Teva Pharmaceutical Industries Ltd. said its Chief Executive Officer Erez Vigodman will step down, three years after he took his post in an effort to turn around the fortunes of the drugmaker.
Teva, the world’s largest maker of generic drugs, said Yitzhak Peterburg, who has served as chairman of the Teva board of directors since January 2015, was appointed interim president and CEO, effective immediately. Peterburg will step down as chairman, Teva said.
The announcement follows a “mutual agreement” between the board of Teva and Vigodman that he would step down. His position on the Teva board of directors has also ended, Teva said in a statement Monday night.
“I believe that now is the right time for me to step down,” said Vigodman in the statement. “It has been a privilege to lead Teva, and I am proud of all we have accomplished. I am confident that the company’s future is bright.”
Vigodman’s departure comes after the Israeli company, which has been a source of national pride and a fixture of local investment plans, has been dogged by a series of missteps, including a $40 billion acquisition of drug company Actavis Generics and an inability to fend off competition for its blockbuster medication for multiple sclerosis, Copaxone. At the end of last month Teva lost a court case in which it sought to block generic versions of the drug from entering the market.
“The resignation of Vigodman does not come as a complete surprise after a rough 2016 in which Teva ran into a difficult market environment coupled with key strategic mistakes,” said Saar Golan, an equity trader at the Tel Aviv based Bank of Jerusalem Ltd. The company “has churned through two failed CEOs since 2012 and investors want the right decision about the new one, and not necessarily a fast decision,” he said.
Vigodman, 57, was hired in 2014 to replace CEO Jeremy Levine, who lasted less than two years at the job before leaving amid disagreements with the board. The company’s shares have dropped some 40 percent in the past 12 months.They declined 1.5% in the US on Monday in after-market trading as the news of Vigodman’s resignation was released. Teva shares traded on the Tel Aviv Stock Exchange slid 1.7% on Tuesday as of 1:29 p.m. in Tel Aviv.
New CEO will have a ‘daunting task’
Teva said that in accordance with Israeli law, Peterburg has stepped down from his role as chairman so he can serve as the interim CEO. Teva’s board of directors “is undertaking a search to identify a permanent chief executive officer with the assistance of a search firm,” it said in a statement.
Peterburg said the company would focus on “realizing the cost synergies and strategic benefits of the Actavis Generics acquisition,” and that he would conduct a “thorough review of the business,” according to the statement
Investors and analysts are concerned that the company, in which almost every household in Israel has a stake through pensions and savings plans, is zigzagging ineffectively in its efforts to find an alternative to its blockbuster proprietary multiple sclerosis drug Copaxone, which is being threatened by competition as its patents expire.
Vigodman, considered a wunderkind of the Israeli industry who led Teva’s share to its August 2015 high, came under fire for taking the company on what has turned out to be an expensive acquisition spree, in a effort to maintain its edge in the generics market and generate an alternative to Copaxone revenues.
“The new CEO of Teva will face a daunting task,” said Gilad Alper, head of foreign equity research at Excellence Nessuah Ltd., an Israeli investment bank. “The company can no longer afford significant acquisitions and the fate of Copaxone will continue to be decided by US courts and by the FDA (US Food and Drug Administration) and is essentially beyond the control of Teva.”
Launched in 1996 by Teva as its first major brand-name drug, Copaxone is still the leading medication for multiple sclerosis patients. The drug’s patents are now expiring and in 2015 competitors started marketing a generic version of this drug. More may enter the fray as early as this year, after the court ruled against Teva last month. The introduction of two Copaxone generic versions in the U.S. could cut as much as $1.2 billion in revenue in 2017, Teva estimated last month.
In 2016 Teva completed the acquisition of Actavis Generics, the generics arm of rival Allergan, in a $40 billion deal. Unfortunately, soon after the acquisition, the generics market changed: US regulators suddenly and unexpectedly speeded up the approval process for generic drugs, a move that created more competition and cut prices.
The most important task for the new CEO, Alper said, would be to ensure that the melding of the activities of Actavis with Teva “is done as well as possible. This is now the major risk facing the company.”
The Actavis deal is expected to generate some $1.4 billion in deal-related synergies and tax savings by the end of 2019, Teva has said.
Prior to rejoining Teva’s board of directors in 2012 — he had also served on it from 2009 to July 2010 — Peterburg led the company’s innovative R&D efforts. Previously, he served as president and CEO of cellular provider Cellcom Israel Ltd.
Teva said its board has elected board member Sol Barer as chairman.
Barer “brings deep knowledge of the global pharmaceutical industry,” the statement said. He was a founder of the biotechnology group at Celanese Corporation, later spun off as Celgene Corporation, where he served in top leadership roles from 1987 to 2011, including as chairman and CEO from 2007 to 2010.
Barer said Teva would conduct a “comprehensive search to identify the best person to lead the company for years to come.”