$52M payday for Abgenix brass
Amgen buy presses 'hot button'
After a year and a half on the job, Abgenix President and CEO William Ringo stands to walk away after Amgen Corp's. planned acquisition of the company with a $10.5 million payday.
Ringo's payout includes more than $5.8 million from the acceleration of stock options and a possible $1.8 million in severance, according to a proxy statement filed by Abgenix earlier this month.
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Ringo would be the biggest beneficiary among the Fremont-based biotech's officers and directors, who as a group could pocket nearly $52 million.
The pending merger with the Thousand Oaks-based biotech giant was announced in December.
Though Ringo stands to reap a rich reward for his brief tenure with the company, he has been there as long or longer than five of the six other senior executives at Abgenix, who together, including Ringo, stand to walk away with close to $30 million from the deal.
Jeffrey Knapp, senior vice president of sales and marketing, will pocket nearly $1.7 million in severance and accelerated options payouts, despite joining Abgenix in November.
The payouts highlight an often overlooked piece of the discussion about executive compensation and raise questions about whether such severance packages and acceleration of options align management interests with those of their shareholders. Critics charge it takes wealth away from stockholders and puts it in the hands of management.
"It's a hot-button item with many institutional investors," said Gregory Taxin, CEO of the San Francisco-based proxy advisory firm Glass, Lewis & Co. "The concern is that this acceleration of options comes irrespective of the contribution of that executive to the performance of the business."
Abgenix on Dec. 14 signed a definitive merger agreement with Amgen for $22.50 a share or $2.2 billion in cash and the assumption of debt. Abgenix did not respond to a request for comment about the expected payouts to senior management and board members.
The deal gives Amgen full ownership of panitumumab, a fully-human monoclonal antibody that is being co-developed by the two companies for colorectal cancer. Amgen believes the drug could reach sales of $2 billion a year.
The deal also eliminates the tiered royalty Amgen would have to pay on future sales of denosumab, an Amgen product developed using Abgenix antibody technology, and also gives the company a 100,000-square-foot manufacturing facility in Fremont.
Graef Crystal, an executive compensation expert and columnist for Bloomberg, said there's nothing unusual about the acceleration of options or the severance packages. He also notes that without such measures, executives might fight deals they should be making.
"You can say they sort of won the lottery," said Crystal. "A lot of times when a person comes into a company, we give you a great big front-loaded grant, and 18 months later you have in some ways a perfect storm, even though each of those actions on their own were fairly benign. They just happened to combine that way."
Already the deal has won approval from the Federal Trade Commission. Abgenix shareholders will vote on the deal March 29.
A lawsuit was filed on behalf of Abgenix shareholders in Superior Court in Alameda the day after the deal was announced. It seeks to prevent the merger, saying that the price paid to stockholders is inadequate and that Abgenix directors violated their fiduciary obligations in approving the deal. Abgenix previously said the lawsuit is without merit and plans to fight it.
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