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AstraZeneca ramps up R&D

by Jonathan Marino  |  Published March 18, 2013 at 2:57 PM
AstraZeneca plc chief executive Pascal Soriot continues to shake up the foundation of the British drugmaker without resorting to dealmaking, this time announcing a sweeping restructuring of its research operations in a bid to help improve its pipeline productivity and increase its focus on biologics.

Calling the move a plan to create R&D centers in biopharmaceutical hubs in the U.K., the U.S. and Sweden, AstraZeneca will, among other things, cut 1,600 jobs across the globe between 2013 and 2016 and incur $1.4 billion in one-time restructuring charges. The restructuring will save AstraZeneca $190 million annually by 2016.

The restructuring plan revolves around two areas in particular: Cambridge, Alderley Park and London in the U.K; and Wilmington, Del., and Gaithersburg, Md., in the U.S.

First, AstraZeneca will invest $500 million to create a new facility in Cambridge that will become its global headquarters. AstraZeneca will consolidate its U.K.-based small molecule and biologics R&D at the facility and wipe out an existing office in London by 2016. AstraZeneca will end its R&D work in Alderley Park and relocate about 1,600 jobs from that site to either Cambridge, a nearby manufacturing facility in Macclesfield or other international sites. AstraZeneca will keep at least 700 non-R&D roles in Alderley Park.

AstraZeneca will make most of its job cuts at its U.S. headquarters in Wilmington, where it will eliminate 1,200 positions. The company will add about 300 jobs in Gaithersburg -- the headquarters of MedImmune Inc. and the epicenter of its biologics operations -- as part of the reshuffling. AstraZeneca acquired MedImmune for $15.2 billion in 2007, its last large-scale buyout. The move is evidence of AstraZeneca's commitment to ramping up its presence in biologics, which are more complex than small molecule drugs and harder to copy. More than 70% of AstraZeneca's revenue is derived from small molecule drugs.

AstraZeneca isn't making any strategic changes to its Molndal site, which will continue to primarily focus on small molecules.

Soriot noted that the changes are critical to AstraZeneca, because its long-term success depends on improving its R&D productivity.

"This is a major investment in the future of this company that will enable us to accelerate innovation by improving collaboration, reducing complexity and speeding up decision-making," he said in a statement. "The strategic centers will also allow us to tap into important bioscience hot spots providing more of our people with easy access to leading-edge academic and industry networks, scientific talent and valuable partnering opportunities."

The announcement is Soriot's latest step in his quest to reshape AstraZeneca, which is struggling with the difficult combination of revenue erosion from a significant patent cliff and a late-stage pipeline that is too thin to cover up the losses. Soriot took the helm at AstraZeneca in August, amid pressure from investors and analysts to use a transformative deal to restock the company's pipeline.

Though Soriot initially added to M&A speculation by halting the company's $2.5 billion share buyback program, he has since downplayed the idea that AstraZeneca will cure its ills through a large buyout.

In a presentation in January announcing AstraZeneca's guidance for 2013, Soriot instead focused on organic growth and other forms of business development, believing that AstraZeneca must execute on what it has internally and using partnerships and small deals to add to its portfolio.

"I really believe that our base plan, which is to execute what we have and complement that with our business development, can actually take us through the patent expiries, the cliff we are facing," he said at the time.

Investors will get a clearer glimpse of AstraZeneca's future plans at a presentation on Thursday, March 21.

Soriot's other significant strategic move to date has been to shake up the company's management structure. He eliminated AstraZeneca's president of R&D and its executive vice president for Global Commercial, while creating seven new senior positions to help sharpen the company's focus on pipeline development.

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Tags: AstraZeneca plc | MedImmune Inc. | Pascal Soriot | R&D

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