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Teva cuts 25% of workforce, with Israel taking a heavy toll

But share prices increase by almost 14%

Teva

New Teva chief executive Kåre Schultz has started the painful process of reorganising the company, and will cut 14,000 jobs from the Israeli firm over the next two years.

The objective is to carve $3bn from Teva’s costs according to Schultz, who said the company needed to take “immediate and decisive actions to reduce our cost base across our global business and become a more efficient and profitable company”.

Along with the job losses, which include around half of the 6,400 people it employs within Israel, Teva is suspending dividend payments to shareholders to help it meet its cost-savings targets. Israel’s biggest trade union Histadrut has already threatened strike action to protest the cutbacks.

The company’s revamp has already claimed the position of former R&D chief Michael Hayden - who will retire at the end of this year - along with other senior executives, and investors seemed to welcome the tough new action, sending Teva’s share price up almost 14% yesterday after months on a downward trend.

Schultz said the latest actions will “protect our revenues and preserve our core capabilities in generics and in select specialty assets, in order to secure long-term growth”. In a letter to Israeli prime minister Benjamin Netanyahu, the new CEO insists that the measures are necessary to “preserve Teva as a strong global company, based in Israel”.

The move comes at a time when Teva is groaning under the weight of nearly $35bn in debt, swelled by its $39bn acquisition of Allergan’s generics business Actavis in 2015, and a cost base of around $16bn. The reductions will cost the company at least $700m next year, primarily from severance costs.

For now, it’s not providing many details about exactly where the job losses will occur, other than to say it plans to sell or close a “significant number” of manufacturing plants, R&D facilities and offices around the world.

Teva has been in a difficult situation for some years, saddled with the loss of patent protection for its Copaxone (glatiramer acetate) blockbuster for multiple sclerosis, disappointing clinical results for would-be successor laquinimod and an underperformance in its generic drug operations that have only been amplified by adding the Actavis business.

The company has already made some changes to its organisational structure, for example selling off its women’s health business for $2.5bn, integrating its generics and specialty medicines units into one, and combining all of its R&D into a single division.

The latest actions will see the number of generic drugs in the portfolio reduced, and a review of all R&D programmes with a view to focusing only on those of highest priority.

Article by
Phil Taylor

15th December 2017

From: Sales

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