Teva's top eleven managers paid $17m

Update: Bernstein analyst Ronny Gal has revised an earlier estimate of executive pay at Teva. The company is being sued over pay disclosures.

Following an approach from the company, analyst Dr. Ronny Gal of Bernstein Research has revised his estimate of executive pay at Israeli pharmaceuticals giant Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA). It was earlier reported that Gal put the annual compensation of Teva's top five managers at $20 million. Revising the figures in accordance with Teva's full filing, Gal reports that the eleven most senior managers at the company received aggregate compensation in 2012 of $12.7 million cash, exercised options and realized blocked shares to the tune of $4 million, and received 1.3 million options.

Gal recently met Teva CEO Dr. Jeremy Levin and CFO Eyal Desheh, and the subject of executive compensation arose in the conversation.

Teva, let us recall, is a dual-listed company, and as such is not obliged to publish the salaries of its senior managers like a company listed on the local stock exchange or like a US company listed on Wall Street. A class action was recently filed against the company, with a demand that it should disclose salary figures for its senior managers in past years. The lawsuit was filed by Professors Sharon Hannes and Ehud Kamar, specialists in corporate law.

In Teva's annual report, there are eleven managers described as senior, among them Levin; Desheh; Chief Scientific Officer Dr. Michael Hayden; and the heads of the geographic regions, Dr. Robert Koremans, Prof. Itzhak Krinsky, and Judith Vardi.

For the sake of comparison, in his last survey of the subject, Gal found that the total compensation of the five most senior executives at Mylan was $35 million; and at Momenta, $7 million. Gal also points out that compensation packages at Teva are based on reaching sales, cash flow and earnings per share targets, and that now, reaching cost cuts targets, which has become an important matter for Teva for the coming year, is part of performance measurement as well.

It will be recalled that Teva plans to cut costs by $1.5-2 billion in the coming years. In its last full report, Teva stated that the aggregate salary of five executives who left the company in 2012 (among them was its previous CEO, Shlomo Yanai), was $14.7 million.

Another matter that arose in Gal's conversation with Teva's senior management was raising the dividend. Following the meeting with Levin and Desheh, Gal estimates that, barring adverse events, Teva will raise its dividend in the fourth quarter of 2013 or the first quarter of 2014, but he adds, " management noted 'one should not buy Teva for the dividend' but rather for the stock appreciation which they believe they can deliver."

Gal comments on several drugs in Teva's pipeline, saying, "Teva is clearly excited about Laquinimod. This is an orally administered drug that Teva is developing for the treatment of multiple sclerosis. Today, the company reported that it had enrolled the first patient for the third Phase III clinical trial for the drug.

Teva has a market cap of $31.9 billion in New York and Tel Aviv.

Published by Globes [online], Israel business news - - on March 6, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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