Teva ousts R&D chief, cuts workforce and restructures
Lackluster generic drug results overall, poor financial results and large debt have combined to put Teva, the Israeli-based generic drug maker, into a tenuous position. As John Carroll summarized in Endpoints News, “The market has been expecting something drastic. Teva’s last set of quarterly numbers drove home this year’s theme: Poor financial results and weak generics prices at a time the internal pipeline lacks the kind and quantity of potential blockbusters needed is forcing a top-to-bottom reorganization. Teva just cut its financial forecast, with an early introduction of Copaxone 40 mg generics expected to bite hard. And this comes after Teva built up debt of close to $35 billion for some badly timed acquisitions that leave the company auctioning off assets…To top it all off, Teva’s closely-watched successor to Copaxone flunked out in the clinic this year, which surprised no one following that multiple sclerosis program.”
Teva’s new chief operating officer, Kåre Schultz, is reportedly planning to cut 25 percent of its workforce, with much of that slashing to happen in the US. Teva's generics and specialty units will be combined as the company focuses on the US, Europe and emerging markets. In addition, chief R&D officer Michael Hayden, whose track record of managing Teva’s pipeline during the past 5 years has been less than the company had anticipated, is out, according to Calcalist. As reported in Hadashot News, “there is an intention to put into practice a streamlining plan.
On Monday, Schultz, who started at Lundbeck – his previous employer – by cutting 17 percent of its workforce, appears to be doing the same thing at Teva. On Monday he revealed the plan in which each region will be responsible for managing the entire portfolio of generics, specialty medicines and over-the-counter drugs, according to Allison Gatlin in Investor’s Business Daily. “A newly formed marketing and portfolio function will oversee interaction between the regions, research and development and operations throughout all product life cycle stages,” the article explained.
Hayden is one of three high-ranking employees who will retire from Teva as of December 31. Schultz has appointed six new executives, all from within Teva, and said that the full plan will be unveiled in mid-December. He is anticipating a turnaround “in the short- to medium-term: and expects that the new structure “will enable Teva to use a leaner setup for finance, legal, human resources and global brand and communications.”
IBD said, “Generic drugmakers have struggled this year amid a growing number of approvals at the Food and Drug Administration, stoking competition. Teva has an IBD Composite Rating of 8 out of a best-possible 99, meaning it underperforms most stocks in terms of key growth metrics.”
According to Credit Suisse analyst Vamil Divan, "We have been here before with Teva, with new management coming in and trying to reshape the company, but running into challenges with the board in executing their plan." Still, circumstances are different, Divan said. While he expressed doubt about the effectiveness of the plan, he acknowledged that the situation is "grim," with Teva's debt level considerably higher than its market cap and its credit status ”walking a tightrope between investment grade and junk.” While Teva's board has said it will work with Schultz to make his plan happen, Divan concluded, "Until we see that commitment backed up by action, we maintain our current outlook."