DEF 14A
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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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Preliminary Proxy Statement

 

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Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to § 240.14a-12

Horizon Therapeutics Public Limited Company

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LOGO

HORIZON THERAPEUTICS PUBLIC LIMITED COMPANY

ANNUAL GENERAL MEETING OF SHAREHOLDERS

April 30, 2020

 

 

NOTICE AND PROXY STATEMENT

 


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LOGO

March 18, 2020

Dear Fellow Shareholder: 

2019 was another exceptional year for Horizon and one of significant progress.  Our focus on commercial execution resulted in record financial results, with net sales of $1.3 billion, up 8 percent over 2018, and adjusted EBITDA of $483 million1, up 7 percent.  The primary driver of our net sales performance was KRYSTEXXA® and we continue to see strong promise for this important biologic medicine for uncontrolled gout.  KRYSTEXXA generated net sales of $342 million, up 32 percent on strong volume growth – an excellent growth trajectory for a nine-year-old medicine.  Our strong focus on execution has generated substantial value for our shareholders, with one-, three- and five-year total shareholder returns of 85 percent, 124 percent and 181 percent, respectively – all considerably exceeding our peer group and the Nasdaq Biotechnology Index (NBI). 

We also made significant advancements with our pipeline, capped off by the approval of TEPEZZA by the U.S. Food and Drug Administration (FDA) for the treatment of thyroid eye disease (TED) on January 21, 2020.  TEPEZZA, our fully human monoclonal antibody insulin-like growth factor 1-receptor (IGF-1R), is the first and only medicine approved for the treatment of this debilitating, vision-threatening rare disease.  The approval came nearly two months ahead of schedule, resulting from the tireless efforts of our clinical, regulatory and manufacturing teams.  Supporting this tremendous achievement was the highly significant TEPEZZA Phase 3 clinical data:  82.9 percent of TEPEZZA patients achieved the primary endpoint of proptosis (eye-bulging) reduction of 2 millimeters or greater, compared to 9.5 percent of placebo patients, with a p-value of less than 0.001, and all secondary endpoints were met with statistical significance as well.  These data, which we announced in February 2019, were recently highlighted in The New England Journal of Medicine – a mark of TEPEZZA’s impressive data, considering that the results of both the Phase 2 and Phase 3 clinical trials were published in the esteemed medical journal. 

The approval of TEPEZZA is a milestone advancement for the many people living with TED in the United States.  Before now, there was no standard of care or well-defined treatment path for the disease.  As a result, TED patients often had to suffer from its horrendous effects for several years.  We aim to simplify the patient journey with rapid and accurate diagnosis as well as establish a clear path to treatment.  We worked tirelessly in 2019, establishing the required commercial infrastructure and engaging in pre-launch outreach and education efforts with physicians and key stakeholders.  Our outreach efforts deepened our understanding of the market and the opportunities for TEPEZZA.  That is why, along with the impressive clinical data, we recently increased our expectations for TEPEZZA peak U.S. annual net sales to more than $1 billion, up from our previous expectation of $750 million or greater. 

In addition to TEPEZZA, we also advanced several of our KRYSTEXXA clinical development programs, which are designed to maximize the benefit this medicine offers patients with uncontrolled gout.  We are working to increase the KRYSTEXXA complete response rate through the co-administration of methotrexate, the immunomodulator most used by rheumatologists, through our two MIRROR trials.  We recently announced dramatic topline data from our MIRROR open-label trial.  A larger 135-patient placebo-controlled MIRROR registrational clinical trial is underway, designed to update the prescribing information if successful.  In the meantime, we are hearing positive anecdotal response from rheumatologists and believe that, supported by the positive growing body of evidence, adoption of the use of KRYSTEXXA with methotrexate will accelerate.  In addition to the MIRROR trials, in 2019 we initiated PROTECT, a KRYSTEXXA trial in kidney transplant patients with uncontrolled gout, to support our strategy to expand the use of KRYSTEXXA among nephrologists by providing additional data about the medicine’s effectiveness with its kidney-friendly mechanism. 

The progress on our pipeline speaks to the strong research and development organization we have built over the past couple of years.  The organization remains highly focused both supporting our strategy of maximizing our growth drivers TEPEZZA and KRYSTEXXA and expanding our pipeline, as evidenced by two new pipeline programs we expect to begin this year, one for TEPEZZA and one for KRYSTEXXA.  We believe the mechanism of action for TEPEZZA – blocking IGF-1R – could benefit other populations and are evaluating additional indications for the medicine, including an exploratory TEPEZZA trial in diffuse cutaneous scleroderma, a rare autoimmune disease.  The new KRYSTEXXA program is an open-label proof-of-concept trial to evaluate a shorter-infusion duration, which could result in improved patient convenience and compliance of therapy.

KRYSTEXXA is an example of the value of our industry-leading comprehensive approach, which combines commercial and clinical strategies to maximize the value of our medicines.  Since acquiring KRYSTEXXA in 2016, we have more than quintupled its annual net sales.  Even so, only approximately 4 percent of the 100,000 addressable patient population used KRYSTEXXA in 2019,


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meaning there is still substantial opportunity for continued growth.  We see three areas of growth for KRYSTEXXA:  continued expansion of existing and new accounts; the increasing use of KRYSTEXXA with immunomodulators such as methotrexate; and accelerating adoption of KRYSTEXXA in nephrology, in part due to the efforts of the dedicated nephrology sales force we put in place in 2019.  Given these areas of opportunity, along with KRYSTEXXA’s continued strong performance, we now project its peak U.S. net sales to exceed $1 billion, up from our previous $750 million-plus expectation.  KRYSTEXXA is a tremendous growth engine for Horizon, along with TEPEZZA, and we are excited about the prospects for both of these medicines. 

Our progress in 2019 included significantly improving our capital structure.  Our objective was to be more aligned to profitable biopharma peers, which generally have lower leverage levels.  We succeeded, reducing our gross debt by $575 million, extending the majority of our debt maturities to 2026 and 2027 from the previous 2023/2024 timeframe and reducing our year-over-year annualized interest expense by more than 40 percent.  Our actions resulted in a significantly lower net leverage of 0.7 times at the end of 2019, well below our target ratio of 2 times. 

The tremendous progress we made in 2019 underscores our focus and strength in executing our strategy.  It also speaks to the tremendous dedication of the people who make up Horizon.  It’s personal for us; making a difference matters to us – whether to patients, their caregivers and treating physicians or the communities we serve and live in.  That commitment translates to engaged employees.  An assessment we conducted against benchmarks of a leading consulting firm showed that the average level of Horizon employees’ engagement and loyalty considerably exceeds that of the average pharmaceutical company – and companies overall.  We continue to receive multiple workplace awards, including placing on several FORTUNE and Great Place to Work® 2019 lists:  Best Workplaces in Health Care and BioPharma, Best Small & Medium Workplaces, Best Workplaces for Parents and Best Workplaces in Chicago.  Crain’s Chicago Business recognized us as one of the Best Places to Work in Chicago and as one of the Most Innovative Companies.  In addition, The Great Place to Work® Institute of Ireland recently certified us as one of the Great Places to Work in Ireland. 

Furthermore, a 2019 Aon study confirmed gender and ethnicity pay equity throughout Horizon – and we ranked in the top five of all companies evaluated, testifying to the value we place on diversity and equality.  Given the intensely competitive nature of the biopharma industry, these results speak to our ability to attract and retain the best talent. 

In summary, our significant progress and achievements in 2019 further fueled the momentum we’ve generated over the past several years.  Today we are a leading, high-growth profitable biopharma company delivering innovative therapies to patients and generating high returns to our shareholders.  We continue to deliver on our comprehensive approach and core principles – strong patient-focused commercial execution, clinical development of innovative medicines, a disciplined business development strategy and expanding patient access – all aimed at making a difference and creating value for our patients, for our employees and for you, our shareholders. 

You are cordially invited to attend our Annual General Meeting of Shareholders on Thursday, April 30, 2020, at 3:00 p.m. local time at our corporate headquarters located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland.  Whether or not you plan to attend the Annual General Meeting, it is important that your shares be represented and voted.  Please take a moment now to vote your shares using the instructions found in the Notice of Internet Availability of Proxy Materials and in this Proxy Statement.  Your vote is important. 

We are pleased this year to be making the Proxy Statement and our Annual Report available to you electronically.  This not only provides a more convenient way to access the materials, but it also allows us to conserve natural resources and reduce the environmental impact – as well as reducing costs.  We welcome and value your feedback and appreciate your continued support. 

Sincerely,

LOGO

Timothy Walbert

Chairman, President and Chief Executive Officer

 

 

1 

In 2019, GAAP net income and non-GAAP net income were $573 million and $390 million, respectively.  Non-GAAP net income and adjusted earnings before interest, taxes, depreciation and amortization and other amounts (adjusted EBITDA) are non-GAAP measures.  These measures are used and provided by us as non-GAAP financial measures so that our investors have a more complete understanding of our financial performance.  In addition, these non-GAAP financial measures are among the indicators management uses for planning and forecasting purposes and for measuring our performance.  Please refer to the discussion of non-GAAP financial measures and the reconciliations thereof to GAAP measures beginning on page 110 of our Annual Report on Form 10-K for the year ended December 31, 2019, which discussion and reconciliations are incorporated herein by reference. 

2 

The peer group used for total shareholder return (TSR) calculations for the one- three- and five-year periods ended December 31, 2019 is our peer group shown on page 42.  The total shareholder return table is shown on page 5. 

 


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LOGO

Horizon Therapeutics plc

Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 30, 2020

Dear Shareholder: 

We will be holding the Annual General Meeting of Shareholders of Horizon Therapeutics plc on Thursday, April 30, 2020, at 3:00 p.m. local time at our corporate headquarters located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland for the following purposes: 

 

  1.

Proposal 1:  To elect, by separate resolutions, the three nominees for Class III directors named herein to hold office until the 2023 Annual General Meeting of Shareholders.

 

  2.

Proposal 2:  To approve the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2020, and to authorize the Audit Committee of our Board of Directors (Board) to determine the auditors’ remuneration.

 

  3.

Proposal 3:  To approve, on an advisory basis, the compensation of our named executive officers, as disclosed in this Proxy Statement.

 

  4.

Proposal 4:  To authorize us and/or any of our subsidiaries to make market purchases or overseas market purchases of our ordinary shares.

 

  5.

Proposal 5:  To approve the 2020 Equity Incentive Plan.

 

  6.

Proposal 6:  To approve the 2020 Employee Share Purchase Plan.

 

  7.

To conduct any other business properly brought before the meeting.

These items of business are more fully described in the Proxy Statement accompanying this Notice.

The Board recommends that you vote FOR each of the nominees for director named herein and FOR Proposals 2, 3, 4, 5 and 6.  The accompanying Proxy Statement contains additional information and should be carefully reviewed by shareholders. 

Our Irish statutory financial statements for the fiscal year ended December 31, 2019, including the reports of the directors and statutory auditors thereon, will be presented at the Annual General Meeting.  There is no requirement under Irish law that such statements be approved by the shareholders and no such approval will be sought at the Annual General Meeting. 

For the purposes of our Articles of Association, Proposals 1 and 2 and the receipt and consideration of the Irish statutory financial statements by us at the Annual General Meeting are deemed to be ordinary business and Proposals 3, 4, 5 and 6 are deemed to be special business.  The Annual General Meeting will also include a review of the Company’s affairs.  Shareholders of record as of February 25, 2020, the record date for the Annual General Meeting, are entitled to notice of the Annual General Meeting and to vote at the Annual General Meeting or any adjournment or postponement thereof. 

As permitted by the U.S. Securities and Exchange Commission, we are making this Proxy Statement and Horizon’s Annual Report to shareholders available to our shareholders electronically through the internet, accessible at www.proxyvote.com/G46188 and also on the Annual Reports/Proxy Statements page of our website at www.horizontherapeutics.com.  We believe this electronic distribution model, known as Notice and Access, provides our shareholders with a convenient and expedited method to access the proxy materials and vote, while allowing us to conserve natural resources and reduce the environmental impact of our Annual General Meeting.  In addition, it reduces the costs of printing and distributing the proxy materials. 

By Order of the Board of Directors

 

LOGO

Jennifer T. Lee

Company Secretary

Dublin 4, Ireland

March 18, 2020


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If you are a shareholder of record on February 25, 2020, you are cordially invited to attend the Annual General Meeting in person.  Whether or not you expect to attend the meeting, please complete, date, sign and return the proxy mailed to you, or vote over the telephone or the internet as instructed in these materials, as promptly as possible in order to ensure your representation at the meeting.  Even if you have voted by proxy, you may still vote in person if you attend the meeting.  Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.

We are closely monitoring developments related to COVID-19.  It could become necessary to change the date, time, location and/or means of holding the Annual General Meeting (including by means of remote communication).  If such a change is made, we will announce the change in advance, and details on how to participate will be issued by press release, posted on our website and filed as additional proxy materials. 

 

YOUR VOTE IS IMPORTANT.  WE ENCOURAGE YOU TO VOTE.

 


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PROXY STATEMENT SUMMARY

     1  

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

     13  

PROPOSAL 1—ELECTION OF DIRECTORS

     18  

THE BOARD OF DIRECTORS AND ITS COMMITTEES

     24  

Overview

     24  

Independence of the Board of Directors

     24  

Code of Ethics

     24  

Board Leadership Structure

     24  

Role of the Board in Risk Oversight

     25  

Director Selection

     25  

Committees of the Board of Directors

     26  

2019 Shareholder Rights Agreement

     29  

Shareholder Communications with the Board of Directors

     29  

NON-EMPLOYEE DIRECTOR COMPENSATION

     30  

EXECUTIVE OFFICERS

     33  

COMPENSATION DISCUSSION AND ANALYSIS

     36  

Executive Summary

     37  

Compensation Program Objectives and Philosophy

     41  

Compensation Determination Process

     41  

Elements of Executive Compensation

     43  

Additional Compensation Policies and Practices

     52  

EXECUTIVE COMPENSATION

     56  

Summary Compensation Table

     56  

Grants of Plan-Based Awards

     58  

Pay Ratio

     60  

Outstanding Equity Awards at December 31, 2019

     61  

Option Exercises and Stock Vested

     63  

Pension Benefits

     63  

Nonqualified Deferred Compensation

     63  

Potential Payments Upon Termination or Change-in-Control

     64  

EQUITY COMPENSATION PLAN INFORMATION

     67  

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     68  

Policies and Procedures for Transactions with Related Persons

     68  

Certain Related-Person Transactions

     68  
PROPOSAL 2—APPROVE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND AUTHORIZE THE AUDIT COMMITTEE TO DETERMINE THE AUDITORS’ REMUNERATION      70  
PROPOSAL 3—ADVISORY VOTE ON EXECUTIVE COMPENSATION      72  
PROPOSAL 4—AUTHORIZE US AND/OR ANY OF OUR SUBSIDIARIES TO MAKE MARKET PURCHASES OR OVERSEAS MARKET PURCHASES OF OUR ORDINARY SHARES      73  
PROPOSAL 5—APPROVE THE 2020 EQUITY INCENTIVE PLAN      74  
PROPOSAL 6—APPROVE THE 2020 EMPLOYEE SHARE PURCHASE PLAN      84  
OTHER INFORMATION      89  

Security Ownership of Certain Beneficial Owners and Management

     89  

Householding of Proxy Materials

     90  

Shareholder Proposals

     91  

Presentation of Irish Statutory Financial Statements

     91  

Special Note Regarding Forward-Looking Statements

     92  
OTHER MATTERS      93  


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Index of Frequently Requested Information      Page  

2019 Executive Compensation at a Glance

     43  

2019 Pay-for-Performance Overview

     40  

Board Leadership Structure

     24  

Board Meeting Attendance

     24  

Clawback Policy

     52  

Code of Ethics

     24  

Compensation Consultant

     42  

Corporate Governance Highlights

     8  

Director Biographies

     18  

Director Compensation

     30  

Director Independence

     24  

Director Selection / Qualifications

     25  

Diversity Policy

     26  

ESG Summary

     6  

Executive Compensation Overview

     9  

Executive Officers

     33  

Executive Share Ownership Guidelines

     52  

Hedging and Pledging Policies

     52  

Independent Accountant Fees

     70  

Majority Voting for Directors

     18  

Peer Group Companies

     42  

Related Party Transactions

     68  

Risk Oversight

     25  

Severance Benefits

     53  

Shareholder Communications with the Board

     29  

Shareholder Engagement

     10  

Summary of Voting Items and Board Recommendations

     11  

Procedures for Shareholder Proposals and Director Nominations for the 2020 Annual General Meeting

     91  

Total Shareholder Return

     5  

Year at a Glance

     2  


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PROXY STATEMENT SUMMARY

This summary 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 2019 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2019 and our subsequent filings with the Securities and Exchange Commission (SEC). 

 

 
Meeting and Voting Information
   
Time and Date:       3:00 p.m. local time on April 30, 2020
   
Place:       Our corporate headquarters located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland
   
Record Date:       February 25, 2020
   
How to Vote:        

Shareholders as of the record date are entitled to vote and may do so in person at the Annual General Meeting. 

 

You may also vote by electronic proxy by: 

•    voting your shares over the internet by going to www.proxyvote.com and using the instructions found in the Notice that will be mailed to shareholders on or about March 18, 2020; or by

•    voting your shares by telephone at +1.800.690.6903 within the United States, U.S. territories or Canada using a touch-tone phone and following the recorded instructions.

 

Alternatively, you may request a printed set of the materials and vote using the toll-free telephone number on the proxy card or by marking, signing, dating and mailing your proxy form in the postage-paid envelope that will be provided should you request a printed copy.  Instructions on how to request a printed set of the proxy materials may be found in the Notice. 

 

Voting Items and Board Recommendations

 

     

Proposal

   Page
Number
  

Board

  Recommendations  

1

   Election of Directors    18    FOR All Nominees

2

   Approval of the Appointment of Independent Registered Public Accounting Firm and Authorization of the Audit Committee to Determine the Auditors’ Remuneration    70    FOR

3

   Approval, on an Advisory Basis, of Executive Compensation    72    FOR

4

   Authorization to Make Market Purchases or Overseas Market Purchases
of Our Ordinary Shares
   73    FOR

5

   Approval of the 2020 Equity Incentive Plan    74    FOR

6

   Approval of the 2020 Employee Share Purchase Plan    84    FOR

 

Horizon  |  Proxy Statement 1


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2019—Year At A Glance

Strong Performance:  Record Net Sales and Strong Shareholder Returns

 

LOGO

Except for 1-, 3- and 5-year total shareholder return, growth percentages represent comparison to full-year 2018. 

TSR:  Total shareholder return through December 31, 2019.  NBI:  Nasdaq Biotechnology Index. 

(1)

Adjusted EBITDA is a non-GAAP measure.  Please refer to the discussion of non-GAAP financial measures and the reconciliations to GAAP measures beginning on page 110 of our Annual Report on Form 10-K for the year ended December 31, 2019, which discussion and reconciliations are incorporated herein by reference. 

 A Year of Milestones and Significant Progress

 

Our Strategy:

Maximizing key growth drivers

KRYSTEXXA and TEPEZZA

while expanding our pipeline

for sustainable growth

 

 

 

 

Our Purpose:

To help build healthier

communities, urgently

and responsibly

    LOGO   

  Announced highly significant TEPEZZA Phase 3 topline data:  82.9% of TEPEZZA patients met the primary endpoint versus 9.5% of placebo (p<0.001); obtained FDA Priority Review from FDA; after an accelerated review obtained U.S. FDA approval of TEPEZZA for thyroid eye disease on January 21, 2020, almost two months before the target action date, making TEPEZZA the first and only approved treatment for the vision-threatening and debilitating disease

 

  Completed KRYSTEXXA plus methotrexate MIRROR immunomodulation open-label trial; topline data demonstrated significant response rate improvement:  79% of patients achieved complete response rate vs 42% for KRYSTEXXA Phase 3 clinical program

 

  Initiated KRYSTEXXA plus methotrexate MIRROR immunomodulation placebo-controlled randomized clinical trial with aim of optimizing treatment outcomes; trial designed to expand the prescribing information for KRYSTEXXA

 

  Initiated PROTECT trial evaluating KRYSTEXXA to improve management of uncontrolled gout for adult kidney transplant patients

 

  Opened new South San Francisco R&D and manufacturing facility

 

  Significantly improved Horizon’s capital structure

 

  Demonstrated strong employee engagement with multiple best-workplace recognitions, as well as gender and ethnicity pay equity

 

  Changed our company name to Horizon Therapeutics plc and rebranded to better reflect who we are today and our vision for the future

 

Horizon  |  Proxy Statement 2


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Business Overview

Horizon at a Glance

 

LOGO   

We are a leading, high-growth profitable biopharma company

  Differentiated commercial model; generating annual net sales of $1.3 billion only 8 years after our IPO

  Focused on rare diseases, rheumatology, nephrology, ophthalmology and endocrinology

  Two high-growth drivers with more than $2 billion in combined peak U.S. annual net sales potential(1)

  
LOGO   

Delivering innovative therapies to patients

  Deep development expertise with proven track record

  Building a pipeline through M&A to support sustainable long-term growth

  
LOGO   

Generating high returns for shareholders

  Outperformed our peers and Nasdaq Biotechnology Index for 1, 3 and 5 years(2)

  Our prospects position us with a top-tier growth profile

 

(1)

Horizon estimate. 

(2)

Total shareholder return (TSR) at December 31, 2019; our peer group is shown on page 42. 

2019:  A Year of Tremendous Progress and Strong Execution on Our Strategy

2019 was a year of tremendous progress and performance at Horizon, marked by the achievement of several important milestones and a testament to the strong execution of our strategy to maximize our key growth drivers and expand our pipeline for sustainable growth.  We generated record net sales of $1.3 billion, an increase of 8 percent over 2018, and adjusted EBITDA of $483 million, an increase of 7 percent despite significant investments made in the development and U.S. launch preparations for TEPEZZA.  We achieved one-year total shareholder return of 85 percent, far outpacing the 25 percent return of the NBI.  In addition to heavily investing in TEPEZZA, we invested in several new R&D programs for our growth driver KRYSTEXXA to maximize the benefit it offers patients and to enhance its leadership in uncontrolled gout.  During 2019 we considerably improved our capital structure to align more closely to profitable biopharma companies, reducing our gross debt by $575 million and extending our debt maturities with lower interest rates.  With the recent accelerated approval of TEPEZZA in January 2020 as well as the continued strong growth prospects for KRYSTEXXA, we believe we are in our strongest position ever as a company, building on our momentum to deliver long-term value to our shareholders. 

Our Unique Approach

We have taken a different approach to become a leading profitable biopharma company. 

Our Unique Biopharma Model is Delivering on Our Third Phase of Growth and Evolution

 

LOGO

 

(1)

Net sales for the year ended Dec. 31, 2019.         (2)    Net sales for the year ended Dec. 31, 2014.         (3)    Net sales for the year ended Dec. 31, 2011. 

 

Horizon  |  Proxy Statement 3


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Driving Our Successful Growth:  Our Comprehensive Approach

Behind our successful growth is the comprehensive approach we use to maximize the value of our medicines, with three integral components. 

We Employ a Comprehensive Approach to Maximize the Value of Our Medicines for Patients – and Shareholders

 

LOGO

Our experience with KRYSTEXXA exemplifies the success of this approach.  An underperforming and undervalued medicine with stagnant growth when we acquired it in 2016, we have transformed its growth trajectory in a few short years, more than quintupling the annual net sales – almost entirely driven by volume growth.  And we see significant room for further expansion of KRYSTEXXA, with three areas of growth:  continued expansion of existing and new accounts; the increasing use of KRYSTEXXA with immunomodulators such as methotrexate; and accelerating adoption of KRYSTEXXA by nephrologists.  We believe that together these three growth drivers can generate peak KRYSTEXXA U.S. net sales of more than $1 billion.  Our comprehensive approach is effective. 

TEPEZZA:  A Milestone Advancement for a Pressing Unmet Need

The efforts of a great many people at Horizon in 2019 culminated in the recent FDA approval of TEPEZZA for the treatment of TED.  TED is a rare, autoimmune vision-threatening and disfiguring disease in which local inflammation and tissue expansion behind the eye can lead to proptosis (eye bulging).  Proptosis can result in double vision, misalignment of the eyes and an inability to close the eyelids, making tasks of daily living extremely difficult. 

TEPEZZA:  A Milestone Advancement in the Treatment of Thyroid Eye Disease (TED)

 

LOGO

 

(1)

Horizon estimate of patients eligible for TEPEZZA each year. 

TEPEZZA is a fully human monoclonal antibody (mAb) and a targeted inhibitor of the insulin-like growth factor-1 receptor (IGF-1R).  The early FDA approval of TEPEZZA in January 2020 is a major milestone for many patients living with TED.  Until now, with no approved medicine for TED, the treatment path was not well defined, adding to the tremendous challenges TED patients already faced.  With a goal to be ready to launch upon FDA approval, we invested significantly in 2019 in preparing the market.  We established the commercial infrastructure necessary to support our patient-centric approach, hiring approximately 100 people.  We engaged with the treating physician community and other key stakeholders – educating them about the disease and the urgency to diagnose and treat.  We established a referral network for infusion sites of care for treating physicians.  We also worked to facilitate access to the medicine.  Our goal is to facilitate a streamlined patient journey, with a quick, accurate diagnosis and clear path to treatment – and to support TED patients through every step of the journey.  We are leveraging our comprehensive approach in bringing TEPEZZA to market – as well as our learnings from KRYSTEXXA.  TEPEZZA embodies our vision in action – making the world a better place through innovative medicines for patients with unmet needs.  It also represents a significant opportunity for growth:  we project peak TEPEZZA U.S. annual net sales of more than $1 billion. 

 

Horizon  |  Proxy Statement 4


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We Are Expanding Our Pipeline to Drive Long-Term Growth

Our pipeline is a top priority and a cornerstone of our strategy to maximize the value of our medicines and drive long-term growth.  Our experienced R&D leadership team has championed multiple achievements, including the accelerated development, submission and approval of TEPEZZA and the optimization of KRYSTEXXA’s profile through several R&D programs and post-clinical data analyses.  Most recently, we opened a new R&D and manufacturing facility in South San Francisco to support further pipeline growth.  Our expanding pipeline attests to our diligent focus on maximizing and expanding our pipeline, which we aim to do in part by adding pipeline assets through the combined efforts of our R&D and business development organizations. 

 

LOGO

 

(1)

Planned trial expected to begin in 2020. 

(2)

Being developed under a collaboration agreement with XL-protein GmbH.

MIRROR:  Trials evaluating the use of KRYSTEXXA in combination with immunomodulator methotrexate to increase the patient response rate. 

PROTECT:  Clinical trial evaluating the effect of KRYSTEXXA on serum uric acid levels in kidney transplant patients with uncontrolled gout. 

OPTIC-X:  Open-label extension trial of the Phase 3 trial evaluating TEPEZZA for the treatment of TED. 

Total Shareholder Return

Our disciplined approach, clear strategy, business development acumen and strong commercial execution has driven rapid, transformational growth.  As a result, we have outperformed both our peer group and the NBI over the one-, three- and five-year periods ended December 31, 2019.  With our key growth driver medicines KRYSTEXXA and TEPEZZA, our durable base of rare disease medicines, the pipeline we are expanding for future growth and our strengthened capital structure, we believe Horizon is well positioned for sustainable long-term growth. 

Our Total Shareholder Return Significantly Surpassed Our Peers and NBI

1, 3- and 5-year periods

 

LOGO

Note:  The peer group used for the TSR calculations for the 1-, 3- and 5-year periods ended December 31, 2019 is our peer group shown on page 42. 

 

Horizon  |  Proxy Statement 5


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Fostering Sustainability for Horizon and Beyond:  Key ESG Factors

We go to incredible lengths at Horizon to impact lives and make the world a better place.  We know that everything we do benefits the patients who use our medicines, their caregivers and treating physicians.  It also benefits all of us who work at Horizon.  For us it’s personal – we want to make a difference.  And that difference contributes to our long-term success and sustainability as well.  The key areas we believe strongly support Horizon’s long-term sustainability include: 

 

Our

Governance

  

We employ strong corporate governance principles and practices. 

•    Our Board of Directors is predominantly independent with a balance of skills and experience. 

•    Our Board is diverse in experience, education, talents, gender and race, and has an established diversity policy. 

•    Horizon is committed to frequent and active shareholder engagement with an established outreach program.  Investor feedback has influenced improvements to our governance. 

    Our Purpose and    

Our Focus on

Ethics and

Integrity

  

Our purpose is to build healthier communities, urgently and responsibly. 

•    Underscoring all we do is our dedication to making the world a better place, one patient, one medicine, one community at a time. 

•    Integrity, honesty and doing the right thing are a part of the core values that define Horizon as a company.

•    We value the trust and reputation behind Horizon’s name and promote high standards of integrity, conducting our affairs in an honest and ethical manner, supported by our strong ethics and compliance leadership. 

•    Horizon is a proud member of Pledge 1%, a movement empowering companies to donate 1% of product, 1% of equity, 1% of profit or 1% of employee time to improve communities around the world. 

Access to

Medicines and

Our

Patient-Centric

Focus

  

We make health a priority, not a privilege. 

•    We work to ensure that patients have access to our medicines, regardless of their ability to pay.  We supported patients in 2019 with more than $1.5 billion in assistance, representing 39 percent of our gross sales. 

•    Patients are at the heart of everything we do.  We’re committed to improving lives by identifying and bringing innovative medicines to market that address unmet medical needs.  And we support patients through the entire patient journey. 

•    We actively partner with 60-plus patient advocacy groups to raise awareness for many underrepresented diseases and advocate for patients and their communities. 

Our Engaged,

Diverse

Award-Winning

Corporate

Culture

  

For us it’s personal – we want to make a difference and are consistently recognized for our engagement. 

•    We are consistently recognized as a best workplace in multiple categories, demonstrating a high level of employee engagement

•    We significantly outscore average biopharma companies in employee loyalty and engagement when comparing to benchmarks of a leading consultant firm. 

•    We believe in diversity, that people with different backgrounds and life experiences fuel innovation and success. 

•    At all levels of our employee population the percentage of women is above industry standards.

•    We demonstrate gender and ethnicity pay equality, as per a 2019 Aon study. 

•    Horizon chairman, president and CEO Timothy Walbert is a signatory of the CEOAction for Diversity and Inclusion pledge. 

•    Ours is a culture of inclusion and commitment to developing and marketing medicines, supporting patient advocacy efforts and giving back to the community. 

Consistently Recognized as One of the Best Places to Work

 

LOGO

 

Horizon  |  Proxy Statement 6


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Director Nominees and Continuing Directors

 

           

Name

   Age     

Director

Since

     Principal Position    Independent      Other
Current
Public
Boards
 

2020 Director Nominees

              

Gino Santini(1)

     63        2012      Chairman, AMAG Pharmaceuticals, Inc.      Yes        4  

James Shannon, M.D.

     63        2017      Director, MannKind Corporation      Yes        2  

Timothy Walbert

     52        2008      Chairman, President and Chief Executive Officer, Horizon Therapeutics plc      No        2  

Continuing Directors

              

William F. Daniel

     67        2014      Chairman, Malin Corporation plc      Yes        1  

Michael Grey

     67        2011      Chairman, Mirum Pharmaceuticals, Inc.      Yes        2  

Jeff Himawan, Ph.D.

     54        2007      Managing Director, Essex Woodlands Health Ventures, L.P.      Yes        2  

Susan Mahony, Ph.D.

     55        2019      Director, Zymeworks Inc.      Yes        3  

H. Thomas Watkins

     67        2014      Chairman, Vanda Pharmaceuticals Inc.      Yes        1  

Pascale Witz

     53        2017      President, PWH Advisors      Yes        3  

 

(1)

Mr. Santini is not standing for re-election to the board of directors of Allena Pharmaceuticals, Inc. at Allena’s 2020 annual meeting of stockholders as disclosed in Allena’s Annual Report on Form 10-K filed with the SEC on March 16, 2020.

Board Highlights

The Nominating and Corporate Governance Committee of our Board examines multiple factors when evaluating directors, including their knowledge, skills and experience, including experience in our industry and with respect to clinical development, business, finance, management and public service.  The Committee believes in an expansive definition of diversity that includes differences of experience, education, talents, gender and race, among other things.  The table below highlights the extensive experience of our directors as well as a balance of skills on our Board: 

 

LOGO

 

 

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Our Board, which is predominantly independent, includes a range of expertise, experience, diversity, as well as newer and longer-tenured directors.  The Board values diversity, believing that maintaining a diverse membership enhances the Board’s deliberations and enables the Board to better represent all of the Company’s constituents.  In this respect, the goal of the Nominating and Corporate Governance Committee is to ensure that the Board has diversity of experience and perspectives, as well as race, gender, geography and areas of expertise – as is set forth in the Board’s diversity policy, which is available on our website at www.horizontherapeutics.com.

 

LOGO

Corporate Governance Highlights

 

       

Independent Oversight

 

        

Continuous Improvement

 

     
     

•    Eight out of nine of our directors are independent

 

•    All Board committees are composed solely of independent directors

 

•    Lead independent director with clearly delineated duties

 

•    Diverse Board in terms of experience, education and talents supported by the Board’s diversity policy

 

     

•    Annual Board and committee self-evaluations

 

•    Risk oversight by the Board and committees

 

•    Ongoing shareholder engagement efforts

    
       

Strong Governance Practices

 

        

Shareholder Rights

 

     
     

•    Regular executive sessions of independent directors

 

•    Independent compensation consultant reporting directly to the Compensation Committee

 

•    Board and committees may engage outside advisors independently of management

 

•    Share ownership guidelines for directors and executive officers

 

•    Annual advisory shareholder vote on executive compensation

 

•    Incentive compensation recoupment “clawback” policy

 

•    One-year holding period post-issuance on all post-2017 equity grants for executive officers

 

       

•    Majority voting for elections of directors

 

•    Shareholder ability to call extraordinary general meeting

 

•    Directors may be removed by ordinary resolution with majority vote of the shareholders

    

 

Horizon  |  Proxy Statement 8


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Executive Compensation Overview

Our executive compensation program emphasizes three major pay considerations; this is how we currently achieve them: 

 

 

Pay Considerations

Long-Term
Performance
   Executive and Shareholder
Alignment
   Risk Mitigation
   
What We Do   What We Don’t Do

Align executive compensation with corporate and individual performance

 

Maintain strong share ownership guidelines for our directors and executives

 

Maintain appropriate balance between short- and long-term compensation, which discourages short-term risk-taking at the expense of long-term results

 

Seek annual shareholder advisory approval on our executive compensation

 

Engage an independent advisor reporting directly to the Compensation Committee

 

Maintain anti-pledging and anti-hedging policy for our shares

 

Cap annual and long-term incentive payouts

 

Conduct annual compensation risk assessments

 

Require a one-year post-issuance holding period on all post-2017 equity grants for executive officers

 

Maintain an incentive compensation recoupment “clawback” policy

 

 

No guaranteed bonuses or salary increases

 

No repricing of stock options without shareholder approval

 

No dividends or dividend equivalents paid on unearned shares

 

No named executive officer excise tax gross-ups

With a strategic focus on growing the business over the long term, it is imperative that our executive compensation program motivates our talented management team in such a manner as to encourage – and reward – successful execution of this business strategy.  We utilize the following compensation elements to achieve this: 

 

       
Element    Form    Performance
Period
   Objective
Base Salary   

Cash

(fixed)

   N/A   

Recognition of an individual’s role and responsibilities; provide competitive pay for retention purposes

Short-Term Incentive    Cash
(variable)
   Annual   

Variable pay designed to reward achievement of annual financial and corporate objectives and individual goals

Long-Term Incentives   

PSU Awards
(variable)

 

RSU Awards

(variable)

   Multi-year

or Annual

 

N/A

  

Promote an ownership culture and aligns the interests of executives with those of shareholders; provide meaningful incentives for management to execute on longer-term financial and strategic growth goals that drive shareholder value creation and support our retention strategy

 

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Shareholder Engagement

We value the views of our shareholders.  During the outreach we conduct each year, we have had significant and meaningful dialogue with our shareholders regarding our compensation and governance.  Feedback from our outreach informs the Compensation Committee’s thinking when evaluating our current compensation program and considering potential modifications going forward. 

Changes to our compensation program and corporate governance over the past several years that were heavily influenced by shareholder feedback include: 

 

   

Board diversity.  Diversity is an important principle for us at Horizon as it is for many of our investors.  Given that our business and operations are diverse and global in nature, our Nominating and Corporate Governance Committee takes into account a broad range of diversity considerations when assessing potential candidates, including diversity of experience and perspectives as well as gender, race, geography and areas of expertise, as well as adhering to our Board’s diversity policy, which is posted on our website.  We have further diversified our Board over the past several years, including the addition in 2019 of Susan Mahony, Ph.D., who brings more than three decades of broad cross-functional and global pharmaceutical experience to the Board. 

 

   

Incentive compensation recoupment policy.  This policy enables us to recover performance-based cash and equity compensation if it is determined not to have been earned by our executive officers, in the event of restatement of financial results. 

 

   

Annual long-term incentive grants.  Our philosophy on granting equity has changed as a result of shareholder feedback.  In January 2018, we shifted from “front-loaded” awards covering a multi-year period to regular, annual grants of long-term incentives. 

 

   

Balance between short-term and long-term performance metrics.  Shareholder feedback informed our decision to combine both a short-term business performance metric and long-term relative TSR metric for the performance share unit (PSU) awards granted as part of our annual long-term incentive plan.  We have continued to use performance-based equity compensation in our regular long-term incentive program, influenced by feedback from our on-going engagement with shareholders regarding executive compensation. 

In 2019, during our shareholder engagement cycle before the Annual General Meeting, we offered engagement opportunities to shareholders who represented 85 percent of our shares outstanding; shareholders who represented 68 percent of our outstanding shares accepted and we conducted calls or meetings with these holders.  Our shareholders appreciated the outreach, and the feedback from this engagement was very positive.  At our 2019 Annual General Meeting of Shareholders, our say-on-pay proposal received the support of 86 percent of the shares voted.  We believe this high level of support is a result of our comprehensive shareholder outreach and engagement program to solicit feedback, understand investor viewpoints and incorporate their feedback into further discussions of our compensation programs and corporate governance. 

In the summer and fall of 2019, we again engaged with shareholders who represented approximately 30 percent of our shares outstanding.  Discussions focused primarily on environmental, social and governance (ESG) disclosure, in particular what our shareholders deem appropriate and effective ESG disclosure for Horizon as we work to enhance our disclosure initiatives. 

In early 2020 during our shareholder engagement cycle before the Annual General Meeting, we offered engagement opportunities to shareholders who represented 75 percent of our shares outstanding and are in the process of conducting calls with those shareholders who expressed interest. 

We greatly value the dialogue we have with our shareholders and remain committed to continued engagement going forward. 

Please see our Compensation Discussion and Analysis on page 36 for additional information on our compensation philosophy. 

 

Horizon  |  Proxy Statement 10


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Summary of Voting Items and Board Recommendations

 

 
Proposal 1:  Election of Directors

We are asking our shareholders to vote, by separate resolutions, on the election of each of the following Class III directors to hold office until the 2023 Annual General Meeting of Shareholders: 

•    Gino Santini

•    James Shannon, M.D.

•    Timothy Walbert

 

Each of the nominees listed is currently one of our directors who was nominated for election by the Board, upon the recommendation of the Nominating and Corporate Governance Committee.  Our Board believes that each nominee has the specific experience, qualifications, attributes and skills to serve as a member of the Board. 

 

Detailed information about each nominee can be found beginning on page 18. 

   The Board of Directors recommends a vote “FOR” each of the nominees. 
   A majority of votes cast are required for approval
   See page 18 for more information. 

 

 
Proposal 2:  Appointment of Independent Registered Public Accounting Firm and Authorization of the Audit Committee to
Determine the Auditors’ Remuneration

Our statutory auditor is PricewaterhouseCoopers (Ireland).  We are asking our shareholders to: 

•    approve the appointment of PricewaterhouseCoopers LLP (United States) (PricewaterhouseCoopers) as our independent registered public accounting firm for the year ending December 31, 2020; and

•    authorize the Audit Committee of our Board to determine the remuneration of our independent registered public accounting firm and our statutory auditor. 

   The Board of Directors recommends a vote “FOR” this proposal. 
   A majority of votes cast are required for approval
   See page 70 for more information. 

 

 
Proposal 3:  Approval, on an Advisory Basis, of Executive Compensation

We are asking our shareholders for advisory approval of our named executive officers’ compensation.  Our Compensation Committee‘s philosophy continues to be based on attracting and retaining top talent with experience in building and leading a successful biopharma company, while providing competitive compensation and benefits packages that create a direct, meaningful link between business results and compensation opportunities.  In doing so, we believe we can align interests of management, employees and shareholders to set priorities and focus on executing our long-term business strategy. 

 

Our executive compensation program is aligned with our business strategy and priorities.  We align our executive officers’ interests with our shareholders’ interests by rewarding our executive officers for both current and longer-term performance, measured both by financial performance and milestones for the advancement of our long-term development programs and strategic initiatives. 

   The Board of Directors recommends a vote “FOR” this proposal. 
   A majority of votes cast are required for approval
   See page 72 for more information. 

 

 
Proposal 4:  Authorization to Make Market Purchases or Overseas Market Purchases of our Ordinary Shares

Consistent with prior years, we are asking our shareholders to authorize us, or any of our subsidiaries, to make open market purchases of up to 10% our issued ordinary shares as of December 31, 2019. 

 

If adopted, the authority will expire at the close of business on October 30, 2021, unless renewed at the 2021 Annual General Meeting of Shareholders. 

 

Such purchases would be made only at price levels the Board considers to be in the best interest of shareholders generally, after taking into account our overall financial position. 

   The Board of Directors recommends a vote “FOR” this proposal. 
   A majority of votes cast are required for approval
   See page 73 for more information. 

 

Horizon  |  Proxy Statement 11


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Proposal 5:  Approval of the 2020 Equity Incentive Plan

We are asking our shareholders to vote on a proposal to approve the 2020 Equity Incentive Plan (2020 EIP).  Currently, we maintain the 2014 Equity Incentive Plan, as amended (2014 EIP) to grant equity awards to our employees.  We are seeking shareholder approval of the 2020 Plan as a successor to and continuation of our 2014 EIP and increase the number of ordinary shares available for the grant of equity awards to our employees by an additional 6,900,000 shares. 

 

The terms of the 2020 EIP reflect current accounting, regulatory and tax rules and include provisions that are designed to protect our shareholders’ interests and reflect corporate governance best practices. 

 

Similar in substance to the 2014 EIP, the 2020 EIP will allow us to continue to utilize a broad array of equity incentives and performance cash incentives in order to secure and retain the services of employees of Horizon and our subsidiaries, and to provide long-term incentives that align the interests of employees with the interests of Horizon shareholders. 

   The Board of Directors recommends a vote “FOR” this proposal. 
   A majority of votes cast are required for approval
   See page 74 for more information. 

 

 
Proposal 6:  Approval of the 2020 Employee Share Purchase Plan

We are asking our shareholders to vote on a proposal to approve the 2020 Employee Share Purchase Plan (2020 ESPP) as a successor to and continuation of our 2014 Employee Share Purchase Plan (2014 ESPP) and to increase the number of ordinary shares available for issuance to our employees pursuant to the exercise of purchase rights by an additional 2,500,000 shares. 

 

The terms of the 2020 ESPP reflect current accounting, regulatory and tax rules. 

 

We believe that the approval of the 2020 ESPP, which is similar in substance to the 2014 ESPP, will allow us to continue to grant purchase rights to our employees at appropriate levels and to assist us in attracting, retaining and motivating qualified employees and in aligning their long-term interests with those of our shareholders. 

   The Board of Directors recommends a vote “FOR” this proposal. 
   A majority of votes cast are required for approval
   See page 84 for more information. 

 

Horizon  |  Proxy Statement 12


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QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

This Proxy Statement contains important information regarding the Annual General Meeting of Shareholders, the proposals on which you are being asked to vote, information you may find useful in determining how to vote, and voting procedures.  You are invited to attend the Annual General Meeting to vote on the proposals described in this Proxy Statement.  However, you do not need to attend the meeting to vote your shares. 

Why did I receive a notice regarding the availability of proxy materials on the internet?

We have sent you a Notice of Internet Availability of Proxy Materials (the Notice) because our Board is soliciting your proxy to vote at the Annual General Meeting, including at any adjournments or postponements of the meeting.  As permitted by the U.S. Securities and Exchange Commission, we are making this Proxy Statement, Horizon’s Annual Report to shareholders, and our Irish statutory financial statements available to our shareholders electronically via the internet.  We believe that using this form of distribution provides a convenient and expedited method for our shareholders to access the proxy materials and vote, while allowing us to conserve natural resources and reduce the environmental impact of our Annual General Meeting.  In addition, it reduces the costs of printing and distributing the proxy materials.  Accordingly, we have sent a Notice to our shareholders of record.  All shareholders can access the proxy materials on the website referred to in the Notice or may request a printed set of the proxy materials.  Instructions on how to access the proxy materials over the internet or to request a print or email copy may be found in the Notice.  We intend to mail the Notice on or about March 18, 2020 to all shareholders of record as of February 25, 2020, who are entitled to vote at the Annual General Meeting. 

How do I attend the Annual General Meeting?

The meeting will be held on Thursday, April 30, 2020, at 3:00 p.m. local time at our corporate headquarters located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland.  Directions to the Annual General Meeting may be found at https://www.google.com/maps/place/Connaught+House,+Burlington+Rd,+Dublin+4,+Ireland.  Information on how to vote in person at the Annual General Meeting is provided below.  However, you do not need to attend the Annual General Meeting to vote your ordinary shares. 

We are closely monitoring developments related to COVID-19.  It could become necessary to change the date, time, location and/or means of holding the Annual General Meeting (including by means of remote communication).  If such a change is made, we will announce the change in advance, and details on how to participate will be issued by press release, posted on our website and filed as additional proxy materials. 

Who can vote at the Annual General Meeting?

Only shareholders of record at the close of business on February 25, 2020, will be entitled to vote at the Annual General Meeting.  On this record date, there were 190,155,863 of our ordinary shares outstanding and entitled to vote. 

Shareholder of Record (shares registered in your name).  If on February 25, 2020, your shares were registered in your name in our Register of Members, which is maintained by our transfer agent, Computershare Shareowner Services LLC, then you are a shareholder of record.  As a shareholder of record, you may vote in person at the meeting or vote by proxy.  Whether or not you plan to attend the meeting, we urge you to vote by proxy over the telephone or on the internet as instructed in the Notice or as discussed below to ensure your vote is counted, or if you request a printed copy, vote by completing and returning the proxy card. 

Beneficial Owner (shares registered in the name of a broker or bank).  If on February 25, 2020, your shares were not registered in your name in our Register of Members, but rather held in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and the Notice is being forwarded to you by that organization.  The organization holding your account is considered to be the shareholder of record for purposes of voting at the Annual General Meeting.  As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account.  You are also invited to attend the Annual General Meeting.  However, since you are not the shareholder of record, you may not vote your shares in person at the meeting unless you request and obtain a valid proxy from your broker or other agent. 

What am I voting on?

There are six matters scheduled for a vote: 

 

   

Election of three Class III directors (Proposal 1);

 

   

Approval of the appointment of independent registered public accounting firm and authorization of the Audit Committee to determine the auditors’ remuneration (Proposal 2);

 

   

Approval, on an advisory basis, of executive compensation (Proposal 3);

 

   

Authorization to make market purchases or overseas market purchases of our ordinary shares (Proposal 4);

 

   

Approval of the 2020 Equity Incentive Plan (Proposal 5); and

 

   

Approval of the 2020 Employee Share Purchase Plan (Proposal 6).

 

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What if another matter is properly brought before the meeting?

The Board knows of no other matters that will be presented for consideration at the Annual General Meeting.  If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on those matters in accordance with their best judgment. 

How do I vote?

You may vote “For” or “Against” each Class III director nominee or you may abstain from voting for all or any of the nominees.  For each of the other matters to be voted on, you may vote “For” or “Against” or abstain from voting. 

The procedures for voting are fairly simple: 

Shareholder of Record.  If you are a shareholder of record, you may vote in person at the Annual General Meeting, by electronic proxy over the telephone or the internet as instructed below, or by proxy using the proxy card you receive if you request a set of printed materials.  Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is counted.  You may still attend the meeting and vote in person even if you have already voted by proxy. 

 

   

To vote in person, come to the Annual General Meeting and we will give you a ballot when you arrive.  Please bring our admission ticket or proof of ownership, as discussed below under “Do I Need a Ticket to Attend the Annual General Meeting?” 

 

   

You may vote by electronic proxy in the following ways: 

 

    •

To vote through the internet, go to www.proxyvote.com to complete an electronic proxy card.  You will be asked to provide the company number and control number from the Notice or proxy card.  Your vote must be received by 11:59 p.m. Eastern Time on April 29, 2020, to be counted. 

 

    •

To vote over the telephone, dial toll-free 1.800.690.6903 within the United States, U.S. territories and Canada using a touch-tone phone and follow the recorded instructions.  You will be asked to provide the company number and control number from the Notice or proxy card.  Your vote must be received by 11:59 p.m., Eastern Time on April 29, 2020, to be counted. 

 

   

Alternatively, you may request a printed set of the materials and vote using the toll-free telephone number on the proxy card or by marking, signing, dating and mailing your proxy form in the postage-paid envelope provided.  Proxy cards submitted through the mail must be received by 11:59 p.m. Eastern Time on April 29, 2020.  If you return your signed proxy card to us before this deadline, we will vote your shares as you direct.  Instructions on how to request a printed set of the proxy materials may be found in the Notice. 

We provide internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions.  However, please be aware that you must bear any costs associated with your internet access, such as usage charges from internet access providers and telephone companies. 

Beneficial Owner.  If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you should have received a Notice containing voting instructions from that organization.  Simply follow the voting instructions in the Notice to ensure that your vote is counted.  Alternatively, you may vote by telephone or through the internet as instructed by your broker, bank or other agent.  To vote in person at the Annual General Meeting, you must obtain a valid proxy from your broker, bank or other agent.  Follow the instructions in the Notice you receive from your broker, bank or other agent, or contact that organization to request a proxy form. 

Joint Holders.  In the case of joint holders of record, any one of such holders may vote either in person or by proxy in respect thereof as if he or she were the sole holder thereof, but the vote of the senior holder who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in our Register of Members. 

How many votes do I have?

On each matter to be voted upon, you have one vote for each ordinary share you own as of February 25, 2020. 

What happens if I do not vote?

Shareholder of Record.  If you are a shareholder of record and do not vote by completing your proxy card, by telephone, through the internet or in person at the Annual General Meeting, your shares will not be voted. 

 

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Beneficial Owner.  If you are a beneficial owner and do not instruct your broker, bank, or other agent how to vote your shares, the question of whether your broker or nominee will still be able to vote your shares depends on whether the New York Stock Exchange (NYSE) deems the particular proposal to be a “routine” matter.  Brokers and nominees can use their discretion to vote “uninstructed” shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters.  Under the rules and interpretations of the NYSE, “non-routine” matters are matters that may substantially affect the rights or privileges of shareholders, such as mergers, shareholder proposals, elections of directors (even if not contested), executive compensation (including any advisory shareholder votes on executive compensation) and certain corporate governance proposals, even if management-supported.  We have been advised by the NYSE that your broker or nominee may not vote your shares on Proposals 1, 3, 5 or 6 without your instructions, but may vote your shares on Proposals 2 and 4. 

What if I return a proxy card or otherwise vote but do not make specific choices?

If you return a signed and dated proxy card or otherwise vote without marking voting selections, then our designated proxy holders (one of the individuals named on your proxy card) will vote your shares in the manner recommended by our Board on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion regarding any other matters properly presented for a vote at the meeting.  If any other matter is properly presented at the meeting, your proxy holder will vote your shares using his or her best judgment. 

Who is paying for this proxy solicitation?

We have retained Alliance Advisors, a proxy solicitation firm, to solicit proxies in connection with the Annual General Meeting at a cost of approximately $22,500 plus expenses.  The cost of soliciting proxies incurred by us and Alliance Advisors, including the preparation, assembly and mailing of the proxies and soliciting material, as well as the cost of forwarding such material to beneficial owners of our ordinary shares, will be borne by us.  Our directors, officers and other employees may, without compensation other than their regular remuneration, solicit proxies personally or by telephone. 

What does it mean if I receive more than one Notice?

If you receive more than one Notice, your shares may be registered in more than one name or in different accounts.  Please follow the voting instructions on the Notices to ensure that all of your shares are voted. 

Can I change my vote after submitting my proxy?

Shareholder of Record.  Yes, you may revoke your proxy at any time before the final vote at the meeting.  If you are the record holder of your shares, you may revoke your proxy in any one of the following ways: 

 

   

You may submit another properly completed proxy card with a later date. 

 

   

You may grant a subsequent proxy by telephone or through the internet. 

 

   

You may send a timely written notice that you are revoking your proxy to our Company Secretary at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland. 

 

   

You may attend the Annual General Meeting and vote in person.  Simply attending the meeting will not, by itself, revoke your proxy. 

Your most current proxy card or telephone or internet proxy is the one that is counted. 

Beneficial Owner.  If your shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker or bank. 

Do I need a ticket to attend the Annual General Meeting?

Yes, you will need an admission ticket or proof of ownership of ordinary shares to enter the Annual General Meeting.  If you are a shareholder of record, your admission ticket is the Notice that was sent to you.  Please bring your Notice and valid photo identification with you to the Annual General Meeting.  If your shares are held in the name of a bank, broker or other holder of record, your admission ticket is your Notice, or if you are a beneficial owner, the ticket is on your voting instruction form.  If you do not bring your admission ticket, you will need proof of ownership of ordinary shares to be admitted to the Annual General Meeting.  A recent brokerage statement or letter from a bank or broker is an example of proof of ownership.  If you arrive at the Annual General Meeting without an admission ticket or proof of ownership of ordinary shares, we will admit you only if we are able to verify that you are one of our shareholders. 

 

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How are votes counted?

Votes will be counted by the inspector of election appointed for the meeting, who will separately count, with respect to the proposal to elect directors, votes “For,” “Against,” abstentions and broker non-votes; and, with respect to other proposals, votes “For” and “Against,” abstentions and, as applicable, broker non-votes.  Abstentions and broker non-votes will be treated as shares present for the purpose of determining the presence of a quorum for the transaction of business at the Annual General Meeting.  Abstentions and broker non-votes will not, however, be considered votes cast at the Annual General Meeting.  Because the approval of all of the proposals is based on the votes cast at the Annual General Meeting, abstentions and broker non-votes will not have any effect on the outcome of voting on the proposals. 

What are “broker non-votes”?

As discussed above, when a beneficial owner of shares held in “street name” does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed by the NYSE to be “non-routine,” the broker or nominee cannot vote the shares.  These un-voted shares are counted as “broker non-votes.” 

What is the quorum requirement?

A quorum of shareholders is necessary to hold a valid meeting.  A quorum will be present if shareholders holding a majority of the issued and outstanding ordinary shares entitled to vote are present at the meeting in person or represented by proxy.  On the record date, there were 190,155,863 ordinary shares outstanding and entitled to vote.  Thus, the holders of 95,077,932 ordinary shares must be present in person or represented by proxy at the meeting to have a quorum. 

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or, provided that you are a shareholder of record, if you vote in person at the meeting.  Abstentions and broker non-votes will be counted towards the quorum requirement.  If there is no quorum, within one hour of the time appointed for the Annual General Meeting, the Annual General Meeting will stand adjourned to May 7, 2020, at 3:00 p.m. local time at the same location, or such other time or place as the Board may determine. 

Assuming there is a quorum of shares present at the Annual General Meeting, how many votes are needed to approve each proposal?

 

   

Proposal

     Vote Required  
1.    Election of Directors    Majority of votes cast
2.    Approval of the Appointment of Independent Registered Public Accounting Firm and Authorization of the Audit Committee to Determine the Auditors’ Remuneration    Majority of votes cast
3.    Approval, on an Advisory Basis, of Executive Compensation    Majority of votes cast
4.    Authorization to Make Market Purchases or Overseas Market Purchases of Our Ordinary Shares    Majority of votes cast
5.    Approval of the 2020 Equity Incentive Plan    Majority of votes cast
6.    Approval of the 2020 Employee Share Purchase Plan    Majority of votes cast

How can I find out the results of the voting at the Annual General Meeting?

Preliminary voting results will be announced at the Annual General Meeting.  In addition, final voting results will be published in a current report on Form 8-K that we expect to file within four business days after the Annual General Meeting.  If final voting results are not available to us in time to file a Form 8-K within four business days after the meeting, we intend to file a Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the final results. 

What are the Irish statutory financial statements?

We are presenting our Irish statutory financial statements, including the reports of the directors and the statutory auditors thereon, at the Annual General Meeting and are making a copy available for download on the Annual Reports / Proxy Statements page in the Investors section of our website (www.horizontherapeutics.com) on or before April 8, 2020.  As an Irish company, we are required to prepare Irish statutory financial statements under applicable Irish company law and to deliver those accounts to shareholders of record in connection with our Annual General Meetings.  The Irish statutory financial statements cover the results of our operations and financial position for the year ended December 31, 2019. 

 

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Irish law requires the directors to prepare financial statements for each financial year giving a true and fair view of the state of the group’s and parent company’s affairs at the end of the financial year and of the group’s profit or loss for the financial year.  Under that law, the directors have prepared the group’s consolidated financial statements in accordance with U.S. accounting standards, as defined in Section 279 of the Irish Companies Act 2014, to the extent that the use of those accounting standards in the preparation of the consolidated financial statements does not contravene any provision of the Irish Companies Act 2014 or of any regulations made thereunder and have prepared Horizon’s parent company’s Irish statutory financial statements in accordance with accounting standards issued by the Financial Reporting Council and promulgated by the Institute of Chartered Accountants in Ireland (Generally Accepted Accounting Practice in Ireland). 

What proxy materials are available on the internet?

The Proxy Statement and the Annual Report are available at https://materials.proxyvote.com/G46188. The Irish financial statements will be available in the Investors section of our website (www.horizontherapeutics.com) on or before April 8, 2020.  We will mail without charge, upon written request, a copy of these materials to shareholders of record or beneficial owners of our ordinary shares.  Requests should be sent to:  Horizon Therapeutics plc, Attention:  Company Secretary, Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland. 

 

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PROPOSAL 1

ELECTION OF DIRECTORS

The Board is divided into three classes.  Each class consists, as nearly as possible, of one-third of the total number of directors and each class has a three-year term.  The Board currently consists of nine members, as follows: 

 

•   Class I:

   William F. Daniel, H. Thomas Watkins and Pascale Witz, whose terms will expire at our 2021 Annual General Meeting of Shareholders;

•   Class II:

   Michael Grey, Jeff Himawan, Ph.D. and Susan Mahony, Ph.D., whose terms will expire at our 2022 Annual General Meeting of Shareholders; and

•   Class III:

   Gino Santini, James Shannon, M.D. and Timothy Walbert, whose terms will expire at our 2020 Annual General Meeting of Shareholders. 

The authorized number of directors may be changed only by resolution of the Board.  Any additional directorships resulting from an increase in the number of directors will be distributed between the three classes so that, as nearly as possible, each class will consist of one-third of the directors.  This classification of the Board may have the effect of delaying or preventing changes in our control or management.  Our directors may be removed by ordinary resolution with majority vote of our shareholders at a general meeting provided that notice of such resolution has been given in accordance with Section 146 of the Irish Companies Act 2014.  Vacancies on the Board may be filled only by persons elected by a majority of the directors then in office, provided that a quorum is present.  A director elected by the Board to fill a vacancy in a class, including vacancies created by an increase in the number of directors, shall serve for the remainder of the full term of that class and until the director’s successor is duly elected and qualified. 

There are currently three directors in Class III whose term of office expires in 2020.  Each of the nominees listed below in Class III is currently a director who was nominated for election by the Board, upon the recommendation of the Nominating and Corporate Governance Committee.  In order to be elected as a director, each nominee must receive the affirmative vote of a majority of the votes cast by the holders of ordinary shares represented at the Annual General Meeting in person or by proxy.  If elected, each of these nominees would serve until the 2023 Annual General Meeting of Shareholders and until his or her successor has been duly elected and qualified, or, if sooner, until the director’s death, resignation, disqualification or removal. 

 

Class III—Directors Whose Terms Expire at the 2020 Annual General Meeting of Shareholders

and are Nominees for Election

 

 

Gino Santini

Chairman, AMAG Pharmaceuticals, Inc.

Mr. Santini currently serves as the chairman of the board of directors of AMAG Pharmaceuticals, Inc., a public biopharma company, and serves on the board of directors of Intercept Pharmaceuticals, Inc., Collegium Pharmaceutical, Inc. and Allena Pharmaceuticals, Inc., all of which are public biopharma companies. 
Mr. Santini also serves on the board of directors of Artax Biopharma Inc. and Intarcia Therapeutics, Inc., each a private biopharma company, and is retired from a distinguished career with Eli Lilly and Company, a public pharmaceutical company.  Mr. Santini previously served on the board of directors of Sorin SpA, a public medical products group, from 2012 to 2015, when it was acquired by LivaNova PLC and Vitae Pharmaceuticals, Inc., a public biotechnology company, from 2014 to 2016, when it was acquired by Allergan plc.  During his tenure at Eli Lilly and Company from June 1983 to December 2010, Mr. Santini held various leadership positions.  Mr. Santini, fluent in four languages, holds an undergraduate degree in mechanical engineering from the University of Bologna and a master of business administration degree from the University of Rochester. 

 

Qualifications: 

The Nominating and Corporate Governance Committee and the Board believe that Mr. Santini’s extensive international and domestic commercial and business development experience brings important insight to the Board as it plans our future growth. 

 

Age:  63

 

Director Since:  March 2012

 

Board Committees: 

•  Transaction (Chair)

•  Compensation

 

Current Public Company Directorships: 

•  AMAG Pharmaceuticals, Inc. (Chair)

•  biopharma company

•  Intercept Pharmaceuticals, Inc.

•  biopharma company

•  Collegium Pharmaceutical, Inc.

•  biopharma company

•  Allena Pharmaceuticals, Inc.

•  biopharma company

 

Mr. Santini is not standing for re-election to the board of directors of Allena Pharmaceuticals, Inc. at Allena’s 2020 annual meeting of stockholders as disclosed in Allena’s Annual Report on Form 10-K filed with the SEC on March 16, 2020.

 

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James Shannon, M.D.

Director, MannKind Corporation

Dr. Shannon currently serves on the board of directors of MannKind Corporation, a public biopharma company focused on treatments for diabetes, and ProQR Therapeutics NV, a public biotechnology company.  From May 2012 to March 2015, Dr. Shannon served as the chief medical officer of GlaxoSmithKline (GSK), a public biopharma company, where he was responsible for matters of patient safety, general medical governance, medical ethics and integrity, medical information as well as investigations involving human subjects relating to any GSK medicine in development or on the market.  Prior to that, Dr. Shannon spent more than a decade with Novartis, a public pharmaceutical company.  In his last role with the company, as global head of pharma development, he was responsible for all of Novartis’s development activities, from pre-clinical through Phase 4 and oversaw an annual development budget of approximately $4 billion.  Dr. Shannon received his science and medical degrees from Queen’s University in Belfast, Northern Ireland.  He also serves as chairman of the board of directors of Kyowa Kirin (NA), a private biopharma company and subsidiary of Kyowa Kirin, and on the boards of directors of Immodulon Therapeutics Limited, a private biopharma company, and MyTomorrows, a private health-based platform that collaborates with drug developers to provide early access to treatments for patients who have exhausted all other options. 

 

Qualifications: 

The Nominating and Corporate Governance Committee and the Board believe that Dr. Shannon is qualified to serve as a director on the basis of his extensive clinical development experience, which brings important insight to the Board as it plans our future growth. 

 

Age:  63

 

Director Since:  Aug. 2017

 

Board Committees: 

•  Compensation

•  Transaction

 

Current Public Company Directorships: 

•  MannKind Corporation.

•  biopharma company

•  ProQR Therapeutics NV

•  biotechnology company

 

 

Timothy Walbert

Chairman, President and Chief Executive Officer, Horizon Therapeutics plc

Mr. Walbert has served as our president, chief executive officer and director of Horizon since June 2008 and served as our chairman since March 2010.  From May 2007 to June 2009, Mr. Walbert served as president, chief executive officer and director of IDM Pharma, Inc., a public biotechnology company that was acquired by Takeda America Holdings, Inc. in June 2009.  Prior to that, Mr. Walbert served as executive vice president, commercial operations of NeoPharm, Inc., a public biotechnology company.  From June 2001 to August 2005, Mr. Walbert served as divisional vice president and general manager of immunology, where he built and led the global development and launch of the multi-indication biologic HUMIRA and divisional vice president, global cardiovascular strategy at Abbott, now AbbVie.  From 1998 to 2001, he served as director, CELEBREX North America and arthritis team leader, Asia Pacific, Latin America and Canada at G.D. Searle & Company.  Mr. Walbert serves as the chairman of the board of directors of Zyla Life Sciences, a public pharmaceutical company, and is also a member of the board of directors of Exicure, Inc., a public clinical-stage biotechnology company.  He also sits on the board of directors of the Illinois Biotechnology Innovation Organization (iBIO), the Biotechnology Innovation Organization (BIO), World Business Chicago (WBC) and the Greater Chicago Arthritis Foundation.  Mr. Walbert is also a member of the Illinois Innovation Council, the National Organization for Rare Disorders (NORD) Advisory Board and serves on the Board of Trustees of Muhlenberg College.  He previously served on the board of directors of XOMA Corporation, a public biotechnology company, from 2011 to 2017, and Sucampo Pharmaceuticals, Inc., a public biopharma company, from 2016 to 2018, and Raptor Pharmaceutical Corp., a public biopharma company, from 2010 to 2014.  Mr. Walbert received his bachelor of arts degree in business from Muhlenberg College, in Allentown, Pennsylvania. 

 

Qualifications: 

The Nominating and Corporate Governance Committee and the Board believe that Mr. Walbert is qualified to serve as a director on the basis of his valuable biopharma industry experience, which brings important strategic insight to the Board as it plans our future growth. 

 

Age:  52

 

Chair Since:  March 2010

 

Director Since:  June 2008

 

Board Committees: 

•  None

 

Current Public Company Directorships: 

•  Zyla Life Sciences (Chair)

•  pharmaceutical company

•  Exicure, Inc.

•  biotechnology company

 

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THE BOARD RECOMMENDS

A VOTE IN FAVOR OF EACH NAMED NOMINEE ABOVE

 

Class I—Directors Continuing in Office Until the 2021 Annual General Meeting of Shareholders

 

 

William F. Daniel

Chairman, Malin Corporation plc

Mr. Daniel, a chartered director and chartered accountant, is currently chairman of the board of directors of Malin Corporation plc, an Ireland-based public global life sciences company.  He was president of the Institute of Directors of Ireland from May 2013 to May 2015, and was originally elected to the board of the Institute of Directors in Ireland in June 2010.  Prior to that, Mr. Daniel was executive vice president and company secretary of Elan Corporation plc, a public biotechnology company, and served in that role from December 2001 to December 2013, until the merger of Elan with Perrigo Company plc.  He was previously an executive director of Elan between 2003 and 2007, having joined the organization as financial controller in 1994.  Mr. Daniel graduated with a degree in commerce from the University College Dublin. 

 

Qualifications: 

The Nominating and Corporate Governance Committee and the Board believe that Mr. Daniel is qualified to serve as a director on the basis of his valuable financial and corporate governance expertise, which brings important strategic insight to the Board as it plans our future growth. 

  

Age:  67

 

Director Since:  Sept. 2014

 

Board Committees: 

•  Audit (Chair)

•  Compensation

 

Current Public Company Directorships: 

•  Malin Corporation plc (Chair)

•  global life sciences company

 

 

H. Thomas Watkins

Chairman, Vanda Pharmaceuticals, Inc.

Mr. Watkins currently serves as the chairman of the board of directors of Vanda Pharmaceuticals, Inc., a public biopharma company.  Prior to that, he was director, president and chief executive officer of Human Genome Sciences, Inc. (HGS), a public biopharma company, from 2004 until HGS was acquired by GlaxoSmithKline in 2012.  Before leading HGS, Mr. Watkins spent over twenty years in senior roles at Abbott Laboratories and its affiliates in the United States and Asia, most recently serving as the president of TAP Pharmaceutical Products, Inc. (TAP), which was jointly owned by Abbott and Takeda Pharmaceutical Company, Inc.  During his tenure, he led the growth of TAP from approximately $2 billion to over $4 billion in annual revenue.  Mr. Watkins began his career in 1974 with Arthur Andersen & Co.  From 1979 to 1985, he was a management consultant with McKinsey and Company, Inc., working with multinational companies in the United States, Europe and Japan.  Mr. Watkins holds a bachelor’s degree from the College of William and Mary, and a master of business administration degree from the University of Chicago Graduate School of Business.  Mr. Watkins is a member of the board of directors of HemoShear Therapeutics, LLC, a private biotechnology company, and of the board of visitors of The College of William and Mary. 

 

Qualifications: 

The Nominating and Corporate Governance Committee and the Board believe that Mr. Watkins is qualified to serve as a director on the basis of his valuable industry experience, which brings important strategic insight to the Board as it plans our future growth. 

  

Age:  67

 

Director Since:  Apr. 2014

 

Board Committees: 

•  Nominating and Corporate Governance (Chair)

•  Audit

 

Current Public Company Directorships: 

•  Vanda Pharmaceuticals, Inc. (Chair)

•  biopharma company

 

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Pascale Witz

President, PWH Advisors

Ms. Witz founded PWH Advisors, a strategic consultancy firm advising healthcare and investment companies, in November 2016 and has served as its president since that time.  From September 2015 to May 2016, Ms. Witz served as executive vice president, global diabetes and cardiovascular at Sanofi, a pharmaceutical company, which she joined in July 2013 as executive vice president, pharma and CHC divisions.  During her tenure at Sanofi, she launched multiple medicines across three continents and strengthened the pipeline through licensing and partnerships.  Prior to Sanofi, Ms. Witz served more than 17 years at GE Healthcare where, in her final role as president and chief executive officer of its pharmaceutical diagnostics business, she ran a $2 billion integrated pharmaceutical organization that encompassed research and development through commercialization.  Ms. Witz also serves on the boards of directors of Fresenius Medical Care AG & Co. KGaA, a public medical supply company, Regulus Therapeutics Inc., a public biotechnology company, PerkinElmer, Inc., a public company focused on human and environmental health, PWH Advisors, Capsule Technologies Inc., a private medical technology company and Arkuda Therapeutics, Inc., a private biopharma company.  Ms. Witz previously served on the board of directors of Savencia SA, a public food and dairy company, from 2016 to 2018, and of Tesaro, Inc., then a public biopharma company, from 2018 to January 2019.  Ms. Witz received her master of business administration degree in economics and marketing from INSEAD and her master of science in biochemistry from INSA Lyon. 

 

Qualifications: 

The Nominating and Corporate Governance Committee and the Board believe that Ms. Witz is qualified to serve as a director on the basis of her valuable industry experience, which brings important strategic insight to the Board as the Board plans our future growth. 

  

Age:  53

 

Director Since:  Aug. 2017

 

Board Committees: 

•  Audit

•  Nominating and Corporate Governance

 

Current Public Company Directorships: 

•  Fresenius Medical Care AG & Co. KGaA

•  medical supply company

•  Regulus Therapeutics Inc.

•  biotechnology company

•  PerkinElmer, Inc.

•  human and environmental health company

 

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Class II—Directors Continuing in Office Until the 2022 Annual General Meeting of Shareholders

 

 

Michael Grey

Chairman, Mirum Pharmaceuticals, Inc.

Mr. Grey has served as chairman of the board of directors of Mirum Pharmaceuticals, Inc., a public biotechnology company, since January 2020, and as executive chairman from March 2019 to December 2019.  Before that he served as chief executive officer of Mirum from the company’s inception in March 2018.  He has served as executive chairman of Amplyx Pharmaceuticals, Inc. (Amplyx), a private pharmaceutical company, since January 2017; Reneo Pharmaceuticals, Inc. (Reneo), a private pharmaceutical company, since December 2017; Spruce Biosciences, Inc., a private biotechnology company, since April 2017, and Curzion Pharmaceuticals, Inc., a private pharmaceutical company, since May 2019.  He has also served as a venture partner at Pappas Ventures since January 2010.  Mr. Grey served from October 2015 to January 2017 as the president and chief executive officer of Amplyx, and from September 2014 to December 2017 as chairman and chief executive officer of Reneo.  From February 2011 to June 2014, Mr. Grey served as president and chief executive officer of Lumena Pharmaceuticals, Inc., a biotechnology company, which was acquired by Shire plc in June 2014.  He has 45 years of experience in the pharmaceutical and biotechnology industries and has held senior positions at a number of companies, including president and chief executive officer of SGX Pharmaceuticals, Inc. (sold to Eli Lilly and Company in 2008), president and chief executive officer of Trega Biosciences, Inc. (sold to LION Bioscience, Inc. in 2001) and president of BioChem Therapeutic Inc.  Prior to these, Mr. Grey served in various roles with Glaxo, Inc. and Glaxo Holdings PLC, culminating in his position as vice president, corporate development and director of international licensing.  Mr. Grey also serves on the boards of directors of BioMarin Pharmaceutical Inc. and Mirati Therapeutics Inc., both public biotechnology companies.  Mr. Grey received a bachelor of science degree in chemistry from the University of Nottingham in the United Kingdom. 

 

Qualifications: 

The Nominating and Corporate Governance Committee and the Board believe that Mr. Grey is qualified to serve as a director on the basis of his extensive experience managing pharmaceutical and biopharma companies, which brings important strategic insight to the Board as it plans our future growth. 

  

Age:  67

 

Director Since:  Sept. 2011

 

Lead Independent Director Since:  Aug. 2012

 

Board Committees: 

•  Nominating and Corporate Governance

•  Transaction

 

Current Public Company Directorships: 

•  Mirum Pharmaceuticals, Inc.  (Chair)

•  biotechnology company

•  BioMarin Pharmaceutical Inc.

•  biotechnology company

•  Mirati Therapeutics Inc.

•  biotechnology company

 

 

Jeff Himawan, Ph.D.

Managing Director, Essex Woodlands Health Ventures, L.P.

Dr. Himawan has been a managing director of Essex Woodlands Health Ventures, a venture capital firm, since 2004.  Prior to that, he was an adjunct partner at Essex Woodlands from 1999 to 2001, and he was a venture partner from 2001 to 2004.  Dr. Himawan co-founded Seed-One Ventures, an early-stage venture capital firm, where he served as a managing director from 1996 to 2001.  Dr. Himawan also currently serves on the boards of directors of Catalyst Biosciences, Inc. and MediciNova, Inc., each a public biopharma company, and on the board of directors of NexEos Diagnostics, Inc., a private biotechnology company.  He received a bachelor of science degree in biology from the Massachusetts Institute of Technology and a doctorate in biological chemistry and molecular pharmacology from Harvard University. 

 

Qualifications: 

The Nominating and Corporate Governance Committee and the Board believe that, with his doctorate in biological chemistry and molecular pharmacology and as a successful venture capitalist, Dr. Himawan brings important scientific and strategic insight to the Board as well as experience working with the investment community. 

  

Age:  54

 

Director Since:  July 2007

 

Board Committees: 

•  Compensation (Chair)

•  Transaction

 

Current Public Company Directorships: 

•  Catalyst Biosciences, Inc.

•  biopharma company

•  MediciNova, Inc.

•  biopharma company

 

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Susan Mahony, Ph.D.

Director, Zymeworks Inc.

Dr. Mahony serves on the board of directors of Zymeworks Inc., a public biopharma company; Vifor Pharma AG, a public pharmaceutical company; Assembly Biosciences, Inc., a public biotechnology company, and Cereius Inc., a private biotechnology company.  Previously, Dr. Mahony served as senior vice president and president of Lilly Oncology and was a member of the executive committee at Eli Lilly and Company from 2009 until her retirement in August 2018.  Prior to that, Dr. Mahony served in a variety of leadership roles at Eli Lilly and Company, including president and general manager Lilly Canada, and executive director global development.  Dr. Mahony worked in sales and marketing at Bristol-Myers Squibb Company from 1995 to 2000, at Amgen Limited from 1991 to 1995, and at Schering Plough from 1989 to 1991.  Dr. Mahony earned bachelor of science and doctorate of philosophy (Ph.D.) degrees in pharmacy, as well as a master of business administration degree from London Business School.  She was awarded an Honorary Doctorate from Aston University. 

 

Qualifications: 

The Nominating and Corporate Governance Committee and the Board believe that Dr. Mahony is qualified to serve as a director on the basis of her industry and leadership expertise, which brings important strategic insight to the Board as it plans our future growth. 

  

Age:  55

 

Director Since:  Aug. 2019

 

Board Committees: 

•  Audit

•  Nominating and Corporate Governance

 

Current Public Company Directorships: 

•  Zymeworks Inc.

•  biopharma company

•  Vifor Pharma AG

•  pharmaceutical company

•  Assembly Biosciences, Inc.

•  biotechnology company

The above biographical information for our directors is as of March 1, 2020. 

 

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THE BOARD OF DIRECTORS AND ITS COMMITTEES

 

Overview

In 2019, the Board held seven meetings and did not act by unanimous written consent without a meeting.  With the exception of Dr. Mahony, who was appointed to the Board in August 2019, each current Board member attended 94% or more of the aggregate number of meetings of the Board and of the committees on which he or she served.  It is our policy to encourage directors and nominees for director to attend annual general meetings of shareholders.  With the exception of Dr. Mahony, who was appointed to the Board in August 2019, and Mr. Daniel, all other current directors attended our 2019 Annual General Meeting of Shareholders. 

The Board is committed to exercising good corporate governance practices.  As part of this commitment, the Board regularly monitors developments in corporate governance and reviews processes, policies and procedures in light of such developments.  Key information regarding our corporate governance initiatives can be found on our website, www.horizontherapeutics.com, including our Memorandum and Articles of Association, Code of Business Conduct and Ethics, and the charters for the Audit, Compensation, Nominating and Corporate Governance and Transaction Committees.  The Board believes that its strong corporate governance policies and practices, including the substantial percentage of independent directors on the Board and the robust duties of its lead independent director, empower the Board to effectively oversee our Chief Executive Officer and provide an effective and appropriately balanced Board governance structure. 

 

Independence of the Board of Directors

Other than Mr. Walbert, our Chairman, President and Chief Executive Officer, all members of the Board are independent, and all members of committees of the Board are independent.  The Board has affirmatively determined that the following eight directors are independent directors within the meaning of the applicable Nasdaq Stock Market (Nasdaq) listing standards:  Mr. Daniel, Mr. Grey, Dr. Himawan, Dr. Mahony, Mr. Santini, Dr. Shannon, Mr. Watkins and Ms. Witz.  In addition, the Board has affirmatively determined that Ronald Pauli, who served on the Board until May 2019, was an independent director within the meaning of the applicable Nasdaq listing standards.  In making these determinations, the Board found that none of these directors or nominees for director had a material or other disqualifying relationship with us.  Mr. Walbert is not an independent director by virtue of his current employment with us.  To determine independence, the Board reviewed all relevant identified transactions or relationships between each director, or any of his or her family members, and us, our senior management and our independent registered public accounting firm. 

As required under applicable Nasdaq listing standards, our independent directors met four times in regularly scheduled executive sessions in 2019, at which only independent directors were present. 

 

Code of Ethics

We have adopted a Code of Business Conduct and Ethics (the Code) that applies to all officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions.  The Code is available on our website at www.horizontherapeutics.com.  If we make any substantive amendments to the Code or grant any waiver from a provision of the Code to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website or in a current report on Form 8-K. 

 

Board Leadership Structure

The Board has determined that the current leadership structure, in which the offices of Chairman and Chief Executive Officer are held by one individual and an independent director acts as lead independent director, ensures that the appropriate level of oversight, independence and responsibility is applied to all Board decisions, including risk oversight, and is in our best interests and those of our shareholders. 

Chairman/Chief Executive Officer

The Board is currently chaired by our President and Chief Executive Officer, Mr. Walbert.  We believe that combining the positions of Chief Executive Officer and Chairman of the Board helps to ensure that the Board and management act with a common purpose for the following reasons: 

 

   

coherent leadership and direction for the Board and executive management;

 

   

clear accountability and a single focus for the chain of command to execute our strategic initiatives and business plans;

 

   

Mr. Walbert’s extensive industry expertise, external public board experience, leadership experience and history and knowledge of our business; and

 

   

by leading management and chairing the Board, we benefit from the Chief Executive Officer’s strategic and operational insights, enabling a focused vision encompassing the full range, from long-term strategic direction and day-to-day execution. 

 

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Lead Independent Director

We require the election, by the independent directors of the Board, of a lead independent director to serve during any period when there is no independent Chairman of the Board.  Because Mr. Walbert is currently serving as Chief Executive Officer and Chairman of the Board, the independent directors of the Board elected Mr. Grey as the lead independent director.  The lead independent director serves as the liaison between the Chairman of the Board and the independent directors and his responsibilities include: 

 

   

facilitates communication with the Board and presides over regularly conducted executive sessions of the independent directors and sessions where the Chairman of the Board is not present;

 

   

establishes the agenda for meetings of the independent directors and reviews and approves matters, schedule sufficiency, and, where appropriate, information provided to other Board members;

 

   

has the authority to call meetings of the independent directors and, if requested by major shareholders, ensures that he is available for consultation and direct communication; and

 

   

conveys messages from meetings of the independent directors to the Chief Executive Officer and makes himself available to discuss with other directors any concerns they may have about us or our performance. 

 

Role of the Board in Risk Oversight

One of the Board’s key functions is informed oversight of our risk management process.  The Board does not have a standing risk management committee, but rather administers this oversight function directly through the Board as a whole, as well as through various Board standing committees that address risks inherent in their respective areas of oversight.  In particular, the Board is responsible for monitoring and assessing strategic risk exposure, including a determination of the nature and level of risk appropriate for the Company. 

Our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken and provides oversight of the performance of our internal audit function and external auditors.  The Audit Committee also reviews and receives regular briefings concerning information security and technology risks (including cybersecurity), including discussions of our information security and risk management programs. 

Our Nominating and Corporate Governance Committee monitors the effectiveness of our corporate governance guidelines, including whether they are successful in preventing illegal or improper liability-creating conduct, and monitors compliance with legal, regulatory and ethical requirements. 

Our Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.  Our Transaction Committee evaluates potential strategic transactions and financing opportunities, including the risks that such transactions could pose to Horizon. 

 

Director Selection

The Nominating and Corporate Governance Committee will consider candidates for the Board who are recommended by shareholders, directors, third-party search firms engaged by the Board and other sources.  When selecting candidates for recommendation to the Board, the Nominating and Corporate Governance Committee will consider the attributes of the candidates and the needs of the Board and will review all candidates in the same manner, regardless of the source of the recommendation.  In evaluating director nominees, a candidate should have certain minimum qualifications, including being able to read and understand basic financial statements, having familiarity with our business and industry, having high moral character and mature judgment and being able to work collegially with others.  In addition, factors such as the following may be considered: 

 

   

the independence standards as set forth in the applicable Nasdaq listing standards, the presence of any material interests that could cause a conflict between our interests and the interests of the director nominee, and the director nominee’s ability to exercise his or her best business judgment in the interest of all shareholders;

 

   

the director nominee’s ability to devote sufficient time to the business of the Board and at least one of the standing committees of the Board, in light of the number of other boards on which the director nominee serves (for profit and not-for-profit) and the other business and professional commitments of the director nominee;

 

   

the appropriate size and the diversity of the Board;

 

   

the knowledge, skills and experience of the director nominee, including experience in the industry in which Horizon operates, as well as in the general areas of clinical development, business, finance, management and public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board; and

 

   

the director nominee’s experience with accounting rules and practices. 

 

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During 2019, we paid a fee to one third-party search firm that was retained by the Board to identify potential nominees and assist our Nominating and Corporate Governance Committee in evaluating such potential nominees. 

Diversity Policy

The Board believes that maintaining a diverse membership enhances the Board’s deliberations and enables the Board to better represent all of Horizon’s constituents, and as such has a formal diversity policy.  As part of the policy, the Nominating and Corporate Governance Committee annually reviews the tenure, performance, and contributions of existing Board members to the extent they are candidates for re-election and considers all aspects of each candidate’s qualifications and skills with the goal of ensuring the Board has diversity of experience and perspectives as well as race, gender, geography, and areas of expertise. 

To further this goal, the Board is committed to including in each director search highly qualified candidates who reflect diverse experiences and backgrounds, including diversity of gender and race.  The diversity policy is available on our website at www.horizontherapeutics.com

Shareholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board at an Annual General Meeting of Shareholders must do so by delivering a written recommendation to the Nominating and Corporate Governance Committee.  See “Other Information – Shareholder Proposals” in this Proxy Statement for additional information. 

 

Committees of the Board of Directors

The Board has four standing committees: 

 

   

Audit Committee

 

   

Compensation Committee

 

   

Nominating and Corporate Governance Committee

 

   

Transaction Committee

All committees comprise independent directors within the meaning of the applicable Nasdaq listing standards.  A description of each committee of the Board is described below. 

The following table provides membership and meeting information for fiscal year 2019 for each of the Board committees: 

 

         
      Audit      Compensation     

  Nominating and  

Corporate
Governance

     Transaction  

Timothy Walbert

                                   

William F. Daniel

     LOGO        LOGO                    

Michael Grey      LOGO

                       LOGO        LOGO  

Jeff Himawan, Ph.D.

              LOGO                 LOGO  

Susan Mahony, Ph.D.(1)

     LOGO                 LOGO           

Ronald Pauli(2)

                                   

Gino Santini

              LOGO                 LOGO  

James Shannon, M.D.

              LOGO                 LOGO  

H. Thomas Watkins

     LOGO                 LOGO           

Pascale Witz

     LOGO                 LOGO           

Total meetings in fiscal year 2019

     5        6        4        6  

 

LOGO = Chair    LOGO = Member    LOGO = Lead Independent Director

 

(1)

Dr. Mahony has served on the Board, the Audit Committee and the Nominating and Corporate Governance Committee since August 2019. 

 

(2)

Mr. Pauli served on the Board, the Audit Committee and the Nominating and Corporate Governance Committee until May 2019. 

 

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Audit Committee

The Audit Committee assists the Board in fulfilling its oversight responsibility with respect to, among other things: 

 

   

our corporate accounting and financial reporting practices;

 

   

the system of internal control over financial reporting;

 

   

the audit process;

 

   

the quality and integrity of our financial statements;

 

   

the qualifications, independence and performance of our independent registered public accounting firm;

 

   

the qualifications, independence and performance of our internal audit function; and

 

   

major financial risk exposures, information security and technology risks (including cybersecurity). 

The independent registered public accounting firm, internal audit and management each periodically meet privately with the Audit Committee. 

The Board has determined that each of Mr. Daniel, Dr. Mahony, Mr. Watkins and Ms. Witz qualify as “audit committee financial experts” within the meaning of applicable SEC rules.  In making this determination, the Board has considered their formal education, the nature and scope of their previous experience and their financial and corporate governance expertise. 

Report of the Audit Committee of the Board of Directors

The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act of 1933, as amended (the Securities Act), or the Securities Exchange Act of 1934, as amended (Exchange Act), whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. 

The Audit Committee has reviewed and discussed the audited financial statements for the year ended December 31, 2019, with Horizon management.  The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board (PCAOB).  The Audit Committee has also received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the accounting firm’s independence.  Based on the foregoing, the Audit Committee has recommended to the Board that the audited financial statements be included in Horizon’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. 

Audit Committee

William F. Daniel, Chair

Susan Mahony, Ph.D.

H. Thomas Watkins

Pascale Witz

Compensation Committee

The Compensation Committee: 

 

   

oversees, reviews and approves or recommends for adoption our compensation policies, plans and programs;

 

   

reviews and approves or recommends to the full Board, as appropriate, the compensation to be paid to our executive officers and directors;

 

   

conducts compensation risk assessments; and

 

   

prepares and reviews the Compensation Committee report included in our annual Proxy Statement. 

In making its compensation decisions and recommendations, the Compensation Committee may take into account the recommendations of the Chief Executive Officer and other senior management.  Other than giving such recommendations, however, the Chief Executive Officer and other senior management have no formal role and no authority to determine the amount or form of executive and director compensation.  The processes and procedures used by the Compensation Committee for the consideration and determination of executive compensation are described in the section of this Proxy Statement captioned, “Compensation Discussion and Analysis – Compensation Determination Process.” 

 

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The Compensation Committee may, at our expense, retain legal counsel (which may, but need not be, our regular corporate counsel) and other consultants and advisors, other than in-house legal counsel and certain other types of advisors, to assist it with its functions only after taking into consideration six factors, prescribed by the SEC and Nasdaq, that bear upon the advisor’s independence; however, there is no requirement that any advisor be independent.  The Compensation Committee has authority to approve such advisors’ fees and other retention terms and to terminate its relationship with any advisor that it retains.  In addition, the Compensation Committee has authority to delegate its responsibilities to subcommittees or individual committee members. 

The Compensation Committee has engaged Radford, which is part of the Rewards Solutions practice at Aon plc, as its independent consultant since 2016.  For additional information regarding our processes and procedures for the consideration and determination of executive and director compensation, including the role of Radford in determining and recommending executive and director compensation and the aggregate cost of Radford’s executive and director compensation consulting services during 2019, see the sections of this Proxy Statement entitled “Compensation Discussion and Analysis – Compensation Determination Process and Non-Employee Director Compensation.”  With respect to non-employee director compensation matters, our Compensation Committee recommends to our Board and our Board 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 “Non-Employee Director Compensation.” 

Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee has ever been an executive officer or employee of Horizon.  None of our executive officers currently serves, or has served during the last completed year, on the compensation committee or board of directors of any other entity that has one or more officers serving as a member of our Board or Compensation Committee. 

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee oversees all aspects of our corporate governance functions on behalf of the Board, including, but not limited to: 

 

   

making recommendations to the Board regarding corporate governance issues;

 

   

identifying, reviewing and evaluating candidates to serve as our directors consistent with criteria approved by the Board and reviewing and evaluating incumbent directors;

 

   

serving as a focal point for communication between such candidates, non-committee directors and our management;

 

   

nominating candidates to serve as directors;

 

   

making other recommendations to the Board regarding affairs relating to our directors; and

 

   

providing oversight assistance in connection with our legal, regulatory and ethical compliance programs, policies and procedures as established by management and the Board. 

The process used by the Nominating and Corporate Governance Committee to identify a nominee to serve as a member of the Board depends on the qualities being sought.  From time to time, the Board engages an executive search firm to assist the Nominating and Corporate Governance Committee in identifying individuals qualified to be Board members.  The process used by the Nominating and Corporate Governance Committee to identify nominees is described in the section of this Proxy Statement captioned, ‘‘Director Selection.’’ 

Transaction Committee

The functions of the Transaction Committee include, but are not limited to: 

 

   

reviewing, considering and evaluating proposed product or business acquisitions or divestitures, licensing, distribution, promotion, collaboration and other commercial agreements and arrangements, joint ventures, and any other business development transactions;

 

   

reviewing, considering and evaluating proposed financing opportunities, including the issuance of equity, debt and convertible securities;

 

   

reviewing, considering and evaluating proposed modifications to Existing Debt Dealings (as defined in the charter of the Transaction Committee);

 

   

monitoring negotiations and other communications with third parties in connection with potential business development transactions, financing opportunities and debt discharge opportunities;

 

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meeting with management to identify and assist the Board in evaluating opportunities that will further our business development strategy;

 

   

periodically reviewing and evaluating prior transactions and financings for consistency with, and achievement of, our strategic business goals, objectives or plans; and

 

   

authorizing potential business development transactions, other business growth and diversification opportunities, general financing opportunities and opportunities for Existing Debt Dealings that the Transaction Committee determines to fall within the scope of our goals and business development strategy and that are in the best interest of our shareholders.

 

2019 Shareholder Rights Agreement

In February 2019, we entered into a short-term shareholder rights agreement, commonly referred to as a poison pill, in response to the takeover environment in general at the time and the Board’s belief that at the time we faced a heightened risk of receiving takeover proposals at inadequate prices, given several factors, including the highly positive Phase 3 teprotumumab clinical trial results announced on February 28, 2019.  The agreement was not intended to prevent an acquisition of Horizon on terms that the Board considered favorable and in the best interests of all shareholders.  Rather, the aim of the shareholder rights agreement was to provide the Board adequate time to fully assess any takeover proposal in full compliance with the Board’s fiduciary duties and to encourage anyone seeking to acquire Horizon to negotiate with the Board prior to attempting a takeover. 

The shareholder rights agreement had a limited 12-month term that expired in February 2020 and was not renewed upon that expiration.

 

Shareholder Communications with the Board of Directors

Shareholders who wish to communicate with the Board may do so by sending written communications addressed to the Company Secretary of Horizon Therapeutics at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland or by communicating online to the Board as a group.  This information and an online communications form are available on our website at www.horizontherapeutics.com.  Each communication will be reviewed by our Company Secretary to determine whether it is appropriate for presentation to the Board or such director on a periodic basis.  Examples of inappropriate communications include advertisements, solicitations or hostile communications.

 

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NON-EMPLOYEE DIRECTOR COMPENSATION

Our directors perform a critical role in guiding Horizon’s strategic direction and overseeing management.  Being a director entails many responsibilities and a substantial time commitment.  Our compensation program for our non-employee directors reflects the critical function they perform and enables us to attract and retain highly qualified directors. 

All current non-employee members of the Board are independent.  Non-employee directors receive a combination of annual cash retainers and restricted stock unit (RSU) grants in amounts that correlate to their responsibilities and levels of Board participation, including service on Board committees.  Our only employee director, Mr. Walbert, receives no separate compensation for his service as a director or chair. 

Highlights

 

   

The Compensation Committee works to ensure that our non-employee director compensation is in line with compensation offered by peer companies that compete with us for director talent. 

 

   

Our non-employee director compensation is designed to address the time, effort, expertise and accountability required of active Board membership.  It also takes into consideration the substantial travel commitment on the part of our directors as a result of being an Irish-domiciled company. 

 

   

The annual cash compensation Horizon pays our non-employee directors is based on their positions on the Board or the committees of the Board.  We do not compensate Board members on a per-meeting basis.

 

   

The Compensation Committee reviews our non-employee director compensation annually.  The October 2019 review determined that our non-employee director compensation philosophy is aligned with that of our peers; that our mix of cash and equity appropriately balances short- and long-term needs; and that our average director pay approximates the 50th percentile of our peers. 

 

   

Beginning in October 2018, we reduced the value of the annual equity grant from $450,000 to $400,000 and replaced an automatic $600,000 equity grant upon a non-employee director’s first election or appointment to the Board with a pro-rata annual equity grant.  In addition, the annual equity award granted to non-employee directors is made in RSUs only and no longer includes stock options. 

As an Irish-domiciled company traded in the United States, we consider our non-employee director compensation, both in amount and structure, against two peer groups:  the 15 U.S.-traded, biopharma companies we use for executive compensation comparative purposes (please see “Compensation Discussion and Analysis – Peer Group”) and eight Irish-domiciled, U.S.-listed pharmaceutical and biopharma companies:  Alkermes plc, Allergan plc, Amarin Corporation plc, Endo International plc, Jazz Pharmaceuticals plc, Mallinckrodt plc, Perrigo Company and Prothena Corporation plc. 

The Compensation Committee reviews the compensation for our non-employee directors annually.  To assist with the review, Radford, an independent compensation consultant, prepares a comprehensive assessment of our non-employee director compensation program, which includes: 

 

   

benchmarking director compensation against the same peer group used for executive compensation purposes;

 

   

reviewing any feedback received during our shareholder engagement program;

 

   

reviewing recent director compensation trends; and

 

   

reviewing related corporate governance best practices. 

The most recent review, conducted in October 2019, determined that: 

 

   

our non-employee director compensation philosophy is aligned with that of our peers;

 

   

our mix of cash and equity appropriately balances short- and long-term needs; and

 

   

our average director pay approximates the 50th percentile of our peers. 

Cash Compensation

Our compensation policy for non-employee directors who are not affiliated with any holder of more than 5% of our ordinary shares provides for annual cash compensation as set forth in the following table.  The cash compensation is generally payable in equal quarterly installments at the end of each quarter in which the services are provided.  For any independent director who joins after the beginning of the quarter, the cash compensation is pro-rated based on days served in that first partial quarter.

 

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Director Position

   Annual Cash  
Compensation  

Non-executive chairman or lead independent director

     $ 100,000     

All other non-employee directors

     $ 60,000

Committee chair fees

    

Audit

     $ 30,000

Compensation

     $ 20,000

Nominating and Corporate Governance

     $ 15,000

Transaction

     $ 20,000

Non-chair committee member fees

    

Audit

     $ 15,000

Compensation

     $ 10,000

Nominating and Corporate Governance

     $ 7,500

Transaction

     $ 12,500

Under our compensation policy, we reimburse our directors for their travel-related expenses, including lodging and other reasonable expenses incurred in attending meetings of the Board and committees of the Board. 

We will also reimburse eligible non-employee directors up to $15,000 annually for financial planning and tax services. 

Equity Compensation

On the date of each Annual General Meeting of Shareholders that coincides with or follows the non-employee director’s initial appointment or election to the Board, eligible non-employee directors will automatically be granted RSUs with an aggregate value of $400,000, which will vest in full upon the earlier of the (i) first anniversary of the date of grant and (ii) date of the next Annual General Meeting of Shareholders. 

Any eligible non-employee director who is first elected or appointed to the Board on any date other than an Annual General Meeting of Shareholders will automatically be granted RSUs on the date that they are first elected or appointed to the Board with a value equal to the annual RSU grant, prorated based on the number of days between such non-employee director’s start date and the one-year anniversary of the date of the Annual General Meeting of Shareholders that most recently preceded such start date, which will vest in full upon the earlier of (i) the first anniversary of the date of the Annual General Meeting of Shareholders that most recently preceded such director’s start date and (ii) the date of the next Annual General Meeting of Shareholders. 

Recent Changes to the Non-Employee Director Compensation

In October 2018, the Compensation Committee, based on a comprehensive review of our director compensation with the assistance of Radford and proxy advisory firm feedback, approved a change to our non-employee director compensation, reducing the value of the annual equity grant from $450,000 to $400,000 and replacing an automatic $600,000 equity grant upon a non-employee director’s first election or appointment to the Board with a pro-rata annual equity grant. 

Non-Employee Director Compensation Summary

The following table sets forth compensation information for our non-employee directors who earned or received compensation under our compensation policy for non-employee directors or otherwise in 2019: 

 

         

Name

  

Fees Earned

or Paid in Cash

   Stock Awards (1)(3)   

All Other

Compensation(2)

   Total

William F. Daniel

     $ 100,000      $ 399,986      $ 2,770 (2)       $ 502,756     

Michael Grey

     $ 120,000      $ 399,986      $ 4,042 (2)       $ 524,028

Jeff Himawan, Ph.D.

     $ 92,500      $ 399,986      $ 28,846 (2)       $ 521,332

Susan Mahony, Ph.D.(4)

     $ 41,250      $ 300,539      $ (2)       $ 341,789

Ronald Pauli(5)

     $ 41,250      $      $ 1,409 (2)       $ 42,659

Gino Santini

     $ 90,000      $ 399,986      $ 28,846 (2)       $ 518,832

James Shannon, M.D.

     $ 82,500      $ 399,986      $ 24,751 (2)       $ 507,237

Thomas H. Watkins

     $ 90,000      $ 399,986      $ 25,229 (2)       $ 515,215

Pascale Witz

     $ 82,500      $ 399,986      $ 12,122 (2)       $ 494,608

 

(1)

The amounts shown in this column reflect the grant date fair value of the awards issued to our non-employee directors during 2019, calculated in accordance with the provisions of ASC Topic 718.  See the assumptions used in Note 18 – “Share-Based and Long-Term Incentive Plans” in the Notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. 

 

(2)

Represents financial planning services payments, including tax gross-up. 

 

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(3)

The aggregate number of shares subject to outstanding stock options and RSU awards held as of December 31, 2019, by the non-employee directors who are listed in the table above, which includes grants made to the non-employee directors in 2019 and prior calendar years, are as follows:  128,240 shares subject to outstanding stock options and 15,390 shares subject to outstanding RSUs for Mr. Daniel; 150,749 shares subject to outstanding stock options and 15,390 shares subject to outstanding RSUs for Mr. Grey; 86,406 shares subject to outstanding stock options and 15,390 shares subject to outstanding RSUs for Dr. Himawan; 12,036 shares subject to outstanding RSUs for Dr. Mahony; 150,749 shares subject to outstanding stock options and 15,390 shares subject to outstanding RSUs for Mr. Santini; 59,393 shares subject to outstanding stock options and 23,594 shares subject to outstanding RSUs for Dr. Shannon; 154,954 shares subject to outstanding stock options and 15,390 shares subject to outstanding RSUs for Mr. Watkins; and 84,393 shares subject to outstanding stock options and 23,594 shares subject to outstanding RSUs for Ms. Witz. 

 

(4)

Dr. Mahony joined the Board in August 2019. 

 

(5)

Mr. Pauli served on the Board until May 2019. 

 

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EXECUTIVE OFFICERS

The following table sets forth information regarding executive officers as of March 1, 2020: 

 

     

Name

   Age      Position with the Company

Timothy Walbert

     52      Chairman, President and Chief Executive Officer

Brian K. Beeler

     47      Executive Vice President, General Counsel

Geoffrey M. Curtis

     45      Executive Vice President, Corporate Affairs and Chief Communications Officer

Michael A. DesJardin

     62      Executive Vice President, Technical Operations and Corporate Quality

Paul W. Hoelscher

     55      Executive Vice President, Chief Financial Officer

Vikram Karnani

     45      Executive Vice President, Chief Commercial Officer

Jeffrey D. Kent, M.D., FACP, FACG

     58      Executive Vice President, Medical Affairs and Outcomes Research

Irina P. Konstantinovsky

     50      Executive Vice President, Chief Human Resources Officer

Barry J. Moze

     66      Executive Vice President, Chief Administrative Officer

Andy Pasternak

     48      Executive Vice President, Chief Business Officer

Jeffrey W. Sherman, M.D., FACP

     65      Executive Vice President, Chief Medical Officer

 

The following biographical information for our executive officers other than Mr. Walbert, whose biographical information is included in Proposal 1, is as of March 1, 2020. 

Brian K. Beeler.  Mr. Beeler has served as our executive vice president, general counsel since May 2015.  Mr. Beeler previously served as our senior vice president, legal and chief compliance officer from January 2015 until May 2015 and as our associate general counsel and chief compliance officer from January 2013 until January 2015.  Prior to joining Horizon, Mr. Beeler served as associate general counsel for Fenwal, Inc., a global blood technology company, from December 2008 until December 2012.  Before that, Mr. Beeler was senior counsel, business development, commercial and research and development at TAP Pharmaceuticals and Takeda Pharmaceuticals North America and also previously served as chief compliance officer at Schwartz Pharma.  Mr. Beeler received a bachelor’s degree in history from Purdue University, a master of business administration degree from the Kellogg School of Management at Northwestern University and a juris doctorate degree from the Indiana University School of Law. 

Geoffrey M. Curtis.  Mr. Curtis has served as our executive vice president, corporate affairs and chief communications officer since August 2018.  Prior to that, from May 2017 he served as our senior vice president of corporate affairs and chief communications officer, and as group vice president of corporate communications from December 2015, when he joined Horizon.  From May 2012 until April 2015, Mr. Curtis served as senior vice president at Edelman Public Relations and, as part of its National Health Media Team, he led media strategy and execution for a large portfolio of pharmaceutical, biotech and medical device clients.  Prior to that, Mr. Curtis was group director of the media practice at WCG, a marketing and communications firm and part of W20 Group, from July 2006 until May 2012 and held a similar role at GCI Group from March 2004 until July 2006.  Prior to joining GCI, Mr. Curtis served as a public affairs manager in the Pharmaceutical Products Division at Abbott, where he led internal and external communications programs for the immunology, neuroscience and oncology franchises.  Mr. Curtis has a bachelor’s degree in English from Lake Forest College in Lake Forest, Illinois. 

Michael A. DesJardin.  Mr. DesJardin has served as our executive vice president, technical operations and corporate quality since February 2017.  Mr. DesJardin previously served as our senior vice president, technical operations from October 2016 to November 2016 and as our senior vice president, life cycle management from December 2016 to January 2017.  Mr. DesJardin joined Horizon from Raptor in October 2016 as part of the Raptor acquisition.  While at Raptor, Mr. DesJardin was the senior vice president of technical operations from April 2015 to October 2016.  Prior to that, Mr. DesJardin served as senior vice president of product development at Jazz Pharmaceuticals Public Limited Company (formerly Jazz Pharmaceuticals, Inc.) (Jazz) from July 2004 to March 2015.  Mr. DesJardin spent nine years as an executive director and engineering fellow at ALZA Corporation and spent 15 years at the Dow Chemical Company working in pharmaceutical and agricultural chemical development for Marion Merrill Dow.  Mr. DesJardin has over 39 years of experience in pharmaceutical development.  Mr. DesJardin received a bachelor of science degree in chemical engineering from the University of California, Berkeley and is a registered professional engineer in the State of California. 

 

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Paul W. Hoelscher.  Mr. Hoelscher has served as our executive vice president, chief financial officer since October 2014.  Previously, Mr. Hoelscher was our executive vice president, finance from June 2014 through September 2014.  Prior to joining Horizon, Mr. Hoelscher served as senior vice president, finance-treasury and corporate development of OfficeMax, Inc., from August 2013 to May 2014, and as vice president, finance-treasury and corporate development of OfficeMax from August 2012 to July 2013.  Prior to that, Mr. Hoelscher served in various finance roles at Alberto Culver Company from 1993 to 2012 and in various positions in the audit practice at KPMG LLP from 1986 to 1993.  He currently serves on the board of trustees of the Illinois Chapter of the Leukemia and Lymphoma Society.  Mr. Hoelscher received his bachelor of science degree in accountancy from the University of Illinois at Urbana-Champaign and is a certified public accountant.

Vikram Karnani.  Mr. Karnani has served as our executive vice president, chief commercial officer since March 2018.  Prior to that, he served as our senior vice president, rheumatology business unit from February 2017 to March 2018, and before that, from July 2014 until February 2017, he served as our general manager, specialty business unit.  Prior to joining Horizon, Mr. Karnani was with Fresenius Kabi, a global health care company, where he served as vice president of the therapeutics and cell therapy business, from October 2011 to July 2014.  Mr. Karnani also held various positions in business development, corporate strategy and strategic marketing within Fenwal Inc., a global blood technology company that was acquired by Fresenius Kabi, from November 2008 to October 2011.  Mr. Karnani brings nearly 17 years of cross-functional expertise across a multitude of industries, including medical devices, management consulting, semiconductors and cellular telecommunications.  Mr. Karnani has a master’s degree from the Kellogg School of Management at Northwestern University, a master’s degree in electrical engineering from Case Western Reserve University and a bachelor of science degree in electrical engineering from University of Bombay, India.

Jeffrey D. Kent, M.D., FACP, FACG.  Dr. Kent has served as our senior vice president, medical affairs and outcomes research since joining Horizon in May 2012.  Before that Dr. Kent was executive director, medical affairs at Astellas Pharmaceuticals, a public Japanese biopharma company, from 2011 to 2012.  Prior to Astellas, he spent more than eight years as global project head for medical affairs in immunology at Abbott Laboratories, then a public health care and pharmaceutical company.  Dr. Kent also worked at G.D. Searle & Company (now Pfizer) from 1999 to 2003, and served in various capacities in research and development, including global director for valdecoxib (Bextra) development.  A Fellow of the American College of Physicians (FACP) and a Fellow of the American College of Gastroenterology (FACG), Dr. Kent received his M.D. from the Jefferson Medical College in Philadelphia, Pennsylvania.  He completed a residency in Internal Medicine at Thomas Jefferson University Hospital and a fellowship in gastroenterology and hepatology at Rush Presbyterian St. Luke’s Hospital in Chicago.

Irina P. Konstantinovsky.  Ms. Konstantinovsky has served as our executive vice president, chief human resources officer since September 2017.  Prior to Horizon, from August 2012 to September 2017, she was vice president of global talent at Baxter International Inc., a healthcare products company, where she led a team of talent professionals worldwide and oversaw organizational effectiveness, leadership development, inclusion and diversity and talent acquisition.  She and her team were responsible for talent management strategies, programs and systems for more than 50,000 employees worldwide.  Prior to Baxter, Ms. Konstantinovsky spent 15 years in senior partner and director roles at Towers Watson (currently Willis Towers Watson), a global human-resources consulting firm serving Fortune 1000 companies.  Ms. Konstantinovsky has a bachelor of arts in education from the University of Buenos Aires and two master’s degrees, one in higher education and one in industrial and labor relations from Cornell University.  In addition, she serves as vice chair on the board of the Human Resource Management Association of Chicago and on the board of the YWCA of Metropolitan Chicago.

Barry J. Moze.  Mr. Moze has served as our executive vice president, chief administrative officer since February 2017.  Prior to that, Mr. Moze was our executive vice president, chief operating officer from February 2016 to January 2017 and was our executive vice president, corporate development from May 2014 to January 2016.  Prior to joining Horizon, Mr. Moze spent more than 28 years as a partner of Crystal Clear Communications, a consulting firm focused on the development and execution of corporate strategies.  Prior to Crystal Clear, Mr. Moze was a founder and president of Review Services and Asset Management Group, a licensed investment advisory firm.

Andy Pasternak.  Mr. Pasternak has served as our executive vice president, chief business officer since November 2019.  Prior to that, Mr. Pasternak served as a partner of Bain & Company, Inc., a global management consulting firm, from 2008 until October 2019, where he most recently led Bain & Company’s healthcare practice in the Americas and was a member of the mergers and acquisition practice.  Mr. Pasternak earned a master of business administration degree from the University of Chicago and a bachelor of arts degree in economics from Northwestern University.

 

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Jeffrey W. Sherman, M.D., FACP.  Dr. Sherman has served as our executive vice president, chief medical officer since January 2018.  From September 2014 to January 2018, Dr. Sherman served as our executive vice president, research and development and chief medical officer.  He joined Horizon in 2009 as our executive vice president, development, manufacturing, regulatory affairs and chief medical officer.  Prior to joining Horizon, Dr. Sherman served as president and board member of the Drug Information Association (DIA), a nonprofit professional association of members who work in government regulatory, academia, patient advocacy and the pharmaceutical and medical device industry.  Before that he held other management roles at IDM Pharma, Inc., Takeda Global Research & Development, NeoPharm, Inc. and G.D. Searle, LLC/Pharmacia.  Dr. Sherman serves on the board of directors of Strongbridge Biopharma plc and Xeris Pharmaceuticals Inc, both public biopharma companies, and the Board of Advisors of the Center for Information and Study on Clinical Research Participation (CISCRP).  He is an adjunct assistant professor of Medicine at the Northwestern University Feinberg School of Medicine and a diplomat of the National Board of Medical Examiners and the American Board of Internal Medicine.  Dr. Sherman received his M.D. from the Rosalind Franklin University/Chicago Medical School.

 

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (CD&A) discusses the compensation philosophy, policies and principles underlying our executive compensation decisions made for 2019 compensation.  This CD&A provides qualitative information on the factors relevant to these decisions and the manner in which compensation is awarded to the following executive officers who have been named in the Summary Compensation Table included in this Proxy Statement and whom we refer to as our named executive officers (NEOs). 

 

Timothy Walbert

   Chairman, President and Chief Executive Officer

Paul W. Hoelscher

   Executive Vice President, Chief Financial Officer

Barry J. Moze

   Executive Vice President, Chief Administrative Officer

Vikram Karnani

   Executive Vice President, Chief Commercial Officer

Shao-Lee Lin, M.D., Ph.D.(1)

   Former Executive Vice President, Research and Development and Chief Scientific Officer

Robert F. Carey (2)

   Former Executive Vice President, Chief Business Officer

 

  (1)

Shao-Lee Lin’s employment was terminated effective January 23, 2020.

 

  (2)

Robert Carey retired effective October 1, 2019. 

Quick CD&A Reference Guide

 

Executive Summary

         Page 37      

Compensation Program Objectives and Philosophy

         Page 41      

Compensation Determination Process

         Page 41      

Elements of Executive Compensation

         Page 43      

Additional Compensation Policies and Practices

         Page 52      

 

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Executive Summary

2019—Year At A Glance

Strong Performance:  Record Net Sales and Strong Shareholder Returns

 

LOGO

Except for 1, 3- and 5-year total shareholder return, growth percentages represent comparison to full-year 2018. 

TSR:  total shareholder return through December 31, 2019.  NBI:  Nasdaq Biotechnology Index. 

(1)

Adjusted EBITDA is a non-GAAP measure.  Please refer to the discussion of non-GAAP financial measures and the reconciliations to GAAP measures beginning on page 110 of our Annual Report on Form 10-K for the year ended December 31, 2019, which discussion and reconciliations are incorporated herein by reference. 

 A Year of Milestones and Significant Progress

 

Our Strategy:

Maximizing key growth drivers

KRYSTEXXA and TEPEZZA

while expanding our pipeline

for sustainable growth

 

 

 

 

Our Purpose:

To help build healthier

communities, urgently

and responsibly

    LOGO   

  Announced highly significant TEPEZZA Phase 3 topline data:  82.9% of TEPEZZA patients met the primary endpoint versus 9.5% of placebo (p<0.001); obtained FDA Priority Review from FDA; after an accelerated review obtained U.S. FDA approval of TEPEZZA for thyroid eye disease on January 21, 2020, almost two months before the target action date, making TEPEZZA the first and only approved treatment for the vision-threatening and debilitating disease

 

  Completed KRYSTEXXA plus methotrexate MIRROR immunomodulation open-label trial; topline data demonstrated significant response rate improvement:  79% of patients achieved complete response rate vs 42% for KRYSTEXXA Phase 3 clinical program

 

  Initiated KRYSTEXXA plus methotrexate MIRROR immunomodulation placebo-controlled randomized clinical trial with aim of optimizing treatment outcomes; trial designed to expand the prescribing information for KRYSTEXXA

 

  Initiated PROTECT trial evaluating KRYSTEXXA to improve management of uncontrolled gout for adult kidney transplant patients

 

  Opened new South San Francisco R&D and manufacturing facility

 

  Significantly improved Horizon’s capital structure

 

  Demonstrated strong employee engagement with multiple best-workplace recognitions, as well as gender and ethnicity pay equity

 

  Changed our company name to Horizon Therapeutics plc and rebranded to better reflect who we are today and our vision for the future

 

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Business Overview: 

2019:  A Year of Tremendous Progress and Strong Execution on Our Strategy

2019 was a year of tremendous progress and performance at Horizon, marked by the achievement of several important milestones and a testament to the strong execution of our strategy to maximize our key growth drivers and expand our pipeline for sustainable growth. 

 

   

We generated record net sales of $1.3 billion, an increase of 8 percent over 2018 and adjusted EBITDA of $483 million, an increase of 7 percent despite significant investments made in the development and U.S. launch preparations for TEPEZZA.

 

   

We achieved one-year total shareholder return of 85 percent, far outpacing the 25 percent return of the NBI. 

 

   

In addition to heavily investing in TEPEZZA, we invested in several new R&D programs for our growth driver KRYSTEXXA to maximize the benefit it offers patients and to enhance its leadership in uncontrolled gout. 

 

   

During 2019 we considerably improved our capital structure to align more closely to profitable biopharma companies, reducing our gross debt by $575 million and extending our debt maturities with lower interest rates. 

With the recent accelerated approval of TEPEZZA in January 2020 as well as the continued strong growth prospects for KRYSTEXXA, we believe we are in our strongest position ever as a company, building on our momentum to deliver long-term value to our shareholders

For additional discussion about our strategy, unique approach, our key growth drivers TEPEZZA and KRYSTEXXA, as well as our expanding pipeline, see the “Business Overview” discussion in the Proxy Summary beginning on page 3. 

Total Shareholder Return

Our disciplined approach, clear strategy, business development acumen and strong commercial execution has driven rapid, transformational growth.  As a result, we have outperformed both our peer group and the NBI over the one-, three- and five-year periods ended December 31, 2019.  With our key growth driver medicines KRYSTEXXA and TEPEZZA, our durable base of rare disease medicines, the pipeline we are expanding for future growth and our strengthened capital structure, we believe Horizon is well positioned for sustainable long-term growth. 

Our Total Shareholder Return Significantly Surpassed Our Peers and NBI

1, 3- and 5-year periods

 

LOGO

Note:  The peer group used for the TSR calculations for the 1-, 3- and 5-year periods ended December 31, 2019 is our peer group shown on page 42. 

 

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Our Pay Program

Our compensation program continues to be based on attracting and retaining top talent with experience in building and leading a successful rare disease biopharma company, while providing competitive compensation and benefits packages that create a direct, meaningful link between business results and compensation opportunities.  In thoughtfully doing so, we believe we can align interests of management, employees and shareholders to set priorities and focus on executing our long-term business strategy. 

Say-on-Pay Results and Shareholder Engagement

We value the views of our shareholders and we have had significant and meaningful engagement with our shareholders regarding our compensation and governance.  Feedback from these outreach efforts informs the Compensation Committee’s thinking when evaluating our current compensation program and when considering potential modifications to the program on a go-forward basis.  During the outreach we conduct each year, we have had significant continued and consistent engagement with our shareholders, led by the Chairman of our Compensation Committee, and we plan to continue this practice. 

In 2019, during our shareholder engagement cycle before the Annual General Meeting, we offered engagement opportunities to shareholders who represented 85 percent of our shares outstanding; shareholders who represented 68 percent of our outstanding shares accepted and we conducted calls or meetings with these holders.  Our shareholders appreciated the outreach, and the feedback from this engagement was very positive.  At our 2019 Annual General Meeting of Shareholders, our say-on-pay proposal received the support of 86 percent of the shares voted.  We believe this high level of support is a result of our comprehensive shareholder outreach and engagement program to solicit feedback, understand investor viewpoints and incorporate their feedback into further discussions of our compensation programs. 

Changes to our compensation program over the past several years that were heavily influenced by shareholder feedback include: 

 

   

Incentive compensation recoupment policy.  This policy enables us to recover performance-based cash and equity compensation if it is determined not to have been earned by our executive officers, in the event of restatement of financial results. 

 

   

Annual long-term incentive grants.  Our philosophy on granting equity has changed as a result of feedback.  In January 2018, we shifted from “front-loaded” awards covering a multi-year period to regular, annual grants of long-term incentives. 

 

   

Balance between short-term and long-term performance metrics.  Shareholder feedback informed our decision to combine both a short-term business performance metric and long-term relative TSR metric for the performance share unit (PSU) awards granted as part of our annual long-term incentive plan.  We have continued to use performance-based equity compensation in our regular long-term incentive program, influenced by feedback from our on-going engagement with shareholders regarding executive compensation. 

We greatly value the dialogue we have with our shareholders and remain committed to conducting consistent engagement going forward. 

 

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2019 Pay-for-Performance Overview

A significant portion – a higher percentage than the majority of our peers – of target total compensation for our CEO and other NEOs is structured in the form of “at-risk” compensation, consisting of annual performance-based incentives and PSUs.  In line with our compensation objectives – including linking executive pay with performance – short-term incentives and PSUs are dependent upon Horizon’s performance, aligning our executives’ interests with those of our shareholders for near- and long-term performance.  In addition, the restricted share unit (RSU) portion of the target total compensation has a time-based vesting component so that the total potential value realized from the RSU portion is dependent on our long-term share price performance.  Total target direct compensation for 2019, as shown below, reflects annual base salary, annual bonus, PSUs and RSUs as reported in the Summary Compensation Table.  More than half of total target compensation of our chief executive officer (CEO) is tied to achievement of specific performance goals and an additional 31 percent is time-based equity. 

 

CEO 2019 Pay Mix at Target    NEO 2019 Pay Mix at Target
LOGO    LOGO

Compensation Program and Governance

Our Compensation Committee is responsible for oversight of our compensation program.  A significant part of this oversight is aligning management interests with our business strategies and goals, as well as the interests of our shareholders, while also mitigating excessive risk-taking.  We continually take steps to strengthen and improve our executive compensation policies and practices.  Highlights of our current policies and practices include: 

 

   
What We Do    What We Don’t Do

  Align executive compensation with corporate and individual performance

 

  Maintain strong share ownership guidelines for our directors and executives

 

  Maintain appropriate balance between short- and long-term compensation, which discourages short-term risk taking at the expense of long-term results

 

  Seek annual shareholder advisory approval on our executive compensation

 

  Engage an independent advisor reporting directly to the Compensation Committee

 

  Apply anti-pledging and anti-hedging policy for our shares

 

  Cap annual and long-term incentive payouts

 

  Require a one-year holding post-issuance period on all post-2017 equity grants for executive officers

 

  Apply an incentive compensation recoupment “clawback” policy

 

  Conduct annual compensation risk assessments

 

  Actively engage with our shareholders

 

  

×   No guaranteed bonuses or salary increases

 

×   No repricing of stock options without shareholder approval

 

×   No dividends or dividend equivalents paid on unearned shares

 

×   No NEO excise tax gross-ups

 

 

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Compensation Program Objectives and Philosophy

We believe in providing a competitive total compensation package to our executive officers through a combination of base salary, annual cash bonuses, long-term incentives, and severance and change-in-control benefits.  Our executive compensation programs are designed to achieve the following objectives: 

 

   

align the interests of our executive officers and shareholders by motivating executive officers to achieve performance objectives that are intended to increase shareholder value;

 

   

attract and retain talented and experienced executives to manage our business to meet our long-term objectives;

 

   

motivate and reward executives whose knowledge, skills and performance are critical to our success;

 

   

provide a competitive compensation package in which total compensation is determined in part by market factors, key performance objectives and milestones and the achievement level of these performance objectives and milestones by our executive officers; and

 

   

reward the achievement of key corporate and individual performance measures. 

Our Compensation Committee believes that our executive compensation programs should include short- and long-term performance incentive components, including cash and equity-based compensation, and should reward consistent performance that meets or exceeds expectations.  The Compensation Committee evaluates both performance and compensation to make sure that the total compensation provided to our executive officers remains competitive relative to compensation paid by companies of similar size and stage of development, operating in the pharmaceutical industry and appropriately reflects our relative performance and our own strategic objectives. 

 

Compensation Determination Process

Role of Compensation Committee

The Compensation Committee seeks to ensure that our executive compensation program is properly rewarding and motivating our executive officers while aligning their goals with our business strategy and the interests of our shareholders.  To do this, our Compensation Committee conducts an annual review of the aggregate level of our executive compensation and the mix of elements used to compensate our executive officers and historic compensation levels, including prior equity awards. 

When setting executive compensation opportunities, the Compensation Committee considers several factors, including: 

 

   

each NEO’s role and responsibilities;

 

   

achievement of key performance objectives and milestones;

 

   

market factors, such as compensation practices of peer companies;

 

   

compensation survey data, as applicable, such as the Radford Global Life Sciences Survey; and

 

   

retention concerns. 

Role of Chief Executive Officer in Compensation Decisions

Our CEO typically evaluates the performance of other executive officers and other employees, along with the performance of the Company as a whole, against previously determined objectives, on an annual basis and makes recommendations to the Compensation Committee with respect to annual base salary adjustments, bonuses, cash performance incentives and annual equity awards for the other executives.  The Compensation Committee exercises its own independent discretion in approving compensation for all executive officers and assessing corporate performance against the pre-established objectives.  The CEO is not present during deliberations or voting with respect to his own compensation. 

Risk Analysis

The Compensation Committee has reviewed our compensation policies applicable to our executive officers and other employees and believes that our policies do not encourage excessive and unnecessary risk-taking, and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on us.  The design of our compensation policies and programs encourages our executive officers and other employees to remain focused on both our short- and long-term goals.  For example, while our short-term cash incentive plan measures performance on an annual basis, our equity LTIP awards, which consist of time-based equity awards (RSUs) and performance-based equity awards (PSUs) vest over a number of years.  Furthermore, a portion of our PSUs

 

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require that we achieve a specified level of performance over multi-year periods, which we believe encourages our employees to focus on execution of our long-term strategy, thus limiting the potential value of excessive risk-taking. 

Role of Independent Consultant

The Compensation Committee retains the services of third-party, independent executive compensation consultants from time to time, as it sees fit, in connection with the establishment of compensation programs and related policies.  The Compensation Committee has engaged Radford, which is part of the Rewards Solutions practice at Aon plc, as its independent consultant since 2016.  Total fees paid to Radford in 2019 were approximately $394,000.  Radford was engaged to assist and advise on all aspects of compensation program design and pay setting, including, but not limited to, the following services: 

 

   

providing the Compensation Committee information on compensation-related trends and developments in the marketplace;

 

   

informing the Compensation Committee of regulatory developments relating to executive compensation practices;

 

   

advising the Compensation Committee on appropriate peer companies for compensation pay levels and design practices, as well as relative performance comparisons;

 

   

assessing the executive compensation structure to confirm that no design elements encourage excessive risk taking; and

 

   

assessing the relationship between executive compensation and corporate performance. 

The Compensation Committee has assessed the independence of Radford according to the six factors mandated by SEC and Nasdaq listing standards.  After conducting this assessment and considering any potential conflicts of interest, the Compensation Committee concluded that the continued engagement of Radford did not raise any conflict of interest and did not adversely affect Radford’s independence. 

Peer Group

Although our Compensation Committee has historically used the Radford survey data as a tool in determining executive compensation, it typically has not used a formula or “benchmark” to set our executives’ compensation in relation to this data.  Instead, the Compensation Committee generally references the 50th percentile of comparable peer companies in combination with multiple other factors, such as the executives’ respective levels of experience and responsibility in determining the total target cash compensation for all executives.  The peer group used for making 2019 compensation decisions and comparative performance analysis was updated by our Compensation Committee in July 2018, with a focus on publicly traded commercial biotechnology and pharmaceutical companies. 

 

Acorda Therapeutics

   Emergent BioSolutions Inc.    Mallinckrodt plc    

Alkermes plc

   Exelixis, Inc.    Nektar Therapeutics    

Alnylam Pharmaceuticals, Inc.

   Incyte Corporation    Seattle Genetics, Inc.    

AMAG Pharmaceuticals, Inc.

   Ionis Pharmaceuticals, Inc.    The Medicines Company    

BioMarin Pharmaceutical Inc.

   Jazz Pharmaceuticals plc    United Therapeutics Corporation    

The selection criteria used, as well as Horizon’s position relative to each criterion at the time of the peer review process, were: 

 

     

 

Criteria

 

  

 

Horizon Position

 

    

 

Headcount

 

  

 

between 350 and 3,100 employees

 

  

 

56th percentile

 

 

 

 

 

 

Revenue

 

  

 

between $400 million and $3.5 billion

 

  

 

68th percentile

 

   

 

 

Market Capitalization

 

  

 

 

between $850 million and $10.3 billion

 

  

29th percentile

(based on a
30-day average)

 

   

 

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Elements of Executive Compensation

Our executive compensation program primarily consists of base salary, annual cash incentives and long-term incentives delivered through equity and cash awards.  Employees in more senior roles have an increasing proportion of their total pay package at risk and tied to performance because they are in a position to have greater influence on our performance results. 

 

       
Element    Form    Performance
Period
   Objective
Base Salary    Cash
(fixed)
   N/A   

Recognition of individual’s role and responsibilities; provides competitive pay for retention purposes

Short-Term Incentive    Cash
(variable)
   Annual   

Variable pay designed to reward achievement of annual financial and corporate objectives and individual goals

Long-Term Incentives   

PSU Awards
(variable)

 

RSU Awards

(variable)

   Multi-year

or Annual

 

N/A

  

Promotes an ownership culture and aligns the interests of executives with those of shareholders; provides meaningful incentives for management to execute on longer-term financial and strategic growth goals that drive shareholder value creation; and supports our retention strategy

2019 Executive Compensation at a Glance

 

         
Element    Form    Performance
Period
   2019
Metrics
   2019 Performance Levels
(% of Target Achieved)
Base Salary    Cash
(fixed)
   N/A         N/A

Short-Term

Incentive

   Cash
(variable)
   Annual   

Quantitative (70%): 

•   Business unit net sales: 

  Orphan (15%)

  Rheumatology (15%)

  Inflammation (5%)

•   Segment operating income: 

  Orphan & Rheumatology (20%)

  Inflammation (5%)

•   Adjusted EBITDA (10%)

 

Qualitative (30%): 

•   Culture and compliance (10%)

•   Business development (10%)

•   Robust R&D organization (10%)

   Quantitative:                103.9%

 

•   12.6%

•   30.0%

•   10.0%

 

•   21.3%

•   10.0%

•   20.0%

 

Qualitative:                    45.0%

•   15.0%

•   10.0%

•   20.0%

 

Total:                             148.9%

Long-Term Incentives    PSU Awards
(variable)

 

 

RSU Awards

(variable)

   Multi-year

or Annual

 

 

N/A

  

PSU Awards: 

Net Sales/TSR PSUs: 

•   Net sales (70%)

•   3-year Relative TSR (30%)

 

 

 

Teprotumumab PSUs

 

RSU Awards:  N/A

   PSU Awards: 

Net Sales/TSR PSUs: 

•   119.2%

•   Not applicable given

     3-year (2019-2021)

     Relative TSR

     performance period

•   100%

 

RSU Awards:  N/A

“Variable” compensation is compensation in which the ultimate value received is contingent either 1) on performance, typically measured as financial, operational, or stock price performance, such as for PSUs; or 2) on the stock price value at the vesting date, such as for RSUs. 

 

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Base Salary

Base salaries for our executive officers are established based on the individual’s scope of responsibilities, experience and market factors.  Base salaries are generally reviewed annually, typically in connection with our annual executive compensation review process.  The Compensation Committee references survey and peer group data to understand the marketplace for individuals in similar positions at the peer group companies.  Based on the survey and peer group data, the Compensation Committee determined that a 3% increase to the base salaries of our NEOs was appropriate as consistent with industry trends. 

The annual base salaries of our NEOs as of March 1, 2019, and the increase from their prior base salary levels, were as follows: 

 

     
Executive    2019      % Increase  

Timothy Walbert

   $ 1,113,945        3.0

Paul W. Hoelscher

   $ 583,495        3.0

Barry J. Moze

   $ 611,078        3.0

Vikram Karnani

   $ 530,450        3.0

Shao-Lee Lin, M.D., Ph.D.(1)

   $ 643,750        3.0

Robert F. Carey(2)

   $ 562,277        3.0

 

(1)

Shao-Lee Lin’s employment was terminated on January 23, 2020.  Pursuant to the agreement we entered into with Dr. Lin in connection with the termination of her employment and in exchange for a release of claims and a non-competition agreement, she is receiving 12 months of base salary continuation payments following the termination of her employment as part of her separation benefits. 

 

(2)

Robert Carey retired on October 1, 2019.  Pursuant to the agreement we entered into with Mr. Carey in connection with his retirement, he is receiving 15 months of base salary continuation payments following his retirement as part of his separation benefits. 

Short-Term Incentives

Individual Performance-Based Bonus Opportunities

We provide performance-based cash annual bonuses as an incentive for our executives to achieve defined, quantitative corporate goals, as well as certain qualitative corporate objectives.  These bonuses may range in payout from 0% to 200% of targeted payout levels.  The overall structure of this program remains unchanged since 2014. 

The target bonus opportunities for our named executive officers remained unchanged from prior levels. 

Bonus opportunities for 2019 were as follows: 

 

       
      Threshold      Target      Maximum  
Executive    (as a % of base salary)  

Timothy Walbert

     86.25      115      230

Paul W. Hoelscher

     45      60      120

Barry J. Moze

     45      60      120

Vikram Karnani

     45      60      120

Shao-Lee Lin, M.D., Ph.D.(1)

     45      60      120

Robert F. Carey(2)

     45      60      120

 

(1)

Pursuant to the agreement we entered into with Dr. Lin in connection with the termination of her employment, Dr. Lin was eligible to receive her target 2019 bonus award as part of her separation benefits. 

 

(2)

Pursuant to the agreement we entered into with Mr. Carey in connection with his retirement, Mr. Carey was eligible to receive his 2019 bonus award based on applicable 2019 achieved performance levels as part of his separation benefits. 

Our annual incentive plan provides our executives the opportunity to earn annual performance-based cash awards based on the achievement of a combination of quantitative goals (70% weighting) and qualitative goals (30% weighting). 

 

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Quantitative Goals

The Compensation Committee established the quantitative goals for the 2019 plan year in February 2019, with the goals allocated between specific net sales goals for each of our three business units, operating income by segment and adjusted earnings before interest, tax, depreciation and amortization (adjusted EBITDA) performance targets for the 2019 calendar year, with a total weighting of 70%. 

Net Sales

For the 2019 plan year, the Compensation Committee established the net sales goals for each of our three business units – orphan, rheumatology and inflammation (previously known as primary care) – and weighted the goals as set forth in the table below. 

 

     
              Performance Levels  

Business Unit

Net Sales

($ millions)

  

Percentage

of Target

Bonus

    

Threshold

75%

    

Target

100%

     125%      150%     

Maximum

200%

 

Orphan

     15.00    $ 498      $ 528      $ 533      $ 538      $ 548  

Rheumatology

     15.00    $ 350      $ 384      $ 390      $ 394      $ 405  

Inflammation

     5.00    $ 320      $ 337      $ 343      $ 350      $ 360  

In setting the net sales goals for the 2019 plan year, the Compensation Committee determined to maintain the greater weighting for the orphan and rheumatology business units, consistent with the weightings for the prior year because they comprise the Company’s strategic growth business, they are the focus of the majority of our business investment and strategy and we believe that our future net sales growth will be mainly driven by the performance of these two business units. 

Segment Operating Income

For the 2019 plan year, the Compensation Committee established performance goals for segment operating income and weighted the goals as set forth in the table below: 

 

     
              Performance Levels  

Segment

Operating Income

($ millions)(1)

  

Percentage

of Target

Bonus

    

Threshold

75%

    

Target

100%

     125%      150%     

Maximum

200%

 

Orphan and Rheumatology

     20.0    $ 275      $ 305      $ 310      $ 315      $ 325  

Inflammation

     5.0    $ 128      $ 143      $ 147      $ 150      $ 160  

 

(1)

While segment operating income contains certain adjustments to the directly comparable GAAP figures in our consolidated financial results, it is considered to be prepared in accordance with GAAP for purposes of presenting our segment operating results. 

The Compensation Committee established the segment operating income performance metric given the change in reporting structure.  Greater weighting was given to the orphan and rheumatology segment for the operating income metric given that it is our strategic growth business. 

Adjusted EBITDA

Additionally, the Compensation Committee established adjusted EBITDA goals for 2019 and weighted the goals as follows: 

 

     
              Performance Levels  

Adjusted

EBITDA

($ millions)(1)

  

Percentage

of Target

Bonus

    

Threshold

75%

    

Target

100%

     125%      150%     

Maximum

200%

 
       10.0    $ 415      $ 450      $ 455      $ 460      $ 475  

 

(1)

Adjusted EBITDA:  Adjusted earnings before interest, taxes, depreciation and amortization and other amounts (EBITDA) is used and provided as a non-GAAP financial measure so our investors have a more complete understanding of our financial performance.  In addition, this non-GAAP financial measure is among the indicators our management uses for planning and forecasting purposes and measuring our performance. 

 

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Qualitative Goals

The Compensation Committee established three qualitative goals (with a total weighting of 30%) for 2019: 

 

   

Culture and Compliance (10%)

 

    •

Ensure corporate culture of compliance by ensuring effective processes and training are in place. 

 

    •

Achieve scores at or above external benchmarks in employee surveys. 

 

    •

Implement key leadership development programs. 

 

   

Business Development (10%)

 

    •

Continue to grow and diversify the product portfolio and pipeline by announcing and/or completing new transactions that advance our strategic growth goals and meet or exceed pre-determined acquisition criteria. 

 

   

Robust Research and Development Organization (10%)

 

    •

Establish a high-performing R&D organization and hire key roles to upscale capability and performance. 

 

    •

Achieve key clinical and regulatory milestones. 

The Compensation Committee chose these qualitative goals because these are the best indicators of the achievement of our operating plan, and they represent the factors most critical to increasing total shareholder value. 

How Did We Do?

Quantitative Goals

Actual results in 2019 for each quantitative goal were as follows: 

 

     

Quantitative Goals

(70% Weighting)

($ millions)

 

          2019 Performance  
  

Percentage of Target

Bonus

     Actual      % Achieved     

% of Total

(Target x
% Achieved)

 

Net Sales

             

Orphan

     15.0    $ 509        83.8      12.6

Rheumatology

     15.0    $ 421        200.0      30.0

Inflammation

     5.0    $ 370        200.0      10.0

Operating Income

             

Orphan & Rheumatology

     20.0    $ 306        106.5      21.3

Inflammation

     5.0    $ 175        200.0      10.0

Adjusted EBITDA

             

Full Year 2019

     10.0    $ 483        200.0      20.0

Aggregate Quantitative Performance Achieved: 

 

              103.9

Qualitative Goals

In addition, the Compensation Committee considered the qualitative measures (as described above) to be achieved at 150.0% of the 30% qualitative target, or 45%, for the year.  This achievement level was determined based on numerous factors: 

With respect to our culture and compliance objective, we advanced all three goal components of compliance, leadership development and employee engagement.  We continued to strengthen our corporate culture of compliance by ensuring effective processes and training.  We also commissioned an independent assessment of our ethics and compliance program by Deloitte, which concluded that our program exceeds the core element requirements of an ethics and compliance program and has a variety of unique enhancements that make our program particularly effective.  We made significant investments in multiple development programs and training for our executive management and other key talent.  Relative to employee engagement, we conducted an assessment that showed that our employee loyalty and engagement levels significantly exceeded that of the average pharmaceutical company compared to benchmarks of a leading consulting firm.  A study by Aon concluded that Horizon

 

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has achieved gender and ethnicity pay equity, and that we rank in the top five of approximately 100 companies in similar studies.  Our employees’ engagement is underscored by the multiple 2019 workplace awards we received, including: 

 

   

Number 3 on the FORTUNE and Great Place to Work® Best Workplaces in Health Care and BioPharma, the second consecutive year to be named to the list;

 

   

Number 8 on the FORTUNE and Great Place to Work Best Small & Medium Workplaces, the fourth consecutive year to be named to the list;

 

   

Number 19 on the FORTUNE and Great Place to Work Best Workplaces for Parents, the first year to be named to the list;

 

   

Certified by Great Place to Work Institute of Ireland as one of the Great Places to Work in Ireland;

 

   

We were also awarded a Best Places to Work in Chicago designation by Crain’s Chicago Business for the sixth consecutive year; named to the FORTUNE and Great Place to Work Best Workplaces in Chicago for the third consecutive year; and cited as one of the Chicago Tribune Top Workplaces for the fifth consecutive year; and

 

   

We were included in the Dave Thomas Adoption Foundation’s Top 100 Adoption-Friendly Workplaces. 

The Compensation Committee considered this objective to be achieved at 150.0%. 

With respect to our business development objectives, we completed several transactions aligned with our strategy, despite a challenging M&A environment created by elevated valuations.  Among our achievements, we: 

 

   

Announced a long-term gout treatment discovery collaboration agreement with HemoShear Therapeutics, which provides the capability to identify and validate novel biologic targets for lowering serum uric acid levels, with the objective of exploring novel approaches in the treatment of gout;

 

   

Amended our license and supply agreements related to LODOTRA® and RAYOS® in January, transferring economic benefits of LODOTRA in Europe, which was not a strategic focus, in exchange for an improved royalty agreement for RAYOS in the United States;

 

   

Divested rights to MIGERGOT®, a non-strategic asset, in June; and

 

   

Significantly improved our capital structure through debt reduction and refinancing.  We reduced our gross debt by $575 million, extended the maturities of our debt and reduced our interest rates.  These initiatives provide us greater flexibility to take advantage of future business development opportunities, as well as resulting in a capital structure more in line with profitable R&D-focused biopharma peers. 

The Compensation Committee considered this objective to be achieved at 100.0%. 

With regards to our research and development organization objectives, we had several milestones and achievements in 2019.  Among our achievements, we: 

 

   

Completed the OPTIC Phase 3 confirmatory trial for TEPEZZA in the treatment of thyroid eye disease (TED) in late February with impressive results:  82.9 percent of TEPEZZA patients met the primary endpoint of reduction in proptosis (eye-bulging) of greater than or equal to 2 millimeters (p<0.001), compared to 9.5 percent in placebo patients, and all secondary endpoints were met with statistical significance;

 

   

Received Priority Review for the TEPEZZA BLA application in September with a Prescription Drug User Fee Act (PDUFA) date of March 8, 2020.  Priority Review is granted for medicine candidates that have the potential to provide significant improvements in the treatment of serious conditions accelerates the standard review process by four months;

 

   

Received a unanimous vote by the FDA’s Dermatologic and Ophthalmic Drugs Advisory Committee (12-0) in December that the potential benefits of TEPEZZA outweigh the potential risks for the treatment of TED and

 

   

Advanced our immunomodulation trials for KRYSTEXXA, which are evaluating the use of KRYSTEXXA with the immunomodulator methotrexate to increase the response rate for KRYSTEXXA.  This would allow more patients to benefit from KRYSTEXXA and maximize the value of the medicine.  Horizon initiated the evaluation through its open-label MIRROR pilot trial, which was completed in late 2019, and the results demonstrated that 79 percent, or 11 of 14 patients, who used KRYSTEXXA with methotrexate achieved a complete response, compared to the 42 percent response rate in the KRYSTEXXA Phase 3 clinical program, which evaluated KRYSTEXXA alone.  The open-label trial was followed by the larger MIRROR randomized clinical trial, which was initiated in June 2019 and is designed for potential update of the label. 

 

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Initiated in October the PROTECT trial, an open-label clinical trial evaluating the effect of KRYSTEXXA on serum uric acid levels in adult kidney transplant patients with uncontrolled gout.  The trial’s objective is to demonstrate that KRYSTEXXA provides effective disease control without burdening the kidneys. 

The Compensation Committee considered this objective to be achieved at 200.0%. 

Short-Term Incentive Plan Total Achievement

With the achievement percentage for the quantitative objective goals of 103.9% and the achievement percentage for the qualitative objective goals of 45.0%, the total achievement percentage for both the qualitative and quantitative short-term incentive plan objective goals was 148.9%

In February 2020, based on management’s recommendations and the Compensation Committee’s own review, deliberation and determination of achievement of the corporate objectives listed above, along with determination of the NEOs’ individual contributions toward meeting those objectives described above, the Compensation Committee approved cash bonus awards for our NEOs as follows, which were paid in March 2020: 

 

       
Executive   

2019 Target

Bonus

Opportunity

    

Total % of Target

Bonus Earned

    

2019 Earned

Annual Incentive

 

Timothy Walbert

   $ 1,275,006        148.9      $ 1,898,483  

Paul W. Hoelscher

   $ 348,449        148.9      $ 518,840  

Barry J. Moze

   $ 364,921        148.9      $ 543,367  

Vikram Karnani

   $ 315,317        148.9      $ 469,507  

Shao-Lee Lin, M.D., Ph.D.(1)

   $ 386,250        100.0      $ 386,250  

Robert F. Carey(2)

   $ 335,778        148.9      $ 499,973  

 

(1)

Pursuant to the agreement we entered into with Dr. Lin in connection with the termination of her employment, Dr. Lin was eligible to receive her target 2019 bonus award as part of her separation benefits. 

 

(2)

Pursuant to the agreement we entered into with Mr. Carey in connection with his retirement, Mr. Carey was eligible to receive his 2019 bonus award based on applicable 2019 achieved performance levels as part of his separation benefits. 

There were no additional discretionary bonuses awarded to our NEOs in 2019. 

Long-Term Incentives

Our Compensation Committee believes in a strong pay-for-performance program and culture which encourages a long-term focus from the executive officers and aligns their interests with those of our shareholders.  To achieve this, the Compensation Committee utilizes two vehicles for our long-term awards: 

 

   

Time-based equity awards:  RSUs

 

   

Performance-based equity awards:  PSUs

2019 Long-Term Incentive Grants

We have adopted a regular, annual long-term incentive grant schedule awarding equity awards in the form of RSUs and PSUs to our executive officers.  In order to further align the interests of our executive officers with those of our shareholders, we award a higher percentage of performance-based equity compensation than the majority of our industry peers.  In addition, our performance-based equity compensation is aligned with all of our stated compensation objectives, including linking executive pay with performance.  Further, we believe that annual grant cycles allow us to more easily manage shareholder dilution and burn rate, while still providing market-competitive incentive opportunities. 

We believe these equity grants align the interests of our executive officers and shareholders in two ways: 

 

   

a large portion of the equity grants vest contingent on performance and have a continued service requirement; and

 

   

equity grants have a one-year holding period after any vested shares are issued. 

 

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As part of our regular, long-term incentive program, we awarded our NEOs a mix of PSUs and time-vested RSUs on January 4, 2019.  The components of the long-term incentive plan were as follows: 

 

 

 

2019 Long-Term Incentive Components

      PSUs    RSUs
   

Performance Criteria/Period

  

Net Sales/TSR PSUs

70%:  2019 Net Sales

 

30%:  3-year Relative TSR (2019-2021)

 

Teprotumumab PSUs

FDA approval before September 30, 2020

 

   N/A
   

Maximum Award

  

Net Sales/TSR PSUs

200% of Target Award

 

Teprotumumab PSUs

N/A

 

   N/A
   

Service Vesting Period

  

Net Sales/TSR PSUs

70% 2019 Net Sales:  3 equal annual installments

 

30% 3-year Relative TSR:  at the end of the 2019-2021 performance period

 

Teprotumumab PSUs

3 equal annual installments on FDA approval date and subsequent anniversary dates

 

   Vest one-third annually
over 3 years
   

Post-Issuance Holding Period

 

  

1 year

 

  

1 year

 

Our NEOs received RSU and PSU grants in January 2019 for the following share amounts: 

 

       

Executive

  

Time-Vested

RSUs

    

Net Sales/TSR

PSUs

    

Teprotumumab

PSUs

 

Timothy Walbert

     174,104        174,104        60,995  

Paul W. Hoelscher

     53,948        53,948        16,669  

Barry J. Moze

     73,948        53,948        17,459  

Vikram Karnani

     53,948        53,948        14,713  

Shao-Lee Lin, M.D., Ph.D.(1)

     53,948        53,948        18,391  

Robert F. Carey(2)

     53,948        53,948        16,061  

 

(1)

Dr. Lin’s employment was terminated on January 23, 2020. 

 

(2)

Mr. Carey retired on October 1, 2019. 

Time-Vested RSUs

The time-vested RSUs are generally subject to three-year annual vesting over the service period commencing January 5, 2019 and ending on January 5, 2022.  Pursuant to the agreement we entered into with Dr. Lin in connection with the termination of her employment on January 23, 2020, her time-vested options and RSUs, including her January 2019 RSU grants, accelerated vesting in accordance with their vesting schedule as if she had completed an additional 12 months of employment with us as of the termination of her employment on January 23, 2020. 

Pursuant to the separation agreement we entered into with Mr. Carey in connection with his retirement on October 1, 2019, his time-vested RSUs will continue to vest as if his employment had continued during the vesting period. 

 

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Performance-Based PSUs

The performance-based PSUs consist of a grant based on the achievement of specific net sales and relative TSR goals (“Net Sales/TSR PSUs”) and an additional company-wide grant tied to the approval of teprotumumab (“Teprotumumab PSUs”), as follows: 

Net Sales/TSR PSUs

The Net Sales/TSR PSUs utilize two performance metrics, a short-term component tied to business performance and a long-term component tied to relative TSR.  Similar to the prior year, shareholder feedback informed our decision to include both the short- and long-term metrics in the award design: 

 

   

Net Sales (70%).  This portion of the PSU award will be determined by the net sales for our orphan business unit and KRYSTEXXA net sales in 2019. 

 

   

Relative TSR (30%).  This portion of the award will be determined by reference to our relative TSR performance over a three-year period ending December 31, 2021, as measured against the components of NBI. 

70% of the PSUs were eligible to vest based on actual 2019 net sales performance of our orphan business unit and our main growth driver medicine KRYSTEXXA in relation to the net sales performance goals as set forth in the table below.  The maximum number of PSUs that may vest is 200% of the target number of PSUs. 

 

 
Net Sales PSU Performance Goals ($ millions)  
             
Multiplier      0%        50%        100%        125%        150%        200%  

Orphan Business Unit

     <$ 498        $ 498        $ 528        $ 533        $ 538        $ 548  

KRYSTEXXA

     <$ 285        $ 285        $ 305        $ 324        $ 337        $ 350  

Teprotumumab PSUs

The Compensation Committee also approved a grant of Teprotumumab PSUs to our executives and the entire broader employee population in January 2019 at which time the Phase 3 data for Teprotumumab were not yet available.  The Teprotumumab PSUs were generally eligible to vest contingent upon 1) receiving FDA approval of teprotumumab no later than September 30, 2020, and 2) continued service through the approval date.  The grant stipulated that if FDA approval was attained on or prior to September 30, 2020, one-third of the Teprotumumab PSUs would vest on the FDA approval date and one-third would vest on each of the first two anniversaries of the FDA approval date, subject to continued service through the applicable vesting dates. 

How Did We Do?

Net Sales/TSR PSUs

Actual net sales results for 2019 were as follows for our orphan business unit and main growth driver KRYSTEXXA: 

 

     
                 2019 Performance  
   

Net Sales PSUs

(70% Weighting)

($ millions)

     Weighting        Actual       

% Net Sales PSU

Goal Achieved

      

% of Total

(Target x
% Achieved)

 

Orphan Business Unit

       35      $ 509          67.7        33.8

KRYSTEXXA

       35      $ 342          170.8        85.4

Aggregate Quantitative Performance Achieved: 

 

       119.2

 

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Accordingly, our net sales attainment was at approximately 119.2% of the target.  The amount of shares earned by our executives for the achieved net sales PSUs are as follows: 

 

         
Executive   

Net Sales PSU

(Target Number)

      

Determined

Net Sales PSU

    

Timothy Walbert

   121,872          145,296        

Paul W. Hoelscher

   37,764          45,021        

Barry J. Moze

   37,764               45,021        

Vikram Karnani

   37,764          45,021           

Shao-Lee Lin, M.D., Ph.D.(1)

   37,764          15,007        

Robert F. Carey(2)

   37,764            45,021        

 

(1)

Dr. Lin was eligible to vest in the first vesting installment of her determined net sales PSUs for 15,007 shares because she was still employed with us on January 5, 2020.  Dr. Lin forfeited the remaining unvested shares subject to her determined net sales PSUs in connection with her termination of her employment on January 23, 2020. 

 

(2)

Mr. Carey retired on October 1, 2019.  Pursuant to the agreement we entered into with Mr. Carey in connection with his retirement, his determined net sales PSUs will continue to vest as if his employment had continued. 

The determined net sales PSUs were eligible to vest in three equal annual installments subject to the executive’s continued service, with the first vesting installment on January 5, 2020.  The actual earned shares for the first vesting installment were not released, however, until performance was certified by the Compensation Committee on February 19, 2020. 

Determination of the level of attainment of the relative TSR PSUs will be made following the three-year performance period ending December 31, 2020.  Pursuant to the agreement we entered into with Mr. Carey in connection with his retirement he is entitled to receive the full number of any determined relative TSR PSUs based on applicable performance during the performance period.  All of Dr. Lin’s relative TSR PSUs were forfeited upon the termination of her employment and are not eligible to vest. 

Teprotumumab PSUs

The FDA approved TEPEZZA (teprotumumab-trbw) on January 21, 2020, earlier than anticipated.  Therefore, the first vesting installment of the Teprotumumab PSUs vested on that date.  The second vesting installment will vest on January 21, 2021 and the final installment will vest on January 21, 2022, subject to the NEO’s continued service through the applicable vesting dates.  If a change in control occurs during the NEO’s continued service and while the Teprotumumab PSUs are outstanding, the Teprotumumab PSU awards will immediately fully vest. 

Pursuant to the agreement we entered into with Mr. Carey in connection with his retirement on October 1, 2019, of the Teprotumumab PSUs he was awarded under the grant, the applicable number of Teprotumumab PSUs determined based on the attained performance levels would be entitled to vest as if his employment had continued.  Dr. Lin was eligible to vest in the first vesting installment of the Teprotumumab PSUs because she was employed on the first vesting date.  Her remaining unvested Teprotumumab PSUs were forfeited upon the termination of her employment and are not eligible to vest. 

2018 Cash Incentive Program

In 2018, in addition to the PSU and RSU awards, the Compensation Committee also approved a performance-based cash incentive plan (CIP) for our executive officers to motivate them to achieve certain financial and business-related milestones related to the 2018 strategic business initiatives and our long-term strategy.  The award amounts previously determined under the 2018 CIP vest in three equal installments beginning on January 5, 2019.  Pursuant to the agreement we entered into with Mr. Carey in connection with his retirement, he is entitled to receive his determined 2018 CIP payments as if his employment had continued.  In connection with the termination of her employment, Dr. Lin forfeited the last vesting installment of her 2018 CIP award that would have otherwise vested in January 2021. 

 

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Additional Compensation Policies and Practices

Executive Share Ownership Guidelines

We have share ownership guidelines that establish the following minimum ownership levels within five years of the adoption of the guidelines (or within five years of the date an executive officer or director first becomes subject to them): 

 

   
Position    Guideline

 

CEO

 

  

 

5x base salary

 

 

Executive Committee Members

 

  

 

2x base salary

 

 

Non-employee Directors

 

  

 

3x annual cash retainer

 

Individual ownership interest is reviewed annually as of the last day of the calendar year.  The dollar value of shares at the end of a given calendar year is determined using the average closing price of Horizon shares over the three-month period of September, October and November of that calendar year.  Shares that count toward satisfaction of these guidelines include:  shares owned outright by the individual (including stock units that have vested but not yet settled); shares retained after an option exercise or issuance under another type of equity award granted under our equity incentive plans; shares retained after purchase under our Employee Share Purchase Plan; shares subject to RSUs that have not vested; and shares held in trust for the benefit of the individual or his/her spouse.  Any unvested PSUs and unexercised stock options, whether vested or unvested, are not counted toward satisfaction of these ownership guidelines. 

In 2019, the Compensation Committee increased the minimum ownership level guidelines for non-employee directors to three times each director’s annual cash retainer from the previous level of two times. 

All of our executive officers and non-employee directors subject to the share ownership guidelines met the guidelines as of December 31, 2019. 

Holding Period Policy

Any shares issued in settlement of any equity award granted to any executive officers on or after January 5, 2018 are subject to a minimum holding period of one year before the shares may be sold or transferred. 

Hedging and Pledging Policies

Our Insider Trading Policy prohibits our executive officers, other employees, non-employee directors and consultants from engaging in short sales, transactions in put or call options, hedging transactions or other inherently speculative transactions with respect to our ordinary shares at any time.  In addition, no officer, director, other employee or consultant of Horizon may margin or pledge, or make any offer to margin or pledge, any of our ordinary shares, including without limitation, borrowing against the value of such ordinary shares, at any time. 

Clawback Policy

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 Chief Executive Officer and Chief Financial Officer may be legally required to reimburse us 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.  Additionally, in January 2018 the Compensation Committee approved our incentive compensation recoupment policy, which provides for recoupment of certain compensation paid to executive officers of the Company under certain circumstances involving material financial restatements.  Any cash and equity incentive compensation that is paid, awarded or vested based on the achievement of reported financial results and that is approved, granted or awarded on or after January 5, 2018 is subject to potential recoupment in accordance with the terms of the incentive compensation recoupment policy, including but not limited to any compensation approved, granted, or awarded under our annual cash bonus plan and PSUs under our long-term incentive program. 

Timing of Equity Awards

Grants of equity awards to our executive officers are generally determined and approved at our pre-scheduled quarterly Compensation Committee meetings whenever practicable.  However, the Compensation Committee may otherwise approve the grant of equity awards in advance of its next scheduled meeting in connection with a new hire, promotion, and other circumstances

 

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where the Compensation Committee deems it appropriate to make such grants.  Starting in 2018, our equity program has included performance vesting metrics for a performance period that begins in January.  Given that, since 2018 our process has been to approve the final grants for our equity program at a special meeting of the Compensation Committee in January.  We expect to continue having a significant portion of our executive officer equity compensation be performance based and believe it is likely that future-year grants will be approved at special Compensation Committee meetings in January.

All stock options are granted with an exercise price that is not less than the closing price of our ordinary shares on Nasdaq on the grant date.  It is our policy not to purposely accelerate or delay the public release of material information in consideration of a pending equity grant to allow the grantee to benefit from a more favorable exercise price.  We recognize that a release of information by the Company in close proximity to an equity grant may appear to be an effort to time the announcement to a grantee’s benefit (even if no such benefit was intended).  Accordingly, it is our policy that our management team makes a good faith effort to advise the Compensation Committee whenever it is aware that material non-public information is planned to be released to the public in close proximity to the grant of equity awards. 

Accounting and Section 162(m) Tax Considerations

We account for share-based awards exchanged for employee services in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718 Compensation – Stock Compensation (ASC Topic 718).  Assumptions used in the calculation of these awards are included in Note 18 – Share-Based and Long-Term Incentive Plans in the Notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.  These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the NEOs.

Under Section 162(m) of the Internal Revenue Code (“Section 162(m)”), compensation paid to any publicly held corporation’s “covered employees” that exceeds $1 million per taxable year for any covered employee is generally non-deductible.  Prior to the enactment of the Tax Cuts and Jobs Act, Section 162(m) provided a performance-based compensation exception, pursuant to which the deduction limit under Section 162(m) did not apply to any compensation that qualified as “performance-based compensation” under Section 162(m).  Pursuant to the Tax Cuts and Jobs Act, the performance-based compensation exception under Section 162(m) was repealed with respect to taxable years beginning after December 31, 2017, except that certain transition relief is provided for compensation paid pursuant to a written binding contract which was in effect on November 2, 2017 and which is not modified in any material respect on or after such date.

Compensation paid to each of our “covered employees” in excess of $1 million per taxable year generally will not be deductible unless it qualifies for the performance-based compensation exception under Section 162(m) pursuant to the transition relief described above.  Because of certain ambiguities and uncertainties as to the application and interpretation of Section 162(m), as well as other factors beyond the control of the Compensation Committee, no assurance can be given that any compensation paid by Horizon will be eligible for such transition relief and be deductible by us in the future.  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 our executive compensation program and the best interests of Horizon and its stockholders, which may include providing for compensation that is not deductible by Horizon due to the deduction limit under Section 162(m).  The Compensation Committee also retains the flexibility to modify 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 our business needs.

Severance and Change-in-Control Benefits Summary

Our NEOs are provided with certain severance benefits in order to assist us in recruiting and retaining talented individuals and align the executives’ interests with the best interests of the shareholders.  We believe these severance benefits are consistent with those provided by our peer group are an essential element of our overall executive compensation package due to the competitive market for executive talent in our industry.  The Compensation Committee believes that the severance benefits are an important element of the NEOs’ retention and motivation and that the benefits of such severance rights agreements, including generally requiring a release of claims against us and entering into a non-competition agreement as a condition to receiving any severance benefits are in our best interests.  Enhanced severance benefits are provided for a qualifying termination that occurs in connection with a change-in-control because the severance benefits are also intended to eliminate, or at least reduce, the reluctance of our executive officers to diligently consider and pursue potential change-in-control transactions that may be in the best interests of our shareholders. 

A description of the severance benefits provided under our executive officer employment agreements is provided below under the heading “Potential Payments Upon Termination or Change-in-Control.”

 

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Robert Carey Retirement Benefits

Robert Carey, our former Executive Vice President, Chief Business Officer, retired effective October 1, 2019.  In connection with his retirement, and in exchange for a release of claims, we agreed to provide severance benefits to Mr. Carey consisting of (i) 15 months’ base salary continuation and continuation of health benefits, (ii) continued eligibility for his annual 2019 cash bonus based on performance against the pre-established goals, (iii) an amendment to his existing stock options to extend the permitted exercise period through the maximum term of the options, (iv) continued vesting of his previously granted RSUs and PSUs (contingent upon meeting the pre-established performance goals), including the Net Sales/TSR PSUs and Teprotumumab PSUs as further described above, and (v) continued vesting and payment of his existing cash long-term incentive plan awards as further described above.

Shao-Lee Lin, M.D., Ph.D. Separation Benefits

Employment of Shao-Lee Lin, M.D., Ph.D., former executive vice president, research and development and chief scientific officer, was terminated effective January 23, 2020.  Pursuant to the agreement we entered into with Dr. Lin in connection with the termination of her employment and in exchange for a release of claims and a non-competition agreement, we agreed to provide severance benefits to Dr. Lin consisting of (i) 12 months’ base salary continuation and continuation of health benefits, (ii) 12 months’ accelerated vesting of her time-based vesting options and RSUs and (iii) her target 2019 bonus award.  In addition to the severance benefits that Dr. Lin was otherwise eligible to receive under her employment agreement, we provided Dr. Lin with her target 2019 bonus award in consideration of her prior services.

Deferred Compensation Plan

All of our executive officers are eligible to participate in our non-qualified Deferred Compensation Plan, which allows the participants to defer receipt of their compensation and recognition of associated income taxes without being subject to the deferral contribution limits of our 401(k) Plan, which provides additional tax and financial planning flexibility.  Our policy is to match Deferred Compensation Plan deferrals under the same matching contribution formula that we apply to our 401(k) Plan.  Accordingly, the matching contribution formula for our Deferred Compensation Plan is 100% of the first 3% and 50% of the next 2% of salary deferrals, which is the same “safe harbor” matching contribution formula that applies to our 401(k) Plan.  Matching contributions to our Deferred Compensation Plan are immediately fully vested contingent upon completion of one year of employment in order to closely align to the vesting schedule of our safe harbor matching contributions to our 401(k) Plan, which are immediately fully vested when made.  A description of our Deferred Compensation Plan is provided below under the heading “Nonqualified Deferred Compensation.”

Other Benefits

All of our executive officers are eligible to receive our standard employee benefits, such as participation in our 401(k) Plan, medical, dental, vision coverage, short-term disability insurance, long-term disability insurance, group life insurance, paid time off, holiday, and the 2014 Employee Share Purchase Plan, in each case on the same basis as our other employees.  Our paid-time-off policy allows no more than 40 paid-time-off hours to be carried over to the following year.  We also reimburse our executives, including our NEOs, up to $15,000 of personal financial planning services incurred annually and related tax gross ups.  We believe that financial planning by experts reduces the time our executives spend on that topic and assists our executives in making the most of the financial rewards received from the Company.  We also reimburse our executive officers for any travel expenses and related tax gross ups they incur in connection with any business-related travel which does not meet the strict eligibility requirements to be treated as a non-taxable business expense reimbursement in accordance with applicable tax guidelines.  We believe that the cost of providing these benefits is reasonable in light of the benefit to our business of having our executive officers more focused on attaining our business objectives in connection with any business-related travel.  The Compensation Committee periodically reviews the levels of benefits provided to executive officers to ensure they remain reasonable and consistent with its compensation philosophy. 

 

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Compensation Committee Report

The material in this report is not “soliciting material,” is furnished to, but not deemed “filed” with, the SEC and is not to be incorporated by reference in any of our filings under the Securities Act or Exchange Act whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with the management of the Company.  Based on this review and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. 

This report has been furnished by the members of the Compensation Committee: 

Jeff Himawan, Ph.D., Chair

William F. Daniel

Gino Santini

James Shannon, M.D.

 

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EXECUTIVE COMPENSATION

 

Summary Compensation Table

The following table provides information regarding the compensation earned during the years ended December 31, 2019, 2018 and 2017 by our NEOs. 

 

                 

Name and Principal Position

   Year      Salary      Bonus    

Stock

Awards(1)

    

Option

Awards(1)

    

Non-Equity

Incentive

Plan(2)

    

All Other

Compensation(3)

     Total  

Timothy Walbert

     2019      $ 1,108,700      $     $ 9,139,117      $      $ 3,398,483      $ 226,871      $ 13,873,172  

    Chairman, President and

     2018      $ 1,076,250      $     $ 13,533,845      $      $ 2,026,436      $ 160,363      $ 16,796,894  

    Chief Executive Officer

     2017      $ 1,033,333      $     $      $      $ 1,167,653      $ 141,039      $ 2,342,025  

Paul W. Hoelscher

     2019      $ 580,748      $     $ 2,773,866      $      $ 968,840      $ 120,135      $ 4,443,588  

    Executive Vice President,

     2018      $ 563,750      $     $ 5,812,495      $      $ 553,809      $ 104,332      $ 7,034,386  

    Chief Financial Officer

     2017      $ 541,667      $     $      $      $ 319,110      $ 69,335      $ 930,112  

Barry J. Moze

     2019      $ 608,201      $     $ 3,202,198      $      $ 793,367      $ 58,744      $ 4,662,510  

    Executive Vice President,

     2018      $ 590,400      $     $ 1,527,062      $      $ 579,989      $ 35,114      $ 2,732,565  

    Chief Administrative Officer

     2017      $ 571,667      $     $      $      $ 334,195      $ 71,675      $ 977,537  

Vikram Karnani

     2019      $ 525,528      $     $ 2,723,029      $      $ 719,507      $ 95,222      $ 4,063,285  

    Executive Vice President,

     2018      $ 483,333      $     $ 1,527,062      $      $ 454,064      $ 68,263      $ 2,532,722  

    Chief Commercial Officer

     2017      $ 393,750      $     $      $      $ 325,000      $ 47,672      $ 766,422  

Shao-Lee Lin, M.D., Ph.D.(4)

     2019      $ 640,719      $ 140,000 (5)    $ 2,818,620      $      $ 636,250      $ 137,225      $ 4,372,814  

    Former Executive Vice President,

     2018      $ 617,898      $ 600,000 (6)    $ 3,963,280      $ 1,099,996      $ 608,842      $ 62,715      $ 6,952,731  

    Research and Development and

                      

    Chief Scientific Officer

                      

Robert F. Carey(7)

     2019      $ 419,061      $     $ 2,758,064      $      $ 949,973      $ 252,537      $ 4,379,635  

    Former Executive Vice President,

     2018      $ 543,250      $     $ 5,812,495      $      $ 533,670      $ 74,120      $ 6,963,536  

    Chief Business Officer

     2017      $ 525,000      $     $      $      $ 307,506      $ 81,713      $ 914,219  

 

(1)

Amounts shown in this column do not reflect actual compensation received by our NEOs. The amounts reflect the grant date fair value of the awards and are calculated in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718 Compensation – Stock Compensation (ASC Topic 718). Assumptions used in the calculation of these awards are included in Note 18 – “Share-Based and Long-Term Incentive Plans” in the Notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the NEOs. The amounts shown in this column include RSUs and PSUs granted in 2018 and 2019. For further information regarding such equity awards, please see the “Grants of Plan-Based Awards” and “Outstanding Equity Awards at December 31, 2019” tables and related footnotes below and “2019 Long-Term Incentive Grants” in our Compensation Discussion and Analysis above. Values for the performance-based Net Sales/TSR PSUs in the table above reflect values less than the maximum potential value of the awards. With respect to the performance-based Net Sales/TSR PSUs granted in January 2018 to each of Mr. Walbert, Mr. Hoelscher, Mr. Moze, Mr. Karnani, Dr. Lee and Mr. Carey, based upon the closing price of our ordinary shares on the date of grant of $15.45 and assuming the maximum level of performance would have been achieved, the grant date fair value would have been $14,179,979; $6,089,988; $1,599,971; $1,599,971; $2,999,988 and $6,089,988, respectively. With respect to the performance-based Net Sales/TSR PSUs granted in January 2019 to each of Mr. Walbert, Mr. Hoelscher, Mr. Moze, Mr. Karnani, Dr. Lee and Mr. Carey, based upon the closing price of our ordinary shares on the date of grant of $20.39 and assuming the maximum level of performance would have been achieved, the grant date fair value would have been $7,099,961; $2,199,999; $2,199,999; $2,199,999; $2,199,999 and $2,199,999, respectively.

 

(2)

As applicable, reflects performance incentives for fiscal years 2019, 2018 and 2017 that were earned and paid in March 2020, March 2019 and March 2018, respectively, pursuant to our annual cash incentive compensation plan in effect for such fiscal year.  Pursuant to the agreement we entered into with Mr. Carey in connection with his retirement, Mr. Carey was eligible to receive his 2019 bonus award based on applicable 2019 achieved performance levels.  Pursuant to the agreement we entered into with Dr. Lin in connection with the termination of her employment, she was eligible to receive her target 2019 bonus award.  For further information please see the Compensation Discussion and Analysis above.  Amounts in full-year 2019 include the following amounts earned under our 2018 Cash Incentive Plan (2018 CIP), which were earned and paid to our NEOs in January 2019:  $1,500,000 paid to Mr. Walbert, $450,000 paid to Mr. Hoelscher, $250,000 paid to Mr. Moze, $250,000 paid to Mr. Karnani, $250,000 paid to Dr. Lin and $450,000 paid to Mr. Carey. 

 

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(3)

Amounts shown in this column include the following items: 

 

                 
    

Year

 

Life Insurance

Benefits Imputed
Income and

Additional

Exec Coverage

 

401(k)

Matching
Contributions

  Deferred
Compensation
Plan
Contributions
 

Financial Planning/

Legal Fee

Reimbursements
(including tax
gross up)

 

Personal

Travel

Expenses(a)

  Severance(b)   Total

Timothy Walbert

      2019     $ 6,005     $ 11,200     $ 125,399     $ 26,930     $ 57,337     $     $ 226,871
      2018     $ 342     $ 11,000     $ 89,756     $ 26,930     $ 32,335     $     $ 160,363
      2017     $ 342     $ 10,800     $ 82,259     $ 28,145     $ 19,493     $     $ 141,039

Paul W. Hoelscher

      2019     $ 6,048     $ 11,200     $ 45,379     $ 20,653     $ 36,855     $     $ 120,135
      2018     $ 342     $ 11,000     $ 35,314     $ 24,237     $ 33,439     $     $ 104,332
      2017     $ 342     $ 10,800     $ 32,437     $ 15,009     $ 10,747     $     $ 69,335

Barry J. Moze

      2019     $ 7,855     $ 8,148     $     $ 17,953     $ 24,788     $     $ 58,744
      2018     $ 342     $     $ 13,368     $ 14,144     $ 7,260     $     $ 35,114
      2017     $ 342     $ 10,800     $ 34,714     $ 15,009     $ 10,810     $     $ 71,675

Vikram Karnani

      2019     $ 3,842     $ 11,200     $ 39,178     $ 17,953     $ 23,048     $     $ 95,222
      2018     $ 285     $ 11,000     $ 32,333     $ 14,144     $ 10,500     $     $ 68,263
      2017     $ 314     $ 10,623     $ 7,341     $ 15,009     $ 14,386     $     $ 47,672

Shao-Lee Lin, M.D., Ph.D.(4)

      2019     $ 5,273     $ 11,200     $ 79,979     $ 26,930     $ 13,843     $     $ 137,225
      2018     $ 342     $ 8,563     $ 21,875     $ 29,936     $ 1,999     $     $ 62,715

Robert F. Carey(7)

      2019     $ 4,349     $ 11,200     $ 38,191     $ 26,930     $ 28,910     $ 142,957     $ 252,537
      2018     $ 342     $ 11,000     $ 34,030     $ 26,930     $ 1,818     $     $ 74,120
      2017     $ 342     $ 10,800     $ 31,770     $ 27,387     $ 11,414     $     $ 81,713

 

  (a)

Represents travel and/or other miscellaneous expenses and related tax gross ups which do not meet the strict eligibility requirements to be treated as a non-taxable business expense reimbursement in accordance with applicable tax guidelines. 

 

  (b)

Represents $140,569 in base salary continuation payments made to Mr. Carey in 2019, and $2,388 value of COBRA premiums paid on behalf of Mr. Carey in 2019 pursuant to the agreement we entered into with Mr. Carey in connection with his retirement on October 1, 2019.  For further information, see the “Compensation Discussion and Analysis” above. 

 

(4)

Dr. Lin joined Horizon in January 2018 and her employment was terminated effective January 23, 2020. 

 

(5)

Represents a sign-on cash bonus of $140,000 paid to Dr. Lin in January 2019 in connection with her continued service through such date. 

 

(6)

Represents a sign-on cash bonus of $600,000 paid to Dr. Lin in January 2018. 

 

(7)

Mr. Carey retired effective October 1, 2019. 

 

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Grants of Plan-Based Awards

The following table sets forth certain information regarding grants of non-equity incentive plan and equity incentive plan-based awards to our NEOs for 2019: 

 

             

Estimated Future Payouts Under

Non-Equity Incentive Plan Awards ($)

  

All Other

Stock Awards: 

Number of

Shares
of Stock

or Units

 

Grant Date Fair  

Value of Stock  

and Option  
Awards  

Name

   Award Type    Grant Date   Threshold    Target   Maximum    (#)   ($)(1)  

Timothy Walbert

       Annual Cash        N/A     $ 905,625      $ 1,275,006 (2)      $ 2,550,011         
       RSU        1/4/2019                     174,104 (8)      $ 3,549,981     
       PSU        1/4/2019                     174,104 (9)      $ 4,003,877
       PSU        5/2/2019                     60,995 (10)      $ 1,585,260

Paul W. Hoelscher

       Annual Cash        N/A     $ 261,337      $ 348,449 (3)      $ 696,897         
       RSU        1/4/2019                     53,948 (8)      $ 1,100,000
       PSU        1/4/2019                     53,948 (9)      $ 1,240,639
       PSU        5/2/2019                     16,669 (10)      $ 433,227

Barry J. Moze

       Annual Cash        N/A     $ 273,690      $ 364,921 (4)      $ 729,841         
       RSU        1/4/2019                     73,948 (8)      $ 1,507,800
       PSU        1/4/2019                     53,948 (9)      $ 1,240,639
       PSU        5/2/2019                     17,459 (10)      $ 453,759

Vikram Karnani

       Annual Cash        N/A     $ 236,488      $ 315,317 (5)      $ 630,634         
       RSU        1/4/2019                     53,948 (8)      $ 1,100,000
       PSU        1/4/2019                     53,948 (9)      $ 1,240,639
       PSU        5/2/2019                     14,713 (10)      $ 382,391

Shao-Lee Lin, M.D., Ph.D.(11)

       Annual Cash        N/A     $ 289,688      $ 386,250 (6)      $ 772,500         
       RSU        1/4/2019                     53,948 (8)      $ 1,100,000
       PSU        1/4/2019                     53,948 (9)      $ 1,240,639
       PSU        5/2/2019                     18,391 (10)      $ 477,982

Robert F. Carey(12)

       Annual Cash        N/A     $ 251,833      $ 335,778 (7)      $ 671,556         
       RSU        1/4/2019                     53,948 (8)      $ 1,100,000
       PSU        1/4/2019                     53,948 (9)      $ 1,240,639
       PSU        5/2/2019                     16,061 (10)      $ 417,425

 

(1)

Amounts shown in this column do not reflect dollar amounts actually received by our NEOs.  Instead, these amounts reflect the grant date fair value of such awards and are calculated in accordance with the provisions of ASC Topic 718.  Assumptions used in the calculation of these amounts and further information on our stock options, RSUs, PSUs and Cash LTIP are included in Note 18 – “Share-Based and Long-Term Incentive Plans” in the Notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.  These amounts do not necessarily correspond to the actual value realized or that may be realized by the NEOs. 

 

(2)

Mr. Walbert’s target bonus for 2019 was $1,275,006, or 115% of his base salary as of December 31, 2019, pro-rated for salary change that took effect March 1, 2019.  In February 2020, the Compensation Committee approved Mr. Walbert’s bonus in the amount of $1,898,483, or 148.9% of his target bonus, which was paid in March 2020. 

 

(3)

Mr. Hoelscher’s target bonus for 2019 was $348,449, or 60% of his base salary as of December 31, 2019, pro-rated for salary change that took effect March 1, 2019.  In February 2020, the Compensation Committee approved Mr. Hoelscher’s bonus in the amount of $518,840, or 148.9% of his target bonus, which was paid in March 2020. 

 

(4)

Mr. Moze’s target bonus for 2019 was $364,921, or 60% of his base salary as of December 31, 2019, pro-rated for salary change that took effect March 1, 2019.  In February 2020, the Compensation Committee approved Mr. Moze’s bonus in the amount of $543,367, or 148.9% of his target bonus, which was paid in March 2020. 

 

(5)

Mr. Karnani’s target bonus for 2019 was $315,317, or 60% of his base salary as of December 31, 2019, pro-rated for salary change that took effect March 1, 2019.  In February 2020, the Compensation Committee approved Mr. Karnani’s bonus in the amount of $469,507, or 148.9% of his target bonus, which was paid in March 2020. 

 

(6)

Dr. Lin’s target bonus for 2019 was $386,250, or 60% of her base salary as of December 31, 2019.  Pursuant to the agreement we entered into with Dr. Lin in connection with the termination of her employment, Dr. Lin was eligible to receive her target 2019 bonus award. 

 

(7)

Mr. Carey’s target bonus for 2019 was $335,778, or 60% of his base salary as of December 31, 2019, pro-rated for salary change that took effect March 1, 2019.  Pursuant to the agreement we entered into with Mr. Carey in connection with his retirement, Mr. Carey was eligible to receive his 2019 bonus award based on applicable 2019 achieved performance levels.  In February 2020, the Compensation Committee approved Mr. Carey’s bonus in the amount of $499,973, or 148.9% of his target bonus, which was paid in March 2020. 

 

(8)

The RSUs vest in three equal annual installments following the grant date.

 

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(9)

The Net Sales/TSR PSU award is divided into two components. 70% of the award is determined by the 2019 net sales of our orphan business unit and the 2019 net sales of KRYSTEXXA.  These shares vest in three equal annual installments from the grant date and are released after financial results are released by the Board.  The Board certified the financial results and performance at 119.2% for the Net Sales/TSR PSU award on February 19, 2020, and the first tranche of this award was released on that date.  The second tranche will vest on January 5, 2021 and the third tranche will vest on January 5, 2022, subject to the executive’s continued service.  The remaining 30% of the award is determined by our relative TSR performance over a three-year period ending December 31, 2021, as measured against the components of the NBI.  These shares vest in full on January 5, 2022 subject to the executive’s continued service. 

 

(10)

As part of the 2019 PSU awards, Teprotumumab PSUs were awarded to the entire employee population in January 2019, including the NEOs, contingent upon shareholder approval at the 2019 Annual Meeting of Shareholders of the proposed amendment to add shares to the Amended 2014 Equity Incentive Plan, which was subsequently approved on May 2, 2019.  Vesting of the Teprotumumab PSUs was contingent upon 1) receiving FDA approval of teprotumumab no later than September 30, 2020, and 2) continued service through the approval date.  If FDA approval was attained on or prior to that date, one-third of the Teprotumumab PSUs would vest on the FDA approval date and one-third would vest on each of the first two anniversaries of the FDA approval date, subject to continued service through the applicable vesting dates.  The FDA approval of TEPEZZA (teprotumumab-trbw) was obtained on January 21, 2020, and the first tranche of this award was released on that date.  The second tranche will vest on January 21, 2021, and the final tranche will vest on January 21, 2022, subject to the NEO’s continued service through the applicable vesting dates.  Further information on the Teprotumumab PSUs are further described in the Compensation Discussion and Analysis above. 

 

(11)

Pursuant to the agreement we entered into with Dr. Lin in connection with the termination of her employment, her severance benefits included 12 months’ vesting acceleration of all of her time-based vesting options and RSUs.  Dr. Lin forfeited her then-remaining unvested options, RSUs and unvested PSUs on such termination date as further described in the Compensation Discussion and Analysis above. 

 

(12)

In connection with his retirement on October 1, 2019, and in exchange for a release of claims, we agreed to provide severance benefits to Mr. Carey which included continued vesting of his previously granted RSUs and PSUs (contingent upon meeting the pre-established performance goals), including the Net Sales/TSR PSUs and Teprotumumab PSUs as further described in the Compensation Discussion and Analysis above. 

Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table

Employment Agreements.  Each of our NEOs has entered into a written employment agreement with us that provides for payment of base salary, target annual cash incentive compensation, eligibility for employee benefit programs and potential severance benefits.  Following the retirement of Robert Carey on October 1, 2019, he ceased to be eligible for benefits under his employment agreement, except for the severance benefits described below.  For further information regarding the base salaries, bonuses and incentive compensation payable to our NEOs and their eligibility for our employee benefit programs, please see our “Compensation Discussion and Analysis” above.  For further information regarding the severance benefits provided under the employment agreements, please see “Potential Payments Upon Termination or Change-in-Control” below. 

In connection with Mr. Carey’s retirement, and in exchange for a release of claims, we agreed to provide severance benefits to Mr. Carey consisting of (i) 15 months’ base salary continuation and continuation of health benefits, (ii) continued eligibility for his annual 2019 cash bonus based on performance against the pre-established goals, (iii) an amendment to his existing stock options to extend the permitted exercise period through the maximum term of the options, (iv) continued vesting of his previously granted RSUs and PSUs (contingent upon meeting the pre-established performance goals), including the Net Sales/TSR PSUs and Teprotumumab PSUs as further described in our Compensation Discussion and Analysis above and (v) continued vesting and payment of his existing cash long-term incentive plan awards as further described in our Compensation Discussion and Analysis above. 

Equity Awards.  We have granted equity awards to our NEOs under our 2014 EIP.  For further information regarding such equity awards, including the vesting schedules, please see the “Grants of Plan-Based Awards” table and related footnotes above and “2019 Long-Term Incentive Grants” in our Compensation Discussion and Analysis above. 

Option Repricings.  Under the terms of our 2014 EIP, option repricing is not permitted without prior shareholder approval, and we did not engage in any repricings or other modifications to any of our NEOs’ outstanding equity awards during the year ended December 31, 2019, except the continued vesting benefits provided to Mr. Carey in connection with his retirement as described above. 

Salary and Annual Incentive Bonus Compared to Total Compensation.  The ratio of salary and annual incentive bonus to total compensation in 2019 (each as set forth in the “Summary Compensation Table” above) is set forth below for each NEO.  For clarity, the annual incentive bonus amounts used to determine the ratios below exclude amounts earned under our 2018 CIP. 

 

   

Timothy Walbert, 21.7%

 

   

Paul W. Hoelscher, 24.7%

 

   

Barry J. Moze, 24.7%

 

   

Vikram Karnani, 24.5%

 

   

Shao-Lee Lin, M.D., Ph.D., 23.5%(1)

 

   

Robert F. Carey, 21.0%(2)

 

  (1)

Dr. Lin’s employment was terminated effective January 23, 2020. 

 

  (2)

Mr. Carey retired effective October 1, 2019. 

 

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Pay Ratio

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), and Item 402(u) of Regulation S-K, we are providing the following information about the ratio of the annual total compensation of our principal executive officer to the total annual compensation of our median employee.  The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. 

The purpose of this disclosure is to provide a measure of the equitability of pay within Horizon.  We believe our compensation philosophy and process yield an equitable result for all of our employees.  During fiscal 2019, the principal executive officer of Horizon was our chairman, president and chief executive officer, Mr. Walbert. 

For 2019: 

 

   

The annual total compensation for Mr. Walbert was $13,873,172. 

 

   

The annual total compensation for our median employee was $250,565. 

 

   

This results in an estimated pay ratio of 55:1. 

Consistent with our prior year pay ratio disclosure, to identify our median compensated employee for 2019 we estimated all employees’ compensation as of October 31, 2019 (the median employee determination date).  For each employee, we aggregated:  (A) base salary as of October 31, 2019, (B) the target bonus for 2019 and (C) the estimated accounting value of any equity awards granted during 2019, and ranked this compensation measure for our employees from lowest to highest.  Amounts paid in foreign currencies were converted to U.S. Dollars based on the average annual exchange rate as of the median employee determination date.  This calculation was performed for all employees, except as identified below and excluding Mr. Walbert, whether employed on a full-time, part-time or seasonal basis. 

For purposes of this disclosure, all Canadian employees, totaling seven individuals, were excluded from the employee population pursuant to the de minimis exemption, which permits us to exclude foreign employees, up to 5% of our total employee population, on a whole-country basis.  As of October 31, 2019, we had 1,092 U.S. employees (excluding our CEO) and 98 non-U.S. employees, irrespective of the de minimis exemption.  Applying the de minimis exemption, the total number of U.S. employees totaled 1,092, and the number of non-U.S. employees totaled 91. 

The pay ratio reported above is a reasonable estimate calculated in a manner consistent with the SEC rules and based on our internal records and the methodology described above.  Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio for us reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. 

 

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Outstanding Equity Awards at December 31, 2019

The following table sets forth certain information regarding outstanding stock options, RSUs and PSUs held by our NEOs on December 31, 2019. 

 

          Option Awards     Stock Awards  
  Name  

Award

Grant Date

   

Number of

Securities

Underlying

Unexercised

Options

Exercisable

(#)

   

Number of

Securities

Underlying

Unexercised

Options

Unexercisable

(#)

   

Option

Exercise

Price ($)

   

Option

Expiration

Date

   

Number of

Shares or

Units of

Stock that

Have Not

Vested (#)

   

Market

Value of

Stock that

Has Not

Vested ($)(1)

   

Number of

Units of

Stock that

are

Unearned

and Have

Not Vested

(#)

   

Market Value

of Unearned

Stock that Has

Not Vested ($)(1)

 

  Timothy Walbert

    3/23/2015       1,050,000       (2)    $ 22.14       3/22/2025          
    5/6/2015       1,650,000       (2)    $ 28.53       5/5/2025          
    1/5/2018               305,933 (5)    $ 11,074,775      
    1/5/2018                   389,355 (6)    $ 14,094,651  
    1/4/2019               174,104 (5)    $ 6,302,565      
    1/4/2019                   174,104 (9)    $ 6,302,565  
    5/2/2019                   60,995 (10)    $ 2,208,019  
   

 

 

   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 
      2,700,000                 480,037     $  17,377,339       624,454     $     22,605,235  

  Paul W. Hoelscher

    6/27/2014       64,940       (2)    $ 15.96       6/26/2024          
    3/23/2015       271,484       (2)    $ 22.14       3/22/2025          
    1/5/2018               131,392 (5)    $ 4,756,390      
    1/5/2018                   173,877 (6)    $ 6,294,347  
    1/4/2019               53,948 (5)    $ 1,952,918      
    1/4/2019                   53,948 (9)    $ 1,952,918  
    5/2/2019                   16,669 (10)    $ 603,418  
   

 

 

   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 
      336,424                 185,340     $ 6,709,308       244,494     $ 8,850,683  

  Barry J. Moze

    6/16/2010       2,106       (7)    $ 12.94       6/15/2020          
    6/6/2014       72,300       (8)    $ 14.48       6/5/2024          
    1/10/2014       10,000       (4)    $ 8.50       6/27/2024          
    9/12/2014       17,700       (2)    $ 11.81       9/11/2024          
    3/23/2015       173,000       (2)    $ 22.14       3/22/2025          
    1/5/2018               34,520 (5)    $ 1,249,624      
    1/5/2018                   53,561 (6)    $ 1,938,908  
    1/4/2019               73,948 (5)    $ 2,676,918      
    1/4/2019                   53,948 (9)    $ 1,952,918  
    5/2/2019                   17,459 (10)    $ 632,016  
   

 

 

   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 
      275,106                 108,468     $ 3,926,542       124,968     $ 4,523,842  

  Vikram Karnani

    8/8/2014       25,600       (2)    $ 9.23       7/30/2024          
    3/23/2015       84,000       (2)    $ 22.14       3/22/2025          
    1/5/2018               34,520 (5)    $ 1,249,624      
    1/5/2018                   53,561 (6)    $ 1,938,908  
    1/4/2019               53,948 (5)    $ 1,952,918      
    1/4/2019                   53,948 (9)    $ 1,952,918  
    5/2/2019                   14,713 (10)    $ 532,611  
   

 

 

   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 
      109,600                 88,468     $ 3,202,542       122,222     $ 4,424,436  

  Shao-Lee Lin, M.D., Ph.D.(11)

    1/4/2018       70,286       76,399 (2)    $ 15.37       1/4/2028       53,676 (3)    $ 1,943,071      
    1/5/2018               64,725 (5)    $ 2,343,045      
    1/5/2018                   100,432 (6)    $ 3,635,638  
    1/4/2019               53,948 (5)    $ 1,952,918      
    1/4/2019                   53,948 (9)    $ 1,952,918  
    5/2/2019                   18,391 (10)    $ 665,754  
   

 

 

   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 
      70,286       76,399           172,349     $ 6,239,034       172,771     $ 6,254,310  

  Robert F. Carey(12)

    3/5/2014       140,000       (2)    $ 13.34       3/4/2024          
    3/5/2014       100,000       (7)    $ 13.34       3/4/2024          
    3/23/2015       276,000       (2)    $ 22.14       3/22/2025          
    1/5/2018               131,392 (5)    $ 4,756,390      
    1/5/2018                   203,877 (6)    $ 7,380,347  
    1/4/2019               53,948 (5)    $ 1,952,918      
    1/4/2019                   53,948 (9)    $ 1,952,918  
    5/2/2019                   16,061 (10)    $ 581,408  
   

 

 

   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 
      516,000                 185,340     $ 6,709,308       273,886     $ 9,914,673  

 

(1)

The market value of stock awards that have not vested is based on the closing share price of our ordinary shares of $36.20 per share on December 31, 2019.

 

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(2)

1/4th of the shares vest one year after the vesting commencement date, which is the same date as the grant date, and 1/48th of the shares vest monthly thereafter over the next three years. 

 

(3)

RSUs vest in four equal annual installments following the grant date. 

 

(4)

1/48th of the shares vest in equal monthly installments over the four years following the vesting commencement date, which is the grant date. 

 

(5)

RSUs vest in three equal annual installments following the grant date. 

 

(6)

The 2018 PSU award is divided into two components:  70% of the award was determined by the net sales for each of our business units in 2018.  These shares vest in three equal annual installments from the grant date, and are released after financial results are certified by the Board.  The Compensation Committee certified the financial results on February 20, 2019, and the first tranche of this component of the award was released.  The second tranche of this award component vested on January 5, 2020 and the third tranche will vest on January 5, 2021, subject to the executive’s continued service.  The remaining 30% of the award is determined by our relative TSR performance over a three-year period ending December 31, 2020, as measured against the components of the NBI.  These shares vest in full on January 1, 2021. 

 

(7)

The shares vested in 12 equal monthly installments from the grant date. 

 

(8)

1/4th of the shares vested on May 19, 2015 and the remaining shares vested in 36 equal monthly installments thereafter. 

 

(9)

The 2019 Net Sales/TSR PSU award is divided into two components:  70% of the award is determined by the net sales for KRYSTEXXA and the Orphan business unit in 2019.  These shares vest in three equal annual installments from the January 5, 2019, and are released after financial results are certified by the Board.  The Compensation Committee certified the financial results on February 19, 2020, and the first tranche of this component of the award was released.  The second tranche of this award component will vest on January 5, 2021 and the third tranche will vest on January 5, 2022, subject to the executive’s continued service.  The remaining 30% of the award is determined by our relative TSR performance over a three-year period ending December 31, 2021, as measured against the components of the NBI.  These shares vest in full on January 1, 2022. 

 

(10)

As part of the 2019 PSU awards, Teprotumumab PSUs were granted to the entire employee population in January 2019, including the NEOs.  Vesting of the Teprotumumab PSUs was contingent upon 1) receiving FDA approval of teprotumumab no later than September 30, 2020, and 2) continued service through the approval date.  If FDA approval was attained on or prior to that date, one-third of the Teprotumumab PSUs would vest on the FDA approval date and one-third would vest on each of the first two anniversaries of the FDA approval date, subject to continued service through the applicable vesting dates.  The FDA approval of TEPEZZA (teprotumumab-trbw) was obtained on January 21, 2020, and the first tranche of this award was released on that date.  The second tranche will vest on January 21, 2021 and the final tranche will vest on January 21, 2022, subject to the NEO’s continued service through the applicable vesting dates.  Further information on the Teprotumumab PSUs are further described in the Compensation Discussion and Analysis above. 

 

(11)

Pursuant to the agreement we entered into with Dr. Lin in connection with the termination of her employment on January 23, 2020, we agreed to provide severance benefits to Dr. Lin, which included 12 months’ continued vesting of her time-based vesting options and RSUs, and she forfeited her then remaining unvested options, RSUs and PSUs on such date as further described in the Compensation Discussion and Analysis above. 

 

(12)

Pursuant to the agreement we entered into with Mr. Carey in connection with his retirement on October 1, 2019, we agreed to provide severance benefits to Mr. Carey, which included continued vesting of his previously granted RSUs and PSUs (contingent upon meeting the pre-established performance goals), including the Net Sales/TSR PSUs and Teprotumumab PSUs as further described in the Compensation Discussion and Analysis above. 

 

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Option Exercises and Stock Vested

The following table sets forth certain information regarding options exercised and stock vested for our NEOs for the fiscal year ended December 31, 2019. 

 

     Option Awards      Stock Awards  

Name

  

Number of

Shares

Acquired on
Exercise (#)

    

Value

Realized on
Exercise ($)

    

Number of

Shares

Acquired on
Vesting (#)

    

Value

Realized on
Vesting ($)(1)

 

Timothy Walbert

     311,869      $ 6,922,824        152,966 (2)     $ 3,118,977  
           168,521 (3)     $ 3,629,942  
           125,000 (4)     $ 3,355,000  

Paul W. Hoelscher

     29,576      $ 318,722        65,695 (2)     $ 1,339,521  
           72,375 (3)     $ 1,558,958  
           31,000 (4)     $ 832,040  

Barry J. Moze

                   17,259 (2)     $ 351,911  
           19,014 (3)     $ 409,562  
           19,250 (4)     $ 516,670  

Vikram Karnani

           17,259 (2)     $ 351,911  
           19,014 (3)     $ 409,562  
           9,500 (4)     $ 254,980  

Shao-Lee Lin, M.D., Ph.D.(6)

                   17,891 (5)     $ 364,797  
           32,362 (2)     $ 659,861  
           35,652 (3)     $ 767,944  

Robert F. Carey(7)

                   65,695 (2)     $ 1,339,521  
           72,375 (3)     $ 1,558,958  
           31,000 (4)     $ 832,040  

 

(1)

Amount realized upon vesting of stock awards was calculated by multiplying the closing price on the vesting date by the number of shares vested.  The Company has withheld from the issuance of shares in settlement of the vesting of the stock awards a number of shares with a value equal to the applicable withholding taxes.

 

(2)

Represents RSUs granted on January 5, 2019, vesting over three annual installments.

 

(3)

Represents PSUs granted on January 5, 2018, certified by the BOD and vested on February 20, 2019.  The remaining outstanding awards will vest in equal annual installments on January 5, 2020 and January 5, 2021.

 

(4)

Represents RSUs granted on March 23, 2015, vesting over four annual installments.

 

(5)

Represents RSUs granted on January 4, 2018, vesting over four annual installments.

 

(6)

Dr. Lin’s employment was terminated effective January 23, 2020.

 

(7)

Mr. Carey retired on October 1, 2019.

 

Pension Benefits

None of our NEOs participate in or have account balances in qualified or nonqualified defined benefit plans sponsored by us.  The Compensation Committee may elect to adopt qualified or nonqualified defined benefit plans in the future if it determines that doing so is in our best interests. 

 

Nonqualified Deferred Compensation

Pursuant to the Deferred Compensation Plan, each year participants may elect to defer receipt and taxation of up to 50% of their salary and up to 100% of their incentive cash compensation.  Beginning in 2017 we made matching contributions with respect to 100% of the first 3% and 50% on the next 2% of deferrals, which is the same general “safe harbor” matching contribution formula that we use for our 401(k) plan, but not restricted by the compensation limits applicable to our 401(k) Plan.  Prior to December 1, 2018, matching contributions generally vested in equal annual installments over a five-year period measured from the participant’s original hire date.  Beginning December 1, 2018, matching contributions vest immediately provided that the participant has provided one year of service from the participant’s original date of hire.  Participants may select among phantom investment alternatives for the deemed investment of their plan accounts, which generally mirror the investment options available for our 401(k) plan.  Payments under the Deferred Compensation Plan will be distributed in the form of a lump sum payment or in up to 10 annual installments upon the participant’s termination of service or up to 10 annual installments upon a selected specified distribution date or dates made by the participant at the time of deferral.  However, if a participant’s service with us terminates prior to the selected distribution date or dates, payments will commence in connection with the termination of service.  Payments triggered upon a termination of service will generally commence in January or July of the next calendar year following a 6-month delay that follows the termination of service.  In the event of a change in control of the Company, all plan balances will generally become immediately payable within 90 days thereafter.  In addition, participants may be entitled to receive earlier payments through certain unforeseeable emergency withdrawals.  Payments scheduled to be made under the Deferred Compensation Plan may be otherwise delayed or accelerated only upon the occurrence of certain specified events that comply with the requirements of Section 409A of the IRC.

 

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We fund the expenses for administering the Deferred Compensation Plan.  We established a “rabbi trust” that holds Deferred Compensation Plan contributions and any credited earnings.  The Deferred Compensation Plan is unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974.  Accordingly, amounts held in the rabbi trust are unsecured and remain subject to claims of our general creditors in the event of our insolvency in order to avoid current income taxation to the participants. 

The following table sets forth certain information regarding the participation of our NEOs in the Deferred Compensation Plan for the fiscal year ended December 31, 2019. 

 

           

Executive

  

Executive

Contributions(1)

  

Company

Contributions(2)

  

Aggregate

Earnings(3)

  

Aggregate

Distributions

  

Aggregate

Balance at

December 31,

2019

Timothy Walbert

     $ 164,599      $ 125,399      $ 191,154      $ (32,162 )      $ 1,236,809   

Paul W. Hoelscher

     $ 55,508      $ 45,379      $ 80,661      $      $ 492,748

Barry J. Moze

     $      $      $ 4,559      $      $ 251,714

Vikram Karnani

     $ 47,867      $ 39,178      $ 29,091      $      $ 222,144

Shao-Lee Lin, M.D., Ph.D.(4)

     $ 61,132      $ 49,979      $ 18,835      $      $ 175,575

Robert F. Carey(5)

     $ 67,657      $ 38,191      $ 152,221      $      $ 748,313

 

(1)

All executive contributions are included in the “Salary” column of the 2019 Summary Compensation Table. 

 

(2)

All Company matching contributions are included in the “All Other Compensation” column of the 2019 Summary Compensation Table

 

(3)

The earnings reflected in this column represent deemed investment earnings from voluntary deferrals and Company contributions, as applicable.  The Deferred Compensation Plan does not guarantee a return on deferred amounts.  No amounts included in this column are reported in the 2019 Summary Compensation Table because the Deferred Compensation Plan does not provide for above-market or preferential earnings. 

 

(4)

Dr. Lin’s employment was terminated on January 23, 2020. 

 

(5)

Mr. Carey retired on October 1, 2019. 

 

Potential Payments Upon Termination or Change-in-Control

Involuntary Termination Severance Benefits

As provided under their amended employment agreements, each of our NEOs