AstraZeneca takes axe to US operation

500 sales staff to lose jobs in fresh cost-cutting drive after failure of new drugs and disappointing sales
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The Independent Online

Astrazeneca is to cut almost 10 per cent of its US salesforce after the pharmaceuticals giantÆs disastrous 2004, when a string of new drugs failed or managed only disappointing sales.

Astrazeneca is to cut almost 10 per cent of its US salesforce after the pharmaceuticals giantÆs disastrous 2004, when a string of new drugs failed or managed only disappointing sales.

Around 500 jobs are being axed, in a move the company described as "adapting to US market conditions''. The number of sales people employed directly and through contractors will be cut to around 5,500.

The salesforce had been expanded in the past 18 months as AstraZeneca geared up to launch drugs including Iressa for cancer and the blood-thinner Exanta, neither of which will now be marketed.

It is understood that the reduction in staff will be made by cutting the contract sales organisation rather than direct employees. The company said it had been taken on in 2004, and the intention had always been to review the contract again at this point.

Last September, a US regulatory panel unexpectedly ruled that Exanta was too dangerous and not effective enough to be allowed on the market. And then last month, a large study of Iressa which was already on the market showed that it did not prolong the life of patients terminally ill with lung cancer, and the drug has not been actively marketed since.

In addition, Crestor, a cholesterol-lowering drug, launched a little over a year ago, has proved disappointing. A high profile consumer group is campaigning to have it banned and a senior scientist at the US regulator, the Food & Drug Administration, said there were potentially worrying side effects that needed more study. Sir Tom McKillop, chief executive, once promised to spend whatever it takes to win a 20 per cent share for Crestor in the global market for anti-cholesterol tablets, but its US market share has been stuck below 10 per cent.

AstraZeneca shares fell by 30 per cent last year as the disappointments mounted and investors accused Sir Tom of over-optimism. The company has been forced to re-examine its relationships with regulators and its own internal methods of assessing a drug s likely success.

Sir Tom has also launched a search for cost savings. Launching a root and branch review last October, he said : "The sales and marketing costs of pharmaceuticals has risen dramatically in recent years, and we have to consider more creative ways of reaching physicians, ways that are more cost effective and more time effective."

Selling and administrative expenses at AstraZeneca in the first nine months of 2004 amounted to $5.8bn, up from $4.9bn for the same period the previous year, with the bulk accounted for by the US sales force. The company in common with the rest of the drug industry spends twice as much on marketing as it does on research and development.

The reversal of AstraZeneca s salesforce build-up will be watched closely by its rivals . Drug makers are all looking for ways to improve the efficiency of their sales operations in the face of falling drug prices in the US. So far, only companies which have suffered specific setbacks appear to be announcing job cuts. These include Merck, which had to withdraw the painkiller Vioxx, and Bristol-Myers Squibb, which faces a string of patent expiries.

Analysts say full-year figures in a month s time will provide an opportunity to examine whether companies have begun to make savings and whether the first cuts are being made in research or in sales.

One pharmaceuticals analyst at a US investment bank said: Research is a company s lifeblood and they might all like to cut the salesforce. But as sales growth slows, the short-term economic response could well be to hire some more salesmen. Nobody wishes to give up the competitive advantage of a strong marketing voice .