Biogen CEO’s pay jumps as he takes the top seat, but the stock's still falling

Biogen CEO Michel Vounatsos
Biogen CEO Michel Vounatsos saw his pay hit $13.6 million, but all eyes are on its MS franchise, and R&D (Biogen)

Biogen CEO Michel Vounatsos totted up a healthy $13.6 million in the usual mix of pay, shares and other compensation last year, but he'll likely need some big R&D deals and wins to boost the company's outlook—and lift his pay for 2018.

Long-standing Biogen CEO George Scangos left to run biotech startup Vir Biotechnology at the start of last year, to be replaced by the “underwhelming” (in the words of Bernstein analyst Ronny Gal) Vounatsos, its chief commercial officer since April 2016. He'd moved to Biogen at that point after a two-decade career at Merck & Co.

Vounatsos' base salary was $1.08 million, beefed up with $9.86 million in equity awards and around $2.5 million in incentive compensation, according to Biogen’s proxy filing. His much meatier $13.6 million total as CEO—he made $5.8 million as chief commercial officer—was a few million down from the $16.9 million Scangos raked in for 2015, when he was rewarded for R&D and the multiple sclerosis (MS) franchise's performance. Vounatsos' 2017 also compared, though a fair few million short, to Bristol CEO Giovanni Caforio's $18.7 million.

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Biogen remains, however, one of the largest of the Big Biotechs, and has a hefty weight on the iShares Nasdaq Biotechnology ETF, alongside Celgene. If Biogen does badly, this has a major knock-on effect, meaning its top executive has added pressure wedded to his internal company concerns.  

So how has his pay packet compared to company performance? Well, on the products side, its MS therapies are hitting a double storm of pricing pressures and competitive headwinds, although its biosimilar work and deals have been doing well for the company.

RELATED: Biogen to boost stake in biosims joint venture as competition to its MS meds mounts

It is, however, looking to collaborations and in-licensing deals, notably on longer-term R&D, to try and batten down the hatches against strengthening headwinds in the future.

Just last week, Biogen said it was paying a hefty $1 billion to enter into a deeper discovery-stage R&D pact with Ionis Pharmaceuticals, giving Biogen a chance to pick up a series of neurological antisense drugs. It’s a long-term gamble, and Vounatsos and his management team, facing pressure to re-energize the R&D business, paid a hefty sum to secure access to the fruits of Ionis’ discovery work. In addition to that $1 billion in up-front cash, Biogen is paying a $375 million fee and splurging another $625 million on Ionis’ stock at a weighty premium.

In return, Ionis is granting Biogen first pick of its neurology targets. If Biogen takes up its option to exclusively collaborate with Ionis on a target, Ionis will identify antisense drug candidates designed to hit it. At that point, Ionis will hand off responsibility to Biogen and wait for a stream of license fees, milestone payments and royalties to trickle into its bank account; at least, that’s the plan.

For Biogen, the deal represents an attempt to replicate one of the bright spots in its recent history, spinal muscular atrophy (SMA) drug Spinraza. The antisense oligonucleotide took off out of the gate, racking up sales of $363 million in the fourth quarter, but has since slowed somewhat.

RELATED: Don't panic about Spinraza's slowdown, Biogen executives say. It's got plenty of room to grow

Biogen needs to move quickly to quell concerns about its prospects. Even the relative success of Spinraza carries an asterisk, with analysts concerned that AveXis’ Novartis-bound gene therapy will supplant it in SMA.

In terms of pipeline, much of its near-term future is weighted upon its Alzheimer’s hope aducanumab, although this is a big gamble: Alzheimer’s is a notorious R&D graveyard for biopharma, stretching back 15 years now, and Biogen’s BACE inhibitor approach has also failed to move the needle for a host of pharma in recent years.

Many analysts want a little more protection should aducanumab repeat the depressingly familiar failures of the last decade-and-a-half, with sentiment dropping this year: At its height in 2018, Biogen was trading at just shy of $368 in late January, but slowly eroded to $276 a share by the end of last week.