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Big bonuses, stock awards help top pharma CEOs dominate 2017 salary chart

While the largest U.S. companies dominated the list of highest-paid pharmaceutical CEOs for 2017, several small companies also made the list, helped by big bumps in their stock awards.

Ian Read, who leads the second-biggest U.S. healthcare company, Pfizer Inc., was the highest paid CEO in the U.S. pharmaceutical sector with his total adjusted compensation increasing by 54% to $26.2 million in 2017. The compensation included a special one-time equity award of $8 million granted to Read as an incentive to continue leading Pfizer as he is currently eligible to retire.

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Read was followed by Alex Gorsky, who manages the largest U.S. healthcare company, Johnson & Johnson. Gorsky's pay package increased by a modest 7.7% to $22.8 million.

Johnson & Johnson's board believed the company largely met or exceeded its combined financial and strategic goals and granted Gorsky an annual performance bonus of $3.1 million and long-term incentive awards of $14.4 million.

The New Brunswick, N.J.-based company, which makes products ranging from cancer drugs to medical devices and baby powder, also had the highest CEO-to-median employee salary ratio of 452.

Next in the ranks was Giovanni Caforio, CEO of Bristol-Myers Squibb Co., a developer of drugs for hepatitis C, HIV and cancer, with a salary of $18.7 million.

Howard Robin, CEO of Nektar Therapeutics was fourth on the list with one of the biggest jumps in compensation, about 280%. Nektar, a developer of cancer and women's health-related drugs, increased Robin's stock and option award to $15.4 million from $2.9 million in 2016.

The company said Robin's salary was aligned with the price of Nektar's stock, which closed at $59.72 at the end of 2017, representing a one-year annual stockholder return of 387%.

Robin is the only CEO to appear in the top 10 for biggest pay package, largest year-over-year increase in total compensation, and the biggest year-over-year boost in stock and option awards.

Compensation of another pharmaceutical heavyweight, Merck & Co. Inc.'s CEO Kenneth Frazier, was nearly flat at $17.1 million when compared to 2016. Frazier was trailed by David Ricks, recently appointed head of Indianapolis-based drugmaker Eli Lilly and Co., with a salary of $14.5 million.

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Another surprise entry to the top list was Vicente Anido, CEO of eye drug maker Aerie Pharmaceuticals Inc., whose compensation jumped by 226.2% to $10.1 million.

The list also featured generic-drug maker Mylan NV's CEO Heather Bresch the only executive whose pay declined from the previous year. Bresch's compensation fell by 4% to $12.7 million in 2017, still translating into the second highest CEO-to-median employee pay ratio at 317 to 1.

Mylan shareholders voted against the executive pay plan at the annual general meeting in June in light of the backlash the company faced over the price-hiking controversy regarding its allergy treatment EpiPen. Bresch also topped the list of 100 CEOs whose pay packages received the fewest votes from shareholders, according to a list compiled by As You Sow, a nonprofit shareholder advocacy organization.

While Mylan's legal headquarters are in the U.K., its main hub of operations is in the U.S., where Bresch is based.

Lucy Lu, who heads Avenue Therapeutics Inc., was the only woman besides Bresch to figure in the top 10 list, reflecting the gender gap in top echelons of the sector. She witnessed the biggest jump in total compensation as her salary increased by 489.6% to $2 million. The company, which is developing a post-operative pain drug, closed a $38 million IPO in June 2017, after which Lu was granted 215,000 restricted stock units in the company.

The big drug companies also came under pressure from shareholder advocacy groups who argued that an executive compensation incentive program reliant on revenue growth solely from price increases is a risky and unsustainable strategy.

The Interfaith Center on Corporate Responsibility, a shareholder coalition, filed resolutions with Pfizer, Bristol Myers Squibb and Eli Lilly requesting information on links between their drug pricing strategies and executive compensation policies, plans and programs.

While the companies managed to keep the coalition's resolutions off their corporate proxies, the demand for transparency is expected to persist through 2018.

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