US Drug Maker to Freeze Pay in 2012

(NewsCore) - Eli Lilly & Co. will freeze base pay for most of its employees in 2012, citing financial pressures caused by patent expirations on top drugs.

The Indianapolis drug maker recently lost US patent protection for its former No. 1 product, the antipsychotic Zyprexa, triggering generic competition that is expected to contribute to a decline in profit and sales for 2012.

Some other top-selling Lilly drugs are expected to lose patent protection in coming years.

The compensation committee of Lilly's board "elected no base pay increase in 2012 in light of patent expirations we're facing now and the financial challenges we're going to have," said Lilly spokesman Mark Taylor.

In a preliminary proxy statement filed Friday with the US Securities and Exchange Commission, Lilly said the base pay freeze would apply to employees in most countries worldwide, including top officers. Lilly has about 38,000 employees.

It's still possible that employees who receive cash bonuses on top of base pay could see overall compensation increases for 2012, but that will depend upon the company's performance this year, Taylor said.

CEO John Lechleiter requested that he receive no increase in base salary and bonus targets for 2012, the third consecutive year he has made such a request, citing business challenges. The board committee granted the request.

Lechleiter, 58, will still do well. His base annual salary is $1.5 million and his bonus target is 140 percent of his salary.

For 2011, Lechleiter's total compensation was valued at $16.4 million, down slightly from $16.5 million for 2010. In addition to his $1.5 million base salary, the total included stock awards valued at $5.6 million; nonequity incentive plan compensation of $2.6 million; change in pension value of $6.5 million; and other compensation valued at $90,000.

Lilly is trying to shore up its business by developing new drugs to replace revenue lost to generic competition.

These include an experimental treatment for Alzheimer's disease, solanezumab, that would have big commercial potential if it proves to be safe and effective in clinical trials. Key trial results are due out later this year for the drug.