Generics Giant Cuts Staff by 25% -- WSJ
December 15 2017 - 03:02AM
Dow Jones News
Teva has been hurt by turbulent U.S. pricing, heavy debt and an
unwieldy supply chain
By Rory Jones in Tel Aviv and Austen Hufford in New York
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 15, 2017).
Teva Pharmaceutical Industries Ltd. is cutting more than 25% of
its workforce, or about 14,000 employees around the world, closing
factories and research centers and suspending its dividend -- the
Israeli firm's most recent move to cut costs and pare debt.
Teva, the world's biggest seller of generic drugs, didn't detail
where it is cutting jobs. At the end of the third quarter, it
employed about 53,000, most of them in Europe and the U.S.
Teva has been hit hard by declining generics prices in the U.S.
and increased competition for its blockbuster multiple-sclerosis
drug. It also recently emerged from a period of boardroom and
executive-suite turmoil. Directors had clashed on the firm's
strategy after swallowing a big acquisition that saddled it with
heavy debt.
Earlier this year, the firm shuffled board members and appointed
Kare Schultz as chief executive -- after the top job sat vacant for
nine months.
Mr. Schultz, who took over in September, has tried to move
quickly to restore stability. Teva said the two-year restructuring
plan will cut $3 billion in costs by the end of 2019, out of an
estimated cost base of $16.1 billion in 2017. Teva will also record
a one-off charge of at least $700 million in 2018, mainly related
to severance costs.
"Making workforce reductions of this magnitude is difficult,"
Mr. Schultz wrote in a memo to employees. "However, there is no
alternative to these drastic steps in the current situation."
Teva stock was up sharply in premarket trading, rising more than
13% early Thursday.
Investors have called for months for sweeping changes to Teva's
sprawling operations and what critics have called an unwieldy
supply chain, to better cope with the turbulent U.S. generics
market. One in seven prescriptions in the U.S. is a Teva drug.
It is also facing new competition to its biggest patented drug,
while investors have grown concerned about the $35 billion in debt
it took on last year when then-Chief Executive Erez Vigodman bought
Allergan PLC's generics unit.
The threat of job cuts has faced opposition in Israel, where
lawmakers already have called on the government to withdraw tax
benefits for Teva. The country's largest labor union said it will
strike over the job losses announced Thursday. Teva is cutting
1,700 jobs in Israel. As of the end of last year, it employed a bit
over 6,800 there.
Teva also said it wouldn't pay an annual bonus this year and
will review the potential for additional divestment of noncore
assets.
Mr. Schultz has shuffled the company's leadership ranks and said
he would combine its generic and specialty businesses to cut costs.
The firm also said research and development operations for the two
businesses would be combined.
Mr. Schultz took charge of the Israeli firm only days before it
announced disappointing third-quarter results and cut its
earnings-per-share estimate for the year. The third-quarter results
followed a $6.1 billion write-down in August, blamed on its U.S.
generics unit. That dragged the company's quarterly net loss to
$6.04 billion. Its shares lost a quarter of their market value that
day.
Teva also this year has said it would face competition for its
blockbuster specialty drug Copaxone earlier than planned. The drug
makes up roughly 20% of the firm's total revenue.
--Noemie Bisserbe in Paris contributed to this article.
Write to Rory Jones at rory.jones@wsj.com and Austen Hufford at
austen.hufford@wsj.com
(END) Dow Jones Newswires
December 15, 2017 02:47 ET (07:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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