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Teva to close 11 plants in $2bn cost-cutting plan

By Fiona BARRY , 07-May-2014

Teva workers in the granulation department

Teva workers in the granulation department

Teva will close eleven of its manufacturing plants and is considering shutting another 16 as part of a campaign to cut annual spending by $2bn (€1.4bn).

Plans to “close or divest” the initial eleven sites are already underway and will see the Israeli generics company move production to its lower-cost facilities, said its CEO Erez Vigodman in a call with investors.

The closures are part of a plan to drastically cut annual spending by $2bn by 2017. The firm is on track to reduce its gross expenses by $1bn by the end of 2014, it told analysts, and has already saved $600m since 2012.

Denise Bradley, VP of Global Corporate Reputation, told us the company operates 50 finished dosage pharmaceutical plants worldwide, with another two under construction. Bradley did not comment on which were due to close, although the company has previously confirmed it will sell its manufacturing facilities in Sellersville, Pennsylvania and in Irvine, California .

The firm plans to sell its Irvine site to a buyer who can “operate as a contract manufacturing organization producing supply for Teva,” it told our sister site last year. This time however the company did not answer questions about whether the eleven manufacturing closures would lead to a greater culture of outsourcing.

Teva told last year it planned to cut 5,000 jobs – approximately 10% of its workforce – in 2014 as part of its cost reduction programme.

Plans to ‘terminate’ products

As well as plant closures, Vigodman told analysts the company has launched an “operational excellence plan” to increase the competitiveness of remaining plants and “fully integrate them into the network.

A third arm of the cost-cutting project, he said, would focus on the Teva’s generics assets. The company is assessing the market and its own portfolio to decide with products “to terminate,” he said. The firm also plans a “strategic revamp” of its API business “to return to sustainable, solid growth,” it said in an accompanying presentation to investors.

Teva’s generics business saw revenues of $2.3bn for Q1, an increase of 3% from the same period last year. Its gross profit increased 10%.

Vigodman, who became CEO in January this year, has continued the cost-cutting programme first implemented by his predecessor, Jeremy Lin, after the latter’s resignation last October.

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