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Biotech / Medical : Agouron Pharmaceuticals (AGPH) -- Ignore unavailable to you. Want to Upgrade?

To: per strandberg who wrote (3850)	2/19/1998 9:54:00 AM
From: biodoc	Respond to of 6136

It is good. Most young biotech companies provide part (in some case most) of the compensation as incentive stock options. As the companies increase in size, the need arises occasionally to increase the shares available for this purpose. While there is some dilution from this, the alternative is to pay higher salaries and bonuses. My guess is the short term effect on stock price would be a wash (does anyone know if this is true?) I work in a biotech firm (not AGPH and I assure you the salary doesn't motivate the 12 hour days, 6 day a week life style, but, along with the scientific interest and ability to work on important drugs, the potential large reward from the options focuses the mind on success.

To: per strandberg who wrote (3850)	2/19/1998 11:12:00 AM
From: Biomaven	Read Replies (1) \| Respond to of 6136

<<Agouron has filed to SEC an "Employee Stock Option Plan", with 1 million shares (to be issued or repurchased) in employee options. Anybody: Is this good/bad/of no importance?>> Employee stock options are what I do for a living. If misused they can be bad for shareholders, but in general (like democracy) they are better than all the alternatives. Current accounting make option grants at the current stock price "free." Dilution only starts to happen if the stock price appreciates above the grant price. Tucked away in the footnotes there is an accounting of what earnings would be if you try to value the option grants as you would a quoted option. This FAS 123 footnote is imperfect in many ways, but it does give some notion of the additional compensation costs stemming from new option grants. The bottom line, however, is that companies that freely award options to a broad base of employees tend to perform better than companies that use them narrowly or not at all. Essentially stockholders are giving away some of the upside to employees, but are getting some current and downside protection by paying employees less currently. Further, and perhaps more important, broad-based option grants in a properly designed plan can make employees "think like shareholders." In general I only get concerned when I see mega-grants going to a few executives. AGPH's option grant policy seems to me to be reasonable, although I haven't checked recently. Peter