Eli Hurvitz

July 1 1995 by Jonathan Burton


Eli Hurvitz studied economics, not medicine, but for nearly two decades he’s been the chief doctor at Teva Pharmaceutical Industries. Hurvitz, who became CEO in 1976, has built Teva into Israel‘s largest drugmaker and a top player in the scrappy, high-stakes generic drug industry. Now Hurvitz is writing Teva a new prescription. While generic drug sales will remain its backbone, the company is awaiting clearance from the U.S. Food and Drug Administration for Copaxone, its first major proprietary drug, developed to fight multiple sclerosis.

Despite Copaxone’s blockbuster potential, it won’t be easy to move into branded drugs. Industry dynamics-already tough-are changing. Competition among generic companies is increasing. Many are consolidating (Hurvitz is looking for acquisitions; others would like to sell). And in the midst of the turmoil is Teva, a non-U.S. company navigating the huge and unforgiving U.S. marketplace.

“This is a muscle business,” Hurvitz says. “Those who are stronger survive and make money.”

That, Teva has done. Sales have more than doubled in the last five years, to $587.7 million from $268.5 million. Operating income last year was $106.7 million, a 21 percent increase over $88 million in 1993-giving Teva an 18 percent profit margin. Financials are shaping up nicely so far in 1995, and some say sales could reach $1 billion within a few years. A major portion of that total could come from Copaxone. The most enthusiastic Wall Street analysts predict the drug could inject Teva with as much as $200 million in additional annual revenues by decade’s end. Even the most conservative expect the drug to boost Teva’s top-line by $100 million.

But to increase revenues, Teva must spend some money, too. Copaxone production facilities will cost the drugmaker roughly $10 million. And last year, Teva doled out $50.8 million-9 percent of sales-for crucial research and development. That’s a 62 percent leap over the $31.3 million it spent in 1993. However, on average, U.S. companies spend 16 percent of sales on R&D, and the biggest prescription drugmakers routinely spend more than $1 billion a year.

If Hurvitz is nervous, he doesn’t show it. Experience counts, and over the years, his decisions have been largely correct. His career began at tiny Assia Chemical Laboratories in 1953, shortly after Israel became independent. Hurvitz held various positions for the first 10 years before moving into management. When Assia was merged into Teva in 1976, he became CEO. Today, the 63-year-old executive is at the helm of a maturing company that has become a significant manufacturer of bulk pharmaceutical chemicals, and Israel‘s largest maker and distributor of veterinary products and hospital supplies.

Internationally, the company produces a broad line of generic drugs under license from the world’s leading drug firms and it exports to 50 countries. About two-thirds of Teva’s sales are outside Israel, mainly in the U.S., where it operates through the Lemmon Co., an American generic drugmaker acquired 10 years ago.

Hurvitz currently aims to make Teva a leading developer of drugs for central nervous system disorders. Copaxone is the key. So far, it is the only drug to specifically isolate MS, and it has fewer side effects than beta interferons, the general combatant drugs developed by Germany‘s Schering AG; Emeryville, CA-based Chiron; and Biogen in Cambridge, MA. Further down Teva’s pipeline are innovations for Alzheimer’s disease, Parkinson’s disease, and epilepsy.

With FDA approval of Copaxone still outstanding, Hurvitz is ever the optimist, saying the drug could be launched in the U.S. by mid-1996. The company has had a solid relationship with FDA regulators for its generic products. While there was a backlog at the agency last year, in which only one of Teva’s 22 applications to market new generics was approved, the company received five such approvals in the first two months of this year.

Since Teva has little experience selling proprietary drugs, Marion Merrell Dow will market Copaxone, which the Israeli company will own exclusively for seven years from the day it comes online. While such a joint venture is not necessarily the most profitable route, it should help Teva grab the market share it needs. And by the time Teva rolls out its second branded drug, Hurvitz predicts, it will have learned the ropes.

Still, Hurvitz hasn’t forgotten Teva’s first brush with the U.S. marketplace. It was daunting, to say the least. “An Israeli who’s coming to the States has a David and Goliath syndrome,” he explains. “He usually forgets who won this battle.

“We had the same syndrome: Are we going to compete with the Mercks of the world? How can we do that?” Hurvitz recalls. “But when we analyzed the situation carefully, we found we are not going to compete with Merck. We’re going to compete with generic companies that are not richer than us, stronger than us, bigger than us, or more sophisticated than us.”