Regeneron’s CEO and CSO could nab a whopping $1.4B in bonuses—if the pipeline pumps up investors – FiercePharma

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Regeneron’s share price has dropped by nearly a third in the last six months as excitement over the company’s recently cleared COVID-19 antibody treatment has largely waned.

But if the company can win back investor enthusiasm after the pandemic ends, it could pay off big time for its top two executives, CEO Leonard Schleifer and CSO George Yancopoulos.

That’s because Regeneron’s board revised Schleifer’s and Yancopoulos’ performance-based rewards, promising a combined payday of up to $1.4 billion eight years from now—a prize that will rely heavily on the company’s ability to grow market share for hits like Eylea and Dupixent while simultaneously pushing novel drugs out of its pipeline.

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Regeneron’s board ditched the annual stock options that had been given to Schleifer and Yancopoulos—which were typically quite generous—and replaced them with performance-restricted stock units (PSUs) tied to total shareholder returns. If Regeneron’s share price grows 65.6% from its recent price of $478.30 over five years, Schleifer and Yancopoulos will each be rewarded $196.5 million in December 2028. (There is a three-year holding period after the awards vest.)

But thanks to the tiered structure of the stock awards, the actual payout could be much higher than that. If Regeneron’s shares jump 140% over five years, at 19.2% annually, Schleifer and Yancopoulos will get $713.3 million each.

The board changed the two execs’ bonuses in response to shareholder preferences, according to the filing. “The Board also recognized [Regeneron’s] long track record of success for patients, shareholders, and employees achieved under the leadership of Drs. Schleifer and Yancopoulos,” as well as its confidence in their leadership “for the foreseeable future,” it said.

RELATED: Regeneron, following in Lilly’s footsteps, wins FDA emergency nod for COVID-19 antibody cocktail

It’s not as if the two execs were suffering before. In fact, they’ve both made appearances at or near the top of Fierce Pharma and Fierce Biotech’s annual highest-paid executive lists. Just last year, Schleifer was one of the 15 highest paid biopharma CEOs, according to our research, with a pay package of $21.46 million. Yancopoulos, meanwhile, pulled in $20.66 million. Both of those packages marked a 20% drop over the previous year, but the decline was mostly due to a shift in equity packages from options to stock.

The new PSU payouts will hinge largely on Dupixent, which Regeneron co-markets with Sanofi to treat sinusitis, eczema and asthma. Sales of the drug skyrocketed 69% year over year in the third quarter to just over $1 billion.

But Dupixent now faces tough competition from AbbVie’s Rinvoq in eczema. Last month, Rinvoq outperformed Dupixent in a phase 3b study. Although Rinvoq does suffer from some safety issues that could limit its use to patients who have already tried Dupixent, SVB Leerink analyst Geoffrey Porges believes the AbbVie drug could pull in $3 billion in eczema sales.

Regeneron and Sanofi hope new indications for Dupixent will help them sustain a market lead. The companies are now gunning for an approval in eosinophilic esophagitis, releasing data last fall showing Dupixent improved the trial patients’ ability to swallow, while also reducing other symptoms.

RELATED: Without more innovation à la Dupixent, Regeneron could be in trouble: report

Still, Schleifer and Yancopoulos will face plenty of challenges as they aim for the highest tier of the PSU plan. Before the pandemic, SVB Leerink analysts warned investors that aside from Dupixent, Regeneron’s “commercial products have been antibodies against known targets with relatively modest differentiation from their established competitors.” The analysts worried that the company relies too much on drugs that are “modestly differentiated,” like its cancer drug Libtayo, which was the sixth PD-1 inhibitor on the market.

In addition to tacking on new indications for Dupixent, Regeneron is counting on a near-term pipeline win with evinacumab, its drug to treat patients with homozygous familial hypercholesterolemia (HoFH). The FDA awarded priority review to the drug and is expected to make its decision by February 11.

So how much of a bonus can Schleifer and Yancopoulos make if investors don’t get on board with the company’s growth plan? Even if Regeneron only achieves 31.3% share growth over the next five years, Schleifer and Yancopoulos could get half the target of 248,108 PSUs. But the company would need to outperform the Nasdaq Biotech Index by at least 200 basis points—a tall order to be sure.

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