Teva continues to whittle down manufacturing network

Teva CEO Erez Vigodman

Teva Pharmaceuticals ($TEVA) has cut $650 million in costs this year but needs to more than double that over the next two as it faces generic competition to its workhorse multiple sclerosis drug Copaxone. A big part of that will be to continue revamping its production network, CEO Erez Vigodman said.

Vigodman told Haaretz he has lots of ideas to return the Israeli drugmaker to growth in 2017, but before that happens it must cut $500 million in costs in 2015 and another $200 million in 2016. Much of that, he says, will come from a plan to cut production costs to less than $10 per 1,000 pills. That will happen by moving 60% of Teva production in the next 5 years to countries where costs run $6 to $7 per 1,000 tablets.

The CEO did not offer up specifics, but the company is already in the midst of closing a significant number of plants which don't fit the new model. During a Q3 earnings call, Vigodman said Teva had sold or closed 6 plants this year, including two that produce over-the-counter drugs. He said 9 more are in the process of being closed or sold and 5 more are being sized up for downsizing in 2015. That totals 20, but in earlier conversations, the company has said it could dump up to half of its 75 facilities.

The company has also said it can get savings by moving from smaller plants to larger, more efficient facilities. During the earnings call, Vigodman pointed out that its operational excellence program includes 10 plants which are "yielding significantly higher efficiency and reduced cost and CapEx."

But even as the company is closing older and smaller, less efficient plants, it is building others so it can expand in markets, like Eastern Europe and Russia, where it needs more presence. It is building a plant in Russia.

- read the Haaretz story

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