Sela, Arnon, Teitelbaum, Bornstein and their colleagues reported the results of the trial in a landmark article published in the prestigious New England Journal of Medicine47 on August 13, 1987. Only six of the 23 members of the control groups were free of MS attacks during the two years, resulting in a total of 61 recorded attacks (2.4 attacks per patient, with approximately half the patients experiencing three attacks). In contrast, 14 of the 25 (56%) patients who were administered Cop-1 were free of attacks and the total number of recorded attacks for the group was much lower: 16. Not only were the Cop-1 patients 2.5 times more likely to be attack-free, but the medication also proved itself to be nontoxic and have no side effects.
As far as Sela was concerned, the trials had proved the drug’s effectiveness beyond a doubt. However, they still had a long way to go before Cop-1 could be formally certified by the FDA. After Bornstein’s trial, another 106 patients were administered Cop-1 and the final results of their studies were expected on January 1, 1988, at the conclusion of four years of testing. Nonetheless, four months prior to the publication of the test results, Sela claimed confidently that he and his team were aware of almost no other drug that had achieved results in its development and lack of toxicity and side effects as dramatic as those of Cop-1. After their extensive study, the scientists knew more about the drug’s operative mechanism and were even more convinced of its effectiveness.
Under ordinary circumstances, these findings would have led to the immediate adoption of Cop-1 by a major pharmaceutical company and its worldwide launch. There was only one problem – nobody knew the molecular structure of Cop-1. The synthetic mixture that makes up Cop-1 to this day consists of molecules of various lengths. Unlike every drug previously approved by the FDA, it was impossible to draw a picture depicting the chemical structure of Cop-1. Accordingly, one major drug company after another viewed Cop-1 in the form that was tested to be unmanufacturable as a drug and unapprovable by the FDA.
•••
Sela and his team could have continued to pursue the major pharmaceutical companies and tried to develop a single molecular structure for Cop-1. However, they knew that their drug in its current form could save the lives of thousands currently suffering from MS. Moreover, they worried that a single molecular form might not be as effective as the “messy” mixture of molecules that had been so effective in the clinical trial.
In the 20 years that Sela and Eli had worked together, they had formed a close friendship. Sela shared his dreams and his frustrations with Eli and asked whether Teva might consider developing Cop-1 as its first innovative (non-generic) drug.
Eli was hesitant at first. Although Teva had grown to be a leading company in the Israeli industry, the process of taking a new drug through the FDA was entirely foreign to Teva and required massive investment. Teva had previously invested in acquisitions and products that might succeed to a greater or lesser degree, but had never before taken a risk on a project that could potentially fail. Approval of a new drug is a binary event: either it is great success or a total loss.
Not only did Cop-1 require additional research, the drug required an unprecedented strategy in order to gain FDA approval for a drug whose structure was unknown. The clinical trial was the smallest part of the challenge that Cop-1 faced. The major challenge was what the industry calls chemical manufacturing controls (CMC), whereby the FDA must understand each aspect of the manufacturing process and the manner in which quality is assured. When a typical drug is approved, there are validated assays to make sure that the drug is in its proper molecular form and that there are no impurities. However, since the molecular form of Cop-1 could not be specified, there was no precedent for the path to CMC approval.
Immediately after receiving the positive results from Bornstein, Sela stopped by Eli’s home in Ramat Hasharon. Over coffee with both their spouses, Sela presented a slide show on the study’s results and emphasizing their revolutionary nature. Sela also explicitly assured Eli that the drug would “pass all the subsequent tests required before it goes on the market.”
By the end of the evening, Eli was convinced. The decision was not easy, especially since both Eli and Sela clearly understood that the new drug was not a cure for the disease, but rather slowed its progression and was therefore by no means guaranteed to succeed in drug markets worldwide. Nonetheless, by the end of the evening, Eli had assumed responsibility for the study’s future development. It was a decision that, as he undoubtedly expected, encountered substantial opposition when he presented it to the group’s corporate management and board of directors. Eli held his ground. Not only was this “an opportunity of a lifetime for Teva,” he argued, but it also was a project that would benefit the Israeli scientific community as whole. True to form, after considerable sweat and effort, Eli convinced Teva’s corporate management and board of directors of the importance of the idea and they budgeted tens of millions of dollars for it. As Sela later explained, Eli “had a vision and the courage to begin developing it.”
With the board’s support, Teva obtained a license for the development rights of Cop-1 from Yeda Research and Development Company Ltd., the entity responsible for the commercial utilization of the inventions and discoveries of scientists from the Weizmann Institute. Teva then embarked upon developing the drug, under the supervision of Dr. Aharon Schwartz. This revolved around the complex process of developing a CMC file so that the drug tested in the final clinical trial could be manufactured in exactly the same form if the FDA approved it. At the end of that process, Teva applied for FDA approval to conduct another trial of Cop-1, this time involving hundreds of patients in 11 large medical centers throughout the United States and Israel.
Teva began to regard the drug’s development as a significant business deal. It would turn out to be the most profitable deal in the history of the Weizmann Institute and Teva.
•••
Teva funded testing of Copaxone (as it was now named) on hundreds of MS patients at medical centers throughout the United States. Even before the end of the trial, Sela, Arnon, and Teitelbaum were confident that the drug had proven itself. So was did Eli.
“Based on preliminary studies,” he declared, “I have no doubt that the day is not far away when we will produce the drug as a good treatment for Multiple Sclerosis…. We can say with total confidence that we have the only product specifically for treating the disease.”
This was also Sela’s opinion; he told the members of Teva’s board of directors that he was “convinced that the tests would be completely successful” and that “the $15 million that have been invested in developing the drug until now, and the tens of millions that will be invested in the future until the drug is approved, will not have been spent in vain.” They believed him – Eli had convinced them. Indeed, Eli’s proclamation in an October 1994 trans-Atlantic conference call that the positive results of the third stage of the testing – the most important stage of all without which a drug could not receive FDA approval – was proof that Sela, Arnon, and Eli’s confidence in the drug had been well placed.
The costs of the continued testing, the process of formally approving the drug, and the establishment of production and marketing systems throughout the world required vast sums, which were growing increasingly challenging for Teva to raise. This prompted Eli to find another partner to share the investment as well as the profit. Eli signed a contract with M.M.D. (a German-French company that Aventis Pharmaceuticals later acquired) to establish a joint enterprise, based on an investment of tens of millions of dollars, that would be responsible for marketing the drug in North America in exchange for 50% of the anticipated profits.
At the time, this seemed like a wise move, considering the fact that between 1994 and 1995, the health ministries of countries around the world, including Israel, had opened their doors to Teva to approve and register the drug. Teva officials were especially looking forward to the authorization of the most widely revered autho
rity of all: the US Food and Drug Administration. On June 14, 1995, in accordance with the schedule which Eli and Sela had set, a request was submitted for FDA approval for the sale of Copaxone to patients suffering from Multiple Sclerosis. Immediately following the FDA request, similar applications were submitted in Israel and Europe. This led Teva’s market value to increase by approximately 50%, providing perhaps the best possible indication of the public’s overall confidence in the drug’s economic potential.
In such cases, it was standard practice for the FDA to convene an advisory board meeting of seven experts from different fields to assess the drug. For the next year, the experts scrutinized the details of the Copaxone trials that had been carried out up to that point to assess whether they confirmed the scientists’ major assertion: the drug suppressed the spread of the disease during its first stage and at a later stage, almost completely eliminated symptoms in some patients. Teva, as a generic drug company, had never conducted an advisory board meeting and had no in-house expertise in doing so. Fortunately, Teva was able to recruit Wayne Pines, a former associate commissioner at the FDA, to lead the advisory board effort. Wayne helped focus attention away from the technical issues of molecular structure and towards the critical issue of benefit to patients with MS who had no other possible treatment. Teva, with Wayne’s leadership successfully mobilized the MS community to vocally support Copaxone’s approval. In the end, doing the right thing for patients was viewed as more important than precise knowledge of molecular structures. On June 19, 1996, the seven-member committee unanimously recommended the drug’s sale in the United States.
When the sale of Copaxone got underway in the US in April 1997, no one dreamed it would be as successful as it was. Although the market for the drug had been estimated at $4 billion, Eli had been extra cautious and had initially maintained that he “would be pleased if its sales reached $200 million.” Later, he changed his assessment somewhat and spoke of higher figures.
By the end of 2011, Copaxone had been administered to more than 200,000 Multiple Sclerosis patients. In the course of its use, it has been unequivocally proven to be extremely effective and has emerged as the leading medication for the treatment of Multiple Sclerosis in the United States, as well as the majority of the 51 countries in which its sale has been approved. It has also proven to be preferable to its chief competitors on the market: Rebif by Serono and Avonex by Biogen. Of Teva’s record-breaking $16.1 billion in sales in 2010, income from the sale of Copaxone accounted for $3.3 billion, reflecting a 17% increase from the previous year. Today, Copaxone is not only Teva’s most widely purchased product, but is also the most widely purchased product produced in Israel. Although Copaxone is not a cure for Multiple Sclerosis, it is an effective drug for its treatment that has earned Teva billions.
Everyone benefited from the brainchild of Sela, Arnon, and Teitelbaum and from the daring and ingenuity of Eli Hurvitz. Copaxone provided relief for hundreds of thousands of Multiple Sclerosis sufferers, whose quality of life improved dramatically and who could almost return to their previous daily routines. The scientists benefited, having proven that perseverance and the quest for clear and accurate scientific results had its payoff, on both a scientific level and a financial level. The Weizmann Institute of Science also benefited. In addition to the prestige that stemmed from the massive scientific publicity, FDA approval of the distribution of Copaxone has provided the institute’s coffers with millions of dollars per year in Yeda R&D royalties from the sale of the drug. Of course, Teva, under Eli’s leadership, also profited from the success. Copaxone established Teva’s standing as the most successful company in Israeli history and as one of the largest drug companies in the world.
Chapter 20
Eli’s Six Lost Years
One day in January 1994, Eli received a call from a man who identified himself as an agent of the Investigations Department of the Income Tax Division of the Israeli Tax Authority.48 He asked Eli to come to the department’s office in Jerusalem and informed him that “the investigation may take longer than usual.” When Eli arrived, he learned that Teva’s chief legal officer, Uzi Karniel, was being interrogated in the next room. Eli’s questioners informed him that he was being questioned under caution, and was suspected of being an accessory to tax evasion amounting to $18 million. The focus of the investigation, they explained, was a company that Teva had purchased in 1980 and whose name was subsequently changed to Promedico and a foreign company named Erutaf Anstalt. The latter had been set up in Vaduz, the capital of Lichtenstein, by two foreign investors: David Weiss, a wealthy Jew from Venezuela; and Benjamin Jesselson, a Jewish billionaire from New York, an owner of Elite, and one of American Jewry’s most generous donors to Israel.
Eli was aware that a few months earlier, Jesselson, in his capacity as an owner of Erutaf, and Promedico CEO Alexander Eisenberg had been arrested on suspicion of tax evasion amounting to tens of millions of dollars. According to media reports, the charges against the men stemmed from the fact that since its establishment, Promedico had been charging exorbitant commissions in the name of Erutaf and transferring them to Erutaf’s bank account in Switzerland without deducting taxes or declaring the income to the tax authorities. At the time, Eli had also been summoned for questioning by the income tax authorities. When asked about the transactions, he replied that he did not believe that anything inappropriate had transpired.
“At first, I said that Jesselson had not come to Israel to steal tax money…. The tax losses [of the State of Israel] that people talk about are a joke in comparison to the amounts he donates,” Eli related.
After a few hours of interrogation, it seemed to Eli that he had explained everything.
“After that, I went home,” he recalled, “and I don’t remember being overly concerned about the incident, even though it had lasted for two or three hours.”
A few weeks later, he was shocked to learn that he was being charged as an accessory to tax evasion.
He stared at his interrogators in astonishment and told them, “It had never crossed his mind” to do such a thing. However, he understood that the investigators needed answers and he tried to provide them, despite the aggressive attitude they took toward him. A tense dialogue subsequently developed between Eli and his interrogators, which Eli summed up as follows: “The investigators interrogating me treated me unpleasantly and I treated them unpleasantly as well.” Nonetheless, in the two days that followed, Eli provided the investigators with detailed answers. Both Promedico and Erutaf, he explained, had been established to purchase an Israeli company named Nissan Preminger. Owned by businessman Dr. Nissan Preminger, this company purchased drugs and medical supplies from foreign manufacturers and sold and distributed them in Israel. The company also served as its suppliers’ exclusive agent in Israel. Promedico and Erutaf split the profits from Preminger: Promedico’s income was the actual profits derived from sales in Israel, whereas Erutaf ’s income stemmed from the commissions that the foreign drug manufacturers paid in Switzerland for the sale of their products in Israel. Beyond the financial benefits in selling the pharmaceuticals, Eli explained to his interrogators, the acquisition also had strategic significance for Teva. He had regarded it as a golden opportunity to cultivate relations with manufacturers abroad in order to receive licenses to manufacture their drugs in Israel in the future.
From the outset, the deal raised several questions related to the taxation of its owners, particularly of the two foreign investors who were involved. With the assistance of his attorney, Amnon Goldenberg, Eli asked attorney Boaz Nahir, then the leading taxation expert in Israel, for his opinion. Upon receiving it, he checked the opinion thoroughly, as he typically did, writing detailed comments in the margins to discuss at a later date.
In February 1980, the parties to the deal signed three separate agreements: one between Preminger and Promedico, in which the sides agreed that Teva would purchase all of Preminger’s equipment in Israel, distr
ibute products in its stead, and receive the profits of the sales; a second agreement between Preminger and Erutaf, granting Erutaf the right to serve as an agent of the foreign drug companies and to be paid a commission on the drugs sold in Israel; and a third agreement between Promedico and Erutaf, which transferred exclusive rights to distribute the drugs to the company set up by Teva.
Teva paid $930,000 for the deal. Eli asked Preminger’s CEO, Alexander Eisenberg, who was familiar with all the deal’s details, to retain his position. Eli regarded him as an important asset and he continued running the company on a daily basis after Teva acquired it. After this agreement was signed, the Supervisor of Foreign Currency of the Bank of Israel authorized it.
During the seven years that followed, Promedico operated in accordance with its designated purpose of selling pharmaceutical drugs in Israel, leading Promedico and Erutaf to each make a handsome profit. Promedico returned its investment in two and a half years and Erutaf in three. In accordance with Nahir’s taxation advice, and in light of the fact that Erutaf was not an Israeli company and operated in Vaduz, no taxes were deducted from the commissions paid to Erutaf and no reports were filed regarding the payments themselves.
Eli Hurvitz and the creation of Teva Pharmaceuticals: An Israeli Biography Page 32
