Total cash compensation in 2014 for our CEO, Dr. Crooke, was within +/- 20%of the 50
th
percentile of the
Executive Peer Group. Dr. Crooke’s total direct compensation was above the 50
th
percentile of the Executive
Peer Group due to the exceptional increase in Isis’ stock price.
Our Productivity vs. Executive Peer Group
All companies in all industries strive to be more productive than their peers. Leadership management and
compensation systems are all focused on enhancing long term productivity. However, measurement of
productivity is challenging, particularly in biotechnology.
Even for established R&D based pharmaceutical companies for which the comparator group is obvious,
comparisons of productivity are challenging. While revenues and profits per employee may be good measures for
a portion of the equation, they are inadequate because they provide little insight into potential for topline sales
growth and no insight into innovation, which is the foundation for long-term sustainable growth. To provide
insight into these attributes, measures of the size, maturity and potential value of the drug pipeline are necessary.
Additionally, measures of innovation such as numbers of issued patents can be used.
Because biotechnology companies’ business models vary, ranging from companies repurposing a single
in-licensed commercial drug, to companies developing in-licensed novel drugs, to true research-based companies
and a few companies pioneering broad new technology platforms, comparisons of productivity within the
biotechnology industry are even more challenging. Such comparisons are even more difficult for development
stage pre-commercial companies.
Nevertheless, it is as important to develop productivity metrics and compare productivity for biotechnology
companies as it is for any other industry. As Isis matures and achieves revenues from the commercial sale of its
products, we will use revenue and profit per employee as metrics, supplemented by metrics that measure the
value of our drug pipeline and innovation. We analyze our productivity against the Executive Peer Group and
other leaders in drug development using, among other measures, number of drugs in clinical development per
employee and number of patents per employee. The table belowmeasures Isis on these productivity metrics
against the median for the Executive Peer Group, and the leading company in the peer group for each
productivity metric (based on the most recent Annual Report of the companies at the time the Compensation
Committee selected the Executive Peer Group in June 2014):
Drugs in Clinical Development
per Employee
Patents per Employee
Isis’ Ranking
1st
2
nd
Executive Peer GroupMedian
1 drug for every 41 employees
1.22 patents per employee
Peer Leader for Drugs in Clinical
Development per Employee
(ImmunoGen)
1 drug for every 19 employees
NA
Peer Leader for Patents per
Employee (Alnylam)
NA
4 patents per employee
Isis Pharmaceuticals, Inc. (ISIS)
1 drug for every 12 employees
3 patents per employee
As illustrated, Isis’ innovative culture and business strategy have made Isis incredibly productive in terms of the
number of drugs in development per employee and patents per employee.
Compensation Allocation/Pay Mix
Akey element of our compensation philosophy is to monitor and adjust our pay mix for our senior
management team so the pay mix is weighted less heavily on fixed compensation (salary) and more heavily
weighted on at-risk cash compensation and long-term equity incentive compensation. As part of the
Compensation Committee’s review of our total pay mix for executive officers, the Compensation Committee
implemented the following:
•
Salaries were frozen for most NEOs from 2011-2013.
The Compensation Committee did not increase
salaries for the CEO and most of our NEOs for each of 2011, 2012 and 2013 to allow an increasing
percentage of total compensation to be at risk;
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