Saying it had “no time to waste,” Teva Pharmaceutical on Thursday announced “drastic steps” to restore its financial stability that will result in the loss of 14,000 jobs.
Investors reacted positively to news of Teva’s “comprehensive restructuring,” sending its shares up 10.1% to $17.30. As The Associated Press reports, the world’s largest generic drugmaker has been hit by the expiration of patents on its Copaxone treatment for multiple sclerosis, pricing pressure on its core generics business, and a $35-billion debt load taken on in its acquisition of the generics business of Allergan.
The two-year restructuring plan is intended to reduce Teva’s cost base by $3 billion by the end of 2019, out of an estimated cost base for 2017 of $16.1 billion.
“The organizational restructuring is driven by the need to unify and simplify the organization and improve business performance, and we have no time to waste,” CEO Kare Schultz told employees in an email.
The layoffs amount to about 25% of Israel-based Teva’s workforce and will occur over the next two years, with most expected in 2018. “There is no alternative to these drastic steps in the current situation,” Schultz said.
According to the AP, the announcement marks “a stunning setback for a company seen as a national source of pride in Israel. With roots going back more than a century, Teva has grown into a major global player over the last 40 years with a series of acquisitions, and by developing original drugs and leading the move toward cost-saving generic medications.”
But in the U.S., Teva’s performance has been hurt by a saturated market for generics. Overall generics unit sales plunged 8% to $3 billion in the third quarter, with U.S. sales down 9%.
The company said its restructuring will include “substantial optimization” of its generics portfolio, most specifically in the U.S., and closures or divestments of a significant number of R&D facilities, headquarters and other office locations.
“Two years from now, it’s going to look good. If we do well, then in five years, it’s going to look great,” Schultz told analysts in a conference call.