Since Eli Lilly CEO David Ricks took the helm last year, he’s shaken up management twice, launched new cost-cutting measures and instituted thousands of job cuts. And he collected a compensation package of nearly $16 million for his efforts.
For his first year in office, Ricks racked up a $1.4 million base salary and $2.8 million in incentive pay, plus stock awards—including shares that vest according to future performance—valued at $10.2 million, according to Lilly’s 2018 proxy statement.
The worth of the performance shares was estimated based on 2017 benchmarks, which would have delivered the “maximum” in value to Ricks, the proxy states. That’s $5.1 million. For the other equity awards, with payouts based on shareholder value, Ricks would have collected $5.1 million.
An increase in pension value amounted to $1.7 million, and Ricks received 401(k) matching funds worth $84,000, the proxy says, but no other perks or special benefits.
Total: $15.84 million.
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That’s more or less on par with his predecessor’s pay; ex-CEO John Lechleiter may have collected more than $18 million as he retired at the end of 2016, but more than $3 million of that traced to his pension value. His cash incentive pay of $2.63 million was actually lower than Ricks’ 2017 levels. And in 2014, when Lilly’s performance wasn’t up to par, Lechleiter earned $14.5 million, with just $6.75 million in equity awards.
How does the new CEO’s compensation measure up against other biopharma pay packages? It wouldn’t have met the threshold for FiercePharma’s top 15 list of highest-paid executives in the industry for 2016. The last-place entry on that list was Amgen chief Robert Bradway at $16.85 million. (Lechleiter, thanks to the boost in pension value, came in ninth place.)
Ricks obviously benefited from Lilly’s comeback performance in 2017, when the company brought in $22.9 billion in revenue, up 8% year over year. Credit for that goes partly to Trulicity, the weekly GLP-1 diabetes drug chalked up $2 billion in sales, more than double its 2016 haul. And Taltz, which is going up against Novartis’ blockbuster Cosentyx managed to bring in $559 million, with $172.5 million of that in the fourth quarter.
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And Lilly is optimistic about the year ahead, despite a new competitive threat to Trulicity in the form of Novo Nordisk’s new weekly GLP-1 Ozempic. "[C]ompetitive threats from Novo's [drug] and Sanofi’s Admelog will be important to watch over the course of the year given the importance of Trulicity and the broader diabetes business to [Eli Lilly]," Credit Suisse analyst Vamil Divan, M.D., wrote in a recent note.
Still, Lilly hiked its 2018 earnings forecast to $4.81 to $4.91 per share, partly because of cost cuts. The company said in September that it would cut 3,500 jobs to save $500 million in annual costs. In November, a spokesperson told FiercePharma the company had accepted 2,300 retirements, with the job-cutting program expected to be mostly done by the end of 2017.