Teva Pharmaceuticals to Cut 25 Percent of Jobs in Huge Reshaping
Posted December 14, 2017 4:09 p.m. EST
Updated December 14, 2017 4:13 p.m. EST
Teva Pharmaceuticals, the world’s biggest maker of generic drugs, said Thursday that it would cut about a quarter of its workforce, or 14,000 jobs, close manufacturing and research facilities and suspend its dividend as it seeks to simplify its structure and reduce its debt.
The Israeli company has faced management turmoil and been squeezed by increased competition as well as lower prices in a challenging market environment for generic drugs in the United States. It cut its full-year forecast after it reported disappointing results in the third quarter this year as revenue from its generics business in the United States fell sharply.
The massive reshaping of Teva came just over two years after it agreed to buy the generic drug business of Allergan for $40.5 billion amid a rush of consolidation in the pharmaceuticals industry. The Allergan deal closed last year.
In September, the company named a new chief executive, Kare Schultz, who filled the spot after his predecessor, Erez Vigodman, stepped down in February. Schultz has brought in a new management team, in addition to announcing the major restructuring.
Teva said that it would undertake a two-year restructuring plan designed to reduce its costs by $3 billion by the end of 2019. The company has an estimated cost base of $16.1 billion this year.
“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,” Schultz said in a news release.
“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,” added Schultz.
The company said it expected to take a restructuring charge of at least $700 million next year, mainly related to severance costs, and could take additional charges tied to the closing of manufacturing plants, research facilities and other offices.
Prices for generic drugs have been falling across the industry, as major pharmacy chains, wholesalers and pharmacy benefit managers have united into colossal buying groups to drive harder bargains with generic drugmakers.
In a twist, Teva is also struggling because its leading brand-name drug, the multiple-sclerosis treatment Copaxone, now has generic competition. Copaxone brought in just over $1 billion in sales in the first three quarters of this year, or about 19 percent of the company’s total revenues. Those sales included about $800 million in the United States, an 8 percent decline over the same period in 2016 that management said was because of the new generic competition.
In addition to pressure on its generics business, Teva is saddled with some $35 billion in debt, much of it taken on in a spree of acquisitions in recent years.
As part of its reshaping, Teva said it would seek to improve its margins through price increases or the discontinuation of some drugs.
It also plans to close or sell a significant number of manufacturing plants in the United States, Europe, Israel and other markets.
Teva’s shares rose 10 percent in New York trading Thursday after the announcement.