With his program of job cuts about to provoke a general strike in Israel, Teva CEO Kare Schultz has written to Prime Minister Benjamin Netanyahu to explain the company's position. Schultz even apologizes on behalf of Teva's previous management for the situation in which the company finds itself. He insists that the cost cutting measures are vital, and warns of the danger of a hostile takeover. He also makes a commitment to maintaining Teva as an Israeli company.
The letter is a s follows:
Dear Prime Minister Netanyahu,
I am writing to you as the newly appointed CEO of Teva. The company is in a very challenging situation as reflected in the financial results Teva published in the second and third quarters of 2017. The challenges facing Teva include reduced Copaxone sales due to generic entry, a reduction of revenues and profit from the U.S. generics business, our most significant market, and the significant $35 billion debt on the balance sheet.
The Teva Board of Directors tasked me to position Teva for a dramatic turnaround in the short to medium term and to create value for all company stakeholders - our patients, shareholders and employees across the globe.
During the past month, I have dedicated my time and energy to evaluate closely Teva's activities around the globe. I have found that our current business reality requires immediate and significant action to ensure the company's future. It is clear that without taking drastic steps in the coming weeks and months, the company will be increasingly vulnerable to potential takeover by global financial institutions or activists with their own agendas and the risk is real.
Accordingly, today we launched a comprehensive global restructuring program, crucial to restoring our financial security and stabilizing our business. Our plan will significantly reduce the company cost base, unify and simplify its organization and improve business performance, profitability, cash flow generation and productivity. This program includes:
Substantial optimization of the generics portfolio globally, and most specifically in the United States;
Restructuring of our 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; and
A thorough review of all R&D programs across the entire company, to prioritize core projects and terminate others immediately, while maintaining a substantial pipeline.
These steps will result in the reduction of over 25% of the global Teva workforce, excluding future divestments, over the next two years and will reduce Teva's total cost base by $3B by the end of 2019.
These measure are painful, but absolutely vital. They will be carried out around the world, including in Israel, in a fair and respectful manner.
I personally wish to apologize on behalf of Teva's previous management for the situation which our company faces. The Board and Management wish to assure you that having carefully examined the alternatives, we have no other choice - we must and we will save Teva.
I have taken upon myself to maintain the global headquarters of Teva in Israel, including my own office. I do so as a reflection of my commitment to Israel and with the utmost confidence in the long-term potential for our success here.
During my 30 years in the pharmaceutical industry, I have admired Teva as a leading, unique company in the industry due to its uncompromising commitment to develop and provide high quality medicines to hundreds of millions patients every day. Teva has reached its global leadership position due to the Israeli spirit that has characterized the company for over 116 years. Today's announcement is designed solely to achieve our shared aspirations to sustain Teva as a strong global company, managed out of and based in Israel.
Prime Minister Netanyahu, I am truly appreciative for the substantial support that Teva has received from the Government of the State of Israel under your leadership, and for your recognition of the major contribution of Teva to the economy of the State of Israel.
I remain available at your request to further elaborate on any of the above.
Respectfully yours,
Kare Schultz, President and CEO, Teva Pharmaceutical Industries
Published by Globes [online], Israel business news - www.globes-online.com - on December 14, 2017
© Copyright of Globes Publisher Itonut (1983) Ltd. 2017