Teva denies big layoffs are planned, but will push greater efficiency and shutter floundering efforts
With its executive suite in turmoil, its flagship drug under attack and its books burdened by debt following years of drought in its R&D arm, Teva is reportedly preparing to unleash a major reorganization that will cost thousands of jobs. But after first staying mum on the subject, the Israeli pharma company now says it isn’t bringing out the ax but will instead pursue a variety of efficiency measures.
The Israeli newspaper Calcalist reported that the biopharma hybrid, which sells generics as well as branded drugs, is planning to cut up to 6,000 staffers — 11% of its total — after Passover. In a statement, though, Teva fired back that it won’t pink slip thousands, preferring instead to ending certain activities, consolidating operations and freezing any new hires.
“The efficiency program is an integral part of Teva’s business reality. The program includes, among other things, ending unprofitable activities and consolidating functions, in addition to freezing recruitment and natural employee turnover,” the company said, according to Reuters.
The latest signs of turmoil come just weeks after CEO Erez Vigodman left the company. Vigodman went out the same door Jeremy Levin was thrown through in late 2013 after he tried, and failed, to push through a restructuring.
That happened soon after a federal court tossed several patents protecting Teva’s 40 mg dose of Copaxone, its multiple sclerosis mainstay that brought in close to 20% of the company’s revenue last year. And the Israeli company has been feeling the heat after a $40.5 billion generics acquisition deal with Allergan last year left a heavy debt to work out as generic prices have dropped.
Teva started the year by lowering its 2017 guidance by $1 billion, which did nothing to endear the company with analysts and investors.
Activist investor Benny Landa, meanwhile, has been pushing for an experienced global player to take over the top job. He also wants to see the company split up into two, with one side taking the generics business and another group spinning off the brand division.
There might be some reluctance on the part of the best candidates, however. Levin tried to reorganize the company and slash staff years ago. But the board responded angrily and pushed him out of the company.
Workers won’t take any layoffs sitting down, if it comes to that.
“We were in a similar situation and we went to the battle,” Eliran Kozlick, the head of Teva’s workers’ committee, wrote in a Facebook post early on Thursday, according to a report in Bloomberg. “If the management wants to do this again, we will all work together and win as we did in the previous struggle.”
Teva, though, is running out of options.
“Every drug company has to change constantly,” Kite CEO Arie Belldegrun told Globes after he resigned from the board. “Teva was very comfortable with Copaxone, but it should have already prepared 8-10 years ago for its subsequent life, and no such proper preparations were made. You can’t accuse the company; it grew so fast. Now it is investing in its future development, but a temporary hole has been left, and must be survived. Teva’s future will come from Prof. Michael Hayden’s department (the innovative department, G.W.). Everyone is sorry that (former generics division head) Siggi (Sigurdur) Olafsson left, but Siggi wasn’t working on Teva’s future.”