Splitting Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) would not create value for shareholders, said Teva CFO Eyal Dehsheh at a Cowen & Company conference in Boston on Tuesday. The splitting of activities would mean, for example, the sale of parts of Teva or separating its generics and brand drugs businesses.
Asked by Cowen analyst Ken Cacciatore if Teva was considering breaking the business up - something that has generated a lot of speculation lately - Desheh said that the company had examined the possibility of creating more value for shareholders by splitting, and that there was a rationale to it, but that it was not the right way forward. "Teva is a very integrated company," he said. "Our conclusion is that it makes no sense at this point in time. We have a number of activities which are tightly integrated and combined, starting from manufacturing. I mean, we manufacture all products, specialty and generic alike, with the same system manufacturer."
Desheh added that the value chain started with the active pharmaceutical ingredients (API), R&D was combined, and that sales teams outside the US were combined. "To top all that, that split in the company will result in a huge tax event. And so, when you bring everything together it just doesn't make sense. It would not create value," he said.
Desheh said that splitting Teva would also stop the company's $2 billion cost reduction plan. "There is board-management unity, which I believe we have. I think Teva - the rumors about our death were a little premature."
Later in the exchange with Cacciatore, Desheh admitted something that the market has known for a long time: the acquisition of Cephalon for $6.8 billion in 2010 has not been a great success. It was intended to fill the vacuum left by Copaxone, Teva's flagship product, when it faces generic competition, but Cephalon's products have not yet gained traction.
"I'll be the first to admit it, the idea behind the Cephalon deal was the right idea. The target was not the right target. Okay, I think we understand it," said Desheh. "We'll make the most out of it. There are some products that will come out of the Cephalon portfolio that will create value, and, hopefully, tremendous value over time, but it was not the best acquisition that we've done."
Published by Globes [online], Israel business news - www.globes-online.com - on March 5, 2014
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