When it rains it pours, and Teva is experiencing a flood of bad news of near biblical proportions. The same day that the company showed CEO Erez Vigodman the door, the drugmaker was said to be under investigation by Israeli police for bribing foreign officials in an investigation that mirrors charges it recently settled with U.S. authorities.
The company acknowledged to Haaretz that Israeli police are conducting a bribery investigation similar to the U.S. probe. Sources told Haaretz it centered on Teva paying hundreds of millions of dollars in bribes to foreign officials and then creating falsified documents to hide the payments.
That U.S. case concerned issues that had occurred between 2007 and 2013 in Russia, Mexico and Ukraine. The company agreed in December to pay nearly $520 million to the U.S. Department of Justice and Securities and Exchange Commission to resolve the violations of the Foreign Corrupt Practices Act. The criminal fine to the DOJ totaled more than $283 million, while Teva ponied up $236 million to the SEC.
The latest disclosure is among a mounting list of problems that has embroiled the company and cost Vigodman his job just 18 months after announcing its $40.5 billion deal for Allergan’s generics unit that many thought would be the big turnaround for the company. The problems started with the fact that it took Teva so long to close the Allergan deal that some investors had lost faith in its upside.
Just months after finally getting it closed last August, generics CEO Siggi Olafsson—a cheerleader for the deal—unexpectedly said he was leaving, spooking investors since he was considered essential to making it work. On top of that a tough pricing environment for the generics industry has left questions in investors minds about how Teva will untangle the mess.
As if in answer, the company told them in January the company was going to have to trim its sales guidance for 2017 by more than $1 billion.
Now with the company’s stock price down more than 50% from its August 2015 highs, Vigodman is out and Chairman Yitzhak Peterburg will handle the day-to-day CEO duties while a permanent replacement is sought. Director and Celgene vet Sol Barer will serve as chairman.
On Tuesday, though, one analyst saw something to like in the whole mess. Credit Suisse analyst Vamil Divan told investors in a note that the change at the top may allow for a fresh start.
"We believe the changes underscore the difficulties Teva has faced over the past 18 months and may be well received as investors look for fresh faces to lead a potential turnaround at the company,” Divan wrote.
Divan has some specific issues that he expects management to answer next week when Teva reports earnings. He wants to see if even the revised earnings projections will be walked back further in light of a court ruling late last month that tossed out four patents on long-acting multiple sclerosis star Copaxone, putting billions of dollars at risk. The analyst wants to know what this is going to do to Teva’s ability to pay down debt and what it will mean for the company’s dividend.
As he sees it, “It will be imperative for TEVA to bring in a CEO who understands the intricacies of the generics business but who can also work to bolster a specialty pharma business,” Divan wrote to clients.