Teva Pharmaceutical’s outlook dims as CEO leaves

Bloomberg

Teva Pharmaceutical Industries Ltd.’s chief executive officer unexpectedly left after just three years, leaving the world’s largest maker of cheap copycat medicines floundering for a new boss as its outlook dims and the shares slump.
Chairman Yitzhak Peterburg became CEO on an interim basis following Erez Vigodman’s departure, and a search is underway for a successor, the Petach Tikva, Israel-based company said in a statement late Monday. The sudden change to the company’s leadership came just two months after the resignation of Sigurdur Olafsson, the former head of Teva’s main business unit: generic medicines.
The two men engineered Teva’s $40.5 billion purchase of Actavis Generics last year, touting it at as a move that would provide growth. Instead, there was more bad news. The company reduced its profit forecast twice, sending the stock to a 12-year low. To compound matters, the drugmaker lost court cases that sought to stop competitors from selling cheaper versions of its bestseller Copaxone. The company now plans to undertake a thorough review of operations.
“There’s a crisis of confidence around Teva right now and that stems from the lack of credibility at the top of the organization,” Andy Summers, a portfolio manager at Janus Capital Management, said in a telephone interview. His firm owns shares in Teva.
The changes overnight leave Peterburg with the challenge of turning around the Israeli drugmaker, the nation’s largest company. Teva’s $36.9 billion of debt as of Sept. 30 exceeds the company’s market value of $34.9 billion. Shares of Teva fell 1.7 percent to 126 shekels at 12:05 p.m. in Tel Aviv. The stock closed at 122.50 shekels on Jan. 24, the lowest since Feb. 27, 2005.
‘NOT GOOD NEWS’
“It’s certainly not good news at this point in time,” said Elizabeth Krutoholow, an analyst with Bloomberg Intelligence, who called 2017 a turning point for Teva. “It doesn’t send a good signal about the future of the company, though a new CEO may be just what the company needs to turn things around. Vigodman hasn’t been the best dealmaker.”
Vigodman’s tenure was short by most standards other than at Teva, which has cycled through several CEOs in recent years. Now 57, he was hired in 2014, replacing then-CEO Jeremy Levin, who lasted less than two years after disagreeing with the board. The company’s shares have lost 25 percent of their value in the last five years, while an index of global drug stocks has jumped 46 percent. Summers of Janus said he’d like to see the company split in half, into separate generics and branded businesses. That sentiment was echoed by others. In a survey of clients, more than half supported Teva splitting itself in half, according to Umer Raffat, an analyst with Evercore ISI said. Denise Bradley, a Teva spokeswoman, declined to comment beyond the release.

‘SIGNIFICANT HEADWINDS’
Vigodman hasn’t had an easy tenure. Teva agreed to pay a $519 million fine to US authorities after admitting to paying bribes in some countries to boost sales, and is part of a sweeping US Justice Department criminal investigation of suspected price collusion that ensnared the largest generic drugmakers.
“The entire health-care sector has faced significant headwinds, and we have not been immune,” Vigodman said on Jan. 6. Peterburg, Teva’s former head of research and development, said the company will be focused on cutting costs.
He’s also facing a bounty of questions as the new head of the struggling behemoth of Israeli business.