Teva Pharmaceutical announced a restructuring plan to significantly reduce its cost base, which includes laying off 14,000 employees worldwide.
"Two weeks ago we announced a new organizational structure and executive management team. Today we are launching a comprehensive restructuring plan, crucial to restoring our financial security and stabilizing our business,” Kåre Schultz, Teva’s President and CEO, said. “We are taking immediate and decisive actions to reduce our cost base across our global business and become a more efficient and profitable company.”
The two year restructuring plan is intended to reduce Teva's total cost base by $3 billion by the end of 2019, out of an estimated cost base for 2017 of $16.1 billion. More than half of the reduction is expected to be achieved by the end of 2018. The company expects to record a restructuring charge as a result of the implementation of the plan in 2018 of at least $700 million, mainly related to severance costs, with additional charges possible following decisions on closures or divestments of manufacturing plants, R&D facilities, headquarters and other office locations.
The restructuring plan will focus on:
- These steps are expected to result in the reduction of 14,000 positions globally – excluding the impact of any future divestments, over 25% of Teva’s total workforce, over the next two years
- The immediate deployment of the new unified and simplified organizational structure
- Optimization of the generics portfolio globally, and most specifically in the United States, through price adjustments and/or product discontinuation
- Closures or divestments of a significant number of R&D facilities, headquarters and other office locations across all geographies
- Teva will work to significantly improve profitability in all existing markets by optimizing their cost base
- A review of all R&D programs across the entire company, in generics and specialty, to prioritize core projects and terminate others immediately, while maintaining a substantial pipeline
The majority of the reductions are expected to occur in 2018, with most of the affected employees being notified within the next 90 days. Restructuring efforts will be done in accordance with applicable local requirements.
In addition to the restructuring plan, Teva is announcing the following measures to address the company’s financial situation:
- The company will immediately suspend dividends on ordinary shares and ADSs, while dividends on mandatory convertible preferred shares will be evaluated on a quarterly basis per current practice
- Teva’s annual bonus for 2017 will not be paid due to the fact that the company's financial results are significantly below our original guidance for the year.
- The company will continue to review the potential for additional divestment of non-core assets
Teva will provide full guidance for 2018 in February with the annual results and will share a longer-term strategic direction for the company later in 2018.