Teva accuses former executive of siphoning trade secrets to her rival CEO boyfriend

Teva
Teva's mounting list of troubles now includes a lawsuit against a former employee claiming she passed trade secrets to a rival, Apotex, which allegedly used the info to compete.

As if Israel’s Teva didn’t have enough troubles on its plate—what with patent losses, pay-for-delay lawsuits, an ongoing CEO search and more—it’s now tangled in a full-blown soap opera with a former U.S. employee.

In a lawsuit filed in a federal court in Pennsylvania, the drug giant is alleging that its ex-chief of regulatory affairs for its American generics business passed trade secrets to her boyfriend, who happened to be the CEO of generics industry rival Apotex.

But it's far more than two lovers engaging in pillow talk about generic pills, Teva claims. The lawsuit alleges that, over a period of about two years ending in 2016, Teva employee Barinder Sandhu copied company files onto flash drives and passed them to Apotex CEO Jeremy Desai. Sandhu was fired in October 2016, according to the suit, which also lists Desai and Apotex as defendants.

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Sandhu’s contact information is listed as unknown in the case files, and a spokeswoman for Teva declined to provide information about her whereabouts. "Teva will vigorously pursue its legal rights in this matter to protect its trade secrets and confidential business information," the spokeswoman said in an email. A spokesman for Apotex said in an email that the company is "reviewing the claims, but wholly denies it acted improperly."

Teva hired Sandhu in 2012 and promoted her to the regulatory affairs perch in the spring of 2014, handing her a salary of $193,000 plus a potential annual bonus of 30% of that haul, the suit says. A few months later, Desai was named CEO of Apotex. The two were already romantically involved and living together in Pennsylvania, according to the suit.

An internal investigation revealed that Sandhu created a folder on her Teva-issued computer called “My Drive,” which synced to a personal cloud account—and that she uploaded 900 Teva files to that folder, “including trade secrets and other confidential information,” the suit says. She also copied files to as many as 10 USB drives, Teva alleges. The use of cloud backup and external drives violated the confidentiality agreement she signed upon accepting employment with the company, the suit contends.

Teva learned of Sandhu’s actions from a former Apotex employee, who reported that Apotex used the information she shared with Desai to compete against Teva. The documents included confidential communications with the FDA about an unnamed drug Teva was developing, which Apotex reportedly used to “speed the regulatory approval of its competing product,” according to the lawsuit.

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Teva also alleges that Desai and/or Apotex “closely reviewed Teva USA’s confidential corporate information and even adopted a similar company structure at Apotex.” Teva is seeking unspecified compensatory and punitive damages.

At first glance, it might seem that Apotex is such a small fry in the generics biz that it wouldn’t be a big worry for Teva. Apotex charted $1.6 billion in revenue last year, placing it 15th in the generics industry—far behind Teva, which took the No. 1 spot with nearly $10 billion in sales. But Apotex is a formidable up-and-comer. Earlier this year, the Canada-based company broke ground on an $184 million facility in Florida that will include manufacturing facilities and an R&D center.

Teva’s struggles over the past couple of years reveal its vulnerability to competitive pressures. The company is grappling with $35 billion in debt and patent losses on its multiple sclerosis blockbuster Copaxone. Meanwhile, some of its recent drug launches have missed expectations, and its $40.5 billion purchase of Allergan’s generics unit, Actavis, has so far failed to yield a meaningful revenue bump.

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What’s more, Teva is dealing with its own legal woes. Israeli police have been investigating bribery allegations against the company. The probe is similar to a U.S. case charging that Teva violated the Foreign Corrupt Practices Act, which resulted in the company shelling out $283 million in criminal fines and $236 million in SEC payments.

Meanwhile, Teva has lost three CEOs in five years and is struggling to recruit someone who is both qualified and game to take on its challenges. The company traditionally insisted on hiring top executives who are Israeli, but not anymore. Interim CEO Yitzhak Peterburg told investors in June that Teva is looking to nab an experienced executive from the top ranks of another pharma company—someone with the chops to embark on a major restructuring.

Editor's note: This story has been updated to include comments from Teva.