Regeneron CEO, CSO rack up smaller 2016 pay packages as options values sink

Regeneron traded cash bonuses for nonequity incentive pay in 2016, and CEO Len Schleifer’s incentive tab came in at $2.23 million, down from $2.88 million in 2015.

Regeneron CEO Len Schleifer and CSO George Yancopoulos have been at or near the top of the biopharma executive-pay charts for several years now, ever since the company’s first-ever marketed drug, Eylea, took the fast route to blockbuster-dom.

That’s still the case for 2016. This time, however, their pay packages don’t outdistance the rest by as wide a margin. But no need to worry about the state of their personal balance sheets: Both Schleifer and Yancopoulos exercised enough stock options in 2016 to cover a few masterpieces at Sotheby’s, fund a few biotech startups and pay for a dozen Ivy League educations, too—if they wanted to, that is.

Schleifer tallied up $28.34 million in total compensation for 2016, according to the company’s 2017 proxy statement, filed Tuesday. Yancopoulos’ total came in slightly lower at $27.77 million. Not too shabby, certainly. Among the CEOs of big biopharma companies that have filed proxies so far this year, Schleifer ranks second only to Valeant Pharmaceuticals’ Joe Papa and his $62 million-plus total, nominal though it is. 

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But still, that’s far less than both men garnered in 2015, when Schleifer’s total compensation amounted to $47.46 million and Yancopoulos’ total, $40.30 million. 

What changed? Each of the execs got a modest bump—3.5%—in base salary. They racked up other compensation—mostly personal aircraft use—that increased by about $150,000 each.

Those hikes weren’t enough to offset the declines in cash incentive pay, however. Regeneron traded cash bonuses for nonequity incentive pay in 2016, with Schleifer’s incentive tab coming in at $2.23 million, down from $2.88 million in 2015. Yancopoulos’ incentive pay took a similar hit, to $1.90 million from $2.45 million.

But the biggest change came in option awards. Regeneron doesn’t hand out stock awards that vest according to performance targets like many other companies do. Instead, it gives its executives stock options that vest over time, believing options are more closely tied to shareholder benefits. If shareholders see their shares rise, then execs see a commensurate increase in their own values.

And for 2016, Regeneron’s board chose to award stock options valued at an identical amount—$24.63 million—to Schleifer and Yancopoulos, who added the word “president” to his CSO title last year. As Regeneron noted in its proxy, the number of options awarded to Schleifer went down by 15% year-over-year, but the value declined by 43%. Regeneron shares lost 32% of their value over the year, according to the proxy.

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The company has been reducing the number of options awarded to its execs for several years, in response to feedback from shareholders, the proxy states. 

Schleifer and Yancopoulos are among the few biopharma execs who actually started their companies and remain with them decades later. Last year they hit something of a speed bump with the PCSK9 drug, Praluent, that they share with Sanofi. Expected to be a blockbuster, the $14,000-plus list price med ran into trouble with payers and hasn’t delivered as much on the sales side as investors might have hoped.

This year could be different: Regeneron nabbed FDA approval, again with Sanofi, for atopic dermatitis drug Dupixent, one of the most anticipated launches of 2017 with long-term sales expectations of $4 billion-plus. The partners are looking at a potential FDA nod for their RA drug sarilumab this quarter, too. If they can fend off Amgen in patent court and keep Praluent on the market, 2017 could be a better year.

Meanwhile, Schleifer and Yancopoulos have exercised a number of their vested options, the proxy says. Last year, Schleifer exercised options worth 250,000 shares, or $89 million worth, while Yancopoulos traded 195,079 of his for $70 million.