Vigodman is right medicine for Teva

Gali Weinreb

If the next Teva CEO has to be Israeli, then Erez Vigodman is the best man for the job says Sphera Fund's Ori Hershkowitz.

Almost two years ago Makhteshim Agan Industries Ltd. CEO Erez Vigodman spoke at a conference on strategic management held in memory of the legendary Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) CEO and chairman Eli Hurvitz. At the conference Vigodman recounted the measures he had taken to ensure his company's future. He said, "If these things remind you of the way in which Teva developed that is no coincidence. We look at Teva as being in a place that we would aspire to be. We also began in generics, as the leading generic agrochemicals company in the world and are trying to expand beyond that. We also manufacture chemicals, like Teva, but for treating plants and not for treating people."

During that period Vigodman was also serving as a director of Teva and he certainly would not have been thinking that in less than two years he would be a candidate to head the pharmaceutical giant. At that time Teva had just chosen a new CEO, Dr. Jeremy Levin, who had come from the pharmaceutical sector to lead a new multi-year strategy.

Ultimately Levin did not get to realize the strategy that had been outlined, and Teva is currently still at the same point: a company based mainly on generics and branded generics, with its main original ethical drug Copaxone about to lose its patent in the next year or two.

So Teva must currently decide if it is to take up the challenge of becoming a truly innovative company in the pharmaceutical industry, or if it will try to better fulfill its role as a generics company and only focus on innovation in niche areas - more or less the way forward that Levin sketched out.

Vigodman, who as "Globes" exclusively reported earlier this week is the leading candidate to become Teva CEO in January, is known for long-term, revolutionary thinking, and thus won't necessarily maintain the status-quo. He said at that same event, "The business world is changing at a non-linear pace that is getting faster. Good companies that don't respond to changes around them find themselves outside of their market."

Teva investors that have suffered a fall of 40% in the share price since March 2010 , perceive Vigodman as a CEO that can implement the planned program of cutbacks but Vigodman himself probably doesn't see things that way. At the same memorial event for Hurvitz he spoke at length about the measures at Makhteshim and said that he was operating in the perfect market: populations are growing, farming land is dwindling, and the world is approaching a critical threshold of undernourishment. Makhteshim has grown in this market just as Teva is continuing to grow in the pharmaceuticals market fed by an aging population. But it is clear that this won't continue.

Makhteshim's management under Vigodman saw tension grow around profitability and made savings on expenditure exactly as Teva currently plans. But he didn't make do with just that. He broke into the agro-biotech market (genetic engineering of crops and plant treatments and vaccinations), stressed more profitable markets and finally initiated the merger with China's ChemChina and swallowed up the relevant ChemChina activities into Makhteshim, making it a rival of major Chinese companies.

A similar challenge faces Teva but it won't be possible to reproduce the solution, and anyway Vigodman is not known as a fan of duplication.

What sort of manager is Erez Vigodman?

"Vigodman is a man with a lot of enterprise," said a person who worked with him before he was at Makhteshim when he was Strauss Group Ltd. (TASE:STRS) CEO. "At Strauss too Vigodman made some creative breakthroughs. Launching Israeli consumer products abroad was his idea."

It is also said of him that "He is dedicated to work in an unbelievable way," and he is "as straight as a ruler." With that he knows how to look after himself. Vigodman's huge salary put him at the top of Israel's salary league table year after year both at Makhteshim and Strauss.

In the past Vigodman said of himself, "One year after I came to Strauss Group, we conducted a discussion - where do we want to be in 6-8 years-time and we decided to write it as an interview with "Fortune." We saw our CEOs and asked them how they see the company in 2009 and we published an internal edition of "Fortune." In July 2009 we compared the article then with a real article written about us by the "Financial Times." The main things were all there - the company had become international, the water brand that hadn't even existed in 2002, the idea of selling hummus in the US, we were thinking from the future - looking back."

In a recent edition of "Lady Globes" the director of the employment firm Emda Nurit Berman said,"When Erez Vigodman assumed his post as Makhteshim CEO, he did the most courageous thing I have ever heard. He took the entire management and asked them to present their candidacy for their job. He put every manager's biggest fear on the table and said, 'You're all candidates.' He didn't fire anyone but changed around everybody's jobs. Everybody in senior management received a different role and was asked to fulfill it as a subordinate to him."

When Vigodman was appointed Makhteshim CEO in 2009 the market reacted with surprise because the sector was considered less glamorous than his job at Strauss. He said, "What attracted me to Makhteshim was the link between Israeli science, chemistry and agronomics and the transition to a very globally active company."

Vigodman is also known as somebody who can get along with every controlling shareholder and chairman, another important attribute at Teva.

Sensitivity to heritage

Sphera Fund Managing Partner, Head of Pharmaceutical Research Ori Hershkowitz said, "As soon as Teva decided that they now want to appoint an Israeli , it restricted itself to a CEO not working in the pharmaceutical sector because there are no global companies in that sector. With this constraint in mind Vigodman is certainly the best CEO that they can choose. He has real experience in managing a global company and has proven he can learn a field that is new to him and put it into practice successfully."

He added, "If it is worthwhile at the moment appointing an Israeli CEO rather than somebody in the field? Probably yes, first of all to unite the divided board of directors, somebody is required who knows the heritage of each of the directors and the company, and a strong, charismatic CEO is required. Levin slipped from power because he did not know how to navigate in the struggle between the Israeli camp and chairman Phillip Frost."

"US investors apparently relate with concern and a certain skepticism to an Israeli CEO that has no previous experience in managing pharmaceutical companies but the level of expectations at Teva is so low that he is likely to be given 100 days grace. If he speaks in language that the market can understand and presents a sustainable strategic plan, then he will be given permission to take off by the market."

Hershkowitz added, "The first thing that he must do is build a cadre of people that understand pharmaceuticals. Then he must conduct a comprehensive revision of the ethical R&D sector where there is huge chaos and an exaggerated tendency towards opportunism. If Teva really wants the DNA of an innovative company, it needs to build an R&D department that knows how to think before it begin projects that have synergy with existing products, and about production, and marketing."

Published by Globes [online], Israel business news - - on December 26, 2013

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

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