Teva Cuts Jobs, Closes Plants as Woes Deepen
As its financial woes continue to deepen, Israeli generics producer Teva is making plans to lay off 7,000 employees and close 15 plants. CEO Yitzhak Peterburg said the company will close or sell six production facilities before the end of 2017, followed by nine in 2018. It will also pull back from 45 countries by the end of this year.
“Given the current environment, we have had to take swift and decisive actions. We are focused on executing meaningful cost reductions, rationalizing our assets and maximizing their value, actively pursuing divestiture opportunities and strengthening our balance sheet,” Peterburg said in a statement.
The CEO said the layoffs will include those already announced. The closure of a sterile manufacturing facility in Hungary, said to be beset by regulatory issues, will cost 500 jobs. Last month, the company said it would cut hundreds of jobs at two plants in Israel.
Teva’s stock price has been plunging for months, as the generics market continues to deteriorate, and the drugmaker has been without a permanent CEO since the abrupt departure of Erez Vigodman in February of this year. The company’s bottom line has also taken a hit. In the second quarter, when it recorded a $5 billion loss, the drugmaker took a $6.1 billion impairment charge related to the US business.
Analysts largely see the troubles rooted in an unworkable acquisition expansion strategy, in particular buying the Actavis generics unit of Allergan last year for $40.5 billion. In view of the market’s challenges, the acquisition price was considered excessive, especially as Teva added 27 production facilities. Some commentators said that by the time the deal closed, the, assets were probably not worth what the company paid for them.
In announcing the Actavis deal, the drugmaker said it expected savings through the realization of cost synergies of $1.4 billion a year. However, falling prices in the US have evidently made this impossible. At the end of the second quarter, the company’s debt burden had risen to $35.1 billion.
Two international rating agencies, Moody’s and Fitch, meanwhile have downgraded their rating for Teva's debt, with Fitch placing the papers just above junk level. The mounting debt burden is seen as indicating that the ratings could be lowered further.
To pay down debt, the interim CEO said Teva will sell assets worth $1 billion, double the amount suggested earlier. Among the generic franchises up for sale will be women’s health and oncology.
As the search for a CEO continues, reports say both Astra Zeneca chief Pascal Soriot and Jacqualyn Fouse, former chief operating officer at Celgene, have turned down the company’s offer.