Investors’ expectations are already running high for Jeremy Levin, who was named new CEO of Teva Pharmaceuticals (NASDAQ:TEVA) Tuesday. Levin is highly regarded for his series of successful acquisitions at Bristol-Myers Squibb (NYSE:BMY). But his ability to reenergize Israel-based Teva could be derailed if the company can’t fight off generic competition for its leading drug, Copaxone.
While Teva is the world’s biggest generic-drug maker, it relies heavily on Copaxone, one of only two proprietary drugs it makes. Used to treat multiple sclerosis, Copaxone is estimated to account for 40% of Teva’s profits. The company’s weak stock performance of late has been attributed to concerns that generics will cut deeply into Teva income when Copaxone loses patent protection in 2014, according to the Israeli news source Haaretz.
Generics aren’t Copaxone’s only potential worries. Teva’s injectable treatment already is being challenged by the first oral MS drug, Gilenya from Novartis (NYSE:NVS). And Biogen Idec (NASDAQ:BIIB) has a promising medicine in clinical trials that’s reported to be safe and reduces relapses in MS patients.
Yet, investors evidently are confident Levin can work his magic quickly. Teva shares are up about 8% since Friday’s close, but at $43.65, they still have a way to go before the 52-week high of $57 is within sight.
The investment community is certainly high on Levin, too. Analysts are praising his appointment, confident he can duplicate his success at Bristol, where he spearheaded the company’s “string of pearls” strategy. This involved Bristol making a number of acquisitions intended to help replace the revenue that will be lost when its blockbuster blood thinner Plavix loses market exclusivity this year.
His success led one industry observer to tell Bloomberg that Levin is “the number one person in business development” in the industry. “A lot of companies say they want to acquire and license stuff, but I can’t think of a company that’s done it as successfully as Bristol,” added ISI Group analyst Mark Schoenebaum. Ori Hershkovitz, partner at Sphera Funds Management, also weighed in on the move, telling Bloomberg: “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.”
Levin, 58, will take over in May for retiring Teva CEO Shlomo Yanai, a physician who was educated at Cambridge University. Levin served as senior vice president for strategy at Bristol. At a press conference in Tel Aviv Tuesday, he said he’ll work closely with Yanai to achieve an “orderly transition,” reported Bloomberg.
“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, according to Bloomberg. “BMY had to come up with a new strategy to deal with slow sales and looming patents.”
The performance of Teva’s shares in 2011 certainly helped seal Yanai’s fate. The company’s stock price plunged the most since 2006. During the year, Yanai made a move to broaden Teva’s product line by acquiring Cephalon for $6.5 billion. Despite the deal, investors were disappointed to learn last month that Teva was unlikely to reach its long-term target of $31 billion in sales by 2015.
Barry Cohen is long BMY and NVS.