Teva (TEVA) is restructuring its operations after a loss of exclusivity (“LOE”) for Copaxone, its blockbuster multiple sclerosis drug. Certain layoffs and plant closings are creating a backlash in Israel where Teva has many of its operations:

Israel’s main labor federation intends to take labor or legal action against Teva Pharmaceutical Industries (TEVA.TA) if the drugmaker does not suspend a decision to close a plant in the Israeli port city of Ashdod, it said on Sunday. Debt-laden Teva (TEVA.N), the world’s largest generic drugmaker and Israel’s biggest company, said last week that it would close the unprofitable plant in March 2019 after failing to find a buyer for the facility.

Half of the factory’s 175 workers could lose their jobs, while the other half could be out of work once the plant closes. Histadrut said the decision to close the plant was counter to Teva’s promise to retain most of its activities in Israel. Teva countered that  the plant’s activities were outside the company’s core operations.

The company has no choice but to restructure its operations. Prior to loss of exclusivity (“LOE”) to Mylan (MYL), Copaxone was 18% of Teva’s total revenue and half its EBITDA. Copaxone had estimated EBITDA margins north of 80%; a major revenue hit from generic Copaxone would punish Teva’s EBITDA and cash flow. The company’s Q4 revenue and EBITDA were down Y/Y by 16% and 29%, respectively. Once generic Copaxone fully kicks in things could get ugly.



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