* Restructuring to cut cost base by $3 bln by end of 2019
* Teva to take restructuring charge of at least $700 mln in
* Teva shares surge 14.6 percent in New York
(Adds comments from conference call, analyst, share reaction)
By Tova Cohen and Ari Rabinovitch
TEL AVIV, Dec 14 (Reuters) - Teva Pharmaceutical Industries
will cut its workforce by more than a quarter, give up
many of its manufacturing plants and suspend its dividend on
ordinary shares in a much-anticipated overhaul to help pay back
its massive debt.
Israel-based Teva, the world's largest generic
drugmaker, said on Thursday the move will result in a reduction
of 14,000 positions globally, with the majority to come in 2018.
The two-year restructuring plan is intended to reduce Teva's
cost base by $3 billion by the end of 2019, out of an estimated
cost base for 2017 of $16.1 billion.
Shares in Teva were up 14.6 percent at $18 in New York, but
are down 53 percent since January.
Investors will like this plan as most are focused on the
near-term cost cuts and not the business outlook, Wells Fargo
analyst David Maris said.
"However, in our view, the new CEO's $3 billion cost-savings
goal is larger than we had anticipated, and while this is more
needed for survival versus optimisation, it may also have
significant negative effects to Teva's competitiveness," said
Maris, who rates the shares "market perform".
Saddled with nearly $35 billion in debt since acquiring
Allergan's Actavis generic drug business for $40.5
billion, Teva made a series of changes after Kare Schultz joined
as its new chief executive on Nov. 1.
Teva expects a restructuring charge from the plan in 2018 of
at least $700 million, mostly to come in the second and third
quarters and mainly related to severance costs. Additional
charges may follow decisions on closures or divestment of
plants, R&D facilities and office locations.
"A longer-term strategy will come later in the year,
however, in the near term we must remain focused on cash-flow
generation, short-term revenue and serving our debt," Schultz
said in a letter to employees.
Investors and analysts have questioned how Teva will be able
to service its debt in coming years.
In a conference call with analysts, Schultz said Teva would
use cash flow to pay down debt, initially focusing on bank debt.
"We do not plan to raise equity in any of the forms that you
imagine," he said.
The company also expects help next year from two new branded
products - its migraine drug fremanezumab and Austedo, which
treats abnormal, involuntary movements associated with
Some 1,700 jobs will be cut and a manufacturing site will be
closed in Israel, where the main labour federation threatened to
hold a half-day general strike on Sunday, the start of the
Israeli work week, in protest at the layoffs.
The government went into damage-control mode ahead of Teva's
announcement, including a telephone call from Prime Minister
Benjamin Netanyahu to Schultz, asking that he keep layoffs in
Israel to a minimum.
Economy Minister Eli Cohen weighed in, saying Teva's
employees should not pay for the company's failed investments
"Teva has succeeded thanks to grants and tax benefits it
received from the state and thanks to developments by Israeli
scientists," he said, adding: "We will fight for every
The company said dividends on convertible preferred shares
would be evaluated on a quarterly basis.
Teva will provide its 2018 outlook in February.
(Editing by Dale Hudson)
First Published: 2017-12-14 14:41:38
Updated 2017-12-14 16:52:54
© 2017 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.