|Teva CEO Erez Vigodman|
The top dogs at Teva Pharmaceutical Industries have been saying for more than a year that to help cut $2 billion in costs, its manufacturing network needed to be trimmed and its API business cinched up. Now, new CEO Erez Vigodman has put some numbers to the calculation: 11 plants are slated for closure and another 16 are still under evaluation.
Vigodman, in his call with analysts last week, did not say which plants or how many jobs would be lost but did say Teva ($TEVA) has already started in on the reduction, according to a transcript of the call from SeekingAlpha. He also said that the cost-cutting should result in $1 billion in annual savings at the end of this year and another $1 billion cast aside by 2017, with $500 million falling to the bottom line by the end of that year.
"There is a lot of value we can unlock from getting our house in order by delivering on our cost reduction program, by accelerating operational network transformation and integration and by strengthening our global generic leadership, while improving profitability," Vigodman said.
If it closes just 11 plants, that is more than 15% of the company's global manufacturing network. According to Teva's annual report, the drugmaker has 50 finished dosage pharmaceutical plants in North America, Europe, Latin America, Asia and Israel with two more plants under construction. Of those, 26 are FDA-approved, and 31 have European Medicines Agency approval. The main manufacturing site for respiratory inhaler products is in Ireland, and its manufacturing sites in Israel, Germany, Hungary and the Czech Republic make up a significant percentage of its capacity. The company produced 64 billion tablets and capsules and over 700 million sterile units last year.
In addition, its independent active pharmaceutical business, TAPI, has 20 sites worldwide and employs more than 5,000. Its facilities are located in Italy, Hungary, the Czech Republic, Croatia, Israel, India, China, Mexico, Puerto Rico and the U.S. That unit produces more than 300 products. But Vigodman said on Thursday that the company will be weeding some of those out. "We are discovering and exploring all the consequences from Teva's API business situation. … We have been assessing market and products in order to terminate products which will not meet a minimum threshold of profitability."
With its top-selling drug, multiple sclerosis treatment Copaxone, going off patent this year despite its legal challenge, Teva has been looking to cut plants and headcount to compensate for the financial hit it will take. But when Vigodman's predecessor, Jeremy Levin, pushed that agenda hard, including cutting jobs in Israel where Teva is based, he ran into so much resistance that he finally left the company.
- here's the SeekingAlpha transcript
- here's the earnings release
Special Reports: Top 10 Drug Patent Losses of 2014 - Copaxone | Top 10 Generics Makers by 2012 Revenue - Teva