Updated from 11:34 am EST with Epizyme comment.

With new stock option grants this week, Epizyme (EPZM - Get Report) executives are sending an ugly message to aggrieved shareholders: We don't mind profiting from your pain.

Biotech stocks are in a tailspin this year, including Epizyme, which is down a staggering 44%. Epizyme executives are at least partly to blame for the steep slide in the company's market value.

During the first week of January, Epizyme chose to price a follow-on stock offering at $9 per share when the prevailing market price for the stock was $15 -- a huge 40% discount.

No other biotech company doing an equity financing at the same time offered as steep a discount as Epizyme.

Epizyme got the deal got done and raised $130 million, but the stock price cratered (it hasn't recovered) and current shareholders were left with with paper losses and a bitter taste in their mouths.

EPZM Chart

On Wednesday night, Epizyme disclosed regulatory filings detailing a new round of stock option grants to the company's top four executives, including 412,500 options awarded to CEO Bob Bazemore. The stock options were priced at $8.98.

That means if Epizyme's stock price recovers to $15, where it was priced before the company's deeply discounted financing, Bazemore's new stock options would be worth $2.5 million.

"Epizyme's board should have priced those options with a strike equal to where the stock originally was -- $15 -- before the offering. A company's management shouldn't benefit from their own choice to drive the stock price down," said Brad Loncar, portfolio manager at Loncar Investments and co-founder of the Loncar Cancer Immunotherapy ETF.

The stock option grants "were consistent with the company's past practice (including timing) and industry standards," said Epizyme CEO Bazemore. "These grants were made to all of the company's regular employees as part of an annual performance review that followed the close of 2015 and are an important part of how we incent and retain our team."

The $130 million raised by Epizyme could come in handy now that investors have turned hostile to financing biotech companies. But Epizyme executives look tone deaf by awarding themselves attractively priced stock options while their shareholders suffer.


Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.