On Thursday, drug maker Teva Pharmaceuticals (NYSE: TEVA) announced plans to cut a quarter of their work force totaling to about 14,000 jobs as well as closing manufacturing and research facilities. The company wants to also suspend their dividend as they hope to reduce debt and simplify their structure. Due to increased competition and lowered prices in a challenging market environment for drugs in the U.S., Teva was forced to cut their full year forecast and reported disappointing third quarter results this year as revenue fell at a sharp rate. Following this announcement, shares spiked 17%.
Two years ago, Teva acquired Allergan for $40.5 billion and is now looking to restructure the company in a two-year plan to reduce costs by up to $3 billion with an estimated cost base of $16.1 billion this year. The firm will focus mainly on revenue and cash flow generation while also optimizing their cost base to ensure that revenues are protected to secure long term growth. By next year, $700 million is expected to be put towards the closure of research facilities, manufacturing plants, and other offices. With the struggle of $35 billion in debt, Teva is also looking to improve their margins with discontinuation of some drugs and price increases.
Kåre Schultz, Teva’s President and CEO, said, "Two weeks ago we announced a new organizational structure and executive management team. Today we are launching a comprehensive restructuring plan, crucial to restoring our financial security and stabilizing our business. We are taking immediate and decisive actions to reduce our cost base across our global business and become a more efficient and profitable company.”