Teva Director Hurvitz Supports Deals, Says Cost Cuts Necessary
Teva Pharmaceutical Industries Ltd. (TEVA) may be prepared to speed up the pace of acquisitions next year as Chief Executive Officer Jeremy Levin cuts costs and sets up a new management team, board member Chaim Hurvitz said.
“Now that we all feel more comfortable with what’s cooking in the kitchen, there could be a few deals in the hundreds-of-millions of dollars to 1-billion-dollar range,” Hurvitz, who previously served as Teva’s international group president said in an telephone interview. “Either you buy a company with a specific geographic presence to enhance your footprint or you buy a company with a specific product line.”
Since taking the helm of the world’s largest generic-drug maker last year, Levin has pledged to focus the company in key areas of expertise such as neurology and respiratory treatments. He has made several changes to management, including the appointment of Americas head Allan Oberman and Chief Scientific Officer Michael Hayden.
While Petach Tikva, Israel-based Teva builds up its pipeline, Levin is under pressure to make up for an expected loss to sales of bestseller Copaxone, as the multiple sclerosis injection faces competition from oral medicines such as Biogen Idec Inc.’s (BIIB) Tecfidera and patent expiration next year. To offset the potential decline in profits, Levin has embarked on the company’s largest cost-cut program to date, promising to eliminate 10 percent of Teva’s jobs to save $2 billion.
The job cuts have sparked outrage in Israel, where operations have been buttressed by the Encouragement of Capital Investments Law, which provides Teva and others, such as Intel Corp., with tax breaks for investing in certain areas. Several political figures, including Finance Minister Yair Lapid, have said that Israel should reconsider Teva’s tax breaks following the cuts.
“As emotional as I am and as painful as it is, we have to bring shareholder value,” said Hurvitz, whose father Eli Hurvitz led Teva as CEO for 25 years. “The board and top management back up the cost savings program 100 percent. In 112 years, we never really laid off people. If we have to do it, it’s justified.”
Chaim Hurvitz now runs CH Health, a venture-capital company.
Since Levin joined Teva, the company has spent less than $1 billion in acquisitions, a shift from his predecessor Shlomo Yanai, who bought Ratiopharm GmbH, based in Ulm, Germany, for about $5 billion and spent $6.2 billion to buy Frazer, Pennsylvania-based Cephalon Inc.
“In Michael’s first year we needed to focus first on internal capabilities,” said Hurvitz, referring to the R&D head who joined shortly after Levin last year. “A few deals in the scales of hundreds of millions can definitely be expected in the next few years. Deals that build up our product line or expand our geographic reach. It’s easy and we know how to integrate them. I’m for it.”
The company offered more than $700 million for San Diego, California-based Receptos Inc. (RCPT), according to Calcalist newspaper today. A Teva spokesman, commenting on the Calcalist story by a text message, said the company doesn’t comment on rumors in the market.
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