Teva Pharmaceuticals’ new CEO is working on a cost-cutting plan that would see some 20 to 25% of the workforce – between 1,300 and 1,700 employees – laid off in Israel.
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Kare Schultz’s plan, which has not yet been finalized, will also include widespread dismissals at the company’s operations in the United States, where some 10,000 workers were employed at the end of 2016.
The dismissals in Israel are the continuation of a plan that includes voluntary retirement and a number of dismissals. This includes 230 staff in the company’s Neot Hovav and Kfar Sava plants, though this is down from the original plan to fire 350.
The need to reduce the workforce stems from the fierce competition Teva is now facing for its best-selling multiple sclerosis drug, Copaxone, which used to provide Teva with 45% of its operational profits.
Rival pharma company Mylan received FDA approval to market its own generic version of Copaxone in early October 2017. Subsequently, Synthon and Alvogen obtained similar permits to market their version in Europe.
This loss of exclusivity came on top of Teva’s eroding profits in the U.S. generic drug market, which had accounted for the bulk of its operations. Teva reported a 27 % drop in profits of its generic drug division, mainly due to price competition in the U.S. market and a collapse of its operations in Venezuela.
Teva has lowered its profit forecast and cash flow for 2017, which is now expected to drop by $1.3 billion. The company also reduced its sales forecast this year by $750 million.
The impact on cash flow due to loss of exclusivity in the Copaxone market, and the drop in profits in its generics division, are particularly critical in light of Teva’s massive debt of $34.7 billion – accrued due to its acquisition of Actavis Generics for some $40 billion in August 2016.
Teva must repay $5.5 billion in 2018, and a further $4 billion every year between 2019 and 2021. The company is thus being forced to sell assets and cut back the workforce.
As part of the belt-tightening plan, the head of Teva’s global R&D division, Prof. Michael Hayden, is expected to leave the company.
Hayden, 66, joined Teva when it was headed by then-CEO Dr. Jeremy Levin. He spearheaded Teva’s approval to market Austedo, a drug used to treat Chorea (associated with the degenerative Huntington’s disease), as well as tardive dyskinesia, a movement disorder that affects the nervous system.