Another milestone, another payday for executives at HeartWare International Inc. (NSDQ:HTWR) — although the taxman needed to take his cut too.
When the 140th, and final, patient enrolled in HeartWare’s “bridge-to-transplant” trial late last month, the event triggered financial windfalls for top management at the Framingham, Mass.-based firm. Under performance rights plans adopted by the HeartWare board in 2007 and 2008, executives received restricted stock awards worth between $100,000 and nearly $1.3 million, depending on their position on the corporate ladder. But the awards also created sizable tax liabilities for the seven individuals, prompting them in recent days to sell off a portion of their holdings to cover the cost of taxes on their newfound wealth.
HeartWare announced Feb. 22 that the final patient had been enrolled in its Advance trial, designed to determine if the company’s miniaturized pump implant could help keep patients with failing hearts alive until a suitable transplant donor could be found. Implant surgery for the patient was planned later that week, starting the clock on an 180-day evaluation period after which the results will be compiled as part of a pre-market application for the implantable left ventricular assist devices (LVADs) with U.S. regulators.
The enrollment phase for the Advance trial wrapped up several weeks ahead of schedule, HeartWare officials said, adding that they now anticipate the pre-market application likely will be submitted in early December rather than later that month as originally expected. That’s more good news for the executive team, because the pre-market application would mark completion of another performance milestone set down in the Nov. 13, 2007 employee rights plans.
So far, two of the four performance criteria have been met, with the first standard — the commercial launch of the LVAD in Europe, among other operational goals — achieved in July 2009. A successful pre-market application process for the company later this year and the completion of enrollment in U.S. trials of the device as a destination therapy would leave only the completion of a human feasibility study for the company’s next-generation implant for HeartWare executives to claim their full allotment of stock awards.
A subsequent rights plan adopted in August 2008 follows many of the same performance criteria as the November 2007 plan, but doles out stock in three parts, half for completing the “bridge-to-transplant” enrollment and the balance in two equal installments triggered by the pre-market application and the next-generation trials.
As would be expected, the largest stock awards went to HeartWare’s top brass. CEO Douglas Godshall last month received restricted stock awards for just under 25,000 shares of HeartWare stock, along with an additional 8,571 shares that will vest after one year. At roughly $38.50 a share, Godshall’s award was worth almost $1.3 million, and in order to pay the expected taxes due on his new stock wealth, he plans to soon sell 10,900 shares at an average price of $38.86 each, for proceeds of $423,574.
Next in line was CFO David McIntyre, who received a total of 8,571 restricted stock units worth about $330,000 and then generated $129,756 by selling 3,330 shares to cover his taxes. Chief Scientific Officer Jeffrey Larose was another big beneficiary, receiving 6,407 shares. Larose sold 2,620 shares for $38.94 apiece, or $102,023, for his tax bill.