Teva Pharmaceutical Industries said today it will eliminate about 5,000 jobs—10% of its workforce—as part of its global restructuring program, designed to cut $2 billion in costs by 2017 while streamlining company operations.
The majority of the job cuts will be completed by the end of 2014 under the restructuring, which Teva said will refocus the company on growing its generics business and core R&D programs, expanding in emerging markets and broadening its portfolio.
“We understand that this may be a difficult time for our employees and are committed to act with fairness, integrity, and respect, and to provide support during this time," Jeremy Levin, D.Phil., Teva’s president and CEO, said in a statement. “The accelerated cost-reduction program will strengthen our organization while improving our competitive position in the global marketplace.”
Teva had previously indicated that it planned to cut costs between $1.5 billion and $2 billion. Now that the target is $2 billion, Teva adds that 50% of this target should be achieved by the end of 2014, and 70% by the end of 2015.
The bulk of the savings, according to Teva, is expected to come from a lower cost of goods. Teva said it expects to reinvest part of the initial savings, accumulated in 2014 and 2015, in programs deemed to have high growth potential. That includes development of the company's generics and specialty pharmaceutical pipeline, which includes more than 30 programs in late stages—more than double the number of 15 late-stage programs that Dr. Levin described to Reuters in a December 2012 interview.
Teva’s R&D effort is struggling to bounce back from recent setbacks, as well as generate new blockbusters. Next year, sales of its flagship branded injection drug, Copaxone for multiple sclerosis, are expected to start slipping due to newer oral versions of the drug as well as expected competition from new generic versions, which could occur starting in the spring. Copaxone, which racked up $3.996 billion in 2012 sales, earlier this month succeeded in fighting off a Mylan invalidity challenge to its European patent, which expires in May 2015.
Earlier this month, Teva said it would submit applications to market 13 new inhalation products, in order to double its sales from respiratory drugs to $2 billion by 2018 and $4 billion by 2023. It is among recent moves through which Teva has sought to strengthen its respiratory drug franchise. In June, Teva acquired MicroDose Therapeutx for $165 million-plus—including $40 million up front, up to $125 million tied to undisclosed regulatory and development milestones, plus sales-based milestone and tiered royalty payments upon commercialization of lead pipeline product MDT-637 for respiratory syncytial virus and an earlier stage asthma/COPD medicine.
In August, the company scrapped development of its sleep apnea compound Nuvigil (armodafinil), after it failed a Phase III trial by failing to meet its primary endpoint of statistically significant greater effectiveness than placebo as adjunct therapy to mood stabilizers and/or atypical antipsychotics. In July, Teva and Lonza Group ended a four-year-old joint venture to develop, manufacture, and market biosimilar drugs, hamstrung by slow progress toward approval standards in Europe, and none to date in the United States. And in January, Teva pulled the plug on a nearly seven-year collaboration with CureTech on the humanized monoclonal antibody CT-011 for blood malignancies and solid tumors.
Teva estimated total pre-tax costs for its restructuring program at about $1.1 billion, to be incurred through 2017 as savings are achieved. About 75% of the savings will consist of cash; the rest, in non-cash accelerated depreciation and impairment of assets charges.
The company said its latest phase of restructuring will not affect its full-year 2013 non-GAAP financial guidance to investors, saying it anticipates ending 2013 near the midpoint of this year’s original revenue range of between $19.5 billion and $20.5 billion. Teva said it expects in December to provide its full-year 2014 financial outlook—including additional details on its cost-cutting efforts.
“Teva is managing its operations to achieve high levels of effectiveness in the short term, while pursuing opportunities for the long term,” Dr. Levin added.