Investor appetite for companies in the industry, paired with low interest rates, has lifted the Nasdaq Biotechnology Index more than
«The big picture shows a very, very fantastic growth story," said Asthika Goonewardene, an analyst at Bloomberg Intelligence.
Higher equity values have bolstered the compensation of other biotechnology executives with pay packages that match or exceed chiefs of companies including Apple Inc. and Blackstone Group LP, despite running businesses a fraction of the size.
Arie Belldegrun, the CEO of Kite Pharma Inc., was given awards valued at $95.2 million as of the company’s fiscal
Juno and Kite are developing new cancer therapies that modify patients’ immune
The value of biotech executives’ compensation can rise and fall with clinical trial results, approvals from government agencies and bids from larger competitors.
The other executives on the index are Kite Chief Operating and Financial Officer Cynthia Butitta and Anacor Pharmaceuticals Inc. CEO Paul Berns, with awarded pay of $39.2 million and $22.4 million, respectively.
The pharma industry’s biggest companies, including Merck & Co. and Pfizer Inc., rely on
Actavis Plc’s takeover bid for antibiotics maker Durata Therapeutics Inc. in October valued former CEO Paul Edick’s options and ownership stake to at least $19.8 million, according to data compiled by Bloomberg.
Sanj Patel, CEO of Synageva BioPharma Corp., held equity valued at $103.7 million when Alexion Pharmaceuticals Inc. offered $230 a share in cash and stock for the Lexington,
Awarded pay measures what a compensation committee intended to pay an executive for the fiscal year, not what was reported by the company in the summary compensation table. It’s priced as of a company’s fiscal year end.
Alexion and Synageva both make drugs for rare diseases. As insurance companies and pharmacy benefit managers have been putting pressure on drug prices, many biotech companies have turned to developing treatments for
Management teams are usually terminated after biotech takeovers, and executives know they might be «selling themselves out of a job," said Susan Stemper, managing director at executive compensation consultant Pearl Meyer & Partners. Termination following a change in control typically allows for executives to cash in their equity awards.
«It’s not so much about buying the talent," Stemper said. «It’s about buying the programs, the products and the molecules.»
Spokesmen for Kite, Radius and Synageva declined to comment. Spokesmen for Juno and Durata didn’t respond to calls and
Share prices can experience big swings as investors with «imperfect» knowledge bet on biotechnology companies, Stemper said.
«It’s hero one day, goat the next," she said. «Some great news on pipeline possibility, the market goes wild and you’re trading at $300 a share. Suddenly, some not so great news coming out of trial, and the price drops remarkably.»
Price volatility therefore becomes an important factor to consider when designing pay packages for top managers at biotech companies, said Kristine Bhalla, principal at executive pay consulting firm ClearBridge Compensation Group.
«We look at different performance scenarios and understand that if we get