Teva Finally Appoints New Chief Executive After Months of Speculation -- 3rd Update

By Rory Jones

Teva Pharmaceutical Industries Ltd., the world's biggest seller of generics medicines, named Kare Schultz as its new chief executive, choosing an industry veteran to navigate a series of daunting challenges, from falling drug prices to the company's high debt.

The appointment of Mr. Schultz, a Dane, ends a monthslong period during which Teva had no permanent top executive. It recently shuffled its board and is shedding assets, while coping with new competitors. Teva shares have been under pressure for months.

The new chief executive joins from Denmark's H. Lundbeck A/S, where he was president and CEO since May 2015. He has also worked as chief operating officer of Novo Nordisk A/S, the world's biggest producer of insulin.

Teva Chairman Sol Barer said the new chief executive has everything that the firm was looking for in a new leader: Global pharmaceutical experience, a restructuring background and knowledge of generic and specialty medicines.

The new chief, only the second non-Israeli to lead the company, also understands the "cultural framework" of working for a pharmaceutical companies firm that like Novo Nordisk is also considered a national champion, Mr. Barer said in an interview with The Wall Street Journal.

"This is a critical time in Teva's history. We had to make sure we got the right person," he said.

Mr. Schultz, 56, joins an executive board at Teva that in recent years has fought over whether the firm should focus on generics drugs or invest in specialty medicines, as competition has increased for its main blockbuster drug.

Board members also have clashed over whether the chief executive should be Israeli or based in Israel.

The new chief executive would review the firm's operations before articulating a new strategy as soon as possible, Mr. Barer said. The new CEO would relocate to Israel and be based out of Teva's Petah Tikva headquarters in a "sign of his commitment" to the firm, the chairman said.

Some of Teva's previous chief executives have found it hard to implement changes at the pharma firm amid heavy scrutiny over its operations by Israeli lawmakers and other local stakeholders, hampering the growth of the multinational in the eyes of many investors.

Teva has been searching for a new, permanent CEO since February, when former boss Erez Vigodman departed the company for undisclosed reasons amid a steep fall in the firm's share price. Yitzhak Peterburg has stood in as interim CEO since then.

There has been plenty of speculation about who might take the reins at Teva, with AstraZeneca PLC CEO Pascal Soriot cited at one stage as a contender by local media.

Teva's share price rallied on news of Mr. Schultz's appointment, rising roughly 8% in early trading Monday in Tel Aviv. AstraZeneca shares rose 2%.

In August, Teva lost about a quarter of its market value in one day on mounting concerns about the future of the company after it cut its full-year outlook and slashed its dividend, blaming the rapid deterioration of the U.S. generic-drug business. Teva took a $6.1 billion write-down on that unit and posted a quarterly net loss of $6.04 billion.

The acquisition last year of Allergan PLC's generics unit--Teva's biggest-ever deal--has left the company with debt of roughly $35 billion. It is attempting to pay down those borrowings with asset sales, but has so far found few takers for its businesses.

At H. Lundbeck, Mr. Schultz was credited with launching a turnaround that has put the company on track to report record revenue and earnings. That overhaul included job cuts and the restructuring of its business, which last year returned the firm to full-year profit. H. Lundbeck shares fell 11% following news of Mr. Schultz's move to Teva.

The Dane has signed an employment agreement for a term of five years and will receive an annual base salary of $2 million, Teva said. He will also get paid about $8.8 million every year in performance-linked bonus and equity incentives, Teva added.

In addition, Mr. Schultz will receive sign-on equity awards of roughly $40 million, depending on the performance of the firm, paid over a five-year period, the company said.

Investors had expected Teva to have to pay up for a new chief executive. Former head Mr. Vigodman received $5.3 million in salary and equity shares last year, company filings show. That figure was less than half what CEOs of S&P 500-listed health-care companies received on average.

Teva didn't give a date for when Mr. Schultz will join the company.

--Ian Walker contributed to this article

Write to Rory Jones at rory.jones@wsj.com

(END) Dow Jones Newswires

September 11, 2017 08:27 ET (12:27 GMT)

Teva Pharmaceutical Indu... (NYSE:TEVA)
Historical Stock Chart
From Mar 2024 to Apr 2024