Teva Layoffs Will Bring More Pain To An Already Fragile Company

11/27/17

Things are about to get worse for Teva (TEVA). Instead of the company offering up good news to its investors it has set the stage for more bad news. It is in the process of terminating a lot of employees in the coming weeks. This couldn't have come at a worse time, especially when the company is trying to get a handle on its earnings. What will also not help the company is the generic version of Copaxone eating into its market share for its own Multiple Sclerosis drug. Earnings have been in decline, and that won't change in the coming quarters. With all these reasons listed, it is why I believe Teva is still a great short opportunity.

Massive Layoffs

Teva is planning to cut about 10,000 employees in both the U.S. and Israel. That is a massive amount of people to be laying off. When you think about it in more detail, these layoffs will do nothing but hurt the company even more at a time when it is already fragile. Sure, cutting that many employees will greatly reduce operating expenses associated with the company. The problem is that cutting that many employees means a smaller sales force to push the current products for improved sales. In my opinion, it is counterproductive to eliminate that many employees. What I also don't like about this is that Teva won't just cut low level employees. They are planning to cut top level executives as well. According to a financial news website Calcalist, Teva plans to even remove its Chief Scientific Officer and President of Research and Development Michael Hayden. In my opinion, cutting the Chief Scientific Officer at a time like this is like the company wants to shoot itself in the foot. The reason why I believe that is because Teva's problem is not the employees or the executives that it employs. The problem with Teva is its business model. It needs to steer away from being a generics driven company, and head back to R&D development of new drug compounds.

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