MNKD 2018 Proxy Statement

and number of employees. All companies in the peer group are either biotechnology or pharmaceutical companies. Companies were selected with various revenue sizes because we are recruiting from and competing for executive talent with companies that are generating revenue. For compensation considerations in 2017, the peer group consisted of eleven companies. Based on data compiled and reviewed by the Compensation Committee in early 2017, three of the companies had revenue of less than $10 million, four between $10 million and $100 million, and four between $100 million and $200 million. Based on the prospects and characteristics of MannKind at that time, the Compensation Committee believed that those peer companies were appropriate. The 2017 peer group consisted of the following 11 companies: Arena Pharmaceuticals Inc. Innoviva Inc. ACADIA Pharmaceuticals Inc. Lexicon Pharmaceuticals Inc. Cti Biopharma Corp. Momenta Pharmaceuticals Celldex Therapeutics Inc. Nektar Therapeutics Exelixis Inc. Rigel Pharmaceuticals Inc. Geron Corporation As per our annual process, in February 2018 our Compensation Committee revised our peer group to consist of ten companies. Based on data compiled and reviewed by the Compensation Committee in February 2018, one of the companies has revenue of less than $10M, six between $10 million and $100 million, and three between $100 million and $200 million. Based on the prospects and characteristics of MannKind at that time, the Compensation Committee believed that those peer companies were appropriate. The 2018 peer group consists of the following 10 companies: Arena Pharmaceuticals Inc. Macrogenics Inc. ACADIA Pharmaceuticals Inc. Momenta Pharmaceuticals Acceleron Pharma Inc. Newlink Genetics Corporation Intersect Ent Inc. Rigel Pharmaceuticals Inc. Lexicon Pharmaceuticals Inc. Vanda Pharmaceuticals Inc. Market Positioning The Compensation Committee reviews executive compensation at least annually, establishes competitive compensation levels and designs the compensation program to provide pay commensurate with individual and corporate performance. With support from Mercer, we have positioned total compensation levels for executives at the 50th percentile of our peer group on the basis that we believe this target to be an appropriate level of compensation to attract and retain qualified and capable executives. However, compensation may fall above or below this level under a range of circumstances, such as individual performance, tenure with the Company or retention concerns. We supplement the peer group data with the survey data described above. We believe our executive compensation packages are reasonable when considering our business strategy, the revenue potential of our business, our compensation philosophy and the competitive market pay data. In addition to the factors listed above, we also consider, among other things: • our business need for the executive officer’s skills; • the contributions that the executive officer has made or we believe will make to our success; • the transferability of the executive officer’s managerial skills to other potential employers; and • the relevance of the executive officer’s experience to other potential employers, particularly in the pharmaceutical and biotechnology industries. 49