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Drug giant cuts jobs, vows to speed up drug development.
AstraZeneca, whose pipeline woes have made it a poster child for the problems facing the industry, is cutting 3,000 jobs and redoubling efforts for quicker, cheaper drug development. But don't expect any announcements of quaking Pfizer-like reorganizations from the Brit-based company, which has already undertaken its "major transformation," according to Michael Zbinovec, an analyst at Fitch Ratings. The downsizing will affect less than 5 percent of the AstraZeneca's workforce compared to 20 percent of Pfizer's.
"We recognize the environment remains tough, as AstraZeneca and the rest of the industry face a strong headwind of patent expirations and the continuing pricing pressures from government and private payers," said CEO David Brennan during an earnings call. "We're taking these actions from a position of strength with our business growing."
AstraZeneca reported 11 percent sales growth and 28 percent operating-profit growth in the fourth quarter. Yet while its top-five products continued to outperform expectations, its pipeline is notoriously rusty. Recent high-profile failures included diabetes drug Galida (tesaglitazar), blood thinner Exanta (ximelagatran), and a Phase III stroke drug that marked the end of research into neuroprotection.
"Almost everyone in pharma is restructuring--that's one trend you'll see for a while," said Les Funtleyder, an analyst at Miller Tabak. "Maybe Pfizer's cuts offered some political coverage to the rest of the industry. There is a point where you can cut too much, but I don't think we're there yet."
Speed and cost are top priorities in the coming year, according to John Patterson, AstraZeneca's executive director of drug development. The company has set a goal to reduce its development time to a median of eight years, one of the fastest rates in the industry. This continues an acceleration that was 10 percent faster last year than in 2005, he noted. In addition, the company is both exploring more proof-of-concept studies in order to kill no-go projects faster and conducting more efficient clinical trials that are up to 60 percent smaller than usual.
AstraZeneca is also exiting development programs in therapeutic areas that were former growth drivers, like hypertension and gastrointestinal disorders. Instead it's ramping up in areas with more promising returns on investment like diabetes, respiratory, obesity, pain, and infection. It's also investing in biologics, biomarkers, and imaging.
The drug giant was also busy last week making deals, acquiring Arrow Therapeutics, which specializes in anti-infectives, and signing with Palatin Technologies to co-develop anti-obesity compounds.
"Costs have more than doubled, outputs are decreasing, you have a very conservative regulatory environment," said Arjun Bedi, a partner in Accenture's health and life-sciences practice. "Time is of the essence--the point of inflection has been reached."