Israel's government urged Teva Pharmaceutical Industries Ltd., the country's largest company, to bring jobs and operations back home while signaling its willingness to aid in a rescue of the beleaguered drugmaker.
The company has an obligation to Israel because of the special tax benefits it's enjoyed over the years, according to a statement Monday from Economy Minister Eli Cohen. Government officials have in recent days successfully pressed Teva to delay 350 job cuts in its home market until after the Jewish holidays in October, and are asking the Petach Tikva, Israel-based company to consider paring costs by targeting the management rather than rank-and-file staff. The company's North American headquarters are in North Wales.
"Teva's Israeli workers don't need to pay the price for failed investments abroad," Cohen said in the statement, after speaking to the drugmaker's interim chief executive officer Yitzhak Peterburg. "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."
The Israeli government's hints about potential support for a rescue plan may cheer investors, though its intervention in the proposed job cuts adds another level of complexity for Teva, already under pressure to pay down $35 billion of debt and revive growth. The company lowered its profit forecast and slashed the dividend last week, while warning that it may breach debt covenants this year if the cash balance doesn't rapidly improve and it fails to raise enough funds from asset sales. Teva shares and bonds have plummeted.
A spokesman for the drugmaker didn't immediately respond to requests for comments.
Teva is looking to lower costs as it struggles to pay back debt following the acquisition of Allergan PLC's generic drugs unit for $40.5 billion last year. The company has said that by the end of the year, it will have eliminated 7,000 jobs globally, or about 12 percent of total headcount, from the time the Allergan deal closed in August 2016.
The planned cuts in Israel represent just five percent of the total for Teva, one of Israel's largest employers with 6,863 workers at the end of 2016. The company assured Cohen it would delay some of the job cuts, and that most reductions would come through a voluntary retirement plan instead of firings.
A domestic environment that fosters innovation allowed the firm to become the world's largest maker of generic medicines, the minister said.