Dive Brief:
- Teva Pharmaceutical Industries emphasized its restructuring into "a new global organizational structure and chain of command that reduces risks" during its third quarter earnings call Nov. 15. CEO Erez Vigodman said a "culture of compliance" now underpins every business decision.
- Teva revealed it has set aside about $520 million to cover expected settlements for potential violations of foreign corruption laws stemming from investigations by both the U.S. Department of Justice and Securities and Exchange Commission. Vigodman said this situation has accelerated the pace of Teva's organizational changes. Separately, he stressed that, with respect to DOJ's sweeping probe into price collusion in the U.S. generics drug industry, Teva is unaware of any issues that would prove problematic to the company.
- The Israeli generic drug giant noted that a significant amount of capital was used in the past year to acquire assets and partner with other companies. Now, Teva is "focusing all of its energy on organic growth," Vigodman said. The company had third-quarter total revenues of $5.6 billion.
Dive Insight:
Restructuring and creating a compliant corporate culture were dominant themes during Teva's discussion of operations. CEO Vigodman described 2016 as a year of transition for Teva, highlighted by the closing in August of its purchase of Actavis Generics from Allergan for $40.5 billion. He said it also has been a challenging year for Teva and the entire industry.
Specifically, Vigodman cited Teva's settlement discussions with DOJ and the SEC to resolve the previously disclosed Foreign Corrupt Practices Act (FCPA) investigation, arising from Teva's conduct in Russia, Mexico and Ukraine from 2007 through 2013.
Teva, spurred on by the FCPA probe, accelerated the pace of operational changes, transforming its governance program and processes on every level, Vigodman said. Its actions included terminating problematic business relationships with third-parties, overhauling the management of several subsidiaries, ceasing operation in several countries, and disbanding an entire business unit.
"In order to institute a culture of compliance throughout the organization, we have also [briefed] tens of thousands of employees on compliance measure protocols and best practices," the exec said. "Since becoming Teva CEO in 2014, I have made compliance a top priority in everything we do." He described Teva's compliance effort as "serious, rigorous and comprehensive," and designed to protect the company and its subsidiaries against future violations.
"Today, Teva is a compliance culture that begins with a strong tone at the top, including our executive regional and local management, a culture of compliance that underpins every single business decision that Teva makes," Vigodman added.