Quintiles’ board of directors, worried about losing CEO Tom Pike after the pending merger with IMS Health Holdings is completed and he’s no longer chief executive, agreed to pay him $9.5 million in cash plus stock valued at $7 million if he remains with the combined business through the end of 2017.
The amended employment contract for Pike, who will become vice chairman of what will become Quintiles IMS Holdings, was detailed this week in a new filing with the Securities and Exchange Commission. The various retention payments, which are spread out between Dec. 31 of this year and Dec. 31 of next year, are in addition to Pike’s $1.2 million annual salary and any performance bonus he might receive.
The so-called merger of equals between Durham-based Quintiles and IMS, a healthcare information company headquartered in Danbury, Conn., was announced last month and is expected to close in the second half of this year. IMS’s chairman and CEO, Ari Bousbib, will hold the same positions in the combined company, which will maintain dual headquarters in Durham and Connecticut.
The SEC filing shows that, early on in the negotiations between the companies, IMS insisted that Bousbib become CEO of the combined company.
On March 10, a pair of board representatives from each company – a group that included Quintiles founder Dennis Gillings – discussed how each of the CEOs “was successfully leading his respective company and each was cable of leading the combined company.” Following that discussion, however, the IMS board reps told their Quintiles counterparts that the IMS board could be flexible “with respect to governance and social issues in general” but that Bousbib must be the CEO of the merged business.
That afternoon the Quintiles board met and agreed to acquiesce to IMS’s demand, but it also concluded that it was important to retain Pike “to mitigate the risks inherent in the proposed integration of the two companies.” The board decided IMS must agree that Pike would have “a senior position” in the combined company.
The Quintiles board’s compensation committee subsequently negotiated with Pike an amended employment agreement designed to ensure that he stayed with the business post-merger. When the Quintiles board voted on the merger on May 2, Pike abstained “in light of” his new employment contract. After the remaining board members who were in attendance unanimously approved the deal, a second vote was held to give Pike “the opportunity to express his decision.” Pike voted in favor of the deal.
Quintiles, the world’s largest contract research organization, helps pharmaceutical and biotechnology companies conduct clinical trials of experimental drugs and analyze the results. It also provides sales forces that market prescription drugs to physicians.
IMS is best known for its vast array of healthcare data encompassing prescription and over-the-counter drugs, medical claims, electronic medical records and social media. Its customers use that data to gain insights into diseases, treatments and costs.
The two companies contend that combining Quintiles’ expertise and IMS’s data will enable them to help drug companies get their products to market faster. Last year the two companies combined generated more than $7 billion in revenue.