Medicis Doubled Pay of Exec Convicted of Off-Label Sales

Medicis more than doubled the pay of its sales chief in 2008 even though that executive, Richard Havens, pled guilty to conspiracy to violate the Food and Drug Act last March. Havens, the former evp of sales, and three of his underlings pleaded guilty right before his April retirement to promoting an off-label use of Loprox, a skin infection treatment. They had promoted it for diaper rash even though it was not approved for children.

In Medicis' proxy statement, CEO Jonah Shacknai saw his total compensation fall in 2008 from $4.6 million to $4.1 million. The other top managers at Medicis saw their total compensation stay roughly flat.

The only standout was Havens, whose packet increased from $1.5 million to $3.9 million. That included a $430-per-hour consultancy deal. He got $600,000 on that deal, plus another $1.9 million in cash in his retirement agreement. He also got stock and options. He was not terminated for cause, despite committing a crime, the proxy statement says.

Here's the summary table:

Name, 2008 pay, 2007 pay
CEO Jonah Shacknai, $4.1 million, $4.6 million
EVP prod. dev. Joseph Cooper, $1.5 million, $1.6 million
General counsel Jason Hanson, $1.3 million, NA
EVP sales Richard Havens $3.9 million, $1.5 million
CFO Richard Peterson, $1.1 million
COO Mark Prygocki, $1.8 million, $1.8 million
Chief science officer Mitchell Wortzman, $1.5 million, $1.4 million Numbers are rounded, includes stock and options whose value may change.

Aside from Havens' compensation, the change in pay has been modest considering the difficult year the company has had. It's primarily a vanity pharma company, and is thus affected by the pullback in discretionary spending triggered by the recession. Nonetheless, the company saw revenues grow from $442 million to $501 million; net income declined from $70.4 million to $10.2 million. (Put another way, had Havens been terminated for cause, receiving a fraction of his retirement pay, Medicis' net income could have been closer to $14 million.)

The company's sales efficiency for the year was flat, but a cut in SG&A in Q4 2008 helped drive it up to $2.06 by year-end, the highest it's been in four quarters.

In terms of products, the company saw increases in Solodyn sales that more than offset declines in demand for dermal fillers Perlane and Restylane, which dropped 20 percent. Medicis also saw off patent challenges from Teva and Impax. It still must weather a new set of challenges from companies such as Sandoz.

The good news on the horizon? Reloxin, its challenger to Allergan's Botox, is on its way. The increased competition will be enough to give anyone wrinkles.

Side note: You can tell Medicis is different from other pharma companies. When most firms put families or goggled scientists on the cover of their annual report, Medicis has a hot naked chick. The company makes prescription beauty treatments, so why hide it? As you can see, they had a disconcertingly perfect looking model on the cover of the 2007 report as well, but this year they've turned up the heat with extra nudity.

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