(Updates with analyst comment in 11th paragraph.)
March 21 (Bloomberg) -- AstraZeneca Plc plans to cut 2,300 sales and administrative jobs and narrow its drug research focus in a bid to return to growth as patents on its best-selling medicines expire.
AstraZeneca will concentrate on respiratory, inflammation and autoimmune diseases, cardiovascular and metabolic illnesses, and cancer, the London-based drugmaker said in a statement today before a briefing for investors on new Chief Executive Officer Pascal Soriot’s strategy for the company. It also plans to double the number of experimental treatments in late-stage development by 2016.
The job cuts are in addition to 1,600 research positions that the company, the U.K.’s second-biggest drugmaker, said on March 18 it would eliminate. Including a February 2012 plan to cut 1,150 posts, AstraZeneca has announced the elimination of 5,050 jobs in 13 months. The company is trying to recover from setbacks in developing treatments for rheumatoid arthritis, cancer and depression.
“I’m disappointed because Pascal didn’t see a need for a quick fix,” such as an acquisition, Fabian Wenner, an analyst with Kepler Capital Markets SA in Zurich, said in an interview today. “They’re confident in their existing pipeline assets and see no need for diversification. All the others are going for diversification because it takes the pressure off the R&D engine, which at AstraZeneca is broken.”
The three sets of job cuts will lead to $2.3 billion in one-time charges, of which $1.7 billion will be cash expenses, the company said today. Benefits of about $800 million a year are expected by 2016, the company said. AstraZeneca employed about 51,700 people on Dec. 31.
AstraZeneca rose 0.5 to 3,056 pence at 9:36 a.m. in London, giving the company a market value of 38.1 billion pounds ($57.7 billion).
Analysts have speculated that Soriot, who joined the company in October, will need to make a big acquisition to jump- start growth at the company. Soriot said in an interview this week that AstraZeneca plans to return to growth through its own research and smaller acquisitions, though he wouldn’t rule out larger deals if the opportunity arises.
AstraZeneca reached an agreement with Moderna Therapeutics Inc. to develop cardiovascular, metabolic and cancer drugs using Moderna’s messenger RNA technology for an upfront payment of $240 million, it said separately today. AstraZeneca also signed a deal with Sweden’s Karolinska Institutet to study cardiovascular, metabolic and regenerative medicine in Stockholm.
AstraZeneca will continue to be active in infection treatments, vaccines and neurology drugs, “though our investments will be more opportunity-driven,” the company said.
“As we focus, accelerate and transform our business, we know that our success will ultimately be measured by the quality of execution,” Soriot said in the statement.
The company expects to “significantly exceed” the average market forecast for revenue of $21.5 billion in 2018. AstraZeneca is “confirming a sustained period of revenue decline in the short-to-medium term,” as 2018 appears to be “a world away,” Navid Malik, an analyst with Cenkos Securities Plc, wrote in a note to investors today.
A management shakeup in January led to the departure of AstraZeneca’s head of research and development and its most senior executive for worldwide sales and marketing activities. Soriot divided research into three parts and said drugs made from human cells, known as biologics, which account for almost half the pipeline, should be a platform for growth.
AstraZeneca also will move its headquarters to Cambridge, England, and focus research and development at three sites, the company said March 18.
Soriot replaced David Brennan, who retired in June after setbacks in coming out with new medicines. Among the disappointments were an experimental antidepressant called TC-5214, which failed two late-stage trials, and the diabetes drug dapagliflozin, which didn’t win backing from the U.S. Food and Drug Administration.
--With assistance from Albertina Torsoli in Paris. Editors: Kristen Hallam, Thomas Mulier