Hard times for Teva Pharmaceutical

The German economic and financial monthly Manager Magazin has published a long article about the Israel-based drugmaker Teva, whose recent misadventures have made it a typical mismanagement case. Teva is headquartered half an hour’s drive from Tel Aviv, in a concrete, two-story 60’s building, and is one of the companies that Israelis respect and feel attached to the most, especially because 88% of its employees work in Israel and its board–at the moment–comprises only people from Israel. Despite this, 90% of its shares are owned by investors living outside Israel and the group is listed in Wall Street. The company has lost approximately 60% in capitalization–out of a total capitalization of $21bn–over the last 12 months, mainly due to its $35bn debt, corresponding to a debt/EBITDA ratio of 4:25. Teva’s huge debt is mainly due to the $40bn acquisition of Allergan’s generics business, performed by the former CEO Erez Vigodman, 57, which cost $40bn. Kare Schultz, 56, former manager at Lundbeck and next Teva CEO, will try to find a solution to the problem. Schultz, indeed, has recently signed a five-year contract with Teva, under which he will be head of the group and will earn a minimum of $100m. The new CEO will have to face the drop in blockbuster Copaxone’s revenues: the drug generates $4.2bn, which correspond to 20% of Teva’s total revenues. Additionally, he will have to find a solution to the decline in generics sales in the US, the first market in the world for the pharmaceutical industry. The group is currently carrying out an intensive divestiture plan, expected to fetch a minimum of $5bn, providing some relief to its finances. According to the article, Teva’s main problems are excessive patriotism and the lack of international managers.
(Source Manager Magazin)