SAN FRANCISCO—Last week, Teva had to slash more than $1 billion off the 2017 sales guidance it announced last July. On Monday at the J.P. Morgan Healthcare Conference, CEO Erez Vigodman explained exactly how the company arrived at the off-base forecast in the first place.
After posting more than $400 million in net revenue for new products in each of the five years prior to 2016—including $883 million in 2014 and more than $1 billion in 2015—Teva predicted it could land $600 million in new launch sales last year. That assumption was “very reasonable” given the pattern Teva had seen, Vigodman said in a fireside chat.
The reality? It couldn’t. It came up well short of that goal, checking in at just $140 million.
That chasm hit 2016 results and prompted the Israeli drugmaker to edit its 2017 expectations, too. “That is the main reason that explains the gap” between the $25.2 billion to $26.2 billion range Teva laid out in July and the revised $23.8 billion to $24.5 billion prediction it put forth last week, Vigodman said. And he promised to “do everything in our power to make sure that something like that does not happen again.”
The new guidance didn’t exactly inspire faith among analysts. On last week’s investor call, Wells Fargo’s David Maris grilled Teva’s execs on whether they had the team in place to forecast the drugmaker’s business accurately.
And he’s not the only one questioning the company’s personnel choices. In a Q&A published Monday in Israeli newspaper Globes, activist investor Benny Landa—whose 2014 attempt to replace Teva’s board with more experienced members prompted some tweaks to the company’s director slate—complained that Teva’s leaders still weren’t seasoned enough to get the job done.
"I don't understand Vigodman's strategy, but it's clear to me that they need one of two things: either a CEO with pharma experience or an experienced board of directors to guide him,” he quipped.
And if he had to pick one? “I'd choose the board first,” he said. “All the directors are excellent people with experience in their fields, but they can't devise a strategy for a company like Teva. It's no wonder that the company made such mistakes. The directors don't even know what questions to ask.”
"They say that the board is passive," Landa went on to say. "Well, what did they think? Have they ever been in such situations? Do they understand what the pharma industry is? They didn't know what to do in the past, they don't know what to do now, and they won't know what to do tomorrow."