Teva Announces Restructuring Plan and Additional Measures to Improve Its Business and Financial Performance
December 14 2017 - 7:03AM
Business Wire
- Total cost base to be reduced by $3
billion by the end of 2019
- Workforce to be reduced by over
25%
- Dividend suspended on ordinary shares
and ADSs
Teva Pharmaceutical Industries Ltd. (NYSE & TASE: TEVA)
announced today a comprehensive restructuring plan to significantly
reduce its cost base, unify and simplify its organization and
improve business performance, profitability, cash flow generation
and productivity.
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the full release here:
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Kåre Schultz, Teva’s President and CEO, said, "Two weeks ago we
announced a new organizational structure and executive management
team. Today we are launching a comprehensive restructuring plan,
crucial to restoring our financial security and stabilizing our
business. We are taking immediate and decisive actions to reduce
our cost base across our global business and become a more
efficient and profitable company.”
"We will execute this plan in a timely and prudent manner,
remaining focused on revenue and cash flow generation, in order to
make sure Teva is ready to meet all of its financial commitments.
Teva will optimize its cost base while ensuring that we protect our
revenues and preserve our core capabilities in generics and in
select specialty assets, in order to secure long-term growth. In
2018, we expect to secure the successful launches of Austedo and
fremanezumab."
The two year restructuring plan announced today is intended to
reduce Teva's total cost base by $3 billion by the end of 2019, out
of an estimated cost base for 2017 of $16.1 billion. More than half
of the reduction is expected to be achieved by the end of 2018. The
company expects to record a restructuring charge as a result of the
implementation of the plan in 2018 of at least $700 million, mainly
related to severance costs, with additional charges possible
following decisions on closures or divestments of manufacturing
plants, R&D facilities, headquarters and other office
locations.
The restructuring plan will focus on:
- The immediate deployment of the new
unified and simplified organizational structure, announced on
November 27. It will deliver cost savings and increase internal
efficiencies by reducing layers of management, and simplifying
business structures and processes across the company's global
operations. The new structure will support our continued commitment
to compliance and business integrity
- Substantial optimization of the
generics portfolio globally, and most specifically in the United
States, through price adjustments and/or product discontinuation.
This will enable the company to accelerate the restructuring of its
manufacturing and supply network, including the closures or
divestments of a significant number of manufacturing plants in the
United States, Europe, Israel and Growth Markets
- Closures or divestments of a
significant number of R&D facilities, headquarters and other
office locations across all geographies, delivering efficiencies
and substantial cost savings
- Teva will work to significantly improve
profitability in all existing markets by optimizing their cost
base
- A thorough review of all R&D
programs across the entire company, in generics and specialty, to
prioritize core projects and terminate others immediately, while
maintaining a substantial pipeline
These steps are expected to result in the reduction of 14,000
positions globally – excluding the impact of any future divestments
– over 25% of Teva’s total workforce – over the next two years.
The majority of the reductions are expected to occur in 2018,
with most of the affected employees being notified within the next
90 days. Restructuring efforts will be done in accordance with
applicable local requirements. Consultations with the relevant
employee representatives will begin in the near term.
In addition to the restructuring plan, Teva is announcing the
following measures to address the company’s financial
situation:
- The company will immediately suspend
dividends on ordinary shares and ADSs, while dividends on mandatory
convertible preferred shares will be evaluated on a quarterly basis
per current practice
- Teva’s annual bonus for 2017 will not
be paid due to the fact that the company's financial results are
significantly below our original guidance for the year.
- The company will continue to review the
potential for additional divestment of non-core assets
Teva will provide full guidance for 2018 in February with the
annual results and will share a longer-term strategic direction for
the company later in 2018.
Schultz concluded, "These are decisions I don't take lightly but
they are necessary to secure Teva's future. We will implement these
changes with fairness and the utmost respect for our colleagues
worldwide. Today's announcement is about positioning Teva for a
sustainable future which we will achieve with our talented people.
We will ensure that we continue to provide high quality medicines
to the many patients we serve every day, while adhering to the
highest standards of GMP compliance."
The plans were outlined in an email from the CEO to Teva's
employees. The message can be accessed here.
About Teva
Teva Pharmaceutical Industries Ltd. (NYSE and TASE: TEVA) is a
leading global pharmaceutical company that delivers high-quality,
patient-centric healthcare solutions used by approximately 200
million patients in over 60 markets every day. Headquartered in
Israel, Teva is the world’s largest generic medicines producer,
leveraging its portfolio of more than 1,800 molecules to produce a
wide range of generic products in nearly every therapeutic area. In
specialty medicines, Teva has the world-leading innovative
treatment for multiple sclerosis as well as late-stage development
programs for other disorders of the central nervous system,
including movement disorders, migraine, pain and neurodegenerative
conditions, as well as a broad portfolio of respiratory products.
Teva is leveraging its generics and specialty capabilities in order
to seek new ways of addressing unmet patient needs by combining
drug development with devices, services and technologies. Teva's
net revenues in 2016 were $21.9 billion. For more information,
visit www.tevapharm.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, which are based on management’s current beliefs and
expectations and are subject to substantial risks and
uncertainties, both known and unknown, that could cause our future
results, performance or achievements to differ significantly from
that expressed or implied by such forward-looking statements.
Important factors that could cause or contribute to such
differences include risks relating to:
- uncertainties relating to our ability
to effectively execute a restructuring plan, including: the effects
of such restructuring plan, including facilities and workforce
reductions, on our business, operations, revenues and
profitability; potential disruptions to our business as a result of
the restructuring and management attention to the restructuring;
uncertainty regarding the timing and amount of exit and disposal
costs and severance, and the potential amount and timing of future
cost savings, associated with the restructuring and the related
workforce reduction; our ability to manage the costs and
liabilities associated with a restructuring plan, including exit
and disposal costs and severance; the potential loss of tax
benefits in Israel as a result of our restructuring plan; and
potential labor unrest as a result of our planned workforce
reductions
- uncertainties relating to the potential
benefits and success of our new organizational structure and recent
senior management changes;
- our generics medicines business,
including: that we are substantially more dependent on this
business, with its significant attendant risks, following our
acquisition of Allergan plc’s worldwide generic pharmaceuticals
business (“Actavis Generics”); our ability to realize the
anticipated benefits of the acquisition (and any delay in realizing
those benefits) or difficulties in integrating Actavis Generics;
the increase in the number of competitors targeting generic
opportunities and seeking U.S. market exclusivity for generic
versions of significant products; price erosion relating to our
generic products, both from competing products and as a result of
increased governmental pricing pressures; and our ability to take
advantage of high-value biosimilar opportunities;
- our specialty medicines business,
including: competition for our specialty products, especially
Copaxone®, our leading medicine, which faces competition from
existing and potential additional generic versions and
orally-administered alternatives; our ability to achieve expected
results from investments in our product pipeline; competition from
companies with greater resources and capabilities; and the
effectiveness of our patents and other measures to protect our
intellectual property rights;
- our substantially increased
indebtedness and significantly decreased cash on hand, which may
limit our ability to incur additional indebtedness, engage in
additional transactions or make new investments, and may result in
a downgrade of our credit ratings;
- our business and operations in general,
including: our ability to develop and commercialize additional
pharmaceutical products; manufacturing or quality control problems,
which may damage our reputation for quality production and require
costly remediation; interruptions in our supply chain; disruptions
of our or third party information technology systems or breaches of
our data security; the failure to recruit or retain key personnel;
the restructuring of our manufacturing network, including potential
related labor unrest; the impact of continuing consolidation of our
distributors and customers; variations in patent laws that may
adversely affect our ability to manufacture our products; our
ability to consummate dispositions on terms acceptable to us;
adverse effects of political or economic instability, major
hostilities or terrorism on our significant worldwide operations;
and our ability to successfully bid for suitable acquisition
targets or licensing opportunities, or to consummate and integrate
acquisitions;
- compliance, regulatory and litigation
matters, including: costs and delays resulting from the extensive
governmental regulation to which we are subject; the effects of
reforms in healthcare regulation and reductions in pharmaceutical
pricing, reimbursement and coverage; potential additional adverse
consequences following our resolution with the U.S. government of
our FCPA investigation; governmental investigations into sales and
marketing practices; potential liability for sales of generic
products prior to a final resolution of outstanding patent
litigation; product liability claims; increased government scrutiny
of our patent settlement agreements; failure to comply with
complex Medicare and Medicaid reporting and payment
obligations; and environmental risks;
- other financial and economic risks,
including: our exposure to currency fluctuations and restrictions
as well as credit risks; the significant increase in our intangible
assets, which may result in additional substantial impairment
charges; potentially significant increases in tax liabilities; and
the effect on our overall effective tax rate of the termination or
expiration of governmental programs or tax benefits, or of a change
in our business;
and other factors discussed in our Annual Report on Form 20-F
for the year ended December 31, 2016 (“Annual Report”),
including in the section captioned “Risk Factors,” and in our other
filings with the U.S. Securities and Exchange Commission,
which are available at www.sec.gov and www.tevapharm.com.
Forward-looking statements speak only as of the date on which they
are made, and we assume no obligation to update or revise any
forward-looking statements or other information contained herein,
whether as a result of new information, future events or otherwise.
You are cautioned not to put undue reliance on these
forward-looking statements.
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version on businesswire.com: http://www.businesswire.com/news/home/20171214005653/en/
Teva Pharmaceutical Industries Ltd.IR Contacts:United
StatesKevin C. Mannix, 215-591-8912Ran Meir,
215-591-3033orIsraelTomer Amitai, 972 (3) 926-7656orPR
Contacts:IsraelIris Beck Codner, 972 (3) 926-7208orUnited
StatesDenise Bradley, 215-591-8974Kaelan Hollon,
202-412-7076
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