Teva to jettison half its plants in multibillion-dollar cost-cutting drive

Teva CFO Eyal Desheh

Teva ($TEVA) CFO Eyal Desheh says the generic giant was built in bits and pieces, picking up a bunch of manufacturing plants in the process that it no longer needs. So the company will close half of its manufacturing facilities over the next 5 years as part of its plan to get more focused and more efficient.

"The company was created by a series of mergers and acquisitions. We managed to accumulate 75 manufacturing facilities ... We can reduce this number to half of what we have today, and the remaining facilities will be efficient, productive and of course of the highest quality, which is very important," Desheh said Tuesday at the Goldman Sachs Healthcare Conference, according to a transcript of his remarks from SeekingAlpha.

With Teva's workhorse product, the multiple sclerosis drug Copaxone, going off patent, the company has been scrambling to reduce expenses and to find new revenue. The drug, which lost patent protection last month, makes up half of the drugmaker's revenue. So far, a planned generic by Mylan ($MYL) has yet to hit the market but it is just a matter of time.

The company for a couple of years has been working on ways to cut costs and build revenue. After a court ruling last year put Copaxone in jeopardy a year earlier than expected, Jeremy Levin laid out an aggressive plan to about 5,000 employees--10% of its workforce--by the end of this year and bank $2 billion in savings before the end of 2017.

Teva CEO Erez Vigodman

Erez Vigodman was named CEO in January after Levin left because of board disagreements. He has talked a lot about plans to boost the top line, but has been short on details about the cost-cutting, much of which Levin said would come from slimming the manufacturing network. Vigodman gave some indication in a May conference call with analysts about how the plan was developing. He said the company had identified 11 plants for closure and was evaluating 16 others, although specific targets have never been identified. Now Desheh is suggesting the number could be 38 or so plants.

The drugmaker is doing other things to make its way through this patent cliff dive. It has been convincing doctors to move patients to a new longer-acting version of Copaxone, a move analysts say will take some of the sting out. "Generics will be approved at some point, but it's no longer going to be devastating," John Park, co-manager of Jackson Park Capital's Oakseed Opportunity Fund, told Bloomberg last month.

Vigodman also told a conference in May that a trio of drugs is launching that will also offset some of the loss. Estimates have put about $1 billion in peak sales to the three drugs, migraine patch Zecuity, Symbicort generic DuoResp Spiromax, and Adasuve, an inhalation powder to treat agitation in schizophrenia patients. The CEO has also said it is looking to invest in some smaller acquisitions and to to build its biosimilars program.

- here's the SeekingAlpha transcript

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