UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No. )

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o Preliminary Proxy Statement
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o Soliciting Material Pursuant to § Rule 14a-12

ALKERMES PLC

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

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Alkermes public limited company incorporated in Ireland with limited liability under the Companies Acts 1963
to 2009, registered number 498284

 

Treasury Building, Lower Grand Canal Street
Dublin 2, Ireland

 

NOTICE OF AN EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS

 

To be held on December 8, 2011

 

Dear Shareholder:

 

You are cordially invited to attend an Extraordinary General Meeting of Shareholders of Alkermes plc, an Irish company (the “Company”). The meeting will be held on Thursday, December 8, 2011 at 10:00 a.m. local time at offices of the Company located at 852 Winter Street, Waltham, Massachusetts 02451, for the following purposes:

 

1. To consider and approve the Alkermes plc 2011 Stock Option and Incentive Plan.

 

 

Proposal 1 is an ordinary resolution requiring a simple majority of the votes cast.

 

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

 

The Board of Directors has fixed 4:01 p.m. (EST) on November 1, 2011 as the record date for the Extraordinary General Meeting. Only shareholders who are registered as shareholders at 4:01 p.m. (EST) on that date will be entitled to notice of, and to vote at, the Extraordinary General Meeting.

 

Any shareholder entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend, speak and vote on such shareholder’s behalf. Such proxy need not be a shareholder of the Company.

 

Important Notice Regarding the Availability of Proxy Materials for the Extraordinary General Meeting of Shareholders to be Held on Thursday, December 8, 2011 at 10:00 a.m. local time at offices of the Company at 852 Winter Street, Waltham, Massachusetts 02451.

 

The proxy statement to shareholders is available at

 

www.edocumentview.com/alksegm

 

By Order of the Board of Directors

 

Kathryn L. Biberstein
Secretary

 

Dublin, Ireland

November 4, 2011

 

You are cordially invited to attend the meeting in person. The presence at the meeting, in person or by proxy, of one or more shareholders who hold shares representing not less than a majority of the issued and outstanding shares entitled to vote at the meeting shall constitute a quorum. Your vote is important. Whether or not you expect to attend the meeting, please complete, date, sign and return the enclosed proxy, or vote over the telephone or the Internet as instructed in these materials, as promptly as possible in order to ensure your representation at the meeting. A return envelope (which is postage prepaid if mailed in the United States) is enclosed for your convenience. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.

 

Alkermes public limited company incorporated in Ireland with limited liability under the Companies Acts 1963
to 2009, registered number 498284

 

Treasury Building, Lower Grand Canal Street
Dublin 2, Ireland

 

PROXY STATEMENT
FOR AN EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS DECEMBER 8, 2011

 

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

 

Why am I receiving these materials?

 

The Board of Directors (the “Board”) of Alkermes plc, an Irish company (“Alkermes” or the “Company”) is soliciting your proxy to vote at an Extraordinary General Meeting of Shareholders (the “Meeting”) to be held at offices of the Company at 852 Winter Street, Waltham, Massachusetts 02451, at 10:00 a.m. local time, on December 8, 2011, and at any postponement or adjournment of the Meeting. You are invited to attend the Meeting to vote on the proposal described in this proxy statement. However, you do not need to attend the meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card, or follow the instructions below to submit your proxy over the telephone or over the Internet. The Company intends to mail this proxy statement and accompanying proxy card on or about November 10, 2011 to all shareholders of record entitled to vote at the Meeting.

 

As you are aware, the Company was organized recently in connection with the business combination transaction (the “Business Combination”) between Alkermes, Inc. and the Elan Drug Technologies (“EDT”) business of Elan Corporation, plc (“Elan”), and now serves as the holding company for such combined business.

 

Who can vote at the Meeting?

 

Only shareholders who are registered at 4:01 p.m. (EST) on November 1, 2011 (the “Record Date”) will be entitled to notice of and to vote at the Meeting. On the Record Date, there were 129,585,141 ordinary shares issued and outstanding and entitled to be voted.

 

Shareholder of Record: Shares Registered in Your Name

 

If, as of the Record Date, your ordinary shares were registered directly in your name with the Company’s transfer agent, Computershare Trust Company, N.A., then you are a shareholder of record. As a shareholder of record, you may vote in person at the Meeting or vote by proxy. Whether or not you plan to attend the Meeting, we urge you to fill out and return the enclosed proxy card or vote by proxy over the telephone or on the Internet as instructed below to ensure your vote is counted.

 

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

 

If, as of the Record Date, your ordinary shares were not held directly in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered to be the shareholder of record for purposes of voting at the Meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You are also invited to attend the Meeting. However, since you are not the shareholder of record, you may not vote your shares in person at the Meeting unless you request and obtain a valid proxy from your broker or other agent.

What am I voting on?

 

The only matter scheduled for a vote is the approval of the Alkermes plc 2011 Stock Option and Incentive Plan.

 

What if another matter is properly brought before the Meeting?

 

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

 

How do I vote?

 

You may vote “For” or “Against” or abstain from voting. The procedures for voting are fairly simple:

 

Shareholder of Record: Shares Registered in Your Name

 

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

 

By Internet.  Access the website of our tabulator, Computershare, at:
http://www.envisionreports.com/alksegm, using the voter control number that we have printed on the enclosed proxy card. Your shares will be voted in accordance with your instructions. You must specify how you want your shares voted or your Internet vote cannot be completed and you will receive an error message. The cutoff time for voting by Internet is 11:59 p.m. (EST) on December 7, 2011.

 

By Telephone.  Call 1-800-652-VOTE (1-800-652-8683) toll-free from the U.S. and Canada if you are calling from outside the U.S. or Canada and follow the instructions on the enclosed proxy card. Your shares will be voted in accordance with your instructions. You must specify how you want your shares voted or your telephone vote cannot be completed. The cutoff time for voting by telephone is 11:59 p.m. (EST) on December 7, 2011.

 

By Mail.  Complete and mail the enclosed proxy card in the enclosed postage prepaid envelope to Computershare. Your proxy will be voted in accordance with your instructions. If you sign and return the enclosed proxy but do not specify how you want your shares voted, they will be voted FOR the Alkermes plc 2011 Stock Option and Incentive Plan; and will be voted according to the best judgment of the proxy holder upon any other business that may properly be brought before the Meeting and at all adjournments and postponements thereof.

 

In Person at the Meeting.  If you attend the Meeting, you may deliver your completed proxy card in person or you may vote by completing a ballot, which will be available at the Meeting.

 

Beneficial Owner: Shares Registered in the Name of Broker or Bank

 

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

 

How many votes do I have?

 

On each matter to be voted upon, you have one vote for each ordinary share you owned as of the Record Date.

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

 

If you return a signed and dated proxy card without making any voting selections, your shares will be voted FOR the approval of the Alkermes plc 2011 Stock Option and Incentive Plan. If any other matter is properly presented at the Meeting, your proxy holder (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.

 

Who is paying for this proxy solicitation?

 

We will pay for the entire cost of soliciting proxies. In addition to these mailed proxy materials, our directors, employees and third party proxy solicitors may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.

 

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

 

If you receive more than one set of proxy materials, your ordinary shares are registered in more than one name or are registered in different accounts. Please complete, sign and return each proxy card to ensure that all of your shares are voted.

 

Can I change my vote after submitting my proxy?

 

Yes. You may revoke your proxy at any time before it is exercised at the Meeting by taking any of the following actions:

 

 

Please note that if your ordinary shares are held of record by a broker or other nominee, you must contact the broker or other nominee to revoke your proxy since attending the meeting alone will not revoke any proxy. If you wish to vote at the Meeting, you must bring to the Meeting a copy of your brokerage account statement or a letter from such broker or other nominee confirming your beneficial ownership of the shares as of the Record Date.

 

How are votes counted?

 

Votes will be counted by the inspector of election appointed for the Meeting. Abstentions will be counted as present for purposes of determining the presence of a quorum for purposes of this proposal, but will not be counted as votes cast. Broker non-votes will be counted as present for purposes of determining the presence of a quorum for purposes of this proposal, but will not be voted. Accordingly, while abstentions and broker non-votes will count towards establishing a quorum, neither abstentions nor broker non-votes will affect the outcome of the vote on this proposal.

 

What are “broker non-votes”?

 

Broker non-votes occur when a nominee, such as a broker or bank, holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that proposal and has not received instructions with respect to that proposal from the beneficial

owner. If you do not give instructions to your broker, your broker can vote your shares with respect to “discretionary” items, but not with respect to “non-discretionary” items. Discretionary items are proposals considered routine under the rules of The NASDAQ Stock Market LLC, or Nasdaq, on which your broker may vote shares held in street name in the absence of your voting instructions. The approval of the Alkermes plc 2011 Stock Option and Incentive Plan is a non-discretionary item. Accordingly, if you own ordinary shares through a nominee, such as a broker or bank, please be sure to instruct your nominee how to vote to ensure that your vote is counted.

 

How many votes are needed to approve the proposal?

 

The affirmative vote of a majority of the votes cast by holders of our ordinary shares entitled to vote at a meeting at which a quorum is present will be required to approve the Alkermes plc 2011 Stock Option and Incentive Plan.

 

What is the quorum requirement?

 

A quorum of shareholders is necessary to hold a valid Meeting. A quorum will be present if at least one or more shareholders holding a majority of the issued and outstanding shares entitled to vote are present at the Meeting or represented by proxy. On the Record Date, there were 129,585,141 ordinary shares issued and outstanding and entitled to vote. Thus, the holders of 64,792,572 ordinary shares must be present in person or represented by proxy at the Meeting to have a quorum.

 

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the Meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, within one hour of the time appointed for the Meeting, the Meeting shall stand adjourned to December 15, 2011 at 10:00 a.m. local time at the offices of the Company located at 852 Winter Street, Waltham, Massachusetts 02451 or such other time or place as the Board may decide.

 

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

 

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

 

When are shareholder proposals due for next year’s Annual Meeting?

 

To be considered for inclusion in the proxy materials for next year’s Annual Meeting, your proposal must be submitted in writing to the Company’s Secretary at Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland within a reasonable time prior to the time we begin to print and mail our proxy materials, and in any event within ten days following the first public announcement of the date for such Annual Meeting. If you wish to bring a matter before the shareholders at next year’s annual meeting and you do not notify us within a reasonable time prior to the time we begin to print and mail our proxy materials, then, for all proxies we receive, the proxy holders will have discretionary authority to vote on the matter, including discretionary authority to vote in opposition to the matter.

 

 

What proxy materials are available on the internet?

 

The letter to shareholders, Notice of Extraordinary General Meeting and proxy statement are available at www.edocumentview.com/alksegm.

PROPOSAL 1

 

APPROVAL OF ALKERMES PLC 2011 STOCK OPTION AND INCENTIVE PLAN

 

Overview

 

Our Board is requesting shareholder approval of the Alkermes plc 2011 Stock Option and Incentive Plan.

 

On September 16, 2011, our Board adopted the Alkermes plc 2011 Stock Option and Incentive Plan and, on October 5, 2011 and October 31, 2011, adopted amendments to such plan (the plan, as amended, the “2011 Plan”), subject to the approval of our shareholders. The 2011 Plan will become effective if approved by our shareholders. The 2011 Plan is attached as Appendix A to this Proxy Statement and is incorporated herein by reference.

 

Why we are asking our shareholders to approve the 2011 Plan?

 

In connection with the Business Combination, the Alkermes, Inc. Amended and Restated 2008 Stock Option and Incentive Plan was converted into and adopted as a plan of the Company entitled the Alkermes plc Amended and Restated 2008 Stock Option and Incentive Plan (the “Restated 2008 Plan”). As of the Record Date, approximately 771,799 ordinary shares remained available for future issuance under the Restated 2008 Plan, excluding the ordinary shares reserved for issuance upon exercise of outstanding options or vesting of restricted stock units. Without replenishment, we believe such amount will be insufficient to meet our anticipated employee recruiting and retention needs before our next annual general meeting of shareholders in 2012.

 

The 2011 Plan was adopted and is proposed for your consideration to provide sufficient flexibility to meet our anticipated employee recruiting and retention needs. The maximum number of our ordinary shares proposed to be reserved for issuance under the 2011 Plan is equal to 8,350,000. The 2011 Plan permits a variety of equity awards, including stock options and full value awards, which consist of restricted stock, restricted stock units, performance stock awards and other stock awards. Under the 2011 Plan, the grant of each ordinary share pursuant to a full value award (i.e., an award other than a stock option) reduces or depletes the number of ordinary shares available for future equity awards under the 2011 Plan by 1.8 ordinary shares and the grant of each ordinary share pursuant to a stock option reduces or depletes the number of ordinary shares available for future equity awards by 1 ordinary share. These shares are treated in a similar manner if returned to reserve status when forfeited or canceled under the 2011 Plan. We expect to grant both stock options and full value awards in the future.

 

As of the Record Date, an aggregate of 17,954,011 ordinary shares are issuable upon exercise of outstanding options with a weighted average exercise price of $13.66 and a weighted average remaining term of 6.10 years; and 2,289,005 ordinary shares are subject to unvested restricted stock unit awards. As of the Record Date, we have a total of 129,585,141 ordinary shares outstanding and 771,799 ordinary shares available for issuance (for future grants) under our Restated 2008 Plan, plus any ordinary shares subject to awards that are forfeited under the Restated 2008 Plan. The Restated 2008 Plan is currently the only equity compensation plan that the Company uses for new equity compensation awards to its employees.

 

Equity Awards are an Integral Component of our Compensation Program

 

Equity awards have been historically and, we believe, will continue to be an integral component of our overall compensation program. The issuance of equity and cash awards under the 2011 Plan will enable the Company to attract new employees and directors, retain our existing employees and provide incentives for our employees to exert maximum efforts for the Company’s success, ultimately contributing to an increase in shareholder value. The Company firmly believes that such awards are a critical part of the compensation package offered to new, existing and key employees and an important tool in the Company’s ability to attract and retain talented personnel. The 2011 Plan allows the Company to continue to utilize a broad array of equity incentives with flexibility in designing such incentives, including traditional option grants, restricted stock awards, restricted stock unit awards and performance stock awards.

Important Aspects of our 2011 Plan Designed to Protect our Shareholders’ Interests

 

The 2011 Plan contains certain provisions that are designed to protect our shareholders’ interests and reflect corporate governance best practices including:

 

 

Recommendation

 

The Board recommends that you vote FOR the approval of the 2011 Plan.

 

Principal Features of the 2011 Plan

 

The material features of the 2011 Plan are:

 

 

Based solely on the closing price of our ordinary shares as reported on Nasdaq on the Record Date, the aggregate market value of the 8,350,000 shares, representing the maximum number of ordinary shares to be issued under the 2011 Plan, is US$140,864,500. Shares tendered or held back upon exercise of an option or settlement of an award to cover the exercise price or tax withholding are not available for future issuance under the 2011 Plan. The shares issued by us under the 2011 Plan will be authorized but unissued shares.

 

To ensure that certain awards granted under the 2011 Plan to a “Covered Employee” (as defined in the Code) qualify as “performance-based compensation” under Section 162(m) of the Code, the 2011 Plan provides that the Administrator may require that the vesting or grant of such awards be conditioned on the satisfaction of performance criteria that may include any or all of the following: (1) earnings before interest, taxes, depreciation and amortization, (2) net income (loss) (either before or after interest, taxes, depreciation and/or amortization), (3) changes in the market price of the Stock, (4) economic value-added, (5) initiation or completion of clinical trials, (6) results of clinical trials, (7) drug development or commercialization milestones, (8) collaboration milestones, (9) operational measures including production capacity and capability, (10) hiring and retention of key managers, (11) expense management, (12) capital raising transactions, (13) sales or revenue, (14) acquisitions or strategic transactions, (15) operating income (loss), (16) cash flow (including, but not limited to, operating cash flow and free cash flow), (17) return on capital, assets, equity, or investment, (18) shareholder returns, (19) gross or net profit levels, (20) operating margins, (21) earnings (loss) per ordinary share and (22) sales or market shares, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group. The Administrator will select, within 90 days following the commencement of a performance cycle, the particular performance criteria for such award and the performance goals with respect to each performance criterion. Each such award will specify the amount payable, or the formula for determining the amount payable, upon achievement of the various applicable performance targets. Subject to adjustments for stock splits and similar events, the maximum award granted to any one individual that is intended to qualify as “performance-based compensation” under Section 162(m) of the Code will not exceed 4,000,000 ordinary shares for any performance cycle. If a performance-based award is payable in cash to any executive, it cannot exceed US$25 million for any performance cycle.

 

Summary of the 2011 Plan

 

The following description of certain features of the 2011 Plan is intended to be a summary only. The summary is qualified in its entirety by the full text of the 2011 Plan that is attached hereto as Appendix A.

 

Plan Administration.  The Administrator has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants, and to determine the specific terms and conditions of each award, subject to the provisions of the 2011 Plan. The Administrator may delegate to a subcommittee comprised of one or more members of the Board all or part of the Administrator’s authority and duties with respect to the granting of Options to employees who are not subject to the reporting and other provisions of Section 16 of the Exchange Act. Any such delegation by the Administrator shall include a limitation as to the amount of Options that may be granted during the period of the delegation and shall contain guidelines as to the determination of the exercise price and the vesting criteria.

 

Eligibility and Limitations on Grants.  Persons eligible to participate in the 2011 Plan will be those officers, employees, non-employee directors and other key persons (including consultants and prospective employees) of the Company and its subsidiaries as selected from time to time by the Administrator. The intention in making awards to eligible persons under the 2011 Plan will be to align the compensation of these individuals over a multi-year period directly with the interests of our shareholders and serve as a tool in the recruiting and retention of these individuals.

 

The maximum award of stock options granted to any one individual will not exceed 4,000,000 ordinary shares (subject to adjustment for stock splits and similar events) for any calendar year period. The maximum

number of ordinary shares that can be awarded in the form of incentive stock options will not exceed 8,350,000 (subject to adjustment for stock splits and similar events).

 

Stock Options granted to employees and key persons.  The 2011 Plan permits the granting of (1) stock options intended to qualify as incentive stock options under Section 422 of the Code and (2) stock options that do not so qualify. Options granted under the 2011 Plan will be non-qualified options if they fail to qualify as incentive options or exceed the annual limit on incentive stock options. Non-qualified options may be granted to any persons eligible to receive incentive options and to non-employee directors and key persons. The option exercise price of each option will be determined by the Administrator but may not be less than 100% of the fair market value of our ordinary shares on the date of grant.

 

The term of each option will be fixed by the Administrator and may not exceed ten years from the date of grant. The Administrator will determine at what time or times each option may be exercised. Options may be made exercisable in installments and the exercisability of options may be accelerated by the Administrator. Options may be exercised in whole or in part with written or electronic notice to the Company’s delegate. Upon exercise of non-qualified stock options, unless otherwise determined by the Administrator, the purchase price must be paid through a net reduction in the number of ordinary shares issuable upon such exercise, based on the fair market value of our ordinary shares on the date of exercise. Upon exercise of incentive stock options and those non-qualified options for which the Administrator elects not to utilize the above payment method, the option exercise price may be paid in full either in cash, by certified or bank check or other instrument acceptable to the Administrator or by delivery (or attestation to the ownership) of ordinary shares that are beneficially owned by the optionee based on the fair market value of our ordinary shares on the date of exercise or, subject to applicable law, by delivery to the Company of an exercise notice together with irrevocable instructions to a broker to promptly deliver cash or a check payable to the Company for the purchase price.

 

To qualify as incentive options, options must meet additional federal tax requirements, including a US$100,000 limit on the value of our ordinary shares subject to incentive options that first become exercisable by a participant in any one calendar year.

 

Stock Options granted to non-employee directors.  The 2011 Plan provides that (a) upon becoming a member of the Board, each non-employee director who is not then a consultant to us shall be granted on such day a non-qualified stock option to acquire 35,000 ordinary shares, which shall vest ratably over the three calendar years following the date of grant, plus an additional stock option to acquire a number of our ordinary shares equal to the product of 25,000 multiplied by a fraction, the numerator of which equals the number of months remaining until the next annual meeting of shareholders of the Company and the denominator of which equals 12, which shall vest on the first anniversary of the date of grant, and (b) each non-employee director who is serving as a director of the Company on each annual meeting of shareholders, beginning with the 2012 annual general meeting of shareholders, shall automatically be granted on such day a non-qualified stock option to acquire 25,000 of our ordinary shares, which shall vest on the first anniversary of the date of grant; provided, however, that no grant shall be made to an individual who ceases to be a member of the Board on such day. The Administrator may grant additional non-qualified stock options to our non-employee directors and such grants may vary among individual non-employee directors. The option exercise price of each option will be determined by the Administrator but may not be less than 100% of the fair market value of our ordinary shares on the date of grant.

 

The term of each option may not exceed ten years from the date of grant. Options may be exercised only by notice to the Company or the Company’s delegate specifying the number of ordinary shares to be purchased. Upon exercise of options, the option exercise price will be paid in the same manner as described above under “Stock Options granted to employees and key persons.”

 

Grants of stock options to our non-employee directors, as contemplated under the 2011 Plan, shall consist of ordinary shares reserved and available for issuance pursuant to the Restated 2008 Plan and, if there are no such ordinary shares remaining under such plan, then such grants shall consist of ordinary shares reserved and available for issuance pursuant to the 2011 Plan.

Restricted Stock Unit Awards.  The Administrator may award stock units as restricted stock unit awards to participants. Restricted stock unit awards are ultimately payable in the form of ordinary shares and may be subject to such conditions and restrictions as the Administrator may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with the Company through a specified vesting period. However, in the event these awards granted to employees have a performance-based goal, the restriction period will be at least one year, and in the event these awards granted to employees have a time-based restriction, the restriction period will be at least three years, but vesting can occur incrementally over the three-year period. The Administrator may waive the foregoing restriction in the case of a grantee’s death, disability or retirement or upon a sale event (as defined in the 2011 Plan). To the extent a Restricted Stock Unit Award is subject to Section 409A of the Code, it may contain such additional terms and conditions as the Administrator shall determine in order for such Award to comply with the requirements of Section 409A.

 

The Administrator, in its sole discretion, may permit a grantee to elect to receive a portion of future cash compensation otherwise due to such grantee in the form of a Restricted Stock Unit Award. Any such election shall be made in writing and shall be delivered to the Company no later than the date specified by the Administrator and in accordance with Section 409A and such other rules and procedures established by the Administrator. Any such future cash compensation that the grantee elects to defer shall be converted to a fixed number of phantom stock units (which may be fully vested) based on the fair market value of our ordinary shares on the date the compensation would otherwise have been paid to the grantee if such payment had not been deferred.

 

Restricted Stock.  The Administrator may award ordinary shares to participants subject to such conditions and restrictions as the Administrator may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with us through a specified restricted period. However, in the event these awards granted to employees have a performance-based restriction, the restriction period will be at least one year, and in the event these awards granted to employees have a time-based restriction, the restriction will be at least three years, but vesting can occur incrementally over the three-year period. The Administrator may waive the foregoing restriction in the case of a grantee’s death, disability or retirement or upon a sale event (as defined in the 2011 Plan).

 

Cash-based Awards.  Each cash-based award shall specify a cash-denominated payment amount, formula or payment ranges as determined by the Administrator. Payment, if any, with respect to a cash-based award may be made in cash or in shares of stock, as the Administrator determines. Except as may otherwise be provided by the Administrator, a grantee’s right in all cash-based awards that have not vested shall automatically terminate upon the grantee’s termination of employment (or cessation of service relationship) with the Company and its subsidiaries for any reason (including if a subsidiary ceases to be a subsidiary of the Company).

 

Performance Share Awards.  The Administrator may grant performance share awards independent of, or in connection with, the granting of other awards under the 2011 Plan. The Administrator, in its sole discretion, determines whether and to whom performance share awards will be granted, the performance goals subject to the award, the period during which performance is to be measured, which may not be less than one year, and such other conditions as the Administrator shall determine. Upon the attainment of the performance goal, the grantee is entitled to receive ordinary shares.

 

Tax Withholding.  Participants in the 2011 Plan are responsible for the payment of any federal, state or local taxes that we are required by law to withhold upon any option exercise or vesting of other awards. The Company has the right to deduct any such taxes from any payment otherwise due to grantee, including the right to reduce the number of ordinary shares otherwise required to be issued to a grantee in an amount that, on the date of issuance, would have a fair market value equal to all such taxes required to be withheld by the Company.

 

Change in Control Provisions.  Under the 2011 Plan, in the case of and subject to the consummation of a sale event (as defined in the 2011 Plan), except as the Administrator may otherwise specify with respect to a particular award in the relevant award documentation, all stock options that are not exercisable immediately

prior to the effective time of the sale event shall become fully exercisable as of the effective time of the sale event, all other awards with time-based vesting, conditions or restrictions shall become fully vested and nonforfeitable as of the effective time of the sale event and all awards with conditions and restrictions relating to the attainment of performance goals may become vested and nonforfeitable in connection with a sale event in the Administrator’s discretion. In addition, in the event of a sale event in which the Company’s shareholders will receive cash consideration, the Company may make or provide for a cash payment to participants holding stock options equal to the difference between the per share cash consideration and the exercise price of such options.

 

Amendments and Termination.  Our Board may at any time amend or discontinue the 2011 Plan and the Administrator may at any time amend or cancel any outstanding award for the purpose of satisfying changes in the law or for any other lawful purpose. However, no such action may adversely affect any rights under any outstanding award without the holder’s consent. Any amendments that materially change the terms of the 2011 Plan, including any amendments that increase the number of ordinary shares reserved for issuance under the 2011 Plan, expand the types of awards available, materially expand the eligibility to participate in, or materially extend the term of, the 2011 Plan, or materially change the method of determining the fair market value of our ordinary shares, will be subject to approval by our shareholders. Amendments shall also be subject to approval by our shareholders if and to the extent determined by the Administrator to be required by the Code to preserve the qualified status of incentive options or to ensure that compensation earned under the 2011 Plan qualifies as performance-based compensation under Section 162(m) of the Code. In addition, except in connection with a reorganization or other similar change in the capital stock of the Company or a merger or other transaction, without prior shareholder approval the Administrator may not reduce the exercise price of an outstanding stock option or effect re-pricing of an outstanding stock option through cancellation or re-grants.

 

Effective Date of 2011 Plan

 

The Board adopted the 2011 Plan on September 16, 2011 and, on October 5, 2011 and October 31, 2011, adopted amendments to such plan. The 2011 Plan will become effective when and if approved by the Company’s shareholders. Awards of incentive options may be granted under the 2011 Plan until ten years after Board approval. No awards may be granted under the 2011 Plan after the date that is ten years from the date of shareholder approval.

 

New Plan Benefits

 

No grants have been issued with respect to the ordinary shares to be reserved for issuance under the 2011 Plan. Except as set forth below for our non-employee directors, the benefits or amounts that may be received by, or allocated to, the Company’s Chief Executive Officer, Chief Financial Officer, and the three other named executives, all executives as a group, non-executive directors as a group, and non-executive officer employees as a group are granted on a discretionary basis and, as such, are not determinable as awards under the 2011 Plan.

 

Grants of stock options to our non-employee directors will initially consist of options in respect of ordinary shares reserved and available for issuance pursuant to our Restated 2008 Plan. If and when no ordinary shares remain available for issuance under our Restated 2008 Plan, then such non-employee director grants will consist of options in respect of ordinary shares reserved and available for issuance under our 2011 Plan and will be as follows:

 

 

 

 

U.S. Federal Income Tax Consequences

 

The following is a summary of the principal U.S. federal income tax consequences of certain transactions under the 2011 Plan. It does not describe all U.S. federal tax consequences under the 2011 Plan, nor does it describe state or local tax consequences.

 

Incentive Options.  No taxable income is generally realized by the optionee upon the grant or exercise of an incentive option. If ordinary shares issued to an optionee pursuant to the exercise of an incentive option are sold or transferred after two years from the date of grant and after one year from the date of exercise, then (1) upon sale of such shares, any amount realized in excess of the option price (the amount paid for the shares) will be taxed to the optionee as a long-term capital gain, and any loss sustained will be a long-term capital loss, and (2) we will not be entitled to any deduction for federal income tax purposes. The exercise of an incentive option will give rise to an item of tax preference that may result in alternative minimum tax liability for the optionee.

 

An incentive option will not be eligible for the tax treatment described above if it is exercised more than three months following termination of employment (or one year in the case of termination of employment by reason of disability). In the case of termination of employment by reason of death, the three-month rule does not apply. If ordinary shares acquired upon the exercise of an incentive option are disposed of prior to the expiration of the two-year and one-year holding periods described above, generally (1) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of the ordinary shares at exercise (or, if less, the amount realized on a sale of such shares) over the option price thereof, and (2) we will be entitled to deduct such amount. Special rules will apply where all or a portion of the exercise price of the incentive option is paid by tendering shares.

 

Non-Qualified Options.  No taxable income is generally realized by the optionee upon the grant of a non-qualified option. Generally (1) at exercise, ordinary income is realized by the optionee in an amount equal to the difference between the option price and the fair market value of the shares on the date of exercise, and we receive a tax deduction for the same amount, and (2) at disposition, appreciation or depreciation after the date of exercise is treated as either short-term or long-term capital gain or loss depending on how long the shares have been held. Special rules will apply where all or a portion of the exercise price of the non-qualified option is paid by tendering shares. Upon exercise, the optionee will also be subject to Social Security taxes on the excess of the fair market value over the exercise price of the option.

 

Parachute Payments

 

The vesting of any portion of an option or other award that is accelerated due to the occurrence of a change in control may cause a portion of the payments with respect to such accelerated awards to be treated as “parachute payments” as defined in the Code. Any such parachute payments may be non-deductible to us, in whole or in part, and may subject the recipient to a non-deductible 20% federal excise tax on all or a portion of such payment (in addition to other taxes ordinarily payable).

 

Limitation on the Company’s Deductions

 

As a result of Section 162(m) of the Code, our deduction for certain awards under the 2011 Plan may be limited to the extent that the Chief Executive Officer or other executive officer (other than our Chief Financial Officer) whose compensation is required to be reported in the summary compensation table receives compensation in excess of US$1 million a year (other than performance-based compensation that otherwise meets the requirements of Section 162(m) of the Code). The 2011 Plan is structured to allow certain grants to qualify as performance-based compensation.

 

A copy of the 2011 Plan is attached as Appendix A.

SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table and notes provide information about the beneficial ownership of our issued and outstanding, ordinary shares as of the Record Date, by:

 

 

According to SEC rules, we have included in the column “Number of Issued Shares” all outstanding shares over which the person has sole or shared voting or investment power, and we have included in the column “Number of Shares Issuable” all shares that the person has the right to acquire within 60 days after the Record Date through the exercise of any stock option, vesting of any stock award or other right. All shares that a person has a right to acquire within 60 days of the Record Date are deemed issued and outstanding for the purpose of computing the percentage beneficially owned by the person, but are not deemed issued and outstanding for the purpose of computing the percentage beneficially owned by any other person.

 

Unless otherwise indicated, each person has the sole power (except to the extent authority is shared by spouses under applicable law) to invest and vote the shares listed opposite the person’s name. Our inclusion of shares in this table as beneficially owned is not an admission of beneficial ownership of those shares by the person listed in the table. The business address of each director is Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland and the business address of the named executive officers is 852 Winter Street, Waltham, MA 02451.

 

Ownership by Directors and Executive Officers

 

 

 

 

 

Ownership By Principal Shareholders

 

The following table and notes provides information about the beneficial ownership of our ordinary shares as of the Record Date, or as otherwise set forth below, by each shareholder known to us to be the beneficial owner of more than 5% of our ordinary shares.

 

 

 

Notes to Ownership by Principal Shareholders Table

 

EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS

 

Business Combination Transaction

 

On September 16, 2011, Alkermes, Inc. and Elan completed a business combination transaction pursuant to which the Company, a new holding company formed in Ireland for purposes of the transaction, became the parent holding company of Alkermes, Inc. and of the EDT business formerly conducted by Elan (and carved out of Elan as part of that transaction). Alkermes, Inc. became a wholly-owned subsidiary of Alkermes pursuant to a merger of a transitory merger subsidiary of Alkermes with and into Alkermes, Inc. In the merger, all outstanding shares of Alkermes, Inc. common stock, par value US$0.01 per share, were canceled and converted into the right to receive, on a one-for-one basis, ordinary shares, nominal value US$0.01 per share, of Alkermes, which ordinary shares now trade under the same Nasdaq symbol in substitution for the Alkermes, Inc. common stock. In connection with the acquisition of the EDT business of Elan, Alkermes issued to a subsidiary of Elan 31,900,000 new ordinary shares.

 

The former shareholders of Alkermes, Inc. own approximately 75% of the issued ordinary share capital of Alkermes, with the remaining approximately 25% owned by ES3, a subsidiary of Elan. The current directors of Alkermes were directors of Alkermes, Inc. prior to the consummation of the Business Combination (two former Alkermes, Inc. directors, who resigned upon the effectiveness of the merger, are not directors of Alkermes) and the directors that served on the Alkermes, Inc. Compensation Committee now serve on the Alkermes Compensation Committee. In addition, the former principal executive officer (“PEO”) and principal financial officer (“PFO”) of Alkermes, Inc. now serve as the PEO and PFO of Alkermes.

 

Given the aforementioned, the following discussion of our Executive Compensation Discussion and Analysis will focus on the most recently completed fiscal year of Alkermes, Inc., as we believe this provides the most relevant disclosure pertaining to the compensation practices that have been and will be followed by Alkermes. Except where specifically noted or the context otherwise requires, the use of terms such as “we” and “our” and “us” in this Executive Compensation Discussion and Analysis refers to Alkermes and to Alkermes, Inc., interchangeably.

 

Introduction and Corporate Governance

 

Our Compensation Committee, or the Committee, reviews, oversees and administers our executive compensation programs. The Committee’s complete roles and responsibilities are set forth in the written charter adopted by the Board, which is available on the Governance page of the Investor Relations section of our website, available at: http://investor.alkermes.com. The Alkermes, Inc. Board selected the following individuals to serve on the Committee for its 2011 fiscal year: Mark B. Skaletsky (Chair), Paul J. Mitchell and David W. Anstice. The Compensation Committee of the Board of Alkermes plc is comprised of the same individuals.

 

Executive Compensation Philosophy and Objectives

 

Our executive compensation program is designed to attract, retain and motivate experienced and well-qualified executive officers who will promote our research and product development, manufacturing, commercialization and operational efforts. We structure our executive officer compensation packages based on level of job responsibility, internal and external peer comparisons, individual performance, principles of internal fairness and our overall company performance. The Committee bases its executive compensation programs on the same objectives that guide us in establishing all our compensation programs, which are:

 

 

 

Compensation Program Elements

 

The compensation program for executive officers consists of the following elements:

 

 

 

The Committee utilizes these elements of compensation to structure compensation packages for executive officers that can reward both short and long-term performance of the individual and our company and foster executive retention.

 

Base Salary

 

Base salaries are used to provide a fixed amount of compensation for the executive’s regular work. The Committee establishes base salaries that are competitive with comparable companies for each position and level of responsibility to the extent such comparable companies and positions exist. The salaries of the executive officers are reviewed on an annual basis, at the time of the mid-fiscal year performance review established by us. In determining increases, if any, to base salary, the Committee may consider factors such as the individual’s performance, level of pay compared to comparable companies for each position and level of responsibility, experience in the position of the individual, cost of living indices, the magnitude of other annual salary increases at our company, and general progress towards achieving the corporate objectives. Any base salary increase for an executive officer must be established by the Committee.

 

Cash Performance Pay

 

Cash performance pay motivates executive officers to achieve both short-term operational and longer term strategic goals that are aligned with, and supportive of, our long-term company value. Cash performance pay is awarded by the Committee after the fiscal year-end based on an evaluation of our company performance and each individual’s contribution to this performance during such fiscal year. Performance objectives are established and evaluated by the Committee as outlined below.

 

In March 2010, the Committee approved the Alkermes, Inc. Fiscal Year 2011 Reporting Officer Performance Pay Plan, or the 2011 Performance Plan, and established target performance pay ranges and target performance pay that may be earned for the period April 1, 2010 to March 31, 2011 by our executive officers, including all of our named executive officers. The plan contained the following fiscal year 2011 corporate objectives for our executives: maximize revenues from our partnered products; prepare for expansion of the VIVITROL^® business into the opioid indication; advance our proprietary pipeline; expand our portfolio; achieve financial performance against budget; and respond to changing business conditions. In March 2010, the Committee initially set the range of the fiscal year 2011 cash performance pay award under the 2011 Performance Plan for Richard F. Pops, our President, Chief Executive Officer and Chairman of the Board, at between 0% and 100% of base salary, with a target performance pay award of 60% of base salary; in July 2010, the Committee, based on comparable market data that had recently been updated by the Committee’s external compensation consultant (as discussed below), modified such performance pay range and target cash performance pay award to between 1% and 150% of base salary and 75% of base salary, respectively. The comparable market data for the President, Chief Executive Officer and Chairman showed that the initial target

cash performance pay fell below the range of target performance pay for chief executive officers in our peer group of comparable companies. In March 2010, the Committee set the range of the fiscal year 2011 cash performance pay awards under the 2011 Performance Plan for participants other than the President, Chief Executive Officer and Chairman of the Board at between 0% and 100% of base salary, with a target cash performance pay award of 50% of base salary. The Committee established such performance pay targets and performance pay ranges based generally on comparable market data. Cash performance pay under our 2011 Performance Plan is awarded after the close of the fiscal year based upon the Committee’s review of the performance of our company against our fiscal year corporate objectives, and the individual performance of each executive officer against such corporate objectives. Individual performance of the participants is determined by the Committee in its sole discretion.

 

Equity Incentives — Stock Options, Restricted Stock Awards and Restricted Stock Unit Awards

 

In October 2008, our shareholders adopted the Alkermes, Inc. 2008 Stock Option and Incentive Plan, or the 2008 Plan. The award of stock options (both incentive and non-qualified options), restricted stock unit awards, restricted stock awards, cash-based awards, and performance share awards is permitted under the 2008 Plan. The 2008 Plan is the only equity plan under which we currently grant equity awards. As used herein, the term “restricted stock award,” unless otherwise specified, will include restricted stock unit awards and restricted stock awards.

 

Grants of stock options and restricted stock awards under our 2008 Plan are designed to promote long-term retention and stock ownership, and align the interests of executives with those of shareholders, providing our executives with the opportunity to share in the future value they are responsible for creating. Generally, stock options and non-performance-based restricted stock awards vest in equal annual installments over a four-year period. The Committee may, in its discretion, award equity with a different vesting schedule; however, under the 2008 Plan, restricted stock awards granted to employees that have a performance-based goal are required to have a restriction period of at least one year, and those with a time-based restriction are required to have at least a three-year restriction period, although vesting can occur incrementally over such three-year period. We had two retirement provisions open to all employees, only one of which (detailed immediately below) contained eligibility criteria that certain of our executive officers have met. If any employee whose age plus years of service equals at least 55 and who has at least 12 years of service with our company retires, then those stock options granted under our 2008 Plan before May 17, 2010, and under our 1998 Equity Incentive Plan and Amended and Restated 1999 Stock Option Plan (i) after December 9, 2004 and before May 17, 2010 or (ii) before December 9, 2004 with an exercise price less than US$13.69, shall vest and become exercisable in full for a prescribed period of time after retirement, not to exceed the full term of the grant. As of March 31, 2011, Mr. Pops, Mr. Landine, and Mr. Frates were the only named executive officers who met the retirement eligibility criteria reflected in these stock option grants; however, Mr. Pops was not entitled to the benefit of this retirement provision for stock options granted to him for performance during fiscal years 2008, 2009 and 2010; this retirement provision did not apply to grants made on or after May 17, 2010. If the retirement criteria have not been met, vested exercisable stock options remain exercisable for up to three months from the recipient’s date of termination from service and unvested stock options are forfeited, unless otherwise specifically determined by the Committee. Currently, there are no special retirement provisions associated with restricted stock awards.

 

The number of shares underlying options and restricted stock awards granted to each executive officer is generally determined by the Committee based on: the performance of the executives and their contributions to overall performance of our company; information with regard to stock option grants and restricted stock awards at comparable companies, and generally within the biotechnology industry, based upon data provided by the independent compensation consultant (as discussed below); the dollar value of equity awards, as determined using the Black-Scholes option pricing model; consideration of previous equity awards made to such person; and personal knowledge of the Committee members regarding executive stock options and restricted stock awards at comparable companies. Consideration is also given to the impact of stock option and restricted stock awards on our results of operations.

During fiscal year 2008, the Committee shifted its equity compensation philosophy by altering the historical composition of equity incentives from primarily stock options to a combination of stock options and restricted stock awards. At the same time, the Committee decided to more selectively utilize these types of equity compensation within the company to focus on senior executives and those other key employees, as identified by our Chief Executive Officer in consultation with our human resources department, who are more likely to be motivated by such equity compensation. The Committee made these changes because it believed using equity in this manner would be more effective in rewarding and retaining key employees and motivating executives to increase shareholder value. In this context, the Committee rebalanced the mix of stock options and restricted stock awards such that senior executives receive a greater proportion of stock options than restricted stock awards, vice presidents receive a more balanced mixture of the two, and we more aggressively utilize restricted stock awards for other of our key employees.

 

The Committee set the range of equity compensation for fiscal year 2011 for our President, Chief Executive Officer and Chairman of the Board at 0 to 600,000 share units, with each full value award issued under our 2008 Plan, such as the grant of a unit of restricted stock, counted as two share units for each share of common stock actually subject to the award, and each grant of a stock option issued under our 2008 Plan counted as an award of one share unit for each share of common stock actually subject to the award.

 

Compensation Determinations

 

Factors Considered in Determining Compensation

 

The Committee may consider a number of factors to assist it in determining compensation for our executive officers.

 

Company Performance.  As discussed previously, the Alkermes, Inc. Board adopted five corporate objectives for our company for fiscal year 2011 and the Committee adopted these objectives and a sixth objective set forth below to measure the performance of our company and its senior executives during the fiscal year ended March 31, 2011: (i) maximize revenues from our partnered products; (ii) prepare for expansion of the VIVITROL business into the opioid indication; (iii) advance our proprietary pipeline; (iv) expand our portfolio; (v) achieve financial performance against budget; and (vi) respond to changing business conditions. The Committee considered the following in assessing our performance against the respective objectives:

 

 

The Committee does not apply a formula or assign these performance objectives relative weights. Rather, it makes a subjective determination after considering such measures individually and in the aggregate.

 

Individual Performance.  In establishing compensation levels, the Committee also evaluates each executive’s individual performance using certain subjective criteria, including an evaluation of each executive’s managerial ability and contribution to achievement of the corporate objectives and to overall corporate performance. In making its evaluations, the Committee consults on an informal basis with other members of the Board. In establishing compensation for executive officers other than Mr. Pops, the Committee reviewed in detail the recommendations of Mr. Pops. With respect to Mr. Pops, the Committee met at the end of the fiscal year to evaluate his performance against the corporate objectives of our company.

 

Use of Compensation Consultant for Benchmarking.  Another factor considered by the Committee in determining executive compensation is the high demand for well-qualified personnel. Given such demand, the Committee strives to maintain compensation levels which are competitive with the compensation of other executives in the industry. To that end, the Committee, through our Human Resource Department’s Director of Compensation and Benefits, retained the services of Pearl Meyer and Partners, or PMP, a nationally-recognized, independent executive compensation consulting firm, to review market data and various incentive programs and to provide assistance in establishing our cash and equity based compensation targets and awards based, in large part, upon a peer group identification and assessment that it was retained to conduct. PMP took direction from, and provided reports to, our Director of Compensation and Benefits, who acted on behalf of and at the direction of the Committee. PMP did not provide us with any services other than the services requested by the Committee.

 

The companies that comprised our pharmaceutical peer group for fiscal year 2011 consisted of: Alnylam Pharmaceuticals, Inc.; AMAG Pharmaceuticals, Inc.; Amylin Pharmaceuticals Inc.; Auxilium Pharmaceuticals, Inc.; BioMarin Pharmaceutical Inc.; Cubist Pharmaceuticals, Inc.; Enzon Pharmaceuticals, Inc.; Isis Pharmaceuticals, Inc.; The Medicines Company; Nektar Therapeutics; United Therapeutics Corporation; Vertex Pharmaceuticals Incorporated; and ViroPharma Incorporated. These thirteen publicly-traded, US-headquartered companies compete in similar product, service and labor markets as Alkermes and have generally similar revenues.

 

PMP also reviewed, and provided to the Committee, data from a survey group of companies, which reflects a broader group of biopharmaceutical/biotechnology companies employing the appropriate revenue, industry and executive role perspectives. Data is collected from survey sources containing data on companies

 

The peer group analyses enable the Committee to compare our executive compensation program as a whole and also the pay of individual executives if the jobs are sufficiently similar to make the comparison meaningful. The Committee seeks to ensure that our executive compensation program is competitive, meaning generally between the 50th and the 75th percentile of our peers in terms of value when we achieve targeted performance levels; however, as mentioned elsewhere in our compensation discussion and analysis, this comparative data provided by PMP is only one of many factors that the Committee takes into consideration in determining executive and individual compensation programs. The Committee, in its sole authority, has the right to hire or terminate outside compensation consultants.

 

Executive Officer Compensation Determination

 

Base Salary.  The Committee reviewed base salaries for all of our executive officers coinciding with our mid-fiscal year performance review. In determining base salary adjustments for executive officers for fiscal year 2011, the Committee considered a number of factors, such as cost of living indices, market data for comparable companies, general progress towards achieving the fiscal year corporate objectives and, for those executive officers other than Mr. Pops, the recommendations of Mr. Pops. Based on this review, the Committee increased the base salaries of Messrs. Pops, Frates, Landine and Pugh and Dr. Ehrich by approximately 3.5%, effective as of October 24, 2010.

 

Cash Performance Pay.  In October 2010, we paid one-time bonuses to certain of our employees for the extraordinary effort required to prepare for and participate in the Psychopharmacologic Drugs Advisory Committee for VIVITROL for the treatment of opioid dependence, which was held in September 2010. As part of those awards and at Mr. Pops’ recommendation, the Committee approved the award of such a one-time bonus to Dr. Ehrich in the amount of US$7,326 in October 2010.

 

In May 2011, the Committee reviewed our performance against the fiscal year corporate objectives, the performance of Mr. Pops against such corporate objectives, and the target cash performance pay and cash performance pay range set by the Committee. The Committee determined that the cash performance pay for Mr. Pops for fiscal year 2011 should be equal to US$900,000, which is equal to approximately 127% of his base salary. The cash performance pay for Mr. Pops was determined based on the Committee’s assessment of his performance against the corporate objectives, including the integral role he played in securing the Business Combination, advancing our proprietary pipeline, addressing the delay in U.S. regulatory approval for BYDUREON, obtaining approval of VIVITROL for the treatment of opioid dependence, meeting our financial objectives and generally transforming us from a drug delivery company dependent on partner portfolio decisions to an integrated pharmaceutical company advancing its own pipeline of proprietary products. In setting Mr. Pops’ cash performance pay, the Committee also discussed data from PMP regarding cash performance pay for chief executive officers of our peer group companies.

 

Also, in April and May 2011, Mr. Pops presented to the Committee a performance evaluation of each of the other named executive officers and his recommendations for cash performance pay amounts based on such evaluation. Based upon the achievement of our corporate objectives, the challenges faced by each individual named executive officer in achieving those objectives and the individual performance recommendations of Mr. Pops, as well as the target cash performance pay and cash performance pay ranges set by the Committee, the Committee determined and awarded cash performance pay for fiscal year 2011 in an amount equal to, for Messrs. Landine and Pugh approximately 72%, Mr. Frates approximately 65% and Dr. Ehrich approximately 73%, of their respective current base salaries. All such amounts are set forth in the Summary Compensation Table below.

 

Equity Incentives — Stock Options and Restricted Stock Awards.  In May 2011, after the close of fiscal year 2011, the Committee awarded equity grants for fiscal year 2011 performance. In determining the grant of equity to Mr. Pops, the Committee took into consideration comparable peer group data provided by PMP, the dollar value of equity awards, as determined using the Black-Scholes option pricing model, historic awards, the overall equity position of Mr. Pops, the performance of our company against corporate objectives, and the

performance of Mr. Pops against the corporate objectives. The Committee also considered the potential beneficial impact on shareholder return offered by the long-term incentive nature of time-vesting equity grants. Based upon these factors, the Committee awarded Mr. Pops a stock option grant of 400,000 shares and a restricted stock unit award of 32,500 shares. These stock options and restricted stock unit awards vest in four equal annual installments commencing on the one-year anniversary of the grant date, subject to early vesting in certain instances described below in “Potential Payments upon Termination or Change in Control.”

 

The following table sets forth equity incentive awards earned by Mr. Pops based on his performance and the performance of our company during fiscal years 2010 and 2011.

 

 

 

 

In November 2009, the Committee provided Mr. Pops with an equity grant in recognition of his new role as Chairman, President and Chief Executive Officer of the Company. In determining the grant of equity to Mr. Pops, the Committee took into consideration the overall equity position of Mr. Pops and the retention value of such equity. The Committee awarded Mr. Pops a stock option grant of 500,000 shares, or the Retention Option Award, vesting in four equal annual installments commencing on the one-year anniversary of the grant date, subject to early vesting in certain instances described below in “Potential Payments upon Termination or Change in Control.” To maximize its retentive value, the stock option grant did not receive the benefit of certain retirement provisions for which Mr. Pops would otherwise qualify and which would provide accelerated vesting and greater time to exercise the options as described above under “Compensation Program Elements — Equity Incentives — Stock Options, Restricted Stock Awards and Restricted Stock Unit Awards.” The Committee also provided Mr. Pops with a restricted stock unit award of 250,000 shares, or the Retention RSU Award, which, together with the Retention Option Award, we refer to as the Retention Awards, vesting 50% on the third anniversary of the date of grant and 50% on the fourth anniversary of the date of grant, subject to early vesting in certain instances described below in “Potential Payments upon Termination or Change in Control.” This vesting schedule, which differs from our standard restricted stock unit vesting schedule, was specifically chosen by the Committee as a retention mechanism and to align Mr. Pops’ interests with the long term interests of our shareholders.

 

In May 2011, after the close of fiscal year 2011, the Committee also awarded equity grants for all other executive officers for performance during such fiscal year. The Committee considered the comparable peer group data provided by PMP, the dollar value of equity awards as determined using the Black-Scholes option pricing model, historic awards, the performance of our company against corporate objectives, the overall equity position of each of the executives and the recommendations of Mr. Pops based on his assessment of each individual’s performance against corporate objectives. Based upon these factors, the Committee awarded the following equity grants to each of Messrs. Frates, Landine and Pugh and Dr. Ehrich: a stock option grant of 100,000 shares and a restricted stock unit award of 15,000 shares. Each of these stock option grants and restricted stock unit awards vests in four equal annual installments commencing on the one-year anniversary of the grant date, subject to early vesting in certain instances such as death or permanent disability and other instances as described below in “Potential Payments upon Termination or Change in Control.”

Stock Ownership Guidelines

 

Our Board members and executive officers (consisting of those who are required to file reports under Section 16(a) of the Exchange Act) are subject to stock ownership guidelines. The guidelines are designed to align the interests of our Board members and executive officers with those of our shareholders by ensuring that our Board members and executive officers have a meaningful financial stake in our long-term success. The guidelines establish minimum ownership levels by position (set forth below), with such values determined based on the value of common stock owned by such persons as of certain annual measurement dates specified in guidelines. Our stock ownership guidelines were approved by the Committee and Alkermes, Inc. Board in March 2009, with an effective date of April 1, 2010. The ownership levels specified in the guidelines became effective for our Chief Executive Officer as of April 1, 2010 and will become effective for all other current members of our Board and executive officers as of April 1, 2015.

 

 

All shares directly or beneficially owned by the director or executive officer, including the value of vested stock options (where the market price of our common stock as of the measurement date exceeds the strike price of such option), are included for purposes of determining the value of shares owned under our stock ownership guidelines.

 

For any Board members and executive officers joining our company after April 1, 2010, the stock ownership guidelines will become effective beginning on that April 1 that is five full years after their appointment as a Board member or executive officer. The Nominating and Corporate Governance Committee determined that Mr. Pops had met the stock ownership thresholds set forth in the guidelines as of April 1, 2011.

 

Perquisites

 

We did not provide executive officers with any perquisites in fiscal year 2011.

 

Retirement benefits

 

The terms of our 401(k) Savings Plan (“401k Plan”), provide for executive officer and broad-based employee participation. Under the 401k Plan, all of our employees are eligible to receive matching contributions from us. Our matching contribution for the 401k Plan for fiscal year 2011 was as follows: dollar for dollar on the first 1% of each participant’s eligible compensation and US$0.50 on the dollar on the next 5% of each participant’s eligible compensation, for a total match of 3.5% of such participant’s eligible compensation, subject to applicable Federal limits.

 

Other benefits

 

Executive officers are eligible to participate in our employee benefit plans on the same terms as all other employees. These plans include medical, dental and life insurance. We may also provide relocation expense reimbursement and related tax gross-up benefits which are negotiated on an individual basis with executive officers. In addition, executive officers are eligible to receive severance benefits in connection with a termination or a change in control as set forth in each of their employment contracts and described more fully below.

 

Post Termination Compensation and Benefits

 

We have a program in place under which our executive officers receive severance benefits if they are terminated without cause or if they terminate their employment for “good reason” (e.g., a material diminution in his or her responsibilities, authority, powers, functions, duties or compensation or a material change in the geographic location at which he or she must perform his or her employment), and thereafter sign a general release of claims. Additionally, named executive officers receive severance benefits if, for a period of time

following a corporate transaction or a change in control, they are terminated without cause or they terminate for “good reason”. The terms of these arrangements and the amounts payable under them are described in more detail below under “Potential Payments Upon Termination or Change in Control.” We provide these arrangements because we believe that some severance arrangements are necessary in a competitive market for talent to attract and retain high quality executives. In addition, the change in control benefit allows the executives to maintain their focus on our business during a period when they otherwise might be distracted.

 

Tax Deductibility of Compensation

 

In general, under Section 162(m) of the Code, we cannot deduct, for federal income tax purposes, compensation in excess of US$1,000,000 paid to our named executive officers. This deduction limitation does not apply, however, to certain “performance-based compensation” within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder.

 

Management regularly reviews the provisions of our plans and programs, monitors legal developments and works with the Committee to preserve Section 162(m) tax deductibility of compensation payments. Changes to preserve tax-deductibility are adopted to the extent reasonably practicable, consistent with our compensation policies and as determined to be in our best interests and the best interests of our shareholders.

 

Summary Compensation Table for the 2011, 2010 and 2009 Fiscal Years

 

The following table presents and summarizes the compensation paid to, or earned by, our named executive officers for the fiscal years ended March 31, 2011, 2010 and 2009. As described above, in light of the recent organization of the Company as part of the Business Combination transaction between Alkermes, Inc. and the EDT business of Elan, the individuals named below were selected based on historical data from Alkermes, Inc.

 

 

Notes to Summary Compensation

 

 

Grants of Plan-Based Awards — for Fiscal Year Ended March 31, 2011

 

The following table presents information on all grants of plan-based awards made in fiscal year 2011 to our named executive officers:

 

 

 

Notes to Grants of Plan-Based Awards

 

Outstanding Equity Awards at 2011 Fiscal Year-End

 

The following table presents the equity awards we have made to each of the named executive officers that were outstanding as of March 31, 2011: