Teva Pharmaceutical Industries Ltd. (TEVA”>TEVA) recently announced a leadership change with current President and CEO, Shlomo Yanai, expected to retire from the company effective May 2012. Mr. Yanai will be succeeded by Dr. Jeremy Levin, a former senior executive at Bristol-Myers Squibb (BMY”>BMY).
Mr. Yanai intends to move into a new phase in his career. He was responsible for converting Teva from an $8.4 billion mainly generics business in 2006 to a more diversified company with a sales target of about $22 billion in 2012.
Yanai is credited with pulling off Teva’s acquisition of Cephalon and Barr Pharma, expanding the company’s operations in Europe, Latin America and Asia, and forming partnerships for biosimilars and over-the-counter (OTC) pharma markets. All these deals helped diversify Teva’s operations.
Meanwhile, Dr. Levin brings with him vast experience and knowledge of the pharma industry. He is credited with managing Bristol-Myers’ successful strategic deals and alliances in the past few years. Prior to joining Bristol-Myers, Dr. Levin was the Global Head of Business Development and Strategic Alliances at Novartis (NVS”>NVS) from 2003 to 2007.
Our Take
We are positive on the upcoming change in Teva’s leadership. While Mr. Yanai has done a good job diversifying Teva’s business, the new CEO will have his work cut out with the company facing several issues.
The shares have been languishing this past year due to several issues like over-dependence on Copaxone (Copaxone accounted for 20.5% of total revenues in 2010), weak performance of the US generics business, manufacturing issues, pipeline setbacks (laquinimod) and over-optimistic guidance.
Though we do not expect instant changes, given Dr. Levin’s track record on the deal-making and branded products front, we expect increased confidence in Teva’s future capital allocation plans and branded pipeline. We also expect the company to withdraw its 2015 guidance and issue more credible numbers. Dr. Levin intends to review the business before giving any guidance or insight on future plans for the company. We expect an update later this year.
We currently have a Neutral recommendation on Teva, which carries a Zacks #3 Rank (short-term Hold rating).
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