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Should You Worry About Alexion Pharmaceuticals, Inc.'s (NASDAQ:ALXN) CEO Pay Cheque?

Simply Wall St

Ludwig Hantson became the CEO of Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) in 2017. First, this article will compare CEO compensation with compensation at other large companies. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Alexion Pharmaceuticals

How Does Ludwig Hantson's Compensation Compare With Similar Sized Companies?

Our data indicates that Alexion Pharmaceuticals, Inc. is worth US$25b, and total annual CEO compensation was reported as US$16m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.2m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$11m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).

It would therefore appear that Alexion Pharmaceuticals, Inc. pays Ludwig Hantson more than the median CEO remuneration at large companies, in the same market. However, this fact alone doesn't mean the remuneration is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see a visual representation of the CEO compensation at Alexion Pharmaceuticals, below.

NasdaqGS:ALXN CEO Compensation, December 14th 2019

Is Alexion Pharmaceuticals, Inc. Growing?

Over the last three years Alexion Pharmaceuticals, Inc. has grown its earnings per share (EPS) by an average of 36% per year (using a line of best fit). In the last year, its revenue is up 21%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. You might want to check this free visual report on analyst forecasts for future earnings.

Has Alexion Pharmaceuticals, Inc. Been A Good Investment?

Since shareholders would have lost about 8.0% over three years, some Alexion Pharmaceuticals, Inc. shareholders would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

We examined the amount Alexion Pharmaceuticals, Inc. pays its CEO, and compared it to the amount paid by other large companies. Our data suggests that it pays above the median CEO pay within that group.

However we must not forget that the EPS growth has been very strong over three years. On the other hand returns to investors over the same period have probably disappointed many. While EPS is positive, we'd say shareholders would want better returns before the CEO is paid much more. So you may want to check if insiders are buying Alexion Pharmaceuticals shares with their own money (free access).

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.