AstraZeneca is to cut around 1,600 jobs as it overhauls research operations and consolidates drug development work in three major centers in Britain, the United States and Sweden.
The move will see the end of drug development at AstraZeneca's Alderley Park facility in northwest England, for many years a hub of the group's research and development (R&D) efforts, the drugmaker said on Monday.
New Chief Executive Pascal Soriot, who will present his detailed strategy plans for the group to investors on March 21, said the program would lead to $1.4 billion in one-time restructuring charges. Annualized benefits of the overhaul are expected to reach approximately $190 million by 2016.
Soriot told Reuters that future R&D would be more intently focused on three key therapy areas - cancer; cardiovascular and metabolism disorders; and respiratory and inflammatory diseases - with reduced spending on anti-infectives and neuroscience.
The decision to spend less on infection, which comes at a time when health officials are warning of a lack of new drugs to fight antibiotic resistance, highlights the reluctance of drug firms to invest in an area with poor returns.
AstraZeneca also aims to step up its pace of deal-making to replenish a sparse drug pipeline and Soriot said the emphasis would be on finding promising products in the three priority areas via a series of licensing deals and acquisitions.
"We can succeed and return to growth without a large deal. Our focus will be more on a string of business development initiatives and bolt-on acquisitions," he added in an interview.
Soriot's R&D plans include a $500 million investment in a new, purpose-built facility in Cambridge, eastern England, where AstraZeneca aims to tap into an environment of world-class academic and clinical life sciences research.
He also plans to move the company's global corporate headquarters to Cambridge from London by 2016.
Its MedImmune unit in Gaithersburg, Maryland, will be the main centre for biotech drug research while Moelndal in Sweden will focus on traditional chemical drugs.
Citigroup analyst Mark Dainty said in a research note: "The pay-off is likely to take several years to be realized but is evidence of sensible organizational change."
The decision to stop drug research at Alderley Park, the company's largest R&D site, is a major blow to a region that has relied on a centre where AstraZeneca and its predecessor ICI have been discovering medicines for more than 40 years.
It is a setback, too, for Britain's ambitions in pharmaceutical research, following an earlier move by Pfizer to shutter its R&D site in Sandwich, southern England, and previous cutbacks by AstraZeneca's former management.
Alderley Park lies within the Cheshire parliamentary constituency of finance minister George Osborne.
AstraZeneca said Britain would see 700 of the planned 1,600 job cuts, with a further 650 positions going in the United States, where the company's Wilmington site is being reduced dramatically.
"SAD DAY" FOR UK PHARMA
"It is a sad day for many in the UK's pharmaceutical industry," said Mark Downs, chief executive of the Society of Biology. "On top of the closure of the Pfizer Sandwich site this latest announcement of at least 700 job losses at AstraZeneca risks further reducing the UK's collective capability in drug development."
Unite, Britain's biggest trade union, said AstraZeneca was "creating a skills crisis" in northwest England by axing highly skilled R&D jobs in the middle of an economic downturn.
AstraZeneca has already reduced its global workforce by around 10,000 as it has struggled to cope with generic competition and disappointing progress in finding new drugs. It now employs a total of 51,700 around the world.
Soriot, a former Roche executive who took over last October, has his work cut out to turn around AstraZeneca, which faces loss of patent protection on key drugs. Analysts expect that will lead to a fall in sales of nearly $6 billion over the next five years.
As a pure pharmaceuticals group, without the cushion of alternative revenue streams, AstraZeneca is particularly exposed to patent losses on key prescription drugs, limiting its room for maneuver.
AstraZeneca shares ended the day down 0.7 percent, underperforming a 0.2 percent fall in a European drugs sector index.