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AstraZeneca axes 7,300 jobs as growth stalls

LONDON (iBBC News) - AstraZeneca is cutting a further 7,300 jobs and expects earnings to fall this year as patents on key drugs expire and governments in Europe and the United States squeeze prices.

Britain's second-biggest drugmaker said on Thursday the latest phase of cost cutting would deliver an extra $1.6 billion in annual benefits by the end of 2014. It will cost $2.1 billion to implement.

The Anglo-Swedish drugmaker faces loss of exclusivity on many of its top-selling drugs over the next five years and has few obvious replacements in its pipeline.

The antipsychotic medicine Seroquel, its second-biggest drug, will lose exclusivity in the United States in March and also goes off patent in European countries this year.

As a result, Chief Executive David Brennan has been shrinking the business. "The further expected losses of market exclusivity make for a challenging 2012 outlook," he said.

The lack of obvious replacements for products like Seroquel and heartburn treatment Nexium, as well as top-selling heart drug Crestor which goes off patent in 2016, has triggered speculation AstraZeneca may need to make a big acquisition.

Following the poorly received purchase of MedImmune in 2007, the company has so far eschewed another large deal. But that strategy could be up for review, especially with the group casting around for an outsider to replace current chairman Louis Schweitzer.

Doubts about AstraZeneca's future have grown since a double blow to its new drug pipeline in December when it scrapped an ovarian cancer drug and took a big writedown on an experimental antidepressant.

Its existing cardiovascular business is also uncertain, with new drug Brilinta off to a slow start and cholesterol fighter Crestor facing more competition following the arrival of cheap generic copies of Pfizer's market-leading Lipitor.

AstraZeneca now expects recently launched products and the pipeline to contribute $2-4 billion to sales by 2014, down from $3-5 billion estimated a year ago.

Despite the challenges, AstraZeneca is committed to returning cash to shareholders and the company announced it planned to buy back $4.5 billion in shares in 2012.

Core earnings this year, which exclude some items, are forecast by the company to be between $6.00 and $6.30 a share, down from $7.28 in 2011.

In the fourth quarter of 2011, earnings rose 16 percent to $1.61 per share -- broadly in line with analyst expectations of around $1.60 -- on flat sales of $8.66 billion. Profit was buoyed last year by an unusually low tax rate.

Analysts, on average, had forecast sales in the quarter of $8.55 billion, according to Thomson Reuters I/B/E/S.

Drug stocks have outperformed the broader market in recent months, with investors attracted by their healthy dividend yields, but growth is elusive for many of the big firms.

Pfizer, the world's biggest drugmaker, reported a sharp fall in quarterly earnings two days ago and trimmed its 2012 forecasts, while European rival Novartis also said it expected lower profitability this year.
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