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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ALKERMES, INC.

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Waltham, Massachusetts

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

To be held October 5, 2010

 

 

To the Shareholders:

 

The annual meeting of shareholders of Alkermes, Inc., or the Company, will be held at the offices of the Company, 852 Winter Street, Waltham, Massachusetts 02451, on October 5, 2010, at 9:00 a.m. for the following purposes:

 

 

The Board of Directors has fixed July 23, 2010 as the record date for determining the holders of Common Stock entitled to notice of, and to vote at, the 2010 Annual Meeting of Shareholders. Consequently, only holders of Common Stock of record on the transfer books of the Company at the close of business on July 23, 2010 will be entitled to notice of, and to vote at, the meeting or any adjournments thereof. All shareholders are cordially invited to attend the meeting.

 

To ensure your representation at the 2010 Annual Meeting of Shareholders, you are urged to vote by one of the following steps as promptly as possible:

 

 

If your shares are held in “street name” in a stock brokerage account or by a bank or other nominee, you must provide your broker with instructions on how to vote your shares in order for your shares to be voted on important matters presented at the annual meeting. If you do not instruct your broker on how to vote in the election of directors this year, your shares will not be counted in the election.

 

Kathryn L. Biberstein

Secretary

 

July 29, 2010

 

 

 

 

ALKERMES, INC.
PROXY STATEMENT

GENERAL INFORMATION ABOUT THE MEETING AND VOTING

 

The accompanying proxy is solicited by the Board of Directors, or Board, of Alkermes, Inc., a Pennsylvania corporation, referred to as Alkermes or the Company, in connection with its 2010 Annual Meeting of Shareholders, or Annual Meeting, to be held at the offices of the Company, 852 Winter Street, Waltham, Massachusetts 02451, at 9:00 a.m., on October 5, 2010. Copies of this Proxy Statement and the accompanying proxy were made available on or after July 29, 2010 to the holders of record of Common Stock on July 23, 2010, which is known as the Record Date. Our 2010 Annual Report on Form 10-K is also being sent with this Proxy Statement.

 

Why are we soliciting proxies?

 

We are furnishing this Proxy Statement to the holders of our common stock in connection with the solicitation of proxies on behalf of our Board for use at our Annual Meeting.

 

When and where is the 2010 Annual Meeting?

 

The Annual Meeting will be held at our offices at 852 Winter Street, Waltham, Massachusetts 02451 on Tuesday, October 5, 2010 at 9:00 A.M. local time or at any future date and time following an adjournment or postponement of the meeting.

 

What are the purposes of the 2010 Annual Meeting?

 

The purposes of the Annual Meeting and the matters to be acted upon are set forth in the accompanying Notice of Annual Meeting of Shareholders. The Board knows of no other business that will come before the Annual Meeting.

 

Who can vote and how does cumulative voting work?

 

Holders of Common Stock of record at the close of business on the Record Date will be entitled to cast one vote per share so held of record on such date on all items of business properly presented at the Annual Meeting, except that the holders have cumulative voting rights in the election of directors. Therefore, each shareholder is entitled to cast as many votes in the election of directors as shall be equal to the number of shares of Common Stock held by such shareholder on the Record Date, multiplied by the number of directors to be elected. A shareholder may cast all such votes for a single nominee or may distribute votes among nominees as the shareholder sees fit. If you choose to cumulate your votes, you will need to make an explicit statement of your intent to cumulate your votes, either by so indicating in writing on your proxy card or on your ballot when voting at the Annual Meeting. Unless contrary instructions are given, the persons named in the proxy will have discretionary authority to accumulate votes among nominees as they consider advisable.

 

How do proxies work?

 

Our Board is asking for your proxy using the accompanying proxy card. Giving us your proxy means that you authorize us to vote your shares at the Annual Meeting in the manner you direct. You may either vote for or withhold voting authority with respect to some or all of our director nominees. You may also vote for or against the other proposals or abstain from voting. If you submit the proxy card without specifying your voting instructions, we will vote your shares as follows:

 

 

With respect to all other matters, the persons named in the accompanying proxy will vote as stated herein. See “Other Business.”

Shares represented by valid proxies received in time for the Annual Meeting and not revoked before the Annual Meeting will be voted at the Annual Meeting. You can revoke your proxy and change your vote in the manner described below in the subsection titled “How can I change my vote?” If your shares are held through a bank, broker or other nominee, please follow the instructions provided by your bank, broker or other nominee.

 

How do I vote?

 

It is important that your shares are represented at the Annual Meeting, whether or not you attend the Annual Meeting in person.

 

If you are a registered shareholder (also called a “record holder”), there are four ways to vote:

 

http://www.envisionreports.com/ALKS, 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 pm EDT on October 4, 2010.

 

 

If your shares are held in a brokerage account in your broker’s name (this is called “street name”), please follow the voting instructions provided by your bank, broker or other nominee. In most cases, you may submit voting instructions by telephone or by Internet to your bank, broker or other nominee, or you can sign, date and return a voting instruction form to your bank, broker or other nominee. If you provide specific voting instructions by telephone, by Internet or by mail, your bank, broker or other nominee must vote your shares as you have directed. If you wish to vote in person at the Annual Meeting, you must request a legal proxy from your bank, broker or other nominee.

 

What does it mean if I receive more than one proxy card or voting instruction form?

 

If you hold your shares in more than one account, you will receive a proxy card or voting instruction form for each account. To ensure that all of your shares are voted, please use each proxy card and voting instruction form to vote by telephone or by Internet or sign, date and return a proxy card or voting instruction form for each account.

 

How can I change my vote?

 

You may revoke your proxy and change your vote at any time before the Annual Meeting by:

 

 

 

Only your latest vote, in whatever form, will be counted.

 

What is a broker non-vote?

 

Broker non-votes generally occur when shares held by a broker nominee for a beneficial owner are not voted with respect to a proposal because the broker nominee has not received voting instructions from the beneficial owner and lacks discretionary authority to vote the shares. Under stock exchange and other rules, brokers have the authority to vote such shares only on discretionary, or routine, matters but not on non-discretionary, or non-routine, matters.

 

Each matter on the agenda for the Annual Meeting (other than ratification of our independent registered public accountants) is a non-routine matter. If you do not instruct your broker how to vote on these matters your shares will not be counted.

 

You should vote your shares by following the instructions on the voting instruction form provided by your bank, broker or other nominee and returning your voting instruction form to your bank, broker or other nominee to ensure that your shares are voted on your behalf.

 

Will my shares be counted if I do not vote?

 

If you are a record holder and do not vote by telephone or by Internet, or by signing, dating and returning a proxy card, or in person at the Annual Meeting, then your shares will not be voted.

 

If you are the beneficial owner of shares held in street name by a bank, broker or other nominee, as the record holder of the shares, your bank, broker or other nominee is required to vote those shares in accordance with your instructions. We urge you to provide instructions to your bank, broker or other nominee so that your votes may be counted on these important matters. You should vote your shares by following the instructions on the voting instruction form provided by your bank, broker or other nominee and returning your voting instruction form to your bank, broker or other nominee to ensure that your shares are voted on your behalf.

 

If you do not give instructions to your broker, your broker will be entitled to vote your shares only with respect to routine matters, which at the Annual Meeting is only the ratification of our independent registered public accountants, but will not be permitted to vote your shares with respect to non-routine matters. Uninstructed shares will be treated as broker non-votes. We urge you to provide instructions to your broker to ensure that your votes will be counted.

 

How many shares must be present to hold the Annual Meeting?

 

The Company had 95,106,212 shares of Common Stock outstanding and entitled to vote on the Record Date. The presence at the Annual Meeting, in person or by proxy, of shareholders entitled to cast at least a majority of the votes that all shareholders of record are entitled to cast on a particular matter will constitute a quorum for the purposes of consideration and action on such matter. If a quorum is not present, we expect that the Annual Meeting will be adjourned until we obtain a quorum.

What vote is required to approve each proposal and how are votes counted?

 

 

Are there other matters to be voted on at the Annual Meeting?

 

We do not know of any other matters that may come before the Annual Meeting. If any other matters are properly presented to the Annual Meeting, the persons named in the accompanying proxy card intend to vote, or otherwise act, in accordance with their best judgment.

 

Where do I find the voting results of the Annual Meeting?

 

We will disclose voting results in a Current Report on Form 8-K filed with the Securities and Exchange Commission, or SEC, within four business days after the end of the Annual Meeting.

 

Important Notice Regarding the Availability of Proxy Materials for the 2010 Annual Meeting of Shareholders to be Held on October 5, 2010.

 

The proxy statement and annual report to Shareholders are available at www.edocumentview.com/ALKS.

 

PROPOSAL 1

 

ELECTION OF DIRECTORS

 

Our Board of Directors currently consists of nine members: David W. Anstice, Floyd E. Bloom, Robert A. Breyer, Geraldine Henwood, Paul J. Mitchell, Richard F. Pops, Alexander Rich, Mark B. Skaletsky and Michael A. Wall. Nine directors are to be elected at the Annual Meeting to serve one-year terms until the 2011 annual meeting of shareholders and until their respective successors are elected and shall qualify. The persons named in the accompanying proxy intend to vote for the election of David W. Anstice, Floyd E. Bloom, Robert A. Breyer, Geraldine Henwood, Paul J. Mitchell, Richard F. Pops, Alexander Rich, Mark B. Skaletsky, and Michael A. Wall unless authority to vote for one or more of such nominees is specifically withheld in the proxy. The persons named in the proxy will have the right to vote cumulatively and to distribute their votes among such nominees as they consider advisable. The Board of Directors is informed that all the nominees are willing to serve as directors, but if any of them should decline to serve or become unavailable for election at the Annual Meeting, an event which the Board of Directors does not anticipate, the persons named in the proxy will vote for such nominee or nominees as may be designated by the Board of Directors, unless the Board of Directors reduces the number of directors accordingly.

 

The nine nominees for directors receiving the highest number of votes cast by shareholders entitled to vote thereon will be elected to serve on the Board of Directors. 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 (shares held by a broker or nominee as to which the broker or nominee does not have the authority to vote on a particular matter) 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 effect the outcome of the vote on this proposal.

 

The Board of Directors recommends that you vote FOR the election of the nominees named herein to the Company’s Board of Directors.

Directors and Executive Officers

 

The following table sets forth the directors, director nominees approved by the Board upon the recommendation of the Nominating and Corporate Governance Committee to be elected at the Annual Meeting and the executive officers of the Company, their ages, and the position currently held by each such person within the Company as of July 23, 2010.

 

 

 

 

Biographical Information

 

Ms. Biberstein is Senior Vice President, General Counsel and Secretary of Alkermes. She is also the Chief Compliance Officer of Alkermes and the head of Government Relations and Public Policy. From March 2003 to April 2007, Ms. Biberstein served as Vice President and General Counsel of Alkermes. She has served as Secretary of Alkermes since June 2004. She was Of Counsel at Crowell & Moring LLC from February 2002 to February 2003 and performed legal consulting services for various clients from March 2000 to February 2002. She was also employed by Serono S.A., a biotechnology company, as General Counsel from 1993 to March 2000, where she was a member of the Executive Committee.

 

Mr. Frates is Senior Vice President, Chief Financial Officer and Treasurer of Alkermes. From June 1998 to April 2007, Mr. Frates served as Vice President, Chief Financial Officer and Treasurer of Alkermes. From June 1996 to June 1998, he was employed at Robertson, Stephens & Company, most recently as a Vice President in Investment Banking. Prior to that time he was employed at Morgan Stanley & Co. Mr. Frates served on the Board of Directors of GPC Biotech AG, a biotechnology company, from June 2004 to 2009, and was a national director of the Association of Bioscience Financial Officers from 2004 to 2009.

 

Mr. Landine is Senior Vice President, Corporate Development of Alkermes. From March 1999 until May 2007, Mr. Landine served as Vice President, Corporate Development of Alkermes. From March 1988 until June 1998, he was Chief Financial Officer and Treasurer of Alkermes. Mr. Landine is a member of the Board

of Directors of Kopin Corporation, a publicly traded manufacturer of components for electronic products, GTC Biotherapeutics, Inc., a publicly traded biotechnology company, and ECI Biotech, a privately held protein sensor company. Mr. Landine is a Certified Public Accountant.

 

Dr. Ehrich serves as Senior Vice President of Research and Development and Chief Medical Officer at Alkermes. Dr. Ehrich leads the Research and Development, Clinical Sciences and Drug Safety functions at Alkermes. Prior to assuming this position in May 2007, Dr. Ehrich served as Vice President, Science Development and Chief Medical Officer. Prior to joining Alkermes in 2000, Dr. Ehrich spent seven years at Merck & Co., Inc., a publicly traded pharmaceutical company, overseeing the clinical development and registration of novel pharmaceuticals. Dr. Ehrich is a Fellow of the American College of Rheumatology and has had numerous publications in peer-reviewed journals. Dr. Ehrich worked as a research associate at the European Molecular Biology Laboratory in Heidelberg, Germany before attending medical school. Dr. Ehrich is also a member of the scientific advisory board for Aileron Therapeutics, a privately held biopharmaceutical company.

 

Mr. Pugh serves as Senior Vice President and Chief Operating Officer at Alkermes and, as of July 2010, as the Company’s Chief Risk Officer. In his current role, he is responsible for the overall leadership of the Operations departments at Alkermes. Additionally, he oversees site management in Waltham, Massachusetts, and Wilmington, Ohio. Prior to assuming these positions in May 2007, Mr. Pugh served as Vice President of Operations at Alkermes. Mr. Pugh has over 25 years of operations and manufacturing experience. For the eight year period prior to joining Alkermes, Mr Pugh worked at Lonza Biologics, Inc., a publicly traded life sciences company, as the Vice President of manufacturing operations in the U.S. and Europe.

 

Mr. Pops is the Chief Executive Officer, President and Chairman of the Board of Directors of Alkermes. Mr. Pops served as Chief Executive Officer of Alkermes from February 1991 to April 2007 and again assumed this role, along with that of President, in September 2009. He has been a director of Alkermes since February 1991 and has been Chairman of the Board of Directors of Alkermes since April 2007. Since 1998, Mr. Pops has served on the Board of Directors of Neurocrine Biosciences, Inc., a publicly traded biopharmaceutical company, Acceleron Pharma, Inc. and Epizyme Inc., both of which are privately held biotechnology companies, the Biotechnology Industry Organization, or BIO, the Pharmaceutical Research and Manufacturers of America, or PhRMA, and the New England Healthcare Institute. He is an advisory board member of Polaris Venture Partners. He has previously served on the Board of Directors of two other publicly traded biopharmaceutical companies, Sirtis Pharmaceuticals (from 2004 until 2008), and CombinatoRx, Incorporated (from 2001 until 2009). Mr. Pops also served on the Board of Directors of Reliant Pharmaceuticals, a privately held pharmaceutical company purchased by GlaxoSmithKline in 2007. He is also a member of the Harvard Medical School Board of Fellows and the Fessenden School Board of Trustees.

 

Mr. Pops’ qualifications for our Board include his leadership experience, business judgment and industry knowledge. As a senior executive of Alkermes for almost twenty years, he provides in-depth knowledge of our company derived from leading its day to day operations. His ongoing involvement as a board member of BIO and PhRMA brings to the organization extensive knowledge of the current state of the pharmaceutical industry.

 

Mr. Anstice has been a director of Alkermes since October 2008. He served as Executive Vice President of Merck & Co., Inc. from 2006 through August 2008 with responsibility for enterprise strategy and implementation; during two separate parts of this period he was acting President, Global Human Health and President of Merck’s business in Japan. From 2003 to 2006, Mr. Anstice served as President of Merck’s Asia Pacific businesses. From 1995 to 2003, Mr. Anstice served as President of Merck’s business units in the U.S. and Canada, and for Latin America. In his 34 years with Merck, he held a variety of positions with their worldwide ventures, including President, Human Health, Europe, and reported to the Chief Executive Officer of Merck from 1994 through August 2008. Mr. Anstice serves as Chairman and President of the Board of the University of Sydney USA Foundation, Member of the Board of Management for the Morris Arboretum at the University of Pennsylvania, Trustee for the US Foundation of the University Del Valle of Guatemala, Board Member of the United States Studies Centre at the University of Sydney, and a board of advice member for the University of Sydney faculty of Economics and Business. He is also an adjunct professor for the faculty of

Economics & Business at the University of Sydney. Since 2008, Mr. Anstice has served as a director of CSL Limited, a publicly traded, global, specialty biopharmaceutical company.

 

Mr. Anstice’s lengthy service with Merck & Co., in combination with the breadth of his responsibilities while at Merck, provide the Company with experience in and knowledge about the pharmaceutical industry. Mr. Anstice’s prior leadership positions in industry organizations augment his pharmaceutical management and organizational expertise and industry knowledge. Mr. Anstice also has expertise in the areas of strategic planning, risk management and corporate governance.

 

Dr. Bloom is a founder of Alkermes and has been a director of Alkermes since 1987. Dr. Bloom has been active in neuropharmacology for more than 35 years, holding positions at Yale University, the National Institute of Mental Health and The Salk Institute. Since 1983, he has been at The Scripps Research Institute where he was Chairman of the Department of Neuropharmacology until February 2005 and where he is currently a Professor Emeritus. From 2000 to 2006, Dr. Bloom served as Chief Executive Officer of Neurome, Inc., a privately held biotechnology company. Dr. Bloom served as Editor-in-Chief of the publication Science from 1995 to May 2000. He is a member of the National Academy of Science, the Institute of Medicine, the Royal Swedish Academy of Science, and the Board of Trustees of Washington University, as Chairman of National Council for the School of Medicine. He also currently serves on the Veterans Administration’s Gulf War Veterans Illness Research Advisory Committee and, until 2009, served on the President’s Council on Bioethics. Dr. Bloom also serves on the Scientific Advisory Boards of Middlebrook Pharmaceuticals, and Rivervest and as a consultant to 5AM Investments, Ceregen, Inc. and RxGen, Inc. From 2007 until 2009, Dr. Bloom served as a member of the Board of Directors of Elan Corporation, a neuroscience-based biotechnology foreign private issuer headquartered in Ireland. Dr. Bloom currently serves on Elan Corporation’s Science and Technology Committee.

 

Dr. Bloom is a distinguished scientist and long-standing member of various scientific societies, including the National Academy of Sciences. His scientific knowledge makes him a resource to the Company’s research and development and commercial teams and a reference point for other directors. Dr. Bloom’s service on other publicly traded company boards provides experience relevant to good corporate governance practices. As a founder of the Company, Dr. Bloom also brings a historical perspective to our Board.

 

Mr. Breyer has been a director of Alkermes since July 1994. He served as the President of Alkermes from July 1994 until his retirement in December 2001 and Chief Operating Officer from July 1994 to February 2001. From August 1991 to December 1993, Mr. Breyer was President and General Manager of Eli Lilly Italy, a subsidiary of Eli Lilly and Company, or Eli Lilly, a publicly traded pharmaceutical company. From September 1987 to August 1991, he was Senior Vice President, Marketing and Sales, of IVAC Corporation, a medical device company and a subsidiary of Eli Lilly. Mr. Breyer is also a former member of the Board of Directors of Lentigen, Inc., a privately held diversified biologics company.

 

Mr. Breyer’s experience as an executive with Eli Lilly provides management and operational skills to our Board. Mr. Breyer has experience with managing overall financial performance of pharmaceutical and medical device units and in pharmaceutical manufacturing and sales and marketing operations. As a former executive at Alkermes, Mr. Breyer also has knowledge of the Company’s technology, manufacturing operations and management team.

 

Ms. Henwood has been a director of Alkermes since April 2003. She is currently the Chief Executive Officer and a director of both Recro Pharma Inc., a privately held specialty pharmaceutical company, and Garnet BioTherapeutics, Inc., a privately held clinical stage cell therapy company, and is a consultant with Malvern Consulting Group. From 1999 to July 2006, she was the President, Chief Executive Officer and a director of Auxilium Pharmaceuticals, a publicly traded pharmaceutical company co-founded by Ms. Henwood and specializing in urologic and male health. Prior to founding Auxilium, Ms. Henwood founded, in 1985, a contract research organization, IBAH, Inc., that became a public company and was eventually sold to a large healthcare company. Prior to founding IBAH, Ms. Henwood was employed by SmithKline Beecham, a pharmaceutical company, in various capacities including senior commercial, medical and regulatory positions. Since 2004, Ms. Henwood has served on the Board of Directors of MAP Pharmaceuticals, Inc., a publicly

traded pharmaceutical company. Ms. Henwood also serves on the Board of Directors of ImmunoScience, Inc., a privately held vaccine development company, and is a trustee of Neumann College.

 

Ms. Henwood brings expertise in clinical development and regulatory approval processes to our Board. Ms. Henwood’s experience at large and small pharmaceutical and biotech companies provides insight into drug development, both as conducted by the Company itself or in partnership with large pharmaceutical companies. Ms. Henwood’s additional qualifications for our Board include her industry knowledge and the management and operational experience she acquired as the Chief Executive Officer of several pharmaceutical and biotechnology companies. Her service on various life science boards also brings relevant corporate governance experience to our Board.

 

Mr. Mitchell has been a director of Alkermes since April 2003. He served as the Chief Financial Officer and Treasurer of Kenet, Inc., a privately held semiconductor company, from April 2002 until January 2009. Prior to joining Kenet, Mr. Mitchell was the Chief Financial Officer and Treasurer of Kopin Corporation, a publicly traded semiconductor company, from April 1985 through September 1998. From September 1998 through June 2001, Mr. Mitchell served in a consulting role at Kopin as Director of Strategic Planning. Prior to joining Kopin, Mr. Mitchell worked for the international accounting firm of Touche Ross & Co. from 1975 to 1984. Mr. Mitchell is also President of Mitchell Financial Group, an investment and consulting firm with activities in the technology, healthcare and financial services industries. He is a Certified Public Accountant.

 

Mr. Mitchell’s background as the Chief Financial Officer of several companies, including a publicly traded company, and as a certified public accountant provides expertise to our Board in the area of financial reporting, treasury, financing issues, executive compensation and compliance with securities obligations. His business judgment is relied upon by our Board when contemplating a variety of organizational and strategic issues.

 

Dr. Rich is a founder of Alkermes and has been a director of Alkermes since 1987. Dr. Rich has been a professor at the Massachusetts Institute of Technology since 1958, and is the William Thompson Sedgwick Professor of Biophysics and Biochemistry. He is a member of the National Academy of Sciences, the American Academy of Arts and Sciences and the Institute of Medicine. Dr. Rich is Chairman of the Board of Directors of Repligen Corporation, a publicly traded biotechnology company, and has served on the Board of Directors of Repligen Corporation since 1981. Dr. Rich also serves as a member of the Board of Directors of Profectus Biosciences Inc., a privately held biotechnology company. He serves on the editorial board of Genomics and the Journal of Biomolecular Structure and Dynamics. He previously served on the Board of Directors of Bristol-Myers Squibb Company from October 1989 to 1995 and on the Board of Directors of the Squibb Corporation from March to October 1989.

 

Dr. Rich is an eminent scientist with over forty years experience in academic research. As the past and current director of several publicly traded life sciences companies, Dr. Rich has insight into issues affecting life science companies as they grow and mature. As a founder of the Company, Dr. Rich has extensive knowledge of our business as well.

 

Mr. Skaletsky has been a director of Alkermes since June 2004 and currently serves as our Lead Independent Director. He is currently Chief Executive Officer and President of Fenway Pharmaceuticals, a privately held pharmaceutical company. Mr. Skaletsky was the President, Chief Executive Officer, and Chairman of Trine Pharmaceuticals, Inc. (formerly Essential Therapeutics, Inc.), a privately held drug development company, from 2001 to 2007. In May 2003, Essential Therapeutics, Inc. filed a Chapter 11 bankruptcy petition which was favorably resolved in October 2003. From 2000 to 2001, Mr. Skaletsky was the Chairman and Chief Executive Officer of The Althexis Company, a privately held drug development company. From 1993 to 2000, he was the President and Chief Executive Officer of GelTex Pharmaceuticals, Inc., a publicly traded pharmaceutical company, until its acquisition by Genzyme, Inc. Mr. Skaletsky also served as President and Chief Operating Officer of Biogen, Inc., a publicly traded life sciences company, from 1981 to 1988 and Chairman and Chief Executive Officer of Enzytech Inc., a privately held biotechnology company, from 1988 to 1993. Since 2000, Mr. Skaletsky has served on the Board of Directors of Immunogen, Inc., a publicly traded pharmaceuticals preparations company and, since 2002, as the non-executive chairman of Targacept, Inc., a publicly traded a biopharmaceutical company; Mr. Skaletsky has been a member of

the Board of Directors of Targacept since 2001. From 2003 until 2009, Mr. Skaletsky served on the Board of Directors of AMAG Pharmaceuticals, Inc., a publicly traded biopharmaceuticals company. Additionally, Mr. Skaletsky has previously served on the Board of Directors of Trine Pharmaceuticals and Icoria, Inc., a publicly traded biotechnology company acquired by Clinical Data in 2005. He is also a member of the Board of Trustees of Bentley University and is a member of the Board of Directors and a former Chairman of BIO.

 

Mr. Skaletsky’s qualifications to serve on our Board include his broad industry knowledge as well as the leadership and financial expertise he acquired as an executive officer of several pharmaceutical and biotechnology companies. As the past and present Chief Executive Officer of several biotechnology companies, as well as director of several other life science companies, he brings to the Board knowledge and expertise on corporate governance, executive compensation, corporate alliances and financial management of publicly traded companies.

 

Mr. Wall is a founder of Alkermes and was Chairman of the Board of Alkermes from 1987 to 2007. He is currently Chairman Emeritus of Alkermes, as well as a part-time employee. Mr. Wall was a pioneer in the founding of BIO and was involved in the creation of several life science companies including Centcor, Inc. From April 1992 until June 1993, he was a director and Chairman of the Executive Committee of Centocor, Inc. From November 1987 to June 1993, he was Chairman Emeritus of Centocor. He has also served on the Board of Directors of Auxilium Pharmaceuticals from 2001 until 2005 and Kopin Corporation from 1984 until 2006.

 

Mr. Wall is a founder of the Company, with extensive knowledge of our business and products. Mr. Wall brings historical knowledge, leadership and continuity to the Board. In addition, as an entrepreneur in the biotechnology field, Mr. Wall has years of business and operational experience as well as experience serving on the Board of Directors of several life science companies.

 

CORPORATE GOVERNANCE AND BOARD MATTERS

 

Independence of Members of the Board of Directors

 

The Company defines an “independent” director in accordance with the applicable provisions of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the rules promulgated thereunder and the applicable rules of the Nasdaq Stock Market LLC (“Nasdaq”). Because it is not possible to anticipate or explicitly provide for all potential situations that may affect independence, the Board periodically reviews each director’s status as an independent director and whether any independent director has any other relationship with the Company that, in the judgment of the Board, would interfere with the director’s exercise of independent judgment in carrying out such director’s responsibilities as a director. The Board makes a determination as to whether each director is “independent” under the applicable provisions of the Exchange Act, the rules promulgated thereunder and the applicable rules of Nasdaq at two points in time during the year — after the annual meeting of shareholders and in conjunction with the preparation and filing of the Company’s Proxy Statement. To assist in making its determination, the Board solicits information from each of the Company’s directors regarding whether such director, or any family member of his immediate family, had a direct or indirect material interest in any transactions involving the Company, was involved in a debt relationship with the Company or received personal benefits outside the scope of such person’s normal compensation.

 

The Board of Directors has determined that each of David W. Anstice, Floyd E. Bloom, Geraldine Henwood, Paul J. Mitchell, Alexander Rich, Mark B. Skaletsky and, as of July 2010, Robert A. Breyer, are independent within the meaning of the Company’s director independence standards and the director independence standards of the Exchange Act and Nasdaq. Furthermore, the Board of Directors has determined that each member of each committee of the Board of Directors, or Committee, is independent within the meaning of the director independence standards of the Company, the Exchange Act and Nasdaq.

Executive Sessions of Independent Directors

 

The Board’s policy is to hold meetings of the independent directors following each regularly scheduled in-person Board meeting (other than in connection with the annual meeting of shareholders). Independent director sessions do not include any employee directors of the Company. From February 2005 through March 2010, Mr. Skaletsky, as selected by a majority of the independent directors, served as the presiding director of the executive sessions of the independent directors. In March 2010, the Board formally adopted a Charter of the Lead Independent Director which requires that members of the Board elect a non-management director to serve in a lead capacity if the Chairman of the Board and Chief Executive Officer of the Company are the same person. Mr. Skaletsky was elected Lead Independent Director by the Board in March 2010.

 

Board Leadership Structure

 

From March through September 2009, the roles of chairman of the board and chief executive officer of the Company were held by different individuals. In September 2009, following the resignation of Mr. Broecker as Chief Executive Officer of the Company, the Board also appointed Mr. Pops, Chairman of our Board, as Chief Executive Officer of the Company. In determining that Mr. Pops serve in this combined role, the Board considered Mr. Pops’ ability to provide consistent and continuous leadership to both our Board and our Company at a time of changing Company priorities, his ability to coordinate the strategic objectives of both management and the Board, his extensive knowledge of our operations and the industry and markets in which we compete and his ability to promote communication and synchronize activities between our Board and our senior management.

 

To facilitate effective independent oversight, the Board adopted a Lead Independent Director role, in which, as previously noted, Mr. Skaletsky currently serves. The Board believes that this structure provides an efficient and effective leadership model for the Company and we believe that this Board leadership structure is the most appropriate structure for the Company as of the date of this Proxy Statement. The duties of the Lead Independent Director include:

 

 

A current copy of our Charter of the Lead Independent Director is available on the Governance page of the Investor Relations section of the Company’s website, available at http://investor.alkermes.com.

 

In addition, the Board has three standing committees, each of which is comprised solely of independent directors and led by an independent chair. These committees are discussed in detail below and under the heading “Board Committees.”

 

Policies Governing Director Nominations

 

Director Qualifications and Consideration of Diversity

 

The Nominating and Corporate Governance Committee is responsible for reviewing with the Board, from time to time, the appropriate qualities, skills and characteristics desired of Board members in the context of the current make-up of the Board. This assessment includes consideration of the following minimum

qualifications that the Nominating and Corporate Governance Committee believes must be met by all directors:

 

 

Although we do not have a formal diversity policy, we and the Nominating and Corporate Governance Committee endeavor to have a Board representing diverse viewpoints with broad experience in areas important to the operation of our Company such as business, science, medicine, finance/accounting, or education. In this context, the Nominating and Corporate Governance Committee, in addition to the minimum qualifications set forth above, also considers a variety of attributes in selecting nominees to the Board of Directors, such as:

 

 

These factors and others are considered useful by the Board, and are reviewed in the context of an assessment of the perceived needs of the Board at a particular point in time.

 

Board members are expected to prepare for, attend, and participate in all Board meetings, meetings of Committees on which they serve and the Company’s annual meeting of shareholders. In addition, directors should stay abreast of the Company’s business and markets. The General Counsel and the Chief Financial Officer will be responsible for assuring the orientation of new directors, and for periodically providing materials or briefing sessions for all directors on subjects that would assist them in discharging their duties. Periodically, the Company will provide opportunities for directors to visit Company facilities in order to provide greater understanding of the Company’s business and operations. The Board performs an annual self-evaluation. The Board, in coordination with each Committee, performs an annual performance evaluation of each such Committee. The Board, following review by the Nominating and Corporate Governance Committee, determines whether other educational measures are appropriate as part of the annual Board evaluation.

 

Each Board member is expected to ensure that other existing and planned future commitments do not materially interfere with the member’s service as an outstanding director. Board members should not hold more than six directorships (including such member’s seat on the Company’s Board of Directors), excluding for this purpose, not-for-profit organizations, trade organizations and related organizations, unless otherwise agreed to by the Nominating and Corporate Governance Committee. These other commitments will be considered by the Nominating and Corporate Governance Committee and the Board when reviewing Board candidates. Directors are expected to report changes in their primary business or professional association, including retirement, to the Chairman of the Board and the chair of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee, in consultation with the Chairman of the Board, will consider any effects these changes may have on the effectiveness of the director’s contribution to the work of the Board.

 

Process for Identifying and Evaluating Director Nominees

 

The Board is responsible for selecting its own members to stand for election. The Board delegates the selection and nomination process to the Nominating and Corporate Governance Committee, with the

expectation that other members of the Board and management will be requested to take part in the process as appropriate.

 

Once candidates have been identified, the Nominating and Corporate Governance Committee confirms that the candidates meet all of the minimum qualifications for director nominees established by the Nominating and Corporate Governance Committee. Based on the results of the evaluation process, the Nominating and Corporate Governance Committee recommends candidates for the Board’s approval as director nominees for election to the Board. The Nominating and Corporate Governance Committee also recommends candidates for the Board’s appointment to the committees of the Board.

 

Procedure for Recommendation of Director Nominees by Shareholders

 

The Nominating and Corporate Governance Committee will consider director candidates who are recommended by shareholders of the Company. Shareholders, in submitting recommendations to the Nominating and Corporate Governance Committee for director candidates, shall follow the following procedures:

 

The Nominating and Corporate Governance Committee must receive any such recommendation for nomination not later than the close of business on the 90th day nor earlier than the close of business on the 150th day prior to the first anniversary of the date of the proxy statement delivered to shareholders in connection with the preceding year’s annual meeting.

 

Such recommendation for nomination must be in writing and include the following:

 

 

Nominations must be sent to the attention of the Secretary of the Company by one of the two methods listed below:

 

By U.S. Mail (including courier or expedited delivery service):

 

Alkermes, Inc.
852 Winter Street
Waltham, MA 02451
Attn: Secretary of Alkermes, Inc.

 

By facsimile to:

 

(781) 609-5856
Attn: Secretary of Alkermes, Inc.

 

The Secretary of the Company will promptly forward any such nominations to the Nominating and Corporate Governance Committee. Once the Nominating and Corporate Governance Committee receives the nomination of a candidate, the candidate will be evaluated and a recommendation with respect to such candidate will be delivered to the Board. Nominations not made in accordance with the foregoing policy shall be disregarded by the Nominating and Corporate Governance Committee and votes cast for such nominee shall not be counted.

 

Composition and Responsibilities of the Board of Directors

 

The Company’s business, property and affairs are managed under the direction of the Board of Directors. Members of the Board are kept informed of the Company’s business through discussions with the Chief Executive Officer and other officers of the Company, by reviewing materials provided to them, by visiting the Company’s offices and by participating in meetings of the Board and its committees and the annual meeting of shareholders.

 

Size of the Board

 

The Board of Directors currently consists of nine members. The Board periodically reviews the appropriate size of the Board and, in accordance with the Company’s By-laws, this number may be adjusted from time to time.

 

Board Compensation

 

It is the general policy of the Board that Board compensation should be a mix of cash and equity based compensation. Full-time employee directors will not be paid for Board membership in addition to their regular employee compensation. Independent directors may not receive consulting, advisory or other compensatory fees from the Company if the receipt of such fees would result in disqualifying the director as an “independent” director in accordance with the applicable provisions of the Exchange Act, the rules promulgated thereunder and the applicable rules of Nasdaq. To the extent practicable or required by applicable rule or regulation, independent directors who are affiliated with the Company’s service providers or partners or collaborators will undertake to ensure that their compensation from such providers or partners or collaborators does not include amounts connected to payments by the Company. The Compensation Committee periodically reviews director compensation.

 

Board’s Role in Risk Oversight

 

Assessing and managing risk is the responsibility of our management and our Board oversees and reviews various aspects of the Company’s risk management efforts. The Board executes its oversight responsibility for Company risk management directly and through its Committees, as follows:

 

 

 

In performing their risk oversight functions, each committee has full access to management, as well as the ability to engage outside advisors.

 

Succession Plan

 

The chair of our Compensation Committee and members of our Nominating and Corporate Governance Committee review and discuss succession planning with our Chief Executive Officer. On an annual basis, the chair of our Compensation Committee and Chief Executive Officer review succession planning with the Board of Directors.

 

Scheduling and Selection of Agenda Items for Board Meetings

 

In-person Board meetings are scheduled in advance at least four times a year. Furthermore, additional Board meetings may be called upon appropriate notice at any time to address specific needs of the Company. Each director may propose the inclusion of items on the agenda, request the presence of or a report by any member of the Company’s management, or at any Board meeting raise subjects that are not on the agenda for that meeting. The Lead Independent Director approves the Board agenda in advance of the meeting. The Board may also take action from time to time by unanimous written consent.

 

Typically, the meetings of the Board are held at the Company’s headquarters in Waltham, Massachusetts, but occasionally meetings may be held at other locations at the discretion of the Board.

 

The annual cycle of agenda items for Board meetings is expected to change on a periodic basis to reflect Board requests, changing business and legal issues and the work done by the Board Committees.

 

Board Committees

 

The Company currently has three standing Committees: Audit and Risk, Compensation, and the Nominating and Corporate Governance Committees. There will, from time to time, be occasions on which the Board may form a new committee or disband a current committee depending upon the circumstances. The Audit and Risk, Compensation and Nominating and Corporate Governance Committees shall each be composed entirely of independent directors.

 

Each Committee has a written charter, approved by the Board, which describes the Committee’s general authority and responsibilities. Each Committee undertakes an annual review of its charter and works with the Board to make such revisions as are considered appropriate.

Each Committee has the authority to engage outside experts, advisors and counsel to the extent it considers appropriate to assist the Committee in its work.

 

Each Committee regularly reports to the Board concerning the Committee’s activities.

 

Assignment of Committee Members

 

The Board is responsible for the appointment of Committee members.

 

Frequency and Length of Committee Meetings and Committee Agenda

 

The Committee chair, in consultation with the Chairman of the Board and appropriate members of management, will determine the frequency and length of the Committee meetings and develop the Committee’s agenda. The agendas and meeting minutes of the Committees will be shared with the full Board, and other Board members are welcome to attend Committee meetings, except that non-independent directors are not permitted to attend the executive sessions of any Committee.

 

Policies Governing Security Holder Communications with the Board of Directors

 

The Board provides to every security holder the ability to communicate with the Board, as a whole, and with individual directors on the Board through an established process for security holder communication (as that term is defined by the rules of the Securities and Exchange Commission) as follows:

 

For communications directed to the Board as a whole, security holders may send such communication to the attention of the Chairman of the Board via one of the two methods listed below:

 

By U.S. Mail (including courier or expedited delivery service):

 

Alkermes, Inc.
852 Winter Street
Waltham, MA 02451
Attn: Chairman of the Board of Directors

 

By facsimile at:

 

(781) 609-5856
Attn: Chairman of the Board of Directors

 

For security holder communications directed to an individual director in his or her capacity as a member of the Board, security holders may send such communications to the attention of the individual director via one of the two methods listed below:

 

By U.S. Mail (including courier or expedited delivery service):

 

Alkermes, Inc.
852 Winter Street
Waltham, MA 02451
Attn: [Name of Individual Director]

 

By facsimile at:

 

(781) 609-5856
Attn: [Name of Individual Director]

 

The Company will forward any such security holder communication to the Chairman of the Board, as a representative of the Board, and/or to the director to whom the communication is addressed on a periodic basis. The Company will forward such communication by certified U.S. Mail to an address specified by each director and the Chairman of the Board for such purposes or by secure electronic transmission.

Policy Governing Director Attendance at Annual Meetings of Shareholders

 

In April of 2004, the Board adopted a policy that all directors and all nominees for election as directors attend the Company’s annual meeting of shareholders in person. All directors, with the exception of Ms. Henwood, attended the 2009 annual meeting of shareholders. Ms. Henwood was unable to attend the annual meeting of shareholders due to a medical emergency.

 

Risk Assessment of Compensation Policies and Practices

 

The Compensation Committee, at the direction of the Board, reviewed our compensation policies and practices and concluded that these policies and practices are not structured to be reasonably likely to have a material adverse effect on the Company. Specifically, our compensation programs contain many features that mitigate the likelihood of inducing excessive risk-taking behavior. These features include:

 

 

Code of Ethics

 

The Company has adopted a “code of ethics” (as defined by the regulations promulgated under the Securities Act of 1933, as amended, and the Exchange Act) that applies to all of the Company’s directors and employees, including principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Company’s Code of Business Conduct and Ethics also meets the requirements of a “code of conduct” (as defined by the rules of Nasdaq) and is applicable to all of the Company’s officers, directors and employees. A current copy of the Code of Business Conduct and Ethics is available on the Governance page of the Investor Relations section of the Company’s website, available at http://investor.alkermes.com. A copy of the Code of Business Conduct and Ethics may also be obtained, free of charge, from the Company upon request directed to: Alkermes, Inc., Attention: Investor Relations, 852 Winter Street, Waltham, MA 02451.

 

Members of the Board of Directors shall act at all times in accordance with the requirements of the Company’s Code of Business Conduct and Ethics, which shall be applicable to each director in connection with his or her activities relating to the Company. This obligation shall at all times include, without limitation, adherence to the Company’s policies with respect to conflicts of interest, confidentiality, protection of the Company’s assets, ethical conduct in business dealings and respect for and compliance with applicable law. Any waiver of the requirements of the Code of Business Conduct with respect to any individual director or any executive officer shall be reported to, and be subject to the approval of, the Board of Directors.

 

For more corporate governance information, you are invited to access the Governance page of the Investor Relations section of the Company’s website, available at: http://investor.alkermes.com.

 

THE BOARD OF DIRECTORS AND ITS COMMITTEES

 

The Board of Directors held seven meetings during the last fiscal year and otherwise acted by unanimous consent. All of the Company’s directors attended at least 75% of the aggregate of all meetings held during the prior full fiscal year of the Board of Directors and of all committees of which the director was a member. The standing committees of the Board are the Audit and Risk Committee, the Nominating and Corporate Governance Committee and the Compensation Committee.

The Audit and Risk Committee consists of Floyd E. Bloom, Paul J. Mitchell and Mark Skaletsky. Mr. Mitchell serves as chair of the Audit and Risk Committee. In compliance with the Sarbanes-Oxley Act of 2002, the entire Board determined, based on all available facts and circumstances, that Mr. Mitchell and Mr. Skaletsky are both “audit committee financial experts” as defined by the Securities and Exchange Commission. The Audit and Risk Committee met seven times during the last fiscal year. The Audit and Risk Committee operates under a written charter adopted by the Board of Directors, a current copy of which can be found on the Governance page of the Investor Relations section of the Company’s website, available at: http://investor.alkermes.com. Each member of the Audit and Risk Committee is independent as such term is defined in Rule 5605(a)(2) and as required under Rule 5605(c)(2) of the Nasdaq’s listing standards, as well as under the applicable requirements of the Exchange Act.

 

Under the terms of its current Charter, the Audit and Risk Committee is responsible for (1) appointing, compensating and retaining the Company’s independent public accountants, (2) overseeing the work performed by any independent public accountants, (3) assisting the Board of Directors in fulfilling its responsibilities by: (i) reviewing the financial reports provided by the Company to the Securities and Exchange Commission, the Company’s shareholders or to the general public (ii) reviewing the Company’s internal financial and accounting controls, and (iii) reviewing all related party transactions, (4) recommending, establishing and monitoring procedures designed to improve the quality and reliability of the disclosure of the Company’s financial condition and results of operations, (5) assessing and providing oversight to management relating to the identification and evaluation of major strategic, operational, regulatory, compliance and external risks inherent to the business of the Company and (6) establishing procedures designed to facilitate: (i) the receipt, retention and treatment of complaints relating to accounting, internal accounting controls or auditing matters and (ii) the receipt of confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters. The committee will engage advisors as necessary, distribute relevant funding provided by the Company, and serve as the Qualified Legal Compliance Committee (the “QLCC”) in accordance with Section 307 of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated by the Securities and Exchange Commission thereunder. Additionally, the Audit and Risk Committee is responsible for approving, in advance, any and all audit and non-audit services to be performed by PWC. All services provided by PWC during fiscal year 2010 were pre-approved by the Audit and Risk Committee.

 

The Nominating and Corporate Governance Committee currently consists of Floyd E. Bloom, Geraldine Henwood and Alexander Rich. Ms. Henwood serves as chair of the Nominating and Corporate Governance Committee. Under the terms of its current Charter, the Nominating and Corporate Governance Committee is responsible for (1) identifying individuals qualified to become members of the Board and recommending that the Board select the director nominees for election, (2) periodically reviewing the Company’s Code of Business Conduct and Ethics applicable to all directors, officers and employees, and (3) monitoring compliance with the Code of Business Conduct and Ethics. Each of the members of the Nominating and Corporate Governance Committee is independent as such term is defined in Rule 5605(a)(2) of the Nasdaq listing standards. During the last fiscal year, the Nominating and Corporate Governance Committee met four times.

 

The Nominating and Corporate Governance Committee operates under a written charter adopted by the Board of Directors, a current copy of which is available on the Governance page of the Investor Relations section of the Company’s website, available at http://investor.alkermes.com.

 

The Compensation Committee, currently consisting of Paul J. Mitchell, David W. Anstice and Mark Skaletsky met nine times during the last fiscal year and otherwise acted by unanimous written consent. Mr. Skaletsky serves as chair of the Compensation Committee. Under the terms of its current Charter, the Compensation Committee is responsible for (1) discharging the Board’s responsibilities relating to the compensation of the Corporation’s executives, (2) administering the Company’s incentive compensation and equity plans, (3) producing an annual report on executive compensation for inclusion in the Company’s proxy statement in accordance with applicable rules and regulations, and (4) reviewing and discussing with the Company’s management the Company’s executive compensation disclosure (including the Company’s disclosure under “Compensation Discussion and Analysis”) included in reports and registration statements filed with the Securities and Exchange Commission. The primary objective of the Compensation Committee is to develop and implement compensation policies and plans that are appropriate for the Company and which provide

incentives that further the Company’s long-term strategic plan and are consistent with the culture of the Company and the overall goal of enhancing the Company’s performance. Each of the members of the Compensation Committee is independent as such term is defined in Rule 5605(a)(2) of the Nasdaq listing standards.

 

The Compensation Committee operates under a written charter adopted by the Board of Directors, a current copy of which is available on the Governance page of the Investor Relations section of the Company’s website, available at: http://investor.alkermes.com.

 

The Compensation Committee has established procedures for the grant of options to new employees. The Limited Compensation Sub-Committee, consisting of Mark Skaletsky, acted by unanimous written consent during fiscal year 2010. The Limited Compensation Sub-Committee has the authority to make individual grants of stock options, up to the limit of its authority, to employees of the Company who are not subject to the reporting requirements of the Exchange Act and who are below the level of Vice President of the Company. The Limited Compensation Sub-Committee has generally approved new hire employee stock option grants of up to 15,000 shares per individual grant to such eligible employees.

 

The Limited Compensation Sub-Committee will grant options to new hires, within the limits of its authority, on the first Wednesday following the first Monday of each month (or the first business day thereafter if such day is a holiday) (the “New Hire Grant Date”) for all new hires beginning their employment the prior month. New hire grants that exceed the authority of the Limited Compensation Sub-Committee will be granted on the New Hire Grant Date or, if not possible, as soon as practicable thereafter, by the Compensation Committee as a whole.

 

PROPOSAL 2

 

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

 

The Audit and Risk Committee of the Board of Directors has retained the firm of PricewaterhouseCoopers LLP, independent registered public accountants, to serve as independent registered public accountants for the fiscal year ending March 31, 2011. The Audit and Risk Committee reviewed and discussed the performance of PricewaterhouseCoopers LLP as the Company’s independent registered public accountants for fiscal year ending March 31, 2010. As a matter of good corporate governance, the Audit and Risk Committee has determined to submit its selection to shareholders for ratification. If the selection of registered public accountants is ratified, the Audit and Risk Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its shareholders.

 

The Board of Directors recommends that you vote FOR the ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accountants for the fiscal year ending March 31, 2011.

 

REPORT OF THE AUDIT AND RISK COMMITTEE

 

This report is submitted by the Audit and Risk Committee of the Board of Directors. The Audit and Risk Committee currently consists of Messrs. Bloom, Mitchell and Skaletsky. The Board of Directors has determined that each member of the Audit and Risk Committee meets the independence requirements promulgated by Nasdaq and the Securities and Exchange Commission including Rule 10A-3(b)(1) under the Exchange Act and that Messrs. Mitchell and Skaletsky qualify as “audit committee financial experts” under the rules of the Securities and Exchange Commission. The Audit and Risk Committee has the responsibility and authority described in the Audit and Risk Committee Charter which has been approved by the Board of Directors. A copy of the Audit and Risk Committee Charter is available on the Governance page of the Investor Relations section of the Company’s website, available at: http://investor.alkermes.com.

 

In accordance with law, the Audit and Risk Committee has ultimate authority and responsibility to select, compensate, evaluate and, when appropriate, replace the Company’s independent auditors. The Audit and Risk Committee has the authority to engage its own outside advisors, including experts in particular areas of accounting, as it determines appropriate, apart from counsel or advisors hired by management.

 

During the fiscal year ended March 31, 2010, the Company’s independent registered public accountants were PricewaterhouseCoopers LLP, or PWC. PWC is responsible for performing an independent audit of the consolidated financial statements and an independent audit of the effectiveness of the Company’s internal control over financial reporting, each in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”). PWC also performed audit-related services and other permissible non-audit services for the Company during the fiscal year ended March 31, 2010, as described more fully below.

 

The Audit and Risk Committee oversees the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the Company’s systems of internal controls. In fulfilling its oversight responsibilities, the Audit and Risk Committee reviewed the audited consolidated financial statements in the Annual Report with management, and discussed with management the quality, not just the acceptability, of the accounting principles, the reasonableness of significant estimates and judgments, critical accounting policies, accounting estimates resulting from the application of these policies, the substance and clarity of disclosures in the financial statements, and reviewed the Company’s disclosure control process and internal control over financial reporting. In addition, the Audit and Risk Committee reviewed the rules under the Sarbanes-Oxley Act that pertain to the Audit and Risk Committee and the roles and responsibilities of Audit and Risk Committee members. The Audit and Risk Committee reviewed with PWC, who are responsible for expressing an opinion on the conformity of the Company’s audited financial statements with accounting principles generally acceptable in the United States, the overall scope and plans for their audit, and PWC’s judgments as to the quality, not just the acceptability, of the Company’s accounting principles, the reasonableness of significant estimates and judgments, critical accounting policies and accounting estimates resulting from the application of these policies, and the substance and clarity of disclosures in the financial statements, and reviewed with PWC the Company’s disclosure control process and internal control over financial reporting. The Committee met with PWC, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal control over financial reporting, and the overall quality of the Company’s financial reporting.

 

The Audit and Risk Committee has reviewed the audited consolidated financial statements of the Company at and for the periods ended March 31, 2010 and 2009 and the consolidated financial statements for each of the quarters in the three-year period ended March 31, 2010, and has discussed them with both management and PWC. In connection with the Company’s Form 10-K for the year ended March 31, 2010, the Audit and Risk Committee discussed with management the results of the Company’s certification process relating to the certification of financial statements under Sections 302 and 906 of the Sarbanes-Oxley Act. The Audit and Risk Committee has also discussed with PWC the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the PCAOB in Rule 3200T; (Communications with Audit Committees), as currently in effect. This discussion included, among other things, a review with management of the quality of the Company’s accounting principles, the reasonableness of significant estimates and judgments, and the clarity of disclosure in the Company’s financial statements, including the disclosures related to critical accounting policies and

practices used by the Company. The Audit and Risk Committee has received the written disclosures and the letter from PWC to confirm their independence as required by applicable requirements of the PCAOB regarding the independent accountants communication with the audit committee concerning independence and has discussed with the independent accountant the independent accountant’s independence. Based on its review of the financial statements and these discussions, the Audit and Risk Committee concluded that it would be reasonable to recommend, and on that basis did recommend, to the Board of Directors that the audited consolidated financial statements and management’s assessment of the Company’s control over financial reporting be included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2010 and the Board of Directors approved such inclusion.

 

The Audit and Risk Committee also reviewed the Company’s quarterly financial statements during the fiscal year ended March 31, 2010 and discussed them with both the management of the Company and PWC prior to including such interim financial statements in the Company’s quarterly reports on Form 10-Q. In connection with the Company’s quarterly reports on Form 10-Q for its first, second and third fiscal quarters of 2010, the Audit and Risk Committee discussed with management the results of the Company’s certification process relating to the certification of financial statements under Sections 302 and 906 of the Sarbanes-Oxley Act. The Audit and Risk Committee also received an assessment from management as to our policies and internal procedures designed to promote compliance with laws and regulations affecting our business and the results of our internal auditing and monitoring practices in this regard. In addition, the Audit and Risk Committee discussed risks identified by our enterprise risk management process, including an evaluation of any such risk and mitigation activities put in place in reference thereto.

 

During the course of the fiscal year ended March 31, 2010, management completed the testing and evaluation of the Company’s system of internal control over financial reporting in response to the requirements set forth in Section 404 of the Sarbanes-Oxley Act and related regulations. At the conclusion of the process, management provided the Committee with, and the Audit and Risk Committee reviewed, a report on the effectiveness of the Company’s internal control over financial reporting. The Audit and Risk Committee also reviewed the report of management contained in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2010 filed with the Securities and Exchange Commission, as well as PWC’s Report of Independent Registered Public Accounting Firm included in the Company’s Annual Report on Form 10-K related to its audit of (i) the consolidated financial statements, and (ii) the effectiveness of internal control over financial reporting. The Committee continues to oversee the Company’s efforts related to its internal control over financial reporting and management’s preparations for the evaluation in the fiscal year ending March 31, 2011.

 

The Audit and Risk Committee monitors the activity and performance of PWC. All services to be provided by PWC are pre-approved by the Audit and Risk Committee. The Audit and Risk Committee’s evaluation of the performance of PWC included, among other things, the amount of fees paid to PWC for audit and permissible non-audit services in fiscal year ended March 31, 2010. Information about PWC fees for the fiscal years ended March 31, 2010 and 2009 is discussed below in this Proxy Statement under “Audit Fees.” The Audit and Risk Committee has retained PWC to serve as the Company’s auditors for the fiscal year ending March 31, 2011.

 

No portion of this Audit and Risk Committee Report shall be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, through any general statement incorporating by reference in its entirety the Proxy Statement in which this report appears, except to the extent that the Company specifically incorporates this report or a portion of it by reference. In addition, this report shall not be deemed filed under either the Securities Act or the Exchange Act.

 

Respectfully submitted by the Audit and Risk Committee,

 

Paul J. Mitchell, Chair
Floyd E. Bloom
Mark Skaletsky

 

For more information about our Audit and Risk Committee and its charter, you are invited to access the Governance page of the Investor Relations section of the Company’s website, available at: http://investor.alkermes.com.

 

AUDIT FEES

 

Aggregate fees for fiscal 2010 and fiscal 2009

 

During the years ended March 31, 2010 and 2009, PWC provided various audit, audit-related and tax services to us. The Audit and Risk Committee understands the need for PWC to maintain objectivity and independence in its audit of our financial statements and our internal control over financial reporting. To minimize relationships that could appear to impair the objectivity of PWC, our Audit and Risk Committee has adopted policies and procedures which require it to pre-approve all audit and non-audit services performed by PWC.

 

The aggregate fees of PWC for the years ended March 31, 2010 and 2009 are as follows:

 

 

 

 

OWNERSHIP OF THE COMPANY’S COMMON STOCK

 

The following table and notes provide information about the beneficial ownership of our outstanding, Common Stock as of July 23, 2010 by:

 

 

According to Securities and Exchange Commission rules, the Company has included in the column “Number of Issued Shares” all shares over which the person has sole or shared voting or investment power, and the Company has included in the column “Number of Shares Issuable” all shares that the person has the right to acquire within 60 days after July 23, 2010 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 July 23, 2010 are deemed outstanding for the purpose of computing the percentage beneficially owned by the person, but are not deemed 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. The Company’s 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 and executive officer is Alkermes, Inc., 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 Common Stock as of July 23, 2010, or as otherwise set forth below, by each shareholder known to us to be the beneficial owner of more than 5% of our Common Stock.

 

 

 

 

 

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who beneficially own more than ten percent of the Common Stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Common Stock.

 

Executive officers, directors and greater than ten percent shareholders are required by Securities and Exchange Commission regulations to furnish the Company with copies of all Section 16(a) forms they file. To the Company’s knowledge, based solely on review of the copies of such reports furnished to the Company for the fiscal year ended March 31, 2010, all reports were timely filed.

 

EXECUTIVE COMPENSATION AND RELATED INFORMATION
COMPENSATION DISCUSSION AND ANALYSIS

 

Introduction and Corporate Governance

 

Our Compensation Committee, or 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 of Directors, which is available on the Governance page of the Investor Relations section of the Company’s website, available at: http://investor.alkermes.com. The Board of Directors selected the following individuals to serve on the Committee for our 2010 fiscal year: Mark B. Skaletsky (Chair), Paul J. Mitchell and David W. Anstice.

 

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 the Company’s research and product development, manufacturing, commercialization and operational efforts. We structure our executive officer compensation packages based on level of job responsibility, peer comparisons, individual performance and overall Company performance. The Committee bases its executive compensation programs on the same objectives that guide the Company in establishing all its 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 the 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 the Company. 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 the 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, long-term Company value. Cash performance pay is awarded by the Committee after the fiscal year-end based on an evaluation of 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 July 2009, the Committee approved the Alkermes Fiscal Year 2010 Reporting Officer Performance Pay Plan, or the Pay Plan, and established target performance pay ranges and target performance pay that may be earned for the period April 1, 2009 to March 31, 2010 by the Company’s executive officers, including all of its named executive officers. The plan contained the following fiscal year 2010 corporate objectives for the executives of the Company: successfully commercialize VIVITROL^®; build and enhance the Company’s proprietary products; achieve financial performance against budget; and respond effectively to changing business conditions. In July 2009, the Committee set target performance pay for fiscal year 2010 as 60% of base salary for Mr. Pops and Mr. Broecker and 50% of base salary for the remaining executive officers named in the performance pay plan. The Committee set the range of the fiscal year 2010 performance pay awards for all executive officers at between 0% and 100% of base salary. The Committee established such performance pay targets and performance pay ranges based generally on comparable market data. Performance pay under our Pay Plan is awarded after the close of the fiscal year based upon the Committee’s review of the performance of the Company against its 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, the shareholders of the Company 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 the Company currently grants 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 the Company’s equity compensation 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. The Company has two retirement provisions open to all employees, only one of which (detailed immediately below) contains eligibility criteria that certain of our executive officers meet. If any employee whose age plus years of service equaled at least 55 and who had at least 12 years of service with the 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 or (ii) before December 9, 2004 with an exercise price less than $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, 2010, Mr. Pops and Mr. Landine were the only named executive officers who met the retirement eligibility criteria reflected in these stock option grants; however, Mr. Pops is not entitled to the

benefit of this retirement provision for stock options granted to him for performance during fiscal years 2008, 2009 and 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 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 Company performance; 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 the Company’s results of operations.

 

During fiscal year 2008, the Committee shifted its equity compensation philosophy and altered the historical composition of equity incentives at the Company 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 believes that this philosophy has been 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 the Company more aggressively utilize restricted stock awards for other key employees of the Company.

 

The Committee established the range of equity compensation for performance during fiscal year 2010 for each of Mr. Pops and Mr. Broecker to be between 0 and 600,000 units (with a stock option counting as a single unit and a stock award counting as two units).

 

Compensation Determinations

 

Factors Considered in Determining Compensation

 

The Committee may consider a number of factors to assist it in determining compensation for the Company’s executive officers.

 

Company Performance.  As discussed previously, the Committee, with the agreement of the Board of Directors, set four corporate objectives by which to measure performance during the fiscal year ended March 31, 2010: (i) successfully commercialize VIVITROL; (ii) build and enhance the Company’s proprietary products; (iii) achieve financial performance against budget; and (iv) respond effectively to changing business conditions. The Committee considered the following in assessing the Company’s performance against the respective objectives:

 

 

The Committee does not apply a formula or assign these performance objectives relative weights. Instead, it makes a subjective determination after considering such measures collectively.

 

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 of Directors. In establishing compensation for executive officers other than Mr. Pops, who served as Chairman of the Company during fiscal year 2010 and as President and Chief Executive Officer of the Company during a portion of fiscal year 2010, 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 the Company.

 

Use of Compensation Consultant for Benchmarking.  Another consideration which affects the Committee’s decisions regarding 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 the Company’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 the Company’s 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, the Company’s 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 the Company’s pharmaceutical peer group for fiscal year 2010 consisted of: Alnylam Pharmaceuticals Inc.; AMAG Pharmaceuticals Inc.; Amylin Pharmaceuticals Inc.; Auxilium Pharma Inc.; BioMarin Pharmaceuticals Inc.; Cubist Pharmaceuticals Inc.; Enzon Pharmaceuticals Inc.; Isis Pharmaceuticals, Inc.; The Medicines Company; Nektar Therapeutics; OSI Pharmaceuticals Inc.; United Therapeutics Corp.; Vertex Pharmaceuticals Inc; and Viropharma Inc. These fourteen publicly-traded US-headquartered firms compete in similar product, service and labor markets as Alkermes and have generally similar revenue.

 

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 of similar size and industry as Alkermes. Surveys used in this analysis were the 2009 Radford Biotech Survey and one survey source maintained as confidential by PMP.

 

The peer group analyses enable the Committee to compare the Company’s 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 median and 65th percentile of our peers in terms of value when the Company achieves the targeted performance levels; however, as mentioned elsewhere in our compensation discussion and analysis, this comparative data provided by our compensation consultant 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 fire outside compensation consultants.

 

Executive Officer Compensation Determination

 

Base Salary.  The Company and Richard Pops entered into an employment agreement pursuant to which, effective April 1, 2007 and for a period of three years, Mr. Pops was to serve as the Company’s Chairman of the Board of Directors with responsibility for overseeing strategic issues affecting the Company and maintaining key relationships with the Company’s business partners. Under the agreement, Mr. Pops continued to receive the same salary (adjusted for inflation), and was entitled to the same benefits, as under his previous employment agreement with the Company. Upon Mr. Broecker’s resignation as President and Chief Executive Officer of the Company on September 10, 2009, Mr. Pops and the Company amended Mr. Pops’ employment agreement to provide, among other things, that Mr. Pops would serve as the Company’s Chairman of the Board, Chief Executive Officer and President and that his base salary would be determined annually by the Compensation Committee of the Board.

The Committee reviewed base salaries for all executive officers of the Company coinciding with the mid-fiscal year performance review established by the Company. In determining base salary adjustments for executive officers for fiscal year 2010, 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 recommendation of Mr. Pops. The Committee increased the base salaries of Messrs Frates, Landine and Pugh and Dr. Ehrich by approximately 3%, effective as of October 26, 2009. The Committee increased the base salary of Mr. Pops by approximately 4% effective as of October 26, 2009, taking into account, in addition to the factors set forth above, the increased operational responsibilities associated with his return to the position of Chief Executive Officer of the Company.

 

Cash Performance Pay.  In May 2010, the Committee reviewed the Company’s performance against the fiscal year corporate objectives, the performance of Mr. Pops against such corporate objectives, and the target performance pay and pay range set by the Committee. The Committee determined that the cash performance pay for Mr. Pops for fiscal year 2010 should be equal to $500,000, which is equal to approximately 73% of his base salary. The performance pay for Mr. Pops was determined based on the Committee’s assessment of his performance against the corporate objectives, recognition of his effectiveness in shifting the overall strategy of the Company and his successful performance against aggressive timelines, and data from the Company’s compensation consultant that indicated that Mr. Pops’ target performance pay was below the comparable target performance pay range of 75% to 105% of base salary at our peer group companies.

 

Also, in May 2010, 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 the Company’s corporate objectives and the individual performance recommendations of Mr. Pops, as well as the target performance pay and performance pay ranges set by the Committee, the Committee determined and awarded cash performance pay for fiscal year 2010 to Messrs. Frates, Landine and Pugh and Dr. Ehrich in an amount equal to their target performance pay, or 50% of their current base salary. All such amounts are set forth in the Summary Compensation Table below.

 

Equity Incentives — Stock Options and Restricted Stock Awards.  In May 2009, the Committee awarded Mr. Pops and Mr. Broecker performance-based restricted stock unit awards of 25,000 shares and 20,000 shares, respectively, which would vest in full upon the later of the receipt of regulatory approval from the FDA of the new drug application, or NDA, for BYDUREON^® (exenatide long-acting injection) or one year after the date of grant; such restricted stock award would expire if not vested five years after grant.

 

In November 2009, the Committee made a special, mid-fiscal year retention grant of equity to certain officers of the Company. This retention grant was not part of the pre-determined compensation calendar. The Committee determined that such retention grants were appropriate given the recent change in executive management of the Company, the corresponding increased number of development programs and enhanced emphasis on accelerated development timelines, and the equity position of the officers of the Company. Based on the recommendation of Mr. Pops, the Committee made the following equity grants: Mr. Frates, stock option grant of 50,000 shares and restricted stock unit award of 25,000 shares; Dr. Ehrich, stock option grant of 40,000 shares and restricted stock unit award of 20,000 shares; Mr. Landine, stock option grant of 40,000 shares and restricted stock unit award of 20,000 shares; and Mr. Pugh, stock option grant of 30,000 shares and restricted stock unit award of 15,000 shares. Each of these stock option grants and restricted stock unit awards vest in four equal installments commencing on the one year anniversary of the grant date and annually thereafter, subject to early vesting in certain instances described below in “Potential Payments upon Termination or Change in Control.” The stock options grants did not receive the benefit of a certain Company retirement provision which would have provided accelerated vesting and greater time to exercise the options for certain executive officers.

 

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 in the Company stock and the retention value of such equity. The Committee awarded Mr. Pops a stock option grant of

500,000 shares, vesting in four equal installments commencing on the one year anniversary of the grant date and annually thereafter, 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 a certain Company retirement provision, for which Mr. Pops would have qualified and which would have provided accelerated vesting and greater time to exercise the options. The Committee also provided Mr. Pops with a restricted stock unit award of 250,000 shares, 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 the standard restricted stock unit vesting schedule employed by the Company, was specifically chosen by the Committee as a retention mechanism and to align Mr. Pops’ interests with the long term interests of shareholders.

 

In May 2010, after the close of fiscal year 2010, the Committee awarded equity grants for fiscal year 2010 performance. In determining the grant of equity to Mr. Pops, the Committee took into consideration comparable company data provided by the independent compensation consultant, 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 the 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 325,000 shares and a restricted stock unit award of 32,500 shares. These stock options and restricted stock unit awards vest in four equal installments commencing on the one year anniversary of the grant date and annually thereafter, 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. Broecker and Mr. Pops based on their performance and the performance of the Company during fiscal years 2009 and 2010.

 

 

 

 

 

In May 2010, after the close of fiscal year 2010, the Committee also determined equity awards for all other executive officers for performance during such fiscal year. The Committee considered the comparable company data provided by the independent compensation consultant, the dollar value of equity awards as determined using the Black-Scholes option pricing model, historic awards, the performance of the Company against corporate objectives, the overall equity position of the executives and the recommendations of Mr. Pops based on his assessment of the individual’s performance against corporate objectives. The Committee made the following equity grants: Mr. Frates, stock option grant of 120,500 shares and restricted stock unit award of 17,400 shares; Dr. Ehrich, stock option grant of 115,800 shares and restricted stock unit award of

16,700 shares; Mr. Landine, stock option grant of 93,000 shares and restricted stock unit award of 13,000 shares; and Mr. Pugh, stock option grant of 91,200 shares and restricted stock unit award of 13,100 shares. Each of these stock option grants and restricted stock unit awards vest in four equal installments commencing on the one year anniversary of the grant date and annually thereafter, 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 Compensation Committee and Board of Directors 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 includes for purposes of determining the value of shares owned under our stock ownership guidelines.

 

For any Board members and executive officers joining the 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, 2010.

 

Perquisites

 

The Company did not provide executive officers with any perquisites in fiscal year 2010.

 

Retirement benefits

 

The terms of the Company’s 401(k) Savings Plan (“401k Plan”), provide for executive officer and broad-based employee participation. Under the 401k Plan, all Company employees are eligible to receive matching contributions from the Company. The Company’s matching contribution for the 401k Plan for fiscal year 2010 was as follows: dollar for dollar on the first 1% of each participant’s eligible compensation and $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 the Company’s employee benefit plans on the same terms as all other employees. These plans include medical, dental and life insurance. The Company 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” (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). 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 Company business during a period when they otherwise might be distracted.

 

Separation Agreement with David Broecker and Appointment of Richard Pops

 

In September 2009, Mr. Broecker resigned as Chief Executive Officer and President and from the Board of Directors of the Company. Mr. Broecker’s employment with Alkermes terminated effective December 31, 2009. Also in September, the Company entered into a separation agreement with Mr. Broecker providing for, among other things: (i) payment of 18 months’ severance (in the aggregate amount of $1,151,250) and continuation of benefits for 18 months; (ii) vesting, upon the termination of his employment, of all stock options and time-vesting restricted stock unit awards that were to have vested by June 30, 2010; and (iii) an extension of time to exercise all such vested stock options until the earlier of June 30, 2011 or the stated expiration date of the stock options. The separation agreement also provided for Mr. Broecker to execute a customary release of liability for the benefit of the Company.

 

In connection with Mr. Broecker’s resignation, the Board appointed Mr. Pops as the Company’s Chief Executive Officer, President and Chairman of the Board. In furtherance of this appointment, Mr. Pops’ employment agreement was amended for the following limited purposes: to make his employment agreement terminable at-will by either the Company or Mr. Pops; to add his new titles and responsibilities; to make clear that his base salary and incentive compensation will be determined annually by the Compensation Committee of the Board, as required by law; and, in order to make Mr. Pops’ agreement consistent with the form of agreement employed for all other executive officers of the Company, to remove a disability benefit to which Mr. Pops was previously entitled and to use Mr. Pops’ current salary as the definition of base salary in the agreement as opposed to the average of his current and past year’s salary. No material amendments were made to Mr. Pops’ employment agreement nor were any material benefits conferred on Mr. Pops as a result of such amendment.

 

Tax Deductibility of Compensation

 

In general, under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), the Company cannot deduct, for federal income tax purposes, compensation in excess of $1,000,000 paid to its 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 the best interests of the Company and its shareholders. Compensation paid to our named executive officers for calendar year 2009 was deductible for federal income tax purposes.

Compensation Committee Report

 

The Compensation Committee furnishes the following report:

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with Alkermes management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

Submitted by,

 

Mark Skaletsky, Chair
Paul J. Mitchell
David W. Anstice

 

Summary Compensation Table for the 2010, 2009 and 2008 Fiscal Years

 

The following table presents and summarizes the compensation paid to or earned by the named executive officers of the Company for the fiscal years ended March 31, 2010, 2009 and 2008:

 

 

 

Notes to Summary Compensation

 

 

 

Grants of Plan-Based Awards — for Fiscal Year Ended March 31, 2010

 

The following table presents information on all grants of plan-based awards made in fiscal year 2010 to our named executive officers.

 

 

 

Notes to Grants of Plan-Based Awards

 

 

Outstanding Equity Awards at 2010 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, 2010: