Stock rally

The company’s shares jumped as much as 19 percent in Tel Aviv, trimming losses for the year to 52 percent, in a sign investors are optimistic the turnaround plan will help reduce Teva’s $35 billion debt burden. The company’s stock in New York also rallied.

Schultz said his top priority is to bring its leverage below 4 times Ebitda, or earnings before interest, taxes, depreciation and amortization, by the end of 2020. The ratio was 4.7 last quarter. The proposals include paying down $4 billion of bank loans within a “relatively short” period, he said.

"The cuts are larger and more rapid than what had been anticipated," Vamil Divan, a New York-based analyst at Credit Suisse Group AG, wrote in a note to clients. Given Schultz’s track record, "investors will also be willing to give him the benefit of the doubt that he will be able to successfully execute on this.”

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The job cuts will affect about 14,000 employees worldwide, including 1,700 positions in Israel over the next two years. Teva will also shut a number of research facilities and exit some unprofitable products, while raising prices on other medicines.

‘Vigorous measures’

“Without taking vigorous measures, Teva may become a target for financial institutions or activist entities with an interest, and the risk is real,” Mark Sabag, Teva’s head of human resources, said in a letter to workers in Israel.

From the get-go, Schultz -- who signed on for the job after receiving an offer of $40 million in cash and stock -- showed he means business. Within days of joining on Nov. 1, he oversaw a management shakeup and announced plans to reorganize its generic and branded drug businesses into a single, streamlined entity.

Teva has been struggling since it paid almost $41 billion last year to acquire Allergan Plc’s generics unit because the deal failed to yield the sales boost Teva’s previous CEO Erez Vigodman promised it would. Compounding the problem is the loss of its monopoly on Copaxone, the multiple sclerosis injection that at one point generated half of Teva’s profits.

The company, whose expenses will total $16.1 billion this year, said most of the cost reduction will take place in 2018. Teva will also record a restructuring charge of at least $700 million.

Hiring Schultz was a departure from more than a century of tradition for Teva, which had until now only hired Jewish men for the top job. At Lundbeck, Schultz cut about 17 percent of the workforce and oversaw a $480 million restructuring and brought a number of new medicines to the market.

“We are taking immediate and decisive actions to reduce our cost base across our global business and become a more efficient and profitable company,” Schultz said.

Instant Insights /

Leading pharmaceutical company to cut 25 percent of workforce

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