Teva manufacturing cuts may have to involve home turf

Teva Pharmaceutical Industries is looking to cut $2 billion in annual costs over the next few years, much of that from its extensive manufacturing network. While the Israeli company is evaluating each plant in its extensive global network, analysts suggest it will be hard for Teva ($TEVA) not to cut on the home turf, even in the face of political blowback.

Teva CEO Jeremy Levin

CEO Jeremy Levin last year laid out plans to cut costs as he worked to remake the company into one less focused on generics. Much of the savings is to come from squeezing costs out of sourcing and from a focus on bigger, more efficient plants in low-cost locations. The drugmaker has a network of 74 plants. Eight of those are in Israel, including two of its largest, Bloomberg reports. Those plants in Kfar Saba and Jerusalem together employ 1,700 workers. More than 15% of its 46,000 employees are in Israel.

"I don't see how they can meet their sizeable cost cut goals without cutting costs in Israel significantly," Ronny Gal, an analyst at Sanford C. Bernstein & Co., said recently at a conference in Israel, Bloomberg reports. "Cutting costs here in Israel is going to be a true test for them."

Levin handed the puzzle of what plants to cut and by how much to Carlo De Notaristefani, president of global operations, who followed Levin to Teva from Bristol-Myers Squibb ($BMY). At BMS, Bloomberg points out, Notaristefani went through a similar exercise. There he whacked its manufacturing network to 12 facilities from 28.

Teva is already getting a whipping in Israel from the Labor leader Shelly Yachimovich over the fact that it paid only $5 million in corporate taxes last year. And Levin can look to some of his peers to see what to expect. Sanofi ($SNY) CEO Christopher A. Viehbacher last year back pedaled back on the company's proposed cuts of 5% to 7% of its workforce of 28,000 in France after facing employee strikes and a public scolding by a top minister. The company made some cuts, but left the rest to attrition. 

- here's the Bloomberg story

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