3,000 job losses to help AZ maintain profits and invest in R&D
pharmafile | February 9, 2007 | News story | Sales and Marketing |Â Â AZÂ
AstraZeneca has indicated its plans to shed 3,000 jobs will mainly involve redundancies at its manufacturing facilities, in a renewed drive to improve the efficiency of its supply chain.
The company's chief financial officer Jonathan Symonds refused to go into details before employees had been consulted, but indicated that the company's supply chain business would be streamlined.
"There's quite a lot of logistical change that needs to be managed around the configurations of our manufacturing plants and where products are made and the supply chains that lie behind them," he said.
The cutbacks represent around 4.6% of the company's total workforce, and are aimed at guaranteeing investors continued high levels of profitability.
The company enjoyed a strong 2006 in terms of rising sales and profits, but is working hard to plug holes in its late-stage pipeline which could otherwise eventually spell a downturn in growth.
The company met forecasts for 2006 with a 28% rise in profits to $8.54 billion and an 11% rise in sales, thanks to sustained growth from its leading brands Nexium, Crestor and Seroquel.
Chief executive David Brennan said the company had achieved the exceptional rise in profits by pushing sales and marketing expenses down in 2006, while still finding funds to increase R&D spending by 15%.
As speculation increases about a new round of mergers and acquisition, Brennan was asked about the significance of its recently signed deal with BMS on two candidates for diabetes.
One, Saxagliptin, is currently in phase III and is in the same DPP-4 inhibitor class as Merck's Januvia and Novartis' Galvus, which is tipped as the next gold standard in oral diabetes treatment.
The other compound is Dapagliflozin, a sodium-glucose cotransporter-2 (SGLT2) inhibitor, which is currently in phase IIb development.
Brennan said: "They [BMS] had a couple of late-stage compounds that they were interested in partnering, both on the development and marketing-selling side. It made very good sense because it's a fit with one of our highest priorities.
"We have additional research going on in this area and we believe this will be a great entrance for us into the market, if both of these products make it to the market."
His measured response to the inquiry suggested AstraZeneca would not rule out a merger with the company.
"Our relationship with Bristol-Myers Squibb is really defined by this relationship across those compounds. Its a good relationship, and one that will be focused on what's best for that."
UK specialist pharma company Shire has been suggested as a good acquisition target for AstraZeneca, though there are no signs of any desire on either side for a link-up.
AstraZeneca has instead been spending its cash reserves on acquiring smaller biotech companies and in-licensing products. The company spent just over $900m on its collaborations, in-licensing deals and the acquisitions of KuDOS and CAT in the past year.
The CAT acquisition was particularly important for AstraZeneca, which wants biologics to make up 25% of its product portfolio by 2010.
The pharma company currently has 120 projects on-going across all phases of development, with five at phase III and 18 at phase II.
Dr Patterson, executive director of development, said the company's focus at phase II was on growing the number of really good molecules.
"They can come from outside or inside and, as long as they fit our overall portfolio, we don't mind which therapeutic area they're from. In fact, we'd quite like to see a broad spread of indications."
Last year, AstraZeneca undertook a review of its early-stage pipeline, which concluded that the company should boost its presence in some therapeutic areas but should stop operating in other areas altogether.
Dr Patterson said: "We've exited some areas, some of which have been core to the company in the past, like hypertension and lower gastrointestinal disorders."
Areas in which the company will expand its presence include diabetes, metabolism and infectious diseases.
The company took an early step towards this last month with a $100 million investment in its R&D centre near Boston. The centre focuses on infectious disease and cancer research and Dr Patterson said it had proved very productive for the company since its opening in 2000.
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