Speaker 1: This is Bloomberg Business Week with Carol Masser and Jason
Speaker 1: Kelly on Bloomberg Radio. Of course, CEO of Teva Pharmaceutical
Speaker 1: truly a global executive in many ways, and this has
Speaker 1: been quite an assignment for you over the last couple
Speaker 1: of years, really coming to the end of a two
Speaker 1: year pretty intense restructuring. Uh, tell me what has been
Speaker 1: going on? Tell me what you essentially inherited two years ago. Yeah. So,
Speaker 1: so it has been a very big restructuring, probably one
Speaker 1: of the biggest in the pharmaceul industry. And the situation
Speaker 1: when I joined to it was really that the company
Speaker 1: had a very tough situation. It had done an acquisition
Speaker 1: here in the US of a comedy called Activists, which
Speaker 1: was another leading engineering company, and had taken on it
Speaker 1: to the tune of more than thirty four billion dollars.
Speaker 1: And then it had run into a price spiraled down
Speaker 1: on the whole U s Generic Managa, and at the
Speaker 1: same time it's big blockbuster, Kopacon, went off patent, so
Speaker 1: it was sort of phacing a loss of revenue to
Speaker 1: the tune of potentially five billion dollars, and its earnings
Speaker 1: were around five billions, which would wipe out the earnings basically,
Speaker 1: and then it's not good to have thirty four billion
Speaker 1: dollars of debt if you don't make any money. So
Speaker 1: so that was a situation when I started talking to
Speaker 1: the board about taking the position as CEO, and the
Speaker 1: simple math was that this could only be handled if
Speaker 1: we could reduce the cost dramatically, because we couldn't do
Speaker 1: anything about kopecs and going off pattern, and we couldn't
Speaker 1: really change the US generic situation short term. So we
Speaker 1: started the restructuring plan which has been now executed over
Speaker 1: the full year of eighteen and nineteen, where we reduced
Speaker 1: the number of manufacturing sites by more than twenty from
Speaker 1: eighty to below sixty, the workforce by more than thirteen thousand,
Speaker 1: and closed a lot of officers, laboratories and so on.
Speaker 1: All in all, we're using the total spend based by
Speaker 1: three billion US dollars, which basically leads you to that
Speaker 1: the revenue dropped five billion, their earnings went away. We
Speaker 1: saved three billions, so now we still make three billions,
Speaker 1: which is enough to really serve the debt, which we've
Speaker 1: also managed in the meantime to bring down from thirty
Speaker 1: four billion to now just below twenty five billions. So
Speaker 1: the math is relatively simple, and yet this is a
Speaker 1: complicated process. At what point did you feel like, along
Speaker 1: the way along this sort of two year journey, Okay,
Speaker 1: now we are sort of on the right track, was
Speaker 1: there a key decision, either a key closure or a
Speaker 1: key investment that you felt like was an inflection point.
Speaker 1: So I'm not saying this to be bragging, but I
Speaker 1: felt from the beginning that the analysis I did show
Speaker 1: that this could be done, and I immediately created my
Speaker 1: new management team when I started. Within ten days, I
Speaker 1: had a point of the new management team. And when
Speaker 1: I've done that and I knew that they were on board,
Speaker 1: I was pretty convinced that we would do it. Interesting,
Speaker 1: we had a little bit of political challenge in Israel
Speaker 1: with the Israeli government with Nitzan Yao, but we all
Speaker 1: came that and stood our ground, and we have basically
Speaker 1: executed the whole plan the way we re laid it
Speaker 1: out in the beginning. Actually now in the next phase,
Speaker 1: which links to our long term financial targets that we
Speaker 1: put out two years ago, because now we're getting to
Speaker 1: the phase where we can grow modestly but we can
Speaker 1: grow again on the top line and grow the bottom line,
Speaker 1: grow the earnings, and we can also start optimizing on
Speaker 1: a more granular level the whole global value chain. Right,
Speaker 1: And so as you think about the pipeline as it were,
Speaker 1: we've only got about a minute left in this segment,
Speaker 1: what are you singularly most excited about? So, what I'm
Speaker 1: excited about that we have created a very focused pipeline
Speaker 1: focused on biopharmaceuticals, both innovative biologics and biosimilars, and we
Speaker 1: have a I think of a great pipeline now twenty
Speaker 1: five projects, some of them very very innovolved, innovative, some
Speaker 1: with partners like we have a protocol in Facino map
Speaker 1: with Regeneral on new pay communication by Logic, which will
Speaker 1: be fantastic if it passes through the phase three. And
Speaker 1: we have launched some exciting new by Logics such as
Speaker 1: a Jovi which is a treatment for chronic migraine, which
Speaker 1: is fantastic as well. So I'm very excited both about
Speaker 1: the pipeline and about the fact that we've stabilized our
Speaker 1: generic business. All Right, you're listening to Bloomberg, but sweet
Speaker 1: chasing Kelly here in New York City alongside Core. Shelt
Speaker 1: He is the CEO of tele Phormaceutical based in Tel Aviv.
Speaker 1: Here in New York City today, So tell me about
Speaker 1: Core the outlook for as you look ahead. You're through
Speaker 1: this restructuring, So what does the rest of the year
Speaker 1: look like? So this year looks a lot more stable
Speaker 1: than we've seen the past. We have very big dynamics
Speaker 1: with loss of revenue on kapas and with big changes
Speaker 1: than the generic revenue. For this year, we expect a
Speaker 1: more calm development. Will still lose a little bit of
Speaker 1: revenue on on Capaccent, but then we will have growth
Speaker 1: in both our anti migrain drug a Jovi and the
Speaker 1: movement disordered drop called Ostato for hundredsons deceas ands out
Speaker 1: of this Kenesia. They will both be growing, so we'll
Speaker 1: get a nice marginal growth on revenue. The generic business
Speaker 1: worldwide we expect to be roughly stable, so we're expecting
Speaker 1: a modest growth in revenues and a modest growth also
Speaker 1: in earnings and and a good strong cash flow. So
Speaker 1: this might not seem terribly exciting, but it's a major
Speaker 1: change from the last three years where we've had you know,
Speaker 1: significant reduced revenues, significant reduced earnings. So we're sort of
Speaker 1: turning the corner slowly here. And I've been saying before
Speaker 1: the nineteen will be the trough here to the bottom
Speaker 1: of the trough. But now we sort of getting to
Speaker 1: where the trough starts. Slowly, slow, slow awards but not dramatic. Well,
Speaker 1: and in some ways I would imagine maybe a little
Speaker 1: bit boring is a little bit good at this point
Speaker 1: after a couple of years of drama, I can tell
Speaker 1: you boring is definitely good and hitting the guidance is
Speaker 1: definitely good. So so I like boring. Yeah, of course
Speaker 1: it's still with me. He is the CEO of Teva
Speaker 1: Pharmaceutical based in Tel Aviv, here in New York City today,
Speaker 1: thank you for hanging with me. Let's talk about the
Speaker 1: world of generics because here in the United States, I
Speaker 1: feel like, especially it's so important given the cost of drugs,
Speaker 1: the cost of healthcare. Help me understand the economics of it,
Speaker 1: both for you and and candidly for our listeners and
Speaker 1: viewers out there as they think about their own health. Yeah,
Speaker 1: let me try and give you a little bit of
Speaker 1: the big picture. The way drug discovery has been organized
Speaker 1: in you say, the Western world for a long time
Speaker 1: since the Second World War, is really that components have
Speaker 1: been incentivized to innovate and find new drugs. But because
Speaker 1: it's so risky, ninety nine out of a hundred projects
Speaker 1: that you initiate fail, there's been sort of an extra
Speaker 1: premium given, which is basically the patent legislation. Now, this
Speaker 1: is worked really well and has made that investors are
Speaker 1: willing to take the risk and invest in drug development,
Speaker 1: and we've seen a phenomenal development over the last fifty
Speaker 1: years of many new drugs coming to the market. Now,
Speaker 1: the way it then works as you get pattern exclusivity
Speaker 1: for a period, let's say ten years, and then when
Speaker 1: the pattern expires, generic manufacturers will take over and will
Speaker 1: manufacture the drug and it will become much much cheaper,
Speaker 1: and it will be widely way little bile worldwide, so
Speaker 1: not just in the US, but worldwide. Now, this in
Speaker 1: principle is a very good model because secures long term,
Speaker 1: very cheap supplies of all kind of drugs, and it
Speaker 1: also secures that there's investments in new products. So what's
Speaker 1: happened over time is, of course more and more products
Speaker 1: go of patent so today way more than all pharmaceuticals
Speaker 1: used in the United States is generic products. Now we're
Speaker 1: the leaders in that. So we produced you know, more
Speaker 1: than one out of ten pills, tablets, medications, injections that
Speaker 1: are taking every year, every single day in in the US.
Speaker 1: They come from US, come from Teva, and worldwide, were
Speaker 1: the leaders with the biggest manufacturer worldwide, with you know,
Speaker 1: many manufactories around the world, and we do a lot
Speaker 1: of different products. So what's been happening then and hurting
Speaker 1: us a little bit financially and we now adjusted to
Speaker 1: it was really that we have been accumulating many different
Speaker 1: companies twenty mergers over twenty years, and then all of
Speaker 1: a sudden, the FDA started approving a lot of Chinese
Speaker 1: and engine manufacturers, and prices on US generics went even lower.
Speaker 1: Some of it even went so low that we couldn't
Speaker 1: compete because the manufacturing costs in India China is significantly
Speaker 1: lower for a lot of reasons, the cost of labor,
Speaker 1: environmental laws, and so on. So we had to say
Speaker 1: to our customers, well, we can't go to the price
Speaker 1: level and me sustainable. Now we provide a high quality product,
Speaker 1: we secure deliveries, secure supplies, and we had a good
Speaker 1: conversation with the big customers, which are from the free
Speaker 1: big buying groups, three big groups that also include pharmacists
Speaker 1: and so on, and I think we reach a good
Speaker 1: compromise where we still supply very very cheap medication, but
Speaker 1: at a level where it's sustainable. And and this is
Speaker 1: very important because if you have a product like um
Speaker 1: you and I just talked about EpiPen. We have a
Speaker 1: product where there's only one supplier and the pattern that expired,
Speaker 1: and that manufacturer gets some quality issues and manufacturing issue,
Speaker 1: then it's a real issue for society that there's not
Speaker 1: the backup suppliers. So ideally, when a product that has
Speaker 1: gone off pattern, you would like to see at least
Speaker 1: two or three companies get approval, and you'd like to
Speaker 1: see a much cheaper price, but a sustainable price where
Speaker 1: you have safety of supply, because for the public, it's
Speaker 1: important that prices come down, but it's also important that
Speaker 1: the quality is always perfect, and it's important you can
Speaker 1: always get the drug when you go to the pharmacy.
Speaker 1: And that's really you know, what what I want to
Speaker 1: in sure is that the product we do with TV,
Speaker 1: they're always the right quality and you can always depend
Speaker 1: on that you can get the product. And I'm very
Speaker 1: happy that without generic Eppin, we've been able to say
Speaker 1: that anybody in the US, if they go to the
Speaker 1: pharmacy and they don't have the original product, they can
Speaker 1: always within twenty four hours scated from US. Interesting, and
Speaker 1: we shave it within twenty four hours to any pharmacy.
Speaker 1: So in the explanation you just gave, one of the
Speaker 1: things that becomes clear is drugs. Drug pricing setting aside,
Speaker 1: even R and D and development is complicated. And yet,
Speaker 1: as you are very much aware, we are in a
Speaker 1: political presidential presidential election you're here in the United States,
Speaker 1: drug pricing will continue to be a key issue. It
Speaker 1: is often fair to say oversimplified by politicians and consumers.
Speaker 1: What do you expect will happen this year? What can
Speaker 1: you do to sort of help inform the debate so
Speaker 1: that it proceeds in in in a rational way. Yes,
Speaker 1: we've just released actually a report, an independent economic report
Speaker 1: on our worldwide activities. And in this report you will
Speaker 1: see that generics in general, of course lower healthcare costs,
Speaker 1: and the generics that we from server supplies to the
Speaker 1: American market actually in two thousand and eighteen lower the
Speaker 1: cost compared to the originator prices by forty one point
Speaker 1: nine billion US dollars, a huge amount, and part of
Speaker 1: that was actually the patient out of pocket cost. So
Speaker 1: the patients in the US saved six billion dollars are
Speaker 1: not having to pay the high copace that goes with
Speaker 1: with patented products. So are generics the answer, I mean,
Speaker 1: our generics the answer to sort of the drug pricing
Speaker 1: conundru No, it's not the whole answer, but it's a
Speaker 1: big part of the answer, which is why more than
Speaker 1: nine of all drugs consumed in the US are generics. Amazing,
Speaker 1: and generics are cheap. I mean the U s generic
Speaker 1: pricing has come down dramatically. It's now at a level
Speaker 1: where it's at the same level or below Europe. So
Speaker 1: so you don't have this disparity that you're discussing. Then
Speaker 1: on specialty products, it's a very complicated situation. As you said,
Speaker 1: there's a lot of payers, there's a lot of buyers,
Speaker 1: there's a lot of intermediates, so it makes it very
Speaker 1: very common. There's no simple solution. I've been supporting very much.
Speaker 1: What also farmers bringing forward that for sure, transparency is
Speaker 1: good because if you get more transparency on pricing on rebates,
Speaker 1: that can only help making the system of efficient. I'm
Speaker 1: not saying it's the solution to everything, but I think
Speaker 1: at least it's something that could be done without any
Speaker 1: major harm to anybody. And why would you not want transparency?
Speaker 1: You could see right? All right? I want to wrap up.
Speaker 1: Only got about a minute left. But you know, having
Speaker 1: gone through this pretty dramatic restructuring, you're an experienced executive.
Speaker 1: What was the thing you learned the most from sort
Speaker 1: of going through this process? From taking the job, as
Speaker 1: you say, ten days in, you sort of had a
Speaker 1: good sense that it was going to work. But I
Speaker 1: have to think you learned something along the way. I
Speaker 1: think I was confirmed in my sort of gradual stronger
Speaker 1: and stronger believing that when you know something has to
Speaker 1: be done, you might as well do it as fast
Speaker 1: as possible because it will actually work better if you
Speaker 1: do it faster. And what work do you have left
Speaker 1: to do? What's the big project you have left to
Speaker 1: do to really be able to look back and say,
Speaker 1: all right, success. So I got two really big challenges left.
Speaker 1: One is to optimize our whole manufacturing really optimize it.
Speaker 1: We've of course done a lot, but there's still a
Speaker 1: long way to go before we can say we have
Speaker 1: perfect logistics, we have perfect value chain optimization, we have
Speaker 1: perfect optimization of all the technologies we're using. So that's
Speaker 1: the one thing I really want to achieve. And the
Speaker 1: other thing I want to achieve is to see some
Speaker 1: major new launches coming out of our pipeline and see
Speaker 1: the great products we have in our stato and enjoy
Speaker 1: we really grow to a global strength and giving the
Speaker 1: benefits to patients worldwide from these new innovations. Right Courseial,
Speaker 1: thank you so much. Really a pleasure to spend some
Speaker 1: time with you, CEO of Teva Pharmaceutical based in Tel Aviv,
Speaker 1: here with me in New York City.