Anonymous
05-01-2009, 09:28 PM
Top Execs at Sepracor to Get Hefty Stock Options
-=-=-=-= Rising Star Equity, LLC. – by Stan M. Goldmen, April 13, 2009, 12:39pm
Sepracor (Nasdaq SEPR), a Marlborough, MA based pharmaceutical company completed a SEC Schedule 14A filing on April 4, 2009 which includes a detailed compensation review for top execs including Class I, II and III directors. Typical, high six-figure salaries with bonuses ranging from 50 to 100% are presented in the proxy statement which really isn’t newsworthy or earth shattering for this company or the pharma industry for that matter; however there is something lurking within the pages which might catch some attention in the weeks to come.
Management is proposing the adoption of a new 2009 STOCK INCENTIVE PLAN which will allow execs to receive a maximum of 500,000 shares per year. The exact number of grants for 2009 for each exec will be determined by the “board compensation committee”; however typical grants for a company this size are 50,000 to 125,000 for each executive and could be a mixture of restricted stock as well as stock options.
Per Schedule 14A from SEPR: “The members of the Compensation Committee are Messrs. Barrios and Mrazek (Chairman) and Ms. Ricciardi. The Compensation Committee held five meetings during 2008. The Board has determined that each of these members is independent as defined under the applicable Nasdaq rules.”
There is full expectation the Compensation Committee will be handing out hefty stock options to top execs as early as May in an effort to “motivate named executive officers for outstanding future performance”, just one of several justifications given in the proxy to support the new stock incentive plan. Some analysts say this move is consistent with companies that have undergone CEO and top management clean outs as cheap options promise windfall incomes that deeply shadow their relatively modest salaries and bonuses. Adrian Adams, former KOS Pharmaceuticals Inc. CEO, was hired by Sepracor in 2007 and proceeded to quickly clean out the upper ranks of the 25 year old company in 2007 and 2008. He also takes credit for a partnership with Germany based Nycomed and Portugal based Bial that has already introduced two branded drugs into the US market (OMNARIS and ALVESCO) and will introduce a third in 2010 (STEDESA).
It remains to be seen if top execs will also shower the lower and mid level employees with option grants since they too should be “motivated … for future performance”. Such action is doubtful as the existing management has continuously avoided achievement of “outstanding performance” over the last 24 months with a string of bad news and weak sales of its flagship products XOPENEX and LUNESTA. It is much more likely Sepracor will follow the lead of other companies and distribute restricted stock shares which puts the tax burden on the employee and minimizes the impact to the company’s bottom line earnings. If so, low and mid level employees could see 200 to 5000 restricted shares and maybe a handful of stock options, only a fraction of the upside potential top execs will enjoy.
In recent developments, bad news teamed up with catastrophic news over the last 3 months as the company executed a 20% layoff in early 2009 and then got word LUNESTA would be going generic in 2012 thanks to 9 ANDA generic filers including Teva-Barr, Dr. Reddy and Roxane. The recent bad news underlines Sepracor’s broad exposure to generic competition as both XOPENEX inhalation solution and LUNESTA brands will fall silent almost exactly at the same time in Q3-2012, leaving OMNARIS, ALVESCO, BROVANA and STEDESA to fill in the revenue gaps. Approximately 81% of total revenues for the year ended December 31, 2008 resulted from sales of LUNESTA and XOPENEX inhalation solution while revenue in 2008 for other brands were $14.6M for OMNARIS, $16.8M for ALVESCO and $57.3M for BROVANA. Analysts predict STEDESA sales, if approved in 2010, will likely follow TRILEPTAL (oxcarbazepine) which bottomed out at $331M in 2008 thanks to generic competition.
Future revenue projections for Sepracor are quite dire without XOPENEX and LUNESTA brands, and most analysts estimate the company will have a tough time hitting $813M in 2012, or roughly 63% of the 2008 annual revenue of $1.292B. This inconvenient “revenue gap” will largely consist of Sepracor’s inability to fend off generic competition which is on target to decimate XOPENEX and LUNESTA sales in 2012. Combine this dull forecast with the realization of no new drugs will move from their R&D pipeline to market in the next 2 years other than STEDESA and one begins to wonder if the company’s CEO and top execs are asleep at the wheel.
At least the top 13 execs picked a good time to self-reward, SEPR stock has been trading between $14-15 recently, a level not consistently observed for over 6 years. The remaining 1600 employees will just have to be happy with the usual petty handouts.
GPE forecasts as of April 2009:
Next 12 months- **Neutral**
Next 24 months- **Underperform**
-=-=-=-= Rising Star Equity, LLC all rights reserved 2009.
-=-=-=-= Rising Star Equity, LLC. – by Stan M. Goldmen, April 13, 2009, 12:39pm
Sepracor (Nasdaq SEPR), a Marlborough, MA based pharmaceutical company completed a SEC Schedule 14A filing on April 4, 2009 which includes a detailed compensation review for top execs including Class I, II and III directors. Typical, high six-figure salaries with bonuses ranging from 50 to 100% are presented in the proxy statement which really isn’t newsworthy or earth shattering for this company or the pharma industry for that matter; however there is something lurking within the pages which might catch some attention in the weeks to come.
Management is proposing the adoption of a new 2009 STOCK INCENTIVE PLAN which will allow execs to receive a maximum of 500,000 shares per year. The exact number of grants for 2009 for each exec will be determined by the “board compensation committee”; however typical grants for a company this size are 50,000 to 125,000 for each executive and could be a mixture of restricted stock as well as stock options.
Per Schedule 14A from SEPR: “The members of the Compensation Committee are Messrs. Barrios and Mrazek (Chairman) and Ms. Ricciardi. The Compensation Committee held five meetings during 2008. The Board has determined that each of these members is independent as defined under the applicable Nasdaq rules.”
There is full expectation the Compensation Committee will be handing out hefty stock options to top execs as early as May in an effort to “motivate named executive officers for outstanding future performance”, just one of several justifications given in the proxy to support the new stock incentive plan. Some analysts say this move is consistent with companies that have undergone CEO and top management clean outs as cheap options promise windfall incomes that deeply shadow their relatively modest salaries and bonuses. Adrian Adams, former KOS Pharmaceuticals Inc. CEO, was hired by Sepracor in 2007 and proceeded to quickly clean out the upper ranks of the 25 year old company in 2007 and 2008. He also takes credit for a partnership with Germany based Nycomed and Portugal based Bial that has already introduced two branded drugs into the US market (OMNARIS and ALVESCO) and will introduce a third in 2010 (STEDESA).
It remains to be seen if top execs will also shower the lower and mid level employees with option grants since they too should be “motivated … for future performance”. Such action is doubtful as the existing management has continuously avoided achievement of “outstanding performance” over the last 24 months with a string of bad news and weak sales of its flagship products XOPENEX and LUNESTA. It is much more likely Sepracor will follow the lead of other companies and distribute restricted stock shares which puts the tax burden on the employee and minimizes the impact to the company’s bottom line earnings. If so, low and mid level employees could see 200 to 5000 restricted shares and maybe a handful of stock options, only a fraction of the upside potential top execs will enjoy.
In recent developments, bad news teamed up with catastrophic news over the last 3 months as the company executed a 20% layoff in early 2009 and then got word LUNESTA would be going generic in 2012 thanks to 9 ANDA generic filers including Teva-Barr, Dr. Reddy and Roxane. The recent bad news underlines Sepracor’s broad exposure to generic competition as both XOPENEX inhalation solution and LUNESTA brands will fall silent almost exactly at the same time in Q3-2012, leaving OMNARIS, ALVESCO, BROVANA and STEDESA to fill in the revenue gaps. Approximately 81% of total revenues for the year ended December 31, 2008 resulted from sales of LUNESTA and XOPENEX inhalation solution while revenue in 2008 for other brands were $14.6M for OMNARIS, $16.8M for ALVESCO and $57.3M for BROVANA. Analysts predict STEDESA sales, if approved in 2010, will likely follow TRILEPTAL (oxcarbazepine) which bottomed out at $331M in 2008 thanks to generic competition.
Future revenue projections for Sepracor are quite dire without XOPENEX and LUNESTA brands, and most analysts estimate the company will have a tough time hitting $813M in 2012, or roughly 63% of the 2008 annual revenue of $1.292B. This inconvenient “revenue gap” will largely consist of Sepracor’s inability to fend off generic competition which is on target to decimate XOPENEX and LUNESTA sales in 2012. Combine this dull forecast with the realization of no new drugs will move from their R&D pipeline to market in the next 2 years other than STEDESA and one begins to wonder if the company’s CEO and top execs are asleep at the wheel.
At least the top 13 execs picked a good time to self-reward, SEPR stock has been trading between $14-15 recently, a level not consistently observed for over 6 years. The remaining 1600 employees will just have to be happy with the usual petty handouts.
GPE forecasts as of April 2009:
Next 12 months- **Neutral**
Next 24 months- **Underperform**
-=-=-=-= Rising Star Equity, LLC all rights reserved 2009.