Most drugmaker CEOs received hefty pay raises in 2018, despite a year in which the share prices of many companies declined, according to a BioPharma Dive analysis of financial filings.
BioPharma Dive looked at nearly 200 life sciences companies, ranging from pharmaceutical giants to small biotechs with market values of at least $500 million. The review compiled data on CEO and median employee compensation, stock performance and gender representation.
The typical CEO in the drug industry earned $5.7 million in total compensation last year, up 39% from the median figure for 2017. Averaged, however, CEO pay across the group came in at $7.2 million, pulled higher by lofty pay packages for heads of the leading pharma and biotech companies.
Employees tended to also receive more in 2018, but not nearly as much as the gains recorded by those at the top. Median compensation for workers, which includes benefits like healthcare as well as salary, increased about 6% last year, to $177,560.
Last year, less than 10% of pharma and biotech CEOs were women, or 16 of the 194 executives included in this analysis. Only one, GlaxoSmithKline's Emma Walmsley, headed up a global pharmaceutical company. Female CEOs earned slightly less, by about 9% on a median basis, although the small number of data points makes drawing conclusions difficult.
Below, we lay out some of the top findings from our analysis. Our methodology is detailed in full at the bottom of this report.
Rankings are listed first for the overall group of 194 companies, and then are segmented by company size: large pharma, biotechs worth more than $10 billion, between $2 billion and $10 billion, and between $500 million and $2 billion.
Compensation includes base salary, cash bonuses and long-term stock and option awards, as described in annual proxy filings.
Company | CEO | Compensation, in $USD millions |
---|---|---|
Moderna | Stephane Bancel | |
Beigene | John Oyler | |
Rubius Therapeutics | Pablo Cagnoni | |
Regeneron | Leonard Schleifer | |
Gilead | John Milligan |
Company | CEO | Compensation, in $USD millions |
---|---|---|
Merck & Co. | Ken Frazier | |
Johnson & Johnson | Alex Gorsky | |
Pfizer | Ian Read | |
Bristol-Myers Squibb | Giovanni Caforio | |
Eli Lilly | David Ricks |
Company | CEO | Compensation, in $USD millions |
---|---|---|
Regeneron | Leonard Schleifer | |
Gilead | John Milligan | |
AbbVie | Rick Gonzalez | |
Vertex | Jeffrey Leiden | |
Amgen | Robert Bradway |
Company | CEO | Compensation, in $USD millions |
---|---|---|
Moderna | Stephane Bancel | |
Beigene | John Oyler | |
Bluebird bio | Nick Leschly | |
Alkermes | Richard Pops | |
Horizon Pharma | Timothy Walbert |
Company | CEO | Compensation, in $USD millions |
---|---|---|
Rubius Therapeutics | Pablo Cagnoni | |
MeiraGTx | Alexandria Forbes | |
Endo | Paul Campanelli | |
TG Therapeutics | Michael Weiss | |
Eagle Pharma | Scott Tarriff |
Company | CEO | Compensation |
---|---|---|
Eidos | Neil Kumar | |
Innoviva | Geoffrey Hulme | |
Twist Bioscience | Emily Leproust | |
Medpace | August Troendle | |
Audentes Therapeutics | Matthew Patterson |
Company | CEO | Compensation, in $USD millions |
---|---|---|
Bayer | Werner Baumann | |
Novo Nordisk | Lars Fruergaard Jorgensen | |
Allergan | Brent Saunders | |
Novartis | Vas Narasimhan | |
GlaxoSmithKline | Emma Walmsley |
Company | CEO | Compensation, in $USD millions |
---|---|---|
Exact Sciences | Kevin Conroy | |
Incyte | Herve Hoppenot | |
Illumina | Francis deSouza | |
BioMarin | Jean-Jacques Bienaime | |
Biogen | Michel Vounatsos |
Company | CEO | Compensation |
---|---|---|
Guardant Health | Helmy Eltoukhy | |
Reata Pharmaceuticals | J. Warren Huff | |
Immunomedics | Michael Pehl | |
Sarepta Therapeutics | Douglas Ingram | |
MorphoSys | Simon Moroney |
Company | CEO | Compensation |
---|---|---|
Eidos Therapeutics | Neil Kumar | |
Innoviva | Geoffrey Hulme | |
Twist Biosciences | Emily Leproust | |
Medpace | August Troendle | |
Audentes Therapeutics | Matthew Patterson |
CEOs in biotech and pharma earn sizable annual salaries, but it's stock and option grants that compose the bulk of total compensation. Like many corporations around the world, biotech and pharma chiefs typically also receive cash bonuses linked to their yearly performance — as defined by the company.
Company | CEO | Total compensation |
---|---|---|
Pfizer | Ian Read | $19,549,213 |
Regeneron | Len Schleifer | $26,520,555 |
Moderna | Stephane Bancel | $58,608,484 |
Paying CEOs mostly via equity awards, the thinking goes, keeps the incentives of company executives in line with those of shareholders. Critics, though, argue the practice can spur short-term thinking, leading company chiefs to chase quarterly earnings numbers rather than long-term growth.
Equity awards can vary greatly year to year. Sarepta Therapeutics' Douglas Ingram, for example, earned roughly $55 million more in 2017 than in 2018, thanks to $44 million in option grants that year. Compensation for MeiraGTx's Alexandria Forbes, meanwhile, swung from just over $1 million in 2017 to nearly $23 million last year.
Valuing equity-based compensation is another question. For the purposes of regulatory reporting, companies determine an effective fair value for stock and option grants given to CEOs. That can differ — quite significantly — from what executives actually earn when they go to sell shares or exercise options, a sum generally referred to as annual realized gains.
Regeneron's Leonard Schliefer, for example, was paid $26.5 million last year. But he also exercised options worth nearly $113 million. (Not all of those options were granted in 2018.)
Like most other industries, biotech and pharma leadership skews heavily male. In 2018, more than 90% of CEOs were men. Just 16 of the 194 executives included in this analysis were female.
Gender representation is even more lopsided among the largest companies. Across the 25 biggest pharma and biotech companies by value, GlaxoSmithKline's Emma Walmsley was the only woman.
Compensation appeared broadly similar by median pay, although such comparison is hindered by a fewer number of data points for female CEO pay. Among the 15 female CEOs for whom numbers were available, the median woman made $5.2 million versus the $5.7 million earned by the median male, a difference of about 9%.
It's worth noting, though, that Walmsley's pay of $7.8 million last year ranked 9th among the 14 pharma executives included in BioPharma Dive's analysis, and below the median sum for both the U.K. cross-industry and global pharmaceutical groups used by GSK as comparators.
Most drugmakers reported CEO pay. Compensation for a handful of executives whose companies are listed abroad was not readily available. Among the 182 companies that did report, the median compensation was about $5.7 million. Averaged, that figure rose to just over $7.6 million.
Fewer companies, 112, reported median employee pay. Using that dataset, the median figure for the group was $177,560, a rough estimate of what a typical worker in the biotech and pharma industry might make. Median pay numbers ranged from $38,661 to $804,000.
Using those median figures for the group yields a CEO-to-employee pay ratio of roughly 32:1.
Company | Compensation |
---|---|
Madrigal Pharma (17 employees) | |
The Medicines Company (62 employees) | |
Esperion Therapeutics (76 employees | |
Sage Therapeutics (637 employees) | |
Heron Therapeutics (68 employees) |
Company | Compensation |
---|---|
Opko Health (5,690 employees) | |
Mylan (35,000 employees) | |
Immunomedics (346 employees) | |
ANI Pharmaceuticals (299 employees) | |
Akorn (2,220 employees) |
Company | Compensation |
---|---|
Bristol-Myers Squibb | |
AstraZeneca | |
Median for group |
Company | Compensation |
---|---|
Celgene | |
Mylan | |
Median for group |
Company | Compensation |
---|---|
The Medicines Company | |
Immunomedics | |
Median for group |
Company | Compensation |
---|---|
Madrigal | |
Opko Health | |
Median for group |
Company | Pay gap |
---|---|
Mylan | 315 : 1 |
Beigene | 293 : 1 |
J&J | 268 : 1 |
Pfizer | 244 : 1 |
Endo International | 243 : 1 |
Company | Pay gap |
---|---|
Innoviva | 2 : 1 |
Sarepta | 4 : 1 |
Madrigal | 7 : 1 |
ArQule | 10 : 1 |
Pacific Biosciences | 10 : 1 |
The provision under the Dodd-Frank Act compelling companies to disclose median employee compensation and CEO pay ratios took effect for fiscal years beginning on or after Jan. 1, 2017, making 2018 the second year for which this data is available.
While that doesn't provide much context, two data points allow for some comparison of change over time.
BioPharma Dive found median CEO compensation — including equity awards — grew significantly faster than that of a median employee at small and medium-sized biotech companies. At large biotechs, median CEO and employee pay grew at roughly similar rates. In absolute terms, however, the typical executive earned more than $800,000 more in 2018 than in 2017, versus a boost of about $9,000 for the typical worker.
Large Biotech | Mid Biotech | Small Biotech | |
---|---|---|---|
CEO pay | ↑ 5% | ↑ 29% | ↑ 65% |
Median Employee Pay | ↑ 6% | ↑ 8% | ↑ 1% |
The typical biopharma company saw its stock fall about 8% last year, but faltering market performance did not appear associated with lower executive compensation. Median pay for CEOs of companies which ended 2018 in the red, in fact, grew slightly more than for those who led drugmakers with positive stock returns last year.
Among the 69 drugmaker stocks which grew in value year over year, the median executive compensation increased by 23%, versus the 27% bump to median pay among the 105 companies which posted declining share values.
For what it's worth, employee pay moved in similar directions to stock performance: median compensation among companies in the green increased 6.1% while declining 4.6% for those in the red.
Scrutiny of executive pay is commonplace regardless of sector, but in the drug industry it comes amid criticism over pharmaceutical pricing.
Do pharma and biotech CEOs make more if they hike prices? It was a question asked by Sen. Ron Wyden, D-Ore., at a hearing held by the powerful Senate Finance Committee in February, when top executives from seven drugmakers were called to testify on drug costs.
Wyden's question was directed at Richard Gonzalez, the CEO of AbbVie, which makes the world's top-selling drug, Humira. AbbVie uses Humira sales as one factor in deciding the annual cash bonus for its top executives, which for Gonzalez totaled nearly $4 million last year.
AbbVie's bonus framework is notable. Among the top 25 companies by value in BioPharma Dive's analysis with marketed products in the U.S., only six included sales of an individual product in their annual bonus calculations.
Wyden's question also raises a wider one for the industry. Revenue targets are typically used in calculating executive compensation like cash bonuses. For many biotechs, though, revenue can be roughly that of one product's sales. AbbVie, for instance, derives three-fifths of its revenue from Humira, while the five others that included individual product sales targets in bonus calculations depended greatly on their respective top-sellers.
Raising prices is a potent lever for boosting sales, so tying bonuses to revenue targets could in theory link compensation to prices for those companies with only one or few marketed products.
In the case of Humira, AbbVie raised the drug’s list price by 9.7% in 2018 and by 6.2% in 2019 — increases that, while diminished by rebates and discounts, helped sales. In a written response to Wyden's question, AbbVie said no one factor determined more than 3% of Gonzalez's total compensation, of which his annual bonus made up 18%.
Others are more explicit. Vertex earns much of its revenue from its three marketed cystic fibrosis drugs and includes a target for combined revenues in its annual bonus calculation. According to the company, though, such goals "were not set, achieved through or dependent upon, price increases."
BioPharma Dive merged and de-duplicated lists of holdings included in two biotech stock indices, the SPDR S&P Biotech ETF and iShares NASDAQ Biotechnology Index, to create a group of 238 biotech companies.
We then added in biotech companies which had IPO'd in 2018 and are not yet included in either index (e.g. Moderna) to get a list of 265.
Pharmaceutical companies, including those headquartered abroad, were included in a separate list of 14.
Biotech companies with market capitalizations below $500 million as of May 20 were excluded from this analysis, reducing the biotech group to 180 companies. We did so to ensure we had a data set with companies in which median employee compensation would be based on a sufficient number of employees, and to create a more manageable data set. Smaller companies are also more likely to claim an exemption from reporting median employee compensation and CEO pay ratios.
Market capitalizations were calculated using the Google Finance function or, when necessary, by multiplying the last disclosed number of outstanding common shares by closing prices on May 20.
Employee compensation numbers and CEO pay ratios were not reported by all companies. Many that did not claimed "Emerging Growth Company" status, a reporting exemption under the Dodd-Frank Act.
Employee numbers were tabulated from the latest relevant regulatory disclosure available, usually a Form 10-K. In some cases, reported CEO pay ratios were rounded to the nearest whole number.
For growth in median compensation, BioPharma Dive segmented companies into large, mid-sized and small biotechs, excluding those lacking matched data (e.g. no 2017 numbers reported). We then calculated the median figures of each matched group for CEO and employee compensation, measuring percent and absolute change from 2017 to 2018.
A public version of the database BioPharma Dive created can be found at this link.
Large cap biotech: Market capitalization greater than $10 billion
Mid-sized biotech: Market capitalization between $2 billion and $10 billion
Small biotech: Market capitalization between $500 million and $2 billion
CEO total compensation: The total figure reported on Summary Compensation Table in proxy or other filings. Inclusive of base salary, annual cash bonus, equity and option grants as well as miscellaneous payments within the 2018 calendar year.
Median employee compensation: Employee compensation reported in the Dodd Frank Act-mandated CEO pay ratio section of company proxy filings. Inclusive of salary, 401(k) contributions and healthcare benefits.
CEO pay ratio: A ratio of CEO total compensation to median employee compensation. Companies are permitted under the Dodd-Frank Act to calculate their own median employee compensation, and can exclude up to 5% of their workforce from such calculations.