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AstraZeneca to cut 7,300 jobs in global restructuring

Sales, research and supply chain operations among those affected

AstraZeneca (AZ) is embarking on a major restructuring of its business that will see the pharma company shed around 7,300 jobs.

The move was announced on the same day the company released its 2011 annual results showing a two per cent drop in revenue to $33.6bn.

More than half of the cuts will be made to its Selling, General and Administrative (SG&A) operations, which includes corporate and support functions as well as the commercial organisation.

The move comes just two years after plans were unveiled to shed more than 10,000 jobs by 2014.

Final estimates for the cost of the new restructuring programme and its impact on employees are still subject to the completion of applicable consultation processes.

As a results of the cuts the company expects to save $1.6bn in annual benefits by the end of 2014, but initial costs of the programme will run to $2.1bn.

David Brennan, AZ's CEO, said the company was “fully committed to our long-term, focused, innovation-driven biopharmaceutical strategy”.

“Today's initiatives should be seen in this strategic context as we continue to reshape our business to improve productivity and innovation and with it our long-term ability to compete in a rapidly changing healthcare environment.

“We are acutely aware that these decisions will affect many employees and we will strive to support our people as we implement these changes.”

AZ said the restructuring was designed to “improve productivity and strengthen the company's commercial operations and research and development capabilities”.

The impact of AstraZeneca's job cuts
In the company's Selling, General and Administrative (SG&A) operations 3,750 jobs will go as AZ looks to “drive efficiencies, rationalise non-customer facing support groups and introduce new ways of meeting customer needs”.

AZ has already started simplifying its global commercial organisation, reducing the number of sales and marketing regions from five to three and clustering smaller countries together to optimise resources, increase shared services and reduce the cost base.

Meanwhile the company is accelerating its use of new, cheaper customer channels like digital technology and call centres for sales and medical advice.

In R&D AZ will pare back its operations by 2,200 positions, trimming excess capacity in certain functions and creating a “simpler and more innovative R&D organisation with a lower and more flexible cost base”.

Changes to AZ's supply chain and increased outsourcing of its manufacturing needs will see further cuts to its Operations function, where an estimated 1,350 posts will go.

Changes to AstraZeneca's R&D operations
The restructuring will also see a number of changes to the way the company conducts its research, most significantly in neuroscience.

Noting that new treatments within the therapy area have “proved elusive”, AZ will create a new 'virtual' neuroscience Innovative Medicines (iMed) unit, staffed by a team of 40-50 company scientists.

Based in Boston, US and Cambridge, UK, they will conduct their research through an external network of academia and industry partners and work closely with partners like Sweden's Karolinska Institute.

AZ's president of research and development Martin Mackay said: “We've made an active choice to stay in neuroscience though we will work very differently to share cost, risk and reward with partners in this especially challenging but important field of medical research.

“The creation of a virtual neuroscience iMed will make us more agile scientifically and financially – we will be able to collaborate flexibly with the best scientific expertise, wherever it exists in the world.”

The new, streamlined model for neuroscience will impact not just the company's existing research workforce but also current sites, and R&D work will halt at Södertälje in Sweden and Montreal in Canada, which both focus on neuroscience.

The Montreal facility will be closed entirely, but Södertälje, which is also home to AZ's largest manufacturing site and the base of its Scandinavian commercial business, will remain open.

AstraZeneca's 2011 results
The extent of the restructuring overshadows AZ's 2011 results, which were also released today.

The company saw revenues fall 2 per cent to $33.6bn as a result of 'pricing interventions' by governments and generic competition, which combined to drag the figures down by around $3bn.

Sales in Western Europe were hit particularly hard and fell by 11 per cent to $8.5bn, while US figures dropped by two per cent to $13.4bn.

Unsurprisingly the best performing area for the company was in emerging markets, where revenues rose by 10 per cent to $5.8bn in 2011.

Meanwhile, the picture doesn't look very positive for 2012 as pricing pressures and generic competition, particularly for Seroquel IR and Atacand in global markets and for Crestor in Canada, continue to cause a decline in sales.

Consequently AZ said it expects constant currency revenues to see a “low double-digit” decline in 2012.

2nd February 2012

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