CEO of Teva, Kare Shultz.
(photo credit: PR)
Israeli pharmaceutical giant Teva announced Monday that Kare Schultz would take the helm of the once-dominant yet now struggling drug company, possibly reviving pressure to split the firm into two – one being its generic drug business and the other its patented specialty medicines.
Schultz, 56, has since 2015 been the CEO of H. Lundbeck A/S, a Danish-based pharmaceutical firm. Teva said that Schultz would relocate to Israel with his family to work at the company’s Petah Tikva headquarters. Teva has lacked a leader since February, when former CEO Erez Vigodman was shown the door. In the interim, CEO Yitzhak Petersburg has been running daily operations.
The appointment of a non-Israeli – and the first non-Jew – to the helm of one of Israel’s most successful companies confirms reports that shareholders are trying to force Teva to shed its Israeli leadership and become more internationally-oriented.
The news led to Teva stocks rising by nearly 17% on the Tel Aviv Stock Exchange as of closing on Monday, as traders hailed the changes in store. The company’s shares have fallen by almost 50% since the beginning of August as the company has slashed its dividend.
“What I heard was that investors were divided on who the CEO should be,” said pharmaceutical analyst Sabina Levy of Leader Capital Markets. “Some of them felt like they should recruit someone from the innovative and specialty [medicine] field and some felt that they should stick to the generic [drug] side.” Schultz is more experienced with brand-name patented pharmaceuticals, Levy said, a sign that Teva may be trying to move away from its status as the world’s largest maker of generic drugs.
The company has struggled since taking out loans to buy a generic drugs division of Allergen
for $40 billion last year, as the price of generic drugs has plummeted due to rising competition from the Far East and less stringent US Food & Drug Administration regulations.
Market pressures and shareholder pleas may force Schultz’s hand in separating Teva into two entities, one focused on brand-name medicine and the other on copy-cat drugs.
“There’s a middle-chance probability that Teva could break up in two companies, one generic and one specialty. I think the market expects them to do so,” Levy said, clarifying that the company split is unlikely at least for the next year or two. Around 60% of Teva’s profit comes from the specialty business with drugs such as Copaxone – which treats multiple sclerosis – and continues to draw billions in revenue annually.
A veteran of the healthcare industry, Schultz has spent nearly 30 years working for global pharmaceutical companies. He spent most of that time at Novo Nordisk, where he was tasked with expanding the company into the US and China. He also worked at McKinsey. When Schultz ascended to the helm of Lundbeck, one of his first acts on the job was to lay-off 1,000 workers, or about 17% of the workforce, according to Bloomberg. Given recent announced layoffs
at Teva – some 230 Israelis and 7,000 elsewhere may lose their jobs by the end of the year – it is unclear if Schultz will be tasked with making further cuts. The company employs some 6,800 Israelis at its headquarters in Petah Tikva and at two plants in Kfar Saba and Neot Hovav.
With no start date scheduled for Schultz, CEO Yitzhak Petersburg will continue to serve in an interim capacity.
“It is an honor for me to join Teva, an iconic company that I have admired throughout my career... What distinguishes it from other companies is its unique commitment to continued global expansion,” Schultz said in a press release. Schultz holds a master’s degree in economics from the University of Copenhagen.
While Teva garnered $22 billion in sales last year, it was recently dethroned as Israel’s largest company by market value. The company also faces some $30 billion in debt. It is unclear if Schultz can help resolve regulatory and competitive challenges facing the company. “After what we saw in the past few years in Teva, the instability in the management, the instability in the strategy, the markets will seek something more fundamental, more stability. I still have questions for the long-term of Teva and whether the new CEO will be able to make a turnaround,” Levy said.