Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) president and CEO Dr. Jeremy Levin explains that the objective of the unprecedented streamlining plan announced today is to "turn Teva into an efficient company suitable for the modern era." But more prosaic reasons probably influenced the decision.
Teva will sooner or later have to deal with the loss of income from its lead product, multiple sclerosis treatment Copaxone (and it is amazing by how much it is succeeding in delaying this), but at the moment, it has no alternative product to cover the loss. The extensive cutbacks are one of the ways left to Teva to improve its earnings per share and meet forecasts as its flagship product loses its dominance.
Until now, Levin has not made any big acquisitions at Teva. In the five years before Levin took up the post, his two predecessors, Shlomo Yanay and Israel Makov, made several big acquisitions, which were supposed to offset Copaxone's decline. Cephalon, acquired by Yanay, was especially intended for this role, but its innovative products have not succeeded as planned, while leaving Teva with heavy debt that it must now service. The estimated savings from the streamlining can help here, too.
Levin says that, alongside the cutbacks, there will be increased investment in R&D in innovative drugs, but the market is still struggling to understand exactly where organic growth will come from, because Levin has chosen not to gamble on one leading product to succeed Copaxone, but to launch several "enhanced generic" products every year.
As always with a major step, the question of Teva's Israeliness crops up. Levin says that mostly employees outside Israel will be laid off, but he does not promise to give Israel preference. Since Teva is one of only a few workplaces for many professionals in biology in Israel, layoffs here are liable to be a severe blow to many people.
Published by Globes [online], Israel business news - www.globes-online.com - on October 10, 2013
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