One Drug Patent Gone, 5,000 Layoffs Ahead

Faced with a looming patent expiration for its biggest-selling drug, Teva Pharmaceuticals (TEVA) is accelerating a $2 billion cost-cutting plan that was begun less than a year ago by cutting 5,000 employees, which amounts to roughly 10 percent of its global workforce.

Teva shares have fallen from a 2010 peak, as revenue has plateaued and profit has declined.

TEVA Chart

TEVA data by YCharts

The drugmaker also intends to take other, unspecified steps that involve “selective trimming of assets that no longer fit its core business or are not critical to its future,” and “scale down oversized parts of the company,” according to a statement.

The move comes less than three months after a U.S. court invalidated the 2015 patent on Teva's Copaxone multiple sclerosis drug. The decision means patent protection for the drug, which generates about half of company earnings and dominates the MS market, may prevent rivals from selling lower-cost versions of the injectable drug only until next year.

Teva, meanwhile, is appealing the decision. Copaxone had second quarter sales of $1.07 billion, up 9% from $982 million a year earlier.

With the big selling drug, Teva’s productivity, as measured by revenue per employee, has grown in recent years, but would come under pressure with the patent expiration.

TEVA Total Employees Chart

TEVA Total Employees data by YCharts

Across the pharma industry, as companies have seen patents expire on blockbuster drugs -- and company labs have failed to produce enough new medicines -- layoffs of drug reps and others, as part of broad cost-cutting plans, have been the result.

To read the remainder of this article, go to Pharmalot.

Ed Silverman, a contributing editor of YCharts, is the founder and editor of Pharmalot. He previously reported on the pharmaceutical industry and other business topics for the Star-Ledger of New Jersey, New York Newsday and Investor’s Business Daily. He can be reached at editor@ycharts.com. Read the RIABiz profile of YCharts. You can also request a demonstration of YCharts Platinum.

Read more articles about: Company Analysis  pharma stocks   

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