Company Announces Layoffs and Restructuring
For years, Teva Pharmaceutical Industries was seen as a symbol of Israel as a “start-up nation.” With 57,000 global employees, and operations in dozens of countries, Teva calls itself the “leading generic drug company in the world.”
But in recent months, Teva has fallen on hard times. It’s stock has plummeted by more than 36 percent over the last three months, and the company announced dramatic plans to downsize. It says it will close 15 plants worldwide and lay off 7000 employees.
Teva’s troubles worry Israeli economists.
“We are the start up nation, and the idea is that we start up companies and then sell them,” Alex Coman, a value creation expert, Academic College Tel Aviv – Jaffa,” told The Media Line. “Teva is our Nokia – it was a big company and it lost a lot of money and huge amounts of value were destroyed.”
Many Israeli pension plans invested in Teva and the stock decline could affect all Israelis.
“Teva was the big bonanza of the Israeli stock market and it’s part of the Tel Aviv stock exchange’s 35 largest stocks,” Coman said. “The crash is painful but it doesn’t mean I won’t be able to afford a wheelchair when I need it.”
Teva has suffered a series of blows recently. In December, the company paid more than $500 million to settle U.S. criminal and civil allegations that the company bribed overseas officials to gain business for its medications. Earlier this year, it lost a patent infringement case in the US for its multiple sclerosis drug Copaxone, meaning its patents were invalidated.
Last year, Teva also bought Actavis Generics, the generics arm of the rival company Allergan, in a $40 billion deal in an effort to consolidate its position as the global leader in generic drugs.
But soon after the acquisition, the US sped up the approval process for generic drugs, leading to more competition and lower prices.
The main architect of the deal then-CEO Erez Vigodman stepped down soon after the Allergan deal.
“All of us at Teva understand the frustration and disappointment of our shareholders in light of these results,” Yitzhak Peterburg, interim president and CEO of Teva said in a statement when announcing the recent second-quarter disappointing stock price. “Given the current environment, we had 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. We will continue to take action to aggressively confront our challenges.”
There has been some speculation that another company might try to take over Teva. But the company’s articles include a provision that the CEO must be a resident of Israel, and that the center of the company’s management to be in Israel, and a majority of the board meetings convened in Israel.
About 7000 people work in Teva in Israel, and the company expects about 350 to be laid off in coming weeks.