Not So Happy Holidays as 14,000 Teva Employees Face Layoffs

---

Reported by Annette Kreuger, Industrial Info Resources (Sugar Land, Texas)--Layoffs are always unwelcome news. But there is an added level of poignancy when they are announced during the holiday season. Israeli generic drugmaker Teva Pharmaceutical Industries Limited (NYSE:TEVA) (Tel Aviv) has announced it will cut 25% of its global workforce, or an estimated 14,000 jobs.

Click on the image at right for a graph detailing Teva facilities that could be affected by the layoffs, by country.

While exact details of the plan are not yet known, it does include closing a number of administrative, manufacturing and research facilities around the world. Teva also announced that seven sites in the U.S. will be consolidated into one location.

In a letter sent to Israeli Prime Minister Benjamin Netanyahu, Teva's newly installed president and Chief Executive Officer (CEO) Kare Shulz said, "It is clear that without taking drastic steps in the coming weeks and months, the company will be increasingly vulnerable to potential takeover by global financial institutions or activists with their own agendas, and the risk is real."

A half-day strike by Israel's public-sector labor union erupted on December 17, following Teva's announcement that more than 1,700 Israeli jobs will be cut and an in-country manufacturing plant will be closed. The strike shut down the airport, stock exchange, banks and all government ministry offices.

Schulz has been generating a lot of press since taking the helm at Teva on November 1. "Two weeks ago we announced a new organizational structure and executive management team," he said in a recent public statement. "Today, we are launching a comprehensive restructuring plan, crucial to restoring our financial security and stabilizing our business."

And then in a letter sent to all Teva employees outlining the plan, Schulz said: "A longer-term strategy will come later in the year. However, in the near term, we must remain focused on cash-flow generation, short-term revenue and serving our debt."

This is just the latest in a series of restructuring moves, closures and divestments by the beleaguered company, as it struggles to overcome soaring costs and limited cash flow. As recently as August, former Teva CEO Yitzhak Peterburg announced there would be 7,000 layoffs and the closure of 15 plants over a two-year period.

It is worth noting that Schulz is the company's third CEO in as many years, dating back to 2014 when Erez Vigodman was hired. Peterburg assumed the role earlier this year as an interim selection.

The company has mentioned a number of factors for its problems, including patent losses and pricing pressures in the generic sector.

But the real elephant in the Teva boardroom is the added burden of a $35 billion debt, the result of purchasing Allergan plc's (NYSE:AGN) generics business ("Actavis Generics") for $40.5 billion in 2016. The two-year restructuring plan is intended to reduce Teva's cost base by $3 billion by the end of 2019, out of an estimated cost base of $16.1 billion for 2017.

With the majority of the layoffs slated for 2018, Teva expects a restructuring charge of at least $700 million, mainly related to severance costs, during the last two quarters of the year. Those employees who will escape this round of cuts would be wise not to drop their guard, as Teva's own press release mentions the possibility of "future divestments" three times.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.