Teva Layoffs 2017: Prices of Generic Drugs Fall; Pharma to Cut Thousands of U.S. Jobs

Teva Layoffs 2017
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Teva Pharmaceutical Industries Ltd. (NYSE:TEVA) is expected to announce a cost-cutting program in the coming weeks that will include the laying off of “tens of percents” of its 10,000 employees.

The generic drugmaker could eliminate up to 25% of its workforce in Israel, where it employs 6,860 people and a few thousand more jobs in the U.S. The company said it will miss its 2017 profit forecasts due to falling prices of generic drugs in the U.S. and weakening sales of “Copaxone,” its drug to treat multiple sclerosis.

Teva is not the only generic drugmaker to face layoffs. Generic drug prices have been falling faster than their historical averages, which has resulted in a large number of layoffs across the pharmaceutical industry.

Teva to Miss 2017 Profit Forecasts, Around 1,000 Layoffs to Take Place in the U.S.

Teva, the world’s largest generic drugmaker, will be sending termination letters to “tens of percents” of its 10,000 employees in the U.S. and Israel in the coming weeks. While Teva has declined to comment on the rumors, the cull is said to include Michael Hayden, the company’s chief scientific officer and president of research and development.

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Teva is expected to implement a cost-cutting program after reporting weaker than expected third-quarter results. The company said it would miss its 2017 profit projections as a result of falling prices of generic drugs in the U.S.

Moreover, Teva is saddled with close to $35.0 billion in debt that came on as a result of its $40.5-billion acquisition of Actavis Generics in 2016, Allergan’s generic drug business. To meet its debt payments, Teva has been selling off its assets.

Much like investors have been selling off Teva. Since the beginning of 2017, Teva’s share price has tumbled 62%; over the last 52 weeks, it has fallen close to 65%.

In the second quarter, Teva reported a larger than expected drop in second-quarter earnings, posting a net loss of $6.0 billion compared to net income of $188.0 million in the same period a year earlier.

Teva also slashed its dividend by 75%, cut it forecast for 2017, and said it planned to cut 7,000 jobs and sell off non-core assets to tackle its $35.0-billion debt load.

Looking ahead, Teva said there was little chance of a quick turnaround, noting that it expects falling U.S. generic drug prices to accelerate in the second half of 2017 and for the momentum to carry into 2018.

In the third quarter, Teva announced that revenue from generic drugs fell eight percent year-over-year. U.S. revenue from generic drugs was down nine percent.

Global sales of Copaxone tumbled seven percent year-over-year, while Copaxone revenue in the U.S. was down eight percent.

Teva’s Previously Announced Plant Closings and Layoffs

It’s been a tough year for Teva employees. After announcing disappointing second-quarter results, the pharma giant revealed a massive restructuring plan, which includes shuttering 15 of its manufacturing plants over the next two years.

The company also said it would lay off 7,000 employees. Most of these employees have already been laid off, with around 1,000 job cuts to take place by the end of 2017. The recent layoff rumors are in addition to the 7,000.

On its second-quarter conference call with investors, interim CEO Dr. Yitzhak Peterburg confirmed that Teva will be closing six manufacturing plants in 2017 and an additional nine plants in 2018.

Teva said it is facing increased competition within the U.S. The U.S. Food and Drug Administration (FDA) has increased approvals of generic drugs, which has resulted in a number of newer drug manufacturers entering the market. This had led to price wars, cutting into Teva’s profits.

Commenting on the company’s proposed restructuring plant, Dr. Peterburg said, “Given the current environment, we have had to take swift and decisive actions. We are focused on executing meaningful cost reductions, rationalizing our assets and maximizing their value, actively pursuing divestiture opportunities and strengthening our balance sheet.”

Since then, Teva has clearly elected to take even swifter, more decisive action.

More Generic Drugmaker Layoffs in 2017 as Drug Prices Fall

Fierce competition and falling generic drug prices have hurt more than just Teva. A number of well-known generic drugmakers have announced job cuts in 2017.

Perrigo Company plc (NYSE:PRGO) announced layoffs back in April. The Allegan, Michigan drug maker said fewer than 50 non-production workers were terminated. The layoffs came after the company asked employees to take voluntary retirement packages.

Construction on the $31.0-million, a 600,000-square-foot warehouse that was slated to start in the spring has been pushed back by a year.

In May, Sun Pharmaceutical Industries Inc., a Mumbai, India-based company, announced its plans to shutter a distribution facility in Wixom, Michigan at the end of June. The move has resulted in 25 layoffs. In 2014, Sun Pharmaceutical shut down its plant in Detroit, laying off 178 employees.

 

Sources

Teva Pharmaceutical set for major layoffs in Israel, U.S.: report,” reuters.com, November 23, 2017.

Teva Reports Second Quarter 2017 Financial Results,” Teva Pharmaceutical Industries Ltd., August 3, 2017.

Teva Reports Third Quarter 2017 Financial Results,” Teva Pharmaceutical Industries Ltd., November 2, 2017.

As shares plunge, Teva sees 7,000 layoffs by year’s end,” The Times of Israel, August 3, 2017.

Teva Pharmaceutical Closing Manufacturing Plants, 7,000 Layoffs to Follow,” AmericaClosed.com, August 5, 2017.

Perrigo confirms layoffs in Allegan County,” wwmt.com, April 12, 2017.

WARN Notices,” Michigan Workforce Development Agency, last accessed November 24, 2017.

WARN Notices,” Michigan Workforce Development Agency, last accessed November 24, 2017.

 

 

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