xene-def14a_20200601.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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

Exchange Act of 1934 (Amendment No.           )

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

Preliminary Proxy Statement

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

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12

 

XENON PHARMACEUTICALS INC.

(Name of Registrant as Specified In Its Charter)

 

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

Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

1)

Title of each class of securities to which transaction applies:

 

 

2)

Aggregate number of securities to which transaction applies:

 

 

3)

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

 

 

4)

Proposed maximum aggregate value of transaction:

 

 

5)

Total fee paid:

 

Fee paid previously with preliminary materials.

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

 

1)

Amount Previously Paid:

 

 

2)

Form, Schedule or Registration Statement No.:

 

 

3)

Filing Party:

 

 

4)

Date Filed:

 

 

 

 

 


XENON PHARMACEUTICALS INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

NOTICE IS HEREBY GIVEN that the annual meeting (the “ Meeting ”) of the shareholders of Xenon Pharmaceuticals Inc. (“ Xenon ” or the “ Corporation ”) will be held at the Corporation’s principal office at 200 - 3650 Gilmore Way, Burnaby, British Columbia, V5G 4W8, Canada , on Monday, June 1, 2020 at 11:30 a.m. ( PDT ) for the following purposes:

 

1.

to receive the financial statements of the Corporation for the financial year ended December 31, 2019 and the report of the Corporation’s auditor thereon;

 

2.

to elect as directors of the Corporation the nine nominees named in the accompanying Proxy Statement and Management Information Circular to hold office until the next annual meeting of the Corporation or until their successors are duly elected;

 

3.

to approve, on an advisory basis, the compensation of the Corporation’s named executive officers;

 

4.

to approve, on an advisory basis, the frequency of future shareholder advisory votes to approve the compensation of the Corporation’s named executive officers;

 

5.

to approve the amendment and restatement of the Corporation’s 2014 Equity Incentive Plan;  

 

6.

to appoint KPMG LLP as the Corporation’s auditor to hold office until the next annual meeting of the Corporation;

 

7.

to authorize the Audit Committee of the board of directors of the Corporation to fix the remuneration to be paid to the auditors of the Corporation; and

 

8.

to conduct such other business as may properly be brought before the Meeting or any adjournment thereof.

The accompanying Proxy Statement and Management Information Circular provides additional information as to the matters to be dealt with at the Meeting and is deemed to form a part of this Notice. The holders of the common shares of the Corporation (the “ Common Shares ”) of record at the close of business on April 6, 2020 (the “ Record Date ”) are entitled to receive notice of and to vote at the Meeting. The holders of the Series 1 preferred shares of the Corporation (the “ Preferred Shares ”) of record at the close of business on the Record Date are entitled to receive notice of and to vote at the Meeting, subject to certain voting limitations set forth in the rights, privileges, restrictions and conditions attached to the Preferred Shares.

In view of the current and rapidly evolving COVID-19 outbreak, Xenon encourages shareholders and proxyholders to vote by proxy well in advance of the Meeting instead of attending the Meeting in person. Xenon will host a live webcast of the Meeting so that shareholders can listen to the Meeting live. The webcast will be broadcast live on the “Investors” section of Xenon's website at  https://www.xenon-pharma.com . No shareholder will be able to vote or otherwise participate in the Meeting through the live webcast and as a result, shareholders are encouraged to vote by proxy prior to the Meeting. Access to the Meeting will, subject to Xenon’s by-laws, be limited to essential personnel and shareholders and proxyholders entitled to attend and vote at the Meeting.

Xenon may take additional precautionary measures in relation to the Meeting in response to further developments with the COVID-19 outbreak. In the event it is not possible or advisable to hold the Meeting in person, Xenon will announce alternative arrangements for the Meeting via press release and filing of additional proxy materials with the Securities and Exchange Commission as promptly as practicable, which may include holding the Meeting entirely by electronic means, telephone or other communication facilities.

A shareholder may attend the Meeting in person or may be represented by proxy. Shareholders who are unable to attend the Meeting in person and who wish to ensure that their Common Shares and Preferred Shares, as applicable, will be voted at the Meeting are requested to complete, date and execute the enclosed forms of proxy, as applicable, and deliver it in accordance with the instructions set out in the forms of proxy and in the Proxy Statement and Management Information Circular.

Proxies for Common Shares to be used at the Meeting must be received by American Stock Transfer & Trust Company, LLC, not later than 11:59 p.m. (EDT) on Friday, May 29, 2020 (or, if the Meeting is adjourned, not later than 48 hours, excluding Saturdays, Sundays and holidays, preceding the time of such adjourned Meeting). Proxies may be submitted by one of the following alternative methods:

By Internet: http://www.voteproxy.com and follow the on-screen instructions or scan the QR code provided on the form of proxy;


By Telephone: 1-800-PROXIE S (1-800-776-9437) (toll-free in the United States and Canada) or 1-718-921-8500 and enter the 11 digit control number printed on the form of proxy;

By Email: Complete, date and sign your proxy and email a scanned copy to proxy@amstock.com;

By Fax: Complete, date and sign your proxy and fax a copy to 718-765-8730; or

By Mail: Complete, date and sign your proxy and mail a copy to American Stock Transfer & Trust Company, LLC, at 6201 15th Avenue, Brooklyn, NY 11219, United States.

Proxies for Preferred Shares to be used at the Meeting must be received by the Corporation, not later than 11:59 p.m. (EDT) on Friday, May 29, 2020 (or, if the Meeting is adjourned, not later than 48 hours, excluding Saturdays, Sundays and holidays, preceding the time of such adjourned Meeting). Proxies may be submitted by one of the following alternative methods:

By Email: Complete, date and sign your proxy and email a scanned copy to legalaffairs@xenon-pharma.com ; or

By Mail: Complete, date and sign your proxy and mail a copy to the Corporation, at 200-3650 Gilmore Way, Burnaby, British Columbia V5G 4W8, Canada, Attention: Corporate Secretary.

If you hold your Common Shares or Preferred Shares in a brokerage account, you are not a registered shareholder. Non-registered shareholders who plan to attend the Meeting must follow the instructions set out in the voting instruction form provided to them by their broker or other intermediary to ensure that their Common Shares or Preferred Shares, as applicable, will be voted at the Meeting.

DATED at Burnaby, British Columbia this 28 th day of April, 2020.

 

By order of the board of directors

 

  /s/ Simon N. Pimstone

 

Simon N. Pimstone

Chief Executive Officer



 

 

 

 

 

 

 

 

 

 

 

 

Table of Contents

 

 

 

 

 

 

Page

General Proxy Information

1

ITEM 1 – Receipt of Financial Statements

7

ITEM 2 – Election of Directors

7

ITEM 3 – Advisory Vote on Compensation of Named Executive Officers (“Say-on-Pay”)

26

ITEM 4 – Advisory Vote on Frequency of Advisory Votes on Executive Officer Compensation

27

Executive Compensation

29

Report of the Compensation Committee of the Board

38

Report of the Audit Committee of the Board

49

ITEM 5 – Approval of Amendment and Restatement of the 2014 Equity Incentive Plan

50

ITEM 6 AND ITEM 7 – Appointment and Remuneration of Auditor

58

SCHEDULE A – Corporate Governance Guidelines

61

SCHEDULE B – Charter of the Audit Committee of the Board of Directors

66

SCHEDULE C – Amended and Restated 2014 Equity Incentive Plan

72

 


XENON PHARMACEUTICALS INC.

PROXY STATEMENT AND

MANAGEMENT INFORMATION CIRCULAR

Annual Meeting of Shareholders

to be held on Monday, June 1, 2020

GENERAL PROXY INFORMATION

Information in this Proxy Statement and Management Information Circular (this “ Circular ”) is provided as of April 6, 2020 (the “ Record Date ”), unless otherwise indicated. In this Circular, “we”, “us”, “our”, “Xenon” and the “Corporation” refers to Xenon Pharmaceuticals Inc. and its wholly-owned subsidiary, Xenon Pharmaceuticals USA Inc. All references in this Circular to “$” or “USD$” are to U.S. dollars and all references to “CAD$” are to Canadian dollars, unless otherwise indicated. “Xenon” and the Xenon logo are trademarks of Xenon Pharmaceuticals Inc. They are registered in the United States and used or registered in various other jurisdictions.

Solicitation of Proxies

This Circular is furnished in connection with the solicitation of proxies by the board of directors (the “Board”) and management of the Corporation for use at the annual meeting (the “Meeting”) of shareholders of the Corporation to be held at the Corporation’s principal office at 200 – 3650 Gilmore Way, Burnaby, British Columbia, V5G 4W8, Canada , on Monday, June 1, 2020 at 11:30 a.m. (PDT). The cost of solicitation will be borne by the Corporation. This Circular, the accompanying notice and the enclosed forms of proxy are expected to first be mailed to shareholders on or about Tuesday, April 28, 2020.

Management expects that proxies will be solicited primarily by mail. Employees and directors of Xenon may also solicit proxies personally or by telephone. If you hold common shares of the Corporation (the “ Common Shares ”) or Series 1 preferred shares of the Corporation (the “ Preferred Shares ”) in the name of a bank, broker or other nominee, please see the section of this Circular captioned “Beneficial Shareholders” below.

Appointment of Proxyholders

The persons named in the accompanying forms of proxy are officers of the Corporation.

A shareholder has the right to appoint a person or company to attend and act for the shareholder and on that shareholder’s behalf at the Meeting other than the persons designated in the enclosed forms of proxy. A shareholder wishing to exercise this right should strike out the names now designated in the enclosed forms of proxy and insert the name of the desired person or company in the blank space provided. The desired person need not be a shareholder of the Corporation.

Only a registered shareholder at the close of business on April 6, 2020 will be entitled to vote, or grant proxies to vote, his, her or its Common Shares or Preferred Shares, as applicable, at the Meeting.

If your Common Shares or Preferred Shares are registered in your name, then you are a registered shareholder. However, if, like most shareholders, you keep your Common Shares or Preferred Shares, as the case may be, in a brokerage account, then you are a beneficial shareholder. The process for voting is different for registered shareholders and beneficial shareholders. Registered shareholders and beneficial shareholders should carefully read the instructions herein if they wish to vote their Common Shares and Preferred Shares, as applicable, at the Meeting.

Page 1


Voting of Sha res Represented by Proxy

Proxies can be voted on a vote by show of hands or on a vote where a poll is required. All Common Shares and Preferred Shares represented by proxy will be voted for, voted against or withheld from voting on each motion, as applicable, on which a poll is taken at the Meeting in accordance with the direction of the shareholder who completed a proxy.

If the persons designated in the enclosed forms of proxy are appointed as proxy holders and no choice is specified by the shareholder, the Common Shares and the Preferred Shares, as applicable, represented by such proxy will be voted FOR the matters described herein. The forms of proxy confer discretionary authority upon the persons named therein with respect to amendments or variations to matters identified in the accompanying Notice of Meeting and to other matters which may properly come before the Meeting or any adjournment or postponement thereof. If any matters which are not now known should properly come before the Meeting, persons named in the forms of proxy will vote on such matters in accordance with their best judgment. At the time of printing this Circular, management of the Corporation is not aware of any amendment, variation or other matters which are to come before the Meeting other than those matters identified in the accompanying Notice of Meeting.

Validity of Proxy

Proxies for Common Shares to be used at the Meeting must be received by American Stock Transfer & Trust Company, LLC, in accordance with the instructions contained in the accompanying form of proxy for Common Shares, not later than 11:59 p.m. (EDT) on Friday, May 29, 2020 (or, if the Meeting is adjourned, not later than 48 hours, excluding Saturdays, Sundays and holidays, preceding the time of such adjourned Meeting). A proxy form will not be valid unless completed and deposited in accordance with the instructions set out in the enclosed form of proxy for Common Shares.

Proxies for Preferred Shares to be used at the Meeting must be received by the Corporation in accordance with the instructions contained in the accompanying form of proxy for Preferred Shares, not later than 11:59 p.m. (EDT) on Friday, May 29, 2020 (or, if the Meeting is adjourned, not later than 48 hours, excluding Saturdays, Sundays and holidays, preceding the time of such adjourned Meeting). A proxy form will not be valid unless completed and deposited in accordance with the instructions set out in the enclosed form of proxy for Preferred Shares.

Revocation of Proxies

A registered shareholder executing the accompanying form of proxy has the power to revoke it at any time before it is exercised. The revocation of a proxy by a registered shareholder may be effected by the registered shareholder either (a) attending the Meeting and voting in person, or (b) giving written notice of the revocation executed by the registered shareholder in the same manner as provided for the deposit of the instrument of proxy. To be effective for Common Shares, the written notice of revocation must be deposited (i) with American Stock Transfer & Trust Company, LLC, in the manner for the deposit of proxies for Common Shares set forth herein and in the accompanying form of proxy for Common Shares or at the registered office of the Corporation at any time up to and including the last business day preceding the Meeting, or any adjournment thereof, or (ii) with the Chair of the Meeting, on the date of the Meeting or any adjournment thereof, and upon deposit the proxy will be revoked. To be effective for Preferred Shares, the written notice of revocation must be deposited (i) with the Corporation in the manner for the deposit of proxies for Preferred Shares set forth herein and in the accompanying form of proxy for Preferred Shares or at the registered office of the Corporation at any time up to and including the last business day preceding the Meeting, or any adjournment thereof, or (ii) with the Chair of the Meeting, on the date of the Meeting or any adjournment thereof, and upon deposit the proxy will be revoked.

A proxy may also be revoked by the giving of a subsequent proxy with a later date. To be effective, the subsequent proxy must be deposited (i) (in original form or in accordance with the instructions in the applicable form of proxy) at any time up to 11:59 p.m. (EDT) on Friday, May 29, 2020; or (ii) at the Meeting, with the Chair of the Meeting before the commencement of the Meeting (or any adjournment thereof).

Beneficial Shareholders

The following information is of significant importance to shareholders who do not hold Common Shares or Preferred Shares in their own name. If Common Shares or Preferred Shares are listed in an account statement provided to a shareholder by an intermediary, then in almost all cases those Common Shares or Preferred Shares will not be registered in the shareholder’s name on the records of the Corporation and such shareholder will be considered a beneficial shareholder. Such Common Shares or Preferred Shares will more likely be registered under the names of the shareholder’s intermediary or an agent of that intermediary. In the United States, the vast majority of shares are registered under the name of Cede & Co. as nominee for The Depository Trust Company (which acts as depositary for many U.S. brokerage firms and custodian banks), and in Canada, under the name of CDS & Co. (the registration name for The Canadian Depository for Securities Limited, which acts as nominee for many Canadian brokerage firms).

Page 2


Beneficial shareholders should note that the only proxies that can be recognized and acted upon a t the Meeting are those deposited by registered shareholders (those whose names appear on the records of the Corporation as the registered holders of Common Shares or Preferred Shares, as applicable). Beneficial shareholders who wish to vote their Common S hares or Preferred Shares, as applicable, at the Meeting should follow the instructions set out in this section.

Beneficial shareholders will receive instructions from their intermediary as to how to vote their Common Shares and Preferred Shares, as applicable. Every intermediary has its own mailing procedures and provides its own return instructions to clients. Beneficial shareholders who wish to vote at the Meeting should follow the instructions of their intermediary carefully to ensure that their Common Shares and Preferred Shares, as applicable, are voted at the Meeting. Generally, intermediaries will provide beneficial shareholders with either: (a) a voting instruction form for completion and execution by the beneficial shareholder, or (b) a proxy form, executed by the intermediary and restricted to the number of Common Shares and Preferred Shares, as applicable, owned by the beneficial shareholder, but otherwise uncompleted. These procedures permit beneficial shareholders to direct the voting of the Common Shares and Preferred Shares, as applicable, that they beneficially own.

If a beneficial shareholder wishes to attend and vote in person at the Meeting, he, she or it must insert their own name in the space provided for the appointment of a proxyholder on the voting instruction form or proxy form provided by the intermediary, and carefully follow the intermediary’s instructions for return of the executed form or other method of response.

If a beneficial shareholder does not provide voting instructions to its intermediary, the beneficial shareholder’s Common Shares and Preferred Shares, as applicable, will not be voted at the Meeting on any matter on which the intermediary does not have discretionary authority to vote. Under current rules, certain intermediaries may not have discretionary authority to vote Common Shares and Preferred Shares, as the case may be, at the Meeting on any matters other than the appointment of KPMG LLP as the Corporation’s auditor and the authorization of the Audit Committee to fix the remuneration to be paid to the Corporation’s auditors. We encourage all beneficial shareholders to provide instructions to the securities broker, financial institution, trustee, custodian or other nominee who holds Common Shares or Preferred Shares, as the case may be, on their behalf by carefully following the instructions provided.

Voting and Broker Non-Votes

All votes will be tabulated by the inspector of election appointed for the Meeting, who will separately tabulate affirmative and negative votes, abstentions, withheld votes and broker non-votes. Abstentions represent a shareholder’s affirmative choice to decline to vote on a proposal and withheld votes represent a shareholder’s affirmative choice to decline to vote for a particular director nominee or the appointment of KPMG LLP as the Corporation’s auditor. Properly executed proxy cards that are marked “abstain” or “withhold” on any proposal, as applicable, will be treated as abstentions for that proposal.

Broker non-votes occur when a broker or intermediary holding Common Shares or Preferred Shares, as the case may be, for a beneficial owner does not vote on a particular matter because such intermediary does not have discretionary authority to vote on that matter and has not received voting instructions from the beneficial owner. Intermediaries typically do not have discretionary authority to vote on non-routine matters. Under the securities laws of the U.S., and the applicable rules (the “ NYSE Rules ”) of the New York Stock Exchange (the “ NYSE ”), which apply to all NYSE-licensed intermediaries who have record ownership of listed company stock (including stock such as our Common Shares that are listed on The Nasdaq Global Market (the “ Nasdaq ”)), intermediaries have discretionary authority to vote on routine matters when they have not received timely voting instructions from the beneficial owner. The matters on which brokers will have discretionary authority to vote in the absence of instructions from the beneficial owners are described in the table included in the section titled “Voting Shares and Principal Holders of Voting Shares.”

Quorum

The quorum for the Meeting shall be one person present in person holding or representing by proxy not less than 33⅓% of the issued and outstanding shares of the Corporation entitled to be voted at the Meeting. Only a shareholder of record at the close of business on the Record Date will be entitled to vote, or grant proxies to vote, his, her or its Common Shares or Preferred Shares, as applicable, at the Meeting (subject, in the case of voting by proxy, to the timely deposit of his, her or its executed form of proxy as described herein). Abstentions and broker non-votes are included in the calculation of the number of votes considered to be present at the Meeting for purposes of determining a quorum. In the absence of a quorum, the chairman of the Meeting may adjourn the Meeting. If the Meeting is adjourned for less than 30 days, the Corporation is not required to provide notice of such adjourned meeting other than by announcement at the original Meeting that it is adjourned.

Page 3


Attendance at the Meeting Discouraged in light of CO VID-19 Pandemic

Xenon intends to hold the Meeting in person at the Corporation’s principal office at 200 - 3650 Gilmore Way, Burnaby, British Columbia, V5G 4W8, Canada . Directions to the Corporation’s principal office are available at http://www.xenon-pharma.com/contact . However, in view of the current and rapidly evolving COVID-19 outbreak, Xenon encourages shareholders and proxyholders to vote by proxy well in advance of the Meeting instead of attending the Meeting in person.  Xenon will host a live webcast of the Meeting so that shareholders can listen to the Meeting live. The webcast will be broadcast live on the “Investors” section of Xenon's website at  https://www.xenon-pharma.com . No shareholder will be able to vote or otherwise participate in the Meeting through the live webcast and as a result, shareholders are encouraged to vote by proxy prior to the Meeting. Access to the Meeting will, subject to Xenon’s by-laws, be limited to essential personnel and shareholders and proxyholders entitled to attend and vote at the Meeting.

Xenon may take additional precautionary measures in relation to the Meeting in response to further developments with the COVID-19 outbreak. In the event it is not possible or advisable to hold the Meeting in person, Xenon will announce alternative arrangements for the Meeting via press release and filing of additional proxy materials with the Securities and Exchange Commission as promptly as practicable, which may include holding the Meeting entirely by electronic means, telephone or other communication facilities.

Page 4


VOTING SHARES AND PRINCIPAL HOLDERS OF VOTING SHARES

The authorized capital of the Corporation consists of an unlimited number of Common Shares and an unlimited number of preferred shares issuable in series, which have been designated as Preferred Shares, as defined above under “Proxy Information – Solicitation of Proxies”. Our Common Shares are listed for trading on the Nasdaq. As of the Record Date, the Corporation had 34,956,272 Common Shares and 1,016,000 Preferred Shares issued and outstanding.

At the Meeting, each holder of Common Shares as of the Record Date is entitled to one vote per Common Share held in connection with each matter to be acted upon at the Meeting.

At the Meeting, each holder of Preferred Shares as of the Record Date is entitled to one vote per Preferred Share held in connection with each matter to be acted upon at the Meeting, voting with the holders of the Common Shares on an as-converted basis and as a single class, provided that any Preferred Shares that are ineligible to be converted into Common Shares due to the Beneficial Ownership Limitation (as defined below), measured as of a given record date that applies for a shareholder meeting or ability to act by written consent, shall be deemed to be non-voting securities of the Corporation. A Preferred Share is ineligible to be converted into a Common Share and shall not be converted into a Common Share to the extent that, after giving effect to such notional conversion, the holder of such Preferred Share (together with such holder’s affiliates (as such term is defined in the Canada Business Corporations Act ), and any other person (as such term is defined in the Canada Business Corporations Act ) whose beneficial ownership of Common Shares would be aggregated with the holder’s for the purposes of Section 13(d) or Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, and applicable regulations of the Securities and Exchange Commission in the United States and National Instrument 62-104 Take Over Bids and Issuer Bids in Canada, including any “group” of which such holder is a member), would beneficially own a number of Common Shares in excess of 9.99% of the number of Common Shares outstanding immediately after giving effect to the issuance of Common Shares pursuant to such notional conversion (the “ Beneficial Ownership Limitation ”) provided, however, that such holder has the right to reset the Beneficial Ownership Limitation to a higher or lower number (not to exceed 19.99% of the number of Common Shares outstanding immediately after giving effect to the issuance of Common Shares pursuant to such notional conversion) upon providing written notice to the Corporation, which notice provides for an increase in the Beneficial Ownership Limitation shall only be effective 61 days after delivery to the Corporation, but no such delay in effectiveness shall be required for a reduction in the Beneficial Ownership Limitation. For additional information regarding the Preferred Shares, please see the Corporation’s Current Report on Form 8-K and the exhibits thereto, filed with the Securities and Exchange Commission and the securities commissions in British Columbia, Alberta and Ontario on March 28, 2018. Pursuant to the application of the Beneficial Ownership Limitation, all 1,016,000 Preferred Shares are eligible to vote at the Meeting and no Preferred Shares are deemed to be non-voting securities.

Page 5


The table below describes the proposals to be voted on at the Meeting, the votes required for approval, whether brokers have discretionary voting authority, the impact of abstentions and broker non-votes an d how a shareholder may vote on a particular proposal.

Proposal

 

Vote Required

 

Do Brokers Have Discretionary Voting Authority?

 

Are Broker Non-Votes Expected?

 

Impact of Abstentions /

Withhold Votes

 

Impact of Broker Non-Votes

 

You May Vote

Election of directors

 

Must Receive Votes "FOR"

 

No

 

Yes

 

No Effect

 

No Effect

 

"FOR" or "WITHHOLD"

Approval on an advisory basis, of the named executive officers' compensation

 

Majority of Votes Cast Must Vote "FOR"

 

No

 

Yes

 

No Effect

 

No Effect

 

"FOR"

"AGAINST"

or

"ABSTAIN"

Approval on an advisory basis, of the frequency of future shareholder advisory votes to approve the named executive officers' compensation

 

Frequency of future advisory votes selected by shareholders will be the frequency that receives the greatest number of votes cast

 

No

 

Yes

 

No Effect

 

No Effect

 

"1 YEAR"

"2 YEAR"

"3 YEAR"

or

"ABSTAIN"

Approval of the amendment and restatement of the 2014 Equity Incentive Plan

 

Majority of Votes Cast Must Vote "FOR"

 

No

 

Yes

 

No Effect

 

No Effect

 

"FOR"

"AGAINST"

or

"ABSTAIN"

Appointment of KPMG LLP as the Corporation’s auditor

 

Must Receive Votes "FOR"

 

Yes

 

No

 

No Effect

 

No Effect

 

"FOR" or "WITHHOLD"

Authorize the Audit Committee to fix the remuneration paid to the auditor

 

Majority of Votes Cast Must Vote "FOR"

 

Yes

 

No

 

No Effect

 

No Effect

 

"FOR"

"AGAINST"

or

"ABSTAIN"

EXPENSES

Xenon will pay all of the expenses of soliciting proxies for management. In addition to the mailing of the proxy material, such solicitation may be made in person or by telephone by directors, officers and employees of Xenon, whose directors, officers and employees will receive no compensation for such solicitation other than their regular salaries or fees. Xenon will also make arrangements with brokerage houses and other custodians, nominees and fiduciaries to send proxy materials to beneficial owners. Xenon will, upon request, reimburse these institutions for their reasonable charges and expenses incurred in forwarding this proxy material to beneficial owners of Common Shares.

Page 6


PARTICULARS OF MA TTERS TO BE ACTED UPON

ITEM 1 – RECEIPT OF FINANCIAL STATEMENTS

The audited annual financial statements of the Corporation for the year ended December 31, 2019 and the report of the auditor will be placed before shareholders at the Meeting.

ITEM 2 – ELECTION OF DIRECTORS

The directors of the Corporation are elected each year at the annual meeting of the Corporation and hold office until their successors are elected or appointed. The Board has nominated each of the nine persons listed below for election as a director of the Corporation and, in the absence of contrary instructions contained therein, the persons named as proxyholders in the enclosed forms of proxy intend to vote for the election of these nominees. The current term of office for each of our current directors will end at the conclusion of the Meeting.

Each nominee elected to the Board at the Meeting will hold office until the next annual meeting of the Corporation, subject to earlier death, resignation, retirement, disqualification or removal.

Page 7


The following table sets out the names of the nominees for election as directors of the Corporation, all major offices and positions with the Corporation each now holds, each nominee’s principal occupation, business or employment for the five preceding years, the period of time during which each has been a director of the Corporation and the number of voting securities of the Corporation beneficially owned by each nominee, directly or indirectly, or over which each exercised control or direction, in acco rdance with National Instrument 51-102 – Continuous Disclosure Obligations , as of the Record Date.

Name and

Municipality of

Residence (1)

 

  

Position with

the

Corporation

  

Age (1)

  

Principal Occupation or Employment in

past 5 years (1)

  

Previous

Service as a

Director

  

Number of

Voting

Securities

Beneficially

Owned,

Controlled or

Directed (1)(2)(3)

Michael Tarnow (4)(6)

Scottsdale, AZ

USA

 

Chair and Director

  

75

  

Mr. Tarnow has served as a member of our Board since March 1999. Since 1995, Mr. Tarnow has been an advisor to and member of the boards of directors of private and public healthcare and biotechnology companies in the U.S., Canada and Europe, including Axcan Pharma, Creative Biomolecules, Inc., Caprion Pharmaceuticals Inc. and MediGene AG. He served as chair of EntreMed, Inc. (now CASI Pharmaceuticals, Inc.) a publicly-traded biotechnology company, from February 2003 to February 2009, and served as Executive Chair of EntreMed from February 2009 to January 2012. Mr. Tarnow holds a B.B.A. in Business Administration from Wayne State University and a J.D. from the University of Illinois, College of Law. Our Board believes that Mr. Tarnow is qualified to serve on our Board because of his senior management experience in the pharmaceutical industry and his knowledge and perspective of the Corporation.

  

Director since March 1999

  

64,569 Common Shares

 

 

 

 

 

 

 

 

 

 

 

Mohammad Azab (5)

San Francisco, CA

USA

 

  Director

 

64

 

Dr. Azab has served as a member of our Board since October 2003. In July 2009, Dr. Azab joined Astex Pharmaceuticals, Inc., a pharmaceutical company focused on the discovery and development of drugs in oncology and other areas, as its Chief Medical Officer. Since January 2014, Dr. Azab has served as President and Chief Medical Officer of Astex and has been a member of Astex’s Board of Directors. Previously, Dr. Azab served as President and CEO of Intradigm Corporation, a developer of siRNA cancer therapeutics. Prior to this, Dr. Azab served as Executive Vice President of Research and Development, and Chief Medical Officer of QLT Inc., and in several leadership positions at Astra Zeneca in the United Kingdom and Sanofi Pharmaceuticals in France. Dr. Azab holds an M.B.A. from the Richard Ivey School of Business, University of Western Ontario, and an MB ChB from Cairo University. He received post-graduate training and degrees in oncology research from the University of Paris-Sud and biostatistics from the University of Pierre et Marie Curie in Paris, France. Our Board believes Dr. Azab is qualified to serve on our Board because of his scientific background and his senior management experience in the pharmaceutical industry.

 

Director since October 2003

 

60,647 Common Shares

Page 8


 

 

 

 

 

 

 

 

 

 

 

Clarissa Desjardins (5)
Westmount, QC
Canada

 

Director

 

53

 

Dr. Desjardins has served as a member of our Board since January 2020. Since founding Clementia Pharmaceuticals Inc. in 2011, Dr. Desjardins served as its President and Chief Executive Officer until 2019. Clementia was acquired by Ipsen S.A. in April 2019 for $1.3 billion. From 2009 to 2011, Dr. Desjardins served as President and Chief Executive Officer and as a director of the Centre of Excellence in Personalized Medicine (CEPMED). From 1998 to 2007, Dr. Desjardins served as Senior Vice President, Corporate Development and a director at Caprion Pharmaceuticals Inc., which she co-founded. Prior to Caprion, Dr. Desjardins co- founded Advanced Bioconcept Inc. in 1992. She served there until 1998, most recently as Vice President, Business Development. Dr. Desjardins currently serves on the Board of Directors of publicly-traded biotechnology companies BELLUS Health Inc. and Insmed. Dr. Desjardins received a B.Sc. in Anatomical Sciences and History and Philosophy of Science and a Ph.D. in Neurology and Neurosurgery, each from McGill University. Dr. Desjardins was a Medical Research Council postdoctoral fellow at Douglas Hospital Research Centre at McGill University. Our Board believes that Dr. Desjardins is qualified to serve on our Board because of her scientific background and her senior management experience in the pharmaceutical industry.

 

Director since January 2020

 

Nil

 

 

 

 

 

 

 

 

 

 

 

Steven Gannon (4)

Montreal, QC

Canada

 

 

Director

 

58

 

Mr. Gannon has served as a member of our Board since May 2015. Mr. Gannon has served on the Board of Directors of Fusion Pharmaceuticals, a private biopharmaceutical company, since January 2020. Mr. Gannon has served on the Board of Directors of enGene Inc., a biotechnology company, since February 2017. Mr. Gannon has also served on the Board of Directors of Aerogen Limited, a medical technology company, since November 2018. From June 2014 to March 2018, Mr. Gannon served on the Board of Directors of Advanced Accelerator Applications SA, a healthcare company acquired by Novartis in January 2018. Mr. Gannon was Chief Financial Officer, Senior Vice President of Finance and Treasurer at Aptalis Pharma Inc. until February 2014, after which it was sold to Forest Laboratories. Prior to joining Aptalis in 2006, Mr. Gannon served as the Chief Financial Officer for Cryocath Technologies Inc. from 1999 to 2006, as the Director of Finance and Administration of the Research Division of AstraZeneca Canada Inc. from 1996 to 1999, and as the Chief Financial Officer of Mallinckrodt Medical Inc.’s Canadian operations from 1989 to 1995. He received a bachelor of commerce in accounting and business systems from Concordia University in Montreal, Canada in 1983, and completed the Executive Program at the Richard Ivey School of Business at the University of Western Ontario in Ontario, Canada in 1995. He has been a CPA, CA since 1985. Our Board believes that Mr. Gannon is qualified to serve on our Board because of his financial expertise and his senior management experience in the pharmaceutical industry.

 

Director since May 2015

 

15,000 Common Shares

 

 

 

 

 

 

 

 

 

 

 

Page 9


Michael Hayden

Vancouver, BC

Canada

 

 

Director

 

68

 

Dr. Hayden has served as a member of our Board since November 1996. Dr. Hayden previously served as our Chief Scientific Officer from January 1997 to September 2012. From September 2012 to December 2017, Dr. Hayden served as President of Global R&D and Chief Scientific Officer of Teva Pharmaceutical Industries Ltd. and was employed by Teva Pharmaceutical in an advisory capacity until August 2018. Dr. Hayden currently serves on the board of directors of several publicly-traded biopharmaceutical companies; Aurinia Pharmaceuticals Inc. since February 2018, Ionis Pharmaceuticals, Inc. since September 2018 and 89bio Inc. since October 2018. Dr. Hayden has been the Executive Chairman of Prilenia Therapeutics, since October 2018. Dr. Hayden is also currently the Killam Professor of Medical Genetics at the University of British Columbia and Canada Research Chair in Human Genetics and Molecular Medicine. He is also the founder and a Senior Scientist of the Centre for Molecular Medicine and Therapeutics at the University of British Columbia. He is presently the Program Director of the Translational Laboratory in Genetic Medicine in Singapore. Dr. Hayden received his MB ChB in Medicine in 1975, Ph.D. in Genetics in 1979 and DCH Diploma in Child Health in 1979 from the University of Cape Town. He received his American Board Certification in both internal medicine and clinical genetics from Harvard Medical School in 1982 and an FRCPC in internal medicine from the University of British Columbia in 1984. Our Board believes Dr. Hayden is qualified to serve on our Board because of his scientific background, his senior management experience in the pharmaceutical industry, and his knowledge and perspective of the Corporation.

 

Director since November 1996

 

272,889 (7) Common Shares

 

 

 

 

 

 

 

 

 

 

 

Page 10


Frank Holler (4)

North Vancouver, BC

Canada

 

 

Director

 

63

 

Mr. Holler has served as a member of our Board since March 1999. Mr. Holler previously served as Xenon’s President and CEO from 1999 to 2003. Mr. Holler has served as director and chairman of Sernova Corporation, a publicly-traded biotechnology company, since 2014. He has also served as a director and chairman of Harvest One Cannabis Inc., a publicly-traded cannabis company, since September 2018. Mr. Holler previously served as chairman and CEO at BC Advantage Funds (VCC) Ltd., a venture capital firm and publicly-traded company that invested in emerging life science, clean tech and information technology companies, from 2004 to 2016. Mr. Holler also previously served on the board of directors of publicly-traded companies including Protox Therapeutics (now Sophiris Bio) from 2005 to 2012, Aquinox Pharmaceuticals, Inc. from 2010 to 2014 and Allon Therapeutics from 2005 to 2013. He also served as chair of the Audit Committee and chair of the Investment Committee for Genome BC, a large publicly funded research organization, from 2005 to 2011. In addition, Mr. Holler served as President and CEO of ID Biomedical Corporation from 1991 to 1998, and was a founding director of Angiotech Pharmaceuticals from 1992 to 1997. Mr. Holler was an Investment Banker with Wood Gundy Inc. (now CIBC World Markets) from 1984 to 1988 and Merrill Lynch Canada from 1988 to 1989. Mr. Holler holds a B.A. in Economics and an M.B.A. from the University of British Columbia. Our Board believes Mr. Holler is qualified to serve on our Board because of his experience as a biotechnology entrepreneur and venture capitalist, his investment banking experience, and his knowledge and perspective of the Corporation.

 

Director since March 1999

 

120,139 (8) Common Shares

 

 

 

 

 

 

 

 

 

 

 

Gary Patou (5)(6)

Los Altos Hills, CA

USA

 

 

Director

 

61

 

Dr. Patou has served as a member of our Board since January 2004. Dr. Patou has been an Executive Partner at MPM Capital, a venture capital fund focused on life sciences companies, since 2005, and has served as interim Chief Medical Officer in various MPM portfolio companies. Since 2014, Dr. Patou has served as a senior medical advisor to Chiasma, Inc. Previously, Dr. Patou served as Chief Medical Officer for Pacira Pharmaceuticals, Inc. from 2009 to 2015, and True North Therapeutics, Inc. from January 2017 to June 2017. Prior to joining Pacira, Dr. Patou was Chief Medical Officer at Peplin Inc. from July 2006 to April 2007, and Chief Medical Officer of Cerimon Pharmaceuticals, Inc. from June 2005 to June 2006. Prior to joining MPM, Dr. Patou was Executive Vice President and Chief Medical Officer of Oscient Pharmaceuticals Corp. from February 2004 to April 2005 following its merger with GeneSoft Pharmaceuticals, Inc. Prior to GeneSoft, Dr. Patou worked at SmithKline Beecham Pharmaceuticals, now a unit of GlaxoSmithKline, as Senior Vice President and Director, Project and Portfolio Management, managing all of the company’s pharmaceutical development projects. Dr. Patou has held a number of academic appointments at University College & Middlesex School of Medicine and received his B.Sc. from University of London and his M.D. from University College London. Our Board believes that Dr. Patou is qualified to serve on our Board because of his scientific background and his senior management experience in the pharmaceutical industry.

 

Director since January 2004

 

34,016 ( 9) Common Shares

Page 11


Simon N. Pimstone

Vancouver, BC

Canada

 

 

Chief Executive Officer and Director

 

52

 

Dr. Pimstone has served as a member of our Board since November 1996, as our Chief Executive Officer since January 2003 and as our President from January 2003 to March 2018. Since 2012, Dr. Pimstone has been a Consultant Physician at the University of British Columbia Hospital, Cardiology Clinic, and since 2014, he has held the position of Clinical Associate Professor at the University of British Columbia, Division of General Internal Medicine. Currently, Dr. Pimstone is an Investigator at the Centre for Heart Lung Innovation (HLI) research centre. Dr. Pimstone currently serves as chair of the board of Eupraxia Pharmaceuticals Inc., Accuro Technologies, and TopiRx Pharmaceuticals, three private specialty pharmaceutical companies, where he has served as a director since 2012, 2012 and 2019, respectively. Dr. Pimstone holds an MBChB from the University of Cape Town, a FRCPC from the University of British Columbia, and a Ph.D. from the University of Amsterdam in cardiovascular genetics. Dr. Pimstone is a former director of Indel Therapeutics Inc., Cyon Therapeutics Inc. and Enject, Inc. Previously, Dr. Pimstone was director and chair of the board of directors of LifeSciences British Columbia, a non-profit industry association that supports the life science community, and a former director of the Providence Healthcare Research Trust, BC Advantage Life Sciences Fund, Centre for Molecular Medicine and Therapeutics, BIOTECanada, and BC Health Research Strategy Advisory Board of the Michael Smith Foundation for Health Research. Our Board believes that Dr. Pimstone is qualified to serve as a director because of his executive leadership experience, many years of service on our Board and as our Chief Executive Officer and his knowledge and perspective of the Corporation.

 

Director since November 1996

 

274,582 (10) Common Shares

 

 

 

 

 

 

 

 

 

 

 

Dawn Svoronos (6)

Hudson, QC

Canada

 

 

Director

 

66

 

Ms. Svoronos has served as a member of our Board since September 2016. Ms. Svoronos sits on the board of directors of several publicly-traded biopharmaceutical companies, PTC Therapeutics, Global Blood Therapeutics, and Theratechnologies Inc., where she is currently the chair of the board. Ms. Svoronos retired in 2011 from Merck & Co., Inc. following a 23-year career in commercial positions of increasing seniority, most recently as President of Europe and Canada. In that role, Ms. Svoronos had full P&L responsibility for 30 European markets with annual sales of several billion dollars and an employee base of several thousand. Previously held positions with Merck include Vice President of Asia Pacific and Vice President of Global Marketing for the Arthritis, Analgesics and Osteoporosis franchise. Ms. Svoronos previously sat on the board of Endocyte, Inc. and Medivation Inc. Ms. Svoronos received a B.A. in English and French Literature from Carleton University. Our Board believes that Ms. Svoronos is qualified to serve on our Board because of her experience in commercialization of pharmaceutical products and her senior management experience in the pharmaceutical industry.

 

Director since September 2016

 

50,000 Common Shares

Page 12


 

(1)

This information has been provided by the respective nominee as of the Record Date.

(2)

The number of Common Shares set forth in this table have been presented in accordance with National Instrument 51-102 – Continuous Disclosure Obligations and do not include derivative securities that may be held by the persons included in the table. Such figures have not been calculated pursuant to the beneficial ownership rules promulgated by the SEC. For additional information regarding ownership of Common Shares presented in accordance with the SEC’s beneficial ownership rules, please see the section of this Circular captioned “Security Ownership of Certain Beneficial Owners and Management.”

(3)

None of the nominees for election as directors of the Corporation own any Preferred Shares.

(4)

Member of the Audit Committee of the Board.

(5)

Member of the Compensation Committee of the Board.

(6)

Member of the Nominating and Corporate Governance Committee of the Board.

(7)

Consists of (i) 107,562 Common Shares held by Dr. Hayden; (ii) 114,403 Common Shares held by Dr. Hayden’s spouse; and (iii) 50,924 Common Shares held by Genworks Inc. (“ Genworks ”), Dr. Hayden’s consulting company.

(8)

Consists of (i) 118,955 Common Shares held by Mr. Holler and (ii) 1,184 Common Shares held by Mr. Holler’s spouse.

(9)

Consists of (i) 21,516 Common Shares held by Dr. Patou and (ii) 12,500 Common Shares held by the Patou Family Trust.

(10)

Consists of (i) 258,122 Common Shares held by Dr. Pimstone and (ii) 16,460 Common Shares held by Dr. Pimstone’s spouse.

YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS:

 

A VOTE “FOR” THE PROPOSED DIRECTORS


Page 13


Penalties, Sanctions and Orders

As at the date of this Circular and within the past 10 years before the date of this Circular, other than as disclosed herein, no proposed nominee for election as a director of the Corporation:

 

(a)

is or was a director, chief executive officer or chief financial officer of any company (including the Corporation) that:

 

i.

was subject to a cease trade or similar order or an order denying the relevant company access to any exemptions under securities legislation, that was in effect for a period of more than 30 consecutive days (any such order being an “ Order ”), that was issued while the proposed nominee was acting in the capacity as director or executive officer; or

 

ii.

was subject to an Order that was issued after the proposed nominee ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while the proposed nominee was acting in the capacity as director, chief executive officer or chief financial officer;

 

(b)

is or was a director or executive officer of any company (including the Corporation) that while the proposed nominee was acting in that capacity or within a year of the proposed nominee ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or

 

(c)

is or has become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed nominee.

Notwithstanding the foregoing, Frank Holler was a director of Allon Therapeutics Inc. (“ Allon ”) and ceased to be a director of that company effective July 16, 2013. On July 5, 2013, Allon made a proposal to its creditors under the Bankruptcy and Insolvency Act and a reorganization of its share structure was approved by order of the Supreme Court of British Columbia. Following such Supreme Court approval, all of the issued and outstanding shares of Allon were acquired by Paladin Labs Inc. The common shares of Allon were delisted from the Toronto Stock Exchange on June 28, 2013. Mr. Holler was a director of Contech Enterprises Inc. (“ Contech ”) until March 6, 2015. On December 23, 2014, Contech made a proposal to its creditors under the Bankruptcy and Insolvency Act and a reorganization of its capital structure was approved by an order of the Supreme Court of British Columbia on January 27, 2015. This proposal was intended to facilitate a financing by a new lender and a debt restructuring that, together, would enable Contech to carry on its business profitably for the foreseeable future. However, on March 6, 2015, the Court of Appeal overturned the approval of the proposal by the Supreme Court of British Columbia and  Contech was automatically deemed bankrupt. On March 20, 2015, Deloitte Restructuring Inc. was appointed Receiver Manager of Contech by the Supreme Court of British Columbia and then proceeded to sell certain assets of Contech and to distribute the net proceeds from such sales to certain secured creditors. On February 25, 2016, the Supreme Court of British Columbia approved a final distribution to certain secured creditors, the fees and disbursements of the Receiver and its legal counsel and the discharge of Deloitte Restructuring Inc. The bankruptcy and receivership have now been finalized.

No proposed nominee for election as a director of the Corporation has been subject to:

 

(a)

any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or

 

(b)

any other penalties or sanctions imposed by a court or a regulatory body that would likely be considered important to a reasonable shareholder in deciding whether to vote for a proposed director.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding the beneficial ownership of our Common Shares and Preferred Shares outstanding as of the Record Date for:

 

each person who, to the knowledge of the directors and officers of the Corporation, owns more than 5% of our Common Shares or Preferred Shares;

 

each of our current directors and each nominee for election to our Board;

 

each of our executive officers named in the Summary Compensation Table included in this Circular; and

 

all current directors and executive officers as a group.

Page 14


The percentage of beneficial ownership shown in the table is based upon 34,956,272 Common Shares and 1,01 6,000 Preferred Shares outstanding as of the Record Date. The holders of Common Shares are entitled to one vote per Common Share. The holders of Preferred Shares are entitled to one vote per Preferred Share, voting with the holders of Common Shares on an a s-converted basis and as a single class, provided that any Preferred Shares that are ineligible to be converted into Common Shares due to the Beneficial Ownership Limitation are deemed to be non-voting securities of the Corporation. For additional informat ion regarding the Preferred Shares’ voting rights and the Beneficial Ownership Limitation, please see the section of this Circular captioned “Voting Shares and Principal Holders of Voting Shares”.

Information with respect to beneficial ownership has been furnished by each director, executive officer and, to the knowledge of the Corporation, each beneficial owner of more than 5% of our Common Shares or Preferred Shares. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules take into account Common Shares issuable pursuant to the exercise of stock options or conversion of other convertible securities that are either immediately exercisable or convertible or exercisable or convertible on or before the 60 th day after the Record Date. These Common Shares are deemed to be outstanding and beneficially owned by the persons holding the stock options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the beneficial ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable common property laws.

Except as otherwise noted below, the address for each person or entity listed in the table is c/o Xenon Pharmaceuticals Inc., 200 - 3650 Gilmore Way, Burnaby, British Columbia V5G 4W8.

 

 

Common Shares

 

 

Preferred Shares

 

 

 

 

 

Name of Beneficial Owner

 

Number

 

 

%

 

 

Number

 

%

 

 

Percentage of Voting Power

 

5% and Greater Shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BVF Partners L.P. (1)

 

 

1,949,075

 

 

 

5.58

%

 

 

1,016,000

 

 

100.00

%

 

 

8.24

%

Avoro Capital Advisors LLC (2)

 

 

2,400,000

 

 

 

6.87

%

 

 

 

 

 

 

 

6.67

%

Capital Research and Management Company (3)

 

 

2,019,226

 

 

 

5.78

%

 

 

 

 

 

 

 

5.61

%

Adage Capital Advisors, L.L.C. (4)

 

 

1,925,000

 

 

 

5.51

%

 

 

 

 

 

 

 

5.35

%

Named Executive Officers and Directors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Simon N. Pimstone

 

 

896,429

 

(5)

 

2.52

%

 

 

 

 

 

 

 

2.45

%

Ian C. Mortimer

 

 

387,555

 

(6)

 

1.10

%

 

 

 

 

 

 

 

1.07

%

Michael R. Hayden

 

 

348,529

 

(7)

*

 

 

 

 

 

 

 

*

 

Frank A. Holler

 

 

204,420

 

(8)

*

 

 

 

 

 

 

 

*

 

Michael M. Tarnow

 

 

139,001

 

(9)

*

 

 

 

 

 

 

 

*

 

Mohammad Azab

 

 

99,455

 

(10)

*

 

 

 

 

 

 

 

*

 

Gary Patou

 

 

74,675

 

(11)

*

 

 

 

 

 

 

 

*

 

Dawn A. Svoronos

 

 

68,644

 

(12)

*

 

 

 

 

 

 

 

*

 

Ernesto Aycardi

 

 

44,375

 

(13)

*

 

 

 

 

 

 

 

*

 

Steven R. Gannon

 

 

37,144

 

(14)

*

 

 

 

 

 

 

 

*

 

Clarissa Desjardins

 

 

 

 

*

 

 

 

 

 

 

 

*

 

All current executive officers and directors as a group (13 persons)

 

 

2,638,987

 

(15)

 

7.20

%

 

 

 

 

 

 

 

7.00

%

* Denotes less than 1% beneficial ownership

Page 15


 

(1)

According to a Schedule 13G/A filed with the SEC on February 14, 2020, as of December 31, 2019, Biotechnology Value Fund, L.P. (“ BVF ”), BVF I GP LLC (“ BVF GP ”), Biotechnology Value Fund II, L.P. (“ BVF2 ”), BVF II GP LLC (“ BVF2 GP ”), Biotechnology Value Trading Fund OS LP (“ Trading Fund OS ”), BVF Partners OS Ltd. (“ Partners OS ”), BVF GP Holdings LLC (“ BVF GPH ”), BVF Partners L.P. (“ Partners ”), BVF Inc. and Mark N. Lampert (“ Mr. Lampert ”) (referred to collectively as the “ Reporting Persons ”) hold an aggregate of 1,016,000 Preferred Shares convertible for an aggregate of 1,016,000 Common Shares. Each Preferred Share is convertible into one Common Share. The Preferred Shares may not be converted if, after such conversion, the Reporting Persons would beneficially own, as determined in accordance with Section 13(d) of the Exchange Act of 1934 (the “ Exchange Act ”), in excess of 9.99% of the number of Common Shares then issued and outstanding (the “ Beneficial Ownership Limitation ”). As of the close of business on December 31, 2019, and excluding the impact of the Beneficial Ownership Limitation, BVF beneficially owned 1,497,009 Common Shares, BVF2 beneficially owned 1,165,961 Common Shares, and Trading Fund OS beneficially owned 203,976 Common Shares. BVF GP, as the general partner of BVF, may be deemed to beneficially own the 1,497,009 shares of Common Stock beneficially owned by BVF. BVF GPH, as the sole member of each of BVF GP and BVF2 GP, may be deemed to beneficially own the 2,662,970 shares of Common Stock beneficially owned in the aggregate by BVF and BVF2. Partners, as the investment manager of BVF, BVF2 and Trading Fund OS, and the sole member of Partners OS, may be deemed to beneficially own the 2,965,075 shares of Common Stock beneficially owned in the aggregate by BVF, BVF2, Trading Fund OS, and certain Partners managed account. BVF Inc., as the general partner of Partners, may be deemed to beneficially own the 2,965,075 shares of Common Stock beneficially owned by Partners. Mr. Lampert, as a director and officer of BVF Inc., may be deemed to beneficially own the 2,965,075 shares of Common Stock beneficially owned by BVF Inc. The address of each of BVF Inc., Partners, BVF, BVF GP, BVF2, BVF2 GP and Mr. Lampert is 44 Montgomery St., 40th Floor, San Francisco, California 94104, USA. The address of each of Trading Fund OS and Partners OS is PO Box 309 Ugland House, Grand Cayman, KY1-1104, Cayman Islands.

(2)

According to a Schedule 13F filed with the SEC on February 14, 2020, as of December 31, 2019, Avoro Capital Advisors LLC, formerly venBio Select Advisor LLC, (“ ACA ”) a global life sciences investment firm is the beneficial owner of 2,400,000 Common Shares. The address for ACA is 110 Greene Street, Suite 800, New York, NY 10012, USA.

(3)

According to each Schedule 13F filed with the SEC on February 18, 2020, as of December 31, 2019, by Capital International Investors (“ CII ”) and Capital World Investors (“ CWI ”), Capital Research and Management Company (“ CRMC ”), is the beneficial owner of 2,019,226 Common Shares. CRMC manages equity assets for various investment companies through three divisions, Capital Research Global Investors, CII and CWI. These divisions generally function separately from each other with respect to investment research activities and they make investment decisions and proxy voting decisions for the investment companies on a separate basis. CII holds 1,055,726 Common Shares, while CWI holds 963,500 Common Shares. The address for CRMC is 333 South Hope Street, Los Angeles, CA, 90071, USA.

(4)

According to a Schedule 13G/A filed with the SEC on February 12, 2020, as of December 31, 2019, Adage Capital Partners, L.P. (“ ACP ”), Adage Capital Partners GP, L.L.C. (“ ACPGP ”), Adage Capital Advisors, L.L.C. (“ ACA ”), Robert Atchinson (“ Mr. Atchinson ”) and Phillip Gross (“ Mr. Gross ”) (referred to collectively as the “ Reporting Persons ”) are the beneficial owner of 1,925,000 Common Shares. ACP has the power to dispose of and the power to vote the Common Shares beneficially owned by it, which power may be exercised by its general partner, ACPGP. ACA, as managing member of ACPGP, directs ACPGP's operations. Neither ACPGP nor ACA directly own any Common Shares. ACPGP and ACA may be deemed to beneficially own the shares owned by ACP. Messrs. Atchinson and Gross, as managing members of ACA, have shared power to vote the Common Shares beneficially owned by ACP. Neither Mr. Atchinson nor Mr. Gross directly own any Common Shares; however, each may be deemed to beneficially own the shares beneficially owned by ACP. The address for each of the Reporting Persons is 200 Clarendon Street, 52nd floor, Boston, Massachusetts 02116, USA.

(5)

Consists of (i) 258,122 Common Shares held by Dr. Pimstone; (ii) 16,460 Common Shares held by Dr. Pimstone’s spouse; and (iii) 621,847 Common Shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(6)

Consists of (i) 6,000 Common Shares held by Mr. Mortimer; (ii) 14,300 Common Shares held by Mr. Mortimer’s spouse; and (iii) 367,255 Common Shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(7)

Consists of (i) 107,562 Common Shares held by Dr. Hayden; (ii) 114,403 Common Shares held by Dr. Hayden’s spouse; (iii) 50,924 Common Shares held by Genworks, Dr. Hayden’s consulting company; (iv) 34,488 Common Shares issuable upon exercise of options exercisable within 60 days of the Record Date held by Dr. Hayden; and (v) 41,152 Common Shares issuable upon exercise of options exercisable within 60 days of the Record Date held by Genworks.

(8)

Consists of (i) 118,955 Common Shares held by Mr. Holler; (ii) 1,184 Common Shares held by Mr. Holler’s spouse; and (iii) 84,281 Common Shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(9)

Consists of (i) 64,569 Common Shares held by Mr. Tarnow; and (ii) 74,432 Common Shares issuable upon exercise of options exercisable within 60 days of the Record Date.

Page 16


(10)

Consists of (i) 60,647 Common S hares held by Dr. Azab; and (ii) 38,808 Common Shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(11)

Consists of (i) 21,516 Common Shares held by Dr. Patou; (ii) 12,500 Common Shares held by Patou Family Trust and (iii) 40,659 Common Shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(12)

Consists of (i) 50,000 Common Shares held by Ms. Svoronos; and (ii) 18,644 Common Shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(13)

Consists of 44,375 Common Shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(14)

Consists of (i) 15,000 Common Shares held by Mr. Gannon; and (ii) 22,144 Common Shares issuable upon exercise of options exercisable within 60 days of the Record Date.

(15)

Consists of (i) 932,338 Common Shares held; and (ii) 1,706,649 Common Shares issuable upon exercise of options exercisable within 60 days of the Record Date.

Information about the Board and Corporate Governance

Our Board oversees the management of the business and affairs of Xenon as required under the applicable rules and regulations of the SEC and Nasdaq and under applicable Canadian laws. Our Board conducts its business through meetings of the Board and three standing committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. A copy of the Corporation’s Corporate Governance Guidelines is attached hereto as Schedule A.

Our Board has established guidelines for determining director independence, and all current directors, with the exception of Dr. Pimstone, have been determined by our Board to be independent under applicable Nasdaq rules, the Board’s governance principles and Canadian securities laws. Dr. Pimstone is not considered independent due to his role as Chief Executive Officer of the Corporation.

Xenon has also adopted a written Code of Conduct in order to help directors, officers and employees resolve ethical issues in an increasingly complex business environment. The Code of Conduct applies to all of our and our subsidiaries’ directors, officers and employees. The Code of Conduct covers topics including, but not limited to, conflicts of interest, confidentiality and compliance with laws. In addition, our Board adopted a set of Corporate Governance Guidelines as a framework within which the Board and its committees conduct business. The Corporation’s President and Chief Financial Officer is responsible for overseeing and monitoring compliance with the Code of Conduct. The President and Chief Financial Officer reports directly to the Chief Executive Officer with respect to these matters and also will make periodic reports to the Corporation’s Audit Committee regarding the implementation and effectiveness of the Code of Conduct as well as the policies and procedures put in place to ensure compliance with the Code of Conduct.

In addition, the Nominating and Corporate Governance Committee reviews actual and potential conflicts of interests of officers and members of our Board, other than related party transactions, which are reviewed by our Audit Committee. The Corporation is committed to maintaining high standards of corporate governance and this philosophy is continually communicated by our Board to management which in turn is emphasized to the employees of the Corporation on a continuous basis.

A copy of the most up-to-date version of our Code of Conduct is available within the “Investors” section on Xenon’s website located at https://www.xenon-pharma.com and on SEDAR at http://www.sedar.com . A copy of our Code of Conduct is also available free of charge in print to any shareholder upon written request to 200 – 3650 Gilmore Way, Burnaby, British Columbia V5G 4W8, Canada, Attention: Vice President, Legal Affairs. We will post amendments to our Corporate Governance Guidelines and Code of Conduct or waivers of the same for directors and executive officers on the “Investors” section on Xenon’s website located at https://www.xenon-pharma.com .

Risk Management

Our Board has an active role, as a whole and also at the committee level, in overseeing the management of our risks. Our Board is responsible for general oversight of risks and regular review of information regarding our risks, including operational risks. The Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements. The Audit Committee is responsible for overseeing the management of risks relating to credit, liquidity, accounting matters and financial reporting. The Nominating and Corporate Governance Committee is responsible for overseeing the management of risks associated with the independence of our Board and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through discussions from committee members about such risks. Our Board believes its administration of its risk oversight function has not affected the Board’s leadership structure.

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Meetings

Our Board held ten (10) meetings in 2019. Mohammad Azab, Steve Gannon, Frank Holler, Simon Pimstone and Michael Tarnow attended each of these meetings. Michael Hayden and Dawn Svoronos attended nine (9) of these meetings. Gary Patou attended eight (8) of these meetings. Our former director, Richard Scheller, attended nine (9) of these meetings. Dr. Scheller resigned from our Board effective January 14, 2020.

The three standing Board committees met the number of times shown in parentheses in 2019: Audit Committee (5); Compensation Committee (6); and Nominating and Corporate Governance Committee (2). Each incumbent director attended all meetings of all Board committees on which they served during such period, except for Michael Tarnow who missed one (1) Audit Committee meeting and Gary Patou who missed one (1) Compensation Committee meeting.

No director attended fewer than 75% of the total number of meetings of the Board and the committees of which he or she was a member in 2019.

Xenon has a formal policy regarding attendance by directors at its annual meetings of shareholders which states that all directors are expected to attend, provided that a director who is unable to attend such a meeting is expected to notify the Chair of the Board in advance of any such meeting. Five (5) directors attended Xenon’s 2019 annual general meeting.

Our Board has held two (2) meetings in 2020 up to the Record Date, which have been attended by all directors of the Corporation.

Committees of the Board

Our Board currently has three standing committees: the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation Committee. Our Board has not adopted descriptions for the positions of Chair of the Board or Chair for each of the Board committees; however the roles and responsibilities for each of the committees of the Board is set forth in the charter for each committee of the Board, which are summarized below.

Audit Committee

Our Audit Committee oversees our corporate accounting and financial reporting process. Among other matters, our Audit Committee:

 

approves the hiring, discharging and compensation of our independent auditors;

 

oversees the work of our independent auditors;

 

approves engagements of the independent auditors to render any audit or permissible non-audit services;

 

reviews on a periodic basis, or as appropriate, our investment policy and recommends to our Board any changes to such policy;

 

reviews compliance with our investment policy;

 

reviews the qualifications, independence and performance of the independent auditors;

 

reviews and/or approves financial statements, critical accounting policies and estimates;

 

reviews the adequacy and effectiveness of our internal controls; and

 

reviews and discusses with management and the independent auditors the results of our annual audit, our quarterly financial statements and our publicly filed reports.

The current members of our Audit Committee are Mr. Holler, Mr. Gannon and Mr. Tarnow. Mr. Holler serves as the chair of our Audit Committee. All members of our Audit Committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq and under applicable Canadian securities laws. Each of Mr. Holler (chair) and Mr. Gannon is an Audit Committee financial expert, as that term is defined under the SEC rules implementing Section 407 of the Sarbanes-Oxley Act of 2002, and possesses financial sophistication, as defined under Nasdaq rules. Under the rules of the SEC and Nasdaq, members of our Audit Committee must also meet heightened independence standards. Our Board has determined that each of Frank Holler (chair), Steven Gannon and Michael Tarnow meet these heightened independence standards, as well as the independence standards of Canadian securities laws. See the biographies for each member of our Audit Committee under the section of this Circular captioned “Item 2 – Election of Directors” for more information regarding their respective skills and experience with respect to financial statements, accounting principles and financial reporting.

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Our Audit Committee operates under a written charter that satisfies the applicable standards of the SEC and Nasdaq and applicable Canadian securities laws. The Audit Committ ee’s current charter is attached hereto as Schedule B and is available under the “Investors” tab on Xenon’s website at http s ://www.xenon-pharma.com . The Corporation will disclose any amendments to, or waivers of, the charter on its website at http s ://www.x enon-pharma.com in accordance with applicable law and the requirements of the Nasdaq corporate governance standards.

Nominating and Corporate Governance Committee

Our Nominating and Corporate Governance Committee oversees and assists our Board in reviewing and recommending nominees for election as directors. Among other matters, our Nominating and Corporate Governance Committee:

 

evaluates and makes recommendations regarding the organization and governance of our Board and its committees;

 

assesses the performance of members of our Board and makes recommendations regarding committee and chair assignments;

 

recommends desired qualifications for Board membership and conducts searches for potential members of the Board; and

 

reviews and makes recommendations with regard to our Corporate Governance Guidelines.

The current members of our Nominating and Corporate Governance Committee are Gary Patou, Michael Tarnow and Dawn Svoronos. Dr. Patou serves as the Chair of our Nominating and Corporate Governance Committee. Each member of our Nominating and Corporate Governance Committee is an independent director under the applicable rules and regulations of the SEC and Nasdaq and applicable Canadian securities laws.

Our Nominating and Corporate Governance Committee operates under a written charter that satisfies the applicable standards of the SEC and Nasdaq and applicable Canadian securities laws. Our Nominating and Corporate Governance Committee’s current charter is available under the “Investors” tab on Xenon’s website at https://www.xenon-pharma.com. The Corporation will disclose any amendments to, or waivers of, the charter on its website at https://www.xenon-pharma.com in accordance with applicable law and the requirements of the Nasdaq corporate governance standards.

Compensation Committee

Our Compensation Committee oversees our compensation policies, plans and benefits programs. Among other matters, our Compensation Committee:

 

reviews and recommends policies relating to compensation and benefits of our directors, officers and employees;

 

reviews and approves, after consultation with the Board, corporate goals and objectives relevant to compensation of our Chief Executive Officer;

 

reviews and approves, after consultation with the Board and the Chief Executive Officer, corporate goals and objectives related to compensation of other senior officers;

 

evaluates, after consultation with the Board and Chief Executive Officer, the performance of our officers in light of established goals and objectives;

 

recommends compensation of our officers based on its evaluations; and

 

reviews, approves and administers the issuance of stock options and other awards under our equity incentive plans to our employees and after consultation with the Board to our officers and directors.

In 2019, the members of our Compensation Committee were Mohammad Azab, Gary Patou and Richard Scheller. The current members of our Compensation Committee are Mohammad Azab, Clarissa Desjardins and Gary Patou. Dr. Azab serves as the Chair of our Compensation Committee. Pursuant to its charter, the compensation committee may form subcommittees and delegate to such subcommittees any power and authority the compensation committee deems appropriate, excluding any power or authority required by law, regulation or listing standard to be exercised by the compensation committee as a whole. Each of the members of our Compensation Committee is an independent director under the applicable rules and regulations of the SEC and Nasdaq and applicable Canadian securities laws and a non-employee director within the meaning of Rule 16b-3 under the Exchange Act. See the biographies for each member of our Compensation Committee under the section of this Circular captioned “Item 2 – Election of Directors” for more information regarding their respective skills and senior management and board experience related to compensation policies and practices in our industry.

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Our Compensation Committee operates under a written charter that satisfies the applicable standards of the SEC and Nasdaq and applicab le Canadian securities laws. Our Compensation Committee’s current charter is available under the “Investors” tab on Xenon’s website at http s ://www.xenon-pharma.com. The Corporation will disclose any amendments to, or waivers of, the charter on its website at http s ://www.xenon-pharma.com in accordance with applicable law and the requirements of the Nasdaq corporate governance standards.

Our Board may from time to time establish other committees.

Compensation Committee Interlocks and Insider Participation

During the fiscal year ended December 31, 2019, Drs. Azab, Patou and Scheller served as members of our Compensation Committee. As of January 13, 2020, Dr. Desjardins was appointed as a member of the Compensation Committee to replace Dr. Scheller. Dr. Scheller resigned from the Board effective January 14, 2020. No such person is currently, or has been at any time, one of our officers or employees. None of our executive officers currently serve, or have served during the last completed three fiscal years, as a member of the board of directors or compensation committee of any other entity that has or had one or more executive officers serving as a member of our Board or Compensation Committee.

Director Nominations

Our Nominating and Corporate Governance Committee identifies, selects and recommends to the Board individuals qualified to serve both on the Board and on Board committees, including persons suggested by shareholders and others. Please see “Item 2 – Election of Directors — Shareholder Recommendations for Nominations to the Board of Directors” below for additional information.

In identifying candidates for nominations to the Board, our Nominating and Corporate Governance Committee seeks to maintain at all times a Board with a diverse range of experience, talent, expertise and background appropriate for the business of the Corporation. Our Nominating and Corporate Governance Committee does not require any specific minimum qualifications or specific qualities or skills, but reviews each person’s qualifications on the whole, including a candidate’s particular experience, skills, expertise, diversity, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, conflicts of interest and such other relevant factors that our Nominating and Corporate Governance Committee considers appropriate in the context of the needs of the Board. Following that review, our Nominating and Corporate Governance Committee then selects nominees and recommends them to the Board for election by the shareholders or appointment by the Board, as the case may be. Our Nominating and Corporate Governance Committee also reviews the suitability of each Board member for continued service as a director when that member’s term expires or that member experiences a significant change in status (for example, a change in employment). Our Nominating and Corporate Governance Committee has not implemented any particular additional policies or procedures to address suggestions received from shareholders with respect to Board or committee nominees because the Committee intends to use the same criteria and manner of review to evaluate candidates (as outlined above), whether or not they are suggested by shareholders.

Pursuant to its charter, our Nominating and Corporate Governance Committee may conduct or authorize investigations or studies into matters within its scope of responsibilities and may retain, at the Corporation’s expense, such independent counsel or other consultants or advisers as it may deem necessary from time to time.

The term of each director expires at the end of each annual meeting of shareholders, or when the successor of such director is elected or appointed to the Board, subject to earlier death, resignation, retirement, disqualification or removal of such director. The Corporation does not impose term limits on its directors as it takes the view that term limits are an arbitrary mechanism for removing directors which can result in valuable, experienced directors being forced to leave the Board solely because of length of service. Instead, the Corporation believes that directors should be assessed based on their ability to continue to make a meaningful contribution. Our Board’s annual assessment of directors reviews the strengths and weaknesses of directors and is, in the Board’s view, together with annual elections by the shareholders, a more meaningful way to evaluate the performance of directors and to make determinations about whether a director should be removed due to under-performance.

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Diversity

Our Nominating and Corporate Governance Committee believes that having a diverse Board and senior management team offers a depth of perspective and enhances Board and management operations. Our Nominating and Corporate Governance Committee takes gender into consideration as part of its overall recruitment and selection process in respect of its Board and senior management. However, the Corporation does not have a formal policy on the representation of women on the Board or senior management of the Corporation as our Board does not believe that a formal policy will necessarily result in the identification or selection of the best candidates. In searches for new directors and senior management, our Nominating and Corporate Governance Committee will consider the level of female representation and diversity on the Board and in management and this will be one of several factors used in its search process.

The Corporation has not yet set measurable objectives for achieving gender diversity. Our Board does not support fixed percentages for any selection criteria, as the composition of the Board is based on the numerous factors established by the selection criteria and it is ultimately the skills, experience, character and behavioral qualities that are most important in determining the value which an individual could bring to the Board. There is currently no female executive officer of the Corporation and two (2) of nine (9) directors on our Board are female.

Shareholder Recommendations for Nominations to the Board of Directors

One or more shareholders holding in the aggregate not less than five percent (5%) of our Common Shares or our Preferred Shares that are entitled to vote at a meeting of our shareholders may make a shareholder proposal for the nomination of a director in accordance with the requirements of the Canada Business Corporations Act (the “ CBCA ”). Upon receipt of a proposal in compliance with the requirements of the CBCA, the Corporation must set out such proposal in the proxy statement and management information circular sent to shareholders in advance of the Corporation’s next annual meeting.

Nominations for directors not made in accordance with the shareholder proposal requirements of the CBCA shall be considered by our Nominating and Corporate Governance Committee in accordance with the requirements of our by-laws. Under our by-laws, shareholders of record may nominate a candidate for election as a director at an annual meeting of the Corporation by submitting a notice to our Corporate Secretary not less than 30 days and not more than 65 days prior to an annual meeting; provided however that in the event that the annual meeting is held less than 50 days after the first public announcement of the annual meeting is made, notice by shareholders must be given to the Corporation not later than 10 days following the date of such public announcement. A notice providing a nomination must include, among other things, certain prescribed information about the nominee and the recommending shareholder; a certification by the recommending shareholder that the recommending shareholder’s notice does not contain an untrue statement and does not omit to state a material fact; and written consent of the nominee to serve as a director of the Corporation, if elected. Shareholders should refer to Section 5.5 of our by-laws for more details relating to the requirements for such notice.

Any nomination or shareholder proposal for the nomination of directors should be sent in writing to 200 - 3650 Gilmore Way, Burnaby, British Columbia, V5G 4W8, Canada, Attention: Corporate Secretary. Shareholder proposals for our 2021 annual meeting must be received by us on or before December 29, 2020 pursuant to Rule 14a-8 of the Exchange Act. Shareholders who do not wish to use the mechanism provided by the Exchange Act may submit proposals to be considered at the 2021 annual meeting of our shareholders under the provisions of the CBCA no later than December 10, 2020. Nominations for directors pursuant to our by-laws must be received by us no earlier than March 27, 2020 and no later than May 1, 2020 for consideration at the Meeting. Shareholders wishing to nominate a director for election should review the relevant provisions of the CBCA and our by-laws.

Shareholder Communications with the Board of Directors

Shareholders wishing to communicate with a member of our Board may do so by writing to such director, and mailing the correspondence to: Xenon Pharmaceuticals Inc., 200 - 3650 Gilmore Way, Burnaby, British Columbia, V5G 4W8, Canada, Attention: Vice President, Legal Affairs. The Vice President, Legal Affairs will forward the messages to the appropriate member of our Board.

Director Independence

Under Nasdaq rules, independent directors must comprise a majority of a listed company’s board of directors within a specified period of the completion of its initial public offering. In addition, Nasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. Under Nasdaq rules, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

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To be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other board c ommittee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries.

Our Board has undertaken a review of its composition, the composition of its committees and the independence of directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our Board has determined that none of Mohammad Azab, Clarissa Desjardins, Steven Gannon, Michael Hayden, Frank Holler, Gary Patou, Michael Tarnow or Dawn Svoronos, being eight of our nine current directors, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under Nasdaq rules and Canadian securities laws. Prior to his resignation effective January 14, 2020, Dr. Richard Scheller, who served as a member of our Board and our Compensation Committee at the time of his resignation, was also an independent director. Our Board also determined that Frank Holler (chair), Steven Gannon and Michael Tarnow, who comprise our Audit Committee, Mohammad Azab (chair), Clarissa Desjardins and Gary Patou who comprise our Compensation Committee, and Gary Patou (chair), Michael Tarnow and Dawn Svoronos who comprise our Nominating and Corporate Governance Committee, satisfy the independence standards for those committees established by applicable SEC and Nasdaq rules and Canadian securities laws.

In making this determination, our Board considered the relationships that each non-employee director has with us and all other facts and circumstances our Board deemed relevant in determining their independence, including the beneficial ownership of our Common Shares by each non-employee director.

The Chair of our Board is Michael Tarnow. Michael Tarnow is “independent” as that term is defined under Nasdaq rules and Canadian securities laws. The roles of Chief Executive Officer and Chair of our Board are currently separated in recognition of the differences between the two roles. We believe that it is in the best interests of our shareholders for the Board to make a determination regarding the separation or combination of these roles each time it elects a new Chair or appoints a Chief Executive Officer, based on the relevant facts and circumstances applicable at such time.

In accordance with the Corporate Governance Guidelines, meetings of the independent directors of the Corporation, without the presence of non-independent directors and members of management, are generally held following each regularly scheduled Board meeting and at such other times as requested by independent directors. The independent directors met four (4) times without the presence of non-independent directors and members of management during 2019. The independent directors met two (2) times without the presence of non-independent directors and members of management up to the Record Date in 2020.

Orientation and Continuing Education

The Corporation has traditionally retained experienced people as directors and hence the orientation needed is minimized. When new directors are appointed, they are acquainted with the Corporation’s operations, its charters and policies, and the expectations of directors. All new and continuing directors are encouraged to review the Board materials prepared by the Corporation consisting of filings, the charters of the Board’s committees, the Corporate Governance Guidelines and the Corporation’s Code of Conduct. Board meetings regularly include presentations or discussions with respect to the Corporation’s corporate governance policies. Board meetings generally also include presentations by the Corporation’s senior management in order to give the directors full insight into the Corporation’s operations.

Assessments

Our Nominating and Corporate Governance Committee assesses the participation, contributions and effectiveness of the Chair and the individual members of the Board on an annual basis. Our Board also annually monitors the effectiveness of the Board and its committees and the actions of the Board as viewed by the individual directors and senior management.

Page 22


Serving on other Boards

The following directors are also directors of the following public companies:

Director

 

Company

Clarissa Desjardins

 

•    BELLUS Health Inc.

•    Insmed, Inc.

Michael Hayden

 

•    Aurinia Pharmaceuticals Inc.

•    Ionis Pharmaceuticals, Inc.

•    89bio Inc.

Frank Holler

 

•    Harvest One Cannabis Inc.

•    Sernova Corp.

Dawn Svoronos

 

•    Good Blood Therapeutics, Inc.  

•    PTC Therapeutics, Inc.

•    Theratechnologies Inc.

Michael Tarnow, Mohammad Azab, Steven Gannon, Gary Patou and Simon Pimstone do not currently serve on the board of directors of any other publicly listed company.

Overseeing the Chief Executive Officer

Dr. Simon Pimstone, our Chief Executive Officer, is responsible for managing the affairs of the Corporation. In accordance with its charter, our Compensation Committee, in consultation with the Board, annually establishes corporate objectives for our Chief Executive Officer and evaluates the performance our Chief Executive Officer against these corporate objectives. Our Board has not developed a written position description of the Chief Executive Officer role.

Director Compensation Policy

For the purposes of the director compensation policy (the “ director compensation policy ”), our Compensation Committee classifies each director into one of the two following categories: (1) a “management director” is a director who is also an officer or otherwise employed by us in a management role; and (2) a “non-management director” is a director who is not an officer and not otherwise employed by us in a management role.

Non-management directors (including the chair of our Board) are eligible to receive compensation in the form of equity and cash under the director compensation policy, as described below. Management directors receive no compensation for their services on our Board.

Effective June 2018, our director compensation policy was amended to change the equity compensation component of director compensation (the “ 2018 amended director compensation policy ”). Our Compensation Committee considered publicly available director compensation data from companies in the biotechnology industry to help guide its decision with respect to director compensation, using the same peer companies as those identified by Radford, an Aon Hewitt company (“ Radford ”), an independent compensation consultant, in evaluating executive compensation.

In January 2020, Radford was engaged by the Compensation Committee to evaluate both director and executive compensation. Radford conducted a thorough review of our director compensation policies and practices and an extensive market analysis of the peer companies listed in the section of this Circular captioned “Use of Compensation Consultants and Market Benchmarking”. Based on its review of competitive market practices and the recommendation from Radford, the Compensation Committee, after consultation with the Board, approved changes to the cash and equity components of director compensation to be effective June 1, 2020 (the “ 2020 amended director compensation policy ”) so that our director compensation program remains competitive with peer companies.

Equity Compensation

Pursuant to the 2018 amended director compensation policy, new non-management directors received an option to purchase 25,000 Common Shares upon joining the Board and each non-management director received, on an annual basis, an option to purchase 15,000 Common Shares.

The exercise price per share of each of the above grants was the fair market value of one of our Common Shares (determined pursuant to our then-effective equity plan) on the date of the grant.

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All of the stock options granted to non-management directors were under our then-effective equity plan. The stock options underlying the above initial and annual grants to each non-m anagement director vest as to one-third of the total stock options on the one year anniversary of the grant date, one-third of the total stock options on the two year anniversary of the grant date and the balance of the total stock options on the three yea r anniversary of the grant date.

The vesting of each grant described above will be subject to the recipient’s continued service as a director through each vesting date and the other terms and conditions of our then-effective equity plan and the applicable stock option agreement with that director.

Pursuant to the 2020 amended director compensation policy, effective June 1, 2020, new non-management directors will receive an option to purchase 20,000 Common Shares upon joining the Board and each non-management director will be eligible to receive, on an annual basis, an option to purchase 10,000 Common Shares, which will be granted in connection with the Meeting. All of the stock options granted pursuant to the 2020 amended director compensation policy will be under our then-effective equity plan and vest in accordance with the schedule set forth above with respect to the 2018 amended director compensation policy.

Cash Compensation

Pursuant to the 2018 amended director compensation policy, for each fiscal year, each non-management director (including the chair of our Board) received an annual cash retainer of CAD$47,000 for serving on the Board. In addition to the annual retainer, the chair of our Board received an additional annual cash retainer of CAD$34,000, for a total of CAD$81,000.

Pursuant to the 2018 amended director compensation policy, the chairs and non-chair members of the three standing committees of our Board will be entitled to the following cash retainers for each fiscal year as follows:

 

 

CHAIR RETAINER

 

 

MEMBER RETAINER

 

BOARD COMMITTEE

 

(CAD$)

 

 

(CAD$)

 

Audit Committee

 

$

20,500

 

 

$

10,500

 

Compensation Committee

 

 

13,500

 

 

 

7,000

 

Nominating and Corporate Governance Committee

 

 

10,000

 

 

 

5,500

 

Pursuant to the 2020 amended director compensation policy, effective June 1, 2020, for each fiscal year, each non-management director (including the chair of our Board) will receive an annual cash retainer of CAD$53,000 for serving on the Board. The chair of our Board will receive an additional annual cash retainer of CAD$40,500, for a total of CAD$93,500.

Pursuant to the 2020 amended director compensation policy, effective June 1, 2020, the chairs and non-chair members of the three standing committees of our Board will be entitled to the following cash retainers for each fiscal year as follows:

 

 

CHAIR RETAINER

 

 

MEMBER RETAINER

 

BOARD COMMITTEE

 

(CAD$)

 

 

(CAD$)

 

Audit Committee

 

$

20,500

 

 

$

10,500

 

Compensation Committee

 

 

16,250

 

 

 

8,250

 

Nominating and Corporate Governance Committee

 

 

10,750

 

 

 

5,500

 

All cash payments are paid in four equal installments on the date of our annual meeting and on the last day of the third month, sixth month and ninth month thereafter, during which such individual served as a director or chair of our Board or of the applicable committee (such payments to be prorated for service during a portion of such quarter).

All directors are reimbursed for standard travel expenses incurred in their capacities as directors and/or committee members.

The following table sets forth information concerning the compensation paid or accrued for services rendered to us by members of our Board for the year ended December 31, 2019. Dr. Simon Pimstone, our Chief Executive Officer, did not receive any additional compensation for service on our Board. Compensation paid or accrued for services rendered to us by Dr. Pimstone in his role as Chief Executive Officer is included in our disclosures related to executive compensation under the section of this Circular captioned “Executive Compensation”.

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Name

 

Fees Earned or Paid in Cash (1)

($)

 

 

Option Awards (2)(3)

($)

 

 

Total

($)

 

Mohammad Azab

 

$

45,599

 

 

$

96,506

 

 

$

142,105

 

Steven R. Gannon

 

 

43,338

 

 

 

96,506

 

 

 

139,844

 

Michael R. Hayden

 

 

35,424

 

 

 

96,506

 

 

 

131,930

 

Frank A. Holler

 

 

50,875

 

 

 

96,506

 

 

 

147,381

 

Gary Patou

 

 

48,237

 

 

 

96,506

 

 

 

144,743

 

Richard H. Scheller (4)

 

 

40,700

 

 

 

96,506

 

 

 

137,206

 

Dawn A. Svoronos

 

 

39,569

 

 

 

96,506

 

 

 

136,075

 

Michael M. Tarnow (5)

 

 

73,109

 

 

 

96,506

 

 

 

169,615

 

 

(1)

Compensation amounts denominated in Canadian dollars have been converted to U.S. dollars. For 2019, the U.S. dollar per Canadian dollar exchange rate used for such conversion was 0.7537 which was the average Bank of Canada foreign exchange rate for the 2019 fiscal year.

(2)

Represents the aggregate grant date fair value of stock option awards granted in 2019. These amounts have been computed in accordance with Financial Accounting Standards Board (“ FASB ”) Accounting Standards Codification (“ ASC ”) Topic 718, using the Black-Scholes option pricing model. For a discussion of valuation assumptions, see Note 11 to our financial statements which are included in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC and on SEDAR. For further information regarding the equity compensation of our directors, please see the section of this Circular captioned “Director Compensation Policy”.

(3)

As of December 31, 2019, the following directors beneficially held outstanding stock options to purchase the number of Common Shares indicated: Dr. Azab (58,808 stock options); Mr. Gannon (42,144 stock options); Dr. Hayden (95,640 stock options, of which 54,488 stock options are held by Dr. Hayden and 41,152 stock options are held by Genworks, Dr. Hayden’s consulting company); Mr. Holler (107,367 stock options); Dr. Patou (60,659 stock options); Dr. Scheller (45,230 stock options); Ms. Svoronos (38,644 stock options) and Mr. Tarnow (94,432 stock options).

(4)

Dr. Scheller resigned from the Board, effective January 14, 2020.

(5)

Chair of our Board.

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ITEM 3 – ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS ("SAY-ON-PAY")

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “ Dodd-Frank Act ”) enables our shareholders to approve, on an advisory or non-binding basis, the compensation of our named executive officers (“ NEOs ”) as disclosed pursuant to Item 402 of Regulation S-K. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on our NEOs’ compensation as a whole. This vote is not intended to address any specific item of compensation or any specific NEO, but rather the overall compensation of all of our NEOs and the philosophy, policies and practices described in this Circular.

The say-on-pay vote is advisory, and therefore is not binding on us, the Compensation Committee or the Board. The say-on-pay vote will, however, provide information to us regarding investor sentiment about our executive compensation philosophy, policies, and practices, which the Compensation Committee will be able to consider when determining executive compensation for the remainder of the current fiscal year and beyond. The Board and the Compensation Committee value the opinions of our shareholders. To the extent there is any significant vote against the compensation of our NEOs as disclosed in this Circular, we will endeavor to communicate with shareholders to better understand the concerns that influenced the vote and consider our shareholders’ concerns, and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.

We believe that the information provided in the section titled “Executive Compensation” demonstrates that our executive compensation program was designed appropriately and is working to ensure management’s interests are aligned with our shareholders’ interests to support long-term value creation. Accordingly, we ask our shareholders to vote “FOR” the following resolution at the Meeting:

"RESOLVED, that the shareholders approve, on an advisory basis, the compensation paid to our named executive officers, as disclosed in the Circular for the 2020 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the SEC, including the compensation tables and narrative discussion and other related disclosure."

Vote Required

The approval, on an advisory basis, of the compensation of our NEOs requires the affirmative vote of a majority of votes cast at the Meeting and entitled to vote thereon to be approved. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the outcome of the voting of this proposal.

As an advisory vote, the result of this proposal is non-binding. Although the vote is non-binding, the Board and the Compensation Committee value the opinions of our shareholders and will consider the outcome of the vote when making future compensation decisions for our NEOs.

YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS:

A VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

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ITEM 4 – ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTES ON EXECUTIVE OFFICER COMPENSATION

The Dodd-Frank Act and Section 14A of the Exchange Act enable our shareholders to indicate their preference at least once every six years regarding how frequently we should solicit a non-binding advisory vote on the compensation of our NEOs as disclosed in our proxy statement. Accordingly, we are asking our shareholders to indicate wheth er they would prefer an advisory vote every one year, two years or three years. Alternatively, shareholders may abstain from casting a vote.

After considering the benefits and consequences of each alternative, the Board recommends that the advisory vote on the compensation of our NEOs be submitted to the shareholders every year. In formulating its recommendation, the Board considered that compensation decisions are made annually and that an annual advisory vote on the compensation of our NEOs will allow shareholders to provide more frequent and direct input on our compensation philosophy, policies and practices.

Vote Required

The alternative among one year, two years or three years that receives the highest number of votes cast at the Meeting by shareholders entitled to vote thereon will be deemed to be the frequency preferred by our shareholders. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the outcome of this proposal.

While the Board believes that its recommendation is appropriate at this time, the shareholders are not voting to approve or disapprove that recommendation, but are instead asked to indicate their preference, on an advisory basis, as to whether non-binding future shareholder advisory votes on the compensation of our NEOs should be held every year, two years or three years.

As an advisory vote, the result of this proposal is non-binding. Although the vote is non-binding, the Board and the Compensation Committee value the opinions of our shareholders in this matter and, to the extent there is any significant vote in favor of one time period over another, will consider the outcome of this vote when making future decisions regarding the frequency of holding future shareholder advisory votes on the compensation of our NEOs.

YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS:

A VOTE TO HOLD FUTURE SHAREHOLDER ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS EVERY “ONE YEAR”

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Executive Officers

The following table sets forth information about our executive officers as of the Record Date:

Name

 

Age

 

Position(s)

Simon N. Pimstone, MBChB, Ph.D.

 

52

 

Chief Executive Officer and Director

Ian C. Mortimer, M.B.A., CPA, CMA

 

44

 

President and Chief Financial Officer, Corporate Secretary

Ernesto Aycardi, M.D.

 

57

 

Chief Medical Officer

Robin P. Sherrington, Ph.D.

 

59

 

Executive Vice President, Strategy & Innovation

James R. Empfield, Ph.D.

 

59

 

Senior Vice President, Drug Discovery

The biography of Dr. Pimstone can be found under “Item 2 – Election of Directors.” The biographies of our other executive officers are as follows:

Ian C. Mortimer, M.B.A., CPA, CMA has served as our President and Chief Financial Officer since March 2018 and additionally as Corporate Secretary since June 2015. Mr. Mortimer previously served as our Chief Financial Officer and Chief Operating Officer since March 2015 and as our Chief Financial Officer since October 2013. Prior to joining us, Mr. Mortimer served as Executive Vice President and Chief Financial Officer at Tekmira Pharmaceuticals Corporation (now Arbutus Biopharma Corporation), a Nasdaq-listed biotechnology company, from 2007 until October 2013. From 2004 to 2007, Mr. Mortimer was Chief Financial Officer at Inex Pharmaceuticals and held various other positions at Inex Pharmaceuticals from 1997 to 2004. Since November 2017, Mr. Mortimer has served on the Board of Directors and as chair of the audit committee and since January 2020 has served as chair of the Board of Directors and of the audit committee for Appili Therapeutics Inc., a publicly-traded biopharmaceutical company focused on developing treatments for infectious diseases. Mr. Mortimer has an M.B.A. from Queen’s University, a B.Sc. in Microbiology from the University of British Columbia and is a Chartered Professional Accountant, Certified Management Accountant.

Ernesto Aycardi, M.D.  is employed by our wholly owned subsidiary, Xenon Pharmaceuticals USA Inc. and has served as our Chief Medical Officer since March 2018. Prior to joining us, Dr. Aycardi was at Teva Pharmaceutical from 2014 to 2018, most recently as Vice-President and Head of Clinical Trial Operations, Biostatistics & Data Sciences and Clinical Pharmacology. Prior to this, he was Teva Pharmaceutical’s Vice-President, Therapeutic Area Head, Clinical Development, Migraine and Headache from 2016 to 2017, and previously Teva Pharmaceutical’s Senior Director, Clinical Development, Migraine & Headache from 2014 to 2016. From 2013 to 2014, Dr. Aycardi was Senior Director Head of Neuro-Degenerative Disorders for EMD Serono, Inc. Previously, he was Director, Medical Research focused on neurology development at Biogen Idec from 2009 to 2013. Dr. Aycardi held a series of roles with increasing responsibility at Merck from 1998 to 2009, both in Colombia and in the United States, where he was Worldwide Clinical Research Senior Director for various therapeutic areas throughout late phases of global drug development from 2006 to 2009. Having received his M.D. from the National University of Colombia, and neurology training at the Military Hospital in Colombia, Dr. Aycardi holds a current medical license in Colombia, and was a practicing neurologist beginning in 1993.

Robin P. Sherrington, Ph.D. has served as our Executive Vice President, Strategy & Innovation since March 2019. Dr. Sherrington previously served as our Executive Vice President, Business & Corporate Development since March 2018, as our Senior Vice President, Business & Corporate Development since February 2012, as our Vice President, Business & Corporate Development from January 2010 to February 2012, and has held various positions in business development and other departments since joining us in March 2001. Prior to joining us, Dr. Sherrington worked at Pfizer, Inc., a global pharmaceutical company, as a neuroscientist from 1999 to 2001. Dr. Sherrington also previously served as Director of Neuroscience, from 1996 to 1999, at the biotechnology companies Axys Pharmaceuticals and Sequana Therapeutics. Prior to 1996 Dr. Sherrington was a post-doctoral fellow at University of Toronto and received his Ph.D. from the University College London, and his B.Sc. with honors from University of Reading.

James R. Empfield, Ph.D. is employed by our wholly owned subsidiary, Xenon Pharmaceuticals USA Inc. and has served as our Senior Vice President, Drug Discovery since February 2016. Prior to joining us, Dr. Empfield served as Vice President, Drug Discovery and Chemistry; Co-Site Head of Research, Boston at Vertex Pharmaceuticals Inc. from 2011 until August 2015, where he was jointly responsible for the entire Boston research organization and for delivery of lead optimization projects into preclinical development. From 2006 to 2011, Dr. Empfield was Director, CNS Chemistry Department at Astrazeneca Pharmaceuticals LP and held various other positions at Astrazeneca Pharmaceuticals from 1990 to 2006. Dr. Empfield has a Ph.D. in Chemistry from the University of Pennsylvania, a M.S. in Chemistry from Bucknell University and a B.Sc. in Chemistry from Lebanon Valley College.

Our executive officers are appointed by, and serve at the discretion of, our Board. There are no family relationships among any of our directors or executive officers.

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EXECUTIVE COMPENSATION

Discussion of Executive Compensation Practices

This section discusses the principles underlying our policies and decisions with respect to the compensation of our NEOs and the most important factors relevant to an analysis of these policies and decisions. This section also describes the material elements of compensation awarded to, earned by or paid to our NEOs for 2019, consisting of the following persons:

 

Simon N. Pimstone, our Chief Executive Officer;

 

Ian C. Mortimer, our President and Chief Financial Officer, Corporate Secretary; and

 

Ernesto Aycardi, our Chief Medical Officer.

Dr. Pimstone, Mr. Mortimer and Dr. Aycardi are included in this Circular as NEOs for 2019 for purposes of Item 402(m) of Regulation S-K promulgated by the SEC and National Instrument 51-102 – Continuous Disclosure Requirements . In addition, this section provides qualitative information regarding the manner and context in which compensation is awarded to and earned by our NEOs and is intended to place in perspective the data presented in the tables and narrative that follow.

Executive Summary

2019 Business Highlights

During 2019, we achieved several important milestones in our business and financial plans, including the following:

 

We initiated a randomized, double-blind, placebo-controlled, multicenter Phase 2b clinical trial (called the X-TOLE study) to evaluate the clinical efficacy, safety and tolerability of XEN1101 administered as adjunctive treatment in approximately 300 adult patients with focal epilepsy. The X-TOLE study is ongoing in multiple jurisdictions, including the United States, Canada, and Europe;

 

We made significant progress advancing XEN496 towards Phase 3 development in 2019 with a focus on developing a novel pediatric-specific formulation, which was tested in vitro and in vivo with data presented at the American Epilepsy Society meeting in December 2019. In December 2019, we submitted an Investigational New Drug (“ IND ”) application with the FDA related to a pharmacokinetic study testing XEN496 in healthy adult volunteers, which is now complete with data supporting the further advancement of XEN496;

 

A physician-led, Phase 2 proof-of-concept study was initiated to study the potential clinical efficacy, safety, and tolerability of XEN007 as an adjunctive treatment in patients diagnosed with treatment-resistant childhood absence epilepsy, which could represent a potential orphan indication for future development of XEN007;

 

We entered into a Collaboration and License Agreement with Neurocrine Biosciences, Inc. (“ Neurocrine Biosciences ”) that included a $30 million upfront payment and $20 million equity investment by Neurocrine Biosciences, with up to $1.7 billion in potential development, regulatory and commercial milestone payments as well as royalties on commercial sales. The agreement also included a multi-year research collaboration to discover, identify and develop additional novel Nav1.6 and Nav1.2/1.6 inhibitors;

 

We achieved a number of pre-clinical research goals, including the identification of novel Nav1.6 and Nav1.2/1.6 inhibitors as well as generating data suggesting that using a precision medicine approach with a highly selective small molecule potentiator of Nav1.1 could potentially address the underlying cause of Dravet Syndrome and may have utility in other neurologic indications where interneuron excitability is impaired;

 

We sold to Flexion Therapeutics, Inc. the global rights to develop and commercialize FX301, which consists of XEN402 formulated for extended release from a thermosensitive hydrogel;

 

We initiated an at-the-market equity (“ ATM ”) offering, raising approximately $10 million prior to year-end, which preceded the additional raise of approximately $102.8 million, net of underwriting discounts and commissions but before offering expenses, from sales under the ATM and an underwritten public offering in early 2020; and

 

We outperformed the Nasdaq Biotechnology Index.

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2019 Executive Compensation Highlights

During 2019, we continued to follow the executive compensation policies and procedures that we put in place in connection with becoming a public company, including:

 

Emphasis on Pay for Performance . Our Compensation Committee is focused on ensuring that a significant portion of total compensation for our NEOs is performance-based (consisting of performance-based cash bonus opportunities and time-based stock options). For 2019, all of our NEOs’ variable non-equity compensation (cash bonus opportunity) was solely based on the achievement of corporate objectives and ranged from 40% to 60% of their base salaries. Other forms of compensation (base salary and equity compensation) were based on individual performance, among a number of other factors.

 

No Guaranteed Increases in Compensation . Although we have signed employment agreements with each of our NEOs, and Dr. Aycardi’s agreement provides for “at will” employment, none of these agreements provides any guarantees relating to salary increases or the amounts of incentive pay or equity awards.

 

Independent Compensation Consultant . Our Compensation Committee engages its own independent compensation consultant, which provides the Compensation Committee with valuable data regarding market compensation trends and guidance about executive compensation.

 

Limited Perquisites . We do not provide any special perquisites to any of our NEOs, except where it serves a legitimate business purpose.

 

Risk Analysis . We believe the structure of our executive compensation program motivates our executives to make thoughtful and appropriate decisions with measured risks balanced by appropriate rewards for the Corporation.

 

No Hedging or Pledging . Our Insider Trading Policy prohibits our executives from engaging in “hedging” or “pledging” transactions with respect to our Common Shares.

Objectives and Philosophy of Our Executive Compensation Program

The primary objectives of our Compensation Committee with respect to executive compensation are to:

 

attract, retain and motivate experienced and talented executives;

 

ensure executive compensation is aligned with our corporate strategies, research and development programs and business goals;

 

recognize the individual contributions of executives, but foster a shared commitment among executives by aligning their individual goals with our corporate goals;

 

promote the achievement of key strategic and operational performance measures by linking compensation to the achievement of measurable corporate and individual performance goals; and

 

align the interests of our executives with our shareholders by rewarding performance that leads to the creation of shareholder value.

To achieve these objectives, our Compensation Committee evaluates our executive compensation program with the goal of setting compensation at levels that are justifiable based on each executive’s level of experience, performance and responsibility and that our Compensation Committee believes are competitive with those of other companies in our industry and our region that compete with us for executive talent. In addition, our executive compensation program ties a portion of each executive’s overall compensation to the achievement of key corporate goals. We provide a portion of our executive compensation in the form of stock options that vest over time, which we believe helps to retain our executives and aligns their interests with those of our shareholders by allowing them to participate in our long-term success as reflected in the appreciation of the price of our Common Shares.

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Compensation Committee Process and Role of C hief Executive Officer

Our Compensation Committee oversees our policies governing the compensation of our executive officers. In this role, our Compensation Committee reviews and, following consultation with the remaining non-management directors, approves all compensation decisions relating to our executive officers. Our Compensation Committee consists of three members of our Board, all of whom have extensive experience in our industry and each of whom is an independent director. Our Compensation Committee uses its judgment and experience and considers the recommendations of our Chief Executive Officer when determining the amount and appropriate mix of compensation for each of our executive officers. Specifically, our Chief Executive Officer provides input and recommendations, via an annual review of executive performance and otherwise, regarding salary adjustments, the goals used to determine annual performance-based cash bonuses and appropriate equity incentive compensation levels. Our Chief Executive Officer provides input to the Compensation Committee on his own compensation, but has not had any control over setting the amount or mix of his compensation and is not present when the Compensation Committee discusses and determines his compensation. No other NEO participates in portions of any meetings during which decisions are made regarding their own compensation. See the section of this Circular captioned “Information about the Board and Corporate Governance — Committees of the Board — Compensation Committee” for additional information as to the composition and skills of our Compensation Committee.

At the beginning of each year, the Compensation Committee meets and approves strategic, operational and financial objectives for the Corporation (“ corporate goals ”) for the upcoming year. The corporate goals are developed by our Chief Executive Officer, the NEOs and other members of senior management and our Chief Executive Officer presents them to the Compensation Committee for its approval after consultation with the Board. The Chief Executive Officer also develops annual individual goals for each NEO. Although no rating is specifically attached to those individual goals for the non-equity bonuses, they are factored into the final assessment for each NEO’s performance for that year and taken into consideration in determining base salary increases and equity incentive compensation.

Our Compensation Committee periodically evaluates the need for revisions to our executive compensation program to ensure our program is competitive with the companies with which we compete for executive talent.

Use of Compensation Consultants and Market Benchmarking

In designing our executive compensation program, our Compensation Committee considers publicly available compensation data for companies in the biotechnology industry to help guide its executive compensation decisions at the time of hiring and for subsequent adjustments in compensation. Our Compensation Committee has also retained the services of Radford to provide it with additional comparative data on executive compensation practices in our industry and to advise it on our executive compensation program generally. Although our Compensation Committee considers Radford’s advice and recommendations about our executive compensation program, our Compensation Committee ultimately makes its own decisions about these matters. None of our Compensation Committee members and none of our executive officers or directors have any relationship with Radford or the individual consultants employed by Radford. Radford has not provided any other services to the Corporation other than compensation consulting services to the Compensation Committee for executive compensation analysis and to management for non-executive compensation analysis. Our Compensation Committee has determined that no conflicts of interest exist between the Corporation and Radford.

Radford was retained by the Corporation in 2013, 2015, 2017 and 2019, and was most recently retained in January 2020 to provide our Compensation Committee with comparative data showing where our total compensation and each element of our compensation ranked among (1) public companies in the biotechnology industry generally, according to compensation data from Radford, and (2) a peer group of publicly traded companies in the biotechnology industry at a stage of development, market capitalization or company size comparable to ours at the time with which our Compensation Committee believed we competed for executive talent, according to publicly available compensation data.

The peer group is used for purposes of gathering data to compare against our existing executive compensation practices and for guiding future compensation decisions. Radford also makes suggestions for changes to our executive compensation practices based on the data they provide to us as well as compensation trends in our industry. However, although our Compensation Committee may consider peer group and other industry compensation data and the recommendations of Radford when making decisions related to executive compensation, to date, it has not made and does not intend to make adjustments to overall executive compensation or any element thereof solely or primarily either to target a specified threshold level of compensation or market benchmark within the peer group, our larger industry or some other group of comparable companies or to act solely on the recommendations of Radford.

For the 2017 annual compensation review, the companies included in the peer group in the Radford 2017 analysis were Adamas Pharmaceuticals, Aquinox Pharmaceuticals, Arbutus Biopharma, Asterias Biotherapeutics, Calithera Biosciences, Cidara Therapeutics, Concert Pharmaceuticals, Endocyte, Epizyme, Fate Therapeutics, Flex Pharma, Flexion Therapeutics, GlycoMimetics, Ignyta, Novan, Revance Therapeutics, Sierra Oncology, Stemline Therapeutics, Trevena and Zogenix.

Page 31


In January 2018, the Compensation Committee confirmed that the peer group identified by Radford in January 2017 remained the same for 2018, reviewed the pu blic disclosures made throughout 2017 by those companies and other relevant data, and performed an internal update of the data used in 2017 for the 2018 annual compensation review.

For the 2019 annual compensation review, the companies included in the peer group in the Radford 2019 analysis were Adamas Pharmaceuticals, Aquinox Pharmaceuticals, Arbutus Biopharma, Calithera Biosciences, ChemoCentryx, Cidara Therapeutics, Concert Pharmaceuticals, Correvio Pharma, Epizyme, GlycoMimetics, Kura Oncology, Marinus Pharmaceuticals, Ovid Therapeutics, Prothena, Revance Therapeutics, Sierra Oncology, Stemline Therapeutics, Voyager Therapeutics, Zynerba Pharmaceuticals and Zymeworks.

For the 2020 annual compensation review, the companies included in the peer group in the Radford 2020 analysis were Abeona Therapeutics, Adamas Pharmaceuticals, Calithera Biosciences, ChemoCentryx, Concert Pharmaceuticals, Constellation Pharmaceuticals, Correvio Pharma, GlycoMimetics, Homology Medicines, Kura Oncology, Marinus Pharmaceuticals, Ovid Therapeutics, Pieris Pharmaceuticals, Prothena, Replimune, Revance Therapeutics, Scholar Rock Holding, Syros Pharmaceuticals, Voyager Therapeutics and Zynerba Pharmaceuticals.

The following table sets forth the fees paid to Radford in 2019 and 2018:

 

 

Twelve months ended December 31, 2019

 

 

Twelve months ended December 31, 2018

 

Executive and Director Compensation - Related Fees

 

$

34,650

 

 

$

 

All Other Fees (1)

 

 

8,900

 

 

 

4,600

 

 

(1)

These fees were for an update to compensation information for non-executive employees.

Annual Compensation Review Process

After the end of each calendar year, we evaluate each executive officer’s performance for the completed year. Our Chief Executive Officer, with respect to each executive other than himself, prepares a written evaluation based on his evaluation of the executives and input from others within the Corporation. Our Chief Executive Officer also prepares his own self-assessment. This process leads to a recommendation by our Chief Executive Officer to our Compensation Committee with respect to each executive officer, including himself, as to:

 

the achievement of stated corporate and individual performance goals;

 

the level of contributions made to the general management and guidance of the Corporation;

 

the need for salary increases and the amount of salary increases;

 

the amount of bonuses to be paid; and

 

whether or not stock option awards should be made and a recommended number of stock options to be granted.

These recommendations are reviewed by our Compensation Committee and are taken into account along with input from the Board when it makes a final determination on all such matters.

Components of Our Executive Compensation Program

The primary elements of our executive compensation program are:

 

base salary;

 

annual performance-based cash bonuses;

 

equity incentive awards;

 

broad-based health benefits; and

 

severance and change of control benefits.

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We do not have a formal or informal policy for allocating between long-term and short-term compensation, between cash and non-cash compensation or among different forms of non-cash compensation. Instead, our Compensation Committee, after reviewing informat ion provided by Radford and other relevant data, determines what it believes to be the appropriate level and mix of the various compensation components. We generally strive to provide our executive officers with a balance of short-term and long-term incent ives to encourage consistently strong performance. Ultimately, the objective in allocating between long-term and currently paid compensation is to ensure adequate base compensation to attract and retain personnel, while providing incentives to maximize lon g-term value for the Corporation and our shareholders. Therefore, we provide cash compensation in the form of base salary to meet competitive salary norms and reward good performance on an annual basis and in the form of non-equity bonus compensation to in cent and reward superior performance based on specific annual goals.

To further focus our executives on longer-term performance and the creation of shareholder value, we rely upon equity-based awards that vest over a meaningful period of time. In addition, we provide our executive officers with benefits that are generally available to our salaried employees and severance benefits to incentivize them to continue to strive to achieve shareholder value in connection with change of control situations.

Base salary

We use base salaries to compensate for services rendered on a day-to-day basis and to recognize the experience, skills, knowledge and responsibilities of our employees, including our executive officers. Base salaries for our executive officers are typically established through arm’s length negotiation at the time the executive is hired, taking into account the position for which the executive is being considered and the executive’s qualifications, prior experience and prior salary. None of our executive officers is currently party to an employment agreement that provides for automatic or scheduled increases in base salary.

On an annual basis, our Compensation Committee reviews and evaluates, with input from our Chief Executive Officer, the need for adjustment of the base salaries of our executives based on changes and expected changes in the scope of an executive’s responsibilities, including promotions, the individual contributions made by and performance of the executive during the prior fiscal year, the executive’s performance over a period of years, overall labor market conditions, the relative ease or difficulty of replacing the executive with a well-qualified person, our overall growth and development as a company and general salary trends in our industry and among our peer group and where the executive’s salary falls in the salary range presented by that data. In making decisions regarding salary increases, we may also draw upon the experience of members of our Board with other companies. No formulaic base salary increases are provided to our executive officers, and we do not target the base salaries of our executive officers at a specified compensation level within our peer group or other market benchmark. All of our executive officers’ base salaries are benchmarked to the U.S. dollar, with Canadian resident executive officers paid in Canadian dollars and U.S. resident executive officers paid in U.S. dollars. The U.S. dollar amount of our Canadian resident executive officers’ semi-monthly pay is converted to Canadian dollars at the Bank of Canada exchange rate five (5) days prior to each pay date and paid to Canadian resident executive officers in Canadian dollars. The base salary of our CEO is reviewed by the Compensation Committee annually based on the same factors and input.

During its annual review of our executives’ target compensation in 2019, the Compensation Committee reviewed market compensation data provided by Radford, which indicated that each NEO’s base salary was below the median of the ba se salaries provided by the companies in our peer group to similarly situated executives. Accordingly, in March 2019 , our Compensation Committee , after taking into account this and the other factors described above, approved the following increases to our NEOs’ base salaries, effective as of January 1, 2019:

Named Executive Officer

 

 

2018 Base Salary

 

 

 

2019 Base Salary

 

 

% Increase

 

 

Simon N. Pimstone (1)

 

$

 

404,342

 

 

$

 

444,776

 

 

 

10.0

 

%

Ian C. Mortimer (1)

 

 

 

345,731

 

 

 

 

420,000

 

 

 

21.5

 

%

Ernesto Aycardi

 

 

 

400,000

 

 

 

 

420,000

 

 

 

5.0

 

%

 

(1)

The U.S. dollar amount of Dr. Pimstone and Mr. Mortimer’s semi-monthly pay is converted to Canadian dollars at the Bank of Canada exchange rate five (5) days prior to each pay date and paid to Dr. Pimstone and Mr. Mortimer in Canadian dollars.

Please refer to the section of this Circular captioned “Executive Compensation — Summary Compensation Table” for the base salary earned by each of our NEOs in 2019.

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Non-Equity Incentive Plan Compensation and Bonuses

We have designed our annual performance-based non-equity bonus program to emphasize pay-for-performance and to reward our executive officers for the achievement of specified annual corporate objectives. Each executive officer is eligible to receive an annual performance-based non-equity bonus, which we refer to as an annual cash bonus, in an amount equal to a percentage of his base salary, or bonus percentage.

The annual cash bonus is based on the achievement of corporate goals that focus on specific research, clinical, regulatory, operational and financial milestones, with a focus on the advancement of our product candidates in preclinical and clinical development, the pursuit of various internal initiatives and ensuring the adequate funding of the Corporation. The corporate goals are proposed by the Chief Executive Officer, the NEOs and other members of senior management each year in our annual operating plan that is reviewed and approved, following consultation with the Board, by our Compensation Committee, with such modifications as the Compensation Committee deems appropriate. In determining whether the corporate objectives for each year have been met, our Compensation Committee takes into consideration the percentage achievement of each specific corporate goal, including in circumstances where achievement of the particular goal was exceeded, as well as any additional objectives that were not contemplated when the corporate goals were initially determined.

Our Compensation Committee has the authority to shift corporate goals to subsequent fiscal years and eliminate them from the current year’s bonus calculation if it determines that circumstances that were beyond the control of the executives were the primary cause of a goal being unattainable. The corporate goals are designed to require significant effort and operational success on the part of our executives and the Corporation, but also to be achievable with hard work and dedication.

2019 Non-Equity Incentive Plan Payments

Our 2019 Non-Equity Incentive Plan provides our NEOs with an opportunity for an annual incentive compensation payment solely upon consideration of achievement of our corporate goals. The corporate goals comprised the entirety of each NEO’s annual incentive award opportunity because our NEOs are in the position to influence and drive overall corporate performance and shareholder value, and therefore the Compensation Committee believes it is appropriate that all of their annual incentive payments be awarded o n this basis. Each NEO’s target award is set based on a percentage of the NEO’s base salary.

The market compensation data provided by Radford in connection with the Compensation Committee’s annual review of our executives’ target compensation indicated th at Dr. Pimstone’s target award (as a percentage of base salary) was at the 25 th percentile of the target award provided by the companies in our peer group to similarly situated executives. Accordingly, in March 2019, our Compensation Committee, after taking into account this and the other factors described above, approved an increase to Dr. Pimstone’s target award. The target award (as a percentage of base salary) for each of our other NEOs remained unchanged from 2018. Our NEOs’ target awards for 2019 were as follows:

Named Executive Officer

 

 

2018 Target Award Opportunity (as a Percentage of Base Salary)

 

 

 

2019 Target Award Opportunity (as a Percentage of Base Salary)

 

Simon N. Pimstone

 

 

 

50

%

 

 

 

60

%

Ian C. Mortimer

 

 

 

45

%

 

 

 

45

%

Ernesto Aycardi

 

 

 

40

%

 

 

 

40

%

The 2019 performance goals for our NEOs are based on the achievement of the following corporate objectives: (i) to be on track for XEN1101 Phase 2b top-line data readout by the end of 2020; (ii) to initiate a XEN496 Phase 3 clinical trial; (iii) to initiate a XEN901 Phase 2 clinical trial; (iv) to initiate a XEN007 Phase 2 clinical trial; (v) to achieve three of the following four Pre-clinical Research stage goals: (A) deliver one development track candidate, (B) deli ver one lead identification project, (C) identify and validate one new target to advance to hit identification, or (D) identify a new pipeline opportunity; (vi) execute against the Corporation’s capital markets objectives; and (vii) to manage to budget.

The 2019 corporate goals can be classified into three categories: (i) Clinical, (ii) Pre-Clinical Research, and (iii) Business/Financial Operations. The Compensation Committee determined that the majority of the Clinical goals were met, and that the Pre-Clinical Research and Business/Financial Operations goals were exceeded. In addition to the stated corporate objectives, the Compensation Committee determined that a number of additional goals were achieved during the year specifically related to business development and financing transactions captured under “2019 Business Highlights” and determined an achievement of 125% for corporate objectives in 2019.

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Both qualitative and quantitative guidelines were established for purposes of evaluating performance relative to the corporate objectives during 2019. As a result, 125% of each NEO’s bonus eligibility was earned for achievement of objectives during fiscal 2019 . For 2019, the aggregate annual payments earned by our NEOs under our 2019 Non-Equity Incentive Plan were the following:

Named Executive Officer

 

 

Target Award Opportunity (1)

 

 

% Achievement

 

 

 

Actual Award Amount

 

 

Simon N. Pimstone

 

$

 

267,413

 

 

125

%

 

$

 

334,266

 

 

Ian C. Mortimer

 

 

 

189,387

 

 

125

 

 

 

 

236,734

 

 

Ernesto Aycardi

 

 

 

168,000

 

(2)

125

 

 

 

 

210,000

 

(2)

 

 

(1)

Except for Dr. Aycardi, compensation amounts were paid in Canadian dollars and have been converted to U.S. dollars for purposes of the table. The U.S. dollar per Canadian dollar exchange rate used for such conversion was 0.7537 which was the average Bank of Canada foreign exchange rate for the 2019 fiscal year.

(2)

Dr. Aycardi’s compensation amount was denominated in U.S. dollars pursuant to his employment agreements with Xenon Pharmaceuticals USA Inc. The compensation amounts in the column titled “Actual Award Amount” reflect the actual U.S. dollar amounts paid to Dr. Aycardi.

2020 Non-Equity Incentive Plan Payments

The 2020 performance goals for these officers are related to various corporate objectives, including: XEN1101 Phase 2b clinical trial top-line data readout; to complete the evaluation to advance XEN1101 in a Phase 2 proof-of-concept non-epilepsy clinical trial; to initiate a Phase 3 clinical trial for XEN496; to achieve Neurocrine Biosciences partnership milestones including regulatory progress and research collaboration support; discovery stage goal to t ransition two projects to lead optimization or lead identification stage; and execution against the Corporation’s capital markets plan and cash-runway objective. The 2020 non-equity incentive plan payment for each of Dr. Pimstone, Mr. Mortimer and Dr. Ayca rdi is based solely on the achievement of corporate goals.

Discretionary Bonuses

Our Board may, in certain circumstances, authorize the payment of discretionary bonuses to our executive officers and other employees. No discretionary bonuses were awarded in 2017, 2018 or 2019.

Equity Incentive Awards

Our equity award program is the primary vehicle for offering long-term incentives to our executives. While we do not currently have any equity ownership guidelines for our executives, we believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executives and our shareholders. Because our executive officers profit from stock options only if the price per share of our Common Shares increases relative to the stock option’s exercise price, we believe that stock options provide meaningful incentives to our executives to achieve increases in the value of our Common Shares over time. In addition, the vesting feature of our equity grants contributes to executive retention by providing an incentive to our executives to remain employed by us during the vesting period.

We use stock options to compensate our executive officers both in the form of initial grants in connection with the commencement of employment and generally on an annual basis thereafter. Our Compensation Committee may also make additional discretionary grants to reward an employee, for retention purposes or for other circumstances recommended by management. Typically, one quarter of the stock options that we grant to our executive officers vest on the one-year anniversary of grant, with the remaining three-quarters of the stock options vesting in equal monthly installments over the next three years. Vesting and exercise rights cease shortly after termination of employment, except in the case of mutual agreement, death or disability. Prior to the exercise of a stock option, the holder has no rights as a shareholder with respect to the Common Shares subject to such stock option, including voting rights or the right to receive dividends or dividend equivalents.

The exercise price of all stock options granted since the closing of our initial public offering on November 10, 2014 (the “ IPO ”) is equal to the fair market value of our Common Shares on the date of grant, which generally is determined by reference to the closing market price of our Common Shares on the date of grant. It is our intention to grant equity awards on, at minimum, an annual basis.

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In determ ining the size of the annual stock option grants to our executive officers, our Compensation Committee considers recommendations developed by Radford, including information regarding comparative stock ownership of and equity grants received by the executiv es in our peer group and our industry. In addition, our Compensation Committee considers our corporate and individual performance, the potential for enhancing the creation of value for our shareholders, the amount of equity previously awarded to the execut ives and the vesting of such awards.

In September 2019, our Compensation Committee approved the grant of stock options to our NEOs. Each of these options vests in equal installments over 36 months on the last day of each month, subject to continued service with us, and covers the following number of Common Shares:

Named Executive Officer

 

 

Shares Subject to Option

 

Simon N. Pimstone

 

 

 

280,000

 

Ian C. Mortimer

 

 

 

135,000

 

Ernesto Aycardi

 

 

 

65,000

 

Executive Employment Arrangements

On March 19, 2019, in connection with its annual review of executive compensation, the Compensation Committee reviewed an analysis of current market practice with respect to executive employment agreements, including input from Radford and advice from external legal counsel with respect to the terms included in the form of executive employment agreement previously approved in October 2014. As a result of this review, the Compensation Committee recommended that we enter into amended and restated employment agreements to (i) adjust foreign exchange currency terms for Canadian executives, including Dr. Pimstone and Mr. Mortimer, (ii) obtain a release in exchange for the severance payments and benefits in the event of a termination without cause, in connection with or not in connection with a change of control, or resignation for good reason in connection with a change of control and (iii) limit to three (3) months the period of time during which a termination without cause or a resignation for good reason can occur  prior to a change of control.

Dr. Simon N. Pimstone

We entered into an amended and restated employment agreement on March 19, 2019, with Dr. Pimstone, our Chief Executive Officer since March 2018, who previously served as our President and Chief Executive Officer between January 2003 and March 2018. The amended and restated employment agreement is for an indefinite term. Dr. Pimstone’s annual base salary for 2019 was $444,776, and he was eligible for an annual incentive payment up to 60% of his base salary, subject to achievement of performance metrics. Effective January 1, 2020, Dr. Pimstone’s base salary was increased to $498,149 and his annual incentive payment eligibility has not changed. Dr. Pimstone’s salary increase was based on a number of factors, including an analysis of our updated peer group, which is benchmarked in U.S. dollars. The U.S. dollar amount of Dr. Pimstone’s semi-monthly pay will be converted to Canadian dollars at the Bank of Canada exchange rate five (5) days prior to each pay date and paid to Dr. Pimstone in Canadian dollars. Additionally, the amended and restated employment agreement provides for severance benefits if Dr. Pimstone is terminated without cause or resigns for good reason in connection with a change of control. For details regarding our current obligations under such circumstances, please see the section of this Circular captioned “Executive Compensation — Potential Payments upon a Termination or Change in Control” below.

Mr. Ian C. Mortimer

We entered into an amended and restated employment agreement on March 19, 2019, with Mr. Mortimer, our President and Chief Financial Officer since March 2018 and Corporate Secretary since June 2015, who previously served as our Chief Financial Officer and Chief Operating Officer since March 2015 and as our Chief Financial Officer since October 2013. The amended and restated employment agreement is for an indefinite term. Mr. Mortimer’s annual base salary for 2019 was $420,000, and he was eligible for an annual incentive payment up to 45% of his base salary, subject to achievement of performance metrics. Effective January 1, 2020, Mr. Mortimer’s base salary was increased to $462,000 and his annual incentive payment eligibility has not changed. Mr. Mortimer’s salary increase was based on a number of factors, including an analysis of our updated peer group , which is benchmarked in U.S. dollars. The U.S. dollar amount of Mr. Mortimer’s semi-monthly pay will be converted to Canadian dollars at the Bank of Canada exchange rate five (5) days prior to each pay date and paid to Mr. Mortimer in Canadian dollars . Additionally, the amended and restated employment agreement provides for severance benefits if Mr. Mortimer is terminated without cause or resigns for good reason in connection with a change of control. For details regarding our current obligations to Mr. Mortimer under such circumstances, please see the section of this Circular captioned “Executive Compensation — Potential Payments upon a Termination or Change in Control” below.

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Dr . Ernesto Aycardi

We entered into an amended and restated employment agreement on March 19, 2019, with Dr. Aycardi, our Chief Medical Officer since March 2018. The amended and restated employment agreement is for an indefinite term. Dr. Aycardi’s annual base salary for 2019 was $420,000, and he is eligible for an annual incentive payment up to 40% of his base salary, subject to achievement of performance metrics. Effective January 1, 2020, Dr. Aycardi’s base salary was increased to $434,700 and his annual incentive payment eligibility has not changed. Dr. Aycardi’s salary increase was based on a number of factors, including an analysis of our updated peer group, which is benchmarked in U.S. dollars. Additionally, the amended and restated employment agreement provides for severance benefits if Dr. Aycardi is terminated without cause or resigns for good reason in connection with a change of control. For details regarding our current obligations to Dr. Aycardi under such circumstances, please see the section of this Circular captioned “Executive Compensation — Potential Payments upon a Termination or Change in Control” below.

Benefits and Other Compensation

We believe that establishing competitive benefit packages for our employees is an important factor in attracting and retaining highly qualified personnel. We maintain broad-based benefits that are provided to all employees, including medical insurance, dental insurance, vision insurance, life insurance, accidental death and dismemberment insurance, long term disability insurance, paramedical coverage and contributions equivalent to 5% of base salary intended for retirement savings. All of our executive officers are eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees. Certain of our executive officers are also entitled to supplemental long-term disability insurance, life insurance and critical illness insurance coverage that is not available to our other employees of the Corporation. Consistent with our compensation philosophy, we intend to continue to maintain our current benefits for our executive officers. Our Compensation Committee in its discretion may revise, amend or add to the executive officer’s benefits and perquisites if it deems it advisable.

In particular circumstances, we sometimes award cash signing bonuses when executive officers first join us or cash bonuses in connection with the achievement of major corporate objectives. Such cash signing bonuses typically must be repaid in full if the executive officer voluntarily terminates employment with us or is terminated for cause prior to the first anniversary of the date of hire. Whether a signing bonus is paid and the amount of the bonus is determined on a case-by-case basis under the specific hiring circumstances. For example, we will consider paying signing bonuses to compensate for amounts forfeited by an executive upon terminating prior employment, to assist with relocation expenses or to create additional incentive for an executive to join the Corporation in a position where there is high market demand. Cash bonuses made outside of our annual performance-based cash bonus program may sometimes be awarded in connection with the achievement of major corporate objectives.

Retirement and Pension Benefits

W e provide our employees with contributions equal to 5% of their base salary intended for retirement savings, including for example contributions to an RRSP, a Canadian retirement plan with features similar to a 401(k) plan, or an individual retirement account administered in the United States. All of our NEOs are eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees.

We do not maintain any defined benefit or defined contribution pension plans.

Severance and Change of Control Benefits

Pursuant to amended and restated employment agreements we have entered into with our executive officers, our executive officers are entitled to specified benefits in the event of the termination of their employment under specified circumstances. We believe that providing these benefits helps us compete for executive talent. After reviewing the practices of companies represented in the compensation peer group, we believe that our severance and change of control benefits are generally in-line with severance packages offered to executives of the companies in our peer group. Please refer to the section of this Circular captioned “Executive Compensation — Potential Payments upon a Termination or Change in Control” for a more detailed discussion of these benefits.

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Limits on H edging and Pledging

As part of our insider trading policy, all employees, including executive officers, and members of our Board are prohibited from engaging in transactions in publicly-traded options, such as puts and calls, and other derivative securities with respect to the Corporation’s securities. This prohibition extends to any hedging or similar transaction designed to decrease the risks associated with holding Corporation securities. Stock options, share appreciation rights, other securities issued pursuant to Corporation benefit plans or other compensatory arrangements with the Corporation, and broad-based index options, futures or baskets are not subject to this prohibition. Our insider trading policy also prohibits certain types of pledges of our securities by certain of our employees, including executive officers and members of our Board, specifically holding our securities in margin accounts or pledging our securities as collateral for a loan.

Risk Considerations in Our Compensation Program

Our Compensation Committee has reviewed and evaluated the philosophy and standards on which our compensation plans have been developed and implemented across the Corporation. It is our belief that our compensation programs do not encourage inappropriate actions or risk taking by our executive officers. We do not believe that any risks arising from our employee compensation policies and practices are reasonably likely to have a material adverse effect on the Corporation. In addition, we do not believe that the mix and design of the components of our executive compensation program encourage management to assume excessive risks. We believe that our current business process and planning cycle fosters the behaviors and controls that would mitigate the potential for adverse risk caused by the action of our executives, including the following:

 

annual establishment of corporate objectives for our performance-based cash bonus programs for our executive officers that are consistent with our annual operating and strategic plans, that are designed to achieve the proper risk/reward balance, and that should not require excessive risk taking to achieve;

 

the mix between fixed and variable, annual and long-term and cash and equity compensation are designed to encourage strategies and actions that balance our short-term and long-term best interests; and

 

stock option awards vest over a period of time, which we believe encourages executives to take a long-term view of our business.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the section captioned “Executive Compensation” that appears in this Circular with management and, based on such review and discussion, the Compensation Committee has recommended to our Board that this “Executive Compensation” section be included in this Circular and incorporated by reference into the Corporation’s 2019 Annual Report on Form 10-K for filing with the SEC.

Respectfully submitted by the members of the Compensation Committee of the Board:

 

The Compensation Committee

Dr. Mohammad Azab (Chair)

Dr. Clarissa Desjardins

Dr. Gary Patou

Page 38


Summary Compensation Table

The table below sets forth compensation information for our NEOs for 2019.

Name and Principal Position

 

Year

 

Salary (1)

 

 

Non-equity Incentive Plan (1)(2)

 

 

Option

Awards (3)

 

 

Bonus

 

 

 

All Other Compensation (1)

 

 

 

Total

 

Simon N. Pimstone

 

2019

 

$

445,688

 

 

$

334,266

 

 

$

1,801,444

 

$

 

 

 

 

$

31,322

 

(4)

 

$

2,612,720

 

Chief Executive Officer

 

2018

 

 

400,555

 

 

 

250,347

 

 

 

485,471

 

 

 

 

 

 

 

28,822

 

(4)

 

 

1,165,195

 

 

 

2017

 

 

399,052

 

 

 

119,716

 

 

 

922,185

 

 

 

 

 

 

 

28,245

 

(4)

 

 

1,469,198

 

Ian C. Mortimer

 

2019

 

 

420,861

 

 

 

236,734

 

 

 

868,553

 

 

 

 

 

 

 

27,234

 

(5)

 

 

1,553,382

 

President and Chief Financial Officer,

 

2018

 

 

342,492

 

 

 

192,652

 

 

 

364,103

 

 

 

 

 

 

 

23,434

 

(5)

 

 

922,681

 

Corporate Secretary

 

2017

 

 

311,537

 

 

 

74,769

 

 

 

537,329

 

 

 

 

 

 

 

21,135

 

(5)

 

 

944,770

 

Ernesto Aycardi

 

2019

 

 

419,991

 

 

 

210,000

 

 

 

418,192

 

 

 

 

 

 

 

24,794

 

(8)

 

 

1,072,977

 

Chief Medical Officer (6)

 

2018

 

 

316,667

 

 

 

158,333

 

 

 

169,702

 

 

 

30,000

 

(7)

 

 

17,309

 

(8)

 

 

692,011

 

 

 

(1)

Except for Dr. Aycardi and as otherwise indicated, compensation amounts were paid in Canadian dollars and have been converted to U.S. dollars for purposes of the table. For 2019, the U.S. dollar per Canadian dollar exchange rate used for such conversion was 0.7537 which was the average Bank of Canada foreign exchange rate for the 2019 fiscal year. For 2018, the U.S. dollar per Canadian dollar exchange rate used for such conversion was 0.7721 which was the average Bank of Canada foreign exchange rate for the 2018 fiscal year. For 2017, the U.S. dollar per Canadian dollar exchange rate used for such conversion was 0.7708 which was the average Bank of Canada foreign exchange rate for the 2017 fiscal year.

(2)

The amount represents payments earned in 2019, 2018 and 2017 under the 2019, 2018 and 2017 Non-Equity Incentive Plan, which were paid in March 2020, March 2019 and March 2018, respectively, as discussed under the sections of this Circular captioned “Non-Equity Incentive Plan Compensation and Bonuses — 2019 Non-Equity Incentive Plan Payments,” “Non-Equity Incentive Plan Compensation and Bonuses — 2018 Non-Equity Incentive Plan Payments” and “Non-Equity Incentive Plan Compensation and Bonuses — 2017 Non-Equity Incentive Plan Payments.”

(3)

Represents the aggregate grant date fair value of stock options granted. These amounts have been computed in accordance with FASB ASC Topic 718, using the Black-Scholes option pricing model. For a discussion of valuation assumptions, see Note 11 to our financial statements included in our Annual Report on Form 10-K and the critical accounting policy discussions in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Critical Accounting Policies and Significant Judgments and Estimates — Stock-based compensation.”

(4)

Of the total amount for 2019, (i) $516 represents life insurance premiums through our group extended benefit plan, (ii) $678 represents provincial health care premiums, (iii) $7,844 represents other insurance premiums, and (iv) $22,284 represents contributions intended for retirement savings. Of the total amount for 2018, (i) $528 represents life insurance premiums through our group extended benefit plan, (ii) $695 represents provincial health care premiums, (iii) $7,571 represents other insurance premiums, and (iv) $20,028 represents contributions intended for retirement savings. Of the total amount for 2017, (i) $476 represents life insurance premiums through our group extended benefit plan, (ii) $1,387 represents provincial health care premiums, (iii) $6,428 represents other insurance premiums, and (iv) $19,954 represents contributions intended for retirement savings.

(5)

Of the total amount for 2019, (i) $516 represents life insurance premiums through our group extended benefit plan, (ii) $678 represents provincial health care premiums, (iii) $4,997 represents other insurance premiums, and (iv) $21,043 represents contributions intended for retirement savings. Of the total amount for 2018, (i) $528 represents life insurance premiums through our group extended benefit plan, (ii) $695 represents provincial health care premiums, (iii) $5,086 represents other insurance premiums, and (iv) $17,125 represents contributions intended for retirement savings. Of the total amount for 2017, (i) $476 represents life insurance premiums through our group extended benefit plan, (ii) $1,387 represents provincial health care premiums, (iii) $3,579 represents other insurance premiums, (iv) $15,577 represents contributions intended for retirement savings, and (v) $116 represents a tenure award.

(6)

Dr. Aycardi is employed by our wholly owned subsidiary, Xenon Pharmaceuticals USA Inc. Dr. Aycardi joined the Corporation as the Chief Medical Officer in March 2018. Compensation amounts, except amounts in the column titled “Option Awards”, reflect the actual U.S. dollar amounts paid to Dr. Aycardi.

(7)

The 2018 bonus represents an amount paid in 2018 upon execution of Dr. Aycardi’s employment agreement.

(8)

Of the total amount for 2019, (i) $1,087 represents life insurance premiums through our group extended benefit plan, (ii) $21,000 represents contributions intended for retirement savings, (iii) $1,622 represents reimbursements for tax compliance services, and (iv) $1,085 represents per diems. Of the total amount for 2018, (i) $770 represents life insurance premiums through our group extended benefit plan, (ii) $15,834 represents contributions intended for retirement savings, and (iii) $705 represents per diems.

Page 39


Outstanding Equity Awards at Fiscal Year-End

The following table presents information concerning all equity awards held by our NEOs at December 31, 2019.

 

Option Awards

 

 

 

 

Number of Securities

Underlying Unexercised

Options (#)

 

 

 

 

 

 

 

 

 

 

Name

 

Vesting Commencement Date

 

Exercisable

 

 

 

Unexercisable

 

 

 

Option Exercise Price ($/share)

 

 

Option

Expiration

Date

Simon N. Pimstone

 

01/01/2010

 

 

6,172

 

(1)

 

 

 

 

 

CAD$

 

 

3.74

 

 

12/31/2019

 

 

01/01/2011

 

 

22,633

 

(1)

 

 

 

 

 

CAD$

 

 

3.74

 

 

12/31/2020

 

 

01/01/2012

 

 

10,288

 

(1)

 

 

 

 

 

CAD$

 

 

3.74

 

 

12/31/2021

 

 

01/01/2012

 

 

20,576

 

(1)

 

 

 

 

 

CAD$

 

 

3.74

 

 

12/31/2021