AstraZeneca on Tuesday eliminated two premiere positions at the company: president of research and development, manned by Martin Mackay, and executive vice president, Global Commercial, a position held by Tony Zook. At the same time, the company created seven new senior management positions in an effort to establish a significant concentration on pipeline development.
AstraZeneca has created three senior R&D roles that are responsible for discovery, early-stage and late-stage drug development for small molecules and biologics. It has also crafted a new position responsible for portfolio and product strategy, which the company said bridges the gap between R&D and sales. Then there are three additional executive posts specifically geared to AstraZeneca's operations in North America, Europe and globally.
"This new senior executive team structure, that draws heavily from the leadership talent within the company, enables us to bring an even sharper management focus to key pipeline assets, key brands and key markets, and helps us further accelerate decision-making," CEO Pascal Soriot, who began leading the company in August, said in a statement.
Zook had been with AstraZeneca since 1997, some two years before the merger between Astra AB and Zeneca Group plc created the current company in 1999. Mackay came onboard in 2010 after spending 15 years at Pfizer Inc. Both will leave AstraZeneca at the end of January.
The board shakeup comes just two weeks before Soriot unveils the highly anticipated results of his sweeping strategic review for AstraZeneca, which should give some insight into how the British pharmaceutical giant's new regime will combat the significant patent expirations the company is facing over the next few years.
Indeed, AstraZeneca is staring at patent expirations for drugs accounting for more than 80% of its annual revenue by 2016. Drugs including antipsychotic drug Seroquel, top-selling cholesterol drug Crestor and gastroesophageal reflux disease pill Nexium, among others, have already either headed over the cliff or will face generic competition within the next few years.
In addition, more than 70% of AstraZeneca's revenue is derived from small molecule drugs, rather than biologics, which are more complex and harder to copy. As a result, the company has undergone a number of strategic changes, from the workforce to the executive suite. The company plans to cut more than 7,000 positions among the rank and file, and Soriot replaced former CEO David Brennan, who abruptly retired in March after six years in the corner office.
AstraZeneca has boosted its presence in global markets such as China and continued to march on with a series of collaborations with other pharmaceutical companies and early-stage biotechs, hoping to reinvigorate a pipeline that has had a series of setbacks over the past few years.
Simon Lowth, AstraZeneca's CFO, for example, went to great lengths at last week's JPMorgan Healthcare Conference in San Francisco to stress the importance of collaborations to AstraZeneca's core strategy. Perhaps its most high-profile collaboration is its multibillion-dollar diabetes partnership with Bristol-Myers Squibb Co. The two, already co-developing a few diabetes drugs, joined together in a $7 billion deal to buy diabetes specialist Amylin Pharmaceuticals Inc. in 2012, one of the largest pharmaceutical transactions of the year.
Even so, however, analysts have been waiting for AstraZeneca to make a transformative M&A transaction, which is something it hasn't done since it paid $15.2 billion for MedImmune Inc. in 2007. Shortly after Soriot came over from Roche Holding Ltd., where he was the chief operating officer of the Basel, Switzerland, company's pharmaceuticals division, he halted the company's $2.5 billion share buyback program, raising speculation that AstraZeneca is now hoarding cash for potential deals.
In a recent report predicting pharmaceutical M&A trends for 2013, Leerink Swann LLC analysts singled out AstraZeneca as potentially the most acquisitive company in the sector.
In fact, Leerink analyst Seamus Fernandez reiterated in a research note Tuesday that attractive takeover candidates include Forest Laboratories Inc., which overlaps with AstraZeneca in therapeutic areas such as asthma, depression and cardiovascular diseases and has a $9.97 billion market capitalization; Shire plc, a large diversified specialty pharma company with an $18.23 billion market cap that may provide a more transformative buyout since analysts feel the fit is complementary but nonoverlapping with AstraZeneca; and Salix Pharmaceuticals Inc., a biotechnology company with a market cap of $2.68 billion that could be more of a bolt-on deal given that it has a gastrointestinal franchise that AstraZeneca could expand with its international sales force.
"We continue to believe that the initial path forward on M&A for [AstraZeneca] should focus on rebuilding the U.S. product portfolio within the company's current areas of strength (mostly primary care) but with an emphasis on accretive transactions," Fernandez wrote.
AstraZeneca had about $6 billion in cash and $10.9 billion in debt as of the third quarter of 2012, according to Fernandez's note. The company's stock traded at $48.91 per share midday Tuesday, up slightly from a $48.77 per share Monday close.
Private equity firm Apax Partners elected Andrew Sillitoe and Mitch Truwit as co-CEOs. On Jan. 1, they will succeed Martin Halusa. For other updates launch today's Movers & shakers slideshow.
To hear more of Jim Cramer′s M&A predictions for 2014 go to www.thedeal.com and sign up to listen to him live on Dec. 5 at the NYSE. More video