Israeli officials have successfully convinced Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) not to carry out its planned 350 job cuts.
A report released by Bloomberg revealed on Sunday that the company was planning to slash roughly 350 jobs in Israel which is its home country. However, Israeli officials called on the firm to delay the job cuts. The country believes that it is better for Teva to slash some of the managerial positions as part of its cost cutting strategy rather than firing lower ranked employees. Teva is the largest firm in Israel and it regularly receives tax incentives.
The request for the company to put the job cuts on hold highlights the Israeli government’s interest in the performance of the firm as well as its interest in protecting employees. Letting go of 350 employees is a bold move for the company and one that would be tough not only on the fired employees but also on the government.
“Teva’s Israeli workers don’t need to pay the price for failed investments abroad. The Ministry of Economy will discuss with the company the return of activity to Israel and help it get out of the crisis it is in,” stated Economy Minister Eli Cohen.
Despite agreeing to put the job cuts on hold, Teva desperately needs to find ways to bring down its costs. Cohen was talking about the company’s purchase of Allergan’s generics unit which took place in 2016. The purchase has plunged the company into a massive debt of $35 billion. The Israeli firm has even issued a warning to its investors to notify them that it will most likely breach its debt covenant with them.
Teva’s stock and bonds have tanked as a result of the unfortunate conundrum. The company is now facing pressure to come up with measures that will be friendly to its bondholders. David Risinger, an analyst at Morgan Stanley (NYSE:MS) stated that the risk of generics pricing pressure to Teva’s earnings and dividends were underappreciated. He also added that his firm expects Teva to continue underperforming based on the current situation.
Teva stock closed the latest trading session on Tuesday at $18.29.