Teva Picks Lundbeck's Schultz to Revive Israeli DrugmakerBy
Shares jump by most in about 10 months in Tel Aviv trading
Schultz left Novo Nordisk after being passed over for CEO role
Teva Pharmaceutical Industries Ltd. named H. Lundbeck A/S’s Kaare Schultz as its new chief executive officer, ending a seven-month search for a new leader to revive sales and reduce debt at the world’s largest maker of generic drugs.
Schultz, 56, will move to Israel and be based at Teva’s headquarters in Petach Tikva, the Israeli company said in a statement Monday, without proving a time-frame for the changes. He would replace Yitzhak Peterburg, who has been acting CEO since Erez Vigodman left Feb. 6 by “mutual agreement” with the board.
The new CEO is likely to face pressure from some investors to split the company into two businesses, one focusing on patented specialty medicines and the other on cheap copycat drugs. Vigodman departed after Teva shares plunged to a 12-year low amid legal challenges to the company’s best-selling patented drug and price pressures on its generics. Teva’s situation worsened in the months since, as the company lowered its profit guidance and slashed its dividend.
Shares of Teva jumped 7.8 percent to 58.75 shekels as of 10:45 a.m. in Tel Aviv trading, after earlier climbing by the most in 10 months. The company ended last week with a market value of $15.7 billion after the stock plunged 57 percent in the past year.
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“I’m the kind of person who likes challenges and am inspired by challenges. I normally thrive on that,” Schultz said in an interview with Bloomberg Television on Monday. “It’s important to work very fast and create a clear strategy and bring the company on strategic course.”
Lundbeck, which also lost its chief commercial officer on Monday, plunged about 13 percent, the most in almost a year. It traded down to 364.10 kroner as of 9:45 a.m. in Copenhagen trading. The stock has generated almost threefold returns during Schultz’s tenure as CEO.
Schultz’s appointment at Teva marks the culmination of a challenging and what at times appeared to be an impossible recruitment effort. The Israeli company’s board set out to find a candidate with prior experience at the helm of a drugmaker for its fourth CEO in less than six years as the company’s woes mounted. Finding the best person meant abandoning some of its unspoken principles: Schultz will be the first non-Jewish person to helm the company in its 116-year history.
“He has a very successful turnaround record,” Sol Barer, chairman of Teva, said in an interview on Monday. “He has a lot of credibility with stakeholders and that is something Teva needs to regain.”
Schultz joined Denmark’s Lundbeck in mid-2015 from Novo Nordisk A/S after he was passed up for the top job at the world’s biggest maker of insulin. He had spent more than 20 years climbing through the ranks there, garnering commercial and operational experience, before being promoted to chief operating officer in 2002. When he left, he was also president and first in line to succeed then-CEO Lars Rebien Sorensen.
In April 2015, Novo chose to extend Rebien Sorensen’s tenure at the helm. It also eliminated Schultz’s role as chief operating officer, effectively demoting him and prompting his departure.
Schultz “made no secret of looking forward to assuming my position,” Novo’s Rebien Sorensen said then.
When Schultz took the helm at Lundbeck, the company had been without a permanent CEO for more than five months, since Ulf Wiinberg left in November 2014 after failing to disclose a shareholding in a company in which his employer later made an investment.
As CEO of the Danish company, one of Schultz’s first steps was to cut about 1,000 jobs, or about 17 percent of the workforce. The cost-saving measure pleased investors, who’d grown concerned about its weak profitability and revenue erosion due to rising competition from copycat versions of its antidepressant Cipralex and Alzheimer’s treatment Ebixa.
He has since shepherded the launch of a number of new drugs including Trintellix and Rexulti, and overseen a $3 billion-restructuring program, according to Rebekah Harper, an analyst at Credit Suisse Group AG. He “oversaw a very successful period in Lundbeck’s history,” she wrote to clients.
Schultz, who will join Teva as “soon as practical,” has every qualification that Teva’s board was seeking, according to Barer.
“He went into Lundebck when it was in financial trouble and turned it around in two years,” Barer said. “He’s almost ideal.”
Recruitment firm Heidrick & Struggles assisted Teva with the search for the new chief, the Israeli company said in its statement.
Schultz is set to become part of a new generation of chieftains at global pharmaceutical companies: Vas Narasimhan will take the helm at Swiss giant Novartis AG on Feb. 1. Emma Walmsley, 48, in April took the helm at London-based GlaxoSmithKline Plc, becoming the only woman to run one of the world’s largest drugmakers. Over in the U.S., David Ricks, 50, became CEO of Indianapolis-based Eli Lilly & Co. on Jan. 1.
Peterburg, who stepped down as Teva chairman to become interim CEO, has put several assets up for sale, closed down factories and announced 7,000 job cuts, all in an effort to stabilize Teva’s financial footing. The Israeli drugmaker’s debt is more than $30 billion -- twice the value of the company -- and Teva warned investors that it risks breaching its debt covenants this year if it doesn’t reap the expected $2 billion from the asset sales.
Schultz will also face choices on whether to maintain Teva’s dividend or devote more money to paying down debt, as well as selecting a new chief financial officer. The company saw its debt balloon largely from the $40.5 billion acquisition last year of Allergan Plc’s generic-drug business.
— With assistance by Phil Serafino