Four Top Execs Cost Teva $31 Million in 2017, Even as It Posted Huge Losses

Nearly half went to three managers leading company during failed Actavis acquisition

Kare Schultz, who took over as CEO in November with the mission of turning Teva around, in 2017/

Teva Pharmaceuticals paid out $30.8 million in compensation to four top executives in 2017, with nearly half of that going to three who were working for the company when it completed the acquisition of Actavis Generics, which saddled the company with dangerously high levels of debt.

The compensation figures, which appeared in the company’s 2017 annual report released last Thursday, showed that the cost of compensation for Erez Vigodman, the Teva CEO who stepped down a year ago after engineering the Actavis acquisition, was $2.8 million, split evenly between salary and other benefits. He is entitled to 18 months salary after his resignation in exchange for abiding by a non-compete clause in his contract.

Compensation for Yitzhak Petersberg, who was chairman of the company and then stepped in as acting CEO when Vigodman left, cost Teva $6.8 million in 2017 – including $1.5 million in salary, $3 million in stocks and $1.5 million in stock options. The cost of compensation for Eyal Desheh, who stepped down as chief financial officer last July, reached $4.2 million in 2017.

Kare Schultz, who took over as CEO in November with the mission of turning Teva around, cost the company $17 million in compensation for the year. That included a salary of $333,000, but stock grants of $14 million and options worth $2 million.

Stung by a rapid decline of its generics business in the United States and the loss of exclusivity for its best-selling Copaxone multiple sclerosis drug, Teva posted a giant 2017 loss of $16.3 billion.

Erez Vigodman, 2014
Bloomberg

On Monday, Teva shares were up 4.35% in late trading in New York at $19.42 after Credit Suisse upgraded Teva stock to Outperform and raising the price target to $23.

Teva’s annual report said the value of stock options held by employees at the end of last year was just $7.4 million because of the decline in the company’s share price in recent years. The average exercise price for the 43 million options outstanding was $44.32, versus an end-year price in the New York Stock Exchange of $18.61.

The report warned that it might not be able to recycle its $32.5 billion debt if it suffers further credit downgrades. All three of the world’s biggest ratings agencies have downgraded the company’s debt, the last being Standard & Poor’s, which cut Teva to BB last Thursday.

Teva said the last series of downgrades alone would cost it between $100 million and $200 million in the first quarter of 2018 alone.

On the controversial issue of taxes, Teva said it paid $96 million in 2017 to Israel, equal to 6.6% of its pre-tax income, down from $209 million, or 13.8% in 2016. Despite its big 2017 loss, its pre-tax profit in Israel fell only 4.3% to $1.45 billion, the company reported.