Sorrento Therapeutics CEO Ji Could Reap Massive Award Similar to Tesla’s Musk as Vaccine Race Continues

September 4, 2020

Erin Lehr

In the era of COVID-19, many pharmaceutical companies are racing to quickly to come up with a vaccine to suppress the virus. One of them, Sorrento Therapeutics, Inc., is asking shareholders to approve a performance-based option award for CEO Henry Ji. The grant is modeled after Tesla’s widely scrutinized 2018 option award to CEO Elon Musk. Sorrento believes the option award will incentivize Ji to grow the company during this unprecedented period.

According to the agreement, Ji’s option award will consist of 10 separate tranches, each with incrementally larger market capitalization milestones to be achieved. Each milestone must also be met in two measures—over a six-month trailing average as well as over a 30-day trailing average. The market capitalization goals range from $5 billion for the first tranche to $35 billion for the final tranche. This incentivizes him to focus on the company’s long-term growth and profitability, especially during a public health crisis in which Sorrento aims to play a critical role. If Sorrento is successful and Ji earns all 10 tranches, he could potentially realize $2.4 billion, according to the company’s latest proxy. Table 1 below shows how Henry Ji’s performance award stacks up against Elon Musk’s.

While the goals initially set by Tesla and Sorrento may appear ambitious, Tesla’s recent performance has demonstrated that they are obtainable. Tesla’s stellar performance this year already resulted in the vesting in two tranches of Musk’s award, amounting to a total value of $6.4 billion based on Wednesday’s closing stock price. The extent to which Sorrento’s lofty goals will be met remains to be seen, but expect the payout Ji receives to be largely dependent on the results of Sorrento’s COVID-19-related endeavors.

Table 1

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Erin Lehr

Research Analyst at Equilar

Erin Lehr, Research Analyst at Equilar, authored this post. Please contact Manager, Content & Communications, at abatish@equilar.com for more information on Equilar research and data analysis.