This excerpt taken from the AGN DEF 14A filed Mar 21, 2007.
The Compensation Committee annually reviews current market compensation data from two national independent surveys of pharmaceutical, biotechnology and medical device industry participants as well as a peer group of companies selected based upon factors including size, employment levels, market capitalization and product lines. These two sources of data are complementary to one another and are used to provide the Compensation Committee with a broad view of compensation practices and levels in the competitive marketplace. The survey company data provides a broader industry-wide component, while the peer group company data provides information regarding companies most directly comparable to us based on the factors discussed above. Many of the peer group companies are listed in the AMEX Pharmaceutical Index. Certain companies not included in the AMEX Pharmaceutical Index were also considered peer group companies because they are comparable to us based on size, scope of operations, line of business, or because they may compete with us for executive talent. Certain companies in the AMEX Pharmaceutical Index were not considered peer group companies because they were not comparable in terms of size or line of business, are not considered competitors for executive talent or because compensation information for those companies was not available. The peer group for the Compensation Committees January 2006 review of executive compensation consisted of the following companies: Alcon, Inc., Amgen Inc., Biogen IDEC Inc., Cephalon Inc., Chiron Corp., Forest Laboratories, Genentech Inc., Genzyme Corp., Gilead Sciences Inc., King Pharmaceuticals, Eli Lilly and Company, Medicis Pharmaceuticals, MedImmune Inc., Pfizer Inc., and Wyeth.
The Compensation Committee, with the help of the consultant, periodically reviews the composition of the peer group and the criteria and data used in compiling the list, and considers modifications to the group. Throughout 2006, the Compensation Committee reviewed data provided by the consultant regarding the appropriate companies
to include in the peer group and the effects such a change would have on the median and 75th percentile for base salary, total cash compensation, long-term equity incentives and total direct compensation for the peer group. In September 2006, the Compensation Committee revised the peer group, which is now composed of: Alcon, Inc., Amgen Inc., Biogen IDEC Inc., Celgene Corporation, Cephalon Inc., Endo Pharmaceuticals, Forest Laboratories, Genentech Inc., Genzyme Corp., Gilead Sciences Inc., Johnson & Johnson, Eli Lilly and Company, Medicis Pharmaceutical, MedImmune Inc., Mentor Corporation, Sepracor Inc., and Wyeth. The Compensation Committee determined that this group of peer companies was more representative of our executive talent pool and our product and market profile, appropriate from a revenue size perspective and comparable in terms of performance and recognition in the marketplace. The change in the composition of the peer group resulted in a slight decrease in the average compensation provided by the peer group, particularly with respect to total direct compensation.