Can New CEO End Crisis For Teva Pharmaceutical

Kåre Schultz willtake over as CEO at a time when the pharmaceutical companystruggles withcompetition, downward pressure on drug prices, expiring patents, rising operational costs, bribery investigations,fines and failed acquisitions.

Industry veteran Kåre Schultz is set to take over as CEO of the leading Israeli generic-drug company, Teva Pharmaceuticals. The company has had an interim CEO since February, when the previous CEO, Erez Vigodman, stepped down following a series of corporate crises, a decline in revenues and investors’ ongoing questions about Teva’s future growth strategy.

Teva has struggled in recent months due to tight competition in the generic and branded drug space, public and government pressure on drug pricing in the US, expiring patents, high operational costs, bribery investigations and fines and a series of failed acquisitions and associated debt, such as the $40.5 billion purchase of Allergan’s generic-drug business.

The CEO selection process didn’t run smoothly for Teva. News about potential candidates, including the potential selection of AstraZeneca CEO Pascal Soriot, impacted the company and markets negatively.

In the end, Teva went with Schultz, who is credited with turning around the fortunes of another struggling pharmaceutical company, Denmark’s Lundbeck, which faced similar challenges as Teva, such as expiring patents and mounting debt.

Teva’s proposed restructuring plan includes an extensive assets sale and the elimination of 7,000 jobs globally, including Israeli workers who make up approximately 5% of the company’s workforce.

The plan received harsh criticism in Israel, especially among government officials, as Teva is Israel’s largest employer and has, over the years, received significant tax benefits in exchange for creating jobs locally.

Israeli parliamentarian and chairman of the Finance Committee, Moshe Gafni, confirmed this view in a statement: “It is safe to assume that the company will recuperate. I ask that the workers not be fired until after the holidays and that Teva discuss the matter and report back to us once a week.”

While Teva’s new CEO can bring a new strategic direction, wider industry trends may impose restrictions on his restructuring plans.

The turmoil in Teva reflects the threats facing the generic-drug industry. Market concentration, lower drug prices, decreasing volumes and new competitive products driven by a faster Federal Drug Administration approval process have all contributed to the ongoing industry crisis.

Among Teva’s struggling competitors are Mylan, a US global generic and specialty pharmaceuticals company, and Indian drug maker Dr. Reddy’s Laboratories.