Teva revamp will see manufacturing shake-up
pharmafile | December 17, 2012 | News story | Manufacturing and Production |Â Â Levin, Teva, manufacturingÂ
Teva’s recent announcement of a major restructuring of its business to cut costs and maintain profitability includes a revamp of its manufacturing network.
Last week, Teva’s new chief executive Jeremy Levin promised to find $2 billion in cost reductions, while setting aside a $10 billion war chest to fund acquisitions and licensing deals as it undertakes a top-to-toe review of R&D.
Among the measures that will be implemented to boost efficiency are a shift towards larger, more cost efficient manufacturing sites, and centralisation of the company’s procurement operations to help reduce raw material costs.
Teva’s operations division – spanning manufacturing and packaging of finished dosage forms, production of active pharmaceutical ingredients and procurement of raw materials – will absorb $1.5 billion of the total cost savings, according to the unit’s recently appointed president Carlo De Notaristefani.
At the moment, Teva operates 73 manufacturing facilities and has two more – in Russia and India – in the pipeline. While not commenting directly on possible site closures, De Notaristefani said that there will be an “an evolution of that network from west to east”, adding that “we will be supplying more and more of our products for the most cost effective locations in our network”.
He highlighted facilities in Eastern Europe – especially Croatia, Hungary, Czech Republic and Poland – that are competitive with low-cost producers in India in serving the European market.
The API business is set for major expansion, he added, as a reduction in the number of suppliers from China thanks to evolving environmental regulations – alongside new EU rules on API imports into the EU – are presenting new opportunities.
With regard to supply chain, De Notaristefani said that Teva will try to leverage its $9 billion procurement spend through the creation of a central procurement division that can negotiate high-level partnerships with a smaller number of strategic suppliers.
Getting better prices for raw materials and avoiding duplication could lead to savings of $400 to $700 million, he said. Meanwhile, savings will also be gained by improving efficiencies in logistics and warehousing, with a reduction in the number of facilities used and changes to the way “we take product from the plant and bring it to the customer”.
Teva needs to revitalise its business as it faces increased competition for flagship product Copaxone (glatiramer acetate) for multiple sclerosis, which recorded sales of $2.94 billion in the first nine months of 2012 but is seeing competition from newer drugs and is due to lose patent protection in 2015.
Copaxone is already in a competitive category and this is expected to intensify now that orally-active drugs such as Novartis’ already-marketed Gilenya (fingolimod) and Biogen Idec’s BG-12 are emerging as rivals to the previous generation of injectable drugs.
Pressure on Copaxone is one factor behind Teva’s recent announcement that it expects to post a small decline in 2013 profit and revenues compared to 2012.
Phil Taylor
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