The Israeli company Teva, the world’s largest generic drug maker facing serious financial difficulties, announced Thursday the suppression of 14,000 jobs worldwide over the next two years, or 25% of its workforce.
The former flagship of the Israeli industry, which has struggled for months with the fallout of past managerial decisions and adverse circumstances, has presented a painful restructuring plan to enable it to make three billion dollars in savings from now to the end of 2019.
“This plan is crucial to restore our financial security and stabilize our business,” says CEO Kare Schultz in a letter to employees published by the Tel Aviv Stock Exchange.
In the letter, he highlights the acuteness of the situation for a company whose debt now stand at $ 35 billion.
“A long-term strategy will come later in the year, and in the short term we need to focus on the need to generate cash, secure income and service our debt,” he adds.
Teva will close or sell “a significant number of production sites in the United States, Europe, Israel and other growth markets”. Research and development centers, headquarters and various offices around the world will also be affected.
The group did not provide a breakdown by country.
“There is not one area where there will be no reduction – geographically it’s everywhere,” Schultz said in a conference call.
In Israel, the head of the Histadrut union center, Avi Nissenkorn, met with Teva’s management and said 1,750 employees would lose their jobs in the country (1,250 in 2018, 500 in 2019).
The plant called for a strike of several hours Sunday, which should involve the entire public sector, banks, the stock market, airports, etc….
However, Israel represents just under 7,000 of the 57,000 workers worldwide, a large proportion of them in Europe and, to a lesser extent, in the United States.
Teva also announced the suspension of dividends on its common shares and on deposit certificates. Teva will not pay an annual bonus in 2017 either.
The group had already announced late November the reorganization of its management and structures. It plans to “optimize its generic portfolio around the world, especially in the United States”, by adjusting its prices and ending the manufacture of certain products.
The drop in generic prices is one of the causes, among others, of Teva’s problems, whose activity is centered on generics.
The group has just announced the launch in the United States of its generic version of Viagra.
Teva was also hit hard in early October with the decision of the US drug regulator, the FDA, to approve the commercialization of a generic version of Teva’s Copaxone’s flagship treatment for multiple sclerosis.
Teva continues also to suffer the consequences of the largely misguided acquisition of Actavis, Allergan’s US generic arm, for tens of billions of dollars.
After months of uncertainty, the appointment in September of a new CEO, the Dane Kare Schultz, was welcomed by the markets, with the hope of seeing him turn around a company that alone represented more than 1% of Israel’s Gross Domestic Product.
In Israel, the restructuring has provoked an outcry.
The company has benefited from 6.2 billion tax breaks since 2006, said the head of Histadrut.
“Teva gives us a painful lesson of ingratitude and rudeness,” Labor MP Itzik Shmuli said. The crisis “is mainly due to inconsiderate management, now they want employees to pay the price,” he said.
Prime Minister Benjamin Netanyahu on Thursday met with Teva’s CEO and asked him to do everything possible to limit social damage and preserve the Israeli identity of the company, to which Mr. Schultz committed himself, reported the services of the head of government.