Teva restructuring puts R&D programs on the chopping block

Teva
Teva will lay off about 25% of its workforce across all of its businesses.

Teva Pharmaceutical has unveiled its restructuring plan—and it doesn't look good for R&D. 

The plan will address a number of key areas, including the closure or divestment of R&D sites, as well as an evaluation of the company's R&D programs, CEO Kåre Schultz said in a letter to employees. 

It is expected to affect a "significant number" of R&D facilities and other sites, Schultz said. Teva will also conduct a "thorough review of all R&D programs across the entire company," with an eye on prioritizing core projects and dumping others, while somehow "maintaining a substantial pipeline." 

RELATED: Teva to shutter Israeli R&D site in company reorganization 

All told, the plan will lead to 14,000 layoffs, about 25% of Teva's total workforce. Slated to start in 2018, the company will begin notifying affected employees over the next three months. Schultz did not detail the distribution of the job cuts, saying that "all businesses and regions will be affected."

Israeli Prime Minister Benjamin Netanyahu has asked Schultz to limit the layoffs in Israel to a minimum, Reuters reported

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With the restructuring, Teva aims to pare down costs, streamline the organization and boost business performance, profitability, cash flow generation and productivity, Schultz said. The company has had to downsize its guidance again and again thanks to generics pricing pressure and a pile of dealmaking debt

"These are decisions I don't take lightly but they are necessary to secure Teva's future. We will implement these changes with fairness and the utmost respect for our colleagues worldwide," he said. 

The two-year plan aims to cut Teva's costs by $3 billion by the end of 2019, from an estimated cost base of $16.1 billion for 2017. But the restructuring itself will end up costing the company at least $700 million in 2018, according to a statement. And the price tag could be even higher, depending on how many manufacturing plants, R&D sites and other office locations the company decides to shut or sell.