After shepherding Teva through a multibillion-dollar operational cutback in his second year on the job, CEO Kåre Schultz had a compelling case for a raise in 2020—from investors' point of view, at least—despite the drugmaker's legal challenges.
This week, Teva shareholders agreed to give Schultz his bump. But there are caveats.
Teva's shareholders agreed Tuesday to raise Schultz's long-term equity incentive pay by $4 million per year to bring the three-year leader's compensation in line with other drugmakers, according to a Securities and Exchange Commission filing. Shareholders also approved a one-year extension to his contract through 2023. The Israeli drugmaker argued the extension would reward Schultz's deft handling of the company's $3 billion operational restructuring plan that concluded at the end of 2019.
As part of that plan, about 13,000 Teva employees lost their jobs. The company closed or sold off 23 manufacturing sites—or soon will—and shuttered 40 offices and laboratories.
Meanwhile, Teva is facing multibillion-dollar legal overhangs from nationwide opioid litigation and a federal probe into an industrywide price-fixing scheme. Teva is pursuing a "global" settlement for the opioid lawsuits and has reportedly walked away from the negotiating table with the feds on the collusion investigation.
In line with the increase in long-term incentive pay, Schultz's contract will also change to allow vesting after his term at Teva's helm—but there are restrictions in place.
Shareholders approved an amendment to Schultz's employment deal that would continue vesting his long-term equity pay if he is fired without cause, leaves for cause or resigns at the end of his contract term. However, continued vesting would require Schultz to maintain a noncompete agreement and a nondisclosure agreement once he left the company.
Schultz's big year in 2020 will follow a major pay cut in 2019 for the former Lundbeck and Novo Nordisk exec.
But that cut isn't exactly what it looks like: Almost all of Schultz's huge pay raise in 2018 was tied to a cool $20 million signing bonus he secured when he took the troubled drugmaker's top job in November 2017. Meanwhile, Schultz's base salary of $2 million in 2019 was the exact same as the year before.
At its annual meeting, Teva shareholders also approved a plan to make the Israeli drugmaker's board of directors a little less Israeli.
Teva will no longer require a majority of its 11-member board to be Israeli, opening the door for more representation from outside the company. Shareholders also stripped away provisions that did not require board members to hold Teva stock and barred corporations from being qualified as board members.
With its restructuring plan complete, Teva plans to lean on its branded medicines portfolio for future growth, including migraine med Ajovy and Huntington's disease therapy Austedo.
Teva has taken a big flyer out on Austedo, in particular, previously predicting "tenfold" growth for the drug. However, Austedo has flopped two recent phase 3 studies in Tourette syndrome, capping its potential somewhat.