Sector News

Teva CFO: We’re looking to grow sales, not slash and burn costs

September 10, 2014
Life sciences
You can rest easy, Teva workers–your jobs are safe, according to CFO Eyal Desheh. On Monday, he told listeners at the Morgan Stanley Global Healthcare Conference in New York that the Israeli drugmaker has no new plans for major cutbacks.
 
“I want to be very careful because this is a major managerial challenge: Reduce your costs, become more efficient, and at the same time grow the business and enter new areas,” he said, as quoted by the Philadelphia Inquirer. “That’s a little bit contradictive. I think we can do both, but another cost-cutting round will be counterproductive to growth.”
 
The statement follows an earlier round of job-cutting, announced last October, that touched off protests throughout Teva’s home country and led to the exit of then-CEO Jeremy Levin. After announcing plans to lay off up to 5,000 people, or about 10% of its workforce, in a bid to slash $2 billion from its annual costs by 2017, Teva saw Levin depart amid a board squabble that spurred its own backlash from shareholders.
 
So without jobs on the block, how does the generics giant plan to hit that cost-savings target? The way Desheh sees it, the company can still lean on its plans to squeeze out $1 billion by changing up procurement. Previously, every small unit within the company did its own purchasing, a practice he called “inefficient.”
 
“Right now, we spend about $10 billion a year buying from others–all kinds of stuff,” he said. “Materials, machines, finished products–not a lot but some–services, rent, you name it. Everything we spend, other than royalties and cost of labor, we consolidated under one head of global procurement.”
 
Cost pressures, like the rest of Teva’s woes–the patent battle over lead product Copaxone, rebel investor pressure for a board revamp–won’t disappear overnight. And even when they do, Desheh cautioned, don’t look for a decrease in total spending. By 2017 or 2018, he hopes to see a stronger company growing, he said.
 
By Carly Helfand
 

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