1. Enough with the sentiment. Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) is Teva. The multinational is not the private or national baby of Israel's citizens. It was once, but it spread its wings and flew far and wide long time ago. Teva is a global corporation, trustworthy, and also manipulative when necessary.
American blood flows in Teva's veins. It is headed by a chairman named Phillip and a CEO named Jeremy. It is a company that is historically registered with the Israeli Corporations Authority and is beloved of Israeli long-term savings portfolios, but for a long time has thought, eaten, spoken, and dressed as an American. It is a company with a market cap of $37 billion. Even if we were to aggregate the market cap of all of Israel's banks, defense companies, and a few more "major" companies, we would not reach this figure.
The company, which has been on the up and up for decades, now faces a big problem: a real threat to a substantial part of its profits. Three months ago, a US judge ruled that the patent on Teva's flagship product, the one that boosted it to the big leagues, Copaxone, will expire in mid-2014. In other words, very soon, Teva's business, profits, and market cap are liable to plummet, slide, fall. Teva must therefore reorganize its business, including firing employees in Israel and around the world.
2. That is the whole story. From this critical point of view, the parties are invited to account for themselves. The board of directors and executives - how they relied far too much on ties with global centers of power, on eminent lawyers, sophisticated accountants, smooth public relations experts and lobbyists, and politicians with their own interests, who promised that they would, with the help of this person or the complicity of that one, deflect the axe: extend the patent; and through threats or appeals to national empathy, ensure a zero tax rate. But they failed to prepare for the day after Copaxone, they did not prepare an adequate alternative for the activity that generated billions of dollars in profits.
Among those who should be doing some soul-searching is Teva's board of directors, which also approves huge salaries for the company's senior manager, NIS 15 million a year for Levin, and for Teva's Israeli face, Chaim Hurvitz, a director and shareholder, who was supposed to succeed his father, the legendary Eli Hurvitz, as the fixer in Israel's power centers, but who has failed to deliver the same quality of goods. Hurvitz and the company failed to see that the Israeli mood had changed, that figures such as NIS 13-14 billion in tax breaks over the past six years had just in the past few months become disclosed to full view as a result of a "Globes" petition to the court.
Although Hurvitz succeeded in July in persuading the Knesset Finance Committee not to raise the tax rate in the periphery to 10%, as requested by the Ministry of Finance, and to accept a lower rate, his ability to change things is diminishing daily, and the public grudge against the "people's share" is growing.
3. Israel must do some soul searching of its own over aid for establishing enterprises in the periphery. First, how is it that such a small country has a periphery at all; and how did it happen that the tens of billions poured out since 1948, when the politicians began babbling about the importance of the Galilee and the Negev, did not do their job? Second, how is it possible both to compete in the world and give public money for the establishment of enterprises and create jobs in the periphery? But to do this properly, efficiently, and flexibly. Not to continue to throw fortunes at a few well-connected corporations, but to let a broad swathe of enterprises benefit.
4. If it turns out that Teva's story about the layoffs was deliberately inflated for extraneous reasons, such as negotiations with the workers over pay and as a way to pressure the government for tax breaks on its huge annual and trapped profits, then it is clear that a total severing of all nationalistic sentiments is needed. This means retroactive change of all the different benefits.
5. Alternatively, assuming that Teva's dramatic announcement of unprecedented layoffs in Israel and around the world was preceded by thorough, honest, credible, fair, and direct thinking, and if Histadrut chairman Ofer Eini insists on punishing Teva under the banner of organized labor, and strikes the company's plants in Israel, possibly joined by other plants as well to enhance the threat, there will be no alternative but to pass a law to restrict the right to strike in Israel.
Published by Globes [online], Israel business news - www.globes-online.com - on October 14, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013