TRENTON, N.J. (AP) – Merck & Co.’s chief executive, who oversaw the drug maker’s acquisition of Schering-Plough Corp. last fall, received a compensation package valued at $11.9 million in 2009, according to an Associated Press calculation of figures disclosed in a regulatory filing Merck made.
Richard T. Clark’s total compensation fell 31 percent, despite the widely praised Schering deal and increases in Merck’s revenue, profit and stock price.
Clark, 64, drew a base salary of $1.8 million last year, up less than 1 percent from a year earlier, and a $2.85 million performance bonus, up 27 percent from 2008.
The value of his perks fell 24 percent to $56,003. Those included $10,959 for home and personal security, $25,448 in unspecified commuting costs, $8,571 for personal use of corporate aircraft and $11,025 in company matches to his retirement plan.
The biggest block of Clark’s compensation came from stock and stock options, which the company valued at $7.18 million at the time they were granted. That was down 46 percent from the $13.22 million worth he received the year before.
A Merck spokeswoman said the difference was due to a lower Merck share price at the time of the share awards, compared with the price at the time of the 2008 share awards.
The board’s compensation committee noted that despite a strong performance, several factors hurt Merck’s performance. Those included lingering manufacturing and supply issues that reduced sales of products including vaccines, and “below target growth” in its pipeline of experimental drugs.
The Associated Press’ compensation formula is designed to isolate the value the company’s board placed on the executive’s total compensation package during the last fiscal year. It includes salary, bonus, performance-related bonuses, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year.
The calculations don’t include changes in the present value of pension benefits, making the AP total different in most cases from the total the companies report to the Securities and Exchange Commission.
Last November, Merck, which is based in Whitehouse Station, N.J., completed its $41.1 billion acquisition of Schering-Plough, its neighbor in New Jersey and a longtime partner in a cholesterol drugs joint venture.
The acquisition vaulted Merck from No. 8 back to its former No. 2 position in the pharmaceutical industry, bringing it one of the best portfolios of drugs in late-stage development and much-needed product diversification. Merck acquired Schering-Plough’s biotech business, animal vaccines and medicines, and a stable of popular consumer health items including the Coppertone sun care and Dr. Scholl’s foot care lines.
Their revenues were needed because Merck’s companion blood pressure pills, Cozaar and Hyzaar – the company’s second-biggest revenue source – have just gotten generic competition, and top seller Singulair for asthma and allergies gets generic competition in 2012. In addition, sales of cholesterol drugs Vytorin and Zetia have fallen amid questions about their efficacy.
The deal also enabled Merck to cut costs by shedding an estimated 17,500 jobs. But it had to pay a total of $93 million in severance to four top Schering-Plough executives, including $33 million to Schering CEO Fred Hassan.
The Schering-Plough acquisition set up a move this March in which Merck and France’s Sanofi-Aventis SA combined their animal health businesses in a joint venture that owns about 29 percent of the $19 billion-a-year global market for medicines for pets and livestock – making it the top dog in the animal business.
For 2009, Merck reported net income of $12.9 billion, or $5.65 per share. That was up 65 percent from $7.81 billion, or $3.63 per share, a year earlier. Revenue climbed 15 percent to $27.43 billion from $23.85 billion.
Merck’s stock gained 20 percent in 2009, ending the year at $36.54, but this year it’s been fluctuating around the $37 range since February. On Monday afternoon, the shares fell 12 cents, to $36.85.
Clark reaches Merck’s mandatory retirement age of 65 next March, and succession planning is under way.
He took over Merck’s helm in May 2005 after predecessor Raymond V. Gilmartin was forced out amid the debacle over former painkiller Vioxx, pulled from the market in September 2004 for triggering heart attacks and strokes.
Issues with Vioxx have cost the company roughly $7 billion in settlement costs and legal fees. A $4.85 billion settlement reached in 2007 ended nearly 50,000 personal injury lawsuits, but other cases are still pending.
Merck shareholders will have their annual meeting on May 25.