As biotechnology firms become the darlings of Hong Kong’s IPO market, their executives get outsized pay packets. Here’s why
- John Oyler, the chief executive of BeiGene, received a package of US$27.9 million last year in cash salary, bonus and share options, in what the company calls a ‘one-time’ special award
- Oyler’s package still pales in comparison with the HK$237 million that Tencent Holdings paid its president Martin Lau in 2017
Biotechnology firms, one of the two targets in Hong Kong’s largest listing reforms in three decades, have become the latest darlings of Asia’s second-biggest capital market, making their chief executives among the highest-paid of salary-earning employees.
John Oyler, the chairman and chief executive of cancer drugs developer BeiGene, tops the scale with a package of US$27.9 million, according to stock exchange filings. The Massachusetts Institute of Technology (MIT) graduate received a 10 per cent increase in his 2018 base salary to US$650,000, with a cash bonus of US$560,000 while the remainder of his remuneration package is granted in a mix of options and shares that are payable over four years if he remains with the firm.
Oyler was the second highest-paid among the bosses of 20 international pharmaceutical companies, more than the chief executives of Gilead, Merck and Pfizer, according to a tally by biotech publication Endpoint News.
A spokesman representing BeiGene, based in the Chinese capital, said Oyler’s package included a US$15 million “one-time special award” in recognition of “his extraordinary leadership and [BeiGene’s] achievements in 2017 and 2018 up to the date of the grant,” features which will not be repeated in the current financial year ending in December.
As one of BeiGene’s founders, Oyler helped to triple the company’s workforce to 1,000 and clinched a collaboration with US partner Celgene that turned Beigene into a revenue-generating firm. The company completed two rounds of initial public offerings on the Nasdaq and in Hong Kong, raising a total of US$946 million for the company. BeiGene’s shares fell 30 per cent since they were listed in Hong Kong last August even though its Nasdaq-listed shares have surged more than fivefold since their 2016 listing.
Biotechnology executives are often paid very well in the first year after their listings because of multiple one-off awards and ongoing shares-based rewards, said Lewis Ho, who advises pharmaceutical and biotech firms on transactions including IPOs at international law firm Loeb & Loeb LLP.
“Some of these awards may look extraordinarily large in the first year after an IPO because of both one-off and multi-year vested performance and retention-based pay,” Ho said. “They could sometimes be accentuated by the nature of drug development which takes years to reach certain key milestones whose achievement could lead to huge gains in the company’s profit potential and market valuation.”
Beigene wasn’t alone in paying its executives well. At rival Innovent Biologics, founder and chairman Michael Yu Dechao saw his 2018 pay package swell to 107 million yuan, from 7 million yuan in 2017.
An Innovent spokesman said the vast majority of the package was a one-time “catch-up” award for Yu’s contribution to the company since its inception eight years ago. Its stock price gained 80 per cent since it went public in Hong Kong last October.
The heads of Hangzhou-based hepatitis drugs developer Ascletis and Shanghai-based diabetes drugs developer Hua Medicine also saw multifold gains in pay packages, despite their share prices have fallen substantially since their debut last year.
The remuneration of biotechnology executives tend to “normalise” in subsequent years, after appearing especially large in the first year after an IPO, which is not uncommon, said Brad Loncar, chief executive of Kansas-based investment firm Loncar Investments and compiler of the Loncar China BioPharma Index.
Wang Huiwen, co-founder of China's largest on-demand online service provider Meituan Dianping, was given 139.5 million yuan of share-based awards last year, according to its annual report. The company booked a net loss of 8.5 billion yuan on its 2018 core operations.
