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| Merck CEO Kenneth Frazier |
Merck ($MRK) CEO Kenneth Frazier scored a 16% raise for 2012. In a normal year, that might be a normal increase in compensation for a pharma CEO, especially for longtime chiefs whose pensions grow in multimillion-dollar leaps. But last year wasn't a normal year. In 2012, some of the industry's biggest products went off patent, and much of Big Pharma reported flat sales at best.
Merck's worldwide sales declined by 2%, a not-too-shabby performance, given that its top-selling Singulair took a big nosedive off the patent cliff. Its numbers mirrored other Big Pharma performances last year; Novartis, for instance, saw reported sales drop by about 3%. GlaxoSmithKline's ($GSK) fell by 1%, while Eli Lilly's ($LLY) fell by 7%.
But among that group, Frazier's burgeoning pay package is something of a standout. Novartis ($NVS) chief Joe Jimenez took a 15.8% pay cut, to $13.2 million. Glaxo CEO Andrew Witty's compensation dropped by almost 43%, to £3.89 million, or about $5.86 million. Eli Lilly's John Lechleiter suffered an 11% drop to $14.6 million.
Frazier's 16% hike took his total to about $15.5 million, up from $13.3 million in 2011. As Dow Jones notes, his cash incentive pay fell to $2.5 million from $3.1 million, but an increase in equity awards helped make up the difference. His options amounted to almost $3.8 million, for instance, up from about $3 million the previous year. The biggest increase came in his pension value and deferred compensation; that grew to $4.3 million from $2.6 million during 2012.
Merck's compensation committee said Frazier's incentive pay and stock awards could have been higher, but Merck's shareholder return fell short of its rivals' performance. R&D setbacks also took their toll, so much so that Merck brought in Amgen's ($AMGN) former research chief, Roger Perlmutter, back in to jump-start its drug development efforts. Plus, the company pulled its cholesterol drug Tredaptive in several countries after a study raised safety concerns. But overall, they said Frazier's "strong leadership" helped the company "overcome the significant hurdles we faced in 2012"--and that made him worth $15 million-plus.
If any Merck shareholders scratch their heads at Frazier's compensation package, the company might point to Big Pharma rival (and Merck's sometime partner) Bristol-Myers Squibb ($BMY). The company suffered a 17% drop in net sales, thanks to Plavix's quick-and-steep decline. But its CEO, Lamberto Andreotti, won a compensation package worth $17.2 million, up 15%. And raise notwithstanding, Frazier's pay is still outstripped by 7 other pharma CEOs.
- see Merck's proxy statement (PDF)
- get more from Dow Jones
Special Reports: Merck - Biopharma's Top R&D Spenders - 2012 | Top Pharma Companies by 2012 Revenues | Top 10 Pharma CEO Salaries of 2011