Teva to Cut $1 Billion in Costs, 10 Percent of Workforce by End of 2014
Teva Pharmaceutical Industries Ltd. announced steps to accelerate the reduction of costs and to optimize its structure and processes. These steps are part of Teva’s worldwide restructuring program, which was introduced in December 2012 and included actions to divest non-core assets, increase organization effectiveness, improve manufacturing efficiency and reduce excess capacity.
Teva will reduce its global workforce by approximately 10% (approximately 5,000 employees), and will complete the majority of the reduction by the end of 2014. Furthermore, Teva continues to identify opportunities to optimize value through the selective trimming of assets that no longer fit its core business or are not critical to its future. Teva will scale down oversized parts of the company, while growing its generics business and core R&D programs – including high-value complex generics, expanding its presence in emerging markets and broadening its portfolio, especially in its specialty medicines and OTC businesses.
Dr. Jeremy Levin, President and CEO of Teva, commented, “Teva is managing its operations to achieve high levels of effectiveness in the short term, while pursuing opportunities for the long term. The accelerated cost reduction program will strengthen our organization while improving our competitive position in the global marketplace. We understand that this may be a difficult time for our employees and are committed to act with fairness, integrity and respect, and provide support during this time."
The company now expects to realize approximately $2.0 billion in annual cost savings by the end of 2017, compared to the previously guided range of $1.5 to $2.0 billion. The company estimates that $1.0 billion, or 50 percent of the annual cost savings, will be realized by the end of 2014, and 70 percent by the end of 2015. The majority of the savings are expected to come from a reduction in the company’s cost of goods. Teva expects to reinvest part of the initial savings accumulated in 2014 and 2015, in high-potential programs. These investments will include the development of the company's complex generics and specialty pharmaceutical pipeline, which includes more than 30 late-stage programs.
Total pre-tax costs for the corporate restructuring program are estimated to be approximately $1.1 billion, to be incurred as savings are achieved through 2017, about 75% in cash and about 25% in non-cash accelerated depreciation and impairment of assets.
Teva reiterates its full-year 2013 Non-GAAP financial outlook and anticipates ending the year near the midpoint of its original 2013 ranges for revenue of $19.5-$20.5 billion, and non-GAAP diluted earnings per share of $4.85 to $5.15. The company is in the process of completing its annual planning and expects to provide its full-year 2014 financial outlook in December, which will also include additional details on its cost reduction program.