1 ELECTION OF DIRECTORS     85  
PROPOSAL 2 RATIFY, ON A NON-BINDING ADVISORY BASIS, THE APPOINTMENT OF INDEPENDENT AUDITORS AND AUTHORIZE, IN A BINDING VOTE, THE BOARD OF DIRECTORS, ACTING THROUGH THE AUDIT COMMITTEE, TO DETERMINE THE INDEPENDENT AUDITORS’ REMUNERATION     92  
Independent Registered Public Accounting Firm Fees and Services     92  
Pre-Approval Policies and Procedures     93  
Independence     93  
PROPOSAL 3 NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION     94  
PROPOSAL 4 RENEW DIRECTORS’ AUTHORITY TO ISSUE SHARES     102  
PROPOSAL 5 RENEW DIRECTORS’ AUTHORITY TO ISSUE SHARES FOR CASH WITHOUT FIRST OFFERING SHARES TO EXISTING SHAREHOLDERS     103  
PROPOSAL 6 ADJOURNMENT PROPOSAL     105  
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING     106  
OTHER MATTERS     113  
Presentation of Irish Statutory Financial Statements     113  
Registered and Principal Executive Offices     113  
Shareholder Proposals and Director Nominations for the 2022 Annual Meeting     113  
Householding of Proxy Materials     113  
Annual Report on Form 10-K     114  
Special Note Regarding Forward-Looking Statements     115  
General     116  
 


Table of Contents

Index of Frequently Requested Information

 

    Page  

Anti-Hedging/Pledging Policy

    29  

Auditor Fees

    92  

Auditor Tenure

    92  

Board Diversity

    28  

Board Leadership

    19  

Board Meeting Attendance

    21  

Clawback Policy

    49  

Code of Conduct

    30  

Compensation Consultant Fees

    26  

Corporate Governance Guidelines

    29  

Culture

    9  

Director Biographies

    86  

Director Commitments

    21  

Director Independence

    19  

Director Qualifications

    85  

Environmental Stewardship

    12  

ESG

    7  

Human Capital Management

    9  

Majority Voting for Directors

    85  

Pay Ratio Disclosure

    77  

Peer Group Companies

    43  

Performance-Based Equity Awards

    48  

Procedures for Shareholder Proposals and Director Nominations for the 2022 Annual Meeting

    113  

Related Party Transactions

    83  

Risk Oversight

    19  

Severance Benefits

    49  

Share Ownership Guidelines for Directors

    80  

Share Ownership Guidelines for Executives

    61  

Shareholder and Other Stakeholder Engagement

    5  

Shareholder Communications with the Board

    30  
 


Table of Contents

2021 NOTICE OF MEETING AND PROXY STATEMENT   

 

PROXY OVERVIEW

This overview highlights certain information contained elsewhere in this proxy statement and does not contain all of the information that you should consider. You should read the entire proxy statement carefully before voting. For more complete information regarding our business and 2020 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2020 that we filed with the Securities and Exchange Commission, or SEC, on February 23, 2021, which we refer to throughout this proxy statement as the 2020 Annual Report on Form 10-K.

In this proxy statement, unless otherwise indicated or the context otherwise requires, all references to “Jazz Pharmaceuticals,” “the company,” “we,” “us” and “our” refer to Jazz Pharmaceuticals plc and its consolidated subsidiaries, except when the context makes clear that the time period being referenced is prior to January 18, 2012, in which case such terms are references to Jazz Pharmaceuticals, Inc. and its consolidated subsidiaries. On January 18, 2012, the businesses of Jazz Pharmaceuticals, Inc. and Azur Pharma Public Limited Company, or Azur Pharma, were combined in a merger transaction, or the Azur Merger, in connection with which Azur Pharma was renamed Jazz Pharmaceuticals plc, and we became the parent company of and successor to Jazz Pharmaceuticals, Inc., with Jazz Pharmaceuticals, Inc. becoming our wholly owned subsidiary.

Meeting and Voting Information

 

LOGO     

Time and Date:

 

3:00 p.m., local time on

Thursday, July 29, 2021

    LOGO     

Place:

 

Our corporate headquarters

Fifth Floor, Waterloo Exchange

Waterloo Road Dublin 4, Ireland

In light of the COVID-19 pandemic, we strongly recommend that you vote your shares by proxy in advance of the meeting. Whether or not you expect to attend the meeting, please vote as soon as possible. Please see “Questions and Answers About These Proxy Materials and Voting—How do I vote?” beginning on page 108 below. Please also see “Questions and Answers About These Proxy Materials and Voting—What are the potential impacts of the COVID-19 pandemic on the annual meeting?” beginning on page 106 below.

Business Overview

We are an innovative global biopharmaceutical company dedicated to developing and commercializing life-changing medicines that transform the lives of patients with serious diseases—often with limited or no therapeutic options. We have a diverse portfolio of marketed medicines and novel product candidates, from early- to late-stage development, across key therapeutic areas. Our focus is in neuroscience, including sleep, epilepsy and movement disorders, and in oncology, including hematologic malignancies and solid tumors. We actively explore new options for patients, including novel compounds, small molecules and biologics, and through cannabinoid science and innovative delivery technologies.

 

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2021 NOTICE OF MEETING AND PROXY STATEMENT   

 

Proxy Overview (continued)

 

 

Our lead marketed products are:

 

 

Xyrem® (sodium oxybate) oral solution, a product approved by the U.S. Food and Drug Administration, or FDA, and marketed in the U.S. for the treatment of both cataplexy and excessive daytime sleepiness, or EDS, in narcolepsy patients seven years of age and older;

 

 

Xywav (calcium, magnesium, potassium, and sodium oxybates) oral solution, a product that contains 92% less sodium than Xyrem, approved by FDA and launched in the U.S. in November 2020 for the treatment of cataplexy or EDS in narcolepsy patients seven years of age and older;

 

 

Epidiolex®, a pharmaceutical formulation comprising highly purified plant-derived cannabidiol, or CBD, approved in the U.S. and also in Europe, where it is marketed as Epidyolex, for the treatment of seizures associated with Lennox-Gastaut syndrome (LGS), Dravet syndrome and Tuberous Sclerosis Complex (TSC), for patients one year of age and older;

 

 

Sunosi® (solriamfetol), a product approved by FDA and marketed in the U.S. and in Europe to improve wakefulness in adult patients with EDS associated with narcolepsy or obstructive sleep apnea;

 

 

Zepzelca (lurbinectedin), a product approved by FDA in June 2020 and launched in the U.S. in July 2020 for the treatment of adult patients with metastatic small cell lung cancer, or SCLC, with disease progression on or after platinum-based chemotherapy;

 

 

Vyxeos® (daunorubicin and cytarabine) liposome for injection, a product approved in the U.S. and in Europe (where it is marketed as Vyxeos® liposomal 44 mg/100 mg powder for concentrate for solution for infusion) for the treatment of adults with newly-diagnosed therapy-related acute myeloid leukemia, or AML, or AML with myelodysplasia-related changes;

 

 

Defitelio® (defibrotide sodium), a product approved in the U.S. for the treatment of adult and pediatric patients with hepatic veno-occlusive disease, or VOD, also known as sinusoidal obstruction syndrome, with renal or pulmonary dysfunction following hematopoietic stem cell transplantation, or HSCT, and in Europe (where it is marketed as Defitelio® (defibrotide)) for the treatment of severe VOD in adults and children after undergoing HSCT therapy; and

 

 

Erwinaze® (asparaginase Erwinia chrysanthemi), a treatment approved in the U.S. and in certain markets in Europe (where it is marketed as Erwinase®) for patients with acute lymphoblastic leukemia, or ALL, who have developed hypersensitivity to E. coli-derived asparaginase.

Our strategy to create sustainable shareholder value is focused on:

 

 

Strong commercial execution to drive diversified revenue growth and address unmet medical needs of our patients across our product portfolio;

 

 

Expanding and advancing our pipeline through internal and external patient-centric innovation to achieve a valuable product portfolio of durable, highly differentiated programs;

 

 

Continuing to build a flexible, efficient, and productive development engine for targeted therapeutic conditions to identify and progress early- and mid-stage assets; and

 

 

Investing in an efficient, scalable operating model and differentiated capabilities to enable growth; and unlock further value through indication expansion and global markets.

In 2020, consistent with our strategy, we continued to focus on research and development activities within our neuroscience and oncology therapeutic areas, such as our expansion into solid tumors, and exploring and investing in adjacent therapeutic areas that could further diversify our portfolio. In addition, in May 2021, we completed the acquisition of GW Pharmaceuticals plc, or GW. We view the acquisition, or the GW Acquisition, as consistent with our overall business and capital allocation strategy to expand our neuroscience portfolio and drive substantial value for our shareholders. We achieved these accomplishments despite the global impact of the COVID-19 pandemic. In response to the COVID-19 pandemic, we developed a comprehensive response strategy including establishing cross-functional response teams and implementing business continuity plans to manage the impacts of the evolving effects of the COVID-19 pandemic on our employees, patients and our business. We support broad public health strategies designed to prevent the spread of COVID-19 and are focused on the health and welfare of our employees.

 

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2021 NOTICE OF MEETING AND PROXY STATEMENT   

 

Proxy Overview (continued)

 

 

Information About Our Board of Directors

Director Nominees and Continuing Directors

The following table provides summary information about each director nominee and each director whose term of office will continue after the annual meeting, in each case as of June 1, 2021. See pages 19 to 22 and 85 to 91 for more information.

 

         

Name

  Age     Director
Since
    Principal Position   Independent     Other Current
Public Boards
 

2021 Director Nominees

         

Peter Gray

    66       2013     Chairman, Teckro, Inc. and Director, Abzena     Yes       0  

Kenneth W. O’Keefe

    54       2004 (1)    Managing Director, Beecken Petty O’Keefe & Company     Yes       0  

Mark D. Smith, M.D.

    69       2020     Professor, University of California, San Francisco and Director, Teladoc Health, Inc. and Phreesia, Inc.     Yes       2  

Catherine A. Sohn, Pharm.D.

    68       2012     Chairperson, BioEclipse Therapeutics, Inc. and Director, Axcella Health Inc., Landec Corporation and Rubius Therapeutics     Yes       3  

Continuing Directors

         

Jennifer E. Cook

    55       2020     Director, BridgeBio Pharma, Inc. and Denali Therapeutics Inc.     Yes       2  

Bruce C. Cozadd

    57       2003 (1)    Chairman and Chief Executive Officer, Jazz Pharmaceuticals plc     No       0  

Patrick G. Enright

    59       2009 (1)    Managing Director, Longitude Capital     Yes       1  

Heather Ann McSharry

    59       2013     Director, International Airlines Group, S.A.     Yes       1  

Seamus Mulligan

    60       2012     Director, Jazz Pharmaceuticals plc     Yes       0  

Anne O’Riordan

    53       2019     Group Director of Digital, Jardine Matheson Limited     Yes       0  

Norbert G. Riedel, Ph.D.

    63       2013     Chief Executive Officer, Aptinyx Inc.     Yes       3  

Rick E Winningham

    61       2010 (1)    Chairman and Chief Executive Officer, Theravance Biopharma, Inc.     Yes       1  

 

(1) 

Includes service on the board of directors of Jazz Pharmaceuticals, Inc., our predecessor.

 

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2021 NOTICE OF MEETING AND PROXY STATEMENT   

 

Proxy Overview (continued)

 

 

Director Skills, Experience and Diversity

We examine the experience and expertise of our board as a whole to ensure alignment between the abilities and contributions of our board and our strategic priorities and long-term plans, emphasizing, among other things, expertise in global and U.S. sales and marketing, in product development, in financial management and in corporate development transactions. All of our directors exhibit high integrity, collegiality, innovative thinking, sound business judgment and a knowledge of corporate governance requirements and practices. The following charts show the key skills, experience, and attributes that our director nominees and continuing directors bring to our boardroom:

 

 

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2021 NOTICE OF MEETING AND PROXY STATEMENT   

 

Proxy Overview (continued)

 

 

Our board is substantially independent and has a mix of relatively newer and longer-tenured directors. The charts below show board makeup by various characteristics with respect to our director nominees and continuing directors:

 

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Shareholder and Other Stakeholder Engagement

A priority for our board of directors is soliciting and listening to the views of our shareholders on a variety of topics, including our business and growth strategy, corporate governance practices, executive compensation matters, and various other environmental, social and governance (ESG) matters. Discussions with our shareholders have been productive and informative and have provided valuable feedback to our board of directors to help ensure that our board’s decisions align with shareholder objectives. The graphic under the section entitled “Executive Compensation—Compensation Discussion and Analysis—How We Determine Executive Compensation—2020 Advisory Vote on Executive Compensation and Shareholder Engagement on page 46 below describes our typical shareholder outreach and engagement cycle.

Following our 2020 annual meeting, we reached out to shareholders who collectively held approximately 47% of our then-outstanding shares to request meetings, and held meetings by phone with each shareholder who accepted our request for engagement.

We have taken a number of significant and responsive actions over the past several years to incorporate feedback received from shareholders, as highlighted in the following table.

 

     

Topic

   What We Heard    What we did

Board Refreshment

   Shareholders continued to express interest in board refreshment and the role it plays in increasing board diversity.   

•    We enhanced our demographic board diversity in both 2019 and 2020. Specifically, in 2020, we underwent a board refreshment program and candidate search for new directors. As part of that search process, the nominating and corporate governance committee asked the search firm it engaged to provide, and then considered, a set of candidates that included both underrepresented people of color and different genders. In late 2020, we added two additional diverse directors.

 

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2021 NOTICE OF MEETING AND PROXY STATEMENT   

 

Proxy Overview (continued)

 

 

     

Topic

   What We Heard    What we did
     

 

•    Two of our longer-tenured directors are not standing for re-election at this annual meeting. As such, we expect that, immediately following the annual meeting, our board will consist of twelve members, four of whom are women, representing 33% of the board.

Compensation

  

While shareholders provided positive feedback regarding our pay-for-performance alignment, we heard a strong preference that our long-term incentive program include performance-based equity awards.

 

Shareholders also expressed their desire for our annual performance bonus plan to have an explicit cap on payouts to avoid the potential of excessive payouts not tied to performance and to mitigate certain risks inherent in incentive plans.

 

Shareholders have raised concerns that our burn rate is higher than some of our peers.

 

Shareholders disfavor the “evergreen provision” in our 2011 Equity Incentive Plan.

  

In response to shareholder feedback:

 

•    Starting in 2021, approximately 50% of each executive officer’s target equity compensation will be in the form of performance-based equity awards, or PSUs;

 

•    Starting in 2021, stock options will be eliminated, and grants will be 100% restricted stock units, or RSUs, and PSUs; and

 

•    We will not seek to extend the evergreen provision in the 2011 Equity Incentive Plan, nor adopt a new one, following the provision’s expiration in 2022.

 

•    Additionally, initial equity grants to new directors were eliminated and instead, new directors will receive a pro-rated annual grant based on their months of service during the board year

 

We also recently adopted a policy for recoupment of incentive compensation, or a clawback policy, which is designed to mitigate risks generally associated with incentive compensation and allow us to recover any erroneously earned compensation.

ESG

   ESG continues to be a priority for our shareholders and stakeholders.   

In 2020, we established the Corporate Sustainability and Social Impact function within the company and brought together a cross-functional team of leaders in the organization to guide the development of our ESG strategy and social impact initiatives. A wide range of departments is involved in our ESG strategy and work, including corporate affairs, corporate strategy, supply chain management, research and development, commercial, patient support services, human resources and legal, among others.

 

Additionally, we recently published our first SASB mapping report, covering information in the following areas:

 

•    Safety of clinical trial participants;

 

•    Access to medicines;

 

•    Affordability and pricing;

 

•    Drug safety;

 

•    Counterfeit drugs;

 

•    Ethical marketing;

 

•    Employee recruitment, development and retention;

 

•    Supply chain management; and

 

•    Business ethics.

We also continue to evaluate feedback received on other topics, including our classified board structure, setting climate change targets, and reporting on workforce diversity.

 

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Table of Contents

2021 NOTICE OF MEETING AND PROXY STATEMENT   

 

Proxy Overview (continued)

 

 

ESG Highlights

We view ESG factors as long-term value drivers for the company. We take a focused approach to ESG that leverages Jazz’s unique capabilities and expertise, striving to identify and manage the most meaningful opportunities based on their likelihood of positively impacting society and driving shareholder value.

If human beings needed a reminder as to how core our health—and the medicines that protect and enhance it—are to economic and political health and stability, as well as to human happiness—the events of the last 18 months provided that reminder.

As a company that brings life-changing medicines to people who truly need them, we believe that these events also highlighted that our greatest societal-related contributions to the world come directly from our core product development, treatments and support of our patients.

Commitment to Purpose and Good Governance

Jazz Pharmaceuticals is dedicated to developing and commercializing life-changing medicines that transform the lives of patients with serious diseases—often with limited or no therapeutic options.

Our management team is well known for having founded the company with a clear vision that creating a positive culture creates the foundation for ongoing financial and ESG sustainability. The practices we describe here reflect the evolution of that belief and its embedding within our core values.

We believe the caliber of our governance starts with the caliber of our board of directors, and we are proud to have a steadily refreshed, diverse and highly capable board of involved directors. These directors help oversee how we operate as well as how well we operate, including with committee and full-board oversight of the ESG issues summarized in this section.

Specifically, the nominating and corporate governance committee has oversight responsibility over our ESG strategy and policies and is regularly briefed by management on matters related to ESG. In 2020, we established the Corporate Sustainability and Social Impact function within the company and brought together a cross-functional team of leaders in the organization to guide the development of our ESG strategy and social impact initiatives. A wide range of departments is involved in our ESG strategy and work, including corporate affairs, corporate strategy, supply chain management, research and development, commercial, patient support services, human resources and legal, among others.

In 2020, we published our first Sustainability Accounting Standards Board (SASB) Mapping Report, which is available on our website.1 We continue to evaluate the use of other non-financial reporting frameworks, including the Global Reporting Initiative and the Task Force on Climate-related Financial Disclosures. We invite shareholder input as we work to enhance how our ESG practices contribute to our financial, environmental and social sustainability.

 

1 

While we believe this information may be of interest to our shareholders, such information, together with any other information appearing on or connected to our website, shall not be deemed incorporated by reference into, and does not form part of, this proxy statement.

 

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Proxy Overview (continued)

 

 

 

COVID-19 Response

 

Especially during this time of uncertainty, Jazz remains dedicated to its purpose and focused approach to ESG. In response to the COVID-19 pandemic, that has meant taking both a short-term and a long-term view of ESG risks and opportunities, selected aspects of which are discussed below.

 

Leadership and Oversight

We have established a COVID-19 response team comprised of senior leadership that is particularly focused on addressing the impacts to our employees, our sites, our patients, our customers and our suppliers. Our board of directors is receiving regular updates from our senior management and is involved in strategy decisions and oversight of evolving business continuity plans.

 

Employee Health, Safety and Well-being

We support broad public health strategies designed to prevent the spread of COVID-19 and are focused on the health and welfare of our employees. In accordance with guidance issued by the Centers for Disease Control and Prevention, the World Health Organization and local authorities, in March 2020, our global workforce, including field-based teams, transitioned to working remotely. Our global organization has mobilized to enable our employees to accomplish our most critical goals in new ways, leveraging positivity, innovation and prioritization of resources to overcome new obstacles. We have rolled out new technologies and collaboration tools to enable our employees to engage with each other and also with healthcare providers through digital platforms and other remote access activities to continue to support and educate them as they care for patients. For our employees, we have implemented processes and resources to support them in the event an employee receives a positive COVID-19 diagnosis. We are now implementing plans related to reopening our sites and enabling our employees to return to work in our global offices, the field, our lab and our manufacturing facilities, which plans will take into account applicable public health authority and local government guidelines and which are designed to ensure employee and patient safety.

 

Product Supply to Our Patients and Access to Medicines

We are executing on a continuity plan in response to the pandemic that is designed to enable us to deliver on our mission to provide essential medicines to patients around the world. We are working closely with our third-party manufacturers, distributors and other trusted partners to manage supply chain activities and mitigate potential disruptions to our product supply as a result of COVID-19.

 

In responding to this pandemic, we are prioritizing patient access to our medications, including through our JazzCares program, which is designed to help patients access medications and services they need. The rapid spread of COVID-19 has caused a significant burden on health systems globally and has highlighted the need for companies to evaluate existing therapies to assess if they can be utilized beyond their current indications to treat COVID-19 as well as consider developing new therapies.

 

Support of Our Local Communities

We are supporting local communities and patient-focused organizations in COVID-19 relief efforts including through corporate donations to charitable organizations providing food and medical relief to our communities in which we operate in Italy, Philadelphia and the San Francisco Bay Area, and other localities where the needs related to the impact of COVID-19 are greatest such as the New York metro area and Spain.

 

 

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Proxy Overview (continued)

 

 

Culture and Human Capital Management

Our “One Jazz” Culture

We strive to excel in three things: put patients first, be a great place to work, and live our values of integrity, collaboration, passion, innovation and pursuit of excellence. We are committed to creating a company where the work culture reflects these goals.

We make a point each year to recognize, through our “Jazz Master” award, individuals who have been leaders in modeling and contributing to our culture by living our mission and demonstrating Jazz’s values throughout their career at our company. We also have programs to recognize individuals who have gone above and beyond expected performance to achieve outstanding results that have had a significant impact on business or patients.

Diversity and Inclusion

We strive to create a workplace culture that supports a diverse, multi-cultural workforce, treats individuals fairly, and provides an inclusive environment where all employees are empowered to contribute and succeed. We continue to evolve our policies, practices and programs that help us demonstrate to our employees how much we value them and that enable them to give their best to each other, our patients and our shareholders and stakeholders. Recently, we have taken the following steps:

 

 

Established goals for our DEI practices, including targets to increase gender, racial and ethnic leadership diversity;

 

 

Created a DEI Inclusion Delegation of employees to embed DEI values in everything we do;

 

 

Supported our employee resource teams (Jazz ConcERTos); and

 

 

Continued to enhance board and leadership-level diversity. Specifically:

 

  ¡   

After giving effect to the announced departure of two of our directors, on the date of our annual meeting, 50% of our board of directors will be diverse in terms of gender, ethnicity and sexual orientation; and

 

  ¡   

Women comprise approximately 40% of our management leadership team, which we refer to as our executive committee. Our executive committee is also diverse in terms of race, age, ethnicity and national origin.

Employee Engagement, Health and Well-Being

Jazz has a strong employee value proposition anchored in our shared commitment to our purpose to innovate to transform the lives of patients. We believe employee engagement and the power of our employee voices is foundational to strong performance. We have transparent and regular communication channels with our employees including:

 

 

Annual and more frequent pulse surveys;

 

 

Regular communication messages from executive leadership;

 

 

Top leadership forums;

 

 

All employee meetings;

 

 

Engagement surveys; and

 

 

Community Beat teams who support local employee and community engagement activities.

We strive to create a culture of health and well-being throughout the organization by offering a diverse and customizable set of programs focusing on employee experience, self-care, work-life balance, flexibility and early intervention. In addition to traditional employee benefits, Jazz supports employees and their families through access to a suite of innovative programs that are designed to enhance their physical, financial, emotional and social well-being, including:

 

 

In response to COVID, launching our “4Cs” employee support framework (care, connection, continuity and consciousness), enabling our people to live our values and further our mission;

 

 

Providing an array of resources to support remote working;

 

 

Increasing work schedule and leave program flexibility; and

 

 

Expanding employee assistance and mindfulness programs.

 

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Proxy Overview (continued)

 

 

Talent Development

We understand that empowering people to find new and better ways of doing things, to gain new experiences and to development new capabilities can also support our growth and achievements as a company. The exciting opportunities within our business provide rich and ample learning opportunities and experiences for career growth. Our talent strategy focuses on attracting the best talent, recognizing and rewarding the performance of our employees as defined by both what they accomplished and how they accomplished it, and continually developing our talent through new experiences and learning opportunities. Specifically, we:

 

 

Recently launched a new performance management system to support our culture of learning, feedback, and continual growth;

 

 

Encourage all employees to have an individual development plan;

 

 

Invest in manager and leadership development; and

 

 

Offer tuition reimbursement in our major markets aimed at growth and career development.

 

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Proxy Overview (continued)

 

 

Patients and Community

How did we enhance and enrich the lives of our patients, and communities this past year? We have and continue to:

 

 

Provide and develop new treatments for conditions in the neuroscience and oncology therapeutic areas—areas that are core to human health and wellbeing. This includes investment in our exceptional pipeline which includes potential treatments at every development stage from pre-clinical, through phase 1-3 trials and the regulatory process;

 

 

Maintain our distribution and pipeline capabilities to protect patients despite the disruptions created by the COVID-19 pandemic;

 

 

Adhere to our global safety and compliance standards, both for our drugs and for our employees and communities;

 

 

Offer access to medicine programs to help patients who face financial obstacles to accessing needed treatments;

 

 

Support a wide and varied corporate giving program to support our patients, employees and communities; and

 

 

Offer extensive medical education programs for patients, caregivers, medical professionals and others. Specifically, in 2020, Jazz:

 

  ¡   

Launched a U.S. patient education program developed in consultation with the Myelodysplastic Syndromes (MDS) Foundation, Inc. and the Cancer Support Community focused on empowering, educating and providing resources to people affected by secondary acute myeloid leukemia (sAML) and MDS;

 

  ¡   

Collaborated with the American Heart Association to educate and empower patients to live healthier lives and improve their well-being; as part of the collaboration, the campaign aimed to raise awareness of the connection between sleep disorders and cardiovascular risk, and further explored the topic via health care provider-focused podcasts and patient-focused news articles and blogs; and

 

  ¡   

Co-created a campaign with the Hypersomnia Foundation to heighten the level of awareness of idiopathic hypersomnia; this campaign took a multi-media approach at building community and empowering patients to recognize their symptoms and have impactful dialogue with health care providers and family members on their condition.

 

 

LOGO

 

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Proxy Overview (continued)

 

 

Environmental Stewardship

We seek to operate our manufacturing facilities in an environmentally responsible way to protect our people, our business, our environment and the local communities in which we operate. In light of the potential impact of our business on the environment, we have adopted a number of internal environmental policies and management systems designed to manage our operations in compliance with applicable laws, directives and regulations on environmental protection and in support of environmental sustainability and local biodiversity. Our environmental policies and management systems include procedures for assessing compliance with applicable environmental laws and regulations and reporting incidents of non-compliance to applicable governmental authorities. For example, we have environmental policies governing both of our manufacturing facilities in Athlone, Ireland and Villa Guardia (Como), Italy, which demonstrate our commitment to environmental sustainability and require us to minimize resource use (e.g., energy and water) and waste generation, optimize the use of raw materials, and undertake continuous improvement in environmental performance, with an emphasis on pollution prevention.

 

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Proxy Overview (continued)

 

 

Summary of Shareholder Voting Matters and Board Recommendations

For the reasons set forth below and in the rest of this proxy statement, our board of directors recommends that you vote your shares “FOR” each of the nominees named below for director to hold office until the 2024 annual meeting of shareholders and “FOR” each of the other proposals.

 

 
Proposal 1 — Election of Directors

 

 

The board of directors recommends a vote “FOR” each of the named nominees.

 

Vote required to elect each nominee to hold office until the 2024 annual meeting of shareholders: Affirmative vote of a majority of the votes cast on his or her election.

 

For more information, see Proposal 1 starting on page 85.

 

    

We are asking our shareholders to vote, by separate resolutions, on the election of each of Peter Gray, Kenneth W. O’Keefe, Mark D. Smith, M.D. and Catherine A. Sohn, Pharm.D. to hold office until the 2024 annual meeting of shareholders. Detailed information about each nominee’s background and experience can be found beginning on page 86.

 

Each of the nominees for director was nominated for election by the board of directors upon the recommendation of our nominating and corporate governance committee. Our board of directors believes that each nominee has the specific experience, qualifications, attributes and skills to serve as a member of the board of directors and has demonstrated the ability to devote sufficient time and attention to board duties and to otherwise fulfill the responsibilities required of directors.

 

 
Proposal 2 — Ratify, on a Non-Binding Advisory Basis, the Appointment of Independent Auditors and Authorize, in a Binding Vote, the Board of Directors, Acting Through the Audit Committee, to Determine the Independent Auditors’ Remuneration

 

 

The board of directors recommends a vote “FOR” this proposal.

 

Vote required for approval: Affirmative vote of a majority of the votes cast on the proposal.

 

For more information, see Proposal 2 starting on page 92.

    

Under Irish law, KPMG will be deemed to be reappointed as our independent auditors for the financial year ending December 31, 2021, without needing a shareholder vote at the annual meeting. However, our shareholders are being asked to ratify KPMG’s appointment on a non-binding advisory basis because we value our shareholders’ views on the company’s independent auditors. The board of directors and the audit committee intend to consider the results of this vote in making determinations in the future regarding the appointment of the company’s independent auditors.

 

Our shareholders are also being asked to authorize the board of directors, acting through the audit committee, to determine KPMG’s remuneration. This authorization is required by Irish law.

 

Less than 7% of the total fees that KPMG billed us for services last year were for services other than audit, audit-related and tax compliance services.

 

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Proxy Overview (continued)

 

 

Proposal 3 — Non-Binding Advisory Vote on Executive Compensation

 

 

The board of directors recommends a vote “FOR” this proposal.

 

Vote required for approval: Affirmative vote of a majority of the votes cast on the proposal.

 

For more information, see Proposal 3 starting on page 94.

 

     We are asking our shareholders for advisory approval of our NEOs’ compensation. This non-binding advisory vote is commonly referred to as a “say-on-pay” vote. Our executive compensation program is aligned with our business strategy and priorities and encourages executive officers to work for meaningful shareholder returns consistent with our pay-for-performance philosophy. Our executive compensation program focuses on total compensation, combining short- and long-term components, cash and equity, and fixed and variable payments, in the proportions that we believe are the most appropriate to incentivize and reward our executive officers for achieving our corporate goals while minimizing incentives for excessive risk taking or unethical conduct. Our annual bonus awards are not earned unless pre-determined levels of performance are achieved against annual corporate objectives approved by our board of directors at the beginning of the year. Likewise, our stock option awards will not provide realizable value and our restricted stock unit, or RSU, awards will not provide increased value unless there is an increase in the value of our shares, which benefits all shareholders. We also have executive share ownership guidelines to further support our ownership culture and align the interests of executive officers and shareholders. Our 2020 advisory say-on-pay proposal was approved by approximately 88% of total votes cast.

 

 
Proposal 4 — Renew Director’s Authority to Issue Shares

 

 

The board of directors recommends a vote “FOR” this proposal.

 

Vote required for approval: Affirmative vote of a majority of the votes cast on the proposal.

 

For more information, see:

 

•  Background to Proposals 4 and 5 on page 96; and

 

•  Proposal 4 starting on page 102.

 

    

Prior to casting your vote on Proposal 4, we strongly urge you to read both the background discussion of Proposals 4 and 5 beginning on page 96 of this proxy statement and the discussion under Proposal 4 beginning on page 102.

 

The directors of an Irish public limited company must have specific authority from shareholders to issue shares (including rights to subscribe for or otherwise acquire any shares)—even shares which are part of the company’s authorized but unissued share capital. Currently, our directors are authorized to issue new ordinary shares without further shareholder approval up to a maximum of our authorized but unissued ordinary share capital. This authority has been in place since the Azur Merger in January 2012 and was most recently approved by our public shareholders in 2016 with over 80% support. Under Irish law, this authority can be granted for a maximum period of five years, at which point it lapses unless renewed by our shareholders. The current share allotment and issuance authority is due to expire on August 4, 2021.

 

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Proxy Overview (continued)

 

 

    

We are asking for your approval to renew our existing authority to issue up to the amount of shares that are already within our authorized share capital for an additional five years. We are not asking you to approve an increase to our authorized share capital. We are and will continue to be subject to the shareholder approval and other requirements of the Nasdaq Stock Market LLC, or Nasdaq, and the U.S. Securities and Exchange Commission, or SEC, with respect to share issuances, and our board of directors will also continue to focus on and satisfy its fiduciary duties to our shareholders with respect to share issuances. This renewal will simply keep us on an equal footing with our peer companies who are incorporated and listed in the U.S. and will best position us to continue to execute on our growth strategy.

 

The renewal of our share issuance authorities is fundamental to the way we intend to advance our business, grow and diversify our revenues, and increase shareholder value. Our growth strategy depends in part on our ability to identify, acquire, in-license and/or develop additional products or product candidates with the goal of growing and diversifying our revenues. Our management and board of directors rely on having the flexibility that the renewal of our share issuance authorities would provide to quickly take advantage of strategic opportunities, including potential acquisitions and other capital-intensive transactions that we believe would increase shareholder value. Many of these opportunities are highly competitive, with multiple parties often offering comparable or even the same economics. If we do not receive the required shareholder approval to renew the directors’ authority to issue shares, we would be required to obtain shareholder approval prior to issuing any shares in connection with new strategic opportunities after August 4, 2021, even if we would not otherwise be required to obtain shareholder approval under Nasdaq rules. This limitation on our ability to issue shares could put us at a distinct disadvantage vis-à-vis many of our peers in competing for acquisitions and similar transactions and might make it difficult for us to complete such transactions in furtherance of our growth strategy, thus potentially limiting our ability to deploy capital to meet strategic goals that are in the best interests of our shareholders.

 

 

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Proxy Overview (continued)

 

 

Proposal 5 — Renew Directors’ Authority to Issue Shares for Cash Without First Offering Shares to Existing Shareholders

 

 

The board of directors recommends a vote “FOR” this proposal.

 

Vote required for approval: Affirmative vote of 75% of the votes cast on the proposal.

 

For more information, see:

 

•  Background to Proposals 4 and 5 on page 96; and

 

•  Proposal 5 on page 103.

 

    

Prior to casting your vote on Proposal 5, we strongly urge you to read both the background discussion of Proposals 4 and 5 beginning on page 96 of this proxy statement and the discussion under Proposal 5 beginning on page 103.

 

In general, unless otherwise authorized by shareholders, before an Irish public limited company can issue shares for cash (including rights to subscribe for or otherwise acquire any shares) to any new shareholders, it must first offer the shares or rights to existing shareholders of the company pro-rata to their existing shareholdings. Currently, our directors are authorized to issue new shares for cash, up to a maximum of our authorized but unissued ordinary share capital, without first offering them to existing shareholders, thereby opting out of the statutory pre-emption rights provision. This pre-emption opt-out authority has been in place since the Azur Merger in January 2012 and was most recently approved by our public shareholders in 2016 with over 80% support. Under Irish law, this authority can be granted for a maximum period of five years, at which point it will lapse unless renewed by our shareholders. The current pre-emption opt-out authority is due to expire on August 4, 2021.

 

We are asking for your approval to renew our existing pre-emption opt-out authority for an additional five years. We are and will continue to be subject to the shareholder approval and other requirements of the Nasdaq and the SEC with respect to share issuances, and our board of directors will also continue to focus on and satisfy its fiduciary duties to our shareholders with respect to share issuances. This renewal will simply keep us on an equal footing with our peer companies who are incorporated and listed in the U.S. and will best position us to continue to execute on our growth strategy. In this regard, companies who are incorporated and publicly-traded in the U.S. generally do not grant all existing shareholders pre-emptive rights on new issuances of shares.

 

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Proxy Overview (continued)

 

 

    

As is the case with Proposal 4, the renewal of our current authority is fundamental to the way we intend to advance our business, grow and diversify our revenues, and increase shareholder value. Our growth strategy depends in part on our ability to identify, acquire, in-license and/or develop additional products or product candidates with the goal of growing and diversifying our revenues. Our management and board of directors rely on having the flexibility that the renewal of our share issuance authorities would provide to quickly take advantage of strategic opportunities, including potential acquisitions and other capital-intensive transactions that we believe would increase shareholder value. Many of these opportunities are highly competitive, with multiple parties often offering comparable or even the same economics. If we do not receive the required affirmative vote of 75% of the votes cast to approve Proposal 5, shares that we would issue for cash in connection with new strategic opportunities after August 4, 2021 would have to first be offered to existing shareholders in costly and time-consuming pro-rata rights offerings. This limitation on our ability to issue shares for cash could put us at a distinct disadvantage vis-à-vis many of our peers in competing for acquisitions and similar transactions, would considerably reduce the speed at which we could complete capital-raising activities undertaken in furtherance of our growth strategy, and would increase our costs and otherwise might make it difficult for us to complete such transactions in furtherance of our growth strategy, thus potentially limiting our ability to deploy capital to meet strategic goals that are in the best interests of our shareholders.

 

The approval of this Proposal 5 is conditional on the approval of Proposal 4 because Irish law requires that a general authority to issue shares be in place before a pre-emption opt-out authority can be granted. Proposal 5 will therefore not be passed unless Proposal 4 is also approved.

 

 

 
Proposal 6 — Adjournment Proposal

 

The board of directors recommends a vote “FOR” this proposal.

 

Vote required for approval: Affirmative vote of a majority of the votes cast on the proposal.

 

For more information, see Proposal 6 starting on page 105.

 

    

We are asking our shareholders to vote on a proposal to approve any motion to adjourn the annual meeting, or any adjournments thereof, to another time and place to solicit additional proxies if there are insufficient votes at the time of the annual meeting to approve Proposal 5.

 

Under Irish law, Proposal 5 is a special resolution, which requires no less than 75% of the votes of shareholders cast (in person or by proxy) at a general meeting to be voted “FOR” the proposal in order to be passed. Given the high vote threshold associated with Proposal 5, we are seeking your authority to adjourn the meeting to solicit additional proxies if there are insufficient votes at the time of the annual meeting to approve Proposal 5.

 

 

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2021 NOTICE OF MEETING AND PROXY STATEMENT   

 

LOGO

PROXY STATEMENT

FOR THE 2021 ANNUAL GENERAL MEETING OF SHAREHOLDERS

TO BE HELD ON JULY 29, 2021

GENERAL

Purpose of this Proxy Statement and Other General Information

Our board of directors is soliciting proxies for use at our 2021 annual general meeting of shareholders, or the annual meeting. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the annual meeting. Please read it carefully. The Notice of Internet Availability of Proxy Materials and our proxy materials, which include this proxy statement, our annual letter to shareholders and our 2020 Annual Report on Form 10-K, are first being mailed to shareholders on or about June     , 2021. Our proxy materials are also available online at https://materials.proxyvote.com/G50871. The specific proposals to be considered and acted upon at the annual meeting are summarized in the accompanying Notice of 2021 Annual General Meeting of Shareholders. Each proposal is described in more detail in this proxy statement.

This solicitation is made on behalf of our board of directors and all solicitation expenses, including costs of preparing, assembling and mailing proxy materials and notices, will be borne by us. In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners. In addition, we have retained Alliance Advisors, a proxy solicitation firm, to assist in the solicitation of proxies for a fee of approximately $40,000 plus reimbursement of expenses.

Our board of directors has set the close of business on June 2, 2021 as the record date for the annual meeting. Shareholders of record who owned our ordinary shares on that date are entitled to vote at and attend the annual meeting. Each ordinary share is entitled to one vote. There were                of our ordinary shares outstanding and entitled to vote on the record date.

 

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CORPORATE GOVERNANCE AND BOARD MATTERS

Overview

We are committed to exercising good corporate governance practices. In furtherance of this commitment, we regularly monitor developments in the area of corporate governance and review our processes, policies and procedures in light of such developments. Key information regarding our corporate governance initiatives can be found on our website, www.jazzpharmaceuticals.com, including our Corporate Governance Guidelines, Code of Conduct, and the charters for our audit, compensation and nominating and corporate governance committees. We believe that our strong corporate governance policies and practices, including the substantial percentage of independent directors on our board of directors and the robust duties of our Lead Independent Director, empower our independent directors to effectively oversee our management—including the performance of our Chief Executive Officer—and provide an effective and appropriately balanced board governance structure. In addition, we believe that our directors are all actively and constructively engaged in the exercise of their duties and responsibilities, with each independent director serving on at least one board committee and engaging with management between board meetings to remain well-informed of our strategy and our business.

Independence of the Board of Directors

As required under the Nasdaq listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. Our board of directors consults with counsel to ensure that the board’s determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in the applicable Nasdaq listing standards, as in effect from time to time. Consistent with these considerations, after review of all relevant transactions or relationships between each director, or any of his or her family members, and our company, our senior management and our independent registered public accounting firm, the board of directors affirmatively determined that all of our current directors are independent directors within the meaning of the applicable Nasdaq listing standards, except that Mr. Cozadd, our Chairman and Chief Executive Officer, is not independent by virtue of his employment with our company. In addition, our board of directors has determined that each member of the audit committee, compensation committee and nominating and corporate governance committee meets the applicable Nasdaq and SEC rules and regulations regarding “independence” and that each member is free of any relationship that would impair his or her individual exercise of independent judgment with regard to the company.

Board Leadership Structure and Risk Oversight

Mr. Cozadd has served as our Chairman and Chief Executive Officer since the closing of the Azur Merger in January 2012. He co-founded Jazz Pharmaceuticals, Inc. in 2003 and served as its Chairman and Chief Executive Officer since April 2009 and, prior to that, as Executive Chairman.

The board of directors believes that the Chief Executive Officer is best suited to serve as our Chairman because he is the member of the board of directors who is most familiar with our business as a whole, and the most capable of identifying and bringing to the attention of the full board of directors the strategic priorities and key issues facing the company. The board of directors also believes that having Mr. Cozadd in particular in a combined Chairman/Chief Executive Officer role helps provide strong, unified leadership for our management team and optimizes communication with our board of directors. In addition, having previously served for many years as a director of other publicly-traded and privately-held companies, as well as in executive management roles, Mr. Cozadd brings both a strategic and operational perspective to this combined position.

To counterbalance concerns regarding our board’s decision to have a combined Chairman and Chief Executive Officer, our Corporate Governance Guidelines require that the independent directors elect a Lead Independent Director when the roles of Chairman and Chief Executive Officer are held by the same person. Since 2014, Rick Winningham has served as our Lead Independent Director. A critical function of the Lead Independent Director is to help to ensure the effective independent functioning of the board of directors in its oversight responsibilities and to provide an appropriate balance in the company’s leadership.

 

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Corporate Governance and Board Matters (continued)

 

 

Specific roles and responsibilities of the Lead Independent Director, which are detailed in our Corporate Governance Guidelines, include:

 

 

serving as the principal liaison between the independent directors and the Chairman;

 

 

coordinating the activities of the independent directors, including developing agendas for and presiding at executive sessions of the independent directors;

 

 

advising the Chairman on board and committee agendas, meeting schedules and information provided to other board members, including the quality, quantity and timeliness of such information that is necessary or appropriate for the directors to effectively and responsibly perform their duties;

 

 

discussing the results of the Chief Executive Officer’s performance evaluation with the chairperson of the compensation committee; and

 

 

presiding at all meetings of the board of directors at which the Chairman is not present.

The Lead Independent Director also has the authority to call meetings of the independent directors of the board of directors and is available for consultation and communication with significant shareholders. In addition to fulfilling the basic requirements of his role as Lead Independent Director, Mr. Winningham attends meetings of committees where he is not a member to remain informed and engaged, communicates with the Chief Executive Officer on matters involving the company on a regular basis, regularly seeks input from other independent directors relating to significant developments at the company between regular board meetings, attends certain meetings at the company involving strategic portfolio and/or scientific reviews, and makes himself available for direct communication with significant shareholders as necessary.

In addition, our board of directors is currently comprised of 14 directors, of whom 13 are independent. At meetings of our board of directors, the independent directors regularly convene executive sessions without the presence of our Chairman and Chief Executive Officer and other members of management. Two of our independent directors have notified the company that they intend to resign as of or prior to the annual meeting.

We believe that our directors provide effective oversight of risk management for our company (including financial, operational, business, intellectual property, information technology (including cybersecurity) and reputational risk, governance and compliance), particularly as a result of the work of our committees and the ongoing dialogue between the full board, our Chairman and Chief Executive Officer and our active and engaged Lead Independent Director. Our audit committee is responsible for overseeing our financial reporting process on behalf of our board of directors and reviewing with management and our auditors, as appropriate, our major financial risk exposures and the steps taken by management to monitor and control these exposures. Our board of directors has also formalized our audit committee’s role in oversight of risks related to information security, including cybersecurity. In its oversight role, the audit committee receives quarterly updates on information security developments, cybersecurity incidents and the steps taken by management to monitor and mitigate risk exposures in these areas. Our compensation committee approves compensation of executive officers and all material compensation plans for our company and reviews our compensation practices to ensure that they do not encourage excessive risk taking and provide appropriate incentives for meeting both short-term and long-term objectives and increasing shareholder value over time. Our compensation committee also works with our full board of directors to oversee matters related to diversity, talent, and culture strategy including human capital programs and policies regarding management development, talent planning, diversity and inclusion initiatives, and employee engagement, as well as human capital management, which includes reviewing workforce trends, executive succession plans and talent risk and maintaining compensation objectives and corporate policies that appropriately incentivize creating and maintaining a positive workplace and corporate culture. Our nominating and corporate governance committee oversees the company’s risk management, other than with respect to the company’s major financial, business or cybersecurity risk exposures or risks related to our compensation programs and policies, on behalf of our board of directors. At its meetings, our full board of directors receives reports concerning the management of the relevant risks from each committee, in addition to reports concerning material risks and concerns or significant updates on such matters from our Chief Legal Officer, Chief Compliance Officer and other executive officers, as necessary.

 

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Meetings of the Board of Directors

The board of directors met seventeen times and acted by written consent once during 2020. All directors attended at least 75% of the aggregate number of meetings of the board of directors and of the committees on which they served that were held during 2020. As required under applicable Nasdaq listing standards, in 2020, the independent directors generally met at each regular board meeting in scheduled executive sessions at which only independent directors were present.

Director Commitments

Our board of directors believes that all members of the board should have sufficient time and attention to devote to board duties and to otherwise fulfill the responsibilities required of directors. In assessing whether directors and nominees for director have sufficient time and attention to devote to board duties, the nominating and corporate governance committee and our board of directors consider, among other things, whether directors may be “overboarded,” which refers to the situation where a director serves on an excessive number of boards.

Our board of directors believes that each of our directors, including each of our director nominees, has demonstrated the ability to devote sufficient time and attention to board duties and to otherwise fulfill the responsibilities required of directors.

Classified Board Structure

Our board of directors is divided into three classes, designated Class I, Class II and Class III. Our nominating and corporate governance committee has discussed the shareholder feedback received on the topic of our classified board structure and continues to believe that this structure is appropriate for our company and beneficial to our shareholders. In particular, the nominating and corporate governance committee believes that the classified board structure:

 

 

promotes stability and continuity, allowing our board and management to remain focused on our long-term strategy and value generation for our shareholders;

 

 

allows for the development of institutional knowledge at the board level, which is particularly important in our industry, given the multi-year life cycles of our product development programs; and

 

 

enhances director independence by decreasing pressures from special interest groups that might have short-term agendas contrary to the long-term interests of our shareholders.

Moreover, a classified board for an Irish company does not present the same entrenchment risk as for a typical U.S. company due to the ability of shareholders to refresh the board at any time under Irish law.

Information About Board Committees

The standing committees of the board of directors include an audit committee, a compensation committee and a nominating and corporate governance committee. Each of these committees is comprised solely of independent directors, has a chairperson and has a written charter approved by the board of directors reflecting applicable standards and requirements adopted by the SEC and Nasdaq. A copy of each committee charter can be found on our website, www.jazzpharmaceuticals.com, in the section titled “About” under the subsection titled “Board of Directors.”

 

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The following table provides membership information for 2020 for each of the audit, compensation, and nominating and corporate governance committees of our board of directors:

 

     

Name

   Audit         Compensation1         Nominating and Corporate
Governance2
    

Paul L. Berns

             🌑               

Patrick G. Enright

   🌑         🌑               

Peter Gray

   C                         

Heather Ann McSharry

   🌑                   C     

Kenneth W. O’Keefe

   🌑                         

Anne O’Riordan

   🌑                         

Norbert G. Riedel, Ph.D.

             C               

Elmar Schnee

                       🌑     

Catherine A. Sohn, Pharm.D.

             🌑         🌑     

Rick E Winningham

                       🌑     

C = committee chairperson                🌑 = committee member

In 2020, the compensation committee’s name was changed to the “Compensation & Management Development Committee” to reflect the committee’s expanded role in reviewing our diversity, talent and culture strategy, including management development, diversity, equity and inclusion initiatives, talent planning and employee engagement. We refer to the Compensation & Management Development Committee in this proxy statement as the compensation committee.

Audit Committee

The audit committee of the board of directors oversees our corporate accounting and financial reporting processes, our systems of internal control over financial reporting and audits of our financial statements, the quality and integrity of our financial statements and reports, the qualifications, independence and performance of the auditors engaged as our independent registered public accounting firm for purposes of preparing or issuing an audit report or performing audit services and certain enterprise risk issues. Specific responsibilities of the audit committee include:

 

 

evaluating the performance of and assessing the qualifications of the independent auditors;

 

 

determining and approving the engagement and remuneration of the independent auditors;

 

 

determining whether to retain or terminate the existing independent auditors or to appoint and engage new independent auditors;

 

 

determining and approving the engagement of the independent auditors to perform any proposed permissible non-audit services;

 

 

monitoring the rotation of partners of the independent auditors on our audit engagement team as required by applicable laws and rules;

 

 

reviewing and advising on the selection and removal of the head of our internal audit function, the activities and organizational structure of the internal audit function and the results of internal audit activities;

 

 

reviewing and approving the internal audit charter at least annually and the annual internal audit plan and budget;

 

 

1 

Jennifer E. Cook was appointed as a member of our compensation committee in April 2021.

2 

Mark D. Smith was appointed as a member of our nominating and corporate governance committee in April 2021.

 

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meeting to review our annual audited financial statements, our quarterly financial statements and our financial press releases with management and the independent auditors, including reviewing our disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our annual and quarterly reports filed with the SEC;

 

 

reviewing, overseeing and approving transactions between our company and any related persons;

 

 

conferring with management, the internal audit function and the independent auditors regarding the scope, adequacy and effectiveness of our internal control over financial reporting;

 

 

reviewing with management, the internal audit function and the independent auditors, as appropriate, major financial risk exposures, including reviewing, evaluating and approving our hedging and other financial risk management policies, as well as the steps taken by management to monitor and control these exposures;

 

 

establishing procedures, when and as required under applicable laws and rules, for the receipt, retention and treatment of any complaints received by our company regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and

 

 

reviewing with management our information security (including cybersecurity) risk exposures and the steps taken by management to monitor and mitigate these exposures.

The audit committee was during all of 2020 composed of Mr. Gray, Mr. Enright, Ms. McSharry, Mr. O’Keefe and Ms. O’Riordan. Our board of directors has determined that each of Mr. Gray, Mr. Enright, Ms. McSharry, Mr. O’Keefe and Ms. O’Riordan meets the independence requirements of Rule 10A-3 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Nasdaq listing standards with respect to audit committee members. Our board of directors has also determined that each of Mr. Gray, Mr. Enright, Ms. McSharry and Mr. O’Keefe qualifies as an “audit committee financial expert” within the meaning of SEC regulations. In making this determination, our board of directors considered the overall knowledge, experience and familiarity of each with accounting matters, analyzing and evaluating financial statements, and, in the case of Mr. O’Keefe, managing private equity investments, and, in the case of Mr. Enright, managing venture capital investments. Mr. Gray serves as chairperson of the audit committee.

The audit committee met four times during 2020. The audit committee also had a number of informal discussions and consultations with one another, with our Chief Financial Officer, our Principal Accounting Officer and our Head of Internal Audit and with Mr. Cozadd during 2020.

 

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Report of the Audit Committee of the Board of Directors(1)

The audit committee has reviewed and discussed the company’s audited financial statements for the fiscal year ended December 31, 2020 with management of the company. The audit committee has discussed with KPMG, the independent registered public accounting firm that audited the company’s financial statements for the fiscal year ended December 31, 2020, the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board, or PCAOB, and the SEC. The audit committee has also received the written disclosures and the letter from KPMG required by applicable requirements of the PCAOB regarding the independent accountants’ communications with the audit committee concerning independence, and has discussed with KPMG that firm’s independence. Based on the foregoing, the audit committee recommended to the board of directors that the audited financial statements be included in the 2020 Annual Report on Form 10-K filed with the SEC.

 

Respectfully submitted,
The Audit Committee of the Board of Directors
Mr. Peter Gray (Chairperson)
Mr. Patrick Enright
Ms. Heather Ann McSharry
Mr. Kenneth W. O’Keefe
Ms. Anne O’Riordan

 

(1)

The material under the heading “Report of the Audit Committee of the Board of Directors” in this proxy statement is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Compensation Committee

The compensation committee of the board of directors reviews and oversees our compensation policies, plans and programs and reviews and generally determines the compensation to be paid to the executive officers and directors, and prepares and reviews the compensation committee report included in our annual proxy statement. Specific responsibilities and authority of our compensation committee include:

 

 

reviewing, modifying (as needed) and approving overall compensation strategy and policies;

 

 

recommending to our board of directors for determination and approval the compensation and other terms of employment of our Chief Executive Officer and evaluating our Chief Executive Officer’s performance in light of relevant goals and objectives;

 

 

reviewing and approving the goals and objectives of our other executive officers and determining and approving the compensation and other terms of employment of these executive officers, as appropriate;

 

 

reviewing and recommending to our board of directors the type and amount of compensation to be paid or awarded to the members of our board of directors;

 

 

having the full power and authority of our board of directors regarding the adoption, amendment and termination of our compensation plans and programs and administering these plans and programs;

 

 

having direct responsibility for appointing, and providing compensation and oversight of the work of, any compensation consultants and other advisors retained by the compensation committee and considering the independence of each such advisor;

 

 

reviewing our practices and policies of employee compensation as they relate to risk management and risk-taking incentives, to determine whether such compensation policies and practices are reasonably likely to have a material adverse effect on our company;

 

 

periodically reviewing with our Chief Executive Officer the plans for succession to the offices of our executive officers and making recommendations to our board of directors with respect to the selection of appropriate individuals to succeed to these positions; and

 

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reviewing and discussing with management our disclosures contained under the caption “Compensation Discussion and Analysis” in our annual proxy statement.

The compensation committee was composed of four directors during 2020: Mr. Berns, Mr. Enright, Dr. Riedel and Dr. Sohn. Dr. Riedel currently serves as the chairperson of the compensation committee. In April 2021, Ms. Cook was appointed as a member of the compensation committee. Each member of the compensation committee meets the independence requirements of the Nasdaq listing standards with respect to compensation committee members. In determining whether Mr. Berns, Mr. Enright, Dr. Riedel, Dr. Sohn and Ms. Cook are independent within the meaning of the Nasdaq listing standards pertaining to compensation committee membership, our board of directors determined, based on its consideration of factors specifically relevant to determining whether any such director has a relationship to us that is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, that no member of the compensation committee has a relationship that would impair that member’s ability to make independent judgments about compensation of our executive officers.

Compensation Committee Processes and Procedures

Our compensation committee meets as often as it determines necessary to carry out its duties and responsibilities through regularly scheduled meetings and, if necessary, special meetings. The agenda for each compensation committee meeting is usually developed by members of our human resources department and our Chief Executive Officer, with input from members of our legal department, and is reviewed and finalized with the chairperson of the compensation committee. Members of our human resources and legal departments also attend compensation committee meetings. From time to time, various other members of management and other employees as well as outside advisors or consultants may be invited by the compensation committee to make presentations, provide financial or other background information or advice or otherwise participate in the compensation committee meetings. The compensation committee met seven times and acted by written consent once during 2020.

In making executive compensation determinations (other than for our Chief Executive Officer), the compensation committee considers recommendations from our Chief Executive Officer. In making his recommendations, our Chief Executive Officer receives input from our human resources department and from the individuals who manage or report directly to the other executive officers, and he reviews various third party compensation surveys and compensation data provided by the independent compensation consultant to the compensation committee, as described in the section of this proxy statement entitled “Executive Compensation—Compensation Discussion and Analysis.” While our Chief Executive Officer discusses his recommendations for the other executive officers with the compensation committee, he does not participate in the deliberations and recommendations to our board of directors concerning, or our board of directors’ determination of, his own compensation. The charter of the compensation committee grants the compensation committee full access to all books, records, facilities and personnel of the company, as well as authority to obtain, at our expense, advice and assistance from compensation consultants and internal and external legal, accounting or other advisors and consultants and other external resources that the compensation committee considers necessary or appropriate in the performance of its duties. In particular, the compensation committee has the authority, in its sole discretion, to retain or obtain, at the expense of the company, compensation consultants to assist in its evaluation of executive compensation, and is directly responsible for the appointment, compensation and oversight of the work of its compensation consultants. The compensation committee engages an independent compensation consultant each year to provide a competitive compensation assessment with respect to the executive officers to assist the compensation committee in making annual compensation decisions. Since 2010, Radford, a business area within Aon plc, or Aon, has been engaged by the compensation committee each year to provide peer company and industry compensation data and provide the compensation committee with advice regarding executive officers’ compensation, including base salaries, performance-based bonuses and long-term equity compensation, and similar advice regarding non-employee director compensation.

 

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The charter of the compensation committee provides that the compensation committee may delegate any responsibility or authority of the compensation committee under its charter to the chairperson of the committee or to one or more committee members, including subcommittees, except to the extent inconsistent with any applicable laws and rules, including the Nasdaq listing standards. Our compensation committee does not, however, delegate any of its functions to others in determining or recommending executive or director compensation.

For additional information regarding our processes and procedures for the consideration and determination of executive compensation, including the role of Radford in determining and recommending executive compensation, see the section of this proxy statement entitled “Executive Compensation—Compensation Discussion and Analysis.” With respect to director compensation matters, our compensation committee recommends to our board of directors and our board of directors determines and sets non-employee director compensation. Our compensation arrangements for our non-employee directors are described under the section of this proxy statement entitled “Director Compensation.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee was at any time our officer or employee during 2020. None of our executive officers serve, or in the past fiscal year served, as a member of the board of directors or the compensation committee of any entity that has one or more of its executive officers serving on our board of directors or compensation committee.

Compensation Consultant Fees

Since 2010, Radford has been engaged by the compensation committee each year to provide peer company and industry compensation data and provide the compensation committee with advice regarding executive officers’ compensation, including base salaries, performance-based bonuses and long-term equity incentives, advice regarding directors’ compensation as well as other matters under the compensation committee’s charter. In 2020, the cost of Radford’s consulting services directly related to compensation committee support was $330,678. In addition, in 2020, our human resources department participated in various human resources and compensation surveys and obtained general benchmarking survey data from Radford at a cost of $15,310.

Management also engaged with Aon plc affiliates of Radford, for various insurance-related products and services, covering health and benefits, pension-related services, other insurance brokerage services and risk services to the business. The aggregate Aon revenue from these additional services in 2020 (not related to Radford’s compensation committee consulting services) was $360,292. Although the compensation committee was aware of the nature of the services performed by Aon affiliates and the non-executive employee compensation survey data provided by Radford, the compensation committee did not review and approve such services, surveys and insurance premiums and policies, as those were reviewed and approved by management in the ordinary course of business.

Aon maintains certain policies and practices to protect the independence of the executive compensation consultants engaged by the compensation committee. In particular, Radford provides an annual update to the compensation committee on the financial relationship between Aon and the company, and provides written assurances that, within Aon, the Radford consultants who perform executive compensation services for the compensation committee have compensation determined separately from Aon’s other lines of business and from the other services it provides to the company. These safeguards were designed to help ensure that the compensation committee’s executive compensation consultants continued to fulfill their role in providing independent, objective advice.

 

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Compensation Committee Report(1)

The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis contained herein. Based on this review and discussion, the compensation committee has recommended to the board of directors that the Compensation Discussion and Analysis be included in our proxy statement for the 2021 annual general meeting of shareholders and be included in the company’s Annual Report on Form 10-K we filed with the SEC for the fiscal year ended December 31, 2020.

 

Respectfully submitted,
The Compensation Committee of the Board of Directors
Dr. Norbert G. Riedel, Ph.D. (Chair)
Mr. Paul L. Berns
Mr. Patrick G. Enright
Dr. Catherine A. Sohn, Pharm.D.

 

(1)

The material under the heading “Compensation Committee Report” in this proxy statement is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Nominating and Corporate Governance Committee

The nominating and corporate governance committee of our board of directors is responsible for, among other things:

 

 

overseeing all aspects of our corporate governance functions on behalf of our board of directors;

 

 

making recommendations to our board of directors regarding corporate governance issues;

 

 

identifying, reviewing and evaluating candidates to serve on our board of directors, and reviewing and evaluating incumbent directors;

 

 

reviewing, evaluating and considering the recommendation for nomination of incumbent members for reelection to our board of directors and monitoring the size of our board;

 

 

recommending director candidates to our board of directors;

 

 

overseeing on behalf of our board of directors the company’s compliance with applicable laws and regulations, other than the financial compliance issues overseen by the audit committee;

 

 

overseeing on behalf of our board of directors the company’s risk management matters, other than with respect to risks that are financial or information security risks (as to which the audit committee has oversight responsibility on behalf of our board of directors) or risks related to compensation policies (as to which the compensation committee has oversight responsibility on behalf of our board of directors);

 

 

evaluating director nominations and proposals by our shareholders and establishing policies, requirements, criteria and procedures in furtherance of the foregoing; and

 

 

reviewing, discussing and assessing the performance of our board of directors, including committees of our board of directors, seeking input from all board members, senior management and others.

The nominating and corporate governance committee believes that candidates for director should have certain minimum qualifications, including the ability to read and understand basic financial statements, being over 21 years of age, and the highest personal integrity and ethics. The nominating and corporate governance committee also intends to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to our affairs, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of our shareholders. However, the nominating and corporate governance committee retains the right to modify these qualifications from time to time. Members of the nominating and corporate

 

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governance committee obtain recommendations for potential directors from their and other board members’ contacts in our industry, and we or the nominating and corporate governance committee have in the past and may from time to time again in the future engage a search firm to assist in identifying potential directors. In this regard, in 2020, we underwent a board refreshment program and candidate search for new directors. As part of that search process, the nominating and corporate governance committee asked the search firm it engaged to provide, and then considered, a set of candidates that included both underrepresented people of color and different genders. In late 2020, after being considered and recommended by the nominating and corporate governance committee, we added two additional diverse directors to our board: Dr. Smith and Ms. Cook.

Candidates for director nominees are reviewed in the context of the then current composition of the board of directors, the operating requirements of the company and the long-term interests of shareholders. In this regard, we examine the experience and expertise of our board as a whole to ensure alignment between the abilities and contributions of our board and our strategic priorities and long-range plan, emphasizing, among other things, expertise in global and U.S. sales and marketing, in product development, in financial management and in corporate development transactions. In addition, while we do not have specific numerical targets with respect to board diversity, the nominating and corporate governance committee’s policy is to take into account a broad range of considerations when assessing director candidates, including individual backgrounds, gender, skill sets, professional experience, geographic residency and other factors. The nominating and corporate governance committee assesses the effectiveness of its diversity policy through its periodic evaluation of the composition of the full board of directors. Recently, in recruiting and nominating candidates for our board of directors, our nominating and corporate governance committee has focused on increasing diversity overall, including with respect to gender and geographic residency.

Of the director nominees and the continuing directors, our board of directors has four female directors, four Irish directors, one of whom is a non-resident, one director that identifies as LBGTQ and one person of color. In the case of incumbent directors whose terms of office are set to expire, the nominating and corporate governance committee reviews these directors’ overall service to the company during their terms, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair the directors’ independence, as well as the results of the board of directors’ self-evaluation, which is generally conducted annually, to determine whether to recommend them to the board of directors for nomination for a new term. In the case of new director candidates, the nominating and corporate governance committee also determines whether the nominee is “independent” based upon applicable Nasdaq listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary. The nominating and corporate governance committee conducts appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the board of directors. The nominating and corporate governance committee meets to discuss and consider the candidates’ qualifications and then selects a nominee for recommendation to the board of directors.

The nominating and corporate governance committee will consider director candidates recommended by shareholders on a case-by-case basis, as appropriate. Shareholders wishing to recommend individuals for consideration by the nominating and corporate governance committee may do so by delivering a written recommendation to our Company Secretary at Fifth Floor, Waterloo Exchange, Waterloo Road, Dublin 4, Ireland with the candidate’s name, biographical data and qualifications and a document indicating the candidate’s willingness to serve if elected. The nominating and corporate governance committee does not intend to alter the manner in which it evaluates candidates based on whether the candidate was recommended by a shareholder or not.

To date, the nominating and corporate governance committee has not received any such nominations nor has it rejected a director nominee from a shareholder or shareholders.

Our nominating and corporate governance committee was during all of 2020 composed of four directors: Ms. McSharry, Mr. Schnee, Dr. Sohn and Mr. Winningham. Ms. McSharry serves as chairperson of the nominating and corporate governance committee. In April 2021, Dr. Smith was appointed as a member of the nominating and corporate governance committee. Each member of the nominating and corporate governance committee meets the independence requirements of the Nasdaq listing standards.

The nominating and corporate governance committee met eight times during 2020.

 

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Corporate Governance Strengths

We are committed to exercising good corporate governance practices. We believe that good governance promotes the long-term interests of our shareholders and strengthens board and management accountability. The highlights of our corporate governance practices include the following:

 

•   Of our director nominees and continuing directors, 11 out of 12 are independent

 

•   Regular executive sessions of independent directors

 

•   Audit, compensation and nominating and corporate governance committees are comprised solely of independent directors

 

•   Diverse board in terms of tenure, residency, gender, ethnicity, sexual orientation, experience and skills

 

•   Annual board self-evaluation(1)

 

•   Risk oversight by the full board and committees

 

•   Board and committees may engage outside advisors independently of management

 

•   Independent compensation consultant reporting directly to the compensation committee

  

•   Director participation in continuing education and related reimbursement policy

 

•   Lead Independent Director with clearly delineated duties

 

•   Corporate Governance Guidelines

 

•   Majority voting for elections of directors for a three-year term

 

•   Share ownership guidelines for directors and executive officers

 

•   Anti-hedging/pledging policy

 

•   Code of Conduct

 

•   Annual advisory approval of executive compensation

 

•   Shareholder ability to call extraordinary meetings

 

 

(1)

In 2020, the nominating and corporate governance committee engaged a third-party advisor to conduct a comprehensive, independent evaluation that included interviews with each member of the board, including a specific focus on the key capabilities and skills that existed on the board and where there were opportunities for enhancement.

Other Corporate Governance Matters

Corporate Governance Guidelines. As a part of our board of directors’ commitment to enhancing shareholder value over the long term, our board of directors has adopted a set of Corporate Governance Guidelines to provide the framework for the governance of our company and to assist our board of directors in the exercise of its responsibilities. Our Corporate Governance Guidelines cover, among other topics, board composition, structure and functioning, director qualifications and board membership criteria, director independence, board and board committee annual self-evaluations, committees of the board, board access to management and outside advisors, board share ownership guidelines, and director orientation and education. Our Corporation Governance Guidelines are available on our website at www.jazzpharmaceuticals.com under the section entitled “About” under “Board of Directors.”

Anti-Hedging/Pledging Policy. Our insider trading policy prohibits directors, executive officers and other employees from engaging in speculative trading activities, including hedging transactions or other inherently speculative transactions with respect to our securities. Our insider trading policy also prohibits directors, executive officers and other employees from pledging our securities as collateral for any loans.

Share Ownership Guidelines for Directors and Executive Officers. We maintain and periodically review share ownership guidelines for our non-employee directors, Chief Executive Officer and certain other employees who serve on our executive committee. More information about our share ownership guidelines can be found under the sections of this proxy statement entitled “Executive Compensation—Compensation Discussion and Analysis—Additional Compensation Information—Ownership Guidelines for Executive Officers” and “Director Compensation—Ownership Guidelines for Directors.”

 

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Shareholder Ability to Call Extraordinary Meetings. Irish law provides that shareholders holding 10% or more of the total voting rights may at any time request that the directors call an extraordinary general meeting (i.e., special meeting). The shareholders who wish to request an extraordinary general meeting must deliver to our principal executive office a written notice, signed by the shareholders requesting the meeting and stating the purposes of the meeting. If the directors do not, within 21 days of the date of delivery of the request, proceed to convene a meeting to be held within two months of that date, those shareholders (or any of them representing more than half of the total voting rights of all of them) may themselves convene a meeting within a specified period, but any meeting so convened cannot be held after the expiration of three months from the date of delivery of the request.

Code of Conduct. Our Code of Conduct applies to all of our employees, directors and officers, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and those of our subsidiaries. The Code of Conduct is available on our website at www.jazzpharmaceuticals.com under the section entitled “About” under “Corporate Ethics.” We intend to satisfy the disclosure requirements under Item 5.05 of SEC Form 8-K regarding an amendment to, or waiver from, a provision of our Code of Conduct by posting such information on our website at the website address and location specified above.

Shareholder Communications with the Board of Directors. Our board of directors believes that shareholders should have an opportunity to communicate with the board, and efforts have been made to ensure that the views of shareholders are heard by the board of directors or individual directors, as applicable, and that appropriate responses are provided to shareholders in a timely manner. We believe that our responsiveness to shareholder communications to the board of directors has been excellent. Shareholders interested in communicating with the board of directors or a particular director (including our Chairman or our Lead Independent Director) may do so by sending written communication to: Jazz Pharmaceuticals plc, Attention: Company Secretary, Fifth Floor, Waterloo Exchange, Waterloo Road, Dublin 4, Ireland. Each communication should set forth the name and address of the shareholder as it appears on our records (and, if the shares are held by a nominee, the name and address of the beneficial owner of the shares), and the number of our ordinary shares that are owned of record by the record holder or beneficially by the beneficial owner, as applicable. The Company Secretary will, in his or her discretion, screen out communications from shareholders that are not related to the duties and responsibilities of the board of directors. The purpose of this screening is to allow the board of directors to avoid having to consider irrelevant or inappropriate communications (such as advertisements, solicitations and hostile communications). If deemed an appropriate communication, the Company Secretary will forward the communication, depending on the subject matter, to the Chairman, the Lead Independent Director or the chairperson of the appropriate committee of the board of directors.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the ownership of our ordinary shares as of May 1, 2021 (except as noted) by: (i) each director; (ii) each of the executive officers named in the Summary Compensation Table under “Executive Compensation” below (referred to throughout this proxy statement as our NEOs); (iii) all of our executive officers and directors as a group; and (iv) all those known by us to be beneficial owners of more than five percent of our ordinary shares.

 

     Beneficial Ownership(2)  
 

Name and Address of Beneficial Owner(1)

   Number of Shares     

Percentage of

Total

 

5% Shareholders:

     

BlackRock, Inc.(3)

55 East 52nd Street

New York, NY 10055

     6,395,173        11.2

The Vanguard Group(4)

100 Vanguard Blvd.

Malvern, PA 19355

     4,877,893        8.6

Renaissance Technologies LLC(5)

800 Third Avenue

New York, NY 10022

     3,099,050        5.4

FMR LLC(6)

245 Summer Street.

Boston, MA 02210

     2,927,121        5.1

Named Executive Officers and Directors:

     

Bruce C. Cozadd(7)

     1,031,071        1.8

Daniel N. Swisher, Jr.(8)

     86,952        *  

Renée Galá(9)

     15,750        *  

Robert Iannone, M.D., M.S.C.E(10)

     32,295        *  

Kim Sablich(11)

     14,700        *  

Paul L. Berns(12)

     38,120        *  

Jennifer E. Cook(13)

                      —        *  

Patrick G. Enright(14)

     26,203        *  

Peter Gray(15)

     39,400        *  

Heather Ann McSharry(16)

     37,713        *  

Seamus Mulligan(17)

     1,183,873        2.1

Kenneth W. O’Keefe(18)

     46,992        *  

Anne O‘Riordan(19)

     14,141        *  

Norbert G. Riedel, Ph.D.(20)

     36,839        *  

Elmar Schnee(21)

     30,982        *  

Mark D. Smith, M.D.(22)

                      —        *  

Catherine A. Sohn, Pharm.D.(23)

     30,002        *  

Rick E Winningham(24)

     25,578        *  

All directors and executive officers as a group (22 persons)(25)

     2,785,882        4.8

 

*

Less than 1%.

 

(1)

Unless otherwise provided in the table above or in the notes below, the address for each of the beneficial owners listed is c/o Fifth Floor, Waterloo Exchange, Waterloo Road, Dublin 4, Ireland.

 

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Security Ownership of Certain Beneficial Owners and Management (continued)

 

 

 

(2)

This table is based upon information supplied by officers and directors as well as Schedules 13G or 13G/A filed with the SEC by beneficial owners of more than five percent of our ordinary shares. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the shareholders named in this table has sole voting and investment power with respect to the ordinary shares indicated as beneficially owned. Applicable percentages are based on 56,895,944 ordinary shares outstanding on May 1, 2021, adjusted as required by rules promulgated by the SEC. The number of shares beneficially owned includes ordinary shares issuable pursuant to the exercise of stock options that are exercisable and RSUs that will vest within 60 days of May 1, 2021. Shares issuable pursuant to the exercise of stock options that are exercisable and RSUs that will vest within 60 days of May 1, 2021 are deemed to be outstanding and beneficially owned by the person to whom such shares are issuable for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

 

(3)

This information is based on a Schedule 13G/A filed with the SEC on February 5, 2021 by BlackRock, Inc., or BlackRock. According to the Schedule 13G/A, as of December 31, 2020, BlackRock has sole power to vote or direct the vote of 5,878,981 ordinary shares and sole power to dispose or direct the disposition of 6,395,173 ordinary shares. The Schedule 13G/A also indicates that BlackRock is acting as a parent holding company for a number of entities that beneficially owned the ordinary shares being reported. The Schedule 13G/A provides information only as of December 31, 2020 and, consequently, the beneficial ownership of the above-mentioned entity may have changed between December 31, 2020 and May 1, 2021.

 

(4)

This information is based on a Schedule 13G/A filed with the SEC on February 10, 2021 by The Vanguard Group, or Vanguard. According to the Schedule 13G/A, as of December 31, 2020, Vanguard has shared power to vote or direct the vote of 51,993 ordinary shares, sole power to dispose or direct the disposition of 4,748,290 ordinary shares, and shared power to dispose or direct the disposition of 129,603 shares. The Schedule 13G/A provides information only as of December 31, 2020 and, consequently, the beneficial ownership of the above-mentioned entity may have changed between December 31, 2020 and May 1, 2021.

 

(5) 

This information is based on a Schedule 13G/A filed with the SEC on February 11, 2021 by Renaissance Technologies, LLC, or Renaissance, on behalf of itself and Renaissance Technologies Holdings Corporation, or RTHC. According to the Schedule 13G/A, as of December 31, 2020, Renaissance has sole power to vote or direct the vote of 3,099,050 ordinary shares and sole power to dispose or the direct the disposition of 3,099,050 ordinary shares. Of these shares, RTHC, as a result of its majority ownership of Renaissance, is the beneficial owner of 3,099,050 ordinary shares, with sole power to vote or direct the vote of 3,099,050 ordinary shares and sole power to dispose or direct the disposition of 3,099,050 ordinary shares. The Schedule 13G/A provides information only as of December 31, 2020 and, consequently, the beneficial ownership of the above-mentioned entities may have changed between December 31, 2020 and May 1, 2021.

 

(6)

This information is based on a Schedule 13G filed with the SEC on February 8, 2021 by FMR, LLC, or FMR. According to the Schedule 13G, as of December 31, 2020, FMR has sole power to vote or direct the vote of 580,941 ordinary shares and sole power to dispose or the direct the disposition of 2,927,121 ordinary shares. The Schedule 13G provides information only as of December 31, 2020 and, consequently, the beneficial ownership of the above-mentioned entity may have changed between December 31, 2020 and May 1, 2021.

 

(7)

Includes 818,905 ordinary shares Mr. Cozadd has the right to acquire pursuant to options exercisable within 60 days of May 1, 2021.

 

(8)

Includes 72,186 ordinary shares Mr. Swisher has the right to acquire pursuant to options exercisable within 60 days of May 1, 2021.

 

(9)

Includes 12,968 ordinary shares Ms. Galá has the right to acquire pursuant to options exercisable within 60 days of May 1, 2021. Ms. Galá was appointed our Executive Vice President and Chief Financial Officer as of March 2020.

 

(10)

Includes 24,885 ordinary shares Dr. Iannone has the right to acquire pursuant to options exercisable and 3,050 shares Dr. Iannone is expected to receive pursuant to RSU’s scheduled to vest, in each case within 60 days of May 1, 2021.

 

(11)

Includes 10,500 ordinary shares Ms. Sablich has the right to acquire pursuant to options exercisable and 4,200 shares Ms. Sablich is expected to receive pursuant to RSU’s scheduled to vest, in each case within 60 days of May 1, 2021. Ms. Sablich was appointed our Executive Vice President and General Manager, North America, as of June 2020.

 

(12)

Includes 31,085 ordinary shares Mr. Berns has the right to acquire pursuant to options exercisable within 60 days of May 1, 2021.

 

(13)

Ms. Cook joined our board of directors effective December 1, 2020.

 

(14)

Includes 8,540 ordinary shares Mr. Enright has the right to acquire pursuant to options exercisable within 60 days of May 1, 2021.

 

(15)

Includes 30,085 ordinary shares Mr. Gray has the right to acquire pursuant to options exercisable within 60 days of May 1, 2021.

 

(16)

Includes 30,085 ordinary shares Ms. McSharry has the right to acquire pursuant to options exercisable within 60 days of May 1, 2021.

 

(17)

Includes 31,085 ordinary shares Mr. Mulligan has the right to acquire pursuant to options exercisable within 60 days of May 1, 2021.

 

(18)

Includes 26,585 ordinary shares Mr. O’Keefe has the right to acquire pursuant to options exercisable within 60 days of May 1, 2021.

 

(19)

Includes 10,327 ordinary shares Ms. O’Riordan has the right to acquire pursuant to options exercisable within 60 days of May 1, 2021.

 

(20)

Includes 30,085 ordinary shares Dr. Riedel has the right to acquire pursuant to options exercisable within 60 days of May 1, 2021.

 

(21)

Includes 23,785 ordinary shares Mr. Schnee has the right to acquire pursuant to options exercisable within 60 days of May 1, 2021.

 

(22)

Dr. Smith joined our board of directors effective December 1, 2020.

 

(23)

Includes 22,085 ordinary shares Dr. Sohn has the right to acquire pursuant to options exercisable within 60 days of May 1, 2021.

 

(24)

Includes 22,085 ordinary shares Mr. Winningham has the right to acquire pursuant to options exercisable within 60 days of May 1, 2021.

 

(25)

Includes 1,289,852 ordinary shares that our executive officers and non-employee directors have the right to acquire pursuant to options exercisable within 60 days of May 1, 2021 and 7,250 ordinary shares that our executive officers are expected to receive pursuant to RSUs scheduled to vest within 60 days of May 1, 2021. See footnotes (7) through (24) above.

 

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EXECUTIVE OFFICERS

The following table provides information regarding our executive officers as of June 1, 2021.

 

   

Name

   Age      Position

Bruce C. Cozadd

     57      Chairman and Chief Executive Officer

Daniel N. Swisher, Jr.

     58      President

Renée Galá

     49      Executive Vice President and Chief Financial Officer

Robert Iannone, M.D., M.S.C.E

     54      Executive Vice President, Research and Development and Chief Medical Officer

Kim Sablich

     52      Executive Vice President and General Manager, North America

Christopher Tovey

     56      Executive Vice President and Chief Operating Officer and Managing Director, Europe and International

Finbar Larkin, Ph.D.

     63      Senior Vice President, Technical Operations

Neena M. Patil

     46      Chief Legal Officer and Senior Vice President, Legal and Corporate Affairs

Samantha Pearce

     55      Senior Vice President, Europe and International

Patricia Carr

     50      Vice President, Finance and Principal Accounting Officer

Bruce C. Cozadd. Biographical information regarding Mr. Cozadd is set forth above under “Our Board of Directors.”

Daniel N. Swisher, Jr. was appointed our President as of January 2018 and also served as our Chief Operating Officer from that date until May 2021. From December 2003 to December 2017, he was Chief Executive Officer and a member of the board of directors of Sunesis Pharmaceuticals, Inc., a biopharmaceutical company focused on the development of novel targeted cancer therapeutics in hematologic and solid tumor malignancies. He also served as Chief Business Officer and Chief Financial Officer of Sunesis from 2001 to 2003. Prior to 2001, Mr. Swisher served in various management roles, including Senior Vice President of Sales and Marketing, for ALZA Corporation from 1992 to 2001. He currently serves as Chairman of the board of directors of Cerus Corporation, a biomedical products company focused on the field of blood transfusion safety, and as a member of the board of directors of Corcept Therapeutics Inc., a pharmaceutical company focused on cortisol-modulating therapeutics to address metabolic and other serious medical conditions. Mr. Swisher received a B.A. from Yale University and an M.B.A. from the Stanford Graduate School of Business.

Renée Galá was appointed our Executive Vice President and Chief Financial Officer as of March 2020. From January to June 2019, Ms. Galá served as the Chief Financial Officer of GRAIL, Inc., a private healthcare company focused on the early detection of cancer. Prior to that, from December 2014 to January 2019, she served as Senior Vice President and Chief Financial Officer of Theravance Biopharma, Inc., a biopharmaceutical company, following its spin-out from Innoviva, Inc. Ms. Galá joined Innoviva in 2006 and held various roles in the finance organization before leading the company’s spin-out transaction. Prior to that, Ms. Galá served in various roles in global treasury, pharmaceutical sales and corporate strategy/business development at Eli Lilly and Company, from 2001 to 2006. Before joining Eli Lilly, Ms. Galá spent seven years in the energy industry in positions focused on corporate finance, project finance, and mergers and acquisitions. Ms. Galá serves on the board of directors of Gossamer Bio, Inc., a clinical-stage biopharmaceutical company, where she also chairs the audit committee, and Gyroscope Therapeutics, a clinical-stage gene therapy company, where she also chairs the audit committee. Ms. Galá previously served on the board of directors of Corcept Therapeutics Inc. from June 2016 to June 2019. Ms. Galá holds a B.S. in Mathematics from Vanderbilt University and an M.B.A. from Columbia Business School.

Robert Iannone, M.D., M.S.C.E. was appointed our Executive Vice President, Research and Development as of May 2019, and additionally has served as our Chief Medical Officer since December 2019. From April 2018 until

 

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Executive Officers (continued)

 

 

May 2019, Dr. Iannone served as Head of Research and Development and Chief Medical Officer of Immunomedics, Inc., a biopharmaceutical company. Prior to that, from July 2014 to April 2018, Dr. Iannone served in the roles of Senior Vice President and Head of Immuno-oncology, Global Medicines Development and the Global Products Vice President at AstraZeneca plc, a global science-led biopharmaceutical company. From 2004 to 2014, Dr. Iannone served in management roles at Merck Co., Inc., a global biopharmaceutical company, culminating in his role as Executive Director and Section Head of Oncology Clinical Development. From 2001 to 2004, he served as Assistant Professor of Pediatrics and from 2004 to 2012 as Adjunct Assistant Professor of Pediatrics at the University of Pennsylvania School of Medicine. Dr. Iannone has been serving on the board of directors of iTeos Therapeutics, Inc., a clinical-stage biopharmaceutical company, since May 2021, Jounce Therapeutics, Inc., a clinical-stage immunotherapy company, since January 2020 and on the Cancer Steering Committee of the Foundation for the National Institutes of Health since 2011. Dr. Iannone received a B.S. from The Catholic University of America, an M.D. from Yale University and an M.S.C.E. from University of Pennsylvania and completed his residency in Pediatrics and fellowship in Pediatric Hematology-Oncology at Johns Hopkins University.

Kim Sablich was appointed our Executive Vice President and General Manager, North America, as of June 2020. Ms. Sablich previously served as the Chief Commercial Officer of Myovant Sciences, Inc., a clinical-stage biopharmaceutical company, from December 2018 to May 2020. Prior to that, she served in various executive roles at GlaxoSmithKline plc, a multinational pharmaceutical company, including as Vice President, U.S. Primary Care Marketing from May 2015 to May 2018, as Vice President, Global Medicines Commercialization from July 2013 to May 2015, and as Vice President, U.S. Vaccines Commercial Strategy from October 2010 to June 2013. Prior to 2010, Ms. Sablich served in various positions of increasing responsibility at Merck & Company, a global healthcare company, in its commercial organization across sales, product management, pricing/access, and customer insights, with a focus on the cardiovascular, respiratory, and vaccines business areas. She serves on the board of directors of AllerGenis, LLC, a food allergy diagnostic solutions company. Ms. Sablich holds a B.A. in Economics from Denison University and an M.B.A. from The Wharton School of the University of Pennsylvania.

Christopher Tovey was appointed our Executive Vice President and Chief Operating Officer and Managing Director, Europe & International, in May 2021 following the GW Acquisition, where he served as Executive Vice President and Chief Operating Officer since joining GW in October 2012. Prior to joining GW, Mr. Tovey served in multiple roles at UCB Pharmaceuticals from 2006 to 2012, most recently as Vice President of Global Marketing Operations. Prior to joining UCB, Mr. Tovey served 18 years at GlaxoSmithKline plc in senior commercial roles in both the European and U.K. organizations. These roles included Director Commercial Strategy Distribution Europe, Director European Vaccine Therapy, Director Commercial Development U.K., Director Vaccines Business Unit U.K. and Business Unit Manager Oncology U.K. Mr. Tovey holds a BSc in marine biology from the University of Liverpool, U.K.

Finbar Larkin, Ph.D. was appointed our Senior Vice President, Technical Operations as of October 2019 and served as our Senior Vice President, Pharmaceutical Development & Manufacturing Science from September 2018 until October 2019, our Vice President, Technical Development from February 2014 until August 2018, and our Executive Director, Technical Operations from April 2013 until February 2014. Prior to that, from September 2009 until March 2013, Dr. Larkin served in management roles at Ipsen Pharma SAS, culminating in his role as Vice President, Engineering & Senior Specialist. From February 1997 until August 2009, he served as Vice President and Managing Director at Ipsen Manufacturing Ireland. From 1990 until 1997, he served in various project and operational management roles at Novartis. Prior to 1990, Dr. Larkin served in various roles in manufacturing science and technology, human resources and quality & analytical science at Lilly SA. Dr. Larkin received a B.Sc. and Ph.D. in Chemistry from University College Dublin.

Neena M. Patil was appointed our Senior Vice President and General Counsel as of July 2019, and has served as our Chief Legal Officer and Senior Vice President, Legal and Corporate Affairs since February 2021. From September 2018 to July 2019, Ms. Patil served as Senior Vice President, General Counsel and Corporate Secretary of Abeona Therapeutics Inc., a clinical-stage biopharmaceutical company. Prior to that, from May 2008 to October 2016, Ms. Patil served in management positions at Novo Nordisk Inc., culminating in her role as Vice President for Legal Affairs and Associate General Counsel. Prior to 2008, she worked for several other global biopharmaceutical companies including Pfizer, GPC Biotech and Sanofi. Since 2015, she has been serving on the

 

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Executive Officers (continued)

 

 

board of directors of Penn Medicine – Princeton Medical Center Foundation. Ms. Patil received a B.A. from Georgetown University and a J.D. and Master of Health Services Administration from the University of Michigan.

Samantha Pearce was appointed our Senior Vice President, Europe and International as of March 2020. From March 2010 to December 2019, Ms. Pearce held various global senior management positions with Celgene Corporation, most recently as Vice President and General Manager, International Markets. Prior to that, from August 2002 to March 2010, she served in management positions at AstraZeneca plc, culminating in her role as Director, Specialist Care. Prior to August 2002, she worked for DuPont Pharmaceuticals. Ms. Pearce received a B.Sc. from Birmingham University, U.K. and an M.B.A. from Cranfield University, U.K.

Patricia Carr was appointed our Vice President, Finance in July 2012 and was appointed our Principal Accounting Officer as of August 2019. Prior to that, from September 2011 to July 2012, she served as Vice President, Finance of Alkermes plc, a global biopharmaceutical company. From June 2002 to September 2011, she served in a number of roles in Elan Corporation, a neuroscience-based biotechnology company, most recently as Vice President, Finance. Ms. Carr is a Fellow of the Institute of Chartered Accountants (Ireland) and received a Bachelor of Commerce from the National University of lreland, Galway.

 

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

 

The following Compensation Discussion and Analysis describes the material elements of compensation for the following individuals who served as our principal executive officer, principal financial officer and three other most highly compensated executive officers as December 31, 2020. These individuals are our named executive officers, or NEOs, for 2020.

 

 

Bruce C. Cozadd

Chairman and Chief Executive officer (CEO)

Daniel N. Swisher, Jr.

President and Chief Operating Officer (COO)(1)

Renée Galá

Executive Vice President and Chief Financial Officer (CFO)

Robert Iannone

Executive Vice President, Research and Development and Chief Medical Officer (CMO)

Kim Sablich

Executive Vice President and General Manager, North America

 

 

TABLE OF CONTENTS

 

Compensation Discussion and Analysis

        

Executive Summary

     37  

2020 Performance Highlights

     38  

Key Features of Our Executive Compensation Program

     40  

2020 Pay-for-Performance Overview

     40  

Compensation Philosophy and Objectives

     41  

How We Determine Executive Compensation

     42  

Role of Our Compensation Committee and Executive Officers

     42  

Role of the Independent Compensation Consultant

     43  

Competitive Assessment of Compensation – Peer Companies and Market Data

     43  

Factors Used in Determining Executive Compensation

     45  

2020 Advisory Vote on Executive Compensation and Shareholder Engagement

     45  

Key Components and Design of the Executive Compensation Program

     47  

Total Direct Compensation

     47  

Components of Total Direct Compensation

     48  

2020 Performance Bonus Program

     49  

Quantitative Objectives

     50  

Qualitative Objectives

     53  

2020 Compensation Decisions for Our Named Executive Officers

     54  

General Approach

     54  

Summary of 2020 Compensation Decisions

     54  

Individual NEO Compensation Decisions

     55  

Additional Compensation Information

     61  

Ownership Guidelines for Executive Officers

     61  

Change in Control Plan

     61  

Equity Grant Timing and Equity Plan Information

     62  

Accounting and Tax Considerations

     62  

Risk Assessment Concerning Compensation Practices and Policies

     63  

Reconciliations of Non-GAAP Financial Measures

     63  
 

 

 

 

(1)

Mr. Swisher served as our Chief Operating Officer from January 2018 to May 2021.

 

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Executive Compensation (continued)

 

 

Executive Summary

We are an innovative global biopharmaceutical company dedicated to developing and commercializing life-changing medicines that transform the lives of patients with serious diseases – often with limited or no therapeutic options. We have a diverse portfolio of marketed medicines and novel product candidates, from early- to late-stage development, across key therapeutic areas. Our focus is in neuroscience, including sleep, epilepsy and movement disorders, and in oncology, including hematologic malignancies and solid tumors. We actively explore new options for patients, including novel compounds, small molecules and biologics and through cannabinoid science and innovative delivery technologies.

Our lead marketed products are:

 

 

Xyrem® (sodium oxybate) oral solution, a product approved by the U.S. Food and Drug Administration, or FDA, and marketed in the U.S. for the treatment of both cataplexy and excessive daytime sleepiness, or EDS, in narcolepsy patients seven years of age and older;

 

 

Xywav (calcium, magnesium, potassium, and sodium oxybates) oral solution, a product that contains 92% less sodium than Xyrem, approved by FDA and launched in the U.S. in November 2020 for the treatment of cataplexy or EDS in narcolepsy patients seven years of age and older;

 

 

Epidiolex®, a pharmaceutical formulation comprising highly purified plant-derived cannabidiol, or CBD, approved in the U.S. and also in Europe, where it is marketed as Epidyolex, for the treatment of seizures associated with Lennox-Gastaut syndrome (LGS), Dravet syndrome and Tuberous Sclerosis Complex (TSC), for patients one year of age and older;

 

 

Sunosi® (solriamfetol), a product approved by FDA and marketed in the U.S. and in Europe to improve wakefulness in adult patients with EDS associated with narcolepsy or obstructive sleep apnea;

 

 

Zepzelca (lurbinectedin), a product approved by FDA in June 2020 and launched in the U.S. in July 2020 for the treatment of adult patients with metastatic small cell lung cancer, or SCLC, with disease progression on or after platinum-based chemotherapy;

 

 

Vyxeos® (daunorubicin and cytarabine) liposome for injection, a product approved in the U.S. and in Europe (where it is marketed as Vyxeos® liposomal 44 mg/100 mg powder for concentrate for solution for infusion) for the treatment of adults with newly-diagnosed therapy-related acute myeloid leukemia, or AML, or AML with myelodysplasia-related changes;

 

 

Defitelio® (defibrotide sodium), a product approved in the U.S. for the treatment of adult and pediatric patients with hepatic veno-occlusive disease, or VOD, also known as sinusoidal obstruction syndrome, with renal or pulmonary dysfunction following hematopoietic stem cell transplantation, or HSCT, and in Europe (where it is marketed as Defitelio® (defibrotide)) for the treatment of severe VOD in adults and children after undergoing HSCT therapy; and

 

 

Erwinaze® (asparaginase Erwinia chrysanthemi), a treatment approved in the U.S. and in certain markets in Europe (where it is marketed as Erwinase®) for patients with acute lymphoblastic leukemia, or ALL, who have developed hypersensitivity to E. coli-derived asparaginase.

Our strategy to create sustainable shareholder value is focused on:

 

 

Strong commercial execution to drive diversified revenue growth and address unmet medical needs of our patients across our product portfolio;

 

 

Expanding and advancing our pipeline through internal and external patient-centric innovation to achieve a valuable product portfolio of durable, highly differentiated programs;

 

 

Continuing to build a flexible, efficient, and productive development engine for targeted therapeutic conditions to identify and progress early- and mid-stage assets; and

 

 

Investing in an efficient, scalable operating model and differentiated capabilities to enable growth; and unlock further value through indication expansion and global markets.

 

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Executive Compensation (continued)

 

 

In 2020, consistent with our strategy, we continued to focus on research and development activities within our neuroscience and oncology therapeutic areas, such as our expansion into solid tumors, and exploring and investing in adjacent therapeutic areas that could further diversify our portfolio. In addition, in May 2021, we completed the GW Acquisition. We view the GW Acquisition as consistent with our overall business and capital allocation strategy to expand our neuroscience portfolio and drive substantial value for our shareholders. We achieved these accomplishments despite the global impact of the COVID-19 pandemic. In response to the COVID-19 pandemic, we developed a comprehensive response strategy including establishing cross-functional response teams and implementing business continuity plans to manage the impacts of the evolving effects of the COVID-19 pandemic on our employees, patients and our business. We support broad public health strategies designed to prevent the spread of COVID-19 and are focused on the health and welfare of our employees.

2020 Performance Highlights

Despite the challenges faced due to the COVID-19 pandemic in 2020, we delivered record total revenues and made meaningful progress on our goal to significantly grow and diversify 2022 revenues from products launched since 2019, highlighted by the strong execution of our U.S. launches of both Zepzelca and Xywav. We meaningfully increased revenues, executed three product launches, advanced early- and late-stage clinical trials and added multiple new product candidates to our expanding pipeline, all of which exemplify our highly effective operational execution throughout 2020, while continuing our transformation as an innovative global biopharmaceutical company.

 

Financial   

•   2020 total revenues of $2,363.6 million increased 9% over 2019

  

•   2020 GAAP1 net income of $238.6 million, or $4.22 per diluted share, compared to $523.4 million, or $9.09 per diluted share, for 2019

  

•   2020 non-GAAP adjusted net income of $704.0 million2, or $12.46 per diluted share, compared to $885.2 million, or $15.38 per diluted share, for 2019

Commercial   

•   2020 net sales of Xyrem of $1,741.8 million increased 6% over 2019

  

•   In November 2020, we launched in the U.S. Xywav (formerly JZP-258), an oxybate product that contains 92% less sodium than Xyrem, for the treatment of cataplexy or excessive daytime sleepiness, or EDS, in narcolepsy patients seven years of age and older. Net product sales for Xywav were $15.3 million in the fourth quarter of 2020

  

•   In July 2020, we launched in the U.S. Zepzelca for the treatment of adult patients with metastatic small cell lung cancer with disease progression on or after platinum-based chemotherapy. Net product sales for Zepzelca were $90.4 million in 2020

  

•   Sunosi net product sales were $28.3 million in 2020

  

•   2020 net sales of Defitelio/defibrotide of $195.8 million increased 13% over 2019

  

•   2020 net product sales of Vyxeos were $121.1 million, in line with 2019

 

1 

U.S. generally accepted accounting principles (GAAP)

2 

2020 non-GAAP adjusted net income includes a $200.0 million upfront payment to PharmaMar, which was recorded as acquired IPR&D expense. Commencing in 2020, we no longer exclude upfront and milestone payments from non-GAAP adjusted net income (and the related per share measure).

 

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Executive Compensation (continued)

 

 

Research &

Development

  

•   In July 2020, Defitelio was approved by the Australian Therapeutic Goods Administration for the treatment of hepatic veno-occlusive disease.

  

•   In September 2020, the U.S. Food and Drug Administration, or FDA, granted Rare Pediatric Disease designation for JZP-458 for the treatment of pediatric acute lymphoblastic leukemia, or ALL, and prior to that, in October 2019, FDA granted Fast Track designation for JZP-458, a recombinant Erwinia asparaginase product candidate, for the treatment of pediatric and adult patients with ALL or lymphoblastic lymphoma, who are hypersensitive to E. coli-derived asparaginase products. We initiated the submission of our biologics license application, or BLA, to FDA for JZP-458 in December 2020 under the Real-Time Oncology Review pilot program, and we will be prepared to launch as early as mid-2021 to ensure that ALL patients have access to a reliable, high-quality recombinant product.

  

•   In October 2020, we announced positive top-line results from a Phase 3 clinical trial evaluating Xywav, also known as JZP-258, in adult patients with idiopathic hypersomnia, or IH, a chronic, neurological disorder that is characterized by EDS, prolonged nighttime sleep, long unrefreshing naps and sleep inertia and that currently has no approved therapies in the U.S. We completed the rolling submission of a supplemental new drug application, or sNDA, in February 2021, Subsequently, FDA granted Priority Review and a PDUFA action date of August 12, 2021. We are planning for a potential commercial launch in the fourth quarter of 2021.

Corporate

Development

  

•   In September 2020, we entered into a new research collaboration agreement with Redx Pharma plc, or Redx, to discover and develop drug candidates for two cancer targets in the Ras/Raf/MAP kinase pathway. This research collaboration follows our previously announced purchase of Redx’s pre-clinical pan-Raf inhibitor program for the potential treatment of Raf and Ras mutant tumors in July 2019.

  

•   In October 2020, we entered into an asset purchase and exclusive license agreement with SpringWorks Therapeutics, Inc., or SpringWorks, under which we acquired SpringWorks’ FAAH inhibitor program, including an assignment of SpringWorks’ proprietary FAAH inhibitor PF-04457845, now named JZP-150. We expect to initiate a Phase 2 study of JZP-150 in late 2021.

  

•   In October 2020, we entered into an amendment and restatement of the original license agreement with Pharma Mar, S.A., or PharmaMar, which gave us our exclusive rights to develop and commercialize Zepzelca in Canada.

 

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Executive Compensation (continued)

 

 

Key Features of Our Executive Compensation Program

 

What We Do

  

What We Don’t Do

  Design executive compensation to align pay with performance

 

  

×  No excessive change in control or severance payments

 

×  No “single-trigger” cash or equity change in control benefits

 

×  No repricing of underwater stock options without prior shareholder approval

 

×  No excessive perquisites

 

×  No tax gross ups on severance or change in control benefits

 

×  No post-termination retirement or pension benefits that are not available to employees generally

 

×  No guaranteed bonuses or base salary increases

  Balance short-term and long-term incentive compensation, with the majority of executive compensation being “at-risk”

 

  Align annual performance bonus plan for CEO with that of other executives and non-sales employees, with 100% of CEO’s bonus based on such corporate performance goals as approved by the board of directors

 

  Establish threshold and maximum levels of achievement for payouts under our annual performance bonus plan

 

  Maintain executive share ownership guidelines

 

  Provide “double-trigger” change in control benefits

 

  Prohibit hedging and pledging by executive officers and directors

 

  Have 100% independent directors on the compensation committee

 

  Hire independent compensation consultant who reports directly to the compensation committee

 

  Meet regularly in executive session without management present

 

  Starting in 2021, grant performance-based equity awards as approximately 50% of each NEO’s target equity compensation

2020 Pay-for-Performance Overview

A significant portion of target total direct compensation for our CEO and other NEOs is structured in the form of “at-risk” compensation, consisting of annual performance bonus and equity incentive awards, with the performance bonus payouts and equity award values dependent upon our company’s performance. This aligns our executives’ interests with those of our shareholders for near- and long-term performance. Despite adverse macroeconomic uncertainties and other conditions created by the COVID-19 pandemic that adversely affected our business in 2020, the compensation committee elected not to adjust the challenging performance goals set for our 2020 annual performance cash bonus plan.

 

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Executive Compensation (continued)

 

 

The pie charts below show the various regular components of target total direct compensation for 2020 for our CEO and other NEOs. These components include the following: (i) annual base salary rate for 2020; (ii) annual target performance bonus opportunity for 2020; and (iii) the grant date fair value of equity awards granted in 2020. The pie charts exclude the non-recurring cash signing bonus Mses. Galá and Sablich each received in connection with their respective appointments in 2020; such bonuses are not considered part of the on-going annual target total direct compensation opportunity.

 

                                                 CEO                                   

Other NEO Average

LOGO

Compensation Philosophy and Objectives

Our executive compensation program is designed with the following objectives and philosophy:

 

 

Attract, incentivize, reward and retain diverse, talented individuals with relevant experience in the life sciences industry through a competitive pay structure. We reward individuals fairly over time and seek to retain those individuals who continue to meet our high expectations.

 

 

Deliver balanced total compensation packages to accomplish our business objectives and mission. Our executive compensation program focuses on target total direct compensation, combining short-term and long-term components, cash and equity, and fixed and variable payments, in the proportions that we believe are the most appropriate to incentivize and reward our executive officers for achieving our corporate goals while minimizing incentives for excessive risk-taking or unethical conduct.

 

 

Align pay with our performance. Our annual performance bonus awards are not earned unless pre-determined levels of performance are achieved against annual corporate objectives approved by our board of directors at the beginning of the year. Likewise, our stock option awards will not provide realizable value and our restricted stock unit, or RSU, awards will not provide increased value unless there is an increase in the value of our shares, which benefits all shareholders. We also have executive share ownership guidelines to further support our ownership culture and align the interests of executive officers and shareholders. Further, starting in 2021, approximately 50% of each NEO’s target equity compensation will be in the form of performance-based equity awards, or PSUs.

 

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Executive Compensation (continued)

 

 

How We Determine Executive Compensation

Role of Our Compensation & Management Development Committee and Executive Officers

In 2020, the compensation committee’s name was changed to the “Compensation & Management Development Committee” to reflect the committee’s expanded role in reviewing our diversity, talent and culture strategy, including management development, diversity, equity and inclusion initiatives, talent planning and employee engagement. We refer to the Compensation & Management Development Committee in this proxy statement as the compensation committee. The compensation committee is (and was at all times during 2020) composed entirely of independent directors, as defined by Rule 5605(a)(2) of the Nasdaq listing standards. Our compensation committee meets as often as it determines necessary to carry out its duties and responsibilities through regularly scheduled meetings and, if necessary, special meetings. Our compensation committee also has the authority to take certain actions by written consent of all members. The agenda for each compensation committee meeting is usually developed by members of our human resources department and our CEO, with input from members of our legal department, and is reviewed and finalized with the chairperson of the compensation committee.

The compensation committee reviews and oversees our compensation policies, plans and programs and reviews and generally determines the compensation to be paid to the executive officers, including the NEOs. Either the compensation committee or the independent members of our board of directors, upon recommendation from the compensation committee, who receives input and advice from its independent compensation consultant, approve the compensation of our CEO. References in this Compensation Discussion and Analysis to our board of directors approving our CEO’s compensation are to the independent members of our board of directors.

In making other executive compensation determinations, the compensation committee considers recommendations from our CEO. In making his recommendations, our CEO receives input from our human resources department and from the individuals who manage or report directly to the other executive officers, and he reviews various sources of market compensation data provided by the independent compensation consultant to the compensation committee, as described below. While our CEO discusses his recommendations for the other executive officers with the compensation committee, he does not participate in the deliberations and recommendations to our board of directors concerning, or our board of directors’ determination of, his own compensation. Members of our human resources and legal departments also attend compensation committee meetings.

Below are the highlights of the annual cycle our compensation committee follows in reviewing and making decisions with respect to our executive compensation program.

 

 

LOGO

 

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Role of the Independent Compensation Consultant

The compensation committee engages an independent compensation consultant each year to provide a competitive compensation assessment with respect to the executive officers to assist the compensation committee in making annual compensation decisions. Since 2010, Radford, a business area within Aon plc, has been engaged by the compensation committee each year to provide peer company and industry compensation data, when requested, and to provide the compensation committee with advice regarding executive officers’ compensation, including base salaries, performance-based bonuses and long-term equity compensation, and similar advice regarding non-employee directors’ compensation. The compensation committee has also consulted with Radford to update the peer company and industry compensation data on an annual basis, address specific questions that arise as the committee fulfills their responsibilities as outlined in the compensation committee charter. The advisor provides support in addressing changes in trends and best practices for executive compensation, incentive and equity and/or other best practices that are requested by the compensation committee, in order to help inform the compensation committee’s decisions. Radford reports directly to the compensation committee, which maintains the authority to direct Radford’s work and engagement. As requested, and under the purview of the compensation committee, Radford may advise the human resources department on projects from time to time. Radford interacts with management to gain access to company information that is required to perform services and to understand the culture and policies of the organization. Radford attends compensation committee meetings, and the compensation committee and Radford meet in executive session with no members of management present, as needed, to address various compensation matters, including deliberations regarding our CEO’s compensation.

In assessing Radford’s independence from management in providing executive compensation services to the compensation committee, the compensation committee considered that Radford is only engaged by, takes direction from, and reports to, the compensation committee for such services and, accordingly, only the compensation committee has the right to terminate or replace Radford as its compensation consultant at any time. The compensation committee also analyzed whether the work of Radford as a compensation consultant with respect to executive and director compensation raised any conflict of interest, taking into consideration the following factors:

 

the provision of other services to our company by Radford and its affiliates;

 

the amount of fees we paid to Radford and its affiliates as a percentage of Radford’s total revenue;

 

any business or personal relationship of Radford or the individual compensation advisors employed by it with any executive officer of our company;

 

any business or personal relationship of the individual compensation advisors with any compensation committee member;

 

Radford’s policies and procedures that are designed to prevent conflicts of interest; and

 

any ordinary shares of our company owned by Radford or the individual compensation advisors employed by it.

 

 

The compensation committee has determined, based on its analysis of the above factors, that the work of Radford and the individual compensation advisors employed by Radford as compensation consultants to our company has not created any conflict of interest.

Competitive Assessment of Compensation – Peer Companies and Market Data

Because we aim to attract and retain the most highly qualified executive officers in an extremely competitive market, the compensation committee believes that it is important when making its compensation decisions to be informed as to the current practices of comparable public companies with which we compete for top talent. To this end, the compensation committee reviews market data for each executive officer’s position, compiled by Radford as described below, including information relating to the mix and levels of compensation for executive officers in the life sciences industry, with a focus on target total direct compensation in line with the compensation committee’s holistic approach to executive compensation.

 

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2020 Peer Group. The compensation committee uses a peer group and other market data to provide context for its executive compensation decision-making. Each year, Radford reviews the external market data and evaluates the composition of our peer group to ensure it appropriately reflects our growth, the increase in our revenues and market capitalization and the consolidation in our industry. In July 2019, with the assistance of Radford, the compensation committee considered companies:

 

 

in the life sciences industry (specifically biotechnology and specialty bio/pharma companies) with commercial products on the market;

 

 

with revenues of approximately one-fourth (0.25x) to three times (3x) our then-projected revenue (resulting in a range of $500 million to $6.0 billion in revenues);

 

 

with market value of approximately one-fourth (0.25x) to four times (4x) our market capitalization at the time (resulting in a range of between $1.9 billion to $29.8 billion in market capitalization); and

 

 

primarily located in the U.S. with a secondary focus on companies that are headquartered in Europe.

Based on these criteria, Radford recommended, and our compensation committee approved, that our peer group remain unmodified from 2019 to 2020. Accordingly, the peer group used for our 2020 compensation decisions consisted of the 16 companies listed in the table below. At the time the compensation committee approved the peer group, we were at the 66th percentile for trailing 12 months revenue and the 46th percentile for market capitalization among the new peer group. The compensation committee considered this a reasonable balance and a good representation of companies that were of similar scope and complexity.

 

       
Alexion Pharmaceuticals, Inc.    Exelixis, Inc.    Mallinckrodt plc    Sarepta Therapeutics, Inc.
Alkermes plc    Horizon Therapeutics plc    Nektar Therapeutics    Seagen Inc. (formerly Seattle Genetics)
BioMarin Pharmaceutical Inc.    Incyte Corporation    Neurocrine Biosciences, Inc.    United Therapeutics Corporation
Endo International plc    Ionis Pharmaceuticals, Inc.    Regeneron Pharmaceuticals, Inc.    Vertex Pharmaceuticals Incorporated

2020 Market Data. In early 2020, Radford completed an assessment of executive compensation based on our 2020 peer group to inform the compensation committee’s determinations of executive compensation for 2020. This assessment used market data that was compiled from multiple sources, including: (i) data from the Radford Global Life Sciences Survey with respect to the 2020 peer group companies listed above, or the peer survey data; (ii) the 2020 peer group companies’ publicly disclosed information, or public peer data; and (iii) data from public biotechnology and pharmaceutical companies in the Radford Global Life Sciences Survey, or the general survey data, which included survey data with respect to our selected 2020 peer group companies. Generally, peer survey data and public peer data are used in establishing market data reference points, and the general survey data is used when there is a lack of peer survey data and public peer data for an executive officer’s position. The peer survey data, the general survey data, and the public peer data, collectively referred to in this proxy statement as market data, were reviewed by the compensation committee, with the assistance of Radford.

Use of 2020 Market Data. From time to time, the compensation committee reviews target total direct compensation, consisting of target total cash compensation and equity compensation, against the market data described above primarily to ensure that our executive compensation program, as a whole, is positioned competitively to attract and retain the highest caliber of executive officers and to ensure that the total direct compensation opportunity for the executive officer group is aligned with our corporate objectives and strategic needs. The compensation committee does not target a specific percentile for setting the level of compensation for the NEOs and does not otherwise use a formulaic approach to setting pay against the market data. The compensation committee believes that over-reliance on benchmarking can result in compensation that is unrelated to the value delivered by our executive officers because compensation benchmarking does not take into account company-to-company variations among actual roles with similar titles or the specific performance of the executive officers.

 

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Executive Compensation (continued)

 

 

Factors Used in Determining Executive Compensation

Our compensation committee sets the compensation of our executive officers at levels that the compensation committee determines to be competitive and appropriate for each NEO, using the compensation committee’s professional experience and judgment. The compensation committee’s pay decisions are not driven by a particular target level of compensation based on market data, and the compensation committee does not otherwise use a formulaic approach to setting executive pay. Instead, the compensation committee believes that executive pay decisions require consideration of multiple relevant factors, which may vary from year to year. The figure below reflects the factors the compensation committee considers in determining and approving the amount, form and mix of pay for our NEOs.

 

 

LOGO

2020 Advisory Vote on Executive Compensation and Shareholder Engagement

We hold a say-on-pay advisory vote on executive compensation annually. Accordingly, at our 2020 annual meeting, we provided shareholders with the opportunity to cast a non-binding vote on a proposal regarding the compensation of our named executive officers for the year ended December 31, 2019. Of the votes cast, approximately 88% were voted in favor of the proposal. We were pleased with these results and believe it reflects our continuous efforts to engage with shareholders and solicit their feedback on our executive compensation program.

The compensation committee reviewed the final vote results for the proposal and, given the significant level of shareholder support, concluded that our executive compensation program continues to provide a competitive pay-for-performance package that effectively incentivizes the NEOs and encourages long-term retention. Accordingly, the compensation committee and, with respect to our CEO’s compensation, our board of directors, determined not to make any significant changes to our 2020 executive compensation policies or decisions as a result of the vote. Our compensation committee and, with respect to our CEO’s compensation, our board of directors will continue to consider the outcome of our say-on-pay proposals and our shareholders’ views when making future compensation decisions for the NEOs.

We also engage with our shareholders when they have topics of particular interest, which may include executive compensation related matters. Shareholder feedback is reported to our compensation committee (and our nominating and corporate governance committee, as applicable) throughout the year.

 

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The following graphic describes our typical shareholder outreach and engagement cycle.

 

 

LOGO

Although we determined not to make any significant changes to our 2020 executive compensation policies or decisions as a result of the say-on-pay advisory vote at our 2020 annual meeting, we have since implemented changes to our compensation program for closer alignment to our strategy and to address shareholder feedback, which includes:

 

 

Performance-Based Equity Awards. While shareholders provided positive feedback regarding our pay-for-performance alignment, there was strong preference that our long-term incentive program include performance-based equity awards. To align our long-term incentive pay with our multiyear strategic priorities and respond to shareholder feedback, the compensation committee, working closely with management and Radford, approved a new performance-based equity program that will be included as part of the NEOs’ 2021 annual long-term incentive grants. For more information on this change, see “Redesign of 2021 Long-Term Incentive Program” on page 61.

 

 

Caps on Annual Performance Bonus Payments. Shareholders expressed their desire for our annual performance bonus plan to have an explicit cap on payouts to avoid the potential of excessive payouts not tied to performance and to mitigate certain risks inherent in incentive plans. In response to this feedback, beginning in 2021, the payouts under our annual performance bonus awards will be capped at 300% of the individual’s target award, although in practice recent payouts for the NEOs have not exceeded ~150% of target. Our CEO’s annual performance bonus award is generally limited to the actual bonus pool funding percentage (with a maximum funding of 200%), which is determined based on the achievement of pre-established financial and other strategic objectives as described in more detail on page 49 under the heading “2020 Performance Bonus Program.”

 

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Executive Compensation (continued)

 

 

Key Components and Design of the Executive Compensation Program

Total Direct Compensation

Our compensation program focuses on target total direct compensation, which consists of base salary, target performance bonus opportunity (which, together with base salary, we refer to as target total cash compensation), and long-term incentive awards (valued based on an approximation of grant date fair value).

 

 

LOGO

We also offer our executive officers severance benefits upon certain types of involuntary terminations in connection with a change in control. The table below captioned “Components of Total Direct Compensation” describes key features of each primary component of our executive compensation program and explains why we provide the particular compensation component.

The compensation committee takes a holistic approach to compensation and seeks to ensure that the aggregate level of pay, across all of the pay elements is meeting the company’s desired objectives for each executive officer. The compensation committee does not have any formal policies for allocating compensation among base salary, target performance bonus opportunity and long-term incentive awards. Instead, the compensation committee uses its experience and business judgment to establish a total compensation program for each NEO that is a mix of current, short-term and long-term incentive compensation, and cash and non-cash compensation, which it believes is appropriate to achieve the goals of our executive compensation program and our corporate goals.

Because we believe it is important to our success to pursue long-term corporate objectives, to avoid excessive risk-taking, and to preserve our cash resources, the majority of the NEOs’ total direct compensation is comprised of “at-risk” compensation, consisting of performance-based bonus opportunities and long-term incentive awards, which align the executive officers’ incentives with the interests of our shareholders. This allocation between “at-risk” and fixed compensation is consistent with our pay-for-performance philosophy.

 

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Components of Total Direct Compensation

 

    Component     Key Features       Purpose
         

Base Salary

 

   

Fixed level of cash compensation

 

No amount is contractually guaranteed

 

Amounts reviewed and determined annually, and are generally effective by March 1 each year

 

       

Provides fixed level of compensation that is competitive within our industry and reflective of the skills and experience required to be successful in fulfilling the role

 

         

Performance

Bonus Award

 

   

Cash compensation under the performance bonus plan, which is “at-risk” because it is dependent upon achievement of pre-established corporate performance objectives

 

Target bonuses reviewed and determined annually

 

Actual bonuses paid shortly after the end of each year, based on the extent corporate goals are attained as determined by the compensation committee, and for executive officers other than our CEO, their individual contributions toward such achievements

 

       

Provides financial incentives to achieve key corporate objectives that are aligned with our business strategy

 

Rewards NEOs (other than our CEO) for extraordinary individual contributions to our corporate achievements

 

         

Long-Term Incentive

Compensation

 

   

“At-risk” long-term incentives that realize value through sustained long-term appreciation of our share price

 

Awards reviewed and generally granted annually, early in the year, at time of hire or promotion

 

Stock options and RSUs generally vest over a 4-year period subject to executive officer’s continued service with us; stock option exercise price is set equal to fair market value on date of grant (i.e., closing price on Nasdaq Global Select Market)

 

Beginning in 2021, NEOs will receive 50% of their long-term incentive opportunity in the form of PSUs tied to multi-year strategic objectives and 50% in RSUs.

 

       

Fosters ownership culture

 

Links compensation to long-term success

 

Up until 2021, stock options were a key aspect of our pay-for-performance culture, by providing a return to our executive officers only if the market price of our ordinary shares appreciates over the stock option term

 

RSUs assist with managing dilution for our shareholders, while reinforcing the importance of shareholder value creation over time

 

Beginning in 2021, PSUs will align compensation earned to the achievement of multi-year strategic objectives and stock price performance versus peer companies.

Executive share ownership guidelines to further support our ownership culture and align the interests of executive officers and shareholders

 

 

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Executive Compensation (continued)

 

 

Other Benefits. Executive officers based in the United States are eligible to participate in all of our benefit plans, such as the 401(k) Plan (see the section below titled “Description of Compensation Arrangements–401(k) Plan”), our medical, dental, vision, short-term disability, long-term disability and group life insurance plans, in each case generally on the same basis as other employees. Executive officers based in the United States and Ireland are eligible to participate in our Employee Stock Purchase Plan, or ESPP, generally on the same basis as other employees. We also have a section 125 flexible benefits healthcare plan and a flexible benefits childcare plan under which employees can set aside pre-tax funds to pay for qualified healthcare expenses and qualified childcare expenses not reimbursed by insurance. We do not currently offer pension or other retirement benefits in the United States; outside the U.S. we offer pension or other retirement benefits that are consistent with local regulations.

Severance Benefits upon Change in Control. Executive officers based in the United States are also eligible to participate in our Amended and Restated Executive Change in Control and Severance Benefit Plan, or the change in control plan, which is described below under the headings “Additional Compensation InformationChange in Control Plan” and “Potential Payments upon Termination or Change in ControlAmended and Restated Executive Change in Control and Severance Benefit Plan.” The change in control plan provides certain severance benefits to participants, in connection with specified involuntary termination events, including termination without cause and constructive termination, following a change in control. Certain executive officers who are not employed by our U.S. affiliates receive comparable change in control benefits pursuant to their employment agreements. The compensation committee believes these severance benefits are important from a retention perspective to provide some level of protection to our executives who might be terminated following a change in control and that the amounts are reasonable and maintain the competitiveness of our executive compensation and retention program. The compensation committee believes this structure serves to mitigate the distraction and loss of key executive officers that may occur in connection with rumored or actual fundamental corporate changes. Such payments protect the interests of our shareholders by enhancing executive focus during rumored or actual change in control activity, retaining executives despite the uncertainty that generally exists while a transaction is under consideration and encouraging the executives responsible for negotiating potential transactions to do so with independence and objectivity. We do not provide any tax gross up payments on severance benefits.

Clawback Requirement. In April 2021, our compensation committee adopted a policy for recoupment of incentive compensation, or a clawback policy. In the event we are required to restate our financial results due to material noncompliance with any financial requirement and the misconduct of an executive officer covered by the policy contributed to such noncompliance, we may recover the amount of any incentive compensation, including any cash or equity compensation granted, earned or vested based in whole or in part on the attainment of a financial performance goal or metric that was paid to him or her during the three-year period preceding the date of the restatement and attributable to the erroneously reported results. The executive officers covered by the policy include our current or former executive officers who are, or were at the time of the relevant misconduct, designated by the board of directors as an officer for purposes of Section 16 of the Exchange Act. The misconduct covered by the policy includes any knowing violation of SEC rules and regulations or company policy, breach of fiduciary duty or willful commission of an act of fraud, dishonesty, gross recklessness or gross negligence in the performance of the executive officer’s duties, as determined by the compensation committee.

In addition, as a public company, if we are required to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws as a result of misconduct, our CEO and CFO may be legally required to reimburse our company for any bonus or other incentive-based or equity-based compensation they receive in accordance with the provisions of section 304 of the Sarbanes-Oxley Act of 2002.

2020 Performance Bonus Program

The corporate objectives and relative weightings established by the board of directors for the 2020 performance bonus program that were communicated to the NEOs in early 2020 are described in the chart below. The revenue objective described below included strategically important, revenue-related stretch goals with the opportunity to

 

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earn up to an additional 17.5% bonus pool funding. Likewise, the adjusted net income objective included a stretch goal with the opportunity to earn up to an additional 2.5% bonus pool funding. For each of the five objectives, achievement can be between 0% and 200% based on company performance, including the identified stretch objectives for revenue and adjusted net income.

 

LOGO

Following the end of the year, after adding together the resulting bonus pool funding percentages for the quantitative and qualitative objectives based on their relative weightings of 70% and 30%, respectively, and considering achievement of stretch goals, the compensation committee approved an overall bonus pool funding percentage of 127.3% of the target bonus pool for the 2020 plan year, as further described below.

The compensation committee did not set specific objectives for individual executive officers. Each executive officer is responsible for contributing to the corporate objectives, individually and as part of the leadership team, with each objective deemed to be important in determining the level of the company’s performance during the year. In approving individual bonus awards, the compensation committee considers the individual contribution towards the company’s achievement of the corporate objectives by each executive officer (other than our CEO). The actual bonus payments approved for each of the NEOs for 2020 are described below under “2020 Compensation Decisions for Our Named Executive Officers.

Individual bonus awards are determined in accordance with the following methodology:

 

 

LOGO

Quantitative Objectives

Each of the three main quantitative objectives for 2020, or objectively measurable goals, had a total relative overall weighting of 70%, and is described in the table and accompanying footnotes below, including each objective’s weighting, actual results and performance multipliers, as well as the total bonus pool funding percentage resulting from the level of achievement of the quantitative objectives.

The compensation committee approved, at the start of the performance year, an algorithm with respect to each main quantitative objective (as well as the strategically important revenue-related stretch goals and the adjusted net income stretch goal discussed below) for calculating the bonus pool funding attributable to the extent of achievement for each such objective. The revenue objective, with a weighting of 35%, was split into an oxybate net sales objective weighted at 17.5% and a non-oxybate revenue objective weighted at 17.5%, as well as five related additional, or strategically important, stretch goals, each with its own individual weighting. The compensation committee set specific threshold and maximum levels of achievement for the revenue objective and the related stretch goals, which are described in the footnotes to the table below. The compensation committee also approved a stretch goal with its own individual weighting for the adjusted net income objective. For the

 

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quantitative product development objectives, the compensation committee established various objectively measurable target goals within these objectives but did not set a threshold performance level; rather, an overall achievement of between 0% and 200%, measured against the multiple targets as described in more detail below, was determined by the compensation committee and used to calculate the applicable bonus pool funding percentage attributable to the product development objectives.

 

Quantitative Objectives

   Weighting      Actual Results    Multiplier     Bonus Pool
Funding(3)
 

1.

  Revenue Objective:           
 

•  Achieve total oxybate net product sales in 2020 of $1,729 million(1)

     17.5   

Above target: net product sales of $1,757 million

     108     18.9
   

•  Achieve total revenue, excluding oxybate net product sales, in 2020 of $643 million(1)

     17.5   

Below target: total revenue excluding oxybate net product sales of $609 million (after giving effect to the adjustment identified in footnote (2))

     73 %(2)      12.8
   

•  Stretch goal: Exceed specified oxybate product year-over-year revenue bottle volume growth(4)

     3.5   

Between threshold and maximum

     73     2.6
   

•  Stretch goal: Launch Xywav before November 30, 2020(5)

     3.5   

Achieved

     100     3.5
   

•  Stretch goal: Exceed budgeted worldwide (WW) Sunosi net product sales(6)

     3.5   

Below threshold

     0     0
   

•  Stretch goal: Exceed budgeted Zepzelca demand vials by ³20%(7)

     3.5   

Above target

     100     3.5
   

•  Stretch goal: Exceed budgeted WW Vyxeos net product sales(8)

     3.5   

Below threshold

     0     0

2.

  Adjusted Net Income Objective: Achieve non-GAAP adjusted net income* in 2020 of $907 million(1)      10   

Above target: non-GAAP adjusted net income* of $924 million (after giving effect to the additional adjustments identified in footnote (9))

     109 %(9)      10.9
   

•  Stretch goal: Achieve non-GAAP adjusted net income* in 2020 of $937 million

     2.5   

Below threshold

     0     0

3.

  Product Development Objectives: Execute on defined development projects(10)      25   

Achieved at 130% level(10)

     130     32.5
   

Total

                           84.8

Note: Amounts may not total due to rounding.

 

(1) 

If the specified threshold annual performance level was met (90% of target for the two components of the revenue objective and the adjusted net income objective), then a pre-established scaled performance multiplier (ranging from 50% to 150% for the two components of the revenue objective and 50% to 175% for the adjusted net income objective) would be used to calculate the applicable bonus pool funding percentage attributable to such quantitative objective. The performance multiplier would be zero if performance was below the threshold level, 50% if performance was at the threshold level, and then scaled for performance above 50% up to the applicable maximum level. The performance multiplier was capped for performance above the specified maximum performance level (110% of target for the two components of the revenue objective and 115% of target for the adjusted net income objective).

 

(2) 

To calculate the threshold performance achievement level and performance multiplier, the reported non-oxybate revenue of $607 million was increased by approximately $2.2 million to adjust for changes in foreign currency exchange rates.

 

(3) 

The percentages in this column represent, for each quantitative corporate objective, the weight of the quantitative objective multiplied by the performance multiplier that corresponds to the actual achievement of such quantitative objective. Due to rounding, the percentages in this column do not add precisely to the total.

 

(4) 

With respect to the oxybate product revenue bottle growth stretch goal, the performance threshold was set at 2.8% bottle volume growth, below which no addition to the total bonus pool funding would be made. Between 2.8% and 4.3% bottle volume growth, the amount added

 

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to the total bonus pool funding percentage would increase from 0% to 3.5%. Actual achievement of 3.9% oxybate bottle volume growth for 2020 was above 2.8% resulting in 2.6% being added to the total bonus pool funding percentage.

 

(5) 

Xywav was launched in the U.S. in November 2020.

 

(6)

With respect to the Sunosi worldwide net sales stretch goal, the threshold performance level was set at achievement of the budgeted Sunosi net sales. Exceeding the net sales budget by between 0% and 20% would have resulted in 0% to 3.5% (scaled linearly) being added to the total bonus pool funding percentage. This stretch goal was difficult to achieve from the outset given that Sunosi launched in the U.S. during 2019 and had not yet been approved in the EU at the start of 2020. The target assumed significant success in market access and product adoption with a new target audience of pulmonologists during 2020. The COVID-19 pandemic had a significant impact on the ability of our field-based teams to interact with prescribers and patient’s inability to meet with healthcare providers; the target was not adjusted to account for this. Actual Sunosi net sales for 2020 were below the threshold level of achievement.

 

(7) 

With respect to the Zepzelca demand vial stretch goal, the threshold performance level was set at achievement of 20% above budgeted Zepzelca demand vials. Exceeding the demand vials budget by between 20% and 50% would have resulted in 0% to 3.5% (scaled linearly) being added to the total bonus pool funding percentage. This stretch goal was inherently difficult to achieve from the outset given that Zepzelca had not yet been approved at the start of 2020 and the prospect of a successful mid-year launch was uncertain, particularly with less than six months to prepare for launch from the time we acquired the U.S. license to the product. However, actual Zepzelca demand vials for 2020 exceeded budget by 50%, resulting in 3.5% being added to the total bonus pool funding percentage.

 

(8) 

With respect to the Vyxeos worldwide net sales stretch goal, threshold performance level was set at achievement of the budgeted net sales. Exceeding the net sales budget by between 0% and 20% would have resulted in 0% to 3.5% (scaled linearly) being added to the total bonus pool funding percentage. This stretch objective was inherently difficult to achieve given ongoing market dynamics such as competitive product launches that continued to impact the ability to achieve the budgeted growth in revenues. The COVID-19 pandemic had a significant impact on the treatment practices of specialists, focusing on less intensive therapies. Actual Vyxeos worldwide net sales for 2020 were below the threshold level of achievement.

 

(9) 

To calculate the threshold performance achievement level and performance multiplier, the reported non-GAAP adjusted net income of $704.0 million was increased by $175.0 million for the post-tax impact of the $200.0 million upfront payment to PharmaMar to acquire the U.S. development and commercialization rights to Zepzelca and by an additional $45.4 million to adjust for the impact of other business development activities in 2020 that were not contemplated when the target was set. Commencing in 2020, we no longer exclude upfront and milestone payments from non-GAAP adjusted net income (and the related per share measure). However, we believe it is appropriate to adjust for these amounts in calculating the threshold performance achievement level due to the lack of predictability as to occurrence.

 

(10) 

With respect to the product development objectives, the compensation committee determined that the actual achievement by the company was 130%, resulting in a performance multiplier of 130%, and therefore, a 32.5% bonus pool funding percentage, based on achievement with respect to the target goals as described below:

 

   

Performance Category

   Target Goals and Results

Top Priority

   This performance category consisted of the following goals: (i) FDA approval of JZP-258 (Xywav) for the treatment of cataplexy and EDS in narcolepsy by the third quarter of 2020; (ii) achieving full enrollment in the JZP-258 Phase 3 clinical trial for the treatment of Idiopathic Hypersomnia, or IH, by the third quarter of 2020; (iii) FDA approval of lurbinectedin (Zepzelca) by the third quarter of 2020; (iv) develop molecule strategy for lurbinectedin; (v) enrollment of 51 patients in the JZP-458 Phase 2/3 program by the third quarter of 2020; and (vi) initiation of the BLA submission for JZP-458 before the end of the year. The compensation committee determined that we had met or significantly exceeded each of the performance goals for this category.

High Priority

   This performance category consisted of the following goals: (i) Initiation of a Phase 2 study for JZP-385 in Essential Tremor in the fourth quarter of 2020; and (ii) Initiation of a Phase 3 study for Sunosi in Major Depressive Disorder, or MDD, in the third quarter of 2020. The compensation committee determined that we did not meet either of the performance goals for this category. While the compensation committee noted that the JZP-385 goal was impacted by the COVID-19 pandemic and the company made a strategic decision not to initiate the Phase 3 study in MDD for Sunosi, the compensation committee did not adjust the performance goals or award any credit for failure to meet the performance goals in this category in light of these effects.

All Other Development

   This performance category consisted of the following goals: (i) Vyxeos phase 1b study completion; (ii) defibrotide prevention of Veno Occlusive Disease, or pVOD, phase 3 study interim analysis completion; (iii) defibrotide early development activities; and (iv) Pan-RAF inhibitor pre-clinical activities. The compensation committee determined that we had partially met our performance goals for other development programs. The compensation committee noted that performance in this category was impacted by the COVID-19 pandemic, but did not adjust the performance goals or otherwise take into account the impact of the COVID-19 pandemic in determining the extent to which we met our performance goals in this category.

 

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With respect to the product development objectives, each of the three product related “top priority” goals – for JZP-258, lurbinectedin, and JZP-458 – carried a 20% weight. The two “high priority” goals – those relating to progress on JZP-385 and Sunosi – collectively carried a 20% weight. All other goals collectively carried a 20% weight.

In determining that the actual achievement by the company was 130% for the product development objective, the compensation committee employed a holistic analysis that took into account the compensation committee’s weighting of the product development objectives described above and the degree to which they were met as a whole against the backdrop of competing development priorities. The compensation committee determined that performance in the top priority category significantly exceeded the goals with achievement of 200% in this category and 25% performance in the high priority and other development categories. Combined, this resulted in company achievement of 130%.

 

 

*

Non-GAAP adjusted net income is a non-GAAP financial measure that both excludes certain items from our GAAP reported net income and includes certain tax-related adjustments as reconciled under “Reconciliations of Non-GAAP Financial Measures” below, except that solely for purposes of calculating the threshold performance achievement level and performance multiplier for 2020, non-GAAP adjusted net income included the additional adjustment as set forth in footnote (9) to this table.

Qualitative Objectives

The qualitative corporate objectives approved by the board of directors fell into two categories: (1) progress on corporate development activities, with a relative weighting of 20%, and (2) a demonstrated commitment to and progress on certain organizational goals, with a relative weighting of 10%. Achievement of the qualitative objectives is inherently less objectively measurable than the quantitative objectives.

Corporate Development Objective. The objective relating to progress on corporate development activities consisted of expanding our development and commercial portfolio of innovative products through a range of strategic and partnering transactions with a focus on sleep/neuroscience and hematology/oncology and the identification of additional therapeutic area opportunities. The multiplier applied to the corporate development objective ranged from 0% to 200%, based on the compensation committee’s determination of the extent to which the corporate development objective was achieved during the year. In considering the company’s corporate development accomplishments in 2020, the compensation committee noted that we advanced negotiations for the potentially transformative acquisition of GW (a definitive agreement was ultimately entered into in February 2021), acquired the rights to a Phase 2 ready neuroscience asset, and completed four pre-clinical transactions. The compensation committee weighed heavily our success in executing these transactions and their potential to meaningfully diversify our revenues starting in 2021 and add future revenue-generating products to our portfolio, our overall deal readiness, and our active and thoughtful corporate development process that led to the evaluation of several other opportunities during the year. The compensation committee determined that, as a whole, our achievement resulted in a multiplier of 150% and, therefore, a 30% bonus pool funding percentage for the 2020 corporate development objective.

Organizational Objective. With respect to the organizational objective, the compensation committee established four sub-goals. Because the sub-goals are not objectively measurable, they were not assigned individual weightings. The multiplier applied to the organizational corporate objective ranged from 0% to 200%, based on the compensation committee’s determination of the extent to which the aggregate organizational corporate objective, including sub-goals, were achieved, as a whole, during the year. The organizational corporate objective sub-goals were:

 

 

strengthen organizational capabilities;

 

 

evolve operating culture for agility and scalability;

 

 

attract, develop and retain talent to deliver on our mission, strategy and values; and

 

 

maintain culture of compliance and adhering to our Code of Conduct, other policies and laws and regulations that apply to our business.

 

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In evaluating the organizational objective, the compensation committee determined that 2020 was an unprecedented year in navigating culture, talent, and employee engagement. It required agility, creativity, and innovation to refocus priorities to both navigate new employee needs and challenges as well as to support critical business requirements. We have made DEI commitments to maintain or increase representation levels, embed a culture of inclusivity through continued education and learning goals, and ensure equity within our key talent processes. Overall, the company had a significant year of progress despite pandemic circumstances. This achievement was in large part fueled by the success of the continued ability to evolve and upgrade capabilities in critical areas and ensure a productive and engaged workforce. After taking into consideration both our accomplishments and challenges with respect to these sub-goals, the compensation committee determined that as a whole, our overall achievement resulted in a multiplier of 125% and therefore, a 12.5% bonus pool funding percentage for the 2020 organizational objective.

2020 Compensation Decisions for Our Named Executive Officers

General Approach

In making compensation decisions for 2020, the compensation committee considered the factors discussed in “Factors Used in Determining Executive Compensation” above and the compensation committee’s specific compensation objectives for 2020. Our compensation committee did not use a formula or assign a particular weight to any one factor in determining each NEO’s target total direct compensation. Rather, our compensation committee’s determination of the target total direct compensation, mix of cash and equity and fixed and “at-risk” pay opportunities was a subjective, individualized decision for each NEO. The compensation committee reviewed and considered each element of pay in the context of the overall target total direct compensation for each NEO. When the compensation committee made changes to one element of pay, those changes were made in the context of the levels of the other elements of pay, and the resulting target total direct compensation for each NEO. As a result, the 2020 pay decisions for each NEO are presented holistically in this section.

The compensation committee also had access to market data with respect to target total cash compensation and target equity award grants. However, as described above, the compensation committee believes that over-reliance on benchmarking can result in compensation that is unrelated to the value delivered by our executive officers because compensation benchmarking does not take into account company-by-company variations among actual roles with similar titles or the specific performance of our executive officers.

Summary of 2020 Compensation Decisions

Target Total Cash Compensation. The compensation committee increased each NEO’s base salary for 2020, and the new base salary rates were effective in March 2020.

Target Equity Compensation and Impact on Target Total Direct Compensation. In determining the appropriate size of 2020 equity award grants, at the time the compensation committee (and the board of directors, with respect to Mr. Cozadd) made its decisions, after careful consideration, the compensation committee aimed to deliver equity awards to each executive officer of a similar value to those delivered in 2019 to balance the need to manage overall dilution to our shareholders, maintain equity opportunities competitive with the market and serve the retention and incentive purposes of the awards.

 

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Form and Mix of Equity Awards and Share Amount Determinations. The compensation committee intended to deliver approximately 50% of the potential value of each NEO’s equity award in the form of stock options and 50% of the potential value in the form of RSUs, in each case based on an approximation of grant date fair value and using an approximately 2.5 to 1 ratio of stock option grants to RSUs, in order to mitigate dilution and to reflect the increased value of receiving shares at full value without the payment of an exercise price. The 50/50 value split was consistent with our historical practices for our executive officers. The actual share amounts granted to each executive officer were determined by applying the company’s 90-day average share price (as of December 31, 2019) to the grant date fair value of the award, which the compensation committee and, in the case of Mr. Cozadd, the board of directors, intended to deliver (dividing such value by the average share price, in the case of RSUs, and applying a Black-Scholes option pricing model calculation using the average share price, in the case of stock options). A 90-day average share price was used, rather than a single day share price, in order to provide a more stabilized share value less susceptible to possible swings in the market. The exercise price of each stock option is equal to our closing share price on Nasdaq Global Select Market on the date of grant. The compensation committee understands that this process can result in the actual reported grant date value of an award being higher or lower than the intended value approved by the compensation committee, but has considered, in consultation with Radford, various approaches to granting equity awards, each of which have advantages and disadvantages, and determined that the process described above, which has been used historically by the compensation committee, is the most appropriate for the company at this time. The shares subject to the option awards vest over four years, with 25% vesting on the one-year anniversary of the grant date and the remainder vesting in equal monthly installments thereafter over the remaining 36 months. The RSUs vest over four years in equal annual installments.

On an annual basis, the compensation committee reviews market trends, including market peer use of performance-based vesting for equity awards, which are often favored by proxy advisory firms and certain institutional investors. For 2020, the compensation committee determined that equity awards vesting over time continued to be the most appropriate incentive structure for our executive officers to reward performance over time and achieve our retention objectives. Our time-based vesting schedules deliver retention incentives for the company over the long-term and, unlike awards that vest based on pre-determined operational or market goals, do not create incentives for inappropriate short-term risk-taking at the expense of realizing long-term value or the potential incentive for unethical conduct. In addition, we deliver a meaningful portion of compensation in the form of annual incentive compensation that is directly tied to, and incentivizes our executives to work towards, achievement of our key corporate goals. The key purposes served by time-vesting options and RSUs for 2020 are discussed above in the chart captioned “Components of Total Direct Compensation.

Individual NEO Compensation Decisions

Below are summaries, for each NEO individually, of the compensation committee’s decisions about 2020 target total direct compensation and the changes from each NEO’s 2019 target total direct compensation. As described above, when making the 2020 compensation decisions, the compensation committee focused primarily on the target total direct compensation for each NEO while considering the factors set forth in the section titled “Factors Used in Determining Executive Compensation” and the compensation committee’s specific compensation objectives for 2020. The footnotes to the tables also include the actual performance bonus paid to each of the NEOs for 2020 and how that actual bonus compared to each NEO’s target bonus.

 

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Executive Compensation (continued)

 

 

Bruce C. Cozadd, Chairman and CEO

 

       
     2019 Pay ($)     2020 Pay ($)     Change (%)  

Target Total Cash Compensation

    2,034,415       2,135,723       5.0

Base Salary(1)

    1,020,000       1,050,600    

Target Performance Bonus(2)

    1,014,415       1,085,123    

Target Equity Compensation(3)

    12,381,420       10,091,856       (18.5 %) 

Options

    5,379,925       4,210,661    

RSUs

    7,001,495       5,881,195    

Target Total Direct Compensation(4)

    14,415,835       12,227,579       (15.2 %) 

 

(1) 

Represents annual base salary rate for the applicable year. 2020 base salary became effective in March 2020.

 

(2) 

The 2020 amount reflects a target performance bonus of 100% of base salary earned, unchanged from the target performance bonus percentage for 2019. The actual 2020 performance bonus paid was $1,381,400, reflecting 127.3% of the target performance bonus, based entirely on the overall 2020 bonus pool funding percentage of 127.3%. The compensation committee (with approval from the board of directors) determined that the overall 2020 bonus pool funding percentage of 127.3% was applicable to Mr. Cozadd, because, as CEO, Mr. Cozadd is responsible for the company meeting all of its objectives.

 

(3) 

The target equity compensation delivered (as presented in the chart) reflects the fair value of the awards as of the grant date, in accordance with FASB Accounting Standards Codification Topic 718, Compensation—Stock Compensation, or ASC 718, as reported in the Grants of Plan-Based Awards Table for 2020.

 

(4) 

The compensation committee and board of directors designed Mr. Cozadd’s target total direct compensation to be competitive compared to the market data, appropriate from an internal equity perspective and more heavily weighted towards equity compensation, in line with our pay-for-performance philosophy. The compensation committee believed it was appropriate to provide a modest increase to his base salary in 2020 in recognition of his individual performance, the performance of the company under his leadership and to remain in line with general market increases. As described above, Mr. Cozadd’s target bonus percentage remained the same as in 2019, but the increase in his base salary resulted in a higher target performance bonus opportunity.

 

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Executive Compensation (continued)

 

 

Daniel N. Swisher, Jr., President and COO(1)

 

       
     

2019 Pay ($)

  

2020 Pay ($)

  

Change (%)

Target Total Cash Compensation

    

 

1,108,750

    

 

1,189,558

    

 

7.3

%

Base Salary(2)

    

 

675,000

    

 

690,000

    

Target Performance Bonus(3)

    

 

433,750

    

 

499,558

    

Target Equity Compensation(4)

    

 

3,466,798

    

 

3,105,186

    

 

(10.4

%)

Options

    

 

1,506,379

    

 

1,295,588

    

RSUs

    

 

1,960,419

    

 

1,809,598

    

Target Total Direct Compensation(5)

    

 

4,575,548

    

 

4,294,744

    

 

(6.1

%)

 

(1)

Mr. Swisher served as our Chief Operating Officer from January 2018 to May 2021.

 

(2)

Represents annual base salary rate for the applicable year. 2020 base salary became effective March 2020.

 

(3)

The 2020 amount reflects a target performance bonus of 70% of base salary earned. The compensation committee increased Mr. Swisher’s target performance bonus percentage in consideration of the market data and impact of Mr. Swisher’s position. The actual 2020 performance bonus paid was $636,000, reflecting 127.3% of target performance bonus, based on the overall 2020 bonus pool funding percentage of 127.3%. The compensation committee determined that the overall 2020 bonus pool funding percentage of 127.3% was applicable to Mr. Swisher, given his overall responsibility for the key operating segments of the company.

 

(4)

The target equity compensation delivered (as presented in the chart) reflects the fair value of the awards as of the grant date, in accordance with ASC 718, as reported in the Grants of Plan-Based Awards Table.

 

(5) 

The compensation committee designed Mr. Swisher’s target total direct compensation to be competitive compared to the market data, appropriate from an internal equity perspective and more heavily weighted towards equity compensation, in line with our pay-for-performance philosophy. The compensation committee determined it was appropriate to increase Mr. Swisher’s base salary in an amount necessary to reflect his scope of responsibility and oversight of significant functions within the organization, as well as to maintain competitive positioning relative to the market data and the other NEOs.

 

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Executive Compensation (continued)

 

 

Renée Galá, Executive Vice President and CFO

 

       
    

2019 Pay ($)(1)

 

2020 Pay ($)

 

Change (%)

Target Total Cash Compensation

   

 

   

 

891,539

   

 

Base Salary(2)

   

 

   

 

600,000

   

Target Performance Bonus(3)

   

 

   

 

266,539

   

Signing Bonus(4)

   

 

   

 

25,000

   

Target Equity Compensation(5)

   

 

   

 

3,198,880

   

 

Options

   

 

   

 

1,382,012

   

RSUs

   

 

   

 

1,816,868

   

Target Total Direct Compensation(6)

   

 

   

 

4,090,419

   

 

 

(1)

We entered into an employment offer letter with Ms. Galá pursuant to which she agreed to serve as our Executive Vice President and CFO effective March 16, 2020.

 

(2) 

Represents annual base salary rate for 2020. Ms. Galá’s actual salary earned was lower due to her joining the company in March 2020.

 

(3) 

Reflects the target percentage of 55% of base salary earned for 2020, taking into account that Ms. Galá was not employed the entire year. The actual 2020 performance bonus paid was $405,000, reflecting 151.9% of target performance bonus, based on the overall 2020 bonus pool funding percentage of 127.3% and Ms. Galá’s significant individual contributions to such achievement. Specifically, the compensation committee considered Ms. Galá’s oversight of complex strategic matters and corporate priorities, such as planning and execution of our debt offering, development of our long-term strategy, her performance with respect to supporting the execution of corporate development priorities and her overall criticality to our business.

 

(4)

Represents the cash signing bonus Ms. Galá received in connection with her appointment as Executive Vice President and CFO. In determining the amount of the bonus, the compensation committee considered the inducement value in recruiting Ms. Galá to join the company. To the extent Ms. Galá had voluntarily resigned within one year of her employment start date, she would have been required to repay the full amount of the signing bonus on or within 30 days of the later of her resignation or termination date.

 

(5) 

The target equity compensation delivered (as presented in the chart) reflects the fair value of the awards as of the grant date, in accordance with ASC 718, as reported in the Grants of Plan-Based Awards Table for 2020.

 

(6)

The compensation committee designed Ms. Galá’s target total direct compensation to be competitive compared to the market data, appropriate from an internal equity perspective and more heavily weighted towards equity compensation, in line with our pay-for-performance philosophy. In determining her compensation package, the compensation committee received advice from Radford to design a competitive, market-based compensation package appropriate for a senior executive with Ms. Galá’s skills and experience and her overall expected contribution to our business.

 

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Executive Compensation (continued)

 

 

Robert Iannone, Executive Vice President, Research and Development and CMO

 

       
    

2019 Pay ($)

 

2020 Pay ($)

 

Change (%)

Target Total Cash Compensation

   

 

927,192

   

 

900,769

   

 

(2.8

%)

Base Salary(1)

   

 

550,000

   

 

575,000

   

Target Performance Bonus(2)

   

 

172,192

   

 

325,769

   

Signing Bonus(4)

   

 

205,000

   

 

   

Target Equity Compensation(3)

   

 

2,922,079

   

 

2,096,001

   

 

(28.3

%)

Options

   

 

1,249,216

   

 

874,522

   

RSUs

   

 

1,672,863

   

 

1,221,479

   

Target Total Direct Compensation(4)

   

 

3,849,271

   

 

2,996,770

   

 

(22.1

%)

 

(1)

Represents annual base salary rate for the applicable year. 2020 base salary became effective March 2020.

 

(2)

The 2020 amount reflects a target performance bonus of 55% of base salary earned. The actual 2020 performance bonus paid was $450,000, reflecting 138.1% of target performance bonus, based on the overall 2020 bonus pool funding percentage of 127.3% and Dr. Iannone’s individual contributions to achieving both our quantitative and qualitative objectives for 2020. The compensation committee also considered Dr. Iannone’s significant individual contributions to such achievement and outperformance of his research and development organization with respect to the corporate objectives. Dr. Iannone’s 2019 target performance bonus was lower due his joining the company mid-2019. The actual bonus paid to Dr. Iannone for 2019 was prorated to reflect his hire date of May 29, 2019.

 

(3) 

The target equity compensation delivered (as presented in the chart) reflects the fair value of the awards as of the grant date, in accordance with ASC 718 as reported in the Grants of Plan-Based Awards Table.

 

(4) 

The compensation committee designed Dr. Iannone’s target total direct compensation to be competitive compared to the market data, appropriate from an internal equity perspective and more heavily weighted towards equity compensation, in line with our pay-for-performance philosophy. The compensation committee determined it was appropriate to increase Dr. Iannone’s base salary in an amount necessary to reflect his scope of responsibility and oversight of significant functions within the organization, as well as to maintain competitive positioning relative to the market data and the other NEOs.

 

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Executive Compensation (continued)

 

 

Kim Sablich, Executive Vice President and General Manager, North America

 

       
    

2019 Pay ($)(1)

 

2020 Pay ($)

 

Change (%)

Target Total Cash Compensation

   

 

   

 

1,030,337

   

 

Base Salary(2)

       

 

550,000

   

Target Performance Bonus(3)

       

 

180,337

   

Signing Bonus(4)

       

 

300,000

   

Target Equity Compensation(5)

   

 

   

 

3,751,761

   

 

Options

       

 

1,616,987

   

RSUs

       

 

2,134,774

   

Target Total Direct Compensation(6)

   

 

   

 

4,782,098

   

 

 

(1)

In May 2020, we entered into an employment offer letter with Ms. Sablich pursuant to which she agreed to serve as our Executive Vice President and General Manager, North America effective June 1, 2020.

 

(2)

Represents annual base salary rate for 2020. Ms. Sablich’s actual salary earned was lower due to her joining the company mid-2020.

 

(3)

Reflects the target percentage of 55% of base salary earned for 2020, taking into account that Ms. Sablich was not employed the entire year. The actual 2020 performance bonus paid was $235,000, reflecting 130.3% of target performance bonus, based on the overall 2020 bonus pool funding percentage of 127.3% and Ms. Sablich’s individual contributions to such achievement of her commercial organization with respect to the corporate objectives.

 

(4)

Represents the cash signing bonus received by Ms. Sablich in 2020 in connection with her appointment as Executive Vice President and General Manager, North America. In determining the amount of the bonus, the compensation committee considered the inducement value in recruiting Ms. Sablich from her prior employer and compensatory value of cash and equity forfeited by Ms. Sablich in leaving her prior employer.

 

(5)

Target equity compensation dollar amounts represent the grant date fair value of each stock option and RSU award, as applicable, and have been calculated in accordance with ASC 718 as reported in the Grants of Plan-Based Awards Table for 2020. See the Grants of Plan-Based Awards Table for the number of shares subject to each award.

 

(6) 

The compensation committee designed Ms. Sablich’s target total direct compensation to be competitive compared to the market data, appropriate from an internal equity perspective and more heavily weighted towards equity compensation, in line with our pay-for-performance philosophy. In determining her compensation package, the compensation committee received advice from Radford to design a competitive, market-based compensation package appropriate for a senior executive with Ms. Sablich’s skills and experience and her overall expected contribution to our business.

 

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Redesign of 2021 Long-Term Incentive Program

In connection with our transformation into an innovative biopharmaceutical company, line of sight to a set of longer-term value drivers and multi-year goals around our strategic pathway to success came into clearer focus. It was with this focus, along with feedback from shareholders that we determined that 2021 was the appropriate time to adopt a new long-term incentive award design that we believe sets the foundation for sustained high performance and shareholder returns and strongly aligns pay to achievement of our longer-term strategic objectives.

Starting in 2021, approximately 50% of each NEO’s aggregate annual equity compensation will be in the form of equity awards that vest based on achievement of performance goals. In early 2021, the compensation committee determined that it was in the best interests of the company and its shareholders to delay the 2021 performance share unit grants until the close of the GW Acquisition, as doing so would allow the compensation committee to select performance measures that reflected the combined company’s financial and strategic priorities across the new integrated leadership team, thus providing the leadership team with a unifying compensation strategy for the post-close organization. In May 2021, the compensation committee granted a PSU to each NEO that will vest, if at all, following the completion of the applicable performance period on December 31, 2023, subject to the company’s achievement of pre-established financial, strategic and relative shareholder return goals for the 2021 to 2023 performance period.

Additional Compensation Information

Ownership Guidelines for Executive Officers

We maintain share ownership guidelines for our CEO and certain other employees who serve on our executive committee, including our NEOs. Under the guidelines, which were amended in May 2018, these individuals are expected to own a number of the company’s ordinary shares with a value equal to six times base salary (increased from three times base salary) for the company’s Chief Executive Officer, two times base salary (increased from one times base salary) for each other member of the company’s executive committee who is an officer for purposes of Section 16 of the Exchange Act, and one times base salary for each other member of the company’s executive committee. The guidelines provide that the officers are expected to establish the minimum ownership levels within five years of first becoming subject to the guidelines (and, with respect to the increased amounts established by the amended guidelines, by the last day of 2021 for officers who were subject to the guidelines as of January 1, 2018). Mr. Cozadd was in compliance with the guidelines as of March 31, 2021 with his actual ownership constituting approximately 32.5 times his base salary (based on the value of shares owned as of March 31, 2021, using a 90-day trailing average price of $164.55 as of such date). Each of our other continuing NEOs has five years from the date of his or her appointment to comply with the guidelines.

Shares that count toward satisfaction of these guidelines include: shares owned outright by the individual (including RSUs that have vested but not yet settled, net of taxes); shares retained after an option exercise or issuance under another type of equity award granted under the company’s equity incentive plans; shares retained after purchase under the ESPP; and shares held in trust for the benefit of the individual. The compensation committee has discretion to develop an alternative individual guideline or an alternative method of complying with the applicable individual guideline for an individual covered by the guidelines if compliance would place a significant hardship on such individual.

Change in Control Plan

Our compensation committee periodically reviews the terms of our change in control plan, including its “double-trigger” structure and benefits, against market data to ensure that the benefits we offer remain appropriate.

Only our executive officers who are employees of our U.S. affiliates are eligible to participate in the change in control plan, which includes all of our NEOs. Certain executive officers who are not employed by our U.S. affiliates receive comparable change in control benefits pursuant to their employment agreements. The compensation committee believes that the change in control benefits we provide are representative of market practice, both in terms of design and cost, and are sufficient to retain our current executive team and to recruit talented executive officers in the future. The terms of the change in control plan are described below under the heading “Potential Payments upon Termination or Change in Control—Amended and Restated Executive Change in Control and Severance Benefit Plan.”

 

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Equity Grant Timing and Equity Plan Information

Our equity incentive grant policy generally provides that all equity grants that are approved for executive officers will be granted on the second trading day following the filing date of our next quarterly or annual report filed under the Exchange Act that occurs after the date on which such grants are approved by our board of directors or compensation committee, as applicable. Accordingly, our equity incentive grant policy generally requires that grants to our executive officers, if any, be made shortly after we have released information about our financial performance to the public for the applicable annual or quarterly period, so that the market will have an opportunity to absorb the financial and other information included in our annual and periodic reports before such grants are awarded. As a result, the timing of equity awards is not coordinated in a manner that intentionally benefits our executive officers; rather, the policy is designed with the objective that the market price of our ordinary shares at the time of grant can generally be expected to reflect our then-current results and prospects. In addition, while our board of directors and compensation committee have discretionary authority to approve equity grants to our executive officers outside of the timing specified in our equity incentive grant policy, we do not in any event time the release of non-public information in coordination with grants of equity awards in a manner that intentionally benefits our executive officers.

We currently grant equity awards to the NEOs, including stock options and RSUs, under the 2011 Equity Incentive Plan, or the 2011 Plan. The 2011 Plan was adopted by Jazz Pharmaceuticals, Inc.’s board of directors and approved by Jazz Pharmaceuticals, Inc.’s stockholders in connection with their approval of the Azur Merger in December 2011 and was assumed by us upon the completion of the Azur Merger. Before the 2011 Plan was adopted, we granted stock options under our 2007 Equity Incentive Plan, or the 2007 Plan, which was adopted by Jazz Pharmaceuticals, Inc.’s board of directors and approved by Jazz Pharmaceuticals, Inc.’s stockholders in connection with Jazz Pharmaceuticals, Inc.’s initial public offering. Awards granted under the 2007 Plan continue to be governed by the terms of the 2007 Plan, but subsequent equity awards have been, and continue to be, awarded under the 2011 Plan. The 2011 Plan affords the compensation committee the flexibility to utilize a broad array of equity incentives and performance cash incentives in order to secure and retain the services of employees of our company and its subsidiaries and to provide long-term incentives that align the interests of employees with the interests of our shareholders.

Additional long-term equity incentives are provided through the ESPP. Pursuant to the ESPP, all eligible employees, including the NEOs, may allocate up to 15% of their base salary to purchase our stock at a 15% discount to the market price, subject to specified limits.

Accounting and Tax Considerations

Under ASC 718, the company is required to estimate and record an expense for each award of equity compensation (including stock options and RSUs) over the vesting period of the award. We record share-based compensation expense on an ongoing basis according to ASC 718. The compensation committee has considered, and may in the future consider, the grant of performance-based or other types of stock awards to executive officers in lieu of or in addition to stock option and time-based RSU grants in light of the accounting impact of ASC 718 and other considerations.

Under Section 162(m) of the Internal Revenue Code, or Section 162(m), compensation paid to each of the company’s “covered employees” that exceeds $1 million per taxable year is generally non-deductible for tax purposes unless the compensation qualifies for certain grandfathered exceptions (including the “performance-based compensation” exception) for certain compensation paid pursuant to a written binding contract in effect on November 2, 2017 and not materially modified on or after such date.

Although the compensation committee will continue to consider tax implications as one factor in determining executive compensation, the compensation committee also looks at other factors in making its decisions and retains the flexibility to provide compensation for the company’s named executive officers in a manner consistent with the goals of the company’s executive compensation program and the best interests of the company and its stockholders, which may include providing for compensation that is not deductible by the company due to the deduction limit under Section 162(m). The compensation committee also retains the flexibility to modify

 

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compensation that was initially intended to be exempt from the deduction limit under Section 162(m) if it determines that such modifications are consistent with the company’s business needs.

Risk Assessment Concerning Compensation Practices and Policies

The compensation committee no less frequently than annually reviews the company’s compensation policies and practices to assess whether they encourage employees to take inappropriate risks. After reviewing each of the company’s compensation plans, and the checks and balances built into, and oversight of, each plan, in February 2020, the compensation committee determined that any risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on our company as a whole. In addition, the compensation committee believes that the mix and design of the elements of executive compensation do not encourage management to assume excessive risks, and significant compensation decisions, as well as decisions concerning the compensation of the company’s executive officers, include subjective considerations by the compensation committee or the board of directors, which restrain the influence of formulae or objective factors on excessive risk-taking. Finally, the mix of short-term compensation (in the form of salary and annual bonus, if any), and long-term compensation (in the form of stock options, PSUs and RSUs) also prevents undue focus on short-term results and helps align the interests of the company’s executive officers with the interests of our shareholders.

Reconciliations of Non-GAAP Financial Measures

To supplement our financial results presented in accordance with U.S. generally accepted accounting principles (GAAP), we use certain non-GAAP (also referred to as non-GAAP adjusted) financial measures in this Compensation Discussion and Analysis. In particular, we present non-GAAP adjusted net income (and the related per share measure), which exclude from reported GAAP net income (and the related per share measure) certain items, as detailed in the reconciliation table that follows, adjust for the income tax effect of the non-GAAP adjustments and the income tax benefit related to an intra-entity intellectual property asset transfer.

We believe that each of these non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors and analysts. In particular, we believe that each of these non-GAAP financial measures, when considered together with our financial information prepared in accordance with GAAP, can enhance investors’ and analysts’ ability to meaningfully compare our results from period to period, and to identify operating trends in our business. In addition, these non-GAAP financial measures are regularly used by investors and analysts to model and track our financial performance. Our management also regularly uses these non-GAAP financial measures internally to understand, manage and evaluate our business and to make operating decisions, and compensation of our executive officers is based in part on certain of these non-GAAP financial measures, as discussed elsewhere in this Compensation Discussion and Analysis. Because these non-GAAP financial measures are important internal measurements for our management, we also believe that these non-GAAP financial measures are useful to investors and analysts since these measures allow for greater transparency with respect to key financial metrics we use in assessing our own operating performance and making operating decisions.

These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures; should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP; have no standardized meaning prescribed by GAAP; and are not prepared under any comprehensive set of accounting rules or principles. In addition, from time to time in the future there may be other items that we may exclude for purposes of our non-GAAP financial measures; and we have ceased, and may in the future cease, to exclude items that we have historically excluded for purposes of our non-GAAP financial measures. For example, commencing in 2020, we no longer exclude upfront and milestone payments from non-GAAP adjusted net income (and the related per share measure). For purposes of comparability, non-GAAP adjusted financial measures for the year ended December 31, 2019 have been updated to reflect this change. Accordingly, such payments are not excluded from our non-GAAP financial measures for the years ended December 31, 2019 and 2020, as detailed in the reconciliation tables that follow. Likewise, we may determine to modify the nature of our adjustments to arrive at our non-GAAP financial measures. Because of the

 

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non-standardized definitions of non-GAAP financial measures, the non-GAAP financial measures as used by us in this Compensation Discussion and Analysis have limits in their usefulness to investors and may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies.

Reconciliations of GAAP reported net income to non-GAAP adjusted net income (and the related per share measures) for the 2019 and 2020 annual periods are as follows (in millions, except per share amounts):

 

    

2019

    

2020

 

GAAP reported net income

  

$

523.4

 

  

$

238.6

 

Intangible asset amortization

  

 

354.8

 

  

 

259.6

 

Share-based compensation expense

  

 

110.6

 

  

 

121.0

 

Impairment charge(1)

  

 

    —

 

  

 

136.1

 

Acquired IPR&D asset acquisition(2)

  

 

48.3

 

  

 

    —

 

Non-cash interest expense(3)

  

 

46.4

 

  

 

56.7

 

Loss on extinguishment of debt

  

 

    —

 

  

 

4.5

 

Income tax effect of above adjustments

  

 

(85.9

  

 

(112.5

Income tax benefit related to intra-entity intellectual property asset transfer

  

 

(112.3

  

 

    —

 

Non-GAAP adjusted net income

  

$

885.2

 

  

$

704.0

 

GAAP reported net income per diluted share

  

$

9.09

 

  

$

4.22

 

Non-GAAP adjusted net income per diluted share

  

$

15.38

 

  

$

12.46

 

Weighted-average ordinary shares used in diluted per share calculations

  

 

57.6

 

  

 

56.5

 

 

Note:

Amounts may not total due to rounding.

Explanation of Adjustments and Certain Line Items:

 

(1)

Impairment charge related to our decision to stop enrollment in its Phase 3 clinical study of defibrotide for pVOD due to a determination by an Independent Data Monitoring Committee that it was highly unlikely that the study will reach its primary endpoint.

 

(2)

Relates to the acquisition of Cavion, Inc. in the year ended December 31, 2019.

 

(3)

Non-cash interest expense associated with debt discount and debt issuance costs.

 

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Executive Compensation (continued)

 

 

Summary of Compensation

The following table sets forth certain summary information for the years indicated with respect to the compensation earned by the NEOs during fiscal years 2020, 2019 and 2018, as applicable.

SUMMARY COMPENSATION TABLE

 

  Name and Principal Position   Year     Salary
($)
(1)
    Bonus
($)
(2)
    Stock
Awards
($)
(3)
    Option
Awards
($)
(4)
   

Non-Equity
Incentive

Plan
Compensation
($)
(5)

    All Other
Compensation
($)
(6)
    Total ($)  

Bruce C. Cozadd(7)

    2020       1,085,123             5,881,195       4,210,661       1,381,400       14,921       12,573,300  

Chairman and CEO

    2019       1,014,415             7,001,495       5,379,925       1,304,500       13,302       14,713,637  
    2018       979,285             5,204,786       4,265,610       980,300       13,152       11,443,133  

Daniel N. Swisher, Jr.

    2020       713,654             1,809,598       1,295,588       636,000       16,247       4,471,087  

President and COO(8)

    2019       667,308             1,960,419       1,506,379       560,000       13,302       4,707,407  
    2018       608,173       125,000       2,532,058       2,075,162       400,000       12,948       5,753,341  

Renée Galá(9)

    2020       484,616       25,000       1,816,868       1,382,012       405,000       9,904       4,123,400  

Executive Vice President and CFO

               

Robert Ianonne(10)

    2020       592,308             1,221,479       874,522       450,000       11,172       3,149,481  

Executive Vice President,

    2019       313,077       205,000       1,672,863       1,249,216       245,000       8,405       3,693,560  

Research and Development and Chief Medical Officer

               

Kim Sablich(11)

    2020       327,885       300,000       2,134,774       1,616,987       235,000       6,598       4,621,245  

Executive Vice President and

               

General Manager, North America

                                                               

 

Note:

Amounts may not total due to rounding.

 

(1) 

The dollar amounts in this column represent base salary earned during the indicated fiscal year. 2020 base salary rates were effective March 2020. For more information on salaries in 2020, see “Compensation Discussion and Analysis—2020 Compensation Decisions for Our Named Executive Officers—Individual NEO Compensation Decisions” above.

 

(2) 

The dollar amounts in this column represent cash signing bonuses paid to Mr. Swisher in 2018, Dr. Iannone in 2019, and each of Ms. Galá and Ms. Sablich in 2020.

 

(3) 

The dollar amounts in this column reflect the aggregate grant date fair value of all RSU awards granted during the indicated fiscal year computed in accordance with ASC 718, excluding the effect of estimated forfeitures. The grant date fair value of each RSU award is measured based on the closing price of our ordinary shares on the date of grant. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the NEOs.

 

(4) 

The dollar amounts in this column reflect the aggregate grant date fair value of all stock option awards granted during the indicated fiscal year. These amounts have been calculated in accordance with ASC 718, using the Black-Scholes option-pricing model and excluding the effect of estimated forfeitures. Assumptions used in the calculation of these amounts are included in the notes to our audited consolidated financial statements included in the company’s 2020 Annual Report on Form 10-K. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the NEOs.

 

(5) 

The dollar amounts in this column represent the cash bonus awarded under the performance bonus plan for the indicated fiscal year. For more information on the cash bonus awards for 2020, see “Compensation Discussion and Analysis—2020 Performance Bonus Program” and “Compensation Discussion and Analysis—2020 Compensation Decisions for Our Named Executive Officers” above.

 

(6) 

The dollar amounts in this column for 2020 include group term life insurance premiums paid, matching contributions under the 401(k) Plan and a payment associated with an annual conference.

 

(7)

Mr. Cozadd served as our interim principal financial officer from October 25, 2019 until Ms. Galá was appointed to serve as our CFO and assumed the duties and responsibilities of principal financial officer from Mr. Cozadd as of March 16, 2020.

 

(8)

Mr. Swisher served as our Chief Operating Officer from January 2018 to May 2021.

 

(9) 

Ms. Galá was appointed our Executive Vice President and CFO as of March 16, 2020.

 

(10) 

Dr. Iannone was appointed our Executive Vice President, Research and Development as of May 29, 2019.

 

(11) 

Ms. Sablich was appointed our Executive Vice President and General Manager, North America as of June 1, 2020.

 

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Grants of Plan-Based Awards

The following table shows, for the fiscal year ended December 31, 2020, certain information regarding grants of plan-based awards to the NEOs.

GRANTS OF PLAN-BASED AWARDS IN FISCAL 2020

 

Name

  Award Type     Grant Date    

Approval

Date

   

Estimated

Possible

Payouts Under
Non-Equity

Incentive

Plan Awards

Target ($)(1)

   

All Other

Stock

Awards:

Number of

Shares of

Stock or

Units (#)(2)

   

All Other

Option

Awards:

Number of

Securities

Underlying

Options (#)(2)

   

Exercise

or Base
Price of

Option

Awards

($/Sh)(3)

   

Grant Date

Fair Value

of Stock

and Option

Awards

($)(4)

 

Bruce C. Cozadd

    Annual Cash                   1,085,123                          
    Annual Option       2/27/2020       2/11/2020                   130,000       113.10       4,210,661  
    Annual RSU       2/27/2020       2/11/2020             52,000                   5,881,195  

Daniel N. Swisher, Jr.

    Annual Cash                   499,558                          
    Annual Option       2/27/2020       2/11/2020                   40,000       113.10       1,295,588  
    Annual RSU       2/27/2020       2/11/2020             16,000                   1,809,598  

Renée Galá

    Annual Cash                   266,539                          
    Initial Option       5/7/2020       4/29/2020                   41,500       109.45       1,382,012  
    Initial RSU       5/7/2020       4/29/2020             16,600                   1,816,868  

Robert Iannone, M.D., M.S.C.E.

    Annual Cash                   325,769                          
    Annual Option       2/27/2020       2/11/2020                   27,000       113.10       874,522  
    Annual RSU       2/27/2020       2/11/2020             10,800                   1,221,479  

Kim Sablich

    Annual Cash                   180,337                          
    Initial Option       8/6/2020       7/29/2020                   42,000       127.07       1,616,987  
      Initial RSU       8/6/2020       7/29/2020             16,800                   2,134,774  

 

(1) 

This column sets forth the target bonus amount for each NEO for the year ended December 31, 2020 under the performance bonus plan. There are no thresholds or maximum bonus amounts for each individual officer established under the performance bonus plan. Target bonuses were set as a percentage of each NEO’s base salary earned for the fiscal year ended December 31, 2020 and were 100% for Mr. Cozadd, 70% for Mr. Swisher, and 55% for each of Ms. Galá, Dr. Iannone and Ms. Sablich. The dollar value of the actual bonus award earned for the year ended December 31, 2020 for each NEO is set forth in the Summary Compensation Table above. As such, the amounts set forth in this column do not represent either additional or actual compensation earned by the NEOs for the year ended December 31, 2020. For a description of the performance bonus plan, see “Compensation Discussion and Analysis—2020 Performance Bonus Program” above.

 

(2) 

Annual stock options and RSU awards were granted under the 2011 Plan. Each of the annual stock option awards listed in the table above vest or vested as to 25% of the ordinary shares underlying the stock options upon the one year anniversary of the grant date and vest as to the remainder of the shares in 36 equal monthly installments thereafter. Each of the annual RSU awards vest in four equal annual installments on the anniversary of the vesting commencement date of March 5, 2020. In March 2020, Ms. Galá was appointed as Executive Vice President and CFO and in June 2020, Ms. Sablich was appointed as Executive Vice President and General Manager, North America, in connection with which they each received new hire grants of stock option and RSU awards, which were granted under the 2011 Plan. The initial stock option awards granted to Ms. Galá and Ms. Sablich vest as to 25% of the ordinary shares underlying the stock options upon the one year anniversary of their respective hire dates of March 16, 2020 for Ms. Galá and June 1, 2020 for Ms. Sablich and vest as to the remainder of the shares in 36 equal monthly installments thereafter. Each of the initial RSU awards granted to Ms. Galá and Ms. Sablich vest in four equal annual installments on the anniversary of the vesting commencement date of April 5, 2020 for Ms. Galá and June 5, 2020 for Ms. Sablich. As a general matter, the vested portion of stock options granted to the NEOs will expire three months after each NEO’s last day of service, subject to extension upon certain termination situations, such as death or disability, and RSUs will cease vesting upon each NEO’s last day of service. Stock option and RSU awards are subject to potential vesting acceleration as described below under the headings “Description of Compensation Arrangements—Equity Compensation Arrangements—2011 Equity Incentive Plan” and “Potential Payments upon Termination or Change in Control—Amended and Restated Executive Change in Control Plan and Severance Benefit Plan” below. See also “Description of Compensation Arrangements—Equity Compensation Arrangements—2011 Equity Incentive Plan” below for a general description of the material terms of the 2011 Plan.

 

(3) 

Stock options were granted with an exercise price equal to 100% of the fair market value on the date of grant which was $113.10 per share for the February 27, 2020 annual grants, $109.45 per share for the May 7, 2020 new hire grant to Ms. Galá, and $127.07 per share for the August 6, 2020 new hire grant to Ms. Sablich.

 

(4) 

The dollar amounts in this column represent the grant date fair value of each stock option and RSU award, as applicable, granted to the NEOs in 2020. These amounts have been calculated in accordance with ASC 718. The grant date fair value of each stock option is calculated using the Black-Scholes option-pricing model and excluding the effect of estimated forfeitures. Assumptions used in the calculation of these amounts are included in the notes to our audited consolidated financial statements included in the company’s 2020 Annual Report on Form 10-K. The grant date fair value of each RSU award is measured based on the closing price of our ordinary shares on the date of grant.

 

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Description of Compensation Arrangements

Executive Employment and Severance Agreements

We do not have employment agreements currently in effect with any of our NEOs. Like other employees, executive officers are eligible for annual salary increases, participation in the performance bonus plan and discretionary equity grants. We have employment agreements in effect with certain employees based outside of the United States.

From time to time, we have provided an offer letter in connection with the commencement of employment of an executive officer based in the United States, which describes such executive officer’s initial terms of employment. For example, in February 2020, we provided an offer letter to Ms. Galá that included her initial base salary and a hiring bonus of $25,000 payable in connection with commencement of her employment, and in April 2020, we provided an offer letter to Ms. Sablich that included her initial base salary and a hiring bonus of $300,000 payable in connection with commencement of her employment. The employment of Ms. Galá and Ms. Sablich, as is the case for all of our employees based in the United States, is at-will and not governed by the terms of their offer letters. We do not have agreements currently in effect with any of our NEOs entitling such individuals to severance benefits (other than in connection with a change in control pursuant to our change in control plan described below).

Amended and Restated Executive Change in Control and Severance Benefit Plan

Each of the current NEOs is a participant in the change in control plan, a description of which is included below under the heading “Potential Payments upon Termination or Change in Control—Amended and Restated Executive Change in Control and Severance Benefit Plan.”

Equity Compensation Arrangements

Since the Azur Merger, we have granted stock options and RSU awards to employees, including the NEOs, under the 2011 Plan. From the initial public offering of Jazz Pharmaceuticals, Inc. until the Azur Merger, we granted stock options to our employees, including some of the NEOs, under the 2007 Plan. For more information on our current equity compensation program and decisions regarding the grants of equity awards in 2020 for our NEOs, see “Compensation Discussion and Analysis—2020 Compensation Decisions for Our Named Executive Officers” above. The following is a brief summary of the material terms of each of our equity compensation plans.

2011 Equity Incentive Plan

The following is a brief summary of the material terms of the 2011 Plan, as amended and restated.

Types of Awards. The 2011 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, RSU awards, other stock awards, and performance awards that may be settled in cash, shares, or other property, which may be granted to employees, including officers.

Corporate Transactions. In the event of certain significant corporate transactions (as defined in the 2011 Plan and described below), our board of directors will have the discretion to take one or more of the following actions with respect to outstanding stock awards (contingent upon the closing or completion of such corporate transaction), unless otherwise provided in the stock award agreement or other written agreement with the participant or unless otherwise provided by our board of directors at the time of grant:

 

 

arrange for assumption, continuation, or substitution of a stock award by a surviving or acquiring corporation (or its parent company);

 

 

arrange for the assignment of any reacquisition or repurchase rights applicable to any shares issued pursuant to a stock award to the surviving or acquiring corporation (or its parent company);

 

 

accelerate the vesting, in whole or in part, and exercisability of a stock award and provide for its termination if it is not exercised at or prior to the corporate transaction;

 

 

arrange for the lapse of any reacquisition or repurchase rights applicable to any shares issued pursuant to a stock award;

 

 

cancel or arrange for the cancellation of a stock award, to the extent not vested or exercised prior to the effective time of the corporate transaction, in exchange for such cash consideration, if any, as the board of directors may consider appropriate; or

 

 

make a payment equal to the excess, if any, of (a) the value of the property that the participant would have received upon the exercise of the stock award over (b) any exercise price payable in connection with such exercise.

Our board of directors need not take the same action for each stock award or with regard to all participants.

 

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For purposes of the 2011 Plan, a “corporate transaction” generally means (i) a sale or disposition of all or substantially all our assets or a sale or disposition of at least 90% of our outstanding securities; (ii) a merger, consolidation or similar transaction after which we are not the surviving corporation; or (iii) a merger, consolidation or similar transaction after which we are the surviving corporation but our ordinary shares are converted or exchanged into other property.

Change in Control. The board of directors has the discretion to provide additional acceleration of vesting and exercisability upon or after a change in control (as defined in the 2011 Plan and described below) as may be provided in a stock award agreement or any other written agreement between us or any of our affiliates and a participant. The forms of stock option agreement and RSU award agreement adopted by the board of directors under the 2011 Plan provide that in the event a participant’s service relationship with us or a successor entity is terminated due to an involuntary termination without cause (as defined in the stock award agreement and as described below) within 12 months following, or one month prior to, the effective date of a change in control, the vesting (and in the case of stock options, exercisability) of the stock award will accelerate in full.

For purposes of the 2011 Plan and the forms of stock option agreement and RSU award agreement issued thereunder, a “change in control” generally means (i) a person or group acquires ownership of more than 30% of the combined voting power of our outstanding securities (other than directly from our company); (ii) certain compromises or arrangements sanctioned by the Irish courts, certain schemes, contracts or offers that have become binding on all of our shareholders, certain takeover bids, certain offers or reverse takeover transactions or a reorganization, merger, statutory share exchange, consolidation or similar transaction involving us, and (A) after which our shareholders do not own more than 50% of the combined voting power of the surviving entity or its parent in substantially the same proportion as their ownership of our outstanding voting securities immediately before the transaction, (B) a person or group acquires ownership of more than 30% of the combined voting power of the surviving entity or its parent, or (C) at least a majority of the members of the board of directors of the parent (or the surviving entity, if there is no parent) following such transaction are not incumbent board members (as defined in (v) below) at the time our board of directors approves the transaction; (iii) our shareholders or our board of directors approves a complete dissolution or liquidation of our company, or a complete dissolution or liquidation of our company otherwise occurs (except for a liquidation into a parent company); (iv) a sale, lease, exclusive license or other disposition of all or substantially all of our assets, other than to certain entities; or (v) individuals who were members of our board of directors on the date of adoption of the 2011 Plan (or members of our board of directors approved or recommended by a majority vote of such members still in office), referred to as “incumbent board members,” cease to constitute at least a majority of our board of directors.

An “involuntary termination without cause” generally means that a participant’s service relationship with us is terminated for any reason other than for the following reasons (and not upon a participant’s death or disability): (i) participant’s commission of any felony or crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof (with respect to Irish participants, the participant’s conviction for any criminal offense (other than an offense under any road traffic legislation in Ireland, the United Kingdom or elsewhere for which a fine or non-custodial penalty is imposed) or any offense under any regulation or legislation relating to insider dealing, fraud or dishonesty); (ii) participant’s attempted commission of or participation in a fraud or act of dishonesty against us; (iii) participant’s intentional, material violation of any contract or agreement with us or of any statutory duty owed to us; (iv) participant’s unauthorized use or disclosure of our confidential information or trade secrets; or (v) participant’s gross misconduct.

2007 Equity Incentive Plan

The following is a brief summary of the material terms of the 2007 Plan.

Types of Awards. The 2007 Plan provided for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, RSU awards, stock appreciation rights, performance stock awards and other forms of equity compensation, which may be granted to employees, including officers, non-employee directors, and consultants. Incentive stock options were granted only to employees, including executive officers. Since the Azur Merger, all of the new grants under the 2007 Plan were granted to non-employee directors, vest ratably over service periods of one to three years and expire no more than 10 years after the date of grant.

Corporate Transactions. Pursuant to the 2007 Plan, in the event of a corporate transaction (as defined in the 2007 Plan and described below), the board of directors will have the discretion to take one or more of the following actions with respect to outstanding stock awards (contingent upon the closing or completion of such corporate transaction), unless otherwise provided in the stock award agreement or other written agreement with the participant or unless otherwise provided by our board of directors at the time of grant:

 

 

arrange for assumption, continuation, or substitution of a stock award by a surviving or acquiring corporation (or its parent company);

 

 

arrange for the assignment of any reacquisition or repurchase rights applicable to any shares issued pursuant to a stock award to the surviving or acquiring corporation (or its parent company);

 

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accelerate the vesting and exercisability of a stock award and provide for its termination if it is not exercised at or prior to the corporate transaction;

 

 

arrange for the lapse of any reacquisition or repurchase rights applicable to any shares issued pursuant to a stock award;

 

 

cancel or arrange for the cancellation of a stock award, to the extent not vested or exercised prior to the effective time of the corporate transaction, in exchange for such cash consideration as the board of directors may consider appropriate; or

 

 

make a payment equal to the excess, if any, of (a) the value of the property that the participant would have received upon the exercise of the stock award over (b) any exercise price payable in connection with such exercise.

The board of directors need not take the same action for each stock award or with respect to all participants. For purposes of the 2007 Plan, a “corporate transaction” generally means (i) a sale or disposition of all or substantially all our assets or a sale or disposition of at least 90% of our outstanding securities; (ii) a merger, consolidation or similar transaction after which we are not the surviving corporation; or (iii) a merger, consolidation or similar transaction after which we are the surviving corporation but our ordinary shares are converted or exchanged into other property.

Change in Control. The board of directors has the discretion to provide additional acceleration of vesting and exercisability upon or after a change in control (as defined in the 2007 Plan and described below) as may be provided in a stock award agreement or any other written agreement between us or any of our affiliates and a participant. The forms of stock option agreement and RSU award agreement adopted by the board of directors under the 2007 Plan provide that in the event a participant’s service relationship with us or a successor entity is terminated due to an involuntary termination without cause (as defined in the stock award agreement and as described below) within 12 months following, or one month prior to, the effective date of a change in control, the vesting (and in the case of stock options, exercisability) of the stock award will accelerate in full. For purposes of the 2007 Plan and the forms of stock option agreement and RSU award agreement issued thereunder, a “change in control” generally means (i) a person or group acquires ownership of more than 50% of the combined voting power of our outstanding securities (other than in connection with a financing or a repurchase program); (ii) a merger, consolidation or similar transaction involving us, after which our shareholders do not own more than 50% of the combined voting power of the surviving entity or its parent in substantially the same proportion as their ownership of our outstanding voting securities immediately before the transaction; (iii) our shareholders or our board of directors approves a complete dissolution or liquidation of our company, or a complete dissolution or liquidation of our company otherwise occurs (except for a liquidation into a parent company); (iv) a sale, lease, exclusive license or other disposition of all or substantially all of our assets, other than to certain entities; or (v) individuals who are members of our board of directors on the date of adoption of the 2007 Plan (or members of our board of directors approved or recommended by a majority vote of such members still in office) cease to constitute at least a majority of our board of directors.

The term “involuntary termination without cause” has a similar meaning as under the 2011 Plan, as described above.

2007 Employee Stock Purchase Plan

Additional long-term equity incentives are provided through the ESPP. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of section 423 of the Internal Revenue Code, or the Code. Under the ESPP, all of our regular employees and employees of any of our parent or subsidiary companies designated by the board of directors as eligible to participate may participate and may contribute, normally through payroll deductions, up to 15% of their earnings up to a total of $15,000 per purchase period for the purchase of our ordinary shares under the ESPP. The ESPP is currently offered to our regular employees in Ireland, Canada and the United States, including the NEOs. The ESPP is implemented through a series of offerings of purchase rights to eligible employees. Under the ESPP, we may specify offerings with a duration of not more than 27 months, and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which our ordinary shares will be purchased for employees participating in the offering. Unless otherwise determined by the board of directors, ordinary shares are purchased for accounts of employees participating in the ESPP at a price per share equal to the lower of (a) 85% of the fair market value of an ordinary share on the first date of an offering or (b) 85% of the fair market value of an ordinary share on the date of purchase.

Performance Bonus Plan

We maintain a performance bonus plan to reward executive officers and other employees for successful achievement of company-wide performance objectives and individual contributions toward those objectives on an annual basis. More information regarding the performance bonus plan is provided above under the headings “Compensation Discussion and Analysis—2020 Performance Bonus Program” and “Compensation Discussion and Analysis—2020 Compensation Decisions for Our Named Executive Officers.”

 

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401(k) Plan

Our employees based in the United States are eligible to participate in the 401(k) Plan. The 401(k) Plan is intended to qualify as a tax-qualified plan under section 401 of the Code. Employee contributions are held and invested by the 401(k) Plan’s trustee. The 401(k) Plan provides that each participant may contribute a portion of his or her pre-tax compensation, up to a statutory annual limit, which was $19,500 for employees under age 50, and $26,000 for employees age 50 and over in 2020. The 401(k) Plan also permits us to make discretionary contributions and matching contributions, subject to established limits and a vesting schedule. In 2013, we began making discretionary matching contributions, which for 2020, consisted of a match of 50% of up to the first 6% of eligible compensation contributed by each employee toward his or her 401(k) plan.

Additional Benefits

The NEOs are eligible to participate in our benefit plans generally available to all employees, as described in “Compensation Discussion and Analysis—Key Components and Design of the Executive Compensation Program.”

Pension Benefits

Other than with respect to tax-qualified defined contribution plans such as the 401(k) Plan, the NEOs do not participate in any plan that provides for retirement payments and benefits, or payments and benefits that will be provided primarily following retirement.

Nonqualified Deferred Compensation

During the year ended December 31, 2020, the NEOs did not contribute to, or earn any amounts with respect to, any defined contribution or other plan sponsored by us that provides for the deferral of compensation on a basis that is not tax-qualified.

 

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Outstanding Equity Awards at Fiscal Year-End

The following table sets forth, for the fiscal year ended December 31, 2020, certain information regarding outstanding equity awards at fiscal year-end for the NEOs.

OUTSTANDING EQUITY AWARDS AT 2020 FISCAL YEAR-END TABLE

 

    Option Awards       Stock Awards
  Name  

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable

 

Number of

Securities

Underlying

Unexercised

Options

(#)(1)

Unexercisable

 

Option

Exercise

Price

($)

 

Option

Expiration

Date(2)

     

Number of

Shares or Units

of Stock That

Have Not

Vested

(#)(3)

 

Market Value of
Shares or Units
of Stock

That Have

Not Vested

($)(4)

   

Bruce C. Cozadd

            130,000 (6)        113.10       2/26/2030         52,000 (10)        8,582,600  
      57,291       67,709 (7)        140.03       2/27/2029         37,500 (11)        6,189,375  
      63,593       28,907 (8)        140.67       2/29/2028         18,500 (12)        3,053,425  
      81,093       5,407 (9)        136.18       3/1/2027         8,650 (13)        1,427,683  
      77,500             123.36       2/24/2026                
      72,500             175.19       2/25/2025                
      48,784 (5)              166.62       2/26/2024                
      73,961 (5)              59.13       3/4/2023                
      109,284 (5)              46.83       8/8/2022                

Daniel N. Swisher, Jr.

            40,000 (6)        113.10       2/26/2030         16,000 (11)        2,640,800  
      16,041       18,959 (7)        140.03       2/27/2029         10,500 (12)        1,733,025  
      32,812       12,188 (14)        140.67       2/29/2028         9,000 (15)        1,485,450  

Renée Galá

            41,500 (16)        109.45       5/6/2030         16,600 (17)        2,739,830  

Robert Iannone, M.D., M.S.C.E

            27,000 (6)        113.10       2/26/2030         10,800 (11)        1,782,540  
      12,072       18,428 (18)        137.12       8/7/2029         9,150 (19)        1,510,208  

Kim Sablich

            42,000 (20)        127.07       8/5/2030           16,800 (21)        2,772,840    

 

(1) 

In addition to the specific vesting schedule for each stock award, each unvested stock award is subject to the general terms of the 2011 Plan or 2007 Plan, as applicable, including the potential for future vesting acceleration described above under the heading “Description of Compensation Arrangements—Equity Compensation Arrangements” as well as the potential vesting acceleration under the terms of the change in control plan described below under the heading “Potential Payments upon Termination or Change in Control—Amended and Restated Executive Change in Control and Severance Benefit Plan.”

 

(2) 

As a general matter, stock options granted to NEOs expire on the day before the tenth anniversary of their grant date, or earlier in the event of an NEO’s termination of service. In the event of an NEO’s termination of service, stock options generally expire three months after such termination of service, subject to extension under limited circumstances such as if the sale of shares during such time was prohibited by our insider trading policy or if exercise would result in violation of securities registration requirements. For more information, see description under the heading “Potential Payments upon Termination or Change in Control—Equity Compensation Plans.”

 

(3) 

Each award listed in this column represents an RSU award that vests in four equal annual installments on the anniversary of the applicable vesting commencement date.

 

(4) 

The market values of the RSU awards that have not vested are calculated by multiplying the number of shares underlying the RSU awards shown in the table by $165.05, the closing price of our ordinary shares on December 31, 2020.

 

(5) 

The number of shares reported reflects the transfer of beneficial ownership of a portion of the indicated stock option awards in 2015 to Mr. Cozadd’s former spouse pursuant to a domestic relations order.

(6) 

The unexercisable shares subject to this stock option award as of December 31, 2020 vested with respect to 25% of the shares underlying the stock option on February 27, 2021, and the remainder vests monthly from March 27, 2021 to February 27, 2024.

 

(7) 

The unexercisable shares subject to this stock option award as of December 31, 2020 vest monthly from January 28, 2021 to February 28, 2023.

 

(8) 

The unexercisable shares subject to this stock option award as of December 31, 2020 vest monthly from January 1, 2021 to March 1, 2022.

 

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(9) 

The unexercisable shares subject to this stock option award as of December 31, 2020 vest monthly from January 2, 2021 to March 2, 2021.

 

(10) 

RSUs awarded on February 27, 2020, vesting in equal annual installments over four years measured from the vesting commencement date of March 5, 2020.

 

(11) 

RSUs awarded on February 28, 2019, vesting in equal annual installments over four years measured from the vesting commencement date of March 5, 2019.

 

(12) 

RSUs awarded on March 1, 2018, vesting in equal annual installments over four years measured from the vesting commencement date of March 5, 2018.

 

(13) 

RSUs awarded on March 2, 2017, vesting in equal annual installments over four years measured from the vesting commencement date of March 5, 2017.

 

(14) 

The unexercisable shares subject to this stock option award as of December 31, 2020 vest monthly from January 3, 2021 to January 3, 2022.

 

(15)

RSUs awarded on March 1, 2018, vesting in equal annual installments over four years measured from the vesting commencement date of January 3, 2018.

 

(16)

The unexercisable shares subject to this stock option award as of December 31, 2020 vested with respect to 25% of the shares underlying the stock option on March 16, 2021, and the remainder vests monthly from April 16, 2021 to March 16, 2024.

 

(17) 

RSUs awarded on May 7, 2020, vesting in equal annual installments over four years measured from the vesting commencement date of April 5, 2020.

 

(18) 

The unexercisable shares subject to this stock option award as of December 31, 2020 vest monthly from January 29, 2020 to May 29, 2023.

 

(19) 

RSUs awarded on August 8, 2019, vesting in equal annual installments over four years measured from the vesting commencement date of June 5, 2019.

 

(20) 

The unexercisable shares subject to this stock option award as of December 31, 2020 vest with respect to 25% of the ordinary shares underlying the stock option on June 1, 2021, and the remainder vest monthly from July 1, 2021 to June 1, 2024.

 

(21) 

RSUs awarded on August 6, 2020, vesting in equal annual installments over four years measured from the vesting commencement date of June 5, 2020.

 

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Option Exercises and Stock Vested

The following table provides information on RSUs vested and stock options exercised, including the number of shares acquired upon exercise and the value realized, determined as described below, for the NEOs in the year ended December 31, 2020.

 

     Option Awards        Stock Awards
  Name   

Number of
Shares

Acquired on
Exercise (#)

  

Value Realized

on Exercise

($)(1)

      

Number of
Shares Acquired
on Vesting

(#)

  

Value Realized on    

Vesting

($)(2)

Bruce C. Cozadd

       6,895        823,125            38,150        4,770,984

Daniel N. Swisher, Jr.

                         8,000        1,093,154

Renée Galá

                               

Robert Iannone, M.D., M.S.C.E

                         3,050        367,982

Kim Sablich

                                     

 

(1) 

The value realized on exercise is based on the difference between the closing price of our ordinary shares on the date of exercise and the applicable exercise price of those options, and does not represent actual amounts received by the NEOs as a result of the option exercises.

 

(2) 

The value realized on vesting is based on the number of shares underlying the RSUs that vested and the closing price of our ordinary shares on the vesting date.

Potential Payments upon Termination or Change in Control

Amended and Restated Executive Change in Control and Severance Benefit Plan

The change in control plan provides that, in the event that an executive’s employment terminates due to an involuntary termination without cause or a constructive termination, in each case upon or within 12 months following a change in control (as such terms are defined in the change in control plan and described generally below), and assuming all of the other conditions of the change in control plan are met, each executive who is a participant in the change in control plan (including each of our NEOs) would be entitled to the following benefits under the change in control plan:

 

 

A single, lump sum cash severance payment equal to the sum of: (i) the applicable base salary described below, multiplied by the applicable percentage set forth below; plus (ii) the product of (A) the applicable base salary, (B) the applicable bonus percentage described below and (C) the applicable percentage set forth below; plus (iii) the product of (A) the applicable base salary, (B) the app