San Francisco/Tel Aviv: After a string of setbacks, Teva Pharmaceutical Industries Ltd is facing another round of dramatic upheaval.
The world’s largest generic drugmaker on Monday said that Erez Vigodman will step down as chief executive officer and the company will “conduct a thorough review of the business.” The sudden change to the company’s leadership came just two months after the resignation of Sigurdur Olafsson, the former head of Teva’s main business unit: generic medicines.
The two men engineered Teva’s $40.5 billion purchase of Actavis Generics last year, touting it at as a move that would provide growth. Instead, there was more bad news.
The company has reduced its profit forecast twice since the Actavis acquisition, sending the stock to a 12-year low. To compound matters, Teva lost court cases that sought to stop competitors from selling cheaper versions of its lead product Copaxone, the multiple sclerosis injection that makes up about a fifth of sales. That is poised to leave chairman Yitzhak Peterburg, who takes over as interim CEO, with the challenge of turning around the Israeli drugmaker. Debt levels at Israel’s largest company now exceed its market value.
The board of directors will begin the search for a full-time replacement for Vigodman, who is stepping down immediately and will also leave the board.
‘Not good news’
“It’s certainly not good news at this point in time,” said Elizabeth Krutoholow, an analyst with Bloomberg Intelligence, who called 2017 a turning point for Petach Tikva-based Teva. “It doesn’t send a good signal about the future of the company, though a new CEO may be just what the company needs to turn things around. Vigodman hasn’t been the best dealmaker.”
“There’s a crisis of confidence around Teva right now and that stems from the lack of credibility at the top of the organization,” Andy Summers, a portfolio manager at Janus Capital Management, said in a telephone interview. He said he’d like to see the company split in half, into separate generics and branded businesses. Janus owns Teva shares.
In a survey of clients, more than half supported Teva splitting itself in half, according to Umer Raffat, an analyst with Evercore ISI said.
Vigodman’s tenure was short by most standards other than at Teva, which has cycled through several CEOs in recent years. Now 57, he was hired in 2014, replacing then-CEO Jeremy Levin, who lasted less than two years after disagreeing with the board. The company’s shares have lost 24% of their value in the last five years, while a broad index of drug stocks has almost doubled. The shares lost 11% under Vigodman.
Denise Bradley, a Teva spokeswoman, declined to comment beyond the release.
Vigodman hasn’t had an easy tenure. Teva agreed to pay a $519 million fine to US authorities after admitting to paying bribes in some countries to boost sales, and is part of a sweeping US Justice Department criminal investigation of suspected price collusion that ensnared the largest generic drugmakers.
“The entire health-care sector has faced significant headwinds, and we have not been immune,” Vigodman said on 6 January.
Peterburg, Teva’s former head of research and development, said the company will be focused on cutting costs.
He’s also facing a bounty of questions as the new head of the struggling behemoth of Israeli business. Bloomberg