DEF 14A
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12

Nektar Therapeutics

(Name of Registrant as Specified In Its Charter)

 

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

Payment of Filing Fee (Check the appropriate box):

  No fee required.
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  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

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Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

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Form, Schedule or Registration Statement No.:

 

     

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Date Filed:

 

     

 

 

 


Table of Contents

LOGO

NEKTAR THERAPEUTICS

455 Mission Bay Boulevard South

San Francisco, California 94158

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 17, 2020

AT 2:00 P.M. PACIFIC TIME

 

 

Dear Stockholder:

You are cordially invited to attend the 2020 Annual Meeting of Stockholders of Nektar Therapeutics, a Delaware corporation which will be held by live webcast only. The 2020 Annual Meeting will be held on Wednesday, June 17, 2020, at 2:00 p.m. solely by webcast for the following purposes:

 

  1.

To elect three directors with terms to expire at the 2023 Annual Meeting of Stockholders.

 

  2.

To approve an amendment of our Amended and Restated 2017 Performance Incentive Plan to increase the aggregate number of shares of common stock authorized for issuance under the plan by 10,000,000 shares.

 

  3.

To approve an amendment and restatement of our Amended and Restated Employee Stock Purchase Plan to increase the aggregate number of shares of common stock authorized for issuance under the plan by 1,000,000 shares.

 

  4.

To ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020.

 

  5.

To approve a non-binding advisory resolution regarding our executive compensation (a “say-on-pay” vote).

 

  6.

To conduct any other business properly brought before the 2020 Annual Meeting.

These items of business are more fully described in the Proxy Statement accompanying this Notice of Annual Meeting of Stockholders. The record date for the 2020 Annual Meeting is April 20, 2020. Only stockholders of record at the close of business on that date are entitled to notice of, and to vote at, the 2020 Annual Meeting or any adjournment thereof.

Due to the public health and travel concerns our stockholders may have related to the coronavirus (COVID-19) and the protocols that federal, state, and local governments may impose, we have elected to hold the Annual Meeting of Stockholders solely by means of remote communication. The webcast of the Annual Meeting will begin promptly at 2:00 p.m. Pacific Time.

To participate in the live webcast, please visit www.virtualshareholdermeeting.com/NKTR2020. You will need the control number included on your Notice, proxy card, or voting instruction form. We encourage you to access the meeting prior to the start time.

Your vote is very important. Whether or not you participate in the 2020 Annual Meeting which will be held by live webcast on the day of the meeting, it is important that your shares be represented. You may vote your proxy on the Internet, by phone or by mail in accordance with the instructions in the Notice of Availability of Proxy Materials.

On behalf of the Board of Directors, thank you for your participation in this important annual process.

By Order of the Board of Directors

/s/ Mark A. Wilson

Mark A. Wilson

Senior Vice President, General Counsel and Secretary

San Francisco, California

April 29, 2020

YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN VIA LIVE WEBCAST ON THE DAY OF THE MEETING. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE VOTE ON THE INTERNET, BY PHONE OR BY MAIL AS INSTRUCTED IN THE NOTICE OF AVAILABILITY OF PROXY 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 DURING THE LIVE WEBCAST IF YOU ATTEND THE ANNUAL 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 ANNUAL MEETING, YOU MUST OBTAIN A PROXY ISSUED IN YOUR NAME FROM THAT RECORD HOLDER.

 


Table of Contents

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING PROCEDURES

     1  

PROPOSAL 1: ELECTION OF DIRECTORS

     8  

PROPOSAL 2: APPROVAL OF AN AMENDMENT TO OUR AMENDED AND RESTATED 2017 PERFORMANCE INCENTIVE PLAN

     10  

PROPOSAL 3: APPROVAL OF AN AMENDMENT AND RESTATEMENT OF OUR AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN

     19  

PROPOSAL 4: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     24  

PROPOSAL 5: ADVISORY VOTE ON EXECUTIVE COMPENSATION

     25  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     26  

DELINQUENT SECTION 16(A) REPORTS

     28  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     29  

INFORMATION ABOUT THE BOARD OF DIRECTORS

     30  

THE BOARD OF DIRECTORS

     30  

DIRECTORS CONTINUING IN OFFICE UNTIL THE 2021 ANNUAL MEETING

     30  

DIRECTORS CONTINUING IN OFFICE UNTIL THE 2022 ANNUAL MEETING

     31  

CURRENT DIRECTORS NOMINATED FOR REELECTION TO SERVE UNTIL THE 2023 ANNUAL MEETING

     32  

MEETINGS OF THE BOARD OF DIRECTORS

     32  

CORPORATE GOVERNANCE

     33  

BOARD LEADERSHIP STRUCTURE

     33  

LEAD INDEPENDENT DIRECTOR

     33  

RISK OVERSIGHT

     33  

INDEPENDENCE OF THE BOARD OF DIRECTORS

     35  

INFORMATION REGARDING THE COMMITTEES OF THE BOARD OF DIRECTORS

     36  

STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS

     42  

CODE OF BUSINESS CONDUCT AND ETHICS

     43  

ORGANIZATION AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     43  

DIRECTOR COMPENSATION TABLE

     44  

COMPENSATION DISCUSSION AND ANALYSIS

     46  

COMPENSATION COMMITTEE REPORT

     64  

SUMMARY COMPENSATION TABLE—FISCAL 2017-2019

     65  

DESCRIPTION OF EMPLOYMENT AGREEMENTS

     66  

GRANTS OF PLAN BASED AWARDS IN 2019

     67  

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END FOR 2019

     70  

OPTION EXERCISES AND STOCK VESTED IN 2019

     72  

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL

     72  

INFORMATION ABOUT OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     77  

PRE-APPROVAL POLICIES AND PROCEDURES

     77  

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

     77  

OTHER MATTERS

     79  

ADDITIONAL INFORMATION

     79  

 


Table of Contents

LOGO

NEKTAR THERAPEUTICS

455 Mission Bay Boulevard South

San Francisco, California 94158

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 17, 2020

AT 2:00 P.M. PACIFIC TIME

 

 

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING PROCEDURES

Due to the public health and travel concerns our stockholders may have related to the coronavirus (COVID-19) and the protocols that federal, state, and local governments may impose, we have elected to hold the Annual Meeting of Stockholders solely by means of remote communication.

W HY AM I RECEIVING THESE MATERIALS ?

We sent you a Notice of Availability of Proxy Materials (the “Notice”) because the board of directors of Nektar Therapeutics, a Delaware corporation (“Nektar,” the “Company,” “we” or “us”), is soliciting your proxy to vote at our 2020 annual meeting of stockholders (the “Annual Meeting”) to be solely by live webcast on June 17, 2020 at 2:00 p.m. There will be no in-person meeting. We invite you to attend the Annual Meeting by live webcast to vote on the proposals described in this proxy statement. However, you do not need to attend the live webcast meeting to vote your shares. Instead, you may vote by proxy over the Internet or by phone by following the instructions provided in the Notice or, if you request printed copies of the proxy materials by mail, you may vote by mail. Please visit our website at www.nektar.com for updated information related to the Annual Meeting. As always, we encourage you to vote your shares prior to the Annual Meeting.

The webcast of the Annual Meeting will begin promptly at 2:00 p.m. Pacific Time. To participate in the live webcast, please visit www.virtualshareholdermeeting.com/NKTR2020. You will need the control number included on your Notice, proxy card, or voting instruction form. We encourage you to access the meeting prior to the start time.

The Notice was first sent or made available on or about April 29, 2020 to all stockholders of record entitled to vote at the Annual Meeting.

W HO CAN VOTE AT THE ANNUAL MEETING ?

Only stockholders of record at the close of business on April 20, 2020 will be entitled to vote at the Annual Meeting. On this record date, there were 177,914,327 shares of common stock outstanding and entitled to vote.

Stockholder of Record: Shares Registered in Your Name

If, on April 20, 2020, your shares were registered directly in your name with our transfer agent, Computershare Inc., then you are a stockholder of record. The Notice will be sent to you by mail directly by us. As a stockholder of record, you may vote remotely at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting remotely, we urge you to vote on the Internet or by phone as instructed in the Notice or by proxy by mail by requesting a paper copy of the proxy materials as instructed in the Notice to ensure your vote is counted.

 

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Beneficial Owner: Shares Registered in the Name of a Broker, Bank or Other Agent

If, on April 20, 2020, your shares were held in an account at a brokerage firm, bank or other agent, 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 the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker, bank or other agent on how to vote the shares in your account. Your brokerage firm, bank or other agent will not be able to vote in the election of directors unless they have your voting instructions, so it is very important that you indicate your voting instructions to the institution holding your shares.

You are also invited to attend the Annual Meeting by live webcast. However, since you are not the stockholder of record, you may not vote your shares remotely at the Annual Meeting by live webcast unless you request and obtain a valid proxy from your broker, bank or other agent.

W HAT AM I VOTING ON ?

There are five matters scheduled for a vote:

 

   

Proposal 1: To elect three directors with terms to expire at the 2023 Annual Meeting of Stockholders.

 

   

Proposal 2: To approve an amendment of our Amended and Restated 2017 Performance Incentive Plan to increase the aggregate number of shares of common stock authorized for issuance under the plan by 10,000,000 shares.

 

   

Proposal 3: To approve an amendment and restatement of our Amended and Restated Employee Stock Purchase Plan to increase the aggregate number of shares of common stock authorized for issuance under the plan by 1,000,000 shares.

 

   

Proposal 4: To ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2020.

 

   

Proposal 5: To approve a non-binding advisory resolution regarding our executive compensation (a “say-on-pay” vote).

H OW ARE PROXY MATERIALS DISTRIBUTED ?

Under rules adopted by the Securities and Exchange Commission (“SEC”), we are sending the Notice to our stockholders of record and beneficial owners as of April 20, 2020. Stockholders will have the ability to access the proxy materials, including this proxy statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, on the Internet at www.nektar.com or to request a printed or electronic set of the proxy materials at no charge. Instructions on how to access the proxy materials over the Internet and how to request a printed copy may be found on the Notice.

In addition, any stockholder may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. Choosing to receive future proxy materials by email will save us the cost of printing and mailing documents to stockholders and will reduce the impact of annual meetings on the environment. A stockholder who chooses to receive future proxy materials by email will receive an email prior to next year’s annual meeting with instructions containing a link to those materials and a link to the proxy voting website. A stockholder’s election to receive proxy materials by email will remain in effect until the stockholder terminates it.

 

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H OW DO I VOTE ?

You may either vote “For” or “Against” or abstain from voting with respect to each nominee to the board of directors. For Proposals 2, 3, 4 and 5, you may vote “For” or “Against” or abstain from voting. The procedures for voting are:

Stockholder of Record: Shares Registered in Your Name

If you are a stockholder of record as of April 20, 2020, you may vote remotely at the Annual Meeting by live webcast, vote by proxy over the Internet or by phone by following the instructions provided in the Notice or, if you request printed copies of the proxy materials by mail, you may vote by mail. If your proxy is properly executed in time to be voted at the Annual Meeting, the shares represented by the proxy will be voted in accordance with the instructions you provide. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the Annual Meeting and vote remotely if you have already voted by proxy.

 

  1.

To vote during the meeting, attend the Annual Meeting which will be held by live webcast. To attend the live meeting go to www.virtualshareholdermeeting.com/NKTR2020 on the day and time of the meeting. You will need the control number included on your Notice, proxy card, or voting instruction form. We encourage you to access the meeting prior to the start time.

 

  2.

To vote on the Internet prior to the Annual Meeting, go to www.proxyvote.com to complete an electronic proxy card. You will be asked to provide the 16-digit control number from the Notice and follow the instructions. Your vote must be received by 11:59 p.m. Eastern Time on June 16, 2020 to be counted.

  3.

To vote by phone, request a paper or email copy of the proxy materials by following the instructions on the Notice and call the number provided with the proxy materials to transmit your voting instructions. Your vote must be received by 11:59 p.m. Eastern Time on June 16, 2020 to be counted.

 

  4.

To vote by mail, request a paper copy of the proxy materials by following the instructions on the Notice and complete, sign and date the proxy card enclosed with the paper copy of the proxy materials and return it promptly in the envelope provided. If you return your signed proxy card to us before the Annual Meeting, we will vote your shares as you direct.

Beneficial Owner: Shares Registered in the Name of a Broker, Bank or Other Agent

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 and voting instructions from that organization rather than from us. Simply follow the instructions to ensure that your vote is counted. To vote by live webcast at the Annual Meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker, bank or other agent included with the Notice, or contact your broker, bank or other agent.

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.

H OW MANY VOTES DO I HAVE ?

On each matter to be voted upon, you have one vote for each share of common stock you owned as of April 20, 2020.

 

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W HAT IS THE QUORUM REQUIREMENT ?

A quorum of stockholders is necessary to take any action during the meeting (other than to adjourn the meeting). The presence, by live webcast, or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote will constitute a quorum. On April 20, 2020, there were 177,914,327 shares outstanding and entitled to vote.

Your shares will be counted towards the quorum only if you submit a valid proxy or vote during the live webcast at the Annual Meeting. Even if your valid proxy card indicates that you abstain from voting or if a broker indicates on a proxy that it lacks discretionary authority to vote your shares on a particular matter, commonly referred to as “broker non-votes,” your shares will still be counted for purposes of determining the presence of a quorum at the Annual Meeting. If there is no quorum, the chairman of the Annual Meeting or a majority of the votes present at the Annual Meeting may adjourn the Annual Meeting to another date.

W HAT IF I RETURN A PROXY CARD BUT DO NOT MAKE SPECIFIC CHOICES ?

If you are a stockholder of record and you return a proxy card without marking any voting selections, your shares will be voted:

 

  1.

Proposal 1: “For” election of the three nominees for director.

 

  2.

Proposal 2: “For” the approval of an amendment to the Amended and Restated 2017 Performance Incentive Plan to increase the aggregate number of shares of common stock authorized for issuance under the plan by 10,000,000 shares.

 

  3.

Proposal 3: “For” the approval of an amendment and restatement of our Amended and Restated Employee Stock Purchase Plan to increase the aggregate number of shares of common stock authorized for issuance under the plan by 1,000,000 shares.

 

  4.

Proposal 4: “For” the ratification of the Audit Committee’s selection of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2020.

 

  5.

Proposal 5: “For” the approval of a non-binding advisory resolution regarding our executive compensation (a “say-on-pay” vote).

If any other matter is properly presented at the meeting, your proxy (one of the individuals named on your proxy card) will vote your shares using his best judgment.

If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, your shares are held by your broker, bank or other agent as your nominee (that is, in “street name”) and you will need to obtain a proxy form from the organization that holds your shares and follow the instructions included on that form regarding how to instruct the organization to vote your shares. If you do not give instructions to your broker, bank or other agent, it can vote your shares with respect to “discretionary” items but not with respect to “non-discretionary” items. Discretionary items are proposals considered routine under the rules of various national securities exchanges, and, in the absence of your voting instructions, your broker, bank or other agent may vote your shares held in street name on such proposals. Non-discretionary items are proposals considered non-routine under the rules of various national securities exchanges, and, in the absence of your voting instructions, your broker, bank or other agent may not vote your shares held in street name on such proposals and the shares will be treated as broker non-votes. Proposals 1, 2, 3 and 5 are matters considered non-routine under the applicable rules. If you do not give your broker specific instructions, the broker will not vote your shares on Proposals 1, 2, 3, and 5 and your shares will constitute broker non-votes which will be counted for purposes of determining whether a quorum exists but will not affect the outcome of these proposals. Proposal 4 involves a matter we believe to be routine and thus if you do not give instructions to your broker, the broker may vote your shares in its discretion on Proposal 4 and therefore no broker non-votes are expected to exist in connection with Proposal 4.

 

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H OW ARE VOTES COUNTED ?

Votes will be counted by the inspector of election appointed for the Annual Meeting, with respect to Proposal 1, “For” votes, “Against” votes, abstentions and broker non-votes for each nominee, with respect to Proposal 2, 3 and 5, “For” votes, “Against” votes, abstentions and broker non-votes, and with respect to Proposal 4, “For” votes, “Against” votes and abstentions.    

W HO WILL SERVE AS INSPECTOR OF ELECTIONS ?

A representative of Broadridge Financial Solutions, Inc. will serve as the inspector of elections.

H OW MANY VOTES ARE NEEDED TO APPROVE EACH PROPOSAL ?

 

   

For Proposal 1 electing three members of the board of directors, each director must receive a “For” vote from a majority of the votes cast during the live webcast or by proxy at the Annual Meeting on the election of the director. A majority of the votes cast shall mean that the number of shares voted “For” a director’s election exceeds fifty percent (50%) of the number of the votes cast with respect to that director’s election.

 

   

For Proposal 2 approving an amendment to our Amended and Restated 2017 Performance Incentive Plan to increase the aggregate number of shares of common stock authorized for issuance under the plan, the proposal must receive a “For” vote from a majority of the votes cast either during the live webcast or by proxy at the Annual Meeting.

 

   

For Proposal 3 approving an amendment and restatement of our Amended and Restated Employee Stock Purchase Plan to increase the aggregate number of shares of common stock available for issuance under the plan. The proposal must receive a “For” vote from a majority of the votes cast either during the live webcast or by proxy at the Annual Meeting.

 

   

For Proposal 4 ratifying the Audit Committee’s selection of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2020, the proposal must receive a “For” vote from a majority of the votes cast either during the live webcast or by proxy at the Annual Meeting.

 

   

For Proposal 5 approving the resolution regarding executive compensation, the proposal must receive a “For” vote from a majority of the votes cast either during the live webcast or by proxy at the Annual Meeting.

For purposes of all proposals above, votes cast shall include any shares voted “Against” and shall exclude abstentions and, to the extent applicable, broker non-votes.

W HO IS PAYING FOR THIS PROXY SOLICITATION ?

We will pay for the entire cost of soliciting proxies. In addition to the Notice and the proxy materials, our directors and employees may also solicit proxies during the live webcast, by telephone or by other means of communication. We have retained Georgeson LLC to assist in the distribution of proxy materials and the solicitation of proxies from brokerage firms, fiduciaries, custodians, and other similar organizations representing beneficial owners of shares for the Annual Meeting. We have agreed to pay Georgeson a fee of approximately $14,795 plus customary costs and expenses for these services. We will not pay our directors and employees any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding the Notice and any other proxy materials to beneficial owners.

W HAT DOES IT MEAN IF I RECEIVE MORE THAN ONE NOTICE ?

If you receive more than one Notice, your shares are registered in more than one name or are registered in different accounts. Please vote by proxy according to each Notice to ensure that all of your shares are voted.

 

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C AN I CHANGE MY VOTE AFTER SUBMITTING MY PROXY ?

Yes, you can revoke your proxy at any time before the final vote at the Annual Meeting. If you are a stockholder of record, you may revoke your proxy in any one of three ways:

 

  1.

A duly executed proxy card with a later date or time than the previously submitted proxy;

 

  2.

A written notice that you are revoking your proxy to our Secretary, care of Nektar Therapeutics, at 455 Mission Bay Boulevard South, San Francisco, California 94158; or

 

  3.

A later-dated vote on the Internet or by phone or a ballot cast during the live webcast at the Annual Meeting (simply attending the Annual Meeting will not, by itself, revoke your proxy).

If you are a beneficial owner, you may revoke your proxy by submitting new instructions to your broker, bank or other agent, or if you have received a proxy from your broker, bank or other agent giving you the right to vote your shares at the Annual Meeting, by attending the meeting and voting during the live webcast.

W HEN ARE STOCKHOLDER PROPOSALS DUE FOR NEXT YEAR S ANNUAL MEETING ?

Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), some stockholder proposals may be eligible for inclusion in our 2021 proxy statement. Any such proposal must be submitted in writing by December 30, 2020, to our Secretary, care of Nektar Therapeutics, 455 Mission Bay Boulevard South, San Francisco, California 94158. If we change the date of our 2021 annual meeting by more than 30 days from the date of the previous year’s annual meeting, the deadline shall be a reasonable time before we begin to print and send our proxy materials. Stockholders interested in submitting such a proposal are advised to contact knowledgeable counsel with regard to the detailed requirements of the applicable securities laws and our bylaws. The submission of a stockholder proposal does not guarantee that it will be included in our proxy statement.

Alternatively, under our bylaws, if you wish to submit a proposal that is not to be included in next year’s proxy statement or nominate a director, you must provide specific information to us no earlier than March 19, 2021 and no later than the close of business on April 18, 2021. If we change the date of our 2021 annual meeting by more than 30 days from the date of the previous year’s annual meeting, the deadline shall be changed to not later than the sixtieth day prior to such annual meeting and no earlier than the close of business on the ninetieth day prior to such annual meeting. The public announcement of an adjournment or postponement of the 2021 annual meeting does not commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described in this proxy statement. You are advised to review our bylaws, which contain additional requirements with respect to advance notice of stockholder proposals and director nominees.

A stockholder’s submission must include certain specific information concerning the proposal or nominee, as the case may be, and information as to the stockholder’s ownership of our common stock. Proposals or nominations not meeting these requirements will not be entertained at any annual meeting.

In relation to stockholder proposals and nominations, in certain instances we may exercise discretionary voting authority under proxies held by the board of directors. For instance, if we do not receive a stockholder proposal by April 18, 2021, we may exercise discretionary voting authority under proxies held by the board of directors on such stockholder proposal. If we change the date of our 2021 annual meeting by more than 30 days from the date of the previous year’s annual meeting, the deadline will change to a reasonable time before we begin to print and send our proxy materials. In addition, even if we are notified of a stockholder proposal within the time requirements discussed above, if the stockholder does not comply with certain requirements of the Exchange Act, we may exercise discretionary voting authority under proxies held by the board of directors on such stockholder proposal if we include advice in our proxy statement on the nature of the matter and how we intend to exercise our discretion to vote on the matter.

 

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W HAT IS HOUSEHOLDING AND HOW DOES IT AFFECT ME ?

We have adopted a procedure approved by the SEC called “householding.” Under this procedure, stockholders who have the same address may receive only one copy of the Notice, unless one or more of these stockholders notifies us that they wish to receive individual copies of the Notice and, if requested, other proxy materials. This process potentially means extra convenience for stockholders and cost savings for companies.

If you are a beneficial owner of our common stock, once you receive notice from your broker, bank or other agent that they will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive separate Notices or other proxy materials, please notify your broker, bank or other agent, direct your written request to Nektar Therapeutics, Secretary, 455 Mission Bay Boulevard South, San Francisco, California 94158 or contact our Secretary at (415) 482-5300. Stockholders who currently receive multiple copies of the Notice or other proxy materials at their address and would like to request householding of their communications should contact their broker, bank or other agent.

H OW CAN I FIND OUT THE RESULTS OF THE VOTING AT THE ANNUAL MEETING ?

Preliminary voting results will be announced at the Annual Meeting. Final voting results will be published in a Current Report on Form 8-K filed with the SEC within four business days following the Annual Meeting.

 

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PROPOSAL 1

ELECTION OF DIRECTORS

Our board of directors is presently comprised of eight (8) directors and is divided into three (3) classes. Class III currently consists of two directors, and each of Classes I and II currently consists of three directors. Each class has a three (3) year term. The three (3) current directors in Class I are Howard W. Robin, Karin Eastham, and Myriam J. Curet, M.D., whose term expires in 2020. Each of the current directors in Class I have been nominated for reelection at the Annual Meeting. Mr. Robin was previously elected by the stockholders. Ms. Eastham was appointed to our board of directors in September 2018 and Dr. Curet was appointed to our board of directors in December 2019.    

Vacancies on the board, including vacancies created by an increase in the number of directors, are filled only by persons elected by a majority of the remaining directors. A director elected by the board to fill a vacancy in a class serves until the earliest of the end of the remaining term of that class, the election and qualification of his or her successor or such director’s death, resignation or removal.

Directors are elected by a majority of the votes cast at the Annual Meeting on the election of directors. A majority of votes cast shall mean that the number of shares voted “For” a director’s election exceeds fifty percent (50%) of the number of votes cast with respect to that director’s election, with votes cast including votes “Against” in each case but excluding abstentions and broker non-votes with respect to that director’s election. Shares represented by executed proxies by stockholders of record will be voted for the election of the three nominees named below, unless the “Against” or “Abstain” voting selection has been marked on the proxy card. Neither abstentions nor broker non-votes will have an effect on the outcome of the vote.

If any nominee becomes unavailable for election as a result of an unexpected occurrence, shares that would otherwise be voted for such nominee will be voted for the election of a substitute nominee proposed by the Nominating and Corporate Governance Committee and nominated by the board of directors. Each person nominated for election has agreed to serve if elected. Our management has no reason to believe that any nominee will be unable to serve. If elected at the Annual Meeting, each of the nominees will serve until the earliest of the 2023 annual meeting of our stockholders, the election and qualification of his or her successor or his or her death, resignation or removal.

The following is a brief biography of each nominee.

Karin Eastham

Karin Eastham , age 70, was appointed to serve as a member of our board of directors in September 2018. Ms. Eastham currently serves on the boards of directors of several life sciences companies. Ms. Eastham has served on the board of directors of Geron Corporation since March 2009, Veracyte, Inc. since December 2012, and Personalis, Inc. since November 2019. Ms. Eastham served as a member of the board of directors of Ilumina Inc. from August 2004 to May 2019, MorphoSys AG from May 2012 to May 2017, Amylin Pharmaceuticals, Inc. from September 2005 until its acquisition in August 2012, Genoptix, Inc. from July 2008 until its acquisition in March 2011, Tercica, Inc. from December 2003 until its acquisition in October 2008, and Trius Therapeutics, Inc. from February 2007 until its acquisition in September 2013. From May 2004 to September 2008, Ms. Eastham served as Executive Vice President and Chief Operating Officer, and as a member of the Board of Trustees, of the Burnham Institute for Medical Research (now Sanford Burnham Prebys Medical Discovery Institute), a non-profit corporation engaged in biomedical research. From April 1999 to May 2004, Ms. Eastham served as Senior Vice President, Chief Financial Officer and Secretary of Diversa Corporation, a biotechnology company. Ms. Eastham previously held similar positions with CombiChem, Inc., a computational chemistry company, and Cytel Corporation, a biopharmaceutical company. Ms. Eastham also held several positions, including Vice President, Finance, at Boehringer Mannheim Diagnostics, from 1976 to 1988. Ms. Eastham received a B.S. in Accounting and an M.B.A. from Indiana University and is a Certified Public Accountant.

 

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Myriam J. Curet, M.D.

Myriam J. Curet, M.D., age 63, was appointed to serve as a member of our board of directors in December 2019. Dr. Curet currently serves as the Executive Vice President and Chief Medical Officer of Intuitive Surgical, Inc. Prior to being promoted as Executive Vice President and Chief Medical Officer in November 2017, Dr. Curet served as the Chief Medical Advisor for Intuitive Surgical from December 2005 to February 2014 and as Intuitive Surgical’s Senior Vice President and Chief Medical Officer from February 2014 to November 2017. Dr. Curet also has a faculty position as Professor of Surgery at Stanford University School of Medicine. Since October 2010, she has served as a Consulting Professor of Surgery at Stanford University with a part time clinical appointment at the Palo Alto Veteran’s Administration Medical Center. She was also on the faculty at the University of New Mexico for six years prior to joining Stanford University in 2000. Dr. Curet received her M.D. from Harvard Medical School and completed her general surgery residency program at the University of Chicago and her Surgical Endoscopy fellowship at the University of New Mexico.

Howard W. Robin

Howard W. Robin, age 67, has served as our President and Chief Executive Officer since January 2007 and has served as a member of our board of directors since February 2007. Mr. Robin served as Chief Executive Officer, President and a director of Sirna Therapeutics, Inc., a biotechnology company, from July 2001 to November 2006 and from January 2001 to June 2001, served as their Chief Operating Officer, President and as a director. From 1991 to 2001, Mr. Robin was Corporate Vice President and General Manager at Berlex Laboratories, Inc. (“Berlex”), a pharmaceutical products company that is a subsidiary of Schering, AG, and from 1987 to 1991 he served as Vice President of Finance and Business Development and Chief Financial Officer. From 1984 to 1987, Mr. Robin was Director of Business Planning and Development at Berlex. He was a Senior Associate with Arthur Andersen & Co. prior to joining Berlex. He received his B.S. in Accounting and Finance from Fairleigh Dickinson University and serves as a member of its Board of Trustees.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH NAMED NOMINEE.

 

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PROPOSAL 2

APPROVAL OF AN AMENDMENT TO OUR AMENDED AND RESTATED 2017 PERFORMANCE INCENTIVE PLAN

At the Annual Meeting, our stockholders will be asked to approve an amendment to the Nektar Therapeutics Amended and Restated 2017 Performance Incentive Plan (the “2017 Plan” and as amended, the “A&R 2017 Plan”) to increase the authorized shares under the A&R 2017 Plan by 10,000,000 shares. The 2017 Plan was approved by our board of directors on March 28, 2017, subject to stockholder approval which was received on June 14, 2017, and was previously amended on June 26, 2018. Our board of directors approved the A&R 2017 Plan on March 31, 2020, subject to stockholder approval at the Annual Meeting.

Prior to the adoption of the 2017 Plan, the Company maintained the Nektar Therapeutics 2012 Plan, as amended (the “2012 Plan”), the Nektar Therapeutics 2008 Equity Incentive Plan, as amended (the “2008 Plan”), the Nektar Therapeutics 2000 Equity Incentive Plan, as amended (the “2000 Plan”), and the Nektar therapeutics 2000 Non-Officer Equity Incentive Plan, as amended (the (“2000 Non-Officer Plan”). The 2000 Non-Officer Plan together with the 2012 Plan, the 2008 Plan and 2000 Plan, are referred to as the “Prior Plans.” Following stockholder approval of the 2017 Plan, no further awards were made under the Prior Plans. As of April 1, 2020, 10,465,708 shares were subject to outstanding stock options and restricted stock units granted under the 2017 Plan and 5,038,066 shares remained available for future grants. In addition, under the terms of the 2017 Plan, the reserve pool under the 2017 Plan may be increased by shares subject to awards granted under the Prior Plans that were outstanding as of December 31, 2017 in the event that such awards expire, or for any reason are cancelled or terminated, without being exercised. As of April 1, 2020 7,219,813 shares remained subject to outstanding stock options and restricted stock units granted under the Prior Plans. If stockholders approve the amendment to the 2017 Plan, as of April 1, 2020, the number of shares available for future awards under the A&R 2017 Plan will increase by 10,000,000 shares to 14,932,121 shares.

Additional Information on Outstanding Awards and Available Shares under the 2017 Plan and the Prior Plans

The following provides additional information on the total equity compensation awards outstanding and available shares.

 

   
Shares Outstanding and Available for Grant under the 2017 Plan and the Prior Plans   As of April 1, 2020  

Total shares subject to outstanding stock options

    13,251,260  

Total shares subject to outstanding deferred restricted stock, restricted stock units, and performance restricted stock units

    4,434.261  

Weighted-average exercise price of outstanding stock options under all stock incentive plans

  $ 25.35  

Weighted-average remaining term of outstanding stock options (years)

    4.05  

Total shares available for grant under all stock incentive plans but not yet granted  (1)

    5,038,066  

(1)   Excludes shares available for purchase under the ESPP (573,266)

    

Based solely on the closing price of our common stock as reported by the NASDAQ Global Select Market on April 1, 2020 and the maximum number of shares that would have been available for awards as of such date, taking into account the proposed increase described herein, the maximum aggregate market value of the common stock that could potentially be issued under the A&R 2017 Plan is $262,506,687.

Given the limited number of shares that currently remain available under the 2017 Plan, our board of directors and management believe it is important that this amendment be approved in order to maintain the Company’s ability to grant stock-based awards to retain employees and continue to provide them with strong

 

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incentives to contribute to the Company’s future success. The Company believes that incentives and stock-based awards focus employees on the objective of creating stockholder value and promoting the success of the Company, and that incentive compensation plans like the 2017 Plan are an important attraction, retention and motivation tool for participants in the plan.

All members of the board of directors and all of the Company’s executive officers will be eligible for awards under the A&R 2017 Plan and thus have a personal interest in the approval of the amendment to the 2017 Plan.

Stockholders are requested in this Proposal 2 to approve the amendment to the 2017 Plan. Approval of the amendment to the 2017 Plan requires the affirmative vote of a majority of the votes cast, in person during the live webcast or by proxy, and entitled to vote at the Annual Meeting. Abstentions and broker non-votes, to the extent applicable, are not included in the tabulation of the voting results and therefore will not have an effect on the outcome of the vote. If stockholders do not approve this amendment, the 2017 Plan will continue in accordance with its current terms.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.

The essential features of the 2017 Plan, as proposed to be amended, are outlined below:

The principal terms of the A&R 2017 Plan are summarized below. The following summary is qualified in its entirety by the full text of the A&R 2017 Plan, which appears as Exhibit A to this proxy statement.

Summary of the A&R 2017 Plan

Purpose . The purpose of the A&R 2017 Plan is to promote the success of the Company and the interests of our stockholders by providing an additional means for us to attract, motivate, retain and reward directors, officers, employees and other eligible persons through the grant of awards. Equity-based awards are also intended to further align the interests of award recipients and our stockholders.

Administration . Our board of directors or one or more committees appointed by our board of directors will administer the A&R 2017 Plan. Our board of directors has delegated general administrative authority for the A&R 2017 Plan to the organization and compensation committee of our board of directors. The organization and compensation committee may delegate some or all of its authority with respect to the A&R 2017 Plan to another committee of directors, and certain limited authority to grant awards to employees may be delegated to one or more officers of the Company. (The appropriate acting body, be it the board of directors, a committee within its delegated authority, or an officer within his or her delegated authority, is referred to in this proposal as the “Administrator”).

The Administrator has broad authority under the A&R 2017 Plan with respect to award grants including, without limitation, the authority:

 

   

to select participants and determine the type(s) of award(s) that they are to receive;

 

   

to determine the number of shares that are to be subject to awards and the terms and conditions of awards, including the price (if any) to be paid for the shares or the award;

 

   

to cancel, modify, or waive the Company’s rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding awards, subject to any required consents;

 

   

to accelerate or extend the vesting or exercisability or extend the term of any or all outstanding awards;

 

   

subject to the other provisions of the A&R 2017 Plan, to make certain adjustments to an outstanding award and to authorize the termination, conversion, succession or substitution of an award; and

 

   

to allow the purchase price of an award or shares of the Company’s common stock to be paid in the form of cash, check, or electronic funds transfer, by the delivery of already-owned shares of the

 

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Company’s common stock or by a reduction of the number of shares deliverable pursuant to the award, by services rendered by the recipient of the award, by notice and third party payment or cashless exercise on such terms as the Administrator may authorize, or any other form permitted by law.

No Repricing. In no case (except due to an adjustment to reflect a stock split or other events referred to under “Adjustments” below, or any repricing that may be approved by stockholders) will the Administrator (1) amend an outstanding stock option or stock appreciation right to reduce the exercise price or base price of the award, (2) cancel, exchange, or surrender an outstanding stock option or stock appreciation right in exchange for cash or other awards for the purpose of repricing the award, or (3) cancel, exchange, or surrender an outstanding stock option or stock appreciation right in exchange for an option or stock appreciation right with an exercise or base price that is less than the exercise or base price of the original award.

Eligibility. Persons eligible to receive awards under the A&R 2017 Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company or any of its subsidiaries, and certain consultants and advisors to the Company or any of its subsidiaries. As of April 1, 2020, approximately 652 employees (including executive officers) and seven non-employee directors would be eligible to participate in the 2017 Plan.

Authorized Shares; Limits on Awards . Subject to the adjustment provisions included in the 2017 Plan, the maximum number of shares of the Company’s common stock initially available for issuance pursuant to awards under the 2017 Plan equaled 8,300,000 shares of the Company’s common stock (reduced by the number of shares of common stock subject to awards granted under the 2012 Plan on or after March 31, 2017 and prior to the adoption of the 2017 Plan), which was increased to 19,200,000 by stockholder approval in June 2018. The proposed amendment to the 2017 Plan would increase the available shares to 29,200,000 Shares issued in respect of any “full-value award” granted under the A&R 2017 Plan will be counted against the share limit described in the preceding sentence as 1.50 shares for every one share actually issued in connection with the award. For example, if the Company granted 100 restricted stock units under the A&R 2017 Plan, 150 shares would be charged against the share limit with respect to that award. For this purpose, a “full-value award” generally means any award granted under the plan other than a stock option or stock appreciation right.

The following other limits are also contained in the A&R 2017 Plan:

 

   

The maximum number of shares that may be delivered pursuant to options qualified as incentive stock options granted under the plan is 29,200,000.

 

   

The maximum number of shares subject to options and stock appreciation rights that are granted during any calendar year to any individual under the plan is 3,000,000 shares.

 

   

“Performance-based awards” under Section 5.2 of the A&R 2017 Plan granted to a participant in any one calendar year will not provide for payment of more than (1) in the case of awards payable only in cash and not related to shares, $5,000,000, and (2) in the case of awards related to shares (and in addition to options and stock appreciation rights which are subject to the limit referred to above), 3,000,000 shares.

 

   

The aggregate value of cash compensation and the grant date fair value (computed in accordance with generally accepted accounting principles) of shares of common stock that may be paid or granted during any calendar year to any non-employee director shall not exceed $1,200,000 for existing non-employee directors and $2,200,000 for new non-employee directors.

Except as described in the next sentence, shares that are subject to or underlie awards which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under the A&R 2017 Plan or the Prior Plans will again be available for subsequent awards under the A&R 2017 Plan (with any such shares subject to full-value awards increasing the A&R 2017 Plan’s share limit based on the full-value award ratio described above or, in the case of an award granted under a Prior Plan, the full-value award ratio set forth in such Prior Plan). Shares that are exchanged by a participant or withheld by the Company to pay

 

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the exercise price of an award granted under the A&R 2017 Plan, as well as any shares exchanged or withheld to satisfy the tax withholding obligations related to any award, will not be available for subsequent awards under the A&R 2017 Plan. To the extent that an award granted under the A&R 2017 Plan or a Prior Plan is settled in cash or a form other than shares, the shares that would have been delivered had there been no such cash or other settlement will again be available for subsequent awards under the A&R 2017 Plan (with any such shares subject to full-value awards increasing the A&R 2017 Plan’s share limit based on the full-value award ratio described above or, in the case of an award granted under a Prior Plan, the full-value award ratio set forth in such Prior Plan). In the event that shares are delivered in respect of a dividend equivalent right, the actual number of shares delivered with respect to the award shall be counted against the share limits of the A&R 2017 Plan. (For purposes of clarity, if 1,000 dividend equivalent rights are granted and outstanding when the Company pays a dividend, and 50 shares are delivered in payment of those rights with respect to that dividend, 75 shares (after adjustment for the full-value award share counting ratio described above) shall be counted against the share limits of the plan.) To the extent that shares are delivered pursuant to the exercise of a stock appreciation right or stock option, the number of underlying shares as to which the exercise related shall be counted against the applicable share limits, as opposed to only counting the shares issued. (For purposes of clarity, if a stock appreciation right relates to 100,000 shares and is exercised at a time when the payment due to the participant is 15,000 shares, 100,000 shares shall be charged against the applicable share limits with respect to such exercise.) In addition, the A&R 2017 Plan generally provides that shares issued in connection with awards that are granted by or become obligations of the Company through the assumption of awards (or in substitution for awards) in connection with an acquisition of another company will not count against the shares available for issuance under the A&R 2017 Plan. The Company may not increase the applicable share limits of the A&R 2017 Plan by repurchasing shares of common stock on the market (by using cash received through the exercise of stock options or otherwise).

Types of Awards . The A&R 2017 Plan authorizes stock options, stock appreciation rights, stock bonuses, restricted stock, performance stock, stock units, phantom stock or similar rights to purchase or acquire shares, whether at a fixed or variable price or ratio related to the common stock, upon the passage of time, the occurrence of one or more events or the satisfaction of performance criteria or other conditions, awards of any similar securities with a value derived from the value of or related to the common stock and/or returns thereon, or cash awards. The A&R 2017 Plan retains flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances. Awards granted under the A&R 2017 Plan will be subject to such terms and conditions as established by the Administrator and set forth in the underlying award agreement, including terms relating to the treatment of an award upon a termination of employment. Any award may be paid or settled in cash.

A stock option is the right to purchase shares of the Company’s common stock at a future date at a specified price per share (the “exercise price”). The per share exercise price of an option may not be less than the fair market value of a share of the Company’s common stock on the date of grant. The maximum term of an option is eight years from the date of grant. An option may either be an incentive stock option or a nonqualified stock option. Incentive stock option benefits are taxed differently from nonqualified stock options, as described under “Federal Income Tax Consequences of Awards Under the A&R 2017 Plan” below. Incentive stock options are also subject to more restrictive terms and are limited in amount by the U.S. Internal Revenue Code of 1986, as amended (the “Code”) and the A&R 2017 Plan. Incentive stock options may only be granted to employees of the Company or a subsidiary.

A stock appreciation right is the right to receive payment of an amount equal to the excess of the fair market value of share of the Company’s common stock on the date of exercise of the stock appreciation right over the base price of the stock appreciation right. The base price will be established by the Administrator at the time of grant of the stock appreciation right and may not be less than the fair market value of a share of the Company’s common stock on the date of grant. Stock appreciation rights may be granted in connection with other awards or independently. The maximum term of a stock appreciation right is eight years from the date of grant.

Performance-Based Awards . The Administrator may grant performance-based awards under the A&R 2017 Plan.    Performance-based awards are in addition to any of the other types of awards that may be granted under

 

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the A&R 2017 Plan. Performance-based awards may be in the form of restricted stock, performance stock, stock units, other rights, or cash bonus opportunities.

The vesting or payment of performance-based awards may depend on the absolute or relative performance of the Company on a consolidated, subsidiary, segment, division, or business unit basis. The Administrator will establish the criterion or criteria and target(s) on which performance will be measured.    The criteria that the Administrator may use for this purpose may include, without limitation, any one or more of the following: earnings per share; cash flow (which means cash and cash equivalents derived from either net cash flow from operations or net cash flow from operations, financing and investing activities); working capital; stock price; total stockholder return; revenue; gross profit; operating income; net earnings (before or after interest, taxes, depreciation and/or amortization); gross margin; operating margin; net margin; return on equity or on assets or on net investment; cost containment or reduction; regulatory submissions or approvals; manufacturing production; completion of strategic partnerships; research milestones; any other measure selected by the Administrator or any combination thereof.    As applicable, these terms are used as applied under generally accepted accounting principles or in the financial reporting of the Company or of its subsidiaries. The applicable performance goals may be applied on a pre- or post-tax basis and may be adjusted to include or exclude determinable components of any performance goal, including, without limitation, foreign exchange gains and losses, asset write-downs, acquisitions and divestitures, change in fiscal year, unbudgeted capital expenditures, special charges such as restructuring or impairment charges, debt refinancing costs, extraordinary or noncash items, unusual, infrequently occurring, nonrecurring or one-time events affecting the Company or its financial statements or changes in law or accounting principles.

The performance measurement period with respect to an award may range from three months to ten years. Performance-based awards may be paid in stock or in cash (in either case, subject to the limits described under the heading “Authorized Shares; Limits on Awards” above). The Administrator has discretion to determine the performance target or targets and any other restrictions or other limitations of performance-based awards and may reserve discretion to reduce payments below maximum award limits.

Dividend Equivalents; Deferrals .  The Administrator may provide for the deferred payment of awards, and may determine the other terms applicable to deferrals. The Administrator may provide that awards under the A&R 2017 Plan (other than options or stock appreciation rights), and/or deferrals, earn dividends or dividend equivalents based on the amount of dividends paid on outstanding shares of common stock, provided that as to any dividends or dividend equivalent rights granted in connection with an award granted under the A&R 2017 Plan that is subject to vesting requirements, no dividends or dividend equivalent payments will be made unless the related vesting conditions of the award are satisfied.

Award Agreements. Each award shall be evidenced by either (1) a written award agreement in a form approved by the Administrator and executed by the Company by an officer duly authorized to act on its behalf, or (2) an electronic notice of award grant in a form approved by the Administrator. The award agreement shall set forth the material terms and conditions of the award as established by the Administrator consistent with the express limitations of the A&R 2017 Plan. Notwithstanding anything in the A&R 2017 Plan to the contrary, the Administrator may approve an award agreement that, upon the termination of a participant’s employment or service, provides that, or may, in its sole discretion based on a review of all relevant facts and circumstances, otherwise take action regarding an award agreement such that (i) any or all outstanding stock options and stock appreciation rights will become exercisable in part or in full, (ii) all or a portion of the restriction or vesting period applicable to any outstanding award will lapse, (iii) all or a portion of the performance measurement period applicable to any outstanding award will lapse and (iv) the performance goals applicable to any outstanding award (if any) will be deemed to be satisfied at the target, maximum or any other interim level.

Assumption and Termination of Awards . Generally, and subject to limited exceptions set forth in the A&R 2017 Plan, upon the occurrence of a “change in control,” as defined in the A&R 2017 Plan, the Administrator may provide for the cash payment in settlement of, or for the termination, assumption, substitution or exchange

 

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of any or all outstanding awards granted under the A&R 2017 Plan. To the extent the administrator does not provide for the assumption, substitution or other continuation of the awards, then all awards then-outstanding under the A&R 2017 Plan will become fully vested or paid, as applicable, and will terminate or be terminated in such circumstances, provided that the holder of a stock option or stock appreciation right would be given reasonable advance (but no more than ten days’) notice of the impending termination and a reasonable opportunity to exercise his or her vested stock option or stock appreciation right (after giving effect to any accelerated vesting required in the circumstances) in accordance with their terms before the termination of such awards. The Administrator also has the discretion to establish other change in control provisions with respect to awards granted under the A&R 2017 Plan. For example, the Administrator could provide for the acceleration of vesting or payment of an award in connection with a change in control and provide that any such acceleration shall be automatic upon the occurrence of any such event, including a termination of employment within a limited period of time following a corporate transaction.

Transfer Restrictions . Subject to certain exceptions contained in the A&R 2017 Plan, awards under the A&R 2017 Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution and are generally exercisable, during the recipient’s lifetime, only by the recipient. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the recipient or the recipient’s beneficiary or representative. The Administrator has discretion, however, to establish written conditions and procedures for the transfer of awards to other persons or entities, provided that such transfers comply with applicable federal and state securities laws and are not made for value (other than nominal consideration, settlement of marital property rights, or for interests in an entity in which more than 50% of the voting securities are held by the award recipient or by the recipient’s family members).

Adjustments . As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the A&R 2017 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends, or other similar events that change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the stockholders.

No Limit on Other Authority . The A&R 2017 Plan does not limit the authority of the board of directors or any committee to grant awards or authorize any other compensation, with or without reference to the Company’s common stock, under any other plan or authority.

Termination of or Changes to the A&R 2017 Plan . The board of directors may amend or terminate the A&R 2017 Plan at any time and in any manner. Stockholder approval for an amendment will be required only to the extent then required by applicable law or any applicable listing agency or required under Sections 422 or 424 of the Code to preserve the intended tax consequences of the plan. Unless terminated earlier by the board of directors, the authority to grant new awards under the 2017 Plan will terminate on March 27, 2027. Outstanding awards, as well as the Administrator’s authority with respect thereto, generally will continue following the expiration or termination of the plan. Generally speaking, outstanding awards may be amended by the Administrator (except for a repricing), but the consent of the award holder is required if the amendment (or any plan amendment) materially and adversely affects the holder.

Clawback Policy. The awards under the A&R 2017 Plan are subject to the terms of the Company’s clawback policy as it may be in effect from time to time.

Federal Income Tax Consequences of Awards under the A&R 2017 Plan

The U.S. federal income tax consequences of the A&R 2017 Plan under current federal law, which is subject to change, are summarized in the following discussion of the general tax principles applicable to the A&R 2017 Plan. This summary is not intended to be exhaustive and, among other considerations, does not

 

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describe the deferred compensation provisions of Section 409A of the Code to the extent an award is subject to and does not satisfy those rules, nor does it describe state, local, or international tax consequences.

With respect to nonqualified stock options, the Company is generally entitled to deduct, except to the extent limited by Section 162(m) of the Code, and the participant recognizes taxable income in an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise. With respect to incentive stock options, the Company is generally not entitled to a deduction nor does the participant recognize income at the time of exercise, although if the participant is subject to the U.S. federal alternative minimum tax, the difference between the option exercise price and the fair market value of the shares at the time of exercise is includible for purposes of such alternative minimum tax. If the shares acquired by exercise of an incentive stock option are held for at least two years from the date the option was granted and one year from the date it was exercised, any gain or loss arising from a subsequent disposition of those shares will be taxed as long-term capital gain or loss, and the Company will not be entitled to any deduction. If, however, such shares are disposed of within the above-described period, then in the year of that disposition the participant will recognize compensation taxable as ordinary income equal to the excess of the lesser of (i) the amount realized upon that disposition and (ii) the excess of the fair market value of those shares on the date of exercise over the purchase price, and the Company will be entitled to a corresponding deduction, except to the extent limited by Section 162(m) of the Code.

The current federal income tax consequences of other awards authorized under the A&R 2017 Plan generally follow certain basic patterns: nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid (if any) only at the time the restrictions constituting a substantial risk of forfeiture lapse (unless the recipient elects to accelerate recognition as of the date of grant); bonuses, restricted stock units, stock appreciation rights, cash and stock-based performance awards, dividend equivalents, stock units, and other types of awards are generally subject to tax at the time of payment; and compensation otherwise effectively deferred is taxed when paid. In each of the foregoing cases, the Company will generally have a corresponding deduction at the time the participant recognizes income, except to the extent limited by Section 162(m) of the Code.

If an award is accelerated under the A&R 2017 Plan in connection with a “change in control” (as defined in the A&R 2017 Plan), the Company may not be permitted to deduct the portion of the compensation attributable to the acceleration (“parachute payments”) if it exceeds certain threshold limits under Section 280G of the Code (and certain related excise taxes may be triggered). Furthermore, Section 162(m) of the Code limits to $1 million the amount that a publicly held corporation is allowed each year to deduct for compensation paid to the corporation’s “covered employees.” “Covered employees” include the corporation’s chief executive officer, chief financial officer and three next most highly compensated executive officers. If an individual is determined to be a covered employee for any year beginning after December 31, 2016, then that individual will continue to be a covered employee for future years, regardless of changes in the individual’s compensation or position.

 

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New Plan Benefits

The Company has not approved any awards that are conditioned upon stockholder approval of the amendment to the 2017 Plan. The Administrator has the discretion to grant awards under the A&R 2017 Plan and, therefore, it is not possible as of the date of this proxy statement to determine future awards that will be received by the Company’s named executive officers or others under the A&R 2017 Plan. Accordingly, in lieu of providing information regarding benefits that will be received under the A&R Plan, the following table provides information concerning the benefits that were received by the following persons and groups during 2019: each named executive officer; all current executive officers, as a group; all current directors who are not executive officers, as a group; and all current employees who are not executive officers, as a group.

 

     
Name and Position   Stock Options     Restricted Stock Units  
         
     

Number of
Shares

(#)

   

Average
Exercise
Price

($)

   

Number of
Units

(#)

     Dollar Value
($) (1)
 

Howard W. Robin

President and Chief Executive Officer

    379,900       21.79       188,200        4,100,859  

Gil M. Labrucherie

Senior Vice President, Chief Operating Officer and Chief Financial Officer

    322,100       20.23       155,300        3,131,971  

John Northcott

Senior Vice President and Chief Commerical Officer

    200,000       19.48       200,000        3,895,980  

Jillian B Thomsen

Senior Vice President and Chief Accounting Officer

    65,000       21.79       29,800        649,339  

Jonathan Zalevsky, Ph.D.

Chief Research and Development Officer

    313,200       20.18       155,300        3,131,971  
All executive officers (5 persons)     1,280,200       20.64 (2)         728,600        14,910,121 (3)    
All non-executive directors (7 persons other than Mr. Robin)     101,400       19.49 (2)         50,700        988,138 (3)    
All employees (other than current executive officers) (approximately 647 persons)*     460,193       25.78 (2)         2,409,497        58,960,820 (3)    
*

As of April 1, 2020

(1)

The valuation of stock awards is based on the grant date fair value computed in accordance with FASB ASC Topic 718. For a discussion of the assumptions used in calculating these values, see Note 11 to our consolidated financial statements in our annual report on Form 10-K for the fiscal year ended December 31, 2019.

(2)

Represents the weighted average exercise price for the group.

(3)

Represents the aggregate grant date fair value for the group.

 

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Equity Compensation Plan Information

The following table presents aggregate summary information as of December 31, 2019, regarding the common stock that may be issued upon the exercise of options and rights under all of our existing equity compensation plans:

 

Plan Category

   Number of Securities
to be Issued Upon
Exercise of Outstanding

Options & Vesting of
RSUs

(a)
     Weighted-Average
Exercise Price
of Outstanding
Options
(b)
     Number of  Securities
Remaining Available for
Issuance Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column(a)
(c)
 

Equity compensation plans approved by security holders

     19,809      $ 25.24        9,145  

Equity compensation plans not approved by security holders

     8      $ 7.21         
  

 

 

    

 

 

    

 

 

 

Total

     19,817      $ 25.23        9,145  
  

 

 

       

 

 

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2 FOR APPROVAL OF THE AMENDMENT TO OUR AMENDED AND RESTATED 2017 PERFORMANCE INCENTIVE PLAN AS DESCRIBED ABOVE AND SET FORTH IN EXHIBIT A HERETO.

 

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PROPOSAL 3

APPROVAL OF AN AMENDMENT AND RESTATEMENT OF OUR AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN

In February 1994, our board of directors adopted, and our stockholders subsequently approved, our Amended and Restated Employee Stock Purchase Plan (the “Purchase Plan”). The Purchase Plan was amended and restated in May 2002, and an amended and restated version of the Purchase Plan was approved by our stockholders in June 2002. In June 2014, an amended and restated version of the Purchase Plan was approved by our stockholders. On March 31, 2020, subject to stockholder approval, our board of directors amended the Purchase Plan to increase the number of shares of common stock available for issuance under the Purchase Plan by an additional 1,000,000 shares. Our board of directors adopted this amendment in order to ensure that a sufficient reserve of shares of common stock remains available for the grant of purchase rights under the Purchase Plan at levels determined appropriate by the board of directors.

Currently, 2,500,000 shares of common stock are authorized for issuance under the Purchase Plan. As of April 1, 2020, 573,266 shares of common stock remain available for future grant under the Purchase Plan. If stockholders approve the amendment and restatement to the Purchase Plan, the maximum number of shares authorized for issuance under the Purchase Plan will increase from 2,500,000 shares to 3,500,000 shares. If approved, the additional 1,000,000 shares would bring the total number of shares currently available for grant under the Purchase Plan to 1,573,266 shares.    

The additional shares that are proposed to be reserved under the amended and restated Purchase Plan have an aggregate value of $175,800,000, based on the April 1, 2020 closing price of our common stock, as reported on the NASDAQ Global Select Market, of $17.58 per share. We believe that the proposed share reserve increase to the Purchase Plan is reasonable, appropriate, and in the best interest of our stockholders. Stockholders are requested in this Proposal 3 to approve the amendment and restatement to the Purchase Plan. The affirmative vote of the holders of a majority of the shares present during the live webcast or represented by proxy at the Annual Meeting and cast on this proposal will be required to approve the amendment and restatement to the Purchase Plan. Abstentions and broker non-votes, to the extent applicable, are not included in the tabulation of the voting results and therefore will not have an effect on the outcome of the vote.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.

The essential features of the Purchase Plan, as amended and restated (the “A&R Purchase Plan”), are outlined below:

Summary of the A&R Purchase Plan

The principal terms of the Purchase Plan, as proposed to be amended and restated, are summarized below. The following summary is qualified in its entirety by the full text of the A&R Purchase Plan, which appears as Exhibit B to this proxy statement.

Purpose. The purpose of the A&R Purchase Plan is (i) to provide a means by which our employees (and employees of any of our subsidiaries designated by the board of directors to participate in the A&R Purchase Plan) may be given an opportunity to purchase our common stock through payroll deductions, (ii) to assist us in retaining the services of our employees and secure and retain the services of new employees, and (iii) to provide incentives for such persons to exert maximum efforts for our success. All of our employees are eligible to participate in the A&R Purchase Plan provided that they satisfy the eligibility requirements described below.

The rights to purchase common stock granted under the A&R Purchase Plan are intended to qualify as options issued under an “employee stock purchase plan” as that term is defined in Section 423(b) of the Code.

 

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Administration . The board of directors will administer the A&R Purchase Plan and has the final power to construe and interpret both the A&R Purchase Plan and the rights granted under it. The board of directors has the power, subject to the provisions of the A&R Purchase Plan, to determine when and how rights to purchase common stock will be granted, the provisions of each offering of such rights (which need not be identical), and whether employees of any of our subsidiaries will be eligible to participate in the A&R Purchase Plan.

The board of directors has the power, which it has not yet exercised, to delegate administration of the A&R Purchase Plan to a committee composed of not fewer than two members of the board of directors. As used herein with respect to the A&R Purchase Plan, the “board of directors” refers to any committee the board of directors appoints and to the board of directors.

Stock Subject to Purchase Plan . Currently, a maximum of 2,500,000 shares of common stock are authorized for issuance under the Purchase Plan. If stockholders approve the amendment and restatement to the Purchase Plan, the maximum number of shares authorized for issuance under the A&R Purchase Plan will increase from 2,500,000 shares to 3,500,000 shares (an increase of 1,000,000 shares). If rights granted under the A&R Purchase Plan expire, lapse or otherwise terminate without being exercised, the shares of common stock not purchased under such rights again become available for issuance under the A&R Purchase Plan.

Offerings . The A&R Purchase Plan is implemented by offerings of rights to all eligible employees from time to time by the board of directors. The maximum length for an offering under the A&R Purchase Plan is twenty-seven months. Currently, under the Purchase Plan, each offering is twenty-four months long and is divided into four shorter “purchase periods” approximately six months long.

Eligibility . Unless otherwise determined by the board of directors in accordance with the terms of the A&R Purchase Plan, any person who is customarily employed at least twenty hours per week and five months per calendar year by us (or by any of our parent or subsidiary designated by the board of directors) on the first day of an offering is eligible to participate in that offering, provided that such employee has been continuously employed by us or the designated parent or subsidiary corporation for at least six months preceding the first day of the offering. Officers who are “highly compensated” as defined in the Code may be eligible to participate in the A&R Purchase Plan.

However, no employee is eligible to participate in the A&R Purchase Plan if, immediately after the grant of purchase rights, the employee would own, directly or indirectly, stock possessing 5% or more of the total combined voting power or value of all classes of our stock or of any parent or subsidiary (including any stock which such employee may purchase under all outstanding rights and options). In addition, no employee may purchase more than $25,000 worth of common stock (determined at the fair market value of the shares at the time such rights are granted) under all of our employee stock purchase plans and the employee stock purchase plans of any of our parent or subsidiary corporations in any calendar year.

As of April 1, 2020, approximately 652 individuals employed by the Company and participating subsidiaries are eligible to participate in the Purchase Plan.

Participation . Eligible employees enroll in the A&R Purchase Plan by delivering to us, prior to the date selected by the board of directors for the offering, an agreement authorizing payroll deductions of up to 15% of such employees’ total compensation during the offering.

Purchase Price . The purchase price per share at which shares of common stock are sold in an offering under the A&R Purchase Plan is no less than the lower of (i) 85% of the fair market value of a share of common stock on first day of the offering or (ii) 85% of the fair market value of a share of common stock on the applicable purchase dates.

Payment of Purchase Price; Payroll Deductions . The purchase price of the shares is accumulated by payroll deductions over the offering. At any time during the offering, a participant may reduce or terminate his or

 

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her payroll deductions as the board of directors provides in the offering. A participant may increase or decrease such payroll deductions after the beginning of the offering as the board of directors provides in the offering. Further, in the case of an employee who first becomes eligible to participate as of a date specified during the offering, such employee may make payroll deductions after the beginning of the offering. All payroll deductions made for a participant are credited to his or her account under the A&R Purchase Plan and deposited with our general funds. A participant may not currently make additional payments into such account.

Purchase of Stock . Upon execution of an agreement to participate in the A&R Purchase Plan by an employee, shares of common stock are automatically purchased on the employee’s behalf under the A&R Purchase Plan. In connection with offerings made under the A&R Purchase Plan, the board of directors specifies a maximum number of shares of common stock an employee may be granted the right to purchase and the maximum aggregate number of shares of common stock that may be purchased pursuant to such offering by all participants. If the aggregate number of shares to be purchased upon exercise of rights granted in the offering would exceed the maximum aggregate number of shares of common stock available, the board of directors would make a pro rata allocation of available shares in a uniform and equitable manner. Unless the employee’s participation is discontinued, his or her right to purchase shares is exercised automatically at the end of the offering at the applicable price. See “Withdrawal” below.

Withdrawal . While each participant in the A&R Purchase Plan is required to sign an agreement authorizing payroll deductions, the participant may withdraw from a given offering by terminating his or her payroll deductions and by delivering to us a notice of withdrawal from the A&R Purchase Plan. Such withdrawal may be elected at any time prior to the end of the applicable offering.

Upon any withdrawal from an offering by the employee, we will distribute to the employee his or her accumulated payroll deductions without interest, less any accumulated deductions previously applied to the purchase of shares of common stock on the employee’s behalf during such offering, and such employee’s interest in the offering will be automatically terminated. The employee is not entitled to again participate in that offering. However, an employee’s withdrawal from an offering will not have any effect upon such employee’s eligibility to participate in subsequent offerings under the A&R Purchase Plan.

Termination of Employment . Rights granted pursuant to any offering under the A&R Purchase Plan terminate immediately upon cessation of an employee’s employment for any reason, and we will distribute to such employee all of his or her accumulated payroll deductions, without interest.

Restrictions on Transfer . Rights granted under the A&R Purchase Plan are not transferable, other than by will or the laws of descent and distribution or by a beneficiary designation by the employee in the event of the employee’s death, and may be exercised only by the person to whom such rights are granted.

Adjustment . In the event of any change in the shares of common stock subject to the A&R Purchase Plan or subject to any purchase right thereunder through a transaction not involving receipt of consideration by us, such as a merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, or change in corporate structure, the A&R Purchase Plan will be appropriately adjusted in the type(s), class(es) and maximum number of shares subject to the A&R Purchase Plan and the outstanding purchase rights granted under the A&R Purchase Plan will be appropriately adjusted in the type(s), class(es), number of shares and purchase limits of such purchase rights.

Effect of Certain Corporate Transactions . In the event of a “corporate transaction,” as defined in the A&R Purchase Plan, any surviving or acquiring corporation may continue or assume rights outstanding under the A&R Purchase Plan or may substitute similar rights. If any surviving or acquiring corporation does not continue or assume such rights or substitute similar rights, then the participants’ accumulated payroll deductions will be used to purchase shares of common stock within ten days prior to the corporate transaction under the ongoing offering and the participants’ rights under the ongoing offering will terminate immediately after such purchase.

 

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Duration, Amendment, and Termination . The board of directors may suspend or terminate the A&R Purchase Plan at any time. Unless terminated earlier, the A&R Purchase Plan will terminate at the time that all of the shares of common stock reserved for issuance under the A&R Purchase Plan, as increased and/or adjusted from time to time, have been issued under the terms of the A&R Purchase Plan.

The board of directors may amend the A&R Purchase Plan at any time. Any amendment of the A&R Purchase Plan must be approved by the stockholders if the amendment is necessary for the A&R Purchase Plan to satisfy Section 423 of the Code or other applicable laws and regulations.

Rights granted before amendment or termination of the A&R Purchase Plan will not be altered or impaired by any amendment or termination of the A&R Purchase Plan without consent of the employee to whom such rights were granted.

New Plan Benefits.

No purchase rights have been granted, and no shares have been issued, on the basis of the 1,000,000 share increase, which is the subject of this proposal. Because benefits under the A&R Purchase Plan will depend on employees’ elections to participate and the fair market value of our common stock at various future dates, it is not possible to determine the benefits that will be received by executive officers and other employees if the A&R Purchase Plan is approved by the stockholders. Non-employee directors are not eligible to participate in the A&R Plan.

Federal Income Tax Information Following is a general summary of the current federal income tax principles applicable to the A&R Purchase Plan. The following summary is not intended to be exhaustive and does not describe state, local or international tax consequences.

The A&R Purchase Plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code. Participant contributions to the A&R Purchase Plan are made on an after-tax basis. That is, a participant’s A&R Purchase Plan contributions are deducted from compensation that is taxable to the participant and for which the Company is generally entitled to a tax deduction. Generally, no taxable income is recognized by a participant with respect to either the grant or exercise of his or her A&R Purchase Plan option. The Company will have no tax deduction with respect to either of those events. A participant will generally recognize income (or loss) only upon a sale or disposition of any shares that the participant acquires under the A&R Purchase Plan. The particular tax consequences of a sale of shares acquired under the A&R Purchase Plan depends on whether the participant has held the shares for a “Required Holding Period” before selling or disposing of the shares. The Required Holding Period starts on the date that the participant acquires the shares under the A&R Purchase Plan and ends on the later of (1) two years after the grant date of the offering period in which the participant acquired the shares, or (2) one year after the exercise date on which the participant acquired the shares.

If the participant holds the shares for the Required Holding Period and then sells the shares at a price in excess of the purchase price paid for the shares, the gain on the sale of the shares will be taxed as ordinary income to the participant to the extent of the lesser of (1) the amount by which the fair market value of the shares on the grant date of the offering period in which the participant acquired the shares exceeded the purchase price of the shares (calculated as though the shares had been purchased on the grant date), or (2) the gain on the sale of the shares. Any portion of the participant’s gain on the sale of the shares not taxed as ordinary income will be taxed as long-term capital gain. If the participant holds the shares for the Required Holding Period and then sells the shares at a price less than the purchase price paid for the shares, the loss on the sale will be treated as a long-term capital loss to the participant. The Company will not be entitled to a tax deduction with respect to any shares held by the participant for the Required Holding Period, regardless of whether the shares are eventually sold at a gain or a loss.

 

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The participant has a “Disqualifying Disposition” if the participant disposes of the shares before the participant has held the shares for the Required Holding Period. If the participant sells the shares in a Disqualifying Disposition, the participant will realize ordinary income in an amount equal to the difference between the purchase price paid for the shares and the fair market value of the shares on the exercise date on which the participant acquired the shares, and the Company generally will be entitled to a corresponding tax deduction. In addition, if the participant makes a Disqualifying Disposition of the shares at a price in excess of the fair market value of the shares on the exercise date, the participant will realize capital gain in an amount equal to the difference between the selling price of the shares and the fair market value of the shares on the exercise date. Alternatively, if the participant makes a Disqualifying Disposition of the shares at a price less than the fair market value of the shares on the Exercise Date, the participant will realize a capital loss in an amount equal to the difference between the fair market value of the shares on the exercise date and the selling price of the shares. The Company will not be entitled to a tax deduction with respect to any capital gain realized by a participant.

Securities Underlying Awards The closing price of a share of the Company’s common stock as of April 20, 2020 was $20.11 per share.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3 TO APPROVE THE AMENDMENT AND RESTATEMENT TO OUR AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN AS DESCRIBED ABOVE AND SET FORTH IN EXHIBIT B HERETO.

 

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PROPOSAL 4

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the board of directors has selected Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020, and has further directed that management submit the selection of our independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP has audited our consolidated financial statements since our inception. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Neither our bylaws nor other governing documents or law require stockholder ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm. However, the Audit Committee is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain Ernst & Young LLP. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the committee determines that such a change would be in our best interests and our stockholders’ best interest.

The affirmative vote of the holders of a majority of the votes cast during the live webcast or by proxy at the Annual Meeting will be required to ratify the selection of Ernst & Young LLP for our fiscal year ending December 31, 2020. Abstentions are treated as shares represented during the live webcast or by proxy and entitled to vote at the Annual Meeting and, therefore, will have the effect of a vote against the ratification of Ernst & Young LLP as our independent registered public accounting firm. No broker non-votes are expected to exist in connection with this proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 4.

 

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PROPOSAL 5

ADVISORY VOTE ON EXECUTIVE COMPENSATION

The board of directors is committed to excellence in governance and is aware of the significant interest in executive compensation matters by investors and the general public.

We have designed our executive compensation program to attract, motivate, reward and retain the senior management talent required to achieve our corporate objectives and increase stockholder value. We believe that our compensation policies and procedures are centered on pay-for-performance principles and are strongly aligned with the long-term interests of our stockholders.

We urge you to carefully review the Compensation Discussion and Analysis section of this proxy statement for details on our executive compensation, including our compensation philosophy and objectives and the 2019 compensation of the named executive officers (“NEOs”) described in the section titled “Compensation Program Objectives and Philosophy.”

We are presenting this proposal, which gives you as a stockholder the opportunity to endorse or not endorse our compensation program for the NEOs by voting for or against the following resolution (a “say-on-pay” vote), as required pursuant to Section 14A of the Exchange Act:

“RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed pursuant to Item 402 of Regulation S-K promulgated by the SEC, including the Compensation Discussion and Analysis, compensation tables and related narrative discussion contained in the proxy statement for the Company’s 2020 Annual Meeting is hereby APPROVED.”

While the vote on the resolution is advisory in nature and therefore will not bind us to take any particular action, our board of directors and our Organization and Compensation Committee intend to carefully consider the stockholder vote resulting from the proposal in making future decisions regarding our compensation program.

The affirmative vote of a majority of the votes cast by holders of the shares of common stock present during the live webcast or represented by proxy at the Annual Meeting is required (on a non-binding advisory basis) for approval of this proposal. Abstentions are treated as shares represented during the live webcast or by proxy and entitled to vote at the Annual Meeting and, therefore, will have the effect of a vote against this proposal. Broker non-votes will have no effect on the outcome of the vote.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 5.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the ownership of our common stock as of April 20, 2020, by: (i) each director and nominee for director; (ii) each of our NEOs; (iii) all of our executive officers and directors as a group; and (iv) all those known by us to be beneficial owners of more than five percent of our common stock.

Unless otherwise noted below, the address of each beneficial owner listed in the table is c/o Nektar Therapeutics, 455 Mission Bay Boulevard South, San Francisco, California 94158.

 

     Beneficial Ownership **  

Beneficial Owner

   Number of
Shares
     Percent of
Total
 

Invesco Ltd. (1)

     31,629,134        17.78

PRIMECAP Management Company (2)

     20,080,348        11.29

FMR LLC (3)

     18,698,403        10.51

BlackRock, Inc. and certain subsidiaries (4)

     18,417,535        10.35

Wellington Management Group LLP (5)

     16,198,179        9.10

The Vanguard Group (6)

     16,157,611        9.08

Jeff Ajer (7)

     82,041        *  

Robert B. Chess (8)

     444,639        *  

Myriam J. Curet, M.D. (9)

     3,900        *  

Karin Eastham (10)

     18,110        *  

R. Scott Greer (11)

     343,249        *  

Lutz Lingnau (12)

     178,366        *  

Howard W. Robin (13)

     2,152,486        1.21

Roy A. Whitfield (14)

     399,916        *  

Gil M. Labrucherie (15)

     837,104        *  

John Northcott (16)

     0        *  

Jillian B. Thomsen (17)

     471,768        *  

Jonathan Zalevsky, Ph.D. (18)

     403,708        *  

All executive officers and directors as a group (12 persons)

     5,335,287        2.99

 

*

Denotes ownership percentage less than 1%.

**

This table is based upon information supplied by officers, directors and principal stockholders and Schedules 13G filed with the SEC. Unless otherwise indicated in the footnotes to this table, and subject to community property laws where applicable, we believe that each of the stockholders named in the table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 177,914,327 shares outstanding on April 20, 2020, adjusted as required by rules promulgated by the SEC.

(1)

Based solely on the Schedule 13G/A (Amendment No. 2) filed with the SEC on February 7, 2020 by Invesco Ltd. a registered investment adviser in accordance with Rule 240.13d-1(b)(1)(ii)(E). Invesco Ltd. has the sole voting power with respect to 31,629,134 shares of our common stock and sole dispositive power with respect 31,629,134 shares of our common stock. The address of Invesco Ltd. is 1555 Peachtree Street NE, Suite 1800, Atlanta, GA 30309. Investco Advisers, Inc. is a subsidiary of Invesco Ltd. and it advises the Invesco Oppenheimer Global Opportunities Fund which owns 17.79% of the security reported herein.

(2)

Based solely on the Schedule 13G/A (Amendment No. 9) filed with the SEC on February 12, 2020 by PRIMECAP Management Company, a registered investment adviser in accordance with Rule 240.13d-1(b)(1)(ii)(E). PRIMECAP Management Company has the sole voting power with respect to 20,010,429 shares of our common stock and sole dispositive power with respect 20,080,348 shares of our common stock. The address of PRIMECAP Management Company is 177 East Colorado Blvd., 11th floor, Pasadena, CA 91105.

 

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(3)

Based solely on the Schedule 13G/A (Amendment No. 5) filed with the SEC on March 10. 2020 by FMR LLC, a parent holding company in accordance with Rule 240.13d-1(b)(1)(ii)(G). FMR LLC has the sole voting power with respect to 4,181,758 shares of our common stock and the sole dispositive power with respect to 18,698,403 shares of our common stock. The address of FMR LLC is 245 Summer Street, Boston, Massachusetts 02210.

(4)

Based solely on the Schedule 13G/A (Amendment No. 11) filed with the SEC on February 4, 2020 by BlackRock, Inc., a parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G). BlackRock, Inc. has the sole voting power with respect to 17,766,330 shares of our common stock and the sole dispositive power with respect to 18,417,535 shares of our common stock. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.

(5)

Based solely on the Schedule 13G/A (Amendment No.1) jointly filed with the SEC on February 12, 2019 by Wellington Management Group, LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP, and Wellington Management Company LLP. Wellington Management Group LLP has the shared voting power with respect to 15,900,223 shares of our common stock and the shared dispositive power with respect to 16,198,179 shares of our common stock. Wellington Group Holdings LLP has the shared voting power with respect to 15,900,223 shares of our common stock and the shared dispositive power with respect to 16,198,179 shares of our common stock. Wellington Investment Advisors Holdings LLP has the shared voting power with respect to 15,900,223 shares of our common stock and shared dispositive power with respect to 16,198,179 shares of our common stock. Wellington Management Company LLP has the shared voting power with respect to 15,692,729 shares of our common stock and shared dispositive power with respect to 15,809,703 shares of our common stock. Each of Wellington Management Group LLP, Wellington Group Holdings LLP and Wellington Investment Advisors Holdings LLP is a parent holding company or control person in accordance with Rule 240.13d-1(b)(1)(ii)(G) and Wellington Management Company LLP is an investment advisor in accordance with Rule 240.13d-1(b)(1)(ii)(E). The shares of our common stock as to which the Schedule 13G/A was filed by Wellington Management Group LLP, as parent holding company of certain holding companies, and the Wellington Investment Advisers, are owned of record by clients of the Wellington Investment Advisers. Wellington Investment Advisors Holdings LLP controls directly, or indirectly through Wellington Management Global Holdings, Ltd., the Wellington Investment Advisers. Wellington Investment Advisors Holdings LLP is owned by Wellington Group Holdings LLP. Wellington Group Holdings LLP is owned by Wellington Management Group LLP. Company LLP, Wellington Management Canada LLC, Wellington Management Singapore Pte Ltd, Wellington Management Hong Kong Ltd, Wellington Management International Ltd, Wellington Management Japan Pte Ltd and Wellington Management Australia Pty Ltd (collectively the “Wellington Investment Advisers”) are owned of record by clients of the Wellington Investment Advisers. Wellington Investment Advisors Holdings LLP controls directly or indirectly through Wellington Management Global Holdings Ltd, the Wellington Investment Advisers. Wellington Investment Advisors Holdings LLP is owned by Wellington Group Holdings LLP, Wellington Group Holdings LLP is owned by Wellington Management Group LLP. The address of Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP and Wellington Management Company LLP is c/o Wellington Management Company LLP, 280 Congress Street, Boston, MA 02210.

(6)

Based solely on the Schedule 13G/A (Amendment No. 7) filed with the SEC on February 11, 2019 by The Vanguard Group Inc., a registered investment adviser in accordance with Rule 240.13d-1(b)(1)(ii)(E). The Vanguard Group has the sole voting power with respect to 208,599 shares of our common stock, shared voting power with respect to 36,535 shares of our common stock, sole dispositive power with respect to 18,068,697 shares of our common stock and shared dispositive power with respect to 235,834 shares of our common stock. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 155,899 shares as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 132,635 shares as a result of its serving as investment manager of Australian investment offerings. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.

(7)

Includes 70,666 shares issuable upon exercise of stock options exercisable within 60 days of April 20, 2020.

 

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(8)

Includes 174,166 shares issuable upon exercise of stock options exercisable within 60 days of April 20, 2020.

(9)

Includes 3,900 shares issuable upon exercise of stock options exercisable within 60 days of April 20, 2020.

(10)

Includes 18,110 shares issuable upon exercise of stock options exercisable within 60 days of April 20, 2020.

(11)

Includes 198,166 shares issuable upon exercise of stock options exercisable within 60 days of April 20, 2020.

(12)

Includes 158,166 shares issuable upon exercise of stock options exercisable within 60 days of April 20, 2020.

(13)

Includes (i) 1,940,598 shares issuable upon exercise of stock options exercisable within 60 days of April 20, 2020, (ii) and 23,629 shares from RSU awards that are scheduled to vest and be released within 60 days of April 20, 2020 and (iii) 410 shares owned by Mr. Robin’s wife.

(14)

Includes (i) 188,166 shares issuable upon exercise of stock options exercisable within 60 days of April 20, 2020 and (ii) 20,000 shares held in trust for Mr. Whitfield’s children under which Mr. Whitfield is the sole trustee.

(15)

Includes (i) 834,395 shares issuable upon exercise of stock options exercisable within 60 days of April 20, 2020, (ii) 16,324 shares from RSU awards that are scheduled to vest and be released within 60 days of April 20, 2020, (iii) 4,218 shares issued pursuant to our Amended and Restated Employee Stock Purchase Plan and (iv) 997 shares issued pursuant to our 401(k) Retirement Plan.

(16)

Mr. Northcott was hired in December of 2019 and does not yet have shares issuable upon exercise of stock options exercisable within 60 days of April 20, 2020 and (ii) does not yet have shares from RSU awards that are scheduled to vest and be released within 60 days of April 20, 2020.

(17)

Includes (i) 409,042 shares issuable upon exercise of stock options exercisable within 60 days of April 20, 2020, (ii) 3,887 shares from RSU awards that are scheduled to vest and be released within 60 days of April 20, 2020, (iii) 988 shares pursuant to our 401(k) Retirement Plan and(iv) 4,809 shares issued pursuant to our Amended and Restated Employee Stock Purchase Plan.

(18)

Includes (i) 362,939 shares issuable upon exercise of stock options exercisable within 60 days of April 20, 2020 and (ii) 12,992 shares from RSU awards that are scheduled to vest and be released within 60 days of April 20, 2020.

D ELINQUENT S ECTION  16( A ) R EPORTS

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who beneficially own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

To our knowledge, based solely on our review of Forms 3, 4 and 5, and any amendments thereto, furnished to us or written representations that no Form 5 was required, we believe that during the fiscal year ended December 31, 2019, all filing requirements applicable to our executive officers and directors under the Exchange Act were met in a timely manner except for one Form 4 for Mr. Lingnau that was filed one day late on October 2, 2019 in connection with the sale of 3,000 shares of common stock on September 27, 2019 pursuant to a 10b5-1 trading plan.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

We review all relationships and transactions between us and (i) any of our directors or executive officers, (ii) any nominee for election as a director, (iii) any security holder who is known to us to own beneficially or of record more than five percent of our common stock or (iv) any member of the immediate family of any of the foregoing. Our legal staff is primarily responsible for the development and implementation of processes and controls to obtain information with respect to related person transactions and for then determining, based on the facts and circumstances, whether the Company or a related person has a direct or indirect material interest in the transaction. In addition, the Audit Committee reviews and approves or ratifies any related person transaction that is required to be disclosed. In the course of its review and approval or ratification of a disclosable related party transaction, the committee considers:

 

   

the nature of the related person’s interest in the transaction;

 

   

the material terms of the transaction, including, without limitation, the dollar amount and type of transaction;

 

   

the importance of the transaction to the related person;

 

   

the importance of the transaction to the Company;

 

   

whether the transaction would impair the judgment of a director or executive officer to act in the best interest of the Company; and

 

   

any other matters the committee deems appropriate.

Any member of the Audit Committee who is a related person with respect to a transaction under review may not participate in the deliberations or vote respecting approval or ratification of the transaction; however, such director may be counted in determining the presence of a quorum at a meeting where the Audit Committee reviews the transaction.

As required under SEC rules, related party transactions that are determined to be directly or indirectly material to us or the related party are disclosed in our proxy statement. Historically, we have not entered into transactions with related parties. Michael Robin, the son of Howard W. Robin, our President and Chief Executive Officer, is employed by the Company in a non-executive officer capacity as a vice-president in our project management group. During 2019, Michael Robin’s total compensation was approximately $723,778 including base salary, bonus, spot awards, RSUs and benefits. Michael Robin’s 2019 compensation is comprised of 43% equity-based compensation. Michael Robin’s compensation was established by the Company in accordance with its compensation practices applicable to employees with equivalent qualifications and responsibilities and holding similar positions, without the direct involvement of Howard W. Robin. During the 2019 fiscal year, there were no other relationships or transactions between us and any related party for which disclosure is required under the rules of the SEC.

 

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INFORMATION ABOUT THE BOARD OF DIRECTORS

The following is a brief biography of each current director, including each nominee for reelection at the Annual Meeting to a new term of office and each director whose current term of office continues through the Annual Meeting.

THE BOARD OF DIRECTORS

D IRECTORS C ONTINUING IN O FFICE U NTIL THE 2021 A NNUAL M EETING

Jeff Ajer

Jeff Ajer , age 57, was appointed to the board of directors of in September 2017. Mr. Ajer currently serves as Executive Vice President and Chief Commercial Officer at BioMarin Pharmaceutical Inc. (“BioMarin”), a global biotechnology company that develops and commercializes innovative therapies for people with serious and life-threatening rare disorders. From October 2012 to January 2014, Mr. Ajer served as Senior Vice President and Chief Commercial Officer of BioMarin. From April 2009 to October 2012, Mr. Ajer served as BioMarin’s Vice President, Commercial Operations, The Americas, where he had responsibility for commercial operations throughout the Americas and led product marketing, reimbursement, and sales operations for BioMarin. Prior to joining BioMarin, Mr. Ajer served in various roles at Genzyme Corporation (“Genzyme”) beginning in November 2003, most recently as Vice President, Global Transplant Operations from December 2004 to August 2005. Mr. Ajer’s experience prior to Genzyme includes roles in sales, marketing and operations at SangStat Medical Corporation and ICN Pharmaceuticals. Mr. Ajer also served on the board of directors of True North Therapeutics. Mr. Ajer received both a B.S. in chemistry and an M.B.A. from the University of California, Irvine.

Robert B. Chess

Robert B. Chess , age 63, is the Chairman of our board of directors and has served as a director since May 1992. From March 2006 until January 2007, Mr. Chess served as our Acting President and Chief Executive Officer, and from April 1999 to January 2007, served as Executive Chairman. He also served as our Co-Chief Executive Officer from August 1998 to April 2000, as President from December 1991 to August 1998, and as Chief Executive Officer from May 1992 to August 1998. Mr. Chess was previously the co-founder and President of Penederm, Inc., a publicly-traded dermatological pharmaceutical company that was sold to Mylan Laboratories. He has held management positions at Intel Corporation and Metaphor Computer Systems (now part of IBM), and was a member of the first President Bush’s White House staff as a White House Fellow and Associate Director of the White House Office of Economic and Domestic Policy. From 1997 until his retirement in 2009, Mr. Chess served on the board of directors of the Biotechnology Industry Organization (“BIO”). Mr. Chess served as Chairman of BIO’s Emerging Companies Section and Co-Chairman of BIO’s Intellectual Property Committee. Mr. Chess was the initial Chairman of Bio Ventures for Global Health and continues to serve on its board. He also serves on the Board of Trustees of the California Institute of Technology where he chairs the Technology Transfer Committee. Mr. Chess is the co-founder and a member of the board of directors of Biota Technology, a private company developing applications of DNA-sequencing for the energy industry, and also serves on the board of directors and is a lead director of Twist Biosciences, a publicly-traded company in the synthetic DNA production field. He is currently a member of the faculty of the Stanford Graduate School of Business, where he teaches courses in the MBA program on starting technology-based businesses and the healthcare industry. Mr. Chess received his B.S. degree in Engineering with honors from the California Institute of Technology and an M.B.A. from Harvard University.

Roy A. Whitfield

Roy A. Whitfield , age 66, has served as our director since August 2000 and as Lead Independent Director since January 2019. Mr. Whitfield is the former Chairman of the Board and Chief Executive Officer of Incyte Corporation (“Incyte”), a drug discovery and development company he co-founded in 1991. From January 1993

 

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to November 2001, Mr. Whitfield served as its Chief Executive Officer and from November 2001 until June 2003 as its Chairman. He also served as a director of Incyte from 1991 to January 2014. From 1984 to 1989, Mr. Whitfield held senior operating and business development positions with Technicon Instruments Corporation (“Technicon”), a medical instrumentation company, and its predecessor company, Cooper Biomedical, Inc., a biotechnology and medical diagnostics company. Prior to his work at Technicon, Mr. Whitfield spent seven years with the Boston Consulting Group’s international consulting practice. He currently serves as a director of Station X, Inc. a private company. Mr. Whitfield previously served as the Executive Chairman of the board of directors of Bioseek and as member of the board of directors of Illumina, Inc. Mr. Whitfield received a B.S. in mathematics from Oxford University and an M.B.A. from Stanford University.

D IRECTORS C ONTINUING IN O FFICE UNTIL THE 2022 A NNUAL M EETING

R. Scott Greer

R. Scott Greer, age 61, has served as our director since February 2010. Mr. Greer currently serves as Managing Director of Numenor Ventures, LLC, a venture capital firm. In 1996, Mr. Greer co-founded Abgenix, Inc., a company that specialized in the discovery, development and manufacture of human therapeutic antibodies, and from June 1996 through May 2002, he served as its Chief Executive Officer. He also served as a director of Abgenix from 1996 and Chairman of the board of directors from 2000 until the acquisition of Abgenix by Amgen, Inc. in April 2006. Prior to Abgenix’s formation, Mr. Greer held senior management positions at Cell Genesys, Inc., a biotechnology company, initially as Chief Financial Officer and Vice President of Corporate Development and later as Senior Vice President of Corporate Development, and various positions at Genetics Institute, Inc., a biotechnology research and development company. He currently serves as a member of the board of directors of Inogen, Inc., a medical device company that develops and markets oxygen therapy products. Mr. Greer served as a member of the board of directors of Sientra, Inc., a medical aesthetics company from 2014-2018, Versartis, Inc., an endocrine focused biopharmaceutical company from 2014-2018, Auspex Pharmaceuticals, a biopharmaceutical company developing drugs for patients with movement disorders and other rare diseases from 2014-2015, Sirna Therapeutics, Inc., a biotechnology company, from 2003, and as its Chairman of the board of directors from 2005, through the closing of the acquisition of Sirna by Merck & Co., Inc. in December 2006. From 2001 to 2005, Mr. Greer served as a member of the board of directors of Illumina, Inc., a provider of integrated systems for the analysis of genetic variation and biological function; and from 2001 to 2004, he served as member of the board of directors of CV Therapeutics, Inc., a biotechnology company. Mr. Greer also served as a member of the board of directors of StemCells, Inc., a biopharmaceutical company focused on stem cell therapeutics from 2010 to 2016 and additionally from 2010-2016 was Chairman of the board of Ablexis, an antibody technology company. Mr. Greer received a B.A. in Economics from Whitman College and an M.B.A. degree from Harvard University. He also was a certified public accountant.

Lutz Lingnau

Lutz Lingnau , age 77, has served as our director since August 2007. Mr. Lingnau retired from Schering AG Group, Germany, in December 2005 as a member of Schering AG’s Executive Board and as Vice Chairman, President and Chief Executive Officer of Schering Berlin, Inc., a United States subsidiary. Prior to his retirement, Mr. Lingnau was responsible for Schering AG’s worldwide specialized therapeutics and dermatology businesses. He joined Schering AG’s business trainee program in 1966. Throughout his career at Schering AG, he served in various capacities and in a number of subsidiaries in South America and the United States, including his roles as President of Berlex Laboratories, Inc., from 1983 to 1985, as the Head of Worldwide Sales and Marketing in the Pharmaceutical Division of Schering AG, from 1985 to 1989, and as Chairman of Berlex Laboratories, Inc. from 1985 to 2005. Mr. Lingnau was a member of the Supervisory Board of LANXESS AG, a specialty chemicals company listed on the Frankfurt Stock Exchange from 2005 to May 2010. From December 2006 through September 2009, he served as Chairman of the board of directors of Micropharma Limited, a private biotechnology company, and was a member of the board of directors of Sirna Therapeutics, Inc., a biotechnology company, from February 2006 through the closing of the acquisition of Sirna by Merck & Co., Inc. in December 2006.

 

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C URRENT D IRECTORS N OMINATED FOR R EELECTION TO S ERVE U NTIL THE 2023 A NNUAL M EETING

Myriam J. Curet, M.D.

Myriam J. Curet , M.D. , age 63, was apponted to serve as a member of our board of directors in December 2019. Dr. Curet currently serves as the Executive Vice President and Chief Medical Officer of Intuitive Surgical, Inc. Prior to being promoted as Executive Vice President and Chief Medical Officer in November 2017, Dr. Curet served as the Chief Medical Advisor for Intuitive Surgical from December 2005 to February 2014 and as Intuitive Surgical’s Senior Vice President and Chief Medical Officer from February 2014 to November 2017. Dr. Curet also has a faculty position as Professor of Surgery at Stanford University School of Medicine. Since October 2010, she has served as a Consulting Professor of Surgery at Stanford University with a part time clinical appointment at the Palo Alto Veteran’s Administration Medical Center. She was also on the faculty at the University of New Mexico for six years prior to joining the Stanford University in 2000. Dr. Curet received her M.D. from Harvard Medical School and completed her general surgery residency program at the University of Chicago and completed her Surgical Endoscopy fellowship at the University of New Mexico.

Karin Eastham

Karin Eastham , age 70, was appointed to serve as a member of our board of directors in September 2018. Ms. Eastham currently serves on the boards of directors of several life sciences companies. Ms. Eastham has served on the board of directors of Geron Corporation since March 2009, Veracyte, Inc. since December 2012, and Personalis, Inc. since November 2019. Ms. Eastham served as a member of the board of directors of Ilumina Inc. from August 2004 to May 2019, MorphoSys AG from May 2012 to May 2017, Amylin Pharmaceuticals, Inc. from September 2005 until its acquisition in August 2012, Genoptix, Inc. from July 2008 until its acquisition in March 2011, Tercica, Inc. from December 2003 until its acquisition in October 2008, and Trius Therapeutics, Inc. from February 2007 until its acquisition in September 2013. From May 2004 to September 2008, Ms. Eastham served as Executive Vice President and Chief Operating Officer, and as a member of the Board of Trustees, of the Burnham Institute for Medical Research (now Sanford Burnham Prebys Medical Discovery Institute), a non-profit corporation engaged in biomedical research. From April 1999 to May 2004, Ms. Eastham served as Senior Vice President, Chief Financial Officer and Secretary of Diversa Corporation, a biotechnology company. Ms. Eastham previously held similar positions with CombiChem, Inc., a computational chemistry company, and Cytel Corporation, a biopharmaceutical company. Ms. Eastham also held several positions, including Vice President, Finance, at Boehringer Mannheim Diagnostics, from 1976 to 1988. Ms. Eastham received a B.S. in Accounting and an M.B.A. from Indiana University and is a Certified Public Accountant.

Howard W. Robin

Howard W. Robin, age 67, has served as our President and Chief Executive Officer since January 2007 and has served as a member of our board of directors since February 2007. Mr. Robin served as Chief Executive Officer, President and a director of Sirna Therapeutics, Inc., a biotechnology company, from July 2001 to November 2006 and from January 2001 to June 2001, served as their Chief Operating Officer, President and as a director. From 1991 to 2001, Mr. Robin was Corporate Vice President and General Manager at Berlex Laboratories, Inc. (“Berlex”), a pharmaceutical products company that is a subsidiary of Schering, AG, and from 1987 to 1991 he served as Vice President of Finance and Business Development and Chief Financial Officer. From 1984 to 1987, Mr. Robin was Director of Business Planning and Development at Berlex. He was a Senior Associate with Arthur Andersen & Co. prior to joining Berlex. He received his B.S. in Accounting and Finance from Fairleigh Dickinson University and serves as a member of its Board of Trustees.

M EETINGS OF THE B OARD OF D IRECTORS

The board of directors met thirteen (13) times during 2019. For the term of service during which he or she was a director in fiscal year 2019, each board member attended 75% or more of the aggregate of the board meetings and key committee meetings. All of our directors on our board, except Dr. Myriam J. Curet (who was appointed to the board effective as of December 12, 2019), attended our 2019 annual meeting of stockholders.

 

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C ORPORATE G OVERNANCE

The board of directors has documented our governance practices in our Corporate Governance Policy Statement to assure that the board will have the necessary authority and practices in place to review and evaluate our business operations as needed and to make decisions that are independent of our management. The guidelines are also intended to align the interests of directors and management with those of our stockholders. The Corporate Governance Policy Statement sets forth certain practices the board will follow with respect to board composition, board committees, board nomination, director qualifications and evaluation of the board and committees. The Corporate Governandce Policy Statement also provides that the board of directors will include qualified candidates when filling positions for Chief Executive Officer vacancies and board membership from a variety of backgrounds and experiences, including candidates of gender, age and racial/ethnic diversity. In any retained search for Chief Executive Officer and board candidates, the board of directors will direct the third party search firm to identify and include candidates with gender and racial/ethnic diversity as part of the retained search. The Corporate Governance Policy Statement, as well as the charters for each committee of the board, may be viewed at www.nektar.com .

B OARD L EADERSHIP S TRUCTURE

The positions of Chief Executive Officer and Chairman of the board of directors are currently held by Howard W. Robin and Robert B. Chess, respectively. The board of directors believes at this time having a separate chairman provides a more effective channel for the board of directors to express its views on management, by enhancing the board’s oversight of, and independence from, management, and allows the Chief Executive Officer to focus more on the strategy and operations of the Company.

Lead Independent Director

Roy A. Whitfield serves as our Lead Independent Director. The board of directors believes that a robust Lead Independent Director role facilitates independent board oversight of management. In accordance with the Company’s revised Corporate Governance Policy Statement approved by the Board on February 4, 2019, the Lead Independent Director shall, among other things, (i) have authority to call meetings of the independent directors; (ii) chair meetings of the independent directors in the event the Chairman of the board of directors is not independent; (iii) serve as a liaison between the Chairman of the board and the independent directors; (iv) approve information sent to the board; (v) approve meeting agendas for the board; (vi) approve meeting schedules for the board to assure that there is sufficient time for discussion of all agenda items; and (vii) have such other duties and responsibilities as may be assigned by the board from time to time.

R ISK O VERSIGHT

The board of directors monitors and assesses key business risks directly through deliberations of the board of directors and also by way of delegation of certain risk oversight functions to be performed by committees of the board of directors. The board of directors regularly reviews and assesses, among other matters, the following important areas that present both opportunities and risk to the Company’s business:

 

   

Review and approval of the Company’s annual operating and capital spending plan and review of management’s updates as to the progress against the plan and any related risks and uncertainties.

 

   

Periodic consideration of the balance of risk and opportunities presented by the Company’s medium to long-term strategic plan and the potential implications of success and failure in one or more of the Company’s key drug development programs.

 

   

Regular consideration of the risks and uncertainties presented by alternative clinical development strategies.

 

   

Periodic review and oversight of information technology (IT) risks and opportunities.

 

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Regular review of the progress and results of the Company’s clinical development programs and early research efforts including but not limited to the strengths, weaknesses, opportunities and threats for these programs.

 

   

Periodic review and oversight of material outstanding litigation or threatened litigation.

 

   

Review and approval of material collaboration partnerships for the further development and commercial exploitation of the Company’s proprietary drug development programs and technologies.

 

   

Regular review and approval of the annual corporate goals and an assessment of the Company’s level of achievement against these established goals.

 

   

Regular review of the Company’s financial position relative to the risk and opportunities for the Company’s business.

 

   

Periodic review of the Company’s intellectual property estate.

 

   

Periodic review and assessment of CEO succession planning.

 

   

Periodic review of the Company’s compensation programs.

The discussion above of risk oversight matters reviewed by the board of directors is intended to be illustrative only and not a complete list of all important matters reviewed and considered by the board of directors in providing oversight and direction for the Company’s senior management and business.

The risk oversight function of the board of directors is also administered through various board committees. The Audit Committee oversees the management of financial, accounting, internal controls, disclosure controls and the engagement arrangement and regular oversight of the independent auditors. The Audit Committee also periodically reviews the Company’s investment policy for its cash reserves, corporate insurance policies, information technology infrastructure and general fraud monitoring practices and procedures, including the maintenance and monitoring of a whistleblower hotline and the segregation of duties and access controls across various functions. To assist the Audit Committee in its risk management oversight function, the internal auditor has a direct reporting relationship to the Audit Committee. The Company’s internal audit function is focused on internal control monitoring and activities in support of the Audit Committee’s risk oversight function.

The Organization and Compensation Committee is responsible for the design and oversight of the Company’s compensation programs as well as succession planning for the chief executive officer position and other key executive positions. The Organization and Compensation Committee regularly considers whether the Company’s compensation policies and practices create risks that could have a material adverse impact on the Company and has concluded that they do not based on several design features of our compensation program that we believe reduces the likelihood of excessive risk-taking, including the following:

 

   

The compensation plan design provides a mix of base salary, short-term incentive compensation opportunity and equity compensation earned over multiple-year periods.

 

   

The determination of the corporate performance rating under the annual bonus plan is based on our achievement of a diversified mix of development, research, organizational and financial objectives. Thus, the achievement of any single corporate objective does not have a disproportionate impact on the aggregate annual bonus awarded.

 

   

Each employee’s annual cash bonus is determined by a combination of the corporate performance rating and a subjective determination of individual performance.

 

   

The maximum payout levels for annual incentive bonuses are capped at 200% of each employee’s annual target bonus.

 

   

A substantial portion of each executive’s compensation opportunity is in the form of long-term equity incentives, which help to further align the long-term interests of our executives with those of our stockholders.

 

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All employees are subject to our security trading policy which prohibits trading in derivative securities (i.e., puts or calls), short selling, and any trading in the Company’s securities on margin.

 

   

Each executive officer is subject to our claw-back policy which provides that any compensation received by an executive officer based upon the achievement of financial results that are subsequently revised is subject to cancellation or a reimbursement obligation.

The Nominating and Corporate Governance Committee periodically reviews the Company’s corporate governance practices, including certain risks that those practices are intended to address. This committee periodically reviews the composition of the board of directors to help ensure that a diversity of skills and experiences is represented by the members of the board of directors taking into account the stage of growth of the Company and its strategic direction.

In carrying out their risk oversight functions, the board of directors and its committees routinely request and review management updates, reports from the independent auditors and legal and regulatory advice from outside experts, as appropriate, to assist in discerning and managing important risks that may be faced by the Company. The board of directors is committed to continuing to ensure and evolve its risk oversight practices as appropriate given the stage of the Company’s evolution as a research-based development stage biopharmaceutical company and the fast-paced changes in the biopharmaceutical industry. In that regard, in 2019 the Company maintained a risk management committee composed of senior managers in charge of important functional areas that regularly reported to the board of directors or one of its designated committees.

I NDEPENDENCE OF THE B OARD O F D IRECTORS

As required under the NASDAQ Global Select Market listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. Our board consults with counsel to ensure that its determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent NASDAQ listing standards, as in effect from time to time.

Consistent with these standards, after review of all relevant transactions (if any) 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, the board has affirmatively determined that all of our directors are independent directors within the meaning of the applicable NASDAQ listing standards, except for Mr. Robin, our President and Chief Executive Officer.

As required under applicable NASDAQ listing standards, in the 2019 fiscal year, our independent directors met at least four times in regularly scheduled executive sessions. The Chairman of the board presided over such sessions at which only independent directors were present.

 

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I NFORMATION R EGARDING THE C OMMITTEES OF THE B OARD OF D IRECTORS

The board of directors has three regularly constituted committees: an Audit Committee, an Organization and Compensation Committee, and a Nominating and Corporate Governance Committee. The following table provides membership and meeting information as of December 31, 2019, for each of the board committees:

 

Name

   Audit     Organization  and
Compensation
    Nominating
and
Corporate
Governance
 

Jeff Ajer

     X       X    

Robert B. Chess

      

Myriam J. Curet, M.D. (1)

      

Karin Eastham

     X       X    

R. Scott Greer

     X (2)         X       X  

Lutz Lingnau

       X (2)         X  

Howard W. Robin

      

Roy A. Whitfield

     X         X (2)    
  

 

 

   

 

 

   

 

 

 

Total meetings in the 2019 fiscal year

     7       6       5  

 

(1)

Dr. Curet was appointed to the board of directors effective as of December 12, 2019.

(2)

Committee Chairperson.

Below is a description of each committee of the board of directors. The board of directors has determined that each member of each committee meets the applicable rules and regulations regarding “independence” and that each member is free of any relationship that would interfere with his or her individual exercise of independent judgment with regard to us.

AUDIT COMMITTEE

The Audit Committee of the board of directors oversees our corporate accounting and financial reporting process. For this purpose, the Audit Committee performs several functions. The Audit Committee:

 

   

evaluates the performance of and assesses the qualifications of our independent registered public accounting firm;

 

   

determines whether to retain or terminate our independent registered public accounting firm or to appoint and engage a new independent registered public accounting firm;

 

   

reviews and determines the engagement of the independent auditors, including the overall scope and plans for their respective audits, the adequacy of staffing and compensation, and negotiates and executes, on behalf of the Company, engagement letters with the independent auditors;

 

   

establishes guidelines and procedures with respect to the rotation of the lead or coordinating audit partners having primary responsibility for the audit and the audit partner responsible for reviewing the audit;

 

   

reviews and approves the retention of the independent registered public accounting firm for any permissible non-audit services and, at least annually, discusses with our independent registered public accounting firm, and reviews, that firm’s independence;

 

   

obtains and reviews, at least annually, a formal written statement prepared by the independent registered public accounting firm delineating all relationships between the independent registered public accounting firm and the Company and discusses with the independent registered public accounting firm, and reviews, its independence from management and the Company;

 

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reviews with the independent registered public accounting firm any management or internal control letter issued or, to the extent practicable, proposed to be issued by the independent registered public accounting firm and management’s response;

 

   

reviews with management and the independent registered public accounting firm the scope, adequacy and effectiveness of our financial reporting controls;

 

   

reviews and discusses with management, the Company’s risk management committee, the internal auditor and the independent registered public accounting firm, as appropriate, the Company’s major financial risks, the Company’s policies for assessment and management of such risks, and the steps to be taken to control such risks;

 

   

reviews and evaluates the Company’s information technology processes and risks;

 

   

establishes and maintains procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, including procedures for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters;

 

   

investigates and resolves any disagreements between our management and the independent registered public accounting firm regarding our financial reporting, accounting practices or accounting policies and reviews with the independent registered public accounting firm any other problems or difficulties it may have encountered during the course of the audit work;

 

   

meets with senior management and the independent registered public accounting firm in separate executive sessions;

 

   

reviews the consolidated financial statements to be included in our quarterly reports on Form 10-Q and our annual reports on Form 10-K;

 

   

discusses with management and the independent registered public accounting firm the results of the independent registered public accounting firm’s review of our quarterly consolidated financial statements and the results of our annual audit and the disclosures contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our periodic reports;

 

   

reviews and discusses with management and the independent registered public accounting firm any material financial arrangements of the Company which do not appear on the financial statements of the Company and any significant transactions or courses of dealing with parties related to the Company;

 

   

reviews with management and the independent registered public accounting firm significant issues that arise regarding accounting principles and financial statement presentation;

 

   

oversees the Company’s internal audit function;

 

   

discusses with management and the independent registered public accounting firm any correspondence from or with regulators or governmental agencies, any employee complaints or any published reports that raise material issues regarding the Company’s consolidated financial statements, financial reporting process or accounting policies;

 

   

oversees the preparation of the Audit Committee report to be included in the Company’s annual report or proxy statement; and

 

   

reviews the Company’s investment policy for its cash reserves, corporate insurance policies, information technology infrastructure and general fraud monitoring practices and procedures, including the maintenance and monitoring of a whistleblower hotline and the segregation of duties and access controls across various functions.

 

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The Audit Committee has the authority to retain special legal, accounting or other professional advisors to advise the committee as it deems necessary, at our expense, to carry out its duties and to determine the compensation of any such advisors.

Mr. Greer serves as the Chairman of the Audit Committee. The board of directors annually reviews the NASDAQ listing standards definition of independence for Audit Committee members and has determined that all members of our Audit Committee are independent.

During the 2019 fiscal year, the board of directors determined that Mr. Greer qualified as an “Audit Committee financial expert” as defined in applicable SEC rules. The board of directors made a qualitative assessment of Mr. Greer’s level of knowledge and experience based on a number of factors, including his formal education and experience as a Chief Executive Officer at a public reporting company, a Chief Financial Officer, and the chairman of public company Audit Committees. In addition to our Audit Committee, Mr. Greer also serves as the chair of the Audit Committee of Inogen, Inc. (NASDAQ: INGN). The board of directors does not believe that such simultaneous service impairs Mr. Greer’s ability to effectively serve as Chairman of our Audit Committee. The board of directors has also determined that Ms. Eastham also qualifies as an “Audit Committee financial expert” as defined in applicable SEC rules. The board of directors made a qualitative assessment of Ms. Eastham’s level of knowledge and experience based on a number of factors, including her formal education and experience as a Chief Financial Officer of a public reporting company. In addition to our Audit Committee, Ms. Eastham also serves on the Audit Committees of Illumina, Inc. (NASDAQ: ILMN), Geron Corporation (NASDAQ: GERN) and Veracyte, Inc. (NASDAQ: VCYT). The board of directors does not believe that such simultaneous service impairs Ms. Eastham’s ability to effectively serve on our Audit Committee. The Audit Committee has adopted a written Audit Committee charter that is available on our corporate website at www.nektar.com .

ORGANIZATION AND COMPENSATION COMMITTEE

The Organization and Compensation Committee of the board of directors administers the variable compensation programs and reviews management’s recommendations for organization structure and development of the Company. Additionally, the Organization and Compensation Committee reviews and in some cases approves the type and level of cash and equity-based compensation for officers, employees and consultants of the Company, and recommends certain compensation actions to the board of directors for review and approval. The Organization and Compensation Committee:

 

   

reviews and approves the structure and guidelines for various incentive compensation and benefit plans;

 

   

grants equity awards under the various equity incentive compensation and benefit plans and an inducement plan established under NASDAQ Listing Rule 5635(c)(4) and IM-5635-1;

 

   

approves the compensation for the executive officers of the Company, including the President and Chief Executive Officer, and those vice-president level employees that report directly to the President and Chief Executive Officer, including, but not limited to, annual salary, bonus, equity compensation and other benefits;

 

   

recommends the compensation levels for the members of the board of directors who are not employed by us or our subsidiaries (“non-employee directors”) for approval by the independent members of the board of directors;

 

   

reviews the operation of the Company’s executive compensation programs to determine whether they remain supportive of the Company’s business objectives and are competitive relative to comparable companies and establishes and periodically reviews policies for the administration of executive compensation programs;

 

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reviews the Company’s executive compensation arrangements to evaluate whether incentive and other forms of compensation do not encourage inappropriate or excessive risk taking and reviews and discusses, at least annually, the relationship between risk management policies and practices, corporate strategy and the Company’s executive compensation arrangements;

 

   

reviews and discusses with management and the Company’s risk management committee, as appropriate, the Company’s major risks relating to the purview of the Organization and Compensation Committee, the Company’s policies for assessment and management of such risks, and the steps to be taken to control such risks;

 

   

oversees the preparation of the Organization and Compensation Committee report to be included in the Company’s annual proxy statement and Annual Report on Form 10-K;

 

   

reviews and reassess the adequacy of the Organization and Compensation Committee charter on at least an annual basis;

 

   

reviews management recommendations on organization structure and development, including succession planning; and

 

   

reviews performance of the executive officers and vice-president level employees that report directly to the Chief Executive Officer.

The Organization and Compensation Committee takes into account our President and Chief Executive Officer’s recommendations regarding the compensatory arrangements for our executive officers, although our President and Chief Executive Officer does not participate in the deliberations or determinations of his own compensation. In particular, the Organization and Compensation Committee considered our President and Chief Executive Officer’s recommendations for 2019 regarding the increase in annual base compensation, award of annual performance-based bonus compensation and the equity granted to our executive officers excluding himself. While the Organization and Compensation Committee considers and appreciates the input and expertise of management in making its decisions, it does ensure that an executive session where no management is present is included in the agenda for every committee meeting. The Organization and Compensation Committee’s charter gives the committee the sole authority to retain independent counsel, compensation and benefits consultants or other outside experts or advisors that it believes to be necessary or appropriate. During 2019, the Organization and Compensation Committee retained Radford, part of the Rewards Solutions practice of Aon plc, a nationally recognized executive compensation consulting firm that performs compensation benchmarking, analysis and design services. Radford was engaged in 2019 to provide regulatory, legislative updates and market trend analysis, to provide analysis on our compensation programs, to provide recommendations and advice on the structure, elements and amounts of compensation provided to our non-employee directors, to provide recommendations and advice on Nektar peer companies, to review the Compensation Discussion and Analysis, and to provide executive compensation analysis as needed. Radford provides compensation survey services to the company in addition to the executive and director compensation services it performs at the request of the Organization and Compensation Committee. In 2019, we paid Radford $31,282 for provision of survey services. After consideration of such services and other factors prescribed by the SEC for purposes of assessing the independence of compensation consultants, we have determined that no conflicts of interest exist between the Company and Radford (or any individuals providing such services to the committee on Radford’s behalf).

The Organization and Compensation Committee may delegate to its subcommittees such authority as it deems appropriate, except for the authority the committee is required to exercise by applicable law or regulation. The Organization and Compensation Committee has delegated certain limited authority to grant stock option awards under our stock incentive plan to a committee comprised of management representatives, and with respect to certain limited authority to grant restricted stock unit awards (RSUs), to a committee of the board of directors, with Mr. Robin serving as the sole member of that committee. These committees may not approve award grants to anyone serving as an executive officer or director of the Company. Other than the authority delegated to these committees, the Organization and Compensation Committee has no current intention to delegate any of its authority to any other committee or subcommittee.

 

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The current members of the Organization and Compensation Committee are Mr. Lingnau, who chairs the committee, and Messrs. Ajer, and Greer, and Ms. Eastham. The board of directors annually reviews the NASDAQ listing standards definition of independence for Organization and Compensation Committee members and has determined that all members of our Organization and Compensation Committee are independent. The Organization and Compensation Committee charter can be found on our corporate website at www.nektar.com .

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

The Nominating and Corporate Governance Committee:

 

   

establishes criteria for board membership, including standards for independence, and considers and assesses the independence of the directors;

 

   

evaluates board composition and performance;

 

   

identifies, reviews and recommends the board’s selected candidates to serve as directors;

 

   

considers stockholder recommendations for director nominations and other proposals submitted by stockholders;

 

   

reviews the adequacy of, and compliance with, our Code of Business Conduct and Ethics;

 

   

administers and oversees all aspects of our corporate governance functions on behalf of the board;

 

   

monitors regulatory and legislative developments in corporate governance, as well as trends in corporate governance practices, and makes recommendations to the board regarding the same;

 

   

reviews and discusses with management and the Company’s risk management committee, as appropriate, the Company’s major risks relating to the purview of the nominating and corporate government committee, the Company’s policies for assessment and management of such risks, and the steps to be taken to control such risks;

 

   

establishes and oversees procedures for the receipt, retention and treatment of complaints received by the Company with respect to legal and regulatory compliance (except for compliance relating to accounting, internal accounting controls, auditing matters and financial disclosure and reporting); and

 

   

provides recommendations to the board of directors to establish such special committees as may be desirable or necessary from time to time in order to address ethical, legal, business or other matters that may arise.

The Nominating and Corporate Governance Committee believes that candidates for director should possess the highest personal and professional ethics, integrity and values, be committed to represent our long-term interests and those of our stockholders, possess diverse experience at policy-making levels in business, science and technology, possess key personal characteristics such as strategic thinking, objectivity, independent judgment, intellect and the courage to speak out and actively participate in meetings, as well as have sufficient time to carry out the duties and responsibilities of a board member effectively.

The current members of the Nominating and Corporate Governance Committee comprise Mr. Whitfield, who chairs the committee, and Messrs. Greer and Lingnau. The board of directors annually reviews the NASDAQ listing standards definition of independence for the Nominating and Corporate Governance Committee and has determined that all members of our Nominating and Corporate Governance Committee are independent. The Nominating and Corporate Governance Committee charter can be found on our corporate website at www.nektar.com .

The current members of our board of directors represent a desirable mix of backgrounds, skills and experiences, and are all believed to share the key personal characteristics described above. Below are some of the specific experiences and skills of our directors.

 

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Jeff Ajer

Mr. Ajer, has more than 25 years of biotechnology industry experience within rare disease and specialty medicine. Mr. Ajer currently serves as Executive Vice President and Chief Commercial Officer at BioMarin Pharmaceutical Inc. Mr. Ajer recently served on the board of directors of True North Therapeutics. Mr. Ajer has extensive knowledge and expertise of the biotechnology industry.

Robert B. Chess

Mr. Chess is our Chairman and former President and Chief Executive Officer and has a deep understanding of our business. Having founded and led private and public companies, Mr. Chess has strong experience leading growing companies in our industry. Due to his long association with the Company as a director and senior executive leader at various times, he possesses significant knowledge and perspective on the history and development of the Company. Mr. Chess is a prominent participant in our industry, was a long-time member of the board of our industry association, and is on the board of trustees and faculty of leading academic institutions.

Myriam J. Curet, M.D.

Dr. Curet has over 20 years of expierence in the biopharmaceutical industry and faculty positions, and currently serves as the Executive Vice President and Chief Medical Officer of Intuitive Surgical. Dr. Curet has held senior executive positons and has served as Vice President and Chief Medical Officer in November 2017, as the Chief Medical Advisor for Intuitive Surgical from December 2005 to February 2014 and as Intuitive Surgical’s Senior Vice President and Chief Medical Officer from February 2014 to November 2017. Dr. Curet also has a faculty position as Professor of Surgery at Stanford University School of Medicine. Since October 2010, she has served as a Consulting Professor of Surgery at Stanford University with a part time clinical appointment at the Palo Alto Veteran’s Administration Medical Center. She was also on the faculty at the University of New Mexico for six years prior to joining the Stanford University in 2000.

Karin Eastham

Ms. Eastham has held senior executive and finance positions in the biopharmaceutical industry and brings more than 35 years of experience as both an executive and independent director with significant experience in life sciences with particular expertise in both finance and operations. Ms. Eastham currently serves as a director of several other companies. As a result of her extensive experience, she brings strong expertise in finance, accounting, operations management, business development, and corporate governance.

R. Scott Greer

Mr. Greer has a proven track record as an entrepreneur and senior executive with extensive experience in the biotechnology industry, most recently with Abgenix, Inc., until its acquisition by Amgen, Inc. in 2006. Mr. Greer has held senior executive and finance positions at other companies in our industry and currently serves as a director of several other companies in the biopharmaceutical and medical device industries and has served as the Chairman of the Board of several companies. He possesses strong expertise in biotech industry strategy, business models, and finance and has served on compensation, governance and audit committees.

Lutz Lingnau

Mr. Lingnau has a strong management background in the pharmaceutical industry as a senior executive and member of the executive board of Schering AG Group. He has international sales and operations experience as former head of worldwide sales and marketing in the pharmaceutical division of Schering, and in operational roles in South America and the U.S., and also as a member of the supervisory board of a German specialty chemicals company.

 

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Howard W. Robin

Mr. Robin is our President and Chief Executive Officer. Mr. Robin has over 25 years of experience in the pharmaceutical and biotechnology industries in a variety of roles of increasing responsibility and, prior to becoming our chief executive officer, was the chief executive officer and president and a director of Sirna Therapeutics, a development stage biotechnology company. The board of directors has determined that Mr. Robin’s position as president and chief executive officer provides him with important insight into the Company’s opportunities, risks, strengths and weaknesses, as well as its organizational and operational capabilities, which is valuable to the board of directors in making strategic decisions and performing its oversight responsibilities.

Roy A. Whitfield

Mr. Whitfield has a strong strategy development and leadership background in the biotechnology and medical industries. He is a former strategy consultant from a major consulting firm, was the founder and chief executive officer of a public biotechnology company and has held executive positions in various segments of the health care industry. He has extensive corporate governance experience through his service on other public company boards in the pharmaceutical and life sciences industries.

Candidates for director nominees are reviewed in the context of the current composition of the board, our operating requirements and the long-term interests of stockholders. In conducting this assessment, the committee considers diversity, age, skills and such other factors as it deems appropriate given our current needs and those of our board to maintain a balance of knowledge, experience and capability. The Nominating and Corporate Governance Committee also periodically reviews the overall effectiveness of the board, including board attendance, level of participation, quality of performance, self-assessment reviews and any relationships or transactions that might impair director independence. In the case of new director candidates, the Nominating and Corporate Governance Committee also determines whether the nominee must be independent for NASDAQ purposes, which determination is based upon applicable NASDAQ listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary. The committee then uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the board. The Nominating and Corporate Governance Committee meets to discuss and consider such candidates’ qualifications and then selects a nominee for recommendation to the board by majority vote. We have paid fees to third party search firms in the past to assist in our process of identifying or evaluating director candidates.

The Nominating and Corporate Governance Committee of our board of directors will consider for nomination any qualified director candidates recommended by our stockholders. Any stockholder who wishes to recommend a director candidate is directed to submit in writing the candidate’s name, biographical information, relevant qualifications and other information required by our bylaws to our Secretary at our principal executive offices before the deadline set forth in our bylaws. All written submissions received from our stockholders will be reviewed by the Nominating and Corporate Governance Committee at the next appropriate meeting. The Nominating and Corporate Governance Committee will evaluate any suggested director candidates received from our stockholders in the same manner as recommendations received from management, committee members or members of our board.

S TOCKHOLDER C OMMUNICATIONS WITH THE B OARD OF D IRECTORS

The board of directors will consider any written or electronic communication from our stockholders to the board, a committee of the board or any individual director. Any stockholder who wishes to communicate to the board of directors, a committee of the board or any individual director should submit written or electronic communications to our Secretary at our principal executive offices, which shall include contact information for such stockholder. All communications from stockholders received will be forwarded by our Secretary to the

 

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board of directors, a committee of the board or an individual director, as appropriate, on a periodic basis, but in any event no later than the board of directors’ next scheduled meeting. The board of directors, a committee of the board, or individual directors, as appropriate, will consider and review carefully any communications from stockholders forwarded by our Secretary.

C ODE OF B USINESS C ONDUCT AND E THICS

We have adopted a code of business conduct and ethics that applies to all employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The code of business conduct and ethics is available on our website at www.nektar.com . Amendments to, and waivers from, the code of business conduct and ethics that apply to any director, executive officer or persons performing similar functions will be disclosed at the website address provided above and, to the extent required by applicable regulations, on a Current Report on Form 8-K filed with the SEC.

O RGANIZATION AND C OMPENSATION C OMMITTEE I NTERLOCKS AND I NSIDER P ARTICIPATION

During 2019, the Organization and Compensation Committee consisted of four independent directors: Messrs. Ajer, Greer and Lingnau and Ms. Eastham. No director who served on the Organization and Compensation Committee in 2019 was, or has been, an officer or employee of us, nor has any director had any relationships requiring disclosure under the SEC rules regarding certain relationships and related-party transactions. None of our executive officers served on the board of directors or the Organization and Compensation Committee (or other board committee performing equivalent functions) of another entity, one of whose executive officers served on our board of directors or Organization and Compensation Committee.

 

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D IRECTOR C OMPENSATION T ABLE —F ISCAL 2019

Each of our non-employee directors participates in our Amended and Restated Compensation Plan for Non-Employee Directors (the “Director Plan”). Only our non-employee directors are eligible to participate in the Director Plan. The following table shows compensation awarded or paid to our non-employee directors for the fiscal year ended December 31, 2019.

 

Name (1)

(a)

   Fees Earned
or Paid in
Cash ($)
(b)
     Stock
Awards
($)(2)
(c)
     Option
Awards
($)(3)
(d)
     All Other
Compensation
(e)
     Total ($)
(f)
 

Jeff Ajer

     90,250        122,199        139,029        0        351,478  

Robert B. Chess

     124,700        122,199        139,029        0        385,928  

Myriam J. Curet, M.D.

     0        254,942        293,165        0        548,107  

Karin Eastham

     91,500        122,199        139,029        0        352,728  

R. Scott Greer

     118,000        122,199        139,029        0        379,228  

Lutz Lingnau

     100,000        122,199        139,029        0        361,228  

Roy A. Whitfield

     123,000        122,199        139,029        0        384,228  

 

(1)

Mr. Robin, our President and Chief Executive Officer, is not included in this table as he was an employee of the Company in 2019 and received no additional compensation for his services in his capacity as a director. Please see the “Summary Compensation Table – Fiscal 2017-2019” for information regarding the compensation Mr. Robin received as our President and Chief Executive Officer.

(2)

Amounts reported represent the aggregate grant date fair value of RSU awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“FASB ASC Topic 718”), based on the closing price of the Company’s common stock on the grant date and excluding the effects of estimated forfeitures. As of December 31, 2019, each of our then-serving non-employee directors had 6,500 outstanding RSUs. Dr. Curet had an additional 5,200 outstanding RSUs as part of her initial grant upon being appointed to the board of directors in December 2019.

(3)

Amounts reported represent the aggregate grant date fair value of option awards computed in accordance with FASB ASC Topic 718, which excludes the effects of estimated forfeitures. For a complete description of the assumptions made in determining the valuation, please refer to Note 11 (Stock-Based Compensation) to our audited financial statements in our annual report on Form 10-K for the fiscal year ended December 31, 2019. Each of our then-serving non-employee directors received a stock option for 13,000 shares for their annual stock option grant on September 25, 2019. Dr. Curet received an additional stock option for 10,400 shares as part of her initial grant upon being appointed to the Board in December, 2019. As of December 31, 2019, each of our non-employee directors had stock options outstanding the following number of shares: Mr. Ajer: 78,750; Mr. Chess: 202,500; Dr. Curet 23,400; Ms. Eastham: 30,000; Mr. Greer: 202,500; Mr. Lingnau: 162,500; and Mr. Whitfield: 192,500.

The 2019 compensation for the Company’s non-employee directors was recommended by the Organization and Compensation Committee to the Board following the receipt of a report from our independent compensation consultant, which in 2019 was Radford, part of the Rewards Solutions practice of Aon plc, which contained an analysis of prevailing market practices regarding levels and types of non-employee director compensation, including the non-employee director compensation practices of our 2019 peer group set forth below in the section entitled “Compensation Discussion and Analysis”, and a comparative assessment of our non-employee director compensation to such peers and market practices. On at least an annual basis, qualified experts deliver a presentation to the Organization and Compensation Committee about recent developments and best practices related to non-employee director compensation.

Effective January 1, 2019 the annual retainer for non-employee directors was $65,000 (“Annual Retainer”) for up to 13 board meetings in each calendar year, after which each member received compensation in the amount of $2,000 for attendance at each subsequent in-person or telephonic Board Meeting, and $1,000 for each in-person Board Meeting attended via conference telephone. In addition to the Annual Retainer, the Chairperson

 

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or Lead Director of the Board of Directors received an additional annual retainer of $50,000 for a total of $115,000 for the annual retainer for Chair of the Board of Directors. The annual retainer amount was $33,000 for the Chair of the Audit Committee and $13,000 for members other than the Chair for up to 9 Audit Committee meetings in each calendar year, after which each member received compensation in the amount of $1,750 for attendance at each subsequent in-person or telephonic Audit Committee meeting and $875 for each in-person Audit Committee meeting who attended via conference telephone in the calendar year, $26,000 for the Chair of the Compensation Committee and $11,000 for members other than the Chair of the Compensation Committee for up to 8 Compensation Committee meetings in each calendar year, after which each member received compensation in the amount of $1,750 for attendance at each subsequent in-person or telephonic Compensation Committee meeting and $875 for each in-person Compensation Committee meeting who attended via conference telephone in the calendar year, $20,000 for the Chair of the Governance Committee and $9,000 for members other than the Chair of the Governance Committee for up to 6 Governance Committee meetings in each calendar year, after which each member received compensation in the amount of $1,750 for attendance at each subsequent in-person or telephonic Governance Committee meeting and $875 for each in-person Governance Committee meeting attended via conference telephone in the calendar year. The Chair of any new committee of the board of directors received an additional annual retainer of $5,000.

In September of each year, each non-employee director is eligible to receive an equity award consisting of either all stock options or a combination of stock options and RSUs, as determined by the board of directors. These equity awards vest over a period of one year (monthly for stock options and upon the anniversary date for RSUs) and include a number of shares as determined annually by the board of directors. In September 2019 our then-serving non-employee directors received 13,000 stock options and 6,500 RSUs. Upon initial appointment to the board of directors, each non-employee director is eligible to receive an equity award consisting of either all stock options or a combination of stock options and RSUs. These initial equity awards vest over a period of three years from the date of appointment and will be at a level based on 180% of the most recent annual equity compensation grant to non-employee directors, as determined annually by the board of directors. The exercise price of stock options granted is equal to the closing price of the Company’s common stock on the grant date. Following completion of a non-employee director’s service on the board of directors, his or her stock options will remain exercisable for a period of eighteen months (or, if earlier, the end of the maximum term of the option). The term of stock options granted to non-employee directors is eight years. In the event of a change of control, the vesting of each option or RSU award held by each non-employee director will accelerate in full as of the closing of such transaction. In the event of death or disability, each RSU of the non-employee director will vest immediately. In the event a non-employee director retires from the Board at the next annual stockholder’s meeting, their RSU awards vest on a pro-rata basis.

The Director Plan includes ownership guidelines for non-employee directors stating that each non-employee director should own shares of our common stock equal to at least three times the value of the annual board cash retainer. The minimum stock ownership level was to be achieved by each non-employee director within five years of the date of his or her first appointment to the board of directors. As of December 31, 2019, each non-employee director met the minimum stock ownership guidelines or was within the five-year grace period provided by the plan. Our 2017 Plan also limits the aggregate value of cash compensation and the grant date fair value (computed in accordance with generally accepted accounting principles) of shares of Common Stock that may be paid or granted during any calendar year to any non-employee director with a maximum of $1,200,000 for existing non-employee directors and $2,200,000 for new non-employee directors.

 

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COMPENSATION DISCUSSION AND ANALYSIS

Introduction

The Compensation Discussion and Analysis is designed to provide our stockholders with an understanding of our executive compensation philosophy and decision-making process. It discusses the principles underlying the structure of the compensation arrangements for our Chief Executive Officer, our Chief Financial Officer, and our other three most highly compensated executive officers who were serving as executive officers on December 31, 2019, collectively, our NEOs. Unless noted otherwise, any reference within the Compensation Discussion and Analysis to decisions made by the board of directors refers to the decisions made by the independent members of the board of directors only. This Compensation Discussion and Analysis primarily focuses on the compensation of our NEOs for 2019 that are identified in the table below.

 

Name    Title

Howard W. Robin

  

President and Chief Executive Officer

Gil M. Labrucherie

  

Chief Operating Officer and Chief Financial Officer

John Northcott

  

Senior Vice President and Chief Commercial Officer

Jillian B. Thomsen

  

Senior Vice President and Chief Accounting Officer

Jonathan Zalevsky, Ph.D.

  

Chief Research and Development Officer

Our current compensation programs for the NEOs are determined and approved by the Organization and Compensation Committee of our board of directors. As described in more detail above under the caption “Information About the Board of Directors-Information Regarding the Committees of the Board of Directors—Organization and Compensation Committee,” the Organization and Compensation Committee takes into account Mr. Robin’s recommendations regarding the compensatory arrangements for our executive officers, although Mr. Robin does not participate in the deliberations or determinations of his own compensation. The other NEOs did not have any role in determining or recommending the form or amount of compensation paid to any of our executive officers.

Company Performance Highlights

In 2019, the Company achieved several important milestones that resulted in significant value creation. We believe these milestones were achieved as a result of a well-crafted long-term strategy and investment priorities established by management over the past several years. The biotechnology industry is characterized by high stock price volatility and, as a result, our focus on pay for performance is based on an assessment of the level of the Company’s achievement against annual business and operating objectives rather than the stock price at any given point in time. Some of the significant accomplishments achieved in 2019 are summarized below.

 

   

In 2019, we continued to evaluate our CD122-preferential IL-2 pathway agonist bempegaldesleukin (NKTR-214) plus Opdivo ® (nivolumab) pursuant to a joint development plan under our Strategic Collaboration Agreement (BMS Collaboration Agreement) with Bristol-Myers Squibb (BMS) that was executed in 2018. We believe this collaboration represented a landmark achievement in the biotechnology industry with a $1.85 billion upfront payment (comprised of a $1 billion upfront payment and an $850 million premium equity investment), $1.43 billion in development and regulatory milestones paid by BMS, with the Company retaining a 65% profit interest and BMS responsible for a majority of costs for the broad development plan. The joint development plan was updated pursuant to an Amendment No. 1 to the BMS Collaboration Agreement that was entered into on January 9, 2020, and includes the ongoing registrational trials in first-line metastatic melanoma, first-line cisplatin ineligible metastatic urothelial cancer and first-line metastatic renal cell carcinoma (RCC), and muscle-invasive bladder cancer, and an additional registrational trial in adjuvant melanoma, as well as a Phase 1/2 dose escalation and expansion study to evaluate bempegaldesleukin plus nivolumab in combination with axitinib in first-line RCC in order to support a future Phase 3 registrational trial. This amendment also included up to $125 million in additional and accelerated milestone payments including a non-refundable, non-creditable milestone payment in the amount of $25 million upon achievement of

 

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the first patient, first visit in the registrational adjuvant melanoma trial, a non-refundable creditable milestone payment in the amount of $25.0 million following the achievement of the first patient, first visit in the registrational muscle-invasive bladder cancer trial which occurred in the first quarter of 2020, and a non-refundable creditable milestone payment in the amount of $75.0 million following the achievement of the first patient, first visit in a registrational first-line non-small-cell lung cancer trial evaluating the combination of bempeg and nivolumab.

 

   

In August 2019, we announced that the U.S. Food and Drug Administration (FDA) granted Breakthrough Therapy Designation for investigational agent bempegaldesleukin in combination with Opdivo ®  for the treatment of patients with previously untreated unresectable or metastatic melanoma. The Breakthrough Therapy Designation is based on clinical data reported at the 2019 American Society of Clinical Oncology (ASCO) Annual Meeting from the cohort of patients with metastatic melanoma that were treated with the doublet therapy in the ongoing PIVOT-02 Phase 1/2 clinical study. FDA Breakthrough Therapy Designation is intended to expedite the development and review of medicines aimed at treating a serious or life-threatening disease where there is preliminary clinical evidence that the investigational therapy may offer substantial improvement over existing therapies on at least one clinically significant endpoint.

 

   

In June 2019, we announced the results of the first-in-human Phase 1a study evaluating single-ascending doses of NKTR-358, a first-in-class T regulatory cell stimulator in clinical development for the treatment of autoimmune and other chronic inflammatory conditions. The data show that NKTR-358 was safe and well-tolerated and led to a marked and selective dose-dependent expansion of T regulatory cells with no measurable effect on conventional CD4+ and CD8+ T cells (Tcons). NKTR-358 is designed to correct the underlying immune system imbalance in people with autoimmune conditions, which are associated with reduced numbers and impaired function of powerful inhibitory immune cells, known as T regulatory (Treg) cells. NKTR-358 works by targeting the interleukin (IL-2) alpha-beta-gamma receptor complex in the body to stimulate proliferation of Treg cells and their suppressive functional activity. NKTR-358 was discovered by Nektar and is being co-developed and commercialized in partnership with Eli Lilly and Company.

 

   

In October 2019, we announced the initiation of two Phase 1b studies of NKTR-358, a novel T regulatory (Treg) cell stimulator, one in patients with psoriasis and one in patients with atopic dermatitis. Nektar entered into a strategic collaboration with Eli Lilly and Company in 2017 to develop and commercialize NKTR-358. The two Phase 1b studies are Lilly-sponsored studies.

 

   

In October 2019, we also announced the initiation of a first-in-human, Phase 1 clinical study evaluating NKTR-255, an interleukin-15 (IL-15) receptor agonist, as monotherapy for patients with relapsed or refractory non-Hodgkin lymphoma (NHL) or multiple myeloma (MM). The study will also combine NKTR-255 with multiple targeted antibodies, that function through an antibody-dependent cell-mediated cytotoxicity (ADCC) mechanism, to evaluate the safety and efficacy in adults with relapsed or refractory MM. NKTR-255 is designed to activate the IL-15 pathway and expand functionally superior natural killer (NK) cells and promote the survival and expansion of memory CD8+ T cells without inducing suppressive regulatory T cells.

 

   

In November 2019, we announced new data at the 2019 Society for Immunotherapy of Cancer (SITC) Annual Meeting for previously untreated metastatic melanoma patients in the PIVOT-02 study of bempegaldesleukin with nivolumab. Key data highlights from this presentation included that at a median time of follow-up of 18.6 months, confirmed objective response rate (ORR) was 53% (20/38) in efficacy-evaluable patients, with 34% (13/38) of patients achieving confirmed complete responses (CR). 42% (16/38) of patients achieved a maximum reduction of 100% in target lesions. DCR, also known as disease control rate (CR+ Partial Response + Stable Disease), was 74% (28/38). At a median time of follow-up of 18.6 months, the Kaplan-Meier estimate of median progression-free survival (PFS) was not reached (95% CI: 5.3, NE).

 

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Throughout 2019 we continued advancing other molecules in our immuno-oncology portfolio. NKTR-262 is a small molecule agonist that targets toll-like receptors found on innate immune cells in the body. NKTR-262 is designed to stimulate the innate immune system and promote maturation and activation of antigen-presenting cells (APC), such as dendritic cells, which are critical to induce the body’s adaptive immunity and create antigen-specific cytotoxic T cells. NKTR-262 is being developed as an intra-tumoral injection in combination with systemic bempegaldesleukin in order to induce an abscopal response and achieve the goal of complete tumor regression in cancer patients with both therapies.

We believe that the above accomplishments, together with accomplishments achieved by the Company over the past ten years, directly resulted in the Company: (1) building and advancing a significant drug candidate pipeline; (2) building an organization and infrastructure designed to execute on our mission of being a leading research-based development stage biopharmaceutical company; and (3) establishing collaboration and proprietary product opportunities that have significant future economic potential based on milestone payments, royalties and sales. We believe that the compensation programs and awards to our NEOs should be evaluated within the context of these significant accomplishments and performance over a sustained period.

Compensation Program Objectives and Philosophy

In order to continue the execution and growth of our business as described above, we believe that it is vital that we continue to retain and attract highly experienced and skilled senior leadership by offering competitive base compensation and benefits, significant performance-based incentives, and the potential for long-term equity compensation. Our goal is to structure a meaningful portion of executive compensation such that it will only have value if the senior leadership is successful in building significant long-term value for Nektar’s business and our stockholders.    

Our current executive compensation programs are intended to achieve the following four fundamental goals and objectives to: (1) incent and reward sustained long-term performance by aligning significant elements of executive compensation with our stockholders’ interests; (2) attract and retain an experienced, highly qualified and motivated executive management team to lead our business; (3) provide economic rewards for achieving high levels of our performance and individual contribution; and (4) pay compensation that is competitive, taking into account the experience, skills and performance of the executives required to build and maintain the organization necessary to support our mission to be a leading research-based development stage biopharmaceutical company.

When structuring our executive compensation programs to achieve our goals and objectives, we are guided by the following philosophies:

 

   

Alignment with Stockholders’ Interests . Our compensation model should be designed to align the economic interests of our executives with those of our stockholders. In 2012, we established a performance-based equity award program for our executive officers. Under this program, 50% of the annual equity awards to our executive officers are performance-based equity awards that only vest if a performance condition is met within five years. The performance goal for 2019 is the Company’s achievement of two (2) of the following five (5) events: (i) filing two (2) Investigational New Drug (“IND”) applications with the FDA for drug candidates wholly-owned by the Company; (ii) two clinical collaborations with significant co-funding support of at least 30% of clinical studies involving Company proprietary drugs; (iii) a judgment by a federal court that a Company-owned patent validly covers a third party product or the settlement of a patent litigation resulting in a payment to Company; (iv) the filing of a New Drug Application (“NDA”) by the FDA for a Company proprietary drug; and (v) the approval of an NDA by the FDA for a Company proprietary drug.

 

   

Pay for Performance . The objective of our executive compensation program is to deliver compensation above industry median for exceptional performance and deliver compensation below the median in

 

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performance periods where the Company does not perform well. Since 2012 we have tied each NEOs’ annual merit equity award to an assessment of individual performance or the achievement of what we believe to be rigorous and objective performance achievement milestones or criteria (such as the filing or approval of an NDA by the FDA for a company proprietary drug).

 

   

Total Rewards Program. The total compensation program must balance pay for performance elements with selected static non-performance-based elements in order to create a total rewards program that is competitive and will help us attract and retain highly qualified and motivated executives.

 

   

Flexible Approach . The level of compensation provided to executives must take into account each executive’s role, experience, tenure, performance and expected contributions to our future success.

 

   

Focus on Achievement of Fundamental Business Goals. The compensation program should be structured so that executives are appropriately incentivized to achieve our short- and long-term goals that are viewed as fundamental to driving value in our business.

We believe that each element of our executive compensation program helps us to achieve one or more of these compensation objectives. For example, we believe that performance-based short-term cash incentive opportunities in combination with performance-based equity incentive awards that are earned over time is the best way to align our executives’ interests with those of our stockholders and pay for performance with our objective to measure performance based upon achieving business milestones that we believe will create long-term value. We also believe that the long-term vesting schedules applicable to equity awards also serve as a significant retention incentive as well as a focus on building long-term stockholder value. Providing base salaries and certain severance protections helps us ensure that we are providing a competitive compensation package that attracts and retains qualified, experienced and highly skilled executives. We designed our total compensation program to combine short- and long-term components, cash and equity, and fixed and contingent payments, in proportions that we believe are appropriate to achieve each of our fundamental compensation philosophies as described above. It was our intent to design the structure of our compensation program to provide appropriate incentives to reward our executives for achieving our long-term goals and objectives, some of the most important of which are building and advancing a robust drug candidate pipeline, entering into new collaboration partnerships and executing on our current collaborations, increasing the skill level and efficiency of our organization and improving our financial performance. We believe that our compensation program has helped us both recruit and retain superior executive talent to continue to build an organization capable of executing on our mission to become a leading research-based development stage biopharmaceutical company.

 

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Relationship between Company Performance and Executive Pay

The biotechnology industry is generally thought to be characterized by a higher risk profile and by more binary business outcomes than other, more traditional industries. This historically has led to high stock volatility for biotechnology companies. Mr. Robin’s total compensation, as reported below in the Summary Compensation Table – Fiscal 2017-2019, decreased by 25% in 2019 as compared with 2018. The graph below demonstrates that even with high levels of volatility in stock price, the total compensation for Mr. Robin is generally aligned with our stock price performance over the past five years. In 2019, CEO (and other NEO) equity awards were targeted at the market 50 th percentile factoring performance but also the company’s then-current position relative to the peer group in terms of size. Individual executive awards were adjusted from 50 th percentile based on individual performance. We anticipate reevaluating competitive positioning annually factoring Nektar’s size relative to the peer group and performance. We adopted a value-based approach for sizing equity, consistent with market practices. Awards were delivered 50% stock options / 50% RSUs (ratio of two stock options: one RSU), with 50% of each vehicle tied to time-based vesting and the other 50% vesting upon achievement of performance milestones.

 

LOGO

In 2017, 2018 and 2019, equity awards made to Mr. Robin accounted for 85%, 80% and 88%, respectively, of his total direct compensation. Our objective in providing a substantial portion of Mr. Robin’s compensation in the form of equity awards is to ensure that substantial compensation value is made available to him that fluctuates based on stock price performance.

In addition, since 2012, one-half of Mr. Robin’s annual equity compensation grants awarded to him included performance-based vesting conditions, and as a result these awards only have value if, for 2019 awards, the Company achieves two (2) of the following five (5) events: (i) filing two (2) IND applications with the FDA for drug candidates wholly-owned by the Company; (ii) two clinical collaborations with significant co-funding support of at least 30% of clinical studies involving Company proprietary drugs; (iii) a judgment by a federal court that a Company-owned patent validly covers a third party product or the settlement of a patent litigation resulting in a payment to Company; (iv) the filing of an NDA by the FDA for a Company proprietary drug; and (v) the approval of an NDA by the FDA for a Company proprietary drug. This performance hurdle is in addition to a time-based vesting requirement that also applies to his equity awards. We believe these performance-based equity grants serve to further align Mr. Robin’s interests with those of our stockholders and create appropriate additional incentives to achieve performance objectives that we consider critical to the long-term growth and value of the Company.

 

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Executive Compensation Practices

Below we provide a summary of our executive compensation practices, including both the practices that we follow and those that we do not follow, in each case based on whether we believe they serve the long-term interests of our stockholders.

Core Compensation Principles and Practices

 

 

Pay for Performance . A substantial majority of the compensation awarded to our NEOs is either tied to specific company-wide and individual performance objectives or has been made either in the form of stock option awards that will only have value if our stock price increases after the grant date or RSUs the value of which fluctuates with our stock price.

 

 

Performance-Based Equity Grants . Since 2012, we have awarded 50% of each then-serving executive officer’s annual equity grants in the form of performance-based equity awards that only vest and become exercisable upon the achievement of the submission and acceptance of NDAs in the U.S. or MAAs in Europe for significant programs in our pipeline, or meeting significant program goals, in addition to satisfying time-based vesting requirements. We believe this program is important in that it even more tightly aligns the economic interests of our senior leadership team with those of our stockholders.

 

 

Ownership Guidelines . Effective 2019 we established ownership guidelines such that the CEO should own shares of our common stock equal to at least three times his base salary, and that the NEOs should own shares of our common stock equal to at least one times his or her base salary.

 

 

Regular Peer Group Review . The Organization and Compensation Committee regularly reviews the Company’s compensation peer group. This review occurred most recently in June 2019.

 

 

Double Trigger . Our change of control severance benefit plan (“CIC Plan”) provides our executive officers with acceleration of unvested equity awards held by them if they are terminated (without cause or constructively) in connection with a change of control transaction or within twelve months following a change of control transaction. Our award agreements and CIC Plan do not mandate accelerated vesting of equity awards based on a change of control alone.

 

 

Reasonable Post-Employment and Change of Control Severance Arrangements . We believe that our severance arrangements with our executive officers are reasonable and in line with industry practice.

 

 

Compensation Claw-Back Policy . We have implemented a claw-back policy which permits us to require reimbursement or cancellation of all or a portion of any performance-based cash awards or equity incentive payments to the extent based on financial results that are subsequently revised.

 

 

Regular Review of Share Utilization for Equity Compensation . We regularly evaluate and manage equity incentive plan share reserve pool utilization by reviewing overhang levels (the dilutive impact of equity compensation on stockholders) and annual burn rates (the aggregate shares awarded as a percentage of total outstanding shares).

 

 

Mitigate Undue Risk . We have designed our executive compensation program to mitigate undue risk associated with compensation by implementing the following: multiple performance targets and caps on potential payments of short-term incentive compensation (i.e., annual bonuses); awarding a substantial portion of executive compensation in the form of long-term compensation (i.e., stock options and RSUs, with multi-year vesting requirements); and compensation claw-back provisions requiring reimbursement or cancellation of all or a portion of any performance-based cash awards or equity incentive payments (please refer to the full policy on Nektar.com/governance).

 

 

Utilize Independent Compensation Consulting Firm . The Organization and Compensation Committee regularly consults with an independent compensation consulting firm which provides no other services to the Company. For more information on our independent compensation consultant, please see

 

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  “Organization and Compensation Committee” under “Information About Our Board of Directors” above.

 

 

Stockholder Outreach . We regularly meet with our stockholders to obtain feedback and discuss items of concern to them, including executive compensation. We describe stockholder outreach efforts on executive compensation in more detail below in the section titled “Role of Stockholder Say-on-Pay Votes.”

 

 

No Stock Option Repricing . Our equity incentive plans prohibit us from repricing, exchanging or otherwise providing value for underwater stock options without stockholder approval.

 

 

Elimination of Excise Tax Gross-Ups on Change of Control Payments . On April 5, 2011, we amended our CIC Plan to eliminate any “gross up” payments for any excise taxes imposed on participants who became eligible to participate in the plan after January 1, 2010 (for prior participants, the provision remains in effect).

 

 

No Accelerated Vesting of Equity Awards on Termination . Whether one of our NEOs is terminated by the Company without cause or resigns for good reason, our severance arrangements do not provide for accelerated vesting of outstanding equity awards (other than in connection with a qualifying termination after a change of control as provided in the CIC Plan).

 

 

No Inclusion of the Value of Equity Awards in Severance Calculations. Our post-termination and change of control severance arrangements do not include the value of equity awards in annual compensation for purposes of determining cash severance amounts.

 

 

No Fixed Employment Terms . We do not have employment contracts with our executive officers that provide for a guaranteed term of employment.

 

 

No Funded Pension or Retirement Plans . We do not provide any guaranteed or funded retirement plan benefits other than a matching contribution of up to $6,000 for 401(k) plan participants that we make available to all employees.

 

 

No Hedging Transactions, Share Pledging, or Short Sales by Employees or Directors . Our security trading policy prohibits any employee or director from engaging in hedging transactions, short sales or trading in any derivative security of the Company. This policy also prohibits purchasing our shares on margin. This policy permits the holding of our stock in a margin account only if an employee or director has, at all times, sufficient cash or securities other than our stock to meet a margin call.

Role of Stockholder Say-on-Pay Votes

Engaging with our stockholders helps us to understand how they view us, assists in setting goals and expectations for our performance, and identifies any emerging issues that may affect our strategies, corporate governance, compensation practices or other aspects of our operations. Throughout the year, members of Investor Relations and other subject-matter experts within the Company engage with our stockholders to remain well-informed regarding their perspective on current issues, as well as to address any questions or concerns. These teams serve as liaisons between stockholders, members of senior management and the Board. Additionally, our stockholder and investor outreach includes investor road shows, analyst meetings, and investor conferences and meetings. We seek stockholder feedback on executive compensation, governance and other matters throughout the year, concentrating our efforts on our largest stockholders.

We provide our stockholders with the opportunity to cast an annual advisory vote on our executive compensation program (referred to as a “say-on-pay vote”). At our annual meeting of stockholders held in June 2019, approximately 97.7% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. After considering the 2019 say-on-pay vote, the Organization and Compensation Committee reaffirmed the design and elements and did not make any changes to our executive compensation program in response to the 2019 say-on-pay vote. The board of directors and Organization and Compensation Committee will continue to

 

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consider the outcome of our say-on-pay proposals and direct stockholder feedback when making future compensation decisions for the NEOs.

Design and Elements of Our Compensation Program

The material elements of our current executive compensation programs for NEOs consist primarily of the following:

 

  1.

Base Salary. Each NEO earned an annual base salary during 2019.

 

  2.

Short-Term Incentive Compensation. Each NEO was eligible to earn an incentive cash compensation payment for the 2019 performance period based on a combination of the Company’s achievement of corporate performance objectives and individual performance.

 

  3.

Long-Term Incentive Compensation. Each NEO was awarded annual equity grants with a mix of approximately 50% of equity award value in the form of RSUs and 50% of equity award value in the form of stock options, in each case with the equity awards granted or vesting based on an assessment of individual performance or objective achievement milestones or criteria.

Direct Compensation Mix

While we review peer group company data regarding the mix of current and long-term incentive compensation and between cash and non-cash compensation, we have not adopted any formal policies or guidelines for allocations among these various compensation elements. Our executive compensation program is predominantly performance-based. As an executive’s ability to impact operational performance increases, so does the proportion of his or her at-risk compensation. Target long-term incentive compensation grows proportionately as job responsibilities increase, which encourages our NEOs to focus on the Company’s long-term success and aligns with the long-term interests of our stockholders.

 

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Consistent with our pay for performance philosophy, we believe that a greater component of overall direct compensation for the NEOs relative to other employees should be performance-based; therefore, in 2019 approximately 75% to 96% of total direct compensation of the NEOs was tied to Company and individual performance objectives or linked to the value of our stock price. The graphics below illustrate the mix of fixed, annual and long-term target incentive compensation we provided to our CEO. These graphics also illustrate the amount of target direct compensation tied to achievement of performance goals. In 2019, approximately 88% of total direct compensation to Mr. Robin was performance-based and not guaranteed.

 

LOGO

50% of the annual merit-based equity awards granted to Mr. Robin in 2019 were contingent upon achievement of a performance-based milestone in addition to time-based vesting.

Use of Peer Company Data

We regularly review the compensation practices of our peer group companies identified below in response to the fast-moving nature of the biotechnology industry, including merger and acquisition activity, and changes in product pipeline and business stage. In determining the appropriate peer companies, we consider the following

 

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factors: business model; commercial and business stage and complexity; therapeutic area; status of the drug candidate pipeline; manufacturing activity (if any); technology platform; product focus and company size: revenue; market capitalization; and likelihood of competition for highly-skilled personnel. As a result of the Company having a combination of multiple drug candidates in diverse therapeutic areas, a mix of wholly-owned and partnered drug candidates, a technology platform with the potential to enable multiple drug candidates in future years, and a significant legacy proprietary manufacturing operation, it is very challenging to identify truly comparable companies.

As part of its annual process, in June 2019 the Organization and Compensation Committee reviewed our compensation peer group with the objective of aligning the Company’s market capitalization and business model with that of the peer group to be used for the 2019 annual compensation decisions. After review, Regeneron Pharmaceuticals, Inc., and Vertex Pharmaceuticals, Inc. were removed from our current peer group. Moderna and Sarepta Therapeutics were added to our current peer group. The peer group of companies considered when evaluating 2019 compensation decisions consisted of the following companies:

 

ACADIA Pharmaceuticals, Inc.

Alexion Pharmaceuticals, Inc.

Alkermes, Inc.

Alnylam Pharmaceuticals, Inc.

BioMarin Pharmaceutical, Inc.

Bluebird Bio, Inc.

Exelixis, Inc.

  

Incyte Corporation

Ionis Pharmaceuticals, Inc.

Jazz Pharmaceuticals Plc.

Moderna, Inc.

Neurocrine Biosciences, Inc.

Sarepta Therapeutics, Inc.

Seattle Genetics, Inc.

Given that certain of our peer group companies have larger or smaller market capitalizations than the Company, the Organization and Compensation Committee also reviews equity and total direct compensation data for our executives against the compensation for similarly situated executives at peer companies contained in surveys. In 2018, we adopted a value-based approach for sizing equity and Radford, part of the Rewards Solutions practice of Aon plc, our independent compensation consultant, provided recommendations which are benchmarked to the 50 th percentile, and adjusted based on the Company’s performance and size relative to the peer group. Although the Organization and Compensation Committee reviewed and discussed the compensation data for the peer group companies to help inform executive compensation decisions, it does not set compensation at any specific level or percentile based solely on the peer group data. The peer group data and general industry compensation survey data is used only as one reference point taken into account in making compensation decisions. In determining total and direct compensation, the Organization and Compensation Committee considers a number of factors including an assessment of individual and company performance, competitive market practices, the number of unvested stock options held by the executive and average exercise price (i.e., the retention value) of these options, the number of unvested RSUs, the individual’s overall contributions, and stockholder dilution. However, we do not use a formula or assign a particular weight to any one factor in determining cash and equity award levels. The determination of equity grant levels is subjective, and the Organization and Compensation Committee awards equity grants at levels it believes in its judgment are reasonably competitive and consistent with our philosophy that a substantial portion of our executives’ compensation should be performance-based and help to further link the interests of our executives with those of our stockholders. The Organization and Compensation Committee does not use peer group or industry survey data as a standalone tool for setting compensation due to the unique aspects of our business and the need to attract and retain particular expert managers with unique experience and skills. However, the Organization and Compensation Committee generally believes that reviewing and analyzing this information is an important component of its executive compensation decision-making process.

Base Salary

Base salary is the initial building block of compensation for the NEOs because it provides the executives with a specified basic level of cash compensation, which we believe is important to attract and retain highly

 

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skilled and experienced executives. The Organization and Compensation Committee determines base salaries by considering competitive pay practices, cost of labor and compensation trends, individual performance and promotions, level and scope of responsibility, experience and internal pay equity. However, the Organization and Compensation Committee does not use a formula or assign a particular weight to any one factor. Rather, the determination of base salary levels is subjective, and base salaries are set at levels that the Organization and Compensation Committee believes to be reasonably competitive. In October 2019, Dr. Zalevsky was provided a base salary increase of 16.2% upon his promotion to his new position of Chief Research and Development Officer. In October 2019, Mr. Labrucherie was provided a base salary increase of 13.4% upon his promotion to his new position of Chief Operating Officer and Chief Financial Officer. In December 2019, the Organization and Compensation Committee reviewed the base salaries of the NEOs and increased the CEO base salary by 3.5% and the other NEO base salaries by 4.8% to 5.1% for 2020. Due to his hire date of December 2, 2019, Mr. Northcott did not receive an increase to his base salary in 2019. The base salary earned by each NEO during 2019 is reported below in the Summary Compensation Table – Fiscal 2017-2019.

Short-Term Incentive Compensation

Incentive Compensation Plan. We believe that our short-term incentive compensation program (“Incentive Compensation Plan”) for the NEOs rewards the achievement of important short-term objectives that advance us toward our long-term strategic objectives. Our Incentive Compensation Plan applies to all employees and all executive officers other than Mr. Robin, who is subject to his own separate annual performance-based bonus compensation arrangement with a combination of corporate and personal objectives established and evaluated by the Organization and Compensation Committee. However, Mr. Robin’s bonus arrangement for 2019 was based on substantially the same corporate objectives that we established under the Incentive Compensation Plan. Consistent with our compensation philosophy of paying for performance and maintaining a flexible approach, we use the Incentive Compensation Plan to incent the NEOs to achieve important corporate goals while at the same time encouraging and rewarding excellent individual performance by recognizing and rewarding differences in performance between individual executives.

Plan Design. The board of directors establishes a small number of important annual corporate goals each year that include clinical development, research, manufacturing, organizational and financial goals which we believe are essential to building long-term stockholder value and are used to assess annual corporate performance. The relative weightings of these corporate goals are based upon our assessment of the importance of each goal in creating long-term value for the Company and our stockholders. If we achieve the target level of performance for all of the stated goals, the overall corporate performance rating should be approximately 100%. We endeavor to select corporate goals that, if met by management, represent significant levels of annual achievement, although we believe the long-term nature of our drug development business does not lend itself to over-weighting the importance of annual goals. Following the conclusion of the annual performance period, the level of achievement for each corporate goal is assessed by the board of directors. The board determines whether each corporate goal has been met, exceeded, or not satisfied. In addition, in assessing corporate performance, the determination of corporate performance may be adjusted upward or downward as deemed appropriate to factor in other significant corporate events, either negative or positive, that occurred during the performance period. After taking into account the level of attainment of each corporate goal and such other corporate performance factors as the board may determine appropriate in reviewing performance for a particular year, the board of directors assigns an overall corporate performance rating for the year, which may range from 0% to 200%. The Organization and Compensation Committee then confirms the corporate performance rating for purposes of the Incentive Compensation Plan. The total available bonus pool under the Incentive Compensation Plan is determined by multiplying the corporate performance rating by the aggregate target bonus of all eligible participants which includes nearly all of the Company’s full-time employees. The aggregate of all individual bonuses awarded under the plan cannot exceed the total available bonus pool so that the total cost of bonuses ultimately reflects our assessment of overall performance and is not inflated by the sum of individual performance ratings. Mr. Robin does not participate in the final selection of the corporate goals or determination of the corporate performance rating.

 

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After the corporate performance rating is determined, the individual performance of each NEO is reviewed by the Organization and Compensation Committee in consultation with Mr. Robin (other than with respect to his own performance) in order to determine the appropriate individual performance percentage rating to be assigned to the executive for the performance period. Mr. Robin’s individual performance is separately reviewed by the Organization and Compensation Committee. Each NEO’s actual annual bonus is based on a combination of the corporate performance rating and individual performance. The Incentive Compensation Plan does not provide for a specific allocation or weighting between corporate and individual performance. The actual annual bonus awarded for each NEO is solely determined by the Organization and Compensation Committee based on criteria that includes an assessment of individual and company performance, and the maximum payout for each NEO, including Mr. Robin, could be up to 200% of his or her annual performance-based compensation target (or, by the same token, an individual executive’s award could be reduced to 0% based on individual performance regardless of the corporate performance rating).

Target Annual Short-Term Incentive Compensation for 2019. The NEOs were each assigned a target annual incentive for 2019 ranging from 50% to 85% of base salary. In 2019, Mr. Labrucherie’s bonus percentage increased from 50% to 75% upon his promotion to the position of Chief Operating Officer and Chief Financial Officer; and Dr. Zalevesky’s bonus percentage increased from 50% to 60% upon his promotion to the position of Chief Research and Development Officer. The table below shows the target annual incentive assigned by us to each NEO as of December 2019 both as a dollar amount and as a percentage of base salary.

 

Name   

Target

Annual

Incentive for

2019

($)

    

Target

Annual

Incentive for

2019

(% of Base

Salary)

 

Howard W. Robin

     864,790        85

Gil M. Labrucherie

     562,500        75

John Northcott

     0        0

Jillian B. Thomsen

     228,500        50

Jonathan Zalevsky, Ph.D.

     390,000        60

Company Performance Objectives. The 2019 corporate objectives and relative weightings assigned to each objective were as follows:

 

Objective    Target %  

Clinical

  

Objectives related to NKTR-214 clinical study enrollment

     25

Objective related to NKTR-181 approval

     10

Objective related to NKTR-262 and NKTR-214 combination clinical study

     15

Objective related to NKTR-358 phase 1 clinical study

     10

Objective related to NKTR-255 clinical study enrollment

     5

Research

  

Objective related to advancing IND enabling work for NKTR-230 in 2020

     5

Objective related to advancing a development candidate status to support an IND filing in 2021

     5

Manufacturing/Supply

  

Objective related to NKTR-214 scale-up to meet clinical and commercial requirements

     10

Objective related to manufacture of NKTR-181 for commercial supply

     5

Corporate and Financial

  

Objective related to putting into place strategic resources and infrastructure to support immuno-oncology program

     5

Objective related to year-end cash position (not including payments from new collaborations, financings, or stock option exercise proceeds)

     5

 

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These performance objectives served as the corporate performance objectives under the Company’s Incentive Compensation Plan. This weighting of objectives is a reflection of our long-term focus as a research-based development stage biopharmaceutical company with the goal of building a broad, robust and diverse pipeline of proprietary drug candidates. We believe this mix of corporate goals represents objectives important to building the long-term foundation of our business. A corporate performance rating in excess of 100% can only be achieved if the Organization and Compensation Committee determines that the goal achievement for one or many of the goals substantially and qualitatively exceeded the target metrics, or the Organization and Compensation Committee uses its discretion to factor in other significantly positive corporate events that occurred during the performance period. The maximum potential corporate performance rating is 200%.

Actual Annual Incentives Earned for 2019 . Management prepared a report on the status of achievement of the 2019 corporate objectives that was reviewed by the Organization and Compensation Committee. The Organization and Compensation Committee determined that seven of the corporate goals identified above were met, one goal was significantly exceeded, three goals were partially met, and one goal was not met resulting in a 63% aggregate corporate performance achievement.

The Organization and Compensation Committee, in consultation with Mr. Robin, determined an individual performance rating for each of the NEOs excluding Mr. Robin, whose performance is determined independently by the Organization and Compensation Committee without his participation. Consistent with standards used to determine annual incentive awards for all employees and our objective to tie pay to performance, the NEOs are eligible to earn annual bonus awards that exceed the corporate performance rating if their rating is “exceptional” or “exceeds expectations.” Employees with ratings of “solid performer,” “needs improvement” or “does not meet expectations” received awards below the corporate performance rating level, and in some cases, they received bonuses significantly below that level or no bonus award at all.

The Organization and Compensation Committee considered a number of performance factors in determining each executive’s performance rating and associated annual incentive awards, including specific accomplishments of each NEO, the effectiveness of leadership within the NEO’s functional area, the level of their contributions to the achievement of the corporate objectives, the achievement of certain outcomes that were not corporate objectives but nonetheless important projects at the Company, and the ability to effectively work with other members of the management team. Although the Organization and Compensation Committee determined that the NEO’s individual performance merited annual bonus awards, Nektar’s Executive Committee (which is comprised of the NEOs and other executives) opted to forego their individual annual cash bonus awards completely to underscore their commitment to the long-term performance of the Company and to reinforce a culture of leadership accountability in a year overall corporate performance did not meet their expectations. The table below includes the actual cash 2019 bonuses, as a percentage of the target bonus, that we awarded the NEOs for 2019. The long-term incentive compensation equity awards granted to the NEOs, which included a 2019 annual equity award and an additional equity award, are discussed in the next section.

 

Name   

Actual Bonus

as a

Percentage of

Target Bonus
for Entire
2019 Year

(%)

 

Howard W. Robin

     0

Gil M. Labrucherie

     0

John Northcott (1)

     0

Jillian B. Thomsen

     0

Jonathan Zalevsky, Ph.D.

     0

 

(1)  

Mr. Northcott was not eligible for an annual bonus due to his hire date of December 2, 2019.

The amount of each NEO’s bonus for the 2019 fiscal year are reported in the Summary Compensation Table – Fiscal 2017-2019.

 

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Long-Term Incentive Compensation: Equity Awards

Overview. In accordance with our objective of aligning executive compensation with our stockholders’ interests, our current long-term incentive program for the NEOs generally consists of annual awards of equity compensation that are subject to a multi-year vesting schedule. We believe that equity compensation is a very effective tool to align the interests of our NEOs with the interests of our stockholders. Consistent with the 2018 program, the 2019 annual equity awards included a mix of approximately 50% in the form of stock options and 50% in the form of RSUs, with the number of RSUs are determined by treating each RSU as the equivalent of two stock options. This ratio converts stock options to RSUs using a slight discount to the stock option fair value disclosed in the Summary Compensation Table – Fiscal 2017-2019 to recognize that RSUs each represent a full value share. Fifty percent (50%) of the 2019 annual stock option and RSU grants are subject to performance-based vesting conditions as well as a time-based vesting requirement. Annual stock options vest monthly over four years and annual RSUs vest quarterly over three years.

Performance-Based Equity Compensation Program. In 2012, we established a performance-based equity program for our executive officers. Under this program, 50% of the annual equity awards granted to our executive officers each year have been made in the form of performance-based equity awards that vest based on time-based vesting schedules plus a separate independent performance condition that must also be achieved within five years of grant. The performance criteria for 2019 is the Company’s achievement of two (2) of the following five (5) events: (i) filing two (2) IND applications with the FDA for drug candidates wholly-owned by the Company; (ii) two clinical collaborations with significant co-funding support of at least thirty percent (30%) of clinical study costs involving Company proprietary drugs; (iii) a judgment by a federal court that a Company-owned patent validly covers a third party product or the settlement of a patent litigation resulting in a payment to Company; (iv) the filing of an NDA by the FDA for a Company proprietary drug; and (v) the approval of an NDA by the FDA for a Company proprietary drug. In setting this performance hurdle, the Organization and Compensation Committee believed it would be challenging to achieve and, if achieved, would help create long-term stockholder value. We believe that the advancement of the late stage drug candidate pipeline is a critical catalyst to stockholder value creation.

Actual Long-Term Incentives Awarded. Consistent with our annual performance review process, the NEOs received an annual equity award in December 2019. Our independent compensation consultant provided data created in December 2019 indicating that the CEO’s and NEO’s 2018 total compensation was around the median for comparable positions. Each of the NEOs received a decrease in their annual equity grant values as compared to 2018 to reflect the market data and change in peer group. The 2019 award to our CEO, Mr. Robin, reflected the median CEO grant value of the 2019 peer group.

In 2018, we adopted a value-based approach for sizing equity, consistent with market practices. In determining the grant levels for equity awards, we consider a number of factors including an assessment of individual performance, competitive market practices, the number of unvested RSUs and stock options held by the executive and average exercise price (i.e., the retention value) of these stock options, the individual’s overall contributions, and stockholder dilution. However, we do not use a formula or assign a particular weight to any one factor in determining equity award levels. Rather, the determination of equity grant levels is subjective, and the Organization and Compensation Committee awards equity grants at levels it believes in its judgment are reasonably competitive and consistent with our philosophy that a substantial portion of our executives’ compensation should be performance-based and help to further link the interests of our executives with those of our stockholders, as well as to provide a retention incentive for the executive as well as an additional incentive to help create value for our stockholders.

In connection to their promotions, we granted additional stock option and RSU awards to Dr. Zalevsky and Mr. Labrucherie upon attaining the positions of Chief Research and Development Officer, and Chief Operating and Chief Finance Officer, respectively, in October 1, 2019. We determined the size of promotion equity (stock option and RSU) grants for Dr. Zalevsky and Mr. Labrucherie in relation to a combination of factors including

 

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market data, their individual performance, expected contributions to the Company, internal pay equity, the number of unvested stock options and RSUs held (including the average exercise price) and retention value. The promotion stock option awards vest monthly over a period of four years from the grant date and promotion RSUs vest quarterly over three years. We believe these promotional equity grants provide significant retention incentives for Dr. Zalevsky and Mr. Labrucherie, as well as aligning their long-term compensation with value creation for our stockholders.

We also granted an equity award to Mr. Northcott in connection with his hiring as the Company’s Senior Vice President and Chief Commercial Officer. We determined the size of Mr. Northcott’s equity grant awards during the process of negotiating his overall compensation package so as to create a sufficient long-term incentive package to secure his skills and experience in building and managing commercial organizations. Consistent with market practice, the size of the new hire equity grant (which included a stock option grant and RSU grant) is several multiples of anticipated annual award levels. The stock option grant vests over four years with 25% of the stock option vesting on the one-year anniversary of Mr. Northcott’s employment start date and the remainder vesting monthly over the following three years. The RSU grant vests over four years with 25% of the RSU award vesting on the next quarterly RSU processing date one year after the vesting commencement date and the remainder vesting quarterly over the following three years in substantially equal installments on each RSU processing date.

In addition to the 2019 annual equity award, the Organization and Compensation Committee awarded an additional stock option grant to all Executive Committee members as a recognition that they had voluntarily forgone their cash bonus that they otherwise would have earned based on the Organization and Compensation Committee’s determination of corporate performance for 2019. With the Executive Committee members having relinquished immediate compensation that would have been paid in cash, we believe these stock options provide an incentive for retaining the executives, as well as aligning their long-term compensation with value creation for our stockholders. Our independent compensation consultant, Radford, assisted in determining the amount of the award that was commensurate with the approximate amount of the cash bonus that each executive would have otherwise received. These grants vest monthly over four years.

Effective January 1, 2019 the Organization and Compensation Committee approved ownership guidelines for our executive officers, such that the CEO should own shares of our common stock equal to at least three times his or her base salary, and the NEOs should own shares of our common stock equal to at least one time his or her base salary. The minimum stock ownership level is to be achieved by each executive officer within five years of the date of his or her appointment to executive officer. As of December 31, 2019, each NEO met the minimum stock ownership guidelines or was within the five-year grace period provided by the plan. The number of shares of common stock subject to stock option and RSU awards granted to each NEO during 2019 and the grant-date fair value of these equity awards is presented in the Grants of Plan Based Awards in 2019 table below. A description of the material terms of the 2019 equity awards is presented in the narrative section following that table.

Severance and Change of Control Benefits

If the employment of an NEO is terminated by us without cause or by the executive for a designated good reason outside of the context of a change of control transaction, the executive would be entitled to severance benefits under the applicable agreement he or she entered into with the Company. Generally, these severance benefits include a cash severance payment based on the executive’s then-current base salary and the amount of his or her target annual incentive bonus, payment of COBRA premiums for up to a maximum of eighteen (18) months, and an additional twelve-month period to exercise vested stock options (an eighteen-month period for Mr. Robin, and a three-month period for Dr. Zalevsky). In order to attract and retain these NEOs in a competitive environment for highly skilled senior executive talent in the biotechnology and pharmaceutical industry and to provide an incentive to obtain a broad release of claims in favor of the Company, we determined it was often necessary to offer each of them severance benefits in the case of a termination without cause or

 

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constructive termination outside the context of a change of control transaction. Many companies provide severance benefits for similar types of terminations of employment, and we believe that it is important for us to offer these severance benefits in order to continue to provide a competitive total compensation program. These NEOs would also be entitled to certain termination benefits upon a termination of employment because of death or disability.

We also maintain a Change of Control Severance Benefit Plan (the “CIC Plan”) that provides the NEOs with certain severance benefits if their employment is terminated in connection with a change of control. The CIC Plan was originally established in 2006, and no amendments have been made to the plan since that time that would increase the severance benefits available under the CIC Plan. Severance benefits under the CIC Plan are structured on a “double-trigger” basis, meaning that the executive must experience a termination without cause or resign for a specifically defined good reason in connection with the change of control in order for severance benefits to become payable under the CIC Plan. Like the severance benefits under the letter agreements, we believe that these change of control severance benefits are an important element of a competitive total compensation program. Additionally, we believe that providing change of control benefits should eliminate, or at least reduce, any reluctance of our NEOs and other key employees covered by the CIC Plan to diligently consider and pursue potential change of control opportunities that may be in the best interests of our stockholders. At the same time, by providing change of control benefits only upon the occurrence of an additional triggering event occurring in connection with the change of control transaction resulting in a job loss, we believe that this CIC Plan helps preserve the value of our key personnel for any potential acquiring company.

Under the CIC Plan, the executive would be entitled to accelerated equity award vesting upon a termination described above. The other severance benefits under the CIC Plan are generally similar to the severance benefits described above; however, Mr. Robin’s cash severance would cover the two-year period following termination and Company-paid COBRA coverage would be eighteen months. Outplacement services received within twelve months following separation, up to a maximum of $5,000, are provided to all participants. In addition, each of the NEOs would be entitled to full equity vesting and, except for Dr. Zalevsky and Mr. Northcott, a “gross up” payment for any excise taxes imposed under Section 4999 of the Internal Revenue Code once a 10% cutback threshold is exceeded. The excise tax gross-up was included in the CIC Plan as originally adopted in 2006 to make the participants whole for any adverse tax consequences to which they may become subject under Section 4999 of the Internal Revenue Code and to avoid unintended differences in net severance based on individual factors like the date of hire and past option exercise decisions, which preserves the level of change of control severance protections that we have determined to be appropriate. At the time the CIC Plan was established, we believed this excise tax gross-up protection was a reasonable part of a competitive total compensation package and generally consistent with industry practice at the time. On April 5, 2011, the board of directors amended the CIC Plan to eliminate any “gross up” payments for any excise taxes imposed under Section 4999 of the Internal Revenue Code for participants who became eligible to participate in the CIC Plan on or after January 1, 2010. The board of directors decided to eliminate this tax gross-up provision under the plan for new participants based on its review of current industry practices.

The “Potential Payments Upon Termination or Change of Control” section below describes and quantifies the severance and other benefits potentially payable to the NEOs.

Other Benefits

We believe that establishing competitive benefit packages for employees is an important factor in attracting and retaining highly-qualified personnel, including the NEOs. The NEOs are eligible to participate in all of our employee benefit plans, such as medical, dental, vision, group life, disability insurance, commuting benefits, employee stock purchase plan and the 401(k) plan, in each case generally on the same basis as other employees. We do not offer a tax-qualified defined-benefit pension plan or any non-qualified defined benefit retirement plans, nor do we provide material perquisites to our executives. In 2019, we offered Mr. Robin the benefit of third party local ground transportation. These ground transportation benefits serve business purposes, such as allowing Mr. Robin to safely increase his productivity by attending to business matters while in transit.

 

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Other Compensation Policies and Practices

Claw-Back Policy

We maintain a performance-based compensation recovery (“clawback”) policy which provides that, in the event that we are required revise our financial results, we may recover from any executive officer any incentive compensation erroneously paid or awarded in excess of what would have been based on the revised financial results. This policy applies to any incentive compensation that is either granted or paid at any time during the period of three full fiscal years prior to the date on which the financial results applicable to such award or payment are revised.

Tax and Accounting Considerations

Deductibility of Executive Compensation

Generally, Section 162(m) of the Code (“ Section 162(m) ”) disallows a federal income tax deduction for public corporations of remuneration in excess of $1 million paid in any fiscal year to certain specified executive officers. For taxable years beginning before January 1, 2018 (i) these executive officers consisted of a public corporation’s chief executive officer and up to three other executive officers (other than the chief financial officer) whose compensation is required to be disclosed to stockholders under the Exchange Act because they are our most highly-compensated executive officers and (ii) qualifying “performance-based compensation” was not subject to this deduction limit if specified requirements are met.

Pursuant to the Tax Cuts and Jobs Act of 2017, which was signed into law on December 22, 2017 (the “ Tax Act ”), for taxable years beginning after December 31, 2017, the remuneration of a public corporation’s chief financial officer is also subject to the deduction limit. In addition, subject to certain transition rules (which apply to remuneration provided pursuant to written binding contracts which were in effect on November 2, 2017 and which are not subsequently modified in any material respect), for taxable years beginning after December 31, 2017, the exemption from the deduction limit for “performance-based compensation” is no longer available. In addition, under the Tax Act, once an executive becomes a “covered employee” under Section 162(m), the individual will continue to be a “covered employee” as long as he or she remains employed by the company. Consequently, for fiscal years beginning after December 31, 2017, all remuneration in excess of $1 million paid to a covered executive will not be deductible unless it qualifies for transitional relief applicable to certain binding, written performance-based compensation arrangements that were in place as November 2, 2017 or transitional relief for applicable to certain newly public companies. These changes will cause more of our compensation to be non-deductible under Section 162(m) in the future and will eliminate the Company’s ability to structure performance-based awards to be exempt from Section 162(m).

In designing our executive compensation program and determining the compensation of our executive officers, including our named executive officers, the Organization and Compensation Committee considers a variety of factors, including the potential impact of the Section 162(m) deduction limit. While the Organization and Compensation Committee is mindful of the benefit of the full deductibility of compensation, it believes that we should not be constrained by the requirements of Section 162(m) where those requirements would impair our flexibility in compensating our executive officers in a manner that can best promote our corporate objectives. Therefore, the Organization and Compensation Committee has not adopted a policy that would require that all compensation be deductible, though it does consider the deductibility of compensation when making compensation decisions. The Organization and Compensation Committee may authorize compensation payments that are not fully tax deductible if it believes that such payments are appropriate to attract and retain executive talent or meet other business objectives.

 

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Accounting for Stock-Based Compensation

We follow FASB ASC Topic 718 for our stock-based compensation awards. FASB ASC Topic 718 requires us to measure the compensation expense for all share-based payment awards made to our employees and non-employee members of our board of directors, including options to purchase shares of our common stock and other stock awards, based on the grant date “fair value” of these awards. This cost is recognized as an expense following the straight-line attribution method over the requisite service period. This calculation is performed for accounting purposes and reported in the executive compensation tables required by the federal securities laws, even though the recipient of the awards may never realize any value from such awards.

 

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C OMPENSATION C OMMITTEE R EPORT

The material in this report is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall the material in this section be deemed to be “soliciting material” or incorporated by reference in any registration statement or other document filed with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as otherwise expressly stated in such filing.

The Organization and Compensation Committee has reviewed the Compensation Discussion and Analysis and discussed it with management. Based on its review and discussions with management, the committee recommended to our board of directors that the Compensation Discussion and Analysis be included in our annual report on Form 10-K for the fiscal year ended December 31, 2019 and in our 2020 proxy statement. This report is provided by the following independent directors, who currently comprise the committee:

Lutz Lingnau—Chairman

Jeff Ajer

Karin Eastham

R. Scott Greer

 

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SUMMARY COMPENSATION TABLE—FISCAL 2017-2019

The following table shows, for the fiscal year ended December 31, 2019, compensation awarded to or earned by our Chief Executive Officer, our Chief Financial Officer and our other three most highly compensated executive officers who were serving as executive officers on December 31, 2019 (the “NEOs”). To the extent any NEOs were also named executive officers for the fiscal years ended December 31, 2018 or December 31, 2017, compensation information for our 2018 and 2017 fiscal years is also presented for such executives.    

 

Name and Principal Position

(a)

  Year
(b)
    Salary
($)
(c)
    Bonus
(S)
(d)
    Stock
Awards
($)(1)(3)
(e)
    Option
Awards
($)(2)(3)
(f)
    Non-Equity
Incentive Plan
Compensation
($)(4)
(g)
    All Other
Compensation
($)
(i)
    Total ($)
(j)
 

Howard W. Robin

    2019       1,017,400         4,100,860       4,652,065       0       168,925 (5)         9,939,250  

President and Chief Executive Officer

    2018       968,921         4,998,206       5,618,256       1,647,100       98,184       13,330,667  
    2017       940,700         6,884,888       8,544,658       1,599,190       127,975       18,097,411  

Gil M. Labrucherie

    2019       683,325         3,131,971       3,661,047       0       12,498 (6)         7,488,841  

Chief Operating Officer and Chief Financial Officer

    2018       631,696         2,099,320       2,359,382       631,600       11,930       5,733,928  
    2017       607,400         2,958,794       3,672,084       531,475       10,338       7,780,091  

John Northcott

    2019       56,250 (8)         200,000 (7)         3,895,980       2,189,480       0       13,313 (9)         6,355,023  

Senior Vice President and Chief Commercial Officer

               

Jillian B. Thomsen

    2019       457,000         649,340       795,957       0       13,787 (10)         1,916,084  

Senior Vice President Finance and Chief Accounting Officer

    2018       435,000         4,461,658       899,489       424,100       13,347       6,233,595  

Jonathan Zalevsky, Ph.D.

    2019       582,000         3,131,971       3,552,0062       0       8,120 (11)         7,274,153  

Chief Research and Development Officer

               

 

(1)

Amounts reported represent the aggregate grant date fair value of RSU awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“FASB ASC Topic 718”), based on the closing price of the Company’s common stock on the grant date and excluding the effects of estimated forfeitures. For a complete description of the assumptions made in determining the valuation, please refer to (i) Note 11 (Stock-Based Compensation) to our audited financial statements in our annual report on Form 10-K for the fiscal year ended December 31, 2019 and (ii) similar footnotes to our audited financial statements in our annual reports on Form 10-K for prior years when the awards were granted.

(2)

Amounts reported represent the aggregate grant date fair value of the stock options granted in the applicable year computed in accordance with FASB ASC Topic 718, which excludes the effects of estimated forfeitures. For a complete description of the assumptions made in determining the valuation, please refer to (i) Note 11 (Stock-Based Compensation) to our audited financial statements in our annual report on Form 10-K for the fiscal year ended December 31, 2019 and (ii) similar footnotes to our audited financial statements in our annual reports on Form 10-K for prior years when the awards were granted.

(3)

As noted in the Compensation Discussion and Analysis above, 50% of the annual equity awards granted to the NEOs in 2017, 2018 and 2019 were performance-based and vest only to the extent a specified performance-based vesting condition is satisfied within 5 years of grant. If the performance-based vesting condition is satisfied, then the performance-based equity awards also remain subject to a time-based vesting requirement. The amounts reported in the “Stock Awards” and “Option Awards” column of the table for 2017, 2018 and 2019 include the grant date fair value of performance-based RSUs and stock options, as applicable for the year, based on the probable outcome (determined as of the grant date in accordance with generally accepted accounting principles) of the performance-based conditions applicable to the awards. The probable grant date fair value for these awards was determined assuming that the underlying performance-

 

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  based vesting condition would be achieved (i.e., the maximum achievement of applicable performance conditions).
(4)

Amounts reported for 2017, 2018 and 2019 represent amounts earned under the Incentive Compensation Plan for that year or, for Mr. Robin, under his amended and restated offer letter effective as of December 1, 2008.

(5)

Includes (i) $59,034 for local ground transportation provided by a third party service provider, (ii) tax reimbursements of $50,187 for such third party local ground transportation, (iii) life insurance premiums of $53,704 and (iv) a $6,000 contribution to the Company’s 401(k) plan. The allowance for third party local ground transportation was valued based on the amounts reimbursed directly to Mr. Robin or the service provider, as applicable.

(6)

Includes (i) life insurance premiums of $2,385, (ii) a $6,000 contribution to the Company’s 401(k) plan, (iii) $273 for parking, (iv) a $238 public transit pass and (v) $202 for tax gross-ups related to parking.

(7)

$200,000 sign-on bonus related to his commencement of employment in December 2019.

(8)

Represents the pro-rated salary for Mr. Northcott from the commencement of his employment in December 2019.

(9)

Includes (i) relocation allowance of $10,000 and (ii) a $3,313 contribution to the Company’s 401(k) plan.

(10)

Includes (i) life insurance premiums of $3,657, (ii) a $6,000 contribution to the Company’s 401(k) plan, (iii) a $3,400 contribution to the Health Savings Account, (iv) $444 for parking and (v) tax gross ups of $286 related to parking.

(11)

Includes (i) life insurance premiums of $2,120 and (ii) a $6,000 contribution to the Company’s 401(k) plans.

Description of Employment Agreements

Each of the NEOs has entered into our standard form of employment agreement and an offer letter or letter agreement. The form of employment agreement provides for protective covenants with respect to confidential information, intellectual property and assignment of inventions and also sets forth other standard terms and conditions of employment. The offer letter agreements do not provide for any minimum or guaranteed term of employment. The letter agreements entered into by each of the NEOs establish the compensation arrangements following separation from us under certain circumstances. Please see “Potential Payments upon Termination or Change of Control” below for more information on these separation arrangements.

 

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GRANTS OF PLAN BASED AWARDS IN 2019

The following table shows, for the fiscal year ended December 31, 2019, certain information regarding grants of plan-based awards to the NEOs.

 

Name
(a)

  Grant
Date
(b)
    Estimated Possible Payouts
Under Non-Equity
Incentive Plan Awards(1)
    Estimated Future Payouts
Under Equity
Incentive Plan Awards(2)
    All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)(3)
(i)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(4)
(j)
    Exercise
or Base
Price  of
Option
Awards
($/
sh)(5)
(k)
    Grant Date
Fair Value
of Stock
and
Option
Awards
($)(6)
(l)
 
  Threshold
($)
(c)
    Target
($)
(d)
    Maximum
($)
(e)
    Threshold
(#)
(f)
    Target
(#)
(g)
    Maximum
(#)
(h)
 

Howard W. Robin

                     

Annual Incentive Award

    N/A             864,790       1,729,580                

Restricted Stock Units

    12/12/2019                   94,100           2,050,430  

Restricted Stock Units

    12/12/2019                   94,100                   2,050,430  

Stock Options

    12/12/2019                     167,650       21.79       2,052,958  

Stock Options

    12/12/2019                   167,650                 21.79       2,052,958  

Stock Options

    12/12/2019                     44,600       21.79       546,149  

Gil M. Labrucherie

                     

Annual Incentive Award

    N/A             562,500       1,125,000                

Restricted Stock Units

    10/1/2019                   75,000           1,382,243  

Stock Options

    10/1/2019                             150,000       18.43       1,553,595  

Restricted Stock Units

    12/12/2019                   40,150           874,864  

Restricted Stock Units

    12/12/2019                   40,150                   874,864  

Stock Options

    12/12/2019                     71,550       21.79       876,166  

Stock Options

    12/12/2019                   71,550                 21.79       876,166  

Stock Options

    12/12/2019                     29,000       21.79       355,120  

John Northcott

                     

Annual Incentive Award (7)

    N/A                                  

Restricted Stock Units

    12/02/2019                   200,000 (8)           3,895,980  

Stock Options

    12/02/2019                     200,000 (9)       19.48       2,189,480  

Jillian B. Thomsen

                     

Annual Incentive Award

    N/A             228,500       457,000                

Restricted Stock Units

    12/12/2019                   14,900           324,670  

Restricted Stock Units

    12/12/2019                   14,900               324,670  

Stock Options

    12/12/2019                     26,600       21.79       325,730  

Stock Options

    12/12/2019                   26,600             21.79       325,730  

Stock Options

    12/12/2019                     11,800       21.79       144,497  

Jonathan Zalevsky, Ph.D.

                     

Annual Incentive Award

    N/A             390,000       780,000                

Restricted Stock Units

    10/1/2019                   75,000           1,382,243  

Stock Options

    10/1/2019                             150,000       18.43       1,553,595  

Restricted Stock Units

    12/12/2019                   40,150           874,864  

Restricted Stock Units

    12/12/2019                   40,150                   874,864  

Stock Options

    12/12/2019                     71,550       21.79       876,166  

Stock Options

    12/12/2019                   71,550                 21.79       876,166  

Stock Options

    12/12/2019                     20,100       21.79       246,135  

 

(1)

Amounts reported represent the potential short-term incentive compensation amounts payable for our 2019 fiscal year under our Incentive Compensation Plan (or for Mr. Robin, the potential amounts payable under his offer letter). The amounts reported represent each NEO’s target and maximum possible payments for 2019. Because actual payments to the NEOs could range from 0% to 200% of their target bonus, no threshold payment amount has been established for the NEOs. The actual short-term incentive bonus amount earned by each NEO for 2019 is reported in Column (g) (Non-Equity Incentive Plan Compensation) of the Summary Compensation Table—Fiscal 2017-2019 above. Although the Organization and Compensation Committee determined that the NEO’s individual performance merited bonus awards, each of Nektar’s Executive Committee members opted to forego their individual annual cash bonus awards completely to underscore their commitment to the long-term performance of the Company and to reinforce a culture of leadership accountability.

(2)

The RSU grants are subject to both a three year time-based vesting requirement (quarterly pro-rata vesting) and the achievement of specified performance criteria within five years of grant. The stock option grants are subject to both a four-year time-based vesting requirement (monthly pro-rata vesting) and the achievement of specified performance criteria within five years of grant.

 

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(3)

Other than the vesting schedule noted in footnote (8), these grants are subject to a three-year quarterly pro-rata vesting requirement.

(4)

Other than the vesting schedule noted in footnote (9), these grants are subject to a four-year monthly pro-rata vesting requirement.

(5)

Exercise price is the closing price of our common stock on the date of grant.

(6)

Refer to Note 11 (Stock-Based Compensation) to our audited financial statements in our annual report on Form 10-K for the fiscal year ended December 31, 2019 for the relevant assumptions used to determine the grant date fair value of the stock options granted during 2019. The grant date fair value of the RSUs was based on the closing price of our common stock on the grant date. The amounts reflected in this column for RSUs and stock options granted during 2019 that are subject to performance-based vesting conditions represent the grant date fair value of these awards based on the probable outcome (determined as of the grant date in accordance with applicable accounting rules) of the performance-based conditions applicable to the awards.

(7)

Mr. Northcott joined Nektar December 12, 2019 and therefore he was not eligible for any bonus in 2019.

(8)

This grant vests over four years with 25% vesting on February 15, 2021 and the remainder vesting over three years in equal quarterly installments.

(9)

This grant vests over a four-year period with 25% vesting on the first anniversary of the grant date and the remaining 75% of the shares vesting in equal monthly installments over the three-year period thereafter.

Description of Plan-Based Awards

Stock Options. Each stock option granted to the NEOs during 2019 may be exercised to purchase the designated number of shares of our common stock at an exercise price equal to the closing price of the underlying common stock on the grant date. Each NEO’s stock option award granted in 2019 has a maximum term of eight (8) years and is subject to a vesting schedule that requires the executive’s continued service through the vesting date. Other than the new hire grant for Mr. Northcott, the 2019 stock option awards granted to the NEOs will vest on a monthly pro-rata basis over a four-year period following the grant date.

Restricted Stock Units. Each NEO’s RSU award granted in 2019 is subject to a vesting schedule that requires the executive’s continued service through the vesting date. Other than the new hire grant for Mr. Northcott, the 2019 RSU annual awards granted to the NEOs will vest on a quarterly pro-rata basis over a three-year period following the grant date.

In December 2019, each NEOs annual merit equity award was tied to either a qualitative assessment of individual performance or objective performance milestones or criteria that were designed to be rigorous and challenging. As an example, the stock options were 50% of the equity granted to our executive officers and were made in the form of performance-based awards vesting based on the standard four-year monthly time-based vesting plus a separate performance condition that must also be achieved within five years of the grant date and before the executive officer is permitted to exercise the performance-based stock option; and RSUs vesting based on the standard three-year quarterly time-based vesting plus a separate performance condition that must also be achieved before the RSU is released.

The performance criteria for the 2019 awards is the Company’s achievement of two (2) of the following five (5) events: (i) filing two (2) INDs with the FDA for drug candidates wholly-owned by the Company; (ii) two (2) clinical collaborations with significant co-funding support of at least thirty percent (30%) of costs from clinical studies involving Company proprietary drugs; (iii) a judgment by a federal court that a Company-owned patent validly covers a third party product or the settlement of a patent litigation resulting in a payment to Company; (iv) the filing of an NDA by the FDA for a Company proprietary drug; and (v) the approval of an NDA by the FDA for a Company proprietary drug.

Any stock options or RSUs that are unvested upon an NEO’s termination of continuous employment or services will be forfeited without any value, unless the termination of continuous service is a result of death, in which event, subject to any restrictions in the stock option or RSU agreement or equity incentive plan, the stock option would become fully vested and exercisable as of the date of death and the RSU would become fully vested and released as of the date of death. For Messrs. Robin and Northcott, in accordance with their letter agreements, if any stock options are unvested upon a termination of continuous employment as a result of a disability, 50% of the unvested stock options would become fully vested and exercisable as of the date of termination. In

 

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accordance with the letter agreements for the NEOs described above, any stock options that are vested upon termination of continuous service by us without cause or by the executive for a good reason resignation (as defined in the CIC Plan) will remain outstanding and exercisable for eighteen (18) months for Mr. Robin, twelve (12) months following termination for Messrs. Labrucherie and Northcott and Ms. Thomsen, and three (3) months for Dr Zalevsky. This exercise period is also twelve (12) months if the termination of employment or continuous services is because of disability and is eighteen (18) months if the termination is a result of death. We also have the discretion to extend the applicable exercise period in connection with other terminations of employment. Any vested stock options that are not exercised within the applicable post-termination of employment exercise period will terminate.

Under the terms of the 2017 Plan, if there is a change of control of the Company, outstanding awards granted under the plan will generally become fully vested and, in the case of stock options, exercisable, unless the Organization and Compensation Committee provides for the substitution, assumption, exchange or other continuation of the outstanding awards. Any stock options that become vested in connection with a change of control generally must be exercised prior to the change of control, or they will be cancelled in exchange for the right to receive a cash payment in connection with the change of control transaction. In addition, outstanding awards held by our NEOs may vest, upon certain terminations of the NEO’s employment without cause or for a good reason resignation in connection with a change of control and in connection with terminations of employment resulting from disability or death. Please see the “Potential Payments Upon Termination or Change of Control” section below for a description of the vesting that may occur in such circumstances.

In 2019 each NEO’s stock option and RSU award was granted under, and is subject to the terms of, the 2017 Plan. The plan is administered by the Organization and Compensation Committee, and this committee has the ability to interpret and make all required determinations under the plan. This authority includes making required proportionate adjustments to outstanding equity awards to reflect certain corporate transactions and making provision to ensure that participants satisfy any required withholding taxes.

The NEOs are not entitled to any dividend equivalent rights on their stock option or RSU awards, and stock option and RSU awards are generally only transferable to a beneficiary of an NEO upon his death.

Short-Term Incentive Compensation. All of the NEOs were eligible to earn a short-term incentive compensation payment under the Incentive Compensation Plan or, for Mr. Robin, under an arrangement that mirrors the Incentive Compensation Plan. These opportunities are reflected in the “Estimated Possible Payouts Under Non-Equity Incentive Plan Awards” columns of the table above. Please see “Compensation Discussion and Analysis—Current Executive Compensation Program Elements—Short-Term Incentive Compensation” for a description of the material terms of the Incentive Compensation Plan and Mr. Robin’s related short-term incentive compensation arrangement. Although the Organization and Compensation Committee determined that the NEO’s individual 2019 performance merited bonus awards, each of Nektar’s Executive Committee members opted to forego their individual annual cash bonus awards completely to underscore their commitment to the long-term performance of the Company and to reinforce a culture of leadership accountability.

 

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END FOR 2019

The following table includes certain information with respect to the value of all unexercised stock options and outstanding equity awards previously awarded to the NEOs as of December 31, 2019.

 

          Option Awards     Stock Awards  

Name

(a)

 

Grant
Date

(b)

    Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(c)
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(d)
   

Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)(1)

(e)

   

Option
Exercise
Price
($)

(f)

   

Option
Expiration
Date

(2)

(g)

   

Number
of
Shares or
Units of
Stock
That
Have Not
Vested
(#)

(h)

   

Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested
($)(3)

(i)

   

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested

(#)

(j)

   

Equity
Incentive
Plan
Awards:
Market or
Payout
value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)(3)

(k)

 

Howard W. Robin

    2/6/2013       225,000       0         8.80       2/5/2021          
    2/6/2013       225,000       0         8.80       2/5/2021          
    2/5/2014       225,000       0         12.43       2/4/2022          
    2/5/2014       225,000       0         12.43       2/4/2022          
    12/9/2014       195,000       0         16.305       12/8/2022          
    12/9/2014       225,000       0         16.305       12/8/2022          
    12/15/2015       56,250       0         15.55       12/14/2023          
    12/15/2015       56,260       0 )         15.55       12/14/2023          
    12/13/2016       103,125       34,375 (4)         12.24       12/12/2024          
    12/13/2016       103,125       34,375 (5)         12.24       12/12/2024          
    12/15/2017       75,625       75,625 (4)         56.90       12/14/2025          
    12/15/2017       75,624       75,626 (5)         56.90       12/14/2025          
    12/15/2017                 20,167 (7)       435,406      
    12/15/2017                 20,167 (7)       435,406      
    12/14/2018       34,587       103,763 (4)         36.51       12/13/2026          
    12/14/2018       0         138,350 (6)       36.51       12/13/2026          
    12/14/2018                 45,364 (7)       2,031,619      
    12/14/2018                     68,450 (8)       2,031,619  
    12/12/2019       0       167,650 (4)         21.79       12/12/2027          
    12/12/2019       0         167,650 (6)       21.79       12/12/2027          
    12/12/2019       0       44,600 (4)         21.79       12/12/2027          
    12/12/2019                 94,100 (7)       935,238      
    12/12/2019                     94,100 (8)       1,477,836  

Gil M. Labrucherie

    2/6/2013       75,000       0         8.80       2/5/2021          
    2/6/2013       75,000       0         8.80       2/5/2021          
    2/5/2014       85,000       0         12.43