Teva Pharmaceutical Industries announced some of the most sweeping job cuts in the drug industry, eliminating 14,000 positions globally as new Chief Executive Officer Kare Schultz seeks to stabilize a company suffering from ill-timed acquisitions and rising competition for its copycat medicines.
The goal is to reduce expenses by $3 billion by the end of 2019, the company said in a statement on Thursday. The drugmaker will also close a number of research facilities and factories. The workforce could shrink further as the world’s largest manufacturer of generic medicines considers more divestments, it said. The stock jumped in New York.
The moves highlight the severity of the challenges facing Schultz, a turnaround specialist who is the drugmaker’s sixth CEO in five years. He shook up the management team within days of joining last month, but now the 56-year-old Dane must move swiftly to prop up a company whose debt has ballooned to more than twice its market value.
“We are taking immediate and decisive actions to reduce our cost base across our global business and become a more efficient and profitable company,” said Schultz.
The stock, which last month hit a 17-year low, climbed 6.8% in early U.S. trading to $16.77. Shares of Teva (TEVA) were suspended from trading in Israevahead of the announcement. Earlier in the day, they fell 0.5% to 55.60 shekels, taking the decline for this year to 60%.
The company is working with advisory firm Evercore to review options for outstanding debt that include shrinking a revolving credit facility and extending the repayment period for some loans, according to people familiar with the matter. Teva may also seek to reset some debt covenants and extend bond maturities, said the people, asking not to be identified because the deliberations are private.
Teva, an acquisitive company by tradition, paid $40.5 billion last year to beef up its copycat medicines business and bolster growth. The deal proved to be ill-timed when profit margins for knockoff drugs in the U.S. began rapidly shrinking. Compounding the problem is the loss of its monopoly on Copaxone, the blockbuster multiple sclerosis injection that at one point generated half of Teva’s profits.
The company, whose expenses will total $16.1 billion this year, said most of the cost reduction will take place in 2018. Teva will also record a restructuring charge of at least $700 million.
Schultz plans to lay out next year’s financial guidance in February, and present a longer-term plan later in 2018. Employees won’t get annual bonuses this year as the financial results are “significantly below” its yearly projections, the drugmaker said.
“These are decisions I don’t take lightly but they are necessary to secure Teva’s future,” Schultz said. “Today’s announcement is about positioning Teva for a sustainable future which we will achieve with our talented people.”