By Andrew Friedman/
Teva Pharmaceutical Industries Ltd. (NYSE & TASE: TEVA) confirmed Thursday that the generic drug giant would lay off 1750 workers in Israel and close at least one local factory as part of what the company called a “comprehensive restructuring plan to significantly reduce its cost base, unify and simplify its organization and improve business performance, profitability, cash flow generation and productivity.”
In a dramatic statement released Thursday, Teva said it would cut 25 percent of its global workforce, or about 14,000 jobs. The majority of the reductions are expected to occur in 2018, with most of the affected employees being notified within the next 90 days.
The company said the move would reduce Teva’s total cost base by $3 billion by the end of 2019, out of an estimated cost base for 2017 of $16.1 billion. More than half of the reduction is expected to be achieved by the end of 2018. The company expects to record a restructuring charge as a result of the implementation of the plan in 2018 of at least $700 million, mainly related to severance costs, with additional charges possible following decisions on closures or divestments of manufacturing plants, R&D facilities, headquarters and other office locations.
Teva stressed that senior management would not receive bonuses for 2017 and that shareholders would not receive dividends. Teva’s President and CEO Kåre Schultz added that the plan would restore the company’s financial security and stabilize its business.
“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. 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.
“In 2018, we expect to secure the successful launches of Austedo and fremanezumab,” Shultz said.
Following the announcement, Prime Minister Binyamin Netanyahu spoke with Teva SEO Schultz and asked him to minimize the blow to Israeli workers, and to ensure that the company remains an Israeli one. Officials from the Histadrut, Israel’s labor federation, also called the announcement a “tough blow” to the Israeli economy and repeated their call for a general strike on Sunday. Histadrut Chairman Avi Nissenkorn told reporters after meeting with Teva officials that the unions would “consider more steps,” but failed to spell out how they proposed to convince the company to spare the local jobs.
MK Shelly Yechimovitch (Zionist Camp) responded to the cuts with a fierce denunciation of both Teva officials, and of Finance Minister Moshe Kahlon, who she said had remained absent from the crash of one of the maintays of Israel’s economy.
“We don’t know too much yet now, but we know that Teva is not offering sufficient severance pay. The are offering the bare legal minimum, whereas people need severance packages that will allow them to sustain themselves and live with a modicum of dignity,”Yechimovitch said.
