Teva CFO says company will close about three dozen plants

Teva CFO Eyal Desheh

Teva Pharmaceutical Industries ($TEVA) execs have said all along that reducing manufacturing and procurement costs from its vast manufacturing system will be key to cutting overhead by $2 billion by the end of 2017. Last month Teva CEO Erez Vigodman said it would close 11 and was looking at 16 more. Now Teva CFO Eyal Desheh said Teva intends to close about three dozen plants in the next four to 5 years.

Desheh made that pronouncement Tuesday during a presentation at the Goldman Sachs Healthcare Conference, according to a transcript of his remarks from SeekingAlpha.

"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," said Desheh.

Desheh served as interim CEO for several months after the departure of Jeremy Levin, who had already laid out the plan to cut costs by trimming back on manufacturing. Levin announced in October that Teva would lay off 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. Vigodman, who in January was named to replace Levin as CEO, has been hewing to Levin's blueprint pretty closely. In a conference call in May he talked about closing 11 plants and evaluating 16 others.

The company also has said it can get savings by moving from smaller plants to larger, more efficient facilities. Execs said they intend to reduce the logistics costs, in part by reducing the number of warehouses it operates. The company last year halted the $300 million warehouse and IT center it had announced for the Philadelphia area. Then, in May, it said it would close a plant in Sellersville, PA, with about 475 workers. It also is closing a facility in Irvine, CA, which it said it thinks it can sell and gave up plans on an active pharmaceutical plant in India.

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: "... building a plant in Russia today that will help us reduce our cost of our foreign product duty in Russia. Local manufacturing has an advantage," Desheh said. "So we're building a plant in Russia. It is a very large market for us in a fast growing Russia and its neighboring countries we are putting a lot of effort on Asia."

- read the SeekingAlpha transcript

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