According to recent reports, Teva Pharmaceutical Industries Ltd (TEVA - Free Report) is likely lay off almost 11% of its global workforce to cut costs and improve growth prospects.
The news, which was first reported by Israeli newspaper Calcalist, mentioned that the company may cut 6,000 jobs or about 11% of its global workforce as part of a multi-year efficiency plan. However, the Israeli generic drugmaker has denied the rumors. Teva reportedly said that it is freezing recruitment but is not reducing its workforce.
Teva’s workforce consists of approximately 57,000 full-time equivalent employees, of which some 7,000 workers are from Israel. Per estimations, the retrenchment of 5,000 jobs will result in savings of approximately $2 billion for the company.
Also, Bloomberg reported that Teva has already cut about 100 jobs in Israel and is likely to reduce its workforce by hundreds in the coming weeks. This cost-cutting process was mainly adopted by the company to service its debt burden, which surged after a series of acquisitions.
For Teva, the year 2016 was an important one as it forged ahead with the integration of Allergan plc’s (AGN - Free Report) generics segment, Actavis Generics, which it acquired last year. Teva is facing a number of near-term headwinds like generic competition for its multiple sclerosis drug Copaxone, new competition for branded products, fewer large generic opportunities, generic pricing pressure, a higher cost base and the sudden departure of its chief executive officer. In Feb 2016, Teva announced it CEO, Erez Vigodman’s resignation. Dr. Yitzhak Peterburg has been appointed interim president and CEO while the search of the new CEO continues.
Teva is also facing patent challenges for the 40 mg thrice-weekly formulation of Copaxone, its key revenue generator. Companies like Mylan N.V. (MYL - Free Report) and Momenta Pharmaceuticals, Inc. (MNTA - Free Report) are looking to get approval for their generic versions of the 40-mg thrice-weekly formulation of Copaxone. Teva suffered a major setback in Jan 2017 as the U.S. District Court for the District of Delaware invalidated four of our five Orange Book patents for Copaxone 40 mg. Teva intends to appeal the decision. Also, there is uncertainty regarding the timing of the generic launch of Copaxone 40mg.
Moreover, Teva’s shares underperformed the generic industry in the past one year. The company’s shares underperformed the Zacks classified Medical-Generic Drugs industry so far this year. Shares of the company lost 9.7%, while the industry registered an increase of 1.4%.
We note that Teva has undertaken an efficiency program to make the most of the synergies from the Actavis Generics acquisition. It is also focusing on cost reduction to improve the profitability of its business.
Tevacurrently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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