Issue link: https://maltatoday.uberflip.com/i/1181032
31.10.19 12 OPINION George Mangion T he unexpected collapse of the gi- ant pharmaceutical company Teva, based in Israel sent shivers down the spine of international investors. Teva shares were trading under $9, down from more than $70 in 2015. e trouble started when, 44 states sued 20 generics wmakers for price fixing and personally named 15 of those compa- nies' executives. Guess who was at the centre of all this? Teva Pharmaceutical. is lawsuit dealt an added blow to the firm. ings have been going very wrong lately for Teva Pharmaceutical Industries Ltd., the drug maker that has been a source of national pride being classified as Israel's biggest company. It has struggled recently to fend off competition on a key medical product and as its shares have plunged, billions of dollars have been wiped out from Israe- lis' savings portfolios. Readers may not be aware that Teva has been struggling with massive debt, amid price cuts in its key activities, and declin- ing sales of its flagship drug. According to a recent suit against Teva, it is being accused that from 2013 to 2015, it is said to have significantly raised prices on around 112 generic drugs and colluded on at least 86 other drugs. Some of the increases were more than 1000%. But the litigation was halted when Teva last May agreed to a $85 million settlement with Oklahoma prosecutors over opioid mis-marketing allegations. It is curious to observe that Judge ad Balkman ordered prosecutors and Teva's attorneys to state how settlement funds so charged are to be disbursed directly to the state's treasury. e judgement asserted that Teva acted through its senior-most executives and account managers, and participated in a wide-ranging series of restraints with more than a dozen generic drug manu- facturers, all of whom did knowingly and willingly participate. It is important to give some background about Teva -the wonder drug producer. At its peak, it was the darling of the Is- raeli government. Without doubt it was a flagship company that was supported in many ways by various fiscal incentives showered over three decades with gener- ous tax benefits. As a result of helping start-ups by direct support for innovation especially in bio- tech and digital sectors, one meets many success stories. In Israel, these compa- nies are fully funded by venture-capital and other business angels. In Israel, it is an open secret that it hosts a booming "start-up-nation" economy. It is ranked as the most dynamic innovation ecosys- tem outside America. As a result, such firms grew in stature and expanded in international markets specialising in manufacture of top-qual- ity products and services. During its meteoric growth, Teva employed tens of thousands of workers and its multiplier effect contributed to the prosperity of Israel's. In its heyday, Teva main production facilities were centred in Israel, but lat- er in a bid to reduce production costs it transferred some units to India. Over time, it expanded in other countries and acquired plants in Malta. In Malta, Teva announced the acqui- sition of Actavis Generics in a bid to improve its international commercial opportunities and significantly enhance the global market. Teva completed its purchase of Actavis Generics, for a cool $40.5bn and in the process piled up addi- tional debt of $35bn. A few months following the acquisition of Actavis saw the Malta subsidiary lay off 200 workers including qualified lab technicians. With hindsight, one notes how in early 2014, Actavis employed around 850 people locally. Later it closed down some of its manufacturing units and its R&D department. Without its R&D in Malta, the generics producer was out on a limb as it was un- able to launch new products. At its peak, Actavis run two manufacturing facilities in Bulebel and Hal-Far. It is opportune to reflect that the strength of Teva lies in the constant support it received from the Israeli government - to build up its research and development potential as part of its unique ability to penetrate in- ternational markets. As a flagship producer, it claims to be a global leader in generic and specialty medicines with a portfolio consisting of over 35,000 products in nearly every therapeutic area. It is no exaggeration to state that more than 200 million people globally take a Teva medicine every day. Such a service is formidable since it is administered by one of the largest and most complex supply chains in the phar- maceutical industry. A recent break- through was the launch of "Ranolazine Extended-Release Tablets". is is a potential cure for people living with chronic conditions like angina. Quoting IQVIA, it amassed annual sales of nearly $938 million in the U.S. Perhaps, in Malta we can learn a les- son and try to cultivate a flair for home- grown research hubs which may be the start of an incubator for local and inter- national research staff to focus on cut- ting-edge technology. Two years ago, when government sold the prime site at St Julian's housing the ITS teaching complex the intention was for government to allocate the proceeds into building a new campus in Smart City - but little tangible progress has been seen so far. e 2020 budget, again mentions the willingness of government to proceed with the start of works of this campus. It goes without saying that to attract in- ternational business we must be ready to help build a top-end R&D hub. Naturally, this is easier said than done since we also need to attract sufficient new talent. It is not an easy journey and many countries want to emulate the commer- cial success which rewarded Boston, Sili- con Valley, Singapore and Israel over the past fifty years. Even China is investing massively in Pearl River Delta town of Shenzhen to emulate the success of Sil- icon Valley. Can our country, albeit small and lack- ing indigenous materials rise to the oc- casion to surf gloriously over the tide to seize this opportunity? Alas the dream of having an interna- tional innovation and business acceler- ator centre of calibre may prove to be a true catalyst to attract and retain such investment. Five years ago, a PKF delegation visited Massachusetts Institute of Technology (MIT) and CIC an accelerator in Boston, USA to explore links to promote Malta as a potential business accelerator and/ or Life Sciences hub. CIC also has a non-profit sister, the Venture Cafe Foun- dation (this provides a Forum for ven- ture capitalists to scout and help fund new talent). Later, accepting an invitation from PKF, Parliamentary Secretary Silvio Schembri toured the impressive innovation centre in Rotterdam. Having visited CIC offices and laboratories, the team were over- whelmed by the number of dedicated entrepreneurs who work hard to delve into innovative studies on a number of subjects. One hopes that this initiative will not die a natural death and talks will resume to attract US investment. Granted, this is not an easy journey since many countries want to emulate the commercial success of Silicon Val- ley. Perhaps the Teva saga will teach us a lesson to be proactive and not risk be- ing overtaken by disruptive technology poised to overtake our pharmaceutical sector. As always, fortune favours the bold. Teva - the battle of the opioids George Mangion is a senior partner of an audit and consultancy firm, and has over 25 years experience in accounting, taxation, financial and consultancy services. His efforts have seen PKF being instrumental in establishing many companies in Malta and ensured PKF become one of the foremost professional financial service providers on the Island To attract international business we must be ready to help build a top-end R&D hub