Eli Hurvitz and the creation of Teva Pharmaceuticals: An Israeli Biography

by Yossi Goldstein

  Eli, by nature, was not fond of analysts. In this case, however, he gladly endorsed the optimistic assessment, though he felt, “They were overly cautious.”

  Chapter 22

  Mr. Teva

  During the third week of April 2002, two dramatic events took place in Eli’s life. On April 17, he was awarded the Israel Prize for Lifetime Achievement in Industry. Five days later, he retired from his position as CEO of Teva. Although the temporal proximity of these two events was wholly incidental, it was nonetheless symbolic. Considered together, these two events summed up his life until that point in many ways. One represented Israeli society’s recognition of Eli’s contribution to the State of Israel as the CEO of Teva and the other represented the gratitude of Teva’s shareholders for his work for the good of the group. Teva’s corporate leadership was not willing to lose Eli altogether and sought his continued involvement in determining the group’s long-term plans as the new chairman of its board of directors.

  The message that Eli’s receipt of the Israel Prize conveyed may have been more significant. The following excerpt from the judges’ considerations, which was read aloud at the award ceremony, speaks for itself: “Hurvitz is a pillar of advanced industry in Israel…. He led Teva to the top of the list of the world’s most advanced drug companies…. During his tenure as CEO of Teva, he brought [Israeli] industry to the international economic stage and offered the vision of a manufacturer that is both an innovator and an initiator.”

  Eli was awarded the Israel Prize only one-and-a-half years after the Supreme Court fully acquitted him of serious allegations. Eli’s receipt of the Israel Prize can also be understood as a decisive, unambiguous statement of Israeli society’s confidence in him and the fact that the charges against him had been unjust.

  Quite naturally, Eli was extremely moved by the award. It was difficult for him to detach himself from such a recent trauma. During an interview, Israeli television and radio broadcaster Rafi Reshef asked Eli: “As a person who today is receiving the [Israel Prize] and who did the unbelievable at Teva, I would be interested to know about one moment, as exists in every career, when you remember being down.”

  Eli responded: “Certainly the trial was the most difficult moment.” “Would you like to talk about it?” Reshef asked.

  “No,” Eli said. “I think of it as something in the past. I ended up winning it and I am very happy. Today, I believe I am being awarded this prize not for my victory in that struggle, but for all the work I have done since the beginning of my career.”

  •••

  At 4 p.m. on April 22, 2002, in a voice filled with emotion, Eli announced he was stepping down from the position of CEO at the annual general meeting of Teva shareholders. He chose that particular date for his announcement because it was his seventieth birthday. The 26 years he had spent in this demanding position were more than enough.

  “I plan on slowing down a bit,” he explained, but also immediately assured all those in attendance that he would “certainly be happy to meet with you in years to come, albeit seated in a different chair in the room.”

  Eli then handed the reins of the company over to Israel Makov. Before introducing Makov to the shareholders as Teva’s new CEO, he offered a brief survey of Teva’s achievements: “We analyzed our products’ portion of the market share worldwide in comparison to those of each of our competitors and the results are amazing! While our share of the generic market in the United States is 10-15 percent, throughout the world it is more than double that. We have no competitor with a comparable share of the world market.” He then addressed his replacement: “From the bottom of my heart, I would like to wish Israel Makov success in the position he has naturally taken upon himself at Teva. Based on my own firsthand experience, I can say that this is the best job I could wish upon a friend and colleague such as Israel Makov.”

  Eli’s resignation as CEO stirred up great excitement and emotion. Teva’s employees were deeply moved, as reflected in a letter that a laboratory worker named Sarah Cohen wrote to him:

  During your visit to Plantex today, I made you a humorous card that rhymed, but at the last minute I got cold feet and was too embarrassed to read it in front of all those present. After all, I am just an average worker and am not used to being center stage…. The words I wrote are true and come from the bottom of my heart and are meant to be neither ingratiating nor self-important…

  All have described and glorified the work that you do,

  But I will exalt the person inside you.

  During our train ride south I was impressed

  That you walked through the train cars and greeted us

  And despite your high position

  You had time for everyone.

  With a kind word and a smile too,

  For all these things, I want to thank you.

  •••

  The historic general meeting that approved Eli’s appointment as a member of Teva’s board of directors and as chairman of the board, as well as Israel Makov’s appointment as CEO, was also addressed by Dr. Meir Heth, the board’s long-term chairman who stepped down at this point. Heth too described Makov’s appointment as natural.

  “It is the best and most appropriate appointment for Teva,” he maintained. “We believe that Makov will continue to bring about growth in Teva and that his cooperative work with Eli Hurvitz will make a continuing contribution to the company’s thriving in the future.”

  Indeed, the harmonious relations between the two men at the time were evident to all. Eli was leaving Makov a company in the midst of a tremendous growth spurt and the new CEO began his new job with relative success. According to Eli’s final report to the board of directors as CEO, the group’s income in 2001 stood at $2.08 billion, representing an increase of 19% from the previous year. During the same year, the company’s net profit (before one-time expenditures) totaled $287 million, or $2.11 per share, reflecting a 55% increase in net profit over the previous year.

  When Eli resigned from the day-to-day management of Teva, his successor inherited a company in ideal condition. Unlike other companies in which CEOs are replaced in order to solve problems, Eli submitted his resignation during a period of dramatic growth. According to all strategic forecasts, there was no doubt that the group’s growth would continue at the same pace.

  Eli was therefore able to resign with a sense of peace and tranquility. In addition to the family’s assets, which were composed primarily of Teva stock that had been transformed into a veritable treasure due to the company’s staggering success, the benefit package Eli received from the board of directors was sufficient to turn Eli into a carefree retiree. When asked during an interview about his plans for retirement, he responded: “I am looking ahead. There are many things I still want to do. I will not be bored…. I will be the chairman of Teva’s board of directors, which will keep me somewhat busy, but will nonetheless be an enjoyable occupation. I am also a member of other boards of directors…. I assume I will take upon myself a bit of public service, which will definitely be non-political. I’ll read more, listen to more music, try to learn French, and try to study a bit at university.” In short, Eli had begun to contemplate his future as a true retiree.

  •••

  This, however, was not how things worked out. Eli continued working as he had in the past. All authority now lay with Makov, who controlled the group as a whole and its day-to-day management. At the same time, Eli was supposed to retire and some thought that he had. In December 2002, for example, Israel’s minister of trade and industry awarded him a lifetime achievement award in recognition of his contribution to Israeli exports, as befitting of someone who had just finished a lifetime of hard work and was now taking it easy. Yet Eli was not taking it easy. He had begun working with a variety of Israeli public institutions. One such endeavor was his role as chairman of the Israeli Democracy Institute (2002-2008), which engaged in policy develop
ment and the design of government reform; the institute’s activities were consistent with his worldview. Another was his membership on the International Council of the Belfer Center for Science and International Affairs at Harvard University’s John F. Kennedy School of Government. Still another was his work with the Institute for Strategic Management at Tel Aviv University’s School of Business, which was named in his honor. However, like his other public pursuits, these endeavors appear to have been no more than extracurricular activities. For Eli still had not completely left Teva.

  Eli took great care to install Makov as his successor. As soon as the transition occurred, Eli and Dalia departed for Paris for six months, where they immersed themselves in the intensive study of French. While Eli approached his role as chairman with the utmost seriousness, he made it clear to all that Makov now held the authority to run the company.

  Upon his return from Paris, Eli continued to lead Teva, but not to manage it. He now focused precisely on the aspect of management he enjoyed the most: strategy, that is, the art of guiding the group to its goals. In practice, from his desk on the second floor of the group’s corporate offices – the floor to which he had made his way every morning for the past 26 years – Eli continued to be the heart and soul of Teva. He did so despite his lack of administrative authority and by virtue of the authority he enjoyed due to his past achievements and his official powers as chairman of the board of directors.

  He still came into the office almost as frequently as he had previously. Adi Duanis, his faithful office director who continued to manage his office when he became the chairman, provided him with the same volume of papers as she had before. The only difference was that his name appeared second on the list of addressees instead of first.

  Once the members of the corporate management understood how his office was working after the change, they began to inform him of developments within the group in parallel to the reports they submitted to Makov. Perhaps they reported things to Eli in more brevity than they did to Makov, but the bottom line was the same. Slowly but surely, he became a confidante of sorts. Since Makov was the man who made the decisions in practice and with whom they naturally disagreed at times, Eli became the person to whom they could turn.

  “Anyone who spends time in the halls of Teva cannot help but sense the immense respect that company employees feel toward their leader [Eli],” the Ma’ariv daily newspaper’s economic consultant wrote.

  The hall that Eli and Makov shared benefited Eli since it took no effort whatsoever for people to continue down the hall to speak with the man who had turned Teva into a generic empire.

  At the beginning of his tenure as CEO, Makov did not appear concerned by this partnership. However, he eventually and quite naturally realized that he may have been given the reins of management and be the one steering the ship, but he had a silent, and sometimes not so silent, partner who was still widely viewed as Teva’s leader. Eli remained a source of inspiration for the members of Teva’s corporate management and Makov simply never inspired the love and confidence that were required to inherit Eli’s mantle of leadership.

  This is how the public viewed things as well. “Mr. Teva,” they called Eli, or at least this is how he was referred to by a senior economic columnist 14 months after the personnel changes, which was a relatively long period considering how rapidly public opinion changes:

  Israel Makov moved into the comparatively modest office of Eli Hurvitz, the mythological CEO of Teva, in the company’s corporate offices in Petah Tikva. Although the office may be modest, the shoes Hurvitz left behind cannot be considered modest in any sense of the word. Hurvitz is a well-admired executive in the Israeli economy and is the person most closely associated with the most successful Israeli company in the world.

  Approximately a year-and-a-half after Makov’s appointment, Ma’ariv’s business magazine conducted a survey of readers regarding the most admired business leaders in Israel. Makov was ranked first with 29.5% of readers’ votes, which was natural since Teva was continuing to grow quickly and was performing better than it had at any time in the past. Eli finished second, with 20.5% of the votes. Although Eli had recently been ranked first in a similar survey regarding admired business leaders, it would have been natural had he ceased to appear on such lists. After all, in a formal sense, he was no longer even a member of Teva’s senior management. Almost all the other figures at the top of the list (except for Nochi Dankner, in fifth place), such as Amikam Cohen, Yitzhak Peterburg, Dan Propper, and Ofra Strauss, were active CEOs of large companies such as Cellcom, Partner, Osem, and Strauss.

  The same newspaper offered the following explanation of Makov’s selection as Eli’s replacement:

  Hurvitz surrounded himself with talented, high-quality senior managers who worked according to the standards that he himself instituted at Teva. This is an attribute required of all admired managers…. Israel Makov was most likely an extremely successful choice for the position. The brand constructed under Hurvitz’s leadership, and the skill possessed by Makov and those who worked under Hurvitz to preserve it and the success that surrounded it, are the reasons for Makov’s selection.

  It is therefore no surprise that the same piece had the following to say about Eli:

  It is not clear what is more impressive: the fact that Israel Makov jumped directly into first place in the list of the most admired business leaders or the fact that Eli Hurvitz – who today is serving as the chairman of the board of directors and is no longer part of Teva’s corporate management – was ranked second, ahead of many senior executives in the Israeli economy?

  The article continued:

  Hurvitz’s selection for second place is an unequivocal indication of the fact that he has burrowed deep into the consciousness of the business elite in Israel and refuses to take his leave…. Hurvitz’s success has not been forgotten and he is still regarded as a senior executive to emulate. He thus remains a subject of admiration.

  •••

  Eli hired and nurtured Makov and appointed him to serve under him. Upon naming him as his successor, he told him before a meeting of Teva shareholders: “It is a position of which you are worthy, Israel. I am certain you will serve shareholders, Teva employees, and all those who are representing and being represented here not only faithfully and skillfully, but with great success.” Makov, whose talents were widely recognized, must also have recognized that although he held the position of CEO, Eli was still the dominant figure within the group – Mr. Teva. Makov apparently found it difficult to accept this. When asked, he continued to say that Eli Hurvitz was his much admired manager. However, he simultaneously tried to build up his own position and his own history in the company. Indeed, as explained in the above quoted article, Makov maintained, “many people in the business community are unaware that Makov played a decisive role in the company’s success long before his appointment as CEO.” According to the article, they were also unaware that

  within Teva’s senior management, Makov was largely responsible for implementing the merger and acquisition policy at the company, which had already completed a large number of such transactions – perhaps more than any other Israeli company. It can be said with a relatively high degree of certainty that without the company’s high success rate in implementing this important policy, Teva would not have achieved the standing it enjoys today.

  The article even continued:

  The success of Teva’s core business activity – the development and production of generic drugs – is dependent on knowledge and the ability to take advantage of synergies, while also ensuring maximum utilization of the production process. Teva did this largely thanks to Makov’s ability to identify the right opportunities in the right markets and, most importantly, at the right time. Therefore, the assertion that Makov received everything already prepared for him is completely unfounded. He had been working on preparing it for many years.

  Eli’s sense o
f unease toward Makov intensified during 2004, but, as was his way, he maintained business as usual. He was also disturbed by Makov’s abrasive public remarks to the effect that he had been responsible for Teva’s development, but restrained himself on this point as well.

  At the end of the day, Makov was seen as the ultimate technocrat, while Eli was perceived as the beloved public property of the people of Israel. His face and his constant smile was one of the best known in Israel. People would approach him on the street to shake his hand and tell him how they had bought their apartment, paid for their daughter’s wedding, or otherwise enriched their lives with the returns from their Teva stock. He transcended the rough and tumble of Israeli politics and people saw him as the epitome of all that was good about Israel. More than one prime minister begged Eli to stand for Israel’s presidency, but he had learned his lesson about entering politics.

  Teva’s leadership viewed Makov’s effort at self-empowerment with incredulity. It seemed as if he saw Eli’s renown as a threat, rather than as one of Teva’s key assets. In the eyes of both Teva’s senior management and the general public, Eli was still Mr. Teva. Makov’s attempt to rewrite history and erase the past deepened Eli’s feeling that an attempt might be underway to strip him of his position as chairman of Teva’s board of directors.

  Indeed, Makov entered into covert negotiations with wealthy individuals and businessmen who sought to take over the group and remove Eli as chairman of the board of directors while leaving Makov in place as CEO. Most prominent in these negotiations were wealthy Americans associated with companies that were competitors of Teva and businessmen from Israeli companies. Eli learned of all this either indirectly or from individuals who had been approached as possible partners. One prominent Israeli businessman requested a meeting with Eli to ask him for explanations. When Eli told him that he did not have anything to do with the initiative or support it, the businessman ceased to pursue it.