Teva: in need of a shot; Generic drugmaker is in need of a complete overhaul

January 8, 2014 Leave a comment

January 6, 2014 4:02 pm

Teva: in need of a shot

Generic drugmaker is in need of a complete overhaul

The board of Teva Pharmaceuticals is a brains trust of scientific and medical knowledge. Shame that so few of its 16 members know anything about running a company. It has taken a shareholder – the Israeli entrepreneur Benny Landa – to point out the obvious: that the world’s largest generic drugmaker by revenue needs more than a new chief executive. It needs a new (or at least smaller) board, a new (or at least clearer) strategy, and a new chairman.The speculation is that Teva will choose Erez Vigodman, boss of agri-chemicals group Makhteshim-Agan, to replace Jeremy Levin. Given the circumstances of Mr Levin’s ouster in October, in a dispute with the board over strategy, it was going to be tough to attract another pharma industry veteran like Mr Levin.

Mr Vigodman is on Teva’s board, and is no novice. But the company’s problems – a bloated cost base, the possibility of imminent patent expiry for Copaxone, the multiple sclerosis drug that accounts for half of profits, and a dysfunctional board chaired by the imperious Phillip Frost – require early and radical action.

An early sign that board changes are afoot is the appointment of Amir Elstein, who heads the Israel Corpconglomerate, as vice-chairman. Mr Elstein must fight to ensure that the new chief executive gets a board seat. The fact that Mr Levin did not have one was a certain indicator that he was never really in charge.

There is a lot at Teva to build on, even without Copaxone. The patent expiry is largely priced in. Teva’s shares trade on just 8.5 times 2014 earnings, well below the sector average, and have fallen 40 per cent since early 2010, coinciding with Mr Frost’s tenure. A new chief executive could start to recover this lost value – but only with the full support of the Teva board. A brains trust with no idea what to do is worse than having no brains at all.

Filed under Health

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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