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Teva Pops on Layoffs

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Teva Pops on Layoffs

Shares of Teva Pharmaceuticals (NYSE:TEVA) traded higher by more than 2 percent on Thursday morning following some positive headlines. The company found itself atop many financial media headlines when it announced it would be executing its planned cost cutting procedures. Over the last year management has hinted at cost cutting, and as a result the company will be letting go 5,000 of its employees, roughly 10 percent of the total workforce. These cuts come as part of “steps to accelerate the reduction of costs and to optimize its structure and processes.” Most of the layoffs will be completed by the end of 2014.

Management had this to say about the decision “Most of the layoffs will be outside Israel. Later this year, we will specify which programs we’ll invest in. We’ll give many more details about what we’re doing at the end of the year. This year, we’ve saved $300 million.”

Teva’s biggest challenge going forward is its competition against its multiple sclerosis treatment, Copaxone, and the expiration of its patent in 2014. In recent years the specialty business segment has been the only driver of growth with Copaxone leading the way. However, the loss of Copaxone revenues would be dire for the company’s valuations, profit, and revenue. Some analysts on the street have attempted to quantify the importance of Copaxone for the company. Roughly 50% of the profit can be attributed to this treatment alone. Moreover, a newer version of the drug, created by competition allows patients to avoid injectable treatment.

It will be interesting to hear analyst commentary following this announcement. Going into the end of the year, many expect a number of competing firms to voice their plans to compete with Copaxone. Early in the session, at the time of this writing, shares sat at $40 even per share.

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