UPDATE: N.J.’s $40M lures Teva HQ; Pa. refused to counter-offer
"Will retain a significant presence in Pennsylvania."
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Teva Pharmaceuticals USA will move its headquarters and consolidate top managers from North Wales, Montgomery County, to its facility in Parsippany-Troy Hills, N.J., a shift that will cost hundreds of jobs in Pennsylvania.
Gov. Murphy, who announced the move Thursday, lured the firm with a $40 million package of tax breaks. Teva USA, an arm of an Israel-based firm that is the world's largest manufacturer of generic drugs, has seen its stock price fall nearly in half as its main moneymaking drug lost its patent protection, and multibillion-dollar acquisitions left it mired in debt. Its latest chief executive, Kare Schultz, has announced a $3 billion plan to cut 14,000 jobs, a quarter of its global workforce.
Of 2,000 employees at its facilities in North Wales, Horsham, West Chester, Frazer, and New Britain, Teva will keep between 500 and 600 workers at its West Chester research facility and "100 plus" supporting operations and distribution in northeastern Pennsylvania, spokeswoman Elizabeth DeLuca said. She had no comment on the fate of the other Pennsylvania jobs. The company is shutting sites, shedding jobs, consolidating locations, and accepting New Jersey's tax breaks "to restore its financial security and stabilize its business," she said.
UPDATE 7/6: "Pennsylvania did not make an offer" to keep Teva, said Michael Gerber, spokesman for the state Department of Community and Economic Development. Noting that Teva has been cutting jobs and shutting sites worldwide "to alleviate financial struggles," Gerber said that "funding this project does not align with the basic economic development principles of responsibly using taxpayer dollars with strong accountability measures built in to foster true job growth in Pennsylvania." (END OF UPDATE)
Teva "will retain a significant presence in Pennsylvania," Brendan O'Grady, Teva's head for commercial operations in North America, said in a statement.
Murphy said the move would lure or save "more than 1,000 high-wage jobs" in Parsippany-Troy Hills, in Morris County, west of New York City and 85 miles from North Wales. Previously, New Jersey economic development officials had said that the state's tax incentives would save 232 existing jobs at the site and lure 833 other jobs from Pennsylvania..
The New Jersey Economic Development Authority (EDA) on June 12 approved tax breaks worth $4 million a year for each of the next 10 years for Teva to protect "jobs at risk" in a "priority area." New Jersey has targeted biotech as a growth area, built on the state's universities and its longtime role as a center for the drug industry, and as home to Johnson & Johnson and other pharmaceutical giants.
While Teva is best known as a maker of generic drugs; it has also acquired and sought to develop proprietary treatments to boost its profit margin. Its products include multiple-sclerosis treatment Copaxone and Huntington’s disease treatment Austedo. Last year, a federal appeals court delivered a major blow to the company, rejecting its claim of patent infringement for its latest version of Copaxone. The year before, the drug accounted for 19 percent of the company’s revenue.
Teva has retreated from Pennsylvania, where it once planned to be a significant employer. Teva in the early 2010s proposed, then discarded, a $300 million plan to build a giant distribution center at a former Budd Co. factory in Northeast Philadelphia.
Teva paid more than $40 million for the 138-acre former Budd train car site at One Red Lion Road in Northeast Philadelphia where it planned to build the warehouse complex, and promised thousands of construction jobs and hundreds of new, permanent jobs. Instead it sold the empty site for $18 million last year.
Murphy, like his predecessor Chris Christie, is using multimillion-dollar tax incentives to attract and keep employers in New Jersey. The state's practice of granting expensive relief on a case-by-case basis has stirred resentment by smaller businesses that have to continue paying taxes.
In his statement, Teva's O'Grady praised New Jersey as "a vibrant business hub and a dynamic life-sciences environment."
Teva shares have lately traded in the low $20s. The stock got a boost last winter when Warren Buffett's Berkshire Hathaway bought a large position, but shares remains far below its highs of over $60 a share in 2015 and 2016.
Teva grew to world prominence with an aggressive strategy of marketing generic drugs against the patented medicines produced by established manufacturers. But the company's $40 billion acquisition of Allergan's generic drugs division in 2015 left it with heavy debt and without immediate big gains in profitability. The company has been shutting factories to get costs more in line with sales.
Teva faces increased worldwide competition and uncertain future margins in the United States, where drug markups have been higher than in Europe and other developed areas, but where uncertainty over long-term government pricing guidelines has clouded prospects.
The company posted sales of $22.5 billion last year, up slightly from $22 billion in 2016.