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
The company plans to pour more than $500 million in additional funds into its active pharmaceutical ingredient (API) plant in Raheen, Limerick County, the country’s Industrial Development Agency (IDA) said. The new funding brings the company’s total investment in the site to 927 million euros ($1 billion).
“If in 2005 someone told you that two-thirds of our industry would be driven on the R&D side by emerging biopharma—it would be unthinkable. If one were to project that trend forward, what it would suggest is that we could have a day when we do this talk, say in 2027 or 2028, where 80% of the industry’s pipeline is coming from emerging companies.”
The German healthcare and agrochemicals giant told Reuters that in future its pharma pipeline will focus on cardiovascular disease, neurology, rare diseases and immunology, while de-emphasizing women’s health, a field it first focused on with the acquisition of the former women’s health specialist Schering in 2006.
