Teva to cut over 25 percent of global workforce

Teva announced Thursday that it will abolish 14 000 jobs, or more than 25 percent of its global workforce, over the next two years as part of a restructuring plan designed to reduce costs by $3 billion. The company, whose shares jumped as much as 14 percent on the news, indicated that the majority of the job losses are expected to be achieved by the end of 2018, although no further details were provided. 

CEO Kare Schultz, who assumed the helm last month, said "we are taking immediate and decisive actions to reduce our cost base across our global business and become a more efficient and profitable company." The news follows the recent shakeup of Teva's business structure and management team, which included the departure of global R&D chief Michael Hayden. 

According to Schultz, the latest overhaul is designed to "protect our revenues and preserve our core capabilities in generics and in select specialty assets, in order to secure long-term growth." Teva indicated that as part of the plan, it will close or divest a "significant number" of manufacturing plants in the US, Europe, Israel and growth markets, as well as shutter or sell a "significant number" of R&D facilities, headquarters and other office locations across all geographies. 

The company said it will conduct a review of all R&D programmes in generics and specialty, and will continue to assess the potential for additional divestments of non-core assets, but noted that it intends to maintain a "substantial pipeline." 

Teva estimated that it will take a restructuring charge of at least $700 million next year, primarily due to severance costs. The drugmaker stated there may also be additional charges based on decisions regarding closures or divestments of manufacturing plants, R&D facilities, headquarters and other office locations. 

FirstWord Reports: Providing insight, analysis and expert opinion on important Pharma trends and challenging issues <Click here>

Schultz commented "these are decisions I don't take lightly, but they are necessary to secure Teva's future." The company said it will provide its full-year guidance for 2018 in February alongside its annual results, and will unveil its "longer-term strategic direction" later next year. 

Teva has been looking for ways to pay down $35 billion in debt following its 2016 acquisition of Allergan's global generic drugs business for $40.5 billion. The Israeli drugmaker divested its remaining specialty global women's health business assets earlier this year for about $1.4 billion, and has also reportedly hired Evercore to help it review debt options. 

Meanwhile, Teva also announced that it will suspend its dividend on ordinary shares, while dividends on preferred shares will be evaluated on a quarterly basis. Further, it said staff bonuses for 2017 will not be paid as "the company's financial results are significantly below our original guidance for the year."

Last month, Teva was forced to reduce its 2017 outlook, citing an "earlier-than-expected, at-risk launch" of generic Copaxone (glatiramer acetate) and lower projected sales for new products in the US (for related analysis, see ViewPoints: A fatal blow to Teva's Copaxone empire?). In his remarks about the restructuring news, Schultz noted that Teva does expect to secure successful launches in 2018 for Austedo (deutetrabenazine), which the FDA approved in April for complications associated with Huntington's disease, as well as for the investigational migraine therapy fremanezumab, currently under US regulatory review.

Sources close to the matter had recently hinted that Teva was considering slashing its global workforce by 5000 to 10 000 positions in an effort to cut spending by $2 billion. Meanwhile, a report earlier this week suggested that Teva might eliminate nearly half of its Israeli workforce of about 6400 employees. Some analysts have warned the company could struggle to implement the job cuts in the face of political and labour union opposition in the country.

To read more Top Story articles, click here.