Teva’s medicine
Erez Vigodman steps down to cure company
Teva Pharmaceutical Industries chief executive Erez Vigodman has stepped down, leaving new management to overhaul the world’s biggest maker of generic drugs and restore confidence after a series of missteps sent its shares plummeting.
Teva, Israel’s largest company, said on Monday evening that Vigodman was departing immediately and would be replaced on an interim basis by chairman Yitzhak Peterburg.
A string of questionable and costly acquisitions, along with delayed drug launches, has prompted calls for a management overhaul and structural changes – such as a spin-off of its branded-drugs businesses – to restore investor confidence.
Investors say Teva, which faces pricing pressure in its core generics business and recently lost patent protection on its key branded drug Copaxone for multiple sclerosis, must choose a new CEO with extensive pharmaceutical experience.
The new boss needs to set a clear strategy, said Eldad Tamir, head of investment house Tamir Fishman, whose funds have slashed holdings in Teva by 90% over the past two years.
“Is it the biggest generics company, or is there an understanding that generics is hitting a glass ceiling and it should do other stuff,” such as investing more in branded drugs, he said.
Compounding the challenge for Teva, US President Donald Trump has pledged to crack down on drug prices.
Tal Levi, a buy-side analyst for Israeli investment house Halman-Aldubi, said Teva needed to manage cash flow better and deliver the hoped-for synergies from last year’s acquisition of the Actavis generics business.
Teva’s New York-listed shares, which hit $72 in July 2015, tumbled to a 10-year low of $32.20 last week after a US court found Copaxone patents to be invalid. The drug accounted for almost a fifth of Teva’s revenue last year.
Teva shares traded down 1.7% in Tel Aviv on Tuesday following Vigodman’s departure, which comes after the head of Teva’s generics business, Siggi Olafsson, left. The New York-listed stock was down 2.5% in premarket trading.
Vigodman joined Teva in 2014 after his success at rejuvenating an ailing Israeli agrochemicals firm earned him a reputation as a turnaround specialist and deal maker.
But a series of stumbles have dismayed investors.
Vigodman embarked on a costly buying spree that culminated in the acquisition of Actavis for $40.5 billion, a price many investors believe was too high.
Teva is now saddled with nearly $36b. in debt, similar to its market value, making it very difficult to raise new equity, Tamir said.
A $2.3b. deal for Mexican drugmaker Rimsa has led to both sides suing each other. And in December, Teva agreed to pay more than $519 million to settle US criminal and civil allegations that it bribed overseas officials to gain business.
Last month, Teva provided a 2017 revenue and profit forecast below Wall Street’s estimates.
THOROUGH REVIEW
Interim leader Peterburg, who will work alongside Teva’s new chairman, former Celgene CEO Sol Barer, said he would conduct a “thorough review” of Teva’s business while the company searches for a permanent CEO.
RBC Capital Markets analyst Randall Stanicky said it was unclear what this entailed and whether asset sales could be on the agenda.
“We find it interesting that Teva would pursue a review before naming a permanent CEO, which may be suggestive of further close involvement of the board and broader management team,” he said.
Some investors have told Reuters they would like to see Teva spin off its specialty-drug business.
This might please US activist investors because it could give a shortterm boost to the stock, said Levi, whose firm has been slowly raising its Teva stake over the past month.
“But Israeli institutions are longterm investors,” he said. “I’m not sure making a short-term profit is a good idea for the Israeli market and Teva.”
Bernstein analyst Ronny Gal, in a video to clients, called Peterburg “a good caretaker CEO, but clearly not a candidate to run the company long term.”
Prior to rejoining Teva’s board of directors in 2012, Peterburg led the company’s research and development efforts as head of global branded products from 2010 until October 2011.