Teva Pharmaceutical Industries, the world's largest generic drugmaker, said Thursday that it will cut about 14,000 jobs, more than 25 percent of its workforce, and close or sell manufacturing plants and research and development facilities at its headquarters in Israel and other locations.
The announcement did not detail where the job cuts will be made, but said more than half will be completed by the end of 2018, and workers will be notified within the next 90 days.
Teva said it expects to reduce its costs by $3 billion within two years. "Today we are launching a comprehensive restructuring plan, crucial to restoring our financial security and stabilizing our business," Teva Chief Executive Officer Kare Schultz said in a statement.
"We are taking immediate and decisive actions."
"Over the next 12 to 24 months e plan to consolidate our offices in the United States from the current seven locations into one main campus, final location to be determined," said Kaelan Hollon, Teva's senior director of communications based in Washington. "We have already closed our office in Cambridge, Mass., and are in the process of closing our offices in Washington, D.C., Horsham, Pa., and Manhattan, N.Y. "All streamlining efforts will be consistent with applicable local requirements. Consultations with the relevant union representatives will begin in the near term."
Hollon said she could not comment on how Teva's North America headquarters in North Wales, Pa., could be affected.
The Israeli press has reported that Teva, one of Israel's largest employers, plans to fire 3,000 of the 6,500 workers in Israel. It will close a research and development center in the coastal city of Netanya, and sell a logistics plant in Shoham.
Teva employs more than 56,000 people worldwide.
"The cuts will stabilize Teva in the near term," analyst Ronny Gal at Sanford C. Bernstein said in a client note. "It is obviously critical for Teva to execute these cuts, and we will judge the company in part on its ability to persevere through the local opposition."
Schultz, who became CEO in November, conducted a similar restructuring at his previous company, Lundbeck in Denmark.
In Israel, the Histadrut labor federation said it would mobilize against the cuts. Avi Nissenkorn, chairman of the union, said at a Tel Aviv news conference late Wednesday, "We're going to strike across all of Teva, all its plants, on Sunday," Bloomberg News reported.
Teva ran up a large debt of $35 billion after buying Allergan's generic business last year for $40.5 billion. Teva faces generic competition for its best-selling multiple sclerosis drug Copaxone, which accounts for 43 percent of the company's profit.
Teva and other pharmaceutical companies are facing declining prices for generic drugs and lower profits, and as a lag in new products. This week Teva released its generic version of Viagra, but Pfizer plans to release a generic Viagra, too.
Teva may still need to divest or sell more assets, including its women's health unit and European pain and oncology portfolio, to meet debt obligations, analysts said.
The planned changes "are all in line with what Teva had to do," Gal said. "We have not seen Teva execute particularly well in the past few years and will want to see management execute successfully before recommending the stock."
"The Israel media highlighted the human impact of the decision and noted a picture of CEO Schultz as the night-king character from Game of Thrones," Gal wrote. "Local politicians have already begun commenting on the discrepancy between the new CEO compensation and the firing of roughly half of Teva's Israeli employees."
Moving generic operations could improve operating efficiency, and some reports suggest that Teva is looking to move its generic manufacturing out of Israel to lower cost countries. Teva owes $6 billion in bond payments due in 2018, and $11.9 billion total through 2020.
Schultz ousted top division heads last month and said he would combine the company's generic and specialty drug businesses. In August, Teva announced it would lay off 7,000 employees in manufacturing by year-end.
Business on 12/15/2017