2005 Compensation and Entrepreneurship Report in Life Sciences
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www.compstudy.com 2005 Compensation and Entrepreneurship Report in Life Sciences 2005((ABRIDGED VERSION)) A AAA TABLE 1 A OF CONTENTS Letter to the Industry . .3 Summary of Results . .4 Founders . .10 Interviews David Hale . .12 Stelios Papadopoulos . .18 Lita Nelsen . .22 About the Companies . .28 Contained within this document are summary level results of our proprietary study of executive equity and cash compensation. This report provides authoritative pay data for ten senior management positions and is based on data collected from 170 private Information Technology companies. The report also provides a window into compensation for outside Board Members. The results are arranged by financing stage, founder/non-founder status, number of employees, company location and business segment within the Information Technology market. This study was produced by professionals at Wilmer Cutler Pickering Hale and Dorr, Ernst & Young and J. Robert Scott. We were assisted in our work by academics from the Harvard Business School. You may also access these summary level results from our website at www.compstudy.com for no fee. We appreciate your professional courtesy in providing proper attribution when citing study results. Participants have been provided detailed unabridged data results at no charge. You may secure a copy of the detailed report for $500 plus a commitment to participate in our next survey. Contact Mike DiPierro of J. Robert Scott at 617-563-2770 or [email protected] to obtain the unabridged results. AAA LETTER 3 A TO THE INDUSTRY We are pleased to present the 2005 edition of our annual Compensation and Entrepreneurship Report in Life Sciences. This survey represents our most com- prehensive respondent population to date with data from more than 800 executives and over 170 private companies from across the country in a wide variety of indus- try segments: Pharmaceuticals, Therapeutics, Diagnostics, Devices, BioInformatics, Genomics and Molecular Technologies. This survey was conducted between January and April of 2005. While the broader US economy continues to show signs of sustained recovery, companies and investors struggle to understand the affect on compensation and the ability to attract and retain key executives. Our inspiration for creating this survey of Life Science company executive compensation emerged from a desire to respond to our clients need for tools to assist them in critical decision making for attracting, rewarding and retaining key executives. There is very little compensation data available on private companies. Our survey continues to grow and represents one of the few reliable sources for executive pay information in the industry. The over- all objective has been to provide fundamental information in a useful, analytic framework to evaluate and respond to the compensation dynamics of the senior executive team. Our sample size has substantially increased and our analytical framework has become richer and more nuanced. This year’s presentation is multidimensional. Variables include: financing stage; company size, both in terms of headcount and development stage; founder/non-founder status; industry segment; and geogra- phy. We also wanted to understand the impact on private companies after the new accounting rules that require the expensing of stock options; accordingly, we have added a more granular look at the equity compensation vehicles private companies are using in their compensation packages. This survey has evolved over the years as a result of the input we have received directly from the industry. This year we have correlated executive compensation to company development stage and have provided additional analysis of the data com- pared to financing rounds. Founders are often compensated using different criteria; therefore we have pulled founder compensation data out of the core analy- sis and have included a separate section analyzing founder compensation. Our intention is to continuously improve our data in an effort to more closely serve the needs of the industry and we encourage readers of this publication to submit comments and suggestions to help ensure the changes we make accurately reflect the requirements of the market. Suggestions and comments should be directed to Mike DiPierro of J. Robert Scott, [email protected]. Lastly we’d like to express our gratitude to two individuals who contributed greatly to the 2005 addition: Professor Brian Hall and Associate Professor Noam Wasserman of the Harvard Business School. Additional thanks go to David Hale, President and Chief Executive Officer of CancerVax Corporation, Stelios Papadopoulos, Managing Director at SG Cowen, and Lita Nelsen, Director of the Technology Licensing Office at MIT. Each generously took time out of crowded schedules to provide perspective on this dynamic industry. 4 SUMMARY www.compstudy.com OF B Non- Founder RESULTS KEY: Founder DEMOGRAPHICS OF RESPONDENT Financing Rounds 43 POPULATION 41 41 • The survey was conducted between January and April 2005. Data was collected from more than 800 executives in 172 Life Sciences and Medical Device companies. 22 23 • This report provides an aggregation of the data as well as an examination of the population from a number of different per- spectives, including: financing stage, founder status, geography, headcount, business segment and product life cycle. 2 Financing Rounds 012345+ • For analysis, the population was divided between companies that have raised one or fewer rounds of financing, two or three, and those that have raised four or more rounds of financing. This is a further increase in detail from our previous editions of Founder/Non- 96 this survey. Companies in the earliest stage represent 25% of 89 the population, those with two or three rounds raised represent 78 the largest slice, 49% of the overall companies, and those with 65 four or more rounds raised comprise 26% of the population. 52 Founder Status 40 41 29 • 24% of the executives in the population were founders of their company. This figure was 29% in our 2004 edition of this report. 10 10 8 5 CEOs were most frequently founders of their company with 47% founders, followed by the Head of Platform Technology/CTO at CFO CEO 45% and the CSO at 43%. COO Head of President/ Headcount by Number of Full Time Employees CBO/Head of BD Clinical Research (FTEs) CSO/Head of R&D • 51% of companies surveyed in this report have fewer than 20 FTEs, while 10% were in the largest category, more than 61 FTEs. Headcount by Number of Full Time Employees (FTEs) 88 41 26 17 1-20 21-40 41-60 61+ 2005 Compensation and Entrepreneurship Report in Life Sciences SUMMARY 5 A OF RESULTS Geography Geography 69 • The geographical distribution of the respondents was most con- centrated in California with 40% of the population. The New England and Mid-Atlantic regions were the next largest regions with 21% and 19% each in the respective regions. The South 36 32 was again the smallest category with 5% of the population. 17 Business Segment 10 8 • Distribution between Life Sciences and Medical Device compa- nies was again similar to our 2004 edition; Life Sciences with California New Mid- Midwest West/ South 65% of the companies surveyed and Medical Devices with 35%. England Atlantic Northwest Product Life Cycle • 30% of the companies surveyed in this report currently have a Founder Status product or service on the market. 48 49 42 24 20 16 15 18 4 4 3 2 4 2 CTO Head of Head of Head of Head of Sales (& Marketing) Manufacturing Human Resources Regulatory Affairs Head of Marketing Head of Engineering Business Segment Product Life Cycle 35% Life Sciences 30% At Market 65% Medical Devices 70% Pre-Product/Service 6 SUMMARY www.compstudy.com OF 2003 2004 Bonus B KEY: RESULTS 2003 2004 Base Total Cash Compensation Total Cash Compensation – 2003 and 2004 This data represents 2003 and 2004 compensation for 53 47 non-founding executives. 30 24 30 32 • Overall, total average cash compensation across the survey 31 31 34 27 27 population increased from 2003 to 2004 by 8%, an 8% rise in 26 271 base salary and 3% rise in bonus. 246 226 232 212 189 204 184 187 • No single position saw a decrease in base salary or total cash in 155 168 167 2004. • Base salary increased most dramatically for the Head of Clinical CFO CEO Research, by 13% in 2004. The Head of Marketing also enjoyed a COO double digit increase in base salary of 11% as well as the CEO, Head of President/ Head of Technology and Head of Business Development, 10%. CBO/Head of BD Clinical Research CSO/Head of R&D Bonus as a Percentage of Base Salary • The overall population average bonus as a percentage of base salary remained steady between 2003 and 2004 at 15%. Executives Eligible • The Head of Sales and CEO had the highest bonus as a percent- age of base salary with 24% and 20%, respectively. 81% 83% 75% 74% 68% 68% CFO CEO COO Head of President/ CBO/Head of BD Clinical Research CSO/Head of R&D Bonus as a Percentage of 20% 19% 18% 17% 17% 16% 16% 16% 15% 15% 13% 10% CFO CEO COO Head of President/ CBO/Head of BD Clinical Research CSO/Head of R&D 2005 Compensation and Entrepreneurship Report in Life Sciences SUMMARY 7 A OF RESULTS – 2003 and 2004 43 18 35 13 19 21 23 20 17 18 23 14 17 20 180 178 155 164 154 160 167 161 162 145 132 141 106 115 CTO Head of Head of Head of Head of Sales (& Marketing) Manufacturing Human Resources Regulatory Affairs Head of Marketing Head of Engineering for Bonus 2004 88% 78% 67% 62% 60% 61% 61% CTO Head of Head of Head of Head of Sales (& Marketing) Manufacturing Human Resources Regulatory Affairs Head of Marketing Head of Engineering Base Salary – 2003 and 2004 24% 21% 19% 15% 14% 14% 13% 13% 12% 12% 12% 12% 11% 8% CTO Head of Head of Head of Head of Sales (& Marketing) Manufacturing Human Resources Regulatory Affairs Head of Marketing Head of Engineering 8 SUMMARY www.compstudy.com OF B RESULTS KEY: Median Average Equity Holdings Total Equity Holdings 4.00 4.06 • The non-founding CEO holds an average of 4.06% of their com- pany while the non-founding CSO holds 1.48%, highest among the positions surveyed.