"Laying off workers is not a solution for Teva"

Teva Photo: Reuters

A former Teva senior executive has also told "Globes" that the company's new innovative drugs will not generate the revenue to provide a solution either.

"Teva is now pinning its hopes on revenue from the innovative products in movement disorders and migraines, but I think that these products will never make back the investment in them," a former senior Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) executive speaking for the first time since the crisis began at the company told "Globes." 

While many market sources believe that acquiring the drugs for movement disorders and migraine headaches were among the few proper decisions taken during a difficult period for the company, the former executive, who knows Teva well, disagrees.

He says, "Teva tried to compete with innovative companies that are larger than it for the acquisition of products at an advanced stage by offering the highest price in the auction for these products, and paid an excessive price as a result. The product for movement disorders appeals to a relatively small market, while the drug for migraines is designed for a very competitive market." He believes that although the product for migraines achieved especially good results in clinical trials, it will not stand out enough in the market to justify what was paid for it. Teva paid $3.5 billion for Auspex Pharmaceuticals, the developer of Austedo, and $825 million for Labrys Biologics, and invested hundreds of millions of dollars more in developing these products.

Commenting on Teva's program of cutbacks, the former executive said, "Personnel is only 20-30% of the cost of producing Teva's generic drugs. Laying off workers and moving plants to cheaper countries can therefore not constitute a solution. The raw materials, which account for 40% of the cost of production, cost the same whether the plant is in Israel or India. Personnel are not the only reason why the plant in Israel is inefficient. Layoffs cut costs, but in the end also reduce revenue."

The former executive added, "It would interest me to hear Erez Vigodman's analysis of events. Was he obsessive about outdoing Eli Hurvitz? Was he afraid that Teva was liable to be acquired, and was he willing to anything to prevent it?

"There is still a great mystery about why innovative generics manager Sigi Olafsson left Teva. He came from Actavis, and there is no doubt that Vigodman relied on his positive recommendation to acquire that company. When it turned out that Actavis was not meeting expectations, Sigi quickly left. What happened there between what Sigi said, what he didn't say, and what Erez chose to understand from what he said?"

"Globes": What lies ahead?

"The company has to become more efficient in generics manufacturing. It has to try to invest in young innovative projects that are beyond the focus of the large companies and do not require large amounts to acquire. The chance that something will come from such an investment is small, but the risk is not very big." The former executive is not optimistic about the utility of these measures: "Teva is entering a spiral that will lead it to the end of the road. It needs $3 billion a year in cash flow, and hasn't got it without Copaxone."

Published by Globes [online], Israel Business News - www.globes-online.com - on December 28, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Teva Photo: Reuters
Teva Photo: Reuters
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