Israeli pharmaceutical giant Teva will cut 5,000 jobs worldwide, a tenth of its overall workforce, the company announced Thursday.
Teva is one of the largest pharmaceutical companies worldwide, the largest manufacturer of generic drugs and the largest commercial company in Israel.
“We cannot yet say what will happen in Israel,” Teva president and CEO Jeremy Levin told Israeli business publication Globes. “Most of the layoffs will be outside Israel. Later this year, we will specify which programs we’ll invest in. We’ll give many more details about what we’re doing at the end of the year. This year, we’ve saved $300 million.”
Hebrew media outlets reported that the company will lay off 700 to 800 of its employees in Israel. Earlier this week, curiously, Teva had announced that the company plans to expand its manufacturing operations in Jerusalem’s Har Hotzvim Industrial Park and hire 1,100 new employees at its two factories in the city. A Teva manager firmly denied the 700-800 figure for those to lose their jobs, saying no such decision had been made.
The layoffs, which comprise 10% of the company’s workforce, are part of Teva’s “worldwide restructuring program, which was introduced in December 2012,” according to a statement.
Next year, Teva faces the expiration of its patent on the multiple sclerosis drug Copaxone, which accounts for 30 to 50 percent of its net profits, according to Globes. However, Levin said that the cutbacks are not due to financial distress.
“This was a decision made with the board of directors to deal with global challenges, he said. “We’re a global company that is facing price pressures and the risk of losing revenue from specialized products. Nonetheless, it is important to invest in R&D. There are about 100 plans for cuts, including the closing of plants. This really isn’t focused on Israel. We’re accelerating this. We said that we’d save $1.5 to 2 billion through 2017, but we can do this more quickly. We’ve located many more places to do this.”
Teva has now raised its projected savings from cutbacks to $2 billion in annual savings by the end of 2017. The company expects to realize 50% of the annual savings by the end of 2014 and 70% by 2015, most of which will be used to invest in “high-potential programs,” including the development of the company’s complex generics and specialty pharmaceutical pipeline, which includes more than 30 late-stage programs.
“Teva is managing its operations to achieve high levels of effectiveness in the short term, while pursuing opportunities for the long term,” Levin said in the statement. “The accelerated cost reduction program will strengthen our organization while improving our competitive position in the global marketplace. We understand that this may be a difficult time for our employees and are committed to act with fairness, integrity and respect, and provide support during this time.
“Teva continues to identify opportunities to optimize value through the selective trimming of assets that no longer fit its core business or are not critical to its future. Teva will scale down oversized parts of the company, while growing its generics business and core R&D programs – including high-value complex generics, expanding its presence in emerging markets and broadening its portfolio, especially in its specialty medicines and OTC businesses.”