Teva share price up 75% since Schultz became CEO

Kare Schultz Photo: PR
Kare Schultz Photo: PR

Kare Schultz has stabilized the ship but faces enormous opposition to his streamlining plan.

Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) CEO Kare Schultz is not popular with the 14,000 employees worldwide who are being laid off but the Israeli pharmaceutical giant's shareholders are more than satisfied with his performance so far.

The Dane, who is receiving a $20 million signing on bonus, took over at the helm on November 1. The following day Teva published disappointing third quarter results, which saw the share price slump to a low of $10.85. Last night on Wall Street, Teva share price closed up 0.91% at $18.92 - in other words up nearly 75% since November 2. The company's market cap of $19.22 billion means that en route it has also reclaimed the symbolic title of Israel's most valuable company, succeeding Check Point Software Technologies Ltd. (Nasdaq: CHKP), which is worth $16.8 billion.

Nevertheless, Schultz has a long way to go if his tenure is to be deemed a success. Teva's share price hit almost $70 in August 2015, giving a market cap of $70 billion, when the $40 billion acquisition of Allergan's generics division Actavis was announced. It was worth less than half at $32 in August when the second quarter results were announced and guidance was cut and following which the share price halved again before plunging further at after the third quarter results.

Shareholders aside, Schultz has so far not cut a popular figure in Israel. As negotiations with the workers committees and the government (which has provided Teva with tax breaks worth billions in recent years) begin in earnest much of the comment about Schultz has been bigoted and xenophobic. For example, he has been berated for taking time off for Christmas.

Other critics have had more serious points to make. Activist shareholder Benny Landa is disappointed that Teva has jettisoned much of its innovative R&D, which was led by axed chief scientist Dr. Michael Hayden. Prime Minister Benjamin Netanyahu is disappointed that Schultz is laying off 1,750 Israeli employees and closing down entire Israeli factories when he could be making deeper cuts overseas.

Schultz has stood firm in the face of enormous pressure in Israel. He has promised to help re-train laid off employees and help them find work and is committed to keeping Teva's headquarters in Israel.

The past two months have provided a stark contrast with the traumatic period that preceded it. For more than a year, during the final months of Erez Vigodman's tenure before he stepped down in February and Yitzhak Peterburg's temporary watch as interim CEO, Teva seemed like a leaky ship battered by stormy waters and sinking beneath the weight of a $35 billion debt.

Schultz has stabilized the ship by throwing over an enormous amount of ballast and his management skills will ultimately be judged by whether the cuts provide a platform for future profit, prosperity and growth. At least there is a feeling that the company has a captain at the helm who has plotted a course, is determined to stick to it, and seems to know where he is going.

Published by Globes [online], Israel business news - - on December 27, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Kare Schultz Photo: PR
Kare Schultz Photo: PR
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018