Teva CEO: Company Would Have Gone Bankrupt Without Layoffs

After having to layoff 1,350 workers in Israel, Kare Schultz describes crisis of the pharmaceutical company which suffered from dropping generic sales in the U.S. market

The CEO of Teva Pharmaceutical Industries Kare Schultz speaks during a news conference to discuss the company's 2019 outlooks in Tel Aviv, Israel, February 19, 2019.
Amir Cohen/Reuters

Teva Pharmaceutical Industries’ November 2017 restructuring plan was necessary to cut costs by $3 billion by the end of 2019 due to a dramatic drop in revenues, stated CEO Kare Schultz in a press conference on Tuesday. Otherwise, the company would have gone bankrupt, he said.

“The fact is, we have a tough situation where revenues are going downhill,” Schultz said on Tuesday. “People forgot that a little bit so we had to remind them.”

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Sales of Teva’s former flagship multiple sclerosis drug Copaxone are down $4 billion since the company lost exclusivity, forcing Teva to cut costs, he acknowledged. Teva also suffered from dropping generic sales in the U.S. market. Last year Teva laid off 1,350 workers in Israel, out of some 10,000 workers worldwide who were laid off.

Things won’t improve until 2020, he forecast. Teva expects a mild return to growth that year, with stronger growth in 2021, he said.

However, the company does not expect more layoffs, he said.

This was the Danish-born CEO’s first press conference with Israeli journalists. He did not mince words, describing Teva as being in a worse state than he did with U.S. analysts, possibly in order to emphasize the need for its widely unpopular layoffs and factory sales.

He also had critical words for his predecessors’ policies in the generics market, saying that their practice of prioritizing the company’s market share ultimately pushed prices downward.

A potential growth outlet is its generic version of Mylan’s EpiPen. Teva expects to claim about 25% of the U.S. market by the end of the year, Schultz said.

Wall Street has viewed the EpiPen rival as a welcome profit-booster for Teva as it contends with declining U.S. margins for its older generic medicines, competition for multiple sclerosis treatment Copaxone and costly acquisitions.

When the device’s approval was announced last year analysts suggested it could add $250 million to Teva’s annual revenue and 4-6 cents per share in earnings, providing a welcome lift for a company that has fired thousands of employees and worked to reduce its debt load to $27 billion from $35 billion.

Mylan also produces a generic version of its life-saving EpiPen allergy treatment, which like Teva’s product is priced at about $300.

The U.S. market for EpiPen is worth roughly $750 million a year.

Teva, the world’s largest generic drugmaker, is already selling its product for adults and plans to start supply of a junior version for young children in 3-4 months, the Danish-born CEO told reporters.

Many of the largest U.S. pharmacies and drug distributors do not yet have Teva’s version of EpiPen, five months after it was approved for sale in the United States, pharmacy chains and a group that tracks drug shortages told Reuters last month.

Mylan’s EpiPen has also been in short supply because of manufacturing problems at the lone Pfizer plant that makes the auto-injectors.

Teva received U.S. approval for its copy of EpiPen in August after several years of delay, but Schultz said additional “validations” were required by the U.S. Food & Drug Administration, which it has now done.

While any pharmacy can call and buy Teva’s product, the company does not have enough supply for all the wholesalers and pharmacies, he said.

“We will be filling up the supply chain more and more over the coming months,” Schultz said.

Schultz estimates that Teva should approach a 50% market share by the end of 2020.