Date: 2017-12-14
Type of information: Restructuring
Compound:
Company: Teva Pharmaceutical (Israel)
Therapeutic area:
Type agreement: restructuring
Action mechanism:
Disease:
Details:
- • On December 14, 2017, Teva Pharmaceutical announced a comprehensive restructuring plan to significantly reduce its cost base, unify and simplify its organization and improve business performance, profitability, cash flow generation and productivity. Two weeks ago the company announced a new organizational structure and executive management team (see below). The two year restructuring plan announced here is intended to reduce Teva's total cost base by $3 billion by the end of 2019, out of an estimated cost base for 2017 of $16.1 billion. More than half of the reduction is expected to be achieved by the end of 2018. The company expects to record a restructuring charge as a result of the implementation of the plan in 2018 of at least $700 million , mainly related to severance costs, with additional charges possible following decisions on closures or divestments of manufacturing plants, R&D facilities, headquarters and other office locations.
- The restructuring plan will focus on:
- - the immediate deployment of the new unified and simplified organizational structure, announced on November 27 . It will deliver cost savings and increase internal efficiencies by reducing layers of management, and simplifying business structures and processes across the company's global operations.
- - substantial optimization of the generics portfolio globally, and most specifically in the United States , through price adjustments and/or product discontinuation. This will enable the company to accelerate the restructuring of its manufacturing and supply network, including the closures or divestments of a significant number of manufacturing plants in the United States , Europe , Israel and Growth Markets
Closures or divestments of a significant number of R&D facilities, headquarters and other office locations across all geographies, delivering efficiencies and substantial cost savings.
- - a thorough review of all R&D programs across the entire company, in generics and specialty, to prioritize core projects and terminate others immediately, while maintaining a substantial pipeline
- These steps are expected to result in the reduction of 14,000 positions globally - excluding the impact of any future divestments - over 25% of Teva's total workforce - over the next two years. The majority of the reductions are expected to occur in 2018, with most of the affected employees being notified within the next 90 days. Restructuring efforts will be done in accordance with applicable local requirements. Consultations with the relevant employee representatives will begin in the near term.
- In addition to the restructuring plan, Teva will immediately suspend dividends on ordinary shares and ADSs, while dividends on mandatory convertible preferred shares will be evaluated on a quarterly basis per current practice
- Teva's annual bonus for 2017 will not be paid due to the fact that the company's financial results are significantly below the original guidance for the year.
- Teva will also continue to review the potential for additional divestment of non-core assets.
- • On November 27, 2017, Teva Pharmaceutical announced a new organization and leadership structure. The new structure will enable strategic alignment across the portfolio, across regions and between functions, leveraging scale, enhancing agility, extracting efficiencies and providing increased proximity to the markets. This new structure will be implemented effective immediately.
- New structure: The commercial business will no longer have two separate global groups for generics and specialty medicines, and will be integrated into one commercial organization, operating through three regions - North America , Europe and Growth Markets. Each of the regions will manage the entire portfolio - including generics, specialty and OTC - with full end-to-end P&L accountability. Some of the former global units will be integrated into the new structure, while others will be made redundant.
- The former Generic R&D and Specialty R&D organizations will be combined into one global group with overall responsibility for all R&D activities - generic, specialty and biologics.
- A newly formed Marketing & Portfolio function will be responsible for overseeing the interface between regions, R&D and operations throughout all product lifecycle stages and optimizing generic and specialty portfolios across the therapeutic areas.
- The new structure will enhance alignment and seamless integration between Teva's Global Operations, the commercial regions, R&D and the Portfolio function, will increase productivity and simplify the organization. The commercial structure will rely on one leaner supporting organizational infrastructure that includes Finance, Legal, HR, and Global Brand & Communications.
- As a result of these changes, Dr. Michael Hayden , Dr. Rob Koremans and Dipankar Bhattacharjee will retire from Teva, effective December 31, 2017.
New executive management team: Michael (Mike) McClellan is appointed Executive Vice President, Chief Financial Officer and will oversee the Finance Group , Business Development, Investor Relations and Information Technology. Previously, he served as Interim CFO and as SVP & CFO Global Specialty Medicines. Prior to joining Teva, Mike was the U.S. CFO at Sanofi.
- Dr. Hafrun Fridriksdottir is appointed Executive Vice President, Global R&D. Previously, she served as President of Global Generics R&D. Prior to joining Teva, Hafrun served as Senior Vice President and President of Global Generics R&D in Allergan.
- Brendan O'Grady is appointed Executive Vice President, North America Commercial. Brendan has previously served as Chief Commercial Officer, Global Specialty Medicine, as interim head of Teva's European specialty business and as President and CEO for Teva's North America generics business and as VP US Market Access and Reimbursement.
- Richard Daniell is appointed Executive Vice President, European Commercial, after having served as President and CEO, Teva Generics Europe.
- Gianfranco Nazzi is appointed Executive Vice President, Growth Markets Commercial. Gianfranco has previously served as President and CEO of Growth Markets at the Global Generic Medicines group, and prior to that he was he has served as Senior Vice President, Specialty Medicines Europe.
- Sven Dethlefs is appointed Executive Vice President, Global Marketing & Portfolio. He previously served as Global Head of Respiratory Medicines and as Chief Operating Officer, Teva Global Operations.
- All appointments are effective immediately, while the retiring executives will stay with Teva to support the transition until the end of the year.
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