Teva Pharma

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Teva Pharmaceutical Industries, Ltd

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In Israel we have a 1970s song based on a poem from 1953 by Amir Gilboa about Theodor Herzl [the most important early advocate for the establishment of Israel]. It has a line in it about Herzl: “Suddenly a man rises in the morning, feels he is a people, and starts walking.” That is exactly what Hurvitz did. Suddenly he woke up in the morning, feels he is a giant world class company, and starts walking. No one, aside from Herzl, has accomplished anything as remotely as impressive in this country as Hurvitz. It was impossible, a million to one odds at best, and he still did it. He woke up one morning and started walking. — Ori Hershkovitz, equity analyst at Tel Aviv-based Leader & Company

The markets had not been kind to Teva Pharmaceutical during the first half of 2006. The stock had plunged nearly 30% from January 1 to June 30, erasing billions of dollars from the company’s market capitalization. Even good news, such as reports in July of Teva’s wildly successful introduction of generic Zocor—the largest blockbuster drug ever to go off-patent—had failed to boost the stock significantly. Since nearly every retirement fund and mutual fund in Israel invested in Teva, this drop had been felt throughout the population, in effect amounting to every Israeli family losing NIS 3000, or $675.1

Teva was more than the world’s leading producer of generic pharmaceuticals. It represented the gold standard of business in Israel. As the country’s largest public company and first true multinational, it had avoided the traditional conglomerate model of early Israeli enterprises, choosing instead a highly focused approach embraced by later generations of successful Israeli firms. With revenues growing from $91 million in 1985 to an estimated $8.5 billion in 2006, the company had bred a class of professional managers and scientists not before seen in the country. It had served as a bridge from Israeli science to the market and had been an important source of talent and capital for the growing biotechnology sector. It had also helped to catalyze the country’s domestic capital markets by being one of the early companies to list on the Tel Aviv Stock Exchange in 1968.2

In 2005, Teva’s $7.4 billion acquisition of Ivax catapulted the company to the top position among global generics in what one reporter dubbed “Generics’ answer to Big Pharma.”3 Less than one year later, Teva filled 20% more prescriptions than Pfizer, the world’s largest pharmaceutical company. It had a portfolio and pipeline twice the size of its next closest competitor.4 With a 20% share of the U.S. generics market by revenue and number of prescriptions, it was by far the largest player in the world’s largest market. Also, with the Ivax acquisition, Teva had gained the broadest geographic reach in the industry. One of the top players in Western Europe, it also had a significant operations in


Professors Tarun Khanna and Krishna Palepu and Doctoral Student Claudine Madras prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

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