Teva Pharmaceutical Industries Ltd. (TEVA:US) rose to a one-year high after the maker of generic medicines said it plans to return to a deal-making strategy that made it one of the most acquisitive drug companies of the past decade.
Teva’s American depositary receipts jumped 6.7 percent to $44.21 at the close in New York yesterday, the highest since May 8, 2012. The drugmaker’s Israel-traded shares gained 7.2 percent to 154.20 shekels at the close today in Tel Aviv.
“We have to do the clever deals that Teva was so good at doing in the past,” Chief Financial Officer Eyal Desheh said yesterday at a JPMorgan Chase & Co. health-care conference in San Francisco. “The ones that you can buy one and one and get to two, I know it’s a cliché. But we’re very good at doing that. And I think that these are the kind of deals that we’ll be looking at in the future.”
Desheh’s tone signals a shift in approach from Teva’s former chief executive officer, Jeremy Levin, who was ousted in October after a dispute with the board. Under Levin, Teva spent less than $1 billion in deals as he sought to boost growth through smaller partnerships and acquisitions.
Teva picked director Erez Vigodman to become CEO on Jan. 9 to lead a drive to cut $2 billion in costs as patents expire on top-seller Copaxone, a treatment for multiple sclerosis.
Investors are interpreting that Teva may be willing to pursue a direction similar to that of companies such as Bridgewater, New Jersey-based Valeant Pharmaceuticals International Inc., whose stock gained almost doubled last year as it made acquisitions, according to Ori Hershkovitz, a partner at Sphera Funds Management Ltd.
“The possibility that Teva will pursue the Valeant model for its M&A strategy is very compelling for investors,” Hershkovitz said by phone. “I would not be surprised at all if these ideas are being supported behind the scenes by Vigodman. It’s quite a nice warm welcome for him.”
Levin, who took over in 2012, had pledged to make the company leaner rather than grow through multibillion-dollar acquisitions. His predecessor, Shlomo Yanai, had spent more than $10 billion in two deals, saddling Teva with the highest debt-load relative to profit among the 10 largest drugmakers in Europe, the Middle East and Africa. Desheh said the company may be ready for big deals as it lowers its debt.
“We’ve managed to reduce our debt to a very reasonable level,” said Desheh. “So if we’re talking about financial resources for a move which is more than a small acquisition or an in-licensing transaction, we do have that. Depending on targets and a few rumors around the corridors here in this building, yeah, you see a lot of targets.”
Vigodman “made himself available on a very short notice,” Desheh said yesterday. “He’s aware, we’re aware, our board is aware that we need to move fast. Fast is not a year, fast is a few months.”
Levin took over after his predecessors spent more than $30 billion on acquisitions in the past decade while failing to wean Teva off its dependence on Copaxone. The medicine, which analysts estimate accounts for at least 50 percent of profit, faces possible generic competition this year. Analysts predict sales of the injected treatment will decline as patients switch to newer oral drugs for MS such as Biogen Idec Inc. (BIIB:US)’s Tecfidera.
“We are rather focused on strengthening the Copaxone franchise, on building it, and learning more about it, and making sure that this drug gets recognized for its incredible safety record, its efficacy, and maintaining sales,” Chief Scientific Officer Michael Hayden said yesterday responding to questions at the conference. “We have a big story around Copaxone. It’s a difficult product to make. Our goal is not to block generic Copaxone, our goal is to protect patients, serve the interest of patients, and also serve our shareholders.”
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