Teva Backpedals on 6,000 Job Cuts, Says Figure is Too High
March 23, 2017
By Mark Terry, BioSpace.com Breaking News Staff
Israel-based Teva Pharmaceutical Industries corrected a news report saying the company was cutting 2,000 to 6,000 jobs. The company didn’t specify the actual number, although it did say that 6,000 was too high.
Several Israeli media sources, including the newspaper Calcalist, reported the figures. Calcalist indicated that over the next few years, the company, was planning to cut between 5,000 and 6,000 positions, which would save $2 billion. The company employs about 57,000 people.
Initially Teva declined to comment. Then it provided a statement saying, “The efficiency program is an integral part of Teva’s business reality. The program includes, among other things, ending unprofitable activities and consolidating functions, in addition to freezing recruitment and natural employee turnover. These processes are conducted through a continuous open dialogue with the employees. This will be the practice, including in Israel, as necessary. We would like to stress that the numbers which were published in the media are incorrect.”
Teva has had several setbacks the last year, including delayed drug launches and expensive acquisitions. In February, the company forced out chief executive officier Erez Vigodman, who is being temporarily replaced by the company’s chairman, Yitzhak Peterburg.
The company indicates it wants to cut costs to pay down debt. However, laying off workers in Israel can be problematic due to government tax breaks. When Jeremy Levin, a previous chief executive officer attempted to lay off workers in Israel about four years ago, he faced stiff opposition from unions and local politicians.
“A few years ago, we were in a similar situation and we went to the battle,” Eliran Kozlick, the head of Teva’s workers’ committee, wrote in a Facebook post today. “If the management wants to do this again, we will all work together and win as we did in the previous struggle.”
The company released its fourth-quarter and full-year financials on February 13. It reported annual revenues of $21.9 billion, up from $19.7 billion the previous year. That was primarily related to the inclusion of the acquisition of the Actavis Generics business. Research and development expenses, however, were $2.1 billion in 2016, up from $1.5 billion in 2015. Earnings per share (EPS) attributable to ordinary shareholders was $0.07 in 2016 compared to $1.84 in 2015.
“2016 was a transitional year for Teva—one that included significant achievements, as well as challenges,” said Peterburg, interim president and chief executive officer of Teva, in a statement. “While we continue to manage through a turbulent and constantly evolving industry, we are committed to execute against our strategy with more diversified revenue sources and profit streams, all backed by strong product development engines in both generics and specialty.”
For this year, the company’s focus will be on “extracting synergies related to the Actavis Generics transaction,” he continued.
The Allergan /Actavis generics deal cost $43 billion, which http://fortune.com/2017/02/28/big-pharma-winners-losers-2016/ feel was dramatically overpriced. The deal made Teva the largest generic medicines producer in the world, and should provide it with more negotiation clout with governments and insurers.
Time will tell, and 2017 will likely be an important year as the company integrates the acquisition into its operations. Steven Tepper, an analyst at Migdal Capital Markets, told the Wharton University of Pennsylvania at the original time the deal was announced, “Levin and Hayden [former CEO and head of R&D, respectively] sought to marry Teva’s proven capabilities in the efficient production of generic drugs with the company’s in-house R&D capabilities, themselves enhanced by a series of acquisitions. The goal is to turn generic drugs into specialty products, for instance by giving them a special formulation or method of application—something that doesn’t change the essence of the drug, but de-commoditizes it and allows for a higher price, higher margins and hence greater profitability.