Teva Shareholders Criticize Generics CEO Switch

09.12.2016 -

Shares of Israeli drugmaker Teva took a hit earlier this week when the company announced that its generics CEO, Siggi Olafsson, was leaving the company and would be replaced by European generics head, Dipankar Bhattacharje. Teva did not explain the move, which it officially described as a retirement, leaving analysts as well as shareholders puzzled as to why.

Financial analysts turned thumbs down on the Teva move in notes to shareholders, criticizing especially the timing of the departure only two and half months after the company bought Allergan's generics unit, Actavis, in a $40.5 billion deal. While the official line was that Olafsson had decided it was time to move on after wrestling with tough challenges in 2016, the consensus appeared to be that his years of experience left him uniquely qualified to run the combined generics businesses.

Comments on the Olafsson’s departure focused in particular on the fact that the Iceland native had worked in the Actavis organization from 2003 to 2014, including a two-year-stint as CEO. That experience, coupled with his recent history at Teva, “should have reduced the risks tied to such a complex integration,” a Wells Fargo analyst wrote to clients. He added that the departure lends further uncertainty to a business that has been underperforming throughout 2016.

Some commentators expressed concern that Olafsson’s exit could prompt the departure of other managers, with one remarking that, if the team falls apart, the business “will be set adrift again,” jeopardizing the stability his leadership had brought.

Teva shareholders have had a rough ride this year, hit by delays on the Allergan deal, a generics price erosion and the legal struggle with Mexican generics acquisition Rimsa, which it acquired in March and filed fraud charges against in September.  The company also has had to deal with a US Justice Department investigation of the generics industry. Its stock has lost 43.5% so far this year, compared with an S&P 500 increase of about 8%, analysts noted.