Shares in Teva Pharmaceuticals (NYSE:TEVA) climbed 12% this morning after the company announced it plans to cut more than a quarter of its global workforce, suspend its dividend and shut down research facilities and factories.
The drug-maker, which appointed a new CEO and management team this year, is looking to restructure and pay down debt.
“Two weeks ago we announced a new organizational structure and executive management team. Today we are launching a comprehensive restructuring plan, crucial to restoring our financial security and stabilizing our business. We are taking immediate and decisive actions to reduce our cost base across our global business and become a more efficient and profitable company,” president & CEO Kare Schultz said in prepared remarks.
The two-year plan is designed to cut Teva’s total costs by $3 billion by the end of 2019, out of an estimated $16.1 billion for 2017, the company reported today. Teva added that it plans to meet more than half of that reduction by the end of next year.
As a result of implementing its restructuring plan, the company is expecting a charge of at least $700 million, mostly due to severance costs.
“I am aware that we will be parting with people who have dedicated years and contributed a great deal to this company and I deeply
appreciate their commitment. We are also aware that these changes impact not only our workforce, but vendors, suppliers and communities where we have played a key role for years,” Schultz wrote in a note to Teva employees. “However, there is no alternative to these drastic steps in the current situation.”
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