AstraZeneca to cut a further 4,600 jobs as costs keep rising
Friday, 27 July 2007
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The Anglo-Swedish drugs giant AstraZeneca is to cut a further 4,600 jobs, taking the total cuts in its restructuring programme to 7,600, 10 per cent of its workforce, and sending costs spiralling. Most of the jobs will go from administrative and data-handling, although some research scientists will also face the axe.
The company announced 3,000 job cuts in February, and the restructuring costs led to a 10 per cent fall in second-quarter pre-tax profits. The chief executive, Dave Brennan, said: "We have made a series of announcements on restructuring since February and there is no specific number or geographical location [for the job cuts] and we are still in the process of talking to unions. This restructuring will mean we can operate more efficiently and improve profitability across the group."
Other job losses are likely to come from marketing, sales and a streamlined global regulatory function. The restructuring is forecast to net $900m (£439m) of savings by 2010, but costs are so far running well ahead of previous estimates. The company originally expected to spend £500m on restructuring, but told investors yesterday that the cost would be $1.6bn, approximately 60 per cent more. As a result, the company announced second-quarter pre-tax profits of $1.99bn, well below the $2.21bn the company reported for the same period last year. The fall in profits came despite a 10 per cent rise in total sales for the quarter to $7.3bn.
Some of the job losses will occur at MedImmune, the Maryland-based biotechnology group AstraZeneca acquired in April for $15.2bn. Although MedImmune made only a partial contribution to yesterday's results, it still contributed $24m of sales and an operating loss of $103m.
However, sales growth of the flagship drug, the stomach-ulcer treatment Nexium, appears to have stalled. The drug, which is the world's third-biggest seller with 2005 sales of $5.7bn, is now facing generic competition since coming off patent. Two newer drugs performed better than expected. Sales of the asthma treatment Smybicort rose 25 per cent to $414m while the cholesterol and heart-disease treatment Crestor posted a 38 per cent jump in sales to $678m.
Shares in AstraZeneca fell 84p to close at 2,592p in yesterday's trade, in line with a much weaker market. The shares have been out of favour since peaking at 3,529p in November, hampered by legal issues, new drug disappointments and the acquisition of MedImmune.
