Teva Nears Collapse
On October 30, 2013, Teva Pharmaceutical Industries,+ Israel’s largest company and the world’s largest generic drugs++ company, announced that President and CEO Jeremy Levin is leaving it. Beyond ongoing operative difficulties, Teva is soon to lose its patent on Copaxone. The ship’s captain abandoned Israel’s industrial flagship with a huge hole in the revenues compartment, before an almost unavoidable sinking in the salty waters of the Dead Sea.
One Luxury Room in a Third Class Ship
Tel Aviv Stock Exchange is led by two companies, Teva and Israel Chemicals. Together they hold roughly 25% of the market. Teva’s revenue in 2012 was over $20 billion, almost 10% of the country’s GDP.
Teva started its enrichment by selling “sulfa”* (a predecessor of antibiotics) to African countries long after this poison was prohibited elsewhere (it is still legal in inhumane Bolivia).
However, its current main product is Copaxone, the commercial name of glatiramer acetate, a drug used for multiple sclerosis developed in the Weizmann Institute of Science. Teva sells $4 billion per year of Copaxone. This product alone equals almost 2% of Israel’s yearly revenue.
However, the patent Teva holds is about to expire; this will substantially hit Teva’s profits. A patent owned on Azilect is not very profitable. The remnant of the sales is within the generic drugs’ realm of infinite boredom; it is like selling used cars. Its generic drugs business cannot justify the company’s current size.
On October 10, Jeremy Levin, Teva’s President and CEO, announced that 800 workers would be fired in Israel and another 4,200 in its abroad installations. This is well over 10% of the company’s core workers in Israel. Most of the workers in fully owned subsidiaries won’t suffer from the move. Expectedly, the company shares in Wall Street rose after the announcement.
The company is highly decentralized and has no significant R&D; it hires universities as research centers or buys the results of their research. I was in the Weizmann Institute in the days the company purchased the Copaxone patent. The researchers complained of having been robbed; Teva kept telling them about the high marketing costs and left them almost with nothing. A similar fate is faced by those working directly in the company.
The company hopes to achieve $2 billion savings until 2017. This won’t compensate for the losses after the Copaxone patent expires.
Reactions in Israel were less enthusiastic. Since the reform was announced, hardly a day passes without the company being vilified by everybody with access to the media. Most of the fired workers won’t have any chance to find a job, the pharma market in Israel is tiny, with one titanic company dominating it; and the Titanic is sinking.
It is hard to blame Mr. Levin for Teva’s probable sinking; a secondary generic drugs producer rose into prominence for a few years thanks to a patent almost robbed from the researchers. Since then, the suddenly rich Teva did nothing to upgrade its products portfolio, failing to shift it towards brand drugs.
He filled the post just a couple of years, which is not enough for developing new drugs. Yet, he is to be blamed for being the captain that abandoned its Titanic, without providing for his sailors. Yet, that’s the Israeli way.
The party was bound to end. The Titanic will become again the rusty rowboat it used to be.
“Since I joined Teva, we have made tremendous progress in setting a new course for the company, I wish the company and its people, whom I respect greatly, every success. I look forward to pursuing new opportunities where I can continue to apply my experience and contribute to the evolution of the global pharmaceutical industry,” Levin said while publicly announcing his resignation.
Hebrew media doesn’t get tired now of mentioning that he is a South African and about to travel to that country to visit his daughters, openly implying that he is a traitor. Trading in shares of Teva was immediately halted.
American Phillip Frost, Chairman of the Board of Teva, dryly commented “In recent weeks we didn’t agree on Teva’s strategy implementation.”
Hundreds of workers get ready to drink salty water while Israel’s flagship is sinking.
TAP – Is this an IBM/Bill Gates shareholder rip-off, where a very strong business is allowed to crash while an unknown business owned by a mega-wealthy family member spirals upwards to replace it?