Teva Seeks CEO With Deep Drug Industry Experience to Lead Recovery Efforts

Teva, the world's biggest generic drug maker, was left without a permanent chief last week after Erez Vigodman stepped down after missteps sent its shares to their lowest in more than 10 years.

A building belonging to Teva Pharmaceutical Industries, the world's biggest generic drugmaker and Israel's largest company, in Jerusalem, February 8, 2017.
Ronen Zvulun/Reuters

Teva Pharmaceutical Industries is seeking a new chief executive with deep drug industry experience, the Israel-based company said on Monday as it looks to restore confidence after a series of missteps and the departure of CEO Erez Vigodman.

Teva, the world's biggest generic drug maker, was left without a permanent chief last week after Vigodman, an industry outsider, stepped down following a string of costly acquisitions and delayed drug launches which sent its shares to their lowest in more than 10 years.

"We are here to fix what is not working, we will leave no stone unturned," interim CEO Yitzhak Peterburg said on Monday after the company reported higher than expected fourth-quarter earnings. Its shares bounced 4.2 percent to $33.55 in early trade in New York.

Teva's main focus in 2017 will be extracting benefits from its $40.5 billion (32 billion pound) acquisition of the Actavis generic drug business in August, implementing efficiency measures, generating cash and paying down debt, Peterburg said.

Teva has already faced calls for management and structural changes, including a possible split into separate generic and branded medicine units.

"With the entire Teva team, I am conducting a thorough review of the business to find additional opportunities to enhance value," Peterburg said. He declined or say whether this could include breaking up the company. 

Investors have said Teva, which faces pricing pressure in its core generics business and recently lost protection on four of its patents for its key branded drug Copaxone for multiple sclerosis, must choose a new CEO with extensive pharmaceutical experience. 

Deep experience

"We want someone with deep and broad pharmaceutical experience ... that can take Teva to the next level," Teva's new chairman, former Celgene CEO Sol Barer, said, noting he was personally involved in the search.

Teva earned $1.38 per share excluding one-time items in the fourth quarter, up from $1.28. Revenue grew 33 percent to $6.5 billion, primarily due to the inclusion of $630 million from the Actavis acquisition. Teva (TEVA.N) had been forecast to earn $1.35 excluding one-off items on revenue of $6.24 billion, according to Thomson Reuters I/B/E/S.

"While today’s results are likely to reassure investors following a turbulent past several months for Teva, execution over the longer term is required to alleviate investor concerns," Citi analyst Liav Abraham said.

Global sales of Copaxone rose 6 percent in the quarter to $1.0 billion. Cash flow from operations fell 12 percent to $1.4 billion.Teva reaffirmed its 2017 forecast of EPS between $4.90 and $5.30, on revenue of between $23.8 billion and $24.5 billion.

Teva is "very committed" to this EPS range and will do what it takes to protect it, including additional cost cuts if necessary, Peterburg said.

But the U.S. launch of one or two generic competitors to Copaxone this month could lower 2017 revenue by between $1 billion and $1.3 billion and EPS by between 75 and 95 cents, Teva said.

It will pay an unchanged quarterly dividend of 34 cents per ordinary share and $17.50 per mandatory convertible preferred share. Teva has no plans to change its payout, Barer said.