Teva to Let Go 14,000 Employees Over the Next Two Years
The company released a statement detailing its reconstruction plan Thursday. CEO Kåre Schultz elaborated on the plan during a call with investors
Teva Pharmaceutical Industries Ltd. will lay off 14,000 employees in the next two years as it pivots back to focus on generics and closes or sells off many of its assets, the company announced in a Tel Aviv Stock Exchange filing Thursday. The planned layoffs do not include any potential future asset divestments, the company said. The announcement sent Teva’s stock up by as much as 19.6% on Nasdaq pre-trading.
For daily updates, subscribe to our newsletter by clicking here.More than half of the layoffs will occur by the end of 2018, and most of the affected employees will be notified within the next 90 days. All business units and regions will be affected. The company is expecting to pay severance costs and other restructuring charges of at least $700 million.
In September, Teva announced the appointment of Denmark-born Schultz, at the time the CEO of Copenhagen-based pharmaceutical company H. Lundbeck A/S. Brought to Lundbeck in 2015 to turn the struggling company around, Mr. Schultz fired 17% of the company’s employees only three months after taking the job, earning the nickname “Hard Core” in Danish media reports. Mr. Schultz stepped in as Teva’s CEO on November 1 after relocating to Israel.“Today we are launching a comprehensive restructuring plan, crucial to restoring our financial security and stabilizing our business,” Mr. Schultz said in a statement Thursday. “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.“ According to the plan, Teva's total cost base will be reduced by $3 billion by the end of 2019. More than half of the reduction is expected to be achieved by the end of 2018. In addition to the restructuring plan, Teva announced it will not pay annual bonuses for 2017 and immediately suspend dividends on ordinary shares and ADSs, while dividends on mandatory convertible preferred shares will be evaluated on a quarterly basis per current practice. The plan is intended to make sure Teva meets all of its financial commitments, Mr. Schultz said. Teva plans to close or sell a significant number of manufacturing plants and research and development facilities in the U.S., Europe, Israel and in growth markets. In a call with investors, Mr. Schultz said that Teva currently has around 80 manufacturing sites as a result of its extensive mergers and acquisitions, and that the plan is to close a “significant double digit number” over the next two years. The company has already sold its women’s health and oncology businesses under interim CEO Yitzhak Peterburg, though last month Bloomberg reported that Mr. Schultz rescinded its plans to sell its oncology division after failing to attract offers at the $1 billion asking price. In the filing, Teva said it will continue to review the potential for additional divestment of non-core assets. In the investor call, Mr. Schultz said that going forward, Teva is going to focus mainly on its respiratory and oncology assets, and on more complex generics that can provide a higher return due to lesser competition from other manufacturers.