Israel
Israel's top company Teva in a tailspin
The pharmaceutical giant is in meltdown after a huge drop in its share price.
August 9, 2017 07:31
The pharmaceutical giant is in meltdown after a huge drop in its share price.
August 9, 2017 07:31Teva Pharmaceuticals, Israel's largest company, is in meltdown after reporting disappointing financial results on Thursday.
The company’s share price plunged 44 per cent in the following three sessions on Wall Street, as its value tumbled from $31 billion to less than $19 billion.
The huge losses will lead to 7,000 job cuts, including 350 in Israel, as well as the closure of 15 factories worldwide.
Teva's woes began long before last week, when it announced a $6 billion loss for the quarter and cut its dividend by 75 per cent. Two years ago when the company was worth $70 billion, it acquired Actavis, the generic division of Allergan for $40 billion.
Many felt the acquisition was overpriced and it became a disaster when US regulators began squeezing pharmaceutical prices. While Teva's rivals were hurt badly, the Israeli company has been hit hardest.
Benny Landa is a successful digital printing entrepreneur and a shareholder in the company. But for the last few years he has harshly criticised the firm’s board of directors.
"They can't have both a CEO and board that lacks pharma experience," he said earlier this year. In February, CEO Erez Vigodman departed and a replacement has not been found since.
Acting CEO, Yitzhak Peterburg, said: "We have a well-organised plan for tackling this crisis including cutbacks."
Teva was built by the late Eli Hurvitz who transformed a family company into the world's largest generics manufacturer. The company has lost its way since his death in 2011.
Under Mr Hurvitz, Teva also developed branded drugs such as Copaxone, a blockbuster multiple sclerosis treatment which earns Teva $4 billion annually. Such branded drugs, as opposed to generic copycats, are what Teva’s future depends on, according to Mr Landa.
"Israel does innovation best," he said.
Better news for the Israeli economy came from Mexico where Mexichem, a producer of plastic pipes, bought 80 per cent of Israel's Netafim for $1.5 billion. Founded on Kibbutz Hazerim in 1965, Netafim has pioneered drip irrigation which cuts water use by 75 per cent while still keeping crops well hydrated. Its annual revenue is $855 million.
Germany's Permira fund sold the 61.35 per cent it acquired in 2011 at a company value of $850 million, while two kibbutzim sold an 18.65 per cent stake and kept a 20 per cent holding.
