6. Kenneth Frazier

Merck & Co. CEO Ken Frazier's overall compensation fell $3 million to $21.78 million in 2016.

Kenneth Frazier
Chairman and CEO, Merck & Co.
2016 compensation: $21.8 million

Merck & Co. CEO Ken Frazier ostensibly got a raise in 2016—a 2.5% bump to his base salary that took it to $1.53 million. But salary is only 10% of his compensation (PDF).

Most of the rest is performance pay, and Frazier’s pay package suffered in that department, thanks to flat sales that missed the company’s goal by $300 million, earnings that came in only one penny above its target of $3.72.

The result? A $3 million decline in overall compensation to $21.78 million.

Pipeline disappointments didn’t help either. Merck's one big win was its previously approved checkpoint inhibitor Keytruda, the first therapy cleared by the FDA to treat patients with non-small cell lung cancer whose tumors express PD-L1. Total sales of the drug flew 148% in 2016 to $1.4 billion, and the med grabbed a much-coveted approval in first-line lung cancer.

But Merck can’t run on one drug alone, and another new launch—Zepatier, Merck’s treatment for hepatitis C—didn’t perform up to snuff. The medication brought in just $500 million for the year as some payers inked exclusive deals with Gilead Sciences and AbbVie.

What’s worse, shrinkage in the hepatitis C market that’s plaguing Gilead hit Merck’s hepatitis pipeline. Uprifosbuvir (MK-3682), an experimental compound it acquired three years ago when it bought Idenix for $3.9 billion, was expected to be a top performer, but no more. Merck now believes uprifosbuvir’s only worth $240 million, so it took a $2.9 billion writedown in February, cutting fourth-quarter earnings per share almost in half, to 22 cents.

And then there’s Remicade, which is quickly losing market share in Europe to biosimilar competition. Sales of that med declined quarter after quarter throughout 2016, after Celltrion and Hospira rolled out a biosim. In September, Biogen launched a second copycat version, which could drive down prices—and sales—even more. By year’s end, Remicade revenue had shrunk by 29% to $1.26 billion.

Meanwhile, Frazier was been working to restock Merck’s pipeline with M&A. Last June, the company picked up Afferent Pharma and its potential blockbuster to treat chronic cough for $1.25 billion. The company also bought IOmet to help boost its immuno-oncology offerings, and it formed a $200 million partnership with Moderna Therapeutics to develop cancer vaccines. But investors are pressuring him to step up the dealmaking even further.

Merck’s board figured that Frazier met the company’s challenges well enough to earn him $7.88 million in stock awards—down from $9.91 million in 2015—and $4.8 million worth of options, same as the prior year. His incentive pay came in at $2.5 million, a decline from from $3.4 million in 2015.

Frazier’s increase in pension value and deferred earnings amounted to about as much as it did in 2015 at $4.75 million, and his other compensation was up slightly to 302,468, including $220,767 in savings plan matching.

6. Kenneth Frazier