PRE 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

 

 

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Preliminary Proxy Statement

 

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Definitive Proxy Statement

 

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Soliciting Material Pursuant to § 240.14a-12

Horizon Pharma Public Limited Company

(Name of Registrant as Specified In Its Charter)

 

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PRELIMINARY PROXY STATEMENT

DATED MARCH 22, 2019 — SUBJECT TO COMPLETION

 

 

LOGO

 

HORIZON PHARMA PUBLIC LIMITED COMPANY

ANNUAL GENERAL MEETING OF SHAREHOLDERS

May 2, 2019

 

 

NOTICE AND PROXY STATEMENT


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LOGO

                    , 2019

Dear Fellow Shareholder:

2018 was an exceptional year for Horizon.  In addition to generating record net sales of $1.2 billion, an increase of 14 percent over 2017, and adjusted EBITDA of $451 million1, an increase of 16 percent, we made tremendous progress executing our strategy to build a robust and differentiated pipeline and maximize the growth of KRYSTEXXA®, our biologic medicine for uncontrolled gout2.  We also generated strong results for our shareholders with a one-year total shareholder return of 34 percent in a year when the Nasdaq Biotechnology Index (NBI) declined 9 percent. 

KRYSTEXXA, with its 65 percent year-over-year growth, was the key driver of our net sales performance for the year.  It was a year of expansion and investment in our flagship medicine to accelerate its growth potential.  We doubled the commercial team and our addressable patient population and supported the expansion with investment in the commercial infrastructure.  Strong demand for this medicine based on the clinical conviction physicians have for KRYSTEXXA was the driving force behind its growth to $259 million in net sales for the year – more than four times the annual sales when we acquired it three years ago.  We are confident in the long-term potential of KRYSTEXXA, the only approved medicine for uncontrolled gout, and continue to project peak U.S. net sales of more than $750 million. 

At Horizon, we do things differently.  Our commercial execution in transforming KRYSTEXXA from an underperforming, underutilized medicine is a great example.  So is our evolution to the rare disease biopharma company we are today.  Instead of the typical biopharma model, starting out with a pipeline and raising capital to finance development opportunities, we started by developing a successful business, using our business development capabilities and strong commercial execution to build our foundation.  Using the resulting cash flows and growth, we built our rare disease medicine portfolio.  Then we moved to where we are today – investing in a pipeline of robust and differentiated medicines to drive sustainable growth over the longer-term – and to make even more of a difference to patients in need of innovative therapies for disease areas many others won’t address. 

We are making a great deal of progress with our pipeline – particularly with teprotumumab, our late-stage fully human monoclonal antibody (mAb) insulin-like growth factor 1-receptor (IFG-1R), and a candidate for the treatment of active thyroid eye disease (TED), a rare eye disease with no approved treatment.  In 2018, we completed enrollment in teprotumumab’s Phase 3 confirmatory trial ahead of schedule.  We also presented 48-week off-treatment data from its breakthrough Phase 2 trial that demonstrated durability of response.  More recently, we were pleased to announce that the Phase 3 trial met its primary endpoint, demonstrating a dramatic, highly significant 82.9 percent response rate in the reduction in proptosis – or bulging of the eye – in patients treated with teprotumumab compared to 9.5 percent for placebo patients (p<0.001), paving the way for the potential approval of this medicine by the U.S. Food and Drug Administration (FDA).  We are very excited about teprotumumab’s prospects – for the many patients suffering the painful, debilitating effects of TED, and for you, our shareholders, as we believe that if approved, it could achieve U.S. peak net sales of greater than $750 million. 

New to our pipeline in 2018 was our MIRROR trial, a clinical program designed to evaluate the effectiveness of combining KRYSTEXXA with the immunomodulator methotrexate, which, if successful, could increase the number of patients who benefit from KRYSTEXXA.  We also advanced our two next-generation programs for uncontrolled gout, designed to sustain our leadership position well into the future.  More recently, we added a new program to discover novel therapies for the treatment of gout. 

To support our expanding pipeline, we considerably enhanced our research and development (R&D) organization in 2018.  Shao-Lee Lin, M.D., Ph.D., joined Horizon early in 2018 to accelerate the development of our R&D portfolio, bringing an impressive record of developing new medicines.  She soon transformed the leadership team, adding scientific expertise and to enhance our R&D capabilities and business development process. 

In addition to building our pipeline, we are aligning our capital structure to be closer to that of R&D-focused rare disease biopharma companies, which generally have lower debt levels.  We recently announced plans to pay down approximately $550 million of our outstanding debt, which was $2.0 billion at December 31, 2018, using available cash and proceeds from our

 

1 

In 2018, GAAP net loss and non-GAAP net income were $74 million and $315 million, respectively.  Non-GAAP net income and adjusted earnings before interest, taxes, depreciation and amortization and other amounts (adjusted EBITDA) are non-GAAP measures.  These measures are used and provided by us as non-GAAP financial measures so that our investors have a more complete understanding of our financial performance.  In addition, these non-GAAP financial measures are among the indicators our management uses for planning and forecasting purposes and measuring our performance.  Please refer to the discussion of non-GAAP financial measures and the reconciliations thereof to GAAP measures beginning on page 104 of our Annual Report on Form 10-K for the year ended December 31, 2018, which discussion and reconciliations are incorporated herein by reference.

2 

Uncontrolled gout is chronic gout that is refractory (unresponsive) to conventional gout therapies. 


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recent $345 million underwritten public offering. This initiative will lower our outstanding debt and leverage ratio, and at the same time allow us the flexibility to take advantage of business development opportunities.  We subsequently paid down $300 million of the debt.  Our current outstanding debt is now $1.7 billion, and we are on track to pay down the remaining $250 million of our $550 million target. 

Transformation describes our journey over the last several years.  Horizon today is much different than it was when we started out as a public company in 2011.  Today, we are a biopharma company focused primarily on rare diseases.  Our disciplined business development strategy, along with our strong commercial execution, has driven rapid, transformational growth and delivered a five-year total shareholder return of 156 percent, significantly ahead of our peer group3 and the NBI.  And importantly for the future, we are building a robust pipeline of innovative medicines.  That is why the Board is recommending changing the name of the Company to Horizon Therapeutics plc, to better reflect who we are today and our vision for the future.  We are transforming health by building healthier communities, urgently and responsibly.  As a company, we are going to incredible lengths to impact incredible lives. 

One way we do this is ensuring that patients have access to our medicines, regardless of their ability to pay.  In 2018, we provided nearly $2.0 billion in patient assistance.  But our dedication goes well beyond our medicines.  We help our patients and their caregivers better manage and live with their disease, and we help their treating physicians as well, through the services we offer, our awareness campaigns and disease advocacy efforts – a holistic approach. 

It’s personal for us.  We are a company of dedicated, engaged people making a difference every day – whether in the results we achieve, the commitments we make or the recognition we receive.  In 2018, PEOPLE Magazine cited us as one of its “50 Companies That Care,” and Fortune Magazine named us the Number One Best Workplace in BioPharma – in addition to several other workplace awards.  We joined Pledge 1%, a corporate philanthropy movement that empowers companies to donate 1% of product, 1% of equity, 1% of profit or 1% of employee time to improve communities around the world – and we are among the first biopharma companies to make this commitment. 

We also received recognition for the value we place on diversity, with Crain’s Chicago Business recognizing us as one of the Best Places for Women to Work in Chicago.  We firmly believe that people from different backgrounds and life experiences greatly contributes to our success and the contributions we make to the patients and diverse communities we serve.  I am proud to be a signatory of the CEOAction for Diversity and Inclusion pledge, a CEO-driven business commitment to advance diversity and inclusion within the workplace.  And our Board recognizes the importance and value of diversity as well, formally instituting its policy on diversity to publicly affirm the Board’s belief that maintaining a diverse membership enhances its deliberations and enables the Board to better represent all of our constituents. 

In sum, we made significant progress in 2018 on multiple fronts.  We are building on that momentum in 2019, continuing to deliver on our core principles – strong commercial execution, a disciplined business development strategy, clinical development of innovative medicines and expanding patient access – all aimed at making a difference and creating value for our patients, for our employees and for you, our shareholders. 

You are cordially invited to attend the Annual General Meeting of Shareholders on Thursday, May 2, 2019, at 3:00 p.m. local time at our corporate headquarters located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland. 

It is important that your shares be represented and voted, whether or not you plan to attend the Annual General Meeting.  Please take a moment now to vote your shares by internet, by toll-free telephone call or by signing, dating and returning the enclosed proxy card. 

Thank you for your continued support. 

 

Sincerely,
LOGO
Timothy P. Walbert
Chairman, President and Chief Executive Officer

  

 

3 

The peer group used for total shareholder return (TSR) calculations for the five-year period ended December 31, 2018 is our peer group shown on page 44. 


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LOGO

Important Notice Regarding the Availability of Proxy Materials for the Annual General Meeting of

Shareholders to Be Held on Thursday, May 2, 2019, at 3:00 p.m. Local Time at Our Corporate

Headquarters Located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland. 

Dear Shareholder:

We will be holding the Annual General Meeting of Shareholders of Horizon Pharma plc on Thursday, May 2, 2019, at 3:00 p.m. local time at our corporate headquarters located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland for the following purposes:

 

  1. 

Proposal 1:  To elect, by separate resolutions, the two nominees for Class II directors named herein to hold office until the 2022 Annual General Meeting of Shareholders. 

 

  2. 

Proposal 2:  To approve the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2019, and to authorize the Audit Committee of our Board of Directors (Board) to determine the auditors’ remuneration. 

 

  3. 

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

 

  4.

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

 

  5.

Proposal 5:  To approve an authorized share capital increase from 40,000 and $30,000 to 40,000 and $60,000 by the creation of an additional 300,000,000 ordinary shares of nominal value $0.0001 per share. 

 

  6. 

Proposal 6:  To renew the Board’s existing authority to allot and issue ordinary shares for cash and non-cash consideration under Irish law. 

 

  7. 

Proposal 7:  To renew the Board’s existing authority to allot and issue ordinary shares for cash without first offering those ordinary shares to existing shareholders pursuant to the statutory pre-emption right that would otherwise apply under Irish law. 

 

  8. 

Proposal 8:  To approve a motion to adjourn the Annual General Meeting, or any adjournments thereof, to another time and place to solicit additional proxies if there are insufficient votes at the time of the Annual General Meeting to approve Proposal 7. 

 

  9. 

Proposal 9:  To approve a change of name of our Company to Horizon Therapeutics Public Limited Company. 

 

  10. 

Proposal 10:  To approve our Amended and Restated 2014 Equity Incentive Plan. 

 

  11. 

Proposal 11:  To approve our Amended and Restated 2014 Non-Employee Equity Plan. 

 

  12. 

To conduct any other business properly brought before the meeting. 

The Board recommends that you vote FOR each of the nominees for director named herein and FOR Proposals 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11. 

Our Irish statutory financial statements for the fiscal year ended December 31, 2018, including the reports of the directors and statutory auditors thereon, will be presented at the Annual General Meeting.  There is no requirement under Irish law that such statements be approved by the shareholders and no such approval will be sought at the Annual General Meeting. 

For the purposes of our Articles of Association, Proposals 1 and 2 and the receipt and consideration of the Irish statutory financial statements by us at the Annual General Meeting are deemed to be ordinary business and Proposals 3, 4, 5, 6, 7, 8, 9, 10 and 11 are deemed to be special business.  The Annual General Meeting will also include a review of the Company’s affairs.  Shareholders of record as of March 13, 2019, the record date for the Annual General Meeting, are entitled to notice of the Annual General Meeting and to vote at the Annual General Meeting or any adjournment or postponement thereof. 

We ask that you review the Proxy Statement carefully and complete, sign, date and return the enclosed proxy card in the envelope provided or vote over the internet or by telephone as instructed in these materials, as promptly as possible in order to ensure your representation at the meeting.  A return envelope (which is postage prepaid if mailed in the United States) has been provided for your convenience.  Even if you have voted by proxy, you may still vote in person if you attend the meeting.  Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder. 

The Proxy Statement and Annual Report to shareholders are available at www.proxyvote.com.

By Order of the Board of Directors

 

 

LOGO

Anne-Marie Dempsey

Company Secretary

Dublin 4, Ireland

                    , 2019


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TABLE OF CONTENTS

 

PROXY STATEMENT SUMMARY

     1  

Index of Frequently Requested Information

     12  

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

     13  

PROPOSAL 1—ELECTION OF DIRECTORS

     18  

THE BOARD OF DIRECTORS AND ITS COMMITTEES

     23  

Overview

     23  

Independence of the Board of Directors

     23  

Code of Ethics

     23  

Board Leadership Structure

     23  

Role of the Board in Risk Oversight

     24  

Director Selection

     24  

Committees of the Board of Directors

     25  

Shareholder Rights Agreement

     27  

Shareholders Communications with the Board of Directors

     28  

EXECUTIVE OFFICERS

     29  

COMPENSATION DISCUSSION AND ANALYSIS

     32  

Executive Summary

     33  

Objectives and Philosophy

     42  

Compensation Determination Process

     43  

Elements of Executive Compensation

     44  

Additional Compensation Policies and Practices

     53  

EXECUTIVE COMPENSATION

     57  

Summary Compensation Table

     57  

Grants of Plan-Based Awards

     59  

Pay Ratio

     61  

Outstanding Equity Awards at December 31, 2018

     62  

Option Exercises and Stock Vested

     63  

Pension Benefits

     63  

Nonqualified Deferred Compensation

     63  

Potential Payments Upon Termination or Change-in-Control

     64  

NON-EMPLOYEE DIRECTOR COMPENSATION

     66  

EQUITY COMPENSATION PLAN INFORMATION

     68  

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     69  

Policies and Procedures for Transactions with Related Persons

     69  

Certain Related-Person Transactions

     69  
PROPOSAL 2—APPROVE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND AUTHORIZE THE AUDIT COMMITTEE TO DETERMINE THE AUDITORS’ REMUNERATION      71  
PROPOSAL 3—ADVISORY VOTE ON EXECUTIVE COMPENSATION      73  
PROPOSAL 4—AUTHORIZE US AND/OR ANY OF OUR SUBSIDIARIES TO MAKE MARKET PURCHASES OR OVERSEAS MARKET PURCHASES OF OUR ORDINARY SHARES      74  
PROPOSAL 5—APPROVE AN AUTHORIZED SHARE CAPITAL INCREASE FROM 40,000 AND $30,000 TO 40,000 AND $60,000 BY THE CREATION OF AN ADDITIONAL 300,000,000 ORDINARY SHARES OF NOMINAL VALUE $0.0001 PER SHARE      75  


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BACKGROUND TO PROPOSALS 6 AND 7

     77  
PROPOSAL 6—RENEW THE BOARD’S EXISTING AUTHORITY TO ALLOT AND ISSUE ORDINARY SHARES FOR CASH AND NON-CASH CONSIDERATION UNDER IRISH LAW      81  
PROPOSAL 7—RENEW THE BOARD’S EXISTING AUTHORITY TO ALLOT AND ISSUE ORDINARY SHARES FOR CASH WITHOUT FIRST OFFERING THOSE ORDINARY SHARES TO EXISTING SHAREHOLDERS PURSUANT TO THE STATUTORY PRE-EMPTION RIGHT THAT WOULD OTHERWISE APPLY UNDER IRISH LAW      82  

PROPOSAL 8—ADJOURNMENT PROPOSAL

     83  

PROPOSAL 9—APPROVE A CHANGE OF NAME OF OUR COMPANY TO HORIZON THERAPEUTICS PUBLIC LIMITED COMPANY

     84  

PROPOSAL 10—APPROVE THE AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN

     85  

PROPOSAL 11—APPROVE THE AMENDED AND RESTATED 2014 NON-EMPLOYEE EQUITY PLAN

     98  

OTHER INFORMATION

     106  

Security Ownership of Certain Beneficial Owners and Management

     106  

Section 16(a) Beneficial Ownership Reporting Compliance

     108  

Householding of Proxy Materials

     108  

Shareholder Proposals

     108  

Presentation of Irish Statutory Financial Statements

     109  

Special Note Regarding Forward-Looking Statements

     109  

OTHER MATTERS

     110  


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PROXY STATEMENT SUMMARY

This summary highlights certain information contained elsewhere in this Proxy Statement and does not contain all of the information that you should consider.  You should read the entire Proxy Statement carefully before voting.  For more complete information regarding our business and 2018 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2018 and our subsequent filings with the Securities and Exchange Commission (SEC). 

 

 

LOGO

Meeting and Voting Information Time and Date: 3:00 p.m. local time on May 2, 2019 Place: Our corporate headquarters located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland Record Date: March 13, 2019 How to Vote: Shareholders as of the record date are entitled to vote and may do so in person at the Annual General Meeting, by returning the completed enclosed proxy card, via the internet at www.proxyvote.com or by telephone at 1-800-690-6903 within the United States, U.S. territories and Canada.

Voting Items and Board Recommendations

 

   

Proposal

 

 

Page

    Number    

 

 

 

 

Board

    Recommendations    

 

1

  Election of Directors   18   FOR All Nominees
2   Approval of the Appointment of Independent Registered Public Accounting Firm and Authorization of the Audit Committee to Determine the Auditors’ Remuneration   71   FOR
3   Approval, on an Advisory Basis, of Executive Compensation   73   FOR
4   Authorization to Make Market Purchases or Overseas Market Purchases
of our Ordinary Shares
  74   FOR
5   Approval of an Authorized Share Capital Increase from 40,000 and $30,000 to 40,000 and $60,000 by the Creation of an Additional 300,000,000 Ordinary Shares of Nominal Value $0.0001 Per Share   75   FOR
6   Renewal of the Board’s Existing Authority to Allot and Issue Ordinary Shares for Cash and Non-cash Consideration under Irish Law   81   FOR
7   Renewal of the Board’s Existing Authority to Allot and Issue Ordinary Shares for Cash Without First Offering Those Ordinary Shares to Existing Shareholders Pursuant to the Statutory Pre-emption Right that Would Otherwise Apply under Irish Law   82   FOR
8   Approval of a Motion to Adjourn the Annual General Meeting, or Any Adjournments thereof, to Another Time and Place to Solicit Additional Proxies if There are Insufficient Votes at the Time of the Annual General Meeting to Approve Proposal 7   83   FOR
9   Approval of a Change of Name of Our Company to Horizon Therapeutics Public Limited Company   84   FOR
10   Approval of Our Amended and Restated 2014 Equity Incentive Plan   85   FOR
11   Approval of Our Amended and Restated 2014 Non-Employee Equity Plan   98   FOR

 

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2018 at a Glance

A Year of Strong Performance Generating Record Net Sales and Strong Shareholder Return

 

 

LOGO

Except for 5-year total shareholder return, growth percentages represent comparison to full-year 2017. 

(1)

Adjusted EBITDA is a non-GAAP measure.  Please refer to the discussion of non-GAAP financial measures and the reconciliations to GAAP measures beginning on page 104 of our Annual Report on Form 10-K for the year ended December 31, 2018, which discussion and reconciliations are incorporated herein by reference. 

A Year of Significant Progress

 

 

LOGO

 

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Business Overview

We made significant progress in 2018 on our strategy to build a robust and differentiated pipeline and maximize the growth of KRYSTEXXA, our biologic medicine for uncontrolled gout, and our flagship medicine.  As a result, we generated record full-year net sales of $1.2 billion, an increase of 14 percent over 2017, and one-year total shareholder return of 34 percent in a year when the Nasdaq Biotechnology Index (NBI) declined 9 percent.  In addition to advancing our existing pipeline programs, we added several new programs designed to enhance our leadership position in uncontrolled gout.  We also transformed our research and development (R&D) organization, augmenting its scientific expertise with a new leadership team.  We accelerated the growth of KRYSTEXXA by investing in its commercial infrastructure — doubling its commercial team and our addressable patient population. 

Our Strategy

We are constantly driving toward our aspiration, which is to be a leading rare disease biopharma company that delivers innovative therapies to patients and generates high returns for our shareholders.  We have made a great deal of progress in that regard and are building on the resulting momentum. 

We have taken a different approach, however, from typical biopharma companies.  Instead of starting out with a pipeline only, raising capital to finance development opportunities, we first developed a successful commercial business, generating cash flows and significant growth.  We then deployed our cash flows and access to capital to the development of leading-edge therapeutic products for rare diseases. 

Our Evolution to a Rare Disease Biopharma Company:  A Different Approach

 

 

LOGO

Horizon today has a growing pipeline of development programs, 11 on-market medicines and total net sales of $1.2 billion — a significant transformation from our beginnings as a public company in 2011, when we had two medicines and total net sales of $7 million.  Today, our medicines for rare and rheumatic diseases make up nearly 70 percent of our total net sales. 

Our strategy is to build a robust and differentiated pipeline and to maximize growth of KRYSTEXXA, our on-market medicine for uncontrolled gout. 

We are also aligning our capital structure to be closer to that of R&D-focused rare disease biopharma companies, which generally have lower debt levels.  We recently announced plans to pay down approximately $550 million of our outstanding debt, which was $2.0 billion at December 31, 2018, using available cash and proceeds from our recent $345 million underwritten public offering.  This initiative which will lower our outstanding debt and leverage ratio, and at the same time allow us the flexibility to take advantage of business development opportunities.  We subsequently paid down $300 million of the debt.  Our current outstanding debt is now $1.7 billion, and we are on track to pay down the remaining $250 million of our $550 million target.  This initiative exemplifies our disciplined approach to debt and efficient use of capital, which together with our strong cash balance enable continued investment in our pipeline and KRYSTEXXA. 

 

3


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Our Future:  Our Expanding Pipeline

Expanding our pipeline to drive long-term sustainable growth is a strategic priority. 

Our lead pipeline candidate, teprotumumab, which we acquired in 2017, is a fully human monoclonal antibody insulin-like growth factor 1-receptor (IGF-1R) for the treatment of active thyroid eye disease (TED).  TED is a rare, autoimmune inflammatory eye disease in which local inflammation and tissue expansion behind the eye can lead to proptosis (eye bulging).  Proptosis can result in double vision, misalignment of the eyes, and an inability to close the eyelids, making the tasks of daily life challenging.  Currently, there are no U.S. Food and Drug Administration (FDA) approved treatments available for treating TED.  Following the presentation of breakthrough Phase 2 results in 2017, in February 2019 we announced the Phase 3 trial topline data, which demonstrated a highly statistically significant reduction in proptosis, with 82.9 percent of teprotumumab patients meeting the primary endpoint versus 9.5 percent of placebo patients.  We continue to expect to submit a biologics license application to the FDA in mid-2019.  We are also conducting an extension study, known as OPTIC-X, which will help inform us if patients would benefit from longer treatment or retreatment with teprotumumab. 

In uncontrolled gout, our R&D strategy is to maximize the benefits of KRYSTEXXA, as well as to enhance and sustain our leadership position through the development of new medicines.  For KRYSTEXXA, which is the only approved treatment for uncontrolled gout, we are investigating ways to improve the patient response rate so that it can benefit more patients.  (Uncontrolled gout is chronic gout that is refractory to conventional therapies.)  Our MIRROR trial is evaluating the combination of KRYSTEXXA and methotrexate, which is the immunomodulator most commonly used by rheumatologists, with the goal to increase the number of patients that can benefit from KRYSTEXXA.  Based on recent positive external case series data, we are adapting the trial to support the potential for registration, with enrollment expected to begin in the second quarter of 2019.  We will also be initiating a clinical trial in the second half of 2019 to study the effect of KRYSTEXXA on serum uric acid levels in kidney transplant patients with uncontrolled gout.  In addition, we are working on three preclinical programs designed to build on and sustain our leadership position in uncontrolled gout well into the future:  two next-generation biologics for uncontrolled gout and the other a long-term collaboration to discover and develop novel therapeutics for gout. 

In support of our expanding pipeline and the value-maximization of our on-market medicines, in 2018, we considerably augmented the scientific expertise and acumen of our R&D organizationShao-Lee Lin, M.D., Ph.D., joined Horizon in January 2018 in the new role of chief scientific officer and head of R&D.  Dr. Lin is an immunologist, rheumatologist and allergist with more than 20 years of academic and industry experience.  She has established a new leadership team that oversees our R&D programs, partners with business development on pipeline opportunities and manages the therapeutic area development strategies and portfolios. 

Our Pipeline

 

 

LOGO

 

(1)   Being developed under a collaboration agreement.

MIRROR:  Methotrexate to Increase Response Rates in Patients with Uncontrolled GOut Receiving KRYSTEXXA.

OPTIC:  Treatment of Graves’ Orbitopathy (Thyroid Eye Disease) to Reduce Proptosis with Teprotumumab Infusions in a Randomized,

        Placebo-Controlled, Clinical Study.

Teprotumumab is an investigational candidate, and its safety and efficacy have not been established.

 

4


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Driving Growth Today and Tomorrow:  Our Orphan and Rheumatology Segment

We have two segments:  orphan and rheumatology, and primary care.  The orphan and rheumatology segment is the strategic driver of our growth today.  Its compound annual growth rate from 2014 to 2018 of 101 percent underscores the value of our focus on rare disease medicines. 

The orphan and rheumatology segment includes KRYSTEXXA, our flagship on-market medicine.  In addition, if approved, teprotumumab, our late-stage development biologic candidate, will be part of this segment’s portfolio.  The segment also includes a durable base of rare disease medicines:  RAVICTI®, for the treatment of urea cycle disorders; PROCYSBI®, for the treatment of nephropathic cystinosis and ACTIMMUNE®, for the treatment of chronic granulomatous disease. 

We believe the orphan and rheumatology segment offers tremendous potential for future growth.  KRYSTEXXA and teprotumumab, if approved, both offer significant growth potential, and we estimate peak annual net sales of more than $750 million for each. 

Our Orphan and Rheumatology Segment: 

Driving Growth Now and In the Future

 

 

LOGO

 

  (1)

Horizon peak sales estimate for U.S. net sales only. 

Teprotumumab is an investigational candidate and its safety and efficacy have not been established. 

CAGR: compound annual growth rate.

The Foundation of Our Success:  Strong Business Development and Commercial Execution

The foundation of our success since we launched as a public company in 2011 lies in our strong business development capabilities and commercial execution. 

Business development is an integral factor in our success — both since launch and going forward — and was a key component of our transformation into a biopharma company focused on rare disease medicines.  In 2014, we began rapidly diversifying our portfolio with rare disease medicines through key transactions that brought us ACTIMMUNE, RAVICTI, KRYSTEXXA and PROCYSBI over the next three years.  In 2017, we made our first acquisition of a development-stage candidate medicine — teprotumumab — beginning the expansion of our pipeline, which is a current strategic priority. 

Being able to quickly take advantage of strategic opportunities is one of our business development strengths, and it has served us well with the many acquisitions we have completed that have performed above and beyond our expectations.  Given the importance of acquisitions to our strategy, it is important that we retain the flexibility to efficiently raise capital going forward, particularly since many acquisitions are highly competitive. 

 

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We Have Transformed to Become a Biopharma Company Focused on Rare Disease Medicines

Through Our Business Development Capabilities

Rare Disease Medicine Acquisitions 2014-2019

 

 

LOGO

Commercial execution — Acquiring assets is not a guarantee of success.  We, however, have a strong record of successfully commercializing our medicines and improving the performance of the medicines we acquire.  We attribute our successful results to the deep expertise and knowledge of our commercial teams, coupled with the holistic approach we employ supporting our patient and physician communities.  KRYSTEXXA is a prime example of the value of our approach:  it was an underperforming asset when we acquired it in 2016.  In only two years we transformed it into the flagship growth driver it is for us today — more than quadrupling its net sales to $259 million in 2018.  Our commercial team understands the market for KRYSTEXXA, and we invested in 2018 to accelerate the potential we see for the medicine — more than $750 million in peak annual net sales. 

Our Purpose:  To Help Build Healthier Communities, Urgently and Responsibly

At Horizon, we are making the world a better place — one patient, one medicine, one community at a time.  That’s why we go to incredible lengths to impact incredible lives — to make health a priority, not a privilege.  That’s what drives our insistence that patients have access to our medicines, regardless of their ability to pay, supporting patients in 2018 with nearly $2.0 billion in assistance, representing 46 percent of our full-year gross sales.  We are transforming health by building healthier communities both urgently and responsibly.  As a company we are going to incredible lengths to impact incredible lives.  It’s in our DNA — who we are as a company and who we are as individuals.  For us, it’s personal — we want to make a difference.  Our social responsibility programs, patient advocacy support and awareness, dedication to individual employee volunteerism — all reflect our ideals, a commitment to our patients and the communities we serve. 

Our dedication and commitment are evident in the recognition we receive.  We were honored in 2018 to be spotlighted by PEOPLE Magazine as one of the “50 Companies That Care” — companies that succeed in business while also demonstrating respect, compassion and concern for their communities, employees and the environment.  This distinction is a realization of what we strive for — to be a positive force for good amid a constantly changing health care system.  We also became a member of Pledge 1%, a corporate philanthropy movement that empowers companies to donate 1% of product, 1% of equity, 1% of profit or 1% of employee time to improve communities around the world.  We are one of the first biopharma companies to join the initiative, which includes 6,000-plus organizations across 100 countries. 

Horizon is a great place to work and our employees tell us so.  We continue to place in multiple third-party workplace recognition surveys, including being named by FORTUNE Magazine as the Number One “Best Workplace in BioPharma.” We are also proud to have been named by Crain’s Chicago Business as one of the “Best Places to Work for Women in Chicago” in 2018.  The percentage of women of our total employee population is above the industry standard for all levels in the Company, including upper management levels, reflecting the value we place on diversity.  But diversity encompasses more than gender:  we believe that people from different backgrounds and life experiences fuel innovation, which helps provide life-changing solutions for our patients — fostering healthier communities and making the world a better place. 

 

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Consistently Recognized as One of the Best Places to Work —

And as a Company That Cares

 

 

 

 

 

LOGO   

 

   

 

 

 

 

LOGO

 

   

 

LOGO

 

 

   

 

 

 

   LOGO   

 

    

 

 

 

LOGO   

 

Total Shareholder Return

Our disciplined approach, with our clear strategy, business development acumen and strong commercial execution, has driven rapid transformational growth.  As a result, we have outperformed both our peer group and the NBI over the one-, three- and five-year periods ended December 31, 2018.  With our durable base of rare disease medicines, our high-growth KRYSTEXXA medicine and the pipeline we are building for future growth, including our late-stage development candidate teprotumumab, we believe Horizon is well positioned for sustainable long-term growth. 

 

 

LOGO

Note:  The peer group used for the TSR calculations for the 1-, 3- and 5-year periods ended December 31, 2018 is our peer group shown on page 44. 

 

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Director Nominees and Continuing Directors

 

  Name

 

  

Age

 

  

Director

Since

 

  

Principal Position

 

  

Independent

 

 

 

Other

    Current    

Public

Boards

 

  2019 Director Nominees(1)              

  Michael Grey

   66    2011   

Chairman and Chief Executive Officer, Mirum Pharmaceuticals, Inc.

   Yes   2

  Jeff Himawan, Ph.D.

   53    2007   

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

   Yes   2
  Continuing Directors              

  Timothy P. Walbert

   51    2008   

Chairman, President and Chief Executive Officer, Horizon Pharma plc

   No   1

  Gino Santini

   62    2012   

Chairman, AMAG Pharmaceuticals, Inc.

   Yes   4

  James Shannon, M.D.

   62    2017   

Director, MannKind Corporation

   Yes   2

  William F. Daniel

   67    2014   

Director, Malin Corporation plc

   Yes   1

  H. Thomas Watkins

   66    2014   

Chairman, Vanda Pharmaceuticals Inc.

   Yes   1

  Pascale Witz

   52    2017   

President, PWH Advisors

   Yes   3

 

(1)

There are three directors whose term of office expires in 2019, one of whom, Ronald Pauli, will not be subject to re-election at the 2019 Annual General Meeting. 

Board Highlights

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

 

 

LOGO

 

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Our Board, which is predominantly independent, includes a range of expertise, experience, diversity, as well as newer and longer-tenured directors.  The Board values diversity, believing that maintaining a diverse membership enhances the Board’s deliberations and enables the Board to better represent all of the Company’s constituents.  In this respect, the goal of the Nominating and Corporate Governance Committee is to ensure that the Board has diversity of experience and perspectives, as well as race, gender, geography and areas of expertise — as is set forth in the Diversity Policy the Board instituted in 2018, which is available on our website at www.horizonpharma.com

 

 

LOGO

Corporate Governance Highlights

 

    

 

Independent Oversight

 

       

 

Continuous Improvement

 

 

 

  

 

Eight out of nine of our directors are independent

 

  

 

 

  

 

Annual Board and committee self-evaluations

 

  

All Board committees are comprised solely of independent directors

 

  

 

  

Risk oversight by the Board and committees

 

Ongoing shareholder engagement efforts

  

Lead independent director with clearly delineated duties

 

  

Diverse Board in terms of experience, education and talents supported by the Board’s Diversity Policy

 

       
    

 

Strong Governance Practices

 

       

 

Shareholder Rights

 

 

 

  

 

Regular executive sessions of independent directors

 

  

 

 

  

 

Majority voting for elections of directors

 

  

Independent compensation consultant reporting directly to the Compensation Committee

 

     

Shareholder ability to call extraordinary general meeting

 

  

Board and committees may engage outside advisors independently of management

 

     

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

 

  

Share ownership guidelines for directors and executive officers

 

       

  

Annual advisory shareholder vote on executive compensation

 

       

  

Incentive compensation recoupment “clawback” policy

 

       

  

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

 

 

         

 

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Executive Compensation Overview

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

 

 

Pay Considerations

 

 

Long-Term

Performance

 

 

 

 

Executive and Shareholder
Alignment

 

  Risk Mitigation

 

What We Do

 

 

 

What We Don’t Do

 

 

Align executive compensation with corporate and individual performance

 

 

 

No guaranteed bonuses or salary increases

 

Maintain strong share ownership guidelines for our directors and executives

 

 

 

No repricing of stock options without shareholder approval

 

 

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

 

 

 

No dividends or dividend equivalents paid on unearned shares

 

Engage an independent advisor reporting directly to the Compensation Committee

 

  No NEO excise tax gross-ups

 

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

 

   

 

Cap annual and long-term incentive payouts

 

   

 

Conduct compensation risk assessments

 

   

 

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

   

Apply an incentive compensation recoupment “clawback” policy

 

   

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

 

Element

 

 

Form

 

 

 

Corporate

Performance

Period

 

 

Objective

 

Base Salary   Cash (fixed)   N/A  

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

 

Short-Term Incentive   Cash (variable)   Annual  

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

 

Long-Term Incentives  

PSU Awards
(variable)

 

RSU Awards

(variable)

 

Cash Incentive
Program (CIP)
(variable)

 

 

Multi-year

or Annual

 

N/A

 

 

Annual

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

 

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Shareholder Engagement

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

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

 

   

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

 

   

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

 

   

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

 

   

Board diversity.  Diversity is an important a principle for us at Horizon as it is for many of our investors.  During 2018, the Board formally instituted a policy on board diversity.  Given that our business and operations are diverse and global in nature, our Nominating and Corporate Governance Committee takes into account a broad range of diversity considerations when assessing potential candidates, including diversity of experience and perspectives as well as gender, race, geography and areas of expertise.  The addition to the Board in 2017 of Pascale Witz, with her extensive global healthcare management experience, and James Shannon, M.D., with his significant clinical development and management experience, are examples of how we have further diversified our Board. 

In 2018, during our spring engagement cycle before the Annual General Meeting, we offered engagement opportunities to 67 percent of our shareholders, and dialogued with 32 percent of our shareholders.  At our 2018 Annual General Meeting of Shareholders, our say-on-pay proposal received the support of 95 percent of the shares voted.  We believe this high level of support is a result of our comprehensive shareholder outreach and engagement program to solicit feedback, understand investor viewpoints and incorporate their feedback into further discussions of our compensation programs and corporate governance. 

In addition, our shareholder engagement provides a forum for educating shareholders on key issues of importance to the Company.  For example, during our 2018 fall engagement cycle, we had discussions with 31 percent of our shareholders on the share-issuance authority we are required to receive from our investors as part of being an Irish plc, as well other governance- and compensation-related topics.  Given that not all of our holders were familiar with the share-issuance authority requirements, we wanted to provide them with the opportunity to learn about the requirements and understand the nuances of our situation as an Irish plc listed on The Nasdaq Stock Market LLC (Nasdaq), a U.S. stock exchange.  Our shareholders appreciated the outreach, and the feedback from this engagement was very positive.

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

Please see our Compensation Discussion and Analysis on page 32 for additional information on our compensation philosophy. 

 

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Index of Frequently Requested Information    Page  

2018 Pay-for-Performance Overview

     39  

Board Leadership Structure

     23  

Board Meeting Attendance

     23  

Code of Ethics

     23  

Compensation Consultant

     43  

Corporate Governance Highlights

     9  

Director Biographies

     19  

Director Independence

     23  

Director Selection / Qualifications

     24  

Diversity Policy

     25  

Executive Compensation Overview

     10  

Executive Officers

     29  

Executive Share Ownership Guidelines

     53  

Hedging and Pledging Policies

     53  

Independent Accountant Fees

     71  

Majority Voting for Directors

     18  

Peer Group Companies

     44  

Realizable Value of CEO Compensation

     40  

Related Party Transactions

     69  

Risk Oversight

     24  

Severance Benefits

     55  

Shareholder Communications with the Board

     28  

Shareholder Engagement

     11  

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

     108  

Total Shareholder Return

     7  

Year at a Glance

     2  

 

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QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

Why am I receiving these materials?

We have sent you these proxy materials because our Board is soliciting your proxy to vote at the Annual General Meeting, including at any adjournments or postponements of the meeting.  You are invited to attend the Annual General Meeting to vote on the proposals described in this Proxy Statement.  However, you do not need to attend the meeting to vote your shares.  Instead, you may simply complete, sign and return the enclosed proxy card, or follow the instructions below to submit your proxy over the telephone or through the internet. 

How do I attend the Annual General Meeting?

The meeting will be held on Thursday, May 2, 2019, at 3:00 p.m. local time at our corporate headquarters located at Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland.  Directions to the Annual General Meeting may be found at https://www.google.com/maps/place/Connaught+House,+Burlington+Rd,+Dublin+4,+Ireland.  Information on how to vote in person at the Annual General Meeting is provided below.  However, you do not need to attend the Annual General Meeting to vote your ordinary shares. 

Who can vote at the Annual General Meeting?

Only shareholders of record at the close of business on March 13, 2019 will be entitled to vote at the Annual General Meeting.  On this record date, there were 184,433,612 of our ordinary shares outstanding and entitled to vote. 

Shareholder of Record (shares registered in your name).  If on March 13, 2019, your shares were registered in your name in our Register of Members, which is maintained by our transfer agent, Computershare Shareowner Services LLC, then you are a shareholder of record.  As a shareholder of record, you may vote in person at the meeting or vote by proxy.  Whether or not you plan to attend the meeting, we urge you to fill out and return the enclosed proxy card or vote by proxy over the telephone or on the internet as instructed below to ensure your vote is counted. 

Beneficial Owner (shares registered in the name of a broker or bank).  If on March 13, 2019, your shares were not registered in your name in our Register of Members, but rather held in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization.  The organization holding your account is considered to be the shareholder of record for purposes of voting at the Annual General Meeting.  As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account.  You are also invited to attend the Annual General Meeting.  However, since you are not the shareholder of record, you may not vote your shares in person at the meeting unless you request and obtain a valid proxy from your broker or other agent. 

What am I voting on?

There are 11 matters scheduled for a vote:

 

   

Election of two Class II directors named in this Proxy Statement to hold office until the 2022 Annual General Meeting of Shareholders (Proposal 1);

 

   

Approval of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2019 and the authorization of the Audit Committee of our Board to determine the auditors’ remuneration (Proposal 2);

 

   

Advisory approval of the compensation of our named executive officers, as disclosed in this Proxy Statement (Proposal 3);

 

   

Authorization for us and/or any of our subsidiaries to make market purchases or overseas market purchases of our ordinary shares (Proposal 4);

 

   

Approval of an authorized share capital increase from 40,000 and $30,000 to 40,000 and $60,000 by the creation of an additional 300,000,000 ordinary shares of nominal value $0.0001 per share (Proposal 5);

 

   

Renewal of the Board’s existing authority to allot and issue ordinary shares for cash and non-cash consideration under Irish law (Proposal 6);

 

   

Renewal of the Board’s existing authority to allot and issue ordinary shares for cash without first offering those ordinary shares to existing shareholders pursuant to the statutory pre-emption right that would otherwise apply under Irish law (Proposal 7);

 

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Approval of a motion to adjourn the Annual General Meeting, or any adjournments thereof, to another time and place to solicit additional proxies if there are insufficient votes at the time of the Annual General Meeting to approve Proposal 7 (Proposal 8);

 

   

Approval of a change of name of our Company to Horizon Therapeutics Public Limited Company (Proposal 9);

 

   

Approval of our Amended and Restated 2014 Equity Incentive Plan (Proposal 10); and

 

   

Approval of our Amended and Restated 2014 Non-Employee Equity Plan (Proposal 11). 

What if another matter is properly brought before the meeting?

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

How do I vote?

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

The procedures for voting are fairly simple:

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

 

   

To vote in person, come to the Annual General Meeting and we will give you a ballot when you arrive. 

 

   

To vote using the proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided.  If you return your signed proxy card to us before the Annual General Meeting, we will vote your shares as you direct. 

 

   

To vote over the telephone, dial toll-free 1-800-690-6903 within the United States, U.S. territories and Canada using a touch-tone phone and follow the recorded instructions.  You will be asked to provide the company number and control number from the enclosed proxy card.  Your vote must be received by 11:59 p.m., Eastern Time on May 1, 2019, to be counted. 

 

   

To vote through the internet, go to www.proxyvote.com to complete an electronic proxy card.  You will be asked to provide the company number and control number from the enclosed proxy card.  Your vote must be received by 11:59 p.m. Eastern Time on May 1, 2019, to be counted. 

 

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

Beneficial Owner.  If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you should have received a voting instruction form with these proxy materials from that organization rather than from us.  Simply complete and mail the voting instruction form to ensure that your vote is counted.  Alternatively, you may vote by telephone or through the internet as instructed by your broker or bank.  To vote in person at the Annual General Meeting, you must obtain a valid proxy from your broker, bank or other agent.  Follow the instructions from your broker or bank included with these proxy materials or contact your broker or bank to request a proxy form. 

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

How many votes do I have?

On each matter to be voted upon, you have one vote for each ordinary share you own as of March 13, 2019. 

 

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What happens if I do not vote?

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

Beneficial Owner.  If you are a beneficial owner and do not instruct your broker, bank, or other agent how to vote your shares, the question of whether your broker or nominee will still be able to vote your shares depends on whether the New York Stock Exchange (NYSE) deems the particular proposal to be a “routine” matter.  Brokers and nominees can use their discretion to vote “uninstructed” shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters.  Under the rules and interpretations of the NYSE, “non-routine” matters are matters that may substantially affect the rights or privileges of shareholders, such as mergers, shareholder proposals, elections of directors (even if not contested), executive compensation (including any advisory shareholder votes on executive compensation) and certain corporate governance proposals, even if management-supported.  We have been advised by the NYSE that your broker or nominee may not vote your shares on Proposals 1, 3, 10 or 11 without your instructions, but may vote your shares on Proposals 2, 4, 5, 6, 7, 8 and 9. 

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

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

Who is paying for this proxy solicitation?

We have retained Alliance Advisors, a proxy solicitation firm, to solicit proxies in connection with the Annual General Meeting at a cost of approximately $35,000 plus expenses.  The cost of soliciting proxies incurred by us and Alliance Advisors, including the preparation, assembly and mailing of the proxies and soliciting material, as well as the cost of forwarding such material to beneficial owners of our ordinary shares, will be borne by us.  Our directors, officers and other employees may, without compensation other than their regular remuneration, solicit proxies personally or by telephone. 

What does it mean if I receive more than one set of proxy materials?

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

Can I change my vote after submitting my proxy?

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

 

   

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

 

   

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

 

   

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

 

   

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

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

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

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

You will need an admission ticket or proof of ownership of ordinary shares to enter the Annual General Meeting.  If you are a shareholder of record, your admission ticket is the top half of the proxy card sent to you.  If you plan to attend the Annual General Meeting, please so indicate when you vote and bring the ticket with you to the Annual General Meeting.  If your shares are held in the name of a bank, broker or other holder of record, you do not need an admission ticket, but you will need proof of ownership to be admitted to the Annual General Meeting.  A recent brokerage statement or letter from a bank or broker is an example of proof of ownership.  If you arrive at the Annual General Meeting without an admission ticket or proof of ownership of ordinary shares, we will admit you only if we are able to verify that you are one of our shareholders. 

 

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How are votes counted?

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

What are “broker non-votes”?

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

What is the quorum requirement?

A quorum of shareholders is necessary to hold a valid meeting.  A quorum will be present if shareholders holding a majority of the issued and outstanding ordinary shares entitled to vote are present at the meeting in person or represented by proxy.  On the record date, there were 184,433,612 ordinary shares outstanding and entitled to vote.  Thus, the holders of 92,216,807 ordinary shares must be present in person or represented by proxy at the meeting to have a quorum. 

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or, provided that you are a shareholder of record, if you vote in person at the meeting.  Abstentions and broker non-votes will be counted towards the quorum requirement.  If there is no quorum, within one hour of the time appointed for the Annual General Meeting, the Annual General Meeting will stand adjourned to May 9, 2019, at 3:00 p.m. local time at the same location, or such other time or place as the Board may determine. 

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

 

    Proposal   Vote Required

  1. 

  Election of Directors   Majority of the votes cast

  2. 

  Approval of the Appointment of Independent Registered Public Accounting Firm and Authorization of the Audit Committee to Determine the Auditors’ Remuneration   Majority of the votes cast

  3. 

  Approval, on an Advisory Basis, of Executive Compensation   Majority of the votes cast

  4. 

  Authorization to Make Market Purchases or Overseas Market Purchases of our Ordinary Shares   Majority of the votes cast

  5. 

  Approval of an Authorized Share Capital Increase from 40,000 and $30,000 to 40,000 and $60,000 by the Creation of an Additional 300,000,000 Ordinary Shares of Nominal Value $0.0001 Per Share   Majority of the votes cast

  6. 

  Renewal of the Board’s Existing Authority to Allot and Issue Ordinary Shares for Cash and Non-Cash Consideration under Irish Law   Majority of the votes cast

  7. 

  Renewal of the Board’s Existing Authority to Allot and Issue Ordinary Shares for Cash Without First Offering Those Ordinary Shares to Existing Shareholders Pursuant to the Statutory Pre-Emption Right that Would Otherwise Apply under Irish Law   75% of the votes cast

  8. 

  Approval of a Motion to Adjourn the Annual General Meeting, or Any Adjournments Thereof, to Another Time and Place to Solicit Additional Proxies If There are Insufficient Votes at the Time of the Annual General Meeting to Approve Proposal 7   Majority of the votes cast

  9. 

  Approval of a Change the Name of our Company to Horizon Therapeutics Public Limited Company   75% of the votes cast

10. 

  Approval of Amended and Restated 2014 Equity Incentive Plan   Majority of the votes cast

11. 

  Approval of Amended and Restated 2014 Non-Employee Equity Plan   Majority of the votes cast

Proposal 7 will be redundant in the event Proposal 6 is not approved. 

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

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

 

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What are the Irish statutory financial statements?

We are presenting our Irish statutory financial statements, including the reports of the directors and the statutory auditors thereon, at the Annual General Meeting, and we are making a copy of them available for download in PDF format in the Investors section (see Annual Reports subsection) of our website (www.horizonpharma.com) on or before April 11, 2019.  Since we are an Irish company, we are required to prepare Irish statutory financial statements under applicable Irish company law and to deliver those accounts to shareholders of record in connection with our Annual General Meetings of Shareholders.  The Irish statutory financial statements cover the results of operations and financial position of Horizon Pharma plc for the year ended December 31, 2018.  Irish law requires the directors to prepare financial statements for each financial year giving a true and fair view of the state of the group’s and parent company’s affairs at the end of the financial year and of the group’s profit or loss for the financial year.  Under that law, the directors have prepared the group’s consolidated financial statements in accordance with U.S. accounting standards, as defined in Section 279 of the Irish Companies Act 2014, to the extent that the use of those accounting standards in the preparation of the consolidated financial statements does not contravene any provision of the Irish Companies Act 2014 or of any regulations made thereunder and have prepared the Irish statutory financial statements in accordance with accounting standards issued by the Financial Reporting Council and promulgated by the Institute of Chartered Accountants in Ireland (Generally Accepted Accounting Practice in Ireland). 

We will mail without charge, upon written request, a copy of the Irish statutory financial statements to shareholders of record or beneficial owners of our ordinary shares.  Requests should be sent to: Horizon Pharma plc, Attention: Company Secretary, Connaught House, 1st Floor, 1 Burlington Road, Dublin 4, D04 C5Y6, Ireland. 

What proxy materials are available on the internet?

The Proxy Statement and the Annual Report to shareholders are available at www.proxyvote.com

 

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PROPOSAL 1

ELECTION OF DIRECTORS

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

 

   

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

 

   

Class II:  Michael Grey, Jeff Himawan, Ph.D. and Ronald Pauli, whose terms will expire at our 2019 Annual General Meeting of Shareholders; and

 

   

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

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

There are currently three directors in Class  II whose term of office expires in 2019, one of whom, Ronald Pauli, will not be subject to re-election at the 2019 Annual General Meeting.  Each of the nominees listed below in Class  II is currently one of our directors who was nominated for election by the Board, upon the recommendation of the Nominating and Corporate Governance Committee.  In order to be elected as a director, each nominee must receive the affirmative vote of a majority of the votes cast by the holders of ordinary shares represented at the Annual General Meeting in person or by proxy.  If elected, each of these nominees would serve until the 2022 Annual General Meeting of Shareholders and until his or her successor has been duly elected and qualified, or, if sooner, until the director’s death, resignation, disqualification or removal. 

 

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Class II—Directors Whose Terms Expire at the 2019 Annual General Meeting of Shareholders and are Nominees for Election

 

 

Michael Grey

 

Chairman and Chief Executive Officer, Mirum Pharmaceuticals, Inc. 

 

 

 

Mr. Grey has served as chairman and chief executive officer of Mirum Pharmaceuticals, Inc., a private biotechnology company, since May 2018, as executive chairman of Amplyx Pharmaceuticals, Inc. (Amplyx), a private pharmaceutical company, since January 2017; Reneo Pharmaceuticals, Inc. (Reneo), a private pharmaceutical company, since December 2017; and Spruce Biosciences, Inc., a private biotechnology company, since April 2017.  He has also served as a venture partner at Pappas Ventures since January 2010.  Mr. Grey served from October 2015 to January 2017 as the president and chief executive officer of Amplyx, and from September 2014 to December 2017 as chairman and chief executive officer of Reneo.  From February 2011 to June 2014, Mr. Grey served as president and chief executive officer of Lumena Pharmaceuticals, Inc., a biotechnology company, which was acquired by Shire plc in June 2014.  He has 40 years of experience in the pharmaceutical and biotechnology industries and has held senior positions at a number of companies, including president and chief executive officer of SGX Pharmaceuticals, Inc. (sold to Eli Lilly and Company in 2008), president and chief executive officer of Trega Biosciences, Inc. (sold to LION Bioscience, Inc. in 2001) and president of BioChem Therapeutic Inc. Prior to these, Mr. Grey served in various roles with Glaxo, Inc. and Glaxo Holdings PLC, culminating in his position as vice president, corporate development and director of international licensing.  Mr. Grey received a bachelor of science degree in chemistry from the University of Nottingham in the United Kingdom. 

 

Qualifications:

 

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

 

      

 

Age: 66

 

Director Since: Sept. 2011

 

Lead Independent Director
Since:
Aug. 2012

 

Board Committees:

•  Nominating and Corporate Governance

•  Transaction

 

Current Public Company Directorships:

•  BioMarin Pharmaceutical Inc.

•  biotechnology company

•  Mirati Therapeutics Inc.

•  biotechnology company

 

 

Jeff Himawan, Ph.D.

 

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

 

 

        

 

Dr. Himawan has been a managing director of Essex Woodlands Health Ventures, a venture capital firm, since 2004.  Prior to that, he was an adjunct partner at Essex Woodlands from 1999 to 2001, and he was a venture partner from 2001 to 2004.  Dr. Himawan co-founded Seed-One Ventures, an early-stage venture capital firm, where he served as a managing director from 1996 to 2001.  Dr. Himawan received a bachelor of science degree in biology from the Massachusetts Institute of Technology and his doctorate in biological chemistry and molecular pharmacology from Harvard University. 

 

Qualifications:

 

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

 

      

 

Age: 53

 

Director Since: July 2007

 

Board Committees:

•  Compensation (Chair)

•  Transaction

 

Current Public Company Directorships:

•  Catalyst Biosciences, Inc.

•  biopharmaceutical company

•  MediciNova, Inc.

•  biopharmaceutical company

 

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THE BOARD RECOMMENDS

A VOTE IN FAVOR OF EACH NAMED NOMINEE

 

Class III—Directors Continuing in Office Until the 2020 Annual General Meeting of Shareholders

 

 

Gino Santini

 

Chairman, AMAG Pharmaceuticals, Inc.

 

 

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

 

Qualifications:

 

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

 

      

 

Age:  62

 

Director Since:  March 2012

 

Board Committees:

•  Compensation

•  Transaction (Chair)

 

Current Public Company Directorships:

•  AMAG Pharmaceuticals, Inc.

•  biopharmaceutical company

•  Intercept Pharmaceuticals, Inc.

•  biopharmaceutical company

•  Collegium Pharmaceutical, Inc.

•  biopharmaceutical company

•  Allena Pharmaceuticals, Inc.

•  biopharmaceutical company

 

 

James Shannon, M.D.

 

Director, MannKind Corporation

 

    

 

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

 

Qualifications:

 

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

 

      

 

Age:  62

 

Director Since:  Aug. 2017

 

Board Committees:

•  Compensation

•  Transaction

 

Current Public Company Directorships:

•  MannKind Corporation.

•  biopharmaceutical company

•  ProQR Therapeutics NV

•  therapeutics company

 

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Timothy P. Walbert

 

Chairman, President and Chief Executive Officer, Horizon Pharma plc

 

 

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

 

Qualifications:

 

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

 

      

 

Age:  51

 

Chair Since:  March 2010

Director Since:  June 2008

 

Board Committees:

•  None

 

Current Public Company Directorships:

•  Egalet Corporation (Chair)

•  pharmaceutical company

 

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

 

 

William F. Daniel

 

Director, Malin Corporation plc

 

 

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

 

Qualifications:

 

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

 

      

 

Age:  67

 

Director Since:  Sept. 2014

 

Board Committees:

•  Audit (Chair)

•  Compensation

 

Current Public Company Directorships:

•  Malin Corporation plc

•  global life sciences company

 

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H. Thomas Watkins

 

Chairman, Vanda Pharmaceuticals, Inc.

 

 

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

 

Qualifications:

 

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

 

      

 

Age:  66

 

Director Since:  Apr. 2014

 

Board Committees:

•  Audit

•  Nominating and Corporate Governance (Chair)

 

Current Public Company Directorships:

•  Vanda Pharmaceuticals, Inc. (Chair)

•  biopharmaceutical company

 

 

Pascale Witz

 

President, PWH Advisors

 

 

Ms. Witz founded PWH Advisors, a strategic consultancy firm advising healthcare and investment companies, in November 2016 and has served as its president since that time.  From September 2015 to May 2016, Ms. Witz served as executive vice president, global diabetes and cardiovascular at Sanofi, a pharmaceutical company.  During her tenure at Sanofi, she launched multiple medicines across three continents and strengthened the pipeline through licensing and partnerships.  Prior to joining Sanofi, Ms. Witz served more than 17 years at GE Healthcare where, in her final role as president and chief executive officer of its medical diagnostics business, she ran a $2 billion integrated pharmaceutical organization that encompassed research and development through commercial.  She previously served on the board of directors of Savencia SA, a public food and dairy company, from 2016 to 2018, and of Tesoro, Inc., then a public biopharmaceutical company, from 2018 to January 2019.  Ms. Witz received her master’s degree of business administration in economics and marketing from INSEAD and her master of science in biochemistry from INSA Lyon.

 

Qualifications:

 

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

 

      

 

Age:   52

 

Director Since:  Aug. 2017

 

Board Committees:

•  Audit

•  Nominating and Corporate Governance

 

Current Public Company Directorships:

•  Fresenius Medical Care AG & Co. KGaA

•  medical supply company

•  Regulus Therapeutics

•  biotechnology company

•  PerkinElmer

•  human and environmental health company

 

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THE BOARD OF DIRECTORS AND ITS COMMITTEES

 

 Overview

 

In 2018, the Board held six meetings and did not act by unanimous written consent without a meeting.  Each Board member attended 93% or more of the aggregate number of meetings of the Board and of the committees on which he or she served.  It is our policy to encourage directors and nominees for director to attend annual general meetings of shareholders.  All our current directors attended our 2018 Annual General Meeting of Shareholders. 

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

 

 Independence of the Board of Directors

 

Other than Mr. Walbert, our chairman, president and chief executive officer, all members of the Board are independent and all members of committees of the Board are independent.  The Board has affirmatively determined that the following eight directors are independent directors within the meaning of the applicable Nasdaq Stock Market (Nasdaq) listing standards:  Mr. Daniel, Mr. Grey, Dr. Himawan, Mr. Pauli, Mr. Santini, Dr. Shannon, Mr. Watkins and Ms. Witz.  In making this determination, the Board found that none of these directors or nominees for director had a material or other disqualifying relationship with us.  Mr. Walbert is not an independent director by virtue of his current employment with us.  To determine independence, the Board reviewed all relevant identified transactions or relationships between each director, or any of his or her family members, and us, our senior management and our independent registered public accounting firm. 

As required under applicable Nasdaq listing standards, in fiscal year 2018, our independent directors met four times in regularly scheduled executive sessions at which only independent directors were present. 

 

 Code of Ethics

 

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

 

 Board Leadership Structure

 

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

Chairman/Chief Executive Officer

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

 

   

coherent leadership and direction for the Board and executive management;

 

   

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

 

   

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

 

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

Lead Independent Director

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

 

   

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

 

   

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

 

   

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

 

   

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

 

 Role of the Board in Risk Oversight

 

One of the Board’s key functions is informed oversight of our risk management process.  The Board does not have a standing risk management committee, but rather administers this oversight function directly through the Board as a whole, as well as through various Board standing committees that address risks inherent in their respective areas of oversight.  In particular, the Board is responsible for monitoring and assessing strategic risk exposure, including a determination of the nature and level of risk appropriate for the Company.  Our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken and provides oversight of the performance of our internal audit function and external auditors.  The Audit Committee also reviews and receives regular briefings concerning information security and technology risks (including cybersecurity), including discussions of our information security and risk management programs.  Our Nominating and Corporate Governance Committee monitors the effectiveness of our corporate governance guidelines, including whether they are successful in preventing illegal or improper liability-creating conduct, and monitors compliance with legal, regulatory and ethical requirements.  Our Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.  Our Transaction Committee evaluates potential strategic transactions and financing opportunities, including the risks that such transactions could pose to the Company. 

 

 Director Selection

 

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

 

   

the independence standards established by the Company, the presence of any material interests that could cause a conflict between our interests and the interests of the director nominee, and the director nominee’s ability to exercise his or her best business judgment in the interest of all shareholders;

 

   

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

 

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the appropriate size and the diversity of the Board;

 

   

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

 

   

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

During 2018, we paid a fee to one third-party search firm that was retained by the Board to identify potential nominees and assist our Nominating and Corporate Governance Committee in evaluating such potential nominees. 

Diversity Policy

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

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

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

 

 Committees of the Board of Directors

 

The Board has four standing committees: the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee, and Transaction Committee.  All committees are comprised of independent directors within the meaning of the applicable Nasdaq listing standards.  A description of each committee of the Board is described below. 

The following table provides membership and meeting information for fiscal year 2018 for each of the Board committees:

 

    

Audit    

 

 

Compensation        

 

 

Nominating and       

Corporate Governance       

 

 

Transaction        

 

 

Timothy P. Walbert

 

               

Michael Grey                       LOGO

 

          LOGO

 

  LOGO

 

William F. Daniel

 

  LOGO

 

  LOGO

 

       

Jeff Himawan, Ph.D.

 

      LOGO

 

      LOGO

 

Ronald Pauli(1)

 

  LOGO

 

      LOGO

 

   

Gino Santini

 

      LOGO

 

      LOGO

 

James Shannon, M.D.(2)

 

      LOGO

 

      LOGO

 

H. Thomas Watkins

 

  LOGO

 

      LOGO

 

   

Pascale Witz(3)

 

  LOGO

 

      LOGO

 

   

Total meetings in fiscal year 2018

 

  5

 

  6

 

  4

 

  7

 

 

LOGO  = Chair    LOGO  = Member    LOGO  = Lead Independent Director

 

  (1)

Mr. Pauli has served on the Nominating and Corporate Governance Committee since February 2018.  Mr. Pauli will not be subject to re-election at the 2019 Annual General Meeting and will no longer serve on any committees of the Board after the 2019 Annual General Meeting. 

  (2)

Dr. Shannon has served on the Compensation Committee since February 2018. 

  (3)

Ms. Witz has served on the Audit Committee since February 2018. 

Audit Committee

The Audit Committee assists the Board in fulfilling its oversight responsibility with respect to, among other things: (i) our corporate accounting and financial reporting practices, (ii) the system of internal control over financial reporting, (iii) the audit

 

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process, (iv) the quality and integrity of our financial statements, (v) the qualifications, independence and performance of our independent registered public accounting firm, (vi) the qualifications, independence and performance of our internal audit function and (vii) enterprise risk management.  Each of the independent registered public accounting firm, internal audit and management periodically meet privately with the Audit Committee. 

The Board has determined that Mr. Daniel qualifies as an “audit committee financial expert,” within the meaning of applicable SEC rules.  In making this determination, the Board has considered Mr. Daniel’s formal education, the nature and scope of his previous experience and his financial and corporate governance expertise. 

Report of the Audit Committee of the Board of Directors

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

The Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2018 with management of the Company.  The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board (PCAOB).  The Audit Committee has also received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the accounting firm’s independence.  Based on the foregoing, the Audit Committee has recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018. 

Audit Committee

William F. Daniel, Chairman

Ronald Pauli

H. Thomas Watkins

Pascale Witz

Compensation Committee

The Compensation Committee oversees, reviews and approves or recommends for adoption our compensation policies, plans and programs, reviews and approves or recommends to the full Board, as appropriate, the compensation to be paid to our executive officers and directors, and prepares and reviews the Compensation Committee report included in our annual proxy statement.  In making its compensation decisions and recommendations, the Compensation Committee may take into account the recommendations of the Chief Executive Officer and other senior management.  Other than giving such recommendations, however, the Chief Executive Officer and other senior management have no formal role and no authority to determine the amount or form of executive and director compensation.  The processes and procedures used for the consideration and determination of executive compensation are described in the section of this Proxy Statement captioned, ‘‘Compensation Discussion and Analysis.’’

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

In October 2016, our Compensation Committee engaged Radford, an Aon Hewitt Company (Radford), as its independent consultant.  For additional information regarding our processes and procedures for the consideration and determination of executive compensation, including the role of Radford in determining and recommending executive compensation, the aggregate cost of Radford’s executive and director compensation consulting services during 2018, see the section of this Proxy Statement entitled “Compensation Discussion and Analysis — Compensation Determination Process.” With respect to director compensation matters, our Compensation Committee recommends to our Board and our Board determines and sets non-employee director compensation.  Our compensation arrangements for our non-employee directors are described under the section of this Proxy Statement entitled “Non-Employee Director Compensation.”

 

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Compensation Committee Interlocks and Insider Participation

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

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee oversees all aspects of our corporate governance functions on behalf of the Board, including, but not limited to, (i) making recommendations to the Board regarding corporate governance issues; (ii) identifying, reviewing and evaluating candidates to serve as our directors consistent with criteria approved by the Board and reviewing and evaluating incumbent directors; (iii) serving as a focal point for communication between such candidates, non-committee directors and our management; (iv) nominating candidates to serve as directors; (v) making other recommendations to the Board regarding affairs relating to our directors; and (vi) providing oversight assistance in connection with our legal, regulatory and ethical compliance programs, policies and procedures as established by management and the Board.

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

Transaction Committee

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

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

 

  Shareholder Rights Agreement

Description of Our Short-Term Shareholder Rights Agreement

In February 2019, we entered into a short-term shareholder rights agreement, commonly referred to as a poison pill.  In general terms, the shareholder rights agreement works by causing significant dilution to any person or group that acquires 10% (or 15% in the case of an existing “13G Investor” as defined in the shareholder rights agreement) or more of our outstanding ordinary shares without the prior approval of the Board.  The shareholder rights agreement, which has a limited 12-month term expiring in February 2020, is not intended to prevent an acquisition of the company on terms that the Board considers favorable to and in the best interests of all shareholders.  Rather, the shareholder rights agreement aims to provide the Board with adequate time to fully assess any takeover proposal in full compliance with its fiduciary duties and to encourage anyone seeking to acquire us to negotiate with the Board prior to attempting a takeover.

 

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Irish Takeover Rules Preclude a “Wait-and-See” Approach Under an “On-the-Shelf” Strategy

As an Irish public company, we are subject to the Irish Takeover Panel Act 1997, as amended, and the Irish Takeover Rules made thereunder.  Under the Irish Takeover Rules, we are precluded from adopting a shareholder rights agreement in the event that we receive an offer to acquire our company or we have reason to believe that such an offer is or may be imminent.  Many U.S.-incorporated companies, particularly those companies incorporated in Delaware, generally have the ability to design, prepare and draft a shareholder rights agreement in advance and put it “on-the-shelf,” with the actual adoption of the shareholder rights agreement delayed until a takeover proposal develops or becomes imminent.  However, as a result of the application of the Irish Takeover Rules, we do not have the ability to “wait-and-see” under this “on-the-shelf” shareholder rights agreement strategy available to U.S.-incorporated companies. 

Rationale for Adoption of Our Short-Term Shareholder Rights Agreement

The Board decided to adopt the shareholder rights agreement in response to the takeover environment in general and the Board’s belief that we face a heightened risk of receiving takeover proposals at inadequate prices, given several factors: our evolution into a biopharma company focused on rare disease medicines; the highly positive Phase 3 clinical trial results of our rare disease drug candidate teprotumumab for the treatment of active thyroid eye disease (TED) announced on February 28, 2019; the strong financial performance we delivered in 2018; the expected $750 million in peak sales for each of KRYSTEXXA and teprotumumab; and the investments we are making in 2019, all of which are discussed in our letter to shareholders at the beginning of this Proxy Statement, as well as the summary to this Proxy Statement beginning on page 2.  In addition, in making the determination, the Board considered our balance sheet cash, our debt levels and our capacity to continue to invest in building a pipeline of rare disease medicines.

Furthermore, as a result of our strong financial performance and our evolution into a rare disease-focused biopharma company, our stock-trading multiples as a percentage of net sales and adjusted EBITDA have increased to be more aligned with biopharma companies we view as comparable.  However, we do not believe analysts and investors have fully valued us as a biopharma company.  Instead, they continue to value us as a specialty pharma company, and we believe this adds to the risk of receiving an inadequately priced takeover proposal.

The adoption of the plan is not in response to any specific approach; as explained above, under the Irish Takeover Rules, we are precluded from adopting a shareholder rights agreement in such a case. 

In consideration of these factors, and due to the application of the Irish Takeover Rules, which preclude a “wait-and-see” approach under an “on-the-shelf” shareholder rights agreement strategy available to U.S.-incorporated companies, explained above, the Board determined that it was necessary and advisable to adopt the shareholder rights agreement in order to guard against attempts to acquire control of the Company at an inadequate price that would be unfair to our shareholders.  The Board balanced its assessment of that risk with what it believed was an appropriately limited term of the shareholder rights agreement, concluding that a short, 12-month term was an adequate response to that risk.  Ultimately, the Board adopted the shareholder rights agreement to enable all of our shareholders to realize the long-term value of their investment in the Company.  During recent discussions with investors, our shareholders have generally been supportive of our strategy and the Board’s decision to adopt our shareholder rights agreement.

 

  Shareholder Communications with the Board of Directors

 

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

 

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EXECUTIVE OFFICERS

The following table sets forth information regarding executive officers as of March 1, 2019:

 

Name

 

 

   Age   

 

 

Position with the Company

 

Timothy P. Walbert   51  

Chairman, President and Chief Executive Officer

Brian K. Beeler   46  

Executive Vice President, General Counsel

Robert F. Carey   60  

Executive Vice President, Chief Business Officer

Geoffrey M. Curtis   44  

Executive Vice President, Corporate Affairs and Chief Communications Officer

Michael A. DesJardin   61  

Executive Vice President, Technical Operations

Paul W. Hoelscher   54  

Executive Vice President, Chief Financial Officer

Vikram Karnani   44  

Executive Vice President, Chief Commercial Officer

Jeffrey D. Kent, M.D., FACG   57  

Senior Vice President, Head of Medical Affairs and Outcomes Research

Irina P. Konstantinovsky   49  

Executive Vice President, Chief Human Resources Officer

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

  52   Executive Vice President, Head of Research and Development, Chief Scientific Officer

Barry J. Moze

  65   Executive Vice President, Chief Administrative Officer

 

 

The following is biographical information as of March 1, 2019 for our executive officers other than Mr. Walbert, whose biographical information is included in Proposal 1.

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

Robert F. Carey.  Mr. Carey has served as our executive vice president, chief business officer since March 2014.  Prior to that, Mr. Carey spent more than 11 years as managing director and head of the life sciences investment banking group at JMP Securities LLC, a full-service investment bank.  Prior to JMP, Mr. Carey was a managing director in the healthcare groups at Dresdner Kleinwort Wasserstein and Vector Securities.  Mr. Carey also has held roles at Shearson Lehman Hutton and Ernst & Whinney.  Mr. Carey serves on the board of directors of Sangamo Therapeutics, Inc., a public pharmaceutical company, and AIT Therapeutics, Inc., a public medical device and biopharmaceutical company.  Mr. Carey previously served on the board of directors of Argos Therapeutics Inc., a public pharmaceutical company, from 2014 to 2018.  Mr. Carey received his bachelor of business administration degree in accounting from the University of Notre Dame.

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

Michael A. DesJardin.  Mr. DesJardin has served as our executive vice president, technical operations since February 2017.  Mr. DesJardin previously served as our senior vice president, technical operations from October 2016 to November 2016 and as our senior vice president, life cycle management from December 2016 to January 2017.  Mr. DesJardin joined Horizon from Raptor in October 2016 as part of the Raptor acquisition.  While at Raptor, Mr. DesJardin was the senior vice president of technical operations from April 2015 to October 2016.  Prior to that, Mr. DesJardin served as senior vice president of product development at Jazz Pharmaceuticals Public Limited Company (formerly Jazz Pharmaceuticals, Inc.) (Jazz) from July 2004 to March 2015.  Mr. DesJardin spent nine years as an executive director and engineering fellow at ALZA Corporation and spent 15 years at the Dow Chemical Company working in pharmaceutical and agricultural chemical development for Marion Merrill Dow.  Mr. DesJardin has over 38 years of experience in pharmaceutical development.  Mr. DesJardin received a bachelor of science

 

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degree in chemical engineering from the University of California, Berkeley and is a registered professional engineer in the State of California.

Paul W. Hoelscher.  Mr. Hoelscher has served as our executive vice president, chief financial officer since October 2014.  Previously, Mr. Hoelscher was our executive vice president, finance from June 2014 through September 2014.  Prior to joining Horizon, Mr. Hoelscher served as senior vice president, finance-treasury and corporate development of OfficeMax, Inc., from August 2013 to May 2014, and as vice president, finance-treasury and corporate development of OfficeMax from August 2012 to July 2013.  Prior to that, Mr. Hoelscher served in various finance roles at Alberto Culver Company from 1992 to 2012 and in various positions in the audit practice at KPMG LLP from 1986 to 1993.  He currently serves on the board of trustees of the Illinois Chapter of the Leukemia and Lymphoma Society.  Mr. Hoelscher received his bachelor of science degree in accountancy from the University of Illinois at Urbana-Champaign and is a certified public accountant.

Vikram Karnani.  Mr. Karnani has served as our executive vice president, chief commercial officer since March 2018.  Prior to that, he served as our senior vice president, rheumatology business unit from February 2017 to March 2018, and before that, from July 2014 until February 2017, he served as our general manager, specialty business unit.  Prior to joining Horizon, Mr. Karnani was with Fresenius Kabi, a global health care company, where he served as vice president of the therapeutics and cell therapy business, from October 2011 to July 2014.  Mr. Karnani also held various positions in business development, corporate strategy and strategic marketing within Fenwal Inc., a global blood technology company that was acquired by Fresenius Kabi, from November 2008 to October 2011.  Mr. Karnani brings nearly 16 years of cross-functional expertise across a multitude of industries, including medical devices, management consulting, semiconductors and cellular telecommunications.  Mr. Karnani has a master’s degree from the Kellogg School of Management at Northwestern University, a master’s degree in electrical engineering from Case Western Reserve University and a bachelor of science degree in electrical engineering from University of Bombay, India.

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

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

Shao-Lee Lin, M.D., Ph.D.  Dr. Lin has served as our executive vice president, head of research and development and chief scientific officer since January 2018.  Prior to Horizon, Dr. Lin was a corporate officer and vice president, therapeutic areas, development excellence and international development at AbbVie, Inc., a pharmaceutical company, from March 2015 to December 2017.  In that role, she led immunology, virology, neuroscience and general medicine, across on-market and pipeline compounds as well as international development across all therapeutic areas.  Prior to AbbVie, Dr. Lin was vice president, inflammation and respiratory development at Gilead Sciences, Inc., a biopharmaceutical company, from July 2012 to February 2015.  She also held leadership positions in immunology and other therapeutic areas while at Amgen Inc., a biotechnology company.  Dr. Lin received her medical degree and doctorate at the Johns Hopkins University School of Medicine and completed fellowships and post-doctoral work in rheumatology, allergy and immunology at the University of California San Diego and The Scripps Clinic and Research Institute.  She has a bachelor of science in biochemistry and chemical engineering from Rice University.  Dr. Lin is currently adjunct faculty at Northwestern University.  She has previously been on the faculty of Rockefeller University as a Clinical Scholar and also served as adjunct faculty at Cornell, University of California Los Angeles (UCLA) and Stanford medical schools. 

 

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

 

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis (CD&A) discusses the compensation philosophy, policies and principles underlying our executive compensation decisions made for 2018 compensation.  This CD&A provides qualitative information on the factors relevant to these decisions and the manner in which compensation is awarded to the following executive officers who have been named in the Summary Compensation Table included in this Proxy Statement and whom we refer to as our named executive officers (NEOs).

 

   

Timothy P. Walbert

 

  

Chairman, President and Chief Executive Officer

 

Paul W. Hoelscher

 

  

Executive Vice President, Chief Financial Officer

 

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

 

  

Executive Vice President, Head of Research and Development and Chief Scientific Officer

 

Robert F. Carey

 

  

Executive Vice President, Chief Business Officer

 

Barry J. Moze

 

  

Executive Vice President, Chief Administrative Officer

 

Quick CD&A Reference Guide

 

   

Executive Summary

 

  

Page 33    

 

Objectives and Philosophy

 

  

Page 42    

 

Compensation Determination Process

 

  

Page 43    

 

Elements of Executive Compensation

 

  

Page 44    

 

Additional Compensation Policies and Practices

 

  

Page 53    

 

 

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 Executive Summary

2018 at a Glance

A Year of Strong Performance Generating Record Net Sales and Strong Shareholder Return

 

 

LOGO

Except for 5-year total shareholder return, growth percentages represent comparison to full-year 2017.

(2)

Adjusted EBITDA is a non-GAAP measure.  Please refer to the discussion of non-GAAP financial measures and the reconciliations to GAAP measures beginning on page 104 of our Annual Report on Form 10-K for the year ended December 31, 2018, which discussion and reconciliations are incorporated herein by reference.

A Year of Significant Progress

 

 

LOGO

 

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Business Overview

We made significant progress in 2018 on our strategy to build a robust and differentiated pipeline and maximize the growth of KRYSTEXXA, our biologic medicine for uncontrolled gout, and our flagship medicine.  As a result, we generated record full-year net sales of $1.2 billion, an increase of 14 percent over 2017, and one-year total shareholder return of 34 percent in a year when the Nasdaq Biotechnology Index (NBI) declined 9 percent.  In addition to advancing our existing pipeline programs, we added several new programs designed to enhance our leadership position in uncontrolled gout.  We also transformed our research and development (R&D) organization, augmenting its scientific expertise with a new leadership team.  We accelerated the growth of KRYSTEXXA by investing in its commercial infrastructure – doubling its commercial team and our addressable patient population.

Our Strategy

We are constantly driving toward our aspiration, which is to be a leading rare disease biopharma company that delivers innovative therapies to patients and generates high returns for our shareholders.  We have made a great deal of progress in that regard and are building on the resulting momentum.

We have taken a different approach, however, from typical biopharma companies.  Instead of starting out with a pipeline only, raising capital to finance development opportunities, we first developed a successful commercial business, generating cash flows and significant growth.  We then deployed our cash flows and access to capital to the development of leading-edge therapeutic products for rare diseases. 

Our Evolution to a Rare Disease Biopharma Company: A Different Approach

 

 

LOGO

Horizon today has a growing pipeline of development programs, 11 on-market medicines and total net sales of $1.2 billion – a significant transformation from our beginnings as a public company in 2011, when we had two medicines and total net sales of $7 million.  Today, our medicines for rare and rheumatic diseases make up nearly 70 percent of our total net sales.

Our strategy is to build a robust and differentiated pipeline and to maximize growth of KRYSTEXXA, our on-market medicine for uncontrolled gout.

We are also aligning our capital structure to be closer to that of R&D-focused rare disease biopharma companies, which generally have lower debt levels.  We recently announced plans to pay down approximately $550 million our outstanding debt, which was $2.0 billion at December 31, 2018, using available cash and proceeds from our recent $345 million underwritten public offering.  This initiative will lower our outstanding debt and leverage ratio, and at the same time allow us the flexibility to take advantage of business development opportunities.  We subsequently paid down $300 million of the debt.  Our current outstanding debt is now $1.7 billion, and are on track to pay down the remaining $250 million of our $550 million target.  This initiative exemplifies our disciplined approach to debt and efficient use of capital, which together with our strong cash balance enable continued investment in our pipeline and KRYSTEXXA.

Our Future: Our Expanding Pipeline

Expanding our pipeline to drive long-term sustainable growth is a strategic priority.

Our lead pipeline candidate, teprotumumab, which we acquired in 2017, is a fully human monoclonal antibody insulin-like growth factor 1-receptor (IGF-1R) for the treatment of active thyroid eye disease (TED).  TED is a rare, autoimmune inflammatory eye disease in which local inflammation and tissue expansion behind the eye can lead to proptosis (eye bulging).  Proptosis can

 

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result in double vision, misalignment of the eyes, and an inability to close the eyelids, making the tasks of daily life challenging.  Currently, there are no U.S. Food and Drug Administration (FDA) approved treatments available for treating TED.  Following the presentation of breakthrough Phase 2 results in 2017, in February 2019 we announced the Phase 3 trial topline data, which demonstrated a highly statistically significant reduction in proptosis, with 82.9 percent of teprotumumab patients meeting the primary endpoint versus 9.5 percent of placebo patients.  We continue to expect to submit a biologics license application to the FDA in mid-2019.  We are also conducting an extension study, known as OPTIC-X, which will help inform us if patients would benefit from longer treatment or retreatment with teprotumumab.

In uncontrolled gout, our R&D strategy is to maximize the benefits of KRYSTEXXA, as well as to enhance and sustain our leadership position through the development of new medicines.  For KRYSTEXXA, which is the only approved treatment for uncontrolled gout, we are investigating ways to improve the patient response rate so that it can benefit more patients.  (Uncontrolled gout is chronic gout that is refractory to conventional therapies.) Our MIRROR trial is evaluating the combination of KRYSTEXXA and methotrexate, which is the immunomodulator most commonly used by rheumatologists, with the goal to increase the number of patients that can benefit from KRYSTEXXA.  Based on recent positive external case series data, we are adapting the trial to support the potential for registration, with enrollment expected to begin in the second quarter of 2019.  We will also be initiating a clinical trial in the second half of 2019 to study the effect of KRYSTEXXA on serum uric acid levels in kidney transplant patients with uncontrolled gout.  In addition, we are working on three preclinical programs designed to build on and sustain our leadership position in uncontrolled gout well into the future: two next-generation biologics for uncontrolled gout and the other a long-term collaboration to discover and develop novel therapeutics for gout.

In support of our expanding pipeline and the value-maximization of our on-market medicines, in 2018, we considerably augmented the scientific expertise and acumen of our R&D organization.  Shao-Lee Lin, M.D., Ph.D., joined Horizon in January 2018 in the new role of chief scientific officer and head of R&D.  Dr. Lin is an immunologist, rheumatologist and allergist with more than 20 years of academic and industry experience.  She has established a new leadership team that oversees our R&D programs, partners with business development on pipeline opportunities and manages the therapeutic area development strategies and portfolios.

Our Pipeline

 

 

LOGO

 

(1)   Being developed under a collaboration agreement.

MIRROR:  Methotrexate to Increase Response Rates in Patients with Uncontrolled GOut Receiving KRYSTEXXA.

OPTIC:  Treatment of Graves’ Orbitopathy (Thyroid Eye Disease) to Reduce Proptosis with Teprotumumab Infusions in a Randomized,

        Placebo-Controlled, Clinical Study.

Teprotumumab is an investigational candidate, and its safety and efficacy have not been established.

Driving Growth Today and Tomorrow: Our Orphan and Rheumatology Segment

We have two segments: orphan and rheumatology, and primary care.  The orphan and rheumatology segment is the strategic driver of our growth today.  Its compound annual growth rate from 2014 to 2018 of 101 percent underscores the value of our focus on rare disease medicines.

The orphan and rheumatology segment includes KRYSTEXXA, our flagship on-market medicine.  In addition, if approved, teprotumumab, our late-stage development biologic candidate, will be part of this segment’s portfolio.  The segment also includes a durable base of rare disease medicines: RAVICTI®, for the treatment of urea cycle disorders; PROCYSBI®, for the treatment of nephropathic cystinosis and ACTIMMUNE®, for the treatment of chronic granulomatous disease.

 

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We believe the orphan and rheumatology segment offers tremendous potential for future growth.  KRYSTEXXA and teprotumumab, if approved, both offer significant growth potential, and we estimate peak annual net sales of more than $750 million for each.

Our Orphan and Rheumatology Segment:

Driving Growth Now and In the Future

 

 

LOGO

 

  (1)

Horizon peak sales estimate for U.S. net sales only.

 

Teprotumumab is an investigational candidate and its safety and efficacy have not been established.

CAGR: compound annual growth rate.

The Foundation of Our Success: Strong Business Development and Commercial Execution

The foundation of our success since we launched as a public company in 2011 lies in our strong business development capabilities and commercial execution.

Business development is an integral factor in our success – both since launch and going forward – and was a key component of our transformation into a biopharma company focused on rare disease medicines.  In 2014, we began rapidly diversifying our portfolio with rare disease medicines through key transactions that brought us ACTIMMUNE, RAVICTI, KRYSTEXXA and PROCYSBI over the next three years.  In 2017, we made our first acquisition of a development-stage candidate medicine – teprotumumab – beginning the expansion of our pipeline, which is a current strategic priority.

Being able to quickly take advantage of strategic opportunities is one of our business development strengths, and it has served us well with the many acquisitions we have completed that have performed above and beyond our expectations.  Given the importance of acquisitions to our strategy, it is important that we retain the flexibility to efficiently raise capital going forward, particularly since many acquisitions are highly competitive.

 

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We Have Transformed to Become a Biopharma Company Focused on Rare Disease Medicines

Through Our Business Development Capabilities

Rare Disease Medicine Acquisitions 2014-2019

 

 

LOGO

Commercial execution – Acquiring assets is not a guarantee of success.  We, however, have a strong record of successfully commercializing our medicines and improving the performance of the medicines we acquire.  We attribute our successful results to the deep expertise and knowledge of our commercial teams, coupled with the holistic approach we employ supporting our patient and physician communities.  KRYSTEXXA is a prime example of the value of our approach: it was an underperforming asset when we acquired it in 2016.  In only two years we transformed it into the flagship growth driver it is for us today – more than quadrupling its net sales to $259 million in 2018.  Our commercial team understands the market for KRYSTEXXA, and we invested in 2018 to accelerate the potential we see for the medicine – more than $750 million in peak annual net sales. 

Our Purpose: To Help Build Healthier Communities, Urgently and Responsibly

At Horizon, we are making the world a better place – one patient, one medicine, one community at a time.  That’s why we go to incredible lengths to impact incredible lives – to make health a priority, not a privilege.  That’s what drives our insistence that patients have access to our medicines, regardless of their ability to pay, supporting patients in 2018 with nearly $2.0 billion in assistance, representing 46 percent of our full-year gross sales.  We are transforming health by building healthier communities both urgently and responsibly.  As a company we are going to incredible lengths to impact incredible lives.  It’s in our DNA – who we are as a company and who we are as individuals.  For us, it’s personal – we want to make a difference.  Our social responsibility programs, patient advocacy support and awareness, dedication to individual employee volunteerism – all reflect our ideals, a commitment to our patients and the communities we serve. 

Our dedication and commitment are evident in the recognition we receive.  We were honored in 2018 to be spotlighted by PEOPLE Magazine as one of the “50 Companies That Care” – companies that succeed in business while also demonstrating respect, compassion and concern for their communities, employees and the environment.  This distinction is a realization of what we strive for – to be a positive force for good amid a constantly changing health care system.  We also became a member of Pledge 1%, a corporate philanthropy movement that empowers companies to donate 1% of product, 1% of equity, 1% of profit or 1% of employee time to improve communities around the world.  We are one of the first biopharma companies to join the initiative, which includes 6,000-plus organizations across 100 countries. 

Horizon is a great place to work and our employees tell us so.  We continue to place in multiple third-party workplace recognition surveys, including being named by FORTUNE Magazine as the Number One “Best Workplace in BioPharma.” We are also proud to have been named by Crain’s Chicago Business as one of the “Best Places to Work for Women in Chicago” in 2018.  The percentage of women of our total employee population is above the industry standard for all levels in the Company, including upper management levels, reflecting the value we place on diversity.  But diversity encompasses more than gender: we believe that people from different backgrounds and life experiences fuel innovation, which helps provide life-changing solutions for our patients – fostering healthier communities and making the world a better place. 

 

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Consistently Recognized as One of the Best Places to Work –

And as a Company That Cares

 

 

 

 

LOGO   

 

   

 

 

 

 

LOGO

 

   

 

LOGO

 

 

   

 

 

 

   LOGO   

 

    

 

 

 

LOGO   

 

Total Shareholder Return

Our disciplined approach, with our clear strategy, business development acumen and strong commercial execution, has driven rapid transformational growth.  As a result, we have outperformed both our peer group and the NBI over the one-, three- and five-year periods ended December 31, 2018.  With our durable base of rare disease medicines, our high-growth KRYSTEXXA medicine and the pipeline we are building for future growth, including our late-stage development candidate teprotumumab, we believe Horizon is well positioned for sustainable long-term growth.

 

 

LOGO

Note: The peer group used for the TSR calculations for the 1-, 3- and 5-year periods ended December 31, 2018 is our peer group shown on page 44.

Our Pay Program

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

Say-on-Pay Results and Shareholder Engagement

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

 

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In 2018, prior to our Annual General Meeting, we offered engagement opportunities to 67 percent of our shareholders, and dialogued with 32 percent of our shareholders.  At our 2018 Annual General Meeting of Shareholders, our say-on-pay proposal received the support of 95 percent of the shares voted.  We believe this high level of support is a result of our comprehensive shareholder outreach and engagement program to solicit feedback, understand investor viewpoints and incorporate their feedback into further discussions of our compensation programs and corporate governance.

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

 

   

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

 

   

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

 

   

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

 

   

Board diversity.  Diversity is an important a principle for us at Horizon as it is for many of our investors.  During 2018, the Board formally instituted a policy on board diversity.  Given that our business and operations are diverse and global in nature, our Nominating and Corporate Governance Committee takes into account a broad range of diversity considerations when assessing potential candidates, including diversity of experience and perspectives as well as gender, race, geography and areas of expertise.  The addition to the Board in 2017 of Pascale Witz, with her extensive global healthcare management experience, and James Shannon, M.D., with his significant clinical development and management experience, are examples of how we have further diversified our Board.

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

2018 Pay-for-Performance Overview

A significant portion – a higher percentage than the majority of our peers – of target total compensation for our CEO and other NEOs is structured in the form of “at-risk” compensation, consisting of annual performance-based incentives and PSUs.  In line with our compensation objectives, including linking executive pay with performance, short-term incentives, PSUs and cash incentives are dependent upon our Company’s performance, aligning our executives’ interests with those of our shareholders for near- and long-term performance.  In addition, the restricted share unit (RSU) portion of the target total compensation has a time-based vesting component so that the total potential value realized from the RSU portion is dependent on our long-term share price performance.  Total target direct compensation for 2018, as shown below, reflects annual base salary, annual bonus, PSUs, RSUs and cash incentives as reported in the Summary Compensation Table.  More than half of total target compensation of our chief executive officer (CEO) is tied to achievement of specific performance goals and an additional 37 percent is time-based equity.

 

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LOGO

CEO 2018 Pay Mix at Target NEO 2018 Pay Mix at Target

Realizable Value of CEO Compensation

The table below shows the compensation of our CEO and compares the reported values in the Summary Compensation Table to the realizable value as of the end of fiscal year 2018 based on our closing share price of $19.54 per share on December 31, 2018 (the last trading day of the year).  As shown below, the grant date fair value of our CEO’s compensation – as required to be reported in the Summary Compensation Table – is not reflective of the actual realizable value that could be received.

Looking over the past four years, there is a clear and stark difference between the average reported value of our CEO’s pay (approximately $29 million) and his realizable pay value (approximately $10 million).  This table demonstrates how our pay-for-performance philosophy works in practice.

 

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2018 was a year of excellent performance for Horizon and strong returns for our shareholders, which is reflected in the increase in value of our CEO’s realizable compensation for the year.  In addition, the chart below reflects how our front-loaded 2015 equity awards, intended to serve as equity compensation for a four-year period, did not reach the threshold performance levels and therefore resulted in zero realized value.  In 2018, after shareholder feedback and other market considerations, the Compensation Committee introduced regular, annual equity awards, shifting away from the front-loaded program.

 

 

LOGO

“Aggregate Reported Value” includes compensation earned from 2015 to 2018 as disclosed in the Summary Compensation Table annually.

“Aggregate Realizable Value” is defined as the compensation earned or deliverable for each year calculated as of the end of the 2018 fiscal year, including: actual salary received, actual amounts earned under the annual cash incentive plan, and the intrinsic value of long-term incentive plan components, as valued on December 31, 2018 using the year-end share price.  Options are valued based on spread value as of December 31, 2018.  PSUs granted in 2015 resulted in zero realized value based on below-threshold relative TSR performance.  For 2018 PSUs, 70% of the grant was eligible to vest based on net sales performance in 2018, with a maximum potential vesting level of 200% for the target PSU award.  Given that we achieved 157% of the target net sales performance level, 505,567 of the 2018 PSUs will be eligible to vest annually over three years following grant.  For the remaining 30% of the 2018 PSUs, vesting is based on 3-year relative TSR and therefore the value has not yet been determined.

 

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Compensation Program Governance

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

 

    

 

What We Do

 

         

 

What We Don’t Do

 

 

Align executive compensation with corporate and individual performance

 

     X  

No guaranteed bonuses or salary increases

 

 

Maintain strong share ownership guidelines for our directors and executives

 

     X   No repricing of stock options without shareholder approval
 

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

 

     X   No dividends or dividend equivalents paid on unearned shares
 

Engage an independent advisor reporting directly to the Compensation Committee

 

     X   No NEO excise tax gross-ups
 

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

 

          
 

Cap annual and long-term incentive payouts

 

          
 

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

 

          
 

Apply an incentive compensation recoupment “clawback” policy

 

          
 

Conduct compensation risk assessments

 

          
 

Actively engage with our shareholders

 

          

 

 

 Objectives and Philosophy

 

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

reward the achievement of key corporate and individual performance measures.

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

 

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 Compensation Determination Process

 

Role of Compensation Committee

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

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

 

   

each NEO’s role and responsibilities;

 

   

achievement of key performance objectives and milestones;

 

   

market factors, such as compensation practices of peer companies;

 

   

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

 

   

retention concerns.

Role of Chief Executive Officer in Compensation Decisions

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

Risk Analysis

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

Role of Independent Consultant

The Compensation Committee retains the services of third-party, independent executive compensation consultants from time to time, as it sees fit, in connection with the establishment of compensation programs and related policies.  Since October 2016, the Compensation Committee has engaged Radford, an Aon Hewitt Company and a subsidiary of Aon plc (Radford), as its independent consultant.  Total fees paid to Radford in 2018 were approximately $394,000.  Radford was engaged to assist and advise on all aspects of compensation program design and pay setting, including, but not limited to, the following services:

 

   

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

 

   

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

 

   

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

 

   

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

 

   

assessing the relationship between executive compensation and corporate performance.

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

 

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Peer Group

Although our Compensation Committee has historically used the Radford survey data as a tool in determining executive compensation, it typically has not used a formula or “benchmark” to set our executives’ compensation in relation to this data.  Instead, the Compensation Committee generally references the 50th percentile of comparable peer companies in combination with multiple other factors, such as the executives’ respective levels of experience and responsibility in determining the total target cash compensation for all executives.  The peer group used for making 2018 compensation decisions and comparative performance analysis was updated by our Compensation Committee in May 2017.  Focusing on publicly traded commercial biotechnology and pharmaceutical companies, the selection criteria used were:

 

   

Headcount:   between 500 and 4,500 employees

 

   

Net Sales:   between $375 million and $4 billion

 

   

Market Capitalization:   between $800 million and $10 billion

Using the above criteria, at the time of the peer review process, Horizon was determined to be positioned at the 67th percentile for headcount, 61st percentile for net sales and 29th percentile for 30-day average market capitalization.

 

Acorda Therapeutics

  

Impax Laboratories, Inc.

  

Nektar Therapeutics

Alkermes plc

  

Incyte Corporation

  

Pacira Pharmaceuticals, Inc.

BioMarin Pharmaceutical Inc.

  

Ionis Pharmaceuticals, Inc.

  

Seattle Genetics, Inc.

 

Assertio Therapeutics, Inc.

(formerly Depomed, Inc.)

 

   Jazz Pharmaceuticals plc    The Medicines Company

Endo International plc

  

Mallinckrodt plc

  

United Therapeutics Corporation

 

 Elements of Executive Compensation

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

 

Element    Form   

 

Corporate
Performance
Period

   Objective

 

Base Salary

  

 

Cash (fixed)

  

 

N/A

  

 

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

 

 

Short-Term Incentive

  

 

Cash (variable)

  

 

Annual

  

 

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

 

 

Long-Term Incentives

  

 

PSU awards

(variable)

 

RSU awards

(variable)

 

Cash Incentive

Program (CIP)

(variable)

  

 

Multi-year

or Annual

 

N/A

 

 

Annual

  

 

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

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

Base Salary

Base salaries for our executive officers are established based on the individual’s scope of responsibilities, experience and market factors.  Base salaries are generally reviewed annually, typically in connection with our annual executive compensation review process.  The Compensation Committee references survey and peer group data to understand the marketplace for individuals in similar positions at the peer group companies.

 

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The annual base salaries of our NEOs as of March 1, 2018 and any increase from their prior base salary levels, if applicable, are as follows:

 

     

  Executive

2018

% Increase  

   

  Timothy P. Walbert

$

    1,081,500     

3.0%

   

  Paul W. Hoelscher

$

566,500     

3.0%

   

  Shao-Lee Lin, M.D., Ph.D.(1)

$

625,000     

N/A

   

  Robert F. Carey

$

545,900     

3.0%

   

  Barry J. Moze

$

593,280     

3.0%

 

  (1)

Dr. Lin joined Horizon in January 2018.  Her salary as disclosed in the above table represents her annualized base salary as set forth in her employment agreement.  She did not receive an increase as of March 1, 2018.

 

Short-Term Incentives

Individual Bonus Opportunities

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

The target bonus opportunities for Messrs. Walbert, Hoelscher, Carey and Moze remained unchanged from prior levels.  Dr. Lin’s bonus target opportunity was established by the Compensation Committee at the time of hire at a level consistent with that provided by our peer group and to other members of our executive team.

Bonus opportunities for 2018 were as follows:

 

  Executive

 

  

 

Threshold      

 

 

 

Target

 

 

 

      Maximum

 

  

(as a % of base salary)

 

 

  Timothy P. Walbert

 

  

 

86.25%

 

 

 

115%

 

 

 

230%

 

 

  Paul W. Hoelscher

 

  

 

     45%

 

 

 

  60%

 

 

 

120%

 

 

  Shao-Lee Lin, M.D., Ph.D.

 

  

 

     45%

 

 

 

  60%

 

 

 

120%

 

 

  Robert F. Carey

 

  

 

     45%

 

 

 

  60%

 

 

 

120%

 

 

  Barry J. Moze

 

  

 

     45%

 

 

 

  60%

 

 

 

120%

 

How It Works

Our annual incentive plan provides our executives the opportunity to earn annual performance-based cash awards based on the achievement of a combination of quantitative goals (70% weighting) and qualitative goals (30% weighting).  The 30% qualitative goal weighting includes our business development goals, the focus of which has shifted to now include development-stage assets in addition to commercial-stage assets and quantifying business-development goals for development-stage assets is highly complex.

Quantitative Goals

The Compensation Committee established the quantitative goals for the 2018 plan year in February 2018, with the goals allocated between specific net sales goals for each of our three business units and adjusted earnings before interest, tax, depreciation and amortization (Adjusted EBITDA) performance targets for the 2018 calendar year.

 

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Net Sales

The Compensation Committee established in February 2018 the net sales goals for each of our three business units and weighted the goals as set forth in the table below.

 

    

Performance Levels

 

 

Business Unit

Net Sales

($ millions)

 

 

  Percentage  

of Target

Bonus

 

 

  Threshold  

75%

 

   

  Target  

100%

 

   

125%

 

   

150%

 

   

  Maximum  

200%

 

 
   

Orphan

 

15.00%

 

 

$470

 

 

 

$500

 

 

 

$518

 

 

 

$530

 

 

 

$545

 

   

Rheumatology

 

15.00%

 

 

$250

 

 

 

$280

 

 

 

$297

 

 

 

$315

 

 

 

$330

 

   

Primary Care

 

  5.00%

 

 

$330

 

 

 

$365

 

 

 

$389

 

 

 

$405

 

 

 

$420

 

In setting the net sales goals for the 2018 plan year, the Compensation Committee determined to increase the weighting of the net sales goal for our orphan and rheumatology businesses and decrease the weighting for the primary care business from the 2017 plan year level.  This adjustment was made because the orphan and rheumatology businesses comprise the Company’s strategic growth business; they are the focus of the majority of our business investment and strategy; and we believe that our future net sales growth will be mainly driven by the performance of these two businesses.

Adjusted EBITDA(1)

Additionally, the Compensation Committee established the Adjusted EBITDA goals for 2018 as follows:

 

          Performance Levels

Adjusted
EBITDA

($ millions)(1)

 

 

  Percentage  
of Target
Bonus

 

 

  Threshold  
75%

 

 

  Target  

100%

 

 

125%

 

 

150%

 

 

  Maximum  

200%

 

   

    35.0%

 

$360

 

$390

 

$413

 

$435

 

$450

  (1)

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

Qualitative Goals

The three qualitative goals (with a total weighting of 30%) for 2018 were:

 

   

High-Performing Culture (10%)

 

   

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

   

Achieve scores at or above external benchmarks in employee surveys.

   

Implement key leadership development programs.

 

   

Business Development (10%)

 

   

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

 

   

Robust Research and Development Organization (10%)

 

   

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

   

Achieve key clinical and regulatory milestones.

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

 

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How Did We Do?

Actual results in 2018 for each quantitative goal were as follows:

 

      2018 Performance

  Quantitative Goal

  (70% Weighting)

  ($ millions)

   Percentage of Target
Bonus
   Actual        % Achieved    
   

Net Sales

 

              
   

Orphan

 

   15.0%

 

   $509

 

   113.1%

 

   

Rheumatology

 

   15.0%

 

   $322

 

   173.7%

 

   

Primary Care

 

     5.0%

 

   $376

 

   111.6%

 

   

Adjusted EBITDA

 

              
   

Full Year 2018

 

   35.0%

 

   $451

 

      200%

 

   

Aggregate Quantitative Performance Achieved

 

   118.7%

 

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

With respect to our high-performing culture objectives, we made significant investments in executive management and other key talent and received multiple 2018 workplace awards that underscore the engagement of our employees.  Great Place to Work® and FORTUNE Magazine selected Horizon as the Number One place to work on FORTUNE’s “Best Workplaces in Health Care & Biopharma” list.  We were recognized by PEOPLE Magazine and Great Place to Work® as one of the 2018 “50 Companies That Care,” a list that spotlights companies with 1,000 or more employees that have succeeded in business while also demonstrating respect, compassion and concern for their communities, their employees and the environment list.  We were designated one of the Best and Brightest Companies to Work for in the Nation, in addition to being awarded a 2018 “Best Places to Work in Chicago” designation by Crain’s Chicago Business, as well as being named to its “10 Best Places to Work for Women” list.  The Compensation Committee considered this objective to be achieved at 150.0%.

With respect to our business development objectives, in 2018 we announced the addition to the pipeline of two preclinical development programs for next-generation uncontrolled gout biologics: 1) the acquisition of licensing rights to HZN-003, a potential next-generation biologic for uncontrolled gout with optimized uricase and PEGylation technology, and 2) a collaboration with XL-protein GmbH to identify clinical-stage product candidates that could use PASylation technology to extend the half-life of uricase.  Both programs have the potential for subcutaneous dosing, which would enhance patience convenience.  In 2018, we also sold the rights to interferon gamma 1b, known as IMUKIN, outside of the United States, Canada and Japan, as well as the rights to RAVICTI and AMMONAPS® (known as BUPHENYL in the United States) outside of North America and Japan.  These transactions further simplified our business outside the United States for these products for an attractive price.  The Compensation Committee considered this objective to be achieved at 100.0%.

With regards to our research and development organization objectives, we hired Shao-Lee Lin, M.D., Ph.D., to head the research and development organization in January of 2018.  Dr. Lin, an accomplished pharmaceutical executive, physician and scientist with more than 20 years of academic and clinical research experience, is driving the expansion or our pipeline in line with our strategic focus.  Since joining the Company, she has enhanced the organization and its capabilities, including the addition of four key leadership roles that expand our development capabilities, support our business development team in evaluating and identifying development-stage opportunities and lead our therapeutic areas from a clinical development strategy and portfolio management perspective.  With respect to clinical and regulatory milestones, in 2018, we initiated the teprotumumab Phase 3 study, which completed enrollment well ahead of schedule and with patient enrollment exceeding our target.  In addition, we presented additional Phase 2 data that demonstrate the potential of teprotumumab to be a disease-modifying therapy.  To enhance our market leadership in uncontrolled gout and provide benefit to a greater number of uncontrolled gout patients, we initiated MIRROR, a company sponsored immunomodulation study evaluating the administration of KRYSTEXXA with methotrexate to potentially improve the durability of response rate of KRYSTEXXA.  The Compensation Committee considered this objective to be achieved at 200.0%.

With the achievement percentage for the quantitative objective of 118.7% and the achievement percentage for the qualitative objective of 45.0%, the total achievement percentage for both objectives was 163.7%.

 

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In February 2019, based on management’s recommendations and the Compensation Committee’s own review, deliberation and determination of achievement of the corporate objectives listed above, along with determination of the NEOs’ individual contributions toward meeting those objectives described above, the Compensation Committee approved cash bonus awards for our NEOs as follows, which were paid in March 2019:

 

Executive

 

    

 

2018 Target
Bonus
Opportunity

 

    

Total % of Target
Bonus Earned

 

    

2018 Earned  
Annual Incentive  

 

   

Timothy P. Walbert

    

$  1,237,869

    

163.7%

    

 

$  2,026,436

 

   

Paul W. Hoelscher

     $     338,300      163.7%        $     553,809  
   

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

     $     371,918      163.7%        $     608,842  
   

Robert F. Carey

     $     325,998      163.7%        $     533,670  
   

Barry J. Moze

     $     354,292      163.7%        $     579,989  

There were no additional discretionary bonuses awarded to our NEOs in 2018 other than a sign-on bonus awarded to Dr. Lin in January 2018 in connection with her joining the Company, as described below.

Long-Term Incentives

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

 

   

Time-based equity awards: RSUs;

 

   

Performance-based equity awards: PSUs; and

 

   

Cash Incentive Plan (CIP).

The Compensation Committee introduced regular, annual equity awards beginning in 2018.  This followed the grant of front-loaded equity awards in 2015, which were intended to serve as equity compensation for a three-year period.  During that ensuing three-year period, we did not maintain a practice of making regular, annual grants, and executive officers did not receive “refresher” grants in 2016 or 2017.  While we believe this was appropriate at the time, after shareholder feedback and other market considerations, the Compensation Committee has introduced regular, annual equity awards beginning in 2018, which we plan to continue going forward.

2018 Long-Term Incentive Grants

In light of market competitiveness and investor feedback, we decided to move away from making front-loaded triennial grants and instead adopted a regular, annual long-term incentive grant schedule.  To begin this practice, in January 2018 we granted the executive officers equity awards, in the form of RSUs and PSUs, as well as implemented the CIP.

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

 

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

 

   

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

 

   

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

 

2018 Long-Term Incentive Plan Components
     PSUs   RSUs   CIP
   

Performance Criteria/Period

 

 

 

70%:  2018 Net Sales for business units

 

30%:  Three-year Relative TSR (2018-2020)

 

N/A

 

 

 

70%:  KRYSTEXXA 2018 vial sales growth

 

30%:  Teprotumumab Phase 3 enrollment progress at Dec. 31, 2018

   

Maximum Award

 

 

200% of Target Award

 

 

N/A

 

 

150% of Target Award

 

   

Service Vesting period

 

 

70% (2018 Net Sales):  Three equal annual installments

 

30% (Relative TSR):  Three-year cliff vesting

 

Vest one-third annually over three years

 

 

Three equal annual installments

 

   

Post-Issuance Holding Period

 

 

1 year

 

 

1 year

 

 

N/A

 

TSR:  total shareholder return.

Equity Awards

In January 2018, we awarded a mix of performance-based PSUs and time-vested RSUs to key executive participants.

Vesting of these equity awards, as described below, was also generally contingent on shareholder approval of an amendment to our Amended and Restated 2014 Equity Incentive Plan which we received on May 3, 2018.

Our NEOs received the following RSU and PSU awards in January 2018:

 

Executive   

  RSUs  

  (number)   

    

  PSUs  

  (target  number)  

 
   

Timothy P. Walbert

 

    

 

458,899

 

 

 

    

 

458,899

 

 

 

   

Paul W. Hoelscher

 

    

 

197,087

 

 

 

    

 

197,087

 

 

 

   

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

 

    

 

97,087

 

 

 

    

 

97,087

 

 

 

   

Robert F. Carey

 

    

 

197,087

 

 

 

    

 

197,087

 

 

 

   

Barry J. Moze

 

    

 

51,779

 

 

 

    

 

51,779

 

 

 

The time-vested RSUs vest in three equal annual installments commencing January 5, 2018.

The PSUs utilize two performance metrics, a short-term component tied to business performance and a long-term component tied to relative TSR.  Shareholder feedback informed our decision to include both the short- and long-term metrics.  The Compensation Committee approved the following weightings and performance target goals for the PSUs in January 2018:

 

   

Net Sales (70%).  This portion of the PSU award is determined by the net sales for each of our business units in 2018, weighted with the rheumatology and orphan business units comprising the majority of the 70% target because together they comprise the Company’s strategic growth business.  The orphan and rheumatology businesses are the focus of the majority of our business investment and strategy, and we believe that our future net sales growth will be mainly driven by the performance of these businesses.

 

   

Relative TSR (30%).  This portion of the award is determined by our relative TSR performance over a three-year period ending December 31, 2020, as measured against the components of the NBI.

 

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70% of the PSUs were eligible to vest based on actual 2018 net sales performance of our three business units in relation to the net sales performance goals as set forth in the chart below:

 

Net Sales PSU Performance Goals ($ millions)

   

Multiplier

  

0%

  

50%

  

100%

  

125%

  

150%

  

200%  

   

Orphan Business Unit

  

<$470

  

$  470

  

$  495

  

$  510

  

$  525

  

$  540  

   

Rheumatology Business Unit

  

<$225

  

$  225

  

$  245

  

$  260

  

$  280

  

$  300  

   

Primary Care Business Unit

  

<$350

  

$  350

  

$  360

  

$  375

  

$  385

  

$  400  

The maximum number of PSUs that may vest is 200% of the target number of PSUs.

In addition to aligning executive interests with shareholders by tying vesting of a meaningful percentage of equity compensation to performance hurdles, we are in further alignment by implementing a 12-month post-issuance holding period on all new equity awards for our executive officers, including our NEOs.

How Did We Do?

Actual net sales results for 2018 were as follows for each of our business units:

 

2018 Performance ($ millions)  
     

Weighting

 

   

Actual

 

    

% Net Sales PSU

Goal Achieved

 

 
   

Total Net Sales

                         
   

Orphan Business Unit

     25   $   509        124.0
   

Rheumatology Business Unit

     30   $ 322        200.0
   

Primary Care Business Unit

     15   $ 376        127.8

Accordingly, our net sales attainment was at 157% of the target, and our executives’ determined net sales PSUs are as follows:

 

Executive

 

  

Net Sales PSU

(Target Number)

 

    

Determined  

Net Sales PSU  

 

 
   

Timothy P. Walbert

 

    

 

321,330

 

 

 

    

 

505,567  

 

 

 

   

Paul W. Hoelscher

 

    

 

137,960

 

 

 

    

 

217,127  

 

 

 

   

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

 

    

 

67,960

 

 

 

    

 

106,957  

 

 

 

   

Robert F. Carey

 

    

 

137,960

 

 

 

    

 

217,127  

 

 

 

   

Barry J. Moze

 

    

 

36,246

 

 

 

    

 

57,042  

 

 

 

The determined net sales PSUs were eligible to vest in three equal annual installments subject to the executive’s continued service, with the first vesting installment on January 5, 2019.  The actual earned shares for the first vesting installment were not released, however, until performance was certified by the Compensation Committee on February 20, 2019.  Determination of the level of attainment of the relative TSR PSUs will be made following the three-year performance period ending December 31, 2020.

Cash Incentive Program

In addition to the equity compensation awards described above, the Compensation Committee also approved a performance-based cash incentive program, the CIP, for our executive officers, including the NEOs, to motivate executives to achieve certain financial and business-related milestones related to our current strategic business initiatives and long-term strategy.  The 2018 CIP was a program that will not be continuing in 2019.

 

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Our NEOs received the following cash incentive target awards in January 2018:

 

Executive   

Cash Incentive Program

Target Award

   

Timothy P. Walbert

 

   $    3,000,000

 

   

Paul W. Hoelscher

 

   $       900,000

 

   

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

 

   $       500,000

 

   

Robert F. Carey

 

   $       900,000

 

   

Barry J. Moze

 

   $       500,000

 

These performance-based cash incentives were eligible to be earned if we achieved key milestones in our rheumatology and orphan business units:

 

   

KRYSTEXXA vial sales growth in 2018 (70%)

 

   

Teprotumumab target patient enrollment levels in the Phase 3 clinical trial by December 31, 2018 (30%)

The KRYSTEXXA vial sales growth target for 2018 was determined compared to 2017 levels.  If the level of KRYSTEXXA vial sales during 2018 was not at least 35% greater than 2017 levels, then no cash bonus would be earned in respect of the KRYSTEXXA portion of the CIP.  The applicable percentage of the KRYSTEXXA portion of the CIP award eligible to be earned was as follows:

 

Increase in

KRYSTEXXA Vial Sales

 

% of KRYSTEXXA

Portion Earned

 

   

<35%

0%

   

35%

75%

   

50%

100%

   

65%

150%

The level of attainment of the teprotumumab Phase 3 clinical trial enrollment performance goal would be determined based on the number of new patients who enroll in the teprotumumab Phase 3 clinical trial during the 2018 calendar year:

 

Number of Teprotumumab

Enrolled Patients

 

% of Teprotumumab

Portion Earned

 

   

<40

0%

   

40

75%

   

60

100%

   

76

150%

Executives were eligible to earn up to 150% of their target CIP award.  The CIP amount eligible to be earned (as determined after application of the performance criteria) are to be earned in equal installments over a three-year service period on each of January 5, 2019, January 5, 2020 and January 5, 2021 subject to the executive’s continued service.

How Did We Do?

Actual results in 2018 were as follows:

KRYSTEXXA vial sales grew approximately 69% over 2017 levels, and the Company announced on September 4, 2018 that enrollment in the teprotumumab Phase 3 clinical trial had completed with 83 patients, well ahead of schedule, resulting in the applicable determined award percentage of the KRYSTEXXA portion of the CIP award at 150% and the applicable determined

 

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award percentage of the teprotumumab Phase 3 clinical trial CIP award at 150%.  Accordingly, our executives received the following CIP award amounts:

 

     

 

KRYSTEXXA Portion

 

    

 

Teprotumumab Portion

 

    

 

Total

 

 

Executive

 

  

Target

Award

 

    

Determined

CIP Award

 

    

Target

Award

 

    

Determined

CIP Award

 

    

Determined

CIP Award

 

 

Timothy P. Walbert

  

$

  2,100,000

 

  

$

  3,150,000

 

  

$

  900,000

 

  

$

  1,350,000

 

  

$

  4,500,000

 

Paul W. Hoelscher

  

$

630,000

 

  

$

945,000

 

  

$

270,000

 

  

$

405,000

 

  

$

1,350,000

 

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

  

$

350,000

 

  

$

525,000

 

  

$

150,000

 

  

$

225,000

 

  

$

750,000

 

Robert F. Carey

  

$

630,000

 

  

$

945,000

 

  

$

270,000

 

  

$

405,000

 

  

$

1,350,000

 

Barry J. Moze

  

$

350,000

 

  

$

525,000

 

  

$

150,000

 

  

$

225,000

 

  

$

750,000

 

The determined CIP award amounts in the above table vest in three equal installments over a three-year period, with the first vesting occurring on January 5, 2019 and the remaining amounts vesting equally on the first and second anniversaries of that date.

2019 Long-Term Incentive Grants

As part of our regular annual long-term incentive program, we awarded PSUs and time-vested RSUs to our NEOs on January 4, 2019.

Our NEOs received the following grant as follows:

 

Executive

 

  

 

Time-Vested
RSUs

 

  

 

Net Sales/TSR
PSUs

 

  

 

Teprotumumab
PSUs

 

Timothy P. Walbert

  

174,104

  

174,104

  

60,995

Paul W. Hoelscher

  

  53,948

  

  53,948

  

16,669

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

  

  53,948

  

  53,948

  

18,391

Robert F. Carey

  

  53,948

  

  53,948

  

16,061

Barry J. Moze

  

  73,948

  

  53,948

  

17,459

Time-Vested RSUs

The time-vested RSUs are subject to three-year annual vesting over the service period commencing January 5, 2019 and ending on January 5, 2022.

Performance-Based PSUs

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

Net Sales/TSR PSUs

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

 

   

Net Sales (70%).  This portion of the PSU award will be determined by the net sales for each of our business units in 2019, weighted with the rheumatology and orphan business units comprising the majority of the 70% target.

 

   

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

The maximum number of Net Sales/TSR PSUs that may vest is 200% of the target number of PSUs.

Teprotumumab PSUs

In addition to the Net Sales/TSR PSU grant, the Committee also approved a company-wide grant of PSUs to our executives and the entire broader employee population (“Teprotumumab PSUs”) as part of our grant of such awards.  The Teprotumumab PSUs

 

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are generally eligible to vest contingent upon 1) receiving approval of teprotumumab from the FDA no later than September 30, 2020 and 2) the employee’s continued service through the approval date.  For further information regarding the terms of the Teprotumumab PSUs and applicable vesting criteria, please see Proposal 10 —“Implementation of our Teprotumumab PSUs.”

 

 Additional Compensation Policies and Practices

Executive Share Ownership Guidelines

We have share ownership guidelines, which were adopted in September 2014 and modified in February 2018, that establish the following minimum ownership levels within five years of the adoption of the guidelines (or within five years of the date an executive officer or director first becomes subject to them):

 

   

Position

 

  

Guideline

 

   

CEO

 

  

5x base salary

 

   

Executive Committee Members

 

  

2x base salary

 

   

Non-employee Directors

 

  

  2x annual cash retainer  

 

Individual ownership interest is reviewed annually as of the last day of the calendar year.  The dollar value of shares at the end of a given calendar year is determined using the average closing price of Horizon Pharma shares over the three-month period of September, October and November of that calendar year.  Shares that count toward satisfaction of these guidelines include: shares owned outright by the individual (including stock units that have vested but not yet settled); shares retained after an option exercise or issuance under another type of equity award granted under our equity incentive plans; shares retained after purchase under our Employee Stock Purchase Plan; shares subject to RSUs that have not vested; and shares held in trust for the benefit of the individual or his/her spouse.  Any unvested PSUs and unexercised stock options, whether vested or unvested, are not counted toward satisfaction of these ownership guidelines.  All of our executive officers and directors subject to the share ownership guidelines met the guidelines as of March 1, 2019.

Holding Period Policy

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

Hedging and Pledging Policies

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

Clawback Policy

As a public company, if we are required to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws as a result of misconduct, our Chief Executive Officer and Chief Financial Officer may be legally required to reimburse us for any bonus or other incentive-based or equity-based compensation they receive in accordance with the provisions of section 304 of the Sarbanes-Oxley Act of 2002.  Additionally, in January 2018 the Compensation Committee approved an incentive compensation recoupment policy, which provides for recoupment of certain compensation paid to executive officers of the Company under certain circumstances involving material financial restatements.  Any cash and equity incentive compensation that is paid, awarded or vested based on the achievement of reported financial results and that is approved, granted or awarded on or after January 5, 2018 is subject to potential recoupment in accordance with the terms of the incentive compensation recoupment policy, including but not limited to any compensation approved, granted, or awarded under our annual cash bonus plan and PSUs under our 2018 long-term incentive program.

Timing of Equity Awards

Grants of equity awards to our executive officers are generally determined and approved at our pre-scheduled quarterly Compensation Committee meetings whenever practicable.  However, the Compensation Committee may otherwise approve the

 

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grant of equity awards in advance of its next scheduled meeting in connection with a new hire, promotion, and other circumstances where the Compensation Committee deems it appropriate to make such grants.  The 2018 long-term incentive program grants to executive officers were approved at a special meeting of the Compensation Committee in January 2018, not at a pre-scheduled quarterly meeting.  This program was developed through review and discussion by the Compensation Committee at several pre-scheduled quarterly meetings during 2017.  At its November 2017 pre-scheduled quarterly meeting, the Compensation Committee decided to hold a special meeting in early January 2018 to approve final grants under this program, due to the fact that the CIP and PSU awards under the program have performance vesting metrics that began on January 1, 2018.  Consistent with this approach, the Compensation Committee approved the final grants for the 2019 program in early January 2019.  We expect to continue having a significant portion of our executive officer equity compensation be performance based and believe it is likely that future-year grants will be approved at special Compensation Committee meetings in January.

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

Accounting and Section 162(m) Tax Considerations

We account for share-based awards exchanged for employee services in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718 Compensation — Stock Compensation (ASC Topic 718).  Assumptions used in the calculation of these awards are included in Note 20 – Share-Based and Long-Term Incentive Plans in the Notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.  These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the NEOs.

Under Section 162(m) of the Internal Revenue Code of 1986, as amended (IRC) compensation paid to any publicly held corporation’s “covered employees” that exceeds $1 million per taxable year for any covered employee is generally non-deductible.  Prior to the enactment of the Tax Cuts and Jobs Act of 2017 (TCJA), Section 162(m) provided a performance-based compensation exception, pursuant to which the deduction limit under Section 162(m) did not apply to any compensation that qualified as “performance-based compensation” under Section 162(m).  Pursuant to the TCJA, the performance-based compensation exception under Section 162(m) was repealed with respect to taxable years beginning after December 31, 2017, except that certain transition relief is provided for compensation paid pursuant to a written binding contract which was in effect on November 2, 2017 and which is not modified in any material respect on or after such date.

Compensation paid to each of our “covered employees” in excess of $1 million per taxable year generally will not be deductible unless it qualifies for the performance-based compensation exception under Section 162(m) pursuant to the transition relief described above.  Because of certain ambiguities and uncertainties as to the application and interpretation of Section 162(m), as well as other factors beyond the control of the Compensation Committee, no assurance can be given that any compensation paid by Horizon will be eligible for such transition relief and be deductible by us in the future.  Although the Compensation Committee will continue to consider tax implications as one factor in determining executive compensation, the Compensation Committee also looks at other factors in making its decisions and retains the flexibility to provide compensation for the Company’s named executive officers in a manner consistent with the goals of our executive compensation program and the best interests of Horizon and its stockholders, which may include providing for compensation that is not deductible by Horizon due to the deduction limit under Section 162(m).  The Compensation Committee also retains the flexibility to modify compensation that was initially intended to be exempt from the deduction limit under Section 162(m) if it determines that such modifications are consistent with our business needs.

Employment Agreement — Shao-Lee Lin, M.D., Ph.D.

In January 2018, we hired Dr. Lin and appointed her as our executive vice president, head of research and development and chief scientific officer.

Dr. Lin’s compensation package includes:

 

   

base salary of $625,000;

   

target bonus opportunity of 60% of base salary;

   

a sign-on cash bonus of $600,000, which was paid in January 2018;

 

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a sign-on cash bonus of $140,000, which was paid in January 2019 in connection with her continued service through such date;

   

a new-hire grant of 146,685 stock options, vesting 25% on the first anniversary of the grant date and 1/36th monthly thereafter;

   

a new-hire grant of 71,567 RSUs, vesting 25% on each anniversary of the grant date for four years;

   

the 2018 Long-Term Incentive RSU, PSU and CIP grants described above;

   

reimbursement of up to $10,000 of legal fees incurred in connection with entering into the employment agreement with us; and

   

severance benefits at level consistent with those provided to our other executives.

The Compensation Committee determined that these base salary and annual bonus target levels were appropriate in order to induce Dr. Lin’s commencement of employment and in order to establish her base salary and annual cash incentive compensation levels in line with those of the rest of our executive officers.  The Compensation Committee determined that the sign-on cash bonuses described above were appropriate in order to induce Dr. Lin’s commencement of employment.  The Compensation Committee also determined that the time-based vesting stock option and RSU award grants to Dr. Lin were in line with those granted to our executive team members and were appropriate in order to give Dr. Lin an equity stake in our business and thereby align her interests with those of our shareholders.  We reimburse all our executive officers for any legal fees that they incur in connection with entering into employment agreements with us.

Severance and Change-in-Control Benefits Summary

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

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

Deferred Compensation Plan

All of our executive officers are eligible to participate in our non-qualified Deferred Compensation Plan, which allows the participants to defer receipt of their compensation and recognition of associated income taxes without being subject to the deferral contribution limits of our 401(k) Plan, which provides additional tax and financial planning flexibility.  Our policy is to match Deferred Compensation Plan deferrals under the same matching contribution formula that we apply to our 401(k) Plan.  Accordingly, the matching contribution formula for our Deferred Compensation Plan is 100% of the first 3% and 50% of the next 2% of salary deferrals, which is the same “safe harbor” matching contribution formula that applies to our 401(k) Plan.  Commencing December 1, 2018, matching contributions to our Deferred Compensation Plan are immediately fully vested contingent upon completion of one year of employment.  The Compensation Committee approved this amendment to our Deferred Compensation Plan so that the vesting of our matching contributions to our Deferred Compensation Plan would more closely align to vesting schedule of our safe harbor matching contributions to our 401(k) Plan, which are immediately fully vested when made.  A description of our Deferred Compensation Plan is provided below under the heading “Nonqualified Deferred Compensation.”

Other Benefits

All of our executive officers are eligible to receive our standard employee benefits, such as participation in our 401(k) Plan, medical, dental, vision coverage, short-term disability insurance, long-term disability insurance, group life insurance, paid time off, holiday, and the 2014 Employee Stock Purchase Plan, in each case on the same basis as our other employees.  Our paid-time-off policy allows no more than 40 paid-time-off hours to be carried over to the following year.  We also reimburse our executives, including our NEOs, up to $15,000 of personal financial planning services incurred annually and related tax gross ups.  We believe that financial planning by experts reduces the time our executives spend on that topic and assists our executives in making the most of the financial rewards received from the Company.  We also reimburse our executive officers for any travel

 

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expenses and related tax gross ups they incur in connection with any business-related travel which does not meet the strict eligibility requirements to be treated as a non-taxable business expense reimbursement in accordance with applicable tax guidelines.  We believe that the cost of providing these benefits is reasonable in light of the benefit to our business of having our executive officers more focused on attaining our business objectives in connection with any business-related travel.  The Compensation Committee periodically reviews the levels of benefits provided to executive officers to ensure they remain reasonable and consistent with its compensation philosophy.

Compensation Committee Report

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

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with the management of the Company.  Based on this review and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

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

Jeff Himawan, Ph.D., Chairman

William F. Daniel

Gino Santini

James Shannon, M.D.

 

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EXECUTIVE COMPENSATION

 

 

 Summary Compensation Table

The following table provides information regarding the compensation earned during the years ended December 31, 2018, 2017 and 2016 by our NEOs. 

 

  Name and Principal Position       Year           Salary             Bonus         Stock
    Awards(1)    
    Option
    Awards(1)    
    Non-Equity
Incentive
     Plan(2)    
    All Other
  Compensation(3)
        Total      

  Timothy P. Walbert

Chairman, President and

Chief Executive Officer

    2018   $     1,076,250     $ —       $       13,533,845     $ —       $     2,026,436     $       160,363     $     16,796,894  
    2017   $ 1,033,333     $ —       $ —       $ —       $ 1,167,653     $ 141,039     $ 2,342,025
    2016   $ 950,000     $ 1,000 (4)     $ —       $ —       $ 1,023,150     $ 303,424     $ 2,277,574  

  Paul W. Hoelscher

Executive Vice President,

Chief Financial Officer

    2018   $ 563,750     $ —       $ 5,812,495     $ —       $ 553,809     $ 104,332     $ 7,034,386  
    2017   $ 541,667     $ —       $ —       $ —       $ 319,110     $ 69,335     $ 930,112  
    2016   $ 500,000     $ 1,000 (4)     $ —       $ —       $ 269,250     $ 133,764     $ 904,014  

  Shao-Lee Lin, M.D., Ph.D.(5)

Executive Vice President,

Head of Research and Development,

Chief Scientific Officer

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

  Robert F. Carey

Executive Vice President,

Chief Business Officer

    2018   $ 543,250     $ —       $ 5,812,495     $ —       $ 533,670     $ 74,120     $ 6,963,535  
    2017   $ 525,000     $ —       $ —       $ —       $ 307,506     $ 81,713     $ 914,219  
    2016   $ 500,000     $ 1,000 (4)     $ —       $ —       $ 269,250     $ 110,840     $ 881,090  

  Barry J. Moze

Executive Vice President,

Chief Administrative Officer

    2018   $ 590,400     $ —       $ 1,527,062     $ —       $ 579,989     $ 35,114     $ 2,732,565  
    2017   $ 571,667     $ —       $ —       $ —       $ 334,195     $ 71,675     $ 977,537  
    2016   $ 550,000     $ 1,000 (4)     $ —       $ —       $ 296,175     $ 104,380     $ 951,555  

 

(1)

Amounts shown in this column do not reflect actual compensation received by our NEOs.  The amounts reflect the grant date fair value of the awards and are calculated in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718 Compensation — Stock Compensation (ASC Topic 718).  Assumptions used in the calculation of these awards are included in Note 20 — “Share-Based and Long-Term Incentive Plans” in the Notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.  These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the NEOs. 

(2)

As applicable, reflects amounts earned in fiscal years 2018, 2017 and 2016 and paid in March 2019, March 2018 and March 2017, respectively, pursuant to our annual cash incentive compensation plan in effect for such fiscal year.  For further information please see the Compensation Discussion and Analysis above. 

 

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(3)

Amounts shown in this column include the following items:

 

     Year      Vacation
Payout
(a)
     Imputed
Income on
Life
Insurance
Benefits
     401(k)
Matching
Contributions
     Deferred
Compensation
Plan
Contributions
    

Financial
Planning/

Legal Fee
Reimbursements
(including tax
gross up)

     Personal
Travel
Expenses
(b)
     Total  

    Timothy P. Walbert

       2018      $ —        $         342      $       11,000      $       89,756      $         26,930      $   32,335      $   160,363      
       2017      $ —        $ 342      $ 10,800      $ 82,259      $ 28,145      $ 19,493      $ 141,039      
       2016      $     127,880      $ 336      $ 7,950      $ 76,500      $ 27,624      $ 63,134      $ 303,424      

    Paul W. Hoelscher

       2018      $ —        $ 342      $ 11,000      $ 35,314      $ 24,237      $ 33,439      $ 104,332      
       2017      $ —        $ 342      $ 10,800      $ 32,437      $ 15,009      $ 10,747      $ 69,335      
       2016      $ 24,619      $ 336      $ 7,950      $ 28,500      $ 18,416      $ 53,943      $ 133,764      

    Shao-Lee Lin, M.D., Ph.D.(5)

       2018      $ —        $ 342      $ 8,563      $ 21,875      $ 29,936      $ 1,999      $ 62,715      

    Robert F. Carey

       2018      $ —        $ 342      $ 11,000      $ 34,030      $ 26,930      $ 1,818      $ 74,120      
       2017      $ —        $ 342      $ 10,800      $ 31,770      $ 27,387      $ 11,414      $ 81,713      
       2016      $ 31,980      $ 336      $ 7,950      $ 28,500      $ 27,624      $ 14,450      $ 110,840      

    Barry J. Moze

       2018      $ —        $ 342      $ —        $ 13,368      $ 14,144      $ 7,260      $ 35,114      
       2017      $ —        $ 342      $ 10,800      $ 34,714      $ 15,009      $ 10,810      $ 71,675      
       2016      $ 11,565      $ 336      $ 7,950      $ 30,000      $ 16,465      $ 38,064      $ 104,380      

 

  (a)

Effective January 1, 2016, we changed our vacation policy to allow no more than 40 hours to be carried over to the following year. This represents a one-time vacation payout to all employees in January 2016 of accrued vacation balances greater than 40 hours at December 31, 2015. 

  (b)

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

(4)

One-time $1,000 discretionary bonus paid to all employees as a result of the Company reaching $1 billion of non-GAAP adjusted net sales. 

(5)

Dr. Lin joined the Company in January 2018. 

(6)

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

 

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 Grants of Plan-Based Awards

The following table sets forth certain information regarding grants of non-equity incentive plan and equity incentive plan-based awards to our NEOs for 2018:

 

  Name    Award Type     Grant Date     

 

Estimated Future Payouts Under
Non-Equity Incentive Plan Awards

($)

     All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)
    All Other
Stock Option
Awards:
Number of
Securities
Underlying
Options (#)
    Option
Exercise
Price ($)
     Grant Date Fair
Value of Stock
and Option
Awards ($)(1)
 
   Threshold      Target     Maximum  

  Timothy P. Walbert

     Annual Cash       N/A          $  905,625      $  1,237,869 (2)         $ 2,475,738            
     Cash LTIP (11)       1/5/2018          $ —        $ 3,000,000         $ 4,500,000            
     RSU       1/5/2018                458,899 (7)          $  6,364,929    
     PSU       1/5/2018                458,899 (8)          $ 7,168,916    

  Paul W. Hoelscher

     Annual Cash       N/A          $ 253,725      $ 338,300 (3)         $ 676,600              
     Cash LTIP (11)       1/5/2018          $ —        $ 900,000         $ 1,350,000            
     RSU       1/5/2018                197,087 (7)          $ 2,733,597    
     PSU       1/5/2018                197,087 (8)          $ 3,078,898    

  Shao-Lee Lin, M.D., Ph.D.

     Annual Cash       N/A          $ 278,939      $ 371,918 (4)         $ 743,836              
     Option       1/4/2018                  146,685 (10)     $ 15.37      $ 1,099,996    
     RSU       1/4/2018                71,567 (9)          $ 1,099,985    
     Cash LTIP (11)       1/5/2018          $ —        $ 500,000         $ 750,000              
     RSU       1/5/2018                97,087 (7)          $ 1,346,597    
     PSU       1/5/2018                97,087 (8)          $ 1,516,698    

  Robert F. Carey

     Annual Cash       N/A          $ 244,499      $ 325,998 (4)         $ 651,996              
     Cash LTIP (11)       1/5/2018          $ —        $ 900,000         $ 1,350,000            
     RSU       1/5/2018                197,087 (7)          $ 2,733,597    
     PSU       1/5/2018                197,087 (8)          $ 3,078,898    

  Barry J. Moze

     Annual Cash       N/A          $ 265,719      $ 354,292 (6)         $ 708,584              
     Cash LTIP (11)       1/5/2018          $ —        $ 500,000         $ 750,000              
     RSU       1/5/2018                51,779 (7)          $ 718,175    
     PSU       1/5/2018                51,779 (8)          $ 808,887    

 

(1)

Amounts shown in this column do not reflect dollar amounts actually received by our NEOs.  Instead, these amounts reflect the grant date fair value of such awards and are calculated in accordance with the provisions of ASC Topic 718.  Assumptions used in the calculation of these amounts and further information on our stock options, RSUs, PSUs and Cash LTIP are included in Note 20 — “Share-Based and Long-Term Incentive Plans” in the Notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.  These amounts do not necessarily correspond to the actual value realized or that may be realized by the NEOs. 

(2)

Mr. Walbert’s target bonus for 2018 was $1,237,869, or 115% of his base salary as of December 31, 2018, pro-rated for salary change that took effect March 1, 2018.  In February 2019, the Compensation Committee approved Mr. Walbert’s bonus in the amount of $2,026,436, or 163.7% of his target bonus, which was paid in March 2019. 

(3)

Mr. Hoelscher’s target bonus for 2018 was $338,300, or 60% of his base salary as of December 31, 2018, pro-rated for salary change that took effect March 1, 2018.  In February 2019, the Compensation Committee approved Mr. Hoelscher’s bonus in the amount of $553,809, or 163.7% of his target bonus, which was paid in March 2019. 

(4)

Dr. Lin joined us on January 4, 2018.  Her target bonus for 2018 was $371,918, or 60% of her base salary as of December 31, 2018, pro-rated for days worked in 2018.  In February 2019, the Compensation Committee approved Dr. Lin’s bonus in the amount of $608,842, or 163.7% of her target bonus, which was paid in March 2019. 

 

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(5)

Mr. Carey’s target bonus for 2018 was $325,998, or 60% of his base salary as of December 31, 2018, pro-rated for salary change that took effect March 1, 2018.  In February 2019, the Compensation Committee approved Mr. Carey’s bonus in the amount of $533,670, or 163.7% of his target bonus, which was paid in March 2019. 

(6)

Mr. Moze’s target bonus for 2018 was $354,292, or 60% of his base salary as of December 31, 2018, pro-rated for salary change that took effect March 1, 2018.  In February 2019, the Compensation Committee approved Mr. Moze’s bonus in the amount of $579,989, or 163.7% of his target bonus, which was paid in March 2019. 

(7)

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

(8)

The PSU award is divided into two components.  70% of the award is determined by the net sales for each of our business units in 2018.  These shares vest in three equal annual installments from the grant date and are released after financial results are released by the Board.  The Board certified the financial results and performance at 157% for these awards on February 20, 2019, and the first tranche of this award was released on that date.  The remaining tranches will vest on January 5, 2020 and January 5, 2021, subject to the executive’s continued service.  The remaining 30% of the award is determined by our relative TSR performance over a three-year period ending December 31, 2020, as measured against the components of the NBI.  These shares vest in full on January 5, 2021. 

(9)

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

(10)

1/4th of the shares subject to the stock option vest one year after the vesting commencement date, which is the same date as the grant date, and the remaining shares vest in 36 equal monthly installments thereafter. 

(11)

The Compensation Committee approved a performance-based cash incentive program for our executive officers on January 5, 2018.  The cash incentives are earned based on reaching key milestones in our KRYSTEXXA vial sales growth in 2018 (70%) and target patient enrollment levels in the teprotumumab phase three clinical trial by December 31, 2018 (30%).  In January 2019, the Compensation Committee determined that the maximum level was achieved.  One-third of the award vested on January 5, 2019 and was paid on January 15, 2019.  The remaining award will vest and be paid in equal installments in January 2020 and January 2021 if required continuous service parameters are met. 

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

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

Equity Awards.  We have granted equity awards to our NEOs under our 2005 Stock Plan (2005 Plan), our 2011 Equity Incentive Plan (2011 Plan) and our 2014 Equity Incentive Plan, as amended (2014 Plan).  For further information regarding such equity awards, including the vesting schedules, please see the Grants of Plan-Based Awards table and related footnotes above and “2018 Long-Term Incentive Grants” in our Compensation Discussion and Analysis above. 

Option Repricings.  We did not engage in any repricings or other modifications to any of our NEOs’ outstanding equity awards during the year ended December 31, 2018. Under the terms of our 2014 Plan, option repricing is not permitted without prior shareholder approval. 

Salary and Bonus Compared to Total Compensation.  The ratio of salary and annual incentive bonus to total compensation in 2018 (each as set forth in the Summary Compensation Table above) is set forth below for each NEO. 

 

   

Timothy P. Walbert, 18.5%

 

   

Paul W. Hoelscher, 15.9%

 

   

Shao-Lee Lin, M.D., 26.3%

 

   

Robert F. Carey, 15.5%

 

   

Barry J. Moze, 42.8%

 

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 Pay Ratio

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

The purpose of this disclosure is to provide a measure of the equitability of pay within Horizon.  We believe our compensation philosophy and process yield an equitable result for all of our employees.  During fiscal 2018, the principal executive officer of Horizon was our chairman, president and chief executive officer, Mr. Walbert. 

For 2018:

 

   

The annual total compensation for Mr. Walbert was $16,796,894. 

 

   

The annual total compensation for our median employee was $207,196. 

 

   

This results in an estimated pay ratio of 81:1. 

Consistent with our prior year pay ratio disclosure, to identify our median compensated employee for 2018 we estimated all employees’ compensation as of October 31, 2018 (the median employee determination date).  For each employee, we aggregated: (A) base salary as of October 31, 2018, (B) the target bonus for 2018, and (C) the estimated accounting value of any equity awards granted during 2018, and (ii) ranked this compensation measure for our employees from lowest to highest.  This calculation was performed for all employees, except as identified below and excluding Mr. Walbert, whether employed on a full-time, part-time or seasonal basis.  This resulted in the identification of an employee whose 2018 compensation was anomalous.  As a result, we exercised discretion permitted by the rule to substitute an employee, directly adjacent to the median employee identified as discussed above, whose compensation was deemed more representative. 

For purposes of this disclosure, all Canadian employees, totaling five individuals, were excluded from the employee population pursuant to the de minimis exemption, which permits us to exclude foreign employees, up to 5% of our total employee population, on a whole-country basis.  As of October 31, 2018, we had 906 U.S. employees (excluding our CEO) and 81 non-U.S. employees, irrespective of the de minimis exclusion.  Applying the de minimis exclusion, the total number of U.S. employees totaled 906, and the number of non-U.S. employees totaled 76. 

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

 

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  Outstanding Equity Awards at December 31, 2018

The following table sets forth certain information regarding outstanding stock options, RSUs and PSUs held by our NEOs on December 31, 2018. 

 

 Name

 

 

Award
Grant Date

 

    Option Awards     Stock Awards  
 

Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)

 

   

Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)

 

         

Option
Exercise
Price ($)

 

   

Option
Expiration
Date

 

   

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

 

         

Market
Value of
Stock that
Has Not
Vested ($)
(1)

 

   

Number of
Units of
Stock that
are
Unearned
and Have
Not Vested
(#)

 

         

Market Value

of Unearned

Stock that Has

Not Vested ($)(1)

 

 

Timothy P. Walbert

    1/2/2013       107,187          (2)      $ 2.40       1/1/2023              
    1/2/2014       204,682          (2)      $ 7.61       1/1/2024              
    3/23/2015       984,375       65,625          (4)      $ 22.14       3/22/2025       125,000       (3)      $ 2,442,500        
    5/6/2015       1,478,125       171,875          (4)      $ 28.53       5/5/2025              
    1/5/2018               1/5/2018       458,899       (5)      $ 8,966,886        
    1/5/2018               1/5/2018             458,899       (6  )     $ 8,966,886  
   

 

 

         

 

 

     

 

 

   

 

 

     

 

 

 
      2,774,369       237,500               583,899       $ 11,409,386       458,899       $ 8,966,886  

Paul W. Hoelscher

    6/27/2014       90,000          (4)      $ 15.96       6/26/2024              
    3/23/2015       258,750       17,250          (4)      $ 22.14       3/22/2025       31,000       (3)      $ 605,740        
    1/5/2018               1/5/2018       197,087       (5)      $ 3,851,080        
    1/5/2018               1/5/2018             197,087       (6)      $ 3,851,080  
   

 

 

         

 

 

     

 

 

   

 

 

     

 

 

 
      348,750       17,250               228,087       $ 4,456,820       197,087       $ 3,851,080  

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

    1/4/2018         146,685          (4)      $ 15.37       1/4/2028       71,567       (3)      $ 1,398,419        
    1/5/2018               1/5/2018       97,087       (5)      $ 1,897,080        
    1/5/2018               1/5/2018             97,087       (6)      $ 1,897,080  
   

 

 

         

 

 

     

 

 

   

 

 

     

 

 

 
        146,685               168,654       $ 3,295,499       97,087       $ 1,897,080  

Robert F. Carey

    3/5/2014       140,000          (4)      $ 13.34       3/4/2024              
    3/5/2014       100,000          (4)      $ 13.34       3/4/2024              
    3/23/2015       258,750       17,250          (4)      $ 22.14       3/22/2025       31,000       (3)      $ 605,740        
    1/5/2018               1/5/2018       197,087       (5)      $ 3,851,080        
    1/5/2018               1/5/2018             197,087       (6)      $ 3,851,080  
   

 

 

         

 

 

     

 

 

   

 

 

     

 

 

 
      498,750       17,250               228,087       $ 4,456,820       197,087       $ 3,851,080  

Barry J. Moze

    6/16/2010       2,106         $ 12.94       6/15/2020              
    6/6/2014       72,300          (7)      $ 14.48       6/5/2014              
    1/10/2014       10,000          (2)      $ 8.50       6/27/2024              
    9/12/2014       17,700          (4)      $ 11.81       9/11/2024              
    3/23/2015       162,187       10,813          (4)      $ 22.14       3/22/2025       19,250       (3)      $ 376,145        
    1/5/2018               1/5/2018       51,779       (5)      $ 1,011,762        
    1/5/2018               1/5/2018             51,779       (6)      $ 1,011,762  
   

 

 

         

 

 

     

 

 

   

 

 

     

 

 

 
      264,293       10,813             71,029       $ 1,387,907       51,779       $ 1,011,762  

 

(1)

The market value of stock awards that have not vested is based on the closing share price of our ordinary shares of $19.54 per share on December 31, 2018.  As of December 31, 2018, no value has been realized by any of the named executive officers with respect to any PSUs. 

 

(2)

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

 

(3)

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

 

(4)

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

 

(5)

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

 

(6)

The PSU award is divided into two components.  70% of the award is determined by the net sales for each of our business units in 2018.  These shares vest in three equal annual installments from the grant date, and are released after financial results are certified by the Board.  The Compensation Committee certified the financial results on February 20, 2019, and the first tranche of this component of the award was released.  The remaining tranches of this award component will vest on January 5, 2020 and January 5, 2021, subject to the executive’s continued service.  The remaining 30% of the award is

 

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  determined by our relative TSR performance over a three-year period ending December 31, 2020, as measured against the components of the NBI.  These shares vest in full on January 5, 2021. 

 

(7)

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

 

 Option Exercises and Stock Vested

The following table sets forth certain information regarding options exercised and stock vested for our NEOs for the fiscal year ended December 31, 2018. 

 

    Option Awards     Stock Awards  
 Name  

Number of
Shares

    Acquired on    

Exercise
(#)

   

Value

    Realized on    

Exercise
($)

   

Number of

Shares
Acquired on
Vesting
(#)

   

Value

    Realized on    

Vesting
($)
(1)

 

Timothy P. Walbert

    83,353      $ 478,846       49,500(2)     $ 743,490  
    408,347      $ 5,890,971       125,000(3)     $  1,732,500  
    49,801      $ 891,619      

Paul W. Hoelscher

    —         —         31,000(3)     $ 429,660  
               20,000(4)     $ 353,400  

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

    —         —         —       $ —    

Robert F. Carey

    —         —         31,025(5)     $ 491,126  
               31,000(3)     $ 429,660  

Barry J. Moze

    —         —         19,250(3)     $ 266,805  
        16,075(6)     $ 242,893  
        3,925(7)     $ 82,072  

 

 

(1)

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

 

(2)

Represents RSUs granted on January 2, 2014, vesting over four annual installments. 

 

(3)

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

 

(4)

Represents RSUs granted on June 23, 2014, vesting over four annual installments. 

 

(5)

Represents RSUs granted on March 5, 2014, vesting over four annual installments. 

 

(6)

Represents RSUs granted on June 6, 2014, vesting over four annual installments. 

 

(7)

Represents RSUs granted on September 12, 2014, vesting over four annual installments. 

 

 Pension Benefits

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

 

 Nonqualified Deferred Compensation

Pursuant to the Deferred Compensation Plan, each year participants may elect to defer receipt and taxation of up to 50% of their salary and up to 100% of their incentive cash compensation.  Starting in 2017 we made matching contributions with respect to 100% of the first 3% and 50% on the next 2% of deferrals, which is the same general “safe harbor” matching contribution formula that we use for our 401(k) plan, but not restricted by the compensation limits applicable to our 401(k) Plan.  Prior to December 1, 2018 matching contributions generally vested in equal annual installments over a five-year period measured from the participant’s original hire date.  Starting December 1, 2018 matching contributions vest immediately provided that the participant has provided one year of service from the participant’s original date of hire.  Participants may select among phantom investment alternatives for the deemed investment of their plan accounts, which generally mirror the investment options available for our 401(k) plan.  Payments under the Deferred Compensation Plan will be distributed in the form of a lump sum payment or in up to 10 annual installments upon the participant’s termination of service or up to 10 annual installments upon a selected specified

 

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distribution date or dates made by the participant at the time of deferral.  However, if a participant’s service with us terminates prior to the selected distribution date or dates, payments will commence in connection with the termination of service.  Payments triggered upon a termination of service will generally commence in January or July of the next calendar year following a 6-month delay that follows the termination of service.  In the event of a change in control of Horizon Pharma, all plan balances will generally become immediately payable within 90 days thereafter.  In addition, participants may be entitled to receive earlier payments through certain unforeseeable emergency withdrawals.  Payments scheduled to be made under the Deferred Compensation Plan may be otherwise delayed or accelerated only upon the occurrence of certain specified events that comply with the requirements of Section 409A of the IRC. 

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

The following table sets forth certain information regarding the participation of our NEOs in the Deferred Compensation Plan for the fiscal year ended December 31, 2018. 

 

Executive   Executive
    Contributions
(1)     
    Company
    Contributions
(2)     
    Aggregate
    Earnings
(3)     
    Aggregate
    Distributions    
    Aggregate
Balance at
December 31,
          2018          
 

Timothy P. Walbert

  $         147,225     $         89,756     $ (61,709   $     (35,880   $         757,514  

Paul W. Hoelscher

  $ 47,334     $ 35,314     $ (17,411   $     $ 312,172  

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

  $ 27,344     $ 21,875     $ (2,517   $     $ 46,702  

Robert F. Carey

  $ 57,913     $ 34,030     $ (51,826   $     $ 490,243  

Barry J. Moze

  $ 20,052     $ 13,368     $       3,733     $     $ 247,155  

 

 

(1)

All executive contributions are included in the “Salary” column of the 2018 Summary Compensation Table. 

(2)

All Company matching contributions are included in the “All Other Compensation” column of the 2018 Summary Compensation Table. 

(3)

The earnings reflected in this column represent deemed investment earnings from voluntary deferrals and Company contributions, as applicable.  The Deferred Compensation Plan does not guarantee a return on deferred amounts.  No amounts included in this column are reported in the 2018 Summary Compensation Table because the Deferred Compensation Plan does not provide for above-market or preferential earnings. 

 

 Potential Payments Upon Termination or Change-in-Control

Involuntary Termination Severance Benefits

As provided under their amended employment agreements, each of our NEOs other than Mr. Walbert has severance benefit protection which provide for up to 12 months’ base salary and COBRA health insurance premiums, 12 months of time-based equity vesting acceleration, plus the amount of any earned but unpaid bonus for a prior completed performance period in the event of a qualifying termination.  Mr. Walbert’s severance benefit protection provides for up to 24 months’ base salary and COBRA health insurance premiums, 200% of target annual cash bonus, 18 months of time-based equity vesting acceleration, plus the amount of any earned but unpaid bonus for a prior completed performance period in the event of a qualifying termination. 

Additionally, in the event of a qualifying termination within three months prior to or within 18 months following a change-in-control, Mr. Walbert has severance benefit protection of 36 months’ base salary, 300% of target annual cash bonus and 36 months COBRA health insurance premiums and each of our other NEOs has severance benefit protection of 18 months’ base salary, 150% of target annual cash bonus and 18 months COBRA health insurance premiums.  In addition, time-based vesting equity awards are subject to full acceleration in a change-in-control related qualifying termination. 

Severance benefits to our NEOs described above are payable only if there is a qualifying termination without cause or resignation for good reason.  Any base salary and COBRA premium severance benefits are payable in installments over the applicable severance benefit period, bonus severance benefits payable in a single lump sum and equity vesting acceleration benefits are immediately effective. 

 

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The following key terms are defined in the amended employment agreements as follows:

 

   

Cause is generally defined as gross negligence or willful failure to substantially perform duties and responsibilities to us or willful and deliberate violation of any of our policies; conviction of a felony involving commission of any act of fraud, embezzlement or dishonesty against us or involving moral turpitude; the unauthorized use or disclosure of any of our proprietary information or trade secrets and willful and deliberate breach of the executive’s obligations under the employment agreement that cause material injury to us. 

 

   

Resignation for good reason is generally defined as a material reduction in duties, authority or responsibilities; the relocation of the place of employment by more than 50 miles; or a material reduction of salary or annual target bonus opportunity. 

 

   

A change-in-control is defined generally as (1) the sale of all or substantially all of our assets; (2) a merger or consolidation in which we are not the surviving entity and in which the holders of our outstanding voting stock immediately prior to such transaction own less than 50% of the voting power of the entity surviving the transaction or, where the surviving entity is a wholly-owned subsidiary of another entity, the surviving entity’s parent; (3) a reverse merger in which we are the surviving entity but the ordinary shares outstanding prior to the merger are converted into other property and in which the holders of our voting stock immediately prior to such transaction own less than 50% of the voting power of our stock, or where we are a wholly-owned subsidiary of another entity, of our parent; or (4) an acquisition by any person, entity or group of beneficial ownership of at least 75% of the combined voting power entitled to vote in an election of our directors. 

Death and Disability.  As provided under their amended employment agreements, in the event of a termination of employment due to death or disability, each NEO is entitled to receive a pro-rata bonus, based on actual performance through the date of termination, and payable in a single lump sum. 

Releases and Non-Competition.  All severance benefits (other than due to death or complete disability) provided to our NEOs pursuant to their employment agreements are contingent upon (1) the executive’s execution of a standard release of claims in our favor and (2) the executive’s entering into a non-competition agreement to be effective during the period during which the executive receives severance benefits. 

Sections 280G and 4999.  Any payment or benefit provided under our NEOs’ employment agreements or otherwise in connection with a change-in-control may be subject to an excise tax under Section 4999 of the IRC.  These payments also may not be eligible for a Company tax deduction pursuant to Section 280G of the IRC.  If any of these payments or benefits are subject to the excise tax, they may be reduced to provide the individual with the best after-tax result.  Specifically, the individual will receive either a reduced amount so that the excise tax is not triggered, or the individual will receive the full amount of the payments and benefits and then be liable for any excise tax. 

The following table sets forth potential payments payable to our NEOs upon a (i) termination of employment without cause or resignation for good reason or (ii) termination of employment without cause or resignation for good reason in connection with a change-in-control.  Except as set forth below, the table below reflects amounts payable to our NEOs assuming their employment was terminated on December 31, 2018 and, if applicable, a change-in-control also occurred on such date:

 

    Upon Termination Without Cause or Resignation
for Good Reason - No Change of Control
    Upon Termination Without Cause or Resignation
for Good Reason - Change of Control(1)
 
Name   Cash
  Severance  
   

  Continuation  

of Medical
Benefits

          Bonus(2)          

Value of
  Accelerated  

Vesting

        Total         Cash
  Severance  
   

 Continuation 

of Medical
Benefits

          Bonus(3)          

Value of
  Accelerated  

Vesting(4)

    Total
 

Timothy P. Walbert

  $   2,163,000     $   35,958     $   4,502,174     $   12,604,961     $   19,306,093     $   6,489,000     $   53,937     $   5,740,043     $   20,376,273     $   32,659,253  

Paul W. Hoelscher

  $ 566,500     $ 24,355     $ 553,809     $ 4,970,273     $ 6,114,937     $ 849,750     $ 36,533     $ 1,061,259     $ 8,307,900     $ 10,255,442  

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

  $ 625,000     $ 11,286     $ 608,842     $ 3,218,740     $ 4,463,868     $ 937,500     $ 16,929     $ 1,166,719     $ 5,804,256     $ 7,925,404  

Robert F. Carey

  $ 545,900     $ 16,863     $ 533,670     $ 4,970,273     $ 6,066,706     $ 818,850     $ 25,295     $ 1,022,667     $ 8,307,900     $ 10,174,712  

Barry J. Moze

  $ 593,280     $ 17,910     $ 579,989     $ 1,522,811     $ 2,713,990     $ 889,920     $ 26,865     $ 1,111,427     $ 2,399,668     $ 4,427,880  

 

 

(1)

Amounts in these columns assume that termination occurs within 90 days immediately preceding or during the 18 months immediately following a change-in-control. 

(2)

Amounts in this column include amounts payable for earned but unpaid bonus for the completed 2018 performance period.  The amount for Mr. Walbert also includes the multiple of his target bonus pursuant to his employment agreement. 

(3)

The value of accelerated vesting is equal to the closing share price of $19.54 per share on December 31, 2018, multiplied by the number of shares subject to accelerated vesting, less the stock option exercise price, if applicable. 

(4)

Amounts in this column indicate amounts payable for earned but unpaid bonus for the completed 2018 performance period and the applicable multiple of target bonus pursuant to the employment agreements. 

 

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NON-EMPLOYEE DIRECTOR COMPENSATION

Our compensation policy for non-employee directors who are not affiliated with any holder of more than 5% of our ordinary shares provides for the annual cash compensation, payable in equal quarterly installments, set forth below:

 

   

$100,000 for a non-executive chairman of the Board or lead independent director;

 

   

$60,000 for all other eligible non-employee directors;

 

   

$30,000 for the chairman of the Audit Committee, $20,000 for the chairman of the Compensation Committee, $15,000 for the chairman of the Nominating and Corporate Governance Committee and $20,000 for the chairman of the Transaction Committee; and

 

   

$15,000 for each member of the Audit Committee other than the chairman, $10,000 for each member of the Compensation Committee other than the chairman, $7,500 for each member of the Nominating and Corporate Governance Committee other than the chairman and $12,500 for each member of the Transaction Committee other than the chairman. 

In addition, prior to October 2018, our non-employee director compensation policy provided for the following automatic equity grants.  Eligible non-employee directors first elected or appointed to the Board were automatically granted (i) a stock option to purchase ordinary shares with an aggregate Black-Scholes option value of $300,000 and (ii) RSUs with an aggregate value of $300,000 on the date that they were first elected or appointed to the Board.  The stock option would vest in 36 equal monthly installments from the date of grant and the RSUs would vest in three equal annual installments from the date of grant.  In addition, on the date of each Annual General Meeting of Shareholders, eligible non-employee directors were automatically granted (i) a stock option to purchase ordinary shares with an aggregate Black-Scholes option value of $212,500 and (ii) RSUs with an aggregate value of $212,500.  The stock option would vest in 12 equal monthly installments from the date of grant, and the RSUs would vest in full upon the first anniversary of the date of grant. 

In October 2018, the Compensation Committee approved a change to the automatic equity grant provisions of our non-employee director compensation policy.  Under the amended compensation policy, on the date of each Annual General Meeting of Shareholders that coincides with or follows the non-employee director’s initial appointment or election, eligible non-employee directors will automatically be granted RSUs with an aggregate value of $400,000, which will vest in full upon the first anniversary of the date of grant.  Any eligible non-employee director who is first elected or appointed to the Board on any date other than an Annual General Meeting of Shareholders will automatically be granted RSUs on the date that they are first elected or appointed to the Board with a value equal to the annual RSU grant, prorated based on the number of days between such non-employee director’s start date and the one-year anniversary of the date of the Annual General meeting of Shareholders that most recently preceded such start date, with vesting of such initial award subject to continued service through the one-year anniversary of the date of the Annual General Meeting of Shareholders that most recently preceded such start date. 

Under our compensation policy, we also will reimburse eligible non-employee directors up to $15,000 annually for financial counseling services. 

Also, we have reimbursed and will continue to reimburse our directors for their travel-related expenses, including lodging and other reasonable expenses incurred in attending meetings of the Board and committees of the Board. 

The following table sets forth compensation information for our non-employee directors who earned or received compensation under our amended compensation policy for non-employee directors or otherwise in 2018:

 

Name

 

 

Fees Earned or

Paid in Cash

 

   

Stock Awards(1)

 

   

Option Awards(1)

 

   

All Other
Compensation

 

   

Total

 

 

William F. Daniel

  $ 100,000     $ 212,488     $ 212,495     $ 17,799(2)     $ 542,782  

Michael Grey

  $   120,000     $   212,488     $   212,495     $ 3,465(2)     $ 548,448  

Jeff Himawan, Ph.D.

  $ 92,500     $ 212,488     $ 212,495     $   28,846(2)     $   546,329  

Virinder Nohria, M.D., Ph.D.(3)

  $ —       $ —       $ —       $ 27,052(2)     $ 27,052  

Ronald Pauli

  $ 80,625     $ 212,488     $ 212,495     $ 1,428(2)     $ 507,036  

Gino Santini

  $ 90,000     $ 212,488     $ 212,495     $ 28,846(2)     $ 543,829  

James Shannon, M.D.

  $ 80,000     $ 212,488     $ 212,495     $ 5,159(2)     $ 510,142  

Thomas H. Watkins

  $ 90,000     $ 212,488     $ 212,495     $ 26,991(2)     $ 541,974  

Pascale Witz

  $ 78,750     $ 212,488     $ 212,495     $ 8,944(2)     $ 512,677  

 

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(1)

The amounts shown in this column reflect the grant date fair value of the awards issued and options granted to our non-employee directors during 2018, calculated in accordance with the provisions of ASC Topic 718.  See the assumptions used in Note 20 — “Share-Based and Long-Term Incentive Plans” in the Notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018. 

 

(2)

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

 

(3)

Dr. Nohria served on the Board until May 2017.  However, he received payments, including tax gross-up, in 2018 for financial planning services related to the 2017 tax year. 

 

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EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of December 31, 2018, with respect to our ordinary shares that may be issued under our equity compensation plans:

 

    (a)     (b)     (c)  

Plan Category

 

 

Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants, and
rights(1)

 

   

Weighted-
average
exercise
price of
outstanding
options,
warrants,
and rights(2)

 

   

Number of securities
remaining available

for future issuances

under equity compensation
plans (excluding
securities
reflected in column (a))

 

 

Equity compensation plans approved by shareholders:

     

2005 Stock Plan (Horizon Pharma, Inc.)

    304,087     $         14.94       —