Teva’s New Chief Levin May Bolster Branded Drugs as Copaxone Threat Looms

By Naomi Kresge - Jan 3, 2012 12:19 AM GMT+0700

After helping Bristol-Myers Squibb Co. (BMY) acquire new drugs in a bid to offset the expected loss of revenue from its top-selling blood thinner Plavix, Teva Pharmaceutical Industries Ltd. (TEVA)’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 (TEVA) 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 rose 3.3 percent to 160.60 shekels at the close in Tel Aviv yesterday, the stock’s biggest increase in two months. The more actively traded American depositary receipts lost 21 percent in 2011 including reinvested dividends, compared with (TEVA) an 11 percent return for the Bloomberg EMEA Pharmaceuticals Index.

‘Orderly Transition’

Levin, a Cambridge University-educated physician who worked at New York-based Bristol-Myers as senior vice president for strategy, said in a press conference in Tel Aviv yesterday that he will work closely with Yanai to achieve an “orderly transition.”

“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.”

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 (BMY) compiled by Bloomberg.

Potential Targets

Fruits of the policy include Yervoy, a skin cancer drug gained in the 2009 acquisition of Medarex Inc (MEDX)., 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.”

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.

‘His Decision’

Teva started looking for Yanai’s replacement during the course of last year, Chairman Phillip Frost said at a news conference in Tel Aviv today. 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 at the news conference. “I intend to use all my knowledge, ability and experience for the good of Israel’s industry, economy and society.”

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.

Conference Call

Teva plans a conference call for analysts at 8:30 a.m. New York time today.

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 of revenue in the third quarter.

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. (BIIB) 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.

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