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Last updated: October 30, 2013 11:42 am
The head of the world’s largest generic drugs company is to step down, less than two years after taking the job in an effort to turn round the company.
The generic drugmaker had in recent weeks been the focus of controversy in Israel over plans to lay off hundreds of workers in the face of generous tax breaks it enjoys.
The company, founded in 1901 and seen as a national industrial champion, said it would sack 5,000 employees worldwide, about a tenth of its workforce, to cut costs and restructure its operations.
Teva is seen as a national industrial champion in a country with few large multinationals. It is Israel’s largest company measured by market capitalisation, with annual revenues of about $20bn.
The job losses comes at a time of fierce debate in Israel over the responsibilities of big business in areas such as tax and employment.
The company initially said it planned to cut about 800 Israeli jobs, but after an outcry from politicians and the Histadrut trade union, Mr Levin agreed to co-ordinate any reductions with the union and the state.
Shelly Yachimovich, leader of the leftwing Labour party, accused the company of having “grossly violated its contract with the state”.
There had also been longer running shareholder frustration at efforts by the company to develop a new strategy and products, including high-margin patented drugs to replace Copaxone, its multiple sclerosis patent, which will soon be vulnerable to competition.
Israeli television reported a leaked memo calling on the Teva board to interfere less in day-to-day management, hinting at discord over cost-cutting.
Bernstein said in a research note on Monday that this indicated tensions between Phillip Frost, the chairman seeking aggressive cost-cutting, and a more cautious attitude by management including Mr Levin, notably over reductions in Israel.
The Bernstein note cautioned: “The leak itself is a major concern. If Teva is unable to keep this level of information from the media, how can they expect to keep business plans hidden from rivals?”
Ronny Gal, an analyst at Bernstein, warned that Teva’s stock would “justifiably” fall given the uncertainties triggered by Mr Levin’s departure. He highlighted the risks that senior executives recruited by Mr Levin might leave and tensions over future governance of the company.
Phillip Frost, chairman and Teva’s largest shareholder, said that Mr Levin and the board had been “fully aligned on the strategy and targets of the company”, but had differences on how to carry out their plans.
The differences were over nuances rather than disagreement over the strategy itself. It just got to the point where the slight differences couldn’t be resolved, and we thought it better to part ways
- Phillip Frost, chairman and Teva’s largest shareholder
“The differences were over nuances rather than disagreement over the strategy itself. It just got to the point where the slight differences couldn’t be resolved, and we thought it better to part ways,” he said.
Teva said it was appointing Eyal Desheh, executive vice-president and chief financial officer, to replace Mr Levin temporarily while searching for a replacement.
Mr Desheh said that the company would continue implementing its strategic plan, and reaffirmed its full-year guidance. The company is due to report its third-quarter earnings on Thursday.
Some analysts expressed scepticism over Teva’s ability to hire a new chief executive, given the friction between Mr Levin and the board and the signal that this sent.
Mr Frost dismissed this, saying: “I suspect that we will have many, many candidates. I know that we will.”
He said that he was not contemplating taking the CEO job himself, saying it would be for someone younger who was willing to spend most of their time in Israel.
Teva shares were 0.48 per cent lower at Shk14,410 after the news.
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