Study On The Scheme Design And Implementation Effect Of Equity Incentive In CRO Enterprises

In recent years,China has successively introduced a number of policies to encourage pharmaceutical innovation.With the introduction of the centralized procurement of drugs and the consistency evaluation system of generic drugs,the profit margins of the generic drug business of pharmaceutical enterprises in China have been greatly compressed.In addition,China’s major pharmaceutical companies are forced to develop innovative drugs.However,due to the increasingly complex process of developing new drugs,it is time-consuming,expensive and likely to fail for pharmaceutical companies to develop them entirely on their own.In order to reduce the difficulty of R&D,accelerate the R&D process,control R&D costs,and enhance the flexibility of R&D,large pharmaceutical companies have chosen to disassemble the R&D process of new drugs and outsource part of the R&D work to specialized organizations known as contract research organizations,or CROs.With the surge in the number of clinical trial approvals of innovative drugs in China,pharmaceutical companies have strong demand for specialized R&D services,and China’s CRO industry has ushered in a period of rapid development.Based on the characteristics of high proportion of technical personnel in the CRO industry,large personnel mobility,and industrial integration,it is very important to implement reasonable equity incentive plans in CRO enterprises to attract,retain and motivate core technical talents.Therefore,this paper focuses on the pharmaceutical sub-industry of CRO,in-depth study of equity incentive issues in the industry and gives targeted improvement suggestions.In this paper,Tigermed was selected as the research object,and the case study method and index analysis method were used for in-depth research.Tigermed,as a leading clinical CRO enterprise in China,has launched a total of 9 equity incentive plans since its listing in 2012,successfully implemented 6 times,covering 4incentive models.This paper first focuses on the CRO industry,and deeply analyzes the implementation status of equity incentives in this industry and the design characteristics of the scheme.Then,taking Tigermed as an example,the specific content,implementation and element design of its previous plans were analyzed in depth.It is concluded that the design of its multiple plans has the characteristics of strategic orientation,continuity and revision,and there are also problems such as short incentive validity period,unreasonable design of assessment arrangement,and significant increase in incentive costs.Then,based on the influence mechanism of equity incentive to improve financial performance,from the aspects of team stability and employee structure,innovation ability,performance,etc.,through horizontal and vertical comparison,verify the above mechanism,and compare and analyze the implementation effect of multiple schemes of Tigermed.Finally,the reasons for the case company to change different incentive models and the conditions for the use of different modes are elaborated.The results of this paper found that: First,the incentive effect of the first two schemes is stronger than that of the later schemes.In addition,the incentive effect of the same scheme is stronger in the early stage and weakened in the late stage.Second,the design of equity incentive programs should be in line with the company’s development strategy.Third,the continuity of the equity incentive plan contributes to the long-term development of the company.Fourth,the equity incentive plan should be continuously revised to give play to its continuous incentive role.The main contribution of this paper is to focus on the pharmaceutical segment of CRO and deeply study the equity incentive issues in this industry.Combined with the characteristics of the CRO industry,we put forward targeted optimization suggestions on the scheme design of equity incentives in this industry: First,ensure the relatively fair internal distribution of incentives,tilted towards the core.Second,refine the assessment requirements for equity incentives and introduce non-financial indicators.Third,match the R&D cycle and set the corresponding assessment period.