After Years of a 'Wild Ride,' Teva CLO Makes Cuts for Sake of Stability
David Stark, executive vice president and chief legal officer of financially strapped Teva Pharmaceutical Industries, based in Teva's U.S. headquarters in Parsippany, New Jersey, had to cut his legal staff by 40 percent since 2017 as part of cost-cutting at the Israel-based company. "It was super difficult and hard on morale.” He also plans reductions in outside legal spending.
November 12, 2018 at 05:07 PM
6 minute read
David Stark, executive vice president and chief legal officer of financially strapped Teva Pharmaceutical Industries, said he feels like he can breathe easier for the first time in years thanks to a new CEO who is working to bring stability to the company.
Stark has been with Israel-based Teva, the world's largest generic drug manufacturer, since 2002. “And it's been a fairly wild ride,” he said in a recent interview with Corporate Counsel.
“Every day when you came into the office, you didn't know what to expect. But the new CEO is a breath of fresh air, improving the business margins, making smart decisions. The environment has stabilized after many years.”
It wasn't painless. CEO Kare Schultz, who took over in November 2017, started by slashing 25 percent of the company's 56,000 employee base. He promised to cut costs by $3 billion by the end of 2019.
While dealing with all the legal work that goes along with downsizing and restructuring a company, Stark's law department endured its own major cuts. Stark, based in Teva's U.S. headquarters in Parsippany, New Jersey, had to cut his legal staff by 40 percent, taking it from 400 employees to about 240.
Stark, who was named CLO in November 2016, didn't want to elaborate on the details of his cuts, but said “basically I did it across the board, starting with my direct team.”
He said the transaction area was easiest to cut, because the company had called a halt on merger and acquisition activity until it is better financially situated.
“We didn't use any outside experts,” Stark said. “I worked closely with my senior management team and my human resources partner. We just rolled up our sleeves. It was super difficult and hard on morale.”
He said the patent and litigation areas are critical to Teva, and he tried to protect them as much as possible. “A fair amount of legal attention is directed into corporate governance as well,” he added.
Part of that governance work is cooperating with a corporate monitor imposed for three years under a December 2016 deferred prosecution agreement with the U.S. Department of Justice. The monitor is Gil Soffer, a former federal prosecutor who is managing partner in the Chicago office of Katten Muchin Rosenman.
Under the agreement, Teva agreed to pay abut $520 million to resolve criminal and civil charges over bribes to government officials in Russia, Ukraine and Mexico, in violation of the Foreign Corrupt Practices Act. DOJ said then it was the largest criminal fine ever imposed against a drug company for violations of the FCPA.
“Working with the monitor is going smoothly, but it is a challenge,” Stark said.
The DPA forced Teva to enhance its compliance efforts. Stark said the compliance unit was split off from the legal department, but they still work closely together.
“I talk every day with the chief compliance officer. I have lawyers on her teams, and she has compliance people embedded in mine. We work arm in arm.”
|
➤ Stay on top of in-house developments with Inside Track, a weekly email briefing that breaks down the news, flags key issues and keeps track of who's on the move. Learn more.
|
Prior to joining Teva, Stark was an associate attorney in the litigation departments at Willkie Farr & Gallagher from 1998 to 2002; Chadbourne & Parke from 1997 to 1998; and Haight, Gardner, Poor & Havens between 1994 and 1997.
He said Teva is on track to meet its financial goals for 2018 and 2019, and the company's third- quarter financial report to the U.S. Securities and Exchange Commission on Nov. 1 supported that view. It has already recorded a cost reduction of $1.8 billion in the first nine months of this year, and said it expects to meet the $3 billion goal by the end of next year, while continuing to pay down debt. Though the quarter showed a $273 million loss, the future outlook for growth after 2019 was positive based on its restructuring.
The legal department will do its share to make more cuts in 2019, Stark said, but this time in its external spend.
“As a heavily regulated industry, it's fair to say our external spend on outside law firms is significant,” he noted.
He has a three-prong plan to reduce outside legal costs: First, Stark said he wants to reduce the number of outside law firms he uses, but give them a higher volume of the work, hoping to receive significant fee discounts in return.
Second, he plans to strip out legal work that can be done in-house or outsourced to less expensive vendors, such as document reviews, and focus “the high-priced law firms on higher-end legal work.”
Third is investing more in technology platforms, including one to help manage outside law firm work and costs.
Stark believes his legal department and his company are on the right track, but he acknowledged that there is much work to be done before the company can claim complete financial stability. If all goes well by the end of 2019, Teva could be well on its way to significantly reducing its $30 billion debt load and ending its DPA and corporate monitor.
“Finally we have a clear idea of what our goals are, where we are headed, and what we need to do to meet our commitments,” Stark said.
Read more from the archives:
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllBaker Botts' Biopharma Client Sues Former In-House Attorney, Others Alleging Extortion Scheme
People and Purpose: AbbVie's GC on Leading With Impact and Inspiring Change
7 minute readSage Therapeutics Axes GC After Drug-Pipeline Failures Force Cost-Cutting
After Guiding Illumina Through Harrowing Merger Fight, GC Charles Dadswell to Depart
Trending Stories
- 1California’s Workplace Violence Laws: Protecting Victims’ Rights in the Workplace
- 2Dealing With an Undocumented Witness in the Second Trump Era
- 3Investors Sue in New York Over $440M International Crypto Ponzi Scheme
- 4Delaying Rent Payment by Assisted Living and Skilled Nursing Facilities in Chapter 11
- 5Legaltech Rundown: Josef Closes Quick Funding Round, SixFifty Launches AI Research Tool, and More
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250