Five years after taking the job, Teva Pharmaceutical Industries chief executive Shlomo Yanai announced his resignation, effective May. He will be replaced by pharma veteran Jeremy Levin, the first non-Israeli to lead the company.
Yanai, 59, who has led Teva for five years, wanted "to move on to a new phase in his career," Teva said.
His term on the job was characterized by a dogged effort to preserve the company's rapid pace of growth, not easy as Teva had already achieved the status of the world's biggest maker of generic drugs and to reduce Teva's dependence on a single drug, Copaxone, a treatment for multiple sclerosis that faces generic and other competition.
Based on the results, it is hard to crown Yanai's years at the company a success, though under his stewardship the company made a number of significant moves, many of which should bear fruit in the future.
Teva stock underperformed benchmarks during the five years Yanai was on the job 0, but in fairness that was mainly due to unfavorable shekel-dollar exchange rates. Compared with peer companies such as DRG, Teva outperformed by anywhere from 8% (against the XLV healthcare index on Nasdaq) and 25% (against the DRG index of drug companies).
Yet Teva slumped on the market during Yanai's last couple of years at the company. Investors lost faith after some optimistic forecasts from the Teva management that failed to pan out. It is no coincidence that Teva's forecast for 2012 is conservative, though yesterday morning Yanai commented that 2012 should be a great one for the company.
Hooked on Copaxone
Teva did grow significantly during Yanai's term, but its dependence on Copaxone did not diminish.
Copaxone is one of Teva's two proprietary drugs, the other being Azilect to treat Parkinson's disease. Teva had traditionally scorned the possibility that Copaxone could face generic competition, based on the drug's complexity and the difficulty making a biologically equivalent copycat version. Yet generic competition has raised its head and is ready to roll once Copaxone's patent runs out in 2014.
Also, Copaxone is administered by injection, and therefore faces competition from oral treatments - pills - for multiple sclerosis. If Yanai has a failure at Teva, it's a shared one with his predecessor, Israel Makov: the company has nothing to replace Copaxone and its $4 billion in sales a year in its pantheon. Teva tried to make a multiple sclerosis pill of its own, laquinimod, but it did not do well in clinical trials.
Copaxone is believed to be responsible for some 40% of Teva's profits. Concern about Teva's results once Copaxone loses patent protection is a chief reason for the stock's weakness of late.
Yanai thought to resolve Teva's "patent cliff" by acquiring Cephalon, which has a big portfolio of brand drugs, for $6.8 billion in October 2011. It will take some years to see if the decision worked out.
During Yanai's term at the steering wheel, Teva spent $20 billion on acquisitions, including Barr Pharmaceuticals for $7.4 billion.
Trouble in Jerusalem
Teva also ran into trouble in its biggest generic target market, the United States, during the second half of Yanai's term at the job. Sales there tumbled 40% in the third quarter of 2011 as its market share plunged following quality-assurance problems found at its Jerusalem plant. Also, during that time Teva had no new product launches.
But Yanai can claim a number of successes as well, including to reduce Teva's dependence on the American market. He achieved that by buying companies in Germany, the second-biggest generic drug consumer after the U.S., and in Japan. He also prepared the groundwork for Teva to become more involved in the market for over-the-counter drugs through an alliance with consumer goods behemoth Procter & Gamble.
Now finding solutions to Teva's main weaknesses must fall to Jeremy Levin.
Teva is the biggest manufacturer of generic drugs in the world and though it manufactures and sells worldwide, has consistently painted itself as an Israeli company, with management headquartered in Israel. Levin, formerly a senior executive with Bristol-Myers Squibb, will be moving with his family to Israel. He and Yanai will be working together for some time to assure an orderly change of the guard.
Yanai served as chief executive officer and president of Teva for five years, having joined the company from the top position at agrochemicals maker Makhteshim-Agan Industries. He had replaced Israel Makov as CEO. During Yanai's stint period at the company, Teva developed from a business of mainly generics with $8.4 billion in annual revenue to a more diversified business with anticipated 2012 revenue of $22 billion. Under Yanai's stewardship it expanded its presence in Europe, Latin America and Asia as well.
Levin was chosen after a protracted search by the board, headed by Phillip Frost, with the participation of Yanai. He was considered the right man for the job by virtue of his strategic vision, deep knowledge of the pharmaceuticals industry and leadership and management qualities, Teva said in a statement.
The company also said Levin has accrued more than 25 years of experience in the global drugs industry. He joined Bristol-Myers Squibb in 2007. He has had direct responsibility for strategy, alliances and transactions, and managed its portfolio of alliances. Before joining Bristol-Myers Squibb, Dr. Levin served from 2003 to 2007 as Global Head of Business Development and Strategic Alliances at Novartis. Earlier, he was CEO of Cadus Pharmaceuticals, a company he took public, Teva stated.
Levin, 58, was born in South Africa and has lived in the United States since 1986. In addition, he has lived in Zimbabwe, Great Britain, Switzerland and Israel, Teva said.
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