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How CEO's of Biotech are Incentivized and What This Means for Investors

Tuesday, February 13, 2018 General News
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LAS VEGAS, February 13, 2018 /PRNewswire/ --
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FN Media Group Presents Microcapspeculators.com News Commentary 

CEO's across the biotechnology industry have varying wages. Business news is flooded with reports regarding the salaries, bonuses and stock option packages awarded CEO's of publicly traded companies. Making sense of these numbers can be difficult. Understanding how CEOs are incentivized is an extremely important aspect to consider when investing in a stock. Executives who are inappropriately compensated, whether too low or too high, lack the incentive to perform in the best interest of the Company's shareholders. Compensation should always be structured in a way to promote value-creation to shareholders. Included in today's commentary:Propanc Biopharma, Inc. (OTC: PPCB), Kura Oncology, Inc. (NASDAQ: KURA), Esperion Therapeutics, Inc. (NASDAQ: ESPR), Juno Therapeutics, Inc. (NASDAQ: JUNO), Verastem, Inc. (NASDAQ: VSTM).
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How does one determine a healthy compensation package for a CEO? The first step is accessing compensation information which can be found in the public filings with the Securities and Exchange Commission (SEC). It is mandated by the SEC that all public companies disclose the amount they pay their executives, how the payment is structured and who is responsible for determining the process. These filings can be lengthy and convoluted.

One of the most common ways to evaluate executive compensation is to compare pay to performance. Comparing a CEO's pay to stock performance can verify whether an executive is overpaid. If the change in the stock price outperforms the change in pay, the executive is not considered to be overpaid. Trends that show executives who are receiving a higher pay rate than performance rates, usually means overcompensation for underperformance. This negatively affects investors both in money paid out and incentive to perform.

Industry peer to peer comparison is another effective way to evaluate appropriate CEO compensation as industry leaders should be paid similarly to their peers. Sometimes a leader in the industry or the founder of a Company can make more than their peers, in this case it makes sense for industry moguls to receive higher wages.

When considering your next investment, make sure to determine pay versus performance and peer to peer salaries for key executives. Executive compensation is a very important consideration for investors because an improperly compensated executive could in turn cost the shareholders money while the CEO lacks the ability or care to encourage growth and increase profits.

In other biotech news:

Propanc Biopharma, Inc. (OTCQB: PPCB)

Market Cap: 1.455M, current share price: $.14 

PPCB is a leading clinical stage biopharmaceutical company with a focus on the development of new and proprietary treatments for cancer patients suffering from solid tumors such as pancreatic, ovarian and colorectal cancers. The Company has taken a major step toward its financial goals as last month it announced the restructuring of approximately $500,000 in senior secured convertible debt. This is an accomplishment for PPCB as the Company looks toward further restructuring its debt and drawing long-term investors to raise capital for a First-In-Human study for their lead candidate, PRP.

Kura Oncology, Inc. (NASDAQ: KURA)

Market Cap: 574.096M, current share price: $19.00 

KURA is another clinical-stage biopharmaceutical company committed to realizing the promise of precision medicines for the treatment of cancer. Last quarter of 2017, KURA was selected to be added to the Nasdaq Biotechnology Index (NBI).

Esperion Therapeutics, Inc. (NASDAQ: ESPR)

Market Cap: 1.812B, current share price: $69.03 

ESPR is currently concluding research on its lipid management platform, bemepedoic acid. The Company is expected to release Phase 3 data this coming March, May and September. It is expected that positive reports resulting in an 80-percent probability of treatment approval by the Food and Drug Administration will occur but it may not be in the timeline the Company has predicted.

Juno Therapeutics, Inc. (NASDAQ: JUNO)

Market Cap: 1.812B, current share price: $69.03 

For the 12 months that ended on December 31st, 2016 compared to the previous year that ended on December 31st, 2015, JUNO reported revenue of $79.36M versus $18.22M. This signifies a 336% increase. The estimated EPS forecast for the next fiscal year is -$4.40 and look out for an official report that is expected on March 7th, 2018. Keep a look out for this report at the end of the first quarter!

Verastem, Inc. (NASDAQ: VSTM)

Market Cap: 173.09M, current share price: $3.42 

VSTM is focused on discovering and developing drugs to improve the survival and quality of life of cancer patients. This Company is planning to submit a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) during this quarter. This submission will request a full approval of duvelisib, one of their lead candidates, for the treatment of patients with relapsed or refractory CLL/SLL and accelerated approval for the treatment of patients with relapsed or refractory follicular lymphoma (FL).

Stemline Therapeutics, Inc.  

Market Cap: 469.345M, current share price: $16.20 

STML is a clinical-stage biopharmaceutical company developing novel oncology therapeutics. The Company recently filed a prospectus supplement to its shelf registration statement on Form S-3 (File No. 333-219794) with the U.S. Securities and Exchange Commission ("SEC") for the public offering of its common stock. This announcement came after STML announced an underwritten public offering of 4,255,000 shares of its common stock. This included the exercise in full of the option to purchase 555,000 additional shares, at a price of $14.00 per share.

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