Teva CEO out, board chairman steps in as interim chief
- Generics giant Teva Pharmaceutical Industries announced late Monday its chief executive Erez Vigodman would step down, to be replaced by the chairman of the board Yitzhak Peterburg on an interim basis.
- In order to comply with Israeli law, Peterburg resigned as chairman to take the interim CEO job. Current board member and former Celgene executive Sol Barer will take over leadership of the board, Teva said.
- Last year, Teva paid about $40 billion to acquire Allergan's generics unit and solidify its spot as the world's largest generic drugmaker. But lawsuits, patent troubles and regulatory headaches have bedeviled the Israeli company, dragging its stock on a steady downward slide over the last year.
Newly appointed interim CEO Peterburg will have his work cut out for him early. The drugmaker recently paid the U.S. government $520 million to resolve criminal charges over an international bribery scheme, and has been named in a sweeping federal lawsuit focusing on price-fixing for generic drugs.
Before his departure, Vigodman had pledged a "culture of compliance." Resolving the new price-fixing allegations will likely be at the top of the agenda for Peterberg and whoever is brought in as permanent CEO.
Adding to the compliance headaches, the U.S. District Court for the District of Delaware last month invalidated Teva's claims on four patents protecting the company's top-selling multiple sclerosis drug Copaxone (glatiramer). Although Teva plans to appeal, the decision could expose Copaxone to stiff generic competition.
In guidance for 2017 given last month, Teva said the potential entry of two generic copies to Copaxone in February could reduce revenues for the drug by between $1 billion and $1.2 billion — a damaging blow that would bleed through to affect earnings per share.
Copaxone sales are particularly profitable for Teva, with higher margins than its generics business and even the rest of its specialty segment outside of that drug.
Peterburg said he would begin a "thorough review of the business" to identify opportunities for improving shareholder value, although it wasn't clear what exactly that would entail.
In order to finance the Actavis deal, Teva took on a substantial amount of debt, which now will likely limit the company's flexibility. Total debt stood at $36.9 billion as of Sept. 30, with an estimated 10% of that figure classified as short term.
Teva did get a boost in recent weeks by securing U.S. approval of its Advair copy, and it hopes to win approval for its delayed Huntington's disease treatment by April. A complete response letter from the Food and Drug Administration had slowed the drug's application, but Evaluate Pharma still pegs the drug as a potential blockbuster by 2022.
Yet it remains to be seen if those positive steps will be enough to outweigh the setbacks in the minds of investors, who have pushed the company's stock down nearly 40% over the last 12 months.
Teva still plans to release its fourth quarter financial results on February 13 and more details on the transition should be forthcoming then.
- Teva Press release
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