Teva Unveils Plan for Separation of Generic, Specialty Medicine Units

Reorganization of generics business signals CEO Erez Vigodman’s dissatisfaction with the unit’s performance.

Ofer Vaknin

Teva Pharmaceuticals is introducing a new organizational structure that divides the company’s global operations into generic medicine and specialty medicine units, with the aim of creating a “less complex, integrated” business.

The reorganization, which goes into effect July 1, will bring with it a series of top-level appointments, including Sigurdur Olafsson, who will be coming in as president and CEO of the generics business, Teva said. Olafsson, who will be based in the United States, had been president of Ireland’s Actavis, responsible for the company’s generics business.

“The new organization structure and leadership team will better position Teva to deliver sustainable growth and create short- and long-term value,” Erez Vigodman, who took over as CEO in February, said in a statement.

Vigodman has been leading a turnaround of the company – the world’s biggest maker of generic drugs, and Israel’s biggest company by market capitalization – after a stormy period under his predecessor, Jeremy Levin.

Teva is under pressure to find substitute revenue streams now that the patent for its best-selling multiple sclerosis treatment is expiring, opening it up to generic competition. But the company has also been accused of having a top-heavy management and inefficient board, which the reorganization, it appears, aims to address.

The announcement was made close to the end of the trading day on the Tel Aviv Stock Exchange Monday, where Teva’s share edged down 0.06%, to close at 176.50 shekels ($50.78). In New York, however, Teva shares were up 2.55% at $51.78 early afternoon local time.

“We must capitalize first on our existing assets and capabilities, and exploit opportunities and synergies emanating from the full integration of all business activities – most importantly, generic and specialty – while leveraging our global R&D and operations capabilities,” Vigodman said.

The new generics unit will put all of Teva’s regional generics business under one roof, a move it said underscores the company’s “commitment” to the segment. The unit will also be responsible for Teva’s growing over-the-counter business, which is run in a joint venture with Procter & Gamble in the United States.

Teva said its global specialty medicine business would continue to be led by Rob Koremans.

The reorganization of its generics business – which is still the foundation of Teva’s operations, despite an expanding portfolio of proprietary drugs – signals Vigodman’s dissatisfaction with the unit’s performance. By bringing in an outsider to run it, it also suggests he was unhappy with the generics business’ current management.

In response to the reorganization, BMO Capital said Monday that the hiring of Olafsson is “tremendously” good news. BMO said Teva’s new structure could be pointing to an eventual separation of the company’s generic and proprietary medicine units, although such a move is very unlikely anytime soon.

Other organization changes unveiled Monday include a newly formed corporate development, strategy and innovation group, which will be responsible for developing new market initiatives, identifying partners and new technologies. Teva said it had yet to name a leader for the division.

The company will also be forming a global corporate marketing excellence and communications group, which will be led by Iris Beck-Codner, who is being promoted from senior vice president and chief communications officer to a group executive vice president.

Her group will be responsible for marketing, brand management, corporate communications and social affairs, Teva said.

Eric Drape, who has been head of sterile, respiratory and specialty operations since last year, was named a group executive vice president and global head of quality, Teva said. Drape joined Teva from the Ipsen Group in France, and before that held positions at Novo Nordisk in France and Denmark.

Eyal Deshe, who served as interim CEO before Vigodman took over, will stay on as chief financial officer and a group executive vice president. He will also take on additional responsibilities for investor relations, together with Vigodman.