Almost 15,000 jobs are set to go at the world's largest generic drugmaker as Israel's Teva takes drastic steps to address its massive debt.
The world's largest generic drugmaker will cut its workforce by more than a quarter, give up many of its manufacturing plants and suspend its dividend on ordinary shares to help pay back its massive debt.
Israel-based Teva Pharmaceutical Industries said on Thursday the move will result in a reduction of 14,000 positions globally, with the majority to come in 2018.
The two-year restructuring plan is intended to reduce Teva's cost base by $3 billion (A$3.9b) by the end of 2019, out of an estimated cost base for 2017 of $16.1 billion.
Shares in Teva were up 14.6 per cent at $18 in New York, but are down 53 per cent since January.
Investors will like this plan as most are focused on the near-term cost cuts and not the business outlook, Wells Fargo analyst David Maris said.
"However, in our view, the new CEO's $3 billion cost-savings goal is larger than we had anticipated, and while this is more needed for survival versus optimisation, it may also have significant negative effects to Teva's competitiveness," said Maris, who rates the shares "market perform".
Saddled with nearly $35 billion in debt since acquiring Allergan's Actavis generic drug business for $40.5 billion, Teva made a series of changes after Kare Schultz joined as its new chief executive on November 1.
Teva expects a restructuring charge from the plan in 2018 of at least $700 million, mostly to come in the second and third quarters and mainly related to severance costs.
"A longer-term strategy will come later in the year, however, in the near term we must remain focused on cash-flow generation, short-term revenue and serving our debt," Schultz said in a letter to employees.
Some 1700 jobs will be cut and a manufacturing site will be closed in Israel, where the main labour federation threatened to hold a half-day general strike.
The government went into damage control ahead of Teva's announcement, including a telephone call from Prime Minister Benjamin Netanyahu to Schultz, asking that he keep lay-offs in Israel to a minimum.