Allergan's CEO pay plummets by 80% without big M&A and strong financials

Brent Saunders
Allergan CEO Brent Saunders took home a 2016 pay package that totaled $4.1 million.

After a 2016 that hit some bumps financially—and one that didn’t feature the Pfizer-Allergan merger the companies had planned on—Allergan CEO Brent Saunders’ pay is down. Way, way down.

The Dublin drugmaker’s chief exec pocketed just $4.1 million in 2016, a sum that’s less than one-fifth of the $21.6 million he took home in 2015—and just 11.3% of his 2014 haul. Included in last year’s figure were a base salary of $1.0 million, along with $2.9 million in nonequity incentive plan compensation, a $2,035 change in pension value, and $173,568 in other freebies, including aircraft use and a car and driver allowance.

Why the big dip from years past? 2014’s $36.6 million package was always meant to be the largest; it had $25.9 million in stock awards and $8.6 million in options baked in from the outset that were meant to cover 2015 through 2017. But 2015’s had some extra padding, too; they featured $14.3 million in “merger success awards” related to cost-savings targets associated with the Forest Labs buyout that brought Saunders to the helm in the first place.

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With its late-2015 deal to merge with Pfizer shut down by the U.S. Treasury, Allergan didn't have any big deal-related cost-cutting opportunities last year. That wasn’t the only key difference between 2016 and 2015, though. Allergan assigns annual incentives as 19% of its CEO’s pay, putting an emphasis on non-GAAP performance net income per share. And the $6 million Saunders netted in 2015 based financial performance shrunk to that $2.9 million figure.

Allergan’s struggles were on full display in last year’s third quarter, which featured misses on both the earnings and sales fronts thanks to misfires with established brands such as Namzaric. As a result, the company lowered its full-year guidance, admitting that “we did have a lot going on this year,” including the “transformation of the company” into a brands-only drugmaker.

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That explanation didn’t exactly satisfy some industry watchers, including Bernstein analyst Ronny Gal. “The best explanation we have is that in a company with so much transition, a few balls were dropped,” he wrote to clients, adding, “They need to do better.”

And Allergan intends to, it said in February alongside street-beating fourth-quarter results. For 2017, the company anticipates $15.5 billion to $15.8 billion in 2017 sales, or 7.4% growth at the midpoint.

Saunders, meanwhile, will have some additional responsibilities on his plate, inherited in October with the passing of the chairman’s torch. He took the title from Paul Bisaro, who also handed him the CEO reins after the Forest buyout.