Chiasma, Inc. (NASDAQ:CHMA) Files An 8-K Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On May 31, 2019, the Board of Directors (the Board) of Chiasma, Inc. (the Company) appointed Raj Kannan as Chief Executive Officer of the Company and member of the Board, effective as of his start date, which is expected on June 17, 2019 (the Effective Date). As of the Effective Date, Mark J. Fitzpatrick, the Companys current Chief Executive Officer, will continue to serve as the Companys President and principal financial officer and will resign from the Board.
Mr. Kannan, age 55, joins the Company from Kiniksa Pharmaceuticals, Ltd. (Kiniksa) (NASDAQ: KNSA) where he has worked since July 2018 as Chief Commercial Officer. In that role, he was responsible for building and leading the companys commercial operations, including sales, marketing, business analytics, and market access functions. Prior to Kiniksa, Mr. Kannan served as the Global Head of the Neurology and Immunology (N&I) business franchise at Merck KGaA, where he was responsible for $2 billion in annual revenues. In that role, he successfully led the launch of Mavenclad, an oral small molecule in Multiple Sclerosis. He also chaired the N&I franchise leadership team that was responsible for advancing the immunology pipeline assets, prioritizing the portfolio mix, and the resource allocation across development assets. Prior to Merck KGaA, Mr. Kannan spent ten years at Boehringer Ingelheim (Boehringer) in roles of increasing responsibility in the U.S., Canada, and in Germany, including the role of Global Marketing Head of the Cardiovascular Franchise where he was responsible for over $3.5 billion in annual revenues. Before Boehringer, he worked for almost ten years at Merck and Co. in various roles from field sales to senior marketing manager in the U.S. Mr. Kannan has led or supported multiple successful launches across therapeutic areas both in the U.S. and globally. Mr. Kannan received a bachelor of science degree in chemistry from the University of Madras, as well as a masters degree in business administration from East Carolina University.
In connection with Mr. Kannans appointment, the Company and Mr. Kannan have entered into an employment agreement (the Kannan Employment Agreement), which provides for the following compensation terms for Mr. Kannan. Mr. Kannan will receive a base salary of $520,000 per year (prorated for 2019), a hiring bonus of $50,000 and will be eligible to receive an annual performance bonus, with a target annual bonus equal to 50% of his base salary. On the Effective Date, Mr. Kannan will also receive an option to purchase 950,000 shares of the common stock of the Company (the Option) at an exercise price per share equal to the stocks fair market value on the date of the grant to the Companys 2015 Stock Option and Incentive Plan (the Plan). The Option will vest over a four-year period as follows: 25% will vest on the first anniversary of the Effective Date and the remaining 75% will vest in equal monthly installments for the following 36 months, provided that Mr. Kannan remains employed by the Company on each such vesting date. Mr. Kannan is eligible to participate in the Companys employee benefit plans on the same basis as generally made available to other full-time employees of the Company, as well as all benefit programs available to the senior executive employees of the Company.
The Kannan Employment Agreement provides for certain payments and benefits in the event of a termination of Mr. Kannans employment under specific circumstances. If Mr. Kannans employment is terminated by the Company without Cause at any time or by Mr. Kannan for Good Reason within 12 months following a Change of Control (each as defined in the Kannan Employment Agreement), he would be entitled to (1) continuation of his base salary at the rate in effect immediately prior to the termination date for 18 months following the termination date; (2) payment of his target bonus for the year in which the Change in Control occurs; (3) immediate vesting of all of the unvested shares subject to the Option and all other equity awards granted to him to the Plan; and (4) continuation of coverage of group health plan benefits (COBRA benefits) until the earlier of (a) 18 months after the date of termination and (b) the date Mr. Kannan becomes eligible for health benefits through another employer or otherwise becomes ineligible for COBRA benefits. Mr. Kannans receipt of such termination payments and benefits is contingent upon execution of a general release of claims in favor of the Company.
In the event Mr. Kannans employment is terminated by the Company without Cause or by Mr. Kannan for Good Reason, in either case other than a termination within 12 months following a Change in Control, provided he adheres to certain conditions set forth in the Agreement, he would be entitled to (1) continuation of his then current base salary for 12 months following the termination date; and (2) COBRA benefits until the earlier of (a) 12 months after the date of termination and (b) the date Mr. Kannan becomes eligible for health benefits through another employer or otherwise becomes ineligible for COBRA benefits. Mr. Kannans receipt of such termination payments and benefits is contingent upon execution of a general release of claims in favor of the Company.
The foregoing description of the Kannan Employment Agreement is a summary and is qualified in its entirety by reference to the Kannan Employment Agreement, which is attached hereto as Exhibit 10.1, and is incorporated by reference herein.
Other than the Kannan Employment Agreement, Mr. Kannan is not a party to any transaction with the Company that would require disclosure under Item 404(a) of Regulation S-K, and there are no arrangements or understandings between Mr. Kannan and any other persons to which he was selected as a director or as Chief Executive Officer.
Mark J. Fitzpatrick
On May 31, 2019, the Company entered into an amended and restated employment agreement with Mark J. Fitzpatrick to reflect his transition to President and principal financial officer as of the Effective Date (the Fitzpatrick Employment Agreement). Mr. Fitzpatrick will receive a base salary of $520,000 per year and will be eligible to receive an annual performance bonus, with a target annual bonus equal to 50% of his base salary. In addition, Mr. Fitzpatrick will continue to be entitled to receive a retention bonus of $25,000 per year, which bonus commenced accruing pro-rata on a monthly basis on October 1, 2016 (i.e., the period commencing each October 1 and ending September 30 the following calendar year), which amount will (1) continue to accrue monthly until he no longer serves as the Companys principal financial officer; (2) not exceed $100,000 in the aggregate; and (3) be payable only if he remains employed with the Company until the Company resubmits its new drug application with the U.S. Food and Drug Administration for Mycapssa® (octreotide capsules) (the NDA) or he is terminated by the Company without Cause (as defined in the Fitzpatrick Employment Agreement) prior to the filing of the NDA.