Teva Pharmaceutical Industries Ltd. told the 14 employees at its Kutztown warehouse last month that the facility would close as part of a previously announced cost-cutting plan. On Monday, the drugmaker's chief financial officer said there were no new plans for major cutbacks.
Facing pressure from investors and financial analysts, Teva said in 2012 that it would cut $1.5 billion to $2 billion in annual costs to help boost its profits and stock price. But investors have been anxious to see the results, and a disagreement between the board of directors and then-CEO Jeremy Levin on how to implement cuts led to Levin's departure.
"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," chief financial officer Eyal Desheh said Monday at the Morgan Stanley Global Healthcare Conference in New York in response to the question of whether Teva would cut more. "That's a little bit contradictive. I think we can do both, but another cost-cutting round will be counterproductive to growth."
Teva is based in Israel but has several facilities in New Jersey and Pennsylvania, and its Americas headquarters is in North Wales, Montgomery County.
As part of the earlier round of cuts, Teva had said it would reduce its workforce by 5,000 people, or about 10 percent. Levin had said Teva had too many facilities from past corporate acquisitions, and he hired Carlo De Notaristefani to fix operations. (De Notaristefani remains part of the leadership.)
As announced earlier, Desheh said Monday that about 12 of Teva's 74 worldwide facilities are being closed or sold.
In May 2013, Teva said it would close its manufacturing plant in Sellersville, Bucks County, by 2017. The Sellersville plant was down to 406 employees, as of Dec. 31. Work was shifted to a Virginia plant.
A Teva spokeswoman said Monday that the Kutztown employees can apply for other jobs within the company. Six more positions are being added at the warehouse in New Britain, Bucks County, to accommodate increased activity there.
Desheh said Teva hopes to get $1 billion of savings just from the way it buys supplies and services.
"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, and she sits in New Jersey and manages our operation."
Lisa Martin joined Teva in April 2013, about the time she won an award from the Institute for Supply Management. Martin worked for drugmaker Warner-Lambert and then Pfizer after it bought Warner-Lambert in 2000.
Desheh said that Martin's group might take three or four years to fix the problem because existing contracts have to be completed or renegotiated - and that the total spending won't be less in 2017 or 2018 because he hopes a stronger company will grow.
"Every country, every small unit in Teva did their own purchasing, which is inefficient with leveraging," Desheh said. "You don't have the right methodologies sometimes or people are not the most professional in doing that. That is a big piece."