Gilead Sciences wants you to know two things about CEO John Milligan’s 2018 pay: Half of his options are underwater, and many of his stock awards aren’t worth anything yet.
But both of those things are really by way of explaining why Milligan, who resigned suddenly in July, raked in such a big compensation package for his last full year on the job. And a not-so-great year for Gilead to boot.
Milligan racked up (PDF) almost $26 million in compensation for last year, a full $10 million more than his 2017 package. His salary went up slightly to $1.58 million and his cash incentive pay ticked up to $3.34 million. But as one might infer from Gilead’s disclaimer, his stock and option awards took a flying leap.
Partly in thanks to his “separation agreement” with Gilead, Milligan nabbed share awards worth $9.86 million and options valued at $11.13 million. Some $3.6 million of those share awards Milligan netted as severance, because they’ll continue to vest based on company performance as they would have had Milligan stuck around. Gilead’s right: They’re not new, or cash. The $3.6 million in accelerated options isn’t all new either.
But even without severance, Milligan would have collected compensation of about $16.7 million last year. That’s up from $15.43 million as reported for 2017—an 8% increase.
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And the fact that his options—which he nabbed through accelerated vesting of awards in prior years—were underwater at year’s end isn’t so much a justification for Milligan’s $26 million total as a knock against Gilead’s performance under his leadership last year. Sales dropped by $3 billion as its hep C franchise—already in freefall—suffered on older competition, payer hardball and AbbVie’s new lower-priced Mavyret, to the point where the company ended up rolling out generic versions of its own Harvoni and Epclusa blockbusters. Its HIV franchise delivered an outsized performance but that couldn’t make up for the hep C decline.
Meanwhile, its Kite buyout so far has cost more than it delivered. Gilead took an $820 million writedown on that deal after canning one of its CAR-T candidates, KITE-585. Its Yescarta cell therapy, approved soon after the deal closed, has been slow getting off the ground, though Gilead’s hoping to double its $264 million in 2018 sales this year.
By year’s end, despite its Yescarta hopes and HIV upswing, the best Gilead could say about its overall outlook was that it’s apparently bottomed out. The company put out a revenue outlook for 2019 lower than what analysts had expected, and flat at best compared with last year.
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Milligan’s accelerated options were valued at $5.8 million when Gilead and its now-former CEO inked the severance deal sometime after he announced his exit in July. Gilead shares ended the year at about $61, down from about $85 at the end of 2017—and down from $76 or so at the end of July and $73 in August.
Gilead is betting its new CEO can turn the tide, and it has shelled out millions to recruit Daniel O’Day, who’d been running Roche’s pharma division and, before that, put in years at Novartis.
Gilead handed O’Day $14 million in performance stock units and cash from the get-go to make up for payoffs he left behind at Roche. And for 2019 itself, O’Day’s looking at equity awards of $12 million, a potential cash bonus of $2.4 million, and a base salary set at $1.6 million. That’s a total in the annual pay column of $16 million. Grand total? $30 million.
