Generic drug giant Teva embraces innovation with a 'mindset shift', moving beyond the shadow of M&A

Once upon a time, Teva Pharmaceuticals was seen as the poster child for problematic mergers and acquisitions—acquiring Allergan's generics unit Actavis for $40 billion in 2016, then cutting a quarter of its workforce in a major restructuring. Now, after nearly a decade of cost-cutting and deep reflection, the Israeli drugmaker may finally be turning a new page.

As a generics company with a history spanning over a century, Teva has been involved in innovative drugs since the approval of Copaxone, a multiple sclerosis treatment, in the 1990s. Today, new drug development has become Teva's top priority, and Dr. Eric Hughes, chief medical officer and EVP of global R&D, says the marketed portfolio and active pipeline reflect this shift in mindset.

"The transformation Teva's R&D organization has undergone over the past few years is exciting," Hughes said. "The question is not whether we will grow, but how much we can grow in the future."

Despite Copaxone facing its own generic competition, as well as controversy over Teva being accused of anticompetitive practices, the company has accelerated its R&D engine, launching new drugs such as Austedo for Huntington's disease and Ajovy for migraine, which have driven growth and injected a new sense of purpose beyond its core generics business. Hughes said Teva is currently in a strong streak of ten consecutive quarters of growth.

"We need to stop thinking about slowing down and cutting costs, and instead think more about how to accelerate and strategically allocate capital to move forward."

—Dr. Eric Hughes, Chief Medical Officer, EVP, Global R&D, Teva Pharmaceuticals

Hughes said the pipeline is even more of a highlight. Duvakitug, an immunology "pipeline-in-product" developed in partnership with Sanofi, is already in late-stage development, and mid-stage candidates such as emrusolmin for multiple system atrophy and TEV-53408 for celiac disease together form a promising lineup.

Here, Hughes explains Teva's strategy for turning things around during an especially difficult period, how it shifted from generics to innovative drugs, and how it is overcoming industry-wide challenges.

This interview has been edited for length and clarity.

PHARMAVOICE: Can you talk about the strategic discussions you had before rebuilding Teva?

DR. ERIC HUGHES:The "Pivot to Growth" strategy began about three years ago, when Richard Francis became our CEO, and I joined about six months before him. The strategy focuses on restoring growth through four pillars: first, fully leveraging marketed brands; second, driving innovation; third, maintaining strength in generics; and fourth, focusing on core business.

I am particularly excited about the second pillar, because leveraging our innovation capabilities and pipeline is the primary way we grow. On top of generics, we can build a modern drug development matrix and capitalize on those synergies.

What does the term "modern drug development matrix" specifically mean for Teva?

Throughout my career, I have worked at several large pharmaceutical companies, so I have studied organizational structures in depth, as well as how to build culture and mindsets around them. Drug development is a complex process that requires multiple disciplines and diverse expertise, so there must be a matrix where strategic leadership works in equal partnership with various functions. When I joined Teva, the structure was very fragmented, but the company had an excellent cultural foundation.

The key to building this system is that there is a wealth of experience in generics and biosimilars that can be applied to innovative drugs, and vice versa.

From the initial approval of Copaxone to the much larger R&D engine today, what lessons from generics have you applied to innovative drug development?

There has always been a seed of innovation in Teva's DNA. This is not a new concept—even in our generics history, we produced excellent formulations. When it comes to developing formulations, whether novel ones or the more than 500 generic products used daily in the U.S., I have never lacked expertise. Sometimes I feel Teva's innovation team is like a biotech company with the resources and funding of a large pharmaceutical company.

This transformation is not just about accelerating the R&D engine and bringing products to market. Talk about how you changed the company's mindset, as you said, toward new drug development.

Organizational structure needs cultural mindset to drive it—boxes on a chart don't develop drugs. What matters most is the people and culture behind it. To execute, you must build a culture of inclusion, listening, and inspiration, because one of Teva's strengths is that we have been through many challenges. After the failed Actavis deal, the company was in survival mode for years. But as we emerged from that, we needed to stop thinking about slowing down and cutting costs, and instead think more about how to accelerate and strategically allocate capital to move forward.

Now, Teva has grown for ten consecutive quarters. How do you attribute the shift from the difficult period?

This is the result of the efforts of every team at Teva, especially the commercial team, which drove the success of Austedo and Ajovy. Francis would be the first to acknowledge that we have a strong commercial footprint, along with the energy and execution the team brings. The generics business is large, and we have been able to keep it strong because we have done it before—now we are improving the efficiency of our R&D system and finding efficiencies in technical operations.

After completing the transformation, what challenges are you currently facing?

We have such a strong pipeline that advancing it as quickly as possible with existing resources is my biggest challenge, with a focus on three Phase 3 programs and two very strong Phase 2 programs. Another challenge is building partnerships in the innovation space. Teva has a broad history of collaboration in generics, and people don't realize how significant that is—collaborating in innovation is a new process for them.

Teva has always had a great culture, but three years ago it also faced an urgent need for change. At that time, the company wasn't growing, and people were hungry for hope. But if you have a baseline mindset of willingness and desire to change, that's the first step. What are we doing to improve the industry and advance drug development? We are shortening timelines and thinking more aggressively about how to achieve things efficiently.

Beyond Teva, how do you assess the current era for the pharmaceutical industry?

The industry faces challenges of rising costs and extended timelines. Despite tighter regulation, we must comply and focus more on how to do so. Teva's approach is to focus on neuroscience and immunology therapeutic areas, ensuring higher probability of success, shorter timelines, and faster value realization.