NEW YORK, April 2 - Call it a love story born of supply and demand.
Despite their comparatively miniscule revenue base, publicly traded biotech companies, including genomics tool and tech firms, pay their CEOs considerably more than medical instrument or pharmaceutical companies, results of a recent survey show.
Using US Securities and Exchange filings to collect compensation data from life-science companies from four revenue brackets, the study researchers found that chief executives from biotech companies earn more across the board in salary and total compensation than their counterparts at medical instrument or pharma firms.
Overall, for example, biotech chiefs earn an average of $400,000 in base salary per year compared with $300,000 for heads of medical instrument firms and $381,000 for CEOs of drug companies.
Broken down, the report, published by Clark/Bardes Consulting, showed that base salaries of CEOs from public biotech companies with total revenue up to $50 million average $366,700 compared with $239,900 for medical instrument chiefs and $306,800 for heads of drug firms.
Chief executives of biotech companies with revenues between $50 million and $250 million also came out on top: $449,600 compared with $300,000 and $350,000 for counterparts at medical instrument and drug firms, respectively. There was an even wider gap among CEOs of companies with revenue between $250 million and $1 billion: Biotech chiefs pocket $659,000 per year on average while heads of medical instrument and drug firms earned $419,400 and $362,900, respectively.
In overall bonuses, however, biotech CEOs come in second behind their drug-firm cousins. Biotech chiefs on average are awarded bonuses that amount to 42.5 percent, or $170,000, of their base salary. Drug-shop heads rack up bonuses of 65.6 percent, or $250,000, their base salary, and medical instruments, life sciences' poor relations, claim bonuses that reach 36.7 percent, or $109,900, of their salaries.
However, there was one exception. CEOs of biotech companies with revenues of between $250 million and $1 billion blew away all other chiefs in that space in terms of bonuses as a percent of salary: Biotech heads earned 166.8 percent, or nearly $1.1 million, compared with 102.3 percent, or $429,000, for medical device firms and a paltry 1.1 percent, or $362,900, for drug companies.
The disequilibrium comes into stark focus when observed against the fact that the 36 biotech companies surveyed by Clark/Bardes averaged a measly $184 million in revenue per year compared with $683 million earned by medical device companies and a titanic $5.7 billion commanded by drug and pharma firms.
Genomic companies surveyed for this study included Human Genome Sciences, Maxygen, Protein Design Labs, ArQule, Genzyme Transgenics, Millennium Pharmaceuticals, and Immunex. The study, entitled "Cracking the Code: Executive Compensation and Stock Option Usage in the Life Science Industry," also covered 43 medical-device companies and 30 drug and pharmaceutical firms and chronicled the compensation of COOs, CFOs, and CLOs.
The author of the study said that one reason for the disparity between the biotech sector's overall revenue and its CEOs' compensation is the dearth of experienced executives.
"There is an awful lot of biotech companies springing up," Jack Dolmat-Connell said in a recent interview with GenomeWeb. "I think that fact is really driving the supply and demand of labor. It's really what we saw on the Internet side not too long ago--where there were not enough highly qualified executives to fill the positions.
"Biotech is probably one of the hottest labor markets that we're seeing right now," he added. "I think this [survey] points out the fact that there's a lot of access to capital out there, and those [biotech] firms are using it not only to fund long-term incentives but also to ... pay healthy wages."
Clark/Bardes said it plans to unveil a more detailed compensation survey in mid-July. The consulting firm will be signing on biotech companies for the next few weeks, said Dolmat-Connell.