Teva Investors May Question If Exec Departure Reflects Deeper Malaise

Bernstein said the departure of Siggi Olafsson is negative for Teva Pharmaceutical Industries Ltd (ADR) TEVA, as investors may fear the move is reflective of deeper malaise. ADRs of Teva were down 3.89 percent in Tuesday’s pre-market hours.

Olafsson's Departure

Teva announced that Olafsson is stepping down from his role of president and CEO of Teva's global generics and will be replaced by Dipankar Bhattacharjee, former president and CEO of Teva generics Europe.

“It appears that Siggi reached out to Erez [Vigodman, CEO] expressing his desire to retire. Erez decided it would be better to have him depart at the end of 2016, to allow the new management team to move forward,” analyst Aaron "Ronny" Gal wrote in a note.

It is to be noted that Olafsson was instrumental in overhauling Teva’s generics team post 2012 patent cliff with the acquisition of Actavis.

Retirement Unrelated To Recent Company News

Gal spoke to Vigodman, who reiterated that Olafsson's departure had nothing to do with Teva's recent board meeting, and the company is trying to retain the rest of the generics team.

“While Teva reiterated that the Actavis team knows Dipankar well, we are a bit concerned,” Gal highlighted.

Also, Olafsson has historically been a big communicator to Wall Street, and his absence will likely lead to further loss of confidence in the business. Although there will be a new communications team, it will take some time to build confidence.

Teva reaffirmed its 2016 guidance, but the analyst is not expecting a great 2017 from Teva's generics.

Gal reiterated his Outperform rating and $52 price target on Teva ADRs, which closed Monday’s trading at $37.04.