Regeneron's CEO, CSO pay under fire from advisory firms, who call on shareholders to oust a board member

No other biopharma executives came close to collecting as much in total pay last year as Regeneron Pharmaceuticals CEO Leonard Schleifer and CSO George Yancopoulos, who snagged about $270 million together.

Now, the hefty pay packages have drawn the ire of two big-name shareholder advisory firms. The firms are asking Regeneron shareholders to oust a board member over the drugmaker’s “excessive” payouts. 

In two separate notes to shareholders ahead of the company’s annual meeting on Friday, advisory firms Glass Lewis and Institutional Shareholder Services (ISS) urged Regeneron investors to vote against director George Sing, who sits on the company's compensation committee. 

Both firms took aim at the committee’s decision to ditch the annual stock options that had been given to Schleifer and Yancopoulos and replace them with a grant of $130 million in front-loaded performance-restricted stock units (PSUs). 

The awards will be doled out “upon achievement of ambitious, predetermined cumulative [total shareholder return] goals over a primary performance period of five years,” the company said in its 2021 proxy statement. Under the agreement, the two execs won’t receive further stock awards until December 2025. 

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Glass Lewis is "highly concerned” by the PSUs, the firm said. While intended to lock down executives for years to come, they also tie the compensation committee’s hands and eliminate the yearly performance incentives for Regeneron’s top brass, the group argued. The firm estimates that the annualized value of the grants equals a 51% bump compared with the previous year. 

Given that Regeneron has received “substantial criticism” for the size of executive grants in recent years, Glass Lewis said it seriously questions whether the upfront PSUs are in the best interests of shareholders, according to the note. 

The full grant value is not guaranteed, Glass Lewis notes, pointing out that the target share prices will require “considerable growth.” Still, the “disclosed dollar value cost of the grants is quite substantial relative to executive compensation levels among public companies worldwide,” according to the note. 

Similarly, ISS said the PSUs were “excessive in value, replace annual grants for a relatively long period of time, and provide multiple opportunities for the same shares to be earned.”

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Typically, shareholders have the chance to vote on executive compensation through say-on-pay votes, ISS noted. Except Regeneron holds their votes every three years, with the next being in 2023. In the absence of a say-on-pay vote this year, “an against vote is warranted for the only compensation committee member on the ballot, George Sing,” ISS said. 

A Regeneron spokesperson wasn’t immediately available for comment. 

The New York-based drugmaker has been a leading player during the COVID-19 pandemic, snaring an emergency authorization in late November for its antibody cocktail of casirivimab and imdevimab. 

While the company's FDA emergency authorization followed Eli Lilly’s nod for bamlanivimab, that drug has faced more challenges against arising variants than Regeneron’s treatment. Regeneron plans to supply the U.S. with 1 million antibody doses this quarter and expects to provide an additional 1.25 million doses in the third quarter.