Teva Pharmaceuticals, the giant but troubled drug maker, announced on Thursday that Erez Vigodman will become its CEO on February 11.
Vigodman, 54, takes over at a time when Teva is coping with boardroom conflicts, a flagging share price and the imminent loss of exclusivity for its top-selling drug, the multiple-sclerosis treatment Copaxone. But Vigodman, currently CEO of Makhteshim Agan, the world’s largest maker of generic agrochemicals, has earned a reputation as an executive who can turnaround companies.
“Vigodman is the right man to lead Teva,” Amir Elstein, Teva’s vice chairman, said in a statement. “He is a change agent with an impressive strategic mindset and a proven ability to execute restructuring programs, build organizational momentum, expand successfully in emerging markets and work with the capital markets. We are extremely pleased with his appointment.”
Teva shares had been rising in recent days amid reports in TheMarker and elsewhere that Vigodman would be getting the CEO’s job. On Thursday, the stock was down 0.4% at 143.70 shekels ($41) in mid-afternoon on the Tel Aviv Stock Exchange.
Vigodman takes the place of Jeremy Levin, who stepped down in October following a dispute with Teva’s board over implementing a strategic retrenchment program. Eyal Desheh, who has been serving as interim CEO, will return to his post as chief financial officer, Teva said.
“I understand the challenges facing Teva and am confident that, together with the management team, we can address these challenges and deliver on our commitment to creating value for our shareholders by expanding Teva’s businesses and delivering long-term growth,” Vigodman said in a statement.
At the top of the list of Vigodman’s challenges is the impending patent expiry in the United States for Copaxone, which accounts for a fifth of its sales and half of its profits in the third quarter of 2013, the last for which the company has reported.
Under a string of CEOs, Teva acquired companies to widen its product line and formed partnerships to develop new proprietary drugs. But those efforts have so far yielded little. Teva’s shares have underperformed the MSCI World Health Care Index by nearly 40% over the past two years and the stock trades at eight times forecast 2014 earning, which is just over half the sector average.
Teva’s efforts have been hindered by conflicts between the board, in particular its chairman Phillip Frost, and Teva’s top management. That infighting broke out into the open days before Levin’s departure with leaked emails documenting the dispute, further undermining the company’s standing. Critics say the 16-member Teva board is too big, insufficiently professional and weighted toward Israelis.
Earlier this week Britain’s Financial Times attacked Teva’s board as unfit for the job. “The board of Teva is a brains trust of scientific and medical knowledge. Shame that so few of its 16 members seem to know anything about running a company,” it said.
Since Levin’s exit, one director, Benny Landa, who founded and sold to HP the digital printing company Indigo, has been leading a boardroom battle to change things. He has proposed cutting the number of board members to 12 and reduce the 85% majority of shareholder votes needed to change directors. Those changes are seen as aimed at weakening Frost and his allies on the board.
Landa praised Vigodman’s appointment as the first step in turning Teva around. “Erez Vigodman’s appointment is the best the board of Teva could have made,” he said on Thursday.
An Israeli with degrees in economics and accounting from Tel Aviv University and Harvard’s executive master of business administration program, Vigodman is familiar with Teva’s business, having served on its board since 2009. He was CEO of Strauss Group, one of Israel’s biggest food makers, for eight years. Sales doubled under his watch as Strauss expanded outside Israel.
Since he took the helm of Makhteshim in 2010, Vigodman has returned the company to profitability, closing production lines in Brazil, renewing research and development activity and improving the company’s supply chain and product offerings. In the first nine months of last year, Makhteshim posted a net profit of $156.3 million, compared with a loss of $132.2 million in 2010.
Before his appointment as Teva’s CEO, Vigodman was believed to be readying Makhteshim Agan for a planned stock offering in early 2015 and then remain for another year at the company. Makhteshim had been trading on the TASE until a majority stake was acquired by China National Chemical Corporation in 2011.
Makhteshim’s board will now need to choose a new CEO. The leading candidates to succeed Vigodman at the Israeli agrochemical maker are its deputy CEO, Chen Lichtenstein, and Ran Maidan , the CEO for Asia-Pacific, Africa and Middle East. But there are also two dark-horse candidates − Ignacio Dominguez, head of Makhteshim’s global products and marketing division, and CEO Americas Shaul Friedland.
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