Teva betting on Schultz as CEO with $40m package
Dane lands top job with beleaguered generics giant after reviving Lundbeck’s fortunes
Boxes of tablets produced by Teva. The Israeli generics giant has prised Kaare Schultz from Lundbeck with a $40m package. Photograph: Chris Ratcliffe/Bloomberg
Teva Pharmaceutical is betting $40 million (€44.4m) that the man credited with the rapid revival of a Danish drugmaker can do it again – and it’s breaking from century-old traditions to prove it.
Following a seven-month search for a new chief executive, the world’s biggest maker of generic drugs will pay Kaare Schultz of Lundbeck that amount in cash and stock just for signing on at a company besieged by $35 billion of debt, slumping profit margins and expiring patents on lucrative medicines like multiple sclerosis treatment Copaxone.
“They were desperate. If you were looking that long for a CEO and nobody is willing to take the job, you pay big,” said Ori Hershkovitz, chief investment officer of Nexthera Capital, a New York-based healthcare hedge fund with $300 million (€250m) under management, which holds a short position on Teva’s stock. “It’s huge. Even for US pharma this is big.”
For Israeli giant Teva the package is a substantial departure from customs that in some cases date back to its founding in 1901. For instance, the top job has traditionally been filled by an Israeli who agreed to accept frugal compensation compared with typical American and European rivals.
Mr Schultz, who will relocate to Israel, stands to make many times more than former CEO Erez Vigodman, who didn’t get a sign-on bonus and was offered $4.49 million (€3.75m) in compensation for his first year on the job in 2014.
The task before Mr Schultz is considerably more daunting than anything he would have faced at Lundbeck. For starters he has to decide whether to split Teva’s generics and speciality drug lines into two different businesses, and needs to drum up enough cash from asset sales and job cuts to avoid breaching debt covenants in the coming months.
Mr Vigodman stepped down after the $41 billion acquisition of Allergan’s generics unit he engineered last year failed to deliver the sales boost he promised.
That revealed cracks in Teva’s strategy of aggressive acquisitions that made it into a pharmaceutical giant but also saddled it with a debt burden that is almost twice its market value.
Shares in Teva, which have slumped 67 per cent in the past 12 months, rallied 12 per cent on Monday as investors welcomed the appointment. – Reuters