Bloomberg News

Teva’s Levin May Boost Brand Drugs as Copaxone Threat Looms

January 04, 2012

(Updates with U.S. trading in fifth paragraph, Levin comment in sixth.)

Jan. 3 (Bloomberg) -- After helping Bristol-Myers Squibb Co. find new drugs to help offset the expected loss of revenue from its top-selling blood thinner Plavix, Teva Pharmaceutical Industries Ltd.’s chief executive officer-designate Jeremy Levin faces the same task at the Israeli drugmaker.

Levin, 58, will replace retiring Teva CEO Shlomo Yanai, 59, in May, the Petach Tikva-based company said yesterday. Teva, the world’s biggest maker of generic drugs, needs new sources of sales as its No. 1 drug, a branded multiple sclerosis medicine called Copaxone, faces competition from newer treatments.

Yanai is stepping down after Teva’s shares last year plunged the most since 2006. A former Israeli army general with no previous pharmaceutical experience, he sought to broaden Teva’s portfolio of innovative medicines with the $6.5 billion acquisition of U.S. biotechnology company Cephalon Inc. last year, then told investors in December that Teva may not meet its long-term target of $31 billion in sales by 2015.

“He’s the perfect guy for this,” Ori Hershkovitz, a Tel Aviv-based partner at Sphera Funds Management Ltd., said of Levin in a phone interview yesterday. “If Jeremy can do one or two good product selections as he has done in the past for Bristol-Myers, that will be very, very good for Teva.” Sphera owns Teva shares.

Teva’s American depositary receipts rose 4.2 percent to $42.07 at 9:45 a.m. in New York. The ADRs gained as much as 5.7 percent, the biggest intraday advance since Aug. 9. The receipts lost 21 percent in 2011 including reinvested dividends, compared with an 11 percent return for the Bloomberg EMEA Pharmaceuticals Index.

‘Deep Dive’

Levin, a Cambridge University-educated physician who worked at New York-based Bristol-Myers as senior vice president for strategy, will take a “deep dive” into Teva’s sites, products and drug pipeline, he said on a conference call with analysts today. He declined to comment more specifically on potential strategy changes.

“There are some parallels between Bristol-Myers from a few years ago and Teva,” Les Funtleyder, a New York-based portfolio manager for Miller Tabak & Co., said in an e-mail yesterday. “BMY had to come up with a new strategy to deal with slow sales and looming patents.”

Potential Targets

At Bristol-Myers, Levin helped oversee the so-called “string of pearls” policy of partnerships and smaller acquisitions to replace revenue that will be lost when Plavix, a blood thinner, faces generic competition in the U.S. this year. Analysts predict the drug had $7.2 billion of sales in 2011, based on the average of three estimates compiled by Bloomberg.

Fruits of the policy include Yervoy, a skin cancer drug gained in the 2009 acquisition of Medarex Inc., Hershkovitz said. The strategy has generated 17 acquisitions and agreements with smaller companies so far.

Levin also handed off drugs Bristol-Myers didn’t plan to develop itself to partner companies in emerging markets, in what he described as an “oyster plan” to build its partners into potential acquisition targets.

“The oysters are being seeded to help create innovation,” Levin said in an interview last month, comparing the Bristol- Myers strategy to the process used to create pearls. “What you’re hoping is that they’ll create an engine of innovation, and then we can do a transaction. Over the years to come, we’ll position ourselves as partners of choice.”

‘His Decision’

Bristol-Myers won’t change its string-of-pearls strategy, Jennifer Mauer, a spokeswoman for the New York-based drugmaker, said in a phone interview. “We have a very strong and experienced team in that role,” she said. “Business development remains a priority.” Levin left the company Jan. 1, she said.

Teva started looking for Yanai’s replacement during the course of last year, Chairman Phillip Frost said at a Tel Aviv press conference yesterday. He declined to be more specific.

Yanai wasn’t asked to retire, said Denise Bradley, a Teva spokeswoman. “Shlomo came to the board with his decision, and the board accepted it, appreciating his considerable contributions to Teva but recognizing his desire to move on,” Bradley said by e-mail.

“The time has come to start a new path,” Yanai said in Tel Aviv. “I intend to use all my knowledge, ability and experience for the good of Israel’s industry, economy and society.”

Yanai’s Future

Yanai is considering both public and private possibilities, Frost said. The executive may be weighing an entry into politics, Gilad Alper, a Tel Aviv-based analyst for Excellence Nessuah Brokerage, said in an e-mail yesterday.

Teva announced Dec. 21 it would buy back as much as $3 billion of its shares to return money to investors. The $31 billion sales goal for 2015 is “aspirational,” Yanai said then.

Analysts suggested the share buyback might herald a pullback from a streak of acquisitions that in recent years included Germany’s Ratiopharm GmbH and Barr Pharmaceuticals Inc. of the U.S.

Teva said last month sales of Copaxone probably will peak this year at $3.8 billion. The injected MS drug accounted for 24 percent of Teva’s $4.34 billion in third-quarter sales.

Copaxone contributes as much as 40 percent of Teva’s earnings, Alper said by phone. “The company will need to do something dramatic relatively quickly.”

Novartis Competition

The medicine is already facing competition from Novartis AG’s Gilenya, the first oral drug for MS. Biogen Idec Inc. reported that its own experimental MS pill, BG-12, is safe and reduces the risk of relapses in a late-stage trial in October. BG-12 may generate as much as $3 billion in annual sales, according to analysts with RBC Capital Markets in San Francisco.

Meanwhile, Teva’s own experimental MS pill, laquinimod, disappointed in two trials last year.

The South African-born Levin was global head of business development and strategic alliances at Novartis from 2003 to 2007. He has worked as a practicing physician and has a medical degree from Cambridge and a doctorate from Oxford University in molecular biology, according to the statement. Levin is a citizen of both the U.S. and the U.K.

--With assistance from Shoshanna Solomon in Tel Aviv, Mike Millard in Seattle, Aya Takada in Tokyo, Makiko Kitamura in London, Gwen Ackerman in Jerusalem and Drew Armstrong in Washington. Editors: Phil Serafino, Thomas Mulier

To contact the reporter on this story: Naomi Kresge in Berlin at nkresge@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net


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