AstraZeneca IS set to slash 8,000 jobs over the next five years as a number of its profitable medicines lose patent protection and governments put increased pressure on big pharmaceutical companies to cut prices.
The new cuts follow the loss of 12,600 roles at the group since 2007. The company, the UK's second biggest drug maker, said the jobs cuts would be made over the next five years, and would affect its operations across the world.
Announcing AstraZeneca's 2009 results yesterday, the chief executive, David Brennan, refused to speculate about where the cuts would be made, saying that he needed to consult with affected employees before giving further details. He did, however, say that the company's research and development, and its sales and marketing arm would bare the brunt of the job losses. He added that with about 50 per cent of the group's staff working in Britain, Sweden and the United States, he expected a number of the redundancies to be made in those countries.
AstraZeneca has sites in Macclesfield in Cheshire, Alderley Park, Loughborough, Bristol, Luton and London.
The job losses come as part of a wide-ranging restructuring programme, which will last over the next five years.
As part of the changes, the company announced a new progressive dividend policy. The Anglo-Swedish group said that its 2009 dividend would be 12 per cent higher than last year. In a further fillip for shareholders, AstraZeneca is also planning a $1bn share buyback programme, reflecting, it says, the group's strength and confidence.
"The board recognises that some earnings fluctuations are to be expected as the company's revenue base transitions through this period of exclusivity losses and new product launches," AstraZeneca said in a statement. "The board's view is that the annual dividend will not just reflect the financial performance of a single year taken in isolation, but reflect its view of the earnings prospects for the group over the entirety of the investment cycle."
Core operating profit jumped by 24 per cent to $13.6bn in 2009, while revenues were up 4 per cent to $32.8bn and earnings per share jumped 22 per cent. The group added that it expects restructuring costs of around $2bn, and to realise annualised cost savings of some $1.8bn, by 2014.
The company conceded that the drugs industry faces a "challenging" next five years. Mr Brennan said that the loss of exclusivity on the breast cancer drug Arimidex and the asthma medicine Pulmicort Respules would squeeze revenues, but was confident it could grow market share for medicines that retain patent protection. The industry is also likely to face demands for cheaper drugs from governments, especially as countries pare back public spending in the wake of the global recession.
AstraZeneca is expecting revenues of between $28bn and $34bn in each of the next five years, from existing drugs, pipeline projects, and licensing and outsourcing deals. Simon Louth, AstraZeneca's finance director, said that the global biopharmaceutical industry can grow at least in line with real GDP over the next five years.
Several analysts were more cautious about the company's longer-term outlook, pointing in particular to litigation over the cholesterol treatment Crestor, which increased sales by 29 per cent last year.
"AstraZeneca, our least favoured stock, faces a series of significant patent expiries and challenges throughout our forecast period," said Jeffrey Holford, an equity analyst at Jefferies International. "Whilst resurgent Crestor growth, pipeline delivery and cost savings may help offset some of the impact, we see a meagre earnings of minus 6.5 per cent (between 2009 and 2014) versus plus 4 per cent for the sector."
Shop Direct to close three call centres
Shop Direct, the home shopping retailer, capped a miserable day for the UK jobs markets by "proposing" to close three call centres, putting 1,500 jobs at risk.
In the latest restructuring of its workforce over recent years, the owner of Littlewoods said it was responding to more customers choosing to shop online, as opposed to over the phone, with the contact centre closures. Shop Direct said it will begin a 90-day consultation with the affected staff and their union representatives.
Following strong festive trading, the group revealed it will exceed its target of 70 per cent of its sales online by 2010/11. The multichannel retailer said that less than four years ago its call centres took 33 million calls, but this has now shrunk to 19 million.