Teva Loses CEO, Leaving Investors to Guess What’s Next
Teva CEO Is Out After Being Hired to Turn Around Drugmaker
(Bloomberg) -- The departure of Teva Pharmaceutical Industries Ltd.’s third CEO this decade leaves his successor with challenges on many fronts, from eroding profits and mounting competition to probes into its U.S. operations.
Chairman Yitzhak Peterburg was named chief executive on an interim basis following Erez Vigodman’s sudden departure, and a search is underway for a successor, according to the Petach Tikva, Israel-based company. The leadership change came just two months after the resignation of Sigurdur Olafsson, the former head of Teva’s main business unit: generic medicines.
The two men engineered Teva’s $40.5 billion purchase of Actavis Generics last year, touting it at as a move that would kindle growth. Instead, there was more bad news. The drugmaker reduced its profit forecast twice, sending the stock to a 12-year low. To compound matters, the drugmaker lost court cases that sought to stop competitors from selling cheaper versions of its bestseller Copaxone.
“There’s a crisis of confidence around Teva right now and that stems from the lack of credibility at the top of the organization,” Andy Summers, a portfolio manager at Janus Capital Management, said in a telephone interview. His firm owns shares in Teva.
Share Rout
Shares of Teva fell 1.8 percent to 125.80 shekels at 12:51p.m. in Tel Aviv trading, extending a 9 percent slump so far this year. The stock has lost 25 percent of its value in the last five years, while an index of global drug stocks has jumped 46 percent. That means the company’s $36.9 billion of debt as of Sept. 30 exceeds its market value of $34.9 billion.
The changes overnight leave Peterburg with the challenge of turning around Israel’s largest company. The interim chief pledged to undertake a thorough review of operations in a statement late Monday.
“It’s certainly not good news at this point in time,” said Elizabeth Krutoholow, an analyst with Bloomberg Intelligence, who called 2017 a turning point for Teva. “It doesn’t send a good signal about the future of the company, though a new CEO may be just what the company needs to turn things around.”
Vigodman’s tenure was short by most standards, though Teva has cycled through several CEOs in recent years. Now 57, he was hired in 2014, replacing then-CEO Jeremy Levin, who lasted less than two years after disagreeing with the board.
Summers of Janus said he’d like to see Teva split in half, into separate generics and branded businesses. That sentiment was echoed by others. In a survey of clients, more than half supported Teva splitting itself in half, according to Umer Raffat, an analyst with Evercore ISI.
Denise Bradley, a Teva spokeswoman, declined to comment beyond the release.
Vigodman hasn’t had an easy tenure. Teva agreed to pay a $519 million fine to U.S. authorities after admitting to paying bribes in some countries to boost sales, and is part of a sweeping U.S. Justice Department criminal investigation of suspected price collusion that ensnared the largest generic drugmakers. The company is also being sued by 20 states over its alleged pricing conduct in the U.S.
Meanwhile, a U.S. court ruling last month invalidating four patents on Teva’s top seller, the multiple sclerosis drug Copaxone, may open the door to generic competition for a product that generates a fifth of Teva’s $20 billion in annual sales. The introduction of two Copaxone copycats in the U.S. could wipe out as much as $1.2 billion of revenue this year, according to the company’s own estimates.
In early January, Teva said new products stemming from its purchase of Allergan Plc’s generics business would be unexpectedly delayed, while prices of its copycat medicines are likely to remain under pressure in the U.S., prompting a cut to its 2017 profit forecast.
“The entire health-care sector has faced significant headwinds, and we have not been immune,” Vigodman said on Jan. 6.
Peterburg, Teva’s former head of research and development, said the company will be focused on cutting costs.
--With assistance from Jared S. Hopkins David Wainer Johannes Koch Naomi Kresge and John Ainger To contact the reporters on this story: Yaacov Benmeleh in Tel Aviv at ybenmeleh@bloomberg.net, Caroline Chen in San Francisco at cchen509@bloomberg.net. To contact the editors responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net, Marthe Fourcade