Opdivo lung cancer slip took a bite out of Bristol CEO's bonus, but pay still hit $16.9M

Bristol-Myers
Bristol-Myers CEO Giovanni Caforio racked up $16.93 million in 2016 despite a big trial failure—but most of the compensation decisions were made before that data were posted. (Bristol-Myers Squibb)

Bristol-Myers Squibb CEO Giovanni Caforio came into the job in mid-2015, just as the company was nearing approval for its biggest new drug in several years: the immuno-oncology therapy Opdivo. His salary that year came to $1.29 million.

Last year, as Opdivo racked up billions in sales and a range of new indications, that base rose to $1.51 million. It was a 17% hike over the previous year—no small increase in today’s job market.

Wait a minute, pharma-watchers might say. Opdivo fell short in an important lung cancer trial—Checkmate-026—in August. That failure prompted analysts to knock billions off sales estimates and investors to drive Bristol-Myers’ share price down by 20%, to just over $60 from about $75. And it's declined since to $52.98 at Tuesday’s close.

The company’s board wasn’t deaf to those questions, as its 2017 proxy filing showed. “Most of the 2016 compensation decisions regarding our executives were made in the first half of 2016 – several months before the CheckMate-026 results were known,” the proxy stated.

Of course, base salary is just one line item in executive pay, usually a small fraction of total compensation. Companies lean on incentive pay to give their CEOs more skin in the game. But base pay, as the only fixed number in the whole package, is one indicator of just how the company’s board sees their designated helmsman.

And in Caforio’s case, the board also felt it needed to adjust his base to be closer to the median target in his pharma peer group—one of those decisions made before the trial results broke.

New equity awards were also decided before then, the filing states, adding, “Portions of our outstanding equity awards granted in prior years that vested in the first half of 2016 did not take into account the market reaction to the CheckMate-026 results.”

Caforio got a boost in his stock awards, to $11.82 million from $10.44 million in 2015. His “other compensation,” which essentially amounts to contributions to retirement plans, rose to about $601,000 from about $410,000. Total: $16.93 million, certain to rank him among the highest-paid executives in biopharma for 2016.

What did happen after those results were posted? Decisions about 2016 incentive pay. And there, Caforio and his fellow BMS executives got dinged. That program mostly focused on “encouraging and rewarding outstanding financial and operational performance.” It also weighed pipeline advancement and a “holistic assessment” of individual performance. “Both of these factors ... were negatively affected by the CheckMate-026 results and the associated market reaction,” the proxy stated.

Still, Caforio’s incentive pay was no small potatoes: $2.99 million, down from $3.46 million in 2015.

In the realm of Big Pharma, Bristol-Myers' CEO stands somewhere in the middle, with Johnson & Johnson chief Alex Gorsky ($26 million), AbbVie CEO Richard Gonzalez ($20.8 million), and Merck & Co. helmsman Ken Frazier ($21 million) all garnering higher compensation packages, but Novartis' Joe Jimenez and Roche's Severin Schwan hitting in the $10 million to $12 million range.

In general, the European executives collect less than U.S. CEOs do.