Medarex CEO Gets $4.2M Bonus in BMS Deal After Just 2 Years' Work

Last Updated Jul 23, 2009 2:49 PM EDT

Medarex CEO Howard Pien stands to make about $4.2 million by allowing Bristol-Myers Squibb to buy his company. The payments -- in cash, stock and about $40,000 in healthcare premiums -- are part of Pien's change-of-control agreement with Medarex.

Since he joined the company in 2007, Pien will have earned $12 million in compensation (for 2007, 2008, and this bonus) in addition to whatever he makes in 2009 compensation for running Medarex. Here's the summary table regarding his BMS bonus:

BMS is paying $2.4 billion, at $16 a share, a 90 percent premium on the stock. That's still a money-losing deal if you bought Medarex at its height in 2007, when it traded at $17.61 a share before heading into the $11 range.

In addition to paying Pien, that money will cure the $1 billion deficit to shareholders that Medarex has accumulated over the years. In Q1 2009, Medarex lost $49 million on revenues of just $11 million.

BMS is buying a big gamble. This money-losing company whose cancer product, ipilimumab, has already been delayed by the FDA once, has been run recently as a self-enrichment project by its management. Despite stock declines and an expanded net loss in 2008, Pien et al rewarded themselves with a 10 percent pay raise; the top five execs' compensation expenses are 28 percent of the company's G&A budget.

Phase III data on ipilimumab will not be unblinded until late 2009. BMS may have been convinced of the drug's effectiveness by this strange press release from the Mayo Clinic, which claimed that three men's prostate cancer disappeared during a trial of the drug. No further details were offered.

Let's hope BMS knows what it is doing.