Teva will lay off 7,000 employees, exit dozens of markets by the end of this year and close 15 plants in the next two years as it tries to offset a deteriorating generics market that has gut-kicked sales of the generics leader.
CEO Yitzhak Peterburg said today that Teva will close or sell six plants in 2017 and another nine in 2018. The firm has also decided to pull out from 45 countries by the end of 2017.
“Given the current environment, we have had to take swift and decisive actions. We are focused on executing meaningful cost reductions, rationalizing our assets and maximizing their value, actively pursuing divestiture opportunities and strengthening our balance sheet. We will continue to take action to aggressively confront our challenges” Peterburg said in statement.
Petersburg made the disclosures as the drugmaker reported an 18.4% drop in Q2 earnings citing “accelerated price erosion and decreased volume,” in the U.S. market. The market was so bad, that Teva took a $6.1 billion impairment charge related to the U.S. generics reporting unit for the quarter.
RELATED: Struggling Teva said to plan thousands of job cuts as it hunts for CEO
Rumors and reports of pending cuts have been circulating for weeks and the fact that manufacturing will take the hardest hit in the restructuring is no big surprise given that Teva bought the Actavis generics unit of Allergan last year for $40.5 billion, netting 27 facilities in that deal.
At the time it has said that “cost synergies”—code for layoffs—would be able to produce $1.4 billion a year in savings by the end of the third year. But the falling prices in the U.S. market has obviously outrun Teva’s ability to find savings so far. Even by the time the deal was done, analysts were saying the assets were not worth what Teva paid for them.
The company indicated the 7,000 job cuts include layoffs that it has previously announced. Already this year, Teva said it would close a sterile manufacturing facility in Hungary that has been beset by regulatory issues, laying off 500 workers there. Last month it indicated it would layoff hundreds of workers at two facilities in Israel.
Petersburg actually foreshadowed today’s drastic actions in an email to workers last month about the planned cuts in Israel. In "view of the difficult business situation facing the entire pharma industry, including Teva,” the company needs to complete a “global restructuring” that he said had already affected operations in many other countries.