AstraZeneca is to slash 3,000 jobs after battling competition from generic manufacturers for its key heart drug Toprol XL.
The UK's second-largest drugs company said the cuts, which are to go from production and manufacturing over the next three years, were part of a broader strategy to improve productivity and cut costs.
David Brennan, the chief executive, would not be more specific on where the jobs would be axed geographically. They account for around 5 per cent of the group's global workforce of 65,000 and will result in charges of $500m to the company accounts. Last month, the US giant Pfizer announced it is to cut 10,000 jobs and the pressure is now on GlaxoSmithKline to throw its hat in the ring when it reports full-year results next week.
The big pharmaceutical firms are all feeling pressure from the sale of cheaper copies of their best-selling drugs as they come out of patent. AstraZeneca has also been hit by a series of late-stage pipeline failures which has led investors to question its long-term future.
However, the short to medium-term story remains positive. Yesterday, AstraZeneca delivered a strong set of results in line with City expectations, with pre-tax profits up 28 per cent to $8.54bn (£4.34bn) on sales up 11 per cent to $26.5bn. The main drivers of growth continue to be the company's five blockbuster products, including Seroquel for schizophrenia and the heartburn drug Nexium.
AstraZeneca's shares rose 2 per cent, up 63p to 2,903p, as the City welcomed the news of the job cuts.
Navid Malik, an analyst at Collins Stewart, said: "It's certainly good news for the industry - following Pfizer, Astra has now come forward. The cuts will help earnings growth."
However, he cautioned that the pipeline was still a major concern. "This won't help top-line growth," he said. "And as expected Toprol has taken a big hit."
Sales of Toprol fell 20 per cent in the fourth quarter after a copycat version was launched, and both Seroquel and Nexium have received patent challenges, raising questions over their future.
Jeremy Batstone, an analyst at Charles Stanley, said AstraZeneca's performance over the next five years was likely to be down to "aggressive cost containment, a continuing willingness to return value to shareholders and further investment in the pipeline".
Mr Brennan said rebuilding the pipeline, considered the poorest among its European peers, is his number one goal. AstraZeneca has been snapping up companies and signing licensing deals to try to bolster its position. Yesterday, it unveiled plans to buy the London-based antiviral specialist Arrow Therapeutics for $150m. This came a day after the group announced licensing deals worth a potential $800m to expand its presence in respiratory and obesity medicine.
Mr Brennan would not be drawn on speculation that the company was considering a move on Bristol-Myers Squibb after agreeing a deal to sell two of its diabetes drugs. Bristol is said to be considering a merger with Sanofi-Aventis.
Investors are now looking to March for news on AstraZeneca's experimental heart drug AGI-1067. Make-or-break clinical trial results are due then and Mr Brennan said it was a "high-risk, high-reward product".Reuse content