Struggling drugmaker takes steps to boost efficiency amid market headwinds
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This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 28, 2017).
Teva Pharmaceutical Industries Ltd.'s new chief executive is shuffling the company's leadership ranks and combining its generic and specialty businesses as he embarks on a turnaround plan at the struggling drugmaker.
Teva, the world's biggest seller of generic drugs, has suffered under price pressure in its U.S. business and increased competition for its blockbuster multiple sclerosis drug. The changes it announced Monday represent Chief Executive Kare Schultz's first significant action since taking charge of the Israeli company Nov. 1, after pledging to review the company's operations and strengthen its business.
The company said its commercial generic and specialty drugs businesses will be combined, in a move it said will make the company more agile and increase efficiency. Research and development operations for the two businesses will also be combined, the company said.
The changes were only the beginning of a wider plan to turn around the firm, with further details to be announced next month, it added.
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"Teva is taking decisive and immediate action," Mr. Schultz, who also serves as Teva's president, said in a statement announcing the changes. "We will focus on driving sustainable value creation."
Mr. Schultz was named as chief in September and inherited a business with falling profits, a huge debt pile and a collapsing share price as investors worried that the firm lacked a coherent strategy to deal with a flurry of market headwinds. Teva has cut its earnings outlook twice this year and its share is down roughly 60%.
Mr. Schultz on Monday said Teva's drug operations would be integrated into one commercial organization operating across three regions -- North America, Europe and growth markets.
North America is the firm's largest market, with one in every seven prescriptions in the U.S. a Teva drug.
Teva in recent years has fought over whether the firm should focus on generics drugs or take advantage of Israel's focus on research and development and invest in specialty medicines, like its multiple sclerosis drug Copaxone. Some investors had urged the company to split completely into separate businesses, rather than merge the two.
Three executives, including Chief Scientific Officer Michael Hayden and the leaders of its generic and specialty businesses, Dipankar Bhattacharjee and Rob Koremans, will leave at the end of the year as a result of the changes, the company said.
The company said it appointed four new executive vice presidents who will oversee areas including global research and development and commercial operations in its North American, European and growth markets. It has appointed an executive vice president of global marketing and portfolio who will lead a newly created segment tasked with overseeing interaction between regions and between units. All are current employees.
Teva also said it appointed interim Chief Financial Officer Michael McClellan to permanently take the role.
The company didn't announce any staff reductions in its news release Monday. A Teva spokeswoman declined to comment on Israeli media reports that have said it could lay off as much as 25% of its workforce in the coming days under Mr. Schultz's revamp plan. She said the company would announce more details on its restructuring plan in mid-December.
Monday's changes immediately cheered investors, with Teva's shares rising 5% on the news.
The drugmaker had earlier this month announced disappointing third-quarter results and cut its earnings per share estimate for the year on weaker revenue from its U.S. generics business. The results followed a $6.1 billion write-down in August on its U.S. generics unit that dragged the company's quarterly net loss down to $6.04 billion.
Before appointing Mr. Schultz, Teva had been without a permanent chief executive for nine months. He took over from Erez Vigodman, who left the firm in February after sealing an acquisition last year of Allergan PLC's generics unit that left the company with debt of about $35 billion and an unwieldy supply chain.
A 30-year pharma veteran, Mr. Schultz developed his skills at Novo Nordisk A/S, one of Denmark's biggest firms. He then moved to H. Lundbeck A/S as chief executive in early 2015, where he successfully restructured and returned the firm to profitability.
The new Teva chief is only the second non-Israeli to lead the firm. The last outsider, Jeremy Levin, also attempted to restructure the firm in 2013, promising 5,000 jobs cuts, or roughly 10% of the workforce. He was forced out the next year during a dispute with the board over the restructuring.
Investors will now eagerly anticipate whether Mr. Schultz also makes major cuts, and if those will be acceptable to Israeli lawmakers. Earlier this year, lawmakers threatened to cut tax benefits -- worth roughly 18 billion Israeli shekels, or $5 billion, over the past decade -- if Teva didn't negotiate with employees over plans to cut 350 jobs at factories.
"Cutting these jobs would be challenging in any democracy," analysts at AB Bernstein said of the mooted thousands of job cuts. "And Israel is particularly sensitive."
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(END) Dow Jones Newswires
November 28, 2017 02:47 ET (07:47 GMT)