JPM18: Teva cutting up to 25 manufacturing sites within 2 years
- Teva Pharmaceutical Industries Ltd. envisions closing up to 25 manufacturing plants over the next two years and about 40 altogether as the strained drugmaker works to trim billions of dollars worth of expenses.
- "Today we have 80 sites in total. So it goes without saying that we have too many," Kåre Schultz, Teva's recently appointed CEO, said during a presentation at the J.P. Morgan Healthcare Conference this week. "On the other hand, you can't just change everything in manufacturing in a few years. You have to do it in a long-term plan. But we will be moving from these 80 towards a more sustainable level that will probably around half the number of sites in longer term."
- Teva announced last month it would be chopping 14,000 positions. Schultz noted during his Jan. 8 presentation that all the various sectors of his company would experience some cuts, but manufacturing and sales would see the least amount.
Teva's annual business expenses are about $16 billion, too high for a company with $35 billion worth of debt and falling revenues. To rightsize itself, the Israeli drugmaker has kicked off a two-year restructuring effort that is expected to bring costs down to about $13 billion per year.
Schultz and his team know those reductions won't be easy.
Long heralded as a buoy to Israel's economy, Teva's decision to cut thousands of jobs marred its image in Israel. Hundreds of company workers protested, spurring thousands more from the private sector to join them, according to Reuters. The response was so widespread it caused parts of the government and the Tel Aviv Stock Exchange to shut down for a period.
Teva has since worked out agreements with employees at two manufacturing plants in Israel, Reuters reported. It remains to be seen how much backlash the company will get as it moves to shut down roughly two dozen more facilities over the next couple years.
"You all know about labor laws and how to negotiate things when you reduce manning, shutting down factories, consolidating R&D sites, consolidating office sites, all that. It takes time. You can't do it in one day. But you can do it sequentially in a couple of years. And that's why we do the majority right now," Schultz said to an audience at JPM.
Teva didn't lay out exactly how much of its $3 billion cost savings goal would be realized by reeling in its manufacturing footprint. Schultz did, however, say that putting its generics business, specialty drug business and global staff functions under one roof — another key part of the restructuring efforts — would account for roughly $1 billion worth of savings.
- Teva Pharmaceutical Industries Ltd. Statement
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