A building in Jerusalem belonging to generic drug producer Teva.
(photo credit: REUTERS/BAZ RATNER)
Teva Pharmaceutical Industries and the Histadrut labor federation on Wednesday announced a rollback in planned layoffs at the troubled pharmaceutical giant’s plants in Israel, cutting dozens off its initial projection to dismiss 230 employees.
The number of firings at the Kfar Saba plant fell 30% to 120, from an initially much higher tally. Another 110 employees will lose their jobs in Neot Hovav, down from proposed cuts of 175 workers, a statement from the Histadrut said.
Both labor and management negotiated in marathon sessions on Tuesday, agreeing to start the layoffs in November, after the conclusion of the fall Jewish holidays. The union said it would work with management to finalize a list of laid-off employees based on seniority and expertise considerations, according to a Histadrut representative.
Once dominant Israeli drug company Teva Pharmaceuticals continues to be battered as its union representatives haggle with management over planned layoffs and its stock price slips lower
Teva said it was helping the laid-off workers find other jobs, and the company pledged that there would be no further layoffs at the Kfar Saba plant until the end of 2020, according to a Teva Pharmaceuticals spokesman. But that promise does not apply to its Neot Hovav facility.
Casting skepticism on Teva’s pledge was one pharmaceutical business analyst. “If we see this continuing pressure in the drug industry in the coming years, they’ll be further cost reductions and layoffs,” said Sabina Levy of Leader Capital Markets.
Approximately 1,100 staffers works at the Kfar Saba plant, while another 960 employees are based in Neot Hovav. Corporate headquarters is located in Petah Tikva, right outside of Tel Aviv.
Overall, the company employs 6,800 people in Israel, with 57,000 employed total.
The pharmaceutical giant has seen better days and earlier this month, Teva was dethroned as Israel’s largest company by market value. The company directly contributes 1.3% of the country’s gross domestic product in 2015, according to Bloomberg Businessweek
, but that tally excludes its many indirect economic contributions.
The company has also lacked a leader since CEO Erez Vigodman was showed the door. Interim CEO Yitzhak Peterburg has promised further cost cutting to meet market challenges. The company faces pressure from shareholders to shed its Israeli leadership and adopt a more international posture.
In keeping with investor pressure, the company says today its management is not Israeli. “Teva’s leadership has always been global as it is a global company,” said the Teva spokesman.
Yet analyst Levy said that the company has a ways to go in diversifying its executive board, adding that Teva’s next leader should not be a toughened Sabra.
“I don’t see any advantage for Teva to recruit a local CEO. I don’t see how a local CEO gives a relative advantage over someone coming from the industry,” Sabina Levy said, adding that most of Teva’s operations, customers and regulators are out of Israel.
“With what’s going on in the political and regulatory environment in the US, it’s better that someone comes from the inside,” she said, referring to how the US Food and Drug Administration has sped up the drug approval process, giving consumers and pharmacies many more generic drug options. That regulatory shift has cut at the heart of Teva’s business model.
The firm has also been beset by financial difficulties since buying a generic- drugs division of Allergan for $40 billion, The Jerusalem Post
“The generic industry in the United States is not sustainable going forward,” Levy said. “Teva is facing a challenging time when everything that could’ve gone wrong, went wrong.”
The company took a massive debt load in order to finance the deal, resulting in Teva’s credit rating being downgraded. Last month, the company cut its shareholder divided by 75% in an attempt to reduce its hefty debt load. Teva’s spokesman declined to comment directly on the stock price.
The company had $22 billion in sales last year, according to Bloomberg