Teva to cut 7000 jobs, close 15 manufacturing sites

Teva interim CEO Yitzhak Peterburg said Thursday that the company will cut 7000 jobs and close or sell six manufacturing plants by the end of the year. The drugmaker, whose shares fell as much as 22 percent on the news, also plans to shutter or divest a further nine manufacturing facilities next year, whilst halting operations in 45 countries by the end of 2017.

The news came after Teva reported second-quarter sales that missed expectations and said revenue and earnings this year will be lower than previously forecast, mainly due to increased price erosion in its US generics business. Peterburg commented "given the current environment, we have had to take swift and decisive actions. We are focused on executing meaningful cost reductions, rationalising our assets and maximising their value, actively pursuing divestiture opportunities and strengthening our balance sheet."

Peterburg explained that the job cuts will surpass an initial estimate of 5000 positions following last year's acquisition of the Actavis generics business. The drugmaker plans to divest some assets, including its global women's health and European cancer and pain-treatment divisions. Peterburg suggested that the divestments and other asset sales, which are likely to be completed by year-end, will help generate at least $2 billion, exceeding an initial target of $1 billion. The chief executive indicated that Teva is also assessing other "non-core" operations, adding "this review will ensure business is much more focused and efficient in the rapidly changing competitive environment."

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In the quarter, sales rose 13 percent year-over-year to $5.7 billion, boosted by the inclusion of the Actavis generics business, but missed analyst estimates of around $5.8 billion. "Second-quarter results were lower than we anticipated due to the performance of our US generics business and the continued deterioration in Venezuela," noted Peterburg.

According to Teva, sales in its generics segment climbed 20 percent to $3.1 billion, while revenue in its specialty medicines division slipped 9 percent to $2.1 billion, with sales of Copaxone down 10 percent at $1 billion. In the three-month period, the drugmaker posted a loss of $6 billion, versus a profit of $188 million in the prior-year quarter.

Peterburg explained that "in our US generics business, we experienced accelerated price erosion and decreased volume mainly due to customer consolidation, greater competition as a result of an increase in generic drug approvals…and some new product launches that were either delayed or subjected to more competition." Peterburg remarked "all of us at Teva understand the frustration and disappointment of our shareholders in light of these results."

For 2017, Teva indicated that sales are predicted to be between $22.8 billion and $23.2 billion, down from a prior estimate of $23.8 billion to $24.5 billion. The company said that price erosion in the US generics business is predicted to be in a high-single digits rate, while the unit will also be hit by delays in generic launches. Meanwhile, earnings per share are now forecast to be in the range of $4.30 to $4.50, cut from an earlier expectation of between $4.90 per share and $5.30 per share.

For further analysis, read Teva: Q2 highlights and key takeaways.

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