Teva CEO gets lots of advice on how to fix beleaguered company, even before he begins

Teva production
Investors have ideas about how to turn around Teva, offering advice before new CEO Kåre Schultz has gotten started.

Kåre Schultz has yet to take over at beleaguered Teva, but he is already getting advice on what to do from some of this investors.

For one, Teva investor Benny Landa is telling anyone who will listen that what Schultz needs to do is concentrate on developing innovative meds and either sell or split off as a separate unit Teva’s struggling generics business. 

“For the long-term health of the company, in my opinion, Teva has to carve out generics and remove it from the focus of Teva’s business,” Landa said in an interview with The Times of Israel.

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Landa, who has for years pushed the drugmaker to make changes, like adding people with more pharma experience on its board, says the new CEO needs to fashion and express a plan to right the company after its disastrous $40.5 billion buyout of Allergan’s generics business as pricing power in the U.S. generics market was crashing.

“The company has lost its way, primarily because it did not have a sensible, clear strategy,” he told the newspaper.

Landa has been saying for some time that Teva should separate its businesses and at least run generics something like Novartis does with Sandoz, as a completely separate entity. But Teva Chairman Sol Barer told Reuters when Schultz was hired that Teva needs to regain its credibility before it does anything and that there are no plans for separating the businesses.

Schultz, who gained his own credibility by fashioning a turnaround for the much smaller Lundbeck after leaving Novo Nordisk, will have to reassure shareholders fairly quickly that there is a path forward.

Analysts at Bernstein met recently with top Teva executives, although not Schultz, and said the company is not yet offering that. In a note to investors, analyst Ronny Gal said the executives, which included Andy Boyer CEO of Generics, were frustrated with pricing in the generics market and suggested some consolidation in the market is going to be needed to change that direction.

“While Teva executives presented thoughts, none are easy to execute and all have clear risks associated with them,” Gal said of the ideas presented by the Teva folks for the company's turnaround. 

“It would take the new CEO to make ... bold moves,” Gal said, but things will take time because he first needs to learn Teva’s business sufficiently to avoid the kinds of mistakes made by his predecessor, who got Teva into the Allergan deal.

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Some of the heavy lifting for a Teva turnaround started before Schultz was named CEO. Teva last month said it would cut 7,000 jobs, in part by closing 15 manufacturing sites and exiting 45 markets. It also has already announced a major hit to its dividend and the year’s second big guidance-slashing.

But that is just a prelude to figuring out what else needs to be done. For one, it is facing growing pressure to its branded drug business after a court tossed out four patents on long-acting multiple sclerosis star Copaxone, putting billions of dollars at risk.

RELATED: Teva lures Lundbeck chief Schultz with $52M package that makes him among pharma's top paid

For what faces him when he relocates to Israel, Schultz has extracted a significant pay package, one that is worth up to $52 million, including $20 million in cash upfront. That will make him among the top paid executives in all of pharma.