Generics Giant Cuts Staff by 25% -- WSJ
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 firstname.lastname@example.org and Austen Hufford at email@example.com
(END) Dow Jones Newswires
December 15, 2017 02:47 ET (07:47 GMT)Copyright (c) 2017 Dow Jones & Company, Inc.