AstraZeneca looks to outsourcing

Job cuts imminent

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Leading British-Swedish pharmaceutical company AstraZeneca has announced that it is to cut 8000 jobs worldwide as it embarks on one of the biggest shake-ups seen in the industry's history.

According to analysts, the job cuts - which were announced at the end of last week - are likely to result in the loss of 1500 job in the UK, where AstraZeneca has research and development (R&D) operations in several locations. Analysts have also speculated that the pharmaceutical giant will shed as many as 3500 posts from its R&D facilities across the globe as it tries to cut costs.

Outsourcing

The reason behind the cuts are simple: saving money. The overall plan, according to the firm's (the UK’s second-largest pharmaceutical company) chief executive David Brennan, is to outsource more of AstraZeneca's research and development function - a division largely defined as the heart of any pharmaceutical company. However, AstraZeneca's plan is to outsource much of that work to pharmamerging markets such as China. In fact, Brenna reportedly told the UK press last week that, "As the majority of our employees are in the UK, the US and Europe, you could expect more job cuts there."

He added, "Let's be clear - 2010 is going to be a challenging year."

Patent protection

Its a difficult time for the pharmaceutical industry at large. Patent expiries and the rise in the generics drug market, are calling for a greater and renewed focus on R&D and drug development. For AstraZeneca in particular, two of their key drugs, the asthma medication Pulmicort and the breast cancer drug Arimidex, face the loss of patent protection this year, and there are no new drugs to replace those sales.

In addition, the group is also facing more than 10,000 lawsuits in the US involving 22,099 plaintiff groups who claim that AstraZeneca did not fully publicise the side effects of its antipsychotic drug Seroquel. Reports suggest that the lawsuits have cost about US$656 million to defend so far, although the company hopes most of this will be covered by an insurance policy. As such, Brennan told UK newspaper The Times, that he "believed the company acted ethically and vowed to defend the lawsuits vigorously."

Nonetheless, the firm has also seen shares fall 140p to 2905p, wiping GBP£2 billion from its market capitalisation and making it the biggest faller in the FTSE 100. For the organization, 2009 saw revenues rise by seven percent to US$32,804 million at constant exchange rates. Now, suggest analysts, in an effort to deal with sales declines, the company has earmarked US$2 billion for restructuring charges between 2010 and 2013.

Evidence shows that as 60 percent of that will be spent this year, most of the job cuts may be this year. In terms of the move to China, Brennan admitted that the nation was "one of those countries where the development of drugs could be outsourced to," although he does stress how AstraZeneca would concentrate on outsourcing within Europe and the US.

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