Severe job cuts at Teva incite massive worker strikes, shutting Israel down
Layoff announcements made by the new head of generics giant Teva Pharmaceutical $TEVA have sparked massive strikes in Israel, the company’s headquarters, briefly shutting down the country.
Israel’s national labor union held rallies outside Teva facilities, burning tires in front of its offices, blocking major roads (including the entrance to Jerusalem), among other protests. The country’s airport, stock exchange, banks, and all government ministries were temporarily shut down on Sunday, the first day of Israel’s work week. Even hospitals scaled back operations. Protesters held signs saying “Bring the failed management of Teva to justice.”
The turmoil is in response to Teva’s announcement last week that it would cut 25% of its global workforce thanks to the company’s suffocating debt. The company plans to slash 14,000 jobs worldwide, including 1,700 jobs in Israel where it will close a manufacturing facility. The layoffs strike a sensitive chord in Israel, as the company is considered a national treasure and one of the largest private-sector employers. And in Israel, where labor unions play an active role in politics, Teva’s workforce is not taking the news lying down.
Protesters told local news they planned to continue protesting Monday. One protester told Israeli National News that the rallies could turn violent: “Our factory is a ticking time-bomb – we have tons of explosive materials and poison. The whole country should get ready.”
Kåre Schultz, who took the reins at Teva as CEO last month, has pleaded to Israel’s prime minister Benjamin Netanyahu to see the generics giant’s side of things. In a letter to Netanyahu, Schultz said the company’s financial crisis had forced him to take drastic measures to prevent hostile takeover of the company. He did promise to keep Teva’s headquarters (along with Schultz’ own office) in Israel, which he hoped would demonstrate Teva’s commitment to the country.
Netanyahu said that he and the finance and economy ministers would meet with the Teva chief executive to discuss the crisis, the Financial Times reports.
Teva’s last quarterly numbers bring the company’s crisis into sharp relief: poor financial results and weak generics prices at a time when the company’s internal pipeline lacks the number of potential blockbusters needed. Teva just cut its financial forecast, with an early introduction of Copaxone generics expected to bite hard. That came after Teva built up debt of close to $35 billion for some badly timed acquisitions that leave the company auctioning off assets.
To add insult to injury, Teva’s closely-watched successor to Copaxone flunked out in the clinic this year, which surprised no one following that multiple sclerosis program.
Teva’s planned job cuts and facility closures are part of the company’s larger plan to bring $3 billion back onto the books by 2019. Among other strategies, Schultz has also told investors Teva will be increasing its drug prices or stop manufacturing them altogether.
“With pricing dynamics, I think it’s reasonable and responsible to reach a sustainable price level,” Schultz told the Financial Times.