Teva is slashing the size of its workforce by 10 per cent in an acceleration of its cost-reduction plans, saying it hopes to trim $2bn off its annual expenses by 2017.
The cutbacks mean that around 5,000 employees will lose their jobs – with most going before the end of next year – which will reduce 2014 costs by $1bn. By 2015 the company expects to have made 70 per cent of its savings target.
Teva first started restructuring its business at the end of last year, when it said it was looking for $1.5bn to $2bn in 2017 cost reduction.
At the time, it said that sales would decline in 2013 thanks to increased competition for multiple sclerosis (MS) blockbuster Copaxone (glatiramer acetate) and leaner opportunities in generic drugs as the infamous pharma ‘patent cliff’ draws to an end.
The company had already started to jettison non-core assets – including some R&D programmes – but says it will now extend that effort.
“Teva will scale down oversized parts of the company, while growing its generics business and core R&D programme,” said the company in a statement.
Priority areas include high-value complex generics, expanding its presence in emerging markets and broadening its portfolio, especially in speciality and over-the-counter (OTC) medicines, it added.
“The accelerated cost reduction programme will strengthen our organisation while improving our competitive position in the global marketplace,” said Teva’s chief executive Jeremy Levin.
The overall pre-tax cost of the restructuring is now estimated at around $1.1bn between now and 2017.
As with many of its pharma peers one of the primary targets for the cost-reduction programme will be Teva’s manufacturing facilities, with the company promising to “improve manufacturing efficiency and reduce excess capacity” and also achieve a “reduction in the company’s cost of goods”.
The company earlier promised to improve efficiency by migrating towards larger, more cost efficient manufacturing sites, and centralising procurement operations to help reduce raw material costs.
However, details of any new measures remain sketchy and Teva is planning to provide additional information when it updates its 2014 financial projections in December.