Once again, with a pharma veteran at the helm, Teva is facing local resistance to its plan to lay off workers in its home country of Israel. But with the scale grander and the stakes higher, can its new chief executive prevail?
That was the question on the mind of industry watchers as government offices, banks, schools, health services, Israel’s main airport and more shut down for four hours on Sunday in protest of Teva’s plan to eliminate 1,750 Israeli positions between now and the end of next year. Those cuts are part of a broader plan, announced last Thursday, to cut 14,000 jobs globally under the leadership of new CEO and experienced cost-cutter Kåre Schultz.
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Avi Nissenkorn, chief of the Histadrut labor federation, told The Times of Israel on Saturday that the strike was meant as a warning signal to Teva that the union wouldn’t accept Israeli job cuts.
“We are fighting for the workers of Teva, to save the industry in Israel and to support blue and white,” he said. “Organized labor has been enlisted and is sending a clear message.”
It’s not the first time Teva has encountered resistance to plans to pare down its local workforce. In October of 2013, Israeli unions vowed to strike against 5,000 global Teva layoffs, and Teva’s worker representatives showed up at the company's headquarters in Petah Tikva. Amid squabbles with the board, Jeremy Levin, a former Bristol-Myers Squibb executive tasked with using his Big Pharma learnings to spark a turnaround, vacated the CEO’s seat not long after.
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But while the storylines may bear some obvious similarities, this time around, there are also a few key differences, Bernstein analyst Ronny Gal said in an interview. For one, the company is in “much bigger financial trouble” thanks to a disastrous $40.5 billion buy of Allergan's generics unit—and Israel knows it.
Teva’s financial woes are “reasonably well understood in Israel,” Gal said, adding that it’s “pretty well understood in Israel that the entire generics industry is in big trouble.”
Accordingly, the cost cuts are much bigger, too; last week’s plan includes a whopping 9,000 more global layoffs than 2013’s.
Teva’s board has also undergone a transformation since that year, propelled in part by activist pressure. In 2014, then-chairman Phillip Frost added Pfizer vet Jean-Michel Halfon after pledging a smaller, more experienced director slate. Not long after, Frost announced he’d be leaving himself as part of the scale-down.
More recently, under the leadership of chairman and Celgene vet Sol Barer, Ph.D., the company added former Regeneron CFO Murray Goldberg; former GlaxoSmithKline R&D official Perry Nisen, M.D., Ph.D.; Roberto Mignone, a managing partner at healthcare-specializing hedge fund Bridger Management; and Chemi Peres, a managing partner of Pitango Venture Capital, which has invested in healthcare. And one day before Teva made its restructuring announcement, Yitzhak Peterburg, who had served as the company’s chairman and interim CEO, left the board, too.
Teva’s director slate has “moved away from majority Israeli with big government connections to essentially dominated by folks with industry experience” who are generally not Israeli, Gal pointed out.
All things considered, he expects Schultz—with the support of a board that only recently appointed him after a months-long search—to come through with the plan, “mostly because you’ve got a prime minister who is aware economically” and a “pretty good professional team at the ministerial level.”
But Gal is “far from being able to commit to that prediction.”
“I do expect at least some politicians to start calling for legislation that will damage Teva,” he said, adding, “that’s what they do.”