Sector News

Wondering how Teva found room to cut $3B? Look at its past mistakes, CEO says

January 10, 2018
Life sciences

Since new CEO Kåre Schultz rolled out Teva’s $3 billion cost-cutting plan a few weeks back, “some have asked me, ‘how on earth is this possible?’” he said Monday at the J.P. Morgan Healthcare Conference.

One word: structure.

The company has had its generics, specialty meds and global staff functions—including human resources and communications—siloed, he said. And besides creating a situation where “very few people have had a good grip on the operating profit and the P&L,” that structure also resulted in a larger workforce than Schultz thinks was necessary.

Merging the three units into one “takes out two-thirds of management in some cases and simplifies the whole operation,” he said.

The fact that Teva has grown through acquisitions hasn’t helped, either. “Unless you’re very motivated to squeeze out costs and create synergies, you don’t necessarily consolidate everything,” Schultz noted, adding that it can be “very suboptimal from a cost-efficiency point of view as opposed to if you grow organically.”

Take manufacturing, for example: Teva probably needs just 2 to 4 API sites and between 8 and 12 functional manufacturing sites, he said. But today, the company has 80 sites.

All of that’s about to change, though, as Teva pushes forward with a cost-cutting plan that’s set to claim 14,000 jobs. While the plan has sparked nationwide labor protests in the company’s home country of Israel, Schultz reassured investors that it was “very firm” and would “definitely happen, so you don’t need to worry about that part of it.”

And there are other changes on the way, too—such as an increased focus on operating profit.

“Teva used to focus on maximizing revenue in the generics business believing that if you just maximize revenue, everything will fall into place and you’ll get great profitability and so on,” Schultz said.

But “that doesn’t really work from my point of view,” he said. “You always need to maximize operating profit.”

By Carly Helfand

Source: Fierce Pharma

comments closed

Related News

January 15, 2022

Colorcon Ventures invests in AI-Driven bio-simulation company VeriSIM Life

Life sciences

Colorcon Ventures, the corporate venture fund of Colorcon Inc., has invested in VeriSIM Life, a San Francisco-based startup with a digital bio-simulation platform that accelerates drug development and reduces animal testing.

January 15, 2022

A record number of biotechs are going public. Here’s how they’re performing.

Life sciences

Initial public offerings have fueled biotech’s boom. Keep track of them as they happen with this database. Which biotechs create value over time, and which fail? What types of companies are generating the best returns? Who are their top investors? Biopharma Dive is tracking these details in the database which will be updated regularly.

January 15, 2022

Sanofi cuts ties with Sangamo, sharpening focus on ‘off-the-shelf’ cell therapy

Life sciences

Sanofi has ended a long-running alliance with Sangamo Therapeutics to develop genetic medicines for inherited blood disorders, among them an experimental sickle cell disease therapy that is in early clinical testing.
The two have been developing complex, personalized treatments, led by a sickle cell drug known as SAR445136. But Sanofi is now more interested in off-the-shelf approaches, which are meant to be more convenient.

Send this to a friend