Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) is Israel’s largest and most successful public company. As such what it does, and how it thinks, become subject to significant scrutiny, more than for most other companies and by and large for good reason. If Teva succeeds Israel succeeds, and when Teva catches a cold many Israelis end up sneezing.
Next year patents on Teva’s bestselling drug Copaxone expire, threatening to slow revenue significantly. As good stewards do, the company’s management is preparing for this early with a programme of labour cut-backs in its 50, 000 world-wide work force. Of the 10%, or 5, 000, of jobs that will be shed some of these will be in Israel too, hence a very public row had already broken out over this for a company that enjoyed many tax breaks to help create those jobs in the first place.
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That does not make it immune from global economic forces, of course, and Teva’s management, to its very great credit, has tried to deal with this here humanely through consultations with labour representatives and with the Government. That may sugar the pill a little, but cuts there will still be as the company tries to position itself in the market for the long term, and it says the overall global cuts it is planning will help it achieve savings of US$2 billion annually by 2017.
Chairman Phillip Frost CEO Jeremy Levin
However a very public version of what may, or may not, be a very major private row that is apparently now brewing between the company’s management, in the person of its CEO Jeremy Levin and its board of directors , in the shape of its aggressive Chairman and significant shareholder Phillip Frost, has now emerged over the pace and timing of such lay-offs in Israel.
The nature of this row, one which is however actually non-existent according to an email the company has been forced to issue in response, comes from Israel’s Channel 2 Television station which claims the two men have clashed over how to implement the plan in Israel. Frost is said to favour a no-compromise approach to lay-offs here, with Teva’s 7, 000 employees in Israel taking its full share of the cuts, while Levin is said to favour a more conciliatory approach.
Channel 2 goes a good deal further however, reporting that Frost is actually trying to push Levin out of the company over the disagreements between them. It also reports Levin has considered resigning and has requested the board “reconsider its interference on day-to-day business decisions”.
In response, a Teva spokesman has written in an email:
“These are baseless claims”…“The company’s management has worked to craft and execute its strategy with complete cooperation from the board of directors. All decisions made by the company’s management, led by its CEO, have been made with consultation and agreement of the board. The chairman and the CEO conduct regular work meetings and conversations, as is customary.”
Levin himself was equally forthright, saying in an emailed statement:
“I categorically deny the rumours suggesting that I am considering resigning from the management of Teva, ” Levin said in an emailed statement on Monday. “We are talking about a report without any basis.”
He said the opposite was true, that he has taken on Israeli citizenship and plans to continue to manage and grow Teva.
This is not the first time Teva has seemed to air some of its dirty laundry in public.
Fifteen months ago, in August 2012 some time after Jeremy Levin had taken up his appointment as CEO there were significant Israeli press reports that the CFO Eyal Deshesh was “unhappy” at the way investor relations were being conducted which then, as now, Teva was forced to publicly completely deny anything of the kind.
So far Philip Frost has not commented individually and, frankly, nor should he. If there is indeed a private dispute between the two men it should stay that way until it is resolved. If there is not then this is a tempest in a teapot; the real issue remains handling the issue of labour cut-backs in a sensitive way in a country dependent for a good deal of its self-image on the success of one of its “champion” corporations. Of course if there is real labour feather bedding going on, that should be dealt with promptly in any case whether it is Teva or the Electric Company makes no difference.