Why Exiting the Generics Biz or a Break Up Could Save Troubled Teva

Published: Sep 20, 2017

Why Exiting the Generics Biz or a Break Up Could Save Troubled Teva September 20, 2017
By Alex Keown, BioSpace.com Breaking News Staff

TEL AVIV, Israel – Should Teva dump its generics drug focus? That’s what activist shareholder and tech entrepreneur Benny Landa believes.

In an interview with The Times of Israel, Landa said the company known as the world’s largest generics manufacturer should “ditch” the generics business and focus on specialty medicines. Landa told the Times that generics should not be a focus of Teva’s core business. He said ridding itself of that would make the company healthier in the long run.

Earlier this year, Teva reported “accelerated price erosion and decreased volume” in its U.S. generics business, which was primarily the result of increased competition. That kind of loss is what has Landa concerned. Landa said the generics business has been on a “steady decline” over the past 10 years. Landa said Teva cannot compete with generic drugmakers in countries like India, Mexico and Malaysia. He said those countries have “relatively cheap labor” and are more capable of “mass producing generic drugs more competitively than Teva.” The clear path forward is specialty drugs, he added.

Landa may be one of the largest individual shareholders of Teva. The Times speculated he holds “tens of millions of dollars’-worth of Teva shares.” How much he holds though is not quite known. During his interview with the Times, Landa would not confirm how many shares he has, but he did say he owns enough shares that the board of directors will listen to his opinion.

Unlike many activist investors though, Landa told the Times he was not looking to restructure the company, but to offer his suggestions on shoring up its financial future.

“My purpose is to try to influence the course Teva takes, because for me Teva is Israel… Teva is Israel’s only truly global company, not just because of its size but because it is the only large Israeli company that develops, manufactures and markets globally. So Teva is a symbol of Israel and it is vital that Teva succeed. That is my interest in Teva,” Landa said in his interview with the Times.

Landa hopes his opinion will be heard by incoming Chief Executive Officer Kåre Schultz, who was hired earlier this month. Landa said Schultz will have a job before him as he develops a profitable strategy for the company.

And Schultz has several challenges ahead of him. The company has been selling assets in order to pay down debt of between $30 and $35 billion – debt related to Teva’s 2015 $40.5 billion acquisition of Actavis , Allergan ’s generics division. Teva sold its branded contraceptive line Paragard, a product within its global Women’s Health business, to CooperSurgical for $1.1 billion. The company has also been looking to unload several non-core businesses, including its Medis and respiratory units.

Teva has struggled for some time due to declining revenues from its branded medicines business, particularly in the United States. Earlier this summer, Teva said it planned to terminate thousands of employees and shutter several manufacturing facilities as it deals with its financial issues. That news came on the heels of disappointing quarterly reports where the company posted an 18.4 percent drop in earnings for the quarter. In that announcement, Teva said it may look for partnerships to fund its pipeline development and sell off some assets to pay down its debt.

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