Teva's Shrinking U.S. Footprint
Teva Pharmaceuticals, Inc. has made more cuts in the United States, this time to real estate holdings. To save money the company will close its offices in Washington, D.C. and New York City. No jobs were reported to be lost from the cuts.
During a meeting with Teva management and investors in Israel Thursday, new Chief Executive Officer Kåre Schultz confirmed the closures, reported Calcalist, a financial publication based in Israel. Schultz said the New York offices were expensive to maintain and the Washington, D.C. office was primarily used for its lobbying efforts. Teva is part of the Generic Pharmaceutical Association, a trade group that lobbies on behalf of the company. Because Teva has access to those trade group lobbyists Schultz said there was no need for the company to pay for office space in Washington, D.C., according to Calcalist. There was no mention of how much money the company will save by shutting down those two spaces. Nor was there any mention if Teva employees may lose their jobs due to the closures.
Schultz took over the beleaguered Teva last year, which is struggling with diminishing generic sales in the United States, challenges to its lead branded MS drug Copaxone and more than $30 billion in debt. The majority of that debt came from Teva’s acquisition of Actavis, the generic drug business of Allergan for $40.5 billion, which was done during the tenure of the previous CEO. To finance that deal Teva took on more than $30 billion in loans, Calcalist said.
In December Schultz pulled the trigger on a comprehensive restructuring plan that includes the elimination of 25 percent of the company’s global workforce, approximately 14,000 jobs, as well as the closure of a number of R&D facilities. Teva said the restructuring plan is intended to reduce Teva's total cost base by $3 billion by the end of 2019. The majority of the layoffs have happened or will happen, overseas, but some cuts have been felt here in the United States. Earlier this month BioSpace reported Teva cut 46 positions at a New Jersey facility. Those cuts followed news the company slashed 208 employees in neighboring Pennsylvania in January.
Teva is struggling to reduce its debt load. Calcalist noted that so far the company has trimmed about $3 billion, lowering its debt from $35.8 billion to $32.5 billion. The company is in the midst of divesting itself of non-core assets. At the beginning of February Teva said it completed the sale of a portfolio of products within its global women’s health business for $703 million in cash. The portfolio spans areas that include contraception, fertility, menopause and osteoporosis. In 2017 Teva sold its branded contraceptive line Paragard, a product within its global Women’s Health business, to CooperSurgical for $1.1 billion.
While the company is paring down excess, the immediate future is still a difficult one. Earlier this month Teva forecast a $2 billion loss of revenue over the next year. Part of that is due to challenges to Copaxone from rival companies like Mylan and Novartis and Momenta. Last fall the U.S. Food and Drug Administration approved a generic version of the MS drug manufactured by Mylan. Last week the FDA approved a second generic version of the drug made by Novartis AG and its development partner Momenta Pharmaceuticals, Inc.. In 2017 Copaxone generated $3.8 billion for Teva, but recent forecasts for 2018 peg the drug at earning $1.8 billion. That’s a significant loss. But there may be something of a silver lining. In his talk with investors, Schultz said they do not foresee any unexpected drops in Copaxone sales. Calcalist reported European sales should be stable “despite a certain erosion of prices.”