Teva CEO on Staying Competitive in Generic Drug Market

of the biggest in the pharmaceul industry. And the situation when I joined to it was really that the company had a very tough situation. It had done an acquisition here in the US of a comedy called Activists, which was another leading engineering company, and had taken on it to the tune of more than thirty four billion dollars.

And then it had run into a price spiraled down on the whole U s Generic Managa, and at the same time it's big blockbuster, Kopacon, went off patent, so it was sort of phacing a loss of revenue to the tune of potentially five billion dollars, and its earnings were around five billions, which would wipe out the earnings basically, and then it's not good to have thirty four billion

dollars of debt if you don't make any money. So so that was a situation when I started talking to the board about taking the position as CEO, and the simple math was that this could only be handled if we could reduce the cost dramatically, because we couldn't do anything about kopecs and going off pattern, and we couldn't

really change the US generic situation short term. So we started the restructuring plan which has been now executed over the full year of eighteen and nineteen, where we reduced the number of manufacturing sites by more than twenty from eighty to below sixty, the workforce by more than thirteen thousand, and closed a lot of officers, laboratories and so on. All in all, we're using the total spend based by three billion US dollars, which basically leads you to that

the revenue dropped five billion, their earnings went away. We saved three billions, so now we still make three billions, which is enough to really serve the debt, which we've also managed in the meantime to bring down from thirty four billion to now just below twenty five billions. So the math is relatively simple, and yet this is a

complicated process. At what point did you feel like, along the way along this sort of two year journey, Okay, now we are sort of on the right track, was there a key decision, either a key closure or a key investment that you felt like was an inflection point. So I'm not saying this to be bragging, but I felt from the beginning that the analysis I did show that this could be done, and I immediately created my new management team when I started. Within ten days, I

had a point of the new management team. And when I've done that and I knew that they were on board, I was pretty convinced that we would do it. Interesting, we had a little bit of political challenge in Israel with the Israeli government with Nitzan Yao, but we all came that and stood our ground, and we have basically executed the whole plan the way we re laid it

out in the beginning. Actually now in the next phase, which links to our long term financial targets that we put out two years ago, because now we're getting to the phase where we can grow modestly but we can grow again on the top line and grow the bottom line, grow the earnings, and we can also start optimizing on a more granular level the whole global value chain. Right, And so as you think about the pipeline as it were, we've only got about a minute left in this segment,

what are you singularly most excited about? So, what I'm excited about that we have created a very focused pipeline focused on biopharmaceuticals, both innovative biologics and biosimilars, and we have a I think of a great pipeline now twenty five projects, some of them very very innovolved, innovative, some with partners like we have a protocol in Facino map with Regeneral on new pay communication by Logic, which will

be fantastic if it passes through the phase three. And we have launched some exciting new by Logics such as a Jovi which is a treatment for chronic migraine, which is fantastic as well. So I'm very excited both about the pipeline and about the fact that we've stabilized our generic business. All Right, you're listening to Bloomberg, but sweet chasing Kelly here in New York City alongside Core. Shelt He is the CEO of tele Phormaceutical based in Tel Aviv.

Here in New York City today, So tell me about Core the outlook for as you look ahead. You're through this restructuring, So what does the rest of the year look like? So this year looks a lot more stable than we've seen the past. We have very big dynamics with loss of revenue on kapas and with big changes than the generic revenue. For this year, we expect a

more calm development. Will still lose a little bit of revenue on on Capaccent, but then we will have growth in both our anti migrain drug a Jovi and the movement disordered drop called Ostato for hundredsons deceas ands out of this Kenesia. They will both be growing, so we'll get a nice marginal growth on revenue. The generic business worldwide we expect to be roughly stable, so we're expecting a modest growth in revenues and a modest growth also

in earnings and and a good strong cash flow. So this might not seem terribly exciting, but it's a major change from the last three years where we've had you know, significant reduced revenues, significant reduced earnings. So we're sort of turning the corner slowly here. And I've been saying before the nineteen will be the trough here to the bottom of the trough. But now we sort of getting to

where the trough starts. Slowly, slow, slow awards but not dramatic. Well, and in some ways I would imagine maybe a little bit boring is a little bit good at this point after a couple of years of drama, I can tell you boring is definitely good and hitting the guidance is definitely good. So so I like boring. Yeah, of course it's still with me. He is the CEO of Teva Pharmaceutical based in Tel Aviv, here in New York City today,

thank you for hanging with me. Let's talk about the world of generics because here in the United States, I feel like, especially it's so important given the cost of drugs, the cost of healthcare. Help me understand the economics of it, both for you and and candidly for our listeners and viewers out there as they think about their own health. Yeah, let me try and give you a little bit of

the big picture. The way drug discovery has been organized in you say, the Western world for a long time since the Second World War, is really that components have been incentivized to innovate and find new drugs. But because it's so risky, ninety nine out of a hundred projects that you initiate fail, there's been sort of an extra

premium given, which is basically the patent legislation. Now, this is worked really well and has made that investors are willing to take the risk and invest in drug development, and we've seen a phenomenal development over the last fifty

years of many new drugs coming to the market. Now, the way it then works as you get pattern exclusivity for a period, let's say ten years, and then when the pattern expires, generic manufacturers will take over and will manufacture the drug and it will become much much cheaper, and it will be widely way little bile worldwide, so not just in the US, but worldwide. Now, this in principle is a very good model because secures long term, very cheap supplies of all kind of drugs, and it

also secures that there's investments in new products. So what's happened over time is, of course more and more products go of patent so today way more than all pharmaceuticals used in the United States is generic products. Now we're the leaders in that. So we produced you know, more than one out of ten pills, tablets, medications, injections that are taking every year, every single day in in the US.

They come from US, come from Teva, and worldwide, were the leaders with the biggest manufacturer worldwide, with you know, many manufactories around the world, and we do a lot

of different products. So what's been happening then and hurting us a little bit financially and we now adjusted to it was really that we have been accumulating many different companies twenty mergers over twenty years, and then all of a sudden, the FDA started approving a lot of Chinese and engine manufacturers, and prices on US generics went even lower.

Some of it even went so low that we couldn't compete because the manufacturing costs in India China is significantly lower for a lot of reasons, the cost of labor, environmental laws, and so on. So we had to say to our customers, well, we can't go to the price

level and me sustainable. Now we provide a high quality product, we secure deliveries, secure supplies, and we had a good conversation with the big customers, which are from the free big buying groups, three big groups that also include pharmacists and so on, and I think we reach a good compromise where we still supply very very cheap medication, but at a level where it's sustainable. And and this is very important because if you have a product like um

you and I just talked about EpiPen. We have a product where there's only one supplier and the pattern that expired, and that manufacturer gets some quality issues and manufacturing issue, then it's a real issue for society that there's not

the backup suppliers. So ideally, when a product that has gone off pattern, you would like to see at least two or three companies get approval, and you'd like to see a much cheaper price, but a sustainable price where you have safety of supply, because for the public, it's important that prices come down, but it's also important that the quality is always perfect, and it's important you can always get the drug when you go to the pharmacy.

And that's really you know, what what I want to in sure is that the product we do with TV, they're always the right quality and you can always depend on that you can get the product. And I'm very happy that without generic Eppin, we've been able to say that anybody in the US, if they go to the pharmacy and they don't have the original product, they can always within twenty four hours scated from US. Interesting, and we shave it within twenty four hours to any pharmacy.

So in the explanation you just gave, one of the things that becomes clear is drugs. Drug pricing setting aside, even R and D and development is complicated. And yet, as you are very much aware, we are in a political presidential presidential election you're here in the United States, drug pricing will continue to be a key issue. It is often fair to say oversimplified by politicians and consumers. What do you expect will happen this year? What can you do to sort of help inform the debate so

that it proceeds in in in a rational way. Yes, we've just released actually a report, an independent economic report on our worldwide activities. And in this report you will see that generics in general, of course lower healthcare costs, and the generics that we from server supplies to the American market actually in two thousand and eighteen lower the cost compared to the originator prices by forty one point nine billion US dollars, a huge amount, and part of

that was actually the patient out of pocket cost. So the patients in the US saved six billion dollars are not having to pay the high copace that goes with with patented products. So are generics the answer, I mean, our generics the answer to sort of the drug pricing conundru No, it's not the whole answer, but it's a big part of the answer, which is why more than nine of all drugs consumed in the US are generics. Amazing, and generics are cheap. I mean the U s generic

pricing has come down dramatically. It's now at a level where it's at the same level or below Europe. So so you don't have this disparity that you're discussing. Then on specialty products, it's a very complicated situation. As you said, there's a lot of payers, there's a lot of buyers, there's a lot of intermediates, so it makes it very very common. There's no simple solution. I've been supporting very much.

What also farmers bringing forward that for sure, transparency is good because if you get more transparency on pricing on rebates, that can only help making the system of efficient. I'm not saying it's the solution to everything, but I think at least it's something that could be done without any major harm to anybody. And why would you not want transparency? You could see right? All right? I want to wrap up.

Only got about a minute left. But you know, having gone through this pretty dramatic restructuring, you're an experienced executive. What was the thing you learned the most from sort of going through this process? From taking the job, as you say, ten days in, you sort of had a good sense that it was going to work. But I

have to think you learned something along the way. I think I was confirmed in my sort of gradual stronger and stronger believing that when you know something has to be done, you might as well do it as fast as possible because it will actually work better if you do it faster. And what work do you have left to do? What's the big project you have left to do to really be able to look back and say, all right, success. So I got two really big challenges left.

One is to optimize our whole manufacturing really optimize it. We've of course done a lot, but there's still a long way to go before we can say we have perfect logistics, we have perfect value chain optimization, we have perfect optimization of all the technologies we're using. So that's

the one thing I really want to achieve. And the other thing I want to achieve is to see some major new launches coming out of our pipeline and see the great products we have in our stato and enjoy we really grow to a global strength and giving the benefits to patients worldwide from these new innovations. Right Courseial, thank you so much. Really a pleasure to spend some time with you, CEO of Teva Pharmaceutical based in Tel Aviv, here with me in New York City.