“You enter his office,” the angry scientist related, “and he knows exactly what is disturbing you…. He’s in his own place – he welcomes you with a smile, talks to you like a friend, as if you are his father…. And you talk about many different subjects. So how can you tell him something negative?”
•••
The major initiative to which Eli dedicated innumerable hours was Teva’s expansion in the United States, which he then viewed as the group’s main target. In 1987, as mentioned above, Teva made a public offering on the NASDAQ and Lemmon became its main distributor of goods in the US. Eli now spent a great deal of time and energy on increasing exports to the United States. The same year, he also decided to conduct a broad yet intensive discussion within Teva’s corporate management regarding the group’s strategy for the next three to five years. Ever since becoming CEO, he had tried to promote multi-year planning to achieve corporate goals. For the most part, he focused on the company’s future structure, marketing, and attempts to demarcate desired paths of growth. In practice, the insights and goals that he so intuitively instituted evolved into a management strategy that was devised and discussed over the course of many meetings. It was even drafted using academic research tools and distributed to members of the management, thanks primarily to Dr. Yossi Alexandrovitch, a strategy consultant whom Teva hired specifically for this purpose.
Eli now sought to formally assess the suitability of Teva’s work in the United States, which until that point had been rooted in intuition alone.
“We invest a great deal of time in a policy of acquisition on the assumption that this will constitute a primary source of our growth in the future,” Eli explained when presenting the aims at a meeting he had convened on multi-year strategy. “But what if this is not right? Perhaps we lack the necessary financial or managerial means? Why should we be investing efforts in this direction at the present time? That’s what I would like to clarify.” Without a doubt, he still trusted his own insights and conclusions and relied on them as CEO. Nonetheless, he wanted to be certain he was moving in the right direction.
•••
During this process, Eli again deviated from his charted path to pursue another goal that had long been important to him. One winter day in 1988, representatives of the Ben-Tovim family, the owners of Abic pharmaceuticals, used a brokerage firm to propose to Jewish Canadian business tycoon and philanthropist Charles Bronfman45 that he purchase their company – the only remaining Israeli pharmaceutical drug company that Teva had not yet taken over. The Netanya-based family and its partners had been considering selling the company for years, but had not yet done so for various reasons. Now, however, Eli wanted the company. He had always considered Abic to be “a company that knows how to sell certain extremely good products, but that was characterized by a mediocre level of overall activity and operations.” Indeed, in addition to the impressive number of high-quality medications manufactured on its production lines, Abic managed to attract a group of capable pharmacists and physicians who over a period of years attempted to develop a number of innovative drugs. Most of its profits were generated by the production of a generic drug that reduced stress on the heart muscle. The Japanese company that had invented the medication had not registered it in Israel and Ben-Tovim took advantage of this to his company’s benefit.
This, however, did little to improve Abic’s unimpressive financial situation. For several years, the company had accumulated substantial losses. As mentioned above, Dan Tolkovsky, representing Discount Investments which owned 40 percent of the plant, had previously conducted unsuccessful negotiations with Eli about purchasing the company. When the investment company’s patience finally expired, it sold its shares in Abic for the paltry sum of $1.4 million, mostly to Poalim Investments and Ampal, but, in smaller amounts, to private investors as well. However, along with the Ben-Tovim family, they too continued to seek out a strategic investor to purchase the plant and follow in their footsteps.
The family preferred to try to interest investors such as Canadian Jewish billionaire Charles Bronfman in purchasing the company for several reasons. One was the insult caused by Eli’s decision to acquire Ikapharm instead of Abic. Another was Teva’s emergence as the largest pharmaceutical company on the market, which Ben-Tovim believed meant it would break up Abic into smaller components after its acquisition. Bronfman knew Eli from the past and enjoyed a close relationship with him. So when he was offered Abic, the first thing he did was to contact Eli.
“I don’t do anything without consulting my good friend,” Bronfman said and then asked Eli if he wanted to be his partner in acquiring the company.
During that period, Eli did not regard the purchase of Abic as an important goal. Although he had wanted to acquire the Netanya-based company for many years, he had given up on the idea in favor of expanding Teva in the United States. The company had since been taken over by Eli Admoni, the talented director of Beilinson Hospital, and Ariel Ben-Tovim, son of the now-ailing Yoel Ben-Tovim, resulting in his brothers’ departure from the company. Abic’s new leadership sought to compete with Teva by all means necessary, causing Eli to have doubts about the company. He did not see eye to eye with its owners about its future, even though Abic manufactured approximately 70 different pharmaceutical products in more than 200 dosages. From time to time, representatives of the owners approached Eli with various proposals to purchase parts of the company (for example, the chemical division), but Eli refused. If he was going to acquire any of it, he wanted it all. In any event, he now lacked the $35 million necessary to make the purchase.
Upon hearing Bronfman’s proposal that they purchase Abic together, Eli agreed in principle, but suggested his own formula for the deal: instead of a full partnership, Teva would issue Bronfman five percent of its stock by means of a private issuance, for a total of $22 million, and in return Bronfman would finance most of the acquisition. The families would draw $10 million as dividends from Abic’s equity capital or from the funds that the company had received or would receive from the sale of its products. Teva would provide the remaining $3 million from its own equity capital. According to Eli’s proposal, Teva would hold 100% of Abic and Bronfman would be issued a five-percent share in Teva.
The proposal, which in itself was extraordinary, estimated the group’s total value at $440 million. Just three and a half years earlier, when callable bonds were issued to Grace, the group’s value had stood at $70 million, which at the time seemed to be incomprehensible. Now, Eli was proposing that Bronfman purchase a small share of the group for six times the price that Grace had paid and he agreed.
All the Canadian billionaire asked was that instead of being issued stock, he be issued callable bonds. Like the management of Grace, Bronfman too preferred not to bind himself to the vicissitudes of the unstable Israeli stock market. Without a doubt, one of his reasons for accepting the offer was his great respect for Teva and its CEO. This was also why Bronfman requested that the deal include the option to purchase an additional 8% share in Teva at market value
Eli agreed. He liked partners like Bronfman, who provided him with strong backing and whose fortune the reliable business magazine Forbes estimated at $2 billion. Eli knew he would not sell his shares quickly. He also knew that Bronfman was trustworthy and a friend in the most basic sense of the word – someone who would not suddenly seek to seize control of Teva one day in the future. Indeed, shortly thereafter Bronfman partially exercised his option by purchasing another three percent share in Teva and was granted the option of purchasing an additional 10 percent, which he ultimately did not exercise. Shareholder Robert Maxwell entered the picture in his place.
•••
From Eli’s perspective, the first stage of the acquisition of Abic – the agreements reached with Bronfman – was the easy part of the process. What came next was more complicated. Eli and his corporate management were concerned that if Ben-Tovim and Admoni got wind of the details of their deal wi
th Bronfman, which amounted to Teva’s complete acquisition of Abic, they were liable to reject the offer, even though the $35 million price was considered particularly generous at the time. This is why everything was done in secrecy “using screens,” in the picturesque words of Dan Susskind, who helped design the deal. This was achieved with the help of Claridge, Bronfman’s investment firm. Claridge asked the owners of Axiom ICF Capital, which specialized in locating investors and had led the Canadian billionaire to the deal, to serve as a broker. Both its owners, one of whom was Israel Makov, formerly of Abic who a few years later would serve as the CEO of Teva, played their role well. Ben-Tovim and Admoni only realized that they were selling their company to Teva a few days before signing the contract. All this took place shortly before Israeli legislation to prevent monopolies came into effect, which was liable to have prevented the acquisition altogether.
•••
In comparison to the two previous takeovers by Assia and Teva, Teva’s takeover of Abic proceeded relatively smoothly. At first, the company’s 420 employees feared for their jobs, but quickly discovered that their fears were unfounded. Unlike in the past, Eli initially refrained from integrating Abic into Teva. Instead, he resolved to leave it as an independent entity and to leave Eli Admoni in place as its CEO, although it was not clear whether this would work to Teva’s benefit. In the years to come, Abic stagnated between minimal profit and loss, leading Teva’s corporate management to the conclusion that dramatic personnel changes in the company were in order. The appointment of Eli’s deputy, Ami Rosenfeld, a respected Technion graduate in industrial engineering with advanced training in management who had supervised Teva’s plants in Europe for seven years, was an initial sign of this change in approach. Indeed, Rosenfeld pushed for change and gradually transformed Abic into a prominent company within the group with profits that were no less than those of other Teva companies. Eli concluded from this that takeovers that were drastic, dramatic, and traumatic were much more effective than moderate takeovers, like Teva’s takeover of Abic.
•••
According to estimates circulating on the market at the time, Teva paid full price for Abic, if not more. Eli was aware of this and explained: “It’s better for me to pay more than for our competitors to buy it.” With the purchase of Abic the Israeli chapter of the expansion of Teva drew to a close.
Undoubtedly, the acquisition of the last remaining large pharmaceutical company not yet under Teva’s control was an historical milestone for Eli and Teva alike. Although the Teva group still controlled only some 40% of pharmaceutical sales in Israel, this was the maximum share possible at the time. Another 40% of the market was controlled by drug importers and the remaining 16% was controlled by small pharmaceutical companies that were simply not worth taking over. On the other hand, Teva controlled 80% of all pharmaceutical production in Israel, which put it on a different scale altogether. As Teva no longer had any competitors, Eli now trained his sights squarely on the international market, as this was the only place his company could continue to grow.
Eli and Dalia, Yom Kippur War, 1973
Writing home from the sands of Sinai, Yom Kippur War, 1973
Eli, Yom Kippur War, 1973
Eli, Yom Kippur War, 1973
Eli's Force, Yom Kippur War, 1973
Signing the Economic Package Deal, 1986. From left: Eli, Yisrael Kessar, Shimon Peres, Yitzhak Modai'
Michael Sela, Ruth Arnon, Eli, 1985
Margaret Thatcher receiving honorary doctorate at the Weizmann Institute of Science, with Eli, 1992
Dali and Eli with their children Haim and Dafna, 1975
Eli receiving Industry Award, 1976. From rigth: Eli, Dalia, Nachman Salomon, Zvi Hurvitz. With back to camera: Dalia's grandmother, Rosa
Manufacturers Association of Israel, 1986. from left: Dov Lautman, Eli, Buma Shavit, Mark Moshevitz (Photo: IPPA, copyright)
Eli with President of Israel, Ezer Weizman, 1996
Eli, at his office, 1976
Eli with Peter Grace, 1986
Eli with his grandson Lior, 1979
Eli with President of Israel, Haim Herzog, visiting the Har Hotzvim Plant, Jerusalem, 1992
Part III
Creating an Empire
Chapter 18
Turning 60
In 1992, on the eve of Passover, Eli celebrated his sixtieth birthday with family and friends. His family had expanded. His eldest daughter, Vered, studied art history, begun working in the field and was about to leave to Oxford for four years to complete her PhD. She and her husband Sariel had two children, Lior and Tal and were expecting the third, Lihi. Lior was Eli’s first grandchild and his birth on July 1, 1979, made Eli feel “odd.” At first, being called “grandpa” seemed somewhat strange to Eli. After all, he still had a youthful appearance, served in the army reserves, and felt that his journey had only just begun. With time, he came to accept the new status that this stage of life brought with love. By the time his second grandchild, Tal, was born seven years later, he felt like a seasoned professional.
Eli’s middle child, Chaim, married Michal and they had a son named Tomer. As expected, Chaim went to university, studying economics and political science. It was clear to Eli that Chaim was his “potential heir,” as he liked to refer to him. The seven years Chaim spent working at another pharmaceutical company before beginning his career at Teva was seen as natural and he began to take major steps toward managing the group. Meanwhile, Eli’s youngest daughter, Dafna, completed her mandatory military service.
Eli also experienced sorrow. Between 1988 and 1993, the Hurvitzes lost Eli’s parents, Zvi and Zippora, as well as Dalia’s father, Nachman.
Dalia was Eli’s rock of stability and he looked to her for reassurance. Their 40 years of marriage only intensified his love for her and friends referred to them as “the perfect couple,” a compliment they accepted happily.
“I am the most boring man in the world,” Eli said on more than one occasion. “I have been married to the same woman and lived in the same apartment for many years…”
Their family life revolved around Dalia and their weekly Friday night dinners became a traditional family gathering that nobody missed. On the rare occasion that Eli missed a Friday night dinner because he was overseas, everyone felt his absence, especially him. The same was true of holidays. The Hurvitzes always celebrated together, with children, grandchildren, and friends. They also traveled together and spent birthdays together. Spending time with their family was important to Eli and Dalia and they passed this on to their children and their grandchildren.
•••
By the early 1990s, under Eli’s management, Teva had slowly but surely assumed the dimensions of an “empire,” as it was frequently referred to in the media. Its growth was astounding by any standard. It was the largest company in Israel and by the end of 1992, it had become the fifth-largest generic pharmaceutical company in the United States. Teva had already been considered a successful company, but its size added to its prestige. The addition of world-renowned immunologist professor Michael Sela, who had served as the president of the Weizmann Institute of Science for a decade, and urology professor Moshe Many, a former president of Tel Aviv University, to Teva’s board of directors also was a clear indication of this. The important scientific institutions with which they were affiliated have enjoyed significant representation on Teva’s board of directors ever since.
For Eli, who had personally recruited both professors, their presence on the board had deeper significance. It was meant to indicate that Teva sought not only the advancement of Israeli industry, but also the advancement of scientific research. In Eli’s eyes, the two were interconnected. Sela and Many were also known as incomparable doers who regarded the link between industry and science as critical to the future of industry in Israel. Their willingness to join the board of directors signified the scientific community’s respect for Teva
’s work and its acknowledgement that it was more than simply another pharmaceutical company. The honorary doctorate that Eli was awarded by the Technion in 1990 bolstered this image, linking Teva, under Eli’s leadership, not only to the plant’s production lines, but also to scientific research.
•••
For years, Eli had sought to lead Teva toward the achievement of strategic goals. During meetings of the corporate management, he encouraged attendees to set clear goals for themselves and strove to motivate them on their journey along the road to achieving these goals. Now, Teva began to surpass the strategic goals which Eli, its corporate management, and its experts had set for the group. Eli viewed long-term planning, or, as he referred to it, “profound, strategic thinking,” as a major component of the corporate management’s responsibilities under his leadership. The fact that production continued to develop and expand more quickly than planned meant that plans needed to be revised from time to time. At the beginning of its campaign to establish its presence in the United States, Teva’s annual sales goal was $250 million, but in 1991, sales had already jumped to $321 million, including $151 million in exports. One year later, sales reached $396 million, including $203 million in exports. In 1993, Teva’s sales reached the unfathomable sum of half-a-billion dollars, with $300 million worth of production geared toward exports.
In light of this, Eli began taking advantage of the meetings of Teva’s corporate officers and board of directors in 1992-1993 to discuss a new strategic goal: the annual production of one billion dollars worth of merchandise by the end of the decade. As in the past, this ambitious goal astonished his colleagues. By this point, however, they ceased to doubt his judgment and started believing in him: if he said something would come to pass, they believed it would. Moreover, as the group’s production continued to develop, its gross annual profit rose accordingly, jumping from $96 million in 1989 to $154 million in 1992 to $214 million one year later. Overall, Teva’s production increased 39% in 1992-1993 alone. By this point, Eli was already talking about the next ambitious goal of half a billion dollars in annual profits by the end of the decade. He would ultimately achieve his goal of “one billion dollars in annual production” three years early (reaching $1,117 billion in 1997), but his forecast was more accurate regarding the growth of gross annual profit: eight years after he set it as a new strategic goal for Teva, at the outset of the new millennium, Teva achieved a gross annual profit of half a billion dollars.
Eli Hurvitz and the creation of Teva Pharmaceuticals: An Israeli Biography Page 29
