One week later, CEO Erez Vigodman resigned, effective immediately. Chairman Yitzhak Peterberg was installed as interim CEO, while former Celgene(CELG) CEO Sol Barer became Chairman(Fun fact: Celgene was a spinoff of Celanese(CE) in 1986). Teva stock has plummeted to its lowest level since 2006 and the company’s debt level now exceeds its market cap. Despite these and other troubles, Bernstein maintains an outperform rating on the stock with a $42 price target.
Strategic Review Underway
New interim management will be conducting a strategic review of the company
Dr. Yitzhak Peterburg said, “The Company is focusing on executing its strategic priorities to transform Teva, with immediate focus on realizing the cost synergies and strategic benefits of the Actavis Generics acquisition. I look forward to working with the entire Teva team to conduct a thorough review of the business to find additional opportunities to enhance value for shareholders. Teva has a deep bench of talented leaders and today’s announcement has no impact on our ability to execute going forward. With the strength of our generics pipeline, unique R&D capabilities and unparalleled footprint, coupled with our existing assets and growing pipeline in specialty medicines, I believe in Teva and the Company’s long-term growth prospects.”
Dr. Barer said, “We are grateful to Yitzhak for taking on the role of interim CEO. Teva’s Board of Directors, with its decades of collective pharmaceutical industry experience, will continue to play an active role in driving the Company’s strategy, and I look forward to working with the management team to execute on the value creation opportunities ahead. We intend to conduct a comprehensive search to identify the best person to lead the Company for years to come. On behalf of the Board, I want to thank Erez for his many contributions to Teva over the years and wish him well in the future.”
Shareholders urge spinoff
A growing chorus of shareholders believes the answer to Teva’s problems lies in splitting its generic pharmaceuticals and branded pharmaceuticals unto separate companies. Andy Summers of Janus Capital Management suggests it, and a survey performed by Evercore ISI found that more than half supported such a transaction.
[Andy] Summers of Janus said he’d like to see Teva split in half, into separate generics and branded businesses. That sentiment was echoed by others. In a survey of clients, more than half supported Teva splitting itself in half, according to Umer Raffat, an analyst with Evercore ISI.
This Fortune article informs us of additional interest in a spinoff
RBC Capital Markets analyst Randall Stanicky said it is unclear what this entails and whether asset sales could be a part of this.
Some investors have told Reuters they would like to see Teva spin off its specialty drug business.
“We find it interesting that Teva would pursue a review before naming a permanent CEO, which may be suggestive of further close involvement of the board and broader management team,” Stanicky said.
Benny Landa, an activist shareholder who founded a digital printing program, has also suggested a spinoff
Landa adds, “I hope that this vision includes splitting Teva into two companies. When you look at the successful companies in the world, the key word is focus. Companies split so that each company after the split will be able to focus on its sector. Teva should be split into a generics company and a separate branded drug company. Teva has recently focused on generics to the extent that it lost direction, and didn’t realize that it should invest in the innovative field for the sake of its future. These are actually two sectors with almost no connection between them.”
The sheer number of people calling for a spinoff may force one to happen, but either way, it will be interesting to see how and if the once great company can regain its footing.
Disclosure: The author holds no shares in any stock mentioned
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