New Teva CEO shakes up structure and executive ranks as major layoffs loom

Teva
Teva named new CEO Kåre Schultz in September.

New Teva CEO Kåre Schultz is getting down to business—and quickly.

Monday, the troubled Israeli drugmaker unveiled a new structure and changes to its leadership team, and it promised its restructuring plan would arrive earlier than expected, too. The company will put its generics and specialty products together under one commercial roof, with segments in North America, Europe and Growth Markets.

That move will put Rob Koremans, CEO of Teva’s global specialty drugs, and Dipankar Bhattacharjee, Teva’s generics chief, out of a job. Generic and specialty R&D will be pushed together as well, cueing the departure of CSO Michael Hayden.

Taking their places on the executive management team will be Allergan vet Hafrun Fridriksdottir as EVP of global R&D; Brendan O’Grady, who will lead the North American commercial segment; Richard Daniell, who will be in charge of Europe; and Gianfranco Nazzi, who will be tasked with spearheading growth markets. Teva also made Mike McClellan’s CFO stint official, promoting the interim financial chief—who served as Sanofi’s U.S. CFO before joining Teva—to a permanent post.

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But the changes at Teva won’t end there. Following reports that the company was expected to slash 20% to 25% of its Israeli workforce and a few thousand U.S. jobs, the generics giant said it would debut its restructuring blueprint in mid-December. That timeline surprised RBC Capital Markets analyst Randall Stanicky, who called it “earlier than expected.” “We had thought early Jan as a conference update or more likely late Feb with 4Q,” he wrote in a note to clients.

At least one analyst wasn’t thrilled with the changes, pointing out that the new segments could result in less transparency for investors and adding that thinner ranks in departments such as finance, regulatory, R&D and HR could provide “longer-term regulatory challenges.”

“It is disappointing to us that with the limited information we have, it appears to us that the new CEO is approaching Teva with an ax in each hand, not hedge clippers or pruning shears. We think the market will like this in the short run, but will eventually have serious questions as to whether this approach is cutting fat or muscle,” Wells Fargo’s David Maris wrote in his own research note Monday.

And others who had pressed the Israeli company on the prospect of a generics-specialty split may not be so happy with the idea, either.

Debt-saddled Teva doesn’t have too many options for righting the ship, though, with credit rating agency Fitch recently downgrading the company to junk status. And while billionaire Len Blavatnik is rumored to be weighing an investment of up to $3 billion, Teva can’t yet count on those funds.

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Schultz, meanwhile, has been through this exercise before, albeit on a smaller scale. As helmsman of Denmark’s Lundbeck, he quickly kicked off a restructuring that claimed 1,000 jobs—and within a year of his arrival, he had profits exceeding expectations and revenue climbing.