Battered drugmaker Teva to cut more than 20% of its Israeli employees

Teva employs some 6,860 Israeli employees.

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November 23, 2017 14:45
2 minute read.
Battered drugmaker Teva to cut more than 20% of its Israeli employees

A building in Jerusalem belonging to generic drug producer Teva. (photo credit: REUTERS/BAZ RATNER)

 
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The once-dominant Teva Pharmaceutical Industries is reportedly planning to lay off some 20% to 25% of its workers in Israel, part of an effort to balance the books after a string of poor quarterly earnings.

Teva employs some 6,860 workers in Israel, the Calcalist financial newspaper reported on Thursday. The company may cut more than 4,000 jobs worldwide, while layoffs in its European divisions are expected to be minor for now.

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A Teva spokesperson declined to comment on the reported layoffs, which may also see the company send termination letters to thousands of employees in the United States.

Teva CEO Kare Schultz, who started earlier this month, is grappling with heightened competition against Teva’s blockbuster drug Copaxone, while he also must deal with changes in US regulations that open up greater competition to generic drug approvals. Such competition has led to rapidly falling generic drug prices, hitting the company hard.

Teva also faces a heavy debt load that followed its ill-advised acquisition of Allergan’s generic unit in 2016. For months now, the company has warned about impending layoffs and further cost-cutting.

“I think the aggressive cost-cutting was something that the market expected,” said pharmaceutical industry analyst Sabina Levy of Leader Capital Markets. “It’s fair to assume that the cost-cutting will be across the board.”

In response to the news, the Histradut labor federation said it would fight the downsizing and seek to protect workers’ rights.

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“The Histadrut will not by any means accept unilateral steps by Teva’s management in Israel,” Histradut spokesman Yaniv Levy said in a statement. “A step of streamlining, if and when it comes up, will be done only through dialogue and agreement with the Histadrut and the workers’ committees. Teva employees are the company’s human capital and its most important resource.”

Aside from layoffs, the company could announce the closure of several factories, along with cutting general administrative expenses and reducing operational expenses, in response to dismal quarterly earnings in 2017.

“The profits are going to be lower, even lower than this year,” industry analyst Levy said. “And the debt is very high. So basically, there are no significant growth drivers during 2018.... That leaves Teva with no choices but to enhance their efficiency measures.”

Streamlining isn’t new to Schultz, who after taking the helm of Danish pharmaceutical company H. Lundbeck A/S, laid-off some 17% of the company’s workforce.

In response, the Danish media nicknamed the CEO “hardcore,” according to Reuters.

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