Billionaire Teva Chairman May Retire by Year’s EndDavid Wainer
Teva Pharmaceutical Industries Ltd. Chairman Phillip Frost may retire before his board term ends next year if he can deliver on pledges to overhaul governance and find an adequate successor.
“I might not want to go that far,” Frost, 77, said of his current term by telephone from Miami yesterday. “I might want to retire sooner. Practically speaking, I’m at the age where it doesn’t really make a lot of sense to go beyond that, but that might already be longer than what I want.”
Billionaire Frost oversaw Teva’s transition from a producer of mainly copycat treatments to innovations in areas such as neurology and respiratory treatments. The Petach Tikva, Israel-based company has been under pressure to improve governance after former Chief Executive Officer Jeremy Levin’s abrupt departure last year fueled investors’ concerns that the board was rife with internal feuds and meddling in operations.
“It’s important to me that I stay as long as it feels it’s the right thing to do,” Frost said. “I’m not putting any timing on it.”
Investors led by Benny Landa want a board populated with industry veterans to support new Chief Executive Officer Erez Vigodman as Teva cuts costs amid possible generic competition this year to multiple sclerosis-treatment Copaxone, the company’s best-selling product.
Teva’s American depositary receipts jumped as much as 5.4 percent, the biggest intraday gain since Jan. 14, and traded 2.9 percent higher at 10:51 a.m. in New York. The shares closed 2.4 percent higher at 159.90 shekels in Tel Aviv.
Last year, Landa urged institutional investors to call for a special meeting to propose governance changes. He sought a reduction in the size of the 16-member board, the addition of pharmaceutical industry veterans as directors and changes to the company’s articles of association to make it easier to oust directors and to amend the articles.
Teva will shrink the size of its board and work to boost the proportion of its directors with global pharmaceutical experience, Frost said in January. The company had said that newly appointed Vigodman would remain a board member.
“Governance issues have been an interest of mine for some time,” Frost said in the interview yesterday. “The fact that recent events have highlighted governance issues is actually fine with me. The board is already far along the way to considering governance policy that will suit the company’s interests.”
The board is weighing the reduction of its size by three to four directors as five members’ terms end this year, according to two people familiar with the matter. The board may also appoint one director with pharma experience this year, said the people, who asked not to be identified because the information is confidential.
As Frost mulls stepping down, the question of who will replace him looms.
“There are many good people on the board,” Frost said, when asked if candidates could come from Teva. “The board will want to choose the person who they think is best suited for the job at that moment. It wouldn’t want to limit itself.”
Among Teva directors who have come forward as possible successors is Dan Propper, the two people said. Propper, 72, served as CEO of Osem Investments Ltd. for 25 years and president of the Manufacturers Association of Israel for six. Propper now heads the Corporate Governance and Nominating Committee that will choose how to trim down the board and bring in new members.
Propper wasn’t available for comment, his office said. A Teva spokesman said he wasn’t immediately able to comment on planned board changes.
Frost, whose first investment was an Everglades fish farm, made his fortune by selling drug ventures to pharmaceutical companies. Frost turned a 1972 $50,000 investment in Key Pharmaceuticals Inc. into a $825 million sale to Schering-Plough Corp. in 1986. He followed that with the sale of generic-drug maker Ivax Corp. to Teva for $7.4 billion in 2006 and was elected chairman of Teva in 2010.
As Teva’s shares slid in 2012, investors criticized Teva’s board for boosting director compensation and giving Frost a 74 percent raise to $900,000 while paying for his private airplane expenses.
“We will see all kinds of positive activities sooner, rather than later, and then I’ll be happy,” Frost said.