Israel's biggest company to get new CEO after 30 years

An era is ending at Teva Pharmaceutical Industries, and a new one is beginning: The Israeli drug company announced Tuesday that vice chairman Phillip Frost would be succeeding chairman Eli Hurvitz.

Hurvitz, who requested a three-week sick leave in February, will be on leave indefinitely, the company announced. He resigned from the Teva board of directors yesterday, and stated in a letter that he wishes to be released from his duties in order to focus on making a full recovery.

The board unanimously backed Frost, 73, as the new chairman. Frost, who will be supervising the global drug company's management, immediately stated he supports Teva's business plan for the years 2010 to 2015, which had been presented at the start of February.

While Hurvitz has been associated with Teva for more than 30 years, Frost joined the Israel-based company from IVAX Corporation. Teva acquired IVAX in January 2006, based on a company valuation of $7.4 billion, making it the biggest corporate acquisition in Israeli history.

Frost was chairman and CEO of IVAX from 1987 until 2006 and is the largest individual shareholder in Teva, with a 1.6% stake. That's worth $900 million, thanks in no small part to Hurvitz: The legendary Teva leader is widely credited with growing the company from a distribution minnow into a multinational powerhouse with a $57 billion market capitalization.

This appointment makes Frost the first non-Israeli to lead Teva.

"We are all saddened by the circumstances that have caused this development," Frost said in a statement. "We are all keenly aware of the unique role Eli Hurvitz has played for so long in Teva's development."

Eli "Mr. Teva" Hurvitz has not only been associated with Teva for more than three decades - including 25 years as CEO and eight as chairman - he also firmly insisted that the company remain based in, and associated with, Israel. Though Frost is based in the United States, he yesterday vowed to TheMarker that Teva would remain based in Israel: "If it ain't broken, don't fix it," he said, adding that Teva certainly isn't broken.

Some American shareholders may be agitating to move Teva's headquarters to the United States. Frost yesterday said the company drew significant advantages from being based in Israel, including access to academic knowhow and quality manpower. Not to mention tax breaks, Frost added.

Some analysts predicted a smooth transition under the new leadership.

"Frost is an industry veteran, very smart and successful, and Teva is too big to be dependent on one person, even Hurvitz," said Gilad Alper at the brokerage Excellence Nessuah. "If all else stays equal, then this is neutral for Teva."

Limor Gruber, head of research at brokerage Psagot, said Teva was not a one-man show. "Teva is a very sophisticated machine. It can still be active and fulfill its strategies and goals, no matter who is chairman," she said.

Gruber also counseled investors to take advantage of any weakness in Teva stock to buy shares.

Speaking with TheMarker yesterday, Frost vowed that despite his veteran standing in the industry, he doesn't have a new vision for Teva; he shares Hurvitz's vision, he said. He too aspires to preserve Teva's status as the biggest generic drug company in the world, and to keep expanding - possibly to Brazil and China, two giant markets that Teva has yet to penetrate.

Among his many activities, Frost, a physician by training, chairs specialty drug company OPKO Health; chairs Prolor Biotech, which invests in Israeli biomed companies; is invested in finance services company Ladenburg Thalman; sits on any number of startup boards; and belongs to the board of regents of the Smithsonian Institution. Happily, he says, he doesn't fulfill any management roles at any of these institutions, and therefore is not worried he won't have enough time to devote to Teva.

Teva is more important to him than any of the above, Frost insisted: partly because of his personal investment and partly because of his sense of pride in the company, his personal commitment to it and all it represents, he said.

The company's main challenge in the years to come will be preserving its growth, he said. The bigger a company is, the greater that challenge, and Teva is the world's biggest generic drugmaker.