Spring is here and along with it the annual corporate rite of filingproxy statements has begun. Proxies offer one main attraction forscrutinizing shareholders and prurient readers alike: they disclose thesalaries of top executives. A quick perusal of fiscal 1995 proxystatements filed by large biotech firms confirms a trend that began inthe early 1990s _ CEOs continue to enjoy hefty annual increases incash compensation.

Since 1992, BioWorld has tracked CEO compensation at publicbiotechnology companies using proxy statements filed with theSecurities and Exchange Commission. The data reveal that from1992 to 1995, CEOs at the seven largest biotech companies saw theirannual cash compensation (base salary plus bonus) rise an average of48 percent. (See the table on page 3.) That translates into a roughly14 percent raise per year. As a reference point, the inflation rate hashovered between 2 and 4 percent each year since 1992.

The generous pay increases may seem logical since some of thesesame seven firms (Amgen Inc., of Thousand Oaks, Calif.; BiogenInc., of Cambridge, Mass.; Centocor Inc., of Malvern, Pa.; ChironCorp., of Emeryville, Calif.; Genentech Inc., of South San Francisco,Calif.; and Genetics Institute Inc. and Genzyme Corp., both ofCambridge, Mass.) have scored important clinical, regulatory andfinancial victories in recent years. Indeed, at the 1992-1995 rate ofgrowth, this collection of CEOs as a group could expect to see theirannual cash compensation double approximately every five to sixyears.

John Hawkins, managing director of the pharmaceutical and lifesciences practice at Russell Reynolds Associates Inc., an executivesearch firm based in Washington, said he is not surprised by the ever-expanding cash compensation packages. "To me the most strikingtrend in recent years is the general uptick in cash compensation in thebiotechnology industry," he told BioWorld Today. "Compensationhas crept up as the industry has matured and as companies have beenforced to offer globally competitive wages."

Outliers: Amgen's Binder And Centocor's Holveck

Amgen's CEO Gordon Binder saw the largest increase in annual cashcompensation between 1992 and 1995, going from $807,000 to $1.51million _ an 87.5 percent gain. His cash compensation for 1995 alsoincluded $129,142 in company contributions to his retirement funds.In addition, in 1995 Binder realized $20 million from the exercise ofstock options granted prior to 1990.

Not surprisingly, Amgen is far and away the largest and mostprofitable company in the group of seven, with a marketcapitalization of nearly $16 billion as of February, 1996 and 1995earnings-per-share of $1.90.

Binder still receives a large chunk of his compensation in equity. In1995, for example, he was granted options to purchase 150,000shares of Amgen stock at an exercise price of $39.88 _ a grant thatcould be worth between $2.4 and $5.7 million depending on the rateat which Amgen's stock price appreciates over the next seven years(the length of the option term). In addition, Binder had exercisablein-the-money stock options worth $75.6 million on Dec. 31, 1995.

On the other end of the spectrum is Centocor's CEO, David Holveck.His annual cash compensation in 1995 of $309,000 was well belowthe $921,000 average in the group of seven companies. He also hadthe smallest increase in total annual compensation from 1992 to1995, a gain of only 29.8 percent (from $238,000 to $309,000. Inaddition to his base salary (he received no bonus), Holveck received$423,750 in restricted stock awards in 1995 and $6,066 incontributions to his retirement plan. He also was granted options on90,000 shares of Centocor stock at an exercise price of $13.88 _ agrant that could be worth between $785,332 and $1.99 milliondepending on the rate of stock price appreciation.

Holveck is not the highest paid executive at Centocor _ thatdistinction belongs to chairman of the board Hubert Schoemaker,who earned a base salary of $371,000 in 1995 (he received no bonus)and who also received $423,750 in restricted stock awards. Centocorposted a loss of 89 cents a share in 1995 but hopes to becomeprofitable in 1996 or 1997 as sales of its anti-platelet antibody,ReoPro, increase.

Top Firms Vs. Industry-Wide Averages

CEOs at the seven largest biotech firms are not alone in gettinghealthy raises every year, according to BioWorld Today's records.The BioWorld Executive Compensation Report 1996, a compilationof detailed compensation data from 194 publicly tradedbiotechnology companies (including the seven mentioned above),found that the average annual cash compensation (base salary plusbonus) for a CEO in 1994 was $298,000. That's a roughly 14 percentincrease from the 1993 average.

Hawkins said he thinks salaries will continue to rise at double-digitrates for executives at successful biotech companies. "The totalfinancial dynamics of the business have changed for those companiesthat get FDA approval and begin selling a product," he explained."That change takes place literally overnight in some cases."

Editor's note: BioWorld Today has tracked CEO compensationtrends since 1992. You can order a copy of the most recent BioWorldExecutive Compensation Report, published in February 1996, bycalling (800) 879-8790 or, outside the U.S. (404) 262-5526. Thereport details the complete compensation packages of 194 biotechCEOs, including ranked lists and breakdowns by marketcapitalization, disease and technology focus, and year of initial publicoffering. It also details compensation data for chief financial officersand research and development executives. n

-- Lisa Piercey Special To BioWorld Today

(c) 1997 American Health Consultants. All rights reserved.