Shire chief shrugs off shareholder protests
Shire chief executive Flemming Ornskov brushed off shareholder protests against his $21.6m pay package even as the drugmaker revealed a surge in sales and profits.
Almost half of investors who voted at Shire’s annual meeting on Thursday rejected the drugmaker’s remuneration policy — one of the biggest in a series of shareholder rebellions over pay at UK-listed companies this spring.
Asked about the vote on Friday, Mr Ornskov told the Financial Times: “It’s up to my board to enter into that dialogue. My role is to focus on delivering results.”
Since he took charge three years ago, Shire’s stock has risen 119 per cent compared with a slight fall in London’s FTSE 100 index. The group’s status as one of the fastest-growing companies in the pharmaceuticals sector was reinforced on Friday by first-quarter results which showed a 15 per cent increase in sales to $1.71bn and a 15 per cent jump in operating profits to $544m.
Performance-related incentives and bonuses helped fuel a fivefold increase in Mr Ornskov’s total pay last year; but it was the 25 per cent increase in his fixed salary to $1.69m which most upset critics.
Shire’s board said the raise was needed to bring Mr Ornskov’s pay into line with peers in the pharma and biotech sectors “to ensure the CEO’s retention given his attractiveness as a potential recruitment target”.
The 58 year-old Dane would not comment on whether he had been approached about other jobs. He said he was “absolutely focused” on driving further expansion in Shire as it prepares to complete the $32bn acquisition of Baxalta.
Mr Ornskov said the transaction — the biggest in Shire’s 30-year history — was on course to close in early June, six months after his long pursuit of the US biotech company ended in an agreed takeover.
The financial benefits from the deal include the reduction of Baxalta’s high US corporate tax rate when it is absorbed into Ireland-based Shire.
While the deal is not a “tax inversion” of the kind that has roused controversy in Washington, there have been questions over whether it could be affected by a recent US Treasury clampdown on tax rules governing cross-border deals.
Jeff Poulton, chief financial officer, said Shire was still confident that the combined group would have a tax rate of 16-17 per cent, compared with Baxalta’s 23 per cent as a standalone company.
“We’ve been through all 500 pages [of the Treasury document] and concluded that it is not going to impact what we can deliver,” he added.
Shire’s increased first quarter sales were broadly in line with market expectations, while earnings-per-share of $3.19 were well ahead of analysts’ consensus forecast for $3.04. Growth came from newer rare disease drugs, such as those acquired from NPS Pharma last year for $5.2bn, but also from its older Vyvanse treatment for attention deficit hyperactivity disorder, which was up 22 per cent at $509m.
Shares in Shire closed nearly 2 per cent higher at £42.61 on Friday, although they are down almost a fifth in the past year after a sell-off in biotech stocks.