News of the layoffs comes hard on the heels of the company’s credit rating having been cut to junk status by Fitch Rating.
Kåre Schultz, the new chief executive officer of Teva Pharmaceuticals will probably be likened to Dr. Seuss’ infamous character The Grinch as he reportedly plans to fire more than 1,000 employees this holiday season.
The Times of Israel reported that Teva will terminate up to 1,700 employees over the next few months as the beleaguered company focuses on a plan to streamline its operations in an effort to improve the company’s financial position. Citing Israel financial publication Calcalist, the Times of Israel said most of the company’s probable terminations outside of Israel will be in the U.S. When Schultz took over as CEO of Teva earlier this month, he told reporters that his top priority will be to improve the company’s financial profile and stabilize its operating budget and cash flow. This is not the first time that Schultz has assumed a new leadership role and initiated layoffs. The Times noted that when he took over as CEO of Danish company Lundbeck A/S in 2015, he terminated 17 percent of company employees.
The Calcalist report indicated that among those employees expected to be cut is Michael Hayden, head of Teva’s research and development division. Hayden, reports say, is out due to an underwhelming pipeline since he took over in that role five years ago.
News of the layoffs comes hard on the heels of the company’s credit rating having been cut to junk status by Fitch Rating. In its report, Fitch cited “significant operational stress” at Teva as the company faces challenges to its generic drugs and attempts to pay down the $30+ billion debt it has. The credit rating cut followed news that the company once-again lowered its 2017 financial outlook due to increased competition to its lead branded drug Copaxone and lower than expected generic sales in the United States.
Despite the grim news of layoffs, shares of Teva are slightly up in early trading, rising to $13.83. Still the stock has a long way to go before it returns to where prices were one year ago. This time last year, shares of Teva were trading at $38.15. Since late November 2016, share prices have steadily lost about 65 percent of its value.
Not only is Teva slashing its workforce, the company has also been selling off assets to pay down its debt. On Nov. 3, Teva announced it completed the $675 million sale of Plan B One-Step to Foundation Consumer Healthcare. Teva sold its branded contraceptive line Paragard, a product within its global Women’s Health business, to CooperSurgical for $1.1 billion. The company has also been looking to unload several non-core businesses, including its Medis and respiratory units to help pay down short-term and long-term debt.
Part of that debt is related to Teva’s 2015 $40.5 billion acquisition of Actavis, Allergan’s generics division. Many industry analysts have suggested that Teva paid too much for Actavis. Criticism over the Actavis acquisition lead to the abrupt departure of Teva Chief Executive Officer Erez Vigodman earlier this year.
