from the April 2010 issue

Teva at the Top of the Generics

Eli Hurwitz's 30 year career with Teva came to an end when he stepped down as Chairman due to illness. The one time kibbutznik merged a number of small pharmaceutical companies into the kernel which became the world's largest generic company. The acquisition of German Ratiopharm by Teva for Euro 3.6 billion marked the height of the career of its Chairman Eli Hurwitz. In the past few years Hurwitz successfully launched acquisitions in excess of $20 b. Hurwitz's career was one of a kibbutznik making good. The first major business opportunity for Teva came during the Second World War Israel could not acquire pharmaceuticals and this offered an opportunity for rapid growth.

Teva began to expand geographically in the early 1980s. Eli Hurwitz, joined the company in a junior management position after graduating in economics and business administration from Hebrew Unversity in 1957, was destined to transform Teva into a global pharmaceutical powerhouse. He perceived an opportunity to penetrate the U.S. market when the federal Waxman- Hatch Act passed Congress in 1984. This legislation concerned generic drugs, treatments that have lost their patent protection. Also known as multi-source or offpatent medicines, generics are chemically identical to branded prescription drugs, but they are priced 30 to 70 percent less than patented versions.

Hurvitz used the generics segment as Teva's entree into the U.S. pharmaceutical market. In 1985, the company forged an agreement with chemical conglomerate W.R. Grace to create TAG Pharmaceuticals, a 50-50 joint venture. In 1985, TAG acquired Lemmon Co., a Pennsylvania-based company. Lemmon became the sales and distribution arm for generics manufactured by Teva in Israel. Although CEO Hurvitz later said that "an Israeli who's coming to the States has a David and Goliath syndrome," he reminded himself that little David prevailed in that Biblical battle.

The potential Teva saw in Lemmon soon turned to profits; the U.S. venture's sales more than doubled from $17 Teva million at the time of its acquisition to about $40 million in 1987, by which time it was marketing seven generic versions of branded drugs.

The company's first major new drug, known as Copaxone, was discovered more than two decades earlier in the laboratories of Israel's Weizmann Institute, where doctoral student Dvora Teitelbaum was studying the use of synthetic proteins to quell multiple sclerosis attacks in animals. Together with Professors Michael Sela and Ruth Arnon, Teitelbaum spent 15 years isolating and researching the polymer COP-1 (later branded Copaxone). Current global sales of Copaxone exceed $1.0 billion a year

Reprinted from the Israel High-Tech & Investment Report April 2010

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