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By Ora Coren

Teva Pharmaceuticals

(Nasdaq:TEVA) is negotiating to receive investment incentives from the Israeli government to build additional manufacturing facilities in Israel.

The planned investment would amount to tens of millions of dollars.

The sides are debating whether the new facility would be considered an expansion of existing facilities or an independent project, unrelated to the company's current operations.

Teva wants the new plant to be classified as an independent investment, which would oblige the government to kick in a larger portion of the investment. Government sources say the pharmaceuticals company is threatening to build the facilities abroad if this condition is not met.

The Ministry of Industry and Trade is leaning toward accepting Teva's terms. But the Finance Ministry insists that the facility is an expansion, say the government sources.

Teva CFO Dan Suesskind confirmed that discussions are being held on the definition of a new facility, but he denied that Teva was making ultimatums or threats.

Teva would receive the investment incentive in the form of tax credits, not direct cash. If the new plant is built in an area defined as National Priority Zone A, which encompasses the Negev and the Galilee, it would be eligible for a 10-year tax holiday, and other benefits in subsequent years.

Teva manufactures in several countries. Its revenues in 2000 climbed 36% against 1999 to $1.75 billion. Teva CEO Eli Hurvitz recently said he expects a similar rate of growth in 2001.

Hurvitz noted that the company devotes a relatively high percentage of its revenues to R&D. Teva spent $80 million on R&D during the second half of 2000, he said. Teva is considered one of the largest producers of generic drugs in the world.