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Teva to Cut Jobs, Shut Down Some Israeli Operations

Teva to Cut Jobs, Shut Down Some Israeli Operations

On Thursday, the troubled drugmaker is expected to unveil its cutback plan. At its center is extensive layoffs and the reorganization and divestment of non-core assets

Dror Reich and Sefi Krupsky | 10:55, 13.12.17
Debt-laden drugmaker Teva Pharmaceutical Industries Ltd. will unveil its full cutback plan Thursday, but Calcalist has learned the details of the plan beforehand.

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Calcalist has learned that Teva will announce tomorrow that a third of its Israeli employees will be let go. The company's research and development center in the central coastal city of Netanya, which employs some 350 people, will be shut down in its entirety. 500 employees will be let go from the company's headquarters in Petah Tikva, which currently employs 1,500. The company will also sell or shut down its factory in the northern city of Kiryat Shmona and fire most of its employees in its Ne'ot Hovav facility.  

Teva Teva's Ne'ot Hovav facility. Photo: Haim Horenstein Teva

Israel-headquartered Teva is currently struggling with a short-term debt of around $2.7 billion and long-term debt and capital lease obligation of around $32 billion. The $40.5 billion acquisition of Allergan's generic business in 2016, diminishing revenues from the generic drug market due to regulatory and retail constraints, and the launch of generic versions of Teva's cash cow Copaxone following patent expiration have all contributed to its current financial struggles and cast doubt on the company's ability to haul debt.

In late November, new CEO Kåre Schultz announced the main tenets of Teva's reorganization strategy. Focusing back on generics, the company has canceled the distinction between its generic and specialty drug businesses, consolidating them under the same management. The reorganization has led to the ousting of several senior executives, including chief scientific officer Michael Hayden.

Layoffs will extend to Teva's global employee pool as well. A Bloomberg report published last week indicated that Teva intends to cut around 10,000 employees overall. The company previously announced it will reduce its five regional divisions to three, North America, Europe, and growth markets. Instead of two regional managers, one for generic medicine and one for specialty medicine, one person will now manage both businesses for each regional division. The purpose of the reorganization is to save Teva expenses of $1.5 billion to $2 billion, which could then go towards paying off its debt.

On Tuesday, Bloomberg reported that Mr. Schultz has also hired New York-headquartered investment banking advisory firm Evercore Inc. to review additional options for allaying Teva's debt.

Teva's facility in the southern industrial zone of Ne'ot Hovav manufactures active pharmaceutical ingredients, which account for 40%-50% of the drug's final price. Teva might refrain from shutting down the facility out of future considerations, but most if not all of the facility's 1,200 employees will be cut.

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Teva's factory in Kiryat Shmona is one of its most profitable facilities, generating annual revenues of several tens of millions of dollars. It manufactures plastic products for the pharmaceutical industry and the Tevadaptor, a closed system transfer device that protects workers from exposure to dangerous substances. The company estimates that the facility could function as an independent unit and will, therefore, attempt to sell it. If proven unsuccessful, the facility may be shut down. It currently employs around 250 people.

Teva will also divest its non-core logistics center, located in the central town of Shoham. Currently employing around 700 people, the center is profitable, making the odds of a sale attempt greater.
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