A building in Jerusalem belonging to generic drug producer Teva.
(photo credit: REUTERS/BAZ RATNER)
Once an industry giant, the now battered Teva Pharmaceuticals Ltd. is expected to lay off nearly half its local workforce, some 3,300 Israelis, along with shuttering some local factories.
A Teva spokeswoman declined to comment to The Jerusalem Post, saying that the company would unveil a full cutback plan on Thursday. But the company is expected to divest many of its assets, including selling manufacturing plants across the country.
In response to the reported layoffs, Teva’s shares on the Tel Aviv Stock Exchange were up 1% from the day prior, to around NIS 59 (as of 5 p.m. Israel time Wednesday). After opening bell on the NASDAQ, Teva’s stock was down 1.6%, to $16.20.
Cities and towns across Israel are bracing for the cuts, which will affect thousands of families and hit local tax bases hard. The company employs around 6,450 people in the country, after earlier layoffs this year.
It also remains to be seen how successful the Histadrut labor federation will be in preventing some of the layoffs.
Headquartered in Petah Tikva, the quintessentially Israeli firm is shedding its local roots in a bid to restore profitability. The company has faced repeated pressure from shareholders to adopt a more international posture, since most of Teva’s operations, customers and regulators are outside Israel.
Its first non-Jewish CEO Kare Schultz, from Denmark, took the helm of the company last month. Since then, he has been paring back Teva’s Israeli-ness, getting previous interim CEO and board-member Yitzhak Peterburg to resign on Tuesday.
“It doesn’t matter if it’s a Jewish CEO or an Israeli CEO,” said pharmaceutical analyst Sabina Levy, from Leader Capital Markets. “They are cutting their costs globally. They will cut in Israel, in the States, in Europe. They will look everywhere. If they find a source for efficacy measures, they will do it.”
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.
What was once an Israeli biotech success story has now become a walking liability as the debt-laden company owes around $35 billion after an ill-fated purchase of Allergan’s generic drug unit.
“The cost-base of Teva is high,” Levy estimates. “Its plants and R&D and sales and marketing and general operations is approximately $16b.... If a company decides to undergo dramatic streamlining measures because it will not be able to repay the debt, it’s something it should do.”
The company also faces falling generic drug prices in the United States due to regulatory changes which make it easier for competitors’ products to reach the market. At the same time, the Food and Drug Administration approved a generic version of Teva’s cash cow drug Copaxone in October, which treats multiple sclerosis.
Earlier in 2017, Teva was dethroned as Israel’s largest company by market value, by Check Point Software Technologies Ltd. In 2015, Teva directly contributed 1.3% of the country’s GDP, but that tally excluded many of its indirect economic contributions.
Layoffs will also hit Teva’s employees outside Israel. Some 10,000 people out of a global workforce of more than 56,000 could lose their jobs, according to a Bloomberg report last week. The company seeks to reduce costs by $1.5b.-$2b. in the next two years.