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3 Jan 2014

Cue More Drama in Teva's Boardroom as its CEO Announcement Nears

It looks like new year, new CEO at Teva Pharmaceutical Industries. But even as the company appears to be on the verge of naming a replacement for former helmsman Jeremy Levin, there's still quite a bit of intrigue at the top of the company. As the Financial Times reports, shareholders are pressing for a boardroom change-up that could end with a new occupant for the chairman's seat.


According to Israeli newspaper Globes, Erez Vigodman is first in line for the top spot at the Israeli company. Vigodman, CEO of Israel's biggest agrochemicals company and the former leader of Israeli food giant Strauss Group, has served on Teva's board since 2009 and has been considered a front-runner for the position since the search began. Citi Research expects the CEO announcement to precede the company's 6 February financial report for 2014, and Israeli news source TheMarker predicts it could come as early as the JP Morgan Healthcare Conference that begins 13 January.


Strictly speaking, Vigodman lacks experience in the pharma industry — but then again, as the Financial Times notes, so does the rest of Teva's board. And that's one reason Israeli entrepreneur and shareholder Benny Landa has set out to rally support for a larger shakeup. In a December email sent to key shareholders, Landa called for "significant board leadership changes" at the generics maker, the FT reports.


"I don't know if this board is able to attract a world class CEO to lead Teva, but with higher standards of corporate governance and a pharma-seasoned board of directors, at least the new CEO will stand a better chance than his predecessor!" he wrote, as quoted by the FT.


Of course, the question of boardroom personnel is especially important in light of the disagreement that led to Levin's exit in October. Chairman Phillip Frost described differences between the two sides as "subtle," rather than a direct butting of heads over Levin's strategy to get the struggling company back on track. But others say the board interference — particularly from Florida-based Frost — was more extreme. "Levin would have to go to Miami to kiss the ring each time he wanted a decision," an external consultant told the FT.


Landa's proposed changes also involve slimming down to 12 directors from 16 — a move Globes calls a possible threat to Frost's job.


Landa told shareholders that the directors themselves would propose his recommended changes this month. But the company told the FT that "no discussions took place with institutional stakeholders on behalf of Teva's board of directors."


The company certainly has plenty to do in the meantime, as it implements a layoffs-heavy cost-cutting effort and prepares to lose patent protection on its leading moneymaker, the multiple sclerosis treatment Copaxone, in May. And as Citi analyst Liav Abraham wrote in a note seen by Reuters, while Vigodman may not have specific pharma experience, after streamlining his current company and selling its controlling interest to China, he does have experience righting a listing ship.


"Although investors may express some skepticism if Mr Vigodman is selected due to his lack of experience in the pharma industry, we note his successful record in the execution of turnaround strategies at large publicly traded companies, which is relevant for Teva as the company faces the loss of exclusivity of Copaxone and implementation of an extensive $2 billion cost reduction program," he said.

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