Teva Calls Channel 2 Report on CEO-Chairman Feud Baseless
Teva Pharmaceutical Industries Ltd. (TEVA) Chief Executive Officer Jeremy Levin denied a Channel 2 television report that he is considering resigning because of disagreements with Chairman Phillip Frost.
Frost and Levin have clashed on how to implement Teva’s cost-cutting plan and haven’t met for several weeks, the Israeli channel reported, citing people close to Levin and a letter from management to the board. Levin has considered resigning and management requested that the board “reconsider its interference on day-to-day” business decisions, it said.
“I wholeheartedly deny the rumors hinting that I am weighing my resignation from managing Teva,” Levin, 60, said in an e-mailed statement. “This is an unfounded report. I have the confidence and full faith in the professional team to implement -- with maximum success -- the strategic plan that we have formulated together.”
The reported tension comes as Teva of Petach Tikva, Israel, seeks to cut 10 percent of its workforce, or about 5,000 jobs, to trim costs. The labor plan has met with uproar in Israel, where the world’s largest generic-drug maker has benefited from the biggest tax breaks granted to publicly traded companies.
Teva says the cuts will help it reach $2 billion in annual savings by 2017. The company is cutting costs as patents protecting its bestselling drug Copaxone expire next year, threatening to curb revenue.
Teva’s American depositary receipts fell 1.6 percent to $41.03 at the close in New York.
The letter to board members is visible in Channel 2’s report, and the text indicates that Teva’s executive committee sent it after a meeting held in Levin’s absence, Ronny Gal, a New York-based analyst at Sanford C. Bernstein & Co., wrote in a report. The tension between management and the board is “worse than we thought, but likely resolvable,” he wrote.
“A disagreement within Teva would be a material problem right now,” said Gal, who rates Teva outperform. “Management reshuffle or simply a distraction caused by infighting would mean Teva will be ineffective right when it needs maximum focus. If this disagreement lingers, we would get more concerned.”
Levin didn’t directly address his relationship with Frost in the e-mailed statement, nor whether the two men have disagreed on Teva’s tactics. The company, in a statement issued earlier today, denied there were disagreements.
“These are baseless claims,” Teva said. “The company’s management has worked to craft and execute its strategy with complete cooperation from the board of directors. All decisions made by the company’s management, led by its CEO, have been made with consultation and agreement of the board. The chairman and the CEO conduct regular work meetings and conversations, as is customary.”
Frost, 76, supports a no-compromise approach in Israel, where Teva employs more than 7,000 workers, and wants management to move ahead with the labor plan, according to the television report. Levin has taken a more conciliatory route, choosing to meet with the head of the workers’ union and to execute the cuts in coordination with the union and a government ministry, Channel 2 reported.
Frost, a U.S. billionaire health-care investor, became Teva’s largest non-institutional shareholder when he sold Ivax Corp. to Teva for $7.4 billion in 2006. After being named chairman in 2010, Frost has sought to shift the company from a focus on generic drugs to development of patented medicines. In 2012, he brought in Levin, who had overseen a string of small and mid-size deals at New York-based Bristol-Myers Squibb Co.
Frost didn’t immediately respond to a Bloomberg request for comment via multiple telephone calls and e-mails.
For Related News and Information: Teva’s Levin Vows Focused Drug Development as Patents Expire
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