Specialty drugmakers often find their treatments scrutinized, with critics wondering if they're worth their sometimes high price tags. But what about their CEOs?
Sanford Bernstein analyst Ronny Gal set out on a quest for clues to understanding compensation decisions for the head honchos at 7 specialty drugmakers--Actavis ($ACT), Allergan ($AGN), Hospira ($HSP), Momenta ($MNTA), Mylan ($MYL) and Teva ($TEVA)--and for a basis on which to compare them, The Wall Street Journal's Pharmalot reports. To do so, he took a look at those companies' proxy statements filed between 2010 and 2013.
His findings? For one, compensation for the top 5 execs at each company averaged about $20 million a year with a compounded annual growth rate of 3%--and 43% of total exec team compensation went to the CEO. Helmsmen largely reached or exceeded their targets, and a trio of those pharmas--Actavis, Mylan and Allergan--introduced new pay plans that will "handsomely" reward officers for hitting their publicly stated long-term targets.
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| Allergan CEO David Pyott |
Meanwhile, all 7 of the companies now require exec teams to boast a meaningful level of ownership--three to 6 times base salary for CEOs, a figure that's on the rise. When options are included, management's exposure to the stock was "considerable," he wrote, at Allergan ($588 million), Mylan ($210 million) and Actavis ($187 million). Allergan chief executive Dave Pyott's position is 29.6 times his annual compensation, he points out, "suggesting their personal interest is much more in stock performance than personal employment."
Overall, average pay for top managers fell about $9 million short of the $29 million average among large-cap pharmas. Actavis created the most shareholder value over the past 5 years while keeping mid-range exec compensation packages hovering around that $20 million mark.
And what about those oft-coveted, non-monetary perks? After a few years of cutting back, companies now aren't changing much--except in the case of Actavis, Gal notes. The New Jersey company "increased perquisites to its ceo and executive chairman, including the use of the company plane for personal use."
- see the Pharmalot story
Special Report: 15 Highest-Paid Biopharma CEOs of 2013\