Teva Picks Vigodman as CEO Amid Restructuring EffortsDavid Wainer
Teva Pharmaceutical Industries Ltd. chose board member Erez Vigodman to run the world’s biggest generic-drug maker, seeking to revive earnings growth and the stock after the previous CEO left in a dispute with the board.
Vigodman, 54, will become president and chief executive officer Feb. 11, the Petach Tikva, Israel-based company said in a statement today. He replaces Jeremy Levin, who left in October amid differences over how to overhaul Teva as patents expire on its top-selling product, the Copaxone multiple sclerosis drug.
Vigodman is credited with boosting growth at two of Israel’s biggest companies, including current employer Makhteshim-Agan Industries Ltd., the world’s largest maker of generic agrochemicals. Now he gets a shot at rescuing Israel’s biggest company after its shares slumped and investors speculated about a possible breakup. While Levin was a drug-company veteran, Vigodman will need to win over investors skeptical of his lack of industry experience.
“The first thing he needs to do -- because he lacks knowledge of the pharma industry -- is surround himself with management that has experience in turning around pharma companies,” said Ori Hershkovitz, a partner at Sphera Funds Management Ltd., which owns Teva shares.
Teva’s American depositary receipts rose 1.3 percent to $41.57 at 4:15 p.m in New York. They had declined 36 percent from their peak in 2010 as of yesterday’s close, compared with a 55 percent increase for the Bloomberg Europe Pharmaceutical Index. Teva’s shares rose 0.4 percent at the close of trading today in Tel Aviv.
Acting CEO Eyal Desheh, who had also been a candidate for the job, will return to his previous job as chief financial officer. Teva declined to make Vigodman available for an interview today and said it hadn’t scheduled a conference call for investors and analysts.
Levin announced Oct. 10 that Teva would eliminate about 5,000 jobs, or 10 percent of the workforce, in a bid to boost earnings. By the end of the month, he was out, after disagreements with Chairman Phillip Frost.
Levin and the board agreed on strategy, but disagreed on how to carry it out, Frost said at the time. The ouster raised concern among some investors that the board was meddling too much in company operations, and that Teva would struggle to find a qualified replacement at a crucial time for the business.
Teva joins companies from AstraZeneca Plc to Forest Laboratories Inc. in naming new CEOs as the industry seeks answers to slower growth. While Teva’s story is unique in that it blossomed as a generic company and was propelled into branded drugs when it discovered Copaxone in the 1990s, its struggle to find new blockbuster drugs is plaguing much of the industry. That has led companies such as U.S.-based Merck & Co. to cut jobs in an effort to boost profitability.
Copaxone, which analysts say accounts for at least 50 percent of profit, faces possible generic competition this year. At the same time, analysts predict sales of the injected treatment will decline as patients switch to newer oral drugs for MS such as Biogen Idec Inc.’s Tecfidera.
“As a member of the Teva board since 2009, Erez has a deep understanding of the company and the industry in which it operates, putting him in a strong position to hit the ground running and deliver value for shareholders,” Frost said in today’s statement.
Vigodman, among Israel’s highest-paid CEOs, turned around agrochemicals maker Makhteshim in the past four years, and before that boosted growth at food company Strauss Group Ltd. As CEO of Strauss, he oversaw a global expansion which included buying coffee makers in Brazil and a prepared-salad company in the U.S. Those deals propelled Strauss to become Israel’s largest food maker and the sixth-biggest buyer of green coffee in the world.
He left Strauss in 2009 to take over Makhteshim, where he will remain CEO until Feb. 6, as competition over cheap generics produced in Asia intensified and a global economic downturn crimped farmers’ demand for agricultural products. Identifying production in China as a prerequisite for growth, he presided over the company’s 2010 merger with China National Chemical Corp., allowing the producer of generic pesticides to grow in previously untapped markets.
After Levin’s departure, shareholder Benny Landa called on directors to change corporate governance rules to allow for a leaner board with more global pharmaceutical experience. He also asked for the board to change rules requiring a supermajority of voters to fire directors and to empower the new CEO with a seat on the board.
Teva’s new Vice Chairman Amir Elstein agreed to propose some changes to the board, letters from Landa reviewed by Bloomberg News show.
Levin took over after his predecessors spent more than $30 billion on acquisitions in the past decade while failing to wean Teva off its dependence on Copaxone. Saddled with one of the industry’s highest debt loads, Levin opted to boost profitability by trimming costs and building the company’s branded-drug pipeline through small deals and partnerships in areas such as respiratory and neurology treatments.
Vigodman should reduce Teva’s debt by selling assets while looking for acquisitions that will boost earnings, said Hershkovitz, the fund manager.