For most people who serve as non-executive board members, it’s a part-time job. For board members of Regeneron and Vertex, it’s an extremely lucrative part-time job.
Regeneron’s board members were the highest paid among all companies in the S&P 500, according to CBS News, which got ahold of a report released on October 5 by Equilar, a Redwood City, CA-based board recruiter and executive compensation consultant. The median retainer paid to Regeneron’s board members last year was $2.06 million--the highest of any S&P company. Vertex came in second, with median board pay of $1.23 million.
Regeneron’s total board compensation was $18.56 million, which also topped off the S&P, according to CBS. Granted, the company did have a big year in 2015, as sales of its vision-preserving blockbuster, Eylea, skyrocketed 54% to $2.7 billion. Regeneron CEO Leonard Schleifer netted $47.5 million in pay last year, putting him ahead of Big Pharma bigwigs like Pfizer CEO Ian Read.
Regeneron spilled plenty of ink in its proxy statement pointing out that its growth in shareholder returns compared with executive pay increases was slower than that of its rivals, and that Schleifer’s compensation was just 0.08% of Regeneron’s market cap in 2015, having dropped from 0.20% in 2011. This year, however, the company is struggling to meet high expectations for its PCSK9-inhibiting cholesterol drug, Praluent, and its stock has fallen 24% from January to $394.
As for Vertex, it scored a big milestone in 2015, winning approval for Orkambi, a two-drug combo to treat cystic fibrosis. But the drug hit the market with an eye-popping price of $259,000 per year, sparking plenty of pushback from doctors and payers. The reimbursement challenges have been especially tough overseas. The U.K.’s National Institute for Health and Care Excellence (NICE), for example, recommended against covering the drug, determining that the cost outweighs the benefits.
Vertex recently won FDA approval for use of Orkambi in children ages 6 to 11 who have two copies of the F508del mutation, which will add 2,500 U.S. patients to the company’s potential customer pool. Still, Vertex lowered its expectations for the drug, saying it now sees peak sales of $950 million to $990 million, not the $1 billion to $1.1 billion it had predicted initially. This year, Vertex’s stock has dropped 30% to $86.
Board compensation is rising at Regeneron and Vertex at a time when overall board pay is on the upswing, Equilar reports. In the past 5 years, the median annual pay for board members has risen 17% from $205,000 to $240,000.
“New corporate governance guidelines and increased shareholder engagement have added responsibilities for boards of directors,” said Matthew Goforth, research and content specialist at Equilar, in a press release. “While pay growth has been incremental and relatively modest on a year-to-year basis, the design of director compensation programs has shifted and increased to reflect these fiduciary duties.”
Equilar points out that the majority of director pay comes in the form of equity, which is usually restricted stock. Still, the cash isn’t bad for a part-time job: The median amount of cash awarded to board members last year was $90,000, up from $70,000 five years ago.
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UPDATED: NICE sticks to its guns and turns down Vertex's Orkambi even as patients plead