Published: Wed, February 08, 2017
Economy | By Melissa Porter

Teva Pharmaceuticals CEO Vigodman Is Stepping Down

Teva Pharmaceuticals CEO Vigodman Is Stepping Down

The task is clear, if not easy.

Vigodman is also standing down from Teva's board of directors - effective immediately - and will be replaced on an interim basis by Teva's chairman Yitzhak Peterburg, formerly head of branded products at the company, while the search for a permanent CEO goes on. In after-hours trading late Monday, the announcement was greeted with further declines in the company's shares, with Teva stock declining 1 percent, to $34 on the New York Stock Exchange.

In a statement, Vigodman said that he "believes that now is the right time for me to step down".

"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.

Bernstein analyst Ronny Gal, in a video released to clients, called Peterburg "a good caretaker CEO, but clearly not a candidate to run the company long term".

A string of questionable and costly acquisitions, along with delayed drug launches, has prompted calls for a management overhaul to lead sweeping structural changes - such as a spin off of its branded drugs businesses and an increased pipeline - to restore investor confidence. Nevertheless, leverage will likely limit how much change TEVA can embark on given its 3.5x target by end of 2017 (which is end of 2018 in RBC's model reflecting generic 3TW Copaxone). The drug's patents are now expiring and in 2015 competitors started marketing a generic version of this drug. Although Teva plans to appeal, the decision could expose Copaxone to stiff generic competition.

Recent challenges include a US court last week finding patents invalid on Teva's most important branded product, the multiple sclerosis treatment Copaxone, integration of the Actavis generics business it bought previous year for $40.5 billion amid criticism that it paid too much, and a USA investigation on generic drug price fixing. Unfortunately, soon after the acquisition, the generics market changed: United States regulators suddenly and unexpectedly speeded up the approval process for generic drugs, a move that created more competition and cut prices. For perspective, management had previously stated that it expected to wring out more than $1.4 billion in annual cost savings.

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.

Barer "brings deep knowledge of the global pharmaceutical industry", the statement said. However, he will now let go of this position to serve as the interim CEO, in accordance with Israeli law.

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